DEBT AND NON-RECOURSE DEBT

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

DEBT AND NON-RECOURSE DEBT

DEBT AND NON-RECOURSE DEBT

Debt

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

($ in millions)	September 30, 2023		December 31, 2022
Debt(1)
Senior secured credit facility
Term loan with a rate of 8.431%, due 2028	$	1,274	$	1,284
Revolver with a rate of 7.320%, due 2026	118		40
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	34		29
Total debt, gross	2,776		2,703
Less: unamortized deferred financing costs and discounts(2)(3)	(46)		(52)
Total debt, net	$	2,730	$	2,651

(1)As of September 30, 2023 and December 31, 2022, weighted-average interest rates were 6.666% and 6.143%, respectively.

(2)Amount includes unamortized deferred financing costs related to our term loan and senior notes of $23 million and $17 million, respectively, as of September 30, 2023 and $26 million and $19 million, respectively, as of December 31, 2022. This amount also includes unamortized original issuance discounts of $6 million and $7 million as of September 30, 2023 and December 31, 2022, respectively.

(3)Amount does not include unamortized deferred financing costs of $3 million and $4 million as of September 30, 2023 and December 31, 2022, respectively, related to our revolving facility which are included in Other assets in our condensed consolidated balance sheets.

Senior secured credit facility

As of September 30, 2023, we had $16 million of letters of credit outstanding under the revolving credit facility and $1 million outstanding backed by cash collateral. We were in compliance with all applicable maintenance and financial covenants and ratios as of September 30, 2023. As of September 30, 2023, we have $866 million remaining borrowing capacity under the revolver facility.

On May 31, 2023, we amended our Credit Facility Agreement to transition from London Interbank Offered Rate (“LIBOR”) reference rates to Secured Overnight Financing Rate (“SOFR”) reference rates. We applied the optional expedients in ASC 848, Reference Rate Reform (“ASC 848”), accounting for the modification as a continuation of the

existing contract. Therefore, the transition did not require remeasurement at the modification date or a reassessment of previous accounting determinations, and the change in reference rates will be applied prospectively from the amendment date.

On October 6, 2023, we amended our Term loan under the Senior secured credit facility. Under the amendment, the new interest rate is SOFR plus a spread adjustment of 0.11% plus 2.75%, down from SOFR plus a spread adjustment of 0.11% plus 3.00%. Additionally, the interest rate floor for the Term loan was lowered from 0.50% to 0.00%.

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 SOFR based senior secured credit facility. During the second quarter of 2023, we amended certain interest rate swap contracts to transition from one-month LIBOR to one-month SOFR as the floating interest rate. The notional amount of the amended contracts was $550 million. The remaining $184 million of interest rate swaps were not amended as of September 30, 2023. We did not de-designate the interest rate swaps with a floating interest rate to one-month LIBOR as we are permitted to maintain the designation as part of the transitional relief in accordance with ASC 848. Transaction costs incurred for the swap amendments were de minimis.

As of September 30, 2023, these interest rate swaps convert the SOFR-based variable rate on our Term Loan to average fixed rates of 1.29% 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, 2023, the aggregate notional values of the interest rate swaps under our Term Loan was $700 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 condensed consolidated balance sheets. As of September 30, 2023 and December 31, 2022, the estimated fair value of our cash flow hedges were $61 million and $63 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, net of tax, in Accumulated other comprehensive income related to our derivative instruments during the nine months ended September 30, 2023:

	Net unrealized gain on derivative instruments
Balance as of December 31, 2022	$	48
Other comprehensive income before reclassifications, net	12
Reclassifications to net income	(13)
Balance as of September 30, 2023	$	47

Senior Notes due 2029 and 2031

The Senior Unsecured Notes are guaranteed on a senior unsecured basis by certain of our subsidiaries. We are in compliance with all applicable financial covenants as of September 30, 2023.

Non-recourse Debt

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

($ in millions)	September 30, 2023		December 31, 2022
Non-recourse debt(1)
Timeshare Facility with an average rate of 6.320%, due 2025(3)	$	—	$	98
HGV Securitized Debt with a weighted average rate of 2.711%, due 2028	27		42
HGV Securitized Debt with a weighted average rate of 3.602%, due 2032	72		98
HGV Securitized Debt with a weighted average rate of 2.431%, due 2033	76		101
HGV Securitized Debt with a weighted average rate of 4.304%, due 2034	128		168
HGV Securitized Debt with a weighted average rate of 4.826%, due 2037	206		251
HGV Securitized Debt with a weighted average rate of 5.937%, due 2038	284		—
HGV Securitized Debt with a weighted average rate of 3.658%, due 2039	103		134
Diamond Resorts Owner Trust 2019 with a weighted average rate of 3.255%, due 2032	59		87
Diamond Resorts Owner Trust 2021 with a weighted average rate of 2.160%, due 2033	96		134
Total non-recourse debt, gross	1,051		1,113
Less: unamortized deferred financing costs(2)	(13)		(11)
Total non-recourse debt, net	$	1,038	$	1,102

(1)As of September 30, 2023 and December 31, 2022, weighted-average interest rates were 4.304% and 3.539%, respectively.

(2)Amount relates to securitized debt only and does not include unamortized deferred financing costs of $3 million and $4 million as of September 30, 2023 and December 31, 2022, respectively, relating to our Timeshare Facility included in Other Assets in our condensed consolidated balance sheets.

(3)The revolving commitment period of the Timeshare Facility terminates in May 2024; however, the repayment maturity date extends 12 months beyond the commitment termination date to May 2025.

In August 2023, we completed a securitization of approximately $293 million of gross timeshare financing receivables and issued approximately $187 million of 5.72% notes, $79 million of 6.11% notes, and $27 million of 6.94% notes due January 2038. The securitized debt is backed by pledged assets, consisting primarily of a pool of timeshare financing receivables secured by first mortgages, deeds of trust, membership interests or timeshare interests (other than a fee simple interest in real estate) and temporarily by approximately $49 million on deposit in a prefunding account. 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 used to pay down in part some of the existing debt and for other general corporate purposes. Additionally, in connection with the securitization, we incurred $5 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. As of September 30, 2023, our Timeshare Facility has a remaining borrowing capacity of $750 million.

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 $90 million and $50 million as of September 30, 2023 and December 31, 2022, respectively, and were included in Restricted cash in our condensed consolidated balance sheets.

Debt Maturities

The contractual maturities of our debt and non-recourse debt as of September 30, 2023 were as follows:

($ in millions)	Debt		Non-recourse Debt		Total
Year
2023 (remaining three months)	$	4	$	79	$	83
2024	17		273		290
2025	16		204		220
2026	133		160		293
2027	13		119		132
Thereafter	2,593		216		2,809
Total	$	2,776	$	1,051	$	3,827