v3.24.2
Debt
 6 Months Ended
Jun. 30, 2024
Debt Disclosure [Abstract]  
Debt Debt
The Company’s indebtedness consisted of the following (in millions):
June 30,
2024		December 31,
2023
Non-recourse vacation ownership debt: (a)
Term notes (b)
$1,593 $1,707 
USD bank conduit facility (due September 2025) (c)
309 261 
AUD/NZD bank conduit facility (due December 2024) (d)
98 103 
Total$2,000 $2,071 
Debt: (e)
$1.0 billion secured revolving credit facility (due October 2026) (f)
$304 $— 
$300 million 2018 secured term loan B (due May 2025) (g)
282 284 
$598 million 2023 secured incremental term loan B (due December 2029) (h)
582 583 
$300 million 5.65% secured notes (due April 2024)— 300 
$350 million 6.60% secured notes (due October 2025) (i)
348 348 
$650 million 6.625% secured notes (due July 2026)647 646 
$400 million 6.00% secured notes (due April 2027) (j)
404 404 
$650 million 4.50% secured notes (due December 2029)644 643 
$350 million 4.625% secured notes (due March 2030)347 347 
Finance leases19 20 
Total$3,577 $3,575 
(a)Represents non-recourse debt that is securitized through bankruptcy-remote special purpose entities, the creditors of which have no recourse to the Company for principal and interest. These outstanding borrowings (which legally are not liabilities of the Company) are collateralized by $2.33 billion and $2.42 billion of underlying gross VOCRs and related assets (which legally are not assets of the Company) as of June 30, 2024 and December 31, 2023.
(b)The carrying amounts of the term notes are net of deferred financing costs of $20 million and $22 million as of June 30, 2024 and December 31, 2023.
(c)The Company has a borrowing capacity of $600 million under the USD bank conduit facility through September 2025. Borrowings under this facility are required to be repaid as the collateralized receivables amortize but no later than October 2026.
(d)The Company has a borrowing capacity of 200 million Australian dollars (“AUD”) and 25 million New Zealand dollars (“NZD”) under the AUD/NZD bank conduit facility through December 2024. Borrowings under this facility are required to be repaid no later than January 2027.
(e)The carrying amounts of the secured notes and term loan are net of unamortized discounts of $17 million and $20 million as of June 30, 2024 and December 31, 2023, and net of unamortized debt financing costs of $10 million and $12 million as of June 30, 2024 and December 31, 2023.
(f)The weighted average effective interest rate on facility borrowings was 7.61% and 7.47% as of June 30, 2024 and December 31, 2023.
(g)The weighted average effective interest rate on facility borrowings was 7.81% and 7.49% as of June 30, 2024 and December 31, 2023.
(h)The weighted average effective interest rate on facility borrowings was 8.77% and 9.25% as of June 30, 2024 and December 31, 2023.
(i)Includes $1 million and $2 million of unamortized losses from the settlement of a derivative as of June 30, 2024 and December 31, 2023.
(j)Includes $5 million and $6 million of unamortized gains from the settlement of a derivative as of June 30, 2024 and December 31, 2023.
Sierra Timeshare 2024-1 Receivables Funding LLC
On March 21, 2024, the Company closed on a placement of a series of term notes payable, issued by Sierra Timeshare 2024-1 Receivables Funding LLC, with an initial principal amount of $350 million, secured by VOCRs and bearing interest at a weighted average coupon rate of 5.66%. The advance rate for this transaction was 95.25%.
Maturities and Capacity
The Company’s outstanding indebtedness as of June 30, 2024, matures as follows (in millions):
Non-recourse Vacation Ownership DebtDebtTotal
Within 1 year$219 $296 $515 
Between 1 and 2 years482 361 843 
Between 2 and 3 years191 1,365 1,556 
Between 3 and 4 years198 7 205 
Between 4 and 5 years198 6 204 
Thereafter712 1,542 2,254 
$2,000 $3,577 $5,577 
Required principal payments on the non-recourse vacation ownership debt are based on the contractual repayment terms of the underlying VOCRs. Actual maturities may differ as a result of prepayments by the VOCR obligors.
As of June 30, 2024, the available capacities under the Company’s borrowing arrangements were as follows (in millions):
Non-recourse Conduit Facilities (a)
Revolving
Credit Facilities (b)
Total capacity$749 $1,000 
Less: outstanding borrowings407 304 
Less: letters of credit— 2 
Available capacity$342 $694 
(a)Consists of the Company’s USD bank conduit facility and AUD/NZD bank conduit facility. The capacities of these facilities are subject to the Company’s ability to provide additional assets to collateralize additional non-recourse borrowings.
(b)Consists of the Company’s $1.0 billion secured revolving credit facility.
Debt Covenants
The revolving credit facility and term loan B facilities are subject to covenants including the maintenance of specific financial ratios as defined in the credit agreement. The financial ratio covenants consist of a minimum interest coverage ratio of no less than 2.50 to 1.0 as of the measurement date and a maximum first lien leverage ratio not to exceed 4.25 to 1.0 as of the measurement date. The interest coverage ratio is calculated by dividing consolidated EBITDA (as defined in the credit agreement) by consolidated interest expense (as defined in the credit agreement), both as measured on a trailing 12-month basis preceding the measurement date. The first lien leverage ratio is calculated by dividing consolidated first lien debt (as defined in the credit agreement) as of the measurement date by consolidated EBITDA (as defined in the credit agreement) as measured on a trailing 12-month basis preceding the measurement date.
As of June 30, 2024, the Company’s interest coverage ratio was 4.15 to 1.0 and the first lien leverage ratio was 3.50 to 1.0. These ratios do not include interest expense or indebtedness related to any qualified securitization financing (as defined in the credit agreement). As of June 30, 2024, the Company was in compliance with the financial covenants described above.
Each of the Company’s non-recourse securitized term notes and bank conduit facilities contain various triggers relating to the performance of the applicable loan pools. If the VOCR pool that collateralizes one of the Company’s securitization notes fails to perform within the parameters established by the contractual triggers (such as higher default or delinquency rates), there are provisions pursuant to which the cash flows for that pool will be maintained in the securitization as extra
collateral for the note holders or applied to accelerate the repayment of outstanding principal to the note holders. As of June 30, 2024, all of the Company’s securitized loan pools were in compliance with applicable contractual triggers.
Interest Expense
The Company incurred interest expense of $63 million and $127 million during the three and six months ended June 30, 2024, excluding interest expense associated with non-recourse vacation ownership debt. These amounts include offsets of less than $1 million and $1 million of capitalized interest during each period. Cash paid related to such interest was $130 million during the six months ended June 30, 2024.
The Company incurred interest expense of $61 million and $119 million during the three and six months ended June 30, 2023, excluding interest expense associated with non-recourse vacation ownership debt. These amounts include offsets of less than $1 million of capitalized interest during each period. Cash paid related to such interest was $121 million during the six months ended June 30, 2023.
Interest expense incurred in connection with the Company’s non-recourse vacation ownership debt was $33 million and $66 million during the three and six months ended June 30, 2024, and $27 million and $52 million during the three and six months ended June 30, 2023. These amounts are included within Consumer financing interest on the Condensed Consolidated Statements of Income. Cash paid related to such interest was $55 million and $41 million for the six months ended June 30, 2024 and 2023.