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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 1997.
OR
[ ] 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 333-19733-02
ADVANTA AUTO FINANCE CORPORATION
(Exact Name of Registrant as specified in its charter)
23-2826077
NEVADA ------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
Welsh & McKean Roads, Spring House, PA 19027
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (215) 323-4200
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Securities Registered Pursuant to Section 12(b) of the Act.
Name of each exchange on
Title of each class which registered:
None None
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
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 X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the 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. [X]
State the aggregate market value of the voting stock and non-voting common
equity held by non-affiliates of Registrant. The aggregate market value shall be
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of specified date within 60 days prior to
the date of filing:
$ 90,853,767.87, as of February 28, 1998.
Documents Incorporated by Reference: Part IV
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PART I
ITEM 1. BUSINESS
The Advanta Automobile Receivables Trust 1997-2, (the "Trust" or "Issuer") is a
business trust established as of December 1, 1997, pursuant to a Trust Agreement
(the "Trust Agreement") between Advanta Auto Receivables Corp. I (the "Seller")
and Wilmington Trust Company, acting thereunder not in its individual capacity
but solely as trustee under the Trust Agreement (the "Owner Trustee"). The
Issuer's only purpose is the issuance of $20,000,000 5.85625% Class A-1 Asset
Backed Notes, $31,000,000 6.19% Class A-2 Asset Backed Notes, $29,000,000 6.22%
Class A-3 Asset Backed Notes and $16,192,000 6.26% Class A-4 Asset Backed Notes
(collectively, the "Notes") issued pursuant to an Indenture dated as December 1,
1997 (the "Indenture") between the Trust and Norwest Bank Minnesota, National
Association, as indenture trustee and as trust collateral agent (the "Indenture
Trust" and the "Trust Collateral Agent"). The Trust also issued $36,486,749
aggregate principal amount of 6.26% Asset Backed Certificates which were not
offered but retained by the Seller (the "Certificates"). The assets of the Trust
consist primarily of a pool of sub-prime motor vehicle retail installment sale
contracts (the "Receivables") purchased by the Seller from Advanta Auto Finance
Corporation (the "Registrant" and the "Master Servicer"). Scheduled payments on
the Notes are unconditionally and irrevocably guaranteed pursuant to a financial
guaranty insurance policy (the "Policy") issued by Financial Security Assurance
(the "Certificate Insurer"). The Receivables are serviced by the Master Servicer
pursuant to a Sale and Servicing Agreement (the "Sale and Servicing Agreement")
dated as of December 1, 1997 among the Issuer, the Seller, the Master Servicer
and the Trust Collateral Agent and subserviced by Nuvell Financial Services
Corp. (the "Subservicer"). The Subservicer has agreed pursuant to a subservicing
agreement to perform the obligations of the Master Servicer under the Sale and
Servicing Agreement. On December 17, 1997, the Seller sold $96,192,000 aggregate
principal amount of Receivables to the Issuer and the Issuer pledged such
Receivables to the Trust in exchange for the Notes and the Issuer sold the Notes
pursuant to a public offering, the underwriting of which was managed by
Prudential Securities Incorporated.
The Receivables and the distributions thereon, along with certain insurance
proceeds and certain proceeds from liquidation of the Receivables, are the only
significant assets of the Issuer. The Notes represent obligations solely of the
Issuer. The Notes were registered under a Registration Statement (file no.
333-19733) on Form S-3 declared effective on March 21, 1997.
ITEM 2. PROPERTIES
The Issuer neither owns nor leases any physical properties.
ITEM 3. LEGAL PROCEEDINGS
The Master Servicer is not aware of any material pending legal proceedings
involving either the Issuer, the Trustee, the Seller or the Master Servicer with
respect to the Notes
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or the Issuer's property. However, the Seller is a direct subsidiary of the
Master Servicer and the Master Servicer is an indirect subsidiary of Advanta
Corp., a Delaware corporation ("Advanta Corp."), a publicly-traded company with
its principal executive offices located in Spring House, Pennsylvania. The
Master Servicer services Receivables securitized by the Seller.
