Mvw 2020-1 Llc

Presale: MVW 2020-1 LLC

July 9, 2020

PRIMARY CREDIT ANALYST

Preliminary Ratings Deborah L Newman New York Class Preliminary rating Preliminary amount (mil. $) Subordination overcollateralization and reserve (%) (1) 212-438-4451 A AAA (sf) 238.010 38.3 deborah.newman @spglobal.com B A (sf) 71.557 19.6 SECONDARY CONTACTS C BBB (sf) 44.005 8.1 Jay Srivats D BB (sf) 21.428 2.5 San Francisco (1) 415-371-5045 Note: This presale report is based on information as of July 9, 2020. The ratings shown are preliminary. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Accordingly, the preliminary ratings should not be construed as jay.srivats evidence of final ratings. This report does not constitute a recommendation to buy, hold, or sell securities. @spglobal.com

Matthew R Howard Chicago Profile + 1 (312) 233 7035 Matthew.Howard Expected closing date July 23, 2020. @spglobal.com

Stated maturity Oct. 20, 2037. Brian Kearon New York Collateral Vacation ownership interval (timeshare) loans. + 1 (212) 438 8156 Arranger Credit Suisse Securities (USA) LLC brian.kearon @spglobal.com Seller MORI SPC Series Corp. ANALYTICAL MANAGER Servicer Marriott Ownership Resorts Inc. Ildiko Szilank Indenture trustee, backup servicer, lockbox bank, and custodian Wells Fargo Bank N.A. New York (1) 212-438-2614 ildiko.szilank @spglobal.com Rationale

The preliminary ratings assigned to MVW 2020-1 LLC's $375.00 million timeshare loan-backed notes reflect our opinion of the credit enhancement that is available in the form of overcollateralization, the subordination for the class A, B and C notes, the reserve account, and the available excess spread. The preliminary ratings are also based on our opinion of Marriott Ownership Resorts Inc.'s (MORI's) servicing ability and experience in the timeshare market.

U.S. lodging is one of the hardest-hit sectors with unprecedented declines in revenue due to the containment measures to slow the spread of COVID-19. Within lodging, we believe the performance of timeshare loan securitizations will likely deteriorate due to travel restraints

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(including the government-mandated closure of resorts), the projected increase in unemployment, the resulting increase in bankruptcy filings, and the potential shift in consumer behavior, including payment priority on various loan obligations. This has put an enormous strain on global economic activity, which S&P Global Ratings expects will continue as long as there are bans and restrictions on travel. For more information, see "COVID-19 Containment Measures Put U.S. Timeshare Loan Payments To The Test," published April 2, 2020.

Given that we are in a recessionary period, and to reflect the uncertain and weakened U.S. economic and sector outlook, we are increasing our base-case default assumption by 1.25x to stress defaults from 'B' to 'BB' rating scenarios. To reflect additional liquidity stress from deferrals and potential increase in delinquencies, we also applied incremental liquidity and sensitivity stress in addition to our rating stress in all rating categories (see detailed results of the stressed runs under the Cash Flow Assumptions And Sensitivity Analysis section).

Our preliminary ratings on the MVW 2020-1 LLC's timeshare loan-backed notes series 2020-1 reflect that the transaction structure is able to pay timely interest and ultimate principal by legal maturity on all the notes under all of our stressed cash flow scenarios, as well as the recovery rate, liquidity, and credit stability sensitivity scenarios.

S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions, but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. We are using this assumption in assessing the economic and credit implications associated with the pandemic (see our research here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates accordingly.

Business Description

Marriott Vacations Worldwide Corp. (MVW) is the exclusive worldwide developer, marketer, seller, and manager of vacation ownership and related products under the Marriott Vacation Club (MVC) and Grand Residences by Marriott, Sheraton, Westin, and Hyatt Residence Club brands, as well as under the Marriott Vacation Club Pulse brand, an extension of the MVC brand. MVW is also the exclusive worldwide developer, marketer, and seller of vacation ownership and related products under The Ritz-Carlton Destination Club (RCDC) brand, managed by the Ritz-Carlton Hotel Company LLC. MVW generates most of its revenues from four primary sources: selling vacation ownership products, managing its resorts, financing consumer purchases of vacation ownership products, and renting vacation ownership inventory. MVW's portfolio consists of over 100 properties and over 660,000 owners in the U.S. and nine other countries and territories.

MVW has had its vacation experience operations for more than 30 years. Since its spin-off from Marriott International Inc. (MII) in November 2011, MVW has been an independent public company, with its common stock listed on the New York Stock Exchange and its corporate headquarters located in Orlando, Fla. As a result of the spin-off, MII and MVW operate independently and have no ownership interest in each other. Since the spin-off, MVW has signed various license agreements to have exclusive rights to use the intellectual property from Marriott, Ritz Carlton, and Grand Residences by Marriott.

In September 2018, MVW completed its acquisition of ILG LLC, which includes Aqua-Aston Hospitality, Hyatt Vacation Ownership, Interval International, Trading Places International, Vacation Resorts International, VRI Americas, and Vistana Signature Experiences, the exclusive licensee for the Sheraton and Westin brands in vacation ownership.

