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 March 3, 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 1998-A 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 March 4, 1998.
UAC SECURITIZATION CORPORATION
as Depositor (Registrant)
/s/ Leeanne Graziani
----------------------------------------
Leeanne Graziani
Vice President, Assistant Treasurer and
Secretary
Computational Materials
UACSC 1998-A Auto Trust
- --------------------------------------------------------------------------------
$28,825,000.00[____]% Class A-1 Money Market Automobile
Receivable Backed Certificates
$74,725,000.00[____]% Class A-2 Automobile Receivable Backed Certificates
$45,200,000.00[____]% Class A-3 Automobile Receivable Backed Certificates
$51,000,000.00[____]% Class A-4 Automobile Receivable Backed Certificates
$29,188,158.83[____]% 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 NationsBanc Montgomery
Securities LLC Syndicate Desk at (704) 386-9690 or the Salomon Smith Barney
Syndicate Desk at (212) 783-3727.
The attached Term Sheet has been prepared by Union Acceptance
Corporation. Neither NationsBanc Montgomery Securities LLC ("NationsBanc
Montgomery") nor Salomon Smith Barney ("Salomon Smith Barney" 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 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 NationsBanc Montgomery Syndicate Desk at (704)
386-9690 or the Salomon Smith Barney Syndicate Desk at 212-783-3727 .
<PAGE>
UACSC 1998-A Auto Trust
UAC Securitization Corporation, Depositor
Union Acceptance Corporation, Servicer
Subject to Revision
Term Sheet dated March 3, 1998
Issuer ..................................UACSC 1998-A 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 Salomon Smith Barney (Co).
The Certificates ........................The Trust will be formed and will
issue the Certificates on or about
March 12, 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 $28,825,000.00
(the "Class A-1 Certificates"); (ii)
_____% Class A-2 Automobile Receivable
Backed Certificates in the aggregate
principal amount of $74,725,000.00
(the "Class A-2 Certificates"); (iii)
_____% Class A-3 Automobile Receivable
Backed Certificates in the aggregate
principal amount of $45,200,000.00
(the "Class A-3 Certificates"); (iv)
_____% Class A-4 Automobile Receivable
Backed Certificates in the aggregate
principal amount of $51,000,000.00
(the "Class A-4 Certificates"); (v)
_____% Class A-5 Automobile Receivable
Backed Certificates in the aggregate
principal amount of $29,188,158.83
(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
February 28, 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 third business
day after the 5th day of each month
(each, a "Distribution Date")
beginning April 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").
<PAGE>
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).
<PAGE>
"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")) 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).
<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
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 (or in the
case of the first Distribution Date,
as of the Cutoff Date) ("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
March 10, 1999 (the "Class A-1 Final
Scheduled Distribution Date"). The
final scheduled Distribution Date of
the Class A-2 Certificates will be May
9, 2001 (the "Class A-2 Final
Scheduled Distribution Date"). The
final scheduled Distribution Date of
the Class A-3 Certificates will be
June 10, 2002 (the "Class A-3 Final
Scheduled Distribution Date"). The
final scheduled Distribution Date of
the Class A-4 Certificates will be
October 8, 2003 (the "Class A-4 Final
Scheduled Distribution Date"). The
final scheduled Distribution Date of
the Class A-5 Certificates will be
August 10, 2005 (the "Class A-5 Final
Scheduled Distribution Date").
<PAGE>
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."
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 1.55% per annum (the
"Class I Pass-Through Rate"). The
Notional Principal Amount represents a
designated principal component of the
Receivables, originally
$183,094,333.85 (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) divided by 30. 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.
<PAGE>
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
$183,094,333.85.
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.
<PAGE>
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" and "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
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 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.
<PAGE>
"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 1.25% 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 6.5% 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.
<PAGE>
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.
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.
"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).
<PAGE>
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% on the first Distribution Date
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 (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 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 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.
<PAGE>
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 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 6.50%. The weighted average remaining maturity of the Receivables will be
approximately 71 months as of the Cutoff Date.
Approximately 96.79% of the aggregate principal balance of the
Receivables as of the Cutoff Date are simple interest contracts which provide
for equal monthly payments. Approximately 3.21% of the aggregate principal
balance of the Receivables as of the Cutoff Date are Precomputed Receivables
originated in the State of California. Approximately 19.92% 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.
