<PAGE>
Filed pursuant to Rule 424(b)(2)
Registration No. 333-16233
Prospectus Supplement
(To Prospectus dated January 24, 1997)
$246,773,107
Bay View 1999-LG-1 Auto Trust
Automobile Receivable Backed Certificates
Bay View Securitization Corporation,
as depositor
Bay View Acceptance Corporation,
as servicer
We are offering the following classes of automobile receivable backed
certificates:
<TABLE>
<CAPTION>
Final
Initial Pass Through Scheduled Underwriting
Class of Certificate Interest Distribution Price Discount
Certificates Balance Rate Date to Public per Certificate
- ---------------------- ------------- ------------ ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Class A-1 certificates $ 42,750,000 6.12912% January 15, 2001 100.0000% .20%
Class A-2 certificates $ 97,000,000 6.88000% February 15, 2003 99.99141% .20%
Class A-3 certificates $ 55,000,000 6.91000% March 15, 2004 99.98567% .20%
Class A-4 certificates $ 52,023,107 7.07000% December 15, 2008 99.98720% .20%
Class I Interest Only
certificates $ 184,645,582/(1)/ 1.50000% -- 1.52000%/(2)/ .50%
</TABLE>
- ---------------------
(1) Initial notional principal amount.
(2) As a percent of initial notional principal amount.
The total price to the public is $249,556,847. The total underwriting
discount is $507,579. The total proceeds to the depositor, including accrued
interest of $611,066, are $249,660,334.
The offered certificates represent interests of the Bay View 1999-LG-1 Auto
Trust only and do not represent obligations of or interests in Bay View
Securitization Corporation, Bay View Acceptance Corporation, any of their
affiliates or any governmental agency. You should carefully consider the factors
set forth under "Risk Factors" beginning on page S-11 of this prospectus
supplement and on page 11 in the prospectus.
__________________________________
This prospectus supplement may be used to offer and sell the offered
certificates only if accompanied by the prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
__________________________________
PaineWebber Incorporated Morgan Stanley Dean Witter
The date of this prospectus supplement is December 9, 1999.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We tell you about the offered certificates in the following documents:
(1) this prospectus supplement, which describes the specific terms of the
offered certificates; and
(2) the accompanying prospectus, which provides general information, some
of which may not apply to the offered certificates.
If the description of the offered certificates varies between this
prospectus supplement and the prospectus, you should rely on the information in
this prospectus supplement.
We include cross-references in this prospectus supplement and in the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following table of contents and the table of
contents included in the accompanying prospectus provide the pages on which
these captions are located.
In this prospectus supplement and the accompanying prospectus, "we" refers
to the depositor, Bay View Securitization Corporation, and "you" refers to any
prospective investor in the offered certificates.
S-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF TERMS...................................................................................... S-5
Issuer........................................................................................... S-5
Depositor........................................................................................ S-5
Servicer......................................................................................... S-5
Trustee.......................................................................................... S-5
Dates............................................................................................ S-5
The Offered Certificates......................................................................... S-5
Distribution Date................................................................................ S-5
Interest on the Class A Certificates............................................................. S-6
Distributions of Principal....................................................................... S-6
The Class I Certificates......................................................................... S-6
Class I Notional Principal Amount................................................................ S-7
The Class IC Certificate......................................................................... S-8
The Trust Assets................................................................................. S-8
Available Funds; Rights of the Class IC Certificateholder........................................ S-9
The Policy....................................................................................... S-9
Policy Amount.................................................................................... S-9
Insurer.......................................................................................... S-10
Legal Investment................................................................................. S-10
Optional Redemption.............................................................................. S-10
Tax Status....................................................................................... S-10
Ratings.......................................................................................... S-10
ERISA Considerations............................................................................. S-10
RISK FACTORS.......................................................................................... S-11
You May Not be Able to Resell the Offered Certificates........................................... S-11
The Offered Certificates Are Interests in the Trust Only and are Not Guaranteed by any Other
Party............................................................................................ S-11
Prepayments May Reduce the Yield on the Class I Certificates..................................... S-11
You May Incur a Loss if there is a Default Under the Policy...................................... S-11
The Insolvency of BVAC or its Affiliates Could Reduce Payments to You............................ S-12
A Change in the Certificate Ratings May Adversely Affect the Offered Certificates................ S-13
Geographic Concentrations of the Receivables May Increase the Losses Realized by the Trust....... S-13
BAY VIEW ACCEPTANCE CORPORATION AND AFFILIATES........................................................ S-14
FORMATION OF THE TRUST................................................................................ S-14
THE RECEIVABLES POOL.................................................................................. S-15
General.......................................................................................... S-15
Composition of the Receivables by Financed Vehicle Type as of November 30, 1999.................. S-16
Distribution of the Receivables by Remaining Term to Stated Maturity as of November 30, 1999..... S-17
Geographic Distribution of the Receivables as of November 30, 1999............................... S-17
Distribution of the Receivables by Financed Vehicle Model Year as of November 30, 1999........... S-18
Distribution of the Receivables by Contract Rate as of November 30, 1999......................... S-18
Delinquency and Net Credit Losses................................................................ S-19
YIELD AND PREPAYMENT CONSIDERATIONS................................................................... S-21
General.......................................................................................... S-21
The Class I Certificates......................................................................... S-21
THE OFFERED CERTIFICATES.............................................................................. S-21
Sale and Assignment of Receivables............................................................... S-22
Accounts......................................................................................... S-22
Advances......................................................................................... S-22
Distributions on the Offered Certificates........................................................ S-22
The Class I Certificates -- Calculation of Notional Principal Amount............................. S-26
Class I Yield Considerations..................................................................... S-29
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
Distributions on the Class IC Certificate......................................................... S-30
The Policy........................................................................................ S-30
Rights of the Insurer upon Servicer Default, Amendment or Waiver.................................. S-31
THE INSURER............................................................................................ S-32
MBIA.............................................................................................. S-32
MBIA Financial Information........................................................................ S-32
Where You Can Obtain Additional Information About MBIA............................................ S-33
Year 2000 Readiness Disclosure.................................................................... S-33
Financial Strength Ratings of MBIA................................................................ S-33
REPORTS TO CERTIFICATEHOLDERS.......................................................................... S-34
ERISA CONSIDERATIONS................................................................................... S-34
UNDERWRITING........................................................................................... S-34
LEGAL OPINIONS......................................................................................... S-35
EXPERTS................................................................................................ S-35
INDEX OF PRINCIPAL TERMS............................................................................... S-36
</TABLE>
S-4
<PAGE>
SUMMARY OF TERMS
. This summary highlights selected information from this prospectus
supplement and does not contain all the information that you should
consider in making your investment decision. To understand all of the terms
of this offering, read the entire prospectus supplement and accompanying
prospectus.
. The definitions of or references to capitalized terms used in this
prospectus supplement can be found on the pages indicated in the "Index of
Principal Terms" on page S-11 in this prospectus supplement or on page 11
of the accompanying prospectus.
Issuer
The Bay View 1999-LG-1 Auto Trust will issue the certificates offered in this
prospectus supplement.
Depositor
Bay View Securitization Corporation is the depositor of the trust. The
depositor will transfer the automobile receivables and related property to the
trust. The depositor is a wholly-owned subsidiary of Bay View Capital
Corporation ("BVCC").
Servicer
Bay View Acceptance Corporation ("BVAC") will act as the servicer of the trust.
The servicer will receive and apply payments on the receivables, service the
collection of the receivables and direct the trustee to make the appropriate
distributions to the certificateholders. The servicer will receive a monthly
servicing fee as compensation for its services. The servicer is a wholly-owned
subsidiary of Bay View Bank, N.A. (the "Bank"), which is a wholly-owned
subsidiary of BVCC. See "Bay View Acceptance Corporation and Affiliates" in
this prospectus supplement.
Trustee
Bankers Trust Company.
Dates
Cutoff Date
. November 30, 1999. The trust will receive payments received with
respect to the receivables after this date. This is also the date used
for preparing the statistical information used in this prospectus
supplement.
Closing Date
. December 14, 1999.
The Offered Certificates
On the closing date, the trust will issue the Class A-l certificates, the Class
A-2 certificates, the Class A-3 certificates, the Class A-4 certificates and the
Class I certificates (collectively we refer to these certificates offered for
sale as the "offered certificates") as described below, under a pooling and
servicing agreement among the depositor, the servicer and the trustee. We are
offering these certificates for sale in this prospectus supplement. The
interest rates and initial certificate balances of the Class A certificates are
as follows:
Pass-Through Initial
Interest Rate Certificate
(per annum) Balance
------------- -----------
Class A-1 certificates 6.12912% $42,750,000
Class A-2 certificates 6.88000% $97,000,000
Class A-3 certificates 6.91000% $55,000,000
Class A-4 certificates 7.07000% $52,023,107
The Class I certificates will be issued with an original notional principal
amount of $184,645,582. See "The Offered Certificates" in this prospectus
supplement.
Distribution Date
The trust will distribute interest and principal on the offered certificates on
the fifteenth calendar day of each month or, if such day is not a business day,
on the next business day. The distributions will begin on January 18, 2000 and
will be made to holders of record of the offered certificates as of the record
date, which will be the last day of the collection period related to the
distribution date. The collection period with respect to any distribution date
is the calendar month immediately preceding the calendar month in which such
distribution date occurs. See "The Offered Certificates -- Distributions on the
Offered Certificates" in this prospectus supplement and "Description of the
Certificates -- Definitive Certificates" in the accompanying prospectus.
S-5
<PAGE>
Interest on the Class A Certificates
Interest on the Class A-1 certificates will be calculated on the basis of a 360-
day year and the actual number of days from the previous distribution date
through the day before the related distribution date. Interest on all other
classes of certificates will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. See "Yield and Prepayment Considerations"
and "The Offered Certificates -- Distributions on the Offered Certificates" in
this prospectus supplement.
Class A-1 Monthly Interest. Generally, the amount of monthly interest
distributable to the Class A-1 certificateholders on each distribution date is
the product of:
(1) 1/360th of the interest rate for the Class A-1 certificates;
(2) the actual number of days from the previous distribution date through
the day before the related distribution date or, in the case of the
first distribution date, from the closing date; and
(3) the aggregate outstanding certificate balance of the Class A -1
certificates on the preceding distribution date (after giving effect
to all distributions to certificateholders on such date).
Monthly Interest for Other Class A Certificates. Generally, the amount of
monthly interest distributable to each class of Class A certificateholders
(other than the Class A-1 certificateholders) on each distribution date is the
product of:
(1) one-twelfth of the interest rate applicable to such class of
certificates; and
(2) the aggregate outstanding certificate balance of such class on the
preceding distribution date (after giving effect to all distributions
to certificateholders on such date) or, in the case of the first
distribution date, from the closing date.
Distributions of Principal
The trust will distribute principal on each distribution date to the Class A
certificateholders of record as of the record date. Generally, the amount of
monthly principal the trust will pay is equal to the decrease in the outstanding
principal balance of the receivables pool during the preceding calendar month.
See "The Offered Certificates -- Distributions on the Offered Certificates" in
this prospectus supplement.
Generally, principal will be distributed to the Class A certificateholders in
the order of the alpha-numeric designation of each class of the Class A
certificates, starting with the Class A-1 certificates and ending with the Class
A-4 certificates. For example, no principal will be distributed to the Class A-
2 certificateholders until the outstanding certificate balance of the Class A-1
certificates has been reduced to zero.
The trust must distribute an amount equal to the outstanding certificate balance
of each class of Class A certificates, to the extent not previously distributed,
by the final scheduled distribution date for such class of Class A certificates
as follows:
Final Scheduled
Distribution Date
-----------------
Class A-1 certificates January 15, 2001
Class A-2 certificates February 15, 2003
Class A-3 certificates March 15, 2004
Class A-4 certificates December 15, 2008
Since the rate of distribution of principal of each class of Class A
certificates depends greatly upon the rate of payment of principal on the
receivables (including voluntary prepayments and principal paid in respect of
defaulted receivables and purchased receivables), the final scheduled
distribution in respect of each class of Class A certificates could occur
significantly earlier than the respective final scheduled distribution dates.
See "Risk Factors --You May Incur a Loss if there is a Default Under the Policy"
and "The Offered Certificates -- Distributions on the Offered Certificates" in
this prospectus supplement.
The Class I Certificates
The Class I certificates are interest only certificates which will not receive
any principal distributions. The pass-through rate for the Class I certificates
is 1.50% per annum. Interest on the Class I certificates will accrue on the
notional principal amount of the Class I certificates at the Class I pass-
through rate. The notional principal amount represents a designated notional
principal component of the receivables. The notional principal amount is
$184,645,582 as of the closing date and shall be reduced on each distribution
date as described below.
Interest on the Class I certificates will be calculated on the basis of a 360-
day year consisting of twelve 30-day months. Generally, the amount of interest
distributable to Class I certificateholders on each distribution date is the
product of one-twelfth of the Class I pass-through rate
S-6
<PAGE>
and the notional principal amount as of the preceding distribution date or, in
the case of the first distribution date, the closing date (after giving effect
to any reduction of the notional principal amount on such distribution date).
Such amount will also be determined by assuming that the month of the closing
date has 30 days. Class I certificateholders will not be entitled to any
distributions after the notional principal amount has been reduced to zero.
Class I Notional Principal Amount
The Class I certificates are interest only certificates based upon a planned
amortization of the notional principal amount of the Class I certificates. We
intend this amortization feature to reduce the uncertainty to Class I
certificateholders caused by prepayments on the receivables. We base the
reduction in the notional principal amount on an expected principal paydown
schedule rather than on the reduction in the actual principal balances of the
receivables. We expect the interest payments on the Class I certificates to
come from the excess of interest earned on the receivables over distributions of
monthly interest on the Class A certificates and the payment of the monthly
servicing fee. We divided the aggregate Class A certificate balance into two
notional principal components, the "PAC Component" and the "Companion
Component," for purposes of calculating the notional principal amount. The sum
of the PAC Component and the Companion Component at any time will equal the then
aggregate unpaid aggregate Class A certificate balance at such time. The
notional principal amount of the Class I certificates will equal the principal
balance of the PAC Component at all times as such amount is calculated using the
allocations of principal payments described below.
The pooling and servicing agreement establishes the planned schedule for the
amortization of the notional principal amount (the "Planned Notional Principal
Amount Schedule") and we provide this schedule to you in this prospectus
supplement under "The Offered Certificates -- The Class I Certificates --
Calculation of Notional Principal Amount."
On each distribution date, the amount of monthly principal allocated to Class A
certificateholders will determine the reduction in the notional principal amount
as follows:
(1) to the PAC Component in an amount up to the amount necessary to reduce
this amount to the amount specified in the Planned Notional Principal
Amount Schedule for such distribution date;
(2) to the Companion Component, until the outstanding principal amount is
reduced to zero; and
(3) to the PAC Component, without regard to the planned notional principal
amount.
The notional principal amount of the Class I certificates will be the same
amount as the outstanding amount of the PAC Component and will decline as the
PAC Component declines.
The Planned Notional Principal Amount Schedule is based on the assumption that
the receivables prepay at a constant prepayment rate between 1.60% and 2.50% ABS
(which is an assumed constant rate of prepayments used in the ABS prepayment
model set forth in this prospectus supplement). The yield to maturity of the
Class I certificates will be sensitive to the rate and timing of principal
payments (including prepayments) on the receivables and may fluctuate
significantly during the actual term of the Class I certificates. If the
receivables prepay at a constant rate within the range of 1.60% to 2.50% ABS,
the PAC Component (and the notional principal amount of the Class I
certificates) will decline according to the Planned Notional Principal Amount
Schedule. If the receivables prepay at a constant rate higher than 2.50% ABS,
the yield on the Class I certificates will be reduced because (1) the amount of
the Companion Component will be reduced to zero more quickly than scheduled, and
(2) the amount of the PAC Component (and the notional principal amount) will
decline more quickly than provided in the Planned Notional Principal Amount
Schedule. A rapid rate of principal prepayments (including liquidations due to
losses, repurchases and other dispositions) will have a material negative effect
on the yield to maturity of the Class I Certificates.
The Planned Notional Principal Amount Schedule has been prepared on the basis of
certain assumptions, which are described in this prospectus supplement under
"The Offered Certificates -- Class I Yield Considerations." You should fully
consider the risks associated with owning Class I certificates, including the
risk that a rapid rate of prepayments could prevent you from recovering your
initial investment in the Class I certificates. See "Risk Factors --
Prepayments May Reduce the Yield on the Class I Certificates" and "Yield and
Prepayment Considerations -- The Class I Certificates" in this prospectus
supplement.
The Class IC Certificate
In addition to the Class A and Class I certificates, the trust will issue a
Class IC certificate pursuant to the pooling
S-7
<PAGE>
and servicing agreement. The Class IC certificate will be retained by the
depositor. We are not offering this certificate for sale in this offering.
The Trust Assets
The trust assets will include:
. a pool of simple and precomputed interest installment sale and installment
loan contracts originated in various states in the United States of
America, secured by new and used automobiles, light-duty trucks,
motorcycles, recreational vehicles, sport utility vehicles and vans;
. certain monies (including accrued interest) due in respect of the
receivables after November 30, 1999, but excluding accrued interest paid
before the closing date;
. security interests in the related vehicles financed through the
receivables;
. funds on deposit in a certificate account;
. any proceeds from claims on certain insurance policies relating to the
financed vehicles or the related obligors;
. an unconditional and irrevocable insurance policy issued by MBIA Insurance
Corporation guaranteeing payments of principal and interest on the
certificates; and
. certain rights under the agreements by which the receivables are sold from
BVAC to the seller and from the seller to the trust.
The receivables arise from:
(1) motor vehicle installment sale contracts that were originated by dealers
for assignment to BVAC or the Bank (directly or through Ultra Funding
Corporation ("Ultra"), or Bay View Credit ("BVC"), both of which were
wholly-owned subsidiaries of BVAC prior to being merged into BVAC on June
14, 1999, or California Thrift & Loan ("CTL"), which was renamed Bay View
Credit on January 2, 1998) or
(2) motor vehicle loan contracts that were solicited by dealers for origination
by BVC, the Bank or CTL.
As a result of the renaming of CTL and subsequent merger into BVAC, all
references to CTL in the accompanying prospectus refer to BVAC except to the
extent such information is superseded in this prospectus supplement.
BVAC will sell all the receivables to be included in the trust to the depositor.
The trust will acquire its assets from the depositor pursuant to the pooling and
servicing agreement. See "Formation of the Trust" in this prospectus
supplement.
Payment of the amount due to the registered lienholder under each receivable is
secured by a first perfected security interest in the related financed vehicle.
BVC, the Bank (or its predecessor, Bay View Federal Bank) or CTL is or will be
the registered lienholder (the "Named Lienholders") on the certificate of title
of each of the financed vehicles.
The receivables were selected from the automobile receivable portfolio of BVAC,
based on the criteria specified in the pooling and servicing agreement and
described in this prospectus supplement under "The Receivables Pools," and
"Description of the Transfer and Servicing Agreements -- Sale and Assignment of
Receivables" in the accompanying prospectus.
The underwriting procedures and standards employed by BVC with respect to the
receivables were substantially similar to those described under "The Receivables
Pools -- Underwriting Procedures" in the accompanying prospectus. The
underwriting procedures and standards employed by Ultra are generally similar to
those used by BVC and CTL except that Ultra used a scoring model developed by
Fair Isaac & Co. Inc. based on the industry experience of its clients, the
maximum amount financed is generally lower than the amount permitted under the
guidelines used by BVC or CTL and lastly, BVC and CTL generally verified receipt
of the automobile and other information with the borrower.
Available Funds; Rights of the Class IC Certificateholder
The amount of funds available for distribution to Class A and Class I
certificateholders on any distribution date will consist of funds from the
following sources:
(1) payments received from obligors in respect of the receivables (net of
any amount required to be deposited to the payahead account in respect
of precomputed receivables);
(2) any net withdrawal from the payahead account in respect of precomputed
receivables;
S-8
<PAGE>
(3) interest earned on funds on deposit in the certificate account;
(4) liquidation proceeds received in respect of receivables;
(5) advances received from the servicer in respect of interest on certain
delinquent receivables; and
(6) amounts received in respect of required repurchases or purchases of
receivables by BVAC or the servicer.
The trustee will draw on the policy if the amount of available funds for any
distribution date is not sufficient to pay:
(1) the amounts owed to the servicer (including the monthly servicing fee
and reimbursement for advances made by the servicer to the trust); and
(2) the required distributions of interest to the Class A and Class I
certificateholders and principal to the Class A certificateholders.
If there is a default under the policy, any losses on the receivables will be
borne directly by the Class A certificateholders pro rata (to the extent of the
outstanding class or classes of Class A certificates at such time) and the Class
I certificateholders. See "Risk Factors -- You May Incur a Loss if there is a
Default Under the Policy," "The Offered Certificates -- Accounts" and "--
Distributions on the Offered Certificates" in this prospectus supplement.
Any amount on deposit in the certificate account on any distribution date after
all other required deposits to and withdrawals from the certificate account have
been made will be distributed to the Class IC certificateholder. Any such
distribution to the Class IC certificateholder will no longer be an asset of the
trust.
See "The Offered Certificates -- Accounts" and "-- The Policy" in this
prospectus supplement.
The Policy
The depositor will obtain an unconditional and irrevocable insurance policy.
Subject to the terms of the policy, the insurer will guarantee the payment of
the monthly servicing fee and the distribution of monthly interest and monthly
principal on the offered certificates up to the policy amount.
In addition, the policy will cover any amount paid or required to be paid by the
trust to the Class A and Class I certificateholders, which amount is sought to
be recovered as a voidable preference by a trustee in bankruptcy of BVAC or the
depositor under the United States Bankruptcy Code in accordance with a final
nonappealable order of a court having competent jurisdiction.
See "The Offered Certificates -- The Policy" in this prospectus supplement.
Policy Amount
The policy amount with respect to any distribution date will be:
the sum of:
(1) the monthly servicing fee;
(2) monthly interest;
(3) the lesser of (a) the outstanding aggregate certificate balance of all
classes of Class A certificates on such distribution date (after
giving effect to any distributions of available funds to distribute
monthly principal on such distribution date) and (b) the initial
aggregate certificate balances of the Class A certificates minus all
amounts drawn on the policy with respect to monthly principal.
Insurer
MBIA Insurance Corporation is the insurer and will guarantee the payment of
monthly interest and monthly principal under the terms of the policy. See "The
Insurer" in this prospectus supplement.
Legal Investment
The Class A-1 certificates will be eligible for purchase by money market funds
under Rule 2a-7 of the Investment Company Act of 1940, as amended.
Optional Redemption
The servicer has the right to purchase all of the receivables as of the last day
of any collection period on which (1) the aggregate balance of the receivables
on the related distribution date (after the distribution of all amounts to be
paid on such distribution date) will be equal to or less than 10% of the initial
aggregate balance of the receivables and (2) the notional principal amount
S-9
<PAGE>
of the Class I certificates is zero (or will be reduced to zero on or before the
related distribution date). We will redeem the offered certificates as a result
of such a purchase of the receivables.
The purchase price for the receivables will be equal to the fair market value of
the receivables; provided that such amount may not be less than the sum of:
(1) 100% of the outstanding aggregate certificate balance of all classes
of the Class A certificates,
(2) accrued and unpaid interest on the outstanding certificate balances of
all outstanding classes of the offered certificates at the weighted
average interest rate of the receivables, and
(3) any amounts due the insurer.
Tax Status
In the opinion of special tax counsel to the depositor, for federal income tax
purposes the trust will not be treated as an association taxable as a
corporation or as a "publicly traded partnership" taxable as a corporation.
The trustee and the certificateholders will agree to treat the trust as a
partnership for federal income tax purposes. As a partnership, the trust will
not be subject to federal income tax and the certificateholders will be required
to report their respective shares of the trust's taxable income, deductions and
other tax attributes. See "Federal Income Tax Consequences" in the accompanying
prospectus.
Ratings
On the closing date, each class of offered certificates will be issued only if
such class receives ratings from Moody's Investors Service, Inc. and Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., as
follows:
Rating
--------------------
Moodys S&P
-------- -----
Class A-1 certificates P-1 A-1+
Class A-2 certificates Aaa AAA
Class A-3 certificates Aaa AAA
Class A-4 certificates Aaa AAA
Class I certificates Aaa AAAr
A rating is not a recommendation to buy, sell or hold the offered certificates
and may be subject to revision or withdrawal at any time by the assigning rating
agency. See "Risk Factors -- A Change in the Certificate Ratings May Adversely
Affect the Offered Certificates" in this prospectus supplement.
ERISA Considerations
The offered certificates may be eligible for purchase by employee benefit plans
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Any benefit plan fiduciary considering the purchase of the
offered certificates should, among other things, consult with experienced legal
counsel in determining whether all required conditions for such purchase have
been satisfied. See "ERISA Considerations" in this prospectus supplement and in
the accompanying prospectus.
S-10
<PAGE>
RISK FACTORS
You should carefully consider the risk factors set forth below and in the
accompanying prospectus as well as the other investment considerations described
in such documents as you decide whether to purchase the offered certificates.
<TABLE>
<S> <C>
You May Not be Able to Resell the Offered Certificates There is currently no secondary market for the offered
certificates. The underwriters currently intend to
make a market to enable resale of the offered
certificates, but are under no obligation to do so.
As such, we cannot assure you that a secondary market
will develop for your certificates or, if one does
develop, that such market will provide you with
liquidity of investment or that it will continue for
the life of your certificates.
The Offered Certificates Are Interests in the Trust The offered certificates are interests in the trust
Only and are Not Guaranteed by any Other Party only and do not represent an interest in or obligation
of the depositor, BVAC, any of their affiliates or any
other party or governmental body. Except for the
policy, the offered certificates have not been insured
or guaranteed by any party or governmental body. See
"The Offered Certificates -- Distributions on the
Offered Certificates" and "-- The Policy" and "The
Insurer" in this prospectus supplement.
Prepayments May Reduce the Yield on the Class I If the Receivables prepay at a constant rate within
Certificates the range of 1.60% to 2.50% ABS assumed in preparing
the Planned Notional Principal Amount Schedule, the
notional principal amount will be reduced in
accordance with the Planned Notional Principal Amount
Schedule. If the receivables prepay at a constant
rate higher than 2.50% ABS, the notional principal
amount will be reduced more quickly than provided in
the Planned Notional Principal Amount Scheduled and
will reduce the yield of the Class I certificates. A
rapid rate of principal prepayments will have a
material negative effect on the yield to maturity of
the Class I certificates. You should fully consider
the risks associated with owning Class I certificates,
including the risk that a rapid rate of prepayments
could prevent you from recovering your initial
investment in the Class I certificates. See "Yield
and Prepayment Considerations -- The Class I
Certificates" in this prospectus supplement.
You May Incur a Loss if there is a Default Under the If the insurer fails to make a required payment under
Policy the policy, the trust will depend solely on payments
on and proceeds from the receivables. If the insurer
fails to make a payment required under the policy to
the trust when due for any reason, such failure will
constitute an insurer default under the policy.
</TABLE>
S-11
<PAGE>
<TABLE>
<S> <C>
If the trust does not have sufficient funds to fully
make the required distributions to Class A and Class I
certificateholders on a distribution date during a
default by the insurer, distributions on the offered
certificates on such distribution date will generally
be reduced in the following order:
1. Class A monthly principal, pro rata,
and
2. Class A and Class I monthly interest, pro rata.
See "The Receivables Pool -- Delinquency and Net
Credit Losses" and "The Offered Certificates --
Accounts," --Distributions on the Offered
Certificates" and "-- The Policy" in this prospectus
supplement.
The Insolvency of BVAC or its Affiliates Could Reduce BVAC will warrant to the depositor in the purchase
Payments to You agreement that the sale of the receivables by BVAC to
the depositor and by the depositor to the trust, are
valid sales of the receivables to the depositor and to
the trust. The benefit of such warranty will be
assigned by the depositor to the trust in the pooling
and servicing agreement. However, the interest of the
trust could be affected by the insolvency of BVAC or
its affiliates as follows:
(1) If BVAC or the depositor becomes a debtor in a
bankruptcy case and a creditor or
trustee-in-bankruptcy of such debtor or the debtor
itself claims that the sale of receivables to the
depositor or the trust, as applicable, constitutes a
pledge of the receivables to secure a loan to such
debtor, then delays in distributions to Class A and
Class I certificateholders could occur. If the court
rules in favor of any such bankruptcy trustee,
creditor or debtor, then reductions in the amounts of
such payments could result.
(2) If the transfer of receivables to the depositor
or the trust is treated as a pledge rather than a
sale, a tax or government lien on the property of BVAC
or the depositor arising before the transfer of such
receivables to the trust may have priority over the
trust's interest in such receivables.
However, if the transfers of receivables from BVAC to
the depositor and from the depositor to the trust are
treated as sales, the receivables would not be part of
BVAC's or the depositor's bankruptcy estate and would
not be available to creditors of BVAC or the depositor.
</TABLE>
S-12
<PAGE>
<TABLE>
<S> <C>
In addition, because BVAC is a wholly owned subsidiary
of the Bank, if the FDIC is appointed the receiver or
conservator of the Bank, the FDIC could take actions
which could negatively affect BVAC by repudiating or
modifying agreements between BVAC and the depositor.
Such action by the FDIC could impair or delay the
ability of the depositor to make distributions to
Class A and Class I certificateholders.
A Change in the Certificate Ratings May Adversely Moody's Investors Service and Standard & Poor's
Affect the Offered Certificates Ratings Services are the rating agencies rating the
offered certificates. The rating for the offered
certificates will reflect only the view of the
relevant rating agency. We cannot assure you that any
such rating will continue for any period of time or
that any rating will not be revised or withdrawn
entirely by such rating agency if, in its judgment,
circumstances so warrant. A revision or withdrawal of
such rating may have an adverse effect on the
liquidity and market price of your offered
certificates. A rating is not a recommendation to
buy, sell or hold the offered certificates.