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MVW offers products under the following brands:

- MVC: MVW's signature offering in the upscale tier of the vacation ownership industry. Resorts typically combine many of the comforts of home, including one-, two-, and three-bedroom options, living and dining areas, in-unit kitchens, and laundry facilities, with resort amenities such as swimming pools, restaurants and bars, convenience stores, fitness facilities, and spas, as well as sports and recreation facilities appropriate for each resort's unique location.

- Marriott Vacation Club Pulse: an extension to the MVC brand that features properties in urban locations, with easy access to local interests, attractions, and transportation. Because of their urban locations, Marriott Vacation Club Pulse properties offer limited on-site amenities and include smaller guestrooms without separate living areas and kitchens.

- The Sheraton Vacation Club provides upscale vacation experiences in family destinations like Florida, South Carolina, and Colorado, allowing owners and guests to relax, play, and experience what those destinations have to offer. Sheraton Vacation Club resorts are part of the Vistana Signature Network (VSN).

- The Westin Vacation Club is a collection of Westin-branded upscale vacation ownership resorts, located in some of the most sought-after destinations and designed with well-being in mind. Units within Westin Vacation Club resorts each include a Heavenly Bed and Westin Vacation Club resorts each offer the WestinWORKOUT program and Heavenly Spa treatments. Westin Vacation Club resorts are part of the VSN.

- Grand Residences by Marriott (GRM): an upscale-tier vacation ownership and whole ownership residence brand, which has accommodations similar to MVC. The time period for the GRM vacation ownership intervals (VOIs) ranges between three and 13 weeks.

- RCDC: a luxury-tier brand that provides vacation experiences commensurate with the Ritz-Carlton brand. RCDC resorts typically feature two-, three-, and four-bedroom units, luxury resort amenities, and access to full-service restaurants and bars. The on-site services usually include daily housekeeping service, valet, in-residence dining, and access to fitness facilities, as well as spa and sports facilities appropriate for each destination. The Ritz-Carlton Residences is a luxury tier whole ownership residence brand.

- The Hyatt Residence Club is a vacation ownership program that provides flexible access to global travel experiences through a diverse portfolio of boutique upscale residential-style retreats. Hyatt Residence Club resorts are located in various destinations, including Maui, Carmel, Aspen, Sedona, San Antonio, and Key West.

- Other offerings include The St. Regis Residence Club, offering luxury fractional real estate and distinctive privileges to members, and The Hyatt Residence Club, a vacation ownership program that provides flexible access to global travel experiences through a diverse portfolio of boutique upscale residential-style retreats.

MVW sells the majority of products through its points-based ownership programs, including MVC, Sheraton Flex, Westin Flex, Westin Aventuras, and the Hyatt Residence Club Portfolio Program, focused in North America and Asia Pacific, including Marriott Vacation Club Destinations (MVCD) and Marriott Vacation Club, Asia Pacific. Owners generally receive an annual allotment of points (representing usage rights) and can use these points to access vacation ownership units across multiple destinations within the portfolio of resort locations. In 2012, MVW stopped offering the RCDC points-based vacation ownership product. Inventory from some of the RCDC-branded resorts was added to the MVCD program. MVW may place additional luxury-branded inventory into the MVCD program. MVW launched a third points-based program, MVCD Australia, which holds interests in MVW's Marriott Vacation Club at Surfers Paradise in Australia.

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MVW participates in Interval International's exchange program and also operates its own internal exchange program. Owners of MVW's vacation ownership products are able to access other locations various internal exchange programs.

MVW also offers weeks-based vacation ownership products in certain markets. MVW offers various global exchange opportunities to these customers through a voluntary participation in MVCD's exchange programs.

The VSN provides Westin Vacation Club and Sheraton Vacation Club owners access to its affiliated resorts as well as the opportunity to exchange through the new Marriott Bonvoy program (previously the Starwood Preferred Guest program) to MVW resorts, through the Interval International network or for a cruise.

Hyatt Residence Club provides its owners internal exchange among Hyatt Residence Club resorts as well as the opportunity to trade their club points for World of Hyatt points which may be redeemed at participating Hyatt-branded properties and exchanged through the Interval International network.

Each resort's timeshare association and the MVCD program's trust ownership association have retained Marriott Resorts Hospitality Corp., a wholly owned MORI subsidiary, or another wholly owned MVW subsidiary to manage the resorts or the interests held in the trust, respectively.

Sales And Marketing

MVW uses various marketing channels to attract qualified customers to sales locations for MVC vacation ownership products, including resort sales centers and certain off-site locations. MVW also markets to Marriott Bonvoy customer loyalty program members. MVW has eliminated some of its higher-cost sales activities and focused sales efforts on existing owners, as well as new buyers. In 2018, approximately 65% of sales were to existing owners, and approximately 90% of sales were originated at a sales center located in a resort. MVW maintains a range of different off-site sales centers, including a central telesales organization based in Orlando, a network of third-party brokers in Latin America and Europe, and city-based sales centers, such as MVW's sales centers in Dubai and Singapore. MVW has more than 80 global sales locations focused on vacation ownership interests. MVW utilizes a number of marketing channels to attract qualified customers to sales locations for Marriott Vacation Club products. As a result of COVID-19, MVW temporarily closed nearly all of its sales centers and resorts. The company is in the process of reopening certain sales centers and resorts.

