<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 14, 1999
REGISTRATION STATEMENT NO. 333-84155
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
AMERICREDIT FINANCIAL SERVICES, INC.
(Exact Name of Registrant as specified in its Charter)
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<S> <C> <C>
Delaware 801 CHERRY STREET 75-2439888
(State of Incorporation) FORT WORTH, TEXAS 76102 (IRS Employer
(Address of Principal Executive Office of Registrant) Identification No.)
</TABLE>
CHRIS A. CHOATE, ESQ.
AMERICREDIT CORP.
801 CHERRY STREET
FORT WORTH, TEXAS 76102
(Name, Address and Telephone Number, including area code, of Agent for Service)
COPY TO:
CHRIS DIANGELO, ESQ.
DEWEY BALLANTINE LLP
1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.[ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering.[ ]
If this Form is filed as a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
CALCULATION OF REGISTRATION FEE
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- ------------------------------------------------------------------------------------------------------------------------
PROPOSED
MAXIMUM
AMOUNT PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TO BE AGGREGATE PRICE OFFERING REGISTRATION
TITLE OF SECURITIES BEING REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE(2)(3)
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<S> <C> <C> <C> <C>
Auto Receivables Asset Backed Securities $5,000,000,000 100% $5,000,000,000 $1,390,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) $278.00 was paid by wire transfer on July 30, 1999. $1,389,722 was paid
on September 10, 1999 pursuant to this Amendment No. 1 to the Registration
Statement.
(3) In accordance with Rule 429 under the Securities Act of 1933, the Prospectus
included herein is a combined prospectus which also relates to the
Registrant's Registration Statement on Form S-3, File No. 333-63565 (the
"Prior Registration Statement"). The amount of securities eligible to be
sold under the Prior Registration Statement ($659,058,186 as of September
14, 1999) shall be carried forward to this Registration Statement. The
filing fee related to the amount being carried forward was paid with the
Prior Registration Statement.
__________________________
<PAGE>
Prospectus Supplement
(To the Prospectus dated ____, 1999)
AmeriCredit Automobile Receivables Trust 1999-__
Issuer
AFS Funding Corporation
Seller
AmeriCredit Financial Services, Inc.
Servicer
<TABLE>
<S> <C>
You should read the section entitled The notes-
"Risk Factors" on page S-10 of this
prospectus supplement and . Are as described in the table below;
consider these factors before
making a decision to invest in these . Are backed by a pledge of assets of the issuer, primarily a
securities. pool of automobile loans secured by new and used automobiles,
light trucks and vans;
Neither these securities nor the auto
loans will be insured or guaranteed by . Receive distributions on the fifth day of each month, beginning
any governmental agency or on ______;
instrumentality.
. Currently have no trading market.
Retain this prospectus supplement for
future reference. This prospectus Credit enhancement for the notes will consist of -
supplement may be used to offer and
sell the notes only if accompanied by . Overcollateralization resulting from the excess of principal
the prospectus value of the initial auto loans over the aggregate principal
amount of the notes; and
. A financial guarantee insurance policy issued by Financial
Security Assurance Inc. unconditionally or irrevocably
guaranteeing timely payment of interest and principal.
</TABLE>
<TABLE>
<CAPTION>
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Issuance Interest Final Scheduled Initial Public Underwriting Net Proceeds(2)
Amount Rate Payment Date Offering Price(1) Discount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 Notes
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Class A-2 Notes
- ------------------------------------------------------------------------------------------------------------------------
Class A-3 Notes
- ------------------------------------------------------------------------------------------------------------------------
Class A-4 Notes
- ------------------------------------------------------------------------------------------------------------------------
Total
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</TABLE>
(1) Plus accrued interest, if any, from ___________.
(2) Net proceeds are before deducting expenses, estimated to be $___________.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
[Underwriters]
The date of this prospectus supplement is____.
<PAGE>
Important Notice about the Information Presented in this Prospectus Supplement
and the Accompanying Prospectus
. We provide information to you about the notes in two separate documents that
progressively provide more detail: (1) the accompanying prospectus, which
provides general information, some of which may not apply to your series of
notes, and (2) this prospectus supplement, which describes the specific terms
of your series of notes.
. This prospectus supplement does not contain complete information about the
offering of the notes. Additional information is contained in the prospectus.
We suggest that you read both this prospectus supplement and the prospectus in
full. We cannot sell the notes to you unless you have received both this
prospectus supplement and the prospectus.
. If the terms of your series of notes vary between this prospectus supplement
and the accompanying prospectus, you should rely on the information in this
prospectus supplement.
. We include cross-references in this prospectus supplement and the accompanying
prospectus to captions in these materials where you can find further related
discussions. The following table of contents and the table of contents
included in the accompanying prospectus provide the pages on which these
captions are located.
Where You Can Find More Information
AmeriCredit Financial Services, Inc. has filed with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933,
as amended, with respect to the notes offered pursuant to this prospectus
supplement. This prospectus supplement and the prospectus, which form a part of
the registration statement, omit certain information contained in such
registration statement pursuant to the rules and regulations of the Commission.
You can read and copy the registration statement at the Public Reference
Room at the Commission at 450 Fifth Street, N.W., Washington, DC 20549 or at the
Commission's regional offices at Seven World Trade Center, 13th Floor, New York,
New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. You can obtain information about the Public
Reference Section by calling the SEC at 1-800-SEC-0330. In addition, the
Commission maintains a site on the World Wide Web containing reports, proxy
materials, information statements and other items. The address is
http://www.sec.gov.
In addition to the documents described in the prospectus under
"Incorporation of Documents by Reference," the consolidated financial statements
of Financial Security Assurance Inc. and its subsidiaries included in, or as
exhibits to, the following documents which have been filed with the commission
by Financial Security Assurance Holdings Ltd., are hereby incorporated by
reference in this prospectus supplement:
(a) Annual Report on form 10-K for the year ended December 31, 1998, and
(b) Quarterly Report on Form 10-Q for the period ended June 30, 1999.
S-2
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All financial statements of Financial Security Assurance Inc., included in
documents it filed under Section 13(a), 13(c), 14, or 15(d) of the Securities
and Exchange Act of 1934 subsequent to the date of this prospectus supplement
and prior to the termination of the offering of the notes, are considered
incorporated by reference in this prospectus supplement and to be a part of this
prospectus supplement from the respective dates of filing of the documents.
We will provide you with copies of these reports, at no charge, if you
write to us at: AmeriCredit Financial Services, Inc., 801 Cherry Street, Fort
Worth, Texas 76102; telephone (817) 332-7000.
AmeriCredit Financial Services, Inc. on behalf of the issuer hereby
undertakes that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the issuer's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities and Exchange Act of 1934 and each filing of
the financial statements of Financial Security Assurance Inc. included in or as
an exhibit to the annual report of Financial Security Assurance Holdings Ltd.
filed pursuant to Section 13(a) or Section 15(d) of the Securities and Exchange
Act of 1934 that is incorporated by reference in the registration statement will
be considered a new registration statement relating to the notes offered by this
prospectus supplement, and the offering of such notes at that time will be
considered an initial bona fide offering.
S-3
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Table of Contents
Page
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Summary......................................................... S-6
Risk Factors.................................................... S-10
The Company/Servicer............................................ S-12
The Seller...................................................... S-12
The Issuer...................................................... S-13
General....................................................... S-13
The Owner Trustee............................................... S-13
The Indenture Trustee........................................... S-14
The Trust Property.............................................. S-14
The Company's Automobile Financing Program...................... S-16
The Auto Loans.................................................. S-17
General....................................................... S-17
Eligibility Criteria.......................................... S-17
Composition................................................... S-19
Yield and Prepayment Considerations............................. S-25
Delinquency and Loan Loss Information......................... S-30
Description of the Notes........................................ S-34
General....................................................... S-34
Distribution Dates............................................ S-34
Payments of Interest.......................................... S-35
Payments of Principal......................................... S-36
Mandatory Redemption.......................................... S-37
Optional Redemption........................................... S-38
Events of Default............................................. S-38
Description of The Purchase Agreements And the Trust Documents.. S-39
Sale and Assignment of Auto Loans............................. S-39
Accounts...................................................... S-40
Servicing Compensation and Trustees' Fees..................... S-41
Certain Allocations........................................... S-42
Distributions................................................. S-43
Distribution Date Calculations and Payments.................. S-43
Insured Distribution Date Calculations and Payments.......... S-44
Statements to Noteholders..................................... S-44
Credit Support................................................ S-45
Spread Account............................................... S-46
Overcollateralization........................................ S-46
Servicer Termination Event.................................... S-47
Rights Upon Servicer Termination Event........................ S-48
Waiver of Past Defaults....................................... S-49
Amendment..................................................... S-49
Material Federal Income Tax Consequences........................ S-53
Tax Characterization of the Issuer............................ S-53
Tax Consequences to Holders of the Notes...................... S-53
Treatment of the Notes as Indebtedness....................... S-53
Original Issue Discount...................................... S-54
Market Discount.............................................. S-54
Market Premium............................................... S-55
Sale or Redemption of Notes.................................. S-55
Taxation of Foreign Investors................................ S-56
Backup Withholding........................................... S-56
State and Local Tax Considerations.............................. S-56
ERISA Considerations............................................ S-57
Legal Investment................................................ S-57
Ratings......................................................... S-57
Underwriting.................................................... S-58
Experts......................................................... S-59
Legal Opinions.................................................. S-60
S-4
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Page
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Glossary........................................................ S-61
Financial Statement of the Trust................................ F-1
Annex I-Clearance, Settlement and Tax Documentation Procedures.. A-1
S-5
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Summary
. This summary highlights selected information from this prospectus supplement
and does not contain all of the information that you need to consider in
making your investment decision. To understand all of the terms of the
offering of the notes, read carefully this entire prospectus supplement and
the accompanying prospectus.
. This summary provides an overview of certain calculations, cash flows and
other information to aid your understanding. To understand all of the terms
of the offering, carefully read this entire document.
Auto Loan-Backed Notes
Series 1999--
Issuer
. AmeriCredit Automobile Receivables Trust _____, a Delaware business trust.
. The issuer's address is 1011 Centre Road, Suite 200, Wilmington, Delaware
19805.
Company/Servicer
. AmeriCredit Financial Services, Inc., a Delaware corporation.
. The company originated or purchased from dealers the auto loans the seller
will sell to the issuer.
. The company's address is 801 Cherry Street, Fort Worth, Texas 76102.
. The company will service the auto loans.
Seller
. AFS Funding Corp., a Nevada corporation.
. The seller's address is 1325 Airmotive Way, Reno, Nevada 89502.
Insurer
. Financial Security Assurance Inc., a New York financial guaranty insurance
company.
Trustee
. [Name of trustee], a national banking association.
Statistical Calculation Date
. __________.
. This is the date used for preparing the statistical information used in this
prospectus supplement.
Initial Cutoff Date
. The opening of business on __________.
. The issuer will receive payments due on, or received regarding, the auto
loans on or after this date.
Closing Date
. On or about __________.
S-6
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Distribution Date
. When the company is the servicer, the [5th] day of each month, or, if the
[5th] day is not a business day, on the following business day. However, the
payment date will never be before the [third] business day of the month. The
first distribution date will be _____.
. If the company is not the servicer, the payment date will become the [twelfth]
day of each month, or if the [twelfth] day is not a business day, the next
following business day.
Final Scheduled Distribution Date
If the notes have not already been paid in full, the issuer will pay the
outstanding principal amount of the notes in full on the following dates:
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<CAPTION>
Class Final Scheduled
Distribution Date
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<S> <C>
A-1
A-2
A-3
A-4
</TABLE>
Denominations
. The issuer will issue the notes in minimum denominations of $1,000 and
integral multiples of $1,000.
Interest
. On each distribution date, the issuer will pay interest at the applicable
interest rate that accrued during the prior interest accrual period.
. Interest on the [Class A-1 Notes and the Class A-2 Notes] will be calculated
on a 360-day year and the actual number of days elapsed in the interest
accrual period.
. Interest on the [Class A-3 and Class A-4 Notes] will be calculated on the
basis of a 360-day year consisting of twelve 30-day months.
Principal
On each distribution date, the issuer will pay principal equaling:
(1) the amount of principal paid by obligors on the auto loans during the
prior month, plus
(2) the amount of excess interest collected on the auto loans during the prior
month.
Sequential Pay Feature:
The issuer will pay principal in the following priority:
. to the Class A-1 noteholders only, until the principal amount on the Class A-1
Notes has been reduced to zero;
. when the Class A-1 Notes have been paid in full to the Class A-2 noteholders
only, until the principal amount on the Class A-2 Notes has been reduced to
zero;
. when the Class A-2 Notes have been paid in full, to the Class A-3 noteholders
only, until the principal amount on the Class A-3 Notes has been reduced to
zero;
. when the Class A-3 Notes have been paid in full, to the Class A-4 noteholders,
until the principal amount
S-7
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on the Class A-4 Notes has been reduced to zero.
The Trust Assets
The issuer will pledge property to secure payments on the notes. The pledged
assets will include:
. automobile loans for new and used automobiles, light duty trucks and vans;
. monies received from the automobile loans on or after __________;
. the security interests in the underlying vehicles;
. the loan files;
. all rights to proceeds from claims on insurance policies covering the vehicles
or the obligors;
. all rights to proceeds from liquidating the auto loans;
. the seller's rights against dealers under agreements between the company and
the dealers;
. the bank accounts opened in connection with this offering;
. all proceeds from the items described above; and
. rights under the transaction documents.
The Auto Loan Pool
The auto loans are evidenced by motor vehicle retail installment sale contracts
which the company purchased from dealers. The automobile loans are primarily
made to individuals with less than perfect credit.
Pre-Funding Feature
. The trustee will hold $__________ of the proceeds of the notes in a pre-
funding account which the issuer will use to purchase additional auto loans.
The company will have originated these additional auto loans.
. The issuer will purchase these additional auto loans on or before __________.
Statistical Information
As of __________ the auto loans in the pool have:
. an aggregate principle balance of $__________;
. a weighted average annual percentage rate of approximately [_____]%;
. a weighted average original maturity of approximately [___] months;
. a weighted average remaining maturity of approximately [___] months; and
. a remaining term of not more than [___] months and not less than [___] months
each.
Optional Redemption
. If the pool balance declines to 10% or less of its original level the company
may redeem all the outstanding Class A-4 Notes. If a redemption occurs, you
will receive a final distribution that
S-8
<PAGE>
equals the unpaid principle amount of the notes plus accrued interest.
Mandatory Redemption
. If any funds deposited in the pre-funding account remain on [date on which the
funding period ends], the company will redeem notes equaling the amounts in
the pre-funding account.
. The aggregate principal amount of each class of notes to be redeemed will
equal the class's pro rata share of the amount remaining in the account. Each
class's pro rata share will be based on the current principal amount of each
class of notes. However, if the amount to be redeemed is $__________ or less,
the trustee will pay the redemption amount according to the notes "sequential
pay" feature, and not pro rata.
--- -----
. The notes may be accelerated and subject to immediate payment upon the
occurrence of an event of default. So long as the insurer is not in default,
it will have the power to declare an event of default. However, the policy
does not guarantee payment of any amounts that become due on an accelerated
basis, unless the insurer elects, in its sole discretion, to pay those amounts
in whole or in part.
Federal Income Tax Consequences
For federal income tax purposes:
. Dewey Ballantine LLP, special tax counsel to the issuer and counsel to the
underwriters, is of the opinion that the notes will be treated as debt and the
trust will not be treated as debt and the trust will not be treated as an
association or publicly traded partnership taxable as a corporation. By your
acceptance of a note, you agree to treat the notes as debt.
. Interest on the notes will be taxable as ordinary income when received by a
holder on the cash method of accounting and when accrued by a holder on the
accrual method of accounting.
. Dewey Ballantine LLP has prepared the discussion under "Material Federal
Income Tax Consequences" in this prospectus supplement and in the prospectus
and is of the opinion that the discussion accurately states all material
federal income tax consequences of the purchase, ownership and disposition of
the notes to their original purchaser.
ERISA Considerations
Subject to the important considerations described under "ERISA Consideration" in
this prospectus supplement, pension, profit-sharing and other employee benefit
plans may purchase notes. You should consult with your counsel regarding the
applicability of the provisions of the Employee Retirement Income Security Act
of 1974, as amended, before purchasing a note.
Ratings
The issuer will not issue the notes unless they have been assigned the following
ratings:
<TABLE>
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Class Rating
----- ------
S&P Moody's
--- -------
<S> <C> <C>
A-1
A-2
A-3
A-4
</TABLE>
You must not assume that the ratings will not be lowered, qualified, or
withdrawn by the rating agencies.
S-9
<PAGE>
Risk Factors
In addition to the risk factors discussed in the prospectus, you should consider
the following additional factors in connection with the purchase of the notes:
<TABLE>
<S> <C>
The company may be unable to originate The ability of the company to originate sufficient additional auto loans may be
enough auto loans to use all moneys in affected by a variety of social and economic factors including:
the pre-funding account and therefore you
may be exposed to reinvestment risk. . interest rates,
. unemployment levels,
. the rate of inflation, and
. consumer perception of economic conditions generally.
If the company does not originate sufficient additional auto loans then the money
deposited in the pre-funding account will not be used up and a mandatory redemption
of a portion of the notes could result.
If a mandatory redemption occurs, you will receive a principal prepayment. You will
bear the risk of reinvesting any prepayment.
We cannot predict the rate at which the Obligors can prepay their auto loans. The rate of prepayments may be influenced
notes will amortize. by economic, social and other factors. In addition, under certain circumstances, the
seller and the company are obligated to purchase auto loans as a result of breaches
of representations and/or covenants.
The trust contains an overcollateralization feature that results in accelerated
principal payments to noteholders, amortizing the notes more quickly than the auto
loan pool. The company also has the right, to purchase the auto loans when the pool
balance is 10% or less of the original pool balance.
</TABLE>
S-10
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Geographic concentrations of auto loans Adverse economic conditions or other factors affecting any state or region
may increase concentration risks. could increase the delinquency or loan loss experience of the auto loans. As of
________ ___, 1999 obligors with respect to approximately _____%, _____%, _____% of
the auto loans based on the auto loans' remaining principal balance were located in
________, ________, _________, respectively. [No other state accounts for more than
5% of the auto loans.]
The notes are asset-backed debt and the The sole sources for repayment of the notes are payments on the auto loans,
issuer has only limited assets. amounts on deposit in the pre-funding account, other cash accounts held by [Name of
indenture trustee] and payments made under the insurance policy. The money in the
pre-funding account will be used solely to purchase additional auto loans and is not
available to cover losses on the auto loan pool. The capitalized interest account is
designed to cover obligations of the issuer relating to that portion of its assets
not invested in the auto loan pool and is not designed to provide protection against
losses on the auto loan pool. Furthermore, if Financial Security Assurance Inc.
defaults in its obligations under the insurance policy, the issuer will depend on
current distributions on the auto loan pool and amounts, if any, available in
certain collateral accounts maintained for the benefit of Financial Security
Assurance Inc. to make payments on the notes.
Ratings on notes are dependent upon the The ratings of the notes will depend primarily on the creditworthiness of the
insurer's creditworthiness. insurer as the provider of the financial guarantee insurance policy relating to the
notes. There is a risk that if the insurer's financial strength ratings are reduced,
the rating agencies may reduce the notes' ratings.
Events of Default under the Indenture may Following the occurrence of an event of default, Financial Security Assurance Inc.
result in an acceleration. may, at its option, elect to cause the liquidation of the assets of the issuer, in
whole or in part, and pay all or any portion of the outstanding amount of the notes,
plus accrued interest thereon.
</TABLE>
S-11
<PAGE>
Use of Proceeds
The issuer will use the proceeds from issuing the notes to:
. pay the seller the auto loan purchase price;
. to deposit the pre-funded amount into the pre-funding account; and
. to fund the capitalized interest account.
The seller or its affiliates may use the net proceeds to pay their debt,
including "warehouse" debt secured by the auto loans prior to their sale to the
issuer. This warehouse debt may have been owed to one or more of the
underwriters or their respective affiliates.
The Company/Servicer
AmeriCredit Financial Services, Inc., is a wholly-owned, and the primary
operating subsidiary of AmeriCredit Corp., a Texas corporation the common shares
of which are listed on the New York Stock Exchange. The company was
incorporated in Delaware on July 22, 1992. The company's executive offices are
located at 801 Cherry Street, Fort Worth, Texas 76102; telephone (817) 332-7000.
The company purchases and services auto loans which are originated and
assigned to it by automobile dealers. The company will sell and assign the auto
loans to the seller.
The company will service the auto loans and will be compensated for acting
as the servicer. As servicer, the company will hold the auto loans, as a
custodian. Prior to taking possession of the auto loans in its custodial
capacity, the company will stamp the auto loans to reflect their sale and
assignment to the issuer.
The servicer will not have the certificates of title of the financed
vehicles amended or reissued to note their sale to the issuer or the grant of a
security interest in the vehicles to the trustee by the issuer. Because the
certificates of title are not amended, the issuer may not have a perfected
security interest in financed vehicles originated in some states, including
Texas and California. See "Certain Legal Aspects of Auto Loans".
The Seller
AFS Funding Corp., the company's wholly-owned subsidiary, is a Nevada
corporation, incorporated in April, 1996. The seller's address is 1325
Airmotive Way, Reno, Nevada 89502; telephone (702) 322-2221.
The seller's purpose is limited to purchasing auto loans from the company
and transferring the loans to third parties and any activities incidental or
necessary for this purpose. The seller has structured this transaction so that
the bankruptcy of the company
S-12
<PAGE>
will not cause a court to consolidate the seller's assets and liabilities with
the company's. The seller has received a legal opinion, subject to various
facts, assumptions and qualifications, opining that if the company was adjudged
bankrupt, it would not be a proper exercise of a court's equitable discretion to
disregard the separate corporate existence of the seller and to require the
consolidation of the seller's assets and liabilities with those of the company.
However, there can be no assurance that a court would not conclude that the
assets and liabilities of the seller should be consolidated with those of the
company.
Delays in distributions on the notes and possible reductions in
distribution amounts could occur if a court decided to consolidate the seller's
assets with the company's, or if a filing were made under any bankruptcy or
insolvency law by or against the seller, or if an attempt were made to litigate
any of those issues.
The Issuer
General
The issuer is a Delaware business trust formed under a trust agreement to
consummate the transactions described in this prospectus supplement. The issuer
will not engage in any activity other than:
. acquiring, holding and managing the auto loans and its other assets;
. issuing the notes and the certificate;
. making payments on the notes; and
. engaging in other activities that are necessary, suitable to the above
listed activities.
The issuer will use the proceeds from the initial sale of the notes to
purchase the initial auto loans from the seller and to fund the deposits in the
pre-funding account, collateral accounts maintained for the benefit of the
insurer, and the capitalized interest account.
The issuer 's principal offices are in Wilmington, Delaware, in care of
[Name of owner trustee and address].
The Owner Trustee
[Name of owner trustee] is the owner trustee. It is a [name of state]
banking corporation. Its principal offices are located at [address].
The owner trustee will perform limited administrative functions under the
trust agreement. The owner trustee's liability in connection with the issuance
of the certificate
S-13
<PAGE>
and the issuance and sale of the notes is limited solely to the express
obligations of the owner trustee detailed in the trust agreement and the sale
and servicing agreement.
The Indenture Trustee
[Name of indenture trustee], a national banking association, is the
indenture trustee. [Name of indenture trustee's] address is _________.
The Trust Property
The trust property will include, among other things, the following:
. initial auto loans secured by new and used automobiles, light duty
trucks and vans;
. monies received (a) for the initial auto loans, on or after _____ the
initial cutoff date, or (b) for the subsequent auto loans, after the
related cutoff date;
. amounts that may be held in the lockbox accounts, the collection
account, the pre-funding account, and the capitalized interest account;
. an assignment of the security interests of the servicer and CP Funding
Corp. in the financed vehicles;
. an assignment of the rights of the seller against dealers under
agreements between the servicer and dealers;
. an assignment of the right to receive proceeds from claims on physical
damage, credit life and disability insurance policies covering the
financed vehicles or the obligors;
. the auto loans files; and
. other rights under the trust documents.
The trust property also will include an assignment of the seller's rights
against the servicer and CP Funding Corp., the servicer's wholly-owned
subsidiary, for breaches of representations and warranties under a purchase
agreement. The initial auto loans will be purchased by the seller under this
purchase agreement on or prior to the date of issuance of the notes.
The issuer will purchase additional auto loans and related property from
the seller on or before __________, from funds on deposit in the pre-funding
account. These subsequent auto loans will be purchased by the seller from the
servicer and CP Funding pursuant to one or more subsequent purchase agreements
between the seller, CP Funding and the servicer.
S-14
<PAGE>
The initial auto loans were, and the subsequent auto loans were or will be,
originated by dealers according to the servicer's requirements, have been or
will be so assigned, and evidence or will evidence the indirect financing made
available to the obligors. Dealer agreements may provide for repurchase or
recourse against the dealer in the event of a breach of a representation or
warranty by the dealer.
The pool balance represents:
(a) the aggregate principal balance of the auto loans at the end of the
preceding calendar month;
plus
(b) any amounts in the pre-funding account;
minus
(c) all payments from obligors and any purchase amounts the seller or
servicer must remit for the month and all losses, including Cram Down
Losses during the month.
Under the indenture, the issuer will grant a security interest in the trust
property to the trust collateral agent for the indenture trustee's benefit on
the noteholders' behalf and for the insurer's benefit in support of the
obligations owed to the insurer. Any proceeds of the security interest will be
distributed according to the indenture. The insurer will be entitled to the
distributions only after payment of amounts owed to, among others, noteholders.
An auto loan's principal balance, as of any date, is the sum of:
(a) the amount financed;
minus
(x) that portion of all amounts received on or prior to that date and
allocable to principal according to the auto loan's terms;
plus
(y) any Cram Down Loss for the auto loan;
plus
(b) the accrued and unpaid interest on the auto loan as of that date.
S-15
<PAGE>
The Company's Automobile Financing Program
Through its branch offices and marketing representatives, the company
provides funding for franchised and independent automobile dealers to finance
their customers' purchase of new and used automobiles, light duty trucks and
vans. The dealers originate auto loans which conform to the company's credit
policies. The company then purchases the auto loans without recourse to the
dealers. The company also services the auto loans that it purchases.
The company 's indirect lending programs are designed to serve consumers
who have limited access to traditional auto financing. The typical borrower
either may have had previous financial difficulties, and is now attempting to
re-establish credit, or has not established a credit history. Because the
company serves consumers who are unable to meet the credit standards imposed by
most traditional auto financing sources, it charges a higher interest at rates
than most traditional auto financing sources. The servicer also expects to
sustain a higher level of delinquencies and credit losses than that experienced
by traditional auto financing sources since it provides financing in a
relatively high risk market.
The company has established relationships with a variety of dealers located
in areas where it has branch offices or marketing representatives. While the
company occasionally finances purchases of new autos, a substantial majority of
the company's auto loans were for used automobiles.
Of the loans the company purchased during the year ended June 30, _____:
. manufacturer-franchised dealers with used auto operations originated
approximately __%, and
. independent dealers specializing in used auto sales originated
approximately __%.
Of the loans the company purchased in the nine months ended __________:
. manufacturer-franchised dealers with used auto operations originated
approximately __%, and
. independent dealers specializing in used auto sales originated
approximately __%.
The servicer purchased loans from __________ dealers during the year ended
June 30, _____ and from __________ dealers during the nine months ended
__________.
To mitigate credit risk, the company typically charges dealers an
acquisition fee when it purchases the loans. Additionally, dealers typically
make representations as to the auto loan's validity and compliance with relevant
laws, and indemnify the company against any claims, defenses and set-offs that
an obligor may assert against the company because of loan's assignment.
S-16
<PAGE>
As of __________, the company operated ________ branch offices in _______
states.
These branch offices solicit dealers for loans and maintain the company's
relationship with the dealers in the branch office's geographic vicinity.
The company also has marketing representatives covering markets where the
company does not have a branch. The servicer does business in a total of _______
states.
See "AmeriCredit's Automobile Financing Program" in the prospectus for a
description of the servicer's contract acquisition, servicing and collection
practices.
The Auto Loans
General
The servicer purchased the auto loans from dealers. The auto loans were
made to individuals with less than perfect credit due to factors, including:
. the manner in which these individuals have handled previous credit;
. the limited extent of their prior credit history; and/or
. their limited financial resources.
Eligibility Criteria
The auto loans were or will be selected according to several criteria,
including those specified under "AmeriCredit's Automobile Financing Program --
Contract Acquisition" in the accompanying prospectus. In addition, as of the
initial cut-off date the initial auto loans were selected from the company's
portfolio of auto loans based on the following criteria:
(a) each initial auto loan had a remaining maturity of not more than [72]
months;
(b) each initial auto loan had an original maturity of not more than [72]
months;
(c) each initial auto loan had a remaining principal balance of at least
$________ and not more than $__________;
(d) each initial auto loan has an annual percentage rate of at least
_______% and not more than _______%;
(e) no initial auto loan was more than [30] days past due; and
(f) neither the company, any dealer nor anyone acting in their behalf
advanced funds to cause any initial auto loan to qualify under clause
(e) above.
S-17
<PAGE>
During the funding period, the seller must purchase the subsequent auto
loans from the company and CP Funding and then sell them to the issuer. The
company anticipates that the aggregate principal balance of the subsequent auto
loans will equal $__________. The seller will sell the subsequent auto loans to
the issuer on the subsequent transfer date and the issuer will pay the seller
the outstanding principal balance of the subsequent auto loans as of their
respective subsequent cutoff dates, which is the price the seller will pay the
company and CP Funding. The issuer will use the funds in the pre-funding
account for this purpose.
The issuer's obligation to purchase the subsequent auto loans is subject to
the following conditions:
(a) as of each loan's subsequent cut-off date, each subsequent auto loan
and/or subsequent financed vehicle must satisfy the auto loan
eligibility criteria specified under "the auto loans" in the prospectus
and the criteria listed in this prospectus supplement in clauses (a)
through (e) regarding the initial auto loans;
(b) the insurer, if there is no insurer default, has approved the
subsequent auto loans transfer to the issuer;
(c) none of the servicer, CP Funding or the seller has selected the
subsequent auto loans in a manner that any of them believes is adverse
to the interests of the insurer or the noteholders;
(d) the servicer, CP Funding and the seller will deliver certain opinions
of counsel regarding the validity of the subsequent auto loan transfer;
and
(e) Standard & Poor's must confirm that the ratings on the notes have not
been withdrawn or reduced because of the subsequent auto loans transfer
to the issuer.
Because the subsequent auto loans may be originated after the initial auto
loans, the auto loan pool's characteristics after the transfer of subsequent
auto loans to the pool may vary from the initial pool.
In addition, issuer's obligation to purchase the subsequent auto loans is
subject to the condition that the auto loans in the trust, including the
subsequent auto loans to be transferred, meet the following criteria:
(a) the auto loans weighted average annual percentage rate ("APR") trust is
not less than __%;
(b) the auto loan's weighted average remaining term on the subsequent
cutoff date is not greater than [72] months; and
(c) not more than __% of the obligors on the auto loans reside in Texas and
California.
S-18
<PAGE>
The criteria in clauses (a) and (b) will be based:
. on the characteristics of the initial auto loans on the initial cutoff
date and
. the auto loans, including the subsequent auto loans, on the related
subsequent cutoff date.
The criteria in clause (c) will be based on the obligor's mailing addresses
on:
. the initial auto loans on the initial cutoff date and
. the subsequent auto loans on the related subsequent cutoff dates.
Except for the above described criteria, there are no required
characteristics for the subsequent auto loans. Therefore, following the
transfer of subsequent auto loans to the issuer, the aggregate characteristics
of the entire pool of auto loans included in the trust may vary in the following
respects:
. composition of the auto loans;
. geographic distribution;
. distribution by remaining principal balance;
. distribution by APR;
. distribution by remaining term; and
. distribution of the auto loans secured by new and used vehicles.
Composition
The statistical information presented in this prospectus supplement is
based on the initial auto loans as of the statistical calculation date which is
____________.
. As of the statistical calculation date, the initial auto loans have an
aggregate principal balance of $__________ .
. As of the initial cutoff date, initial auto loans have an aggregate
principal balance of $__________ .
The company will acquire additional auto loans after the statistical
calculation date but prior to the initial cutoff date. In addition some
amortization has occurred prior to the initial cutoff date but after the
statistical calculation date. In addition, some auto loans included as of the
statistical calculation date have prepaid in full or have been determined not to
meet the eligibility requirements and have not been included in the auto loan
pool. As a result, the statistical distribution of characteristics as of the
initial cutoff
S-19
<PAGE>
date varies from the statistical distribution of characteristics as of the
statistical calculation date, although the variance is not material.
The initial auto loan pool's composition and distribution by APR and its
geographic concentration as of the statistical calculation date is detailed in
the following tables:
S-20
<PAGE>
Composition of the Initial Auto Loans
as of the Statistical Calculation Date
<TABLE>
<CAPTION>
New Used Total
--------------- --------------- ---------------
<S> <C> <C> <C>
Aggregate principal balance(1)
Number of auto loans
Percent of Aggregate
principal balance
Average principal balance
Range of principal balances
Weighted Average APR(1)
Range of APRs
Weighted Average Remaining Term
Range of Remaining Terms
Weighted Average Original Term
Range of Original Terms
</TABLE>
- -----------------
(1) Aggregate principal balance includes some portion of accrued interest. As a
result, the Weighted Average APR of the auto loans may not be equivalent to
the auto loans aggregate yield on the aggregate principal balance.
S-21
<PAGE>
Distribution of the Initial Auto Loans by APR
as of the Statistical Calculation Date
<TABLE>
<CAPTION>
Aggregate % of Aggregate % of Total
principal principal Number of auto
APR Range balance(1) balance(2) Number of auto loans loans(2)
- ----------------- --------------------- --------------------- -------------------- -------------------
<S> <C> <C> <C> <C>
8.000 to 8.999% $ % %
9.000 to 9.999
10.000 to 10.999
11.000 to 11.999
12.000 to 12.999
13.000 to 13.999
14.000 to 14.999
15.000 to 15.999
16.000 to 16.999
17.000 to 17.999
18.000 to 18.999
19.000 to 19.999
20.000 to 20.999
21.000 to 21.999
22.000 to 22.999
23.000 to 23.999
24.000 to 24.999
25.000 to 25.999
26.000 to 26.999
27.000 to 27.999
28.000 to 28.999
29.000 to 29.999
--------------------- --------------------- -------------------- -------------------
TOTAL $ % %
===================== ===================== ==================== ===================
</TABLE>
- --------------------------
(1) Aggregate principal balances include some portion of accrued interest.
(2) Percentages may not add to 100% because of rounding.
S-22
<PAGE>
Distribution of the Initial Auto Loans by Geographic Location
of Obligor as of the Statistical Calculation Date
<TABLE>
<CAPTION>
Aggregate % of Aggregate % of Total
principal principal Number of auto
State balance(1) balance(2) Number of auto loans loans(2)
- ----------------- --------------------- --------------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Alabama $ % %
Arizona
California
Colorado
Connecticut
Delaware
Florida
Georgia
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
Tennessee
Texas
Utah
Virginia
Washington
West Virginia
Wisconsin
Other(3)
--------------------- --------------------- -------------------- -------------------
TOTAL $ % %
===================== ===================== ==================== ===================
</TABLE>
- ----------------------------
(1) Aggregate principal balances include some portion of accrued interest.
(2) Percentages may not add to 100% because of rounding.
(3) States with Aggregate principal balances less than $2,000,000.
S-23
<PAGE>
All the auto loans provide the obligor to pay:
. a specified total amount;
. in substantially equal monthly installments on each due date.
Each obligor's total payment amount equals the amount financed plus
interest for the auto loan's term. The interest charges on the auto loans are
determined either by the simple interest method or by adding a precomputed
interest charge to the auto loan as of its origination date.
Under a simple interest auto loan, the amount of an obligor's fixed level
installment payment allocated to interest is equal to the product of the fixed
interest rate on the loan, typically the APR, multiplied by the elapsed time
period, expressed as a fraction of a year, since the preceding loan payment.
The obligor's remaining payment amount is allocated to reduce the principal
amount financed.
The issuer will account for all auto loans, including simple interest auto
loans and precomputed auto loans, as if those auto loans amortized under the
simple interest method. The servicer will not deposit amounts it receives on a
full prepayment of a precomputed auto loan in excess of the loan's outstanding
principal balance and accrued interest to the collection account but will retain
any excess amounts -- minus amounts required to be rebated to the obligor -- as
supplemental servicing fees.
S-24
<PAGE>
Yield and Prepayment Considerations
Obligors may prepay any auto loan at any time. If an obligor prepays an
auto loan, the actual weighted average life of the auto loans may be shorter
than the scheduled weighted average life. These prepayments include:
. liquidations due to default, and
. proceeds from credit life, credit disability, and casualty insurance
policies.
Weighted average life means the average amount of time during which each
dollar of principal on an auto loan is outstanding.
The prepayment rate on the auto loans may be influenced by a variety of
economic, social, and other factors, including the fact that an obligor may not
sell or transfer the financed vehicle without the servicer's consent. The
servicer believes that the actual prepayment rate will result in the auto loans
having a substantially shorter weighted average life than their scheduled
weighted average life.
The rate of payment of principal of each class of notes will depend on the
rate of payment, including prepayments, of the auto loan's principal balance.
As a result, final payment of any class could occur significantly earlier than
the classes final scheduled distribution date. Noteholders will bear any
reinvestment risk resulting from the early payment on the notes.
Auto loan prepayments can be measured relative to a prepayment standard or
model. The model used in this prospectus supplement, the absolute prepayment
model "ABS," represents an assumed prepayment rate of each month relative to the
original number of auto loans in the pool. ABS further assumes that all the
auto loans are the same size and pay at the same rate and that each auto loan in
each month of its life will either be paid as scheduled or be prepaid in full.
For example, in a pool of auto loans originally containing 10,000 auto loans, a
1% ABS rate means that 100 auto loans prepay each month. ABS does not purport
to be an historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of auto loans, including the auto
loans.
The tables captioned "Percent of Initial Note Principal Balance at Various
ABS Percentages" have been prepared on the basis of the following assumptions:
. the trust includes three pools of auto loans with the characteristics
described in the following table;
. the auto loans prepay in full at the specified constant percentage of
ABS monthly, with no defaults, losses or repurchases;
. each scheduled monthly payment on the auto loans is made on the last day
of each month and each month has 30 days;
S-25
<PAGE>
. the initial principal amount of each class of notes is detailed in this
prospectus supplement's cover page;
. interest accrues during each interest period at the following assumed
coupon rates: Class A-1 Notes, _____%; Class A-2 Notes, _____%; Class A-
3 Notes, _____%; and Class A-4 Notes, _____%;
. payments on the notes are made on the [5th] day of each month whether or
not a business day;
. the notes are purchased on __________;
. each auto loan's scheduled monthly payment has been calculated on the
basis of the assumed characteristics in the following table so that each
auto loan will amortize in amounts sufficient to repay its principal
balance by its indicated remaining term to maturity;
. the first due date for each auto loan is the last day of the month of
the assumed cutoff date for the auto loan as detailed in the following
table;
. the entire pre-funded amount is used to purchase subsequent auto loans;
. the servicer does exercise its repurchase option;
. accelerated principal amounts are paid on each distribution date until
the later of the first distribution date on which the Pro Forma Note
Balance reaches the Required Pro Forma Note Balance and the Class A-1
Notes are paid in full; and
. the difference between the gross APR and the net APR is equal to the
base servicing fee, and the net APR is further reduced by the fees due
to the indenture trustee, the trust collateral agent, the owner trustee
and the insurer.
<TABLE>
<CAPTION>
Remaining
Aggregate Assumed Term to
principal Cutoff Maturity Seasoning
Pool balance Gross APR Date (in Months) (in Months)
- ------------ ----------------- ----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
1 $ %
2
3
Total $ %
</TABLE>
Based on the assumptions described above, the ABS Tables indicate the
percentages of the initial principal amount of each class of notes that would be
outstanding after each of the distribution dates shown at various percentages of
ABS and the corresponding weighted average lives of the notes. The auto loans'
actual characteristics and performance will differ from the assumptions used in
constructing the ABS Tables. The assumptions used are hypothetical and have
been provided only to give
S-26
<PAGE>
a general sense of how the principal cash flows might behave under varying
prepayment scenarios.
For example it is very unlikely that:
. the auto loans will prepay at a constant level of ABS until maturity,
. all of the auto loans will prepay at the same level of ABS, or
. the coupon rates on the notes will remain constant.
The diverse terms of auto loans could produce slower or faster principal
distributions than indicated in the ABS Tables at the various constant
percentages specified, even if the original and remaining terms to maturity of
the auto loans are as assumed. Any difference between those assumptions and the
actual characteristics and performance of the auto loans, including actual
prepayment experience or losses, will affect the percentages of initial balances
outstanding over time and the weighted average lives of each class of notes.
S-27
<PAGE>
Percent of Initial Note Principle Balance at Various ABS Percentages(1)
<TABLE>
<CAPTION>
Class A-1 Notes Class A-2 Notes
-------------------------------------------------- ---------------------------------------------------
Distribution Date 0.0% 1.0% 1.7% 2.5% 0.0% 1.0% 1.7% 2.5%
- ----------------- ------------- ------------ ------------ ---------- ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average
Life in Years(2)
</TABLE>
- ---------------------------
(1) The percentages in this table have been rounded to nearest whole number.
(2) The weighted average life of a note is determined by (a) multiplying the
amount of each principal payment on a note by the number of years from the
date of the issuance of the note to the related distribution date, (b)
adding the results and (c) dividing the sum by the related initial principal
amount of the note.
S-28
<PAGE>
Percent of Initial Note Principle Balance at Various ABS
Percentages(1)
<TABLE>
<CAPTION>
Class A-3 Notes Class A-4 Notes
-------------------------------------------------- ---------------------------------------------------
Distribution Date 0.0% 1.0% 1.7% 2.5% 0.0% 1.0% 1.7% 2.5%
- ----------------- ------------- ------------ ------------ ---------- ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average Life in
Years(2)
</TABLE>
- -------------------------------
(1) The percentages in this table have been rounded to nearest whole number.
(2) The weighted average life of a note is determined by (a) multiplying the
amount of each principal payment on a note by the number of years from the
date of the issuance of the note to the related distribution date, (b)
adding the results and (c) dividing the sum by the related initial principal
amount of the note.
S-29
<PAGE>
Delinquency and Loan Loss Information
The following tables detail information relating to the company's
delinquency and loan loss experience regarding all auto loans it has purchased
and serviced. This information includes the company's experience with respect
to all auto loans its portfolio, including auto loans which do not meet the auto
loan pool selection criteria.
Delinquency Experience
Repossessed financed vehicles that have not yet been liquidated and
bankrupt accounts which have not yet been charged off are both included as
delinquent accounts in the table below.
<TABLE>
<CAPTION>
At ________ At June 30
------------------------------------------------- -------------------------------------------------
Number of Number of Number of Number of
auto loans Amount auto loans Amount auto loans Amount auto loans Amount
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio at end of
period(1)
Period of Delinquency(2)
31-60 days(3)
61-90 days
91 days or more
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Delinquencies
Repossessed Assets
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Delinquencies and
Repossessed Assets
========== ========== ========== ========== ========== ========== ========== ==========
Total Delinquencies as
a Percentage of the
Portfolio
Total Repossessed
Assets as a
Percentage of
the Portfolio
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Delinquencies
and Repossessed
Assets as a
Percentage of
the Portfolio
========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
- -----------------------------
(1) All amounts and percentages are based on the principal balances of the auto
loans. Principal balances include some portion of accrued interest. All
dollar amounts are in thousands of dollars.
(2) The company considers a loan delinquent when an obligor fails to make a
contractual payment by the due date. The period of delinquency is based on
the number of days payments are contractually past due.
(3) Amounts shown do not include loans which are less than [31] days delinquent.
S-30
<PAGE>
Credit Loss Experience
<TABLE>
<CAPTION>
Months Ended Fiscal Year Ended
_______ June 30,
------------------------- -------------------------
----------- ---------- ---------- -----------
<S> <C> <C>
Period-End Principal Outstanding(1)
Average Month-End Amount
Outstanding During the Period(1)
Net Charge-Offs(2)
Net Charge-Offs as a Percentage of
Period-End Principal Outstanding
Net Charge-Offs as a Percent of
Average Month-End Amount
Outstanding
</TABLE>
- -------------------------------
(1) All amounts and percentages are based on the auto loans' principal balances.
Principal balances include some portion of accrued interest. All dollar
amounts are in thousands of dollars.
(2) Net Charge-Offs equal Gross Charge-Offs minus Recoveries. Gross Charge-Offs
do not include unearned finance charges and other fees. Recoveries include
repossession proceeds received from the sale of repossessed financed
vehicles net of repossession expenses, refunds of unearned premiums from
credit life and credit accident and health insurance and extended service
contract costs obtained and financed in connection with the vehicle
financing and recoveries from obligors on deficiency balances.
S-31
<PAGE>
The Insurer
The following information has been obtained from Financial Security
Assurance Inc. (hereinafter in this section, "Financial Security") and has not
been verified by the seller or the underwriters. No representations or warranty
is made by the seller or the Underwriters with respect thereto.
General
Financial Security is a monoline insurance company incorporated in 1984
under the laws of the State of New York. Financial Security is licensed to
engage in the financial guaranty insurance business in all 50 states, the
District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments of an
issuer's securities -- thereby enhancing the credit rating of those securities -
- - in consideration for the payment of a premium to the insurer. Financial
Security and its subsidiaries principally insure asset-backed, collateralized
and municipal securities. Asset-backed securities are generally supported by
residential mortgage loans, consumer or trade receivables, securities or other
assets having an ascertainable cash flow or market value. Collateralized
securities include public utility first mortgage bonds and sale/leaseback
obligation bonds. Municipal securities consist largely of general obligation
bonds, special revenue bonds and other special obligations of state and local
governments. Financial Security insures both newly issued securities sold in
the primary market and outstanding securities sold in the secondary market that
satisfy Financial Security's underwriting criteria.
Financial Security is a wholly-owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprises Holdings, Inc.,
MediaOne Capital Corporation, The Tokio Marine and Fire insurance Co., Ltd. and
XL Capital Ltd. No shareholder of Holdings is obligated to pay any debt of
Financial Security or any claim under any insurance policy issued by Financial
Security or to make any additional contribution to the capital of Financial
Security.
The principal executive offices of Financial Security are located at 350
Park Avenue, New York, New York 10022, and its telephone number at that location
is (212) 826-0100.
Reinsurance
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by Financial Security or any
of its domestic or Bermuda operating insurance company subsidiaries are
generally reinsured among such companies on an agreed-upon percentage
substantially proportional to their respective
S-32
<PAGE>
capital, surplus and reserves, subject to applicable statutory risk limitations.
In addition, Financial Security reinsures a portion of its liabilities under
certain of its financial guaranty insurance policies with other reinsurers under
various quota share treaties and on a transaction-by-transaction basis. Such
reinsurance is utilized by Financial Security as a risk management device and to
comply with certain statutory and rating agency requirements; it does not alter
or limit Financial Security's obligations under any financial guaranty insurance
policy.
Rating of Claims-Paying Ability
Financial Security's insurance financial strength is rated "Aaa" by Moody's
Investors Service, Inc. Financial Security's insurer financial strength is
rated "AAA" by Standard & Poor's Ratings Services and Standard & Poor's
(Australia) Pty. Ltd. Financial Security's claims-paying ability is rated "AAA"
by Fitch IBCA, Inc. and Japan Rating and Investment Information, Inc. Such
ratings reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies. See "Risk Factors -- Ratings on
Notes" herein.
