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): June 10, 1998
UACSC 1998 AUTO TRUSTS
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of incorporation)
333-52101 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 June 10, 1998, Computational Materials were distributed to
potential investors in connection with a proposed offering of
asset-backed certificates under Reg. No. 333-52101. Under the proposed
pooling and servicing agreement (the "Proposed Agreement"), UAC
Securitization Corporation ("UACSC") will act as the proposed
depositor and establish the UACSC 1998-B Auto Trust (the "Proposed
Trust") by selling and assigning the proposed trust property to the
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 June 10, 1998.
UAC SECURITIZATION CORPORATION
as Depositor (Registrant)
/s/ Leeanne Graziani
----------------------------------------
Leeanne Graziani
Vice President, Assistant Treasurer and
Secretary
Computational Materials
UACSC 1998-B Auto Trust
$44,250,000.00[____]% Class A-1 Money Market Automobile Receivable Backed
Certificates
$92,750,000.00[____]% Class A-2 Automobile Receivable Backed Certificates
$39,925,000.00[____]% Class A-3 Automobile Receivable Backed Certificates
$63,025,000.00[____]% Class A-4 Automobile Receivable Backed Certificates
$28,030,468.00[____]% 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, the Underwriters (all as defined
below) nor any of their respective 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 characteristics of the applicable securities 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 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 securities should be made by you based solely upon all of the
information contained in the final prospectus of the UACSC Auto Trusts, 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 NationsBanc Montgomery Securities
LLC Syndicate Desk at (704) 386-9690 or the Bear, Stearns & Co. Inc. Syndicate
Desk at (212) 272-4955.
The attached Term Sheet has been prepared by Union Acceptance
Corporation. Neither NationsBanc Montgomery Securities LLC ("NationsBanc
Montgomery") nor Bear, Stearns & Co. Inc. ("Bear Stearns" and together with
NationsBanc Montgomery, 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 Information addresses only certain aspects of the characteristics
of the applicable securities 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 have 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 NationsBanc Montgomery Syndicate Desk at (704)
386-9690 or the Bear Stearns Syndicate Desk at (212) 272-4955.
<PAGE>
UACSC 1998-B Auto Trust
UAC Securitization Corporation, Depositor
Union Acceptance Corporation, Servicer
Subject to Revision
Term Sheet dated June 10, 1998
Issuer ...........................UACSC 1998-B 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.......................NationsBanc Montgomery Securities LLC (Lead)
and Bear, Stearns & Co. Inc. (Co).
The Certificates .................The Trust will be formed and will issue the
Certificates on or about June 23, 1998 (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 $44,250,000.00 (the "Class A-1
Certificates"); (ii) _____% Class A-2
Automobile Receivable Backed Certificates in
the aggregate principal amount of
$92,750,000.00 (the "Class A-2
Certificates"); (iii) _____% Class A-3
Automobile Receivable Backed Certificates in
the aggregate principal amount of
$39,925,000.00 (the "Class A-3
Certificates"); (iv) _____% Class A-4
Automobile Receivable Backed Certificates in
the aggregate principal amount of
$63,025,000.00 (the "Class A-4
Certificates"); (v) _____% Class A-5
Automobile Receivable Backed Certificates in
the aggregate principal amount of
$28,030,468.00 (the "Class A-5 Certificates"
and together with the Class A-1 Certificates,
the Class A-2 Certificates, the Class A-3
Certificates and the Class A-4 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."
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 May 31, 1998 (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 Insurer, the
Policy 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 through the day before the first
Distribution Date and therefore may include
more or less than a full month's interest.
The Class A Certificates ..........Interest. Interest will be distributable on
the eighth calendar day of each month or, if
such day is not a business day, on the first
business day thereafter (each, a
"Distribution Date") beginning July 8, 1998,
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").
Interest on the Class A-1 Certificates will
be calculated on the basis of a 360-day year
and the actual number of days from the
previous Distribution Date through the day
before the related Distribution Date or, in
the case of the first Distribution Date, the
number of days from the Closing Date through
the day before the first Distribution Date.
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
through the day before the first Distribution
Date (assuming the month of the Closing Date
has 30 days). See "Yield and Prepayment
Considerations" and "The Offered
Certificates-- Distributions" herein .
