Prospectus Supplement
(To Prospectus Dated September 10, 1998)
$351,379,110.20
UACSC 1998-C Auto Trust
$ 49,800,000.00 5.5269% Class A-1 Money Market Automobile
Receivable Backed Certificates
$110,900,000.00 5.44% Class A-2 Automobile Receivable Backed Certificates
$ 74,675,000.00 5.41% Class A-3 Automobile Receivable Backed Certificates
$ 72,575,000.00 5.52% Class A-4 Automobile Receivable Backed Certificates
$ 43,429,110.20 5.64% Class A-5 Automobile Receivable Backed Certificates
UAC Securitization Corporation
Depositor
[UACSC LOGO]
Union Acceptance Corporation
Servicer
Interest at the applicable pass-through rate shown above, will be
distributed to Class A Certificateholders (as defined herein) on each
Distribution Date (as defined herein), beginning October 8, 1998. Principal will
be distributed to Class A Certificateholders on each Distribution Date in the
sequence described herein. Each Class A Certificate offered hereby will
represent an undivided interest in the UACSC 1998-C Auto Trust (the "Trust") to
be formed by UAC Securitization Corporation, a Delaware corporation, having its
principal office and principal place of business in Bonita Springs, Florida (the
"Depositor"). The Trust property will include an irrevocable insurance policy
guaranteeing payments of interest and principal on the Class A Certificates
issued by MBIA Insurance Corporation (the "Insurer") and a Spread Account for
the benefit of the Class A Certificateholders, as well as the Insurer.
Concurrently with the issuance of the Class A Certificates, the Trust will issue
a Class IC Automobile Receivable Backed Certificate (the "Class IC
Certificate"). The Class IC Certificate will be issued to the Depositor, and
will not be offered hereby.
Prior to their issuance there has been no market for the Class A
Certificates nor can there be any assurance that one will develop, or if it does
develop, that it will provide the holders of the Class A Certificates with
liquidity or will continue for the life of the Class A Certificates. The
Underwriters (as defined herein) intend, but are not obligated, to make a market
in the Class A Certificates.
Prospective investors should consider, among other things, the information
set forth under "Risk Factors" on page S-10 hereof and page 10 of the
Prospectus.
THE CLASS A CERTIFICATES DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF
UAC SECURITIZATION CORPORATION OR ANY AFFILIATE THEREOF. NEITHER THESE
SECURITIES NOR THE UNDERLYING RECEIVABLES WILL BE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================================
Price to Underwriting Proceeds to
Public Discounts Depositor (1)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Certificate...... 100.000000% 0.125% 99.875000%
- ------------------------------------------------------------------------------------------------
Per Class A-2 Certificate...... 99.994530% 0.200% 99.794530%
- ------------------------------------------------------------------------------------------------
Per Class A-3 Certificate...... 99.986030% 0.220% 99.766030%
- ------------------------------------------------------------------------------------------------
Per Class A-4 Certificate...... 99.989080% 0.270% 99.719080%
- ------------------------------------------------------------------------------------------------
Per Class A-5 Certificate...... 99.972580% 0.300% 99.672580%
- ------------------------------------------------------------------------------------------------
Total.......................... $351,342,778.42 $774,574.83 $350,568,203.59
================================================================================================
</TABLE>
(1) Before deducting expenses, estimated to be $475,000.00.
The Class A Certificates are offered, subject to prior sale, when, as and
if accepted by the Underwriters, and subject to approval of certain legal
matters by Cadwalader, Wickersham & Taft, counsel for the Underwriters. It is
expected that delivery of the Class A Certificates in book-entry form will be
made on or about September 17, 1998 through the facilities of The Depository
Trust Company, against payment therefor in immediately available funds.
NationsBanc Montgomery Securities LLC Bear, Stearns & Co. Inc.
The date of this Prospectus Supplement is September 10, 1998
<PAGE>
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT
THE OFFERING OF THE CLASS A CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN
THE PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CLASS A CERTIFICATES MAY NOT
BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. THIS PROSPECTUS SUPPLEMENT CONTAINS INFORMATION THAT IS
SPECIFIC TO THE TRUST AND THE CLASS A CERTIFICATES AND, TO THAT EXTENT,
SUPPLEMENTS AND REPLACES THE MORE GENERAL INFORMATION PROVIDED IN THE
PROSPECTUS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Class A Certificates, whether or not participating
in this distribution, may be required to deliver this Prospectus Supplement and
the Prospectus. This is in addition to the obligation of dealers to deliver this
Prospectus Supplement and the Prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
REPORTS TO CERTIFICATEHOLDERS
Unless and until definitive certificates are issued (which will occur
only under the limited circumstances described herein), Harris Trust and Savings
Bank, as Trustee, will provide to Cede & Co., the nominee of The Depository
Trust Company, as registered holder of the Class A Certificates, monthly and
annual statements concerning the Trust and the Class A Certificates. Such
statements will not constitute financial statements prepared in accordance with
generally accepted accounting principles. A copy of the most recent monthly or
annual statement concerning the Trust and the Class A Certificates may be
obtained by contacting the Servicer at Union Acceptance Corporation, 250 North
Shadeland Avenue, Indianapolis, Indiana 46219 (telephone (317) 231-2717).
<PAGE>
SUMMARY OF TERMS
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
Prospectus. Certain capitalized terms used in this Summary are defined elsewhere
in this Prospectus Supplement on the pages indicated in the "Index of Principal
Terms" or, to the extent not defined herein, have the meanings assigned to such
terms in the Prospectus.
Issuer ..................................UACSC 1998-C 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.
The Certificates ........................The Trust will be formed and will
issue the Certificates on or about
September 17, 1998 (the "Closing
Date") pursuant to a pooling and
servicing agreement (the "Pooling and
Servicing Agreement"). The
"Certificates" will consist of: (i)
5.5269% Class A-1 Money Market
Automobile Receivable Backed
Certificates in the aggregate
principal amount of $49,800,000.00
(the "Class A-1 Certificates"); (ii)
5.44% Class A-2 Automobile Receivable
Backed Certificates in the aggregate
principal amount of $110,900,000.00
(the "Class A-2 Certificates"); (iii)
5.41% Class A-3 Automobile Receivable
Backed Certificates in the aggregate
principal amount of $74,675,000.00
(the "Class A-3 Certificates"); (iv)
5.52% Class A-4 Automobile Receivable
Backed Certificates in the aggregate
principal amount of $72,575,000.00
(the "Class A-4 Certificates"); (v)
5.64% Class A-5 Automobile Receivable
Backed Certificates in the aggregate
principal amount of $43,429,110.20
(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") and (vi) the Class IC
Automobile Receivable Backed
Certificate (the "Class IC
Certificate"). The Class IC
Certificate will be issued to the
Depositor on the Closing Date and is
not being offered hereby.
<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
August 31, 1998 (the "Cutoff Date"),
security interests in the related
vehicles financed thereby (the
"Financed Vehicles"), monies on
deposit in the Certificate Account and
the proceeds thereof, any proceeds
from claims on certain insurance
policies relating to the Financed
Vehicles or the related Obligors, any
lender's single interest insurance
policy, the Spread Account (as defined
herein) for the benefit of the Class A
Certificateholders and the Insurer,
the Policy for the benefit of the
Class A Certificateholders and certain
rights under the Pooling and Servicing
Agreement. Interest paid to the Class
A 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
October 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 Class A Certificates --
Distributions on the Class A
Certificates" herein .
The amount of interest distributable
to the Class A-1 Certificateholders on
any Distribution Date, other than the
first Distribution Date, is the
product of 1/360th of the applicable
pass-through rate of 5.5269% for the
Class A-1 Certificates (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
aggregate outstanding principal
balance of the Class A-1 Certificates
(the "Class A-1 Certificate Balance")
on the preceding Distribution Date
(after giving effect to all
distributions to Class A
Certificateholders on such date).