Capitalization
The following table sets forth the capitalization of Financial Security and
its wholly-owned subsidiaries on the basis of generally accepted accounting
principles as of _____________:
<TABLE>
<CAPTION>
--------------
(Unaudited)
(in thousands)
<S> <C>
Deferred Premium Revenue (net of prepaid reinsurance premiums) $
Surplus Notes................................................................
Minority Interest............................................................
Shareholder's Equity:
Common Stock................................................................
Additional Paid-In Capital..................................................
Accumulated Other Comprehensive Income (net of deferred income taxes).......
Accumulated Earnings........................................................
Total Shareholder's Equity..................................................
Total Deferred Premium Revenue, Surplus Notes, Minority Interest and
Shareholder's Equity........................................................
$
===================
</TABLE>
For further information concerning Financial Security, see the Consolidated
Financial Statements of Financial Security and Subsidiaries, and the notes
thereto, incorporated by reference herein. Financial Security's financial
statements are included as exhibits to the Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q filed with the Commission by Holdings and may be
reviewed at the EDGAR website
S-33
<PAGE>
maintained by the Commission and at Holdings' website, http://www.FSA.com.
Copies of the statutory quarterly and annual statements filed with the State of
New York insurance Department by Financial Security are available upon request
to the State of New York insurance Department.
Insurance Regulation
Financial Security is licensed and subject to regulation as a financial
guaranty insurance corporation under the laws of the State of New York, its
state of domicile. In addition, Financial Security and its insurance
subsidiaries are subject to regulation by insurance laws of the various other
jurisdictions in which they are licensed to do business. As a financial
guaranty insurance corporation licensed to do business in the State of New York,
Financial Security is subject to Article 69 of the New York insurance Law which,
among other things, limits the business of each such insurer to financial
guaranty insurance and related lines, requires that each such insurer maintain a
minimum surplus to policyholders, establishes contingency, loss and unearned
premium reserve requirements for each such insurer, and limits the size of
individual transactions ("single risks") and the volume of transactions
("aggregate risks") that may be underwritten by each such insurer. Other
provisions of the New York insurance Law, applicable to non-life insurance
companies such as Financial Security, regulate, among other things, permitted
investments, payment of dividends, transactions with affiliates, mergers,
consolidations, acquisitions or sales of assets and incurrence of liabilities
for borrowings.
Description of the Notes
General
The issuer will issue the notes under an indenture, a form of which has
been filed as an exhibit to the registration statement. The following summary
describes material terms of the notes and the indenture. The summary does not
purport to be complete and is subject to all the provisions of the notes and the
indenture. The following summary supplements, and to the extent inconsistent
replaces, the description of the general terms and provisions of the notes of
any given series and the related indenture described in the accompanying
prospectus.
The issuer will offer the notes in denominations of $1,000 and integral
multiples of $1,000 in book-entry form only. Persons acquiring beneficial
interests in the notes will hold their interests through The Depository Trust
Company in the United States or Cedelbank, societe anonyme or in the Euroclear
System in Europe. See "Description of the Notes -- Book-Entry Registration" in
the prospectus and Annex I in this prospectus supplement.
Distribution Dates
While AmeriCredit is the servicer, the notes will pay interest and
principal on the fifth day of each month -- or, if the fifth day is not a
business day, on the next following business day. However, any distribution
date will not be earlier than the third business
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day of the month. The first distribution date will be ___________________.
Holders of record as of the close of business on the business day immediately
preceding a distribution date, commonly known as a record date, will receive
payments on that distribution date. A business day is a day other than a
Saturday, Sunday or other day on which commercial banks located in the States of
Texas, Delaware, Ohio or New York are authorized or obligated to be closed.
The insured distribution date will be the [twelfth] day of each month, or,
if the [twelfth] day is not a business day, the next following business day.
If the backup servicer or another successor servicer becomes the servicer,
the distribution date will become the twelfth day of each month, or if the
twelfth day is not a business day, the next following business day.
The final scheduled distribution dates are as follows:
. for the Class A-1 Notes, the __________ insured distribution date;
. for the Class A-2 Notes, the __________ insured distribution date;
. for the Class A-3 Notes, the __________ insured distribution date; and
. for the Class A-4 Notes, the __________ insured distribution date.
Payments of Interest
Interest on each class of notes will accrue during each interest period at
the applicable interest rate from and including the most recent distribution
date that interest was paid -- or, in the case of the first distribution date,
from and including the closing date __________, but excluding, the following
distribution date. In the case of the first distribution date, the interest
period shall be ___days. The interest accruing during an interest period will
accrue on each class's outstanding principal amount as of the end of the prior
distribution date -- or, in the case of the first distribution date, as of the
closing date.
However, if the principal balance is further reduced by a principal payment
on the insured distribution date which immediately follows the prior
distribution date, then interest shall accrue:
. from and including the prior distribution date to, but excluding, the
related insured distribution date, on the principal balance
outstanding as of the end of the prior distribution date (or, in the
case of the first distribution date, as of the closing date); and
. from and including the insured distribution date, to, but excluding,
the following distribution date, on the principal balance outstanding
as of the end of the insured distribution date.
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For any distribution date interest due but not paid on the distribution
date will be due on the next insured distribution date together with, to the
extent permitted by law, interest on the amount at the applicable interest rate.
The amount of interest distributable on the notes on each distribution date will
equal interest accrued during the related interest period, plus any shortfall
amount carried forward. Interest on the Class A-1 Notes and the Class A-2 Notes
will be calculated on the basis of a 360-day year and the actual number of days
elapsed in the applicable interest period. Interest on the Class A-3 Notes and
the Class A-4 Notes will be calculated on the basis of a 360-day year consisting
of twelve 30-day months.
The servicer will pay interest on the notes from the note distribution
amount after paying accrued and unpaid trustees' fees, the issuers' other
administrative fees and the servicing fees. See "Description of the Purchase
Agreements and the Trust Documents -- Distributions" in this prospectus
supplement.
Payments of Principal
Principal payments equaling the sum of the Noteholders' Principal
Distributable Amount plus the Noteholders' Accelerated Principal Amount, if any,
for the distribution date will be due on each distribution date. In addition,
principal payments will be due and payable on the distribution date only to the
extent of funds available for that purpose on the distribution date. The
Noteholders' Principal Distributable Amount will equal the sum of:
(a) the Noteholders' Percentage of the Principal Distributable Amount; and
(b) any unpaid portion of the Noteholder's Percentage of the Principal
Distributable Amount for a prior distribution date.
The Noteholders' Percentage will be 100% until the notes have been paid in
full, and then will be zero.
For any calendar month, a liquidated auto loan is an auto loan which, as of
the last day of the calendar month:
. [90] days have elapsed since the servicer repossessed the financed
vehicle provided, however, that in no case shall [5%] or more of a
scheduled auto loan payment have become [210] or more days delinquent
in the case of a repossessed financed vehicle;
. the servicer has determined in good faith that it has received all
amounts it expects to recover;
. [5%] or more of a scheduled payment became [120] or more days
delinquent, except in the case of repossessed financed vehicles.
For any auto loan, the purchase amount is its principal balance as of the
purchase date.
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Amounts available from the spread account and under the insurance policy
are available to pay the note principal only in two circumstances:
. to reduce, after taking into account all reductions funded from other
sources, the aggregate principal balance of the notes to the
collateral balance - i.e., the sum of the pool balance plus the pre-
funded amount -in the event that the note principal balance would
otherwise exceed the collateral balance; and
. to pay off each class's principal on its final scheduled distribution
date, to the extent that the class is not paid off on or prior to the
final scheduled distribution date from other sources.
The Noteholders' Percentage will be 100% until the Class A-4 Notes have
been paid in full and then will be zero. Principal payments on the notes will
be applied on each distribution date sequentially, to the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes, in that order,
until the respective principal amount of each class has been paid in full so
that no principal will be paid on a class number until the principal of all
classes having a lower number has been paid in full. In addition, the
outstanding principal amount of any class, to the extent not previously paid,
will be payable on the respective final scheduled distribution date for the
class -- and, if not paid in full on that date, will be paid on the insured
distribution date immediately following the final scheduled distribution date.
The actual date on which the aggregate outstanding principal amount of any class
is paid may be earlier than the final scheduled distribution date for that
class.
Mandatory Redemption
If any portion of the pre-funded amount remains on deposit in the pre-
funding account at the end of the funding period, each class of notes will be
redeemed in part on the mandatory redemption date. Each class' note prepayment
amount of the remaining pre-funded amount on that date will be an amount equal
to that class' pro rata share, based on the respective current principal amount
of each class of notes. However, if the aggregate remaining amount in the pre-
funding account is $100,000 or less, that amount will be applied exclusively to
reduce the outstanding principal balance of the class of notes then entitled to
receive principal distributions.
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Optional Redemption
The Class A-4 Notes, to the extent still outstanding, may be redeemed in
whole, but not in part, on any distribution date when the pool balance has
declined to 10% or less of the original pool balance, as described in the
accompanying prospectus under "Description of the Trust Agreements --
Termination." This redemption will cause the early retirement of that class.
The redemption price will equal the unpaid principal amount of the Class A-4
Notes, plus accrued and unpaid interest.
Events of Default
Unless an insurer default shall have occurred and be continuing, events of
default under the indenture will consist of those events listed below as
insurance Agreement Indenture Cross Defaults. In addition, they will constitute
an event of default under the indenture only if the insurer delivers to the
indenture trustee and does not rescind a written notice specifying that any
insurance Agreement Indenture Cross Default constitutes an event of default
under the indenture.
insurance Agreement Indenture Cross Defaults consist of:
. a demand for payment under the policy;
. events of bankruptcy, insolvency, receivership or liquidation of the
issuer;
. the issuer becoming taxable as an association (or publicly traded
partnership) taxable as a corporation for federal or state income tax
purposes;
. on any insured distribution date, after taking into account the
application of the sum of Available Funds for the related calendar
month plus the Deficiency Claim Amount for the related distribution
date, any amounts listed in clauses 1, 2, 3 and 5 under "Description
of the Purchase Agreements and the Trust Documents -- Distributions"
in this prospectus supplement has not been paid in full; and
. any failure to observe or perform in any material respect any other
covenants or agreements in the indenture, or any representation or
warranty of the issuer made in the indenture or in any certificate or
other writing delivered under or in connection with the indenture
proving to have been incorrect in any material respect when made, and
the failure continuing or not being cured, or the circumstance or
condition for which the representation or warranty was incorrect not
having been eliminated or otherwise cured, for [30] days after the
giving of written notice of the failure or incorrect representation or
warranty to the issuer and the indenture trustee by the insurer.
For any determination date the deficiency claim amount is the amount that,
after taking into account the application on the distribution date of Available
Funds for the related calendar month, an amount, without duplication, equal to
the sum of:
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(a) any shortfall in the full payment of amounts described in clauses 1,
2, 3 and 5 under "Description of the Purchase Agreements and the Trust
Documents -- Distributions";
(b) the Noteholders' Parity Deficit Amount, if any, for the distribution
date; and
(c) if the related distribution date is the final scheduled distribution
date for any class, any remaining outstanding principal balance of
that class, to the extent that the amount is available on the related
insured distribution date according to the spread account's terms.
Upon an event of default occurring, so long as an insurer default has not
occurred and continued, the insurer will have the right, but not the obligation,
to cause the trust collateral agent to liquidate the trust property in whole or
in part, on any date or dates following the event of default as the insurer, in
its sole discretion elects. The insurer also has the right to cause the trust
collateral agent to deliver the proceeds to the indenture trustee for
distribution to noteholders. The insurer may not, however, cause the trust
collateral agent to liquidate the trust property in whole or in part if the
liquidation proceeds would be insufficient to pay all outstanding principal of
and accrued interest on the notes, unless the event of default arose from a
claim on the policy or from the issuer's bankruptcy, insolvency, receivership or
liquidation. Following any event of default, the trust collateral agent will
continue to submit claims under the policy for any shortfalls in scheduled
payments. Following any event of default under the indenture, the insurer may
elect to pay all or any portion of the outstanding amount of the notes, plus
accrued interest on the notes. See "The Policy" in this prospectus supplement.
Description of The Purchase Agreements
And the Trust Documents
The following summary describes material terms of the purchase agreements,
which includes the purchase agreement and any subsequent purchase agreement, and
the trust documents which include the sale and servicing agreement, any
subsequent transfer agreement and the trust agreement. The issuer has filed
forms of the purchase agreements and the trust documents as exhibits to the
registration statement. The summary does not claim to be complete and is
subject to all the provisions of the purchase agreements and the trust
documents. The following summary supplements, and to the extent inconsistent
with replaces, the description of the general terms and provisions of the trust
agreement, (as the term is used in the prospectus), which was detailed in the
prospectus.
Sale and Assignment of Auto Loans
On or prior to the closing date, or, with respect to subsequent auto loans,
the related subsequent transfer date, the company and CP Funding will enter into
a purchase agreement with the seller under which the company and CP Funding will
sell and assign to the seller, without recourse, their entire interest in and to
the related auto loans. Under the purchase agreement, the company and CP
Funding will also sell and assign, without
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recourse, their security interest in the financed vehicles securing the auto
loans and their rights to receive all payments on, or proceeds from the auto
loans to the extent paid or payable after the applicable cutoff date. Under the
purchase agreement, the company will agree that, upon a breach of any
representation or warranty under the trust documents which triggers the seller's
repurchase obligation, the owner trustee will be entitled to require the company
to repurchase the auto loans from the issuer. The issuer's rights under the
purchase agreement will constitute part of the issuer's property and may be
enforced directly by the owner trustee and the insurer. In addition, the owner
trustee will pledge the rights to the indenture trustee as collateral for the
notes and the indenture trustee may directly enforce those rights.
On the closing date, or, for subsequent auto loans, the subsequent transfer
date, the seller will sell and assign to the owner trustee, without recourse,
the seller's entire interest in the auto loans and the proceeds, including its
security interest in the financed vehicles. Each auto loan transferred by the
seller to the issuer will be identified in an auto loan schedule appearing as an
exhibit to the trust documents.
Accounts
The company will instruct each obligor to make payments on the auto loans
after the applicable cutoff date directly to one or more post office boxes or
other mailing locations maintained by the lockbox bank. The servicer will
establish and maintain a lockbox account that is a segregated account with a
bank or banks acceptable to the insurer, in the indenture trustee's name for the
noteholders' benefit, into which the servicer must deposit all obligor payments
within one business day of receipt. The issuer will establish and maintain with
the indenture trustee, in the indenture trustee's name, on both the noteholders'
and insurer's behalf one or more collection accounts, into which all amounts
previously deposited in the lockbox account will be transferred within three
business days of deposit. The collection account will be maintained with the
indenture trustee so long as the indenture trustee's deposits have a rating
acceptable to the insurer and the rating agencies. If the deposits of the
indenture trustee or its corporate parent no longer have an acceptable rating,
the servicer shall, with the indenture trustee's assistance if necessary, move
the accounts within [30] days to a bank whose deposits have the proper rating.
The servicer will establish and maintain a distribution account in which
amounts released from the collection account for distribution to noteholders
will be deposited and from which all distributions to noteholders will be made,
in the name of the trust collateral agent, for the indenture trustee's benefit,
on the noteholder's and insurer's behalf.
On the closing date, the issuer will deposit the initial pre-funded amount
equaling $__________ in the pre-funding account, which will be established with
the trust collateral agent. The funding period encompasses the period from the
closing date until the earliest of the date on which:
. the amount on deposit in the pre-funding account is less than
$__________,
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. a servicer termination event occurs under the sale and servicing
agreement, or
. __________.
The initial pre-funded amount, as reduced during the funding period from
the purchase of subsequent auto loans, is the pre-funded amount. The seller
expects that the pre-funded amount will be reduced to less than $__________ on
or before the end of the funding period. The issuer will pay the noteholders
any pre-funded amount remaining at the end of the funding period as a mandatory
redemption. The mandatory redemption date is the earlier of:
. the distribution date in __________;or
. the distribution date which relates to the calculation date occurring
in _______ or _______ __ if the last day of the funding period occurs
on or prior to that calculation date.
On the closing date, the issuer will deposit funds in the capitalized
interest account which will be established with the trust collateral agent. The
amount, if any, deposited in the capitalized interest account will be applied on
the distribution dates occurring in _____, _____ and _____,_____ to fund the
monthly capitalized interest amount which will equal the interest accrued for
each distribution date at the weighted average interest rates on the portion of
the notes having a principal balance in excess of the principal balances of the
auto loans, which portion will equal the pre-funded amount. Any amounts
remaining in the capitalized interest account on the mandatory redemption date
and not used for these purposes will be paid directly to the seller on that
date. See "Description of the Purchase Agreements and the Trust Documents --
Accounts."
As described in the prospectus, all accounts will be eligible deposit
accounts, acceptable to the insurer, so long as no insurer default has occurred
and is continuing.
Servicing Compensation and Trustees' Fees
The servicer will receive a basic servicing fee on each distribution date,
which equals the product of __________ times _____% of the aggregate principal
balance of the auto loans as of the opening of business on the first day of the
related calendar month. So long as AmeriCredit is the servicer, a portion of
the servicing fee will be payable to the backup servicer for agreeing to stand
by as successor servicer and for performing other functions. The servicer will
also collect and retain any late fees, prepayment charges and other
administrative fees or similar charges allowed by applicable law with respect to
the auto loans, and will be entitled to reimbursement from the issuer for
various expenses. The servicer will allocate obligor payments to scheduled
payments, late fees and other charges, and principal and interest in accordance
with the servicer's normal practices and procedures.
The basic servicing fee will compensate the servicer for performing the
functions of a third-party servicer of automotive loans as an agent for their
beneficial owner.
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These servicer functions include:
. collecting and posting all payments, responding to obligor inquiries
on the auto loans,
. investigating delinquencies,
. reporting tax information to obligors,
. paying the disposition costs of defaulted accounts,
. policing the collateral,
. accounting for collections,
. furnishing monthly and annual statements to the issuer and the insurer
with respect to distributions, and
. generating federal income tax information.
The basic servicing fee also will reimburse the servicer for:
. taxes,
. accounting fees,
. outside auditor fees,
. data processing costs, and
. other costs incurred with administering the auto loans and for paying
the backup servicing fees.
On each distribution date, the indenture trustee will receive a fee, in an
amount agreed upon by the indenture trustee and the servicer, for its services
as indenture trustee and trust collateral agent during the prior calendar month.
On each distribution date, the owner trustee will receive a fee, in an amount
agreed upon by the owner trustee and the servicer, for its services as owner
trustee during the prior calendar month.
The issuer will pay all these fees from the collection account.
Certain Allocations
On each determination date, the servicer will deliver the servicer's
certificate to the indenture trustee, the owner trustee and the insurer
specifying, among other things:
. the amount of aggregate collections on the auto loans, and
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. the aggregate purchase amount of auto loans to be purchased by the
seller and the company, in the preceding calendar month.
Based solely on the information contained in the servicer's certificate, on
each determination date the indenture trustee will deliver to the trust
collateral agent, the insurer and the servicer a deficiency notice specifying
the deficiency claim amount, if any, for the distribution date. The deficiency
notice will direct the trust collateral agent to remit the deficiency claim
amount to the collection account from amounts on deposit in collateral accounts
maintained for the insurer's benefit.
For any insured distribution date, the deficiency notice will consist of a
written notice delivered by the indenture trustee to the insurer, the servicer
and any other person required under the insurance agreement, specifying the
deficiency claim amount for the insured distribution date.
The determination date for any calendar month, is the earlier of:
. the fourth business day preceding the related insured distribution
date in the next calendar month; and
. the [5th] day of the next calendar month, or if the [5th] day is not a
business day, the next succeeding business day.
Distributions
Distribution Date Calculations and Payments.
On or prior to each distribution date, the servicer will instruct the
indenture trustee to make the following distributions from Available Funds in
the following order of priority:
1. To the servicer, the servicing fee for the related calendar month, any
supplemental servicing fees for the month and, to the extent the
servicer has not reimbursed itself or to the extent not retained by
the servicer, other amounts relating to mistaken deposits, postings or
checks returned for insufficient funds;
2. to the indenture trustee and the owner trustee, any accrued and unpaid
trustees' fees and any accrued and unpaid trust collateral agent's
fees, each to the extent the servicer has not previously paid the
fees;
3. to the note distribution account, the Noteholders' Interest
Distributable Amount;
4. to the note distribution account, the Noteholders' Principal
Distributable Amount, to be distributed as described under
"Description of the Notes -- Payments of Principal;"
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5. to the insurer, any unpaid amounts owed to the insurer under the
insurance agreement;
6. to the spread account, less certain investment earnings, any amount
required to increase the amount in the spread account to its required
level;
7. to the note distribution account, less certain investment earnings,
and together with amounts, if any, available according to the spread
account's terms, the Noteholders' Accelerated Principal Amount; and
8. to the spread account, or as otherwise specified in the trust
documents, any remaining funds.
After considering all distributions made on the insured distribution date
and the related distribution date, amounts in the spread account on any insured
distribution date exceeding the Specified Spread Account Requirement for the
distribution date, may be released to the certificateholder without the
noteholders' consent.
If the notes are accelerated following an event of default under the
indenture, amounts collected will be distributed in the order described above.
Insured Distribution Date Calculations and Payments
In the event that any servicer's certificate delivered by the servicer
indicates that Available Funds for a distribution date are insufficient to fully
fund scheduled payments plus the amounts described in clauses 1 and 5 above, the
indenture trustee shall request the deficiency claim amount for the spread
account.
Further, in the event that any servicer's certificate delivered by the
servicer indicates that the sum of:
. Available Funds with respect to a distribution date, plus
. any related deficiency claim amount
is insufficient to fully fund scheduled payments plus the amount described in
clauses 1 and 2 above, the indenture trustee shall furnish to the insurer no
later than 12:00 noon New York City time on the related Draw Date a completed
notice of claim for the policy claim amount. The insurer will deposit the
amounts it will pay under the notice into the note distribution account for
payment to noteholders on the related insured distribution date.
Statements to Noteholders
On or prior to each insured distribution date, the indenture trustee will
forward a statement to the noteholders detailing information required under the
trust documents. These statements will be based on the information in the
related servicer's certificate. Each statement that the indenture trustee
delivers to the noteholders will include the
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following information regarding the notes on the related distribution date and
the related insured distribution date, as applicable:
(a) the amount of the distribution(s) allocable to interest;
(b) the amount of the distribution(s) allocable to principal;
(c) the amount of the distribution, if any, payable under the policy
claim;
(d) each class of notes' aggregate outstanding principal amount, after
considering all payments reported under (b) above on that date;
(e) the Noteholders' Interest Carryover Shortfall and the Noteholders'
Principal Carryover Shortfall, if any, and the change in those amounts
from the preceding statement;
(f) the servicing fee paid for the related calendar month; and
(g) during the funding period, the remaining pre-funded amount, the amount
in the pre-funding account and the amount remaining in the Capitalized
interest account.
Each amount described in subclauses (a) through (f) for the notes will be
expressed as a dollar amount per $1,000 of the notes' initial principal amount.
Unless and until Definitive Notes are issued, the indenture trustee will
send these reports to Cede & Co., as registered holder of the notes and the
nominee of DTC on the trust's behalf. See "Reports to Securityholders" and
"Description of the Securities" in the prospectus.
After the end of each calendar year, within the required time period, the
indenture trustee will furnish to each person who at any time during the
calendar year was a noteholder:
. a statement as to the aggregate amounts of interest and principal paid
to the noteholder,
. information regarding the amount of servicing compensation the
servicer received and
. other information as the seller deems necessary to enable the
noteholder to prepare its tax returns.
Credit Support
The Accelerated Principal Amount and the spread account result in credit
support. The insurer will require the issuer to increase and maintain credit
support at a level it establishes. This level changes over time, and may take
two forms:
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. the spread account, which is a funded cash reserve account; and
. overcollateralization.
The insurer may permit the required credit support level to reduce, or
"step down," over time.
Spread Account
On the closing date, the issuer may fund the spread account with an initial
cash deposit. On each subsequent distribution date, the trust collateral agent
will deposit additional amounts into the spread account from the auto loan
payments as described under "--Distributions" above to the extent that the funds
in the spread account are below the required level. Amounts, if any, on deposit
in the spread account on an insured distribution date will be available to fund
any Deficiency Claim Amount, to the extent provided in the spread account
agreement. Amounts on deposit in the spread account on any insured distribution
date, after giving effect to all distributions made on the insured distribution
date, in excess of the Specified Spread Account Requirement for the insured
distribution date will be released to the seller without the noteholder's
consent.
In addition, the seller, the insurer and the trust collateral agent may
amend the spread account agreement - and any provisions in the insurance
agreement relating to the spread account - in any respect, including, without
limitation:
. reducing or eliminating the Specified Spread Account Requirement;
. reducing or eliminating the spread account funding requirements;
and/or
. permitting those funds to be used for the benefit of persons other
than noteholders without the consent of, or notice to, the trustee,
the owner trustee or the noteholders.
The trust collateral agent shall not withhold or delay its consent to any
amendment not adversely affecting the trust collateral agent in its individual
capacity. Notwithstanding any reduction in or elimination of the spread account
funding requirements or the spread account's depletion, on each insured
distribution date the insurer must fund the full amount of each scheduled
payment required to be paid and which would not be paid in the absence of a
policy payment. If the insurer breaches its obligations, the noteholders will
bear any losses on the auto loans.
Overcollateralization
Overcollateralization is created by applying excess interest to the payment
of principal on the notes and is paid in the form of the Noteholders'
Accelerated Principal Amount. The excess interest is interest which is
collected on the auto loans in excess of the amount of interest that is paid on
the notes, used to pay fees, or, under certain circumstances, deposited to the
spread account. Applying excess interest causes the outstanding principal
balance to pay down more quickly than the pool balance.
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If the insurer permits the required overcollateralization level to step
down, principal collections which would otherwise be paid through to the
noteholders as part of the Principal Distributable Amount may be released to the
seller instead.
Servicer Termination Event
A servicer termination event under the sale and servicing agreement will
consist of the occurrence and continuance of any of the following:
. the servicer's failure to deliver any required payment to the trust
collateral agent for distribution to the noteholders, which failure
continues unremedied for two business days, or any failure to deliver
the servicer's certificate by the fourth business day prior to the
insured distribution date;
. the servicer's failure to observe or perform in any material respect
any other covenant or agreement under the sale and servicing agreement
or the purchase agreement (if the company is the servicer) which
failure continues unremedied for [60] days after the issuer, the trust
collateral agent or the issuer gives the servicer written notice of
such failure, or if an insurer default has occurred and is continuing,
[60] days after any noteholder gives the servicer written notice
. events of insolvency, readjustment of debt, marshalling of assets and
liabilities, or similar proceedings regarding the servicer or, so long
as the company is servicer, of any of its affiliates, and actions by
the servicer, or, as long as the company is servicer, actions by its
affiliates, indicating its or their insolvency, reorganization under
bankruptcy proceedings, or inability to pay its obligations;
. any servicer representation, warranty or statement that is proved
incorrect in any material respect and which has a material adverse
effect on the insurer's interests, and the circumstances or conditions
for which the representation, warranty or statement was incorrect
shall not have been eliminated or cured;
. so long as a insurer default shall not have occurred and be
continuing, the insurer has not have delivered an extension notice;
. so long as a insurer default shall not have occurred and be
continuing, an insurance Agreement event of default or an event of
default under any other insurance and indemnity agreement relating to
any series of securities shall have occurred; or
. a claim is made under the policy.
An insurer default includes the occurrence and continuance of any of the
following events:
(a) the insurer's failure to make a required policy payment;
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(b) the insurer's:
. filing or commencing of a petition or any case or proceeding
under any provision or chapter of the United States Bankruptcy
Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or
reorganization,
. general assignment for the benefit of its creditors, or
. having an order for relief entered against it under the United
States Bankruptcy Code or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation
or reorganization which is final and nonappealable; or
(c) the entering of a final and nonappealable order, judgment or decree by
a court of competent jurisdiction, the New York Department of
insurance or other competent regulatory authority:
. appointing a custodian, trustee, agent or receiver for the
insurer or for all or any material portion of its property or
. authorizing a custodian, trustee, agent or receiver to take
possession of the insurer or to take possession of all or any
material portion of the property of the insurer.
Rights Upon Servicer Termination Event
As long as a servicer termination event remains unremedied:
. provided no insurer default has occurred and is continuing, the
insurer in its sole and absolute discretion may terminate all of the
servicer's rights and obligations under the sale and servicing
agreement; or
. if an insurer default has occurred and is continuing, then the trust
collateral agent or a note majority, the backup servicer, or any other
successor servicer that the insurer appoints (so long as no insurer
default has occurred and is continuing), will succeed to all the
responsibilities, duties, and liabilities of the servicer.
If the terminated servicer is not the company, the insurer will appoint a
successor servicer or, if a insurer default has occurred and is continuing, the
trust collateral agent will appoint a successor servicer.
Any successor servicer will succeed to all the responsibilities, duties,
and liabilities of the servicer under the sale and servicing agreement and will
be entitled to similar compensation arrangements. There is no assurance that
the succession of a successor servicer will not result in a material disruption
in the performance of the servicer's duties.
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Waiver of Past Defaults
Notwithstanding anything to the contrary described under "Description of
the Trust Agreements -- Waiver of Past Defaults" in the prospectus, the insurer
may, on behalf of all noteholders, waive any default by the servicer under the
sale and servicing agreement and its consequences. No waiver will impair the
noteholders' rights with respect to subsequent defaults.
Amendment
Notwithstanding anything to the contrary described under "Description of
the Trust Agreements -- Amendment" in the prospectus, the seller, the servicer
and the owner trustee with the consent of the indenture trustee - which consent
may not be unreasonably withheld - and with the insurer's consent, so long as no
insurer default has occurred and is continuing, but without the consent of the
noteholders, may amend the sale and servicing agreement. The agreement may be
amended in this manner to cure any ambiguity, or to correct or supplement any
provision in the agreement which may be inconsistent with any other provision.
However, the amendment shall not in any material respect adversely affect the
interests of any noteholder. In addition, if an insurer default has occurred
and is continuing, the amendment shall not materially adversely affect insurer's
interests. The seller, the servicer and the owner trustee may also amend the
sale and servicing agreement with the insurer's, indenture trustee's and the
holders of a majority of the principal amount of the notes' outstanding consent
to add, change or eliminate any other provisions with respect to matters or
questions arising under the agreement or affecting the rights of the
noteholders; provided that the action will not:
. increase or reduce in any manner, or accelerate or delay the timing
of, collections of payments on auto loans or distributions that are
required to be made for the benefit of the noteholders; or
. reduce the percentage of the noteholders required to consent to any
amendment, without, in either case, the consent of the holders of all
notes outstanding. However, if an insurer default has occurred and is
continuing, the amendment shall not materially adversely affect the
interest of the insurer.
The seller and servicer must deliver to the owner trustee, the indenture
trustee and the insurer upon the execution and delivery of the sale and
servicing agreement and any amendment to the sale and servicing agreement an
opinion of counsel, satisfactory to the indenture trustee, that all financing
statements and continuation statements have been filed.
The Policy
The following summary of the terms of the Policy does not purport to be
complete and is qualified in its entirety by reference to the Policy.
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Simultaneously with the issuance of the notes, the insurer will deliver the
Policy to the Trust Collateral Agent as agent for the indenture trustee for the
benefit of each noteholder. Under the Policy, the insurer will unconditionally
and irrevocably guarantee to the Trust Collateral Agent, on each insured
Distribution Date, for the benefit of each noteholder the full and complete
payment of (i) Scheduled Payments (as defined below) on the notes and (ii) the
amount of any Scheduled Payment which subsequently is avoided in whole or in
part as a preference payment under applicable law. In the event the Trust
Collateral Agent fails to make a claim under the Policy, noteholders do not have
the right to make a claim directly under the Policy, but may sue to compel the
Trust Collateral Agent to do so.
The "insured Distribution Date" will be the twelfth day of each month, or,
if such twelfth day is not a Business Day, the next following Business Day. In
the event that, on any Distribution Date, the noteholders did not receive the
full amount of the Scheduled Payment then due to them, such shortfall (together
with, in the case of an interest shortfall, interest thereon at the related
interest rate) shall be due and payable and shall be funded on the insured
Distribution Date either from the Spread Account or from the proceeds of a
drawing under the Policy. The Record Date applicable to an insured Distribution
Date shall be the Record Date applicable to the related Distribution Date.
"Scheduled Payments" means payments which are required to be made on the
notes during the term of the Policy in accordance with the original terms of the
notes when issued and without regard to any subsequent amendment or modification
of the notes or the Indenture that has not been consented to by the insurer,
which payments, with respect to any insured Distribution Date, are (i) the
Noteholders' Interest Distributable Amount, with respect to the related
Distribution Date, (ii) the Noteholders' Remaining Parity Deficit Amount with
respect to the related Distribution Date and (iii) with respect to the Final
Scheduled Distribution Date for any class of notes, the outstanding principal
amount of such class on such Final Scheduled Distribution Date, after taking
into account reductions on such date of such outstanding principal amount from
all sources other than the Policy. Scheduled Payments do not include payments
which become due on an accelerated basis as a result of (a) a default by the
Trust, (b) an election by the Trust to pay principal on an accelerated basis,
(c) the occurrence of an Event of Default under the Indenture or (d) any other
cause, unless the insurer elects, in its sole discretion, to pay in whole or in
part such principal due upon acceleration, together with any accrued interest to
the date of acceleration. In the event the insurer does not so elect, the
Policy will continue to guarantee Scheduled Payments due on the notes in
accordance with their original terms. Scheduled Payments shall not include (x)
any portion of a Noteholders' Interest Distributable Amount or of a Noteholders'
Interest Carryover Amount due to noteholders because the appropriate notice and
certificate for payment in proper form was not timely Received (as defined
below) by the insurer, (y) any portion of a Noteholders' Interest Distributable
Amount due to noteholders representing interest on any Noteholders' Interest
Carryover Shortfall accrued from and including the date of payment of the amount
of such Noteholders' Interest Carryover Shortfall pursuant to the Policy or (z)
any Note Prepayment Amounts, unless the insurer elects, in its sole discretion,
to pay such amount in whole or in part. Scheduled Payments shall not include,
nor shall coverage be provided under the Policy in respect of,
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any taxes, withholding or other charge imposed with respect to any noteholder by
any governmental authority due in connection with the payment of any Scheduled
Payment to a noteholder.
Payment of claims on the Policy made in respect of Scheduled Payments will
be made by the insurer following Receipt (as defined below) by the insurer of
the appropriate notice for payment on the later to occur of (i) 12:00 noon, New
York City time, on the third Business Day following Receipt of such notice for
payment, and (ii) 12:00 noon, New York City time, on the date on which such
payment was due on the notes.
If payment of any amount avoided as a preference under applicable
bankruptcy, insolvency, receivership or similar law is required to be made under
the Policy, the insurer shall cause such payment to be made on the later of (a)
the date when due to be paid pursuant to the Order referred to below or (b) the
first to occur of (i) the [fourth] Business Day following Receipt by the insurer
from the Trust Collateral Agent of (A) a certified copy of the order (the
"Order") of the court or other governmental body that exercised jurisdiction to
the effect that the noteholder is required to return Scheduled Payments made
with respect to the notes during the term of the Policy because such payments
were avoidable as preference payments under applicable bankruptcy law, (B) a
certificate of the noteholder that the Order has been entered and is not subject
to any stay and (C) an assignment duly executed and delivered by the noteholder,
in such form as is reasonably required by the insurer and provided to the
noteholder by the insurer, irrevocably assigning to the insurer all rights and
claims of the noteholder relating to or arising under the notes against the
Trust or otherwise with respect to such preference payment, or (ii) the date of
Receipt (as defined below) by the insurer from the Trust Collateral Agent of the
items referred to in clauses (A), (B) and (C) above if, at least four Business
Days prior to such date of Receipt, the insurer shall have Received (as defined
below) written notice from the Trust Collateral Agent that such items were to be
delivered on such date and such date was specified in such notice. Such payment
shall be disbursed to the receiver, conservator, debtor-in-possession or trustee
in bankruptcy named in the Order and not to the Trust Collateral Agent or any
noteholder directly (unless a noteholder has previously paid such amount to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Order, in which case such payment shall be disbursed to the Trust Collateral
Agent for distribution to such noteholder upon proof of such payment reasonably
satisfactory to the insurer). In connection with the foregoing, the insurer
shall have the rights provided pursuant to the Sale and Servicing Agreement,
including, without limitation, the right to direct all matters relating to any
preference claim and subrogation to the rights of the Trust Collateral Agent and
each noteholder in the conduct of any proceeding with respect to a preference
claim.
Other Provisions of the Policy
The terms "Receipt" and "Received" with respect to the Policy shall mean
actual delivery to the insurer and to its fiscal agent, if any, prior to 12:00
noon, New York City time, on a Business Day; delivery either on a day that is
not a Business Day or after 12:00
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noon, New York City time, shall be deemed to be Received on the next succeeding
Business Day. If any notice or certificate given under the Policy by the Trust
Collateral Agent is not in proper form or is not properly completed, executed or
delivered, it shall be deemed not to have been Received, and the insurer or its
fiscal agent shall promptly so advise the Trust Collateral Agent, and the Trust
Collateral Agent may submit an amended notice.
Under the Policy, "Business Day" means any day other than a Saturday,
Sunday, legal holiday or other day on which commercial banking institutions in
Wilmington, Delaware, New York, New York or Columbus, Ohio or any other location
of any successor servicer, successor owner trustee or successor Trust Collateral
Agent are authorized or obligated by law, executive order or governmental decree
to be closed.
The insurer's obligations under the Policy in respect of Scheduled Payments
shall be discharged to the extent funds are transferred to the Trust Collateral
Agent as provided in the Policy whether or not such funds are properly applied
by the Trust Collateral Agent.
The insurer shall be subrogated to the rights of each noteholder to receive
payments of principal and interest to the extent of any payment by the insurer
under the Policy.
Claims under the Policy constitute direct, unsecured and unsubordinated
obligations of the insurer ranking not less than pari passu with other unsecured
and unsubordinated indebtedness of the insurer for borrowed money. Claims
against the insurer under the Policy and each other financial guaranty insurance
policy issued thereby constitute pari passu claims against the general assets of
the insurer. The terms of the Policy cannot be modified or altered by any other
agreement or instrument, or by the merger, consolidation or dissolution of the
Trust. The Policy may not be canceled or revoked prior to distribution in full
of all Scheduled Payments. The Policy is not covered by the Property/Casualty
insurance Security Fund specified in Article 76 of the New York insurance Law.
The Policy is governed by the laws of the State of New York.
It is a condition to issuance that the Class A-l Notes be rated [A-l+] by
S&P and [P-l] by Moody's, and that the Class A-2 Notes, the Class A-3 Notes and
the Class A-4 Notes be rated [AAA] by S&P and [Aaa] by Moody's. The ratings by
the Rating Agencies of the notes will be (i) with respect to the Class A-1
Notes, without regard to the Policy in the case of S&P and substantially based
on the Policy in the case of Moody's and (ii) with respect to all other classes
of notes, based on the issuance of the Policy. To the extent that such ratings
are based on the Policy, such ratings apply to distributions due on the insured
Distribution Dates, and not to distributions due on the Distribution Dates. A
rating is not a recommendation to purchase, hold or sell notes. In the event
that the rating initially assigned to any of the notes is subsequently lowered
or withdrawn for any reason, including by reason of a downgrading of the claims-
paying ability of the insurer, no person or entity will be obligated to provide
any additional credit enhancement with respect to the notes. Any reduction or
withdrawal of a rating may
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have an adverse effect on the liquidity and market price of the notes. See
"Ratings" herein.
Material Federal Income Tax Consequences
The following is a general discussion of the material federal income tax
considerations to investors of the purchase, ownership and disposition of the
notes. The discussion is based upon laws, regulations, rulings and decisions
now in effect, all of which are subject to change. The discussion below does
not purport to deal with all federal tax considerations applicable to all
categories of investors. Some holders, including insurance companies, tax-
exempt organizations, financial institutions or broker dealers, taxpayers
subject to the alternative minimum tax, and holders that will hold the notes as
other than capital assets, may be subject to special rules that are not
discussed below. It is recommended that investors consult their own tax
advisors in determining the federal, state, local and any other tax consequences
to them of the purchase, ownership and disposition of the notes.
Tax Characterization of the Issuer
Dewey Ballantine LLP is our tax counsel, and is of the opinion that,
assuming the parties will comply with the terms of the governing agreements, the
issuer will not be an association, or publicly traded partnership, taxable as a
corporation for federal income tax purposes.
Tax Consequences to Holders of the Notes
Treatment of the Notes as Indebtedness.
The seller agrees, and the noteholders will agree by their purchase of
notes, to treat the notes as debt for all federal, state and local income tax
purposes. There are no regulations, published rulings or judicial decisions
involving the characterization for federal income tax purposes of securities
with terms substantially the same as the notes. In general, whether instruments
such as the notes constitute indebtedness for federal income tax purposes is a
question of fact, the resolution of which is based primarily upon the economic
substance of the instruments and the transaction under which they are issued
rather than merely upon the form of the transaction or the manner in which the
instruments are labeled.
The Internal Revenue Service and the courts have stated various factors to
be taken into account in determining, for federal income tax purposes, whether
or not an instrument constitutes indebtedness and whether a transfer of property
is a sale because the transferor has relinquished substantial incidents of
ownership in the property or whether the transfer is a borrowing secured by the
property.
On the basis of its analysis of the above factors as applied to the facts
and its analysis of the economic substance of the contemplated transaction, tax
counsel is of the opinion that, for federal income tax purposes, the notes will
be treated as indebtedness,
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and not as an ownership interest in the auto loans, nor as an equity interest in
the trust or in a separate association taxable as a corporation or other taxable
entity.
If the notes are characterized as indebtedness, interest paid or accrued on
a note will be treated as ordinary income to the noteholders and principal
payments on a note will be treated as a return of capital to the extent of the
noteholder's basis in the note allocable thereto. An accrual method taxpayer
will be required to include in income interest on the notes when earned, even if
not paid, unless it is determined to be uncollectible. The issuer will report
to noteholders of record and the IRS regarding the interest paid and original
issue discount, if any, accrued on the notes to the extent required by law.
Although, as described above, it is the tax counsel's opinion that, for
federal income tax purposes, the notes will be characterized as debt, this
opinion is not binding on the IRS and thus no assurance can be given that this
characterization will prevail. If the IRS successfully asserted that one or
more of the notes did not represent debt for federal income tax purposes, the
noteholders would likely be treated as owning an interest in a partnership and
not an interest in an association or publicly traded partnership, taxable as a
corporation. If the noteholders were treated as owning an equitable interest in
a partnership, the partnership itself would not be subject to federal income
tax; rather each partner would be taxed individually on their respective
distributive share of the partnership's income, gain, loss, deductions and
credits. The amount, timing and characterization of types of income and
deductions for a noteholder would differ if the notes were held to constitute
partnership interests, rather than indebtedness. Since the issuer will treat
the notes as indebtedness for federal income tax purposes, the servicer will not
attempt to satisfy the tax reporting requirements that would apply under this
alternative characterization of the notes. Investors that are foreign persons
should consult their own tax advisors in determining the federal, state, local
and other tax consequences to them of the purchase, ownership and disposition of
the notes. See "Taxation of Certain Foreign Investors" below.
Original Issue Discount.
It is anticipated that the notes will not have any original issue discount
or OID, other than possibly OID within a de minimis exception and that
accordingly the provisions of sections 1271 through 1273 and 1275 of the
Internal Revenue Code, generally will not apply to the notes. OID will be
considered de minimis if it is less than 0.25% of the principal amount of a note
multiplied by its expected weighted average life.
Market Discount.
A subsequent purchaser who buys a note for less than its principal amount
may be subject to the market discount rules of section 1276 through 1278 of the
Code. If a subsequent purchaser of a note disposes of the note, including some
nontaxable dispositions such as a gift, any gain upon the sale or other
disposition will be recognized as ordinary income to the extent of any accrued
for the period that the purchaser holds the note. Similarly, if a subsequent
purchase receives a principal payment, the amount of that
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principal payment will be treated as ordinary income to the extent of any market
discount accrued for the period that the purchaser holds the note. The holder
may instead elect to include market discount in income as it accrues on all debt
instruments acquired in the year of acquisition of the notes and thereafter.
Market discount generally will equal the excess, if any, of the then current
unpaid principal balance of the note over the purchaser's basis in the note
offered immediately after the purchaser acquired the note. In general, market
discount on a note will be treated as accruing over the term of the note in the
ratio of interest for the current period over the sum of the current interest
and the expected amount of all remaining interest payments, or at the election
of the holder, under a constant yield method. At the request of a holder of a
note, information will be made available that will allow the holder to compute
the accrual of market discount under the first method described in the preceding
sentence.
The market discount rules also provide that a holder who incurs or
continues indebtedness to acquire a note at a market discount may be required to
defer the deduction of all or a portion of the interest on the indebtedness
until the corresponding amount of market discount is included in income.
However, market discount on a note will be considered to be zero if it is
less than a de minimis amount, which is 0.25% of the remaining principal balance
of the note multiplied by its expected weighted average remaining life. If OID
or market discount is de minimis, the actual amount of discount must be
allocated to the remaining principal distributions on the notes and, when each
distribution is received, capital gain equal to the discount allocated to the
distribution will be recognized.
Market Premium.
A subsequent purchaser who buys a note for more than its principal amount
generally will be considered to have purchased the note at a premium. The
holder may amortize the premium, using a constant yield method, over the
remaining term of the note and, except as future regulations may otherwise
provide, may apply the amortized amounts to reduce the amount of interest
reportable for the note over the period from the purchase date to the date of
maturity of the note. The amortization of the premium on an obligation that
provides for partial principal payments prior to maturity should be governed by
the methods described above for accrual of market discount on such an
obligation. A holder that elects to amortize premium must reduce his tax basis
in the obligation by the amount of the aggregate deductions, or interest
offsets, allowable for amortization of premium. If a debt instrument purchased
at a premium is redeemed in full prior to its maturity, a purchaser who has
elected to amortize premium should be entitled to a deduction for any remaining
unamortized premium in the taxable year of redemption.
Sale or Redemption of Notes.
If a note is sold or retired, the seller will recognize gain or loss equal
to the difference between the amount realized on the sale and the holder's
adjusted basis in the note. The adjusted basis generally will equal the cost of
the note to the seller, increased
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by any original issue discount included in the seller's gross income in respect
of the note, and by any market discount which the taxpayer elected to include in
income or was required to include in income, and reduced by payments other than
payments of qualified stated interest in respect of the note received by the
seller and by any amortized premium. Similarly, a holder who receives a payment
other than a payment of qualified stated interest for a note, either on the date
on which the payment is scheduled to be made or as a prepayment, will recognize
gain equal to any excess, of the amount of the payment over his adjusted basis
in the note allocable thereto. A noteholder who receives a final payment which
is less than his adjusted basis in the note will generally recognize a loss in
the amount of the shortfall on the last day of his taxable year. Generally, this
gain or loss realized by an investor who holds a note as a capital asset within
the meaning of Internal Revenue Code Section 1221 should be capital gain or
loss, except as described above in respect of market discount and except that a
loss attributable to accrued but unpaid interest may be an ordinary loss.
Taxation of Foreign Investors.
