<PAGE> 1
Pursuant to Rule 424b2
Registration No. 333-82895
SUBJECT TO COMPLETION, DATED SEPTEMBER 13, 1999
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 17, 1999
$2,530,479,000
FORD CREDIT AUTO OWNER TRUST 1999-D
[FORD LOGO]
FORD CREDIT AUTO FORD MOTOR CREDIT
RECEIVABLES TWO L.P. COMPANY
SELLER SERVICER
THE TRUST WILL ISSUE THE FOLLOWING SECURITIES:
<TABLE>
<CAPTION>
FINAL
PRINCIPAL SCHEDULED
AMOUNT INTEREST RATE DISTRIBUTION DATE
--------- ------------- -----------------
<S> <C> <C> <C>
Class A-1 Notes(1)................... $153,000,000 5.411% December 15, 1999
Class A-2 Notes(1)................... $449,000,000 5.816% June 15, 2000
Class A-3 Notes...................... $1,370,000,000 6.20% April 15, 2002
Class A-4 Notes...................... $400,000,000 6.40% October 15, 2002
Class A-5 Notes...................... $588,189,000 6.52% September 15, 2003
Class B Notes........................ $109,640,000 6.87% January 15, 2004
Class C Certificates................. $62,650,000 7.21% March 15, 2004
Class D Certificates(1).............. $62,650,000 8.00% December 15, 2004
</TABLE>
-----------------------------------------
(1) The Class A-1 Notes, the Class A-2 Notes and the Class D
Certificates are not being offered by this prospectus
supplement.
-- The trust will pay interest and principal on the
securities on the 15th day of each month. The first
payment date will be October 15, 1999.
-- The trust will pay principal sequentially to the
earliest maturing Class of securities then outstanding
until paid in full.
THE UNDERWRITERS ARE OFFERING THE FOLLOWING SECURITIES BY
THIS PROSPECTUS SUPPLEMENT:
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO THE
OFFERING PRICE(1) DISCOUNT SELLER(1)(2)
----------------- ------------ ---------------
<S> <C> <C> <C>
Per Class A-3 Note........ 99.996160% 0.175% 99.821160%
Per Class A-4 Note........ 99.993323% 0.210% 99.783323%
Per Class A-5 Note........ 99.986955% 0.250% 99.736955%
Per Class B Note.......... 99.982258% 0.350% 99.632258%
Per Class C Certificate... 99.982642% 0.350% 99.632642%
Total..................... $2,530,292,627.63 $5,310,987.50 $2,524,981,640.13
</TABLE>
-----------------------------------------
(1) The price of the offered notes and certificates will also
include interest accrued on the offered securities, if
any, from September 23, 1999.
(2) Before deducting expenses payable by the seller estimated
to be $1,250,000.
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 PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
GOLDMAN, SACHS & CO. SALOMON SMITH BARNEY
BANC ONE CAPITAL MARKETS, INC.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
----------------------
The date of this prospectus supplement is September 17, 1999
BEFORE YOU PURCHASE ANY OF
THESE SECURITIES, BE SURE YOU
UNDERSTAND THE STRUCTURE AND
THE RISKS. SEE ESPECIALLY THE
RISK FACTORS BEGINNING ON
PAGE S-13 OF THIS PROSPECTUS
SUPPLEMENT AND ON PAGE 9 OF
THE ATTACHED PROSPECTUS.
These securities are asset
backed securities issued by a
trust. The securities are not
obligations of Ford Motor
Company, Ford Motor Credit
Company, the servicer, the
seller or any of their
affiliates.
No one may use this
prospectus supplement to
offer and sell these
securities unless it is
accompanied by the
prospectus.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
WHERE TO FIND INFORMATION IN THESE
DOCUMENTS.......................... S-3
SUMMARY OF TERMS OF THE SECURITIES... S-4
STRUCTURAL SUMMARY................... S-8
RISK FACTORS......................... S-13
THE TRUST............................ S-20
Limited Purpose and Limited
Assets.......................... S-20
Capitalization of the Trust........ S-20
The Owner Trustee and the Delaware
Trustee......................... S-21
THE RECEIVABLES POOL................. S-21
Weighted Average Life of the
Securities...................... S-24
Delinquencies, Repossessions and
Net Losses of Ford Credit's and
PRIMUS's Portfolios............. S-29
HOW YOU CAN COMPUTE YOUR PORTION OF
THE AMOUNT OUTSTANDING ON THE NOTES
OR CERTIFICATES.................... S-30
MATURITY AND PREPAYMENT
CONSIDERATIONS..................... S-31
DESCRIPTION OF THE NOTES............. S-32
Payments of Interest............... S-32
Payments of Principal.............. S-33
The Indenture...................... S-34
Optional Redemption................ S-35
DESCRIPTION OF THE CERTIFICATES...... S-35
Distributions of Interest Income... S-35
Distributions of Principal
Payments........................ S-36
Priority of Notes.................. S-37
Optional Prepayment................ S-37
DESCRIPTION OF THE RECEIVABLES
TRANSFER AND SERVICING
AGREEMENTS......................... S-38
Accounts........................... S-38
Servicing Compensation and
Expenses........................ S-38
Rights Upon Event of Servicing
Termination..................... S-39
Waiver of Past Events of Servicing
Termination..................... S-39
Distributions...................... S-39
Reserve Account.................... S-46
YEAR 2000 ISSUES AFFECTING FORD
CREDIT............................. S-47
Year 2000 Conversion............... S-47
State of Readiness................. S-47
Y2K Costs.......................... S-49
Y2K Risks.......................... S-49
Y2K Contingency Plans.............. S-49
FEDERAL INCOME TAX MATTERS........... S-49
Scope of the Tax Opinions.......... S-50
Tax Characterization of the
Trust........................... S-51
Tax Consequences to Holders of
the Notes....................... S-51
Tax Consequences to Holders of
Class C Certificates............ S-55
Certain U.S. Federal Income Tax
Documentation Requirements...... S-60
STATE TAX MATTERS.................... S-61
Michigan Tax Consequences.......... S-61
Michigan Tax Consequences With
Respect to the Notes............ S-62
Michigan Tax Consequences With
Respect to the Class C
Certificates.................... S-62
ERISA CONSIDERATIONS................. S-63
The Notes.......................... S-63
The Class C Certificates........... S-63
UNDERWRITING......................... S-64
LEGAL OPINIONS....................... S-66
GLOSSARY OF TERMS FOR THE PROSPECTUS
SUPPLEMENT......................... S-67
ANNEX I -- Form of Investment Letter,
Class C Certificates...... I-1
</TABLE>
S-2
<PAGE> 3
WHERE TO FIND INFORMATION IN THESE DOCUMENTS
This prospectus supplement and the attached prospectus provide information about
the trust, Ford Credit Auto Owner Trust 1999-D, including terms and conditions
that apply to the notes and certificates to be issued by the trust. The specific
terms of the trust are contained in this prospectus supplement. You should rely
only on information on the notes and certificates provided in this prospectus
supplement and the attached prospectus. We have not authorized anyone to provide
you with different information.
We have included cross-references to captions in these materials where you can
find further related discussions. We have started with several introductory
sections describing the trust and terms in abbreviated form, followed by a more
complete description of the terms. The introductory sections are:
-- Summary of Terms of the Securities -- provides important information
concerning the amounts and the payment terms of each Class of
securities
-- Structural Summary -- gives a brief introduction to the key structural
features of the trust
-- Risk Factors -- describes briefly some of the risks to investors of a
purchase of the securities
Cross references may be contained in the introductory sections which will direct
you elsewhere in this prospectus supplement or the attached prospectus to more
detailed descriptions of a particular topic. You can also find references to key
topics in the Table of Contents on the preceding page.
Capitalized terms are defined in a Glossary beginning on page S-67 of this
prospectus supplement or in the Glossary beginning on page 60 of the prospectus.
S-3
<PAGE> 4
SUMMARY OF TERMS OF THE SECURITIES
The following summary is a short description of the main terms of the
offering of the securities. For that reason, this summary does not contain all
of the information that may be important to you. To fully understand the terms
of the offering of the securities, you will need to read both this prospectus
supplement and the attached prospectus, each in its entirety.
ISSUER
Ford Credit Auto Owner Trust 1999-D, a Delaware business trust, will use the
proceeds from the issuance and sale of the securities to purchase a pool of
motor vehicle retail installment sale contracts which constitute the
receivables. Ford Motor Credit Company acquired the receivables directly, or
indirectly through PRIMUS. Ford Credit will service the receivables. The trust
will rely upon collections on the receivables and the funds on deposit in
certain accounts to make payments on the securities. The trust will be solely
liable for the payment of the securities.
OFFERED SECURITIES
The following securities are being offered by this prospectus supplement:
-- $1,370,000,000 Class A-3 6.20% Asset Backed Notes
-- $400,000,000 Class A-4 6.40% Asset Backed Notes
-- $588,189,000 Class A-5 6.52% Asset Backed Notes
-- $109,640,000 Class B 6.87% Asset Backed Notes
-- $62,650,000 Class C 7.21% Asset Backed Certificates
The trust is also issuing $153,000,000 aggregate principal amount of Class A-1
5.411% Asset Backed Notes, $449,000,000 aggregate principal amount of Class A-2
5.816% Asset Backed Notes and $62,650,000 aggregate principal amount of Class D
8.00% Asset Backed Certificates. The trust is not offering the Class A-1 Notes,
the Class A-2 Notes or the Class D Certificates by this prospectus supplement.
CLOSING DATE
The trust expects to issue the securities on September 23, 1999.
TRUSTEES
Notes The Chase Manhattan Bank,
a New York corporation.
Certificates The Bank of New York, a
New York banking corporation, as owner trustee and The Bank
of New York (Delaware), a Delaware banking corporation, as
Delaware trustee.
INTEREST AND PRINCIPAL PAYMENT DATES
On the 15th day of each month (or if the 15th day is not a business day, the
next business day), the trust will pay interest and principal on the securities.
FIRST SCHEDULED PAYMENT DATE
The first scheduled payment date will be October 15, 1999.
RECORD DATES
On each payment date, the trust will pay interest and principal to the holders
of the securities as of the related record date. The record dates for the
securities will be as follows:
Notes The day immediately
preceding the payment date.
Certificates The last day of the month
immediately preceding the payment date.
INTEREST RATES
The trust will pay interest on each Class of securities at the rates specified
on the cover of this prospectus supplement.
S-4
<PAGE> 5
INTEREST ACCRUAL
Offered Notes and Certificates
"30/360", accrued from the
15th day of the previous month to the 15th day of the
current month.
This means that, if there are no outstanding shortfalls in
the payment of interest, the interest due on each payment
date will be the product of:
1. the outstanding principal balance;
2. the interest rate; and
3. 30 (or in the case of the first payment date, 22) divided
by 360.
For a more detailed description of the payment of interest, you should refer to
the sections of this prospectus supplement entitled "Description of the Notes --
Payments of Interest" and "Description of the Certificates -- Distributions of
Interest Income."
SEQUENTIAL PRINCIPAL PAYMENTS
The trust will pay principal sequentially to the earliest maturing Class of
securities then outstanding until such Class is paid in full.
For a more detailed description of the payment of principal, you should refer to
the sections of this prospectus supplement entitled "Description of the Notes --
Payments of Principal" and "Description of the Certificates -- Distributions of
Principal Payments."
OPTIONAL REDEMPTION
The servicer has the option to purchase the receivables on any payment date on
which the aggregate principal balance of the receivables is 10% or less of the
aggregate principal balance of the receivables at the time they were sold to the
trust at a price equal to the outstanding principal balance of the securities
plus accrued and unpaid interest thereon. The trust will apply such payment to
the redemption of the securities in full.
It is expected that at the time this redemption option becomes available to the
servicer only the Class A-5 Notes, the Class B Notes and the Certificates will
be outstanding.
FINAL SCHEDULED DISTRIBUTION DATES
The trust is required to pay the outstanding principal amount of each Class of
notes and certificates, to the extent not previously paid, in full on the
respective final scheduled distribution dates specified on the cover page of
this prospectus supplement for each Class.
RATINGS
It is a condition to the issuance of the securities that the:
-- Class A-1 Notes and Class A-2 Notes be rated in the highest
short-term rating category by at least two nationally recognized
rating agencies;
-- Class A-3 Notes, Class A-4 Notes and Class A-5 Notes be rated in the
highest long-term rating category by at least two nationally
recognized rating agencies;
-- Class B Notes be rated "A" or its equivalent by at least two
nationally recognized rating agencies; and
-- Class C Certificates be rated "BBB" or its equivalent by at least two
nationally recognized rating agencies.
A rating is not a recommendation to purchase, hold or sell the offered notes and
certificates, inasmuch as such rating does not comment as to market price or
suitability for a particular investor. The ratings of the offered notes and
certificates address the likelihood of the payment of principal and interest on
the notes and certificates according to their terms. A rating agency rating the
notes or certificates may lower or withdraw its rating in the future, in its
discretion.
MINIMUM DENOMINATIONS
Offered Notes $1,000 and integral multiples
thereof
S-5
<PAGE> 6
Class C Certificates
$20,000 and integral
multiples of $1,000 in excess thereof
REGISTRATION, CLEARANCE AND SETTLEMENT
Offered Notes DTC/Cedel/Euroclear
Class C Certificates
Issued in fully registered,
certificated form
REQUIRED REPRESENTATIONS FROM PURCHASERS OF THE CLASS C CERTIFICATES
To purchase Class C Certificates, you (and anyone to whom you assign or sell the
Class C Certificates) must:
(1) represent and certify under penalties of perjury that you are a United
States person; and
(2) represent and certify that you
(a) are not a plan that is subject to the fiduciary responsibility
provisions of the Employee Retirement Income Security Act of
1974, as amended, or Section 4975 of the Internal Revenue Code
of 1986, as amended and are not purchasing Class C Certificates
on behalf of such a plan or arrangement; or
(b) are an insurance company using its general account and less than
25% of the assets of such general account represent assets of
one or more plans or arrangements described above.
You can find a form of the representation letter an investor in the Class C
Certificates will have to sign in Annex I to this prospectus supplement.
TAX STATUS
Opinions of Counsel
Skadden, Arps, Slate, Meagher & Flom LLP will deliver its opinion that for
federal income tax purposes the:
-- Class A Notes will be characterized as debt;
-- Class B Notes should be treated as debt, although the issue is not
free from doubt; and
-- trust will not be characterized as an association (or a publicly
traded partnership) taxable as a corporation.
Hurley D. Smith, Esq., Secretary and Corporate Counsel of Ford Credit, will
deliver his opinion to the same effect with respect to Michigan income and
single business tax purposes.
Investor Representations
Notes If you purchase the notes,
you agree by your purchase that you will treat the notes as
indebtedness.
Class C Certificates
If you purchase the Class C
Certificates, you agree by your purchase that you will treat
the trust as a partnership in which the certificateholders
are partners for federal income tax and Michigan income and
single business tax purposes.
Investment Restrictions
Class C Certificates
The Class C Certificates
may not be purchased by persons who are not U.S. Persons.
If you are considering purchasing the Class C Certificates, you should refer to
"Federal Income Tax Matters" in this prospectus supplement and "Tax Matters" in
the prospectus and "State Tax Matters" in this prospectus supplement for more
details.
S-6
<PAGE> 7
ERISA CONSIDERATIONS
Notes The notes are generally
eligible for purchase by employee benefit plans, subject to
the considerations discussed under "ERISA Considerations" in
this prospectus supplement and the prospectus.
Class C
Certificates The Class C Certificates
may not be acquired by an employee benefit plan or by an
individual retirement account. However, an insurance company
using its general account may acquire the Class C
Certificates subject to the considerations discussed under
"ERISA Considerations" in this prospectus supplement and in
the prospectus.
INVESTOR INFORMATION -- MAILING ADDRESS, TELEPHONE NUMBER, FACSIMILE NUMBER AND
PRINCIPAL EXECUTIVE OFFICES
The mailing address of Ford Credit Auto Receivables Two L.P. is The American
Road, Dearborn, Michigan 48121, attention of the Secretary. The servicer's
telephone number is (313) 322-3000 and the facsimile number is (313) 594-7742.
CUSIP NUMBERS
-- Class A-3 Notes: 34527RCX9
-- Class A-4 Notes: 34527RCY7
-- Class A-5 Notes: 34527RCZ4
-- Class B Notes: 34527RDA8
-- Class C Certificates: 34527RDB6
S-7
<PAGE> 8
STRUCTURAL SUMMARY
This summary briefly describes certain major structural components of the
trust. To fully understand the terms of the trust, you will need to read both
this prospectus supplement and the attached prospectus, each in its entirety.
TRANSFER OF RECEIVABLES AND APPLICATION OF PROCEEDS
Ford Credit Auto Receivables Two L.P., the seller, will purchase certain motor
vehicle retail installment sale contracts originated by Ford Credit and PRIMUS,
which constitute the receivables, and then will sell the receivables with an
aggregate principal balance of $3,300,023,039.40 as of September 1, 1999 to Ford
Credit Auto Owner Trust 1999-D on the closing date.
The following chart represents the application of proceeds from investors and
the transfer of the receivables sold by Ford Credit:
[FORD MOTOR CREDIT COMPANY FLOW CHART DESCRIBING APPLICATION OF PROCEEDS FROM
INVESTORS AND THE TRANSFER OF RECEIVABLES SOLD BY FORD MOTOR CREDIT COMPANY]
<TABLE>
<S> <C> <C> <C> <C>
Ford Motor
Credit Company
Receivables
Proceeds
Receivables
Ford Credit Auto Ford Credit
Receivables Auto Owner
Two L.P. (Seller) Trust 1999-D
Notes and
Offered Certificates
Class A-1 Notes
Notes and and Proceeds
Proceeds Class A-2 Class C
Notes Certificates
Ford Financial Underwriters
Services, Inc.
Class A-1 Offered Notes
Notes and and Class C Proceeds
Proceeds Class A-2 Certificates
Notes
Investors Investors
</TABLE>
PROPERTY OF THE TRUST
The property of the trust will include the following:
-- the receivables and the collections on the receivables;
-- security interests in the vehicles financed by the receivables;
-- bank accounts;
-- rights to proceeds under insurance policies that cover the obligors
under the receivables or the vehicles financed by the receivables;
-- remedies for breaches of representations and warranties made by the
dealers that originated the receivables; and
-- other rights under documents relating to the receivables.
COMPOSITION OF THE RECEIVABLES
The composition of the receivables as of September 1, 1999 is as follows:
<TABLE>
<S> <C> <C>
-- Aggregate Principal
Balance................ $3,300,023,039.40
-- Number of Receivables.. 236,799
-- Average Principal
Balance................ $13,935.97
(Range).............. $250.21 to
$49,966.74
-- Average Original Amount
Financed............... $16,778.67
(Range).............. $700.00 to
$72,108.00
-- Weighted Average APR... 7.43%
(Range)(1)........... 1.90% to
20.00%
-- Weighted Average
Original Term.......... 54.9 months
(Range).............. 8 months to
60 months
-- Weighted Average
Remaining Term......... 46.1 months
(Range).............. 1 month to
58 months
-- Scheduled Weighted
Average Life(2)........ 2.06 years
</TABLE>
- ---------------
(1) Includes receivables with APRs below the interest rates on the notes and
certificates.
(2) From September 1, 1999, assuming (1) payments on all receivables are due on
the first day of the month, (2) all payments on the receivables are paid
when due, commencing one month from September 1, 1999 and (3) no prepayments
on the receivables are made.
S-8
<PAGE> 9
SERVICER OF THE RECEIVABLES
Ford Credit will be the servicer of the receivables. The trust will pay the
servicer a servicing fee on each payment date equal to 1/12 of 1% of the
principal balance of the receivables at the beginning of the previous month. In
addition to the servicing fee, the trust will also pay the servicer a
supplemental servicing fee equal to any late, prepayment, and other
administrative fees and expenses collected during each month and any
reinvestment earnings on any payments received on the receivables.
PRIORITY OF DISTRIBUTIONS
From collections on the receivables during the prior calendar month and amounts
withdrawn from the reserve account, the trust will pay the following amounts on
each payment date in the following order of priority, after reimbursement of
advances made in prior months by the servicer for payments due from obligors but
not received:
(1) Servicing Fee -- the servicing fee payable to the servicer;
(2) Class A Note Interest -- interest due on all the Class A Notes
ratably to each Class of the Class A Notes;
(3) First Allocation of Principal -- to the principal distribution
account, an amount, if any, equal to the excess of (x) the principal
balances of the Class A Notes over (y) the principal balance of the
receivables less the yield supplement overcollateralization amount
specified for such payment date on the schedule beginning on page
S-74 of this prospectus supplement;
(4) Class B Note Interest -- interest due on the Class B Notes to the
holders of the Class B Notes;
(5) Second Allocation of Principal -- to the principal distribution
account, an amount, if any, equal to the excess of (x) the principal
balances of the notes over (y) the principal balance of the
receivables less the yield supplement overcollateralization amount
specified for such payment date on the schedule beginning on page
S-74 of this prospectus supplement. This amount will be reduced by
any amount deposited in the principal distribution account in
accordance with clause (3) above;
(6) Class C Certificate Interest -- interest due on the Class C
Certificates to the holders of the Class C Certificates;
(7) Class D Certificate Interest -- interest due on the Class D
Certificates to the holders of the Class D Certificates;
(8) Reserve Account Deposit -- to the reserve account, the amount, if
any, necessary to reinstate the balance of the reserve account up to
its required amount;
(9) Regular Principal Allocation -- to the principal distribution
account, an amount equal to the greater of (1) the sum of the
principal balance of the Class A-1 Notes and the Class A-2 Notes and
(2) the excess of (x) the sum of the principal balances of the notes
and the certificates over (y) the principal balance of the
receivables less the specified overcollateralization amount and less
the yield supplement overcollateralization amount specified for such
payment date on the schedule beginning on page S-74 of this
prospectus supplement. This amount will be reduced by any amounts
previously deposited to the principal distribution account in
accordance with clauses (3) and (5) above; and
(10) any amounts remaining after the above distributions shall be paid to
the seller.
S-9
<PAGE> 10
DISTRIBUTIONS FROM THE PRINCIPAL DISTRIBUTION ACCOUNT
From deposits made to the principal distribution account, the trust will pay
principal on the notes and certificates in the following order of priority:
(1) to the Class A-1 Notes until they are paid in full;
(2) to the Class A-2 Notes until they are paid in full;
(3) to the Class A-3 Notes until they are paid in full;
(4) to the Class A-4 Notes until they are paid in full;
(5) to the Class A-5 Notes until they are paid in full;
(6) to the Class B Notes until they are paid in full;
(7) to the Class C Certificates until they are paid in full;
(8) to the Class D Certificates until they are paid in full; and
(9) to the seller, any funds remaining.
For a more detailed description of the priority of distributions and the
allocation of funds on each payment date, you should refer to "Description of
the Receivables Transfer and Servicing Agreements -- Distributions -- Monthly
Withdrawals from Collection Account" in this prospectus supplement.
CHANGE IN PRIORITY OF DISTRIBUTION UPON CERTAIN EVENTS OF DEFAULT AND INSOLVENCY
EVENTS
The order of priority for distributions will change upon the occurrence of the
events set forth below.
-- Following the occurrence of
1. a default in the payment of principal which has resulted in an acceleration
of the notes,
2. a default for five days or more in the payment of interest on any Class of
notes which has resulted in an acceleration of the notes,
3. an insolvency or a dissolution with respect to the trust which has resulted
in an acceleration of the notes, or
4. an insolvency or a dissolution with respect to the seller or Ford Credit
Auto Receivables Two, Inc., the general partner of the seller,
the trust will make no distributions of principal or interest on the Class B
Notes until payment in full of principal and interest on the Class A Notes and
no distributions of principal or interest on the Class C Certificates until
payment in full of principal and interest on the Class B Notes.
-- Following the occurrence of any other event of default which has resulted
in an acceleration of the notes, no change will be made in the priority of
payment of interest on the Class A Notes and the Class B Notes on each
payment date until a liquidation, if any, of the property of the trust.
However, the trust will pay the Class A Notes and the Class B Notes in full
before paying any principal or interest on the Class C Certificates or the
Class D Certificates.
For a more detailed description of events of default and rights of investors in
such circumstance, you should refer to "Description of Notes -- The Indenture --
Events of Default" and "-- Rights upon Event of Default" in the prospectus and
"Description of the Notes -- The Indenture -- Rights Upon Event of Default" in
this prospectus supplement. For a more detailed description of the priority of
distributions and allocation of funds following an event of default, you should
refer to "Descriptions of the Transfer and Servicing Agreements -- Distributions
- --Priority of Payments" in this prospectus supplement.
CREDIT ENHANCEMENT
The credit enhancement provides protection for the Class A Notes, the Class B
Notes and the Class C Certificates against losses and delays in payment. Losses
on the receivables or other shortfalls of cash flow will be covered by payments
on other receivables to the extent of any overcollateralization, by
S-10
<PAGE> 11
withdrawals from the reserve account and by allocation of available cash flow to
the more senior Classes of securities prior to more subordinate Classes.
The credit enhancement for the securities will be as follows:
Class A Notes Subordination of the
Class B Notes, the Class C Certificates and the Class D
Certificates; the reserve account; and
overcollateralization;
Class B Notes Subordination of the
Class C Certificates and the Class D Certificates; the
reserve account; and overcollateralization; and
Class C Subordination of the
Certificates Class D Certificates; the reserve account; and
overcollateralization.
Subordination of Principal and Interest
As long as the Class A Notes remain outstanding, (1) payments of interest on the
Class B Notes will be subordinated to payments of interest on the Class A Notes
and, in certain circumstances, allocations to principal and (2) payments of
principal on the Class B Notes will be subordinated to payments of interest and
principal on the Class A Notes.
As long as the Class A Notes or Class B Notes remain outstanding, (1) payments
of interest on the Class C Certificates will be subordinated to payments of
interest on the Class A Notes and the Class B Notes and, in certain
circumstances, allocations to principal and (2) payments of principal on the
Class C Certificates will be subordinated to payments of interest and principal
on the Class A Notes and the Class B Notes.
As long as the Class A Notes, Class B Notes, or Class C Certificates remain
outstanding, (1) payments of interest on the Class D Certificates will be
subordinated to payments of interest on the Class A Notes, the Class B Notes and
the Class C Certificates and, in certain circumstances, allocations to principal
and (2) payments of principal on the Class D Certificates will be subordinated
to payments of interest and principal on the Class A Notes, the Class B Notes
and the Class C Certificates.
For a more detailed discussion of the subordination of the notes and
certificates and the priority of distributions, including changes after certain
events of default, you should refer to "Description of the Certificates --
Priority of Notes", "Description of the Receivables Transfer and Servicing
Agreements -- Distributions -- Priority of Payments" and "Description of the
Notes -- The Indenture" in this prospectus supplement.
Reserve Account
On the closing date, the seller will deposit $16,500,115.20 to the reserve
account for the trust.
On each payment date, if collections on the receivables are insufficient to pay
the first seven items listed in "Priority of Distributions" above, the indenture
trustee will withdraw funds from the reserve account to pay such amounts.
On and after the final scheduled distribution date for any Class of securities,
if any principal amount of such Class remains outstanding, the indenture trustee
will withdraw funds from the reserve account to repay such Class of securities
in full.
The balance required to be on deposit in the reserve account will be the lesser
of (a) $16,500,115.20 and (b) the outstanding principal balance of the notes and
certificates.
On each payment date, the trust will deposit into the reserve account, to the
extent necessary to reinstate the required balance of the reserve account, any
collections on the receivables remaining after the first seven items listed in
"Priority of Distributions" above are satisfied.
On each payment date, the trust will distribute funds on deposit in the reserve
account in excess of the required balance in accordance with the priority of
payments.
S-11
<PAGE> 12
For a more detailed description of the deposits to and withdrawals from the
reserve account, you should refer to "Description of the Receivables Transfer
and Servicing Agreements -- Reserve Account" in this prospectus supplement.
Overcollateralization
The overcollateralization amount represents the amount by which the principal
balance of the receivables exceeds the principal balance of the notes and
certificates. Initially, the receivables balance will exceed the principal
balance of the notes and certificates by 3.18% of the receivables balance. The
application of funds according to item nine of "Priority of Distributions" above
is expected to result in the payment of more principal on the securities in most
months than the amount of principal paid on the receivables in the related
period. As the principal balance of the notes and certificates is paid down to a
target overcollateralization level further below the receivables balance,
additional credit enhancement is created.
The target level for the overcollateralization amount is structured as a dynamic
formula to absorb anticipated losses on the receivables and to compensate for
the low interest rates of some of the receivables. The target level for the
overcollateralization amount on each payment date will be the sum of:
(X) the excess of:
(1) the lesser of:
(a) the greatest of:
(A) $16,500,115.20,
(B) 1.00% of the outstanding principal balance of the
receivables,
and
(C) the aggregate principal balance of the receivables that are
delinquent 91 days or more and have not yet been liquidated,
and
(b) the outstanding principal balance of the notes and certificates,
over
(2) the balance required to be on deposit in the reserve account,
and
(Y) the yield supplement overcollateralization amount specified for the
applicable payment date on the schedule beginning on page S-74 of this
prospectus supplement.
For a more detailed description of the application of funds and the calculation
of the overcollateralization amount, you should refer to "Description of the
Receivables Transfer and Servicing Agreements -- Distributions -- Priority of
Payments" in this prospectus supplement.
S-12
<PAGE> 13
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase any of these securities.
THE ABSENCE OF A SECONDARY
MARKET COULD LIMIT YOUR
ABILITY TO RESELL YOUR NOTES
OR CERTIFICATES The absence of a secondary market for the notes
and the certificates could limit your ability to
resell them. This means that if in the future you
want to sell any of your notes or certificates
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 notes or certificates. There
currently is no secondary market for the notes or
the certificates. The underwriters for the
offered notes and the Class C Certificates expect
to make a market in such securities but will not
be obligated to do so. There is no assurance that
a secondary market for the notes and certificates
will develop. If a secondary market for the notes
and certificates does develop, it might end at
any time or it might not be sufficiently liquid
to enable you to resell any of your notes or
certificates.
PREPAYMENTS ON RECEIVABLES
WILL CAUSE PREPAYMENTS OF
YOUR NOTES OR CERTIFICATES
RESULTING IN REINVESTMENT
RISK TO YOU You may receive payment of principal on your
notes or certificates earlier than you expect for
the reasons set forth below. You may not be able
to reinvest any principal paid to you earlier
than you expected at a rate of return that is
equal to or greater than the rate of return on
your notes or certificates.
Prepayments on the receivables by the related
obligors and purchases of the receivables by the
seller and the servicer will shorten the life of
the securities to an extent that cannot be fully
predicted. The receivables included in the trust
may be prepaid, in full or in part, voluntarily
or as a result of defaults, theft of or damage to
the related vehicles or other reasons. Ford
Credit will be required to repurchase a
receivable from the seller, and the seller will
be required to repurchase a receivable from the
trust, if Ford Credit breached its
representations and warranties with respect to
the receivable in the purchase agreement with the
seller. Ford Credit, in its capacity as servicer,
also will be required to purchase a receivable
from the trust if it breaches its servicing
obligations with respect to the receivable and
the receivable is materially and adversely
affected by the breach. The servicer also will be
entitled to purchase all remaining receivables
from the trust once the aggregate principal
balance of the receivables is 10% or less of the
aggregate principal balance of the receivables as
of the date on which the receivables were
initially transferred to the trust.
S-13
<PAGE> 14
The rate of prepayments on the receivables may be
influenced by a variety of economic, social and
other factors in addition to those described in
the preceding paragraph.
Ford Credit does not generally maintain records
of the historical prepayment experience of its
portfolio of receivables. No prediction can be
made as to the actual prepayment rates which will
be experienced on the receivables. You will bear
all reinvestment risk resulting from prepayments
on the receivables and the corresponding
acceleration of payments on the securities.
The final payment of each Class of securities is
expected to occur prior to its final payment date
because of the prepayment and purchase
considerations set forth above. If sufficient
funds are not available to pay any Class of notes
in full on its final payment date, an event of
default will occur and final payment of such
Class of notes may or may not occur later than
such date.
For more information regarding the timing of
repayments of the notes and the certificates, see
"Maturity and Prepayment Considerations" in this
prospectus supplement and in the prospectus.
YOU MAY SUFFER LOSSES DUE TO
LIMITED ASSETS OF THE TRUST The only source of funds for payments on the
notes and certificates will be the assets of the
trust. You may suffer a loss on your notes or
certificates if the assets of the trust are
insufficient to pay fully the principal amount of
the securities. The securities are obligations
solely of the trust and will not be insured or
guaranteed by Ford Credit, including in its
capacity as servicer or originator of the
receivables, the indenture trustee, the owner
trustee or any other person or entity.
Consequently, you must rely for payment of your
securities upon payments on the receivables, and,
to the extent available, funds on deposit in the
reserve account.
The indenture authorizes the indenture trustee to
sell the receivables following an acceleration of
the maturity dates of the notes, subject to the
conditions set forth in the indenture, and the
trust agreement requires the indenture trustee to
sell the receivables following an Insolvency
Event or dissolution of the seller or the General
Partner unless a majority of each class of
securities disapproves of the sale. However, the
amount received by the indenture trustee upon
selling the receivables may be less than the
aggregate principal amount of the outstanding
notes and certificates. In such circumstance, the
principal amount of the notes and the principal
balance of the certificates may not be paid in
full.
YOU MAY SUFFER LOSSES DUE TO
RECEIVABLES WITH LOW APRS The receivables include receivables which have
APRs that are less than the interest rates on the
notes or certificates. Interest paid on the
higher coupon receivables compensates for the
lower coupon receivables to the extent such
interest is
S-14
<PAGE> 15
paid by the trust as principal on the notes or
certificates and additional overcollateralization
is created. Excessive prepayments on the higher
coupon receivables may adversely impact your
notes or certificates by reducing such interest
payments available.
The target level of overcollateralization takes
into account the mix of receivables by APR and
potential changes in that mix, but there is no
assurance that the target overcollateralization
will be achieved or will be sufficient to pay all
notes and certificates in full.
CLASS C CERTIFICATES AND
CLASS B NOTES ARE SUBJECT TO
GREATER CREDIT RISK BECAUSE
THE CLASS C CERTIFICATES ARE
SUBORDINATE TO THE CLASS A
NOTES AND THE CLASS B NOTES,
AND THE CLASS B NOTES ARE
SUBORDINATE TO THE CLASS A
NOTES The Class C Certificates bear greater credit risk
than the notes because payments of interest and
principal on the Class C Certificates are
subordinated, to the extent described below, to
payments of interest and principal on the Class A
Notes and the Class B Notes. The Class B Notes
bear greater risk than the Class A Notes because
payments of interest and principal on the Class B
Notes are subordinated, to the extent described
below, to payments of interest and principal on
the Class A Notes.
Interest payments on the Class B Notes on each
payment date will be subordinated to servicing
fees due to the servicer, interest payments on
the Class A Notes and an allocation of principal
payments to the Class A Notes to the extent the
sum of the principal balances of the Class A
Notes exceeds the receivables balance. Interest
payments on the Class C Certificates on each
payment date will be subordinated to servicing
fees due to the servicer, interest payments on
the Class A Notes and Class B Notes and an
allocation of principal payments to the Class A
Notes and Class B Notes to the extent the sum of
the principal balances of the Class A Notes and
the Class B Notes exceeds the receivables balance
(after giving effect to the allocation described
in the preceding sentence).
For a more detailed description of such principal
payment circumstances, see "Description of the
Receivables Transfer and Servicing
Agreements -- Distributions -- Priority of
Payments" in this prospectus supplement. The
payment sequence changes, however, following
certain events of default.
Principal payments on the Class B Notes will be
fully subordinated to principal payments on the
Class A Notes. No principal will be paid on the
Class B Notes until the Class A Notes have been
paid in full. Principal payments on the
S-15
<PAGE> 16
Class C Certificates will be fully subordinated
to principal payments on the Class B Notes. No
principal will be paid on the Class C
Certificates until the Class B Notes have been
paid in full.
PREPAYMENTS, POTENTIAL LOSSES
AND CHANGE IN ORDER OF
PRIORITY OF PRINCIPAL
PAYMENTS MAY RESULT FROM AN
EVENT OF DEFAULT UNDER THE
INDENTURE OR CERTAIN EVENTS
OF INSOLVENCY An Event of Default under the indenture may
result in payments on the notes being
accelerated. As a result --
-- you may suffer losses on your notes or
certificates if the assets of the trust are
insufficient to pay the amounts owed on the
notes or certificates;
-- payments on your notes or certificates may
be delayed until more senior Classes of
notes are repaid; and
-- your notes or certificates may be repaid
earlier than as scheduled, which may require
you to reinvest your principal at a lower
rate of return.
NON-PAYMENT OF INTEREST OR PRINCIPAL ON THE NOTES
OR INSOLVENCY OR DISSOLUTION OF THE TRUST, THE
SELLER OR THE GENERAL PARTNER MAY DELAY INTEREST
PAYMENTS ON THE CLASS B NOTES AND THE
CERTIFICATES. The trust will not make any
distributions of principal or interest on the
Class B Notes or on the certificates until
payment in full of principal and interest on the
Class A Notes following --
-- an Event of Default under the indenture
relating to the payment of principal on any
note or the payment of interest on the Class
A Notes which has resulted in acceleration
of the notes;
-- an Event of Default under the indenture
relating to an Insolvency Event or a
dissolution with respect to the trust which
has resulted in an acceleration of the
notes; or
-- an Insolvency Event or a dissolution with
respect to the seller or Ford Credit Auto
Receivables Two, Inc., the general partner
of the seller.
This may result in a delay or default in paying
interest on the Class B Notes or the
certificates.
ANY EVENT OF DEFAULT MAY DELAY PAYMENTS ON THE
CERTIFICATES. Following the occurrence of any
Event of Default which has resulted in
acceleration of the notes, the trust will not
make any distribution of principal or interest on
the certificates until the notes are paid in
full.
INDENTURE TRUSTEE MAY SELL RECEIVABLES ON AN
EVENT OF DEFAULT. If the maturity dates of the
notes are accelerated following an Event of
Default under the indenture, the indenture
trustee, under certain circumstances, may sell
the receivables and prepay the notes, and after
the notes are
S-16
<PAGE> 17
paid in full, prepay the certificates. Upon a
sale of the receivables following an Event of
Default:
-- no amounts will be distributed to the Class
B noteholders until interest and principal
due on the Class A Notes has been paid in
full; and
-- no amounts will be distributed to the Class
C certificateholders until all interest and
principal due on the Class B Notes has been
paid in full.
So long as the Class A Notes are the Controlling
Class, the holders of the Class B Notes will not
have any right to vote on waivers of an Event of
Default or to direct the indenture trustee to
accelerate the notes following an Event of
Default and will have the right to vote on the
sale of the receivables following an Event of
Default and acceleration in only limited
circumstances.
See "Description of the Notes -- The
Indenture -- Rights Upon Events of Default" in
this prospectus supplement and in the prospectus.
YOU MAY SUFFER LOSSES BECAUSE
YOU HAVE LIMITED CONTROL OVER
ACTIONS OF THE TRUST AND
CONFLICTS BETWEEN CLASSES OF
NOTES MAY OCCUR Because the trust has pledged the property of the
trust to the indenture trustee to secure payment
on the notes, the indenture trustee may, and at
the direction of the specified percentage of the
Controlling Class (which will be the Class A
Notes for so long as any Class A Notes are
outstanding) will, take one or more of the other
actions specified in the indenture relating to
the property of the trust, including a sale of
the receivables. Furthermore, the holders of a
majority of the Class A Notes, or the indenture
trustee acting on behalf of the holders of Class
A Notes, under certain circumstances, has the
right to waive Events of Servicing Termination or
to terminate the servicer as the servicer of the
receivables without consideration of the effect
such waiver or termination would have on the
holders of Class B Notes or certificates. The
holders of Class B Notes will have only limited
rights to direct remedies under the indenture and
will not have the ability to waive Events of
Servicing Termination or to remove the servicer
until the Class A Notes have been paid in full.
The holders of certificates will not have the
ability to waive any such events or to remove the
servicer until the notes have been paid in full.
S-17
<PAGE> 18
See "Description of the Receivables Transfer and
Servicing Agreements -- Events of Servicing
Termination" in the prospectus and "-- Rights
Upon Event of Servicing Termination" and
"-- Waiver of Past Events of Servicing
Termination" in this prospectus supplement and in
the prospectus.
GEOGRAPHIC CONCENTRATION MAY
RESULT IN MORE RISK TO YOU As of September 1, 1999, Ford Credit's records
indicate that the billing addresses of the
obligors of the receivables were recorded as
being in the following states:
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE
PRINCIPAL
BALANCE
-------------
<S> <C>
Texas..................................... 11.69%
California................................ 10.12%
Florida................................... 8.83%
Illinois.................................. 5.05%
</TABLE>
No other state, by billing addresses, constituted
more than 5% of the balance of the receivables as
of September 1, 1999. Economic conditions or
other factors affecting these states in
particular could adversely affect the
delinquency, credit loss or repossession
experience of the trust.
POTENTIAL DELAYS IN PAYMENTS
ON SECURITIES DUE TO
POTENTIAL COMPUTER PROGRAM
PROBLEMS BEGINNING IN THE
YEAR 2000 An issue affecting Ford Credit and others is the
inability of many computer systems and
applications to process the year 2000 and beyond
("Y2K"). To address this problem, in 1996, Ford
Credit initiated a global Y2K program to manage
Ford Credit's overall Y2K compliance effort. As
part of this program, Ford Credit established a
global Y2K Program Office to coordinate Ford
Credit's compliance efforts. Ford Credit
participates closely with Ford's Y2K Central
Program Office and the Ford Y2K Steering
Committee. Ford's Y2K program has been certified
by the Information Technology Association of
America as meeting its Y2K best practices
standards.
The most reasonably likely worst case scenario
for Ford Credit with respect to the Y2K problem
as it relates to the securities is the failure of
an external alliance, particularly another
financial institution or energy supplier to that
financial institution, to be Y2K compliant. This
could result in delay in collecting receivables,
which in turn could result in a delay in making
payments on the notes and certificates.
S-18
<PAGE> 19
Ford Credit has established a Y2K business
resumption planning committee to evaluate
business disruption scenarios, coordinate the
establishment of Y2K contingency plans, and
identify and implement preemptive strategies.
Detailed contingency plans for critical business
processes have been developed. Additionally, a
Global Response Center is being launched as a
communications hub for the most current Y2K
status during the millennium rollover period. The
trust will not be responsible for paying any Y2K
compliance costs incurred by Ford Motor Company
or by Ford Credit.
S-19
<PAGE> 20
THE TRUST
LIMITED PURPOSE AND LIMITED ASSETS
Ford Credit Auto Owner Trust 1999-D is a business trust formed under the
laws of the State of Delaware by a trust agreement dated as of September 1, 1999
among Ford Credit Auto Receivables Two L.P., the Owner Trustee and the Delaware
Trustee. The trust will not engage in any activity other than:
-- acquiring, holding and managing the assets of the trust, including the
receivables, and the proceeds of those assets;
-- issuing the notes and the certificates;
-- making payments on the notes and the certificates; and
-- engaging in other activities that are necessary, suitable or
convenient to accomplish any of the other purposes listed above or are
in any way connected with those activities.
The trust will be capitalized by the issuance of the notes and the
certificates. The Class D Certificates initially will be retained by the seller
and thereafter may be sold to third party investors. The proceeds from the
issuance of the notes and the certificates will be used (1) to purchase the
receivables from the seller under a sale and servicing agreement to be dated as
of September 1, 1999 among the trust, the seller and the servicer, and (2) to
fund the initial deposit to the Reserve Account.
If the protection provided to the holders of record of the notes by the
subordination of the certificates and to the noteholders and the
certificateholders by the Reserve Account is insufficient, the trust would have
to look principally to the obligors on the receivables and the proceeds from the
repossession and sale of the financed vehicles which secure defaulted
receivables. In that event, various factors, such as the trust not having
perfected security interests in the financed vehicles securing the receivables
in all states, may affect the servicer's ability to repossess and sell the
collateral securing the receivables, and thus may reduce the proceeds which the
trust can distribute to the noteholders and the certificateholders. See
"Description of the Receivables Transfer and Servicing
Agreements -- Distributions" and "-- Reserve Account" in this prospectus
supplement and "Some Important Legal Issues Relating to the Receivables" in the
attached prospectus.
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the trust as of the
Closing Date, as if the issuance and sale of the notes and the certificates had
taken place on such date:
<TABLE>
<CAPTION>
<S> <C>
Class A-1 Notes............................................. $ 153,000,000
Class A-2 Notes............................................. 449,000,000
Class A-3 Notes............................................. 1,370,000,000
Class A-4 Notes............................................. 400,000,000
Class A-5 Notes............................................. 588,189,000
Class B Notes............................................... 109,640,000
Class C Certificates........................................ 62,650,000
Class D Certificates........................................ 62,650,000
--------------
Total.................................................. $3,195,129,000
==============
</TABLE>
S-20
<PAGE> 21
THE OWNER TRUSTEE AND THE DELAWARE TRUSTEE
The Bank of New York is the owner trustee under the trust agreement. The
Bank of New York is a New York banking corporation and its principal offices are
located at One Wall Street, New York, New York. The Bank of New York (Delaware)
is the Delaware Trustee under the trust agreement. The Bank of New York
(Delaware) is a Delaware banking corporation and its principal offices are
located at White Clay Center, Route 273, Newark, Delaware. The seller and its
affiliates may maintain normal commercial banking relations with the owner
trustee, the Delaware Trustee, their parents and their affiliates.
THE RECEIVABLES POOL
The trust will own a pool of receivables consisting of motor vehicle retail
installment sale contracts secured by security interests in the motor vehicles
financed by those contracts. The Receivables Pool will consist of the
receivables which the seller transfers to the trust on the Closing Date. The
receivables will include payments on the receivables which are made on or after
the Cutoff Date.
CRITERIA APPLICABLE TO SELECTION OF RECEIVABLES. Ford Credit purchased
88.04% of the receivables (by principal balance) from dealers in the ordinary
course of its business in accordance with Ford Credit's underwriting standards.
PRIMUS purchased 11.96% of the receivables (by principal balance) from dealers
in the ordinary course of its business in accordance with PRIMUS' underwriting
standards which are substantially identical to Ford Credit's underwriting
standards. Prior to PRIMUS becoming a part of Ford Credit, PRIMUS sold all
receivables it purchased to Ford Credit immediately after their purchase.
