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Filed Pursuant to Rule 424(b)(1)
Registration No. 333-81455
PROSPECTUS
$282,900,000
(RYDER LOGO)
ASSET BACKED SENIOR NOTES
RYDER VEHICLE LEASE TRUST 1999-A
Issuer
RYDER FUNDING LP
Transferor
RYDER TRUCK RENTAL, INC.
Administrative Agent
---------------------
The trust's main sources for payment of the senior notes will be lease
payments generated by a portfolio of commercial full service lease contracts and
the proceeds from the future sale of the trucks, highway tractors and trailers
currently leased under those contracts.
Interest and principal will be payable quarterly and the first scheduled
payment date is January 17, 2000.
BEFORE YOU DECIDE TO INVEST, READ THIS PROSPECTUS CAREFULLY, ESPECIALLY THE
RISK FACTORS BEGINNING ON PAGE 10.
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The senior notes are obligations of the trust only. The senior notes are
not obligations of Ryder Funding LP, Ryder Truck Rental, Inc. or any of their
affiliates.
The trust will issue the following classes of senior notes--
<TABLE>
<CAPTION>
Original
Principal Interest Rate Final Payment Price to Underwriting Proceeds to
Amount (per annum) Date Public Discount Transferor
------------ ------------- --------------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
October 16,
Per Class A-1 Note....... $ 28,000,000 6.165% 2000 100% 0.20% 99.80%
January 15,
Per Class A-2 Note....... $ 63,000,000 6.43% 2003 99.998787% 0.225% 99.773787%
Per Class A-3 Note....... $ 54,000,000 6.68% April 15, 2004 99.986077% 0.250% 99.736077%
Per Class A-4 Note....... $ 53,000,000 6.89% April 15, 2005 99.977783% 0.30% 99.677783%
October 16,
Per Class A-5 Note....... $ 84,900,000 7.13% 2006 99.983315% 0.325% 99.658315%
------------ ------------ ---------------
Total.................... $282,900,000 $767,675.00 $282,098,101.82
</TABLE>
- The price to the public and proceeds to the transferor do not include
interest accrued from the date the notes will be issued.
- Total proceeds to the transferor excludes expenses, estimated at
approximately $1,053,646.
Neither the SEC nor any state securities commission has approved these
securities or determined that this prospectus is accurate or complete. It is
illegal for anyone to tell you otherwise.
---------------------
MERRILL LYNCH & CO.
FIRST UNION SECURITIES, INC.
SALOMON SMITH BARNEY
---------------------
The date of this prospectus is November 4, 1999.
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
CONTENT OF PROSPECTUS
You should rely only on the information contained in this document. We have
not authorized anyone to provide you with different information.
We include cross-references in this prospectus to the captions under which
you can find additional related information. The following table of contents
lists the pages on which these captions are located.
You can find a listing of the pages where capitalized terms used in this
prospectus are defined under "Index of Principal Terms" beginning on page 107.
LIMITATIONS ON OFFERS OR SOLICITATIONS
We do not intend this document to be an offer or solicitation:
- if used in a jurisdiction in which an offer or solicitation is not
authorized;
- if the person making an offer or solicitation is not qualified to do so;
or
- if an offer or solicitation is made to anyone to whom it is unlawful to
make an offer or solicitation.
DEALER PROSPECTUS DELIVERY REQUIREMENTS
For 90 days after the date of this prospectus, all dealers that effect
transactions in the senior notes, whether or not participating in this offering,
may be required to deliver a prospectus. This requirement is in addition to the
dealers' obligation to deliver a prospectus when acting as underwriters with
respect to their unsold allotments or subscriptions.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN
THIS PROSPECTUS................................ 2
OVERVIEW OF TRANSACTION........................ 4
SUMMARY........................................ 5
RISK FACTORS................................... 10
OVERVIEW OF THE TRANSACTION.................... 15
THE TRUST...................................... 16
Formation.................................. 16
Capitalization............................. 17
The Owner Trustee.......................... 17
Property of the Trust...................... 17
USE OF PROCEEDS................................ 18
THE ORIGINATION TRUST.......................... 19
General.................................... 19
The UTI Beneficiaries...................... 19
The Origination Trustee.................... 20
Property of the Origination Trust.......... 20
Lease Origination and the Titling of
Vehicles................................. 20
THE SUBIS...................................... 21
General.................................... 21
Transfers of the SUBI Certificates......... 22
THE TRANSFEROR................................. 23
RYDER.......................................... 23
General.................................... 23
Shared Services Center..................... 24
The Leases................................. 24
Lease Underwriting Procedures.............. 28
Insurance.................................. 28
Collection, Repossession and Disposition
Procedures............................... 29
Servicing.................................. 29
Lease Payments............................. 30
Historical Data............................ 32
Year 2000 Preparation...................... 34
THE SPECIFIED LEASES........................... 36
General.................................... 36
Characteristics............................ 37
Representations, Warranties and
Covenants................................ 41
MATURITY, PAYMENT AND YIELD CONSIDERATIONS..... 43
NOTE FACTORS AND TRADING INFORMATION........... 47
DESCRIPTION OF THE SENIOR NOTES................ 48
General.................................... 48
Interest................................... 48
Principal.................................. 49
Optional Purchase.......................... 50
The Indenture Trustee...................... 50
Book-Entry Registration.................... 50
ADDITIONAL INFORMATION REGARDING THE
SECURITIES................................... 54
Payments on the Securities................. 54
Optional Purchase.......................... 56
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Statements to Senior Noteholders........... 57
Definitive Notes........................... 58
SECURITY FOR THE SECURITIES.................... 58
General.................................... 58
The Program Operating Lease................ 59
The Subordinated Notes..................... 60
The Certificates........................... 60
The Accounts............................... 61
The Contingent and Excess Liability
Insurance................................ 64
ADDITIONAL DOCUMENT PROVISIONS................. 64
The Indenture.............................. 64
The Trust Agreement........................ 68
The SUBI Trust Agreement................... 71
The Administration Agreement............... 73
Miscellaneous Provisions................... 83
ADDITIONAL LEGAL ASPECTS OF THE ORIGINATION
TRUST AND THE SUBIS.......................... 88
The Origination Trust...................... 88
The SUBIs.................................. 89
Insolvency-Related Matters................. 90
ADDITIONAL LEGAL ASPECTS OF THE SPECIFIED
LEASES AND THE SPECIFIED VEHICLES............ 92
Back-up Security Interests................. 92
Titling Grade Period -- Lack of Perfected
Ownership Interest....................... 93
Vicarious Tort Liability................... 94
Repossession of Specified Vehicles......... 94
Deficiency Judgments....................... 95
Other Limitations.......................... 95
MATERIAL FEDERAL INCOME TAX CONSEQUENCES....... 95
General.................................... 95
Senior Notes............................... 96
DELAWARE AND FLORIDA TAX CONSEQUENCES.......... 101
General.................................... 101
Delaware................................... 101
Florida.................................... 102
Miscellaneous.............................. 102
ERISA CONSIDERATIONS........................... 102
General.................................... 102
Prohibited Transactions.................... 103
RATINGS OF THE SENIOR NOTES.................... 103
UNDERWRITING................................... 104
LEGAL MATTERS.................................. 105
EXPERTS........................................ 105
AVAILABLE INFORMATION.......................... 105
INDEX OF PRINCIPAL TERMS....................... 107
INDEX TO FINANCIAL STATEMENTS.................. F-1
GLOBAL CLEARANCE, SETTLEMENT AND TAX
DOCUMENTATION PROCEDURES..................... A-1
</TABLE>
3
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CHART
- - The above special units of beneficial interest, or SUBIs, represent specific
assets that produce income for the issuer.
- - The vehicle SUBI represents the specified vehicles and the lease SUBI
represents the specified leases.
- - The UTI represents other origination trust assets and the issuer has neither
any rights in those assets nor in the income they produce.
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SUMMARY
- - This summary highlights selected information from this prospectus and does not
contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of the offering of the
senior notes, you should carefully read this entire prospectus.
- - This summary provides an overview of some calculations, cash flows and other
information to aid your understanding and is qualified by the full description
of these calculations, cash flows and other information in this prospectus.
BASIC TERMS OF THE SENIOR NOTES
<TABLE>
<S> <C>
ISSUER/TRUST: Ryder Vehicle Lease Trust
1999-A
TRANSFEROR: Ryder Funding LP
ADMINISTRATIVE AGENT: Ryder Truck Rental, Inc.
MAINTENANCE
PROVIDER: Ryder Truck Rental, Inc.
OWNER TRUSTEE: Chase Manhattan Bank
Delaware
INDENTURE TRUSTEE: U.S. Bank National
Association
ORIGINATION TRUST: Ryder Truck Rental LT
ORIGINATION TRUSTEE: RTRT, Inc.
TRUST ASSETS: Beneficial and security
interests in leased vehicles
and lease contracts, and
related proceeds
LEASES: Commercial leases of trucks,
highway tractors and
trailers
CUTOFF DATE: Opening of business on
October 1, 1999
CREDIT ENHANCEMENT: A reserve fund, a residual
value surplus account, the
subordinated notes retained
by the transferor and the
certificates
NOTES TO BE OFFERED:
Class A-1 notes: $28,000,000
Class A-2 notes: $63,000,000
Class A-3 notes: $54,000,000
Class A-4 notes: $53,000,000
Class A-5 notes: $84,900,000
INTEREST RATES:
Class A-1 notes: 6.165%
Class A-2 notes: 6.43%
Class A-3 notes: 6.68%
Class A-4 notes: 6.89%
Class A-5 notes: 7.13%
INTEREST BASIS:
Class A-1 notes: Actual number of days
elapsed and assuming a
360-day year
Other senior
notes: A 360-day year of twelve
30-day months
PAYMENT DATES: The first business day after
the 14th day of each
January, April, July and
October
RECORD DATE: Holders of record are
determined one business day
prior to a payment date
FIRST PAYMENT DATE: January 17, 2000
FINAL PAYMENT DATES:
Class A-1 notes: October 16, 2000
Class A-2 notes: January 15, 2003
Class A-3 notes: April 15, 2004
Class A-4 notes: April 15, 2005
Class A-5 notes: October 16, 2006
CLEARANCE AND
SETTLEMENT: The Depository Trust
Company, Cedelbank and
Euroclear
CLOSING DATE: Expected to be
November 16, 1999
</TABLE>
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THE STRUCTURE OF THIS TRANSACTION
GENERAL
Ryder Truck Rental, Inc. has assigned commercial lease contracts and the related
leased vehicles to Ryder Truck Rental LT. The leased vehicles include trucks,
highway tractors and trailers. Some of these lease contracts and the related
leased vehicles have been allocated to a separate pool of assets. Beneficial and
security interests -- but not direct ownership -- in the vehicles and contracts
in that pool will be transferred to the trust. Neither the trust nor holders of
the trust's securities will receive any interest in assets other than those in
that pool. Payment of the senior notes will be backed by those beneficial and
security interests in the vehicles and contracts in the pool.
The trust will apply the net proceeds from the issuance and sale of the senior
notes to purchase those interests in the pool. In addition to the senior notes,
the trust is also issuing $13,023,237.85 in aggregate principal amount of asset
backed subordinated notes and $10,858,575.00 in aggregate principal amount of
asset backed certificates. The trust is not offering the subordinated notes or
the asset backed certificates under this prospectus. The asset backed
certificates will be sold in one or more private placements.
The trust will rely upon collections from the pool's lease contracts, sales
proceeds from the disposition of the related vehicles and funds on deposit in
specified accounts to make payments on the senior notes. The trust will be
solely liable for payments made on the senior notes.
REPAYMENT OF THE NOTES
The timing of payments of principal on the senior notes is largely dependent on
the timing of collections of cash flows generated by the underlying assets.
Principal will be paid on your senior notes on each payment date in an amount
generally equal to the available principal distribution amount generated by the
underlying pool of lease contracts and proceeds from the sale of the leased
vehicles.
Principal payments on the senior notes generally will be made to the holders of
the senior notes sequentially, so that no principal will be paid on any class of
senior notes until each class of senior notes with a lower numerical designation
has been paid in full. For example, no principal will be paid on the Class A-2
Notes until the Class A-1 Notes have been paid in full.
Until all principal due to the senior notes is paid, no principal will be paid
to the subordinated notes and the asset backed certificates. Principal will then
be paid to the subordinated notes until they have been paid in full, and then to
the asset backed certificates.
An exception to the sequential payment rule is that allocable principal from the
sale of the trust's assets following a default under the indenture and the
acceleration of the senior notes or the transferor's insolvency will be paid
first to the Class A-1 Senior Notes until they have been paid in full, second,
on a pro rata basis, to all other classes of the senior notes until they have
been paid in full, and third, ratably, to the subordinated notes (which amounts
will be paid to the reserve fund) and the asset backed certificates pro rata
until they have been paid in full.
Any unpaid principal amount of each class of senior notes will be payable in
full on the final payment dates listed on the cover page of this prospectus.
Ryder Truck Rental, Inc. will administer the lease contracts, the disposition of
the related vehicles when their leases terminate and the collection of amounts
due in respect of the leases and will also provide maintenance and other
services in connection with the leases and the vehicles. It also will be
entitled to certain lease payments that are not being securitized in this
transaction and that are thus neither the property of the trust nor in any other
way available to make payments on the senior notes. If the total amount that
Ryder receives from the lessee on a pool lease is less than the amount due, the
shortfall will be allocated pro rata to the trust's and Ryder's portions of the
amount due.
For information on the components of the lease payments that the senior notes
will or will not be entitled to and on Ryder's role in servicing the leases, see
"Ryder -- The Leases -- Collection, Repossession and Disposition Procedures,
-- Servicing, and -- Lease Payments".
For information on the allocation of collection shortfalls see "Additional
Document Provisions -- The Administration Agreement -- Collections -- Financial
Component Payments".
See "Description of the Senior Notes -- Principal" and "Additional Information
Regarding the Securities -- Payments on the Securities -- Deposits to the
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Distribution Accounts; Priority Of Payments" for additional detail regarding the
allocation of any principal losses or shortfalls in amounts required to be
distributed to holders of senior notes and the reimbursement of those losses.
OPTIONAL REDEMPTION OF THE NOTES
The transferor has the option to purchase all of the assets of the trust on any
payment date when the combined unpaid principal balance of the senior notes,
subordinated notes and asset backed certificates is less than or equal to 10% of
the total initial balance of the senior notes, subordinated notes and asset
backed certificates. If the transferor exercises this option, any senior notes
that are outstanding at that time will be prepaid in whole at a redemption price
equal to their unpaid principal amount, plus accrued and unpaid interest.
THE PROPERTY OF THE TRUST
GENERAL
The primary property of the trust will be:
- the vehicle SUBI certificate, which is described below, including the right
to receive 99% of the amounts realized from sales of the specified vehicles;
- the program operating lease under which the trust will lease the vehicle
SUBI certificate to the transferor;
- the right under the program operating lease to receive an amount equal to
99% of the payments made in respect of the financial component of specified
vehicle leases;
- the pledge by Ryder Funding LP of the lease SUBI certificate to secure the
payments due under the program operating lease; and
- the right to certain amounts deposited in the reserve fund and the residual
value surplus account.
THE PROGRAM OPERATING LEASE
When the senior notes are issued, the trust and the transferor will enter into a
program operating lease, under which the trust will lease the vehicle SUBI
certificate to the transferor, subject to the lien of the indenture. Pursuant to
the program operating lease and a pledge of the lease SUBI certificate, the
transferor will be obligated to make payments during the period that each
underlying vehicle is represented by the vehicle SUBI and covered by the program
operating lease.
The transferor will make payments on the program operating lease on each payment
date in an amount generally equal to certain payments made on or for the
specified leases and specified vehicles during the three-month collection period
immediately before the month in which the related payment date occurs. These
payments consist of:
- the financial component of the fixed charge portion of the total monthly
payment paid under each specified lease, and
- termination value payments made upon the exercise of any annual termination
option included in a specified lease.
The trust will apply these collected payments, together with certain proceeds
received during the related collection period from the sale or other disposition
of specified vehicles either:
- after the scheduled maturity or other termination of the related specified
leases, or
- as a result of an exercise of the annual termination option when the lessee
does not make a termination value payment,
to pay interest on and principal of the senior notes, the subordinated notes and
the certificates in accordance with their terms.
THE SPECIFIED LEASES AND THE SPECIFIED VEHICLES
The specified vehicles are commercial trucks, highway tractors and trailers
titled in the name of the origination trust or, in some cases, that will be
titled in the name of the origination trust during the 60 days after the
closing. The specified leases are full-service leases of specified vehicles.
Ryder Truck Rental, Inc. originated the specified leases in 26 states and
services the specified leases, as well as many other leases in which the trust
does not have an interest. The initial securitization value of the specified
leases and specified vehicles will be their net book value on the administrative
agent's books and the residual value of the specified vehicles will be their
currently estimated sales proceeds upon the scheduled maturity of their
specified leases. As of October 1, 1999:
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- the aggregate securitization value of the specified leases and specified
vehicles was $309,880,619.04;
- the aggregate estimated sales proceeds of the specified vehicles at
scheduled maturity was $112,112,717.00;
- the weighted average original term of the specified leases was 71.32 months;
and
- the weighted average remaining term to scheduled maturity of the specified
leases was 64.41 months.
THE SUBI CERTIFICATES
The origination trust will issue two special units of beneficial interest, which
are also called SUBIs:
- a lease SUBI that will constitute a beneficial interest in the specified
portfolio of lease contracts, and
- a vehicle SUBI that will constitute a beneficial interest in vehicles that
are leased under those lease contracts.
The SUBIs relating to the trust thus consists of the lease SUBI and the vehicle
SUBI. The SUBIs will not be offered to you under this prospectus.
A 99% SUBI certificate will be issued for each of the lease SUBI and the vehicle
SUBI. One SUBI certificate will represent a 99% undivided interest in the lease
SUBI and the other SUBI certificate will represent a 99% undivided interest in
the vehicle SUBI. The SUBI certificate for the lease SUBI will be pledged and
the SUBI certificate for the vehicle SUBI will be transferred to the trust at
the time it issues the senior notes. The SUBI certificates will not be offered
to you under this prospectus.
The SUBI certificates will evidence a 99% beneficial interest in the SUBI
assets, not a direct ownership interest in the SUBI assets. The SUBI assets are
the specified leases and specified vehicles. By holding the Vehicle SUBI
certificate and the program operating lease, the trust will be entitled to
receive an amount equal to 99% of all payments made on or in respect of the SUBI
assets. Payments made on or in respect of the 1% beneficial interest in the SUBI
assets not evidenced by the SUBI certificates will not be available to make
payments on the senior notes, the subordinated notes or the asset backed
certificates.
The SUBI certificates will not evidence an interest in any origination trust
assets other than the SUBI assets, and payments made on or for all other
origination trust assets will not be available to make payments on the senior
notes.
For more information regarding the trust's property see "The SUBIs" and "The
Specified Leases".
CREDIT ENHANCEMENT
The credit enhancement for the senior notes will consist primarily of the
following:
- subordination of the subordinated notes;
- subordination of the asset backed certificates;
- the reserve fund; and
- the residual value surplus account.
SUBORDINATION OF THE SUBORDINATED NOTES
The subordinated notes will be subordinated to the senior notes to provide
credit enhancement for the senior notes.
SUBORDINATION OF THE CERTIFICATES
The certificates will be subordinated to the senior notes to provide additional
credit enhancement for the senior notes.
THE RESERVE FUND
As an additional source of credit enhancement, the administrative agent will
establish a reserve fund. The reserve fund will be funded as follows:
- on the closing date, the transferor will make an initial deposit into the
reserve fund of $9,970,408.92, which is 3.25% of the aggregate initial
balance of the senior notes, subordinated notes and asset backed
certificates;
- interest and principal paid on the subordinated notes will be deposited into
the reserve fund; and
- on each payment date, any excess collections remaining after interest and
principal on the senior notes, subordinated notes and asset backed
certificates and various other obligations and expenses of the trust have
been paid will be deposited into the reserve fund.
Deposits will be made to the reserve fund after the closing date only to the
extent needed to maintain a balance in the reserve fund equal to its initial
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deposit. Any further excess collections will be paid to the transferor.
Available amounts in the reserve fund on each payment date will be available to
cover shortfalls in distributions of interest and principal on the senior notes
and the certificates.
THE RESIDUAL VALUE SURPLUS ACCOUNT
As an additional source of credit enhancement, a residual value surplus account
will provide funds for the benefit of the senior notes and the certificates in
the event any residual value losses are incurred on the sale of specified
vehicles.
Residual value losses will be any amount by which the net proceeds from the sale
of specified vehicles are less than the aggregate securitization values of those
specified vehicles and their specified leases.
The residual value surplus account will not be funded with an initial balance,
but on each payment date it will be funded with the amount by which the sales
proceeds for each specified vehicle sold during the related collection period
exceeded the securitization value of the related specified lease.
After all distributions required on a given payment date have been made, any
funds remaining in the residual value surplus account will be paid to the
transferor.
For more information regarding the residual value surplus account, see "Security
for the Securities -- The Accounts -- The Residual Value Surplus Account".
ADMINISTRATION AND MAINTENANCE
Ryder Truck Rental, Inc. will act as administrative agent to service the
origination trust assets, including the SUBI assets, and will also act as
maintenance provider to provide certain supplies, maintenance and other services
for the specified vehicles and to the lessees under the specified leases.
For more information regarding the administrative agent and the maintenance
provider, see "Additional Document Provisions -- The Administration Agreement"
and "Ryder".
TAX STATUS
Steel Hector & Davis LLP, as special tax counsel to the transferor, is of the
opinion that:
- the senior notes will be characterized as indebtedness for federal income
tax purposes, and
- the trust will not be a separately taxable entity for federal income tax
purposes.
By accepting a senior note, each holder or beneficial owner will agree to treat
the senior notes as indebtedness. You should consult your own tax advisor
regarding the federal income tax consequences of the purchase, ownership and
disposition of the senior notes, and the tax consequences arising under the laws
of any state or other taxing jurisdiction.
For more information, see "Material Federal Income Tax Consequences".
ERISA CONSIDERATIONS
It is expected that the senior notes will be eligible for purchase by employee
benefit plans. However, plans contemplating a purchase of senior notes should
consult their counsel before making a purchase.
For more information, see "ERISA
Considerations".
SENIOR NOTE RATINGS
The senior notes will be issued only if the Class A-1 Notes are rated in the
highest short-term rating category and the other senior notes are rated in the
highest long-term category by Moody's Investors Service, Inc. and Duff & Phelps
Credit Rating Co. There can be no assurance that a rating will not be lowered or
withdrawn by an assigning rating agency.
MONEY MARKET INVESTMENT
The Class A-1 Notes have been structured to be eligible securities for purchase
by money market funds under Rule 2a-7 under the Investment Company Act of 1940.
However, money market funds contemplating a purchase of Class A-1 Notes should
consult their counsel before making a purchase.
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RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the senior notes:
YOU MAY HAVE DIFFICULTY
SELLING YOUR SENIOR NOTES OR
OBTAINING YOUR DESIRED SALES
PRICE. - The senior notes will not be listed on any
securities exchange. The underwriters intend
to make a secondary market for the senior
notes. The underwriters will do so by
offering to buy the senior notes from
investors that wish to sell. However, the
underwriters will not be obligated to make
offers to buy the senior notes and may stop
making offers at any time. In addition, the
prices offered, if any, may not reflect
prices that other potential purchasers would
be willing to pay, were they to be given the
opportunity. There have been times in the
past where there have been very few buyers of
asset backed securities and thus there has
been a lack of liquidity. There may be a
similar lack of liquidity at times in the
future. As a result, you may not be able to
sell your senior notes when you want to do
so, or you may not be able to obtain the
price that you wish to receive.
YOU WILL EXPERIENCE A LOSS ON
YOUR INVESTMENT IF DEFAULTS ON
THE LEASE CONTRACTS OR RESIDUAL
VALUE LOSSES EXCEED THE AVAILABLE
CREDIT ENHANCEMENT. - The trust does not have, nor is it expected
to have, any significant assets or sources of
funds other than the SUBI certificates and
payments under the program operating lease,
together with available funds in the reserve
fund, the residual value surplus account and
the distribution and collection accounts. The
senior notes represent obligations solely of
the trust and will not be insured or
guaranteed by any entity. Accordingly, you
will rely primarily upon payments on the
program operating lease which are based on
collections on the specified leases and
specified vehicles -- together with monies on
deposit in the reserve fund and the residual
value surplus account -- for payments on the
senior notes. The reserve fund and the
residual value surplus account, together with
the credit enhancement provided by
subordination of the subordinated notes and
the certificates, are intended to provide
protection against delinquencies on the
specified leases and losses on the specified
leases and specified vehicles. However, if
the level of delinquencies and losses exceeds
the available credit enhancement, you will
suffer a loss. You will have no claim to any
amounts properly distributed to others from
time to time.
YOUR SHARE OF POSSIBLE LOSSES
MAY NOT BE PROPORTIONATE. - Principal payments on the senior notes
generally will be made to the holders of the
senior notes sequentially, so that no
principal will be paid on any class of senior
notes until each class of senior notes with a
lower numerical designation has been paid in
full. Losses in excess of the available
credit enhancement relating to the specified
leases and specified vehicles will be
allocated, after the class A-1 senior notes
are paid, to each remaining class of senior
notes based on a fraction equal to the unpaid
principal amount of that class divided by the
unpaid principal amount of all classes. As a
result, a class of senior notes with a later
maturity may be allocated more losses than a
class of senior notes with an earlier
maturity as a relative percentage of their
initial principal amounts.
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THE TIMING OF PRINCIPAL
PAYMENTS IS UNCERTAIN. - The amount of distributions of principal on
the senior notes and the time when you
receive those distributions depends on the
rate of payments and losses relating to the
specified leases and the specified vehicles,
which cannot be predicted with certainty.
Those principal payments may be regularly
scheduled payments or unscheduled payments
like those resulting from prepayments or
liquidations of defaulted specified leases.
Additionally, the administrative agent may be
required to make payments relating to
specified leases and specified vehicles under
some circumstances, and the transferor will
have the right to purchase all assets of the
trust pursuant to a clean-up call. Each of
these payments will have the effect of
shortening the average life of the senior
notes. You will bear any reinvestment risks
resulting from a faster or slower rate of
payments of the specified leases and the
specified vehicles.
DURING A TITLING GRACE PERIOD
THE ORIGINATION TRUST WILL LACK A
PERFECTED OWNERSHIP INTEREST IN
SOME VEHICLES. - During a titling grace period, vehicles
having an aggregate securitization value on
the cutoff date not to exceed $4,900,848,
representing 1.58% of the aggregate
securitization value of all the trust assets,
will be titled in the name of Ryder Truck
Rental, Inc. rather than in the name of the
origination trust or the origination trustee
on behalf of the origination trust. During
this grace period, the administrative agent
will title these vehicles in the name of the
origination trust or the origination trustee
on behalf of the origination trust, but no
action will be taken to note a lien in favor
of the transferor on the applicable
certificates of title. An ownership interest
or security interest in a motor vehicle
registered in most states may be perfected
against creditors and subsequent purchasers
without notice for valuable consideration
only by one or more of the following:
o depositing with the state's department of
motor vehicles a properly endorsed
certificate of title for the vehicle
showing the transferee or secured party
as legal owner or lienholder thereon,
o filing a sworn notation of lien with the
state's department of motor vehicles and
noticing such lien on the certificate of
title, or
o if the vehicle has not been previously
registered, filing an application for an
original registration together with an
application for registration of the
secured party as legal owner or
lienholder, as the case may be, with the
state's department of motor vehicles.
The origination trust and the transferor may
thus not have a validly perfected ownership
interest and security interest, respectively,
in some vehicles during the grace period. As
a result, the origination trust's and the
transferor's ownership or security interest
in these vehicles will not be perfected and
the transferor's interest could be inferior
to interests of other creditors or purchasers
who have taken the steps described above. If
such creditors or purchasers successfully did
so, the affected vehicles
11
<PAGE> 12
would not be available to the trust to
generate their expected cash flow and you
could suffer a loss on your investment.
For a discussion of the possible liability of
the trust in connection with the negligent
use or operation of the leased vehicles, see
"Additional Legal Aspects of the Specified
Leases and the Specified Vehicles -- Titling
Grace Period -- Lack of Perfected Ownership
Interest".
THE GEOGRAPHIC CONCENTRATION
OF THE LEASES, ECONOMIC FACTORS
AND THE COMMERCIAL TRUCK, HIGHWAY
TRACTOR AND TRAILER MARKET COULD
NEGATIVELY AFFECT THE TRUST'S
ASSETS. - The specified leases were originated in 26
states, with 10.77% -- the largest percentage
of specified leases in any state (based on
cutoff date securitization
value) -- originated in North Carolina. Less
than 10.00% of the total number of specified
leases were originated in any states other
than Pennsylvania, California and Tennessee.
Adverse economic conditions in one of more of
these states or in the market for commercial
trucks, highway tractors and trailers may
have a disproportionate impact on the
performance of the specified leases and the
specified vehicles. Economic factors like
unemployment, interest rates, the rate of
inflation and consumer perceptions of the
economy may affect the rate of prepayment and
defaults on the specified leases and the
ability to sell or dispose of the related
specified vehicles for an amount at least
equal to their residual values.
THE ADMINISTRATIVE AGENT AND
THE MAINTENANCE PROVIDER HAVE
INTERESTS BEYOND SERVICING THE
ASSETS OF THE TRUST AND THEREFORE
MAY HAVE COMPETING OR CONFLICTING
INTERESTS. - Ryder Truck Rental, Inc., in addition to
serving as administrative agent and
maintenance provider, also is and will be
engaged in leasing and providing maintenance
services in connection with its own
commercial trucks, highway tractors and
trailers and servicing the related leases. It
therefore may from time to time have
competing interests or conflicts of interest
in performing its obligations with respect to
the maintenance and sale of the specified
vehicles and the servicing of the specified
leases. Ryder has contractually agreed that
when serving as administrative agent and
maintenance provider it will use the same
degree of skill, care and attention and the
same customary and usual procedures it
employs in connection with vehicles it leases
and maintains for its own account.
A DEFAULT, REPLACEMENT OR
DECLINE IN THE QUALITY OF THE
SERVICE OF THE ADMINISTRATIVE
AGENT OR THE MAINTENANCE PROVIDER
COULD DELAY OR LIMIT PAYMENTS
TO YOU. - Because the specified leases and specified
vehicles will be serviced and maintained by
the administrative agent and the maintenance
provider, a default by or the replacement of
either could reduce or delay payments made
under the specified leases. Ryder Truck
Rental, Inc. will serve as both the
administrative agent and the maintenance
provider. Any reduction or delay in the
payments made under the specified leases
could cause delays in payments due to you or
limit the amount of principal and interest
paid to you. A decline in the quality of
service provided by the administrative agent
or the maintenance provider could also cause
delays in payments due to you or limit the
amount of principal and interest paid to you.
VICARIOUS TORT LIABILITY MAY
RESULT IN A LOSS ON YOUR
INVESTMENT. - Some states allow a party that incurs an
injury involving a leased vehicle to sue the
owner of the vehicle merely because of that
ownership. Most states, however, either
prohibit these vicarious liability suits or
limit the lessor's liability to the amount of
12
<PAGE> 13
liability insurance that the lessee was
required to carry under applicable law but
failed to maintain. If vicarious liability
imposed on the trust or the origination trust
exceeds the coverage provided by its primary
and excess liability insurance policies, you
could experience delays in payments due to
you or may ultimately suffer a loss.
For a discussion of the possible liability of
the trust in connection with the use or
operation of the leased vehicles, see
"Additional Legal Aspects of the Specified
Leases and the Specified
Vehicles -- Vicarious Tort Liability".
A BANKRUPTCY OF THE TRANSFEROR
OR THE ADMINISTRATIVE AGENT
COULD DELAY OR LIMIT PAYMENTS
TO YOU. - Following a bankruptcy or insolvency of the
administrative agent or the transferor, a
court could conclude that the vehicle SUBI
certificate is owned by the administrative
agent or the transferor, instead of the
trust. This conclusion could be either
because the transfer of the vehicle SUBI
certificate from the transferor to the trust
was not a true sale or because the court
concluded that the transferor or the trust
should be treated as the same entity as
administrative agent or the transferor for
bankruptcy purposes. If this were to occur,
you could experience delays in payments due
to you or may not ultimately receive all
interest and principal due to you as a result
of:
o the automatic stay which prevents a
secured creditor from exercising remedies
against a debtor in bankruptcy without
permission from the court, and
o the fact that neither the trust nor the
indenture trustee has a perfected
security interest in the specified
vehicles and may not have a perfected
security interest in any cash collections
of the specified leases and specified
vehicles held by the administrative agent
at the time that a bankruptcy proceeding
begins.
For a discussion of how a bankruptcy
proceeding of the administrative agent, the
transferor or certain related entities may
affect the trust and the senior notes, see
"Additional Legal Aspects of the Origination
Trust and the SUBIs -- Insolvency Related
Matters".
IF ERISA LIENS ARE PLACED ON
THE ASSETS OF THE TRUST, YOU
COULD SUFFER A LOSS ON YOUR
INVESTMENT. - Liens in favor of the Pension Benefit
Guaranty Corporation could attach to the
specified leases and specified vehicles and
be used to satisfy unpaid ERISA obligations
of any member of a controlled group that
includes Ryder Truck Rental, Inc. and its
affiliates. These liens could have priority
over the interest of security holders in SUBI
assets, like the specified vehicles, that are
not covered by a prior perfected security
interest in favor of the indenture trustee.
The transferor believes that the likelihood
of this liability being asserted against the
assets of the trust or, if so asserted, being
successfully pursued, is remote. However, you
cannot be sure the lease contracts and leased
vehicles will not become subject to an ERISA
liability.
