SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 16, 1997
UACSC 1997 AUTO TRUSTS
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of incorporation)
333-06929 35-1937340
(Registration Number) (IRS Employer Identification No.)
9240 Bonita Beach Road
Suite 1109-A
Bonita Springs, Florida 34135
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (941) 948-1850
<PAGE>
Item 5. Other Events.
Computational Materials
-----------------------
On November 17, 1997, Computational Materials were distributed to
potential investors in connection with a proposed offering of
asset-backed certificates under Reg. No. 333-06929. Under the proposed
pooling and servicing agreement (the "Proposed Agreement"), UAC
Securitization Corporation ("UACSC") will act as the proposed
depositor and establish the UACSC 1997-D Auto Trust (the "Proposed
Trust") by selling and assigning the proposed trust property to
trustee in exchange for certificates, each of which represents a
fractional and undivided interest in the Proposed Trust. Pursuant to
the Proposed Agreement, Union Acceptance Corporation will act as
servicer. Such Computational Materials are filed with this Current
Report on Form 8-K on the basis of the position of the Division of
Corporation Finance set forth in Kidder, Peabody Acceptance
Corporation I (available May 20, 1994), Public Securities Association
(available May 27, 1994), Public Securities Association (available
February 17, 1995) and subsequent related no-action letters.
Item 7. Financial Statements and Exhibits.
Exhibit
Number Description
------ -----------
99 Computational Materials
-2-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized in the City of Bonita Springs, State of
Florida, on November 18, 1997.
UAC SECURITIZATION CORPORATION
as Depositor (Registrant)
/s/ Leeanne Graziani
----------------------------------------
By: Leeanne Graziani, Vice President
Computational Materials
- --------------------------------------------------------------------------------
UACSC 1997-D Auto Trust
$33,250,000.00[____]% Class A-1 Money Market Automobile Receivable
Backed Certificates
$71,250,000.00[____]% Class A-2 Automobile Receivable Backed Certificates
$31,925,000.00[____]% Class A-3 Automobile Receivable Backed Certificates
$44,725,000.00[____]% Class A-4 Automobile Receivable Backed Certificates
$22,997,164.67[____]% Class A-5 Automobile Receivable Backed Certificates
Class I Interest Only Automobile Receivable Backed Certificates
UAC Securitization Corporation
Depositor
Union Acceptance Corporation
Servicer
Computational
Materials
Neither the Trust, the Depositor nor any of their affiliates make any
representation as to the accuracy or completeness of the information herein. The
information contained in the attached materials is referred to as the
"Information". The Information is preliminary, and will be superseded by the
applicable Offering Documents (as defined below) and by any other information
subsequently filed with the Securities and Exchange Commission. The Information
addresses only certain aspects of the applicable security's characteristics and
thus does not provide a complete assessment of the characteristics. As such, the
information may not reflect the impact of all structural characteristics of the
security. The assumptions underlying the information, including structure and
collateral, may be modified from time to time to reflect changed circumstances.
The attached Term Sheet is not intended to be a prospectus and any investment
decision with respect to the Certificates should be made by you based solely
upon all of the information contained in the final prospectus of the UACSC Auto
Trust, as supplemented by a final prospectus supplement relating to the
securities. Such prospectus and prospectus supplement are referred to
collectively herein as the "Offering Documents." Under no circumstances shall
the Information presented constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of the securities in any jurisdiction
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of such jurisdiction.
The securities may not be sold nor may an offer to buy be accepted prior to the
delivery of the Offering Documents relating to the securities. All information
described herein is preliminary, limited in nature and subject to completion or
amendment. No representation is made that the above referenced securities will
actually perform as described in any scenario presented. The Depositor has not
prepared, reviewed or participated in the preparation hereof, is not responsible
for the accuracy hereof and has not authorized the dissemination hereof.
Offering Documents may be obtained by contacting the Salomon Brothers Inc
Syndicate Desk at (212) 783-3727 or the NationsBanc Montgomery Securities, Inc.
Syndicate Desk at (704) 386-9690.
The attached Term Sheet has been prepared by Union Acceptance
Corporation. Neither Salomon Brothers Inc ("Salomon Brothers") nor NationsBanc
Montgomery Securities, Inc. ("NationsBanc Montgomery" and together with Salomon
Brothers, the "Underwriters") nor any of their respective affiliates makes any
representation as to the accuracy or completeness of the Information herein. The
Information contained herein is preliminary and will be superseded by the
applicable Offering Documents and by any other information subsequently filed
with the Securities and Exchange Commission.
[THE FOLLOWING APPEARS ON THE BOTTOM OF EACH PAGE]
This page must be accompanied by the disclaimer on the cover page of these
materials. If you did not receive such a disclaimer
please contact your Financial Advisor at Salomon Brothers
or NationsBanc Montgomery immediately.
<PAGE>
The Information addresses only certain aspects of the applicable
securities characteristics and thus does not provide a complete assessment of
the characteristics. As such, the Information may not reflect the impact of all
structural characteristics of the securities. The assumptions underlying the
Information, including structure, Trust property and collateral, may be modified
from time to time to reflect changed circumstances.
Although a registration statement (including a form of prospectus)
relating to the securities discussed in this communication has been filed with
the Securities and Exchange Commission and is effective, the Offering Documents
relating to the securities discussed in this communication has not been filed
with the Securities and Exchange Commission. Prospective purchasers are referred
to the Offering Documents relating to the securities discussed in this
communication for definitive Information on any matter discussed in this
communication. Any investment decision should be based only on the data in the
Offering Documents and the then current version of the Information. Offering
Documents contain data that is current as of their publication dates and after
publication may no longer be complete or current. Offering Documents may be
obtained by contacting the Salomon Syndicate Desk at 212-783-3727 or the
NationsBanc Montgomery Syndicate Desk at (704) 386-9690.
<PAGE>
UACSC 1997-D Auto Trust
UAC Securitization Corporation, Depositor
Union Acceptance Corporation, Servicer
Subject to Revision
Term Sheet dated November 17, 1997
Issuer ...........................UACSC 1997-D Auto Trust (the "Trust").
Depositor..........................UAC Securitization Corporation (the
"Depositor").
Servicer ..........................Union Acceptance Corporation (in its capacity
as servicer, the "Servicer," otherwise
"UAC").
Trustee ..........................Harris Trust and Savings Bank.
Underwriters.......................Salomon Brothers Inc (Lead) and NationsBanc
Montgomery Securities, Inc. (Co).
The Certificates .................The Trust will be formed and will issue the
Certificates on or about November 25, 1997
(the "Closing Date") pursuant to a pooling
and servicing agreement (the "Pooling and
Servicing Agreement"). The "Certificates"
will consist of: (i) _____% Class A-1 Money
Market Automobile Receivable Backed
Certificates in the aggregate principal
amount of $33,250,000.00 (the "Class A-1
Certificates"); (ii) _____% Class A-2
Automobile Receivable Backed Certificates in
the aggregate principal amount of
$71,250,000.00 (the "Class A-2
Certificates"); (iii) _____% Class A-3
Automobile Receivable Backed Certificates in
the aggregate principal amount of
$31,925,000.00 (the "Class A-3
Certificates"); (iv) _____% Class A-4
Automobile Receivable Backed Certificates in
the aggregate principal amount of
$44,725,000.00 (the "Class A-4
Certificates"); (v) _____% Class A-5
Automobile Receivable Backed Certificates in
the aggregate principal amount of
$22,997,164.67 (the "Class A-5 Certificates"
and together with the Class A-1 Certificates,
the Class A-2 Certificates, the Class A-3
Certificates, the Class A-4 Certificates and
the Class A-5 Certificates, the "Class A
Certificates"); (vi) the Class I Interest
Only Automobile Receivable Backed
Certificates (the "Class I Certificates") and
(vii) the Class IC Automobile Receivable
Backed Certificate (the "Class IC
Certificate"). The Class I Certificates are
interest only certificates and will not
receive distributions of principal. The Class
IC Certificate will be issued to the
Depositor on the Closing Date and is not
being offered hereby. The Class A
Certificates and the Class I Certificates are
referred to herein as the "Offered
Certificates."
<PAGE>
Each of the Certificates will represent a
fractional undivided interest in the Trust.
The Trust assets will include a pool of
simple and precomputed interest installment
sale and installment loan contracts
originated in various states in the United
States of America, secured by new and used
automobiles, light trucks and vans (the
"Receivables"), certain monies due thereunder
as of and after November 12, 1997 (the
"Cutoff Date"), security interests in the
related vehicles financed thereby (the
"Financed Vehicles"), monies on deposit in
the account into which all payments made in
respect of the Receivables will be deposited
(the "Certificate Account") and the proceeds
thereof, any proceeds from claims on certain
insurance policies relating to the Financed
Vehicles or the related obligors (each, an
"Obligor"), any lender's single interest
insurance policy, the Spread Account (as
defined herein) for the benefit of the Class
A Certificateholders, the Class I
Certificateholders and the Surety Bond
Issuer, the Surety Bond for the benefit of
the Class A Certificateholders and Class I
Certificateholders and certain rights under
the Pooling and Servicing Agreement. Interest
paid to the Certificateholders on the first
Distribution Date will be based upon the
amount of interest accruing from the Closing
Date and will therefore not include a full
month's interest.
