<PAGE>
As Filed Pursuant to Rule 424(b)(5)
Registration No. 333-47278
PROSPECTUS SUPPLEMENT
(To Prospectus dated September 16, 1999)
$443,250,000 AUTOMOBILE RECEIVABLES BACKED NOTES
AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-1
AFS SENSUB CORP.
SELLER
[AMERICREDIT FINANCIAL SERVICES, INC. LOGO]
SERVICER
You should carefully review the risk factors beginning on page S-14 of this
prospectus supplement and page 10 of the accompanying prospectus.
The notes represent obligations of the issuer only and do not represent
obligations of or interest in AmeriCredit Financial Services, Inc., AFS SenSub
Corp. or any of their affiliates.
THE ISSUER WILL ISSUE -
- five classes of notes that are offered by this prospectus supplement; and
- two classes of subordinated notes that are not offered by this prospectus
supplement. These subordinate notes are anticipated to be privately placed,
primarily with institutional investors.
THE NOTES -
- are backed by a pledge of assets of the issuer. The assets of the issuer
securing the notes will include a pool of non-prime quality auto loans
secured by new and used automobiles, light duty trucks and vans;
- receive monthly distributions on the 5th day of each month, or, if not a
business day, then on the next business day, beginning on December 5, 2000;
and
- currently have no trading market.
CREDIT ENHANCEMENT FOR THE NOTES OFFERED BY THIS PROSPECTUS SUPPLEMENT WILL
CONSIST OF -
- excess cashflow collected on the pool of automobile loans;
- overcollateralization resulting from the excess of the principal amount of
the auto loans over the aggregate principal amount of the notes;
- the subordination of each class of notes to those classes senior to it,
including the subordination of the two classes of notes which are not being
offered by this prospectus supplement to each class of notes being offered
by this prospectus supplement; and
- a reserve account that can be used to cover payments of timely interest and
ultimate principal on the notes.
<TABLE>
<CAPTION>
PRINCIPAL INTEREST FINAL SCHEDULED UNDERWRITING PROCEEDS
AMOUNT RATE DISTRIBUTION DATE PRICE TO PUBLIC(1) DISCOUNTS TO SELLER (2)
------ ---- ----------------- ------------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 Notes $ 80,000,000 6.757% November 5, 2001 100.000000% 0.125% 99.875000%
Class A-2 Notes $174,000,000 6.700% March 5, 2004 99.993100% 0.200% 99.793100%
Class A-3 Notes $119,250,000 6.740% May 5, 2005 99.981512% 0.250% 99.731512%
Class B Notes $ 45,000,000 7.160% September 5, 2005 99.989137% 0.300% 99.689137%
Class C Notes $ 25,000,000 7.440% December 5, 2005 99.992508% 0.450% 99.542508%
</TABLE>
(1) Plus accrued interest, if any, from November 16, 2000.
(2) Before expenses, estimated to be $625,000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the prospectus to which it relates is truthful or
complete. Any representation to the contrary is a criminal offense.
FOR THE CLASS A AND CLASS B NOTES FOR THE CLASS C NOTES
STRUCTURING AGENT AND STRUCTURING AGENT AND
JOINT LEAD MANAGER JOINT LEAD MANAGER SOLE MANAGER
DEUTSCHE BANC ALEX. BROWN CHASE SECURITIES INC. DEUTSCHE BANC ALEX. BROWN
Prospectus Supplement dated November 1, 2000.
<PAGE>
You should rely only on the information contained in this document or
that we have referred you to. We have not authorized any person to provide you
with information that is different. The information in this document speaks only
as of its date, and may not be accurate at any time after its date. This
document is not an offer to sell these securities, and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
-------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
SUMMARY.............................................S-6
RISK FACTORS.......................................S-14
USE OF PROCEEDS....................................S-17
THE SERVICER.......................................S-17
THE SELLER.........................................S-18
THE ISSUER.........................................S-18
THE OWNER TRUSTEE..................................S-19
THE INDENTURE TRUSTEE..............................S-19
THE TRUST PROPERTY.................................S-19
AMERICREDIT'S AUTOMOBILE FINANCING PROGRAM.........S-20
THE AUTOMOBILE LOANS...............................S-22
YIELD AND PREPAYMENT CONSIDERATIONS................S-28
DESCRIPTION OF THE NOTES...........................S-36
MATERIAL FEDERAL INCOME TAX CONSEQUENCES...........S-51
STATE AND LOCAL TAX CONSIDERATIONS.................S-55
ERISA CONSIDERATIONS...............................S-56
LEGAL INVESTMENT...................................S-56
RATINGS............................................S-57
UNDERWRITING.......................................S-58
EXPERTS............................................S-60
LEGAL OPINIONS.....................................S-60
GLOSSARY...........................................S-61
REPORT OF INDEPENDENT ACCOUNTANTS...................F-1
ANNEX I CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES .....................A-1
S-2
<PAGE>
PROSPECTUS
PAGE
SUMMARY OF PROSPECTUS................................ 5
RISK FACTORS.........................................10
THE COMPANY AND THE SERVICER.........................19
THE TRUSTEE..........................................19
THE ISSUER...........................................19
COMPOSITION OF THE TRUST PROPERTY....................19
THE AUTOMOBILE LOANS.................................20
AMERICREDIT'S AUTOMOBILE FINANCING PROGRAM...........23
POOL FACTORS.........................................27
USE OF PROCEEDS......................................28
DESCRIPTION OF THE SECURITIES........................28
DESCRIPTION OF THE TRUST AGREEMENTS..................39
CERTAIN LEGAL ASPECTS OF THE AUTOMOBILE LOANS........49
MATERIAL TAX CONSIDERATIONS..........................57
STATE TAX CONSIDERATIONS.............................76
ERISA CONSIDERATIONS.................................76
METHODS OF DISTRIBUTIONS.............................81
LEGAL OPINIONS.......................................82
FINANCIAL INFORMATION................................82
Until ninety (90) days after the date of this Prospectus Supplement,
all dealers that buy, sell or trade the notes may be required to deliver a
prospectus, regardless of whether they are participating in the offer. This is
in addition to the obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
S-3
<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 information concerning your series of notes varies between this
prospectus supplement and the accompanying prospectus, you should rely on the
information contained 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.
S-4
<PAGE>
You may request a free copy of any of the filings incorporated by
reference into this prospectus supplement by writing or calling: AmeriCredit
Financial Services, Inc., 801 Cherry Street, Suite 3900, Fort Worth, Texas
76102; telephone (817) 302-7000.
S-5
<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 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 and is qualified by the full
description of these calculations, cash flows and other information in this
prospectus supplement and the accompanying prospectus.
THE ISSUER
AmeriCredit Automobile Receivables Trust 2000-1, or THE ISSUER, is a Delaware
business trust. The issuer will issue the notes and be liable for their payment.
The issuer's principal asset will be a pool of automobile loans.
THE SELLER
AFS SenSub Corp., or THE SELLER, is a Nevada corporation which is a wholly-owned
special-purpose subsidiary of AmeriCredit. The seller will sell the automobile
loans to the issuer.
THE SERVICER
AmeriCredit Financial Services, Inc., or AMERICREDIT, is a Delaware corporation.
AmeriCredit originated the automobile loans and will service them on behalf of
the issuer.
THE TRUSTEE
The Chase Manhattan Bank, or CHASE, is a New York banking corporation. Chase
will be the trust collateral agent, the indenture trustee and the backup
servicer.
STATISTICAL CALCULATION DATE
October 4, 2000. This is the date we used in preparing the statistical
information used in this prospectus supplement.
CUTOFF DATE
November 2, 2000. The issuer will receive amounts collected on the automobile
loans after this date.
CLOSING DATE
November 16, 2000.
DESCRIPTION OF THE SECURITIES
The issuer will issue seven classes of its asset backed notes. The notes are
designated as the CLASS A-1 NOTES, the CLASS A-2 NOTES, the CLASS A-3 NOTES, the
CLASS B NOTES, the CLASS C NOTES, the CLASS D NOTES and the CLASS E NOTES. The
Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes are the CLASS A
NOTES.
S-6
<PAGE>
The Class A Notes, the Class B Notes and the Class C Notes are being offered by
this prospectus supplement and are sometimes referred to as the
PUBLICLY OFFERED NOTES. The Class D Notes and the Class E Notes are not being
offered by this prospectus supplement, and are anticipated to be privately
placed with institutional investors.
Each class of notes will have the initial note principal amounts, interest rates
and final scheduled distribution dates listed in the following tables:
<TABLE>
<CAPTION>
PUBLICLY OFFERED NOTES
INITIAL NOTE INTEREST FINAL SCHEDULED
CLASS PRINCIPAL BALANCE RATE DISTRIBUTION DATE
----- ----------------- ---- -----------------
<S> <C> <C> <C>
A-1 $ 80,000,000 6.757% 11/5/2001
A-2 $ 174,000,000 6.700% 3/5/2004
A-3 $ 119,250,000 6.740% 5/5/2005
B $ 45,000,000 7.160% 9/5/2005
C $ 25,000,000 7.440% 12/5/2005
<CAPTION>
PRIVATELY PLACED NOTES
INITIAL NOTE INTEREST FINAL SCHEDULED
CLASS PRINCIPAL BALANCE RATE DISTRIBUTION DATE
----- ----------------- ---- -----------------
<S> <C> <C> <C>
D $ 25,000,000 8.220% 4/5/2006
E $ 26,750,000 10.680% 8/6/2007
</TABLE>
The Publicly Offered Notes will initially be issued in book-entry form only, and
will be issued in minimum denominations of $1,000 and multiples of $1,000.
You may hold your Publicly Offered Notes through DTC in the United States or
Clearstream Banking, societe anonyme or in the Euroclear System in Europe.
The notes will be secured solely by the pool of automobile loans and the other
assets of the issuer which are described under the section of this summary
entitled "THE TRUST ASSETS."
DISTRIBUTION DATES
- Distribution dates:
The distribution date will be the 5th day of each month, subject to the
business day rule set forth below, commencing on December 5, 2000.
- Business day rule:
If any scheduled date for a distribution is not a business day, then the
distribution will be made on the next business day.
- Record dates:
The record date for all distribution dates is the close of business on the
business day immediately preceding that distribution date.
CREDIT ENHANCEMENT
Credit enhancement reduces the risk of loss to the holders of the notes which
may result from shortfalls in payments received from and losses incurred on the
pool of automobile loans. The credit enhancement consists of the following:
APPLICATION OF EXCESS CASHFLOW
Generally, because more interest is paid by the obligors than is necessary to
pay the interest which accrues on the notes, there is expected to be excess
cashflow each month. Some of the excess cashflow will be applied as accelerated
principal payments on
S-7
<PAGE>
the notes to create overcollateralization.
OVERCOLLATERALIZATION
The cash flow provisions of the issuer may result in a limited acceleration
of the notes relative to the amortization of the automobile loans. This
acceleration feature creates overcollateralization, which equals the excess
of the total principal balance of the pool of automobile loans over the total
principal balance of the notes. The purpose of overcollateralization is to
ensure that there are excess funds available to pay interest and principal on
the notes so that noteholders will have some protection against payment
shortfalls, and so that the note balance for each class of notes will be paid
off no later than its final scheduled distribution date.
As of the closing date, the level of overcollateralization will be 1.0%. On each
distribution date, excess cashflow will be applied to pay down the notes until
the required level of overcollateralization is achieved.
SUBORDINATION
A class of notes that is lower in priority of payment than other classes of
notes provides credit enhancement to those other classes. As a result, to the
extent that the trust assets generate less cash than is necessary to satisfy the
trust's obligations to the holders of all classes, losses will be suffered first
by the holder of the certificate representing the residual interest in the
trust, and then by the holders of the Class E, Class D, Class C, Class B and
Class A Notes in that order.
While the Class E Notes are subordinated to the Class A, Class B, Class C and
Class D Notes, amounts that would otherwise be payable to the certificateholder
will be distributed as a further reduction of the outstanding principal balance
of the Class E Notes until they are paid off.
RESERVE ACCOUNT
A reserve account will be established for the benefit of the noteholders. On the
closing date, a portion of the proceeds from the sale of the notes will be
deposited in the reserve account in an amount equal to $5,000,000, which is 1.0%
of the initial pool balance. On each distribution date, excess cashflow will be
deposited in the reserve account to maintain that amount on deposit.
On each distribution date, cash will be withdrawn from the reserve account to
fund any deficiencies in interest payments and certain principal payments owed
to the noteholders. In addition, on the final scheduled distribution date for
any class of notes, if the cashflow for that distribution date is insufficient
to pay the remaining principal balance of that class, amounts on deposit in the
reserve account will be used to pay off that remaining principal for that class
before it is used to pay any other interest or principal shortfalls.
S-8
<PAGE>
FLOW OF FUNDS
On each payment date, the trustee will apply the trust's available funds in the
following order of priority:
1. to pay the monthly servicing fees to the servicer and, to the extent
available, to pay to AmeriCredit any amounts paid by the borrowers during
the preceding calendar month that did not relate to principal and interest
payments due on the automobile loans;
2. to pay the monthly indenture trustee, owner trustee, backup servicer and
trust collateral agent fees (to the extent not already paid), subject to a
maximum annual limit;
3. to pay interest due on the Class A Notes;
4. to pay principal to the extent necessary to reduce the Class A Note
principal balance to the pool balance, which amount will be paid out as
described below under "Principal";
5. to pay the remaining principal balance of any Class A Notes on their final
scheduled distribution date;
6. to pay interest due on the Class B Notes;
7. to pay principal to the extent necessary to reduce the combined Class A and
Class B Note principal balance to the pool balance, which amount will be
paid out as described below under "Principal";
8. to pay the remaining principal balance of the Class B Notes on their final
scheduled distribution date;
9. to pay interest due on the Class C Notes;
10. to pay principal to the extent necessary to reduce the combined Class A,
Class B and Class C Note principal balance to the pool balance, which
amount will be paid out as described below under "Principal";
11. to pay the remaining principal balance of the Class C Notes on their final
scheduled distribution date;
12. to pay interest due on the Class D Notes;
13. to pay principal to the extent necessary to reduce the combined Class A,
Class B, Class C and Class D Note principal balance to the pool balance,
which amount will be paid out as described below under "Principal";
14. to pay the remaining principal balance of the Class D Notes on their final
scheduled distribution date;
15. to pay interest due on the Class E Notes;
16. to pay principal to the extent necessary to reduce the combined Class A,
Class B, Class C, Class D and Class E Note principal balance to the pool
balance, which amount will be paid out as described below under
"Principal";
17. to pay the remaining principal balance of the Class E Notes on their final
scheduled distribution date;
18. to pay the principal distributable amount, which amount will be
S-9
<PAGE>
paid out as described below under "Principal";
19. to fund a deposit into the reserve account of the amount necessary to
achieve a specified reserve account amount;
20. to pay principal to achieve a specified amount of overcollateralization,
which amount will be paid out as described below under "Principal"; and
21. to pay principal to reduce the Class E Note principal balance, or, if the
Class E Notes are no
longer outstanding, to fund a payment of all remaining amounts to the
certificateholder.
