<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 17, 2001
REGISTRATION STATEMENT NO. 333 - 44924
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMERICREDIT FINANCIAL SERVICES, INC.
(Exact Name of Registrant as specified in its Charter)
801 CHERRY STREET, SUITE 3900
DELAWARE FORT WORTH, TEXAS 76102 75-2439888
(State of Incorporation) (Address of Principal Executive (IRS Employer
Office of Registrant) Identification No.)
CHRIS A. CHOATE, ESQ.
AMERICREDIT CORP.
801 CHERRY STREET
FORT WORTH, TEXAS 76102
(Name, Address and Telephone Number, including area code, of Agent for Service)
COPY TO:
CHRIS DIANGELO, ESQ.
DEWEY BALLANTINE LLP
1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. |_|
If this Form is filed as a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, please check the following box and list
the Securities Act registration number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM MAXIMUM
AMOUNT AGGREGATE PRICE AGGREGATE AMOUNT OF
TO BE PER UNIT(1) OFFERING PRICE(1) REGISTRATION
TITLE OF SECURITIES BEING REGISTERED REGISTERED FEE(2)(3)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Auto Receivables Asset Backed Securities $8,000,000,000 100% $8,000,000 $2,000,014
-----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Paid by wire transfer on January 16, 2001. A portion of the filing fee
($264) was paid by wire transfer on August 25, 2000.
(3) In accordance with Rule 429 under the Securities Act of 1933, the
Prospectus included herein is a combined prospectus which also relates
to the Registrant's Registration Statement on Form S-3, File No.
333-47278 (the "Prior Registration Statement"). The amount of securities
eligible to be sold under the Prior Registration Statement
($347,619,823 as of January 16, 2001) shall be carried forward to this
Registration Statement. The filing fee related to the amount being
carried forward was paid with the Prior Registration Statement.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
PROSPECTUS SUPPLEMENT
(TO THE PROSPECTUS DATED ____, 2000)
AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-__
ISSUER
AFS FUNDING CORPORATION
SELLER
AMERICREDIT FINANCIAL SERVICES, INC.
SERVICER
YOU SHOULD READ THE SECTIONS ENTITLED "RISK FACTORS" ON PAGE S-12 OF THIS
PROSPECTUS SUPPLEMENT AND ON PAGE __ OF THE ACCOMPANYING PROSPECTUS AND
CONSIDER THESE FACTORS BEFORE MAKING A DECISION TO INVEST IN THESE SECURITIES.
Neither these securities nor the auto loans will be insured or guaranteed by
any governmental agency or instrumentality.
Retain this prospectus supplement for future reference. This prospectus
supplement may be used to offer and sell the notes only if accompanied by the
prospectus.
THE NOTES-
o Are as described in the table below;
o Are backed by a pledge of "non-prime" assets of the issuer,
primarily a pool of automobile loans secured by new and used
automobiles, light trucks and vans; "Non-prime" automobile
loans are automobile loans made to borrowers with limited
credit histories or modest income or who have experienced prior
credit difficulties;
o Receive distributions on the fifth day of each month, beginning
on ______;
o Currently have no trading market.
CREDIT ENHANCEMENT FOR THE NOTES WILL CONSIST OF -
o Overcollateralization resulting from the excess of principal
value of the initial automobile loans over the aggregate
principal amount of the notes; and
o A financial guarantee insurance policy issued by Financial
Security Assurance Inc. unconditionally or irrevocably
guaranteeing timely payment of interest and principal.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
ISSUANCE INTEREST FINAL SCHEDULED INITIAL PUBLIC UNDERWRITING NET
AMOUNT RATE DISTRIBUTION DATE OFFERING PRICE DISCOUNT PROCEEDS
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 Notes
-------------------------------------------------------------------------------------------------------------------------------
Class A-2 Notes
-------------------------------------------------------------------------------------------------------------------------------
Class A-3 Notes
-------------------------------------------------------------------------------------------------------------------------------
Class A-4 Notes
-------------------------------------------------------------------------------------------------------------------------------
Total
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Initial public offering price is before adding accrued interest, if any,
from ___________.
(2) Net proceeds are before deducting expenses, estimated to be
$___________.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[UNDERWRITERS]
The date of this prospectus supplement is ____.
<PAGE>
IMPORTANT NOTICE ABOUT THE INFORMATION PRESENTED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
o 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.
o 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.
o If the prospectus contemplates multiple options, you should rely on the
information in this prospectus supplement as to the applicable option.
o 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.
A number of items will be incorporated by reference into the
registration statement. See "Incorporation by Reference" in the prospectus for
a description of incorporation by reference.
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.
The consolidated financial statements of Financial Security Assurance
Inc. and its subsidiaries included in, or as exhibits to, the following
documents which have been filed with the commission by Financial Security
Assurance Holdings Ltd., are hereby incorporated by reference in this
prospectus supplement:
(a) Annual Report on form 10-K for the year ended December 31,
____, and
(b) Quarterly Report on Form 10-Q for the period ended __________.
S-2
<PAGE>
All financial statements of Financial Security Assurance Inc., included
in documents it filed under Section 13(a), 13(c), 14, or 15(d) of the Securities
and Exchange Act of 1934 subsequent to the date of this prospectus supplement
and prior to the termination of the offering of the notes, are considered
incorporated by reference in this prospectus supplement and to be a part of this
prospectus supplement from the respective dates of filing of the documents.
We will provide you with copies of these reports, at no charge, if you
write to us at: AmeriCredit Financial Services, Inc., 801 Cherry Street, Fort
Worth, Texas 76102; telephone (817) 332-7000.
AmeriCredit Financial Services, Inc. on behalf of the issuer hereby
undertakes that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the issuer's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities and Exchange Act of 1934 and each filing of
the financial statements of Financial Security Assurance Inc. included in or as
an exhibit to the annual report of Financial Security Assurance Holdings Ltd.
filed pursuant to Section 13(a) or Section 15(d) of the Securities and Exchange
Act of 1934 that is incorporated by reference in the registration statement will
be considered a new registration statement relating to the notes offered by this
prospectus supplement, and the offering of such notes at that time will be
considered an initial bona fide offering.
S-3
<PAGE>
TABLE OF CONTENTS
Page
----
Summary.............................................S-6
The Company/Servicer...............................S-15
The Seller.........................................S-15
The Issuer.........................................S-16
General........................................S-16
The Owner Trustee..................................S-16
The Indenture Trustee..............................S-17
The Trust Property.................................S-17
The Company's Automobile Financing Program.........S-19
The Automobile Loans...............................S-20
General........................................S-20
Eligibility Criteria...........................S-20
Composition....................................S-22
Yield and Prepayment Considerations................S-29
Delinquency and Loan Loss Information..........S-34
Description of the Notes...........................S-38
Payments of Interest...........................S-39
Payments of Principal..........................S-40
Mandatory Redemption...........................S-41
Optional Redemption............................S-42
Events of Default..............................S-42
Description of The Purchase Agreements And the
Trust Documents..............................S-43
Sale and Assignment of Automobile Loans........S-43
Accounts.......................................S-44
Servicing Compensation and Trustees' Fees......S-45
Certain Allocations............................S-46
Distributions..................................S-47
Distribution Date Calculations and Payments..S-47
Insured Distribution Date Calculations and
Payments...................................S-48
Statements to Noteholders......................S-49
Credit Support.................................S-50
Spread Account...............................S-50
Overcollateralization........................S-51
Servicer Termination Event.....................S-51
Rights Upon Servicer Termination Event.........S-52
Waiver of Past Defaults........................S-53
Amendment......................................S-53
Material Federal Income Tax Consequences...........S-57
Tax Characterization of the Issuer.............S-57
Tax Consequences to Holders of the Notes.......S-57
Treatment of the Notes as Indebtedness.......S-57
Original Issue Discount......................S-58
Market Discount..............................S-59
Market Premium...............................S-59
Sale or Redemption of Notes..................S-60
Taxation of Foreign Investors................S-60
Backup Withholding...........................S-60
State and Local Tax Considerations.................S-61
ERISA Considerations...............................S-61
Legal Investment...................................S-61
Ratings............................................S-62
Underwriting.......................................S-62
Experts............................................S-64
S-4
<PAGE>
Page
----
Legal Opinions.....................................S-64
Glossary...........................................S-65
Annex I Clearance, Settlement and Tax
Documentation Procedures..........................A-1
S-5
<PAGE>
SUMMARY
o 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.
o This summary provides an overview of certain calculations, cash flows and
other information to aid your understanding. To understand all of the terms
of the offering, carefully read this entire document.
o There are material risks associated with an investment in the notes. You
should read the section entitled "Risk Factors" on page S-__ of this
prospectus supplement and page __ of the accompanying prospectus, and
consider the risk factors described in those sections, before making a
decision to invest in the notes.
AUTOMOBILE LOAN-BACKED NOTES
SERIES 2000-__
ISSUER
o AmeriCredit Automobile Receivables Trust 2000-__, a Delaware business
trust.
o The issuer's address is 1011 Center Road, Suite 200, Wilmington, Delaware
19805.
COMPANY/SERVICER
o AmeriCredit Financial Services, Inc., a Delaware corporation.
o The company will sell to the issuer automobile loans purchased by the
company from dealers or made directly by the company to consumers. In the
case of loans purchased from dealers, the original credit extension is made
by the dealer and the loan subsequently assigned to the company. In the
case of loans made directly to consumers, the dealer is not involved in the
original extension of credit.
o The company's address is 801 Cherry Street, Fort Worth, Texas 76102.
o The company will service the automobile loans.
SELLER
o AFS Funding Corp., a Nevada corporation.
o The seller's address is 639 Isbell Rd., Suite 390, Reno, Nevada 89509.
INSURER
o Financial Security Assurance Inc., a New York financial guaranty insurance
company.
TRUSTEE
o [Name of trustee], a national banking association.
STATISTICAL CALCULATION DATE
S-6
<PAGE>
o __________.
o This is the date used for preparing the statistical information used in
this prospectus supplement.
INITIAL CUTOFF DATE
o The opening of business on __________.
o The issuer will receive payments due on, or received regarding, the
automobile loans on or after this date.
CLOSING DATE
o On or about __________.
DISTRIBUTION DATE
o When the company is the servicer, the [5th] day of each month, or, if the
[5th] day is not a business day, on the following business day. However,
the distribution date will never be before the [third] business day of the
month. The first distribution date will be _____.
o If the company is not the servicer, the distribution date will become the
[twelfth] day of each month, or if the [twelfth] day is not a business day,
the next following business day.
FINAL SCHEDULED DISTRIBUTION DATE
o If the notes have not already been paid in full, the issuer will pay the
outstanding principal amount of the notes in full on the following dates:
<TABLE>
<CAPTION>
CLASS FINAL SCHEDULED DISTRIBUTION DATE
----- ---------------------------------
<S> <C>
A-1
A-2
A-3
A-4
</TABLE>
S-7
<PAGE>
DENOMINATIONS
o The issuer will issue the notes in minimum denominations of $1,000 and
integral multiples of $1,000.
NO LISTING
o The notes will not be listed on any securities exchange.
INTEREST
o On each distribution date, the issuer will pay interest at the applicable
interest rate that accrued during the prior interest accrual period.
o Interest on the [Class A-1 Notes and the Class A-2 Notes] will be
calculated on a 360-day year and the actual number of days elapsed in the
interest accrual period.
o Interest on the [Class A-3 and Class A-4 Notes] will be calculated on the
basis of a 360-day year consisting of twelve 30-day months.
PRINCIPAL
On each distribution date, the issuer will pay principal equaling:
(1) the amount of principal paid by obligors on the automobile loans
during the prior month, plus
(2) the amount of excess interest collected on the automobile loans during
the prior month.
SEQUENTIAL PAY FEATURE
The issuer will pay principal in the following priority:
o to the Class A-1 noteholders only, until the principal amount on the Class
A-1 Notes has been reduced to zero;
o when the Class A-1 Notes have been paid in full to the Class A-2
noteholders only, until the principal amount on the Class A-2 Notes has
been reduced to zero;
o when the Class A-2 Notes have been paid in full, to the Class A-3
noteholders only, until the principal amount on the Class A-3 Notes has
been reduced to zero;
o when the Class A-3 Notes have been paid in full, to the Class A-4
noteholders, until the principal amount on the Class A-4 Notes has been
reduced to zero.
THE TRUST ASSETS
The issuer will pledge property to secure payments on the notes. The pledged
assets will include:
o a pool consisting primarily of "non-prime" automobile loans for new and
used automobiles, light duty trucks and vans;
S-8
<PAGE>
o monies received from the automobile loans on or after __________;
o the security interests in the underlying vehicles;
o the loan files;
o all rights to proceeds from claims on insurance policies covering the
vehicles or the obligors;
o all rights to proceeds from liquidating the automobile loans;
o the seller's rights against dealers under agreements between the company
and the dealers;
o the bank accounts opened in connection with this offering;
o all proceeds from the items described above; and
o rights under the transaction documents.
"Non-prime" automobile loans, the principal component of the trust assets, is a
common term used to describe loans made to borrowers with limited credit
histories or modest incomes or who have experienced prior credit difficulties.
THE AUTOMOBILE LOAN POOL
The automobile loans are primarily made to individuals with less than perfect
credit. Automobile loans are originated by the company in two ways: purchasing
loans without recourse from automobile dealers or making loans directly to
consumers. In the case of loans purchased from dealers, the original credit
extension is made by the dealer and the loan subsequently assigned to the
company. In the case of loans made directly to consumers, the dealer is not
involved in the original extension of credit.
PRE-FUNDING FEATURE
o The trustee will hold $__________ of the proceeds of the notes in a
pre-funding account which the issuer will use to purchase additional
automobile loans. The company will have originated these additional
automobile loans.
o The issuer will purchase these additional automobile loans on or before
__________.
STATISTICAL INFORMATION
As of __________ the automobile loans in the pool have:
o an aggregate principle balance of $__________;
o a weighted average annual percentage rate of approximately [_____]%;
o a weighted average original maturity of approximately [___] months;
o a weighted average remaining maturity of approximately [___] months; and
o a remaining term of not more than [___] months and not less than [___]
months each.
S-9
<PAGE>
OPTIONAL REDEMPTION
o If the pool balance declines to 10% or less of its original level the
company may redeem all the outstanding Class A-4 Notes. If a redemption
occurs, you will receive a final distribution that equals the unpaid
principle amount of the notes plus accrued interest.
MANDATORY REDEMPTION
o If any funds deposited in the pre-funding account remain on [date on which]
the funding period ends], the company will redeem notes equaling the
amounts in the pre-funding account.
o The aggregate principal amount of each class of notes to be redeemed will
equal the class's pro rata share of the amount remaining in the account.
Each class's pro rata share will be based on the current principal amount
of each class of notes. However, if the amount to be redeemed is
$__________ or less, the trustee will pay the redemption amount according
to the notes "sequential pay" feature, and not PRO RATA.
o The notes may be accelerated and subject to immediate payment upon the
occurrence of an event of default. So long as the insurer is not in
default, it will have the power to declare an event of default. However,
the policy does not guarantee payment of any amounts that become due on an
accelerated basis, unless the insurer elects, in its sole discretion, to
pay those amounts in whole or in part.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes:
o Dewey Ballantine LLP, special tax counsel to the issuer and counsel to the
underwriters, is of the opinion that (i) the notes will be treated as debt
and (ii) the trust will not be treated as an association or publicly traded
partnership taxable as a corporation and therefore is not subject to
federal income tax. By your acceptance of a note, you agree to treat the
notes as debt.
o Interest on the notes will be taxable as ordinary income when received by a
holder on the cash method of accounting and when accrued by a holder on the
accrual method of accounting.
o Dewey Ballantine LLP has prepared the discussion under "Material Federal
Income Tax Consequences" in this prospectus supplement and in the
prospectus and is of the opinion that the discussion accurately states all
material federal income tax consequences of the purchase, ownership and
disposition of the notes to their original purchaser.
S-10
<PAGE>
ERISA CONSIDERATIONS
Subject to the important considerations described under "ERISA Consideration" in
this prospectus supplement, pension, profit-sharing and other employee benefit
plans may purchase notes. You should consult with your counsel regarding the
applicability of the provisions of the Employee Retirement Income Security Act
of 1974, as amended, before purchasing a note.
RATINGS
The issuer will not issue the notes unless they have been assigned the following
ratings:
<TABLE>
<CAPTION>
CLASS RATING
----- ------
S&P MOODY'S
--- -------
<S> <C> <C>
A-1
A-2
A-3
A-4
</TABLE>
You must not assume that the ratings will not be lowered, qualified, or
withdrawn by the rating agencies.
We refer you to "Ratings" in this prospectus supplement for more information
regarding the ratings assigned to the notes.
S-11
<PAGE>
RISK FACTORS
THIS SECTION AND THE SECTION UNDER THE CAPTION "RISK FACTORS" IN THE
ACCOMPANYING PROSPECTUS DESCRIBE THE PRINCIPAL RISK FACTORS ASSOCIATED WITH AN
INVESTMENT IN THE NOTES. YOU SHOULD CONSIDER THESE FACTORS IN CONNECTION WITH
THE PURCHASE OF THE NOTES:
THE COMPANY MAY BE UNABLE TO ORIGINATE ENOUGH The ability of the company to
AUTOMOBILE LOANS TO USE ALL MONEYS IN THE originate sufficient
PRE-FUNDING ACCOUNT AND THEREFORE YOU MAY BE additional automobile loans
EXPOSED TO REINVESTMENT RISK. may be affected by a variety
of social and economic factors
including:
o interest rates,
o unemployment levels,
o the rate of inflation,
and
o consumer perception of
economic conditions
generally.
If the company does not
originate sufficient
additional automobile loans
then the money deposited in
the pre-funding account will
not be used up and a mandatory
redemption of a portion of the
notes could result.
If a mandatory redemption
occurs, you will receive a
principal prepayment. You will
bear the risk of reinvesting
any prepayment.
WE CANNOT PREDICT THE RATE AT WHICH THE NOTES Obligors can prepay their
WILL AMORTIZE. automobile loans. The rate of
prepayments may be influenced
by economic, social and other
factors. In addition, under
certain circumstances, the
seller and the company are
obligated to purchase
automobile loans as a result
of breaches of representations
and/or covenants.
The trust contains an
overcollateralization feature
that results in accelerated
principal payments to
noteholders, amortizing the
notes more quickly than the
automobile loan pool. The
company also has the right, to
purchase the automobile loans
when the pool balance is 10%
or less of the original pool
balance.
S-12
<PAGE>
GEOGRAPHIC CONCENTRATIONS OF AUTOMOBILE LOANS Adverse economic conditions or
MAY INCREASE CONCENTRATION RISKS. other factors affecting any
state or region could increase
the delinquency or loan loss
experience of the automobile
loans. As of ________ ___,
2000 obligors with respect to
approximately _____%, _____%,
_____% of the automobile loans
based on the automobile loans'
remaining principal balance
were located in ________,
________, _________,
respectively.
[No other state accounts for
more than 5% of the automobile
loans.]
THE TRUST PROPERTY CONTAINS DERIVATIVES WHICH The trust property will
WILL ONLY PAY UNDER LIMITED CIRCUMSTANCES, MAY include an interest rate cap
NOT BE REPLACED IN THE EVENT OF A DEFAULT, AND agreement under which _______
WHICH MAY NOT BE INDEPENDENTLY ENFORCED BY THE will pay to the trust the
INVESTORS. amount by which LIBOR exceeds
an annual rate of ___%, based
on a notional schedule. The
notional schedule may be less
or greater than the aggregate
note balance then outstanding,
and, if it is less, you may
experience a shortfall. In the
event that ________ defaults
in its payment obligation,
________ is required to find a
replacement cap agreement at
no cost to the trust, although
_______ may not be able to do
so. If _______ is in default
under the cap agreement, only
the trustee and FSA, and not
the noteholders, will be able
to enforce the cap agreement.]
S-13
<PAGE>
THE NOTES ARE ASSET-BACKED DEBT AND THE ISSUER The sole sources for repayment
HAS ONLY LIMITED ASSETS. of the notes are payments on
the automobile loans, amounts
on deposit in the pre-funding
account, other cash accounts
held by [Name of indenture
trustee] and payments made
under the insurance policy.
The money in the pre-funding
account will be used solely to
purchase additional automobile
loans and is not available to
cover losses on the automobile
loan pool. The capitalized
interest account is designed
to cover obligations of the
issuer relating to that
portion of its assets not
invested in the automobile
loan pool and is not designed
to provide protection against
losses on the automobile loan
pool. Furthermore, if
Financial Security Assurance
Inc. defaults in its
obligations under the
insurance policy, the issuer
will depend on current
distributions on the
automobile loan pool and
amounts, if any, available in
certain collateral accounts
maintained for the benefit of
Financial Security Assurance
Inc. to make payments on the
notes.
RATINGS ON NOTES ARE DEPENDENT UPON THE The ratings of the notes will
INSURER'S CREDITWORTHINESS. depend primarily on the
creditworthiness of the
insurer as the provider of the
financial guarantee insurance
policy relating to the notes.
There is a risk that if the
insurer's financial strength
ratings are reduced, the
rating agencies may reduce the
notes' ratings.
EVENTS OF DEFAULT UNDER THE INDENTURE MAY Following the occurrence of an
RESULT IN AN ACCELERATION. event of default, Financial
Security Assurance Inc. may,
at its option, elect to cause
the liquidation of the assets
of the issuer, in whole or in
part, and pay all or any
portion of the outstanding
amount of the notes, plus
accrued interest thereon.
S-14
<PAGE>
USE OF PROCEEDS
The issuer will use the proceeds from issuing the notes to:
o pay the seller the automobile loan purchase price;
o to deposit the pre-funded amount into the pre-funding account; and
o to fund the capitalized interest account.
The seller or its affiliates may use the net proceeds to pay their
debt, including "warehouse" debt secured by the automobile loans prior to their
sale to the issuer. This warehouse debt may have been owed to one or more of the
underwriters or their respective affiliates.
THE COMPANY/SERVICER
AmeriCredit Financial Services, Inc., is a wholly-owned, and the
primary operating subsidiary of AmeriCredit Corp., a Texas corporation the
common shares of which are listed on the New York Stock Exchange. The company
was incorporated in Delaware on July 22, 1992. The company's executive offices
are located at 801 Cherry Street, Fort Worth, Texas 76102; telephone (817)
332-7000.
The company purchases and services automobile loans which are
originated and assigned to it by automobile dealers. The company will sell and
assign the automobile loans to the seller.
The company will service the automobile loans and will be compensated
for acting as the servicer. In its capacity as servicer, the company will hold
the automobile loans, as a custodian. Prior to taking possession of the
automobile loans in its custodial capacity, the company 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
Texas and California. See "Certain Legal Aspects of automobile loans".
THE SELLER
AFS Funding Corp., the company's wholly-owned subsidiary, is a Nevada
corporation, incorporated in April, 1996. The seller's address is 639 Isbell
Rd., Suite 390, Reno, Nevada 89509; telephone (702) 322-2221.
S-15
<PAGE>
The seller was organized for the limited purpose of purchasing
automobile loans from the company and transferring the loans to third parties
and any activities incidental or necessary for this purpose. The seller has
structured this transaction so that the bankruptcy of the company will not
result in the consolidation of seller's assets and liabilities with the
company's. The seller has received a legal opinion, subject to various facts,
assumptions and qualifications, opining that if the company was adjudged
bankrupt, it would not be a proper exercise of a court's equitable discretion to
disregard the separate corporate existence of the seller and to require the
consolidation of the seller's assets and liabilities with those of the company.
However, there can be no assurance that a court would not conclude that the
assets and liabilities of the seller should be consolidated with those of the
company.
Delays in distributions on the notes and possible reductions in
distribution amounts could occur if a court decided to consolidate the seller's
assets with the company's, or if a filing were made under any bankruptcy or
insolvency law by or against the seller, or if an attempt were made to litigate
any of those issues.
THE ISSUER
GENERAL
The issuer is a Delaware business trust formed under a trust agreement
to consummate the transactions described in this prospectus supplement. The
issuer will not engage in any activity other than:
o acquiring, holding and managing the automobile loans and its other
assets and proceeds from its assets;
o issuing the notes and the certificate;
o making payments on the notes; and
o engaging in other activities that are necessary, suitable to the
above listed activities.
The issuer will use the proceeds from the initial sale of the notes to
purchase the initial automobile loans from the seller and to fund the deposits
in the pre-funding account, collateral accounts maintained for the benefit of
the insurer, and the capitalized interest account.
The issuer 's principal offices are in Wilmington, Delaware, in care of
[Name of owner trustee and address].
S-16
<PAGE>
THE OWNER TRUSTEE
[Name of owner trustee] is the owner trustee. It is a [name of state]
banking corporation. Its principal offices are located at [address].
The owner trustee will perform limited administrative functions under
the trust agreement. The owner trustee's liability in connection with the
issuance of the certificate and the issuance and sale of the notes is limited
solely to the express obligations of the owner trustee detailed in the trust
agreement and the sale and servicing agreement.
THE INDENTURE TRUSTEE
[Name of indenture trustee], a national banking association, is the
indenture trustee. [Name of indenture trustee's] address is _________.
THE TRUST PROPERTY
The trust property will include, among other things, the following:
o initial, primarily "non-prime" quality, automobile loans
secured by new and used automobiles, light duty trucks and
vans;
o monies received (a) for the initial automobile loans, on or
after _____ the initial cutoff date, or (b) for the
subsequent, primarily "non-prime" quality, automobile loans,
after the related cutoff date;
o amounts that may be held in the lockbox accounts, the
collection account, the pre-funding account, and the
capitalized interest account;
o an assignment of the security interests of the servicer in the
financed vehicles;
o an assignment of the rights of the seller against dealers
under agreements between the servicer and dealers;
o 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;
o the automobile loans files; and
o other rights under the trust documents.
The pre-funding account will initially be funded with $________, which
is ___% of the initial total note balance. Prior to the time the funds in the
pre-funding account are applied to the purchase of the additional automobile
loans, those amounts will be invested in high-quality, short-term investments,
such as "A-1/P-1 commercial paper, or government money market funds.
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 initial automobile loans
S-17
<PAGE>
will be purchased by the seller under this purchase agreement on or prior to the
date of issuance of the notes.
The issuer will purchase additional automobile loans and related
property from the seller on or before __________, from funds on deposit in the
pre-funding account. These subsequent automobile loans will be purchased by the
seller from the servicer and CP Funding pursuant to one or more subsequent
purchase agreements between the seller, CP Funding and the servicer.
The initial automobile loans were, and the subsequent automobile loans
were or will be, originated by dealers according to the company's requirements,
have been or will be so assigned, and evidence or will evidence the indirect
financing made available to the obligors. Dealer agreements may provide for
repurchase or recourse against the dealer in the event of a breach of a
representation or warranty by the dealer.
The pool balance represents:
(a) the aggregate principal balance of the automobile loans at the
end of the preceding calendar month;
plus
(b) any amounts in the pre-funding account;
minus
(c) all payments from obligors and any purchase amounts the seller
or servicer must remit for the month and all losses, including
CRAM DOWN LOSSES during the month.
Under the indenture, the issuer will grant a security interest in the
trust property to the trust collateral agent for the indenture trustee's benefit
on the noteholders' behalf and for the insurer's benefit in support of the
obligations owed to the insurer. Any proceeds of the security interest will be
distributed according to the indenture. The insurer will be entitled to the
distributions only after payment of amounts owed to, among others, noteholders.
An automobile loan's principal balance, as of any date, is the sum of:
(a) the amount financed;
minus
(x) that portion of all amounts received on or prior to
that date and allocable to principal according to the
automobile loan's terms;
plus
S-18
<PAGE>
(y) any CRAM DOWN LOSS for the automobile loan;
plus
(b) the accrued and unpaid interest on the automobile loan as of
that date.
THE COMPANY'S AUTOMOBILE FINANCING PROGRAM
Through its branch offices and marketing representatives, the company
provides funding for franchised and independent automobile dealers to finance
their customers' purchase of new and used automobiles, light duty trucks and
vans. The dealers originate automobile loans which conform to the company's
credit policies. The company then purchases the automobile loans without
recourse to the dealers. The company also services the automobile loans that it
purchases.
The company '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 has not established a credit history.
Because the company serves consumers who are unable to meet the credit standards
imposed by most traditional automobile financing sources, it charges a higher
interest at rates than most traditional automobile financing sources. The
servicer also expects to sustain a higher level of delinquencies and credit
losses than that experienced by traditional automobile financing sources since
it provides financing in a relatively high risk market.
The company has established relationships with a variety of dealers
located in areas where it has branch offices or marketing representatives. While
the company occasionally finances purchases of new automobiles, a substantial
majority of the company's automobile loans were for used automobiles.
Of the loans the company purchased during the year ended June 30,
_____:
o manufacturer-franchised dealers with used automobile
operations originated approximately __%, and
o independent dealers specializing in used automobile sales
originated approximately __%.
Of the loans the company purchased in the nine months ended __________:
o manufacturer-franchised dealers with used automobile
operations originated approximately __%, and
o independent dealers specializing in used automobile sales
originated approximately __%.
S-19
<PAGE>
The servicer purchased loans from __________ dealers during the year
ended June 30, _____ and from __________ dealers during the ____ months ended
__________.
To mitigate credit risk, the company typically charges dealers an
acquisition fee when it purchases the loans. Additionally, dealers typically
make representations as to the automobile loan's validity and compliance with
relevant laws, and indemnify the company against any claims, defenses and
set-offs that an obligor may assert against the company because of loan's
assignment.
As of __________, the company operated ________ branch offices in
_______ states.
These branch offices solicit dealers for loans and maintain the
company's relationship with the dealers in the branch office's geographic
vicinity.
The company also has marketing representatives covering markets where
the company does not have a branch. The servicer does business in a total of
_______ states.
See "AmeriCredit's Automobile Financing Program" in the prospectus for
a description of the servicer's contract acquisition, servicing and collection
practices.
THE AUTOMOBILE LOANS
GENERAL
Automobile loans are originated by the company in two ways: purchasing
loans without recourse from automobile dealers or making loans directly to
consumers. In the case of loans purchased from dealers, the original credit
extension is made by the dealer and the loan subsequently assigned to the
company. In the case of loans made directly to consumers, the dealer is not
involved in the original extension of credit. The automobile loans were made to
individuals with less than perfect credit due to factors, including:
o the manner in which these individuals have handled previous
credit;
o the limited extent of their prior credit history; and/or
o their limited financial resources.
ELIGIBILITY CRITERIA
The automobile loans included in the trust property were or will be
selected according to several criteria, including those specified under
"AmeriCredit's Automobile Financing Program -- Contract Acquisition" in the
accompanying prospectus. In addition, as of the initial cut-off date the initial
automobile loans were selected from the company's portfolio of automobile loans
based on the following criteria:
[(a) each initial automobile loan had a remaining maturity of not
more than [72] months];
S-20
<PAGE>
(b) each initial automobile loan had an original maturity of not
more than [72] months;
(c) each initial automobile loan had a remaining principal balance
of at least $________ and not more than $__________;
(d) each initial automobile loan has an annual percentage rate of
at least _______% and not more than -------%;
(e) no initial automobile loan was more than [30] days past due;
and
(f) neither the company, any dealer nor anyone acting in their
behalf advanced funds to cause any initial automobile loan to
qualify under clause (e) above.
During the funding period, the seller must purchase the subsequent
automobile loans from the company and then sell them to the issuer. The company
anticipates that the aggregate principal balance of the subsequent automobile
loans will equal approximately $__________. The seller will sell the subsequent
automobile loans to the issuer on the subsequent transfer date and the issuer
will pay the seller the outstanding principal balance of the subsequent
automobile loans as of their respective subsequent cutoff dates, which is the
price the seller will pay the company. The issuer will use the funds in the
pre-funding account for this purpose.
The issuer's obligation to purchase the subsequent automobile loans is
subject to the following conditions:
(a) as of each loan's subsequent cut-off date, each subsequent
automobile loan and/or subsequent financed vehicle must
satisfy the automobile loan eligibility criteria specified
under "the Automobile Loans" in the prospectus and the
criteria listed in this prospectus supplement in clauses (a)
through (e) regarding the initial automobile loans;
(b) the insurer, if there is no insurer default, has approved the
subsequent automobile loans transfer to the issuer;
(c) neither the company, nor the seller has selected the
subsequent automobile loans in a manner that any of them
believes is adverse to the interests of the insurer or the
noteholders;
(d) the company and the seller will deliver certain opinions of
counsel regarding the validity of the subsequent automobile
loan transfer; and
(e) Standard & Poor's must confirm that the ratings on the notes
have not been withdrawn or reduced because of the subsequent
automobile loans transfer to the issuer.
S-21
<PAGE>
Because the subsequent automobile loans may be originated after the
initial automobile loans, the automobile loan pool's characteristics after the
transfer of subsequent automobile loans to the pool may vary from the initial
pool.
In addition, issuer's obligation to purchase the subsequent automobile
loans is subject to the condition that the automobile loans in the trust,
including the subsequent automobile loans to be transferred, meet the following
criteria:
(a) the automobile loans weighted average annual percentage rate
("APR") trust is not less than __%;
(b) the automobile loan's weighted average remaining term on the
subsequent cutoff date is not greater than [72] months; and
(c) not more than __% of the obligors on the automobile loans
reside in Texas and California.
The criteria in clauses (a) and (b) will be based on the
characteristics of:
o the initial automobile loans on the initial cutoff
date and
o the automobile loans, including the subsequent
automobile loans, on the related subsequent cutoff
date.
The criteria in clause (c) will be based on the obligor's mailing
addresses on:
o the initial automobile loans on the initial cutoff
date; and
o the subsequent automobile loans on the related
subsequent cutoff dates.
Except for the above described criteria, there are no required
characteristics for the subsequent automobile loans. Therefore, following the
transfer of subsequent automobile loans to the issuer, the aggregate
characteristics of the entire pool of automobile loans included in the trust may
vary in the following respects:
o composition of the automobile loans;
o geographic distribution;
o distribution by remaining principal balance;
o distribution by APR;
o distribution by remaining term; and
o distribution of the automobile loans secured by new
and used vehicles.
S-22
<PAGE>
COMPOSITION
The statistical information presented in this prospectus supplement is
based on the initial automobile loans as of the statistical calculation date
which is ____________.
o As of the statistical calculation date, the initial
automobile loans have an aggregate principal balance
of $__________ .
o As of the initial cutoff date, initial automobile
loans have an aggregate principal balance of
$__________ .
The company will acquire additional automobile loans after the
statistical calculation date but prior to the initial cutoff date. In addition
some amortization has occurred prior to the initial cutoff date but after the
statistical calculation date. In addition, some automobile loans included as of
the statistical calculation date have prepaid in full or have been determined
not to meet the eligibility requirements and have not been included in the
automobile loan pool. As a result, the statistical distribution of
characteristics as of the initial cutoff date varies from the statistical
distribution of characteristics as of the statistical calculation date, although
the variance is not material.
The initial automobile loan pool's composition and distribution by APR
and its geographic concentration as of the statistical calculation date is
detailed in the following tables:
S-23
<PAGE>
COMPOSITION OF THE INITIAL AUTOMOBILE LOANS
AS OF THE STATISTICAL CALCULATION DATE
<TABLE>
<CAPTION>
NEW USED TOTAL
--- ---- -----
<S> <C> <C> <C>
Aggregate principal balance
Number of automobile loans
Percent of Aggregate principal
balance
Average principal balance
RANGE OF PRINCIPAL BALANCES
Weighted Average APR
RANGE OF APRS
Weighted Average Remaining Term
RANGE OF REMAINING TERMS
Weighted Average Original Term
RANGE OF ORIGINAL TERMS
</TABLE>
----------
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 INITIAL AUTOMOBILE LOANS BY APR
AS OF THE STATISTICAL CALCULATION DATE
<TABLE>
<CAPTION>
APR RANGE AGGREGATE PRINCIPAL % OF AGGREGATE NUMBER OF % OF TOTAL NUMBER
BALANCE PRINCIPAL AUTOMOBILE LOANS OF AUTOMOBILE
BALANCE LOANS
--------- ------------------- -------------- ---------------- -----------------
<S> <C> <C> <C> <C>
8.000 to 8.999% $ % %
9.000 to 9.999
10.000 to 10.999
11.000 to 11.999
12.000 to 12.999
13.000 to 13.999
14.000 to 14.999
15.000 to 15.999
16.000 to 16.999
17.000 to 17.999
18.000 to 18.999
19.000 to 19.999
20.000 to 20.999
21.000 to 21.999
22.000 to 22.999
23.000 to 23.999
24.000 to 24.999
25.000 to 25.999
26.000 to 26.999
27.000 to 27.999
28.000 to 28.999
29.000 to 29.999
--------------- ------- ----------- --------
TOTAL $ % %
=============== ======= =========== ========
</TABLE>
----------
Aggregate principal balances include some portion of accrued interest.
Percentages may not add to 100% because of rounding.
S-25
<PAGE>
DISTRIBUTION OF THE INITIAL AUTOMOBILE LOANS BY GEOGRAPHIC LOCATION
OF OBLIGOR AS OF THE STATISTICAL CALCULATION DATE
<TABLE>
<CAPTION>
STATE AGGREGATE PRINCIPAL % OF AGGREGATE NUMBER OF AUTOMOBILE % OF TOTAL NUMBER OF
BALANCE PRINCIPAL BALANCE LOANS AUTOMOBILE LOANS
----- ------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Alabama $ % %
Arizona
California
Colorado
Connecticut
Delaware
Florida
Georgia
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
Tennessee
Texas
Utah
Virginia
Washington
West Virginia
Wisconsin
Other(3)
--------------- ------- ------------- -------
TOTAL $ % %
=============== ======= ============= =======
</TABLE>
----------
Aggregate principal balances include some portion of accrued interest.
S-26
<PAGE>
Percentages may not add to 100% because of rounding.
"Other" includes States with Aggregate principal balances less
than $2,000,000.
S-27
<PAGE>
All the automobile loans provide the obligor to pay:
o a specified total amount of payments;
o in substantially equal monthly installments on each due date.
Each obligor's total payment amount equals the amount financed plus
interest for the automobile loan's 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 automobile loan as of its origination date.
Under a simple interest automobile loan, the amount of an obligor's
fixed level installment payment allocated to interest is equal to the product of
the fixed interest rate on the loan, typically the APR, multiplied by the
elapsed time period, expressed as a fraction of a year, since the preceding loan
payment. The obligor's remaining payment amount is allocated to reduce the
principal amount financed.
The issuer will account for all automobile loans, including simple
interest automobile loans and precomputed automobile loans, as if those
automobile loans amortized under the simple interest method. The servicer will
not deposit amounts it receives on a full prepayment of a precomputed automobile
loan in excess of the loan's outstanding principal balance and accrued interest
to the collection account but will retain any excess amounts -- minus amounts
required to be rebated to the obligor -- as supplemental servicing fees.
S-28
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
Obligors may prepay any automobile loan at any time. If an obligor
prepays an automobile loan, the actual weighted average life of the automobile
loans may be shorter than the scheduled weighted average life.
These prepayments include:
o liquidations due to default; and
o proceeds from credit life, credit disability, and casualty
insurance policies.
Weighted average life means the average amount of time during which
each dollar of principal on an automobile loan is outstanding.
The prepayment rate on the automobile loans may be influenced by a
variety of economic, social, and other factors, including the fact that an
obligor may not sell or transfer the financed vehicle without the servicer's
consent. The servicer believes that the actual prepayment rate will result in
the automobile loans having a substantially shorter weighted average life than
their scheduled weighted average life.
The rate of payment of principal of each class of notes will depend on
the rate of payment, including prepayments, of the automobile loan's principal
balance. As a result, final payment of any class could occur significantly
earlier than that class' final scheduled distribution date. Noteholders will
bear any reinvestment risk resulting from the early payment on the notes.
automobile loan prepayments can be measured relative to a prepayment
standard or model. The model used in this prospectus supplement, the absolute
prepayment model "ABS," represents an assumed prepayment rate of each month
relative to the original number of automobile loans in the pool. ABS further
assumes that all the automobile loans are the same size and pay at the same rate
and that each automobile loan in each month of its life will either be paid as
scheduled or be prepaid in full. For example, in a pool of automobile loans
originally containing 10,000 automobile loans, a 1% ABS rate means that 100
automobile loans prepay each month. ABS does not purport to be a historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of automobile loans, including the automobile loans.
The tables captioned "Percent of Initial Note Principal Balance at
Various ABS Percentages" have been prepared on the basis of the following
assumptions:
o the trust includes three pools of automobile loans with the
characteristics described in the following table;
o the automobile loans prepay in full at the specified constant
percentage of ABS monthly, with no defaults, losses or
repurchases;
S-29
<PAGE>
o each scheduled monthly payment on the automobile loans is made
on the last day of each month and each month has 30 days;
o the initial principal amount of each class of notes is
detailed in this prospectus supplement's cover page;
o interest accrues during each interest period at the following
assumed coupon rates: Class A-1 Notes, _____%; Class A-2
Notes, _____%; Class A-3 Notes, _____%; and Class A-4 Notes,
_____%;
o payments on the notes are made on the [5th] day of each month
whether or not a business day;
o the notes are purchased on __________;
o each automobile loan's scheduled monthly payment has been
calculated on the basis of the assumed characteristics in the
following table so that each automobile loan will amortize in
amounts sufficient to repay its principal balance by its
indicated remaining term to maturity;
o the first due date for each automobile loan is the last day of
the month of the assumed cutoff date for the automobile loan
as detailed in the following table;
o the entire pre-funded amount is used to purchase subsequent
automobile loans;
o the servicer does exercise its repurchase option;
o accelerated principal amounts are paid on each distribution
date until the later of the first distribution date on which
the PRO FORMA NOTE BALANCE reaches the REQUIRED PRO FORMA NOTE
BALANCE and the Class A-1 Notes are paid in full; and
o the difference between the gross APR and the net APR is equal
to the base servicing fee, and the net APR is further reduced
by the fees due to the indenture trustee, the trust collateral
agent, the owner trustee and the insurer.
<TABLE>
<CAPTION>
POOL AGGREGATE GROSS APR ASSUMED CUTOFF REMAINING TERM SEASONING (IN
PRINCIPAL DATE TO MONTHS)
BALANCE MATURITY
(IN MONTHS)
---- --------- --------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
1 $ %
2
3
Total $ %
</TABLE>
Based on the assumptions described above, the ABS Tables indicate the
percentages of the initial principal amount of each class of notes that would be
S-30
<PAGE>
outstanding after each of the distribution dates shown at various percentages of
ABS and the corresponding weighted average lives of the notes. The automobile
loans' actual characteristics and performance will differ from the assumptions
used in constructing the ABS Tables. The assumptions used are hypothetical and
have been provided only to give a general sense of how the principal cash flows
might behave under varying prepayment scenarios.
For example it is very unlikely that:
o the automobile loans will prepay at a constant level of ABS
until maturity;
o all of the automobile loans will prepay at the same level of
ABS; or
o the coupon rates on the notes will remain constant.