The amount of interest distributable
to the Class A-2 Certificateholders,
the Class A-3 Certificateholders and
the Class A-4 Certificateholders on
any Distribution Date, other than the
first Distribution Date, is the
product of one-twelfth of the
applicable pass-through rate of 5.44%
for the Class A-2 Certificates (the
"Class A-2 Pass-Through Rate"), the
applicable pass-through rate of 5.41%
for the Class A-3 Certificates (the
"Class A-3 Pass-Through Rate") and the
applicable pass-through rate of 5.52%
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"), as the case may be, as of
the preceding Distribution Date (after
giving effect to all distributions to
Class A Certificateholders on such
date).
<PAGE>
The amount of interest distributable
to the Class A-5 Certificateholders on
any Distribution Date, other than the
first Distribution Date, is the
product of one-twelfth of the
applicable pass-through rate of 5.64%
for the Class A-5 Certificates (which
per annum rate shall be increased by
0.50% after the Clean-Up Call Date, if
required) (the "Class A-5 Pass-Through
Rate") multiplied by the aggregate
outstanding principal balance of the
Class A-5 Certificates (the "Class A-5
Certificate Balance" and together with
the Class A-1 Certificate Balance, the
Class A-2 Certificate Balance, the
Class A-3 Certificate Balance and the
Class A-4 Certificate Balance, the
"Certificate Balance" ) as of the
preceding Distribution Date (after
giving effect to all distributions to
Class A Certificateholders on such
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 in accordance
with 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
October 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
January 8, 2003 (the "Class A-3 Final
Scheduled Distribution Date"). The
final scheduled Distribution Date of
the Class A-4 Certificates will be
March 8, 2004 (the "Class A-4 Final
Scheduled Distribution Date"). The
final scheduled Distribution Date of
the Class A-5 Certificates will be May
8, 2006 (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 Class A
Certificates -- Distributions on the
Class A Certificates" herein.
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
Class A Certificateholders, the
Insurer, the monthly fee payable to
the Servicer (the "Monthly Servicing
Fee") and any permitted reimbursement
of outstanding Advances. In the event
that Available Funds 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, 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 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 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), as
described herein. See "The Class A
Certificates -- Accounts" and "--
Distributions on the Class A
Certificates" herein.
<PAGE>
The Class A Certificates will be
senior in right and interest to the
Class IC Certificate. 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
(as 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 the
lesser of (i) 1.50% of the initial
Pool Balance or (ii) the Certificate
Balance as of the previous
Distribution Date (after giving effect
to all distributions to Class A
Certificateholders on such date). If
the average aggregate yield of the
Receivables 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
4.75% 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. See "The Class
A Certificates -- Accounts" and "--
The Policy" herein.
<PAGE>
The Policy ............................. The Depositor shall obtain an
irrevocable insurance policy (the
"Policy") issued by the Insurer for
the benefit of the Trustee on behalf
of the Class A Certificateholders.
Subject to the terms of the Policy,
the Insurer will unconditionally and
irrevocably guarantee the payment of
Monthly Interest and Monthly Principal
up to the Policy Amount. 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 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 any amount
distributed or required to be
distributed by the Trust to Class A
Certificateholders that is sought to
be recovered as a voidable preference
by a trustee in bankruptcy of UAC, the
Depositor or UAFC 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. See "The Class
A Certificates -- The Policy."
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)
Monthly Interest, plus (C) 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.
<PAGE>
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 (the "Optional
Sale") as of the last day of any
Collection Period on which the Pool
Balance is equal to or less than 10%
of the initial Certificate Balance.
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. See "Certain Federal
Income Tax Consequences" in the
Prospectus.
Ratings ............................... As a condition to the issuance of the
Class A Certificates, the Class A
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"). 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."
<PAGE>
ERISA Considerations .................. Subject to the considerations
discussed under "ERISA Considerations"
in the Prospectus, the Class A
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 a Class A Certificate
should, among other things, consult
with experienced legal counsel in
determining whether all required
conditions for such purchase have been
satisfied. See "ERISA Considerations"
herein and in the Prospectus.
<PAGE>
RISK FACTORS
Investors should carefully consider the information set forth below as
well as the other investment considerations described in this Prospectus
Supplement.
Limited Liquidity
There is currently no secondary market for the Class A Certificates.
The Underwriters currently intend to make a market in the Class A 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 Class A
Certificateholders with liquidity of investment or that it will continue for the
life of the Class A Certificates.
Certificates Solely Obligations of the Trust
The Class A Certificates are interests in the Trust only and do not
represent the obligation of any other person. The Class A Certificateholders are
senior in right and interest to the Class IC Certificateholder (as described
under "The Class A Certificates -- Distributions on the Class A Certificates").
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 Class A Certificates and distributions
on the Class A Certificates may be made pro rata based on the amounts to which
Class A Certificateholders of each class are entitled as set forth under "The
Class A Certificates -- Distributions on the Class A Certificates." See "The
Receivables Pool -- Delinquencies, Repossessions and Net Losses" and "The Class
A Certificates -- Accounts" and "-- Distributions on the Class A Certificates"
herein.
Certificate Rating
It is a condition of issuance of the Certificates that the Class A
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 Class A Certificates. A
security rating is not a recommendation to buy, sell or hold securities.
<PAGE>
FORMATION OF THE TRUST
The Depositor will establish the Trust by selling and assigning the
Trust property, as described below, to the Trustee in exchange for the Class A
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. See "Description
of the Transfer and Servicing Agreements -- Servicing Compensation and Payment
of Expenses" in the Prospectus. 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.
See "Certain Legal Aspects of the Receivables" in the Prospectus. 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 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 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 Class A
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 Class A Certificateholders. See
"The Class A Certificates -- Accounts" herein and "Certain Legal Aspects of the
Receivables" in the Prospectus.
THE RECEIVABLES POOL
The Receivables were selected from the portfolio of UAFC, 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 (except that approximately 0.99% of the aggregate principal balance of
the Receivables as of the Cutoff Date consist of Modified Receivables which have
been amended or modified after origination to provide that the term from the
time of origination to maturity may exceed 84 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 remaining term and (iv) has a contract rate of interest (a "Contract Rate")
(exclusive of prepaid finance charges) of not less than 4.95%. The weighted
average remaining maturity of the Receivables is approximately 69 months as of
the Cutoff Date.
Approximately 2.61% of the aggregate principal balance of the
Receivables as of the Cutoff Date were selected from the "non-prime" or "Tier
II" portfolio of UAFC (the "Tier II Receivables"). See "-- Delinquencies,
Repossessions and Net Losses."
<PAGE>
Approximately 98.10% of the aggregate principal balance of the
Receivables as of the Cutoff Date are simple interest contracts which provide
for equal monthly payments. Approximately 1.90% 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 26.14% 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 State of 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............ 4,646 $ 82,281,930.80 $ 91,111,263.98 11.89%
Used Automobiles and Light-Duty Trucks........... 18,419 237,291,296.38 255,450,175.27 13.14%
New Vans (1)..................................... 452 9,570,031.25 10,644,778.80 11.73%
Used Vans (1).................................... 1,718 22,235,851.77 24,888,218.19 13.18%
------ --------------- --------------- -----
All Receivables.................................. 25,235 $351,379,110.20 $382,094,436.24 12.81%
====== =============== =============== =====
Weighted Weighted Percent of
Average Average Aggregate
Remaining Original Principal
Term(2) Term(2) Balance(3)
------- ------- ----------
New Automobiles and Light-Duty Trucks.......... 73.6mos. 77.3mos. 23.42%
Used Automobiles and Light-Duty Trucks......... 67.1 69.7 67.53
New Vans (1)................................... 75.4 79.5 2.72
Used Vans (1).................................. 66.0 69.6 6.33
---- ---- ------
All Receivables................................ 68.8mos. 71.8mos. 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>
Distribution of the Receivables by Remaining Term as of the Cutoff Date
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Remaining Number of Number of Principal Principal
Term Range Receivables Receivables (1) Balance Balance(1)
---------- ----------- --------------- ------- ----------
<S> <C> <C> <C> <C>
1 to 12 months....................... 798 3.16% $ 1,649,455.44 0.47%
13 to 24 months....................... 2,006 7.95 8,939,789.06 2.54
25 to 36 months....................... 813 3.22 5,499,467.32 1.57
37 to 48 months....................... 1,769 7.01 16,688,976.26 4.75
49 to 60 months....................... 4,834 19.16 61,191,393.23 17.41
61 to 72 months....................... 7,631 30.24 118,016,980.36 33.59
73 to 84 months....................... 7,384 29.26 139,393,048.53 39.67
------ ------ --------------- ------
Total....................... 25,235 100.00% $351,379,110.20 100.00%
====== ====== =============== ======
</TABLE>
- ------------
(1) Sum may not equal 100% due to rounding.