Geographic Concentrations of the Receivables May As of November 30, 1999, based upon billing address
Increase the Losses Realized by the Trust information provided to BVAC, the obligors resided in
50 states and the District of Columbia, three of
which, California, Illinois and Texas account for
approximately 35.78%, 11.81% and 31.81%, respectively,
of the aggregate principal balance of the receivables.
Adverse economic conditions in California, Illinois or
Texas could adversely affect the delinquency, loan
loss or repossession experience of the trust.
</TABLE>
S-13
<PAGE>
BAY VIEW ACCEPTANCE CORPORATION AND AFFILIATES
BVAC is an automotive finance company engaged primarily in the indirect
financing (the purchase of loan contracts from dealers) of automobile purchases
by individuals. BVAC currently acquires receivables from over 3,800
manufacturer franchised automobile dealerships in 14 states. BVAC is a Nevada
corporation, formerly known as Bay View Financial Corporation ("BVFC") and was
formed in 1989 by BVAC's parent, the Bank. The Bank is the wholly-owned
subsidiary of BVCC. In January, 1998 BVFC was renamed BVAC and entered the
indirect automobile finance business through a corporate restructuring by which
it became the holding company of CTL, formerly a California thrift and loan
acquired by BVCC in June, 1996. CTL was also renamed in January 1998, as BVC.
CTL's primary business was the underwriting and purchasing of high yield retail
installment sales contracts secured by new and used automobiles and light-duty
trucks from dealers located primarily in the States of California, Arizona,
Colorado, Illinois, New Mexico, Nevada, Oregon and Texas. BVAC began purchasing
and originating receivables in January, 1998.
Ultra was organized in August 1997 by BVCC primarily to acquire retail
installment sales contracts secured by new and used automobiles originated by
Ultra Funding, Ltd., based in Austin, Texas, which Ultra acquired in October
1997. From November 1996 until its acquisition, BVCC participated in a
strategic alliance with Ultra Funding, Ltd. to purchase from Ultra Funding, Ltd.
all motor vehicle loan contracts meeting BVCC's underwriting criteria. BVC and
Ultra were both merged into BVAC in June, 1999. For the fiscal years ended
December 31, 1996, 1997, 1998, and the nine months ended September 30, 1999,
BVAC and/or the other Named Lienholders acquired motor vehicle loans aggregating
$98 million, $312 million, $432 million and $372 million, respectively. At
September 30, 1999 the servicing portfolio of BVAC (consisting of the principal
balance of receivables held to maturity and securitized receivables) totaled
approximately $748 million. The depositor is a wholly-owned bankruptcy remote
subsidiary of BVCC.
FORMATION OF THE TRUST
The depositor will establish the trust by assigning the trust assets to the
trustee in exchange for the certificates. The depositor will sell the offered
certificates and retain the Class IC certificate. BVAC will service the
receivables pursuant to the pooling and servicing agreement and will receive
compensation for acting as the servicer. To facilitate servicing and to
minimize administrative burden and expense, the servicer will serve as custodian
of the receivables for the trustee. However, the servicer will not stamp the
receivables to reflect the sale and assignment of the receivables to the trust
or the trustee or make any notation of the trustee's lien on the certificates of
title of the financed vehicles. In the absence of such notation on the
certificates of title, the trust or the trustee may not have perfected security
interests in the financed vehicles securing the receivables. Under the terms of
the pooling and servicing agreement, BVAC may delegate its duties as servicer
and custodian, however, any such delegation will not relieve BVAC of its
liability and responsibility with respect to such duties. See "Description of
the Transfer and Servicing Agreements -- Servicing Compensation and Distribution
of Expenses" and "Certain Legal Aspects of the Receivables" in the accompanying
prospectus.
The depositor will obtain the policy for the benefit of the Class A and
Class I certificateholders. The trustee will draw on the policy, up to the
policy amount, if available funds (after paying amounts owed to the servicer)
are not sufficient to fully distribute monthly interest and monthly principal.
If there is a default under the policy, the trust will look only to the obligors
on the receivables and the proceeds from the repossession and sale of financed
vehicles that secure defaulted receivables for distributions of interest and
principal on the offered certificates. In such event, certain factors, such as
the trustee not having perfected security interests in some of the financed
vehicles, may affect the trust's ability to realize on the collateral securing
the receivables, and thus may reduce the proceeds to be distributed to the
certificateholders. See "The Offered Certificates -- Accounts," "--
Distributions on the Offered Certificates" and -- The Policy" in this prospectus
supplement and "Certain Legal Aspects of the Receivables" in the accompanying
prospectus.
S-14
<PAGE>
THE RECEIVABLES POOL
General
The receivables were acquired by BVAC or a Named Lienholder from dealers or
originated by BVAC or a Named Lienholder through dealers in the ordinary course
of business. One of the Named Lienholders will be the registered lienholder on
the certificates of title to each of the financed vehicles.
The receivables were selected from the portfolio of BVAC for purchase by
the depositor according to several criteria, including that each receivable:
. is secured by a new or used vehicle;
. provides for level monthly payments (except for the initial down
payment, which may be different from the level payments) that fully
amortize the amount financed over the original term to maturity of the
receivable;
. is a precomputed receivable or a simple interest receivable;
. has an original term to stated maturity of not more than 96 months and
not less than eighteen months;
. has a remaining term to stated maturity of not more than 96 months and
not less than twelve months; and
. has a contract rate of interest (exclusive of prepaid finance charges)
of not less than 10.99%.
The weighted average remaining term to stated maturity of the receivables
was approximately 57 months as of November 30, 1999.
Approximately 90.99% of the aggregate principal balance of the receivables
as of November 30, 1999 are simple interest contracts which provide for equal
monthly payments. Approximately 8.74% of the aggregate principal balance of the
receivables as of November 30, 1999 are precomputed receivables originated in
the State of California. All of such precomputed receivables are rule of 78's
receivables. Approximately 24.46% of the aggregate principal balance of the
receivables as of November 30, 1999 represent financing of new vehicles; the
remainder of the receivables represent financing of used vehicles.
Receivables representing more than 10% of the aggregate principal balance
of the receivables as of November 30, 1999 were originated in the States of
California, Illinois and Texas. The performance of the receivables in the
aggregate could be adversely affected in particular by the development of
adverse economic conditions in such states.
S-15
<PAGE>
Composition of the Receivables by Financed Vehicle Type as of November 30, 1999
<TABLE>
<CAPTION>
Weighted
Aggregate Original Average
Number of Principal Principal Contract
Receivables Balance Balance Rate
------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C>
New Automobiles and Light-Duty
Trucks................................... 2,580 $ 50,001,329 $ 60,941,003 12.28%
Used Automobiles and Light-Duty
Trucks................................... 11,939 149,512,133 186,543,708 13.13%
New Motorcycles............................ 3 20,140 43,852 14.39%
Used Motorcycles........................... 16 161,221 214,979 13.69%
New Recreational Vehicles.................. 1 13,164 13,526 11.90%
Used Recreational Vehicles................. 80 657,783 850,395 13.95%
New Sport Utility Vehicles................. 279 6,806,433 7,967,097 12.20%
Used Sport Utility Vehicles................ 1,874 26,212,031 31,580,228 13.10%
New Vans (1)............................... 159 3,518,926 4,171,539 12.31%
Used Vans (1).............................. 822 9,869,946 12,178,193 13.28%
------ ------------ ------------
All Receivables............................ 17,753 $246,773,107 $304,504,522 12.93%
====== ============ ============
</TABLE>
<TABLE>
<CAPTION>
Weighted Weighted Percent of
Average Average Aggregate
Remaining Original Principal
Term/(2)/ Term/(3)/ Balance/(4)/
------------------- --------------- ------------------
<S> <C> <C> <C>
New Automobiles and Light-Duty
Trucks.......................................... 60.57 75.92 20.26%
Used Automobiles and Light-Duty
Trucks/(1)/..................................... 54.88 70.13 60.59
New Motorcycles................................... 27.30 72.00 0.01
Used Motorcycles.................................. 50.59 67.66 0.07
New Recreational Vehicles......................... 92.00 96.00 0.01
Used Recreational Vehicles........................ 51.18 68.94 0.27
New Sport Utility Vehicles........................ 64.68 77.79 2.76
Used Sport Utility Vehicles....................... 59.33 73.15 10.62
New Vans/(1)/..................................... 65.63 80.04 1.43
Used Vans/(1)/.................................... 55.24 69.58 4.00
------
All Receivables................................... 56.93 71.95 100.00%
======
</TABLE>
________________________
(1) References to vans include minivans and van conversions.
(2) Expressed in months. Based on stated maturity as of the cutoff date and
assuming no prepayments of the receivables.
(3) Expressed in months. Based on stated maturity as of the origination date
and assuming no prepayment of receivables.
(4) Sum may not equal 100% due to rounding.
S-16
<PAGE>
Distribution of the Receivables by Remaining Term to Stated Maturity as of
November 30, 1999
<TABLE>
<CAPTION>
Percent
Aggregate of Aggregate
Number of Principal Principal
Remaining Term Range Receivables Balance Balance/(1)/
- -------------------------------------- ------------------- --------------- ----------------
<S> <C> <C> <C>
12 months............................. 17 $ 69,379 0.03%
13 to 24 months....................... 1,048 5,039,431 2.04
25 to 36 months....................... 3,650 28,878,138 11.70
37 to 48 months....................... 4,281 50,248,934 20.36
49 to 60 months....................... 3,948 61,611,398 24.97
61 to 72 months....................... 2,689 51,946,780 21.05
73 to 84 months....................... 1,402 32,732,421 13.26
85 to 96 months....................... 718 16,246,627 6.58
------ ------------ ------
Total............................. 17,753 $246,773,107 100.00%
====== ============ ======
</TABLE>
___________________________
(1) Sum may not equal 100% due to rounding.
Geographic Distribution of the Receivables as of November 30, 1999
<TABLE>
<CAPTION>
Percent
Aggregate of Aggregate
Number of Principal Principal
State/(1)(2)/ Receivables Balance Balance/(3)/
- -------------------------------------- ------------------- --------------- ----------------
<S> <C> <C> <C>
California............................ 7,057 $ 88,295,584 35.78%
Texas................................. 5,673 78,497,223 31.81
Illinois.............................. 1,641 29,146,524 11.81
Arizona............................... 859 12,650,020 5.13
New Mexico............................ 517 8,329,420 3.38
Colorado.............................. 526 7,852,685 3.18
Oregon................................ 427 6,413,975 2.60
Nevada................................ 414 5,915,183 2.40
Other/(4)/............................ 639 9,672,493 3.92
------ ------------ ------
Total............................. 17,753 $246,773,107 100.00%
====== ============ ======
</TABLE>
____________________________
(1) Based on address of the borrower.
(2) No other state accounts for greater than 1.00% of the aggregate principal
balance of the receivables.
(3) Sum may not equal 100% due to rounding.
(4) Includes military personnel located outside the United States.
S-17
<PAGE>
Distribution of the Receivables by Financed Vehicle Model Year as of November
30, 1999
<TABLE>
<CAPTION>
Percent
Aggregate of Aggregate
Number of Principal Principal
Model Year Receivables Balance Balance/(1)/
- --------------------------------- -------------- ------------ -------------
<S> <C> <C> <C>
1988 or Prior.................... 1,523 $ 13,338,581 5.41%
1989............................. 605 4,480,123 1.82
1990............................. 745 6,136,818 2.49
1991............................. 884 7,642,554 3.10
1992............................. 1,068 10,861,009 4.40
1993............................. 1,373 14,578,860 5.91
1994............................. 1,794 21,263,718 8.62
1995............................. 2,278 31,473,128 12.75
1996............................. 2,102 31,783,114 12.88
1997............................. 2,482 41,724,908 16.91
1998............................. 1,725 33,646,929 13.63
1999............................. 1,008 25,592,674 10.37
2000............................. 166 4,250,691 1.72
------ ------------ ------
Total........................ 17,753 $246,773,107 100.00%
====== ============ ======
</TABLE>
___________
(1) Sum may not equal 100% due to rounding.
Distribution of the Receivables by Contract Rate as of November 30,
1999
<TABLE>
<CAPTION>
Percent
Aggregate of Aggregate
Number of Principal Principal
Contract Rate Range Receivables Balance Balance/(1)/
--------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C>
10.501 to 11.000%................. 506 $ 9,758,012 3.95%
11.001 to 11.500%................. 2,221 39,370,686 15.95
11.501 to 12.000%................. 2,659 29,102,053 18.95
12.001 to 12.500%................. 1,935 29,102,679 11.79
12.501 to 13.000%................. 2,588 37,962,601 15.38
13.001 to 13.500%................. 1,331 17,619,142 7.14
13.501 to 14.000%................. 1,488 18,393,552 7.45
14.001 to 14.500%................. 1,003 10,769,549 4.36
14.501 to 15.000%................. 1,266 13,171,616 5.34
15.001 to 15.500%................. 465 4,819,715 1.95
15.501 to 16.000%................. 643 5,976,667 2.42
16.001 to 16.500%................. 317 2,811,829 1.14
16.501 to 17.000%................. 356 3,281,935 1.33
17.001 to 17.500%................. 174 1,452,274 0.59
17.501 to 18.000%................. 262 1,944,696 0.79
18.001 to 18.500%................. 148 1,014,164 0.41
18.501 to 19.000%................. 129 926,370 0.38
19.001 to 19.500%................. 31 227,123 0.09
19.501 to 20.000%................. 61 382,827 0.16
20.001 to 20.500%................. 74 553,167 0.22
20.501 to 21.000%................. 76 373,641 0.15
21.001 to 21.500%................. 18 77,711 0.03
21.501 to 22.000%................. 2 14,098 0.01
------ ------------ ------
Total......................... 17,753 $246,773,107 100.00%
====== ============ ======
</TABLE>
___________
(1) Sum may not equal 100% due to rounding.
S-18
<PAGE>
Delinquency and Net Credit Losses
We have set forth below certain information about the experience of BVAC
relating to delinquencies and net losses on its fixed rate retail automobile,
light truck, motorcycle, recreational vehicle, sport utility vehicle and van
receivables serviced by BVAC. We cannot assure you that the delinquency and net
loss experience of the receivables will be comparable to that set forth in the
following tables.
Delinquency Experience/(1)/
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------------------------------------
At September 30,
1996 1997 1998 1999
------------------------ ----------------------- ---------------------- -------------------------
Number of Number of Number of Number of
Receivables Amount Receivables Amount Receivables Amount Receivables Amount
------------- -------- ------------- -------- ------------- -------- ------------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Servicing portfolio............ 23,956 $296,625 32,694 $443,028 41,152 $616,445 47,100 $747,675
------ -------- ------ -------- ------ -------- ------ --------
Delinquencies
30-59 days.................. 127 1,323 193 2,403 248 3,208 222 2,560
60-89 days.................. 67 625 128 1,576 107 1,378 71 967
90 days or more............. 51 455 49 462 32 468 40 536
------ -------- ------ -------- ------ -------- ------ --------
Total delinquencies............ 245 $ 2,403 370 $ 4,441 387 $ 5,053 333 $ 4,064
====== ======== ====== ======== ====== ======== ====== ========
Total delinquencies
as a percent of servicing
portfolio................... 1.02% 0.81% 1.13% 1.00% 0.94% 0.82% 0.71% 0.54%
</TABLE>
- ------------------------
(1) Sums may not total due to rounding.
S-19
<PAGE>
Credit Loss Experience/(1)/
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
Nine Months Ended
1996 1997 1998 September 30, 1999/(5)/
------------------------ ----------------------- ----------------------- -------------------------
Number of Number of Number of Number of
Receivables Amount Receivables Amount Receivables Amount Receivables Amount
-------------- -------- ------------- -------- ------------- -------- ------------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Avg. servicing portfolio/(2)/ 23,632 $288,361 28,765 $357,551 38,101 $546,360 43,884 $676,098
------ -------- ------ -------- ------ -------- ------ --------
Gross charge-offs 709 4,455 868 6,645 1,002 11,269 409 6,624
Recoveries/(3)/ -- 755 -- 904 -- 3,152 -- 1,661
-------- -------- -------- --------
Net losses -- 3,700 -- 5,741 -- 8,117 -- 4,963
======== ======== ======== ========
Gross charge-offs as a %
of average servicing
portfolio/(4)/ 3.00% 1.55% 3.02% 1.86% 2.63% 2.06% 1.24% 1.31%
Recoveries as a % of
gross charge-offs -- 16.96% -- 13.60% -- 27.97% -- 25.08%
Net losses as a % of average
servicing portfolio/(4)/ -- 1.28% -- 1.61% -- 1.49% -- 0.98%
</TABLE>
___________________________________
(1) There is generally no recourse to dealers under any of the receivables in
the portfolio serviced by BVAC, except to the extent of limited
representations and warranties made by dealers in connection with such
receivables.
(2) Equals the monthly arithmetic average, and includes receivables sold in
prior securitization transactions.
(3) Recoveries include recoveries on receivables previously charged off, cash
recoveries and unsold repossessed assets carried at fair market value.
(4) Variation in the size of the portfolio serviced by BVAC will affect the
percentages in "Gross charge-offs as a percentage of average servicing
portfolio" and "Net losses as a percentage of average servicing portfolio."
(5) Percentages are annualized in "Gross charge-offs as a percentage of average
servicing portfolio" and "Net losses as a percentage of average servicing
portfolio" for partial years.
S-20
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
General
Monthly Interest will be distributed to Class A and Class I
certificateholders on each distribution date to the extent of the pass-through
interest rate applicable to each offered certificate applied to the aggregate
certificate balance or notional principal amount, as applicable, for each class
of offered certificates as of the preceding distribution date or the closing
date, as applicable (after giving effect to payments of principal on such
preceding distribution date). See "The Offered Certificates -- Distributions on
the Offered Certificates" in this prospectus supplement.
Upon a full or partial prepayment on a receivable, Class A and Class I
certificateholders should receive interest for the full month of such prepayment
either:
(1) through the distribution of interest paid on the receivables;
(2) by an advance from the servicer; or
(4) by a draw on the policy.
The receivables will have different contract rates. The contract rate on a
small percentage of the receivables will not exceed the sum of:
(1) the weighted average of the pass-through interest rates on the Class A
certificates;
(2) the Class I pass-through rate;
(3) the per annum rate used to calculate the insurance premium paid to the
insurer; and
(4) the per annum rate used to calculate the monthly servicing fee.
Disproportionate rates of prepayments between receivables with higher and
lower contract rates could affect the ability of the trust to distribute Monthly
Interest to you.
The Class I Certificates
The Class I certificates are interest-only certificates. We intend the
planned amortization feature of the notional principal amount of the Class I
certificates to reduce the effect that prepayments will have on the Class I
certificates. However, the notional principal amount of the Class I
certificates may be reduced more quickly than provided in the Planned Notional
Principal Amount Schedule if the receivables prepay more quickly than 2.50% ABS.
Such prepayments in excess of the rate assumed in the Planned Notional Principal
Amount Schedule will reduce the yield of the Class I certificates. As such, the
yield to maturity on the Class I certificates will be very sensitive to the rate
of prepayments, including voluntary prepayments and prepayments due to
liquidations and repurchases. See "Risk Factors -- Prepayments May Reduce the
Yield on the Class I Certificates" and "The Offered Certificates -- The Class I
Certificates - Calculation of Notional Principal Amount" and "-- Class I Yield
Considerations" in this prospectus supplement.
THE OFFERED CERTIFICATES
The offered certificates will be issued pursuant to the pooling and
servicing agreement. You may request a copy of this agreement (without
exhibits) by contacting the servicer at the address set forth under "Reports to
Certificateholders" in this prospectus supplement. We do not claim that the
following summary is complete. For a more detailed description of the pooling
and servicing agreement, you should read the pooling and servicing agreement.
S-21
<PAGE>
Sale and Assignment of Receivables
We have described the conveyance of the receivables (1) from BVAC to the
depositor pursuant to a purchase agreement between BVAC and the depositor, and
(2) from the depositor to the trust pursuant to the pooling and servicing
agreement in the accompanying prospectus under the heading "Description of the
Transfer and Servicing Agreements -- Sale and Assignment of Receivables."
Accounts
In addition to the certificate account, the property of the trust will
include the payahead account.
Payahead Account. The servicer will establish a payahead account in the
name of the trustee on behalf of obligors on the receivables and the
certificateholders. The payahead account will initially be maintained with the
trustee. To the extent required by the pooling and servicing agreement, early
payments by or on behalf of obligors on precomputed receivables will be
deposited in the payahead account until such time as the payment becomes due.
Until such time as payments are transferred from the payahead account to the
certificate account, they will not constitute collected interest or collected
principal and will not be available for payment to certificateholders. We will
pay the interest earned on the balance in the payahead account to the servicer
each month. We will apply collections received on a precomputed receivable
during a collection period first to any overdue scheduled payment on such
receivable, then to the scheduled payment on such receivable due in such
collection period. If the amount collected on a precomputed receivable exceeds
the amount required for any overdue scheduled payment or scheduled payment, but
is insufficient to prepay the precomputed receivable in full, then generally
such excess collections will be transferred to and kept in the payahead account
until such amount may be applied either to a later scheduled payment or to
prepay such receivable in full.
Advances
With respect to each receivable delinquent more than 30 days at the end of
a collection period, the servicer will make an advance in an amount equal to 30
days of interest but only if the servicer, in its sole discretion, expects to
recover the advance from subsequent collections on the receivable. The servicer
will deposit the advance in the certificate account on or before the second
business day before the distribution date. The servicer will recover its
advance from subsequent payments by or on behalf of the respective obligor from
insurance proceeds or, upon the servicer's determination that reimbursement from
the preceding sources is unlikely, will recover its advance from any collections
made on other receivables.
Distributions on the Offered Certificates
Available Funds. The servicer will deposit in the certificate account the
aggregate principal and interest payments, including full and partial
prepayments (except certain prepayments in respect of precomputed receivables as
described above under "-- Accounts") received on all receivables with respect to
the preceding collection period. The funds available for distribution on the
next distribution date ("Available Funds") will consist of:
. all payments on the simple interest receivables received during the
related collection period;
. the scheduled payments received from obligors on precomputed
receivables:
. interest earned on funds on deposit in the certificate account;
. the net amount to be transferred from the payahead account to the
certificate account for the related distribution date;
. all advances for such collection period; and
. the purchase amount for all receivables that were purchased or
repurchased by BVAC or the servicer during the preceding collection
period.
S-22
<PAGE>
As an administrative convenience, the servicer will be permitted to make
the deposit of collections and aggregate advances and purchase amounts for or
with respect to the collection period net of distributions to be made to the
servicer with respect to the collection period (as described below). The
servicer, however, will account to the trustee and to the certificateholders as
if all deposits and distributions were made individually.
The servicer will determine the amount of funds necessary to make
distributions of Monthly Principal and Monthly Interest to the holders of the
offered certificates and to pay the monthly servicing fee to the servicer. If
there is a deficiency with respect to Monthly Interest or Monthly Principal on
any distribution date, after giving effect to payments of the monthly servicing
fee and permitted reimbursements of outstanding advances to the servicer on such
distribution date, or if there is a deficiency with respect to the monthly
servicing fee, the servicer will notify the trustee of the deficiency, and the
trustee will draw on the policy, up to the Policy Amount, to pay Monthly
Interest, Monthly Principal, and the monthly servicing fee.
Distributions. On each distribution date, the trustee will use the
Available Funds (plus any amounts drawn on the policy) to make the following
distributions in the following priority:
(a) without duplication, an amount equal to the sum of (1) the amount of
outstanding advances in respect of receivables that became defaulted
receivables during the prior collection period plus (2) the amount of
outstanding advances in respect of receivables that the servicer
determines to be unrecoverable, to the servicer;
(b) the monthly servicing fee, including any overdue monthly servicing
fee, to the servicer, to the extent not previously distributed to the
servicer;
(c) Monthly Interest (including any overdue amounts) to the Class A and
Class I certificateholders;
(d) Monthly Principal (including any overdue amounts) to the Class A
certificateholders in accordance with the Principal Distribution
Sequence (described below);
(e) the insurance premium including any overdue insurance premium plus any
accrued interest to the insurer;
(f) the amount of recoveries of advances (to the extent such recoveries
have not previously been reimbursed to the servicer pursuant to clause
(a) above), to the servicer;
(g) the aggregate amount of any unreimbursed draws on the policy payable
to the insurer under the insurance and reimbursement agreement, for
Monthly Interest, Monthly Principal and any other amounts owing to the
insurer under the insurance and reimbursement agreement plus accrued
interest thereon; and
(h) the excess, if any, to the Class IC certificateholder.
Payments due the insurer on a distribution date as described in clause (g)
above will be payable from Available Funds, after distribution of the amounts
described in clauses (a) through and including (f) above.
Any amounts distributed to the Class IC certificateholder will no longer be
property of the trust and will not be available to make payments to you.
Definitions. The following defined terms are used in this "Distributions
on the Offered Certificates" section.
"Monthly Principal" for any distribution date will equal the sum of the
following:
1. the amount by which the aggregate principal balance of the receivables
pool declined during the related collection period; and
2. the additional amount, if any, which is necessary to reduce the
certificate balance of a class of Class A certificates to zero on its
final maturity date.
S-23
<PAGE>
If there is a shortfall in Available Funds on any distribution date, the
amount of Monthly Principal otherwise distributable to Class A
certificateholders will be reduced by the lesser of: (1) the amount of such
shortfall or (2) the amount, if any, by which the aggregate outstanding
certificate balance of the Class A certificates as of the preceding distribution
date (after giving effect to all distributions of principal on such date) was
less than the aggregate principal balance of the receivables pool as of the end
of the related collection period. For the purpose of determining Monthly
Principal, the unpaid principal balance of a defaulted receivable or a
receivable required to be purchased or repurchased by BVAC or the servicer will
be zero as of the end of the collection period in which such receivable became a
defaulted receivable or a purchased receivable. In no event will Monthly
Principal exceed the aggregate outstanding certificate balance of the Class A
certificates.
A defaulted receivable for any collection period is a receivable as to
which the earliest to occur of any of the following has occurred: (1) any
payment, or part thereof, is 120 days or more delinquent as of the last day of
such collection period; (2) the financed vehicle that secures the receivable has
been repossessed and liquidated; or (3) the receivable has been determined to be
uncollectable in accordance with the servicer's customary practices on or prior
to the last day of such collection period; provided, however, that any
receivable which the seller or the servicer is obligated to repurchase or
purchase pursuant to the pooling and servicing agreement shall be deemed not to
be a defaulted receivable unless not repurchased within the time period
provided for in the pooling and servicing agreement.
"Monthly Interest" for any distribution date will equal the sum of Class A-
1 Monthly Interest, Class A-2 Monthly Interest, Class A-3 Monthly Interest Class
A-4 and Class I Monthly Interest.
"Class A-1 Monthly Interest" means for any distribution date, the product
of the following:
(a) one-three hundred sixtieth (1/360th) of the Class A-1 interest
rate,
(b) the actual number of days from the previous distribution date or,
in the case of the first distribution date, from the closing date
through the day before the related distribution date, and
(c) the aggregate certificate balance of the Class A-1 certificates
as of the immediately preceding distribution date or, in the case
of the first distribution date, the closing date (after giving
effect to any distribution of principal made on such distribution
date).
"Class A-2 Monthly Interest" means for any distribution date, the product
of the following:
(a) one-twelfth of the Class A-2 interest rate, and
(b) the aggregate certificate balance of the Class A-2 certificates
as of the immediately preceding distribution date or, in the case
of the first distribution date, the closing date (after giving
effect to any distribution of principal made on such distribution
date).
"Class A-3 Monthly Interest" means for any distribution date, the product
of the following:
(a) one-twelfth of the Class A-3 interest rate, and
(b) the aggregate certificate balance of the Class A-3 certificates
as of the immediately preceding distribution date or, in the case
of the first distribution date, the closing date (after giving
effect to any distribution of principal made on such distribution
date).
"Class A-4 Monthly Interest" means for any distribution date, the product
of the following:
(a) one-twelfth of the Class A-4 interest rate, and
(b) the aggregate certificate balance of the Class A-4 certificates
as of the immediately preceding distribution date or, in the case
of the first distribution date, the closing date (after giving
effect to any distribution of principal made on such distribution
date).
S-24
<PAGE>
"Class I Monthly Interest" means for any distribution date, the product of
the following:
(a) one-twelfth of the Class I pass-through rate; and
(b) the notional principal amount of the Class I certificates as of
the immediately preceding distribution date or, in the case of
the first distribution date, the closing date (after giving
effect to any distribution of Monthly Principal made on such
distribution date);
provided, however, that after the Class A-4 Final Scheduled Distribution Date,
the Class I Monthly Interest shall be zero.
"Principal Distribution Sequence" means the order in which Monthly
Principal will be distributed among the Class A certificateholders. The order
of distribution of Monthly Principal is:
(1) to the Class A-1 certificateholders until the aggregate certificate
balance of the Class A-1 certificates has been reduced to zero;
(2) to the Class A-2 certificateholders until the aggregate certificate
balance of the Class A-2 certificates has been reduced to zero;
(3) to the Class A-3 certificateholders until the aggregate certificate
balance of the Class A-3 certificates has been reduced to zero; and
(4) to the Class A-4 certificateholders until the aggregate certificate
balance of the Class A-4 certificates has been reduced to zero.
However, if the amount of Available Funds (together with amounts drawn on the
policy) are not sufficient to pay the required distribution of Monthly Principal
to Class A certificateholders in full on any distribution date, the amount of
such funds available to pay Monthly Principal to Class A certificateholders will
be distributed pro rata to the Class A certificateholders based upon the
relative aggregate certificate balance of each class of Class A certificates.
S-25
<PAGE>
Example of Distribution Date Activities. The following chart sets forth
an example of the application of the foregoing provisions to the first
distribution date on January 18, 2000:
December 1 - December 31, 1999....... Collection Period. The collection period
for each distribution date is the
calendar month preceding the
distribution date. The servicer receives
monthly payments, prepayments, and other
proceeds in respect of the receivables
and deposits them in the certificate
account. The servicer may deduct the
monthly servicing fee from such
deposits.
January 10, 2000..................... Determination Date. The determination
date is the tenth calendar day of the
month, or if such day is not a business
day, the first business day thereafter.