YEAR 2000 COMPUTER PROBLEMS
COULD DELAY OR LIMIT PAYMENTS
TO YOU. - Some computers were not programmed to
recognize more than two digits in the year of
a given date. As a result, in the year 2000,
those computers will not know whether an "00"
refers to
13
<PAGE> 14
the year 1900 or the year 2000. To the extent
that computer systems of the administrative
agent, maintenance provider, indenture
trustee or any parties that they rely on
continue to have these problems in the year
2000 and later, you could experience delays
in payments due to you or may not ultimately
receive all interest and principal due to
you. In addition, if lessees under the
specified leases experience computer problems
in the year 2000 or later, they may default
or make late payments under the specified
leases. As a result, you could experience
delays in payments due to you or may not
ultimately receive all principal and interest
due to you.
For a discussion of Ryder's year 2000
preparations and how they may affect the
trust and the senior notes, see
"Ryder -- Year 2000 Preparations".
A CHANGE OR WITHDRAWAL BY THE
RATING AGENCIES OF THEIR INITIAL
RATINGS MAY REDUCE THE MARKET
VALUE OF THE SENIOR NOTES. - A security rating is not a recommendation by
a rating agency that you buy, sell or hold
securities. Similar ratings on different
types of securities do not necessarily mean
the same thing. You are encouraged to analyze
the significance of each rating independently
from any other rating. Any rating agency may
change its rating of the senior notes after
the senior notes are issued if that rating
agency believes that circumstances have
changed. A rating downgrade may reduce the
price that a subsequent purchaser will be
willing to pay for the senior notes.
IF THE TRUST IS REQUIRED TO
SELL ITS ASSETS, YOU MAY SUFFER
A LOSS ON YOUR INVESTMENT. - If the transferor becomes bankrupt or
insolvent, the trust will be dissolved and
the indenture trustee will be required to
sell the assets of the trust, including the
SUBI certificates, on commercially reasonable
terms. Because the bankruptcy of the
transferor will also require the origination
trust to be terminated with respect to
holding the SUBI assets, the SUBI assets will
be distributed to the purchaser of the
trust's assets and the specified vehicles
will be retitled at the direction of that
purchaser. The indenture trustee will
distribute the proceeds from the sale of the
trust's assets and monies on deposit in the
reserve fund and the residual value surplus
account, after the payment of certain unpaid
fees and reimbursement of outstanding
advances made by the administrative agent to
the trust, first to the senior note holders
for interest due, second to the reserve fund
for interest due on the subordinated notes,
third to the certificate holders for interest
due, fourth to the Class A-1 Note holders
until the Class A-1 Notes have been paid in
full, fifth pro rata to each other class of
senior note holders based on their class'
note balances until the senior notes have
been paid in full, and sixth to the
certificate holders and the subordinated note
holders ratably -- with amounts paid on the
subordinated notes being paid to the reserve
fund. If these proceeds and amounts are not
sufficient to pay the senior notes in full,
you would incur a loss on your investment.
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<PAGE> 15
THE FAILURE TO MAKE PRINCIPAL
PAYMENTS ON THE NOTES WILL
GENERALLY NOT RESULT IN AN EVENT
OF DEFAULT. - You should be aware that the amount of
principal required to be paid to you prior to
the final scheduled payment date for a class
of senior notes generally will be limited to
amounts available for those purposes.
Therefore, the failure to repay principal of
a class of senior notes generally will not
result in the occurrence of an event of
default under the indenture until the final
scheduled payment date for the class of
notes.
THE SENIOR NOTES ARE NOT
SUITABLE INVESTMENTS FOR ALL
INVESTORS. - The senior notes are not a suitable
investment if you require a regular
predictable schedule of payments. The senior
notes are complex investments that should be
considered only by investors who, either
alone or with their financial, tax and legal
advisors, have the expertise to analyze
prepayment, reinvestment, default and market
risk, the tax consequences of an investment,
and the interaction of these factors.
OVERVIEW OF THE TRANSACTION
Please refer to page 4 for a diagram providing an overview of the
transaction described in this prospectus. You can find a listing of the pages
where capitalized terms used in this prospectus are defined under the caption
"Index of Principal Terms" beginning on page 107.
Ryder Truck Rental, Inc. ("Ryder") has assigned, and will assign,
full-service commercial truck, highway tractor and trailer leases and the
related vehicles to Ryder Truck Rental LT, a Delaware business trust (the
"Origination Trust"). The Origination Trust was created in July 1997 to
facilitate the titling of trucks, tractors and trailers in connection with the
securitization of truck, tractor and trailer leases. The Origination Trust has
issued to Ryder Truck Rental I LP ("RTR I LP") and Ryder Truck Rental II LP
("RTR II LP" and, together with RTR I LP, the "UTI Beneficiaries") a 99% and a
1% beneficial interest, respectively, in the undivided trust interest (the
"UTI"). The UTI represents the entire beneficial interest in assets of the
Origination Trust that have not been allocated to special units of beneficial
interest such as the ones described in this prospectus. The trustee of the
Origination Trust will be directed by the UTI Beneficiaries:
- to establish two special units of beneficial interest (each a "1999-A
SUBI," and collectively, the "SUBIs");
- to allocate a separate portfolio of leases and some related assets of the
Origination Trust (the "Specified Leases") to one 1999-A SUBI (the "Lease
SUBI"); and
- to allocate the vehicles that are leased under the Specified Leases and
some other related assets of the Origination Trust (the "Specified
Vehicles") to the other 1999-A SUBI (the "Vehicle SUBI").
The SUBIs will represent the entire beneficial interest in the Specified Leases
and Specified Vehicles (collectively, the "SUBI Assets"). RTR I LP and RTR II LP
will respectively be issued 99% and 1% interests in each 1999-A SUBI. Upon
creation of each 1999-A SUBI, the related SUBI Assets will no longer be a part
of the Origination Trust Assets represented by the UTI, and the interest in the
Origination Trust Assets represented by the UTI will be reduced accordingly.
Each 1999-A SUBI will evidence an indirect beneficial interest, rather than a
direct legal interest, in the related SUBI Assets. Each 1999-A SUBI will not
represent a beneficial interest in any Origination Trust Assets other than the
related SUBI Assets. Payments made on or in respect of any Origination Trust
Assets other than the SUBI Assets will not be available to make payments on the
Senior Notes. The UTI Beneficiaries may from time to time cause special units of
beneficial interest other than the SUBIs (each, an "Other SUBI") to be created
out of the UTI. The Trust (and, accordingly, the Senior Noteholders) will have
no interest in the UTI, any Other SUBI or any assets of the Origination Trust
Assets evidenced by the UTI or any Other SUBI. See "The SUBIs" and "The
Origination Trust".
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<PAGE> 16
RTR I LP will sell, transfer and assign its 99% interest in each 1999-A
SUBI (collectively, the "SUBI Interest") to Ryder Funding LP (the "Transferor").
The Transferor will in turn (a) transfer and assign the certificate representing
its 99% interest in the Vehicle SUBI (the "Vehicle SUBI Certificate") to Ryder
Vehicle Lease Trust 1999-A (the "Trust"), and (b) pledge the certificate
representing its 99% interest in the Lease SUBI (the "Lease SUBI Certificate",
and together with the Vehicle SUBI Certificate, the "SUBI Certificates") to the
Trust. RTR II LP will permanently retain the 1% beneficial interest in the SUBI
Assets not represented by the SUBI Certificates (the "Retained SUBI Interest").
The Trust will issue five classes of senior notes (the "Senior Notes") in an
aggregate principal amount of $282,900,000.00 (the "Initial Senior Note
Balance") and will pledge the Vehicle SUBI Certificate and its interest in the
Lease SUBI Certificate to the Indenture Trustee as security therefor. The Trust
will also issue one class of asset backed subordinated notes (the "Subordinated
Notes," and together with the Senior Notes, the "Notes") in an aggregate
principal amount of $13,023,237.85 (the "Initial Subordinated Note Balance") and
one class of asset backed certificates (the "Certificates") in an aggregate
principal amount of $10,858,575.00 (the "Initial Certificate Balance"). The
Senior Notes, the Subordinated Notes and the Certificates are collectively
referred to as the "Securities" and the holders of Securities are referred to as
"Securityholders". Each Note will represent an obligation of, and for some
non-tax purposes, each Certificate will represent a fractional undivided
interest in, the Trust. Payments in respect of the Subordinated Notes and the
Certificates will be subordinated to payments in respect of the Senior Notes to
the extent described in this prospectus. The Subordinated Notes and the
Certificates are not being offered to you in this offering.
On the date of initial issuance of the Securities (the "Closing Date"), the
Trust and the Transferor will enter into a program operating lease (the "Program
Operating Lease") under which the Trust will lease the Vehicle SUBI Certificate,
subject to the lien of the Indenture, to the Transferor in exchange for the
obligation of the Transferor to make certain payments during the period that
each underlying Specified Vehicle is covered by the Program Operating Lease. The
Trust will apply these payments, together with proceeds received from certain
sales of Specified Vehicles, to pay interest on and principal of the Securities.
As a condition to the issuance of the Senior Notes, Moody's Investors
Service, Inc. and Duff & Phelps Credit Rating Co. (each, a "Rating Agency"),
must each rate the Class A-1 Senior Notes in their highest short-term rating
category, and the remaining classes of Senior Notes in their highest long-term
rating category. See "Risk Factors -- A change or withdrawal by the rating
agencies of their initial ratings may reduce the market value of the senior
notes" and "Ratings of the Securities" for further information concerning the
ratings assigned to the Senior Notes, including the limitations of such ratings.
THE TRUST
Formation
The Trust will be formed under the laws of the State of Delaware solely for
the purposes of the transactions described in this prospectus. The Trust will be
governed by an amended and restated trust agreement, dated as of October 1, 1999
(the "Trust Agreement"), between the Transferor and Chase Manhattan Bank
Delaware, as Owner Trustee.
The Trust will issue the Senior Notes under an indenture dated as of
October 1, 1999 (the "Indenture"), between the Trust and U.S. Bank National
Association, as trustee (in that capacity, the "Indenture Trustee"). The
Subordinated Notes and the Certificates will be issued under the Trust
Agreement.
The Trust will not engage in any activity other than as duly authorized in
accordance with the terms of the Trust Agreement. On the Closing Date, the
authorized purposes of the Trust will be limited to:
- issuing the Securities;
- acquiring the Vehicle SUBI Certificate and the other property of the
Trust Estate with the proceeds from the sale of the Securities;
- assigning and pledging the Trust Estate to the Indenture Trustee;
16
<PAGE> 17
- leasing the Vehicle SUBI Certificate to the Transferor;
- making payments on the Securities;
- entering into and performing its obligations under the Basic Documents to
which it is a party; and
- engaging in other transactions, including entering into agreements, that
are necessary, suitable or convenient to accomplish, or that are
incidental to or connected with, any of the foregoing activities.
Approval of additional Trust activities and purposes may be requested by holders
of at least 75% of the outstanding balance of the Certificates and will require
(a) that each Rating Agency have delivered a letter to the effect that the
activities and purposes would not cause its then-current ratings of the Senior
Notes or the Certificates to be qualified, reduced or withdrawn, and (b)
approval by holders of at least 75% of the outstanding balance of the Senior
Notes, or if the Senior Notes are no longer outstanding, by the Subordinated
Noteholder.
Under an administration agreement, dated as of October 1, 1999 (the "Trust
Administration Agreement"), Ryder, as administrator (the "Administrator"), will
perform the Trust's administrative obligations under the Trust Agreement and the
Indenture.
The Trust's principal offices will be in Wilmington, Delaware, in care of
the Owner Trustee, at the address listed below under "The Owner Trustee".
Capitalization
On the Closing Date, the Trust will be capitalized with $306,781,812.85
aggregate principal amount of Securities. The Trust will sell the Senior Notes
and the Certificates, other than the Transferor Certificate, to third party
investors that are expected to be unaffiliated with the Transferor, the
Administrative Agent or their respective affiliates. In exchange for the
transfer of the Vehicle SUBI Certificate and the pledge of the Lease SUBI
Certificate, the Trust will pay the Transferor the net proceeds from the sale of
the Senior Notes and the Certificates, and will issue to the Transferor the
Subordinated Notes and a Certificate with a $108,575.75 principal balance, which
will approximately equal to 1% of the Initial Certificate Balance (the
"Transferor Certificate"). The following table illustrates the capitalization of
the Trust as of the Closing Date, as if the issuance and sale of the Securities
had taken place on that date:
<TABLE>
<S> <C>
Senior Notes........................................ $282,900,000.00
Subordinated Notes.................................. 13,023,237.85
Certificates........................................ 10,858,575.00
---------------
Total..................................... $306,781,812.85
===============
</TABLE>
The Owner Trustee
Chase Manhattan Bank Delaware will be the trustee (the "Owner Trustee")
under the Trust Agreement. Chase Manhattan Bank Delaware is a Delaware banking
corporation, and its Corporate Trust Office is located at 1201 Market Street,
Wilmington, Delaware 19801. The Transferor, the Administrative Agent and their
affiliates may maintain normal commercial banking relationships with the Owner
Trustee and its affiliates. The fees and expenses of the Owner Trustee will be
paid by the Administrator. See "Additional Document Provisions -- Miscellaneous
Provisions -- Fees and Expenses".
Property of the Trust
On the Closing Date, the Transferor will transfer the Vehicle SUBI
Certificate to the Trust pursuant to the Issuer SUBI Certificate Transfer
Agreement and will pledge the Lease SUBI Certificate to the Trust pursuant to
the Program Operating Lease. The Trust will then pledge its interest in each
SUBI Certificate to the Indenture Trustee under the Indenture and then, subject
to that pledge, will lease the Vehicle SUBI Certificate to the Transferor
pursuant to the Program Operating Lease. See "The SUBIs -- Transfers of the SUBI
Certificates".
17
<PAGE> 18
After giving effect to the transactions described in this prospectus, the
property of the Trust (the "Trust Estate") will include:
- the Vehicle SUBI Certificate, evidencing a 99% beneficial interest in the
assets allocated to the Vehicle SUBI (the "Vehicle SUBI Assets"),
including the right to payments thereunder from certain Sales Proceeds on
deposit in the SUBI Collection Account and the Residual Value Surplus
Account and investment earnings, net of losses and investment expenses,
on amounts on deposit in the SUBI Collection Account and the Residual
Value Surplus Account;
- the rights of the Trust under the Program Operating Lease;
- the rights of the Trust as pledgee of the Lease SUBI Certificate;
- the rights of the Trust as secured party under a back-up security
agreement with respect to the SUBI Certificates and the 99% undivided
interest in the SUBI Assets;
- the rights of the Trust to funds on deposit from time to time in the Note
Distribution Account and any other account or accounts established
pursuant to the Indenture;
- the rights of the Transferor, as transferee, under the SUBI Certificate
Transfer Agreement;
- the rights of the Trust, as transferee, under the Issuer SUBI Certificate
Transfer Agreement;
- the rights of the Trust as a third-party beneficiary under the
Administration Agreement, including rights to certain Advances, and the
SUBI Trust Agreement;
- the security interest of the Trust in the Subordinated Notes and the
Reserve Fund (including investment earnings, net of losses and investment
expenses, on amounts on deposit therein); and
- all proceeds of the foregoing.
The Indenture will require the Trust Estate to be pledged by the Trust to the
Indenture Trustee.
Because the SUBI will represent a beneficial interest in the SUBI Assets,
Senior Noteholders will be dependent on payments made on the Specified Leases
and proceeds received in connection with the sale or other disposition of
Specified Vehicles for the payment of interest on and principal of the Senior
Notes. The Trust will not have a direct ownership interest in the Specified
Leases or a direct ownership interest or perfected security interest in the
Specified Vehicles -- which will be titled in the name of the Origination Trust
or the Origination Trustee on behalf of the Origination Trust -- and it is
therefore possible that a claim or lien in respect of the Specified Vehicles or
the Origination Trust could limit the amounts payable in respect of the SUBI
Certificates to less than the amounts received from the lessees of the Specified
Vehicles (each, an "Obligor") or received from the sale or other disposition of
Specified Vehicles. To the extent that a claim or lien were to delay the
disposition of the Specified Vehicles or reduce the amount paid to the holders
of the SUBI Certificates in respect of their beneficial interests in the SUBI
Assets, Senior Noteholders could experience delays in payment or losses on their
investment. See "Risk Factors -- A bankruptcy of the transferor or the
administrative agent could delay or limit payments to you", "Risk Factors -- If
ERISA liens are placed on the assets of the trust, you could suffer a loss on
your investment", "The SUBIs", "Additional Legal Aspects of the Origination
Trust and the SUBIs -- The SUBIs" and "Additional Legal Aspects of the Specified
Leases and the Specified Vehicles -- Back-up Security Interests".
USE OF PROCEEDS
The net proceeds from the sale of the Senior Notes -- the proceeds of the
public offering minus expenses relating thereto -- together with the proceeds
from the private placement of the Certificates and the issuance of the
Subordinated Notes, will be applied by the Trust to acquire the Vehicle SUBI
Certificate and the pledge of the Lease SUBI Certificate from the Transferor.
18
<PAGE> 19
THE ORIGINATION TRUST
General
The Origination Trust is a Delaware business trust and is governed by an
amended and restated trust agreement dated as of February 1, 1998 (the
"Origination Trust Agreement"), among the UTI Beneficiaries, the Administrative
Agent, RTRT, Inc., as trustee (the "Origination Trustee"), Delaware Trust
Capital Management, Inc. and U.S. Bank National Association ("U.S. Bank"), as
trust agent (in that capacity, the "Trust Agent"). The assets of the Origination
Trust (the "Origination Trust Assets") consist of:
- full service operating leases (the "Leases") assigned to the Origination
Trust by Ryder;
- the commercial trucks, highway tractors and trailers leased under those
Leases (the "Vehicles"); and
- certain payments under the Leases, proceeds from sales of the Vehicles,
and other assets more fully described below.
The primary business purpose of the Origination Trust is to acquire from or at
the direction of Ryder, and serve as record holder of title to, the Leases and
Vehicles, in order to facilitate the titling of the Vehicles in connection with
asset backed securities issuance transactions.
Under an administration agreement dated as of February 1, 1998, as amended
by a supplement to be dated as of October 1, 1999 (as amended or supplemented
from time to time, the "Administration Agreement"), among the Origination Trust,
the UTI Beneficiaries, and Ryder, as administrative agent (in that capacity, the
"Administrative Agent"), Ryder will service the Leases, including the Specified
Leases, and, as maintenance provider (in that capacity, the "Maintenance
Provider"), will provide specified services and maintenance in respect of the
Vehicles, including the Specified Vehicles.
Except as otherwise described under "Additional Document Provisions -- The
SUBI Trust Agreement," under the Origination Trust Agreement, the Origination
Trust has not and will not:
- issue interests or securities other than the SUBI Interest and the
Retained SUBI Interest, the SUBI Certificates, the Retained SUBI
Certificates, Other SUBIs, one or more certificates representing each
Other SUBI (the "Other SUBI Certificates"), the UTI and one or more
certificates representing the UTI (the "UTI Certificates");
- borrow money, except from Ryder or the UTI Beneficiaries in connection
with funds used to acquire Leases and Vehicles;
- make loans;
- invest in or underwrite securities;
- offer securities in exchange for Origination Trust Assets, with the
exception of the SUBI Certificates, the Retained SUBI Certificates, Other
SUBI Certificates and the UTI Certificates;
- repurchase or otherwise reacquire its securities, other than for purposes
of cancellation, except as permitted by or in connection with financing
or refinancing the acquisition of Leases and Vehicles or as otherwise
permitted by each such financing or refinancing; or
- grant any security interest in or lien on any Origination Trust Assets.
For further information regarding the Origination Trust, the servicing of the
Leases and the providing of services and maintenance in respect of the Vehicles,
see "Additional Document Provisions -- The SUBI Trust Agreement" and "-- The
Administration Agreement".
The UTI Beneficiaries
RTR I LP and RTR II LP are the UTI Beneficiaries under the Origination
Trust Agreement. The sole general partners of RTR I LP and RTR II LP are Ryder
Truck Rental I LLC ("RTR I LLC") and Ryder Truck Rental II LLC ("RTR II LLC"),
respectively, each a Delaware limited liability company. Ryder is the
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<PAGE> 20
sole limited partner of each of the UTI Beneficiaries. The UTI Beneficiaries
were formed as limited partnerships under the laws of Delaware in June 1997 for
the sole purpose of being initial beneficiaries of the Origination Trust,
holding the UTI and the UTI Certificates, acquiring interests in the SUBI and
Other SUBIs and engaging in related transactions. The limited liability company
operating agreements of each of RTR I LLC and RTR II LLC and the limited
partnership agreements of each UTI Beneficiary limit their respective activities
to the foregoing purposes and to any activities incidental thereto or necessary
therefor. So long as any financings involving interests in the Origination
Trust, including the transaction described in this prospectus, are outstanding,
neither RTR I LLC nor RTR II LLC may transfer its general partnership interest
in the related UTI Beneficiary. The principal offices of RTR I LP and RTR II LP
are located at 3600 N.W. 82nd Avenue, Miami, Florida 33166 and their telephone
number is (305) 500-3726.
The Origination Trustee
The Origination Trustee is a wholly owned special purpose subsidiary of
U.S. Bank and was incorporated in June 1997 for the sole purpose of acting as
Origination Trustee. The Origination Trustee is not affiliated with Ryder or any
of its affiliates. U.S. Bank, as Trust Agent, serves as agent for the
Origination Trustee to perform some functions of the Origination Trustee under
the Origination Trust Agreement. Under the Origination Trust Agreement, if U.S.
Bank can no longer act as the Trust Agent, the designees of the UTI
Beneficiaries which may not be either UTI Beneficiary or any of their
affiliates -- will have the option to purchase the stock of the Origination
Trustee for a nominal amount. If the UTI Beneficiaries do not timely exercise
that option, the Origination Trustee will appoint a new trust agent which will
have the option to purchase the stock of the Origination Trustee. If none of
these options is timely exercised, U.S. Bank may sell the stock of the
Origination Trustee to another party.
Property of the Origination Trust
The Origination Trust Assets generally consist of:
- Leases originated by Ryder and all monies due from Obligors thereunder;
- Vehicles and all proceeds of those Vehicles;
- all of Ryder's rights with respect to those Leases and Vehicles;
- the rights to proceeds from any physical damage, liability or other
insurance policies, if any, covering the Leases or the related Obligors
or the Vehicles, including but not limited to the Contingent and Excess
Liability Insurance; and
- all proceeds of the foregoing.
From time to time after the date of this prospectus, Ryder will assign
additional Leases to the Origination Trust and, as described below, title the
related Vehicles in the name of the Origination Trust or the Origination Trustee
on behalf of the Origination Trust. During the Titling Grace Period, Vehicles
titled in the name of Ryder and having a Cutoff Date Securitization Value of not
more than $4,900,848 will be titled in the name of the Origination Trust or the
Origination Trustee on behalf of the Origination Trust and allocated to the
SUBIs, thereby becoming SUBI Assets. See "Additional Legal Aspects of the
Specified Leases and the Specified Vehicles -- Titling Grace Period -- Lack of
Perfected Ownership Interest".
Lease Origination and the Titling of Vehicles
All Leases have been or will be underwritten using the underwriting
criteria described under "Ryder -- Lease Underwriting Procedures". Under each
Lease, the Origination Trust, or the Origination Trustee on behalf of the
Origination Trust, will be listed as the owner of the related Vehicle on the
Vehicle's certificate of title. Liens will not be placed on the certificates of
title, nor will new certificates of title be issued, to reflect the interest of
the Trust, as holder of the Vehicle SUBI Certificate, in the Specified Vehicles.
After the sale of the Vehicle SUBI Certificate to the Trust, the
Administrative Agent will be obligated to repurchase any Vehicles covered by
Leases not meeting certain representations and warranties of the
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Administrative Agent by making Reallocation Payments in respect thereof. Those
representations and warranties relate primarily to the origination of the
Leases, and do not typically relate to the creditworthiness of the related
Obligors or the collectibility of the Leases.
All of the Specified Vehicles will either be titled in the name of the
Origination Trust or the Origination Trustee on behalf of the Origination Trust
by the Closing Date, or will be titled in the name of Ryder but will be
re-titled into the name of the Origination Trust or the Origination Trustee on
behalf of the Origination Trust within 60 days after the Closing Date (the
"Titling Grace Period"). Specified Vehicles relating to Specified Leases having
an aggregate Cutoff Date Securitization Value of not less than $304,979,771.04
will be titled in the name of the Origination Trust or the Origination Trustee
on behalf of the Origination Trust by the Closing Date. Specified Vehicles
relating to Specified Leases having an aggregate Cutoff Date Securitization
Value not to exceed $4,900,848.00 will be titled in the name of the Origination
Trust or the Origination Trustee on behalf of the Origination Trust during the
Titling Grace Period. If the Administrative Agent fails to properly retitle any
Titling Grace Period Vehicle, it will be required to make a payment equal to the
Securitization Value of the related Specified Lease as of the last day of the
Titling Grace Period. See "Risk Factors -- During a titling grace period the
origination trust will lack a perfected ownership interest in some vehicles" and
"Additional Legal Aspects of the Specified Leases and the Specified
Vehicles -- Titling Grace Period -- Lack of Perfected Ownership Interest". Other
Leases and Vehicles will also to be assigned to the Origination Trust after the
Closing Date but will not constitute Specified Leases or Specified Vehicles.
All Vehicles owned by the Origination Trust will be held for the benefit of
entities that from time to time hold beneficial interests in the Origination
Trust. Those interests will be evidenced with respect to:
- Leases and Vehicles not allocated to the 1999-A SUBIs or an Other SUBI,
by the UTI,
- the Specified Leases and the Specified Vehicles, by the 1999-A SUBIs, or
- Leases and Vehicles financed in another transaction, by an Other SUBI.
Entities holding beneficial interests in the Origination Trust will not have a
direct ownership in the related Leases or a direct ownership or perfected
security interest in the related Vehicles.
The certificates of title for the Specified Vehicles will not reflect the
indirect interest of the Trust in the Specified Vehicles by virtue of its
beneficial interest in the Vehicle SUBI Assets. Therefore, if the Senior Notes
were recharacterized as secured loans, the Trust would not have a perfected lien
in the Specified Vehicles, but will have filed a financing statement to perfect
the security interest in the Vehicle SUBI Assets, but only to the extent that
the security interest may be perfected by filing under the UCC. For further
information regarding the titling of the Specified Vehicles and the interest of
the Trust therein, see "Additional Legal Aspects of the Specified Leases and the
Specified Vehicles -- Back-up Security Interests".
THE SUBIS
General
Each 1999-A SUBI will be issued by the Origination Trust under a
supplement, dated as of October 1, 1999 (the "SUBI Supplement" and, together
with the Origination Trust Agreement, the "SUBI Trust Agreement"), to the
Origination Trust Agreement. The 1999-A SUBIs will not represent a direct
interest in the related SUBI Assets or an interest in any Origination Trust
Assets other than the related SUBI Assets. The Trust and the Senior Noteholders
will have no interest in the UTI, any Other SUBI or any assets of the
Origination Trust evidenced by the UTI or any Other SUBI. Payments made on or in
respect of Origination Trust Assets not represented by the SUBIs will not be
available to make payments on the Senior Notes. For further information
regarding the Origination Trust, see "The Origination Trust".
The Lease SUBI Certificate will evidence a beneficial interest in the
assets allocated to the Lease SUBI (the "Lease SUBI Assets"), which will
generally consist of the Specified Leases and all proceeds of or
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payments on those leases received or due on or after October 1, 1999 (the
"Cutoff Date") and all other related Lease SUBI Assets, including:
- amounts in the SUBI Collection Account received in respect of the
Specified Leases,
- certain monies due under or payable in respect of the Specified Leases on
or after the Cutoff Date, including the right to receive payments made to
Ryder, the Transferor, the Origination Trust, the Origination Trustee or
the Administrative Agent under any insurance policy relating to the
Specified Leases or the related Obligors, and
- all proceeds of the foregoing.
The Vehicle SUBI Certificate will evidence a beneficial interest in the
Vehicle SUBI Assets, which will generally consist of the Specified Vehicles and
all proceeds of or payments on those vehicles received or due on or after the
Cutoff Date and all other related Vehicle SUBI Assets, including:
- amounts in the SUBI Collection Account received in respect of the sale of
the Specified Vehicles and the Residual Value Surplus Account,
- certain monies due under or payable in respect of the Specified Vehicles
on or after the Cutoff Date, including the right to receive payments made
to Ryder, the Transferor, the Origination Trust, the Origination Trustee
or the Administrative Agent under any insurance policies related to the
Specified Vehicles, and
- all proceeds of the foregoing.
On the Closing Date, the Origination Trust will issue (a) the SUBI
Certificates, evidencing the SUBI Interest, to RTR I LP and (b) certificates
evidencing the Retained SUBI Interest (the "Retained SUBI Certificates"), to RTR
II LP. RTR II LP will permanently retain the Retained SUBI Certificates and will
be entitled to receive 1% of all payments made on or in respect of the SUBI
Assets and will share in 1% of all losses and liabilities incurred with respect
to the SUBI Assets. Accordingly, payments made in respect of the Retained SUBI
Certificates will not be available to make payments on the Senior Notes, the
Subordinated Notes or the Certificates.
Transfers of the SUBI Certificates
Simultaneously with the issuance of the SUBI Certificates to RTR I LP, RTR
I LP will convey the SUBI Certificates to the Transferor pursuant to a transfer
agreement, dated as of October 1, 1999 (the "SUBI Certificate Transfer
Agreement"). RTR I LP will covenant to treat the conveyance of the SUBI
Certificates to the Transferor as an absolute sale, transfer and assignment for
all purposes.
Immediately after the transfer of the SUBI Certificates to the Transferor,
the Transferor will:
- transfer to the Trust, without recourse, all of its right, title and
interest in and to the Vehicle SUBI Certificate and the SUBI Interest it
represents under a transfer agreement, dated as of October 1, 1999 (the
"Issuer SUBI Certificate Transfer Agreement");
- deliver the Vehicle SUBI Certificate to the Trust;
- pledge the Lease SUBI Certificate, and the SUBI Interest it represents,
to the Trust under the Program Operating Lease as security for the
obligations of the Transferor under the Program Operating Lease; and
- deliver the Lease SUBI Certificate to the Trust to perfect the pledge.
In exchange, the Trust will pay to the Transferor the net proceeds from the sale
of the Senior Notes and Certificates (other than the Transferor Certificate) to
third party investors, and will issue to the Transferor the Subordinated Notes
and the Transferor Certificate.
Immediately following the transfer of the Vehicle SUBI Certificate and the
pledge of the Lease SUBI Certificate to the Trust, the Trust will pledge its
interest in the Trust Estate, which includes the Vehicle SUBI
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Certificate and the pledge of the Lease SUBI Certificate, to the Indenture
Trustee as security for the Senior Notes. The Trust and the Transferor will then
enter into the Program Operating Lease, under which the Trust will lease the
Vehicle SUBI Certificate to the Transferor, subject to the pledge thereof to the
Indenture Trustee. During the term of the Program Operating Lease, the
Transferor, as lessee of the Vehicle SUBI Certificate, will be required to make
Program Operating Lease Payments to the Trust and will be entitled to receive
proceeds from the Vehicle SUBI Certificate -- as well as from the Lease SUBI
Certificate -- in respect of the Specified Vehicles to the extent described
under "Security for the Securities -- The Program Operating Lease".
THE TRANSFEROR
The Transferor is a limited partnership that was formed under the laws of
Delaware in May 1998. The sole general partner of the Transferor is Ryder Truck
Rental III LLC ("RTR III LLC"), a Delaware limited liability company. RTR III
LLC may not transfer its general partnership interest in the Transferor so long
as any financings involving interests held by the Transferor at any time in the
Origination Trust, including the transaction described in this prospectus, are
outstanding. Ryder is the sole limited partner of the Transferor. The principal
office of the Transferor is located at 3600 N.W. 82nd Avenue, Miami, Florida
33166 and its telephone number is (305) 500-3726.
The Transferor and RTR III LLC were organized solely for the purpose of
acquiring interests in the UTI, the SUBIs and Other SUBIs, causing securities
like the Senior Notes to be issued, and engaging in related transactions. The
limited partnership agreement of the Transferor and the limited liability
company agreement of RTR III LLC limit their respective activities to those
purposes and to any activities incidental or necessary thereto.
RYDER
General
All of the Leases, including the Specified Leases, have been originated by
Ryder in the ordinary course of its leasing business using the underwriting
criteria described under "Ryder -- Lease Underwriting Procedures". Additionally,
Ryder, as the Administrative Agent, will service the Leases, including the
Specified Leases, and, as Maintenance Provider, will provide specified services
and maintenance in respect of the Vehicles, including the Specified Vehicles.
Ryder is a Florida corporation that was incorporated in 1953. Ryder
provides full service truck leasing to about 13,000 commercial customers ranging
from large national enterprises to small companies. As of December 31, 1998,
Ryder had a fleet of 109,124 vehicles -- including 14,751 vehicles leased to
affiliates -- leased or rented through 894 locations in 48 states, Puerto Rico,
and 8 Canadian provinces. Under a full service lease, Ryder provides its
customers with vehicles, maintenance, supplies and related equipment necessary
for operation, while its customers furnish and supervise their own drivers, and
dispatch and exercise control over the related vehicles. Additionally, as of
December 31, 1998, Ryder provided contract maintenance services to more than
1,500 customers, serviced 44,856 vehicles -- including approximately 9,560
vehicles owned by affiliates -- under maintenance contracts. Ryder also provided
short-term truck rentals, which tends to be seasonal, to commercial customers to
supplement their fleets during peak business periods. As of December 31, 1998,
Ryder had a fleet of 37,517 vehicles, ranging from heavy-duty tractors and
trailers to light-duty trucks, available for commercial short-term rental.