Geographic Distribution of the Receivables as of the Cutoff Date
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Number of Number of Principal Principal
State (1) (2) Receivables Receivables (3) Balance Balance (3)
- ------------- ----------- --------------- ------- -----------
<S> <C> <C> <C> <C>
Arizona................................. 1,076 4.26% $14,930,514.49 4.25%
California.............................. 1,864 7.39 28,430,585.38 8.09
Colorado................................ 442 1.75 5,040,771.04 1.43
Florida................................. 1,830 7.25 26,400,431.09 7.51
Georgia................................. 863 3.42 13,484,418.49 3.84
Idaho................................... 35 0.14 573,212.08 0.16
Illinois................................ 1,537 6.09 21,613,595.97 6.15
Indiana................................. 1,006 3.99 10,612,570.62 3.02
Iowa ................................... 721 2.86 10,351,735.65 2.95
Kansas.................................. 285 1.13 3,760,700.27 1.07
Kentucky................................ 206 0.82 3,024,336.57 0.86
Maryland................................ 315 1.25 4,764,692.87 1.36
Massachussetts.......................... 362 1.43 5,693,171.15 1.62
Michigan................................ 460 1.82 6,935,258.05 1.97
Minnesota............................... 545 2.16 7,776,807.83 2.21
Missouri................................ 641 2.54 7,042,353.02 2.00
Nebraska................................ 168 0.67 2,407,863.97 0.69
Nevada.................................. 98 0.39 1,550,661.38 0.44
New Mexico.............................. 84 0.33 1,228,778.53 0.35
North Carolina.......................... 2,484 9.84 35,006,388.87 9.96
Ohio .................................. 1,854 7.35 21,446,391.47 6.10
Oklahoma................................ 1,201 4.76 13,653,223.14 3.89
Oregon.................................. 118 0.47 2,029,651.04 0.58
Pennsylvania............................ 175 0.69 2,606,400.53 0.74
South Carolina.......................... 834 3.30 12,873,997.83 3.66
South Dakota............................ 7 0.03 104,944.23 0.03
Tennessee............................... 657 2.60 10,608,427.75 3.02
Texas................................... 3,289 13.03 47,192,004.96 13.43
Utah ................................... 216 0.86 3,452,973.57 0.98
Virginia................................ 1,406 5.57 19,997,778.77 5.69
Washington.............................. 123 0.49 2,243,207.52 0.64
Wisconsin............................... 333 1.32 4,541,262.07 1.29
------ ------ --------------- ------
Total................................... 25,235 100.00% $351,379,110.20 100.00%
====== ====== =============== ======
</TABLE>
<PAGE>
(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.
<PAGE>
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>
1984 and earlier..................... 6 0.02% $ 44,091.85 0.01%
1985................................. 10 0.04 56,536.73 0.02
1986................................. 13 0.05 72,405.03 0.02
1987................................. 35 0.14 180,946.30 0.05
1988................................. 73 0.29 395,085.25 0.11
1989................................. 282 1.12 1,161,627.46 0.33
1990................................. 748 2.96 4,154,903.60 1.18
1991................................. 1,180 4.68 7,408,786.82 2.11
1992................................. 1,806 7.16 14,580,395.06 4.15
1993................................. 2,783 11.03 26,447,512.19 7.53
1994................................. 3,508 13.90 40,019,048.40 11.39
1995................................. 4,064 16.10 59,439,707.80 16.92
1996................................. 3,142 12.45 51,064,457.83 14.53
1997................................. 3,009 11.92 52,535,660.70 14.95
1998................................. 4,370 17.32 88,800,679.93 25.27
1999................................. 206 0.82 5,017,265.25 1.43
------ ------ --------------- ------
Total.............................. 25,235 100.00% $351,379,110.20 100.00%
====== ====== =============== ======
</TABLE>
- ------------
(1) Sum may not equal 100% due to rounding.
<PAGE>
Distribution of the Receivables by Contract Rate as of the Cutoff Date
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Number of Number of Principal Principal
Contract Rate Range Receivables Receivables(1) Balance Balance(1)
- ------------------- ----------- -------------- ------- ----------
<S> <C> <C> <C> <C>
Less than 7.000%...................... 126 0.50% $ 1,083,340.89 0.31%
7.000 to 7.999%...................... 288 1.14 3,103,921.79 0.88
8.000 to 8.999%...................... 771 3.06 8,389,543.51 2.39
9.000 to 9.999%...................... 1,464 5.80 17,552,809.55 5.00
10.000 to 10.999%...................... 2,610 10.34 36,251,253.39 10.32
11.000 to 11.999%...................... 3,847 15.24 58,064,942.07 16.52
12.000 to 12.999%...................... 5,513 21.85 82,558,872.53 23.50
13.000 to 13.999%...................... 4,572 18.12 65,388,961.97 18.61
14.000 to 14.999%...................... 2,679 10.62 36,607,751.91 10.42
15.000 to 15.999%...................... 1,302 5.16 16,453,202.03 4.68
16.000 to 16.999%...................... 764 3.03 10,303,889.51 2.93
17.000 to 17.999%...................... 399 1.58 5,228,041.40 1.49
18.000 to 18.999%...................... 650 2.58 7,897,347.42 2.25
19.000 to 19.999%...................... 65 0.26 688,812.54 0.20
20.000 to 20.999%...................... 62 0.25 642,692.79 0.18
21.000 to 21.999%...................... 98 0.39 953,525.12 0.27
22.000 to 22.999%...................... 8 0.03 79,908.32 0.02
23.000 to 23.999%...................... 1 0.00 8,954.72 0.00
24.000 to 24.999%...................... 5 0.02 34,113.14 0.01
25.000 to 25.999%...................... 10 0.04 81,449.99 0.02
26.000 to 26.999%...................... 1 0.00 5,775.61 0.00
------ ------ --------------- ------
Total...................... 25,235 100.00% $351,379,110.20 100.00%
====== ====== =============== ======
</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.
