Debt & Non-recourse Debt

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Debt & Non-recourse Debt

Debt & Non-recourse Debt

Debt

The following table details our outstanding debt balance and its associated interest rates:

($ in millions)	September 30, 2022		December 31, 2021
Debt(1)
Senior secured credit facility
Term loan with a rate of 5.250%, due 2028	$	1,287	$	1,297
Revolver with a rate of 4.424%, due 2026	—		300
Senior notes with a rate of 5.000%, due 2029	850		850
Senior notes with a rate of 4.875%, due 2031	500		500
Other debt	29		27
	2,666		2,974
Less: unamortized deferred financing costs and discounts(2)(3)	(54)		(61)
	$	2,612	$	2,913

(1)As of September 30, 2022 and December 31, 2021, weighted-average interest rates were 5.248% and 4.052%, respectively.

(2)Amount includes unamortized deferred financing costs related to our term loan and senior notes of $27 million and $20 million, respectively, as of September 30, 2022 and $33 million and $22 million, respectively, as of December 31, 2021. This amount also includes unamortized original issuance discounts of $7 million and $6 million as of September 30, 2022 and December 31, 2021, respectively.

(3)Amount does not include unamortized deferred financing costs of $4 million and $5 million as of September 30, 2022 and December 31, 2021, respectively, related to our revolving facility which are included in Other assets in our unaudited condensed consolidated balance sheets.

Senior secured credit facilities

During the nine months ended September 30, 2022, we repaid $310 million under the senior secured credit facilities. As of September 30, 2022, we had $1 million of letters of credit outstanding under the revolving credit facility and $2 million outstanding backed by cash collateral. We were in compliance with all applicable maintenance and financial covenants and ratios as of September 30, 2022.

We primarily use interest rate swaps as part of our interest rate risk management strategy for our variable-rate debt. These interest rate swaps are associated with the remaining available LIBOR based senior secured credit facility. Therefore as of September 30, 2022, these interest rate swaps convert the LIBOR based variable rate on our Term Loan to average fixed rates of 1.32 percent per annum with maturities between 2023 and 2028, for the balance on this borrowing up to the notional values of our interest rate swaps. As of September 30, 2022, the notional values of the interest rate swaps under our Term Loan was $710 million. Our interest rate swaps have been designated and qualify as cash flow hedges of interest rate risk and recorded at their estimated fair value as an asset in Other assets in our unaudited condensed consolidated balance sheets. As of September 30, 2022 and December 31, 2021, the estimated fair value of our cash flow hedges are $67 million and $2 million, respectively. We characterize payments we make in connection with these derivative instruments as interest expense and a reclassification of accumulated other comprehensive income for presentation purposes. The following table reflects the activity in accumulated other comprehensive income related to our derivative instruments during the nine months ended September 30, 2022.

	Net unrealized gain on derivative instruments
Balance as of December 31, 2021	$	2
Other comprehensive income before reclassifications, net	48
Reclassification to net income	1
Balance as of September 30, 2022	$	51

Non-recourse Debt

The following table details our outstanding non-recourse debt balance and associated interest rates:

($ in millions)	September 30, 2022		December 31, 2021
Non-recourse debt(1)
Timeshare Facility with an average rate of 2.35%, due 2025(3)	$	—	$	131
HGV Securitized Debt with a weighted average rate of 2.711%, due 2028	48		70
HGV Securitized Debt with a weighted average rate of 3.602%, due 2032	108		143
HGV Securitized Debt with a weighted average rate of 2.431%, due 2033	111		151
HGV Securitized Debt with a weighted average rate of 4.304%, due 2034	147		—
HGV Securitized Debt with a weighted average rate of 4.826%, due 2037	260		—
HGV Securitized Debt with a weighted average rate of 3.658%, due 2039	192		193
Diamond Resorts Premium Yield Facility with an average rate of 4.766%, due 2031	—		8
Diamond Resorts Conduit Facility with an average rate of 2.250%, due 2023	—		125
Diamond Resorts Conduit Facility with an average rate of 3.000%, due 2024	—		8
Diamond Resorts Owner Trust 2017 with a weighted average rate of 3.504%, due 2029	—		41
Diamond Resorts Owner Trust 2018 with a weighted average rate of 4.061%, due 2031	62		92
Diamond Resorts Owner Trust 2019 with a weighted average rate of 3.255%, due 2032	98		148
Diamond Resorts Owner Trust 2021 with a weighted average rate of 2.160%, due 2032	147		224
	1,173		1,334
Less: unamortized deferred financing costs(2)	(12)		(6)
	$	1,161	$	1,328