Ryder is a wholly owned subsidiary of Ryder System, Inc. ("Ryder System").
Ryder System is a publicly held Florida corporation that was incorporated in
1955. Through its subsidiaries, Ryder System engages primarily in the following
businesses:
- full service leasing, maintenance and short-term commercial rental of
trucks, highway tractors and trailers and
- integrated logistics, including dedicated contract carriage, the
management of carriers and inventory deployment.
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Ryder System's common stock, which is listed and traded on the New York
Stock Exchange under the symbol "R", is a component of both the Dow Jones
Transportation Average and the Standard & Poor's 500 Index. As of December 31,
1998, Ryder System and its subsidiaries had a fleet of 173,116 vehicles and
45,373 employees.
Further information regarding Ryder System and its subsidiaries, including
Ryder, is available in the periodic reports Ryder System files with the SEC. For
the location of the SEC's reference locations and internet address at which such
information is available see "Available Information".
Shared Services Center
Ryder has consolidated most financial administrative functions, including
collections and underwriting, into its Shared Services Center, a centralized
processing center located in Alpharetta, Georgia. This change is intended to
result in more efficient and consistent centralized processing of selected
administrative operations. The Shared Service Center was developed to:
- reduce on-going annual administrative costs;
- enhance customer service through process standardization;
- create an organizational structure that will improve market flexibility;
and
- allow future reengineering efforts to be more easily attained at lower
implementation costs.
The transfer of functions to the Shared Service Center was completed in December
1997.
The Leases
Use and Nature of the Vehicles
Ryder furnishes commercial trucks, highway tractors and trailers to a wide
range of customers under full service operating leases with terms running
typically five or six years. Full service leasing is Ryder's and Ryder System's
largest product line, with about 13,000 customers and approximately 109,000
vehicles on lease in the United States and Canada. The leased vehicles may be
generically configured or they may be specialized units with refrigeration
systems or other application-specific equipment.
Ryder purchases trucks and highway tractors from manufacturers such as
Navistar/International, Freightliner, Mack, Volvo and Isuzu, and trailers from
manufacturers such as Utility and Stoughton. Ryder also specifies many of the
components used by those vehicle vendors. Ryder purchases such components from
various manufacturers, including Cummins engines, Bridgestone tires, Meritor
Automotive clutches, transmissions, axles, brakes and drivelines, ASF Castloc
fifth wheels, Kysor fan clutches, Bendix valves and Accuride wheels.
Full-service truck leases are designed for customers who wish to manage
their own transportation systems without investing the capital and human
resources necessary to purchase and maintain a fleet. Ryder offers its customers
a flexible range of full-service truck leasing products and virtually all of the
support services needed to operate them, including safety and regulatory
compliance programs, vehicle specification and acquisition support, preventive
maintenance, licensing and permitting, emergency road service, fuel and fuel tax
reporting, vehicle painting and washing and vehicle liability and protection
programs. Companies in a variety of industries, such as the beverage, baking and
snack, newspaper, grocery, chemicals, retail and automotive aftermarket parts
industries, lease their trucks from Ryder.
Truck Lease and Service Agreement
Ryder's Truck Lease and Service Agreement (each, a "TLSA") is a contract
between Ryder, and an Obligor, that, when taken together with the lease schedule
for a Vehicle (each, a "Schedule A" and, together with a TLSA, a "Lease"),
requires the Obligor to make Total Monthly Payments for a predetermined number
of months in exchange for the use of one or more Vehicles. In addition to use of
the Vehicle, to the extent set forth in the related Lease, the Obligor will also
be entitled to receive other services related to that Vehicle. Maintenance and
mechanical repair of the Vehicle by Ryder, however, is almost always included.
The terms of a Lease do not separate the payment for Vehicle use from the
payment for maintenance and other goods and services within the Total Monthly
Payment. See "-- Lease Payments". At the scheduled maturity or other termination
of a Lease (the "Maturity Date"), the Obligor must return the related Vehicle to
Ryder at a
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specified maintenance facility and must restore the Vehicle to its original
condition, if any structural alterations have been made by the Obligor.
The TLSA is a form of master lease that describes the general terms of the
Lease and the respective rights and obligations of Ryder and the Obligor. These
terms, unless amended, apply to all Vehicles leased under a TLSA. Every Schedule
A describes each particular Vehicle being leased, its Fixed Charge, the term of
its lease (the "Lease Term") and the depreciation schedule and other specific
terms of the Lease, including the party responsible for maintaining liability
insurance on the Vehicle and the party responsible for physical risk of loss or
damage to the Vehicle. The Schedule A also specifies each Vehicle's domicile and
the location of the maintenance facility where the Vehicle will be routinely
maintained and repaired.
A typical full-service operating Lease will provide for payments based on,
among other things, the original value of the Vehicle leased thereunder, the
amount of total depreciation over the Lease Term and the prorated cost of all
unexpired license fees, applicable taxes and other expenses prepaid by Ryder for
the Vehicle, as well as payments for various other goods and services Ryder
provides in connection with the Vehicle. Both the financial and service
commitments of the parties are covered by the Lease and, accordingly, both Ryder
and the Obligor have continuing performance obligations during the term of the
Lease. In connection with the origination of a Lease, Ryder modifies its
standard Lease in the ordinary course of its business to meet the requirements
of the related Obligor and all descriptions of a Lease contained in this
prospectus are of a typical or illustrative Lease. Modifications may affect,
among other things, the services provided, the payment terms, the allocation of
risk and the parties' respective rights and obligations upon termination or
breach. A breach of or default under a Lease may result in the termination of
the Lease. The termination may occur either (a) as part of the termination of a
master lease, thus effecting the termination of all Vehicles leased under the
master lease arrangement, or (b) only with respect to the specific Vehicle
directly affected by the breach or default.
Maintenance and Services Provided
A typical Lease may cover:
- maintenance and repair of the related Vehicles by Ryder at a specified
maintenance facility, including all labor and parts;
- exterior washing of the Vehicles;
- specification assistance, whereby Ryder will assist the Obligor in
formulating appropriate specifications based on the Obligor's intended
use of the Vehicles;
- supplying the Obligor with one or more substitute Vehicles (each, a
"Substitute Vehicle"), at no extra cost to the Obligor, if a mechanical
failure renders a Vehicle temporarily inoperable;
- emergency road service in the event that a Vehicle suffers mechanical or
tire failure;
- initial exterior painting and lettering, up to a specified allowance, at
the time the Vehicles are placed into service;
- licensing and payment of certain specified taxes, up to a specified
annual amount;
- enrollment of the Obligor in a Vehicle-related safety program;
- the provision of fuel, whether by Ryder or the Obligor;
- whether Ryder will extend its liability insurance to cover the Obligor
for the Vehicles and any Substitute Vehicles (the "Insured Vehicles");
and
- whether Ryder or the Obligor assumes the risk of physical damage to and
theft and loss of the Vehicles or any Substitute Vehicles. See
"-- Insurance".
A Lease may provide that Ryder will supply the Obligor with a substitute
vehicle at no extra cost if a mechanical failure renders a Vehicle temporarily
inoperable. The Fixed Charge on a Vehicle, more fully described under "-- Lease
Payments", will continue to accrue on a Vehicle if the Vehicle is out of service
due
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to a temporary mechanical failure unless Ryder fails to provide a Substitute
Vehicle, in which event the Fixed Charge will not continue to accrue until the
Vehicle is repaired. Ryder will not provide a Substitute Vehicle when:
- a Vehicle is out of service for the performance of scheduled preventative
maintenance;
- a Vehicle is out of service for the repair of physical damage, such as
that caused by collision, fire, vandalism or Act of God;
- a Vehicle is out of service because the Obligor has violated the related
Lease;
- a Vehicle has been stolen;
- a Vehicle has been outfitted with special equipment or has otherwise been
customized for use by the Obligor; or
- special equipment, which Ryder is not contracted to maintain, is being
repaired.
If a Vehicle is out of service for the repair of physical damage, Ryder will
rent the related Obligor a replacement vehicle at a rental rate equal to the
lease rate on the related Lease; however, the Fixed Charge on the out of service
Vehicle will continue to accrue. Ryder may also rent Obligors additional
Vehicles for short-term use so that the Obligor can manage fluctuations in its
needs, and the rates therefor may be set forth in the related Lease.
Although Ryder may be responsible for providing fuel to the related
Vehicles under a Lease, the Lease will not include charges for any fuel so
provided. All fuel charges are separately billed to the Obligor on a monthly
basis. If Ryder is responsible for providing fuel, it obtains all applicable
fuel tax permits, prepares and files fuel tax returns and pays the taxes imposed
on the consumption of fuel, which amounts are billed to the Obligor. If the
Obligor provides fuel, then it performs those fuel tax permitting and reporting
functions and indemnifies Ryder for any liability for the failure to pay all
applicable fuel taxes.
Vehicle Operating Rules
Under the terms and conditions applicable to each Lease of a Vehicle, an
Obligor must:
- operate the related Vehicles in the normal and ordinary course of its
business;
- comply with all federal, state and local laws and regulations;
- not use the Vehicles in a reckless or abusive manner;
- operate the Vehicles only within the United States or, occasionally,
Canada, and pay for all charges that accrue if a Vehicle is detained
outside of these countries;
- if the Obligor operates a Vehicle, such as a trailer, while it is
connected to a vehicle that Ryder does not maintain, maintain the
connected vehicle in good operating condition; and
- pay for all physical damage, repairs, maintenance and expenses resulting
from operation of a Vehicle in violation of any of the Lease
restrictions.
Drivers
Under a Lease, only properly licensed and qualified drivers under the
Obligor's exclusive direction and control are permitted to operate the Vehicles.
Ryder reserves the right to request in writing that the Obligor remove unsafe or
incompetent drivers based on their safety record, accident experience or
driver's license status. If Ryder asks an Obligor to remove a driver and the
Obligor fails to comply with that request, then any or all of the following may
apply:
- the Obligor must reimburse Ryder for any damages occurring while the
driver asked to be removed operates the Vehicle, even if Ryder assumed
responsibility for paying for physical damage to the Vehicle,
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- even if Ryder extended liability insurance to the Obligor, the Obligor
must defend, release, indemnify and hold harmless Ryder for all damages
and defense costs resulting from the driver's operation of the Vehicle,
- Ryder may cancel any liability insurance it extended to the Obligor by
providing the Obligor with 30 days' prior written notice, or
- Ryder may terminate any physical damage coverage it extended to the
Obligor by providing the Obligor with 30 days' prior written notice; if
Ryder terminates the physical damage coverage, the Obligor will become
responsible for all physical damage to the Vehicles, and must provide
Ryder with proof of satisfactory physical damage insurance.
Obligor Expenses
With respect to each Vehicle an Obligor leases pursuant to a Lease, the
Obligor is responsible for the following expenses:
- taxes, licenses, fees and tolls (collectively, "Taxes") arising from the
use or operation of the Vehicle, other than those items Ryder has
contracted to pay for or provide, including sales, use, excise, gross
receipts or any similar tax, and any special license fees or taxes
resulting from the operation and use of the Vehicle by the Obligor;
- any excess over the annual allowances that may be stated in the Lease for
state motor vehicle license fees, registration fees, vehicle inspection
fees, personal property taxes, federal vehicle use taxes and fuel tax
permits;
- any increased costs resulting from a change in the assessment method for
any of the preceding items;
- reimbursement of Ryder for settlement of a claim or lien resulting from
the Obligor's failure to pay any taxes, fees or tolls on the Leased
Vehicles; and
- all damages, repairs, maintenance and related expenses resulting from the
operation of the Vehicles in violation of the Lease terms.
The foregoing items comprise part of the Maintenance Component of Total Monthly
Payments and will not be available to make payments in respect of the Senior
Notes, the Subordinated Notes or the Certificates.
Accidents, Vehicle Theft or Vehicle Destruction
The Leases require the Obligors to notify Ryder immediately of any accident
involving an Insured Vehicle, to provide Ryder with a detailed report of the
accident and to cooperate with Ryder and the insurer of the Insured Vehicle in
defending any claim. Within 30 days after that notice, Ryder will determine if
the Insured Vehicle is damaged beyond economic repair. If so, once the related
Obligor pays Ryder all amounts owed under the Lease for the Insured Vehicle,
including any proceeds owed under any physical damage insurance policy obtained
by the Obligor, the Lease will terminate as to the Insured Vehicle.
The Obligors must also notify Ryder immediately if an Insured Vehicle is
lost or stolen. If an Insured Vehicle is not located within 30 days after that
notice, the related Lease will terminate as to the Insured Vehicle once the
related Obligor pays Ryder all amounts owed to Ryder for the Insured Vehicle
under the Lease, including any proceeds received by the Obligor under any
physical damage insurance policy.
Cargo Loss
Ryder is not responsible for the loss of or damage to cargo carried in or
on any Insured Vehicle, even if the loss or damage is caused by Ryder's
negligence.
Annual Termination Option
The Leases generally contain an annual termination option (the "Annual
Termination Option") which permits either Ryder or the Obligor to terminate a
Lease on the annual anniversary of the date the related Vehicle was delivered to
the Obligor, or with respect to some Leases, more frequently, by giving the
other party at least 60 days' written notice of its election to exercise the
Annual Termination Option. If Ryder exercises the Annual Termination Option on a
Lease, the related Obligor will have the right, but not the
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obligation, to purchase the related Vehicle. If an Obligor exercises the Annual
Termination Option on a Lease, Ryder has the option to require the Obligor to
purchase the related Vehicle on the effective date of the termination.
If an Obligor elects or is required to purchase a Vehicle in connection
with the exercise of the Annual Termination Option, the Obligor must remit a
payment to Ryder (the "Termination Value Payment") in the amount specified in
the Schedule A as the termination value of the Vehicle (the "Termination
Value"). Additionally, the Obligor must pay all sales and use taxes relating to
the purchase. The Termination Value of a Vehicle ordinarily will exceed its
Residual Value. If an Obligor fails to purchase a Vehicle when required to do
so, Ryder may solicit wholesale cash bids for the Vehicle and require the
Obligor to pay the difference between the highest bid and the Termination Value
of the Vehicle.
Obligors have neither the right nor the obligation to purchase a Vehicle at
the Maturity Date of the related Lease.
If an Obligor becomes bankrupt or insolvent, then the Obligor may have the
right to reject some or all of the Leases relating to the Obligor, in which case
the Obligor would not be required to perform its obligations under the Leases,
and although Ryder could treat the Leases as having been terminated, Ryder could
not enforce any requirement that the Obligor purchase the related Obligor
Vehicles.
Lease Underwriting Procedures
The underwriting or credit review and approval area is responsible for all
credit requests for potential and existing lease customers of Ryder. The credit
decision for a potential customer is based on an analysis of financial
information obtained from third party sources, bank and trade references, as
well as Ryder's experience with respect to the customer's payment performance.
The tools available to Ryder's underwriting staff include numerous automated
tools provided by the Dun & Bradstreet Corporation. Ryder's credit policy has
been centralized at the Shared Service Center with extensive oversight by
Ryder's corporate headquarters. For example, credit personnel are not able to
extend credit or increase credit limits beyond certain predetermined guidelines,
which are enforced by corporate headquarters. Any requests beyond the
predetermined limits require corporate approval.
Insurance
Liability Insurance and Indemnity
Each Lease specifies whether Ryder or the Obligor is responsible for
procuring and maintaining liability insurance on the related Vehicles and any
Substitute Vehicles. The liability insurance must cover both parties, either as
an insured or additional insured, for the ownership, maintenance, use and
operation of the Vehicles, up to certain specified per-occurrence dollar limits.
If the Obligor fails to obtain required liability insurance, then it must
indemnify Ryder for all damages arising out of the ownership, maintenance, use
or operation of the Vehicles. The insurer must be acceptable to Ryder, and the
liability insurance must provide primary coverage, rather than additional or
excess coverage. If Ryder extends its liability insurance to the Obligor, it may
terminate the extension of the insurance by providing the Obligor with 30 days'
prior written notice. The Obligor must then obtain the required liability
insurance from a third party insurer.
Each Lease requires the Obligor to indemnify Ryder for all damages in
excess of the liability insurance arising out of the ownership, maintenance, use
or operation of the Insured Vehicles and injuries or death to the Obligor or the
Obligor's employees, drivers or agents arising out of the ownership,
maintenance, use or operation of the Insured Vehicles.
Physical Damage
Obligor Risk of Loss. If an Obligor is required by a Lease to be
responsible for physical damage, the Obligor must pay for all physical damage,
including theft and loss, to the related Vehicles, even if the damage occurs as
a result of Ryder's negligence or on Ryder's premises. If a Vehicle is repaired
by a garage that Ryder has not approved and the repair is defective, then Ryder
may re-repair the Vehicle at the Obligor's expense. The Obligor must furnish
Ryder with evidence of reasonably acceptable physical damage insurance coverage
on the Vehicles, listing Ryder as the named insured or endorsed as the loss
payee. Ryder reserves the right to retain the salvage value of any Vehicle that
is damaged beyond economic repair. If Ryder elects to retain the
28
<PAGE> 29
salvage value, it will deduct the salvage value from the amount owed to Ryder by
the related Obligor for the Vehicle.
Ryder Risk of Loss. If a Lease requires Ryder to be responsible for
physical damage to the related Vehicles, then Ryder assumes the risk of all
physical damage to and loss and theft of the Insured Vehicles, except that:
- the Obligor remains responsible for the deductible amount per occurrence
as specified in the Schedule A;
- Ryder will not pay, and the Obligor is responsible, for physical damage
caused by the Obligor's violation of the Lease terms and for any willful
damage to an Insured Vehicle, including (1) damage caused in a labor
dispute involving the Obligor or (2) any theft or conversion of an
Insured Vehicle by the Obligor's employees or agents; Ryder will be
entitled to retain the salvage value of any Insured Vehicle that is
damaged beyond economic repair through an excluded peril, in which case
the salvage value of the Insured Vehicle will be deducted from the amount
owed by the Obligor; and
- Ryder may terminate its responsibility for physical damage to and loss
and theft of the Insured Vehicles by giving the Obligor 30 days' prior
written notice, after which time the Obligor then assumes all risk of
loss with respect to, and must procure physical damage insurance
covering, those Vehicles.
Collection, Repossession and Disposition Procedures
Collections. Ryder's collections activities have been centralized into one
administrative center at the Shared Service Center with more than 50
professionals devoted to collections. Ryder uses numerous automated tools to
assist it in the identification, tracking and resolution of collections
disputes. In addition to various Dun & Bradstreet Corporation performance
indices, Ryder also uses a number of proprietary performance measurements. When
a delinquency is identified, Ryder makes calls and/or sends demand letters to
the delinquent Obligor. The tone of a phone call or the level of aggressiveness
placed on each collection effort is determined by the length and amount of the
delinquency, credit history and quality of the Obligor and customer relationship
considerations.
Defaults. When an Obligor fails to bring its account back into accord with
contractual or otherwise acceptable payment terms, Ryder may issue a default
notice to the Obligor. Receipt of a default notification typically requires the
Obligor to remit payment within seven days and achieve either contractual or
otherwise acceptable payment terms. Failure to remit payment can result in the
termination of the related Lease, in which case Ryder will:
- demand the immediate return of all Obligor Vehicles,
- initiate repossession actions if the Obligor fails to return the Obligor
Vehicles, or
- require the Obligor to purchase the Obligor Vehicles for their
Termination Values.
Repossessions. Once a Specified Vehicle is repossessed, depending on its
condition and specifications, if it is determined to still have useful life
remaining, it will either be leased to another customer of Ryder that has a need
for the same type of vehicle or placed into Ryder's commercial rental fleet, or
it will be sold into the marketplace through Ryder's used vehicle sales
marketing group.
Servicing
Lease Collections. Billing transactions for both securitized and
unsecuritized vehicles will continue to be generated by Ryder's existing billing
system and appear on one invoice. A portion of the payments received with
respect to invoices that include securitized Vehicles will be paid to the
Origination Trust. The payments will be available for either partial or full
payment of the financial component (the "Financial Component") of the fixed
charge portion (the "Fixed Charge") of the total monthly payment payable under
the Leases (the "Total Monthly Payment"). See "-- Lease Payments -- Calculation
of the Financial Component".
On a daily basis, invoices that include securitized Vehicles will be
compared with payments received for the invoices. The appropriate amounts to be
paid to the Origination Trust and advanced by Ryder will be calculated
accordingly. See "Additional Document Provisions -- The Administration
Agreement -- Ad-
29
<PAGE> 30
vances" for a discussion of the calculation of Financial Component Advances and
the repayment of the Advances.
Residuals. Ryder will begin the disposal process for a Specified Vehicle
upon its return when the related Specified Lease has reached its Maturity Date
or date of early termination. Specified Vehicles will be prepared for sale and
placed on Ryder's used vehicle sales lots for retail/commercial sales or they
may be traded to manufacturers' groups through local or national "trade
packages".
If a Specified Vehicle is sold during the Collection Period in which its
lease terminates, Ryder will remit the Sales Proceeds to the SUBI Collection
Account within two days of processing. If the Specified Vehicle is not sold
during the Collection Period in which the Specified Vehicle comes off-lease,
Ryder will advance the Securitization Value to the SUBI Collection Account for
that Specified Vehicle. See "Additional Document Provisions -- The
Administration Agreement -- Advances" for a discussion of the calculation of
Sales Proceeds Advances and the repayment of those Advances.
Lease Payments
Over the Lease Term, the Obligor is required to make Total Monthly Payments
intended to cover:
- the cost of financing the related Vehicles,
- scheduled depreciation of the Vehicles, and
- certain specified services and maintenance to be performed and supplies
to be furnished by Ryder.
Invoices are sent to each Obligor setting forth the Total Monthly Payment
due with respect to the Obligor Vehicles. Total Monthly Payments are generally
comprised of four components:
- the Fixed Charge, which is a fixed dollar amount due every month during
the Lease Term regardless of the actual usage of the Vehicle by the
Obligor;
- a variable charge, which changes from month to month depending on Vehicle
usage;
- a variable charge for fuel provided by Ryder during the preceding month;
and
- a variable charge for other services, including without limitation
accident charges, repairs, accessory charges, customer vehicle fuel for
non-Ryder vehicles, miscellaneous charges, credits and interstate fuel
taxes.
The Leases require the related Obligors to pay the invoiced Total Monthly
Payment within ten days of the date of the invoice. See "-- Collection,
Repossession and Disposition Procedures". However, with regard to the Trust and
Specified Leases and as discussed in more detail below under "-- Calculation of
the Financial Component," only the rights to the Financial Component of the
Fixed Charge, which represents the financing cost and depreciation of the
related Specified Vehicle, will be available to the Transferor and the Trust to
make payments in respect of the Program Operating Lease and the Senior Notes.
Total Monthly Payments made by Obligors under the Specified Leases normally
will be paid by mail, deposited into a lock box maintained by a bank and
controlled by the Administrative Agent and then deposited into the SUBI
Collection Account within two Business Days of processing, unless the Monthly
Remittance Condition has been met, which would then permit the Administrative
Agent to make the deposits on a monthly basis. See "Additional Document
Provisions -- The Administration Agreement -- Collections".
Calculation of the Financial Component
In the case of the Specified Leases, only the rights to the Financial
Component of the Fixed Charge, which represents the financing cost and
depreciation of the related Specified Vehicle, will be available to the
Transferor and the Trust to make payments in respect of the Program Operating
Lease and the Senior Notes. Because the Financial Component and the Maintenance
Component are not billed separately to the Obligor or tracked separately by
Ryder, a predetermined dollar amount of the Fixed Charge component of Total
Monthly Payments will be identified as the Financial Component. The remainder of
the Fixed Charge, in addition to the other components of the Total Monthly
Payment, will comprise the Maintenance Component. The Maintenance Component will
be allocated to and retained by Ryder, as Maintenance Provider, pro rata with
30
<PAGE> 31
the Financial Component. Although each Lease provides that Ryder may change the
Fixed Charge on specified dates twice yearly based on changes in the Consumer
Price Index, the Financial Component of each Specified Lease will be established
as of the Cutoff Date and will not change over the Lease Term.
Under the Administration Agreement, the portion of each Total Monthly
Payment allocated to the Maintenance Component of the Specified Leases will be
retained by the Maintenance Provider, will not be available to make Program
Operating Lease Payments and, therefore, will not be available to make payments
on the Senior Notes.
The following example is included to depict, with respect to a hypothetical
individual lease, the nature of its Financial Component and the relationship of
the Financial Component to the Securitization Rate in the amortization of the
Cutoff Date Securitization Value of the related leased vehicle. It is set forth
for illustrative purposes only.
Amortization of a vehicle lease contract:
<TABLE>
<S> <C>
Original Book Value $78,130
Cutoff Date Securitization Value (Book Value) $69,943
Residual Value $25,260
Securitization Rate 8.25%
Original Lease Term (Months) 78
Seasoning (Elapsed Term, in Months) 11
Remaining Lease Term (Months) 67
Fixed Charge Per Month $ 1,722
Financial Component (Calculated) $ 1,008
</TABLE>
(CHART)
31
<PAGE> 32
Calculation of the Securitization Value of the Specified Leases
Under the Administration Agreement, the Administrative Agent will calculate
a "Securitization Value" for each Specified Lease equal to the following:
<TABLE>
<CAPTION>
Calculation Date Securitization Value Formula
- ---------------- ----------------------------
<S> <C>
as of the Cutoff Date -- the value of the Specified Lease and the related
Specified Vehicle on Ryder's books (the "Net
Book Value") as of the Cutoff Date (the "Cutoff
Date Securitization Value");
as of its Maturity Date -- the estimated sales proceeds of the Specified
Vehicle as determined on or before the Cutoff
Date (the "Residual Value"); and
as of any other date -- the present value, calculated using the
Securitization Rate, of the sum of (a) the
aggregate Financial Component payments remaining
on the Specified Lease and (b) the Residual
Value of the Specified Vehicle.
</TABLE>
For each Specified Vehicle and related Specified Lease, the Financial
Component will equal the constant payment required to amortize the Cutoff Date
Securitization Value of the Specified Vehicle to the Residual Value of that
Specified Vehicle over its remaining Lease Term, at a rate equal to the
Securitization Rate. The Securitization Value, which represents the amount of
financing that will be raised against each Specified Vehicle and related
Specified Lease, will at any given time during the term of the Specified Lease
represent the principal amount of Securities that can be amortized by the sum of
the Financial Component payments due in respect of the Specified Vehicle over
the remaining Lease Term, plus the Residual Value of the Specified Vehicle, in
each case discounted at an annualized rate equal to the Securitization Rate. The
"Securitization Rate" will equal the sum of (a) the weighted average interest
rate on the Securities on the Closing Date, (b) the Administration Fee and (c)
0.50%.
Historical Data
The following tables set forth selected delinquency, write-off and residual
value performance data for Ryder's portfolio of leased trucks, tractors and
trailers located throughout the United States as of and for the years ended
December 31, 1993 through December 31, 1998, and the six months ended June 30,
1998 and 1999. The tables are followed by a discussion of Ryder's views as to
trends, anomalies and reasons for changes in the tables.
The data presented in the following tables are for illustrative purposes
only. Delinquency, write-off and residual value performance experience may be
influenced by a variety of economic, social, geographic and other factors.
Neither Ryder nor the Trust can assure that Ryder's delinquency, write-off and
residual value experience with respect to its portfolio of leased trucks,
tractors and trailers in the future, or the Trust's experience with respect to
the Specified Vehicles, will be similar to that set forth below.
Ryder generally writes off a receivable when it is six months past due.
Prior to that time a write-off may be taken, on an account-by-account basis, if
Ryder's credit and collections personnel determine that circumstances so
warrant, such as in the case of a court-approved reorganization plan or a
liquidating obligor with poor pay-out prospects. Ryder tracks delinquency
information for periods of 1 to 30 days, 31 to 60 days, 61 to 90 days, and over
90 days. As of June 30, 1999, delinquencies of over 60 days as a percentage of
net book value were about one third of one percent. Ryder does not group
delinquencies in 30-day tranches beyond 90 days as the amounts are not
considered material. As of June 30, 1999, delinquencies of over 90 days as a
percentage of net book value were about one tenth of one percent. Additional
detail and historical information on delinquencies is set forth in the table
below.
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<PAGE> 33
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, AT DECEMBER 31,
------------------------------- ------------------------------------------------
1999 1998 1998 1997 1996
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Number of Customers......... 11,979 10,965 11,217 11,287 11,393
Number of Vehicles.......... 92,276 84,258 88,249 83,091 79,750
Ending Net Book Value of
Vehicles................... $2,857,591,050 $2,486,163,560 $2,615,245,281 $2,443,976,045 $2,453,850,570
Dollar Amount of Leases
Delinquent
61-90 Days............. $ 5,990,596 $ 6,068,691 $ 7,794,902 $ 7,579,897 $ 3,885,370
91 Days or More........ $ 3,135,128 $ 3,170,869 $ 3,028,988 $ 4,780,667 $ 2,621,514
Percentage Delinquent as a
Percentage of Net Book
Value
61-90 Days............. 0.21% 0.24% 0.30% 0.31% 0.16%
91 Days or More........ 0.11% 0.13% 0.12% 0.20% 0.11%
<CAPTION>
AT DECEMBER 31,
-------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Number of Customers......... 10,923 10,208
Number of Vehicles.......... 78,561 72,313
Ending Net Book Value of
Vehicles................... $2,414,791,790 $2,011,432,118
Dollar Amount of Leases
Delinquent
61-90 Days............. $ 1,624,538 $ 1,449,054
91 Days or More........ $ 1,568,546 $ 1,486,811
Percentage Delinquent as a
Percentage of Net Book
Value
61-90 Days............. 0.07% 0.07%
91 Days or More........ 0.06% 0.07%
</TABLE>
- ---------------
- The Ending Net Book Value of Vehicles is based on the sum of the Net Book
Value of all Vehicles under the Leases.
- In presenting the Dollar Amount of Leases Delinquent the period of
delinquency is based on the number of days any portion of a payment is
contractually past due.
- The Percentage Delinquent as a Percentage of Net Book Value is shown as a
percentage of the aggregate Net Book Value of Vehicles at period end.
WRITE-OFF EXPERIENCE
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, AT DECEMBER 31,
------------------------------- ------------------------------------------------
1999 1998 1998 1997 1996
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Number of Customers......... 11,979 10,965 11,217 11,287 11,393
Number of Vehicles.......... 92,276 84,258 88,249 83,091 79,750
Ending Net Book Value of
Vehicles................... $2,857,591,050 $2,486,163,560 $2,615,245,281 $2,443,976,045 $2,453,850,570
Dollar Amount of
Write-offs................. $ 2,330,114 $ 3,495,406 $ 5,339,570 $ 6,157,679 $ 4,076,041
Write-offs as a Percentage
of Net Book Value.......... 0.16% 0.28% 0.20% 0.25% 0.17%
<CAPTION>
AT DECEMBER 31,
-------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Number of Customers......... 10,923 10,208
Number of Vehicles.......... 78,561 72,313
Ending Net Book Value of
Vehicles................... $2,414,791,790 $2,011,432,118
Dollar Amount of
Write-offs................. $ 3,560,212 $ 1,915,465
Write-offs as a Percentage
of Net Book Value.......... 0.15% 0.10%
</TABLE>
- ---------------
- The Dollar Amount of Write-offs is based on the time at which Ryder
formally determines a Lease receivable to be uncollectible and removes the
Lease receivable from its books. Ryder's general policy is to write off an
account when it is 6 months past due. Prior to that time a write off may
be taken, on an account-by-account basis, if Ryder's collections personnel
determine that circumstances so warrant.
- The Dollar Amount of Write-offs is net of recoveries.
- Write-offs as a Percentage of Net Book Value are listed as a percentage of
the aggregate Net Book Value of Vehicles at period end and six-month data
is annualized.
33
<PAGE> 34
RESIDUAL VALUE PERFORMANCE
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, AT DECEMBER 31,
--------------------------- -----------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Number of Vehicles
Sold.................... 7,799 6,308 12,868 10,431 8,391 9,103 5,061
Aggregate Residual
Values of Vehicles
Sold.................. $120,626,799 $ 89,906,055 $190,271,739 $180,266,234 $123,949,475 $120,433,482 $59,083,279
Aggregate Sales
Proceeds.............. $140,258,967 $107,941,002 $225,322,796 $211,878,187 $147,923,019 $149,847,757 $76,789,821
Aggregate Gain (Loss)... $ 19,632,167 $ 18,034,947 $ 35,051,056 $ 31,611,953 $ 23,973,544 $ 29,414,274 $17,706,542
Average Gain (Loss) Per
Vehicle............... $ 2,517 $ 2,859 $ 2,724 $ 3,031 $ 2,857 $ 3,231 $ 3,499
</TABLE>
- ---------------
- The Number of Vehicles Sold only includes Vehicles that were under full
service lease contracts. These full service lease contracts were all
originated after December 31, 1991.
Ryder believes the increase in the number of vehicles under lease over the
periods presented by the tables above primarily reflects increased market demand
for leased vehicles, and the increasing trend in delinquency experience through
1998 reflects relatively low levels of delinquency in earlier years and start-up
related inefficiencies associated with Ryder's strategic move to centralizing
its lease collection and administration activities in a national shared service
center. Ryder believes decreases in delinquency since this period are the result
of the improved collection effectiveness of the Shared Service Center, which
became fully operational in December 1997.
Ryder believes the increasing trend in net write-off experience reflected
in the above tables is due to general growth in the size of the lease portfolio.
The significant level of net write-off experience in 1997 as compared to other
periods presented by the tables above reflects the implementation of the
national shared service center. As part of its effort to uniformly apply
write-off policies across the Company, the Shared Service Center wrote-off a
number of accounts in 1997 for which an allowance for loss was previously
provided, but the write-off had not yet occurred.