<TABLE>
<CAPTION>
Delinquency Experience (1) (2)
At June 30, At December 31, At March 31, At June 30,
1996 1997 1997 1998 1998
------------------- ------------------ ------------------- ------------------- ----------------------
(Dollars in thousands)
Number of Number of Number of Number of Number of
Receivables Amount Receivables Amount Receivables Amount Receivables Amount Receivables Amount
----------- ------ ----------- ------ ----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Servicing portfolio....... 147,722 $1,548,538 173,693 $1,860,272 179,962 $1,920,930 181,026 $1,929,151 184,003 $1,978,920
------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- ----------
Delinquencies
30-59 days............. 1,602 $ 17,030 2,487 $ 27,373 3,954$ 41,778 3,426 $ 35,449 3,179 $ 32,967
60-89 days............. 694 7,629 1,646 18,931 2,274 25,933 1,923 21,818 1,907 20,819
90 days or more........ 333 3,811 723 8,826 688 8,048 623 7,088 657 6,993
------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- ----------
Total delinquencies....... 2,629 $ 28,470 4,856 $ 55,130 6,916 $ 75,759 5,972 $ 64,355 5,743 $ 60,779
======= ========== ======= ========== ======= ========== ======= ========== ======= ==========
Total delinquencies as a
percent of servicing
portfolio............ 1.78% 1.84% 2.80% 2.96% 3.84% 3.94% 3.30% 3.34% 3.12% 3.07%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Credit Loss Experience (1) (2)
Year ended June 30, Three Months Ended Three Months Ended
1996 1997 December 31, 1997 (6) March 31, 1998 (6)
------------------- ------------------- ---------------------- -----------------------
(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(3)........... 132,363 $1,343,770 164,858 $1,759,666 179,334 $1,916,778 180,631 $1,924,930
Gross charge-offs......... 3,663 $ 40,815 6,280 $ 70,830 1,977 $ 22,373 1,886 $ 20,767
Recoveries (4)............ 19,543 28,511 8,527 8,186
--------- ---------- ---------- ----------
Net losses................ $ 21,272 $ 42,319 $ 13,846 $ 12,581
========= ========== ========== ==========
Gross charge-offs as a % of
avg. servicing
portfolio(5)........... 2.77% 3.04% 3.81% 4.03% 4.41% 4.67% 4.18% 4.32%
Recoveries as a % of gross
charge-offs............ 47.88% 40.25% 38.11% 39.42%
Net losses as a % of avg.
servicing portfolio(5). 1.58% 2.40% 2.89% 2.61%
</TABLE>
Three Months Ended Year Ended
June 30, 1998 (6) June 30, 1998
--------------------- ----------------------
Number of Number of
Receivables Amount Receivables Amount
----------- ------ ----------- ------
Avg. servicing
portfolio(3)........... 183,402 $1,968,595 179,822 $1,922,977
Gross charge-offs......... 1,992 $ 21,129 7,909 $ 87,325
Recoveries (4)............ 8,698 33,546
---------- ----------
Net losses................ $ 12,431 $ 53,779
========== ==========
Gross charge-offs as a % of
avg. servicing
portfolio(5)........... 4.34% 4.29% 4.40% 4.54%
Recoveries as a % of gross
charge-offs............ 41.17% 38.41%
Net losses as a % of avg.
servicing portfolio(5). 2.53% 2.80%
<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) The delinquency experience and credit loss experience of the Tier II
Receivables are not included herein but are described on the following
page.
(3) Equals the monthly arithmetic average, and includes receivables sold in
prior securitization transactions.
(4) Recoveries include recoveries on receivables previously charged off,
cash recoveries and unsold repossessed assets carried at fair market
value.
(5) 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."
(6) 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.
UAC continues to see steady improvement in delinquency and credit loss
trends as demonstrated by the last three quarters. UAC attributes the
improvement to strategic efforts made by its origination department in
originating loans and its collection department in collecting delinquent
accounts. The efforts in the origination department include implementing tighter
credit standards beginning in March 1997, developing quality control screens
that rank potential obligors by predetermined debt and income ratios in addition
to credit scores and growing the portfolio with quality obligors through dealer
development and dealer expansion. The collection department's efforts include
restructuring the collectors to form specialized sub-departments of collectors
for auxiliary functions such as skip tracing and high risk accounts, initiating
collection calls earlier in the delinquency process through the use of a power
dialer, targeting higher risk obligors through the use of sophisticated credit
scoring and increasing collection efforts on charged-off accounts.
As indicated by the foregoing delinquency experience table, delinquency
rates on the prime auto portfolio based upon outstanding loan balances of
accounts 30 days past due and over decreased to 3.07% at June 30, 1998, compared
to 3.34%, 3.94% and 4.33% at March 31, 1998, December 31, 1997, and September
30, 1997, respectively. However, the delinquency rate at June 30, 1998, has
increased slightly from 2.96% at June 30, 1997, for UAC's prime servicing
portfolio. The decreased delinquency since September 30, 1997, is primarily
attributed to the factors discussed in the foregoing paragraph.
As indicated in the foregoing credit loss experience table, net credit
losses on the prime auto portfolio totaled approximately $53.8 million for the
year ended June 30, 1998, or 2.80% of the average servicing portfolio, while net
credit losses for the quarter ended June 30, 1998, were 2.53% (annualized)
compared to 2.61% (annualized), 2.89% (annualized) and 3.17% (annualized) for
the quarters ended March 31, 1998, December 31, 1997, and September 30, 1997,
respectively, and 2.40% for the year ended June 30, 1997. Decreased credit
losses since September 30, 1997, are primarily a result of strategic efforts
made by UAC as described above and due to improvements in recovery rates.
<PAGE>
Recoveries have shown gradual improvements over the last three quarters
which contributed to the improvement in credit losses. Recoveries as a
percentage of gross charge-offs improved to 41.17% for the quarter ended June
30, 1998, from 39.42%, 38.11% and 35.28% for the quarters ended March 31, 1998,
December 31, 1997, and September 30, 1997, respectively. Although recovery rates
showed signs of improvement during the past three quarters, UAC continues to
look for ways to improve recovery rates, including more diligently monitoring
and expanding the repossession and remarketing operations.
UAC's non-prime lending began in 1994 and was replaced by UAC's "Tier
II" lending on March 1, 1998. The majority of the Tier II Receivables were
originated under UAC's Tier II lending from applications that did not qualify
for credit under UAC's "Tier I" lending. Although it is too early to determine
actual trends with respect to delinquency and credit losses of the Tier II
Receivables, UAC believes that the rate of delinquency and credit loss
associated with the Tier II Receivables will more closely follow the experience
of UAC's non-prime portfolio rather than the prime or Tier I portfolio which is
set forth on the preceding page. At June 30, 1998, UAC's non-prime servicing
portfolio consisted of approximately $66.9 million in loans and had a
delinquency rate based upon outstanding loan balances of accounts 30 days past
due and over of 8.29% compared to 6.18% at June 30, 1997. For the years ended
June 30, 1998, and 1997, the credit losses on the non-prime portfolio were 7.67%
and 5.18% of the average non-prime servicing portfolio, respectively. As the
Tier II Receivables account for approximately 2.61% of the Receivables as of the
Cutoff Date, UAC believes that the credit quality of the Tier II Receivables
will not affect the credit quality of the Receivables as a whole in a materially
adverse manner.
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' abilities 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
Monthly Interest will be distributed to Class A Certificateholders on
each Distribution Date to the extent of the pass-through rate applied to the
applicable Certificate Balance 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 Class A Certificates --
Distributions on the Class A Certificates" herein. In the event of a full or
partial prepayment on a Receivable, Class A Certificateholders will receive
interest for the full month of such prepayment either (i) through the
distribution of interest paid on the 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 per annum rate used to calculate the Insurance
Premium and (c) 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 Class A Certificateholders.
<PAGE>
THE DEPOSITOR AND UAC
UAC currently acquires loans from over 3,500 manufacturer franchised
automobile dealerships in 32 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,
1995, 1996, 1997, and 1998, UAC and/or the Predecessor acquired prime loans
aggregating $767 million, $995 million, $1,076 million and $945 million,
respectively, representing annual increases of 30%, 8% and an annual decrease of
12%, respectively. Of the $2.0 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, 1998, approximately 76% represented loans on used cars and
approximately 24% 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 (including any amounts due but
unpaid from third party reinsurers), as well as its unearned premiums and
contingency reserves, to the Insurer. The Company is not obligated to pay the
debts of or claims against CMAC.
