XML 37 R23.htm IDEA: XBRL DOCUMENT v3.22.4
Debt
12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
Debt Debt
The Company’s indebtedness consisted of the following (in millions):
As of December 31,
20222021
Non-recourse vacation ownership debt: (a)
Term notes (b)
$1,545 $1,614 
USD bank conduit facility (due July 2024) (c)
321 190 
AUD/NZD bank conduit facility (due December 2024) (d)
107 130 
Total$1,973 $1,934 
Debt: (e)
$1.0 billion secured revolving credit facility (due October 2026) (f)
$— $— 
$300 million secured term loan B (due May 2025) (g)
286 288 
$300 million secured incremental term loan B (due December 2029) (h)
288 — 
$400 million 3.90% secured notes (due March 2023) (i)
400 401 
$300 million 5.65% secured notes (due April 2024)299 299 
$350 million 6.60% secured notes (due October 2025) (j)
346 345 
$650 million 6.625% secured notes (due July 2026)645 643 
$400 million 6.00% secured notes (due April 2027) (k)
406 407 
$650 million 4.50% secured notes (due December 2029)642 641 
$350 million 4.625% secured notes (due March 2030)346 346 
Finance leases11 
Total$3,669 $3,379 
(a)Represents non-recourse debt that is securitized through bankruptcy-remote special purpose entities (“SPEs”), 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 $2.29 billion and $2.17 billion of underlying gross VOCRs and related assets (which legally are not assets of the Company) as of December 31, 2022 and 2021.
(b)The carrying amounts of the term notes are net of deferred financing costs of $18 million as of both December 31, 2022 and 2021.
(c)The Company has a borrowing capacity of $600 million under the USD bank conduit facility through July 2024. Borrowings under this facility are required to be repaid as the collateralized receivables amortize but no later than August 2025.
(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 $23 million and $20 million as of December 31, 2022 and 2021, and net of unamortized debt financing costs of $10 million and $8 million as of December 31, 2022 and 2021.
(f)The weighted average effective interest rate on borrowings from this facility was 7.53% and 3.19% as of December 31, 2022 and 2021.
(g)The weighted average effective interest rate on borrowings from this facility was 4.01% and 2.39% as of December 31, 2022 and 2021.
(h)The weighted average effective interest rate on borrowings from this facility was 8.24% as of December 31, 2022.
(i)Includes less than $1 million and $2 million of unamortized gains from the settlement of a derivative as of December 31, 2022 and 2021.
(j)Includes $3 million and $4 million of unamortized losses from the settlement of a derivative as of December 31, 2022 and 2021.
(k)Includes $7 million and $9 million of unamortized gains from the settlement of a derivative as of December 31, 2022 and 2021.

Maturities and Capacity
The Company’s outstanding indebtedness as of December 31, 2022, matures as follows (in millions):
Non-recourse Vacation Ownership DebtDebtTotal
Within 1 year$218 $411 

$629 
Between 1 and 2 years219 309 528 
Between 2 and 3 years511 631 1,142 
Between 3 and 4 years214 648 862 
Between 4 and 5 years200 408 608 
Thereafter611 1,262 1,873 
$1,973 $3,669 $5,642 

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 December 31, 2022, the available capacity under the Company’s borrowing arrangements was as follows (in millions):
Non-recourse Conduit Facilities (a)
Revolving
Credit Facilities (b)
Total capacity$752 $1,000 
Less: outstanding borrowings428 — 
Available capacity$324 $1,000 
(a)Consists of the Company’s USD bank conduit facility and AUD/NZD bank conduit facility. The capacity of these facilities is 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.

Non-recourse Vacation Ownership Debt
As discussed in Note 16—Variable Interest Entities, the Company issues debt through the securitization of VOCRs.

Sierra Timeshare 2022-1 Receivables Funding, LLC. On March 23, 2022, the Company closed on a placement of a series of term notes payable, issued by Sierra Timeshare 2022-1 Receivables Funding LLC, with an initial principal amount of $275 million, secured by VOCRs and bearing interest at a weighted average coupon rate of 3.84%. The advance rate for this transaction was 98%. As of December 31, 2022, the Company had $170 million of outstanding borrowings under these term notes, net of debt issuance costs.

