Credit Crunch Bites DVC Earnings

In today's Orlando Sentinel Jason Garcia reveals how the woes of the US banking industry are impacting Disney Vacation Club

According to the Sentinel, DVC recently lost access to a line of credit used to finance member point purchases.  Additionally the market for re-selling the mortgage debt is vanishing due to overall investor concerns in tough economic times. 

Packaging time-share mortgages together and selling them off to investors -- "securitizing" them -- has been a valuable profit center for Disney Vacation Club in recent years. Disney Co. Chief Financial Officer Tom Staggs said during a December conference with analysts that the practice generated about $40 million in operating profit last year for Vacation Club.

Despite the fact that most DVC purchases are financed for up to 10 years, Disney has historically been able to realize the interest revenue much quicker by selling-off the debt to investment groups.  The Sentinel quotes CFO Tom Staggs as saying that Disney would have "less or no" securitization in 2009.  Disney would continue to own the mortgage debt and profit from associated interest, but loses the immediate bottom line benefits of securitizing the notes.  

The complete article can be found at OrlandoSentinel.com.

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