<PAGE>
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>
Aggregate Original Weighted
Number of Principal Principal Average
Receivables Balance Balance Rate
----------- ------- ------- ----
<S> <C> <C> <C> <C>
New Automobiles and Light-Duty Trucks............ 2,076 $ 40,356,441.59 $ 41,788,360.22 12.13%
Used Automobiles and Light-Duty Trucks........... 12,389 165,919,538.89 169,264,154.80 13.13%
New Vans (1)..................................... 230 5,237,175.31 5,438,736.93 11.72%
Used Vans (1).................................... 1,229 17,425,003.04 17,864,662.01 13.03%
------ --------------- --------------- -----
All Receivables.................................. 15,924 $228,938,158.83 $234,355,913.96 12.92%
====== =============== =============== =====
</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.......... 77.1mos. 79.4mos. 17.63%
Used Automobiles and Light-Duty Trucks......... 69.1 70.8 72.47
New Vans (1)................................... 78.8 81.2 2.29
Used Vans (1).................................. 70.0 71.8 7.61
---- ---- ------
All Receivables................................ 70.8mos. 72.6mos. 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............................................ 2.55%
California......................................... 11.52
Colorado........................................... 1.97
Florida............................................ 9.21
Georgia............................................ 4.32
Idaho.............................................. 0.10
Illinois........................................... 7.49
Indiana............................................ 2.72
Iowa............................................... 2.71
Kansas............................................. 1.08
Kentucky........................................... 0.85
Maryland........................................... 2.44
Michigan........................................... 2.93
Minnesota.......................................... 0.73
Missouri........................................... 2.35
Nebraska........................................... 0.37
Nevada............................................. 0.52
New Mexico......................................... 0.52
North Carolina..................................... 8.83
Ohio............................................... 4.22
Oklahoma........................................... 3.80
Oregon............................................. 0.10
Pennsylvania....................................... 0.83
South Carolina..................................... 4.54
Tennessee.......................................... 2.66
Texas.............................................. 11.16
Utah............................................... 0.49
Virginia........................................... 7.17
Washington......................................... 0.65
Wisconsin.......................................... 1.16
------
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 to 100% due to rounding.
<PAGE>
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>
0 to 6 months....................... 18 $ 27,309.26 $ 1,517.18 0.01%
7 to 12 months....................... 92 300,036.11 3,261.26 0.13
13 to 24 months....................... 305 1,465,754.24 4,805.75 0.64
25 to 36 months....................... 492 3,147,580.15 6,397.52 1.37
37 to 48 months....................... 986 8,256,572.59 8,373.81 3.61
49 to 60 months....................... 3,066 36,597,193.11 11,936.46 15.99
61 to 66 months....................... 1,213 16,144,481.67 13,309.55 7.05
67 to 72 months....................... 3,824 56,532,986.33 14,783.73 24.69
73 to 84 months....................... 5,928 106,466,245.37 17,959.89 46.50
------ --------------- ---------- ------
Total....................... 15,924 $228,938,158.83 $14,376.93 100.00%
====== =============== ========== ======
</TABLE>
(1) Sum may not equal 100% due to rounding.
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>
1981 and earlier..................... 3 0.02% $ 17,868.35 0.01%
1982................................. 2 0.01 13,649.55 0.01
1983................................. 3 0.02 10,858.85 0.00
1984................................. 4 0.03 12,620.38 0.01
1985................................. 8 0.05 50,428.42 0.02
1986................................. 30 0.19 149,417.58 0.07
1987................................. 29 0.18 131,167.38 0.06
1988................................. 99 0.62 574,301.42 0.25
1989................................. 268 1.68 1,680,011.11 0.73
1990................................. 502 3.15 3,570,842.40 1.56
1991................................. 813 5.11 6,899,268.76 3.01
1992................................. 1,221 7.67 12,448,305.99 5.44
1993................................. 1,873 11.76 21,556,483.56 9.42
1994................................. 2,245 14.10 30,231,177.40 13.20
1995................................. 2,828 17.76 42,966,024.46 18.77
1996................................. 2,084 13.09 34,075,130.53 14.88
1997................................. 2,533 15.91 45,898,931.68 20.05
1998................................. 1,379 8.66 28,651,671.01 12.52
------ ------ --------------- ------
Total.............................. 15,924 100.00% $228,938,158.83 100.00%
====== ====== =============== ======
</TABLE>
(1) Sum may not equal 100% due to rounding.