The diverse terms of automobile loans could produce slower or faster
principal distributions than indicated in the ABS Tables at the various constant
percentages specified, even if the original and remaining terms to maturity of
the automobile loans are as assumed. Any difference between those assumptions
and the actual characteristics and performance of the automobile loans,
including actual prepayment experience or losses, will affect the percentages of
initial balances outstanding over time and the weighted average lives of each
class of notes.
S-31
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPLE BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES
--------------- ---------------
DISTRIBUTION DATE 0.0% 1.0% 1.7% 2.5% 0.0% 1.0% 1.7% 2.5%
----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average
Life in Years
</TABLE>
----------
The percentages in this table have been rounded to nearest whole
number.
The weighted average life of a note is determined by (a) multiplying
the amount of each principal payment on a note by the number of years
from the date of the issuance of the note to the related distribution
date, (b) adding the results and (c) dividing the sum by the related
initial principal amount of the note.
S-32
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPLE BALANCE AT VARIOUS ABS
PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-3 NOTES CLASS A-4 NOTES
--------------- ---------------
DISTRIBUTION DATE 0.0% 1.0% 1.7% 2.5% 0.0% 1.0% 1.7% 2.5%
----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average
Life in Years
</TABLE>
----------
The percentages in this table have been rounded to nearest whole
number.
The weighted average life of a note is determined by (a) multiplying
the amount of each principal payment on a note by the number of years
from the date of the issuance of the note to the related distribution
date, (b) adding the results and (c) dividing the sum by the related
initial principal amount of the note.
S-33
<PAGE>
DELINQUENCY AND LOAN LOSS INFORMATION
The following tables detail information relating to the company's
delinquency and loan loss experience regarding all automobile loans it has
originated and serviced. This information includes the company's experience with
respect to all automobile loans its portfolio, including automobile loans which
do not meet the automobile loan pool selection criteria.
As reflected in the following credit loss experience table, the
company's net charge-off percentages have steadily decreased over time. These
decreases are due to improvements in the company's credit scoring models over
the periods shown in the credit loss experience table and the company's
targeting of higher credit-quality borrowers. Favorable and stable general
economic conditions during the periods shown have also contributed to the
decrease in charge-off percentages.
Delinquency percentages, as reflected in the following delinquency
experience table, are more subject to periodic fluctuation based on, among
other factors, seasonal events such as holiday periods. The company is not
aware of any material trends in its delinquency experience.
Delinquencies, defaults, repossession and losses generally increase
during periods of economic recession. These periods also may be accompanied by
decreased consumer demand for automobiles and declining values of automobiles
securing outstanding loans, which weakens collateral coverage and increases the
amount of a loss in the event of default. Significant increases in the inventory
of used automobiles during periods of economic recession may also depress the
prices at which repossessed automobiles may be sold or delay the timing of these
sales. Because the company focuses on non-prime borrower, the actual rates of
delinquencies, defaults, repossessions and losses on the loans included in the
trust property could be higher than those experienced in the general automobile
finance industry and could be more dramatically affected by a general economic
downturn.
We cannot assure you that the levels of delinquency and loss experience
reflected in the following tables are indicative of the performance of the
automobile loans included in the trust.
DELINQUENCY EXPERIENCE
Repossessed financed vehicles that have not yet been liquidated and
bankrupt accounts which have not yet been charged off are both included as
delinquent accounts in the table below.
<TABLE>
<CAPTION>
AT JUNE 30,
----------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------------- --------------------- --------------------- --------------------- -------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ---------- --------- ---------- ---------- --------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio at end of
period(1) 568,099 $6,649,981 66,262 $4,105,468 213,549 $2,302,516 112,847 $1,138,255 59,913 $523,981
Period of
Delinquency(2)
31-60 days(3) 39,793 $445,797 25,423 $277,592 12,259 $126,012 7,684 $ 73,197 3,843 31,338
61-90 days 9,944 110,521 5,230 53,487 2,545 25,847 1,901 17,451 1,083 8,889
91 days or more 3,878 40,103 2,007 20,026 3,891 33,328 2,316 18,970 1,054 7,318
------- ---------- ------ ---------- ------- ---------- ------- ---------- ------ --------
Total Delinquencies 53,615 $596,421 32,660 $351,105 18,695 $185,187 11,901 $109,618 5,980 $ 47,545
Repossessed Assets 3,723 42,764 3,207 37,773 1,732 18,818 1,491 14,471 840 6,845
------- ---------- ------ ---------- ------- ---------- ------- ---------- ------ --------
Total Delinquencies
and Repossessed
Assets 57,338 639,185 35,867 388,878 20,427 204,005 13,392 124,089 6,820 54,390
======= ========== ====== ========== ======= ========== ======= ========== ====== ========
Total Delinquencies
as a Percentage of
the Portfolio 9.4% 9.0% 8.9% 8.6% 8.8% 8.1% 10.6% 9.6% 10.0% 9.1%
Total Repossessed
Assets as a
Percentage of the
Portfolio 0.7% 0.6% 0.9% 0.9% 0.8% 0.8% 1.3% 1.3% 1.4% 1.3%
------- ---------- ------ ---------- ------- ---------- ------- ---------- ------ --------
Total Delinquencies
and Repossessed
Assets as a
Percentage of the
Portfolio 10.1% 9.6% 9.8% 9.5% 9.6% 8.9% 11.9% 10.9% 11.4% 10.4%
======= ========== ====== ========== ======= ========== ======= ========== ====== ========
</TABLE>
----------
(1) All amounts and percentages are based on the principal balances of the
automobile loans. Principal balances include some portion of accrued
interest. All dollar amounts are in thousands of dollars.
(2) The company considers a loan delinquent when an obligor fails to make a
contractual payment by the due date. The period of delinquency is based on
the number of days payments are contractually past due.
(3) Amounts shown do not include loans which are less than [31] days
delinquent.
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<PAGE>
CREDIT LOSS EXPERIENCE
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
JUNE 30,
---------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Period-End Principal Outstanding $6,649,981 $4,105,468 $2,302,516 $1,138,255 $523,981
Average Month-End Amount
Outstanding During the Period 5,334,580 3,129,463 1,649,416 792,155 357,966
Net Charge-Offs 214,276 147,344 88,002 43,231 19,974
Net Charge-Offs as a Percentage of
Period-End Principal Outstanding 3.2% 3.6% 3.8% 3.8% 3.8%
Net Charge-Offs as a Percent of
Average Month-End Amount Outstanding 4.0% 4.7% 5.3% 5.5% 5.6%
</TABLE>
----------
(1) All amounts and percentages are based on the automobile loans'
principal balances. Principal balances include some portion of accrued
interest. All dollar amounts are in thousands of dollars.
(2) Net Charge-Offs equal Gross Charge-Offs minus Recoveries. Gross
Charge-Offs do not include unearned finance charges and other fees.
Recoveries include repossession proceeds received from the sale of
repossessed financed vehicles net of repossession expenses, refunds of
unearned premiums from credit life and credit accident and health
insurance and extended service contract costs obtained and financed in
connection with the vehicle financing and recoveries from obligors on
deficiency balances.
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<PAGE>
THE INSURER
The following information has been obtained from Financial Security
Assurance Inc. (hereinafter in this section, "Financial Security") and has not
been verified by the seller or the underwriters.
GENERAL
Financial Security is a monoline insurance company incorporated in 1984
under the laws of the State of New York. Financial Security is licensed to
engage in the financial guaranty insurance business in all 50 states, the
District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments of an
issuer's securities --thereby enhancing the credit rating of those securities --
in consideration for the payment of a premium to the insurer. Financial Security
and its subsidiaries principally insure asset-backed, collateralized and
municipal securities. Asset-backed securities are generally supported by
residential mortgage loans, consumer or trade receivables, securities or other
assets having an ascertainable cash flow or market value. Collateralized
securities include public utility first mortgage bonds and sale/leaseback
obligation bonds. Municipal securities consist largely of general obligation
bonds, special revenue bonds and other special obligations of state and local
governments. Financial Security insures both newly issued securities sold in the
primary market and outstanding securities sold in the secondary market that
satisfy Financial Security's underwriting criteria.
Financial Security is a wholly-owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprises Holdings, Inc.,
MediaOne Capital Corporation, The Tokio Marine and Fire insurance Co., Ltd. and
XL Capital Ltd. No shareholder of Holdings is obligated to pay any debt of
Financial Security or any claim under any insurance policy issued by Financial
Security or to make any additional contribution to the capital of Financial
Security.
The principal executive offices of Financial Security are located at
350 Park Avenue, New York, New York 10022, and its telephone number at that
location is (212) 826-0100.
REINSURANCE
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written or reinsured from third parties by Financial Security
or any of its domestic or Bermuda operating insurance company subsidiaries are
generally reinsured among such
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<PAGE>
companies on an agreed-upon percentage substantially proportional to their
respective capital, surplus and reserves, subject to applicable statutory risk
limitations. In addition, Financial Security reinsures a portion of its
liabilities under certain of its financial guaranty insurance policies with
other reinsurers under various quota share treaties and on a
transaction-by-transaction basis. Such reinsurance is utilized by Financial
Security as a risk management device and to comply with certain statutory and
rating agency requirements; it does not alter or limit Financial Security's
obligations under any financial guaranty insurance policy.
RATING OF CLAIMS-PAYING ABILITY
Financial Security's insurance financial strength is rated "Aaa" by
Moody's Investors Service, Inc. Financial Security's insurer financial strength
is rated "AAA" by Standard & Poor's Ratings Services and Standard & Poor's
(Australia) Pty. Ltd. Financial Security's claims-paying ability is rated "AAA"
by Fitch IBCA, Inc. and Japan Rating and Investment Information, Inc. Such
ratings reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies. See "Risk Factors -- Ratings on
Notes" herein.
CAPITALIZATION
The following table sets forth the capitalization of Financial Security
and its wholly-owned subsidiaries on the basis of generally accepted accounting
principles as of _____________:
<TABLE>
<CAPTION>
(Unaudited)
(in thousands)
<S> <C>
Deferred Premium Revenue (net of prepaid reinsurance premiums)................... $
Surplus Notes....................................................................
Minority Interest................................................................
Shareholder's Equity:
Common Stock..................................................................
Additional Paid-In Capital....................................................
Accumulated Other Comprehensive Income (net of deferred income taxes).........
Accumulated Earnings..........................................................
Total Shareholder's Equity....................................................
Total Deferred Premium Revenue, Surplus Notes, Minority Interest and
Shareholder's Equity.......................................................... $
</TABLE>
For further information concerning Financial Security, see the
Consolidated Financial Statements of Financial Security and Subsidiaries, and
the notes thereto, incorporated by reference herein. Financial Security's
financial statements are included as
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<PAGE>
exhibits to the Annual Report on Form 10-K and Quarterly Reports on Form 10-Q
filed with the Commission by Holdings and may be reviewed at the EDGAR website
maintained by the Commission and at Holdings' website, http://www.FSA.com.
Copies of the statutory quarterly and annual statements filed with the State of
New York insurance Department by Financial Security are available upon request
to the State of New York insurance Department.
INSURANCE REGULATION
Financial Security is licensed and subject to regulation as a financial
guaranty insurance corporation under the laws of the State of New York, its
state of domicile. In addition, Financial Security and its insurance
subsidiaries are subject to regulation by insurance laws of the various other
jurisdictions in which they are licensed to do business. As a financial guaranty
insurance corporation licensed to do business in the State of New York,
Financial Security is subject to Article 69 of the New York insurance Law which,
among other things, limits the business of each such insurer to financial
guaranty insurance and related lines, requires that each such insurer maintain a
minimum surplus to policyholders, establishes contingency, loss and unearned
premium reserve requirements for each such insurer, and limits the size of
individual transactions ("single risks") and the volume of transactions
("aggregate risks") that may be underwritten by each such insurer. Other
provisions of the New York insurance Law, applicable to non-life insurance
companies such as Financial Security, regulate, among other things, permitted
investments, payment of dividends, transactions with affiliates, mergers,
consolidations, acquisitions or sales of assets and incurrence of liabilities
for borrowings.
DESCRIPTION OF THE NOTES
GENERAL
The issuer will issue the notes under an indenture, a form of which has
been filed as an exhibit to the registration statement. The following statements
(together with the additional statements under "Description of the Purchase
Agreements and the Trust Documents" below and under "Description of the
Securities" and "Description of the Trust Documents" in the prospectus)
summarize material terms and 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 described
in the accompanying prospectus.
The issuer will offer the notes in denominations of $1,000 and integral
multiples of $1,000 in book-entry form only. The notes will not be listed on any
securities exchange or quoted in the automated quotation system of a registered
securities association. Persons acquiring beneficial interests in the notes will
hold their interests through The Depository Trust Company in the United States
or Cedelbank, societe anonyme or in the Euroclear System in Europe. See
"Description of the Notes -- Book-Entry Registration" in the prospectus and
Annex I to this prospectus supplement, which Annex is an integral part of this
prospectus supplement.
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<PAGE>
DISTRIBUTION DATES
While AmeriCredit is the servicer, the notes will pay interest and
principal on the fifth day of each month -- or, if the fifth day is not a
business day, on the next following business day. However, any distribution date
will not be earlier than the third business day of the month. The first
distribution date will be ___________________. Holders of record as of the close
of business on the business day immediately preceding a distribution date,
commonly known as a record date, will receive payments on that distribution
date. A business day is a day other than a Saturday, Sunday or other day on
which commercial banks located in the States of Texas, Delaware, Ohio or New
York are authorized or obligated to be closed.
The insured distribution date will be the [twelfth] day of each month,
or, if the [twelfth] day is not a business day, the next following business day.
If the backup servicer or another successor servicer becomes the
servicer, the distribution date will become the twelfth day of each month, or if
the twelfth day is not a business day, the next following business day.
The final scheduled distribution dates are as follows:
o for the Class A-1 Notes, the __________ insured distribution
date;
o for the Class A-2 Notes, the __________ insured distribution
date;
o for the Class A-3 Notes, the __________ insured distribution
date; and
o for the Class A-4 Notes, the __________ insured distribution
date.
PAYMENTS OF INTEREST
Interest on each class of notes will accrue during each interest period
at the applicable interest rate from and including the most recent distribution
date that interest was paid -- or, in the case of the first distribution date,
from and including the closing date, but excluding, the following distribution
date. In the case of the first distribution date, the interest period shall be
___ days. The interest accruing during an interest period will accrue on each
class's outstanding principal amount as of the end of the prior distribution
date -- or, in the case of the first distribution date, as of the closing date.
However, if the principal balance is further reduced by a principal
payment on the insured distribution date which immediately follows the prior
distribution date, then interest shall accrue:
o from and including the prior distribution date to, but
excluding, the related insured distribution date, on the
principal balance outstanding as of the end of the prior
distribution date (or, in the case of the first distribution
date, as of the closing date); and
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<PAGE>
o from and including the insured distribution date, to, but
excluding, the following distribution date, on the principal
balance outstanding as of the end of the insured distribution
date.
For any distribution date interest due but not paid on the distribution
date will be due on the next insured distribution date together with, to the
extent permitted by law, interest on the amount at the applicable interest rate.
The amount of interest distributable on the notes on each distribution date will
equal interest accrued during the related interest period, plus any shortfall
amount carried forward. Interest on the Class A-1 Notes and the Class A-2 Notes
will be calculated on the basis of a 360-day year and the actual number of days
elapsed in the applicable interest period. Interest on the Class A-3 Notes and
the Class A-4 Notes will be calculated on the basis of a 360-day year consisting
of twelve 30-day months.
The servicer will pay interest on the notes from the note distribution
amount after paying accrued and unpaid trustees' fees, the issuers' other
administrative fees and the servicing fees. See "Description of the Purchase
Agreements and the Trust Documents -- Distributions" in this prospectus
supplement.
PAYMENTS OF PRINCIPAL
Principal payments equaling the sum of the NOTEHOLDERS' PRINCIPAL
DISTRIBUTABLE AMOUNT plus the NOTEHOLDERS' ACCELERATED PRINCIPAL AMOUNT, if any,
for the distribution date will be due on each distribution date. In addition,
principal payments will be due and payable on the distribution date only to the
extent of funds available for that purpose on the distribution date. The
NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT will equal the sum of:
(a) the NOTEHOLDERS' PERCENTAGE of the PRINCIPAL DISTRIBUTABLE
AMOUNT; and
(b) any unpaid portion of the Noteholder's Percentage of the
PRINCIPAL DISTRIBUTABLE AMOUNT for a prior distribution date.
The NOTEHOLDERS' PERCENTAGE will be 100% until the notes have been paid
in full, and then will be zero.
For any calendar month, a liquidated automobile loan is an automobile
loan which, as of the last day of the calendar month:
o [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;
o the servicer has determined in good faith that it has received
all amounts it expects to recover;
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<PAGE>
o [5%] or more of a scheduled payment became [120] or more days
delinquent, except in the case of repossessed financed
vehicles.
For any automobile loan, the purchase amount is its principal balance
as of the purchase date.
Amounts available from the spread account and under the insurance
policy are available to pay the note principal only in two circumstances:
o to reduce, after taking into account all reductions funded
from other sources, the aggregate principal balance of the
notes to the collateral balance - i.e., the sum of the pool
balance plus the pre-funded amount - in the event that the
note principal balance would otherwise exceed the collateral
balance; and
o to pay off each class's principal on its final scheduled
distribution date, to the extent that the class is not paid
off on or prior to the final scheduled distribution date from
other sources.
The NOTEHOLDERS' PERCENTAGE will be 100% until the Class A-4 Notes have
been paid in full and then will be zero. Principal payments on the notes will be
applied on each distribution date sequentially, to the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes, in that order,
until the respective principal amount of each class has been paid in full so
that no principal will be paid on a class number until the principal of all
classes having a lower number has been paid in full. In addition, the
outstanding principal amount of any class, to the extent not previously paid,
will be payable on the respective final scheduled distribution date for the
class -- and, if not paid in full on that date, will be paid on the insured
distribution date immediately following the final scheduled distribution date.
The actual date on which the aggregate outstanding principal amount of any class
is paid may be earlier than the final scheduled distribution date for that
class.
In the event of the non-payment of principal or of interest the
noteholders will be able to sue directly to enforce their notes.
MANDATORY REDEMPTION
If any portion of the pre-funded amount remains on deposit in the
pre-funding account at the end of the funding period, each class of notes will
be redeemed in part on the mandatory redemption date. Each class' note
prepayment amount of the remaining pre-funded amount on that date will be an
amount equal to that class' pro rata share, based on the respective current
principal amount of each class of notes. However, if the aggregate remaining
amount in the pre-funding account is $100,000 or less, that amount will be
applied exclusively to reduce the outstanding principal balance of the class of
notes then entitled to receive principal distributions.
OPTIONAL REDEMPTION
The Class A-4 Notes, to the extent still outstanding, may be redeemed
in whole, but not in part, on any distribution date when the pool balance has
declined to 10% or less
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<PAGE>
of the original pool balance, as described in the accompanying prospectus under
"Description of the Trust Agreements -- Termination." This redemption will cause
the early retirement of that class. The redemption price will equal the unpaid
principal amount of the Class A-4 Notes, plus accrued and unpaid interest.
EVENTS OF DEFAULT
Unless an insurer default shall have occurred and be continuing, events
of default under the indenture will consist of those events listed below as
insurance Agreement Indenture Cross Defaults. In addition, they will constitute
an event of default under the indenture only if the insurer delivers to the
indenture trustee and does not rescind a written notice specifying that any
insurance Agreement Indenture Cross Default constitutes an event of default
under the indenture.
insurance Agreement Indenture Cross DefaultS consist of:
o a demand for payment under the policy;
o events of bankruptcy, insolvency, receivership or liquidation
of the issuer;
o the issuer becoming taxable as an association (or publicly
traded partnership) taxable as a corporation for federal or
state income tax purposes;
o on any insured distribution date, after taking into account
the application of the sum of AVAILABLE FUNDS for the related
calendar month plus the Deficiency Claim Amount for the
related distribution date, any amounts listed in clauses 1, 2,
3 and 5 under "Description of the Purchase Agreements and the
Trust Documents -- Distributions" in this prospectus
supplement has not been paid in full; and
o any failure to observe or perform in any material respect any
other covenants or agreements in the indenture, or any
representation or warranty of the issuer made in the indenture
or in any certificate or other writing delivered under or in
connection with the indenture proving to have been incorrect
in any material respect when made, and the failure continuing
or not being cured, or the circumstance or condition for which
the representation or warranty was incorrect not having been
eliminated or otherwise cured, for [30] days after the giving
of written notice of the failure or incorrect representation
or warranty to the issuer and the indenture trustee by the
insurer.
For any determination date the deficiency claim amount is the amount
that, after taking into account the application on the distribution date of
AVAILABLE FUNDS for the related calendar month, an amount, without duplication,
equal to the sum of:
(a) any shortfall in the full payment of amounts described in
clauses 1, 2, 3 and 5 under "Description of the Purchase
Agreements and the Trust Documents -- Distributions";
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<PAGE>
(b) the NOTEHOLDERS' PARITY DEFICIT AMOUNT, if any, for the
distribution date; and
(c) if the related distribution date is the final scheduled
distribution date for any class, any remaining outstanding
principal balance of that class, to the extent that the amount
is available on the related insured distribution date
according to the spread account's terms.
Upon an event of default occurring, so long as an insurer default has
not occurred and continued, the insurer will have the right, but not the
obligation, to cause the trust collateral agent to liquidate the trust property
in whole or in part, on any date or dates following the event of default as the
insurer, in its sole discretion elects. The insurer also has the right to cause
the trust collateral agent to deliver the proceeds to the indenture trustee for
distribution to noteholders. The insurer may not, however, cause the trust
collateral agent to liquidate the trust property in whole or in part if the
liquidation proceeds would be insufficient to pay all outstanding principal of
and accrued interest on the notes, unless the event of default arose from a
claim on the policy or from the issuer's bankruptcy, insolvency, receivership or
liquidation. Following any event of default, the trust collateral agent will
continue to submit claims under the policy for any shortfalls in scheduled
payments. Following any event of default under the indenture, the insurer may
elect to pay all or any portion of the outstanding amount of the notes, plus
accrued interest on the notes. See "The Policy" in this prospectus supplement.
DESCRIPTION OF THE PURCHASE AGREEMENTS
AND THE TRUST DOCUMENTS
The following statements (together with the additional statements under
"Description of the Notes" above and under "Description of the Securities" and
"Description of the Trust Agreements" in the prospectus) summarize the material
terms and provisions of the purchase agreements, which includes the purchase
agreement and any subsequent purchase agreement, and the trust documents, which
include the sale and servicing agreement, any subsequent transfer agreement and
the trust agreement. The issuer has filed forms of the purchase agreements and
the trust documents as exhibits to the registration statement. These summaries
do not claim to be complete and are 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, (as
the term is used in the prospectus), contained in the prospectus.
SALE AND ASSIGNMENT OF AUTOMOBILE LOANS
On or prior to the closing date, or, with respect to subsequent
automobile loans, the related subsequent transfer date, the company will enter
into a purchase agreement with the seller under which the company will sell and
assign to the seller, without recourse, its entire interest in and to the
related automobile loans. Under the purchase agreement, the company will also
sell and assign, without recourse, its security interest in the financed
vehicles securing the automobile loans and their rights to receive all payments
on, or proceeds from the automobile loans to the extent paid or payable after
the applicable cutoff date. Under the purchase agreement, the company will agree
that, upon a breach of any representation or
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warranty under the trust documents which triggers the seller's repurchase
obligation, the owner trustee will be entitled to require the company to
repurchase the 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 and the insurer. In addition, the owner
trustee will pledge the rights to the indenture trustee as collateral for the
notes and the indenture trustee may directly enforce those rights.
On the closing date, or, for subsequent automobile loans, the
subsequent transfer date, the seller will sell and assign to the owner trustee,
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 trust documents.
ACCOUNTS
The company will instruct each obligor to make payments on the
automobile loans after the applicable cutoff date directly to one or more post
office boxes or other mailing locations maintained by the lockbox bank. The
servicer will establish and maintain a lockbox accounT that is a segregated
account with a bank or banks acceptable to the insurer, in the indenture
trustee's name for the noteholders' benefit, into which the servicer must
deposit all obligor payments within one business day of receipt. The issuer will
establish and maintain with the indenture trustee, in the indenture trustee's
name, on both the noteholders' and insurer's behalf one or more collection
accounts, into which all amounts previously deposited in the lockbox account
will be transferred within three business days of deposit. The collection
account will be maintained with the indenture trustee so long as the indenture
trustee's deposits have a rating acceptable to the insurer and the rating
agencies. If the deposits of the indenture trustee or its corporate parent no
longer have an acceptable rating, the servicer shall, with the indenture
trustee's assistance if necessary, move the accounts within [30] days to a bank
whose deposits have the proper rating.
The servicer will establish and maintain a distribution account in
which amounts released from the collection account for distribution to
noteholders will be deposited and from which all distributions to noteholders
will be made, in the name of the trust collateral agent, for the indenture
trustee's benefit, on the noteholder's and insurer's behalf.
On the closing date, the issuer will deposit the initial pre-funded
amount equaling $__________ in the pre-funding account, which will be
established with the trust collateral agent. The funding period encompasses the
period from the closing date until the earliest of the date on which:
o the amount on deposit in the pre-funding account is less than
$__________;
o a servicer termination event occurs under the sale and
servicing agreement; or
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o __________.
The initial pre-funded amount, as reduced during the funding period
from the purchase of subsequent automobile loans, is the pre-funded amount. The
seller expects that the pre-funded amount will be reduced to less than
$__________ on or before the end of the funding period. The issuer will pay the
noteholders any pre-funded amount remaining at the end of the funding period as
a mandatory redemption. The mandatory redemption datE is the earlier of:
o the distribution date in __________;or
o the distribution date which relates to the calculation date
occurring in _______ or _______ __ if the last day of the
funding period occurs on or prior to that calculation date.
On the closing date, the issuer will deposit funds in the capitalized
interest account which will be established with the trust collateral agent. The
amount, if any, deposited in the capitalized interest account will be applied on
the distribution dates occurring in _____, _____ and _____,_____ to fund the
monthly capitalized interest amount which will equal the interest accrued for
each distribution date at the weighted average interest rates on the portion of
the notes having a principal balance in excess of the principal balances of the
automobile loans, which portion will equal the pre-funded amount. Any amounts
remaining in the capitalized interest account on the mandatory redemption date
and not used for these purposes will be paid directly to the seller on that
date. See "Description of the Purchase Agreements and the Trust Documents
--Accounts."
As described in the prospectus, all accounts will be eligible deposit
accounts, acceptable to the insurer, so long as no insurer default has occurred
and is continuing.
SERVICING COMPENSATION AND TRUSTEES' FEES
The servicer will receive a basic servicing fee on each distribution
date, which equals the product of __________ times _____% of the aggregate
principal balance of the 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, late fees and other charges, and principal and interest in
accordance with the servicer's normal practices and procedures.
The basic servicing fee will compensate the servicer for performing the
functions of a third-party servicer of automotive loans as an agent for their
beneficial owner.
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These servicer functions include:
o collecting and posting all payments, responding to obligor
inquiries on the automobile loans;
o investigating delinquencies;
o reporting tax information to obligors;
o paying the disposition costs of defaulted accounts;
o policing the collateral;
o accounting for collections;
o furnishing monthly and annual statements to the issuer and the
insurer with respect to distributions; and
o generating federal income tax information.
The basic servicing fee also will reimburse the servicer for:
o taxes;
o accounting fees;
o outside auditor fees;
o data processing costs; and
o 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, the owner trustee and the insurer
specifying, among other things:
o the amount of aggregate collections on the automobile loans;
and
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o the aggregate purchase amount of automobile loans to be
purchased by the seller and the company, in the preceding
calendar month.
Based solely on the information contained in the servicer's
certificate, on each determination date the indenture trustee will deliver to
the trust collateral agent, the insurer and the servicer a deficiency notice
specifying the deficiency claim amount, if any, for the distribution date. The
deficiency notice will direct the trust collateral agent to remit the deficiency
claim amount to the collection account from amounts on deposit in collateral
accounts maintained for the insurer's benefit.
For any insured distribution date, the deficiency notice will consist
of a written notice delivered by the indenture trustee to the insurer, the
servicer and any other person required under the insurance agreement, specifying
the deficiency claim amount for the insured distribution date.
The determination date for any calendar month, is the earlier of:
o the fourth business day preceding the related insured
distribution date in the next calendar month; and
o the [5th] day of the next calendar month, or if the [5th] day
is not a business day, the next succeeding business day.
DISTRIBUTIONS
DISTRIBUTION DATE CALCULATIONS AND PAYMENTS.
On or prior to each distribution date, the servicer will instruct the
indenture trustee to make the following distributions from AVAILABLE FUNDS in
the following order of priority:
1. To the servicer, the servicing fee for the related calendar
month, any supplemental servicing fees for the month and, to
the extent the servicer has not reimbursed itself or to the
extent not retained by the servicer, other amounts relating to
mistaken deposits, postings or checks returned for
insufficient funds;
2. to the indenture trustee and the owner trustee, any accrued
and unpaid trustees' fees and any accrued and unpaid trust
collateral agent's fees, each to the extent the servicer has
not previously paid the fees;
3. to the note distribution account, the NOTEHOLDERS' INTEREST
DISTRIBUTABLE AMOUNT;
4. to the note distribution account, the NOTEHOLDERS' PRINCIPAL
DISTRIBUTABLE AMOUNT, to be distributed as described under
"Description of the Notes -- Payments of Principal;"
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5. to the insurer, any unpaid amounts owed to the insurer under
the insurance agreement;
6. to the spread account, less certain investment earnings, any
amount required to increase the amount in the spread account
to its required level;
7. to the note distribution account, less certain investment
earnings, and together with amounts, if any, available
according to the spread account's terms, the NOTEHOLDERS'
ACCELERATED PRINCIPAL AMOUNT; and
8. to the spread account, or as otherwise specified in the trust
documents, any remaining funds.
After considering all distributions made on the insured distribution
date and the related distribution date, amounts in the spread account on any
insured distribution date exceeding the Specified Spread Account Requirement for
the distribution date, may be released to the certificateholder without the
noteholders' consent.
If the notes are accelerated following an event of default under the
indenture, amounts collected will be distributed in the order described above.
INSURED DISTRIBUTION DATE CALCULATIONS AND PAYMENTS
In the event that any servicer's certificate delivered by the servicer
indicates that AVAILABLE FUNDS for a distribution date are insufficient to fully
fund scheduled payments plus the amounts described in clauses 1 and 5 above, the
indenture trustee shall request the deficiency claim amount for the spread
account.
Further, in the event that any servicer's certificate delivered by the
servicer indicates that the sum of:
o AVAILABLE FUNDS with respect to a distribution date; plus
o any related deficiency claim amount
is insufficient to fully fund scheduled payments plus the amount described in
clauses 1 and 2 above, the indenture trustee shall furnish to the insurer no
later than 12:00 noon New York City time on the related Draw Date a completed
notice of claim for the policy claim amount. The insurer will deposit the
amounts it will pay under the notice into the note distribution account for
payment to noteholders on the related insured distribution date.
STATEMENTS TO NOTEHOLDERS
On or prior to each insured distribution date, the indenture trustee
will forward a statement to the noteholders detailing information required under
the trust documents. These statements will be based on the information in the
related servicer's certificate.
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Each statement that the indenture trustee delivers to the noteholders will
include the following information regarding the notes on the related
distribution date and the related insured distribution date, as applicable:
(a) the amount of the distribution(s) allocable to interest;
(b) the amount of the distribution(s) allocable to principal;
(c) the amount of the distribution, if any, payable under the
policy claim;
(d) each class of notes' aggregate outstanding principal amount,
after considering all payments reported under (b) above on
that date;
(e) the Noteholders' Interest Carryover Shortfall and the
Noteholders' Principal Carryover Shortfall, if any, and the
change in those amounts from the preceding statement;
(f) the servicing fee paid for the related calendar month; and
(g) during the funding period, the remaining pre-funded amount,
the amount in the pre-funding account and the amount remaining
in the Capitalized interest account.
Each amount described in subclauses (a) through (f) for the notes will
be expressed as a dollar amount per $1,000 of the notes' initial principal
amount.
Unless and until Definitive Notes are issued, the indenture trustee
will send these reports to Cede & Co., as registered holder of the notes and the
nominee of DTC on the trust's behalf. See "Reports to Securityholders" and
"Description of the Securities" in the prospectus.
After the end of each calendar year, within the required time period,
the indenture trustee will furnish to each person who at any time during the
calendar year was a noteholder:
o a statement as to the aggregate amounts of interest and
principal paid to the noteholder;
o information regarding the amount of servicing compensation the
servicer received; and
o other information as the seller deems necessary to enable the
noteholder to prepare its tax returns.
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CREDIT SUPPORT
The ACCELERATED PRINCIPAL AMOUNT and the spread account result in
credit support. The insurer will require the issuer to increase and maintain
credit support at a level it establishes. This level changes over time, and may
take two forms:
o the spread account, which is a funded cash reserve account;
and
o overcollateralization.
The insurer may permit the required credit support level to reduce, or
"step down," over time.
SPREAD ACCOUNT
On the closing date, the issuer may fund the spread account with an
initial cash deposit. On each subsequent distribution date, the trust collateral
agent will deposit additional amounts into the spread account from the
automobile loan payments as described under "--Distributions" above to the
extent that the funds in the spread account are below the required level.
Amounts, if any, on deposit in the spread account on an insured distribution
date will be available to fund any Deficiency Claim Amount, to the extent
provided in the spread account agreement. Amounts on deposit in the spread
account on any insured distribution date, after giving effect to all
distributions made on the insured distribution date, in excess of the Specified
Spread Account Requirement for the insured distribution date will be released to
the seller without the noteholder's consent.
In addition, the seller, the insurer and the trust collateral agent may
amend the spread account agreement - and any provisions in the insurance
agreement relating to the spread account - in any respect, including, without
limitation:
o reducing or eliminating the Specified Spread Account
Requirement;
o reducing or eliminating the spread account funding
requirements; and/or
o permitting those funds to be used for the benefit of persons
other than noteholders without the consent of, or notice to,
the trustee, the owner trustee or the noteholders.
The trust collateral agent shall not withhold or delay its consent to
any amendment not adversely affecting the trust collateral agent in its
individual capacity. Notwithstanding any reduction in or elimination of the
spread account funding requirements or the spread account's depletion, on each
insured distribution date the insurer must fund the full amount of each
scheduled payment required to be paid and which would not be paid in the absence
of a policy payment. If the insurer breaches its obligations, the noteholders
will bear any losses on the automobile loans.
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OVERCOLLATERALIZATION
Overcollateralization is created by applying excess interest to the
payment of principal on the notes and is paid in the form of the NOTEHOLDERS'
ACCELERATED PRINCIPAL AMOUNT. The excess interest is interest which is collected
on the automobile loans in excess of the amount of interest that is paid on the
notes, used to pay fees, or, under certain circumstances, deposited to the
spread account. Applying excess interest causes the outstanding principal
balance to pay down more quickly than the pool balance.
If the insurer permits the required overcollateralization level to step
down, principal collections which would otherwise be paid through to the
noteholders as part of the PRINCIPAL DISTRIBUTABLE AMOUNT may be released to the
seller instead.
SERVICER TERMINATION EVENT
A servicer termination event under the sale and servicing agreement
will consist of the occurrence and continuance of any of the following:
o the servicer's failure to deliver any required payment to the
trust collateral agent for distribution to the noteholders,
which failure continues unremedied for two business days, or
any failure to deliver the servicer's certificate by the
fourth business day prior to the insured distribution date;
o the servicer's failure to observe or perform in any material
respect any other covenant or agreement under the sale and
servicing agreement or the purchase agreement (if the company
is the servicer) which failure continues unremedied for [60]
days after the issuer, the trust collateral agent or the
issuer gives the servicer written notice of such failure, or
if an insurer default has occurred and is continuing, [60]
days after any noteholder gives the servicer written notice;
o events of insolvency, readjustment of debt, marshalling of
assets and liabilities, or similar proceedings regarding the
servicer or, so long as the company is servicer, of any of its
affiliates, and actions by the servicer, or, as long as the
company is servicer, actions by its affiliates, indicating its
or their insolvency, reorganization under bankruptcy
proceedings, or inability to pay its obligations;
o any servicer representation, warranty or statement that is
proved incorrect in any material respect and which has a
material adverse effect on the insurer's interests, and the
circumstances or conditions for which the representation,
warranty or statement was incorrect shall not have been
eliminated or cured;
o so long as a insurer default shall not have occurred and be
continuing, the insurer has not have delivered an extension
notice;
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o so long as a insurer default shall not have occurred and be
continuing, an insurance Agreement event of default or an
event of default under any other insurance and indemnity
agreement relating to any series of securities shall have
occurred; or
o a claim is made under the policy.
An insurer default includes the occurrence and continuance of any of
the following events:
(a) the insurer's failure to make a required policy payment;
(b) the insurer's:
o filing or commencing of a petition or any case or
proceeding under any provision or chapter of the
United States Bankruptcy Code or any other similar
federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or
reorganization;
o general assignment for the benefit of its creditors;
or
o having an order for relief entered against it under
the United States Bankruptcy Code or any other
similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or
reorganization which is final and nonappealable; or
(c) the entering of a final and nonappealable order, judgment or
decree by a court of competent jurisdiction, the New York
Department of insurance or other competent regulatory
authority:
o appointing a custodian, trustee, agent or receiver
for the insurer or for all or any material portion of
its property; or
o authorizing a custodian, trustee, agent or receiver
to take possession of the insurer or to take
possession of all or any material portion of the
property of the insurer.
RIGHTS UPON SERVICER TERMINATION EVENT
As long as a servicer termination event remains unremedied:
o provided no insurer default has occurred and is continuing,
the insurer in its sole and absolute discretion may terminate
all of the servicer's rights and obligations under the sale
and servicing agreement; or
o if an insurer default has occurred and is continuing, then the
trust collateral agent or a note majority, the backup
servicer, or any other successor servicer
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that the insurer appoints (so long as no insurer default has
occurred and is continuing), will succeed to all the
responsibilities, duties, and liabilities of the servicer.
If the terminated servicer is not the company, the insurer will appoint
a successor servicer or, if a insurer default has occurred and is continuing,
the trust collateral agent will appoint a successor servicer.
Any successor servicer will succeed to all the responsibilities,
duties, and liabilities of the servicer under the sale and servicing agreement
and will be entitled to similar compensation arrangements. There is no assurance
that the succession of a successor servicer will not result in a material
disruption in the performance of the servicer's duties.
WAIVER OF PAST DEFAULTS
Notwithstanding anything to the contrary described under "Description
of the Trust Agreements -- Waiver of Past Defaults" in the prospectus, the
insurer may, on behalf of all noteholders, waive any default by the servicer
under the sale and servicing agreement and its consequences. No waiver will
impair the noteholders' rights with respect to subsequent defaults.
AMENDMENT
Notwithstanding anything to the contrary described under "Description
of the Trust Agreements --Amendment" in the prospectus, the seller, the servicer
and the owner trustee with the consent of the indenture trustee - which consent
may not be unreasonably withheld - and with the insurer's consent, so long as no
insurer default has occurred and is continuing, but without the consent of the
noteholders, may amend the sale and servicing agreement. The agreement may be
amended in this manner to cure any ambiguity, or to correct or supplement any
provision in the agreement which may be inconsistent with any other provision.
However, the amendment shall not in any material respect adversely affect the
interests of any noteholder. In addition, if an insurer default has occurred and
is continuing, the amendment shall not materially adversely affect insurer's
interests. The seller, the servicer and the owner trustee may also amend the
sale and servicing agreement with the insurer's, indenture trustee's and the
holders of a majority of the principal amount of the notes' outstanding consent
to add, change or eliminate any other provisions with respect to matters or
questions arising under the agreement or affecting the rights of the
noteholders; PROVIDED that the action will not:
o 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
o reduce the percentage of the noteholders required to consent
to any amendment, without, in either case, the consent of the
holders of all notes
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outstanding. However, if an insurer default has occurred and
is continuing, the amendment shall not materially adversely
affect the interest of the insurer.
The seller and servicer must deliver to the owner trustee, the
indenture trustee and the insurer upon the execution and delivery of the sale
and servicing agreement and any amendment to the sale and servicing agreement an
opinion of counsel, satisfactory to the indenture trustee, that all financing
statements and continuation statements have been filed.
THE POLICY
The following statements summarize the material terms of the Policy.
This summary does not purport to be complete and is qualified in its entirety by
reference to the Policy.
Simultaneously with the issuance of the notes, the insurer will deliver
the Policy to the Trust Collateral Agent as agent for the indenture trustee for
the benefit of each noteholder. Under the Policy, the insurer will
unconditionally and irrevocably guarantee to the Trust Collateral Agent, on each
insured Distribution Date, for the benefit of each noteholder the full and
complete payment of: (i) Scheduled Payments (as defined below) on the notes; and
(ii) the amount of any Scheduled Payment which subsequently is avoided in whole
or in part as a preference payment under applicable law. In the event the Trust
Collateral Agent fails to make a claim under the Policy, noteholders do not have
the right to make a claim directly under the Policy, but may sue to compel the
Trust Collateral Agent to do so.
The "Insured Distribution Date" will be the twelfth day of each month,
or, if such twelfth day is not a Business Day, the next following Business Day.
In the event that, on any Distribution Date, the noteholders did not receive the
full amount of the Scheduled Payment then due to them, such shortfall (together
with, in the case of an interest shortfall, interest thereon at the related
interest rate) shall be due and payable and shall be funded on the insured
Distribution Date either from the Spread Account or from the proceeds of a
drawing under the Policy. The Record Date applicable to an insured Distribution
Date shall be the Record Date applicable to the related Distribution Date.
"Scheduled Payments" means payments which are required to be made on
the notes during the term of the Policy in accordance with the original terms of
the notes when issued and without regard to any subsequent amendment or
modification of the notes or the Indenture that has not been consented to by the
insurer, which payments, with respect to any insured Distribution Date, are: (i)
the NOTEHOLDERS' INTEREST DISTRIBUTABLE Amount, with respect to the related
Distribution Date; (ii) the NOTEHOLDERS' REMAINING PARITY DEFICIT AMOUNT with
respect to the related Distribution Date; and (iii) with respect to the Final
Scheduled Distribution Date for any class of notes, the outstanding principal
amount of such class on such Final Scheduled Distribution Date, after taking
into account reductions on such date of such outstanding principal amount from
all sources other than the Policy. Scheduled Payments do not include payments
which become due on an accelerated basis as a result of; (a) a default by the
Trust; (b) an election by the Trust to
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pay principal on an accelerated basis; (c) the occurrence of an Event of Default
under the Indenture; or (d) any other cause, unless the insurer elects, in its
sole discretion, to pay in whole or in part such principal due upon
acceleration, together with any accrued interest to the date of acceleration. In
the event the insurer does not so elect, the Policy will continue to guarantee
Scheduled Payments due on the notes in accordance with their original terms.