"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). "Monthly
Interest" for any Distribution Date will
equal the sum of Class A Monthly Interest and
Class I Monthly Interest (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 applicable
pass-through rate of _____% for the Class A-1
Certificates (the "Class A-1 Pass-Through
Rate")) multiplied by (the number of days
from the Closing Date through the day before
the first Distribution Date) multiplied by
(the aggregate outstanding principal balance
of the Class A-1 Certificates (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 from the previous Distribution Date
through the day before the related
Distribution Date 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 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"), as the case may be)
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") at the Closing Date)
multiplied by (the number of days from the
Closing Date through the day before the first
Distribution Date (assuming the month of the
Closing Date has 30 days) divided by 30) 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
applicable pass-through rate of _____% for
the Class A-5 Certificates (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") at the Closing Date) multiplied by
(the number of days from the Closing Date
through the day before the first Distribution
Date (assuming the month of the Closing Date
has 30 days) divided by 30) and (ii) with
respect to each subsequent Distribution Date,
the product of one-twelfth of the Class A-5
Pass-Through Rate (as adjusted after the
Clean-Up Call Date (as defined below), 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). Principal. On
each Distribution Date, the Trustee will
distribute as principal to the Class A
Certificateholders in a maximum aggregate
amount equal to the Certificate Balance as of
the previous Distribution Date (after giving
effect to any distributions of Monthly
Principal required to be made on such
Distribution Date) (or, in the case of the
first Distribution Date, as of the Closing
Date) less the aggregate outstanding
principal amount of the Receivables (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
June 8, 1999 (the "Class A-1 Final Scheduled
Distribution Date"). The final scheduled
Distribution Date of the Class A-2
Certificates will be October 9, 2001 (the
"Class A-2 Final Scheduled Distribution
Date"). The final scheduled Distribution Date
of the Class A-3 Certificates will be August
8, 2002 (the "Class A-3 Final Scheduled
Distribution Date"). The final scheduled
Distribution Date of the Class A-4
Certificates will be February 9, 2004 (the
"Class A-4 Final Scheduled Distribution
Date"). The final scheduled Distribution Date
of the Class A-5 Certificates will be January
9, 2006 (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.
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 1.00% per annum
(the "Class I Pass-Through Rate"). The
Notional Principal Amount represents a
designated principal component of the
Receivables, originally $208,715,851.64 (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 through the day before the
first Distribution Date (assuming the month
of the Closing Date has 30 days). 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, 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 (the "Class I
Monthly Interest"). 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 $208,715,851.64.
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 distributed to Class A
Certificateholders will be allocated first to
the PAC Component in an amount up to the
amount necessary to reduce the amount thereof
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 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 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" and "Yield and Prepayment
Considerations -- The Class I Certificates."
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 Insurer, 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 Policy, 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 Insurer. 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 Policy, any remaining 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.
"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 payaheads 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. 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 Insurer 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 1.0% 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 and Reimbursement Agreement,
entered into on or before the Closing Date
among the Depositor, UAFC, UAC, in its
individual capacity and as Servicer, and the
Insurer (the "Insurance Agreement") the
Required Spread Amount will be increased to
6.0% 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 Policy Amount,
as further described below. Under certain
circumstances, the Required Spread Amount may
be reduced.
The Policy.........................The Depositor shall obtain an irrevocable
insurance policy (the "Policy") issued by the
Insurer (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 Policy 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 Policy Amount.
In addition, the Policy will cover amounts
previously distributed to a Certificateholder
by the Trust that is sought to be recovered
as a voidable preference by a trustee in
bankruptcy pursuant to the United States
Bankruptcy Code (11 U.S.C.), as amended from
time to time in accordance with a final
nonappealable order of a court having
competent jurisdiction.
Policy Amount ...................The term "Policy 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 Policy 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 (after
giving effect to any funds withdrawn from the
Spread Account to pay Monthly Principal on
such Distribution Date). "Net Principal
Policy Amount" means the Certificate Balance
as of the first Distribution Date minus all
amounts previously drawn on the Policy or
from the Spread Account with respect to
Monthly Principal.
Insurer ..........................MBIA Insurance Corporation.
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.
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 Pool
Balance is equal to or less than 10% of the
initial Certificate Balance and (ii) the
Notional Principal Amount of the Class I
Certificates will have been reduced to zero
on or before the related Distribution Date.