Underwriting And Collections Process

MORI prescreens prospective buyers in the early stages of the marketing and sales process. MORI generally requires that loans to borrowers with lower FICO scores have higher interest rates and higher down payments, or, in some cases, it may reject the loan altogether. For foreign loan applications, a combination of MVW's realized historical loan performance by resident country and published country risk ratings may be used to determine foreign obligor underwriting guidelines, including minimum down payment requirements and interest rates. Foreign obligors in certain countries are required to make significantly higher down payments to obtain loan financing for the VOI loans. For example, MORI primarily requires at least a 15% down payment from obligors who live outside the U.S. and Canada.

MORI's collection department manages loan delinquencies by initiating phone, mail, and email contact with the borrower approximately 10 days after a loan becomes delinquent. Once the

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account reaches 60 days past due, a borrower is notified that he or she is in default under their loan agreement; and if the account remains past due, the loan may be accelerated.

At 90 days past due, MORI begins to exercise remedies, including accelerating the related borrower's loan balance if a full reinstatement or a work-out plan is not put into effect. Between 120 and 150 days past due, the borrower may be offered a deed in lieu of foreclosure, and arrangements are made to commence a foreclosure action. The foreclosure process takes approximately nine-to-36 months depending on the jurisdiction in which foreclosure occurs. Once the foreclosure process is complete, the related timeshare property is listed for resale.

Transaction Structure

S&P Global Ratings expects the MVW 2020-1 transaction to include four classes of fixed-rate notes that will pay interest and principal monthly in a specific priority (see table 1).

Table 1

Payment Waterfall

Priority Payment

1 Indenture trustee and custodial fees, indemnities, and expenses (capped).

2 Backup servicing fees, indemnities, and expenses (capped).

3 First, servicing fee plus reimbursement of unpaid Lockbox fee; and second, any extraordinary lockbox expenses.

4 Class A notes' interest.

5 Class B notes' interest.

6 Class C notes' interest.

7 Class D notes' interest.

8 During a nontrigger event, class A, B, C and D note principal, pro rata. During a trigger event, pay down class A principal, then class B note principal, then class C note principal, and then class D note principal sequentially until each class' outstanding note balance is zero.

9 During a nontrigger event, the extra principal distribution amount pro rata to the class A, B, C, and D notes.

10 To the reserve account and force majeure loan reserve account until the required amount is achieved.

11 The class A, then B, then C, then D notes, sequentially, to reimburse any note balance writedown amounts plus any deferred interest.

12 To the indenture trustee and custodian, any expenses and indemnities not paid in item 1.

13 To the backup servicer, any expenses and indemnities not paid in item 2.

14 To the lockbox bank, any extraordinary expenses not paid in item 3.

15 To the letter of credit bank, any fees and expenses related.

16 Any remaining funds to the issuer.

Collateral

According to the transaction documents, the VOI loans that back the MVW 2020-1 LLC transaction must satisfy various eligibility criteria, including:

- For each loan, the borrower has made at least one payment before the related cut-off date (other than loans that are substituted for upgrades);

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- None of the loans' principal or interest payments is more than 30 days delinquent as of the cut-off date;

- Timeshare loans with a foreign obligor have not exceeded 9% of the aggregate closing date collateral balance; and

- The loan's terms have not been modified in any material respect (except under certain specific conditions).

- The loan is not a Force Majeure Loan which permits the deferral of interest for up to six months

The statistical collateral pool consists of approximately 55.1% loans from the MVC brand; and 0.04%, 19.16%, 19.15%, 6.56%, from the Ritz Carlton Club, Westin, Sheraton, and Hyatt brands, respectively. In addition, the issuer may acquire additional collateral, subject to certain restrictions discussed below, during the prefunding period.

Prefunding period

The issuer will make an initial deposit of approximately $14.7 million, or 3.92% of the aggregate initial note balances of the notes, into a prefunding account. The issuer may use these amounts to purchase additional collateral until Sept. 30, 2020, provided that neither a trigger event period has commenced nor an event of default has occurred. The prefunding period will also be terminated if the balance in the account falls below $10,000. Amounts remaining in the prefunding account at the end of the prefunding period will be distributed to the noteholders as principal. The cash portion of the purchase price for each subsequent timeshare loan will equal the product of the cut-off date loan balance of such subsequent timeshare loan and the initial advance rate, which will be funded from the prefunding account.

It is anticipated that a majority of the loans acquired by the issuer during the prefunding period will be redeemed from Marriott Vacation Club Owner Trust 2013-1 (MVW 2013-1 Timeshare Loans).

Additional loans purchased must satisfy certain eligibility criteria including:

- At least 80.00% of the aggregate loan balance of loans acquired during the prefunding period must be MVW 2013-1 timeshare loans

- The weighted average seasoning on all MVW 2013-1 timeshare loans must be greater than 96 months,

- The weighted average credit score of all MVW 2013-1 timeshare loans' domestic loan obligors must be equal to or greater than 705, and

- The weighted average credit score of all loans that are not MVW 2013-1 timeshare loans must be equal to or greater than 735.

