<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-40421
SUPPLEMENTAL PROSPECTUS SUPPLEMENT
TO PROSPECTUS SUPPLEMENT DATED JULY 20, 1998 AND PROSPECTUS DATED JULY 16, 1998
FORD CREDIT AUTO OWNER TRUST 1998-C
$200,000,000 CLASS A-5 5.86% ASSET BACKED NOTES
Ford Credit Auto Receivables Two L.P. Ford Motor Credit Company
Seller Servicer
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This is an offering of only the Class A-5 Notes of Ford Credit Auto
Owner Trust 1998-C. The Prospectus Supplement and the Prospectus attached to
this Supplemental Prospectus Supplement provide a complete description of the
Trust and of the Notes and Certificates previously issued by the Trust. The
Class A-5 Notes are obligations of the Trust only and are not obligations of
Ford Motor Company, Ford Motor Credit Company or any of their respective
affiliates. There is presently no secondary market for the Class A-5 Notes.
<TABLE>
<CAPTION>
Class A-5 Notes
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<S> <C>
Principal Amount: $200,000,000
Interest Rate: 5.86% per annum
Interest Payments: 15th of each month
Principal Payments: 15th of each month, after the Class A-4 Notes are paid in full
Optional Redemption: After the Pool Balance has declined to 10% or less of initial amount
Scheduled Final
Principal Repayment Date: October 15, 2002
Initial Public Offering Price: Varying prices to be determined at the time of sale
<CAPTION>
Percentage of
Aggregate
Principal Amount Total
---------------- -----------------
Proceeds to the Seller: 101.58656% $203,173,120
plus accrued plus accrued
interest from interest from
October 15, 1998 October 15, 1998
</TABLE>
BEFORE BUYING THE CLASS A-5 NOTES, YOU SHOULD CONSIDER CAREFULLY THE
RISK FACTORS BEGINNING ON PAGE SPS-4 OF THIS SUPPLEMENTAL PROSPECTUS SUPPLEMENT,
ON PAGE S-20 OF THE ATTACHED PROSPECTUS SUPPLEMENT AND ON PAGE 13 OF THE
ATTACHED PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS SUPPLEMENTAL PROSPECTUS SUPPLEMENT, THE PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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GOLDMAN, SACHS & CO.
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The Date of this Supplemental Prospectus Supplement is October 21, 1998
<PAGE> 2
SUMMARY
The following summary highlights selected information about the Class
A-5 Notes and does not contain all of the information that you should consider
in making an investment decision. To understand all of the terms of the Class
A-5 Notes, carefully read this document, the Prospectus Supplement and the
Prospectus.
<TABLE>
<S> <C>
ISSUER......................... Ford Credit Auto Owner Trust 1998-C (the "Trust" or the "Issuer"), a
Delaware business trust. The assets of the Trust include a pool of motor
vehicle retail installment sale contracts (the "Receivables") which are
secured by security interests in the motor vehicles financed and certain
other property, as more fully described in the attached Prospectus
Supplement.
SELLER......................... Ford Credit Auto Receivables Two L.P., a Delaware limited partnership
(the "Seller"). The principal executive offices of the Seller are located at
The American Road, Dearborn, Michigan 48121. The telephone number
of such offices is (313) 322-3000.
SERVICER....................... Ford Motor Credit Company, a Delaware corporation (the "Servicer" or
"Ford Credit").
INDENTURE TRUSTEE.............. The Chase Manhattan Bank, a New York corporation (the "Indenture
Trustee").
OWNER TRUSTEE.................. PNC Bank, Delaware, a Delaware banking corporation (the "Owner
Trustee").
THE NOTES...................... On July 29, 1998, the Trust issued Asset Backed Notes (the "Notes") with
the following terms:
</TABLE>
<TABLE>
<CAPTION>
Interest Principal Scheduled Final
Class Rate Amount Principal Repayment Date
----- ---------- ---------------- ------------------------
<S> <C> <C> <C>
A-1 5.608% $300,000,000 January 15, 1999
A-2 5.670% $300,000,000 June 15, 1999
A-3 5.730% $650,000,000 November 15, 2000
A-4 5.810% $712,000,000 March 15, 2002
A-5 5.860% $200,000,000 October 15, 2002
B 6.060% $ 92,000,000 February 15, 2003
Simultaneously, the Trust issued Asset
Backed Certificates (the "Certificates")
with the following terms:
Interest Principal Scheduled Final
Class Rate Amount Principal Repayment Date
----- ---------- --------------- ------------------------
C 6.30% $ 46,000,000 April 15, 2003
D 7.70% $ 46,000,000 January 15, 2004
The Class B Notes and the Certificates are
subordinate to the Class A-5 Notes.
</TABLE>
SPS - 2
<PAGE> 3
You can buy the Class A-5 Notes only in book
entry form and only in minimum denominations
of $1,000 and integral multiples thereof.
RATINGS OF THE
CLASS A-5 NOTES................ At the time of purchase by the Underwriters,
the Class A-5 Notes must (1) be rated in the
highest long-term rating category by at
least two nationally recognized rating
agencies and (2) not have been placed on
watch list by any nationally recognized
rating agency. A rating agency can lower or
withdraw a rating at its sole discretion.