INTEREST
Interest on the notes of each class will accrue at the interest rate for that
class from a distribution date to the day before the next distribution date. In
the case of the first distribution date, interest begins to accrue on the day of
the closing.
Interest on the Class A-1 Notes will be calculated on an "actual/360" basis.
Interest on the other classes of notes will be calculated on a "30/360" basis.
PRINCIPAL
- Principal of the notes will be payable on each distribution date in an
amount generally equal to:
(1) 100% of the principal amortization which occurred in the automobile
loan pool during the prior calendar month, plus
(2) certain amounts of INTEREST collected on the automobile loans
during the prior calendar month, which will be used to pay
PRINCIPAL on the notes on that distribution date, but only as
necessary to prevent under-collateralization, plus
(3) certain amounts of EXCESS INTEREST, collected on the automobile
loans during the prior calendar month, which would otherwise be
distributed to the certificateholder, which will be used to pay
PRINCIPAL on the notes on that distribution date, but only as
necessary to build or maintain over-collateralization at its
required amount or to reduce the principal balance of the Class E
Notes until they are paid off.
- The outstanding principal amount of the notes of any class, if not
previously paid, will be payable on the final scheduled distribution date
for that class.
S-10
<PAGE>
- The classes of notes are "sequential pay" classes. On each distribution
date, all amounts allocated to the payment of principal as described in
clauses 4, 7, 10, 13, 16, 18 and 20 of "Flow of Funds" above will be
aggregated and will be paid out in the following order:
- first, the Class A-1 Notes will be paid off;
- once the Class A-1 Notes are paid off, the Class A-2 Notes will begin
to amortize, until they are paid off;
- once the Class A-2 Notes are paid off, the Class A-3 Notes will begin
to amortize, until they are paid off;
- once the Class A-3 Notes are paid off, the Class B Notes will begin to
amortize, until they are paid off;
- once the Class B Notes are paid off, the Class C Notes will begin to
amortize until they are paid off;
- once the Class C Notes are paid off, the Class D Notes will begin to
amortize until they are paid off; and
- once the Class D Notes are paid off, the Class E Notes (if still
outstanding) will begin to amortize until they are paid off.
On each distribution date that the reserve account is funded at its target level
and the overcollateralization target has been reached, excess interest that
would otherwise be distributed to the certificateholder will instead be used to
amortize the Class E Notes until they are paid off. It is therefore likely that
despite the fact that principal collections are paid sequentially, the Class E
Notes will be paid off earlier than certain other classes senior to them.
THE TRUST ASSETS
The issuer's assets will principally include:
- a pool of non-prime quality automobile loans, which are secured by new and
used automobiles, light duty trucks and vans;
- collections on the automobile loans received after November 2, 2000;
- an assignment of the security interests in the vehicles securing the
automobile loan pool; and
- amounts held in the collection account and the reserve account.
THE AUTOMOBILE LOAN POOL
The automobile loans consist of motor vehicle retail installment sale contracts
originated by dealers or third-party lenders and then acquired by AmeriCredit or
motor vehicle loans originated by AmeriCredit directly with consumers. The
automobile loans were made primarily to individuals with less than perfect
credit due to various factors, including the manner in which those individuals
have
S-11
<PAGE>
handled previous credit, the limited extent of their prior credit history,
and limited financial resources.
STATISTICAL INFORMATION
The statistical information in this prospectus supplement is based on a
statistical pool of automobile loans as of October 4, 2000. The statistical pool
as of October 4, 2000 reflected approximately $500,000,000 in automobile loans.
The final pool as of November 2, 2000 is expected to reflect approximately
$500,000,000 in automobile loans. The statistical distribution of the
characteristics of the automobile loan pool as of the cutoff date, which is
November 2, 2000, will vary somewhat from the statistical distribution of those
characteristics in the statistical pool as of October 4, 2000, although that
variance will not be material.
- As of October 4, 2000 the automobile loans in the statistical pool have:
- a weighted average annual percentage rate of approximately 19.17%;
- a weighted average original maturity of approximately 62 months;
- a weighted average remaining maturity of approximately 61 months; and
- an individual remaining term of not more than 72 months.
REDEMPTION
- Optional redemption:
The Class D and Class E Notes, if still outstanding, may be redeemed in
whole, but not in part, on any distribution date on which AmeriCredit
exercises its "clean-up call" option to purchase the automobile loan pool.
This can only occur after the pool balance declines to 10% or less of its
original balance. The redemption price is equal to the unpaid principal
amount of the notes of each class then outstanding plus accrued and unpaid
interest.
- Mandatory redemption:
If an event of default under the indenture occurs, the notes may be
accelerated and subject to immediate payment at par.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes:
- Dewey Ballantine LLP, tax counsel, is of the opinion that the Publicly
Offered Notes will constitute indebtedness and the issuer will not be an
association or publicly traded partnership taxable as a corporation. By
your acceptance of a Publicly Offered Note, you agree to treat the note as
indebtedness.
- Interest on the Publicly Offered Notes will be taxable as ordinary income:
S-12
<PAGE>
- when received by a holder using the cash method of accounting, and
- when accrued by a holder using the accrual method of accounting.
- Dewey Ballantine LLP has prepared the discussion under "MATERIAL FEDERAL
INCOME TAX CONSEQUENCES" in the prospectus supplement and "MATERIAL TAX
CONSIDERATIONS" 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 Publicly Offered Notes to their
original purchaser.
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 Publicly Offered Notes. Fiduciaries of such plans may
wish to consult with counsel regarding the applicability of the provisions of
ERISA before purchasing Publicly Offered Notes.
LEGAL INVESTMENT
The Class A-1 Notes will be eligible securities for purchase by money market
funds under Rule 2a-7 of the Investment Company Act of 1940, as amended.
RATING OF THE NOTES
The publicly offered notes must receive at least the following ratings from
Standard & Poor's, a division of the McGraw-Hill Companies, Inc. and Moody's
Investors Service, Inc. in order to be issued:
<TABLE>
<CAPTION>
CLASS RATING
----- ------
S&P MOODY'S
--- -------
<S> <C> <C>
A-1 A-1+ P-1
A-2 AAA Aaa
A-3 AAA Aaa
B AA Aa3
C A A3
</TABLE>
S-13
<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:
WE CANNOT PREDICT THE RATE AT WHICH THE NOTES If you are repaid principal on
WILL AMORTIZE. the notes earlier than you
expect, you may not be able to
reinvest the principal repaid
to you at a rate of return
that is at least equal to the
rate of return on your notes.
Your notes may amortize more
quickly than expected for a
variety of reasons.
First, obligors can prepay
their automobile loans. The
rate of prepayments may be
influenced by a variety of
factors, including changes in
economic and social
conditions. The fact that
consumer obligors generally
may not sell or transfer their
financed vehicles securing
automobile loans without
AmeriCredit's consent may also
influence the rate of
prepayments. In addition,
under certain circumstances,
the seller and AmeriCredit are
obligated to purchase
automobile loans as a result
of breaches of representations
and/or covenants. In any of
these cases, the pool of
automobile loans would
amortize more quickly than
expected and the notes would
also amortize more quickly as
a result.
Second, the notes contain an
overcollateralization feature
that results in accelerated
principal payments to
noteholders, and that results
in a faster amortization of
the notes than of the
automobile loan pool.
Finally, AmeriCredit has the
right to purchase the
automobile loans remaining in
the automobile loan pool when
the automobile loan pool
balance is 10% or less of the
original automobile loan pool
balance.
S-14
<PAGE>
YOU MAY SUFFER A LOSS IF THE FINAL If a default occurs under the
MATURITY DATE OF THE NOTE IS ACCELERATED. indenture and the maturity
dates of the outstanding notes
are accelerated, the indenture
trustee may sell the
automobile loans and prepay
those notes in advance of
their maturity dates. The
proceeds from such a sale of
the automobile loans may be
insufficient to pay the
aggregate principal amount of
the outstanding notes and
accrued interest on those
notes in full. If this occurs,
you may suffer a loss due to
such an acceleration.
GEOGRAPHIC CONCENTRATIONS OF AUTOMOBILE LOANS Adverse economic conditions or
MAY INCREASE CONCENTRATION RISKS other factors affecting any
state or region could increase
the delinquency and loan loss
experience of the automobile
loans. As of October 4, 2000
obligors with respect to
approximately 13.01%, 11.51%,
8.44% and 5.35% of the
automobile loans based on the
automobile loans' remaining
principal balance were located
in Texas, California, Florida
and Pennsylvania,
respectively.
No other state accounts for
more than 5% of the automobile
loans as of October 4, 2000.
THE NOTES ARE ASSET-BACKED DEBT AND THE ISSUER Payments due on the notes are
HAS ONLY LIMITED ASSETS. not guaranteed by the
servicer, the seller, the
trustee or any insurer. The
only source of funds for
payments on the notes will be
the assets of the issuer, so
you may suffer a loss on the
notes if the assets of the
issuer are insufficient to pay
amounts due on the notes. The
issuer will not have any
significant assets other than
the automobile loans, the cash
in the collection account and
the cash held in the reserve
account. Additionally, amounts
in the reserve account are
limited, and if they are
exhausted it will be necessary
for you to rely exclusively on
current payments on the
automobile loans for payment
on the notes.
THERE MAY BE A CONFLICT OF INTEREST AMONG As described elsewhere in this
CLASSES OF NOTES prospectus supplement, the
holders of the most senior
class of notes then
outstanding will make certain
decisions with regard to
treatment of defaults by the
servicer, acceleration of
S-15
<PAGE>
payments on the notes in the
event of a default under the
indenture and certain other
matters. Because the holders
of different classes of notes
may have varying interests
when it comes to these
matters, you may find that
courses of action determined
by other noteholders do not
reflect your interests but
that you are nonetheless bound
by the decisions of these
other noteholders.
BECAUSE THE CLASS B AND THE CLASS C NOTES Certain notes are
ARE SUBORDINATED TO THE CLASS A NOTES, subordinated, which means that
PAYMENTS ON HEM ARE MORE SENSITIVE TO principal and interest paid on
LOSSES ON THE RECEIVABLES those classes as part of
monthly distributions T or, in
the event of a default, upon
acceleration, will be made
only once payments have been
made in full to all classes of
notes senior to those classes.
The Class A Notes have the
highest priority of payment,
followed in descending order
of priority of payment by the
Class B Notes, the Class C
Notes, the Class D Notes and,
except in certain
circumstances where they are
paid principal before classes
senior to them, the Class E
Notes. Therefore, if there are
insufficient amounts available
to pay all classes of notes
the amounts they are owed on
any distribution date or
following acceleration, delays
in payment or losses will be
suffered by the most junior
outstanding class or classes
even as payment is made in
full to more senior classes.
PRINCIPAL MAY BE PAID ON CERTAIN CLASSES OF If on any distribution date
NOTES BEFORE INTEREST IS PAID ON OTHER CLASSES. the outstanding principal
amount of the notes exceeds
the principal balance of the
pool of automobile loans, a
payment of principal will be
made to the holders of the
most senior outstanding class
or classes of notes to
eliminate that
undercollateralization. This
principal payment will be made
before interest payments are
made on certain subordinated
classes of notes on that
distribution date. As a
result, there may not be
enough cash available to pay
the interest on certain
subordinated classes of notes
on that distribution date.
S-16
<PAGE>
USE OF PROCEEDS
The issuer will use the proceeds from issuing the notes to:
- pay the seller, who will, in turn, pay AmeriCredit, the purchase price
for the automobile loans; and
- fund an initial deposit to the reserve account.
The seller or its affiliates may use the net proceeds to pay their
debt, including "warehouse" debt and related expenses secured by the automobile
loans prior to their sale to the issuer. This "warehouse" debt and related
expenses may be owed to one or more of the underwriters or their affiliates, so
a portion of the proceeds that is used to pay "warehouse" debt may be paid to
the underwriters or their affiliates.
THE 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. AmeriCredit
was incorporated in Delaware on July 22, 1992. AmeriCredit's executive offices
are located at 801 Cherry Street, Suite 3900, Fort Worth, Texas 76102; telephone
(817) 302-7000.
AmeriCredit purchases automobile loans which are originated and
assigned to it by automobile dealers and, to a lesser extent, by third-party
lenders. AmeriCredit may also originate automobile loans directly to consumers.
All automobile loans purchased or originated by AmeriCredit are serviced by
AmeriCredit. AmeriCredit will sell and assign the automobile loans to the
seller.
AmeriCredit will service the automobile loans and will be compensated
for acting as the servicer. In its capacity as servicer, AmeriCredit will hold
the automobile loans, as a custodian. Prior to taking possession of the
automobile loans in its custodial capacity, AmeriCredit will stamp the
automobile 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
California, Texas, Florida and Pennsylvania. See "Certain Legal Aspects of the
Automobile Loans" in the Prospectus.
S-17
<PAGE>
THE SELLER
AFS SenSub Corp., AmeriCredit's wholly-owned subsidiary, is a Nevada
corporation, incorporated in October, 2000. The seller's address is 639 Isbell
Road, Suite 390, Reno, Nevada 89509; telephone (775) 823-3080.
The seller was organized for the limited purpose of purchasing
automobile loans from AmeriCredit 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 AmeriCredit will not
result in the consolidation of the seller's assets and liabilities with those of
AmeriCredit. The seller has received a legal opinion, subject to various facts,
assumptions and qualifications, opining that if AmeriCredit 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 AmeriCredit.
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
AmeriCredit.
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 those of AmeriCredit, 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
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 automobile loans and its other
assets and proceeds from its assets;
- issuing the notes and the certificate which represents the residual
interest in the trust;
- making payments on the notes; and
- engaging in other activities that are necessary, suitable or
convenient to accomplish these other activities.