On Friday, January 22, 1999, Fleet Financial Group, Inc. and certain of its
affiliates ("Fleet") filed a complaint (the "Complaint") against Advanta Corp.
and certain of its affiliates relating to the transaction with Fleet which
closed on February 20, 1998 in which Advanta Corp. contributed substantially of
its consumer credit card business to a limited liability company owned by Fleet
(the "Fleet Transaction"). The Complaint centers around post-closing adjustments
to the transaction and other matters relating to the Fleet Transaction.
Advanta Corp. has filed an answer to the Complaint denying the material
allegations of the Complaint. Advanta Corp. also has filed a countersuit against
Fleet seeking damages from Fleet. Advanta Corp. does not expect this suit to
have any material adverse effect on the financial position or future operating
results.
The ability of Advanta Corp.'s subsidiaries to honor their financial and other
obligations is to some extent influenced by the financial condition of Advanta
Corp. Such obligations primarily consist of the Seller's obligation to
repurchase Receivables which are inconsistent with representations and
warranties set forth in certain agreements relating to Notes issued by the Trust
sponsored by the Registrant as well as the obligations of the Master Servicer
pursuant to certain agreements relating to the Notes issued by the Trust.
In addition, on or about March 3, 1999 Advanta Corp. announced that it intends
to exit the automobile financing business.
This Report on Form 10-K contains forward-looking statements that are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those projected. The most significant among these risks and
uncertainties is the uncertainty of the legal process.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter has been submitted to a vote of the holders of beneficial interests in
the Issuer through the solicitation of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Trust is not an issuer of common stock in a corporation, although the Notes
have voting rights. The equity of the Trust consists of the beneficial or
ownership interest therein for which, to the best knowledge of the Master
Servicer, there is no established public trading market.
As of March 13, 1998, there were approximately 4 holders of the Class A-1 Notes,
3 holders of the Class A-2 Notes, 8 holders of the Class A-3 Notes and 1
holder of the Class A-4 Notes. The number of holders includes individual
participants in security position listings. As of December 15, 1997, no monthly
distributions had been made to the holders of the Notes.
ITEM 6. SELECTED FINANCIAL DATA
Not Applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATION
On December 17, 1997, the Issuer issued $20,000,000.00 aggregate principal
amount of Class A-1 Notes having a fixed rate of 5.85625% per annum,
$31,000,000.00 aggregate principal amount of Class A-2 Notes having a fixed rate
of 6.19% per annum, $29,000,000 aggregate principal amount of Class A-3 Notes
having a fixed rate of 6.22% per annum and $16,192,000 aggregate principal
amount of Class A-4 Notes having a fixed rate of 6.26% per annum which are
collateralized by Receivables.
The sale of the Receivables to the Issuer, the issuance of the Notes and the
simultaneous delivery of the Notes to the Issuer for sale pursuant to a public
offering, the underwriting of which was co-managed by Prudential Securities
Incorporated has been accounted for as a sale of the Notes. The value of the
Notes issued by the Issuer equaled the value of the Receivables conveyed to the
Issuer by the Seller. Accordingly, there was no income to the Issuer resulting
from the aforementioned transaction.
CAPITAL RESOURCES AND LIQUIDITY
The Issuer's primary sources of funds with respect to the Notes will be receipts
of interest on and principal of the Receivables, along with certain insurance
proceeds and certain proceeds from the liquidation of the Receivables. The
respective managements of the Seller and the Master Servicer believe that the
Issuer will have sufficient liquidity and capital resources to pay all amounts
on the Notes as they become due and all other
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anticipated expenses of the Issuer. The Issuer does not have, nor will it have
in the future, any significant source of capital for payment of the Notes and
its operating expenses other than the receipt of interest on and principal of
the Receivables, certain insurance proceeds and certain proceeds obtained from
the liquidation of the Receivables and any payments made by the Certificate
Insurer. The Issuer is a limited purpose trust. The Notes represent obligations
solely of the Issuer.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Not Applicable.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes of accountants or disagreements on accounting or financial
disclosures between the Issuer and its accountants.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Issuer does not have any directors or officers.