- Other than MVW 2013-1 timeshare loans, domestic loan obligors must have a FICO score of at least 600.

- Other than the MVW 2013-1 timeshare loans, the loan does not have an original term greater than 15 years.

- Other than MVW 2013-1 timeshare Loans, the loan is secured by an interest in an MVC-branded resort.

- The weighted average interest rate on all loans purchased during the prefunding period must be greater than 12.20%.

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The transaction will not include a capitalized interest account to cover interest payments during the prefunding period. Any negative carry owing to the amount held in the prefunding account will have to be paid out of the transaction's payment priority.

Force majeure deferral/non-force majeure deferral

Per the transaction documents, the servicer will be permitted to modify, waive, amend, or defer the terms of a timeshare loan, up to a maximum cap of 5% of the aggregate closing date collateral balance, in connection with a force majeure deferral (force majeure loan). A force majeure event is defined as a natural disaster, act of war or terrorism, epidemic or pandemic (including COVID-19), or other circumstance beyond the reasonable control of the servicer.

The timeshare loans that are a part of this deferral bucket will not be included in the delinquency or default calculations during such time. A loan will not be considered a force majeure loan if it fails to pay amounts due during the deferral period or the obligor has made two consecutive payments in full during the deferral period.

The transaction includes a force majeure reserve account. The required reserve balance is the amount of interest that would have been due on such timeshare loan if the force majeure deferral had not been entered into. If MORI is the servicer at the time of execution of the deferral, the servicer will fund the reserve, and any shortfall will be replenished through the waterfall with available collections.

In addition the service is permitted to modify, waive, amend or defer the terms of any timeshare loan (other than a force majeure deferral), up to 5% of the aggregate closing date collateral balance, so long as it does so in accordance with its credit and collection policies (non-force majeure modification).

A force majeure loan may be modified again so long as the second modification of the loan is counted towards the 5% limitation on non-force majeure modifications.

Repurchase/substitution for upgrades

MORI may repurchase or substitute for a loan that is the subject of an upgrade with a qualified substitute loan. The maximum amount of upgraded loans that may be substituted is limited to an amount equal to 20% of the aggregate closing date collateral balance (including loans purchased during the prefunding period), minus the aggregate loan balances of timeshare loans that were previously substituted by MORI for upgraded timeshare loans. The qualified substitute loan when aggregated with the other timeshare loans being substituted on that date, must satisfy certain criteria, including:

- Does not have a weighted average coupon rate that is less than the weighted average coupon rate of the timeshare loans being substituted.

- Does not have a weighted average credit score less than that of the obligors being substituted, if such original obligor was a domestic obligor.

- Does not have a stated maturity later than 12 months prior to the notes' stated maturity.

- Complies as of the related transfer date with each of the representations and warranties set forth in the sale agreement.

- When aggregated with the other qualified substitute timeshare loans being transferred on such transfer date, does not cause the percentage of the aggregate loan balance of timeshare loans

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relating to domestic obligors to decrease.

- Either is related to a timeshare property at a resort or a timeshare loan secured by beneficial interests or by certificated membership interests.

Table 2 compares the portfolio characteristics of the identified collateral as of the May 31, 2020, statistical cut-off date, with those of the recent MVW transactions as of the statistical cut-off date. The closing date collateral balance will be at least $382,653,061.22 (including amounts on deposit in the prefunding account).

Table 2

Summary

MVW 2020-1(i) MVW-2019-2 MVW 2019-1 MVW 2018-1 MVW 2017-1 MVW 2016-1 MVW 2015-1 MVW 2014-1

Aggregate 387,938,276.11 236,250,436.61 373,766,001.34 292,075,025.26 294,216,528.24 206,868,844.00 204,443,876.66 200,509,318.30 principal balance ($)

No. of 15,121.00 10,873.00 14,244.00 12,868.00 12,437.00 11,133.00 13,831.00 10,780.00 loans

Max. 325,057.00 247,614.07 249,944.65 187,517.00 175,183.65 225,518.00 231,819.47 284,598.00 principal balance ($)

Min. 1,017.00 1,000.00 1,000.00 1,003.00 1,095.91 1,005.00 1,026.73 1,030.00 principal balance ($)

Average 25,655.60 21,728.17 26,240.24 22,697.77 23,656.55 18,582.00 14,781.57 18,600.00 principal balance ($)

Weighted 13.10 13.02 12.78 12.46 12.27 12.78 13.05 12.72 average coupon rate (%)

Max. 179 179 179.00 179 179 179 183 179 remaining term

Min. 4 3 3 6 6 6 6 6 remaining term

Weighted 128 124 124 114 119 113 89 106 average remaining term

Max. 240 240 180 240 180 240 240 240 original term

Min. 36 36 36 36 36 36 36 36 original term

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Table 2

Summary (cont.)