The Class A Certificates .........Interest. Interest will be distributable on
the third business day after the 5th day of
each month (each, a "Distribution Date")
beginning December 10, 1997, to holders of
record as of the last day of the calendar
month immediately preceding the calendar
month in which such Distribution Date occurs
(the "Record Date") of the Class A
Certificates (the "Class A
Certificateholders," which includes the
"Class A-1 Certificateholders," the "Class
A-2 Certificateholders," the "Class A-3
Certificateholders", the "Class A-4
Certificateholders" and the "Class A-5
Certificateholders").
The maximum amount of interest distributable
to the Class A-1 Certificateholders on any
Distribution Date is the product of 1/360th
of the applicable pass-through rate of _____%
for the Class A-1 Certificates (the "Class
A-1 Pass-Through Rate"), the actual number of
days elapsed during the related Collection
Period and the aggregate outstanding
principal balance of the Class A-1
Certificates (the "Class A-1 Certificate
Balance") as of the preceding Distribution
Date (after giving effect to all
distributions to Certificateholders on such
date) or, in the case of the first
Distribution Date, as of the Closing Date.
The maximum amount of interest distributable
to the Class A-2 Certificateholders, the
Class A-3 Certificateholders and the Class
A-4 Certificateholders on any Distribution
Date is the product of 1/12th of the
<PAGE>
applicable pass-through rate of _____% for
the Class A-2 Certificates (the "Class A-2
Pass-Through Rate"), the applicable
pass-through rate of _____% for the Class A-3
Certificates (the "Class A-3 Pass-Through
Rate") and the applicable pass-through rate
of _____% for the Class A-4 Certificates (the
"Class A-4 Pass-Through Rate") multiplied by
the aggregate outstanding principal balance
of the Class A-2 Certificates, the Class A-3
Certificates and the Class A-4 Certificates
(respectively, the "Class A-2 Certificate
Balance," the "Class A-3 Certificate Balance"
and the "Class A-4 Certificate Balance") as
of the preceding Distribution Date (after
giving effect to all distributions to
Certificateholders on such date) or, in the
case of the first Distribution Date, as of
the Closing Date.
The maximum amount of interest distributable
to the Class A-5 Certificateholders on any
Distribution Date is the product of 1/12th of
the applicable pass-through rate of _____%
for the Class A-5 Certificates (which rate
shall be increased by 0.50% for each
Distribution Date on and after the Clean-Up
Call Date, if required) (as defined below)
(the "Class A-5 Pass-Through Rate")
multiplied by the aggregate outstanding
principal balance of the Class A-5
Certificates (the "Class A-5 Certificate
Balance" and together with the Class A-1
Certificate Balance, the Class A-2
Certificate Balance, the Class A-3
Certificate Balance and the Class A-4
Certificate Balance, the "Certificate
Balance" ) as of the preceding Distribution
Date (after giving effect to all
distributions to Certificateholders on such
date) or, in the case of the first
Distribution Date, as of the Closing Date.
Interest on the Class A-1 Certificates will
be calculated on the basis of a 360-day year
and the actual number of days elapsed during
the preceding Collection Period or, in the
case of the first Distribution Date, the
number of days from the Closing Date
remaining in the month of the closing.
Interest on the Class A-2 Certificates, the
Class A-3 Certificates, the Class A-4
Certificates and the Class A-5 Certificates
will be calculated on the basis of a 360-day
year consisting of twelve 30-day months or,
in the case of the first Distribution Date,
the number of days from the Closing Date
remaining in the month of the closing
(assuming a 30-day month). See "The Offered
Certificates -- Distributions." The effective
yield on the Class A Certificates will be
below that otherwise produced by the
applicable pass-through rate because the
distribution of Monthly Principal (as defined
below) and Class A Monthly Interest (as
defined below) in respect of any given month
will not be made until the third business day
after the fifth calendar day of the following
month. See "Yield and Prepayment
Considerations" herein.
<PAGE>
"Class A Monthly Interest" for any
Distribution Date will equal the sum of Class
A-1 Monthly Interest, Class A-2 Monthly
Interest, Class A-3 Monthly Interest, Class
A-4 Monthly Interest and Class A-5 Monthly
Interest (each as defined below).
"Class A-1 Monthly Interest" will equal (i)
for the first Distribution Date, the product
of the following: (1/360th of the Class A-1
Pass-Through Rate) multiplied by (the number
of days remaining in the month of the Closing
Date) multiplied by (the Class A-1
Certificate Balance at the Closing Date) and
(ii) with respect to each subsequent
Distribution Date, the product of 1/360th of
the Class A-1 Pass-Through Rate, the number
of days in the preceding Collection Period
and the Class A-1 Certificate Balance on the
preceding Distribution Date (after giving
effect to any distribution of Monthly
Principal required to be made on such
preceding Distribution Date).
"Class A-2 Monthly Interest," "Class A-3
Monthly Interest" and "Class A-4 Monthly
Interest" will equal (i) for the first
Distribution Date, the product of the
following: (one-twelfth of the Class A-2
Pass-Through Rate, the Class A-3 Pass-through
Rate or the Class A-4 Pass-Through Rate, as
the case may be) multiplied by (the number of
days remaining in the month of the Closing
Date, assuming a 30 day month, from the
Closing Date divided by 30) multiplied by
(the Class A-2 Certificate Balance, the Class
A-3 Certificate Balance or the Class A-4
Certificate Balance, as the case may be, on
the Closing Date) and (ii) with respect to
each subsequent Distribution Date, the
product of one-twelfth of the Class A-2
Pass-Through Rate, the Class A-3 Pass-Through
Rate or the Class A-4 Pass-Through Rate, as
the case may be, and the Class A-2
Certificate Balance, the Class A-3
Certificate Balance or the Class A-4
Certificate Balance, as the case may be, on
the preceding Distribution Date (after giving
effect to any distribution of Monthly
Principal required to be made on such
preceding Distribution Date).
"Class A-5 Monthly Interest" will equal (i)
for the first Distribution Date, the product
of the following: (one-twelfth of the Class
A-5 Pass-Through Rate) multiplied by (the
number of days remaining in the month of the
Closing Date, assuming a 30-day month, from
the Closing Date divided by 30) multiplied by
(the Class A-5 Certificate Balance on the
Closing Date) and (ii) with respect to each
subsequent Distribution Date, the product of
one-twelfth of the Class A-5 Pass-Through
Rate (as adjusted on and after the Clean-Up
Call Date, if required) and the Class A-5
Certificate Balance on the preceding
Distribution Date (after giving effect to any
distribution of Monthly Principal required to
be made on such preceding Distribution Date).
<PAGE>
Principal. On each Distribution Date, the
Trustee will distribute as principal to the
Class A Certificateholders in a maximum
aggregate amount equal to the aggregate
outstanding principal amount of the
Receivables (the "Pool Balance") on the last
day of the second preceding calendar month
(or, in the case of the first Distribution
Date, as of the Cutoff Date) less the Pool
Balance on the last day of the immediately
preceding calendar month ("Monthly
Principal"). Monthly Principal will be
distributed sequentially to the Class A
Certificateholders as follows: (i) to the
Class A-1 Certificateholders until the Class
A-1 Certificate Balance has been reduced to
zero; (ii) to the Class A-2
Certificateholders until the Class A-2
Certificate Balance has been reduced to zero;
(iii) to the Class A-3 Certificateholders
until the Class A-3 Certificate Balance has
been reduced to zero; (iv) to the Class A-4
Certificateholders until the Class A-4
Certificate Balance has been reduced to zero
and (v) to the Class A-5 Certificateholders
until the Class A-5 Certificate Balance has
been reduced to zero (the "Principal
Distribution Sequence"). For purposes of
determining Monthly Principal, the unpaid
principal balance of a Defaulted Receivable
or a Purchased Receivable will be deemed to
be zero on and after the date such Receivable
became a Defaulted Receivable or a Purchased
Receivable.
The final scheduled Distribution Date of the
Class A-1 Certificates will be November 11,
1998 (the "Class A-1 Final Scheduled
Distribution Date"). The final scheduled
Distribution Date of the Class A-2
Certificates will be March 8, 2001 (the
"Class A-2 Final Scheduled Distribution
Date"). The final scheduled Distribution Date
of the Class A-3 Certificates will be
February 8, 2002 (the "Class A-3 Final
Scheduled Distribution Date"). The final
scheduled Distribution Date of the Class A-4
Certificates will be July 9, 2003 (the "Class
A-4 Final Scheduled Distribution Date"). The
final scheduled Distribution Date of the
Class A-5 Certificates will be May 10, 2005
(the "Class A-5 Final Scheduled Distribution
Date").
