Starwood 2011 Annual Report Download - page 141

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STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS
The following tables present future maturities of gross VOI notes receivable (in millions) and interest rates:
Securitized Unsecuritized Total
2012 .............................................. $ 73 $ 29 $ 102
2013 .............................................. 77 14 91
2014 .............................................. 79 12 91
2015 .............................................. 78 14 92
Thereafter .......................................... 283 100 383
Balance at December 31, 2011 ......................... $ 590 $ 169 $ 759
Weighted Average Interest Rates ........................ 12.84% 11.89% 12.58%
Range of interest rates ................................ 5to17% 5to17% 5to17%
For the vacation ownership and residential segment, the Company records an estimate of expected
uncollectibility on its VOI notes receivable as a reduction of revenue at the time it recognizes profit on a
timeshare sale. The Company holds large amounts of homogeneous VOI notes receivable and therefore assesses
uncollectibility based on pools of receivables. In estimating loss reserves, the Company uses a technique referred
to as static pool analysis, which tracks uncollectible notes for each year’s sales over the life of the respective
notes and projects an estimated default rate that is used in the determination of its loan loss reserve requirements.
As of December 31, 2011, the average estimated default rate for the Company’s pools of receivables was 9.9%.
The activity and balances for the Company’s loan loss reserve are as follows (in millions):
Securitized Unsecuritized Total
Balance at December 31, 2008 ............................ $— $91 $ 91
Provisions for loan losses .............................. — 64 64
Write-offs .......................................... — (61) (61)
Balance at December 31, 2009 ............................ — 94 94
Provisions for loan losses .............................. 14 32 46
Write-offs .......................................... — (52) (52)
Adoption of ASU No. 2009-17 .......................... 77 (4) 73
Other .............................................. (9) 9 —
Balance at December 31, 2010 ............................ 82 79 161
Provisions for loan losses .............................. 2 27 29
Write-offs .......................................... — (54) (54)
Other .............................................. (4) 4 —
Balance at December 31, 2011 ............................ $80 $56 $136
The primary credit quality indicator used by the Company to calculate the loan loss reserve for the vacation
ownership notes is the origination of the notes by brand (Sheraton, Westin, and Other) as the Company believes
there is a relationship between the default behavior of borrowers and the brand associated with the vacation
ownership property they have acquired. In addition to quantitatively calculating the loan loss reserve based on its
static pool analysis, the Company supplements the process by evaluating certain qualitative data, including the
aging of the respective receivables, current default trends by brand and origination year, and the FICO scores of
the buyers.
F-24