MVW 2020-1(i) MVW-2019-2 MVW 2019-1 MVW 2018-1 MVW 2017-1 MVW 2016-1 MVW 2015-1 MVW 2014-1

Weighted 136 136 130 126 125 131 133 130 average original term

Max. 230 197 176 225 168 170 221 173 seasoning

Min. 1 1 1 1 1 1 1 1 seasoning

Weighted 8 12 6 12 6 18 43 24 average seasoning

Weighted 735 733 737 736 741 737 726 717 average credit score

Max. 99.81 97.67 99.84 98.31 96.43 98.69 97.66 98.39 current equity cost (%)

Min. 10.09 10.08 10.02 10.02 10.13 10.13 10.14 10.15 current equity cost (%)

Weighted 21.69 23.06 18.74 19.19 16.80 23.68 34.71 24.63 average current equity cost (%)

Domestic 93.95 93.40 94.13 92.19 92.01 83.31 87.91 81.42 obligors (%)

Foreign 6.05 6.60 5.87 7.81 7.99 16.69 12.09 18.58 obligors (%)

Right to 1.33 2.24 3.10 3.76 0.99 4.02 4.10 1.48 use (%)

Mortgage 98.67 97.76 96.90 96.24 99.01 95.98 95.90 98.52 loans (%)

(i)As of May 31, 2020, cutoff date; does not include prefunding bucket. MVW--MVW Owner Trust.

Table 3 compares statistical pools for recently rated timeshare transactions.

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Table 3

Statistical Portfolio Characteristics

BRE Grand MVW 2020-1(i) Hilton 2020-A Islander 2019-A Hilton 2019-A Elara 2019-A Hilton 2018-A VSE 2018-A

Aggregate $387,938,276.11 $315,002,349.15 $164,341,734.00 $283,568,690.00 $151,596,195.60 $357,141,940.00 $220,941,479.49 loan balance ($)

No. of loans 15,121 10,062 4,067 10,023 6,617 15,122 11,246

Range of 1,017-325,057 203- 248,561 39-391,419 50-248,381 46-181,147 362.17-188,691 1,001- 226,881 loan balances ($)

Avg. loan 25,655.60 31,306.14 40,408.00 28,292.00 22,910.11 23,617.00 19,646.00 balance ($)

Range of 6.84-16.49 3.90-19.50 7.50-17.92 6.50-19.50 7-19.50 6.00-18.90 8.90-15.90 coupon rates (%)

Weighted 13.10 12.44 12.11 12.3 13.19 11.86 13.41 avg. coupon rate (%)

Range of 36-240 12-180 60-120 60-144 60-120 60-120 12-180 original terms (mos.)

Weighted 136 122 116 119 120 120 135 avg. original term (mos.)

Range of 4-179 2-179 1-119 1-119 1-115 4-119 3-179 remaining terms (mos.)

Weighted 128 110 104 103 107 103 118 avg. remaining term (mos.)

Range of 1-230 1-129 1-119 1-119 5-119 1-116 0-177 seasoning (mos.)

Weighted 8 12 12 16 13 17 17 avg. seasoning (mos.)

Range of 550-842 600-800 601-839 600-844 551-844 600-843 551-844 current FICO scores

Weighted 735 750 751 746 740 750 727 avg. current FICO score

Weighted 21.7 27 24.2 22.13 32.35 avg. equity (%)

Foreign/U.S. 6.05/93.95 12.38/87.62 75/25 15.2/84.8 0.67/99.33 11.0/89.0 9.63/90.37 (%)

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Table 3

Statistical Portfolio Characteristics (cont.)

BRE Grand MVW 2020-1(i) Hilton 2020-A Islander 2019-A Hilton 2019-A Elara 2019-A Hilton 2018-A VSE 2018-A

Closing date 7/23/2020 6/10/2020 4/10/2019 8/13/2019 8/14/2019 9/1/2018 7/1/2018

(i)As of May 31, 2020, cutoff date; does not include prefunding bucket. MVW--MVW Owner Trust. Hilton 2020-A--Hilton Grand Vacations Trust 2020-A. BRE Grand Islander 2019-A--BRE Grand Islander Timeshare Issuer 2019-A LLC. Hilton 2019-A--Hilton Grand Vacations Trust 2019-A. Elara 2019-A--Elara HGV Timeshare Issuer 2019-A LLC. Hilton 2018-A--Hilton Grand Vacations Trust 2018-A. VSE 2018-A--VSE 2018-A Mortgage LLC.

S&P Global Ratings' Expected Gross Default Assumptions: Domestic Only: 12.7%; Total Pool (Including Foreign): 14.4%

To derive our base-case gross default rate for the MVW 2020-1 transaction, we examined the historical gross default performance of the MVCI, Sheraton, Westin and Hyatt brands' quarterly origination static pools from 2008 – second-quarter 2018. We reviewed the pools of VOI loans that were made to MVC foreign obligors separately from those made to its domestic obligors. The expected gross default assumption for domestic obligors is 12.7%, and the total expected gross default assumption, including foreign obligors, is 14.4%.