Interest payments including OID, if any, on the notes made to a foreign
person, which is a nonresident alien individual, foreign corporation or other
non-United States person generally will be portfolio interest. This interest is
not subject to United States tax if the payments are not effectively connected
with the conduct of a trade or business in the United States by the foreign
person and if the trust or other person who would otherwise be required to
withhold tax from these payments is provided with an appropriate statement that
the beneficial owner of the note identified on the statement is a foreign
person.
Backup Withholding.
Distributions of interest and principal as well as distributions of
proceeds from the sale of the notes may be subject to the backup withholding tax
under Section 3406 of the Internal Revenue Code at a rate of 31% if recipients
of the distributions fail to furnish to the payor their taxpayer identification
numbers and other required information, or otherwise fail to establish an
exemption from tax. Any amounts deducted and withheld from a distribution to a
recipient would be allowed as a credit against the recipient's federal income
tax. Furthermore, penalties may be imposed by the IRS on a recipient of
distributions that is required to supply information but that does not do so in
the proper manner.
State and Local Tax Considerations
Potential noteholders should consider the state and local income tax
consequences of the purchase, ownership and disposition of the notes. State and
local income tax laws may differ substantially from the corresponding federal
law, and this discussion does not purport to describe any aspect of the income
tax laws of any state or locality. Therefore, potential noteholders should
consult their own tax advisors as to the various state and local tax
consequences of an investment in the notes.
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ERISA Considerations
The notes may be purchased by ERISA plans as described in the prospectus
under "ERISA Considerations - ERISA Considerations regarding securities which
are Notes." The notes should be treated as indebtedness without substantial
equity features for purposes of the plan assets regulation. This determination
is based in part on the traditional debt features of the notes, including the
reasonable expectation of purchasers of notes that the notes will be repaid when
due, as well as the absence of conversion rights, warrants and other typical
equity features. The debt treatment of the notes for ERISA purposes could
change if the trust incurred losses. As described in the prospectus, the
acquisition or holding of the notes by or on behalf of an employee benefit plan
could still result in a prohibited transaction if the acquisition or holding of
the notes by or on behalf of the plan were deemed to be a prohibited loan to a
party in interest with respect to the plan. Accordingly, each purchaser and
each transferee using the assets of a plan subject to ERISA or Section 4975 of
the Internal Revenue Code to acquire the notes will be deemed to have
represented that the acquisition and continued holding of the notes will be
covered by a Department of Labor class exemption.
Any plan fiduciary considering the purchase of a note may wish to consult
with its counsel as to the potential applicability of ERISA and the Internal
Revenue Code to the investment. Moreover, each plan fiduciary may wish to
determine whether, under the general fiduciary standards of investment prudence
and diversification, an investment in the notes is appropriate for the plan,
taking into account the overall investment policy of the plan and the
composition of the plan's investment portfolio.
The sale of notes to a plan is in no respect a representation by us or the
underwriters that this investment meets all relevant legal requirements for
investments by plans generally or any particular plan or that this investment is
appropriate for plans generally or any particular plan.
Legal Investment
The Class A-1 Notes will be eligible securities for purchase by money
market funds under the Investment Company Act of 1940, as amended.
Ratings
It is a condition to the notes' issuance that the Class A-1 Notes be rated
[A-1+] by S&P, and [P-1] by Moody's Investors Service, Inc., and that the Class
A-2 Notes, the Class A-3 Notes and the Class A-4 Notes be rated [AAA] by S&P and
[Aaa] by Moody's.
The notes' ratings will be:
. without regard to the policy in the case of S&P and substantially
based on the policy in the case of Moody's for the Class A-1 Notes,
and
. based primarily on the policy for all other classes of notes.
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To the extent that the ratings are based on the policy, the ratings apply
to distributions due on the insured distribution dates, and not to distributions
due on the distribution dates. We cannot assure you that the rating agencies
will not lower or withdraw the ratings.
Underwriting
Subject to the terms and conditions described in an underwriting agreement,
the seller has agreed to cause the issuer to sell to each of the underwriters
named below the notes. Each of the underwriters has severally agreed to
purchase, the principal amount of the notes set forth opposite its name below:
<TABLE>
<CAPTION>
Class A-1 Notes
Principal Amount
----------------
<S> <C>
[Underwriter]................................................................. $
[Underwriter].................................................................
[Underwriter].................................................................
[Underwriter].................................................................
Total...................................................................... $
======================
<CAPTION>
Class A-2 Notes
Principal Amount
<S> <C>
[Underwriter]................................................................. $
[Underwriter].................................................................
[Underwriter].................................................................
[Underwriter].................................................................
Total...................................................................... $
======================
<CAPTION>
Class A-3 Notes
Principal Amount
<S> <C>
[Underwriter]................................................................. $
[Underwriter].................................................................
[Underwriter].................................................................
[Underwriter].................................................................
Total...................................................................... $
======================
<CAPTION>
Class A-4 Notes
Principal Amount
<S> <C>
[Underwriter]................................................................ $
[Underwriter].................................................................
[Underwriter].................................................................
[Underwriter].................................................................
Total...................................................................... $
======================
</TABLE>
The underwriters have advised the seller that they propose initially to
offer the notes to the public at the prices listed below, and to dealers at
prices less the initial
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concession not in excess of _____% per Class A-1 note, _____% per Class A-2
note, _____% per Class A-3 note and _____% per Class A-4 note. The underwriters
may allow and dealers may reallow a concession not in excess of _____% per Class
A-1 note, _____% per Class A-2 note, _____% per Class A-3 note and _____% per
Class A-4 note to other dealers. After the initial public offering of the notes,
the public offering prices and such concessions may be changed.
Each underwriter has represented and agreed that:
. it has not offered or sold, and will not offer or sell, any notes to
persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing
of investments, as principal or agent, for the purposes of their
businesses or otherwise in circumstances that do not constitute an
offer to the public in the United Kingdom for the purposes of the
Public Offers of Securities Regulations 1995,
. it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 of Great Britain with respect to anything
done by it in relation to the notes in, from or otherwise involving
the United Kingdom and
. it has only issued or passed on and will only issue or pass on in the
United Kingdom any document in connection with the issue of the notes
to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1995 or is a person to whom the document may otherwise lawfully
be issued or passed on.
Upon receiving a request by an investor who has received an electronic
prospectus supplement and prospectus from an underwriter or a request by the
investor's representative within the period during which there is an obligation
to deliver a prospectus supplement and prospectus, the underwriter will promptly
deliver, or cause to be delivered, without charge, a paper copy of the
prospectus supplement and prospectus.
The seller or its affiliates may apply all or any portion of the net
proceeds of this offering to the repayment of debt, including "warehouse" debt
secured by the auto loans - prior to their sale to the issuer. One or more of
the underwriters, or their respective affiliates, may have acted as a "warehouse
lender" to its affiliates, and may receive a portion of the proceeds as a
repayment of the "warehouse" debt.
In connection with this offering the underwriters may over-allot or effect
transactions which stabilize or maintain the market prices of the notes at
levels above those which might otherwise prevail in the open market. Such
stabilizing, if commenced, may be discontinued at any time.
Experts
The consolidated balance sheets of Financial Security Assurance Inc. and
its subsidiaries as of __________ and _____ and the related consolidated
statements of
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income, changes in shareholder's equity and cash flows for each of the three
years in the period ended __________, incorporated by reference in this
prospectus supplement, are incorporated in reliance on the report of [ ],
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The balance sheet of the issuer as of __________ has been included in this
prospectus supplement in reliance on the report of [
], independent accountants, given on the authority of that firm as experts in
accounting and auditing.
Legal Opinions
In addition to the legal opinions described in the prospectus, certain
federal income tax and other matters will be passed upon for the seller and the
issuer by Dewey Ballantine LLP, New York, New York. Certain legal matters
relating to the notes will be passed upon for the Underwriters by Dewey
Ballantine LLP, New York, New York. Certain legal matters will be passed upon
for the insurer by [ ], [Assistant] General Counsel,
to the insurer. The insurer is represented by [ ],
New York, New York.
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Glossary
"Accelerated Principal Amount" for a distribution date will equal the
lesser of
(x) the sum of:
(a) the excess, if any, of the amount of Available Funds on the
distribution date over the amounts payable on the distribution
date under clauses 1 through 6 under "Distributions"
plus
(b) amounts, if any, available according to the terms of the Spread
Account Agreement; and
(y) the greater of
(a) the excess, if any, on the distribution date of:
. the Pro Forma Note Balance for the distribution date over
. the Required Pro Forma Note Balance for the distribution date, and
(b) the amount necessary, after taking into account all other
distributions to be made on the date, to reduce the principal balance of the
Class A-1 Notes to zero.
"Additional Funds Available" means, with respect to any insured
distribution date the sum of:
(a) the deficiency claim amount, if any, received by the indenture trustee
with respect to the insured distribution date
plus
(b) the Insurer Optional Deposit, if any, received by the indenture
trustee with respect to the insured distribution date.
"Amount Financed" means, for any auto loan the aggregate amount loaned
toward the purchase price of the financed vehicle and related costs, including
amounts advanced for:
. accessories,
. insurance premiums,
. service,
. car club and warranty contracts,
S-61
<PAGE>
. other items customarily financed as part of retail automobile
installment sale contracts or promissory notes, and related costs.
"Available Funds" means, for any calendar month, the sum of:
. the Collected Funds for the calendar month,
. all purchase amounts deposited in the collection account during the
calendar month, plus income on investments held in the collection
account,
. the Monthly Capitalized Interest Amount for the distribution date
which immediately follows the calendar month,
. the proceeds of any liquidation of the assets of the issuer, and
. any remaining pre-funded amount applied to the mandatory redemption of
the notes.
"Collected Funds" means, any calendar month, the amount of funds in the
collection account representing auto loan collections during the calendar month,
including all Net Liquidation Proceeds collected during the calendar month, but
excluding any purchase amounts.
"Cram Down Loss" means, for any automobile loan, if a court of appropriate
jurisdiction in an insolvency proceeding issued an order reducing the amount
owed on the auto loan or otherwise modifying or restructuring the scheduled
payments to be made on the auto loan, an amount equal to;
. the excess of the auto loan's principal balance immediately prior to
the auto loan order over the auto loan's principal balance as reduced
and/or
. if the court issued an order reducing the effective interest rate on
the auto loan, the excess of the auto loan principal balance
immediately prior to the order over the auto loan's net present
value - using as the discount rate the higher of the APR on the auto
loan or the rate of interest, if any, specified by the court in the
order - of the scheduled payments as so modified or restructured. A
Cram Down Loss shall be deemed to have occurred on the order's
issuance date.
"Insurer Optional Deposit" means, for any insured distribution date, an
amount other than policy claim amount delivered by the insurer, at its sole
option, for deposit into the collection account for any of the following
purposes:
. to provide funds to pay the fees or expenses of any of the issuer's
service providers for the insured distribution date; or
S-62
<PAGE>
. to include those amounts as part of Additional Funds Available for the
insured distribution date to the extent that without them a draw would
be required to be made on a policy.
"Net Liquidation Proceeds" means, for liquidated auto loans:
. proceeds from the underlying financed vehicles' disposition, minus
. the servicer's reasonable out-of-pocket costs, including repossession
and resale expenses not already deducted from the proceeds, and any
amounts the obligor is required to remit by law;
. any insurance proceeds; or
. other monies received from the obligor.
"Noteholders' Accelerated Principal Amount" means, for any distribution
date, the Noteholders' Percentage of the Accelerated Principal Amount on the
distribution date, if any.
"Noteholders' Distributable Amount" means, any distribution date, the sum
of the Noteholders' Principal Distributable Amount and the Noteholders' Interest
Distributable Amount.
"Noteholders' Interest Carryover Amount" means, for any class of notes and
any determination date, all or any portion of the Noteholders' Interest
Distributable Amount for the class for the immediately preceding distribution
date, and any outstanding Noteholders' Interest Carryover Amount still unpaid as
of the determination date, plus, to the extent permitted by law, interest on the
unpaid amount at the interest rate paid by the class of notes from the preceding
distribution date to but excluding the determination date.
"Noteholders' Interest Distributable Amount" means, for any distribution
date, the sum of the Noteholders' Monthly Interest Distributable Amount for each
class of notes for the distribution date and the Noteholders' Interest Carryover
Amount, if any, for each class of notes, calculated as of the distribution date.
"Noteholders' Monthly Interest Distributable Amount" means, for any
distribution date and any class of notes, that the interest accrued during the
applicable interest period shall accrue on the principal amount of the notes of
each class outstanding as of the end of the prior distribution date or, in the
case of the first distribution date, as of the closing date. However, if the
principal balance is further reduced by a principal payment on the insured
distribution date immediately following the prior distribution date, then the
interest shall accrue:
. from and including the prior distribution date to, but excluding, the
related insured distribution date, on the principal balance
outstanding as of the end of
S-63
<PAGE>
the prior distribution date - or, in the case of the first
distribution date, as of the closing date; and
. from and including the insured distribution date, to, but excluding,
the following distribution date, on the principal balance outstanding
as of the end of the insured distribution date, calculated on the
basis of a 360-day year and:
(a) in the case of the Class A-1 Notes and the Class A-2 Notes,
the actual number of days elapsed; and
(b) in the case of the Class A-3 Notes and the Class A-4 Notes,
twelve 30-day months.
"Noteholders' Monthly Principal Distributable Amount" means, for any
distribution date, the Noteholders' Percentage of the Principal Distributable
Amount.
"Noteholders' Parity Deficit Amount" means, for any distribution date, the
excess, if any, of:
(x) the aggregate remaining principal balance outstanding on the
distribution date, after giving effect to all reductions in the aggregate
principal balance from sources other than:
. the spread account and
. the policy
over;
(y) the sum of the pool balance and the pre-funded amount at the end
of the prior calendar month.
"Noteholders' Percentage" means:
. for each distribution date prior to the distribution date on which the
Class A-4 Notes are fully paid, 100%;
. on the distribution date on which the Class A-4 Notes are fully paid,
the percentage equivalent of a fraction, the numerator of which is the
outstanding principal amount of the Class A-4 Notes immediately prior
to the distribution date, and the denominator of which is the
Principal Distributable Amount for the distribution date; and
. for any distribution date thereafter, zero.
"Noteholders' Principal Carryover Amount" means, as of any determination
date, all or any portion of the Noteholders' Principal Distributable Amount and
any outstanding
S-64
<PAGE>
Noteholders' Principal Carryover Amount from the preceding distribution date
which remains unpaid.
"Noteholders' Principal Distributable Amount" means, for any distribution
date, other than the final scheduled distribution date for any class of notes,
the sum of the Noteholders' Monthly Principal Distributable Amount for the
distribution date and the Noteholders' Principal Carryover Amount, if any, as of
the distribution date.
The Noteholders' Principal Distributable Amount on the final scheduled
distribution date for any class will equal the sum of:
(1) the Noteholders' Monthly Principal Distributable Amount for the
distribution date;
(2) the Noteholders' Principal Carryover Amount as of the distribution
date; and
(3) the excess of the outstanding principal amount of the class of
notes, if any, over the amounts described in clauses (1) and (2).
"Noteholders' Remaining Parity Deficit Amount" means, for any distribution
date:
. the Noteholders' Parity Deficit Amount for the distribution date
minus
. any reduction in the note's aggregate principal balance on the
distribution date which is funded from the spread account.
The policy claim amount for any insured distribution date, equals the sum
of
(x) the excess, if any, without duplication, of:
. the sum of the Noteholders' Interest Distributable Amount and
the Noteholders' Parity Deficit Amount for the related
distribution date, together with:
(a) if the related distribution date was the mandatory
redemption date, the Note Prepayment Amount; and
(b) if the related distribution date was the final scheduled
distribution date for any class, the unpaid principal balance of
the class;
over
. the sum of:
S-65
<PAGE>
(a) the amount actually deposited into the note distribution
account on the related distribution date; and
(b) Additional Funds Available, if any, for the insured
distribution date
plus
(y) the Noteholders' Interest Carryover Amount, if any, which has accrued
since the related distribution date.
"Principal Distributable Amount" means, for any distribution date, the
amount equal to the excess, if any, of:
(x) the sum of the following amounts for the related calendar
month, computed according to the simple interest method:
. collections received on auto loans, other than liquidated and
purchased auto loans, allocable to principal, including full and
partial principal prepayments;
. the principal balance of all auto loans, other than purchased auto
loans, that became liquidated auto loans during the calendar month,
. (A) the portion of the purchase amount allocable to principal of all
auto loans that became purchased auto loans as of the immediately
preceding record date;
. (B) at the option of the insurer, the outstanding principal balance
of those auto loans that the seller or the company was required
repurchase during the calendar month but were not repurchased; and
. the aggregate amount of Cram Down Losses during the related calendar
month over
(y) the Step-Down Amount, if any, for the distribution date.
"Pro Forma Note Balance" means, for any distribution date, the aggregate
remaining principal balance of the notes outstanding on the distribution date,
after giving effect to distributions under clauses 1 through 4 under
"Distributions."
"Required Pro Forma Note Balance" means, for any distribution date, a
dollar amount equal to product of
(x) 90% and
(y) the sum of the pool balance and the pre-funded amount as of the end of
the prior calendar month.
S-66
<PAGE>
"Step-Down Amount" means, for any distribution date, the excess, if any,
of:
(x) the Required Pro Forma Note Balance over
(y) the Pro Forma Note Balance on the distribution date, for this purpose
only calculated without deduction for any Step-Down Amount - i.e., with the
assumption that the entire amount described in clause (x) of the definition of
"Principal Distributable Amount" is distributed as principal on the notes.
S-67
<PAGE>
Report Of Independent Accountants
To the managers of AmeriCredit Automobile Receivables Trust _____:
In our opinion, the accompanying balance sheet presents fairly, in all material
respects, the financial position of AmeriCredit Automobile Receivables Trust
_____ as of __________, in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the trust's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes:
. examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet,
. assessing the accounting principles used and significant estimates
made by management, and
. evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion
expressed above.
[city, state]
[date]
F-1
<PAGE>
AmeriCredit Automobile Receivables Trust _____
Balance Sheet
---------------
Assets
Cash................................................... $
-----------
Total Assets........................................... $
===========
Liabilities and Trust Principal
Interest in Trust...................................... $
-----------
Total liabilities and trust principal.................. $
===========
The accompanying notes are an integral part of this financial statement.
F-2
<PAGE>
AmeriCredit Automobile Receivables Trust _____
Notes to Financial Statement
--------------------
1. Nature of Operations:
AmeriCredit Automobile Receivables Trust _____ (the "Trust"), was formed in
the State of __________ on __________.
The Trust was organized to engage exclusively in the following business and
financial activities:
. to acquire motor vehicle retail installment sale contracts from the
seller and any of its affiliates;
. to issue and sell notes collateralized by its assets; and to engage in
any lawful act or activity and to exercise any power that is
incidental and is necessary or convenient to the foregoing.
The seller is a Nevada corporation which is a wholly-owned subsidiary of
the company.
2. Capital Contribution:
The seller purchased, for $_____, a _____% beneficial ownership interest in
the Trust.
F-3
<PAGE>
Annex I
Clearance, Settlement and Tax Documentation Procedures
Except in limited circumstances, the securities will be available only in
book-entry form. Investors in the securities may hold the securities through
any of DTC, Cedelbank or Euroclear. The securities will be tradeable as home
market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors through Cedelbank and Euroclear
will be conducted in the ordinary way in accordance with the normal rules and
operating procedures of Cedelbank and Euroclear and in accordance with
conventional eurobond practice, which is seven calendar day settlement.
Secondary market trading between investors through DTC will be conducted
according to DTC's rules and procedures applicable to U.S. corporate debt
obligations.
Secondary cross-market trading between Cedelbank or Euroclear and DTC
participants holding securities will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedelbank and Euroclear and as DTC
participants.
Non-U.S. holders of global securities will be subject to U.S. withholding
taxes unless the holders meet a number of requirements and deliver appropriate
U.S. tax documents to the securities clearing organizations or their
participants.
Initial Settlement
All securities will be held in book-entry form by DTC in the name of Cede &
Co. as nominee of DTC. Investors' interests in the securities will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, Cedelbank and Euroclear will hold
positions on behalf of their participants through their relevant depository
which in turn will hold these positions in their accounts as DTC participants.
Investors electing to hold their securities through DTC will follow DTC
settlement practices. Investor securities custody accounts will be credited
with their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their securities through Cedelbank or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary security and no lock-up or
restricted period. Securities will be credited to the securities custody
accounts on the settlement date against payment in same-day funds.
A-1
<PAGE>
Annex I
Clearance, Settlement and Tax Documentation Procedures
Except in limited circumstances, the securities will be available only in
book-entry form. Investors in the securities may hold the securities through
any of DTC, Cedelbank or Euroclear. The securities will be tradeable as home
market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors through Cedelbank and Euroclear
will be conducted in the ordinary way in accordance with the normal rules and
operating procedures of Cedelbank and Euroclear and in accordance with
conventional eurobond practice, which is seven calendar day settlement.
Secondary market trading between investors through DTC will be conducted
according to DTC's rules and procedures applicable to U.S. corporate debt
obligations.
Secondary cross-market trading between Cedelbank or Euroclear and DTC
participants holding securities will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedelbank and Euroclear and as DTC
participants.
Non-U.S. holders of global securities will be subject to U.S. withholding
taxes unless the holders meet a number of requirements and deliver appropriate
U.S. tax documents to the securities clearing organizations or their
participants.
Initial Settlement
All securities will be held in book-entry form by DTC in the name of Cede &
Co. as nominee of DTC. Investors' interests in the securities will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, Cedelbank and Euroclear will hold
positions on behalf of their participants through their relevant depository
which in turn will hold these positions in their accounts as DTC participants.
Investors electing to hold their securities through DTC will follow DTC
settlement practices. Investor securities custody accounts will be credited
with their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their securities through Cedelbank or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary security and no lock-up or
restricted period. Securities will be credited to the securities custody
accounts on the settlement date against payment in same-day funds.
A-2
<PAGE>
Annex I
Clearance, Settlement and Tax Documentation Procedures
Except in limited circumstances, the securities will be available only in
book-entry form. Investors in the securities may hold the securities through
any of DTC, Cedelbank or Euroclear. The securities will be tradeable as home
market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors through Cedelbank and Euroclear
will be conducted in the ordinary way in accordance with the normal rules and
operating procedures of Cedelbank and Euroclear and in accordance with
conventional eurobond practice, which is seven calendar day settlement.
Secondary market trading between investors through DTC will be conducted
according to DTC's rules and procedures applicable to U.S. corporate debt
obligations.
Secondary cross-market trading between Cedelbank or Euroclear and DTC
participants holding securities will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedelbank and Euroclear and as DTC
participants.
Non-U.S. holders of global securities will be subject to U.S. withholding
taxes unless the holders meet a number of requirements and deliver appropriate
U.S. tax documents to the securities clearing organizations or their
participants.
Initial Settlement
All securities will be held in book-entry form by DTC in the name of Cede &
Co. as nominee of DTC. Investors' interests in the securities will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, Cedelbank and Euroclear will hold
positions on behalf of their participants through their relevant depository
which in turn will hold these positions in their accounts as DTC participants.
Investors electing to hold their securities through DTC will follow DTC
settlement practices. Investor securities custody accounts will be credited
with their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their securities through Cedelbank or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary security and no lock-up or
restricted period. Securities will be credited to the securities custody
accounts on the settlement date against payment in same-day funds.
A-3
<PAGE>
Annex I
Clearance, Settlement and Tax Documentation Procedures
Except in limited circumstances, the securities will be available only in
book-entry form. Investors in the securities may hold the securities through
any of DTC, Cedelbank or Euroclear. The securities will be tradeable as home
market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors through Cedelbank and Euroclear
will be conducted in the ordinary way in accordance with the normal rules and
operating procedures of Cedelbank and Euroclear and in accordance with
conventional eurobond practice, which is seven calendar day settlement.
Secondary market trading between investors through DTC will be conducted
according to DTC's rules and procedures applicable to U.S. corporate debt
obligations.
Secondary cross-market trading between Cedelbank or Euroclear and DTC
participants holding securities will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedelbank and Euroclear and as DTC
participants.
Non-U.S. holders of global securities will be subject to U.S. withholding
taxes unless the holders meet a number of requirements and deliver appropriate
U.S. tax documents to the securities clearing organizations or their
participants.
Initial Settlement
All securities will be held in book-entry form by DTC in the name of Cede &
Co. as nominee of DTC. Investors' interests in the securities will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, Cedelbank and Euroclear will hold
positions on behalf of their participants through their relevant depository
which in turn will hold these positions in their accounts as DTC participants.
Investors electing to hold their securities through DTC will follow DTC
settlement practices. Investor securities custody accounts will be credited
with their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their securities through Cedelbank or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary security and no lock-up or
restricted period. Securities will be credited to the securities custody
accounts on the settlement date against payment in same-day funds.
A-4
<PAGE>
Annex I
Clearance, Settlement and Tax Documentation Procedures
Except in limited circumstances, the securities will be available only in
book-entry form. Investors in the securities may hold the securities through
any of DTC, Cedelbank or Euroclear. The securities will be tradeable as home
market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors through Cedelbank and Euroclear
will be conducted in the ordinary way in accordance with the normal rules and
operating procedures of Cedelbank and Euroclear and in accordance with
conventional eurobond practice, which is seven calendar day settlement.
Secondary market trading between investors through DTC will be conducted
according to DTC's rules and procedures applicable to U.S. corporate debt
obligations.
Secondary cross-market trading between Cedelbank or Euroclear and DTC
participants holding securities will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedelbank and Euroclear and as DTC
participants.
Non-U.S. holders of global securities will be subject to U.S. withholding
taxes unless the holders meet a number of requirements and deliver appropriate
U.S. tax documents to the securities clearing organizations or their
participants.
Initial Settlement
All securities will be held in book-entry form by DTC in the name of Cede &
Co. as nominee of DTC. Investors' interests in the securities will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, Cedelbank and Euroclear will hold
positions on behalf of their participants through their relevant depository
which in turn will hold these positions in their accounts as DTC participants.
Investors electing to hold their securities through DTC will follow DTC
settlement practices. Investor securities custody accounts will be credited
with their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their securities through Cedelbank or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary security and no lock-up or
restricted period. Securities will be credited to the securities custody
accounts on the settlement date against payment in same-day funds.
A-5
<PAGE>
PROSPECTUS SUPPLEMENT
(To The Prospectus Dated ____, 1999)
Americredit Automobile Receivables Trust 1999-__
Issuer
AFS Funding Corporation
Seller
Americredit Financial Services, Inc.
Servicer
You should read the section entitled "Risk Factors" on page S-9 of this
prospectus supplement and consider these factors before making a decision to
invest in these securities.
Neither these certificates nor the auto loans will be insured or guaranteed by
any governmental agency or instrumentality.
Retain this prospectus supplement for future reference. This prospectus
supplement may be used to offer and sell the certificates only if accompanied by
the prospectus.
The Certificates-
. Represent beneficial ownership interest in the assets of the issuer;
. The assets of the issuer will include a pool of non-prime auto loans secured
by new and used automobiles, light trucks and vans;
. Receive monthly distributions beginning on ________; and
. Currently have no trading market.
Credit Enhancement
. For the Class A Certificates, the overcollaterization, the and the Class B
Certificates.
. For the Class B Certificates, the overcollaterization; and
. For the Class A Certificates [and the Class B Certificates] a financial
guarantee insurance policy issued by Financial Security Assurance, Inc.
unconditionally or irrevocably guaranteeing timely payment of interest and
principal.
<TABLE>
<CAPTION>
Issuance Pass-through Final Scheduled Initial Public Underwriting Net
Amount Rate Distribution Offering Price(1) Discount Proceeds(2)
Date
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Class A Certificates
- -------------------------------------------------------------------------------------------------------------------------
Class B Certificates
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from ___________.
(2) Net proceeds are before deducting expenses, estimated to be $___________.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
[Underwriters]
The date of this prospectus supplement is____.
<PAGE>
Important Notice about the Information Presented in this Prospectus Supplement
and the Accompanying Prospectus
. We provide information to you about the certificates in two separate documents
that progressively provide more detail: (1) the accompanying prospectus,
which provides general information, some of which may not apply to your class
of certificates, and (2) this prospectus supplement, which describes the
specific terms of your class of certificates.
. This prospectus supplement does not contain complete information about the
offering of the certificates. Additional information is contained in the
prospectus. We suggest that you read both this prospectus supplement and the
prospectus in full. We cannot sell the certificates to you unless you have
received both this prospectus supplement and the prospectus.
. If the terms of your class of certificates vary between this prospectus
supplement and the accompanying prospectus, you should rely on the information
in this prospectus supplement.
. We include cross-references in this prospectus supplement and the accompanying
prospectus to captions in these materials where you can find further related
discussions. The following table of contents and the table of contents
included in the accompanying prospectus provide the pages on which these
captions are located.
WHERE YOU CAN FIND MORE INFORMATION
AmeriCredit Financial Services, Inc. has filed with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933,
as amended, with respect to the certificates offered under this prospectus
supplement. This prospectus supplement and the prospectus, which form a part of
the registration statement, omit certain information contained in the
registration statement under the rules and regulations of the Commission.
You can read and copy the registration statement at the Public Reference
Room at the Commission at 450 Fifth Street, N.W., Washington, DC 20549 or at the
Commission's regional offices at Seven World Trade Center, 13th Floor, New York,
New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. You can obtain information about the Public
Reference Section by calling the SEC at 1-800-SEC-0330. In addition, the
Commission maintains a site on the World Wide Web containing reports, proxy
materials, information statements and other items. The address is
http://www.sec.gov.
In addition to the documents described in the prospectus under
"Incorporation of Documents by Reference," the consolidated financial statements
of Financial Security Assurance Inc. and its subsidiaries included in, or as
exhibits to, the following documents which have been filed with the commission
by Financial Security Assurance Holdings Ltd., are hereby incorporated by
reference in this prospectus supplement:
(a) Annual Report on form 10-K for the year ended December 31, 1998, and
(b) Quarterly Report on Form 10-Q for the period ended June 30, 1999.
S-2
<PAGE>
All financial statements of Financial Security Assurance Inc., included in
documents it filed under Section 13(a), 13(c), 14, or 15(d) of the Securities
and Exchange Act of 1934 subsequent to the date of this prospectus supplement
and prior to the termination of the offering of the certificates, are considered
incorporated by reference in this prospectus supplement and to be a part of this
prospectus supplement from the respective dates of filing of the documents.
We will provide you with copies of these reports, at no charge, if you
write to us at: AmeriCredit Financial Services, Inc., 801 Cherry Street, Fort
Worth, Texas 76102; telephone (817) 332-7000.
AmeriCredit Financial Services, Inc. on behalf of the issuer hereby
undertakes that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the issuer's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities and Exchange Act of 1934 and each filing of
the financial statements of Financial Security Assurance Inc. included in or as
an exhibit to the annual report of Financial Security Assurance Holdings Ltd.
filed pursuant to Section 13(a) or Section 15(d) of the Securities and Exchange
Act of 1934 that is incorporated by reference in the registration statement will
be considered a new registration statement relating to the certificates offered
by this prospectus supplement, and the offering of the certificates at that time
will be considered an initial bona fide offering.
S-3
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Summary.................................................................... 5
Risk Factors............................................................... 9
The Class B Certificates are subordinated certificates, and the risk
of loss or delay in distributions is greater than on the
Class A Certificates.................................................. 10
The Company/Servicer....................................................... 12
The Seller................................................................. 12
The Issuer................................................................. 13
General.................................................................. 13
The Trust Property......................................................... 13
The Company's Automobile Financing Program................................. 15
The Auto Loans............................................................. 17
General.................................................................. 17
Eligibility Criteria..................................................... 17
Composition.............................................................. 19
Yield and Prepayment Considerations........................................ 24
Delinquency and Loan Loss Information.................................... 28
Description of the Certificates............................................ 32
General.................................................................. 32
[Payments of Principal................................................... 34
Mandatory Redemption..................................................... 35
Optional Redemption...................................................... 35
Events of Default........................................................ 35
Description of The Purchase Agreements And the Trust Documents............. 37
Sale and Assignment of Auto Loans........................................ 37
Accounts................................................................. 37
Servicing Compensation and Trustees' Fees................................ 39
Certain Allocations...................................................... 40
Distributions............................................................ 41
Distribution Date Calculations and Payments............................. 41
Insured Distribution Date Calculations and Payments..................... 42
Statements to Certificateholders......................................... 42
Credit Support........................................................... 43
Spread Account.......................................................... 43
Overcollateralization................................................... 44
Servicer Termination Event............................................... 44
Rights Upon Servicer Termination Event................................... 46
Waiver of Past Defaults.................................................. 46
Amendment................................................................ 46
Material Federal Income Tax Consequences................................... 50
Tax Status of the Trust................................................. 51
General................................................................. 51
Income on the Auto Loans................................................ 51
Stripped Bonds and Stripped Coupons..................................... 52
Accrual of Original Issue Discount...................................... 52
Premium................................................................. 53
Sale of a Certificate................................................... 53
Foreign Certificateholders.............................................. 54
Information Reporting and Backup Withholding............................ 54
New Withholding Regulations............................................. 54
ERISA Considerations....................................................... 55
[Legal Investment Error! Bookmark not defined..............................
Ratings.................................................................... 56
Underwriting............................................................... 56
Experts.................................................................... 57
Legal Opinions............................................................. 58
Glossary................................................................... 59
Annex I Clearance, Settlement and Tax Documentation Procedures............. 1
</TABLE>
S-4
<PAGE>
Summary
. This summary highlights selected information from this prospectus supplement
and does not contain all of the information that you need to consider in
making your investment decision. To understand all of the terms of the
offering of the certificates, read carefully this entire prospectus supplement
and the accompanying prospectus.
. This summary provides an overview of certain calculations, cash flows and
other information to aid your understanding. To understand all of the terms
of the offering, carefully read this entire document.
Auto Loan-Backed Certificates
Series 1999
Issuer/Trust
. AmeriCredit Automobile Receivables Trust _____, a New York common law trust.
Company/Servicer
. AmeriCredit Financial Services, Inc., a Delaware corporation.
. The company originated or purchased from dealers the auto loans the seller
will sell to the issuer.
. The company's address is 801 Cherry Street, Fort Worth, Texas 76102.
. The company will service the auto loans.
Seller
. AFS Funding Corp., a Nevada corporation.
. The seller's address is 1325 Airmotive Way, Reno, Nevada 89502.
Insurer
. Financial Security Assurance Inc., a New York financial guaranty insurance
company.
Trustee
. [Name of trustee], a national banking association.
Statistical Calculation Date
. __________.
. This is the date used for preparing the statistical information used in this
prospectus supplement.
Initial Cutoff Date
The opening of business on __________.
. The issuer will receive payments due on, or received regarding, the auto
loans on or after this date.
Closing Date
. On or about __________.
Distribution Date
. When the company is the servicer, the [5th] day of each month, or, if the
[5th] day is not a business day, on the following business day. However, the
S-5
<PAGE>
distribution date will never be before the [third] business day of the month.
The first distribution date will be _____.
. If the company is not the servicer, the distribution date will become the
[twelfth] day of each month, or if the [twelfth] day is not a business day,
the next following business day.
Final Scheduled Distribution Date
If the certificates have not already been paid in full, the issuer will pay the
outstanding principal amount of the certificates in full on the following dates:
<TABLE>
<CAPTION>
Final Scheduled
Class Distribution Date
- ----------------------------------
<S> <C>
A
B
</TABLE>
Denominations
. The issuer will issue the certificates in minimum denominations of $1,000 and
integral multiples of $1,000.
Interest
. On each distribution date, the issuer will pay interest at the applicable
certificate interest rate that accrued during the prior interest accrual
period.
. Interest on the [Class A Certificates] [and the Class B Certificates] will be
calculated on the basis of a 360-day year [and the actual number of days
elapsed in the interest accrual period] [consisting of twelve 30-day months].
. Amounts to be paid to holders of the certificates will be shared in proportion
to their interest in the issuer.
Principal
. On each distribution date, the issuer will pay principal equaling:
(1) the amount of principal paid by obligors on the auto loans during the
prior month, plus
(2) the amount of excess interest collected on the auto loans during the prior
month.
. The principal payments will be allocable between the Class A Certificates and
the Class B Certificates pro rata, and paid to the individual
--- ----
certificateholder in proportion to their percentage interest, until the
outstanding principal amount of that class is paid in full.
Sequential Pay Feature
On each distribution date, the issuer will pay principal and interest in the
following priority:
. First, to the Class A Certificateholders, the Class A Certificate interest;
. Second, to the Class A Certificateholders, the Class A Certificateholders
principal;
. Third, to the Class B Certificateholders, the Class B Certificate interest;
and
. Fourth, to the Class B Certificateholders, the Class B Certificate principal
The Trust Assets
The issuer's assets will include:
. automobile loans for new and used automobiles, light duty trucks and vans;
. monies received from the automobile loans on or after __________;
S-6
<PAGE>
. the security interests in the underlying vehicles;
. the loan files;
. all rights to proceeds from claims on insurance policies covering the vehicles
or the obligors;
. all rights to proceeds from liquidating the auto loans;
. the seller's rights against dealers under agreements between the company and
the dealers;
. the bank accounts opened in connection with this offering;
. all proceeds from the items described above; and
. rights under the transaction documents.
The Auto Loan Pool
The auto loans are evidenced by motor vehicle retail installment sale contracts
which the company purchased from dealers. The automobile loans are primarily
made to individuals with less than perfect credit.
Pre-Funding Feature
. The trustee will hold $__________ of the proceeds of the certificates in a
pre-funding account which the issuer will use to purchase additional auto
loans. The company will have originated these additional auto loans.
. The issuer will purchase these additional auto loans on or before __________.
Statistical Information
As of __________, the auto loans in the pool have:
. an aggregate principle balance of $__________;
. a weighted average annual percentage rate of approximately [_____]%;
. a weighted average original maturity of approximately [___] months;
. a weighted average remaining maturity of approximately [___] months; and
. a remaining term of not more than [___] months and not less than [___] months
each.
Optional Redemption
. If the pool balance declines to 10% or less of its original level the company
may redeem all the outstanding Class A and B Certificates. If a redemption
occurs, you will receive a final payment that equals the unpaid principle
amount of the certificates plus accrued interest.
Mandatory Redemption
. If any funds deposited in the pre-funding account remain on [date on which the
funding period ends], the company will redeem certificates equaling the
amounts in the pre-funding account.
. The aggregate principal amount of each class of certificates to be redeemed
will equal the class' pro rata share of the amount remaining in the account.
Each class' pro rata share will be based on the current principal amount of
each class of certificates. However, if the amount to be redeemed is
$__________ or less, the trustee will pay the redemption amount according to
the certificates "sequential pay" feature, and not pro rata.
--- -----
. The certificates may be accelerated and subject to immediate payment upon the
S-7
<PAGE>
occurrence of an event of default. So long as the insurer is not in default,
it will have the power to declare an event of default. However, the policy
does not guarantee payment of any amounts that become due on an accelerated
basis, unless the insurer elects, in its sole discretion, to pay those amounts
in whole or in part.
Federal Income Tax Consequences
For federal income tax purposes:
In the opinion of Dewey Ballantine LLP, the trust will be treated as a grantor
trust for federal income tax purposes and will not be subject to federal income
tax. Owners of beneficial interests in the certificates will report their pro
rata share of all income earned on the auto loans, other than amounts if any,
treated as stripped coupons. Subject to certain limitations in the case of such
owners who are individuals, trusts or estates, may deduct their pro rata share
of reasonable servicing and other fees.
ERISA Considerations
Subject to the important considerations described under "ERISA Considerations"
in this prospectus supplement, pension, profit-sharing and other employee
benefit plans may purchase the Class A Certificates. The Class B Certificates
are not eligible for purchase by ERISA plans. You may wish to consult with your
counsel regarding the applicability of the particular provisions of ERISA,
before purchasing a Class A Certificate.
Ratings
. The issuer will not issue the certificates unless they have been
assigned the ratings stated below:
<TABLE>
<CAPTION>
Rating
Standard & Moody's
Poor's
<S> <C> <C>
Class A Certificates
Class B Certificates
</TABLE>
. You should know that the ratings could be lowered, qualified or withdrawn by
the rating agencies.
S-8
<PAGE>
Risk Factors
In addition to the risk factors discussed in the prospectus, you should consider
the following additional factors in connection with the purchase of the
certificates:
The company may be unable to originate enough auto loans to use all moneys in
the pre-funding account and therefore you may be exposed to reinvestment risk.
The ability of the company to originate sufficient additional auto loans may be
affected by a variety of social and economic factors including:
. interest rates,
. unemployment levels,
. the rate of inflation, and
. consumer perception of economic conditions generally.
If the company does not originate sufficient additional auto loans then the
money deposited in the pre-funding account will not be used up and a mandatory
redemption of a portion of the certificates could result.
If a mandatory redemption occurs, you will receive a principal prepayment. You
will bear the risk of reinvesting any prepayment.
We cannot predict the rate at which the certificates will amortize.
Obligors can prepay their auto loans. The rate of prepayments may be influenced
by economic, social and other factors. In addition, under certain circumstances,
the seller and the company are obligated to purchase auto loans as a result of
breaches of representations and/or covenants.
The trust contains an overcollateralization feature that results in accelerated
principal payments to certificateholders, amortizing the certificates more
quickly than the auto loan pool. The company also has the right, to purchase the
auto loans when the pool balance is 10% or less of the original pool balance.
S-9
<PAGE>
Geographic concentrations of auto loans may increase concentration risks.
Adverse economic conditions or other factors affecting any state or region could
increase the delinquency or loan loss experience of the auto loans. As of
________ ___, 1999 obligors with respect to approximately _____%, _____%, _____%
of the auto loans based on the auto loans' remaining principal balance were
located in ________, ________, _________, respectively.
[No other state accounts for more than 5% of the auto loans.]
The Class B Certificates are subordinated certificates, and the risk of loss or
delay in distributions is greater than on the Class A Certificates.
Distributions of interest and principal on the Class B Certificates will be
subordinated in priority of payment to interest and principal due on the Class A
Certificates. Consequently, the Class B Certificateholders will not receive any
distributions on distribution date unless the full amount of interest and
principal due on the Class A Certificates on that distribution date has been
distributed to the Class A Certificateholders. This subordination has the effect
of increasing the likelihood of payment on the Class A Certificates and
therefore decreasing the likelihood of payment on the Class B Certificates.
The certificates are asset-backed debt and the issuer has only limited assets.
The sole sources for repayment of the certificates are payments on the auto
loans, amounts on deposit in the pre-funding account, other cash accounts held
by [Name of trustee] and payments made under the insurance policy. The money in
the pre-funding account will be used solely to purchase additional auto loans
and is not available to cover losses on the auto loan pool. The capitalized
interest account is designed to cover obligations of the issuer relating to that
portion of its assets not invested in the auto loan pool and is not designed to
provide protection against losses on the auto loan pool. Furthermore, if
Financial Security Assurance Inc. defaults in its obligations under the
insurance policy, the issuer will depend on current distributions on the auto
loan pool and amounts, if any, available in certain collateral accounts
maintained for the benefit of Financial Security Assurance Inc. to make payments
on the certificates.
S-10
<PAGE>
Ratings on certificates are dependent upon the insurer's creditworthiness.
The ratings of the certificates will depend primarily on the creditworthiness of
the insurer as the provider of the financial guarantee insurance policy relating
to the certificates. There is a risk that if the insurer's financial strength
ratings are reduced, the rating agencies may reduce the certificates' ratings.
Events of default under the pooling and servicing agreement may result in an
acceleration.
Following the occurrence of an event of default, Financial Security Assurance
Inc. may, at its option, elect to cause the liquidation of the assets of the
issuer, in whole or in part, and pay all or any portion of the outstanding
amount of the certificates, plus accrued interest thereon.
S-11
<PAGE>
Use of Proceeds
The issuer will use the proceeds from issuing the certificates to:
. pay the seller the auto loan purchase price;
. to deposit the pre-funded amount into the pre-funding account; and
. to fund the capitalized interest account.
The seller or its affiliates may use the net proceeds to pay their debt,
including "warehouse" debt secured by the auto loans prior to their sale to the
issuer. This warehouse debt may have been owed to one or more of the
underwriters or their respective affiliates.
The Company/Servicer
AmeriCredit Financial Services, Inc., is a wholly-owned, and the primary
operating subsidiary of AmeriCredit Corp., a Texas corporation the common shares
of which are listed on the New York Stock Exchange. The company was
incorporated in Delaware on July 22, 1992. The company's executive offices are
located at 801 Cherry Street, Fort Worth, Texas 76102; telephone (817) 332-7000.
The company purchases and services auto loans which are originated and
assigned to it by automobile dealers. The company will sell and assign the auto
loans to the seller.
The company will service the auto loans and will be compensated for acting
as the servicer. As servicer, the company will hold the auto loans, as a
custodian. Prior to taking possession of the auto loans in its custodial
capacity, the company will stamp the auto loans to reflect their sale and
assignment to the issuer.
The servicer will not have the certificates of title of the financed
vehicles amended or reissued to note their sale to the issuer or the grant of a
security interest in the vehicles to the trustee by the issuer. Because the
certificates of title are not amended, the issuer may not have a perfected
security interest in financed vehicles originated in some states, including
Texas and California.
The Seller
AFS Funding Corp., the company's wholly-owned subsidiary, is a Nevada
corporation, incorporated in April, 1996. The seller's address is 1325
Airmotive Way, Reno, Nevada 89502; telephone (702) 322-2221.
The seller's purpose is limited to purchasing auto loans from the company
and transferring the loans to third parties and any activities incidental or
necessary for this purpose. The seller has structured this transaction so that
the bankruptcy of the company
S-12
<PAGE>
will not cause a court to consolidate the seller's assets and liabilities with
the company's. The seller has received a legal opinion, subject to various
facts, assumptions and qualifications, opining that if the company was adjudged
bankrupt, it would not be a proper exercise of a court's equitable discretion to
disregard the separate corporate existence of the seller and to require the
consolidation of the seller's assets and liabilities with those of the company.
However, there can be no assurance that a court would not conclude that the
assets and liabilities of the seller should be consolidated with those of the
company.
Delays in distributions on the certificates and possible reductions in
distribution amounts could occur if a court decided to consolidate the seller's
assets with the company's, or if a filing were made under any bankruptcy or
insolvency law by or against the seller, or if an attempt were made to litigate
any of those issues.
The Issuer
General
The issuer is a New York common law trust formed under a pooling and
servicing agreement to consummate the transactions described in this prospectus
supplement. The issuer will not engage in any activity other than:
. acquiring, holding and managing the auto loans and its other assets;
. issuing the certificates;
. making payments on the certificates; and
. engaging in other activities that are necessary and suitable to the above
listed activities.
The issuer will use the proceeds from the initial sale of the certificates
to purchase the initial auto loans from the seller and to fund the deposits in
the pre-funding account, collateral accounts maintained for the benefit of the
insurer, and the capitalized interest account.
The Trustee
[Name of the Trustee] will be the trustee under the pooling and servicing
agreement. [Name of the Trustee] is a [New York] banking corporation, the
principal offices of which are located at [address].
The Trust Property
The trust property will include, among other things, the following:
S-13
<PAGE>
. initial auto loans secured by new and used automobiles, light duty
trucks and vans;
. monies received (a) for the initial auto loans, on or after _____ the
initial cutoff date, or (b) for the subsequent auto loans, after the
related cutoff date;
. amounts that may be held in the lockbox accounts, the collection
account, the pre-funding account, the capitalized interest account and
other bank accounts opened in connection with this offering, if any;
. an assignment of the security interests of the servicer and CP Funding
Corp. in the financed vehicles;
. an assignment of the rights of the seller against dealers under
agreements between the servicer and dealers;
. an assignment of the right to receive proceeds from claims on physical
damage, credit life and disability insurance policies covering the
financed vehicles or the obligors;
. the auto loans files; and
. other rights under the trust documents.