On or before this date, the servicer
delivers the servicer's certificate to
the trustee setting forth the amounts to
be distributed on the distribution date
and the amounts of any deficiencies. If
necessary, the trustee notifies the
insurer of any draws in respect of the
policy.
December 31, 1999.................... Record Date. The record date is the last
day of the collection period before the
distribution date. Payments on the
distribution date are made to
certificateholders of record at the
close of business on this date.
January 18, 2000..................... Distribution Date. The distribution date
is the fifteenth calendar day of the
month, or if such day is not a business
day, the first business day thereafter.
The trustee withdraws funds from the
certificate account and, as necessary,
then draws on the policy to pay Monthly
Interest and Monthly Principal to the
Class A and Class I certificateholders,
pays the monthly servicing fee to the
extent not previously paid, pays the
insurance premium and all other amounts
owing to the insurer.
The Class I Certificates -- Calculation of Notional Principal Amount
The Class I Certificates are entitled to receive interest at the Class I
pass-through rate on the notional principal amount of the Class I Certificates.
Solely for the purpose of calculating the amount payable to the Class I
certificateholders, the aggregate Class A certificate balance will be divided
into two notional principal components, the "PAC Component" and the "Companion
Component." The notional principal amount will be the same amount as the PAC
Component, originally $184,645,582. The sum of the PAC Component and the
Companion Component at any time will equal the then aggregate unpaid Class A
certificate balance at such time.
The pooling and servicing agreement establishes the Planned Notional
Principal Amount Schedule under which principal will be allocated to the PAC
Component and the Companion Component. On each distribution date, the amount of
Monthly Principal allocated to Class A certificateholders will determine the
reduction in the notional principal amount as follows:
(1) to the PAC Component up to the amount necessary to reduce the PAC
Component to the amount specified in the Planned Notional Principal
Amount Schedule for such Distribution Date;
(2) to the Companion Component until the balance thereof is reduced to
zero; and
S-26
<PAGE>
(3) to the PAC Component, without regard to the planned notional principal
amount for such distribution date.
As the PAC Component is reduced, the notional principal amount and payments
to the Class I certificateholders will also be reduced. The Class I
certificates are not entitled to receive any principal payments.
Planned Notional Principal Amount Schedule
<TABLE>
<CAPTION>
Planned Notional
Distribution Date in Principal Amount
-------------------------------------------------- ----------------
<S> <C>
Initial........................................... $184,645,581.57
January, 2000..................................... $175,917,043.08
February, 2000.................................... $167,311,480.03
March, 2000....................................... $158,831,106.62
April, 2000....................................... $150,478,170.76
May, 2000......................................... $142,254,954.54
June, 2000........................................ $134,163,774.71
July, 2000........................................ $126,206,983.19
August, 2000...................................... $118,386,967.50
September, 2000................................... $110,706,151.33
October, 2000..................................... $103,166,994.99
November, 2000.................................... $ 95,771,995.95
December, 2000.................................... $ 88,523,689.35
January, 2001..................................... $ 81,424,648.52
February, 2001.................................... $ 74,477,485.55
March, 2001....................................... $ 67,684,851.75
April, 2001....................................... $ 61,603,743.70
May, 2001......................................... $ 55,811,801.62
June, 2001........................................ $ 50,276,799.79
July, 2001........................................ $ 45,003,594.00
August, 2001...................................... $ 39,963,861.00
September, 2001................................... $ 35,882,550.94
October, 2001 .................................... $ 31,981,471.91
November, 2001.................................... $ 28,243,583.93
December, 2001.................................... $ 24,671,129.41
January, 2002 .................................... $ 21,248,879.65
February, 2002.................................... $ 18,594,638.17
March, 2002....................................... $ 16,053,196.63
April, 2002....................................... $ 13,615,374.10
May, 2002......................................... $ 11,281,809.56
June, 2002........................................ $ 9,044,262.72
July, 2002........................................ $ 7,476,267.04
August, 2002...................................... $ 5,975,037.60
September, 2002................................... $ 4,536,010.42
October, 2002..................................... $ 3,158,766.09
November, 2002.................................... $ 1,839,252.61
December, 2002.................................... $ 1,198,036.28
January, 2003..................................... $ 585,470.21
February, 2003.................................... $ 0.00
</TABLE>
The Class I certificates will not be entitled to any distribution after the
notional principal amount has been reduced to zero.
S-27
<PAGE>
Class I Yield Considerations
We intend the planned amortization feature of the Class I certificates to
reduce the uncertainty caused by prepayments of the receivables and the effect
of prepayments to the Class I certificates. However, the yield to maturity of
the Class I certificates will still be very sensitive to the prepayment
experience of the receivables, including voluntary prepayments and prepayments
due to liquidations and repurchases. You should note that you will not be
entitled to any distributions on your Class I certificates after the notional
principal amount of the Class I certificates has been reduced to zero and that
receivables may be repurchased due to breaches of representations. See "Risk
Factors -- Prepayments May Reduce the Yield on the Class I Certificates" in this
prospectus supplement.
The following tables illustrate the significant effect that prepayments on
the receivables have upon the yield to maturity of the Class I certificates.
The first table assumes that the receivables have been aggregated into seven
hypothetical pools having the characteristics described therein and that the
level scheduled monthly payment for each of the seven pools (which is based on
its principal balance, weighted average contract rate, weighted average
remaining term as of November 30, 1999 and its weighted average original term)
will be such that such pool will be fully amortized by the end of its weighted
average remaining term. Based on such hypothetical pools, the second table
shows the approximate hypothetical pre-tax yields to maturity of the Class I
certificates, stated on a corporate bond equivalent basis, under five different
prepayment assumptions based on the assumed purchase price and the ABS
prepayment model described below.
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Original Term to Remaining Term to
November 30, 1999 Weighted Average Maturity (in Maturity (in
Pool Principal Balance Contract Rate Months) Months)
- -------- -------------------- -------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
1 $37,630,335.95 12.6047% 76 74
2 $39,587,335.73 12.5638% 75 70
3 $33,774,954.71 12.7733% 73 63
4 $33,771,880.63 12.8122% 70 55
5 $34,833,921.73 12.9959% 69 49
6 $38,426,456.18 13.3150% 69 44
7 $28,748,222.30 13.5653% 72 40
</TABLE>
For purposes of the table, it is also assumed that:
(1) the purchase price of the Class I certificates is as set forth below;
(2) the receivables prepay monthly at the specified percentages of ABS as
set forth in the table below;
(3) prepayments representing prepayments in full of individual receivables
are received on the last day of the month and include a full month's
interest;
(4) the closing date for the offered certificates is December 14, 1999;
(5) distributions on the offered certificates are made, in cash,
commencing on January 15, 2000, and on the fifteenth day of each month
thereafter;
(6) no defaults or delinquencies in the payment of the receivables are
experienced; and
(7) no receivable is repurchased for any breach of representation or
warranty or for any other reason.
S-28
<PAGE>
Sensitivity of the Yield on the Class I Certificates to Prepayments
<TABLE>
<CAPTION>
Price(1) 1.0% ABS 1.4% ABS 1.6% ABS 2.0% ABS 2.5% ABS 3.0% ABS
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1.52% 33.93% 15.03% 7.25% 7.25% 7.25% -16.42%
</TABLE>
___________________
(1) Expressed as a percentage of the original notional principal amount.
Based on the assumptions described above and assuming a purchase price of
1.52% at approximately 2.69% ABS, the pre-tax yield to maturity of the Class I
certificates would be approximately 0%.
We do not expect that the receivables will prepay at a constant rate until
maturity. In addition, we do not expect that the receivables will prepay at the
same rate. The foregoing table assumes that each receivable bears interest at
its specified contract rate, has the same remaining amortization term, and
prepays at the same rate. In fact, the receivables will prepay at different
rates and have different terms.
The yields set forth in the preceding table were calculated by determining
the monthly discount rates which, when applied to the assumed stream of cash
flows to be paid on the Class I certificates, would cause the discounted present
value of such assumed cash flows to equal the assumed purchase price of such
Class I certificates. Then we convert such monthly rates to corporate bond
equivalent rates. Our calculations do not take into account variations that may
occur in the interest rates at which you may be able to reinvest funds received
as distributions on the Class I certificates and we do not purport to reflect
the return on any investment in the Class I certificates when such reinvestment
rates are considered.
The receivables will not necessarily have the characteristics assumed above
and we cannot assure you that:
(1) the receivables will prepay at any of the rates shown in the table or
at any other particular rate or will prepay proportionately;
(2) the pre-tax yield on the Class I certificates will correspond to any
of the pre-tax yields shown above; or
(3) the aggregate purchase price of the Class I certificates will be equal
to the assumed purchase price.
Because the receivables will include receivables that have remaining terms
to stated maturity shorter or longer than those assumed and contract rates
higher or lower than those assumed, the pre-tax yield on the Class I
certificates will differ from those set forth above, even if all of the
receivables prepay at the indicated constant prepayment rates.
The ABS prepayment model was used in the preceding table to model the rate
of prepayment each month on the receivables. For a description of the ABS
model, see "Weighted Average Life of the Class A Certificates" in this
prospectus supplement.
Distributions on the Class IC Certificate
The Class IC certificate will be initially issued to the depositor and will
entitle the depositor to receive all funds after payment of all amounts owed to
the Class A and Class I certificateholders, the servicer and the insurer. On or
after the termination of the trust, the Class IC certificateholder is entitled
to receive any amounts remaining in the trust (only after all required payments
to the insurer are made) after the payment of expenses and payments to the Class
A and Class I certificateholders. See "-- Accounts" and "-- Distributions on
the Offered Certificates" above.
The Policy
On or before the closing date, the depositor, the trust, BVAC, in its
individual capacity and as servicer, and the insurer will enter into the
insurance and reimbursement agreement pursuant to which the insurer will issue
an unconditional and irrevocable insurance policy. Subject to the terms of the
policy, the insurer will guarantee the payment of the monthly servicing fee,
Monthly Interest and Monthly Principal up to the Policy Amount. Under the terms
of the pooling and servicing agreement, the trustee will be authorized to draw
on the policy to pay a deficiency
S-29
<PAGE>
in the monthly servicing fee, Monthly Interest or Monthly Principal, and credit
the certificate account for such draws as described above under "--
Distributions on the Offered Certificates."
The maximum amount that may be drawn under the policy on any distribution
date is limited to the policy amount for such distribution date. The policy
amount with respect to any distribution date will equal:
the sum of:
(1) the monthly servicing fee;
(2) Monthly Interest;
(3) the lesser of (a) the outstanding aggregate certificate balance
of all classes of Class A certificates on such distribution date
(after giving effect to any distributions of Available Funds on
such distribution date) and (b) the initial aggregate certificate
balances of the Class A certificates minus all amounts drawn on
the policy with respect to principal.
The policy will also cover any amount paid or required to be paid by the
trust to Class A and Class I certificateholders that is sought to be recovered
as a voidable preference by a trustee in bankruptcy of BVAC or the depositor
pursuant to the United States Bankruptcy Code (11 U.S.C.), as amended from time
to time, in accordance with a final nonappealable order of a court having
competent jurisdiction.
The insurer will be entitled to receive the insurance premium and certain
other amounts on each distribution date as described under "-- Distributions on
the Offered Certificates." Generally, the insurance premium for a distribution
date will be the product of one three hundred sixteenth (1/360th) of the policy
per annum fee rate (as set forth in the insurance and reimbursement agreement),
the actual days elapsed and the aggregate certificate balances of the Class A
certificates as of the preceding distribution date (after giving effect to all
payments of principal on such date). The insurer will not be entitled to
reimbursement of any amounts from the Class A and Class I certificateholders.
The insurer's obligation under the policy is irrevocable and unconditional. The
insurer will have no obligation to the certificateholders or the trustee other
than its obligations under the policy.
If there has been a default under the policy, the trust will depend solely
on current collections on the receivables to make payments of principal and
interest on the offered certificates. In addition, because the market value of
motor vehicles generally declines with age and because of difficulties that may
be encountered in enforcing motor vehicle contracts as described in the
accompanying prospectus under "Certain Legal Aspects of the Receivables," the
servicer may not recover the entire amount due on such receivables in the event
of a repossession and resale of a financed vehicle securing a receivable in
default. In such event, the Class A and Class I certificateholders may suffer a
corresponding loss. Any such losses by the Class A and Class I
certificateholders will be borne pro rata based upon the relative certificate
balances of the outstanding classes of Class A certificates or the notional
principal amount, as applicable. See "-- Distributions on the Offered
Certificates" above.
Rights of the Insurer upon Servicer Default, Amendment or Waiver
Upon the occurrence of an event of default by the servicer under the
pooling and servicing agreement, the insurer, or the trustee upon the consent of
the insurer, will be entitled to appoint a successor servicer. In addition to
the events constituting an event of default as described in the accompanying
prospectus, the pooling and servicing agreement will also permit the insurer to
appoint a successor servicer and to redirect payments made under the receivables
to the trustee upon the occurrence of certain additional events involving a
failure of performance by the servicer or a material misrepresentation made by
the servicer under the insurance and reimbursement agreement.
The pooling and servicing agreement cannot be amended or any provisions
thereof waived without the consent of the insurer if such amendment or waiver
would have a materially adverse effect upon the rights of the insurer.
S-30
<PAGE>
THE INSURER
MBIA
MBIA Insurance Corporation ("MBIA"), the insurer, is the principal
operating subsidiary of MBIA Inc., a New York Stock Exchange listed company (the
"Company"). The Company is not obligated to pay the debts of or claims against
MBIA. MBIA is domiciled in the State of New York and licensed to do business in
and subject to regulation under the laws of all 50 states, the District of
Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, the Virgin Islands of the United States and the Territory of
Guam. MBIA has two European branches, one in the Republic of France and the
other in the Kingdom of Spain. New York has laws prescribing minimum capital
requirements, limiting classes and concentrations of investments and requiring
the approval of policy rates and forms. State laws also regulate the amount of
both the aggregate and individual risks that may be insured, the payment of
dividends by MBIA, changes in control and transactions among affiliates.
Additionally, MBIA is required to maintain contingency reserves on its
liabilities in certain amounts and for certain periods of time.
MBIA does not accept any responsibility for the accuracy or completeness of
this prospectus supplement or any information or disclosure contained in, or
omitted from, this prospectus supplement, other than with respect to the
accuracy of the information regarding the policy and MBIA set forth under the
heading "The Insurer." Additionally, MBIA makes no representation regarding the
offered certificates or the advisability of investing in the offered
certificates.
The policy issued by MBIA as insurer is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
MBIA Financial Information
The consolidated financial statements of MBIA, a wholly owned subsidiary of
the Company, and its subsidiaries as of December 31, 1998 and December 31, 1997
and for each of the three years in the period ended December 31, 1998, prepared
in accordance with generally accepted accounting principles ("GAAP"), included
in the Annual Report on Form 10-K of the Company for the year ended December 31,
1998, and the consolidated financial statements of MBIA and its subsidiaries as
of September 30, 1999 and for the nine month periods ended September 30, 1999
and September 30, 1998 included in the Quarterly Report on Form 10-Q of the
Company for the period ended September 30, 1999, are hereby incorporated by
reference into this prospectus supplement and shall be deemed to be a part of
this prospectus supplement. Any statement contained in a document incorporated
by reference in this prospectus supplement shall be modified or superseded for
purposes of this prospectus supplement to the extent that a statement contained
in this prospectus supplement or in any other subsequently filed document which
also is incorporated by reference in this prospectus supplement modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
prospectus supplement.
All financial statements of MBIA and its subsidiaries included in documents
filed by the Company pursuant to 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 supplement and prior to the termination of the offering of the
offered certificates shall be deemed to be incorporated by reference into this
prospectus supplement and to be a part of this prospectus supplement from the
respective dates of filing such documents.
S-31
<PAGE>
The tables below present selected financial information of MBIA determined
in accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities ("SAP") and GAAP:
SAP
--------------------------------
December 31, September 30,
1998 1999
---------------- --------------
(Audited) (Unaudited)
(in millions)
Admitted Assets.............. $6,521 $6,930
Liabilities.................. 4,231 4,571
Capital and Surplus.......... 2,290 2,359
GAAP
--------------------------------
December 31, September 30,
1998 1999
---------------- --------------
(Audited) (Unaudited)
(in millions)
Assets....................... $7,488 $7,422
Liabilities.................. 3,211 3,234
Shareholder's Equity......... 4,277 4,188
Where You Can Obtain Additional Information About MBIA
Copies of the financial statements of MBIA incorporated by reference in
this prospectus supplement and copies of MBIA's 1998 year-end audited financial
statements prepared in accordance with statutory accounting practices are
available, without charge, from MBIA. The address of MBIA is 113 King Street,
Armonk, New York 10504. The telephone number of MBIA is (914) 273-4545.
Year 2000 Readiness Disclosure
The Company is actively managing a high-priority Year 2000 ("Y2K") program
addressing the issue of whether its computer systems can correctly distinguish
between the years 1900 and 2000. The Company has established an independent Y2K
testing lab in its Armonk office, with a committee of business unit managers
overseeing the project. The Company has a budget of $1.13 million for its 1998-
2000 Y2K efforts. As of September 30, 1999, the Company has spent $949,000 on
the project. A recent review of efforts at certain subsidiaries has indicated
the need to spend an additional $1.03 million this year on remediation. As of
September 30, 1999, the Company has spent $568,000 of this additional amount.
However, this increase will not have a material effect on the Company's
financial results.
The Company has initiated a comprehensive Y2K plan which includes the
following phases: assessment -- completed in the second quarter of 1998;
remediation -- completed in the fourth quarter of 1998; testing -- completed in
the second quarter of 1999; and contingency planning -- completed in the third
quarter of 1999, subject to final approval by senior management and any need for
revision that might arise in the future. This plan covers "mission-critical"
internally developed systems, vendor software, hardware and certain third-party
entities through which we conduct our business. Testing to date indicates that
functions critical to the financial guarantee business, both domestic and
international, were Y2K-ready as of December 31, 1998. Additional testing is
being carried out throughout 1999.
Financial Strength Ratings of MBIA
Moody's Investors Service, Inc. rates the financial strength of MBIA
"Aaa."
S-32
<PAGE>
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. rates the financial strength of MBIA "AAA."
Fitch IBCA, Inc. (formerly known as Fitch Investors Service, L.P.) rates
the financial strength of MBIA "AAA."
Each rating of MBIA should be evaluated independently. The ratings reflect
the respective rating agency's current assessment of the creditworthiness of
MBIA and its ability to pay claims on its policies of insurance. Any further
explanation as to the significance of the above ratings may be obtained only
from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the offered
certificates, and such ratings may be subject to revision or withdrawal at any
time by the rating agencies. Any downward revision or withdrawal of any of the
above ratings may have an adverse effect on the market price of the offered
certificates. MBIA does not guaranty the market price of the offered
certificates nor does it guaranty that the ratings on the offered certificates
will not be revised or withdrawn.
REPORTS TO CERTIFICATEHOLDERS
Unless and until definitive certificates are issued (which will occur only
under the limited circumstances described in the accompanying prospectus),
Bankers Trust Company, as trustee, will provide monthly and annual statements
concerning the trust and the offered certificates to Cede & Co., the nominee of
The Depository Trust Company, as registered holder of the offered certificates.
Such statements will not constitute financial statements prepared in accordance
with generally accepted accounting principles. A copy of the most recent
monthly or annual statement concerning the trust and the offered certificates
may be obtained by contacting the servicer at Bay View Acceptance Corporation,
818 Oak Park Road, Covina, California 91724 (telephone (800) 524-9292).
ERISA CONSIDERATIONS
Subject to the considerations set forth below and under "ERISA
Considerations" in the accompanying prospectus, the offered certificates may be
purchased by an employee benefit plan or an individual retirement account (a
"Benefit Plan") subject to ERISA or Section 4975 of the Code. A fiduciary of a
Benefit Plan must determine that the purchase of an offered certificate is
consistent with its fiduciary duties under ERISA and does not result in a
nonexempt prohibited transaction as defined in Section 406 of ERISA or Section
4975 of the Code. Section 406 of ERISA prohibits parties in interest or
disqualified persons ("Parties in Interest") with respect to a Benefit Plan from
engaging in certain transactions (including loans) involving a Benefit Plan and
its assets unless a statutory or administrative exemption applies to the
transaction. Section 4975 of the Code imposes certain excise taxes (or, in some
cases, a civil penalty may be assessed pursuant to section 502(i) of ERISA) on
Parties in Interest which engage in non-exempt prohibited transactions.
For additional information regarding treatment of the certificates under
ERISA, see "ERISA Considerations" in the accompanying prospectus.
UNDERWRITING
Under the terms and subject to the conditions set forth in the underwriting
agreement for the sale of the offered certificates, dated December 9, 1999, the
underwriters, PaineWebber Incorporated and Morgan Stanley & Co. Incorporated,
have agreed, subject to the terms and conditions set forth therein, to purchase
all the offered certificates.
The underwriters propose to offer part of the offered certificates directly
to you at the prices set forth on the cover page of this prospectus supplement
and part to certain dealers at a price that represents a concession not in
excess of .12% of the denominations of the Class A-1 certificates, .12% of the
denominations of the Class A-2 certificates, .12% of the denominations of the
Class A-3 certificates, .12% of the denominations of the Class A-4 certificates
and .30% of the gross proceeds of the Class I certificates. The underwriters
may allow and such dealers may reallow a concession not in excess of .08% of the
denominations of the Class A-l certificates, .08% of the denominations of the
Class A-2 certificates, .08% of the denominations of the Class A-3 certificates,
.08% of the denominations of the Class A-4 certificates and .20% of the gross
proceeds of the Class I certificates.
S-33
<PAGE>
The depositor and BVAC have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
The underwriters tell us that they intend to make a market in the offered
certificates, as permitted by applicable laws and regulations. However, the
underwriters are not obligated to make a market in the offered certificates and
any such market-making may be discontinued at any time at the sole discretion of
the underwriters. Accordingly, we give no assurances regarding the liquidity
of, or trading markets for, the offered certificates.
In connection with this offering, the underwriters may over-allot or effect
transactions which stabilize or maintain the market price of the offered
certificates at a level above that which might otherwise prevail in the open
market. Such stabilizing, if commenced, may be discontinued at any time.
In the ordinary course of their businesses, the underwriters and their
respective affiliates have engaged and may in the future engage in investment
banking, commercial banking and other advisory or commercial relationships with
the depositor, BVAC and their affiliates.
We will receive proceeds of $249,660,334 from the sale of the offered
certificates, before deducting our net expenses estimated to be $250,000.
LEGAL OPINIONS
Certain legal matters relating to the offered certificates will be passed
upon for the depositor and the trust by Silver, Freedman & Taff, L.L.P., and for
the underwriters by Cadwalader, Wickersham & Taft. Certain federal income tax
consequences with respect to the offered certificates will be passed upon for
the trust by Silver, Freedman & Taff, L.L.P.
EXPERTS
The consolidated balance sheets of MBIA Insurance Corporation and
subsidiaries as of December 31, 1998 and December 31, 1997 and the related
consolidated statements of income, changes in shareholder's equity, and cash
flows for each of the three years in the period ended December 31, 1998,
incorporated by reference in this prospectus supplement, have been incorporated
into this prospectus supplement in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
S-34
<PAGE>
INDEX OF PRINCIPAL TERMS
We have listed below the terms used in this prospectus supplement and the
pages where definitions of the terms can be found.
Available Funds........................................................ S-22
Bank................................................................... S-5
Benefit Plan........................................................... S-34
BVAC................................................................... S-5
BVC.................................................................... S-8
BVCC................................................................... S-5
BVFC................................................................... S-14
CTL.................................................................... S-8
Class A-1 Monthly Interest............................................. S-24
Class A-2 Monthly Interest............................................. S-24
Class A-3 Monthly Interest............................................. S-24
Class A-4 Monthly Interest............................................. S-25
Class I Monthly Interest............................................... S-25
Closing Date........................................................... S-5
Collection Period...................................................... S-26
Company................................................................ S-32
Cutoff Date............................................................ S-5
Determination Date..................................................... S-26
Distribution Date...................................................... S-26
ERISA.................................................................. S-10
GAAP................................................................... S-32
MBIA................................................................... S-32
Monthly Interest....................................................... S-24
Monthly Principal...................................................... S-23
Named Lienholders...................................................... S-8
Offered Certificates................................................... S-5
Parties in Interest.................................................... S-34
Planned Notional Principal Amount Schedule............................. S-7
Policy Amount.......................................................... S-9
Principal Distribution Sequence........................................ S-25
Record Date............................................................ S-26
SAP.................................................................... S-33
Ultra.................................................................. S-8
Y2K.................................................................... S-33
S-35
<PAGE>
PROSPECTUS
BAY VIEW AUTO TRUSTS
ASSET BACKED CERTIFICATES
----------------
BAY VIEW SECURITIZATION CORPORATION
DEPOSITOR
CALIFORNIA THRIFT & LOAN
SERVICER
The asset backed certificates described herein (the "Certificates") may be
sold from time to time in one or more series (each, a "Series"), in amounts,
at prices and on terms to be determined at the time of sale and to be set
forth in a supplement to this Prospectus (a "Prospectus Supplement"). Each
Series of Certificates will be issued by a trust (each, a "Trust") to be
formed with respect to such Series and will include one or more classes of
Certificates. The property of each Trust will include a pool of motor vehicle
installment sale or installment loan contracts secured by new and used
automobiles, light trucks, recreational vehicles, motorcycles and vans (the
"Receivables"), certain monies received thereunder after the applicable cutoff
date, security interests in the vehicles financed thereby and certain other
property, as more fully described herein and as more specifically described in
the related Prospectus Supplement. For a description of the types of property
that may be included in the Trusts, see "The Trusts". If so specified in the
related Prospectus Supplement, the property of a Trust will include monies on
deposit in a trust account, which will be used to purchase additional
Receivables after the related closing date. California Thrift & Loan will act
as servicer (in such capacity, the "Servicer") of the Receivables for each
Trust. Each class of Certificates of any Series will represent the right to
receive a specified amount of payments of principal and interest on the
related Receivables, at the rates, on the dates and in the manner described
herein and to the extent specified in the related Prospectus Supplement. If so
provided in the related Prospectus Supplement, a Series of Certificates may
include one or more classes of Certificates entitled to interest distributions
with disproportionate, nominal or no distributions in respect of principal, or
to principal distributions with disproportionate, nominal or no distributions
in respect of interest. As more fully described herein and in the related
Prospectus Supplement, distributions on any class of Certificates may be
senior or subordinate to distributions on one or more other classes of
Certificates of the same Series.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS" ON PAGE 11 OF THIS PROSPECTUS AND IN THE RELATED PROSPECTUS
SUPPLEMENT.
----------------
THE CERTIFICATES OF A SERIES WILL REPRESENT BENEFICIAL INTERESTS IN THE RELATED
TRUST ONLY, AND WILL NOT REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT
GUARANTEED OR INSURED BY, BAY VIEW SECURITIZATION CORPORATION, ANY AFFILIATE
THEREOF OR ANY GOVERNMENTAL INSTRUMENTALITY.
THESE CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of Certificates of any Series unless accompanied by the
related Prospectus Supplement.
----------------
January 24, 1997
<PAGE>
AVAILABLE INFORMATION
The Depositor, as originator of the Trusts, has filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement on Form S-
3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended, with respect to the
Certificates being offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement, which is available for inspection without charge at the public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and the regional offices of the Commission at
5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036-3648, and
Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of such
information can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, the Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding the Depositor's electronic filings with the Commission. The address
of the Commission's Web site is "http://www.sec.gov".
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and 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 Supplement and Prospectus, the Depositor or
such Underwriter will promptly deliver, or cause to be delivered, without
charge, to such investor a paper copy of the Prospectus Supplement and
Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Servicer or the Depositor on behalf of the Trust
referred to in the accompanying Prospectus Supplement with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), after the date of this Prospectus
and prior to the termination of the offering of the Certificates offered by
such Trust shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the dates of filing of such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein (or in the accompanying Prospectus Supplement) or in any subsequently
filed document that also is or is deemed to be incorporated by reference
herein 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 Servicer on behalf of any Trust will provide without charge to each
person to whom a copy of this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents incorporated
herein by reference. Requests to the Servicer for such copies should be
addressed to California Thrift & Loan, 818 Oakpark Road, Covina, California
91724, (800) 524-9292.
2
<PAGE>
SUMMARY OF TERMS
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and by reference to the
information with respect to each Series of Certificates contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Certificates. Certain capitalized terms used in this
summary are defined elsewhere in this Prospectus in the "Index of Principal
Terms" on page 52 of this Prospectus.
Issuer........................ With respect to any Series of Certificates, a
Trust formed pursuant to a pooling and
servicing agreement (each, a "Pooling and
Servicing Agreement") among the Depositor, the
Servicer and the Trustee for such Trust.
Depositor..................... Bay View Securitization Corporation, a Delaware
corporation having its principal office and
place of business in San Mateo, California (the
"Depositor"). The Depositor's principal
executive offices are located at 2121 South El
Camino Real, San Mateo, California 94403, and
its telephone number is (415) 573-7300.
Servicer...................... California Thrift & Loan, a California
corporation havingits principal office and
place of business in Santa Barbara,California
(in its capacity as servicer, the "Servicer",
otherwise "CTL") The Servicer's operations are
located at 818 Oakpark Road, Covina, California
91724, and its telephone number is (800) 524-
9292.
Trustee....................... With respect to each Trust, the trustee
specified in the related Prospectus Supplement
(the "Trustee").
Securities Offered............ Each Series of asset backed securities issued
by a Trust will consist of one or more classes
of Certificates. Each class of Certificates of
a Series will be issued pursuant to the related
Pooling and Servicing Agreement. The related
Prospectus Supplement will specify which class
or classes of Certificates of the related
Series are being offered thereby.
Each class of Certificates will have a stated
certificate balance (the "Class Certificate
Balance") and will accrue interest on such
Class Certificate Balance at a specified rate
(with respect to each class of Certificates,
the "Pass-Through Rate"). If so specified in
the related Prospectus Supplement, one or more
classes of Certificates ("Strip Certificates")
may be entitled to (i) interest distributions
with disproportionate, nominal or no principal
distributions or (ii) principal distributions
with disproportionate, nominal or no interest
distributions. See "Description of the
Certificates--Distributions of Principal and
Interest."