No Monthly Principal will be distributed (i)
to the Class A-2 Certificateholders until the
Class A-1 Certificate Balance has been
reduced to zero; (ii) to the Class A-3
Certificateholders until the Class A-2
Certificate Balance has been reduced to zero;
(iii) to the Class A-4 Certificateholders
until the Class A-3 Certificate Balance has
been reduced to zero; and (iv) to the Class
A-5 Certificateholders until the Class A-4
Certificate Balance has been reduced to zero.
Since the rate of payment of principal of
each class of Class A Certificates depends
upon the rate of payment of principal
(including prepayments) of the Receivables,
the final distribution in respect of each
class of Class A Certificates could occur
significantly earlier than the respective
final scheduled distribution dates. See "The
Offered Certificates -- Distributions."
<PAGE>
The Class I Certificates...........Interest. The Class I Certificates are
interest only certificates which will not be
entitled to any principal distributions.
Interest will accrue on the Notional
Principal Amount (defined below) of the Class
I Certificates at the rate of 1.65% per annum
(the "Class I Pass-Through Rate"). The
Notional Principal Amount represents a
designated principal component of the
Receivables, originally $151,027,447.84 (the
"Original Notional Principal Amount").
Interest with respect to the Class I
Certificates will accrue on the basis of a
360-day year consisting of twelve 30-day
months or, in the case of the first
Distribution Date, the number of days from
the Closing Date remaining in the month of
the closing (assuming a 30-day month). On
each Distribution Date, the Trustee shall
distribute pro rata to holders of Class I
Certificates (the "Class I
Certificateholders") of record as of the
preceding Record Date, Class I Monthly
Interest at the Class I Pass-Through Rate on
the Notional Principal Amount outstanding on
the immediately preceding Distribution Date
(after giving effect to any reduction of the
Notional Principal Amount on such
Distribution Date) or, in the case of the
first Distribution Date, as of the Closing
Date. Holders of the Class I Certificates
will not be entitled to any distributions
after the Notional Principal Amount thereof
has been reduced to zero.
Planned Amortization Feature; Calculation of
the Class I Notional Principal Amount. The
Class I Certificates represent an
interest-only planned amortization class. The
planned amortization feature is intended to
reduce the uncertainty to investors in the
Class I Certificates with respect to
prepayments. Because the Class I Certificates
will receive interest based on the Notional
Principal Amount, this is accomplished by
basing the reduction in the Notional
Principal Amount on a principal paydown
schedule rather than on the reduction in the
actual principal balances of the Receivables,
as described below. The amount which will be
paid to the Class I Certificateholders is
expected to be derived from the excess of
interest earned on the Receivables over the
Class A Monthly Interest and the monthly
Servicing Fee payable to the Servicer (the
"Monthly Servicing Fee"). Solely for the
purpose of calculating the amount payable
with respect to the Class I Certificates, the
Certificate Balance will be divided into two
principal components, the "PAC Component" and
the "Companion Component." The sum of the PAC
Component and the Companion Component will at
all times equal the then aggregate unpaid
Certificate Balance. The "Notional Principal
Amount" of the Class I Certificates at any
time will be equal to the principal balance
of the PAC Component as calculated based on
the allocations of principal payments
described below, originally $151,027,447.84.
<PAGE>
The Pooling and Servicing Agreement
establishes a schedule (a "Planned Notional
Principal Amount Schedule") which is set
forth herein under "The Offered
Certificates--The Class I
Certificates-Calculation of Notional
Principal Amount." On each Distribution Date,
Monthly Principal will be allocated first to
the PAC Component in an amount up to the
amount necessary to reduce the amount thereof
to the Planned Notional Principal Amount for
such Distribution Date, as set forth in the
Planned Notional Principal Amount Schedule,
second, to the Companion Component until the
outstanding amount thereof is reduced to zero
and third, to the PAC Component, without
regard to the Planned Notional Principal
Amount. As described above, the Notional
Principal Amount of the Class I Certificates
will be equal to the outstanding amount of
the PAC Component and thus will be reduced as
the PAC Component is reduced.
The Planned Notional Principal Amount
Schedule has been prepared on the basis of
the assumption, among other things, that the
Receivables prepay at a constant rate between
1.6% and 2.5% ABS (as defined herein), an
assumed annualized constant rate of
prepayments and the prepayment model used in
this Term Sheet. The yield to maturity of the
Class I Certificates will be sensitive to the
rate and timing of principal payments
(including prepayments) on the Receivables
and may fluctuate significantly from time to
time. If the Receivables prepay at a constant
rate within the range assumed in preparing
the Planned Notional Principal Amount
Schedule, the PAC Component (and the Notional
Principal Amount of the Class I Certificates)
will be reduced in accordance with the
Planned Notional Principal Amount Schedule.
If the Receivables prepay at a constant rate
higher than 2.5% ABS, the amount of the
Companion Component will be reduced to zero
more quickly and the amount of the PAC
Component (and the Notional Principal Amount
of the Class I Certificates) will be reduced
more quickly than provided in the Planned
Notional Principal Amount Schedule, thereby
reducing the yield to holders of the Class I
Certificates. In general, a rapid rate of
principal prepayments (including liquidations
due to losses, repurchases and other
dispositions) will have a material negative
effect on the yield to maturity of the Class
I Certificates.
The Planned Notional Principal Amount
Schedule is set forth herein under "The
Offered Certificates -- The Class I
Certificates -- Calculation of Notional
Principal Amount." The Planned Notional
Principal Amount Schedule has been prepared
on the basis of certain assumptions, which
are described herein under "The Offered
Certificates -- Class I Yield
Considerations." Prospective investors in the
Class I Certificates should fully consider
the associated risks, including the risk that
a rapid rate of prepayments could result in
the failure of investors in the Class I
Certificates to recoup their initial
investment. See "Risk Factors -- Prepayment
Risks Associated with the Class I
Certificates," "Yield and Prepayment
Considerations -- The Class I Certificates."
<PAGE>
Subordination; Spread Account......The Depositor will establish an account (the
"Spread Account") on the Closing Date. On
each Distribution Date thereafter, the
Servicer will deposit into the Spread Account
any amounts remaining in the Certificate
Account after the payment on such date of all
amounts owing pursuant to the Pooling and
Servicing Agreement to the Certificateholders
(other than the Class IC Certificateholder),
the Surety Bond Issuer, the Servicer for the
Monthly Servicing Fee and any permitted
reimbursement of outstanding Advances. In the
event that Available Funds (as defined below)
are insufficient on any Distribution Date
prior to the termination of the Trust (after
payment of the Monthly Servicing Fee) to pay
Monthly Principal and Monthly Interest to the
Class A Certificateholders and the Class I
Certificateholders, draws will be made on the
Spread Account to the extent of the balance
thereof and, if necessary, the Surety Bond,
in the manner and to the extent described
herein. The Spread Account is solely for the
benefit of the Class A Certificateholders,
the Class I Certificateholders and the Surety
Bond Issuer. In the event the amount on
deposit in the Spread Account is zero, after
giving effect to any draws thereon for the
benefit of the Class A Certificateholders and
the Class I Certificateholders, and there is
a default under the Surety Bond, any losses
on the Receivables will be borne directly pro
rata by all classes of Class A
Certificateholders (to the extent of the
classes or class of Class A Certificates
which are outstanding at such time) and Class
I Certificateholders, as described herein.
Any such reduction of the principal balance
of the Receivables due to losses on the
Receivables may also result in a reduction of
the Class I Notional Principal Amount. See
"The Offered Certificates-- Distributions."
"Available Funds" for any Distribution Date
and the related Collection Period will
consist of all payments on simple interest
Receivables received during such Collection
Period, the scheduled payments on Precomputed
Receivables (as defined below) received
during such Collection Period, the net amount
to be transferred to the Certificate Account
in respect of add on interest on Precomputed
Receivables for such Distribution Date, all
advances of funds in respect of delinquent
Receivables made by the Servicer for such
Collection Period (each, an "Advance"),
liquidation proceeds in respect of defaulted
receivables and the purchase amount for all
Receivables that UAC was required to purchase
during the preceding Collection Period.
"Precomputed Receivables" are rule of 78's
Receivables (as opposed to simple interest
Receivables) which will be amortized by the
Trust using the actuarial method.