The receivables were selected from Ford Credit's and PRIMUS's portfolio for
inclusion in the Receivables Pool by several criteria, some of which are set
forth in the prospectus under "The Receivables Pools." These criteria include
the requirement that each receivable:
-- provides for level monthly payments which provide interest at an APR
of not less than 1.90% and not greater than 20.00%;
-- will fully amortize the amount financed over an original term no
greater than 60 months;
-- is not more than 30 days past due as of the Cutoff Date and has never
been extended;
-- was originated on or after September 1, 1997.
The receivables were selected at random from Ford Credit's and PRIMUS's
portfolio of retail installment sale contracts for new and used vehicles, in
each case meeting the criteria described above and in the prospectus. No
selection procedures believed to be adverse to the noteholders or the
certificateholders were utilized in selecting the receivables. No receivable has
a scheduled maturity later than June 29, 2004.
With respect to the expected prepayment experience of the Receivables Pool,
Ford Credit --
-- believes that the actual rate of prepayments will result in a
substantially shorter weighted average life than the scheduled
weighted average life; and
-- estimates that the actual weighted average life of its portfolio of
U.S. retail installment contracts for new and used vehicles ranges
between 60% and 70% of their scheduled weighted average life.
See "Maturity and Prepayment Considerations" in this prospectus supplement and
in the prospectus.
The geographical distribution and distribution by average APR of the
Receivables Pool as of the Cutoff Date are set forth in the following tables.
S-21
<PAGE> 22
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE PRINCIPAL
STATE(1) BALANCE(2)
-------- -------------------
<S> <C>
Alabama(3)............ 0.00%
Alaska................ 0.17%
Arizona............... 1.56%
Arkansas.............. 1.41%
California............ 10.12%
Colorado.............. 1.32%
Connecticut........... 1.56%
Delaware.............. 0.18%
District of
Columbia............ 0.10%
Florida............... 8.83%
Georgia............... 4.52%
Hawaii................ 0.26%
Idaho................. 0.19%
Illinois.............. 5.05%
Indiana............... 1.72%
Iowa.................. 0.81%
Kansas................ 1.25%
Kentucky.............. 1.12%
Louisiana............. 2.02%
Maine................. 0.42%
Maryland.............. 2.35%
Massachusetts......... 2.70%
Michigan.............. 4.39%
Minnesota............. 1.46%
Mississippi........... 1.15%
Missouri.............. 3.33%
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE PRINCIPAL
STATE(1) BALANCE(2)
-------- -------------------
<S> <C>
Montana............... 0.16%
Nebraska.............. 0.39%
Nevada................ 0.69%
New Hampshire......... 0.73%
New Jersey............ 2.63%
New Mexico............ 0.60%
New York.............. 3.86%
North Carolina........ 3.90%
North Dakota.......... 0.12%
Ohio.................. 2.97%
Oklahoma.............. 1.40%
Oregon................ 1.09%
Pennsylvania(3)....... 0.00%
Rhode Island.......... 0.25%
South Carolina........ 1.66%
South Dakota.......... 0.16%
Tennessee............. 2.49%
Texas................. 11.69%
Utah.................. 0.31%
Vermont............... 0.33%
Virginia.............. 2.74%
Washington............ 1.68%
West Virginia......... 0.57%
Wisconsin............. 1.46%
Wyoming............... 0.14%
</TABLE>
- ---------------
(1) Based on the billing addresses of the obligors on the receivables as of the
Cutoff Date.
(2) May not add to 100% due to rounding.
(3) Alabama and Pennsylvania excluded for administrative reasons.
S-22
<PAGE> 23
DISTRIBUTION BY APR OF THE RECEIVABLES POOL
AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE
NUMBER OF AGGREGATE PRINCIPAL
APR RANGE RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
- --------- ----------- ----------------- -------------
<S> <C> <C> <C>
1.90 to 1.99%.............................. 13,358 $ 171,879,759.08 5.21%
2.00 to 2.49............................... 2 7,084.62 0.00%
2.50 to 2.99............................... 28,014 422,114,862.30 12.79%
3.00 to 3.49............................... 0 0.00 0.00%
3.50 to 3.99............................... 22,151 340,746,867.61 10.33%
4.00 to 4.49............................... 2 20,978.48 0.00%
4.50 to 4.99............................... 19,177 286,322,730.43 8.68%
5.00 to 5.49............................... 5 54,935.22 0.00%
5.50 to 5.99............................... 27,333 458,878,954.52 13.91%
6.00 to 6.49............................... 177 2,720,860.10 0.08%
6.50 to 6.99............................... 10,158 165,345,184.07 5.01%
7.00 to 7.49............................... 3,021 43,513,685.62 1.32%
7.50 to 7.99............................... 12,093 189,784,000.45 5.75%
8.00 to 8.49............................... 5,828 77,528,695.84 2.35%
8.50 to 8.99............................... 8,762 118,176,818.94 3.58%
9.00 to 9.49............................... 4,468 58,489,309.29 1.77%
9.50 to 9.99............................... 14,091 190,760,711.83 5.78%
10.00 to 10.49............................. 4,256 51,082,797.14 1.55%
10.50 to 10.99............................. 8,285 105,202,766.92 3.19%
11.00 to 11.49............................. 2,892 34,712,739.58 1.05%
11.50 to 11.99............................. 7,775 100,326,571.84 3.04%
12.00 to 12.49............................. 3,267 37,835,533.97 1.15%
12.50 to 12.99............................. 6,942 80,985,326.84 2.45%
13.00 to 13.49............................. 2,589 28,970,058.53 0.88%
13.50 to 13.99............................. 5,126 56,442,664.47 1.71%
14.00 to 14.49............................. 2,068 22,334,558.83 0.68%
14.50 to 14.99............................. 3,945 42,368,874.89 1.28%
15.00 to 15.49............................. 2,055 21,693,045.10 0.66%
15.50 to 15.99............................. 3,043 30,326,461.03 0.92%
16.00 to 16.49............................. 1,359 13,881,047.05 0.42%
16.50 to 16.99............................. 2,555 25,716,007.24 0.78%
17.00 to 17.49............................. 1,732 18,401,352.92 0.56%
17.50 to 17.99............................. 2,028 21,032,688.50 0.64%
18.00 to 18.49............................. 2,664 29,062,942.90 0.88%
18.50 to 18.99............................. 1,964 19,314,563.32 0.59%
19.00 to 19.49............................. 1,065 9,924,503.66 0.30%
19.50 to 19.99............................. 2,059 19,662,594.28 0.60%
20.00...................................... 490 4,400,501.99 0.13%
------- ----------------- ------
Totals................................ 236,799 $3,300,023,039.40 100.00%
======= ================= ======
</TABLE>
- ---------------
(1) May not add to 100.00% due to rounding.
S-23
<PAGE> 24
The receivables have the characteristics indicated below.
<TABLE>
<CAPTION>
PERCENTAGE
BY AGGREGATE
CHARACTERISTIC PRINCIPAL BALANCE
- -------------- -----------------
<S> <C>
Purchased by Ford Credit.................................... 88.04%
Purchased by PRIMUS......................................... 11.96%
Simple Interest Receivables................................. 99.05%
Actuarial Receivables....................................... 0.95%
Vehicles financed at new vehicle rates by principal
balance................................................... 70.00%
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE
BY AGGREGATE
NUMBER OF
RECEIVABLES
------------
<S> <C>
Number of vehicles financed at new vehicle rates............ 62.82%
</TABLE>
See "The Receivables Pools" in the prospectus for a further description of
the characteristics of Actuarial Receivables and Simple Interest Receivables.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Prepayments on automotive receivables can be measured relative to a
prepayment standard or model. The model used in this prospectus supplement, the
Absolute Prepayment Model, represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool of receivables. ABS
further assumes that all the receivables are the same size and amortize at the
same rate and that each receivable in each month of its life will either be paid
as scheduled or be prepaid in full. For example, in a pool of receivables
originally containing 10,000 receivables, a 1% ABS rate means that 100
receivables 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 assets, including the receivables.
The rate of payment of principal of each Class of notes and each Class of
certificates will depend on the rate of payment (including prepayments) of the
principal balance of the receivables. For this reason, final payment of any
Class of notes and the final distribution in respect of either Class of
certificates could occur significantly earlier than the respective Final
Scheduled Distribution Dates. The noteholders and the certificateholders will
exclusively bear any reinvestment risk associated with early payment of the
notes and the certificates, respectively.
The table captioned "Percent of Initial Note Principal Amount or Initial
Certificate Balance at Various ABS Percentages" has been prepared on the basis
of the characteristics of the receivables. The ABS Table assumes that --
-- the receivables prepay in full at the specified constant percentage of
ABS monthly, with no defaults, losses or repurchases;
-- each scheduled monthly payment on the receivables is made on the last
day of each month and each month has 30 days;
-- payments on the notes and distributions on the certificates are made
on each Distribution Date (and each such date is assumed to be the
fifteenth day of each applicable month);
-- the balance in the Reserve Account on each Distribution Date is equal
to the Specified Reserve Balance; and
-- the servicer exercises its option to purchase the receivables on the
earliest Distribution Date on which it is permitted to do so, as
described in this prospectus supplement.
S-24
<PAGE> 25
The pools have an assumed cutoff date of September 1, 1999. The ABS Table
indicates the projected weighted average life of each Class of notes and the
Class C Certificates and sets forth the percent of the initial principal amount
of each Class of notes and the percent of the initial Certificate Balance of the
Class C Certificates that is projected to be outstanding after each of the
Distribution Dates shown at various constant ABS percentages.
The ABS Table also assumes that the receivables have been aggregated into
hypothetical pools with all of the receivables within each such pool having the
following characteristics and that the level scheduled monthly payment for each
of the pools (which is based on its aggregate principal balance, APR, original
term to maturity and remaining term to maturity as of the Cutoff Date) will be
such that each pool will be fully amortized by the end of its remaining term to
maturity.
<TABLE>
<CAPTION>
ORIGINAL TERM REMAINING TERM
AGGREGATE TO MATURITY TO MATURITY
POOL PRINCIPAL BALANCE APR (IN MONTHS) (IN MONTHS)
- ---- ----------------- --- ------------- --------------
<S> <C> <C> <C> <C>
1............................ 115,873,552.76 2.594% 36 22
2............................ 69,692,728.19 3.315% 35 29
3............................ 271,281,534.82 3.715% 48 33
4............................ 40,756,648.56 3.766% 35 32
5............................ 137,615,286.66 3.907% 48 42
6............................ 103,179,321.31 4.157% 48 44
7............................ 296,731,797.54 5.011% 60 54
8............................ 657,282,278.64 5.172% 60 46
9............................ 261,587,230.53 5.303% 60 56
10........................... 364,545,430.92 11.293% 60 54
11........................... 307,842,942.56 11.431% 60 47
12........................... 388,034,318.80 11.545% 60 56
13........................... 25,941,279.50 11.743% 34 21
14........................... 27,200,919.29 11.989% 33 27
15........................... 71,457,081.59 12.002% 47 34
16........................... 63,597,144.60 12.124% 47 41
17........................... 29,902,984.69 12.431% 33 29
18........................... 67,500,558.44 12.511% 47 44
-----------------
$3,300,023,039.40
=================
</TABLE>
The actual characteristics and performance of the receivables will differ
from the assumptions used in constructing the ABS Table. 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 the receivables will prepay at a constant
level of ABS until maturity or that all of the receivables will prepay at the
same level of ABS. Moreover, the diverse terms of receivables within each of the
hypothetical pools could produce slower or faster principal distributions than
indicated in the ABS Table at the various constant percentages of ABS specified,
even if the original and remaining terms to maturity of the receivables are as
assumed. Any difference between such assumptions and the actual characteristics
and performance of the receivables, or actual prepayment experience, will affect
the percentages of initial amounts outstanding over time and the weighted
average lives of each Class of notes and the Class C Certificates.
S-25
<PAGE> 26
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT OR
INITIAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES
--------------------------------- --------------------------------- ---------------------------------
DISTRIBUTION DATE 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8%
----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/23/99.............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/99............. 41.88 29.69 16.14 7.22 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
11/15/99............. 0.00 0.00 0.00 0.00 95.55 87.42 78.38 72.43 100.00 100.00 100.00 100.00
12/15/99............. 0.00 0.00 0.00 0.00 76.89 64.96 51.70 42.97 100.00 100.00 100.00 100.00
1/15/00.............. 0.00 0.00 0.00 0.00 58.32 42.76 25.48 14.11 100.00 100.00 100.00 100.00
2/15/00.............. 0.00 0.00 0.00 0.00 39.82 20.82 0.00 0.00 100.00 100.00 99.91 95.36
3/15/00.............. 0.00 0.00 0.00 0.00 21.38 0.00 0.00 0.00 100.00 99.71 91.61 86.28
4/15/00.............. 0.00 0.00 0.00 0.00 3.03 0.00 0.00 0.00 100.00 92.69 83.47 77.40
5/15/00.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 95.00 85.75 75.48 68.72
6/15/00.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 89.04 78.92 67.76 60.43
7/15/00.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 83.58 72.70 60.63 52.70
8/15/00.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 78.20 66.56 53.65 45.17
9/15/00.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 72.83 60.49 46.81 37.83
10/15/00............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 67.47 54.50 40.11 30.67
11/15/00............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 62.13 48.58 33.57 23.70
12/15/00............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 56.81 42.74 27.17 16.86
1/15/01.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 51.50 36.99 20.87 10.23
2/15/01.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 46.20 31.31 14.70 3.79
3/15/01.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 40.92 25.70 8.69 0.00
4/15/01.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 35.66 20.12 2.84 0.00
5/15/01.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 30.41 14.63 0.00 0.00
6/15/01.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 25.16 9.21 0.00 0.00
7/15/01.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 19.97 3.96 0.00 0.00
8/15/01.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 15.15 0.00 0.00 0.00
9/15/01.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10.34 0.00 0.00 0.00
10/15/01............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.55 0.00 0.00 0.00
11/15/01............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.77 0.00 0.00 0.00
12/15/01............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1/15/02.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2/15/02.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
3/15/02.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
4/15/02.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
5/15/02.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
6/15/02.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
7/15/02.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
8/15/02.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
9/15/02.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
10/15/02............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
11/15/02............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
12/15/02............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1/15/03.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2/15/03.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
3/15/03.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
4/15/03.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life
(years)(1)......... 0.10 0.09 0.07 0.07 0.39 0.32 0.27 0.25 1.38 1.18 1.00 0.90
</TABLE>
- ---------------
(1) 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.
THE ABS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-26
<PAGE> 27
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT OR
INITIAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-4 NOTES CLASS A-5 NOTES
--------------------------------- ---------------------------------
DISTRIBUTION DATE 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8%
----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
9/23/99........................................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/99....................................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
11/15/99....................................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
12/15/99....................................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
1/15/00........................................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2/15/00........................................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
3/15/00........................................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
4/15/00........................................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
5/15/00........................................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
6/15/00........................................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
7/15/00........................................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
8/15/00........................................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
9/15/00........................................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/00....................................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
11/15/00....................................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
12/15/00....................................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
1/15/01........................................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2/15/01........................................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
3/15/01........................................ 100.00 100.00 100.00 91.63 100.00 100.00 100.00 100.00
4/15/01........................................ 100.00 100.00 100.00 70.98 100.00 100.00 100.00 100.00
5/15/01........................................ 100.00 100.00 90.22 51.03 100.00 100.00 100.00 100.00
6/15/01........................................ 100.00 100.00 71.25 31.80 100.00 100.00 100.00 100.00
7/15/01........................................ 100.00 100.00 53.03 13.46 100.00 100.00 100.00 100.00
8/15/01........................................ 100.00 96.85 36.12 0.00 100.00 100.00 100.00 97.57
9/15/01........................................ 100.00 80.40 19.70 0.00 100.00 100.00 100.00 86.43
10/15/01....................................... 100.00 64.21 3.78 0.00 100.00 100.00 100.00 75.74
11/15/01....................................... 100.00 48.28 0.00 0.00 100.00 100.00 92.10 65.51
12/15/01....................................... 86.33 32.63 0.00 0.00 100.00 100.00 81.97 55.74
1/15/02........................................ 70.31 17.45 0.00 0.00 100.00 100.00 72.30 46.51
2/15/02........................................ 54.35 2.54 0.00 0.00 100.00 100.00 62.99 37.75
3/15/02........................................ 39.23 0.00 0.00 0.00 100.00 92.21 54.35 29.71
4/15/02........................................ 24.16 0.00 0.00 0.00 100.00 82.88 46.06 22.12
5/15/02........................................ 9.15 0.00 0.00 0.00 100.00 73.73 38.11 14.99
6/15/02........................................ 0.00 0.00 0.00 0.00 96.24 64.91 30.63 0.00
7/15/02........................................ 0.00 0.00 0.00 0.00 87.50 57.16 23.99 0.00
8/15/02........................................ 0.00 0.00 0.00 0.00 79.13 49.83 17.80 0.00
9/15/02........................................ 0.00 0.00 0.00 0.00 70.79 42.64 0.00 0.00
10/15/02....................................... 0.00 0.00 0.00 0.00 62.48 35.60 0.00 0.00
11/15/02....................................... 0.00 0.00 0.00 0.00 54.19 28.72 0.00 0.00
12/15/02....................................... 0.00 0.00 0.00 0.00 45.94 22.00 0.00 0.00
1/15/03........................................ 0.00 0.00 0.00 0.00 37.72 15.43 0.00 0.00
2/15/03........................................ 0.00 0.00 0.00 0.00 29.53 0.00 0.00 0.00
3/15/03........................................ 0.00 0.00 0.00 0.00 21.63 0.00 0.00 0.00
4/15/03........................................ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life
(years)(1)................................... 2.46 2.18 1.87 1.69 3.22 2.95 2.58 2.34
</TABLE>
- ---------------
(1) 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.
THE ABS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-27
<PAGE> 28
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT OR
INITIAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS B NOTES CLASS C CERTIFICATES
------------------------------------ ------------------------------------
DISTRIBUTION DATE 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8%
----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
9/23/99............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/99............................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
11/15/99............................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
12/15/99............................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
1/15/00............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2/15/00............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
3/15/00............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
4/15/00............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
5/15/00............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
6/15/00............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
7/15/00............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
8/15/00............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
9/15/00............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/00............................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
11/15/00............................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
12/15/00............................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
1/15/01............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2/15/01............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
3/15/01............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
4/15/01............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
5/15/01............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
6/15/01............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
7/15/01............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
8/15/01............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
9/15/01............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/01............................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
11/15/01............................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
12/15/01............................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
1/15/02............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2/15/02............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
3/15/02............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
4/15/02............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
5/15/02............................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
6/15/02............................. 100.00 100.00 100.00 0.00 100.00 100.00 100.00 0.00
7/15/02............................. 100.00 100.00 100.00 0.00 100.00 100.00 100.00 0.00
8/15/02............................. 100.00 100.00 100.00 0.00 100.00 100.00 100.00 0.00
9/15/02............................. 100.00 100.00 0.00 0.00 100.00 100.00 0.00 0.00
10/15/02............................ 100.00 100.00 0.00 0.00 100.00 100.00 0.00 0.00
11/15/02............................ 100.00 100.00 0.00 0.00 100.00 100.00 0.00 0.00
12/15/02............................ 100.00 100.00 0.00 0.00 100.00 100.00 0.00 0.00
1/15/03............................. 100.00 100.00 0.00 0.00 100.00 100.00 0.00 0.00
2/15/03............................. 100.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
3/15/03............................. 100.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00
4/15/03............................. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life
(years)(1)(2)..................... 3.56 3.39 2.98 2.73 3.56 3.39 2.98 2.73
</TABLE>
- ---------------
(1) 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.
(2) The weighted average life of a certificate is determined by (a) multiplying
the amount of each distribution in respect of the Certificate Balance of a
certificate by the number of years from the date of the issuance of the
certificate to the related Distribution Date, (b) adding the results and (c)
dividing the sum by the original Certificate Balance of the certificate.
THE ABS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-28
<PAGE> 29
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES OF FORD CREDIT'S AND PRIMUS'S
PORTFOLIOS
Set forth below is certain information concerning the combined experience
of Ford Credit and PRIMUS with their portfolios 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). There is no assurance
that the delinquency, repossession or loss experience of the receivables will be
comparable to Ford Credit's and PRIMUS's experience shown in the following
tables or that the general downward trend commencing in 1998 and continuing
during the first six months of 1999 will continue in the future.
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Average Number of Contracts Outstanding
During the Period...................... 4,833,211 4,189,348 4,359,281 4,000,754 3,917,263 3,655,309 3,595,861
Average Daily Delinquencies as a Percent
of Average Contracts Outstanding
31-60 Days(2).......................... 2.26% 2.57% 2.53% 2.80% 2.49% 2.17% 2.03%
61-90 Days(2).......................... 0.30% 0.34% 0.32% 0.32% 0.28% 0.23% 0.15%
Over 90 Days(3)........................ 0.13% 0.14% 0.14% 0.14% 0.09% 0.05% 0.03%
</TABLE>
- ---------------
(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.
(2) Delinquencies represent the daily average number of contracts delinquent.
(3) Delinquencies represent the average monthly end-of-period number of
contracts delinquent.
CREDIT LOSS AND REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Average Portfolio Outstanding During
the Period (Millions) Gross.......... $63,019 $50,552 $54,106 $46,020 $43,760 $38,028 $35,639
Net.................................. $55,671 $43,703 $47,075 $39,288 $36,862 $32,134 $30,253
Repossessions as a Percent of Average
Number of Contracts Outstanding...... 2.26% 2.75% 2.65% 3.08% 3.07% 2.37% 2.13%
Net Losses as a Percent of Gross
Liquidations(2).................... 1.83% 2.29% 2.27% 2.61% 2.31% 1.45% 1.06%
Net Losses as a Percent of Average
Gross Portfolio Outstanding(2)..... 0.92% 1.22% 1.16% 1.44% 1.31% 0.83% 0.61%
Net Losses as a Percent of Average
Net Portfolio Outstanding(2)....... 1.05% 1.41% 1.34% 1.69% 1.56% 0.98% 0.72%
</TABLE>
- ---------------
(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.
(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.
S-29
<PAGE> 30
HOW YOU CAN COMPUTE YOUR PORTION OF THE AMOUNT
OUTSTANDING ON THE NOTES OR CERTIFICATES
The servicer will provide to you in each report which it delivers to you a
factor which you can use to compute your portion of the principal amount
outstanding on the notes or certificates. We have described these factors
separately for the notes and the certificates below.
NOTES
HOW THE SERVICER COMPUTES THE FACTOR FOR YOUR CLASS OF NOTES. The servicer
will compute a separate factor for each Class of notes. The factor for each
Class of notes will be a seven-digit decimal which the servicer will compute
prior to each distribution with respect to such Class of notes indicating the
remaining outstanding principal amount of such Class of notes, as of the
applicable Distribution Date. The servicer will compute the factor after giving
effect to payments to be made on such Distribution Date, as a fraction of the
initial outstanding principal amount of such Class of notes.
YOUR PORTION OF THE OUTSTANDING AMOUNT OF THE NOTES. For each note you own,
your portion of that Class of notes is the product of --
-- the original denomination of your note; and
-- the factor relating to your class of notes computed by the servicer in
the manner described above.
CERTIFICATES
HOW THE SERVICER COMPUTES THE FACTOR FOR YOUR CLASS OF CERTIFICATES. The
servicer will compute a separate factor for each Class of certificates. The
factor for each Class of certificates will be a seven-digit decimal which the
servicer will compute prior to each distribution with respect to such Class of
certificates indicating the remaining Certificate Balance of such Class of
certificates, as of the applicable Distribution Date. The factor for either
Class of certificates will be calculated after giving effect to distributions to
be made on such Distribution Date, as a fraction of the initial Certificate
Balance of such Class of certificates.
YOUR PORTION OF THE OUTSTANDING AMOUNT OF THE CERTIFICATES. For each
certificate you own, your portion of that Class of certificates is the product
of --
-- the original denomination of your certificate; and
-- the factor relating to your class of certificates computed by the
servicer in the manner described above.
THE FACTORS DESCRIBED ABOVE WILL DECLINE AS THE TRUST MAKES PAYMENTS ON THE
SECURITIES
Each of the factors described above will initially be 1.0000000. They will
then decline to reflect reductions, as applicable, in --
-- the outstanding principal amount of the applicable Class of notes; or
-- the outstanding principal amount of the applicable Class of
certificates.
These amounts will be reduced over time as a result of scheduled payments,
prepayments, purchases of the receivables by the seller or the servicer and
liquidations of the receivables.
S-30
<PAGE> 31
MATURITY AND PREPAYMENT CONSIDERATIONS
Information regarding certain maturity and prepayment considerations with
respect to the securities is set forth under "Maturity and Prepayment
Considerations" in the prospectus. In addition, no principal payments will be
made at any time, including upon the occurrence and during the continuation of
an Event of Default under the indenture --
-- of the Class A-2 Notes until the Class A-1 Notes have been paid in
full;
-- of the Class A-3 Notes until the Class A-2 Notes have been paid in
full;
-- of the Class A-4 Notes until the Class A-3 Notes have been paid in
full;
-- of the Class A-5 Notes until the Class A-4 Notes have been paid in
full; or
-- of the Class B Notes until the Class A-5 Notes have been paid in full.
No distributions of principal of the certificates will be made until all
the notes have been paid in full. In addition, no distributions of principal of
the Class D Certificates will be made until the Certificate Balance of the Class
C Certificates has been reduced to zero. See "Description of the
Notes -- Payments of Principal" and "Description of the
Certificates -- Distributions of Principal Payments" in this prospectus
supplement.
As the rate of payment of principal of each Class of notes and each Class
of certificates depends on the rate of payment (including prepayments) of the
principal balance of the receivables, final payment of any Class of notes and
the final distribution in respect of each Class of certificates could occur
significantly earlier than the respective Final Scheduled Distribution Dates.
THERE IS NO ASSURANCE THAT YOUR SECURITIES WILL BE REPAID ON THE SCHEDULED
DATES. It is expected that final payment of each Class of notes and the final
distribution in respect of each Class of certificates will occur on or prior to
the respective Final Scheduled Distribution Dates. Failure to make final payment
of any Class of notes on or prior to the respective Final Scheduled Distribution
Dates would constitute an Event of Default under the indenture. See "Description
of the Notes -- The Indenture -- Rights upon Event of Default" in this
prospectus supplement and in the prospectus. In addition, the remaining
Certificate Balance of each Class of certificates is required to be paid in full
on the respective Final Scheduled Distribution Dates. However, no assurance can
be given that sufficient funds will be available to pay each Class of notes and
each Class of certificates in full on or prior to the respective Final Scheduled
Distribution Dates. If sufficient funds are not available, final payment of any
Class of notes and the final distribution in respect of either Class of
certificates could occur later than such dates.
THE LEVEL OF PREPAYMENTS OF THE RECEIVABLES AND REQUIRED REPURCHASES BY THE
SELLER ARE UNPREDICTABLE AND MAY AFFECT PAYMENTS ON THE SECURITIES. The rate of
prepayments of the receivables may be influenced by a variety of economic,
social and other factors. In addition, under circumstances relating to breaches
of representations, warranties or covenants, the seller and/or the servicer may
be obligated to repurchase receivables from the trust. See "The Receivables
Pool" in this prospectus supplement and "Description of the Receivables Transfer
and Servicing Agreements -- Sale and Assignment of Receivables" in the
prospectus. A higher than anticipated rate of prepayments will reduce the
aggregate principal balance of the receivables more quickly than expected and
thereby reduce anticipated aggregate interest payments on the securities. The
noteholders and the certificateholders alone will bear any reinvestment risks
resulting from a faster or slower incidence of prepayment of receivables as set
forth in the priority of distributions in this prospectus supplement. Such
reinvestment risks include the risk that interest rates may be lower at the time
such holders received payments from the trust than interest rates would
otherwise have been had such prepayments not been made or had such prepayments
been made at a different time.
S-31
<PAGE> 32
RISKS OF SLOWER OR FASTER REPAYMENTS. Noteholders and certificateholders
should consider --
-- in the case of notes or certificates purchased at a discount, the risk
that a slower than anticipated rate of principal payments on the
receivables could result in an actual yield that is less than the
anticipated yield; and
-- in the case of notes or certificates purchased at a premium, the risk
that a faster than anticipated rate of principal payments on the
receivables could result in an actual yield that is less than the
anticipated yield.
DESCRIPTION OF THE NOTES
The trust will issue the notes under an indenture to be dated as of
September 1, 1999, between the trust and The Chase Manhattan Bank, as indenture
trustee. We will file a copy of the indenture with the Securities and Exchange
Commission after the trust issues the notes. The following summary describes
certain terms of the notes and the indenture. The summary is not a complete
description of all the provisions of the notes and the indenture. We refer you
to those provisions. The following summary supplements the description of the
general terms and provisions of the notes of any given series and the related
indenture set forth under the headings "Description of the Notes" and "Certain
Information Regarding the Securities" in the prospectus.
PAYMENTS OF INTEREST
Each Class of notes will constitute "Fixed Rate Securities," as that term
is defined under "Certain Information Regarding the Securities -- Fixed Rate
Securities" in the prospectus. Interest on the principal amounts of the notes
will accrue at the respective per annum interest rates for the various Classes
of notes and will be payable to the noteholders on each Distribution Date. The
trust will make payments to the noteholders as of each Record Date.
CALCULATION OF INTEREST. Interest will accrue during each Interest Period
and will be calculated on the various Classes of notes as follows:
-- Actual/360. Interest on the Class A-1 Notes and the Class A-2 Notes
will be calculated on the basis of actual days elapsed and a 360-day
year.
-- 30/360. Interest on the Class A-3 Notes, Class A-4 Notes, Class A-5
Notes and Class B Notes will be calculated on the basis of a 360-day
year of twelve 30-day months.
-- Unpaid Interest Accrues. Interest accrued as of any Distribution Date
but not paid on such Distribution Date will be due on the next
Distribution Date, together with interest on such amount at the
applicable interest rate (to the extent lawful).
PRIORITY OF INTEREST PAYMENTS. The trust will generally derive the interest
payments it makes on the notes on any Distribution Date from the funds deposited
into the Collection Account with respect to the preceding Collection Period.
This will include funds, if any, deposited into the Collection Account from the
Reserve Account and the Payahead Account, remaining after the payment of --
-- the Servicing Fee; and
-- in the case of the Class B Notes, interest on the Class A Notes and
the First Priority Principal Distribution Amount, if any.
THE TRUST WILL PAY INTEREST PRO RATA TO CLASS A NOTEHOLDERS IF IT DOES NOT
HAVE ENOUGH FUNDS AVAILABLE TO PAY ALL INTEREST DUE. The amount available for
interest payments on the Class A Notes could be less than the amount of interest
payable on the Class A Notes on any Distribution Date. In that event, the Class
A-1 noteholders, the Class A-2 noteholders, the Class A-3 noteholders, the Class
A-4 noteholders and the Class A-5 noteholders will receive their
S-32
<PAGE> 33
ratable share of the aggregate amount available to be distributed in respect of
interest on the Class A Notes. Each such Class' ratable share of the amount
available to pay interest will be based on the amount of interest due on such
Class relative to the total amount of interest due to the Class A noteholders.
INTEREST PAID ON THE CLASS B NOTES IS SUBORDINATE TO INTEREST PAID ON THE
CLASS A NOTES. Interest on the Class B Notes will not be paid on any
Distribution Date until interest payments on the Class A Notes and the First
Priority Principal Distribution Amount, if any, have been paid in full. If the
amount available for interest payments on the Class B Notes is less than the
amount of interest payable on the Class B Notes on any Distribution Date, each
of the holders of the Class B Notes will receive their ratable share (based upon
the total amount of interest due to such Class B noteholders) of the aggregate
amount available to be distributed in respect of interest on the Class B Notes.
See "Description of the Receivables Transfer and Servicing
Agreements -- Distributions" and "-- Reserve Account" in this prospectus
supplement.
EVENT OF DEFAULT. An Event of Default under the indenture will occur if the
full amount of interest due on the Class A Notes is not paid within five days of
the related Distribution Date. While any of the Class A Notes remain
outstanding, the failure to pay interest due on the Class B Notes within five
days of the related Distribution Date will not be an Event of Default. See
"Description of the Notes -- The Indenture -- Rights upon Event of Default" in
the prospectus.
PAYMENTS OF PRINCIPAL
The trust will generally make principal payments to the noteholders on each
Distribution Date in an amount equal to the Principal Distribution Amount. The
"Principal Distribution Amount" with respect to any Distribution Date equals the
sum of --
-- the First Priority Principal Distribution Amount;
-- the Second Priority Principal Distribution Amount; and
-- the Regular Principal Distribution Amount.
The trust will pay the Principal Distribution Amount on each Distribution Date
to the extent that it has funds available after it pays in full all amounts
ranking senior to each component of the Principal Distribution Amount. The trust
will make these payments in accordance with the priorities described in
"Description of the Receivables Transfer and Servicing Agreements --
Distributions" in this prospectus supplement.
The trust will derive principal payments on the notes from the funds on
deposit in the Collection Account with respect to the Collection Period
preceding the related Distribution Date. This will include funds, if any,
deposited into the Collection Account from the Reserve Account and the Payahead
Account.
On each Determination Date, the indenture trustee will determine the amount
in the Collection Account for distribution on the related Distribution Date.
Payments to noteholders and certificateholders will be made on each Distribution
Date in accordance with that determination.
EVENT OF DEFAULT. An Event of Default will occur under the indenture if the
amount of principal due on any note on its Final Scheduled Distribution Date has
not been paid in full. Payments on the notes may be accelerated upon an Event of
Default. Upon an acceleration of the notes, the priority in which the trust
makes distributions to the noteholders and
S-33
<PAGE> 34
certificateholders will change. The effect on the noteholders of an Event of
Default depends on the type of default, as described beginning on page S-42 of
this prospectus supplement.
PRIORITY OF PRINCIPAL REPAYMENTS. Principal payments on the notes will be
made sequentially on each Distribution Date, including upon the occurrence and
during the continuation of an Event of Default in the following order of
priority:
-- to the principal amount of the Class A-1 Notes until such principal
amount is paid in full;
-- to the principal amount of the Class A-2 Notes until such principal
amount is paid in full;
-- to the principal amount of the Class A-3 Notes until such principal
amount is paid in full;
-- to the principal amount of the Class A-4 Notes until such principal
amount is paid in full;
-- to the principal amount of the Class A-5 Notes until such principal
amount is paid in full; and
-- to the principal amount of the Class B Notes until such principal
amount is paid in full.
NOTES MIGHT NOT BE REPAID ON THEIR SCHEDULED DATES OF FINAL PRINCIPAL
REPAYMENTS. The principal amounts of any Class of notes to the extent not
previously paid will be due on the Final Scheduled Distribution Date relating
that Class of notes. Those dates are listed on the cover of this prospectus
supplement. The actual date on which the aggregate outstanding principal amount
of any Class of notes is paid may be earlier or later than the Final Scheduled
Distribution Dates relating to that Class of notes based on a variety of
factors, including those described under "Maturity and Prepayment
Considerations" in this prospectus supplement and in the prospectus.
THE INDENTURE
RIGHTS UPON EVENT OF DEFAULT. Upon an Event of Default under the indenture,
the noteholders will have the rights set forth in the prospectus under
"Description of the Notes -- The Indenture -- Rights Upon Event of Default",
including the right to declare all the notes to be immediately due and payable.
The indenture trustee may sell the receivables subject to certain conditions
after an Event of Default which has resulted in an acceleration of the notes.
The conditions depend upon why the Event of Default occurred. If the Event of
Default occurred as a result of a default in the payment of any principal of or
a default for five days or more in the payment of any interest on any note, the
indenture trustee does not have to obtain any consent of noteholders to sell the
receivables.
In the case of any other Event of Default, the indenture trustee may not
sell the receivables unless one of the conditions set forth in the prospectus
under "Description of the Notes -- The Indenture -- Rights upon Event of
Default" has been satisfied.
In the event of a sale of the receivables by the indenture trustee
following an Event of Default, the noteholders and certificateholders will
receive notice and an opportunity to submit a bid in the sale.
Under the Trust Indenture Act of 1939, the indenture trustee may be deemed
to have a conflict of interest and be required to resign as trustee for either
the Class A Notes or the Class B Notes if a default occurs under the indenture.
In these circumstances, the indenture will provide for a successor trustee to be
appointed for one or both of the Class A Notes and Class B Notes, in order that
there be separate trustees for each of the Class A Notes and the Class B Notes.
In general, so long as any amounts remain unpaid with respect to the Class A
Notes --
-- only the indenture trustee for the Class A noteholders will have the
right to exercise remedies under the indenture; and
S-34
<PAGE> 35
-- only the Class A noteholders will have the right to direct or consent
to any action to be taken, including sale of the receivables.
In any case, the Class B noteholders will be entitled to their respective shares
of any proceeds of enforcement, subject to the subordination of the Class B
Notes to the Class A Notes as described in this prospectus supplement. When the
Class A Notes are repaid in full, all rights to exercise remedies under the
indenture will transfer to the trustee for the Class B Notes.
If the indenture trustee relating to any Class of notes resigns, its
resignation will become effective only after a successor indenture trustee for
that Class of notes is appointed and the successor accepts the appointment.
OPTIONAL REDEMPTION
All outstanding notes will be redeemed in whole, but not in part, on any
Distribution Date on which the servicer exercises its option to purchase the
receivables. The servicer may purchase the receivables when the Pool Balance
shall have declined to 10% or less of the Initial Pool Balance, as described in
the prospectus under "Description of the Receivables Transfer and Servicing
Agreements -- Termination." The redemption price for the notes outstanding will
be equal to --
-- the unpaid principal amount of such notes plus accrued and unpaid
interest at the rate of interest on those notes; plus
-- interest on any past due interest at the rate of interest on those
notes (to the extent lawful).
DESCRIPTION OF THE CERTIFICATES
The trust will issue the certificates in fully registered, certificated
form under the trust agreement. We have filed a form of the trust agreement as
an exhibit to the registration statement of which this prospectus supplement is
a part. A copy of the trust agreement will be filed with the SEC after the trust
issues the notes and the certificates. We summarize below some of the most
important terms of the certificates and the trust agreement. This summary is not
a complete description of all the provisions of the trust agreement and the
certificates. We refer you to those documents. The following summary is a
supplement to the description of the general terms and provisions of the
certificates of any given series and the related trust agreement provided under
the headings "Description of the Certificates," "Certain Information Regarding
the Securities" in the prospectus and "Description of the Receivables Transfer
and Servicing Agreements" in the prospectus and in this prospectus supplement.
We refer you to those sections.
DISTRIBUTIONS OF INTEREST INCOME
On each Distribution Date, commencing October 15, 1999, the
certificateholders of each Class of certificates will be entitled to
distributions in an amount equal to the amount of interest that accrues on the
Certificate Balance of their Class of certificates at the applicable rate of
interest on the certificates. The certificates will constitute Fixed Rate
Securities, as such term is defined under "Certain Information Regarding the
Securities -- Fixed Rate Securities" in the prospectus.
Interest will accrue --
-- from and including the Closing Date (in the case of the first
Distribution Date) to but excluding the fifteenth day of the following
calendar month; or
S-35
<PAGE> 36
-- from and including the fifteenth day of the calendar month preceding
each Distribution Date to but excluding the fifteenth day of the
following calendar month.
INTEREST IS CALCULATED 30/360. Interest on the certificates will be
calculated on the basis of a 360-day year of twelve 30-day months.
UNPAID INTEREST ACCRUES. Interest distributions due for any Distribution
Date but not distributed on such Distribution Date will be due on the next
Distribution Date increased by an amount equal to interest on such amount at the
rate of interest on the certificates (to the extent lawful).
FUNDS AVAILABLE FOR DISTRIBUTIONS ON CERTIFICATES. The trust will fund
interest distributions on the certificates from the portion of the funds on
deposit in the Collection Account with respect to the Collection Period
preceding the related Distribution Date, including funds, if any, deposited into
the Collection Account from the Reserve Account and the Payahead Account,
remaining after the trust pays:
-- the Servicing Fee;
-- the interest due on the Class A Notes;
-- the First Priority Principal Distribution Amount, if any;
-- the interest due on the Class B Notes;
-- the Second Priority Principal Distribution Amount, if any; and
-- in the case of the Class D Certificates, the interest due on the Class
C Certificates.
However, following the occurrence of an Event of Default which has resulted
in an acceleration of the notes or following an Insolvency Event or a
dissolution with respect to the seller or the General Partner, the noteholders
will be entitled to be paid interest and all principal in full before any
distributions may be made on the certificates. See "Description of the
Receivables Transfer and Servicing Agreements -- Distributions" and "-- Reserve
Account" in this prospectus supplement.
DISTRIBUTIONS OF PRINCIPAL PAYMENTS
THE TRUST WILL DISTRIBUTE PRINCIPAL ON THE CERTIFICATES ONLY AFTER
PRINCIPAL ON THE NOTES IS FULLY PAID. Certificateholders will be entitled to
receive principal payments on each Distribution Date, commencing with the
Distribution Date on which all of the notes have been paid in full, in an amount
generally equal to the Principal Distribution Amount, after giving effect to any
portion of that amount payable to noteholders. The trust will make distributions
of principal to the certificateholders at that time to the extent that amounts
are remaining after it pays in full all amounts ranking senior to such component
in accordance with the priorities described in "Description of the Receivables
Transfer and Servicing Agreements -- Distributions" in this prospectus
supplement.
PRIORITY OF PRINCIPAL DISTRIBUTIONS. Distributions of principal of the
certificates will be made sequentially from funds on deposit in the Certificate
Principal Distribution Account on each Distribution Date commencing on the
Distribution Date on which all the notes are paid in full in the following order
of priority:
(1) in payment of the Certificate Balance of the Class C Certificates,
until the Certificate Balance of the Class C Certificates has been paid
in full; and
S-36
<PAGE> 37
(2) in payment of the Certificate Balance of the Class D Certificates,
until the Certificate Balance of the Class D Certificates has been paid
in full.
However, following the occurrence of an Event of Default which has resulted
in an acceleration of the notes or following an Insolvency Event or a
dissolution with respect to the seller or the General Partner, the noteholders
will be entitled to be paid interest and all principal in full before any
distributions may be made on the certificates. See "Description of the
Receivables Transfer and Servicing Agreements -- Distributions" in this
prospectus supplement.
The outstanding Certificate Balance of each Class of certificates will be
payable in full on the Final Scheduled Distribution Date relating to that Class
of certificates. The actual date on which the trust pays the aggregate
Certificate Balance of either Class of certificates may be earlier or later than
the applicable Final Scheduled Distribution Date, based on a variety of factors,
including those described under "Maturity and Prepayment Considerations" in this
prospectus supplement and in the prospectus.
PRIORITY OF NOTES
The rights of certificateholders to receive distributions of interest are
subordinated to the rights of noteholders to receive payments of interest and,
under some conditions, principal. In addition, the certificateholders will have
no right to receive distributions of principal until the aggregate principal
amount of all the notes has been paid in full.
Consequently, before the trust makes distributions of interest on the Class
C Certificates, funds on deposit in the Collection Account with respect to the
Collection Period preceding the related Distribution Date (including funds, if
any, deposited into the Collection Account from the Reserve Account and the
Payahead Account) will be applied to the payment of --
-- the interest due on the Class A Notes;
-- the First Priority Principal Distribution Amount, if any;
-- the interest due on the Class B Notes; and
-- the Second Priority Principal Distribution Amount, if any.
Those amounts also will be applied to the payment of principal on the notes in
full before distributions of principal on the Class C Certificates. See
"Description of the Receivables Transfer and Servicing
Agreements -- Distributions" in this prospectus supplement.
In addition, following the occurrence of an Event of Default which has
resulted in an acceleration of the notes or following an Insolvency Event or a
dissolution with respect to the seller or the General Partner, the noteholders
will be entitled to be paid interest and all principal in full before any
distributions may be made on the certificates. See "Description of the
Receivables Transfer and Servicing Agreements -- Insolvency Event or
Dissolution" in the prospectus.
OPTIONAL PREPAYMENT
If the servicer exercises its option to purchase the receivables when the
Pool Balance declines to 10% or less of the Initial Pool Balance, you will
receive an amount in respect of your certificates equal to the sum of:
-- the outstanding Certificate Balance of your Class of certificates
together with accrued interest at the rate of interest on that Class
of certificates; and
-- interest on any past due interest at the rate of interest on your
certificates, to the extent lawful.
S-37
<PAGE> 38
That distribution will cause the early retirement of your certificates. See
"Description of the Receivables Transfer and Servicing Agreements --
Termination" in the prospectus.
DESCRIPTION OF THE RECEIVABLES TRANSFER AND SERVICING AGREEMENTS
We have summarized below some of the important terms of the Receivables
Transfer and Servicing Agreements. We have filed forms of the Receivables
Transfer and Servicing Agreements as exhibits to the registration statement. We
will file copies of the actual Receivables Transfer and Servicing Agreements
with the SEC after we issue the notes and the certificates. This summary is not
a complete description of all of the provisions of the Receivables Transfer and
Servicing Agreements. It is subject to all of the provisions of the Receivables
Transfer and Servicing Agreements. You can find more information about the
transfer of the receivables from the seller to the trust on the Closing Date
under the sale and servicing agreement in the prospectus under "Description of
the Receivables Transfer and Servicing Agreements -- Sale and Assignment of
Receivables".
ACCOUNTS
ACCOUNTS OF THE TRUST. In general, the servicer will be permitted to retain
collections on the receivables until the business day preceding any Distribution
Date. However, the servicer will be required to remit collections received with
respect to the receivables not later than the second Business Day after receipt
to the Collection Account (1) if there is an Event of Servicing Termination, (2)
if Ford Credit is no longer the servicer or (3) if one of the other conditions
set forth in the sale and servicing agreement is not met. In addition to the
accounts referred to under "Description of the Receivables Transfer and
Servicing Agreements -- Accounts" in the prospectus --
-- the indenture trustee will establish the Principal Distribution
Account;
-- the owner trustee will establish the Certificate Interest Distribution
Account and the Certificate Principal Distribution Account; and
-- the servicer will establish and will maintain with the indenture
trustee the Reserve Account, in the name of the indenture trustee on
behalf of the noteholders and the certificateholders.
PAYAHEAD ACCOUNT. The servicer also will establish and will maintain with
the indenture trustee the Payahead Account. Amounts on deposit in the Payahead
Account are held for the benefit of obligors who have paid ahead a payment or a
payment before its due date until the servicer applies those amounts when the
payment is due. For that reason, the Payahead Account will not be included in
the property of the trust.
