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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1998.
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
__________ to __________
COMMISSION FILE NUMBER: 333-58677
NEWCOURT EQUIPMENT TRUST SECURITIES 1998-1
(ISSUER WITH RESPECT TO THE SECURITIES)
NEWCOURT RECEIVABLES CORPORATION II
(DEPOSITOR OF THE TRUST)
(Exact name of registrant as specified in its charter)
DELAWARE 35-2010710
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2700 BANK ONE TOWER, 111 MONUMENT CIRCLE, INDIANAPOLIS, INDIANA 46204-5787
TELEPHONE: (317) 229-3406
(Address and telephone number of the of the registrant's principal executive
office)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (317) 229-3406
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the registrant's common stock held by
non-affiliates of the registrant: Not Applicable
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Indicate the number of shares outstanding of the registrant's classes of
common stock, as of the latest practicable date: Not Applicable
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
Item 1. Business
Not Applicable
Item 2. Properties
Newcourt Equipment Trust Securities 1998-1 (the "Trust") was formed
pursuant to a Trust Agreement, dated as of October 15, 1998 between Newcourt
Receivables Corporation II (the "Trust Depositor") and The Bank of New York
(Delaware), as Owner Trustee. The property of the Trust includes a pool of
contracts consisting of (i) conditional sale agreements, promissory notes with
related security agreements, operating and finance leases, installment payment
agreements, and similar types of financing agreements with end-users ("End-User
Contracts") in each case with respect to certain information technology
equipment, communications equipment, commercial business and industrial
equipment, medical equipment, resources equipment and transportation and
construction equipment (collectively, the "Equipment"), certain computer
software and related support and consulting services (together with the
Equipment, the "Financed Items"), together with certain rights of financing
originators under finance program agreements and vendor assignments with vendors
of the Financed Items, as well as the Equipment or a security interest in the
Equipment and (ii) limited recourse contractual payment obligations payable by
vendors and secured by the vendors' interest in the End-User Contracts
originated by such vendors and by the Equipment related to such End-User
Contracts.
Item 3. Legal Proceedings
There are no material pending legal proceedings with respect to the
Trust or the Trust Depositor involving the Trust, the Trust Depositor or
Newcourt Financial USA Inc., as Servicer, other than ordinary or routine
litigation incidental to the Trust assets or the Servicer's duties under the
Pooling and Servicing Agreement, dated as of October 15, 1998 among the Trust
Depositor, the Trust, Newcourt Financial USA Inc., as Servicer, and Harris Trust
and Savings Bank, as Indenture Trustee.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) The Trust has issued the 5.007% Class A-1 Receivable-Backed Notes,
Series 1998-1 ("Class A-1 Notes"), 5.170% Class A-2 Receivable-Backed
Notes, Series 1998-1 ("Class A-2 Notes"), 5.240% Class A-3
Receivable-Backed Notes, Series 1998-1 ("Class A-3 Notes"), 5.393%
Class A-4 Receivable-Backed Notes, Series 1998-1 ("Class A-4 Notes"),
5.970% Class B Receivable-Backed Notes, Series 1998-1 ("Class B
Notes"), 6.940% Class C Receivable-Backed Notes, Series 1998-1
("Class C Notes"), the 8.060% Class D Receivable-Backed Notes, Series
1998-1 ("Class D Notes") and the 9.440% Class E Receivable-Backed
Notes, Series 1998-1 ("Class E Notes" and together with the Class A-1
Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, the Class B
Notes, the Class C Notes and the Class D Notes, the "Notes"). There
is no established public trading market for the Notes.
(b) Except for the Class D Notes and the Class E Notes, all of the Notes
were issued in book-entry form only. There is only one holder of
record for each of the Class A-1 Notes, Class A-2 Notes, Class A-3
Notes, Class A-4 Notes, Class B Notes and Class C Notes.
(c) The Trust does not pay dividends.
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Item 6. Selected Financial Data
Not applicable.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Not applicable.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data.
Not applicable.
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure.
None.
PART III.
Item 10. Directors and Executive Officers of the Registrant
Not applicable.