<PAGE>
The Class A Certificates and Class I
Certificates will be senior in right and
interest to the Class IC Certificate. The
Class A Certificateholders and the Class I
Certificateholders will have equal rights
with respect to amounts collected on or with
respect to the Receivables and other assets
of the Trust in the event of a shortfall. The
Trustee will first withdraw funds from the
Spread Account on each Distribution Date to
the extent of any shortfall in the Monthly
Servicing Fee, permitted reimbursements of
outstanding Advances, Monthly Interest and
Monthly Principal as described above. Any
amount on deposit in the Spread Account on
any Distribution Date in excess of the
Required Spread Amount (defined below) after
all other required deposits thereto and
withdrawals therefrom have been made, and
after payment therefrom of all amounts due
the Surety Bond Issuer will be distributed to
the holder of the Class IC Certificate (the
"Class IC Certificateholder"). Any amount so
distributed to the Class IC Certificateholder
will no longer be an asset of the Trust.
While it is intended that the amount on
deposit in the Spread Account will grow over
time, through the deposit thereto of the
excess collections, if any, on the
Receivables, to the Required Spread Amount,
there can be no assurance that such growth
will actually occur. The "Required Spread
Amount" with respect to any Distribution Date
will equal 1.25% of the initial Pool Balance.
If the average aggregate yield of the
Receivables pool in excess of losses falls
below a prescribed level set forth in the
Insurance Agreement, the Required Spread
Amount will be increased to 7% of the Pool
Balance. Upon and during the continuance of
an Event of Default or upon the occurrence of
certain other events described in the
Insurance Agreement generally involving a
failure of performance by the Servicer or a
material misrepresentation made by the
Servicer under the Pooling and Servicing
Agreement or the Insurance Agreement, the
Required Spread Amount shall be equal to the
Surety Bond Amount, as further described
below. Under certain circumstances, the
Required Spread Amount may be reduced.
Surety Bond........................The Depositor shall obtain an irrevocable
surety bond (the "Surety Bond") issued by the
Surety Bond Issuer (as specified below), for
the benefit of the Trustee on behalf of the
Class A Certificateholders and the Class I
Certificateholders. The Trustee shall draw on
the Surety Bond in the event that sufficient
funds are not available (after payment of the
Monthly Servicing Fee and after withdrawals
from the Spread Account to pay the Class A
Certificateholders and the Class I
Certificateholders on any Distribution Date
in accordance with the Pooling and Servicing
Agreement) to distribute Monthly Interest and
Monthly Principal, up to the Surety Bond
Amount.
<PAGE>
Surety Bond Amount.................The term "Surety Bond Amount" means with
respect to any Distribution Date: (x) the sum
of (A) the lesser of (i) the Certificate
Balance (after giving effect to any
distribution of Available Funds and any funds
withdrawn from the Spread Account to pay
Monthly Principal on such Distribution Date)
and (ii) the Net Principal Surety Bond
Amount, plus (B) Class A Monthly Interest,
plus (C) Class I Monthly Interest, plus (D)
the Monthly Servicing Fee; less (y) all
amounts on deposit in the Spread Account on
such Distribution Date. "Net Principal Surety
Bond Amount" means the Certificate Balance as
of the first Distribution Date minus all
amounts previously drawn on the Surety Bond
or from the Spread Account with respect to
Monthly Principal.
Legal Investment...................The Class A-1 Certificates will be eligible
securities for purchase by money market funds
under Rule 2a-7 of the Investment Company Act
of 1940, as amended.
Surety Bond Issuer.................Capital Markets Assurance Corporation.
Optional Sale......................The Class IC Certificateholder has the right
to cause the Trustee to sell all of the
Receivables (referred to herein as an
"Optional Sale") as of the last day of any
Collection Period, on which (i) the
Certificate Balance as of the prior
Distribution Date was equal to or less than
10% or less of the initial Certificate
Balance and (ii) the Notional Principal
Amount of the Class I Certificates had been
reduced to zero. The purchase price
applicable to the Optional Sale shall be
equal to the fair market value of the
Receivables (but not less than the sum of (i)
their aggregate outstanding principal balance
plus accrued and unpaid interest thereon and
(ii) any amounts due the Surety Bond Issuer).
Clean-Up Call Date.................If the Class IC Certificateholder does not
exercise its rights with respect to the
Optional Sale on or before the Distribution
Date on which the Optional Sale was first
permitted (the "Clean-Up Call Date"), the
Class A-5 Pass-Through Rate will be increased
by 0.50% for each Distribution Date on and
after the Clean-Up Call Date.
Tax Status.........................In the opinion of special tax counsel to the
Depositor, the Trust will not be treated as
an association taxable as a corporation or as
a "publicly traded partnership" taxable as a
corporation. The Trustee and the
Certificateholders will agree to treat the
Trust as a partnership for federal income tax
purposes, which will not be subject to
federal income tax at the Trust level.
Ratings ..........................As a condition to the issuance of the Offered
Certificates, the Class A Certificates and
the Class I Certificates must be rated in the
highest category by Moody's Investors
Service, Inc. and Standard & Poor's Ratings
Group, a division of The McGraw-Hill
Companies (each a "Rating Agency" and
collectively, the "Rating Agencies"). The
<PAGE>
ratings of the Class I Certificates do not
address the possibility that rapid rates of
principal prepayments could result in a
failure of the holders of the Class I
Certificates to fully recover their
investment. A security rating is not a
recommendation to buy, sell or hold
securities and may be subject to revision or
withdrawal at any time by the assigning
rating agency. See "Risk Factors --
Certificate Rating."
ERISA Considerations...............Subject to the considerations discussed under
"ERISA Considerations" in the Prospectus, the
Class A Certificates and the Class I
Certificates may be eligible for purchase by
employee benefit plans subject to Title I of
the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). Any benefit
plan fiduciary considering the purchase of an
Offered Certificate should, among other
things, consult with experienced legal
counsel in determining whether all required
conditions for such purchase have been
satisfied.
<PAGE>
RISK FACTORS
Investors should carefully consider the information set forth below as
well as the other investment considerations described in this Term Sheet.
Limited Liquidity
There is currently no secondary market for the Offered Certificates.
The Underwriters currently intend to make a market in the Offered Certificates,
but are under no obligation to do so. There can be no assurance that a secondary
market will develop or, if one does develop, that it will provide
Certificateholders with liquidity of investment or that it will continue for the
life of the Offered Certificates.
Certificates Solely Obligations of the Trust
The Offered Certificates are interests in the Trust only and do not
represent the obligation of any other person. The Class A Certificateholders and
the Class I Certificateholders are senior in right and interest to the Class IC
Certificateholder (as described under "The Offered Certificates --
Distributions"). The Trustee will withdraw funds from the Spread Account, up to
the full balance of the funds on deposit in such account, only in the event that
Available Funds are insufficient in accordance with the Pooling and Servicing
Agreement to distribute Monthly Interest and Monthly Principal (after payment of
the Monthly Servicing Fee). The amount on deposit in the Spread Account is
intended to increase over time to an amount equal to the Required Spread Amount.
There is no assurance that such growth will occur or that the balance in the
Spread Account will always be sufficient to assure payment in full of Monthly
Principal and Monthly Interest. If the amount on deposit in the Spread Account
is reduced to zero after giving effect to all amounts to be deposited to and
withdrawn from the Spread Account pursuant to the Pooling and Servicing
Agreement, on any Distribution Date prior to termination of the Trust, the
Trustee will draw on the Surety Bond, in an amount equal to the shortfall in
respect of Monthly Interest and Monthly Principal, up to the Surety Bond Amount.
If the Spread Account is reduced to zero and there is a default under the Surety
Bond, the Trust will depend solely on current distributions on the Receivables
to make distributions on the Offered Certificates and distributions of interest
and principal on the Offered Certificates may be made pro rata based on the
amounts to which Certificateholders of each class are entitled as set forth
under "The Offered Certificates -- Distributions." See "The Receivables Pool --
Delinquencies, Repossessions and Net Losses."
Prepayment Risks Associated with the Class I Certificates
If the Receivables prepay at a constant rate within the range assumed
in preparing the Planned Notional Principal Amount Schedule, the PAC Component
(and the Notional Principal Amount) will be reduced in accordance with the
Planned Notional Principal Amount Schedule. If the Receivables prepay at a
constant rate higher than 2.5% ABS, the Notional Principal Amount will be
reduced more quickly than provided in the Planned Notional Principal Amount
Schedule, thereby reducing the yield to holders of the Class I Certificates. In
general, a rapid rate of principal prepayments will have a material negative
effect on the yield to maturity of the Class I Certificates. Prospective
investors should fully consider the associated risks, including the risk that a
rapid rate of prepayments could result in the failure of investors in the Class
I Certificates to recoup their initial investment. See "Yield and Prepayment
Considerations -- The Class I Certificates" herein.
Certificate Rating
It is a condition of issuance of the Offered Certificates that the
Class A Certificates and the Class I Certificates be rated in the highest
applicable category by the Rating Agencies. Such ratings will reflect only the
views of the relevant rating agency. There is no assurance that any such rating
will continue for any period of time or that it will not be revised or withdrawn
entirely by such rating agency if, in its judgment, circumstances so warrant. A
revision or withdrawal of such rating may have an adverse effect on the market
price of the Offered Certificates. The ratings of the Class I Certificates do
not address the possibility that rapid rates of principal prepayments could
result in a failure of the holders of the Class I Certificates to fully recover
their investment. A security rating is not a recommendation to buy, sell or hold
securities.