SPS - 3
<PAGE> 4
RISK FACTORS
You should also read the risk factors discussed under "Risk Factors"
beginning on page S-20 of the attached Prospectus Supplement and page 13 of the
attached Prospectus.
LIMITED LIQUIDITY
There is presently no secondary market for the Class A-5 Notes. This means
that if in the future you want to sell Class A-5 Notes before they mature, you
may be unable to find a buyer or, if you find a buyer, the selling price may be
less than it would have been if a market existed for the Class A-5 Notes. The
Underwriters presently intend to make a market in the Class A-5 Notes but they
are not required to do so. If a secondary market does develop, it might end at
any time or it might not be sufficiently liquid to enable you to resell any of
your Class A-5 Notes.
THE RECEIVABLES POOL
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning Ford Credit's experience
with respect to its portfolio of U.S. retail installment sale contracts for new
and used automobiles and light trucks (including previously sold contracts which
Ford Credit continues to service, but not including retail installment sale
contracts purchased by Ford Credit under certain special financing programs).
There is no assurance that the behavior of the Receivables will be comparable to
Ford Credit's experience shown in the following tables or that the general
upward trend in losses and delinquencies will not accelerate in the future.
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
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1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Average Number of Contracts
Outstanding During the Period $3,724,428 3,558,015 3,591,153 3,612,265 3,438,699 3,430,145 3,398,797
Average Daily Delinquencies
as a Percent of Average Con
tracts Outstanding
31-60 Days(2) 2.64% 2.78% 2.85% 2.54% 2.21% 2.03% 2.02%
61-90 Days(2) 0.31% 0.31% 0.32% 0.26% 0.17% 0.15% 0.15%
Over 90 Days(3) 0.10% 0.10% 0.11% 0.08% 0.04% 0.03% 0.03%
</TABLE>
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(1) The information in the table includes U.S. retail installment sale
contracts for new and used automobiles and light trucks and includes
previously sold contracts which Ford Credit continues to service; it does
not include retail installment sale contracts purchased by Ford Credit
under certain special financing programs.
(2) Delinquencies represent the daily average number of contracts delinquent.
(3) Delinquencies represent the average monthly end-of-period number of
contracts delinquent.
SPS - 4
<PAGE> 5
CREDIT LOSS AND REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
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1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Average Portfolio Outstanding
During the Period (Millions)
Gross $45,169 $39,933 $41,186 $40,269 $35,699 $33,703 $31,205
Net $38,535 $33,517 $34,715 $33,647 $30,015 $28,526 $26,152
Repossessions as a Percent of
Average Number of Contracts
Outstanding 2.83% 3.02% 3.01% 3.01% 2.38% 2.15% 2.27%
Net Losses as a Percent of
Gross Liquidations(2) 2.10% 2.27% 2.46% 2.21% 1.43% 1.06% 1.16%
Net Losses as a Percent of
Average Gross Portfolio
Outstanding(2) 1.13% 1.31% 1.38% 1.28% 0.82% 0.62% 0.69%
Net Losses as a Percent of
Average Net Portfolio
Outstanding(2) 1.32% 1.56% 1.64% 1.53% 0.98% 0.73% 0.82%
</TABLE>
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(1) All gross amounts and percentages are based on the gross amount scheduled
to be paid on each contract including unearned finance and other charges.
All net amounts and percentages are based on the net amount scheduled to
be paid on each contract excluding unearned finance and other charges. The
information in the table includes U.S. retail installment sale contracts
for new and used automobiles and light trucks and includes previously sold
contracts which Ford Credit continues to service; it does not include
retail installment sale contracts purchased by Ford Credit under certain
special financing programs.
(2) "Net Losses" are equal to the aggregate balance of all contracts which are
determined to be uncollectible in the period less any recoveries on
contracts charged-off in the period or any prior periods. Net losses
include expenses associated with outside collection agencies but exclude
other expenses associated with collection, repossession, and disposition
of the vehicle. These other expenses are not material to the data
presented.
As shown above, credit losses increased each year from 1995 through
1997, reversing a general trend of improvement that had begun in 1989. The
increase reflected an increase in losses per repossession and an increase in
repossession rates. In 1998, credit losses have stabilized, and are not expected
to increase from 1997 levels. See "Description of the Transfer and Servicing
Agreements - Servicing Procedures" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting
Agreement (the "Underwriting Agreement"), the Seller has agreed to sell to
Goldman, Sachs & Co. (the "Underwriters"), and the Underwriters have agreed to
purchase the entire $200,000,000 outstanding principal amount of Class A-5
Notes. The Class A-5 Notes will be purchased by the Seller from Ford Credit
prior to purchase by the Underwriters.
Distribution of the Class A-5 Notes will be made by the Underwriters
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. Proceeds to the Seller will be 101.58656% of
the aggregate principal amount of the Class A-5 Notes, or $203,173,120, plus
accrued interest from October 15, 1998. In connection with the purchase and sale
of the Class A-5 Notes, the
SPS - 5
<PAGE> 6
Underwriters may be deemed to have received compensation from the Seller in the
form of underwriting discounts.