The following individuals comprise the board of directors and officers of the
Registrant:
Name Position
- ---- --------
David E. Plante President and Director
Susan McVeigh Vice President and Treasurer
Michael Coco Vice President
James Shreero Vice President and Assistant Treasurer
Mark Dunsheath Vice President
Scott Heidemann Assistant Secretary and Assistant Treasurer
Robert Cardwell Assistant Secretary
ITEM 11. EXECUTIVE COMPENSATION
Not Applicable. The Issuer does not have employees.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth (i) the name and address of each entity owning
more than 5% of the outstanding principal amount of the Advanta Automobile
Receivables Trust 1997-2, Class A-1 Notes ("Class A-1 Notes"), Class A-2 Notes
("Class A-2 Notes"), Class A-3 Notes (the "Class A-3 Notes") and Class A-4 Notes
(the "Class A-4 Notes") (ii) the principal amount of each Class of Notes and
(iii) the percent that the principal
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amount of each Class of Notes owned represents of the outstanding principal
amount of such Class of Notes. The information set forth in the table is based
upon information obtained by the Issuer from Depository Trust Company. The
Registrant is not aware of any Schedules 13D or 13G filed with the Securities
and Exchange Commission in respect of the Notes.
<TABLE>
<CAPTION>
AMOUNT OWNED
-------------------------------------
(All Dollar Amounts are in Thousands)
-------------------------------------
NAME AND ADDRESS PRINCIPAL PERCENT
- ---------------- --------- -------
<S> <C> <C>
Class A-1 Notes
- ---------------
Bank of New York
925 Patterson Plank Rd.
Secaucus, NJ 07094 6,000 30.00%
Chase Manhattan Bank
4 New York Plaza 13th Floor
New York, NY 10004 5,000 25.00%
Chase Manhattan Bank/Chemical
4 New York Plaza
Proxy Department 13th Floor
New York, NY 10004 2,000 10.00%
State Street Bank and Trust Company
1776 Heritage Drive
Global Corporate Action Unit JAB
5NW
No. Quincy, MA 02171 7,000 35.00%
Class A-2 Notes
- ---------------
Chase Manhattan Bank
4 New York Plaza 13th Floor
New York, NY 10004 15,000 48.39%
Northern Trust Company-Safekeeping
50 South Lasalle Street, Level A
Chicago, IL 60675 15,000 48.39%
Class A-3 Notes
- ---------------
Chase Manhattan Bank
4 New York Plaza 13th Floor
New York, NY 10004 7,000 24.14%
Manufacturers and Traders Trust Company
P.O. Box 1377
Buffalo, NY 14240 2,000 6.90%
Northern Trust Company-Safekeeping
50 South Lasalle Street, Level A
Chicago, IL 60675 13,000 44.83%
Mercantile Bancorporation Inc.
721 Locust Street, 19th Floor
St. Louis, MO 63101 13,000 44.83%
State Street Bank and Trust Company
1776 Heritage Drive
Global Corporate Action Unit JAB 5NW
No. Quincy, MA 02171 5,500 17.24%
Class A-4 Notes
- ---------------
Bank of New York
925 Patterson Plank Rd.
Secaucus, NJ 07094 16,192 100.00%
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements: Not applicable.
2. Financial Statement Schedules: Not applicable.
3. Exhibits: As the Issuer was established as of December 17,
1997, the Master Servicer is obligated to prepare an Annual
Statement as to Compliance for the year ended December 31,
1997, and mail such statement to the Noteholders on or before
the last day of March, 1998 and Independent Certified Public
Accounts are required to prepare an annual report pertaining
to the compliance of the Master Servicer with its servicing
obligations pursuant to the Sale and Servicing Agreement on or
before the last day of March, 1998. The Subservicer has
agreed, pursuant to the subservicing agreement, to perform the
obligations of the Master Servicer under the Sale and
Servicing Agreement, including the obligation to deliver the
Annual Statement as to Compliance which is included herewith
as Exhibit 28.1 and the Annual Independent Certified Public
Accounts' Report is included herewith as Exhibit 28.2.
Exhibit No. Description
- ----------- -----------
*3.1 Certificate of Incorporation of the Advanta Auto Finance
Corporation.
*3.2 By-laws of the Advanta Auto Finance Corporation.
*4 Sale and Servicing Agreement.
28.1 Annual Statement as to Compliance for the year ended December
31, 1997.
