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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 27, 1997
ACC CONSUMER FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-27268 33-0682821
(Commission File No.) (IRS Employer Identification No.)
12750 HIGH BLUFF DRIVE, SUITE 320
SAN DIEGO, CALIFORNIA 92130
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (619) 793-6300
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ITEM 5. OTHER EVENTS.
On April 1, 1997, ACC Consumer Finance Corporation ("Company") issued
a press release announcing (i) the closing of the ACC Automobile Trust 1997-A
Transaction ("1997-A Transaction") under a new asset-securitization structure,
(ii) the sale of the subordinated notes created as part of the 1997-A
Transaction, (iii) the closing of a commercial paper-backed warehouse facility
with Alpine Securitization Corporation ("Alpine"), a commercial paper conduit
managed by Credit Suisse First Boston, as agent and as lender ("CSFB") and
(iv) the exercise of the Company's option to terminate its repurchase facility
with Cargill Financial Services Corporation ("Cargill").
ASSET-SECURITIZATION
On March 31, 1997, the Company closed the 1997-A Transaction pursuant
to which $75.2 million senior asset-backed notes ("Senior Notes") and $4.8
million in subordinated asset-backed notes ("Subordinated Notes") were
privately placed through CS First Boston as the sole placement agent. The
Company sold $75 million in nonprime automobile installment contracts
("Contracts") at the closing and may deliver an additional $5 million in
Contracts during the second quarter of 1997 under a pre-funding mechanism. The
Senior Notes have a fixed interest rate of 6.75% per year and the subordinated
Notes have a fixed interest rate of 10.25% per year. The Senior Notes were
rated AAA by Standard & Poor's Ratings Services ("S&P") and Aaa by Moody's
Investor Services, Inc. ("Moody's") based upon a guaranty of Financial Security
Assurance, Inc. ("FSA") and the Subordinated Notes were rated BB by S&P and Bb
by Moody's.
The structure of the 1997-A Transaction differs from the structure of
the prior asset securitizations of the Company and should result in the
deferral of the Company's tax liabilities from the sale of Contracts through
asset securitizations. The new structure is designed to enable the sale of
Contracts to an owner's trust to be treated as a gain on sale for accounting
purposes, even though the transaction is treated as an issuance of indebtedness
for tax purposes. As a result, the Company will not be required to pay income
tax on the gain on sale of Contracts in the quarter in which the
asset-securitization transaction closes. Instead, the Company will pay income
taxes as it receives cash from the excess servicing receivables ("ESRs")
retained by Trust in the transaction.
Under the new structure, ACC Receivables Corp. ("Receivables") sold a
pool of Contracts to a Delaware business trust ("Trust") owned by Receivables
and ACC Funding Corp., a newly formed special purposes, wholly-owned subsidiary
of ACC, in exchange for ESRs and the Subordinated Notes. The Trust then pledged
its assets to secure payment of the Senior Notes and the Subordinated Notes
issued under an Indenture. In addition, the Indenture required the
establishment of a cash reserve fund equal to one percent (1%) of the
outstanding balance of Contracts owned by the Trust as additional collateral
for the Subordinated Notes.
2.
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Concurrent with the 1997-A Transaction, FSA and the Company agreed to
reset the spread account requirements and increased the trigger levels for all
future asset securitizations and all prior transactions other than the 1995-A
Transaction. FSA also waived the trigger events that had occurred in the 1995-B
and 1996-A Transactions.
Finally, as reported in the press release, the Company sold the
Subordinated Notes for $4.7 million in cash, which demonstrated the liquidity
of the Subordinated Notes and the Subordinated Certificates that were
reclassified as held-for-sale on the Company's balance sheet as of December 31,
1996.
COMMERCIAL PAPER-BACKED FACILITY
On March 27, 1997, the Company entered into a new warehouse facility,
with a $100 million limit, to fund the Company's purchase of Contracts on an
interim basis before sale of the Contracts through asset-securitizations. The
lenders are Alpine and CSFB and the borrower is ACC Liquidity LLC, a newly
formed Delaware limited liability company, wholly owned by special purpose
subsidiaries of ACC. The facility is secured by Contracts pledged by ACC
Liquidity (purchased in a true sale from OFL-A or ACC) and is credit enhanced
through a guaranty of FSA. The facility bears interest at the weighted average
rate of the commercial paper issued by Alpine plus commissions and expenses,
repriced daily (the interest rate on the facility was 7.01% as of March 31,
1997, and 6.01% on April 1, 1997), unless the lenders, in their sole
discretion, determine in good faith that the commercial paper rate is
unavailable or not desirable and apply a bank rate. In addition, the borrower
pays FSA a premium of 45 basis points.