The issuer will use the proceeds from the initial sale of the notes to
purchase the automobile loans from the seller and to fund an initial deposit to
the reserve account.
S-18
<PAGE>
The issuer's principal offices are in Wilmington, Delaware, in care of
Bankers Trust (Delaware) at the address listed below.
THE OWNER TRUSTEE
Bankers Trust (Delaware) is the owner trustee. It is a Delaware banking
corporation. Its principal offices are located at 1011 Centre Road, Suite 200,
Wilmington, Delaware 19805.
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 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
The Chase Manhattan Bank, a New York banking corporation, is the
indenture trustee. Its address is 450 West 33rd Street, New York, New York
10001.
THE TRUST PROPERTY
The trust property will include, among other things, the following:
- automobile loans secured by new and used automobiles, light duty
trucks and vans;
- monies received for the automobile loans on or after the cutoff date;
- amounts that may be held in the lockbox accounts, the collection
account and the reserve account;
- an assignment of the security interests of the servicer 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 rights of the seller against third-party lenders
under agreements between the servicer and third-party lenders;
- 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;
S-19
<PAGE>
- the automobile loan files; and
- other rights under the trust documents.
The trust property also will include an assignment of the seller's
rights against the servicer for breaches of representations and warranties under
a purchase agreement.
The automobile loans will be purchased by the seller under the purchase
agreement on or prior to the date of issuance of the notes and will then be
purchased by the issuer from the seller on the date of issuance of the notes.
The automobile loans were originated by AmeriCredit or by dealers and
third-party lenders according to AmeriCredit's credit policies for assignment to
AmeriCredit. The automobile loans originated by dealers and third-party lenders
have been assigned to AmeriCredit and evidence the indirect financing made to
the obligor. AmeriCredit's agreements with the dealers and third-party lenders
who originate the automobile loans may provide for repurchase by or recourse
against the dealer or third-party lender if there is a breach of a
representation or warranty under the relevant agreement.
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. Any proceeds of the trust property will be
distributed according to the indenture.
AMERICREDIT'S AUTOMOBILE FINANCING PROGRAM
Through its branch offices and marketing representatives, AmeriCredit
provides funding which allows franchised and independent automobile dealers to
finance their customers' purchases of new and used automobiles, light duty
trucks and vans. AmeriCredit also originates direct loans to consumers for the
purchase of automobiles, light duty trucks and vans, and purchases loans from
other third-party lenders in connection with the sales of automobiles, light
duty trucks and vans. The dealers and third-party lenders originate automobile
loans which conform to AmeriCredit's credit policies, and AmeriCredit then
purchases the automobile loans, generally without recourse to the dealers and
third-party lenders. AmeriCredit also services the automobile loans that it
originates and purchases.
AmeriCredit's indirect lending programs are designed to serve consumers
who have limited access to traditional automobile financing. The typical
borrower either may have had previous financial difficulties, and is now
attempting to re-establish credit, or may not have established a credit history.
Because AmeriCredit serves consumers who are unable to meet the credit standards
imposed by most traditional automobile financing sources, it charges higher
interest
S-20
<PAGE>
rates than most traditional automobile financing sources. The servicer also
generally sustains a higher level of delinquencies and credit losses than
that experienced by traditional automobile financing sources since it
provides financing in this relatively high risk market.
AmeriCredit has established relationships with a variety of dealers
located in areas where it has branch offices or marketing representatives, and
with selected third-party lenders. Loans are purchased only from dealers and
third-party lenders with whom AmeriCredit has entered into appropriate purchase
agreements. While AmeriCredit occasionally finances purchases of new
automobiles, a substantial majority of AmeriCredit's automobile loans are for
used automobiles.
Of the loans AmeriCredit purchased during the year ended June 30,
2000:
- manufacturer-franchised dealers with used automobile operations
originated approximately 96% of the automobile loans; and
- independent dealers specializing in used automobile sales
originated approximately 4% of the automobile loans.
The servicer purchased loans from 14,076 dealers during the year ended
June 30, 2000.
Direct lending to consumers and the acquisition of loans generated by
third-party lenders is a recent expansion of AmeriCredit's business. No loans
were generated under these new programs in the year ended June 30, 2000, and
only a small number of loans are expected to be generated under these programs
in the current year.
Automobile loans are generally purchased by AmeriCredit without
recourse to the dealers and third-party lenders so the dealer or third-party
lender usually has no liability to AmeriCredit if the obligor defaults on the
automobile loan. To mitigate credit risk of the obligors, AmeriCredit typically
charges an acquisition fee when it purchases the loans from dealers.
Additionally, dealers and third-party lenders typically make representations to
AmeriCredit as to the automobile loan's validity and compliance with relevant
laws, and agree to indemnify AmeriCredit against any claims, defenses and
set-offs that an obligor may assert against AmeriCredit because of a loan's
assignment.
As of June 30, 2000, AmeriCredit operated 196 branch offices in 41
states and Canada. These branch offices solicit dealers for loans and maintain
AmeriCredit's relationship with the dealers in the branch office's geographic
vicinity.
S-21
<PAGE>
AmeriCredit also has marketing representatives covering markets where
AmeriCredit does not have a branch. The servicer does business in a total of 48
states.
See "AmeriCredit's Automobile Financing Program" in the prospectus for
a description of the servicer's contract acquisition, servicing and collection
practices.
THE AUTOMOBILE LOANS
GENERAL
AmeriCredit purchased or will purchase the automobile loans from
manufacturer-franchised and independent dealers and third-party lenders, and has
originated or will originate loans directly to consumers. The automobile loans
were made to obligors with less than perfect credit due to factors including:
- the manner in which they have handled previous credit;
- the limited extent of their prior credit history; and/or
- their limited financial resources.
ELIGIBILITY CRITERIA
The automobile loans were or will be selected according to several
criteria, including those specified under "AmeriCredit's Automobile Financing
Program -- Automobile Loan Acquisition" in the accompanying prospectus. In
addition, as of the cutoff date the automobile loans were selected from
AmeriCredit's portfolio of automobile loans based on the following criteria:
(a) each automobile loan had a remaining maturity of not more than 72
months;
(b) each automobile loan had an original maturity of not more than 72
months;
(c) each automobile loan had a remaining Principal Balance (as
defined in the Glossary) of at least $250 and not more than
$60,000;
(d) each automobile loan has an annual percentage rate of at least 8%
and not more than 30%;
(e) no automobile loan was more than 30 days past due; and
S-22
<PAGE>
(f) neither AmeriCredit, any dealer, any third-party lender nor
anyone acting in their behalf advanced funds to cause any
automobile loan to qualify under clause (e) above.
COMPOSITION
The statistical information presented in this prospectus supplement is
based on a statistical pool of automobile loans as of the statistical
calculation date, which is October 4, 2000.
- As of the statistical calculation date, the automobile loans
in the statistical pool had an aggregate Principal Balance of
$500,009,241.37.
- As of the cutoff date, automobile loans in the final pool are
expected to have an aggregate Principal Balance of
approximately $500,000,000.
The statistical distribution of the characteristics of the automobile
loan pool as of the cutoff date, which is November 2, 2000, will vary somewhat
from the statistical distribution of those characteristics in the statistical
pool as of October 4, 2000, although that variance will not be material.
The statistical automobile loan pool's composition and distribution by
APR and its geographic concentration as of the statistical calculation date are
detailed in the following tables:
S-23
<PAGE>
COMPOSITION OF THE AUTOMOBILE LOANS IN THE STATISTICAL POOL
AS OF THE STATISTICAL CALCULATION DATE
<TABLE>
<CAPTION>
NEW USED TOTAL
--- ---- -----
<S> <C> <C> <C>
Aggregate Principal Balance(1) $160,738,486.21 $339,270,755.16 $500,009,241.37
Number of Automobile Loans 9,081 23,870 32,951
Percent of Aggregate Principal Balance 32.15% 67.85% 100.00%
Average Principal Balance $17,700.53 $14,213.27 $15,174.33
RANGE OF PRINCIPAL BALANCES ($601.72 TO $51,513.85) ($275.31 TO $50,858.55) ($275.31 TO $51,513.85)
Weighted Average APR(1) 17.98% 19.74% 19.17%
RANGE OF APRS (11.90% TO 29.99%) (9.95% TO 30.00%) (9.95% TO 30.00%)
Weighted Average Remaining Term 64 60 61
RANGE OF REMAINING TERMS (13 TO 72 MONTHS) (10 TO 72 MONTHS) (10 TO 72 MONTHS)
Weighted Average Original Term 65 61 62
RANGE OF ORIGINAL TERMS (24 TO 72 MONTHS) (18 TO 72 MONTHS) (18 TO 72 MONTHS)
</TABLE>
----------
(1) Aggregate principal balance includes some portion of accrued interest. As
a result, the weighted average APR of the automobile loans may not be
equivalent to the automobile loans' aggregate yield on the aggregate
principal balance.
S-24
<PAGE>
DISTRIBUTION OF THE AUTOMOBILE LOANS IN THE STATISTICAL POOL BY APR
AS OF THE STATISTICAL CALCULATION DATE
<TABLE>
<CAPTION>
DISTRIBUTION OF THE AUTOMOBILE
LOANS
BY APR AS OF THE AGGREGATE PRINCIPAL % OF AGGREGATE NUMBER OF AUTOMOBILE % OF TOTAL NUMBER OF
STATISTICAL CALCULATION DATE BALANCE(1) PRINCIPAL BALANCE(2) LOANS AUTOMOBILE LOANS(2)
---------------------------- ---------- -------------------- ----- -------------------
<S> <C> <C> <C> <C>
9.000% - 9.999% $ 102,379.79 0.02% 5 0.02%
10.000% - 10.999% 14,659.61 0.00 1 0.00
11.000% - 11.999% 131,440.98 0.03 6 0.02
12.000% - 12.999% 9,281,442.52 1.86 544 1.65
13.000% - 13.999% 5,604,525.77 1.12 295 0.90
14.000% - 14.999% 16,580,686.99 3.32 873 2.65
15.000% - 15.999% 20,300,666.87 4.06 1,063 3.23
16.000% - 16.999% 53,293,872.60 10.66 2,959 8.98
17.000% - 17.999% 108,112,022.54 21.62 6,542 19.85
18.000% - 18.999% 56,236,166.68 11.25 3,602 10.93
19.000% - 19.999% 44,702,676.12 8.94 2,876 8.73
20.000% - 20.999% 58,866,881.01 11.77 4,245 12.88
21.000% - 21.999% 51,596,988.95 10.32 3,712 11.27
22.000% - 22.999% 28,861,103.75 5.77 2,192 6.65
23.000% - 23.999% 30,957,608.60 6.19 2,565 7.78
24.000% - 24.999% 12,443,824.93 2.49 1,177 3.57
25.000% - 25.999% 2,018,535.47 0.40 202 0.61
26.000% - 26.999% 469,213.39 0.09 47 0.14
27.000% - 27.999% 268,298.64 0.05 25 0.08
28.000% - 28.999% 53,820.49 0.01 7 0.02
29.000% - 29.999% 106,560.46 0.02 12 0.04
30.000% 5,865.21 0.00 1 0.00
--------------- ------ ------ ------
TOTAL: $500,009,241.37 100.00% 32,951 100.00%
=============== ====== ====== ======
</TABLE>
(1) Aggregate principal balances include some portion of accrued interest. (2)
Percentages may not add to 100% because of rounding.
S-25
<PAGE>
DISTRIBUTION OF THE AUTOMOBILE LOANS IN THE STATISTICAL POOL BY GEOGRAPHIC
LOCATION OF OBLIGOR AS OF THE STATISTICAL CALCULATION DATE
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL % OF AGGREGATE NUMBER OF AUTOMOBILE % OF TOTAL NUMBER OF
STATE BALANCE(1) PRINCIPAL BALANCE(2) LOANS AUTOMOBILE LOANS(2)
----- ---------- -------------------- ----- -------------------
<S> <C> <C> <C> <C>
Alabama $ 8,713,556.25 1.74% 567 1.72%
Arizona 17,908,098.47 3.58 1,188 3.61
California 57,554,047.23 11.51 3,545 10.76
Colorado 6,714,782.66 1.34 439 1.33
Connecticut 5,676,755.73 1.14 377 1.14
Delaware 2,051,162.97 0.41 136 0.41
Florida 42,198,021.96 8.44 2,789 8.46
Georgia 17,823,087.65 3.56 1,104 3.35
Illinois 19,169,970.71 3.83 1,267 3.85
Indiana 9,922,270.97 1.98 683 2.07
Iowa 2,727,377.44 0.55 188 0.57
Kansas 3,509,617.82 0.70 233 0.71
Kentucky 6,554,442.41 1.31 467 1.42
Louisiana 9,737,661.40 1.95 628 1.91
Maryland 8,766,503.45 1.75 569 1.73
Massachusetts 7,101,893.91 1.42 531 1.61
Michigan 16,134,790.76 3.23 1,051 3.19
Minnesota 7,666,241.56 1.53 509 1.54
Mississippi 3,771,481.22 0.75 250 0.76
Missouri 6,584,781.26 1.32 433 1.31
Nevada 6,738,763.38 1.35 453 1.37
New Hampshire 2,319,812.82 0.46 175 0.53
New Jersey 13,999,386.12 2.80 944 2.86
New Mexico 2,998,465.66 0.60 205 0.62
New York 21,813,986.00 4.36 1,515 4.60
North Carolina 14,731,759.13 2.95 963 2.92
Ohio 21,573,616.01 4.31 1,503 4.56
Oklahoma 4,272,257.47 0.85 295 0.90
Pennsylvania 26,736,917.94 5.35 1,871 5.68
South Carolina 5,340,513.52 1.07 343 1.04
Tennessee 8,584,614.97 1.72 576 1.75
Texas 65,035,216.56 13.01 4,005 12.15
Utah 2,344,493.18 0.47 160 0.49
Virginia 13,028,606.27 2.61 877 2.66
Washington 8,556,824.80 1.71 576 1.75
West Virginia 3,904,823.65 0.78 267 0.81
Wisconsin 7,163,155.08 1.43 504 1.53
Other(3) 10,579,482.98 2.11 765 2.34
--------------- ------ ------ ------
TOTAL: $500,009,241.37 100.00% 32,951 100.00%
</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-26
<PAGE>
The obligor under each of the automobile loans is required to pay a
specified total amount of payments in substantially equal monthly installments
on each due date. Each obligor's total payment amount equals the amount financed
plus interest charges for the automobile loan's entire term. The interest
charges on the automobile loans are determined either by the simple interest
method or by adding a precomputed interest charge to the amount of the
automobile loan as of its origination date.
