Starwood 2008 Annual Report Download - page 139

possible that the carrying value of the VOI notes receivable could materially change in 2009 if the economy
continues to worsen.
The interest rates of the owned VOI notes receivable are as follows:
2008 2007
December 31,
Range of stated interest rates .................................. 0%-18% 0%-18%
Weighted average interest rate.................................. 11.9% 11.8%
The maturities of the gross VOI notes receivable are as follows (in millions):
2008 2007
December 31,
Due in 1 year...................................................... $ 54 $ 50
Due in 2 years ..................................................... 47 35
Due in 3 years ..................................................... 52 38
Due in 4 years ..................................................... 64 50
Due in 5 years ..................................................... 66 56
Due beyond 5 years ................................................. 298 255
Total gross VOI notes receivable ....................................... $581 $484
The activity in the allowance for VOI loan losses was as follows (in millions):
Balance at January 1, 2008 .................................................. $68
Provision for loan losses .................................................. 73
Write-offs of uncollectible receivables ........................................ (50)
Balance at December 31, 2008 ............................................... $91
Note 10. Notes Receivable Securitizations
From time to time, the Company securitizes, without recourse, its fixed rate VOI notes receivable. To
accomplish these securitizations, the Company transfers a pool of VOI notes receivable to special purpose entities
(together with the special purpose entities in the next sentence, the “SPEs”) and the SPEs transfer the VOI notes
receivable to qualifying special purpose entities (“QSPEs”), as defined in SFAS No. 140, “Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities — a Replacement of FASB Statement
No. 125” (“SFAS No. 140”). To accomplish these securitizations, the Company transfers a pool of VOI notes
receivable to SPEs and the SPEs transfer the VOI notes receivable to a third party purchaser. The Company
continues to service the securitized VOI notes receivable pursuant to servicing agreements negotiated at arms-
length based on market conditions; accordingly, the Company has not recognized any servicing assets or liabilities.
All of the Company’s VOI notes receivable securitizations to date have qualified to be, and have been, accounted for
as sales in accordance with SFAS No. 140.
With respect to those transactions still outstanding at December 31, 2008, the Company retains economic
interests (the “Retained Interests”) in securitized VOI notes receivables through SPE ownership of QSPE beneficial
interests. The Retained Interests, which are comprised of subordinated interests and interest only strips in the related
VOI notes receivable, provides credit enhancement to the third-party purchasers of the related QSPE beneficial
interests. Retained Interests cash flows are limited to the cash available from the related VOI notes receivable, after
servicing and other related fees, absorbing 100% of any credit losses on the related VOI notes receivable and QSPE
fixed rate interest expense. With respect to those transactions still outstanding at December 31, 2008, the Retained
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STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)