3
<PAGE>
Each class of Certificates may have a different
Pass-Through Rate, which may be a fixed,
variable or adjustable Pass-Through Rate, or
any combination of the foregoing. The related
Prospectus Supplement will specify the Pass-
Through Rate, or the method for determining the
applicable Pass-Through Rate, for each class of
Certificates.
A Series of Certificates may include two or
more classes of Certificates that differ as to
timing and/or priority distributions,
seniority, allocations of losses, Pass-Through
Rate, amount of distributions in respect of
principal or interest, or any combination of
the foregoing. Additionally, distributions in
respect of principal or interest in respect of
any such class or classes may or may not be
made upon the occurrence of specified events or
on the basis of collections from designated
portions of the related Receivables Pool.
If so specified in the related Prospectus
Supplement, Certificates will be available in
book-entry form only and will be available for
purchase in minimum denominations of $1,000 and
integral multiples thereof, except that one
Certificate of each class may be issued in such
denomination as is required to include any
residual amount. Certificateholders will not be
able to receive physical delivery of the
Certificates beneficially owned by book-entry
registration except in the limited
circumstances described herein or in the
related Prospectus Supplement. See "Description
of the Certificates--Definitive Certificates"
and "--Book-Entry Registration."
Optional Purchase by the
Servicer..................... If so provided in the related Prospectus
Supplement, the Servicer may be entitled to
purchase the Receivables of a Trust or to cause
such Receivables to be purchased by another
entity, in the manner and subject to the
conditions described in such Prospectus
Supplement. If the Servicer exercises any such
option to purchase the Receivables or to cause
the Receivables to be purchased, the
Certificates will be prepaid as set forth in
the related Prospectus Supplement. See
"Description of the Transfer and Servicing
Agreements--Termination" herein. In addition,
if the related Prospectus Supplement provides
that the property of a Trust will include a
Pre-Funding Account, one or more classes of
Certificates may be subject to a partial
prepayment of principal following the end of
the Funding Period, in the manner and to the
extent specified in the related Prospectus
Supplement. See "Description of the Transfer
and Servicing Agreements--Accounts--Pre-Funding
Account" herein.
The Trust Property............ The property of each Trust will include a pool
of simple interest and/or precomputed interest
installment sale and installment loan contracts
secured by new and used automobiles, light
trucks, recreational vehicles, motorcycles and
vans (the "Receivables"), certain monies due or
received thereunder after the date specified
4
<PAGE>
in the related Prospectus Supplement (each, a
"Cutoff Date"), security interests in the
vehicles financed thereby (the "Financed
Vehicles"), any right to recourse the purchaser
of the Receivables may have against the dealers
who sold the Financed Vehicles (the "Dealers"),
proceeds from claims on certain insurance
policies, and certain rights under the purchase
agreement (each, a "Purchase Agreement") among
CTL and the Depositor pursuant to which the
Depositor will purchase the related Receivables
from CTL. The majority of the Receivables are
currently originated in the States of
California and Texas. The property of each
Trust also will include amounts on deposit in,
or certain rights with respect to, certain
accounts, including the related Certificate
Account and any Pre-Funding Account, Cash
Collateral Account, Yield Supplement Account or
any other account or assets identified in the
applicable Prospectus Supplement. See
"Description of the Transfer and Servicing
Agreements--Accounts."
To the extent specified in the related
Prospectus Supplement, the Receivables arise,
or will arise, from motor vehicle installment
sale contracts that were originated by new and
used car, light truck, recreational vehicle and
motorcycle dealers for assignment to CTL or
motor vehicle loan contracts that were
solicited by dealers for origination by CTL
(the "Contracts"). Payment of the amount due
under each Contract is secured by a first
perfected security interest in the related
Financed Vehicle. To the extent specified in
the related Prospectus Supplement, CTL is the
registered lienholder on the certificate of
title of each of the Financed Vehicles and the
certificates of title to such Financed Vehicles
will not be amended to reflect the assignment
either to the Depositor or to the Trust. If
specified in the related Prospectus Supplement,
CTL may purchase Receivables from third party
originators, in which case the registered
lienholder on the certificate of title will be
named in the Prospectus Supplement. The
Receivables for each Receivables Pool will be
selected from the Contracts owned by CTL based
on the criteria specified in the related
Pooling and Servicing Agreement and described
herein under "The Receivables Pools" and
"Description of the Transfer and Servicing
Agreement--Sale and Assignment of Receivables"
and in the related Prospectus Supplement under
"The Receivables Pool."
Pre-Funding Account........... On the date of issuance of a Series of
Certificates (each, a "Closing Date"), the
Depositor will convey Receivables to the
related Trust in the aggregate principal amount
provided in the related Prospectus Supplement
and, if so provided in such Prospectus
Supplement, will deposit the amount specified
in such Prospectus Supplement (the "Pre-Funded
Amount") into a trust account established in
the name of the Trustee for the benefit of the
Certificateholders (the "Pre-Funding Account").
The Pre-Funded Amount with respect to any Trust
will not exceed 25% of the initial aggregate
Class Certificate Balances for the related
Series (the "Certificate Balance").
5
<PAGE>
If the property of a Trust includes a Pre-
Funding Account, CTL will be obligated under
the related Purchase Agreement to sell
additional Receivables (the "Subsequent
Receivables") to the Depositor from time to
time during the period provided in the related
Prospectus Supplement (the "Funding Period")
having an aggregate principal balance
approximately equal to the Pre-Funded Amount.
The Depositor, in turn, will be obligated under
the Pooling and Servicing Agreement to sell
such Subsequent Receivables to the related
Trust, and the Trust will be obligated to
purchase the Subsequent Receivables, subject to
the satisfaction of certain conditions set
forth in the Pooling and Servicing Agreement
and described herein under "Description of the
Transfer and Servicing Agreements--Sale and
Assignment of Receivables." As used in this
Prospectus, the term Receivables will include
the Receivables transferred to a Trust on the
related Closing Date as well as any Subsequent
Receivables transferred to such Trust during
the related Funding Period. All Receivables
originated or purchased from dealers by CTL
will be underwritten as described herein under
"The Receivable Pools--Underwriting
Procedures." In the event CTL purchases
Receivables from a third party originator, all
such Receivables shall meet CTL's underwriting
standards. Additionally, the Rating Agencies
must approve the transfer of the Subsequent
Receivables, all as set forth under
"Description of the Transfer and Servicing
Agreements--Sale and Assignment of the
Receivables."
Amounts on deposit in any Pre-Funding Account
during the Funding Period will be invested by
the Trustee (as directed by the Servicer) in
Eligible Investments, and any resultant
investment income (less any related investment
expenses) will be included, on the Distribution
Date immediately following the date on which
such investment income is paid to the Trust, in
the Available Funds for such Distribution Date.
Any funds remaining in a Pre-Funding Account at
the end of the related Funding Period will be
distributed to holders of the related Series of
Certificates (the "Certificateholders") as a
prepayment of principal of the Certificates, in
the amounts and priority described in the
related Prospectus Supplement. No Funding
Period will continue for more than three
calendar months after the related Closing Date.
See "Description of the Transfer and Servicing
Agreements--Accounts--Pre-Funding Account".
Repurchase of Certain
Receivables.................. In each Purchase Agreement, CTL will make
certain representations and warranties with
respect to the related Receivables and will
undertake to repurchase from the Depositor at
the Purchase Amount (as defined herein) any
Receivable with respect to which there exists
an uncured breach of any of its representations
or warranties, if such breach materially and
adversely affects the rights of the Depositor,
or the Depositor's assignee, in such
Receivable. In each Pooling and Servicing
Agreement, the Depositor will assign to the
related Trust certain rights under the related
Purchase Agreement, including the right to
6
<PAGE>
cause CTL to repurchase any Receivable in
respect of which there is an uncured breach of
a representation or warranty that materially
and adversely affects the interest of the Trust
in such Receivable. The repurchase obligation
pursuant to each Purchase Agreement and Pooling
and Servicing Agreement will constitute the
sole remedy available to the related
Certificateholders or Trustee for any uncured
breach of a representation or warranty. See
"Description of the Transfer and Servicing
Agreements--Sale and Assignment of
Receivables."
Credit and Cash Flow
Enhancement.................. If, and to the extent, specified in the related
Prospectus Supplement, credit enhancement with
respect to a Trust or any class or classes of
Certificates may include any one or more of the
following: subordination of one or more other
classes of Certificates of the same Series,
Cash Collateral Accounts, yield supplement
accounts, spread accounts, surety bonds,
insurance policies, letters of credit, credit
or liquidity facilities, over-
collateralization, guaranteed investment
contracts, swaps or other interest rate
protection agreements, repurchase obligations,
other agreements with respect to third-party
payments or other support, cash deposits, or
other arrangements. To the extent specified in
the related Prospectus Supplement, a form of
credit enhancement with respect to a Trust or
class or classes of Certificates may be subject
to certain limitations and exclusions from
coverage thereunder.
Transfer and Servicing
Agreements................... Pursuant to each Purchase Agreement, CTL will
sell the related Receivables to the Depositor
without recourse and, if so stated in the
related Prospectus Supplement, will undertake
to sell Subsequent Receivables, in the
aggregate amount specified therein, to the
Depositor during the related Funding Period.
The Depositor, in turn, will sell such
Receivables to the related Trust, without
recourse, and will undertake to sell any such
Subsequent Receivables to the related Trust
during the related Funding Period. In addition,
the Servicer will agree in each Pooling and
Servicing Agreement to be responsible for
servicing, managing, maintaining custody of and
making collections on the related Receivables.
In the event a Receivable which is outstanding
during the calendar month preceding any
Distribution Date (as defined herein) (the
"Collection Period") becomes more than 30 days
delinquent, the Servicer will advance funds
(each, an "Advance") to cover 30 days of
interest due on such delinquent Receivable
(each, an "Interest Shortfall"), but only to
the extent that the Servicer, in its sole
discretion, expects to be able to recoup such
Advance from subsequent payments on the
Receivable. Advances by the Servicer will add
to the funds available for distributions to
Certificateholders on a Distribution
7
<PAGE>
Date, but the Servicer will be entitled to
reimbursement for such Advances from subsequent
payments of the Receivables or, to the extent
set forth in the related Prospectus Supplement,
from insurance proceeds or withdrawals from any
Cash Collateral Account or similar form of
credit enhancement. See "Risk Factors--Risks
Associated with Automobile Loans," and
"Description of the Transfer and Servicing
Agreements--Advances." Certificateholders will
receive notice of such Advance as described
herein under "Description of the Certificates--
Statements to Certificateholders."
CTL will be obligated to repurchase from the
Trust any Receivable in which the interest of
such Trust is materially and adversely affected
as a result of a breach of any representation
or warranty made by CTL in the related Purchase
Agreement if such breach is not cured in a
timely manner following the discovery by or
notice to CTL. The Servicer will be obligated
under each Pooling and Servicing Agreement to
purchase any Receivable at the Purchase Amount
(as defined herein) if (i) among other things,
the Servicer reduces the rate of interest under
the related Contract (the "Contract Rate"),
reduces the amount of the scheduled monthly
payments or reduces the amount financed or if
the Servicer fails to maintain a perfected
security interest in the related Financed
Vehicle and (ii) the interest of the
Certificateholders in such Receivable is
materially and adversely affected by such
action or failure to act of the Servicer. If
the Servicer extends the date for final payment
by the obligor on the related Contract (each,
an "Obligor") so that the Receivable remains
outstanding on the final scheduled maturity
date with respect to a Series of Certificates
specified in the related Prospectus Supplement
(the "Final Scheduled Maturity Date"), the
Servicer will be obligated to purchase the
Receivable at the Purchase Amount as of the
last day of the Collection Period preceding
such Final Scheduled Maturity Date.
The Servicer will receive a fee for servicing
the Receivables of each Trust equal to the
Servicing Fee Rate times the aggregate
outstanding principal balance of the related
Receivables (the "Pool Balance"), plus certain
late fees, prepayment charges and other
administrative fees or similar charges. The
Servicer may also receive investment earnings
from certain accounts and other cash flows with
respect to a Trust. See "Description of the
Transfer and Servicing Agreements--Servicing
Compensation and Payment of Expenses."
Certain Legal Aspects of the
Receivables; Repurchase
Obligations.................. In connection with each sale of Receivables by
CTL to the Depositor and by the Depositor to a
Trust, security interests in the related
Financed Vehicles will be assigned by CTL to
the
8
<PAGE>
Depositor and by the Depositor to the Trust;
due to the administrative and quality control
concerns related to the retitling of a large
amount of certificates of title and related
fees and expenses of each state's Department of
Motor Vehicles, however, the certificates of
title to such Financed Vehicles will not be
amended to reflect the assignment either to the
Depositor or to the Trust. In the absence of
such an amendment, the Trust may not have a
perfected security interest in the Financed
Vehicles securing the Receivables in some
states.
CTL will be obligated to repurchase from a
Trust any Receivable sold to such Trust as to
which all action necessary to secure a first
perfected security interest in the name of the
Trust in the Financed Vehicle securing such
Receivable shall not have been taken as of the
date such Receivable is purchased by such
Trust, if such breach materially and adversely
affects the interest of the related
Certificateholders in such Receivable and if
such failure or breach is not cured by the last
day of the month following the discovery by or
notice to the Servicer of such breach. If a
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 may be adversely affected. To the
extent the security interest is perfected, a
Trust will have a prior claim over subsequent
purchasers of the Financed Vehicle and holders
of subsequently perfected security interests.
However, as against liens for repairs of
Financed Vehicles or for taxes unpaid by the
related Obligor, or through fraud or
negligence, a Trust could lose its security
interest or the priority of its security
interest in a Financed Vehicle. Neither the
Depositor nor CTL will be obligated to
repurchase a Receivable with respect to which a
Trust loses its security interest or the
priority of its security interest in the
related Financed Vehicle after the Closing Date
as the result of any such tax lien or
mechanic's lien or the fraud or negligence of a
third party.
Federal and state consumer protection laws
impose requirements on creditors in connection
with extensions of credit and collections of
retail installment loans, and certain of these
laws make an assignee of such a loan liable to
the obligor thereon for any violation by the
lender. CTL will be required to repurchase from
the Trust any Receivable that fails to comply
with the requirements of such consumer
protection laws on or before the last day of
the month following discovery by or notice to
the Servicer of such failure, if such failure
materially and adversely affects the interests
of the related Certificateholders in such
Receivable. See "Risk Factors--Perfection of
Security Interests in Financed Vehicles" and
"Certain Legal Aspects of the Receivables."
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Tax Considerations............ If a Prospectus Supplement specifies that the
related Trust is a grantor trust, to the extent
provided in such Prospectus Supplement, upon
the issuance of the related Series of
Certificates, Silver, Freedman & Taff, L.L.P.,
special federal tax counsel to the Trust, will
deliver an opinion to the effect that such
Trust will be treated as a grantor trust for
federal income tax purposes and will not be
subject to federal income tax.
If a Prospectus Supplement does not specify
that the related Trust is a grantor trust, upon
the issuance of the related Series of
Certificates, Silver, Freedman & Taff, L.L.P.
will deliver an opinion to the effect that such
Trust will not be treated as an association
taxable as a corporation or as a "publicly
traded partnership" taxable as a corporation.
See "Federal Income Tax Consequences" for
additional information regarding the
application of federal tax laws to a Trust and
the related Series of Certificates.
ERISA Considerations.......... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
related Prospectus Supplement and unless
otherwise provided therein, any Certificates
that meet certain United States Department of
Labor requirements are eligible for purchase by
employee benefit plans and other retirement
arrangements subject to Title I of the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA") or Section 4975 of the
Internal Revenue Code of 1986, as amended (the
"Code"). Any class of Certificates that is
subordinated to any other class of Certificates
of the same Series may not be acquired by any
such employee benefit plan or retirement
arrangement. See "ERISA Considerations" herein
and in the related Prospectus Supplement.
Ratings....................... It is a condition to the issuance of the
Certificates to be offered hereunder that they
be rated in one of the four highest rating
categories by at least one nationally
recognized statistical rating organization
(each, a "Rating Agency"). A rating is not a
recommendation to purchase, hold or sell
Certificates inasmuch as a rating does not
comment as to market price or suitability for a
particular investor. Ratings of Certificates
will address the likelihood of the payment of
principal of and interest on the Certificates
pursuant to their terms. There can be no
assurance that a rating will remain for a given
period of time or that a rating will not be
lowered or withdrawn entirely by a Rating
Agency if in its judgment circumstances in the
future so warrant. See "Risk Factors--Ratings
of the Certificates" herein. For more detailed
information regarding the ratings assigned to
any class of Certificates of a particular
Series, see "Summary of Terms--Ratings" and
"Risk Factors--Ratings of the Certificates" in
the related Prospectus Supplement.
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RISK FACTORS
In addition to the other information contained in this Prospectus and in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of any Series of Certificates, prospective investors should
carefully consider the following risk factors before investing in any class or
classes of Certificates of any such Series.
RISK ASSOCIATED WITH PRE-FUNDING ACCOUNTS
If so provided in the related Prospectus Supplement, on the Closing Date the
Depositor will deposit the Pre-Funded Amount specified in such Prospectus
Supplement into the Pre-Funding Account. In no event will the Pre-Funded
Amount exceed 25% of the initial Certificate Balance of the related Series of
Certificates. The Pre-Funded Amount will be used to purchase Subsequent
Receivables from the Depositor (which, in turn, will acquire such Subsequent
Receivables from CTL) from time to time during the Funding Period. During the
Funding Period and until such amounts are applied by the Trustee to purchase
Subsequent Receivables, amounts on deposit in the Pre-Funding Account will be
invested by the Trustee (as instructed by the Servicer) in Eligible
Investments, and any investment income with respect thereto (net of any
related investment expenses) will be distributed on each Distribution Date
during the Funding Period as part of the Available Funds for the related
Collection Period. No Funding Period will end more than three calendar months
after the related Closing Date.
To the extent that the entire Pre-Funded Amount has not been applied to the
purchase of Subsequent Receivables by the end of the related Funding Period,
any amounts remaining in the Pre-Funded Account will be distributed as a
prepayment of principal to Certificateholders following the end of the Funding
Period, in the amounts and pursuant to the priorities set forth in the related
Prospectus Supplement. Such prepayment will reduce the outstanding principal
balance of one or more classes of the related Series of Certificates and may
reduce the anticipated yield thereon.
SALES OF SUBSEQUENT RECEIVABLES
If so provided in the related Prospectus Supplement, (i) CTL will be
obligated pursuant to the Purchase Agreement to sell Subsequent Receivables
(subject only to the availability thereof) to the Depositor from time to time
during the Funding Period in an aggregate principal amount approximately equal
to the Pre-Funded Amount, (ii) the Depositor, in turn, will be obligated
pursuant to the Pooling and Servicing Agreement to sell such Subsequent
Receivables to the Trust and (iii) the Trust will be obligated to purchase
such Subsequent Receivables, subject only to the satisfaction of certain
conditions set forth in the Pooling and Servicing Agreement and described in
the related Prospectus Supplement. If the principal amount of eligible
Subsequent Receivables originated or acquired by CTL during a Funding Period
is less than the Pre-Funded Amount, CTL and the Depositor may have
insufficient Subsequent Receivables to transfer to a Trust, and holders of one
or more classes of the related Series of Certificates may receive a full or
partial prepayment of principal at the end of the Funding Period as described
above under "--Pre-Funding Accounts."
PERFECTION OF SECURITY INTERESTS IN FINANCED VEHICLES
Simultaneously with each sale of Receivables, CTL will assign to the
Depositor, and the Depositor will assign to the related Trust, security
interests in the related Financed Vehicles; due to administrative and quality
control concerns related to the retitling of a large amount of certificates of
title and related fees and expenses of each state's Department of Motor
Vehicles, however, the certificates of title to such Financed Vehicles will
not be amended to reflect the assignment to either the Depositor or the Trust.
In the absence of such amendments, a Trust may not have a perfected security
interest in such Financed Vehicles in some states, including Texas. In
California the security interest will continue to be perfected against
creditors and transferees of the vehicle owner. CTL will be obligated to
repurchase from the related Trust any Receivable sold to a Trust as to which
all actions necessary to secure a first perfected security interest in the
name of the Trustee in the Financed Vehicle securing such Receivable shall not
have been taken as of the date such Receivable is transferred to such Trust,
if such breach materially and adversely affects the interest of the
Certificateholders in such Receivable and if such failure or breach is not
timely cured following discovery by or notice thereof to the Depositor or CTL.
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If a 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 may be adversely affected. To the extent the security interest is
perfected, the Trust will have a prior claim over subsequent purchasers of
such Financed Vehicle and holders of subsequently perfected security
interests; however, the Trust could lose its security interest or the priority
of its security interest in a Financed Vehicle as against liens for repairs of
such Financed Vehicle or for taxes unpaid by the related Obligor or through
fraud or negligence. Neither the Depositor nor CTL will have any obligation to
repurchase a Receivable in respect of which a Trust loses its security
interest or the priority of its security interest in the related Financed
Vehicle as the result of any such mechanic's or tax lien or the fraud or
negligence of a third party occurring after the date such security interest
was conveyed to the Trust. See "Certain Legal Aspects of the Receivables--
Security Interests in Vehicles."
Perfection of Security Interests in Connection with the Transfer of
Receivables
Generally each Receivable will be "chattel paper" as defined in the Uniform
Commercial Code ("UCC") as in effect in California (where CTL's and the
Depositor's chief executive offices are located) and the jurisdiction in which
the related Financed Vehicle was located at origination. Under the UCC as in
effect in each such jurisdiction, the sale of chattel paper is treated in a
manner similar to perfection of a security interest in chattel paper. Each of
CTL and the Depositor will make appropriate filings of UCC-1 financing
statements in the Office of the Secretary of State of the State of California
to give notice of the sale of the Receivables. These steps may not be
sufficient to protect the Trust's interest in the Receivables against the
claims of CTL's creditors or a trustee (or a receiver or conservator, as the
case may be) of CTL in bankruptcy to the extent that the Receivables do not
constitute "chattel paper" within the meaning of the UCC as in effect in
California. The Trust's interest in the Receivable could also be defeated if a
subsequent purchaser were able to take physical possession of the Receivables
without notice of such assignment. Pursuant to the Purchase Agreement,
however, CTL will be obligated to repurchase a Receivable if its
representation and warranties with respect to the Receivable are not true and
correct.
Risk Associated With Consumer Protection Laws
Federal and state consumer protection laws impose requirements on creditors
in connection with extensions of credit and collections of retail installment
loans, and certain of these laws make an assignee of such a loan (such as a
Trust) liable to the obligor thereon for any violation by the lender. To the
extent specified herein and in the related Prospectus Supplement, CTL will be
obligated to make certain indemnities and to repurchase from the related Trust
any Receivable that fails to comply with such requirements. See "Certain Legal
Aspects of the Receivables--Consumer Protection Laws."
Insolvency Considerations
The Depositor has been established as a special purpose subsidiary of Bay
View Capital Corporation ("Bay View"), the holding company of CTL, to reduce
the risk of bankruptcy of the Depositor and its resulting effect on the
Certificates of each Series. In addition, the Depositor has undertaken to
follow certain procedures to preserve its corporate separateness, with a view
to maintaining the assets of the Depositor separate from the assets of Bay
View, with the result that the assets of the Depositor would not be available
directly to creditors of Bay View or its affiliates, to the representative of
any bankruptcy estate of Bay View or to any bankruptcy trustee or receiver or
conservator which may be appointed with respect to Bay View or any of its
affiliates other than the Depositor. There can be no assurance, however, that,
despite the bankruptcy remote nature of the Depositor and the procedures
described above, an appropriate party in interest would not succeed in an
effort to cause consolidation of the assets and liabilities of the Depositor
with those of Bay View or any of its affiliates.
CTL will warrant to the Depositor in each Purchase Agreement (the benefit of
which warranty will be assigned by the Depositor to each Trust in the related
Pooling and Servicing Agreement), that the sale of the related Receivables by
CTL to the Depositor is a sale, and not a financing, of the Receivables to the
Depositor. Likewise, the Depositor will warrant to the Trustee under the
related Pooling and Servicing Agreement that the
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sale of the related Receivables by the Depositor to the Trustee is a sale, and
not a financing, of the Receivables to such Trust. If the transactions
contemplated under the related Transfer and Servicing Agreements are treated
as a sale, the Receivables would not be part of CTL's or the Depositor's
insolvency estate and would not be available to the creditors of CTL or the
Depositor. Notwithstanding the foregoing, if CTL or the Depositor were to
become a debtor in a bankruptcy case, and an appropriate party in interest
were to take the position that the sale of Receivables to the Depositor or
such Trust, as applicable, should be treated as a pledge of such Receivables
to secure a borrowing of CTL or the Depositor, then delays in payments of
collections of Receivables to Certificateholders could occur or reductions in
the amounts of such payments could result. If the transfer of Receivables to
the Depositor or any Trust is treated as a pledge instead of a sale, a tax or
government lien on the property of CTL or the Depositor, as applicable,
arising before the transfer of such Receivables to such Trust may have
priority over such Trust's interest in such Receivables.
The decision of the U.S. Court of Appeals for the Tenth Circuit, Octagon Gas
Systems, Inc. v. Rimmer (In re Meridian Reserve, Inc.) (decided May 27, 1993),
contains language to the effect that accounts sold by a debtor would remain
property of the debtor's bankruptcy estate under the UCC, whether or not the
sale of the accounts was perfected. Although the Receivables constitute
chattel paper under the UCC, rather than accounts, Article 9 of the UCC
applies to the sale of chattel paper as well as the sale of accounts, and
perfection of a security interest in both chattel paper and accounts may be
accomplished by the filing of a UCC-1 financing statement. The court's
decision in the Octagon case has been extensively criticized as being
incorrectly reasoned and was expressly rejected under legislation subsequently
adopted in the State of Oklahoma. Nevertheless, if, following an insolvency
proceeding in respect of the Depositor or CTL, a court were to follow the
reasoning of the Tenth Circuit, then the Receivables could be included in the
insolvency estate of the Depositor or CTL, as applicable, and delays and
reductions in payments of collections on or in respect of the Receivables
could occur.
Limited Obligations of CTL and the Depositor
Neither CTL nor the Depositor will be generally obligated to make any
payments to a Trust in respect of the related Certificates or Receivables.
However, in connection with the sale of the Receivables, CTL will make
representations and warranties regarding the characteristics of such
Receivables and, in certain circumstances, CTL will be required to repurchase
from the Trust any Receivables with respect to which such representations and
warranties have been breached. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables." In addition, CTL, as
Servicer, may be required to purchase Receivables from a Trust under certain
circumstances set forth in the Pooling and Servicing Agreement. See
"Description of the Transfer and Servicing Agreements--Servicing Procedures."
Subordination of Certain Classes of Certificates
To the extent specified in the related Prospectus Supplement, distributions
of interest and principal on one or more classes of Certificates may be
subordinated in priority of payment to interest and principal due on one or
more other classes of Certificates of the same Series.
Limited Assets of each Trust
None of the Trusts will have, nor will any such Trust be permitted or
expected to have, any significant assets or sources of funds other than the
related Receivables and, to the extent provided in the related Prospectus
Supplement, a Pre-Funding Account or Cash Collateral Account, yield supplement
account or other form of credit enhancement. Subject to the foregoing, the
Certificates of each Series will represent interests solely in the related
Trust and will not represent obligations of or interests in, or be insured or
guaranteed by, CTL, the Depositor, the Trustee or any other entity.
Consequently, holders of the Certificates of any Series must rely for
repayment upon payments on the related Receivables and, if and to the extent
available, amounts available under any available form of credit enhancement,
all as specified in the related Prospectus Supplement.
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Risks Associated with Automobile Loans
Automobiles rapidly depreciate. As a consequence, the Obligor's continuing
financial stability rather than the value of the vehicle is generally relied
upon for the repayment of the related receivable. This is especially true with
respect to Receivables purchased by CTL, because CTL's underwriting procedures
are primarily based on the ability of the Obligor to repay. As a result,
subject to the credit score, CTL may permit the origination of a loan in
excess of the manufacturer's suggested retail price, in the case of new
vehicles, or the value established by used car reference publications.
Therefore, a repossessed automobile may not provide an adequate source of
repayment of the outstanding loan balance. See "The Receivables Pools--
Underwriting Procedures." Furthermore, the application of various federal and
state laws, including bankruptcy and insolvency laws, may limit the amount
which can be recovered on such loans. See "The Receivables Pools--
Delinquencies and Credit Losses."
Maturity and Prepayment Considerations
All of the Receivables are prepayable at any time by the related Obligor. As
used herein with respect to any Receivable, the term prepayment includes
prepayments in full, partial prepayments (including those related to rebates
of extended warranty contract costs and insurance premiums) and liquidations
due to defaults, as well as receipts of proceeds from physical damage, credit
life and disability insurance policies and any lender's insurance policy, and
Purchase Amounts with respect to certain other Receivables repurchased by CTL
as a result of a breach of a representation or warranty or purchased by the
Servicer for administrative reasons. The rate of prepayments on the
Receivables may be influenced by a variety of economic, social and other
factors, including the fact that an Obligor generally may not sell or transfer
the Financed Vehicle securing a Receivable without the consent of CTL. The
rate of prepayment on the Receivables may also be influenced by the structure
of the underlying loans. To the extent prepayments on the Receivables are more
rapid than expected, Certificateholders' anticipated yield may be reduced to
the extent the Certificates were purchased at a premium. See "Weighted Average
Life of the Certificates." In addition, if so provided in the related
Prospectus Supplement, the Servicer may be entitled to purchase the
Receivables of a given Receivables Pool under the circumstances described in
such Prospectus Supplement. See "Description of the Transfer and Servicing
Agreements--Termination."
In addition, a Series of Certificates may include one or more classes of
interest-only or other Strip Certificates that may be more sensitive than
other classes of Certificates of such Series to the rate of payment on the
related Receivables. Prospective investors in any such class of Certificates
should carefully consider the information provided with respect to such
Certificates under "Risk Factors" and elsewhere in the related Prospectus
Supplement.