We segmented the pool data for each MVC, Westin, Sheraton, and Hyatt domestic quarterly vintage into sub pools based on the following FICO score ranges:

- Domestic with no FICO score;

- 550-599;

- 600-649;

- 650-699;

- 700-749;

- 750-799; and

- 800-850

For each MVC FICO score subpool, we built a default curve using the data from first-quarter 2008 through second-quarter 2011. We used the loan balance data from these vintages to construct an aggregate default timing curve for each FICO score range and the MVC Foreign obligors weighted by the origination amount. We used these vintages to construct an aggregate default timing curve because these vintages generally have less than approximately 5% of the original aggregate loan balance outstanding. Then we estimated the expected defaults for each FICO score category subpool for the remaining 2011 through the second-quarter 2018 static pool vintages using the actual cumulative default data to date and the applicable default timing curve to form an expected default rate assumption for the pool.

For the Westin, Sheraton, and Hyatt brands, we repeated the steps above. We built an aggregate default timing curve for each FICO score range within each brand and estimated the expected defaults for each FICO score category subpool to form an expected default rate assumption. For the Westin brand, we built an aggregate default timing curve for each FICO score range using data from first-quarter 2008 through second-quarter 2011. For Sheraton and Hyatt, the aggregate default timing curve for each FICO score range was built using data from first-quarter 2008 through third-quarter 2011.

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For example purposes, chart 1 shows the following:

- The average cumulative gross default rate for MVC's domestic loans that were originated in first-quarter 2008 through second-quarter 2011 to borrowers with FICO scores in the 600-649 range;

- The actual cumulative default rate to date for MVC's domestic loans that were originated in third-quarter 2013 in the same FICO score range; and

- The projected ultimate cumulative default rate for the third-quarter 2013 600-649 FICO score subpool.

Chart 1

We assume the cumulative defaults on the 600-649 FICO score subpool for loans originated in third-quarter 2013 follow a similar timing pattern to those of the average pools in first-quarter 2008 through second-quarter 2011. Hence, our expected gross default rate for the third-quarter 2013 pools' 600-649 FICO score subpool is approximately 23.8%.

To determine an expected cumulative gross default rate for each FICO score range in each brand, we repeated this process for each quarterly vintage pool following the vintages used to construct the default curves. We weighted the results for each FICO band by the amount of originations in that vintage to arrive at the expected cumulative gross default rate for each FICO category.

To account for additional collateral that the issuer will purchase from the originator during the prefunding period, we constructed a worst-case pool based on the portfolio limitations and blended that pool with the initial collateral pool when generating gross default assumptions.

We applied a 1.25x multiple to the resulting expected cumulative gross default rate to reflect our view of the current stressed environment. The 1.25x multiple effectively increases our base case or 'B' loss assumptions to a 'BB' stress. We applied seasoning credit to the resulting cumulative

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gross default numbers based on the collateral pool's seasoning. We typically assume the expected default rate decreases as loans mature past 24 months.

Based on this analysis and the loan pool's brand and credit score distribution, we expect the pool to experience a cumulative gross default rate of 14.4% as a base case, which is a combination of the domestic segment cumulative gross default rate of 12.7% and the foreign segment default expectations. We also reviewed the sovereign risk criteria and made adjustments to the hurdle rates, if necessary.

To the extent the actual pool varies from the statistical pool, our base-case and stress gross default assumptions may vary, which could potentially affect our preliminary ratings.

High-Balance Loans And Loan With Original Terms Greater Than 10 Years

Approximately 26% of the pool comprises loans with a current loan balance greater than $50,000, and approximately 27% of the pool comprises loans with an original term greater than 120 months. We observed that these loans have historically exhibited an increased propensity to default, which we also considered in our analysis.

Stressed Expected Gross Default Assumption ('AAA', 'A', 'BBB', 'BB'): 50.2%, 36.3%, 29.6% And 21.7%

We use a multiple of our expected base-case approach to assess the applicable stressed expected cumulative gross default rate for the assigned preliminary ratings. We applied a multiple of 3.5x to arrive at a gross default rate as high as 50.2% under a 'AAA' scenario, a multiple of 2.5x to arrive at a 36.3% under a 'A' scenario, a multiple of 2.0x to arrive at 29.6% under a 'BBB' scenario, and a multiple of 1.5x to arrive at 21.7% under a 'BB' scenario.

At closing, approximately 6% of the initial collateral is related to loans made to foreign obligors, excluding loans made to Canadian obligors. To address the risk of exposures in foreign countries, we considered the sovereign rating and transfer and convertibility (T&C) assessment of the foreign obligor's domicile when the rating on the notes exceeded the associated sovereign rating and T&C assessment. As an additional consideration to our analysis, we applied the stress based on our "Request For Comment: Methodology And Assumptions For Ratings Above The Sovereign - Multijurisdiction Structured Finance," published Sept. 30, 2015.

Credit Support

The credit support for the MVW 2020-1 LLC notes will be provided by:

- The 2.0% initial overcollateralization, building up to 4.0%.

- The approximately 35.8% subordination for the class A notes.

- The approximately 17.10% subordination for the class B notes.

- The approximately 5.6% subordination for the class C notes.

- A deposit into the reserve account equal to 0.50% of the initial collateral from proceeds of the note issuance.