<PAGE>
FORMATION OF THE TRUST
The Depositor will establish the Trust by selling and assigning the
Trust property, as described below, to the Trustee in exchange for the Offered
Certificates. The Depositor will retain the Class IC Certificate. UAC will be
responsible for servicing the Receivables pursuant to the Pooling and Servicing
Agreement and will be compensated for acting as the Servicer. To facilitate
servicing and to minimize administrative burden and expense, the Servicer will
be appointed custodian of the Receivables by the Trustee, but will not stamp the
Receivables to reflect the sale and assignment of the Receivables to the Trust
or make any notation of the Trust's lien on the certificates of title of the
Financed Vehicles. In the absence of such notation on the certificates of title,
the Trustee may not have perfected security interests in the Financed Vehicles
securing the Receivables. Under the terms of the Pooling and Servicing
Agreement, UAC may delegate its duties as Servicer and custodian; however, any
such delegation will not relieve UAC of its liability and responsibility with
respect to such duties.
The Depositor will establish the Spread Account for the benefit of the
Class A Certificateholders, the Class I Certificateholders and the Surety Bond
Issuer and will obtain the Surety Bond. Withdrawals from the Spread Account and,
only after such withdrawals, draws on the Surety Bond will be made in accordance
with the Pooling and Servicing Agreement in the event that sufficient funds are
not available (after payment of the Monthly Servicing Fee) to distribute, in the
case of Class I Monthly Interest, Class A Monthly Interest and Monthly
Principal, up to the Surety Bond Amount. If the Spread Account is exhausted and
there is a default under the Surety Bond, the Trust will look only to the
Obligors on the Receivables and the proceeds from the repossession and sale of
Financed Vehicles that secure Defaulted Receivables for distributions of
interest and principal on the Certificates. In such event, certain factors, such
as the Trustee's not having perfected security interests in some of the Financed
Vehicles, may affect the Trust's ability to realize on the collateral securing
the Receivables, and thus may reduce the proceeds to be distributed to
Certificateholders.
THE RECEIVABLES POOL
The Receivables were selected from the prime portfolio of Union
Acceptance Funding Corporation, a subsidiary of UAC, for purchase by the
Depositor by several criteria, including that each Receivable: (i) has an
original number of payments of not more than 84 payments and not less than 12
payments, (ii) has a remaining maturity of not more than 84 months and not less
than three months, (iii) provides for level monthly payments that fully amortize
the amount financed over the original term, and (iv) has a contract rate of
interest (a "Contract Rate") (exclusive of prepaid finance charges) of not less
than 6.0%. The weighted average remaining maturity of the Receivables will be
approximately 67 months as of the Cutoff Date.
Approximately 95.54% of the aggregate principal balance of the
Receivables as of the Cutoff Date are simple interest contracts which provide
for equal monthly payments. Approximately 4.46% of the aggregate principal
balance of the Receivables as of the Cutoff Date are Precomputed Receivables
originated in the State of California. Approximately 23.30% of the aggregate
principal balance of the Receivables as of the Cutoff Date represent financing
of new vehicles; the remainder of the Receivables represent financing of used
vehicles.
Receivables representing more than 10% of the aggregate principal
balance of the Receivables as of the Cutoff Date were originated in metropolitan
areas in the States of California and Texas. The performance of the Receivables
in the aggregate could be adversely affected in particular by the development of
adverse economic conditions in such metropolitan areas.
<PAGE>
Composition of the Receivables as of the Cutoff Date
<TABLE>
<CAPTION>
Aggregate Original Weighted
Number of Principal Principal Average
Receivables Balance Balance Rate
----------- ------- ------- ----
<S> <C> <C> <C> <C>
New Automobiles and Light-Duty Trucks............ 3,092 $ 42,070,973.25 $ 55,719,727.11 12.03%
Used Automobiles and Light-Duty Trucks........... 12,427 142,865,446.30 161,225,626.90 13.34%
New Vans (1)..................................... 364 5,496,018.70 7,965,200.52 11.83%
Used Vans (1).................................... 1,240 13,714,726.42 17,072,333.56 13.20%
------ --------------- --------------- -----
All Receivables.................................. 17,123 $204,147,164.67 $241,982,888.09 13.02%
====== =============== =============== =====
</TABLE>
<TABLE>
<CAPTION>
Weighted Weighted Percent of
Average Average Aggregate
Remaining Original Principal
Term(2) Term(2) Balance(3)
<S> <C> <C> <C>
New Automobiles and Light-Duty Trucks.......... 69.065mos. 77.567mos. 20.61%
Used Automobiles and Light-Duty Trucks......... 66.834 69.806 69.98
New Vans (1)................................... 65.423 77.614 2.69
Used Vans (1).................................. 65.037 70.212 6.72
------ ------ ------
All Receivables................................ 67.135mos. 71.643mos. 100.00%
====== ====== ======
</TABLE>
(1) References to vans include minivans and van conversions.
(2) Based on scheduled maturity and assuming no prepayments of the Receivables.
(3) Sum may not equal 100% due to rounding.
<PAGE>
Geographic Distribution of the Receivables as of the Cutoff Date
Percent of Aggregate
State (1)(2) Principal Balance (3)
Arizona.......................................... 3.90%
California....................................... 11.32
Colorado......................................... 1.83
Florida.......................................... 8.99
Georgia.......................................... 3.72
Idaho............................................ 0.14
Illinois......................................... 8.20
Indiana.......................................... 2.74
Iowa............................................. 2.40
Kansas........................................... 1.22
Kentucky......................................... 0.54
Maryland......................................... 2.15
Michigan......................................... 2.16
Minnesota........................................ 0.96
Missouri......................................... 2.45
Nebraska......................................... 0.35
Nevada........................................... 0.32
New Mexico....................................... 0.28
North Carolina................................... 8.04
Ohio............................................. 4.60
Oklahoma......................................... 4.36
Oregon........................................... 0.13
Pennsylvania..................................... 0.59
South Carolina................................... 3.42
Tennessee........................................ 2.72
Texas............................................ 13.96
Utah............................................. 0.36
Virginia......................................... 6.44
Washington....................................... 0.62
Wisconsin........................................ 1.10
------
Total ...................................... 100.00%
======
(1) Based on address of the Dealer selling the related Financed Vehicle.
(2) Receivables originated in Ohio were solicited by Dealers for direct
financing by UAC or its predecessor. All other Receivables were
originated by Dealers and purchased from such Dealers by UAC or its
predecessor.
(3) Sum may not equal to 100% due to rounding.
Distribution of the Receivables by Remaining Term as of the Cutoff Date
<TABLE>
<CAPTION>
Percentage of
Remaining Aggregate Average Aggregate
Scheduled Number of Principal Principal Principal
Term Range Receivables Balance Balance Balance(1)
---------- ----------- ------- ------- ----------
<S> <C> <C> <C> <C>
0 to 6 months....................... 243 $ 284,507.80 $ 1,170.81 0.14%
7 to 12 months....................... 1,059 2,372,443.00 2,240.27 1.16
13 to 24 months....................... 2,615 12,193,882.91 4,663.05 5.97
25 to 36 months....................... 548 3,629,784.06 6,623.69 1.78
37 to 48 months....................... 974 8,366,309.02 8,589.64 4.10
49 to 60 months....................... 2,771 32,680,364.10 11,793.71 16.01
61 to 66 months....................... 993 13,349,307.28 13,443.41 6.54
67 to 72 months....................... 2,999 44,131,537.05 14,715.42 21.62
73 to 84 months....................... 4,921 87,139,029.45 17,707.59 42.68
------ --------------- ---------- ------
Total....................... 17,123 $204,147,164.67 $11,922.39 100.00%
====== =============== ========== ======
</TABLE>
(1) Sum may not equal 100% due to rounding.
<PAGE>
Distribution of Receivables by Financed
Vehicle Model Year as of the Cutoff Date
<TABLE>
<CAPTION>
Percentage Percentage
of Total Aggregate of Aggregate
Model Number of Number of Principal Principal
Year Receivables Receivables(1) Balance Balance(1)
---- ----------- -------------- ------- ----------
<S> <C> <C> <C> <C>
1977 and earlier..... 2 0.01% $ 11,009.79 0.01%
1982................. 2 0.01 10,974.88 0.01
1983................. 3 0.02 13,360.85 0.01
1984................. 7 0.04 30,689.01 0.02
1985................. 5 0.03 31,577.64 0.02
1986................. 19 0.11 113,362.10 0.06
1987................. 43 0.25 199,011.97 0.10
1988................. 166 0.97 607,513.76 0.30
1989................. 726 4.24 2,979,908.03 1.46
1990................. 1,006 5.88 5,411,632.93 2.65
1991................. 1,417 8.28 9,513,757.31 4.66
1992................. 1,901 11.10 15,859,928.08 7.77
1993................. 3,317 19.37 29,030,031.87 14.22
1994................. 2,008 11.73 27,485,678.76 13.46
1995................. 2,208 12.90 34,374,694.51 16.84
1996................. 1,621 9.47 26,145,809.03 12.81
1997................. 2,045 11.94 39,053,701.16 19.13
1998................. 627 3.66 13,274,522.99 6.50
------ ------ --------------- ------
Total.............. 17,123 100.00% $204,147,164.67 100.00%
====== ====== =============== ======
</TABLE>
(1) Sum may not equal 100% due to rounding.