Sierra Timeshare 2022-2 Receivables Funding LLC. On July 21, 2022, the Company closed on a placement of a series of term notes payable, issued by Sierra Timeshare 2022-2 Receivables Funding LLC, with an initial principal amount of $275 million, secured by VOCRs and bearing interest at a weighted average coupon rate of 5.7%. The advance rate for this transaction was 90.5%. As of December 31, 2022, the Company had $205 million of outstanding borrowings under these term notes, net of debt issuance costs.
Sierra Timeshare 2022-3 Receivables Funding LLC. On October 20, 2022, the Company closed on a placement of a series of term notes payable, issued by Sierra Timeshare 2022-3 Receivables Funding LLC, with an initial principal amount of $250 million, secured by VOCRs and bearing interest at a weighted average coupon rate of 6.91%. The advance rate for this transaction was 87.5%. As of December 31, 2022, the Company had $220 million of outstanding borrowings under these term notes, net of debt issuance costs.

Term Notes. In addition to the 2022 term notes described above, as of December 31, 2022, the Company had $950 million of outstanding non-recourse borrowings, net of debt issuance costs, under term notes entered into prior to December 31, 2021. The Company’s non-recourse term notes include fixed and floating rate term notes for which the weighted average interest rate was 4.2%, 3.9%, and 4.5% during 2022, 2021, and 2020.

USD bank conduit facility. On March 4, 2022, the Company renewed its USD timeshare receivables conduit facility, extending the end of the commitment period from October 2022 to July 2024. The renewal included a reduction of the USD borrowing capacity from $800 million to $600 million. This capacity reduction was made in an effort to reduce fees associated with unused capacity. The facility bears interest based on a mixture of variable commercial paper rates plus a spread for certain participating banks and the Daily Simple Secured Overnight Financing Rate (“SOFR”) plus a spread for other participating banks. Borrowings under this facility are required to be repaid as the collateralized receivables amortize, no later than August 2025. As of December 31, 2022, the Company had $321 million of outstanding borrowings under this facility.

AUD/NZD bank conduit facility. On December 21, 2022, the Company renewed its AUD/NZD timeshare receivables conduit facility, extending the end of the commitment period from April 2023 to December 2024. The renewal included a reduction of the AUD borrowing capacity from A$250 million to A$200 million and a reduction of the NZD borrowing capacity from NZ$48 million to NZ$25 million. These capacity reductions were made in an effort to reduce fees associated with unused capacity. The facility is secured by VOCRs and bears interest at variable rates based on the Bank Bill Swap Bid Rate plus 2.0%. Borrowings under this facility are required to be repaid no later than January 2027. As of December 31, 2022, the Company had $107 million of outstanding borrowings under this facility.

As of December 31, 2022, the Company’s non-recourse vacation ownership debt of $1.97 billion was collateralized by $2.29 billion of underlying gross VOCRs and related assets. Additional usage of the Company’s non-recourse bank conduit facilities is subject to the Company’s ability to provide additional assets to collateralize such facilities. The combined weighted average interest rate on the Company’s total non-recourse vacation ownership debt was 4.2%, 4.0%, and 4.2% during 2022, 2021, and 2020.

Debt
$1.0 billion Revolving Credit Facility and $300 million Term Loan B. The Company has a credit agreement with Bank of America, N.A. as administrative agent and collateral agent. The agreement provides for senior secured credit facilities in the amount of $1.3 billion, consisting of the secured term loan B of $300 million maturing in 2025 and a secured revolving facility of $1.0 billion maturing in 2026. As of December 31, 2022, the Company’s interest rate per annum applicable to term loan B is equal to, at the Company’s option, either a base rate plus a margin of 1.25% or the London Interbank Offered Rate (“LIBOR”) plus a margin of 2.25%. The interest rate per annum applicable to borrowings under the revolving credit facility is equal to, at the Company’s option, either a base rate plus a margin ranging from 0.75% to 1.25% or LIBOR plus a margin ranging from 1.75% to 2.25%, in either case based upon the first-lien leverage ratio of Travel + Leisure Co. and its restricted subsidiaries. The LIBOR rate with respect to either term loan B or the revolving credit facility borrowings are subject to a floor of 0.00%. The Company is also subject to a commitment fee for the unused portion of its revolving credit facility. This fee is based upon the first-lien leverage ratio and ranges from 0.25% to 0.35% per annum of the unused balance.

As of December 31, 2022, the security agreement that exists in connection with the credit agreement names Bank of America N.A. as collateral agent on behalf of the secured parties (as defined in the security agreement), and has been in force since May 31, 2018. The security agreement grants a security interest in the collateral of the Company (as defined in the security agreement) and includes the holders of Travel + Leisure Co.'s outstanding secured notes, as “secured parties.” These noteholders share equally and ratably in the collateral (as defined in the security agreement) owned by the Company for so long as the indebtedness under the credit agreement is secured by such collateral.