SERVICING COMPENSATION AND EXPENSES
The servicer is entitled to receive the Servicing Fee on each Distribution
Date. The Servicing Fee, together with any portion of the Servicing Fee that
remains unpaid from prior Distribution Dates, will be payable on each
Distribution Date. The Servicing Fee will be paid only to the extent of the
funds on deposit in the Collection Account with respect to the Collection Period
preceding such Distribution Date, including funds, if any, deposited into the
Collection Account from the Reserve Account and the Payahead Account. The
servicer also is entitled to receive the Supplemental Servicing Fee. See
"Description of the Receivables Transfer and Servicing Agreements -- Servicing
Compensation and Expenses" in the prospectus.
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<PAGE> 39
RIGHTS UPON EVENT OF SERVICING TERMINATION
If an Event of Servicing Termination occurs, the indenture trustee or
holders of not less than a majority of the principal amount of the Controlling
Class (or, if no notes are outstanding, a majority of the Certificate Balance of
the Controlling Certificate Class) may remove the servicer without the consent
of any of the other securityholders.
WAIVER OF PAST EVENTS OF SERVICING TERMINATION
If an Event of Servicing Termination occurs, a majority of the principal
amount of the Controlling Class (or, if no notes are outstanding, a majority of
the Certificate Balance of the Controlling Certificate Class), subject to the
exceptions provided in the sale and servicing agreement, may waive any Event of
Servicing Termination except for a failure to make any required deposits to or
payments from any account, without the consent of any of the other
securityholders. The certificateholders will not have the right to determine
whether any Event of Servicing Termination should be waived until the notes have
been paid in full.
DISTRIBUTIONS
DEPOSITS TO THE COLLECTION ACCOUNT AND DETERMINATION OF AVAILABLE
COLLECTIONS. On or before the Distribution Date, the servicer will cause all
collections on receivables, Actuarial Advances, Simple Interest Advances and
other amounts constituting the Available Funds to be deposited into the
Collection Account. See "Description of the Receivables Transfer and Servicing
Agreements -- Sale and Assignment of Receivables," "-- Collections" and "--
Advances" in the prospectus. On or before each Distribution Date, the servicer
will notify the indenture trustee to withdraw from the Reserve Account and
deposit into the Collection Account the Reserve Account Excess Amount.
In addition, the servicer will notify the indenture trustee to withdraw
from the Reserve Account and deposit in the Collection Account an amount equal
to the lesser of:
-- the amount, if any, by which (a) the Total Required Payment exceeds
(b) the Available Funds for such Distribution Date; and
-- the amount of cash or other immediately available funds in the Reserve
Account on such Distribution Date (after giving effect to any
withdrawals from the Reserve Account relating to the Reserve Account
Excess Amount for that Distribution Date).
On or before the Final Scheduled Distribution Date with respect to any
Class of notes or either Class of certificates, the servicer will notify the
indenture trustee to withdraw from the Reserve Account and deposit in the
Collection Account an amount equal to the lesser of --
-- the difference, if any, between (1) the sum of the Available Funds
plus the amount, if any, withdrawn from the Reserve Account for the
amount of the Total Required Payment which exceeds the Available Funds
for such Distribution Date over (2) the amount required to pay such
Class of notes or such Class of certificates in full in accordance
with the priorities described in "-- Priority of Payments" below; and
-- the amount of cash or other immediately available funds in the Reserve
Account on such Distribution Date (after giving effect to any
withdrawals from the Reserve Account relating to the Reserve Account
Excess Amount and to the amount by which the Total Required Payment
exceeds the Available Funds for such Distribution Date).
The Available Collections will be determined on the related Determination
Date as described under "Description of the Notes -- Payments of Principal" in
this prospectus supplement and "Description of the Receivables Transfer and
Servicing Agreements -- Distributions" in the prospectus.
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<PAGE> 40
SOURCES OF FUNDS AVAILABLE FOR
DISTRIBUTION ON ANY DISTRIBUTION DATE
[FLOW CHART]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Obligors
Reserve Account
Scheduled payments,
Liquidation Proceeds, full Late fees, prepayment
prepayments on fees and other Seller
Payaheads Actuarial Receivables amounts constituting
and all prepayments on the Supplemental
Simple Interest Servicing Fee
Reserve Account Excess Receivables
Amount
Reimbursement
of Advances Servicer
Payahead
Account
Purchase
Amount of
Advances receivables
repurchased
Total Required by the
Payment minus seller or
Available Funds Shortfalls on servicer
receivables for which
Payaheads previously
received
Additional amount
on any Final Scheduled
Distribution Date to the Available Funds
extent that other amounts
deposited into the
Collection Account are
insufficient to pay the
remaining principal
amount on the Amounts deposited into the Collection Account
applicable Class for distribution
</TABLE>
[Sources of Funds]
PRIORITY OF PAYMENTS. On each Distribution Date, the servicer will allocate
amounts on deposit in the Collection Account as described under "Description of
the Receivables Transfer and Servicing Agreements -- Distributions" in the
prospectus and will instruct the indenture trustee to make the following
deposits and distributions, to the extent of funds then on deposit in the
Collection Account with respect to the Collection Period preceding such
Distribution Date (including funds, if any, deposited into the Collection
Account from the Reserve Account and the Payahead Account), in the following
order of priority:
(1) to the servicer, the Servicing Fee and all unpaid Servicing Fees from
prior Collection Periods;
(2) to the Class A noteholders --
(a) the aggregate amount of interest accrued for the related Interest
Period on each of the Class A Notes at their respective interest
rates on the principal outstanding as of the previous Distribution
Date after giving effect to all payments of principal to the Class
A noteholders on the preceding Distribution Date; and
(b) any shortfall in the amount of interest payable to the Class A
noteholders on prior Distribution Dates over the amounts actually
paid to the Class A noteholders on those prior Distribution Dates,
plus interest on any such shortfall to the extent permitted by law.
(3) to the Principal Distribution Account, the First Priority Principal
Distribution Amount, if any;
(4) to the Class B noteholders --
(a) the aggregate amount of interest accrued for the related Interest
Period on each of the Class B Notes at the interest rate on such
notes on the principal
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<PAGE> 41
outstanding as of the previous Distribution Date after giving
effect to all payments of principal to the Class B noteholders on
the preceding Distribution Date; and
(b) any shortfall in the amount of interest payable to the Class B
noteholders on prior Distribution Dates over the amounts actually
paid to the Class B noteholders on those prior Distribution Dates,
plus interest on any such shortfall to the extent permitted by law;
(5) to the Principal Distribution Account, the Second Priority Principal
Distribution Amount, if any;
(6) to the Certificate Interest Distribution Account --
(a) the aggregate amount of interest accrued for the related Interest
Period on the Class C Certificates at the interest rate on such
certificates on the Certificate Balance as of the previous
Distribution Date after giving effect to all payments of principal
to the Class C certificateholders on the preceding Distribution
Date; and
(b) any shortfall in the amount of interest payable to the Class C
certificateholders on prior Distribution Dates over the amounts
actually paid to the Class C certificateholders on those prior
Distribution Dates, plus interest on any such shortfall to the
extent permitted by law;
(7) to the Certificate Interest Distribution Account --
(a) the aggregate amount of interest accrued for the related Interest
Period on the Class D Certificates at the interest rate on such
certificates on the Certificate Balance as of the previous
Distribution Date after giving effect to all payments of principal
to the Class D certificateholders on the preceding Distribution
Date; and
(b) any shortfall in the amount of interest payable to the Class D
certificateholders on prior Distribution Dates over the amounts
actually paid to the Class D certificateholders on those prior
Distribution Dates, plus interest on any such shortfall to the
extent permitted by law;
(8) to the Reserve Account, the amount required to reinstate the amount in
the Reserve Account up to the Specified Reserve Balance;
(9) to the Principal Distribution Account, the Regular Principal
Distribution Amount; and
(10) to the seller, any funds remaining on deposit in the Collection
Account with respect to the Collection Period preceding such
Distribution Date.
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<PAGE> 42
[FLOW CHART]
HOW THE TRUST DISTRIBUTES FUNDS ON DEPOSIT IN THE COLLECTION ACCOUNT WHEN NO
EVENT OF DEFAULT RESULTING IN ACCELERATION HAS OCCURRED
<TABLE>
<C> <C> <S>
Amount deposited into the Collection
Account for distribution
Servicer Servicing Fee and prior unpaid
Servicing Fees
Accrued Class A)
Note Interest
(paid pro rata
to the respective
classes
Class A-1 Noteholders
First Priority Principal Distribution
Class A-2 Noteholders Amount, if any
Class A-3 Noteholders
Accrued Class B Note Interest
Class A-4 Noteholders
Class A-5 Noteholders
Second Priority Principal Distribution
Class B Noteholders Amount, if any
Class C Certificateholders
Class D Certificateholders
Accrued Class C Certificate Interest
Accrued Class D Certificate Interest
Principal
Distribution Amount Required to reinstate Reserve
Account Account up to the Specified Reserve Reserve
Balance Account
To pay principal
of the most senior Regular Principal Distribution Amount
class of notes or
certificates then
outstanding
Seller
</TABLE>
PRIORITY OF PAYMENTS MAY CHANGE UPON AN EVENT OF DEFAULT UNDER THE
INDENTURE AND UPON CERTAIN INSOLVENCY EVENTS. Upon the occurrence and
continuation of any Event of Default described in the prospectus under
"Description of the Notes -- The Indenture -- Events of Default", the indenture
trustee or the holders of a majority of the Controlling Class may
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<PAGE> 43
accelerate the maturity of the notes. Acceleration of the notes will result in a
change in the priority of payments, which will depend upon the type of default,
as described below.
-- DEFAULTS IN PAYMENT OF INTEREST AND PRINCIPAL RESULTING IN
ACCELERATION AND CERTAIN INSOLVENCY EVENTS.
(1) Following the occurrence and during the continuation of an Event of
Default relating to:
-- a default in the payment of principal on any note which has
resulted in acceleration of the notes;
-- a default for five days or more in the payment of interest on any
note which has resulted in acceleration of the notes; or
-- an Insolvency Event or dissolution with respect to the trust which
has resulted in an acceleration of the notes; or
(2) following the occurrence of an Insolvency Event or a dissolution with
respect to the seller or the General Partner,
the priority of payments changes and the Class A noteholders must be paid in
full before any distributions of interest or principal may be made on the
Class B Notes and the certificates.
-- OTHER DEFAULTS RESULTING IN ACCELERATION. Following the occurrence of
any other Event of Default which has resulted in an acceleration of
the notes, the trust will continue to pay interest on the Class A
Notes and the Class B Notes on each Distribution Date in the manner
set forth in "-- Priority of Payments," above until a liquidation, if
any, of the receivables.
-- CERTIFICATES SUBORDINATED UPON ANY EVENT OF DEFAULT RESULTING IN
ACCELERATION. Following the occurrence of any Event of Default which
has resulted in an acceleration of the notes, the priority of
distributions changes and the noteholders will be entitled to be paid
in full before any distributions of principal or interest may be made
on the certificates. See "Description of the Receivables Transfer and
Servicing Agreements -- Distributions" and "-- Reserve Account" in
this prospectus supplement.
INTEREST AND PRINCIPAL PAID IN ORDER OF SENIORITY UPON A SALE OF COLLATERAL
FOLLOWING AN EVENT OF DEFAULT. Following an Event of Default, the indenture
trustee may elect to liquidate the receivables and the other property of the
trust, subject to the requirements set forth in the prospectus and this
prospectus supplement under "Description of the Notes -- The Indenture -- Rights
Upon Event of Default." Irrespective of the type of Event of Default, upon such
a liquidation of receivables (1) no amounts will be distributed to the Class B
noteholders until all interest and principal due on the Class A Notes has been
paid in full and (2) no amounts will be distributed to the certificateholders
until all interest and principal due on the Class B Notes has been paid in full.
PRINCIPAL DISTRIBUTION AMOUNTS. On and after the Distribution Date on which
the principal amount of the notes has been paid in full, amounts in respect of
the First Priority Principal Distribution Amount, if any, the Second Priority
Principal Distribution Amount, if any, and the Regular Principal Distribution
Amount, if any (in each case, after giving effect to any portion thereof payable
to noteholders) as described in clauses (3), (5) and (9) in "Priority of
Payments" above, respectively, will be deposited into the Certificate Principal
Distribution Account.
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<PAGE> 44
SERVICER WILL PROVIDE INFORMATION TO INDENTURE TRUSTEE. On each
Determination Date, the servicer will provide the indenture trustee with the
information specified in the sale and servicing agreement with respect to the
Collection Period preceding such Determination Date, including:
-- the amount of aggregate collections on the receivables;
-- the aggregate amount of Liquidated Receivables;
-- the aggregate Advances to be made by the servicer; and
-- the aggregate Purchase Amount of receivables to be repurchased by the
seller or to be purchased by the servicer.
OVERVIEW OF HOW THE TRUST DISTRIBUTES PRINCIPAL. In general, the trust will
make principal distributions on the notes and certificates under the following
circumstances:
-- as the Pool Balance decreases as a result of principal payments on
the receivables, purchases of receivables by the seller or the
servicer, receipt of Liquidation Proceeds allocable to principal
and Realized Losses, to the extent that the Pool Balance is less
than the aggregate outstanding principal balance on the notes and
the certificates plus the intended amount of overcollateralization;
and
-- on the respective Final Scheduled Distribution Dates of the notes
and certificates to the extent that the principal amounts on the
applicable notes or certificates were not previously repaid.
We discuss each of these situations in more detail below.
The Trust Will Make Principal Payments to Maintain Overcollateralization as
the Pool Balance Decreases. The trust will make principal distributions on
Distribution Dates which are not Final Scheduled Distribution Dates in order to
maintain a desired level of overcollateralization. The trust will generally pay
principal on the most senior Class of notes or certificates outstanding at any
time that the aggregate outstanding principal balance of the notes and the
certificates exceeds the Pool Balance minus both the Specified
Overcollateralization Amount and the Yield Supplement Overcollateralization
Amount. Under most circumstances, the amount of that prepayment will be equal to
the Regular Principal Distribution Amount. However, where substantial
prepayments, late payments on Simple Interest Receivables or Realized Losses
occur in a single Collection Period, to the extent that the aggregate
outstanding principal balance of the notes exceeds the remaining Pool Balance, a
Second Priority Principal Distribution Amount or a First Priority Principal
Distribution Amount may also be payable.
Required Principal Distributions Made as a Result of Notes Reaching Their
Final Scheduled Distribution Dates May Delay Interest Payments on More
Subordinate Classes of Notes or Certificates. The principal amounts on the notes
and the certificates are generally expected to be repaid prior to the applicable
Final Scheduled Distribution Date. However, if the principal amount on any class
of notes or certificates has not been fully repaid prior to its Final Scheduled
Distribution Date, any remaining principal amounts on that Class of securities
will be immediately due on that date, and will be payable before any payments of
principal or interest are made to more junior classes of securities. Interest on
more junior classes of notes or certificates may therefore be delayed as a
result.
A substantial amount payable on a Final Scheduled Distribution Date would
generally occur as a result of slower-than-expected payments on the receivables,
including --
-- a larger-than-expected number of late payments on the Simple Interest
Receivables; or
-- slower-than-expected prepayments on the receivables.
Higher-Priority Principal Payments Made as a Result of Losses or
Prepayments May Delay Interest Payments on Class B Notes or Certificates. The
trust will pay principal on the most senior Classes of notes prior to the
payment of interest on more subordinate notes or certificates in
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<PAGE> 45
cases where the Pool Balance has decreased to a level which is less than the
aggregate outstanding principal balance of the notes.
-- To the extent that the Pool Balance has decreased to a level which is
less than the aggregate outstanding principal balance on the notes, a
Second Priority Principal Distribution Amount will be payable prior to
the payment of interest on the certificates.
-- To the extent that the Pool Balance has decreased to a level which is
less than the aggregate outstanding principal balance on the Class A
Notes, a First Priority Principal Distribution Amount will be payable
prior to the payment of interest on the Class B Notes and on the
certificates.
Because of the prioritization of the above amounts, the occurrence of any of the
following events may result in insufficient funds for the trust to make payments
of interest on more subordinate Classes of notes or certificates on a timely
basis:
-- substantial losses suffered by the trust as a result of defaults which
are not covered by sufficient Liquidation Proceeds allocable to
principal or by sufficient credit enhancement; or
-- delayed collections on the receivables resulting from either --
-- a larger-than-expected number of late payments on the Simple
Interest Receivables; or
-- slower-than-expected prepayments on the receivables; or
-- reduction of the Pool Balance to zero through a sale of receivables
following an Event of Default or Insolvency Event with respect to the
seller or the General Partner.
PRIORITY IN WHICH THE TRUST DISTRIBUTES AMOUNTS IN THE PRINCIPAL
DISTRIBUTION ACCOUNT. On each Distribution Date, the trust will pay out all
amounts on deposit in the Principal Distribution Account in the following order
of priority:
(1) to the Class A-1 noteholders in reduction of principal until the
principal amount of the Class A-1 Notes has been paid in full;
(2) to the Class A-2 noteholders in reduction of principal until the
principal amount of the Class A-2 Notes has been paid in full;
(3) to the Class A-3 noteholders in reduction of principal until the
principal amount of the Class A-3 Notes has been paid in full;
(4) to the Class A-4 noteholders in reduction of principal until the
principal amount of the Class A-4 Notes has been paid in full;
(5) to the Class A-5 noteholders in reduction of principal until the
principal amount of the Class A-5 Notes has been paid in full;
(6) to the Class B noteholders in reduction of principal until the
principal amount of the Class B Notes has been paid in full;
(7) to the Certificate Principal Distribution Account, in reduction of the
Certificate Balance of the Class C Certificates, until the Certificate
Balance of the Class C Certificates has been reduced to zero;
(8) to the Certificate Principal Distribution Account, in reduction of the
Certificate Balance of the Class D Certificates, until the Certificate
Balance of the Class D Certificates has been reduced to zero; and
(9) to the seller, any funds remaining on deposit in the Principal
Distribution Account.
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<PAGE> 46
On each Distribution Date, all amounts on deposit in the Certificate
Interest Distribution Account will be paid in the following order of priority:
(1) to the Class C Certificateholders, all interest accrued on the Class C
Certificates, including unpaid interest and interest on that interest;
(2) to the Class D Certificateholders, all interest accrued on the Class D
Certificates, including unpaid interest and interest on that interest;
and
(3) to the seller, any funds remaining on deposit in the Certificate
Interest Distribution Account.
On each Distribution Date, all amounts on deposit in the Certificate
Principal Distribution Account will be paid in the following order of priority:
(1) to the Class C Certificateholders, in reduction of the Certificate
Balance of the Class C Certificates, until the Certificate Balance of
the Class C Certificates has been reduced to zero;
(2) to the Class D Certificateholders, in reduction of the Certificate
Balance of the Class D Certificates, until the Certificate Balance of
the Class D Certificates has been reduced to zero; and
(3) to the seller, any funds remaining on deposit in the Certificate
Principal Distribution Account.
RESERVE ACCOUNT
The seller will establish the Reserve Account. It will be held in the name
of the indenture trustee for the benefit of the noteholders and
certificateholders. To the extent that amounts on deposit in the Reserve Account
are depleted, the noteholders and certificateholders will have no recourse to
the assets of the seller or servicer as a source of payment.
DEPOSITS TO THE RESERVE ACCOUNT. The Reserve Account will be funded by a
deposit by the seller on the Closing Date in the amount of $16,500,115.20. The
amount on deposit in the Reserve Account may increase from time to time up to
the Specified Reserve Balance by deposits of funds withdrawn from the Collection
Account after payment of the Total Required Payment.
WITHDRAWALS FROM THE RESERVE ACCOUNT. The amount on deposit in the Reserve
Account may decrease --
-- on each Distribution Date by withdrawal of the Reserve Account Excess
Amount, if any, with respect to such Distribution Date;
-- on each Distribution Date by withdrawal of any shortfall between the
Total Required Payment and Available Funds on such Distribution Date;
and
-- on the Final Scheduled Distribution Date of any Class of notes or
either Class of certificates, by withdrawal of the amount, if any, by
which the sum of the Available Funds plus the amount, if any,
withdrawn from the Reserve Account in respect of the excess of the
Total Required Payment over the Available Funds for such Distribution
Date is insufficient to pay such Class of notes or such Class of
certificates in full in accordance with the priorities described in
"Description of the Receivables Transfer and Servicing Agreements --
Distributions" in this prospectus supplement.
In addition, the indenture trustee will withdraw amounts from the Reserve
Account on any Distribution Date to the extent that such amounts together with
the Available Funds for such Distribution Date would be sufficient to pay the
sum of the Servicing Fee and all outstanding notes and certificates in full.
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<PAGE> 47
INVESTMENT. Amounts on deposit in the Reserve Account will be invested by
the indenture trustee at the direction of the seller in Permitted Investments
and investment earnings (net of losses and investment expenses) therefrom will
be deposited into the Reserve Account. Permitted Investments are generally
limited to obligations or securities that mature on or before the next
Distribution Date. However, to the extent each Rating Agency rating the notes or
certificates confirms that such actions will not adversely affect its ratings of
the notes, funds in the Reserve Account may be invested in notes or certificates
that will not mature prior to the next Distribution Date with respect to such
certificates or notes and will not be sold to meet any shortfalls.
FUNDS IN THE RESERVE ACCOUNT WILL BE LIMITED. Amounts on deposit in the
Reserve Account from time to time are available to --
-- enhance the likelihood that you will receive the amounts due on your
notes or certificates; and
-- decrease the likelihood that you will experience losses on your notes
or certificates.
However, the amounts on deposit in the Reserve Account are limited to the
Specified Reserve Balance. If the amount required to be withdrawn from the
Reserve Account to cover shortfalls in funds on deposit in the Collection
Account exceeds the amount on deposit in the Reserve Account, a temporary
shortfall in the amounts distributed to the noteholders and certificateholders
could result. In addition, depletion of the Reserve Account ultimately could
result in losses on your notes or certificates.
After making distributions which are ranked senior in priority, the trust
will deposit amounts to the Reserve Account in order to maintain the Specified
Reserve Balance.
After the payment in full, or the provision for such payment of all accrued
and unpaid interest on the notes and certificates and the outstanding principal
amount of the notes and certificates, any funds remaining on deposit in the
Reserve Account, subject to certain limitations, will be paid to the seller.
YEAR 2000 ISSUES AFFECTING FORD CREDIT
YEAR 2000 CONVERSION
An issue affecting Ford Credit and others is the inability of many computer
systems and applications to process the year 2000 and beyond. To address this
problem, in 1996, Ford Credit initiated a global Y2K program to manage Ford
Credit's overall Y2K compliance effort. As part of this program, Ford Credit
established a global Y2K Program Office to coordinate Ford Credit's compliance
efforts. Ford Credit participates closely with Ford Motor Company's Y2K Central
Program Office and the Ford Motor Company Y2K Steering Committee. Ford Motor
Company's Y2K program has been certified by the Information Technology
Association of America as meeting its Y2K best practices standards.
STATE OF READINESS
Ford Credit achieved all compliance objectives that it established for
1998. Ford Credit has identified the following six distinct areas for its Y2K
compliance efforts. A timetable showing the target dates for compliance and the
present status for each area follows.
Business Computer Systems: These include computer systems and applications
relating to operations such as retail and lease financing, commercial lending,
customer account processing, collections, insurance operations, treasury, and
financial reporting. In 1997 Ford Credit implemented a compliance plan focused
on critical systems. By year-end 1998, most critical systems had been repaired,
tested, independently verified and implemented into a production
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<PAGE> 48
environment. In addition, Ford Credit is participating in Ford Motor Company's
enterprise test plan for all key business processes. As of June 30, 1999, 97% of
all business computer systems were Y2K compliant.
External Alliances (Banks, Credit Bureaus, Trustees, Underwriters, etc.):
Ford Credit has deployed, in conjunction with an industry trade association (the
Automotive Industry Action Group), a process to pursue a common Y2K compliance
approach with the financial institutions in North America. Similar actions are
underway in Europe and the rest of the world. Ford Credit does business with
approximately 700 critical external alliances. Each of these has been asked to
respond to a Y2K compliance questionnaire, and a majority have responded.
Integration testing is being conducted with each highly critical financial
institution.
Affiliates: All managed affiliates have developed plans to address Y2K
compliance similar to those of Ford Credit. These affiliates are being monitored
to ensure timely Y2K compliance.
End-User Computing: Ford Credit's plan to ensure Y2K compliance of desktop
computers throughout the company includes the replacement or repair of all
non-compliant computers and related software and the distribution of an
assessment tool for end user developed applications. Through June 1999, 99% of
critical end user desktop programs were completed and 99% of the PCs and
workstations were compliant.
Technical Infrastructure: All Ford Credit's infrastructure hardware and
software has been inventoried and assessed and through June 1999, 99% completed.
Ford Motor Company's dedicated test facility will be used to test selected
critical systems infrastructure.
Physical Properties and Infrastructures: Ford Credit, in conjunction with
Ford Motor Company, is assessing the Y2K compliance of its significant building
systems, including energy and security systems. The landlords of leased office
facilities have been requested to assess the compliance of those facilities.
These facilities have minimal Y2K issues. As of June 30, 1999, approximately 84%
of these landlords were conducting their assessments. Actions are being taken to
determine energy and other utility supplier preparedness.
Set forth below is a timetable showing Ford Credit's internal target dates
for compliance and the present status of compliance (at June 30, 1999) for each
of the areas mentioned above. Ford Credit has established these target dates
well before December 31, 1999 to allow sufficient time to perform
enterprise-wide testing and further validation of Ford Credit's Y2K compliance.
Status as of June 30, 1999:
<TABLE>
<CAPTION>
Y2K PROGRAM TIMING
------------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Critical Business Computer Systems................. -- Plan: 100% compliant by 6/99 --
Status: 97%
Critical External Alliances........................ -- Plan: 100% ready(a) by 6/99 --
Status: 99%
Affiliates......................................... -- Plan: 100% ready(a) by 6/99 --
Status: 100%
Critical End-User Computing........................ -- Plan: 100% compliant by 6/99 --
Status: 99%
Technical Infrastructure........................... -- Plan: 100% compliant by 6/99 --
Status: 99%
Physical Properties and Infrastructure............. -- Plan: 100% compliant by 6/99 --
Status: 84%
</TABLE>
- ---------------
(a) "Ready" means having a comprehensive Y2K program in place and a plan that
will achieve compliance before January 1, 2000.
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<PAGE> 49
Y2K COSTS
Ford Credit is sharing many of Ford Motor Company's Y2K compliance tools.
Ford Credit estimates that its incremental costs will be about $25 million for
Y2K compliance efforts. This amount will be incurred over a three-year period
that commenced mid-1997 and will end mid-2000. Y2K compliance costs incurred
through June 30, 1999 are estimated at $22 million. Ford Credit's annual Y2K
costs relating to information technology have represented and are expected in
the future to represent less than 10% of Ford Credit's annual information
technology budget.
Y2K RISKS
The most reasonably likely worst case scenario for Ford Credit with respect
to the Y2K problem is the failure of an external alliance, particularly another
financial institution or energy supplier to that financial institution, to be
Y2K compliant. This could result in Ford Credit not being able to conduct
financial transfers such as payment of debt, selling commercial paper, or
collecting receivables, which in turn could result in lost revenue. The
preparedness of Ford Credit's utility suppliers is being monitored closely to
ensure plans are in place for uninterrupted service.
Y2K CONTINGENCY PLANS
Ford Credit has established a Y2K business resumption planning committee to
evaluate business disruption scenarios, coordinate the establishment of Y2K
contingency plans, and identify and implement preemptive strategies. Detailed
contingency plans for critical business processes have been developed and will
be validated by October 1999. Additionally, a Global Response Center is being
launched as a communications hub for the most current Y2K status during the
millenium rollover period.
FEDERAL INCOME TAX MATTERS
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of the notes and the
Class C Certificates. Unless otherwise indicated, this summary deals only with
the consequences to holders of notes and Class C Certificates that are U.S.
persons, as defined below, who acquired their notes or Class C Certificates at
their original issue price in the original issuance of those notes or Class C
Certificates and who hold these securities as capital assets.
The summary does not purport to deal with federal income tax consequences
applicable to all categories of holders, some of which may be subject to special
rules. For example, it does not discuss the tax treatment of noteholders or
certificateholders that are:
-- insurance companies;
-- regulated investment companies;
-- dealers in securities or currencies;
-- tax exempt entities;
-- persons holding certificates or notes as apart of a hedging,
integrated conversion, or constructive sale transaction or a straddle;
or
-- persons whose functional currency is not the U.S. Dollar.
Moreover, there are no cases or Internal Revenue Service rulings on similar
transactions involving both debt instruments and equity interests issued by a
trust with terms similar to those of the notes and the Class C Certificates. As
a result, the IRS may disagree with all or a part of
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the discussion below. Prospective investors are urged to consult their own tax
advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the notes and
the Class C Certificates.
The following summary is based upon current provisions of the tax code, the
Treasury regulations under the tax code and judicial or ruling authority, all of
which are subject to change, which change may be retroactive. Special Tax
Counsel will provide to the trust an opinion regarding certain federal income
tax matters discussed below. An opinion of Special Tax Counsel, however, is not
binding on the IRS or the courts. We have not sought, nor will we seek, a ruling
on any of the issues discussed below.
For purposes of this discussion, the term U.S. person means a beneficial
owner of a note or a Class C Certificate that is:
-- a citizen or resident of the United States;
-- a corporation or partnership created or organized in the United States
or under the laws of the United States or any political subdivision of
the United States;
-- an estate the income of which is subject to United States federal
income taxation regardless of its source; or
-- a trust that is subject to the supervision of a court within the
United States and the control of a United States person as described
in section 7701(a)(30) of the tax code or that has a valid election in
effect under applicable U.S. Treasury regulations to be treated as a
United States person.
For purposes of this discussion, the term non-U.S. person means a
beneficial owner of a note or Class C Certificate who is not a U.S. person.
SCOPE OF THE TAX OPINIONS
Upon issuance of the notes and certificates, Special Tax Counsel will
deliver its opinion that, under current law and subject to the discussion below,
the trust will not be classified as an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. Special
Tax Counsel will advise the trust that the Class A Notes will be classified as
debt for federal income tax purposes. While there is no authority directly
addressing analogous situations and the issue is not free from doubt, Special
Tax Counsel will advise the trust that the Class B Notes should be classified as
debt for federal income tax purposes. Class B Noteholders are advised that the
opinion of Special Tax Counsel is not binding on the IRS. In the event that the
Class B Notes were treated as equity interests in the trust, the consequences
governing the Class C Certificates described under the heading "-- Tax
Consequences to Holders of Class C Certificates" would apply to the Class B
noteholders. In particular, in such a case, income to certain tax-exempt
entities would be "unrelated business taxable income." Class B noteholders are
strongly urged to review the disclosure under the headings "-- Tax Consequences
to Holders of the Notes -- Possible Alternative Treatments of the Notes" and
"Tax Consequences to Holders of Class C Certificates" below, and to consult
their tax advisers regarding the treatment, for federal income tax purposes, of
the Class B Notes.
In addition, Special Tax Counsel has prepared or reviewed the statements
under the heading "Summary -- Tax Status" as they relate to federal income tax
matters and under the heading "Certain Federal Income Tax Consequences" in this
prospectus supplement and in the prospectus and is of the opinion that such
statements are correct in all material respects. Such statements are intended as
an explanatory discussion of the possible effects of the classification of the
trust as a partnership for federal income tax purposes on investors generally
and of related tax matters affecting investors generally, but do not purport to
furnish information in the level of detail or with the attention to the
investor's specific tax circumstances that would be provided by an investor's
own tax adviser. Accordingly, each investor is advised to consult its own tax
advisers with regard to the tax consequences to it of investing in notes and
Class C Certificates.
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TAX CHARACTERIZATION OF THE TRUST
Special Tax Counsel will deliver its opinion that the trust will not be
classified as an association (or publicly traded partnership) taxable as a
corporation for federal income tax purposes. This opinion will be based on the
assumption that the terms of the trust agreement and related documents will be
complied with, and on counsel's conclusions that --
-- the trust is not an entity that is per se classified as an association
taxable as a corporation; and
-- either the nature of the income of the trust will exempt it from the
provisions of the Code requiring some publicly traded partnerships to
be taxed as corporations or the trust will otherwise qualify for an
exemption from the rules governing publicly traded partnerships.
However, as discussed above, this opinion will not be binding on the IRS.
Special Tax Counsel cannot give any assurances that this characterization will
prevail. If the trust were taxable as a corporation for federal income tax
purposes, the trust would be subject to corporate income tax on its taxable
income. The trust's taxable income would include all of its income on the
receivables, possibly reduced by its interest expense on the notes. Any such
corporate income tax could materially reduce the amount of cash available to
make payments on the notes and distributions on the certificates. The
certificateholders and, possibly, the Class B noteholders could be liable for
any such tax that is unpaid by the trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The noteholders will be deemed to
agree, by their purchase of the notes, to treat the notes as debt for federal
income tax purposes. The discussion below assumes that this characterization of
the Class A Notes and the Class B Notes is correct.
ORIGINAL ISSUE DISCOUNT. Unless a note is a Short-Term Note, it will be
treated as issued with original issue discount if the excess of the note's
"stated redemption price at maturity" over the issue price equals or exceeds a
de minimis amount equal to 1/4 of 1 percent of the note's stated redemption
price at maturity multiplied by the number of complete years (based on the
anticipated weighted average life of a note) to its maturity.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a note and its issue price. A holder of a note
must include such OID in gross income as ordinary interest income as it accrues
under a method taking into account an economic accrual of the discount. In
general, a holder of a note with OID must include the OID in its income before
the holder receives the cash representing that income. The amount of OID on a
note will be considered to be zero if it is less than a de minimis amount
determined as described above.
However, the amount of any de minimis OID must be included in income as
principal payments are received on a note, in the proportion that each such
payment bears to the original principal amount of the note. The issue price of a
note will generally be the initial offering price at which a substantial amount
of the notes are sold. The trust intends to treat the issue price as including,
in addition, the amount paid by the noteholders for accrued interest, if any,
that relates to a period prior to the Closing Date. Under the Treasury
regulations governing OID, the stated redemption price at maturity is the sum of
all payments on the note other than any "qualified stated interest" payments.
Qualified stated interest is defined as any one of a series of payments equal to
the product of the outstanding principal amount of the note and a single fixed
rate or certain variable rates of interest that is unconditionally payable at
least annually.
The holder of a note issued with OID must include in gross income, for all
days during its taxable year on which it holds such note, the sum of the "daily
portions" of such OID. Such daily portions are computed by allocating to each
day during a taxable year a pro rata portion of the
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OID that accrued during the relevant accrual period(s). In the case of an
obligation which is prepayable by the borrower, such as the notes, OID is
computed by taking into account the Prepayment Assumption. The Prepayment
Assumption that will be used in determining the rate of accrual of OID, premium
and market discount, if any, is 1.5% ABS. The amount of OID that will accrue
during an accrual period (generally the period between interest payments or
compounding dates) is the excess, if any, of the sum of
-- the present value of all payments remaining to be made on the note as
of the close of the accrual period; and
-- the payments during the accrual period of amounts included in the
stated redemption price of the note; over
-- the "adjusted issue price" of the note at the beginning of the accrual
period.
An "accrual period" is the period over which OID accrues, and may be of any
length, provided that each accrual period is no longer than one year and each
scheduled payment of interest or principal occurs on either the last day or the
first day of an accrual period. The trust intends to report OID on the basis of
an accrual period that corresponds to the interval between Distribution Dates.
The adjusted issue price of a note is the sum of its issue price plus prior
accruals of OID, reduced by the total payments made with respect to such note in
all prior periods, other than qualified stated interest payments. The present
value of the remaining payments is determined on the basis of the following
three factors:
-- the original yield to maturity of the note (determined on the basis of
compounding at the end of each accrual period and properly adjusted
for the length of the accrual period);
-- events which have occurred before the end of the accrual period; and
-- the assumption that the remaining payments will be made in accordance
with the original Prepayment Assumption.
The effect of this method is to increase the portions of OID required to be
included in income by a noteholder to take into account prepayments on the
receivables at a rate that exceeds the Prepayment Assumption, and to decrease
(but not below zero for any period) the portions of OID required to be included
in income by a noteholder to take into account prepayments with respect to the
receivables at a rate that is slower than the Prepayment Assumption. Although
OID will be reported to noteholders based on the Prepayment Assumption, no
representation is made to noteholders that the receivables will be prepaid at
that rate or at any other rate.
A holder of a note that acquires the note for an amount that exceeds its
stated redemption price will not include any OID in gross income. A subsequent
holder of a note which acquires the note for an amount that is less than its
stated redemption price will be required to include OID in gross income, but
such a holder who purchases such note for an amount that exceeds its adjusted
issue price will be entitled (as will an initial holder who pays more than a
note's issue price) to reduce the amount of OID included in income in each
period by the amount of OID multiplied by a fraction, the numerator of which is
the excess of
-- the purchaser's adjusted basis in the note immediately after purchase
thereof; over
-- the adjusted issue price of the note,
and the denominator of which is the excess of
-- all amounts remaining to be paid on the note after the purchase date,
other than qualified stated interest; over
-- the adjusted issue price of the note.
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TOTAL ACCRUAL ELECTION. As an alternative to separately accruing stated
interest, OID, de minimis OID, market discount, de minimis market discount,
unstated interest, premium, and acquisition premium, a holder of a note (other
than a Short-Term Note, as described below) may elect to include all income that
accrues on the note using the constant yield method. If a noteholder makes this
election, income on a note will be calculated as though --
-- the issue price of the note were equal to the noteholder's adjusted
basis in the note immediately after its acquisition by the noteholder;
-- the note were issued on the noteholder's acquisition date; and
-- none of the interest payments on the note were "qualified stated
interest."
A noteholder may make such an election for a note that has premium or
market discount, respectively, only if the noteholder makes, or has previously
made, an election to amortize bond premium or to include market discount in
income currently. See "-- Market Discount" and "-- Amortizable Bond Premium"
below.
MARKET DISCOUNT. The notes, whether or not issued with OID, will be subject
to the "market discount rules" of Section 1276 of the Code. In general, these
rules provide that if a Note Owner acquires a note at a market discount (that
is, a discount from its stated redemption price at maturity or, if the notes
were issued with OID, its original issue price plus any accrued OID that exceeds
a de minimis amount specified in the Code) and thereafter --
-- recognizes gain upon a disposition; or
-- receives payments of principal,
then, the lesser of such gain or principal payment or the accrued market
discount will be taxed as ordinary interest income.
Generally, the accrued market discount will be the total market discount on
the note multiplied by a fraction, the numerator of which is
-- the number of days the Note Owner held the note
and the denominator of which is
-- the number of days from the date the Note Owner acquired the note
until its maturity date.
The Note Owner may elect, however, to determine accrued market discount
under the constant yield method.
Limitations imposed by the Code which are intended to match deductions with
the taxation of income may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
note with accrued market discount. A Note Owner may elect to include market
discount in gross income as it accrues and, if the Note Owner makes such an
election, is exempt from this rule. Any such election will apply to all debt
instruments acquired by the taxpayer on or after the first day of the first
taxable year to which such election applies. The adjusted basis of a note
subject to such election will be increased to reflect market discount included
in gross income, thereby reducing any gain or increasing any loss on a sale or
taxable disposition.
AMORTIZABLE BOND PREMIUM. In general, if a Note Owner purchases a note at a
premium (that is, an amount in excess of the amount payable upon the maturity
thereof), such Note Owner will be considered to have purchased such note with
"amortizable bond premium" equal to the amount of such excess. Such Note Owner
may elect to amortize such bond premium as an offset to interest income and not
as a separate deduction item as it accrues under a constant yield method over
the remaining term of the note. Such Note Owner's tax basis in the note will be
reduced by the amount of the amortized bond premium. Any such election shall
apply to all debt instruments (other than instruments the interest on which is
excludible from gross income) held by the Note Owner at the beginning of the
first taxable year for which the election applies or thereafter acquired and is
irrevocable without the consent of the IRS. Bond premium on a note
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held by a Note Owner who does not elect to amortize the premium will remain a
part of such Note Owner's tax basis in such note and will decrease the gain or
increase the loss otherwise recognized on the disposition of the note.
SHORT-TERM NOTES. Under the Code, special rules apply to Short-Term Notes.
Such notes are treated as issued with "acquisition discount" which is calculated
and included in income under principles similar to those governing OID except
that acquisition discount is equal to the excess of all payments of principal
and interest on the Short-Term Notes over their issue price. In general, an
individual or other cash basis holder of a short-term obligation is not required
to accrue acquisition discount for federal income tax purposes unless it elects
to do so. Accrual basis noteholders and certain other noteholders, including
banks, regulated investment companies, dealers in securities and cash basis
noteholders who so elect, are required to accrue acquisition discount on
Short-Term Notes on either a straight-line basis or under a constant yield
method (based on daily compounding), at the election of the noteholder. In the
case of a noteholder not required and not electing to include acquisition
discount in income currently, any gain realized on the sale or retirement of the
Short-Term Notes will be ordinary income to the extent of the acquisition
discount accrued on a straight-line basis (unless an election is made to accrue
the acquisition discount under the constant yield method) through the date of
sale or retirement. Noteholders who are not required and do not elect to accrue
acquisition discount on Short-Term Notes will be required to defer deductions
for interest on borrowings allocable to short-term obligations in an amount not
exceeding the deferred income until the deferred income is realized.
SALE OR OTHER DISPOSITION. If a noteholder sells a note, the holder will
recognize gain or loss in an amount equal to the difference between:
-- the amount realized on the sale, and
-- the holder's adjusted tax basis in the note.
The adjusted tax basis of a note to a particular noteholder generally will
equal the holder's cost for the note, increased by any market discount,
acquisition discount, OID and gain previously included by such noteholder in
income with respect to the note and decreased by any bond premium previously
amortized and principal payments previously received by such noteholder with
respect to such note.
Any such gain or loss and any gain or loss realized upon prepayment of a
note (other than unamortized OID, whether or not accrued) will be capital gain
or loss if the noteholder held the note as a capital asset, except for gain
representing accrued interest, accrued market discount or OID that has not
previously accrued, in each case to the extent not previously included in
income. A noteholder may generally only use capital losses incurred on sale or
disposition of a note to offset the noteholder's capital gains.
NON-U.S. PERSONS. In general, a non-U.S. person will not be subject to
United States federal income tax on interest (including OID) on a beneficial
interest in a note unless --
-- the non-U.S. person actually or constructively owns 10 percent or more
of the total combined voting power of all Classes of stock of the
seller (or affiliate of the seller) entitled to vote (or of a profits
or capital interest of the trust);
-- the non-U.S. person is a controlled foreign corporation that is
related to the seller (or the trust) through stock ownership,
-- the non-U.S. person is a bank receiving interest described in Code
Section 881(c)(3)(A);
-- such interest is contingent interest described in Code Section
871(h)(4);
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-- the non-U.S. person (who is a noteholder) bears certain relationships
to any certificateholder.
To qualify for the exemption from taxation, the non-U.S. person must comply
with applicable certification requirements.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a non-U.S. person will be exempt from United
States federal income tax and withholding tax, provided that --
-- such gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. person; and
-- in the case of an individual non-U.S. person, the non-U.S. person is
not present in the United States for 183 days or more in the taxable
year.
BACKUP WITHHOLDING. Each holder of a note (other than an exempt holder such
as a corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct taxpayer identification number and a statement that the holder is not
subject to backup withholding. Should a nonexempt noteholder fail to provide the
required certification, the trust will be required to withhold 31 percent of the
amount otherwise payable to the holder, and remit the withheld amount to the IRS
as a credit against the holder's federal income tax liability.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If the IRS successfully
asserted that one or more of the notes did not represent debt for federal income
tax purposes, the notes might be treated as equity interests in the trust. If so
treated, the trust might be treated as a publicly traded partnership that would
not be taxable as a corporation because it would meet certain qualifying income
tests. Nonetheless, treatment of the notes as equity interests in such a
publicly traded partnership could have adverse tax consequences to certain
holders. For example, income to certain tax-exempt entities (including pension
funds) would be "unrelated business taxable income," income to noteholders that
are non-U.S. persons generally would be subject to U.S. federal tax and U.S.
federal tax return filing and withholding requirements, individual holders might
be subject to certain limitations on their ability to deduct their share of
trust expenses, and taxpayers such as regulated investment companies and real
estate investment trusts could be adversely affected.
TAX CONSEQUENCES TO HOLDERS OF CLASS C CERTIFICATES
TREATMENT OF THE TRUST AS A PARTNERSHIP. The seller and the servicer will
agree, and the certificateholders will be deemed to agree by their purchase of
certificates, to treat the trust as a partnership for purposes of federal and
state income tax, franchise tax and any other tax measured in whole or in part
by income, with the assets of the partnership being the assets held by the
trust, the partners of the partnership being the seller and the
certificateholders, and the notes being debt of the partnership. However, the
proper characterization of the arrangement involving the trust, the
certificates, the notes, the seller and the servicer is not clear because there
is no authority on transactions closely comparable to those contemplated in this
prospectus supplement.
A variety of alternative characterizations of the certificates are
possible. For example, because the certificates generally will have certain
features characteristic of debt, the certificates might be considered debt of
the seller or the trust. Any such characterization would not result in
materially adverse tax consequences to certificateholders as compared to the
consequences from treatment of the certificates as equity in a partnership,
described below. The following discussion assumes that the certificates
represent equity interests in a partnership.
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PARTNERSHIP TAXATION. Assuming that the trust is classified as a
partnership, the trust will not be subject to federal income tax, but each
certificateholder will be required to take into account separately such holder's
allocated share of income, gains, losses, deductions and credits of the trust.
The trust's income will consist primarily of interest accrued on the receivables
(including appropriate adjustments for market discount (as discussed below), and
any OID and bond premium), investment income from investments of collections
held between Distribution Dates, any gain upon, or with respect to, collection
or disposition of the receivables and any income earned on any notional
principal contracts. The trust's deductions will consist primarily of interest
accruing on the notes, servicing and other fees and losses or deductions upon,
or with respect to, collection or the disposition of the receivables.