Distribution of the Receivables by Note Rate as of the Cutoff Date
<TABLE>
<CAPTION>
Percentage of
Aggregate Average Aggregate
Number of Principal Principal Principal
Note Rate Range Receivables Balance Balance Balance(1)
--------------- ----------- ------- ------- ----------
<S> <C> <C> <C> <C>
6.000 to 6.999%.... 1 $ 5,988.81 $ 5,988.81 0.00%
7.000 to 7.999%.... 65 398,829.73 6,135.84 0.20
8.000 to 8.999%.... 336 2,551,718.50 7,594.40 1.25
9.000 to 9.999%.... 1,057 8,691,427.55 8,222.73 4.26
10.000 to 10.999%.... 1,669 16,085,078.75 9,637.55 7.88
11.000 to 11.999%.... 2,522 31,378,214.81 12,441.80 15.37
12.000 to 12.999%.... 3,750 49,313,163.06 13,150.18 24.16
13.000 to 13.999%.... 3,624 45,857,247.51 12,653.77 22.46
14.000 to 14.999%.... 2,020 25,447,570.01 12,597.81 12.47
15.000 to 15.999%.... 1,009 12,395,718.34 12,285.15 6.07
16.000 to 16.999%.... 494 5,912,962.13 11,969.56 2.90
17.000 to 17.999%.... 281 3,220,235.78 11,459.91 1.58
18.000 to 18.999%.... 165 1,798,165.56 10,897.97 0.88
19.000 to 19.999%.... 42 440,446.26 10,486.82 0.22
20.000 to 20.999%.... 61 481,203.53 7,888.58 0.24
21.000 to 21.999%.... 2 5 161,185.97 6,447.44 0.08
24.000 to 24.999%.... 1 5,431.14 5,431.14 0.00
25.000 to 25.999%.... 1 2,577.23 2,577.23 0.00
------ --------------- ---------- ------
Total.... 17,123 $204,147,164.67 $11,922.39 100.00%
====== =============== ========== ======
</TABLE>
(1) Sum may not equal 100% due to rounding.
<PAGE>
Delinquencies, Repossessions and Net Losses
Set forth below is certain information concerning the experience of UAC
and the Predecessor pertaining to delinquencies, repossessions, and net losses
on its prime fixed rate retail automobile, light truck and van receivables
serviced by UAC and the Predecessor. There can be no assurance that the
delinquency, repossession, and net loss experience on the Receivables will be
comparable to that set forth below.
<TABLE>
<CAPTION>
Delinquency Experience
At June 30, At September 30,
1995 1996 1997 1997
-------------------- --------------------- ------------------- --------------------
(Dollars in thousands)
Number of Number of Number of Number of
Receivables Amount Receivables Amount Receivables Amount Receivables Amount
----------- ------ ----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Servicing portfolio....... 117,837 $1,159,349 147,722 $1,548,538 173,693 $1,860,272 177,377 $1,896,748
------- ---------- ------- ---------- ------- ---------- ------- ----------
Delinquencies
30-59 days............. 1,169 $ 12,097 1,602 $ 17,030 2,487 $ 27,373 4,310 45,766
60-89 days............. 377 4,124 694 7,629 1,646 18,931 2,196 25,156
90 days or more........ 0 0 333 3,811 723 8,826 934 11,131
------- ---------- ------- ---------- ------- ---------- ------- ----------
Total delinquencies....... 1,546 $ 16,221 2,629 $ 28,470 4,856 $ 55,130 7,440 $82,053
======= ========== ======= ========== ======= ========== ======= ==========
Total delinquencies as a
percent of servicing
portfolio............ 1.31% 1.40% 1.78% 1.84% 2.80% 2.96% 4.19% 4.33%
</TABLE>
<TABLE>
<CAPTION>
Credit Loss Experience (1)
Year Ended June 30, Three Months Ended
1995 1996 1997 September 30, 1997
-------------------- ---------------------- --------------------- -----------------------
(Dollars in thousands)
Number of Number of Number of Number of
Receivables Amount Receivables Amount Receivables Amount Receivables Amount
----------- ------ ----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Avg. servicing portfolio(2).... 104,455 $982,875 132,363 $1,343,770 164,858 $1,759,666 175,920 $1,881,603
------- -------- ------- ---------- ------- ---------- ------- ----------
Gross charge-offs.............. 3,493 $ 28,628 3,663 $ 40,815 6,280 70,830 2,054 23,056
Recoveries (4)................. 15,258 19,543 28,511 8,134
-------- ---------- ---------- ----------
Net losses..................... $13,370 $ 21,272 $ 42,319 $14,922
======== ========== ========== ==========
Gross charge-offs as a % of
avg. servicing portfolio(3). 3.34% 2.91% 2.77% 3.04% 3.81% 4.03% 4.67% 4.90%
Recoveries as a % of gross
charge-offs................. 53.30% 47.88% 40.25% 35.28%
Net losses as a % of avg.
servicing portfolio(4)...... 1.36% 1.58% 2.40% 3.17%
</TABLE>
(1) There is generally no recourse to Dealers under any of the receivables in
the portfolio serviced by UAC or the Predecessor, except to the extent of
representations and warranties made by Dealers in connection with such
receivables.
(2) Equals the monthly arithmetic average, and includes receivables sold in
prior securitization transactions.
(3) Variation in the size of the portfolio serviced by UAC will affect the
percentages in "Gross charge-offs as a percentage of average servicing
portfolio" and "Net losses as a percentage of average servicing portfolio."
(4) In fiscal 1995, the method by which recoveries are stated was changed.
Currently, recoveries include recoveries on receivables previously charged
off, cash recoveries and unsold repossessed assets carried at fair market
value. Under the previous method, reported recoveries excluded unsold
repossessed assets carried at fair market value. Prior period credit loss
experience has been restated to conform to current period classifications.
(5) Annualized.
<PAGE>
As indicated in the above Delinquency Experience table, delinquency
rates based upon outstanding loan balances of accounts 30 days past due and over
increased to 4.33% at September 30, 1997, from 2.96% and 2.02% at June 30, 1997
and September 30, 1996, respectively, for UAC's prime servicing portfolio. The
increased delinquency is primarily due to the deterioration of consumer credit
trends, especially in those loans securitized in 1995, as discussed below.
As indicated in the above Credit Loss Experience table, credit losses
on the prime auto portfolio totaled $14.9 million for the quarter ended
September 30, 1997, or 3.17% as an annualized percentage of the average
servicing portfolio compared to $12.5 million for the quarter ended June 30,
1997, or 2.69%. Increased credit losses are primarily a result of higher gross
charge-off rates (due to consumer credit trends, especially in the loans
securitized in 1995, as discussed below), as well as a decline in recovery
rates.
There has been a general deterioration in the consumer credit markets
despite low unemployment and relatively good economic conditions. UAC believes
that this decline is due primarily to debtor overextension, which results in
higher consumer debt levels and the consumer's increased readiness to declare
bankruptcy. These factors have led to increased delinquency and net credit
losses, especially among loans securitized in 1995. According to industry loss
curves, the losses on those loans securitized in 1995 should have peaked as they
are currently in the 23rd to 32nd months of their lives. However, delinquency
and losses on these loan pools have remained higher than expected. The
delinquency and projected losses on those loans securitized in 1996 are also
higher than UAC expectations, however, the credit quality of those loans, as
well as loans securitized in 1997, appear to have improved over those
securitized in 1995. UAC has and is continuing to address this issue through
tightened credit standards in originations and by forming collection teams to
specifically target problem accounts. Additionally, UAC is utilizing new scoring
tools that allow UAC to focus its collection efforts in the most effective
manner.
Recovery rates have continued to decline due to the soft used car
market, resulting from saturation of used leased vehicles and repossessed
vehicles due to bankruptcy. UAC continues to look for ways to improve recovery
rates. One step recently taken was to increase tracking and collection efforts
on insurance and warranty refunds due to UAC.
UAC's expectations with respect to delinquency and credit loss trends
constitute forward-looking statements and are subject to important factors that
could cause actual results to differ materially from those projected by UAC.