Scheduled Payments shall not include: (x) any portion of a NOTEHOLDERS' INTEREST
DISTRIBUTABLE AMOUNT or of a NOTEHOLDERS' INTEREST CARRYOVER AMOUNT due to
noteholders because the appropriate notice and certificate for payment in proper
form was not timely Received (as defined below) by the insurer; (y) any portion
of a NOTEHOLDERS' INTEREST DISTRIBUTABLE Amount due to noteholders representing
interest on any Noteholders' Interest Carryover Shortfall accrued from and
including the date of payment of the amount of such Noteholders' Interest
Carryover Shortfall pursuant to the Policy; or (z) any Note Prepayment Amounts,
unless the insurer elects, in its sole discretion, to pay such amount in whole
or in part. Scheduled Payments shall not include, nor shall coverage be provided
under the Policy in respect of, any taxes, withholding or other charge imposed
with respect to any noteholder by any governmental authority due in connection
with the payment of any Scheduled Payment to a noteholder.
Payment of claims on the Policy made in respect of Scheduled Payments
will be made by the insurer following Receipt (as defined below) by the insurer
of the appropriate notice for payment on the later to occur of (i) 12:00 noon,
New York City time, on the third Business Day following Receipt of such notice
for payment, and (ii) 12:00 noon, New York City time, on the date on which such
payment was due on the notes.
If payment of any amount avoided as a preference under applicable
bankruptcy, insolvency, receivership or similar law is required to be made under
the Policy, the insurer shall cause such payment to be made on the later of (a)
the date when due to be paid pursuant to the Order referred to below or (b) the
first to occur of (i) the [fourth] Business Day following Receipt by the insurer
from the Trust Collateral Agent of (A) a certified copy of the order (the
"Order") of the court or other governmental body that exercised jurisdiction to
the effect that the noteholder is required to return Scheduled Payments made
with respect to the notes during the term of the Policy because such payments
were avoidable as preference payments under applicable bankruptcy law, (B) a
certificate of the noteholder that the Order has been entered and is not subject
to any stay and (C) an assignment duly executed and delivered by the noteholder,
in such form as is reasonably required by the insurer and provided to the
noteholder by the insurer, irrevocably assigning to the insurer all rights and
claims of the noteholder relating to or arising under the notes against the
Trust or otherwise with respect to such preference payment, or (ii) the date of
Receipt (as defined below) by the insurer from the Trust Collateral Agent of the
items referred to in clauses (A), (B) and (C) above if, at least four Business
Days prior to such date of Receipt, the insurer shall have Received (as defined
below) written notice from the Trust Collateral Agent that such items were to be
delivered on such date and such date was specified in such notice. Such payment
shall be disbursed to the receiver, conservator, debtor-in-possession or trustee
in bankruptcy named in the Order and not to the Trust Collateral Agent or any
noteholder directly
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(unless a noteholder has previously paid such amount to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order,
in which case such payment shall be disbursed to the Trust Collateral Agent for
distribution to such noteholder upon proof of such payment reasonably
satisfactory to the insurer). In connection with the foregoing, the insurer
shall have the rights provided pursuant to the Sale and Servicing Agreement,
including, without limitation, the right to direct all matters relating to any
preference claim and subrogation to the rights of the Trust Collateral Agent and
each noteholder in the conduct of any proceeding with respect to a preference
claim.
OTHER PROVISIONS OF THE POLICY
The terms "Receipt" and "Received" with respect to the Policy shall
mean actual delivery to the insurer and to its fiscal agent, if any, prior to
12:00 noon, New York City time, on a Business Day; delivery either on a day that
is not a Business Day or after 12:00 noon, New York City time, shall be deemed
to be Received on the next succeeding Business Day. If any notice or certificate
given under the Policy by the Trust Collateral Agent is not in proper form or is
not properly completed, executed or delivered, it shall be deemed not to have
been Received, and the insurer or its fiscal agent shall promptly so advise the
Trust Collateral Agent, and the Trust Collateral Agent may submit an amended
notice.
Under the Policy, "Business Day" means any day other than a Saturday,
Sunday, legal holiday or other day on which commercial banking institutions in
Wilmington, Delaware, New York, New York or Columbus, Ohio or any other location
of any successor servicer, successor owner trustee or successor Trust Collateral
Agent are authorized or obligated by law, executive order or governmental decree
to be closed.
The insurer's obligations under the Policy in respect of Scheduled
Payments shall be discharged to the extent funds are transferred to the Trust
Collateral Agent as provided in the Policy whether or not such funds are
properly applied by the Trust Collateral Agent.
The insurer shall be subrogated to the rights of each noteholder to
receive payments of principal and interest to the extent of any payment by the
insurer under the Policy.
Claims under the Policy constitute direct, unsecured and unsubordinated
obligations of the insurer ranking not less than PARI PASSU with other unsecured
and unsubordinated indebtedness of the insurer for borrowed money. Claims
against the insurer under the Policy and each other financial guaranty insurance
policy issued thereby constitute PARI PASSU claims against the general assets of
the insurer. The terms of the Policy cannot be modified or altered by any other
agreement or instrument, or by the merger, consolidation or dissolution of the
Trust. The Policy may not be canceled or revoked prior to distribution in full
of all Scheduled Payments. THE POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY
INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF
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THE NEW YORK INSURANCE LAW. The Policy is governed by the laws of the State of
New York.
It is a condition to issuance that the Class A-l Notes be rated [A-l+]
by S&P and [P-l] by Moody's, and that the Class A-2 Notes, the Class A-3 Notes
and the Class A-4 Notes be rated [AAA] by S&P and [Aaa] by Moody's. The ratings
by the Rating Agencies of the notes will be (i) with respect to the Class A-1
Notes, without regard to the Policy in the case of S&P and substantially based
on the Policy in the case of Moody's and (ii) with respect to all other classes
of notes, based on the issuance of the Policy. To the extent that such ratings
are based on the Policy, such ratings apply to distributions due on the insured
Distribution Dates, and not to distributions due on the Distribution Dates. A
rating is not a recommendation to purchase, hold or sell notes. In the event
that the rating initially assigned to any of the notes is subsequently lowered
or withdrawn for any reason, including by reason of a downgrading of the
claims-paying ability of the insurer, no person or entity will be obligated to
provide any additional credit enhancement with respect to the notes. Any
reduction or withdrawal of a rating may have an adverse effect on the liquidity
and market price of the notes. See "Ratings" herein.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences to investors of the purchase, ownership and disposition of the
notes. The discussion is based upon laws, regulations, rulings and decisions now
in effect, all of which are subject to change. The discussion does not purport
to deal with all federal tax consequences applicable to all categories of
investors, including:
o insurance companies;
o tax-exempt organizations;
o financial institutions or broker dealers;
o taxpayers subject to the alternative minimum tax; and
o holders of non capital asset securities assets.
We suggest that investors consult their own tax advisors to determine
the particular federal, state and local consequences of the purchase, ownership
and disposition of the securities.
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, and therefore is not subject to
federal income tax.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS.
The seller agrees, and the noteholders will agree by their purchase of
notes, to treat the notes as debt for all federal, state and local income tax
purposes. There are no regulations, published rulings or judicial decisions
involving the characterization for
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federal income tax purposes of securities with terms substantially the same as
the notes. In general, whether instruments such as the notes constitute
indebtedness for federal income tax purposes is a question of fact, the
resolution of which is based primarily upon the economic substance of the
instruments and the transaction under which they are issued rather than merely
upon the form of the transaction or the manner in which the instruments are
labeled.
The Internal Revenue Service and the courts have stated various factors
to be taken into account in determining, for federal income tax purposes,
whether or not an instrument constitutes indebtedness and whether a transfer of
property is a sale because the transferor has relinquished substantial incidents
of ownership in the property or whether the transfer is a borrowing secured by
the property.
On the basis of its analysis of the above factors as applied to the
facts and its analysis of the economic substance of the contemplated
transaction, tax counsel is of the opinion that, for federal income tax
purposes, the notes will be treated as indebtedness, and not as an ownership
interest in the automobile loans, nor as an equity interest in the trust or in a
separate association taxable as a corporation or other taxable entity.
If the notes are characterized as indebtedness, interest paid or
accrued on a note will be treated as ordinary income to the noteholders and
principal payments on a note will be treated as a return of capital to the
extent of the noteholder's basis in the note allocable thereto. An accrual
method taxpayer will be required to include in income interest on the notes when
earned, even if not paid, unless it is determined to be uncollectible. The
issuer will report to noteholders of record and the IRS regarding the interest
paid and original issue discount, if any, accrued on the notes to the extent
required by law.
Although, as described above, it is the tax counsel's opinion that, for
federal income tax purposes, the notes will be characterized as debt, this
opinion is not binding on the IRS and thus no assurance can be given that this
characterization will prevail. If the IRS successfully asserted that one or more
of the notes did not represent debt for federal income tax purposes, the
noteholders would likely be treated as owning an interest in a partnership and
not an interest in an association or publicly traded partnership, taxable as a
corporation. If the noteholders were treated as owning an equitable interest in
a partnership, the partnership itself would not be subject to federal income
tax; rather each partner would be taxed individually on their respective
distributive share of the partnership's income, gain, loss, deductions and
credits. The amount, timing and characterization of types of income and
deductions for a noteholder would differ if the notes were held to constitute
partnership interests, rather than indebtedness. Since the issuer will treat the
notes as indebtedness for federal income tax purposes, the servicer will not
attempt to satisfy the tax reporting requirements that would apply under this
alternative characterization of the notes. Investors that are foreign persons
should consult their own tax advisors in determining the federal, state, local
and other tax consequences to them of the purchase, ownership and disposition of
the notes. See "TAXATION OF CERTAIN FOREIGN INVESTORS" below.
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ORIGINAL ISSUE DISCOUNT.
It is anticipated that the notes will not have any original issue
discount or OID, other than possibly OID within a DE MINIMIS exception and that
accordingly the provisions of sections 1271 through 1273 and 1275 of the
Internal Revenue Code, generally will not apply to the notes. OID will be
considered DE MINIMIS if it is less than 0.25% of the principal amount of a note
multiplied by its expected weighted average life.
MARKET DISCOUNT.
A subsequent purchaser who buys a note for less than its principal
amount may be subject to the MARKET DISCOUNT rules of section 1276 through 1278
of the Code. If a subsequent purchaser of a note disposes of the note, including
some nontaxable dispositions such as a gift, any gain upon the sale or other
disposition will be recognized as ordinary income to the extent of any accrued
for the period that the purchaser holds the note. Similarly, if a subsequent
purchase receives a principal payment, the amount of that principal payment will
be treated as ordinary income to the extent of any market discount accrued for
the period that the purchaser holds the note. The holder may instead elect to
include market discount in income as it accrues on all debt instruments acquired
in the year of acquisition of the notes and thereafter. Market discount
generally will equal the excess, if any, of the then current unpaid principal
balance of the note over the purchaser's basis in the note offered immediately
after the purchaser acquired the note. In general, market discount on a note
will be treated as accruing over the term of the note in the ratio of interest
for the current period over the sum of the current interest and the expected
amount of all remaining interest payments, or at the election of the holder,
under a constant yield method. At the request of a holder of a note, information
will be made available that will allow the holder to compute the accrual of
market discount under the first method described in the preceding sentence.
The market discount rules also provide that a holder who incurs or
continues indebtedness to acquire a note at a market discount may be required to
defer the deduction of all or a portion of the interest on the indebtedness
until the corresponding amount of market discount is included in income.
However, market discount on a note will be considered to be zero if it
is less than a DE MINIMIS amount, which is 0.25% of the remaining principal
balance of the note multiplied by its expected weighted average remaining life.
If OID or market discount is DE MINIMIS, the actual amount of discount must be
allocated to the remaining principal distributions on the notes and, when each
distribution is received, capital gain equal to the discount allocated to the
distribution will be recognized.
MARKET PREMIUM.
A subsequent purchaser who buys a note for more than its principal
amount generally will be considered to have purchased the note at a premium. The
holder may amortize the premium, using a constant yield method, over the
remaining term of the note
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and, except as future regulations may otherwise provide, may apply the amortized
amounts to reduce the amount of interest reportable for the note over the period
from the purchase date to the date of maturity of the note. The amortization of
the premium on an obligation that provides for partial principal payments prior
to maturity should be governed by the methods described above for accrual of
market discount on such an obligation. A holder that elects to amortize premium
must reduce his tax basis in the obligation by the amount of the aggregate
deductions, or interest offsets, allowable for amortization of premium. If a
debt instrument purchased at a premium is redeemed in full prior to its
maturity, a purchaser who has elected to amortize premium should be entitled to
a deduction for any remaining unamortized premium in the taxable year of
redemption.
SALE OR REDEMPTION OF NOTES.
If a note is sold or retired, the seller will recognize gain or loss
equal to the difference between the amount realized on the sale and the holder's
adjusted basis in the note. The adjusted basis generally will equal the cost of
the note to the seller, increased by any original issue discount included in the
seller's gross income in respect of the note, and by any market discount which
the taxpayer elected to include in income or was required to include in income,
and reduced by payments other than payments of qualified stated interest in
respect of the note received by the seller and by any amortized premium.
Similarly, a holder who receives a payment other than a payment of qualified
stated interest for a note, either on the date on which the payment is scheduled
to be made or as a prepayment, will recognize gain equal to any excess, of the
amount of the payment over his adjusted basis in the note allocable thereto. A
noteholder who receives a final payment which is less than his adjusted basis in
the note will generally recognize a loss in the amount of the shortfall on the
last day of his taxable year. Generally, this gain or loss realized by an
investor who holds a note as a CAPITAL asset within the meaning of Internal
Revenue Code Section 1221 should be capital gain or loss, except as described
above in respect of market discount and except that a loss attributable to
accrued but unpaid interest may be an ordinary loss.
TAXATION OF FOREIGN INVESTORS.
Interest payments including OID, if any, on the notes made to a FOREIGN
PERSON, which is a nonresident alien individual, foreign corporation or other
non-United States person generally will be PORTFOLIO INTEREST. This interest is
not subject to United States tax if the payments are not effectively connected
with the conduct of a trade or business in the United States by the foreign
person and if the trust or other person who would otherwise be required to
withhold tax from these payments is provided with an appropriate statement that
the beneficial owner of the note identified on the statement is a foreign
person.
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<PAGE>
BACKUP WITHHOLDING.
Distributions of interest and principal as well as distributions of
proceeds from the sale of the notes may be subject to the BACKUP WITHHOLDING TAX
under Section 3406 of the Internal Revenue Code at a rate of 31% if recipients
of the distributions fail to furnish to the payor their taxpayer identification
numbers and other required information, or otherwise fail to establish an
exemption from tax. Any amounts deducted and withheld from a distribution to a
recipient would be allowed as a credit against the recipient's federal income
tax. Furthermore, penalties may be imposed by the IRS on a recipient of
distributions that is required to supply information but that does not do so in
the proper manner.
STATE AND LOCAL TAX CONSIDERATIONS
Potential noteholders should consider the state and local income tax
consequences of the purchase, ownership and disposition of the notes. State and
local income tax laws may differ substantially from the corresponding federal
law, and this discussion does not purport to describe any aspect of the income
tax laws of any state or locality. Therefore, potential noteholders should
consult their own tax advisors as to the various state and local tax
consequences of an investment in the notes.
ERISA CONSIDERATIONS
The notes may be purchased by ERISA plans as described in the
prospectus under "ERISA Considerations -ERISA Considerations regarding
securities which are Notes." The notes should be treated as indebtedness without
substantial equity features for purposes of the plan assets regulation. This
determination is based in part on the traditional debt features of the notes,
including the reasonable expectation of purchasers of notes that the notes will
be repaid when due, as well as the absence of conversion rights, warrants and
other typical equity features. The debt treatment of the notes for ERISA
purposes could change if the trust incurred losses. As described in the
prospectus, the acquisition or holding of the notes by or on behalf of an
employee benefit plan could still result in a prohibited transaction if the
acquisition or holding of the notes by or on behalf of the plan were deemed to
be a prohibited loan to a party in interest with respect to the plan.
Accordingly, each purchaser and each transferee using the assets of a plan
subject to ERISA or Section 4975 of the Internal Revenue Code to acquire the
notes will be deemed to have represented that the acquisition and continued
holding of the notes will be covered by a Department of Labor class exemption.
Any plan fiduciary considering the purchase of a note may wish to
consult with its counsel as to the potential applicability of ERISA and the
Internal Revenue Code to the investment. Moreover, each plan fiduciary may wish
to determine whether, under the general fiduciary standards of investment
prudence and diversification, an investment in the notes is appropriate for the
plan, taking into account the overall investment policy of the plan and the
composition of the plan's investment portfolio.
S-61
<PAGE>
The sale of notes to a plan is in no respect a representation by us or
the underwriters that this investment meets all relevant legal requirements for
investments by plans generally or any particular plan or that this investment is
appropriate for plans generally or any particular plan.
LEGAL INVESTMENT
The Class A-1 Notes will be eligible securities for purchase by money
market funds under the Investment Company Act of 1940, as amended.
RATINGS
It is a condition to the notes' issuance that the Class A-1 Notes be
rated [A-1+] by S&P, and [P-1] by Moody's Investors Service, Inc., and that the
Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes be rated [AAA] by
S&P and [Aaa] by Moody's.
The notes' ratings will be:
o without regard to the policy in the case of S&P and
substantially based on the policy in the case of Moody's for
the Class A-1 Notes; and
o based primarily on the policy for all other classes of notes.
To the extent that the ratings are based on the policy, the ratings
apply to distributions due on the insured distribution dates, and not to
distributions due on the distribution dates. We cannot assure you that the
rating agencies will not lower or withdraw the ratings.
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 distribution 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.
UNDERWRITING
Subject to the terms and conditions described in an underwriting
agreement, the seller has agreed to cause the issuer to sell to each of the
underwriters named below the notes. Each of the underwriters has severally
agreed to purchase, the principal amount of the notes set forth opposite its
name below:
CLASS A-1 NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
[Underwriter].................................................................... $
[Underwriter]....................................................................
[Underwriter]....................................................................
[Underwriter]....................................................................
Total...................................................................... $
</TABLE>
CLASS A-2 NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
S-62
<PAGE>
<S> <C>
[Underwriter].................................................................... $
[Underwriter]....................................................................
[Underwriter]....................................................................
[Underwriter]....................................................................
Total...................................................................... $
</TABLE>
CLASS A-3 NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
[Underwriter].................................................................... $
[Underwriter]....................................................................
[Underwriter]....................................................................
[Underwriter]....................................................................
Total...................................................................... $
</TABLE>
CLASS A-4 NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
[Underwriter].................................................................... $
[Underwriter]....................................................................
[Underwriter]....................................................................
[Underwriter]....................................................................
Total...................................................................... $
</TABLE>
The underwriters have advised the seller that they propose initially to
offer the notes to the public at the prices listed below, and to dealers at
prices less the initial concession not in excess of _____% per Class A-1 Note,
_____% per Class A-2 Note, _____% per Class A-3 Note and _____% per Class A-4
Note. The underwriters may allow and dealers may reallow a concession not in
excess of _____% per Class A-1 Note, _____% per Class A-2 Note, _____% per Class
A-3 Note and _____% per Class A-4 Note to other dealers. After the initial
public offering of the notes, the public offering prices and such concessions
may be changed.
Each underwriter has represented and agreed that:
o 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;
o 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
o 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
S-63
<PAGE>
(Investment Advertisements) (Exemptions) Order 1995 or is a
person to whom the document may otherwise lawfully be issued
or passed on.
Upon receiving a request by an investor who has received an electronic
prospectus supplement and prospectus from an underwriter or a request by the
investor's representative within the period during which there is an obligation
to deliver a prospectus supplement and prospectus, the underwriter will promptly
deliver, or cause to be delivered, without charge, a paper copy of the
prospectus supplement and prospectus.
The seller or its affiliates may apply all or any portion of the net
proceeds of this offering to the repayment of debt, including "warehouse" debt
secured by the automobile loans - prior to their sale to the issuer. One or more
of the underwriters, or their respective affiliates, may have acted as a
"warehouse lender" to its affiliates, and may receive a portion of the proceeds
as a repayment of the "warehouse" debt.
IN CONNECTION WITH THIS OFFERING THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE NOTES
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
EXPERTS
The consolidated balance sheets of Financial Security Assurance Inc.
and its subsidiaries as of __________ and _____ and the related consolidated
statements of income, changes in shareholder's equity and cash flows for each of
the three years in the period ended __________, incorporated by reference in
this prospectus supplement, are incorporated in reliance on the report of [ ],
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The balance sheet of the issuer as of __________ has been included in
this prospectus supplement in reliance on the report of [ ], independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
LEGAL OPINIONS
In addition to the legal opinions described in the prospectus, certain
federal income tax and other matters have been passed upon for the seller and
the issuer by Dewey Ballantine LLP, New York, New York. Certain legal matters
relating to the notes have been passed upon for the Underwriters by Dewey
Ballantine LLP, New York, New York. Certain legal matters have been passed upon
for the insurer by [ ], [Assistant] General Counsel, to the insurer. The insurer
is represented by [ ], New York, New York.
S-64
<PAGE>
GLOSSARY
"ACCELERATED PRINCIPAL AMOUNT" for a distribution date will equal the
lesser of
(x) the sum of:
(a) the excess, if any, of the amount of AVAILABLE FUNDS
on the distribution date over the amounts payable on
the distribution date under clauses 1 through 6 under
"Distributions";
plus
(b) amounts, if any, available according to the terms of
the Spread Account Agreement; and
(y) the greater of
(a) the excess, if any, on the distribution date of:
o the PRO FORMA NOTE BALANCE for the distribution date;
over
o the REQUIRED PRO FORMA NOTE BALANCE for the
distribution date, and
(b) the amount necessary, after taking into account all
other distributions to be made on the date, to reduce
the principal balance of the Class A-1 Notes to zero.
"ADDITIONAL FUNDS AVAILABLE" means, with respect to any insured
distribution date the sum of:
(a) the deficiency claim amount, if any, received by the indenture
trustee with respect to the insured distribution date;
plus
(b) the INSURER OPTIONAL DEPOSIT, if any, received by the indenture
trustee with respect to the insured distribution date.
"AMOUNT FINANCED" means, for any automobile loan the aggregate amount
loaned toward the purchase price of the financed vehicle and related costs,
including amounts advanced for:
o accessories;
o insurance premiums;
o service;
S-65
<PAGE>
o car club and warranty contracts;
o 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:
o the COLLECTED FUNDS for the calendar month;
o all purchase amounts deposited in the collection account
during the calendar month, plus income on investments held in
the collection account;
o the Monthly Capitalized Interest Amount for the distribution
date which immediately follows the calendar month;
o the proceeds of any liquidation of the assets of the issuer;
and
o any remaining pre-funded amount applied to the mandatory
redemption of the notes.
"COLLECTED FUNDS" means, any calendar month, the amount of funds in the
collection account representing 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;
o the excess of the automobile loan's principal balance
immediately prior to the automobile loan order over the
automobile loan's principal balance as reduced; and/or
o 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.
"INSURER OPTIONAL DEPOSIT" means, for any insured distribution date, an
amount other than policy claim amount delivered by the insurer, at its sole
option, for deposit into the collection account for any of the following
purposes:
S-66
<PAGE>
o to provide funds to pay the fees or expenses of any of the
issuer's service providers for the insured distribution date;
or
o to include those amounts as part of ADDITIONAL FUNDS AVAILABLE
for the insured distribution date to the extent that without
them a draw would be required to be made on a policy.
"NET LIQUIDATION PROCEEDS" means, for liquidated automobile loans:
o proceeds from the underlying financed vehicles' disposition;
minus
o 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;
o any insurance proceeds; or
o other monies received from the obligor.
"NOTEHOLDERS' ACCELERATED PRINCIPAL AMOUNT" means, for any distribution
date, the NOTEHOLDERS' Percentage of the ACCELERATED PRINCIPAL AMOUNT on the
distribution date, if any.
"NOTEHOLDERS' DISTRIBUTABLE AMOUNT" means, any distribution date, the
sum of the NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT and the NOTEHOLDERS'
INTEREST DISTRIBUTABLE AMOUNT.
"NOTEHOLDERS' INTEREST CARRYOVER AMOUNT" means, for any class of notes
and any determination date, all or any portion of the NOTEHOLDERS' INTEREST
DISTRIBUTABLE AMOUNT for the class for the immediately preceding distribution
date, and any outstanding NOTEHOLDERS' INTEREST CARRYOVER AMOUNT still unpaid as
of the determination date, plus, to the extent permitted by law, interest on the
unpaid amount at the interest rate paid by the class of notes from the preceding
distribution date to but excluding the determination date.
"NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, for any
distribution date, the sum of the NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE
AMOUNT for each class of notes for the distribution date and the NOTEHOLDERS'
INTEREST CARRYOVER AMOUNT, if any, for each class of notes, calculated as of the
distribution date.
"NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, for any
distribution date and any class of notes, that the interest accrued during the
applicable interest period shall accrue on the principal amount of the notes of
each class outstanding as of the end of the prior distribution date or, in the
case of the first distribution date, as of the closing date. However, if the
principal balance is further reduced by a principal payment on the insured
distribution date immediately following the prior distribution date, then the
interest shall accrue:
S-67
<PAGE>
o from and including the prior distribution date to, but
excluding, the related insured distribution date, on the
principal balance outstanding as of the end of the prior
distribution date - or, in the case of the first distribution
date, as of the closing date; and
o from and including the insured distribution date, to, but
excluding, the following distribution date, on the principal
balance outstanding as of the end of the insured distribution
date, calculated on the basis of a 360-day year and:
(a) in the case of the Class A-1 Notes and the Class
A-2 Notes, the actual number of days elapsed; and
(b) in the case of the Class A-3 Notes and the Class
A-4 Notes, twelve 30-day months.
"NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, for any
distribution date, the NOTEHOLDERS' PERCENTAGE of the PRINCIPAL DISTRIBUTABLE
AMOUNT.
"NOTEHOLDERS' PARITY DEFICIT AMOUNT" means, for any distribution date,
the excess, if any, of:
(x) the aggregate remaining principal balance outstanding on
the distribution date, after giving effect to all reductions in the
aggregate principal balance from sources other than:
o the spread account; and
o the policy
over;
(y) the sum of the pool balance and the pre-funded amount at
the end of the prior calendar month.
"NOTEHOLDERS' PERCENTAGE" means:
o for each distribution date prior to the distribution date on
which the Class A-4 Notes are fully paid, 100%;
o on the distribution date on which the Class A-4 Notes are
fully paid, the percentage equivalent of a fraction, the
numerator of which is the outstanding principal amount of the
Class A-4 Notes immediately prior to the distribution date,
and the denominator of which is the PRINCIPAL DISTRIBUTABLE
AMOUNT for the distribution date; and
o for any distribution date thereafter, zero.
S-68
<PAGE>
"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, other than the final scheduled distribution date for any
class of notes, the sum of the NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE
AMOUNT for the distribution date and the NOTEHOLDERS' PRINCIPAL CARRYOVER
AMOUNT, if any, as of the distribution date.
The NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT on the final scheduled
distribution date for any class will equal the sum of:
(1) the NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT
for the distribution date;
(2) the NOTEHOLDERS' PRINCIPAL CARRYOVER AMOUNT as of the
distribution date; and
(3) the excess of the outstanding principal amount of the
class of notes, if any, over the amounts described in clauses (1) and
(2).
"NOTEHOLDERS' REMAINING PARITY DEFICIT AMOUNT" means, for any
distribution date:
o the NOTEHOLDERS' PARITY DEFICIT AMOUNT for the distribution
date;
MINUS
o any reduction in the note's aggregate principal balance on the
distribution date which is funded from the spread account.
The POLICY CLAIM AMOUNT for any insured distribution date, equals the
sum of
(x) the excess, if any, without duplication, of:
o the sum of the NOTEHOLDERS' INTEREST DISTRIBUTABLE
AMOUNT and the NOTEHOLDERS' PARITY DEFICIT AMOUNT for
the related distribution date, together with:
(a) if the related distribution date was the
mandatory redemption date, the Note Prepayment Amount; and
(b) if the related distribution date was the final
scheduled distribution date for any class, the unpaid
principal balance of the class;
over
o the sum of:
S-69
<PAGE>
(a) the amount actually deposited into the note
distribution account on the related distribution date; and
(b) ADDITIONAL FUNDS AVAILABLE, if any, for the
insured distribution date;
plus
(y) the NOTEHOLDERS' INTEREST CARRYOVER AMOUNT, if any, which has
accrued since the related distribution date.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, for any distribution date, the
amount equal to the excess, if any, of:
(x) the sum of the following amounts for the related calendar
month, computed according to the simple interest method:
o collections received on automobile loans, other than
liquidated and purchased automobile loans, allocable to
principal, including full and partial principal prepayments;
o the principal balance of all automobile loans, other than
purchased automobile loans, that became liquidated automobile
loans during the calendar month;
o (A) the portion of the purchase amount allocable to principal
of all automobile loans that became purchased automobile loans
as of the immediately preceding record date;
o (B) at the option of the insurer, the outstanding principal
balance of those automobile loans that the seller or the
company was required repurchase during the calendar month but
were not repurchased; and
o the aggregate amount of CRAM DOWN LOSSES during the related
calendar month over
(y) the STEP-DOWN AMOUNT, if any, for the distribution
date.
"PRO FORMA NOTE BALANCE" means, for any distribution date, the
aggregate remaining principal balance of the notes outstanding on the
distribution date, after giving effect to distributions under clauses 1 through
4 under "Distributions."
"REQUIRED PRO FORMA NOTE BALANCE" means, for any distribution date, a
dollar amount equal to product of
(x) 90%; and
S-70
<PAGE>
(y) the sum of the pool balance and the pre-funded amount as of the end
of the prior calendar month.
"STEP-DOWN AMOUNT" means, for any distribution date, the excess, if
any, of:
(x) the REQUIRED PRO FORMA NOTE BALANCE; over
(y) the PRO FORMA NOTE BALANCE on the distribution date, for this
purpose only calculated without deduction for any STEP-DOWN AMOUNT - i.e., with
the assumption that the entire amount described in clause (x) of the definition
of "PRINCIPAL DISTRIBUTABLE AMOUNT" is distributed as principal on the notes.
S-71
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the managers of AmeriCredit Automobile Receivables Trust 2000-__:
In our opinion, the accompanying balance sheet presents fairly, in all material
respects, the financial position of AmeriCredit Automobile Receivables Trust
2000-__ as of __________, in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the trust's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes:
o examining, on a test basis, evidence supporting the amounts
and disclosures in the balance sheet;
o assessing the accounting principles used and significant
estimates made by management; and
o evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion
expressed above.
[city, state]
[date]
F-1
<PAGE>
AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-__
<TABLE>
<CAPTION>
BALANCE SHEET
----------
ASSETS
<S> <C>
Cash.................................................. $
-
Total Assets.......................................... $
=
LIABILITIES AND TRUST PRINCIPAL
Interest in Trust...................................... $
-
Total liabilities and trust principal.................. $
=
</TABLE>
The accompanying notes are an integral part of this financial
statement.
F-2
<PAGE>
AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-__
NOTES TO FINANCIAL STATEMENT
-----------------
1. Nature of Operations:
AmeriCredit Automobile Receivables Trust 2000-__ (the "Trust"), was
formed in the State of __________ on __________.
The Trust was organized to engage exclusively in the following business
and financial activities:
o to acquire motor vehicle retail installment sale contracts
from the seller and any of its affiliates;
o to issue and sell notes collateralized by its assets; and to
engage in any lawful act or activity and to exercise any power
that is incidental and is necessary or convenient to the
foregoing.
The seller is a Nevada corporation which is a wholly-owned subsidiary
of the company.
2. Capital Contribution:
The seller purchased, for $_____, a _____% beneficial ownership
interest in the Trust.
F-3
<PAGE>
ANNEX I
CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
NOTICE TO INVESTORS: THIS ANNEX IS AN INTEGRAL PART OF THE PROSPECTUS
SUPPLEMENT TO WHICH IT IS ATTACHED.
Except in limited circumstances, the securities will be available only
in book-entry form. Investors in the securities may hold the securities through
any of DTC, Cedelbank or Euroclear. The securities will be tradeable as home
market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors through Cedelbank and
Euroclear will be conducted in the ordinary way in accordance with the normal
rules and operating procedures of Cedelbank and Euroclear and in accordance with
conventional eurobond practice, which is seven calendar day settlement.
Secondary market trading between investors through DTC will be
conducted according to DTC's rules and procedures applicable to U.S. corporate
debt obligations.
Secondary cross-market trading between Cedelbank or Euroclear and DTC
participants holding securities will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedelbank and Euroclear and as DTC
participants.
Non-U.S. holders of global securities will be subject to U.S.
withholding taxes unless the holders meet a number of requirements and deliver
appropriate U.S. tax documents to the securities clearing organizations or their
participants.
INITIAL SETTLEMENT
All securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the securities will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, Cedelbank and Euroclear will hold
positions on behalf of their participants through their relevant depository
which in turn will hold these positions in their accounts as DTC participants.
Investors electing to hold their securities through DTC will follow DTC
settlement practices. Investor securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their securities through Cedelbank or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary security and no
lock-up or restricted period. Securities will be credited to the securities
custody accounts on the settlement date against payment in same-day funds.
A-1
<PAGE>
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS
Secondary market trading between DTC participants will be settled using
the procedures applicable to asset-back securities issues in same-day funds.
TRADING BETWEEN CEDELBANK OR EUROCLEAR PARTICIPANTS
Secondary market trading between Cedelbank participants or Euroclear
participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
TRADING BETWEEN DTC, SELLER AND CEDELBANK OR EUROCLEAR PARTICIPANTS
When securities are to be transferred from the account of a DTC
participant to the account of a Cedelbank participant or a Euroclear
participant, the purchaser will send instructions to Cedelbank or Euroclear
through a Cedelbank participant or Euroclear participant at least one business
day prior to settlement. Cedelbank or Euroclear will instruct the relevant
depository, as the case may be, to receive the securities against payment.
Payment will include interest accrued on the securities from and including the
last coupon distribution date to and excluding the settlement date, on the basis
of the actual number of days in the accrual period and a year assumed to consist
of 360 days. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following month.
Payment will then be made by the relevant depository to the DTC participant's
account against delivery of the securities. After settlement has been completed,
the securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Cedelbank
participant's or Euroclear participant's account. The securities credit will
appear the next day, European time and the cash debt will be back-valued to, and
the interest on the global securities will accrue from, the value date, which
would be the preceding day when settlement occurred in New York. If settlement
is not completed on the intended value date and the trade fails, the Cedelbank
or Euroclear cash debt will be valued instead as of the actual settlement date.
Cedelbank participants and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Cedelbank or Euroclear. Under
this approach, they may take on credit exposure to Cedelbank or Euroclear until
the securities are credited to their account one day later.
A-2
<PAGE>
As an alternative, if Cedelbank or Euroclear has extended a line of
credit to them, Cedelbank participants or Euroclear participants can elect not
to preposition funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, Cedelbank participants or Euroclear
participants purchasing securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the securities were credited to their
accounts. However, interest on the securities would accrue from the value date.
Therefore, in many cases the investment income on the global securities earned
during that one-day period may substantially reduce or offset the amount of the
overdraft charges, although the result will depend on each Cedelbank
participant's or Euroclear participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC participants can employ their usual procedures for crediting global
securities to the respective European depository for the benefit of Cedelbank
participants or Euroclear participants. The sale proceeds will be available to
the DTC seller on the settlement date. Thus, to the DTC participants a
cross-market transaction will settle no differently than a trade between two DTC
participants.
TRADING BETWEEN CEDELBANK OR EUROCLEAR SELLER AND DTC PURCHASER
Due to time zone differences in their favor, Cedelbank participants and
Euroclear participants may employ their customary procedures for transactions in
which securities are to be transferred by the respective clearing system,
through the respective depository, to a DTC participant. The seller will send
instructions to Cedelbank or Euroclear through a Cedelbank participant or
Euroclear participant at least one business day prior to settlement. In these
cases Cedelbank or Euroclear will instruct the respective depository, as
appropriate, to credit the securities to the DTC participant's account against
payment. Payment will include interest accrued on the securities from and
including the last interest payment to and excluding the settlement date on the
basis of the actual number of days in the accrual period and a year assumed to
consist of 360 days. For transactions settling on the 31st of the month, payment
will include interest accrued to and excluding the first day of the following
month. The payment will then be reflected in the account of Cedelbank
participant or Euroclear participant the following day, and receipt of the cash
proceeds in the Cedelbank participant's or Euroclear participant's account would
be back-valued to the value date, which would be the preceding day, when
settlement occurred in New York. In the event that the Cedelbank participant or
Euroclear participant has a line of credit with its respective clearing system
and elects to be in debt in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft incurred over that
one-day period. If settlement is not completed on the intended value date and
the trade fails, receipt of the cash proceeds in the Cedelbank participant's or
Euroclear participant's account would instead be valued as of the actual
settlement date.
Finally, day traders that use Cedelbank or Euroclear and that purchase
global securities from DTC participants for delivery to Cedelbank participants
or Euroclear participants may wish to note that these trades would automatically
fail on the sale side
A-3
<PAGE>
unless affirmative action is taken. At least three techniques should be readily
available to eliminate this potential problem:
o borrowing through Cedelbank or Euroclear for one day, until the
purchase side of the trade is reflected in their Cedelbank or Euroclear
accounts in accordance with the clearing system's customary procedures;
o borrowing the securities in the U.S. from a DTC participant no later
than one day prior to settlement, which would give the securities
sufficient time to be reflected in their Cedelbank or Euroclear account
in order to settle the sale side of the trade; or
o staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC participant is at
least one day prior to the value date for the sale to the Cedelbank
participant or Euroclear participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of securities holding securities through Cedelbank
or Euroclear, or through DTC if the holder has an address outside the U.S., will
be subject to the 30% U.S. withholding tax that generally applies to payments of
interest, including original issue discount, on registered debt issued by U.S.
persons, unless:
(1) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business in the chain of intermediaries between the beneficial owner
and the U.S. entity required to withhold tax complies with applicable
certification requirements and
(2) the beneficial owner takes one of the following steps to
obtain an exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS-FORM W-8
Beneficial owners of global securities that are non-U.S.
persons can obtain a complete exemption from the withholding tax by filing a
signed Form W-8 Certificate of Foreign Status. If the information shown on Form
W-8 changes, a new Form W-8 must be filed within 30 days of the change.
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED
INCOME-FORM 4224
A non-U.S. person, as defined below, including a non-U.S.
corporation or bank with a U.S. branch, for which the interest income is
effectively connected with its conduct of a trade or business in the United
States, can obtain an exemption from the withholding tax by filing Form 4224,
Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States.
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN
TREATY COUNTRIES-FORM 1001
A-4
<PAGE>
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. Form
1001 may be filed by securityholders or their agent.
EXEMPTION FOR U.S. PERSONS-FORM W-9
U.S. persons can obtain a complete exemption from the
withholding tax by filing Form W-9 "Payer's Request for Taxpayer Identification
Number and Certification".
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE
The Owner of a global security or, in the case of a Form 1001
or a Form 4224 filer, his agent, files by submitting the appropriate form to the
person through whom it holds, the clearing agency, in the case of persons
holding directly on the books of the clearing agency. Form W-8 and Form 1001 are
effective for three calendar years and Form 4224 is effective for one calendar
year.
On April 22, 1996, the IRS proposed regulations relating to
withholding, backup withholding and information reporting that, if adopted in
their current form would, among other things, unify current certification
procedures and forms and clarify reliance standards. The regulations are
proposed to be effective for payments made after December 31, 2000 but provide
that securities issued on or before the date that is 60 days after the proposed
regulations are made final will continue to be valid until they expire. Proposed
regulations, however, are subject to change prior to their adoption in final
form.
A U.S. PERSON is:
(1) a citizen or resident of the United States;
(2) a corporation, partnership or other entity organized in or
under the laws of the United States or any political subdivision
thereof;
(3) an estate that is subject to U.S. federal income tax
regardless of the source of its income; or
(4) a trust if a court within the United States can exercise
primary supervision over its administration and at least one United
States fiduciary has the authority to control all substantial decisions
of the trust.
A NON-U.S. PERSON is any person who is not a U.S. person.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of the securities. Investors
are advised to consult their
A-5
<PAGE>
own tax advisors for specific tax advice concerning their holding and disposing
of the securities.
A-6
<PAGE>
================================================================================
<TABLE>
<S> <C>
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
AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-__ securities in any
state where the offer or sale is not permitted.
-------------------
TABLE OF CONTENTS PAGE $__________ CLASS A-1 _____%
----
PROSPECTUS SUPPLEMENT ASSET BACKED NOTES
Summary.......................................................S-6
Risk Factors..................................................S-10 $__________ CLASS A-2 _____%
The Company/Servicer..........................................S-11 ASSET BACKED NOTES
The Seller....................................................S-11
The Issuer....................................................S-12 $__________ CLASS A-3 _____%
The Owner Trustee.............................................S-13 ASSET BACKED NOTES
The Indenture Trustee.........................................S-14
The Trust Property............................................S-14 $__________ CLASS A-4 _____%
The Company's Automobile Financing Program....................S-16 ASSET BACKED NOTES
The Automobile Loans..........................................S-17
Yield and Prepayment Considerations...........................S-23
The insurer...................................................S-29
Description of the Notes......................................S-31
Description of the Purchase Agreements and the Trust
Documents....................................................S-35
The Policy....................................................S-47 AFS FUNDING CORP.
Material Federal Income Tax Consequences......................S-49 Seller
State and Local Tax Considerations............................S-52
ERISA Considerations..........................................S-52
Legal Investment..............................................S-53 [AMERICREDIT FINANCIAL
Ratings.......................................................S-54 SERVICES LOGO]
Underwriting..................................................S-54 Servicer
Experts.......................................................S-55
Legal Opinions................................................S-56
Report of Independent Public Accountants......................S-57
Glossary......................................................S-60 PROSPECTUS SUPPLEMENT
Global Clearance Settlement and
Tax Documentation Procedures..............................Annex 1
PROSPECTUS
Important Information............................................2
Summary of Prospectus............................................4 [UNDERWRITERS]
Risk Factors....................................................14
Where You Can Find More Information.............................17
The Company and the Servicer....................................17
The Trustees....................................................17
The Issuers.....................................................17
Composition of the Trust Property...............................18
The Automobile Loans............................................19
AmeriCredit's Automobile Financing Program......................21
Pool Factors....................................................23
Use of Proceeds.................................................23
Description of the Securities...................................24
Description of the Trust Agreements.............................30
Material Legal Aspects of the Automobile Loans..................36
Material Tax Considerations.....................................41
State Tax Considerations........................................41
ERISA Considerations............................................41
Method of Distribution..........................................42
Legal Opinions..................................................43
Financial Information...........................................44
Until [90] days after the date of this prospectus supplement, all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a
prospectus supplement and the prospectus to which it relates. This
is in addition to the dealers' obligation to deliver a prospectus
supplement and the related prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
</TABLE>
================================================================================
<PAGE>
PROSPECTUS SUPPLEMENT
(TO THE PROSPECTUS DATED ____, 2000)
AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-__
ISSUER
AFS FUNDING CORPORATION
SELLER
AMERICREDIT FINANCIAL SERVICES, INC.