The tax items of a partnership are allocable to the partners in accordance
with the tax code, Treasury regulations and the partnership agreement. In the
trust agreement, the certificateholders will agree that the yield on a
certificate is intended to qualify as a "guaranteed payment" and not as a
distributive share of partnership income. A guaranteed payment would be treated
by a certificateholder as ordinary income, but may well not be treated as
interest income. The trust agreement will provide that, to the extent that such
treatment is not respected, the certificateholders of each Class of certificates
will be allocated ordinary gross income of the trust for each interest period
equal to the sum of --
-- the amount of interest that accrues on such Class of certificates for
such interest period based on the rate of interest on that Class of
certificates;
-- an amount equivalent to interest that accrues during such interest
period on amounts previously due on such Class of certificates but not
yet distributed; and
-- any trust income attributable to discount on the receivables that
corresponds to any excess of the principal balance of such Class of
certificates over their initial issue price.
All remaining taxable income of the trust generally will be allocated to
the seller, as "general partner" of the trust.
Except as set forth below, losses and deductions generally will not be
allocated to the certificateholders except to the extent the certificateholders
are reasonably expected to bear the economic burden of such losses or
deductions. Any losses allocated to certificateholders could be characterized as
capital losses, and the certificateholders generally would only be able to
deduct such losses against capital gain income, and deductions would be subject
to the limitations set forth below. Accordingly, a certificateholder's taxable
income from the trust could exceed the cash it is entitled to receive from the
trust.
Although the allocation of gross income to certificateholders described
above if the certificateholders are not treated as receiving a "guaranteed
payment" is intended to comply with applicable Treasury regulations and other
authorities, no assurance can be given that the IRS would not instead require
that certificateholders be allocated a distributive share of partnership net
income or loss. Moreover, if losses or deductions were allocated to
certificateholders, such losses or deductions would, to the extent that funds
were available therefor, later be reimbursed through allocations of ordinary
income.
We believe that allocating partnership income on the foregoing basis should
comport with the certificateholders' economic interests in the trust, although
no assurance can be given that the IRS would not require a greater amount of
income to be allocated to certificateholders. Moreover, under the foregoing
method of allocation, certificateholders of each Class of certificates may be
allocated income equal to the amount of interest accruing on such Class of
certificates based on the rate of interest on the certificates even though the
trust might not have sufficient cash to make current cash distributions of such
amount. Thus, cash basis certificateholders will in effect be required to report
income from the certificates on the accrual basis and certificateholders may
become liable for taxes on trust income even if they have not
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received cash from the trust to pay such taxes. In addition, because tax
allocation and tax reporting will be done on a uniform basis for all
certificateholders but certificateholders may be purchasing certificates at
different times and at different prices, certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the trust.
Certificateholders will be required to report items of income, loss and
deduction allocated to them by the trust in the taxable year in which or with
which the taxable year of the trust to which such allocations relate ends. The
tax code prescribes certain rules for determining the taxable year of the trust.
It is likely that, under these rules, the taxable year of the trust will be the
calendar year. However, in the event that all of the certificateholders
possessing a 5 percent or greater interest in the equity or the profits of the
trust share a taxable year that is other than the calendar year, the trust would
be required to use that year as its taxable year.
All of the taxable income allocated to a certificateholder 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 such a holder under the tax code. The
characterization under the trust agreement of yield on the certificates as a
guaranteed payment could adversely affect taxpayers, such as regulated
investment companies and real estate investment trusts, that expect to earn
"interest" income on their investment in the trust.
LIMITATIONS ON LOSSES AND DEDUCTIONS. In the event that losses or
deductions are allocated to certificateholders in the circumstances described
above, the following rules will apply. Under the "passive activity" rules of the
tax code, any loss allocated to a certificateholder who is a natural person,
estate, trust, closely held "C" corporation, or personal service corporation
would be a passive activity loss while, for purposes of those rules, income
allocated to such a certificateholder would be "portfolio income." Moreover, any
losses allocated to a certificateholder may be capital losses.
In addition, a taxpayer that is an individual, trust or estate may
generally deduct miscellaneous itemized deductions (which do not include
interest expense) only to the extent that they exceed two percent of the
taxpayer's adjusted gross income. Those limitations would apply to an individual
certificateholder's share of expenses of the trust (including fees paid to the
servicer) and might result in such holder having taxable income that exceeds the
amount of cash which the certificateholder is entitled to receive over the life
of the trust.
The trust intends to make all tax calculations relating to income and
allocations to certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each receivable, the trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on certificateholders.
DISCOUNT AND PREMIUM. It is believed that the receivables were not issued
with original issue discount or imputed interest, and, therefore, the trust
should not have original issue discount or imputed interest income. However, the
purchase price paid by the trust for the receivables may be greater or less than
the remaining principal balance of the receivables at the time of purchase. If
so, the receivables will have been acquired at a premium or discount, as the
case may be. (As indicated above, the trust will make this calculation on an
aggregate basis, but might be required to recompute it on a
receivable-by-receivable basis.)
If the trust acquires the receivables at a market discount or premium, the
trust will elect to include any such discount in income currently as it accrues
over the life of the receivables or to offset any such premium against interest
income on the receivables. As indicated above, a portion of such market discount
income or premium deduction may be allocated to certificateholders.
SECTION 708 TERMINATION. Under Section 708 of the tax code, the trust will
be deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in
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the trust are sold or exchanged within a 12-month period. If such a termination
occurs, the trust will be considered to have contributed all of its assets and
liabilities to a new partnership in exchange for an interest in the new
partnership and immediately thereafter, the terminated partnership will be
considered to have distributed interests in the new partnership to all of its
partners (including the purchasing partner who caused the termination) in
proportion to their interests in the terminated partnership in liquidation of
the terminated partnership. The trust will not comply with certain technical
requirements that might apply when such a constructive termination occurs. As a
result, the trust may be subject to certain tax penalties and may incur
additional expenses if it is required to comply with those requirements.
Furthermore, the trust might not be able to comply due to lack of data.
DISTRIBUTIONS TO CERTIFICATEHOLDERS. Certificateholders generally will not
recognize gain or loss with respect to distributions from the trust. A
certificateholder will, however --
-- recognize gain to the extent any money distributed exceeds the
certificateholder's adjusted basis in the certificates (as described
below under "-- Disposition of Certificates") immediately before the
distribution; and
-- recognize loss upon termination of the trust or termination of the
certificateholder's interest in the trust if the trust only
distributes money to the certificateholder and the amount distributed
is less than the certificateholder's adjusted basis in the
certificates.
Any such gain or loss would be long-term capital gain or loss if the
holding period of the certificates were more than one year, assuming that the
certificates are held as capital assets.
DISPOSITION OF CERTIFICATES. Generally, capital gain or loss will be
recognized on a sale of certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the certificates sold.
A certificateholder's tax basis in a certificate will generally equal the
holder's cost increased by the holder's share of trust income (includible in
income) and decreased by any distributions received with respect to such
certificate. In addition, both the tax basis in the certificates and the amount
realized on a sale of a certificate would include the holder's share of the
notes and other liabilities of the trust. A holder acquiring certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in such certificates, and, upon sale or other disposition of some of the
certificates, allocate a portion of such aggregate tax basis to the certificates
sold (rather than maintaining a separate tax basis in each certificate for
purposes of computing gain or loss on a sale of that certificate).
Any gain on the sale of a certificate attributable to the holder's share of
unrecognized accrued market discount on the receivables would generally be
treated as ordinary income to the holder and would give rise to special federal
income tax reporting requirements. The trust does not expect to have any other
assets that would give rise to such special reporting requirements. Thus, to
avoid those special reporting requirements, the trust will elect to include
market discount in income as it accrues.
If a certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed miscellaneous itemized
deductions described above) over the life of the certificates that exceeds the
aggregate cash distributions with respect with respect to the certificates, such
excess will generally give rise to a capital loss upon the retirement of the
certificates.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the certificateholders in
proportion to the principal balance of certificates owned by them as of the
close of the last day of such month. As a result, a holder purchasing
certificates may be allocated tax items (which will affect its tax liability and
tax basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
Treasury regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of
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the partner's interest), taxable income or losses of the trust might be
reallocated among the certificateholders. The seller is authorized to revise the
trust's method of allocation between transferors and transferees to conform to a
method permitted by future Treasury regulations.
SECTION 754 ELECTION. In the event that a certificateholder sells its
certificates at a profit (loss), the purchasing certificateholder will have a
higher (lower) basis in the certificates than the selling certificateholder had.
The tax basis of the trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the trust will not make such election. As a
result, certificateholders might be allocated a greater or lesser amount of
trust income than would be appropriate based on their own purchase price for
certificates.
ADMINISTRATIVE MATTERS. The Owner Trustee is required to keep or have kept
complete and accurate books of the trust. Such books will be maintained for
financial reporting and federal income tax purposes on an accrual basis and the
fiscal year of the trust will be the calendar year. The Owner Trustee will file
a partnership information return (Form 1065) with the IRS for each taxable year
of the trust and will report each certificateholder's allocable share of items
of trust income and expense to holders and the IRS on Schedule K-1. The trust
will provide the Schedule K-1 information to nominees that fail to provide the
trust with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
certificates. Generally, holders must file federal income tax returns that are
consistent with the information return filed by the trust or be subject to
penalties unless the holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds certificates as a
nominee at any time during a calendar year is required to furnish the trust with
a statement containing certain information on the nominee, the beneficial owners
and the certificates so held. Such information includes:
-- the name, address and federal taxpayer identification number of the
nominee; and
-- as to each beneficial owner --
-- the name, address and federal taxpayer identification number of such
person;
-- whether such 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
-- certain information on certificates that were held, bought or sold on
behalf of such person throughout the year.
In addition, brokers and financial institutions that hold certificates
through a nominee are required to furnish directly to the trust information as
to themselves and their ownership of certificates. A clearing agency registered
under Section 17A of the Securities Exchange Act of 1934, as amended is not
required to furnish any such information statement to the trust. The information
referred to above for any calendar year must be furnished to the trust on or
before the following January 31. 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 taxpayer. Under these audit procedures, the tax
treatment of items of trust income, gain, loss, deduction and credit would be
determined at the trust level in a unified proceeding, rather than in separate
proceedings with each certificateholder. Generally, the statute of limitations
for trust items does not expire before three years after the date on which the
partnership information return is filed. The seller will be designated the "tax
matters partner" for
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the trust and, as such, is designated to receive notice on behalf of, and to
provide notice to those certificateholders not receiving notice from, the IRS,
and to represent the certificateholders in any dispute with the IRS. 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
certificateholders, and while the certificateholders may participate in any
adjudicative process that is undergone at the trust level in arriving at such a
determination, such certificateholders will be precluded from separately
litigating a proposed adjustment to the items of the trust. As the tax matters
partner, the seller may enter into a binding settlement on behalf of all
certificateholders with a less than a 1 percent interest in the trust (except
for any group of such certificateholders with an aggregate interest of 5 percent
or more in trust profits that elects to form a notice group or
certificateholders who otherwise notify the IRS that the seller is not
authorized to settle on their behalf). In the absence of a proceeding at the
trust level, a certificateholder under certain circumstances may pursue a claim
for credit or refund on his own behalf by filing a request for administrative
adjustment of a trust item. Each certificateholder is advised to consult its own
tax advisor with respect to the impact of these procedures on its particular
case.
BACKUP WITHHOLDING. Distributions 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, the certificateholder fails to comply with
certain identification procedures and is not an exempt recipient under
applicable provisions of the tax code.
NO NON-U.S. PERSONS. The Class C Certificates may not be purchased by
non-U.S. persons. For these purposes, non-U.S. person does include
certificateholders whose ownership of the certificates is effectively connected
with such person's conduct of a trade or business within the United States
(within the meaning of the tax code) and who provides the trust and the seller
with a Form 4224 (and such other certifications, representations, or opinions of
counsel as may be requested by the trust or the seller).
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of notes 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 (i) 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 such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Treasury regulations provide that as of January 1, 1999, in order to
qualify for reduced rates of withholding, non-U.S. Persons are obliged to file a
new unified Form W-8 that has replaced the former versions of Form 1001
(Ownership, Exemption or Reduced Rate Certificate), Form W-8 (Certificate of
Foreign Status), and Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States). Therefore, pursuant to those regulations, all beneficial owners of
notes who have a valid former version of Form W-8, Form 1001, or Form 4224, as
the case may be, on file with the appropriate party (as described above) must
file a new unified Form W-8 with such party before the earlier of (i) the
expiration of the Form W-8, Form 1001, or Form 4224 currently on file, (ii) a
change in circumstances that makes any of the information on the currently filed
former version of Form W-8, Form 1001, or Form 4224 incorrect, or (iii) December
31, 2000. Beneficial owners who are non-U.S. persons who do not currently have a
valid former version of Form W-8, Form 1001, or Form 4224, as the case may be,
on file, must file the new unified Form W-8 in order to obtain an exemption or
reduced tax rate on any of the bases addressed by the former versions of Form
W-8, Form 1001, or Form 4224.
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<PAGE> 61
Exemption for non-U.S. Persons (Former Form W-8). Beneficial owners of
notes that are non-U.S. persons can obtain a complete exemption from the
withholding tax if they currently have a signed and valid former version of the
Form W-8 on file with the appropriate party (as described above). If the
information shown on Form W-8 changes, a new unified Form W-8 must be filed
within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Former
Form 4224). A non-U.S. person, 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 if it has a valid former version of Form 4224 on file
with the appropriate party (as discussed above).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Former Form 1001). Non-U.S. persons that are beneficial owners of notes
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) if they have a
valid current version of the Form 1001 on file with the correct party (as
discussed above). If the treaty provides only for a reduced rate, withholding
tax will be imposed at that rate unless the filer alternatively has a valid
current version of Form W-8 on file with the appropriate party (as described
above).
Exemption for U.S. Persons (Former 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).
Exemption for all non-U.S. Persons with no valid current version of Form
W-8, Form 1001, or Form 4224 on file (Form W-8). Beneficial owners who are
non-U.S. persons who do not currently have a valid former version of Form W-8,
Form 1001, or Form 4224, as the case may be, on file, must file the new unified
Form W-8 in order to obtain an exemption or reduced tax rate on any of the bases
addressed by the former versions of Form W-8, Form 1001, or Form 4224.
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a note
files by submitting the new unified Form W-8 to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). The new unified Form W-8 is effective for three calendar
years.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to non-U.S. persons who are holders of the
notes. Investors are advised to consult their own tax advisers for specific tax
advice concerning their holding and disposing of the notes.
STATE TAX MATTERS
Because of the variation in each state's and locality's tax laws, it is
impossible to predict the tax Classification of the trust or the tax
consequences to the trust or to holders of notes and Class C Certificates in all
of the state and local taxing jurisdictions in which they may be subject to tax.
Noteholders and certificateholders are urged to consult their own tax advisors
with respect to state and local taxation of the trust and state and local tax
consequences of the purchase, ownership and disposition of notes and Class C
Certificates.
MICHIGAN TAX CONSEQUENCES
The State of Michigan imposes a state individual income tax and a Single
Business Tax which is based partially upon the net income of corporations,
partnerships and other entities doing business in the State of Michigan. This
discussion is based upon present provisions of Michigan statutes and the
regulations promulgated thereunder, and applicable judicial or ruling
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authority, all of which are subject to change, which change may be retroactive.
No ruling on any of the issues discussed below will be sought from the Michigan
Department of Treasury.
MICHIGAN TAX CONSEQUENCES WITH RESPECT TO THE NOTES
Michigan Tax Counsel will deliver his opinion that, assuming the notes will
be treated as debt for federal income tax purposes, the notes will be treated as
debt for Michigan income tax and Single Business Tax purposes. Accordingly,
noteholders not otherwise subject to taxation in Michigan should not become
subject to taxation in Michigan solely because of a holder's ownership of notes.
However, a noteholder already subject to Michigan's income tax or Single
Business Tax could be required to pay additional Michigan tax as a result of the
holder's ownership or disposition of notes. However, in the event that the Class
B Notes were treated as equity interests in the trust, the consequences
governing the certificates described under the heading "-- Michigan Tax
Consequences With Respect to the Certificates" would apply to the Class B
noteholders.
MICHIGAN TAX CONSEQUENCES WITH RESPECT TO THE CLASS C CERTIFICATES
Michigan Tax Counsel will deliver an opinion that if the arrangement
created by the trust agreement is treated as a partnership (not taxable as a
corporation) for federal income tax purposes, the same treatment should also
apply for Michigan tax purposes. In such case, the partnership should have no
Michigan Single Business Tax liability (which could otherwise result in reduced
distributions to certificateholders). The certificateholders also should not be
subject to the Michigan Single Business Tax on income received through the
partnership.
Individual certificateholders that are nonresidents of Michigan and are not
otherwise subject to Michigan taxes may be subject to Michigan Individual Income
Tax of 4.4% on the income from the partnership. Michigan law is not clear with
respect to this issue. Other states, with similar laws, do take the position
that individual partners are subject to personal income tax on income from a
partnership when a partnership is doing business in their state. A
certificateholder not otherwise subject to taxation in Michigan would not be
subject to Michigan Individual Income Tax on income beyond that derived from the
certificates, solely because of the certificateholder's ownership of the
certificates.
If the certificates are instead treated as ownership interests in an
association taxable as a corporation or a "publicly traded partnership" taxable
as a corporation, then the hypothetical entity would be subject to the Michigan
Single Business Tax (which would result in reduced distributions to
certificateholders). A certificateholder not otherwise subject to tax in
Michigan would not become subject to Michigan tax as a result of its mere
ownership of such an interest.
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
OR CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF OFFERED NOTES AND CLASS C CERTIFICATES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
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ERISA CONSIDERATIONS
THE NOTES
The notes may, in general, be purchased by or on behalf of Benefit Plan
Investors. Although no assurance can be given in this regard, the notes should
be treated as "debt" and not as "Equity Interests" for purposes of the Plan
Assets Regulation because the notes --
-- are expected to be treated as indebtedness under local law and will,
in the opinion of Special Tax Counsel, be treated as debt, rather than
equity, for federal tax purposes (see "Federal Income Tax Matters" in
this prospectus supplement); and
-- should not be deemed to have any "substantial equity features."
Accordingly, the notes may also, in general, be purchased by or on behalf
of Benefit Plan Investors. See "ERISA Considerations" in the prospectus.
However, the acquisition and holding of notes of any Class by or on behalf
of a Benefit Plan Investor could be considered to give rise to a prohibited
transaction under ERISA and Section 4975 of the Code if the trust, the Owner
Trustee, the indenture trustee, any certificateholder or any of their respective
affiliates, is or becomes a "party in interest" or a "disqualified person" (as
defined in ERISA and the Code, respectively) with respect to such Benefit Plan
Investor. In such case, certain exemptions from the prohibited transaction rules
could be applicable to such acquisition and holding by a Benefit Plan Investor
depending on the type and circumstances of the Benefit Plan Investor fiduciary
making the decision to acquire a note. For additional information regarding
treatment of the notes under ERISA, see "ERISA Considerations" in the
prospectus.
THE CLASS C CERTIFICATES
The Issuer intends to limit equity ownership in the Class C Certificates
(and each other Class of equity securities issued by the trust) by Benefit Plan
Investors to less than 25% of the value of that Class of certificates.
Accordingly, Benefit Plan Investors may not acquire the Class C Certificates (or
any other Class of equity issued by the trust); provided, however, that an
insurance company using the assets of its general account may purchase Class C
Certificates on the condition that --
-- such insurance company is able to represent that, as of the date it
acquires an interest in a Class C Certificate, less than 25% of the
assets of such general account constitute "plan assets" for purposes
of Title I of ERISA and Section 4975 of the Code; and
-- such insurance company agrees that if at any time during any calendar
quarter while it is holding an interest in such Class C Certificate,
25% or more of the assets of such general account constitute "plan
assets" for purposes of Title I of ERISA and Section 4975 of the Code,
and, at that time, if no exemption or exception applies to the
continued holding of the Class C Certificate under ERISA, by the end
of the next quarter such insurance company will dispose of all Class C
Certificates then held in its general account by the end of the next
quarter.
In addition, investors other than Benefit Plan Investors should be aware
that a prohibited transaction under ERISA and the Code could be deemed to occur
if any holder of the Class C Certificates or any of its affiliates is or becomes
a party in interest or a disqualified person with respect to any Benefit Plan
Investor that acquires and holds the notes without such Benefit Plan Investor
being covered by one or more exemptions from the prohibited transaction rules.
Each purchaser of the Class C Certificates will be required to represent and
certify that it either --
-- is not a Benefit Plan Investor nor acquiring such Class C Certificates
on behalf of any such Benefit Plan Investor; or
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<PAGE> 64
-- is an insurance company using the assets of its general account under
the limitations described above.
For additional information regarding treatment of the Class C Certificates
under ERISA, see "ERISA Considerations" in the prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, the seller has agreed to cause the trust to sell to Ford Financial
Services, Inc. and Ford Financial Services, Inc. has agreed to purchase, the
entire principal amount of the Class A-1 Notes and Class A-2 Notes. Ford
Financial Services, Inc. will resell the Class A-1 Notes and Class A-2 Notes to
investors without registration pursuant to the exemption provided under Section
3(a)(3) of the Securities Act of 1933. Ford Financial Services, Inc. is a wholly
owned subsidiary of the servicer and an affiliate of the seller.
Subject to the terms and conditions set forth in the underwriting
agreement, the seller has agreed to cause the trust to sell to each of the
underwriters named below, and each of those underwriters has severally agreed to
purchase, the initial principal amount of Class A-3 Notes, Class A-4 Notes and
Class A-5 Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A-3 NOTE / A-4 NOTE / A-5 NOTE CLASS A-3 CLASS A-4 CLASS A-5
UNDERWRITER NOTES NOTES NOTES
- ------------------------------------ -------------- ------------ ------------
<S> <C> <C> <C>
Goldman, Sachs & Co. ........................ $ 274,000,000 $ 80,000,000 $117,641,000
Salomon Smith Barney Inc. ................... 274,000,000 80,000,000 117,637,000
Banc One Capital Markets, Inc. .............. 274,000,000 80,000,000 117,637,000
Lehman Brothers Inc. ........................ 274,000,000 80,000,000 117,637,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................... 274,000,000 80,000,000 117,637,000
-------------- ------------ ------------
Total................................... $1,370,000,000 $400,000,000 $588,189,000
============== ============ ============
</TABLE>
The seller has been advised by the underwriters of the Class A-3 Notes, the
Class A-4 Notes and the Class A-5 Notes that they propose initially to offer the
Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes to the public at
the prices set forth in this prospectus supplement. After the initial public
offering of the Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes,
the public offering prices may change.
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<PAGE> 65
Subject to the terms and conditions set forth in the underwriting
agreement, the seller has agreed to cause the trust to sell to each of the
underwriters named below, and each of those underwriters has severally agreed to
purchase, the initial principal amount of the Class B Notes and the Class C
Certificates set forth below opposite its name.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
CLASS B CLASS C
CLASS B NOTE / CLASS C CERTIFICATE UNDERWRITERS NOTES CERTIFICATES
- ----------------------------------------------- ------------ ------------
<S> <C> <C>
Goldman, Sachs & Co. ....................................... $ 54,820,000 $31,325,000
Salomon Smith Barney Inc. .................................. 54,820,000 31,325,000
------------ -----------
Total.................................................. $109,640,000 $62,650,000
============ ===========
</TABLE>
The seller has been advised by the underwriters of the Class B Notes and
the Class C Certificates that they propose initially to offer the Class B Notes
and the Class C Certificates to the public at the prices set forth in this
prospectus supplement. After the initial public offering of the Class B Notes
and the Class C Certificates, the public offering prices may change.
The underwriting discounts and commissions, the selling concessions that
the underwriters of the notes and the certificates may allow to certain dealers,
and the discounts that such dealers may reallow to certain other dealers,
expressed as a percentage of the principal amount of each Class of notes and as
an aggregate dollar amount, shall be as follows:
<TABLE>
<CAPTION>
NET
UNDERWRITING PROCEEDS SELLING
DISCOUNT AND TO THE CONCESSIONS REALLOWANCE
COMMISSIONS SELLER(1)(2) NOT TO EXCEED NOT TO EXCEED
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Class A-3 Notes.............. 0.175% 99.821160% 0.105% 0.060%
Class A-4 Notes.............. 0.210% 99.783323% 0.125% 0.075%
Class A-5 Notes.............. 0.250% 99.736955% 0.150% 0.090%
Class B Notes................ 0.350% 99.632258% 0.210% 0.090%
Class C Certificates......... 0.350% 99.632642% 0.210% 0.125%
Total for the Offered
Notes and Class C
Certificates.......... $5,310,987.50 $2,524,981,640.13
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from September 23, 1999.
(2) Before deducting other expenses estimated at $1,250,000.
Until the distribution of the Offered Notes and the Class C Certificates is
completed, rules of the SEC may limit the ability of the underwriters and
certain selling group members to bid for and purchase the Offered Notes and the
Class C Certificates. As an exception to these rules, the underwriters are
permitted to engage in certain transactions that stabilize the price of the
Offered Notes and the Class C Certificates. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Offered Notes and the Class C Certificates.
If the underwriters create a short position in the Offered Notes or the
Class C Certificates in connection with this offering (i.e., they sell more
Offered Notes or Class C Certificates than are set forth on the cover page of
this prospectus supplement), the underwriters may reduce that short position by
purchasing Offered Notes or Class C Certificates, as the case may be, in the
open market.
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<PAGE> 66
The underwriters may also impose a penalty bid on certain underwriters and
selling group members. This means that if the underwriters purchase Offered
Notes or Class C Certificates in the open market to reduce the underwriters'
short position or to stabilize the price of such Offered Notes or Class C
Certificates, they may reclaim the amount of the selling concession from any
underwriter or selling group member who sold those Offered Notes or Class C
Certificates, as the case may be, as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the seller nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Offered Notes or the Class C
Certificates. In addition, neither the seller nor any of the underwriters makes
any representation that the underwriters will engage in such transactions or
that such transactions, once commenced, will not be discontinued without notice.
The notes and the certificates are new issues of securities and there
currently is no secondary market for the notes or the certificates. The
underwriters for the Offered Notes and the Class C Certificates expect to make a
market in such securities but will not be obligated to do so. There is no
assurance that a secondary market for the Offered Notes or the Class C
Certificates will develop. If a secondary market for the Offered Notes or the
Class C Certificates does develop, it might end at any time or it might not be
sufficiently liquid to enable you to resell any of your notes or certificates.
The indenture trustee may, from time to time, invest the funds in the
Collection Account and the Reserve Account in investments acquired from or
issued by the underwriters.
In the ordinary course of business, the underwriters and their affiliates
have engaged and may engage in investment banking and commercial banking
transactions with the servicer and its affiliates.
The seller and Ford Credit have agreed to indemnify the underwriters
against certain liabilities, including civil liabilities under the Securities
Act of 1933, as amended, or to contribute to payments which the underwriters may
be required to make in respect thereof.
The closings of the sale of each Class of the notes and each Class of the
certificates are conditioned on the closing of the sale of each other Class of
notes and certificates.
Upon receipt of a request by an investor who has received an electronic
prospectus from an underwriter 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 underwriter will promptly deliver, or cause to be delivered,
without charge, a paper copy of the prospectus.
LEGAL OPINIONS
Certain legal and state tax matters relating to the notes and the Class C
Certificates will be passed upon for the seller and the servicer by Hurley D.
Smith, Esq., Secretary and Corporate Counsel of the servicer. Certain legal
matters relating to the notes and the Class C Certificates will be passed upon
for the underwriters and certain federal income tax and other matters will be
passed upon for the seller by Skadden, Arps, Slate, Meagher & Flom LLP. Mr.
Smith is a full-time employee of Ford Credit and owns and holds options to
purchase shares of Common Stock of Ford Motor Company. Skadden, Arps, Slate,
Meagher & Flom LLP have from time to time represented Ford Motor Company, Ford
Credit and their affiliates in connection with other transactions.
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GLOSSARY OF TERMS FOR THE PROSPECTUS SUPPLEMENT
"ABS" means the Absolute Prepayment Model which we use to measure
prepayments on receivables.
"ABS TABLE" means the table captioned "Percent of Initial Note Principal
Amount or Initial Certificate Balance at Various ABS Percentages" beginning on
page S-26 of this prospectus supplement.
"ACTUARIAL ADVANCE" means an advance on an Actuarial Receivable made by the
Servicer, in its sole discretion, for a deficiency in a scheduled payment as of
the last day of a Collection Period.
"AVAILABLE COLLECTIONS" for a Distribution Date will be the sum of the
following amounts with respect to the Collection Period preceding that
Distribution Date (subject to the exclusions set forth below such amounts):
-- all scheduled payments and all prepayments in full collected with
respect to Actuarial Receivables (including amounts withdrawn from the
Payahead Account but excluding amounts deposited into the Payahead
Account) and all payments collected with respect to Simple Interest
Receivables;
-- all Liquidation Proceeds and all recoveries in respect of Liquidated
Receivables which were written off in prior Collection Periods;
-- all Actuarial Advances made by the servicer of principal due on the
Actuarial Receivables;
-- all Advances made by the servicer of interest due on the receivables;
-- all Advances, if any, of interest made by the servicer in respect of
receivables which were prepaid in full;
-- the Purchase Amount of each receivable that was repurchased by the
seller or purchased by the servicer under an obligation which arose
during the related Collection Period; and
-- partial prepayments of any refunded item included in the principal
balance of a receivable, such as extended warranty protection plan
costs, or physical damage, credit life, disability insurance premiums,
or any partial prepayment which causes a reduction in the obligor's
periodic payment to an amount below the scheduled payment as of the
Cutoff Date.
The AVAILABLE COLLECTIONS on any Distribution Date will exclude the
following:
-- amounts received on any receivable to the extent that the servicer has
previously made an unreimbursed Advance with respect to such
receivable;
-- amounts received on any of the receivables to the extent that the
servicer has previously made an unreimbursed Advance on a receivable
which is not recoverable from collections on the particular
receivable;
-- Liquidation Proceeds with respect to a particular Actuarial Receivable
to the extent of any unreimbursed Actuarial Advances made with respect
to that Actuarial Receivable;
-- all payments and proceeds (including Liquidation Proceeds) of any
receivables the Purchase Amount of which has been included in the
Available Funds in a prior Collection Period;
-- Liquidation Proceeds with respect to a Simple Interest Receivable
attributable to accrued and unpaid interest thereon (but not including
interest for the then current Collection Period) but only to the
extent of any unreimbursed Simple Interest Advances; and
-- amounts constituting the Supplemental Servicing Fee.
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<PAGE> 68
"AVAILABLE FUNDS" for a Distribution Date shall be the sum of the Available
Collections and the Reserve Account Excess Amount.
"BUSINESS DAY" is a day other than a Saturday, a Sunday or a day on which
banking institutions or trust companies in The City of New York or the State of
Delaware are authorized by law, regulation or executive order to be closed.
"CERTIFICATE BALANCE" means:
-- with respect to the Class C Certificates, initially, $62,650,000 and,
thereafter, means the initial Certificate Balance of the Class C
Certificates, reduced by all amounts allocable to principal previously
distributed to the Class C certificateholders; and
-- with respect to the Class D Certificates, initially, $62,650,000 and,
thereafter, means the initial Certificate Balance of the Class D
Certificates, reduced by all amounts allocable to principal previously
distributed to the Class D certificateholders.
"CERTIFICATE INTEREST DISTRIBUTION ACCOUNT" means the interest payment
account which the Owner Trustee will create for the benefit of the
certificateholders.
"CERTIFICATE PRINCIPAL DISTRIBUTION ACCOUNT" means the principal payment
account which the Owner Trustee will create for the benefit of the
certificateholders.
"CLOSING DATE" means September 23, 1999.
"COLLECTION ACCOUNT" means an account, held in the name of the indenture
trustee, into which the servicer is required to deposit collections on the
receivables.
"COLLECTION PERIOD" means, with respect to the first Distribution Date, the
calendar month ending on September 30, 1999, and with respect to each subsequent
Distribution Date, the calendar month preceding the calendar month in which such
Distribution Date occurs.
"CUT-OFF DATE" means the date as of which the seller will transfer the
Receivables to the trust, which is September 1, 1999.
"DELAWARE TRUSTEE" means The Bank of New York (Delaware), a Delaware
banking corporation as Delaware trustee under the trust agreement.
"DETERMINATION DATE" means the Business Day immediately preceding each
Distribution Date.
"DISTRIBUTION DATE" means the date on which the trust will pay interest and
principal on the notes and certificates, which will be the fifteenth day of each
month or, if any such day is not a Business Day, on the next Business Day,
commencing October 15, 1999.
"FINAL SCHEDULED DISTRIBUTION DATE" for each Class of notes and
certificates means the respective dates set forth on the cover page of this
prospectus supplement or, if such date is not a Business Day, the next
succeeding Business Day.
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<PAGE> 69
"FIRST PRIORITY PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, an amount not less than zero equal to:
AN - (PB - YSOA)
Where:
<TABLE>
<S> <C> <C>
AN = the aggregate outstanding principal amount of the Class A
Notes as of the preceding Distribution Date, after giving
effect to any principal payments made on the Class A Notes
on such preceding Distribution Date;
PB = the Pool Balance at the end of the Collection Period
preceding such Distribution Date; and
YSOA = the Yield Supplement Overcollateralization Amount with
respect to such Distribution Date.
</TABLE>
Provided, however that:
-- the First Priority Principal Distribution Amount on or after the
Class A-1 Final Scheduled Distribution Date shall not be less than
the amount that is necessary to reduce the outstanding principal
amount of the Class A-1 Notes to zero;
-- the First Priority Principal Distribution Amount on or after the
Class A-2 Final Scheduled Distribution Date shall not be less than
the amount that is necessary to reduce the outstanding principal
amount of the Class A-2 Notes to zero;
-- the First Priority Principal Distribution Amount on or after the
Class A-3 Final Scheduled Distribution Date shall not be less than
the amount that is necessary to reduce the outstanding principal
amount of the Class A-3 Notes to zero;
-- the First Priority Principal Distribution Amount on or after the
Class A-4 Final Scheduled Distribution Date shall not be less than
the amount that is necessary to reduce the outstanding principal
amount of the Class A-4 Notes to zero; and
-- the First Priority Principal Distribution Amount on or after the
Class A-5 Final Scheduled Distribution Date shall not be less than
the amount that is necessary to reduce the outstanding principal
amount of the Class A-5 Notes to zero.
"INDENTURE TRUSTEE" means The Chase Manhattan Bank, a New York bank and
trust company, as indenture trustee under the indenture.
"INITIAL POOL BALANCE" is the Pool Balance as of the Cutoff Date, which is
$3,300,023,039.40.
"INITIAL RECEIVABLES" means the receivables which the seller transfers to
the trust on the Closing Date.
"INITIAL RECEIVABLES POOL" means the pool of receivables consisting of the
Initial Receivables.
"INTEREST PERIOD" means:
-- with respect to the Class A-1 and Class A-2 Notes --
-- in the case of the first Distribution Date, the period from and
including the Closing Date to but excluding the first Distribution
Date, or
-- in the case of any other Distribution Date, the period from and
including the most recent Distribution Date on which interest has
been paid to but excluding the following Distribution Date; and
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<PAGE> 70
-- with respect to all other Classes of notes and each Class of
certificates --
-- in the case of the first Distribution Date, the period from and
including the Closing Date to but excluding the fifteenth day of the
following calendar month; and
-- in the case any other Distribution Date, the period from and
including the fifteenth day of the calendar month preceding such
Distribution Date, to but excluding the fifteenth day of the
following calendar month.
"MICHIGAN TAX COUNSEL" means Hurley D. Smith, Esq., Secretary and Corporate
Counsel of the servicer.
"NOTE OWNER" means a person acquiring a beneficial ownership interest in
notes.
"OFFERED NOTES" means collectively the Class A-3 Notes, the Class A-4
Notes, the Class A-5 Notes and the Class B Notes.
"OID" means original issue discount.
"OID REGULATIONS" means the Treasury regulations governing OID.
"OWNER TRUSTEE" means The Bank of New York, a New York banking corporation,
as owner trustee under the trust agreement under which the trust is formed.
"PAYAHEAD ACCOUNT" is an account which the servicer will establish in the
name of the related indenture trustee into which it will deposit Payaheads.
"POOL BALANCE" will represent the aggregate principal balance of the
receivables at the end of the preceding Collection Period (or in the case of the
first Collection Period, the Cutoff Date), after giving effect to all payments
(other than Payaheads) received from obligors, Liquidation Proceeds, Advances
and Purchase Amounts to be remitted by the servicer or the seller, as the case
may be, all for such Collection Period and all Realized Losses during such
Collection Period.
"PREPAYMENT ASSUMPTION" means the anticipated rate of prepayments assumed
in pricing a debt instrument.
"PRIMUS" means --
-- until August 1999, PRIMUS Automotive Financial Services, Inc., a
wholly owned subsidiary of Ford Credit conducting its business as a
corporate entity separate from Ford Credit; and
-- beginning in August 1999, Primus Financial Services, a d/b/a of Ford
Credit, conducting its business as a division of Ford Credit.
"PRINCIPAL DISTRIBUTION ACCOUNT" means, so long as any of the notes are
outstanding, the administrative subaccount within the Collection Account created
by the indenture trustee for the benefit of the holders of notes and
certificates entitled the "Principal Distribution Account" and after the
principal of all the notes has been paid in full, the Certificate Principal
Distribution Account.
"PRINCIPAL DISTRIBUTION AMOUNT" means the First Priority Principal
Distribution Amount, the Second Priority Principal Distribution Amount or the
Regular Principal Distribution Amount, as applicable.
"REALIZED LOSSES" means the excess of the principal balance of any
Liquidated Receivable over Liquidation Proceeds to the extent allocable to
principal.
"RECEIVABLES POOL" means the pool of receivables which the trust owns at
any time.
"RECEIVABLES TRANSFER AND SERVICING AGREEMENTS" means collectively the
purchase agreement, the sale and servicing agreement, the trust agreement and
the administration agreement.
S-70
<PAGE> 71
"RECORD DATE" with respect to any Distribution Date means --
-- with respect to the notes, the day immediately preceding the
Distribution Date or, if the notes are issued as Definitive Notes, the
last day of the preceding month; and
-- with respect to the certificates, the last day of the month preceding
the Distribution Date.
"REGULAR PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, an amount not less than zero equal to the greater of --
A1 + A2 -- (FPDA + SPDA); and
(OS -- (PB -- [SOA + YSOA])) -- (FPDA + SPDA)
<TABLE>
<CAPTION>
Where:
<S> <C> <C>
A1 = the aggregate outstanding principal amount of the Class A-1
Notes as of the preceding Distribution Date (after giving
effect to any principal payments made on the Class A-1 Notes
on such preceding Distribution Date);
A2 = the aggregate outstanding principal amount of the Class A-2
Notes as of the preceding Distribution Date (after giving
effect to any principal payments made on the Class A-2 Notes
on such preceding Distribution Date and the Class A-2
Notes);
OS = the sum of the aggregate outstanding principal amount of all
the notes and the certificates as of the preceding
Distribution Date (after giving effect to any principal
payments to be made on the securities on such preceding
Distribution Date) or the Closing Date, as the case may be;
PB = the Pool Balance at the end of the Collection Period
preceding such Distribution Date;
SOA = the Specified Overcollateralization Amount with respect to
such Distribution Date;
YSOA = the Yield Supplement Overcollateralization Amount;
FPDA = the First Priority Principal Distribution Amount, if any,
with respect to such Distribution Date; and
SPDA = the Second Priority Principal Distribution Amount, if any,
with respect to such Distribution Date.
</TABLE>
provided, however, that the REGULAR PRINCIPAL DISTRIBUTION AMOUNT --
-- shall not exceed the sum of the aggregate outstanding principal amount
of all the notes and the aggregate Certificate Balance of all the
certificates on such Distribution Date, after giving effect to any
principal payments made on the securities on such Distribution Date in
respect of the First Priority Principal Distribution Amount, if any,
and the Second Priority Principal Distribution Amount, if any;
-- on or after the Final Scheduled Distribution Date relating to the
Class C Certificates shall not be less than the amount that is
necessary to reduce the Certificate Balance of the Class C
Certificates to zero; and
-- on or after the Final Scheduled Distribution Date relating to the
Class D Certificates shall not be less than the amount that is
necessary to reduce the Certificate Balance of the Class D
Certificates to zero.
S-71
<PAGE> 72
"RESERVE ACCOUNT" means the account which the seller will establish in the
name of the indenture trustee into which the seller will deposit the Reserve
Initial Deposit and into which the indenture trustee will make the other
deposits and withdrawals specified in the prospectus and this prospectus
supplement.
"RESERVE ACCOUNT EXCESS AMOUNT", with respect to any Distribution Date,
means an amount equal to the excess, if any, of --
-- the amount of cash or other immediately available funds in the Reserve
Account on that Distribution Date, prior to giving effect to any
withdrawals from the Reserve Account relating to that Distribution
Date, over
-- the Specified Reserve Balance with respect to that Distribution Date.
"RESERVE INITIAL DEPOSIT" means the $16,500,115.20 initially deposited into
the Reserve Account.
"SECOND PRIORITY PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, an amount not less than zero equal to:
(N -- (PB -- YSOA)) -- FPDA
Where:
N = the aggregate outstanding principal amount of the notes as
of the preceding Distribution Date (after giving effect to
any principal payments made on the notes on such preceding
Distribution Date);
PB = the Pool Balance at the end of the Collection Period
preceding such Distribution Date;
YSOA = the Yield Supplement Overcollateralization Amount; and
FPDA = the First Priority Principal Distribution Amount, if any, with
respect to such Distribution Date.
provided, however, that --
-- the Second Priority Principal Distribution Amount shall not exceed
the sum of the aggregate outstanding principal amount of all the
notes and the aggregate Certificate Balance of all the
certificates on such Distribution Date (after giving effect to any
principal payments to be made on the securities on such
Distribution Date in respect of the First Priority Principal
Distribution Amount, if any); and
-- the Second Priority Principal Distribution Amount on or after the
Final Scheduled Distribution Date relating to the Class B Notes
shall not be less than the amount that is necessary to reduce the
outstanding principal amount of the Class B Notes to zero.
"SERVICER FEE" means the Servicing Fee together with the Supplemental
Servicing Fee.
"SERVICING FEE" means a fee payable to the servicer on each Distribution
Date for servicing the receivables which is equal to the product of 1/12 of
1.00% and the Pool Balance as of the first day of the related Collection Period.
"SHORT-TERM NOTES" means notes that have a maturity of one year or less
from their date of original issuance.
"SPECIAL TAX COUNSEL" means Skadden, Arps, Slate, Meagher & Flom LLP.
S-72
<PAGE> 73
"SPECIFIED CREDIT ENHANCEMENT AMOUNT" means, with respect to any
Distribution Date, the greatest of --
-- $16,500,115.20;
-- 1.00% of the Pool Balance at the end of the Collection Period
preceding that Distribution Date; or
-- the aggregate principal balance of the receivables that are delinquent
91 days or more and are not Liquidated Receivables at the end of the
Collection Period preceding such Distribution Date;
provided, however, that the Specified Credit Enhancement Amount with
respect to any Distribution Date shall not exceed the sum of the aggregate
outstanding principal amount of all the notes and the aggregate Certificate
Balance of all the certificates as of the preceding Distribution Date
(after giving effect to any principal payments made on the securities on
such preceding Distribution Date).
"SPECIFIED OVERCOLLATERALIZATION AMOUNT" means, with respect to any
Distribution Date, the excess, if any, of --
-- the Specified Credit Enhancement Amount with respect to such
Distribution Date, over
-- the Specified Reserve Balance with respect to such Distribution Date.
"SPECIFIED RESERVE BALANCE" means the lesser of --
-- $16,500,115.20; and
-- the sum of the aggregate outstanding principal amount of all the notes
and the certificates as of the preceding Distribution Date, after
giving effect to any principal payments made on the securities on such
preceding Distribution Date.
"SUPPLEMENTAL SERVICING FEE" means, for each Collection Period, the amount
of any late, prepayment, and other administrative fees and expenses collected
during that Collection Period, plus any interest earned during the Collection
Period on amounts on deposit in the Collection Account and the Payahead Account
during the Collection Period.
"TOTAL REQUIRED PAYMENT" means, on any Distribution Date, the sum of --
-- the Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods;
-- all interest payable on the Class A Notes, including any accrued
interest and interest on accrued interest;
-- the First Priority Principal Distribution Amount, if any;
-- all interest payable on the Class B Notes, including any accrued
interest and interest on accrued interest;
-- the Second Priority Principal Distribution Amount, if any; and
-- all interest payable on the certificates, including any accrued
interest and interest on accrued interest;
provided, however, that following the occurrence and during the
continuation of an Event of Default which has resulted in an acceleration
of the notes or following an Insolvency Event or a dissolution with respect
to the seller or the General Partner, on any Distribution Date until the
Distribution Date on which the outstanding principal amount of all the
notes has been paid in full, the TOTAL REQUIRED PAYMENT shall mean the sum
of --
-- the Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods;
-- all interest payable on the Class A Notes, including any accrued
interest thereon;
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<PAGE> 74
-- all interest payable on the Class B Notes, including any accrued
interest thereon; and
-- the amount necessary to reduce the outstanding principal amount of all
the notes to zero.
"YIELD SUPPLEMENT OVERCOLLATERALIZATION AMOUNT" means, with respect to any
Distribution Date, the amount specified below with respect to such Distribution
Date:
<TABLE>
<S> <C>
Closing Date............. $ 167,542,662.80
October 1999............. 160,495,841.56
November 1999............ 153,591,627.07
December 1999............ 146,831,791.26
January 2000............. 140,218,029.56
February 2000............ 133,751,967.90
March 2000............... 127,435,315.38
April 2000............... 121,269,707.31
May 2000................. 115,256,895.42
June 2000................ 109,398,620.15
July 2000................ 103,696,590.99
August 2000.............. 98,152,560.18
September 2000........... 92,768,239.64
October 2000............. 87,545,423.27
November 2000............ 82,485,924.37
December 2000............ 77,591,417.15
January 2001............. 72,862,813.97
February 2001............ 68,300,301.72
March 2001............... 63,903,740.63
April 2001............... 59,673,516.01
May 2001................. 55,611,048.45
June 2001................ 51,717,290.95
July 2001................ 47,992,068.09
August 2001.............. 44,435,161.75
September 2001........... 41,045,359.08
October 2001............. 37,820,517.25
November 2001............ 34,758,808.73
December 2001............ 31,856,984.19
January 2002............. 29,112,184.84
February 2002............ 26,520,965.41
March 2002............... 24,079,242.94
April 2002............... 21,783,301.32
May 2002................. 19,628,374.42
June 2002................ 17,608,544.67
July 2002................ 15,719,030.17
August 2002.............. 13,955,955.30
September 2002........... 12,317,577.76
October 2002............. 10,802,337.78
November 2002............ 9,408,845.04
December 2002............ 8,134,561.88
January 2003............. 6,976,989.93
February 2003............ 5,932,505.12
March 2003............... 4,996,094.02
April 2003............... 4,163,301.16
May 2003................. 3,429,400.45
June 2003................ 2,787,769.90
July 2003................ 2,230,886.91
August 2003.............. 1,750,727.79
September 2003........... 1,343,146.24
October 2003............. 1,003,262.43
November 2003............ 724,731.16
December 2003............ 500,670.81
January 2004............. 324,628.63
February 2004............ 191,935.59
March 2004............... 98,705.53
April 2004............... 40,473.28
May 2004................. 10,303.84
June 2004................ 70.55
</TABLE>
The YIELD SUPPLEMENT OVERCOLLATERALIZATION AMOUNT has been calculated for
each Distribution Date as the sum of the amount for each receivable equal to the
excess, if any, of --
-- the scheduled payments due on such receivable for each future
Collection Period discounted to present value as of the end of the
preceding Collection Period at the APR of such receivable, over
-- the scheduled payments due on the receivable for each future
Collection Period discounted to present value as of the end of the
preceding Collection Period at 9.50%.