The trust property also will include an assignment of the seller's rights
against the servicer and CP Funding Corp., the servicer's wholly-owned
subsidiary, for breaches of representations and warranties under a purchase
agreement. The initial auto loans will be purchased by the seller under this
purchase agreement on or prior to the date of issuance of the certificates.
The issuer will purchase additional auto loans and related property from
the seller on or before __________, from funds on deposit in the pre-funding
account. These subsequent auto loans will be purchased by the seller from the
servicer and CP Funding pursuant to one or more subsequent purchase agreements
between the seller, CP Funding and the servicer.
The initial auto loans were, and the subsequent auto loans were or will be,
originated by dealers according to the servicer's requirements, have been or
will be so assigned, and evidence or will evidence the indirect financing made
available to the obligors. Dealer agreements may provide for repurchase or
recourse against the dealer in the event of a breach of a representation or
warranty by the dealer.
The pool balance represents:
(a) the aggregate principal balance of the auto loans at the end of the
preceding calendar month;
plus
S-14
<PAGE>
(b) any amounts in the pre-funding account;
minus
(c) all payments from obligors and any purchase amounts the seller or
servicer must remit for the month and all losses, including Cram Down
Losses during the month.
Under the pooling and servicing agreement, the issuer will grant a security
interest in the trust property to the trust collateral agent for the trustee's
benefit on the certificateholders' behalf and for the insurer's benefit in
support of the obligations owed to the insurer. Any proceeds of the security
interest will be distributed according to the pooling and servicing agreement.
The insurer will be entitled to the distributions only after payment of amounts
owed to, among others, certificateholders.
An auto loan's principal balance, as of any date, is the sum of:
(a) the amount financed;
minus
(x) that portion of all amounts received on or prior to that date and
allocable to principal according to the auto loan's terms;
plus
(y) any Cram Down Loss for the auto loan;
plus
(b) the accrued and unpaid interest on the auto loan as of that date.
The Company's Automobile Financing Program
Through its branch offices and marketing representatives, the company
provides funding for franchised and independent automobile dealers to finance
their customers' purchase of new and used automobiles, light duty trucks and
vans. The dealers originate auto loans which conform to the company's credit
policies. The company then purchases the auto loans without recourse to the
dealers. The company also services the auto loans that it purchases.
The company's indirect lending programs are designed to serve consumers
who have limited access to traditional auto financing. The typical borrower
either may have had previous financial difficulties, and is now attempting to
re-establish credit, or has not established a credit history. Because the
company serves consumers who are unable to meet the credit standards imposed by
most traditional auto financing sources, it charges a higher interest at rates
than most traditional auto financing sources. The servicer also expects to
sustain a higher level of delinquencies and credit losses than that experienced
S-15
<PAGE>
by traditional auto financing sources since it provides financing in a
relatively high risk market.
The company has established relationships with a variety of dealers located
in areas where it has branch offices or marketing representatives. While the
company occasionally finances purchases of new autos, a substantial majority of
the company's auto loans were for used automobiles.
Of the loans the company purchased during the year ended June 30, _____:
. manufacturer-franchised dealers with used auto operations originated
approximately __%, and
. independent dealers specializing in used auto sales originated
approximately __%.
Of the loans the company purchased in the nine months ended __________:
. manufacturer-franchised dealers with used auto operations originated
approximately __%, and
. independent dealers specializing in used auto sales originated
approximately __%.
The servicer purchased loans from __________ dealers during the year ended
June 30, _____ and from __________ dealers during the nine months ended
__________.
To mitigate credit risk, the company typically charges dealers an
acquisition fee when it purchases the loans. Additionally, dealers typically
make representations as to the auto loan's validity and compliance with relevant
laws, and indemnify the company against any claims, defenses and set-offs that
an obligor may assert against the company because of loan's assignment.
As of __________, the company operated ________ branch offices in _______
states.
These branch offices solicit dealers for loans and maintain the company's
relationship with the dealers in the branch office's geographic vicinity.
The company also has marketing representatives covering markets where the
company does not have a branch. The servicer does business in a total of _______
states.
See "AmeriCredit's Automobile Financing Program" in the prospectus for a
description of the servicer's contract acquisition, servicing and collection
practices.
S-16
<PAGE>
The Auto Loans
General
The servicer purchased the auto loans from dealers. The auto loans were
made to individuals with less than perfect credit due to factors, including:
. the manner in which these individuals have handled previous credit;
. the limited extent of their prior credit history; and/or
. their limited financial resources.
Eligibility Criteria
The auto loans were or will be selected according to several criteria,
including those specified under "AmeriCredit's Automobile Financing Program --
Contract Acquisition" in the accompanying prospectus. In addition, as of the
initial cut-off date the initial auto loans were selected from the company's
portfolio of auto loans based on the following criteria:
(a) each initial auto loan had a remaining maturity of not more than [72]
months;
(b) each initial auto loan had an original maturity of not more than [72]
months;
(c) each initial auto loan had a remaining principal balance of at least
$________ and not more than $__________;
(d) each initial auto loan has an annual percentage rate of at least
_______% and not more than _______%;
(e) no initial auto loan was more than [30] days past due; and
(f) neither the company, any dealer nor anyone acting in their behalf
advanced funds to cause any initial auto loan to qualify under clause
(e) above.
During the funding period, the seller must purchase the subsequent auto
loans from the company and CP Funding and then sell them to the issuer. The
company anticipates that the aggregate principal balance of the subsequent auto
loans will equal $__________. The seller will sell the subsequent auto loans to
the issuer on the subsequent transfer date and the issuer will pay the seller
the outstanding principal balance of the subsequent auto loans as of their
respective subsequent cutoff dates, which is the price the seller will pay the
company and CP Funding. The issuer will use the funds in the pre-funding
account for this purpose.
The issuer's obligation to purchase the subsequent auto loans is subject to
the following conditions:
S-17
<PAGE>
(a) as of each loan's subsequent cut-off date, each subsequent auto loan
and/or subsequent financed vehicle must satisfy the auto loan
eligibility criteria specified under "the auto loans" in the prospectus
and the criteria listed in this prospectus supplement in clauses (a)
through (e) regarding the initial auto loans;
(b) the insurer, if there is no insurer default, has approved the
subsequent auto loans transfer to the issuer;
(c) none of the servicer, CP Funding or the seller has selected the
subsequent auto loans in a manner that any of them believes is adverse
to the interests of the insurer or the certificateholders;
(d) the servicer, CP Funding and the seller will deliver certain opinions
of counsel regarding the validity of the subsequent auto loan transfer;
and
(e) Standard & Poor's must confirm that the ratings on the certificates
have not been withdrawn or reduced because of the subsequent auto loans
transfer to the issuer.
Because the subsequent auto loans may be originated after the initial auto
loans, the auto loan pool's characteristics after the transfer of subsequent
auto loans to the pool may vary from the initial pool.
In addition, issuer's obligation to purchase the subsequent auto loans is
subject to the condition that the auto loans in the trust, including the
subsequent auto loans to be transferred, meet the following criteria:
(a) the auto loans weighted average annual percentage rate ("APR") is not
less than __%;
(b) the auto loan's weighted average remaining term on the subsequent
cutoff date is not greater than [72] months; and
(c) not more than __% of the obligors on the auto loans reside in Texas and
California.
The criteria in clauses (a) and (b) will be based:
. on the characteristics of the initial auto loans on the initial cutoff
date and
. the auto loans, including the subsequent auto loans, on the related
subsequent cutoff date.
The criteria in clause (c) will be based on the obligor's mailing addresses
on:
. the initial auto loans on the initial cutoff date and
S-18
<PAGE>
. the subsequent auto loans on the related subsequent cutoff dates.
Except for the above described criteria, there are no required
characteristics for the subsequent auto loans. Therefore, following the
transfer of subsequent auto loans to the issuer, the aggregate characteristics
of the entire pool of auto loans included in the trust may vary in the following
respects:
. composition of the auto loans;
. geographic distribution;
. distribution by remaining principal balance;
. distribution by APR;
. distribution by remaining term; and
. distribution of the auto loans secured by new and used vehicles.
Composition
The statistical information presented in this prospectus supplement is
based on the initial auto loans as of the statistical calculation date which is
____________.
. As of the statistical calculation date, the initial auto loans have an
aggregate principal balance of $__________.
. As of the initial cutoff date, initial auto loans have an aggregate
principal balance of $__________.
The company will acquire additional auto loans after the statistical
calculation date but prior to the initial cutoff date. In addition some
amortization has occurred prior to the initial cutoff date but after the
statistical calculation date. In addition, some auto loans included as of the
statistical calculation date have prepaid in full or have been determined not to
meet the eligibility requirements and have not been included in the auto loan
pool. As a result, the statistical distribution of characteristics as of the
initial cutoff date varies from the statistical distribution of characteristics
as of the statistical calculation date, although the variance is not material.
The initial auto loan pool's composition and distribution by APR and its
geographic concentration as of the statistical calculation date is detailed in
the following tables:
S-19
<PAGE>
Composition of the Initial Auto Loans
as of the Statistical Calculation Date
<TABLE>
New Used Total
--------------- --------------- ---------------
<S> <C> <C> <C>
Aggregate principal balance(1)
Number of auto loans
Percent of Aggregate principal
balance
Average principal balance
Range of principal balances
Weighted Average APR(1)
Range of APRs
Weighted Average Remaining
Term
Range of Remaining Terms
Weighted Average Original
Term
Range of Original Terms
</TABLE>
- ---------------------------
(1) Aggregate principal balance includes some portion of accrued interest. As a
result, the Weighted Average APR of the auto loans may not be equivalent to
the auto loans aggregate yield on the aggregate principal balance.
S-20
<PAGE>
Distribution of the Initial Auto Loans by APR
as of the Statistical Calculation Date
<TABLE>
Aggregate % of Aggregate % of Total
principal principal Number of auto Number of auto
APR Range balance(1) balance(2) loans loans(2)
- ----------------- ------------------- -------------------- -------------------- -----------------
<S> <C> <C> <C> <C>
8.000 to 8.999% $ % %
9.000 to 9.999
10.000 to 10.999
11.000 to 11.999
12.000 to 12.999
13.000 to 13.999
14.000 to 14.999
15.000 to 15.999
16.000 to 16.999
17.000 to 17.999
18.000 to 18.999
19.000 to 19.999
20.000 to 20.999
21.000 to 21.999
22.000 to 22.999
23.000 to 23.999
24.000 to 24.999
25.000 to 25.999
26.000 to 26.999
27.000 to 27.999
28.000 to 28.999
29.000 to 29.999
------------------- -------------------- -------------------- -----------------
TOTAL $ % %
=================== ==================== ==================== =================
</TABLE>
- ---------------------------
(1) Aggregate principal balances include some portion of accrued interest.
(2) Percentages may not add to 100% because of rounding.
S-21B
<PAGE>
Distribution of the Initial Auto Loans by Geographic Location
of Obligor as of the Statistical Calculation Date
<TABLE>
Aggregate % of Aggregate % of Total
principal principal Number of auto Number of auto
State balance(1) balance(2) loans loans(2)
- ------------- ------------------ -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Alabama $ % %
Arizona
California
Colorado
Connecticut
Delaware
Florida
Georgia
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
Tennessee
Texas
Utah
Virginia
Washington
West Virginia
Wisconsin
Other(3)
------------------ -------------------- ------------------- --------------------
TOTAL $ % %
================== ==================== =================== ====================
</TABLE>
- ---------------------------
(1) Aggregate principal balances include some portion of accrued interest.
(2) Percentages may not add to 100% because of rounding.
(3) States with Aggregate principal balances less than $2,000,000.
S-22
<PAGE>
All the auto loans provide the obligor to pay:
. a specified total amount;
. in substantially equal monthly installments on each due date.
Each obligor's total payment amount equals the amount financed plus
interest for the auto loan's term. The interest charges on the auto loans are
determined either by the simple interest method or by adding a precomputed
interest charge to the auto loan as of its origination date.
Under a simple interest auto loan, the amount of an obligor's fixed level
installment payment allocated to interest is equal to the product of the fixed
interest rate on the loan, typically the APR, multiplied by the elapsed time
period, expressed as a fraction of a year, since the preceding loan payment.
The obligor's remaining payment amount is allocated to reduce the principal
amount financed.
The issuer will account for all auto loans, including simple interest auto
loans and precomputed auto loans, as if those auto loans amortized under the
simple interest method. The servicer will not deposit amounts it receives on a
full prepayment of a precomputed auto loan in excess of the loan's outstanding
principal balance and accrued interest to the collection account but will retain
any excess amounts -- minus amounts required to be rebated to the obligor -- as
supplemental servicing fees.
S-23
<PAGE>
Yield and Prepayment Considerations
Obligors may prepay any auto loan at any time. If an obligor prepays an
auto loan, the actual weighted average life of the auto loans may be shorter
than the scheduled weighted average life. These prepayments include:
. liquidations due to default, and
. proceeds from credit life, credit disability, and casualty insurance
policies.
Weighted average life means the average amount of time during which each
dollar of principal on an auto loan is outstanding.
The prepayment rate on the auto loans may be influenced by a variety of
economic, social, and other factors, including the fact that an obligor may not
sell or transfer the financed vehicle without the servicer's consent. The
servicer believes that the actual prepayment rate will result in the auto loans
having a substantially shorter weighted average life than their scheduled
weighted average life.
The rate of payment of principal of the certificates will depend on the
rate of payment, including prepayments, of the auto loan's principal balance.
As a result, final payment of any class of certificates could occur
significantly earlier than the class' final scheduled distribution date.
Certificateholders will bear any reinvestment risk resulting from the early
payment on the certificates.
Auto loan prepayments can be measured relative to a prepayment standard or
model. The model used in this prospectus supplement, the absolute prepayment
model "ABS," represents an assumed prepayment rate of each month relative to the
original number of auto loans in the pool. ABS further assumes that all the
auto loans are the same size and pay at the same rate and that each auto loan in
each month of its life will either be paid as scheduled or be prepaid in full.
For example, in a pool of auto loans originally containing 10,000 auto loans, a
1% ABS rate means that 100 auto loans prepay each month. ABS does not purport
to be an historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of auto loans, including the auto
loans.
The tables captioned "Percent of Initial Certificate Principal Balance at
Various ABS Percentages" have been prepared on the basis of the following
assumptions:
. the trust includes three pools of auto loans with the characteristics
described in the following table;
. the auto loans prepay in full at the specified constant percentage of ABS
monthly, with no defaults, losses or repurchases;
. each scheduled monthly payment on the auto loans is made on the last day
of each month and each month has 30 days;
S-24
<PAGE>
. the initial principal amount of the certificates is detailed in this
prospectus supplement's cover page;
. interest accrues during each interest period at the following assumed
coupon rates: Class A Certificates, _____%; and Class B Certificates,
_____%;
. payments on the certificates are made on the [5th] day of each month
whether or not a business day;
. the certificates are purchased on __________;
. each auto loan's scheduled monthly payment has been calculated on the
basis of the assumed characteristics in the following table so that each
auto loan will amortize in amounts sufficient to repay its principal
balance by its indicated remaining term to maturity;
. the first due date for each auto loan is the last day of the month of the
assumed cutoff date for the auto loan as detailed in the following table;
. the entire pre-funded amount is used to purchase subsequent auto loans;
. the servicer does exercise its repurchase option;
. accelerated principal amounts are paid on each distribution date until
the later of the first distribution date on which the Pro Forma
Certificate Balance reaches the Required Pro Forma Certificate Balance
[and the Class A Certificates are paid in full]; and
. the difference between the gross APR and the net APR is equal to the base
servicing fee, and the net APR is further reduced by the fees due to the
trustee, the trust collateral agent, and the insurer.
<TABLE>
Remaining
Aggregate Term to
principal Assumed Maturity Seasoning
Pool balance Gross APR Cutoff Date (in Months) (in Months)
- ----------- ----------------- --------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
1 $ %
2
3
Total $ %
</TABLE>
Based on the assumptions described above, the ABS Tables indicate the
percentages of the initial principal amount of the certificates that would be
outstanding after each of the distribution dates shown at various percentages of
ABS and the corresponding weighted average lives of the certificates. The auto
loans' actual characteristics and performance will differ from the assumptions
used in constructing the ABS Tables. The assumptions used are hypothetical and
have been provided only to give
S-25
<PAGE>
a general sense of how the principal cash flows might behave under varying
prepayment scenarios.
For example it is very unlikely that:
. the auto loans will prepay at a constant level of ABS until maturity,
. all of the auto loans will prepay at the same level of ABS, or
. the coupon rates on the certificates will remain constant.
The diverse terms of auto loans could produce slower or faster principal
distributions than indicated in the ABS Tables at the various constant
percentages specified, even if the original and remaining terms to maturity of
the auto loans are as assumed. Any difference between those assumptions and the
actual characteristics and performance of the auto loans, including actual
prepayment experience or losses, will affect the percentages of initial balances
outstanding over time and the weighted average lives of the certificates.
S-26
<PAGE>
Percent of Initial Certificate Principle Balance at Various ABS Percentages(1)
<TABLE>
Class A Certificates Class B Certificates
-------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution Date 0.5% 1.0% 1.7% 2.5% 0.5% 1.0% 1.7% 2.5%
- ----------------- ------ ------ ------ ----- ------ ------ ------ ------
</TABLE>
Weighted Average
Life in Years(2)
____________________________________
(1) The percentages in this table have been rounded to nearest whole number.
(2) The weighted average life of a certificate is determined by (a) multiplying
the amount of each principal payment on a certificate by the number of years
from the date of issuance of the certificate to the related distribution
date, (b) adding the results and (c) dividing the sum by the related initial
principal amount of the certificate.
S-27
<PAGE>
Delinquency and Loan Loss Information
The following tables detail information relating to the company's
delinquency and loan loss experience regarding all auto loans it has purchased
and serviced. This information includes the company's experience with respect
to all auto loans its portfolio, including auto loans which do not meet the auto
loan pool selection criteria.
Delinquency Experience
Repossessed financed vehicles that have not yet been liquidated and
bankrupt accounts which have not yet been charged off are both included as
delinquent accounts in the table below.
<TABLE>
<CAPTION>
At________ At June 30
----------------------------------------- ----------------------------------------
[Year] [Year] [Year] [Year]
------------------- ------------------- ------------------ ------------------
Number of Number of Number of Number of
auto loans Amount auto loans Amount auto loans Amount auto loans Amount
---------- ------ ---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio at end
of period(1)
Period of Delinquency(2)
31-60 days(3)
61-90 days
91 days or more ------- ------ ------- ------ ------- ------ ------- ------
Total Delinquencies
Repossessed Assets
------- ------ ------- ------ ------- ------ ------- ------
Total Delinquencies and
Repossessed Assets
======= ====== ======= ====== ======= ====== ======= ======
Total Delinquencies as a
Percentage of the
Portfolio
Total Repossessed Assets
as a Percentage of the
Portfolio
------- ------ ------- ------ ------- ------ ------- ------
Total Delinquencies and
Repossessed Assets as
a Percentage of the
Portfolio
======= ====== ======= ====== ======= ====== ======= ======
</TABLE>
____________________________________
(1) All amounts and percentages are based on the principal balances of the auto
loans. Principal balances include some portion of accrued interest. All
dollar amounts are in thousands of dollars.
(2) The company considers a loan delinquent when an obligor fails to make a
contractual payment by the due date. The period of delinquency is based on
the number of days payments are contractually past due.
(3) Amounts shown do not include loans which are less than [31] days delinquent.
S-28
<PAGE>
Credit Loss Experience
<TABLE>
Months Ended Fiscal Year Ended
_______ June 30,
--------------------- ---------------------
[Year] [Year] [Year] [Year]
--------------------- ---------------------
<S> <C> <C> <C> <C>
Period-End Principal Outstanding(1)
Average Month-End Amount Outstanding
During the Period(1)
Net Charge-Offs(2)
Net Charge-Offs as a Percentage of
Period-End Principal Outstanding
Net Charge-Offs as a Percent of
Average Month-End Amount Outstanding
</TABLE>
____________________________________
(1) All amounts and percentages are based on the auto loans' principal balances.
Principal balances include some portion of accrued interest. All dollar
amounts are in thousands of dollars.
(2) Net Charge-Offs equal Gross Charge-Offs minus Recoveries. Gross Charge-Offs
do not include unearned finance charges and other fees. Recoveries include
repossession proceeds received from the sale of repossessed financed
vehicles net of repossession expenses, refunds of unearned premiums from
credit life and credit accident and health insurance and extended service
contract costs obtained and financed in connection with the vehicle
financing and recoveries from obligors on deficiency balances.
S-29
<PAGE>
The Insurer
The following information has been obtained from Financial Security
Assurance Inc. (hereinafter in this section, "Financial Security") and has not
been verified by the seller or the underwriters. No representations or warranty
is made by the seller or the Underwriters with respect thereto.
General
Financial Security is a monoline insurance company incorporated in 1984
under the laws of the State of New York. Financial Security is licensed to
engage in the financial guaranty insurance business in all 50 states, the
District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments of an
issuer's securities -- thereby enhancing the credit rating of those securities -
- - in consideration for the payment of a premium to the insurer. Financial
Security and its subsidiaries principally insure asset-backed, collateralized
and municipal securities. Asset-backed securities are generally supported by
residential mortgage loans, consumer or trade receivables, securities or other
assets having an ascertainable cash flow or market value. Collateralized
securities include public utility first mortgage bonds and sale/leaseback
obligation bonds. Municipal securities consist largely of general obligation
bonds, special revenue bonds and other special obligations of state and local
governments. Financial Security insures both newly issued securities sold in
the primary market and outstanding securities sold in the secondary market that
satisfy Financial Security's underwriting criteria.
Financial Security is a wholly-owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprises Holdings, Inc.,
MediaOne Capital Corporation, The Tokio Marine and Fire insurance Co., Ltd. and
XL Capital Ltd. No shareholder of Holdings is obligated to pay any debt of
Financial Security or any claim under any insurance policy issued by Financial
Security or to make any additional contribution to the capital of Financial
Security.
The principal executive offices of Financial Security are located at 350
Park Avenue, New York, New York 10022, and its telephone number at that location
is (212) 826-0100.
Reinsurance
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by Financial Security or any
of its domestic or Bermuda operating insurance company subsidiaries are
generally reinsured among such companies on an agreed-upon percentage
substantially proportional to their respective
S-30
<PAGE>
capital, surplus and reserves, subject to applicable statutory risk limitations.
In addition, Financial Security reinsures a portion of its liabilities under
certain of its financial guaranty insurance policies with other reinsurers under
various quota share treaties and on a transaction-by-transaction basis. Such
reinsurance is utilized by Financial Security as a risk management device and to
comply with certain statutory and rating agency requirements; it does not alter
or limit Financial Security's obligations under any financial guaranty insurance
policy.
Rating of Claims-Paying Ability
Financial Security's insurance financial strength is rated "Aaa" by Moody's
Investors Service, Inc. Financial Security's insurer financial strength is
rated "AAA" by Standard & Poor's Ratings Services and Standard & Poor's
(Australia) Pty. Ltd. Financial Security's claims-paying ability is rated "AAA"
by Fitch IBCA, Inc. and Japan Rating and Investment Information, Inc. Such
ratings reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies. See "Risk Factors -- Ratings on
Certificates" herein.
Capitalization
The following table sets forth the capitalization of Financial Security and
its wholly-owned subsidiaries on the basis of generally accepted accounting
principles as of _____________:
<TABLE>
<CAPTION> ---------------
(Unaudited)
(in thousands)
<S> <C>
Deferred Premium Revenue (net of prepaid reinsurance premiums) $
Surplus Notes................................................................
Minority Interest............................................................
Shareholder's Equity:
Common Stock................................................................
Additional Paid-In Capital..................................................
Accumulated Other Comprehensive Income (net of deferred income taxes).......
Accumulated Earnings........................................................
Total Shareholder's Equity..................................................
Total Deferred Premium Revenue, Surplus Notes, Minority Interest and $
Shareholder's Equity........................................................ ===================
</TABLE>
For further information concerning Financial Security, see the Consolidated
Financial Statements of Financial Security and Subsidiaries, and the notes
thereto, incorporated by reference herein. Financial Security's financial
statements are included as exhibits to the Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q filed with the Commission by Holdings and may be
reviewed at the EDGAR website
S-31
<PAGE>
maintained by the Commission and at Holdings' website, http://www.FSA.com.
Copies of the statutory quarterly and annual statements filed with the State of
New York insurance Department by Financial Security are available upon request
to the State of New York insurance Department.
Insurance Regulation
Financial Security is licensed and subject to regulation as a financial
guaranty insurance corporation under the laws of the State of New York, its
state of domicile. In addition, Financial Security and its insurance
subsidiaries are subject to regulation by insurance laws of the various other
jurisdictions in which they are licensed to do business. As a financial
guaranty insurance corporation licensed to do business in the State of New York,
Financial Security is subject to Article 69 of the New York insurance Law which,
among other things, limits the business of each such insurer to financial
guaranty insurance and related lines, requires that each such insurer maintain a
minimum surplus to policyholders, establishes contingency, loss and unearned
premium reserve requirements for each such insurer, and limits the size of
individual transactions ("single risks") and the volume of transactions
("aggregate risks") that may be underwritten by each such insurer. Other
provisions of the New York insurance Law, applicable to non-life insurance
companies such as Financial Security, regulate, among other things, permitted
investments, payment of dividends, transactions with affiliates, mergers,
consolidations, acquisitions or sales of assets and incurrence of liabilities
for borrowings.
Description of the Certificates
General
The certificates will be issued according to the terms of the pooling and
servicing agreement. A form of the pooling and servicing agreement has been
filed as an exhibit to the registration statement of which this prospectus
supplement is a part. The following summary describes terms of the certificates
and the pooling and servicing agreement.
The certificates will be issued only in fully registered form, in
denominations of $1,000 and integral multiples of $1,000. The certificates will
represent beneficial ownership interests in the assets of the issuer.
Replacement certificates, if issued, will be transferable and exchangeable at
the corporate trust office of the trustee. No service charge will be made for
any registration, exchange or transfer of certificates, but the trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge.
The Class A Certificateholders are entitled to receive, on each
distribution date, the Class A Percentage of the Certificateholders'
Distributable Amount plus interest at the Class A pass-through rate on the Class
A principal balance. Subject to the prior rights of the Class A
Certificateholders, the Class B Certificateholders are entitled receive, on each
distribution date, the Class B Percentage of the Certificateholders'
Distributable Amount plus interest at the Class B pass through rate on the Class
B principal balance.
S-32
<PAGE>
The Certificates represent beneficial ownership interests in the issuer.
The Class A Certificates will evidence in the aggregate an undivided ownership
interest of approximately __%, which is the Class A Percentage of the issuer and
the Class B Certificates will evidence in the aggregate an undivided ownership
interest of approximately __%, which is the Class B Percentage of the issuer.
Distribution Dates
While AmeriCredit is the servicer, the certificates will pay interest and
principal on the fifth day of each month -- or, if the fifth day is not a
business day, on the next following business day. However, any distribution
date will not be earlier than the third business day of the month. The first
distribution date will be _________________. Holders of record as of the close
of business day immediately preceding a distribution date, commonly known as a
record date, will receive payments on that distribution date. A business day is
a day other than a Saturday, Sunday or other day on which commercial banks
located in the States of Texas, Delaware, Ohio or New York are authorized or
obligated to be closed.
The insured distribution date will be the [twelfth] day of each month, or,
if the [twelfth] day is not a business day, the next following business day.
If the backup servicer or another successor servicer becomes the servicer,
the distribution date will become the twelfth day of each month, or if the
twelfth day is not a business day, the next following business day.
The final scheduled distribution dates are as follows:
. for the Class A Certificates, the ________ insured distribution date;
and
. for the Class B Certificates, the ________ insured distribution date.
Payments of Interest
[Interest on the certificates will be distributable monthly on each
distribution date, commencing on __________, in an amount equal to interest
accrued during the applicable accrual period, as defined below, at the
certificate rate on the outstanding principal balance for certificates. The per
annum rate of interest accruing on the certificates of each class is referred to
as the pass-through rate for that class certificates. The pass-through rate for
the Class A Certificates is __%, and the pass-through rate for the Class B
Certificates is ___%.
Interest on the certificates for a distribution date will accrue from, and
including, the preceding distribution date, or in the case of the first
distribution date, from the closing date, through, and including, the day
preceding the distribution date. Each of these periods is an accrual period.
Interest on the certificates will be calculated on the basis of a 360-day year
[and the actual number of days elapsed in an applicable interest period].
Interest for any distribution date due but not paid on the distribution date
will
S-33
<PAGE>
bear interest, to the extent permitted by applicable law, at the applicable
pass-through rate until paid.]
Interest on each class of certificates will accrue during each interest
period at the applicable interest rate from and including the most recent
distribution date that interest was paid -- or, in the case of the first
distribution date, from and including the closing date _________, but excluding,
the following distribution date. In the case of the first distribution date,
the interest period shall be ___ days. The interest accruing during an interest
period will accrue on each class' outstanding principal amount as of the end of
the prior distribution date -- or, in the case of the first distribution date,
as of the closing date.
However, if the principal balance is further reduced by a principal payment
on the insured distribution date which immediately follows the prior
distribution date, then interest shall accrue:
1. from and including the prior distribution date to, but excluding, the
related insured distribution date, on the principal balance
outstanding as of the end of the prior distribution date (or, in the
case of the first distribution date, as of the closing date); and
2. from and including the insured distribution date, to, but excluding,
the following distribution date, on the principal balance outstanding
as of the end of the insured distribution date.
Payments of Principal
On each distribution date, principal payments will be distributed on the
certificates in an amount generally equal to a percentage of the decrease in the
Principal Balance of the auto loan pool during the prior calendar month to the
extent of funds available. These principal payments will be allocable between
the Class A Certificates and the Class B Certificates pro rata, and will be paid
--- ----
to the certificateholders in proportion to their percentage interest, until the
outstanding principal amount of that class is paid in full.
Amounts available under the insurance policy are available to pay the
certificate principal only in two circumstances:
. to reduce, after taking into account all reductions funded from other
sources, the aggregate principal balance of the certificates to the
collateral balance - i.e., the sum of the Pool Balance plus the pre-
funded amount - in the event that the certificate principal balance would
otherwise exceed the collateral balance; and
. to pay off each class' principal on its final scheduled distribution
date, to the extent that the class is not paid off on or prior to the
final scheduled distribution date from other sources.
S-34
<PAGE>
Mandatory Redemption
If any portion of the pre-funded amount remains on deposit in the pre-
funding account at the end of the funding period, each class of certificates
will be redeemed in part on the mandatory redemption date. Each class'
certificate prepayment amount of the remaining pre-funded amount on that date
will be an amount equal to that class' pro rata share, based on the respective
current principal amount of each class of certificates. However, if the
aggregate remaining amount in the pre-funding account is $100,000 or less, that
amount will be applied exclusively to reduce the outstanding principal balance
of the class of certificates then entitled to receive principal distributions.
Optional Redemption
The Class A and B Certificates, to the extent still outstanding, may be
redeemed in whole, but not in part, when the pool balance has declined to 10% or
less of the original pool balance, as described in the accompanying prospectus
under "Description of the Trust Agreements -- Termination." This redemption
will cause the early retirement of that class. The redemption price will equal
the unpaid principal amount of the certificates, plus accrued and unpaid
interest.
Events of Default
Unless an insurer default shall have occurred and be continuing, events of
default under the pooling and servicing agreement will consist of those events
listed below as Insurance Agreement Pooling and Servicing Agreement Cross
Defaults. In addition, they will constitute an event of default under the
pooling and servicing agreement only if the insurer delivers to the trustee and
does not rescind a written notice specifying that any Insurance Agreement
Pooling and Servicing Agreement Cross Default constitutes an event of default
under the pooling and servicing agreement.
Insurance Agreement Pooling and Servicing Agreement Cross Defaults consist
of:
. a demand for payment under the policy;
events of bankruptcy, insolvency, receivership or liquidation of the
. issuer;
. the issuer becoming taxable as an association (or publicly traded
partnership) taxable as a corporation for federal or state income tax
purposes;
. on any insured distribution date, after taking into account the
application of the sum of Available Funds for the related calendar
month plus the Deficiency Claim Amount for the related distribution
date, any amounts listed in clauses 1, 2, 3 and 5 under "Description of
the Purchase Agreements and the Trust Documents -- Distributions" in
this prospectus supplement has not been paid in full; and
S-35
<PAGE>
. any failure to observe or perform in any material respect any other
covenants or agreements in the pooling and servicing agreement, or any
representation or warranty of the issuer made in the pooling and
servicing agreement or in any certificate or other writing delivered
under or in connection with the pooling and servicing agreement proving
to have been incorrect in any material respect when made, and the
failure continuing or not being cured, or the circumstance or condition
for which the representation or warranty was incorrect not having been
eliminated or otherwise cured, for [30] days after the giving of
written notice of the failure or incorrect representation or warranty
to the issuer and the trustee by the insurer.
For any determination date the deficiency claim amount is the amount that,
after taking into account the application on the distribution date of Available
Funds for the related calendar month, an amount, without duplication, equal to
the sum of:
(a) any shortfall in the full payment of amounts described in clauses 1, 2,
3 and 5 under "Description of the Purchase Agreements and the Trust
Documents -- Distributions";
(b) the Certificateholders' Parity Deficit Amount, if any, for the
distribution date; and
(c) if the related distribution date is the final scheduled distribution
date for any class, any remaining outstanding principal balance of that
class, to the extent that the amount is available on the related
insured distribution date according to the spread account's terms.
Upon an event of default occurring, so long as an insurer default has not
occurred and continued, the insurer will have the right, but not the obligation,
to cause the trust collateral agent to liquidate the trust property in whole or
in part, on any date or dates following the event of default as the insurer, in
its sole discretion elects. The insurer also has the right to cause the trust
collateral agent to deliver the proceeds to the trustee for distribution to
certificateholders. The insurer may not, however, cause the trust collateral
agent to liquidate the trust property in whole or in part if the liquidation
proceeds would be insufficient to pay all outstanding principal of and accrued
interest on the certificates, unless the event of default arose from a claim on
the policy or from the issuer's bankruptcy, insolvency, receivership or
liquidation. Following any event of default, the trust collateral agent will
continue to submit claims under the policy for any shortfalls in scheduled
payments. Following any event of default under the pooling and servicing
agreement, the insurer may elect to pay all or any portion of the outstanding
amount of the certificates, plus accrued interest on the certificates. See "The
Policy" in this prospectus supplement.
S-36
<PAGE>
Description of The Purchase Agreements
And the Trust Documents
The following summary describes material terms of the purchase agreements,
which includes the purchase agreement and any subsequent purchase agreement, and
the trust documents which include any subsequent transfer agreement and the
pooling and servicing agreement. The issuer has filed forms of the purchase
agreements and the trust documents as exhibits to the registration statement.
The summary does not claim to be complete and is subject to all the provisions
of the purchase agreements and the trust documents. The following summary
supplements, and to the extent inconsistent with replaces, the description of
the general terms and provisions of the trust agreement (as the term is used in
the prospectus), which was detailed in the prospectus.
Sale and Assignment of Auto Loans
On or prior to the closing date, or, with respect to subsequent auto loans,
the related subsequent transfer date, the company and CP Funding will enter into
a purchase agreement with the seller under which the company and CP Funding will
sell and assign to the seller, without recourse, their entire interest in and to
the related auto loans. Under the purchase agreement, the company and CP
Funding will also sell and assign, without recourse, their security interest in
the financed vehicles securing the auto loans and their rights to receive all
payments on, or proceeds from the auto loans to the extent paid or distributable
after the applicable cutoff date. Under the purchase agreement, the company
will agree that, upon a breach of any representation or warranty under the trust
documents which triggers the seller's repurchase obligation, the trustee will be
entitled to require the company to repurchase the auto loans from the issuer.
The issuer's rights under the purchase agreement will constitute part of the
trust property and may be enforced directly by the trustee and the insurer. In
addition, the trustee will pledge the rights to the trustee as collateral for
the certificates and the trustee may directly enforce those rights.
On the closing date, or, for subsequent auto loans, the subsequent transfer
date, the seller will sell and assign to the trustee, without recourse, the
seller's entire interest in the auto loans and the proceeds, including its
security interest in the financed vehicles. Each auto loan transferred by the
seller to the issuer will be identified in an auto loan schedule appearing as an
exhibit to the pooling and servicing agreement.
Accounts
The company will instruct each obligor to make payments on the auto loans
after the applicable cutoff date directly to one or more post office boxes or
other mailing locations maintained by the lockbox bank. The servicer will
establish and maintain a lockbox account that is a segregated account with a
bank or banks acceptable to the insurer, in the trustee's name for the
certificateholders' benefit, into which the servicer must deposit all obligor
payments within one business day of receipt. The issuer will establish and
maintain with the trustee, in the trustee's name, on both the
certificateholders' and insurer's behalf one or more collection accounts, into
which all
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<PAGE>
amounts previously deposited in the lockbox account will be transferred within
three business days of deposit. The collection account will be maintained with
the trustee so long as the trustee's deposits have a rating acceptable to the
insurer and the rating agencies. If the deposits of the trustee or its corporate
parent no longer have an acceptable rating, the servicer shall, with the
trustee's assistance if necessary, move the accounts within [30] days to a bank
whose deposits have the proper rating.
The servicer will establish and maintain a distribution account in which
amounts released from the collection account for distribution to
certificateholders will be deposited and from which all distributions to
certificateholders will be made, in the name of the trust collateral agent, for
the trustee's benefit, on the certificateholder's and insurer's behalf.
On the closing date, the issuer will deposit the initial pre-funded amount
equaling $__________ in the pre-funding account, which will be established with
the trust collateral agent. The funding period encompasses the period from the
closing date until the earliest of the date on which:
. the amount on deposit in the pre-funding account is less than
$__________,
. a servicer termination event occurs under the sale and servicing
agreement, or
. __________.
The initial pre-funded amount, as reduced during the funding period from
the purchase of subsequent auto loans, is the pre-funded amount. The seller
expects that the pre-funded amount will be reduced to less than $__________ on
or before the end of the funding period. The issuer will pay the
certificateholders any pre-funded amount remaining at the end of the funding
period as a mandatory redemption. The mandatory redemption date is the earlier
of:
. the distribution date in __________; or
. the distribution date which relates to the calculation date occurring
in _______ or _______ __ if the last day of the funding period occurs on
or prior to that calculation date.
On the closing date, the issuer will deposit funds in the capitalized
interest account which will be established with the trust collateral agent. The
amount, if any, deposited in the capitalized interest account will be applied on
the distribution dates occurring in _____, _____ and _____,_____ to fund the
monthly capitalized interest amount which will equal the interest accrued for
each distribution date at the weighted average interest rates on the portion of
the certificates having a principal balance in excess of the principal balances
of the auto loans, which portion will equal the pre-funded amount. Any amounts
remaining in the capitalized interest account on the mandatory redemption date
and not used for these purposes will be paid directly to the seller on that
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date. See "Description of the Purchase Agreements and the Trust Documents --
Accounts."
As described in the prospectus, all accounts will be eligible deposit
accounts, acceptable to the insurer, so long as no insurer default has occurred
and is continuing.
Servicing Compensation and Trustees' Fees
The servicer will receive a basic servicing fee on each distribution date,
which equals the product of __________ times _____% of the aggregate principal
balance of the auto loans as of the opening of business on the first day of the
related calendar month. So long as AmeriCredit is the servicer, a portion of
the servicing fee will be distributable to the backup servicer for agreeing to
stand by as successor servicer and for performing other functions. The servicer
will also collect and retain any late fees, prepayment charges and other
administrative fees or similar charges allowed by applicable law with respect to
the auto loans, and will be entitled to reimbursement from the issuer for
various expenses. The servicer will allocate obligor payments to scheduled
payments, late fees and other charges, and principal and interest in accordance
with the servicer's normal practices and procedures.
The basic servicing fee will compensate the servicer for performing the
functions of a third-party servicer of automotive loans as an agent for their
beneficial owner.
These servicer functions include:
. collecting and posting all payments, responding to obligor inquiries on
the auto loans,
. investigating delinquencies,
. reporting tax information to obligors,
. paying the disposition costs of defaulted accounts,
. policing the collateral,
. accounting for collections,
. furnishing monthly and annual statements to the issuer and the insurer
with respect to distributions, and
. generating federal income tax information.
The basic servicing fee also will reimburse the servicer for:
. taxes,
. accounting fees,
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. outside auditor fees,
. data processing costs, and
. other costs incurred with administering the auto loans and for paying
the backup servicing fees.
On each distribution date, the trustee will receive a fee, in an amount
agreed upon by the trustee and the servicer, for its services as trustee and
trust collateral agent during the prior calendar month. On each distribution
date, the owner trustee will receive a fee, in an amount agreed upon by the
owner trustee and the servicer, for its services as owner trustee during the
prior calendar month.
The issuer will pay all these fees from the collection account.
Certain Allocations
On each determination date, the servicer will deliver the servicer's
certificate to the trustee, the owner trustee and the insurer specifying, among
other things:
. the amount of aggregate collections on the auto loans, and
. the aggregate purchase amount of auto loans to be purchased by the seller
and the company, in the preceding calendar month.
Based solely on the information contained in the servicer's certificate, on
each determination date the trustee will deliver to the trust collateral agent,
the insurer and the servicer a deficiency notice specifying the deficiency claim
amount, if any, for the distribution date. The deficiency notice will direct
the trust collateral agent to remit the deficiency claim amount to the
collection account from amounts on deposit in collateral accounts maintained for
the insurer's benefit.
For any insured distribution date, the deficiency notice will consist of a
written notice delivered by the trustee to the insurer, the servicer and any
other person required under the insurance agreement, specifying the deficiency
claim amount for the insured distribution date.
The determination date for any calendar month, is the earlier of:
. the fourth business day preceding the related insured distribution date
in the next calendar month; and
. the [5th] day of the next calendar month, or if the [5th] day is not a
business day, the next succeeding business day.
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Distributions
Distribution Date Calculations and Payments.
On or prior to each distribution date, the servicer will instruct the
trustee to make the following distributions from Available Funds in the
following order of priority:
1. To the servicer, the servicing fee for the related calendar month, any
supplemental servicing fees for the month and, to the extent the
servicer has not reimbursed itself or to the extent not retained by
the servicer, other amounts relating to mistaken deposits, postings or
checks returned for insufficient funds;
2. to the trustee, any accrued and unpaid trustees' fees and any accrued
and unpaid trust collateral agent's fees, each to the extent the
servicer has not previously paid the fees;
3. to the certificate distribution account, the Certificateholders'
Interest Distributable Amount;
4. to the certificate distribution account, the Certificateholders'
Principal Distributable Amount, to be distributed as described under
"Description of the Certificates -- Payments of Principal;"
5. to the insurer, any unpaid amounts owed to the insurer under the
insurance agreement;
6. to the spread account, less certain investment earnings, any amount
required to increase the amount in the spread account to its required
level;
7. to the certificate distribution account, less certain investment
earnings, and together with amounts, if any, available according to
the spread account's terms, the Certificateholders' Accelerated
Principal Amount; and
8. to the spread account, or as otherwise specified in the trust
documents, any remaining funds.
After considering all distributions made on the insured distribution date
and the related distribution date, amounts in the spread account on any insured
distribution date exceeding the Specified Spread Account Requirement for the
distribution date, may be released to the certificateholders.
If the certificates are accelerated following an event of default under the
pooling and servicing agreement, amounts collected will be distributed in the
order described above.
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Insured Distribution Date Calculations and Payments
In the event that any servicer's certificate delivered by the servicer
indicates that Available Funds for a distribution date are insufficient to fully
fund scheduled payments plus the amounts described in clauses 1 and 5 above, the
trustee shall request the deficiency claim amount for the spread account.
Further, in the event that any servicer's certificate delivered by the
servicer indicates that the sum of:
. Available Funds with respect to a distribution date, plus
. any related deficiency claim amount
is insufficient to fully fund scheduled payments plus the amount described in
clauses 1 and 2 above, the trustee shall furnish to the insurer no later than
12:00 noon New York City time on the related Draw Date a completed notice of
claim for the policy claim amount. The insurer will deposit the amounts it will
pay under the notice into the certificate distribution account for payment to
certificateholders on the related insured distribution date.
Statements to Certificateholders
On or prior to each insured distribution date, the trustee will forward a
statement to the certificateholders detailing information required under the
trust documents. These statements will be based on the information in the
related servicer's certificate. Each statement that the trustee delivers to the
certificateholders will include the following information regarding the
certificates on the related distribution date and the related insured
distribution date, as applicable:
(a) the amount of the distribution(s) allocable to interest;
(b) the amount of the distribution(s) allocable to principal;
(c) the amount of the distribution, if any, distributable under the policy
claim;
(d) each class of certificates' aggregate outstanding principal amount,
after considering all payments reported under (b) above on that date;
(e) the Certificateholders' Interest Carryover Shortfall and the
Certificateholders' Principal Carryover Shortfall, if any, and the
change in those amounts from the preceding statement;
(f) the servicing fee paid for the related calendar month; and
(g) during the funding period, the remaining pre-funded amount, the amount
in the pre-funding account and the amount remaining in the Capitalized
interest account.
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Each amount described in subclauses (a) through (f) for the certificates
will be expressed as a dollar amount per $1,000 of the certificates' initial
principal amount.
Unless and until Definitive Certificates are issued, the pooling and
servicing agreement trustee will send these reports to Cede & Co., as registered
holder of the certificates and the nominee of DTC on the trust's behalf.
After the end of each calendar year, within the required time period, the
trustee will furnish to each person who at any time during the calendar year was
a certificateholder:
. a statement as to the aggregate amounts of interest and principal paid
to the certificateholder,
. information regarding the amount of servicing compensation the servicer
received and
. other information as the seller deems necessary to enable the
certificateholder to prepare its tax returns.
Credit Support
The Accelerated Principal Amount and the spread account result in credit
support. The insurer will require the issuer to increase and maintain credit
support at a level it establishes. This level changes over time, and may take
two forms:
. the spread account, which is a funded cash reserve account; and
. overcollateralization.
The insurer may permit the required credit support level to reduce, or
"step down," over time.
Spread Account
On the closing date, the issuer may fund the spread account with an initial
cash deposit. On each subsequent distribution date, the trust collateral agent
will deposit additional amounts into the spread account from the auto loan
payments as described under "--Distributions" above to the extent that the funds
in the spread account are below the required level. Amounts, if any, on deposit
in the spread account on an insured distribution date will be available to fund
any Deficiency Claim Amount, to the extent provided in the spread account
agreement. Amounts on deposit in the spread account on any insured distribution
date, after giving effect to all distributions made on the insured distribution
date, in excess of the Specified Spread Account Requirement for the insured
distribution date will be released to the seller without the certificateholder's
consent.
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In addition, the seller, the insurer and the trust collateral agent may
amend the spread account agreement - and any provisions in the insurance
agreement relating to the spread account - in any respect, including, without
limitation:
. reducing or eliminating the Specified Spread Account Requirement;
. reducing or eliminating the spread account funding requirements; and/or
. permitting those funds to be used for the benefit of persons other than
certificateholders without the consent of, or notice to, the trustee, or
the certificateholders.
The trust collateral agent shall not withhold or delay its consent to any
amendment not adversely affecting the trust collateral agent in its individual
capacity. Notwithstanding any reduction in or elimination of the spread account
funding requirements or the spread account's depletion, on each insured
distribution date the insurer must fund the full amount of each scheduled
payment required to be paid and which would not be paid in the absence of a
policy payment. If the insurer breaches its obligations, the certificateholders
will bear any losses on the auto loans.