SERVICER
--------------------------------------------------------------------------------
You should read the section entitled "Risk Factors" on page S-9 of this
prospectus supplement and consider these factors before making a decision to
invest in these securities.
Neither these certificates nor the auto loans will be insured or guaranteed by
any governmental agency or instrumentality.
Retain this prospectus supplement for future reference. This prospectus
supplement may be used to offer and sell the certificates only if accompanied by
the prospectus.
--------------------------------------------------------------------------------
THE CERTIFICATES-
o Represent beneficial ownership interest in the assets of the
issuer;
o The assets of the issuer will include a pool of "non-prime"
automobile loans secured by new and used automobiles, light
trucks and vans. "Non-prime" automobile loans are automobile
loans made to borrowers with limited credit histories or
modest incomes or who have experienced prior credit
difficulties;
o Receive monthly distributions beginning on ________; and
o Currently have no trading market.
CREDIT ENHANCEMENT
o For the Class A Certificates, the overcollaterization, and
the Class B Certificates;
o For the Class B Certificates, the overcollaterization; and
o For the Class A Certificates [and the Class B Certificates] a
financial guarantee insurance policy issued by Financial
Security Assurance, Inc. unconditionally or irrevocably
guaranteeing timely payment of interest and principal.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
ISSUANCE PASS-THROUGH FINAL SCHEDULED INITIAL PUBLIC UNDERWRITING NET
AMOUNT RATE DISTRIBUTION DATE OFFERING PRICE(1) DISCOUNT PROCEEDS(2)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A Certificates
-------------------------------------------------------------------------------------------------------------------------------
Class B Certificates
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Initial public offering price is before adding accrued interest, if
any, from ___________.
(2) Net proceeds are before deducting expenses, estimated to be
$___________.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[UNDERWRITERS]
The date of this prospectus supplement is____.
<PAGE>
IMPORTANT NOTICE ABOUT THE INFORMATION PRESENTED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
o We provide information to you about the certificates in two separate
documents that progressively provide more detail: (1) the accompanying
prospectus, which provides general information, some of which may not apply
to your class of certificates, and (2) this prospectus supplement, which
describes the specific terms of your class of certificates.
o This prospectus supplement does not contain complete information about the
offering of the certificates. Additional information is contained in the
prospectus. We suggest that you read both this prospectus supplement and
the prospectus in full. We cannot sell the certificates to you unless you
have received both this prospectus supplement and the prospectus.
o If the prospectus contemplates multiple options, you should rely on the
information in this prospectus supplement as to the applicable option.
o We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following table of contents and the table
of contents included in the accompanying prospectus provide the pages on
which these captions are located.
WHERE YOU CAN FIND MORE INFORMATION
AmeriCredit Financial Services, Inc. has filed with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933,
as amended, with respect to the certificates offered under this prospectus
supplement. This prospectus supplement and the prospectus, which form a part of
the registration statement, omit certain information contained in the
registration statement under the rules and regulations of the Commission.
A number of items will be incorporated by reference into the
registration statement. See "Incorporation by Reference" in the prospectus for
a description of incorporation by reference.
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.
The consolidated financial statements of Financial Security Assurance
Inc. and its subsidiaries included in, or as exhibits to, the following
documents which have been filed with the commission by Financial Security
Assurance Holdings Ltd., are hereby incorporated by reference in this prospectus
supplement:
(a) Annual Report on form 10-K for the year ended December 31,
____, and
(b) Quarterly Report on Form 10-Q for the period ended _______,
____.
S-2
<PAGE>
All financial statements of Financial Security Assurance Inc., included
in documents it filed under Section 13(a), 13(c), 14, or 15(d) of the Securities
and Exchange Act of 1934 subsequent to the date of this prospectus supplement
and prior to the termination of the offering of the certificates, are considered
incorporated by reference in this prospectus supplement and to be a part of this
prospectus supplement from the respective dates of filing of the documents.
We will provide you with copies of these reports, at no charge, if you
write to us at: AmeriCredit Financial Services, Inc., 801 Cherry Street, Fort
Worth, Texas 76102; telephone (817) 332-7000.
AmeriCredit Financial Services, Inc. on behalf of the issuer hereby
undertakes that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the issuer's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities and Exchange Act of 1934 and each filing of
the financial statements of Financial Security Assurance Inc. included in or as
an exhibit to the annual report of Financial Security Assurance Holdings Ltd.
filed pursuant to Section 13(a) or Section 15(d) of the Securities and Exchange
Act of 1934 that is incorporated by reference in the registration statement will
be considered a new registration statement relating to the certificates offered
by this prospectus supplement, and the offering of the certificates at that time
will be considered an initial bona fide offering.
S-3
<PAGE>
TABLE OF CONTENTS
Page
----
Summary...............................................6
Risk Factors.........................................11
The Company/Servicer.................................14
The Seller...........................................14
The Issuer...........................................15
General..........................................15
The Trust Property...................................15
The Company's Automobile Financing Program...........17
The Automobile Loans.................................19
General..........................................19
Eligibility Criteria.............................19
Composition......................................21
Yield and Prepayment Considerations..................27
Delinquency and Loan Loss Information............31
Description of the Certificates......................36
General..........................................36
Payments of Principal............................38
Mandatory Redemption.............................39
Optional Redemption..............................39
Events of Default................................39
Description of The Purchase Agreements And the Trust
Documents..........................................41
Sale and Assignment of automobile Loans..........41
Accounts.........................................41
Servicing Compensation and Trustees' Fees........43
Certain Allocations..............................44
Distributions....................................45
Distribution Date Calculations and Payments....45
Insured Distribution Date Calculations and
Payments.....................................46
Statements to Certificateholders.................46
Credit Support...................................47
Spread Account.................................47
Overcollateralization..........................48
Servicer Termination Event.......................48
Rights Upon Servicer Termination Event...........50
Waiver of Past Defaults..........................50
Amendment........................................50
Material Federal Income Tax Consequences.............54
Tax Status of the Trust........................55
General........................................55
Income on the automobile Loans.................55
Stripped Bonds and Stripped Coupons............56
Accrual of Original Issue Discount.............56
Premium........................................57
Sale of a Certificate..........................58
Foreign Certificateholders.....................58
Information Reporting and Backup Withholding...58
New Withholding Regulations....................59
ERISA Considerations.................................59
Ratings..............................................60
Underwriting.........................................60
Experts..............................................62
Legal Opinions.......................................62
Glossary.............................................63
Annex I Clearance, Settlement and Tax
Documentation Procedures.....................1
S-4
<PAGE>
SUMMARY
o This summary highlights selected information from this prospectus
supplement and does not contain all of the information that you need to
consider in making your investment decision. To understand all of the
terms of the offering of the certificates, read carefully this entire
prospectus supplement and the accompanying prospectus.
o This summary provides an overview of certain calculations, cash flows
and other information to aid your understanding. To understand all of
the terms of the offering, carefully read this entire document.
o There are material risks associated with an investment in the
certificates. You should read the section entitled "Risk Factors" on
page S-__ of this prospectus supplement and page ___ of the
accompanying prospectus, and consider the risk factors described in
those sections, before making a decision to invest in the certificates.
AUTOMOBILE LOAN-BACKED CERTIFICATES
SERIES 2000
ISSUER/TRUST
o AmeriCredit Automobile Receivables Trust _____, a New York common law
trust.
COMPANY/SERVICER
o AmeriCredit Financial Services, Inc., a Delaware corporation.
o The company will sell to the issuer automobile loans purchased by the
company from dealers or made directly by the company to consumers. In
the case of loans purchased from dealers, the original credit extension
is made by the dealer and the loan subsequently assigned to the
company. In the case of loans made directly to consumers, the dealer is
not involved in the original extension of credit.
o The company's address is 801 Cherry Street, Fort Worth, Texas 76102.
o The company will service the automobile loans.
SELLER
o AFS Funding Corp., a Nevada corporation.
o The seller's address is 1325 Airmotive Way, Reno, Nevada 89502.
INSURER
o Financial Security Assurance Inc., a New York financial guaranty
insurance company.
TRUSTEE
o [Name of trustee], a national banking association.
STATISTICAL CALCULATION DATE
o __________.
o This is the date used for preparing the statistical information used in
this prospectus supplement.
INITIAL CUTOFF DATE
o The opening of business on __________.
o The issuer will receive payments due on, or received regarding, the
automobile loans on or after this date.
CLOSING DATE
o On or about __________.
DISTRIBUTION DATE
o When the company is the servicer, the [5th] day of each month, or, if
the [5th] day is not a business day, on the following business day.
However, the
S-5
<PAGE>
distribution date will never be before the [third] business day of the
month. The first distribution date will be _____.
o If the company is not the servicer, the distribution date will become
the [twelfth] day of each month, or if the [twelfth] day is not a
business day, the next following business day.
FINAL SCHEDULED DISTRIBUTION DATE
If the certificates have not already been paid in full, the issuer will pay the
outstanding principal amount of the certificates in full on the following dates:
<TABLE>
<CAPTION>
CLASS FINAL SCHEDULED DISTRIBUTION DATE
----- ---------------------------------
<S> <C>
A
B
</TABLE>
DENOMINATIONS
o The issuer will issue the certificates in minimum denominations of
$1,000 and integral multiples of $1,000.
NO LISTING
o The certificates will not be listed on any exchange.
INTEREST
o On each distribution date, the issuer will pay interest at the
applicable certificate interest rate that accrued during the prior
interest accrual period.
o Interest on the [Class A Certificates] [and the Class B Certificates]
will be calculated on the basis of a 360-day year [and the actual
number of days elapsed in the interest accrual period] [consisting of
twelve 30-day months].
o Amounts to be paid to holders of the certificates will be shared in
proportion to their interest in the issuer.
PRINCIPAL
o On each distribution date, the issuer will pay principal equaling:
(1) the amount of principal paid by obligors on the automobile
loans during the prior month, plus
(2) the amount of excess interest collected on the automobile
loans during the prior month.
o The principal payments will be allocable between the Class A
Certificates and the Class B Certificates PRO RATA, and paid to the
individual certificateholder in proportion to their percentage
interest, until the outstanding principal amount of that class is paid
in full.
SEQUENTIAL PAY FEATURE
On each distribution date, the issuer will pay principal and interest in the
following priority:
o First, to the Class A Certificateholders, the Class A Certificate
interest;
o Second, to the Class A Certificateholders, the Class A
Certificateholders principal;
o Third, to the Class B Certificateholders, the Class B Certificate
interest; and
o Fourth, to the Class B Certificateholders, the Class B Certificate
principal
THE TRUST ASSETS
The issuer's assets will include:
S-6
<PAGE>
o a pool consisting primarily of "non-prime" automobile loans for new and
used automobiles, light duty trucks and vans;
o monies received from the automobile loans on or after __________;
o the security interests in the underlying vehicles;
o the loan files;
o all rights to proceeds from claims on insurance policies covering the
vehicles or the obligors;
o all rights to proceeds from liquidating the automobile loans;
o the seller's rights against dealers under agreements between the
company and the dealers;
o the bank accounts opened in connection with this offering;
o all proceeds from the items described above; and
o rights under the transaction documents.
"Non-prime" automobile loans, the principal component of the trust assets, is a
common term used to describe loans made to borrowers with limited credit
histories or modest incomes or who have experienced prior credit difficulties.
THE AUTOMOBILE LOAN POOL
The automobile loans are primarily made to individuals with less than perfect
credit. Automobile loans are originated by the company in two ways:
purchasing loans without recourse from an automobile dealer or making loans
directly to consumers. In the case of loans purchased from dealers, the
original credit extension is made by the dealer and the loan subsequently
assigned to the company. In the case of loans made directly to consumers, the
dealer is not involved in the original extension of credit.
PRE-FUNDING FEATURE
o The trustee will hold $__________ of the proceeds of the certificates
in a pre-funding account which the issuer will use to purchase
additional automobile loans. The company will have originated these
additional automobile loans.
o The issuer will purchase these additional automobile loans on or before
__________.
STATISTICAL INFORMATION
As of __________, the automobile loans in the pool have:
o an aggregate principle balance of $__________;
o a weighted average annual percentage rate of approximately [_____]%;
o a weighted average original maturity of approximately [___] months;
o a weighted average remaining maturity of approximately [___] months;
and
o a remaining term of not more than [___] months and not less than [___]
months each.
OPTIONAL REDEMPTION
o If the pool balance declines to 10% or less of its original level the
company may redeem all the outstanding Class A and B Certificates. If a
redemption occurs, you will receive a final payment that equals the
unpaid principle amount of the certificates plus accrued interest.
MANDATORY REDEMPTION
o If any funds deposited in the pre-funding account remain on [date on
which the funding period ends], the company will redeem certificates
equaling the amounts in the pre-funding account.
o The aggregate principal amount of each class of certificates to be
redeemed will equal the class' pro rata share of the amount remaining
in the account. Each class' pro rata share will be based on the current
principal amount of each class of
S-7
<PAGE>
certificates. However, if the amount to be redeemed is $__________ or
less, the trustee will pay the redemption amount according to the
certificates "sequential pay" feature, and not PRO RATA.
o The certificates may be accelerated and subject to immediate payment
upon the occurrence of an event of default. So long as the insurer is
not in default, it will have the power to declare an event of default.
However, the policy does not guarantee payment of any amounts that
become due on an accelerated basis, unless the insurer elects, in its
sole discretion, to pay those amounts in whole or in part.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes:
In the opinion of Dewey Ballantine LLP, the trust will be treated as a grantor
trust for federal income tax purposes and will not be subject to federal income
tax. Owners of beneficial interests in the certificates will report their pro
rata share of all income earned on the automobile loans, other than amounts if
any, treated as stripped coupons. Subject to certain limitations in the case of
such owners who are individuals, trusts or estates, may deduct their pro rata
share of reasonable servicing and other fees.
ERISA CONSIDERATIONS
Subject to the important considerations described under "ERISA Considerations"
in this prospectus supplement, pension, profit-sharing and other employee
benefit plans may purchase the certificates. You may wish to consult with your
counsel regarding the applicability of the particular provisions of ERISA,
before purchasing a certificate.
RATINGS
o The issuer will not issue the certificates unless they have been
assigned the ratings stated below:
<TABLE>
<CAPTION>
RATING
STANDARD & POOR'S MOODY'S
----------------- -------
<S> <C> <C>
Class A Certificates
Class B Certificates
</TABLE>
----------
o You should know that the ratings could be lowered, qualified or
withdrawn by the rating agencies.
We refer you to "Ratings" in this prospectus supplement for more information
regarding the ratings assigned to the certificates.
S-8
<PAGE>
RISK FACTORS
THIS SECTION AND THE SECTION UNDER THE CAPTION "RISK FACTORS" IN THE
ACCOMPANYING PROSPECTUS DESCRIBE THE PRINCIPAL RISK FACTORS ASSOCIATED WITH
AN INVESTMENT IN THE CERTIFICATES. YOU SHOULD CONSIDER THESE ADDITIONAL
FACTORS IN CONNECTION WITH THE PURCHASE OF THE CERTIFICATES:
THE COMPANY MAY BE UNABLE TO ORIGINATE ENOUGH The ability of the company to
AUTOMOBILE LOANS TO USE ALL MONEYS IN THE originate sufficient
PRE-FUNDING ACCOUNT AND THEREFORE YOU MAY BE additional automobile loans
EXPOSED TO REINVESTMENT RISK. may be affected by a variety
of social and economic factors
including:
o interest rates,
o unemployment levels,
o the rate of inflation,
and
o consumer perception of
economic conditions
generally.
If the company does not
originate sufficient
additional automobile loans
then the money deposited in
the pre-funding account will
not be used up and a mandatory
redemption of a portion of the
certificates could result.
If a mandatory redemption
occurs, you will receive a
principal prepayment. You will
bear the risk of reinvesting
any prepayment.
WE CANNOT PREDICT THE RATE AT WHICH THE Obligors can prepay their
CERTIFICATES WILL AMORTIZE. automobile loans. The rate of
prepayments may be influenced
by economic, social and other
factors. In addition, under
certain circumstances, the
seller and the company are
obligated to purchase
automobile loans as a result
of breaches of representations
and/or covenants.
The trust contains an
overcollateralization feature
that results in accelerated
principal payments to
certificateholders, amortizing
the certificates more quickly
than the automobile loan pool.
The company also has the
right, to purchase the
automobile loans when the pool
balance is 10% or less of the
original pool balance.
S-9
<PAGE>
Geographic concentrations of automobile loans Adverse economic conditions or
may increase concentration risks. other factors affecting any
state or region could increase
the delinquency or loan loss
experience of the automobile
loans. As of ________ ___,
2000 obligors with respect to
approximately _____%, _____%,
_____% of the automobile loans
based on the automobile loans'
remaining principal balance
were located in ________,
________, _________,
respectively.
[No other state accounts for
more than 5% of the
automobile loans.]
The trust property contains derivatives which The trust property will
will only pay under limited circumstances, may include an interest rate cap
not be replaced in the event of a default, and agreement under which _______
which may not be independently enforced by the will pay to the trust the
investors. amount by which LIBOR exceeds
an annual rate of ___%, based
on a notional schedule. The
notional schedule may be less
or greater than the aggregate
certificate balance then
outstanding, and, if it is
less, you may experience a
shortfall. In the event that
________ defaults on its
payment obligation, ________
is required to fund a
replacement cap agreement at
no cost to the trust, although
________ may not be able to do
so. If ________ is in default
under the cap agreement, and,
the trustee and FSA, and not
the certificateholders, will
be able to enforce the cap
agreement.]
The Class B Certificates are subordinated Distributions of interest and
certificates, and the risk of loss or delay in principal on the Class B
distributions is greater than on the Class A Certificates will be
Certificates. subordinated in priority of
payment to interest and
principal due on the Class A
Certificates. Consequently,
the Class B Certificateholders
will not receive any
distributions on distribution
date unless the full amount of
interest and principal due on
the Class A Certificates on
that distribution date has
been distributed to the Class
A Certificateholders. This
subordination has the effect
of increasing the likelihood
of payment on the Class A
Certificates and therefore
decreasing the likelihood of
payment on the Class B
Certificates.
The certificates are asset-backed debt and the The sole sources for repayment
issuer has only limited assets. of the certificates are
payments on the automobile
loans, amounts on deposit
in the pre-funding account,
other cash accounts held by
[Name of] trustee] and
payments made under the
insurance policy. The money
in the pre-funding account
will be used solely to
purchase additional
automobile loans and is not
available to cover losses
on the automobile loan
pool. The capitalized
interest account is
designed to cover
obligations of the issuer
relating to that portion of
its assets not invested in
the automobile loan pool
and is not designed to
provide protection against
losses on the automobile
loan pool. Furthermore, if
Financial Security
Assurance Inc. defaults in
its obligations under the
insurance policy, the
issuer will depend on
current distributions on
the automobile loan pool
and amounts, if any,
available in certain
collateral accounts
maintained for the benefit
of Financial Security
Assurance Inc. to make
payments on the
certificates.
S-10
<PAGE>
RATINGS ON CERTIFICATES ARE DEPENDENT UPON THE The ratings of the
INSURER'S CREDITWORTHINESS. certificates will depend
primarily on the
creditworthiness of the
insurer as the provider of the
financial guarantee insurance
policy relating to the
certificates. There is a risk
that if the insurer's
financial strength ratings are
reduced, the rating agencies
may reduce the certificates'
ratings.
EVENTS OF DEFAULT UNDER THE POOLING AND Following the occurrence of an
SERVICING AGREEMENT MAY RESULT IN AN event of default, Financial
ACCELERATION. Security Assurance Inc. may,
at its option, elect to cause
the liquidation of the assets
of the issuer, in whole or in
part, and pay all or any
portion of the outstanding
amount of the certificates,
plus accrued interest thereon.
S-11
<PAGE>
USE OF PROCEEDS
The issuer will use the proceeds from issuing the certificates to:
o pay the seller the automobile loan purchase price;
o to deposit the pre-funded amount into the pre-funding account;
and
o to fund the capitalized interest account.
The seller or its affiliates may use the net proceeds to pay their
debt, including "warehouse" debt secured by the automobile loans prior to their
sale to the issuer. This warehouse debt may have been owed to one or more of the
underwriters or their respective affiliates.
THE COMPANY/SERVICER
AmeriCredit Financial Services, Inc., is a wholly-owned, and the
primary operating subsidiary of AmeriCredit Corp., a Texas corporation the
common shares of which are listed on the New York Stock Exchange. The company
was incorporated in Delaware on July 22, 1992. The company's executive offices
are located at 801 Cherry Street, Fort Worth, Texas 76102; telephone (817)
332-7000.
The company purchases and services automobile loans which are
originated and assigned to it by automobile dealers. The company will sell and
assign the automobile loans to the seller.
The company will service the automobile loans and will be compensated
for acting as the servicer. As servicer, the company will hold the automobile
loans, as a custodian. Prior to taking possession of the automobile loans in its
custodial capacity, the company 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
Texas and California.
THE SELLER
AFS Funding Corp., the company's wholly-owned subsidiary, is a Nevada
corporation, incorporated in April, 1996. The seller's address is 1325 Airmotive
Way, Reno, Nevada 89502; telephone (702) 322-2221.
The seller's purpose is limited to purchasing automobile loans from the
company and transferring the loans to third parties and any activities
incidental or necessary for this purpose. The seller has structured this
transaction so that the bankruptcy of the company
S-12
<PAGE>
will not cause a court to consolidate the seller's assets and liabilities with
the company's. The seller has received a legal opinion, subject to various
facts, assumptions and qualifications, opining that if the company was adjudged
bankrupt, it would not be a proper exercise of a court's equitable discretion to
disregard the separate corporate existence of the seller and to require the
consolidation of the seller's assets and liabilities with those of the company.
However, there can be no assurance that a court would not conclude that the
assets and liabilities of the seller should be consolidated with those of the
company.
Delays in distributions on the certificates and possible reductions in
distribution amounts could occur if a court decided to consolidate the seller's
assets with the company's, or if a filing were made under any bankruptcy or
insolvency law by or against the seller, or if an attempt were made to litigate
any of those issues.
THE ISSUER
GENERAL
The issuer is a New York common law trust formed under a pooling and
servicing agreement to consummate the transactions described in this prospectus
supplement. The issuer will not engage in any activity other than:
o acquiring, holding and managing the automobile loans and its
other assets;
o issuing the certificates;
o making payments on the certificates; and
o engaging in other activities that are necessary and suitable
to the above listed activities.
The issuer will use the proceeds from the initial sale of the
certificates to purchase the initial automobile loans from the seller and to
fund the deposits in the pre-funding account, collateral accounts maintained for
the benefit of the insurer, and the capitalized interest account.
THE TRUSTEE
[Name of the Trustee] will be the trustee under the pooling and
servicing agreement. [Name of the Trustee] is a [New York] banking corporation,
the principal offices of which are located at [address].
THE TRUST PROPERTY
The trust property will include, among other things, the following:
S-13
<PAGE>
o initial, primarily "non-prime" quality, automobile loans
secured by new and used automobiles, light duty trucks and
vans;
o monies received (a) for the initial automobile loans, on or
after _____ the initial cutoff date, or (b) for the
subsequent, primarily "non-prime" quality, automobile loans,
after the related cutoff date;
o amounts that may be held in the lockbox accounts, the
collection account, the pre-funding account, the capitalized
interest account and other bank accounts opened in connection
with this offering, if any;
o an assignment of the security interests of the servicer and in
the financed vehicles;
o an assignment of the rights of the seller against dealers
under agreements between the servicer and dealers;
o 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;
o the automobile loans files; and
o other rights under the trust documents.
The pre-funding account will initially be funded with $________, which
is _____% of the initial certificate balance. Prior to the time the funds in the
pre-funding account are applied to the purchases of the additional automobile
loans, those amounts will be invested in high-quality short-term investment,
such as "A-1/P-1" commercial paper, or government money market funds.
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 initial automobile loans will be purchased by the
seller under this purchase agreement on or prior to the date of issuance of the
certificates.
The issuer will purchase additional automobile loans and related
property from the seller on or before __________, from funds on deposit in the
pre-funding account. These subsequent automobile loans will be purchased by the
seller from the servicer pursuant to one or more subsequent purchase agreements
between the seller and the servicer.
The initial automobile loans were, and the subsequent automobile loans
were or will be, originated by dealers according to the servicer's requirements,
have been or will be so assigned, and evidence or will evidence the indirect
financing made available to the obligors. Dealer agreements may provide for
repurchase or recourse against the dealer in the event of a breach of a
representation or warranty by the dealer.
The pool balance represents:
(a) the aggregate principal balance of the automobile loans at the
end of the preceding calendar month;
S-14
<PAGE>
plus
(b) any amounts in the pre-funding account;
minus
(c) all payments from obligors and any purchase amounts the seller
or servicer must remit for the month and all losses, including
Cram Down Losses during the month.
Under the pooling and servicing agreement, the issuer will grant a
security interest in the trust property to the trust collateral agent for the
trustee's benefit on the certificateholders' behalf and for the insurer's
benefit in support of the obligations owed to the insurer. Any proceeds of the
security interest will be distributed according to the pooling and servicing
agreement. The insurer will be entitled to the distributions only after payment
of amounts owed to, among others, certificateholders.
An automobile loan's principal balance, as of any date, is the sum of:
(a) the amount financed;
minus
(x) that portion of all amounts received on or prior to
that date and allocable to principal according to the
automobile loan's terms;
plus
(y) any CRAM DOWN LOSS for the automobile loan;
plus
(b) the accrued and unpaid interest on the automobile loan as of
that date.
THE COMPANY'S AUTOMOBILE FINANCING PROGRAM
Through its branch offices and marketing representatives, the company
provides funding for franchised and independent automobile dealers to finance
their customers' purchase of new and used automobiles, light duty trucks and
vans. The dealers originate automobile loans which conform to the company's
credit policies. The company then purchases the automobile loans without
recourse to the dealers. The company also services the automobile loans that it
purchases.
The company '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 has not established a credit history.
Because the company serves consumers who are unable to
S-15
<PAGE>
meet the credit standards imposed by most traditional automobile financing
sources, it charges a higher interest at rates than most traditional automobile
financing sources. The servicer also expects to sustain a higher level of
delinquencies and credit losses than that experienced by traditional automobile
financing sources since it provides financing in a relatively high risk market.
The company has established relationships with a variety of dealers
located in areas where it has branch offices or marketing representatives. While
the company occasionally finances purchases of new autos, a substantial majority
of the company's automobile loans were for used automobiles.
Of the loans the company purchased during the year ended June 30,
_____:
o manufacturer-franchised dealers with used automobile
operations originated approximately __%, and
o independent dealers specializing in used automobile sales
originated approximately __%.
Of the loans the company purchased in the nine months ended __________:
o manufacturer-franchised dealers with used automobile
operations originated approximately __%, and
o independent dealers specializing in used automobile sales
originated approximately __%.
The servicer purchased loans from __________ dealers during the year
ended June 30, _____ and from __________ dealers during the nine months ended
__________.
To mitigate credit risk, the company typically charges dealers an
acquisition fee when it purchases the loans. Additionally, dealers typically
make representations as to the automobile loan's validity and compliance with
relevant laws, and indemnify the company against any claims, defenses and
set-offs that an obligor may assert against the company because of loan's
assignment.
As of __________, the company operated ________ branch offices in
_______ states.
These branch offices solicit dealers for loans and maintain the
company's relationship with the dealers in the branch office's geographic
vicinity.
The company also has marketing representatives covering markets where
the company does not have a branch. The servicer does business in a total of
_______ states.
See "AmeriCredit's Automobile Financing Program" in the prospectus for
a description of the servicer's contract acquisition, servicing and collection
practices.
S-16
<PAGE>
THE AUTOMOBILE LOANS
GENERAL
Automobile loans are originated by the company in two ways: purchasing
loans without recourse from automobile dealers or making loans directly to
consumers. In the case of loans purchased from dealers, the original credit
extension is made by the dealer and the loans subsequently assigned to the
company. In the case of loans made directly to consumers, the dealer is not
involved in the original extension of credit. The automobile loans were made to
individuals with less than perfect credit due to factors, including:
o the manner in which these individuals have handled previous
credit;
o the limited extent of their prior credit history; and/or
o their limited financial resources.
ELIGIBILITY CRITERIA
The automobile loans included in the trust property were or will be
selected according to several criteria, including those specified under
"AmeriCredit's Automobile Financing Program -- Contract Acquisition" in the
accompanying prospectus. In addition, as of the initial cut-off date the initial
automobile loans were selected from the company's portfolio of automobile loans
based on the following criteria:
(a) each initial automobile loan had a remaining maturity of not
more than [72] months;
(b) each initial automobile loan had an original maturity of not
more than [72] months;
(c) each initial automobile loan had a remaining principal balance
of at least $________ and not more than $__________;
(d) each initial automobile loan has an annual percentage rate of
at least _______% and not more than _______%;
(e) no initial automobile loan was more than [30] days past due;
and
(f) neither the company, any dealer nor anyone acting in their
behalf advanced funds to cause any initial automobile loan to
qualify under clause (e) above.
During the funding period, the seller must purchase the subsequent
automobile loans from the company and then sell them to the issuer. The company
anticipates that the aggregate principal balance of the subsequent automobile
loans will equal $__________. The seller will sell the subsequent automobile
loans to the issuer on the subsequent transfer date and the issuer will pay the
seller the outstanding principal balance of the subsequent automobile loans as
of their respective subsequent cutoff dates, which is the price the seller will
pay the company. The issuer will use the funds in the pre-funding account for
this purpose.
The issuer's obligation to purchase the subsequent automobile loans is
subject to the following conditions:
S-17
<PAGE>
(a) as of each loan's subsequent cut-off date, each subsequent
automobile loan and/or subsequent financed vehicle must
satisfy the automobile loan eligibility criteria specified
under "the automobile loans" in the prospectus and the
criteria listed in this prospectus supplement in clauses (a)
through (e) regarding the initial automobile loans;
(b) the insurer, if there is no insurer default, has approved the
subsequent automobile loans transfer to the issuer;
(c) neither the servicer, nor the seller has selected the
subsequent automobile loans in a manner that any of them
believes is adverse to the interests of the insurer or the
certificateholders;
(d) the servicer and the seller will deliver certain opinions of
counsel regarding the validity of the subsequent automobile
loan transfer; and
(e) Standard & Poor's must confirm that the ratings on the
certificates have not been withdrawn or reduced because of the
subsequent automobile loans transfer to the issuer.
Because the subsequent automobile loans may be originated after the
initial automobile loans, the automobile loan pool's characteristics after the
transfer of subsequent automobile loans to the pool may vary from the initial
pool.
In addition, issuer's obligation to purchase the subsequent automobile
loans is subject to the condition that the automobile loans in the trust,
including the subsequent automobile loans to be transferred, meet the following
criteria:
(a) the automobile loans weighted average annual percentage rate
("APR") is not less than __%;
(b) the automobile loan's weighted average remaining term on the
subsequent cutoff date is not greater than [72] months; and
(c) not more than __% of the obligors on the automobile loans
reside in Texas and California.
The criteria in clauses (a) and (b) will be based:
o on the characteristics of the initial automobile
loans on the initial cutoff date and
o the automobile loans, including the subsequent
automobile loans, on the related subsequent cutoff
date.
The criteria in clause (c) will be based on the obligor's mailing
addresses on:
o the initial automobile loans on the initial cutoff
date and
S-18
<PAGE>
o the subsequent automobile loans on the related
subsequent cutoff dates.
Except for the above described criteria, there are no required
characteristics for the subsequent automobile loans. Therefore, following the
transfer of subsequent automobile loans to the issuer, the aggregate
characteristics of the entire pool of automobile loans included in the trust may
vary in the following respects:
o composition of the automobile loans;
o geographic distribution;
o distribution by remaining principal balance;
o distribution by APR;
o distribution by remaining term; and
o distribution of the automobile loans secured by new
and used vehicles.
COMPOSITION
The statistical information presented in this prospectus supplement is
based on the initial automobile loans as of the statistical calculation date
which is ____________.
o As of the statistical calculation date, the initial
automobile loans have an aggregate principal balance
of $__________.
o As of the initial cutoff date, initial automobile
loans have an aggregate principal balance of
$__________.
The company will acquire additional automobile loans after the
statistical calculation date but prior to the initial cutoff date. In addition
some amortization has occurred prior to the initial cutoff date but after the
statistical calculation date. In addition, some automobile loans included as of
the statistical calculation date have prepaid in full or have been determined
not to meet the eligibility requirements and have not been included in the
automobile loan pool. As a result, the statistical distribution of
characteristics as of the initial cutoff date varies from the statistical
distribution of characteristics as of the statistical calculation date, although
the variance is not material.
The initial automobile loan pool's composition and distribution by APR
and its geographic concentration as of the statistical calculation date is
detailed in the following tables:
S-19
<PAGE>
COMPOSITION OF THE INITIAL AUTOMOBILE LOANS
AS OF THE STATISTICAL CALCULATION DATE
<TABLE>
<CAPTION>
NEW USED TOTAL
--- ---- -----
<S> <C> <C> <C>
Aggregate principal balance
Number of automobile loans
Percent of Aggregate principal
balance
Average principal balance
RANGE OF PRINCIPAL BALANCES
Weighted Average APR
RANGE OF APRS
Weighted Average Remaining Term
RANGE OF REMAINING TERMS
Weighted Average Original Term
RANGE OF ORIGINAL TERMS
</TABLE>
----------
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-20
<PAGE>
DISTRIBUTION OF THE INITIAL AUTOMOBILE LOANS BY APR
AS OF THE STATISTICAL CALCULATION DATE
<TABLE>
<CAPTION>
APR RANGE AGGREGATE PRINCIPAL % OF AGGREGATE NUMBER OF % OF TOTAL NUMBER
BALANCE PRINCIPAL AUTOMOBILE LOANS OF AUTOMOBILE
BALANCE LOANS
--------- ------------------- -------------- ---------------- -----------------
<S> <C> <C> <C> <C>
8.000 to 8.999% $ % %
9.000 to 9.999
10.000 to 10.999
11.000 to 11.999
12.000 to 12.999
13.000 to 13.999
14.000 to 14.999
15.000 to 15.999
16.000 to 16.999
17.000 to 17.999
18.000 to 18.999
19.000 to 19.999
20.000 to 20.999
21.000 to 21.999
22.000 to 22.999
23.000 to 23.999
24.000 to 24.999
25.000 to 25.999
26.000 to 26.999
27.000 to 27.999
28.000 to 28.999
29.000 to 29.999
--------------- ------- ----------- --------
TOTAL $ % %
=============== ======= =========== ========
</TABLE>
----------
Aggregate principal balances include some portion of accrued interest.
Percentages may not add to 100% because of rounding.
S-21
<PAGE>
DISTRIBUTION OF THE INITIAL AUTOMOBILE LOANS BY GEOGRAPHIC LOCATION
OF OBLIGOR AS OF THE STATISTICAL CALCULATION DATE
<TABLE>
<CAPTION>
STATE AGGREGATE PRINCIPAL % OF AGGREGATE NUMBER OF AUTOMOBILE % OF TOTAL NUMBER OF
BALANCE PRINCIPAL BALANCE LOANS AUTOMOBILE LOANS
----- ------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Alabama $ % %
Arizona
California
Colorado
Connecticut
Delaware
Florida
Georgia
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
Tennessee
Texas
Utah
Virginia
Washington
West Virginia
Wisconsin
Other(3)
--------------- ------- ------------- -------
TOTAL $ % %
=============== ======= ============= =======
</TABLE>
----------
Aggregate principal balances include some portion of accrued interest.
Percentages may not add to 100% because of rounding.
S-22
<PAGE>
"Other" includes states with Aggregate principal balances less than
$2,000,000.
S-23
<PAGE>
All the automobile loans provide the obligor to pay:
o a specified total amount;
o in substantially equal monthly installments on each due date.
Each obligor's total payment amount equals the amount financed plus
interest for the automobile loan's 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 automobile loan as of its origination date.
Under a simple interest automobile loan, the amount of an obligor's
fixed level installment payment allocated to interest is equal to the product of
the fixed interest rate on the loan, typically the APR, multiplied by the
elapsed time period, expressed as a fraction of a year, since the preceding loan
payment. The obligor's remaining payment amount is allocated to reduce the
principal amount financed.
The issuer will account for all automobile loans, including simple
interest automobile loans and precomputed automobile loans, as if those
automobile loans amortized under the simple interest method. The servicer will
not deposit amounts it receives on a full prepayment of a precomputed automobile
loan in excess of the loan's outstanding principal balance and accrued interest
to the collection account but will retain any excess amounts -- minus amounts
required to be rebated to the obligor -- as supplemental servicing fees.
S-24
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
Obligors may prepay any automobile loan at any time. If an obligor
prepays an automobile loan, the actual weighted average life of the automobile
loans may be shorter than the scheduled weighted average life.
These prepayments include:
o liquidations due to default, and
o proceeds from credit life, credit disability, and casualty
insurance policies.
Weighted average life means the average amount of time during which
each dollar of principal on an automobile loan is outstanding.
The prepayment rate on the automobile loans may be influenced by a
variety of economic, social, and other factors, including the fact that an
obligor may not sell or transfer the financed vehicle without the servicer's
consent. The servicer believes that the actual prepayment rate will result in
the automobile loans having a substantially shorter weighted average life than
their scheduled weighted average life.
The rate of payment of principal of the certificates will depend on the
rate of payment, including prepayments, of the automobile loan's principal
balance. As a result, final payment of any class of certificates could occur
significantly earlier than the class' final scheduled distribution date.
Certificateholders will bear any reinvestment risk resulting from the early
payment on the certificates.
Auto loan prepayments can be measured relative to a prepayment standard
or model. The model used in this prospectus supplement, the absolute prepayment
model "ABS," represents an assumed prepayment rate of each month relative to the
original number of automobile loans in the pool. ABS further assumes that all
the automobile loans are the same size and pay at the same rate and that each
automobile loan in each month of its life will either be paid as scheduled or be
prepaid in full. For example, in a pool of automobile loans originally
containing 10,000 automobile loans, a 1% ABS rate means that 100 automobile
loans prepay each month. ABS does not purport to be an historical description of
prepayment experience or a prediction of the anticipated rate of prepayment of
any pool of automobile loans, including the automobile loans.
The tables captioned "Percent of Initial Certificate Principal Balance
at Various ABS Percentages" have been prepared on the basis of the following
assumptions:
o the trust includes three pools of automobile loans with the
characteristics described in the following table;
o the automobile loans prepay in full at the specified constant
percentage of ABS monthly, with no defaults, losses or
repurchases;
S-25
<PAGE>
o each scheduled monthly payment on the automobile loans is made
on the last day of each month and each month has 30 days;
o the initial principal amount of the certificates is detailed
in this prospectus supplement's cover page;
o interest accrues during each interest period at the following
assumed coupon rates: Class A Certificates, _____%; and Class
B Certificates, _____%;
o payments on the certificates are made on the [5th] day of each
month whether or not a business day;
o the certificates are purchased on __________;
o each automobile loan's scheduled monthly payment has been
calculated on the basis of the assumed characteristics in the
following table so that each automobile loan will amortize in
amounts sufficient to repay its principal balance by its
indicated remaining term to maturity;
o the first due date for each automobile loan is the last day of
the month of the assumed cutoff date for the automobile loan
as detailed in the following table;
o the entire pre-funded amount is used to purchase subsequent
automobile loans;
o the servicer does exercise its repurchase option;
o accelerated principal amounts are paid on each distribution
date until the later of the first distribution date on which
the PRO FORMA CERTIFICATE BALANCE reaches the REQUIRED PRO
FORMA CERTIFICATE BALANCE [and the Class A Certificates are]
paid in full]; and
o the difference between the gross APR and the net APR is equal
to the base servicing fee, and the net APR is further reduced
by the fees due to the trustee, the trust collateral agent,
and the insurer.
<TABLE>
<CAPTION>
POOL AGGREGATE GROSS APR ASSUMED CUTOFF REMAINING TERM SEASONING (IN
PRINCIPAL DATE TO MONTHS)
BALANCE MATURITY
(IN MONTHS)
---- --------- --------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
1 $ %
2
3
Total $ %
</TABLE>
Based on the assumptions described above, the ABS Tables indicate the
percentages of the initial principal amount of the certificates that would be
outstanding after each of the distribution dates shown at various percentages of
ABS and the corresponding weighted average lives of the certificates. The
automobile loans' actual
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<PAGE>
characteristics and performance will differ from the assumptions
used in constructing the ABS Tables. The assumptions used are hypothetical and
have been provided only to give a general sense of how the principal cash flows
might behave under varying prepayment scenarios.
For example it is very unlikely that:
o the automobile loans will prepay at a constant level of ABS
until maturity,
o all of the automobile loans will prepay at the same level of
ABS, or
o the coupon rates on the certificates will remain constant.
The diverse terms of automobile loans could produce slower or faster
principal distributions than indicated in the ABS Tables at the various constant
percentages specified, even if the original and remaining terms to maturity of
the automobile loans are as assumed. Any difference between those assumptions
and the actual characteristics and performance of the automobile loans,
including actual prepayment experience or losses, will affect the percentages of
initial balances outstanding over time and the weighted average lives of the
certificates.
S-27
<PAGE>
PERCENT OF INITIAL CERTIFICATE PRINCIPLE BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A CERTIFICATES CLASS B CERTIFICATES
DISTRIBUTION DATE 0.5% 1.0% 1.7% 2.5% 0.5% 1.0% 1.7% 2.5%
----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average
Life in Years
</TABLE>
----------
The percentages in this table have been rounded to nearest whole
number.
The weighted average life of a certificate is determined by (a)
multiplying the amount of each principal payment on a certificate by
the number of years from the date of issuance of the certificate to the
related distribution date, (b) adding the results and (c) dividing the
sum by the related initial principal amount of the certificate.
S-28
<PAGE>
DELINQUENCY AND LOAN LOSS INFORMATION
The following tables detail information relating to the company's
delinquency and loan loss experience regarding all automobile loans it has
originated and serviced. This information includes the company's experience with
respect to all automobile loans its portfolio, including automobile loans which
do not meet the automobile loan pool selection criteria.
As reflected in the following credit loss experience table, the
company's net charge-off percentages have steadily decreased over time. These
decreases are due to improvements in the company's credit scoring models over
the periods shown in the credit loss experience table and the company's
targeting of higher credit-quality borrowers. Favorable and stable general
economic conditions during the periods shown have also contributed to the
decrease in charge-off percentages.
Delinquencies percentages, as reflected in the following delinquency
experience table, are more subject to periodic fluctuation based on, among
other factors, seasonal events such as holiday periods. The company is not
aware of any material trends in its delinquency experience.
Delinquencies, defaults, repossession and losses generally increase
during periods of economic recession. These periods also may be accompanied by
decreased consumer demand for automobiles and declining values of automobiles
securing outstanding loans, which weakens collateral coverage and increases the
amount of a loss in the event of default. Significant increases in the inventory
of used automobiles during periods of economic recession may also depress the
prices at which repossessed automobiles may be sold or delay the timing of these
sales. Because the company focuses on non-prime borrower, the actual rates of
delinquencies, defaults, repossessions and losses on the loans included in the
trust property could be higher than those experienced in the general automobile
finance industry and could be more dramatically affected by a general economic
downturn.