Under a simple interest automobile loan, the amount of an obligor's
fixed level installment payment which is allocated to interest is equal to the
product of the fixed interest rate on the loan (which is typically the APR)
multiplied by the elapsed time period (which is expressed as a fraction of a
year) multiplied by the remaining principal balance after the preceding loan
payment. The remainder of the obligor's payment amount is allocated to reduce
the principal amount financed.
The issuer will account for all automobile loans, whether interest
charges on them are accrued under the simple interest method or the precomputed
interest method, as if they amortized under the simple interest method. If an
automobile loan's interest is computed using the precomputed interest method and
that automobile loan is prepaid in full by the obligor, the amount of the
payment that is greater than the sum of outstanding Principal Balance of the
automobile loan plus accrued interest on that automobile loan will not be
deposited into the collection account but instead will be paid to the servicer
as a supplemental servicing fee.
S-27
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
Prepayments can be made on any of the auto loans at any time. If
prepayments are received on the auto loans, their actual weighted average life
may be shorter than their weighted average life would be if all payments were
made as scheduled and no prepayments were made. Prepayments on the auto loans
may include moneys received from 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 any principal is
outstanding on an auto loan.
The rate of prepayments on the auto loans may be influenced by a
variety of economic, social, and other factors, including the fact that no
borrower under an auto loan may sell or transfer that auto loan without the
consent of AmeriCredit. AmeriCredit believes that the weighted average life of
the auto loans will be substantially shorter than their scheduled weighted
average life. This opinion is based primarily on AmeriCredit's assessment of
what the actual rate of prepayments will be. Any risk resulting from faster or
slower prepayments of the auto loans will be borne solely by the noteholders.
The rate of payment of principal of the notes will depend on the rate
of payment, and the rate of prepayments, of principal on the auto loans. It is
possible that the final payment on any class of notes could occur significantly
earlier than the date on which the final distribution for that class of notes is
scheduled to be paid. Any risk resulting from early payment of the notes will be
borne solely by the noteholders.
Prepayments on auto loans can be measured against prepayment standards
or models. The model used in this prospectus supplement, the Absolute Prepayment
Model, or ABS, assumes a rate of prepayment each month which is related to the
original number of auto loans in a pool of loans. ABS also assumes that all of
the auto loans in a pool are the same size, that all of those auto loans
amortize at the same rate, and that for every month that any individual auto
loan is outstanding, payments on that particular auto loan will either be made
as scheduled or the auto loan will be prepaid in full. For example, in a pool of
receivables originally containing 10,000 auto loans, if a 1% ABS were used, that
would mean that 100 auto loans would prepay in full each month. The percentage
of prepayments that is assumed for ABS is not an historical description of
prepayment experience on pools of auto loans or a prediction of the anticipated
rate of prepayment on either the pool of auto loans involved in this transaction
or on any pool of auto loans. You should not assume that the actual rate of
prepayments on the auto loans will be in any way related to the percentage of
prepayments that we assume for ABS.
S-28
<PAGE>
The tables below which are captioned "Percent of Initial Note Principal
Balance at Various ABS Percentages" are based on ABS and were prepared using the
following assumptions:
- the issuer includes four pools of auto loans with the characteristics set
forth in the following table;
- all prepayments on the auto loans each month are made in full at the
specified constant percentage of ABS and there are 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;
- the initial principal amounts of each class of Publicly Offered Notes are
equal to the initial principal amounts set forth on the cover of this
prospectus supplement, the initial principal amount of the Class D Notes is
$25,000,000 and the initial principal amount of the Class E Notes is
$26,750,000;
- interest accrues on the Class A-1 Notes at 6.757%, on the Class A-2 Notes
at 6.700%, on the Class A-3 Notes at 6.740%, on the Class B Notes at
7.160%, on the Class C Notes at 7.440%, on the Class D Notes at 8.220% and
on the Class E Notes at 10.680%;
- payments on the notes are made on the fifth day of each month;
- the notes are purchased on November 16, 2000;
- the scheduled monthly payment for each auto loan was calculated on the
basis of the characteristics described in the following table and in such a
way that each auto loan would amortize in a manner that will be sufficient
to repay the principal balance of that auto loan 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 that auto loan as set forth in the following table;
- AmeriCredit exercises its "clean-up call" option to purchase the auto loans
at the earliest opportunity;
- accelerated principal will be paid on each class of the notes on each
distribution date until the first distribution date on which the required
over-collateralization is achieved; and
- the difference between the gross APR and the net APR is equal to the base
servicing fee due to the servicer.
<TABLE>
<CAPTION>
REMAINING TERM
AGGREGATE PRINCIPAL TO MATURITY SEASONING
POOL BALANCE (IN MONTHS) (IN MONTHS) GROSS APR
<S> <C> <C> <C> <C> <C>
1 $ 5,895,775.72 33 1 22.068%
2 $ 20,608,900.91 46 1 21.555%
3 $338,843,101.97 59 1 19.544%
4 $134,652,221.40 70 1 17.753%
---------------
Total $500,000,000.00
===============
</TABLE>
S-29
<PAGE>
The following tables were created relying on the assumptions listed
above. The tables indicate the percentages of the initial principal amount of
each class of notes that would be outstanding after each of the listed
distribution dates if certain percentages of ABS are assumed. The tables also
indicate the corresponding weighted average lives of each class of notes if the
same percentages of ABS are assumed.
The assumptions used to construct the tables are hypothetical and have
been provided only to give a general sense of how the principal cash flows might
behave under various prepayment scenarios. The actual characteristics and
performance of the auto loans will differ from the assumptions used to construct
the tables. For example, it is very unlikely that the auto loan pool will prepay
at a constant level of ABS throughout its life. Moreover, the auto loans have
diverse terms and that fact alone could produce slower or faster principal
distributions than indicated in the tables at the various constant percentages
of ABS, even if the original and remaining terms to maturity of the auto loans
are as assumed. Any difference between the assumptions used to construct the
tables and the actual characteristics and performance of the auto loans,
including actual prepayment experience or losses, will affect the percentages of
initial balances outstanding on any given date and the weighted average lives of
each class of notes.
The percentages in the tables have been rounded to the nearest whole
number. As used in the tables which follow, the WEIGHTED AVERAGE LIFE of a class
of notes is determined by:
- 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,
- adding the results, and
- dividing the sum by the related initial principal amount of the note.
S-30
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS
PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES
DISTRIBUTION DATE 0.50% 1.00% 1.70% 2.50% 0.50% 1.00% 1.70% 2.50%
----------------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100 100 100 100
05-Dec-00 84 81 77 71 100 100 100 100
05-Jan-01 70 63 55 45 100 100 100 100
05-Feb-01 55 46 33 18 100 100 100 100
05-Mar-01 41 29 12 0 100 100 100 96
05-Apr-01 26 11 0 0 100 100 96 85
05-May-01 16 0 0 0 100 100 89 76
05-Jun-01 7 0 0 0 100 94 82 68
05-Jul-01 0 0 0 0 99 89 75 59
05-Aug-01 0 0 0 0 95 84 68 50
05-Sep-01 0 0 0 0 91 79 62 42
05-Oct-01 0 0 0 0 87 74 55 33
05-Nov-01 0 0 0 0 83 68 48 25
05-Dec-01 0 0 0 0 78 63 42 17
05-Jan-02 0 0 0 0 74 58 35 9
05-Feb-02 0 0 0 0 70 53 29 1
05-Mar-02 0 0 0 0 66 48 23 0
05-Apr-02 0 0 0 0 61 43 17 0
05-May-02 0 0 0 0 57 38 10 0
05-Jun-02 0 0 0 0 53 33 4 0
05-Jul-02 0 0 0 0 49 28 0 0
05-Aug-02 0 0 0 0 44 23 0 0
05-Sep-02 0 0 0 0 40 18 0 0
05-Oct-02 0 0 0 0 36 13 0 0
05-Nov-02 0 0 0 0 31 8 0 0
05-Dec-02 0 0 0 0 27 3 0 0
05-Jan-03 0 0 0 0 22 0 0 0
05-Feb-03 0 0 0 0 18 0 0 0
05-Mar-03 0 0 0 0 14 0 0 0
05-Apr-03 0 0 0 0 9 0 0 0
05-May-03 0 0 0 0 5 0 0 0
05-Jun-03 0 0 0 0 0 0 0 0
05-Jul-03 0 0 0 0 0 0 0 0
05-Aug-03 0 0 0 0 0 0 0 0
05-Sep-03 0 0 0 0 0 0 0 0
05-Oct-03 0 0 0 0 0 0 0 0
05-Nov-03 0 0 0 0 0 0 0 0
05-Dec-03 0 0 0 0 0 0 0 0
05-Jan-04 0 0 0 0 0 0 0 0
05-Feb-04 0 0 0 0 0 0 0 0
05-Mar-04 0 0 0 0 0 0 0 0
05-Apr-04 0 0 0 0 0 0 0 0
05-May-04 0 0 0 0 0 0 0 0
05-Jun-04 0 0 0 0 0 0 0 0
05-Jul-04 0 0 0 0 0 0 0 0
05-Aug-04 0 0 0 0 0 0 0 0
05-Sep-04 0 0 0 0 0 0 0 0
05-Oct-04 0 0 0 0 0 0 0 0
05-Nov-04 0 0 0 0 0 0 0 0
05-Dec-04 0 0 0 0 0 0 0 0
05-Jan-05 0 0 0 0 0 0 0 0
05-Feb-05 0 0 0 0 0 0 0 0
05-Mar-05 0 0 0 0 0 0 0 0
05-Apr-05 0 0 0 0 0 0 0 0
05-May-05 0 0 0 0 0 0 0 0
05-Jun-05 0 0 0 0 0 0 0 0
05-Jul-05 0 0 0 0 0 0 0 0
Weighted Average Life (in years) 0.30 0.24 0.20 0.16 1.64 1.32 1.00 0.77
</TABLE>
S-31
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS
PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-3 NOTES CLASS B NOTES
DISTRIBUTION DATE 0.50% 1.00% 1.70% 2.50% 0.50% 1.00% 1.70% 2.50%
----------------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100 100 100 100
05-Dec-00 100 100 100 100 100 100 100 100
05-Jan-01 100 100 100 100 100 100 100 100
05-Feb-01 100 100 100 100 100 100 100 100
05-Mar-01 100 100 100 100 100 100 100 100
05-Apr-01 100 100 100 100 100 100 100 100
05-May-01 100 100 100 100 100 100 100 100
05-Jun-01 100 100 100 100 100 100 100 100
05-Jul-01 100 100 100 100 100 100 100 100
05-Aug-01 100 100 100 100 100 100 100 100
05-Sep-01 100 100 100 100 100 100 100 100
05-Oct-01 100 100 100 100 100 100 100 100
05-Nov-01 100 100 100 100 100 100 100 100
05-Dec-01 100 100 100 100 100 100 100 100
05-Jan-02 100 100 100 100 100 100 100 100
05-Feb-02 100 100 100 100 100 100 100 100
05-Mar-02 100 100 100 91 100 100 100 100
05-Apr-02 100 100 100 79 100 100 100 100
05-May-02 100 100 100 69 100 100 100 100
05-Jun-02 100 100 100 58 100 100 100 100
05-Jul-02 100 100 98 48 100 100 100 100
05-Aug-02 100 100 89 38 100 100 100 100
05-Sep-02 100 100 81 28 100 100 100 100
05-Oct-02 100 100 72 18 100 100 100 100
05-Nov-02 100 100 64 9 100 100 100 100
05-Dec-02 100 100 56 0 100 100 100 99
05-Jan-03 100 98 48 0 100 100 100 75
05-Feb-03 100 91 40 0 100 100 100 52
05-Mar-03 100 84 33 0 100 100 100 30
05-Apr-03 100 77 25 0 100 100 100 9
05-May-03 100 70 18 0 100 100 100 0
05-Jun-03 100 63 11 0 100 100 100 0
05-Jul-03 94 57 4 0 100 100 100 0
05-Aug-03 87 50 0 0 100 100 93 0
05-Sep-03 81 44 0 0 100 100 76 0
05-Oct-03 74 37 0 0 100 100 59 0
05-Nov-03 68 31 0 0 100 100 43 0
05-Dec-03 61 25 0 0 100 100 27 0
05-Jan-04 55 18 0 0 100 100 12 0
05-Feb-04 48 12 0 0 100 100 0 0
05-Mar-04 42 6 0 0 100 100 0 0
05-Apr-04 35 0 0 0 100 100 0 0
05-May-04 29 0 0 0 100 85 0 0
05-Jun-04 22 0 0 0 100 70 0 0
05-Jul-04 15 0 0 0 100 55 0 0
05-Aug-04 9 0 0 0 100 40 0 0
05-Sep-04 2 0 0 0 100 25 0 0
05-Oct-04 0 0 0 0 89 11 0 0
05-Nov-04 0 0 0 0 72 0 0 0
05-Dec-04 0 0 0 0 55 0 0 0
05-Jan-05 0 0 0 0 39 0 0 0
05-Feb-05 0 0 0 0 22 0 0 0
05-Mar-05 0 0 0 0 5 0 0 0
05-Apr-05 0 0 0 0 0 0 0 0
05-May-05 0 0 0 0 0 0 0 0
05-Jun-05 0 0 0 0 0 0 0 0
05-Jul-05 0 0 0 0 0 0 0 0
Weighted Average Life (in years) 3.24 2.77 2.17 1.67 4.12 3.71 2.98 2.27
</TABLE>
S-32
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS
PERCENTAGES
<TABLE>
<CAPTION>
CLASS C NOTES
DISTRIBUTION DATE 0.50% 1.00% 1.70% 2.50%
----------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
Closing Date 100 100 100 100
05-Dec-00 100 100 100 100
05-Jan-01 100 100 100 100
05-Feb-01 100 100 100 100
05-Mar-01 100 100 100 100
05-Apr-01 100 100 100 100
05-May-01 100 100 100 100
05-Jun-01 100 100 100 100
05-Jul-01 100 100 100 100
05-Aug-01 100 100 100 100
05-Sep-01 100 100 100 100
05-Oct-01 100 100 100 100
05-Nov-01 100 100 100 100
05-Dec-01 100 100 100 100
05-Jan-02 100 100 100 100
05-Feb-02 100 100 100 100
05-Mar-02 100 100 100 100
05-Apr-02 100 100 100 100
05-May-02 100 100 100 100
05-Jun-02 100 100 100 100
05-Jul-02 100 100 100 100
05-Aug-02 100 100 100 100
05-Sep-02 100 100 100 100
05-Oct-02 100 100 100 100
05-Nov-02 100 100 100 100
05-Dec-02 100 100 100 100
05-Jan-03 100 100 100 100
05-Feb-03 100 100 100 100
05-Mar-03 100 100 100 100
05-Apr-03 100 100 100 100
05-May-03 100 100 100 78
05-Jun-03 100 100 100 43
05-Jul-03 100 100 100 9
05-Aug-03 100 100 100 0
05-Sep-03 100 100 100 0
05-Oct-03 100 100 100 0
05-Nov-03 100 100 100 0
05-Dec-03 100 100 100 0
05-Jan-04 100 100 100 0
05-Feb-04 100 100 95 0
05-Mar-04 100 100 70 0
05-Apr-04 100 100 46 0
05-May-04 100 100 22 0
05-Jun-04 100 100 0 0
05-Jul-04 100 100 0 0
05-Aug-04 100 100 0 0
05-Sep-04 100 100 0 0
05-Oct-04 100 100 0 0
05-Nov-04 100 96 0 0
05-Dec-04 100 72 0 0
05-Jan-05 100 49 0 0
05-Feb-05 100 26 0 0
05-Mar-05 100 3 0 0
05-Apr-05 78 0 0 0
05-May-05 48 0 0 0
05-Jun-05 17 0 0 0
05-Jul-05 0 0 0 0
Weighted Average Life (in years) 4.51 4.17 3.41 2.58
</TABLE>
S-33
<PAGE>
DELINQUENCY AND LOAN LOSS INFORMATION
The following tables provide information relating to AmeriCredit's
delinquency and loan loss experience for each period indicated with respect to
all automobile loans it has originated or purchased and serviced. This
information includes the experience with respect to all automobile loans in
AmeriCredit's portfolio of automobile loans serviced during each listed period,
including automobile loans which do not meet the criteria for selection as an
automobile loan. All dollar amounts provided in the following tables are in
thousands of dollars.