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) 100% of the outstanding Certificate
Balance, (ii) accrued and unpaid interest on
such amount at the weighted average note
rates of the Receivables less any payments
received but not applied to interest or
principal and (iii) any amounts due the
Insurer).
Clean-Up Call Date.................If the Class IC Certificateholder does not
exercise its rights with respect to the
Optional Sale on 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%
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
Services, a division of The McGraw-Hill
Companies, Inc. (each a "Rating Agency" and
collectively, the "Rating Agencies"). 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 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
Supplement and 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. 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 the Trustee will draw on the
Policy, in an amount equal to the shortfall in respect of Monthly Interest and
Monthly Principal, up to the Policy Amount. If the Spread Account is reduced to
zero and there is a default under the Policy, 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. 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.
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 Insurer and
will obtain the Policy. Withdrawals from the Spread Account and, only after such
withdrawals, draws on the Policy 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
Policy Amount. If the Spread Account is exhausted and there is a default under
the Policy, 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 one month, (iii) provides for level monthly payments that fully amortize
the amount financed over the remaining term, and (iv) has a contract rate of
interest (a "Contract Rate") (exclusive of prepaid finance charges) of not less
than 5.90%. The weighted average remaining maturity of the Receivables will be
approximately 68 months as of the Cutoff Date.
Approximately 97.68% of the aggregate principal balance of the
Receivables as of the Cutoff Date are simple interest contracts which provide
for equal monthly payments. Approximately 2.32% of the aggregate principal
balance of the Receivables as of the Cutoff Date are Precomputed Receivables
originated in the State of California. All of such Precomputed Receivables are
rule of 78's receivables. Approximately 24.83% 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.
Composition of the Receivables as of the Cutoff Date
<TABLE>
<CAPTION>
Weighted
Aggregate Original Average
Number of Principal Principal Contract
Receivables Balance Balance Rate
----------- ------- ------- ----
<S> <C> <C> <C> <C>
New Automobiles and Light-Duty Trucks............ 4,151 $ 59,016,369.54 $ 77,232,155.80 11.44%
Used Automobiles and Light-Duty Trucks........... 15,083 181,930,372.60 206,587,281.93 12.88%
New Vans (1)..................................... 457 7,516,125.70 10,029,852.60 11.37%
Used Vans (1).................................... 1,626 19,517,600.16 23,578,694.99 12.68%
------ --------------- --------------- -----
All Receivables.................................. 21,317 $267,980,468.00 $317,427,985.32 12.51%
====== =============== =============== =====
</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.......... 69.3mos. 77.3mos. 22.02%
Used Automobiles and Light-Duty Trucks......... 66.9 70.5 67.89
New Vans (1)................................... 71.5 79.1 2.80
Used Vans (1).................................. 66.0 71.0 7.28
---- ---- ----
All Receivables................................ 67.5mos. 72.3mos. 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.
Geographic Distribution of the Receivables as of the Cutoff Date
Percent of Aggregate
State (1)(2) Principal Balance (3)
------------ ---------------------
Arizona.................................................. 3.08%
California............................................... 10.03
Colorado................................................. 2.21
Florida.................................................. 6.78
Georgia.................................................. 3.30
Idaho.................................................... 0.10
Illinois................................................. 6.25
Indiana.................................................. 3.48
Iowa..................................................... 2.18
Kansas................................................... 1.05
Kentucky................................................. 0.82
Maryland................................................. 1.58
Michigan................................................. 2.46
Minnesota................................................ 2.15
Missouri................................................. 2.14
Nebraska................................................. 0.52
Nevada................................................... 0.24
New Mexico............................................... 0.31
North Carolina........................................... 9.60
Ohio..................................................... 7.66
Oklahoma................................................. 4.11
Oregon................................................... 0.46
Pennsylvania............................................. 1.04
South Carolina........................................... 3.46
South Dakota............................................. 0.07
Tennessee................................................ 3.23
Texas.................................................... 13.39
Utah..................................................... 1.23
Virginia................................................. 5.52
Washington............................................... 0.75
Wisconsin................................................ 0.81
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 the Predecessor. All other Receivables were
originated by Dealers and purchased from such Dealers by UAC or the
Predecessor.
(3) Sum may not equal 100% due to rounding.