We cannot assure you that the levels of delinquency and loss experience
reflected in the following tables are indicative of the performance of the
automobile loans in the trust.
DELINQUENCY EXPERIENCE
Repossessed financed vehicles that have not yet been liquidated and
bankrupt accounts which have not yet been charged off are both included as
delinquent accounts in the table below.
<TABLE>
<CAPTION>
AT JUNE 30,
----------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------------- --------------------- --------------------- --------------------- -------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio at end of
period(1) 568,099 $6,649,981 66,262 $4,105,468 213,549 $2,302,516 112,847 $1,138,255 59,913 $523,981
Period of
Delinquency(2)
31-60 days(3) 39,793 $445,797 25,423 $277,592 12,259 $126,012 7,684 $ 73,197 3,843 31,338
61-90 days 9,944 110,521 5,230 53,487 2,545 25,847 1,901 17,451 1,083 8,889
91 days or more 3,878 40,103 2,007 20,026 3,891 33,328 2,316 18,970 1,054 7,318
------- ---------- ------ ---------- ------- ---------- ------- ---------- ------ --------
Total Delinquencies 53,615 $596,421 32,660 $351,105 18,695 $185,187 11,901 $109,618 5,980 $ 47,545
Repossessed Assets 3,723 42,764 3,207 37,773 1,732 18,818 1,491 14,471 840 6,845
------- ---------- ------ ---------- ------- ---------- ------- ---------- ------ --------
Total Delinquencies
and Repossessed
Assets 57,338 639,185 35,867 388,878 20,427 204,005 13,392 124,089 6,820 54,390
======= ========== ====== ========== ======= ========== ======= ========== ====== ========
Total Delinquencies
as a Percentage of
the Portfolio 9.4% 9.0% 8.9% 8.6% 8.8% 8.1% 10.6% 9.6% 10.0% 9.1%
Total Repossessed
Assets as a
Percentage of the
Portfolio 0.7% 0.6% 0.9% 0.9% 0.8% 0.8% 1.3% 1.3% 1.4% 1.3%
------- ---------- ------ ---------- ------- ---------- ------- ---------- ------ --------
Total Delinquencies
and Repossessed
Assets as a
Percentage of the
Portfolio 10.1% 9.6% 9.8% 9.5% 9.6% 8.9% 11.9% 10.9% 11.4% 10.4%
======= ========== ====== ========== ======= ========== ======= ========== ====== ========
</TABLE>
----------
(1) All amounts and percentages are based on the principal balances of the
automobile loans. Principal balances include some portion of accrued
interest. All dollar amounts are in thousands of dollars.
(2) The company considers a loan delinquent when an obligor fails to make a
contractual payment by the due date. The period of delinquency is based on
the number of days payments are contractually past due.
(3) Amounts shown do not include loans which are less than [31] days
delinquent.
S-29
<PAGE>
CREDIT LOSS EXPERIENCE
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30,
--------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Period-End Principal Outstanding $6,649,981 $4,105,468 $2,302,516 $1,138,255 $523,981
Average Month-End Amount
Outstanding During the Period 5,334,580 3,129,463 1,649,416 792,155 357,966
Net Charge-Offs 214,276 147,344 88,002 43,231 19,974
Net Charge-Offs as a Percentage of
Period-End Principal Outstanding 3.2% 3.6% 3.8% 3.8% 3.8%
Net Charge-Offs as a Percent of
Average Month-End Amount Outstanding 4.0% 4.7% 5.3% 5.5% 5.6%
</TABLE>
----------
All amounts and percentages are based on the automobile loans'
principal balances. Principal balances include some portion of accrued
interest. All dollar amounts are in thousands of dollars.
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-30
<PAGE>
THE INSURER
The following information has been obtained from Financial Security
Assurance Inc. (hereinafter in this section, "Financial Security") and has not
been verified by the seller or the underwriters.
GENERAL
Financial Security is a monoline insurance company incorporated in 1984
under the laws of the State of New York. Financial Security is licensed to
engage in the financial guaranty insurance business in all 50 states, the
District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments of an
issuer's securities -- thereby enhancing the credit rating of those securities
-- in consideration for the payment of a premium to the insurer. Financial
Security and its subsidiaries principally insure asset-backed, collateralized
and municipal securities. Asset-backed securities are generally supported by
residential mortgage loans, consumer or trade receivables, securities or other
assets having an ascertainable cash flow or market value. Collateralized
securities include public utility first mortgage bonds and sale/leaseback
obligation bonds. Municipal securities consist largely of general obligation
bonds, special revenue bonds and other special obligations of state and local
governments. Financial Security insures both newly issued securities sold in the
primary market and outstanding securities sold in the secondary market that
satisfy Financial Security's underwriting criteria.
Financial Security is a wholly-owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprises Holdings, Inc.,
MediaOne Capital Corporation, The Tokio Marine and Fire insurance Co., Ltd. and
XL Capital Ltd. No shareholder of Holdings is obligated to pay any debt of
Financial Security or any claim under any insurance policy issued by Financial
Security or to make any additional contribution to the capital of Financial
Security.
The principal executive offices of Financial Security are located at
350 Park Avenue, New York, New York 10022, and its telephone number at that
location is (212) 826-0100.
REINSURANCE
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written or reinsured from third parties by Financial Security
or any of its domestic or Bermuda operating insurance company subsidiaries are
generally reinsured among such
S-31
<PAGE>
companies on an agreed-upon percentage substantially proportional to their
respective capital, surplus and reserves, subject to applicable statutory risk
limitations. In addition, Financial Security reinsures a portion of its
liabilities under certain of its financial guaranty insurance policies with
other reinsurers under various quota share treaties and on a
transaction-by-transaction basis. Such reinsurance is utilized by Financial
Security as a risk management device and to comply with certain statutory and
rating agency requirements; it does not alter or limit Financial Security's
obligations under any financial guaranty insurance policy.
RATING OF CLAIMS-PAYING ABILITY
Financial Security's insurance financial strength is rated "Aaa" by
Moody's Investors Service, Inc. Financial Security's insurer financial strength
is rated "AAA" by Standard & Poor's Ratings Services and Standard & Poor's
(Australia) Pty. Ltd. Financial Security's claims-paying ability is rated "AAA"
by Fitch IBCA, Inc. and Japan Rating and Investment Information, Inc. Such
ratings reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies. See "Risk Factors -- Ratings on
Certificates" herein.
CAPITALIZATION
The following table sets forth the capitalization of Financial Security
and its wholly-owned subsidiaries on the basis of generally accepted accounting
principles as of _____________:
<TABLE>
<CAPTION>
--------------
(Unaudited)
(in thousands)
<S> <C>
Deferred Premium Revenue (net of prepaid reinsurance premiums) .................. $
Surplus Notes....................................................................
Minority Interest................................................................
Shareholder's Equity:
Common Stock..................................................................
Additional Paid-In Capital....................................................
Accumulated Other Comprehensive Income (net of deferred income taxes).........
Accumulated Earnings..........................................................
Total Shareholder's Equity....................................................
Total Deferred Premium Revenue, Surplus Notes, Minority Interest and
Shareholder's Equity.......................................................... $
</TABLE>
For further information concerning Financial Security, see the
Consolidated Financial Statements of Financial Security and Subsidiaries, and
the notes thereto, incorporated by reference herein. Financial Security's
financial statements are included as
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<PAGE>
exhibits to the Annual Report on Form 10-K and Quarterly Reports on Form 10-Q
filed with the Commission by Holdings and may be reviewed at the EDGAR website
maintained by the Commission and at Holdings' website, http://www.FSA.com.
Copies of the statutory quarterly and annual statements filed with the State of
New York insurance Department by Financial Security are available upon request
to the State of New York insurance Department.
INSURANCE REGULATION
Financial Security is licensed and subject to regulation as a financial
guaranty insurance corporation under the laws of the State of New York, its
state of domicile. In addition, Financial Security and its insurance
subsidiaries are subject to regulation by insurance laws of the various other
jurisdictions in which they are licensed to do business. As a financial guaranty
insurance corporation licensed to do business in the State of New York,
Financial Security is subject to Article 69 of the New York insurance Law which,
among other things, limits the business of each such insurer to financial
guaranty insurance and related lines, requires that each such insurer maintain a
minimum surplus to policyholders, establishes contingency, loss and unearned
premium reserve requirements for each such insurer, and limits the size of
individual transactions ("single risks") and the volume of transactions
("aggregate risks") that may be underwritten by each such insurer. Other
provisions of the New York insurance Law, applicable to non-life insurance
companies such as Financial Security, regulate, among other things, permitted
investments, payment of dividends, transactions with affiliates, mergers,
consolidations, acquisitions or sales of assets and incurrence of liabilities
for borrowings.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The certificates will be issued according to the terms of the pooling
and servicing agreement. A form of the pooling and servicing agreement has been
filed as an exhibit to the registration statement of which this prospectus
supplement is a part. The following statements (together with the additional
statements under "Description of the Purchase Agreements and the Trust
Documents" below and under "Description of the Securities" and "Description of
the Trust Documents" in the prospectus) summarize material terms and provisions
of the certificates and the pooling and servicing agreement. The following
summary supplements the description of the general terms and provisions of the
certificates of any given series and the related pooling and servicing agreement
described in the accompanying prospectus.
The certificates will be issued only in fully registered form, in
denominations of $1,000 and integral multiples of $1,000. The certificates will
not be listed on any securities exchange or quoted in the automated quotation
system of a registered securities association. The certificates will represent
beneficial ownership interests in the assets of the issuer. Replacement
certificates, if issued, will be transferable and exchangeable at the corporate
trust office of the trustee. No service charge will be made for any
registration, exchange or transfer of certificates, but the trustee may require
payment of a sum sufficient to cover any tax or other governmental charge.
The Class A Certificateholders are entitled to receive, on each
distribution date, the Class A Percentage of the CERTIFICATEHOLDERS'
DISTRIBUTABLE AMOUNT plus interest at the Class A pass-through rate on the Class
A principal balance. Subject to the prior rights of the Class A
Certificateholders, the Class B Certificateholders are entitled receive, on each
S-33
<PAGE>
distribution date, the Class B Percentage of the CERTIFICATEHOLDERS'
DISTRIBUTABLE AMOUNT plus interest at the Class B pass through rate on the Class
B principal balance.
The Certificates represent beneficial ownership interests in the
issuer. The Class A Certificates will evidence in the aggregate an undivided
ownership interest of approximately __%, which is the Class A Percentage of the
issuer and the Class B Certificates will evidence in the aggregate an undivided
ownership interest of approximately __%, which is the Class B Percentage of the
issuer.
DISTRIBUTION DATES
While AmeriCredit is the servicer, the certificates will pay interest
and principal on the fifth day of each month -- or, if the fifth day is not a
business day, on the next following business day. However, any distribution date
will not be earlier than the third business day of the month. The first
distribution date will be _________________. Holders of record as of the close
of business day immediately preceding a distribution date, commonly known as a
record date, will receive payments on that distribution date. A business day is
a day other than a Saturday, Sunday or other day on which commercial banks
located in the States of Texas, Delaware, Ohio or New York are authorized or
obligated to be closed.
The insured distribution date will be the [twelfth] day of each month,
or, if the [twelfth] day is not a business day, the next following business day.
If the backup servicer or another successor servicer becomes the
servicer, the distribution date will become the twelfth day of each month, or if
the twelfth day is not a business day, the next following business day.
The final scheduled distribution dates are as follows:
? for the Class A Certificates, the ________ insured
distribution date; and
? for the Class B Certificates, the ________ insured
distribution date.
PAYMENTS OF INTEREST
[Interest on the certificates will be distributable monthly on each
distribution date, commencing on __________, in an amount equal to interest
accrued during the applicable accrual period, as defined below, at the
certificate rate on the outstanding principal balance for certificates. The per
annum rate of interest accruing on the certificates of each class is referred to
as the pass-through rate for that class certificates. The pass-through rate for
the Class A Certificates is __%, and the pass-through rate for the Class B
Certificates is ___%.
Interest on the certificates for a distribution date will accrue from,
and including, the preceding distribution date, or in the case of the first
distribution date, from the closing date, through, and including, the day
preceding the distribution date. Each of
S-34
<PAGE>
these periods is an accrual period. Interest on the certificates will be
calculated on the basis of a 360-day year [and the actual number of days elapsed
in an applicable interest period]. Interest for any distribution date due but
not paid on the distribution date will bear interest, to the extent permitted by
applicable law, at the applicable pass-through rate until paid.]
Interest on each class of certificates will accrue during each interest
period at the applicable interest rate from and including the most recent
distribution date that interest was paid -- or, in the case of the first
distribution date, from and including the closing date _________, but excluding,
the following distribution date. In the case of the first distribution date, the
interest period shall be ___ days. The interest accruing during an interest
period will accrue on each class' outstanding principal amount as of the end of
the prior distribution date -- or, in the case of the first distribution date,
as of the closing date.
However, if the principal balance is further reduced by a principal
payment on the insured distribution date which immediately follows the prior
distribution date, then interest shall accrue:
1. from and including the prior distribution date to, but
excluding, the related insured distribution date, on the
principal balance outstanding as of the end of the prior
distribution date (or, in the case of the first distribution
date, as of the closing date); and
2. from and including the insured distribution date, to, but
excluding, the following distribution date, on the principal
balance outstanding as of the end of the insured distribution
date.
PAYMENTS OF PRINCIPAL
On each distribution date, principal payments will be distributed on
the certificates in an amount generally equal to a percentage of the decrease
in the PRINCIPAL BALANCE of the automobile loan pool during the prior
calendar month to the extent of funds available. These principal payments
will be allocable between the Class A Certificates and the Class B
Certificates PRO RATA, and will be paid to the certificateholders in
proportion to their percentage interest, until the outstanding principal
amount of that class is paid in full.
Amounts available under the insurance policy are available to pay the
certificate principal only in two circumstances:
o to reduce, after taking into account all reductions funded
from other sources, the aggregate principal balance of the
certificates to the collateral balance - i.e., the sum of the
Pool Balance plus the pre-funded amount - in the event that
the certificate principal balance would otherwise exceed the
collateral balance; and
S-35
<PAGE>
o to pay off each class' principal on its final scheduled
distribution date, to the extent that the class is not paid
off on or prior to the final scheduled distribution date from
other sources.
MANDATORY REDEMPTION
If any portion of the pre-funded amount remains on deposit in the
pre-funding account at the end of the funding period, each class of certificates
will be redeemed in part on the mandatory redemption date. Each class'
certificate prepayment amount of the remaining pre-funded amount on that date
will be an amount equal to that class' pro rata share, based on the respective
current principal amount of each class of certificates. However, if the
aggregate remaining amount in the pre-funding account is $100,000 or less, that
amount will be applied exclusively to reduce the outstanding principal balance
of the class of certificates then entitled to receive principal distributions.
OPTIONAL REDEMPTION
The Class A and B Certificates, to the extent still outstanding, may be
redeemed in whole, but not in part, when the pool balance has declined to 10% or
less of the original pool balance, as described in the accompanying prospectus
under "Description of the Trust Agreements -- Termination." This redemption will
cause the early retirement of that class. The redemption price will equal the
unpaid principal amount of the certificates, plus accrued and unpaid interest.
EVENTS OF DEFAULT
Unless an insurer default shall have occurred and be continuing, events
of default under the pooling and servicing agreement will consist of those
events listed below as Insurance Agreement Pooling and Servicing Agreement Cross
Defaults. In addition, they will constitute an event of default under the
pooling and servicing agreement only if the insurer delivers to the trustee and
does not rescind a written notice specifying that any Insurance Agreement
Pooling and Servicing Agreement Cross Default constitutes an event of default
under the pooling and servicing agreement.
Insurance Agreement Pooling and Servicing Agreement Cross Defaults
consist of:
o a demand for payment under the policy;
o events of bankruptcy, insolvency, receivership or liquidation
of the issuer;
o the issuer becoming taxable as an association (or publicly
traded partnership) taxable as a corporation for federal or
state income tax purposes;
o on any insured distribution date, after taking into account
the application of the sum of AVAILABLE FUNDS for the related
calendar month plus the Deficiency Claim Amount for the
related distribution date, any amounts listed in clauses 1, 2,
3 and 5 under "Description of the Purchase Agreements and the
Trust
S-36
<PAGE>
Documents -- Distributions" in this prospectus supplement has
not been paid in full; and
o any failure to observe or perform in any material respect any
other covenants or agreements in the pooling and servicing
agreement, or any representation or warranty of the issuer
made in the pooling and servicing agreement or in any
certificate or other writing delivered under or in connection
with the pooling and servicing agreement proving to have been
incorrect in any material respect when made, and the failure
continuing or not being cured, or the circumstance or
condition for which the representation or warranty was
incorrect not having been eliminated or otherwise cured, for
[30] days after the giving of written notice of the failure or
incorrect representation or warranty to the issuer and the
trustee by the insurer.
For any determination date the deficiency claim amount is the amount
that, after taking into account the application on the distribution date of
AVAILABLE FUNDS for the related calendar month, an amount, without duplication,
equal to the sum of:
(a) any shortfall in the full payment of amounts described in
clauses 1, 2, 3 and 5 under "Description of the Purchase
Agreements and the Trust Documents-- Distributions";
(b) the CERTIFICATEHOLDERS' PARITY DEFICIT AMOUNT, if any, for the
distribution date; and
(c) if the related distribution date is the final scheduled
distribution date for any class, any remaining outstanding
principal balance of that class, to the extent that the amount
is available on the related insured distribution date
according to the spread account's terms.
Upon an event of default occurring, so long as an insurer default has
not occurred and continued, the insurer will have the right, but not the
obligation, to cause the trust collateral agent to liquidate the trust property
in whole or in part, on any date or dates following the event of default as the
insurer, in its sole discretion elects. The insurer also has the right to cause
the trust collateral agent to deliver the proceeds to the trustee for
distribution to certificateholders. The insurer may not, however, cause the
trust collateral agent to liquidate the trust property in whole or in part if
the liquidation proceeds would be insufficient to pay all outstanding principal
of and accrued interest on the certificates, unless the event of default arose
from a claim on the policy or from the issuer's bankruptcy, insolvency,
receivership or liquidation. Following any event of default, the trust
collateral agent will continue to submit claims under the policy for any
shortfalls in scheduled payments. Following any event of default under the
pooling and servicing agreement, the insurer may elect to pay all or any portion
of the outstanding amount of the certificates, plus accrued interest on the
certificates. See "The Policy" in this prospectus supplement.
S-37
<PAGE>
DESCRIPTION OF THE PURCHASE AGREEMENTS
AND THE TRUST DOCUMENTS
The following statements (together with the additional statements under
"Description of the Certificates" above and under "Description of the
Securities" and "Description of the Trust Agreements" in the prospectus)
summarize the material terms and provisions of the purchase agreements, which
includes the purchase agreement and any subsequent purchase agreement, and the
trust documents which include any subsequent transfer agreement and the pooling
and servicing agreement. The issuer has filed forms of the purchase agreements
and the trust documents as exhibits to the registration statement. These
summaries do not claim to be complete and are 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 (as the term is used in the prospectus), contained in the prospectus.
SALE AND ASSIGNMENT OF AUTOMOBILE LOANS
On or prior to the closing date, or, with respect to subsequent
automobile loans, the related subsequent transfer date, the company will enter
into a purchase agreement with the seller under which the company will sell and
assign to the seller, without recourse, its entire interest in and to the
related automobile loans. Under the purchase agreement, the company 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 distributable
after the applicable cutoff date. Under the purchase agreement, the company will
agree that, upon a breach of any representation or warranty under the trust
documents which triggers the seller's repurchase obligation, the trustee will be
entitled to require the company to repurchase the automobile loans from the
issuer. The issuer's rights under the purchase agreement will constitute part of
the trust property and may be enforced directly by the trustee and the insurer.
In addition, the trustee will pledge the rights to the trustee as collateral for
the certificates and the trustee may directly enforce those rights.
On the closing date, or, for subsequent automobile loans, the
subsequent transfer date, the seller will sell and assign to the trustee,
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 pooling and servicing
agreement.
ACCOUNTS
The company will instruct each obligor to make payments on the
automobile loans after the applicable cutoff date directly to one or more post
office boxes or other mailing locations maintained by the lockbox bank. The
servicer will establish and maintain a lockbox account that is a segregated
account with a bank or banks acceptable to the insurer, in the trustee's name
for the certificateholders' benefit, into which the servicer must deposit all
obligor payments within one business day of receipt. The issuer will establish
and maintain with the trustee, in the trustee's name, on both the
certificateholders' and insurer's behalf one or more collection accounts, into
which all
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<PAGE>
amounts previously deposited in the lockbox account will be transferred within
three business days of deposit. The collection account will be maintained with
the trustee so long as the trustee's deposits have a rating acceptable to the
insurer and the rating agencies. If the deposits of the trustee or its corporate
parent no longer have an acceptable rating, the servicer shall, with the
trustee's assistance if necessary, move the accounts within [30] days to a bank
whose deposits have the proper rating.
The servicer will establish and maintain a distribution account in
which amounts released from the collection account for distribution to
certificateholders will be deposited and from which all distributions to
certificateholders will be made, in the name of the trust collateral agent, for
the trustee's benefit, on the certificateholder's and insurer's behalf.
On the closing date, the issuer will deposit the initial pre-funded
amount equaling $__________ in the pre-funding account, which will be
established with the trust collateral agent. The funding period encompasses the
period from the closing date until the earliest of the date on which:
o the amount on deposit in the pre-funding account is less than
$__________,
o a servicer termination event occurs under the sale and
servicing agreement, or
o __________.
The initial pre-funded amount, as reduced during the funding period
from the purchase of subsequent automobile loans, is the pre-funded amount. The
seller expects that the pre-funded amount will be reduced to less than
$__________ on or before the end of the funding period. The issuer will pay the
certificateholders any pre-funded amount remaining at the end of the funding
period as a mandatory redemption. The mandatory redemption date is the earlier
of:
o the distribution date in __________; or
o the distribution date which relates to the calculation date
occurring in _______ or _______ __ if the last day of the
funding period occurs on or prior to that calculation date.
On the closing date, the issuer will deposit funds in the capitalized
interest account which will be established with the trust collateral agent. The
amount, if any, deposited in the capitalized interest account will be applied on
the distribution dates occurring in _____, _____ and _____,_____ to fund the
monthly capitalized interest amount which will equal the interest accrued for
each distribution date at the weighted average interest rates on the portion of
the certificates having a principal balance in excess of the principal balances
of the automobile loans, which portion will equal the pre-funded amount. Any
amounts remaining in the capitalized interest account on the mandatory
redemption date and not used for these purposes will be paid directly to the
seller on that
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date. See "Description of the Purchase Agreements and the Trust Documents --
Accounts."
As described in the prospectus, all accounts will be eligible deposit
accounts, acceptable to the insurer, so long as no insurer default has occurred
and is continuing.
SERVICING COMPENSATION AND TRUSTEES' FEES
The servicer will receive a basic servicing fee on each distribution
date, which equals the product of __________ times _____% of the aggregate
principal balance of the 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 distributable to the backup servicer for
agreeing to stand by as successor servicer and for performing other functions.
The servicer will also collect and retain any late fees, prepayment charges and
other administrative fees or similar charges allowed by applicable law with
respect to the automobile loans, and will be entitled to reimbursement from the
issuer for various expenses. The servicer will allocate obligor payments to
scheduled payments, late fees and other charges, and principal and interest in
accordance with the servicer's normal practices and procedures.
The basic servicing fee will compensate the servicer for performing the
functions of a third-party servicer of automotive loans as an agent for their
beneficial owner.
These servicer functions include:
o collecting and posting all payments, responding to obligor
inquiries on the automobile loans,
o investigating delinquencies,
o reporting tax information to obligors,
o paying the disposition costs of defaulted accounts,
o policing the collateral,
o accounting for collections,
o furnishing monthly and annual statements to the issuer and the
insurer with respect to distributions, and
o generating federal income tax information.
The basic servicing fee also will reimburse the servicer for:
o taxes,
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o accounting fees,
o outside auditor fees,
o data processing costs, and
o other costs incurred with administering the automobile loans
and for paying the backup servicing fees.
On each distribution date, the trustee will receive a fee, in an amount
agreed upon by the trustee and the servicer, for its services as trustee and
trust collateral agent during the prior calendar month. On each distribution
date, the owner trustee will receive a fee, in an amount agreed upon by the
owner trustee and the servicer, for its services as owner trustee during the
prior calendar month.
The issuer will pay all these fees from the collection account.
CERTAIN ALLOCATIONS
On each determination date, the servicer will deliver the servicer's
certificate to the trustee, the owner trustee and the insurer specifying, among
other things:
o the amount of aggregate collections on the automobile loans,
and
o the aggregate purchase amount of automobile loans to be
purchased by the seller and the company, in the preceding
calendar month.
Based solely on the information contained in the servicer's
certificate, on each determination date the trustee will deliver to the trust
collateral agent, the insurer and the servicer a deficiency notice specifying
the deficiency claim amount, if any, for the distribution date. The deficiency
notice will direct the trust collateral agent to remit the deficiency claim
amount to the collection account from amounts on deposit in collateral accounts
maintained for the insurer's benefit.
For any insured distribution date, the deficiency notice will consist
of a written notice delivered by the trustee to the insurer, the servicer and
any other person required under the insurance agreement, specifying the
deficiency claim amount for the insured distribution date.
The determination date for any calendar month, is the earlier of:
o the fourth business day preceding the related insured
distribution date in the next calendar month; and
o the [5th] day of the next calendar month, or if the [5th] day
is not a business day, the next succeeding business day.
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DISTRIBUTIONS
DISTRIBUTION DATE CALCULATIONS AND PAYMENTS.
On or prior to each distribution date, the servicer will instruct the
trustee to make the following distributions from AVAILABLE FUNDS in the
following order of priority:
1. To the servicer, the servicing fee for the related calendar
month, any supplemental servicing fees for the month and, to
the extent the servicer has not reimbursed itself or to the
extent not retained by the servicer, other amounts relating to
mistaken deposits, postings or checks returned for
insufficient funds;
2. to the trustee, any accrued and unpaid trustees' fees and any
accrued and unpaid trust collateral agent's fees, each to the
extent the servicer has not previously paid the fees;
3. to the certificate distribution account, the
CERTIFICATEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT;
4. to the certificate distribution account, the
CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT, to be
distributed as described under "Description of the
Certificates -- Payments of Principal;"
5. to the insurer, any unpaid amounts owed to the insurer under
the insurance agreement;
6. to the spread account, less certain investment earnings, any
amount required to increase the amount in the spread account
to its required level;
7. to the certificate distribution account, less certain
investment earnings, and together with amounts, if any,
available according to the spread account's terms, the
CERTIFICATEHOLDERS' ACCELERATED PRINCIPAL AMOUNT; and
8. to the spread account, or as otherwise specified in the trust
documents, any remaining funds.
After considering all distributions made on the insured distribution
date and the related distribution date, amounts in the spread account on any
insured distribution date exceeding the Specified Spread Account Requirement for
the distribution date, may be released to the certificateholders.
If the certificates are accelerated following an event of default under
the pooling and servicing agreement, amounts collected will be distributed in
the order described above.
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INSURED DISTRIBUTION DATE CALCULATIONS AND PAYMENTS
In the event that any servicer's certificate delivered by the servicer
indicates that AVAILABLE FUNDS for a distribution date are insufficient to fully
fund scheduled payments plus the amounts described in clauses 1 and 5 above, the
trustee shall request the deficiency claim amount for the spread account.
Further, in the event that any servicer's certificate delivered by the
servicer indicates that the sum of:
o AVAILABLE FUNDS with respect to a distribution date, plus
o any related deficiency claim amount
is insufficient to fully fund scheduled payments plus the amount described in
clauses 1 and 2 above, the trustee shall furnish to the insurer no later than
12:00 noon New York City time on the related Draw Date a completed notice of
claim for the policy claim amount. The insurer will deposit the amounts it will
pay under the notice into the certificate distribution account for payment to
certificateholders on the related insured distribution date.
STATEMENTS TO CERTIFICATEHOLDERS
On or prior to each insured distribution date, the trustee will forward
a statement to the certificateholders detailing information required under the
trust documents. These statements will be based on the information in the
related servicer's certificate. Each statement that the trustee delivers to the
certificateholders will include the following information regarding the
certificates on the related distribution date and the related insured
distribution date, as applicable:
(a) the amount of the distribution(s) allocable to interest;
(b) the amount of the distribution(s) allocable to principal;
(c) the amount of the distribution, if any, distributable under
the policy claim;
(d) each class of certificates' aggregate outstanding principal
amount, after considering all payments reported under (b)
above on that date;
(e) the Certificateholders' Interest Carryover Shortfall and the
Certificateholders' Principal Carryover Shortfall, if any, and
the change in those amounts from the preceding statement;
(f) the servicing fee paid for the related calendar month; and
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(g) during the funding period, the remaining pre-funded amount,
the amount in the pre-funding account and the amount remaining
in the Capitalized interest account.
Each amount described in subclauses (a) through (f) for the
certificates will be expressed as a dollar amount per $1,000 of the
certificates' initial principal amount.
Unless and until Definitive Certificates are issued, the pooling and
servicing agreement trustee will send these reports to Cede & Co., as registered
holder of the certificates and the nominee of DTC on the trust's behalf.
After the end of each calendar year, within the required time period,
the trustee will furnish to each person who at any time during the calendar year
was a certificateholder:
o a statement as to the aggregate amounts of interest and
principal paid to the certificateholder,
o information regarding the amount of servicing compensation the
servicer received and
o other information as the seller deems necessary to enable the
certificateholder to prepare its tax returns.
CREDIT SUPPORT
The ACCELERATED PRINCIPAL AMOUNT and the spread account result in
credit support. The insurer will require the issuer to increase and maintain
credit support at a level it establishes. This level changes over time, and may
take two forms:
o the spread account, which is a funded cash reserve account;
and
o overcollateralization.
The insurer may permit the required credit support level to reduce, or
"step down," over time.
SPREAD ACCOUNT
On the closing date, the issuer may fund the spread account with an
initial cash deposit. On each subsequent distribution date, the trust
collateral agent will deposit additional amounts into the spread account from
the automobile loan payments as described under "--Distributions" above to
the extent that the funds in the spread account are below the required level.
Amounts, if any, on deposit in the spread account on an insured distribution
date will be available to fund any Deficiency Claim Amount, to the extent
provided in the spread account agreement. Amounts on deposit in the spread
account on any insured distribution date, after giving effect to all
distributions made on the insured
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distribution date, in excess of the Specified Spread Account Requirement for the
insured distribution date will be released to the seller without the
certificateholder's consent.
In addition, the seller, the insurer and the trust collateral agent may
amend the spread account agreement - and any provisions in the insurance
agreement relating to the spread account - in any respect, including, without
limitation:
o reducing or eliminating the Specified Spread Account
Requirement;
o reducing or eliminating the spread account funding
requirements; and/or
o permitting those funds to be used for the benefit of persons
other than certificateholders without the consent of, or
notice to, the trustee, or the certificateholders.
The trust collateral agent shall not withhold or delay its consent to
any amendment not adversely affecting the trust collateral agent in its
individual capacity. Notwithstanding any reduction in or elimination of the
spread account funding requirements or the spread account's depletion, on each
insured distribution date the insurer must fund the full amount of each
scheduled payment required to be paid and which would not be paid in the absence
of a policy payment. If the insurer breaches its obligations, the
certificateholders will bear any losses on the automobile loans.
OVERCOLLATERALIZATION
Overcollateralization is created by applying excess interest to the
payment of principal on the certificates and is paid in the form of the
CERTIFICATEHOLDERS' ACCELERATED PRINCIPAL AMOUNT. The excess interest is
interest which is collected on the automobile loans in excess of the amount of
interest that is paid on the certificates, used to pay fees, or, under certain
circumstances, deposited to the spread account. Applying excess interest causes
the outstanding principal balance to pay down more quickly than the pool
balance.
If the insurer permits the required overcollateralization level to step
down, principal collections which would otherwise be paid through to the
certificateholders as part of the PRINCIPAL DISTRIBUTABLE AMOUNT may be released
to the seller instead.
SERVICER TERMINATION EVENT
A servicer termination event under the pooling and servicing agreement
will consist of the occurrence and continuance of any of the following:
o the servicer's failure to deliver any required payment to the
trust collateral agent for distribution to the
certificateholders, which failure continues unremedied for two
business days, or any failure to deliver the servicer's
certificate by the fourth business day prior to the insured
distribution date;
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o the servicer's failure to observe or perform in any material
respect any other covenant or agreement under the sale and
servicing agreement or the purchase agreement (if the company
is the servicer) which failure continues unremedied for [60]
days after the issuer, the trust collateral agent or the
issuer gives the servicer written notice of such failure, or
if an insurer default has occurred and is continuing, [60]
days after any certificateholder gives the servicer written
notice
o events of insolvency, readjustment of debt, marshalling of
assets and liabilities, or similar proceedings regarding the
servicer or, so long as the company is servicer, of any of its
affiliates, and actions by the servicer, or, as long as the
company is servicer, actions by its affiliates, indicating its
or their insolvency, reorganization under bankruptcy
proceedings, or inability to pay its obligations;
o any servicer representation, warranty or statement that is
proved incorrect in any material respect and which has a
material adverse effect on the insurer's interests, and the
circumstances or conditions for which the representation,
warranty or statement was incorrect shall not have been
eliminated or cured;
o so long as a insurer default shall not have occurred and be
continuing, the insurer has not have delivered an extension
notice;
o so long as a insurer default shall not have occurred and be
continuing, an insurance Agreement event of default or an
event of default under any other insurance and indemnity
agreement relating to any series of securities shall have
occurred; or
o a claim is made under the policy.
An insurer default includes the occurrence and continuance of any of
the following events:
(a) the insurer's failure to make a required policy payment;
(b) the insurer's:
o filing or commencing of a petition or any case or
proceeding under any provision or chapter of the
United States Bankruptcy Code or any other similar
federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or
reorganization,
o general assignment for the benefit of its creditors,
or
o having an order for relief entered against it under
the United States Bankruptcy Code or any other
similar federal or state law relating to
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insolvency, bankruptcy, rehabilitation, liquidation
or reorganization which is final and nonappealable;
or
(c) the entering of a final and nonappealable order, judgment or
decree by a court of competent jurisdiction, the New York
Department of insurance or other competent regulatory
authority:
o appointing a custodian, trustee, agent or receiver
for the insurer or for all or any material portion of
its property or
o authorizing a custodian, trustee, agent or receiver
to take possession of the insurer or to take
possession of all or any material portion of the
property of the insurer.
RIGHTS UPON SERVICER TERMINATION EVENT
As long as a servicer termination event remains unremedied:
o provided no insurer default has occurred and is continuing,
the insurer in its sole and absolute discretion may terminate
all of the servicer's rights and obligations under the sale
and servicing agreement; or
o if an insurer default has occurred and is continuing, then the
trust collateral agent or a certificate majority, the backup
servicer, or any other successor servicer that the insurer
appoints (so long as no insurer default has occurred and is
continuing), will succeed to all the responsibilities, duties,
and liabilities of the servicer.
If the terminated servicer is not the company, the insurer will appoint
a successor servicer or, if a insurer default has occurred and is continuing,
the trust collateral agent will appoint a successor servicer.
Any successor servicer will succeed to all the responsibilities,
duties, and liabilities of the servicer under the sale and servicing agreement
and will be entitled to similar compensation arrangements. There is no assurance
that the succession of a successor servicer will not result in a material
disruption in the performance of the servicer's duties.
WAIVER OF PAST DEFAULTS
Notwithstanding anything to the contrary described under "Description
of the Trust Agreements -- Waiver of Past Defaults" in the prospectus, the
insurer may, on behalf of all certificateholders, waive any default by the
servicer under the sale and servicing agreement and its consequences. No waiver
will impair the certificateholders' rights with respect to subsequent defaults.
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AMENDMENT
Notwithstanding anything to the contrary described under "Description
of the Trust Agreements -- Amendment" in the prospectus, the seller and the
servicer with the consent of the trustee - which consent may not be unreasonably
withheld - and with the insurer's consent, so long as no insurer default has
occurred and is continuing, but without the consent of the certificateholders,
may amend the pooling and servicing agreement. The agreement may be amended in
this manner to cure any ambiguity, or to correct or supplement any provision in
the agreement which may be inconsistent with any other provision. However, the
amendment shall not in any material respect adversely affect the interests of
any certificateholder. In addition, if an insurer default has occurred and is
continuing, the amendment shall not materially adversely affect insurer's
interests. The seller, the servicer and the trustee may also amend the pooling
and servicing agreement with the insurer's, trustee's and the holders of a
majority of the principal amount of the certificates' outstanding consent to
add, change or eliminate any other provisions with respect to matters or
questions arising under the agreement or affecting the rights of the
certificateholders; PROVIDED that the action will not:
o 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 certificateholders; or
o reduce the percentage of the certificateholders required to
consent to any amendment, without, in either case, the consent
of the holders of all certificates outstanding. However, if an
insurer default has occurred and is continuing, the amendment
shall not materially adversely affect the interest of the
insurer.
The seller and servicer must deliver to the trustee and the insurer
upon the execution and delivery of the pooling and servicing agreement and any
amendment to the pooling and servicing agreement an opinion of counsel,
satisfactory to the trustee, that all financing statements and continuation
statements have been filed.
THE POLICY
The following statements summarize the material terms of the Policy.
This summary does not purport to be complete and is qualified in its entirety by
reference to the Policy.
Simultaneously with the issuance of the certificates, the insurer will
deliver the Policy to the trust collateral agent as agent for the trustee for
the benefit of each certificateholder. Under the Policy, the insurer will
unconditionally and irrevocably guarantee to the trust collateral agent, on each
insured Distribution Date, for the benefit of each certificateholder the full
and complete payment of (i) Scheduled Payments (as defined below) on the
certificates and (ii) the amount of any Scheduled Payment which subsequently is
avoided in whole or in part as a preference payment under applicable law. In the
event the trust collateral agent fails to make a claim under the Policy,
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certificateholders do not have the right to make a claim directly under the
Policy, but may sue to compel the trust collateral agent to do so.
The "Insured Distribution Date" will be the twelfth day of each month,
or, if such twelfth day is not a Business Day, the next following Business Day.
In the event that, on any Distribution Date, the certificateholders did not
receive the full amount of the Scheduled Payment then due to them, such
shortfall (together with, in the case of an interest shortfall, interest thereon
at the related interest rate) shall be due and distributable and shall be funded
on the insured Distribution Date either from the Spread Account or from the
proceeds of a drawing under the Policy. The Record Date applicable to an insured
Distribution Date shall be the Record Date applicable to the related
Distribution Date.
"Scheduled Payments" means payments which are required to be made on
the certificates during the term of the Policy in accordance with the original
terms of the certificates when issued and without regard to any subsequent
amendment or modification of the certificates or the pooling and servicing
agreement that has not been consented to by the insurer, which payments, with
respect to any insured Distribution Date, are (i) the CERTIFICATEHOLDERS'
INTEREST DISTRIBUTABLE AMOUNT, with respect to the related Distribution Date,
(ii) the CERTIFICATEHOLDERS' REMAINING PARITY DEFICIT AMOUNT with respect to the
related Distribution Date and (iii) with respect to the Final Scheduled
Distribution Date for any class of certificates, the outstanding principal
amount of such class on such Final Scheduled Distribution Date, after taking
into account reductions on such date of such outstanding principal amount from
all sources other than the Policy. Scheduled Payments do not include payments
which become due on an accelerated basis as a result of (a) a default by the
Trust, (b) an election by the Trust to pay principal on an accelerated basis,
(c) the occurrence of an Event of Default under the pooling and servicing
agreement or (d) any other cause, unless the insurer elects, in its sole
discretion, to pay in whole or in part such principal due upon acceleration,
together with any accrued interest to the date of acceleration. In the event the
insurer does not so elect, the Policy will continue to guarantee Scheduled
Payments due on the certificates in accordance with their original terms.
Scheduled Payments shall not include (x) any portion of a CERTIFICATEHOLDERS'
INTEREST DISTRIBUTABLE AMOUNT or of a CERTIFICATEHOLDERS' INTEREST CARRYOVER
AMOUNT due to certificateholders because the appropriate notice and certificate
for payment in proper form was not timely Received (as defined below) by the
insurer, (y) any portion of a CERTIFICATEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT
due to certificateholders representing interest on any Certificateholders'
Interest Carryover Shortfall accrued from and including the date of payment of
the amount of such Certificateholders' Interest Carryover Shortfall pursuant to
the Policy or (z) any Certificate Prepayment Amounts, unless the insurer elects,
in its sole discretion, to pay such amount in whole or in part. Scheduled
Payments shall not include, nor shall coverage be provided under the Policy in
respect of, any taxes, withholding or other charge imposed with respect to any
certificateholder by any governmental authority due in connection with the
payment of any Scheduled Payment to a certificateholder.
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Payment of claims on the Policy made in respect of Scheduled Payments
will be made by the insurer following Receipt (as defined below) by the insurer
of the appropriate notice for payment on the later to occur of (i) 12:00 noon,
New York City time, on the third Business Day following Receipt of such notice
for payment, and (ii) 12:00 noon, New York City time, on the date on which such
payment was due on the certificates.
If payment of any amount avoided as a preference under applicable
bankruptcy, insolvency, receivership or similar law is required to be made under
the Policy, the insurer shall cause such payment to be made on the later of (a)
the date when due to be paid pursuant to the Order referred to below or (b) the
first to occur of (i) the [fourth] Business Day following Receipt by the insurer
from the trust collateral agent of (A) a certified copy of the order (the
"Order") of the court or other governmental body that exercised jurisdiction to
the effect that the certificateholder is required to return Scheduled Payments
made with respect to the certificates during the term of the Policy because such
payments were avoidable as preference payments under applicable bankruptcy law,
(B) a certificate of the certificateholder that the Order has been entered and
is not subject to any stay and (C) an assignment duly executed and delivered by
the certificateholder, in such form as is reasonably required by the insurer and
provided to the certificateholder by the insurer, irrevocably assigning to the
insurer all rights and claims of the certificateholder relating to or arising
under the certificates against the Trust or otherwise with respect to such
preference payment, or (ii) the date of Receipt (as defined below) by the
insurer from the trust collateral agent of the items referred to in clauses (A),
(B) and (C) above if, at least four Business Days prior to such date of Receipt,
the insurer shall have Received (as defined below) written notice from the trust
collateral agent that such items were to be delivered on such date and such date
was specified in such notice. Such payment shall be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
and not to the trust collateral agent or any certificateholder directly (unless
a certificateholder has previously paid such amount to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order,
in which case such payment shall be disbursed to the trust collateral agent for
distribution to such certificateholder upon proof of such payment reasonably
satisfactory to the insurer). In connection with the foregoing, the insurer
shall have the rights provided pursuant to the Sale and Servicing Agreement,
including, without limitation, the right to direct all matters relating to any
preference claim and subrogation to the rights of the trust collateral agent and
each certificateholder in the conduct of any proceeding with respect to a
preference claim.