For purposes of such calculation, future scheduled payments on the receivables
are assumed to be made on their scheduled due dates without any delays, defaults
or prepayments.
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<PAGE> 75
ANNEX I
FORM OF INVESTMENT LETTER -- CLASS C CERTIFICATES
[Date]
Ford Credit Auto Owner Trust 1999-D,
as Issuer
The Bank of New York,
as Owner Trustee and
as Certificate Registrar
101 Barclay Street
New York, New York 10286
Ladies and Gentlemen:
In connection with our proposed purchase of the Class C 7.21% Asset Backed
Certificates (the "Certificates") of Ford Credit Auto Owner Trust 1999-D (the
"Issuer"), a trust formed by Ford Credit Auto Receivables Two L.P. (the
"Depositor" or "Seller"), we confirm that:
1. We are either:
(a) not, and each account (if any) for which we are purchasing the
Certificates is not, (i) an employee benefit plan (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that
is subject to Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of
the Internal Revenue Code of 1986, as amended (the "Code") that is subject to
Section 4975 of the Code, (iii) a governmental plan, as defined in Section 3(32)
of ERISA, subject to any federal, state or local law which is, to a material
extent, similar to the provisions of Section 406 of ERISA or Section 4975 of the
Code, (iv) an entity whose underlying assets include plan assets by reason of a
plan's investment in the entity (within the meaning of Department of Labor
Regulation 29 C.F.R. Section 2510.3-101 or otherwise under ERISA) or (v) a
person investing "plan assets" of any such plan (including without limitation,
for purposes of this clause (v), an insurance company general account, but
excluding an entity registered under the Investment Company Act of 1940, as
amended), or
(b) an insurance company acting on behalf of a general account and (i) on
the date hereof less than 25% of the assets of such general account (as
reasonably determined by us) constitute "plan assets" for purposes of Title I of
ERISA and Section 4975 of the Code, (ii) the purchase and holding of such
Certificates are eligible for exemptive relief under Sections (I) and (III) of
Prohibited Transaction Class Exemption 95-60, and (iii) the undersigned agrees
that if, after the undersigned's initial acquisition of the Certificates, at any
time during any calendar quarter 25% or more of the assets of such general
account (as reasonably determined by us no less frequently than each calendar
quarter) constitute "plan assets" for purposes of Title I of ERISA or Section
4975 of the Code and no exemption or exception from the prohibited transaction
rules applies to the continued holding of the Certificates under Section 401(c)
of ERISA and the final regulations thereunder or under an exemption or
regulation issued by the United States Department of Labor under ERISA, we will
dispose of all Certificates then held in our general account by the end of the
next following calendar quarter.
2. We are, and each account (if any) for which we are purchasing the
Certificates is, a person who is (A) a citizen or resident of the United States,
(B) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof, (C) an estate the income of which
is includible in gross income for United States tax purposes, regardless of its
source, (D) a trust if a U.S. court is able to exercise primary supervision over
I-1
<PAGE> 76
the administration of such trust and one or more Persons meeting the conditions
of clause (A), (B), (C) or (E) of this paragraph 2 has the authority to control
all substantial decisions of the trust or (E) a Person not described in clauses
(A) through (D) above whose ownership of the Certificates is effectively
connected with such Person's conduct of a trade or business within the United
States (within the meaning of the Code) and who provides the Issuer and the
Depositor with an IRS Form 4224 (and such other certifications, representations,
or opinions of counsel as may be requested by the Issuer or the Depositor).
3. We understand that any purported resale, transfer, assignment,
participation, pledge, or other disposal of (any such act, a "Transfer") of any
Certificate (or any interest therein) to any person who does not meet the
conditions of paragraphs 1 and 2 above shall be null and void (each, a "Void
Transfer"), and the purported transferee in a Void Transfer shall not be
recognized by the Issuer or any other person as a Certificateholder for any
purpose.
4. We agree that if we determine to Transfer any of the Certificates we
will cause our proposed transferee to provide to the Issuer and the Certificate
Registrar a letter substantially in the form of this letter.
You are entitled to rely upon this letter and are irrevocably authorized to
produce this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
By:
-----------------------------------
Name:
Title:
Securities To Be Purchased:
$[ ] principal balance of Certificates
Annex A attached hereto lists the name of the account and principal balance of
Certificates purchased for each account (if any) for which we are purchasing
Certificates.
I-2
<PAGE> 77
[FORD LOGO]
FORD CREDIT AUTO TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
<TABLE>
<S> <C>
FORD CREDIT AUTO FORD MOTOR CREDIT
RECEIVABLES TWO L.P. COMPANY
SELLER SERVICER
</TABLE>
THE TRUSTS --
-- may periodically issue asset-backed notes and
certificates in one or more classes; and
-- will own --
-- receivables in a portfolio of motor vehicle
retail installment sale contracts;
-- collections on the receivables;
-- security interests in the vehicles securing
those receivables;
-- funds in the accounts of the trust; and
-- any enhancements issued.
THE NOTES --
-- will represent obligations of a trust and will be
paid only from the assets of that trust;
-- may have one or more forms of enhancement; and
-- will include one or more classes of notes.
THE CERTIFICATES --
-- will represent beneficial interests in a trust
and will be paid only from the assets of that
trust;
-- may have one or more forms of enhancement; and
-- will include one or more classes of certificates.
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 PROSPECTUS OR ANY RELATED PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this prospectus is September 17, 1999
BEFORE YOU PURCHASE ANY OF THESE SECURITIES, BE SURE YOU UNDERSTAND THE
STRUCTURE AND THE RISKS. SEE ESPECIALLY THE RISK FACTORS BEGINNING ON PAGE 9 OF
THIS PROSPECTUS AND THE RISK FACTORS SET FORTH IN THE RELATED PROSPECTUS
SUPPLEMENT.
The notes and the certificates will represent interests in or obligations of the
trust only and will not represent interests in or obligations of Ford Motor
Company, Ford Motor Credit Company, the servicer, the seller or any of their
affiliates.
This prospectus may be used to offer and sell any of the notes and/or
certificates only if accompanied by the prospectus supplement for the related
trust.
<PAGE> 78
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE INFORMATION IN THIS
PROSPECTUS AND THE PROSPECTUS
SUPPLEMENT................................ 3
SUMMARY..................................... 4
RISK FACTORS................................ 9
THE TRUSTS.................................. 16
The Receivables........................... 16
The Trustee............................... 17
FORD CREDIT................................. 17
PRIMUS...................................... 18
THE RECEIVABLES POOLS....................... 18
Property of the Trusts.................... 18
Origination............................. 18
Underwriting............................ 18
Subvention.............................. 19
Servicing and Collections............... 19
Repossession and Write-offs............. 19
Criteria for Selecting the
Receivables........................... 20
Simple Interest Receivables............. 20
Actuarial Receivables................... 21
Final Payment Receivables............... 21
We Will Provide More Specific Information
About the Receivables in the Prospectus
Supplement.............................. 21
MATURITY AND PREPAYMENT CONSIDERATIONS...... 21
USE OF PROCEEDS............................. 22
THE SELLER AND THE GENERAL PARTNER.......... 22
Description of the Seller and the General
Partner................................. 22
Insolvency of the Seller or the General
Partner May Result in Consolidation of
Their Assets with the Trust............. 23
Trust Assets May be Affected if Sale of
Receivables to the Seller Were Treated
as a Loan............................... 23
DESCRIPTION OF THE NOTES.................... 24
The Trust May Use Book-Entry Registration
Instead of Issuing Definitive Notes..... 24
Principal and Interest on the Notes....... 25
The Indenture............................. 26
The Indenture Trustee..................... 31
DESCRIPTION OF THE CERTIFICATES............. 31
The Trusts Might Not Issue Physical
Certificates Representing
Certificates............................ 31
Distributions of Principal and Interest... 32
List of Certificateholders................ 32
CERTAIN INFORMATION REGARDING THE
SECURITIES................................ 33
Fixed Rate Securities..................... 33
Floating Rate Securities.................. 33
Book-Entry Registration................... 34
Definitive Securities..................... 38
Reports to Securityholders................ 39
DESCRIPTION OF THE RECEIVABLES TRANSFER AND
SERVICING AGREEMENTS...................... 40
Sale and Assignment of Receivables........ 40
Accounts.................................. 42
Servicing Procedures...................... 43
Collections............................... 43
Advances.................................. 44
Servicing Compensation and Expenses....... 44
Distributions............................. 45
Credit and Cash Flow Enhancement.......... 45
Net Deposits.............................. 46
Statements to Trustees and Trusts......... 46
Evidence as to Compliance................. 46
Certain Matters Regarding the Servicer.... 47
Events of Servicing Termination........... 47
Rights Upon Event of Servicing
Termination............................. 48
Waiver of Past Events of Servicing
Termination............................. 48
Amendment................................. 49
Insolvency Event or Dissolution........... 49
Payment of Notes.......................... 50
Termination............................... 50
Administration Agreement.................. 50
SOME IMPORTANT LEGAL ISSUES RELATING TO THE
RECEIVABLES............................... 51
Security Interests in Vehicles............ 51
Repossession.............................. 52
Notice of Sale; Cure Rights............... 52
Deficiency Judgments and Excess
Proceeds................................ 53
Consumer Protection Laws.................. 53
Other Limitations......................... 54
Transfers of Vehicles..................... 54
TAX MATTERS................................. 55
Scope of the Tax Opinions................. 55
ERISA CONSIDERATIONS........................ 55
Prohibited Transaction Considerations..... 56
Investment in Notes....................... 56
Investment in Certificates................ 57
Special Considerations Applicable to
Insurance Company General Accounts...... 57
Plans Not Subject to ERISA or the tax
code.................................... 57
General Investment Considerations......... 58
PLAN OF DISTRIBUTION........................ 58
LEGAL OPINIONS.............................. 59
WHERE YOU CAN FIND MORE INFORMATION......... 59
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE................................. 59
GLOSSARY OF TERMS IN THE PROSPECTUS......... 60
</TABLE>
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OVERVIEW OF THE INFORMATION IN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT
This prospectus provides general information about the notes and certificates to
be issued by the trusts, some of which may not apply to a particular trust.
The related prospectus supplement will describe the specific terms of the trust,
including:
-- the timing and amount of interest and principal payments;
-- information about the receivables;
-- information about credit enhancement for each offered Class;
-- credit ratings; and
-- the method for selling the securities.
You should rely only on information on the notes and certificates provided in
this prospectus and the related prospectus supplement. We have not authorized
anyone to provide you with different information.
We have included cross-references to captions in these materials where you can
find further related discussions. We have started with several introductory
sections which provide the information in abbreviated form, followed by a more
complete description. The introductory sections are:
-- Summary -- gives an overview of the terms which the securities may
have.
-- Risk Factors -- describes briefly some of the risks to investors of a
purchase of the securities.
Cross references may be contained in the introductory sections which will direct
you elsewhere in this prospectus or the related prospectus supplement to more
detailed descriptions of a particular topic. You can also find references to key
topics in the Table of Contents on the preceding page.
You can find a glossary of the defined terms that appear in this document under
the caption "Glossary of Terms for Prospectus" beginning on page 60 in this
prospectus.
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<PAGE> 80
SUMMARY
The following summary is a short description of the information contained
elsewhere in this prospectus. For that reason, this summary does not contain all
of the information that may be important to you. To fully understand the terms
of the offering of the securities, you will need to read both this prospectus
and the related prospectus supplement, each in its entirety.
THE TRUSTS
A separate trust will be formed to issue each series of securities. Each trust
will be a Delaware business trust or a common law trust created by a trust
agreement between the seller and the trustee.
THE SELLER
Ford Credit Auto Receivables Two L.P., a Delaware limited partnership.
THE SERVICER
Ford Motor Credit Company, a Delaware corporation.
THE TRUSTEES
Each prospectus supplement will specify --
-- the trustee(s) of the trust; and
-- the indenture trustee relating to the notes.
THE NOTES
Each trust will issue one or more Classes of notes. The notes issued by each
trust will be governed by an indenture between the trust and an indenture
trustee.
Some of the notes issued by each trust may not be offered to the public. Each
prospectus supplement will specify the Class or Classes of notes that are being
offered.
The minimum denominations will be specified in the related prospectus
supplement.
Principal and Interest on the Notes
For each Class of notes, the prospectus supplement will state --
-- the principal amount; and
-- either the rate of interest or the method of determining the rate of
interest. The rate of interest on the notes may be fixed, variable or
adjustable.
THE CERTIFICATES
Each trust may issue one or more Classes of certificates. The certificates will
be governed by a trust agreement.
Some of the certificates in any trust may not be offered to the public. Each
prospectus supplement will specify the Class or Classes of certificates that are
being offered by it.
The minimum denominations will be specified in the related prospectus
supplement.
Principal and Interest on the Certificates
For each Class of certificates, the prospectus supplement will state --
-- the certificate balance; and
-- the rate of interest or the method of determining the rate of
interest. The rate of interest on the certificates may be fixed,
variable or adjustable.
Subordination to Notes
Distributions on the certificates will be subordinated to payments on the notes
to the extent described in the related prospectus supplement.
OPTIONAL REDEMPTION
The servicer has the option to purchase the receivables of each trust on any
payment date on which the aggregate principal balance of the receivables at the
time they were sold to the trust declines to 10% or less of the initial amount,
and, upon the purchase, the notes and the certificates will be prepaid in full.
A TRUST MAY ISSUE MULTIPLE CLASSES WITH DIFFERENT CHARACTERISTICS
Each trust may issue more than one Class of notes and certificates. In these
cases, the
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characteristics of the securities issued by the trust may differ from one
another. Some of these characteristics are:
-- rate at which interest accrues (if at all);
-- whether the interest rate is fixed, variable or adjustable;
-- timing and/or frequency of interest payments;
-- amount of payments of interest and principal;
-- priority of interest and principal payments relative to the other
Classes;
-- whether or not distributions of principal and interest will be
delayed or not made at all upon the occurrence of specified events;
-- whether payments of principal and interest may or may not be made
from designated portions of the pool of receivables; and
-- allocations of losses on the receivables.
Any differences in characteristics will be specified in the prospectus
supplement.
RESIDUAL PAYMENT SECURITIES MAY BE ISSUED
A trust might issue one or more Classes of notes or certificates entitled to all
or some of the remaining payments of principal and interest on the related
receivables after the trust has made all other payments it is required to make.
STRIP SECURITIES MAY BE ISSUED
A trust might issue one or more Classes of notes or certificates providing for
distributions of interest which are disproportionately large or small in
comparison to the principal distributions, including --
-- distributions of interest with no or only a nominal distribution of
principal; or
-- distributions of principal with no or only a nominal distribution of
interest.
PHYSICAL SECURITIES MIGHT NOT BE ISSUED
The notes are available only in book-entry form. Each investor's interest in the
notes would be represented through an agent, rather than by a physical note held
by the investor. A trust will not issue physical notes to investors unless
specific events occur which make it necessary or desirable to do so.
The certificates may be issued in physical form or in book-entry form, as
described in the prospectus supplement.
For a more detailed description of the events under which physical notes will be
issued, see "Certain Information Regarding the Securities -- Definitive
Securities."
THE RECEIVABLES AND OTHER TRUST PROPERTY
The receivables supporting the securities of each trust will consist of a pool
of motor vehicle retail installment sale contracts secured by new and used
automobiles and light trucks and other property, including:
-- the rights to receive payments made on the receivables after the
cutoff date specified in the related prospectus supplement;
-- security interests in the vehicles financed by the receivables;
-- various accounts and the proceeds thereof; and
-- any proceeds from claims on various related insurance policies.
Various motor vehicle dealers will have originated the receivables and sold them
to Ford Credit or to PRIMUS (which immediately assigned them to Ford Credit),
and Ford Credit will in turn sell them to the seller. A receivables purchase
agreement will govern the sale of the receivables by Ford Credit to the seller
and will specify eligibility criteria for the receivables.
The seller will transfer the receivables to the trust on the closing date under
a sale and servicing agreement. The prospectus supplement will specify the
aggregate principal balance of any receivables initially transferred to the
trust.
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For a more detailed description of the receivables, including the criteria they
must meet, and the other property supporting the securities, see "The
Receivables Pools" in this prospectus.
Other Property of the Trust
In addition to the receivables, each trust will own amounts on deposit in
various trust accounts, which may include:
-- an account into which collections are deposited;
-- an account to fund post-closing purchases of additional receivables;
-- a reserve account or other account relating to credit enhancement;
and
-- any other account identified in the related prospectus supplement.
Purchase of Receivables After the Closing Date
A trust may be permitted to purchase additional receivables during a specified
period after the closing date. A trust will purchase additional receivables with
amounts deposited on the closing date in a pre-funding account. One or more
Classes of notes or certificates may be prepaid if all of the additional
receivables are not purchased before the time described in the prospectus
supplement. The holders of securities that are prepaid due to additional
receivables not being purchased may be entitled to a prepayment premium if so
specified in the prospectus supplement.
The prospectus supplement will specify the amount of the deposit to the
pre-funding account. The prospectus supplement will also describe (1) how often
receivables may be purchased, which could be as frequently as daily, and (2) the
time period during which additional receivables may be purchased, which can be
up to one year.
To the extent provided in the related prospectus supplement, the seller may be
required to sell, and the trust may be required to purchase, receivables with an
aggregate principal balance approximately equal to the amount on deposit in the
pre-funding account. These requirements will be subject to --
-- the availability of additional receivables; and
-- any conditions provided in the related sale and servicing agreement.
CREDIT AND PAYMENT ENHANCEMENT
The related prospectus supplement will specify the credit enhancement, if any,
for each trust. Credit or payment enhancement may consist of one or more of the
following:
-- subordination of one or more Classes of securities;
-- a reserve account;
-- "excess spread," or interest earned on the receivables in excess of
the amount required to be paid on the securities;
-- collateralization greater than the principal amount of securities
issued;
-- letters of credit;
-- liquidity facilities;
-- surety bonds;
-- guaranteed investment contracts;
-- guaranteed rate agreements;
-- swaps or other interest rate protection agreements;
-- repurchase obligations;
-- yield supplement arrangements;
-- cash deposits; or
-- other agreements with respect to third party payments or other
support.
Limitations or exclusions from coverage could apply to any form of credit
enhancement. The prospectus supplement will describe the credit enhancement and
related limitations and exclusions applicable for securities issued by the
trust.
Reserve Account
If there is a reserve account, the seller will initially deposit in it cash or
other investments
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having a value equal to the amount specified in the prospectus supplement.
Any reserve account will be available to cover shortfalls in the payments on the
securities as described in the prospectus supplement. The prospectus supplement
may also specify (1) a minimum balance to be maintained in the reserve account
and what funds are available for deposit to reinstate that balance, and (2) when
and to whom any amount will be distributed if the balance exceeds this minimum
amount.
For more information about credit enhancement, see "Description of the
Receivables Transfer and Servicing Agreements -- Credit and Cash Flow
Enhancement" in this prospectus.
TRANSFER AND SERVICING OF THE RECEIVABLES
The seller will transfer the related receivables to each trust under the sale
and servicing agreement and each trust will assign its rights and benefits under
the sale and servicing agreement to the indenture trustee as collateral for the
notes. The servicer will agree with the trust to be responsible for servicing,
managing, maintaining custody of and making collections on the receivables.
For more information about the sale and servicing of the receivables, see
"Description of the Receivables Transfer and Servicing Agreements -- Sale and
Assignment of Receivables" in this prospectus.
Servicing Fees
Each trust will pay the servicer a fee based on the outstanding balance of the
receivables for providing servicing of the receivables. The amount of the fee
will be specified in the prospectus supplement. The servicer will also be
entitled to retain as supplemental servicing compensation --
-- late fees;
-- prepayment charges;
-- extension fees;
-- other administrative fees or similar charges; and
-- reinvestment proceeds on any payments received in respect of the
receivables.
Servicer Advances Certain Late Payments
When actual collections received on the receivables are less than the scheduled
collections received in a collection period, the servicer is required to advance
to the trust that portion of the shortfalls that the servicer, in its sole
discretion, expects to be paid in the future by the related obligors (excluding
principal of simple interest receivables). On each date on which payments are
due on the securities, the servicer is required to advance to the applicable
trust --
-- any shortfall in the scheduled payments under any actuarial
receivable; and/or
-- any shortfall in interest (but not principal) due under each simple
interest receivable.
The servicer will be entitled to reimbursement from future collections by the
trust for these advances before any payments are made on notes or certificates.
Repurchase/Advances May Be Required For Modified Receivables
In the course of its normal servicing procedures, the servicer may defer or
modify the payment schedule of a receivable. Some of these arrangements may
obligate the servicer to --
-- repurchase the receivable; or
-- advance funds to the trust with respect to the receivable.
For a discussion of the representations and warranties given by the servicer and
its related repurchase obligations, see "Description of the Receivables Transfer
and Servicing Agreements -- Sale and Assignment of Receivables" in this
prospectus.
Repurchase May Be Required For Breaches of Representation or Warranty
Ford Credit will make representations and warranties relating to the receivables
when it sells them to the seller. The seller will make
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<PAGE> 84
similar representations and warranties when it sells the receivables to the
trust.
-- Ford Credit will be required to repurchase a receivable from the
seller or the trust if (1) one of Ford Credit's representations or
warranties is breached with respect to that receivable and (2) the
receivable is materially and adversely affected by the breach. The
seller has assigned its rights against Ford Credit to the trust.
-- The seller will be required to repurchase a receivable from the trust
if (1) one of the seller's representations or warranties is breached
with respect to that receivable and (2) the receivable is materially
and adversely affected by the breach.
For a discussion of the representations and warranties given by the seller and
its related repurchase obligations, see "Description of the Receivables Transfer
and Servicing Agreements -- Sale and Assignment of Receivables" in this
prospectus.
THE TRUST'S SECURITY INTEREST IN THE RECEIVABLES AND THE VEHICLES SECURING THE
RECEIVABLES
Ford Credit will assign to the seller its ownership interest in the receivables
and its security interest in the financed vehicles securing the receivables, and
the seller will in turn assign to the trust a security interest in the
receivables and the financed vehicles.
For more information about the trust's security interest in the vehicles
securing the receivables see "Some Important Legal Issues Relating to the
Receivables -- Security Interests in Vehicles" in this prospectus.
TAX STATUS
Upon the issuance of securities by a trust --
-- Special Tax Counsel to the trust is required to deliver an opinion
that, for federal income tax purposes, the trust will not be
characterized as an association (or a publicly traded partnership)
taxable as a corporation; and
-- Michigan tax counsel to the trust is required to deliver an opinion
that the same characterizations would apply for Michigan income and
single business tax purposes as for federal income tax purposes.
ERISA CONSIDERATIONS
Administrators of employee benefit plans should review the matters discussed
under "ERISA Considerations" in this prospectus and in the related prospectus
supplement.
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RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase any of the securities.
INTERESTS OF OTHER PERSONS IN
THE RECEIVABLES COULD REDUCE
THE FUNDS AVAILABLE TO MAKE
PAYMENTS ON THE SECURITIES Financing statements under the Uniform Commercial
Code will be filed reflecting the sale of the
receivables by Ford Credit to the seller and the
subsequent sale by the seller to the trust. Ford
Credit's accounting records and computer systems
will also be marked to reflect a sale of the
receivables to the trust. However, by obtaining
physical possession of a receivable, another
person could acquire an interest in that
receivable that is superior to the trust's
interest because the servicer will not segregate
or mark the receivables as belonging to the
trust. If another person acquires an interest in
a receivable that is superior to the trust's
interest in the receivable, the collections on
that receivable will not be available to make
payment on the securities.
Another person could acquire an interest in a
vehicle financed by a receivable that is superior
to the trust's interest because the servicer will
not amend the certificate of title or ownership
to identify the trust as the new secured party.
If another person acquires an interest in a
vehicle that is superior to the trust's interest
in the vehicle, the proceeds from the sale of the
vehicle will not be available to make payments on
the securities.
The trust's security interest in the receivables
or the financed vehicles could be impaired for
one or more of the following reasons:
-- Ford Credit or PRIMUS might fail to perfect
its security interest in a receivable;
-- Ford Credit or PRIMUS might fail to perfect
its security interest in a financed vehicle;
-- the trust may not have a security interest
in the financed vehicles in all states
because the certificates of title to the
financed vehicles will not be amended to
reflect assignment to the trust;
-- holders of some types of liens, such as tax
liens or mechanics liens, may have priority
over the trust's security interest;
-- the trust may lose its security interest in
vehicles confiscated by the government; and
-- the trust could lose its priority to a
person who obtains physical possession of a
receivable without knowledge of the
assignment of the receivable to the trust.
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Neither the seller nor the servicer will be
required to repurchase a receivable if the
security interest in a related vehicle or the
receivable becomes impaired after the receivable
is sold to the trust.
BANKRUPTCY OF FORD CREDIT
COULD RESULT IN DELAYS IN
PAYMENT OR LOSSES ON THE
SECURITIES If Ford Credit becomes subject to bankruptcy
proceedings, you could experience losses or
delays in payments on your securities. Ford
Credit will sell the receivables to the seller,
and the seller will in turn transfer the
receivables to the trust. However, if Ford Credit
becomes subject to a bankruptcy proceeding, a
court in the bankruptcy proceeding could conclude
that Ford Credit effectively still owns the
receivables by concluding that the sale to the
seller was not a "true sale" or that the seller
should be consolidated with Ford Credit for
bankruptcy purposes. If a court were to reach
this conclusion, you could experience losses or
delays in payments on your securities due to,
among other things:
-- the "automatic stay" which prevents secured
creditors from exercising remedies against a
debtor in bankruptcy without permission from
the court and provisions of the U.S.
Bankruptcy Code that permit substitution of
collateral in certain circumstances;
-- certain tax or government liens on Ford
Credit's property that arose prior to the
transfer of the receivables to the trust
have a claim on collections that is senior
to payments on your securities; and
-- the trust not having a perfected security
interest in (1) one or more of the vehicles
securing the receivables or (2) any cash
collections held by Ford Credit at the time
that Ford Credit becomes the subject of a
bankruptcy proceeding.
The seller will take steps in structuring the
transactions to minimize the risk that a court
would consolidate the seller with Ford Credit for
bankruptcy purposes or conclude that the sale of
the receivables to the seller was not a "true
sale."
In a 1993 case, the U.S. Court of Appeals for the
Tenth Circuit concluded that accounts transferred
by a seller to a buyer should be included in the
bankruptcy estate of the seller even if the
transfer was a true sale. The reasoning appears
to be inconsistent with other cases and of expert
commentators to the Uniform Commercial Code,
including comments made after the 1993 decision,
and we are not aware of any subsequent cases that
have been similarly decided. However, if Ford
Credit enters a bankruptcy proceeding and the
court in the bankruptcy proceeding applies the
reasoning of the court in that case, you could
experience losses or delays in payments on your
securities.
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THE TRUST MAY SELL THE
RECEIVABLES UPON AN
INSOLVENCY OR DISSOLUTION OF
THE SELLER OR GENERAL
PARTNER, WHICH COULD RESULT
IN LOSSES TO YOU If the seller or the General Partner becomes
insolvent or dissolves, the receivables may be
liquidated and the trust terminated. If this
occurs (1) the trust might suffer a loss on the
sale of the receivables, reducing the amount
available to repay your securities and (2) the
average term and date of repayment of your
securities would be shortened.
Liquidation of the receivables might be required
where either of the seller or the General Partner
becomes insolvent or dissolves.
The receivables generally need not be liquidated
if --
-- an objection to the liquidation is received
from a majority of (1) each Class of
noteholders, (2) each Class of
certificateholders and (3) any other persons
that may be specified in the related
prospectus supplement, in each case
excluding the seller; and
-- an entity acceptable to Ford Credit agrees
to acquire an interest in a trust and to act
as a substitute "general partner" for
federal income tax purposes; and
-- the trustee of the trust obtains an opinion
of counsel as to certain tax matters.
The proceeds from any such sale, disposition or
liquidation of the receivables will be treated as
collections on the receivables.
For more information on the possible liquidation
of the trust as a result of the insolvency of the
seller or the general partner, you should refer
to the section of this prospectus entitled
"Description of the Receivables Transfer and
Servicing Agreements -- Insolvency Event or
Dissolution."
ONLY THE ASSETS OF THE TRUST
ARE AVAILABLE TO PAY YOUR
SECURITIES None of the seller, the general partner of the
seller, Ford Credit or Ford Motor Company or any
of their affiliates is obligated to make any
payments relating to (1) the notes or
certificates of a trust or (2) the receivables
owned by a trust. Therefore, you may seek payment
of your securities only from the assets of the
trust. If these assets are insufficient, you may
suffer losses on your securities. There are,
however, two exceptions:
-- first, the seller will make representations
and warranties regarding the characteristics
of the receivables it sells to the trust and
may have to repurchase receivables if any of
these representations and warranties are
breached and the receivable is materially
and adversely affected by the breach; and
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<PAGE> 88
-- second, the servicer may have to purchase a
receivable if it breaches certain of its
servicing obligations, including extending
the payment schedule of the receivable
beyond the date specified in the prospectus
supplement.
Each trust will have the receivables as assets
and, to the extent specified in the related
prospectus supplement, various deposit accounts
and any credit enhancement.
AMOUNTS ON DEPOSIT IN ANY RESERVE ACCOUNT WILL BE
LIMITED AND SUBJECT TO DEPLETION. The amount
required to be on deposit in any reserve account
will be limited in amount. After the amounts in
the reserve account are depleted, the trust will
depend solely on collections on the receivables
to make payments on your securities. The balance
in any reserve account will decrease as --
-- the outstanding balance of the receivables
decreases; and
-- amounts are paid out to cover shortfalls in
distributions of principal and interest on
the securities.
YOU MAY SUFFER LOSSES UPON A LIQUIDATION OF THE
RECEIVABLES IF THE PROCEEDS OF THE LIQUIDATION
ARE LESS THAN THE AMOUNTS DUE ON THE OUTSTANDING
SECURITIES. If the receivables of any trust are
liquidated, the related securityholders may
suffer losses if the trust sells the receivables
for less than the total amount due on the
securities. If an Event of Default occurs under
the related indenture, the indenture trustee may
sell the receivables owned by the related trust,
subject to the conditions set forth in
"Description of the Notes -- The Indenture --
Rights Upon Events of Default" in this
prospectus. The market value of the receivables
may be less than the aggregate principal amount
of the outstanding notes and certificates.
Therefore, upon an event of default with respect
to the notes of any trust, there can be no
assurance that sufficient funds will be available
to repay the related securityholders in full.
DELAYS IN COLLECTING PAYMENTS
COULD OCCUR IF FORD CREDIT
CEASES TO BE THE SERVICER If Ford Credit were to cease acting as servicer,
the processing of payments on the receivables and
information relating to collections could be
delayed, which could delay payments to
securityholders. Ford Credit can be removed as
servicer if it defaults on its servicing
obligations as described in the prospectus
section titled "Description of the Receivables
Transfer and Servicing Agreements -- Events of
Servicing Termination".
SUBORDINATION MAY CAUSE SOME
CLASSES OF SECURITIES TO BEAR
ADDITIONAL CREDIT RISK The rights of the holders of any Class of notes
to receive payments of interest and principal may
be subordinated to one or more other Classes of
notes. In addition, the rights of the holders of
any Class of certificates to receive payments
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<PAGE> 89
of interest and principal may be subordinated to
one or more Classes of notes and to one or more
other Classes of certificates.
Holders of subordinated Classes of securities
will bear more credit risk than more senior
Classes. Subordination may take the following
forms:
-- interest payments on any date on which
interest is due will first be allocated to
the more senior Classes;
-- principal payments on the subordinated
Classes might not begin until principal of
the more senior Classes is repaid in full;
-- subordinated Classes bear the first risk of
losses; and
-- if the trustee had to sell receivables, the
net proceeds of that sale may be allocated
first to pay principal and interest on the
more senior Classes.
The timing and priority of payment, seniority,
allocations of losses and method of determining
payments on the respective Classes of securities
of any trust will be described in the related
prospectus supplement.
For more information about these credit risks,
see "Description of the Notes" and "Description
of the Certificates" in this prospectus and, as
applicable, in the related prospectus supplement.
YOU MAY HAVE TO REINVEST YOUR
PRINCIPAL AT A LOWER RATE OF
RETURN BECAUSE OF PREPAYMENTS
ON THE SECURITIES If your securities are prepaid, you may not be
able to reinvest the principal repaid to you
earlier than expected at a rate of return that is
equal to or greater than the rate of return on
your securities.
POTENTIAL PREPAYMENT OF SECURITIES DUE TO
PREPAYMENT OF RECEIVABLES. All the receivables
may be prepaid at any time. "Prepayments" may
include:
-- prepayments in full;
-- partial prepayments (including those related
to rebates of extended warranty contract
costs and insurance premiums);
-- liquidations due to default;
-- receipts of proceeds from physical damage,
credit life and disability insurance
policies; and
-- repurchases for other administrative
reasons.
A variety of economic, social and other factors
will influence the rate of prepayments on the
receivables, including the structure of the loan
and the fact that the vehicle securing a
receivable may not be sold without the consent of
the
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<PAGE> 90
servicer. Faster than expected prepayments on the
receivables will require the trust to make
payments on the notes and certificates earlier
than expected.
YOU MAY SUFFER LOSSES ON YOUR
SECURITIES BECAUSE THE
SERVICER WILL HOLD
COLLECTIONS AND COMMINGLE
THEM WITH ITS OWN FUNDS The servicer will generally be permitted to hold
with its own funds (1) collections it receives
from obligors on the receivables and (2) the
purchase price of receivables required to be
repurchased from the trust until the next date
distributions are due to be made on the
securities. During this time, the servicer may
invest collections and repurchase price amounts
at its own risk and for its own benefit and need
not segregate them from its own funds. If the
servicer is unable to pay these amounts to the
trust on the distribution date, you might incur a
loss on your securities.
On or before the business day preceding a date
when payments are due to be made on the
securities, the servicer must deposit to the
related collection account (1) all the
collections it received and (2) the aggregate
purchase amount of any receivables to be
purchased from the trust.
For more information about the servicer's
obligations regarding payments on the
receivables, see "Description of the Receivables
Transfer and Servicing Agreements -- Collections"
in this prospectus.
THE CONTROLLING CLASS
CONTROLS REMOVAL OF THE
SERVICER UPON A DEFAULT ON
ITS SERVICING OBLIGATIONS The indenture trustee or the holders of a
majority of the outstanding balance of the
Controlling Class (or, if no notes are
outstanding, the Owner Trustee or a majority of
the Certificate Balance of the Controlling
Certificate Class) can remove the servicer if the
servicer --
-- does not deliver to the applicable trustee
the available funds for application to a
required payment after a grace period after
notice or discovery;
-- defaults on a servicing obligation which
materially and adversely affects the trust
after a grace period after notice; or
-- becomes the subject of certain insolvency
proceedings.
A majority of the Controlling Class (or, if no
notes are outstanding, the Controlling
Certificate Class) may also waive a default by
the servicer. The holders of any subordinate
Class of securities do not have any rights to
participate in such determinations for so long as
any of the more senior Classes are outstanding,
and the subordinate Classes of securities may be
adversely affected by determinations made by the
more senior Classes. See "Description of the
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Receivables Transfer and Servicing Agreements --
Events of Servicing Termination".
IF BOOK-ENTRY REGISTRATION IS
USED, YOU MAY BE ABLE TO
EXERCISE YOUR RIGHTS AS A
SECURITYHOLDER ONLY THROUGH
THE CLEARING AGENCY If the prospectus supplement specifies that
securityholders of the trust will hold their
interests through a clearing agency or one of its
participating organizations, the securities will
be registered in the name of a nominee of the
clearing agency and physical certificates will
not be issued to individual securityholders.
These securityholders will not be recognized
directly by the trustee of the trust or the
indenture trustee and must exercise all of their
rights and receive any payments through the
clearing agency or the participating
organization, unless physical certificates are
issued. Physical certificates will only be issued
in the limited circumstances described in the
prospectus section titled "Certain Information
Regarding the Securities -- Definitive
Securities". The clearing agency in the U.S. is
expected to be DTC and in Europe either
Cedelbank, societe anonyme or Euroclear.
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THE TRUSTS
The seller will establish a separate trust as either a Delaware business
trust or a common law trust to issue each series of notes and certificates. Each
trust will be established for the transactions described in this prospectus and
in the related prospectus supplement.
THE RECEIVABLES
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) will be set forth in each prospectus supplement. There can
be no assurance that the delinquency, repossession and net loss experience on
any Receivables Pool will be comparable to prior experience or to such
information.
In addition to the receivables, the trust will also have a right to --
-- in the case of Actuarial Receivables, all payments due thereunder on
or after the applicable Cutoff Date;
-- in the case of Simple Interest Receivables, all payments due or
received thereunder on or after the applicable Cutoff Date; and
-- monies received prior to the applicable Cutoff Date on any receivable
that are due on or after the applicable Cutoff Date and were not used
to reduce the principal balance of the receivable.
On the Closing Date, the seller will sell and transfer the Initial
Receivables to the trust in an amount specified in the related prospectus
supplement. To the extent provided in the related prospectus supplement, the
seller will convey any Subsequent Receivables to the trust as frequently as
daily during the Funding Period specified in the prospectus supplement. The
trusts will purchase any Subsequent Receivables with amounts on deposit in a
pre-funding account. Up to 100% of the net proceeds from the sale of the
securities issued by a trust may be deposited into a pre-funding account to
later purchase Subsequent Receivables. Any Subsequent Receivables will also be
assets of the trust and will be subject to the prior rights of the related
indenture trustee and the noteholders, if any, therein. The property of each
trust will also include:
-- security interests in the financed vehicles;
-- the rights to proceeds from claims on certain physical damage, credit
life, credit disability or other insurance policies, if any, covering
the financed vehicles or the obligors;
-- the seller's rights to certain documents and instruments relating to
the receivables;
-- such amounts as from time to time may be held in one or more accounts
maintained under the related sale and servicing agreement;
-- certain rights under the related sale and servicing agreement;
-- certain rights under the purchase agreement;
-- certain payments and proceeds with respect to the receivables held by
the servicer;
-- certain rebates of premiums and other amounts relating to certain
insurance policies and other items financed under the receivables;
-- security interests in any other property securing the receivable
whether attaching prior to or subsequent to the purchase of the
receivable by Ford Credit; and
-- any and all proceeds of the above items.
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The relevant rights and benefits with respect to the property of the trust
will be assigned by the seller and the applicable trustee to the related
indenture trustee for the benefit of the noteholders. Any yield supplement
account will be maintained with the related indenture trustee or applicable
trustee, as the case may be, for the benefit of the holders of the related
securities.
ASSETS RELATING TO CREDIT ENHANCEMENT MAY BE PART OF THE PROPERTY OF THE
TRUST. If and to the extent specified in the related prospectus supplement, one
or more of the following may be a part of the property of the trust:
-- a yield supplement account (including any rights under the related
yield supplement agreement);
-- a reserve account; or
-- another form of credit enhancement.
THE TRUSTEE
The trustee for each trust will be specified in the related 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 set forth in the related trust agreement. The trustee may resign at any
time, in which event the administrator, or its successor, will be obligated to
appoint a successor trustee. The administrator of each trust may also remove the
trustee if:
-- the trustee ceases to be eligible to continue as trustee under the
related trust agreement, or
-- the trustee becomes insolvent.
In either of these circumstances, the administrator must appoint a
successor trustee. If the trustee resigns or is removed, the resignation or
removal and appointment of a successor trustee will not become effective until
the successor trustee accepts its appointment.
The principal offices of each trust and the related trustee will be
specified in the applicable prospectus supplement.
FORD CREDIT
Ford Credit was incorporated in Delaware in 1959 and is a wholly owned
indirect subsidiary of Ford Motor Company.
Ford Credit and its subsidiaries provide wholesale financing and capital
loans to Ford dealers and associated non-Ford dealers throughout the world, most
of which are privately owned and financed, and purchase retail installment sale
contracts and retail leases from them. Ford Credit also makes loans to vehicle
leasing companies, the majority of which are affiliated with such dealerships.
In addition, Ford Credit provides these financing services in the United States,
Europe, Canada and Australia to non-Ford dealers. A substantial majority of all
new vehicles financed by Ford Credit are manufactured by Ford Motor Company. In
the United States, Ford Credit (exclusive of PRIMUS) purchases automotive retail
contracts from about 7,100 Ford dealers and associated non-Ford dealers through
approximately 140 automotive financing branches.
Ford Credit and PRIMUS also provide retail financing for used vehicles
built by Ford Motor Company and other manufacturers. In addition to vehicle
financing, Ford Credit makes loans to affiliates of Ford Motor Company and
finances certain receivables of Ford Motor Company and its subsidiaries. Ford
Credit also conducts insurance operations through the American Road Insurance
Company and its subsidiaries in the United States and Canada. American Road's
business consists of extended service plan contracts for new and used vehicles
manufactured by
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affiliated and nonaffiliated companies, primarily originating from Ford dealers,
physical damage insurance covering vehicles and equipment financed at wholesale
by Ford Credit, and the reinsurance of credit life and credit disability
insurance for retail purchasers of vehicles and equipment.
The mailing address of Ford Credit's executive offices is The American
Road, Dearborn, Michigan 48121. The telephone number of such offices is (313)
322-3000.
PRIMUS
Primus Automotive Financial Services, Inc., a New York corporation, was
formed in October 1991 and is the successor corporation to Marine Midland
Automotive Financial Corporation, which was purchased by Ford Credit in 1990.
Approximately 1,800 Ford Credit employees conduct PRIMUS' operations in the
United States through 29 branch offices and its headquarters located in suburban
Nashville, Tennessee.
Commencing in 1991, and until August 1999, PRIMUS conducted its business as
a wholly owned subsidiary of Ford Credit. Until August 1999, PRIMUS assigned
receivables it generated, together with the related financing documents,
security interests in the related vehicles and any other property securing the
receivables, to Ford Credit immediately after being acquired by PRIMUS.
Commencing in August 1999, PRIMUS Automotive Financial Services, Inc. ceased its
business operations, and Ford Credit began conducting the business using the
d/b/a Primus Financial Services.
PRIMUS offers a full array of automotive financing products, including
indirect retail and lease programs, wholesale lines of credit, mortgages,
capital loans and revolving lines of credit, all designed for non-Ford dealers
and their retail customers. These non-Ford dealers include those selling
vehicles manufactured by DaimlerChrysler, General Motors, Honda, Jaguar, Mazda,
Nissan, Saturn, Subaru, Suzuki, Toyota and Volkswagen. In addition to offering
financing under the PRIMUS name, PRIMUS offers private-label financial services
to Subaru of America, Inc., Jaguar Cars, Inc., Mazda North American Operations,
American Suzuki Motor Company and Kia Motors America, Inc. PRIMUS also is the
source of choice for The Hertz Corporation and Aston Martin Lagonda. In
addition, PRIMUS purchases receivables from other finance sources.
The retail installment sale contracts purchased by PRIMUS are usually
purchased without recourse to the dealer or the seller, subject to exceptions
for certain breaches of representations and warranties and delivery to PRIMUS of
a valid, enforceable and correctly issued lien on the related vehicle. PRIMUS
services the receivables it originates in accordance with substantially the same
servicing guidelines and criteria as Ford Credit.
THE RECEIVABLES POOLS
PROPERTY OF THE TRUSTS
ORIGINATION. The receivables in each trust consist of retail installment
sale contracts secured by new and used automobiles and light trucks. The
receivables have been or will be purchased directly by Ford Credit or by PRIMUS
from vehicle dealers in the ordinary course of business. A dealer is paid a
purchase price for each receivable generally equal to the total contract balance
less the finance charge. A portion of the finance charge usually is paid or
credited to the dealer.
Generally, no more than 100% of the negotiated purchase price of a vehicle,
plus related amounts such as taxes, insurance, etc., is financed, which amount
generally is less than or equal to the MSRP of a new vehicle or published prices
for used vehicles. New vehicles generally can be purchased at a discount from
MSRP.
UNDERWRITING. Ford Credit and PRIMUS utilize common underwriting standards
and credit evaluation criteria which emphasize the obligor's ability to pay and
creditworthiness, as well as
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the asset value of the vehicle being produced. Each applicant for a contract
completes a credit application with the dealer. Each application is screened for
acceptability and a credit investigation is conducted to determine the
creditworthiness of the applicant. The credit investigation is conducted through
the use of a credit bureau review of each application together with an internal
review and verification process. Statistically-based retail credit risk rating
guidelines are used to determine the creditworthiness of applicants.
These guidelines are used as internal measuring devices to indicate the
degree of risk associated with offered contracts and are not the sole method
used to decide whether to extend credit. The final credit decision also reflects
other factors such as the relationship with the dealer and the judgment of the
credit analyst. Within each branch, purchase approval authority guidelines are
established based upon the amount financed, the percent of the total purchase
price advanced and credit scores. The retail rate pricing strategy is based on a
principle of offering the dealer or seller a minimum rate that reflects the
level of risk associated with the customer's credit evaluation. The dealer
establishes the retail rate with the obligor. Each obligor is required on each
related receivable to obtain or agree to obtain physical damage insurance.
Once an offered contract has been approved, the dealer submits the contract
and the credit application to be checked by Ford Credit or PRIMUS for accuracy
and regulatory compliance. The dealer is required to perfect the security
interest of either Ford Credit or PRIMUS, as applicable, in the vehicles.