Ryder believes the increasing trend in the number of vehicles sold is due
to overall growth in the size of its portfolio, combined with the conscious
effort by Ryder, particularly in 1997, to control the size of its portfolio by
actively selling certain used equipment. Ryder believes competitive pressures on
selling prices, more accurate forecasting of the residual value of vehicles sold
and the sales efforts discussed previously are responsible for the decreasing
trend in average gain per vehicle since 1994 shown in the table above.
Year 2000 Preparation
The Year 2000 issue is the result of computer systems, software products
and embedded technology using two digits rather than four to indicate the
applicable year. If not addressed, such computer systems, software products and
embedded technology may be unable to properly interpret dates beyond the year
1999, which could cause system failures or miscalculations and lead to
disruptions in the activities and operations of Ryder System and its
subsidiaries, including Ryder.
During 1997, after consideration of the potential impact to operations,
including customer and supplier relationships, an enterprise-wide program was
initiated to modify computer information systems to be Year 2000 compliant or to
replace non-compliant systems at Ryder System and its subsidiaries. A Year 2000
Steering Committee comprised of senior executives was established to address
compliance issues and alternatives. A program office dedicated to implementing
the Year 2000 compliance plan was also established, and it has engaged external
consultants to provide day-to-day management oversight and contractors to
remediate and test non-compliant source code. Ryder System has stated that it
believes adequate resources have been allocated to the Year 2000 effort and that
it expects the Year 2000 compliance program to be completed on a timely basis.
34
<PAGE> 35
Ryder System and its subsidiaries have identified three major areas
determined to be critical for successful Year 2000 compliance:
- information systems, such as mainframes, PCs, networks and similar type
systems maintained at customer sites, and legacy applications relating to
operations such as financial reporting, human resources, purchasing,
treasury, marketing and sales;
- third-party relationships, including customers, suppliers, vendors and
government agencies; and
- facilities and equipment which may contain microprocessors with embedded
technology.
Ryder System and its subsidiaries' Year 2000 compliance program for each
major area can be segregated into three broad phases. Phase I of the program is
the assessment of information systems, facilities and equipment, and services
and products provided by third parties in order to identify exposures to Year
2000 issues and to develop a master plan of action including remediation,
retirement or replacement of non-compliant systems. Phase II of the program is
the implementation of action plans. Phase III of the program is the final
testing of each major area of exposure to ensure compliance, the placement of
remediated items into production and contingency planning to assess reasonably
likely worst case scenarios.
Ryder System and its subsidiaries have completed the assessment of the
legacy application and system software. Their remediation plan for this area is
segregated into 15 major partitions worldwide. Overall, approximately 99% of the
effort in this area had been performed as of September 30, 1999. Remediation and
testing activities were virtually complete on core business applications as of
September 30, 1999. Final testing of remediated code is scheduled to be
substantially completed during November of 1999. In addition, due to the
uncertainties inherent in this undertaking, contingency planning has been
initiated to evaluate a course of action to minimize the impact of any
unforeseen disruption resulting from non-compliance.
Ryder System and its subsidiaries rely on suppliers, vendors and government
agencies to timely provide a wide range of goods and services, including
equipment, supplies, telecommunications, utilities, transportation services and
banking services. Their management believes that third-party relationships
represent the greatest risk with respect to the Year 2000 issue because of their
limited ability to influence actions of third parties and to estimate the impact
of non-compliance of third parties throughout their operations. They are making
concerted efforts to understand the Year 2000 status of third parties whose Year
2000 non-compliance could either have a material adverse effect on their
business, financial condition or results of operations or involve a safety risk
to their employees or customers. They continue to survey and communicate with
customers, suppliers and vendors with whom they have important financial and
operational relationships to assess the status of their Year 2000 compliance
program and to develop a joint contingency plan.
The vendor compliance program of Ryder System and its subsidiaries includes
the following: assessing vendor compliance status; tracking vendor compliance
progress; developing contingency plans, including identifying alternate vendors,
as needed; addressing contract language; replacing, remediating or upgrading
equipment; requesting certification from vendors or making on-site assessments,
as required; and sending questionnaires and conducting phone interviews. Some
significant suppliers and vendors have not responded to inquiries, have declined
to respond because of liability concerns or have not responded with sufficient
detail for Ryder System and its subsidiaries to ensure (a) timely Year 2000
compliance, or (b) the impact to the company in the event of non-compliance.
Ryder System is continuing to pursue adequate responses from mission critical
business partners under the new "Year 2000 Readiness Disclosure" legislation.
However, Ryder System and its subsidiaries can provide no assurance that Year
2000 compliance plans will be successfully completed by third parties in a
timely manner.
In the facilities and equipment area, Ryder's exposure relates to embedded
technology in, among other things, vehicles, vehicle-related devices, and fuel
storage and other facilities. Based upon preliminary testing and discussions
with major truck manufacturers, it appears that the microprocessors installed by
the truck manufacturers are Year 2000 compliant. Remediation of leak detection
devices on underground fuel storage tanks has been completed. Ryder is
continuing to assess its exposure and to develop action and contingency plans
for other critical facilities and equipment, including on-board vehicle
computers acquired from manufacturers other than major truck manufacturers.
35
<PAGE> 36
Ryder System and its subsidiaries have developed a Year 2000 contingency
plan development process to mitigate, to the extent practicable, potential
disruptions in their activities and operations that may be created by failures
of critical business partners, facilities and equipment, and internal systems.
Their management currently believes that the most likely worst case scenario
will consist of some localized disruptions of systems that may affect individual
business processes, facilities or suppliers for a short time rather than
systemic or long-term problems affecting business operations as a whole. Through
visits to key operating sites, departments, customers, and vendors, potential
disruption scenarios have been identified and contingency plans have been
developed. Ryder System is continuing to evaluate, modify and augment
contingency plans for each business unit (including Ryder) and for critical
business processes as additional information becomes available. These plans
address preparation, assessment of failure, and resumption of critical business
functions. Initial plans developed cover early warning, preventative actions and
alternative processes. Quick response teams will be formed to identify and
correct problems as they occur. Ryder System is considering the following plans
of action in anticipation of any potential Year 2000 problems: carrying
additional supplies of fuel, additional data back-ups, computer shut downs and
restarts, finishing 1999 transactions early, freezing new system installations
and alternative means of communication. However, Ryder System and its
subsidiaries can provide no assurance that they will correctly anticipate the
level, impact or duration of non-compliance by critical business partners,
facilities and equipment or internal systems, or that contingency plans will be
sufficient to mitigate the impact of non-compliance.
Ryder System's contingency planning process has focused on risks, scenarios
and reasonable contingency plans involving materially important information
systems and third-party relationships. However, there are an almost infinite
number of additional risks which are not practicably assessable and for which,
therefore, specific contingency and mitigation plans have not been developed.
Such risks include the failures of one or more information systems or
third-parties which failures, individually, Ryder System does not consider
materially important but which could trigger an unanticipated cascade of other
Year 2000 failures, the combination of which could be materially important or
could affect the implementation of existing contingency plans.
The inability of Ryder to address the necessary Year 2000 modifications of
computerized information systems could result in a significant adverse effect on
its performance as Administrative Agent and Maintenance Provider, including the
potential inability to collect receivables, pay obligations, and operate service
facilities. Any such inability could have a material adverse effect on Senior
Noteholders and you could suffer a loss on your investment.
The foregoing description under the heading "Year 2000 Preparation"
contains various "forward looking statements" within the meaning of Section 27A
of the Securities Act and Section 21E of the Securities Exchange Act of 1934
(the "Exchange Act"), which represent expectations or beliefs expressed by Ryder
System management concerning future events, including that the assessment and
remediation efforts associated with Year 2000 issues will be completed by Ryder
System and its subsidiaries on a timely basis and that completion of the
contingency plan relating to Year 2000 issues is expected by the end of fiscal
year 1999. Ryder System cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those in the forward looking statements, including the failure of Ryder System
and its subsidiaries to resolve Year 2000 issues on a timely basis due to
non-performance by outside contractors, the failure of third parties to
remediate their Year 2000 issues or other factors, or the failure of Ryder
System and its subsidiaries to develop an adequate contingency plan relating to
Year 2000 issues. Results actually achieved thus may differ materially from the
expected results included in these statements. The safe harbor for forward
looking statements under Section 27A of the Securities Act and Section 21E of
the Exchange Act does not apply to initial public offerings but does apply to
the Exchange Act reports from which the foregoing statements by Ryder System
have been taken.
THE SPECIFIED LEASES
General
The Specified Leases selected from the Origination Trust's portfolio of
Leases will consist of a pool of 6,323 Vehicles for which the related Leases had
an Aggregate Cutoff Date Securitization Value of $309,880,619.04. The Specified
Leases were assigned to the Origination Trust by Ryder on or prior to the
36
<PAGE> 37
Closing Date. The Specified Leases are operating leases under generally accepted
accounting principles and have been selected based upon the criteria specified
in the SUBI Trust Agreement and described under "-- Characteristics of the
Specified Leases -- General" and "-- Representations, Warranties and Covenants".
Ryder will represent and warrant that it used no adverse selection procedures in
selecting the Specified Leases for allocation to the Lease SUBI as SUBI Assets
and that it is not aware of any bias in the selection of the Specified Leases
that would cause delinquencies or losses on the Specified Leases to be worse
than any other Leases held by the Origination Trust. However, there can be no
assurance as to delinquencies or losses on the Specified Leases.
Specified Vehicles relating to Specified Leases having an aggregate Cutoff
Date Securitization Value not to exceed $4,900,848, which represents 1.58% of
the Aggregate Cutoff Date Securitization Value, will be titled in the name of
the Origination Trust or the Origination Trustee on behalf of the Origination
Trust during the Titling Grace Period. If the Administrative Agent fails to
properly retitle any Titling Grace Period Vehicle, it will be required to make a
payment equal to the Securitization Value of the related Specified Lease as of
the last day of the Titling Grace Period. See "Risk Factors -- During a titling
grace period the origination trust will lack a perfected ownership interest in
some vehicles" and "Additional Legal Aspects of the Specified Leases and the
Specified Vehicles -- Back-up Security Interests".
Each Specified Lease will provide that Ryder may terminate the Specified
Lease and repossess the related Specified Vehicle following an event of default
by the related Obligor (each, a "Lease Default"). Typical Lease Defaults
include, but may not be limited to, failure of the Obligor to make payments when
due, certain events of bankruptcy or insolvency of the Obligor, failure of the
Obligor to maintain the insurance required by the related Specified Lease (if
the Obligor is required to maintain the insurance), failure to make required
repairs on the related Specified Vehicle or failure to comply with any other
term or condition of the Specified Lease. Ryder regularly tracks Obligors'
compliance with their payment and insurance obligations and monitors Obligors
for noncompliance as more fully described under "Ryder -- Insurance" and
"-- Collection, Repossession and Disposition Procedures".
In the event of termination of a Specified Lease where the related Obligor
is in default following a casualty of the related Specified Vehicle, amounts
collected with respect to the Specified Lease and Specified Vehicle, after
deducting costs and other sums retained by the Administrative Agent in
connection therewith, may be less than the Securitization Value of the Specified
Lease. In the event that any of the foregoing shortfalls are not covered from
available monies on deposit in the Residual Value Surplus Account and Reserve
Fund and the subordination of payments otherwise payable to the holders of the
Subordinated Notes and the Certificates to the extent described in this
prospectus, investors in the Senior Notes could suffer a loss on their
investment.
Characteristics
General. The Specified Leases were selected by reference to several
criteria, including, that as of the Cutoff Date, each Specified Lease applied to
a Specified Vehicle that:
- is a commercial truck, highway tractor or trailer;
- has a model year of 1996 or later;
- is subject to a Lease with a Maturity Date on or after the April 2001
Payment Date and no later than the July 2009 Payment Date; and
- Fixed Charge payments in respect of which were not more than 60 days past
due as of the Cutoff Date.
Based on an analysis of the recent payment history of the Specified Leases, on
average 53% paid in under 30 days and the remaining 47% paid on average in 31 to
60 days of the due date. The Issuer believes that the collection periods with
respect to amounts invoiced on or about the Cutoff Date will not differ
materially from these results.
For a listing of other applicable selection criteria see "-- Representations,
Warranties and Covenants".
37
<PAGE> 38
As of the Cutoff Date, the Specified Leases had:
- an average Cutoff Date Securitization Value of $49,008.48;
- a weighted average original term of 71.32 months;
- a weighted average term to maturity of 64.41 months; and
- an aggregate Securitization Value (the "Aggregate Cutoff Date
Securitization Value") of $309,880,619.04.
As of the Cutoff Date, no single Obligor accounted for more than 2.04% of
the total Net Book Value of the Specified Vehicles. As of the Cutoff Date, the
top five and ten Obligors accounted for approximately 7.44% and 11.65% of the
Specified Vehicles by Aggregate Cutoff Date Securitization Value, respectively,
and the Specified Vehicles had an aggregate Residual Value of $112,112,717.00.
Distribution of the Specified Vehicles by Cutoff Date Securitization Value
As of the Cutoff Date, the composition of the Specified Vehicles by Cutoff
Date Securitization Value was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE CUTOFF DATE AGGREGATE CUTOFF DATE
CUTOFF DATE SECURITIZATION VALUE VEHICLES SECURITIZATION VALUE SECURITIZATION VALUE
- -------------------------------- --------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
$ 0.00 to $ 10,000.00 1 $ 6,711.49 0.00%
$ 10,000.01 to $ 20,000.00 329 6,088,697.76 1.96
$ 20,000.01 to $ 30,000.00 569 14,716,727.11 4.75
$ 30,000.01 to $ 40,000.00 917 32,758,967.37 10.57
$ 40,000.01 to $ 50,000.00 1,205 54,263,448.19 17.51
$ 50,000.01 to $ 60,000.00 1,635 90,634,426.94 29.25
$ 60,000.01 to $ 70,000.00 1,261 80,977,654.53 26.13
$ 70,000.01 to $ 80,000.00 374 27,642,425.58 8.92
$ 80,000.01 to $ 90,000.00 25 2,083,996.28 0.67
$ 90,000.01 to $100,000.00 3 279,576.79 0.09
$100,000.01 to $110,000.00 3 302,792.00 0.10
$120,000.01 to $130,000.00 1 125,195.00 0.04%
----- --------------- ------
Total............................ 6,323 $309,880,619.04 100.00%
===== =============== ======
</TABLE>
Distribution of the Specified Vehicles by Original Maturity
As of the Cutoff Date, the distribution of the Specified Vehicles by the
term of original maturity was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE CUTOFF DATE AGGREGATE CUTOFF DATE
TERM OF MATURITY VEHICLES SECURITIZATION VALUE SECURITIZATION VALUE
- ---------------- --------- ---------------------- ---------------------
<S> <C> <C> <C>
18 -- 24 months................... 13 $ 580,089.26 0.19%
25 -- 36 months................... 153 6,995,046.00 2.26
37 -- 48 months................... 358 15,867,166.91 5.12
49 -- 60 months................... 1,212 53,517,062.96 17.27
61 -- 72 months................... 1,949 103,759,074.83 33.48
73 -- 84 months................... 2,311 114,513,737.98 36.95
85 -- 96 months................... 310 14,058,761.33 4.54
97 -- 108 months.................. 1 52,043.36 0.02
109 -- 120 months................. 16 537,636.41 0.17
----- --------------- ------
Total............................. 6,323 $309,880,619.04 100.00%
===== =============== ======
</TABLE>
38
<PAGE> 39
Distribution of the Specified Vehicles by Remaining Term
As of the Cutoff Date, the composition of the Specified Vehicles by number
of months until Maturity Date was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE CUTOFF DATE AGGREGATE CUTOFF DATE
REMAINING TERM VEHICLES SECURITIZATION VALUE SECURITIZATION VALUE
- -------------- --------- --------------------- ---------------------
<S> <C> <C> <C>
16 -- 24 months...................................... 59 $ 3,071,134.33 0.99%
25 -- 36 months...................................... 242 10,432,543.20 3.37
37 -- 48 months...................................... 537 23,554,973.65 7.60
49 -- 60 months...................................... 1,520 71,137,624.67 22.96
61 -- 72 months...................................... 2,169 111,962,961.07 36.13
73 -- 84 months...................................... 1,544 78,269,061.48 25.26
85 -- 96 months...................................... 236 10,914,684.23 3.52
97 -- 108 months..................................... 5 127,089.44 0.04
109 -- 115 months.................................... 11 410,546.97 0.13
----- --------------- ------
Total................................................ 6,323 $309,880,619.04 100.00%
===== =============== ======
</TABLE>
Distribution of the Specified Vehicles by Manufacturer
As of the Cutoff Date, the distribution of the Specified Vehicles by
manufacturer was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE CUTOFF DATE AGGREGATE CUTOFF DATE
MANUFACTURER VEHICLES SECURITIZATION VALUE SECURITIZATION VALUE
- ------------ --------- ----------------------- ---------------------
<S> <C> <C> <C>
Freightliner......................................... 2,489 $146,339,353.45 47.22%
International (Navistar)............................. 1,884 86,042,909.49 27.77
Mack Trucks.......................................... 559 29,332,403.39 9.47
Isuzu................................................ 474 14,304,524.79 4.62
General Motors Corp.................................. 221 6,174,589.20 1.99
Volvo................................................ 86 5,750,004.68 1.86
Kenworth............................................. 63 5,013,124.49 1.62
Great Dane Trailers.................................. 207 4,293,562.22 1.39
Utility Trailers..................................... 67 2,818,991.91 0.91
Peterbilt............................................ 27 2,009,973.22 0.65
Trailmobile Trailers................................. 56 1,925,978.17 0.62
Ford................................................. 74 1,818,853.68 0.59
Ottawa............................................... 27 1,381,540.29 0.45
Sterling Ford........................................ 22 1,192,440.39 0.38
Wabash............................................... 42 806,321.18 0.26
Stoughton Trailers................................... 13 236,947.57 0.08
Other................................................ 3 118,531.24 0.04
Dorsey Trailers...................................... 2 88,772.00 0.03
Chevrolet............................................ 3 85,051.52 0.03
Clements Trailer..................................... 2 78,439.93 0.03
Budd Trailer......................................... 1 43,460.00 0.01
Dodge................................................ 1 24,846.23 0.01
----- --------------- ------
Total................................................ 6,323 $309,880,619.04 100.00%
===== =============== ======
</TABLE>
39
<PAGE> 40
Distribution of the Specified Vehicles by State
As of the Cutoff Date, the distribution of the Specified Vehicles by state
of origination, based on the state in which the related Specified Vehicle is
titled, was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE CUTOFF DATE AGGREGATE CUTOFF DATE
STATE VEHICLES SECURITIZATION VALUE SECURITIZATION VALUE
----- --------- --------------------- ---------------------
<S> <C> <C> <C>
Alabama........................................ 363 $ 19,031,238.89 6.14%
Arizona........................................ 162 6,781,724.94 2.19
California..................................... 674 32,510,315.90 10.49
Colorado....................................... 186 8,754,765.87 2.83
Delaware....................................... 27 1,303,990.97 0.42
Florida........................................ 6 257,371.36 0.08
Idaho.......................................... 10 535,235.10 0.17
Illinois....................................... 72 3,470,553.44 1.12
Indiana........................................ 592 25,780,778.31 8.32
Kansas......................................... 112 5,734,299.00 1.85
Maryland....................................... 14 681,154.08 0.22
Massachusetts.................................. 99 4,428,695.79 1.43
Minnesota...................................... 96 4,316,642.80 1.39
Mississippi.................................... 229 12,822,834.95 4.14
New Mexico..................................... 40 2,041,399.21 0.66
North Carolina................................. 624 33,359,826.22 10.77
Ohio........................................... 524 25,498,247.17 8.23
Oklahoma....................................... 165 7,061,451.74 2.28
Oregon......................................... 39 1,824,669.56 0.59
Pennsylvania................................... 697 32,717,113.74 10.56
South Carolina................................. 330 16,972,650.86 5.48
Tennessee...................................... 566 31,273,672.43 10.09
Utah........................................... 36 1,491,937.03 0.48
Virginia....................................... 233 9,473,512.59 3.06
Washington..................................... 147 7,744,826.92 2.50
Wisconsin...................................... 280 14,011,710.17 4.52
----- --------------- ------
Total.......................................... 6,323 $309,880,619.04 100.00%
===== =============== ======
</TABLE>
40
<PAGE> 41
Distribution of the Specified Vehicles by Asset Class
As of the Cutoff Date, the distribution of the Specified Vehicles by asset
class was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE CUTOFF DATE AGGREGATE CUTOFF DATE
ASSET CLASS VEHICLES SECURITIZATION VALUE SECURITIZATION VALUE
----------- --------- --------------------- ---------------------
<S> <C> <C> <C>
Dry Trailer.................................... 269 $ 5,641,648.70 1.82%
Diesel Truck (less than or equal to 16,000
pounds)...................................... 351 9,923,197.82 3.20
Diesel Truck (less than or equal to 26,000
pounds/less than or equal to 20 feet)........ 271 10,702,583.59 3.45
Diesel Truck (less than or equal to 26,000
pounds/greater than 20 feet)................. 490 18,897,788.95 6.10
Diesel Truck (greater than 26,000 pounds/less
than or equal to 20 feet).................... 50 2,219,869.56 0.72
Diesel Truck (greater than 26,000
pounds/greater than 20 feet)................. 378 17,147,747.18 5.53
Flatbed Trailer................................ 46 872,141.58 0.28
Gas Straight Truck............................. 18 443,237.94 0.14
Other Tractor.................................. 11 711,977.94 0.23
Other Trailer.................................. 2 91,582.52 0.03
Other Truck.................................... 272 12,365,118.63 3.99
Panel Van and Pickup........................... 120 2,337,619.96 0.75
Parcel Van..................................... 66 1,594,951.84 0.51
Refrigeration Trailer.......................... 73 3,687,100.18 1.19
Refrigeration Truck (less than or equal to
26,000 pounds)............................... 192 9,309,203.97 3.00
Refrigeration Truck (greater than or equal to
26,000 pounds)............................... 123 7,368,255.25 2.38
Single Axle Sleeper Tractor.................... 50 2,918,068.87 0.94
Single Axle Tractor............................ 882 43,323,478.92 13.98
Stake and Flatbed Truck........................ 213 8,872,178.88 2.86
Tandem Axle Conventional Sleeper Tractor....... 1,438 93,108,018.45 30.05
Tandem Axle Tractor............................ 1,008 58,344,848.31 18.83
----- --------------- ------
Total.......................................... 6,323 $309,880,619.04 100.00%
===== =============== ======
</TABLE>
(Percentages in the preceding distribution tables on pages 38 to 41 may not add
to precisely 100% due to rounding.)
Representations, Warranties and Covenants
The Specified Leases and the related Specified Vehicles will be described
in a schedule appearing as an exhibit to the SUBI Trust Agreement, which will
identify each Specified Vehicle by vehicle identification number and set forth
as to each Specified Lease or Specified Vehicle, as the case may be, among other
things:
- the date of origination,
- the Net Book Value,
- the Residual Value,
- the Financial Component,
- the Fixed Charge, and
- the number of months remaining from the Cutoff Date to the month in which
the Maturity Date occurs.
Under the Administration Agreement, the Administrative Agent will represent
and warrant as to certain characteristics of each Specified Lease and Specified
Vehicle as described in the first paragraph under
41
<PAGE> 42
"-- Characteristics of the Specified Leases -- General". The Administrative
Agent will also represent and warrant that each Specified Lease or, to the
extent applicable, the related Specified Vehicle or Obligor:
- was originated by Ryder in the United States for an Obligor with a U.S.
address in the ordinary course of Ryder's business;
- is a U.S. dollar-denominated obligation;
- has been validly assigned to the Origination Trust by Ryder, except that
if a Specified Vehicle is a Titling Grace Period Vehicle, it will be
retitled in the name of the Origination Trust or the Origination Trustee
on behalf of the Origination Trust during the Titling Grace Period, and
Ryder will provide each Rating Agency with a report on the status of such
retitling on or before the end of the Titling Grace Period;
- provides for constant or increasing Fixed Charge payments to be made by
the Obligor over the Lease Term;
- is a Lease as to which no selection procedure was used that was believed
to be adverse to the holders of interests in the Origination Trust, the
SUBIs or any Other SUBI;
- was created in compliance in all material respects with all applicable
federal and state laws, including disclosure laws;
- as of the date assigned to the Origination Trust, (a) is a legal, valid
and binding payment obligation of the Obligor, enforceable against the
Obligor in accordance with its terms, as amended, (b) has not been
satisfied, subordinated, rescinded, canceled or terminated, (c) no right
of rescission, setoff, counterclaim or defense has been asserted or
threatened in writing and (d) no written default notice has been
transmitted to Ryder;
- had an original term of not less than 12 months and has a remaining term
of not greater than 120 months;
- an executed copy of the documentation associated therewith is located at
one of Ryder's offices;
- the Obligor or Ryder has obtained physical damage insurance covering the
related Specified Vehicle as required under the Lease;
- the Obligor or Ryder has obtained liability insurance covering the
related Specified Vehicle as required under the Lease;
- does not have any Fixed Charge payment that is in whole or in part more
than 60 days past due as of the Cutoff Date;
- has not had any liens or claims filed on or against it for work, labor or
materials; and
- the monthly Fixed Charge due is equal to or greater than the monthly
Financial Component due in respect thereof.
The Administrative Agent will be required to deposit or cause to be
deposited into the SUBI Collection Account an amount equal to the Securitization
Value of a Specified Lease (the "Reallocation Payment") if:
- the Origination Trustee, the Administrative Agent, the Trust or the
Transferor discovers a breach of any representation, warranty or covenant
referred to in the preceding paragraph that materially and adversely
affects the Trust's interests in a Specified Lease or Specified Vehicle,
and
- the breach is not cured in all material respects within 60 days after the
Administrative Agent discovers the breach or is given notice of it.
The Reallocation Payment must be made by the Administrative Agent as of the
day on which the related cure period ended. Upon such payment, the related
Specified Lease and Specified Vehicle shall no longer constitute SUBI Assets.
The foregoing payment obligation will survive any termination of Ryder as
Administrative Agent under the Administration Agreement. Under some
circumstances, the Administrative
42
<PAGE> 43
Agent will be required to make Reallocation Payments in respect of some
Specified Leases as to which certain servicing procedures have not been followed
that materially and adversely affect the interests of the Trust in the Specified
Lease. Additionally, if the Administrative Agent fails to properly retitle any
Titling Grace Period Vehicle during the Titling Grace Period, it will be
required to make a deposit in the SUBI Collection Account equal to the
Securitization Value of the related Specified Lease as of the last day of the
Titling Grace Period and such Specified Lease and the related Specified Vehicle
will be transferred to the Administrative Agent.
MATURITY, PAYMENT AND YIELD CONSIDERATIONS
In general, the rate of payment of principal and the yield to maturity of
the Senior Notes will be directly related to the rate at which payments on or in
respect of the Specified Leases and the Specified Vehicles are made. A
prepayment of a Specified Lease in full may be in the form of:
- proceeds resulting from a voluntary early termination of the Specified
Lease;
- proceeds resulting from the exercise of the Annual Termination Option and
receipt of the related Termination Value Payment;
- Termination Proceeds following a default by or bankruptcy of the related
Obligor;
- Insurance Proceeds resulting from Casualty Termination Leases; or
- Reallocation Payments made by the Administrative Agent.
The rate of prepayments on the Specified Leases may be influenced by a
variety of economic, social and other factors, including competing truck,
highway tractor and trailer lessors and the conditions in the used truck,
highway tractor and trailer market.
Ryder does not maintain records of the historical prepayment experience of
its truck, highway tractor and trailer lease portfolio. Ryder is not aware of
any publicly available industry statistics setting forth termination rates for
truck, highway tractor and trailer leases similar to the Leases. Neither Ryder
nor the Trust can assure that prepayments on the Specified Leases will conform
to any historical experience, nor can they predict the actual prepayment rates
that may be experienced on the Specified Leases.
In general, prepayments of Specified Leases will shorten the weighted
average life of the Senior Notes, which is the average amount of time during
which each dollar of the principal balance of a Senior Note is outstanding. As
the rate of payment of principal on the Senior Notes will depend primarily on
the rate of payment -- including prepayments -- of the Specified Leases, the
final payment of principal of the Senior Notes could occur significantly earlier
than the final payment dates specified on the front cover of this prospectus for
each class of Senior Notes (each, a "Final Payment Date"). If prepayments on
Specified Leases cause the principal of the Senior Notes to be paid earlier than
anticipated, the Senior Noteholders will bear the risk of being able to reinvest
principal payments at interest rates at least equal to the Interest Rate on the
Senior Notes.
The effective yield on, and average life of, the Senior Notes will depend
on, among other things, the amount of scheduled payments on or in respect of the
Specified Leases and the Specified Vehicles and the rate at which such payments
are made to the Senior Noteholders. The timing of changes in the rate of
payments in respect of the Specified Vehicles also may affect significantly an
investor's actual yield to maturity and the average life of the Senior Notes. A
substantial increase in the rate of payments on or in respect of the Specified
Leases and Specified Vehicles -- including liquidations of the Specified
Leases -- may shorten the final maturity of, and may significantly affect the
yield on, the Senior Notes.
An investor's expected yield will be affected by:
- the price paid for the Senior Notes,
- the rate of prepayments of the Specified Leases, and
- the investor's assumed reinvestment rate.
43
<PAGE> 44
These factors do not operate independently, but are interrelated. For example,
if prepayments on the Specified Leases are slower than anticipated, an
investor's yield will be lower if interest rates are higher than anticipated and
higher if interest rates are lower than anticipated. Conversely, if prepayments
on the Specified Leases are faster than anticipated, an investor's yield will be
higher if interest rates are higher than anticipated and lower if interest rates
are lower than anticipated.
The following information is provided solely to illustrate the effect of
prepayments of the Specified Leases on the unpaid principal amounts of the
Senior Notes and the weighted average life of the Senior Notes under the
assumptions stated below, and is not a prediction of the prepayment rates that
might actually be experienced with respect to the Specified Leases.
Prepayments on truck, tractor and trailer leases may be measured by a
prepayment standard or model. The prepayment model used in this prospectus is
based on a Conditional Prepayment Rate. A "Conditional Prepayment Rate" or "CPR"
represents a constant annual rate of prepayment relative to the then outstanding
Securitization Value of a pool of Specified Leases applied monthly during the
indicated portion of the life of a Specified Lease. A 100% Prepayment Assumption
assumes a 0% CPR for the first month of the life of a Specified Lease and an
additional 12/11% CPR per annum each month thereafter during the life of the
Specified Lease until month 12. Beginning in the 12th month and in each month
thereafter until the 30th month during the life of a Specified Lease, a 100%
Prepayment Assumption assumes a 12% CPR per annum. Beginning in the 30th month
during the life of a Specified Lease, a 100% Prepayment Assumption assumes a 12%
CPR and an additional 1/3% CPR per annum each month thereafter until month 60
and each month thereafter during the life of a Specified Lease, a 100%
Prepayment Assumption assumes a 22% CPR.
The tables below were prepared on the basis of certain assumptions,
including that:
- all Total Monthly Payments are timely received and no Specified Lease is
ever delinquent;
- no Reallocation Payment is made in respect of any Specified Lease;
- all Titling Grace Period Vehicles are properly retitled during the
Titling Grace Period;
- there are no losses in respect of the Specified Leases;
- distributions of principal of and interest on the Senior Notes are made
on January 15, April 15, July 15 and October 15 of each year whether or
not the day is a Business Day;
- all payments in respect of the Subordinated Notes are deposited to the
Reserve Fund;
- the Administration Fee is 1.00% per annum;
- all prepayments on the Specified Leases are prepayments in full;
- all Program Operating Lease Payments are made on a timely basis;
- no Residual Value Surplus is deposited into the Residual Value Surplus
Account; and
- the Reserve Fund is funded with an amount equal to the Initial Deposit.
No representation is made as to what the actual levels of losses and
delinquencies on the Specified Leases will be. Because payments on the Specified
Leases will differ from those used in preparing the following tables,
distributions of principal of the Senior Notes may be made earlier or later than
as set forth in the tables. Investors are urged to make their investment
decisions on a basis that includes their determination as to anticipated
prepayment rates under a variety of the assumptions discussed herein.
44
<PAGE> 45
The following tables set forth the percentages of the unpaid principal
balance of the Senior Notes that would be outstanding after each of the dates
shown, based on a rate equal to 0%, 50%, 100%, 150% and 200% of the Prepayment
Assumption. As used in the table, "0% Prepayment Assumption" assumes no
prepayments on a Specified Lease, "50% Prepayment Assumption" assumes that a
Specified Lease will prepay at 50% of the Prepayment Assumption, and so forth.
PERCENTAGE OF CLASS A-1 SENIOR NOTE BALANCE OUTSTANDING TO MATURITY
<TABLE>
<CAPTION>
Prepayment Assumption
-----------------------------------------
0% 50% 100% 150% 200%
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
November 16, 1999........................ 100% 100% 100% 100% 100%
June 15, 2000............................ 45% 18% 0% 0% 0%
December 15, 2000........................ 0% 0% 0% 0% 0%
June 15, 2001............................ 0% 0% 0% 0% 0%
December 15, 2001........................ 0% 0% 0% 0% 0%
June 15, 2002............................ 0% 0% 0% 0% 0%
Weighted Average Life to Maturity
(years)................................ 0.50 0.36 0.29 0.25 0.22
Weighted Average Life to Call (years).... 0.50 0.36 0.29 0.25 0.22
</TABLE>
- ---------------
- The weighted average life of the Class A-1 Senior Notes is determined by
(a) multiplying the amount of each distribution in reduction of principal
balance by the number of years from the Closing Date to the date
indicated, (b) adding the results and (c) dividing the sum by the
aggregate distributions in reduction of principal balance referred to in
clause (a).
- The weighted average life to call assumes that an Optional Purchase
occurs.