Ratings of the Certificates
It is a condition of the issuance of the Certificates to be offered
hereunder that they be rated in one of the four highest rating categories by
at least one nationally recognized statistical rating organization. A rating
is not a recommendation to purchase, hold or sell Certificates inasmuch as a
rating does not comment as to market price or suitability for a particular
investor. The ratings of the Certificates will address the likelihood of the
payment of principal and interest thereon pursuant to their terms. There can
be no assurance that a rating will remain in effect for any given period of
time or that a rating will not be lowered or withdrawn entirely by a Rating
Agency if in its judgment circumstances in the future so warrant. For more
detailed information regarding the ratings assigned to any class of a
particular Series of Certificates, see "Summary of Terms--Ratings" and "Risk
Factors--Ratings of the Certificates" in the related Prospectus Supplement.
Book-Entry Registration
If so specified in the related Prospectus Supplement, each class of the
Certificates of a given Series initially will be represented by one or more
certificates registered in the name of Cede & Co. ("Cede"), or any other
nominee of The Depository Trust Company ("DTC") set forth in the related
Prospectus Supplement, and will not be registered in the names of the holders
of such Certificates or their nominees. Because of this, unless and
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until Definitive Certificates for such Series are issued, the beneficial
owners of such Certificates will not be recognized by the Trustee as
"Certificateholders" (as such term is used herein or in the related Pooling
and Servicing Agreement). Hence, until Definitive Certificates are issued,
beneficial owners of the Certificates will be able to exercise the rights of
Certificateholders only indirectly through DTC and its participating
organizations. See "Description of the Certificates--Book-Entry Registration"
and "--Definitive Certificates."
Limited Liquidity
There can be no assurance that a secondary market will develop for the
Certificates or, if it does develop, that it will provide the holders of the
Certificates with liquidity of investment or that it will remain for the term
of the Certificates. The issuance of the Certificates in book-entry form may
reduce the liquidity of such Certificates in the secondary trading market
since investors may be unwilling to purchase Certificates in the secondary
trading market for which they cannot obtain physical certificates. See
"Description of the Certificates--Book-Entry Registration."
Difficulty in Pledging
Since transactions in Certificates can be effected only through DTC,
participating organizations, indirect participants and certain banks, the
ability of a beneficial Owner to pledge a Certificate to persons or entities
that do not participate in the DTC system, or otherwise to take actions in
respect of such Certificates, may be limited due to the lack of a physical
certificate representing the Certificates. See "Description of the
Certificates--Book-Entry Registration."
THE TRUSTS
Each Series of Certificates will be issued by a separate Trust established
by the Depositor pursuant to a Pooling and Servicing Agreement for the
transactions described herein and in the related Prospectus Supplement. The
property of each Trust will include a pool (a "Receivables Pool") of simple
interest and/or precomputed interest retail installment sale or installment
loan contracts secured by new or used automobiles, recreational vehicles,
light trucks, motorcycles or vans and certain payments due or received
thereunder after the applicable Cutoff Date. To the extent specified in the
related Prospectus Supplement, the Receivables in each Receivables Pool were
or will be either (a) originated by Dealers for assignment to CTL or (b)
solicited by Dealers for origination by CTL. CTL is the registered lienholder
listed on the certificates of title of the Financed Vehicles. If specified in
the related Prospectus Supplement, CTL may purchase Receivables from third
party originators, in which case the registered lienholder on the certificate
of title will be named in the Prospectus Supplement. The Receivables will
continue to be serviced by CTL as the initial Servicer under each Pooling and
Servicing Agreement.
On or prior to the applicable Closing Date, CTL will sell to the Depositor,
pursuant to the Purchase Agreement, Receivables in the aggregate principal
amount specified in the related Prospectus Supplement. Thereafter, on such
Closing Date, the Depositor will convey such Receivables and, if so provided
in the related Prospectus Supplement, the Pre-Funded Amount to the related
Trust in exchange for the delivery to the Depositor of the Series of
Certificates issued on such date by such Trust. If the Prospectus Supplement
provides for the conveyance of a Pre-Funded Amount to the related Trust, CTL
will also be required under the Purchase Agreement, and the Depositor will be
required under the related Pooling and Servicing Agreement, to convey to the
Depositor and the Trust, respectively, Subsequent Receivables from time to
time during the Funding Period in an aggregate principal amount approximately
equal to such Pre-Funded Amount. Any Subsequent Receivables so conveyed to a
Trust will also be assets of such Trust. The property of each Trust will also
include (i) interests in certain amounts that may from time to time be held in
separate trust accounts established and maintained pursuant to the related
Pooling and Servicing Agreement and, if so provided in the related Prospectus
Supplement, the proceeds of such accounts; (ii) security interests in the
Financed Vehicles and any other interest of CTL and the Depositor in such
Financed Vehicles; (iii) any recourse rights of CTL against Dealers; (iv) any
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rights of CTL to proceeds from claims on or refunds of premiums with respect
to certain physical damage, credit life and disability insurance policies
covering the Financed Vehicles or the Obligors, as the case may be, including
any lender's insurance policy; (v) any property that secures a Receivable and
that has been acquired by the Trust; (vi) certain rights under the related
Purchase Agreement; and (vii) any and all proceeds of the foregoing. CTL will
not convey to the Depositor, and the Depositor will not convey to a Trust, and
the related Certificateholders will have no interest in, any contract with a
Dealer establishing "dealer reserves" or any rights to recapture dealer
reserves pursuant to such a contract. To the extent specified in the related
Prospectus Supplement, a Pre-Funding Account or a Cash Collateral Account, a
yield supplement account, surety bond, swap or other interest rate protection,
or any other form of credit enhancement may be a part of the property of a
Trust or may be held by the Trustee for the benefit of holders of the related
Certificates.
CTL, as initial Servicer under each Pooling and Servicing Agreement, will
continue to service the Receivables held by each Trust and will receive fees
for such services. See "Description of the Transfer and Servicing Agreements--
Servicing Compensation and Payment of Expenses" herein. To facilitate the
servicing of the Receivables, the Depositor and each Trustee will designate
the Servicer as custodian of the Receivables and the related documents for the
related Trust; due to the administrative burden and expense, however, the
certificates of title to the Financed Vehicles will not be amended to reflect
the sale and assignment of the security interest in the Financed Vehicles to
either the Depositor or the Trust. In the absence of such an amendment, a
Trust may not have a perfected security interest in certain of the Financed
Vehicles in some states. See "Certain Legal Aspects of the Receivables" and
"Description of the Transfer and Servicing Agreements--Sale and Assignment of
Receivables."
If the protection provided to the holders of the Certificates of any Series
(the "Certificateholders") by the subordination, if any, of one or more
classes of Certificates of such Series and by any Cash Collateral Account,
yield supplement account or other available form of credit enhancement for
such Series is insufficient, such Certificateholders will have to look to
payments by or on behalf of Obligors on the related Receivables and the
proceeds from the repossession and sale of Financed Vehicles that secure
defaulted Receivables for distributions of principal of and interest on the
related Certificates. In such event, certain factors, such as the Trust's not
having perfected security interests in all of the Financed Vehicles, may limit
the ability of a Trust to realize on the collateral securing the related
Receivables or may limit the amount realized to less than the amount due
thereunder. Certificateholders may thus be subject to delays in payment on, or
may incur losses on their investment in, such Certificates as a result of
defaults or delinquencies by Obligors and depreciation in the value of the
related Financed Vehicles. See "Description of the Transfer and Servicing
Agreements--Credit and Cash Flow Enhancement" and "Certain Legal Aspects of
the Receivables."
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 Certificates is limited solely to the express obligations of
such Trustee set forth in the related Pooling and Servicing Agreement. A
Trustee may resign at any time, in which event the Servicer will be obligated
to appoint a successor Trustee. The Servicer may also remove a Trustee if such
Trustee ceases to be eligible to continue as Trustee under the related Pooling
and Servicing Agreement or if such Trustee becomes insolvent. If the Servicer
so removes a Trustee, the Servicer will be obligated to appoint a successor to
such Trustee. Any resignation or removal of a Trustee and appointment of a
successor Trustee will not become effective until acceptance of the
appointment by the successor Trustee.
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THE RECEIVABLES POOLS
General
To the extent specified in the related Prospectus Supplement, the
Receivables arise, or will arise, from motor vehicle installment sale
contracts that were originated by new and used car, light truck, recreational
vehicle, van and motorcycle dealers for assignment to CTL or motor vehicle
loan contracts that were solicited by dealers for origination by CTL in the
ordinary course of business. CTL is the registered lienholder on the
certificates of title to each of the Financed Vehicles. If specified in the
related Prospectus Supplement, CTL may purchase Receivables from third party
originators, in which case the registered lienholder on the certificate of
title will be named in the Prospectus Supplement.
The Receivables to be sold to each Trust will be selected from CTL's
portfolio for inclusion in a Receivables Pool based on several criteria,
including that each Receivable (i) is secured by a new or used vehicle, (ii)
provides for level monthly payments (except for the last payment, which may be
different from the level payments) that fully amortize the amount financed
over the original term to maturity of the Receivable, (iii) is a Precomputed
Receivable or a Simple Interest Receivable (each as defined herein) and (iv)
satisfies the other criteria, if any, set forth in the related Prospectus
Supplement. No selection procedures believed by CTL or the Depositor to be
adverse to Certificateholders were or will be used in selecting the
Receivables.
Underwriting Procedures
CTL uses the degree of the applicant's creditworthiness as the basic
criterion when originating an installment sales contract or purchasing such a
contract from a Dealer. Each credit application requires that the applicant
provide current information regarding the applicant's employment history, bank
accounts, debts, credit references, and other factors that bear on
creditworthiness. CTL generally applies uniform underwriting standards when
originating loans on new and used vehicles. CTL also typically obtains a
credit report from a major credit reporting agency summarizing the applicant's
credit history and paying habits, including such items as open accounts,
delinquent payments, bankruptcies, repossessions, lawsuits, and judgments.
Information relating to the applicant and supplied by the applicant on the
loan application combined with information provided by credit reporting
agencies is used to generate the borrower's credit score.
The credit score generated is used as the basic determinant for loan
approval. CTL's credit scoring model was developed by an independent firm
experienced in developing such models and utilizes extensive historical data
related to CTL's origination and servicing experience as well as the
experience of CTL's senior management. CTL's credit scoring model evaluates an
applicant's credit profile along with certain applicant specific
characteristics to arrive at an estimate of the associated credit risk.
Additionally, CTL's credit analysts may also verify an applicant's employment
income and/or residency or where appropriate, verify an applicant's payment
history directly with the applicant's creditors. CTL will also generally
verify receipt of the automobile and other information directly with the
borrower. Based on these procedures, a credit decision is considered and
approved by CTL personnel at various levels of authority, depending on a
variety of factors including the amount of the loan and the applicant's credit
score.
CTL's underwriting guidelines adhere to no specific loan-to-value ratios
because the primary focus is on the ability of the borrower to repay the loan
rather than the value of underlying collateral. The amount financed by CTL
will generally be up to the full sales price of the vehicle plus sales tax,
dealer preparation fees, license fees and title fees, plus the cost of service
and warranty contracts and premiums for physical damage, credit life and
disability insurance obtained in connection with the vehicle or the financing
(such amounts in addition to the sales price, collectively the "Additional
Vehicle Costs"). Accordingly, the amount financed by CTL under an installment
contract generally may exceed, depending on the credit score, in the case of
new vehicles, the manufacturer's suggested retail price of the financed
vehicle and the Additional Vehicle Costs. In the case of used vehicles, if the
applicant meets CTL's creditworthiness criteria, the amount financed may
exceed the vehicle's value as assigned by one of the three standard reference
sources for dealers of used cars and the Additional Vehicle Costs. Depending
on the dealer's location, CTL will use the "Kelley Blue Book," "NADA Official
Used Car Guide" or the "Black Book" published by National Auto Research to
obtain a value to assign to a used vehicle for underwriting purposes.
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CTL believes based on its historical experience that the resale value of a
new vehicle purchased by an obligor will generally decline below the
manufacturer's suggested retail price and, in some cases, may decline for a
period of time below the principal balance outstanding on the related
installment contract. CTL also believes that the resale value of a used
vehicle purchased by an obligor will generally decline, but believes that the
percentage of such decline generally will be less than the percentage of
decline in the resale value of a new vehicle. CTL regularly reviews the
quality of the Contracts purchased from Dealers and periodically conducts
quality control audits to ensure compliance with its established policies and
procedures. See also "California Thrift & Loan and Affiliates" herein.
Allocation of Payments
The Receivables will be either Simple Interest Receivables or Precomputed
Receivables. "Simple Interest Receivables" provide for equal monthly payments
that are applied, first, to collection fees, if any, then to applicable late
charges, then to pay interest accrued to the date of such payment, then to
principal due on such date, and then to further reduce the outstanding
principal balance. Accordingly, if an Obligor pays a fixed monthly installment
before its due date under a Simple Interest Receivable, the portion of the
payment allocable to interest for the period since the preceding payment will
be less than it would have been had the payment been made on the contractual
due date, and the portion of the payment applied to reduce the principal
balance of the Receivable will be correspondingly greater. Conversely, if an
Obligor pays a fixed monthly installment under a Simple Interest Receivable
after its contractual due date, the portion of such payment allocable to
interest for the period since the preceding payment will be greater than it
would have been had the payment been made when due, and the portion of such
payment applied to reduce the principal balance of the Receivable will be
correspondingly less, in which case a larger portion of the principal balance
may be due on the final scheduled payment date.
"Precomputed Receivables" consist of either (i) monthly actuarial
receivables ("Actuarial Receivables") or (ii) receivables that provide for
allocation of payments according to the "sum of periodic balances" method,
similar to the Rule of 78's ("Rule of 78's Receivables"). An Actuarial
Receivable provides for amortization of the loan over a series of fixed level
payment monthly installments. Each monthly installment, including the monthly
installment representing the final payment of the receivable, consists of an
amount of interest equal to 1/12 of the annual percentage rate of the loan
multiplied by the unpaid principal balance of the loan, and an amount of
principal equal to the remainder of the monthly payment. A Rule of 78's
Receivable provides for the payment by the Obligor of a specified total amount
of payments, payable in equal monthly installments on each due date, which
total represents the principal amount financed and add-on interest for the
term of the receivable. The rate at which the amount of add-on interest is
earned and, correspondingly, the amount of each fixed monthly payment
allocated to reduction of the outstanding principal amount of the Receivable
are calculated in accordance with the sum of the periodic time balances or the
"Rule of 78's." If a Precomputed Receivable is prepaid in full (voluntarily or
by liquidation, acceleration or otherwise), under the terms of the Contract a
"refund" or "rebate" will be made to the Obligor of the portion of the total
amount of payments then due and payable under the Contract allocable to
"unearned" interest. Unearned interest is calculated in accordance with the
sum of the periodic time balances method, the Rule of 78's or an equivalent
method. The amount of any such rebate under a Precomputed Receivable generally
will be less than or equal to the remaining scheduled payments of interest
that would have been due under a Simple Interest Receivable for which all
payments were made on schedule and generally will be significantly less than
such amount.
To the extent specified in the related Prospectus Supplement, all of the
Receivables that are Precomputed Receivables will be Rule of 78's Receivables;
however, the Trust will account for all Rule of 78's Receivables as if such
Receivables were Actuarial Receivables. If so provided in the related
Prospectus Supplement early payments on Precomputed Receivables ("Payaheads")
will be deposited to the Payahead Account as described under "Description of
the Transfer and Servicing Agreements--Accounts." Amounts received upon
prepayment in full of a Rule of 78's Receivable in excess of the then
outstanding principal balance of such Receivable (computed on an actuarial
basis) will not be passed through to Certificateholders, except to the extent
necessary to pay interest and principal on the Certificates.
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In the event of the liquidation of a Receivable or the repossession of a
Financed Vehicle, amounts recovered are applied first to the expenses of
repossession, and then to unpaid interest (to the extent not previously
written off) and principal and any related payment or other fee.
Delinquencies and Credit Losses
Certain information concerning the delinquencies and credit losses with
respect to new and used retail automobile, light truck, recreational vehicle,
motorcycle and van receivables will be set forth in each Prospectus
Supplement. There can be no assurance that the delinquency and credit loss
experience with respect to any Receivables Pool will be comparable to prior
experience or to such information.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
The weighted average life of the Certificates of any Series generally will
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. For this purpose, the term prepayments includes
prepayments in full, partial prepayments (including those related to rebates
of extended warranty contract costs and insurance premiums), liquidations due
to defaults, as well as receipts of proceeds, if any, from physical damage,
credit life and disability and/or any lender's insurance policies, and the
amount of Receivables repurchased by CTL due to a breach of a representation
or warranty or purchased by the Servicer for administrative purposes. All of
the Receivables are prepayable at any time without penalty (or with a de
minimis charge) to the Obligor. The rate of prepayment of automotive
receivables is influenced by a variety of economic, social and other factors,
including the fact that an Obligor generally may not sell or transfer the
Financed Vehicle securing a Receivable without the consent of the registered
lienholder (or the Servicer on behalf of such lienholder). The rate of
prepayment on the Receivables may also be influenced by the structure of the
loan. In addition, under certain circumstances, CTL will be obligated to
repurchase Receivables from a Trust pursuant to the related Purchase Agreement
and Pooling and Servicing Agreement as a result of breaches of representations
and warranties, and the Servicer will be obligated to purchase Receivables
from a Trust pursuant to the related Pooling and Servicing Agreement as a
result of breaches of certain covenants. See "Description of the Transfer and
Servicing Agreements--Sale and Assignment of Receivables" and "--Servicing
Procedures." See also "Description of the Transfer and Servicing Agreements--
Termination" regarding the option of the Servicer to purchase the Receivables
from a Trust.
A Series of Certificates may include one or more classes of Strip
Certificates that are more sensitive than certain other classes of
Certificates of the same Series to the rate of payment of the related
Receivables. Prospective investors in any such Strip Certificates should
consider carefully the information regarding such Certificates in the related
Prospectus Supplement.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Certificates of a Series on any
Distribution Date 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
Certificateholders. 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
Series of Certificates or particular classes of Certificates.
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POOL FACTORS AND OTHER CERTIFICATE INFORMATION
The "Certificate Pool 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 and which will indicate the
remaining Class Certificate Balance of such class of Certificates, as of the
applicable Distribution Date (after giving effect to distributions to be made
on such Distribution Date), as a fraction of the initial Class Certificate
Balance of such class of Certificates. Each Certificate Pool Factor will be
1.0000000 as of the related Closing Date and thereafter will decline to
reflect reductions in the applicable Class Certificate Balance. A
Certificateholder's portion of the aggregate outstanding Class Certificate
Balance will equal the product of (a) the original denomination of such
Certificateholder's Certificate and (b) the applicable Certificate Pool Factor
at the time of determination.
The Certificateholders will receive reports on or about each Distribution
Date concerning payments received on the Receivables, the Pool Balance and
each Certificate Pool Factor. In addition, Certificateholders of record during
any calendar year will be furnished information for tax reporting purposes not
later than the latest date permitted by law. See "Description of the
Certificates--Statements to Certificateholders."
USE OF PROCEEDS
On each Closing Date, the Depositor will convey the Receivables and, if so
provided in the related Prospectus Supplement, the applicable Pre-Funded
Amount to the related Trust in exchange for the related Series of
Certificates. The Depositor will apply the net proceeds from the sale of the
Certificates to the purchase of the Receivables from CTL and, if so provided
in the related Prospectus Supplement, to fund the Pre-Funding Account, and to
such other things, if any, as specified in the related Prospectus Supplement.
CTL will use the portion of such proceeds paid to it to repay deposits, short-
term borrowings and for general corporate purposes.
CALIFORNIA THRIFT & LOAN AND AFFILIATES
CTL is a 38 year-old, FDIC-insured California thrift and loan. CTL's
business is the underwriting and purchasing of high yield consumer loans
(primarily retail installment sales contracts secured by new and used
automobiles and light-duty trucks), residential real estate loans and
commercial equipment leases for small and medium sized businesses. CTL
conducts its business primarily in the States of California, Arizona,
Colorado, Illinois, New Mexico, Nevada, Oregon and Texas.
On June 14, 1996 Bay View acquired CTL Credit, Inc., the holding company of
CTL. CTL is now a wholly-owned subsidiary of Bay View.
The Depositor is a wholly-owned subsidiary of Bay View, formed in November
1996 as a Delaware corporation, and is organized for the limited purpose of
purchasing, acquiring owning and holding vehicle installment sale and
installment loan contracts, reselling such receivables and conducting
activities incidental thereto.
The Depositor has taken steps in structuring the transactions contemplated
hereby that are intended to ensure that the voluntary or involuntary
application for relief by Bay View under the United States Bankruptcy Code or
other applicable laws ("Insolvency Laws") will not result in the consolidation
of the assets and liabilities of the Depositor with those of Bay View or CTL.
These steps include the creation of the Depositor as a separate, limited-
purpose subsidiary pursuant to a certificate of incorporation containing
certain limitations (including restrictions on the nature of the Depositor's
business, as described above, and restrictions on the Depositor's ability to
commence a voluntary case or proceeding under any Insolvency Law without the
unanimous affirmative vote of all its directors). However, there can be no
assurance that the activities of the Depositor would
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not result in a court concluding that the assets and liabilities of the
Depositor should be consolidated with those of Bay View or CTL in a proceeding
under an Insolvency Law. See "Risk Factors--Insolvency Considerations."
In addition, tax and certain other statutory liabilities, such as
liabilities to the Pension Benefit Guaranty Corporation, if any, relating to
the underfunding of pension plans of Bay View or its affiliates can be
asserted against the Depositor. To the extent that any such liabilities arise
after the transfer of Receivables to a Trust, the Trust's interest in the
Receivables would be prior to the interest of the claimant with respect to any
such liabilities. However, the existence of a claim against the Depositor
could permit the claimant to subject the Depositor to an involuntary
proceeding under the Bankruptcy Code or other Insolvency Laws. See "Risk
Factors--Insolvency Considerations."
DESCRIPTION OF THE CERTIFICATES
General
Each Trust will issue a Series of Certificates pursuant to a Pooling and
Servicing Agreement. A form of the Pooling and Servicing Agreement has been
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The following is a summary of the material terms of the
Certificates and is subject to, and is qualified in its entirety by reference
to, the provisions of the related Certificates and Pooling and Servicing
Agreement.
If so specified in the related Prospectus Supplement, the Certificates will
be available for purchase in minimum denominations of $1,000 and integral
multiples in excess thereof in book-entry form only.
Distributions of Principal and Interest
The timing and priority of distributions, seniority, allocations of losses,
Pass-Through Rate and amount of or method of determining distributions with
respect to principal and interest on each class of Certificates of a Series
will be described in the related Prospectus Supplement. Distributions on such
Certificates will be made on the dates specified in the related Prospectus
Supplement (the "Distribution Date") and may be made prior to distributions
with respect to principal of such Certificates. To the extent provided in the
related Prospectus Supplement, a Series of Certificates may include one or
more classes of Strip Certificates entitled to (i) interest distributions with
disproportionate, nominal or no principal distributions or (ii) principal
distributions with disproportionate, nominal or no interest distributions.
Each class of Certificates may have a different Pass-Through Rate, which may
be a fixed, variable or adjustable Pass-Through Rate (and which may be zero
for certain classes of Strip Certificates) or any combination of the
foregoing. The related Prospectus Supplement will specify the Pass-Through
Rate for each class of Certificates of a Series or the method for determining
such Pass-Through Rate.
To the extent specified in any Prospectus Supplement, one or more classes of
Certificates of a given Series may have fixed principal and/or interest
distribution schedules, as set forth in such Prospectus Supplement.
In the case of a Series of Certificates that 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.
Distributions in respect of interest on and principal of any class of
Certificates will be made on a pro rata basis among all holders of
Certificates of such class.
Book-Entry Registration
If so specified in the related Prospectus Supplement, each class of
Certificates initially will berepresented by one or more certificates, in each
case registered in the name of the nominee of DTC. Unless
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another nominee is specified in the related Prospectus Supplement, the nominee
of DTC will be Cede. Accordingly, such nominee is expected to be the holder of
record of the Certificates of each Series, except for Certificates, if any,
retained by the Depositor. Unless and until Definitive Certificates are issued
under the limited circumstances described herein or in the related Prospectus
Supplement, no Certificateholder will be entitled to receive a physical
certificate representing a Certificate; all references herein and in the
related Prospectus Supplement to actions by Certificateholders will refer to
actions taken by DTC upon instructions from its participating members
("Participants"), and all references herein and in the related Prospectus
Supplement to distributions, notices, reports and statements to
Certificateholders will refer to distributions, notices, reports and
statements to DTC or its nominee, as the case may be, as the registered holder
of the Certificates, for distribution to Certificateholders in accordance with
DTC's procedures with respect thereto. Beneficial owners of the Certificates
("Certificate Owners") will not be recognized as "Certificateholders" by the
related Trustee, as such term is used in each Pooling and Servicing Agreement,
and Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and its Participants.
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the UCC in effect in the State of New York, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for the Participants and to
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, banks, trust companies and clearing corporations. Indirect access to
the DTC system also is available to banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "Indirect Participants").
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or an interest
in, the Certificates may do so only through Participants and Indirect
Participants. In addition, all Certificate Owners will receive all
distributions of principal and interest from the related Trustee through
Participants. Under a book-entry format, Certificate Owners may experience
some delay in their receipt of payments, since such payments will be forwarded
by the Trustee to DTC's nominee. DTC will then forward such payments to the
Participants, which thereafter will forward them to Indirect Participants or
Certificate Owners.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Certificates
and to receive and transmit distributions of principal of and interest on the
Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Certificates similarly are required
to make book-entry transfers and to receive and transmit such payments on
behalf of their respective Certificate Owners. Accordingly, although
Certificate Owners will not possess physical certificates representing the
Certificates, the Rules provide a mechanism by which Participants and Indirect
Participants will receive payments and transfer interests, directly or
indirectly, on behalf of Certificate Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificate Owner to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions with respect to such
Certificates, may be limited due to the lack of a physical certificate
representing such Certificates.
DTC may take any action permitted to be taken by a Certificate Owner under
the Pooling and Servicing Agreement only at the direction of one or more
Participants to whose account with DTC the Certificates 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.
Except as required by law, the related Trustee will not have any liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests of Certificates of any Series held by
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DTC's nominee, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Definitive Certificates
To the extent the related Prospectus Supplement specifies the related
Certificates be delivered through the facilities of DTC, the Certificates of a
given Series will be issued in fully registered, certificated form
("Definitive Certificates") to Certificateholders or their respective
nominees, rather than to DTC or its nominee, only if (i) the Depositor advises
the related Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as depository with respect to the
related Certificates and the Depositor or such Trustee is unable to locate a
qualified successor, (ii) the Depositor, at its option, advises the Trustee in
writing that it elects to terminate the book-entry system through DTC or (iii)
after the occurrence of an Event of Default, Certificate Owners representing
not less than 50% of the Certificate Balance of the Certificates of such
Series advise the related Trustee through DTC in writing that the continuation
of a book-entry system through DTC (or a successor thereto) is no longer in
the best interests of the related Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the related Trustee will notify DTC of the occurrence of
such events and of the availability of Definitive Certificates to Certificate
Owners. Upon surrender to the Trustee by DTC of the certificates representing
all Certificates of any affected class and the receipt of instructions from
DTC for re-registration, the Trustee will issue Definitive Certificates to the
related Certificate Owners. Distributions on the related Definitive
Certificates will be made thereafter by the related Trustee directly to the
holders in whose name the related Definitive Certificates are registered at
the close of business on the applicable record date, in accordance with the
procedures set forth herein and in the related Pooling and Servicing
Agreement. Distributions will be made by check mailed to the address of such
holders as they appear on the register specified in the related Pooling and
Servicing Agreement.
Definitive Certificates will be transferable and exchangeable at the offices
of the related Trustee (or any security registrar appointed thereby). No
service charge will be imposed for any registration of transfer or exchange,
but such Trustee may require payment of a sum sufficient to cover any tax or
other governmental charge imposed in connection therewith.
STATEMENTS TO CERTIFICATEHOLDERS
With respect to each Series of Certificates, on or prior to each
Distribution Date, the Servicer (to the extent applicable to such
Certificateholder) will prepare and forward to the related Trustee to be
included with the distribution to each Certificateholder of record a statement
setting forth for the related Collection Period substantially the following
information (and any other information specified in the related Prospectus
Supplement):
(i) the amount of the distribution allocable to principal (including any
overdue principal) of each class of Certificates of such Series;
(ii) the amount of the distribution allocable to interest (including any
overdue interest) on each class of Certificates of such Series;
(iii) the amount of fees and compensation paid to the Servicer and the
Trustee with respect to the related Collection Period;
(iv) the Class Certificate Balance and Certificate Pool Factor for each
class of Certificates of such Series as of the related record date;
(v) the amount, if any withdrawn from and the balance of any Cash
Collateral Account or other form of credit enhancement, after giving
effect to any additions thereto or withdrawals therefrom or reductions
thereto to be made on the following Distribution Date;
(vi) with respect to any Series of Certificates as to which a Pre-Funding
Account has been established, for Distribution Dates during the
Funding Period, the remaining Pre-Funded Amount; and
(vii) for the Distribution Date that falls on or immediately after the end
of the Funding Period, if any, the amount of the Pre-Funded Amount
that has not been used to purchase Subsequent Receivables.
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(viii) the aggregate net losses on the Receivables for the related
Collection Period;
(ix) the aggregate principal balance of all Receivables which were
delinquent 30 days or more as of the last day of the related
Collection Period; and
(x) the amount of Advances made on such Distribution Date; the aggregate
amount of outstanding Advances on such Distribution Date; and the
amount of Advances reimbursed to the Servicer on such Distribution Date
based on the fact that the related Receivable became a Defaulted
Receivable during the prior Collection Period.
Dollar amounts described in items (i), (ii) and (iv) above will be expressed
as a dollar amount per $1,000 of initial Class Certificate Balance of such
Certificates.