<PAGE>
Distribution of the Receivables by Note Rate as of the Cutoff Date
<TABLE>
<CAPTION>
Percent 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 $ 8,010.14 $ 8,010.14 0.00%
7.000 to 7.999%...................... 15 157,948.24 10,529.88 0.07
8.000 to 8.999%...................... 188 3,249,103.86 17,282.47 1.42
9.000 to 9.999%...................... 468 7,489,813.42 16,003.87 3.27
10.000 to 10.999%...................... 1,211 18,986,892.10 15,678.69 8.29
11.000 to 11.999%...................... 2,535 40,382,707.35 15,930.06 17.64
12.000 to 12.999%...................... 3,895 58,790,386.42 15,093.81 25.68
13.000 to 13.999%...................... 3,543 50,382,270.73 14,220.23 22.01
14.000 to 14.999%...................... 2,070 26,216,956.49 12,665.20 11.45
15.000 to 15.999%...................... 972 11,683,532.98 12,020.10 5.10
16.000 to 16.999%...................... 469 5,435,861.35 11,590.32 2.37
17.000 to 17.999%...................... 241 2,914,741.23 12,094.36 1.27
18.000 to 18.999%...................... 213 2,368,958.30 11,121.87 1.03
19.000 to 19.999%...................... 48 481,435.06 10,029.90 0.21
20.000 to 20.999%...................... 41 311,190.36 7,590.01 0.14
21.000 to 21.999%...................... 10 59,685.56 5,968.56 0.03
22.000 to 22.999%...................... 2 13,097.84 6,548.92 0.01
23.000 to 23.999%...................... 1 4,119.53 4,119.53 0.00
24.000 to 24.999%...................... 1 1,447.87 1,447.87 0.00
------ --------------- ---------- ------
Total...................... 15,924 $228,938,158.83 $14,376.93 100.00%
====== =============== ========== ======
</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 (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>
At June 30,
1995 1996 1997
---------------------- ----------------------- ----------------------
(Dollars in thousands)
Number of Number of Number of
Receivables Amount Receivables Amount Receivables Amount
----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Servicing portfolio .... 117,837 $1,159,349 147,722 $1,548,538 173,693 $1,860,272
------- ---------- ------- ---------- ------- ----------
Delinquencies
30-59 days .......... 1,169 $ 12,097 1,602 $ 17,030 2,487 $ 27,373
60-89 days .......... 377 4,124 694 7,629 1,646 18,931
90 days or more ..... 0 0 333 3,811 723 8,826
------- ---------- ------- ---------- ------- ----------
Total delinquencies .... 1,546 $ 16,221 2,629 $ 28,470 4,856 $ 55,130
======= ========== ======= ========== ======= ==========
Total delinquencies as a
percent of servicing
portfolio ......... 1.31% 1.40% 1.78% 1.84% 2.80% 2.96%
</TABLE>
At September 30, At December 31,
1997 1997
------------------------- ----------------------
(Dollars in thousands)
Number of Number of
Receivables Amount Receivables Amount
----------- ------ ----------- ------
Servicing portfolio .... 177,377 $1,896,748 179,962 $1,920,930
------- ---------- ------- ----------
Delinquencies
30-59 days .......... 4,310 $ 45,766 3,954 $ 41,778
60-89 days .......... 2,196 25,156 2,274 25,933
90 days or more ..... 934 11,131 688 8,048
------- ---------- ------- ----------
Total delinquencies .... 7,440 $ 82,053 6,916 $ 75,759
======= ========== ======= ==========
Total delinquencies as a
percent of servicing
portfolio ......... 4.19% 4.33% 3.84% 3.94%
<TABLE>
<CAPTION>
Credit Loss Experience (1)
Year ended June 30,
1995 1996 1997
------------------------ ----------------------- ------------------------
(Dollars in thousands)
Number of Number of Number of
Receivables Amount Receivables Amount Receivables Amount
----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Avg. servicing
portfolio(2)............ 104,455 $982,875 132,363 $1,343,770 164,858 $1,759,666
------- -------- ------- ---------- ------- ----------
Gross charge-offs ........... 3,493 $ 28,628 3,663 $ 40,815 6,280 $ 70,830
Recoveries (3) .............. 15,258 19,543 28,511 8,134 8,527 16,661
-------- ---------- ----------
Net losses .................. $ 13,370 $ 21,272 $ 42,319
======== ========== ==========
Gross charge-offs as a %
of avg. servicing
portfolio(4) ............. 3.34% 2.91% 2.77% 3.04% 3.81% 4.03%
Recoveries as a % of gross
charge-offs .............. 53.30% 47.88% 40.25%
Net losses as a % of avg
servicing portfolio(4) ... 1.36% 1.58% 2.40%
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Six Months Ended
September 30, 1997 (5) December 31, 1997 (5) December 31, 1997 (5)
------------------------- ------------------------ --------------------------
(Dollars in thousands)
Number of Number of Number of
Receivables Amount Receivables Amount Receivables Amount
----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Avg. servicing
portfolio(2)............ 175,920 $1,881,603 179,334 $1,916,778 177,627 $1,899,190
------- ---------- ------- ---------- ------- ----------
Gross charge-offs ........... 2,054 $ 23,056 1,977 $ 22,373 4,031 $ 45,429
Recoveries (3) ..............