Item 11. Executive Compensation
Not applicable.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The Notes, other than the Class D Notes and Class E Notes, are
represented by one or more notes registered in the name of Cede & Co., the
nominee of The Depository Trust Company ("DTC"). An investor holding such Notes
is not entitled to receive a certificate representing such Notes except in
limited circumstances. Accordingly, Cede & Co. is the sole holder of record of
the Notes, which it holds on behalf of brokers, dealers, banks and other
participants in the DTC system. Such participants may hold Notes for their own
accounts or for the accounts of their customers. The address of Cede & Co. is:
Cede & Co.
c/o The Depository Trust Company
Seven Hanover Square
New York, New York 10004
Item 13. Certain Relationships and Related Transactions
There has not been, and there is not currently proposed, any
transaction or series of transactions, to which any of the Trust, the Trust
Depositor, The Bank of New York (Delaware), as Owner Trustee, or Newcourt
Financial USA Inc., as Servicer, is a party with any Noteholder who, to the
knowledge of the Trust Depositor or the Servicer, owns of record or beneficially
owns more than five percent of the Notes.
Item 14. Exhibits, Financial Statements and Reports on Form 8-K
(a) 1. Not applicable.
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2. Not applicable.
3. Exhibits:
Exhibit No. Description
99.1 Annual Summary Statement
99.2 Annual Statement as to Compliance
99.3 Annual Independent Accountant's Report
(b) Reports on 8-K.
The Registrant has filed a Current Report on Form 8-K with
the Securities and Exchange Commission dated December 18,
1998.
.
(c) see (a)3 above
(d) Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
NEWCOURT EQUIPMENT TRUST SECURITIES 1998-1
By: Newcourt Receivables Corporation II
By: /s/ Steven K. Hudson
-----------------------------------
Steven K. Hudson
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Steven K. Hudson Chief Executive Officer May 26, 1999
----------------------------- (Principal Executive Officer)
Steven K. Hudson
/s/ Daniel A. Jauernig Chief Financial Officer May 26, 1999
----------------------------- (Principal Financial
Daniel A. Jauernig Officer), Chief Accounting
Officer and Director
/s/ Bradley D. Nullmeyer Director May 26, 1999
-----------------------------
Bradley D. Nullmeyer
/s/ David F. Banks Director May 26, 1999
-----------------------------
David F. Banks
/s/ Peter H. Sorensen Director May 26, 1999
-----------------------------
Peter H. Sorensen
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Annual Summary Statement
99.2 Annual Statement as to Compliance
99.3 Annual Independent Accountant's Report
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EXHIBIT 99.1
NEWCOURT EQUIPMENT TRUST SECURITIES 1998-1
PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
REPORT DATE OCT-98 NOV-98 DEC-98
<S> <C> <C> <C>
ADCB 1,131,739,137 1,095,032,205 1,059,575,381
Debt Balances
A1 Principal 356,497,828 319,790,696 284,334,072
A2 Principal 130,150,001 130,150,001 130,150,001
A3 Principal 447,036,959 447,036,959 447,036,959
A4 Principal 101,856,622 101,856,522 101,856,522
B Principal 42,440,218 42,440,218 42,440,218
C Principal 22,634,783 22,634,783 22,634,783
D Principal 14,146,739 14,146,739 14,146,739
E Principal 16,976,087 16,976,087 16,976,087
Reserve 16,976,087 16,976,087 16,976,087
Waterfall
- ---------
Servicing 0.600% 565,869.57 547,516.10
A1 Interest 5.007% 2,330,396.59 1,354,327.51
A2 Interest 5.170% 878,476.35 560,729.59
A3 Interest 5.240% 3,058,229.51 1,952,061.39
A4 Interest 5.393% 717,157.52 457,760.19
B Interest 5.970% 330,786.13 211,140.08
C Interest 6.940% 205,083.71 130,904.50
D Interest 8.060% 148,862.99 95,018.93
E Interest 9.440% 209,220.84 133,545.22
A1 Principal 36,708,932 35,456,824
A2 Principal - -
A3 Principal - -
A4 Principal - -
B Principal - -
C Principal - -
D Principal - -
E Principal - -
Reserve - 44,478
Newcourt - -
Delinquency
- -----------
31 - 60 Days Past Due 37,076,740 25,179,191
61 - 90 Days Past Due 8,996,780 5,764,377
91 - 120 Days Past Due - 4,937,955
121+ Days Past Due - 1,086,514
Delinquency Ratios
- ------------------
31 - 60 Days Past Due (Note 1) 3.39% 2.38%
61 - 90 Days Past Due 0.82% 0.54%
91 - 120 Days Past Due 0.00% 0.47%
121+ Days Past Due 0.00% 0.10%
Gross Losses - 33,357
Recoveries - -
Prepayments 6,619,826 5,703,029
Bond Principal Factors
- ----------------------
A-1 89.7034626% 79.7575889%
A-2 100.0000000% 100.0000000%
A-3 100.0000000% 100.0000000%
A-4 100.0000000% 100.0000000%
B 100.0000000% 100.0000000%
C 100.0000000% 100.0000000%
D 100.0000000% 100.0000000%
E 100.0000000% 100.0000000%
Conditional Payment Rate
- ------------------------
1 Month CPR 6.9572% 6.2383%
Average 3 Month CPR N/A N/A
Life to Date 6.9572% 6.6920%
</TABLE>
Note 1: Arrears divided by ADCB
NETS98 Performance A 4/1/99
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EXHIBIT 99.2
ANNUAL STATEMENT AS TO COMPLIANCE
NEWCOURT FINANCIAL USA INC.