In addition, within the prescribed period of time for tax reporting purposes
after the end of each calendar year during the term of each Trust, the related
Trustee will mail to each person who at any time during such calendar year
shall have been a registered Certificateholder a statement containing certain
information for the purposes of such Certificateholder's preparation of
federal income tax returns. See "Federal Income Tax Consequences."
LIST OF CERTIFICATEHOLDERS
Each Trustee, within 15 days after receipt of written request of the
Servicer, will provide the Servicer with a list of the names and addresses of
all holders of record as of the most recent record date of the related Series
of Certificates. In addition, three or more holders of the Certificates of any
Series or one or more holders of such Certificates evidencing not less than
25% of the applicable Certificate Balance may, by written request to the
related Trustee, obtain access to the list of all Certificateholders
maintained by such Trustee for the purpose of communicating with other
Certificateholders with respect to their rights under the related Pooling and
Servicing Agreement or under such Certificates.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following is a summary of the material terms of each Purchase Agreement
and Pooling and Servicing Agreement (collectively, the "Transfer and Servicing
Agreements") pursuant to which the Depositor will purchase Receivables from
CTL, a Trust will purchase Receivables from the Depositor, and the Servicer
will agree to service such Receivables. Forms of the Purchase Agreement and
Pooling and Servicing Agreement have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part. The following
summary is subject to, and is qualified in its entirety by reference to, the
provisions of the related Transfer and Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
On the related Closing Date, (i) CTL will sell and assign to the Depositor
pursuant to the related Purchase Agreement, without recourse, its entire right
in the related Receivables, including its security interests in the related
Financed Vehicles and (ii) the Depositor will sell and assign to the related
Trust pursuant to the related Pooling and Servicing Agreement, without
recourse, (a) its entire right in such Receivables and all of its right, title
and interest under the Purchase Agreement, including the security interests in
the Financed Vehicles, and (b) if so provided in the related Prospectus
Supplement, the applicable Pre-Funded Amount. Each Receivable will be
identified in a schedule appearing as an exhibit to the related Purchase
Agreement and Pooling and Servicing Agreement. The Trustee will, concurrently
with such sale and assignment of the Receivables and, if applicable, the Pre-
Funded Amount, to the related Trust, execute, authenticate and deliver the
related Series of Certificates to the Depositor in exchange for such
Receivables and such Pre-Funded Amount, if any. The related Prospectus
Supplement will specify whether the property of a Trust will include the Pre-
Funded Amount and, if so, the terms, conditions and manner under which
Subsequent Receivables will be sold and assigned by the Depositor to the
related Trust.
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In each Purchase Agreement, CTL will represent and warrant to the Depositor,
among other things, that (i) the information provided with respect to the
related Receivables is correct in all material respects; (ii) the Obligor on
each such Receivable has obtained or agreed to obtain and maintain physical
damage insurance covering the Financed Vehicle in accordance with CTL's normal
requirements; (iii) at the Closing Date, with respect to Receivables conveyed
to a Trust on the Closing Date, and on the applicable Subsequent Transfer Date
with respect to any Subsequent Receivables, the Receivables are free and clear
of all security interests, liens, charges and encumbrances, other than the
lien of the Depositor, and no offsets, defenses or counterclaims against the
Depositor or CTL have been asserted or threatened with respect to the related
Receivables; (iv) at the Closing Date or Subsequent Transfer Date, as
applicable, each of the related Receivables secured by a security interest in
a Financed Vehicle registered in the State of California is secured by a first
perfected security interest in the related Financed Vehicle in favor of the
Trustee on behalf of the Trust as secured party or all necessary action has
been taken by CTL to secure such a first perfected security interest; and (v)
each of the related Receivables, at the time it was originated, complied and,
at the Closing Date or Subsequent Transfer Date, as applicable, complies, in
all material respects with applicable federal and state laws, including,
without limitation, consumer credit, truth in lending, equal credit
opportunity and disclosure laws. As of the last day of any Collection Period
following the discovery by or notice to CTL of a breach of any such
representation or warranty that materially and adversely affects the interests
of the Depositor or its assignee in a Receivable (or as of the last day of the
preceding Collection Period, if CTL so elects), CTL, unless it has cured such
breach, will repurchase the Receivable at a price equal to the unpaid
principal balance owed by the Obligor thereon plus, accrued interest thereon
at the applicable Contract Rate to the date of purchase (the "Purchase
Amount"), and such Receivable will be considered a "Purchased Receivable" as
of such date. In each Pooling and Servicing Agreement, the Depositor will
assign certain rights under the related Purchase Agreement to the related
Trust, including the right to cause CTL to repurchase Receivables with respect
to which it is in breach of any such representation and warranty. The
repurchase obligation of CTL pursuant to each Purchase Agreement and Pooling
and Servicing Agreement will constitute the sole remedy available to the
related Certificateholders or Trustee for any uncured breach of a
representation or warranty.
If the related Prospectus Supplement provides that the property of a Trust
will include a Pre-Funding Account, CTL will be obligated to sell and assign
to the Depositor pursuant to the related Purchase Agreement, and the Depositor
will be obligated to sell and assign to the related Trust pursuant to the
related Pooling and Servicing Agreement, Subsequent Receivables from time to
time during the Funding Period in an aggregate outstanding principal amount
approximately equal to the Pre-Funded Amount. Any conveyance of Subsequent
Receivables to a Trust is subject to the satisfaction, on or before the
related transfer date (each, a "Subsequent Transfer Date"), of the following
conditions precedent, among others: (i) each such Subsequent Receivable must
satisfy the eligibility criteria specified in the related Pooling and
Servicing Agreement; (ii) the Subsequent Receivables shall have been selected
based on the criteria specified in the applicable Prospectus Supplement and
neither CTL nor the Depositor shall have selected such Subsequent Receivables
in a manner that it deems is adverse to the interests of holders of the
related Certificates; (iii) as of the respective Cutoff Date for such
Subsequent Receivables, all of the Receivables in the Trust, including the
Subsequent Receivables to be conveyed to the Trust as of such date, must
satisfy the parameters described under "The Receivables Pools" herein and "The
Receivables Pool" in the related Prospectus Supplement; (iv) any required
deposit to any Cash Collateral Account or other similar account shall have
been made; and (v) CTL must execute and deliver to the Depositor, and the
Depositor must execute and deliver to such Trust, a written assignment
conveying such Subsequent Receivables to the Depositor or such Trust, as
applicable. In addition, the conveyance of Subsequent Receivables to a Trust
is subject to the satisfaction of the following conditions subsequent, among
others, each of which must be satisfied within the applicable time period
specified in the related Prospectus Supplement: (a) the Depositor must deliver
certain opinions of counsel to the related Trustee with respect to the
validity of the conveyance of the Subsequent Receivables to the Trust; (b) the
Trustee must receive written confirmation from a firm of certified independent
public accountants that, as of the end of the period specified therein, the
Receivables in the Trust, including the Subsequent Receivables, satisfied the
parameters described under "The Receivables Pools" herein and "The Receivables
Pool" in the related Prospectus Supplement; and (c) each of the Rating
Agencies must notify the Depositor in writing that, following the conveyance
of the Subsequent
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Receivables to the Trust, each class of Certificates will have the same rating
assigned to it by such Rating Agency that it had on the Closing Date. Such
confirmation of the ratings of the Certificates may depend on factors other
than the characteristics of the Subsequent Receivables, including the
delinquency, repossession and net loss experience on the automobile, light
truck, motorcycle and van receivables in the portfolio serviced. If any such
conditions precedent or conditions subsequent are not met with respect to any
Subsequent Receivables within the time period specified in the related
Prospectus Supplement, CTL will be required under the related Purchase
Agreement and Pooling and Servicing Agreement to repurchase such Subsequent
Receivables from the related Trust, at a purchase price equal to the related
Purchase Amounts therefor. See "Risk Factors--Sales of Subsequent
Receivables."
Custody of Receivable Files
If so specified in the related Prospectus Supplement, CTL initially will be
appointed to act as custodian for the Receivable files of each Trust. Pursuant
to the related Pooling and Servicing Agreement, CTL or another institution
specified in the related Prospectus Supplement will agree to hold the
Receivable files on behalf of the related Trust. Any such custodial
arrangement may be terminated by the Trust or any credit enhancer upon the
terms set forth therein. See also "Risk Factors--Insolvency Considerations."
If, through inadvertence or otherwise, any of the Receivables were sold to
another party (or a security interest therein were granted to another party)
that purchased (or took such security interest in) any of such Receivables in
the ordinary course of its business and took possession of such Receivables,
the purchaser (or secured party) would acquire an interest in the Receivables
superior to the interest of the related Trust if the purchaser (or secured
party) acquired (or took a security interest in) the Receivables for new value
and without actual knowledge of such Trust's interest. See "Risk Factors--
Perfection of Security Interests in Connection with the Transfer of
Receivables."
Accounts
Certificate Account. With respect to each Trust, the Servicer will establish
and maintain one or more accounts, in the name of the Trustee on behalf of the
related Certificateholders, into which all payments made on or in respect of
the related Receivables will be deposited and from which all distributions
with respect to the related Certificates will be made (the "Certificate
Account"). The amounts on deposit in the Certificate Account will be invested
by the Trustee in Eligible Investments.
Payahead Account. If so provided in the related Prospectus Supplement, the
Servicer will establish an additional account (the "Payahead Account"), in the
name of the Trustee and for the benefit of Obligors on the Receivables, into
which, to the extent required by the Pooling and Servicing Agreement,
Payaheads on Precomputed Receivables will be deposited until such time as the
payment becomes due. Until such time as payments are transferred from the
Payahead Account to the Certificate Account, they will not constitute
collected interest or collected principal and will not be available for
distribution to Certificateholders. The Payahead Account will initially be
maintained with the Trustee. Interest earned on the balance in the Payahead
Account will be remitted to the Servicer monthly. Collections on a Precomputed
Receivable made during a Collection Period shall be applied first to any
overdue scheduled payment on such Receivable, then to the scheduled payment on
such Receivable due in such Collection Period. If any collections remaining
after the scheduled payment is made are insufficient to prepay the Precomputed
Receivable in full, then generally such remaining collections shall be
transferred to and kept in the Payahead Account until such later Collection
Period as the collections may be retransferred to the Certificate Account and
applied either to a later scheduled payment or to prepay such Receivable in
full.
Pre-Funding Account. If so provided in the related Prospectus Supplement,
the Servicer will establish and maintain an account, in the name of the
related Trustee on behalf of the related Certificateholders, into which the
Depositor will deposit the Pre-Funded Amount on the related Closing Date (the
"Pre-Funding Account"). In no
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event will the Pre-Funded Amount exceed 25% of the aggregate Certificate
Balance of the related Series of Certificates. The Pre-Funded Amount will be
used by the related Trustee to purchase Subsequent Receivables from the
Depositor from time to time during the Funding Period. The amounts on deposit
in the Pre-Funding Account during the Funding Period will be invested by the
Trustee in Eligible Investments. Any investment income received on the
Eligible Investments during a Collection Period (such amounts, net of any
related investment expenses, "Investment Income") will be included in the
interest distribution amount on the following Distribution Date. The Funding
Period, if any, for a Trust will begin on the related Closing Date and will
end on the date specified in the related Prospectus Supplement, which in no
event will be later than the date that is three calendar months after the
related Closing Date. Any amounts remaining in the Pre-Funding Account at the
end of the Funding Period will be distributed to the related
Certificateholders, in the manner and priority specified in the related
Prospectus Supplement, as a prepayment of principal of the related
Certificates.
Any other accounts to be established with respect to a Trust, including any
Cash Collateral Account or yield supplement account, will be described in the
related Prospectus Supplement.
For each Series of Certificates, funds in the Certificate Account, Pre-
Funding Account and any other account identified as such in the related
Prospectus Supplement (collectively, the "Trust Accounts") will be invested as
provided in the related Pooling and Servicing Agreement in Eligible
Investments and any related Investment Income will be distributed as described
herein and in the related Prospectus Supplement. "Eligible Investments"
generally will be limited to investments acceptable to the Rating Agencies as
being consistent with the rating of the related Certificates. Except as may be
otherwise indicated in the applicable Prospectus Supplement, Eligible
Investments will include (i) direct obligations of, and obligations guaranteed
by, the United States of America, the Federal National Mortgage Association,
or any instrumentality of the United States of America; (ii) demand and time
deposits in or similar obligations of any depository institution or trust
company (including the Trustee or any agent of the Trustee, acting in their
respective commercial capacities) rated P-1 by Moody's Investors Service, Inc.
("Moody's") or A-1+ by Standard & Poor's Ratings Services ("Standard &
Poor's") (an "Approved Rating") or any other deposit which is fully insured by
the FDIC; (iii) repurchase obligations with respect to any security issued or
guaranteed by an instrumentality of the United States of America entered into
with a depository institution or trust company having an Approved Rating
(acting as principal); (iv) short-term corporate securities bearing interest
or sold at a discount issued by any corporation incorporated under the laws of
the United States of America or any State, the short-term unsecured
obligations of which have an Approved Rating, or higher, at the time of such
investment; (v) commercial paper having an Approved Rating at the time of such
investment; (vi) a guaranteed investment contract issued by any insurance
company or other corporation acceptable to the Rating Agencies; (vii)
interests in any money market fund having a rating of Aaa by Moody's or AAAm
by Standard & Poor's; and (viii) any other investment approved in advance in
writing by the Rating Agencies.
Except as described herein or in the related Prospectus Supplement, Eligible
Investments will be limited to obligations or securities that mature on or
before the date of the next scheduled distribution to Certificateholders of
such Series; provided, however, that each Pooling and Servicing Agreement will
generally permit the investment of funds in any Cash Collateral Account or
similar type of credit enhancement account to be invested in Eligible
Investments without the limitation that such Eligible Investments mature not
later than the business day prior to the next succeeding Distribution Date if
(i) the Servicer obtains a liquidity facility or similar arrangement with
respect to such Cash Collateral Account or other account and (ii) each rating
agency that initially rated the related Certificates confirms in writing that
the ratings of such Certificates will not be lowered or withdrawn as a result
of eliminating or modifying such limitation.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states 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 has a credit rating from
each Rating Agency in one of its generic rating categories that
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signifies investment grade. "Eligible Institution" means, with respect to a
Trust, (a) the corporate trust department of the related Trustee or (b) a
depository institution organized under the laws of the United States of
America or any one of the states thereof or the District of Columbia (or any
domestic branch of a foreign bank) (i) which has (A) (1) a long-term unsecured
debt rating of at least Baa3 from Moody's and at least BBB- from Standard &
Poor's and (2) a short term unsecured debt rating of at least P-2 from Moody's
and at least A-2 from Standard & Poor's or (B) is approved by each Rating
Agency and any credit enhancer of the related Series and (ii) whose deposits
are insured by the FDIC.
Servicing Procedures
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables and will, consistent with the related Pooling and
Servicing Agreement, follow such collection procedures as it follows with
respect to comparable automotive installment contracts that it owns or
services for others. The Servicer will continue to follow such normal
collection practices and procedures as it deems necessary or advisable to
realize upon any Receivables with respect to which the Servicer determines
that eventual payment in full is unlikely. The Servicer may sell the Financed
Vehicle securing such Receivables at a public or private sale, or take any
other action permitted by applicable law.
Consistent with its normal procedures, the Servicer may, in its discretion,
arrange with the Obligor on a Receivable to extend or modify the payment
schedule; if, however, the extension of a payment schedule causes a Receivable
to remain outstanding on the Final Scheduled Maturity Date the Servicer will
purchase such Receivable at the Purchase Amount as of the last day of the
Collection Period preceding such Final Scheduled Distribution Date. In
addition, unless otherwise provided in the related Prospectus Supplement, the
Servicer will be obligated under each Pooling and Servicing Agreement to
purchase any Receivable at the Purchase Amount if (i) among other things, the
Servicer reduces the Contract Rate, reduces the amount of the scheduled
monthly payments or reduces the amount financed or fails to maintain a
perfected security interest in the related Financed Vehicle and (ii) the
interest of the Certificateholders in such Receivable is materially and
adversely affected by such action or failure to act of the Servicer. The
Servicer's purchase obligation will constitute the sole remedy available to
the related Certificateholders or Trustee for any such modification of a
Contract.
Collections
With respect to each Trust, the Servicer will deposit all payments (from
whatever source) on and all proceeds of the related Receivables collected
during a Collection Period into the related Certificate Account not later than
two business days after receipt thereof. However, at any time that and for so
long as (i) CTL is the Servicer, (ii) no Event of Default shall have occurred
and be continuing with respect to the Servicer and (iii) each other condition
to making deposits less frequently than daily as may be specified by the
Rating Agencies or set forth in the related Prospectus Supplement is
satisfied, the Servicer will not be required to deposit such amounts into the
Certificate Account until on or before the applicable Distribution Date.
Pending deposit into the Certificate Account, collections may be invested by
the Servicer at its own risk and for its own benefit and will not be
segregated from its own funds. If the Servicer were unable to remit such
funds, Certificateholders might incur a loss. 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
on the related Receivables and payment of the aggregate Purchase Amounts with
respect to Receivables purchased by the Servicer.
Payaheads on Precomputed Receivables will be transferred from the
Certificate Account and deposited into the Payahead Account for subsequent
transfer to the Certificate Account, as described above under "--Accounts."
Advances
If a Receivable is delinquent more than 30 days at the end of a Collection
Period, the Servicer will make an Advance in the amount of 30 days of interest
due on such Receivable, but only to the extent that the Servicer, in
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its sole discretion, expects to recoup the Advance from subsequent collections
on the Receivable or from withdrawals from any Cash Collateral Account or
other form of credit enhancement. The Servicer will deposit Advances in the
Certificate Account on or prior to the date specified therefor in the related
Prospectus Supplement. If the Servicer determines that reimbursement of an
Advance from subsequent payments on or with respect to the related Receivable
is unlikely, the Servicer may recoup such Advance from insurance proceeds,
collections made on other Receivables or from any other source specified in
the related Prospectus Supplement.
Servicing Compensation and Payment of Expenses
The Servicer will be entitled to receive a fee with respect to each Trust
(the "Servicing Fee"), equal to one percent (1.00%) per annum (the "Servicing
Fee Rate"), payable monthly at one-twelfth the annual rate, of the related
aggregate Pool Balance. The Servicer also will collect and retain any late
fees, prepayment charges, other administrative fees or similar charges allowed
by applicable law with respect to the Receivables and will be entitled to
reimbursement from each Trust for certain liabilities.
The Servicing Fee will compensate the Servicer for performing the functions
of a third-party servicer of automotive receivables as an agent for the
related Trust, including collecting and posting all payments, making Advances,
responding to inquiries of Obligors on the Receivables, investigating
delinquencies, sending payment coupons to Obligors, and overseeing the
collateral in cases of Obligor default. The Servicing Fee will also compensate
the Servicer for administering the related Receivables Pool, including
accounting for collections and furnishing monthly and annual statements to the
related Trustee with respect to distributions, and generating federal income
tax information for such Trust and for the related Certificateholders. The
Servicing Fee also will reimburse the Servicer for certain taxes, accounting
fees, outside auditor fees, data processing costs, and other costs incurred in
connection with administering the applicable Receivables Pool.
Distributions
With respect to each Series of Certificates, beginning on the Distribution
Date specified in the related Prospectus Supplement, distributions of
principal and interest (or, where applicable, of interest only or principal
only) on each class of Certificates entitled thereto will be made by the
related Trustee to the related Certificateholders. The timing, calculation,
allocation, order, source and priorities of, and requirements for, all
distributions to the holders of each class of Certificates will be set forth
in the related Prospectus Supplement.
With respect to each Trust, collections on or with respect to the related
Receivables will be deposited into the related Certificate Account for
distribution to the related Certificateholders on each Distribution Date to
the extent and in the priority provided in the related Prospectus Supplement.
Credit enhancement, such as a Cash Collateral Account or yield supplement
account or other arrangement, may be available to cover 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, and unless otherwise specified therein, distributions
in respect of principal of a class of Certificates of a Series will be
subordinate to distributions in respect of interest on such class, and
distributions in respect of one or more classes of Certificates of a Series
may be subordinate to payments in respect of other classes of Certificates.
Distributions of principal on the Certificates of a Series may be based on the
amount of principal collected or due, or the amount of realized losses
incurred, in a Collection Period.
Credit and Cash Flow Enhancement
The amounts and types of any credit and cash flow enhancement arrangements
and the provider thereof, if applicable, with respect to each class of
Certificates of a Series will be set forth in the related Prospectus
Supplement. To the extent provided in the related Prospectus Supplement,
credit or cash flow enhancement may be in the form of subordination of one or
more classes of Certificates, Cash Collateral Accounts, reserve accounts,
yield supplement accounts, spread accounts, letters of credit, surety bonds,
insurance policies, over-collateralization, credit or liquidity facilities,
guaranteed investment contracts, swaps or other interest rate
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protection agreements, repurchase obligations, other agreements with respect
to third-party payments or other support, cash deposits, or such other
arrangements as may be described in the related Prospectus Supplement, or any
combination of the foregoing. If specified in the applicable Prospectus
Supplement, credit or cash flow enhancement for a class of Certificates may
cover one or more other classes of Certificates of the same Series, and credit
enhancement for a Series of Certificates may cover one or more other Series of
Certificates.
The existence of a Cash Collateral Account or other form of credit
enhancement for the benefit of any class or Series of Certificates is intended
to enhance the likelihood of receipt by the Certificateholders of such class
or Series of the full amount of principal and interest due thereon and to
decrease the likelihood that such Certificateholders will experience losses.
To the extent specified in the related Prospectus Supplement, the credit
enhancement for a class or Series of Certificates will not provide protection
against all risks of loss and will not guarantee repayment of all principal
and interest thereon. If losses occur which exceed the amount covered by such
credit enhancement or which are not covered by such credit enhancement,
Certificateholders will bear their allocable share of such losses, as
described in the related Prospectus Supplement. In addition, if a form of
credit enhancement covers more than one Series of Certificates,
Certificateholders of any such Series will be subject to the risk that such
credit enhancement may be exhausted by the claims of Certificateholders of
other Series.
Cash Collateral Account. If so provided in the related Prospectus
Supplement, pursuant to the related Pooling and Servicing Agreement the
Depositor will establish an account (a "Cash Collateral Account") for a Series
or class or classes of Certificates, which will be maintained with the related
Trustee. To the extent provided in the related Prospectus Supplement, a Cash
Collateral Account will be funded by an initial deposit by the Depositor on
the Closing Date in the amount set forth in the related Prospectus Supplement
and, if the related Series has a Funding Period, may also be funded 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 Cash Collateral Account may be increased or
reinstated on each Distribution Date, to the extent described in the related
Prospectus Supplement, by the deposit thereto of the amount of collections on
the related Receivables remaining on such Distribution Date after the payment
of all other required payments and distributions on such date. The related
Prospectus Supplement will describe the circumstances under which and the
manner in which distributions may be made out of any such Cash Collateral
Account, either to holders of the Certificates covered thereby or to the
Depositor or to any other entity.
Evidence as to Compliance
Each Pooling and Servicing Agreement will provide that a firm of independent
public accountants will furnish annually to the related Trustee a statement as
to compliance by the Servicer during the preceding twelve months with certain
standards relating to the servicing of the Receivables.
Each Pooling and Servicing Agreement will also provide for delivery to the
related Trustee each year of a certificate signed by an officer of the
Servicer stating that the Servicer has fulfilled its obligations under the
related Pooling and Servicing Agreement throughout the preceding twelve months
or, if there has been a default in the fulfillment of any such obligation,
describing each such default. The Servicer has agreed or will agree to give
each Trustee notice of Events of Defaults under the related Pooling and
Servicing Agreement. Copies of the foregoing statements and certificates may
be obtained by Certificateholders by a request in writing addressed to the
related Trustee at the Corporate Trust Office for such Trustee specified in
the related Prospectus Supplement.
Certain Matters Regarding the Servicer
Each Pooling and Servicing Agreement will provide that CTL may not resign
from its obligations and duties as Servicer thereunder, except upon
determination that CTL's performance of such duties is no longer permissible
under applicable law. Under certain circumstances, CTL may transfer its
obligations and duties as Servicer to a qualified affiliate of Bay View. No
such assignment or resignation will become effective until the
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related Trustee or a successor servicer has assumed CTL's servicing
obligations and duties under the related Pooling and Servicing Agreement.
Each Pooling 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 Certificateholders for taking any
action or for refraining from taking any action pursuant to the related
Pooling and Servicing Agreement or for errors in judgment; provided, however,
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 or by
reason of reckless disregard of its obligations and duties thereunder. In
addition, each Pooling 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 its servicing responsibilities under such Pooling and
Servicing Agreement and that, in its opinion, may cause it to incur any
expense or liability.
Under the circumstances specified in each Pooling and Servicing Agreement,
any entity into which CTL may be merged or consolidated, or any entity
resulting from any merger or consolidation to which CTL is a party, or any
entity succeeding to the indirect automobile financing or receivable servicing
business of CTL, which corporation or other entity assumes the obligations of
the Servicer, will be the successor to the Servicer under the related Pooling
and Servicing Agreement.
CTL has a contract with Norwest Financial Inc., pursuant to which Norwest
Financial Inc. will provide CTL data processing and communication system
services through October, 2001.
Events of Default
"Events of Default" under each Pooling and Servicing Agreement will consist
of: (i) any failure by the Servicer or CTL to deliver to the related Trustee
for distribution to the related Certificateholders any required payment, which
failure continues unremedied for five business days after discovery by an
officer of the Servicer or after written notice to the Servicer of such
failure from the Trustee or holders of the related Certificates evidencing not
less than 25% of the aggregate Certificate Balance (or notional principal
amount, if applicable); (ii) any failure by the Servicer, CTL or the Depositor
duly to observe or perform in any material respect any covenant or agreement
in the related Pooling and Servicing Agreement, Certificates or Purchase
Agreement, which failure materially and adversely affects the rights of the
related Certificateholders and which continues unremedied for 60 days after
written notice of such failure is given (1) to the Servicer, CTL or the
Depositor, as the case may be, by the related Trustee or (2) to the Servicer,
CTL or the Depositor, as the case may be, and to the related Trustee by
holders of the related Certificates evidencing not less than 25% of the
related Certificate Balance (or notional principal amount, if applicable); and
(iii) certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities, or similar proceedings with respect to the Servicer
and certain actions by the Servicer indicating its insolvency, reorganization
pursuant to bankruptcy proceedings or inability to pay its obligations.
Rights Upon Event of Default
As long as an Event of Default under the related Pooling and Servicing
Agreement remains unremedied, the related Trustee or holders of Certificates
of the related Series evidencing not less than 25% of the Certificate Balance
(or notional principal amount, if applicable) may terminate all the rights and
obligations of the Servicer under such Pooling and Servicing Agreement,
whereupon a successor Servicer appointed by the related Trustee or such
Trustee will succeed to all the responsibilities, duties and liabilities of
the Servicer under such Pooling and Servicing Agreement and will be entitled
to similar compensation arrangements, provided, however, that if the Trustee
becomes the successor Servicer it will not be subject to all of the
indemnification obligations of the Servicer. In the event that the related
Trustee is unwilling or unable to act as successor to the Servicer, such
Trustee may appoint, or may petition a court of competent jurisdiction to
appoint a successor with assets of at
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least $50,000,000 and whose regular business includes the servicing of
automotive receivables. The related Trustee may arrange for compensation to be
paid to such successor Servicer, which in no event may be greater than the
servicing compensation paid to the Servicer under the related Pooling and
Servicing Agreement. See "Risk Factors--Insolvency Considerations." A credit
enhancement provider may have certain rights upon Event of Default, as
specified in the related Prospectus Supplement.
Waiver of Past Defaults
Holders of Certificates evidencing not less than a majority of the related
aggregate Certificate Balance (or notional principal amount, if applicable)
may, on behalf of all such Certificateholders, waive any default by the
Servicer in the performance of its obligations under the related Pooling and
Servicing Agreement and its consequences, except a default in making any
required deposits to or payments from any Account in accordance with the
Pooling and Servicing Agreement. No such waiver will impair the
Certificateholders' rights with respect to subsequent Events of Default.
Amendment
Each Pooling and Servicing Agreement may be amended from time to time by the
Depositor, the Servicer and the related Trustee, without the consent of the
related Certificateholders, to cure any ambiguity, correct or supplement any
provision therein that may be inconsistent with other provisions therein, or
to make any other provisions with respect to matters or questions arising
under such Pooling and Servicing Agreement that are not inconsistent with the
provisions of the Pooling and Servicing Agreement; provided that such action
shall not, in the opinion of counsel satisfactory to the related Trustee,
materially and adversely affect the interests of any related
Certificateholder. Each Pooling and Servicing Agreement may also be amended by
the Depositor, the Servicer and the related Trustee with the consent of the
holders of the related Certificates evidencing not less than 51% of the
related aggregate Certificate Balance (and notional principal amount, if
applicable) for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of such Pooling and Servicing
Agreement or of modifying in any manner the rights of such Certificateholders;
provided, however, that no such amendment may (i) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on or in respect of the related Receivables or distributions that are
required to be made for the benefit of such Certificateholders or (ii) reduce
the aforesaid percentage of the Certificate Balance of such Series that is
required to consent to any such amendment, without the consent of the holders
of all of the outstanding Certificates of such Series. Any provision in a
Pooling and Servicing Agreement that imposes unlimited liability on the holder
of a Class IC Certificate and provides for the termination of the related
Trust upon the occurrence of an "Insolvency Event" (as described in the
related Prospectus Supplement) with respect to such holder of the Class IC
Certificate, shall not be amended without the unanimous consent of the Trustee
and all holders of outstanding Certificates of such Series (or unless an
opinion of Counsel is delivered to the effect that such provision is not
required under relevant state law). No amendment of a Pooling and Servicing
Agreement shall be permitted unless an opinion of counsel is delivered to the
Trustee to the effect that such amendment will not adversely affect the tax
status of the Trust.