Distribution of the Receivables by Remaining Term as of the Cutoff Date
<TABLE>
<CAPTION>
Percent of
Remaining Aggregate Average Aggregate
Scheduled Number of Principal Principal Principal
Term Range Receivables Balance Balance Balance(1)
---------- ----------- ------- ------- ----------
<S> <C> <C> <C> <C>
1 to 6 months....................... 485 $ 608,099.40 $ 1,253.81 0.23%
7 to 12 months....................... 1,199 2,849,180.06 2,376.30 1.06
13 to 24 months....................... 2,888 13,385,776.39 4,634.96 5.00
25 to 36 months....................... 586 3,880,970.02 6,622.82 1.45
37 to 48 months....................... 1,142 10,172,188.73 8,907.35 3.80
49 to 60 months....................... 3,418 41,864,941.01 12,248.37 15.62
61 to 66 months....................... 1,278 17,368,831.62 13,590.64 6.48
67 to 72 months....................... 4,292 66,043,953.86 15,387.69 24.65
73 to 84 months....................... 6,029 111,806,526.91 18,544.79 41.72
------ --------------- ---------- ------
Total....................... 21,317 $267,980,468.00 $12,571.21 100.00%
====== =============== ========== ======
(1) Sum may not equal 100% due to rounding.
</TABLE>
Distribution of Receivables by Financed
Vehicle Model Year as of the Cutoff Date
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Model Number of Number of Principal Principal
Year Receivables Receivables(1) Balance Balance(1)
---- ----------- -------------- ------- ----------
<S> <C> <C> <C> <C>
1983 and earlier..................... 1 0.00% $ 3,213.80 0.00%
1984................................. 2 0.01 8,762.88 0.00
1985................................. 2 0.01 15,902.29 0.01
1986................................. 16 0.08 78,105.97 0.03
1987................................. 37 0.17 150,831.68 0.06
1988................................. 99 0.46 428,389.50 0.16
1989................................. 439 2.06 1,422,631.59 0.53
1990................................. 949 4.45 4,645,002.59 1.73
1991................................. 1,382 6.48 7,788,309.13 2.91
1992................................. 1,724 8.09 12,996,316.08 4.85
1993................................. 3,266 15.32 26,900,525.19 10.04
1994................................. 2,988 14.02 32,505,401.20 12.13
1995................................. 2,970 13.93 44,601,684.17 16.64
1996................................. 2,386 11.19 39,256,376.25 14.65
1997................................. 2,588 12.14 46,045,503.11 17.18
1998................................. 2,404 11.28 49,411,223.24 18.44
1999................................. 64 0.30 1,722,289.33 0.64
------ ------ --------------- ------
Total.............................. 21,317 100.00% $267,980,468.00 100.00%
====== ====== =============== ======
</TABLE>
(1) Sum may not equal 100% due to rounding.
Distribution of the Receivables by Contract Rate as of the Cutoff Date
<TABLE>
<CAPTION>
Percent of
Aggregate Average Aggregate
Number of Principal Principal Principal
Contract Rate Range Receivables Balance Balance Balance(1)
- ------------------- ----------- ------- ------- ----------
<S> <C> <C> <C> <C>
Less than 6.000%...................... 1 $ 25,415.29 $25,415.29 0.01%
6.000 to 6.999%...................... 225 861,980.29 3,831.02 0.32
7.000 to 7.999%...................... 589 5,706,370.57 9,688.24 2.13
8.000 to 8.999%...................... 904 7,906,476.86 8,746.10 2.95
9.000 to 9.999%...................... 1,417 13,294,617.91 9,382.23 4.96
10.000 to 10.999%...................... 2,407 28,211,407.20 11,720.57 10.53
11.000 to 11.999%...................... 3,344 45,682,537.43 13,661.05 17.05
12.000 to 12.999%...................... 4,748 66,351,555.46 13,974.63 24.76
13.000 to 13.999%...................... 3,714 50,107,681.62 13,491.57 18.70
14.000 to 14.999%...................... 2,072 26,726,537.17 12,898.91 9.97
15.000 to 15.999%...................... 981 12,039,740.08 12,272.93 4.49
16.000 to 16.999%...................... 410 5,074,013.64 12,375.64 1.89
17.000 to 17.999%...................... 219 2,627,837.84 11,999.26 0.98
18.000 to 18.999%...................... 217 2,748,144.71 12,664.26 1.03
19.000 to 19.999%...................... 23 247,665.01 10,768.04 0.09
20.000 to 20.999%...................... 34 306,764.27 9,022.48 0.11
21.000 to 21.999%...................... 9 37,658.64 4,184.29 0.01
22.000 to 22.999%...................... 1 14,339.96 14,339.96 0.01
23.000 to 23.999%...................... 1 2,147.45 2,147.45 0.00
25.000 to 25.999%...................... 1 7,576.60 7,576.60 0.00
------ --------------- ---------- ------
Total...................... 21,317 $267,980,468.00 $12,571.21 100.00%
====== =============== ========== ======
</TABLE>
(1) Sum may not equal 100% due to rounding.