---------- ---------- ----------
Net losses .................. $ 14,922 $ 13,846 $ 28,768
========== ========== ==========
Gross charge-offs as a %
of avg. servicing
portfolio(4) ............. 4.67% 4.90% 4.41% 4.67% 4.54% 4.78%
Recoveries as a % of gross
charge-offs .............. 35.28% 38.11% 36.68%
Net losses as a % of avg
servicing portfolio(4) ... 3.17% 2.89% 3.03%
</TABLE>
<PAGE>
(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 3.94% at December 31, 1997, compared to 4.33% at September 30,
1997, and increased from 2.96% at June 30, 1997, for UAC's prime servicing
portfolio. The decreased delinquency from 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 $13.8 million for the
quarter ended December 31, 1997, or 2.89% (annualized) of the average servicing
portfolio compared to 3.17% for the quarter ended September 30, 1997, 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.
Increasing delinquency and credit losses prior to this quarter have
been attributed to the deterioration of consumer credit despite low unemployment
and relatively good economic conditions. There has been a slight improvement in
delinquency and credit losses since September 30, 1997, which is primarily
attributable to strategic efforts made by UAC. Beginning in March 1997, UAC
implemented tighter credit standards in loan acquisitions to help ensure
adequate credit quality. Several collection strategies have been implemented to
target problem accounts, including forming specialized collection teams to
concentrate on specific classes of accounts and utilization of new scoring tools
to focus collection efforts most effectively.
Recovery rates are a contributing factor to higher credit losses. The
market for the sale of used-cars at auction has continued to decline due to
saturation by used leased vehicles and repossessed vehicles due to bankruptcy.
Recoveries as a percentage of gross charge-offs increased to 38.11% for the
quarter ended December 31, 1997, up from 35.28% for the quarter ended September
30, 1997. Although recovery rates showed signs of improvement during the most
recent quarter, UAC continues to look for ways to improve recovery rates
including expansion of UAC's reconditioning 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.
<PAGE>
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). 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 Insurer in respect of the Policy 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.
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, 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.
<PAGE>
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, 1996 the Insurer had admitted assets of $4.4 billion
(audited), total liabilities of $3.0 billion (audited), and total capital and
surplus of $1.4 billion (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of September 30, 1997, the Insurer had admitted assets of $5.1
billion (unaudited), total liabilities of $3.4 billion (unaudited), and total
capital and surplus of $1.7 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.
<PAGE>
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 April 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 (as defined herein). It is
also intended that the Trustee distribute to the Class I Certificateholders, on
each Distribution Date beginning on April 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 $183,094,333.85. 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 $183,094,333.85. 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 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.
<PAGE>
Planned Notional Principal Amount Schedule
Planned Notional
Distribution Date in Principal Amount
- -------------------- ----------------
Initial.................................................... $183,094,333.85
April 1998................................................. 177,083,521.77
May 1998................................................... 171,123,886.53
June 1998.................................................. 165,216,390.34
July 1998.................................................. 159,362,010.25
August 1998................................................ 153,561,738.32
September 1998............................................. 147,816,581.89
October 1998............................................... 142,127,563.74
November 1998.............................................. 136,495,722.35
December 1998.............................................. 130,922,112.10
January 1999............................................... 125,407,803.47
February 1999.............................................. 119,953,883.33
March 1999................................................. 114,561,455.09
April 1999................................................. 109,231,638.99
May 1999................................................... 103,965,572.30
June 1999.................................................. 98,764,409.59
July 1999.................................................. 93,629,322.95
August 1999................................................ 88,561,502.21
September 1999............................................. 83,562,155.25
October 1999............................................... 78,632,508.20
November 1999.............................................. 73,773,805.70
December 1999.............................................. 68,987,311.17
January 2000............................................... 64,274,307.08
February 2000.............................................. 59,636,095.20
March 2000................................................. 55,073,996.84
April 2000................................................. 50,589,353.19
May 2000................................................... 46,183,525.52
June 2000.................................................. 41,857,895.52
July 2000.................................................. 37,613,865.54
August 2000................................................ 33,452,858.89
September 2000............................................. 29,376,320.13
October 2000............................................... 25,385,715.38
November 2000.............................................. 21,482,532.59
December 2000.............................................. 17,668,281.84
January 2001............................................... 13,944,495.68
February 2001.............................................. 10,312,729.39
March 2001................................................. 6,774,561.34
April 2001................................................. 3,331,593.29
May 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."
<PAGE>
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 four
hypothetical pools having the characteristics described therein and that the
level scheduled monthly payment for each of the four 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 $ 11,963,606.19 13.753% 41 43
2 36,681,473.67 13.071 58 60
3 73,628,976.01 12.877 69 71
4 106,664,102.96 12.795 80 82
</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 March
12, 1998, (v) distributions on the Offered Certificates are made, in cash,
commencing on April 8, 1998, and on the ninth 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
-------- --- --- --- --- ---
2.135753% 26.529% 6.000% 6.000% 6.000% - 3.910%
(1) Expressed as a percentage of the original Notional Principal Amount.
Based on the assumptions described above and assuming a purchase price
of 2.135753% at approximately 2.843% 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.
<PAGE>
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.