DELINQUENCY EXPERIENCE
Financed vehicles which have been repossessed but not yet liquidated and
bankrupt accounts which have not yet been charged off are both included as
delinquent accounts in the table below.
<TABLE>
<CAPTION>
AT JUNE 30,
2000 1999 1998
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Portfolio at end of period(1) 568,099 $6,649,981 366,262 $4,105,468 213,549 $2,302,516
Period of Delinquency(2)
31-60 days(3) 39,793 $ 445,797 25,423 $ 277,592 12,259 $ 126,012
61-90 days 9,944 110,521 5,230 53,487 2,545 25,847
91 days or more 3,878 40,103 2,007 20,026 3,891 33,328
Total Delinquencies 53,615 $ 596,421 32,660 $ 351,105 18,695 $ 185,187
Repossessed Assets 3,723 42,764 3,207 37,773 1,732 18,818
Total Delinquencies and
Repossessed Assets 57,338 639,185 35,867 388,878 20,427 204,005
Total Delinquencies as a
Percentage of the
Portfolio 9.4% 9.0% 8.9% 8.6% 8.8% 8.1%
Total Repossessed Assets as a
Percentage of the Portfolio 0.7% 0.6% 0.9% 0.9% 0.8% 0.8%
Total Delinquencies and
Repossessed Assets as a
Percentage of the
Portfolio 10.1% 9.6% 9.8% 9.5% 9.6% 8.9%
</TABLE>
----------
(1) All amounts and percentages are based on the Principal Balances of the
Receivables. Principal Balances include some portion of accrued
interest. All dollar amounts are in thousands of dollars.
(2) AmeriCredit 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-34
<PAGE>
LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Period-End Principal Outstanding(1) $6,649,981 $4,105,468 $2,302,516
Average Month-End Amount Outstanding During
the Period(1) 5,334,580 3,129,463 1,649,416
Net Charge-Offs(2) 214,276 147,344 88,002
Net Charge-Offs as a Percentage of
Period-End Principal Outstanding 3.2% 3.6% 3.8%
Net Charge-Offs as a Percent of Average
Month-End Amount Outstanding 4.0% 4.7% 5.3%
</TABLE>
-----------
(1) All amounts and percentages are based on the Principal Balances of the
Receivables. 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-35
<PAGE>
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 the description of the general
terms and provisions of the notes of any given series and the related indenture
as described in the accompanying prospectus, and to the extent that those
descriptions differ from the descriptions provided in this prospectus
supplement, the descriptions provided in this prospectus supplement replace
those descriptions.
The issuer will offer the Publicly Offered Notes in denominations of
$1,000 and integral multiples of $1,000 in book-entry form only. Persons
acquiring beneficial interests in the Publicly Offered Notes will hold their
interests through The Depository Trust Company in the United States or
Clearstream Banking, societe anonyme or in the Euroclear System in Europe. See
"Description of the Securities -- Book-Entry Registration" in the prospectus and
Annex I in this prospectus supplement.
DISTRIBUTION DATES
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, no distribution date will be earlier than the third
business day of the month. The first distribution date will be December 5, 2000.
Only 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 or New York are
authorized or obligated to be closed.
The final scheduled distribution dates are as follows:
- for the Class A-1 Notes, November 5, 2001;
- for the Class A-2 Notes, March 5, 2004;
- for the Class A-3 Notes, May 5, 2005;
- for the Class B Notes, September 5, 2005;
- for the Class C Notes, December 5, 2005;
S-36
<PAGE>
- for the Class D Notes, April 5, 2006; and
- for the Class E Notes, August 6, 2007.
CREDIT ENHANCEMENT
Credit enhancement reduces the risk to the holders of notes resulting
from shortfalls in payments received from and losses incurred on the pool of
automobile loans. The credit enhancement consists of the application of excess
cashflow, overcollateralization, subordination and the reserve account.
APPLICATION OF EXCESS CASHFLOW
Generally, because more interest is paid by the obligors than is
necessary to pay the interest earned on the notes, there is expected to be
excess cashflow each month. To the extent that the collections in any month are
greater than the amount necessary to pay trust expenses and principal and
interest on the notes, the remaining amount will be available to make
accelerated principal payments on the notes to create overcollateralization, to
maintain the reserve account at its target amount and to make accelerated
payments of principal on the Class E Notes rather than to the certificateholder.
OVERCOLLATERALIZATION
Overcollateralization will exist whenever the Pool Balance as of the
last day of the calendar month immediately preceding a distribution date exceeds
the principal balance of the notes as of that distribution date, after making
all payments on that date. As of the closing date there will be 1.0%
overcollateralization, but the sale and servicing agreement requires that the
amount of overcollateralization be increased to, and then maintained at, a
target amount.
The target amount of overcollateralization on any distribution date
will equal:
(1) 7.0% of the Pool Balance;
PLUS
(2) the aggregate, cumulative amount of principal paid to the
holders of the Class E Notes pursuant to clause 21 of
"DESCRIPTION OF THE PURCHASE AGREEMENTS AND THE TRUST
DOCUMENTS--FLOW OF FUNDs," below, on all prior distribution
dates;
MINUS
(3) the amount required to be on deposit in the reserve account.
S-37
<PAGE>
The increase to, and maintenance of, the overcollateralization target
will be accomplished by the application of monthly excess cashflow to the
payment of the Noteholders' Accelerated Principal Amount (as defined in the
Glossary) to reduce the principal balance of the most senior outstanding class
or classes of notes until the target is reached. Because the excess cashflow
represents interest collections on the automobile loans but is distributed as
principal on the notes, its distribution will increase overcollateralization by
paying down principal on the notes more quickly than it is collected on the
automobile loans.
Because the overcollateralization target is determined by reference to
the Pool Balance, as the Pool Balance decreases over time, the amount of
overcollateralization required will also decrease, or "step down." If the amount
of overcollateralization steps down on a distribution date, less principal will
be distributed on the notes than was collected on the automobile loans in the
preceding calendar month. By amortizing the notes more slowly than the
automobile loans, the overcollateralization would also decrease to the
overcollateralization target. However, the amount of overcollateralization will
not be allowed to step down on any distribution date if, as a result of the step
down, the sum of the amount on deposit in the reserve account plus the amount of
overcollateralization would be less than either $7,500,000, which is 1.5% of the
initial pool balance, or the outstanding principal balance of all outstanding
classes of notes, whichever is lesser.
SUBORDINATION
A class of notes that is lower in priority of payment provides credit
enhancement to those classes of notes having higher priority of payment relative
to that class. Consequently, to the extent that the trust assets do not generate
enough cash to satisfy the trust's obligations, including the obligations to
make payments to noteholders, losses will be absorbed as follows:
- first, by the certificateholder;
- second, by the holders of the Class E Notes;
- third, by the holders of the Class D Notes;
- fourth, by the holders of the Class C Notes;
- fifth, by the holders of the Class B Notes; and
- sixth, by the holders of the Class A Notes.
S-38
<PAGE>
RESERVE ACCOUNT
On the closing date, a reserve account will be established in the name
of the Trustee on behalf of the noteholders and an initial cash deposit of
approximately $5,000,000, which is 1.0% of the initial pool balance, will be
made to the reserve account. The reserve account will be in the name of and
maintained by the indenture trustee for the benefit of the noteholders and will
be part of the trust assets. On each distribution date, excess cashflow will be
deposited to the reserve account to maintain the amount on deposit at
$5,000,000.
Amounts on deposit in the reserve account will be invested in certain
eligible investments that mature not later than the business day prior to the
following distribution date, or, if each of the rating agencies confirms that it
would not affect the ratings assigned to the notes, that mature later than the
business day prior to the following distribution date. Any net income from those
investments will be deposited into the reserve account.
On each distribution date, the amount on deposit in the reserve account
will be withdrawn, to the extent necessary, to fund any deficiencies in the
payments of trust expenses, interest payments on the notes, principal payments
on the notes that are necessary to prevent the principal balance of the notes
from exceeding the Pool Balance and principal payments on each class of notes
that are necessary to pay them off on their final scheduled distribution date,
which are due under clauses 1 through 17 of "DESCRIPTION OF THE PURCHASE
AGREEMENTS AND THE TRUST DOCUMENTS--FLOw OF FUNDS " below.
If the amount on deposit in the reserve account on any distribution
date, after giving effect to any withdrawals on that distribution date, exceeds
$5,000,000, excess amounts will be removed from the reserve account and treated
as excess interest.
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
19 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.
For any distribution date, interest due but not paid on that
distribution date will be due on the next distribution date together with, to
the extent permitted by law, interest at the applicable interest rate on that
unpaid amount. Interest on the
S-39
<PAGE>
Class A-1 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-2, Class A-3, Class B, Class C, Class D and Class E 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
account 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 -- Flow of Funds" in this prospectus
supplement.
PAYMENTS OF PRINCIPAL
On any distribution date, the amount of principal that is available to
make distributions of principal to noteholders will equal the Principal
Distributable Amount (as defined in the Glossary). Of that Principal
Distributable Amount, the actual amount that will be distributed to the
noteholders will equal:
(1) 100% of the total principal amounts that are available for
distribution to noteholders on that distribution date;
PLUS
(2) any principal amounts that should have been paid to the
noteholders on a previous distribution date but which were not
paid then and have not been paid by the related distribution
date.
On any distribution date, principal will be distributed to the most
senior outstanding class of notes to maintain parity between the note principal
balance and the Pool Balance. The principal payments made to cure this
undercollateralization, if any then exists, will be made prior to the payment of
interest on the more subordinated classes of notes on that distribution date.
See "DESCRIPTION OF THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS-- FLOw OF
FUNDS" below.
Until the specified overcollateralization target has been achieved, the
Accelerated Principal Amount (as defined in the Glossary) will be paid on each
distribution date to the most senior outstanding class or classes of notes as
payments of principal. These amounts will be paid under clause 20 under
"DESCRIPTION OF THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS-- FLOW OF FUNDS"
below.
The classes of notes are "sequential pay" classes. On each distribution
date, all amounts allocated to the payment of principal as described in clauses
4, 7, 10, 13, 16, 18 and 20 under "DESCRIPTION OF THE PURCHASE AGREEMENTS AND
THE TRUST
S-40
<PAGE>
DOCUMENTS-- FLOW OF FUNDS" below, will be aggregated and will be paid out in
the following order:
- first, the Class A-1 Notes will be paid off;
- once the Class A-1 Notes are paid off, the Class A-2 Notes
will begin to amortize, until they are paid off;
- once the Class A-2 Notes are paid off, the Class A-3 Notes
will begin to amortize, until they are paid off;
- once the Class A-3 Notes are paid off, the Class B Notes will
begin to amortize, until they are paid off;
- once the Class B Notes are paid off, the Class C Notes will
begin to amortize, until they are paid off; o once the Class C
Notes are paid off, the Class D Notes will begin to amortize
until they are paid off; and
- once the Class D Notes are paid off, the Class E Notes (if
still outstanding) will begin to amortize until they are paid
off.
Also, once the reserve account is fully funded and the
overcollateralization target has been reached, any remaining available funds
will be used to amortize the Class E Notes until they are paid off. As a result
of this feature, it is likely that the Class E Notes will be paid off earlier
than certain other classes senior to them.
In addition, any outstanding principal amount of any class of notes
that has not been previously paid will be payable on the final scheduled
distribution date for that class. The actual date on which the aggregate
outstanding principal amount of any class of notes is paid may be earlier than
the final scheduled distribution date for that class, depending on a variety of
factors.
OPTIONAL REDEMPTION
The Class D and E 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 initial 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 or Classes
of Notes being redeemed, plus accrued and unpaid interest.
S-41
<PAGE>
EVENTS OF DEFAULT
Events of default under the indenture will consist of:
- events of bankruptcy, insolvency, receivership or liquidation of
the issuer;
- the issuer becoming taxable as an association or a publicly traded
partnership taxable as a corporation for federal or state income
tax purposes;
- the failure to pay interest on any class of Notes when the same
becomes due and payable, and such failure shall have continued for
a period of five days;
- the failure to pay the outstanding principal amount of any class
of Notes on its final scheduled distribution date; 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.