Delinquencies, Repossessions and Net Losses
Set forth below is certain information concerning the experience of UAC
and the Predecessor (as defined herein) 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.
Delinquency Experience
<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>
At December 31, At March 31,
1997 1998
Number of Number of
Receivables Amount Receivables Amount
----------- ------ ----------- ------
Servicing portfolio...... 179,962 $1,920,930 181,026 $1,929,151
Delinquencies
30-59 days............ 3,954 41,778 3,426 35,449
60-89 days............ 2,274 25,933 1,923 21,818
90 days or more....... 688 8,048 623 7,088
----- ---------- ----- ------
Total delinquencies...... 6,916 $ 75,759 5,972 64,355
===== ========== ===== ======
Total delinquencies as a
percent of servicing
portfolio........... 3.84% 3.94% 3.30% 3.34%
<PAGE>
Credit Loss Experience (1)
<TABLE>
<CAPTION>
Year ended June 30, Three Months Ended
1995 1996 1997 September 30, 1997 (5)
(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 (3)............ 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(4)........... 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>
Three Months Ended Three Months Ended
December 31, 1997 (5) March 31, 1998 (5)
--------------------- ----------------------
Number of Number of
Receivables Amount Receivables Amount
----------- ------ ----------- ------
Avg. servicing
portfolio(2)........... 179,334 $1,916,778 180,631 $1,924,930
Gross charge-offs......... 1,977 $ 22,373 1,886 $ 20,767
Recoveries (3)............ 8,527 8,186
---------- ----------
Net losses................ $ 13,846 $ 12,581
========== ==========
Gross charge-offs as a %
of avg. servicing
portfolio(4)........... 4.41% 4.67% 4.18% 4.32%
Recoveries as a % of gross
charge-offs............ 38.11% 39.42%
Net losses as a % of avg.
servicing portfolio(4). 2.89% 2.61%
(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) 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.
(4) 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."
(5) Percentages are annualized in "Gross charge-offs as a percentage of
average servicing portfolio" and "Net losses as a percentage of average
servicing portfolio" for partial years.
As indicated by the foregoing delinquency experience table, delinquency
rates based upon outstanding loan balances of accounts 30 days past due and over
decreased to 3.34% at March 31, 1998, compared to 3.94% at December 31, 1997 and
4.33% at September 30, 1997. However, the delinquency rate has increased from
2.96% at June 30, 1997, for UAC's prime servicing portfolio. The decreased
delinquency from December 31, and September 30, 1997, is primarily attributed to
collection strategies implemented to target problem accounts as well as the
utilization of new scoring tools to focus collection efforts most effectively.
As indicated in the foregoing credit loss experience table, credit
losses on the prime auto portfolio totaled approximately $12.6 million for the
quarter ended March 31, 1998, or 2.61% (annualized) of the average servicing
portfolios compared to 2.89% and 3.17% for the quarters ended December 31, 1997
and September 30, 1997, respectively and 2.40% for the year ended June 30, 1997.
Decreased credit losses from September 30, 1997, are primarily a result of
strategic efforts made by UAC to improve the overall credit-quality of loans as
well as a slight improvement in recovery rates.
UAC has seen steady improvement in delinquency and credit losses over
the last two quarters. UAC attributes the improvement to strategic efforts made
by UAC including implementing tighter credit standards in March 1997, forming
specialized collection teams to concentrate on specific groups of accounts and
increasing collection efforts on charged-off accounts.
A decline in delinquency and credit losses on those loans originated
and securitized in 1995 has also contributed to the improved delinquency and
credit losses for the portfolio. In the past, these pools have had higher credit
losses and delinquency than anticipated and have had continued higher credit
losses in the latter months of the pool life rather than reflecting a typical
loss life cycle which should peak between the 12th and 18th month. Over the last
six months, those loans originated and securitized in 1995 have become a smaller
proportion of the total portfolio's credit losses and delinquency as the dollar
amount of credit losses and delinquency in those pools has been decreasing.