The Seller and Ford Credit have agreed to indemnify the Underwriters
against certain liabilities, including civil liabilities under the Securities
Act, or to contribute to payments which the Underwriters may be required to make
in respect thereof.
Upon receipt of a request by an investor who has received an electronic
Prospectus from the Underwriters or a request by such investor's representative
within the period during which there is an obligation to deliver a Prospectus,
the Seller or the Underwriters will promptly deliver, or cause to be delivered,
without charge, a paper copy of the Prospectus.
SPS - 6
<PAGE> 7
INDEX OF TERMS
Set forth below is a list of the defined terms used in this
Supplemental Prospectus Supplement and defined herein and the pages on which the
definitions of such terms may be found herein. Certain defined terms used in
this Supplemental Prospectus Supplement are defined in the Prospectus Supplement
and Prospectus. See "Index of Terms" in the Prospectus Supplement and
Prospectus.
PAGE
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Certificates........................................................ SPS-2
Ford Credit......................................................... SPS-2
Indenture Trustee................................................... SPS-2
Issuer.............................................................. SPS-2
Net Losses.......................................................... SPS-5
Notes............................................................... SPS-2
Owner Trustee....................................................... SPS-2
Receivables......................................................... SPS-2
Seller.............................................................. SPS-2
Servicer............................................................ SPS-2
Trust............................................................... SPS-2
Underwriters........................................................ SPS-5
Underwriting Agreement.............................................. SPS-5
SPS - 7
<PAGE> 8
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS SUPPLEMENTAL PROSPECTUS
SUPPLEMENT AND ACCOMPANYING PROSPECTUS SUPPLEMENT
AND PROSPECTUS. NO ONE HAS BEEN AUTHORIZED TO PROVIDE
YOU WITH DIFFERENT INFORMATION. THE CLASS A-5 NOTES ARE NOT
BEING OFFERED IN ANY JURISDICTION WHERE THE OFFER IS NOT
PERMITTED. THE SELLER AND THE SERVICER DO NOT CLAIM THE
ACCURACY OF THIS SUPPLEMENTAL PROSPECTUS SUPPLEMENT AND
ACCOMPANYING PROSPECTUS SUPPLEMENT AND PROSPECTUS AS
OF ANY DATE OTHER THAN THE DATES STATED ON THEIR RESPECTIVE
COVER PAGES.
TABLE OF CONTENTS
SUPPLEMENTAL PROSPECTUS SUPPLEMENT
PAGE
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Summary.....................................................SPS-2
Risk Factors................................................SPS-4
The Receivables Pool........................................SPS-4
Underwriting................................................SPS-5
Index of Terms..............................................SPS-7
PROSPECTUS SUPPLEMENT
PAGE
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Reports to Securityholders.................................. S-3
Summary..................................................... S-5
Risk Factors................................................ S-20
The Trust................................................... S-23
The Receivables Pool........................................ S-24
Pool Factors................................................ S-32
Maturity and Prepayment Considerations...................... S-32
Description of the Notes.................................... S-33
Description of the Certificates............................. S-36
Description of the Transfer and Servicing Agreements........ S-38
Certain Federal Income Tax Consequences..................... S-46
Certain State Tax Consequences.............................. S-55
Legal Investment............................................ S-56
ERISA Considerations........................................ S-56
Underwriting................................................ S-57
Legal Opinions.............................................. S-59
Index of Terms.............................................. S-60
Annex I - Global Clearance, Settlement and
Tax Documentation Procedures.............................. I-1
PROSPECTUS
Available Information.......................................... 2
Incorporation of Certain Documents by Reference................ 2
Summary........................................................ 3
Risk Factors.................................................. 13
The Trusts.................................................... 18
The Receivables Pools......................................... 20
Maturity and Prepayment Considerations........................ 22
Pool Factors and Trading Information.......................... 23
Use of Proceeds............................................... 23
The Seller and the General Partner............................ 24
The Servicer.................................................. 25
Description of the Notes...................................... 26
Description of the Certificates............................... 31
Certain Information Regarding the Securities.................. 32
Description of the Transfer and Servicing Agreements.......... 42
Certain Legal Aspects of the Receivables...................... 56
Certain Federal Income Tax Consequences....................... 60
ERISA Considerations.......................................... 60
Plan of Distribution.......................................... 65
Legal Opinions................................................ 66
Index of Terms................................................ 67
UNTIL JANUARY 19, 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THE CLASS
A-5 NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A SUPPLEMENTAL PROSPECTUS SUPPLEMENT, PROSPECTUS SUPPLEMENT AND A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
================================================================================
FORD CREDIT
AUTO OWNER TRUST
1998-C
$200,000,000
CLASS A-5
5.86% ASSET BACKED NOTES
FORD CREDIT AUTO
RECEIVABLES TWO L.P.
SELLER
FORD MOTOR CREDIT COMPANY
SERVICER
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SUPPLEMENTAL
PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
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