Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk from changes in interest rates, currency exchange rates, and debt prices. We manage our exposure to these risks by monitoring available financing alternatives, through pricing policies that may take into account currency exchange rates, and by entering into derivative arrangements.
We are exposed to interest rate risk through borrowings on our Warehouse Credit Facility and our Corporate Credit Facility, which includes our Revolving Corporate Credit Facility and our Term Loan, as these facilities bear interest at variable rates. All other interest bearing debt, including securitized debt, incurs interest at fixed rates. Changes in interest rates also impact the fair value of our fixed-rate vacation ownership notes receivable and our fixed-rate debt. We typically issue securitized debt backed by consumer loans twice a year. To the extent interest rates are higher relative to the interest rates in our financing programs on our loans being securitized at the time of a transaction, the excess spread we realize over the life of a securitization will be lower. While we adjust interest rates on our financing programs from time to time, such changes are typically not made in lockstep with the timing and magnitude of changes in broader market rates.
We manage the interest rate risk on our corporate debt through the use of a combination of fixed-rate debt and interest rate swaps that fix a portion of our variable-rate debt. At December 31, 2025, after considering the impact of our interest rate swap agreement and excluding finance leases, the interest rate applicable to 85% (approximately $2.9 billion) of our total corporate debt, was effectively fixed and the interest rate applicable to the remaining 15% (approximately $488 million) was variable. Assuming no outstanding balance on our Revolving Corporate Credit Facility, a 100 basis point increase in the underlying benchmark rate on our variable-rate debt at December 31, 2025 would result in an increase of approximately $5 million in annual cash interest due to the impact of our hedging arrangements discussed in Footnote 15 “Debt” to our Financial Statements. Assuming we had no outstanding hedging arrangements and no outstanding balance on our Revolving Corporate Credit Facility, a 100 basis point increase in the underlying benchmark rate on our variable-rate debt at December 31, 2025 would result in an annual increase in cash interest of approximately $8 million.
The following table presents the scheduled maturities and the total fair value as of December 31, 2025 for our financial instruments that are impacted by market risks:
($ in millions) Average
Interest
Rate Maturities by Period
2026 2027 2028 2029 2030 Thereafter Total Carrying Value Total
Fair
Value
Assets – Maturities represent expected principal receipts; fair values represent assets
Vacation ownership notes receivable — non-securitized 11.9% $ 107 $ 80 $ 72 $ 61 $ 48 $ 297 $ 665 $ 670
Vacation ownership notes receivable — securitized 13.4% $ 163 $ 168 $ 169 $ 169 $ 171 $ 1,060 $ 1,900 $ 1,975
Contracts receivable for financed VOI sales, net 12.9% $ 4 $ 5 $ 5 $ 6 $ 7 $ 68 $ 95 $ 95
Liabilities – Maturities represent expected principal payments; fair values represent liabilities
Securitized debt 4.8% $ (185) $ (189) $ (192) $ (191) $ (193) $ (1,223) $ (2,173) $ (2,196)
Term Loan 6.0% $ (8) $ (8) $ (8) $ (8) $ (8) $ (748) $ (788) $ (788)
Senior Notes
2028 Notes 4.8% $ — $ — $ (350) $ — $ — $ — $ (350) $ (346)
2029 Notes 4.5% $ — $ — $ — $ (500) $ — $ — $ (500) $ (479)
2033 Notes
6.5% $ — $ — $ — $ — $ — $ (575) $ (575) $ (553)
2026 Convertible Notes 0.0% $ (575) $ — $ — $ — $ — $ — $ (575) $ (564)
2027 Convertible Notes 3.3% $ — $ (575) $ — $ — $ — $ — $ (575) $ (548)
65
We are exposed to currency exchange rate risk through investments in foreign subsidiaries that transact business in a currency other than the U.S. dollar and through the revaluation of assets and liabilities denominated in a currency other than the functional currency.
We may use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates and currency exchange rates. As a matter of policy, we only enter into transactions that we believe will be highly effective at offsetting the underlying risk and we do not use derivatives for trading or speculative purposes. However, we cannot assure you that these transactions will be as effective as we anticipate.
66