Advances under the facility are limited to the borrowing base. The
borrowing base, which can never be greater than 93% of the eligible Contracts
pledged as collateral, is calculated under a complex formula that takes into
account, among other factors, the current interest rate for U.S. Treasury
securities with a 21 month remaining term (or LIBOR), the weighted average
coupon rate on all Contracts owned by the Company and the pricing on the
Company asset securitization transactions. As of March 31, 1997, the advance
rate was 90.89% of eligible contracts, including a one percent liquidity cash
reserve. If Treasury rates or LIBOR rises or the weighted average coupon of
Contracts being originated by the Company declines, then the advance rate will
decline if all other factors remain the same. A decrease in advance rates will
increase the Company's capital requirements for the facility and adversely
affect its liquidity.
3.
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The facility requires the borrower to do a take out financing within
four months of the closing of the facility and, thereafter, at least once each
six month period. The borrower is obligated by September 27, 1997, to secure
from another lender an additional warehouse facility with a minimum facility
limit of the lesser of $50 million or 50% of the prior quarter's originations
of Contracts. The Company is in the process of procuring a second warehouse
facility from a commercial bank or other lender, but there is no assurance that
the Company will be able to obtain such a facility on as favorable a terms as
either the commercial-paper backed facility or the Cargill repurchase facility
that was terminated.
The events of default under the facility include, among others, a
downgrade of the claims paying ability of FSA to less than A or A2 by either
S&P or Moody's (FSA is currently rated AAA and AAA by S&P and Moody's,
respectively), the average Delinquency Rate (as defined in the facility)
exceeding 2.5% during the preceding four months or the occurrence of a servicer
event of default. A servicer event of default includes, among others, (i) total
delinquencies as a percentage of the Company's servicing portfolio in excess of
8% during the preceding three months or (ii) annualized charge offs as a
percentage of average servicing portfolio in excess of 7% during the preceding
six months. The lenders have the right to replace ACC as the servicer upon the
occurrence of a servicer event of default. Under the agreement, ACC is
obligated to give monthly computer tapes to Norwest Bank Minnesota, N.A., which
is designated as the custodian for the collateral and lockbox and is the
back-up servicer. In the event that FSA is downgraded to AA or AA, then the
Company has six months to replace the facility.
TERMINATION OF REPURCHASE FACILITY
On March 28, 1997, the Company notified Cargill that it had elected to
exercise its option to terminate the Repurchase Facility, effective immediately
with the settlement of the outstanding balance on March 31, 1997. As announced
in the press release, the termination of the Repurchase Facility will result in
a one-time restructuring charge in the Company's first quarter of 1997. The
restructuring charge will be an extraordinary item and will reflect the value
of the 174,500 shares of unregistered Common Stock of the Company issued to
Cargill in exchange for the option to terminate the facility, as well as
certain capitalized expenses incurred in connection with the creation of the
Repurchase Facility. The restructuring charge will be an after-tax charge of
up to $1.1 million, or 12 cents per share.
4.
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FORWARD-LOOKING INFORMATION AND RISK FACTORS
This report contains forward-looking information under the Private
Securities Litigation Reform Act of 1995, including statements relating to
obtaining a second warehouse facility and the amount of the restructuring
charge to be taken during the first quarter. Each of such statements is subject
to risks and uncertainties that could cause actual results to differ materially
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include, without limitation, the risk factors set forth
in the Company's Annual Report on Form 10-K for the year ended December 31,
1996, filed on March 27, 1997. In addition, the new commercial paper-backed
facility is subject to the risk of a downgrade in the claims paying ability of
FSA.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS
99.1 Press Release dated April 1, 1997.
5.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: April 18, 1997 By: /s/ ROCCO J. FABIANO
------------------------
Rocco J. Fabiano
6.
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INDEX TO EXHIBITS
PAGE NO.
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99.1 Press Release dated April 1, 1997
7.
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EXHIBIT 99.1
[LETTERHEAD OF BUSINESS WIRE]
(SW)(ACC-CONSUMER-FINANCE)(ACCI) ACC Consumer Finance closes both an $80
million asset-backed security and a $100 million commercial paper facility.
BUSINESS EDITORS
SAN DIEGO -- (BUSINESS WIRE) -- April 1, 1997 -- ACC Consumer Finance
Corp. (NASDAQ:ACCI) Tuesday announced that it had completed the sale of $75
million of installment contracts through the issuance of certificates backed by
the contracts. ACCI also sold the subordinated certificates created as part of
this transaction. Separately, the company announced that it had entered into an
agreement for a $100 million commercial paper facility.
