Quarterly report pursuant to Section 13 or 15(d)

Variable Interest Entities

v3.21.2
Variable Interest Entities
6 Months Ended
Jun. 30, 2021
Variable Interest Entity, Primary Beneficiary, Does Not Hold Majority Voting Interest, Disclosures [Abstract]  
Variable Interest Entities Variable Interest Entities
In accordance with the applicable accounting guidance for the consolidation of a variable interest entity (“VIE”), the Company analyzes its variable interests, including loans, guarantees, SPEs, and equity investments, to determine if an entity in which the Company has a variable interest is a VIE. If the entity is considered to be a VIE, the Company determines whether it would be considered the entity’s primary beneficiary. The Company consolidates into its financial statements those VIEs for which it has determined that it is the primary beneficiary.

Vacation Ownership Contract Receivables Securitizations
The Company pools qualifying VOCRs and sells them to bankruptcy-remote entities. VOCRs qualify for securitization based primarily on the credit strength of the VOI purchaser to whom financing has been extended. VOCRs are securitized through bankruptcy-remote SPEs that are consolidated within the Company’s Condensed Consolidated Financial Statements. As a result, the Company does not recognize gains or losses resulting from these securitizations at the time of sale to the SPEs. Interest income is recognized when earned over the contractual life of the VOCRs. The Company services the securitized VOCRs pursuant to servicing agreements negotiated on an arm’s-length basis based on market conditions. The activities of these SPEs are limited to (i) purchasing VOCRs from the Company’s vacation ownership subsidiaries, (ii) issuing debt securities and/or borrowing under a conduit facility to fund such purchases, and (iii) entering into derivatives to hedge interest rate exposure. The bankruptcy-remote SPEs are legally separate from the Company. The receivables held by the bankruptcy-remote SPEs are not available to creditors of the Company and legally are not assets of the Company. Additionally, the non-recourse debt that is securitized through the SPEs is legally not a liability of the Company and thus, the creditors of these SPEs have no recourse to the Company for principal and interest.

The assets and liabilities of these vacation ownership SPEs are as follows (in millions):
June 30,
2021
December 31,
2020
Securitized contract receivables, gross (a)
$ 2,158  $ 2,458 
Securitized restricted cash (b)
83  92 
Interest receivables on securitized contract receivables (c)
17  23 
Other assets (d)
Total SPE assets 2,263  2,578 
Non-recourse term notes (e) (f)
1,719  1,893 
Non-recourse conduit facilities (e)
299  341 
Other liabilities (g)
Total SPE liabilities 2,027  2,236 
SPE assets in excess of SPE liabilities $ 236  $ 342 
(a)The Company does not allocate allowance for loan losses to SPEs. This amount is included in Vacation ownership contract receivables, net on the Condensed Consolidated Balance Sheets.
(b)Included in Restricted cash on the Condensed Consolidated Balance Sheets.
(c)Included in Trade receivables, net on the Condensed Consolidated Balance Sheets.
(d)Primarily includes deferred financing costs for the bank conduit facility and a security investment asset, which is included in Other assets on the Condensed Consolidated Balance Sheets.
(e)Included in Non-recourse vacation ownership debt on the Condensed Consolidated Balance Sheets.
(f)Includes deferred financing costs of $19 million and $21 million as of June 30, 2021 and December 31, 2020, related to non-recourse debt.
(g)Primarily includes accrued interest on non-recourse debt, which is included in Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets.
In addition, the Company has VOCRs that have not been securitized through bankruptcy-remote SPEs. Such gross receivables were $734 million and $717 million as of June 30, 2021 and December 31, 2020. A summary of total vacation ownership receivables and other securitized assets, net of securitized liabilities and the allowance for loan losses, is as follows (in millions):
June 30,
2021
December 31,
2020
SPE assets in excess of SPE liabilities $ 236  $ 342 
Non-securitized contract receivables 734  717 
Less: Allowance for loan losses 573  693 
Total, net $ 397  $ 366