Such factors include, but are not limited to, general economic factors affecting
obligors' ability to make timely payments on their indebtedness such as
employment status, rates of consumer bankruptcy, consumer debt levels generally
and the interest rates applicable thereto. In addition, credit losses are
affected by UAC's ability to realize on recoveries of repossessed vehicles,
including, but not limited to, the market for used cars at any given time.
YIELD AND PREPAYMENT CONSIDERATIONS
General
Monthly Interest (as defined herein) on the Receivables will be
distributed to Certificateholders on each Distribution Date to the extent of the
pass-through rate applied to the applicable Certificate Balance or Notional
Principal Amount, as applicable, as of the preceding Distribution Date or the
Closing Date, as applicable (after giving effect to distributions of principal
on such preceding Distribution Date). See "The Offered Certificates --
Distributions." In the event of a full or partial prepayment on a Receivable,
Certificateholders will receive interest for the full month of such prepayment
either through the distribution of interest paid on other Receivables or from a
withdrawal from the Spread Account.
Although the Receivables will have different Contract Rates, each
Receivable's Contract Rate generally will exceed the sum of (a) the weighted
average of the Class A-1 Pass-Through Rate, the Class A-2 Pass-Through Rate, the
Class A-3 Pass-Through Rate, the Class A-4 Pass-Through Rate and the Class A-5
Pass-Through Rate, (b) the Class I Pass-Through Rate (c) the per annum rate used
to calculate the fee payable to the Surety Bond Issuer in respect of the Surety
Bond and (d) the Monthly Servicing Fee. The Contract Rate on a small percentage
of the Receivables, however, will be less than the foregoing sum.
Disproportionate rates of prepayments between Receivables with higher and lower
Contract Rates could affect the ability of the Trust to distribute Monthly
Interest to Certificateholders.
<PAGE>
The effective yield to Certificateholders will be below the yield
otherwise produced by the Pass-Through Rate because the distribution of Monthly
Principal and Monthly Interest in respect of any given month will not be made
until the related Distribution Date, which will not be earlier than the eighth
day of the following month.
The Class I Certificates
The Class I Certificates are interest only certificates. Although the
planned amortization feature of the Class I Certificates is intended to reduce
the uncertainty of prepayments with respect to the Class I Certificates, if the
Receivables prepay sufficiently quickly, the Notional Principal Amount of the
Class I Certificates may be reduced more quickly than provided in the Planned
Notional Principal Amount Schedule, thereby reducing the yield to the holders of
the Class I Certificates. The yield to maturity on the Class I Certificates will
therefore be very sensitive to the rate of prepayments, including voluntary
prepayments and prepayments due to liquidations and repurchases. Prospective
investors should fully consider the associated risks, including the risk that a
rapid rate of prepayments could result in the failure of investors in the Class
I Certificates to recoup their initial investment. See "Risk Factors" and "The
Offered Certificates -- The Class I Certificates -- Calculation of Notional
Principal Amount" and "-- Class I Yield Considerations."
THE DEPOSITOR AND UAC
UAC currently acquires loans from over 3,200 manufacturer franchised
automobile dealerships in 30 states. UAC is an Indiana corporation, formed in
December 1993 by UAC's predecessor to succeed to the indirect automobile finance
business of the predecessor, which the predecessor had operated since 1986. UAC
began purchasing and originating receivables in April 1994. For the fiscal years
ended June 30, 1994, 1995, 1996 and 1997 UAC and/or its predecessor acquired
prime loans aggregating $615 million, $767 million, $995 million and $1,076
million, respectively, representing annual increases of 25%, 30% and 8%,
respectively. Of the $1.9 billion of loans in the servicing portfolio of UAC and
its predecessor (consisting of the principal balance of loans held for sale and
securitized loans) at June 30, 1997, approximately 75.43% represented loans on
used cars and approximately 24.57% represented loans on new cars.
THE SURETY BOND ISSUER
SEE THE PROSPECTUS SUPPLEMENT FOR UPDATED INFORMATION AND EVENTS
AFFECTING THE SURETY BOND ISSUER.
Capital Markets Assurance Corporation is the surety bond provider (the
"Surety Bond Issuer"). The Surety Bond Issuer is a New York-domiciled monoline
stock insurance company which engages only in the business of financial
guarantee and surety insurance. The Surety Bond Issuer is licensed in 50 states
in addition to the District of Columbia, the Commonwealth of Puerto Rico and the
territory of Guam. The Surety Bond Issuer insures structured asset-backed,
corporate, municipal and other financial obligations in the U.S. and
international capital markets. The Surety Bond Issuer also provides financial
guarantee reinsurance for structured asset-backed, corporate, municipal and
other financial obligations written by other major insurance companies.
The Surety Bond Issuer's claims-paying ability is rated "Aaa" by
Moody's Investors Service, Inc. ("Moody's"), "AAA" by Standard & Poor's Ratings
Services ("Standard & Poor's"), "AAA" by Duff & Phelps Credit Rating Co. ("Duff
& Phelps") and "AAA" by Nippon Investors Service Inc. Such ratings reflect only
the views of the respective rating agencies, are not recommendations to buy,
sell or hold securities and are subject to revision or withdrawal at any time by
such rating agencies.
The Surety Bond Issuer is a wholly-owned subsidiary of CapMAC Holdings
Inc. ("Holdings"). Neither Holdings nor any of its stockholders is obligated to
pay any claims under any surety bond issued by the Surety Bond Issuer or any
debts of the Surety Bond Issuer or to make additional capital contributions to
the Surety Bond Issuer.
<PAGE>
The Surety Bond Issuer is regulated by the Superintendent of Insurance
of the State of New York. In addition, the Surety Bond Issuer is subject to
regulation by the insurance laws and regulations of the other jurisdictions in
which it is licensed. Such insurance laws regulate, among other things, the
amount of net exposure per risk that the Surety Bond Issuer may retain, capital
transfers, dividends, investment of assets, changes in control, transactions
with affiliates and consolidations and acquisitions. The Surety Bond Issuer is
subject to periodic regulatory examinations by the same regulatory authorities.
The Surety Bond Issuer's obligations under the Surety Bond may be
reinsured. Such reinsurance does not relieve the Surety Bond Issuer of any of
its obligations under the Surety Bond.
THE SURETY BOND IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE
SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
As of December 31, 1996 and 1995, the Surety Bond Issuer had qualified
statutory capital (which consists of policyholders' surplus and contingency
reserve) of approximately $260 million and $240 million, respectively, and had
not incurred any debt obligations. Article 69 of the New York State Insurance
Law requires the Surety Bond Issuer to establish and maintain the contingency
reserve, which is available to cover claims under surety bonds issued by the
Surety Bond Issuer.
The Surety Bond Issuer is located at 885 Third Avenue, New York, New
York 10022, and its telephone number is (212) 755-1155.
THE OFFERED CERTIFICATES
The Offered Certificates will be issued pursuant to the Pooling and
Servicing Agreement. Copies of the Pooling and Servicing Agreement (without
exhibits) may be obtained by Certificateholders upon request in writing to the
Servicer. Citations to the relevant sections of the Pooling and Servicing
Agreement appear below in parentheses. The following summary does not purport to
be complete and is subject to and qualified in its entirety by reference to the
Pooling and Servicing Agreement.
Distributions
In general, it is intended that the Trustee distribute to the Class A
Certificateholders on each Distribution Date beginning December 10, 1997, the
aggregate principal payments, including full and partial prepayments (except
certain prepayments in respect of Precomputed Receivables), received on the
Receivables during the related Collection Period, plus Class A Monthly Interest.
Principal to be distributed to the Class A Certificateholders will be allocated
on the basis of the Principal Distribution Sequence (as defined herein). It is
also intended that the Trustee distribute to the Class I Certificateholders, on
each Distribution Date beginning on December 10, 1997 and continuing until the
Distribution Date on which the Notional Principal Amount is reduced to zero,
Class I Monthly Interest. (Section 9.04.) Interest to Certificateholders may be
provided by a payment made by or on behalf of the Obligor, by an Advance made by
the Servicer to cover interest due on a defaulted Receivable or by a withdrawal
from the Spread Account. If such interest represents Monthly Interest it may be
provided by a draw on the Surety Bond if there are not sufficient funds (after
payment of the Monthly Servicing Fee, permitted reimbursements of outstanding
Advances and after giving effect to any withdrawals from the Spread Account for
the benefit of the Class A Certificateholders and the Class I
Certificateholders) to pay Monthly Interest and Monthly Principal. Draws on the
Surety Bond to pay Monthly Interest and Monthly Principal will be limited to the
Surety Bond Amount.