The consolidated financial statements of the Insurer, a wholly owned
subsidiary of the Company, and its subsidiaries as of December 31, 1997, and
December 31, 1996, and for each of the three years in the period ended December
31, 1997, prepared in accordance with generally accepted accounting principles
("GAAP"), included in the Annual Report on Form 10-K of the Company for the year
ended December 31, 1997, and the consolidated financial statements of the
Insurer and its subsidiaries of June 30, 1998, and for the six month periods
ending June 30, 1998, and June 30, 1997, included in the Quarterly Report on
Form 10-Q of the Company for the period ending June 30, 1998, are hereby
incorporated by reference into this Prospectus Supplement and shall be deemed to
be a part hereof. Any statement contained in a document incorporated by
reference herein shall be modified or superseded for purposes of this Prospectus
Supplement to the extent that a statement contained herein or in any other
subsequently filed document which also is incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus Supplement.
<PAGE>
All financial statements of the Insurer and its subsidiaries included
in documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, as amended, subsequent to the date of
this Prospectus Supplement and prior to the termination of the offering of the
Class A Certificates shall be deemed to be incorporated by reference into this
Prospectus Supplement and to be a part hereof from the respective dates of
filing such documents.
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 GAAP:
SAP
-----------------------------------------
December 31 June 30
1997 1998
----------- -----------
(Audited) (Unaudited)
(in millions)
Admitted Assets $5,256 $6,048
Liabilities 3,496 3,962
Capital and Surplus 1,760 2,086
GAAP
-----------------------------------------
December 31 June 30
1997 1998
----------- -----------
(Audited) (Unaudited)
(in millions)
Assets $5,988 $6,794
Liabilities 2,624 2,977
Shareholder's Equity 3,364 3,817
Copies of the financial statements of the Insurer incorporated by
reference herein and copies of the Insurer's 1997 year end audited financial
statements prepared in accordance with SAP are available, without charge, from
the Insurer. 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 does not accept any responsibility for the accuracy or
completeness of this Prospectus Supplement or any information or disclosure
contained herein, or omitted herefrom, other than with respect to the accuracy
of the information regarding the Insurer set forth under the headings "The
Insurer" and "The Class A Certificates -- The Policy." Additionally, the Insurer
makes no representation regarding the Class A Certificates or the advisability
of investing in the Class A Certificates.
The Policy is 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."
<PAGE>
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 CLASS A CERTIFICATES
The Class A Certificates will be issued pursuant to the Pooling and
Servicing Agreement. Copies of the Pooling and Servicing Agreement (without
exhibits) may be obtained by Class A Certificateholders upon request in writing
to the Servicer at the address set forth herein under "Reports to
Certificateholders." 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 October 8, 1998, the
aggregate principal payments, including full and partial prepayments (except
certain prepayments in respect of Precomputed Receivables as described below
under "--Accounts"), received on the Receivables during the related Collection
Period, plus Monthly Interest. Principal to be distributed to the Class A
Certificateholders will be allocated on the basis of the Principal Distribution
Sequence. (Section 9.04.) See "-- Distributions on the Class A Certificates."
Monthly Interest and Monthly Principal may be provided by a payment made by or
on behalf of the Obligor, by an Advance made by the Servicer or by a withdrawal
from the Spread Account. Monthly Interest and Monthly Principal 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) 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. See "-- Accounts" and "--The Policy"
herein.
Sale and Assignment of Receivables
Certain information with respect to the conveyance of the Receivables
(i) from UAFC to the Depositor pursuant to the Purchase Agreement dated as of
September 1, 1998, among UAFC, UAC and the Depositor and (ii) from the Depositor
to the Trust pursuant to the Pooling and Servicing Agreement is set forth under
"Description of the Transfer and Servicing Agreements -- Sale and Assignment of
Receivables" in the Prospectus.
<PAGE>
Accounts
In addition to the Certificate Account, the property of the Trust will
include the Spread Account and the Payahead Account.
Spread Account. On the Closing Date, the Trustee will establish the
Spread Account. Thereafter, the amount held in the Spread Account will be
increased up to the Required Spread Amount by the deposit thereto of payments on
the Receivables not utilized to make payments to the Class A Certificateholders,
the Insurer and the Servicer for the Monthly Servicing Fee and any permitted
reimbursements of outstanding Advances on any Distribution Date. While it is
intended that the Spread Account will grow over time to equal the Required
Spread Amount through monthly deposits of excess collections on the Receivables,
if any, there can be no assurance that such growth will actually occur. The
Spread Account will be established for the benefit of the Class A
Certificateholders and the Insurer. On each Distribution Date, any amounts on
deposit in the Spread Account after the payment of any amounts owed to the
Insurer in excess of the Required Spread Amount will be withdrawn from the
Spread Account and distributed to the Class IC Certificateholder.
Under the terms of the Pooling and Servicing Agreement, the Trustee
will withdraw funds from the Spread Account and transfer them to the Certificate
Account for any deficiency of Monthly Interest or Monthly Principal as further
described below under "-- Distributions on the Class A Certificates," to the
extent available, prior to making any draw on the Policy.
In the event that the balance of the Spread Account is reduced to zero
and there is a default under the Policy on any Distribution Date, the Trust will
depend solely on current distributions on the Receivables to make distributions
of principal and interest on the Certificates. In addition, because the market
value of motor vehicles generally declines with age and because of difficulties
that may be encountered in enforcing motor vehicle contracts as described in the
Prospectus under "Certain Legal Aspects of the Receivables," the Servicer may
not recover the entire amount due on such Receivables in the event of a
repossession and resale of a Financed Vehicle securing a Receivable in default.
In such event, the Class A Certificateholders may suffer a corresponding loss
which will be borne pro rata by the Class A Certificateholders.
Payahead Account. The Servicer will establish an additional account
(the "Payahead Account"), in the name of the Trustee on behalf of Obligors on
the Receivables and Certificateholders, into which, to the extent required by
the Pooling and Servicing Agreement, early payments by or on behalf of Obligors
on Precomputed Receivables will be deposited until such time as the payment
becomes due. Until such time as payments are transferred from the Payahead
Account to the Certificate Account, they will not constitute collected interest
or collected principal and will not be available for distribution to
Certificateholders. The Payahead Account will initially be maintained with the
Trustee. Interest earned on the balance in the Payahead Account will be remitted
to the Servicer monthly. Collections on a Precomputed Receivable made during a
Collection Period shall be applied first to any overdue scheduled payment on
such Receivable, then to the scheduled payment on such Receivable due in such
Collection Period. If any collections remaining after the scheduled payment is
made are insufficient to prepay the Precomputed Receivable in full, then
generally such remaining collections shall be transferred to and kept in the
Payahead Account until such later Collection Period as the collections may be
retransferred to the Certificate Account and applied either to a later scheduled
payment or to prepay such Receivable in full.
<PAGE>
Advances
With respect to each Receivable delinquent more than 30 days at the end
of a Collection Period, the Servicer will make an Advance in an amount equal to
30 days of interest, but only to the extent that the Servicer in its sole
discretion, expects to recoup the Advance from subsequent collections on the
Receivable. The Servicer will deposit the Advance in the Certificate Account on
or before the Determination Date. The Servicer will recoup its Advance from
subsequent payments by or on behalf of the respective Obligor, from insurance
proceeds or, upon the Servicer's determination that reimbursement from the
preceding sources is unlikely, will recoup its Advance from any collections made
on other Receivables. (Section 9.05.)
Distributions on the Class IC Certificate
The Class IC Certificate will be initially issued to the Depositor and
will entitle it to receive monthly all funds held in the Spread Account in
excess of the Required Spread Amount after payment of all amounts owed to the
Insurer. On or after the termination of the Trust, the Class IC
Certificateholder is entitled to receive any amounts remaining in the Spread
Account (only after all required payments to the Insurer are made) after the
payment of expenses and distributions to Class A Certificateholders.
See "-- Accounts" above.