(1)As of September 30, 2022 and December 31, 2021, weighted-average interest rates were 3.661% and 2.876%, respectively.

(2)Amount relates to securitized debt only and does not include unamortized deferred financing costs of $4 million and $2 million as of September 30, 2022 and December 31, 2021, respectively, relating to our Timeshare Facility included in Other Assets in our unaudited condensed consolidated balance sheets.

(3)In connection with the amended and restated Timeshare Facility executed in May 2022, the revolving commitment period of the Timeshare Facility terminates in August 2024, however the repayment maturity date extends 12 months beyond the commitment termination date to August 2025.

During the nine months ended September 30, 2022, we terminated our conduit facility due in 2023 and 2024.

In August 2022, we completed a securitization of $269 million of gross timeshare financing receivables and issued approximately $153 million of 4.30 percent notes, $73 million of 4.74 percent notes, $26 million of 5.57 percent notes, and $17 million of 8.73 percent notes due January 2037. The securitized debt is backed by pledged assets, consisting primarily of a pool of timeshare financing receivables secured by first mortgages or deeds of trust on timeshare interest. The proceeds were primarily used to pay down the remaining borrowings of our Timeshare Facility and general corporate operating expenses. In connection with the securitization, we incurred $5 million in debt issuance costs.

In April 2022, we completed a securitization of $246 million of gross timeshare financing receivables and issued approximately $107 million of 3.61 percent notes, $84 million of 4.10 percent notes, $22 million of 4.69 percent notes, and $33 million of 6.79 percent notes due June 2034. The securitized debt is backed by pledged assets, consisting primarily of a pool of timeshare financing receivables secured by first mortgages or deeds of trust on timeshare interest and temporarily by a $34 million cash deposit. The securitized debt is a non-recourse obligation and is payable solely from the pool of timeshare financing receivables pledged as collateral to the debt. The proceeds were primarily used to pay down the remaining borrowings on one of our conduit facility and general corporate operating expenses. In connection with the securitization, we incurred $4 million in debt issuance costs.

The Timeshare Facility is a non-recourse obligation payable solely from the pool of timeshare financing receivables pledged as collateral and related assets. In May 2022, we Amended and Restated our Timeshare Facility agreement under new terms, which include increasing the borrowing capacity from $450 million to $750 million, allowing

us to borrow up to the maximum amount until May 2024 and requiring all amounts borrowed to be repaid in 2025. In connection with the amendment, we incurred $3 million in debt issuance costs.

We are required to deposit payments received from customers on the timeshare financing receivables securing the Timeshare Facility and Securitized Debt into depository accounts maintained by third parties. On a monthly basis, the depository accounts are utilized to make required principal, interest and other payments due under the respective loan agreements. The balances in the depository accounts were $59 million and $67 million as of September 30, 2022 and December 31, 2021, respectively, and were included in Restricted cash in our unaudited condensed consolidated balance sheets.

Debt Maturities

The contractual maturities of our debt and non-recourse debt as of September 30, 2022 were as follows:

($ in millions)	Debt		Non-recourse Debt		Total
Year
2022 (remaining)	$	4	$	188	$	192
2023	15		433		448
2024	15		164		179
2025	14		214		228
2026	13		65		78
Thereafter	2,605		109		2,714
	$	2,666	$	1,173	$	3,839