PERCENTAGE OF CLASS A-2 SENIOR NOTE BALANCE OUTSTANDING TO MATURITY
<TABLE>
<CAPTION>
Prepayment Assumption
-----------------------------------------
0% 50% 100% 150% 200%
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
November 16, 1999........................ 100% 100% 100% 100% 100%
June 15, 2000............................ 100% 100% 96% 83% 70%
December 15, 2000........................ 95% 70% 46% 22% 0%
June 15, 2001............................ 68% 33% 0% 0% 0%
December 15, 2001........................ 39% 0% 0% 0% 0%
June 15, 2002............................ 7% 0% 0% 0% 0%
December 15, 2002........................ 0% 0% 0% 0% 0%
June 15, 2003............................ 0% 0% 0% 0% 0%
Weighted Average Life to Maturity
(years)................................ 1.83 1.31 1.00 0.81 0.67
Weighted Average Life to Call (years).... 1.83 1.31 1.00 0.81 0.67
</TABLE>
- ---------------
- The weighted average life of the Class A-2 Senior Notes is determined by
(a) multiplying the amount of each distribution in reduction of principal
balance by the number of years from the Closing Date to the date
indicated, (b) adding the results and (c) dividing the sum by the
aggregate distributions in reduction of principal balance referred to in
clause (a).
- The weighted average life to call assumes that an Optional Purchase
occurs.
45
<PAGE> 46
PERCENTAGE OF CLASS A-3 SENIOR NOTE BALANCE OUTSTANDING TO MATURITY
<TABLE>
<CAPTION>
Prepayment Assumption
-----------------------------------------
0% 50% 100% 150% 200%
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
November 16, 1999........................ 100% 100% 100% 100% 100%
June 15, 2000............................ 100% 100% 100% 100% 100%
December 15, 2000........................ 100% 100% 100% 100% 97%
June 15, 2001............................ 100% 100% 100% 62% 25%
December 15, 2001........................ 100% 95% 48% 4% 0%
June 15, 2002............................ 100% 50% 0% 0% 0%
December 15, 2002........................ 68% 3% 0% 0% 0%
June 15, 2003............................ 27% 0% 0% 0% 0%
December 15, 2003........................ 0% 0% 0% 0% 0%
June 15, 2004............................ 0% 0% 0% 0% 0%
Weighted Average Life to Maturity
(years)................................ 3.26 2.53 2.02 1.64 1.37
Weighted Average Life to Call (years).... 3.26 2.53 2.02 1.64 1.37
</TABLE>
- ---------------
- The weighted average life of the Class A-3 Senior Notes is determined by
(a) multiplying the amount of each distribution in reduction of principal
balance by the number of years from the Closing Date to the date
indicated, (b) adding the results and (c) dividing the sum by the
aggregate distributions in reduction of principal balance referred to in
clause (a).
- The weighted average life to call assumes that an Optional Purchase
occurs.
PERCENTAGE OF CLASS A-4 SENIOR NOTE BALANCE OUTSTANDING TO MATURITY
<TABLE>
<CAPTION>
Prepayment Assumption
-----------------------------------------
0% 50% 100% 150% 200%
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
November 16, 1999........................ 100% 100% 100% 100% 100%
June 15, 2000............................ 100% 100% 100% 100% 100%
December 15, 2000........................ 100% 100% 100% 100% 100%
June 15, 2001............................ 100% 100% 100% 100% 100%
December 15, 2001........................ 100% 100% 100% 100% 62%
June 15, 2002............................ 100% 100% 97% 48% 4%
December 15, 2002........................ 100% 100% 45% 0% 0%
June 15, 2003............................ 100% 56% 0% 0% 0%
December 15, 2003........................ 82% 10% 0% 0% 0%
June 15, 2004............................ 33% 0% 0% 0% 0%
December 15, 2004........................ 0% 0% 0% 0% 0%
June 15, 2005............................ 0% 0% 0% 0% 0%
Weighted Average Life to Maturity
(years)................................ 4.36 3.61 3.00 2.53 2.14
Weighted Average Life to Call (years).... 4.36 3.61 3.00 2.53 2.14
</TABLE>
- ---------------
- The weighted average life of the Class A-4 Senior Notes is determined by
(a) multiplying the amount of each distribution in reduction of principal
balance by the number of years from the Closing Date to the date
indicated, (b) adding the results and (c) dividing the sum by the
aggregate distributions in reduction of principal balance referred to in
clause (a).
- The weighted average life to call assumes that an Optional Purchase
occurs.
46
<PAGE> 47
PERCENTAGE OF CLASS A-5 SENIOR NOTE BALANCE OUTSTANDING TO MATURITY
<TABLE>
<CAPTION>
Prepayment Assumption
-----------------------------------------
0% 50% 100% 150% 200%
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
November 16, 1999........................ 100% 100% 100% 100% 100%
June 15, 2000............................ 100% 100% 100% 100% 100%
December 15, 2000........................ 100% 100% 100% 100% 100%
June 15, 2001............................ 100% 100% 100% 100% 100%
December 15, 2001........................ 100% 100% 100% 100% 100%
June 15, 2002............................ 100% 100% 100% 100% 100%
December 15, 2002........................ 100% 100% 100% 97% 70%
June 15, 2003............................ 100% 100% 98% 67% 42%
December 15, 2003........................ 100% 100% 70% 41% 19%
June 15, 2004............................ 100% 77% 44% 19% 2%
December 15, 2004........................ 81% 45% 19% 0% 0%
June 15, 2005............................ 48% 20% 1% 0% 0%
December 15, 2005........................ 15% 0% 0% 0% 0%
June 15, 2006............................ 0% 0% 0% 0% 0%
Weighted Average Life to Maturity
(years)................................ 5.53 5.01 4.44 3.91 3.45
Weighted Average Life to Call (years).... 5.52 5.01 4.44 3.91 3.45
</TABLE>
- ---------------
- The weighted average life of the Class A-5 Senior Notes is determined by
(a) multiplying the amount of each distribution in reduction of principal
balance by the number of years from the Closing Date to the date
indicated, (b) adding the results and (c) dividing the sum by the
aggregate distributions in reduction of principal balance referred to in
clause (a).
- The weighted average life to call assumes that an Optional Purchase
occurs.
NOTE FACTORS AND TRADING INFORMATION
The "Note Factor" for the Senior Notes will be a seven-digit decimal that
the Administrative Agent will compute for each Payment Date, which will
represent the remaining outstanding principal balance of the Senior Notes as of
that Payment Date, after giving effect to payments made on the Payment Date,
expressed as a fraction of the initial outstanding principal balance of the
Senior Notes. The Note Factor will initially be 1.0000000, and will thereafter
decline to reflect reductions in the Senior Note Balance. A Senior Noteholder's
portion of the principal balance of the Senior Notes, will be the product of (a)
the original denomination of the Senior Notes and (b) the applicable Note
Factor.
On each Payment Date, the Indenture Trustee will provide to Cede & Co.
("Cede") as the nominee of The Depository Trust Company ("DTC") (unless
Definitive Notes are issued under the limited circumstances described herein),
unaudited reports concerning payments received on or in respect of the Specified
Leases and the Specified Vehicles, the Note Factors, and various other items of
information. Senior Note Owners may obtain copies of the reports upon a request
in writing to the Indenture Trustee at its Corporate Trust Office. In addition,
Senior Noteholders will be furnished information for tax reporting purposes
during each calendar year, not later than the latest date permitted by law. For
further details concerning information furnished to Senior Noteholders and
Senior Note Owners, see "Additional Information Regarding the
Securities -- Statements to Senior Noteholders" and "Description of the Senior
Notes -- Book-Entry Registration".
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<PAGE> 48
DESCRIPTION OF THE SENIOR NOTES
General
The Senior Notes will be issued under the Indenture. The Indenture,
together with the SUBI Trust Agreement, the Administration Agreement, the Trust
Administration Agreement, the Trust Agreement, the Program Operating Lease, the
SUBI Certificate Transfer Agreement, and the Issuer SUBI Certificate Transfer
Agreement, are called the "Basic Documents". The following summaries of the
material provisions of the Basic Documents and the summaries of material
provisions included under "The SUBIs", "The Origination Trust", "The Specified
Leases -- Characteristics of the Specified Leases", "-- General" and
"-- Representations, Warranties and Covenants", "Security for the Securities"
and "Additional Document Provisions" do not purport to be complete and are
subject to, and qualified in their entirety by reference to, the provisions of
those documents. Where particular provisions of or terms used in a Basic
Document are referred to, the actual provisions, including definitions of terms,
are incorporated by reference as part of those summaries. Copies of the Basic
Documents may be obtained by request to the Transferor at the address set forth
under "The Transferor".
The Senior Notes will be issued in minimum denominations of $1,000 and
integral multiples of $1,000 in excess thereof in book-entry form. The Senior
Notes initially will be represented by certificates registered in the name of
Cede, the nominee of DTC. No Senior Note Owner will be entitled to receive a
certificate representing that owner's Senior Note, except as set forth below.
Unless and until Senior Notes are issued in fully registered certificated form
(the "Definitive Notes") under the limited circumstances described below, all
references herein to distributions, notices, reports and statements to Senior
Noteholders will refer to the same actions made with respect to DTC or Cede, as
the case may be, for the benefit of Senior Note Owners in accordance with DTC
procedures. See "-- Book-Entry Registration" and "Additional Information
Regarding the Securities -- Definitive Notes".
Distributions in respect of the Subordinated Notes and the Certificates
will be subordinated to distributions in respect of the Senior Notes to the
extent described under "Additional Information Regarding the
Securities -- Payments on the Securities".
Interest
Interest on the unpaid principal balance of the Senior Notes will be paid
in quarterly installments on the first Business Day after the 14th day of each
January, April, July and October, beginning January 17, 2000 (each, a "Payment
Date") to holders of record of the Senior Notes (the "Senior Noteholders") as of
the day immediately preceding the Payment Date (each such date, a "Record
Date"), with the final interest payment due on the earlier of (a) the Payment
Date on which the principal balance of the Senior Notes is reduced to zero or
(b) the Final Payment Date. A "Business Day" will be any day other than a
Saturday, a Sunday or a day on which banking institutions in the states of
Delaware, Florida, Illinois or New York are authorized or obligated by law,
executive order or government decree to be closed.
Interest will accrue on each class of Senior Notes at the interest rate
specified for each class on the front cover of this prospectus (each, an
"Interest Rate"), from and including the Closing Date, or from and including the
15th day of the month in which the preceding Payment Date occurred to and
including the 14th day of the month in which the Payment Date occurs (each, an
"Accrual Period") at the applicable Interest Rate until the principal amount of
the Senior Notes has been paid in full. Interest on the Class A-1 Senior Notes
will be calculated on the basis of the actual number of days elapsed, but
assuming a 360-day year. Interest on the other classes of Senior Notes will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
48
<PAGE> 49
As more fully described under "Additional Information Regarding the
Securities -- Payments on the Securities", interest payments on the Senior Notes
on a Payment Date generally will be made from the sum of:
- Available Funds remaining after the Administrative Agent has been paid
the Payment Date Advance Reimbursement and the Administration Fee, and
- the Reserve Fund Draw Amount, if any.
Principal
Securityholders are entitled to receive on each Payment Date an amount (the
"Principal Distribution Amount") equal to the greater of (a) the sum of (1) the
Optimal Principal Distribution Amount and (2) any Principal Carryover Shortfall
as of the preceding Payment Date, and (b) if the amount on deposit in the
Reserve Fund after giving effect to all deposits and withdrawals referenced in
clause (a) of the definition of the Reserve Fund Draw Amount as more fully
described under "Security for the Securities -- The Accounts -- The Reserve
Fund", exceeds the unpaid principal amount of the Securities, the unpaid
principal amount of the Securities (the "Securities Balance"). Notwithstanding
the foregoing, the Principal Distribution Amount shall not exceed the Securities
Balance.
The funds available to make principal distributions on a Payment Date (the
"Available Principal Distribution Amount") will equal the sum of (a) the amount
of Available Funds remaining after the Administrative Agent has been paid the
Payment Date Advance Reimbursement and the Administration Fee, and after accrued
interest has been paid on the Securities and (b) the Reserve Fund Draw Amount
remaining after accrued interest has been paid on the Securities. Principal
payments will be made to Securityholders in the priority set forth below on each
Payment Date in an amount equal to the lesser of (a) the Principal Distribution
Amount and (b) the Available Principal Distribution Amount (the "Quarterly
Principal Distributable Amount").
"Principal Carryover Shortfall" will mean, as of the close of any Payment
Date, the sum of the excess, if any, of the then Principal Distribution Amount
over the Quarterly Principal Distributable Amount.
On each Payment Date, unless the maturity of the Senior Notes has been
accelerated following an Indenture Default, principal payments shall be made
sequentially so that no principal will be paid on any class of Senior Notes
until each class of Senior Notes with a lower numerical designation shall have
been paid in full. Thus no principal will be paid on the Class A-2 Senior Notes
until the principal on the Class A-1 Senior Notes shall have been paid in full.
No principal will be paid on the Class A-3 Senior Notes until the principal on
the Class A-2 Senior Notes shall have been paid in full. No principal will be
paid on the Class A-4 Senior Notes until the principal on the Class A-3 Senior
Notes shall have been paid in full. No principal will be paid on the Class A-5
Senior Notes until the principal on the Class A-4 Senior Notes shall have been
paid in full. Until all principal due to the Senior Notes is paid, no principal
will be paid to the Subordinated Notes and the Certificates. Any remaining
principal payment will then be paid first to the Subordinated Notes until they
have been paid in full -- which amounts will be deposited into the Reserve Fund
until the Reserve Fund is fully funded -- and then to the Certificates.
On any Payment Date, (a) the "Senior Note Balance" and the "Certificate
Balance" will equal the Initial Senior Note Balance or the Initial Certificate
Balance, as the case may be, reduced by all payments of principal made on or
prior to the Payment Date on the Senior Notes or the Certificates, as the case
may be, and (b) the "Subordinated Note Balance" will equal the Initial
Subordinated Note Balance, reduced by all payments of principal made on or prior
to the Payment Date, whether paid to the Subordinated Noteholder or deposited in
the Reserve Fund.
On each Payment Date after the maturity of the Senior Notes has been
accelerated following an Indenture Default, principal will be allocated, first,
to the Class A-1 Senior Notes, second, pro rata among all other outstanding
classes of Senior Notes, and third, to the Subordinated Notes and the
Certificates pro rata. See "Additional Information Regarding the
Securities -- Payments on the Securities" and "Additional Document
Provisions -- The Indenture -- Indenture Defaults".
49
<PAGE> 50
The "Optimal Principal Distributable Amount" for any Payment Date and the
related Collection Period will equal the sum of the following amounts:
- for each Specified Vehicle for which the related Specified Lease did not
terminate during that Collection Period, the difference between the
Securitization Value of the Specified Lease at the beginning and at the
end of that Collection Period;
- for each Specified Vehicle for which the related Specified Lease reached
its Maturity Date during that Collection Period, the Securitization Value
of the Specified Lease as of the Maturity Date;
- for each Specified Lease terminated by the Obligor or the Administrative
Agent during that Collection Period pursuant to exercise of the Annual
Termination Option, the Securitization Value of such Specified Lease as
of the effective date of termination;
- for each Specified Vehicle purchased by the Administrative Agent before
its Maturity Date, the Securitization Value of the related Specified
Lease as of the date of the purchase;
- for each Specified Vehicle relating to a Specified Lease that became a
Casualty Termination Lease during that Collection Period, the
Securitization Value of the Specified Lease as of the date the Specified
Lease became a Casualty Termination Lease; and
- for each Specified Lease that became a Default Termination Lease during
that Collection Period, the Securitization Value of the Specified Lease
as of the date the Specified Lease became a Default Termination Lease.
A "Casualty Termination Lease" will mean a Specified Lease that terminated
because the related Specified Vehicle has been lost, stolen or damaged beyond
economic repair.
A "Default Termination Lease" will mean a Specified Lease terminated by (a)
the Administrative Agent following a default by or bankruptcy of the related
Obligor or (b) the Obligor -- other than by exercising the Annual Termination
Option -- based on an alleged breach by the Maintenance Provider under the
Specified Lease.
The principal amount of each class of Senior Notes, to the extent not paid,
will be due on the related Final Payment Date. The actual date on which the
Senior Note Balance is paid may be earlier than the Final Payment Date based on
a variety of factors, including the factors described under "Risk Factors -- The
timing of principal payments is uncertain" and "Maturity, Payment and Yield
Considerations".
Optional Purchase
The Senior Notes may be redeemed in whole, but not in part, on any Payment
Date when an Optional Purchase can be exercised. The redemption price will
equal the Senior Note Balance plus accrued interest thereon at the applicable
Interest Rate through the related Accrual Period. See "Additional Information
Regarding the Securities -- Optional Purchase".
The Indenture Trustee
U.S. Bank will be the Indenture Trustee under the Indenture. The Indenture
Trustee is a national banking association and its Corporate Trust Office is
located at One Illinois Center, 111 East Wacker Drive, Suite 3000, Chicago,
Illinois 60601. The fees and expenses of the Indenture Trustee will be paid by
the Administrative Agent or the Administrator. See "Additional Document
Provisions -- Miscellaneous Provisions -- Fees and Expenses". The Transferor,
the Administrative Agent and their respective affiliates may maintain normal
commercial banking relationships with the Indenture Trustee and its affiliates.
Book-Entry Registration
The Senior Notes will be issued in book-entry form. DTC will act as
securities depository for the Senior Notes. The Senior Notes will be issued as
fully registered securities registered in the name of Cede, the nominee of DTC.
An investor acquiring an interest in the Senior Notes (each, a "Senior Note
Owner") may
50
<PAGE> 51
hold its interest through DTC in the United States, or Cedelbank ("Cedelbank")
or the Euroclear system ("Euroclear") in Europe, which in turn hold through DTC.
One fully registered Senior Note will be issued with respect to each $200
million in principal amount of Senior Notes or such smaller amount as necessary.
It is anticipated that the only Senior Noteholder will be Cede, the nominee of
DTC. Senior Note Owners will not be recognized by the Indenture Trustee as
"Senior Noteholders", as that term will be used in the Indenture, and Senior
Note Owners will only be permitted to exercise the rights of Senior Noteholders
indirectly through DTC and its Participants, as further described below.
DTC was created to hold securities for its participating members (the
"Participants") and to facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of its Participants, thereby eliminating the need for physical movement
of certificates. 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 Uniform Commercial
Code (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.
Participants include securities brokers and dealers, including the Initial
Purchaser, 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"). Transfers between
Participants in DTC will occur in accordance with DTC rules. The rules
applicable to DTC and its Participants are on file with the SEC.
Cedelbank and the Euroclear will hold omnibus positions on behalf of their
Participants through customers' securities accounts in the Depositaries which
will in turn will hold such positions in customers' securities accounts in DTC
through Citibank, N.A. or Morgan Guaranty Trust Company of New York, the
relevant depositaries (collectively, the "Depositaries") of Cedelbank or
Euroclear, respectively, and each a participating member of DTC. Transfers
between Participants in Cedelbank ("Cedelbank Participants") and Participants in
Euroclear ("Euroclear Participants") will occur in accordance with their
respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedelbank
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of Cedelbank or Euroclear by its Depositary.
However, each such cross-market transaction will require delivery of
instructions to Cedelbank or Euroclear by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time). Cedelbank or Euroclear will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf of delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedelbank Participants and
Euroclear Participants may not deliver instructions directly to the related
Depositaries.
Because of time-zone differences, credits of securities received in
Cedelbank or Euroclear as a result of a transaction with a DTC Participant will
be made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. Such credits or any transactions
in such securities settled during such processing will be reported to the
relevant Cedelbank Participants or Euroclear Participants on such business day.
Cash received in Cedelbank or Euroclear as a result of sales of Senior Notes by
or through a Cedelbank Participant or Euroclear Participant to a DTC Participant
will be received with value on the DTC settlement date but will be available in
the relevant Cedelbank or Euroclear cash account only as of the business day
following settlement in DTC.
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<PAGE> 52
Senior Note Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or an interest in,
Senior Notes may do so only through Participants and Indirect Participants.
Participants will receive a credit for the Senior Notes on DTC's records. The
ownership interest of each Senior Note Owner will in turn be recorded on the
respective records of Participants and Indirect Participants. Senior Note Owners
will not receive written confirmation from DTC of their purchase of Senior
Notes, but Senior Note Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Participant or Indirect Participant through which the Senior
Note Owner entered into the transaction. Transfers of ownership interests in the
Senior Notes will be accomplished by entries made on the books of Participants
acting on behalf of Senior Note Owners.
To facilitate subsequent transfers, all Senior Notes deposited by
Participants with DTC will be registered in the name of Cede, the nominee of
DTC. The deposit of Senior Notes with DTC and their registration in the name of
Cede will not change the beneficial ownership of the Senior Notes. DTC will have
no knowledge of the actual Senior Note Owners and its records will reflect only
the Participants to whose accounts those Senior Notes are credited, which may or
may not be the Senior Note Owners. Participants and Indirect Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants and by Participants and Indirect
Participants to Senior Note Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
DTC's practice is to credit Participants' accounts on each Payment Date in
accordance with their respective holdings of Senior Notes shown on DTC's records
unless DTC has reason to believe that it will not receive payment on that
Payment Date. Payments by Participants and Indirect Participants to Senior Note
Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name". These payments will be the responsibility of the
Participants and not of DTC, the Indenture Trustee or the Transferor, subject to
any statutory or regulatory requirements as may be in effect from time to time.
Payment of principal of and interest on the Senior Notes to DTC will be the
responsibility of the Indenture Trustee, disbursement of the payments to
Participants will be the responsibility of DTC and disbursement of the payments
to Senior Note Owners will be the responsibility of Participants and Indirect
Participants. As a result, under the book-entry format, Senior Note Owners may
experience some delay in their receipt of payments. DTC will forward the
payments to its Participants, which will then forward them to Indirect
Participants or Senior Note Owners.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Senior Note
Owner to pledge Senior Notes to persons or entities that do not participate in
the DTC system, or otherwise take actions with respect to the Senior Notes, may
be limited due to the lack of a physical certificate for the Senior Notes.
DTC management is aware that some computer applications and systems used
for processing data were written using two digits rather than four to define the
applicable year, and therefore may not recognize a date using "00" as the year
2000. This could result in "Year 2000" problems, such as the inability of these
systems to properly process transactions with dates in the year 2000 and
thereafter. DTC has informed its Participants and other members of the financial
community that it has developed and is implementing a program to address this
issue so that its applications and systems relating to the payment of
distributions -- including principal and income payments -- to securityholders,
book-entry deliveries and settlement of trades within DTC continue to function
properly. This program includes a technical assessment and a remediation plan,
each of which is complete. DTC plans to implement a testing phase of this
program which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has indicated that it
52
<PAGE> 53
is contacting (and will continue to contact) third party vendors from whom DTC
acquires services to: (i) impress upon them the importance of such services
being Year 2000 compliant; and (ii) determine the extent of their efforts for
Year 2000 remediation (and, as appropriate, testing) of their services. In
addition, DTC is in the process of developing such contingency plans as it deems
appropriate.
The information set forth in the preceding two paragraphs has been provided
by DTC for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind. The Trust makes
no representations as to the accuracy or completeness of this information.
If the DTC Systems are not made Year 2000 compliant on a timely basis,
DTC's ability to provide DTC services, including payments on the Notes may be
materially and adversely affected. If this were to occur, Senior Note Owners
could experience delays in payments due or may not ultimately receive all
interest and principal due to the Senior Note Owners.
Neither DTC nor Cede will consent or vote with respect to the Senior Notes.
Under its usual procedures, DTC will mail an omnibus proxy to the Indenture
Trustee as soon as possible after each applicable record date for such a consent
or vote. The omnibus proxy will assign Cede's consenting or voting rights to
those Participants who have Notes credited to their accounts with the
Participants on that record date. These Participants will be identified in a
listing attached to the omnibus proxy.
Cedelbank is incorporated under the laws of Luxembourg as a professional
depository. Cedelbank holds securities for Cedelbank Participants and
facilitates the clearance and settlement of securities transactions between
Cedelbank Participants through electronic book-entry changes in accounts of
Cedelbank Participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in Cedelbank in any of 34 currencies,
including United States dollars. Cedelbank provides to Cedelbank Participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Cedelbank interfaces with domestic markets in several countries. As a
professional depositary, Cedelbank is subject to regulation by the Luxembourg
Monetary Institute. Cedelbank Participants are recognized financial institutions
around the world, including underwriters, securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. Indirect
access to Cedelbank is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Cedelbank Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for Euroclear Participants
and to clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby eliminating
the need for physical movement of certificates and any risk from lack of
simultaneous transfers of securities and cash. Transactions may now be settled
in any of 34 currencies, including United States dollars. The Euroclear System
includes various other services, including securities lending and borrowing, and
interfaces with domestic markets in more than 25 countries generally similar to
the arrangements for cross-market transfers with DTC described above. Euroclear
is operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of
New York (the "Euroclear Operator"), under contract with Euroclear Clearance
System S.C., a Belgian cooperative corporation (the "Cooperative"). All
operations are conducted by the Euroclear Operator, and all Euroclear
securities, clearance accounts, and Euroclear cash accounts, are accounts with
the Euroclear Operator, not the Cooperative. The Cooperative Board establishes
policy for the Euroclear System. Euroclear Participants include banks, including
central banks, securities brokers and dealers and other professional financial
intermediaries. Indirect access to the Euroclear System is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governers of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
53
<PAGE> 54
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Senior Notes held through Cedelbank or
Euroclear will be credited to the cash accounts of Cedelbank Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will be
subject to tax reporting and withholding in accordance with relevant United
States tax laws and regulations. For further information in this regard, see
"Material Federal Income Tax Consequences -- Senior Notes -- Tax Consequences to
Foreign Investors" herein and "Global Clearance, Settlement and Tax
Documentation Procedures -- Certain U.S. Federal Income Tax Documentation
Requirements" in Annex I hereto. Cedelbank or the Euroclear Operator, as the
case may be, will take any other action permitted to be taken by a Senior
Noteholder on behalf of a Cedelbank Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to the related
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Senior Notes among Participants
of DTC, Cedelbank and Euroclear, they are under no obligation to perform or
continue to perform such procedures and the procedures may be discontinued at
any time.
None of the Administrative Agent, the Transferor, the Administrator or the
Indenture Trustee will have any liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests of the Senior
Notes held by Cede, DTC, Cedelbank or Euroclear, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
ADDITIONAL INFORMATION REGARDING THE SECURITIES
Payments on the Securities
General
As more fully described under "Summary -- Credit Enhancement -- The SUBI
Certificates", the SUBI Interest evidenced by the SUBI Certificates will
evidence a 99% beneficial interest in the SUBI Assets, which comprise Specified
Vehicles and Specified Leases having an aggregate Cutoff Date Securitization
Value of $309,880,619.04. The Retained SUBI Interest evidenced by the Retained
SUBI Certificates will evidence a 1% beneficial interest in the SUBI Assets and
will be permanently retained by Ryder II LP. Accordingly, Ryder II LP will be
entitled to receive 1% of all payments made on or in respect of the SUBI Assets
and will share in 1% of all losses and liabilities incurred with respect to the
SUBI Assets. Any payments made in respect of the Retained SUBI Interest will not
be available to make Program Operating Lease Payments or payments on the Senior
Notes.
On the tenth calendar day of each month in which a Payment Date occurs or,
if such day is not a Business Day, the immediately succeeding Business Day
(each, a "Determination Date"), the Administrative Agent will inform the
Indenture Trustee and the Owner Trustee of, among other things, the amount of
(a) Collections, (b) Advances to be made by the Administrative Agent and (c) the
Administration Fee payable to the Administrative Agent, in each case with
respect to the three-month period immediately preceding the month in which the
Payment Date occurs (the "Collection Period"). On or before each Determination
Date, the Administrative Agent will also determine the Optimal Principal
Distributable Amount and, based on Available Funds and other amounts available
for distribution on the related Payment Date as described below, the amount to
be distributed to the Securityholders.
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The Indenture Trustee and the Owner Trustee will make distributions to the
Securityholders out of amounts on deposit in the related Distribution Accounts.
The amount to be distributed to the Administrative Agent and the Securityholders
will be determined in the manner described below.
Determination of Available Funds
The amount of funds available for distribution on a Payment Date will
generally equal the sum of Available Funds and the Reserve Fund Draw Amount.
On each Payment Date, the sum of (a) 1% of Collections for the related
Collection Period and (b) 1% of the Residual Value Surplus Draw Amount for the
related Collection Period (the "Retained Certificate Distribution Amount") will
be due the Retained Certificateholder, representing amounts owed in respect of
the Retained SUBI Certificates, and will not be available to make Program
Operating Lease Payments or payments on the Senior Notes.
"Available Funds" for a Payment Date and the related Collection Period will
equal the sum of the following amounts: (a) 99% of Collections, (b) Advances
required to be made by the Administrative Agent, (c) 99% of the Residual Value
Surplus Draw Amount and (d) in the case of an Optional Purchase, the Optional
Purchase Price.
The "Available Funds Shortfall Amount" for a Payment Date and the related
Collection Period will equal the amount by which Available Funds is less than
the amount necessary to make the distributions in clauses (c) through (f) of the
first paragraph under "--Deposits to the Distribution Accounts; Priority of
Payments", except that the Optimal Principal Distributable Amount rather than
the Quarterly Principal Distributable Amount will be used for purposes of clause
(f).
Deposits to the Distribution Accounts; Priority of Payments
SUBI Collection Account. On each Payment Date, after taking into account
the distribution of amounts to be paid to the Retained SUBI Certificateholder on
the related Payment Date, the Administrative Agent will allocate amounts on
deposit in the SUBI Collection Account with respect to the related Collection
Period as described below and will instruct the Origination Trustee, acting
through the Trust Agent, to cause the following deposits and distributions to be
made in the following amounts and order of priority:
(a) to the Administrative Agent, the Payment Date Advance Reimbursement;
(b) to the Administrative Agent, the Administration Fee;
(c) to the Note Distribution Account, to pay interest due on the
outstanding Senior Notes on that Payment Date, and, to the extent
permitted under applicable law, interest on any overdue interest at the
Interest Rate;
(d) to the Reserve Fund, an amount equal to the interest due on the
outstanding Subordinated Notes on that Payment Date, and, to the extent
permitted under applicable law, interest on any overdue interest at the
Subordinated Note Rate;
(e) to the Certificate Distribution Account, an amount equal to the
interest accrued on the Certificates with respect to that Payment Date,
and, to the extent permitted under applicable law, interest on any
overdue interest at the Certificate Rate;
(f) to the related Distribution Account or, in the case of the Subordinated
Notes, to the Reserve Fund, the Quarterly Principal Distributable
Amount, which will be allocated to pay principal on the Senior Notes,
the Subordinated Notes and the Certificates in the amounts and order of
priority described under "Description of the Senior Notes--Principal";
and
(g) to the Reserve Fund, all remaining amounts (the "Excess Amounts").
Reserve Fund. On each Payment Date, after taking into account amounts
available to be distributed to Securityholders from the SUBI Collection Account,
the Administrative Agent will allocate the Reserve Fund
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Draw Amount on deposit in the Reserve Fund with respect to the related
Collection Period and will instruct the Indenture Trustee to make the following
deposits and distributions in the following amounts and order of priority:
(a) to the Note Distribution Account, to pay any remaining interest due on
the outstanding Senior Notes on that Payment Date, and, to the extent
permitted under applicable law, interest on any overdue interest at the
Interest Rate;
(b) to the Reserve Fund, an amount equal to any remaining interest due on
the outstanding Subordinated Notes on that Payment Date, and, to the
extent permitted under applicable law, interest on any overdue interest
at the Subordinated Note Rate;
(c) to the Certificate Distribution Account, an amount equal to any
remaining interest accrued on the Certificates with respect to that
Payment Date, and, to the extent permitted under applicable law,
interest on any overdue interest at the Certificate Rate; and
(d) to the related Distribution Account -- or, in the case of the
Subordinated Notes, to the Reserve Fund, and thereafter, in the event
of any remaining shortfall in amounts required to pay the Quarterly
Principal Distributable Amount with respect to the Certificates, to the
Certificate Distribution Account -- the remaining Quarterly Principal
Distributable Amount, which will be allocated to pay principal on the
Securities in the amounts and order of priority described under
"Description of the Senior Notes -- Principal".
On each Payment Date, if, after the giving effect to the distributions set
forth above, the amount on deposit in the Reserve Fund exceeds the Reserve Fund
Requirement, any such excess (a) up to the amounts deposited into the Reserve
Fund on or before that Payment Date in respect of the Subordinated Notes will be
released to the Transferor as the Subordinated Noteholder and (b) any additional
excess shall be released to the Transferor.
The "Payment Date Advance Reimbursement" for a Payment Date will equal the
sum of all outstanding Sales Proceeds Advances that have been outstanding as of
the end of that Collection Period for at least 270 days.
Amounts deposited in the Reserve Fund in accordance with clause (d) in the
first paragraph under "-- SUBI Collection Account" and clause (b) under
"-- Reserve Fund" will be deemed to have been distributed to the Subordinated
Noteholder as payments in respect of interest, including overdue interest, and
the Subordinated Noteholder will not be entitled to any further interest on such
amounts after the related Payment Date.
Amounts deposited in the Reserve Fund in accordance with clause (f) in the
first paragraph under "--SUBI Collection Account" and clause (d) under
"-- Reserve Fund" will be deemed to have been distributed to the Subordinated
Noteholder as payments in respect of principal, including overdue principal, and
the Subordinated Noteholder will not be entitled to any further interest on such
amounts after the related Payment Date.
The final distribution to any Senior Noteholder will be made only upon
surrender and cancellation of the certificate representing its Senior Notes at
an office or agency of the Trust specified in the notice of termination. Any
funds remaining in the Trust, after the related Trustee has taken certain
measures to locate the related Senior Noteholders and those measures have
failed, will be distributed to the Administrative Agent.