Termination
The obligations of the Servicer, the Depositor and the related Trustee
pursuant to the related Pooling and Servicing Agreement will terminate upon
the earlier to occur of (i) the maturity or other liquidation of the last
Receivable in the related Receivables Pool and the disposition of any amounts
received upon liquidation of any such remaining Receivables; (ii) the payment
to the related Certificateholders of all amounts required to be paid to them
pursuant to the Pooling and Servicing Agreement; and (iii) the occurrence of
certain Insolvency Events, to the extent set forth in the related Prospectus
Supplement.
In order to avoid excessive administrative expenses, the Servicer will be
permitted to purchase from each Trust or to cause such Trust to sell all
remaining Receivables in the related Receivables Pool as of the end of any
Collection Period, if the Certificate Balance as of the Distribution Date
following such Collection Period would be less than or equal to 10% of the
initial aggregate Certificate Balance, at a purchase price equal to the fair
market value of such Receivables, but not less than the sum of (x) the
outstanding Pool Balance and
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(y) accrued and unpaid interest on such amount computed at a rate equal to the
weighted average Contract Rate, minus any amount representing payments
received on the Receivables and not yet applied to reduce the principal
balance thereof or interest related thereto. To the extent there is an
interest only class of Strip Certificates offered under the related Prospectus
Supplement, the right of the Servicer to purchase the remaining Receivables
will be contingent on the reduction to zero of the notional amount of such
class.
If and to the extent provided in the related Prospectus Supplement, the
related Trustee may, within ten days following a Distribution Date as of which
the Pool Balance is equal to or less than 10% of the original Pool Balance,
solicit bids for the purchase of the Receivables remaining in such Trust, in
the manner and subject to the terms and conditions set forth in such
Prospectus Supplement. If such Trustee receives satisfactory bids as described
in such Prospectus Supplement, then the Receivables remaining in such Trust
will be sold to the highest bidder at a purchase price equal to the fair
market value of such Receivables, but not less than the sum of (x) the
outstanding Pool Balance and (y) accrued and unpaid interest on such amount
computed at a rate equal to the weighted average Contract Rate, minus any
amount representing payments received on the Receivables and not yet applied
to reduce the principal balance thereof or interest related thereto.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Security Interests in Vehicles
Installment sale contracts such as those included in the Receivables
evidence the credit sale of automobiles, light trucks, recreational vehicles,
motorcycles and vans by dealers to obligors; the contracts and the installment
loan and security agreements also constitute personal property security
agreements and include grants of security interests in the vehicles under the
UCC. 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 all of the States where CTL currently acquires or originates
Receivables, a security interest in a vehicle is perfected by notation of the
secured party's lien on the vehicle's certificate of title. A majority of the
Receivables are currently originated in California and Texas. Unless otherwise
specified in the related Prospectus Supplement, with respect to the
Receivables, the lien is or will be perfected in the name of CTL. Each
Receivable prohibits the sale or transfer of the Financed Vehicle without the
lienholder's consent.
Pursuant to each Purchase Agreement, CTL will assign its security interests
in the Financed Vehicles to the Depositor along with the Receivables. Pursuant
to each Pooling and Servicing Agreement, the Depositor will assign its
security interests in the Financed Vehicles to the related Trustee along with
the Receivables. Because of the administrative and quality control concerns
related to the retitling of a large amount of certificates of title and
related fees and expenses of each state's Department of Motor Vehicles,
neither the Depositor nor the related Trustee will amend any certificate of
title to identify itself as the secured party.
In most states, including California, an assignment such as that under a
Pooling and Servicing Agreement should be an effective conveyance of a
security interest 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 certain other states, the laws governing
certificates of title are silent on the question of the effect of an
assignment on the continued validity and perfection of a security interest in
vehicles. However, with respect to security interests perfected by a central
filing, the UCC in these states provides that a security interest continues to
be valid and perfected even though the security interest has been assigned to
a third party and no amendments or other filings are made to reflect the
assignment. An official comment to the UCC states that this rule should
control a security interest in a vehicle which is perfected by the notation of
the lien on the certificate of title. Although the comment does not have the
force of law, official comments are typically given substantial weight by the
courts.
Other states, including Texas, have statutory provisions that address or
could be interpreted as addressing assignments. However, nearly all of these
statutory provisions either do not require compliance with the procedure
outlined to insure the continued validity and perfection of the lien or are
ambiguous (including Texas) on the issue of whether the procedure must be
followed. Under the official comment noted above, if these procedures for
noting an assignee's name on a certificate of title are determined to be
merely permissive in nature, the procedures would not have to be followed as a
condition to the continued validity and perfection of the security interest.
By not identifying the Trust as the secured party on the certificate of
title, the security interest of the Trust in the vehicle could be defeated
through fraud or negligence. In the absence of fraud or forgery by the vehicle
owner or CTL, or administrative error by state or local agencies, the notation
of CTL's lien on the certificates should be sufficient to protect the Trust
against the right of subsequent purchasers of a vehicle or subsequent lenders
who take a security interest in a vehicle securing a Receivable. If there are
any vehicles as to which CTL failed to obtain a perfected security interest,
its security interest would be subordinate to, among others, subsequent
purchasers of the vehicles and holders of perfected security interests. Such a
failure, however, would constitute a breach of warranties under the related
Pooling and Servicing Agreement and Purchase Agreement and would create an
obligation of CTL to repurchase the related Receivable, unless such breach
were cured in a timely manner. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables."
Under the laws of most states, including California and Texas, the perfected
security interest in a vehicle continues for four months after a vehicle is
moved to a state other than the state which issued the certificate of title
and thereafter until the vehicle owner re-registers the vehicle in the new
state. A majority of states, including
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California and Texas, require surrender of a certificate of title to re-
register a vehicle. Since CTL will have its lien noted on the certificates of
title and the Servicer will retain possession of the certificates issued by
most states in which Receivables were or will be originated, the Servicer
would ordinarily learn of an attempt at re-registration through the request
from the obligor to surrender possession of the certificate of title or would
receive notice of surrender from the state of re-registration since the
security interest would be 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, the Servicer takes 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,
the Servicer must surrender possession of the certificate of title or will
receive notice as a result of CTL's lien noted thereon and accordingly will
have an opportunity to require satisfaction of the related Receivable before
release of the lien. Under each Pooling and Servicing Agreement, the Servicer
is obligated to take appropriate steps, at its own expense, to maintain
perfection of security interests in the Financed Vehicles.
Under the laws of most states, including California and Texas, liens for
repairs performed on a motor vehicle and liens for unpaid taxes would take
priority over even a perfected security interest in a Financed Vehicle. In
some states, a perfected security interest in a Financed Vehicle may take
priority over liens for repairs.
CTL will represent and warrant in each Purchase Agreement and Pooling and
Servicing Agreement that, as of the date of issuance of the Certificates, 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 could arise at any time during the term of a Receivable. No
notice will be given to the Trustee or Certificateholders in the event such a
lien arises.
Repossession
In the event of a default by vehicle purchasers, the holder of a retail
installment sale contract or an installment loan and security agreement has
all of the remedies of a secured party under the UCC, except where
specifically limited by other state laws. The remedy employed by the Servicer
in most cases of default is self-help repossession and is accomplished simply
by taking possession of the Financed Vehicle. The self-help repossession
remedy is available under the UCC in most of the states, including California
and Texas, in which Receivables have been or will be originated as long as the
repossession can be accomplished without a breach of the peace.
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. The vehicle must then be repossessed in
accordance with that order.
Notice of Sale; Redemption Rights
In the event of default by an obligor, some jurisdictions (not including
California or Texas) 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. The written terms of the Receivables, however, may require such
notice. Generally, this right of reinstatement may be exercised on a limited
number of occasions in any one-year period.
The UCC and other state laws require the secured party to provide an obligor
with reasonable notice of the date, time and place of any public sale and/or
the date after which any private sale of the collateral may be held. The
obligor generally 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 its sale, and, to the extent
provided in the related retail installment sale contract, and, as permitted by
law, reasonable attorneys' fees.
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Deficiency Judgments and Excess Proceeds
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. If the net proceeds from resale do not cover the full amount of
the indebtedness, a deficiency judgment may be sought. 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 all
indebtedness, there is a surplus of funds. In that case, the UCC requires the
lender to remit the surplus to any holder of a lien with respect to the
vehicle or if no such lienholder exists, the UCC requires the lender to remit
the surplus to the former owner of the vehicle.
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
Billing 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 Act and of the Uniform
Consumer Credit Code and state motor vehicle 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. Those 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
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, other state statutes, or the common laws 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 that 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, the Trustee, as holder of the
Receivables, will be subject to any claims or defenses that the purchaser of
the related financed vehicle may assert against the seller of the vehicle.
Such 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, including California
and Texas, dealers of motor vehicles are required to be licensed to sell motor
vehicles at retail sale. In addition, with respect to used vehicles, the
Federal Trade Commission's Rule on Sale of Used Vehicles requires that all
sellers of used vehicles prepare, complete and display a "Buyer's Guide" which
explains the warranty coverage for such vehicles. Furthermore, Federal
Odometer Regulations promulgated under the Motor Vehicle Information and Cost
Savings Act requires that all sellers of used vehicles furnish a written
statement signed by the seller certifying the accuracy of the odometer
reading. If a seller is not properly licensed or if either a Buyer's Guide or
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 CTL's
representations and warranties under each Purchase Agreement and Pooling and
Servicing Agreement and would create an obligation of CTL to make certain
indemnities and repurchase the Receivable unless such breach were cured in a
timely manner. See "Description of the Transfer and Servicing Agreements--Sale
and Assignment of Receivables."
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an obligor from some or all of the
legal consequences of a default.
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In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC 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 UCC
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.
CTL will represent and warrant in each Purchase Agreement that each
Receivable complies with all requirements of law in all material respects.
Accordingly, if an Obligor has a claim against a 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 CTL's representations
and warranties under the Purchase Agreement and would create an obligation of
CTL to repurchase such Receivable unless the breach were cured. See
"Description of the Transfer and Servicing Agreements--Sale and Assignment of
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 an automobile, and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
automobile 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.
FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of the anticipated material United States
federal income tax consequences of the purchase, ownership and disposition of
Certificates, to the extent it relates to matters of law or legal conclusions
with respect to the Trust being classified as a partnership represents the
opinion of Silver, Freedman & Taff, L.L.P., counsel to the Depositor, subject
to the assumptions or qualifications set forth herein. The discussion is
directed to investors who will hold the Certificates as "capital assets"
within the meaning of Section 1221 of the Internal Revenue Code of 1996, as
amended (the "Code") and does not purport to discuss all federal income taxes
that may be applicable to the individual circumstances of particular investors
which, or categories of holders (such as insurance companies, regulated
investment companies or dealers in securities) who, may be subject to special
rules under the Code. Further, the authorities on which this discussion, and
the opinion as to partnership classification referred to below, are based are
subject to change or potential differing interpretations which could apply
retroactively. Prospective investors should note that no rulings have been or
will be sought from the Internal Revenue Service (the "IRS") with respect to
any of the United States federal income tax consequences discussed below and
no assurance can be given that the IRS will not take contrary positions.
Taxpayers and preparers of tax returns should be aware that under applicable
Treasury regulations a provider of advice on specific issues of law is not
considered an income tax return preparer unless the advice (i) is given with
respect to events that have occurred at the time the advice is rendered and is
not given with respect to the consequences of contemplated actions, and (ii)
is directly relevant to the determination of an entry on a tax return.
Accordingly, prospective investors should consult their tax advisors and tax
return preparers regarding the preparation of any item on a tax return, even
where the anticipated tax treatment is discussed herein. In addition to the
United States federal income tax consequences described herein, prospective
investors are advised to consider the state, local, foreign and other tax
consequences that may be applicable to them in connection with the purchase,
ownership and disposition of Certificates. Certificate Owners are advised to
consult their tax advisors concerning all tax consequences applicable to them
(including federal, state, local, foreign or other tax consequences) arising
from the purchase, ownership and disposition of Certificates.
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Prior to the issuance of any Certificates by each Trust, an opinion of
counsel to the Depositor will be delivered as to whether the Trust will be
classified as a partnership or as a grantor trust for United States federal
income tax purposes. The tax opinion as to partnership classification will be
the same or substantially the same as the Silver, Freedman & Taff, L.L.P.
opinion set forth under the heading "Tax Characterization of the Trust as a
Partnership" in this Prospectus. Silver, Freedman & Taff, L.L.P. has agreed to
deliver a tax opinion, based upon the assumption that current tax laws and
interpretations thereof shall continue in full force and effect without
modification, to the effect that if the Trust is not classified as a
partnership for tax purposes, it will be classified as a grantor trust for
United States federal income tax purposes. For purposes of the discussion set
forth herein, references to the Trust, the Certificates and related terms,
parties and documents shall be deemed to refer, unless otherwise specified
herein, to each Trust and Certificates and the related terms, parties and
documents applicable to such Trust.
As discussed below, the United States federal income tax consequences to
Certificate Owners will vary depending on whether the Trust is treated as a
partnership or whether the Trust will be treated as a grantor trust under the
Code. The Prospectus Supplement for each Series of Certificates will specify
whether the Trust will be treated as a partnership (not taxable as a
corporation) or a grantor trust. In addition, a copy of the tax opinion of
Silver, Freedman & Taff, L.L.P., counsel to the Depositor, with respect to
each Trust will be filed by the Depositor with the Commission on a Current
Report on Form 8-K within 15 days after the Closing Date for the Series of
Certificates issued by such Trust.
TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
Tax Characterization of the Trust as a Partnership
In the opinion of Silver, Freedman & Taff, L.L.P., under current law, the
Trust will not be classified as an association (or publicly traded
partnership) taxable as a corporation for United States federal income tax
purposes. This opinion is based on the assumption that the terms of the
Pooling and Servicing Agreement and related documents will be complied with,
and that (i) the Trust will make a proper election not to be treated as an
association taxable as a corporation pursuant to the final "check-the-box"
regulations issued by the Department of the Treasury on December 17, 1996 and
effective as of January 1, 1997, by timely filing Form 8832--Entity
Classification Election, with the appropriate IRS service center as further
provided in the Pooling and Servicing Agreement, and (ii) the nature of the
income of the Trust will exempt it from the rule that certain publicly traded
partnerships are taxable as corporations.
As a result of the Trust's tax classification, each Certificate Owner will
be required to include in its gross income its pro rata share of the original
issue discount accrued with respect to the Receivables whether or not cash is
actually distributed to the Certificate Owner. See "--Discussion of Tax
Consequences to Holders of the Certificates--Discount and Premium" and "Trusts
Treated As Grantor Trusts--Stripped Bonds and Stripped Coupons--Original Issue
Discount."
Discussion of Tax Consequences to Holders of the Certificates
Treatment of the Trust as a Partnership. The Depositor and the Servicer will
agree, and the related Certificate Owners will 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 Certificate Owners (including
the holder of the Class IC Certificate). Although the proper characterization
of the arrangement involving the Trust, the Certificates, the Depositor and
the Servicer is not certain because there is no authority on transactions
closely comparable to that contemplated herein, the related Pooling and
Servicing Agreement will provide that an election to treat the Trust as a
partnership shall be made under the "check-the-box" procedure described above
under "Tax Characterization of the Trust as a Partnership."
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Partnership Taxation. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificate Owner will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the related Receivables
(including appropriate adjustments for market discount, original issue
discount ("OID") and bond premium) and any gain upon collection or disposition
of such Receivables. The Trust's deductions will consist primarily of
servicing and other fees, and losses or deductions upon collection or
disposition of Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (i.e., the
Pooling and Servicing Agreement and related documents). The Pooling and
Servicing Agreement will provide, in general, that the Certificate Owners will
be allocated taxable income of the Trust for each month equal to the sum of:
(i) the interest that accrues on the Certificates in accordance with their
terms for such month, including interest accruing at the related Pass-Through
Rate for such month and interest, if any, on amounts previously due on the
Certificates but not yet distributed; (ii) any Trust income attributable to
discount on the related Receivables that corresponds to any excess of the
principal amount of the Certificates over their initial issue price; (iii) any
other amounts of income payable to the Certificate Owners for such month; and
(iv) in the case of an individual, such Certificate Owner's share of income
corresponding to the miscellaneous itemized deductions described in the next
paragraph. Such allocation will be reduced by any amortization by the Trust of
premium on Receivables that corresponds to any excess of the issue price of
Certificates over their principal amount. It is anticipated that all remaining
taxable income of the Trust will be allocated to the Class IC
Certificateholder. In the event the Trust issues interest-only Class I
Certificates, the amount allocated to such Certificate Owners will equal the
excess of (i) the Class I Pass-Through Rate times the Notional Principal
Amount for such month over (ii) the portion of the amount distributed with
respect to the Class I Certificates for such month that would constitute a
return of basis if the Class I Certificates constituted an instrument
described in Section 860G(a)(1)(B)(ii) of the Code, applying the principles of
Section 1272(a)(6) of the Code and employing the constant yield method of
accrual (utilizing the appropriate prepayment assumption); provided, that no
negative accruals shall be permitted, and, provided further, that other
deductions derived by the Trust equal to the aggregate remaining capital
account balances of the Class I Certificate Owners will be allocated to the
Class I Certificates in proportion to the respective capital account balances
immediately before the final redemption.
An individual taxpayer's share of expenses of the Trust (including fees to
the Servicer, but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or
in part and might result in such holder being taxed on an amount of income
that exceeds the amount of cash actually distributed to such holder over the
life of the Trust. Any net loss of the Trust will be allocated first to the
Class IC Certificateholder to the extent of its adjusted capital account and
then to the other Certificate Owners in the priorities set forth in the
Pooling and Servicing Agreement to the extent of their respective adjusted
capital accounts, and thereafter to the Class IC Certificateholder.
The Trust intends to make all calculations relating to market discount
income and amortization of premium with respect to both Simple Interest
Receivables and Precomputed Receivables on an aggregate basis rather than a
Receivable-by-Receivable 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 Certificate Owners.
Discount and Premium. It is believed that the Receivables were not issued
with OID, and, therefore, the Trust should not have OID income. However, the
purchase price paid by the Trust for the related 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.)
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If the Trust acquires the related Receivables at a market discount or
premium, it will elect to include any such discount in income currently as it
accrues over the life of such Receivables or to offset any such premium
against interest income on such Receivables. As indicated above, a portion of
such market discount income or premium deduction may be allocated to
Certificate Owners.
Section 708 Termination. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a 12-
month period. If such a termination occurs, the Trust will be considered to
make a deemed contribution of the assets of the Trust to a new partnership in
exchange for interests in the Trust. Such interests in a new partnership would
be deemed distributed to the partners of the Trust in liquidation thereof,
which would not constitute a sale or exchange. 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.
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 Certificate Owner'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 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, to 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 related Receivables would
generally be treated as ordinary income to the holder and would give rise to
special 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 Certificate Owner is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, 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 Certificate Owners in
proportion to the principal amount of Certificates (or notional principal
amount, in the case of any interest only 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
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or
losses of the Trust might be reallocated among the Certificate Owners. The
Class IC Certificateholder, acting as tax matters partner for the Trust, will
be authorized to revise the Trust's method of allocation between transferors
and transferees to conform to a method permitted by future regulations.
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Section 754 Election. In the event that a Certificate Owner sells its
Certificates at a profit (loss), the purchasing Certificate Owner will have a
higher (lower) basis in the Certificates than the selling Certificate Owner
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, Certificate Owners 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 Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis, and the fiscal year
of the Trust is expected to be the calendar year. The Trustee will file a
partnership information return (IRS Form 1065) with the IRS for each taxable
year of the Trust and will report each Certificate Owner'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-l 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 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 (i) the name,
address and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (a) the name, address and identification number of such
person, (b) 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 (c) 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 Exchange Act 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 Class IC Certificateholder or the party named in the related Prospectus
Supplement will be designated as the tax matters partner for each Trust in the
related Pooling and Servicing Agreement and, as such, will be responsible for
representing the Certificate Owners in any dispute with the IRS. The Code
provides for administrative examination of a partnership as if the partnership
were a separate and distinct taxpayer. Generally, the statute of limitations
for partnership items does not expire before three years after the date on
which the partnership information return is filed. Any adverse determination
following an audit of the return of the Trust by the appropriate taxing
authorities could result in an adjustment of the returns of the Certificate
Owners, and, under certain circumstances, a Certificate Owner may be precluded
from separately litigating a proposed adjustment to the items of the Trust. An
adjustment could also result in an audit of a Certificate Owner's returns and
adjustments of items not related to the income and losses of the Trust.
Tax Consequences to Foreign Certificate Owners. It is not clear whether the
Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under
facts substantially similar to those described herein. Although it is not
expected that the Trust would be engaged in a trade or business in the United
States for such purposes, the Trust will withhold as if it were so engaged in
order to protect the Trust from possible adverse consequences of a failure to
withhold. The Trust expects to withhold on the portion of its taxable income
that is allocable to foreign Certificate Owners pursuant to Section 1446 of
the Code, as if such income were effectively connected to a U.S. trade or
business, at a rate of 35% for foreign holders that are
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taxable as corporations and 39.6% for all other foreign holders. Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures. In
determining a holder's withholding status, the Trust may rely on IRS Form W-8,
IRS Form W-9 or the holder's certification of nonforeign status signed under
penalties of perjury.
Each foreign holder might be required to file a U.S. individual or corporate
income tax return (including, in the case of a corporation, the branch profits
tax) on its share of the Trust's income. Each foreign holder must obtain a
taxpayer identification number from the IRS and submit that number to the
Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
Certificate Owner who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard
to the income of the Trust. If these interest payments are properly
characterized as guaranteed payments, then the interest will not be considered
"portfolio interest". As a result, Certificate Owners will be subject to
United States federal income tax and withholding tax at a rate of 30 percent,
unless reduced or eliminated pursuant to an applicable treaty. In such case, a
foreign holder would only be entitled to claim a refund for that portion of
the taxes in excess of the taxes that should be withheld with respect to the
guaranteed payments.
Backup Withholding. Distributions made on the Certificates and proceeds from
the sale of the Certificates will be subject to a "backup" withholding tax of
31% if, in general, the Certificate Owner fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
TRUSTS TREATED AS GRANTOR TRUSTS
Tax Characterization of Grantor Trusts
If specified in the related Prospectus Supplement, Silver, Freedman & Taff,
L.L.P. will deliver its opinion that the Trust will not be classified as an
association taxable as a corporation and that such Trust will be classified as
a grantor trust under subpart E, Part I of subchapter J of the Code. In this
case, beneficial owners of Certificates (referred to herein as "Grantor Trust
Certificateholders") will be treated for federal income tax purposes as owners
of a portion of the Trust's assets as described below. The Certificates issued
by a Trust that is treated as a grantor trust are referred to herein as
"Grantor Trust Certificates."
Discussion of Tax Consequences to Holders of the Certificates
Characterization. Each Grantor Trust Certificateholder will be treated as
the beneficial owner of a pro rata undivided interest in the interest and
principal portions of the Trust represented by the Grantor Trust Certificates
and will be considered the equitable owner of a pro rata undivided interest in
each of the Receivables in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable
because of a default or delinquency in payment will be treated for federal
income tax purposes as having the same character as the payments they replace.
To the extent a particular Series provides for a Yield Supplement Account,
each Grantor Trust Certificateholder will also be treated as the beneficial
owner of a pro rata undivided interest in a contractual obligation of the
Depositor to pay interest at the applicable Pass-Through Rates on the Grantor
Trust Certificateholders' respective undivided interests in the Receivables
for which the Note Rate is less than the sum of (i) the initial weighted
average of the applicable Pass-Through Rates and (ii) the per annum rate used
to calculate the Monthly Servicing Fee (such obligation, the "Yield Supplement
Agreement"). In such case, however the Service could assert that the
Certificates represent indebtedness of the Depositor either in their entirety
or in an amount corresponding to the principal amount of the Receivables that
are covered by the Yield Supplement Agreement for federal income tax purposes.
The Depositor believes that, except as noted below, such a determination would
not have a materially different effect on the timing or character of taxable
income to Grantor Trust Certificateholders.
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Each Grantor Trust Certificateholder must allocate the amount it pays for
its Grantor Trust Certificate between its interest in the Receivables and its
interest in the other assets of the Trust, including, in particular, the Yield
Supplement Agreement. Such allocation must be made based on the relative fair
market values of the Receivables and the Yield Supplement Agreement. Because
the Yield Supplement Deposit is not expected to be significant relative to the
Certificate Principal Balance as of the Cutoff Date and because of the
expected amortization method of reporting amounts received pursuant to the
Yield Supplement Agreement (described below under "Yield Supplement
Agreement"), such allocation will not be provided separately in reports to
Grantor Trust Certificateholders. As further described below, a Grantor Trust
Certificateholder would calculate separately its income realized with respect
to the Receivables and its income with respect to the Yield Supplement
Agreement.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire
income from the Receivables in the Trust represented by Grantor Trust
Certificates, including interest, OID, if any, prepayment fees, assumption
fees, any gain recognized upon an assumption and late payment charges received
by the Servicer, and its share of the income portion of payments on the Yield
Supplement Agreement (as discussed below under "Yield Supplement Agreement").
The portion of each monthly payment to a Grantor Trust Certificateholder that
is allocable to principal on the Receivables will represent a return of
capital (other than accrued market discount not yet reported as income), and
there will be a corresponding reduction in the tax basis of such Grantor Trust
Certificateholder's undivided interest in the Receivables. Grantor Trust
Certificateholders also will be entitled to amortize their basis in the
Grantor Trust Certificates allocated to the Yield Supplement Agreement under
one of the methods described below under "Yield Supplement Agreement."
Under Code Sections 162 or 212, each Grantor Trust Certificateholder will be
entitled to deduct, consistent with its method of accounting, its pro rata
share of servicing fees, prepayment fees, assumption fees and late payment
charges retained by the Servicer, provided that such amounts are reasonable
compensation for services rendered to the Trust. Code Section 67 provides,
however, that if a Grantor Trust Certificateholder is an individual, estate,
or trust, the deduction for its pro rata share of such fees will be allowed
only to the extent that all of its miscellaneous itemized deductions,
including its share of such fees will be allowed only to the extent that all
of its miscellaneous itemized deductions, including its share of such fees,
exceed 2% of its adjusted gross income. In addition, Code Section 68 provides
that itemized deductions otherwise allowable for a taxable year of an
individual taxpayer will be reduced by the lesser of (i) 3% of the excess, if
any, of adjusted gross income over $100,000 ($50,000 in the case of a married
individual filing a separate return) (subject to adjustment for post-1991
inflation) or (ii) 80% of the amount of itemized deductions otherwise
allowable for such year. To the extent either of such limitations apply, such
Grantor Trust Certificateholder may have gross income in excess of interest
received in cash without a corresponding deduction.
A Grantor Trust Certificateholder using the cash method of accounting must
take into account its pro rata share of income and deductions as and when
collected by or paid to the Servicer. A Grantor Trust Certificateholder using
an accrual method of accounting must take into account its pro rata share of
income and deductions as they become due or are paid to the Servicer,
whichever is earlier. If the servicing fees paid to the Servicer are deemed to
exceed reasonable servicing compensation, the amount of such excess could be
considered as an ownership interest retained by the Servicer (or any person to
whom the Servicer assigned for value all or a portion of the servicing fees)
in a portion of the interest payments on the Receivables. The Receivables
would then be subject to the "coupon stripping" rules of the Code discussed
below. In addition, each Grantor Trust Certificateholder must include accrued
OID in its gross income regardless of such holder's method of accounting.
For federal income tax purposes, the outstanding principal balance of each
Rule of 78's Receivable as of the Cutoff Date is based on the Rule of 78's
(the "Cutoff Date Scheduled Balance"). Because the Rule of 78's allocates a
greater portion of the early payments on a Rule of 78's Receivable to interest
than the actuarial method, the Cutoff Date Scheduled Balance of each Rule of
78's Receivable exceeds the amount that would have been its principal balance
as of the Cutoff Date if each Rule of 78's Receivable had been amortized from
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origination under the actuarial method (such amount, the "Cutoff Date
Actuarial Balance"). The purchase price paid by Grantor Trust
Certificateholders for each Rule of 78's Receivable will reflect the Cutoff
Date Actuarial Balance.
The proper tax method for accounting for the Rule of 78's Receivables is
uncertain. As described above, the Servicer and the Trustee intend to report
income to Grantor Trust Certificateholders based on the actuarial method.
However, prospective investors should consult their tax advisors as to whether
they may be required or permitted to use the Rule of 78's method to account
for interest on the Rule of 78's Receivables. A Grantor Trust
Certificateholder will be furnished information for federal income tax
purposes enabling him to report interest on the Rule of 78's Receivables,
under the Rule of 78's method of accounting only upon written request to the
Trustee, and payment of the costs of producing such information. In the event
that a Grantor Trust Certificateholder reports taxable income based on the
Rule of 78's method, such Grantor Trust Certificateholder should consult his
or her tax advisor as to the application of the original issue and market
discount rules with respect to the Rule of 78's Receivables.
If a Rule of 78's Receivable is prepaid in full, any amount collected from
the Obligor pursuant to the Rule of 78's Receivable in excess of the principal
balance thereof and accrued interest thereon, computed using an actuarial
method, will be paid to the Servicer. Such amount may be treated as additional
income in the nature of a prepayment penalty to a Grantor Trust
Certificateholder who had reported income with respect to the Rule of 78's
Receivables on the actuarial method, and would be deductible only to the
extent described above. Alternatively, such amount might be treated as an
interest in the Rule of 78's Receivables retained by the Servicer, in which
event it would not be included in a Grantor Trust Certificateholder's income.