SUBVENTION. Subvention programs are marketing tools of automobile
manufacturers under which the manufacturer will offer a reduced financing rate
to retail customers as an incentive to purchase an automobile. Subvention
programs, if any, require the respective automobile manufacturer to pay an
amount to compensate Ford Credit or PRIMUS for offering the incentive interest
rate financing. The subvention compensation payments will not be property of the
trust.
SERVICING AND COLLECTIONS. Ford Credit and PRIMUS separately service their
respective accounts, but utilize common servicing practices and procedures. Ford
Credit services over 4.2 million retail accounts. On June 15, 1999, Ford Credit
announced that it intended to restructure its servicing operations and move them
into seven regional service centers in the U.S. PRIMUS services over 0.5 million
retail accounts in the United States from its service center in Franklin,
Tennessee. Servicing personnel do not know if a receivable that they are
servicing has been sold to a third party.
Obligors are instructed to send their monthly payments to one of several
lock-box centers. Most of the receivables are paid without any additional
servicing. Collection accounts are rated by behavior evaluation and collection
assignments are initiated after specified periods of delinquency. These
assignments are placed in high, medium and low categories respectively for
collection follow-up.
A customer collection representative will attempt to contact a delinquent
obligor to determine the reason for a delinquency and identify the obligor's
plans to resolve the delinquency. If the obligor cannot make the past due
payments, extensions and rewrites are the primary options used to adjust a
delinquent account. A rewrite is a refinancing of the obligor's outstanding
balance with a different contract term, while an extension defers remaining
payments for one or more months. A fee or additional interest, as appropriate,
is usually collected on extensions and rewrites to cover the costs associated
with revised terms. Periodic management reports (delinquencies, extensions,
rewrites, etc.) and operating audits are the primary methods used to maintain
control over the use of collection actions.
REPOSSESSION AND WRITE-OFFS. Reasonable efforts will be made to collect on
delinquent accounts and keep obligors' accounts current. Repossession is
considered as a last resort when:
-- the obligor has demonstrated the inability or intention not to pay;
-- the security interest in the vehicle is impaired; and/or
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-- the customer has not complied with specific contract provisions.
Upon repossession or voluntary surrender of a vehicle, a condition report
is prepared. A repossessed vehicle is sold at an auction and the proceeds are
applied to the outstanding balance of the receivable. Ford's Vehicle Remarketing
Department manages the disposal of repossessed vehicles and seeks to obtain the
highest net price for the vehicle, comprised of gross auction proceeds less
auction fees and costs for reconditioning and transportation.
All collection activities for accounts that have been written off by Ford
Credit are consolidated and performed by Ford Credit at its collection
operations in Mesa, Arizona. These collection efforts have recovered an average
of 20% of the remaining balances (after application of repossession proceeds).
The collection activities for accounts written off by PRIMUS have been performed
by PRIMUS employees and by outside collection agencies, but are expected to be
consolidated and performed by Ford Credit in the near future. Collection
activities are continued until an account is paid or settled in full, legally
uncollectible due to bankruptcy of the obligor, the death of the obligor without
a collectible estate or the expiration of the statute of limitations.
CRITERIA FOR SELECTING THE RECEIVABLES. The receivables to be held by each
trust will be selected from Ford Credit's portfolio for inclusion in a
Receivables Pool by several criteria, including that each receivable:
-- is secured by a new or used vehicle;
-- was originated in the U. S.;
-- provides for level monthly payments (except for the last payment,
which may be minimally different from the level payments or which, in
the case of Final Payment Receivables, may be a larger final scheduled
payment) that fully amortize the amount financed over its original
term to maturity;
-- is an Actuarial Receivable or a Simple Interest Receivable (either of
which may be a Final Payment Receivable); and
-- satisfies the other criteria, if any, set forth in the related
prospectus supplement.
No selection procedures which the seller believes to be adverse to the
noteholders or the certificateholders of any trust will be used in selecting the
related receivables. All terms of the retail installment sale contracts
constituting such receivables which are material to investors are described in
this prospectus and in the related prospectus supplement.
SIMPLE INTEREST RECEIVABLES. If an obligor on a Simple Interest Receivable
pays a fixed monthly installment before its scheduled due date --
-- the portion of the payment allocable to interest for the period since
the preceding payment was made will be less than it would have been
had the payment been made as scheduled; and
-- the portion of the payment applied to reduce the unpaid principal
balance will be correspondingly greater.
Conversely, if an obligor pays a fixed monthly installment after its
scheduled due date --
-- the portion of the payment allocable to interest for the period since
the preceding payment was made will be greater than it would have been
had the payment been made as scheduled; and
-- the portion of the payment applied to reduce the unpaid principal
balance will be correspondingly less.
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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 a Simple Interest Receivable is prepaid, the obligor is required to
pay interest only to the date of prepayment. The servicer, however, is required
to make a non-reimbursable advance to the trust of interest which would have
accrued to the next scheduled due date of the receivable.
ACTUARIAL RECEIVABLES. Because interest and principal are not computed
separately on Actuarial Receivables, obligors under Actuarial Receivables will
be entitled to rebates of unearned finance charges if they prepay or if their
obligations are accelerated. If an Actuarial Receivable is prepaid in full, with
minor variations based upon state law, Actuarial Receivables require that any
rebate be calculated on the basis of a constant interest rate.
FINAL PAYMENT RECEIVABLES. If so provided in the related prospectus
supplement, only the principal and interest payments due on Final Payment
Receivables prior to the final scheduled payment and not the final scheduled
payment will be included in a trust; the final scheduled payment will be
retained by the seller. However, the seller may also transfer the final
scheduled payments with respect to the related Final Payment Receivables to a
trust and cause that trust to issue certificates representing interests in such
final scheduled payments or indebtedness secured by such final scheduled
payments.
WE WILL PROVIDE MORE SPECIFIC INFORMATION ABOUT THE RECEIVABLES IN THE
PROSPECTUS SUPPLEMENT
We will provide information about each Receivables Pool in the related
prospectus supplement, including, to the extent appropriate:
-- the portion of such Receivables Pool originated by Ford Credit and by
PRIMUS;
-- the portion of such Receivables Pool consisting of Actuarial
Receivables and of Simple Interest Receivables;
-- the portion of such Receivables Pool secured by new vehicles and by
used vehicles;
-- the aggregate principal balance of all of the receivables;
-- the average principal balance of the receivables and the range of
principal balances;
-- the number of receivables;
-- the average original amount financed and the range of original amount
financed;
-- the weighted average APR and the range of APRs;
-- the weighted average original term and the range of original terms;
-- the weighted average remaining term and the range of remaining terms;
-- the scheduled weighted average life; and
-- the distribution by APR and by the states of origination.
MATURITY AND PREPAYMENT CONSIDERATIONS
The weighted average life of the notes and the certificates of any trust
will generally be influenced by the rate at which the principal balances of the
related receivables are paid, which payment may be in the form of scheduled
amortization or prepayments. "Prepayments" for these purposes includes the
following circumstances:
-- Prepayments in full. All of the receivables are prepayable at any time
without penalty to the obligor.
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-- Repurchases of the receivables by the seller. The seller may be
required to repurchase a receivable from the trust if certain breaches
of representations and warranties occur and the receivable is
materially and adversely affected by the breach.
-- Repurchases of the receivables by the servicer. The servicer may be
obligated to purchase a receivable from the trust if certain breaches
of covenants occur or if the servicer extends or modifies the terms of
a receivable beyond the date specified in the prospectus supplement.
-- Partial prepayments, including those related to rebates of extended
warranty contract costs and insurance premiums.
-- Liquidations of the receivables due to default.
-- Receipts of proceeds from physical damage, credit life and disability
insurance policies.
-- Receivables repurchased by the seller or the servicer for
administrative reasons.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the notes or the certificates of a
given trust on each Distribution Date, as applicable, since such amount will
depend, in part, on the amount of principal collected on the related Receivables
Pool during the applicable Collection Period. Any reinvestment risks resulting
from a faster or slower incidence of prepayment of receivables will be borne
entirely by the securityholders of a given trust. The related prospectus
supplement may set forth certain additional information with respect to the
maturity and prepayment considerations applicable to the particular Receivables
Pool and the related securities of the trust.
USE OF PROCEEDS
The net proceeds from the sale of the securities of a given trust will be
applied by the trust --
-- to the purchase of the receivables from the seller;
-- to make the initial deposit into any pre-funding account;
-- to make the initial deposit into any yield supplement account;
-- to make the initial deposit into any reserve account; and
-- for any other purposes specified in the related prospectus supplement.
The trust may also issue certain Classes of notes or certificates to the
seller in partial payment for the receivables. The seller will use the proceeds
of the sale of the securities to purchase the receivables from Ford Credit.
Additionally, the seller may transfer to Ford Credit certain Classes of notes or
certificates in partial payment for the receivables.
THE SELLER AND THE GENERAL PARTNER
DESCRIPTION OF THE SELLER AND THE GENERAL PARTNER
The seller was organized as a Delaware limited partnership in February
1996. The General Partner of the seller is Ford Credit Auto Receivables Two,
Inc., a Delaware corporation and a wholly owned, limited-purpose subsidiary of
Ford Credit. The limited partnership interests in the seller are owned by Ford
Credit. The seller was organized for limited purposes, which include purchasing
receivables from Ford Credit and transferring such receivables to third parties
and any activities incidental to and necessary or convenient for the
accomplishment of such purposes. The principal executive offices of the seller
are located at The American Road,
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Dearborn, Michigan 48121. The telephone number of such offices is (313)
322-3000. The General Partner is located at The American Road, Dearborn,
Michigan 48121.
INSOLVENCY OF THE SELLER OR THE GENERAL PARTNER MAY RESULT IN CONSOLIDATION OF
THEIR ASSETS WITH THE TRUST
The seller has taken steps in structuring the transactions contemplated in
this prospectus and in the related prospectus supplement that are intended to
ensure that the voluntary or involuntary application for relief by Ford Credit
under any Insolvency Law will not result in consolidation of the assets and
liabilities of either of the seller or the General Partner with those of Ford
Credit. These steps include the creation of the seller as a separate,
limited-purpose limited partnership under a limited partnership agreement
containing certain limitations (including restrictions on the nature of the
seller's business and a restriction on the seller's ability to commence a
voluntary case or proceeding under any Insolvency Law without the consent of the
General Partner). In addition, the General Partner is a separate,
limited-purpose corporation whose Certificate of Incorporation contains certain
limitations (including restrictions on the nature of the General Partner's
business and a restriction on the General Partner's ability to commence a
voluntary case or proceeding with respect to itself or the seller under any
Insolvency Law without the unanimous affirmative vote of all of its directors).
Such Certificate of Incorporation includes a provision that, under certain
circumstances relating to the credit ratings of Ford Credit, requires the
General Partner to have two directors who qualify under the Certificate of
Incorporation as "Independent Directors." However, there can be no assurance
that the activities of the seller or the General Partner would not result in a
court concluding that the assets and liabilities of such entity should be
consolidated with those of Ford Credit in a proceeding under any Insolvency Law.
The seller has received the advice of counsel to the effect that, subject
to certain facts, assumptions and qualifications, it would not be a proper
exercise by a court of its equitable discretion to disregard the separate
existence of each of the seller and the General Partner and to require the
consolidation of the assets and liabilities of either such entity with the
assets and liabilities of Ford Credit in the event of the application of the
federal bankruptcy laws to Ford Credit. Among other things, it is assumed by
counsel that each of the seller and the General Partner will follow certain
procedures in the conduct of its affairs, including maintaining records and
books of account separate from those of Ford Credit, refraining from commingling
its assets with those of Ford Credit, doing business from an office separate
from that of Ford Credit and refraining from holding itself out as having agreed
to pay, or being liable for, the debts of Ford Credit. Each of the seller and
the General Partner intends to follow and has represented to such counsel that
it will follow these and other procedures related to maintaining its separate
identity. However, in the event that either the seller or the General Partner
did not follow these procedures, there can be no assurance that a court would
not conclude that the assets and liabilities of such entity should be
consolidated with those of Ford Credit. If a court were to reach such a
conclusion, or a filing were made under any Insolvency Law by or against the
seller or the General Partner, or if an attempt were made to litigate any of the
foregoing issues, delays in distributions on the securities (and possible
reductions in the amount of such distributions which may be substantial) could
occur.
TRUST ASSETS MAY BE ADVERSELY AFFECTED IF SALE OF RECEIVABLES TO THE SELLER WERE
TREATED AS A LOAN
Ford Credit and the seller each intend that each transfer of receivables by
Ford Credit to the seller under a purchase agreement constitute a "true sale" of
such receivables to the seller. If the transfer constitutes such a "true sale,"
the receivables and the proceeds thereof would not be part of Ford Credit's
bankruptcy estate under Section 541 of the U. S. Bankruptcy Code should Ford
Credit become the subject of a bankruptcy case subsequent to the transfer of the
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receivables to the seller. The seller has received the advice of counsel to the
effect that, subject to certain facts, assumptions and qualifications, in the
event Ford Credit were to become the subject of a voluntary or involuntary case
under the United States Bankruptcy Code subsequent to the transfer of
receivables to the seller, the transfer of such receivables by Ford Credit to
the seller under the related purchase agreement would be characterized as a
"true sale" of such receivables from Ford Credit to the seller and such
receivables and the proceeds thereof would not form part of Ford Credit's
bankruptcy estate under Section 541 of the U. S. Bankruptcy Code.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993),
cert. denied 114 S. Ct. 554 (1993), the United States Court of Appeals for the
Tenth Circuit suggested that even where a transfer of accounts from a seller to
a buyer constitutes a "true sale," the accounts would nevertheless constitute
property of the seller's bankruptcy estate in a bankruptcy of the seller. If
Ford Credit or the seller were to become subject to a bankruptcy proceeding and
a court were to follow the Octagon court's reasoning, securityholders might
experience delays in payment or possibly losses on their investment in the
securities. As part of the advice of counsel described above, counsel has
advised the seller that the reasoning of the Octagon case appears to be
inconsistent with other precedent. In addition, the Permanent Editorial Board of
the Uniform Commercial Code has issued an official commentary (PEB Commentary
No. 14) which characterizes the Octagon court's interpretation of Article 9 of
the Uniform Commercial Code as erroneous. Such commentary states that nothing in
Article 9 is intended to prevent the transfer of ownership of accounts or
chattel paper. However, such commentary is not legally binding on any court.
DESCRIPTION OF THE NOTES
One or more Classes of Asset Backed Notes of the related trust will be
issued under the terms of an indenture between the trust and the indenture
trustee specified in the related prospectus supplement, a form of which has been
filed as an exhibit to the Registration Statement of which this prospectus forms
a part. The following summary does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all the provisions of the
notes and the indenture.
THE TRUST MAY USE BOOK-ENTRY REGISTRATION INSTEAD OF ISSUING DEFINITIVE NOTES
Each Class of notes may initially be represented by one or more notes, in
each case registered in the name of DTC's nominee, unless they are Definitive
Notes. The notes will be available for purchase in the denominations specified
in the related prospectus supplement and may be available in book-entry form
only. Accordingly, such nominee is expected to be the holder of record of the
notes issued in book-entry form. If a Class of notes is issued in book-entry
form, unless and until Definitive Notes are issued under the limited
circumstances described in this prospectus or in the related prospectus
supplement, no noteholder of such Class of notes will be entitled to receive a
physical certificate representing a note of such Class. If a Class of notes is
issued in book-entry form, all references in this prospectus and in the related
prospectus supplement to actions by noteholders of such Class of notes refer to
actions taken by DTC upon instructions from its participating organizations and
all references in this prospectus and in the related prospectus supplement to
distributions, notices, reports and statements to noteholders of such Class of
notes refer to distributions, notices, reports and statements to DTC or its
nominee, as the registered holder of such Class of notes, for distribution to
noteholders of such Class of notes in accordance with DTC's procedures with
respect thereto.
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PRINCIPAL AND INTEREST ON THE NOTES
Each Class of notes will have a stated principal or notional amount and may
bear interest at the Note Interest Rate. The timing and priority of payment,
seniority, allocations of losses, Note Interest Rate and amount of or method of
determining payments of principal and interest on each Class of notes of a given
trust will be described in the related prospectus supplement. The right of
holders of any Class of notes to receive payments of principal and/or interest
may be senior or subordinate to the rights of holders of any other Class or
Classes of notes of such trust, as described in the related prospectus
supplement. Payments of interest on the notes of such trust may be made prior to
payments of principal thereon. The dates for payments of interest and principal
on the notes of such trust may be different from the Distribution Dates for the
certificates of such trust. To the extent provided in the related prospectus
supplement, the trust may include one or more Classes of notes designated as
planned amortization Classes, targeted amortization Classes or companion
Classes, each as described in the related prospectus supplement.
STRIP NOTES AND RESIDUAL CASH FLOW NOTES. To the extent provided in the
related prospectus supplement, the trust may include one or more Classes of
notes that are --
-- Strip Notes entitled to (1) principal payments with disproportionate,
nominal or no interest payments or (2) interest payments with
disproportionate, nominal or no principal payments; or
-- Residual Cash Flow Notes entitled to all or a portion of any remaining
payments of principal and interest on the related receivables after
making all other distributions on each Distribution Date.
NOTE INTEREST RATES. Each Class of notes may have a different Note Interest
Rate, which may be a fixed, variable or adjustable rate. For certain Classes of
Strip Notes, the Note Interest Rate may be zero. The related prospectus
supplement will specify the Note Interest Rate for each Class of notes of a
given trust or the method for determining such Note Interest Rate.
PREPAYMENT OF NOTES. One or more Classes of notes of the trust may be
redeemable in whole or in part under the circumstances specified in the related
prospectus supplement, including at the end of the any Funding Period or as a
result of the servicer's exercising its option to purchase the related
Receivables Pool. In the event of a redemption at the end of any Funding Period,
the noteholders may be entitled to receive a redemption premium from the trust,
in the amount and to the extent provided in the related prospectus supplement.
FIXED PRINCIPAL PAYMENTS. To the extent specified in any prospectus
supplement, one or more Classes of notes of a given trust may have fixed
principal payment schedules; noteholders of such notes would be entitled to
receive as payments of principal on any given Distribution Date the applicable
amounts set forth on such schedule with respect to such notes, in the manner and
to the extent set forth in the related prospectus supplement.
PRIORITY. If so specified in the related prospectus supplement, payments of
interest to all noteholders of a particular Class or to one or more other
Classes will have the same priority. Under certain circumstances, the amount
available for such payments could be less than the amount of interest payable on
the notes on any of the dates specified for payments in the related prospectus
supplement, in which case each noteholder of a particular Class will receive its
ratable share (based upon the aggregate amount of interest due to such Class of
noteholders) of the aggregate amount available to be distributed in respect of
interest on the notes of such trust. See "Description of the Receivables
Transfer and Servicing Agreements -- Distributions" and "-- Credit and Cash Flow
Enhancement."
If a trust issues two or more Classes of notes, the sequential order and
priority of payment in respect of principal and interest, and any schedule or
formula or other provisions applicable to
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the determination thereof, of each such Class will be set forth in the related
prospectus supplement. Payments in respect of principal and interest of any
Class of notes will be made on a pro rata basis among all the noteholders of
such Class.
THE INDENTURE
EVENTS OF DEFAULT. With respect to the notes issued by a given trust,
"Events of Default" under the related indenture will consist of:
-- a default for five days or more in the payment of any interest on
notes of the Controlling Class;
-- a default in the payment of the principal of or any installment of
the principal of any note when the same becomes due and payable;
-- a default in the observance or performance of any material
covenant or agreement of the trust made in the related indenture
other than those dealt with specifically elsewhere as an Event of
Default and the continuation of any such default for a period of
60 days after notice thereof is given to the trust by the
applicable indenture trustee or to the trust and such indenture
trustee by the holders of at least 25% in principal amount of the
Controlling Class of notes;
-- any representation or warranty made by the trust in the related
indenture or in any certificate delivered pursuant thereto or in
connection therewith having been incorrect in any material respect
as of the time made, and such breach not having been cured within
30 days after notice thereof is given to the trust by the
applicable indenture trustee or to the trust and such indenture
trustee by the holders of at least 25% in principal amount of the
Controlling Class of notes;
-- certain events of bankruptcy, insolvency, receivership or
liquidation of the applicable trust or its property as specified
in the indenture; or
-- such other events, if any, set forth in the related prospectus
supplement.
The amount of principal required to be paid to noteholders of such trust
under the related indenture, however, generally will be limited to amounts
available to be deposited in the applicable note payment account. Therefore, the
failure to pay principal on a Class of notes generally will not result in the
occurrence of an Event of Default under the indenture until the final scheduled
Distribution Date for such Class of notes.
RIGHTS UPON EVENT OF DEFAULT. With respect to the notes of a given trust,
if an Event of Default should occur and be continuing with respect to the notes
of any trust, the related indenture trustee or holders of a majority in
principal amount of the Controlling Class may declare the principal of such
notes to be immediately due and payable. Such declaration may be rescinded by
the holders of a majority in principal amount of the Controlling Class then
outstanding if both of the following occur:
(1) the issuer has paid or deposited with the indenture trustee enough
money to pay:
-- all payments of principal of and interest on all notes and all
other amounts that would then be due if the Event of Default
causing the acceleration of maturity had not occurred; and
-- all sums paid or advanced by the indenture trustee and the
reasonable compensation, expenses, disbursements and advances of
the indenture trustee and its agents and counsel; and
(2) all Events of Default, other than the nonpayment of the principal
of the notes that has become due solely by the acceleration, have been
cured or waived.
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Any such rescission could be treated, for federal income tax purposes, as a
constructive exchange of such notes by the related noteholders for deemed new
notes upon which gain or loss would be recognized.
If an Event of Default has occurred with respect to the notes issued by any
trust, the related indenture trustee may institute proceedings to collect
amounts due or foreclose on trust property, exercise remedies as a secured party
or sell the related receivables. Upon the occurrence of (1) an Event of Default
relating to the payment of principal of or a default for five days or more in
the payment of interest of any note of such trust, in each case resulting in
acceleration of the notes or (2) an Insolvency Event relating to the General
Partner or the seller, the indenture trustee may sell the related receivables
without obtaining the consent of the securityholders or may elect to have the
applicable trust maintain possession of such receivables and apply collections
as received. However, the indenture trustee is prohibited from selling the
related receivables following an Event of Default, unless
-- the holders of 100% of the Controlling Class issued by such trust
consent to such sale (excluding notes held by the seller, the servicer
or their affiliates),
-- the proceeds of such sale are sufficient to pay in full the principal
of and the accrued interest on the outstanding notes of such trust at
the date of such sale, or
-- the indenture trustee determines that the proceeds of the receivables
would not be sufficient on an ongoing basis to make all payments on
the notes of such trust as such payments would have become due if such
obligations had not been declared due and payable, and such indenture
trustee obtains the consent of the holders of 66 2/3% of the aggregate
outstanding amount of the Controlling Class of such trust.
In addition, if the Event of Default relates to a default by a trust in
observing or performing any material covenant or agreement (other than an Event
of Default relating to non-payment of interest or principal, insolvency or any
other event which is otherwise specifically dealt with by the indenture), the
indenture trustee is prohibited from selling the receivables unless the holders
of all outstanding notes and certificates consent to such sale or the proceeds
of such sale are sufficient to pay in full the principal of and the accrued
interest on the outstanding notes and certificates of such trust.
Subject to the provisions of the applicable indenture relating to the
duties of the related indenture trustee, if an Event of Default under the
indenture occurs and is continuing with respect to notes of the trust, such
indenture trustee will be under no obligation to exercise any of the rights or
powers under such indenture at the request or direction of any of the holders of
such notes, if such indenture trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with such request. Subject to the provisions for
indemnification and certain limitations contained in the related indenture, the
holders of a majority in principal amount of the Controlling Class of a given
trust will have the right to direct the time, method and place of conducting any
proceeding or any remedy available to the applicable indenture trustee, and the
holders of a majority in principal amount of the Controlling Class may, in
certain cases, waive any default with respect thereto, except a default in the
payment of principal or interest or a default in respect of a covenant or
provision of such indenture that cannot be modified without the waiver or
consent of the holders of all of the outstanding notes of the related trust. Any
such waiver could be treated, for federal income tax purposes, as a constructive
exchange of such notes by the related noteholders for deemed new notes upon
which gain or loss would be recognized.
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No holder of a note of any trust will have the right to institute any
proceeding with respect to the related indenture, unless --
-- such holder previously has given to the applicable indenture trustee
written notice of a continuing Event of Default;
-- the holders of not less than 25% in principal amount of the
Controlling Class of such trust have made written request to such
indenture trustee to institute such proceeding in its own name as
indenture trustee;
-- such holder or holders have offered such indenture trustee reasonable
indemnity;
-- such indenture trustee has for 60 days after such notice, request and
offer of indemnity failed to institute such proceeding; and
-- no direction inconsistent with such written request has been given to
such indenture trustee during such 60-day period by the holders of a
majority in principal amount of the Controlling Class.
Each indenture trustee and the related noteholders, by accepting the
related notes, will covenant that they will not at any time institute against
the applicable trust any bankruptcy, reorganization or other proceeding under
any federal or state bankruptcy or similar law.
With respect to any trust, neither the related indenture trustee nor the
related trustee in its individual capacity, nor any holder of a certificate
representing an ownership interest in the trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will be personally liable for the payment of the principal
of or interest on the related notes or for the agreements of the trust contained
in the applicable indenture.
THE TRUSTS WILL BE SUBJECT TO COVENANTS UNDER THE INDENTURE. Each trust
will be subject to the covenants discussed below, as provided in the related
indenture.
-- Restrictions on merger and consolidation. The related trust may not
consolidate with or merge into any other entity, unless:
-- the entity formed by or surviving such consolidation or merger is
organized under the laws of the United States, any state or the
District of Columbia,
-- such entity expressly assumes the trust's obligation to make due and
punctual payments upon the notes of the related trust and the
performance or observance of every agreement and covenant of the
trust under the indenture,
-- no event that is (or with notice or lapse of time or both would
become) an Event of Default under the indenture shall have occurred
and be continuing immediately after such merger or consolidation,
-- the trust has been advised that the rating of the notes and the
certificates of such trust then in effect would not be reduced or
withdrawn by the Rating Agencies as a result of such merger or
consolidation,
-- the trust has received an opinion of counsel to the effect that such
consolidation or merger would have no material adverse tax
consequence to the trust or to any related noteholder or
certificateholder,
-- any action as is necessary to maintain the lien and security
interest created by the related indenture shall have been taken, and
-- the trust has received an opinion of counsel and officer's
certificate each stating that such consolidation or merger satisfies
all requirements under the related indenture.
-- Other negative covenants. Each trust will not, among other things --
-- except as expressly permitted by the applicable Basic Documents,
sell, transfer, exchange or otherwise dispose of any of the assets
of the trust,
-- claim any credit on or make any deduction from the principal and
interest payable in respect of the notes of the related trust (other
than amounts withheld under the
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tax code or applicable state law) or assert any claim against any
present or former holder of such notes because of the payment of
taxes levied or assessed upon the trust or its property,
-- dissolve or liquidate in whole or in part,
-- permit the lien of the related indenture to be subordinated or
otherwise impaired,
-- permit the validity or effectiveness of the related indenture to be
impaired or permit any person to be released from any covenants or
obligations with respect to such notes under such indenture except
as may be expressly permitted thereby, or
-- permit any lien, charge, excise, claim, security interest, mortgage
or other encumbrance to be created on or extend to or otherwise
arise upon or burden the assets of the trust or any part thereof, or
any interest therein or the proceeds thereof, except as may be
created by the terms of the related indenture.
No trust may engage in any activity other than as specified under the
section of the related prospectus supplement titled "The Trust." No trust will
incur, assume or guarantee any indebtedness other than indebtedness incurred
under the related notes and indenture, the related certificates and as a result
of any Advances made to it by the servicer or otherwise in accordance with the
Basic Documents.
LIST OF NOTEHOLDERS. With respect to the notes of any trust, three or more
holders of the notes of any trust or one or more holders of such notes
evidencing not less than 25% of the aggregate outstanding principal amount of
the Controlling Class may, by written request to the related indenture trustee
accompanied by a copy of the communication that the applicant proposes to send,
obtain access to the list of all noteholders maintained by such indenture
trustee for the purpose of communicating with other noteholders with respect to
their rights under the related indenture or under such notes. Such indenture
trustee may elect not to afford the requesting noteholders access to the list of
noteholders if it agrees to mail the desired communication or proxy, on behalf
of and at the expense of the requesting noteholders, to all noteholders of such
trust.
ANNUAL COMPLIANCE STATEMENT. Each trust will be required to file annually
with the related indenture trustee a written statement as to the fulfillment of
its obligations under the indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT. The indenture trustee for each trust
will be required to mail each year to all related noteholders a brief report
relating to its eligibility and qualification to continue as indenture trustee
under the related indenture, any amounts advanced by it under the indenture, the
amount, interest rate and maturity date of certain indebtedness owing by the
trust to the applicable indenture trustee in its individual capacity, the
property and funds physically held by such indenture trustee as such and any
action taken by it that materially affects the related notes and that has not
been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE. An indenture will be discharged
with respect to the collateral securing the related notes upon the delivery to
the related indenture trustee for cancellation of all such notes or, with
certain limitations, upon deposit with such indenture trustee of funds
sufficient for the payment in full of all such notes.
MODIFICATION OF INDENTURE. Any trust, together with the related indenture
trustee, may, without the consent of the noteholders of the trust, execute a
supplemental indenture for the purpose of adding to the covenants of the trust,
curing any ambiguity, correcting or supplementing any provision which may be
inconsistent with any other provision or making any other provision with respect
to matters arising under the related indenture which will not be inconsistent
with other provisions of the indenture provided that such action will not
materially adversely affect the interests of the noteholders.
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The trust and the applicable indenture trustee may also enter into
supplemental indentures, without obtaining the consent of the noteholders of the
related trust, for the purpose of, among other things, adding any provisions to
or changing in any manner or eliminating any of the provisions of the related
indenture or modifying in any manner the rights of such noteholders (except with
respect to the matters listed in the next paragraph which require the approval
of the noteholders) provided that:
-- such action will not, as evidenced by an opinion of counsel, materially
adversely affect the interest of any noteholder;
-- such action will not, as confirmed by the Rating Agencies rating the notes
of the related trust, cause the then current rating assigned to any Class
of such notes to be withdrawn or reduced; and
-- an opinion of counsel as to certain tax matters is delivered.
Without the consent of the holder of each such outstanding note affected
thereby (in addition to the satisfaction of each of the conditions set forth in
the preceding paragraph), however, no supplemental indenture will:
-- change the due date of any installment of principal of or interest on
any such note or reduce the principal amount thereof, the interest
rate thereon or the redemption price with respect thereto, change the
application of the proceeds of a sale of the trust property to payment
of principal and interest on the notes or change any place of payment
where, or the coin or currency in which, any such note or any interest
thereon is payable;
-- impair the right to institute suit for the enforcement of certain
provisions of the related indenture regarding payment;
-- reduce the percentage of the aggregate amount of the Controlling Class
or of the notes, the consent of the holders of which is required for
any such supplemental indenture or the consent of the holders of which
is required for any waiver of compliance with certain provisions of
the related indenture or of certain defaults or events of default
thereunder and their consequences as provided for in such indenture;
-- modify or alter the provisions of the related indenture regarding the
voting of notes held by the applicable trust, any other obligor on
such notes, the seller or an affiliate of any of them;
-- reduce the percentage of the aggregate outstanding amount of the
Controlling Class, the consent of the holders of which is required to
direct the related indenture trustee to sell or liquidate the
receivables after an Event of Default if the proceeds of such sale
would be insufficient to pay the principal amount and accrued but
unpaid interest on the outstanding notes and certificates of such
trust;
-- decrease the percentage of the aggregate principal amount of the
Controlling Class or of the notes required to amend the sections of
the related indenture which specify the applicable percentage of
aggregate principal amount of the notes of such trust necessary to
amend such indenture or any of the other Basic Documents;
-- affect the calculation of the amount of interest or principal payable
on any note on any distribution date (including the calculation of any
of the individual components of such calculation);
-- affect the rights of the noteholders to the benefit of any provisions
for the mandatory redemption of the notes provided in the related
indenture; or
-- permit the creation of any lien ranking prior to or on a parity with
the lien of the related indenture with respect to any of the
collateral for such notes or, except as otherwise
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permitted or contemplated in such indenture, terminate the lien of
such indenture on any such collateral or deprive the holder of any
such note of the security afforded by the lien of such indenture.
THE INDENTURE TRUSTEE
The indenture trustee of notes for each trust will be specified in the
related prospectus supplement. The indenture trustee for any trust may resign at
any time, in which event the trust will be obligated to appoint a successor
trustee for such trust. The trust will remove an indenture trustee if such
indenture trustee ceases to be eligible to continue as such under the related
indenture or if such indenture trustee becomes insolvent. In such circumstances,
the trust will be obligated to appoint a successor trustee for the notes of the
applicable trust. In addition, a majority of the Controlling Class may remove
the indenture trustee without cause and may appoint a successor indenture
trustee. Any resignation or removal of the indenture trustee and appointment of
a successor trustee for the notes of the trust does not become effective until
acceptance of the appointment by the successor trustee for such trust.
DESCRIPTION OF THE CERTIFICATES
One or more Classes of certificates of the related trust will be issued
under the terms of a trust agreement, a form of which has been filed as an
exhibit to the Registration Statement of which this prospectus forms a part. The
following summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
certificates and the trust agreement.
THE TRUSTS MIGHT NOT ISSUE PHYSICAL CERTIFICATES REPRESENTING CERTIFICATES
Except for the certificates, if any, of a given trust retained by the
seller, each Class of certificates may initially be represented by one or more
certificates registered in the name of DTC's nominee, except as set forth below.
Except for the certificates, if any, of a given trust retained by the seller,
the certificates will be available for purchase in the denominations specified
in the related prospectus supplement and may be available in book-entry form
only. Accordingly, such nominee is expected to be the holder of record of any
Class of certificates issued in book-entry form that is not retained by the
seller. If a Class of certificates is issued in book-entry form, unless and
until Definitive Certificates are issued under the limited circumstances
described in this prospectus or in the related prospectus supplement, no
certificateholder of such Class of certificates will be entitled to receive a
physical certificate representing a certificate of such Class. If a Class of
certificates is issued in book-entry form, all references in this prospectus and
in the related prospectus supplement to actions by certificateholders of such
Class of certificates refer to actions taken by DTC upon instructions from its
participating organizations and all references in this prospectus and in the
related prospectus supplement to distributions, notices, reports and statements
to certificateholders of such Class of certificates refer to distributions,
notices, reports and statements to DTC or its nominee, as the case may be, as
the registered holder of such Class of certificates, for distribution to
certificateholders of such Class of certificates in accordance with DTC's
procedures with respect thereto. Any certificates of a given trust owned by the
seller or its affiliates will be entitled to equal and proportionate benefits
under the applicable trust agreement, except that such certificates will be
deemed not to be outstanding for the purpose of determining whether the
requisite percentage of certificateholders have given any request, demand,
authorization, direction, notice, consent or other action under the Basic
Documents. See also "Certain Information Regarding the Securities -- Book-Entry
Registration" and "-- Definitive Securities."
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DISTRIBUTIONS OF PRINCIPAL AND INTEREST
Each Class of certificates will have a stated Certificate Balance and may
accrue interest on such Certificate Balance at the Certificate Rate. The timing
and priority of distributions, seniority, allocations of losses, Certificate
Rate and amount of or method of determining distributions with respect to
principal and interest of each Class of certificates will be described in the
related prospectus supplement. Distributions of interest on such certificates
will be made prior to distributions with respect to principal of such
certificates on the Distribution Date specified in the prospectus supplement.
To the extent provided in the related prospectus supplement, the trust may
include one or more Classes of certificates that are --
-- Strip Certificates entitled to (1) distributions in respect of
principal with disproportionate, nominal or no interest distributions
or (2) interest distributions with disproportionate, nominal or no
distributions in respect of principal; or
-- Residual Cash Flow Certificates entitled to all or a portion of any
remaining payments of principal and interest on the related
receivables after the trust has made all other distributions on each
Distribution Date.
CERTIFICATE RATES. Each Class of certificates may have a different
Certificate Rate, which may be a fixed, variable or adjustable Certificate Rate.
The Certificate Rate for certain Classes of Strip Certificates may be zero. The
related prospectus supplement will specify the Certificate Rate for each Class
of certificates of a given trust or the method for determining such Certificate
Rate. See also "Certain Information Regarding the Securities -- Fixed Rate
Securities" and "-- Floating Rate Securities."
CERTIFICATES ARE SUBORDINATED TO NOTES. Distributions in respect of the
certificates of a trust are subordinate to payments in respect of the notes of
such trust as more fully described in the related prospectus supplement.
Distributions in respect of interest on and principal of any Class of
certificates will be made on a pro rata basis among all the certificateholders
of such Class. One or more Classes of certificates of the trust may be prepaid
in whole or in part under the circumstances specified in the related prospectus
supplement, including at the end of any Funding Period or as a result of the
servicer's exercising its option to purchase the related Receivables Pool. In
the event of a prepayment, the certificateholders may be entitled to receive a
prepayment premium from the trust, in the amount and to the extent provided in
the related prospectus supplement. See "Description of the Receivables Transfer
and Servicing Agreements Termination."
CERTIFICATES MAY BE SUBORDINATED TO ONE OR MORE CLASSES OF OTHER
CERTIFICATES. In the case of a certificates of a trust which includes two or
more Classes of certificates, the timing, sequential order, priority of payment
or amount of distributions in respect of interest and principal, and any
schedule or formula or other provisions applicable to the determination thereof,
of each such Class shall be as set forth in the related prospectus supplement.
LIST OF CERTIFICATEHOLDERS
With respect to the certificates of any trust, three or more holders of the
certificates of such trust or one or more holders of such certificates
evidencing not less than 25% of the Certificate Balance of such certificates
may, by written request to the related trustee accompanied by a copy of the
communication that the applicant proposes to send, obtain access to the list of
all certificateholders maintained by the trustee for the purpose of
communicating with other certificateholders with respect to their rights under
the related trust agreement or under such certificates.
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CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each Class of securities (other than certain Classes of Strip Notes or
Strip Certificates) may be Fixed Rate Securities or Floating Rate Securities, as
more fully described below and in the applicable prospectus supplement. Each
Class of Fixed Rate Securities will bear interest at the applicable per annum
Note Interest Rate or Certificate Rate, as the case may be, specified in the
applicable prospectus supplement. Interest on each Class of Fixed Rate
Securities may be computed on the basis of a 360-day year of twelve 30-day
months or on such other day count basis as is specified in the applicable
prospectus supplement. See "Description of the Notes -- Principal and Interest
on the Notes" and "Description of the Certificates -- Distributions of Principal
and Interest."
FLOATING RATE SECURITIES
Each Class of Floating Rate Securities will bear interest for each
applicable Interest Reset Period at a rate determined by reference to the Base
Rate), plus or minus the Spread, if any, or multiplied by the Spread Multiplier,
if any, in each case as specified in the related prospectus supplement.
The applicable prospectus supplement will designate one of the following
Base Rates as applicable to a given Floating Rate Security:
-- the CD Rate,
-- the Commercial Paper Rate,
-- the Federal Funds Rate,
-- LIBOR,
-- the Treasury Rate, or
-- such other Base Rate as is set forth in such prospectus supplement.
As specified in the applicable prospectus supplement, Floating Rate
Securities of a given Class may also have either or both of the following (in
each case expressed as a rate per annum):
-- a maximum limitation, or ceiling, on the rate at which interest may
accrue during any interest period. In addition to any maximum interest
rate that may be applicable to any Class of Floating Rate Securities,
the interest rate applicable to any Class of Floating Rate Securities
will in no event be higher than the maximum rate permitted by
applicable law; and
-- a minimum limitation, or floor, on the rate at which interest may
accrue during any interest period.
Each trust with respect to which a Class of Floating Rate Securities will
be issued will appoint, and enter into agreements with a Calculation Agent to
calculate interest rates on each such Class of Floating Rate Securities issued
with respect thereto. The applicable prospectus supplement will set forth the
identity of the Calculation Agent for each such Class of Floating Rate
Securities of a given trust, which may be either the related trustee or
indenture trustee with respect to such trust. All determinations of interest by
the Calculation Agent shall, in the absence of manifest error, be conclusive for
all purposes and binding on the holders of Floating Rate Securities of a given
Class. All percentages resulting from any calculation of the rate of interest on
a Floating Rate Security will be rounded, if necessary, to the nearest 1/100,000
of 1% (.0000001), with five one-millionths of a percentage point rounded upward.
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CD RATE SECURITIES. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the CD
Rate and the Spread or Spread Multiplier, if any, specified in such prospectus
supplement and in the applicable prospectus supplement.
COMMERCIAL PAPER RATE SECURITIES. Each Commercial Paper Rate Security will
bear interest for each Interest Reset Period at the interest rate calculated
with reference to the Commercial Paper Rate and the Spread or Spread Multiplier,
if any, specified in such security and in the applicable prospectus supplement.
FEDERAL FUNDS RATE SECURITIES. Each Federal Funds Rate Security will bear
interest for each Interest Reset Period at the interest rate calculated with
reference to the Federal Funds Rate and the Spread or Spread Multiplier, if any,
specified in such prospectus supplement and in the applicable prospectus
supplement.
LIBOR SECURITIES. Each LIBOR Security will bear interest for each Interest
Reset Period at the interest rate calculated with reference to LIBOR and the
Spread or Spread Multiplier, if any, specified in such prospectus supplement and
in the applicable prospectus supplement.
TREASURY RATE SECURITIES. Each Treasury Rate Security will bear interest
for each Interest Reset Period at the interest rate calculated with reference to
the Treasury Rate and the Spread or Spread Multiplier, if any, specified in such
prospectus supplement and in the applicable prospectus supplement.
BOOK-ENTRY REGISTRATION
The prospectus supplement related to a given trust will specify whether the
holders of the notes or certificates of such trust may hold their respective
securities as Book-Entry Securities.
Investors in the global notes may hold them through any of The Depository
Trust Company, Cedelbank, societe anonyme or the Euroclear System. The global
notes 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.
INITIAL SETTLEMENT OF THE GLOBAL NOTES. All global notes will be held in
book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors'
interests in the global notes 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 customers or
participants through their respective depositaries, which in turn will hold such
positions in accounts as DTC participants.
Investors electing to hold their global notes through DTC will follow the
settlement practices applicable to U.S. corporate debt obligations. 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 global notes through Cedelbank or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global notes will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
Unless and until Definitive Securities are issued under the limited
circumstances described in this prospectus or in the related prospectus
supplement, no securityholder will be entitled to receive a physical certificate
representing a Book-Entry Security. All references in this prospectus and in the
related prospectus supplement to actions by securityholders shall refer to
actions taken by DTC upon instructions from its participants, and all references
in this prospectus and in the related prospectus supplement to distributions,
notices, reports and statements to securityholders shall refer to distributions,
notices, reports and statements to DTC or its nominee as the registered holder
of the Book-Entry Securities, as the case may be, for distribution to holders of
Book-Entry Securities in accordance with DTC's procedures with respect thereto.
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In the event that any of DTC, Cedelbank or Euroclear should discontinue its
services, the related administrator of each trust would seek an alternative
depository (if available) or cause the issuance of Definitive Securities to
securityholders or their nominees in the manner described under "-- Definitive
Securities" below.
Except as required by law, none of the administrator, if any, the
applicable trustee or the applicable indenture trustee, if any, will have any
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the securities of any trust held by DTC's
nominee, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
SECONDARY MARKET TRADING OF THE GLOBAL NOTES. 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 U.S. corporate
debt obligations in same-day funds.
Trading between Cedelbank customers and/or Euroclear participants.
Secondary market trading between Cedelbank customers 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 purchaser. When
global notes are to be transferred from the account of a DTC participant to the
account of a Cedelbank customer or a Euroclear participant, the purchaser will
send instructions to Cedelbank or Euroclear through a Cedelbank customer or
Euroclear participant at least one business day prior to settlement. Cedelbank
or Euroclear will instruct the respective depositary, as the case may be, to
receive the global notes against payment. Payment will include interest accrued
on the global notes from and including the last coupon payment date to and
excluding the settlement date. Payment will then be made by the respective
depositary to the DTC participant's account against delivery of the global
notes. After settlement has been completed, the global notes will be credited to
the respective clearing system and by the clearing system, in accordance with
its usual procedures, to the Cedelbank customer's or Euroclear participant's
account. The securities credit will appear the next day (European time) and the
cash debit will be back-valued to, and the interest on the global notes 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
(that is, the trade fails), the Cedelbank or Euroclear cash debit will be valued
instead as of the actual settlement date.
Cedelbank customers 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 pre-position 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 global
notes are credited to their accounts one day later.
As an alternative, if Cedelbank or Euroclear has extended a line of credit
to them, Cedelbank customers or Euroclear participants can elect not to
pre-position funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, Cedelbank customers or Euroclear participants
purchasing global notes would incur overdraft charges for one day, assuming they
cleared the overdraft when the global notes were credited to their accounts.
However, interest on the global notes would accrue from the value date.
Therefore, in many cases the investment income on the global notes earned during
that one-day period may substantially reduce or offset the amount of such
overdraft charges, although this result will depend on each Cedelbank customer's
or Euroclear participant's particular cost of funds.
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Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending global notes to the
respective depositary for the benefit of Cedelbank customers or Euroclear
participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC participant 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 customers and Euroclear
participants may employ their customary procedures for transactions in which
global notes are to be transferred by the respective clearing system, through
the respective depositary, to a DTC participant. The seller will send
instructions to Cedelbank or Euroclear through a Cedelbank customer or Euroclear
participant at least one business day prior to settlement. In these cases,
Cedelbank or Euroclear will instruct the respective depositary, as appropriate,
to deliver the bonds to the DTC participant's account against payment. Payment
will include interest accrued on the global notes from and including the last
coupon payment date to and excluding the settlement date. The payment will then
be reflected in the account of the Cedelbank customer or Euroclear participant
the following day, and receipt of the cash proceeds in the Cedelbank customer'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). Should the
Cedelbank customer or Euroclear participant have a line of credit with its
respective clearing system and elect to be in debit in anticipation of receipt
of the sale proceeds in its account, the back-valuation will extinguish any
overdraft charges incurred over that one-day period. If settlement is not
completed on the intended value date (that is, the trade fails), receipt of the
cash proceeds in the Cedelbank customer'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 notes from DTC participants for delivery to Cedelbank customers or
Euroclear participants should note that these trades would automatically fail on
the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
(a) borrowing through Cedelbank or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedelbank or
Euroclear accounts) in accordance with the clearing system's customary
procedures;
(b) borrowing the global notes in the U.S. from a DTC participant no later
than one day prior to settlement, which would give the global notes
sufficient time to be reflected in their Cedelbank or Euroclear account
in order to settle the sale side of the trade; or
(c) 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
customer or Euroclear participant.