Optional Purchase
In order to avoid excessive administrative expenses, the Transferor will be
permitted at its option to purchase from the Trust the Vehicle SUBI Certificate
and SUBI Interest evidenced thereby, and to terminate the pledge of the Lease
SUBI Certificate and the SUBI Interest evidenced thereby, on any Payment Date
if, either before or after giving effect to any payment of principal required to
be made on that Payment Date, the Securities Balance is less than or equal to
10% of the sum of the Initial Senior Note Balance, the Initial
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Certificate Balance and the Initial Subordinated Note Balance (collectively, the
"Initial Securities Balance"). The exercise of that option by the Transferor is
referred to in this prospectus as an "Optional Purchase". The purchase price for
the Vehicle SUBI Certificate and the termination of the pledge of the Lease SUBI
Certificate will equal the Securities Balance, together with accrued interest
thereon to the date fixed for redemption (the "Optional Purchase Price"), which
will be deposited by the Transferor into the SUBI Collection Account on the
Deposit Date related to the Payment Date fixed for redemption. In connection
with an Optional Purchase, the Senior Notes will be redeemed on that Payment
Date in whole, but not in part, for the Redemption Price. The "Redemption Price"
for the Senior Notes will equal the Senior Note Balance, plus accrued and unpaid
interest thereon at the related Interest Rates, to but not including the Payment
Date fixed for redemption. The Administrator or the Trust will provide at least
45 days' prior notice of the redemption of the Senior Notes to the Indenture
Trustee, which will provide at least 30 days' notice to the Senior Noteholders.
On the Payment Date fixed for redemption, the Senior Notes will be due and
payable at the Redemption Price, and no interest will accrue on the Senior Notes
after the Payment Date.
Statements to Senior Noteholders
On each Payment Date, the Indenture Trustee or the Owner Trustee, as the
case may be, will include with each distribution to each Senior Noteholder of
record, or as of the close of business on the related Record Date -- which, in
the case of the Senior Notes, shall be Cede as the nominee of DTC unless
Definitive Notes are issued under the limited circumstances described in this
prospectus -- and each Rating Agency, a statement, setting forth with respect to
that Payment Date or the related Deposit Date or Collection Period, as the case
may be, among other things, the following:
(a) the amount of Collections allocable to each of the SUBI Certificates
and the Retained SUBI Certificates for that Collection Period;
(b) the amount being distributed to the Senior Noteholders (the "Senior
Note Distribution Amount");
(c) the amount of the Senior Note Distribution Amount allocable to interest
on and principal of the Senior Notes, and any Principal Carryover
Shortfall for the Senior Notes, the Subordinated Notes and the
Certificates, respectively;
(d) the amount of Available Funds for that Collection Period;
(e) the amount of Sales Proceeds Advances and Financial Component Advances
included in Available Funds;
(f) the amount of Residual Value Losses and Residual Value Surplus for that
Collection Period and the Residual Value Surplus Draw Amount, if any,
included in Available Funds, after giving effect to the Retained
Certificate Distribution Amount;
(g) the Reserve Fund Draw Amount, if any, the balance on deposit in the
Reserve Fund on that Payment Date after giving effect to withdrawals
therefrom and deposits thereto in respect of that Payment Date and the
change in that balance from the immediately preceding Payment Date;
(h) the aggregate outstanding principal balance of the Senior Notes, the
Subordinated Notes and the Certificates;
(i) the Note Factor for the Senior Notes after giving effect to the
distribution of the Senior Note Distribution Amount;
(j) the amount of Special Event Purchases made during that Collection
Period and the aggregate Cutoff Date Securitization Value of all
Specified Leases relating to Special Event Purchases made (a) during
the related calendar year or (b) since the Closing Date;
(k) the Payment Date Advance Reimbursement; and
(l) the Administration Fee.
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Each amount set forth pursuant to clauses (b), (c), (h) and (k) above will
be expressed in the aggregate and as a dollar amount per $1,000 of original
principal balance of a Senior Note, Subordinated Note or Certificate, as
applicable. Copies of the statements may be obtained by Senior Noteholders or
Senior Note Owners by a request in writing addressed to the Indenture Trustee.
In addition, within the prescribed period of time for tax reporting purposes
after the end of each calendar year, the Indenture Trustee -- during the term of
the Indenture -- will mail to each person who at any time during that calendar
year was a Senior Noteholder a statement containing that information as is
reasonably necessary to permit the Noteholder to prepare its state and federal
income taxes.
Definitive Notes
Definitive Notes will be issued in fully registered, certificated form to
Senior Note Owners rather than to DTC only if:
- DTC is no longer willing or able to discharge its responsibilities as
depository with respect to the Senior Notes, and neither the Indenture
Trustee nor the Transferor is able to locate a qualified successor,
- the Transferor, at its option, elects to terminate the book-entry system
through DTC, or
- after an Indenture Default, Senior Note Owners representing in the
aggregate not less than 51% of the aggregate principal amount of the
Senior Notes advise the Indenture Trustee through DTC and its
Participants in writing that the continuation of a book-entry system
through DTC or its successor is no longer in the best interest of Senior
Note Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Indenture Trustee will be required to notify all Senior
Note Owners, through Participants, of the availability through DTC of Definitive
Notes. Upon surrender by DTC of the certificates representing all Senior Notes
and the receipt of instructions for re-registration, the Indenture Trustee will
issue Definitive Notes to Senior Note Owners, who thereupon will become Senior
Noteholders for all purposes of the Indenture.
Payments on the Definitive Notes will be made by the Indenture Trustee or
the Owner Trustee, as the case may be, directly to the holders of the Definitive
Notes in accordance with the procedures set forth in this prospectus and to be
set forth in the Indenture. Interest and principal payments on the Securities on
each Payment Date will be made to the holders in whose names the related
Definitive Notes were registered at the close of business on the Record Date
with respect to that Payment Date. Payments will be made by check mailed to the
address of such holders as they appear on the Note Register. However, the final
payment on any Definitive Notes, or if Definitive Notes have not been issued,
certificates registered in the name of Cede representing the Senior Notes, will
be made only upon presentation and surrender of the Definitive Notes at the
office or agency specified in the notice of final payment to Senior Noteholders.
The Indenture Trustee or the Owner Trustee, as the case may be, or a paying
agent will provide that notice to the registered Senior Noteholders not more
than 30 days or less than 15 days prior to the date on which the final payment
is expected to occur.
Definitive Notes will be transferable and exchangeable at the offices of
the Indenture Trustee or the Owner Trustee or the Note Registrar to be set forth
in the Indenture. No service charge will be imposed for any registration of
transfer or exchange, but the Indenture Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith.
SECURITY FOR THE SECURITIES
General
The property of the Trust -- the Trust Estate -- will consist of:
- the right to receive payments under the Program Operating Lease under
which the Trust will lease to the Transferor the Vehicle SUBI Certificate
and the SUBI Interest evidenced thereby, which is more fully described
under "The SUBIs -- General";
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- the pledge by the Transferor of the Lease SUBI Certificate as security
for such payments;
- the right to receive 99% of the amounts realized from sales of Specified
Vehicles;
- certain rights to payment from the Reserve Fund and the Residual Value
Surplus Account; and
- the other property and assets described under "The Trust -- Property of
the Trust", including available amounts on deposit in the Reserve Fund
and the Trust's rights as a third-party beneficiary of the SUBI Trust
Agreement and the Administration Agreement.
The Program Operating Lease
General
Immediately following the sale, transfer and assignment of the Vehicle SUBI
Certificate to the Trust and the pledge to the Indenture Trustee of the Trust's
interest therein as described in "The SUBIs--Transfers of the SUBI
Certificates", the Trust and the Transferor will enter into the Program
Operating Lease pursuant to which the Trust will lease the Vehicle SUBI
Certificate to the Transferor during the term of the Program Operating Lease. As
lessee, the Transferor will be entitled to receive all proceeds from the Vehicle
SUBI Certificate in respect of the Specified Vehicles during the term of the
Program Operating Lease and will be required to make Program Operating Lease
Payments to the Trust.
Program Operating Lease Terms
Under the Program Operating Lease, the Transferor will make payments to the
Trust in the amount of (a) the Financial Component of the Fixed Charge paid by
the Obligors during the related Collection Period and (b) all Termination Value
Payments made by Obligors following the exercise of the Annual Termination
Option during the related Collection Period (the "Program Operating Lease
Payments").
The termination date of the Program Operating Lease (the "Program Operating
Lease Termination Date") will be 60 days after the latest Maturity Date of any
Specified Lease as of the Cutoff Date. Notwithstanding the Program Operating
Lease Termination Date, the Program Operating Lease will expire with respect to
each Specified Lease and the related Specified Vehicle on the earliest to occur
of:
- the related Maturity Date;
- the effective date of exercise by the Administrative Agent or the related
Obligor of the Annual Termination Option;
- the date of the Administrative Agent's termination of that Specified
Lease for other commercial reasons as described under "Additional
Document Provisions -- The Administration Agreement -- Purchase of
Specified Vehicles Before their Maturity Dates";
- the date that Specified Lease becomes a Default Termination Lease;
- the date that Specified Lease becomes a Casualty Termination Lease; or
- the date the Administrative Agent is required to purchase that Specified
Vehicle pursuant to certain provisions of the Administration Agreement.
Program Operating Lease Defaults; Remedies
Defaults under the Program Operating Lease (each, a "Program Operating
Lease Default") will include, among other things, the failure by the Transferor
to make timely Program Operating Lease Payments to the Trust, breach of a
material representation or warranty, failure to observe or perform certain
covenants and the occurrence of an Indenture Default. Upon the occurrence of a
Program Operating Lease Default, (a) the Indenture Trustee, as assignee of the
Trust's rights under the Program Operating Lease pursuant to the pledge of the
Trust Estate, will be entitled to terminate the Program Operating Lease and to
foreclose on the pledge of the Lease SUBI Certificate. Upon that termination,
the Trust will directly receive all distributions with respect to, or will have
the right to sell, the SUBI Certificates and to apply the funds on deposit in
the
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Accounts to pay interest on and principal of the Senior Notes. Each Program
Operating Lease Default will constitute an Indenture Default, which will permit
the Senior Noteholders to accelerate the maturity of the Senior Notes and, in
some circumstances, cause the sale of the Trust Estate. See "Additional Document
Provisions -- The Indenture -- Indenture Defaults". If the maturity of the
Senior Notes has been accelerated following a Program Operating Lease Default,
the Indenture Trustee, as assignee of the Trust, will be entitled to demand that
the Transferor pay all previously due but as yet unpaid Program Operating Lease
Payments plus, as liquidated damages, an amount equal to the sum of:
- any interest due and unpaid on the Securities,
- the unpaid principal balance of the Securities, and
- any other amounts payable by the Transferor under the Basic Documents.
Upon payment of such amounts, the Transferor will be entitled to receive the
SUBI Certificates.
The Subordinated Notes
Interest will accrue on the unpaid principal amount of the Subordinated
Notes during each Accrual Period at a rate per annum (the "Subordinated Note
Rate") equal to 7.70%. Interest on the Subordinated Notes will be calculated on
the basis of a 360-day year consisting of twelve 30-day months. Payments of
interest on and principal of the Subordinated Notes will be subordinated to
payments on the Senior Notes to the extent described herein.
To secure payments of principal and interest on the other Securities, the
Transferor will pledge all of its right, title and interest in the Subordinated
Notes to the Trust and deliver them to the Indenture Trustee as a portion of the
Trust Estate. On each Payment Date, payments in respect of the Subordinated
Notes will be deposited into the Reserve Fund. If, on any Payment Date, after
the application of amounts required to be paid on that Payment Date, the amount
on deposit therein exceeds the Reserve Fund Requirement, (a) any such excess up
to the amounts deposited into the Reserve Fund on or before that Payment Date in
respect of the Subordinated Notes will be released to the Transferor as the
Subordinated Noteholder and (b) any additional excess shall be released to the
Transferor.
The Certificates
Payments on the Certificates will be subordinated to payments on the Senior
Notes and the Subordinated Notes to the extent described in this prospectus. The
right of the holder of the Transferor Certificate to receive distributions of
principal and interest will rank pari passu with the rights of the holders of
the other Certificates.
Interest on the Certificates will accrue during each Accrual Period at a
rate per annum (the "Certificate Rate") equal to 7.70% until the principal
amount of the Certificates has been paid in full. Interest on the Certificates
will be calculated on the basis of a 360-day year consisting of twelve 30-day
months. Interest payments on the Certificates on a Payment Date generally will
be made from the sum of (1) Available Funds remaining after the Administrative
Agent has been paid the Payment Date Advance Reimbursement and the
Administration Fee and all amounts allocated to payment of interest on the
Senior Notes have been paid and (2) the Reserve Fund Draw Amount, if any,
remaining after all amounts allocated to payment of interest on the Senior Notes
have been paid.
Principal payments will be made to Certificateholders as described under
"Description of the Senior Notes -- Principal". If not paid in full prior to the
Final Payment Date, the remaining Certificate Balance, if any, will be payable
on that Payment Date.
The Certificates will be subject to prepayment in whole, but not in part,
on any Payment Date relating to an Optional Purchase. In the event of an
Optional Purchase, the Certificateholders will receive an amount in respect of
the Certificates equal to the Certificate Balance, together with accrued
interest thereon at the Certificate Rate.
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The Accounts
The SUBI Collection Account
On or prior to the Closing Date, the Origination Trustee will establish a
trust account for the benefit of the holders of interests in the SUBI, into
which collections on or in respect of the Specified Leases and the Specified
Vehicles will generally be deposited (the "SUBI Collection Account").
Deposits into the SUBI Collection Account. As more fully described under
"Additional Document Provisions -- The Administration Agreement -- Collections"
and "-- Monthly Remittance Condition", Collections and other amounts received on
or in respect of the SUBI Assets generally will be deposited by the
Administrative Agent into the SUBI Collection Account within two days after
processing, unless the Monthly Remittance Condition is satisfied. If the Monthly
Remittance Condition is satisfied, such amounts received in respect of a Monthly
Period will be deposited into the SUBI Collection Account on the second Business
Day following the end of the related Monthly Period, or, in the case of the
Monthly Period immediately preceding the related Payment Date, the related
Deposit Date. In addition, on each Deposit Date, the following additional
amounts, if any, in respect of the related Collection Period and Payment Date
will be deposited into the SUBI Collection Account: Advances made by the
Administrative Agent, the Residual Value Surplus Draw Amount and, in the case of
an Optional Purchase, the Optional Purchase Price. Payments received in respect
of the Maintenance Component either will not be deposited into the SUBI
Collection Account or will be withdrawn from the SUBI Collection Account on a
daily basis and, in either event, will be paid to or retained by the Maintenance
Provider. See "Additional Document Provisions -- The Administration
Agreement -- Collections" and "-- Monthly Remittance Condition".
Withdrawals from the SUBI Collection Account. On each Deposit Date, the
Administrative Agent shall cause the Origination Trustee to withdraw from the
SUBI Collection Account and deposit in the Residual Surplus Value Account, the
amount of Residual Value Surplus for each Specified Vehicle sold during the
related Collection Period. On each Payment Date, the Origination Trustee shall
transmit or shall cause to be transmitted:
- the sum of (1) all Available Funds for the related Collection Period and
(2) the Retained Administration Payment in the amounts, in the priority,
and to such accounts as set forth under "Certain Information Regarding
the Securities -- Payments on the Securities -- Deposits to the
Distribution Accounts; Priority of Payments", and
- the excess of (1) the Retained Certificate Distribution
Amount -- representing amounts payable in respect of the Retained SUBI
Interest -- for the related Collection Period over (2) 1% of the
Administration Fee for the related Collection Period (the "Retained
Administration Payment"), to an account specified by the holder of the
Retained SUBI Certificates.
In the event that on any date the Administrative Agent supplies the
Origination Trustee and the Indenture Trustee with an officer's certificate
setting forth the basis for such withdrawal, the Origination Trustee shall remit
to the Administrative Agent or the Maintenance Provider, as the case may be,
without interest and before to any other distribution from the SUBI Collection
Account on that date, monies from the SUBI Collection Account representing (a)
payments in respect of the Maintenance Component and (b) unreimbursed
Disposition Expenses.
The Reserve Fund
On or before the Closing Date, the Owner Trustee will establish a trust
account in the name of the Indenture Trustee for the benefit of the
Securityholders (the "Reserve Fund"). The Reserve Fund will be established to
provide additional security for payments on the Senior Notes. On each Payment
Date, amounts on deposit in the Reserve Fund, together with Available Funds,
will be available to make the distributions described under "Additional
Information Regarding the Securities -- Payments on the Securities -- Deposits
to the Distribution Accounts; Priority of Payments".
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The Reserve Fund initially will be funded by the Transferor with a deposit
of $9,970,408.92 (the "Initial Deposit"), and the amounts on deposit in the
Reserve Fund will be pledged to the Trust. As described under "-- The
Subordinated Notes", all payments made on the Subordinated Notes will be
deposited in the Reserve Fund. On each Payment Date, monies on deposit in the
Reserve Fund will be supplemented by the deposit of:
- payments of interest on and principal of the Subordinated Notes,
- any Excess Amounts, and
- income received on the investment of funds on deposit in the SUBI
Collection Account, the Residual Value Surplus Account and the Reserve
Fund.
On each Payment Date, a withdrawal will be made from the Reserve Fund in an
amount (the "Reserve Fund Draw Amount") equal to the sum of (a) the lesser of
(1) the Available Funds Shortfall Amount, calculated as described under
"Additional Information Regarding the Securities -- Payments on the
Securities -- Determination of Available Funds" for that Payment Date, and (2)
the amount on deposit in the Reserve Fund after giving effect to all deposits
thereto on the related Deposit Date or that Payment Date; and (b) in the event
the amount on deposit in the Reserve Fund, after giving effect to all
withdrawals therefrom and deposits thereto made on or in respect of that Payment
Date exceeds the unpaid principal balance of the Securities, the Securities
Balance.
On any Payment Date on which the amount on deposit in the Reserve Fund,
after giving effect to all withdrawals therefrom and deposits thereto in respect
of that Payment Date, exceeds the Reserve Fund Requirement, any such excess (a)
up to the amounts deposited into the Reserve Fund on or before that Payment Date
in respect of the Subordinated Notes, will be released to the Transferor as the
holder of the Subordinated Notes (in that capacity, the "Subordinated
Noteholder") and (b) any additional excess shall be released to the Transferor.
On any Payment Date, the "Reserve Fund Requirement" will equal:
- 3.25% of the Initial Securities Balance, or
- on any Payment Date occurring on or after the earlier to occur of the
date on which the last remaining Specified Lease terminates or the date
on which the Program Operating Lease is terminated following a Program
Operating Lease Default, zero, or
- on any Payment Date when the Senior Note Balance shall be zero, the
Securities Balance.
The Residual Value Surplus Account
On or before the Closing Date, the Origination Trustee will cause a trust
account to be established in the name of the Origination Trustee for the benefit
of the holders of interests in the SUBIs, into which all Residual Value Surplus
with respect to a Collection Period will be deposited on the related Deposit
Date (the "Residual Value Surplus Account").
The Residual Value Surplus Account will not be funded with any money on the
Closing Date. On the Business Day immediately preceding each Payment Date (each,
a "Deposit Date"), the Administrative Agent will cause the Origination Trustee
to transfer to the Residual Value Surplus Account from the SUBI Collection
Account the amount, if any, of Residual Value Surplus for each Expired Vehicle
sold during that Collection Period.
On each Deposit Date, a withdrawal of an amount equal to the lesser of (a)
the sum of all Residual Value Losses and any unreimbursed Disposition Expenses
relating to Specified Vehicles that were sold by the Administrative Agent during
the related Collection Period and (b) the amount on deposit in the Residual
Value Surplus Account (the "Residual Value Surplus Draw Amount") will be made
from the Residual Value Surplus Account for deposit into the SUBI Collection
Account. On each Payment Date, after giving effect to the withdrawal of the
Residual Value Surplus Draw Amount, if any, from the Residual Value Surplus
Account described in the immediately preceding paragraph on the related Deposit
Date, any amounts remaining on deposit in the Residual Value Surplus Account
will be paid to the Transferor.
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The Distribution Accounts
On or before the Closing Date, (a) the Indenture Trustee will establish a
trust account in the name of the Indenture Trustee on behalf of the Senior
Noteholders, into which amounts released from the SUBI Collection Account and,
when necessary, from the Reserve Fund, for distribution to the Senior
Noteholders will be deposited and from which all distributions to the Senior
Noteholders will be made (the "Note Distribution Account") and (b) the Owner
Trustee will establish a trust account in the name of the Owner Trustee on
behalf of the Certificateholders, into which amounts released from the SUBI
Collection Account and, when necessary, from the Reserve Fund, for distribution
to the Certificateholders will be deposited and from which all distributions to
the Certificateholders will be made (the "Certificate Distribution Account" and,
together with the Note Distribution Account, the "Distribution Accounts"). For
further information regarding these deposits and payments, see "-- The SUBI
Collection Account" and "-- The Reserve Fund".
On or before each Payment Date, (a) the Origination Trustee shall deposit
or cause to be deposited from the SUBI Collection Account and (b) the Indenture
Trustee shall deposit from the Reserve Fund, if necessary, respectively, the
amounts allocable to the Senior Noteholders and the Certificateholders, as set
forth in "Additional Information Regarding the Securities -- Payments on the
Securities -- Deposits to the Distribution Accounts; Priority of Payments" for
the related Payment Date in the Note Distribution Account and the Certificate
Distribution Account, respectively. On each Payment Date, the Indenture Trustee
and the Owner Trustee will distribute to the Senior Noteholders and the
Certificateholders the allocated amounts for the related Collection Period to
the Senior Noteholders and the Certificateholders, respectively.
Maintenance of the Accounts
The Note Distribution Account and the Reserve Fund, and the SUBI Collection
Account and the Residual Value Surplus Account, will be maintained with the
Indenture Trustee and the Trust Agent, respectively, so long as either (a) the
short-term unsecured debt obligations of the Indenture Trustee or the Trust
Agent, as the case may be, are rated in the highest short-term rating category
by each Rating Agency or (b) the Indenture Trustee or the Trust Agent, as the
case may be, is a depository institution or trust company having a long-term
unsecured debt rating acceptable to each Rating Agency and corporate trust
powers and the related Account is maintained in the corporate trust department
of the Indenture Trustee or the Trust Agent, as the case may be (the "Required
Deposit Rating"). Each of the foregoing accounts will be segregated trust
accounts. If either of the Indenture Trustee or the Trust Agent at any time does
not have the Required Deposit Rating, the Administrative Agent shall, with the
assistance of the Indenture Trustee or the Trust Agent, as the case may be, as
necessary, cause the related Account to be moved to a depository institution or
trust company organized under the laws of the United States or any State that
has the Required Deposit Rating.
On the Payment Date on which all Securities have been paid in full and
following payment of any remaining obligations of the Transferor under the Basic
Documents, any amounts remaining on deposit in the Accounts -- after giving
effect to all withdrawals therefrom and deposits thereto in respect of that
Payment Date -- will be paid to the Transferor.
Permitted Investments
When funds are deposited in (a) the SUBI Collection Account and the
Residual Value Surplus Account and (b) the Reserve Fund, they will be invested
at the direction of the Administrative Agent and the Administrator,
respectively, in one or more Permitted Investments maturing no later than the
Deposit Date immediately succeeding the date of that investment. Notwithstanding
the foregoing, investments on which the entity at which the related Account is
located is the obligor may mature on the related Deposit Date.
On each Payment Date, all net income or other gain from the investment of
funds on deposit in the Residual Value Surplus Account, the Reserve Fund and the
SUBI Collection Account in respect of the related Collection Period will be
deposited in the Reserve Fund. "Permitted Investments" will be specified in the
SUBI Trust Agreement and will be limited to investments that meet the criteria
of each Rating Agency from time to time as being consistent with its
then-current rating of the Senior Notes and the Certificates.
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The Contingent and Excess Liability Insurance
In addition to the personal property and liability insurance coverage
required to be obtained and maintained by the Obligor or Ryder pursuant to the
Specified Leases, and as additional protection in the event the Obligor fails to
maintain the required insurance, Ryder maintains contingent liability insurance
for the benefit of, among others, Ryder, the Origination Trust, the UTI
Beneficiaries, the Transferor and the Trust, which provides coverage, with no
annual or aggregate cap on the number of claims thereunder, for liability caused
by any Specified Vehicle owned by the Origination Trust. Ryder also maintains
substantial amounts of excess insurance coverage as to which the Origination
Trustee is an additional named insured (together with the aforementioned primary
contingent liability insurance policy, the "Contingent and Excess Liability
Insurance"). These insurance policies collectively provide insurance coverage in
excess of $10 million per accident and permit multiple claims in any policy
period. Claims could be imposed against the assets of the Origination Trust if
such coverage were exhausted and damages were assessed against the Origination
Trust. In that event, investors in the Senior Notes could incur a loss on their
investment. See "Risk Factors -- Vicarious tort liability may result in a loss
of your investment", "Additional Legal Aspects of the Origination Trust and the
SUBIs -- The SUBIs" and "Additional Legal Aspects of the Specified Leases and
the Specified Vehicles -- Vicarious Tort Liability" for a discussion of related
risks.
With respect to damage to the Specified Vehicles, an Obligor may be
required by the related Specified Lease to maintain comprehensive and collision
insurance. As more fully described under "Additional Document Provision -- The
Administration Agreement -- Insurance on Specified Vehicles", the Administrative
Agent will be required to monitor the maintenance of required Obligor insurance.
In the event that the foregoing insurance coverage was exhausted and no
third-party reimbursement for that damage was available, investors in the Senior
Notes could incur a loss on their investment.
The Administration Agreement will provide that for so long as any Senior
Notes or Certificates are outstanding, neither the Origination Trustee nor Ryder
may terminate or cause the termination of any Contingent and Excess Liability
Insurance policy unless each Rating Agency has delivered a letter to the effect
that such termination or any replacement insurance would not cause its
then-current ratings of the Senior Notes or the Certificates to be qualified,
reduced or withdrawn. These obligations of Ryder will survive any termination of
Ryder as Administrative Agent under the Administration Agreement.
ADDITIONAL DOCUMENT PROVISIONS
The Indenture
Indenture Defaults
The following events (each an "Indenture Default") will be events of
default under the Indenture:
- a default for 30 days or more in the payment of interest on the Senior
Notes;
- a default in the payment of principal of a class of Senior Notes on the
related Final Payment Date or on a Payment Date fixed for redemption of
the Senior Notes;
- the occurrence of a Program Operating Lease Default;
- a default in the observance or performance of any covenant or agreement,
or any representation or warranty made in the Indenture or in any
certificate or writing delivered under the Indenture proves to have been
incorrect in any material respect at the time made, and the continuation
of that default for a period of 30 days after notice thereof is given to
the Trust by the Indenture Trustee or to the Trust and the Indenture
Trustee by the holders of not less than 25% of the aggregate principal
balance of the Senior Notes; or
- certain events of bankruptcy, insolvency, receivership or liquidation of
the Trust.
Senior Noteholders holding at least a majority of the aggregate principal
balance of the Senior Notes may waive any past default or Indenture Default
prior to the declaration of the acceleration of the maturity of the Senior
Notes, except a default in the payment of principal of or interest on any of the
Senior Notes, or in respect of any covenant or provision in the Indenture that
cannot be modified or amended without unanimous consent of the Senior
Noteholders.
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Remedies
If an Indenture Default occurs and is continuing, the Indenture Trustee or
the holders of a majority of the aggregate principal balance of the Senior Notes
may declare the principal of the Senior Notes to be immediately due and payable.
This declaration may be rescinded by the holders of a majority of the aggregate
principal balance of the Senior Notes before a judgment or decree for payment of
the amount due has been obtained by the Indenture Trustee if
- the Trust has deposited with the Indenture Trustee an amount sufficient
to pay (1) all interest on and principal of the Senior Notes as if the
Indenture Default giving rise to that declaration had not occurred and
(2) all amounts advanced by the Indenture Trustee and its costs and
expenses, and
- all Indenture Defaults -- other than the nonpayment of principal of the
Senior Notes that has become due solely due to that acceleration -- have
been cured or waived.
If the Senior Notes have been declared due and payable following an
Indenture Default, the Indenture Trustee may institute proceedings to collect
amounts due, exercise remedies as a secured party, including foreclosure or sale
of the Trust Estate, or elect to maintain the Trust Estate and continue to apply
proceeds from the Trust Estate as if there had been no declaration of
acceleration. The Indenture Trustee may not, however, unless it is required to
sell the Trust Estate under the Trust Agreement as a result of the bankruptcy or
insolvency of the Transferor, sell the Trust Estate following an Indenture
Default -- other than the occurrence of an Indenture Default described in the
first two bullet points in the definition thereof -- unless
- 100% of the Senior Noteholders consent thereto,
- the proceeds of that sale are sufficient to pay in full the principal of
and the accrued interest on all outstanding Securities, or
- the Indenture Trustee determines that the Trust Estate would not be
sufficient on an ongoing basis to make all payments on the Senior Notes
as such payments would have become due if such obligations had not been
declared due and payable, and the Indenture Trustee obtains the consent
of holders of 66 2/3% of the aggregate principal balance of the Senior
Notes.
The Indenture Trustee may, but is not required to, obtain and rely upon an
opinion of an independent accountant or investment banking firm as to the
sufficiency of the Trust Estate to pay interest on and principal of the Senior
Notes on an ongoing basis. Any sale of the Trust Estate, other than a sale
resulting from the bankruptcy, insolvency or termination of the Transferor, is
subject to the requirement that an opinion of counsel be delivered to the effect
that such sale will not cause the Origination Trust or the Trust to be
classified as an association, or a publicly traded partnership, taxable as a
corporation for federal income tax purposes.
In the event of a sale of the Trust Estate, either as a result of the
bankruptcy or insolvency of the Transferor or following the occurrence of an
Indenture Default under the circumstances described in the prior paragraph, at
the direction of the Indenture Trustee or the Senior Noteholders, the proceeds
of such sale, including available monies on deposit in the Reserve Fund, will be
distributed first, to the Indenture Trustee for amounts due as compensation or
indemnity payments pursuant to the terms of the Indenture; second, to the
Administrative Agent for reimbursement of all outstanding Advances; third, to
the Administrative Agent for amounts due in respect of unpaid Administration
Fees; fourth, to the Senior Noteholders to pay due and unpaid
interest -- including any overdue interest and, to the extent permitted under
applicable law, interest on any overdue interest at the related Interest Rate;
fifth, to the Reserve Fund for the payment of due and unpaid interest including
any overdue interest and, to the extent permitted under applicable law, interest
on any overdue interest at the Subordinated Note Rate -- on the Subordinated
Notes; sixth, to the Certificate Distribution Account for the payment of due and
unpaid interest -- including any overdue interest and, to the extent permitted
under applicable law, interest on any overdue interest at the Certificate Rate
- -- on the Certificates; seventh, to the holders of the Class A-1 Senior Notes to
pay due and unpaid principal on the Class A-1 Senior Notes, eighth, to the
holders of all other classes of Senior Notes to pay due and unpaid principal on
those classes of Senior Notes, which shall be allocated to such classes of
Senior Notes on a pro
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rata basis; ninth, ratably to the Subordinated Noteholder for amounts due and
unpaid in accordance with the terms of the Subordinated Notes, which amounts
shall be deposited into the Reserve Fund, and the Certificateholders for amounts
due and unpaid in accordance with the terms of the Certificates; tenth, to the
Transferor, in its capacity as Subordinated Noteholder, up to the amount
deposited into the Reserve Fund in respect of the Subordinated Notes on or
before the date of the preceding distributions; and eleventh, any remaining
amounts shall be paid to the Transferor.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Indenture Default occurs and is continuing, the
Indenture Trustee will be under no obligation to exercise any of the rights or
powers under the Indenture at the request or direction of any of the Senior
Noteholders if the Indenture Trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities that might be
incurred by it in complying with that request. Subject to such provisions for
indemnification and some limitations contained in the Indenture, the holders of
at least a majority of the aggregate principal balance of the Senior Notes will
have the right to direct the time, method and place of conducting any proceeding
or any remedy available to the Indenture Trustee or exercising any trust power
conferred on the Indenture Trustee. In addition, the holders of at least a
majority of the aggregate principal balance of the Senior Notes may, in some
cases, waive any default with respect to the Indenture, except a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the Indenture that cannot be modified without the waiver or consent
of all holders of outstanding Senior Notes.
No Senior Noteholder will have the right to institute any proceeding with
respect to the Indenture unless:
- that Senior Noteholder previously has given the Indenture Trustee written
notice of a continuing Indenture Default,
- Senior Noteholders holding not less than 25% of the aggregate principal
balance of the Senior Notes have made written request of the Indenture
Trustee to institute that proceeding in its own name as Indenture
Trustee,
- the Senior Noteholder has offered the Indenture Trustee reasonable
indemnity,
- the Indenture Trustee has for 60 days failed to institute that
proceeding, and
- no direction inconsistent with that written request has been given to the
Indenture Trustee during that 60 day period by Senior Noteholders holding
a majority of the aggregate principal balance of the Senior Notes.
Neither the Indenture Trustee nor the Owner Trustee in their respective
individual capacities, nor any holder of a Subordinated Note or a Certificate,
nor any of their respective owners, beneficiaries, agents, officers, directors,
employees, successors or assigns will, in the absence of an express agreement to
the contrary, be personally liable for the payment of interest on or principal
of the Senior Notes or for the agreements of the Trust or the Trustee, in its
capacity as trustee, contained in the Indenture.