The Class I Certificates -- Calculation of Notional Principal Amount
The Class I Certificates are interest only planned amortization
securities. The Class I Certificates are entitled to receive interest at the
Class I Pass-Through Rate on the Notional Principal Amount of the Class I
Certificates, initially $151,027,447.84. The planned amortization feature is
intended to reduce the uncertainty to investors in the Class I Certificates with
respect to prepayments because the Class I Certificates will receive interest
based on their Notional Principal Amount on a principal paydown schedule rather
than on the reduction in the actual Certificate Balance as a result of principal
payments and prepayments, as described below. Solely for the purpose of
calculating the amount payable with respect to the Class I Certificates, the
Certificate Balance will be divided into two principal components, the "PAC
Component" and the "Companion Component". The Notional Principal Amount will be
equal to the PAC Component, originally $151,027,447.84. The sum of the PAC
Component and the Companion Component will at all times equal the then aggregate
unpaid Certificate Balance.
<PAGE>
The Pooling and Servicing Agreement establishes a schedule (the
"Planned Notional Principal Amount Schedule") pursuant to which principal will
be allocated to the PAC Component and the Companion Component, as described
below. As the PAC Component is reduced, the Notional Principal Amount and
payments to the holders of the Class I Certificates will also be reduced.
On each Distribution Date, Monthly Principal will be allocated first to
the PAC Component up to the amount necessary to reduce the PAC Component to the
amount specified in the Planned Notional Principal Amount Schedule (the "Planned
Notional Principal Amount") for such Distribution Date, second, to the Companion
Component until the balance thereof is reduced to zero and third, to the PAC
Component, without regard to the Planned Notional Principal Amount for such
Distribution Date. The foregoing allocations will be made solely for purposes of
calculating the Notional Principal Amount and correspondingly, the amount of
interest payable with respect to the Class I Certificates. The Class I
Certificates are not entitled to receive any principal payments. The foregoing
calculations will not affect distributions of principal with respect to the
Class A Certificates.
Planned Notional Principal Amount Schedule
Planned Notional
Distribution Date in Principal Amount
Initial.................................................... $151,027,447.84
December 1997.............................................. 144,569,129.94
January 1998............................................... 139,851,101.72
February 1998.............................................. 135,172,469.66
March 1998................................................. 130,533,989.29
April 1998................................................. 125,936,427.96
May 1998................................................... 121,380,565.02
June 1998.................................................. 116,867,192.02
July 1998.................................................. 112,397,112.86
August 1998................................................ 107,971,144.03
September 1998............................................. 103,590,114.66
October 1998............................................... 99,254,866.83
November 1998.............................................. 94,966,255.70
December 1998.............................................. 90,725,149.66
January 1999............................................... 86,532,430.59
February 1999.............................................. 82,388,993.98
March 1999................................................. 78,295,749.22
April 1999................................................. 74,253,619.67
May 1999................................................... 70,263,542.96
June 1999.................................................. 66,326,471.16
July 1999.................................................. 62,443,370.97
August 1999................................................ 58,615,223.89
September 1999............................................. 54,843,026.56
October 1999............................................... 51,127,790.86
November 1999.............................................. 47,470,544.11
December 1999.............................................. 43,872,329.38
January 2000............................................... 40,334,205.64
February 2000.............................................. 36,857,248.02
March 2000................................................. 33,442,548.04
April 2000................................................. 30,091,213.76
May 2000................................................... 26,804,370.15
June 2000.................................................. 23,583,159.24
July 2000.................................................. 20,428,740.32
August 2000................................................ 17,342,290.30
September 2000............................................. 14,325,003.86
October 2000............................................... 11,378,093.74
November 2000.............................................. 8,502,790.98
December 2000.............................................. 5,700,345.19
January 2001............................................... 2,972,024.78
February 2001.............................................. 337,388.43
March 2001................................................. 0.00
The Class I Certificates will not be entitled to any distributions after the
Notional Principal Amount has been reduced to zero.
<PAGE>
Class I Yield Considerations
Although the planned amortization feature of the Class I Certificates
is intended to reduce the uncertainty relating to prepayments of the Receivables
with respect to the Class I Certificates, the yield to maturity of the Class I
Certificates will remain extremely sensitive to the prepayment experience of the
Receivables, including voluntary prepayments and prepayments due to liquidations
and repurchases. Prospective investors should fully consider the associated
risks, including the risk that such investors may not fully recover their
initial investment. In particular, investors in the Class I Certificates should
note that they will not be entitled to any distributions after the Notional
Principal Amount of the Class I Certificates has been reduced to zero and that
Receivables may be repurchased due to breaches of representations. See "Risk
Factors."
The following tables illustrate the significant effect that prepayments
on the Receivables have upon the yield to maturity of the Class I Certificates.
The first table assumes that the Receivables have been aggregated into five
hypothetical pools having the characteristics described therein and that the
level scheduled monthly payment for each of the five pools (which is based on
its principal balance, weighted average Contract Rate, weighted average
remaining term as of the Cutoff Date and its weighted average original term)
will be such that such pool will be fully amortized by the end of its weighted
average remaining term. Based on such hypothetical pools, the second table shows
the approximate hypothetical pre-tax yields to maturity of the Class I
Certificates, stated on a corporate bond equivalent basis, under five different
prepayment assumptions based on the assumed purchase price and the ABS
prepayment model described below.
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Cutoff Date Weighted Average Remaining Term to Original Term to
Pool Principal Balance Note Rate Maturity (in Months) Maturity (in Months)
<S> <C> <C> <C> <C>
1 $ 18,480,617.77 11.725% 20 62
2 8,366,309.02 13.972 46 47
3 32,680,364.10 13.154 59 59
4 57,836,414.62 13.160 70 71
5 86,783,459.16 13.052 80 81
</TABLE>
For purposes of the table, it is also assumed that (i) the purchase
price of the Class I Certificates is as set forth below, (ii) the Receivables
prepay monthly at the specified percentages of ABS as set forth in the table
below, (iii) prepayments representing prepayments in full of individual
Receivables are received on the last day of the month and include a full month's
interest thereon, (iv) the Closing Date for the Offered Certificates is November
25, 1997, (v) distributions on the Offered Certificates are made, in cash, on
the ninth day of each month, commencing on December 9, 1997, (vi) no defaults or
delinquencies in the payment of the Receivables are experienced, and (vii) no
Receivable is repurchased for breach of representation and warranty or
otherwise.
Sensitivity of the Yield on the Class I Certificates to Prepayments
1.0% 1.6% 1.8% 2.5% 3.0%
Price(1) ABS ABS ABS ABS ABS
-------- ------ ----- ----- ----- -----
2.223646% 10.581% 6.025% 6.025% 6.025% -3.613%
(1) Expressed as a percentage of the original Notional Principal Amount.
Based on the assumptions described above and assuming a purchase price
of 2.223646% at approximately 2.851% ABS, the pre-tax yield to maturity of the
Class I Certificates would be approximately 0%.
<PAGE>
It is highly unlikely that the Receivables will prepay at a constant
rate until maturity or that all of the Receivables will prepay at the same rate.
The foregoing table assumes that each Receivable bears interest at its specified
Contract Rate, has the same remaining amortization term, and prepays at the same
rate. In fact, receivables will prepay at different rates and have different
terms.
The yields set forth in the preceding table were calculated by
determining the monthly discount rates which, when applied to the assumed stream
of cash flows to be paid on the Class I Certificates, would cause the discounted
present value of such assumed cash flows to equal the assumed purchase price of
such Class I Certificates and by converting such monthly rates to corporate bond
equivalent rates. Such calculations do not take into account variations that may
occur in the interest rates at which investors may be able to reinvest funds
received by them as distributions on the Class I Certificates and consequently
do not purport to reflect the return on any investment in the Class I
Certificates when such reinvestment rates are considered.
The Receivables will not necessarily have the characteristics assumed
above and there can be no assurance that (i) the Receivables will prepay at any
of the rates shown in the table or at any other particular rate or will prepay
proportionately, (ii) the pre-tax yield on the Class I Certificates will
correspond to any of the pre-tax yields shown above or (iii) the aggregate
purchase price of the Class I Certificates will be equal to the purchase price
assumed. Because the Receivables will include Receivables that have remaining
terms to stated maturity shorter or longer than those assumed and Contract Rates
higher or lower than those assumed, the pre-tax yield on the Class I
Certificates may differ from those set forth above, even if all of the
Receivables prepay at the indicated constant prepayment rates.
Prepayments on automotive receivables can be measured relative to a
prepayment standard or model. The Absolute Prepayment Model ("ABS") used in the
preceding tables represents an assumed rate of prepayment each month relative to
the original number of receivables in a pool of receivables. ABS further assumes
that all the receivables are the same size and amortize at the same rate and
that each receivable in each month of its life will either be paid as scheduled
or be prepaid in full. For example, in a pool of receivables originally
containing 10,000 receivables, a 1% ABS rate means that 100 receivables prepay
each month. ABS does not purport to be an historical description of prepayment
experience or a prediction of the anticipated rate of prepayment of any pool of
receivables, including the Receivables.