Upon the occurrence of an event of default, the indenture trustee 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. The decision as to whether to cause the trust collateral
agent to liquidate the trust property will be made solely at the discretion of
the Majority Noteholders (as defined in the Glossary). The Majority Noteholders
also have the right to cause the trust collateral agent to deliver the proceeds
of the liquidation to the indenture trustee for distribution to noteholders.
S-42
<PAGE>
DESCRIPTION OF THE PURCHASE AGREEMENTS
AND THE TRUST DOCUMENTS
The following summary describes material terms of the purchase
agreements and the trust documents, including the sale and servicing agreement
and the trust agreement. The issuer has filed forms of the purchase agreements
and the trust documents as exhibits to the registration statement. This 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,
the description of the general terms and provisions of the trust agreement,
which was detailed in the prospectus and to the extent that that description
differs from the description in this prospectus supplement, the description in
this prospectus supplement replaces that description.
SALE AND ASSIGNMENT OF AUTOMOBILE LOANS
On or prior to the closing date, AmeriCredit will enter into a purchase
agreement with the seller under which AmeriCredit will sell and assign to the
seller, without recourse, its entire interest in and to the automobile loans.
Under that purchase agreement, AmeriCredit will also sell and assign, without
recourse, its security interest in the financed vehicles securing the automobile
loans and its rights to receive all payments on, or proceeds from, the
automobile loans to the extent paid or payable after the cutoff date. Under the
purchase agreement, AmeriCredit will agree that, upon the 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 AmeriCredit
to repurchase the automobile 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. 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, the seller will sell and assign to the issuer,
without recourse, the seller's entire interest in the automobile loans and the
proceeds, including its security interest in the financed vehicles. Each
automobile loan transferred by the seller to the issuer will be identified in an
automobile loan schedule appearing as an exhibit to the purchase documents.
ACCOUNTS
AmeriCredit will instruct each obligor to make payments on the
automobile loans after the 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, in the
indenture trustee's name for the noteholders' benefit, into which the servicer
must deposit all obligor
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payments within one business day of receipt. The issuer will establish and
maintain with the indenture trustee, in the indenture trustee's name, on the
noteholders' 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 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 behalf.
As described in the prospectus, all accounts will be eligible deposit
accounts.
SERVICING COMPENSATION AND TRUSTEES' FEES
The servicer will receive a basic servicing fee on each distribution
date, which equals the product of one-twelfth times 2.25% of the aggregate
Principal Balance of the automobile 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 automobile loans, and will be entitled to reimbursement from the
issuer for various expenses. The servicer will allocate obligor payments to
scheduled payments due from obligors, 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 will include:
- collecting and posting all payments;
- responding to obligor inquiries regarding the automobile loans;
- investigating delinquencies;
- reporting tax information to obligors;
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- paying the disposition costs of defaulted accounts;
- monitoring the collateral;
- accounting for collections;
- furnishing monthly and annual statements to the issuer 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 automobile 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 and the owner trustee specifying, among
other things,
- the amount of aggregate collections on the automobile loans; and
- the aggregate Purchase Amounts (as defined in the Glossary) of
automobile loans purchased by the seller and AmeriCredit in the
preceding calendar month.
The determination date for any calendar month is the business day prior
to the related distribution date.
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FLOW OF FUNDS
On or prior to each distribution date, the servicer will instruct the
indenture trustee to make the following distributions from Available Funds (as
defined in Glossary) 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, and to AmeriCredit, to the extent
available, any amounts paid by the borrowers during the
preceding calendar month that were collected in the lockbox
account but that do not relate to principal and interest
payments due on the automobile loans;
2. to the indenture trustee, the owner trustee, the backup
servicer and the trust collateral agent any accrued and unpaid
fees then due to each of them (to the extent the servicer has
not previously paid those fees) subject to a maximum annual
limit;
3. to the note distribution account, that portion of the
Noteholders' Interest Distributable Amount payable on the
Class A Notes for payment PARI PASSU to the holders of the
Class A-1, Class A-2 and Class A-3 Notes;
4. to the note distribution account, to make a payment of
principal to the extent necessary to reduce the Class A Note
principal balance to the Pool Balance, which amount will be
paid out as described above under "Description of the
Notes--Payments of Principal";
5. to the note distribution account, to make a payment of the
remaining principal balance of any of the Class A Notes on
their final scheduled distribution date;
6. to the note distribution account, that portion of the
Noteholders' Interest Distributable Amount payable on the
Class B Notes;
7. to the note distribution account, to make a payment of
principal to the extent necessary to reduce the combined Class
A and Class B Note principal balance to the Pool Balance,
which amount will be paid out as described above under
"Description of the Notes--Payments of Principal";
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8. to the note distribution account, to make a payment of the
remaining principal balance of the Class B Notes on their
final scheduled distribution date;
9. to the note distribution account, that portion of the
Noteholders' Interest Distributable Amount payable on the
Class C Notes;
10. to the note distribution account, to make a payment of
principal to the extent necessary to reduce the combined Class
A, Class B and Class C Note principal balance to the Pool
Balance, which amount will be paid out as described above
under "Description of the Notes--Payments of Principal";
11. to the note distribution account, to make a payment of the
remaining principal balance of the Class C Notes on their
final scheduled distribution date;
12. to the note distribution account, that portion of the
Noteholders' Interest Distributable Amount payable on the
Class D Notes;
13. to the note distribution account, to make a payment of
principal to the extent necessary to reduce the combined Class
A, Class B, Class C and Class D Note principal balance to the
Pool Balance, which amount will be paid out as described above
under "Description of the Notes--Payments of Principal";
14. to the note distribution account, to make a payment of the
remaining principal balance of the Class D Notes on their
final scheduled distribution date;
15. to the note distribution account, that portion of the
Noteholders' Interest Distributable Amount payable on the
Class E Notes;
16. to the note distribution account, to make a payment of
principal to the extent necessary to reduce the combined Class
A, Class B, Class C, Class D and Class E Note principal
balance to the Pool Balance, which amount will be paid out as
described above under "Description of the Notes--Payments of
Principal";
17. to the note distribution account, to make a payment of the
remaining principal balance of the Class E Notes on their
final scheduled distribution date;
18. to the note distribution account, to make a payment of the
Noteholders' Principal Distributable Amount (as defined in the
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Glossary), which amount will be paid out as described above
under "Description of the Notes--Payments of Principal";
19. to the reserve account, an amount necessary to increase the
amount on deposit in the reserve account to its required
level;
20. to the note distribution account, to make a payment of the
Accelerated Principal Amount, which amount will be paid out as
described above under "Description of the Notes--Payments of
Principal"; and
21. to the note distribution account, to make a payment of
principal to the holders of the Class E Notes, or, if the
Class E Notes are no longer outstanding, to make a payment of
all remaining amounts to the certificateholder.
After considering all distributions made on the related distribution
date, amounts on deposit in the reserve account that are in excess of $5,000,000
may be released and used as excess cashflow to make the payments described in
clauses 20 and 21 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.
STATEMENTS TO NOTEHOLDERS
On or prior to each 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 following information regarding the
notes on the related 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) each class of notes' aggregate outstanding principal amount,
after considering all payments reported under (b) above on
that date;
(d) the related Noteholders' Interest Carryover Amount and the
related Noteholders' Principal Carryover Amount (as each term
is defined in the Glossary), if any, and the change in those
amounts from the preceding statement; and
(e) the servicing fee paid for the related calendar month.
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Each amount described in subclauses (a) through (e) 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 Publicly
Offered Notes and the nominee of DTC on the trust's behalf. See "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.
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;
- the servicer's failure to deliver the servicer's certificate by
the first business day prior to the 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 AmeriCredit is
the servicer, which failure continues unremedied for 60 days after
the issuer, the trust collateral agent or the Majority
Noteholder's give the servicer written notice of such failure;
- events of insolvency, readjustment of debt, marshalling of assets
and liabilities, or similar proceedings regarding the servicer or,
so long as AmeriCredit is servicer, of any of its affiliates, and
actions by the servicer, or, as long as AmeriCredit is servicer,
actions by its affiliates, indicating its or their insolvency,
reorganization under bankruptcy proceedings, or inability to pay
its obligations; or
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- any servicer representation, warranty or statement is proved
incorrect in any material respect, and the circumstances or
conditions for which the representation, warranty or statement was
incorrect shall not have been eliminated or cured.
RIGHTS UPON SERVICER TERMINATION EVENT
As long as a servicer termination event remains unremedied the trust
collateral agent or the Majority Noteholders may terminate all of the servicer's
rights and obligations under the sale and servicing agreement.
If AmeriCredit is the servicer that is terminated, then the backup
servicer, or any other successor servicer, will succeed to all the
responsibilities, duties, and liabilities of the servicer. If the terminated
servicer is not AmeriCredit, 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
Majority Noteholders may, on behalf of all noteholders, waive any default by the
servicer under the sale and servicing agreement and any consequences of any
default. 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 -- but without the consent of the
noteholders, may amend the sale and servicing agreement. The sale and servicing
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. The seller, the servicer and
the owner trustee may also amend the sale and servicing agreement with the
consent of the indenture trustee and the Majority Noteholders in order 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.
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However, the amendment may not increase or reduce in any manner, or
accelerate or delay the timing of, collections of payments on automobile 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.
The seller and servicer must deliver to the owner trustee and the
indenture trustee, 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, which states that all financing
statements and continuation statements have been filed.
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 Publicly Offered 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
Publicly Offered 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
Publicly Offered 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 PUBLICLY OFFERED NOTES
TREATMENT OF THE PUBLICLY OFFERED NOTES AS INDEBTEDNESS
The seller agrees, and the noteholders will agree by their purchase of
Publicly Offered Notes, to treat the Publicly Offered Notes as indebtedness 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 Publicly Offered Notes. In general, whether instruments such as the Publicly
Offered Notes constitute indebtedness for federal income tax purposes is a
question of fact, the resolution of
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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 Publicly Offered Notes will constitute indebtedness, and not an
ownership interest in the automobile loans, nor an equity interest in the issuer
or in a separate association taxable as a corporation or other taxable entity.
If the Publicly Offered Notes are characterized as indebtedness,
interest paid or accrued on a Publicly Offered Note will be treated as ordinary
income to the noteholders and principal payments on a Publicly Offered 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 Publicly Offered 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 Publicly Offered 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 Publicly Offered Notes will constitute
indebtedness, 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 indebtedness 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 equity 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 Publicly Offered
Notes were held to constitute partnership interests, rather than indebtedness.
Since the issuer will treat the Publicly Offered 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
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consequences to them of the purchase, ownership and disposition of the Publicly
Offered Notes. See "TAXATION OF FOREIGN INVESTORS" below.
ORIGINAL ISSUE DISCOUNT
It is anticipated that the Publicly Offered Notes will not have any
original issue discount, or "OID", other than possibly OID within a DE MINIMIS
amount and that accordingly the provisions of sections 1271 through 1273 and
1275 of the Internal Revenue Code (the "CODE") generally will not apply to the
Publicly Offered Notes. OID will be considered DE MINIMIS if it is less than
0.25% of the principal amount of a Publicly Offered Note multiplied by its
expected weighted average life.
MARKET DISCOUNT
A subsequent purchaser who buys a Publicly Offered Note for less than
its principal amount may be subject to the MARKET DISCOUNT rules of sections
1276 through 1278 of the Code. If a subsequent purchaser of a Publicly Offered
Note disposes of the note, including by 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 market discount accrued for the period that the
purchaser holds the Publicly Offered Note. Similarly, if a subsequent purchaser
receives a principal payment, the amount of that principal payment will be
treated as ordinary income to the extent of any market discount accrued for the
period that the purchaser holds the Publicly Offered 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 Publicly Offered Notes
and thereafter. Market discount generally will equal the excess, if any, of the
then current unpaid principal amount of the note over the purchaser's basis in
the note offered immediately after the purchaser acquired the Publicly Offered
Note. In general, market discount on a Publicly Offered 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 Publicly Offered 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 Publicly Offered 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 Publicly Offered Note will be considered
to be zero if it is less than a DE MINIMIS amount, which is 0.25% of the
remaining principal amount of the note multiplied by its expected weighted
average remaining
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life. If OID or market discount is DE MINIMIS, the actual amount of discount
must be allocated to the remaining principal distributions on the Publicly
Offered 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 Publicly Offered 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 Publicly Offered 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 PUBLICLY OFFERED NOTES
If a Publicly Offered 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 Publicly Offered Note to the seller,
increased by any OID 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 Publicly Offered 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 its adjusted basis in the note allocable thereto. A noteholder who receives
a final payment which is less than his adjusted basis in the Publicly Offered
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 Publicly Offered Note as a CAPITAL ASSET within the meaning of
Section 1221 of the Code 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.
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TAXATION OF FOREIGN INVESTORS
Interest payments including OID, if any, on the Publicly Offered Notes
made to a FOREIGN PERSON, which is a nonresident alien individual, foreign
corporation or other non-United States persons 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 issuer 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 Publicly Offered Note
identified on the statement is a foreign person.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Distributions of interest and principal as well as distributions of
proceeds from the sale of the Publicly Offered Notes 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 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.
The IRS has 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, although
taxpayers may begin compliance with the withholding regulations immediately.
Prospective investors are urged to consult their own tax advisors regarding the
withholding regulations.
STATE AND LOCAL TAX CONSIDERATIONS
Potential noteholders should consider the state and local income tax
consequences of the purchase, ownership and disposition of the Publicly Offered
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 Publicly Offered Notes.
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ERISA CONSIDERATIONS
The Publicly Offered 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 Publicly
Offered Notes, including the reasonable expectation of purchasers of Publicly
Offered Notes that the Publicly Offered 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 Publicly Offered Notes for ERISA purposes could change
if the issuer incurred losses. As described in the prospectus, the acquisition
or holding of the Publicly Offered 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 Publicly Offered Notes
will be deemed to have represented that the acquisition and continued holding of
the Publicly Offered Notes will be covered by a Department of Labor prohibited
transaction class exemption.
Any plan fiduciary considering the purchase of Publicly Offered Notes
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 Publicly Offered
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 Publicly Offered Notes to a plan is in no respect a
representation by the issuer 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 Rule 2a-7 of the Investment Company Act of 1940, as amended.