The interest rates increased for certain of the outstanding secured notes that were impacted by the rating agency downgrades of the Company’s corporate notes. Pursuant to the terms of the indentures governing such rating sensitive
series of notes, the interest rate on each such series of notes may be subject to future increases or decreases, as a result of future downgrades or upgrades to the credit ratings of such notes by Standard & Poor’s Rating Services (“S&P”), Moody’s Investors Service, Inc. (“Moody’s”), or a substitute rating agency. Since issuance, the interest rates on the impacted notes have increased 150 basis points as of December 31, 2022, with a maximum potential for additional increase of 50 basis points.

Incremental Term Loan B. On December 14, 2022, the Company amended the credit agreement governing its revolving credit facility and term loan B (“Third Amendment”). The Third Amendment provides for an incremental term loan B of $300 million, which will mature on December 14, 2029. The incremental term loan B bears interest, at the Company’s option, at a rate of (a) Base Rate (which is the highest of Bank of America’s prime rate, the federal funds rate plus 0.50%, and the Term SOFR (as defined in the Company’s existing Credit Agreement) one month rate, inclusive of the SOFR Adjustment (defined as 0.10% per annum in the Company’s Credit Agreement), plus 1.00% (subject in each case to a floor of 0.50%)), plus an applicable rate of 3.00%, or (b) the Term SOFR rate, inclusive of the SOFR Adjustment, plus an applicable rate of 4.00% (subject to a floor of 0.50%). The incremental term loan B amortizes in equal quarterly installments of 0.25% of the initial principal amount, starting with the first full fiscal quarter after the closing date. The incremental term loan B was issued with an original issue discount of 97.5%. Proceeds for the facility were $289 million, which were net of the discount, arrangement fees, and structuring fees. Debt discount and deferred financing costs were collectively $12 million, which will be amortized over the life of the notes.

As of December 31, 2022, the Company had $3.08 billion of outstanding secured notes issued prior to December 31, 2021. Interest on these notes is payable semi-annually in arrears. The notes are redeemable at the Company’s option at a redemption price equal to the greater of (i) the sum of the principal being redeemed, and (ii) a “make-whole” price specified in the indenture of the notes, plus, in each case, accrued and unpaid interest. These notes rank equally in right of payment with all of the Company’s other secured indebtedness.

Deferred Financing Costs
The Company classifies debt issuance costs related to its revolving credit facilities and the bank conduit facilities within Other assets on the Consolidated Balance Sheets. Such costs were $9 million and $10 million as of December 31, 2022 and 2021.

Debt Covenants
The revolving credit facilities and term loan B 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.

During 2021, the Company renewed the credit agreement governing the revolving credit facilities and term loan B (“Second Amendment”). The Second Amendment terminated the relief period restrictions adopted in the July 15, 2020 first amendment as a result of the COVID-19 pandemic. Beginning in the third quarter of 2022, the Second Amendment returned the first lien leverage ratio financial covenant to not exceed 4.25 to 1.0 and reestablished the interest coverage ratio (as defined in the credit agreement) of no less than 2.50 to 1.0, the levels in place prior to COVID-19.

As of December 31, 2022, the Company’s interest coverage ratio was 4.83 to 1.0 and the first lien leverage ratio was 3.54 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 December 31, 2022, the Company was in compliance with all of the financial covenants described above.

Each of the Company’s non-recourse securitized term notes, and the 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 December 31, 2022, all of the Company’s securitized loan pools were in compliance with applicable contractual triggers.
Interest Expense
The Company incurred interest expense of $195 million during 2022, consisting of interest on debt, excluding non-recourse vacation ownership debt, and including an offset of $1 million of capitalized interest. Cash paid related to such interest was $189 million.

The Company incurred interest expense of $198 million during 2021, consisting of interest on debt, excluding non-recourse vacation ownership debt, and including an offset of less than $1 million of capitalized interest. Cash paid related to such interest was $207 million.

The Company incurred interest expense of $192 million during 2020, consisting of interest on debt, excluding non-recourse vacation ownership debt, and including an offset of $1 million of capitalized interest. Cash paid related to such interest was $163 million.

Interest expense incurred in connection with the Company’s non-recourse vacation ownership debt was $79 million, $81 million, and $101 million during 2022, 2021, and 2020, and is reported within Consumer financing interest on the Consolidated Statements of Income/(Loss). Cash paid related to such interest was $51 million, $56 million, and $74 million during 2022, 2021, and 2020.