OTHER PROVISIONS OF THE POLICY
The terms "Receipt" and "Received" with respect to the Policy shall
mean actual delivery to the insurer and to its fiscal agent, if any, prior to
12:00 noon, New York City time, on a Business Day; delivery either on a day that
is not a Business Day or after 12:00 noon, New York City time, shall be deemed
to be Received on the next succeeding Business Day. If any notice or certificate
given under the Policy by the trust collateral
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agent is not in proper form or is not properly completed, executed or delivered,
it shall be deemed not to have been Received, and the insurer or its fiscal
agent shall promptly so advise the Trust collateral agent, and the trust
collateral agent may submit an amended notice.
Under the Policy, "Business Day" means any day other than a Saturday,
Sunday, legal holiday or other day on which commercial banking institutions in
Wilmington, Delaware, New York, New York or Columbus, Ohio or any other location
of any successor servicer, or successor trust collateral agent are authorized or
obligated by law, executive order or governmental decree to be closed.
The insurer's obligations under the Policy in respect of Scheduled
Payments shall be discharged to the extent funds are transferred to the trust
collateral agent as provided in the Policy whether or not such funds are
properly applied by the Trust collateral agent.
The insurer shall be subrogated to the rights of each certificateholder
to receive payments of principal and interest to the extent of any payment by
the insurer under the Policy.
Claims under the Policy constitute direct, unsecured and unsubordinated
obligations of the insurer ranking not less than PARI PASSU with other unsecured
and unsubordinated indebtedness of the insurer for borrowed money. Claims
against the insurer under the Policy and each other financial guaranty insurance
policy issued thereby constitute PARI PASSU claims against the general assets of
the insurer. The terms of the Policy cannot be modified or altered by any other
agreement or instrument, or by the merger, consolidation or dissolution of the
Trust. The Policy may not be canceled or revoked prior to distribution in full
of all Scheduled Payments. THE POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY
INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
The Policy is governed by the laws of the State of New York.
It is a condition to issuance that the Class A Certificates be rated
[A-l+] by S&P and [P-l] by Moody's, and that the Class B Certificates, be rated
[AAA] by S&P and [Aaa] by Moody's. The ratings by the Rating Agencies of the
certificates will be (i) with respect to the Class A Certificates, without
regard to the Policy in the case of S&P and substantially based on the Policy in
the case of Moody's and (ii) with respect to the Class B Certificates, based on
the issuance of the Policy. To the extent that such ratings are based on the
Policy, such ratings apply to distributions due on the insured Distribution
Dates, and not to distributions due on the Distribution Dates. A rating is not a
recommendation to purchase, hold or sell certificates. In the event that the
rating initially assigned to any of the certificates is subsequently lowered or
withdrawn for any reason, including by reason of a downgrading of the
claims-paying ability of the insurer, no person or entity will be obligated to
provide any additional credit enhancement with respect to the certificates. Any
reduction or withdrawal of a rating may have an adverse effect on the liquidity
and market price of the certificates. See "Ratings" herein.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences to investors of the purchase, ownership and disposition of the
certificates. This discussion is based upon laws, regulations, rulings and
decisions currently 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:
o insurance companies;
o tax-exempt organizations;
o regulated investment companies;
o financial institutions or broker dealers;
o taxpayers subject to the alternative minimum tax; and
o holders of non capital asset securities assets.
We suggest that investors consult their own tax advisors to
determine the particular federal, state and local consequences of the
purchase, ownership and disposition of the securities.
TAX STATUS OF THE TRUST
In the opinion of Dewey Ballantine LLP, special tax counsel to the
Company, the issuer will be classified as a grantor trust under subpart E, part
I of subchapter J of Chapter 1 of Subtitle A of the Code and not as an
association or publicly traded partnership taxable as a corporation for federal
income tax purposes and therefore is not subject to federal income tax.
Certificateholders will be treated as the owners of the trust, except as
described below.
GENERAL
For purposes of federal income tax, the certificateholders will each be
deemed to have acquired a fixed portion of the interest due on each automobile
loan. These fixed portions of interest will be treated as "stripped coupons"
within the meaning of the Code. Accordingly, for federal income tax purposes,
each certificateholder will be treated as owning its pro rata percentage
interest in the principal of each automobile loan and such interest in each
automobile loan will be treated as a "stripped bond" within the meaning of
Section 1286 of the Code.
INCOME ON THE AUTOMOBILE LOANS
Each certificateholder will be required to report on its federal income
tax return, in a manner consistent with its method of accounting, its pro rata
allocable share of the entire gross income of the trust, including interest or
finance charges earned on the automobile loans, and any gain or loss upon
collection or disposition of the automobile loans. In computing its federal
income tax liability, a certificateholder will be entitled to deduct, consistent
with its method of accounting, its pro rata allocable share of reasonable fees
and expenses that are paid or incurred by the trust as provided in Section 162
or 212 of the Code. If a certificateholder is an individual, estate or trust the
deduction for its pro rata share of such fees will be allowed only to the extent
that all of its miscellaneous itemized deductions,
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including its share of such fees, exceed 2% of its adjusted gross income. In
addition, Code Section 68 provides that itemized deductions otherwise allowable
for a taxable year of an individual taxpayer whose adjusted gross income exceeds
a specified amount will be reduced by the lesser of (1) 3% of the excess, if
any, of adjusted gross income over such amount, or (2) 80% of the amount of
itemized deductions otherwise allowable for such year. As a result, such
investors holding certificates, directly or indirectly through a pass-through
entity, may have aggregate taxable income in excess of the aggregate amount of
cash received on such certificates with respect to interest at the certificate
rate. A certificateholder using the cash method of accounting must take into
account its pro rata share of income and deductions as and when collected by or
paid by the trust. A certificateholder using the accrual method of accounting
must take into account its pro rata share of income and deductions as and when
such amounts become due to or payable by the trust.
A certificateholder will not be subject to the market discount rules
discussed below regarding the stripped automobile loans, but instead will be
subject to the original issue discount rules contained in the Code. A
certificateholder will be required to include any original issue discount in
income as it accrues, regardless of whether cash payments are received, using a
method reflecting a constant rate of interest on the automobile loans.
STRIPPED BONDS AND STRIPPED COUPONS
Although the tax treatment of stripped bonds is not entirely clear,
based on guidance by the IRS, each purchaser of a certificate will be treated as
the purchaser of a stripped bond or stripped coupon which generally should be
treated as a single debt instrument issued on the day it is purchased for
purposes of calculating any original issue discount. Generally, under Treasury
regulations, if the discount on a stripped bond certificate is larger than a de
minimis amount, as calculated for purposes of the original issue discount rules
of the Code, that stripped bond certificate will be considered to have been
issued with original issue discount. See "-- Accrual of Original Issue
Discount."
ACCRUAL OF ORIGINAL ISSUE DISCOUNT
In determining whether a certificateholder has purchased its
interest in the automobile loans or any automobile loan at a discount, a
portion of the purchase price for a certificate may be allocated to the
accrued interest on the automobile loans at the time of purchase as though
that accrued interest were a separate asset. This would reduce the portion of
the purchase price allocable to the certificateholder's undivided interest in
the automobile loans. If the interests in the automobile loans represented by
the certificates are considered to be issued with original issue discount,
the rules described in this paragraph would apply. Generally, the owner of a
stripped bond or stripped coupon issued or acquired with original issue
discount must include in gross income the sum of the daily portions, as
described below, of such original issue discount for each day on which it
owns a certificate, including the date of purchase but excluding the date of
disposition. In the case of an original certificateholder, the daily portions
of original issue discount for a certificate generally would be determined as
follows. A calculation will be made of the portion of original
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issue discount that accrues with respect to the certificate during each
successive monthly accrual period. This will be done, in the case of each
full monthly accrual period, by adding (1) the present value of all remaining
payments to be received on the certificate under the prepayment assumption
used for the certificates and (2) any payments received during such accrual
period, and subtracting from that total the adjusted issue price of the
certificate at the beginning of that accrual period. No representation is
made that the automobile loans will prepay at any specified rate. The
adjusted issue price of a certificate at the beginning of the first accrual
period is its issue price, as determined for purposes of the original issue
discount rules of the Code, and the adjusted issue price of a certificate at
the beginning of a subsequent accrual period is the adjusted issued price at
the beginning of the immediately preceding accrual period plus the amount of
original issue discount allocable to that accrual period and reduced by the
amount of any payment made at the end of or during that accrual period. The
original issue discount accruing during such accrual period will then be
divided by the number of days in the period to determine the daily portion of
original issue discount for each day in the period. For an initial accrual
period shorter than a full monthly accrual period, the daily portions of
original issue discount must be determined according to a reasonable method
as set forth in the Treasury Regulations regarding original issue discount.
For the certificates, the method of calculating original issue discount
as described above will cause the accrual of original issue discount to either
increase or decrease but never below zero, in any given accrual period to
reflect the fact that prepayments are occurring at a faster or slower rate than
the prepayment assumption used for the certificates.
Subsequent purchasers that purchase certificates at more than a de
minimis discount should consult their tax advisors about the proper method to
accrue such original issue discount.
PREMIUM
The purchase of a certificate at more than its adjusted principal
amount will result in the creation of a premium with respect to the interest in
the underlying automobile loans represented by those certificates. In
determining whether a certificateholder has purchased its interest in the
automobile loans at a premium, a portion of the purchase price for a certificate
may be allocated to the accrued interest on the automobile loans at the time of
purchase as though such accrued interest were a separate asset, thus reducing
the portion of the purchase price allocable to the certificateholder's undivided
interest in the automobile loans. A purchaser who does not hold the certificate
for sale to borrowers or in inventory may elect under Section 171 of the Code to
amortize that premium. Under the Code, premium is allocated among the interest
payments on the automobile loans to which it relates and is considered as an
offset against and thus a reduction of such interest payments. With certain
exceptions, that election would apply to all debt instruments held or
subsequently acquired by the electing holder. If the election is not made, the
premium will be deductible as an ordinary loss only upon disposition of the
certificate or pro rata as principal is paid on the automobile loans.
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Holders of certificates acquired at a premium are urged to consult with
their own tax advisors regarding the proper treatment of the certificates for
federal income tax purposes.
SALE OF A CERTIFICATE
If a certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale, allocable to each of the
automobile loans and the certificateholder's adjusted basis in each of them.
However, amounts attributable to accrued and unpaid interest which will be
treated as ordinary income. A certificateholder's adjusted basis will equal the
certificateholder's cost for the certificate, increased by any discount
previously included in income, and decreased, but not below zero, by any
previously amortized premium and by the amount of payments previously received
on the automobile loans. Any gain or loss will be capital gain or loss if the
certificate was held as a capital asset, except that gain will be treated in
whole or in part as ordinary interest income to the extent of the seller's
interest in accrued market discount not previously taken into income on
underlying automobile loans having a fixed maturity date of more than one year
from the date of origination. A capital gain or loss will be long-term or
short-term depending on whether or not the certificates have been owned for more
than one year.
FOREIGN CERTIFICATEHOLDERS
Interest attributable to the automobile loans which is received by a
foreign certificateholder will generally not be subject to the normal 30%
withholding tax imposed on those payments, provided that (1) the foreign
certificateholder does not own, directly or indirectly, 10% or more of, and
is not a controlled foreign corporation related to, the seller and (2) that
holder fulfills certain certification requirements. Under those requirements,
the holder must certify, under penalty of perjury, that it is not a United
States person and provide its name and address. For this purpose, United
States person means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision of the United States,
an estate the income of which is includible in gross income for United States
federal income tax purposes regardless of its source or a trust if a court
within the United States is able to exercise primary supervision of the
administration of the trust and one or more United States fiduciaries have
the authority to control all substantial decisions of the trust. Gain
realized upon the sale of a certificate by a foreign certificateholder
generally will not be subject to United States withholding tax. If, however,
such interest or gain is effectively connected to the conduct of a trade or
business within the United States by that foreign certificateholder, that
holder will be subject to United States federal income tax on the
certificates at regular rates. Potential investors who are not United States
persons should consult their own tax advisors regarding the specific tax
consequences to them of owning a certificate.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
The trustee will furnish or make available, within the prescribed
period of time for tax reporting purposes after the end of each calendar year,
to each certificateholder or each person holding a certificate on behalf of a
certificateholder at any time during such year, such information as the trustee
deems necessary or desirable to assist certificateholders in preparing their
federal income tax returns. Payments made on the certificates and proceeds from
the sale of the certificates will not be subject to a "backup" withholding tax
of 31% unless, in general, a certificateholder fails to comply with certain
reporting procedures and is not an exempt recipient under applicable provisions
of the Code.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new withholding
regulations which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The new withholding
regulations attempt to unify certification requirements and modify reliance
standards. The new withholding regulations will generally be effective for
payments made after December 31, 2000, subject to certain transition rules.
Prospective investors are urged to consult their own tax advisors regarding the
new withholding regulations.
ERISA CONSIDERATIONS
The certificates may be purchased by ERISA plans as described in the
prospectus under "ERISA CONSIDERATIONS - ERISA CONSIDERATIONS REGARDING
SECURITIES WHICH ARE CERTIFICATES."
The Department of Labor has issued to the underwriters individual
prohibited transaction exemptions which, as described in the prospectus,
generally exempt from the application of certain prohibited transaction
provisions of ERISA and the Code transactions with respect to the initial
purchase, the holding and the subsequent resale by plans of certificates
representing beneficial ownership interests in a trust which holds secured
receivables, secured loans and other secured obligations that meet the
conditions and requirements of the exemption. The loans covered by the
underwriter's exemptions include loans such as the automobile loans.
As of the initial cut-off date, there is no single automobile loan
included in the trust that constitutes more than five percent of the
aggregate unamortized principal balance of the assets of the trust. Before
purchasing a certificate based on the underwriter exemptions, a fiduciary of
a plan should itself confirm (1) that such certificate constitutes a
certificate for purposes of the exemption and (2) that the conditions and
other requirements set forth in the underwriter exemptions would be
satisfied.
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Any plan fiduciary considering the purchase of a certificate may wish
to consult with its counsel as to the potential applicability of ERISA, the
Code and the underwriter exemptions prior to making an investment in the
certificates. Moreover, each plan fiduciary may wish to determine whether,
under the general fiduciary standards of investment prudence and
diversification, an investment in the certificates is appropriate for the
plan, taking into account the overall investment policy of the plan and the
composition of the plan's investment portfolio.
The sale of the certificates to a plan is not a representation
by the company or the underwriters that this investment meets all relevant legal
requirements for investments by plans generally or by any particular plan or
that this investment is appropriate for plans generally or any particular plan.
RATINGS
It is a condition to the certificates' issuance that the Class A
Certificates be rated [A-1+] by S&P, and [P-1] by Moody's , and that the Class B
Certificates be rated [AAA] by S&P and [Aaa] by Moody's.
The certificates' ratings will be:
o [without regard to the policy in the case of S&P and
substantially based on the policy in the case of Moody's for
the Class A Certificates, and
o based primarily on the policy for the Class B of
Certificates.]
To the extent that the ratings are based on the policy, the ratings
apply to distributions due on the insured distribution dates, and not to
distributions due on the distribution dates. We cannot assure you that the
rating agencies will not lower or withdraw the ratings.
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 certificates do not represent address the likelihood of the
receipt by the certificateholders of all distributions to which the
certificateholders are entitled by their respective final scheduled distribution
dates. The ratings assigned to the certificates do not represent any assessment
of the likelihood that principal prepayments might differ from those originally
anticipated or address the possibility that certificateholders might suffer a
lower than anticipated yield.
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
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certificates. Each of the underwriters has severally agreed to purchase, the
principal amount of the certificates set forth opposite its name below:
CLASS A CERTIFICATES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
[Underwriter].................................................................... $
[Underwriter]....................................................................
[Underwriter]....................................................................
[Underwriter]....................................................................
Total...................................................................... $
</TABLE>
CLASS B CERTIFICATES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
[Underwriter].................................................................... $
[Underwriter]....................................................................
[Underwriter]....................................................................
[Underwriter]....................................................................
Total...................................................................... $
</TABLE>
The underwriters have advised the seller that they propose initially to
offer the certificates to the public at the prices listed below, and to dealers
at prices less the initial concession not in excess of _____% per Class A
Certificate and _____% per Class B Certificate. The underwriters may allow and
dealers may reallow a concession not in excess of _____% per Class A Certificate
and _____% per Class B Certificate to other dealers. After the initial public
offering of the certificates, the public offering prices and such concessions
may be changed.
Each underwriter has represented and agreed that:
o it has not offered or sold, and will not offer or sell, any
certificates to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments, as principal or
agent, for the purposes of their businesses or otherwise in
circumstances that do not constitute an offer to the public in
the United Kingdom for the purposes of the Public Offers of
Securities Regulations 1995,
o it has complied and will comply with all applicable provisions
of the Financial Services Act 1986 of Great Britain with
respect to anything done by it in relation to the certificates
in, from or otherwise involving the United Kingdom and
o it has only issued or passed on and will only issue or pass on
in the United Kingdom any document in connection with the
issue of the certificates to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or is a
person to whom the document may otherwise lawfully be issued
or passed on.
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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, may have acted as a
"warehouse lender" to its affiliates, and may receive a portion of the proceeds
as a repayment of the "warehouse" debt.
IN CONNECTION WITH THIS OFFERING THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
EXPERTS
The consolidated balance sheets of Financial Security Assurance Inc.
and its subsidiaries as of __________ and _____ and the related consolidated
statements of income, changes in shareholder's equity and cash flows for each of
the three years in the period ended __________, incorporated by reference in
this prospectus supplement, are incorporated in reliance on the report of [ ],
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
LEGAL OPINIONS
In addition to the legal opinions described in the prospectus, certain
federal income tax and other matters have been passed upon for the seller and
the issuer by Dewey Ballantine LLP, New York, New York. Certain legal matters
relating to the certificates have been passed upon for the [company] by Dewey
Ballantine LLP, New York, New York. Certain legal matters have been passed upon
for the insurer by [ ], [Assistant] General Counsel, to the insurer. The insurer
is represented by [ ], New York, New York.
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GLOSSARY
"ACCELERATED PRINCIPAL AMOUNT" means for a distribution date, an amount
which equals the lesser of
(x) the sum of:
(a) the excess, if any, of the amount of AVAILABLE FUNDS
on the distribution date over the amounts
distributable on the distribution date under clauses
1 through 6 under "Distributions"
plus
(b) amounts, if any, available according to the terms of
the Spread Account Agreement; and
(y) the greater of
(a) the excess, if any, on the distribution date of:
o the PRO FORMA CERTIFICATE BALANCE for the
distribution date over
o the REQUIRED PRO FORMA CERTIFICATE BALANCE for the
distribution date, and
(b) the amount necessary, after taking into account all
other distributions to be made on the date, to reduce
the principal balance of the Class A Certificates to
zero.
"ADDITIONAL FUNDS AVAILABLE" means, with respect to any insured
distribution date, the sum of:
(a) the deficiency claim amount, if any, received by the trustee with
respect to the insured distribution date
plus
(b) the Insurer Optional Deposit, if any, received by the trustee with
respect to the insured distribution date.
"AMOUNT FINANCED" means, for any automobile loan, the aggregate amount
loaned toward the purchase price of the financed vehicle and related costs,
including amounts advanced for:
o accessories,
o insurance premiums,
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o service,
o car club and warranty contracts,
o other items customarily financed as part of retail automobile
installment sale contracts or promissory certificates, and
related costs.
"AVAILABLE FUNDS" means, for any calendar month, the sum of:
o the COLLECTED FUNDS for the calendar month,
o all purchase amounts deposited in the collection account
during the calendar month, plus income on investments held in
the collection account,
o the Monthly Capitalized Interest Amount for the distribution
date which immediately follows the calendar month,
o the proceeds of any liquidation of the assets of the issuer,
and
o any remaining pre-funded amount applied to the mandatory
redemption of the certificates.
"CERTIFICATEHOLDERS' ACCELERATED PRINCIPAL AMOUNT" means, for any
distribution date, the CERTIFICATEHOLDERS' PERCENTAGE of the ACCELERATED
PRINCIPAL AMOUNT on the distribution date, if any.
"CERTIFICATEHOLDERS' DISTRIBUTABLE AMOUNT" means, any distribution
date, the sum of the CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT and the
CERTIFICATEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT.
"CERTIFICATEHOLDERS' INTEREST CARRYOVER AMOUNT" means, for any class of
certificates and any determination date, all or any portion of the
CERTIFICATEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT for the class for the
immediately preceding distribution date, and any outstanding CERTIFICATEHOLDERS'
INTEREST CARRYOVER AMOUNT still unpaid as of the determination date, plus, to
the extent permitted by law, interest on the unpaid amount at the interest rate
paid by the class of certificates from the preceding distribution date to but
excluding the determination date.
"CERTIFICATEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, for any
distribution date, the sum of the CERTIFICATEHOLDERS' MONTHLY INTEREST
DISTRIBUTABLE AMOUNT for each class of certificates for the distribution date
and the CERTIFICATEHOLDERS' INTEREST CARRYOVER AMOUNT, if any, for each class of
certificates, calculated as of the distribution date.
"CERTIFICATEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, for
any distribution date and any class of certificates, that the interest accrued
during the applicable interest period shall accrue on the principal amount of
the certificates of each class outstanding as of the end of the prior
distribution date or, in the case of the first
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distribution date, as of the closing date. However, if the principal balance is
further reduced by a principal payment on the insured distribution date
immediately following the prior distribution date, then the interest shall
accrue:
o from and including the prior distribution date to, but
excluding, the related insured distribution date, on the
principal balance outstanding as of the end of the prior
distribution date - or, in the case of the first distribution
date, as of the closing date; and
o from and including the insured distribution date, to, but
excluding, the following distribution date, on the principal
balance outstanding as of the end of the insured distribution
date, calculated on the basis of a 360-day year and:
[(a) in the case of the Class A Certificates [and the
Class B Certificates], the actual number of days elapsed; and
(b) in the case of the Class A Certificates [and the
Class B Certificates,] twelve 30-day months.]
"CERTIFICATEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, for
any distribution date, the CERTIFICATEHOLDERS' PERCENTAGE of the PRINCIPAL
DISTRIBUTABLE AMOUNT.
"CERTIFICATEHOLDERS' PARITY DEFICIT AMOUNT" means, for any distribution
date, the excess, if any, of:
(x) the aggregate remaining principal balance outstanding on
the distribution date, after giving effect to all reductions in the
aggregate principal balance from sources other than:
o the spread account and
o the policy
over;
(y) the sum of the pool balance and the pre-funded amount at
the end of the prior calendar month.
"CERTIFICATEHOLDERS' PERCENTAGE" means:
o for each distribution date prior to the distribution date on
which the Class A Certificates are fully paid, 100%;
o on the distribution date on which the Class B Certificates are
fully paid, the percentage equivalent of a fraction, the
numerator of which is the outstanding principal amount of the
Class B Certificates immediately prior to the
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distribution date, and the denominator of which is the
PRINCIPAL DISTRIBUTABLE AMOUNT for the distribution date; and
o for any distribution date thereafter, zero.
"CERTIFICATEHOLDERS' PRINCIPAL CARRYOVER AMOUNT" means, as of any
determination date, all or any portion of the CERTIFICATEHOLDERS' PRINCIPAL
DISTRIBUTABLE AMOUNT and any outstanding CERTIFICATEHOLDERS' PRINCIPAL CARRYOVER
AMOUNT from the preceding distribution date which remains unpaid.
"CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, for any
distribution date, other than the final scheduled distribution date for any
class of certificates, the sum of the CERTIFICATEHOLDERS' MONTHLY PRINCIPAL
DISTRIBUTABLE AMOUNT for the distribution date and the CERTIFICATEHOLDERS'
PRINCIPAL CARRYOVER AMOUNT, if any, as of the distribution date.
The CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT on the final
scheduled distribution date for any class will equal the sum of:
(1) the CERTIFICATEHOLDERS' MONTHLY PRINCIPAL
DISTRIBUTABLE AMOUNT for the distribution date;
(2) the CERTIFICATEHOLDERS' PRINCIPAL CARRYOVER AMOUNT as
of the distribution date; and
(3) the excess of the outstanding principal amount of the
class of certificates, if any, over the amounts
described in clauses (1) and (2).
"CERTIFICATEHOLDERS' REMAINING PARITY DEFICIT AMOUNT" means, for any
distribution date:
o the CERTIFICATEHOLDERS' PARITY DEFICIT AMOUNT for the
distribution date
MINUS
o any reduction in the certificate's aggregate principal balance
on the distribution date which is funded from the spread
account.
"COLLECTED FUNDS" means, any calendar month, the amount of funds in
the collection account representing automobile loan collections during the
calendar month, including all Net Liquidation Proceeds collected during the
calendar month, but excluding any purchase amounts.
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"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;
o the excess of the automobile loan's principal balance
immediately prior to the automobile loan order over the
automobile loan's principal balance as reduced and/or
o 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.
"INSURER OPTIONAL DEPOSIT" means, for any insured distribution date, an
amount other than the POLICY CLAIM AMOUNT delivered by the insurer, at its sole
option, for deposit into the collection account for any of the following
purposes:
o to provide funds to pay the fees or expenses of any of the
issuer's service providers for the insured distribution date;
or
o to include those amounts as part of ADDITIONAL FUNDS AVAILABLE
for the insured distribution date to the extent that without
them a draw would be required to be made on a policy.
"NET LIQUIDATION PROCEEDS" means, for liquidated automobile loans:
o proceeds from the underlying financed vehicles' disposition,
minus
o 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;
o any insurance proceeds; or
o other monies received from the obligor.
POLICY CLAIM AMOUNT means for any insured distribution date, the sum of
(x) the excess, if any, without duplication, of:
o the sum of the CERTIFICATEHOLDERS' INTEREST
DISTRIBUTABLE AMOUNT and the CERTIFICATEHOLDERS'
PARITY DEFICIT AMOUNT for the related distribution
date, together with:
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(a) if the related distribution date was the
mandatory redemption date, the Certificate Prepayment Amount;
and
(b) if the related distribution date was the final
scheduled distribution date for any class, the unpaid
principal balance of the class;
over
o the sum of:
(a) the amount actually deposited into the
Certificate payment account on the related distribution date;
and
(b) ADDITIONAL FUNDS AVAILABLE, if any, for the
insured distribution date
plus
(y) the CERTIFICATEHOLDERS' INTEREST CARRYOVER AMOUNT, if any, which
has accrued since the related distribution date.
"PRINCIPAL BALANCE" means, with respect to any automobile loan, as of
any date, the AMOUNT FINANCED minus (a) that portion of all amounts received on
or prior to the date and allocable to principal in accordance with the terms of
the automobile loan, and (b) any CRAM DOWN LOSS in respect of the automobile
loan. The "PRINCIPAL BALANCE" of a liquidated automobile loan or a purchased
automobile loan shall be zero.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, for any distribution date, the
amount equal to the excess, if any, of:
(x) the sum of the following amounts for the related calendar
month, computed according to the simple interest method:
o collections received on automobile loans, other than
liquidated and purchased automobile loans, allocable to
principal, including full and partial principal prepayments;
o the principal balance of all automobile loans, other than
purchased automobile loans, that became liquidated automobile
loans during the calendar month,
o (A) the portion of the purchase amount allocable to principal
of all automobile loans that became purchased automobile loans
as of the immediately preceding record date;
o (B) at the option of the insurer, the outstanding principal
balance of those automobile loans that the seller or the
company was required repurchase during the calendar month but
were not repurchased; and
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o the aggregate amount of Cram Down Losses during the related
calendar month over
(y) the STEP-DOWN AMOUNT, if any, for the distribution
date.
"PRO FORMA CERTIFICATE BALANCE" means, for any distribution date, the
aggregate remaining principal balance of the certificates outstanding on the
distribution date, after giving effect to distributions under clauses 1 through
4 under "Distributions."
"REQUIRED PRO FORMA CERTIFICATE BALANCE" means, for any distribution
date, a dollar amount equal to product of
(x) [90%]; and
(y) the sum of the pool balance and the pre-funded amount as of the end
of the prior calendar month.
"STEP-DOWN AMOUNT" means, for any distribution date, the excess, if
any, of:
(x) the REQUIRED PRO FORMA CERTIFICATE BALANCE; over
(y) the PRO FORMA CERTIFICATE BALANCE on the distribution date, for
this purpose only calculated without deduction for any STEP-DOWN AMOUNT - i.e.,
with the assumption that the entire amount described in clause (x) of the
definition of "PRINCIPAL DISTRIBUTABLE AMOUNT" is distributed as principal on
the certificates.
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ANNEX I
CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
NOTICE TO INVESTORS: THIS ANNEX A IS AN INTEGRAL PART OF THE PROSPECTUS
SUPPLEMENT TO WHICH IT IS ATTACHED.
Except in limited circumstances, the securities will be available only
in book-entry form. Investors in the securities may hold the securities through
any of DTC, Cedelbank or Euroclear. The securities will be tradeable as home
market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors through Cedelbank and
Euroclear will be conducted in the ordinary way in accordance with the normal
rules and operating procedures of Cedelbank and Euroclear and in accordance with
conventional eurobond practice, which is seven calendar day settlement.
Secondary market trading between investors through DTC will be
conducted according to DTC's rules and procedures applicable to U.S. corporate
debt obligations.
Secondary cross-market trading between Cedelbank or Euroclear and DTC
participants holding securities will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedelbank and Euroclear and as DTC
participants.
Non-U.S. holders of global securities will be subject to U.S.
withholding taxes unless the holders meet a number of requirements and deliver
appropriate U.S. tax documents to the securities clearing organizations or their
participants.
INITIAL SETTLEMENT
All securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the securities will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, Cedelbank and Euroclear will hold
positions on behalf of their participants through their relevant depository
which in turn will hold these positions in their accounts as DTC participants.
Investors electing to hold their securities through DTC will follow DTC
settlement practices. Investor securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their securities through Cedelbank or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary security and no
lock-up or restricted period. Securities will be credited to the securities
custody accounts on the settlement date against payment in same-day funds.
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SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS
Secondary market trading between DTC participants will be settled using
the procedures applicable to asset-back securities issues in same-day funds.
TRADING BETWEEN CEDELBANK OR EUROCLEAR PARTICIPANTS
Secondary market trading between Cedelbank participants or Euroclear
participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
TRADING BETWEEN DTC, SELLER AND CEDELBANK OR EUROCLEAR PARTICIPANTS
When securities are to be transferred from the account of a DTC
participant to the account of a Cedelbank participant or a Euroclear
participant, the purchaser will send instructions to Cedelbank or Euroclear
through a Cedelbank participant or Euroclear participant at least one business
day prior to settlement. Cedelbank or Euroclear will instruct the relevant
depository, as the case may be, to receive the securities against payment.
Payment will include interest accrued on the securities from and including the
last coupon distribution date to and excluding the settlement date, on the basis
of the actual number of days in the accrual period and a year assumed to consist
of 360 days. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following month.
Payment will then be made by the relevant depository to the DTC participant's
account against delivery of the securities. After settlement has been completed,
the securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Cedelbank
participant's or Euroclear participant's account. The securities credit will
appear the next day, European time and the cash debt will be back-valued to, and
the interest on the global securities will accrue from, the value date, which
would be the preceding day when settlement occurred in New York. If settlement
is not completed on the intended value date and the trade fails, the Cedelbank
or Euroclear cash debt will be valued instead as of the actual settlement date.
Cedelbank participants and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Cedelbank or Euroclear. Under
this approach, they may take on credit exposure to Cedelbank or Euroclear until
the securities are credited to their account one day later.
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As an alternative, if Cedelbank or Euroclear has extended a line of
credit to them, Cedelbank participants or Euroclear participants can elect not
to preposition funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, Cedelbank participants or Euroclear
participants purchasing securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the securities were credited to their
accounts. However, interest on the securities would accrue from the value date.
Therefore, in many cases the investment income on the global securities earned
during that one-day period may substantially reduce or offset the amount of the
overdraft charges, although the result will depend on each Cedelbank
participant's or Euroclear participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC participants can employ their usual procedures for crediting global
securities to the respective European depository for the benefit of Cedelbank
participants or Euroclear participants. The sale proceeds will be available to
the DTC seller on the settlement date. Thus, to the DTC participants a
cross-market transaction will settle no differently than a trade between two DTC
participants.
TRADING BETWEEN CEDELBANK OR EUROCLEAR SELLER AND DTC PURCHASER
Due to time zone differences in their favor, Cedelbank participants and
Euroclear participants may employ their customary procedures for transactions in
which securities are to be transferred by the respective clearing system,
through the respective depository, to a DTC participant. The seller will send
instructions to Cedelbank or Euroclear through a Cedelbank participant or
Euroclear participant at least one business day prior to settlement. In these
cases Cedelbank or Euroclear will instruct the respective depository, as
appropriate, to credit the securities to the DTC participant's account against
payment. Payment will include interest accrued on the securities from and
including the last interest payment to and excluding the settlement date on the
basis of the actual number of days in the accrual period and a year assumed to
consist of 360 days. For transactions settling on the 31st of the month, payment
will include interest accrued to and excluding the first day of the following
month. The payment will then be reflected in the account of Cedelbank
participant or Euroclear participant the following day, and receipt of the cash
proceeds in the Cedelbank participant's or Euroclear participant's account would
be back-valued to the value date, which would be the preceding day, when
settlement occurred in New York. In the event that the Cedelbank participant or
Euroclear participant has a line of credit with its respective clearing system
and elects to be in debt in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft incurred over that
one-day period. If settlement is not completed on the intended value date and
the trade fails, receipt of the cash proceeds in the Cedelbank participant's or
Euroclear participant's account would instead be valued as of the actual
settlement date.
Finally, day traders that use Cedelbank or Euroclear and that purchase
global securities from DTC participants for delivery to Cedelbank participants
or Euroclear participants may wish to Certificate that these trades would
automatically fail on the sale
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side unless affirmative action is taken. At least three techniques should be
readily available to eliminate this potential problem:
o borrowing through Cedelbank or Euroclear for one day, until the
purchase side of the trade is reflected in their Cedelbank or Euroclear
accounts in accordance with the clearing system's customary procedures;
o borrowing the securities in the U.S. from a DTC participant no later
than one day prior to settlement, which would give the securities
sufficient time to be reflected in their Cedelbank or Euroclear account
in order to settle the sale side of the trade; or
o staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC participant is at
least one day prior to the value date for the sale to the Cedelbank
participant or Euroclear participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of securities holding securities through Cedelbank
or Euroclear, or through DTC if the holder has an address outside the U.S., will
be subject to the 30% U.S. withholding tax that generally applies to payments of
interest, including original issue discount, on registered debt issued by U.S.
persons, unless:
(1) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business in the chain of intermediaries between the beneficial owner
and the U.S. entity required to withhold tax complies with applicable
certification requirements and
(2) the beneficial owner takes one of the following steps to
obtain an exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS-FORM W-8
Beneficial owners of global securities that are non-U.S.
persons can obtain a complete exemption from the withholding tax by filing a
signed Form W-8 Certificate of Foreign Status. If the information shown on Form
W-8 changes, a new Form W-8 must be filed within 30 days of the change.
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED
INCOME-FORM 4224
A non-U.S. person, as defined below, including a non-U.S.
corporation or bank with a U.S. branch, for which the interest income is
effectively connected with its conduct of a trade or business in the United
States, can obtain an exemption from the withholding tax by filing Form 4224,
Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States.
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN
TREATY COUNTRIES-FORM 1001
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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. Form
1001 may be filed by securityholders or their agent.
EXEMPTION FOR U.S. PERSONS-FORM W-9
U.S. persons can obtain a complete exemption from the
withholding tax by filing Form W-9 "Payer's Request for Taxpayer Identification
Number and Certification".
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE
The Owner of a global security or, in the case of a Form 1001
or a Form 4224 filer, his agent, files by submitting the appropriate form to the
person through whom it holds, the clearing agency, in the case of persons
holding directly on the books of the clearing agency. Form W-8 and Form 1001 are
effective for three calendar years and Form 4224 is effective for one calendar
year.
On April 22, 1996, the IRS proposed regulations relating to
withholding, backup withholding and information reporting that, if adopted in
their current form would, among other things, unify current certification
procedures and forms and clarify reliance standards. The regulations are
proposed to be effective for payments made after December 31, 2000 but provide
that securities issued on or before the date that is 60 days after the proposed
regulations are made final will continue to be valid until they expire. Proposed
regulations, however, are subject to change prior to their adoption in final
form.
A U.S. PERSON is:
(1) a citizen or resident of the United States,
(2) a corporation, partnership or other entity organized in or
under the laws of the United States or any political subdivision
thereof,
(3) an estate that is subject to U.S. federal income tax
regardless of the source of its income or
(4) a trust if a court within the United States can exercise
primary supervision over its administration and at least one United
States fiduciary has the authority to control all substantial decisions
of the trust.
A NON-U.S. PERSON is any person who is not a U.S. person.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of the securities. Investors
are advised to consult their own tax advisors for specific tax advice concerning
their holding and disposing of the securities
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<PAGE>
Prospectus
--------------------------------------------------------------------------------
AMERICREDIT FINANCIAL SERVICES, INC. AUTOMOBILE RECEIVABLE ASSET-
SERVICER BACKED SECURITIES, ISSUABLE IN
SERIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 --
o will be issued from time to time in series;
o will be backed primarily by one or more pools of "non-prime"
automobile loans held by the issuer;
o will be rated in one of the four highest rating categories by at least
one nationally recognized statistical rating organization; and
o 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 "non-prime"
automobile loans, funds on deposit in one or more accounts and forms of
credit support described in this prospectus and in the prospectus supplement.
"Non-prime" automobile loans are automobile loans made to borrowers with
limited credit histories or modest incomes or who have experienced prior
credit difficulties.
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 ____________________, 2000
<PAGE>
IMPORTANT INFORMATION ABOUT THE INFORMATION PRESENTED IN THIS PROSPECTUS
AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the securities in two separate
documents that progressively provide more detail: (1) this prospectus, which
provides general information, some of which may not apply to a particular series
of securities; and (2) the prospectus supplement, which describes the specific
terms of your series of securities.
This prospectus by itself does not contain complete information about
the offering of your securities; the balance of that information is contained in
the prospectus supplement. We suggest that you read both this prospectus and the
prospectus supplement in full. We cannot sell the securities to you unless you
have received both this prospectus and the prospectus supplement.
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary of Prospectus..........................................................5
Issuer................................................................5
Company...............................................................5
Servicer..............................................................5
Trustee...............................................................5
The Securities........................................................5
Trust Property........................................................6
Payment Date..........................................................7
Record Date...........................................................7
Remittance Period.....................................................7
Credit Enhancement....................................................7
Cross-Collateralization...............................................7
Registration of Securities............................................8
Optional Termination..................................................8
Mandatory Termination.................................................8
Material Federal Income Tax Consequences..............................8
Ratings...............................................................9
Risk Factors..................................................................10
The Company and the Servicer..................................................18
The Trustee...................................................................18
The Issuer....................................................................18
Composition of The Trust Property.............................................18
The Automobile Loans..........................................................19
Automobile Loan Pools................................................19
The Automobile Loans.................................................19
Rule of 78s Automobile Loans................................20
Fixed Value Automobile Loans................................20
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Simple Interest Automobile Loans............................20
Delinquencies, Repossessions, and Net Loss Information on the
Automobile Loans.....................................................21
Maturity and Prepayment Considerations on the Automobile Loans.......21
AmeriCredit's Automobile Financing Program....................................22
General..............................................................22
AmeriCredit's Lending Program through Dealers...............22
Automobile Loan Acquisition..........................................23
Pool Factors..................................................................26
Use of Proceeds...............................................................26
Description of the Securities.................................................27
General..............................................................27
General Payment Terms of Securities..................................29
Distribution Dates...................................................29
Determination of Principal and Interest on the Securities............29
Soft Bullets.........................................................30
Fixed Rate Securities................................................30
Floating Rate Securities.............................................30
Indexed Securities...................................................31
Scheduled Amortization Securities; Companion Securities..............32
Book-Entry Registration..............................................32
Definitive Securities................................................36
Reports to Securityholders...........................................37
Forward Commitments; Pre-Funding.....................................37
Description of the Trust Agreements...........................................38
Sale and Assignment of the Automobile Loans..........................38
Accounts.............................................................39
The Servicer.........................................................40
Servicing Procedures.................................................40
Payments on Automobile Loans.........................................41
Servicing Compensation...............................................41
Distributions........................................................42
Credit and Cash Flow Enhancements....................................42
Statements to Indenture Trustees and Trustees........................43
Evidence as to Compliance............................................43
Matters Regarding the Servicer.......................................43
Servicer Termination Event...........................................44
Rights upon Servicer Termination Event...............................44
Waiver of Past Defaults..............................................45
Amendment............................................................45
Insolvency Event.....................................................45
Termination..........................................................46
Material Legal Aspects of the Automobile Loans................................47
General..............................................................47
Security Interests in the Financed Vehicles..........................47
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General.....................................................47
Perfection..................................................47
Continuity of Perfection....................................48
Priority of Certain Liens Arising by Operation of Law.......49
Repossession.........................................................50
Notice of Sale; Redemption Rights....................................50
Deficiency Judgments and Excess Proceeds.............................50
Consumer Protection Laws.............................................51
Soldiers' and Sailors' Civil Relief Act of 1940......................53
Other Limitations....................................................53
Material Federal Income Tax Consequences......................................54
General..............................................................54
Grantor Trust Securities.............................................55
Taxation of Beneficial Owners of Grantor Trust Securities...55
Sales of Grantor Trust Securities...........................56
Grantor Trust Reporting.....................................56
Debt Securities......................................................56
Taxation of Beneficial Owners of Debt Securities............57
Sales of Debt Securities....................................57
Debt Securities Reporting...................................57
Partnership Interests................................................58
Taxation of Beneficial Owners of Partnership Interests......58
Sale or Exchange of Partnership Interests...................58
Partnership Reporting.......................................59
FASIT Securities.....................................................60
Discount and Premium.................................................63
Original Issue Discount.....................................64
Market Discount.............................................66
Premium.....................................................67
Special Election............................................67
Backup Withholding and Information Reporting.........................68
Foreign Investors....................................................68
Grantor Trust Securities, Debt Securities, and FASIT
Regular Securities..........................................68
High-Yield FASIT Regular Securities.........................69
Partnership Interests.......................................69
State and Local Tax Considerations............................................70
ERISA Considerations..........................................................70
General..............................................................70
ERISA Considerations regarding Securities which are Certificates.....71
Plan Assets..........................................................71
Underwriter Exemptions...............................................71
ERISA Considerations regarding Securities which are Notes............73
Consultation With Counsel............................................74
Methods of Distributions......................................................75
Legal Opinions................................................................76
Financial Information.........................................................77
</TABLE>
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<PAGE>
Summary of Prospectus
o 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.
o 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.
o There are material risks associated with an investment in the securities.
You should read the selection entitled "Risk Factors" on page of this
prospectus and in the accompanying prospectus supplement, and consider the
risk factors described in those sections, before making a decision to invest
in the securities.