Overcollateralization
Overcollateralization is created by applying excess interest to the payment
of principal on the certificates and is paid in the form of the
Certificateholders' Accelerated Principal Amount. The excess interest is
interest which is collected on the auto loans in excess of the amount of
interest that is paid on the certificates, used to pay fees, or, under certain
circumstances, deposited to the spread account. Applying excess interest causes
the outstanding principal balance to pay down more quickly than the pool
balance.
If the insurer permits the required overcollateralization level to step
down, principal collections which would otherwise be paid through to the
certificateholders as part of the Principal Distributable Amount may be released
to the seller instead.
Servicer Termination Event
A servicer termination event under the pooling and servicing agreement will
consist of the occurrence and continuance of any of the following:
. the servicer's failure to deliver any required payment to the trust
collateral agent for distribution to the certificateholders, which
failure continues unremedied for two business days, or any failure to
deliver the servicer's certificate by the fourth business day prior to
the insured distribution date;
. the servicer's failure to observe or perform in any material respect
any other covenant or agreement under the sale and servicing agreement or
the purchase agreement (if the company is the servicer) which failure
continues unremedied for [60] days after the issuer, the trust collateral
agent or the issuer gives the servicer written notice of such failure, or
if an insurer default has occurred and
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is continuing, [60] days after any certificateholder gives the servicer
written notice
. events of insolvency, readjustment of debt, marshalling of assets and
liabilities, or similar proceedings regarding the servicer or, so long as
the company is servicer, of any of its affiliates, and actions by the
servicer, or, as long as the company is servicer, actions by its
affiliates, indicating its or their insolvency, reorganization under
bankruptcy proceedings, or inability to pay its obligations;
. any servicer representation, warranty or statement that is proved
incorrect in any material respect and which has a material adverse effect
on the insurer's interests, and the circumstances or conditions for which
the representation, warranty or statement was incorrect shall not have
been eliminated or cured;
. so long as a insurer default shall not have occurred and be continuing,
the insurer has not have delivered an extension notice;
. so long as a insurer default shall not have occurred and be continuing,
an insurance Agreement event of default or an event of default under any
other insurance and indemnity agreement relating to any series of
securities shall have occurred; or
. a claim is made under the policy.
An insurer default includes the occurrence and continuance of any of the
following events:
(a) the insurer's failure to make a required policy payment;
(b) the insurer's:
. filing or commencing of a petition or any case or proceeding under
any provision or chapter of the United States Bankruptcy Code or any
other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization,
. general assignment for the benefit of its creditors, or
. having an order for relief entered against it under the United
States Bankruptcy Code or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization which is final and nonappealable; or
(c) the entering of a final and nonappealable order, judgment or decree by
a court of competent jurisdiction, the New York Department of
insurance or other competent regulatory authority:
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. appointing a custodian, trustee, agent or receiver for the insurer
or for all or any material portion of its property or
. authorizing a custodian, trustee, agent or receiver to take
possession of the insurer or to take possession of all or any
material portion of the property of the insurer.
Rights Upon Servicer Termination Event
As long as a servicer termination event remains unremedied:
. provided no insurer default has occurred and is continuing, the insurer
in its sole and absolute discretion may terminate all of the servicer's
rights and obligations under the sale and servicing agreement; or
. if an insurer default has occurred and is continuing, then the trust
collateral agent or a certificate majority, the backup servicer, or any
other successor servicer that the insurer appoints (so long as no insurer
default has occurred and is continuing), will succeed to all the
responsibilities, duties, and liabilities of the servicer.
If the terminated servicer is not the company, the insurer will appoint a
successor servicer or, if a insurer default has occurred and is continuing, the
trust collateral agent will appoint a successor servicer.
Any successor servicer will succeed to all the responsibilities, duties,
and liabilities of the servicer under the sale and servicing agreement and will
be entitled to similar compensation arrangements. There is no assurance that
the succession of a successor servicer will not result in a material disruption
in the performance of the servicer's duties.
Waiver of Past Defaults
Notwithstanding anything to the contrary described under "Description of
the Trust Agreements -- Waiver of Past Defaults" in the prospectus, the insurer
may, on behalf of all certificateholders, waive any default by the servicer
under the sale and servicing agreement and its consequences. No waiver will
impair the certificateholders' rights with respect to subsequent defaults.
Amendment
Notwithstanding anything to the contrary described under "Description of
the Trust Agreements -- Amendment" in the prospectus, the seller and the
servicer with the consent of the trustee - which consent may not be unreasonably
withheld - and with the insurer's consent, so long as no insurer default has
occurred and is continuing, but without the consent of the certificateholders,
may amend the pooling and servicing agreement. The agreement may be amended in
this manner to cure any ambiguity, or to correct or supplement any provision in
the agreement which may be inconsistent with any
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other provision. However, the amendment shall not in any material respect
adversely affect the interests of any certificateholder. In addition, if an
insurer default has occurred and is continuing, the amendment shall not
materially adversely affect insurer's interests. The seller, the servicer and
the trustee may also amend the pooling and servicing agreement with the
insurer's, trustee's and the holders of a majority of the principal amount of
the certificates' outstanding consent to add, change or eliminate any other
provisions with respect to matters or questions arising under the agreement or
affecting the rights of the certificateholders; provided that the action will
not:
. increase or reduce in any manner, or accelerate or delay the timing of,
collections of payments on auto loans or distributions that are required
to be made for the benefit of the certificateholders; or
. reduce the percentage of the certificateholders required to consent to
any amendment, without, in either case, the consent of the holders of all
certificates outstanding. However, if an insurer default has occurred
and is continuing, the amendment shall not materially adversely affect
the interest of the insurer.
The seller and servicer must deliver to the trustee and the insurer upon
the execution and delivery of the pooling and servicing agreement and any
amendment to the pooling and servicing agreement an opinion of counsel,
satisfactory to the trustee, that all financing statements and continuation
statements have been filed.
THE POLICY
The following summary of the terms of the Policy does not purport to be
complete and is qualified in its entirety by reference to the Policy.
Simultaneously with the issuance of the certificates, the insurer will
deliver the Policy to the trust collateral agent as agent for the trustee for
the benefit of each certificateholder. Under the Policy, the insurer will
unconditionally and irrevocably guarantee to the trust collateral agent, on each
insured Distribution Date, for the benefit of each certificateholder the full
and complete payment of (i) Scheduled Payments (as defined below) on the
certificates and (ii) the amount of any Scheduled Payment which subsequently is
avoided in whole or in part as a preference payment under applicable law. In
the event the trust collateral agent fails to make a claim under the Policy,
certificateholders do not have the right to make a claim directly under the
Policy, but may sue to compel the trust collateral agent to do so.
The "Insured Distribution Date" will be the twelfth day of each month, or,
if such twelfth day is not a Business Day, the next following Business Day. In
the event that, on any Distribution Date, the certificateholders did not receive
the full amount of the Scheduled Payment then due to them, such shortfall
(together with, in the case of an interest shortfall, interest thereon at the
related interest rate) shall be due and distributable and shall be funded on the
insured Distribution Date either from the Spread Account or from the proceeds of
a drawing under the Policy. The Record Date applicable to an
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insured Distribution Date shall be the Record Date applicable to the related
Distribution Date.
"Scheduled Payments" means payments which are required to be made on the
certificates during the term of the Policy in accordance with the original terms
of the certificates when issued and without regard to any subsequent amendment
or modification of the certificates or the pooling and servicing agreement that
has not been consented to by the insurer, which payments, with respect to any
insured Distribution Date, are (i) the Certificateholders' Interest
Distributable Amount, with respect to the related Distribution Date, (ii) the
Certificateholders' Remaining Parity Deficit Amount with respect to the related
Distribution Date and (iii) with respect to the Final Scheduled Distribution
Date for any class of certificates, the outstanding principal amount of such
class on such Final Scheduled Distribution Date, after taking into account
reductions on such date of such outstanding principal amount from all sources
other than the Policy. Scheduled Payments do not include payments which become
due on an accelerated basis as a result of (a) a default by the Trust, (b) an
election by the Trust to pay principal on an accelerated basis, (c) the
occurrence of an Event of Default under the pooling and servicing agreement or
(d) any other cause, unless the insurer elects, in its sole discretion, to pay
in whole or in part such principal due upon acceleration, together with any
accrued interest to the date of acceleration. In the event the insurer does not
so elect, the Policy will continue to guarantee Scheduled Payments due on the
certificates in accordance with their original terms. Scheduled Payments shall
not include (x) any portion of a Certificateholders' Interest Distributable
Amount or of a Certificateholders' Interest Carryover Amount due to
certificateholders because the appropriate notice and certificate for payment in
proper form was not timely Received (as defined below) by the insurer, (y) any
portion of a Certificateholders' Interest Distributable Amount due to
certificateholders representing interest on any Certificateholders' Interest
Carryover Shortfall accrued from and including the date of payment of the amount
of such Certificateholders' Interest Carryover Shortfall pursuant to the Policy
or (z) any Certificate Prepayment Amounts, unless the insurer elects, in its
sole discretion, to pay such amount in whole or in part. Scheduled Payments
shall not include, nor shall coverage be provided under the Policy in respect
of, any taxes, withholding or other charge imposed with respect to any
certificateholder by any governmental authority due in connection with the
payment of any Scheduled Payment to a certificateholder.
Payment of claims on the Policy made in respect of Scheduled Payments will
be made by the insurer following Receipt (as defined below) by the insurer of
the appropriate notice for payment on the later to occur of (i) 12:00 noon, New
York City time, on the third Business Day following Receipt of such notice for
payment, and (ii) 12:00 noon, New York City time, on the date on which such
payment was due on the certificates.
If payment of any amount avoided as a preference under applicable
bankruptcy, insolvency, receivership or similar law is required to be made under
the Policy, the insurer shall cause such payment to be made on the later of (a)
the date when due to be paid pursuant to the Order referred to below or (b) the
first to occur of (i) the [fourth] Business Day following Receipt by the insurer
from the trust collateral agent of (A) a
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certified copy of the order (the "Order") of the court or other governmental
body that exercised jurisdiction to the effect that the certificateholder is
required to return Scheduled Payments made with respect to the certificates
during the term of the Policy because such payments were avoidable as preference
payments under applicable bankruptcy law, (B) a certificate of the
certificateholder that the Order has been entered and is not subject to any stay
and (C) an assignment duly executed and delivered by the certificateholder, in
such form as is reasonably required by the insurer and provided to the
certificateholder by the insurer, irrevocably assigning to the insurer all
rights and claims of the certificateholder relating to or arising under the
certificates against the Trust or otherwise with respect to such preference
payment, or (ii) the date of Receipt (as defined below) by the insurer from the
trust collateral agent of the items referred to in clauses (A), (B) and (C)
above if, at least four Business Days prior to such date of Receipt, the insurer
shall have Received (as defined below) written notice from the trust collateral
agent that such items were to be delivered on such date and such date was
specified in such notice. Such payment shall be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
and not to the trust collateral agent or any certificateholder directly (unless
a certificateholder has previously paid such amount to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order,
in which case such payment shall be disbursed to the trust collateral agent for
distribution to such certificateholder upon proof of such payment reasonably
satisfactory to the insurer). In connection with the foregoing, the insurer
shall have the rights provided pursuant to the Sale and Servicing Agreement,
including, without limitation, the right to direct all matters relating to any
preference claim and subrogation to the rights of the trust collateral agent and
each certificateholder in the conduct of any proceeding with respect to a
preference claim.
Other Provisions of the Policy
The terms "Receipt" and "Received" with respect to the Policy shall mean
actual delivery to the insurer and to its fiscal agent, if any, prior to 12:00
noon, New York City time, on a Business Day; delivery either on a day that is
not a Business Day or after 12:00 noon, New York City time, shall be deemed to
be Received on the next succeeding Business Day. If any notice or certificate
given under the Policy by the trust collateral agent is not in proper form or is
not properly completed, executed or delivered, it shall be deemed not to have
been Received, and the insurer or its fiscal agent shall promptly so advise the
Trust collateral agent, and the trust collateral agent may submit an amended
notice.
Under the Policy, "Business Day" means any day other than a Saturday,
Sunday, legal holiday or other day on which commercial banking institutions in
Wilmington, Delaware, New York, New York or Columbus, Ohio or any other location
of any successor servicer, or successor trust collateral agent are authorized or
obligated by law, executive order or governmental decree to be closed.
The insurer's obligations under the Policy in respect of Scheduled Payments
shall be discharged to the extent funds are transferred to the trust collateral
agent as provided in the Policy whether or not such funds are properly applied
by the Trust collateral agent.
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The insurer shall be subrogated to the rights of each certificateholder to
receive payments of principal and interest to the extent of any payment by the
insurer under the Policy.
Claims under the Policy constitute direct, unsecured and unsubordinated
obligations of the insurer ranking not less than pari passu with other unsecured
and unsubordinated indebtedness of the insurer for borrowed money. Claims
against the insurer under the Policy and each other financial guaranty insurance
policy issued thereby constitute pari passu claims against the general assets of
the insurer. The terms of the Policy cannot be modified or altered by any other
agreement or instrument, or by the merger, consolidation or dissolution of the
Trust. The Policy may not be canceled or revoked prior to distribution in full
of all Scheduled Payments. The Policy is not covered by the Property/Casualty
insurance Security Fund specified in Article 76 of the New York insurance Law.
The Policy is governed by the laws of the State of New York.
It is a condition to issuance that the Class A Certificates be rated [A-l+]
by S&P and [P-l] by Moody's, and that the Class B Certificates, be rated [AAA]
by S&P and [Aaa] by Moody's. The ratings by the Rating Agencies of the
certificates will be (i) with respect to the Class A Certificates, without
regard to the Policy in the case of S&P and substantially based on the Policy in
the case of Moody's and (ii) with respect to the Class B Certificates, based on
the issuance of the Policy. To the extent that such ratings are based on the
Policy, such ratings apply to distributions due on the insured Distribution
Dates, and not to distributions due on the Distribution Dates. A rating is not
a recommendation to purchase, hold or sell certificates. In the event that the
rating initially assigned to any of the certificates is subsequently lowered or
withdrawn for any reason, including by reason of a downgrading of the claims-
paying ability of the insurer, no person or entity will be obligated to provide
any additional credit enhancement with respect to the certificates. Any
reduction or withdrawal of a rating may have an adverse effect on the liquidity
and market price of the certificates. See "Ratings" herein.
Material Federal Income Tax Consequences
The following is a general discussion of certain federal income tax
consequences of the purchase, ownership and disposition of the certificates.
This summary is based upon laws, regulations, rulings and decisions currently in
effect, all of which are subject to change. The discussion does not deal with
all federal tax consequences applicable to all categories of investors, some of
which may be subject to special rules. In addition, this summary is generally
limited to investors who will hold the certificates as "capital assets" which
generally means property held for investment, within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended, referred to in this prospectus
supplement as the Code. Investors should consult their own tax advisors to
determine the federal, state, local and other tax consequences of the purchase,
ownership and disposition of the certificates. Prospective investors should
know that no rulings have been or will be sought from the IRS regarding any of
the federal income tax consequences discussed below, and no assurance can be
given that the IRS will not take contrary positions.
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Tax Status of the Trust
In the opinion of Dewey Ballantine LLP, special tax counsel to the Company,
the issuer will be classified as a grantor trust under subpart E, part I of
subchapter J of Chapter 1 of Subtitle A of the Code and not as an association or
publicly traded partnership taxable as a corporation for federal income tax
purposes. Certificateholders will be treated as the owners of the trust, except
as described below.
General
For purposes of federal income tax, the certificateholders will each be
deemed to have acquired a fixed portion of the interest due on each auto loan.
These fixed portions of interest will be treated as "stripped coupons" within
the meaning of the Code. Accordingly, for federal income tax purposes, each
certificateholder will be treated as owning its pro rata percentage interest in
the principal of each auto loan and such interest in each auto loan will be
treated as a "stripped bond" within the meaning of Section 1286 of the Code.
Income on the Auto Loans
Each certificateholder will be required to report on its federal income tax
return, in a manner consistent with its method of accounting, its pro rata
allocable share of the entire gross income of the trust, including interest or
finance charges earned on the auto loans, and any gain or loss upon collection
or disposition of the auto loans. In computing its federal income tax
liability, a certificateholder will be entitled to deduct, consistent with its
method of accounting, its pro rata allocable share of reasonable fees and
expenses that are paid or incurred by the trust as provided in Section 162 or
212 of the Code. If a certificateholder is an individual, estate or trust the
deduction for its pro rata share of such fees will be allowed only to the extent
that all of its miscellaneous itemized deductions, including its share of such
fees, exceed 2% of its adjusted gross income. In addition, Code Section 68
provides that itemized deductions otherwise allowable for a taxable year of an
individual taxpayer whose adjusted gross income exceeds a specified amount will
be reduced by the lesser of (1) 3% of the excess, if any, of adjusted gross
income over such amount, or (2) 80% of the amount of itemized deductions
otherwise allowable for such year. As a result, such investors holding
certificates, directly or indirectly through a pass-through entity, may have
aggregate taxable income in excess of the aggregate amount of cash received on
such certificates with respect to interest at the certificate rate. A
certificateholder using the cash method of accounting must take into account its
pro rata share of income and deductions as and when collected by or paid by the
trust. A certificateholder using the accrual method of accounting must take
into account its pro rata share of income and deductions as and when such
amounts become due to or payable by the trust.
A certificateholder will not be subject to the market discount rules
discussed below regarding the stripped auto loans, but instead will be subject
to the original issue discount rules contained in the Code. A certificateholder
will be required to include any
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original issue discount in income as it accrues, regardless of whether cash
payments are received, using a method reflecting a constant rate of interest on
the auto loans.
Stripped Bonds and Stripped Coupons
Although the tax treatment of stripped bonds is not entirely clear, based
on guidance by the IRS, each purchaser of a certificate will be treated as the
purchaser of a stripped bond or stripped coupon which generally should be
treated as a single debt instrument issued on the day it is purchased for
purposes of calculating any original issue discount. Generally, under Treasury
regulations, if the discount on a stripped bond certificate is larger than a de
minimis amount, as calculated for purposes of the original issue discount rules
of the Code, that stripped bond certificate will be considered to have been
issued with original issue discount. See "-- Accrual of Original Issue
Discount."
Accrual of Original Issue Discount
In determining whether a certificateholder has purchased its interest in
the auto loans or any auto loan at a discount, a portion of the purchase price
for a certificate may be allocated to the accrued interest on the auto loans at
the time of purchase as though that accrued interest were a separate asset.
This would reduce the portion of the purchase price allocable to the
certificateholder's undivided interest in the auto loans. If the interests in
the auto loans represented by the certificates are considered to be issued with
original issue discount, the rules described in this paragraph would apply.
Generally, the owner of a stripped bond or stripped coupon issued or acquired
with original issue discount must include in gross income the sum of the daily
portions, as described below, of such original issue discount for each day on
which it owns a certificate, including the date of purchase but excluding the
date of disposition. In the case of an original certificateholder, the daily
portions of original issue discount for a certificate generally would be
determined as follows. A calculation will be made of the portion of original
issue discount that accrues with respect to the certificate during each
successive monthly accrual period. This will be done, in the case of each full
monthly accrual period, by adding (1) the present value of all remaining
payments to be received on the certificate under the prepayment assumption used
for the certificates and (2) any payments received during such accrual period,
and subtracting from that total the adjusted issue price of the certificate at
the beginning of that accrual period. No representation is made that the auto
loans will prepay at any specified rate. The adjusted issue price of a
certificate at the beginning of the first accrual period is its issue price, as
determined for purposes of the original issue discount rules of the Code, and
the adjusted issue price of a certificate at the beginning of a subsequent
accrual period is the adjusted issued price at the beginning of the immediately
preceding accrual period plus the amount of original issue discount allocable to
that accrual period and reduced by the amount of any payment made at the end of
or during that accrual period. The original issue discount accruing during such
accrual period will then be divided by the number of days in the period to
determine the daily portion of original issue discount for each day in the
period. For an initial accrual period shorter than a full monthly accrual
period, the daily portions of original issue discount must be determined
according to a reasonable method as set forth in the Treasury Regulations
regarding original issue discount.
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For the certificates, the method of calculating original issue discount as
described above will cause the accrual of original issue discount to either
increase or decrease but never below zero, in any given accrual period to
reflect the fact that prepayments are occurring at a faster or slower rate than
the prepayment assumption used for the certificates.
Subsequent purchasers that purchase certificates at more than a de minimis
discount should consult their tax advisors about the proper method to accrue
such original issue discount.
Premium
The purchase of a certificate at more than its adjusted principal amount
will result in the creation of a premium with respect to the interest in the
underlying auto loans represented by those certificates. In determining whether
a certificateholder has purchased its interest in the auto loans at a premium, a
portion of the purchase price for a certificate may be allocated to the accrued
interest on the auto loans at the time of purchase as though such accrued
interest were a separate asset, thus reducing the portion of the purchase price
allocable to the certificateholder's undivided interest in the auto loans. A
purchaser who does not hold the certificate for sale to borrowers or in
inventory may elect under Section 171 of the Code to amortize that premium.
Under the Code, premium is allocated among the interest payments on the auto
loans to which it relates and is considered as an offset against and thus a
reduction of such interest payments. With certain exceptions, that election
would apply to all debt instruments held or subsequently acquired by the
electing holder. If the election is not made, the premium will be deductible as
an ordinary loss only upon disposition of the certificate or pro rata as
principal is paid on the auto loans.
Holders of certificates acquired at a premium are urged to consult with
their own tax advisors regarding the proper treatment of the certificates for
federal income tax purposes.
Sale of a Certificate
If a certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale, allocable to each of the
auto loans and the certificateholder's adjusted basis in each of them. However,
amounts attributable to accrued and unpaid interest which will be treated as
ordinary income. A certificateholder's adjusted basis will equal the
certificateholder's cost for the certificate, increased by any discount
previously included in income, and decreased, but not below zero, by any
previously amortized premium and by the amount of payments previously received
on the auto loans. Any gain or loss will be capital gain or loss if the
certificate was held as a capital asset, except that gain will be treated in
whole or in part as ordinary interest income to the extent of the seller's
interest in accrued market discount not previously taken into income on
underlying auto loans having a fixed maturity date of more than one year from
the date of origination. A capital gain or loss will be long-term
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or short-term depending on whether or not the certificates have been owned for
more than one year.
Foreign Certificateholders
Interest attributable to the auto loans which is received by a foreign
certificateholder will generally not be subject to the normal 30% withholding
tax imposed on those payments, provided that (1) the foreign certificateholder
does not own, directly or indirectly, 10% or more of, and is not a controlled
foreign corporation related to, the seller and (2) that holder fulfills certain
certification requirements. Under those requirements, the holder must certify,
under penalty of perjury, that it is not a United States person and provide its
name and address. For this purpose, United States person means a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision of the United States, an estate the income of which is includible in
gross income for United States federal income tax purposes regardless of its
source or a trust if a court within the United States is able to exercise
primary supervision of the administration of the trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust. Gain realized upon the sale of a certificate by a foreign
certificateholder generally will not be subject to United States withholding
tax. If, however, such interest or gain is effectively connected to the conduct
of a trade or business within the United States by that foreign
certificateholder, that holder will be subject to United States federal income
tax on the certificates at regular rates. Potential investors who are not
United States persons should consult their own tax advisors regarding the
specific tax consequences to them of owning a certificate.
Information Reporting and Backup Withholding
The trustee will furnish or make available, within the prescribed period of
time for tax reporting purposes after the end of each calendar year, to each
certificateholder or each person holding a certificate on behalf of a
certificateholder at any time during such year, such information as the trustee
deems necessary or desirable to assist certificateholders in preparing their
federal income tax returns. Payments made on the certificates and proceeds from
the sale of the certificates will not be subject to a "backup" withholding tax
of 31% unless, in general, a certificateholder fails to comply with certain
reporting procedures and is not an exempt recipient under applicable provisions
of the Code.
New Withholding Regulations
On October 6, 1997, the Treasury Department issued new withholding
regulations which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The new
withholding regulations attempt to unify certification requirements and modify
reliance standards. The new withholding regulations will generally be effective
for payments made after December 31, 2000, subject to certain transition rules.
Prospective investors are urged to consult their own tax advisors regarding the
new withholding regulations.
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ERISA Considerations
Class A Certificates
The Class A Certificates may be purchased by ERISA plans as described in
the prospectus under "ERISA Considerations - ERISA Considerations regarding
Securities which are Certificates."
The Department of Labor has issued to the underwriter an individual
prohibited transaction exemption which, as described in the prospectus,
generally exempts from the application of the prohibited transaction provisions
of Section 406(a), Section 406(b)(1), Section 406(b)(2) and Section 407(a) of
ERISA and the excise taxes imposed by Sections 4975(a) and (b) of the Internal
Revenue Code, transactions concerning the initial purchase, the holding and the
subsequent resale by employee benefit plans of certificates in pass-through
trusts that consist of receivables, loans and other obligations that meet the
conditions and requirements of the exemption. The loans covered by the
underwriter's exemption include loans such as the auto loans.
As of the initial cut-off date, there is no single auto loan included in
the trust that constitutes more than five percent of the aggregate unamortized
principal balance of the assets of the trust. Before purchasing a certificate
based on the underwriter's exemption, a fiduciary of a plan should itself
confirm (1) that such certificate constitutes a concerning certificate for
purposes of the exemption and (2) that the conditions and other requirements set
forth in the exemption would be satisfied.
Any plan fiduciary considering the purchase of a Class A Certificate may
wish to consult with its counsel as to the potential applicability of ERISA, the
Code and the underwriter's exemption prior to making an investment in the Class
A Certificates. Moreover, each plan fiduciary may wish to determine whether,
under the general fiduciary standards of investment prudence and
diversification, an investment in the certificates is appropriate for the plan,
taking into account the overall investment policy of the plan and the
composition of the plan's investment portfolio.
The sale of the Class A Certificates to a plan is not a representation by
us or the underwriter that this investment meets all relevant legal requirements
for investments by plans generally or by any particular plan or that this
investment is appropriate for plans generally or any particular plan.
Class B Certificates
The Class B Certificates may not be acquired by (1) an employee benefit
plan that is subject to the provisions of ERISA, (2) a plan described in Section
4975 (e) (1) of the Internal Revenue Code or (3) any entity whose underlying
assets include plan assets by reason of a plan's investment in the entity. By
its acceptance of a Class B Certificate, each Class B Certificateholder will be
considered to have represented and warranted that it is not subject to these
limitations. For additional information regarding treatment of the
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Class B Certificates under ERISA, see "ERISA Considerations -- ERISA
Considerations regarding Securities which are Certificates" in the prospectus.
Ratings
It is a condition to the certificates' issuance that the Class A
Certificates be rated [A-1+] by S&P, and [P-1] by Moody's, and that the Class B
Certificates be rated [AAA] by S&P and [Aaa] by Moody's.
The certificates' ratings will be:
. [without regard to the policy in the case of S&P and substantially
based on the policy in the case of Moody's for the Class A
Certificates, and
. based primarily on the policy for the Class B of Certificates.]
To the extent that the ratings are based on the policy, the ratings apply
to distributions due on the insured distribution dates, and not to distributions
due on the distribution dates. We cannot assure you that the rating agencies
will not lower or withdraw the ratings.
Underwriting
Subject to the terms and conditions described in an underwriting agreement,
the seller has agreed to cause the issuer to sell to each of the underwriters
named below the certificates. Each of the underwriters has severally agreed to
purchase, the principal amount of the certificates set forth opposite its name
below:
Class A Certificates
<TABLE>
<CAPTION>
Principal Amount
----------------
<S> <C>
[Underwriter]................................................................. $
[Underwriter].................................................................
[Underwriter].................................................................
[Underwriter].................................................................
Total...................................................................... $
=
Class B Certificates
Principal Amount
----------------
[Underwriter]................................................................. $
[Underwriter].................................................................
[Underwriter].................................................................
[Underwriter].................................................................
Total...................................................................... $
=
</TABLE>
The underwriters have advised the seller that they propose initially to
offer the certificates to the public at the prices listed below, and to dealers
at prices less the initial concession not in excess of _____% per Class A
Certificate and _____% per Class B
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Certificate. The underwriters may allow and dealers may reallow a concession not
in excess of _____% per Class A Certificate and _____% per Class B Certificate
to other dealers. After the initial public offering of the certificates, the
public offering prices and such concessions may be changed.
Each underwriter has represented and agreed that:
. it has not offered or sold, and will not offer or sell, any certificates
to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments, as principal or agent, for the purposes of their businesses
or otherwise in circumstances that do not constitute an offer to the
public in the United Kingdom for the purposes of the Public Offers of
Securities Regulations 1995,
. it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 of Great Britain with respect to anything
done by it in relation to the certificates in, from or otherwise
involving the United Kingdom and
. it has only issued or passed on and will only issue or pass on in the
United Kingdom any document in connection with the issue of the
certificates to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1995 or is a person to whom the document may otherwise lawfully be
issued or passed on.
Upon receiving a request by an investor who has received an electronic
prospectus supplement and prospectus from an underwriter or a request by the
investor's representative within the period during which there is an obligation
to deliver a prospectus supplement and prospectus, the underwriter will promptly
deliver, or cause to be delivered, without charge, a paper copy of the
prospectus supplement and prospectus.
The seller or its affiliates may apply all or any portion of the net
proceeds of this offering to the repayment of debt, including "warehouse" debt
secured by the auto loans - prior to their sale to the issuer. One or more of
the underwriters, or their respective affiliates, may have acted as a "warehouse
lender" to its affiliates, and may receive a portion of the proceeds as a
repayment of the "warehouse" debt.
In connection with this offering the underwriters may over-allot or effect
transactions which stabilize or maintain the market prices of the certificates
at levels above those which might otherwise prevail in the open market. Such
stabilizing, if commenced, may be discontinued at any time.
Experts
The consolidated balance sheets of Financial Security Assurance Inc. and
its subsidiaries as of __________ and _____ and the related consolidated
statements of income, changes in shareholder's equity and cash flows for each of
the three years in the
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period ended __________, incorporated by reference in this prospectus
supplement, are incorporated in reliance on the report of [ ], independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
Legal Opinions
In addition to the legal opinions described in the prospectus, certain
federal income tax and other matters will be passed upon for the seller and the
issuer by Dewey Ballantine LLP, New York, New York. Certain legal matters
relating to the certificates will be passed upon for the [company] by Dewey
Ballantine LLP, New York, New York. Certain legal matters will be passed upon
for the insurer by [ ], [Assistant] General Counsel,
to the insurer. The insurer is represented by [ ], New York, New York.
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Glossary
"Accelerated Principal Amount" means for a distribution date, an amount
which equals the lesser of
(x) the sum of:
(a) the excess, if any, of the amount of Available Funds on the
distribution date over the amounts distributable on the
distribution date under clauses 1 through 6 under "Distributions"
plus
(b) amounts, if any, available according to the terms of the Spread
Account Agreement; and
(y) the greater of
(a) the excess, if any, on the distribution date of:
. the Pro Forma Certificate Balance for the distribution date over
. the Required Pro Forma Certificate Balance for the distribution
date, and
(b) the amount necessary, after taking into account all other
distributions to be made on the date, to reduce the principal balance
of the Class A Certificates to zero.
"Additional Funds Available" means, with respect to any insured
distribution date, the sum of:
(a) the deficiency claim amount, if any, received by the trustee with
respect to the insured distribution date
plus
(b) the Insurer Optional Deposit, if any, received by the trustee with
respect to the insured distribution date.
"Amount Financed" means, for any auto loan, the aggregate amount loaned
toward the purchase price of the financed vehicle and related costs, including
amounts advanced for:
. accessories,
. insurance premiums,
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. service,
. car club and warranty contracts,
. other items customarily financed as part of retail automobile
installment sale contracts or promissory certificates, and related
costs.
"Available Funds" means, for any calendar month, the sum of:
. the Collected Funds for the calendar month,
. all purchase amounts deposited in the collection account during the
calendar month, plus income on investments held in the collection
account,
. the Monthly Capitalized Interest Amount for the distribution date which
immediately follows the calendar month,
. the proceeds of any liquidation of the assets of the issuer, and
. any remaining pre-funded amount applied to the mandatory redemption of
the certificates.
"Certificateholders' Accelerated Principal Amount" means, for any
distribution date, the Certificateholders' Percentage of the Accelerated
Principal Amount on the distribution date, if any.
"Certificateholders' Distributable Amount" means, any distribution date,
the sum of the Certificateholders' Principal Distributable Amount and the
Certificateholders' Interest Distributable Amount.
"Certificateholders' Interest Carryover Amount" means, for any class of
certificates and any determination date, all or any portion of the
Certificateholders' Interest Distributable Amount for the class for the
immediately preceding distribution date, and any outstanding Certificateholders'
Interest Carryover Amount still unpaid as of the determination date, plus, to
the extent permitted by law, interest on the unpaid amount at the interest rate
paid by the class of certificates from the preceding distribution date to but
excluding the determination date.
"Certificateholders' Interest Distributable Amount" means, for any
distribution date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for each class of certificates for the distribution date
and the Certificateholders' Interest Carryover Amount, if any, for each class of
certificates, calculated as of the distribution date.
"Certificateholders' Monthly Interest Distributable Amount" means, for any
distribution date and any class of certificates, that the interest accrued
during the applicable interest period shall accrue on the principal amount of
the certificates of each class outstanding as of the end of the prior
distribution date or, in the case of the first distribution date, as of the
closing date. However, if the principal balance is further
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reduced by a principal payment on the insured distribution date immediately
following the prior distribution date, then the interest shall accrue:
. from and including the prior distribution date to, but excluding, the
related insured distribution date, on the principal balance outstanding
as of the end of the prior distribution date - or, in the case of the
first distribution date, as of the closing date; and
. from and including the insured distribution date, to, but excluding, the
following distribution date, on the principal balance outstanding as of
the end of the insured distribution date, calculated on the basis of a
360-day year and:
[(a) in the case of the Class A Certificates [and the Class B
Certificates], the actual number of days elapsed; and
(b) in the case of the Class A Certificates [and the Class B
Certificates,] twelve 30-day months.]
"Certificateholders' Monthly Principal Distributable Amount" means, for any
distribution date, the Certificateholders' Percentage of the Principal
Distributable Amount.
"Certificateholders' Parity Deficit Amount" means, for any distribution
date, the excess, if any, of:
(x) the aggregate remaining principal balance outstanding on the
distribution date, after giving effect to all reductions in the aggregate
principal balance from sources other than:
. the spread account and
. the policy
over;
(y) the sum of the pool balance and the pre-funded amount at the end
of the prior calendar month.
"Certificateholders' Percentage" means:
. for each distribution date prior to the distribution date on which the
Class A Certificates are fully paid, 100%;
. on the distribution date on which the Class B Certificates are fully
paid, the percentage equivalent of a fraction, the numerator of which is
the outstanding principal amount of the Class B Certificates immediately
prior to the distribution date, and the denominator of which is the
Principal Distributable Amount for the distribution date; and
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. for any distribution date thereafter, zero.
"Certificateholders' Principal Carryover Amount" means, as of any
determination date, all or any portion of the Certificateholders' Principal
Distributable Amount and any outstanding Certificateholders' Principal Carryover
Amount from the preceding distribution date which remains unpaid.
"Certificateholders' Principal Distributable Amount" means, for any
distribution date, other than the final scheduled distribution date for any
class of certificates, the sum of the Certificateholders' Monthly Principal
Distributable Amount for the distribution date and the Certificateholders'
Principal Carryover Amount, if any, as of the distribution date.
The Certificateholders' Principal Distributable Amount on the final
scheduled distribution date for any class will equal the sum of:
(1) the Certificateholders' Monthly Principal Distributable Amount
for the distribution date;
(2) the Certificateholders' Principal Carryover Amount as of the
distribution date; and
(3) the excess of the outstanding principal amount of the class of
certificates, if any, over the amounts described in clauses (1)
and (2).
"Certificateholders' Remaining Parity Deficit Amount" means, for any
distribution date:
. the Certificateholders' Parity Deficit Amount for the distribution date
minus
. any reduction in the certificate's aggregate principal balance on the
distribution date which is funded from the spread account.
"Collected Funds" means, any calendar month, the amount of funds in the
collection account representing auto loan collections during the calendar month,
including all Net Liquidation Proceeds collected during the calendar month, but
excluding any purchase amounts.
"Cram Down Loss" means, for any automobile loan, if a court of appropriate
jurisdiction in an insolvency proceeding issued an order reducing the amount
owed on the auto loan or otherwise modifying or restructuring the scheduled
payments to be made on the auto loan, an amount equal to;
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. the excess of the auto loan's principal balance immediately prior to the
auto loan order over the auto loan's principal balance as reduced and/or
. if the court issued an order reducing the effective interest rate on the
auto loan, the excess of the auto loan principal balance immediately
prior to the order over the auto loan's net present value - using as the
discount rate the higher of the APR on the auto loan or the rate of
interest, if any, specified by the court in the order - of the scheduled
payments as so modified or restructured. A Cram Down Loss shall be
deemed to have occurred on the order's issuance date.
"Insurer Optional Deposit" means, for any insured distribution date, an
amount other than the Policy Claim Amount delivered by the insurer, at its sole
option, for deposit into the collection account for any of the following
purposes:
. to provide funds to pay the fees or expenses of any of the issuer's
service providers for the insured distribution date; or
. to include those amounts as part of Additional Funds Available for the
insured distribution date to the extent that without them a draw would
be required to be made on a policy.
"Net Liquidation Proceeds" means, for liquidated auto loans:
. proceeds from the underlying financed vehicles' disposition, minus
. the servicer's reasonable out-of-pocket costs, including repossession
and resale expenses not already deducted from the proceeds, and any
amounts the obligor is required to remit by law;
. any insurance proceeds; or
. other monies received from the obligor.
Policy Claim Amount means for any insured distribution date, the sum of
(x) the excess, if any, without duplication, of:
. the sum of the Certificateholders' Interest Distributable Amount and
the Certificateholders' Parity Deficit Amount for the related
distribution date, together with:
(a) if the related distribution date was the mandatory redemption
date, the Certificate Prepayment Amount; and
(b) if the related distribution date was the final scheduled
distribution date for any class, the unpaid principal balance of the class;
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over
. the sum of:
(a) the amount actually deposited into the Certificate payment
account on the related distribution date; and
(b) Additional Funds Available, if any, for the insured
distribution date
plus
(y) the Certificateholders' Interest Carryover Amount, if any, which has
accrued since the related distribution date.
"Principal Balance" means, with respect to any auto loan, as of any date,
the Amount Financed minus (a) that portion of all amounts received on or prior
to the date and allocable to principal in accordance with the terms of the auto
loan, and (b) any Cram Down Loss in respect of the auto loan. The "Principal
Balance" of a liquidated auto loan or a purchased auto loan shall be zero.
"Principal Distributable Amount" means, for any distribution date, the
amount equal to the excess, if any, of:
(x) the sum of the following amounts for the related calendar month,
computed according to the simple interest method:
. collections received on auto loans, other than liquidated and purchased
auto loans, allocable to principal, including full and partial principal
prepayments;
. the principal balance of all auto loans, other than purchased auto
loans, that became liquidated auto loans during the calendar month,
. (A) the portion of the purchase amount allocable to principal of all
auto loans that became purchased auto loans as of the immediately
preceding record date;
. (B) at the option of the insurer, the outstanding principal balance of
those auto loans that the seller or the company was required repurchase
during the calendar month but were not repurchased; and
. the aggregate amount of Cram Down Losses during the related calendar
month over
(y) the Step-Down Amount, if any, for the distribution date.
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"Pro Forma Certificate Balance" means, for any distribution date, the
aggregate remaining principal balance of the certificates outstanding on the
distribution date, after giving effect to distributions under clauses 1 through
4 under "Distributions."
"Required Pro Forma Certificate Balance" means, for any distribution date,
a dollar amount equal to product of
(x) 90%; and
(y) the sum of the pool balance and the pre-funded amount as of the end of
the prior calendar month.
"Step-Down Amount" means, for any distribution date, the excess, if any,
of:
(x) the Required Pro Forma Certificate Balance; over
(y) the Pro Forma Certificate Balance on the distribution date, for this
purpose only calculated without deduction for any Step-Down Amount - i.e., with
the assumption that the entire amount described in clause (x) of the definition
of "Principal Distributable Amount" is distributed as principal on the
certificates.
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Annex I
Clearance, Settlement and Tax Documentation Procedures
Except in limited circumstances, the securities will be available only in
book-entry form. Investors in the securities may hold the securities through
any of DTC, Cedelbank or Euroclear. The securities will be tradeable as home
market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors through Cedelbank and Euroclear
will be conducted in the ordinary way in accordance with the normal rules and
operating procedures of Cedelbank and Euroclear and in accordance with
conventional eurobond practice, which is seven calendar day settlement.
Secondary market trading between investors through DTC will be conducted
according to DTC's rules and procedures applicable to U.S. corporate debt
obligations.
Secondary cross-market trading between Cedelbank or Euroclear and DTC
participants holding securities will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedelbank and Euroclear and as DTC
participants.
Non-U.S. holders of global securities will be subject to U.S. withholding
taxes unless the holders meet a number of requirements and deliver appropriate
U.S. tax documents to the securities clearing organizations or their
participants.
Initial Settlement
All securities will be held in book-entry form by DTC in the name of Cede &
Co. as nominee of DTC. Investors' interests in the securities will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, Cedelbank and Euroclear will hold
positions on behalf of their participants through their relevant depository
which in turn will hold these positions in their accounts as DTC participants.
Investors electing to hold their securities through DTC will follow DTC
settlement practices. Investor securities custody accounts will be credited
with their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their securities through Cedelbank or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary security and no lock-up or
restricted period. Securities will be credited to the securities custody
accounts on the settlement date against payment in same-day funds.
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Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants
Secondary market trading between DTC participants will be settled using the
procedures applicable to asset-back securities issues in same-day funds.
Trading between Cedelbank or Euroclear Participants
Secondary market trading between Cedelbank participants or Euroclear
participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
Trading between DTC, Seller and Cedelbank or Euroclear Participants
When securities are to be transferred from the account of a DTC participant
to the account of a Cedelbank participant or a Euroclear participant, the
purchaser will send instructions to Cedelbank or Euroclear through a Cedelbank
participant or Euroclear participant at least one business day prior to
settlement. Cedelbank or Euroclear will instruct the relevant depository, as
the case may be, to receive the securities against payment. Payment will
include interest accrued on the securities from and including the last coupon
distribution date to and excluding the settlement date, on the basis of the
actual number of days in the accrual period and a year assumed to consist of 360
days. For transactions settling on the 31st of the month, payment will include
interest accrued to and excluding the first day of the following month. Payment
will then be made by the relevant depository to the DTC participant's account
against delivery of the securities. After settlement has been completed, the
securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Cedelbank
participant's or Euroclear participant's account. The securities credit will
appear the next day, European time and the cash debt will be back-valued to, and
the interest on the global securities will accrue from, the value date, which
would be the preceding day when settlement occurred in New York. If settlement
is not completed on the intended value date and the trade fails, the Cedelbank
or Euroclear cash debt will be valued instead as of the actual settlement date.
Cedelbank participants and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Cedelbank or Euroclear. Under
this approach, they may take on credit exposure to Cedelbank or Euroclear until
the securities are credited to their account one day later.
As an alternative, if Cedelbank or Euroclear has extended a line of credit
to them, Cedelbank participants or Euroclear participants can elect not to
preposition funds and
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allow that credit line to be drawn upon to finance settlement. Under this
procedure, Cedelbank participants or Euroclear participants purchasing
securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the securities were credited to their accounts. However, interest
on the securities would accrue from the value date. Therefore, in many cases the
investment income on the global securities earned during that one-day period may
substantially reduce or offset the amount of the overdraft charges, although the
result will depend on each Cedelbank participant's or Euroclear participant's
particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for crediting global securities
to the respective European depository for the benefit of Cedelbank participants
or Euroclear participants. The sale proceeds will be available to the DTC
seller on the settlement date. Thus, to the DTC participants a cross-market
transaction will settle no differently than a trade between two DTC
participants.
Trading between Cedelbank or Euroclear Seller and DTC Purchaser
Due to time zone differences in their favor, Cedelbank participants and
Euroclear participants may employ their customary procedures for transactions in
which securities are to be transferred by the respective clearing system,
through the respective depository, to a DTC participant. The seller will send
instructions to Cedelbank or Euroclear through a Cedelbank participant or
Euroclear participant at least one business day prior to settlement. In these
cases Cedelbank or Euroclear will instruct the respective depository, as
appropriate, to credit the securities to the DTC participant's account against
payment. Payment will include interest accrued on the securities from and
including the last interest payment to and excluding the settlement date on the
basis of the actual number of days in the accrual period and a year assumed to
consist of 360 days. For transactions settling on the 31st of the month,
payment will include interest accrued to and excluding the first day of the
following month. The payment will then be reflected in the account of Cedelbank
participant or Euroclear participant the following day, and receipt of the cash
proceeds in the Cedelbank participant's or Euroclear participant's account would
be back-valued to the value date, which would be the preceding day, when
settlement occurred in New York. In the event that the Cedelbank participant or
Euroclear participant has a line of credit with its respective clearing system
and elects to be in debt in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft incurred over that
one-day period. If settlement is not completed on the intended value date and
the trade fails, receipt of the cash proceeds in the Cedelbank participant's or
Euroclear participant's account would instead be valued as of the actual
settlement date.
Finally, day traders that use Cedelbank or Euroclear and that purchase
global securities from DTC participants for delivery to Cedelbank participants
or Euroclear participants may wish to Certificate that these trades would
automatically fail on the sale side unless affirmative action is taken. At
least three techniques should be readily available to eliminate this potential
problem:
A-3
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. borrowing through Cedelbank or Euroclear for one day, until the purchase
side of the trade is reflected in their Cedelbank or Euroclear accounts
in accordance with the clearing system's customary procedures;
. borrowing the securities in the U.S. from a DTC participant no later
than one day prior to settlement, which would give the securities
sufficient time to be reflected in their Cedelbank or Euroclear account
in order to settle the sale side of the trade; or
. staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC participant is at
least one day prior to the value date for the sale to the Cedelbank
participant or Euroclear participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of securities holding securities through Cedelbank or
Euroclear, or through DTC if the holder has an address outside the U.S., will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest, including original issue discount, on registered debt issued by U.S.
persons, unless:
(1) each clearing system, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between the beneficial owner and the U.S.
entity required to withhold tax complies with applicable certification
requirements and
(2) the beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for Non-U.S. Persons-Form W-8
Beneficial owners of global securities that are non-U.S. persons can
obtain a complete exemption from the withholding tax by filing a signed Form W-8
Certificate of Foreign Status. If the information shown on Form W-8 changes, a
new Form W-8 must be filed within 30 days of the change.
Exemption for Non-U.S. Persons with effectively connected income-
Form 4224
A non-U.S. person, as defined below, including a non-U.S. corporation
or bank with a U.S. branch, for which the interest income is effectively
connected with its conduct of a trade or business in the United States, can
obtain an exemption from the withholding tax by filing Form 4224, Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a Trade
or Business in the United States.
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries-Form 1001
Non-U.S. persons residing in a country that has a tax treaty with the
United States can obtain an exemption or reduced tax rate, depending on the
treaty terms, by filing Form 1001, "Ownership, Exemption or Reduced Rate
Certificate". If the treaty provides only for a reduced rate, withholding tax
will be imposed at that rate unless the
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filer alternatively files Form W-8. Form 1001 may be filed by securityholders or
their agent.