NEWCOURT RECEIVABLES ASSET TRUST 1998-1
The undersigned, a duly authorized representative of Newcourt Financial USA
Inc. ("Newcourt"), as Servicer pursuant to the Pooling and Servicing Agreement
dated as of October 15, 1998 (the "Pooling and Servicing Agreement"), among
Newcourt Receivables Corporation II, as Trust Depositor, Newcourt, as Servicer,
Harris Trust and Savings Bank, as Indenture Trustee, does hereby certify that:
1. Capitalized terms used in this Certificate have their respective
meanings set forth in the Pooling and Servicing Agreement.
2. Newcourt is as of the date hereof the Servicer under the Pooling and
Servicing Agreement.
3. The undersigned is duly authorized pursuant to the Pooling and
Servicing Agreement to execute and deliver this Certificate.
4. This Certificate is delivered pursuant to Section 9.05 of the Pooling
and Servicing Agreement.
5. A review of the activities of the Servicer during the year ended
December 31, 1998 and of its performance under the Pooling and
Servicing Agreement was made under my supervision.
6. Based on such review, to the best of the undersigned's knowledge, the
Servicer has performed or caused to be performed in all material
respects all of its obligations under the Pooling and Servicing
Agreement throughout such year and no Servicer Default has occurred or
is continuing except as set forth in paragraph 7 below.
7. The following is a description of each Servicer Default under the
provisions of the Pooling and Servicing Agreement known to me to have
occurred during the year ended December 31, 1998, which sets forth in
detail the (i) nature of each such Servicer Default, (ii) the action
taken by the Servicer, if any, to remedy each such Servicer Default
and (iii) the current status of each such Servicer Default:
NONE
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the
Servicer, has duly executed this Certificate this 31st day of March, 1999.
By: /s/ Brian McLean
Vice President, Securitization
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EXHIBIT 99.3
[LOGO] ERNST & YOUNG
To the Shareholders of Newcourt Credit Group Inc.
We have audited the consolidated balance sheets of Newcourt Credit Group Inc.
as at December 31, 1998 and 1997, and the consolidated statements of income
and retained earnings and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December
31, 1998 and 1997, and the results of its operations and its cash flows for
the years then ended in accordance with accounting principles generally
accepted in Canada.
/s/ Ernst & Young
Chartered Accountants
Toronto, Canada
February 28, 1999
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[LOGO] ERNST & YOUNG
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Newcourt Financial USA Inc.
We have examined management's assertion that Newcourt Financial USA Inc.
maintained an effective internal control structure over the servicing of
leases and loans subject to the Pooling and Servicing Agreement dated as of
October 15, 1998 between Newcourt Financial USA Inc., as Servicer, and in its
individual capacity, Newcourt Receivables Corporation II, the Trust
Depositor, and Harris Trust and Savings Bank, the Indenture Trustee for the
Newcourt Equipment Trust Securities 1998-1 (the "Servicing Agreement"), for
the period from November 4, 1998 through December 31, 1998: a copy of
management's assertion is attached hereto. Management is responsible for its
controls over its lease and loan servicing. Our responsibility is to express
an opinion on management's assertion based on our examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
obtaining an understanding of the controls over Newcourt Financial USA Inc.'s
lease and loan servicing, testing and evaluating the design and operating
effectiveness of those controls, and such other procedures as we considered
necessary in the circumstances. We believe that our examination provides a
reasonable basis for our opinion.