Certain Covenants
Under the Indenture, the Trust will covenant that it will not
- sell, transfer, exchange or otherwise dispose of any of its assets,
except as expressly permitted by the Indenture, the Program Operating
Lease and the other Basic Documents,
- claim any credit on or make any deduction from the principal and interest
payable in respect of the Senior Notes -- other than amounts withheld
under the Code or applicable state law -- or assert any claim against any
present or former Senior Noteholder because of the payment of taxes
levied or assessed upon the Trust, or
- permit (1) the validity or effectiveness of the Indenture to be impaired,
(2) any person to be released from any covenants or obligations with
respect to the Senior Notes under the Indenture except as may be
expressly permitted thereby or (3) any lien, charge, excise, claim,
security interest, mortgage or
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other encumbrance to be created on or extend to or otherwise arise upon
or burden the Trust's assets or any part thereof, or any interest therein
or the proceeds therefrom.
The Trust may not engage in any activities other than financing, acquiring,
owning, leasing -- subject to the lien of the Indenture -- pledging and managing
the SUBI Certificates as contemplated by the Indenture and the other Basic
Documents. The Trust will not incur, assume or guarantee any indebtedness other
than indebtedness incurred pursuant to the Securities or otherwise in accordance
with the Basic Documents.
Replacement of the Indenture Trustee
Senior Noteholders holding at least a majority of the aggregate principal
balance of the Senior Notes may remove the Indenture Trustee without cause by so
notifying the Indenture Trustee and the Trust, and following that removal may
appoint a successor Indenture Trustee. Any successor Indenture Trustee must at
all times satisfy all applicable requirements of the Trust Indenture Act of
1939, and in addition, have a combined capital and surplus of at least
$50,000,000 and a long-term debt rating of "A" or better by each Rating Agency
or be otherwise acceptable to each Rating Agency. Each Rating Agency must
confirm that the appointment of the successor Indenture Trustee would not cause
the then-current ratings on the Senior Notes and the Certificates to be
qualified, reduced or withdrawn.
The Indenture Trustee may resign at any time by so notifying the Trust, the
Administrative Agent and each Rating Agency. The Trust will be required to
remove the Indenture Trustee if the Indenture Trustee:
- ceases to be eligible to continue as the Indenture Trustee,
- is adjudged to be bankrupt or insolvent, or
- otherwise becomes incapable of acting.
Upon the resignation or removal of the Indenture Trustee, or the failure of the
Senior Noteholders to appoint a successor Indenture Trustee following the
removal without cause of the Indenture Trustee, the Trust will be required
promptly to appoint a successor Indenture Trustee.
Duties of Indenture Trustee
Except during the continuance of an Indenture Default, the Indenture
Trustee will
- perform such duties and only such duties as are specifically set forth in
the Indenture,
- rely, as to the truth of the statements and the correctness of the
opinions expressed therein, on certificates or opinions furnished to the
Indenture Trustee that conform to the requirements of the Indenture, and
- examine any such certificates and opinions that are specifically required
to be furnished to the Indenture Trustee by the Indenture to determine
whether or not they conform to the requirements of the Indenture.
Upon the continuance of an Indenture Default, the Indenture Trustee will be
required to exercise the rights and powers vested in it by the Indenture and use
the same degree of care and skill in the exercise thereof as a prudent person
would exercise or use under the circumstances in the conduct of that person's
own affairs.
Compensation and Indemnity
The Administrative Agent or the Administrator will
- pay the Indenture Trustee from time to time reasonable compensation for
its services,
- reimburse the Indenture Trustee for all reasonable expenses, advances and
disbursements reasonably incurred by it in connection with the
performance of its duties as Indenture Trustee, and
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- indemnify the Indenture Trustee for, and hold it harmless against, any
loss, liability or expense, including reasonable attorneys' fees and
expenses, incurred by it in connection with the performance of its duties
as Indenture Trustee.
The Indenture Trustee will not be indemnified by the Administrator against any
loss, liability or expense incurred by it through its own willful misconduct,
negligence or bad faith, except that the Indenture Trustee will not be liable
- for any error of judgment made by it in good faith, unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts,
- with respect to any action it takes or omits to take in good faith in
accordance with a direction received by it from the Senior Noteholders in
accordance with the terms of the Indenture, and
- for interest on any money received by it except as the Indenture Trustee
and the Trust may agree in writing.
The Indenture Trustee will not be deemed to have knowledge of any event unless
an officer of the Indenture Trustee has actual knowledge of the event or has
received written notice of the event in accordance with the provisions of the
Indenture.
Access to Senior Noteholder Lists
If Definitive Notes are issued in the limited circumstances set forth in
"Additional Information Regarding the Securities -- Definitive Notes", or the
Indenture Trustee is not the Senior Note Registrar, the Trust will furnish or
cause to be furnished to the Indenture Trustee a list of the names and addresses
of the Senior Noteholders (a) as of each Record Date, within five days
thereafter and (b) as of not more than ten days before the time that list is
furnished, within 30 days after receipt by the Trust of a written request for
the list.
Annual Compliance Statement
The Trust will be required to file an annual written statement with the
Indenture Trustee certifying the fulfillment of its obligations under the
Indenture.
Satisfaction and Discharge of Indenture
The Indenture will be discharged with respect to the collateral securing
the Senior Notes upon the delivery to the Indenture Trustee for cancellation of
all of the Senior Notes or, with some limitations -- including receipt of
certain opinions with respect to tax matters -- upon deposit with the Indenture
Trustee of funds sufficient for the payment in full of all of the Senior Notes,
including interest, and any fees due and payable to the Owner Trustee or the
Indenture Trustee.
The Trust Agreement
Authority and Duties of the Owner Trustee
The Owner Trustee will administer the Trust in the interest of the
Certificateholders, subject to the lien of the Indenture and the obligations of
the Trust with respect to the Notes, in accordance with the Trust Agreement and
the other Basic Documents.
Subject to the rights of the Indenture Trustee under the Indenture, the
Transferor, as holder of the Transferor Certificate, may, by written
instruction, direct the Owner Trustee in the administration of the Trust;
provided that such instruction shall not, as evidenced by an opinion of counsel,
materially adversely affect any Senior Noteholder or Certificateholder. The
Owner Trustee will not be required to follow any such instruction if it
reasonably determines or is advised by counsel that so doing is likely to result
in liability to the Owner Trustee, contrary to the terms of the Trust Agreement
or any other Basic Document or any obligation of the Owner Trustee or the Trust,
or unlawful.
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The Owner Trustee will not be required to perform any of the obligations of
the Trust under the Trust Agreement or the other Basic Documents that are
required to be performed by
- the Administrative Agent under the Administration Agreement or the SUBI
Trust Agreement;
- the Administrator under the Trust Agreement, the Trust Administration
Agreement or the Indenture;
- the Transferor under the SUBI Certificate Transfer Agreement or the
Program Operating Lease; or
- the Indenture Trustee under the Indenture.
Restrictions on Actions by Owner Trustee
The Owner Trustee may not:
- initiate or settle any claim or lawsuit involving the Trust, unless
brought by the Administrative Agent to collect amounts owed under a
Specified Lease;
- amend the Indenture by a supplemental indenture where Senior Noteholder
consent is required;
- amend the Indenture by supplemental indenture where Senior Noteholder
consent is not required if such amendment materially adversely affects
the Certificateholders; or
- amend any Basic Document other than the Trust Agreement if such amendment
materially adversely affects the Certificateholders;
unless (1) the Owner Trustee provides 30 days' written notice thereof to the
Certificateholders and each Rating Agency and (2) Certificateholders holding at
least 25% of the aggregate principal balance of the Certificates do not object
in writing to any such proposed amendment within 30 days of that notice.
Actions by Certificateholders and Owner Trustee with Respect to Certain
Matters
The Owner Trustee may not, except upon the occurrence of an Administrative
Agent Default subsequent to the payment in full of the Senior Notes and in
accordance with the written directions of Certificateholders holding 66 2/3% of
the aggregate principal balance of the Certificates, remove the Administrative
Agent with respect to the SUBI Assets or appoint a successor Administrative
Agent with respect thereto. However, the Owner Trustee will not be required to
follow any directions of the Certificateholders if doing so would be contrary to
any obligation of the Owner Trustee or the Trust. The Owner Trustee may not sell
the Vehicle SUBI Certificate or assign its interest in the Lease SUBI
Certificate except in the event of the bankruptcy or dissolution of the Trust or
the Transferor, or upon an Indenture Default -- and in any event unless the
Owner Trustee has properly foreclosed on the Lease SUBI. Upon any such sale of
the Vehicle SUBI Certificate or the assignment of the Lease SUBI Certificate,
the applicable Vehicle SUBI Assets and Lease SUBI Assets will be distributed to
the purchaser thereof and will no longer constitute Origination Trust Assets,
and the Specified Vehicles may be retitled as directed by that purchaser.
The right of the Transferor or the Certificateholders to take any action
affecting the Trust Estate will be subject to the rights of the Indenture
Trustee under the Indenture.
Resignation and Removal of the Owner Trustee
The Owner Trustee may resign at any time upon written notice to the
Administrator, the Administrative Agent, the Transferor, the Indenture Trustee
and the Certificateholders, whereupon the Transferor will be obligated to
appoint a successor Owner Trustee. The Transferor or Certificateholders holding
at least a majority of the aggregate principal balance of the Certificates may
remove the Owner Trustee if the Owner Trustee becomes insolvent, ceases to be
eligible or becomes legally unable to act. Upon removal of the Owner Trustee,
the Transferor will appoint a successor Owner Trustee. The Transferor will be
required to deliver written notice to each Rating Agency of any resignation or
removal of the Owner Trustee.
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The Owner Trustee and any successor thereto must at all times:
- be able to exercise corporate trust powers;
- be subject to supervision or examination by federal or state authorities;
- have a combined capital and surplus of at least $50 million; and
- have a long-term debt rating of "A" or better by each Rating Agency or be
otherwise acceptable to each Rating Agency.
Each Rating Agency must also confirm that the appointment of the successor Owner
Trustee would not cause the then-current ratings of the Senior Notes or the
Certificates to be qualified, reduced or withdrawn. Any co-trustee or separate
trustee appointed for the purpose of meeting applicable state requirements will
not be required to meet these eligibility requirements.
Termination
The Trust Agreement will terminate upon (a) the final distribution of all
funds or other property or proceeds of the Trust Estate in accordance with the
terms of the Indenture and the final distribution on the Subordinated Notes and
the Certificates pursuant to the Trust Agreement, (b) the occurrence of certain
events of bankruptcy, insolvency, receivership or liquidation with respect to
the Transferor or (c) an Optional Purchase by the Transferor. Upon termination
of the Trust Agreement pursuant to clause (b) above, the Owner Trustee will
direct the Indenture Trustee to sell the Trust Estate, other than amounts on
deposit in the Distribution Accounts, in a commercially reasonable manner and on
commercially reasonable terms. The Indenture Trustee will apply the proceeds of
that sale to pay amounts owed to the Indenture Trustee and interest on and
principal of the Securities in accordance with the terms of the Indenture. See
"-- The Indenture -- Remedies".
Liabilities and Indemnification
The Transferor, as holder of the Transferor Certificate and the
Subordinated Notes, will be directly liable for any claims against the
Trust -- other than payment of principal of and interest on the Securities -- as
if the Trust were a partnership and the Transferor were a general partner
thereof. The Transferor, in that capacity, will indemnify the Owner Trustee for
any expenses incurred by the Owner Trustee in the performance of its duties
under the Trust Agreement. The Transferor will not be entitled to make any claim
upon the Trust Estate for the payment of any such liabilities or indemnified
expenses. The Transferor will not indemnify the Owner Trustee for expenses
resulting from the willful misconduct, bad faith or negligence of the Owner
Trustee, or for the inaccuracy of any representation or warranty of the Owner
Trustee in the Trust Agreement. The Owner Trustee will not be liable for:
- any error in judgment of an officer of the Owner Trustee,
- any action taken or omitted to be taken in accordance with the
instructions of any Certificateholder, the Indenture Trustee, the
Transferor or the Administrative Agent,
- the interest on or principal of the Securities, or
- the default or misconduct of the Administrator, the Administrative Agent,
the Transferor or the Indenture Trustee.
The Subordinated Notes
The Subordinated Notes will be issued to the Transferor pursuant to the
Trust Agreement, pledged by the Transferor to the Trust and held by the
Indenture Trustee during the term of the Indenture as part of the Trust Estate
pledged to the Indenture Trustee. The Subordinated Notes will be subordinated in
right of payment to the Senior Notes to the extent described herein. See
"Additional Information Regarding the Securities -- Payments on the Securities"
and "Security for the Securities -- The Subordinated Notes". If a default occurs
with respect to the Trust's obligations under the Subordinated Notes while the
Senior Notes are outstanding,
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the Subordinated Noteholder will not be permitted to declare the principal
balance of the Subordinated Notes to be immediately due and payable.
The SUBI Trust Agreement
The SUBIs, Other SUBIs and the UTI
The UTI Beneficiaries are the initial beneficiaries of the Origination
Trust. The UTI Beneficiaries may from time to time assign, transfer, grant and
convey, or cause to be assigned, transferred, granted and conveyed, to the
Origination Trustee, in trust, Origination Trust Assets. The UTI Beneficiaries
will hold the UTI, which represents a beneficial interest in all Origination
Trust Assets except for (a) any Origination Trust Assets allocated to Other
SUBIs ("Other SUBI Assets") and (b) the SUBI Assets (those Origination Trust
Assets to be referred to as the "UTI Assets"). The UTI Beneficiaries may in the
future pledge the UTI as security for obligations to third-party lenders and may
in the future create and sell or pledge Other SUBIs in connection with
financings similar to the transaction described in this prospectus. Each holder
or pledgee of the UTI will be required to expressly waive any claim to the
Origination Trust Assets other than the UTI Assets and to fully subordinate any
such claims to those other Origination Trust Assets in the event that the waiver
is not given full effect. Each holder or pledgee of any Other SUBI will be
required to expressly waive any claim to the Origination Trust Assets, except
for the related Other SUBI Assets, and to fully subordinate those claims to the
Origination Trust Assets or any other SUBI in the event that waiver is not given
effect. Except under the limited circumstances described under "Additional Legal
Aspects of the Origination Trust and the SUBIs -- The SUBIs" and "-- The SUBIs,
Other SUBIs and the UTI", the SUBI Assets will not be available to make payments
in respect of, or pay expenses relating to, the UTI or any Other SUBI. Any Other
SUBI Assets evidenced by any Other SUBIs will not be available to make payments
in respect of, or pay expenses relating to, the SUBIs, the UTI or any Other
SUBI.
Each Other SUBI will be created pursuant to a supplement to the Origination
Trust Agreement (each, an "Other SUBI Supplement"), which will amend the
Origination Trust Agreement only with respect to the Other SUBI or Other SUBIs
to which it relates. The SUBI Supplement will amend the Origination Trust
Agreement only as it relates to the SUBIs and no Other SUBI Supplement will
amend the Origination Trust Agreement as it relates to the SUBIs.
All Origination Trust Assets, including the SUBI Assets, will be owned by
the Origination Trustee on behalf of the beneficiaries of the Origination Trust.
The SUBI Assets will be segregated from the rest of the Origination Trust Assets
on the books and records of the Origination Trustee and the Administrative
Agent, and the holders of other beneficial interests in the Origination Trust --
including the UTI and any Other SUBIs -- will have no rights in or to the SUBI
Assets. Liabilities of the Origination Trust will be respectively allocated to
the SUBI Assets, the UTI Assets and Other SUBI Assets if incurred in each case
with respect thereto, or will be allocated pro rata among all Origination Trust
Assets if incurred with respect to the Origination Trust Assets generally.
Special Obligations of the UTI Beneficiaries
The UTI Beneficiaries will be jointly and severally liable for all debts
and obligations arising with respect to the Origination Trust Assets or the
operation of the Origination Trust, except that their liability with respect to
any pledge of the UTI and any assignee or pledgee of a SUBI or a SUBI
Certificate or any Other SUBI or Other SUBI Certificate shall be as set forth in
the financing documents relating thereto. To the extent the UTI Beneficiaries
pay or suffer any liability or expense with respect to the Origination Trust
Assets or the operation of the Origination Trust, the UTI Beneficiaries will be
indemnified, defended and held harmless out of the assets of the Origination
Trust against any such liability or expense, including reasonable attorneys'
fees and expenses.
Origination Trustee Duties and Powers; Fees and Expenses
Under the SUBI Trust Agreement, the Origination Trustee will be required to
(a) apply for and maintain, or cause to be applied for and maintained, all
licenses, permits and authorizations necessary or
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appropriate to accept assignments of the Specified Leases and the Specified
Vehicles and to carry out its duties as Origination Trustee and (b) when
required by applicable state law or administrative practice, file, or cause to
be filed, applications for certificates of title as are necessary or appropriate
so as to cause the Origination Trust or the Origination Trustee on behalf of the
Origination Trust to be recorded as the owner or holder of legal title of record
to the Specified Vehicles. In carrying out these duties, the Origination Trustee
will be required to exercise the same degree of care and skill as a prudent
person would exercise or use under the circumstances in the conduct of that
person's own affairs.
The Origination Trustee may be replaced by the UTI Beneficiaries, acting
together, if it ceases to be qualified in accordance with the terms of the SUBI
Trust Agreement, or if certain representations and warranties made by the
Origination Trustee therein prove to have been materially incorrect when made or
in the event of certain events of bankruptcy or insolvency of the Origination
Trustee.
The Origination Trustee will make no representations as to the validity or
sufficiency of the SUBIs, the SUBI Certificates, or the Retained SUBI
Certificates -- other than the execution and authentication of the SUBI
Certificates and the Retained SUBI Certificates -- or of any Specified Lease,
Specified Vehicle or related document, will not be responsible for performing
any of the duties of the UTI Beneficiaries or the Administrative Agent and will
not be accountable for the use or application by any owners of beneficial
interests in the Origination Trust Assets of any funds paid in respect of the
Origination Trust Assets or the investment of any of such monies before such
monies are deposited into the accounts relating to the SUBIs, any Other SUBI and
the UTI. The Origination Trustee will not independently verify the Specified
Leases or the Specified Vehicles. The duties of the Origination Trustee will
generally be limited to the acceptance of assignments of Leases, the titling of
Vehicles in the name of the Origination Trust or the Origination Trustee on
behalf of the Origination Trust, the creation of the SUBIs, Other SUBIs and the
UTI, the creation of the SUBI Collection Account and the Residual Value Surplus
Account and the receipt of the various certificates, reports or other
instruments required to be furnished to the Origination Trustee under the SUBI
Trust Agreement, in which case the Origination Trustee will only be required to
examine them to determine whether they conform to the requirements of the SUBI
Trust Agreement.
The Origination Trustee will be under no obligation to exercise any of the
rights or powers vested in it by the SUBI Trust Agreement, to make any
investigation of any matters arising thereunder or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order or
direction of the UTI Beneficiaries, the Administrative Agent or the holders of a
majority in interest in the SUBIs, unless such party or parties have offered to
the Origination Trustee reasonable security or indemnity against any costs,
expenses or liabilities that may be incurred therein or thereby. The reasonable
expenses of every such exercise of rights or powers or examination will be paid
by the party or parties requesting such exercise or examination or, if paid by
the Origination Trustee, will be a reimbursable expense of the Origination
Trustee.
The Origination Trustee may enter into one or more agreements with such
person or persons, including without limitation any affiliate of the Origination
Trustee, as are by experience and expertise qualified to act in a trustee
capacity and otherwise acceptable to the UTI Beneficiaries. The Origination
Trustee has engaged U.S. Bank as Trust Agent. Under the SUBI Trust Agreement,
the Trust Agent shall perform each and every obligation of the Origination
Trustee under the SUBI Trust Agreement.
Indemnity of Trustee and Trust Agents
The Origination Trustee and each Trust Agent will be indemnified and held
harmless out of and to the extent of the Origination Trust Assets with respect
to any loss, liability, claim, damage or reasonable expense, including
reasonable fees and expenses of counsel and reasonable expenses of litigation
(collectively, a "Loss"), arising out of or incurred in connection with (a) any
of the Origination Trust Assets, including without limitation any Loss relating
to Leases or Vehicles, any personal injury or property damage claims arising
with respect to any such Vehicle or any Loss relating to any tax arising with
respect to any Origination Trust Asset, or (b) the Origination Trustee's or the
Trust Agent's acceptance or performance of the trusts and duties contained in
the SUBI Trust Agreement. Notwithstanding the foregoing, neither the Origination
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Trustee nor any Trust Agent will be indemnified or held harmless out of the
Origination Trust Assets as to such a Loss:
- for which Ryder shall be liable under the Administration Agreement,
- incurred by reason of the Origination Trustee's or that Trust Agent's
willful misfeasance, bad faith or negligence, or
- incurred by reason of the Origination Trustee's or that Trust Agent's
breach of its respective representations and warranties made in the SUBI
Trust Agreement or the Administration Agreement.
Termination
The Origination Trust will dissolve and the obligations and
responsibilities of the UTI Beneficiaries and the Origination Trustee will
terminate upon the later to occur of the full payment of all amounts owed under
the Origination Trust Agreement, the Trust Agreement and the Indenture or under
any financing in connection with an Other SUBI.
Trust as Third-Party Beneficiary
As the holder of the Vehicle SUBI Certificate and the SUBI Interest
evidenced thereby and a pledgee of the Lease SUBI Certificate and the SUBI
Interest evidenced thereby, the Trust will be a third-party beneficiary of the
SUBI Trust Agreement. Therefore, the Trust may, and, upon the direction of
holders of Senior Notes and Certificates holding at least 51% of the aggregate
unpaid principal balance of the Senior Notes and Certificates, unless a higher
percentage is required by either the Trust Agreement or the Indenture, voting
together as a single class, will, exercise any right conferred by the SUBI Trust
Agreement upon a holder of any interest in the SUBIs. However, during the term
of the Indenture, the Trust will pledge the Lease SUBI Certificate to the
Indenture Trustee and any action with respect to the SUBIs must be approved by
the Senior Noteholders in such percentage as required by the Indenture. See
"-- Miscellaneous Provisions -- Amendment Provisions".
The Administration Agreement
General
Under the Administration Agreement, the Administrative Agent will perform
on behalf of the Origination Trust all of the obligations of the lessor under
the Specified Leases, including, but not limited to, collecting and processing
payments, responding to inquiries of Obligors, investigating delinquencies,
sending payment statements, paying costs of the sale or other disposition of
Expired Vehicles or Default Vehicles, overseeing the Specified Leases,
commencing legal proceedings to enforce Specified Leases and servicing the
Specified Leases, including accounting for collections, furnishing monthly and
annual statements to the Origination Trustee with respect to distributions and
generating federal income tax information. In this regard, the Administrative
Agent will make reasonable efforts to collect all amounts due on or in respect
of the Specified Leases and, in a manner consistent with the Administration
Agreement, will be obligated to service the Specified Leases generally in
accordance with the customary and usual procedures of institutions that service
truck, tractor and trailer leases and, to the extent more exacting, the
procedures used by the Administrative Agent in respect of truck, tractor and
trailer leases serviced by it for its own account. Payments made in respect of
the Maintenance Component will be retained by or remitted to the Maintenance
Provider as compensation for providing maintenance and other specified services
to the Specified Vehicles, and will not be available to make Program Operating
Lease Payments or to make payments on the Senior Notes, the Subordinated Notes
or the Certificates. See "Ryder -- Lease Payments -- Calculation of the
Financial Component". The Trust will be a third-party beneficiary of the
Administration Agreement.
The Administration Agreement will require the Administrative Agent to
obtain all licenses and make all filings required to be held or filed by the
Origination Trust in connection with the ownership of the Specified Leases and
the Specified Vehicles and take all necessary steps to maintain evidence of the
Origination Trust's ownership on the certificates of title to the Specified
Vehicles.
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The Administrative Agent will be responsible for filing all periodic sales
and use tax or property, real or personal, tax reports, periodic renewals of
licenses and permits, periodic renewals of qualifications to act as a business
trust and other periodic regulatory filings, registrations or approvals arising
with respect to or required of the Origination Trustee or the Origination Trust.
Custody of Lease Documents and Certificates of Title
To reduce administrative costs and ensure uniform quality in the servicing
of the Specified Leases and Ryder's own portfolio of leases, the Origination
Trustee will appoint the Administrative Agent as its agent, bailee and custodian
of the Specified Leases, the certificates of title relating to the Specified
Vehicles, the insurance policies and insurance records and other documents
related to the Specified Leases and the related Obligors and Specified Vehicles.
Such documents will not be physically segregated from other leases, certificates
of title, insurance policies and insurance records or other documents related to
other leases and vehicles owned or serviced by the Administrative Agent,
including Leases and Vehicles which are not part of the SUBI Assets. The
accounting records and computer systems of Ryder will reflect the allocation of
the Specified Leases and Specified Vehicles to the SUBIs, and the interest of
the holders of the SUBI Certificates therein. UCC financing statements
reflecting certain interests in the Specified Leases will be filed as described
under "Additional Legal Aspects of the Specified Leases and Specified
Vehicles -- Back-up Security Interests".
Collections
General. Under the Administration Agreement, except as otherwise permitted
under the Monthly Remittance Condition and described under "--Monthly Remittance
Condition", the Administrative Agent will deposit Collections received into the
SUBI Collection Account within two Business Days of processing. "Collections"
with respect to any Collection Period will include all net collections collected
or received in respect of the SUBI Assets during the three Monthly Periods
comprising that Collection Period that are allocable to the Program Operating
Lease or the Securities, including:
- Financial Component payments and Partial Financial Component Payments
made by Obligors, net of Daily Advance Reimbursements;
- Reallocation Payments made by the Administrative Agent;
- Sales Proceeds other than Residual Value Surplus, Termination Proceeds,
Casualty Proceeds and Insurance Proceeds;
- Termination Value Payments; and
- payments by the Administrative Agent of the Securitization Value of
certain Specified Leases before the Maturity Dates of such Specified
Leases and certain Expired Vehicles, as described in this prospectus
under "-- Purchase of Specified Vehicles Before their Maturity Dates" and
"-- Purchase of Expired Vehicles".
Monthly Remittance Condition. The Administration Agreement will require
the Administrative Agent to make all deposits of Collections received on or in
respect of the Specified Leases and the Specified Vehicles to be deposited into
the SUBI Collection Account on the second Business Day following processing
thereof. However, so long as the Monthly Remittance Condition is satisfied, the
Administrative Agent may retain such amounts received during a Monthly Period
until the second day following that Monthly Period. The "Monthly Remittance
Condition" will be satisfied if (a)(1) Ryder is the Administrative Agent, (2)
Ryder's short-term debt is rated in the highest rating category, or is otherwise
acceptable to, each Rating Agency and (3) no Administrative Agent Default has
occurred or (b)(1) the Administrative Agent obtains a letter of credit, surety
bond or insurance policy under which demands for payment may be made to secure
timely remittance of monthly collections to the SUBI Collection Account and (2)
the Trustees are provided with confirmation from each Rating Agency to the
effect that the use of such alternative remittance schedule will not result in
the qualification, reduction or withdrawal of its then-current rating on the
Senior Notes or the Certificates.
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Pending deposit into the SUBI Collection Account, Collections may be used by the
Administrative Agent at its own risk and for its own benefit and will not be
segregated from its own funds.
Net Deposits. For so long as Ryder is the Administrative Agent, the
Administrative Agent will be permitted to deposit into the SUBI Collection
Account only the net amount distributable to the Trust, as holder of the Vehicle
SUBI Certificate, on the related Deposit Date. The Administrative Agent will,
however, account to the Trust, the Trustees and the Senior Noteholders and
Certificateholders as if all of the deposits and distributions described herein
were made individually. This provision has been established for the
administrative convenience of the parties involved and will not affect amounts
required to be deposited into the Accounts for the benefit of the
Securityholders.
Payment of the Maintenance Component to the Maintenance Provider. During
each Collection Period, the Maintenance Component payment, to the extent
available, will be allocated and retained by or paid to the Maintenance
Provider. Payments on the Specified Leases will be allocated pro rata using the
Financial Component and the Maintenance Component thereof.
Financial Component Payments. If an Obligor makes a monthly payment equal
to the Total Monthly Payment billed with respect to all Vehicles leased by that
Obligor for the related Monthly Period, which may include one or more Specified
Vehicles as well as one or more Vehicles allocated to the UTI or one or more
Other SUBIs (collectively, "Obligor Vehicles"), the Administrative Agent will
deposit into the SUBI Collection Account the entire Financial Component relating
to the Specified Vehicles leased by that Obligor. If an Obligor makes a monthly
payment of less than the Total Monthly Payment billed in respect of a Specified
Vehicle or in respect of all Obligor Vehicles for that Monthly Period, the
Administrative Agent will deposit into the SUBI Collection Account a pro rata
share of the total amount paid (the "Partial Financial Component Payment")
determined by multiplying the total amount paid by a percentage equal to the
Financial Component due divided by the Total Monthly Payment due.
Sales Proceeds and Termination Proceeds
Under the Administration Agreement, the Administrative Agent, on behalf of
the Trust, will sell or otherwise dispose of Specified Vehicles:
- related to Specified Leases that have reached their respective Maturity
Dates, or as to which the Annual Termination Option was exercised but an
amount equal to the related Termination Value Payment was not paid (each,
an "Expired Vehicle"),
- related to Default Termination Leases (each, a "Defaulted Vehicle"), and
- under the circumstances described under "-- Purchase of Specified
Vehicles Before their Maturity Dates".
In connection with the sale or other disposition of an Expired Vehicle or a
Defaulted Vehicle, within two Business Days of processing, the Administrative
Agent will deposit into the SUBI Collection Account all Sales Proceeds from
Specified Vehicles received during the related Collection Period. On each
Deposit Date, the Administrative Agent will cause the Origination Trustee,
acting through the Trust Agent, to transfer any Residual Value Surplus to the
Residual Value Surplus Account. Any payment received from the related Obligor in
respect of the Termination Value of the related Specified Vehicle will be
deposited into the SUBI Collection Account.
"Disposition Expenses" will mean expenses and other amounts reasonably
incurred by the Administrative Agent in connection with the sale or other
disposition of an Expired Vehicle or a Defaulted Vehicle, including but not
limited to sales commissions, and expenses incurred in connection with making
claims under any
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Contingent and Excess Liability Insurance or other applicable insurance
policies. Disposition Expenses will be reimbursable to the Administrative Agent:
- as a deduction from Sales Proceeds, Termination Proceeds and Casualty
Proceeds, and
- in the case of Disposition Expenses relating to the sale of Vehicles,
from amounts on deposit in the Residual Value Surplus Account.
"Residual Value Losses" in respect of a Collection Period will mean the
amount by which the Sales Proceeds from the sale of Specified Vehicles,
excluding any Insurance Proceeds, during that Collection Period are less than
the aggregate Securitization Values of the related Specified Leases.
"Residual Value Surplus" will mean the amount, if any, by which the Sales
Proceeds of any Expired Vehicle, excluding any amounts paid by an Obligor or any
Casualty Proceeds, exceed the Securitization Value of the related Specified
Lease as of the effective date of termination of that Specified Lease.
"Sales Proceeds" with respect to any Expired Vehicle or Defaulted Vehicle
will mean all proceeds received from the sale or other disposition of that
Vehicle, including any applicable Insurance Proceeds, less all applicable
Disposition Expenses and, in the case of an Expired Vehicle, any outstanding
Sales Proceeds Advances.
"Termination Proceeds" with respect to any Defaulted Vehicle will mean an
amount equal to the sum of (1) any payment received from the related Obligor in
respect of the Termination Value of Vehicle and (2) the Sales Proceeds.
Purchase of Specified Vehicles Before their Maturity Dates
The Administrative Agent will be required to purchase or cause to be
purchased a Specified Vehicle before the Maturity Date of the related Specified
Lease and remit to the SUBI Collection Account an amount equal to the
Securitization Value of that Specified Lease as of the effective date of
termination if:
- that Specified Lease becomes a Casualty Termination Lease and, pursuant
to that Specified Lease, the Administrative Agent is responsible for
paying for the loss or theft of or damage to that Specified Vehicle;
- the Administrative Agent (1) agrees with the Obligor to a change in the
lease rates applicable to that Specified Vehicle and that change results
in a change in the Residual Value and/or the Lease Term or (2) invoices
the Obligor for a material mileage surcharge under that Specified Lease
for that Specified Vehicle;
- at the request of the Obligor, the Administrative Agent permits that
Obligor to (1) terminate that Specified Lease other than through the
exercise of the Annual Termination Option or (2) reduce or delay payments
due in respect of the Financial Component of that Specified Lease;
- that Obligor exercises the Annual Termination Option or that Specified
Lease becomes a Default Termination Lease and the Administrative Agent
(1) releases the Obligor from its obligation to purchase that Specified
Vehicle for its Termination Value or (2) neither demands that the Obligor
so purchase that Specified Vehicle nor offers a termination or default
settlement to the Obligor for that Specified Vehicle; or
- that Obligor exercises the Annual Termination Option or that Specified
Lease becomes a Default Termination Lease and that Specified Lease has
been amended to eliminate the Obligor's obligation to thereupon purchase
that Specified Vehicle for its Termination Value.
The Administrative Agent will be required to purchase a Specified Vehicle
before the Maturity Date of the related Specified Lease and remit to the SUBI
Collection Account an amount equal to the Securitization Value of that Specified
Lease as of the effective date of termination if the related Obligor desires to
change the domicile of or title to a Vehicle subject to a Lease and that change
would result in (a) the Origination Trust doing business in a jurisdiction in
which it is not then qualified and licensed or (b) significant transfer
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expenses not paid by the Obligor, including without limitation the imposition of
any transfer tax. In addition, the Administrative Agent may, but will not be
required to, purchase or cause to be purchased a Specified Vehicle before the
Maturity Date of the related Specified Lease and remit to the SUBI Collection
Account an amount equal to the Securitization Value of that Specified Lease as
of the effective date of termination if (a) the Administrative Agent exercises
the Annual Termination Option, including, without limitation, if the related
Obligor rejects an increase in the Maintenance Component when the current
Maintenance Component provides the Maintenance Provider with below average
service margins or (b) the Administrative Agent elects to purchase that
Specified Vehicle for any other administrative or commercial reason (each, a
"Special Event Purchase"). Notwithstanding the foregoing, Special Event
Purchases may only be made with respect to Specified Vehicles having an
aggregate initial Securitization Value of no more than 10% of the Initial
Securities Balance in the aggregate over the term of the Securities, and with
respect to no more than 5% of the Initial Securities Balance in any calendar
year.
