Wyndham warns on subprime, immigration…

March 4, 2008

images-1.jpegIt’s no longer news that the subprime crisis is, directly or indirectly, hitting companies in all sorts of industries, or at least making them nervous. Take Wyndham Worldwide (WYN). Wyndham has been busy selling timeshares to would-be vacationers (the company brags that it has the world’s largest “vacation ownership” business), but warns in its 10-K, filed Friday, that skittish credit markets and troubled bond insurers are making it toss and turn a bit at night.

As is the case with many firms, Wyndham doesn’t seem to be in any imminent danger, but these events cause an uneasy rumbling in the background that might or might not get louder as the year progresses.

Wyndham has joined the growing club of companies that have uttered the word “monoline'” in a regular filing for the first time. (The term describes insurers that insure only one type of business, and in this case refers specifically to bond insurers like Ambac and FGIC, who must long for the days when they existed in blissful obscurity.) Noting that a “significant portion” of its outstanding debt takes the form of asset-backed paper backed by receivables from its timeshare business, Wyndham has beefed up its disclosure about its securitization activities. Under the heading ‘”Liquidity Risk,” the firm explains – in far more detail than last year – that some of its asset-backed debt is insured by the monolines, so it may become more difficult and expensive to complete these deals. In fact, Wyndham’s securitization expenses rose in the last two quarters of 2007, thanks to “increased spreads over relevant benchmarks” and “increased monoline insurance costs.”

The company also alludes to concerns about selling asset-backed securities into a more skeptical credit market, tweaking last year’s language to make clear that sales of this kind of paper are dependent not just on the “ability” of investors to buy it, but their “willingness.” In other words, fool me once…

In another sign of the times – putting subprime woes aside for the moment – Wyndham stuck a new disclosure in its 10-K, entitled “Immigration.” The company points out that it’s now required by law to verify new employees’ social security numbers, which could make its hiring process more difficult and costly. Presumably this concern applies equally to other firms in the hotel business, or in any industry with similar personnel needs, but there doesn’t seem to be much disclosure out there on this point.

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