Tuesday, December 13, 2005

Timeshare Defaults Over 20%

Readers may recall this blog is tracking some timeshare companies for potential default bargains, "Sunterra Corporation today reported net income for its fiscal fourth quarter ended September 30, 2005, of $7.2 million. For the year ended September 30, 2005, the company reported a net loss of $34.7 million."

"Sunterra offers consumer financing to individual purchasers of Vacation Interests, primarily in North America, and records a provision for estimated loan losses each period via a charge equal to a percentage of each loan. The company’s provision for mortgages and contracts receivable losses rose to $3.7 million for the fourth quarter of 2005, and rose to $12.2 million for the year ended September 30, 2005."

"During the fiscal year ended September 30, 2005, approximately 14.6% of North American Vacation Interest revenues were cash sales and required no financing by us. Of the remaining 85.4%, we financed approximately 70.3%."

"The default periods below represent 12-month periods by which defaults recognized in the first twelve months after origination are included in the '1' period. Amounts represent cumulative defaults to date, and do not include estimated defaults to be recognized."

Sold in 1998
Year 1, 7.3%

Year 2, 14.7%

Year 3, 18.4%

Year 4, 20.8%

Year 5, 22.4%

Year 6, 23.6%

Year 7, 24.4%

So by the 4th year these loans have defaulted by over 20%. Sunterra is having to borrow against these loans, as my last post on the firm indicated. Stay tuned, as there will be some bargains as this sector falls out.


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