On March 31, 1997, ACCI completed the sale of certificates issued by
ACC Automobile Receivables Trust 1997-A, a trust formed specifically for the
purpose of completing the offering. The certificates are rated AAA by Standard
& Poor's Rating Services and Aaa by Moody's Investors' Service Inc. Financial
Security Assurance Inc. issued an irrevocable guarantee of the certificates,
and Credit Suisse First Boston acted as the sole placement agent.
Despite the difficulties experienced by some issuers in recent months,
ACCI's certificates priced at 65 basis points above comparable Treasury
certificates. The offering was over-subscribed and matched the best historic
pricing on the company's comparable transactions.
The certificates, which were privately placed, pay a fixed rate of
interest of 6.75 percent per annum. The transaction was structured as debt for
tax purposes and as a sale for "book" purposes.
This transaction was unique for ACCI in that, for the first time, ACCI
also sold the subordinated certificates created as part of this transaction.
The subordinated certificates were rated BB by Standard & Poor's Rating
Services and Bb by Moody's Investors Service Inc.
On March 27, 1997, in a separate transaction, ACCI entered into a
commercial paper-backed warehouse facility with Alpine Securitization Corp., a
commercial paper conduit managed by Credit Suisse First Boston. Financial
Security Assurance Inc. issued an irrevocable guarantee in support of the
facility. This facility has a term of one year and will support outstanding
borrowings of up to $100 million at any point in time.
As a result of its success in obtaining this new commercial paper
facility, on March 27, 1997, ACCI provided Cargill Financial Services Corp.
with notice of its intent to terminate the existing repurchase agreement
between ACCI and Cargill.
Under the repurchase facility with Cargill, ACCI has paid interest at a
rate equal to 3.25 percent over the one-month LIBOR. In addition, in 1996, ACCI
paid "repurchase fees" of approximately $3.3 million in connection with the
Cargill repurchase facility, representing $1.9 million after tax, or 23 cents
per share.
The new commercial paper facility will provide financing at a
considerably lower cost, approximating commercial paper rates, and there are no
"repurchase fees" associated with this debt facility.
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As previously announced by the company, ACCI's election to terminate
the Cargill repurchase facility will result in a one-time restructuring charge
in ACCI's first quarter. This restructuring charge will be an extraordinary
item and will reflect the value of the 174,500 shares of unregistered common
stock issued to Cargill in January of this year, as well as certain capitalized
expenses incurred in connection with the creation of the repurchase facility.
The restructuring charge will be an after-tax charge of up to $1.2
million, or 14 cents per share.
ACCI's chairman and chief executive officer, Rocco Fabiano, commented:
"We are pleased that we have obtained a financing structure that will enable
ACCI to so significantly reduce our effective warehouse borrowing costs on
future installment contract purchases. We are particularly pleased since this
attractive financing was accomplished against a backdrop of significant
liquidity concerns for many non-prime auto finance companies."
"We feel this financing, the excellent pricing on our asset
securitization and the first-ever sale of our subordinated certificates all
reflect further validation of the quality of our credit controls."
With respect to the quarter ended March 31, 1997, ACCI announced that
contract acquisition volumes increased significantly relative to the quarter
ended December 31, 1996, and relative to the comparable quarter last year.
Contract acquisitions amounted to $77 million for the quarter, up 26 percent
from the previous quarter and up 126 percent from the comparable quarter a
year earlier.
Delinquencies were down significantly relative to the quarter ended
December 31, 1996. Contracts which were 31 days or more delinquent as of March
31, 1997, were 4.15 percent, down from 5.03 percent in the previous quarter.
Contracts which were 61 days or more delinquent as of March 31, 1997, were 1.46
percent, down from 1.73 percent in the previous quarter. More detailed
financial data were not yet available.
ACCI specializes in the indirect financing of automobile installment
contracts purchased primarily from franchised automobile dealers for consumers
who have limited access to traditional sources of financing for vehicle
purchases. The Company purchases these contracts through its five regional
credit centers in Atlanta, Dallas, Miami, Newark, Del. and San Diego.
The company current services contracts in 38 states and actively
markets its program to dealers in Arizona, California, Colorado, Delaware,
Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana,
Maryland, Michigan, Mississippi, Missouri, Montana, Nevada, New Jersey, New
Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina,
Tennessee, Texas, Virginia, Washington and West Virginia.
This news release contains forward-looking statements relating to the
future warehouse borrowing costs and the quality of the company's credit
controls, which are subject to risks and uncertainties that could cause actual
results to differ materially.
Factors that cause actual results to differ include the risk of a
downgrade of FSA that could cause an event of default under the commercial
paper facility, as well as the credit and interest-related risks set forth in
ACCI's Annual Report and Form 10-K for the year ended December 31, 1996.
CONTACT: ACC Consumer Finance Corp., San Diego