The securityholders who are not participants, either directly or
indirectly, but who desire to purchase, sell or otherwise transfer ownership of,
or other interest in, securities may do so only through direct and indirect
participants. In addition, securityholders will receive all distributions of
principal and interest from the indenture trustee or the applicable trustee
through the participants who in turn will receive them from DTC. Under a
book-entry format, securityholders may experience some delay in their receipt of
payments, since such payments will be forwarded by the applicable trustee to
DTC's nominee. DTC will forward such payments to its participants which
thereafter will forward them to indirect participants or securityholders. To the
extent the related prospectus supplement provides that Book-Entry Securities
will be issued, the only "noteholder" or "certificateholder," as applicable,
will be DTC's nominee. Securityholders will not be recognized by the applicable
trustee as "noteholders" or "certificateholders" and securityholders will be
permitted to exercise the rights of securityholders only indirectly through DTC
and its participants.
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Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of securities among
participants on whose behalf it acts with respect to the securities and is
required to receive and transmit distributions of principal and interest on the
securities. Participants and indirect participants with which securityholders
have accounts with respect to their respective securities similarly are required
to make book-entry transfers and receive and transmit such payments on behalf of
their respective securityholders. Accordingly, although securityholders will not
possess their respective securities, the rules provide a mechanism by which
participants will receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and certain 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 with respect to such
securities, may be limited due to the lack of a physical certificate for such
securities.
DTC will advise the related administrator of each trust that it will take
any action permitted to be taken by a securityholder under the related indenture
or trust agreement only at the direction of one or more participants to whose
accounts with DTC such securities are credited. DTC may take conflicting actions
with respect to other undivided interests to the extent that such actions are
taken on behalf of participants whose holdings include such undivided interests.
Non-U.S. holders of global notes will be subject to U.S. withholding taxes
unless such holders meet certain requirements and deliver appropriate U.S. tax
documents to the securities clearing organizations or their participants.
THE DEPOSITORIES. 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 New York Uniform Commercial
Code, and a "clearing agency" registered under the provisions of Section 17A of
the Securities Exchange Act of 1934, as amended. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers (who may include any of the underwriters
of securities of the trust), banks, trust companies and clearing corporations
and may include certain other organizations. Indirect access to the DTC system
also is available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly.
Cedelbank is incorporated under the laws of Luxembourg as a professional
depository. Cedelbank holds securities for its customers and facilitates the
clearance and settlement of securities transactions between Cedelbank customers
through electronic book-entry changes in accounts of Cedelbank customers,
thereby eliminating the need for physical movement of certificates. Transactions
may be settled by Cedelbank in any of 36 currencies, including United States
dollars. Cedelbank provides to its Cedelbank customers, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Cedelbank interfaces with domestic markets in several countries. As a
professional depository, Cedelbank is subject in Luxembourg to regulation by and
supervision by the Commission for the Supervision of the Financial Sector.
Cedelbank customers are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations and may include any of the
underwriters of any trust securities. Indirect access to Cedelbank is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Cedelbank customer,
either directly or indirectly.
Euroclear was created in 1968 to hold securities for its participants and
to clear and settle transactions between Euroclear participants through
simultaneous electronic book-entry delivery
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against payment, thereby eliminating the need for physical movement of
certificates and the risk from transfers of securities and cash that are not
simultaneous.
The Euroclear system has subsequently been extended to clear and settle
transactions between Euroclear participants and counterparties both in Cedelbank
and in many domestic securities markets. Transactions may be settled in any of
34 currencies. In addition to safekeeping (custody) and securities clearance and
settlement, the Euroclear system includes securities lending and borrowing and
money transfer services. The Euroclear system is operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York under contract with
Euroclear Clearance System, S.C., a Belgian cooperative corporation that
establishes policy on behalf of Euroclear participants. 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.
All operations are conducted by the Euroclear operator and all Euroclear
securities clearance accounts and cash accounts are accounts with the Euroclear
operator. They are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear system and
applicable Belgian law. These govern all transfers of securities and cash, both
within the Euroclear system, and receipts and withdrawals of securities and
cash. All securities in the Euroclear system are held on a fungible basis
without attribution of specific certificates to specific securities clearance
accounts.
Euroclear participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries and may
include any of the underwriters of any trust securities. Indirect access to the
Euroclear system 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 acts under the Terms and Conditions, the
Operating Procedures of the Euroclear system and Belgian law only on behalf of
Euroclear participants and has no record of or relationship with persons holding
through Euroclear participants.
DEFINITIVE SECURITIES
With respect to any Class of notes and any Class of certificates issued in
book-entry form, such notes or certificates will be issued as Definitive Notes
and Definitive Certificates, respectively, to noteholders or certificateholders
or their respective nominees, rather than to DTC or its nominee, only if (1) the
related administrator of the trust determines that DTC is no longer willing or
able to discharge properly its responsibilities as depository with respect to
such securities and such administrator or the seller, as the case may be, is
unable to locate a qualified successor and so notifies the applicable trustee in
writing, (2) the administrator or the seller, as the case may be, at its option,
elects to terminate the book-entry system through DTC or (3) after the
occurrence of an Event of Default under the indenture or an Event of Servicing
Termination with respect to such securities, holders representing at least a
majority of the outstanding principal amount of the notes or the certificates,
as the case may be, of such Class advise the applicable trustee through DTC in
writing that the continuation of a book-entry system through DTC (or a successor
thereto) with respect to such notes or certificates is no longer in the best
interest of the holders of such securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the applicable trustee will be required to notify all applicable
securityholders of a given Class through participants of the availability of
Definitive Securities. Upon surrender by DTC of the definitive certificates
representing the corresponding securities and receipt of instructions for re-
registration, the applicable trustee will reissue such securities as Definitive
Securities to such securityholders.
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Distributions of principal of, and interest on, such Definitive Securities
will thereafter be made by the applicable trustee in accordance with the
procedures set forth in the related indenture or the related trust agreement
directly to holders of Definitive Securities were registered at the close of
business on the applicable record date specified for such securities in the
related prospectus supplement. Such distributions will be made by check mailed
to the address of such holder as it appears on the register maintained by the
applicable trustee. The final payment on any such Definitive Security, however,
will be made only upon presentation and surrender of such Definitive Security at
the office or agency specified in the notice of final distribution to the
applicable securityholders.
Definitive Securities will be transferable and exchangeable at the offices
of the applicable trustee or of a registrar named in a notice delivered to
holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the applicable 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 Distribution Date, the servicer or administrator will
prepare and provide to the related indenture trustee a statement to be delivered
to the related noteholders on such Distribution Date. With respect to securities
of each trust, on or prior to each Distribution Date, the servicer or the
administrator will prepare and provide to the related trustee a statement to be
delivered to the related certificateholders on such Distribution Date. With
respect to securities of each trust, each such statement to be delivered to
noteholders will include (to the extent applicable) the following information
(and any other information so specified in the related prospectus supplement) as
to the notes of such trust with respect to such Distribution Date or the period
since the previous Distribution Date, as applicable, and each such statement to
be delivered to certificateholders will include (to the extent applicable) the
following information (and any other information so specified in the related
prospectus supplement) as to the certificates of such trust with respect to such
Distribution Date or the period since the previous Distribution Date, as
applicable:
(1) the amount of the distribution allocable to principal of each Class of
such notes and to the Certificate Balance of each Class of such
certificates;
(2) the amount of the distribution allocable to interest on or with
respect to each Class of securities of such trust;
(3) the amount of the distribution allocable to draws from any reserve
account, any yield supplement account or payments in respect of any
other credit or cash flow enhancement arrangement;
(4) the Pool Balance as of the close of business on the last day of the
preceding Collection Period;
(5) any overcollateralization amount or credit enhancement amount;
(6) the aggregate outstanding principal amount for each Class of such
notes and the Certificate Balance for each Class of such certificates
and any related factors needed to compute the principal amount
outstanding of the notes or certificates, each after giving effect to
all payments reported under clause (1) above on such date;
(7) the amount of the servicing fee paid to the servicer and the amount of
any unpaid servicing fee with respect to the related Collection Period
or Collection Periods, as the case may be;
(8) the amount of the aggregate Realized Losses (as defined in the related
prospectus supplement), if any, for such Collection Period;
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(9) previously due and unpaid interest payments (plus interest accrued on
such unpaid interest), if any, on the notes and the certificates, in
each case as applicable to each Class of securities, and the change in
such amounts from the preceding statement;
(10) previously due and unpaid principal payments (plus interest accrued on
such unpaid principal), if any, on the notes and the certificates, in
each case as applicable to each Class of securities, and the change in
such amounts from the preceding statement;
(11) the aggregate Purchase Amounts for receivables, if any, that were
repurchased in such Collection Period;
(12) the balance of any reserve account on such date, after giving effect
to changes therein on such date;
(13) the balance of any yield supplement account on such date, after giving
effect to changes therein on such date;
(14) the amount of Advances on such date;
(15) for each such date during any Funding Period, the amount remaining in
the pre-funding account;
(16) for the first such date that is on or immediately following the end of
any Funding Period, the amount remaining in the pre-funding account
that has not been used to fund the purchase of Subsequent Receivables
and is being passed through as payments of principal on the securities
of such trust; and
(17) the amount of any cumulative shortfall between payments due in respect
of any credit or cash flow enhancement arrangement and payments
received in respect of such credit or cash flow enhancement
arrangement, and the change in any such shortfall from the preceding
statement.
Each amount set forth under clauses (1), (2), (7), (9) and (10) with
respect to the notes or the certificates of any trust will be expressed as a
dollar amount per $1,000 of the initial principal amount of such notes or the
initial Certificate Balance of such certificates, as applicable.
Within the prescribed period of time for federal income tax reporting
purposes after the end of each calendar year during the term of each trust, the
applicable trustee will mail to each person who at any time during such calendar
year has been a securityholder with respect to the trust and received any
payment thereon a statement containing certain information for the purposes of
such securityholder's preparation of federal income tax returns. See "Tax
Matters."
DESCRIPTION OF THE RECEIVABLES TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Receivables Transfer
and Servicing Agreements. Forms of the Receivables Transfer and Servicing
Agreements have been filed as exhibits to the Registration Statement of which
this prospectus forms a part. This summary does not purport to be complete and
is subject to, and qualified in its entirety by reference to, all the provisions
of the Receivables Transfer and Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
SALE AND ASSIGNMENT BY FORD CREDIT. Before each trust issues the related
securities, Ford Credit will sell and assign to the seller under a purchase
agreement, without recourse, its entire interest in the Initial Receivables, if
any, of the related Receivables Pool, including its security interests in the
related financed vehicles in exchange for the net proceeds received by the
seller from the sale of the notes and the certificates of the trust and certain
classes of securities if so provided in the related prospectus supplement.
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SALE AND ASSIGNMENT BY THE SELLER. When the trust issues the related
securities, the seller will sell and assign to the trust under a sale and
servicing agreement, without recourse, the seller's entire interest in the
Initial Receivables, including its security interests in the related financed
vehicles, in exchange for the notes and certificates issued by the trust. Each
such receivable will be identified in a schedule to the related sale and
servicing agreement. The applicable trustee of the trust will not independently
verify the existence and eligibility of any receivables. The trustee of the
trust will, concurrently with such sale and assignment, execute and deliver the
related notes and/or certificates to the seller in exchange for the receivables.
SALE AND ASSIGNMENT OF SUBSEQUENT RECEIVABLES. The related prospectus
supplement for the trust will specify whether, and the terms, conditions and
manner under which, Subsequent Receivables will be sold by Ford Credit to the
seller and by the seller to the applicable trust from time to time during any
Funding Period on each Subsequent Transfer Date.
REPRESENTATIONS AND WARRANTIES. In each purchase agreement, Ford Credit
will represent and warrant to the seller, and in each sale and servicing
agreement the seller will represent and warrant to the applicable trust among
other things, that at the date of issuance of the related notes and/or
certificates or at the applicable Subsequent Transfer Date --
-- the information provided about the related receivables is correct in
all material respects;
-- the obligor on each related receivable had obtained or agreed to
obtain physical damage insurance in accordance with Ford Credit's
normal requirements;
-- the related receivables are free and clear of all security interests,
liens, charges, and encumbrances (such representation and warranty
will be made to the best of its knowledge with respect to mechanic's
liens and the like relating to each financed vehicle) and no setoffs,
defenses, or counterclaims against it have been asserted or
threatened;
-- each of the related receivables is or will be secured by a first
priority perfected security interest in the financed vehicle in favor
of Ford Credit or PRIMUS; and
-- each related receivable, at the time it was originated, complied, and
at the date of issuance of the related notes and/or certificates or at
the applicable Subsequent Transfer Date, if any, complies in all
material respects with applicable federal and state laws, including
consumer credit, truth in lending, equal credit opportunity, and
disclosure laws.
SELLER MUST REPURCHASE THE RECEIVABLES RELATING TO A BREACH OF
REPRESENTATION OR WARRANTY. As of the last day of the second (or, if the seller
elects, the first) Collection Period following the discovery by or notice to the
seller of a breach of any representation or warranty of the seller which
materially and adversely affects the interests of the related trust in any
receivable, the seller, unless the breach has been cured, will purchase such
receivable from the trust. Ford Credit will then be required to purchase such
receivable from the seller, at a price equal to the Purchase Amount. The
purchase obligation will constitute the sole remedy available to the
certificateholders or the trustee and any noteholders or indenture trustee in
respect of the related trust for any such uncured breach.
SERVICING OF THE RECEIVABLES. Under each sale and servicing agreement, the
servicer will service and administer the receivables held by each trust and, as
custodian on behalf of the trust, will maintain possession as the trustee's
agent of the retail installment sale contracts and any other documents relating
to such receivables. To assure uniform quality in servicing both the receivables
and the servicer's own portfolio of receivables, as well as to facilitate
servicing and save administrative costs, the installment sale contracts and
other documents relating thereto will not be physically segregated from other
similar documents that are in the servicer's possession or otherwise stamped or
marked to reflect the transfer to the trust so long as Ford Credit is servicing
the related receivables. However, Uniform Commercial Code financing statements
reflecting the sale and assignment of such receivables by Ford Credit to the
seller and by the
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seller to the trust, will be filed, and the servicer's accounting records and
computer systems will be marked to reflect such sale and assignment. Because
such receivables will remain in the servicer's possession and will not be
stamped or otherwise marked to reflect the assignment to the trust if a
subsequent purchaser were to obtain physical possession of such receivables
without knowledge of the assignment, the trust's interest in the receivables
could be defeated. See "Some Important Legal Issues Relating to the
Receivables -- Security Interests in Vehicles."
ACCOUNTS
The servicer will establish and maintain with the related indenture trustee
one or more collection accounts in the name of the indenture trustee on behalf
of the related noteholders and certificateholders into which all payments made
on or with respect to the related receivables will be deposited. The servicer
may establish and maintain with such indenture trustee a note payment account
(which may be a subaccount of the collection account), in the name of such
indenture trustee on behalf of such noteholders, into which amounts released
from the collection account and any pre-funding account, reserve account or
other credit enhancement for payment to such noteholders will be deposited and
from which all distributions to such noteholders will be made. The servicer may
establish and maintain with the related trustee one or more certificate
distribution accounts, in the name of the trustee on behalf of such
certificateholders, into which amounts released from the collection account and
any pre-funding account, yield supplement account, reserve account or other
credit or cash flow enhancement for distribution to such certificateholders will
be deposited and from which all distributions to such certificateholders will be
made.
If so provided in the related prospectus supplement, the servicer will
establish for each trust an additional payahead account in the name of the
related indenture trustee into which, to the extent required by the sale and
servicing agreement, Payaheads will be deposited until such time as the payment
falls due. Until such time as payments are transferred from the payahead account
to the collection account, they will not constitute collected interest or
collected principal with respect to the related receivables and will not be
available for distribution to the applicable noteholders or certificateholders.
The payahead account initially will be maintained with the applicable indenture
trustee. So long as Ford Credit is the servicer and provided that (1) there
exists no Event of Servicing Termination and (2) each other condition to holding
Payaheads as may be required by the applicable sale and servicing agreement is
satisfied, Payaheads may be retained by the servicer until the applicable
Distribution Date.
Any other accounts to be established with respect to securities of the
trust, including any pre-funding account, yield supplement account or reserve
account, will be described in the related prospectus supplement.
For any securities of the trust, funds in the trust accounts will be
invested as provided in the related sale and servicing agreement in Permitted
Investments. Permitted Investments are generally limited to obligations or
securities that mature on or before the date of the next distribution for such
series. However, to the extent permitted by the Rating Agencies, funds in any
reserve account may be invested in securities that will not mature prior to the
date of the next distribution on the notes or certificates and which will not be
sold to meet any shortfalls. Thus, the amount of cash available 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 on the related receivables (as provided in the related prospectus
supplement) exceeds the amount of cash in the reserve account, a temporary
shortfall in the amounts distributed to the related noteholders or
certificateholders could result, which could, in turn, increase the average life
of the notes or the certificates of such trust. Net investment earnings on funds
deposited in the trust accounts shall be deposited in the applicable collection
account or distributed as provided in the related prospectus supplement.
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The trust accounts will be maintained as Eligible Deposit Accounts.
SERVICING PROCEDURES
Ford Credit will act as servicer and make reasonable efforts to collect all
payments due with respect to the receivables held by each trust and will use the
same collection procedures that it follows with respect to automotive retail
installment sale contracts that it continues to own, in a manner consistent with
the related sale and servicing agreement.
Consistent with its normal procedures, the servicer may, in its discretion,
arrange with the obligor on a receivable to defer or modify the payment
schedule. Some of such arrangements may require the servicer to purchase the
receivable while others may result in the servicer making Advances with respect
to the receivable. The servicer may be obligated to purchase or make Advances
with respect to any receivable if, among other things, it extends the date for
final payment by the obligor of such receivable beyond six months past the last
day of the Collection Period preceding the latest date that a receivable
matures, as set forth in the related prospectus supplement, changes the APR or
the total amount or number of scheduled payments of such receivable or fails to
maintain a perfected security interest in the related financed vehicle. If the
servicer determines that eventual payment in full of a receivable is unlikely,
the servicer will follow its normal practices and procedures to realize upon the
receivable, including the repossession and disposition of the financed vehicle
securing the receivable at a public or private sale, or the taking of any other
action permitted by applicable law.
Ford Credit may from time to time take additional security securing payment
of any receivable held by a trust.
COLLECTIONS
With respect to securities of each trust, so long as Ford Credit is the
servicer and provided that (1) there exists no Event of Servicing Termination
and (2) each other condition to making monthly deposits as may be required by
the related sale and servicing agreement is satisfied, the servicer may retain
all payments on the related receivables received from obligors and all proceeds
of the related receivables collected during a Collection Period until the
business day preceding the applicable Distribution Date. However, if such
conditions are not met, the servicer will be required to deposit such amounts
into the related collection account not later than the second business day after
receipt. The servicer or the seller, as the case may be, will remit the
aggregate Purchase Amount of any receivables to be purchased from the trust to
the related collection account on or prior to the business day preceding the
applicable Distribution Date. Pending deposit into the collection account,
collections may be employed by the servicer at its own risk and for its own
benefit and will not be segregated from its own funds. To the extent set forth
in the related prospectus supplement, the servicer may, in order to satisfy the
requirements described above, obtain a letter of credit or other security for
the benefit of the related trust to secure timely remittances of collections of
the related receivables and payment of the aggregate Purchase Amount with
respect to receivables purchased by the servicer.
Collections on a receivable made during a Collection Period which are not
late fees, prepayment charges, or certain other similar fees or charges shall be
applied first to any outstanding Advances made by the servicer with respect to
such receivable and then to the scheduled payment. To the extent that
collections on an Actuarial Receivable during a Collection Period exceed the
outstanding Actuarial Advances and the scheduled payment on such Actuarial
Receivable, the collections shall be applied to prepay the Actuarial Receivable
in full. If the collections are insufficient to prepay the Actuarial Receivable
in full, they generally shall be treated as Payaheads until such later
Collection Period as such Payaheads may be transferred to the collection account
and applied either to the scheduled payment or to prepay the Actuarial
Receivable in full.
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ADVANCES
To the extent the collections on an Actuarial Receivable for a Collection
Period are less than the scheduled payment, the amount of Payaheads made on such
Actuarial Receivable not previously applied, if any, with respect to such
Actuarial Receivable shall be applied by the servicer to the extent of the
shortfall. To the extent of any remaining shortfall, the servicer may make an
Actuarial Advance. The servicer will be obligated to make an Actuarial Advance
in respect of an Actuarial Receivable only to the extent that the servicer, in
its sole discretion, expects to recoup the Actuarial Advance from the related
obligor, the Purchase Amount or Liquidation Proceeds. The servicer will deposit
Actuarial Advances in the related collection account on or prior to the business
day preceding the applicable Distribution Date. The servicer will be entitled to
recoup its Actuarial Advances from subsequent payments by or on behalf of the
obligor, collections of Liquidation Proceeds and payment of any related Purchase
Amount; or, upon the determination that reimbursement from the preceding sources
is unlikely, will be entitled to recoup its Actuarial Advances from collections
from other receivables in the related Receivables Pool.
On or before each applicable Distribution Date, the servicer shall deposit
into the related collection account an amount equal to the Simple Interest
Advance. If the Simple Interest Advance is a negative number, an amount equal to
such amount shall be paid to the servicer in reimbursement of outstanding Simple
Interest Advances. In addition, in the event that a Simple Interest Receivable
becomes a Liquidated Receivable, the amount of accrued and unpaid interest
thereon (but not including interest for the then current Collection Period)
shall be withdrawn from the collection account and paid to the servicer in
reimbursement of outstanding Simple Interest Advances. No advances of principal
will be made with respect to Simple Interest Receivables.
In the event that an obligor shall prepay a receivable in full, if the
related contract did not require such obligor to pay a full month's interest for
the month of prepayment, at the APR, generally the servicer will advance the
amount of such interest. The servicer will not be entitled to recoup any such
advance. The servicer may instruct the indenture trustee to withdraw such
Advances instead from the reserve account provided that the servicer within two
business days replaces in the reserve account any funds so used.
SERVICING COMPENSATION AND EXPENSES
The servicer will be entitled to receive a servicing fee for each
Collection Period equal to a specified percentage of the Pool Balance as of the
first day of such Collection Period. The servicer also will be entitled to
receive as a supplemental servicing fee for each Collection Period any late,
prepayment, and other administrative fees and expenses collected during such
Collection Period. If specified in the related prospectus supplement, the
supplemental servicing fee will include net investment earnings on funds
deposited in the trust accounts and other accounts with respect to the trust.
The servicer will be paid the servicing fee and the supplemental servicing fee
for each Collection Period on the applicable Distribution Date.
The servicing fee and the supplemental servicing fee are intended to
compensate the servicer for performing the functions of a third party servicer
of the receivables as an agent for their beneficial owner, including collecting
and posting all payments, responding to inquiries of obligors on the
receivables, investigating delinquencies, sending payment coupons to obligors,
reporting federal income tax information to obligors, paying costs of
collections, and policing the collateral. The fees will also compensate the
servicer for administering the particular receivables pool, including making
advances, accounting for collections, furnishing monthly and annual statements
to the related trustee and indenture trustee with respect to distributions, and
generating federal income tax information for the trust. The fees also will
reimburse the servicer for certain taxes, the fees of the related trustee and
indenture trustee, accounting fees, outside
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auditor fees, data processing costs, and other costs incurred in connection with
administering the applicable receivables.
DISTRIBUTIONS
With respect to securities of each trust, beginning on the Distribution
Date specified in the related prospectus supplement, distributions of principal
and interest (or, where applicable, of principal or interest only) on each Class
of such securities entitled thereto will be made by the applicable trustee to
the noteholders and the certificateholders of such trust. The timing,
calculation, allocation, order, source, priorities of and requirements for all
payments to each Class of noteholders and all distributions to each Class of
certificateholders of such trust will be set forth in the related prospectus
supplement.
With respect to securities of each trust, on each Distribution Date,
collections on the related receivables will be transferred from the collection
account to the note payment account for distribution to noteholders, if any, and
to the certificate distribution account for distribution to certificateholders,
to the extent provided in the related prospectus supplement. Credit enhancement,
such as a reserve account, will be available to the related trust to cover any
shortfalls in the amount available for distribution on such date to the extent
specified in the related prospectus supplement. As more fully described in the
related prospectus supplement, distributions in respect of principal of a Class
of securities of a given trust will be subordinate to distributions in respect
of interest on such Class, and distributions in respect of one or more Classes
of certificates of such trust may be subordinate to payments in respect of notes
of such trust or other Classes of certificates of such trust.
ALLOCATION OF COLLECTIONS ON RECEIVABLES. Distributions of principal on the
securities of the trust may be based on the amount of principal collected or due
and the amount of realized losses incurred in a Collection Period. The servicer
shall allocate collections to the interest and principal portion of scheduled
payments on the receivables in accordance with its customary servicing
procedures. On each Determination Date, the indenture trustee, if any, or,
otherwise, the trustee, shall determine the amount in the collection account
available to make payments or distributions to securityholders on the related
Distribution Date and will make the distributions as described in the related
prospectus supplement.
CREDIT AND CASH FLOW ENHANCEMENT
ANY FORM OF CREDIT ENHANCEMENT MAY BE LIMITED AND MAY ONLY APPLY TO CERTAIN
CLASSES OF SECURITIES. The presence of a reserve account and other forms of
credit enhancement for the benefit of any Class or securities of the trust is
intended to (1) enhance the likelihood of receipt by the securityholders of such
Class of the full amount of principal and interest due thereon and (2) decrease
the likelihood that such securityholders will experience losses. The credit
enhancement for a Class of securities may not provide protection against all
risks of loss and may not guarantee repayment of the entire principal amount and
interest thereon. 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, as described in the related
prospectus supplement.
SELLER MAY REPLACE CREDIT ENHANCEMENT WITH RATING CONFIRMATION. If so
provided in the related prospectus supplement, the seller may replace the credit
enhancement for any Class of securities with another form of credit enhancement
without the consent of securityholders, provided the Rating Agencies confirm in
writing that substitution will not result in the reduction or withdrawal of the
rating of any Class of securities of the related trust.
RESERVE ACCOUNT. If so provided in the related prospectus supplement, the
reserve account will be funded by an initial deposit by the seller on the
closing date in the amount set forth in the related prospectus supplement and,
if the related trust has a Funding Period, will also be funded
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on each Subsequent Transfer Date to the extent described in the related
prospectus supplement. As further described in the related prospectus
supplement, the amount on deposit in the reserve account will be increased on
each Distribution Date thereafter up to the specified reserve balance by the
deposit therein of the amount of collections on the related receivables
remaining on each such Distribution Date after the payment of all other required
payments and distributions on such date. The related prospectus supplement will
describe the circumstances and manner under which distributions may be made out
of the reserve account, either to holders of the securities covered thereby or
to the seller.
SELLER MAY ASSIGN RIGHTS IN RESERVE ACCOUNT SUBJECT TO CONDITIONS. The
seller may at any time, without consent of the securityholders, sell, transfer,
convey or assign in any manner its rights to and interests in distributions from
the reserve account provided that --
-- the Rating Agencies confirm in writing that such action will not
result in a reduction or withdrawal of the rating of any Class of
securities;
-- the seller provides to the applicable trustee and any indenture
trustee an opinion of counsel from independent counsel that such
action will not cause the trust to be classified as an association (or
publicly traded partnership) taxable as a corporation for federal
income tax purposes; and
-- such transferee or assignee agrees in writing to take positions for
federal income tax purposes consistent with the federal income tax
positions previously taken by the seller.
NET DEPOSITS
As an administrative convenience and for so long as certain conditions are
satisfied (see "-- Collections" above), the servicer will be permitted to make
the deposit of collections, aggregate Advances and Purchase Amounts for any
trust for or with respect to the related Collection Period, net of distributions
to the servicer as reimbursement of Advances or payment of fees to the servicer
with respect to such Collection Period. Similarly, the servicer may cause to be
made a single, net transfer from the collection account to any related payahead
account, or vice versa. The servicer, however, will account to the trustee, any
indenture trustee, the noteholders, if any, and the certificateholders with
respect to each trust as if all deposits, distributions, and transfers were made
individually.
STATEMENTS TO TRUSTEES AND TRUSTS
Prior to each Distribution Date with respect to securities of each trust,
the servicer will provide to the applicable indenture trustee, if any, and the
applicable trustee as of the close of business on the last day of the preceding
Collection Period a statement setting forth substantially the same information
as is required to be provided in the periodic reports provided to
securityholders of such trust described under "Certain Information Regarding the
Securities -- Reports to Securityholders."
EVIDENCE AS TO COMPLIANCE
Each sale and servicing agreement will provide that a firm of independent
certified public accountants will furnish to the related trust and indenture
trustee or trustee, as applicable, annually a statement as to compliance by the
servicer during the preceding twelve months (or, in the case of the first such
certificate, from the applicable closing date) with certain standards relating
to the servicing of the applicable receivables, the servicer's accounting
records and computer files with respect thereto and certain other matters.
Each sale and servicing agreement will also provide for delivery to the
related trust and indenture trustee or trustee, as applicable, substantially
simultaneously with the delivery of such accountants' statement referred to
above, of a certificate signed by an officer of the servicer
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stating that the servicer has fulfilled its obligations under the sale and
servicing agreement throughout the preceding twelve months (or, in the case of
the first such certificate, from the closing date) or, if there has been a
default in the fulfillment of any such obligation, describing each such default.
The servicer has agreed to give each indenture trustee and each trustee notice
of certain Events of Servicing Termination under the related sale and servicing
agreement.
Copies of such statements and certificates may be obtained by
securityholders by a request in writing addressed to the applicable trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each sale and servicing agreement will provide that Ford Credit may not
resign from its obligations and duties as servicer thereunder, except upon a
determination that Ford Credit's performance of such duties is no longer
permissible under applicable law. No such resignation will become effective
until the related indenture trustee or trustee, as applicable, or a successor
servicer has assumed Ford Credit's servicing obligations and duties under such
sale and servicing agreement.
Each sale and servicing agreement will further provide that neither the
servicer nor any of its directors, officers, employees and agents will be under
any liability to the related trust or the related noteholders or
certificateholders for taking any action or for refraining from taking any
action under such sale and servicing agreement or for errors in judgment; except
that neither the servicer nor any such person will be protected against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence in the performance of the servicer's duties thereunder or by
reason of reckless disregard of its obligations and duties thereunder. In
addition, each sale and servicing agreement will provide that the servicer is
under no obligation to appear in, prosecute or defend any legal action that is
not incidental to the servicer's servicing responsibilities under such sale and
servicing agreement and that, in its opinion, may cause it to incur any expense
or liability. The servicer may, however, undertake any reasonable action that it
may deem necessary or desirable in respect of a particular sale and servicing
agreement, the rights and duties of the parties thereto, and the interests of
the related securityholders thereunder. In such event, the legal expenses and
costs of such action and any liability resulting therefrom will be expenses,
costs, and liabilities of the servicer, and the servicer will not be entitled to
be reimbursed therefor.
Under the circumstances specified in each sale and servicing agreement, 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, with respect to its
obligations as servicer, any corporation 50% or more of the voting stock of
which is owned, directly or indirectly, by Ford Motor Company, which corporation
or other entity in each of the foregoing cases assumes the obligations of the
servicer, will be the successor of the servicer under such sale and servicing
agreement. For as long as Ford Credit is the servicer, it may at any time
subcontract some or substantially all of its duties as servicer under a
particular sale and servicing agreement to any corporation more than 50% of the
voting stock of which is owned, directly or indirectly, by Ford Motor Company
and the servicer may at any time perform certain specific duties as servicer
through other subcontractors.
EVENTS OF SERVICING TERMINATION
"Events of Servicing Termination" under each sale and servicing agreement
will consist of:
-- any failure by the servicer or the seller, as the case may be, to
deliver to the trustee or indenture trustee for distribution to
the securityholders of the related trust or for deposit in any of
the trust accounts or the certificate distribution account any
required payment, which failure continues unremedied for three
business days after written notice from the trustee or indenture
trustee is received by the servicer or the
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seller, as the case may be, or after discovery by an officer of
the servicer or the seller, as the case may be;
-- any failure by the servicer or the seller, as the case may be,
duly to observe or perform in any material respect any other
covenant or agreement in such sale and servicing agreement, which
failure materially and adversely affects the rights of the
noteholders or the certificateholders of the related trust and
which continues unremedied for 90 days after the giving of written
notice of such failure (A) to the servicer or the seller, as the
case may be, by the applicable trustee or (B) to the servicer, the
seller and the applicable trustee by holders of notes or
certificates of such trust, as applicable, of not less than 25% in
principal amount of the Controlling Class (or, if no notes are
outstanding, 25% by aggregate Certificate Balance of the
Controlling Certificate Class;
-- the occurrence of certain Insolvency Events specified in the sale
and servicing agreement with respect to the servicer or the
seller; and
-- such other events, if any, set forth in the related prospectus
supplement.
RIGHTS UPON EVENT OF SERVICING TERMINATION
As long as an Event of Servicing Termination under a sale and servicing
agreement remains unremedied, the related indenture trustee or holders of not
less than a majority of the Controlling Class or the Class of notes specified in
the prospectus supplement (and after the notes have been paid in full, the
trustee or the holders of not less than a majority of the Controlling
Certificate Class or the Class of certificates specified in the prospectus
supplement) may terminate all the rights and obligations of the servicer under
such sale and servicing agreement, whereupon such indenture trustee or trustee
or a successor servicer appointed by such indenture trustee or trustee will
succeed to all the responsibilities, duties and liabilities of the servicer
under such sale and servicing agreement and will be entitled to similar
compensation arrangements.
If, however, a bankruptcy trustee or similar official has been appointed
for the servicer, and no Event of Servicing Termination other than such
appointment has occurred, such trustee or official may have the power to prevent
such indenture trustee, such noteholders, the trustee or such certificateholders
from effecting a transfer of servicing. In the event that such indenture trustee
is legally unable to act as servicer, it may appoint, or petition a court of
competent jurisdiction for the appointment of, a successor with a net worth of
at least $100,000,000 and whose regular business includes the servicing of motor
vehicle receivables. Such indenture trustee or trustee may make such
arrangements for compensation to be paid, which in no event may be greater than
the servicing compensation to the servicer under such sale and servicing
agreement.
WAIVER OF PAST EVENTS OF SERVICING TERMINATION
The holders of not less than a majority of the Controlling Class or the
Class of notes specified in the prospectus supplement (and after the notes have
been paid in full, the trustee or the holders of not less than a majority of the
Controlling Certificate Class or the Class of certificates specified in the
prospectus supplement) may, on behalf of all such noteholders and
certificateholders, waive any Event of Servicing Termination under the related
sale and servicing agreement and its consequences, except an Event of Servicing
Termination consisting of a failure to make any required deposits to or payments
from any of the trust accounts or to the certificate distribution account in
accordance with such sale and servicing agreement.
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AMENDMENT
The parties to each of the Receivables Transfer and Servicing Agreements
may amend such agreements without the consent of the related securityholders, to
add any provisions to or change or eliminate any of the provisions of such
Receivables Transfer and Servicing Agreements or modify the rights of such
noteholders or certificateholders; provided that such action will not, in the
opinion of counsel satisfactory to the related indenture trustee and trustee
materially and adversely affect the interest of any such noteholder or
certificateholder and provided that an opinion of counsel as to certain tax
matters is delivered if required. The Receivables Transfer and Servicing
Agreements may also be amended by the seller, the servicer, the related trustee
and any related indenture trustee with the consent of the holders of notes of
such trust evidencing not less than a majority in principal amount of each Class
of notes, voting separately and the holders of the certificates of such trust
evidencing not less than a majority of the Certificate Balance of such
certificates then outstanding, to add any provisions to or change or eliminate
any of the provisions of such Receivables Transfer and Servicing Agreements or
modify the rights of the noteholders or certificateholders; provided, however,
that no such amendment may (1) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, collections of payments on the related
receivables or distributions that are required to be made for the benefit of
such noteholders or certificateholders or change any Note Interest Rate or
Certificate Rate or the amount required to be on deposit in the reserve account,
if any, or (2) reduce the percentage of the notes or certificates of such trust
which are required to consent to any such amendment, without the consent of the
holders of all the outstanding notes and certificates of such trust and provided
that an opinion of counsel as to certain tax matters is delivered if required.
INSOLVENCY EVENT OR DISSOLUTION
If certain Insolvency Events specified in the sale and servicing agreement
occur, or a dissolution occurs, with respect to the seller or the General
Partner, the related receivables will be liquidated and the trust will be
terminated 90 days after the date of such Insolvency Event or dissolution,
unless, before the end of such 90-day period --
-- the related trustee shall have received written instructions from --
-- the noteholders (other than the seller) of each Class of notes of
such trust representing not less than a majority of the aggregate
unpaid principal amount of such Class of notes and the right to
receive interest thereon;
-- the certificateholders (other than the seller) of certificates of
such trust representing not less than a majority of the aggregate
Certificate Balance of each class of certificates and the right to
receive interest thereon; and
-- any other person specified in the related prospectus supplement,
to the effect that each such party disapproves of the liquidation of such
receivables and termination of the trust; and
-- in connection therewith, the indenture trustee or trustee --
-- appoints an entity acceptable to Ford Credit to acquire an interest
in the trust and to act as a substitute "general partner" for
federal income tax purposes; and
-- obtains an opinion of counsel that the trust will thereafter not be
classified as an association taxable as a corporation for federal
income tax and applicable state tax purposes.
Promptly after the occurrence of an Insolvency Event or a dissolution with
respect to the seller or the General Partner, notice thereof is required to be
given to the noteholders, and certificateholders, but any failure to give such
required notice will not prevent or delay termination
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of the trust. Upon termination of a trust, the related trustee shall, or shall
direct the related indenture trustee to, promptly sell the assets of the trust
(other than the reserve account, the collection account, the principal
distribution account and the certificate distribution account) in a commercially
reasonable manner and on commercially reasonable terms. The proceeds from any
such sale, disposition or liquidation of the receivables of the trust will be
treated as collections on such receivables and deposited in the related
collection account. With respect to any trust, if the proceeds from the
liquidation of the related receivables and any amounts on deposit in the reserve
account, the payahead account, the note payment account and the certificate
distribution account are not sufficient to pay the notes and the certificates of
such trust in full, the amount of principal returned to noteholders and
certificateholders thereof will be reduced and some or all of such noteholders
and/or certificateholders will incur a loss.
Each trust agreement will provide that the applicable trustee does not have
the power to commence a voluntary proceeding in bankruptcy with respect to the
related trust without the unanimous prior approval of all certificateholders
(excluding the seller, the servicer or their affiliates) of the trust and the
delivery to the trustee by each such certificateholder (excluding the seller,
the servicer or their affiliates) of a certificate certifying that such
certificateholder reasonably believes that the trust is insolvent.
PAYMENT OF NOTES
Upon the payment in full of all outstanding notes of a given trust and the
satisfaction and discharge of the related indenture, the indenture trustee will
continue to carry out its obligations under the sale and servicing agreement as
agent for the trustee(s) of the trust.
TERMINATION
With respect to each trust, the obligations of the servicer, the seller,
the related trustee and the related indenture trustee under the Receivables
Transfer and Servicing Agreements will terminate upon the earlier of (1) the
maturity or other liquidation of the last related receivable and the disposition
of any amounts received upon liquidation of any such remaining receivables, (2)
the payment to noteholders and certificateholders of the related trust of all
amounts required to be paid to them under the Receivables Transfer and Servicing
Agreements and (3) the occurrence of either event described below.
In order to avoid excessive administrative expense, the servicer will be
permitted at its option to purchase from each trust as of the end of any
applicable Collection Period, if the then outstanding Pool Balance with respect
to the receivables held by the trust is 10% or less of the Initial Pool Balance,
all remaining related receivables at a price equal to the aggregate of the
Purchase Amounts thereof as of the end of such Collection Period.
If and to the extent provided in the related prospectus supplement with
respect to the trust, the applicable trustee will, within ten days following a
Distribution Date as of which the Pool Balance is equal to or less than the
percentage of the Initial Pool Balance specified in the related prospectus
supplement, solicit bids for the purchase of the receivables remaining in the
trust in the manner and subject to the terms and conditions set forth in such
prospectus supplement. If the applicable trustee receives satisfactory bids as
described in such prospectus supplement, then the receivables remaining in the
trust will be sold to the highest bidder.
As more fully described in the related prospectus supplement, any
outstanding notes of the related trust will be redeemed concurrently with either
of the events specified above and the subsequent distribution to the related
certificateholders of all amounts required to be distributed to them under the
applicable trust agreement will effect early retirement of the certificates of
such trust.
ADMINISTRATION AGREEMENT
Ford Credit, will be the administrator of each trust and will agree, to the
extent provided in an administration agreement, to provide the notices and
certain reports and to perform other
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administrative obligations required by the related indenture. The administrator
will be entitled to a periodic administration fee which will be paid by the
seller as compensation for the performance of the administrator's obligations
under the applicable administration agreement and as reimbursement for its
expenses related thereto.
SOME IMPORTANT LEGAL ISSUES RELATING TO THE RECEIVABLES
SECURITY INTERESTS IN VEHICLES
In all states in which the receivables have been originated, retail
installment sale contracts such as the receivables evidence the credit sale of
automobiles and light trucks by dealers to obligors; the contracts also
constitute personal property security agreements and include grants of security
interests in the vehicles under the Uniform Commercial Code. Perfection of
security interests in the vehicles is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In most states
in which the receivables have been originated, a security interest in a vehicle
is perfected by notation of the secured party's lien on the vehicle's
certificate of title. Each receivable prohibits the sale or transfer of the
financed vehicle without the consent of Ford Credit or PRIMUS, as the case may
be.
With respect to each trust, under the related purchase agreement, Ford
Credit will assign its security interests in the financed vehicles securing the
related receivables to the seller. Under the related sale and servicing
agreement, the seller will assign its security interests in the financed
vehicles securing the related receivables to the trust. However, because of the
administrative burden and expense, the servicer, the seller and the trust will
not amend any certificate of title to identify the trust as the new secured
party on the certificates of title relating to the financed vehicles. Also, the
servicer will continue to hold any certificates of title relating to the
financed vehicles in its possession as custodian for the trust under the related
sale and servicing agreement. See "Description of the Receivables Transfer and
Servicing Agreements -- Sale and Assignment of Receivables."
In most states, assignments such as those under the purchase agreement and
the sale and servicing agreement relating to each trust together with a
perfected security interest in the chattel paper are an effective conveyance of
a security interest in the vehicles subject to the chattel paper without
amendment of any lien noted on a vehicle's certificate of title, and the
assignee succeeds thereby to the assignor's rights as secured party. In the
absence of fraud or forgery by the vehicle owner or the servicer or
administrative error by state or local agencies, the notation of Ford Credit's
or PRIMUS' lien on the certificates of title will be sufficient to protect the
trust against the rights of subsequent purchasers of a financed vehicle or
subsequent lenders who take a security interest in a financed vehicle. If there
are any financed vehicles as to which Ford Credit or PRIMUS failed to obtain a
perfected security interest, its security interest would be subordinate to,
among others, subsequent purchasers of the financed vehicles and holders of
perfected security interests. Such a failure would constitute a breach of Ford
Credit's warranties under the related purchase agreement and of the seller's
warranties under the related sale and servicing agreement and would create an
obligation of Ford Credit under such purchase agreement and of the seller under
such sale and servicing agreement to purchase the related receivable if such
breach shall materially adversely affect the interest of the trust in such
receivable and if such failure or breach shall not have been cured by the last
day of the second (or, if the seller elects, the first) month following the
discovery by or notice to the seller of such breach. By not identifying the
trust as the secured party on the certificate of title, that trust's interest in
the chattel paper may not have the benefit of the security interest in the
financed vehicle in all states or such security interest could be defeated
through fraud or negligence. The seller will assign its rights under each
purchase agreement to the related trust. If the trust does not have a perfected
security interest in a financed vehicle, its ability to realize on such financed
vehicle in the event of a default would be adversely affected.
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Under the laws of most states, the perfected security interest in a vehicle
would continue for four months after a vehicle is moved to a state other than
the state in which it is initially registered and thereafter until the vehicle
owner re-registers the vehicle in the new state. A majority of states generally
require surrender of a certificate of title to re-register a vehicle;
accordingly, a secured party must surrender possession if it holds the
certificate of title to the vehicle, or, in the case of vehicles registered in
states providing for the notation of a lien on the certificate of title but not
possession by the secured party, the secured party would receive notice of
surrender if the security interest is noted on the certificate of title. Thus,
the secured party would have the opportunity to re-perfect its security interest
in the vehicle in the state of relocation. In states that do not require a
certificate of title for registration of a motor vehicle, re-registration could
defeat perfection. In the ordinary course of servicing receivables, Ford Credit
and PRIMUS take steps to effect re-perfection upon receipt of notice of
re-registration or information from the obligor as to relocation. Similarly,
when an obligor sells a vehicle, Ford Credit or PRIMUS must surrender possession
of the certificate of title or will receive notice as a result of its lien noted
thereon and accordingly will have an opportunity to require satisfaction of the
related receivable before release of the lien. Under each sale and servicing
agreement, the servicer will be obligated to take appropriate steps, at the
servicer's expense, to maintain perfection of security interests in the financed
vehicles.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for certain unpaid taxes take priority over even a perfected
security interest in a financed vehicle. The Internal Revenue Code of 1986, as
amended, also grants priority to certain federal tax liens over the lien of a
secured party. Federal law and the laws of certain states permit the
confiscation of motor vehicles under certain circumstances if used in unlawful
activities, which may result in the loss of a secured party's perfected security
interest in the confiscated motor vehicle. With respect to each trust, Ford
Credit will represent to the seller and the seller will represent to the trust
that each security interest in a financed vehicle is or will be prior to all
other present liens (other than tax liens and liens that arise by operation of
law) upon and security interests in such financed vehicle. However, liens for
repairs or taxes, or the confiscation of a financed vehicle, could arise or
occur at any time during the term of a receivable. No notice will be given to
the applicable trustee or certificateholders or any indenture trustee or
noteholders, if any, in the event such a lien arises or confiscation occurs.