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RATINGS
As a condition to issuance, the notes must receive at least the
following ratings from Moody's Investors Service, Inc. and Standard & Poor's
Ratings Services, a division of the McGraw-Hill Companies, Inc., in order to be
issued:
<TABLE>
<CAPTION>
CLASS RATINGS
S&P MOODY'S
--- -------
<S> <C> <C>
A-1 A-1+ P-1
A-2 AAA Aaa
A-3 AAA Aaa
B AA Aa3
C A A3
</TABLE>
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time. The ratings
assigned to the notes address the likelihood of the receipt by the noteholders
of all distributions to which the noteholders are entitled by their respective
final scheduled payment dates. The ratings assigned to the notes do not
represent any assessment of the likelihood that principal prepayments might
differ from those originally anticipated or address the possibility that
noteholders might suffer a lower than anticipated yield.
We cannot assure you that the rating agencies will not lower or
withdraw the ratings.
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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 Publicly Offered Notes. Each of the underwriters
has severally agreed to purchase, the principal amount of the Publicly Offered
Notes set forth opposite its name below:
<TABLE>
<CAPTION>
Principal Amount of Principal Amount of Principal Amount of Principal Amount of Principal Amount of
Class A-1 Notes Class A-2 Notes Class A-3 Notes Class B Notes Class C Notes
--------------- --------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Deutsche Bank
Securities Inc. $40,000,000.00 $87,000,000.00 $59,625,000.00 $22,500,000.00 $25,000,000.00
Chase
Securities Inc. $40,000,000.00 $87,000,000.00 $59,625,000.00 $22,500,000.00 N/A
------------------- ---------------------- ---------------------- ---------------------- --------------------- ------------------
Total $80,000,000.00 $174,000,000.00 $119,250,000.00 $45,000,000.00 $25,000,000.00
</TABLE>
The underwriters have advised the seller that they propose initially to
offer the Publicly Offered Notes to the public at the prices listed below, and
to dealers at prices less the initial concessions listed below:
<TABLE>
<CAPTION>
Selling
Underwriting Net Proceeds Concessions Reallowance
Discount to the Seller (1) Not to Exceed Not to Exceed
-------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Class A-1 0.125% 99.875000% 0.075% 0.065%
Class A-2 0.200% 99.793100% 0.120% 0.100%
Class A-3 0.250% 99.731512% 0.150% 0.125%
Class B 0.300% 99.689137% 0.180% 0.125%
Class C 0.450% 99.542508% 0.250% 0.125%
----------------------------- ------------------ ---------------------- ------------------- ------------------
Total for the Publicly
Offered Notes $993,625.00 $442,215,560.71
</TABLE>
(1) Before deducting expenses, estimated to be $625,000.
The Class D Notes and the Class E Notes are not being offered by this
prospectus supplement, and are anticipated to be privately placed with
institutional investors.
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;
S-58
<PAGE>
- 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.
The underwriters have advised AmeriCredit that discretionary sales are
not expected to exceed 5% (five percent) of the principal amount of the
securities being offered.
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 automobile loans - prior to their sale to the issuer. One or more
of the underwriters, or their respective affiliates or entities for which their
respective affiliates act as administrator and/or provide liquidity lines, 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. Because more than 10% of
the net offering proceeds of the offering may be paid to the underwriters or
their respective affiliates or associated persons, this offering is being made
pursuant to the provisions of Rule 2710(c)(8) of the Conduct Rules of the
National Association of Securities Dealers.
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.
S-59
<PAGE>
EXPERTS
The balance sheet of the issuer as of October 18, 2000 included in this
prospectus supplement has been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said 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.
S-60
<PAGE>
GLOSSARY
ACCELERATED PRINCIPAL AMOUNT for a distribution date will equal the lesser of
(1) 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 19 under "Description of the
Purchase Agreements and the Trust Documents -- Flow of Funds";
and
(2) the excess, if any, on the distribution date of:
(a) the Pro Forma Note Balance for the distribution date;
MINUS
(b) the Required Pro Forma Note Balance for the distribution
date.
AMOUNT FINANCED means, for any automobile loan, the aggregate amount loaned
toward the purchase price of the financed vehicle and related costs, including
amounts advanced at the time the automobile loan is originated for:
- accessories;
- insurance premiums;
- service;
- car club and warranty contracts; and
- 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:
(1) the Collected Funds for the calendar month;
PLUS
(2) all Purchase Amounts deposited in the collection account
during the calendar month, plus income on investments held in
the collection account;
PLUS
(3) the proceeds of any liquidation of the assets of the issuer,
other than Net Liquidation Proceeds.
S-61
<PAGE>
COLLECTED FUNDS means, any calendar month, the amount of funds in the collection
account representing automobile 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 automobile loan or otherwise modifying or restructuring the
scheduled payments to be made on the automobile loan, an amount equal to:
- the excess of the automobile loan's Principal Balance immediately
prior to the order over the automobile loan's Principal Balance as
reduced; and/or
- if the court issued an order reducing the effective interest rate
on the automobile loan, the excess of the automobile loan
Principal Balance immediately prior to the order over the
automobile loan's net present value--using as the discount rate
the higher of the APR on the automobile 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.
LIQUIDATED AUTOMOBILE LOAN means, for any calendar month, an automobile loan for
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 automobile 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; or
- 5% or more of a scheduled payment became 120 or more days
delinquent, except in the case of repossessed financed vehicles.
MAJORITY NOTEHOLDERS means the holders of notes representing a majority of the
principal balance of the most senior class of notes then outstanding.
S-62
<PAGE>
NET LIQUIDATION PROCEEDS means, for Liquidated Automobile Loans:
(1) proceeds from the underlying financed vehicles' disposition;
PLUS
(2) any insurance proceeds;
PLUS
(3) other monies received from the obligor that are allocable to
principal and interest due under the automobile loan;
MINUS
(4) 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.
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 related distribution 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 such distribution date and the Noteholders' Interest Carryover Amount,
if any, for each class of notes, calculated as of such distribution date.
NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT means, for any distribution
date and any class of notes, the interest accrued during the applicable interest
period that 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.
NOTEHOLDERS' PRINCIPAL CARRYOVER AMOUNT means, as of any determination date, all
or any portion of the Noteholders' Principal Distributable Amount and any
outstanding Noteholders' Principal Carryover Amount from the preceding
distribution date which remains unpaid.
NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT means, for any distribution date,
the sum of the Principal Distributable Amount for the distribution date and the
Noteholders' Principal Carryover Amount, if any, as of the distribution date.
S-63
<PAGE>
POOL BALANCE means, as of any date:
(1) the aggregate Principal Balance of the automobile loans,
excluding all Liquidated Loan and all Purchased Automobile
Loans, at the end of the preceding calendar month;
MINUS
(2) (a) all payments from obligors and any Purchase Amounts
the seller or servicer must remit for the month,
PLUS
(b) all losses, including Cram-Down Losses accounted for
during the month.
PRINCIPAL BALANCE means, for any automobile as of any date, the sum of:
(1) the Amount Financed;
MINUS
(a) that portion of all amounts received on or prior to
that date and allocable to principal according to the
automobile loan's terms;
PLUS
(b) any Cram Down Losses for the automobile loan
accounted for as of that date;
PLUS
(2) the accrued and unpaid interest on the automobile loan as of that
date.
S-64
<PAGE>
PRINCIPAL DISTRIBUTABLE AMOUNT means, for any distribution date, the amount
equal to:
(1) the sum of:
(a) collections received on automobile loans (other than
Liquidated Automobile Loans and Purchased Automobile
Loans) that are allocable to principal, including any
full and partial principal prepayments,
PLUS
(b) the Principal Balance of all automobile loans (other
than Purchased Automobile Loans) that became
Liquidated Automobile Loans during the related
calendar month and
PLUS
(c) the portion of the Purchase Amount allocable to
principal of all Purchased Automobile Loans that
became Purchased Automobile Loans as of the
immediately preceding record date;
PLUS
(d) the aggregate amount of Cram Down Losses during the
related calendar month;
MINUS
(2) the Step-Down Amount, if any, for the distribution date.
PRO FORMA NOTE BALANCE means, for any distribution date, the aggregate remaining
principal amount of the notes outstanding on the distribution date, after giving
effect to distributions under clauses 1 through 18 under "Description of the
Purchase Agreements and the Trust Documents -- Flow of Funds."
PURCHASE AMOUNT means, for any automobile loan, the Principal Balance as of the
date of purchase.
PURCHASED AUTOMOBILE LOAN means an automobile loan purchased as of the close of
business on the last day of a collection period by AmeriCredit as the result of
a breach of a covenant or as an exercise of its optional redemption right.
S-65
<PAGE>
REQUIRED PRO FORMA NOTE BALANCE means, for any distribution date, a dollar
amount equal to:
(1) the Pool Balance;
MINUS
(2) the sum of:
(a) 7.0% of the Pool Balance;
PLUS
(b) the aggregate, cumulative amount of principal paid to
the holders of the Class E Notes pursuant to clause
21 of "DESCRIPTION OF THE PURCHASE AGREEMENTS AND THE
TRUST DOCUMENTS-- FLOW OF FUNDS," below, on all prior
distribution dates;
MINUS
(c) the amount required to be on deposit in the reserve
account.
STEP-DOWN AMOUNT means, for any distribution date, the excess, if any, of:
(1) the Required Pro Forma Note Balance;
MINUS
(2) 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.
Provided, however, that the Step-Down Amount in no event may exceed the amount
that would reduce the sum of (i) the amount on deposit in the Reserve Account,
plus (ii) the positive difference, if any, of the Pool Balance minus the Pro
Forma Note Balance, to an amount less than the lesser of (i) $7,500,000 or (ii)
the outstanding principal amount of all Classes of Notes.
S-66
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Managers of AmeriCredit Automobile Receivables Trust 2000-1:
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of AmeriCredit Automobile Receivables
Trust 2000-1 as of October 18, 2000, in conformity with accounting principles
generally accepted in the United States of America. 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 auditing standards generally accepted in the United
States of America, 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 balance sheet presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Fort Worth, Texas
October 19, 2000
F-1
<PAGE>
AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-1
BALANCE SHEET
OCTOBER 18, 2000
ASSETS
<TABLE>
<S> <C>
Cash..................................................... $1,000
------
Total Assets............................................. $1,000
======
<CAPTION>
LIABILITIES AND TRUST PRINCIPAL
<S> <C>
Interest in Trust........................................ $1,000
------
Total liabilities and trust principal.................... $1,000
======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-2
<PAGE>
AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-1
NOTES TO FINANCIAL STATEMENT
----------
1. NATURE OF OPERATIONS:
AmeriCredit Automobile Receivables Trust 2000-1 (the "Trust"), was
formed in the State of Delaware on October 11, 2000. The Trust has been inactive
since that date.
The Trust was organized to engage exclusively in the following business
and financial activities: to acquire motor vehicle retail installment sale
contracts from AFS SenSub Corp. 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. AFS SenSub Corp., is a Nevada corporation which is a wholly owned
subsidiary of AmeriCredit Financial Services, Inc.
2. CAPITAL CONTRIBUTION:
AFS SenSub Corp. purchased, for $1,000, a 100% beneficial ownership
interest in the Trust on October 18, 2000.
F-3
<PAGE>
ANNEX I
CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in limited circumstances, the Publicly Offered Notes will be
available only in book-entry form. Investors in the Publicly Offered Notes may
hold the Publicly Offered Notes through any of DTC, Clearstream or Euroclear.
The Publicly Offered Notes will be tradable 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 Clearstream and
Euroclear will be conducted in the ordinary way in accordance with the normal
rules and operating procedures of Clearstream 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 Clearstream or Euroclear and DTC
participants holding Publicly Offered Notes will be effected on a
delivery-against-payment basis through the respective Depositaries of
Clearstream 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 Publicly Offered Notes will be held in book-entry form by DTC in
the name of Cede & Co. as nominee of DTC. Investors' interests in the Publicly
Offered Notes will be represented through financial institutions acting on their
behalf as direct and indirect participants in DTC. As a result, Clearstream 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 Publicly Offered Notes 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.
A-1
<PAGE>
Investors electing to hold their Publicly Offered Notes through
Clearstream 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. Publicly Offered Notes will be
credited to the securities custody accounts on the settlement date against
payment in same-day funds.
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 CLEARSTREAM OR EUROCLEAR PARTICIPANTS
Secondary market trading between Clearstream participants or Euroclear
participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
TRADING BETWEEN DTC, SELLER AND CLEARSTREAM OR EUROCLEAR PARTICIPANTS
When Publicly Offered Notes are to be transferred from the account of a
DTC participant to the account of a Clearstream participant or a Euroclear
participant, the purchaser will send instructions to Clearstream or Euroclear
through a Clearstream participant or Euroclear participant at least one business
day prior to settlement. Clearstream or Euroclear will instruct the relevant
depository, as the case may be, to receive the Publicly Offered Notes against
payment. Payment will include interest accrued on the Publicly Offered Notes
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 Publicly Offered Notes.
After settlement has been completed, the Publicly Offered Notes will be credited
to the respective clearing system and by the clearing system, in accordance with
its usual procedures, to the Clearstream 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
A-2
<PAGE>
is not completed on the intended value date and the trade fails, the
Clearstream or Euroclear cash debt will be valued instead as of the actual
settlement date.
Clearstream 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 Clearstream or Euroclear. Under
this approach, they may take on credit exposure to Clearstream or Euroclear
until the Publicly Offered Notes are credited to their account one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, Clearstream participants or Euroclear participants can elect not
to preposition funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, Clearstream participants or Euroclear
participants purchasing Publicly Offered Notes would incur overdraft charges for
one day, assuming they cleared the overdraft when the Publicly Offered Notes
were credited to their accounts. However, interest on the Publicly Offered Notes
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 Clearstream 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 Clearstream
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 CLEARSTREAM OR EUROCLEAR SELLER AND DTC PURCHASER
Due to time zone differences in their favor, Clearstream participants
and Euroclear participants may employ their customary procedures for
transactions in which Publicly Offered Notes are to be transferred by the
respective clearing system, through the respective depository, to a DTC
participant. The seller will send instructions to Clearstream or Euroclear
through a Clearstream participant or Euroclear participant at least one business
day prior to settlement. In these cases Clearstream or Euroclear will instruct
the respective depository, as appropriate, to credit the Publicly Offered Notes
to the DTC participant's account against payment. Payment will include interest
accrued on the Publicly Offered Notes 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.