28.2 Annual Independent Certified Public Accountants' Report.
*Incorporated by reference to the Exhibit of the same designation filed with the
Issuer's Form S-3 registration statement declared effective March 21, 1997.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed by the Issuer during the period which
relate to the period covered by this report.
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Notes and Class A-4 Asset-Backed Notes
(c) See "Item 14(a)(3)-Exhibits".
(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, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ADVANTA AUTO FINANCE CORPORATION
as Registrant and Master Servicer and on behalf of
Advanta Automobile Receivables Trust 1997-2
By: /s/ David E. Plante
----------------------
Name: David E. Plante
Title: President
August 6, 1999
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ David E. Plante
------------------------------------------
Name: David E. Plante
Title: President and Director
Date: August 6, 1999
By: /s/ Michael Coco
------------------------------------------
Name: Michael Coco
Title: Vice President
Date: August 6, 1999
By: /s/ Susan McVeigh
------------------------------------------
Name: Susan McVeigh
Title: Vice President and Treasurer
Date: August 6, 1999
By: /s/ James Shreero
------------------------------------------
Name: James Shreero
Title: Vice President and Assistant
Treasurer
Date: August 6, 1999
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By: /s/ Mark Dunsheath
------------------------------------------
Name: Mark Dunsheath
Title: Vice President
Date: August 6, 1999
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INDEX TO EXHIBITS (ITEM 14(c))
Exhibit No. Description
- ----------- -----------
*3.1 Certificate of Incorporation of the Advanta Auto
Finance Corporation
*3.2 By-laws of the Advanta Auto Finance Corporation
*4 Sale and Servicing Agreement
28.1 Annual Statement as to Compliance for the year
ended December 31, 1998
28.2 Annual Independent Certified Public Accountants'
Report.
* Incorporated by reference to the Exhibit of the same designation filed with
the Issuer's Form S-3 registration statement declared effective March 21, 1997.
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EXHIBIT 28.1
[LETTERHEAD]
NuVell
Financial Services Corp.
March 16, 1998
Dave Plante
Advanta Auto Finance
500 Office Center Drive
Suite 400
Fort Washington, PA 19034
RE: Servicing Agreement dated March 28, 1996, between Advanta
Auto Receivables Trust 1997-2 ("Trustee"), and LSI
Financial Group ("Servicer")
Mr. Plante:
A review of the activities of the Servicer during the preceding calendar year
and of performance under this Agreement has been made under such officer's
supervision and pursuant to Section 7.04(b) of the Servicing Agreement. To the
best of my knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement and has been in compliance with all federal,
state and local laws relating to the servicing and collection of the Auto Loans
and its performance of the Agreement throughout such year.
Sincerely,
Timothy S. Sambrano
President, CEO
c: NuVell FAC General Counsel
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Exhibit 28.2
[Deloitte & Touche LLP Letterhead]
INDEPENDENT ACCOUNTANT'S REPORT
To Nuvell Financial Services Corp.:
We have examined management's assertion about Nuvell Financial Services Corp.'s
(a wholly owned subsidiary of Basic Credit Holding Company, LLC) compliance with
the minimum servicing standards identified in the Mortgage Bankers Association
of America's Uniform Single Attestation Program for Mortgage Bankers ("USAP") as
of December 31, 1997, and for the period from November 1, 1997 through December
31, 1997, included in the accompanying management assertion. Management is
responsible for Nuvell Financial Services Corp.'s compliance with those minimum
servicing standards. Our responsibility is to express an opinion on management's
assertion about the entity's compliance based on our examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about Nuvell Financial Services Corp.'s
compliance with the minimum servicing standards and performing such other
procedures as we considered necessary in the circumstances. We believe that our
examination provides a reasonable basis for our opinion. Our examination does
not provide a legal determination on Nuvell Financial Services Corp.'s
compliance with the minimum servicing standards.
In our opinion, management's assertion that Nuvell Financial Services Corp.
complied with the aforementioned minimum servicing standards as of December 31,
1997, and for the period from November 1, 1997 through December 31, 1997, is
fairly stated, in all material respects.
Deloitte & Touche LLP
March 13, 1998
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