Neither the seller nor the servicer will have any obligation to repurchase a
receivable as to which any of the aforementioned occurrences result in the trust
losing the priority of its security interest or its security interest in such
financed vehicle after the closing date with respect to a receivable.
REPOSSESSION
In the event of default by vehicle purchasers, the holder of the retail
installment sale contract has all the remedies of a secured party under the
Uniform Commercial Code, except where specifically limited by other state laws.
The Uniform Commercial Code remedies of a secured party include the right to
repossession by self-help means, unless such means would constitute a breach of
the peace. Unless a vehicle is voluntarily surrendered, self-help repossession
is the method employed by Ford Credit and PRIMUS in the majority of instances in
which a default occurs and is accomplished simply by retaking 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 court order
must be obtained from the appropriate state court, and the vehicle must then be
repossessed in accordance with that order.
NOTICE OF SALE; CURE RIGHTS
In the event of default by the obligor, some jurisdictions require that the
obligor be notified of the default and be given a time period within which the
obligor may cure the default prior to repossession. Generally, this right to
cure may be exercised on a limited number of occasions.
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The Uniform Commercial Code and other state laws require the secured party
to provide the 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. The obligor has the right to redeem the collateral prior to actual
sale by paying the secured party the unpaid principal balance of the obligation
plus reasonable expenses for repossessing, holding, and preparing the collateral
for disposition and arranging for this sale, plus, in some jurisdictions,
reasonable attorneys' fees. In some states, a reinstatement right is permitted
by payment of delinquent installments. Repossessed vehicles are generally
disposed of by Ford's Vehicle Marketing Department at auction.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the repossessed vehicles generally will be
applied to the expenses of resale and repossession and then to the satisfaction
of the indebtedness of the obligor on the receivable. While some states impose
prohibitions or limitations on deficiency judgments if the net proceeds from
resale do not cover the full amount of the indebtedness, a deficiency judgment
can be sought in those states that do not prohibit or limit such judgments.
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. 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.
Occasionally, after resale of a vehicle and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the Uniform Commercial
Code requires the lender to remit the surplus to any holder of any lien with
respect to the vehicle or if no such lienholder exists or there are remaining
funds, the Uniform Commercial Code requires the lender to remit the surplus to
the former obligor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Reporting
Act, the Fair Debt Collection Practices Act, the Magnuson-Moss Warranty Act, the
Federal Reserve Board's Regulations B and Z, state adaptations of the National
Consumer Credit Protection Act and of the Uniform Consumer Credit Code, and
state motor vehicle retail installment sales acts, retail installment sales
acts, and other similar laws. Also, state laws impose finance charge ceilings
and other restrictions on consumer transactions and require contract disclosures
in addition to those required under federal law. The requirements impose
specific statutory liabilities upon creditors who fail to comply with their
provisions. In some cases, this liability could affect an assignee's ability to
enforce consumer finance contracts such as the receivables.
The so-called holder-in-due-course rule of the Federal Trade Commission,
also known as the FTC rule, the provisions of which are generally duplicated by
the Uniform Consumer Credit Code, other state statutes, or the common law in
certain states, has the effect of subjecting a seller (and certain related
lenders and their assignees) in a consumer credit transaction and any assignee
of the seller to all claims and defenses which the obligor in the transaction
could assert against the seller of the goods. Liability under the FTC rule is
limited to the amounts paid by the obligor under the contract, and the holder of
the contract may also be unable to collect any balance remaining due thereunder
from the obligor.
Most of the receivables will be subject to the requirements of the FTC
rule. Accordingly, each trust, as holder of the related receivables, will be
subject to any claims or defenses that the purchaser of the financed vehicle may
assert against the seller of the financed vehicle. Such
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claims are limited to a maximum liability equal to the amounts paid by the
obligor on the receivable. Under most state motor vehicle dealer licensing laws,
sellers of motor vehicles are required to be licensed to sell motor vehicles at
retail sale. Furthermore, Federal Odometer Regulations promulgated under the
Motor Vehicle Information and Cost Savings Act require that all sellers of new
and 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
an Odometer Disclosure Statement was not provided to the purchaser of the
related financed vehicle, the obligor may be able to assert a defense against
the seller of the vehicle. If an obligor were successful in asserting any such
claim or defense, such claim or defense would constitute a breach of Ford
Credit's and the seller's representations and warranties under the related
purchase agreement and the related sale and servicing agreement and would create
an obligation of Ford Credit and the seller to repurchase the receivable unless
the breach is cured. See "Description of the Receivables Transfer and Servicing
Agreements -- Sale and Assignment of the Receivables."
Courts have imposed general equitable principles on secured parties
pursuing repossession of collateral 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.
In several cases, obligors have asserted that the self-help remedies of
secured parties under the Uniform Commercial Code and related laws violate the
due process protections provided under the 14th Amendment to the Constitution of
the United States. Courts have generally upheld the notice provisions of the
Uniform Commercial Code and related laws as reasonable or have found that the
repossession and resale by the creditor do not involve sufficient state action
to afford constitutional protection to consumers.
Ford Credit and the seller will warrant under each purchase agreement and
the applicable sale and servicing agreement that each receivable complies with
all requirements of law in all material respects. Accordingly, if an obligor has
a claim against the trust for violation of any law and such claim materially and
adversely affects the trust's interest in a receivable, such violation would
constitute a breach of warranty under the related purchase agreement and the
related sale and servicing agreement and would create an obligation of Ford
Credit and the seller to repurchase the receivable unless the breach is cured.
See "Description of the Receivables Transfer and Servicing Agreements -- Sale
and Assignment of the Receivables."
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 a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
lender 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 (as determined by the court), 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 a contract or change the rate of interest and time of repayment of the
indebtedness.
TRANSFERS OF VEHICLES
The receivables prohibit the sale or transfer of the vehicle securing a
receivable without consent and permit acceleration of the maturity of the
receivable upon a sale or transfer without consent except where prohibited by
law. The servicer does not intend to consent to any sale or transfer and intends
to require prepayment of the receivable. The servicer may enter into a
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transfer of equity agreement with the secondary purchaser for the purpose of
effecting the transfer of the financed vehicle.
TAX MATTERS
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of the notes and the
certificates of a trust. The summary does not purport to deal with federal
income tax consequences applicable to all categories of holders, some of which
may be subject to special rules. For example, it does not discuss the tax
treatment of noteholders or certificateholders that are insurance companies,
regulated investment companies or dealers in securities. Moreover, there are no
cases or IRS rulings on similar transactions involving both debt instruments and
equity interests issued by a trust with terms similar to those of the notes and
the certificates. As a result, the IRS may disagree with all or a part of the
discussion below. Prospective investors are urged to consult their own tax
advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the notes and
the certificates of any trust.
The following summary is based upon current provisions of the tax code, the
Treasury regulations promulgated thereunder and judicial or ruling authority,
all of which are subject to change, which change may be retroactive. Each trust
will be provided with an opinion of Special Tax Counsel to each trust specified
in the related prospectus supplement regarding certain federal income tax
matters discussed below. An opinion of Special Tax Counsel, however, is not
binding on the IRS or the courts. No ruling on any of the issues discussed below
will be sought from the IRS. For purposes of the following summary, references
to the trust, the notes, the certificates and related terms, parties and
documents shall be deemed to refer to each trust and the notes, certificates and
related terms, parties and documents applicable to the trust.
SCOPE OF THE TAX OPINIONS
It is expected that Special Tax Counsel will, upon issuance of notes and/or
certificates of the trust, deliver its opinion that the applicable trust will
not be Classified as an association (or publicly traded partnership) taxable as
a corporation for federal income tax purposes.
In addition, Special Tax Counsel will render its opinion that it has
prepared or reviewed the statements in this prospectus and in the related
prospectus supplement under the heading "Summary -- Tax Status" as they relate
to federal income tax matters and under the heading "Tax Matters," and is of the
opinion that such statements are correct in all material respects. Such
statements are intended as an explanatory discussion of the possible effects of
the Classification of the trust as a partnership for federal income tax purposes
on investors generally and of related tax matters affecting investors generally,
but do not purport to furnish information in the level of detail or with the
attention to the investor's specific tax circumstances that would be provided by
an investor's own tax adviser. Accordingly, each investor is advised to consult
its own tax advisers with regard to the tax consequences to it of investing in
the notes and/or certificates.
ERISA CONSIDERATIONS
ERISA and the tax code impose certain requirements on Plans and on persons
who are fiduciaries of Plans. In accordance with ERISA's general fiduciary
standards, before investing in securities, a Plan fiduciary should determine,
among other factors, whether the investment:
-- is permitted under the governing Plan;
-- is appropriate for the Plan in view of its overall investment policy
and the composition and diversification of its portfolio; and
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-- is prudent considering the factors discussed in this prospectus.
ERISA and the tax code prohibit some transactions involving assets of a
Plan and persons who are "parties in interest" under ERISA or "disqualified
persons" under the tax code. Prohibited transactions may generate excise taxes
and other liabilities.
A fiduciary of any Plan should carefully review with its legal and other
advisors whether the purchase or holding of any securities of a trust could give
rise to a transaction prohibited or otherwise impermissible under ERISA or the
tax code, and should refer to "ERISA Considerations" in the related prospectus
supplement regarding any restrictions on the purchase and/or holding of the
securities offered thereby.
PROHIBITED TRANSACTION CONSIDERATIONS
Whether or not an investment in the notes or the certificates will give
rise to a transaction prohibited or otherwise impermissible under ERISA or the
tax code will depend on the structure of the trust.
Certain transactions involving a trust might be deemed to constitute
prohibited transactions under ERISA and the tax code if assets of the trust were
deemed to be assets of a Plan investing in securities issued by the trust. Under
the Plan Assets Regulation issued by the DOL, the assets of the trust would be
treated as plan assets of a Plan for purposes of ERISA and the tax code if the
Plan acquires an "equity interest" in the trust and none of the exceptions
contained in the Plan Assets Regulation is applicable. An equity interest is
defined under the Plan Assets Regulation as an interest other than an instrument
which is treated as indebtedness under applicable local law and which has no
substantial equity features. Under the Plan Assets Regulation, if a Plan invests
in an "equity interest" of an entity that is neither a "publicly offered
security" nor a security issued by an investment company registered under the
Investment Company Act of 1940, the Plan's assets are deemed to include both the
equity interest itself and an undivided interest in each of the entity's
underlying assets, unless it is established that the entity is an "operating
company" or that equity participation by "benefit plan investors" is not
"significant."
Equity participation in an entity by Benefit Plan Investors is
"significant" on any date if the 25% Limitation is met.
The certificates will most likely be deemed Equity Interests for purposes
of ERISA. It should be noted, however, as discussed below, that the purchase of
notes by a Plan may also give rise to potential prohibited transactions, and all
prospective investors should review the discussion in this prospectus with their
legal advisors.
INVESTMENT IN NOTES
The seller believes that the notes of a trust should be treated as
indebtedness without substantial equity features for purposes of the Plan Assets
Regulation. (If provided in the prospectus supplement that notes of any Class
are not to be treated as indebtedness for ERISA purposes, the discussion in "--
The Certificates" below will apply to any such Class of notes.) However, without
regard to whether the notes of the trust are treated as an Equity Interest for
such purposes, the acquisition or holding of such notes by or on behalf of a
Plan could be considered to give rise to a prohibited transaction if the
applicable trust, trustee, indenture trustee, any holder of the certificates of
such trust or any of their respective affiliates, is or becomes a Party in
Interest or a Disqualified Person with respect to such Plan. In such case,
certain exemptions from the prohibited transaction rules could be applicable
depending on the type and circumstances of the Plan fiduciary making the
decision to acquire a note. Included among these exemptions are PTCE 90-1, PTCE
95-60, PTCE 91-38, PTCE 96-23, and PTCE 84-14. It should be noted, however, that
even if the conditions specified in one or more of
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these exemptions are met, the scope of relief provided by these exemptions may
not necessarily cover all acts that might be construed as prohibited
transactions.
INVESTMENT IN CERTIFICATES
The certificates will most likely be treated as Equity Interests under the
Plan Assets Regulation. Accordingly, if equity participation in the certificates
by Benefit Plan Investors is "significant" within the meaning of the Plan Asset
Regulation, the assets of the trust could be deemed to be the assets of Plans
investing in the certificates. In such event, such assets, transactions
involving such assets and the persons with authority or control over and
otherwise providing services with respect to such assets would be subject to the
fiduciary responsibility provisions of ERISA and the prohibited transaction
provisions of ERISA and of the tax code and there is no assurance that any
statutory or administrative exemption from the application of such rules would
be available.
In addition, investors other than Plan investors should be aware that a
prohibited transaction could be deemed to occur if any holder of the
certificates or any of their respective affiliates, is or becomes a Party in
Interest or a Disqualified Person with respect to any Plan that purchases and
holds the related notes without being covered by one or more of the exemptions
described above in "The Notes."
SPECIAL CONSIDERATIONS APPLICABLE TO INSURANCE COMPANY GENERAL ACCOUNTS
The Small Business Job Protection Act of 1996 added new Section 401(c) of
ERISA relating to the status of the assets of insurance company general accounts
under ERISA and Section 4975 of the tax code. Under Section 401(c), the
Department of Labor is required to issue general account regulations with
respect to insurance policies issued on or before December 31, 1998 that are
supported by an insurer's general account. The general account regulations are
to provide guidance on which assets held by the insurer constitute "plan assets"
for purposes of the fiduciary responsibility provisions of ERISA and Section
4975 of the tax code. Section 401(c) also provides that, except in the case of
avoidance of the general account regulations and actions brought by the
Secretary of Labor relating to certain breaches of fiduciary duties that also
constitute breaches of state or federal criminal law, until the date that is 18
months after the general account regulations become final, no liability under
the fiduciary responsibility and prohibited transaction provisions of ERISA and
Section 4975 of the tax code may result on the basis of a claim that the assets
of the general account of an insurance company constitute the assets of any
Plan. The plan asset status of insurance company separate accounts is unaffected
by new Section 401(c) of ERISA, and separate account assets continue to be
treated as the plan assets of any Plan invested in a separate account. Plan
investors considering the purchase of securities on behalf of an insurance
company general account should consult their legal advisors regarding the effect
of the general account regulations on such purchase.
As of the date hereof, the DOL has issued proposed regulations under
Section 401(c). It should be noted that if the general account regulations are
adopted substantially in the form in which proposed, the general account
regulations may not exempt the assets of insurance company general accounts from
treatment as "plan assets" after December 31, 1998. The general account
regulations should not, however, adversely affect the applicability of PTCE
95-60.
PLANS NOT SUBJECT TO ERISA OR THE TAX CODE
Certain employee benefit plans, such as governmental plans and certain
church plans (each of which is defined in ERISA) are not subject to the
prohibited transaction provisions of ERISA and Section 4975 of the tax code.
Accordingly, assets of such plans may, subject to the
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provisions of any other applicable federal and state law, be invested in
securities of any trust without regard to the factors described in this
prospectus and under "ERISA Considerations" in the related prospectus
supplement. It should be noted, however, that any such plan that is qualified
and exempt from taxation under Sections 401(a) and 501(a) of the tax code is
subject to the prohibited transaction rules set forth in Section 503 of the tax
code.
GENERAL INVESTMENT CONSIDERATIONS
Prospective investors who are Plan investors should consult with their
legal advisors concerning the impact of ERISA and the tax code and the potential
consequences of making an investment in any securities of the trust with respect
to such investors' specific circumstances. Moreover, each Plan fiduciary should
take into account, among other considerations, whether the fiduciary has the
authority to make the investment; the composition of the Plan's portfolio with
respect to diversification by type of asset; the Plan's funding objectives; the
tax effects of the investment; and whether under the general fiduciary standards
of investment prudence and diversification an investment in any securities of
the trust is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio.
PLAN OF DISTRIBUTION
The seller will agree to cause the related trust to sell to the
underwriters named in the related prospectus supplement the notes and
certificates of the trust that the seller agrees to sell in an underwriting
agreement. Each of the underwriters will severally agree to purchase the
principal amount of each Class of notes and certificates of the related trust
set forth in the related prospectus supplement and the underwriting agreement.
Each prospectus supplement (or supplemental prospectus supplement, as
described below) will either --
-- set forth the price at which each Class of notes and certificates, as
the case may be, being offered thereby will be offered to the public
and any concessions that may be offered to certain dealers
participating in the offering of such notes and certificates; or
-- specify that the related notes and certificates, as the case may be,
are to be resold by the underwriters in negotiated transactions at
varying prices to be determined at the time of such sale.
After the initial public offering of any such notes and certificates, such
public offering prices and such concessions may be changed. Each prospectus
supplement, together with a supplemental prospectus supplement, may also be used
by Ford Credit or another affiliate for the sale of a specified Class of notes
or certificates originally purchased from the seller by Ford Credit.
The seller and Ford Credit will indemnify the underwriters of securities
purchased from the seller against certain civil liabilities, including
liabilities under the Securities Act, or contribute to payments the several
underwriters may be required to make in respect thereof. Ford Credit will
indemnify the underwriters of securities purchased from Ford Credit against
certain civil liabilities under the Securities Act, or contribute to payments
the several underwriters may be required to make in respect thereof.
Each trust may, from time to time, invest the funds in its trust accounts
in Permitted Investments acquired from such underwriters or from the seller.
Under each underwriting agreement with respect to a given trust, the
closing of the sale of any Class of securities subject to such underwriting
agreement will be conditioned on the closing
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of the sale of all other such Classes of securities of that trust (some of which
may not be registered or may not be publicly offered).
The place and time of delivery for the securities in respect of which this
prospectus is delivered will be set forth in the related prospectus supplement.
LEGAL OPINIONS
Certain legal matters relating to the securities of any trust will be
passed upon for the related trust, the seller and the servicer by Hurley D.
Smith, Esq., Secretary and Corporate Counsel of the servicer, or other counsel
satisfactory to the underwriters. Certain Michigan state tax and other matters
will be passed upon for each trust by Hurley D. Smith, Esq., Secretary and
Corporate Counsel of the servicer, or other counsel to the servicer acceptable
to the underwriters. Mr. Smith is a full-time employee of Ford Credit and owns,
and holds options to purchase, shares of Common Stock of Ford Motor Company.
WHERE YOU CAN FIND MORE INFORMATION
The seller, as originator of each trust, has filed with the SEC a
Registration Statement, Registration No. 333-82895 under the Securities Act,
with respect to the notes and the certificates offered by this prospectus. You
may read and copy any notices, reports, statements or other information that any
of the trust, Ford Credit, the seller or Ford Motor Company has filed or causes
to be filed and obtain copies of the Registration Statement at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549; and at the
SEC's regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, New York, New York 10048.
Copies of the Registration Statement may be obtained from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the SEC maintains a public access site on the
Internet through the World Wide Web at which site reports, information
statements and other information, including all electronic filings, may be
viewed. The Internet address of such World Wide Web site is http://www.sec.gov.
You may obtain more information on the operation of the Public Room by calling
the SEC at 1-800-SEC-0330. You may also obtain more information about the Ford
Motor Company and Ford Credit on the World Wide Web. The respective Internet
addresses of such World Wide Web sites are http://www.Ford.com and
http://www.FordCredit.com.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by each trust under Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, as amended, subsequent to the date of
this prospectus and prior to the termination of the offering of the securities
shall be deemed to be incorporated by reference in this prospectus. Any
statement contained in this prospectus or in a document incorporated or deemed
to be incorporated by reference in this prospectus shall be deemed to be
modified or superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus or in any subsequently filed document
which also is or is deemed to be incorporated by reference in this prospectus
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
The seller will provide without charge to each person, including any
beneficial owner of securities, to whom a copy of this prospectus is delivered,
on the written or oral request of any such person, a copy of any or all of the
documents incorporated in this prospectus or in any related prospectus
supplement by reference, except the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents). Requests
for such copies should be directed to Ford Motor Credit Company, c/o Secretary,
The American Road, Dearborn, Michigan 48121 (Telephone: (313) 322-3000).
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GLOSSARY OF TERMS FOR THE PROSPECTUS
Set forth below is a list of the defined terms used in this prospectus. The
terms appear in bold faced type whenever used.
"25% LIMITATION" means that immediately after the most recent acquisition
of any equity interest in the entity, 25% or more of the value of any Class of
equity interest in the entity is held by Benefit Plan Investors.
"ACTUARIAL ADVANCE" means an advance on an Actuarial Receivable made by the
servicer, in its sole discretion, for a deficiency in a scheduled payment as of
the last day of a Collection Period.
"ACTUARIAL RECEIVABLE" means a receivable that provides for amortization of
the loan over a series of fixed level payment monthly installments where each
monthly installment, including the monthly installment representing the final
payment on the receivable, consists of an amount of interest equal to 1/12 of
the loan APR multiplied by the unpaid principal balance of the loan, and an
amount of principal equal to the remainder of the monthly installment.
"ADVANCES" means, collectively, Actuarial Advances and Simple Interest
Advances.
"ADMINISTRATOR" means Ford Credit, in its capacity as administrator of the
trust under an administration agreement.
"APR" means, with respect to a receivable, its annual percentage rate and
with respect to the Receivables Pool, the weighted average annual percentage
rate of all of the receivables in that pool.
"BASE RATE" means, with respect to Floating Rate Securities, an interest
rate basis upon which a Spread is applied to calculate the interest rate of the
Floating Rate Securities for a particular period.
"BASIC DOCUMENTS" means the applicable trust agreement, purchase agreement,
sale and servicing agreement, indenture, administration agreement, control
agreement and certain other related documents.
"BENEFIT PLAN INVESTOR" means any:
-- "employee benefit plans" (as defined in Section 3(3) of ERISA
including without limitation governmental plans, foreign pension plans
and church plans;
-- "plans" described in Section 4975(e)(1) of the tax code, including
individual retirement accounts and Keogh plans; or
-- entities whose underlying assets include plan assets by reason of a
plan's investment in such entity, including without limitation, as
applicable, an insurance company general account.
"BOOK-ENTRY SECURITIES" means the notes and certificates that are held in
the U.S. through DTC and in Europe through Cedelbank or Euroclear.
"CALCULATION AGENT" means, for each trust that issues Floating Rate
Securities, that the calculation agent appointed to calculate interest rates on
each Class of Floating Rate Securities issued by the trust.
"CALCULATION DATE" means:
(1) with respect to any CD Rate Determination Date, any Commercial Paper
Rate Determination Date or any Treasury Rate Determination Date, the
first to occur of:
-- the tenth calendar day after the respective determination date or,
if it is not a business day, the next business day, or
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-- the second business day preceding the date any payment is required
to be made for any period following the applicable Interest Reset
Date; and
(2) with respect to any Federal Funds Rate Determination Date, the next
business day.
"CD RATE" for each Interest Reset Period shall be the rate as of the CD
Rate Determination Date for negotiable certificates of deposit having the Index
Maturity designated in the applicable prospectus supplement as published in
H.15(519) under the heading "CDs (Secondary Market)." If such rate is not
published on or before 3:00 p.m., New York City time on the Calculation Date,
then the CD Rate shall be the rate on such CD Rate Determination Date for
negotiable certificates of deposit of the Index Maturity designated in the
applicable prospectus supplement as published in Composite Quotations under the
heading "Certificates of Deposit." If such rate is not published in either
H.15(519) or Composite Quotations on or before 3:00 p.m., New York City time on
such Calculation Date, then the CD Rate will be calculated by the Calculation
Agent for such CD Rate Security from the arithmetic mean of the secondary market
offered rates as of 10:00 a.m., New York City time, on such CD Rate
Determination Date, of three leading nonbank dealers selected by the Calculation
Agent for such CD Rate Security in negotiable U.S. dollar certificates of
deposit in The City of New York for negotiable certificates of deposit of major
United States money center banks of the highest credit standing (in the market
for negotiable certificates of deposit) with a remaining maturity closest to the
Index Maturity designated in the related prospectus supplement in a denomination
of $5,000,000; provided, however, that if the dealers selected by the
Calculation Agent are not quoting offered rates, the CD Rate for such Interest
Reset Period will be the same as the CD Rate for the immediately preceding
Interest Reset Period.
"CD RATE DETERMINATION DATE" means the second business day prior to the
Interest Reset Date for the related Interest Reset Period.
"CD RATE SECURITY" means a Floating Rate Security designated in the
applicable prospectus supplement with a Base Rate equal to the CD Rate.
"CEDELBANK" means Cedelbank, societe anonyme, a professional depository
under the laws of Luxembourg.
"CEDELBANK CUSTOMER" means a participating organization of Cedelbank.
"CERTIFICATE BALANCE" means with respect to each Class of certificates and
as the context so requires, (i) with respect to all certificates of such Class,
an amount equal to, initially, the initial Certificate Balance of such Class of
certificates and, thereafter, an amount equal to the initial Certificate Balance
of such Class of certificates, reduced by all amounts distributed to
certificateholders of such Class of certificates and allocable to principal or
(ii) with respect to any certificate of such Class, an amount equal to,
initially, the initial denomination of such certificate and, thereafter, an
amount equal to such initial denomination, reduced by all amounts distributed in
respect of such certificate and allocable to principal.
"CERTIFICATE RATE" with respect to each Class of certificates, the rate
specified in the prospectus supplement at which interest may accrue.
"CLASS" means a class of notes or certificates issued by a trust having the
same interest rate, maturity and alphabetical and numerical designation.
"CLOSING DATE" means the date specified in the prospectus supplement on
which the seller will sell and transfer the Initial Receivables to the trust.
"COLLECTION PERIOD" means with respect to securities of each trust, the
period specified in the related prospectus supplement with respect to
calculating payments and proceeds of the related receivables.
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"COMMERCIAL PAPER RATE" for each Interest Reset Period shall be the Money
Market Yield on the Commercial Paper Rate Determination Date of the rate for
commercial paper having the Index Maturity specified in the applicable
prospectus supplement, as such rate shall be published in H.15(519) under the
heading "Commercial Paper." If such rate is not published on or before 3:00
p.m., New York City time on the Calculation Date, then the Commercial Paper Rate
will be the Money Market Yield of the rate for commercial paper of the specified
Index Maturity as published in Composite Quotations under the heading
"Commercial Paper." If such rate is not published in either H.15(519) or
Composite Quotations on or before 3:00 p.m., New York City time on such
Calculation Date, then the Commercial Paper Rate shall be the Money Market Yield
of the arithmetic mean of the offered rates, as of 11:00 a.m., New York City
time, on such Commercial Paper Rate Determination Date, of three leading dealers
of commercial paper selected by the Calculation Agent for such Commercial Paper
Rate Security in The City of New York for commercial paper of the specified
Index Maturity placed for an industrial issuer whose bonds are rated "AA" or the
equivalent by a nationally recognized Rating Agency; provided, however, that if
the dealers selected by the Calculation Agent are not quoting offered rates, the
Commercial Paper Rate for such Interest Reset Period will be the same as the
Commercial Paper Rate for the immediately preceding Interest Reset Period.
"COMMERCIAL PAPER RATE DETERMINATION DATE" means the second business day
prior to the Interest Reset Date for the related Interest Reset Period.
"COMMERCIAL PAPER RATE SECURITY" means a Floating Rate Security designated
in the applicable prospectus supplement with a Base Rate equal to the Commercial
Paper Rate.
"COMPOSITE QUOTATIONS" means the daily statistical release entitled
"Composite 3:30 p.m. Quotations for U.S. Government Securities" published by the
Federal Reserve Bank of New York.
"CONTROLLING CERTIFICATE CLASS" shall mean, with respect to any
Certificates outstanding, the Class C Certificates as long as any Class C
Certificates are outstanding and thereafter the Class D Certificates so long as
any Class D Certificates are outstanding.
"CONTROLLING CLASS" means, with respect to any trust, the Class A Notes
described in the related prospectus supplement as long as any Class A Notes are
outstanding, and thereafter the Class B Notes described in the related
prospectus supplement as long as any Class B Notes are outstanding, and
thereafter each other Class of notes described in the prospectus supplement in
order of seniority.
"CUTOFF DATE" means the "Cutoff Date" specified in the applicable
prospectus supplement.
"DEFINITIVE CERTIFICATES" means with respect to any Class of certificates
issued in book-entry form, such certificates issued in fully registered,
certificated form to certificateholders or their respective nominees, rather
than to DTC or its nominee.
"DEFINITIVE NOTES" means with respect to any Class of notes issued in
book-entry form, such notes issued in fully registered, certificated form to
noteholders or their respective nominees, rather than to DTC or its nominee.
"DEFINITIVE SECURITIES" means collectively, the Definitive Notes and the
Definitive Certificates.
"DETERMINATION DATE" means the business day immediately preceding each
Distribution Date.
"DISTRIBUTION DATE" means the dates specified in each related prospectus
supplement for the payment of principal of and interest on the securities.
"DOL" means the United States Department of Labor.
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"DTC" means The Depository Trust Company and any successor depository
selected by the trust.
"ELIGIBLE DEPOSIT ACCOUNT" means either --
-- a segregated account with an Eligible Institution; or
-- a segregated trust account with the corporate trust department of
a depository institution organized under the laws of the U. S. or
any one of the states thereof 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 such account, so long
as any of the securities of such depository institution have a
credit rating from each Rating Agency in one of its generic rating
categories which signifies investment grade.
"ELIGIBLE INSTITUTION" means, with respect to securities of the trust --
-- the corporate trust department of the indenture trustee or the
related trustee, as applicable; or
-- a depository institution organized under the laws of the U. S. or
any one of the states thereof or the District of Columbia (or any
domestic branch of a foreign bank), (1) which has either (A) a
long-term unsecured debt rating acceptable to the Rating Agencies
or (B) a short-term unsecured debt rating or certificate of
deposit rating acceptable to the Rating Agencies and (2) whose
deposits are insured by the FDIC.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EUROCLEAR" means a professional depository operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York under contract with
Euroclear Clearance System, S.C., a Belgian cooperative corporation.
"EVENTS OF DEFAULT" under the related indenture will consist of the events
specified under "Description of the Notes -- The Indenture" in this prospectus.
"EVENTS OF SERVICING TERMINATION" under each sale and servicing agreement
will consist of the events specified under "Description of the Transfer and
Servicing Agreements -- Events of Servicing Termination" in this prospectus.
"FEDERAL FUNDS RATE" for each Interest Reset Period shall be the effective
rate on the Federal Funds Rate Determination Date for Federal Funds as published
in H.15(519) under the heading "Federal Funds (Effective)." If such rate is not
published on or before 3:00 p.m., New York City time on the Calculation Date,
then the Federal Funds Rate shall be the rate on such Federal Funds Rate
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations on or before 3:00 p.m., New York City time on
such Calculation Date, then the Federal Funds Rate shall be the rate on such
Federal Funds Rate Determination Date made publicly available by the Federal
Reserve Bank of New York which is equivalent to the rate which appears in
H.15(519) under the heading "Federal Funds (Effective)"; provided, however, that
if such rate is not made publicly available by the Federal Reserve Bank of New
York on or before 3:00 p.m., New York City time on such Calculation Date, the
Federal Funds Rate for such Interest Reset Period will be the same as the
Federal Funds Rate in effect for the immediately preceding Interest Reset
Period. In the case of a Federal Funds Rate Security that resets daily, the
interest rate on such prospectus supplement for the period from and including a
Monday to but excluding the succeeding Monday will be reset by the Calculation
Agent for such prospectus supplement on such second Monday (or, if not a
business day, on the next succeeding business day) to a
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rate equal to the average of the Federal Funds Rates in effect with respect to
each such day in such week.
"FEDERAL FUNDS RATE DETERMINATION DATE" means the Interest Reset Date for
the related Interest Reset Period.
"FEDERAL FUNDS RATE SECURITY" means a Floating Rate Security designated in
the applicable prospectus supplement with a Base Rate equal to the Federal Funds
Rate.
"FINAL PAYMENT RECEIVABLES" are monthly payment receivables secured by new
or used automobiles or light trucks with a final scheduled payment which is
greater than the scheduled monthly payments. A Final Payment Receivable provides
for amortization of the loan over a series of fixed level payment monthly
installments like an Actuarial Receivable or a Simple Interest Receivable, but
also requires a final scheduled payment due after payment of such monthly
installments which may be satisfied by --
-- payment in full in cash of such amount;
-- transfer of the vehicle to Ford Credit provided certain conditions
are satisfied; or
-- refinancing the final scheduled payment in accordance with certain
conditions.
"FINAL PAYMENT SECURITIES" indebtedness secured by, final scheduled
payments with respect to the Final Payment Receivables, if any, initially
retained by the seller and subsequently added to the trust.
"FIXED RATE SECURITIES" means securities (other than certain Classes of
Strip Notes or Strip Certificates) which bear interest at a fixed rate per
annum.
"FLOATING RATE SECURITIES" securities (other than certain Classes of Strip
Notes or Strip Certificates) may bear interest at a variable or adjustable rate
per annum.
"FORD CREDIT" means Ford Motor Credit Company.
"FUNDING PERIOD" the period specified in the related prospectus supplement
during which the seller will sell any Subsequent Receivables to the trust, which
period may be as frequently as daily.
"GENERAL PARTNER" means Ford Credit Auto Receivables Two, Inc., a Delaware
corporation, the general partner of the seller.
"H.15(519)" means the publication entitled "Statistical Release H.15(519),
Selected Interest Rates," or any successor publication, published by the Board
of Governors of the Federal Reserve System.
"INDEX MATURITY" for any Class of Floating Rate Securities means the period
of maturity of the instrument or obligation from which the Base Rate is
calculated.
"INITIAL POOL BALANCE" means the Pool Balance on the related Closing Date,
as described in the related prospectus supplement.
"INITIAL RECEIVABLES" means the receivables the seller will sell or
transfer to the trust on the Closing Date specified in the related prospectus
supplement having an aggregate principal balance specified in the related
prospectus supplement as of the applicable cutoff date.
"INSOLVENCY EVENT" means, with respect to any entity, any of the following
events or actions: certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings with respect to
such entity and certain actions by such entity indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations.
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"INSOLVENCY LAWS" means the United States Bankruptcy Code or similar
applicable state laws.
"INTEREST RESET DATE" means the first day of the applicable Interest Reset
Period, or such other day as may be specified in the related prospectus
supplement with respect to a Class of Floating Rate Securities.
"INTEREST RESET PERIOD" means with respect to any Class of Floating Rate
Securities, each period for which interest is accrued, as defined in the related
prospectus supplement
"LIBOR" with respect to the London Inter-Bank Offering Rate indexed to the
offered rates for U.S. dollar deposits, for each Interest Reset Period will be
determined by the Calculation Agent for any LIBOR Security as follows:
(1) On the LIBOR Determination Date, the Calculation Agent for such LIBOR
Security will determine the arithmetic mean of the offered rates for
deposits in U.S. dollars for the period of the Index Maturity specified
in the applicable prospectus supplement, commencing on such Interest
Reset Date, which appear on the Reuters Screen LIBO Page at
approximately 11:00 a.m., London time, on such LIBOR Determination
Date. For purposes of calculating LIBOR, London banking day means any
business day on which dealings in deposits in United States dollars are
transacted in the London interbank market and "Reuters Screen LIBO
Page" means the display designated as page "LIBO" on the Reuters
Monitor Money Rates Service (or such other page as may replace the LIBO
page on that service for the purpose of displaying London interbank
offered rates of major banks). If at least two such offered rates
appear on the Reuters Screen LIBO Page, LIBOR for such Interest Reset
Period will be the arithmetic mean of such offered rates as determined
by the Calculation Agent for such LIBOR Security.
(2) If fewer than two offered rates appear on the Reuters Screen LIBO Page
on such LIBOR Determination Date, the Calculation Agent for such LIBOR
Security will request the principal London offices of each of four
major banks in the London interbank market selected by such Calculation
Agent to provide such Calculation Agent with its offered quotations for
deposits in U.S. dollars for the period of the specified Index
Maturity, commencing on such Interest Reset Date, to prime banks in the
London interbank market at approximately 11:00 a.m., London time, on
such LIBOR Determination Date and in a principal amount equal to an
amount of not less than $1,000,000 that is representative of a single
transaction in such market at such time. If at least two such
quotations are provided, LIBOR for such Interest Reset Period will be
the arithmetic mean of such quotations. If fewer than two such
quotations are provided, LIBOR for such Interest Reset Period will be
the arithmetic mean of rates quoted by three major banks in The City of
New York selected by the Calculation Agent for such LIBOR Security at
approximately 11:00 a.m., New York City time, on such LIBOR
Determination Date for loans in U.S. dollars to leading European banks,
for the period of the specified Index Maturity, commencing on such
Interest Reset Date, and in a principal amount equal to an amount of
not less than $1,000,000 that is representative of a single transaction
in such market at such time; provided, however, that if the banks
selected as aforesaid by such Calculation Agent are not quoting rates
as mentioned in this sentence, LIBOR for such Interest Reset Period
will be the same as LIBOR for the immediately preceding Interest Reset
Period.
"LIBOR DETERMINATION DATE" means the second London banking day prior to the
Interest Reset Date for the related Interest Reset Period.
"LIBOR SECURITY" means a Floating Rate Security designated in the
applicable prospectus supplement with a Base Rate equal to LIBOR.
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<PAGE> 142
"LIQUIDATION PROCEEDS" means all proceeds of Liquidated Receivables, net of
expenses incurred by the servicer in connection with such liquidation and any
amounts required by law to be remitted to the obligor on such Liquidated
Receivables in accordance with the servicer's customary servicing procedures.
"LIQUIDATED RECEIVABLES" means a receivable which:
-- by its terms, is in default; and
-- as to which the servicer has determined, in accordance with its
customary servicing procedures, that eventual payment in full is
unlikely or has repossessed and disposed of the related financed
vehicle.
"MONEY MARKET YIELD" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C> <C> <C>
Money Market Yield D X 360 X 100
= --------------
360 -(D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
"MSRP" means with respect to a motor vehicle, the manufacturer's suggested
retail price.
"NOTE INTEREST RATE" with respect to each Class of notes, the rate
specified in the prospectus supplement at which interest may accrue.
"PAYAHEADS" means early payments by or on behalf of obligors on Actuarial
Receivables which do not constitute scheduled payments, full prepayments, nor
certain partial prepayments that result in a reduction of the obligor's periodic
payment below the scheduled payment as of the applicable Cutoff Date.
"PERMITTED INVESTMENTS" means:
-- direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America or its agencies;
-- demand deposits, time deposits, certificates of deposit or
bankers' acceptances of certain depository institutions or trust
companies having the highest rating from the applicable Rating
Agency rating the notes or certificates;
-- commercial paper having, at the time of such investment, a rating
in the highest rating category from the applicable Rating Agency
rating the notes or certificates;
-- investments in money market funds having the highest rating from
the applicable Rating Agency rating the notes or certificates;
-- repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of
America or its agencies, in either case entered into with a
depository institution or trust company having the highest rating
from the applicable Rating Agency rating the notes or
certificates; and
-- any other investment (which may include motor vehicle retail
installment sale contracts) acceptable to the applicable Rating
Agencies.
Permitted Investments are generally limited to obligations or securities which
mature on or before the next distribution date.
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"PLAN" means any of the following
-- employee benefit plans (as defined in Section 3(3) of ERISA),
-- plans described in Section 4975(e)(1) of the tax code, including
individual retirement accounts or Keogh plans, and
-- any entities whose underlying assets include plan assets by reason
of a plan's investment in such entities.
"PLAN ASSETS REGULATION" means a regulation, 29 C.F.R. Section 2510.3-101,
issued by the DOL.
"POOL BALANCE" is the aggregate principal balance of the receivables as of
the Cutoff Date or the end of a Collection Period, as further described in the
prospectus supplement.
"PRIMUS" means --
-- until August 1999, PRIMUS Automotive Financial Services, Inc., a
wholly owned subsidiary of Ford Credit conducting its business as
a corporate entity separate from Ford Credit; and
-- beginning in August 1999, Primus Financial Services, a d/b/a of
Ford Credit, conducting its business as a division of Ford Credit.
"PTCE" means a Prohibited Transaction Class Exemption under ERISA.
"PURCHASE AMOUNT" means a price at which the seller or the servicer must
purchase a receivable, equal to the amount required to be paid by the related
obligor to prepay such receivable (including one month's interest thereon, in
the month of payment, at the APR), after giving effect to the receipt of any
monies collected (from whatever source) on such receivable.
"RATING AGENCIES" means the nationally recognized Rating Agencies providing
a rating on the securities issued by the applicable trust.
"RECEIVABLES POOL" means the pool of receivables sold to the applicable
trust.
"RECEIVABLES TRANSFER AND SERVICING AGREEMENTS" means collectively each
purchase agreement under which Ford Credit will sell receivables to the seller,
each sale and servicing agreement under which the trust will purchase
receivables from the seller and the servicer will agree to service such
receivables, each trust agreement under which the trust will be created and
certificates will be issued and each administration agreement under which Ford
Credit will undertake certain administrative duties.
"RESIDUAL CASH FLOW CERTIFICATES" are certificates which are entitled to
all or a portion of any remaining payments of principal and interest on the
related receivables after making all other distributions required on each
distribution date.
"RESIDUAL CASH FLOW NOTES" are notes which are entitled to all or a portion
of any remaining payments of principal and interest on the related receivables
after making all other distributions required on each distribution date.
"SELLER" means Ford Credit Auto Receivables Two L.P., a Delaware limited
partnership, as the seller of the securities being offered by the prospectus
supplement.
"SERVICER" means Ford Credit acting in its capacity as servicer of the
receivables under the applicable sale and servicing agreement.
"SIMPLE INTEREST ADVANCE" means an amount that the servicer shall deposit
into the related collection account, in its sole discretion, equal to the amount
of interest that would have been due on the related Simple Interest Receivables
at their respective APRs for the related Collection Period (assuming that such
Simple Interest Receivables are paid on their respective due dates)
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<PAGE> 144
minus the amount of interest actually received on such Simple Interest
Receivables during the related Collection Period.
"SIMPLE INTEREST RECEIVABLES" are receivables that provide for the
amortization of the amount financed under each receivable over a series of fixed
level payment monthly installments. However, unlike the monthly installment
under an Actuarial Receivable, each monthly installment consists of an amount of
interest which is calculated on the basis of the outstanding principal balance
of the receivable 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 Receivable,
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.
"SPECIAL TAX COUNSEL" means the special federal tax counsel to each trust
specified in the related prospectus supplement that will provide an opinion
regarding certain federal income tax matters.
"SPREAD" means the number of basis points (one basis point is equal to one
one-hundredth of a percentage point), as specified in the applicable prospectus
supplement, to be added to or subtracted from the Base Rate in determining the
interest rate applicable to a Floating Rate Security.
"SPREAD MULTIPLIER" means the percentage, if any, specified in the
applicable prospectus supplement, to be multiplied by the Base Rate in
determining the interest rate applicable to a Floating Rate Security.
"STRIP CERTIFICATES" means any certificates issued that are entitled to:
-- distributions in respect of principal with disproportionate,
nominal or no interest distributions, or
-- interest distributions with disproportionate, nominal or no
distributions in respect of principal.
"STRIP NOTES" means any notes issued that are entitled to:
-- principal payments with disproportionate, nominal or no interest
payments, or
-- interest payments with disproportionate, nominal or no principal
payments.
"SUBSEQUENT RECEIVABLES" means additional receivables sold by the seller to
the applicable trust during a Funding Period after the Closing Date.
"SUBSEQUENT TRANSFER DATE" means each date specified as a transfer date in
the related prospectus supplement on which Subsequent Receivables will be sold
by the seller to the applicable trust.
"TAX CODE" means the Internal Revenue Code of 1986, as amended.
"TREASURY RATE" for each Interest Period shall be the rate for the auction
held on the Treasury Rate Determination Date for such Interest Reset Period of
U. S. Treasury bills having the Index Maturity specified in the applicable
prospectus supplement, as such rate shall be published in H.15(519) under the
heading "U.S. Government Securities -- Treasury bills -- auction average
(investment)". If such rate is not published on or to 3:00 p.m., New York City
time on the Calculation Date, then the Treasury Rate shall be the auction
average rate (expressed as a bond equivalent on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) on such Treasury Rate
Determination Date as otherwise announced by the United States Department of the
Treasury. In the event that the results of the auction of Treasury bills having
the specified Index Maturity are not published or reported as provided above on
or before 3:00 p.m., New York City time on such Calculation Date, or if no such
auction
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<PAGE> 145
is held on such Treasury Rate Determination Date, then the Treasury Rate shall
be calculated by the Calculation Agent and shall be the yield to maturity
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 p.m., New York City time of
three leading primary United States government securities dealers selected by
such Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if the dealers
selected by such Calculation Agent are not quoting bid rates, then the Treasury
Rate for such Interest Reset Period will be the same as the Treasury Rate for
the immediately preceding Interest Reset Period.
"TREASURY RATE DETERMINATION DATE" for each Interest Reset Period will be
the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury bills would normally be auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Treasury Rate Determination Date pertaining to the Interest Reset
Period commencing in the next succeeding week. If an auction date shall fall on
any day that would otherwise be an Interest Reset Date for a Treasury Rate
Security, then such Interest Reset Date shall instead be the business day
immediately following such auction date.
"TREASURY RATE SECURITY" means a Floating Rate Security designated in the
applicable prospectus supplement with a Base Rate equal to the Treasury Rate.
"TRUSTEE" means the trustee of the trust identified in the related
prospectus supplement.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO GIVE YOU DIFFERENT INFORMATION. WE DO NOT CLAIM THE
ACCURACY OF THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AS
OF ANY DATE OTHER THAN THE DATE STATED ON THE COVER PAGE. WE ARE NOT OFFERING
THE SECURITIES IN ANY STATES WHERE IT IS NOT PERMITTED.
----------------------
(FORD LOGO)
FORD CREDIT AUTO
RECEIVABLES TWO L.P.
SELLER
FORD MOTOR CREDIT COMPANY
SERVICER
----------------------
DEALER PROSPECTUS DELIVERY OBLIGATION. UNTIL DECEMBER 16, 1999 ALL DEALERS THAT
EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THE
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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FORD CREDIT
AUTO OWNER TRUST
1999-D
$1,370,000,000 CLASS A-3
6.20% ASSET BACKED NOTES
$400,000,000 CLASS A-4
6.40% ASSET BACKED NOTES
$588,189,000 CLASS A-5
6.52% ASSET BACKED NOTES
$109,640,000 CLASS B
6.87% ASSET BACKED NOTES
$62,650,000 CLASS C
7.21% ASSET BACKED CERTIFICATES
----------------------
PROSPECTUS SUPPLEMENT
----------------------
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
BANC ONE CAPITAL MARKETS, INC.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
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