- The required reserved account balance of the greater of 0.50% of the aggregate loan balance

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for any payment date during a nontrigger event period and the reserve account floor equal to the lesser of 0.25% of the initial note balance and 50% of the aggregate outstanding note balance on the payment date. If a trigger event occurs on any payment date, the reserve account floor amount is $0. A trigger event will occur if the average default level for the past three due periods (and if fewer than three due periods have elapsed, the average of the default levels for the actual number of periods that have elapsed) is greater than, for the first 18 determination dates following the closing date, 0.25% and, thereafter, 0.50%; the average delinquency level for the past three due periods is greater than 5.25%; the cumulative default level exceeds 16.00%; or the overcollateralization amount falls below a certain threshold for the two previous payment dates.

- The force majeure loan reserve account.

- Available excess spread.

Cash Flow Assumptions And Sensitivity Analysis

According to our criteria for rating timeshare loan securitizations, we ran various cash flow scenarios to determine the appropriate preliminary ratings for the series 2020-1 notes, given the transaction's credit enhancement, and to test the transaction's sensitivity to changes in default timing and different voluntary prepayment assumptions (see "Rating Criteria For U.S. Timeshare Loan Securitizations," published Oct. 8, 2003). Our expected gross default assumption and default timing patterns are applied in aggregate to the collateral pool. Our methodology distributes defaults among the collateral in order to match our aggregated gross default assumptions and default timing patterns as closely as possible. Depending on how the collateral pool is represented, some collateral groups may experience higher or lower defaults depending on their seasoning.

We ran several gross default rate timing curves to test the transaction under stressed gross default rate assumptions applied under different timing scenarios (see table 4). We ran each default timing scenario (or curve) under various voluntary prepayment assumptions (see table 5).

Table 4

Gross Default Timing Curves For Cash Flow Modeling

Year A B C D E F G H I S1 S2

1 13.00 50.00 50.00 50.00 50.00 45.00 40.00 40.00 10.00 13.21 27.44

2 47.00 25.00 25.00 5.00 50.00 30.00 30.00 25.00 15.00 24.24 23.50

3 22.00 15.00 25.00 5.00 0.00 3.13 15.00 15.00 15.00 19.96 17.71

4 10.00 10.00 0.00 5.00 0.00 3.13 2.16 2.86 20.00 15.10 11.75

5 5.00 0.00 0.00 5.00 0.00 3.13 2.14 2.86 20.00 9.87 7.27

6 1.00 0.00 0.00 5.00 0.00 3.13 2.14 2.86 10.00 6.63 5.23

7 0.60 0.00 0.00 5.00 0.00 3.12 2.14 2.86 10.00 4.52 3.36

8 0.70 0.00 0.00 5.00 0.00 3.12 2.14 2.86 0.00 3.06 2.36

9 0.30 0.00 0.00 5.00 0.00 3.12 2.14 2.85 0.00 2.02 0.86

10 0.40 0.00 0.00 10.00 0.00 3.12 2.14 2.85 0.00 1.38 0.51

We also determined what we believe to be the break-even gross default levels for each scenario

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(see table 5). All of the scenarios we ran under a 10% constant prepayment rate have a break-even default level that is above respective classes stressed expected gross default assumption.

The results of our cash flow modeling suggest that, in our opinion, the class A, B, C and D noteholders will likely receive timely interest and ultimate principal even if the cumulative default rates from the MVW 2020-1 loan pool increase to the levels listed in table 5.

Table 5

Break-Even Gross Default Assuming 10% CPR

Class

Number Pattern A B C D

1 A 58.1 42.9 32.7 27.7

2 B 57.4 42.2 31.8 26.6

3 C 57.2 42.0 31.6 26.4

4 D 59.1 45.0 34.8 29.4

5 E 56.7 41.5 31.1 26.0

6 F 58.8 43.8 33.2 27.8

7 G 58.6 43.3 32.8 27.6

8 H 58.5 43.7 33.3 27.9

9 I 58.0 43.7 34.3 24.4

10 S1 58.5 43.4 33.6 29.4

11 S2 58.7 43.2 33.1 28.4

CPR--Constant prepayment rate.

We compared this transaction's base-case cumulative gross default assumptions with those of several recent timeshare transactions (see table 6).

Table 6

Base-Case Default Assumptions And Advance Rates

BRE Grand MVW Hilton MVW MVW Islander Elara Hilton MVW Hilton VSE 2020-1 2020-A 2019-2 2019-1 2019-A 2019-A 2019-A 2018-1 2018-A 2018-A

Base-case 14.4 13.0 10.4 8.95 7.4 11.4 8.9 8 7.9 10.7 default assumption (%)

Advance rate (%)

'AAA' 62.2 56.1 73.5 76.15 51.3 70.75 72.5 75 71.20

'AA+'

'AA' 90.5 87.25 90

'A+' 90.8 87.4

'A' 80.9 75.9 90.7 97.5 36.6 98 88.1

'A-' 98.5

'BBB+' 98 98 97

'BBB' 92.4 90.5 26.9 98

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Table 6

Base-Case Default Assumptions And Advance Rates (cont.)