Exemption for U.S. Persons-Form W-9
U.S. persons can obtain a complete exemption from the withholding tax
by filing Form W-9 "Payer's Request for Taxpayer Identification Number and
Certification".
U.S. Federal Income Tax Reporting Procedure
The Owner of a global security or, in the case of a Form 1001 or a
Form 4224 filer, his agent, files by submitting the appropriate form to the
person through whom it holds, the clearing agency, in the case of persons
holding directly on the books of the clearing agency. Form W-8 and Form 1001
are effective for three calendar years and Form 4224 is effective for one
calendar year.
On April 22, 1996, the IRS proposed regulations relating to withholding,
backup withholding and information reporting that, if adopted in their current
form would, among other things, unify current certification procedures and forms
and clarify reliance standards. The regulations are proposed to be effective
for payments made after December 31, 2000 but provide that securities issued on
or before the date that is 60 days after the proposed regulations are made final
will continue to be valid until they expire. Proposed regulations, however, are
subject to change prior to their adoption in final form.
A U.S. person is:
(1) a citizen or resident of the United States,
(2) a corporation, partnership or other entity organized in or under
the laws of the United States or any political subdivision thereof,
(3) an estate that is subject to U.S. federal income tax regardless of
the source of its income or
(4) a trust if a court within the United States can exercise primary
supervision over its administration and at least one United States
fiduciary has the authority to control all substantial decisions of the
trust.
A non-U.S. person is any person who is not a U.S. person.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of the securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the securities.
A-5
<PAGE>
Prospectus
- -------------------------------------------------------------------------------
AmeriCredit Financial Services, Inc. Automobile Receivable
Servicer Asset-Backed Securities,
Issuable in Series
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The Securities --
We suggest that you read the section . will be issued from time to time
entitled "Risk Factors" on page 9 of in series;
this prospectus and consider these . will be backed by one or more
factors before making a decision to pools of automobile loans held by the
invest in these securities. issuer;
These securities are automobile loan . will be rated in one of the four
asset-backed securities which highest rating categories by at least
represent interests in or one nationally recognized statistical
obligations of the issuer issuing rating organization; and
that series of securities and are
not interests in or obligations of . may have the benefit of one or
any other person or entity. more forms of credit enhancement,
such as insurance policies,
Neither these securities nor the overcollateralization, subordination
automobile loans will be insured or or reserve funds.
guaranteed by any governmental
agency or instrumentality. The Assets --
The assets of each issuer will
primarily consist of a pool of
Retain this prospectus for future automobile loans, funds on deposit in
reference. This prospectus may not one or more accounts and forms of
be used to consummate sales of credit support described in this
securities unless accompanied by the prospectus and in the prospectus
prospectus supplement relating to supplement.
the offering of these securities.
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
The date of this prospectus is September 16, 1999
<PAGE>
Important Information about the Information Presented in this Prospectus
and the Accompanying Prospectus Supplement
We provide information to you about the securities in two separate
documents that progressively provide more detail: (1) this prospectus, which
provides general information, some of which may not apply to a particular series
of securities; and (2) the prospectus supplement, which describes the specific
terms of your series of securities.
This prospectus by itself does not contain complete information about the
offering of your securities; the balance of that information is contained in the
prospectus supplement. We suggest that you read both this prospectus and the
prospectus supplement in full. We cannot sell the securities to you unless you
have received both this prospectus and the prospectus supplement.
Table of Contents
<TABLE>
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Page
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Summary of Prospectus................................................................ 5
Issuer.......................................................................... 5
Company......................................................................... 5
Servicer........................................................................ 5
Trustee......................................................................... 5
The Securities.................................................................. 5
Trust Property.................................................................. 6
Payment Date.................................................................... 7
Record Date..................................................................... 7
Remittance Period............................................................... 7
Credit Enhancement.............................................................. 7
Cross-Collateralization......................................................... 7
Registration of Securities...................................................... 7
Optional Termination............................................................ 8
Mandatory Termination........................................................... 8
Tax Considerations.............................................................. 8
Rating.......................................................................... 8
Risk Factors......................................................................... 9
The Trustee.......................................................................... 17
The Issuer........................................................................... 17
Composition of the Trust Property.................................................... 17
The Automobile Loans................................................................. 18
Automobile Loan Pools........................................................... 18
The Automobile Loans............................................................ 18
Rule of 78s Automobile Loans............................................... 18
Fixed Value Automobile Loans............................................... 19
Simple Interest Automobile Loans........................................... 19
Delinquencies, Repossessions, and Net Loss Information on the Automobile Loans.. 20
Maturity and Prepayment Considerations on the Automobile Loans.................. 20
AmeriCredit's Automobile Financing Program........................................... 20
General......................................................................... 20
Automobile Loan Acquisition..................................................... 21
Servicing and Collections....................................................... 22
</TABLE>
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Pool Factors......................................................................... 23
Use of Proceeds...................................................................... 24
Description of the Securities........................................................ 24
General......................................................................... 24
General Payment Terms of Securities............................................. 26
Indexed Securities.............................................................. 27
Scheduled Amortization Securities; Companion Securities......................... 28
Book-Entry Registration......................................................... 28
Definitive Securities........................................................... 31
Reports to Securityholders...................................................... 32
Forward Commitments; Pre-Funding................................................ 33
Description of the Trust Agreements.................................................. 33
Transfer of the Automobile Loans................................................ 34
Accounts........................................................................ 35
The Servicer.................................................................... 35
Servicing Procedures............................................................ 35
Payments on Automobile Loans.................................................... 36
Servicing Compensation.......................................................... 36
Distributions................................................................... 37
Credit and Cash Flow Enhancements............................................... 37
Statements to Indenture Trustees and Trustees................................... 38
Evidence as to Compliance....................................................... 38
Matters Regarding the Servicer.................................................. 38
Servicer Default................................................................ 39
Rights upon Servicer Default.................................................... 39
Waiver of Past Defaults......................................................... 39
Amendment....................................................................... 40
Insolvency Event................................................................ 40
Termination..................................................................... 41
Certain Legal Aspects of the Automobile Loans........................................ 41
General......................................................................... 41
Security Interests in the Financed Vehicles..................................... 42
General.................................................................... 42
Perfection................................................................. 42
Continuity of Perfection................................................... 43
Priority of Certain Liens Arising by Operation of Law...................... 43
Repossession.................................................................... 44
Notice of Sale; Redemption Rights............................................... 44
Deficiency Judgments and Excess Proceeds........................................ 45
Consumer Protection Laws........................................................ 45
Soldiers' and Sailors' Civil Relief Act of 1940................................. 47
Other Limitations............................................................... 47
Material Tax Considerations.......................................................... 48
General......................................................................... 48
Grantor Trust Securities........................................................ 49
Taxation of Beneficial Owners of Grantor Trust Securities.................. 49
Sales of Grantor Trust Securities.......................................... 50
Grantor Trust Reporting.................................................... 50
Debt Securities................................................................. 50
Taxation of Beneficial Owners of Debt Securities........................... 50
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Sales of Debt Securities................................................... 51
Debt Securities Reporting.................................................. 51
Partnership Interests........................................................... 51
Taxation of Beneficial Owners of Partnership Interests..................... 51
Sale or Exchange of Partnership Interests.................................. 52
Partnership Reporting...................................................... 53
FASIT Securities................................................................ 54
Taxation of Beneficial Owners of FASIT Regular Securities.................. 54
Taxes on a FASIT Trust..................................................... 56
Discount and Premium............................................................ 57
Original Issue Discount.................................................... 57
Market Discount............................................................ 59
Premium.................................................................... 60
Special Election........................................................... 60
Backup Withholding.............................................................. 61
Foreign Investors............................................................... 61
Grantor Trust Securities, Debt Securities, and FASIT Regular Securities.... 61
High-Yield FASIT Regular Securities........................................ 62
Partnership Interests...................................................... 62
State Tax Considerations............................................................. 62
ERISA Considerations................................................................. 63
General......................................................................... 63
ERISA Considerations regarding Securities which are Certificates................ 63
ERISA Considerations regarding Securities which are Notes....................... 65
Consultation With Counsel....................................................... 66
Methods of Distributions............................................................. 66
Legal Opinions....................................................................... 67
Financial Information................................................................ 68
</TABLE>
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Summary of Prospectus
. This summary highlights selected information from this prospectus and does
not contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of the offering of the
securities, carefully read this entire prospectus and the accompanying
prospectus supplement.
. This summary provides an overview of the structural elements, calculations,
cash flows and other information to aid your understanding and is qualified by
the full description of these calculations, cash flows and other information in
this prospectus and the accompanying prospectus supplement.
Issuer
The issuer for a particular series of securities may be either a special-purpose
finance subsidiary of the company or a trust formed by the company.
Company
AmeriCredit Financial Services, Inc., a Delaware corporation. The company's
principal offices are located at 801 Cherry Street, Forth Worth, Texas 76102 and
its telephone number is (817) 332-7000.
Servicer
AmeriCredit Financial Services, Inc.
Trustee
For any series of securities, the trustee named in the related prospectus
supplement.
In addition, if the issuer is a trust, it may separately enter into and issue
notes pursuant to a separate indenture. In that case, the trust and the
indenture will be administered by separate independent trustees.
The Securities
Each class of securities will be either:
. certificates evidencing beneficial
ownership in the trust property; or
. notes representing indebtedness of the issuer.
Each class or series of securities may have a different interest rate, which may
be a fixed or floating interest rate. The related prospectus supplement will
specify the interest rate for each class or series of securities, or the initial
interest rate and the method for determining subsequent changes to the interest
rate.
A series may include one or more classes which:
. are stripped of regular interest payments and entitled only to principal
distributions, with disproportionate, nominal or no interest distributions;
. are stripped of regular principal payments and entitled only to interest
distributions, with disproportionate, nominal or no principal
distributions;
. have different terms including different interest rates and different
timing, sequential order or priority of payments, amount of principal or
interest or both;
. will not distribute accrued interest but rather will add the accrued
interest to the note principal balance, or nominal balance, in
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<PAGE>
the manner described in the related
prospectus supplement;
. are senior to one or more other classes of securities in respect of
distributions of principal and interest and allocations of losses on
receivables; or
. has a lockout feature, under which a class receives no principal
distributions for an initial period, then receives all or a portion of the
principal distributions during a subsequent period.
A series of securities may provide that distributions of principal or interest
or both on any class may be made:
. upon the occurrence of specified events;
. in accordance with a schedule or formula; or
. on the basis of collections from designated portions of the related pool
of automobile loans.
Trust Property
As specified in the prospectus supplement, the trust property may consist of:
. automobile loans between manufacturers, dealers, or other originators and
retail purchasers together with all monies received relating to the
contracts;
. participation interests in automobile loans and all monies received
relating to the contracts;
. a security interest in the underlying automobiles and light duty trucks
and the proceeds from the disposition of automobiles and light duty
trucks, and property relating to the automobiles and trucks;
. Rule of 78s loans under which the obligor pays, in monthly installments, a
specified total representing the principal amount financed and finance
charges, which finance charges are calculated so that the interest portion
of each payment is greater during the early months of the contract term
and lower during later months;
. fixed value loans which provide for monthly payments with a final fixed
payment that is greater than the scheduled monthly payments;
. simple interest loans which provide for amortization of the amount
financed through a series of fixed level monthly payments;
. amounts held in any collection, reserve, pre-funding or other accounts
established pursuant to the transaction documents;
. credit enhancement for the trust property or any class of securities; and
. interest on short-term investments.
If the prospectus supplement specifies, the trustee may acquire additional
receivables during a specified pre-funding period from monies in a pre-funding
account.
If the prospectus supplement specifies, the securities may have a revolving
period. During a revolving period, the issuer may acquire additional automobile
loans from the proceeds of payments on existing automobile loans. The
securities will not pay principal during this period.
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<PAGE>
Payment Date
As described in the prospectus supplement, the securities will pay principal
and/or interest on specified dates. Payment dates will occur monthly,
quarterly, or semi-annually.
Record Date
The prospectus supplement will describe a date preceding the payment date, as of
which the trustee or its paying agent will fix the identity of securityholders.
Securityholders whose identities are fixed on this date will receive payments on
the next succeeding payment date.
Remittance Period
A period preceding each payment date - for example, in the case of monthly-pay
securities, the calendar month preceding the month in which a payment date
occurs. As the prospectus supplement will more fully describe, the servicer
will remit collections received in respect of a remittance period to the related
trustee prior to the related payment date. The collections may be used to fund
payments to securityholders on that payment date or to acquire additional
automobile loans.
Credit Enhancement
As described in the prospectus supplement, credit enhancement for the trust
property or any class of securities may include any one or more of the
following:
. a policy issued by an insurer specified in the related prospectus
supplement;
. a reserve account;
. letters of credit;
. credit or liquidity facilities;
. third party payments or other support;
. cash deposits or other arrangements;
. swaps (including currency swaps) and other derivative instruments and
interest rate protection agreements; and
. subordination, cross-collateralization and over-collateralization.
Cross-Collateralization
As described in the prospectus supplement, a series or class of securities may
include the right to receive monies from a common pool of credit enhancement
which may be available for more than one series of securities.
The common pool of credit enhancement may consist of one or more of the
following:
. a master reserve acount;
. a master insurance policy; or
. a master collateral pool.
Payments received by an issuer on automobile loans may not be used to pay
principal or interest on securities issued by any other issuer, except to the
limited extent that collections in excess of amounts needed to pay an issuer's
securities may be deposited in a common master reserve account or an
overcollateralization account that provides credit enhancement for more than one
series of securities.
Registration of Securities
The issuer may issue the securities as global securities registered in the name
of Cede & Co. as nominee of the Depository Trust
7
<PAGE>
Company, or another nominee. In this case, securityholders will not receive
definitive securities representing their interests except in limited
circumstances described in the prospectus supplement.
Optional Termination
As described in this prospectus and the prospectus supplement, the servicer, the
company, or if the prospectus supplement specifies, other entities, may, at
their respective options, cause the early retirement of a series of securities.
Mandatory Termination
As described in this prospectus and the related prospectus supplement, the
trustee, the servicer, or if the related prospectus supplement specifies, other
entities, may be required to retire early all or any portion of a series of
securities. An indenture may require these parties to solicit competitive bids
for the purchase of the trust property or otherwise.
Tax Considerations
The securities of each series will, for federal income tax purposes, constitute
one of the following:
. interests in a trust treated as a grantor trust under applicable
provisions of the Internal Revenue Code;
. debt issued by a trust or by the company secured by the underlying
automobile loans;
. interests in a trust which is treated as a partnership; or
. regular interests or high-yield interests in a trust treated as a
financial asset securitization investment conduit or FASIT under the
Internal Revenue Code.
In addition to reviewing Material Tax Considerations in this prospectus and the
prospectus supplement, you should consult your tax advisors.
ERISA Considerations
A fiduciary of a pension, profit sharing or other employee benefit plan may wish
to review with its legal advisors whether the purchase, holding or disposition
of securities could give rise to a prohibited transaction under ERISA, or the
Internal Revenue Code, and whether an exemption from the prohibited transaction
rules is available. We suggest that you review "ERISA Considerations" beginning
on page 66 in this prospectus and in the prospectus supplement.
Rating
Each class of securities offered by a prospectus supplement will be rated in one
of the four highest rating categories of at least one nationally recognized
statistical rating agency.
8
<PAGE>
Risk Factors
You should consider the following risk factors prior to any purchase of any
class of securities. You should also consider the information under the caption
"Risk Factors" in the accompanying prospectus supplement.
<TABLE>
<S> <C>
You may not be able to sell your A secondary market for these securities is
securities, and may have to hold your unlikely to develop. If it does develop, it
securities to maturity even though you may not provide you with sufficient liquidity
may want to sell it. of investment or continue for the life of
these securities. The underwriters may
establish a secondary market in the
securities, although no underwriter will be
obligated to do so. The securities are not
expected to be listed on any securities
exchange or quoted in the automated quotation
system of a registered securities association.
Issuance of the securities in book-entry form
may also reduce the liquidity in the secondary
trading market, since some investors may be
unwilling to purchase securities for which
they cannot obtain definitive physical
securities.
Prepayments on the automobile loans could The yield to maturity of the securities may be
cause you to be paid earlier than you adversely affected by a higher or lower than
expect, which may adversely affect your anticipated rate of prepayments on the
yield to maturity. automobile loans. If you purchase a security
at a premium based on your expectations as to
its maturity or weighted average life, and the
security pays principal more quickly than you
expected, your yield will be reduced and you
may not recover the premium you paid.
Similarly, if you purchase a security at a
discount based on your expectations as to its
maturity or weighted average life, and the
security pays principal more slowly than you
expected, your yield will be lower than you
anticipated.
The yield to maturity on interest only
securities will be extremely sensitive to the
rate of prepayments on the contracts. If the
automobile loans prepay very quickly the yield
on an interest only security could be
dramatically reduced.
</TABLE>
9
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<TABLE>
<CAPTION>
<S> <C>
The automobile loans may be prepaid in full or
in part at any time, although prepayment may
require the borrower to pay a prepayment
penalty or premium. These penalties will
generally not be property of the trust, and
will not be available for distributions to you.
We cannot predict the rate of prepayments of
the automobile loans, which is influenced by a
wide variety of economic, social and other
factors, including among others, obsolescence,
the prevailing interest rates, availability of
alternative financing, local and regional
economic conditions and natural disasters.
Therefore, we can give no assurance as to the
level of prepayments that a trust will
experience.
Your securities could be subject to optional
or mandatory redemption features, exposing you
to investment risk.
One or more classes of securities of any
series may be subject to optional or mandatory
redemption in whole or in part, on or after a
specified date, or on or after the time when
the aggregate outstanding principal amount of
the automobile loans or the securities is less
than a specified amount or percentage.
Since prevailing interest rates may fluctuate,
we cannot assure you that you will be able to
reinvest these amounts at a yield equaling or
exceeding the yield on your securities. You
will bear the risk of reinvesting unscheduled
distributions resulting from a redemption.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Credit enhancement, if provided, will be Credit enhancement may be provided in limited
limited in both amount and scope of amounts to cover some, but not all, types of
coverage, and may not be sufficient to cover losses on the contracts and may reduce over
all losses or risks on your investment. time in accordance with a schedule or formula.
Furthermore, credit enhancement may provide
only very limited coverage as to some types of
losses, and may provide no coverage as to
other types of losses. Credit enhancement
does not directly or indirectly guarantee to
the investors any specified rate of
prepayments, which is one of the principal
risks of your investment. The amount and
types of credit enhancement coverage, the
identification of any entity providing the
credit enhancement, the terms of any
subordination and any other information will
be described in the accompanying prospectus
supplement.
Possession of the automobile loans by the Any insolvency by the company, the servicer,
company combined with the insolvency of the or a third party while in possession of the
company, the servicer, or other party, may automobile loans may result in competing
cause your payments to be reduced or delayed. claims to ownership or security interests in
the automobile loans which could result in
delays in payments on the securities, losses
to securityholders or the repayment of the
securities.
In addition, if the company, the servicer, or
a third party while in possession of the
automobile loans, sells or pledges and
delivers them to another party, that party
could acquire an interest in the automobile
loans with priority over the trustee's
interest. This could result in delays in
payments on the securities, losses to you or
the repayment of the securities.
State laws and other factors may limit the State laws may prohibit, limit, or delay
collection of payments on the automobile repossession and sale of the vehicles to
loans and repossession of the vehicles. recover losses on defaulted automobile loans.
As a result, you may experience delays in
receiving payments and suffer losses.
Additional factors that may affect the
issuer's ability to recoup the full amount due
on an automobile loan include:
. the company's failure to file amendments to
certificates of title relating to the vehicles;
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. the company's failure to file financing
statements to perfect its security interest in
the vehicle;
. depreciation;
. obsolescence;
. damage or loss of any vehicle; and
. the application of Federal and state
bankruptcy and insolvency laws.
Insolvency of the company may cause your In some circumstances, a bankruptcy of the
payments to be reduced or delayed. company may reduce payments to you. The
company will structure the transactions
contemplated by this prospectus to guard
against the trust property becoming property
of the bankruptcy estate of the company.
These steps include the creation of one or
more separate limited-purpose subsidiaries,
which contain restrictions on the nature of
their businesses and their ability to commence
a voluntary bankruptcy case or proceeding.
The company believes that the transfer of the
automobile loans to a limited-purpose
subsidiary should be treated as an absolute
and unconditional assignment and transfer.
However, in the event of an insolvency of the
company a court or bankruptcy trustee could
attempt to:
. recharacterize the transfer of the automobile
loans by the company to the subsidiary as a
borrowing by the company from the subsidiary
or the related securityholders secured by a
pledge of the automobile loans; or
. consolidate the assets of the subsidiary with
those of the company because the company will
own the equity interests of the subsidiary.
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If a recharacterization attempt is successful,
a court could elect to accelerate payment of
the securities and liquidate the automobile
loans. Then you may only be entitled to the
outstanding principal amount and interest on
the securities at the interest rate on the
date of payment. A recharacterization
attempt, even if unsuccessful, could result in
delays in payments to you.
If either attempt is successful, the
securities would be accelerated and the
trustee's recovery on your behalf could be
limited to the then current value of the
automobile loans. Consequently, you could
lose the right to future payments and you may
not receive your anticipated interest and
principal on the securities.
Commingling of funds with the company's funds While the company is the servicer, cash
may result in reduced or delayed payments to collections held by the company may be
you. commingled and used for the company's benefit
prior to each payment date.
If bankruptcy proceedings are commenced with
respect to the company while acting as
servicer, the company (if not the servicer),
the issuer, or the trustee, may not have a
perfected security interest and any funds then
held by the servicer may be unavailable to
securityholders.
Losses and delinquencies on the automobile We cannot guarantee that the delinquency and
loans may differ from the company's loss levels of the automobile loans in the
historical loss and delinquency levels. trust will correspond to the historical levels
the company experienced on its loan and
vehicle portfolio. There is a risk that
delinquencies and losses could increase or
decline significantly for various reasons
including:
. changes in the federal income tax laws; or
. changes in the local, regional or national
economies.
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Securityholders have no recourse against the There is no recourse against the company. The
company for losses. securities represent obligations solely of the
trust or debt secured by the trust property.
No securities will be guaranteed by the
company, the servicer, or the applicable
trustee. Consequently, if payments on the
automobile loans, and to the extent available,
any credit enhancement, are insufficient to
pay the securities in full, you have no rights
to obtain payment from the company.
Transfer of servicing may delay payments to If the company were to cease servicing the
you. automobile loans, delays in processing
payments on the automobile loans and
information regarding automobile loan payments
could occur. This could delay payments to you.
Inability of the company to reacquire The transaction documents require the company
automobile loans which breach a to acquire automobile loans from the trust
representation or warranty may cause your property if representations and warranties
payments to be reduced or delayed. concerning the loan's eligibility have been
breached. If the company is unable to
reacquire the automobile loans and no other
party is obligated to perform or satisfy these
obligations, you may experience delays in
receiving payments and losses.
Inadequate insurance on vehicles may cause Each automobile loan requires the company to
you losses on your investment. maintain insurance covering physical damage to
the vehicle in an amount not less than the
unpaid principal balance of the automobile
loan with the company named as a loss payee.
Since the obligors select their own insurers
to provide the required coverage, the specific
terms and conditions of their policies vary.
In addition, although each automobile loan
generally gives the company the right to force
place insurance coverage in the event the
required physical damage insurance on a
vehicle is not maintained by an obligor,
neither the company nor the servicer is
obligated to force place coverage. In the
event insurance coverage is not maintained by
obligors and coverage is not force placed,
then insurance recoveries may be limited in
the event of losses or casualties to vehicles
included in the trust property, and you could
suffer a loss on your investment.
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Limitations on interest payments and Generally, under the terms of the Soldiers'
repossessions may cause losses on your and Sailors' Civil Relief Act of 1940, as
investment. amended, or similar state legislation, a
lender may not charge an obligor who enters
military service after the origination of the
automobile loan interest, including fees and
charges, above an annual rate of 6% during the
period of the obligor's active duty status,
unless a court orders otherwise upon
application of the lender. It is possible
that this action could effect the servicer's
ability to collect full amounts of interest on
some of the automobile loans. In addition,
the relief act imposes limitations that would
impair the servicer's ability to repossess on
an affected automobile loan during the
obligor's period of active duty status. Thus,
in the event that these automobile loans go
into default, there may be delays and losses
to you.
Risks associated with Year 2000 compliance. The year 2000 issue is whether the company's
or its vendors' computer system will properly
recognize date sensitive information when the
year changes to 2000. Systems that do not
properly recognize this information could
generate erroneous data or fail.
The company has developed a comprehensive
project plan for achieving year 2000
readiness. It has compiled an inventory of
critical hardware and software and has
assessed information technology components.
This assessment included major suppliers and
business partners and the company is
monitoring their continued progress toward
year 2000 compliance; however, the company
does not rely on any single supplier or
partner to conduct business. The company has
completed the process of renovating or
replacing critical systems. In addition, the
company is currently developing contingency
plans for critical systems. Integrated
testing and installation of all renovated
systems has been completed.
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The company presently believes that with
modifications to existing systems and/or
conversion to new systems, the year 2000 issue
will not pose significant operational problems
for the company. However, there can be no
assurance that unforeseen problems in the
company's computer systems, or the systems of
third parties on which the company's computers
rely, would not have an adverse effect on the
company's systems or operations.
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The Company and the Servicer
The company is a wholly-owned, and the primary operating subsidiary of,
AmeriCredit Corp., a Texas corporation the common shares of which are listed on
the New York Stock Exchange. The company was incorporated in Delaware on July
22, 1992. The company purchases and services automobile loans which are
originated and assigned to it by automobile dealers. The company's executive
offices are located at 801 Cherry Street, Fort Worth, Texas 76102; telephone
(817) 332-7000.
The Trustee
The trustee for each series of securities will be specified in the
prospectus supplement. The trustee's liability in connection with the issuance
and sale of the related securities is limited solely to the express obligations
of the trustee detailed in the trust agreement.
The prospectus supplement will specify procedures for the trustee's and for
a successor trustee's appointment, resignation or removal.
The Issuer
The company will either establish a separate trust that will issue the
securities, or the company will form a finance subsidiary that will issue the
securities.
Composition of the Trust Property
As specified in the prospectus supplement, the trust property will include:
. a pool of automobile loans;
. all monies, including accrued interest, due on the loans on or after the
cut-off date;
. amounts that the servicer may hold in one or more accounts;
. the security interests, if any, in the vehicles relating to the pool of
automobile loans;
. the right to proceeds from claims on physical damage policies covering
the vehicles or the obligors;
. the proceeds of any repossessed vehicles related to the pool of
automobile loans;
. the rights of the company under the related automobile loan acquisition
agreement; and
. interest earned on short-term investments held in the trust property,
unless the prospectus supplement specifies that the interest may be
paid to the servicer or the company.
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If specified in the prospectus supplement, the trust property will also
include monies on deposit in a pre-funding account, which the trustee will use
to acquire or receive a security interest in additional automobile loans during
a pre-funding period. In addition, some combination of credit enhancement may
be issued to or held by the trustee on behalf of the trust for the benefit of
the securityholders.
The automobile loans comprising the trust property will be either:
. originated by the company;
. originated by manufacturers and acquired by the company;
. originated by dealers and acquired by the company; or
. acquired by the company from originators or owners of automobile loans.
The trust property will include automobile loans for which the related
vehicle is subject to federal or state registration or titling requirements.
The Automobile Loans
Automobile Loan Pools
To the extent appropriate, the prospectus supplement will describe the
composition of the automobile loans and the distribution of the automobile loans
by:
. geographic concentration;
. payment frequency; and
. current principal balance.
The Automobile Loans
The automobile loans may consist of any combination of:
. rule of 78s automobile loans;
. fixed value automobile loans; or
. simple interest automobile loans.
Rule of 78s Automobile Loans
Rule of 78s automobile loans provide for fixed level monthly payments which
will amortize the full amount of the automobile loan over its term. The rule of
78s automobile loans provide for allocation of payments according to the "sum of
periodic balances" or "sum of monthly payments" method -- the rule of 78s.
Each rule of 78s automobile loan requires the obligor to pay a specified total
amount of payments, in monthly installments, which total represents the
principal amount financed and finance charges in an amount calculated on the
basis of a stated annual percentage rate for the term of the automobile loan.
Under the rule of
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78s, the portion of each payment allocable to interest is higher during the
early months of the term of a contract and lower during later months than that
under a constant yield method for allocating payments between interest and
principal. Nevertheless, all payments received by the servicer on or in respect
of the rule of 78s automobile loans may be allocated on an actuarial or simple
interest basis.
Fixed Value Automobile Loans
Fixed value automobile loans provide for monthly payments with a final
fixed value payment which is greater than the scheduled monthly payments. A
fixed value automobile loan provides for amortization of the loan over a series
of fixed level payment monthly installments. The final fixed value payment in
fixed value automobile loan may be satisfied by:
. payment in full in cash of the fixed value amount;
. transfer of the vehicle to the company, provided various conditions
are satisfied; or
. refinancing the fixed value payment in accordance with various
conditions.
For fixed value automobile loans, only the principal and interest
payments due prior to the final payment and not the final payment may be
included initially in the trust property.
Simple Interest Automobile Loans
Simple interest automobile loans provide for the amortization of the
amount financed over a series of fixed level monthly payments. However, unlike
the rule of 78s automobile loans, each monthly payment consists of an
installment of interest which is calculated on the basis of the outstanding
principal balance of the automobile loan multiplied by the stated APR and
further multiplied by the period elapsed, as a fraction of a calendar year,
since the preceding payment of interest was made. As payments are received under
a simple interest automobile loan, the amount received is applied first to
interest accrued to the date of payment and the balance is applied to reduce the
unpaid principal balance. Accordingly, if an obligor pays a fixed monthly
installment before its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be less
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly greater. Conversely, if an obligor pays a fixed monthly
installment after its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be greater
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. In either case, the obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the amount of
the final installment is increased or decreased as necessary to repay the then
outstanding principal balance.
If an obligor elects to prepay a rule of 78s automobile loan in full, it
is entitled to a rebate of the portion of the outstanding balance then due and
payable attributable to unearned finance charges. If a simple interest contract
is prepaid, rather than receive a rebate, the obligor is required to pay
interest only to the date of prepayment. The amount of a rebate under a rule of
78s automobile loan will always be less than had the rebate been calculated on
an actuarial basis and generally will be less than the remaining scheduled
payments of interest that would be due
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under a simple interest automobile loan for which all payments were made on
schedule. Distributions to securityholders may not be affected by rule of 78s
rebates because under the prospectus supplement the distributions may be
determined using the actuarial or simple interest method.
Delinquencies, Repossessions, and Net Loss Information on the Automobile Loans
The prospectus supplement will describe the company's delinquency,
repossession and net loss experience with respect to automobile loans it has
originated or acquired. This information may include, among other things, the
experience with respect to all automobile loans in the company's portfolio
during specified periods. There can be no assurance that the delinquency,
repossession and net loss experience on any trust property will be comparable to
the company's prior experience.
Maturity and Prepayment Considerations on the Automobile Loans
The weighted average life of the securities will be influenced by the rate
at which the principal of the automobile loans backing those securities are
paid. If an automobile loan permits a prepayment, the payment, together with
accelerated payments resulting from defaults, will shorten the weighted average
life of the securities. The rate of prepayments on the automobile loans may be
influenced by a variety of economic, financial and other factors. In addition,
the Trust Agreements or acquisition agreements will require the company, under
specific circumstances, to acquire automobile loans from the related trust
property as a result of breaches of representations and warranties. Any
reinvestment risks resulting from a faster or slower rate of principal repayment
on the securities will be borne entirely by the securityholders.
Each prospectus supplement will provide additional information regarding
the maturity and prepayment considerations applicable to a particular pool of
automobile loans and series of securities, together with a description of any
prepayment penalties.
AmeriCredit's Automobile Financing Program
General
Through its branch offices and marketing representatives, the company
provides funding for franchised and independent automobile dealers to finance
their customers' purchase of new and used automobiles and light duty trucks.
Automobile loans originated by dealers which conform to the company's credit
policies are purchased by the company generally without recourse to dealers.
The company also services the purchased automobile loans. In addition, the
company may, from time to time, refinance those customers that qualify under the
company's credit policies.
The company's indirect lending programs are designed to serve consumers who
have limited access to traditional automobile financing. The typical borrower
may have had previous financial difficulties, but is now attempting to re-
establish credit, or may not yet have sufficient credit history. Because the
company serves consumers who are unable to meet the credit standards imposed by
most traditional automobile financing sources, it charges interest at higher
rates than those charged by many traditional automobile financing sources. As
the company provides financing in a relatively high risk market, it expects to
experience a higher
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level of delinquencies and credit losses than that experienced by traditional
automobile financing sources.
The company has established relationships with a variety of dealers located
in the markets where the company has branch offices or marketing
representatives. While the company occasionally finances purchases of new
autos, substantially all of the company's automobile loans were originated in
connection with the purchases of used autos.
Because automobile loans are purchased by the company without recourse to
the dealer, the dealer usually has no liability to the company if the consumer
defaults on the automobile loan. To mitigate the risk from potential credit
losses, the company charges the dealers an acquisition fee when purchasing
automobile loans. These acquisition fees are negotiated with dealers on a loan-
by-loan basis and are usually non-refundable. Although automobile loans are
purchased without recourse, dealers typically make representations as to the
automobile loan's validity and compliance with relevant laws. In addition,
dealers typically indemnify the company against any claims, defenses and set-
offs that may be asserted against the company because of assignment of the an
automobile loan.
Automobile Loan Acquisition
The company purchases individual automobile loans through its branch
offices and through its central purchasing office, which underwrites
applications solicited by marketing representatives. The central purchasing
office operates in a manner similar to the branch office network.
All credit extensions are executed at the branch level. Each branch
manager has a specific credit authority based upon their experience and
historical loan portfolio results and credit scoring parameters. Extensions of
credit outside these limits are reviewed and approved by a regional vice
president. Although the credit approval process is decentralized, all credit
decisions are guided by the company's credit scoring strategies and overall
credit and underwriting policies and procedures.
The company has implemented a credit scoring system to support the branch
level credit approval process. Credit scoring is used to prioritize
applications for processing and to tailor pricing and structure to an empirical
assessment of credit risk. The credit scoring system was developed by Fair
Isaac & Co., Inc. from the company's loan origination and portfolio databases.
Loan application packages completed by prospective obligors are received
via facsimile at the branch offices from dealers. Application data is entered
into the company's automated application processing system. A credit bureau
report is automatically generated and a credit score is computed. Depending on
the credit quality of the applicant, a customer service representative may then
investigate the residence, employment and credit history of the applicant or
forward the application directly to the branch manager. In either case, the
company's credit policy requires that all applications be investigated prior to
loan funding. The branch manager reviews the application package and determines
whether to approve the application, approve the application subject to
conditions that must be met, or to deny the application.
The branch manager considers many factors in arriving at a credit decision,
including:
* the applicant's credit score;
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* capacity to pay;
* stability;
* character and intent to pay; and
* the loan terms and collateral value. In some cases, a regional vice
president may review and approve the branch manager's credit decision. The
company estimates that approximately 50% of applicants are denied credit by the
company typically because of their credit histories or because their income
levels are not sufficient to support the proposed level of monthly automobile
loan payments. Dealers are contacted regarding credit decisions by facsimile
and/or telephone. Declined applicants are also notified.
Completed loan packages are received from dealers at the branch office.
Loan terms are reverified with the obligor by branch personnel and the loan
packages are forwarded to the centralized loan services department where the
package is scanned to create an electronic copy. Key original documents are
stored in a fire-proof vault and the loan packages are further processed in an
electronic environment. The loans are reviewed for proper documentation and
regulatory compliance and are entered into the loan accounting system. A daily
report is generated for final review by consumer finance operations management.
Once cleared for funding by consumer finance operations management, the loan
services department issues a funding check to the dealer. Upon funding, the
company acquires a perfected security interest in the vehicle.
The company requires all consumers to obtain or provide evidence that they
carry current comprehensive and collision insurance. Through a third party
administrator, the company tracks the insurance status of each automobile loan
and sends notices to obligors when collateral becomes uninsured. If no action
is taken by the obligor to insure the collateral, continuing efforts are made to
persuade the obligor to comply with the automobile loan's insurance
requirements. Although it has the right, the company rarely repossesses a
vehicle for being uninsured. The company also does not typically force place
insurance coverage and add the premium to the obligor's obligations, although
under the automobile loan it has the right to do so.
Servicing and Collections
The company's servicing activities consist of:
. collecting and processing obligor payments;
. responding to obligor inquiries;
. contacting obligors who are delinquent in their loan payment;
. maintaining the security interest in the vehicle; and
. repossessing and liquidating collateral when necessary.
The company utilizes automated systems to support its servicing and
collections activities.
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Approximately 15 days before an obligor's first payment due date and each
month thereafter, the company mails the obligor a billing statement directing
them to mail payments to a lockbox banking facility for deposit in a lockbox
account. Payment receipt data is electronically transferred to the company by
the lockbox banking facility for posting to the company records. All subsequent
payment processing and customer account maintenance is performed centrally by
the company's loan services department.
Collection activity on automobile loans is performed by collectors who
follow standardized collection policies and procedures at the company's
headquarters facility. In addition, they monitor the loan portfolio through a
computer assisted collection system and usually take action on delinquencies
within a few days after delinquency occurs.
Typically, a collector contacts the obligor by telephone through the
company's automated predictive dialing system. This system dials multiple
telephone numbers simultaneously based upon parameters set by management. When
a telephone connection is made, the call is routed to a collector and the
delinquent obligor's account information is displayed on a collector's computer
terminal. The collector then attempts to work out the delinquency with the
obligor.
If an obligor continues to be delinquent, the company's policy is to work
out suitable payment arrangements with the obligor. However, if the obligor
becomes seriously delinquent or deals in bad faith with the company, the company
may ultimately have to repossess the vehicle and generally will take prompt
action to do so. Repossessions are handled by independent repossession firms
engaged by the company. All repossessions are approved by collection officers.
The company follows prescribed legal procedures for repossessions, which
include:
. peaceful repossession;
. one or more notices to obligors;
. a prescribed waiting period prior to disposing of the vehicle; and
. return of the obligor's personal items.
Upon repossession and after any prescribed waiting period, the vehicle is
typically sold at auction. The company will pursue collection of deficiencies
when it deems such action to be appropriate.
Pool Factors
The pool factor for each class of securities will be a seven-digit decimal,
which the servicer will compute prior to each distribution. The pool factor
indicates the remaining outstanding principal balance of a class as of the
applicable payment date, as a fraction of the initial outstanding principal
balance of the class. Each pool factor will be initially 1.0000000, and
thereafter will decline to reflect reductions in the outstanding principal
balance of the applicable class.
A securityholder's portion of the aggregate outstanding principal balance
of the related class is the product of:
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. the original aggregate purchase price of the securityholder's
securities; and
. the applicable pool factor.
The securityholders of record will receive reports on or about each
payment date concerning:
. the payments received on the automobile loans;
. the pool balance (as defined in the prospectus supplement);
. each pool factor; and
. other items of information.
In addition, securityholders of record during any calendar year will be
furnished information for tax reporting purposes not later than the latest date
permitted by law.
Use of Proceeds
The proceeds from the sale of the securities of a given series will be
used by the company for the acquisition of the automobile loans, and/or for
general corporate purposes, including:
. the purchase of additional receivables from dealers;
. repayment of indebtedness; and
. general working capital purposes.
The company expects that it will make additional transfers of automobile
loans to the trust from time to time, but the timing and amount of any
additional transfers will be dependent upon a number of factors, including:
. the volume of automobile loans the company originates or acquires;
. prevailing interest rates;
. availability of funds; and
. general market conditions.
Description of the Securities
General
The securities will be issued in series. The following summaries describe
the securities' material provisions. These summaries are subject to all of the
provisions of the trust agreement for the related securities and the related
prospectus supplement.
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Each series of securities -- or in some instances, two or more series of
securities -- will be issued under a trust agreement.
All of the offered securities will be rated in one of the four highest
rating categories by one or more rating agencies.
The securities may be offered in the form of certificates representing
beneficial ownership interests in the automobile loans held by the trust or in
the form of notes representing debt secured by the automobile loans held by the
trust.
Each series or class of securities may have a different interest rate,
which may be fixed or adjustable. The prospectus supplement will specify the
interest rate for each series or class of securities, or the initial interest
rate and the method for determining subsequent changes to the interest rate.
A series may include one or more classes of strip securities which are:
. stripped of regular interest payments and entitled only to principal
distributions, with disproportionate, nominal or no interest
distributions; or
. stripped of regular principal payments and entitled only to interest
distributions, with disproportionate, nominal or no principal
distributions.
In addition, a series of securities may include two or more classes of
securities that differ as to:
. timing;
. sequential order;
. priority of payment;
. interest rate; or
. amount of principal or interest distribution or both.
Distributions of principal or interest or both on any class of securities
may be made upon:
. the occurrence of specified events;
. in accordance with a schedule or formula; or
. on the basis of collections from designated portions of the related
pool of automobile loans.
A series may include one or more classes of accrual securities, which will
not distribute accrued interest but rather will add the accrued interest to the
principal balance, or nominal balance, in the case of accrual securities which
are also strip securities, on each payment date, or in the manner described in
the prospectus supplement.
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A series may include one or more other classes of securities that are
senior to one or more other classes of securities in respect of distributions of
principal and interest and allocations of losses on automobile loans.
A series of securities may have a balance that may decrease based on the
amortization of automobile loans or increase based on principal collections used
to purchase additional automobile loans.
A series or class of securities may also include a derivative arrangement.
A derivative arrangement may include a guaranteed rate agreement, a maturity
liquidity facility, a tax protection agreement, an interest rate cap or floor
agreement, an interest rate or currency swap agreement or any other similar
arrangement.
In addition, some classes of senior, or subordinate, securities may be
senior to other classes of senior or, subordinate securities, in respect of
distributions or losses.
General Payment Terms of Securities
Securityholders will be entitled to receive payments on their securities on
specified payment dates. Payment dates will occur monthly, quarterly or semi-
annually, as described in the prospectus supplement.
The prospectus supplement will describe the record date for each payment
date, as of which the trustee or its paying agent will fix the identity of
securityholders for the purpose of receiving payments on that payment date. For
monthly-pay securities the payment date may be the tenth, twelfth, fifteenth or
twenty-fifth day of each month. For quarterly-pay securities, the tenth,
twelfth, fifteenth or twenty-fifth day of every third month. And for semi-
annual pay securities, the tenth, twelfth, fifteenth or twenty-fifth day of
every sixth month. The record date will be the close of business as of the last
day of the calendar month preceding the calendar month in which a payment date
occurs.
Each trust agreement will describe a remittance period preceding each
payment date -- for example, in the case of monthly-pay securities, the calendar
month preceding the month in which a payment date occurs. The trust agreement
will require the servicer to remit collections received on or with respect to
automobile loans held by a trust during a remittance period to the trustee prior
to the related payment date. These collections will be used to fund payments to
securityholders. The trust agreement may provide that the trustee may apply all
or a portion of the payments collected on or with respect to the automobile
loans to the acquisition of additional automobile loans during a specified
period -- rather than be used to fund payments of principal to securityholders
during such period. This will result in the securities possessing an interest-
only period, also commonly referred to as a revolving period, which will be
followed by an amortization period. Any interest only or revolving period may,
upon the occurrence of events to be described in the prospectus supplement,
terminate prior to the end of the specified period and result in the earlier
than expected payment of the securities.
In addition, the trust agreement may provide that the trustee retain all or
a portion of collected payments -- and hold the payments in temporary
investments, including automobile loans -- for a specified period prior to being
used to fund payments of principal to securityholders.
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The trust agreement may require the trustee to retain and invest
temporarily the collected payments for the purposes of:
(a) slowing the payment rate of the securities relative to the installment
payment schedule of the automobile loans; or
(b) attempting to match the payment rate of the securities to a payment
schedule established at the time the securities are issued.
Any of these features may terminate when events to be described in the
prospectus supplement occur, resulting in distributions to the securityholders
and an acceleration of the payment of the securities.
No governmental agency or instrumentality, the company, the servicer, any
trustee or any of their respective affiliates will guarantee or insure the
securities or the underlying automobile loans unless specifically stated in the
prospectus supplement.
To the extent that any trust property includes certificates of interest or
participations in automobile loans, the prospectus supplement will describe the
material terms and conditions of the certificates or participations.
Indexed Securities
Any class of securities may consist of securities in which the indexed
principal amount, the principal amount payable at the final scheduled payment
date, is determined by reference to a measure commonly known as an index, which
will be related to one or more of the following:
. the difference in the rate of exchange between United States dollars
and a currency or composite currency;
. the difference in the price of a specified commodity on specified
dates;
. the difference in the level of a specified stock index, which may be
based on U.S. or foreign stocks, on specified dates; or
. other objective price or economic measures as are described in the
prospectus supplement.
The prospectus supplement will describe the manner of determining the
indexed principal amount of an indexed security and historical and other
information concerning the applicable index, together with information
concerning tax consequences to the holders of indexed securities.
If the determination of the indexed principal amount of an indexed security
is based on an index calculated or announced by a third party and the third
party either suspends the calculation or announcement of the index or changes
the basis upon which the index is calculated -- other than changes consistent
with policies in effect at the time the indexed security was issued and
permitted changes described in the prospectus supplement -- then the index will
be calculated for purposes of that indexed security by an independent
calculation agent on the same basis, and subject to the same conditions and
controls, as applied to the original third party. If for any reason the index
cannot be calculated on the same basis and subject to the same
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conditions and controls as applied to the original third party, then the indexed
principal amount of the indexed security shall be calculated in the manner
described in the prospectus supplement. In the absence of manifest error, any
determination of the independent calculation agent will bind all parties.
The indexed security will pay interest based on an amount designated in the
prospectus supplement. The prospectus supplement will describe how the
principal amount of the indexed security, if any, will be payable upon
redemption or repayment prior to the applicable final scheduled distribution
date.
Scheduled Amortization Securities; Companion Securities
The securities may include one or more classes of scheduled amortization
securities and companion securities. Scheduled amortization securities are
securities for which payments of principal are to be made in specified amounts
on specified payment dates, to the extent of funds being available on that
payment date. Companion securities are securities which receive payments of all
or a portion of any funds available on a given payment date which are in excess
of amounts required to be applied to payments on scheduled amortization
securities on that payment date. Because of the manner of application of
payments of principal to companion securities, the weighted average lives of
companion securities of a series may be expected to be more sensitive to the
actual rate of prepayments on the automobile loans in the related trust than
will the scheduled amortization securities of that series.
Book-Entry Registration
We expect that the securities of each series will be issued in
uncertificated book-entry form, and will be registered in the name of Cede, the
nominee of the Depository Trust Company, commonly known as DTC in the United
States or Cedelbank or the Euroclear system in Europe. Cedel and Euroclear will
hold omnibus positions for Cedel participants and Euroclear participants,
respectively, through customers' securities accounts in Cedel's and Euroclear's
names on the books of their respective depositaries. The depositaries will hold
these positions in customers' security accounts in the depositaries names on
DTC's books. The prospectus supplement will state if the securities will be in
physical rather than book-entry form.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a clearing
corporation within the meaning of the Uniform Commercial Code and a clearing
agency registered under Section 17A of the Securities Exchange Act. DTC was
created to hold securities for its participants and facilitate the clearance and
settlement of securities transactions between its participants through
electronic book-entry changes in their accounts, eliminating the need for
physical movement of certificates. DTC's participants include securities
brokers and dealers, banks, trust companies and clearing corporations and may
include other organizations. Indirect access to the DTC system also is
available to indirect participants such as brokers, dealers, banks and trust
companies that clear through or maintain a custodial relationship with a DTC
participant, either directly or indirectly.