Distributions on the Class A Certificates
The Servicer will deposit in the Certificate Account the amount of
payments on all Receivables received with respect to the preceding Collection
Period. All such payments on the Simple Interest Receivables, the scheduled
payments on Precomputed Receivables, plus the net amount to be transferred from
the Payahead Account to the Certificate Account for the related Distribution
Date, all Advances for such Collection Period and the Purchase Amount for all
Receivables that became Purchased Receivables during the preceding Collection
Period, will be available for distribution pursuant to the terms of the Pooling
and Servicing Agreement on the next succeeding Distribution Date ("Available
Funds"). The Servicer will determine the amount of funds necessary to make
distributions of Monthly Principal and Monthly Interest to the Class A
Certificateholders and to pay the Monthly Servicing Fee to the Servicer. If
there is a deficiency with respect to Monthly Interest or Monthly Principal on
any Distribution Date, after giving effect to payments of the Monthly Servicing
Fee and permitted reimbursements of outstanding Advances to the Servicer on such
Distribution Date, the Servicer will withdraw amounts, to the extent available,
from the Spread Account, in the amount of such deficiency and notify the Trustee
of any remaining deficiency, whereupon the Trustee will draw on the Policy, up
to the Policy Amount, to pay Monthly Interest and Monthly Principal. Moreover,
if the Available Funds for a Distribution Date are insufficient to pay current
and past due Insurance Premiums, and other amounts owed to the Insurer, pursuant
to the Insurance Agreement, plus accrued interest thereon, to the Insurer, the
Servicer will notify the Trustee of such deficiency, and the amount, if any,
then on deposit in the Spread Account (after giving effect to any withdrawal to
satisfy a deficiency described in this and the preceding sentences) will be
available to cover such deficiency.
The Monthly Servicing Fee due to the Servicer in respect of each
Collection Period will be distributed to the Servicer during such Collection
Period from collections received during such Collection Period.
<PAGE>
On each Distribution Date, the Trustee will apply or cause to be
applied the Available Funds (plus, to the extent required for payment of Monthly
Interest or Monthly Principal any amounts withdrawn from the Spread Account or
drawn on the Policy, as applicable) to make the following payments in the
following priority:
(a) without duplication, an amount equal to the sum of the amount
of outstanding Advances in respect of Receivables (x) that
became Defaulted Receivables during the prior Collection
Period plus (y) that the Servicer determines to be
unrecoverable, to the Servicer;
(b) the Monthly Servicing Fee, including any overdue Monthly
Servicing Fee, to the Servicer, to the extent not
previously distributed to the Servicer;
(c) Monthly Principal, in accordance with the Principal
Distribution Sequence (described below), and Monthly Interest,
including any overdue Monthly Interest, to the Class A
Certificateholders;
(d) the Insurance Premium including any overdue Insurance Premium
plus interest thereon to the Insurer;
(e) the amount of recoveries of Advances (to the extent such
recoveries have not previously been reimbursed to the Servicer
pursuant to clause (a) above), to the Servicer;
(f) the aggregate amount of any unreimbursed draws on the Policy
payable to the Insurer under the Insurance Agreement, for
Monthly Interest and any other amounts owing to the Insurer
under the Insurance Agreement plus accrued interest thereon;
and
(g) the balance into the Spread Account.
After all distributions pursuant to clauses (a) through (g) above have
been made for each Distribution Date, the amount of funds remaining in the
Spread Account on such date, if any, in excess of the Required Spread Amount,
will be distributed by the Trustee to the Class IC Certificateholder. Any
amounts so distributed to the Class IC Certificateholder will no longer be
property of the Trust and Class A Certificateholders will have no rights with
respect thereto.
If on any Distribution Date there are not sufficient Available Funds
(together with amounts withdrawn from the Spread Account and/or the Policy) to
pay the distribution required by (c) above, the Available Funds distributable
thereunder shall be distributed proportionately on the basis of the ratio of the
required distribution due each of the Class A Certificateholders to the sum of
the distributions required by (c) to the Class A Certificateholders. The amount
so distributed to the Class A Certificateholders hereunder shall be allocated
first to Monthly Interest, and second to Monthly Principal pro rata among the
Class A Certificateholders.
"Class A-1 Monthly Interest" means, (i) for the first Distribution
Date, the product of the following: (one-three hundred sixtieth (1/360th) of 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 Class
A-1 Certificate Balance at the Closing Date and (ii) for any subsequent
Distribution Date, one-three hundred sixtieth (1/360th) of the product of the
Class A-1 Pass-Through Rate, the actual number of days from the previous
Distribution Date through the day before the related Distribution Date and the
Class A-1 Certificate Balance as of the immediately preceding Distribution Date
(after giving effect to any distribution of Monthly Principal made on such
immediately preceding Distribution Date).
<PAGE>
"Class A-2 Monthly Interest" means, (i) for the first Distribution
Date, the product of the following: (one twelfth of the Class A-2 Pass-Through
Rate) multiplied by (the number of days from the Closing Date (assuming the
month of the Closing Date has 30 days) through the day before the first
Distribution Date divided by 30) multiplied by the Class A-2 Certificate Balance
at the Closing Date and (ii) for any subsequent Distribution Date, one-twelfth
of the product of the Class A-2 Pass-Through Rate and the Class A-2 Certificate
Balance as of the immediately preceding Distribution Date (after giving effect
to any distribution of Monthly Principal made on such immediately preceding
Distribution Date).
"Class A-3 Monthly Interest" means, (i) for the first Distribution
Date, the product of the following: (one twelfth of the Class A-3 Pass-Through
Rate) multiplied by (the number of days from the Closing Date (assuming the
month of the Closing Date has 30 days) through the day before the first
Distribution Date divided by 30) multiplied by the Class A-3 Certificate Balance
at the Closing Date and (ii) for any subsequent Distribution Date, one-twelfth
of the product of the Class A-3 Pass-Through Rate and the Class A-3 Certificate
Balance as of the immediately preceding Distribution Date (after giving effect
to any distribution of Monthly Principal made on such immediately preceding
Distribution Date).
"Class A-4 Monthly Interest" means, (i) for the first Distribution
Date, the product of the following: (one twelfth of the Class A-4 Pass-Through
Rate) multiplied by (the number of days from the Closing Date (assuming the
month of the Closing Date has 30 days) through the day before the first
Distribution Date divided by 30) multiplied by the Class A-4 Certificate Balance
at the Closing Date and (ii) for any subsequent Distribution Date, one-twelfth
of the product of the Class A-4 Pass-Through Rate and the Class A-4 Certificate
Balance as of the immediately preceding Distribution Date (after giving effect
to any distribution of Monthly Principal made on such immediately preceding
Distribution Date).
"Class A-5 Monthly Interest" means, (i) for the first Distribution
Date, the product of the following: (one twelfth of the Class A-5 Pass-Through
Rate) multiplied by (the number of days from the Closing Date (assuming the
month of the Closing Date has 30 days) through the day before the first
Distribution Date divided by 30) multiplied by the Class A-5 Certificate Balance
at the Closing Date and (ii) for any subsequent Distribution Date, one-twelfth
of the product of the Class A-5 Pass-Through Rate (as adjusted after the
Clean-Up Call Date) and the Class A-5 Certificate Balance as of the immediately
preceding Distribution Date (after giving effect to any distribution of Monthly
Principal made on such immediately preceding Distribution Date).
"Defaulted Receivable" will mean, for any Collection Period, a
Receivable as to which any of the following has occurred: (i) any payment, or
part thereof, in excess of $10 is 120 days or more delinquent as of the last day
of such Collection Period; (ii) the Financed Vehicle that secures the Receivable
has been repossessed; or (iii) the Receivable has been determined to be
uncollectable in accordance with the Servicer's customary practices on or prior
to the last day of such Collection Period; provided, however, that any
Receivable which the Depositor or the Servicer is obligated to repurchase or
purchase pursuant to the Pooling and Servicing Agreement shall be deemed not to
be a Defaulted Receivable.