BRE Grand MVW Hilton MVW MVW Islander Elara Hilton MVW Hilton VSE 2020-1 2020-A 2019-2 2019-1 2019-A 2019-A 2019-A 2018-1 2018-A 2018-A

'BBB-'

'BB' 98.0

In table 7, we indicate the average range of the observed excess for the break-even gross default levels in each default timing curve over the stressed expected gross default assumptions for each rating level, as well as the minimum observed cushions. For example, for the class A notes, the average excess is greater than 5.00%, and minimum excess is greater than 5.00%.

Table 7

Standard Default Patterns: Average/Minimum Cushion

MVW 2020-1 MVW 2019-2 MVW 2019-1

Class A

Greater than 5.00% Avg./min. Avg./min. Avg.

2.00%-4.99%

1.00%-1.99% Min.

0.10%-0.99%

Less than 0.10%

Class B

Greater than 5.00% Avg./min. Avg.

2.00%-4.99% Avg./min. Min.

1.00%-1.99%

0.10%-0.99%

Less than 0.10%

Class C

Greater than 5.00% Avg. Avg.

2.00%-4.99% Avg.

1.00%-1.99% Min. Min.

0.10%-0.99% Min.

Less than 0.10%

Class D

Greater than 5.00% Avg.

2.00%-4.99% Min.

1.00%-1.99%

0.10%-0.99%

Less than 0.10%

MVW--MVW 2020-1 LLC.

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MVW has historically had a high number of upgrades; as a result, the MVW transactions may experience higher prepayments. For the sensitivity analysis, we reviewed the maximum break-even for each default pattern under a 15% constant prepayment rate scenario. Table 8 shows the average and minimum observed cushion for the maximum break-even level for this sensitivity scenario at the 'AAA', 'A', 'BBB', and 'BB' rating level. For example, for the class B notes, the average cushion for the maximum break-even sensitivity default levels over the stressed expected gross default assumption at the 'A' level is 2.00%-4.99%.

Table 8

15% CPR Sensitivity: Average/Minimum Cushion

MVW 2020-1 MVW 2019-2 MVW 2019-1

Class A

Greater than 5.00%

2.00%-4.99% Avg./min. Avg./min. Avg.

1.00%-1.99%

0.10%-0.99%

Less than 0.10% Min.

Class B

Greater than 5.00%

2.00%-4.99% Avg./min. Avg.

1.00%-1.99%

0.10%-0.99%

Less than 0.10% Avg./min. Min.

Class C

Greater than 5.00%

2.00%-4.99%

1.00%-1.99% Avg.

0.10%-0.99% Avg.

Less than 0.10% Avg./min. Min. Min.

Class D

Greater than 5.00%

2.00%-4.99%

1.00%-1.99%

0.10%-0.99% Avg.

Less than 0.10% Min.

CPR--Constant prepayment rate. MVW--MVW 2020-1 LLC.

Additional Sensitivities For Liquidity And Credit Stability

We tested the transaction's ability to withstand incremental liquidity stresses given the current environment. Under these stresses, classes A, B, C, and D could withstand a 50% reduction in excess spread (amounts available after payment of senior fees and interest on the notes) over a

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12-month period. We did not apply recovery credit to the defaulted collateral. As of May 2020, MVW's total COVID-19 deferrals were 1.3% overall, and total delinquencies (61-150) days for all timeshare loans originated were 2.8% for MVC, 1.81% for Westin, 4.02% for Sheraton, and 3.85% for Hyatt. This transaction will not include any modified loans or delinquent loans on the closing date. The transaction also includes a delinquency trigger of 5.25%, upon a breach of the transaction would hit a rapid amortization event and all available funds may be allocated to pay down the notes.

We believe the results of the sensitivity scenarios are adequate at the requisite rating levels. In addition to analyzing break-even cash flows and the incremental stressed scenarios discussed above, we also conducted a sensitivity analysis to see whether under a moderate ('BBB') stress scenario, all else being equal, our preliminary ratings would remain within the tolerances allowed by our rating stability criteria. Under a 'BBB' stress environment, we don't expect our ratings on the class A notes to be lowered by more than one rating category and on the class B, C, and D notes to be lowered by more than two rating categories from our preliminary ratings within the next 12 months. These rating movements are within the tolerances specified by our credit stability criteria (see "Methodology: Credit Stability Criteria," published May 3, 2010).

Legal Review

The issuer's special-purpose entity provisions are expected to be consistent with our bankruptcy-remoteness criteria. In rating this transaction, we will review the legal matters that we believe are relevant to our analysis, as outlined in our criteria.

Related Criteria

- Criteria | Structured Finance | Legal: U.S. Structured Finance Asset Isolation And Special-Purpose Entity Criteria, May 15, 2019

- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019

- General Criteria: Principles For Rating Debt Issues Based On Imputed Promises, Dec. 19, 2014

- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012

- Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment, May 28, 2009

- Criteria | Structured Finance | ABS: Rating Criteria For U.S. Timeshare Loan Securitizations, Oct. 8, 2003

Related Research

- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016

In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Counterparty Risk Framework: Methodology And Assumptions," March 8, 2019; "Post-Default Ratings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23,

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2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, 2009.

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