Stripped Bonds and Stripped Coupons
Original Issue Discount. Although the tax treatment of stripped bonds is not
entirely clear, based on guidance by the IRS, it appears that each purchaser
of a Grantor Trust Certificate will be treated as the purchaser of a stripped
bond, which generally should be treated as a single debt instrument issued on
the day it is purchased for purposes of calculating any original issue
discount. Generally, under applicable Treasury regulations (the "Section 1286
Treasury Regulations"), if the discount on a stripped bond is larger than a de
minimis amount (as calculated for purposes of the OID rules of the Code) such
stripped bond will be considered to have been issued with OID. For these
purposes, OID is the excess of the "stated redemption price at maturity"
(generally, principal and any interest which is not "qualified stated
interest") of a debt instrument over its issue price. Based on the preamble to
the Section 1286 Treasury Regulations, although the matter is not entirely
clear, the interest income on the Certificates at the sum of the Pass-Through
Rate and the portion of the Servicing Fee Rate that does not constitute excess
servicing should be treated as "qualified stated interest" within the meaning
of the Section 1286 Treasury Regulations and such income will be so treated in
the Trustee's tax information reporting. It is possible that the treatment
described in this paragraph will apply only to that portion of the Receivables
in a particular trust as to which there is "excess servicing" and that the
remainder of such Receivables will not be treated as stripped bonds, but as
undivided interests as described above.
If the allocable purchase price paid by a Grantor Trust Certificateholder
who purchases a Grantor Trust Certificate in its original public offering
equals the portion of the principal balance of the Receivables that is
allocable to its Grantor Trust Certificate, or is less than such principal
balance by a statutorily defined de minimis amount, then there would be no
original issue discount with respect to its interest in the Receivables.
Furthermore, the allocation of a portion of the purchase price of a Grantor
Trust Certificate to a Grantor Trust Certificateholder's undivided interest in
the Yield Supplement Agreement will result in the Grantor Trust
Certificateholder's acquisition of the related Receivables at a greater
discount, and the purchase price so allocated may not be recovered at the same
time or over the same period than if it had been allocated to such
Receivables. See "--The Yield Supplement Agreement" below. Although the
Service could assert that a Grantor Trust Certificateholder's basis in the
Receivables should be determined on a Receivable-by-Receivable basis, a
Grantor Trust Certificateholder will not have sufficient information with
respect to the Receivables to allocate its basis in this manner. In addition,
although the Service could assert that the income derived by a Grantor Trust
Certificateholder from the Receivables should be determined on a Receivable-
by-Receivable basis, income will
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be reported to Grantor Trust Certificateholders on an aggregate basis. If the
Service were to require reporting on a Receivable-by-Receivable basis, a
Grantor Trust Certificateholder's recognition of income could be accelerated
or decelerated. Moreover, because the interest rates of the Receivables vary
significantly, the allocation of basis and computation of income on a
Receivable-by-Receivable basis could have a more significant effect on the
income of a Grantor Trust Certificateholder than it would if the Receivables
had more uniform characteristics. It is not anticipated that Grantor Trust
Certificates will be issued with greater than de minimis OID.
To the extent the rules of the Code relating to OID (Sections 1271 though
1273 and 1275) are applicable to a person comparable to a Grantor Trust
Certificateholder that acquires an undivided interest in a stripped bond
issued or acquired with OID, such person must include in gross income the sum
of the "daily portions," as defined below, of the OID on such stripped bond
for each day on which it owns a Certificate, including the date of purchase
but excluding the date of disposition. It is not clear whether such OID will
be determined under Code Section 1272(a)(6), applicable to debt instruments
whose payments may be accelerated by prepayments on underlying obligations. It
is anticipated that such approach will be used, with OID accruals based on a
constant interest method and a prepayment assumption indicated in such
Prospectus Supplement. In the case of an original Grantor Trust
Certificateholder, the daily portions of OID generally would be determined as
follows. A calculation will be made of the portion of OID that accrues on the
stripped bond during each successive monthly accrual period (or shorter period
in respect of the date of original issue or the final Distribution Date). This
will be done, in the case of each full monthly accrual period, by adding (i)
the present value of all remaining payments to be received on the stripped
bond under the prepayment assumption used in respect of the Grantor Trust
Certificates and (ii) any payments received during such accrual period, and
subtracting from the total the "adjusted issue price" of the stripped bond at
the beginning of such accrual period. No representation is made that the
Grantor Trust Certificates will prepay at any prepayment assumption. The
"adjusted issue price" of a stripped bond at the beginning of the first
accrual period is its issue price (as determined for purposes of the OID rules
of the Code) and the "adjusted issue price" of a stripped bond at the
beginning of a subsequent accrual period is the "adjusted issue price" at the
beginning of the immediately preceding accrual period plus the amount of OID
allocable to that accrual period and reduced by the amount of any payment
(other than "qualified stated interest") made at the end of or during that
accrual period. The OID accruing during such accrual period will then be
divided by the number of days in the period to determine the daily portion of
OID for each day in the period. A subsequent Grantor Trust Certificateholder
will be required to adjust its OID accrual to reflect its purchase price, the
remaining period to maturity and, possibly, a new prepayment assumption. The
Servicer will report to all Grantor Trust Certificateholders as if they were
original holders.
With respect to the Receivables, the method of calculating OID as described
above will cause the accrual of OID to either increase or decrease (but never
below zero) in any given accrual period to reflect the fact that prepayments
are occurring at a faster or slower rate than the prepayment assumption used
in respect of the Receivables. Subsequent purchasers that purchase Grantor
Trust Certificates at more than a de minimis discount should consult their tax
advisors with respect to the proper method to accrue such OID.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules
of Sections 1276 though 1278 to the extent an undivided interest in a
Receivable or stripped bond is considered to have been purchased at a "market
discount." Generally, the amount of market discount is equal to the excess of
the portion of the principal amount of such Receivable or stripped bond
allocable to such holder's undivided interest over such holder's tax basis in
such interest. Market discount with respect to a Grantor Trust Certificate
will be considered to be zero if the amount allocable to the Grantor Trust
Certificate is less than 0.25% of the Grantor Trust Certificate's stated
redemption price at maturity multiplied by the weighted average maturity
remaining after the date of purchase. Treasury regulations implementing the
market discount rules have not yet been issued; therefore, investors should
consult their own tax advisors regarding the application of these rules and
the advisability of making any of the elections allowed under Code Section
1276 and 1278.
The Code provides that any principal payment (whether a scheduled payment or
a prepayment) or any gain or disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes
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of determining the tax treatment of subsequent principal payments or
dispositions of the market discount bond is to be reduced by the amount so
treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. While the
Treasury Department has not yet issued regulations, rules described in the
relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis
of a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount
that accrues during any accrual period would be equal to the product of (i)
the total remaining market discount and (ii) a fraction, the numerator of
which is the OID accruing during the period and the denominator of which is
the total remaining OID at the beginning of the accrual period. For Grantor
Trust Certificates issued without OID, the amount of market discount that
accrues during a period is equal to the product of (i) the total remaining
market discount and (ii) a fraction, the numerator of which is the amount of
stated interest paid during the accrual period and the denominator of which is
the total amount of stated interest remaining to be paid at the beginning of
the accrual period. For purposes of calculating market discount under any of
the above methods in the case of instruments (such as the Grantor Trust
Certificates) that provide for payments that may be accelerated by reason of
prepayments of other obligations securing such instruments, the same
prepayment assumption applicable to calculating the accrual of OID will apply.
Because the regulations described above have not been issued, it is impossible
to predict what effect those regulations might have on the tax treatment of a
Grantor Trust Certificate purchased at a discount or premium in the secondary
market.
A holder who acquired a Grantor Trust Certificate at a market discount also
may be required to defer a portion of its interest deductions for the taxable
year attributable to any indebtedness incurred or continued to purchase or
carry such Grantor Trust Certificate purchased with market discount. For these
purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the
year in which such market discount is includible in income. If such holder
elects to include market discount in income currently as it accrues on all
market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Premium. To the extent a Grantor Trust Certificateholder is considered to
have purchased an undivided interest in a Receivable or stripped bond for an
amount that is greater than its stated redemption price at maturity of such
Receivable or stripped bond, such Grantor Trust Certificateholder will be
considered to have purchased the Receivable with "amortizable bond premium"
equal in amount to such excess. A Grantor Trust Certificateholder (who does
not hold the Certificate for sale to customers or in inventory) may elect
under Section 171 of the Code to amortize such premium. Under the Code, the
premium is allocated among the interest payments on the Receivables or
stripped bonds to which it relates and is considered as an offset against (and
thus a reduction of) such interest payments. With certain exceptions, such an
election would apply to all debt instruments held or subsequently acquired by
the electing holder. Absent such an election, the premium will be deductible
as an ordinary loss only upon disposition of the Certificate or pro rata as
principal is paid on the Receivables or stripped bonds.
Election to Treat All Interest as OID. The OID regulations permit a Grantor
Trust Certificateholder to elect to accrue all interest, discount (including
de minimis market discount or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were to be
made with respect to a Grantor Trust Certificate with market discount, the
Certificate Owner would be deemed to have made an election to include in
income currently market discount with respect to all other debt instruments
having market discount that such Grantor Trust Certificateholder acquires
during the year of the election or thereafter. Similarly, a Grantor Trust
Certificateholder that makes this election for a Grantor Trust Certificate
that is acquired at a premium will be deemed to have made an election to
amortize bond premium with respect to all debt instruments having amortizable
bond premium that such Grantor Trust Certificateholder owns or acquires. See
"--Premium" herein. The election to accrue interest, discount and premium on a
constant yield method with respect to a Grantor Trust Certificate is
irrevocable.
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The Yield Supplement Agreement
The manner in which income with respect to the Yield Supplement Agreement
should be accrued is not clear. Moreover, the sum of the income and deductions
properly reportable by a Grantor Trust Certificateholder in any taxable year
may not equal the amounts that would be reportable if a Grantor Trust
Certificateholder held, instead of an interest in the Receivables and in the
Yield Supplement Agreement, either (i) a debt instrument bearing interest at
the related Pass-Through Rate or (ii) an interest in a trust holding
Receivables each of which bears interest at a rate at least equal to the sum
of the related Pass-Through Rate plus the rate equivalent to the Monthly
Servicing Fee. It is possible that a Grantor Trust Certificateholder will be
required to report as income on a current basis its pro rata share of all
amounts received by the Trust pursuant to the Yield Supplement Agreement. In
such event, the Grantor Trust Certificateholder should be entitled to amortize
in some manner the portion of the purchase price paid for its Grantor Trust
Certificate that is allocable to its pro rate interest in the Yield Supplement
Agreement. It is not clear whether such amortization deduction would be
computed in a manner reflecting a constant yield method, pro rata method,
straight-line method, or some other method of amortization. It is not clear
whether, and to what extent, the amounts includable in income or amortizable
under any of these methods would be adjusted to take account of prepayments on
the Receivables. In addition, to the extent that the amounts payable pursuant
to the Yield Supplement Agreement in respect of Receivables for which the Note
Rate is less than the sum of the initial weighted average of the applicable
Pass-Through Rates and the per annum rate used to calculate the Monthly
Servicing Fee decline during any period as a result of prepayments on such
Receivables, it is possible that a portion of the amount amortizable by the
Grantor Trust Certificateholder during such period would be treated as a
capital loss (which would not offset ordinary income) rather than as an
ordinary deduction. It is anticipated that the Servicer will employ an
amortization method in reporting to Grantor Trust Certificateholders that
results in net income with respect to the related Receivable at the applicable
Pass-Through Rate. Grantor Trust Certificateholders are advised to consult
their own tax advisors regarding the appropriate method of accounting for
income attributable to the Yield Supplement Agreement.
Treatment of Losses
Grantor Trust Certificateholders on the accrual method of accounting will be
required to report income with respect to the Grantor Trust Certificates
without giving effect to delays or reductions in distributions attributable to
defaults or delinquencies on the Receivables, except to the extent it can be
established that such losses are uncollectible. Accordingly, the holder of a
Grantor Trust Certificate, particularly a subordinate Grantor Trust
Certificate, may have income or may incur a diminution in cash flow as a
result of a default or delinquency, but may not be able to take a deduction
(subject to the discussion below) for the corresponding loss until a
subsequent taxable year. To the extent the rules of Code Section 166 regarding
bad debts are applicable, it appears that Grantor Trust Certificateholders
that are corporations or that hold the Grantor Trust Certificates in
connection with a trade or business should in general be allowed to deduct as
an ordinary loss such loss with respect to principal sustained during the
taxable year on account of any such Grantor Trust Certificates becoming wholly
or partially worthless, and that, in general, Grantor Trust Certificateholders
that are not corporations and do not hold the Grantor Trust Certificates in
connection with a trade or business will be allowed to deduct as a short-term
capital loss any loss sustained during the taxable year on account of a
portion of any such Grantor Trust Certificates becoming wholly worthless.
Although the matter is not free from doubt, such non-corporate Grantor Trust
Certificateholders should be allowed a bad debt deduction at such time as the
principal balance of such Grantor Trust Certificates is reduced to reflect
losses resulting from any liquidated Receivables. The Service, however, could
take the position that if the "stripped bond" rules of the Code are
applicable, non-corporate holders will be allowed a bad debt deduction to
reflect such losses only after all the affected Receivables remaining in the
Trust have been liquidated or the applicable class of Grantor Trust
Certificates has been otherwise retired Grantor Trust Certificateholders are
urged to consult their own tax advisors regarding the appropriate timing,
amount and character of any loss sustained with respect to such Grantor Trust
Certificates. Losses attributable to interest previously reported as income
should be deductible as ordinary losses by both corporate and non-corporate
holders. Special loss rules are applicable to banks and thrift institutions,
including rules regarding reserves for bad debts. Such taxpayers are advised
to consult their tax advisors regarding the treatment of losses on Grantor
Trust Certificates.
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Sale or Exchange of a Grantor Trust Certificate
Sale or exchange of a Grantor Trust Certificate prior to its maturity will
result in gain or loss equal to the difference, if any, between the amount
received and the owner's adjusted basis in the Grantor Trust Certificate. Such
adjusted basis generally will equal the seller's purchase price for the
Grantor Trust Certificate, increased by the OID and any market discount
included in the seller's gross income with respect to the Grantor Trust
Certificate, and reduced by any market premium amortized by the Depositor and
by principal payments on the Grantor Trust Certificate previously received by
the seller. Such gain or loss will be capital gain or loss to an owner for
which a Grantor Trust Certificate is a "capital asset" within the meaning of
Section 1221 (except in the case of gain attributable to accrued market
discount, as noted above under "--Stripped Bonds and Stripped Coupons--Market
Discount"), and will be long-term or short-term depending on whether the
Grantor Trust Certificate has been owned for the long-term capital gain
holding period (currently more than one year).
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1), so that gain or loss recognized from the sale of
a Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
Foreign Grantor Trust Certificates
Non-U.S. Persons. Interest or OID paid to non-U.S. Owners of Grantor Trust
Certificates will be treated as "portfolio interest" for purposes of United
States withholding tax. Such interest (including OID, if any) attributable to
the underlying Receivables will not be subject to the normal 30% (or such
lower rate provided for by an applicable tax treaty) withholding tax imposed
on such amounts provided that (i) the Non-U.S. Certificate Owner is not a "10%
shareholder" (within the definition of Section 871(h)(3)) of any obligor on
the Receivables; and is not a controlled foreign corporation (within the
definition of Section 957) related to any Obligor on the Receivables and (ii)
such Certificate Owner fulfills certain certification requirements. Under
these requirements, the Certificate Owner must certify, under penalty of
perjury, that it is not a "United States person" and must provide its name and
address. For this purpose "United States person" means a citizen or resident
of the United States, a corporation, partnership other entity created or
organized in or under the laws of the United States or any political
subdivision thereof, an estate the income of which is includible in gross
income for United States federal income tax purposes, without regard to its
source or a trust if a court within the United States is able to exercise
primary supervision over the administration of such trust, and one or more
United States fiduciaries have the authority to control all substantial
decisions of such trust. If, however, such interest or gain is effectively
connected to the conduct of a trade or business within the United States by
such Certificate Owner, such owner will be subject to United States federal
income tax thereon at graduated rates. Potential investors who are not United
States persons should consult their own tax advisors regarding the specific
tax consequences of owning a Certificate.
Information Reporting and Backup Withholding
The Servicer will furnish or make available, within a reasonable time after
the end of each calendar year, to each person who was a Grantor Trust
Certificateholder at any time during such year, such information as may be
deemed necessary or desirable to assist Grantor Trust Certificateholders in
preparing their federal income tax returns, or to enable holders to make such
information available to beneficial owners or financial intermediaries that
hold Grantor Trust Certificates as nominees on behalf of beneficial owners. If
a holder, beneficial owner, financial intermediary or other recipient of a
payment on behalf of a beneficial owner fails to supply a certified taxpayer
identification number or if the Secretary of the Treasury determines that such
person has not reported all interest and dividend income required to be shown
on its federal income tax return, a 31% backup withholding may be required
with respect to any payments. Any amounts deducted and withheld from a
distribution to a recipient would be allowed as a credit against such
recipient's federal income tax liability.
48
<PAGE>
* * *
THE FEDERAL TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A CERTIFICATE
OWNER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS OF CERTIFICATES
SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF CERTIFICATES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Sections 404 and 406 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), impose certain fiduciary and prohibited transaction
restrictions on employee pension and welfare benefit plans subject to ERISA
("ERISA Plans"). Section 4975 of the Code imposes essentially the same
prohibited transaction restrictions on tax-qualified retirement plans
described in Section 401(a) of the Code and on Individual Retirement Accounts
described in Section 408 of the Code (collectively, "Tax Favored Plan"). ERISA
and the Code prohibit a broad range of transactions involving assets of ERISA
Plans and Tax Favored Plans (collectively, "Plans") and persons who have
certain specified relationships to such Plans (so-called "parties in interest"
within the meaning of ERISA or "disqualified persons" within the meaning of
the Code) unless a statutory or administrative exemption is available. A
violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and the Code. Certain parties in interest or
disqualified persons that participate in a prohibited transaction may be
subject to a penalty or excise taxes, unless a statutory or administrative
exemption is available.
Certain employee benefit plans, such as governmental plans (as defined in
Section 3(32) of ERISA), and, if no election has been made under Section
410(d) of the Code, church plans (as defined in Section 3(33) of ERISA), are
not subject to the ERISA requirements discussed herein. Accordingly, assets of
such plans may be invested in Certificates without regard to the ERISA
considerations described herein, subject to the provisions of other applicable
federal, state and local law, and, before purchasing a Certificate, a
fiduciary of such a plan should itself confirm the compliance with such laws.
Any such plan that is qualified and exempt from taxation under Section 401(a)
and 501(a) of the Code, however, is subject to the prohibited transaction
rules set forth in Section 503 of the Code. Violation of the prohibited
transaction rules may result in the denial of the plan's exempt status.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Plan that
purchased Certificates if assets of the Trust were deemed to be assets of the
Plan. Under a regulation issued by the United States Department of Labor (the
"Plan Assets Regulation"), the assets of a Trust would be treated as plan
assets of a Plan for the purposes of ERISA and the Code only if the Plan
acquired an "equity interest" in the Trust and none of the exceptions
contained in the Plan Assets Regulation were applicable. An equity interest is
defined under the Plan Assets Regulation as an interest other than an
instrument that is treated as indebtedness under applicable local law and
which has no substantial equity features. The likely treatment in this context
of Certificates of a given Series will be discussed in the related Prospectus
Supplement.
A plan fiduciary considering the purchase of Certificates of a given Series
should consult its legal advisors regarding whether the assets of the related
Trust would be considered plan assets, the possibility of exemptive relief
from the prohibited transaction rules and other issues and their potential
consequences.
The United States Department of Labor has granted to the underwriter (or in
the case of series offered by more than one underwriter, the lead underwriter)
named in each Prospectus Supplement an exemption (the "Exemption") from
certain of the prohibited transaction rules of ERISA with respect to the
initial purchase, the holding and the subsequent resale by Plans of
certificates representing interests in asset-backed pass-through trusts that
consist of certain receivables, loans and other obligations that meet the
conditions and requirements of
49
<PAGE>
the Exemption. The receivables covered by the Exemption include motor vehicle
installment sales contracts such as the Receivables. The Exemption might apply
to the acquisition, holding and resale of nonsubordinated Certificates
(referred to herein as "Senior Certificates") by a Plan, provided that certain
conditions and requirements set forth therein (certain of which are described
below) are met.
Among the conditions that must be satisfied for the Exemption to apply to
the Senior Certificates are the following:
(1) The Trust is considered to consist solely of obligations which bear
interest or are purchased at a discount and which are secured by motor
vehicles or equipment, or "qualified motor vehicle leases" (as defined in
the Exemption), property that had secured such obligations or qualified
motor vehicle leases, cash or temporary investments maturing no later than
the next date on which distributions are to be made to the Senior
Certificate Owners, and rights of the Trustee under the Pooling and
Servicing Agreement and under credit support arrangements with respect to
such obligations or qualified motor vehicle leases.
(2) The acquisition of the Senior Certificates by a Plan is on terms
(including the price for the Senior Certificates) that are at least as
favorable to the Plan as they would be in an arm's length transaction with
an unrelated party;
(3) The rights and interests evidenced by the Senior Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(4) The Senior Certificates acquired by the Plan have received a rating
at the time of such acquisition that is in one of the three highest generic
rating categories from either Standard & Poor's Ratings Group, Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co. or Fitch Investors
Service, L.P.;
(5) The related Trustee is not an affiliate of any other member of the
Restricted Group (as defined below);
(6) The sum of all payments made to the underwriters in connection with
the distribution of the Senior Certificates represents not more than
reasonable compensation for underwriting the Senior Certificates; the sum
of all payments made to and retained by the Depositor pursuant to the sale
of the Contracts to the related Trust represents not more than the fair
market value of such Contracts; and the sum of all payments made to and
retained by the Servicer represents not more than reasonable compensation
for the Servicer's services under the related Pooling and Servicing
Agreement and reimbursement of the Servicer's reasonable expenses in
connection therewith; and
(7) The Plan investing in the Senior Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Commission
under the Securities Act of 1933, as amended.
Moreover, the Exemption would provide relief from certain self-
dealing/conflict of interest or prohibited transactions only if, among other
requirements, (i) in the case of the acquisition of Senior Certificates in
connection with the initial issuance, at least 50% of the Senior Certificates
are acquired by persons independent of the Restricted Group (as defined
below), (ii) the Benefit Plan's investment in Senior Certificates does not
exceed 25% of all of the Senior Certificates outstanding at the time of the
acquisition and (iii) immediately after the acquisition, no more than 25% of
the assets of the benefit Plan are invested in certificates representing an
interest in one or more trusts containing assets sold or serviced by the same
entity. The Exemption does not apply to Plans sponsored by the Depositor, any
underwriter, the related Trustee, the Servicer, any obligor with respect to
Contracts included in the related Trust constituting more than 5% of the
aggregate unamortized principal balance of the assets in the Trust, or any
affiliate of such parties (the "Restricted Group").
Before purchasing a Senior Certificate, a fiduciary of a Plan should itself
confirm that (i) the Trust constitutes a "trust" for purposes of the
Exemption, (ii) the Senior Certificates constitute "certificates" for purposes
of the Exemption and (iii) the conditions and the other requirements set forth
in the Exemption would be satisfied. A fiduciary of an ERISA Plan should also
determine whether the purchase of Senior Certificates is consistent with
certain general fiduciary requirements imposed under Section 404 of ERISA,
including those of investment prudence and diversification and the requirement
that an ERISA Plan's investments be made in
50
<PAGE>
accordance with the documents governing the ERISA Plan. The sale of Senior
Certificates to a Plan is in no way a representation by the Depositor or
underwriter that this investment meets all relevant legal requirements with
respect to investments by Plans generally or any particular Plan, or that this
investment is appropriate for Plans generally or any particular Plan.
Under current law, the purchase and holding of Certificates other than
Senior Certificates by or on behalf of a Plan may constitute or result in
prohibited transactions within the meaning of ERISA and the Code. Such
Certificates may not be acquired by Plans or by persons acting on behalf of or
investing the assets of Plans.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to a given Series (the "Underwriting Agreement"), the Depositor will
agree to cause the related Trust to sell to the underwriters named therein and
in the related Prospectus Supplement, and each of such underwriters will
severally agree to purchase, the principal amount of each class of
Certificates of the related Series set forth therein and in the related
Prospectus Supplement.
In each Underwriting Agreement, the underwriter or several underwriters will
agree, subject to the terms and conditions set forth therein, to purchase all
of the Certificates described therein that are offered hereby and by the
related Prospectus Supplement if any of such Certificates are purchased.
Each Prospectus Supplement will either (i) set forth the price at which each
class of Certificates 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 Certificates or (ii) specify that the related Certificates
are to be resold by the underwriters in negotiated transactions at varying
prices to be determined at the time of such sale.
Each Underwriting Agreement will provide that CTL, the Depositor and Bay
View will indemnify the related underwriters 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.
Each Trust may, from time to time, invest the funds in the related Accounts in
Eligible Investments acquired from such underwriters. Pursuant to each
Underwriting Agreement, the closing of the sale of any class of Certificates
subject thereto will be conditioned on the closing of the sale of all other
classes of Certificates of such Series. The place and time of delivery for the
Certificates in respect of which this Prospectus is delivered will be set
forth in the related Prospectus Supplement.
LEGAL MATTERS
Certain legal matters relating to the Certificates of any Series will be
passed upon for the related Trust, the Depositor and the Servicer by Silver,
Freedman & Taff, L.L.P., Washington, D.C., and for the underwriters by
Cadwalader, Wickersham & Taft, New York, New York or such other firm as shall
be identified in the related Prospectus Supplement. Certain federal income tax
and other matters will be passed upon for each Trust by Silver, Freedman &
Taff, L.L.P. or such other firm as shall be identified in the related
Prospectus Supplement.
51
<PAGE>
INDEX OF PRINCIPAL TERMS
Set forth below is a list of certain of the more significant terms used in
this Prospectus and the pages on which the definitions of such terms may be
found herein.
<TABLE>
<CAPTION>
Term Page
---- ------------
<S> <C>
Actuarial Receivables.............................................. 18
Additional Vehicle Costs........................................... 17
Advance............................................................ 7
Approved Rating.................................................... 27
Bay View........................................................... 12
Cash Collateral Account............................................ 30
Cede............................................................... 15
Certificate Account................................................ 26
Certificate Balance................................................ 5
Certificate Owners................................................. 22
Certificate Pool Factor............................................ 20
Certificateholders................................................. 6
Certificates....................................................... Prosp. Cover
Class Certificate Balance.......................................... 3
Closing Date....................................................... 5
Code............................................................... 10
Collection Period.................................................. 9
Commission......................................................... 2
Contracts.......................................................... 5
Contract Rate...................................................... 8
CTL................................................................ 3
Cutoff Date........................................................ 5
Cutoff Date Actuarial Balance...................................... 43
Cutoff Date Scheduled Balance...................................... 43
Dealers............................................................ 5
Definitive Certificates............................................ 23
Depositor.......................................................... 3
Distribution Date.................................................. 21
DTC................................................................ 15
Eligible Deposit Account........................................... 27
Eligible Institution............................................... 27
Eligible Investments............................................... 27
ERISA.............................................................. 10
ERISA Plans........................................................ 49
Events of Default.................................................. 31
Exchange Act....................................................... 2
Exemption.......................................................... 49
FDIC............................................................... 12
Final Scheduled Distribution Date..................................
Final Scheduled Maturity Date...................................... 8
Financed Vehicles.................................................. 5
FTC Rule........................................................... 36
Funding Period..................................................... 6
Grantor Trust Certificates......................................... 42
Grantor Trust Certificateholders................................... 42
Indirect Participants.............................................. 22
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Term Page
---- ------------
<S> <C>
Insolvency Laws.................................................... 20
Interest Shortfall................................................. 7
Investment Income.................................................. 27
IRS................................................................ 37
Moody's............................................................ 28
Obligor............................................................ 8
OID................................................................ 39
Participants....................................................... 22
Pass-Through Rate.................................................. 3
Payaheads.......................................................... 18
Payahead Account................................................... 26
Plans.............................................................. 49
Plan Assets Regulations............................................ 49
Pooling and Servicing Agreement.................................... 3
Pool Balance....................................................... 8
Precomputed Receivables............................................ 18
Pre-Funded Amount.................................................. 5
Pre-Funding Account................................................ 5
Prospectus Supplement.............................................. Prosp. Cover
Purchase Agreement................................................. 5
Purchase Amount.................................................... 25
Purchased Receivable............................................... 25
Rating Agency...................................................... 10
Receivables........................................................ Prosp. Cover
Receivables Pool................................................... 15
Registration Statement............................................. 2
Restricted Group................................................... 50
Rules.............................................................. 22
Rule of 78's Receivables........................................... 18
Section 1286 Treasury Regulations.................................. 44
Senior Certificates................................................ 50
Series............................................................. Prosp. Cover
Servicer........................................................... Prosp. Cover
Servicing Fee...................................................... 29
Servicing Fee Rate................................................. 29
Simple Interest Receivables........................................ 18
Standard & Poor's.................................................. 28
Strip Certificates................................................. 3
Subsequent Receivables............................................. 6
Subsequent Transfer Date........................................... 25
Tax Favored Plans.................................................. 49
Transfer and Servicing Agreements.................................. 24
Trust.............................................................. Prosp. Cover
Trust Accounts..................................................... 27
Trustee............................................................ 3
UCC................................................................ 12
Underwriting Agreement............................................. 51
Yield Supplement Agreement......................................... 43
</TABLE>
53
<PAGE>
$246,773,107
BAY VIEW 1999-LG-1 AUTO TRUST
Bay View Securitization Corporation,
as depositor
Bay View Acceptance Corporation,
as servicer
$42,750,000 Class A-1 Automobile Receivable Backed Certificates
$97,000,000 Class A-2 Automobile Receivable Backed Certificates
$55,000,000 Class A-3 Automobile Receivable Backed Certificates
$52,023,107 Class A-4 Automobile Receivable Backed Certificates
$184,645,582 Class I Interest Only Certificates
____________________________
Prospectus Supplement
____________________________
PaineWebber Incorporated Morgan Stanley Dean Witter
____________________________
You should rely only on the information contained or incorporated by
reference in its prospectus supplement and the accompanying prospectus. We
have not authorized anyone to provide you with different or additional
information.
We are not offering the offered certificates in any state where the offer
is not permitted.
Dealers will deliver this prospectus supplement and prospectus when acting
as underwriters of the offered certificates with respect to their unsold
allotments or subscriptions. In addition, all dealers selling the offered
certificates will deliver this prospectus supplement and prospectus until March
13, 2000.
