KBRA Assigns Preliminary Ratings to Welk Resorts 2019-A

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four
classes of notes issued by Welk Resorts 2019-A (“WELK 2019-A”). This is
a $150.72 million timeshare ABS transaction that is expected to close
June 12, 2019.

Welk Resorts 2019-A, LLC will issue four classes of notes rated ‘AAA
(sf)’ through ‘BBB- (sf)’, totaling $150.72 million. Welk 2019-A
includes a prefunding feature that allows up to $25 million or 16.3% of
the collateral pool to be purchased up to 180 days from closing. The
notes are collateralized by the vacation ownership interests (“VOIs”)
purchased through the timeshare loans. Credit enhancement for the Notes
is comprised of 1.50% initial overcollateralization (subject to a 0.50%
floor), subordination of junior note classes (52.00% in the case of the
Class A notes, 28.00% in the case of the Class B notes and 5.00% in the
case of the Class C notes), a 2.50% general reserve account (which can
step down to 1.00% after month 12) and excess spread. The transaction
has initial hard credit enhancement levels of 56.00% for the Class A
notes through 4.00% for the Class D notes.

The timeshare loans are fixed rate installment loans, generally made to
prime borrowers, having an original loan term of 10 or 15 years, with a
5%-15% down payment and paying an average interest rate of 14.9% –
16.9%. The VOI provides the owner annual or biennial rights to use any
property in Welk’s system for perpetuity, subject to resort availability
and the owner having the appropriate amount of redeemable points.

Welk is a leading international hospitality and vacation ownership
interest company with its corporate office in San Marcos, California.
The Company was founded by the late Lawrence Welk, the famous band
leader and television celebrity, has been in the timeshare business
since 1984 and has operated resorts since 1964. Welk has an experienced
management team with a diverse experience in the hospitality industry.

KBRA applied its U.S. Timeshare ABS methodology as part of its analysis
of the transaction’s underlying collateral pool, the proposed capital
structure and Welk’s historical static pool data. KBRA also conducted an
operational assessment on the originator and servicer, as well as a
review of the transaction’s legal structure and transaction documents.
KBRA will also review the operative agreements and legal opinions for
the transaction prior to closing.

To access ratings, reports and disclosures, click here.

Related Publications: (available at www.kbra.com)

• U.S.
  Timeshare ABS Rating Methodology
• Welk
  Resorts 2019-A Pre-Sale Report

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S.
Securities and Exchange Commission as an NRSRO. In addition, KBRA is
designated as a designated rating organization by the Ontario Securities
Commission for issuers of asset-backed securities to file a short form
prospectus or shelf prospectus. KBRA is also recognized by the National
Association of Insurance Commissioners as a Credit Rating Provider, and
is a certified Credit Rating Agency (CRA) by the European Securities and
Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is
registered with ESMA as a CRA.

Contacts

Analytical Contacts:

Eric Neglia, Managing Director
(646) 731-2456
eneglia@kbra.com

Jenny Ovallle, Director
(646) 731-2309
jovalle@kbra.com

Brendan Carter, Associate Director
(646) 731-3315
bcarter@kbra.com