Recovery rates have been a contributing factor to credit loss
experience. Recoveries have, however, shown gradual improvements over the last
two quarters which contributed to the improvement in delinquency and credit
losses. Recoveries as a percentage of gross charge-offs improved to 39.42% for
the quarter ended March 31, 1998, from 38.11% and 35.28% for the quarters ended
December 31, 1997, and September 30, 1997, respectively. Although recovery rates
showed signs of improvement during the past two quarters, UAC continues to look
for ways to improve recovery rates, including more diligently monitoring and
expanding the repossession and remarketing operations.
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) 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). In the event of a full or partial prepayment on a
Receivable, Certificateholders will receive interest for the full month of such
prepayment either (i) through the distribution of interest paid on other
Receivables, (ii) from a withdrawal from the Spread Account, (iii) by an Advance
by the Servicer or (iv) by a draw on the Policy.
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 Insurer in respect of the Policy and (d) the
per annum rate used to calculate 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.
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 3,400 manufacturer franchised
automobile dealerships in 31 states. UAC is an Indiana corporation, formed in
December 1993 by UAC's predecessor, Union Federal Savings Bank of Indianapolis
(the "Predecessor"), to succeed to the Predecessor's indirect automobile finance
business, 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 the 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 (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 INSURER
MBIA Insurance Corporation (the "Insurer") is the principal operating
subsidiary of MBIA Inc., a New York Stock Exchange listed company (the
"Company"). The Company is not obligated to pay the debts of or claims against
the Insurer. The Insurer is domiciled in the State of New York and licensed to
do business in and subject to regulation under the laws of all 50 states, the
District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the
Northern Mariana Islands, the Virgin Islands of the United States and the
Territory of Guam. The Insurer has two European branches, one in the Republic of
France and the other in the Kingdom of Spain. New York has laws prescribing
minimum capital requirements, limiting classes and concentrations of investments
and requiring the approval of policy rates and forms. State laws also regulate
the amount of both the aggregate and individual risks that may be insured, the
payment of dividends by the Insurer, changes in control and transactions among
affiliates. Additionally, the Insurer is required to maintain contingency
reserves on its liabilities in certain amounts and for certain periods of time.
Effective February 17, 1998, the Company acquired all of the
outstanding stock of Capital Markets Assurance Corporation ("CMAC") through a
merger with its parent CapMAC Holdings Inc. Pursuant to a reinsurance agreement,
CMAC has ceded all of its net insured risks, as well as its unearned premiums
and contingency reserves, to the Insurer and the Insurer has reinsured CMAC's
net outstanding exposure. The Company is not obligated to pay the debts of or
claims against CMAC.
As of December 31, 1997 the Insurer had admitted assets of $5.3 billion
(audited), total liabilities of $3.5 billion (audited), and total capital and
surplus of $1.8 billion (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of March 31, 1998, the Insurer had admitted assets of $5.5
billion (unaudited), total liabilities of $3.7 billion (unaudited), and total
capital and surplus of $1.8 billion (unaudited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities.
Furthermore, copies of the Insurer's year end financial statements
prepared in accordance with statutory accounting practices are available without
charge from the Insurer. A copy of the Annual Report on Form 10-K of the Company
is available from the Insurer or the Securities and Exchange Commission. The
address of the Insurer is 113 King Street, Armonk, New York 10504. The telephone
number of the Insurer is (914) 273-4545.
The Insurer's financial guarantee insurance policies, such as the
Policy, are not covered by the Property/Casualty Insurance Security Fund
specified in Article 76 of the New York Insurance Law.
Moody's Investors Service, Inc. rates the claims paying ability of the
Insurer "Aaa."
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. rates the claims paying ability of the Insurer "AAA."
Fitch IBCA, Inc. (formerly known as Fitch Investors Service, L.P.)
rates the claims paying ability of the Insurer "AAA."
Each rating of the Insurer should be evaluated independently. The
ratings reflect the respective rating agency's current assessment of the
creditworthiness of the Insurer and its ability to pay claims on its policies of
insurance. Any further explanation as to the significance of the above ratings
may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the
securities, and such ratings may be subject to revision or withdrawal at any
time by the rating agencies. Any downward revision or withdrawal of any of the
above ratings may have an adverse effect on the market price of the securities.