Because of inherent limitations in any control, errors or fraud may occur and
not be detected. Also, projections of any evaluation of the controls over
the lease and loan servicing to future periods are subject to the risk that
the controls may become inadequate because of changes in conditions, or that
the degree of compliance with the controls may deteriorate.
In our opinion, management's assertion that Newcourt Financial USA Inc.
maintained an effective internal control structure over lease and loan
servicing as required under the Servicing Agreement for the period from
November 4, 1998 through December 31, 1998, is fairly stated in all material
respects, based upon the stated criteria set forth in Exhibit A "Stated
Lease/Loan Servicing Internal Control Procedures" of management's report.
Toronto, Canada /s/ Ernst & Young LLP
March 31, 1999 Chartered Accountants
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Newcourt Financial USA Inc.
MANAGEMENT ASSERTION
In accordance with the terms of the Pooling and Servicing Agreement
dated as of October 15, 1998 between Newcourt Financial USA Inc. (the
"Company"), as Servicer, and in its individual capacity, Newcourt Receivables
Corporation II, the Trust Depositor, and Harris Trust and Savings Bank, the
Indenture Trustee for the Newcourt Equipment Trust Securities 1998-1 (the
"Servicing Agreement"), the Company is responsible for servicing the leases
and loans that are the subject of the Servicing Agreement. For the period
from November 4, 1998 through December 31, 1998, management of the Company
believes that it complied with its servicing responsibilities under the
Servicing Agreement by maintaining an effective internal control structure
over the servicing of the leases and loans based on the stated criteria set
forth in the attached Exhibit A.
Newcourt Financial USA Inc., as Servicer
By: /s/ Brian McLean
-----------------------------------
Brian McLean
Vice President, Securitization
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Toronto, Ontario
March 31, 1999
EXHIBIT A
NEWCOURT
STATED LEASE/LOAN SERVICING INTERNAL CONTROL PROCEDURES
I. SEGREGATION OF SERVICED PORTFOLIO
The Company segregates leases and loans between owned and managed on its
systems for the tracking and reporting of these records.
II. LEASE/LOAN PAYMENTS
Scheduled monthly lease and loan payments, prepayments and liquidation
proceeds (remittances) are applied to the respective customer accounts on a
daily basis, based on an established payment hierarchy.
III. ACCOUNTING
The Company maintains financial records for the serviced portfolios which are
periodically reconciled to the Company's subsidiary records.
IV. DELINQUENCIES
The Company maintains system records and reports detailing the delinquency
status by account and monitors the collection efforts for these accounts.
V. TRUSTEE DISBURSEMENTS
Remittances received by the Company are transferred to the Trustee by the
Company's Lease Accounting Group on a daily and monthly basis in accordance
with the timeframe established within the Servicing Agreement.
VI. TRUSTEE ACCOUNTING AND REPORTING
The Company's Securitization Reporting Unit generates a monthly servicing
report to the Trustee and investors which provides the cash activity,
delinquency, and defaults relating to the serviced portfolio. Information on
this report is reconciled to the records of the respective servicing entity
or the Lease Accounting Group.
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NEWCOURT
STATED LEASE/LOAN SERVICING INTERNAL CONTROL PROCEDURES
I. SEGREGATION OF SERVICED PORTFOLIO
The Company segregates leases and loans between owned and managed on its
systems for the tracking and reporting of these records.
a. Transactions which have been securitized are identified with a special code
(flagged) within the servicing entity's lease accounting system to
segregate the cash activity and reporting relating to these transactions.
b. System security has been established to restrict modifications to
securitization codes by users (accounting and operations).
c. The Company generates daily cash reports which segregate managed cash
relying on the systems codes that flag the securitized contracts.
d. The Company adheres to its normal operating procedures in making any
contract changes on the system.