Transfers between DTC participants will occur according to DTC rules.
Transfers between Cedel participants and Euroclear participants will occur
according to their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
participants or Euroclear participants, on
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the other, will be effected in DTC according to DTC rules on behalf of the
relevant European international clearing system by its depositary; however,
these cross-market transactions will require the counterparty to deliver
instructions to the relevant European international clearing system according to
the counterparty rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to its
depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment according to
normal procedures for same-day funds settlement applicable to DTC. Cedel
participants and Euroclear participants may not deliver instructions directly to
the depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear resulting from a transaction with a DTC participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and the credits or any transactions in the
securities settled during the processing will be reported to the relevant Cedel
participant or Euroclear participant on that business day. Cash received in
Cedel or Euroclear resulting from sales of securities by or through a Cedel
participant or a Euroclear participant to a DTC participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following settlement
in DTC.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participant organizations and
facilitates the clearance and settlement of securities transactions between
Cedel participants through electronic book-entry changes in accounts of Cedel
participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in Cedel in any of 28 currencies,
including United States dollars. Cedel provides its participants, among other
things, services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. Cedel
interfaces with domestic markets in several countries. As a professional
depository, Cedel is subject to regulation by the Luxembourg Monetary Institute.
Cedel participants are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Indirect access to Cedel
is also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Cedel
participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating both the need for physical movement of securities and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 37 currencies, including United States dollars. Euroclear
includes various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. Euroclear is
operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of New
York, under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation. All operations are conducted by the Euroclear
operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear operator, not Euroclear Clearance.
Euroclear Clearance establishes policy for Euroclear on behalf of Euroclear
participants. Euroclear participants include banks (including central banks),
securities brokers and dealers, and other professional financial intermediaries.
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Indirect access to Euroclear is also available to other firms that clear through
or maintain a custodial relationship with a Euroclear participant, either
directly or indirectly.
The Euroclear operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related operating procedures of the Euroclear system and applicable Belgian law.
The Terms and Conditions govern transfers of securities and cash within
Euroclear, withdrawals of securities and cash from Euroclear, and receipts of
payments with respect to securities in Euroclear. All securities in Euroclear
are held on a fungible basis without attribution of specific securities to
specific securities clearance accounts. The Euroclear operator acts under the
Terms and Conditions only on behalf of Euroclear participants, and has no record
of or relationship with persons holding through Euroclear participants.
Under a book-entry format, securityholders that are not DTC participants or
indirect participants but desire to purchase, sell or otherwise transfer
ownership of securities registered in the name of Cede, as nominee of DTC, may
do so only through participants and indirect participants. In addition, these
securityholders will receive all distributions of principal of and interest on
the securities from the trustee through DTC and its participants.
Securityholders may receive payments after the payment date because DTC will
forward these payments to its participants, which thereafter will be required to
forward these payments to indirect participants or securityholders. Unless and
until physical securities are issued, it is anticipated that the only
securityholder will be Cede, as nominee of DTC, and that the beneficial holders
of securities will not be recognized by the trustee as securityholders under the
agreements. Securityholders which are not DTC participants will only be
permitted to exercise their rights under the agreements through DTC or through
its participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among its
participants and is required to receive and transmit payments of principal of
and interest on the securities. DTC's participants and indirect participants
are required to make book-entry transfers and receive and transmit payments on
behalf of their respective securityholders. Accordingly, although
securityholders will not possess physical securities, the rules provide a
mechanism by which securityholders will receive distributions and will be able
to transfer their interests.
Unless and until physical securities are issued, securityholders who are
not DTC participants may transfer ownership of securities only through DTC
participants by instructing those participants to transfer securities, through
DTC for the account of the purchasers of the securities, which account is
maintained with their respective participants. Under DTC's rules and in
accordance with DTC's normal procedures, transfers of ownership of securities
will be executed through DTC and the accounts of the respective participants at
DTC will be debited and credited. Similarly, the respective participants will
make debits or credits, as the case may be, on their records on behalf of the
selling and purchasing securityholders.
Because DTC can only act on behalf of its participants, who in turn act on
behalf of indirect participants and some banks, the ability of a securityholder
to pledge securities to
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persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of the securities may be limited due to the lack of a
physical certificate for the securities.
DTC advises that it will take any action permitted to be taken by a
securityholder under the agreements only at the direction of one or more of its
participants to whose account the securities are credited. Additionally, DTC
advises that it will take actions only at the direction of and on behalf of its
participants whose holdings include current principal amounts of outstanding
securities that satisfy the minimum percentage established in the agreements.
DTC may take conflicting actions if directed by its participants.
Any securities initial registered in the name of Cede, as nominee of DTC,
will be issued in fully registered, certificated form to securityholders or
their nominees, rather than to DTC or its nominee only under the events
specified in the agreements and described in the prospectus supplement. Upon
the occurrence of any of the events specified in Definitive Securities in this
prospectus or in the agreements and the prospectus supplement, DTC will be
required to notify its participants of the availability through DTC of physical
certificates. Upon surrender by DTC of the securities and receipt of
instruction for reregistration, the trustee will issue the securities in the
form of physical certificates, and thereafter the trustee will recognize the
holders of the physical certificates as securityholders. Thereafter, payments
of principal of and interest on the securities will be made by the trustee
directly to securityholders in accordance with the procedures set forth in the
agreements. The final distribution of any security whether physical
certificates or securities registered in the name of Cede, however, will be made
only upon presentation and surrender of the securities on the final payment date
at the office or agency specified in the notice of final payment to
securityholders.
None of the company, any finance subsidiary, the originators, the servicer
or the trustee will have any liability for any actions taken by DTC or its
nominee or Cedel or Euroclear, including, without limitation, actions for any
aspect of the records relating to or payments made on account of the securities
held by Cede, as nominee for DTC, or for maintaining, supervising or reviewing
any records relating to the securities.
Definitive Securities
The securities will be issued in fully registered, certificated form,
commonly called definitive securities, to the securityholders or their nominees,
rather than to DTC or its nominee, only if:
. the trustee advises in writing that DTC is no longer willing or able
to discharge properly its responsibilities as depository with respect
to the securities and the trustee is unable to locate a qualified
successor;
. the trustee, at its option, elects to terminate the book-entry-system
through DTC; or
. after the occurrence of an event of default under the indenture or a
default by the servicer under the trust agreements, securityholders
representing at least a majority of the outstanding principal amount
of the securities advise the trustee through DTC in writing that the
continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the securityholders' best interest.
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Upon the occurrence of any event described in the immediately preceding
paragraph, the trustee will notify all affected securityholders through
participants of the availability of definitive securities. Upon surrender by
DTC of its securities and receipt of instructions for re-registration, the
trustee will reissue the securities as definitive securities.
Distributions of principal of, and interest on, the securities will then be
made by the trustee in accordance with the procedures in the indenture or trust
agreement directly to holders of definitive securities in whose names the
definitive securities were registered at the close of business on the applicable
record date. Distributions will be made by check mailed to the address of the
holder as it appears on the register maintained by the trustee. The final
payment on any security, however, will be made only upon presentation and
surrender of the security at the office or agency specified in the notice of
final distribution.
Definitive securities will be transferable and exchangeable at the offices
of the trustee or of a certificate registrar named in a notice delivered to
holders of the definitive securities. No service charge will be imposed for any
registration of transfer or exchange, but the trustee may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
Reports to Securityholders
On or prior to each payment date, the servicer or the trustee will forward
or cause to be forwarded to each holder of record a statement or statements with
respect to the trust property generally describing the following information:
(1) the amount of the distribution with respect to each class;
(2) the amount of the distribution allocable to principal;
(3) the amount of the distribution allocable to interest;
(4) the pool balance, if applicable, as of the close of business on the
last day of the related remittance period;
(5) the aggregate outstanding principal balance and the pool factor for
each class after giving effect to all payments reported under (2)
above on the payment date;
(6) the amount paid to the servicer, if any, with respect to the related
remittance period;
(7) the amount of the aggregate purchase amounts for automobile loans that
have been reacquired, if any, for the related remittance period; and
(8) the amount of coverage under any form of credit enhancement covering
default risk as of the close of business on the payment date and a
description of any substitute credit enhancement.
Each amount described under subclauses (1), (2), (3) and (5) will be
expressed as a dollar amount per $1,000 of the initial principal balance of the
securities, as applicable. The actual information to be described in statements
to securityholders will be detailed in the prospectus supplement.
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Within the prescribed period of time for tax reporting purposes after the
end of each calendar year, the trustee will provide the securityholders a
statement containing the amounts described in (2) and (3) above for that
calendar year and any other information required by applicable tax laws.
Forward Commitments; Pre-Funding
A trust may enter into a forward purchase agreement with the company where
the company will agree to transfer additional automobile loans to the trust
following the date on which the trust is established and the securities are
issued. The trust may enter into forward purchase agreements to acquire
additional automobile loans that could not be delivered by the company or have
not formally completed the origination process, prior to the closing date. Any
forward purchase agreement will require that any automobile loans transferred to
the trust conform to specified requirements.
If a forward purchase agreement is utilized, and unless otherwise specified
in the prospectus supplement, the trustee will be required to deposit in a pre-
funding account up to 100% of the net proceeds received by the trustee in
connection with the sale of one or more classes of securities. The additional
automobile loans will be transferred to the trust in exchange for money released
to the company from the pre-funding account. Each forward purchase agreement
will set a specified funding period during which any transfers must occur. For
a trust which elects federal income treatment as a grantor trust, the funding
period will be limited to three months from the date the trust is established;
for a trust which is treated as a mere security device for federal income tax
purposes, the funding period will be limited to nine months from the date the
trust is established. The forward purchase agreement or the trust agreement
will require that any monies originally deposited in the pre-funding account and
not used by the end of the funding period be applied as a mandatory prepayment
of the related class or classes of securities.
During the funding period the monies deposited to the pre-funding account
will either:
. be held uninvested; or
. be invested in cash-equivalent investments rated in one of the four
highest rating categories by at least one nationally recognized
statistical rating organization.
The invested monies will either mature prior to the end of the funding
period, or will be drawable on demand and in any event, will not constitute the
type of investment which would require registration of the trust as an
"investment company" under the Investment Company Act of 1940, as amended.
Description of the Trust Agreements
Each series of securities will be issued under one or more trust agreements
which will establish the trust, transfer the automobile loans and issue the
securities. The following paragraphs describe the material provisions common to
the agreements. A more detailed discussion of the trust agreements governing
your specific series will appear in the prospectus supplement. The term trust
agreement as used with respect to a trust means, except as otherwise specified,
any and all agreements relating to the establishment of the trust, the servicing
of the automobile loans and the issuance of the securities, including without
limitation the indenture.
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Transfer of the Automobile Loans
On the closing date, the company or a finance subsidiary will transfer
automobile loans originated by the company either to a trust, or will pledge the
company's or the finance subsidiary's right, title and interests in and to the
automobile loans to a trustee on behalf of the securityholders.
The company will be obligated to acquire from the related trust property
any automobile loan transferred to a trust or pledged to a trustee if the
interest of the securityholders is materially adversely affected by a breach of
any representation or warranty made by the company with respect to the
automobile loan, which breach has not been cured following the discovery by or
notice to the company. In addition, the company may from time to time reacquire
automobile loans or substitute other automobile loans for automobile loans under
conditions described in the trust agreement.
Accounts
For each series of securities issued by a trust, the servicer will
establish and maintain with a trustee one or more collection accounts, in the
trustee's name on behalf of the securityholders in which the servicer will
deposit all payments made on or with respect to the automobile loans. The
servicer will also establish and maintain with the trustee separate distribution
accounts, in the trustee's name on behalf of the securityholders, in which
amounts released from the collection account, the reserve account or other
credit enhancement will be deposited and from which distributions to
securityholders will be made.
The prospectus supplement will describe any other accounts to be
established with respect to a trust.
For any series of securities, funds in the collection account, the
distribution account, any reserve account and other accounts (collectively, the
trust accounts) will be invested in eligible investments. Eligible investments
are limited to investments acceptable to the rating agencies as being consistent
with the rating of the securities. Eligible investments may include securities
issued by the company, the servicer or their respective affiliates or other
trusts created by the company or its affiliates. Except as described below or
in the prospectus supplement, eligible investments are limited to obligations or
securities that mature not later than the business day immediately preceding a
payment date. However, subject to conditions, funds in the reserve account may
be invested in securities that will not mature prior to the next distribution
date and will not be sold to meet any shortfalls. Thus, the amount of cash in
any reserve account at any time may be less than the balance of the reserve
account. If the amount required to be withdrawn from any reserve account to
cover shortfalls in collections exceeds the amount of cash in the reserve
account, a temporary shortfall in the amounts distributed to the related
securityholders could result. This could, in turn, increase the average life of
the securities. The servicer will deposit investment earnings on funds in the
trust accounts, net of losses and investment expenses, in the applicable
collection account on each payment date. The investment earnings will be
treated as collections of interest on the automobile loans.
The trust accounts will be maintained as eligible deposit accounts. An
eligible deposit account is an account that is either (a) a segregated account
with the corporate trust department of the related indenture trustee of the
related trustee, (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
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States of America or any one of the states or the District of Columbia, or any
domestic branch of a foreign bank, having corporate trust powers and acting as
trustee for funds deposited in the account, so long as any of the securities of
the depository institution has a credit rating from each rating agency which
signifies investment grade or (c) a segregated account with a depository
institution organized under the laws of the United States of America or any one
of the states or the District of Columbia, or any domestic branch of a foreign
bank.
The depository institution or its parent corporation must have either:
. a long-term unsecured debt rating acceptable to the rating agencies; or
. a short-term unsecured debt rating or certificate of deposit rating
acceptable to the rating agencies.
In addition, the depository institution's deposits must be insured by the
FDIC.
The Servicer
The servicer under each trust agreement will be named in the prospectus
supplement. The servicer may be the company or an affiliate of the company and
may have other business relationships with the company or the company's
affiliates. Any servicer may delegate its servicing responsibilities to one or
more sub-servicers, but delegation will not relieve it of its liabilities under
the trust agreements.
The servicer will make representations and warranties regarding its
authority to enter into, and its ability to perform, its obligations under the
trust agreement. An uncured breach of a representation or warranty that
materially and adversely affects the interests of the securityholders will
constitute a servicer default.
Servicing Procedures
Each trust agreement will provide that the servicer will make reasonable
efforts to:
. collect all payments due on the automobile loans which are part of the
trust fund; and
. make collections on the automobile loan using the same collection
procedures that it follows with respect to automobile loans that it
services for itself and others.
Consistent with its normal procedures, the servicer may, in its discretion,
arrange with an obligor on a automobile loan to extend or modify the payment
schedule. Some of the arrangements -- including, without limitation any
extension of the payment schedule beyond the final scheduled payment date for
the securities -- may result in the servicer acquiring the automobile loan if
the loan becomes a defaulted automobile loan. The servicer may sell the vehicle
securing the defaulted automobile loans, if any, at a public or private sale, or
take any other action permitted by applicable law.
The prospectus supplement will describe the material aspects of any
particular servicer's collections and other relevant procedures.
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Payments on Automobile Loans
The servicer will deposit into the collection account all payments on the
related automobile loans, from whatever source, and all proceeds of the
automobile loans collected within three business days of receipt in the related
collection facility. The servicer may not commingle monies deposited in the
collection facility with funds from other sources.
Servicing Compensation
The servicer will be entitled to receive a servicing fee for each
collection period at a rate equal to a specified percentage per year of the
value of the assets of the trust property, generally as of the first day of the
collection period. Each prospectus supplement and servicing agreement will
specify the priority of distributions with respect to the servicing fee --
together with any portion of the servicing fee that remains unpaid from prior
payment dates. The servicing fee will be paid prior to any distribution to the
securityholders.
The servicer will also collect and retain any late fees, the penalty
portion of interest paid on past due amounts and other administrative fees or
similar charges allowed by applicable law with respect to the automobile loans.
In addition, the servicer will be entitled to reimbursement from each trust for
specified liabilities. Payments by or on behalf of obligors will be allocated
to scheduled payments and late fees and other charges in accordance with the
servicer's normal practices and procedures.
The servicing fee will compensate the servicer for performing the functions
of a third party servicer of similar types of automobile loans as an agent for
their beneficial owner. These functions include:
. collecting and posting all payments;
. responding to obligor inquiries on the related automobile loans;
. investigating delinquencies;
. sending billing statements to obligors;
. reporting tax information to obligors;
. paying costs of collection and disposition of defaults;
. policing the collateral;
. administering the automobile loans; and
. accounting for collections and furnishing statements to the trustee or
the indenture trustee with respect to distributions.
The servicing fee also will reimburse the servicer for:
. certain taxes;
. accounting fees;
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. outside auditor fees;
. data processing costs; and
. other costs incurred in connection with administering the automobile
loans.
Distributions
Distributions of principal and interest, or, where applicable, of principal
or interest only, on each class of securities will be made by the indenture
trustee to the noteholders and by the trustee to the certificateholders. The
timing, calculation, allocation, order, source, priorities of and requirements
for each class of noteholders and all distributions to each class of
certificateholders will be detailed in the prospectus supplement.
On each payment date, the servicer will transfer collections on the
automobile loans from the collection account to the distribution account for
distribution to securityholders. Credit enhancement may be available to cover
any shortfalls in the amount available for distribution, to the extent specified
in the prospectus supplement. Distributions in respect of principal of a class
of securities will be subordinate to distributions in respect of interest on the
class, and distributions in respect of the certificates of a series may be
subordinate to payments in respect of the notes of a series.
Credit and Cash Flow Enhancements
The amounts and types of credit enhancement arrangements, if any, and the
credit enhancement provider, with respect to each class of securities will be
detailed in the prospectus supplement. Credit enhancement may be in the form
of:
. an insurance policy;
. subordination of one or more classes of securities;
. reserve accounts;
. overcollateralization;
. letters of credit;
. credit or liquidity facilities;
. third party payments or other support;
. surety bonds;
. guaranteed cash deposits; or
. other arrangements or any combination of two or more of the foregoing.
Credit enhancement for a class may cover one or more other classes of the
same series, and credit enhancement for a series of securities may cover one or
more other series of securities.
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Credit enhancement for any class or series of securities is intended to
enhance the likelihood that securityholders of that class or series will receive
the full amount of principal and interest due and to decrease the likelihood
that the securityholders will experience losses. Credit enhancement for a class
or series of securities will not provide protection against all risks of loss
and will not guarantee repayment of the entire principal balance and interest.
If losses occur which exceed the amount covered by any credit enhancement, or
which are not covered by any credit enhancement, securityholders will bear their
allocable share of deficiencies. In addition, if a form of credit enhancement
covers more than one series of securities, securityholders of those series will
be subject to the risk that the credit enhancement will be exhausted by the
claims of securityholders of other series.
Statements to Indenture Trustees and Trustees
Prior to each payment date, the servicer will provide to the indenture
trustee and/or the trustee and credit enhancer as of the close of business on
the last day of the preceding collection period a statement describing
substantially the same information provided in the periodic reports to
securityholders. These reports are described under "Description of the
Securities -- Reports to Securityholders".
Evidence as to Compliance
The trust agreements provide for the delivery of an annual statement signed
by an officer of the servicer to the effect that the servicer has fulfilled its
material obligations under the trust agreements throughout the preceding
calendar year, except as specified in the statement.
Each year, a firm of independent certified public accountants will furnish
a report to the trustee or the indenture trustee to the effect that the
accountants have examined documents and the records relating to servicing of the
automobile loans, and compared mathematical calculations for monthly servicing
reports selected by the accountants with the servicer's computer reports, and
the examination, has disclosed no items of noncompliance with the provision of
the trust agreements or variations in the results of the calculations which, in
the opinion of the firm, are material, except for the items of non-compliance as
shall be referred to in the report.
Securityholders may obtain copies of the statements and certificates by
securityholders by a request in writing addressed to the indenture trustee or
the trustee.
Matters Regarding the Servicer
The servicer may not resign from its obligations and duties as servicer,
except upon determination that the performance by the servicer of its duties is
no longer permissible under applicable law. No resignation will become
effective until the trustee or a successor servicer has assumed the servicer's
servicing obligations and duties under the trust agreement.
The servicer will not be liable to the securityholders for taking any
action, or for errors in judgment; provided, however, that the servicer will not
be protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
or by reason of reckless disregard of obligations and duties. The servicer will
be under no obligation to appear in, prosecute, or defend any legal action that
is not incidental to its servicing responsibilities and that, in its opinion,
may cause it to incur any expense or liability.
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Any entity into which the servicer may be merged or consolidated, or any
entity resulting from any merger or consolidation to which the servicer is a
party, or any entity succeeding to the business of the servicer or, an entity in
each of the prior cases that assumes the obligations of the servicer, will be
the successor to the servicer.
Servicer Default
A servicer default will include:
. any failure by the servicer to deliver to the trustee for deposit any
required payment or to direct trustee to make any required
distributions, which failure continues unremedied for more than three
business days after written notice from the trustee is received by the
servicer or after discovery by the servicer;
. any failure by the servicer to observe or perform in any material
respect any other covenant or agreement in the trust agreement, which
failure materially and adversely affects the rights of the
securityholders and which continues unremedied for more than thirty
days after the giving of written notice of the failure to the servicer
by the trustee, or to the servicer, and to the trustee by
securityholders, evidencing not less than 50% of the voting rights of
outstanding securities;
. any insolvency event which means the financial insolvency,
readjustment of debt, marshalling of assets and liabilities, or
similar proceedings with respect to the servicer and other actions by
the servicer indicating its insolvency, or inability to pay its
obligations; and
. any claim being made on an insurance policy issued as credit
enhancement.
Rights upon Servicer Default
As long as a servicer default remains unremedied, the trustee, credit
enhancer or securityholders evidencing not less than 50% of the voting rights of
the then outstanding securities may terminate all the rights and obligations of
the servicer, at which time a successor servicer appointed by the trustee or the
trustee itself will succeed to all the responsibilities, duties and liabilities
of the servicer and will be entitled to similar compensation arrangements. If,
however, a bankruptcy trustee or similar official has been appointed for the
servicer, and no other servicer default has occurred, the bankruptcy trustee or
official may have the power to prevent the trustee or the securityholders from
effecting a transfer of servicing. In the event the trustee is unwilling or
unable to act as servicer, it may appoint, or petition a court of competent
jurisdiction for the appointment of a successor servicer with a net worth of at
least $25,000,000 and whose regular business includes the servicing of a similar
type of automobile loans. The trustee may make arrangements for compensation to
be paid to the successor servicer, which in no event may be greater than the
servicing compensation payable to the servicer under the related trust
agreement.
Waiver of Past Defaults
With respect to each trust, unless otherwise provided in the prospectus
supplement and subject to the approval of any credit enhancer, noteholders
evidencing at least a majority of the voting rights of the then outstanding
securities may, on behalf of all securityholders, waive any
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default by the servicer in the performance of its obligations under the trust
agreement and its consequences, except a default in making any required deposits
to or payments from any of the trust accounts. The waiver will not impair the
securityholders' rights with respect to subsequent defaults.
Amendment
If not materially adversely affecting the securityholders and subject to an
opinion of counsel acceptable to the trustee and any credit enhancer's approval,
the trust agreements may be amended, without the securityholders' consent for
the purpose of adding, changing or eliminating any provisions of the trust
agreements or of modifying in any manner the rights of the securityholders. The
company, the servicer, and the trustee with the consent of securityholders
evidencing at least a majority of the voting rights of the then outstanding
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securities may amend the trust agreements to add, change in any manner, or
eliminate any provisions of the trust agreements or to modify in any manner the
rights of the securityholders including provisions that would adversely affect
the ratings of the securities; provided, however, that no amendment may:
. increase or reduce in any manner the amount or priority of, or
accelerate or delay the timing of, collections on the automobile loans
or distributions that are required to be made for the benefit of the
securityholders; or
. without the consent of the securityholders reduce the percentage of
securities which are required to consent to any such amendment.
Insolvency Event
If an insolvency event occurs with respect to a debtor relating to trust
property, the trust will terminate, and the automobile loans of the trust
property will be liquidated and that trust will be terminated 90 days after the
date of the insolvency event. The liquidation and termination will not occur
if, before the end of such 90-day period, the trustee receives written
instructions from each of the securityholders, other than the company and/or
credit enhancer to the effect that that party disapproves of the liquidation of
the automobile loans. Promptly after the occurrence of any insolvency event
with respect to a debtor, notice is required to be given to the securityholder
and/or credit enhancer; provided, however, that any failure to give the required
notice will not prevent or delay termination of any trust. Upon termination of
any trust, the trustee shall direct that the assets of those trusts be promptly
sold (other than the related trust accounts) in a commercially reasonable manner
and on commercially reasonable terms. The proceeds from any sale, disposition
or liquidation of those automobile loans will be treated as collections on the
automobile loans and deposited in the collection account. If the proceeds from
the liquidation of the automobile loans and any amounts on deposit in the
reserve account, if any, and the related distribution account are not sufficient
to pay the securities in full, and no additional credit enhancement is
available, the amount of principal returned to securityholders will be reduced
and some or all of the securityholders will incur a loss.
Each trust agreement will provide that the trustee does not have the power
to commence a voluntary proceeding in bankruptcy with respect to any trust
without the unanimous prior approval of all the trusts' certificateholders,
including the company if applicable, and the delivery to the trustee by each
certificateholder of a certificate certifying that the certificateholder
reasonably believes that the trust is insolvent.
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Termination
With respect to each trust, the obligations of the servicer, the company
and the trustee will terminate upon the earlier to occur of:
. the maturity or other liquidation of the last automobile loan and the
disposition of any amounts received upon liquidation of any remaining
automobile loans; and
. the payment to securityholders.
If the pool balance of the automobile loans is less than a specified
percentage of the initial pool balance in respect of the trust property, in
order to avoid excessive administrative expense, the servicer will be permitted,
at its option, to purchase from the trust property, as of the end of any
collection period immediately preceding a payment date, all remaining automobile
loans at a price equal to the aggregate of the purchase amounts described as of
the end of the collection period. The securities will be redeemed following
such purchase.
Within ten days following a payment date as of which the pool balance is
equal to or less than the percentage of the initial pool balance specified in
the prospectus supplement, the trustee will solicit bids for the purchase of the
automobile loans remaining in the trust. The prospectus supplement will
describe the manner and terms and conditions for the bidding. If the trustee
receives satisfactory bids as described in the prospectus supplement, then the
automobile loans remaining in the trust property will be sold to the highest
bidder.
Any outstanding notes of the related series will be redeemed concurrently
with either of the events specified above. The subsequent distribution to the
certificateholders of all amounts required to be distributed to them may effect
the prepayment of the certificates.
Certain Legal Aspects of the Automobile Loans
General
The transfer of automobile loans by the company or its finance subsidiary
to the trust, the perfection of the security interests in the automobile loans,
and the enforcement of rights to realize on the vehicles are subject to a number
of federal and state laws, including the UCC as codified in various states. The
servicer will take necessary actions to perfect the trustee's rights in the
automobile loans. If, through inadvertence or otherwise, a third party were to
purchase -- including the taking of a security interest in -- an automobile
loan for new value in the ordinary course of its business, without actual
knowledge of the trust's interest, and then were to take possession of the
automobile loan, the purchaser would acquire an interest in the automobile loan
superior to the trust's interest. No entity will take any action to perfect the
trustee's right in proceeds of any insurance policies covering individual
vehicles or obligors. Therefore, the rights of a third party with an interest
in these proceeds could prevail against the rights of the trust prior to the
time the servicer deposits the proceeds into a trust account.
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Security Interests in the Financed Vehicles
General
In all the states in which automobile loans have been originated, retail
installment sale contracts evidence the credit sale of automobiles and light
duty trucks by dealers to consumers. The automobile loans are chattel paper
under the UCC. Perfection of security interests in automobiles and light duty
trucks is generally governed by the vehicle registration or titling laws of the
state in which each vehicle is registered or titled. In most states a security
interest in a vehicle is perfected by noting the secured party's lien on the
vehicle's certificate of title.
Perfection
The company will sell and assign the automobile loans it has originated
or acquired and its security interests in the vehicles to the trustee.
Alternatively, the company may sell and assign the automobile loans and its
interest in the vehicles to a finance subsidiary. The finance subsidiary will
then sell and assign the automobile loans and related security interests to the
trustee. The prospectus supplement will specify whether, because of the
administrative burden and expense, the company, the servicer or the trustee will
not amend any certificate of title to identify the trustee as the new secured
party on the certificates of title. The prospectus supplement will specify the
UCC financing statements to be filed in order to perfect the transfer of the
automobile loans to the finance subsidiary and their subsequent transfer by the
finance subsidiary to the trustee. Further, although the trustee will not rely
on possession of the automobile loans as the legal basis for the perfection of
its interest in the automobile loans or in the security interests in the
vehicles, the servicer will continue to hold the automobile loans and any
certificates of title in its possession as custodian for the trustee. This
should preclude any other party from claiming a competing security interest in
the automobile loans on the basis their security interest is perfected by
possession.
In most states, a secured creditor can perfect its security interest in a
motor vehicle against creditors and subsequent purchasers without notice only by
one or more of the following methods:
. depositing with the related Department of Motor Vehicles or analogous
state office a properly endorsed certificate of title for the vehicle
showing the secured party as legal owner or lienholder on the
vehicle;
. filing a sworn notice of lien with the related Department of Motor
Vehicles or analogous state office and noting the lien on the
certificate of title; or
. if the vehicle has not been previously registered, filing an
application in usual form for an original registration together with
an application for registration of the secured party as legal owner or
lienholder, as the case may be.
However, under the laws of most states, a transferee of a security interest
in a motor vehicle is not required to reapply to the related Department of Motor
Vehicles or analogous state office for a transfer of registration when the
security interest is sold or transferred by the lienholder to secure payment or
performance of an obligation. Accordingly, under the laws of these states, the
assignment by the company of its interest in the automobile loans to the trustee
effectively conveys the company's security in the automobile loans, and
specifically, the
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vehicles, without re-registration and without amendment of any lien noted on the
certificate of title, and the trustee will succeed to the company's rights as
secured party.
Although it is not necessary to re-register the vehicle to convey the
perfected security interest in the vehicles to the trustee, the trustee's
security interest could be defeated through fraud, negligence, forgery or
administrative error because it may not be listed as legal owner or lienholder
on the certificates of title. However, in the absence of these events, the
notation of the company's lien on the certificates of title will be sufficient
to protect the trust against the rights of subsequent purchasers or subsequent
creditors who take a security interest in a vehicle. The company or its finance
subsidiary will represent and warrant that it has, taken all action necessary to
obtain, a perfected security interest in each vehicle. If there are any
vehicles for which the company failed to obtain a first priority perfected
security interest, the company's security interest would be subordinate to,
among others, subsequent purchasers and the holders of first priority perfected
security interests in these vehicles. Such a failure, however, would constitute
a breach of the company's or the finance subsidiary's representations and
warranties. Accordingly, the company or finance subsidiary would be required to
repurchase these automobile loans from the trustee unless the breach were cured.
Continuity of Perfection
Under the laws of most states, a perfected security interest in a motor
vehicle continues for four months after the vehicle is moved to a new state from
the state in which it is initially registered and continues until the owner re-
registers the motor vehicle in the new state. To re-register a vehicle, a
majority of states require the registering party to surrender the certificate of
title. In those states that require a secured party to take possession of the
certificate of title to maintain perfection, the secured party would learn of
the re-registration through the obligor's request for the certificate of title
so it could re-register the vehicle. In the case of vehicles registered in
states that provide for notation of a lien on the certificate of title but which
do not require possession, Texas, for example, the secured party would receive
notice of surrender from the state of re-registration if the security interest
is noted on the certificate of title. Thus, the secured party would have the
opportunity to reperfect its security interest in the vehicle in the new state.
However, these procedural safeguards will not protect the secured party if,
through fraud, forgery or administrative error, the debtor somehow procures a
new certificate of title that does not list the secured party's lien.
Additionally, in states that do not require the re-registering party to
surrender the certificate of title, re-registration could defeat perfection.
The trust documents will require the servicer to take steps to re-perfect the
security interest upon receiving notice of re-registration or information from
the obligor that it relocated . Similarly, when an obligor sells a vehicle, the
servicer will have an opportunity to require that the loan be satisfied before
it releases the lien. The opportunity arises because the servicer will be
required to surrender possession of the certificate of title in connection with
the sale, or because the servicer will receive notice as a result of its lien
being noted on the certificate. The servicer will hold the certificates of
title for the vehicles as custodian for the trustee and will be obligated to
take appropriate steps, at its own expense, to maintain perfected security
interests in the vehicles.
Priority of Certain Liens Arising by Operation of Law
Under the laws of most states, statutory liens take priority over even a
first priority perfected security interest in a vehicle. These statutory liens
include:
. mechanic's, repairmen's and garagemen's liens;
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. motor vehicle accident liens;
. towing and storage liens;
. liens arising under various state and federal criminal statutes; and
. liens for unpaid taxes.
The UCC also grants certain federal tax liens priority over a secured
party's lien. Additionally, the laws of most states and federal law permit
governmental authorities to confiscate motor vehicles under certain
circumstances if used in or acquired with the proceeds of unlawful activities.
Confiscation may result in the loss of the perfected security interest in the
vehicle. The company will represent and warrant to the trustee that, as of the
closing date, each security interest in a vehicle shall be a valid, subsisting
and enforceable first priority security interest in the vehicle. However, liens
for repairs or taxes superior to the trustee's security interest in any vehicle,
or the confiscation of a vehicle, could arise at any time during the term of an
automobile loan. No notice will be given to the trustee or any securityholder
in the event these types of liens or confiscations arise. Moreover, any liens
of these types or any confiscation arising after the closing date would not give
rise to the company's repurchase obligation.
Repossession
In the event an obligor defaults, the holder of the related automobile loan
has all the remedies of a secured party under the UCC, except where specifically
limited by other state laws. Under the UCC, a secured party's remedies include
the right to repossession by self-help, unless self-help would constitute a
breach of the peace. Unless a vehicle is voluntarily surrendered, self-help
repossession is accomplished simply by taking possession of the financed
vehicle. In cases where the obligor objects or raises a defense to
repossession, or if otherwise required by applicable state law, a secured party
must obtain a court order from the appropriate state court, and the vehicle must
then be recovered in accordance with that order. In some jurisdictions, the
secured party is required to notify the debtor of the default and the intent to
repossess the collateral and then must give the debtor a time period within
which to cure the default. Generally, this right of cure may only be exercised
on a limited number of occasions during the term of the related automobile loan.
Other jurisdictions permit repossession without prior notice if it can be
accomplished without a breach of the peace -- although in some states, a course
of conduct in which the creditor has accepted late payments has been held to
create a right by the obligor to receive prior notice.
Notice of Sale; Redemption Rights
The UCC and other state laws require a secured party to provide an obligor
with reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. In addition,
some states also impose substantive timing requirements on the sale of
repossessed vehicles and/or various substantive timing and content requirements
on the notices. In some states, after a financed vehicle has been repossessed,
the obligor may redeem the collateral by paying the delinquent installments and
other amounts due. The obligor has the right to redeem the collateral prior to
actual sale or entry by the secured party into a contract for sale of the
collateral by paying the secured party:
. the unpaid principal balance of the automobile loan;
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. accrued interest on the automobile loan;
. the secured party's reasonable expenses for repossessing, holding, and
preparing the collateral for sale and arranging for its sale, plus, in
some jurisdictions, reasonable attorneys' fees and legal expenses; or
. in some other states, by paying the delinquent installments on the
unpaid principal balance on the automobile loans.
Deficiency Judgments and Excess Proceeds
The proceeds from the resale of the vehicles generally will be applied
first to the expenses of resale and repossession and then to satisfying the
outstanding debt. In many instances, the remaining principal amount of the
indebtedness will exceed the proceeds. Under the UCC and laws applicable in
some states, a creditor is entitled to bring an action to obtain a deficiency
judgment from a debtor for any deficiency on repossession and resale of a motor
vehicle securing such debtor's loan. However, the deficiency judgment would be
a personal judgment against the obligor for the shortfall, and a defaulting
obligor can be expected to have very little capital or sources of income
available following repossession. Additionally, in some states a creditor is
prohibited from seeking a deficiency judgment from a debtor whose financed
vehicle had an initial cash sales price less than a specified amount, usually
$3,000. Some states, impose prohibitions, limitations or notice requirements on
actions for deficiency judgments. Therefore, in many cases, it may not be
useful to seek a deficiency judgment or, if one is obtained, it may be settled
at a significant discount or be uncollectible.
In addition to the notice requirement described above, the UCC requires
that every aspect of the sale or other disposition, including the method,
manner, time, place and terms, be "commercially reasonable". Courts have held
that when a sale is not "commercially reasonable", the secured party loses its
right to a deficiency judgment. Also, prior to a sale, the UCC permits the
debtor or other interested person to obtain an order mandating that the secured
party refrain from disposing of the collateral if it is established that the
secured party is not proceeding in accordance with the "default" provisions
under the UCC.
Courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
Occasionally, after a secured party sells a vehicle and uses the sale
proceeds to pay all expenses and indebtedness, there is a surplus of funds. In
that case, the UCC requires the creditor to remit the surplus to any holder of a
subordinate lien with respect to the vehicle or if no subordinate lienholder
exists or if there are remaining funds after the subordinate lienholder is paid,
the UCC requires the creditor to remit the surplus to the obligor.
Consumer Protection Laws
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon creditors and servicers involved in
consumer finance. These laws include:
. the Truth-in-Lending Act;
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. the Equal Credit Opportunity Act;
. the Federal Trade Commission Act;
. the Fair Credit Reporting Act;
. the Fair Debt Collection Practices Act;
. the Magnuson-Moss Warranty Act;
. the Federal Reserve Board's Regulations B and Z;
. state adaptations of the Uniform Consumer Credit Code;
. state motor vehicle retail installment sale acts;
. state "lemon" laws; and
. other similar laws.
In addition, the laws of some states impose finance charge ceilings and other
restrictions on consumer transactions and require other disclosures in addition
to those required under federal law. These requirements impose specific
statutory liabilities upon creditors who fail to comply with their provisions.
In some cases, this liability could affect the trustee's ability to enforce
consumer finance contracts such as the automobile loans.
The Federal Trade Commission's so-called holder-in-due-course rule has the
effect of subjecting any assignee of the seller in a consumer credit
transaction, and other related creditors and their assignees, to all claims and
defenses which the obligor in the transaction could assert against the
originator of the automobile loan. However, liability under the FTC rule is
limited to the amounts paid by the obligor under the loan. Because of the FTC
Rule the loan holder may be unable to collect any balance due from the obligor.
The FTC rule is generally duplicated by the Uniform Consumer Credit Code, other
state statutes or the common law in some states. To the extent that the
automobile loans will be subject to the requirements of the FTC rule, the
trustee, as holder of the automobile loans, will be subject to any claims or
defenses that the purchaser of the related vehicle may assert against the
seller. These claims will be limited to a maximum liability equal to the
amounts paid by the obligor under the related automobile loan.
Under most state vehicle dealer licensing laws, sellers of automobiles and
light duty trucks must be licensed to sell vehicles at retail sale. In
addition, the Federal Trade Commission's rule on sale of used vehicles requires
that all sellers of used vehicles prepare, complete and display a "Buyer's
Guide" explaining the warranty coverage for the vehicles. Furthermore, Federal
odometer regulations promulgated under the Motor Vehicle Information and Cost
Savings Act and the motor vehicle title laws of most states require that all
sellers of used vehicles furnish a written statement signed by the seller
certifying the accuracy of the odometer reading. If a seller is not properly
licensed or if the seller did not provide either a buyer's guide or odometer
disclosure statement to the purchaser, the obligor may be able to assert a
defense against the seller. If an obligor on an automobile loan were successful
in asserting these claims or defenses, the servicer would pursue on behalf of
the trust any reasonable remedies against the vehicle seller or manufacturer.
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Any loss, to the extent not covered by credit support, could result in
losses to securityholders. If an obligor were successful in asserting any claim
or defense described in the two immediately preceding paragraphs, the claim or
defense may constitute a breach of a representation and warranty under the trust
agreement and may create an obligation of the company to repurchase the
automobile loan unless the breach were cured.
The company or the finance subsidiary, if any will represent and warrant
that each automobile loan complies with all requirements of law in all material
respects. Accordingly, if an obligor has a claim against the trustee because
the company or its finance subsidiary violated any law and the claim materially
and adversely affects the trustee's interest in an automobile loan, the
violation would create an obligation of the company or the finance subsidiary,
if any to repurchase the automobile loan unless the violation were cured.
Soldiers' and Sailors' Civil Relief Act of 1940
Under the terms of the Soldiers' Civil Relief Act of 1940, as amended, the
holder of an automobile loan may not charge an obligor who enters military
service after the obligor takes out a loan more than a 6% annual rate, including
fees and charges, during the obligor's active duty status, unless a court orders
otherwise upon application of the lender. The relief act applies to obligors
who are members of the Army, Navy, Air Force, Marines, National Guard, Reserves,
Coast Guard, and officers of the U.S. Public Health Service assigned to duty
with the military. Because the relief act applies to obligors who enter
military service, including reservists who are called to active duty, after
origination of the automobile loan, the company cannot provide information as to
the number of loans that may be effected. Application of the relief act would
adversely affect, for an indeterminate period of time, the servicer's ability to
collect full amounts of interest on some automobile loans. Any shortfall in
interest collections resulting from the application of the relief act or similar
legislation or regulations, which would not be recoverable from the related
automobile loans, would result in a reduction of the amounts distributable to
securityholders, and would not be covered by advances, or any form of credit
enhancement provided in connection with the securities. In addition, the relief
act imposes limitations that would impair the ability of the servicer to
repossess an automobile loan during the obligor's period of active duty status,
and, in some circumstances, during an additional three month period afterward.
Thus, in the event that the relief act or similar legislation or regulations
applies to any automobile loan which goes into default, there may be delays in
payment and losses on the securities. Any other interest shortfalls, deferrals
or forgiveness of payments on the automobile loans resulting from similar
legislation or regulations may result in delays in payments or losses to
securityholders.
Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of the trust,
finance subsidiary or the servicer to repossess a vehicle or enforce a
deficiency judgment. For example, in a Chapter 13 proceeding under the federal
bankruptcy law, a court may prevent a creditor from repossessing a motor
vehicle, and, as part of the rehabilitation plan, reduce the amount of the
secured indebtedness to the market value of the motor vehicle at the time of
bankruptcy, leaving the party providing financing as a general unsecured
creditor for the remainder of the indebtedness. A bankruptcy court may also
reduce the monthly payments due under an automobile loan or change the rate of
interest and time of
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repayment of the indebtedness. Any such shortfall, to the extent not covered by
credit support, could result in losses to securityholders.
Material Tax Considerations
General
The following is a general discussion of the material anticipated federal
income tax consequences to investors of the purchase, ownership and disposition
of the securities offered by this prospectus. The discussion is based upon
laws, regulations, rulings and decisions now in effect, all of which are subject
to change. The discussion does not purport to deal with all federal tax
consequences applicable to all categories of investors, including:
. insurance companies;
. tax-exempt organizations;
. regulated investment companies;
. financial institutions or broker dealers;
. taxpayers subject to the alternative minimum tax; and
. holders of non capital asset securities assets.
Investors are urged to consult their own tax advisors to determine the
particular federal, state and local consequences of the purchase, ownership and
disposition of the securities.
This discussion addresses securities of four general types:
. grantor trust securities, representing interests in a grantor trust;
. debt securities, that are intended to be treated for federal income tax
purposes as indebtedness secured by the underlying loans;
. partnership interests, representing interests in a trust, a
partnership, that is intended to be treated as a partnership under the
Internal Revenue Code of 1986, as amended; and
. FASIT securities, representing interests in a financial asset
securitization investment trust, a FASIT, or a portion of a FASIT,
which the seller will covenant to elect to have treated as a FASIT
under sections 860H through 860L of the Code. The prospectus supplement
for each series of securities will indicate whether a FASIT election,
or elections, will be made for the related trust. If a FASIT election
is to be made, the prospectus supplement will identify all "regular
interests," "high-yield interests" and the "ownership interest" in the
FASIT.
The Taxpayer Relief Act of 1997 adds provisions to the Code requiring the
recognition of gain upon the "constructive sale of an appreciated financial
position." A constructive sale of an appreciated financial position occurs if a
taxpayer enters into a transaction or series of transactions regarding a
financial instrument that have the effect of substantially eliminating the
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taxpayer's risk of loss and opportunity for gain with respect to the financial
instrument. These provisions apply only to classes of securities that do not
have a principal balance.
Grantor Trust Securities
For each series of grantor trust securities, Dewey Ballantine LLP, special
tax counsel to the seller, will deliver its opinion to the seller that the
related grantor trust will be classified as a grantor trust and not as a
partnership or an association taxable as a corporation for each series of
grantor trust securities. The opinion will be attached on Form 8-K to be filed
with the SEC within fifteen days after the initial issuance of the securities or
filed with the SEC as a post-effective amendment to the prospectus.
Accordingly, each beneficial owner of a grantor trust security will generally be
treated as the owner of an interest in the automobile loans included in the
grantor trust.
A grantor trust security representing an undivided equitable ownership
interest in the principal of the automobile loans constituting the related
grantor trust, together with interest thereon at a pass-through rate, will be
referred to as a Grantor Trust Fractional Interest Security. A grantor trust
security representing ownership of all or a portion of the difference between
interest paid on the automobile loans constituting the related grantor trust and
interest paid to the beneficial owners of grantor trust fractional interest
securities issued with respect to a grantor trust will be referred to as a
Grantor Trust Strip Security.
Taxation of Beneficial Owners of Grantor Trust Securities.
Generally, beneficial owners of grantor trust fractional interest
securities will be required to report on their federal income tax returns their
respective shares of the income from the automobile loans, including amounts
used to pay reasonable servicing fees and other expenses. Excluded are amounts
payable to beneficial owners of any corresponding Grantor Trust Strip
Securities, and, subject to limitations, they will be entitled to deduct their
shares of any reasonable servicing fees and other expenses. If a beneficial
owner acquires a grantor trust fractional interest security for an amount that
differs from its outstanding principal amount, the amount includible in income
on a grantor trust fractional interest security may differ from the amount of
its distributable interest. See "Discount and Premium," below. Individuals
holding a grantor trust fractional interest security directly or through a pass-
through entity will be allowed a deduction for reasonable servicing fees and
expenses only to the extent that the aggregate of a beneficial owner's
miscellaneous itemized deductions exceeds 2% of a beneficial owner's adjusted
gross income. Further, beneficial owners may not deduct miscellaneous itemized
deductions in determining alternative minimum taxable income unless they are a
corporation which is subject to the alternative minimum tax.
Beneficial owners of grantor trust strip securities will generally be
required to treat the securities as "stripped coupons" under section 1286 of the
Code. Accordingly, a beneficial owner will be required to treat the excess of
the total amount of payments on a security over the amount paid for a security
as original issue discount and to include a discount in income as it accrues
over the life of a security. See "Discount and Premium," below.
Grantor trust fractional interest securities may also be subject to the
coupon stripping rules if a class of grantor trust strip securities is issued as
part of the same series of securities. The consequences of the application of
the coupon stripping rules appears to be that any discount arising upon the
purchase of a security, and perhaps all its stated interest, would be classified
as
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original issue discount and includible in the beneficial owner's income as it
accrues, regardless of the beneficial owner's method of accounting, as described
below under "Discount and Premium." However, the coupon stripping rules will not
apply, if:
. the pass-through rate is no more than 100 basis points lower than the
gross rate of interest payable on the underlying automobile loans;
and
. the difference between the outstanding principal balance on the security
and the amount paid for a security is less than 0.25% of the principal
balance times the weighted average remaining maturity of the security.