The Insurer does not guaranty the market price of the securities nor does it
guaranty that the ratings on the securities will not be revised or withdrawn.
The tables below present selected financial information of the Insurer
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities ("SAP") as well as generally
accepted accounting principles ("GAAP"):
SAP
-----------------------------------------
December 31 March 31
1997 1998
----------- -----------
(Audited) (Unaudited)
(in millions)
Admitted Assets $5,256 $5,475
Liabilities 3,496 3,658
Capital and Surplus 1,760 1,817
GAAP
-----------------------------------------
December 31 March 31
1997 1998
----------- -----------
(Audited) (Unaudited)
(in millions)
Assets $5,988 $6,196
Liabilities 2,624 2,725
Shareholder's Equity 3,364 3,471
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 July 8, 1998, 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. It is also intended that
the Trustee distribute to the Class I Certificateholders, on each Distribution
Date beginning on July 8, 1998 and continuing through the Distribution Date on
which the Notional Principal Amount is reduced to zero, the Class I Monthly
Interest. (Section 9.04.) Monthly Interest 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. Monthly Interest may be provided by a draw on the Policy 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 Policy to pay Monthly Interest and Monthly
Principal will be limited to the Policy 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 $208,715,851.64. 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 $208,715,851.64. The sum of the PAC
Component and the Companion Component will at all times equal the then aggregate
unpaid Certificate Balance.
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, the Monthly Principal distributed to Class A
Certificateholders 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...................................... $208,715,851.64
July 1998.................................... 199,638,160.80
August 1998.................................. 192,374,224.18
September 1998............................... 185,272,646.82
October 1998................................. 178,327,567.92
November 1998................................ 171,533,453.89
December 1998................................ 164,885,074.62
January 1999................................. 158,377,481.92
February 1999................................ 152,005,989.69
March 1999................................... 145,766,156.01
April 1999................................... 139,653,766.56
May 1999..................................... 133,664,819.53
June 1999.................................... 127,770,469.87
July 1999.................................... 121,945,657.38
August 1999.................................. 116,191,608.50
September 1999............................... 110,509,567.81
October 1999................................. 104,900,798.24
November 1999................................ 99,366,581.35
December 1999................................ 93,908,217.56
January 2000................................. 88,527,026.44
February 2000................................ 83,224,346.90
March 2000................................... 78,001,537.55
April 2000................................... 72,859,976.87
May 2000..................................... 67,801,063.54
June 2000.................................... 62,826,216.68
July 2000.................................... 57,936,876.14
August 2000.................................. 53,134,502.80
September 2000............................... 48,420,578.79
October 2000................................. 43,796,607.86
November 2000................................ 39,264,115.58
December 2000................................ 34,824,649.73
January 2001................................. 30,479,780.51
February 2001................................ 26,231,100.90
March 2001................................... 22,080,226.93
April 2001................................... 18,028,798.02
May 2001..................................... 14,078,477.26
June 2001.................................... 10,230,951.76
July 2001.................................... 6,520,810.99
August 2001.................................. 2,969,708.70
September 2001............................... 0.00
The Class I Certificates will not be entitled to any distributions after the
Notional Principal Amount has been reduced to zero.
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 Contract Rate Maturity (in Months) Maturity (in Months)
---- ----------------- ------------- -------------------- --------------------
<S> <C> <C> <C> <C>
1 $ 16,843,055.85 10.702% 16 68
2 14,053,158.75 12.834 42 49
3 41,864,941.01 12.617 58 60
4 83,412,785.48 12.614 70 71
5 111,806,526.91 12.616 80 81
</TABLE>
For purposes of the following 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 June 24, 1998, (v) distributions on the Offered Certificates are
made, in cash, commencing on July 8, 1998, and on the eighth day of each month
thereafter, (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
-------- --- --- --- --- ---
1.336179% 19.051% 5.910% 5.910% 5.910% - 4.454%
(1) Expressed as a percentage of the original Notional Principal Amount.
Based on the assumptions described above and assuming a purchase price
of 1.336179% at approximately 2.825% ABS, the pre-tax yield to maturity of the
Class I Certificates would be approximately 0%.
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 table 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.