II. LEASE/LOAN PAYMENTS
Scheduled monthly lease and loan payments, prepayments and liquidation
proceeds (remittances) are applied to the respective customer accounts on a
daily basis, based on an established payment hierarchy.
a. Customers are directed to forward their remittances to the Company's
lockboxes as indicated on their respective invoices.
b. Payments received at the lockbox are electronically fed to the Company's
lease accounting system on a daily basis and are posted to customer records
on the subsequent day.
c. System security has been established to restrict modifications to the
system controlled payment hierarchy.
d. There is a proper segregation of duties between the personnel responsible
for the posting of payments (systems for electronic transmissions and
operations for manual adjustments) and reconciling the cash activity to the
general ledger (accounting).
e. System suspense cash accounts are utilized to monitor unapplied cash
(rejects, unidentified, and unknowns).
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f. Operations personnel review the clearing of suspense cash activity to
ensure application of such activity.
g. Scheduled monthly lease/loan payments, prepayments, and liquidation
proceeds received by the Company are separately identified and remitted on
a daily basis.
h. The Company generates daily cash reports which segregate the total cash
received within a given period for the managed assets.
III. ACCOUNTING
The Company maintains financial records for the serviced portfolios which are
periodically reconciled to the Company's subsidiary records.
a. There is an adequate segregation of duties between the personnel
responsible for record maintenance on the lease accounting system
(operations) and reconciling lease and loan activity to the general ledger
(accounting).
b. The Company maintains an automated or manual interface between the lease
accounting system and the general ledger.
c. Monthly reconciliations between the lease accounting system and general
ledger for the owned portfolio are performed.
d. The Company's computer systems generate a present value of each contract
in the segregated portfolio using the interest rate as specified in the
securitization transaction.
IV. DELINQUENCIES
The Company maintains system records and reports detailing the delinquency
status by account and monitors the collection efforts for these accounts.
a. Procedures exist for the periodic reviews of delinquent transactions,
generation of delinquent transactions, generation of delinquency reports
and collection efforts.
b. Account delinquency status is system calculated and generated.
c. The Company's collection department performs periodic review of the
delinquency reporting and collection activity at the servicing entities.
Periodic audits are conducted to test the accuracy and timeliness of
collection efforts and delinquency reporting.
d. Collection effort information such as phone calls, correspondence, and
follow-up activity is maintained on-line by the customer service
representatives.
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e. Delinquency reporting is reviewed by the Company's Vice President of
Portfolio Management.
f. Customer account monitoring is system driven based on delinquency and
follow up action required. Management reviews performance levels of the
Collectors.
V. TRUSTEE DISBURSEMENTS
Remittances received by the Company are transferred to the Trustee by the
Company's Lease Accounting Group on a daily and monthly basis in accordance
with the timeframe established within the Servicing Agreement.
a. The Company has written procedures for the transfer of funds to the Trustee
on a daily and monthly basis.
b. Appropriate approvals in writing are required to initiate a wire transfer
of funds to the Trustee account.
c. Periodic bank reconciliations are performed at the servicing entities.
d. A monthly cash reconciliation is performed between the Lease Accounting
Group's cash records and the monthly servicing report produced by the
Securitization Reporting Unit.
VI. TRUSTEE ACCOUNTING AND REPORTING
The Company's Securitization Reporting Unit generates a monthly servicing
report to the Trustee and investors which provides the cash activity,
delinquency and defaults relating to the serviced portfolio. Information on
this report is reconciled to the records of the respective servicing entity
or the Lease Accounting Group.
a. A monthly data extract file at a lease and loan level is transmitted
electronically from the servicing entity to the Securitization Reporting
Unit. Edits are performed to ensure a complete accountability of the
securitized portfolio as well as check for errors in various data elements
by performing analytical procedures and periodic recalculations of amounts
provided by the servicing entities.
b. A monthly cash reconciliation is performed between the Lease Accounting
Group cash records and the monthly servicing report produced by the
Securitization Reporting Unit.
c. Appropriate system security and back up is maintained over the Corporate
System used for securitization.
d. The Securitization Reporting Unit's management performs an analytical
review on the monthly servicing report.
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e. Treasury is provided a draft of the monthly servicing report for their
review and approval before submission.
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