A-3
<PAGE>
The payment will then be reflected in the account of Clearstream participant
or Euroclear participant the following day, and receipt of the cash proceeds
in the Clearstream 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 Clearstream
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 Clearstream participant's or Euroclear participant's account would
instead be valued as of the actual settlement date.
Finally, day traders that use Clearstream or Euroclear and that
purchase global securities from DTC participants for delivery to Clearstream
participants or Euroclear participants may wish to note 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:
- borrowing through Clearstream or Euroclear for one day, until the
purchase side of the trade is reflected in their Clearstream or Euroclear
accounts in accordance with the clearing system's customary procedures;
- borrowing the Publicly Offered Notes in the U.S. from a DTC participant
no later than one day prior to settlement, which would give the Publicly Offered
Notes sufficient time to be reflected in their Clearstream 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 Clearstream participant or
Euroclear participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Publicly Offered Notes holding Publicly Offered
Notes through Clearstream 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' Publicly Offered Notes 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 steps described below to
obtain an exemption or reduced tax rate.
A-4
<PAGE>
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, although taxpayers may
begin compliance with the withholding regulations immediately.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of the Publicly Offered
Notes as well as the application of the withholding regulations. Prospective
investors are urged to consult their own tax advisors for specific advice
regarding their holding and disposing of the Publicly Offered Notes.
EXEMPTION FOR NON-U.S. PERSONS
Under the existing rules, beneficial owners of global securities that
are non-U.S. persons, as defined below, can obtain a complete exemption from the
withholding tax by filing a signed Form W-8, Certificate of Foreign Status.
Under the withholding regulations, a non-U.S. person may claim beneficial owner
status by filing Form W-8BEN, Certificate of Foreign Status of Beneficial Owner
for United States Tax Withholding. The old Form W-8 is valid until the earlier
of (i) three years beginning on the date that the form is signed, or (ii)
December 31, 2000. The new Form W-8BEN is valid for a period of three years
beginning on the date that the form is signed. If the information shown on Form
W-8 or Form W-8BEN changes, a new Form W-8 or Form W-8BEN must be filed within
30 days of the change.
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME
Under the existing rules, 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. Under the
withholding regulations, a non-U.S. person may claim an exemption from U.S.
withholding on income effectively connected with the conduct of a trade or
business in the United States by filing Form W-8ECI, Certificate of Foreign
Person's Claim for Exemption From Withholding on Income Effectively Connected
With the Conduct of a Trade or Business in the United States. The old Form 4224
is valid until the earlier of (i) one year beginning on the date that the form
is signed, or (ii) December 31, 2000. The new Form W-8ECI is valid for a period
of three years beginning on the date that the form is signed.
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY
COUNTRIES
A-5
<PAGE>
Under the existing rules, 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 filer alternatively
files Form W-8. Under the withholding regulations, a non-U.S. person may claim
treaty benefits by filing Form W-8BEN, Certificate of Foreign Status of
Beneficial Owner for United States Tax Withholding. The old Form 1001 is valid
until the earlier of (i) three years beginning on the date that the form is
signed, or (ii) December 31, 2000. The new Form W-8BEN is valid for a period of
three years beginning on the date that the form is signed.
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
Under the existing rules, the beneficial owner of a global security or
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. The withholding regulations revise the procedures that
withholding agents and payees must follow to comply with, or to establish an
exemption from, withholding for payments made after December 31, 2000. Each
foreign holder of Publicly Offered Notes should consult its own tax advisor
regarding compliance with these procedures under the withholding regulations.
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.
A-6
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Prospectus
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AUTOMOBILE RECEIVABLE
AMERICREDIT FINANCIAL SERVICES, INC. ASSET-BACKED SECURITIES,
SERVICER ISSUABLE IN SERIES
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WE SUGGEST THAT YOU READ THE SECTION ENTITLED "RISK FACTORS" ON PAGE 10 OF THIS
PROSPECTUS AND CONSIDER THESE FACTORS BEFORE MAKING A DECISION TO INVEST IN
THESE SECURITIES.
These securities are automobile loan asset-backed securities which represent
interests in or obligations of the issuer issuing that series of securities and
are not interests in or obligations of any other person or entity.
Neither these securities nor the automobile loans will be insured or guaranteed
by any governmental agency or instrumentality.
Retain this prospectus for future reference. This prospectus may not be used to
consummate sales of securities unless accompanied by the prospectus supplement
relating to the offering of these securities.
--------------------------------------------------------------------------------
THE SECURITIES --
- will be issued from time to time in series;
- will be backed by one or more pools of automobile loans held by the issuer;
- will be rated in one of the four highest rating categories by at least one
nationally recognized statistical rating organization; and
- may have the benefit of one or more forms of credit enhancement, such as
insurance policies, overcollateralization, subordination or reserve funds.
THE ASSETS --
The assets of each issuer will primarily consist of a pool of automobile loans,
funds on deposit in one or more accounts and forms of credit support described
in this prospectus and in the prospectus supplement.
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
PAGE
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.............................................8
Registration of Securities..........................................8
Optional Termination................................................8
Mandatory Termination...............................................8
Tax Considerations..................................................9
Risk Factors..............................................................10
The Company and the Servicer..............................................19
The Trustee...............................................................19
The Issuer................................................................19
Composition of the Trust Property.........................................19
The Automobile Loans......................................................20
AUTOMOBILE LOAN POOLS...............................................20
THE AUTOMOBILE LOANS................................................20
Rule of 78s Automobile Loans..................................21
Fixed Value Automobile Loans..................................21
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Simple Interest Automobile Loans..............................21
DELINQUENCIES, REPOSSESSIONS, AND NET LOSS INFORMATION ON THE
AUTOMOBILE LOANS....................................................22
MATURITY AND PREPAYMENT CONSIDERATIONS ON THE AUTOMOBILE LOANS......22
AmeriCredit's Automobile Financing Program................................23
GENERAL.............................................................23
AUTOMOBILE LOAN ACQUISITION.........................................24
SERVICING AND COLLECTIONS...........................................26
Pool Factors..............................................................27
Use of Proceeds...........................................................28
Description of the Securities.............................................28
GENERAL.............................................................28
GENERAL PAYMENT TERMS OF SECURITIES.................................30
INDEXED SECURITIES..................................................31
SCHEDULED AMORTIZATION SECURITIES; COMPANION SECURITIES.............32
BOOK-ENTRY REGISTRATION.............................................32
DEFINITIVE SECURITIES...............................................37
REPORTS TO SECURITYHOLDERS..........................................38
FORWARD COMMITMENTS; PRE-FUNDING....................................38
Description of the Trust Agreements.......................................39
TRANSFER OF THE AUTOMOBILE LOANS....................................40
ACCOUNTS............................................................40
THE SERVICER........................................................41
SERVICING PROCEDURES................................................42
PAYMENTS ON AUTOMOBILE LOANS........................................42
SERVICING COMPENSATION..............................................42
DISTRIBUTIONS.......................................................43
CREDIT AND CASH FLOW ENHANCEMENTS...................................44
STATEMENTS TO INDENTURE TRUSTEES AND TRUSTEES.......................45
EVIDENCE AS TO COMPLIANCE...........................................45
MATTERS REGARDING THE SERVICER......................................45
SERVICER DEFAULT....................................................46
RIGHTS UPON SERVICER DEFAULT........................................47
WAIVER OF PAST DEFAULTS.............................................47
AMENDMENT...........................................................47
INSOLVENCY EVENT....................................................48
TERMINATION.........................................................49
Certain Legal Aspects of the Automobile Loans.............................49
GENERAL.............................................................49
SECURITY INTERESTS IN THE FINANCED VEHICLES.........................50
General.......................................................50
Perfection....................................................50
Continuity of Perfection......................................51
Priority of Certain Liens Arising by Operation of Law.........52
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REPOSSESSION........................................................53
NOTICE OF SALE; REDEMPTION RIGHTS...................................53
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS............................54
CONSUMER PROTECTION LAWS............................................55
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940.....................56
OTHER LIMITATIONS...................................................57
Material Tax Considerations...............................................57
GENERAL.............................................................57
GRANTOR TRUST SECURITIES............................................58
Taxation of Beneficial Owners of Grantor Trust Securities.....59
Sales of Grantor Trust Securities.............................60
Grantor Trust Reporting.......................................60
DEBT SECURITIES.....................................................60
Taxation of Beneficial Owners of Debt Securities..............61
Sales of Debt Securities......................................61
Debt Securities Reporting.....................................61
PARTNERSHIP INTERESTS...............................................62
Taxation of Beneficial Owners of Partnership Interests........62
Sale or Exchange of Partnership Interests.....................63
Partnership Reporting.........................................63
FASIT SECURITIES....................................................65
Taxation of Beneficial Owners of FASIT Regular Securities.....65
Taxes on a FASIT Trust........................................67
DISCOUNT AND PREMIUM................................................68
Original Issue Discount.......................................69
Market Discount...............................................72
Premium.......................................................72
Special Election..............................................73
BACKUP WITHHOLDING AND INFORMATION REPORTING........................73
FOREIGN INVESTORS...................................................74
Grantor Trust Securities, Debt Securities, and FASIT Regular
Securities....................................................74
High-Yield FASIT Regular Securities...........................75
Partnership Interests.........................................75
State Tax Considerations..................................................76
ERISA Considerations......................................................76
GENERAL.............................................................76
ERISA CONSIDERATIONS REGARDING SECURITIES WHICH ARE CERTIFICATES....77
ERISA CONSIDERATIONS REGARDING SECURITIES WHICH ARE NOTES...........79
CONSULTATION WITH COUNSEL...........................................80
Methods of Distributions..................................................81
Legal Opinions............................................................82
Financial Information.....................................................82
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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;
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- 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 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;
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- 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.
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;
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- 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 account;
- 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 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.
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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 67 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.
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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.
YOU MAY NOT BE ABLE TO SELL YOUR A secondary market for these securities
SECURITIES, AND MAY HAVE TO HOLD YOUR is unlikely to develop. If it does
SECURITIES TO MATURITY EVEN THOUGH YOU develop, it may not provide you with
MAY WANT TO SELL IT. sufficient liquidity 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 The yield to maturity of the securities
COULD CAUSE YOU TO BE PAID EARLIER may be adversely affected by a higher
THAN YOU EXPECT, WHICH MAY ADVERSELY or lower than anticipated rate of
AFFECT YOUR YIELD TO MATURITY. prepayments on the 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.
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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.
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
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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.
CREDIT ENHANCEMENT, IF PROVIDED, WILL Credit enhancement may be provided in
BE LIMITED IN BOTH AMOUNT AND SCOPE OF limited amounts to cover some, but not
COVERAGE, AND MAY NOT BE SUFFICIENT TO all, types of losses on the contracts
COVERAGE, AND MAY NOT BE SUFFICIENT TO and may reduce over time in accordance
COVER ALL LOSSES OR RISKS ON YOUR with a schedule or formula.
INVESTMENT. 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 Any insolvency by the company, the
THE COMPANY COMBINED WITH THE servicer, or a third party while in
INSOLVENCY OF THE COMPANY, THE possession of the automobile loans may
SERVICER, OR OTHER PARTY, MAY CAUSE result in competing claims to ownership
YOUR PAYMENTS TO BE REDUCED OR DELAYED. 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
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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 State laws may prohibit, limit, or
THE COLLECTION OF PAYMENTS ON THE delay repossession and sale of the
AUTOMOBILE LOANS AND REPOSSESSION OF vehicles to recover losses on defaulted
THE VEHICLES. 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;
- 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 In some circumstances, a bankruptcy of
YOUR PAYMENTS TO BE REDUCED OR DELAYED. the 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
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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.
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
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anticipated interest and principal on
the securities.
COMMINGLING OF FUNDS WITH THE COMPANY'S While the company is the servicer, cash
FUNDS MAY RESULT IN REDUCED OR DELAYED collections held by the company may be
PAYMENTS TO 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 We cannot guarantee that the
AUTOMOBILE LOANS MAY DIFFER FROM THE delinquency and loss levels of the
COMPANY'S HISTORICAL LOSS AND automobile loans in the trust will
DELINQUENCY LEVELS. 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.
SECURITYHOLDERS HAVE NO RECOURSE There is no recourse against the
AGAINST THE COMPANY FOR LOSSES. company. The 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
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from the company.
TRANSFER OF SERVICING MAY DELAY If the company were to cease servicing
PAYMENTS TO YOU. the 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
AUTOMOBILE LOANS WHICH BREACH A company to acquire automobile loans
REPRESENTATION OR WARRANTY MAY CAUSE from the trust property if
YOUR PAYMENTS TO BE REDUCED OR DELAYED. representations and warranties
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 Each automobile loan requires the
CAUSE YOU LOSSES ON YOUR INVESTMENT. company to 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
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trust property, and you could suffer a
loss on your investment.
LIMITATIONS ON INTEREST PAYMENTS AND Generally, under the terms of the
REPOSSESSIONS MAY CAUSE LOSSES ON YOUR Soldiers' and Sailors' Civil Relief Act
INVESTMENT. of 1940, as 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 The year 2000 issue is whether the
COMPLIANCE. 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,
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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.
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;
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- 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.
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;
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- 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 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
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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 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
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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 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.
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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.
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The branch manager considers many factors in arriving at a credit
decision, including:
- the applicant's credit score;
- 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.
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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.
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.
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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:
- 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.
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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.
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
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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.
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.
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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.
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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.
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.
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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 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
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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 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
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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. 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
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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
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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 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.
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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.
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.
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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.
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
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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
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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
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.
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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.
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.
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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;
- 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
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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.
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
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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
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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.
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.
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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 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 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:
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- 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
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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.
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;
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- 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 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
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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;
- 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
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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;
- accrued interest on the automobile loan;
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- 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.
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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;
- 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
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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.
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
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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 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;
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- 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
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
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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
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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
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
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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 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
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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.
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
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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 interest.
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.
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
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(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
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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 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
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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:
- 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;
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(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.
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:
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(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.
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
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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:
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(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:
(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
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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 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
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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.
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.
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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;
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(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
(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 institution holding on its behalf and does not have
actual knowledge that 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.
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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.
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.
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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.
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
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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:
- 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;
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- 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;
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- PTCE 90-1, regarding transactions entered into by INSURANCE COMPANY
POOLED SEPARATE ACCOUNTS;
- 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.
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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:
- 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.
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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 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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