<PAGE>
"Insurance Premium" for any Distribution Date will equal one-twelfth of
the product of the Policy per annum fee rate set forth in the Insurance
Agreement and the Certificate Balance calculated as of the last day of the
Collection Period to which such Distribution Date relates and payable monthly in
arrears.
"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.
"Monthly Principal" for any Distribution Date will equal the amount
necessary to reduce the Certificate Balance as of the prior Distribution Date
(after giving effect to the distribution of Monthly Principal on such date) (or
as of the Closing Date in the case of the first Distribution Date) to the
aggregate unpaid principal balance of the Receivables on the last day of the
related Collection Period; provided, however, that Monthly Principal on the
final scheduled Distribution Date for each class of Class A Certificates will be
increased by the amount, if any, which is necessary to reduce the Certificate
Balance of such class to zero on such date. For the purpose of determining
Monthly Principal, the unpaid principal balance of a Defaulted Receivable or a
Purchased Receivable is deemed to be zero on and after the last day of the
Collection Period in which such Receivable became a Defaulted Receivable or a
Purchased Receivable.
"Principal Distribution Sequence" means the order in which Monthly
Principal shall be distributed among the Class A Certificateholders in the
following sequence: (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.
As an administrative convenience, the Servicer will be permitted to
make the deposit of collections and aggregate Advances and Purchase Amounts for
or with respect to the Collection Period, net of distributions to be made to the
Servicer with respect to the Collection Period. The Servicer, however, will
account to the Trustee and to the Certificateholders as if all deposits and
distributions were made individually. (Section 9.06.)
<PAGE>
The following chart sets forth an example of the application of the
foregoing provisions to a monthly distribution:
September 1 - September 30 ............. Collection Period. The Servicer
receives monthly payments,
prepayments, and other proceeds in
respect of the Receivables and
deposits them in the Certificate
Account. The Servicer may deduct the
Monthly Servicing Fee from such
deposits.
September 30 .......................... Record Date. Distributions on the
Distribution Date are made to Class A
Certificateholders of record at the
close of business on this date.
October 6............................... "Determination Date" (second business
day before the Distribution Date). On
or before this date, the Servicer
delivers the Servicer's Certificate
setting forth the amounts to be
distributed on the Distribution Date
and of any deficiencies. If necessary,
the Trustee notifies the Insurer of
any draws in respect of the Policy.
October 8............................... "Distribution Date" (eighth calendar
day of the month, or if such day is
not a business day, the first business
day thereafter). The Trustee withdraws
funds from the Spread Account and/or
draws on the Policy, if necessary, to
pay Monthly Principal and Monthly
Interest to Class A Certificateholders
as described herein. The Trustee
distributes to Class A
Certificateholders amounts payable in
respect of the Class A Certificates,
pays the Monthly Servicing Fee to the
extent not previously paid, pays the
Insurance Premium and all other
amounts owing to the Insurer.
<PAGE>
The Policy
On or before the Closing Date, the Depositor, UAFC, UAC, in its
individual capacity and as Servicer, and the Insurer will enter into an
Insurance and Reimbursement Agreement (the "Insurance Agreement") pursuant to
which the Insurer will issue the Policy. Subject to the terms of the Policy, the
Insurer will unconditionally and irrevocably guarantee the payment of Monthly
Interest and Monthly Principal up to the Policy Amount. Under the terms of the
Pooling and Servicing Agreement, after withdrawal of any amounts in the Spread
Account with respect to a Distribution Date to pay a deficiency in Monthly
Interest or Monthly Principal, the Trustee will be authorized to draw on the
Policy for the benefit of the Class A Certificateholders and credit the
Certificate Account for such draws as described above under "--Distributions on
the Class A Certificates." The maximum amount that may be drawn under the Policy
on any Distribution Date is limited to the Policy Amount for such Distribution
Date. The Policy Amount, with respect to any Distribution Date, shall equal (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) Monthly Interest, plus (C) 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.
The Policy will also cover any amount distributed or required to be
distributed by the Trust to Class A Certificateholders that is sought to be
recovered as a voidable preference by a trustee in bankruptcy of UAC, the
Depositor or UAFC 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.
The Insurer will be entitled to receive the Insurance Premium and
certain other amounts on each Distribution Date as described under
"--Distributions on the Class A Certificates" and to receive amounts on deposit
in the Spread Account as described above under "--Accounts." The Insurer will
not be entitled to reimbursement of any amounts from the Certificateholders. The
Insurer's obligation under the Policy is irrevocable. The Insurer will have no
obligation other than its obligations under the Policy to the Class A
Certificateholders or the Trustee.
In the event that the balance in the Spread Account is reduced to zero
and there has been a default under the Policy, the Trust may depend solely on
current collections on the Receivables to make distributions of principal and
interest on the Class A Certificates. In addition, because the market value of
motor vehicles generally declines with age and because of difficulties that may
be encountered in enforcing motor vehicle contracts as described in the
Prospectus under "Certain Legal Aspects of the Receivables," the Servicer may
not recover the entire amount due on such Receivables in the event of a
repossession and resale of a Financed Vehicle securing a Receivable in default.
In such event, the Class A Certificateholders may suffer a corresponding loss.
Any such losses would be borne pro rata by the Class A Certificateholders. See "
- -- Distributions on the Class A Certificates."
Rights of the Insurer upon Events of Default, Amendment or Waiver
Upon the occurrence of an Event of Default, the Insurer, or the Trustee
upon the consent of the Insurer, will be entitled to appoint a successor
Servicer. In addition to the events constituting an Event of Default as
described in the Prospectus, the Pooling and Servicing Agreement will also
permit the Insurer to appoint a successor Servicer and to redirect payments made
under the Receivables to the Trustee upon the occurrence of certain additional
events involving a failure of performance by the Servicer or a material
misrepresentation made by the Servicer under the Insurance Agreement.
The Pooling and Servicing Agreement cannot be amended or any provisions
thereof waived without the consent of the Insurer if such amendment or waiver
would have a materially adverse effect upon the rights of the Insurer.
<PAGE>
ERISA CONSIDERATIONS
Subject to the considerations set forth under "ERISA Considerations" in
the Prospectus, the Class A Certificates may be eligible for purchase by an
employee benefit plan or an individual retirement account (a "Plan Plan")
subject to Title I of ERISA or Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code"). A fiduciary of a Plan must determine that the
purchase of a Class A Certificate is consistent with its fiduciary duties under
ERISA and does not result in a nonexempt prohibited transaction as defined in
Section 406 of ERISA or Section 4975 of the Code. For additional information
regarding treatment of the Class A Certificates under ERISA, see "ERISA
Considerations" in the Prospectus.
UNDERWRITING
Under the terms and subject to the conditions set forth in the
underwriting agreement for the sale of the Class A Certificates, dated September
10, 1998, the Depositor has agreed to sell and each of the underwriters named
below (the "Underwriters") severally agreed to purchase the principal amount of
the Class A Certificates set forth below its name below:
<TABLE>
<CAPTION>
NationsBanc Montgomery Bear,
Securities LLC Stearns & Co. Inc. Total
-------------- ------------------ -----
<S> <C> <C> <C>
Principal Amount
of Class A-1 Certificates........ $24,900,000.00 $24,900,000.00 $ 49,800,000.00
Principal Amount
of Class A-2 Certificates........ $55,450,000.00 $55,450,000.00 $110,900,000.00
Principal Amount
of Class A-3 Certificates........ $37,337,500.00 $37,337,500.00 $ 74,675,000.00
Principal Amount
of Class A-4 Certificates........ $36,287,500.00 $36,287,500.00 $ 72,575,000.00
Principal Amount
of Class A-5 Certificates........ $21,714,555.10 $21,714,555.10 $ 43,429,110.20
</TABLE>
In the underwriting agreement, the Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all the Class A
Certificates offered hereby if any of the Class A Certificates are purchased.
