Variable Interest Entities

The Company pools qualifying vacation ownership contract receivables and sells them to bankruptcy-remote entities. Vacation ownership contract receivables qualify for securitization based primarily on the credit strength of the VOI purchaser to whom financing has been extended. Vacation ownership contract receivables are securitized through bankruptcy-remote SPEs that are consolidated within the 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 vacation ownership contract receivables. The Company services the securitized vacation ownership contract receivables pursuant to servicing agreements negotiated on an arms-length basis based on market conditions. The activities of these SPEs are limited to (i) purchasing vacation ownership contract receivables 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:



	December 31, 2016		December 31, 2015
Securitized contract receivables, gross ^(a)	$	2,489	$	2,462
Securitized restricted cash ^(b)	90		92
Interest receivables on securitized contract receivables ^(c)	21		20
Other assets ^(d)	4		5
Total SPE assets	2,604		2,579
Securitized term notes ^(e)(f)	1,857		1,867
Securitized conduit facilities ^(e)	284		239
Other liabilities ^(g)	2		2
Total SPE liabilities	2,143		2,108
SPE assets in excess of SPE liabilities	$	461	$	471


^(a)	Included in current ($235 million and $248 million as of December 31, 2016 and 2015, respectively) and non-current ($2,254 million and $2,214 million as of December 31, 2016 and 2015, respectively) vacation ownership contract receivables on the Consolidated Balance Sheets.


^(b)	Included in other current assets ($75 million and $73 million as of December 31, 2016 and 2015, respectively) and other non-current assets ($15 million and $19 million as of December 31, 2016 and 2015, respectively) on the Consolidated Balance Sheets.


^(c)	Included in trade receivables, net on the Consolidated Balance Sheets.


^(d)	Primarily includes deferred financing costs for the bank conduit facility and a security investment asset, which is included in other non-current assets on the Consolidated Balance Sheets.


^(e)	Included in current ($195 million and $209 million as of December 31, 2016 and 2015, respectively) and long-term ($1,946 million and $1,897 million as of December 31, 2016 and 2015, respectively) securitized vacation ownership debt on the Consolidated Balance Sheets.


^(f)	Includes deferred financing costs of $24 million as of both December 31, 2016 and 2015, related to securitized debt.


^(g)	Primarily includes accrued interest on securitized debt, which is included in accrued expenses and other current liabilities on the Consolidated Balance Sheets.

In addition, the Company has vacation ownership contract receivables that have not been securitized through bankruptcy-remote SPEs. Such gross receivables were $909 million and $829 million as of December 31, 2016 and 2015, respectively. A summary of total vacation ownership receivables and other securitized assets, net of securitized liabilities and the allowance for loan losses, is as follows:



	December 31, 2016		December 31, 2015
SPE assets in excess of SPE liabilities	$	461	$	471
Non-securitized contract receivables	909		829
Less: Allowance for loan losses	621		581
Total, net	$	749	$	719

Midtown 45, NYC Property

During January 2013, the Company entered into an agreement with a third-party partner whereby the partner acquired the Midtown 45 property in New York City through an SPE. The Company is managing and operating the property for rental purposes while the Company converts it into VOI inventory. The SPE financed the acquisition and planned renovations with a four-year mortgage note and mandatorily redeemable equity provided by related parties of such partner. At the time of the agreement, the Company committed to purchase such VOI inventory from the SPE over a four-year period which will be used to repay the four-year mortgage note and the mandatorily redeemable equity of the SPE. The Company is considered to be the primary beneficiary of the SPE and therefore, the Company consolidated the SPE within its financial statements.

The assets and liabilities of the SPE are as follows:



	December 31, 2016			December 31, 2015
Receivable for leased property and equipment ^(a)	$	16		$	47
Total SPE assets	16			47
Accrued expenses and other current liabilities	—			1
Long-term debt ^(b)	17			46
Total SPE liabilities	17			47
SPE deficit	$	(1	)	$	—


^(a)	Represents a receivable for assets leased to the Company which are reported within property and equipment, net on the Company’s Consolidated Balance Sheets.

^(b)

As of December 31, 2016, included $15 million relating to a four-year mortgage note due in 2017 and $2 million of mandatorily redeemable equity, both of which are included in current portion of long-term debt on the Consolidated Balance Sheet. As of December 31, 2015, included $42 million relating to a four-year mortgage note due in 2017 and $4 million of mandatorily redeemable equity; of which $29 million was included in current portion of long-term debt on the Consolidated Balance Sheet.

During 2016 and 2015, the SPE conveyed $28 million and $23 million, respectively of property and equipment to the Company. In addition, the Company subsequently transferred $36 million and $55 million of property and equipment to VOI inventory during the year ended December 31, 2016 and 2015, respectively.