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:
o certificates evidencing beneficial ownership in the trust
property; or
o 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:
o are stripped of regular interest payments and entitled only to
principal distributions, with disproportionate, nominal or no
interest distributions;
o are stripped of regular principal payments and entitled only
to interest distributions, with disproportionate, nominal or
no principal distributions;
o have different terms including different interest rates and
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<PAGE>
different timing, sequential order or priority of payments,
amount of principal or interest or both;
o 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;
o 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
o 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:
o upon the occurrence of specified events;
o in accordance with a schedule or formula; or
o 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:
o a pool consisting primarily of "non-prime" automobile loans
between manufacturers, dealers, or other originators and
retail purchasers together with all monies received relating
to the contracts;
o participation interests in automobile loans and all monies
received relating to the contracts;
o 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;
o 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;
o fixed value loans which provide for monthly payments with a
final fixed payment that is greater than the scheduled monthly
payments;
o simple interest loans which provide for amortization of the
amount financed through a series of fixed level monthly
payments;
o amounts held in any collection, reserve, pre-funding or other
accounts established pursuant to the transaction documents;
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<PAGE>
o credit enhancement for the trust property or any class of
securities; and
o 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.
"Non-prime" automobile loans, the principal component of the trust property,
is a common term used to describe loans made to borrowers with limited credit
histories or modest incomes or who have experienced prior credit difficulties.
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.
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:
o a policy issued by an insurer specified in the related
prospectus supplement;
o a reserve account;
o letters of credit;
o credit or liquidity facilities;
o third party payments or other support;
o cash deposits or other arrangements;
o swaps (including currency swaps) and other derivative
instruments and interest rate protection agreements; and
o 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.
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<PAGE>
The common pool of credit enhancement may consist of one or more of the
following:
o a master reserve account;
o a master insurance policy; or
o 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.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The securities of each series will, for federal income tax purposes, constitute
one of the following:
o interests in a trust treated as a grantor trust under
applicable provisions of the Internal Revenue Code;
o debt issued by a trust or by the company secured by the
underlying automobile loans;
o interests in a trust which is treated as a partnership; or
o 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
8
<PAGE>
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. The ratings are not a recommendation to
purchase, hold or sell the securities and do not address the market price or
suitability of the securities for a particular investor. The ratings address
the likelihood of timely payment of interest and the ultimate payment of
principal on the securities by the stated maturity date. The ratings do not
address the rate of prepayments that may be experienced on the automobile
loans or the effect on the rate of prepayments on the return of principal to
security holders.
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RISK FACTORS
This section and the section under the caption "Risk Factors" in the
accompanying prospectus supplement described the principal risk factors
associated with an investment in any class of securities. You should consider
these risk factors prior to any purchase of any class of securities.
YOU MAY NOT BE ABLE TO SELL YOUR A secondary market for these
SECURITIES, AND MAY HAVE TO HOLD YOUR securities is unlikely to develop. If
SECURITIES TO MATURITY EVEN THOUGH YOU it does develop, it may not provide
MAY WANT TO SELL. you with 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
COULD CAUSE YOU TO BE PAID EARLIER THAN securities may be adversely affected
YOU EXPECT, WHICH MAY ADVERSELY AFFECT by a higher or lower than anticipated
YOUR YIELD TO MATURITY. rate of 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.
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
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on an interest only security could be
dramatically reduced.
The automobile loans may be prepaid in
full or in part at any time.
We cannot predict the rate of
prepayments of the automobile loans,
which is influenced by a wide variety
of economic, social and other factors,
including among others, obsolescence,
the prevailing interest rates,
availability of alternative financing,
local and regional economic conditions
and natural disasters. Therefore, we
can give no assurance as to the level
of prepayments that a trust will
experience.
Your securities could be subject to
optional or mandatory redemption
features, exposing you to investment
risk.
One or more classes of securities of
any series may be subject to optional
or mandatory redemption in whole or in
part, on or after a specified date, or
on or after the time when the
aggregate outstanding principal amount
of the automobile loans or the
securities is less than a specified
amount or percentage.
Since prevailing interest rates may
fluctuate, we cannot assure you that
you will be able to reinvest these
amounts at a yield equaling or
exceeding the yield on your
securities. You will bear the risk of
reinvesting unscheduled distributions
resulting from a redemption.
THE TRUST ASSETS CONSIST The trust assets consist primarily
MAINLY OF LOANS MADE TO of "non-prime" automobile loans
"NON-PRIME" BORROWERS. originated under lending programs of
the company designed to serve
consumers who have limited access to
traditional automobile financing.
There is a high degree of risk
associated with non-prime borrowers.
The typical non-prime borrower may have
had previous financial difficulties 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
services, it charges interest at
higher rates than those charged by
many traditional financing sources.
"Non-prime" automobile loans such as
those included in trust assets
therefore entail relatively higher
risk and may be expected to
experience higher levels of
delinquencies and credit losses than
automobile loans originated by
traditional automobile financing
sources.
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
COVER ALL LOSSES OR RISKS ON YOUR and may reduce over time in accordance
INVESTMENT. with a schedule or formula.
Furthermore, credit enhancement may
provide only very limited coverage as
to some types of losses, and may
provide no coverage as to other types
of losses. Credit enhancement does
not directly or indirectly
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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
YOUR PAYMENTS TO BE REDUCED OR DELAYED. ownership or security interests in the
automobile loans which could result in
delays in payments on the securities,
losses to securityholders or the
repayment of the securities.
In addition, if the company, the
servicer, or a third party while in
possession of the automobile loans,
sells or pledges and delivers them to
another party, that party could
acquire an interest in the automobile
loans with priority over the trustee's
interest. This could result in delays
in payments on the securities, losses
to you or the repayment of the
securities.
STATE LAWS AND OTHER FACTORS MAY LIMIT 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
THE VEHICLES. defaulted automobile loans. As a
result, you may experience delays in
receiving payments and suffer losses.
Additional factors that may affect the
issuer's ability to recoup the full
amount due on an automobile loan
include:
o the company's failure to file
amendments to certificates of title
relating to the vehicles;
o the company's failure to file
financing statements to perfect its
security interest in the vehicle;
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o depreciation;
o obsolescence;
o damage or loss of any vehicle; and
o 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 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:
o 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
o 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.
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Then you may only be entitled to the
outstanding principal amount and
interest on the securities at the
interest rate on the date of payment.
A recharacterization attempt, even if
unsuccessful, could result in delays
in payments to you.
If either attempt is successful, the
securities would be accelerated and
the trustee's recovery on your behalf
could be limited to the then current
value of the automobile loans.
Consequently, you could lose the right
to future payments and you may not
receive your anticipated interest and
principal on the securities.
COMMINGLING OF FUNDS WITH THE COMPANY'S While the company is the servicer,
FUNDS MAY RESULT IN REDUCED OR DELAYED cash collections held by the company
PAYMENTS TO YOU. may be 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:
o changes in the federal income tax
laws; or
o 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
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securities will be guaranteed by the
company, the servicer, or the
applicable trustee. Consequently, if
payments on the automobile loans, and
to the extent available, any credit
enhancement, are insufficient to pay
the securities in full, you have no
rights to obtain payment from the
company.
USED VEHICLES INCLUDED IN THE Some or all of the assets of a trust
AUTOMOBILE LOAN POOL MAY INCUR HIGHER may consist of loans to finance the
LOSSES THAN NEW AUTOMOBILES. purchase of used vehicles. Because
the value of a used vehicle is more
difficult to determine, upon sale of a
repossessed vehicle, a greater loss
may be incurred.
DEFAULTED AUTOMOBILE LOANS MAY RESULT In the event that the company or the
IN A DELAY IN PAYMENTS TO servicer must repossess and dispose of
SECURITYHOLDERS AND A LOSS OF YOUR vehicles to recover scheduled payments
INVESTMENT. due on defaulted automobile loans, the
trust may not realize the full amount
due on an automobile loan, or may not
realize the full amount on a timely
basis. Other factors that may affect
the ability of the trust to realize
the full amount due on an automobile
loan include whether endorsements or
amendments to certificates of title
relating to the vehicles had been
filed or such certificates have been
delivered to the trustee, whether
financing statements to perfect the
security interest in the automobile
loans had been filed, depreciation,
obsolescence, damage or loss of any
vehicle, and the application of
federal and state bankruptcy and
insolvency laws. As a result, you may
be subject to delays in receiving
payments and suffer loss of your
investment in the securities.
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.
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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. obligor 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 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
INVESTMENT. Act 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
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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.
The ratings assigned to your securities The ratings assigned to the securities
by the ratings agencies may be lowered will be based on, among other things,
or withdrawn at any time, which may the adequacy of the assets of the
affect your ability to sell your trust and any credit enhancement for a
securities. series of securities. Any rating which
is assigned may not remain in effect
for any given period of time or may
be lowered or withdrawn entirely by
the ratings agencies, if, in their
judgment, circumstances in the
future so warrant. Ratings may also
be lowered or withdrawn because of
an adverse change in the financial
or other condition of a provider of
credit enhancement or a change in
the rating of a credit enhancement
provider's long term debt at any
time, which may affect your ability
to sell your securities.
Because the ratings of the securities The ratings of securities enhanced by
are dependent upon creditworthiness a credit/enhancement provider will
of the credit enhancement provider, depend primarily on the
a downgrade of the credit enhancement creditworthiness of the credit
provider could cause a downgrade of enhancement provider. There is a risk
the securities. that any reduction in any of the
credit enhancement provider's
financial strength ratings could
result in a reduction of the ratings
on the securities.
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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. 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.
THE TRUST PROPERTY
As specified in the prospectus supplement, the trust property will
include:
o a pool of primarily "non-prime" automobile loans;
o all monies, including accrued interest, due on the loans on or
after the cut-off date;
o amounts that the servicer may hold in one or more accounts;
o the security interests, if any, in the vehicles relating to
the pool of automobile loans;
o the right to proceeds from claims on physical damage policies
covering the vehicles or the obligors;
o the proceeds of any repossessed vehicles related to the pool
of automobile loans;
o the rights of the company under the related automobile loan
acquisition agreement ; if any; and
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o 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.
"Non-prime" or "sub-prime" automobile loans, the principal component
of the trust property, are common terms used to describe loans made to
borrowers with limited credit histories or modest incomes or who have
experienced prior credit difficulties.
The automobile loans comprising the trust property will be either:
o originated by the company;
o originated by manufacturers and acquired by the company;
o originated by dealers and acquired by the company;
o originated by other lenders and acquired by the company; or
o 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:
o geographic concentration;
o payment frequency; and
o current principal balance.
THE AUTOMOBILE LOANS
The automobile loans may consist of any combination of:
o rule of 78s automobile loans;
o fixed value automobile loans; or
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o 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:
o payment in full in cash of the fixed value amount;
o transfer of the vehicle to the company, provided various
conditions are satisfied; or
o refinancing the fixed value payment in accordance with various
conditions.
For fixed value automobile loans, only the principal and interest
payments due prior to the final payment and not the final payment may be
included initially in the trust property.
SIMPLE INTEREST AUTOMOBILE LOANS
Simple interest automobile loans provide for the amortization of the
amount financed over a series of fixed level monthly payments. However, unlike
the rule of 78s automobile loans, each monthly payment consists of an
installment of interest which is calculated on the basis of the outstanding
principal balance of the automobile loan multiplied by the stated APR and
further multiplied by the period elapsed, as a fraction of a calendar year,
since the preceding payment of interest was made. As payments are received under
a simple interest automobile loan, the amount received is applied first to
interest accrued to the date of payment and the balance is applied to reduce the
unpaid principal balance. Accordingly, if an obligor pays a fixed monthly
installment before its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be less
than it would have
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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 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 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.
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AMERICREDIT'S AUTOMOBILE FINANCING PROGRAM
GENERAL
The company's 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 majority of the
company's automobile loans were originated in connection with the purchases of
used autos.
Automobile loans are originated by the company in two ways:
purchasing loans without recourse from automobile dealers or making loans
directly to consumers. In the case of loans purchased from dealers, the
original credit extension is made by the dealer and the loan subsequently
assigned to the company. In the case of loans made directly to consumers, the
dealer is not involved in the original extension of credit.
Through strategic alliances with internet partners the company may
provide financing for the purchase of new and used automobiles and light duty
trucks via the internet.
As in the company's traditional business, automobile loans
originated via the internet must conform to the company's credit policies.
AMERICREDIT'S LENDING PROGRAM THROUGH DEALERS
The company provides funding for franchised and independent automobile
dealers to finance their customers' purchase of new and used automobiles and
light duty trucks. The company has established relationships with a variety of
dealers located in the markets where the company has branch offices or marketing
representatives. Automobile loans originated by dealers which conform to the
company's credit policies are purchased by the company generally without
recourse to dealers. In addition, the company may, from time to time, offer
automobile loans to existing customers that qualify under the company's credit
policies.
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 an office in the branch office network.
The company has implemented a credit scoring system to support
the 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
from the company's loan origination and portfolio databases. Credit scoring
is used to differentiate credit applicants and to rank order credit risk in
terms of expected default rates, which enables the Company to tailor loan
pricing and structure according to this statistical assessment of credit
risk. For example, a consumer with a lower score would indicate a higher
probability of default and, therefore, the company would seek to compensate
for this higher default risk through the structuring and pricing of the
transaction. While the company employs a credit scoring system in the credit
approval process, credit scoring does not eliminate credit risk. Adverse
determinations in evaluating contracts for purchase could adversely affect
credit quality.
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Loan application packages completed by prospective obligors are
received electronically or via facsimile from dealers. A credit bureau report is
automatically generated and a credit score is computed. Depending on the credit
quality of the applicant, the residence, employment and credit history of the
applicant may be further investigated, or the loan package may be forwarded
directly to the branch manager for approval. In either case, the company's
credit policy requires that all applications be investigated prior to funding.
The company may approve an application, approve an application subject
to conditions that must be met, or deny an application. In reviewing an
application, the company may consider many factors, focusing principally on the
applicant's credit score and the proposed loan terms and collateral value. The
company estimates that approximately 60% 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 electronically,
by facsimile and/or by telephone.
If an applicant is approved, the dealer prepares the retail installment
contract and, following execution by the consumer, forward the contracts and
related documents to the company's branch office. Prior to loan funding, the
company confirms that the loan documents as completed by the dealer are
consistent with the approved terms and that all stipulated supporting
documentation is complete and verified
Following verification, loan packages are scanned and electronically
forwarded to the centralized loan services department. Key original
documents are stored in a fire-proof vault and loan packages are further
processed and serviced in an electronic environment. The loan documents are
reviewed for proper documentation and regulatory compliance, and are entered
into the loan accounting system. The loan services department then initiates
the funding process, which may be by check or by electronic funds transfer to
the dealer. Upon funding, the company acquires a perfected security interest
in the financed 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 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.
The company's centralized risk management department is responsible
for monitoring the origination process, supporting management's supervision
of each branch office, tracking collateral values and monitoring portfolio
returns. The risk management department uses proprietary databases to
identify concentrations of risk, to price for the risk associated with
selected market segments and endeavors to enhance the credit quality and
profitability of the loans originated. Though originations and approvals are
made on a decentralized, branch-level basis, credit decisions must comply
with the company's credit scoring strategies and underwriting policies and
procedures. The risk management department also prepares regular credit
indicator packages reviewing portfolio performance at various levels of
detail including total company, branch office and dealer. Various daily
reports and analytical data are also generated by the company's management
information systems. The company uses this information to monitor credit
quality as well as to constantly refine the structure and mix of new loan
originations. The company reviews portfolio returns on a consolidated basis,
as well as at the branch office, dealer and contract levels.
COMPLIANCE AUDITS. The company's internal audit department conducts
regular compliance audits of branch office operations, loan services,
collections and other functional areas. The primary objective of the audits
is to measure compliance with the company's written policies and procedures
as well as regulatory matters. Branch office audits include a review of:
o compliance with underwriting policies;
o completeness of loan documentation;
o collateral value assessment; and
o extent of applicant data investigation.
SERVICING AND COLLECTIONS
The company's servicing activities consist of:
o collecting and processing obligor payments;
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o responding to obligor inquiries;
o contacting obligors who are delinquent in their loan payment;
o maintaining the security interest in the vehicle; and
o 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 account services department.
Collection activity on automobile loans is performed by COLLECTORS who
follow standardized collection policies and procedures at the company's
servicing facilities. In addition, they monitor the loan portfolio through a
computer assisted collection system and usually take action on delinquencies
within a few days after delinquency occurs.
Typically, a collector contacts the obligor by telephone through the
company's automated predictive dialing system. This system dials multiple
telephone numbers simultaneously based upon parameters set by management. When a
telephone connection is made, the call is routed to a collector and the
delinquent obligor's account information is displayed on a collector's computer
terminal. The collector then attempts to work out the delinquency with the
obligor.
If an obligor continues to be delinquent, the company's policy is to
work out suitable payment arrangements with the obligor. However, if the obligor
becomes seriously delinquent or deals in bad faith with the company, the company
may ultimately have to repossess the vehicle and generally will take prompt
action to do so. Repossessions are handled by independent repossession firms
engaged by the company. All repossessions are approved by collection officers.
The company follows prescribed legal procedures for repossessions,
which include:
o peaceful repossession;
o one or more notices to obligors;
o a prescribed waiting period prior to disposing of the vehicle;
and
o return of the obligor's personal items.
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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:
o the original aggregate purchase price of the securityholder's
securities; and
o the applicable pool factor.
The securityholders of record will receive reports on or about each
payment date concerning:
o the payments received on the automobile loans;
o the POOL BALANCE (as defined in the prospectus supplement);
o each pool factor; and
o other items of information.
In addition, securityholders of record during any calendar year will be
furnished information for tax reporting purposes not later than the latest date
permitted by law.
USE OF PROCEEDS
The proceeds from the sale of the securities of a given series will be
used by the company for the acquisition of the automobile loans, and/or for
general corporate purposes, including:
o the origination or acquisition of additional receivables;
o repayment of indebtedness; and
o general working capital purposes.
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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:
o the volume of automobile loans the company originates or
acquires;
o prevailing interest rates;
o availability of funds; and
o general market conditions.
DESCRIPTION OF THE SECURITIES
GENERAL
The securities will be issued in series. The following statements
summarize the material terms and provisions common to the securities. A more
detailed description of the securities of each series will appear in the
related prospectus supplement. 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 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:
o stripped of regular interest payments and entitled only to
principal distributions, with disproportionate, nominal or no
interest distributions; or
o 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:
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o timing;
o sequential order;
o priority of payment;
o interest rate; or
o amount of principal or interest distribution or both.
Distributions of principal or interest or both on any class of
securities may be made upon:
o the occurrence of specified events;
o in accordance with a schedule or formula; or
o 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.
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, semi-annually or as described in the prospectus supplement.
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The prospectus supplement will describe a record date for each payment
date, as of which the trustee or its paying agent will fix the identity of the
securityholders for the purpose of receiving payments on that payment date. The
prospectus supplement and the agreements will describe a period, known as the
COLLECTION period, prior to each payment date. Interest accrued and principal
collected on the automobile loans during a collection period will be required to
be remitted by the servicer to the trustee prior to the payment date and will be
used to distribute payments to securityholders on that payment date.
None of the securities or the automobile loans will be guaranteed or
insured by any governmental agency or instrumentality, the lenders, the
servicer, the trustee, or any of their respective affiliates.
DISTRIBUTION DATES
On each payment date, distributions of principal and interest or, where
applicable, of principal only or interest only, on each class of securities will
be made either by the trustee or a paying agent appointed by the trustee, to the
persons who are registered as securityholders at the close of business on the
record date. Interest that accrues and is not payable on a class of securities
may be added to the principal balance of each security of the class.
Distributions will be made in immediately available funds, by wire transfer or
otherwise, to the account of a securityholder. If the securityholder has
notified the trustee or the paying agent, as the case may be, and the agreements
provide, payment may be in the form of a check mailed to the address of the
person entitled thereto as it appears on the register. The final payment
distribution upon retirement of the securities will be made only upon
presentation and surrender of the securities at the office or agency of the
trustee specified in the notice to securityholders of the final distribution.
DETERMINATION OF PRINCIPAL AND INTEREST ON THE SECURITIES
The method of determining, and the amount of, distributions of
principal and interest or, principal only or interest only, on a particular
series of securities will be described in the prospectus supplement. Each class
of securities, except for principal only securities, may bear interest at a
different interest rate. Interest on the securities will be calculated either on
the basis of a 360-day year consisting of twelve 30-day months, on the basis of
the actual number of days in the interest period over 360, or on the basis of
the actual number of days in the interest period over 365 or 366, as the case
may be.
On each payment date, the trustee or the paying agent will distribute
to each securityholder an amount equal to the percentage interest represented by
the security held by the holder multiplied by the total amount to be distributed
on that payment date on account of that class.
For a series of securities that includes two or more classes, the
timing, sequential order, priority of payment, amount of distributions in
respect of principal, any schedule or formula or other provisions applicable to
the determination of distributions among multiple classes of senior securities
or subordinate securities will be described in the prospectus supplement.
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Prior to each payment date the trustee will determine the amounts of
principal and interest which will be due to securityholders on that payment
date. If the amount then available to the trustee is insufficient to cover the
amount due to securityholders, the trustee will be required to notify the credit
enhancement provider, if there is one for that series providing credit
enhancement for this type of deficiency. The credit enhancement provider, in
this case, will then be required to fund the deficiency.
SOFT BULLETS
Since the automobile loan pools which will back the securities will
generate principal collections in each period, and will have unpredictable
amortization rates, the securities will generally not be structured as "bullet"
maturities similar to corporate debt, meaning a debt security which pays
interest in all periods but principal only in a single payment at maturity.
However, a trust may enter into forward purchase or liquidity
arrangements which result in a security not unlike "bullet maturity" corporate
debt. These securities, commonly known as SOFT BULLETS, typically have interest
payments due in all periods and a single principal payment due on a date
certain, but the payment of that principal on that date certain may be dependent
on the trust's ability at the time to issue refunding debt, or to access the
liquidity lines. If the refunding debt cannot be issued, or if the liquidity
lines cannot be accessed, the securities will then begin to amortize in each
period until final maturity.
FIXED RATE SECURITIES
Each class of securities may bear interest at an annual fixed rate or
at a variable or adjustable rate per annum, as more fully described below and in
the prospectus supplement. Each class of fixed rate securities will bear
interest at the applicable interest rate specified in the prospectus supplement.
FLOATING RATE SECURITIES
Each class of floating rate securities will bear interest for each
related interest period at a rate per annum determined by reference to an
interest rate index, commonly known as the BASE RATE, plus or minus a spread, if
any, or multiplied by a spread multiplier, in each case as specified in the
prospectus supplement. The SPREAD is the percentage above or below the base rate
at which interest will be calculated that may be specified in the prospectus
supplement as being applicable to such class, and the SPREAD MULTIPLIER is the
percentage that may be specified in the prospectus supplement as being
applicable to such class.
The prospectus supplement will designate a base rate for a given
floating rate security based on the London interbank offered rate, commonly
called LIBOR, eurodollar synthetic forward rates, commercial paper rates,
federal funds rates, U.S. Government treasury securities rates, negotiable
certificates of deposit rates or another rate as set forth in the prospectus
supplement.
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As specified in the prospectus supplement, floating rate securities may
also have either or both of the following, in each case expressed as an annual
rate: (1) a maximum limitation, or ceiling, on the rate at which interest may
accrue during any interest period, which may be an available funds cap rate and
(2) a minimum limitation, or floor, on the rate at which interest may accrue
during any interest period. The interest rate on either type of security will
not be higher than the maximum rate permitted by applicable law.
Each trust that issues a class of floating rate securities will appoint
and enter into agreements with a calculation agent to calculate interest rates
on each class of floating rate securities. The prospectus supplement will set
forth the identity of the calculation agent for each such class of floating rate
securities which may be the trustee for the series. All determinations of
interest by the calculation agent will, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of floating rate
securities of a given class.
The trust may also include a derivative arrangement for any series or
any class of securities. 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.
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:
o the difference in the rate of exchange between United States
dollars and a currency or composite currency;
o the difference in the price of a specified commodity on
specified dates;
o the difference in the level of a specified stock index, which
may be based on U.S. or foreign stocks, on specified dates; or
o other objective price or economic measures as are described in
the prospectus supplement.
The prospectus supplement will describe the manner of determining the
indexed principal amount of an indexed security and historical and other
information concerning the applicable index, together with information
concerning tax consequences to the holders of indexed securities.
If the determination of the indexed principal amount of an indexed
security is based on an index calculated or announced by a third party and the
third party either suspends the calculation or announcement of the index or
changes the basis upon which the index is calculated -- other than changes
consistent with policies in effect at the time the indexed security was issued
and permitted changes described in the prospectus supplement -- then the index
will be calculated
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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 Clearstream Banking, societe anonyme (formerly Cedelbank), commonly
known as Clearstream, Luxembourg, or the Euroclear system, in Europe.
CLEARSTREAM, LUXEMBOURG and EUROCLEAR will hold omnibus positions for
CLEARSTREAM, LUXEMBOURG PARTICIPANTS and EUROCLEAR PARTICIPANTS, respectively,
through customers' securities accounts in Clearstream, Luxembourg'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
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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 Clearstream, Luxembourg 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 Clearstream,
Luxembourg 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. Clearstream,
Luxembourg participants and Euroclear participants may not deliver instructions
directly to the depositaries.
Because of time-zone differences, credits of securities in Clearstream,
Luxembourg 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 Clearstream, Luxembourg participant or Euroclear participant on
that business day. Cash received in Clearstream, Luxembourg or Euroclear
resulting from sales of securities by or through a Clearstream, Luxembourg
participant or a Euroclear participant to a DTC participant will be received
with value on the DTC settlement date but will be available in the relevant
Clearstream, Luxembourg or Euroclear cash account only as of the business day
following settlement in DTC.
Clearstream, Luxembourg was incorporated in 1970 as Cedel S.A., a
company with limited liability under Luxembourg law (a societe anonyme). Cedel
S.A. subsequently changed its name to Cedelbank. On January 10, 2000,
Cedelbank's parent company, Cedel International, societe anonyme, merged its
clearing, settlement and custody business with that of Deutsche Borse Clearing
AG.
Clearstream, Luxembourg holds securities for its customers and
facilitates the clearance and settlement of securities transactions between
Clearstream, Luxembourg customers through electronic book-entry changes in
accounts of Clearstream, Luxembourg customers, thereby eliminating the need for
physical movement of certificates. Transactions may be settled by Clearstream,
Luxembourg in any of 36 currencies, including U.S. Dollars. Clearstream,
Luxembourg provides, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream, Luxembourg also deals with
domestic securities markets in over 30 countries
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through established depository and custodial relationships. Clearstream,
Luxembourg is registered as a bank in Luxembourg, and as such is subject to
regulation by the Commission de Surveillance du Secteur Financier which
supervises Luxembourg banks. Clearstream, Luxembourg's customers are world-wide
financial institutions including underwriters, securities brokers and dealers,
banks, trust companies and clearing corporations. Clearstream, Luxembourg's U.S.
customers are limited to securities brokers and dealers, and banks. Currently,
Clearstream, Luxembourg has approximately 2,000 customers located in over 80
countries, including all major European countries, Canada, and the United
States. Indirect access to Clearstream, Luxembourg is available to other
institutions that clear through or maintain a custodial relationship with an
account holder of Clearstream, Luxembourg. Clearstream, Luxembourg has
established an electronic bridge with Morgan Guaranty Trust Company of New York
as the operator of the Euroclear System in Brussels to facilitate settlement of
trades between Clearstream, Luxembourg and Euroclear."
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
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.
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Under a book-entry format, securityholders that are not DTC
participants or indirect participants but desire to purchase, sell or otherwise
transfer ownership of securities registered in the name of Cede, as nominee of
DTC, may do so only through participants and indirect participants. In addition,
these securityholders will receive all distributions of principal of and
interest on the securities from the trustee through DTC and its participants.
Securityholders may receive payments after the payment date because DTC will
forward these payments to its participants, which thereafter will be required to
forward these payments to indirect participants or securityholders. Unless and
until physical securities are issued, it is anticipated that the only
securityholder will be Cede, as nominee of DTC, and that the beneficial holders
of securities will not be recognized by the trustee as securityholders under the
agreements. Securityholders which are not DTC participants will only be
permitted to exercise their rights under the agreements through DTC or through
its participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among its
participants and is required to receive and transmit payments of principal of
and interest on the securities. DTC's participants and indirect participants are
required to make book-entry transfers and receive and transmit payments on
behalf of their respective securityholders. Accordingly, although
securityholders will not possess physical securities, the rules provide a
mechanism by which securityholders will receive distributions and will be able
to transfer their interests.
Unless and until physical securities are issued, securityholders who
are not DTC participants may transfer ownership of securities only through DTC
participants by instructing those participants to transfer securities, through
DTC for the account of the purchasers of the securities, which account is
maintained with their respective participants. Under DTC's rules and in
accordance with DTC's normal procedures, transfers of ownership of securities
will be executed through DTC and the accounts of the respective participants at
DTC will be debited and credited. Similarly, the respective participants will
make debits or credits, as the case may be, on their records on behalf of the
selling and purchasing securityholders.
Because DTC can only act on behalf of its participants, who in turn act
on behalf of indirect participants and some banks, the ability of a
securityholder to pledge securities to 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
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supplement. Upon the occurrence of any of the events specified in Definitive
Securities in this prospectus or in the agreements and the prospectus
supplement, DTC will be required to notify its participants of the availability
through DTC of physical certificates. Upon surrender by DTC of the securities
and receipt of instruction for reregistration, the trustee will issue the
securities in the form of physical certificates, and thereafter the trustee will
recognize the holders of the physical certificates as securityholders.
Thereafter, payments of principal of and interest on the securities will be made
by the trustee directly to securityholders in accordance with the procedures set
forth in the agreements. The final distribution of any security whether physical
certificates or securities registered in the name of Cede, however, will be made
only upon presentation and surrender of the securities on the final payment date
at the office or agency specified in the notice of final payment to
securityholders.
None of the company, any finance subsidiary, the originators, the
servicer or the trustee will have any liability for any actions taken by DTC or
its nominee or Cedel or Euroclear, including, without limitation, actions for
any aspect of the records relating to or payments made on account of the
securities held by Cede, as nominee for DTC, or for maintaining, supervising or
reviewing any records relating to the securities.
DEFINITIVE SECURITIES
The securities will be issued in fully registered, certificated form,
commonly called DEFINITIVE SECURITIES, to the securityholders or their nominees,
rather than to DTC or its nominee, only if:
o 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;
o the trustee, at its option, elects to terminate the
book-entry-system through DTC; or
o 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
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address of the holder as it appears on the register maintained by the trustee.
The final payment on any security, however, will be made only upon presentation
and surrender of the security at the office or agency specified in the notice of
final distribution.
Definitive securities will be transferable and exchangeable at the
offices of the trustee or of a certificate registrar named in a notice delivered
to holders of the definitive securities. No service charge will be imposed for
any registration of transfer or exchange, but the trustee may require payment of
a sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
REPORTS TO SECURITYHOLDERS
On or prior to each payment date, the servicer or the trustee will
forward or cause to be forwarded to each holder of record a statement or
statements with respect to the trust property generally describing the following
information:
(1) the amount of the distribution with respect to each class;
(2) the amount of the distribution allocable to principal;
(3) the amount of the distribution allocable to interest;
(4) the pool balance, if applicable, as of the close of business
on the last day of the related remittance period;
(5) the aggregate outstanding principal balance and the pool
factor for each class after giving effect to all payments
reported under (2) above on the payment date;
(6) the amount paid to the servicer, if any, with respect to the
related remittance period;
(7) the amount of the aggregate purchase amounts for automobile
loans that have been reacquired, if any, for the related
remittance period; and
(8) the amount of coverage under any form of credit enhancement
covering default risk as of the close of business on the
payment date and a description of any substitute credit
enhancement.
Each amount described under subclauses (1), (2), (3) and (5) will be
expressed as a dollar amount per $1,000 of the initial principal balance of the
securities, as applicable. The actual information to be described in statements
to securityholders will be detailed in the prospectus supplement.
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.
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FORWARD COMMITMENTS; PRE-FUNDING
A trust may enter into a forward purchase agreement with the company
where the company will agree to transfer additional automobile loans to the
trust following the date on which the trust is established and the securities
are issued. The trust may enter into forward purchase agreements to acquire
additional automobile loans that could not be delivered by the company or have
not formally completed the origination process, prior to the closing date. Any
forward purchase agreement will require that any automobile loans transferred to
the trust conform to specified requirements.
If a forward purchase agreement is utilized, and unless otherwise
specified in the prospectus supplement, the trustee will be required to deposit
in a pre-funding account up to 100% of the net proceeds received by the trustee
in connection with the sale of one or more classes of securities. The additional
automobile loans will be transferred to the trust in exchange for money released
to the company from the pre-funding account. Each forward purchase agreement
will set a specified FUNDING PERIOD during which any transfers must occur. For a
trust which elects federal income treatment as a grantor trust, the funding
period will be limited to three months from the date the trust is established;
for a trust which is treated as a mere security device for federal income tax
purposes, the funding period will be limited to nine months from the date the
trust is established. The forward purchase agreement or the trust agreement will
require that any monies originally deposited in the pre-funding account and not
used by the end of the funding period be applied as a mandatory prepayment of
the related class or classes of securities.
During the funding period the monies deposited to the pre-funding
account will either:
o be held uninvested; or
o 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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SALE AND ASSIGNMENT OF THE AUTOMOBILE LOANS
On the closing date, the company or a finance subsidiary will transfer
automobile loans originated by the company either to a trust, or will pledge the
company's or the finance subsidiary's right, title and interests in and to the
automobile loans to a trustee on behalf of the securityholders.
The company will be obligated to acquire from the related trust
property any automobile loan transferred to a trust or pledged to a trustee if
the interest of the securityholders is materially adversely affected by a breach
of any representation or warranty made by the company with respect to the
automobile loan, which breach has not been cured following the discovery by or
notice to the company. In addition, the company may from time to time reacquire
automobile loans or substitute other automobile loans for automobile loans under
conditions described in the trust agreement.
ACCOUNTS
For each series of securities issued by a trust, the servicer will
establish and maintain with a trustee one or more COLLECTION ACCOUNTS, in the
trustee's name on behalf of the securityholders in which the servicer will
deposit all payments made on or with respect to the automobile loans. The
servicer will also establish and maintain with the trustee separate DISTRIBUTION
ACCOUNTS, in the trustee's name on behalf of the securityholders, in which
amounts released from the collection account, the reserve account or other
credit enhancement will be deposited and from which distributions to
securityholders will be made.
The prospectus supplement will describe any other accounts to be
established with respect to a trust.
For any series of securities, funds in the collection account, the
distribution account, any reserve account and other accounts (collectively, the
TRUST ACCOUNTS) will be invested in eligible investments. ELIGIBLE INVESTMENTS
are limited to investments acceptable to the rating agencies as being consistent
with the rating of the securities. Eligible investments may include securities
issued by the company, the servicer or their respective affiliates or other
trusts created by the company or its affiliates. Except as described below or in
the prospectus supplement, eligible investments are limited to obligations or
securities that mature not later than the business day immediately preceding a
payment date. However, subject to conditions, funds in the reserve account may
be invested in securities that will not mature prior to the next distribution
date and will not be sold to meet any shortfalls. Thus, the amount of cash in
any reserve account at any time may be less than the balance of the reserve
account. If the amount required to be withdrawn from any reserve account to
cover shortfalls in collections exceeds the amount of cash in the reserve
account, a temporary shortfall in the amounts distributed to the related
securityholders could result. This could, in turn, increase the average life of
the securities. The servicer will deposit investment earnings on funds in the
trust accounts, net of losses and investment expenses, in the applicable
collection account on each payment date. The investment earnings will be treated
as collections of interest on the automobile loans.
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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:
o a long-term unsecured debt rating acceptable to the rating
agencies; or
o a short-term unsecured debt rating or certificate of deposit
rating acceptable to the rating agencies.
In addition, the depository institution's deposits must be insured by
the FDIC.
THE SERVICER
The servicer under each trust agreement will be named in the prospectus
supplement. The servicer may be the company or an affiliate of the company and
may have other business relationships with the company or the company's
affiliates. Any servicer may delegate its servicing responsibilities to one or
more sub-servicers, but delegation will not relieve it of its liabilities under
the trust agreements.
The servicer will make representations and warranties regarding its
authority to enter into, and its ability to perform, its obligations under the
trust agreement. An uncured breach of a representation or warranty that
materially and adversely affects the interests of the securityholders will
constitute a servicer default.
SERVICING PROCEDURES
Each trust agreement will provide that the servicer will make
reasonable efforts to:
o collect all payments due on the automobile loans which are
part of the trust fund; and
o 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
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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. 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:
o collecting and posting all payments;
o responding to obligor inquiries on the related automobile
loans;
o investigating delinquencies;
o sending billing statements to obligors;
o reporting tax information to obligors;
o paying costs of collection and disposition of defaults;
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o policing the collateral;
o administering the automobile loans; and
o 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:
o certain taxes;
o accounting fees;
o outside auditor fees;
o data processing costs; and
o other costs incurred in connection with administering the
automobile loans.
DISTRIBUTIONS
Distributions of principal and interest, or, where applicable, of
principal or interest only, on each class of securities will be made by the
indenture trustee to the noteholders and by the trustee to the
certificateholders. The timing, calculation, allocation, order, source,
priorities of and requirements for each class of noteholders and all
distributions to each class of certificateholders will be detailed in the
prospectus supplement.
On each payment date, the servicer will transfer collections on the
automobile loans from the collection account to the distribution account for
distribution to securityholders. Credit enhancement may be available to cover
any shortfalls in the amount available for distribution, to the extent specified
in the prospectus supplement. Distributions in respect of principal of a class
of securities will be subordinate to distributions in respect of interest on the
class, and distributions in respect of the certificates of a series may be
subordinate to payments in respect of the notes of a series.
CREDIT AND CASH FLOW ENHANCEMENTS
The amounts and types of credit enhancement arrangements, if any, and
the credit enhancement provider, with respect to each class of securities will
be detailed in the prospectus supplement. Credit enhancement may be in the form
of:
o an insurance policy;
o subordination of one or more classes of securities;
o reserve accounts;
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o overcollateralization;
o letters of credit;
o credit or liquidity facilities;
o third party payments or other support;
o surety bonds;
o guaranteed cash deposits; or
o 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 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
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computer reports, and the examination, has disclosed no items of noncompliance
with the provision of the trust agreements or variations in the results of the
calculations which, in the opinion of the firm, are material, except for the
items of non-compliance as shall be referred to in the report.
Securityholders may obtain copies of the statements and certificates by
securityholders by a request in writing addressed to the indenture trustee or
the trustee.
MATTERS REGARDING THE SERVICER
The servicer may not resign from its obligations and duties as
servicer, except upon determination that the performance by the servicer of its
duties is no longer permissible under applicable law. No resignation will become
effective until the trustee or a successor servicer has assumed the servicer's
servicing obligations and duties under the trust agreement.
The servicer will not be liable to the securityholders for taking any
action, or for errors in judgment; PROVIDED, HOWEVER, that the servicer will not
be protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
or by reason of reckless disregard of obligations and duties. The servicer will
be under no obligation to appear in, prosecute, or defend any legal action that
is not incidental to its servicing responsibilities and that, in its opinion,
may cause it to incur any expense or liability.
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 TERMINATION EVENT
A SERVICER TERMINATION EVENT will include:
o 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;
o 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;
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o 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
o any claim being made on an insurance policy issued as credit
enhancement.
RIGHTS UPON SERVICER TERMINATION EVENT
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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o 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
o 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.
TERMINATION
With respect to each trust, the obligations of the servicer, the
company and the trustee will terminate upon the earlier to occur of:
o 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
o 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
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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, but not less than the
outstanding principal balance of the securities plus accrued and unpaid
interest thereon. 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 without any continuing direct or indirect recourse
of the trust or the noteholders as sellers of the automobile loans.
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.
MATERIAL LEGAL ASPECTS OF THE AUTOMOBILE LOANS
GENERAL
The transfer of automobile loans by the company or its finance
subsidiary to the trust, the perfection of the security interests in the
automobile loans, and the enforcement of rights to realize on the vehicles are
subject to a number of federal and state laws, including the UCC as codified in
various states. The servicer will take necessary actions to perfect the
trustee's rights in the automobile loans. If, through inadvertence or otherwise,
a third party were to purchase -- including the taking of a security interest in
-- an automobile loan for new value in the ordinary course of its business,
without actual knowledge of the trust's interest, and then were to take
possession of the automobile loan, the purchaser would acquire an interest in
the automobile loan superior to the trust's interest. No entity will take any
action to perfect the trustee's right in proceeds of any insurance policies
covering individual vehicles or obligors. Therefore, the rights of a third party
with an interest in these proceeds could prevail against the rights of the trust
prior to the time the servicer deposits the proceeds into a trust account.
SECURITY INTERESTS IN THE FINANCED VEHICLES
GENERAL
In all of the states in which automobile loans have been originated,
the credit sales of automobiles and light duty trucks to consumers are evidenced
either by retail installment sales contracts or by promissory notes with a
security interest in the vehicle. The installment sales contracts and promissory
notes with a security interest 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.
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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:
o 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;
o 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
o 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
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lienholder on the certificates of title. However, in the absence of these
events, the notation of the company's lien on the certificates of title will be
sufficient to protect the trust against the rights of subsequent purchasers or
subsequent creditors who take a security interest in a vehicle. The company or
its finance subsidiary will represent and warrant that it has taken all action
necessary to obtain, a perfected security interest in each vehicle. If there are
any vehicles for which the company failed to obtain a first priority perfected
security interest, the company's security interest would be subordinate to,
among others, subsequent purchasers and the holders of first priority perfected
security interests in these vehicles. Such a failure, however, would constitute
a breach of the company's or the finance subsidiary's representations and
warranties. Accordingly, the company or finance subsidiary would be required to
repurchase these automobile loans from the trustee unless the breach were cured.
CONTINUITY OF PERFECTION
Under the laws of most states, a perfected security interest in a motor
vehicle continues for four months after the vehicle is moved to a new state from
the state in which it is initially registered and continues until the owner
re-registers the motor vehicle in the new state. To re-register a vehicle, a
majority of states require the registering party to surrender the certificate of
title. In those states that require a secured party to take possession of the
certificate of title to maintain perfection, the secured party would learn of
the re-registration through the obligor's request for the certificate of title
so it could re-register the vehicle. In the case of vehicles registered in
states that provide for notation of a lien on the certificate of title but which
do not require possession, Texas, for example, the secured party would receive
notice of surrender from the state of re-registration if the security interest
is noted on the certificate of title. Thus, the secured party would have the
opportunity to reperfect its security interest in the vehicle in the new state.
However, these procedural safeguards will not protect the secured party if,
through fraud, forgery or administrative error, the debtor somehow procures a
new certificate of title that does not list the secured party's lien.