The Underwriters propose to offer part of the Class A Certificates
directly to the public at the prices set forth on the cover page hereof, and
part to certain dealers at a price that represents a concession not in excess of
0.075% of the denominations of the Class A-1 Certificates, 0.120% of the
denominations of the Class A-2 Certificates, 0.135% of the denominations of the
Class A-3 Certificates, 0.165% of the denominations of the Class A-4
Certificates or 0.180% of the denominations of the Class A-5 Certificates. The
Underwriters may allow and such dealers may reallow a concession not in excess
of 0.050% of the denominations of the Class A-1 Certificates, 0.100% of the
denominations of the Class A-2 Certificates, 0.115% of the denominations of the
Class A-3 Certificates, 0.150% of the denominations of the Class A-4
Certificates or 0.175% of the denominations of the Class A-5 Certificates.
<PAGE>
The Depositor and UAC have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act.
The Depositor has been advised by the Underwriters that the
Underwriters presently intend to make a market in the Class A Certificates, as
permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in the Class A Certificates and any such
market-making may be discontinued at any time at the sole discretion of the
Underwriters. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Class A Certificates.
LEGAL OPINIONS
Certain legal matters relating to the Class A Certificates will be
passed upon for the Depositor by Barnes & Thornburg, Indianapolis, Indiana, and
for the Underwriters by Cadwalader, Wickersham & Taft. Certain federal income
tax consequences with respect to the Class A Certificates will be passed upon
for the Depositor by Cadwalader, Wickersham & Taft.
EXPERTS
The consolidated balance sheets of MBIA Insurance Corporation and
Subsidiaries as of December 31, 1997 and 1996 and the related consolidated
statements of income, changes in shareholder's equity, and cash flows for each
of the three years in the period ended December 31, 1997, incorporated by
reference in this Prospectus Supplement, have been incorporated herein in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
<PAGE>
INDEX OF PRINCIPAL TERMS
TERM PAGE
-----------------------------------------------------------------------
Available Funds ....................................... S-21
Certificates ........................................ S-3
Certificate Balance..................................... S-5
Class A Certificates ............................... S-3
Class A Certificateholders .......................... S-4
Class A-1 Certificate Balance........................... S-4
Class A-1 Certificateholders............................ S-4
Class A-1 Certificates.................................. S-3
Class A-1 Final Scheduled Distribution Date............. S-6
Class A-1 Monthly Interest ............................ S-22
Class A-1 Pass-Through Rate............................. S-4
Class A-2 Certificate Balance........................... S-5
Class A-2 Certificateholders............................ S-4
Class A-2 Certificates.................................. S-3
Class A-2 Final Scheduled Distribution Date............. S-6
Class A-2 Monthly Interest ............................ S-22
Class A-2 Pass-Through Rate............................. S-5
Class A-3 Certificate Balance........................... S-5
Class A-3 Certificateholders............................ S-4
Class A-3 Certificates.................................. S-3
Class A-3 Final Scheduled Distribution Date............. S-6
Class A-3 Monthly Interest ............................ S-22
Class A-3 Pass-Through Rate............................. S-5
Class A-4 Certificate Balance........................... S-5
Class A-4 Certificateholders............................ S-4
Class A-4 Certificates.................................. S-3
Class A-4 Final Scheduled Distribution Date............. S-6
Class A-4 Monthly Interest ............................ S-23
Class A-4 Pass-Through Rate............................. S-5
Class A-5 Certificate Balance........................... S-5
Class A-5 Certificateholders............................ S-4
Class A-5 Certificates.................................. S-3
Class A-5 Final Scheduled Distribution Date............. S-6
Class A-5 Monthly Interest ............................ S-23
Class A-5 Pass-Through Rate............................. S-5
Class IC Certificate ................................ S-1, S-3
Class IC Certificateholder .......................... S-7
Clean-Up Call Date...................................... S-9
Closing Date ........................................ S-3
CMAC.................................................... S-18
Code ................................................. S-25
Company................................................. S-17
Cutoff Date ......................................... S-3
Defaulted Receivable ................................... S-23
Depositor ........................................... S-1, S-3
Determination Date...................................... S-24
Distribution Date .................................... S-4, S-24
ERISA ............................................... S-9
Financed Vehicles....................................... S-3
GAAP.................................................... S-18
<PAGE>
Insurance Premium ...................................... S-23
Insurance Agreement .................................... S-7, S-24
Insurer ................................................S-1, S-8, S-17
Issuer.................................................. S-3
Legal Investment........................................ S-8
Monthly Interest ...................................... S-23
Monthly Principal ..................................... S-5, S-23
Monthly Servicing Fee................................... S-6
Net Principal Policy Amount............................. S-8, S-25
Optional Sale ...................................... S-8
Payahead Account ....................................... S-20
Plan .................................................. S-25
Policy.................................................. S-8
Policy Amount........................................... S-8
Pool Balance ....................................... S-5
Pooling and Servicing Agreement .................... S-3
Predecessor............................................. S-17
Principal Distribution Sequence......................... S-23
Rating Agency........................................... S-9
Receivables ......................................... S-3
Record Date ......................................... S-4
Required Spread Amount .............................. S-7
SAP..................................................... S-18
Servicer ............................................ S-3
Spread Account.......................................... S-6
Trust ............................................... S-1, S-3
Trustee ............................................. S-3
UAC ................................................. S-3
Underwriters .......................................... S-26
<PAGE>
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus Supplement and the Prospectus in connection with the offer contained
herein, and, if given or made, such information or representations must not be
relied upon as having been authorized by the Depositor, the Servicer or the
Underwriters. This Prospectus Supplement and the Prospectus do not constitute an
offer to sell or a solicitation of an offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction. The delivery of this Prospectus
Supplement and the Prospectus at any time does not imply that the information
herein or therein is correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
Prospectus Supplement
Reports to Certificateholders........................................... S-2
Summary of Terms........................................................ S-3
Risk Factors ........................................................... S-10
Formation of the Trust ................................................ S-11
The Receivables Pool.................................................... S-12
Yield and Prepayment Considerations..................................... S-17
The Depositor and UAC ................................................. S-17
The Insurer............................................................. S-17
The Class A Certificates .............................................. S-19
ERISA Considerations.................................................... S-25
Underwriting............................................................ S-26
Legal Opinions.......................................................... S-26
Experts................................................................. S-27
Index of Principal Terms ............................................... S-28
Prospectus
Available Information ............................................... 2
Incorporation of Certain Documents
by Reference......................................................... 2
Summary of Terms........................................................ 3
Risk Factors............................................................ 10
The Trusts.............................................................. 13
The Receivables Pools................................................... 14
Weighted Average Life of the Certificates............................... 16
Pool Factors and Other
Certificate Information.............................................. 17
Use of Proceeds......................................................... 17
Union Acceptance Corporation and Affiliates............................. 18
Description of the Certificates......................................... 19
Description of the Transfer
and Servicing Agreements............................................. 22
Certain Legal Aspects of the Receivables................................ 29
Certain Federal Income Tax Consequences................................. 33
ERISA Considerations.................................................... 42
Plan of Distribution.................................................... 43
Legal Matters........................................................... 44
Index of Principal Terms................................................ 45
<PAGE>
$351,379,110.20
UACSC 1998-C Auto Trust
$49,800,000.00
5.5269% Class A-1 Money Market
Automobile Receivable Backed Certificates
$110,900,000.00
5.44% Class A-2 Automobile
Receivable Backed Certificates
$74,675,000.00
5.41% Class A-3 Automobile
Receivable Backed Certificates
$72,575,000.00
5.52% Class A-4 Automobile
Receivable Backed Certificates
$43,429,110.20
5.64% Class A-5 Automobile
Receivable Backed Certificates
Union Acceptance Corporation
Servicer
UAC Securitization Corporation
Depositor
[UACSC LOGO]
NationsBanc Montgomery
Securities LLC
Bear, Stearns & Co. Inc.
Prospectus Supplement
Dated September 10, 1998