Sales of Grantor Trust Securities.
Any gain or loss recognized on the sale of a grantor trust security, equal
to the difference between the amount realized on the sale and the adjusted basis
of a grantor trust security, will be capital gain or loss, except to the extent
of accrued and unrecognized market discount, which will be treated as ordinary
income, and in the case of banks and other financial institutions except as
provided under section 582(c) of the Code. The adjusted basis of a grantor trust
security will generally equal its cost, increased by any income reported by the
originator, including original issue discount and market discount income, and
reduced, but not below zero, by any previously reported losses, any amortized
premium and any distributions of principal.
Grantor Trust Reporting.
With each distribution the trustee will furnish to each beneficial owner of
a grantor trust fractional interest security a statement detailing the amount of
the distribution allocable to principal on the underlying the automobile loans
and to interest thereon at the related interest rate. In addition, within a
reasonable time after the end of each calendar year, based on information
provided by the servicer, the trustee will furnish to each beneficial owner
during the year the customary factual information as the servicer deems
necessary or desirable to enable beneficial owners of grantor trust securities
to prepare their tax returns and will furnish comparable information to the
Internal Revenue Service as and when required to do so by law.
Debt Securities
For each series of debt securities, Dewey Ballantine LLP, special tax
counsel to the seller, will deliver its opinion to the seller that the
securities will be classified as debt secured by the related automobile loans.
Consequently, the debt securities will not be treated as ownership interests in
the automobile loans or the trust. Beneficial owners will be required to report
income received with respect to the debt securities in accordance with their
normal method of accounting. For additional tax consequences relating to debt
securities purchased at a discount or with premium, see "Discount and Premium,"
below.
Taxation of Beneficial Owners of Debt Securities.
If the debt securities are characterized as indebtedness, interest paid or
accrued on a debt security will be treated as ordinary income to the beneficial
owner and principal payments on a debt security will be treated as a return of
capital to the extent of the beneficial owner's basis in the debt security. An
accrual method taxpayer will be required to include in income interest on the
debt security when earned, even if not paid, unless it is determined to be
uncollectible. The
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trust will report to beneficial owners of record and the IRS the amounts of
interest paid and original issue discount, if any, accrued on the debt
securities to the extent required by law.
Sales of Debt Securities.
If a beneficial owner of a debt security sells or exchanges the security,
the beneficial owner will recognize gain or loss equal to the difference, if
any, between the amount received and the beneficial owner's adjusted basis in
the security. The adjusted basis in the security generally will equal its
initial cost, increased by any original issue discount or market discount
previously included in the seller's gross income regarding the security and
reduced by the payments previously received on the security, other than payments
of qualified stated interest, and by any amortized premium.
In general, except as described in "Discount and Premium -- Market
Discount," below, except for financial institutions subject to section 582(c) of
the Code, any gain or loss on the sale or exchange of a debt security recognized
by an investor who holds the security as a capital asset, within the meaning of
section 1221 of the Code, will be capital gain or loss and will be long-term or
short-term depending on whether the security has been held for more than one
year.
Debt Securities Reporting.
The trustee will furnish to each beneficial owner of a debt security with
each distribution a statement setting forth the amount of a distribution
allocable to principal on the underlying automobile loans and to interest on it
at the related interest rate. In addition, within a reasonable time after the
end of each calendar year, based on information provided by the servicer, the
trustee will furnish to each beneficial owner during a year the customary
factual information as the servicer deems necessary or desirable to enable
beneficial owners of debt securities to prepare their tax returns and will
furnish comparable information to the IRS as and when required to do so by law.
Partnership Interests
For each series of partnership interests, Dewey Ballantine LLP will
deliver its opinion to the seller that the trust will be treated as a
partnership and not an association taxable as a corporation for federal income
tax purposes. The opinion shall be attached on Form 8-K to be filed with the
Commission within fifteen days after the initial issuance of the securities or
filed with the SEC as a post-effective amendment to the prospectus. Accordingly,
each beneficial owner of a partnership interest will generally be treated as the
owner of an interest in the automobile loans.
Taxation of Beneficial Owners of Partnership Interests.
If the trust is treated as a partnership for federal income tax purposes,
the trust will not be subject to federal income tax. Instead, each beneficial
owner of a partnership interest will be required to separately take into account
its allocable share of income, gains, losses, deductions, credits and other tax
items of the trust. These partnership allocations are made in accordance with
the Code, Treasury regulations and the partnership agreement, here, the trust
agreement and related documents.
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The trust's assets will be the assets of the partnership. The trust's
income will consist primarily of interest and finance charges earned on the
underlying the automobile loans. The trust's deductions will consist primarily
of interest accruing with respect to any indebtedness issued by the trust,
servicing and other fees, and losses or deductions upon collection or
disposition of the trust's assets.
In certain instances, the trust could have an obligation to make payments
of withholding tax on behalf of a beneficial owner of a partnership interest.
See "Backup Withholding" and "Foreign Investors" below.
Substantially all of the taxable income allocated to a beneficial owner of
a partnership interest that is a pension, profit sharing or employee benefit
plan or other tax-exempt entity, including an individual retirement account,
will constitute "unrelated business taxable income" generally taxable to a
holder under the Code.
Under section 708 of the Code, the trust will be deemed to terminate for
federal income tax purposes if 50% or more of the capital and profits interests
in the trust are sold or exchanged within a 12-month period. Under Treasury
regulations issued on May 9, 1997 if a termination occurs, the trust is deemed
to contribute all of its assets and liabilities to a newly formed partnership in
exchange for a partnership interest. Immediately thereafter, the terminated
partnership distributes interests in the new partnership to the purchasing
partners and remaining partners in proportion to their interests in liquidation
of the terminated partnership.
Sale or Exchange of Partnership Interests.
Generally, capital gain or loss will be recognized on a sale or exchange of
partnership interests in an amount equal to the difference between the amount
realized and the seller's tax basis in the partnership interests sold. A
beneficial owner's tax basis in a partnership interest will generally equal the
beneficial owner's cost increased by the beneficial owner's share of trust
income recognized and decreased by any distributions received with respect to
the partnership interest. In addition, both the tax basis in the partnership
interest and the amount realized on a sale of a partnership interest would take
into account the beneficial owner's share of any indebtedness of the trust. A
beneficial owner acquiring partnership interests at different prices may be
required to maintain a single aggregate adjusted tax basis in the partnership
interests, and upon sale or other disposition of some of the partnership
interests, to allocate a portion of the aggregate tax basis to the partnership
interests sold, rather than maintaining a separate tax basis in each partnership
interest for purposes of computing gain or loss on a sale of that partnership
interes t.
Any gain on the sale of a partnership interest attributable to the
beneficial owner's share of unrecognized accrued market discount on the assets
of the trust would generally be treated as ordinary income to the holder and
would give rise to special tax reporting requirements. If a beneficial owner of
a partnership interest is required to recognize an aggregate amount of income
over the life of the partnership interest exceeding the aggregate cash
distributions with respect to the partnership interest, the excess will
generally give rise to a capital loss upon the retirement of the partnership
interest. If a beneficial owner sells its partnership interest at a profit or
loss, the transferee will have a higher or lower basis in the partnership
interests than the transferor had. The tax basis of the trust's assets will not
be adjusted to reflect that higher or lower basis unless the trust files an
election under section 754 of the Code.
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Partnership Reporting.
The owner trustee is required to:
(1) keep complete and accurate books of the trust;
(2) file a partnership information return (IRS Form 1065) with the IRS
for each taxable year of the trust; and
(3) report each beneficial owner's allocable share of items of trust
income and expense to beneficial owners and the IRS on Schedule K-1.
The trust will provide the Schedule K-1 information to nominees that fail
to provide the trust with the information statement described below and the
nominees will be required to forward the information to the beneficial owners of
the partnership interests. Generally, beneficial owners of a partnership
interest must file tax returns that are consistent with the information return
filed by the trust or be subject to penalties unless the beneficial owner of a
partnership interest notifies the IRS of all inconsistencies.
Under section 6031 of the Code, any person that holds partnership
interests as a nominee at any time during a calendar year is required to furnish
the trust with a statement containing information on the nominee, the beneficial
owners and the partnership interests so held. The information includes:
(a) the name, address and taxpayer identification number of the nominee;
and
(b) as to each beneficial owner:
(1) the name, address and identification number of the person;
(2) whether the person is a United States person, a tax-exempt entity
or a foreign government, an international organization, or any
wholly-owned agency or instrumentality of either of the foregoing;
and
(3) information on partnership interests that were held, bought or sold
on behalf of the person throughout the year.
In addition, brokers and financial institutions that hold partnership
interests through a nominee are required to furnish directly to the trust
information regarding themselves and their ownership of partnership interests. A
clearing agency registered under section 17A of the Exchange Act is not required
to furnish any information statement to the trust. Nominees, brokers and
financial institutions that fail to provide the trust with the information
described above may be subject to penalties .
The Code provides for administrative examination of a partnership as if the
partnership were a separate and distinct taxpayer. Generally, the statute of
limitations for partnership items does not expire before three years after the
date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the trust by the appropriate
taxing authorities could result in an adjustment of the returns of the
beneficial owner of a partnership interest, and, under circumstances, a
beneficial owner of a partnership interest may be precluded from separately
litigating a proposed adjustment to the items of the trust. An
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adjustment could also result in an audit of the beneficial owner of a
partnership interest's returns and adjustments of items not related to the
income and losses of the trust.
FASIT Securities
If provided in a related prospectus supplement, an election will be made to
treat the trust as a FASIT within the meaning of Code Section 860L(a).
Qualification as a FASIT requires ongoing compliance with certain conditions.
With respect to each series of securities for which an election is made, Dewey
Ballantine LLP will deliver its opinion to the seller that assuming compliance
with the trust agreements, the trust will be treated as a FASIT for federal
income tax purposes. A trust for which a FASIT election is made will be
referred to herein as a "FASIT trust." The securities of each class will be
designated as "regular interests" or "high-yield regular interests" in the FASIT
trust except that one separate class will be designated as the "ownership
interest" in the FASIT trust. The prospectus supplement for each series of
securities will state whether securities of each class will constitute either a
regular interest or a high-yield regular interest, a FASIT regular security, or
an ownership interest, a FASIT ownership security. An opinion shall be attached
on Form 8-K to be filed with the Commission within fifteen days after the
initial issuance of the securities or filed with the Commission as a post-
effective amendment to the prospectus.
Taxation of Beneficial Owners of FASIT Regular Securities.
A FASIT trust will not be subject to federal income tax except with respect
to income from prohibited transactions and in certain other instances as
described below. The FASIT regular securities generally will be treated for
federal income tax purposes as newly-originated debt instruments. In general,
interest, original issue discount (OID), and market discount on a FASIT regular
security will be treated as ordinary income to the beneficial owner, and
principal payments, other than principal payments that do not exceed accrued
market discount, on an FASIT regular security will be treated as a return of
capital to the extent of the beneficial owner's basis allocable thereto.
Beneficial owners must use the accrual method of accounting with respect to
FASIT regular securities, regardless of the method of accounting otherwise used
by the beneficial owners. See "Discount and Premium" below.
In order for the FASIT trust to qualify as a FASIT, there must be ongoing
compliance with the requirements set forth in the Code. The FASIT must fulfill
an asset test, which requires that substantially all the assets of the FASIT, as
of the close of the third calendar month beginning after the FASIT's startup
day, which for purposes of this discussion is the date of the initial issuance
of the FASIT securities, and at all times thereafter, must consist of cash or
cash equivalents, debt instruments, other than debt instruments issued by the
owner of the FASIT or a related party, and hedges, and contracts to acquire the
same, foreclosure property and regular interests in another FASIT or in a Real
Estate Mortgage Investment Conduit. Based on identical statutory language
applicable to REMICs, it appears that the "substantially all" requirement should
be met if at all times the aggregate adjusted basis of the nonqualified assets
is less than one percent of the aggregate adjusted basis of all the FASIT's
assets. The FASIT provisions of the Code, sections 860H through 860L, also
require the FASIT ownership interest and "high-yield regular interests",
described below, to be held only by fully taxable domestic corporations.
Permitted debt instruments must bear interest, if any, at a fixed or
qualified variable rate. Permitted hedges include:
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. interest rate or foreign currency notional principal contracts;
. letters of credit;
. insurance; and
* guarantees of payment default and similar instruments to be provided in
regulations, and which are reasonably required to guarantee or hedge
against the FASIT's risks associated with being the obligor on interests
issued by the FASIT.
Foreclosure property is real property acquired by the FASIT in connection
with the default or imminent default of a qualified mortgage, provided the
seller had no knowledge or reason to know as of the date the asset was acquired
by the FASIT that a default had occurred or would occur.
In addition to the foregoing requirements, the various interests in a FASIT
also must meet various other requirements. All of the interests in a FASIT must
be either of the following:
(a) one or more classes of regular interests; or
(b) a single class of ownership interest.
A regular interest is an interest in a FASIT that is issued on or after the
startup day with fixed terms, is designated as a regular interest, and:
(1) unconditionally entitles the holder to receive a specified
principal amount, or other similar amount;
(2) provides that interest payments, or other similar amounts, if
any, at or before maturity are payable based on either a fixed
rate or a qualified variable rate;
(3) has a stated maturity of not longer than 30 years;
(4) has an issue price not greater than 125% of its stated principal
amount; and
(5) has a yield to maturity not greater than 5 percentage points
higher than the related applicable Federal rate, as defined in
Code section 1274(d).
A regular interest that is described in the preceding sentence except that
it fails to meet one or more of requirements, (1), (2), (4), or (5) is a "high-
yield regular interest." A high-yield regular interest that fails requirement
(2) must consist of a specified, nonvarying portion of the interest payments on
the permitted assets, by reference to the REMIC rules. An ownership interest is
an interest in a FASIT other than a regular interest that is issued on the
startup day, is designated an ownership interest and is held by a single, fully-
taxable, domestic corporation. An interest in a FASIT may be treated as a
regular interest even if payments of principal with respect to interest are
subordinated to payments on other regular interests or the ownership interest in
the FASIT, and are dependent on the absence of defaults or delinquencies on
permitted assets lower than reasonably expected returns on permitted assets,
unanticipated expenses incurred by the FASIT or prepayment interest shortfalls.
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If an entity fails to comply with one or more of the ongoing requirements
of the Code for status as a FASIT during any taxable year, the Code provides
that the entity or applicable portion thereof will not be treated as a FASIT
thereafter. The legislative history to the FASIT provisions indicates, however,
that an entity can continue to be a FASIT if loss of its status was inadvertent,
it takes prompt steps to requalify and other requirements that may be provided
in Treasury regulations are met. Loss of FASIT status results in retirement of
all regular interests and their reissuance. If the resulting instruments are
treated as equity under general tax principles, cancellation of debt income
may result.
Taxes on a FASIT Trust.
Income from certain transactions by a FASIT, called prohibited
transactions, are taxable to the holder of the ownership interest in a FASIT at
a 100% rate. Prohibited transactions generally include:
(1) the disposition of a permitted asset other than for:
(a) foreclosure, default, or imminent default,
(b) bankruptcy or insolvency of the FASIT,
(c) a qualified, complete, liquidation,
(d) substitution for another permitted debt instrument or
distribution of the debt instrument to the holder of the
ownership interest to reduce overcollateralization, but only
if a principal purpose of acquiring the debt instrument which
is disposed of was not the recognition of gain, or the
reduction of a loss, on the withdrawn asset as a result of an
increase in the market value of the asset after its
acquisition by the FASIT, or
(e) the retirement of a Class of FASIT regular interests;
(2) the receipt of income from nonpermitted assets;
(3) the receipt of compensation for services; or
(4) the receipt of any income derived from a loan originated by the
FASIT.
It is unclear the extent to which tax on the transactions could be
collected from the FASIT trust directly under the applicable statutes rather
than from the holder of the FASIT residual security.
Due to the complexity of these rules, the absence of Treasury regulations
and the current uncertainty as to the manner of their application to the trust
and to holders of FASIT securities, it is particularly important that potential
investors consult their own tax advisors regarding the tax treatment of their
acquisition, ownership and disposition of the FASIT regular securities.
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Discount and Premium
A security purchased for an amount other than its outstanding principal
amount will be subject to the rules governing original issue discount, market
discount or premium. In addition, all grantor trust strip securities and various
grantor trust fractional interest securities will be treated as having original
issue discount by virtue of the coupon stripping rules in section 1286 of the
Code.
In very general terms:
. original issue discount is treated as a form of interest and must be
included in a beneficial owner's income as it accrues, regardless of
the beneficial owner's regular method of accounting, using a constant
yield method;
. market discount is treated as ordinary income and must be included in
a beneficial owner's income as principal payments are made on the
security, or upon a sale of a security; and
. if a beneficial owner elects, premium may be amortized over the life
of the security and offset against inclusions of interest income.
These tax consequences are discussed in greater detail below.
Original Issue Discount.
In general, a security will be considered to be issued with original issue
discount equal to the excess, if any, of its "stated redemption price at
maturity" over its "issue price." The issue price of a security is the initial
offering price to the public, excluding bond houses and brokers, at which a
substantial number of the securities were sold. The issue price also includes
any accrued interest attributable to the period between the beginning of the
first remittance period and the closing date. The stated redemption price at
maturity of a security that has a notional principal amount or receives
principal only or that provides for or may provide for accruals of interest is
equal to the sum of all distributions to be made under the security. The stated
redemption price at maturity of any other security is its stated principal
amount, plus an amount equal to the excess, if any, of the interest payable on
the first payment date over the interest that accrues for the period from the
closing date to the first payment date. The trustee will supply, at the time and
in the manner required by the IRS, to beneficial owners, brokers and middlemen
information with respect to the original issue discount accruing on the
securities.
Notwithstanding the general definition, original issue discount will be
treated as zero if the discount is less than 0.25% of the stated redemption
price at maturity of the security multiplied by its weighted average life. The
weighted average life of a security is apparently computed for this purpose as
the sum, for all distributions included in the stated redemption price at
maturity, of the amounts determined by multiplying:
(1) the number of complete years, rounding down for partial years, from
the closing date until the date on which each distribution is expected
to be made under the assumption that the automobile loans prepay at
the rate specified in the related prospectus supplement, the
Prepayment Assumption; by
(2) a fraction, the numerator of which is the amount of the distribution
and the denominator of which is the security's stated redemption price
at maturity.
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Even if original issue discount is treated as zero under this rule, the
actual amount of original issue discount must be allocated to the principal
distributions on the security and, when each distribution is received, gain
equal to the discount allocated to the distribution will be recognized.
Section 1272(a)(6) of the Code contains special original issue discount
rules applicable to prepayable securities. Under these rules, described in
greater detail below, (a) the amount and rate of accrual of original issue
discount on each series of securities will be based on (1) the prepayment
assumption, and (2) in the case of a security calling for a variable rate of
interest, an assumption that the value of the index upon which the variable rate
is based remains equal to the value of that rate on the closing date, and (b)
adjustments will be made in the amount of discount accruing in each taxable year
in which the actual prepayment rate differs from the prepayment assumption.
Section 1272(a)(6)(B)(iii) of the Code requires that the prepayment
assumption used to calculate original issue discount be determined in the manner
prescribed in Treasury regulations. To date, no regulations have been
promulgated. The legislative history of this Code provision indicates that the
assumed prepayment rate must be the rate used by the parties in pricing the
particular transaction. The seller anticipates that the prepayment assumption
for each series of securities will be consistent with this standard. The seller
makes no representation, however, that the automobile loans for a given series
will prepay at the rate reflected in the prepayment assumption for that series
or at any other rate. Each investor must make its own decision as to the
appropriate prepayment assumption to be used in deciding whether or not to
purchase any of the securities.
Each beneficial owner must include in gross income the sum of the "daily
portions" of original issue discount on its security for each day during its
taxable year on which it held the security. For this purpose, in the case of an
original beneficial owner, the daily portions of original issue discount will be
determined as follows. A calculation will first be made of the portion of the
original issue discount that accrued during each "accrual period." Original
issue discount calculations must be based on accrual periods of no longer than
one year either:
(1) beginning on a payment date, or, in the case of the first period, the
closing date, and ending on the day before the next payment date;
or
(2) beginning on the next day following a payment date and ending on the
next payment date.
Under section 1272(a)(6) of the Code, the portion of original issue
discount treated as accruing for any accrual period will equal the excess, if
any, of:
(a) the sum of (1) the present values of all the distributions remaining
to be made on the security, if any, as of the end of the accrual
period and (2) the distribution made on the security during the
accrual period of amounts included in the stated redemption price at
maturity; over
(b) the adjusted issue price of the security at the beginning of the
accrual period.
The present value of the remaining distributions referred to in the
preceding sentence will be calculated based on:
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(1) the yield to maturity of the security, calculated as of the closing
date, giving effect to the prepayment assumption;
(2) events, including actual prepayments, that have occurred prior to the
end of the accrual period;
(3) the prepayment assumption; and
(4) in the case of a security calling for a variable rate of interest, an
assumption that the value of the index upon which the variable rate is
based remains the same as its value on the closing date over the
entire life of the security.
The adjusted issue price of a security at any time will equal the issue
price of the security, increased by the aggregate amount of previously accrued
original issue discount with respect to the security, and reduced by the amount
of any distributions made on the security as of that time of amounts included in
the stated redemption price at maturity. The original issue discount accruing
during any accrual period will then be allocated ratably to each day during the
period to determine the daily portion of original issue discount.
In the case of Grantor Trust Strip Securities and various FASIT securities,
the calculation described in the preceding paragraph may produce a negative
amount of original issue discount for one or more accrual periods. No definitive
guidance has been issued regarding the treatment of negative amounts. The
legislative history to section 1272(a)(6) indicates that negative amounts may be
used to offset subsequent positive accruals but may not offset prior accruals
and may not be allowed as a deduction item in a taxable year in which negative
accruals exceed positive accruals. Beneficial owners of the securities should
consult their own tax advisors concerning the treatment of negative accruals.
A subsequent purchaser of a security that purchases the security at a cost
less than its remaining stated redemption price at maturity also will be
required to include in gross income for each day on which it holds the security,
the daily portion of original issue discount with respect to the security, but
reduced, if the cost of the security to the purchaser exceeds its adjusted issue
price, by an amount equal to the product of (1) the daily portion and (2) a
constant fraction, the numerator of which is the excess and the denominator of
which is the sum of the daily portions of original issue discount on the
security for all days on or after the day of purchase.
Market Discount.
A beneficial owner that purchases a security at a market discount, that is,
at a purchase price less than the remaining stated redemption price at maturity
of the security, or, in the case of a security with original issue discount, its
adjusted issue price, will be required to allocate each principal distribution
first to accrued market discount on the security, and recognize ordinary income
to the extent the distribution does not exceed the aggregate amount of accrued
market discount on the security not previously included in income. For
securities that have unaccrued original issue discount, the market discount must
be included in income in addition to any original issue discount. A beneficial
owner that incurs or continues indebtedness to acquire a security at a market
discount may also be required to defer the deduction of all or a portion of the
interest on the indebtedness until the corresponding amount of market discount
is included in income. In general terms, market discount on a security may be
treated as accruing either (1) under a constant yield method or (2) in
proportion to remaining accruals of original issue discount, if any, or if none,
in proportion to remaining distributions of interest on the security, in
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any case taking into account the prepayment assumption. The trustee will make
available, as required by the IRS, to beneficial owners of securities
information necessary to compute the accrual of market discount.
Notwithstanding the above rules, market discount on a security will be
considered to be zero if the discount is less than 0.25% of the remaining stated
redemption price at maturity of the security multiplied by its weighted average
remaining life. Weighted average remaining life presumably would be calculated
in a manner similar to weighted average life, taking into account payments,
including prepayments, prior to the date of acquisition of the security by the
subsequent purchaser. If market discount on a security is treated as zero under
this rule, the actual amount of market discount must be allocated to the
remaining principal distributions on the security and, when each distribution is
received, gain equal to the discount allocated to the distribution will be
recognized.
Premium.
A purchaser of a security that purchases the security at a cost greater
than its remaining stated redemption price at maturity will be considered to
have purchased the Premium Security, at a premium. A purchaser need not include
in income any remaining original issue discount and may elect, under section
171(c)(2) of the Code, to treat the premium as "amortizable bond premium." If a
beneficial owner makes an election, the amount of any interest payment that must
be included in the beneficial owner's income for each period ending on a payment
date will be reduced by the portion of the premium allocable to that period
based on the Premium Security's yield to maturity. The premium amortization
should be made using constant yield principles. If an election is made by the
beneficial owner, the election will also apply to all bonds the interest on
which is not excludible from gross income, "fully taxable bonds", held by the
beneficial owner at the beginning of the first taxable year to which the
election applies and to all fully taxable bonds thereafter acquired by it, and
is irrevocable without the consent of the IRS. If an election is not made:
(1) a beneficial owner must include the full amount of each interest
payment in income as it accrues; and
(2) the premium must be allocated to the principal distributions on the
premium security and when each distribution is received a loss equal
to the premium allocated to the distribution will be recognized.
Any tax benefit from the premium not previously recognized will be taken
into account in computing gain or loss upon the sale or disposition of the
premium security.
Special Election.
A beneficial owner may elect to include in gross income all "interest" that
accrues on the security by using a constant yield method. For purposes of the
election, the term interest includes stated interest, acquisition discount,
original issue discount, de minimis original issue discount, market discount, de
minimis market discount and unstated interest as adjusted by any amortizable
bond premium or acquisition premium. A beneficial owner should consult its own
tax advisor regarding the time and manner of making and the scope of the
election and the implementation of the constant yield method.
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<PAGE>
Backup Withholding and Information Reporting
Distributions of interest and principal, as well as distributions of
proceeds from the sale of securities, may be subject to the "backup withholding
tax" under section 3406 of the Code at a rate of 31% if recipients of the
distributions fail to furnish to the payor certain information, including their
taxpayer identification numbers, or otherwise fail to establish an exemption
from the tax. Any amounts deducted and withheld from a distribution to a
recipient would be allowed as a credit against the recipient's federal income
tax. Furthermore, penalties may be imposed by the IRS on a recipient of
distributions that is required to supply information but that does not do so in
the proper manner.
The IRS recently issued Withholding Regulations, which make certain
modifications to withholding, backup withholding and information reporting
rules. The withholding regulations attempt to unify certification requirements
and modify certain reliance standards. The withholding regulations will
generally be effective for payments made after December 31, 2000. Prospective
investors are urged to consult their own tax advisors regarding the withholding
regulations.
Foreign Investors
The Withholding Regulations
The withholding regulations would require, in the case of securities held
by a foreign partnership, that:
. the certification described above be provided by the partners rather
than by the foreign partnership; and
. the partnership provide information, including a United States
taxpayer identification number. See "Backup Withholding" above.
A look-through rule would apply in the case of tiered partnerships. In
addition, the withholding regulations may require that a foreign beneficial
owner, including, in the case of a foreign partnership, the partners thereof,
obtain a United States taxpayer identification number and make certain
certifications if the foreign beneficial owner wishes to claim exemption from,
or a reduced rate of, withholding under an income tax treaty. Non-U.S. Persons
should consult their own tax advisors regarding the application to them of the
withholding regulations.
Grantor Trust Securities, Debt Securities, and FASIT Regular Securities.
Distributions made on a grantor trust security, debt security or a FASIT
regular security to, or on behalf of, a beneficial owner that is not a U.S.
person generally will be exempt from U.S. federal income and withholding taxes.
The term U.S. Person means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, an estate that
is subject to U.S. federal income tax regardless of the source of its income, or
a trust if a court within the United States can exercise primary supervision
over its administration and at least one United States person has the authority
to control all substantial decisions of the trust. This exemption is applicable
provided:
(a) the beneficial owner is not subject to U.S. tax as a result of a
connection to the United States other than ownership of the
security
(b) the beneficial owner signs a statement under penalties of perjury
that certifies that the beneficial owner is not a U.S. person,
and provides the name and address of the beneficial owner
and
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<PAGE>
(c) the last U.S. person in the chain of payment to the beneficial
owner receives a statement from a beneficial owner or a financial
insitution holding on its behalf and does not have actual
knowledge tht the statement is false.
Beneficial owners should be aware that the IRS might take the position that
this exemption does not apply to a beneficial owner of a FASIT regular security
that also owns 10% or more of the FASIT ownership securities of any FASIT trust,
or to a beneficial owner that is a "controlled foreign corporation" described in
section 881(c)(3)(C) of the Code.
High-Yield FASIT Regular Securities.
High-yield FASIT regular securities may not be sold to or beneficially-
owned by non-U.S. persons. Any purported transfer will be null and void and,
upon the trustee's discovery of any purported transfer in violation of this
requirement, the last preceding owner of a high-yield FASIT regular securities
will be restored to ownership thereof as completely as possible. The last
preceding owner will, in any event, be taxable on all income with respect to a
high-yield FASIT regular securities for federal income tax purposes. The trust
documents agreement will provide that, as a condition to transfer of a high-
yield FASIT Regular Security, the proposed transferee must furnish an affidavit
as to its status as a U.S. Person and otherwise as a permitted transferee.
Partnership Interests.
Depending upon the particular terms of the trust agreement, a trust may be
considered to be engaged in a trade or business in the United States for
purposes of federal withholding taxes with respect to non-U.S. persons. If the
trust is considered to be engaged in a trade or business in the United States
for these purposes and the trust is treated as a partnership, the income of the
trust distributable to a non-U.S. person would be subject to federal withholding
tax. Also, in such cases, a non-U.S. beneficial owner of a partnership interest
that is a corporation may be subject to the branch profits tax. If the trust is
notified that a beneficial owner of a partnership interest is a foreign person,
the trust may withhold as if it were engaged in a trade or business in the
United States in order to protect the trust from possible adverse consequences
of a failure to withhold. A foreign holder generally would be entitled to file
with the IRS a claim for refund with respect to withheld taxes, taking the
position that no taxes were due because the trust was not in a U.S. trade or
business.
State Tax Considerations
In addition to the federal income tax consequences described in "Material
Federal Income Tax Considerations," potential investors should consider the
state and local income tax consequences of the acquisition, ownership, and
disposition of the securities. State and local income tax law may differ
substantially from the corresponding federal law, and this discussion does not
purport to describe any aspect of the income tax laws of any state or locality.
Therefore, potential investors should consult their own tax advisors with
respect to the various state and local tax consequences of an investment in the
securities.
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<PAGE>
ERISA Considerations
General
Provisions of ERISA and of the Internal Revenue Code prohibit a pension,
profit sharing or other employee benefit plan and other individual retirement
arrangements from engaging in transactions involving "plan assets" with persons
that are "parties in interest" under ERISA or "disqualified persons" under the
Code with respect to the plan. However, if a statutory or administrative
exemption applies to the transaction, plans may engage in these transactions.
ERISA and the Code also prohibit generally actions involving conflicts of
interest by fiduciaries of plans or arrangements. Persons who violate these
"prohibited transaction" rules may incur excise tax and other liabilities under
ERISA and the Code. In addition, investments by plans are subject to ERISA's
general fiduciary requirements, including ERISA's investment prudence and
diversification requirements and the requirement that a plan make its
investments in accordance with its governing documents. Employee benefit plans
that are governmental plans and church plans under ERISA, are not subject to
ERISA requirements. Accordingly, these plans may invest in securities without
regard to the ERISA considerations discussed below. Any plan, which is
qualified and exempt from taxation under Section 401(a) and 501(a) of the Code,
however, is subject to the prohibited transaction rules detailed in Section 503
of the Code.
Transactions involving the trust might be deemed to constitute prohibited
transactions under ERISA and the Code with respect to a plan, including an
individual retirement arrangement, that purchased securities. Therefore, in the
absence of an exemption, the purchase, sale or holding of a security by a plan,
including an individual retirement arrangement, might result in prohibited
transactions. This may result in excise taxes and civil penalties being imposed.
ERISA Considerations regarding Securities which are Certificates
The Department of Labor has issued to various underwriters individual
prohibited transaction exemptions which generally exempt transactions meeting
the department's requirements from:
. the application of the prohibited transaction provisions of Section
406(a), Section 406(b)(1), Section 406(b)(2) and Section 407(a) of ERISA;
and
. excise taxes imposed under Sections 4975(a) and (b) of the Code.
These exempted transactions deal with the initial purchase, holding and the
subsequent resale by plans of certificates in pass-through trusts consisting of:
. secured receivables;
. secured loans; and
. other secured obligations.
The underwriter exemptions will only be available for securities that are
certificates.
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Among the conditions that must be satisfied for the underwriter exemptions
to apply are the following:
. the plan must acquire the certificates on terms, including the
certificate's price, that are at least as favorable to the plan as
they would be in an arm's-length transaction with an unrelated
party;
. the certificates must not be subordinated to the trust's other
certificates;
. when the plan acquires the certificates, the certificates must have a
rating in one of the three highest generic rating categories from
Standard & Poor's, Moody's, Duff & Phelps Credit Rating Co. or
Fitch;
. the trustee must not be an affiliate of any other member of the
restricted group;
. the sum of all payments made to and retained by the underwriters must
not total more than reasonable compensation for underwriting the
certificates; the sum of all payments made to and retained by the
originators and the company/finance subsidiary for assigning the loans
to the trust must not total more than the fair market value of the
loans; the sum of all payments made to and retained by any servicer
must not total more than reasonable compensation and expense
reimbursement for its services;
. the plan must be an "accredited investor" as defined in Rule 501(a)(1)
of Regulation D of the commission under the Securities Act of 1933;
and
. in the event that all of the obligations used to fund the trust have
not been transferred to the trust on the closing date, additional
automobile loans having an aggregate value equal to no more than 25%
of the certificate's total principal amount may be transferred to the
trust under a pre-funding feature within 90 days or 3 months following
the closing date.
The trust estate must also meet the following requirements:
. the trust property must consist solely of assets of the type that have
been included in other investment pools;
. certificates in the other investment pools must have been rated in one
of the three highest rating categories of Standard & Poor's, Moody's,
Fitch or Duff & Phelps for at least one year prior to the date the
plan acquired the certificates; and
. investors other than plans must have purchased certificates evidencing
interests in the other investment pools for at least one year prior to
the date the plan acquired the certificates.
Moreover, the underwriter exemptions provide relief from various self-
dealing/conflict of interest prohibited transactions that may occur when the
plan fiduciary causes a plan to acquire certificates in a trust in which the
fiduciary, or its affiliate, is an obligor on the receivables held in the trust;
provided that, among other requirements:
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<PAGE>
. when a plan acquires an initial issuance of certificates, at least
fifty percent of each class in which a plan has invested is acquired
by persons independent of the restricted group and at least fifty
percent of the aggregate interest in the trust is acquired by persons
independent of the restricted group;
. the fiduciary, or its affiliate, is an obligor with respect to five
percent or less of the fair market value of the obligations contained
in the trust;
. when the plan acquires the certificates, the plan's investment in any
class does not exceed twenty-five percent of all of the certificates
of that class; and
. immediately after the plan acquires the certificates, no more than
twenty-five percent of the plan's assets for which the person is a
fiduciary are invested in certificates representing an interest in one
or more trusts containing assets sold or serviced by the same entity.
The underwriter exemptions do not apply to plans sponsored by a member of a
restricted group which includes the company/finance subsidiary, the
underwriters, the trustee, the servicer, any other servicer, any obligor with
respect to automobile loans included in the trust property constituting more
than five percent of the aggregate unamortized principal balance of the trust
estate's assets, or any affiliate of these parties.
ERISA Considerations regarding Securities which are Notes
The underwriter exemptions will not be available for securities that are
notes. Under the plan assets regulation issued by the Department of Labor, the
trust's assets would be treated as a plan's assets for the purposes of ERISA and
the Code only if the plan acquired an equity interest in the trust and none of
the exceptions contained in the Plan Assets Regulation were applicable. An
"equity interest" is defined under the Plan Assets Regulation as an interest
other than an instrument which:
. is treated as indebtedness under applicable local law; and
. which has no substantial equity features.
If the notes are treated as having substantial equity features, the
purchase, holding and resale of the notes could result in a transaction that is
prohibited under ERISA or the Code. If the notes are treated as indebtedness
without substantial equity features, the trust's assets would not be deemed
assets of a plan. In that case, the acquisition or holding of the notes by or
on behalf of a plan could result in a prohibited transaction, if the acquisition
or holding of notes by or on behalf of a plan were deemed to be a prohibited
loan to a party in interest with respect to the plan. Exemptions from these
prohibited transaction rules could apply to a plan's purchase and its holding of
notes, depending on the type and circumstances of the plan fiduciary making the
decision to acquire the notes. Included among these exemptions are:
. PTCE 84-14, regarding transactions effected by qualified professional
asset managers;
. PTCE 90-1, regarding transactions entered into by insurance company
pooled separate accounts;
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<PAGE>
. PTCE 91-38, regarding transactions entered into by bank collective
investment funds;
. PTCE 95-60, regarding transactions entered into by insurance company
general accounts; and
. PTCE 96-23, regarding transactions effected by in-house asset managers.
Each purchaser and each transferee of a note that is treated as debt for
purposes of the Plan Assets Regulation may be required to represent and warrant
that its purchase and holding of the note will be covered by one of the
exemptions listed above or by another Department of Labor class exemption.
Consultation With Counsel
The prospectus supplement will provide further information that plans
should consider before purchasing the securities. A plan fiduciary considering
the purchase of securities should consult its tax and/or legal advisors
regarding:
. whether the trust's assets would be considered plan assets;
. the possibility of exemptive relief from the prohibited transaction
rules; and
. other ERISA issues and their potential consequences.
In addition, each plan fiduciary should determine whether under the general
fiduciary standards of investment prudence and diversification, investing in the
securities is appropriate for the plan, taking into account the plan's overall
investment policy and the composition of the plan's investment portfolio. The
sale of securities to a plan is in no respect a representation by the
company/finance subsidiary or the underwriters that this investment meets all
relevant requirements regarding investments by plans generally or any particular
plan or that this investment is appropriate for plans generally or any
particular plan.
In John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank,
-----------------------------------------------------------------------
510 U.S. 86 (1993), the United States Supreme Court ruled that assets held in an
insurance company's general account may be deemed to be "plan assets" for ERISA
purposes under certain circumstances.
Methods of Distributions
The issuer will offer the securities offered by this prospectus and by the
prospectus supplement in series through one or more of the methods described
below. The prospectus supplement will describe the offering method and will
state the public offering or purchase price and the net proceeds to the company
from the sale.
The company intends that securities will be offered through the following
methods from time to time and that offerings may be made concurrently through
more than one of these methods or that an offering of a particular series of
securities may be made through a combination of two or more of these methods.
The methods are as follows:
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<PAGE>
. By negotiated firm commitment or best efforts underwriting and public
re-offering by underwriters;
. By placements by the company with institutional investors through
dealers;
. By direct placements by the company with institutional investors; and
. By competitive bid.
In addition, securities may be offered in whole or in part in exchange for
the automobile loans -- and other assets, if applicable -- that would comprise
the trust property.
If underwriters are used in a sale of any securities, other than in
connection with an underwriting on a best efforts basis, the securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at fixed
public offering prices or at varying prices to be determined at the time of sale
or at the time of commitment. The securities will be described on the cover of
the prospectus supplement and the members of the underwriting syndicate, if any,
will be named in the prospectus supplement.
In connection with the sale of the securities, underwriters may receive
compensation from the company or from purchasers of the securities in the form
of discounts, concessions or commissions. Underwriters and dealers
participating in the distribution of the securities may be deemed to be
underwriters in connection with the securities, and any discounts or commissions
received by them from the company and any profit on the resale of securities by
them may be deemed to be underwriting discounts and commissions under the
Securities Act. The prospectus supplement will describe any compensation paid
by the company.
It is anticipated that the underwriting agreement pertaining to the sale of
securities will provide that the obligations of the underwriters will be subject
to conditions precedent providing that the underwriters will be obligated to
purchase all the securities if any are purchased, other than in connection with
an underwriting on a best efforts basis, and that, in limited circumstances, the
company will indemnify the several underwriters and the underwriters will
indemnify the company against certain civil liabilities, including liabilities
under the Securities Act or will contribute to payments required to be made.
The prospectus supplement with respect to any securities offered by
placements through dealers will contain information regarding the nature of the
offering and any agreements to be entered into between the company and
purchasers of securities.
Purchasers of securities, including dealers, may, depending on the facts
and circumstances of such purchases, be deemed to be "underwriters" within the
meaning of the Securities Act in connection with reoffers and sales by them of
securities. Securityholders should consult with their legal advisors in this
regard prior to any reoffer or sale.
Legal Opinions
Certain legal matters relating to the issuance of the securities of any
series, including certain federal and state income tax consequences with respect
thereto, will be passed upon by
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<PAGE>
Dewey Ballantine LLP, New York, New York, or other counsel specified in the
prospectus supplement.
Financial Information
Certain specified trust property will secure each series of securities,
however, no trust will engage in any business activities or have any assets or
obligations prior to the issuance of the securities, except for the capital
contribution made to any trust which is a Delaware business trust. Accordingly,
financial statements with respect to the trust property of any trust which is a
Delaware business trust will be included in the prospectus supplement.
A prospectus supplement may also contain the financial statements of the
related credit enhancer, if any.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the amount of fees and expenses (other
than underwriting discounts and commissions) to be incurred in connection with
the issuance and distribution of the securities.
<TABLE>
<CAPTION>
<S> <C>
SEC Filing Fee................................................
$1,390,000
Trustee's Fees and Expenses*.................................. 20,000
Legal Fees and Expenses*...................................... 300,000
Accounting Fees and Expenses*................................. 80,000
Printing and Engraving
Expenses*..................................................... 100,000
Blue Sky Qualification and
Legal
Investment Fees and
Expenses................................................... 10,000
Rating Agency Fees*........................................... 200,000
Certificate Insurer's Fee*.................................... 150,000
Miscellaneous*................................................ 200,000
----------
TOTAL.........................................................
$2,450,000
==========
</TABLE>
__________
* Estimated in accordance with Item 511 of Regulation S-K.
Item 15. Indemnification of Directors and Officers.
Indemnification. Under the laws which govern the organization of the
registrant, the registrant has the power and in some instances may be required
to provide an agent, including an officer or director, who was or is a party or
is threatened to be made a party to certain proceedings, with indemnification
against certain expenses, judgments, fines, settlements and other amounts under
certain circumstances.
Section 9 of the Certificate of Incorporation of AmeriCredit Financial
Services, Inc. provides that all officers and directors of the corporation shall
be indemnified by the corporation from and against all expenses, liabilities or
other matters arising out of their status as an officer or director for their
acts, omissions or services rendered in such capacities.
The forms of the Underwriting Agreement, filed as Exhibits 1.1 and 1.2 to
this Registration Statement, provide that AmeriCredit Financial Services, Inc.
will indemnify and reimburse the underwriter(s) and each controlling person of
the underwriter(s) with respect to certain expenses and liabilities, including
liabilities under the 1933 Act or other federal or state regulations or under
the common law, which arise out of or are based on certain material
misstatements or omissions in the Registration Statement. In addition, the
Underwriting Agreements provide that the underwriter(s) will similarly indemnify
and reimburse AmeriCredit
II-1
<PAGE>
Financial Services, Inc. with respect to certain material misstatements or
omissions in the Registration Statement which are based on certain written
information furnished by the underwriter(s) for use in connection with the
preparation of the Registration Statement.
Insurance. As permitted under the laws which govern the organization of the
registrant, the registrant's Certificate of Incorporation permits the board of
directors to purchase and maintain insurance on behalf of the registrant's
agents, including its officers and directors, against any liability asserted
against them in such capacity or arising out of such agents' status as such,
whether or not such registrant would have the power to indemnify them against
such liability under applicable law.
II-2
<PAGE>
<TABLE>
<CAPTION>
Item 16. Exhibits.
<C> <S> <C>
1.1 -- Form of Underwriting Agreement -- Notes (incorporated by reference to Exhibit 1.1 to the
Registrant's Registration Statement on Form S-3 (Reg. No. 33-98620).
1.2 -- Form of Underwriting Agreement -- Certificates (incorporated by reference to Exhibit 1.2 to
the Registrant's Registration Statement on Form S-3 (Reg. No. 33-98620).
3.1 -- Certificate of Incorporation of the Sponsor (incorporated by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-3 (Reg. No. 33-98620).
3.2 -- By-Laws of the Sponsor (incorporated by reference to Exhibit 3.2 to the Registrant's
Registration Statement on Form S-3 (Reg. No. 33-98620).
4.1 -- Form of Indenture between the Trust and the Indenture Trustee (incorporated by reference to
Exhibit 4.1 to the Registrant's Registration Statement on Form S-3 (Reg. No. 33-98620).
4.2 -- Form of Indenture between the Sponsor and the Indenture Trustee (incorporated by reference to
Exhibit 4.2 to the Registrant's Registration Statement on Form S-3 (Reg. No. 33-98620).
4.3 -- Form of Pooling and Servicing Agreement (incorporated by reference to Exhibit 4.3 to the
Registrant's Registration Statement on Form S-3 (Reg. No. 33-98620).
4.4 -- Form of Trust Agreement (incorporated by reference to Exhibit 4.4 to the Registrant's
Registration Statement on Form S-3 (Reg. No. 33-98620).
5.1 -- Opinion of Dewey Ballantine with respect to validity.*
8.1 -- Opinion of Dewey Ballantine with respect to tax matters.*
10.1 -- Form of Receivables Acquisition Agreement (incorporated by reference to Exhibit 10.1 to the
Registrant's Registration Statement on Form S-3 (Reg. No. 33-98620).
23.1 -- Consents of Dewey Ballantine are included in its opinions filed as Exhibits 5.1 and 8.1 hereto.
</TABLE>
* Previously Filed.
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<PAGE>
Item 17. Undertakings.
A. Undertaking in respect of indemnification
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described above in Item 15, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by them is against public policy as expressed in the 1933
Act and will be governed by the final adjudication of such issue.
B. Undertaking pursuant to Rule 415.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent on more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change of such information in the Registration Statement; provided,
however, that paragraphs (i) and (ii) do not apply if the information required
to be included in the post-effective amendment is contained in periodic reports
filed by the Issuer pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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<PAGE>
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
C. Undertaking pursuant to Rule 430A.
The Registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of a
registration statement in Reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Fort Worth, State of Texas on the 13th
day of September, 1999.
AMERICREDIT FINANCIAL SERVICES, INC.
By /s/ Michael R. Barrington
-------------------------
Michael R. Barrington
Director, Vice Chairman and
Chief Executive Officer
The Registrant reasonably believes that the security ratings to be assigned
to the securities registered hereunder will make the securities "investment
grade securities" pursuant to Transaction Requirement B.2 of Form S-3, prior to
the sale of such securities.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- -----
<S> <C> <C>
/s/ Michael R. Barrington Director, Vice Chairman and Chief September 13, 1999
- -------------------------- Executive Officer
Michael R. Barrington (Principal Executive Officer)
/s/ Daniel E. Berce Director, Vice Chairman and Chief September 13, 1999
- -------------------------- Financial Officer
Daniel E. Berce (Principal Financial Officer and
Principal Accounting Officer)
/s/ Edward H. Esstman Director, President and Chief Operating September 13, 1999
- -------------------------- Officer
Edward H. Esstman
/s/ Clifton H. Morris, Jr. Director and Chairman of the Board September 13, 1999
- ---------------------------
Clifton H. Morris, Jr.
</TABLE>
II-6