Additionally, in states that do not require the re-registering party to
surrender the certificate of title, re-registration could defeat perfection. The
trust documents will require the servicer to take steps to re-perfect the
security interest upon receiving notice of re-registration or information from
the obligor that it relocated. Similarly, when an obligor sells a vehicle, the
servicer will have an opportunity to require that the loan be satisfied before
it releases the lien. The opportunity arises because the servicer will be
required to surrender possession of the certificate of title in connection with
the sale, or because the servicer will receive notice as a result of its lien
being noted on the certificate. The servicer will hold the certificates of title
for the vehicles as custodian for the trustee and will be obligated to take
appropriate steps, at its own expense, to maintain perfected security interests
in the vehicles.
PRIORITY OF CERTAIN LIENS ARISING BY OPERATION OF LAW
Under the laws of most states, statutory liens take priority over even
a first priority perfected security interest in a vehicle. These statutory liens
include:
o mechanic's, repairmen's and garagemen's liens;
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o motor vehicle accident liens;
o towing and storage liens;
o liens arising under various state and federal criminal
statutes; and
o liens for unpaid taxes.
The UCC also grants certain federal tax liens priority over a secured
party's lien. Additionally, the laws of most states and federal law permit
governmental authorities to confiscate motor vehicles under certain
circumstances if used in or acquired with the proceeds of unlawful activities.
Confiscation may result in the loss of the perfected security interest in the
vehicle. The company will represent and warrant to the trustee that, as of the
closing date, each security interest in a vehicle shall be a valid, subsisting
and enforceable first priority security interest in the vehicle. However, liens
for repairs or taxes superior to the trustee's security interest in any vehicle,
or the confiscation of a vehicle, could arise at any time during the term of an
automobile loan. No notice will be given to the trustee or any securityholder in
the event these types of liens or confiscations arise. Moreover, any liens of
these types or any confiscation arising after the closing date would not give
rise to the company's repurchase obligation.
REPOSSESSION
In the event an obligor defaults, the holder of the related automobile
loan has all the remedies of a secured party under the UCC, except where
specifically limited by other state laws. Under the UCC, a secured party's
remedies include the right to repossession by self-help, unless self-help would
constitute a breach of the peace. Unless a vehicle is voluntarily surrendered,
self-help repossession is accomplished simply by taking possession of the
financed vehicle. In cases where the obligor objects or raises a defense to
repossession, or if otherwise required by applicable state law, a secured party
must obtain a court order from the appropriate state court, and the vehicle must
then be recovered in accordance with that order. In some jurisdictions, the
secured party is required to notify the debtor of the default and the intent to
repossess the collateral and then must give the debtor a time period within
which to cure the default. Generally, this right of cure may only be exercised
on a limited number of occasions during the term of the related automobile loan.
Other jurisdictions permit repossession without prior notice if it can be
accomplished without a breach of the peace -- although in some states, a course
of conduct in which the creditor has accepted late payments has been held to
create a right by the obligor to receive prior notice.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require a secured party to provide an
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. In
addition, some states also impose substantive timing requirements on the sale of
repossessed vehicles and/or various substantive timing and content requirements
on the notices. In some states, after a financed vehicle has been
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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:
o the unpaid principal balance of the automobile loan;
o accrued interest on the automobile loan;
o 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
o 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
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subordinate lienholder exists or if there are remaining funds after the
subordinate lienholder is paid, the UCC requires the creditor to remit the
surplus to the obligor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon creditors and servicers
involved in consumer finance. These laws include:
o the Truth-in-Lending Act;
o the Equal Credit Opportunity Act;
o the Federal Trade Commission Act;
o the Fair Credit Reporting Act;
o the Fair Debt Collection Practices Act;
o the Magnuson-Moss Warranty Act;
o the Federal Reserve Board's Regulations B and Z;
o state adaptations of the Uniform Consumer Credit Code;
o state motor vehicle retail installment sale and loan acts;
o state "lemon" laws; and
o 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 retail installment
sale, and other related creditors and their assignees, to all claims and
defenses which the obligor in the transaction could assert against the retail
seller. However, liability under the FTC rule is limited to the amounts paid by
the obligor under the contract. Because of the FTC Rule the assignee 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
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vehicle may assert against the seller. These claims will be limited to a maximum
liability equal to the amounts paid by the obligor under the related automobile
loan.
Under most state vehicle dealer licensing laws, sellers of automobiles
and light duty trucks must be licensed to sell vehicles at retail sale. In
addition, the Federal Trade Commission's rule on sale of used vehicles requires
that all sellers of used vehicles prepare, complete and display a "Buyer's
Guide" explaining the warranty coverage for the vehicles. Furthermore, federal
odometer regulations 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 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
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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 FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a discussion of the material 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:
o insurance companies;
o tax-exempt organizations;
o regulated investment companies;
o financial institutions or broker dealers;
o taxpayers subject to the alternative minimum tax; and
o holders of non capital asset securities assets.
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We suggest that investors consult their own tax advisors to
determine the particular federal, state and local consequences of the
purchase, ownership and disposition of the securities.
The discussion below addresses in greater detail securities of four
general types including special tax counsel's opinion regarding those types
of securities:
O GRANTOR TRUST SECURITIES, representing interests in a grantor
trust;
O DEBT SECURITIES, that are intended to be treated for federal
income tax purposes as indebtedness secured by the underlying
loans;
O 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
O 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.
Dewey Ballantine LLP, special tax counsel to the seller, has
provided its opinion of the federal income tax consequences of an investment
in securities offered by this prospectus. With respect to each series of
securities, special tax counsel will deliver its opinion with respect to
federal tax matters for that series prior to the issuance of the securities.
Each opinion shall be attached on Form 8-K to be filed with the SEC prior to
the sale of that series.
GRANTOR TRUST SECURITIES
In the opinion of Dewey Ballantine LLP:
O each grantor trust security will be issued by a trust which
qualifies as a grantor trust for federal income tax purposes;
and
O 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
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beneficial owners of grantor trust fractional interest securities issued with
respect to a grantor trust will be referred to as a GRANTOR TRUST STRIP
SECURITY.
TAXATION OF BENEFICIAL OWNERS OF GRANTOR TRUST SECURITIES
Generally, beneficial owners of grantor trust fractional interest
securities will be required to report on their federal income tax returns their
respective shares of the income from the automobile loans, including amounts
used to pay reasonable servicing fees and other expenses. Excluded are amounts
payable to beneficial owners of any corresponding Grantor Trust Strip
Securities, and, subject to limitations, they will be entitled to deduct their
shares of any reasonable servicing fees and other expenses. If a beneficial
owner acquires a grantor trust fractional interest security for an amount that
differs from its outstanding principal amount, the amount includible in income
on a grantor trust fractional interest security may differ from the amount of
its distributable interest. See "Discount and Premium," below. Individuals
holding a grantor trust fractional interest security directly or through a
pass-through entity will be allowed a deduction for reasonable servicing fees
and expenses only to the extent that the aggregate of a beneficial owner's
miscellaneous itemized deductions exceeds 2% of a beneficial owner's adjusted
gross income. Further, beneficial owners may not deduct miscellaneous itemized
deductions in determining alternative minimum taxable income unless they are a
corporation which is subject to the alternative minimum tax.
Beneficial owners of grantor trust strip securities will generally be
required to treat the securities as "stripped coupons" under section 1286 of the
Code. Accordingly, a beneficial owner will be required to treat the excess of
the total amount of payments on a security over the amount paid for a security
as original issue discount and to include a discount in income as it accrues
over the life of a security. See "Discount and Premium," below.
Grantor trust fractional interest securities may also be subject to the
coupon stripping rules if a class of grantor trust strip securities is issued as
part of the same series of securities. The consequences of the application of
the coupon stripping rules appears to be that any discount arising upon the
purchase of a security, and perhaps all its stated interest, would be classified
as 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:
o 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
o 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
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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
In the opinion of Dewey Ballantine LLP, debt securities will be:
o issued by a trust which, for federal income purposes, is
treated either as a partnership or as a disregarded entity,
which means that its separate existence is disregarded for
federal income tax purposes;
o will be treated as indebtedness for federal income tax
purposes; and
o 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.
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In general, except as described in "Discount and Premium -- Market
Discount," below, except for financial institutions subject to section 582(c) of
the Code, any gain or loss on the sale or exchange of a debt security recognized
by an investor who holds the security as a capital asset, within the meaning of
section 1221 of the Code, will be capital gain or loss and will be long-term or
short-term depending on whether the security has been held for more than one
year.
DEBT SECURITIES REPORTING
The trustee will furnish to each beneficial owner of a debt security
with each distribution a statement setting forth the amount of a distribution
allocable to principal on the underlying automobile loans and to interest on it
at the related interest rate. In addition, within a reasonable time after the
end of each calendar year, based on information provided by the servicer, the
trustee will furnish to each beneficial owner during a year the customary
factual information as the servicer deems necessary or desirable to enable
beneficial owners of debt securities to prepare their tax returns and will
furnish comparable information to the IRS as and when required to do so by law.
PARTNERSHIP INTERESTS
In the opinion of Dewey Ballantine LLP:
o each partnership interest will be issued by a trust which
is treated as a partnership for federal income tax purposes;
and
o 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 trust documents 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.
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Under section 708 of the Code, the trust will be deemed to terminate
for federal income tax purposes if 50% or more of the capital and profits
interests in the trust are sold or exchanged within a 12-month period. Under
Treasury regulations issued on May 9, 1997 if a termination occurs, the trust is
deemed to contribute all of its assets and liabilities to a newly formed
partnership in exchange for a partnership interest. Immediately thereafter, the
terminated partnership distributes interests in the new partnership to the
purchasing partners and remaining partners in proportion to their interests in
liquidation of the terminated partnership.
SALE OR EXCHANGE OF PARTNERSHIP INTERESTS
Generally, capital gain or loss will be recognized on a sale or
exchange of partnership interests in an amount equal to the difference between
the amount realized and the seller's tax basis in the partnership interests
sold. A beneficial owner's tax basis in a partnership interest will generally
equal the beneficial owner's cost increased by the beneficial owner's share of
trust income recognized and decreased by any distributions received with respect
to the partnership interest. In addition, both the tax basis in the partnership
interest and the amount realized on a sale of a partnership interest would take
into account the beneficial owner's share of any indebtedness of the trust. A
beneficial owner acquiring partnership interests at different prices may be
required to maintain a single aggregate adjusted tax basis in the partnership
interests, and upon sale or other disposition of some of the partnership
interests, to allocate a portion of the aggregate tax basis to the partnership
interests sold, rather than maintaining a separate tax basis in each partnership
interest for purposes of computing gain or loss on a sale of that partnership
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
(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.
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The trust will provide the Schedule K-1 information to nominees that
fail to provide the trust with the information statement described below and the
nominees will be required to forward the information to the beneficial owners of
the partnership interests. Generally, beneficial owners of a partnership
interest must file tax returns that are consistent with the information return
filed by the trust or be subject to penalties unless the beneficial owner of a
partnership interest notifies the IRS of all inconsistencies.
Under section 6031 of the Code, any person that holds partnership
interests as a nominee at any time during a calendar year is required to furnish
the trust with a statement containing information on the nominee, the beneficial
owners and the partnership interests so held. The information includes:
(a) the name, address and taxpayer identification number of the
nominee; and
(b) as to each beneficial owner:
(1) the name, address and identification number of the
person;
(2) whether the person is a United States person, a
tax-exempt entity or a foreign government, an
international organization, or any wholly-owned
agency or instrumentality of either of the foregoing;
and
(3) information on partnership interests that were held,
bought or sold on behalf of the person throughout the
year.
In addition, brokers and financial institutions that hold partnership
interests through a nominee are required to furnish directly to the trust
information regarding themselves and their ownership of partnership interests. A
clearing agency registered under section 17A of the Exchange Act is not required
to furnish any information statement to the trust. Nominees, brokers and
financial institutions that fail to provide the trust with the information
described above may be subject to penalties.
The Code provides for administrative examination of a partnership as if
the partnership were a separate and distinct taxpayer. Generally, the statute of
limitations for partnership items does not expire before three years after the
date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the trust by the appropriate
taxing authorities could result in an adjustment of the returns of the
beneficial owner of a partnership interest and, under circumstances, a
beneficial owner of a partnership interest may be precluded from separately
litigating a proposed adjustment to the items of the trust. An 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 section 860L(a) of
the Code.
In the opinion of Dewey Ballantine LLP:
o the trust issuing FASIT securities will qualify as a FASIT;
and
o FASIT regular securities generally will be treated for federal
income tax purposes as newly-originated debt instruments.
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The trust will make the election at the direction of the lenders. Continuing
to qualify as a FASIT requires ongoing compliance with certain conditions.
The tax opinion delivered prior to the sale of, and in connection with, a
FASIT issuance, will state that the permissible characteristics and
composition of the trust property will enable the trust to meet the
requirements for qualification and taxation as a FASIT. A trust for which a
FASIT election is made will be referred to in this prospectus 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 your 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.
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 and avoid double taxation (income
is not taxed at the corporate level but only to the investors). Interest paid to
holders of regular interests in a FASIT is deductible by the FASIT in computing
its net income as passed through to its owner. In general, interest, original
issue discount 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 a 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:
(1) the entity elects to be treated as a FASIT;
(2) there is a single ownership interest held directly by an eligible
corporation;
(3) all other interests that are issued by the FASIT qualify as regular
interests;
(4) no later than three months after formation, substantially all
assets of the FASIT (including assets treated as held by the entity, such as
assets held by the owner or a person related to the owner that support any
regular interest in such entity) are permitted assets; and
(5) the entity is not a regulated investment company (RIC) (such as a
mutual fund).
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 STARTUP DAY, which for purposes of this discussion is the date of the
initial issuance of the FASIT securities, and at all times thereafter, must
consist of cash or cash equivalents, debt instruments, other than debt
instruments issued by the owner of the FASIT or a related party, and hedges, and
contracts to acquire the same, foreclosure property and regular interests in
another FASIT or in a Real Estate Mortgage
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Investment Conduit, commonly referred to as a REMIC. Based on proposed
regulations issued by the Treasury Department on February 7, 2000 (the "Proposed
Regulations"), 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.
The FASIT provisions allow the lenders to add additional assets to a
FASIT trust after the startup day. These assets would be limited to
additional automobile loans and credit enhancement support relating to the
additional automobile loans, such as cash, hedging agreements, and insurance
policies. After the initial contribution of assets -- including any assets
subsequently purchased during the first ninety days after formation -- the
FASIT will not purchase additional assets. The FASIT provisions additionally
permit the removal of assets from a FASIT trust.
The trust agreements will require that each FASIT Trust will be limited
in its ability to acquire or dispose of its assets to the degree permitted by
the more restrictive REMIC rules, as opposed to the FASIT rules.
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, 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 borrower 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 lenders 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 certain other requirements. All of the interests in a FASIT
must be either of the following: (a) one or more classes of regular interests or
(b) a single class of ownership interest. A regular interest is an interest in a
FASIT that is issued on or after the startup day with fixed terms, is designated
as a regular interest, and (1) unconditionally entitles the holder to receive a
specified principal amount, or other similar amount, (2) provides that interest
payments, or other similar amounts, if any, at or before maturity are payable
based on either a fixed rate or a qualified variable rate, (3) has a stated
maturity of not longer than 30 years, (4) has an issue price not greater than
125% of its stated principal amount, and (5) has a yield to maturity not greater
than 5 percentage points higher than the related applicable federal rate, as
defined in Code section 1274(d). A regular interest that is described in the
preceding sentence except that it fails to meet one or more of requirements (1),
(2), (4), or (5) is a "high-yield regular interest." A high-yield regular
interest that fails requirement (2) must consist of a specified, nonvarying
portion of the
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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 Proposed Regulation indicate, however, that the
Commissioner may allow an entity to continue to be a FASIT or to re-elect FASIT
status if loss of its status is determined by the Commissioner to have been
inadvertent, it takes prompt steps to requalify and the holders of the ownership
interests in the entity agree to make such adjustments as the Commissioner may
require with respect to the period in which the entity failed to qualify as a
FASIT. Loss of FASIT status results in retirement of all regular interests and
their reissuance. If the resulting instruments are treated as equity under
general tax principles, cancellation of debt income may result.
TAXES ON A FASIT TRUST. Income from certain transactions by a FASIT,
called prohibited transactions, are taxable to the holder of the ownership
interest in a FASIT at a 100% rate. Prohibited transactions generally include
(1) the disposition of a permitted asset other than for (a) foreclosure,
default, or imminent default, (b) bankruptcy or insolvency of the FASIT, (c) a
qualified, complete, liquidation, (d) substitution for another permitted debt
instrument or distribution of the debt instrument to the holder of the ownership
interest to reduce overcollateralization, but only if a principal purpose of
acquiring the debt instrument which is disposed of was not the recognition of
gain, or the reduction of a loss, on the withdrawn asset as a result of an
increase in the market value of the asset after its acquisition by the FASIT or
(e) the retirement of a class of FASIT regular interests; (2) the receipt of
income from nonpermitted assets; (3) the receipt of compensation for services;
or (4) the receipt of any income derived from a loan originated by the FASIT
(subject to certain safe harbors). 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.
The Proposed Regulations issued by the Treasury Department on February
7, 2000 include rules applicable to FASITs. These rules address administrative
provisions, ownership issues, permitted assets, prohibited transactions,
consequences of FASIT cessation, gain recognition on property transferred to a
FASIT, and include a prohibition of foreign FASITs and a special anti-abuse
rule. The Proposed Regulations are proposed to become effective on the date
final regulations are filed with the Federal Register, except for the portions
of the Proposed Regulations containing the anti-abuse rule and allowing the
deferral of gain on assets held by a pre-effective date FASIT, which are
proposed to become effective February 4, 2000. The Proposed Regulations are
subject to change before being adopted as final regulations, and it is unclear
whether they will be applied retroactively when adopted.
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Due to the complexity of these rules and the proposed form of the
Treasury regulations, potential investors may wish to 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:
o original issue discount is treated as a form of interest and
must be included in a beneficial owner's income as it accrues,
regardless of the beneficial owner's regular method of
accounting, using a constant yield method;
o 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
o 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
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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.
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
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(2) beginning on the next day following a payment date and ending
on the next payment date.
Under section 1272(a)(6) of the Code, the portion of original issue
discount treated as accruing for any accrual period will equal the excess, if
any, of:
(a) the sum of (1) the present values of all the distributions
remaining to be made on the security, if any, as of the end of
the accrual period and (2) the distribution made on the
security during the accrual period of amounts included in the
stated redemption price at maturity; over
(b) the adjusted issue price of the security at the beginning of
the accrual period.
The present value of the remaining distributions referred to in the
preceding sentence will be calculated based on:
(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
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each day on which it holds the security, the daily portion of original issue
discount with respect to the security, but reduced, if the cost of the security
to the purchaser exceeds its adjusted issue price, by an amount equal to the
product of (1) the daily portion and (2) a constant fraction, the numerator of
which is the excess and the denominator of which is the sum of the daily
portions of original issue discount on the security for all days on or after the
day of purchase.
MARKET DISCOUNT
A beneficial owner that purchases a security at a market discount, that
is, at a purchase price less than the remaining stated redemption price at
maturity of the security, or, in the case of a security with original issue
discount, its adjusted issue price, will be required to allocate each principal
distribution first to accrued market discount on the security, and recognize
ordinary income to the extent the distribution does not exceed the aggregate
amount of accrued market discount on the security not previously included in
income. For securities that have unaccrued original issue discount, the market
discount must be included in income in addition to any original issue discount.
A beneficial owner that incurs or continues indebtedness to acquire a security
at a market discount may also be required to defer the deduction of all or a
portion of the interest on the indebtedness until the corresponding amount of
market discount is included in income. In general terms, market discount on a
security may be treated as accruing either (1) under a constant yield method or
(2) in proportion to remaining accruals of original issue discount, if any, or
if none, in proportion to remaining distributions of interest on the security,
in any case taking into account the prepayment assumption. The trustee will make
available, as required by the IRS, to beneficial owners of securities
information necessary to compute the accrual of market discount.
Notwithstanding the above rules, market discount on a security will be
considered to be zero if the discount is less than 0.25% of the remaining stated
redemption price at maturity of the security multiplied by its weighted average
remaining life. Weighted average remaining life presumably would be calculated
in a manner similar to weighted average life, taking into account payments,
including prepayments, prior to the date of acquisition of the security by the
subsequent purchaser. If market discount on a security is treated as zero under
this rule, the actual amount of market discount must be allocated to the
remaining principal distributions on the security and, when each distribution is
received, gain equal to the discount allocated to the distribution will be
recognized.
PREMIUM
A purchaser of a security that purchases the security at a cost greater
than its remaining stated redemption price at maturity will be considered to
have purchased the PREMIUM SECURITY, at a premium. A purchaser need not include
in income any remaining original issue discount and may elect, under section
171(c)(2) of the Code, to treat the premium as "amortizable bond premium." If a
beneficial owner makes an election, the amount of any interest payment that must
be included in the beneficial owner's income for each period ending on a payment
date will be reduced by the portion of the premium allocable to that period
based on the Premium Security's yield to maturity. The premium amortization
should be made using constant yield
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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.
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. Prospective investors are urged to consult their own tax advisors
regarding the withholding regulations.
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FOREIGN INVESTORS
THE WITHHOLDING REGULATIONS
The withholding regulations would require, in the case of securities
held by a foreign partnership, that:
o the certification described above be provided by the partners
rather than by the foreign partnership; and
o the partnership provide information, including a United States
taxpayer identification number. See "Backup Withholding"
above.
A look-through rule would apply in the case of tiered partnerships. In
addition, the withholding regulations may require that a foreign beneficial
owner, including, in the case of a foreign partnership, the partners thereof,
obtain a United States taxpayer identification number and make certain
certifications if the foreign beneficial owner wishes to claim exemption from,
or a reduced rate of, withholding under an income tax treaty. Non-U.S. Persons
should consult their own tax advisors regarding the application to them of the
withholding regulations.
GRANTOR TRUST SECURITIES, DEBT SECURITIES, AND FASIT REGULAR SECURITIES
Distributions made on a grantor trust security, debt security or a
FASIT regular security to, or on behalf of, a beneficial owner that is not a
U.S. person generally will be exempt from U.S. federal income and withholding
taxes. The term U.S. PERSON means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, an estate that
is subject to U.S. federal income tax regardless of the source of its income, or
a trust if a court within the United States can exercise primary supervision
over its administration and at least one United States person has the authority
to control all substantial decisions of the trust. This exemption is applicable
provided:
(a) the beneficial owner is not subject to U.S. tax as a
result of a connection to the United States other
than ownership of the security;
(b) the beneficial owner signs a statement under
penalties of perjury that certifies that the
beneficial owner is not a U.S. person, and provides
the name and address of the beneficial owner; and
(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%
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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 documents, a trust may
be considered to be engaged in a trade or business in the United States for
purposes of federal withholding taxes with respect to non-U.S. persons. If the
trust is considered to be engaged in a trade or business in the United States
for these purposes and the trust is treated as a partnership, the income of the
trust distributable to a non-U.S. person would be subject to federal withholding
tax. Also, in such cases, a non-U.S. beneficial owner of a partnership interest
that is a corporation may be subject to the branch profits tax. If the trust is
notified that a beneficial owner of a partnership interest is a foreign person,
the trust may withhold as if it were engaged in a trade or business in the
United States in order to protect the trust from possible adverse consequences
of a failure to withhold. A foreign holder generally would be entitled to file
with the IRS a claim for refund with respect to withheld taxes, taking the
position that no taxes were due because the trust was not in a U.S. trade or
business.
STATE AND LOCAL TAX CONSIDERATIONS
In addition to the federal income tax consequences described in
"Material Federal Income Tax Considerations," potential investors should
consider the state and local income tax consequences of the acquisition,
ownership, and disposition of the securities. State and local income tax law may
differ substantially from the corresponding federal law, and this discussion
does not purport to describe any aspect of the income tax laws of any state or
locality. Therefore, potential investors should consult their own tax advisors
with respect to the various state and local tax consequences of an investment in
the securities.
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ERISA CONSIDERATIONS
GENERAL
A fiduciary of a pension, profit-sharing, retirement or other employee
benefit plan subject to Title I of the Employee Retirement Income Security
Act of 1974, as amended, should consider the fiduciary standards thereunder in
the context of the plan's particular circumstances before authorizing an
investment of a portion of such plan's assets in the securities offered by
this prospectus. Accordingly, pursuant to Section 404 of ERISA, such
fiduciary should consider, among other factors:
o whether the investment is for the exclusive
benefit of plan participants and their beneficiaries;
o whether the investment satisfies the applicable
diversification requirements;
o whether the investment is in accordance with the
documents and instruments governing the plan; and
o whether the investment is prudent, considering the
nature of the investment.
Fiduciaries of plans also should consider ERISA's prohibition on improper
delegation of control over, or responsibility for, plan assets.
In addition, employee benefit plans and other retirement arrangements
subject to ERISA, as well as individual retirement accounts, certain types of
Keogh plans not subject to ERISA but subject to section 4975 of the Code, and
entities (including insurance company separate or general accounts) whose
underlying assets include plan assets by reason of such plans, arrangements
or accounts investing in such entities, are prohibited from engaging in a
broad range of transactions involving "plan assets" with persons that are
"parties in interest" under ERISA or "disqualified persons" under the Code.
Such transactions are treated as prohibited transactions under Section 406 of
ERISA and excise taxes and/or other penalties are imposed on such persons
under ERISA and/or section 4975 of the Code unless a statutory, regulatory or
administrative exemption applies. The underwriter, the servicer, any
subservicers, any insurer, the trustee, any indenture trustee and certain of
their affiliates might be considered parties in interest or disqualified
persons with respect to a plan. If so, the acquisition, holding or
disposition of securities by or on behalf of such plan could be considered to
give rise to a prohibited transaction unless an exemption is available.
Governmental plans and certain church plans are not subject to the
requirements of ERISA or section 4975 of the Code. Accordingly, assets of these
plans may be invested in securities without regard to the ERISA considerations
discussed below; however, investment by such plans may be subject to the
provisions of other applicable federal, state and local law. Any plan that is
qualified and exempt from taxation under sections 401(a) and 501(a) of the Code,
however, is subject to the prohibited transaction rules set forth in section 503
of the Code.
ERISA CONSIDERATIONS REGARDING SECURITIES WHICH ARE CERTIFICATES
PLAN ASSETS
The Department of Labor has issued regulations defining what
constitutes "plan assets" for purposes of ERISA and section 4975 of the Code.
The PLAN ASSET REGULATIONS provide that if a plan makes an investment in an
EQUITY INTEREST in an entity, an undivided portion of the assets of the entity
will be considered the assets of such plan unless certain exceptions set forth
in such regulations apply. Securities that are certificates will be considered
equity interests in the issuer for purposes of the plan asset regulations, and
there can be no assurance that the issuer will qualify for any of the exceptions
under the plan asset regulations. As a result, a plan that invests in
certificates may be deemed to have acquired an undivided interest in the trust
property, and transactions occurring in connection with the management and
operation of the trust, including the servicing of the automobile loans, might
constitute prohibited transactions unless an exemption is available.
UNDERWRITER EXEMPTIONS
The Department of Labor has issued to various underwriters individual
prohibited transaction exemptions which generally exempt from the application
of certain prohibited transaction provisions of ERISA and the Code transactions
with respect to the initial purchaser, the holding and the subsequent resale
by plans of securities issued by investment pools whose assets consist of:
o certain types of secured receivables, secured loans
and other secured obligations, including obligations
that bear interest or are purchased at a discount and
which are fully secured by motor vehicles;
o property securing a permitted obligation;
o undistributed cash, cash credited to a PRE-FUNDING
ACCOUNT or a CAPITALIZED INTEREST ACCOUNT, and
certain temporary investments made therewith; and
o certain types of credit support arrangements,
including yield supplement agreements and
interest-rate swaps that meet certain requirements
set forth in exemptions.
The securities covered by the underwriter exemptions include certificates
representing a beneficial ownership interest in the assets of a trust (including
a grantor trust, owner trust or FASIT) and which entitle the holder to payments
of principal, interest and/or other payments made with respect to the assets of
such trust.
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Among the conditions that must be satisfied for the underwriter
exemptions to apply are the following:
o the plan must acquire the securities on terms, including the
security price, that are at least as favorable to the plan as
they would be in an arm's-length transaction with an unrelated
party;
o the securities must not be subordinated to any other
class of securities issued by the same issuer, unless the
securities are issued in a designated transaction;
o at the time of acquisition, the securities acquired by the
plan must have received a rating in one of the three (or, in
the case of desiganted transactions, four) highest generic
rating categories from Standard and Poor's Rating Services,
Moody's Investors Services, Inc. or Fitch ICBA, each referred
to herein as a rating agency;
o the trustee must not be an affiliate of any other member of
the restricted group;
o the sum of all payments made to and retained by the
underwriters must not total more than reasonable compensation
for underwriting the securities; the sum of all payments
made to and retained by the issuer's sponsor for assigning
the obligations to the issuer must not total more than the
fair market value of the obligations, and the sum of all
payments made to and retained by any servicer must not total
more than reasonable compensation and expense reimbursement
for its services;
o 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
o in the event that all of the obligations used to fund the
issuer have not been transferred to the issuer on the closing
date, additional obligations having an aggregate value equal
to no more than 25% of the total principal amount of the
securities being offered may be transferred to the issuer
under a pre-funding feature within ninety days or three months
following the closing date.
For purposes of the underwriter exemptions, the term "designated
transaction" includes any securitization transaction in which the assets of
the issuer consist of obligations that bear interest or are purchased at a
discount and which are fully secured by motor vehicles.
The issuer must also meet the following requirements:
o the assets of the issuer must consist solely of assets of the
type that have been included in other investment pools;
o securities evidencing interests in the other investment pools
must have been rated in one of the three (or in the case of
the designated transactions, four) highest rating categories
by a rating agency for at least one year prior to the plan's
acquisition of securities; and
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o investors other than plans must have purchased certificates
evidencing interests in the other investment pools for at
least one year prior to the plan's acquisition of securities.
The underwriter exemptions also provide relief from various
self-dealing/conflict of interest prohibited transactions that may occur when
a plan fiduciary causes a plan to acquire securities of an issuer and the
fiduciary, or its affiliate, is an obligor with respect to obligations or
receivables contained in the issuer; provided that, among other requirements:
o in the case of an acquisition in connection with the initial
issuance of the securities, at least fifty percent of each
class of securities in which plans have invested is acquired
by persons independent of the restricted group and at least
fifty percent of the aggregate interest in the issuer
is acquired by persons independent of the restricted group;
o the fiduciary, or its affiliate, is an obligor with respect to
five percent or less of the fair market value of the
obligations or receivables contained in the issuer;
o the plan's investment in each class of securities does not
exceed twenty-five percent of all of the securities of that
class outstanding at the time of acquisition; and
o immediately after the plan acquires the securities, 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 the
member of a restricted group, which includes the underwriter, the issuer's
sponsor, the servicer, any subservicer, the trustee, any obligor with respect
to obligations or receivables included in the issuer constituting more than
five percent of the aggregate unamortized principal balance of the issuer's
assets, any insurer, the counterparty to any interest-rate swap entered into
by the issuer and any affiliate of these parties.
ERISA CONSIDERATIONS REGARDING SECURITIES WHICH ARE NOTES
Securities that are notes will not be considered equity interests in
the issuer for purposes of the plan asset regulations if the notes are treated
as indebtedness under applicable local law and have no substantial equity
features. If the notes have substantial equity features, a plan that purchased
notes might be deemed to have acquired an undivided interest in the trust
property, and certain transactions involving the trust property might constitute
prohibited transactions. If the notes are treated as indebtedness without
substantial equity features, the issuer's assets would not be deemed to include
assets of a plan that acquired notes. However, in such circumstances, the
acquisition or holding of notes by or on behalf a plan could nevertheless give
rise to a prohibited transaction if such acquisition or holding were deemed to
be a prohibited loan to a party in interest or disqualified person with respect
to the plan. There can be no assurance that the issuer or an affiliate will not
become party in interest or disqualified person with respect to a plan that
acquires notes.
Prohibited transaction exemption 2000-58 amended the underwriter
exemptions and extended the relief available thereunder to transactions
involving the initial purchase, the holding and the subsequent resale by plans
of securities denominated as debt that are issued by, and are obligations of,
investment pools whose assets are held in trust or held by a partnership,
special purpose corporation or limited liability company. The same conditions
described above relating to certificates must also be met with respect to notes,
In addition, prior to the issuance of the notes, the issuer must receive a legal
opinion to the effect that the noteholders will have a perfected security
interest in the issuer's assets. As with certificates, exemptive relief would
not be available for plans sponsored by a member of the restricted group.
In the event that the underwriter exemptions are not applicable to the notes,
one or more other prohibited transaction exemptions could apply to the purchase,
holding and resale of notes by a plan, depending on the type and circumstances
of the plan fiduciary making the decision to acquire or dispose of the notes.
Included among these exemptions are:
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o PTCE 84-14, regarding transactions effected by QUALIFIED
PROFESSIONAL ASSET MANAGERS;
o PTCE 90-1, regarding transactions entered into by INSURANCE
COMPANY POOLED SEPARATE ACCOUNTS;
o PTCE 91-38, regarding transactions entered into by BANK
COLLECTIVE INVESTMENT FUNDS;
o PTCE 95-60, regarding transactions entered into by INSURANCE
COMPANY GENERAL ACCOUNTS; and
o 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 (or, in the case of a book-entry note, may be deemed to represent and
warrant) either that it is not using plan assets or 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:
o whether the trust's assets would be considered plan assets;
o the possibility of exemptive relief from the prohibited
transaction rules; and
o 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,
an investment in 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 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.
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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:
o By negotiated firm commitment or best efforts underwriting and
public re-offering by underwriters;
o By placements by the company with institutional investors
through dealers;
o By direct placements by the company with institutional
investors; and
o 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.
INCORPORATION BY REFERENCE
The Company will from time to time, file various items with the
Securities and Exchange Commission relating to the issuing trusts and the
securities offered by this prospectus and the prospectus supplements. These
items will include the definitive legal documents used for each issuance,
definitive prospectus supplements and computational materials, as well as
periodic reports on Forms 8-K and 10-K, which the company will file for each
trust for so long as that trust is subject to the reporting requirements of
the Exchange Act. In addition, the financial statements of each credit
enhancement provider, if not attached to the related prospectus supplement,
will also be incorporated by reference.
All of these items will be INCORPORATED BY REFERENCE into the
registration statement of which this prospectus is a part, which means, among
other things, that those items are considered to be a part of this
registration statement for purposes of the federal securities laws. These
items will be publicly available through the Securities and Exchange
Commission -- see "Where You Can Find More Information" in the related
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 enhancement provider, if any.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the amount of fees and expenses
(other than underwriting discounts and commissions) to be incurred in connection
with the issuance and distribution of the Offered Securities.
<TABLE>
<S> <C>
SEC Filing Fee...................... $ 2,000,014
Trustee's Fees and Expenses*........ 100,000
Legal Fees and Expenses*............ 1,500,000
Accounting Fees and Expenses*....... 400,000
Printing and Engraving Expenses*.... 500,000
Blue Sky Qualification and Legal
Investment Fees and Expenses... 50,000
Rating Agency Fees*................. 1,000,000
Security Insurer's Fee*.......... 750,000
Miscellaneous*...................... 1,000,000
------------
TOTAL............................... $ 7,300,014
============
</TABLE>
----------
* Estimated in accordance with Item 511 of Regulation S-K.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
INDEMNIFICATION. Under the laws which govern the organization of the
registrant, the registrant has the power and in some instances may be required
to provide an agent, including an officer or director, who was or is a party or
is threatened to be made a party to certain proceedings, with indemnification
against certain expenses, judgments, fines, settlements and other amounts under
certain circumstances.
Section 9 of the Certificate of Incorporation of AmeriCredit Financial
Services, Inc. provides that all officers and directors of the corporation shall
be indemnified by the corporation from and against all expenses, liabilities or
other matters arising out of their status as an officer or director for their
acts, omissions or services rendered in such capacities.
The forms of the Underwriting Agreement, filed as Exhibits 1.1 and 1.2
to this Registration Statement, provide that AmeriCredit Financial Services,
Inc. will indemnify and reimburse the underwriter(s) and each controlling person
of the underwriter(s) with respect to certain expenses and liabilities,
including liabilities under the 1933 Act or other federal or state
II-1
<PAGE>
regulations or under the common law, which arise out of or are based on certain
material misstatements or omissions in the Registration Statement. In addition,
the Underwriting Agreements provide that the underwriter(s) will similarly
indemnify and reimburse AmeriCredit Financial Services, Inc. with respect to
certain material misstatements or omissions in the Registration Statement which
are based on certain written information furnished by the underwriter(s) for use
in connection with the preparation of the Registration Statement.
INSURANCE. As permitted under the laws which govern the organization of
the registrant, the registrant's Certificate of Incorporation permits the board
of directors to purchase and maintain insurance on behalf of the registrant's
agents, including its officers and directors, against any liability asserted
against them in such capacity or arising out of such agents' status as such,
whether or not such registrant would have the power to indemnify them against
such liability under applicable law.
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<PAGE>
ITEM 16. EXHIBITS.
1.1 -- Form of Underwriting Agreement -- Notes (incorporated by
reference to Exhibit 1.1 to the Registrant's Registration
Statement on Form S-3 (Reg. No. 33-98620).
1.2 -- Form of Underwriting Agreement-- Certificates (incorporated
by reference to Exhibit 1.2 to the Registrant's Registration
Statement on Form S-3 (Reg. No. 33-98620).
3.1 -- Certificate of Incorporation of the Sponsor (incorporated
by reference to Exhibit 3.1 to the Registrant's Registration
Statement on Form S-3 (Reg. No. 33-98620).
3.2 -- By-Laws of the Sponsor (incorporated by reference to
Exhibit 3.2 to the Registrant's Registration Statement on Form
S-3 (Reg. No. 33-98620).
4.1 -- Form of Indenture between the Trust and the Indenture
Trustee (incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-3 (Reg. No.
33-98620). The Exhibit includes forms of securities issued as
notes.
4.2 -- Form of Indenture between the Sponsor and the Indenture
Trustee (incorporated by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-3 (Reg. No.
33-98620). The Exhibit includes forms of securities issued as
notes.
4.3 -- Form of Pooling and Servicing Agreement (incorporated by
reference to Exhibit 4.3 to the Registrant's Registration
Statement on Form S-3 (Reg. No. 33-98620). The Exhibit
includes forms of securities issued as notes.
4.4 -- Form of Trust Agreement (incorporated by reference to
Exhibit 4.4 to the Registrant's Registration Statement on Form
S-3 (Reg. No. 33-98620).
5.1 -- Opinion of Dewey Ballantine with respect to validity.*
8.1 -- Opinion of Dewey Ballantine with respect to tax matters.*
10.1 -- Form of Receivables Acquisition Agreement (incorporated by
reference to Exhibit 10.1 to the Registrant's Registration
Statement on Form S-3 (Reg. No. 33-98620).
23.1 -- Consents of Dewey Ballantine are included in its opinions
filed as Exhibits 5.1 and 8.1 hereto.
* Filed herewith.
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<PAGE>
ITEM 17. UNDERTAKINGS.
A. UNDERTAKING IN RESPECT OF INDEMNIFICATION
Insofar as indemnification for liabilities arising under the
1933 Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described above in Item 15, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by them is against public policy as expressed in the 1933
Act and will be governed by the final adjudication of such issue.
B. UNDERTAKING PURSUANT TO RULE 415.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent on more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) to include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change of such information in the Registration
Statement; provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in the post-effective amendment is contained
in periodic reports filed by the Issuer pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
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<PAGE>
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
C. UNDERTAKING PURSUANT TO RULE 430A.
The Registrant hereby undertakes:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of a registration statement in Reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
D. UNDERTAKING REGARDING DOCUMENTS INCORPORATED BY REFERENCE.
The Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
E. UNDERTAKING REGARDING TRUST INDENTURE QUALIFICATIONS.
The Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of section 310 of the Trust Indenture Act ("Act") in
accordance with the rules and regulations prescribed by the Commission under
section 305(b)(2) of the Act.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 3 to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Fort Worth, State
of Texas on the 17th day of January, 2001.
Americredit Financial Services, Inc.
By /s/ MICHAEL R. BARRINGTON
-------------------------------------
Michael R. Barrington
Director, Chairman of the Board
Chief Executive Officer and President
The Registrant reasonably believes that the security ratings
to be assigned to the securities registered hereunder will make the securities
"investment grade securities" pursuant to Transaction Requirement B.2 of Form
S-3, prior to the sale of such securities.
Pursuant to the requirements of the Securities Act of 1933,
this Amendment No. 3 to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ MICHAEL R. BARRINGTON Director, Chairman of the Board, Chief
-------------------------- Executive Officer and President January 17, 2001
Michael R. Barrington (Principal Executive Officer)
/s/ DANIEL E. BERCE Director, Vice Chairman and Chief January 17, 2001
--------------------------- Financial Officer
Daniel E. Berce (Principal Financial Officer and
Principal Accounting Officer)
/s/ EDWARD H. ESSTMAN Director, Vice Chairman, President and January 17, 2001
--------------------------- Chief Operating Officer, Dealer Services
Edward H. Esstman
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
EXHIBIT
1.1 - Form of Underwriting Agreement -- Notes (incorporated by
reference to Exhibit 1.1 to the Registrant's Registration
Statement on Form S-3 (Reg. No. 33-98620).
1.2 - Form of Underwriting Agreement-- Certificates (incorporated
by reference to Exhibit 1.2 to the Registrant's Registration
Statement on Form S-3 (Reg. No. 33-98620).
3.1 - Articles of Incorporation of the Sponsor (incorporated by
reference to Exhibit 3.1 to the Registrant's Registration
Statement on Form S-3 (Reg. No. 33-98620).
3.2 - Bylaws of the Sponsor (incorporated by reference to Exhibit
3.2 to the Registrant's Registration Statement on Form S-3
(Reg. No. 33-98620).
4.1 -- Form of Indenture between the Trust and the Indenture
Trustee (incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-3 (Reg. No.
33-98620). The Exhibit includes forms of securities issued as
notes.
4.2 -- Form of Indenture between the Sponsor and the Indenture
Trustee (incorporated by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-3 (Reg. No.
33-98620). The Exhibit includes forms of securities issued as
notes.
4.3 -- Form of Pooling and Servicing Agreement (incorporated by
reference to Exhibit 4.3 to the Registrant's Registration
Statement on Form S-3 (Reg. No. 33-98620). The Exhibit
includes forms of securities issued as notes.
4.4 - Form of Trust Agreement (incorporated by reference to
Exhibit 4.4 to the Registrant's Registration Statement on Form
S-3 (Reg. No. 33-98620).
5.1 - Opinion of Dewey Ballantine with respect to legality.*
8.1 - Opinion of Dewey Ballantine with respect to tax matters.*
10.1 - Form of Receivables Acquisition Agreement (incorporated by
reference to Exhibit 10.1 to the Registrant's Registration
Statement on Form S-3 (Reg. No. 33-98620).
23.1 - Consent of Dewey Ballantine (included in Exhibits 5.1 and
8.1).
* Filed herewith.
II-7