"Insurance Proceeds" will include recoveries under any insurance policy or
rights thereunder or proceeds therefrom, including any self-insurance and also
including the Contingent and Excess Liability Insurance, and any vehicle
liability insurance policy required to be obtained and maintained by the
Administrative Agent or the related Obligors pursuant to the Specified Leases,
and amounts paid by any insurer under any other insurance policy relating to the
Specified Leases or the related Obligors or Specified Vehicles.
Purchase of Expired Vehicles
The Administrative Agent may purchase an Expired Vehicle at any time. With
respect to the related Specified Lease, in the event that
- no Sales Proceeds Advance has been made, the purchase price will equal
the Securitization Value of that Specified Lease as of the date of
expiration, and
- a Sales Proceeds Advance has been made,
no additional amounts need be remitted by the Administrative Agent; however, the
Administrative Agent will relinquish all rights to reimbursement of that Sales
Proceeds Advance.
Casualty Proceeds
If an Obligor is responsible for paying for damage to a Specified Vehicle
relating to a Casualty Termination Lease, the Administrative Agent will remit to
the SUBI Collection Account, within two Business Days of processing, an amount
equal to the sum of
- all Insurance Proceeds received in respect of damage to that Specified
Vehicle (the "Insurance Casualty Proceeds"), and
- any proceeds received from the sale of that Specified Vehicle at salvage,
net of any applicable Disposition Expenses (the "Salvage Casualty
Proceeds", and together with the Insurance Casualty Proceeds, the
"Casualty Proceeds").
All Casualty Proceeds will be deposited in the SUBI Collection Account.
In the event that a Specified Lease becomes a Casualty Termination Lease
and that Specified Lease requires the Administrative Agent to be responsible for
all loss or theft of or damage to the related Specified Vehicle, the
Administrative Agent will remit to the SUBI Collection Account an amount equal
to the Securitization Value of that Casualty Termination Lease as of the
effective date of casualty.
Extensions
The Administration Agreement will provide that no extensions of a Specified
Lease may be granted, except that for operational and administrative purposes,
the Administrative Agent may, on behalf of the Trust, delay or accelerate the
Maturity Date of a Specified Lease by as much as 45 days.
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Notification of Liens and Claims
The Administrative Agent will be required to notify as soon as practicable
the Transferor -- in the event that Ryder is not acting as the Administrative
Agent, the Indenture Trustee and the Origination Trustee of all liens or claims
of any kind of a third party that would materially and adversely affect the
interests of, among others, the Transferor or the Origination Trust in any
Specified Lease or Specified Vehicle. When the Administrative Agent becomes
aware of any such lien or claim with respect to any Specified Lease or Specified
Vehicle, it will take whatever action it deems reasonably necessary to cause
that lien or claim to be removed.
Advances
On each Deposit Date, the Administrative Agent will be obligated to make,
by deposit into the SUBI Collection Account, a Financial Component Advance in
respect of the unpaid Financial Component of certain Specified Vehicles, and a
Sales Proceeds Advance in respect of the Securitization Value of Specified
Leases relating to certain Expired Vehicles. An "Advance" refers to either a
Financial Component Advance or a Sales Proceeds Advance. The Administrative
Agent will be required to make an Advance only to the extent that it determines
that such Advance will be recoverable from future payments or collections on the
related Specified Lease or Specified Vehicle or otherwise. In making Advances,
the Administrative Agent will assist in maintaining a regular flow of scheduled
payments on the Specified Leases and, accordingly, in respect of the Program
Operating Lease and the Senior Notes, rather than guarantee or insure against
losses. Accordingly, all Advances will be reimbursable to the Administrative
Agent, without interest, as described in this prospectus.
Financial Component Advances. If an Obligor makes a monthly payment that
is less than the Total Monthly Payment billed with respect to all Obligor
Vehicles for the related Monthly Period, but the payment made is greater than or
equal to the Fixed Charge for all Obligor Vehicles, the Administrative Agent
will advance the entire difference between (a) the amount of the Financial
Component due and (b) the Partial Financial Component Payment (each, a "Full
Financial Component Advance").
If an Obligor makes a monthly payment that is less than the Total Monthly
Payment billed with respect to all Obligor Vehicles for the related Monthly
Period, and the payment made is less than the Fixed Charge for all Obligor
Vehicles, the Administrative Agent will advance an amount equal to (a)(1) the
actual Obligor payment, multiplied by (2) a percentage equal to (A) the actual
Obligor payment divided by (B) the Fixed Charge for all Obligor Vehicles, less
(b) the Partial Financial Component Payment (each, a "Partial Financial
Component Advance"). Notwithstanding the foregoing, the total amount paid shall
not exceed the total amount of the Financial Component due for the related
Monthly Period.
The Administrative Agent will be entitled to reimbursement of all Partial
Financial Component Advances and all Full Financial Component Advances
(collectively, "Financial Component Advances"). The Administrative Agent will
offset, on an ongoing basis, from amounts collected or received in respect of
the SUBI Assets, an amount to repay Financial Component Advances where a
Financial Component Advance amount has been recovered in a subsequent payment
made by the related Obligor of the Total Monthly Payment due, or the Financial
Component Advance has been outstanding for at least 180 days after the due date
of the invoice in respect of which such Financial Component Advance was made
(collectively, "Daily Advance Reimbursements").
Sales Proceeds Advances. If, during a Collection Period, the
Administrative Agent has not sold a Specified Vehicle that became an Expired
Vehicle during that Collection Period, on the related Deposit Date the
Administrative Agent will advance the Securitization Value of the related
Specified Lease to the Trust (each, a "Sales Proceeds Advance").
After the Administrative Agent makes a Sales Proceeds Advance for an
Expired Vehicle, the Trust will have no claim against or interest in that
Expired Vehicle or any Sales Proceeds resulting from its sale or other
disposition except with respect to Residual Value Surplus. If the Administrative
Agent sells an Expired Vehicle after making a Sales Proceeds Advance, the Trust
will retain the Sales Proceeds Advance and the
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Administrative Agent will retain the Sales Proceeds up to the Securitization
Value of the related Specified Lease, and will deposit the Residual Value
Surplus into the SUBI Collection Account, which will be transferred on the
related Deposit Date to the Residual Value Surplus Account.
If the Administrative Agent has not sold an Expired Vehicle within 270 days
after it has made a Sales Proceeds Advance, it will be reimbursed for that Sales
Proceeds Advance from the SUBI Collection Account. Within six months of
receiving that reimbursement, if the related Specified Vehicle has not been
sold, the Administrative Agent shall cause that Specified Vehicle to be sold at
auction and shall remit the proceeds associated with the disposition of that
Specified Vehicle to the SUBI Collection Account.
Insurance on the Specified Vehicles
Each Specified Lease will indicate whether Ryder or the related Obligor
will be required to maintain in full force and effect during the related Lease
Term a comprehensive collision and physical damage insurance policy covering the
actual cash value of the related Specified Vehicle and naming the Origination
Trustee, on behalf of the Origination Trust, as loss payee. Additionally, either
Ryder or the related Obligor will be required to maintain vehicle liability
insurance in amounts equal to the greater of the amount prescribed by applicable
state law or industry standards as set forth in the related Specified Lease,
naming the Origination Trust or the Origination Trustee, on behalf of the
Origination Trust, as an additional insured. Because Obligors may choose their
own insurers to provide the required coverage, the actual terms and conditions
of their policies may vary. If an Obligor fails to obtain or maintain the
required insurance, the related Specified Lease will be in default and the
Administrative Agent may either obtain insurance on behalf of, and at the
expense of, the Lessee or deem the related Lease in default. In that event, it
is the practice of the Administrative Agent to repossess the related Specified
Vehicle.
Ryder does not require Obligors to carry credit disability, credit life or
credit health insurance or other similar insurance coverage that provides for
payments to be made on the Specified Leases on behalf of the Obligors in the
event of disability or death. To the extent that this type of insurance coverage
is obtained on behalf of an Obligor, payments received in respect of the
coverage may be applied to payments on the related Specified Lease to the extent
that the Obligor's beneficiary chooses to do so.
Realization Upon Charged-Off Specified Leases
The Administrative Agent will use commercially reasonable efforts to
repossess and liquidate Defaulted Vehicles. Such liquidation may be effected
through repossession of that Defaulted Vehicles and their disposition through
sale, or the Administrative Agent may take any other action permitted by
applicable law. The Administrative Agent may enforce all rights of the lessor
under the related Default Termination Lease, sell that Defaulted Vehicle in
accordance with such Default Termination Lease and commence and pursue any
proceedings in connection with such Default Termination Lease. In connection
with any such repossession, the Administrative Agent will follow such practices
and procedures as it deems necessary or advisable and as are normal and usual in
the servicing of full-service operating truck, tractor and trailer leases, and
in each case in compliance with applicable law, and to the extent more exacting,
the practices and procedure used by the Administrative Agent in respect of any
leases serviced by it for its own account. The Administrative Agent will be
responsible for all costs and expenses incurred in connection with the sale or
other disposition of Defaulted Vehicles, but will be entitled to reimbursement
to the extent such costs constitute Disposition Expenses or are expenses
recoverable under an applicable insurance policy. Proceeds from the sale or
other disposition of repossessed Specified Vehicles will constitute Termination
Proceeds and will be deposited into the SUBI Collection Account. To the extent
not otherwise covered by Sales Proceeds or Termination Proceeds, the
Administrative Agent will be entitled to reimbursement of all Disposition
Expenses from amounts on deposit in the Residual Value Surplus Account upon
presentation to the Indenture Trustee of an officer's certificate of the
Administrative Agent. Collections in respect of a Collection Period will include
all Sales Proceeds and Termination Proceeds collected during that Collection
Period.
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Administrative Agent Records, Determinations and Reports
The Administrative Agent will retain or cause to be retained all
data -- including, without limitation, computerized records, operating software
and related documentation -- relating directly to or maintained in connection
with the servicing of the Specified Leases. Upon the occurrence and continuance
of an Administrative Agent Default and termination of the Administrative Agent's
obligations under the Administration Agreement, the Administrative Agent will
use commercially reasonable efforts to effect the orderly and efficient transfer
of the servicing of the Specified Leases to a successor servicer.
The Administrative Agent will perform some monitoring and reporting
functions on behalf of the Transferor, the Trust, the Trustees and the Senior
Noteholders, including the preparation and delivery to the Indenture Trustee,
the Origination Trustee and each Rating Agency, on or before each Determination
Date, of a quarterly certificate setting forth all information necessary to make
all distributions required in respect of the related Collection Period, and the
preparation and delivery of quarterly statements setting forth the information
described under "Additional Information Regarding the Securities -- Statements
to Senior Noteholders", and an annual officer's certificate specifying the
occurrence and status of any Administrative Agent Default.
Evidence as to Compliance
Under the Administration Agreement, on or before April 30 of each year,
beginning April 30, 2000, a firm of nationally recognized independent
accountants will furnish the Trust with a statement as to compliance by the
Administrative Agent during the preceding 12 months ended December 31 -- or
since the Closing Date in the case of the first such statement.
The Administration Agreement will also provide for the delivery to the
Trust, on or before April 30 of each year, beginning April 30, 2000, of a
certificate, signed by an officer of the Administrative Agent, stating
that there has been no Administrative Agent Default during the preceding 12
months ended
December 31 -- or since the Closing Date in the case of the first such
certificate -- or, if there has been any Administrative Agent Default,
describing each such default.
Copies of such statements and certificates may be obtained by Senior
Noteholders or Senior Note Owners by a request in writing addressed to the
Indenture Trustee or the Owner Trustee, as the case may be, at the related
Corporate Trust Office.
Servicing Compensation
The Administrative Agent will be entitled to compensation for the
performance of its servicing and administrative obligations with respect to the
SUBI Assets under the Administration Agreement. The Administrative Agent will be
entitled to receive a fee in respect of the SUBI Assets allocable to the SUBI
Interest and the Retained SUBI Interest equal to, for each month in the related
Collection Period (each, a "Monthly Period"), one-twelfth of the product of (a)
1.00% and (b) the aggregate Securitization Value of all Specified Leases as of
the first day of that Monthly Period (the "Administration Fee"). The
Administration Fee will be payable on each Payment Date in respect of the three
Monthly Periods comprising the related Collection Period and will be calculated
and paid based upon a 360-day year consisting of twelve 30-day months.
The Administrative Agent will also be entitled to additional compensation
in the form of expense reimbursement, administrative fees or similar charges
paid with respect to the Specified Leases including any late payment fees now or
later in effect. The Administrative Agent will pay all expenses incurred by it
in connection with its servicing and administration activities under the
Administration Agreement and will not be entitled to reimbursement of such
expenses, except to the extent such expenses constitute Disposition Expenses.
The Administration Fee will compensate the Administrative Agent for
performing the functions of a third party servicer of the Specified Leases as an
agent for the Origination Trust under the Administration Agreement, including
collecting and processing payments, responding to inquiries of Obligors,
investigating
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delinquencies, sending payment statements, paying costs of the sale or other
disposition of Expired Vehicles and Defaulted Vehicles, overseeing the SUBI
Assets and administering the Specified Leases, including making Advances,
accounting for collections, furnishing monthly and annual statements to the
Origination Trustee with respect to distributions and generating federal income
tax information.
Administrative Agent Resignation and Termination
The Administrative Agent may not resign from its obligations and duties
under the Administration Agreement unless it determines that its duties
thereunder are no longer permissible by reason of a change in applicable law or
regulations. No such resignation will become effective until a successor
administrative agent has assumed the Administrative Agent's obligations under
the Administration Agreement. The Administrative Agent may not assign the
Administration Agreement or any of its rights, powers, duties or obligations
thereunder except as otherwise provided therein or except in connection with a
consolidation, merger, conveyance, transfer or lease made in compliance with the
Administration Agreement.
The rights and obligations of the Administrative Agent under the
Administration Agreement may be terminated following the occurrence and
continuance of an Administrative Agent Default, as described under
"-- Administrative Agent Defaults".
Indemnification by the Administrative Agent
The Administrative Agent will indemnify the Trustees and their respective
agents for any loss, liability, claim, damage or expense that may be incurred by
them as a result of any act or omission by the Administrative Agent in
connection with the performance of its duties under the Administration Agreement
but only to the extent such liability arose out of the Administrative Agent's
negligence, willful misconduct, bad faith or recklessness.
Administrative Agent Defaults
The following are among the events that would constitute "Administrative
Agent Defaults" under the Administration Agreement:
(a) any failure by the Administrative Agent to deliver to (1) the
Origination Trustee for distribution to holders of interests in the UTI,
the SUBIs or any Other SUBI, (2) the Indenture Trustee for distribution to
the Noteholders or (3) the Owner Trustee for distribution to the
Certificateholders, any required payment, which failure continues
unremedied for five Business Days after discovery thereof by an officer of
the Administrative Agent or receipt by the Administrative Agent of notice
thereof from the Indenture Trustee, the Trustee or Senior Noteholders or
Certificateholders evidencing not less than 25% of the aggregate principal
balance of the Securities, voting together as a single class;
(b) any failure by the Administrative Agent to duly observe or perform
in any material respect any other of its covenants or agreements in the
Administration Agreement, which failure materially and adversely affects
the rights of holders of interests in the UTI, the SUBIs or any Other SUBI
or the Senior Noteholders or Certificateholders, and which continues
unremedied for 90 days after written notice thereof is given as described
in clause (a) above;
(c) any failure by the Administrative Agent to deliver to the
Origination Trustee any report required to be delivered to the Origination
Trustee or the Trust pursuant to the Administration Agreement within 30
Business Days after the date that report is due;
(d) any failure to deliver to the Indenture Trustee any report
required to be delivered to the Indenture Trustee or the Trust pursuant to
the Basic Documents, which failure continues for 30 Business Days after
discovery of that failure by an officer of the Administrative Agent or
receipt by the Administrative Agent of written notice thereof from the
Indenture Trustee;
(e) any representation, warranty or statement of the Administrative
Agent made in the Administration Agreement, any other Basic Document to
which the Administrative Agent is a party or by which it is
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bound or any certificate, report or other writing delivered pursuant to the
Administration Agreement shall prove to be incorrect in any material
respect when made, which failure materially and adversely affects the
rights of holders of interests in the UTI, the SUBIs or any Other SUBI or
the Senior Noteholders or the Certificateholders, and which failure
continues unremedied for 30 days after written notice thereof is given as
described in clause (a) above;
(f) any failure by the Administrative Agent to maintain or pay when
due any premium in respect of any Contingent and Excess Liability Insurance
Policy; and
(g) the occurrence of certain events of bankruptcy, insolvency,
receivership or liquidation in respect of the Administrative Agent;
provided, however, that the occurrence of any event set forth in clauses
(a) through (f) with respect to either 1999-A SUBI will be an
Administrative Agent Default only with respect to the SUBIs and will not be
an Administrative Agent Default with respect to the UTI or any Other SUBI.
Notwithstanding the foregoing, a delay in or failure of performance referred to
under clause (b) for a period of 120 days, under clause (c) for a period of 45
Business Days or under clause (e) for a period of 60 days, will not constitute
an Administrative Agent Default if that failure or delay was caused by force
majeure or other similar occurrence. Upon the occurrence of any such event, the
Administrative Agent will not be relieved from using all commercially reasonable
efforts to perform its obligations in a timely manner in accordance with the
terms of the Administration Agreement, and the Administrative Agent will provide
to the Indenture Trustee, the Origination Trustee, the Transferor and the
Securityholders prompt notice of such failure or delay by it, together with a
description of its efforts to so perform its obligations.
Upon the occurrence of any Administrative Agent Default, the sole remedy
available to the holders of the UTI, the SUBIs and any Other SUBIs will be to
remove the Administrative Agent and appoint a successor Administrative Agent.
However, if the commencement of a bankruptcy or similar case or proceeding were
the only default, the Administrative Agent or its trustee-in-bankruptcy might
have the power to prevent that removal. See "-- Removal or Replacement of the
Administrative Agent".
Termination
The Administration Agreement will terminate upon the earlier to occur of
(a) the dissolution of the Origination Trust or (b) the discharge of the
Administrative Agent in accordance with the terms of the Administration
Agreement, which will effect a termination only with respect to the SUBI Assets
and not with respect to any other Origination Trust Assets.
Removal or Replacement of the Administrative Agent
Upon the occurrence of an Administrative Agent Default, the Origination
Trustee may, to the extent such Administrative Agent Default relates (a) to all
Origination Trust Assets, upon the direction of the holders of the SUBIs, the
UTI and any Other SUBI -- excluding Ryder, the UTI Beneficiaries or any other
affiliate of the Administrative Agent -- terminate all of the rights and
obligations of the Administrative Agent under the Administration Agreement with
respect to all Origination Trust Assets or (b) only to the SUBI Assets, upon the
direction of the holder and pledge of the SUBI Certificates, terminate all of
the rights and obligations of the Administrative Agent under the Administration
Agreement with respect to the SUBI Assets. For purposes of the immediately
preceding sentence, the holder and pledgee of the SUBI Certificates will be the
Indenture Trustee acting at the direction of Senior Noteholders holding not less
than 66 2/3% of the aggregate principal balance of the Senior Notes, so long as
any Senior Notes are outstanding. In each case, the Origination Trustee will
effect that termination by delivering notice thereof to the Administrative
Agent, with a copy to each Rating Agency or any other securities based on any
Other SUBIs affected by that Administrative Agent Default.
Upon the termination or resignation of the Administrative Agent, the
Administrative Agent subject to that termination or removal will continue to
perform its functions as Administrative Agent, in the case of (a) termination,
until the earlier of the date specified in the termination notice or, if no such
date is specified
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therein, the date of the Administrative Agent's receipt of such notice, and (b)
resignation, until the later of (1) 45 days after the delivery to the
Origination Trustee of the written resignation notice or (2) the date upon which
the resigning Administrative Agent becomes unable to act as Administrative
Agent, as specified in the resignation notice and accompanying opinion of
counsel.
In the event of a termination of the Administrative Agent as a result of an
Administrative Agent Default with respect to the SUBI Assets only, the
Origination Trustee, acting at the direction of the holder and pledgee of the
SUBI Certificates -- which holder for this purpose will be the Indenture
Trustee, acting at the direction of Senior Noteholders holding not less than
66 2/3% of the aggregate principal balance of the Senior Notes -- will appoint a
successor Administrative Agent. The Origination Trustee will have the right to
approve that successor Administrative Agent, and that approval may not be
unreasonably withheld. If a successor Administrative Agent is not appointed by
the effective date of the predecessor Administrative Agent's resignation or
termination, then the Origination Trustee will act as successor Administrative
Agent. If the Origination Trustee is legally unable to act as Administrative
Agent, then the Origination Trustee will be required to appoint, or petition a
court of competent jurisdiction to appoint, any established entity the regular
business of which includes the servicing of truck, tractor and trailer leases as
the successor Administrative Agent.
Upon appointment of a successor Administrative Agent, the successor
Administrative Agent will assume all of the rights and obligations of the
Administrative Agent under the Administration Agreement; provided, however, that
no successor Administrative Agent will have any responsibilities with respect to
the purchase of additional Leases or Vehicles by the Origination Trust or with
respect to making Advances. Any compensation payable to a successor
Administrative Agent may not be in excess of that permitted the predecessor
Administrative Agent unless the holders of the UTI, the SUBIs and any Other
SUBIs, as the case may be, bear such excess costs exclusively. If a bankruptcy
trustee or similar official has been appointed for the Administrative Agent,
that trustee or official may have the power to prevent the Indenture Trustee,
the Owner Trustee, the Senior Noteholders or the Certificateholders from
effecting that transfer of servicing. The predecessor Administrative Agent will
have the right to be reimbursed for any outstanding Advances made with respect
to the SUBI Assets to the extent funds are available therefore in respect of the
Advances made.
Miscellaneous Provisions
Amendment Provisions
General. For so long as any Senior Notes are outstanding, the Trust's
rights in the SUBI Certificates will be subject to the lien of the Indenture.
The Indenture Trustee will be the holder of the SUBI Certificates for purposes
of determining whether any proposed amendment to the SUBI Trust Agreement, the
Administration Agreement or the Trust Agreement will materially adversely affect
the interests of the holders of the SUBI Certificates.
Amendment of the SUBI Trust Agreement and the Administration
Agreement. Each of the SUBI Trust Agreement and the Administration Agreement
may be amended without the consent of the holders of the Senior Notes, the
Certificateholders, the SUBI Certificates, the UTI Certificates or any Other
SUBI Certificates, as the case may be, to cure any ambiguity, correct or
supplement any provision therein that may be inconsistent with any other
provision therein, add any other provisions with respect to matters or questions
arising under the related agreement that are not inconsistent with the
provisions of the respective agreements or add or amend any provision that
provides additional rights to any of such holders; provided, that any such
action will not, in the good faith judgment of the parties thereto, materially
and adversely affect the interest of any of such holders, or upon the delivery
of an opinion of counsel to the effect that such amendment will not adversely
and materially affect the interest of any such holder. Each of the SUBI Trust
Agreement and the Administration Agreement may also be amended from time to time
as it relates to either 1999-A SUBI, by the parties thereto, including to change
the manner in which the Residual Value Surplus Account or the Reserve Fund is
funded, including the elimination of the Residual Value Surplus Account or the
Reserve
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Fund, or to change the remittance schedule for depositing Collections and other
amounts into the SUBI Collection Account,
- upon confirmation from each Rating Agency to the effect that such
amendment would not cause its then-current rating on the Senior Notes or
Certificates to be qualified, reduced or withdrawn, or
- upon receipt of the consent of Senior Noteholders holding at least a
majority of the aggregate principal balance of the Senior Notes and, to
the extent affected thereby, the consent of Certificateholders holding at
least a majority of the aggregate principal balance of the Certificates,
for the purpose of adding any provision to, or changing in any manner or
eliminating any provision of, the agreements or modifying in any manner the
rights of the Senior Notes or Certificates; provided, however, that
- no such amendment may increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments in respect of
the SUBI Interest or the SUBI Certificates, distributions required to be
made on the Senior Notes or the Certificates or the Interest Rate or the
Certificate Rate,
- no amendment of any type shall reduce the percentage of the aggregate
principal amount of the Senior Notes and the Certificates required to
consent to any such amendment, in each case without the consent of all
the holders or 100% of all outstanding Senior Notes or Certificates, as
the case may be, and
- an opinion of counsel as to certain tax matters is delivered.
To the extent that any such amendment also relates to or affects the UTI or any
Other SUBI, such amendment will require the consent of the holders affected
thereby. Notwithstanding the foregoing, the SUBI Trust Agreement and the
Administration Agreement may be amended at any time by the parties thereto to
the extent reasonably necessary to assure that none of the Origination Trust,
the Trust or the Transferor will be classified as an association, or a publicly
traded partnership, taxable as a corporation for federal income tax purposes.
Amendment of the Trust Agreement. The Trust Agreement may be amended by
the Transferor and the Owner Trustee without the consent of any of the Senior
Noteholders or Certificateholders to cure any ambiguity, correct or supplement
any of its provisions that may be inconsistent with any other provision in the
Trust Agreement, add any other provisions with respect to matters or questions
arising under the Trust Agreement that are not inconsistent with the provisions
of the Trust Agreement or add or amend any provision in the agreement in
connection with permitting transfers of the Subordinated Notes or the
Certificates; provided, however, that this action shall not, as evidenced by an
opinion of counsel, materially adversely affect the interests of the holders of
the SUBI Certificates or the Retained SUBI Certificates -- which, so long as any
Senior Notes are outstanding, shall include the Indenture Trustee -- or any the
Senior Notes or Certificates.
The Trust Agreement may also be amended from time to time by the Transferor
and the Owner Trustee,
- with prior written notice to each Rating Agency and confirmation from
each Rating Agency that such amendment would not cause the then-current
ratings assigned to the Senior Notes and the Certificates to be
qualified, reduced or withdrawn,
- with the consent of the Senior Noteholders holding at least a majority of
the aggregate principal balance of the Senior Notes and
- to the extent affected thereby, the consent of the holders of the
Subordinated Notes holding at least a majority of the aggregate principal
balance of the Subordinated Notes, and Certificateholders holding at
least a majority of the aggregate principal balance of the Certificates,
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for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Trust Agreement or of modifying in any
manner the rights of the Senior Noteholders, the Certificateholders or the
holders of the Subordinated Notes. No such amendment shall, however,
- increase or reduce in any manner the amount of, or accelerate or delay
the timing of, distributions that are required to be made on the Notes or
the Certificates, or
- reduce the percentage of the Senior Noteholders, holders of the
Subordinated Notes or Certificateholders required to consent to any such
amendment,
without the consent of the holders of 100% of all outstanding Certificates other
than the Transferor Certificate, and provided, further that an opinion of
counsel shall be furnished to the Indenture Trustee and the Owner Trustee to the
effect that such amendment shall not (1) affect the treatment of the Senior
Notes as debt for federal income tax purposes, (2) be deemed to cause a taxable
exchange of the Senior Notes for federal income tax purposes or (3) cause the
Trust or the SUBI Certificates to be classified as an association, or a publicly
traded partnership, taxable as a corporation for federal income tax purposes.
Notwithstanding the foregoing, the Trust Agreement may be amended at any time by
the parties thereto to the extent reasonably necessary to assure that none of
the Origination Trust, the Trust or the Transferor will be classified as an
association, or a publicly traded partnership, taxable as a corporation for
federal income tax purposes.
The Trust Agreement may also be amended from time to time to approve
additional Trust activities and purposes upon the request of holders of at least
75% of the outstanding balance of the Certificates; provided, however, that any
such amendment will also require
- that each Rating Agency have delivered a letter to the effect that the
activities and purposes would not cause its then-current ratings of the
Senior Notes or the Certificates to be qualified, reduced or withdrawn,
and
- approval by holders of at least 75% of the outstanding balance of the
Senior Notes, or if the Senior Notes are no longer outstanding, by the
Subordinated Noteholder.
See "The Trust -- Formation".
The Trust Agreement will require the Owner Trustee to give the
Certificateholders 30 days' written notice of any proposed supplement to the
Indenture which would materially adversely affect the Certificateholders if the
consent of the Senior Noteholders is not required or any other amendment or
supplement to any other Basic Document unless the Owner Trustee is furnished
with an opinion of counsel that such amendment or supplement would not
materially adversely affect the Certificateholders. The Trust Agreement provides
that the Owner Trustee will not enter into such amendment unless
Certificateholders holding 25% or more of the aggregate principal balance of the
Certificates consent in writing.
Amendment of the Indenture. Without the consent of the Senior Noteholders
but with prior notice to each Rating Agency, the Owner Trustee, on behalf of the
Trust, and the Indenture Trustee, upon request by the Trust, may execute a
supplemental indenture for the purpose of adding to the covenants of the Trust,
curing any ambiguity, correcting or supplementing any provision that may be
inconsistent with any other provision or adding any other provision with respect
to matters or questions arising under the Indenture that will not be
inconsistent with other provisions of the Indenture.
Without the consent of the holder of each outstanding Senior Note affected
thereby, no supplemental indenture may:
- change the Final Payment Date of, or Interest Rate on, reduce the
principal amount thereof, or the Redemption Price with respect thereto or
change any place of payment where, or the coin or currency in which, the
Senior Notes or the interest thereon is payable;
- impair any right to institute suit for the enforcement of certain
provisions of the Indenture regarding payment;
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- reduce the percentage of the aggregate principal balance of the Senior
Notes the consent of the holders of which is required for any
supplemental indenture or for any waiver of compliance with certain
provisions of the Indenture or of certain defaults thereunder and their
consequences as provided for therein;
- modify or alter the provisions of the Indenture regarding the voting of
Senior Notes held by the Transferor, the Administrative Agent or any of
their respective affiliates or any obligor on the Senior Notes;
- reduce the percentage of the aggregate principal balance of Senior Notes
the consent of the holders of which is required to direct the Indenture
Trustee to sell or liquidate the Trust Estate, if the proceeds of that
sale would be insufficient to pay the aggregate principal balance and
accrued but unpaid interest on the Senior Notes;
- decrease the percentage of the aggregate principal balance of Senior
Notes required to amend the sections of the Indenture that specify the
applicable percentage of the aggregate principal balance of Senior Notes
necessary to amend the Indenture or the other Basic Documents; or
- permit the creation of any lien ranking prior to or on a parity with the
lien of the Indenture with respect to any of the collateral for the
Senior Notes or, except as otherwise permitted by or contemplated in the
Indenture, terminate the lien of the Indenture on any such collateral or
deprive the holder of any Senior Note of the security afforded by the
lien of the Indenture.
The Trust and the Indenture Trustee may also enter into supplemental
indentures, with the consent of holders of at least a majority of the aggregate
principal balance of the Senior Notes, and with written notice to each Rating
Agency, for the purpose of adding any provision to, changing in any manner or
eliminating any provision of the Indenture or for the purpose of modifying in
any manner the rights of the Senior Noteholders; provided, that
- such action will not, (1) as evidenced by an opinion of counsel,
materially adversely affect the interests of any Senior Noteholder and
(2) as confirmed by each Rating Agency, cause the then-current ratings of
the Senior Notes or the Certificates to be qualified, reduced or
withdrawn, and
- an opinion of counsel as to certain tax matters is delivered.
Amendment of the Program Operating Lease. The Program Operating Lease may
be amended without the consent of the Senior Noteholders or the
Certificateholders; provided, however, that
- such amendment may not, as evidenced by an opinion of counsel, materially
adversely affect the interests of the Senior Noteholders or the
Certificateholders, unless 100% of the Senior Noteholders and
Certificateholders materially adversely affected consent thereto,
- as confirmed by each Rating Agency, that amendment will not cause the
then-current rating assigned to any Senior Notes or the Certificates to
be qualified, withdrawn or reduced, and
- an opinion of counsel as to certain tax matters is delivered.
Notwithstanding the foregoing, the Program Operating Lease may be amended at any
time by the parties thereto to the extent reasonably necessary to ensure that
none of Origination Trust, the Trust or the Transferor will be classified as an
association, or a publicly traded partnership, taxable as a corporation for
federal income tax purposes.
Amendment of the SUBI Certificate Transfer Agreement. The SUBI Certificate
Transfer Agreement may be amended from time to time by the parties thereto.
Amendment of the Issuer SUBI Certificate Transfer Agreement. The Issuer
SUBI Certificate Transfer Agreement may be amended from time to time by the
parties thereto.
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Bankruptcy Provisions
The UTI Beneficiaries and the Origination Trust. The Trustees, the UTI
Beneficiaries, any Paying Agent, the Transferor, the Trust Agent, Ryder, the
Administrative Agent, each holder of an interest in the SUBI, an Other SUBI or
the UTI, and each Securityholder, by accepting the related Security, including
each Senior Noteholder, by accepting a beneficial interest in the related Senior
Notes (collectively, the "Non-Petition Parties"), will covenant that for a
period of one year and one day after payment in full of all amounts due to each
holder or pledgee of an interest in the UTI, the SUBIs or any Other SUBI, they
will not institute, or join in instituting, any bankruptcy, reorganization,
insolvency or liquidation proceeding or other similar proceeding against either
UTI Beneficiary or the Origination Trust. Notwithstanding the foregoing, each
Securityholder, the Indenture Trustee and the Owner Trustee may institute or
join any such proceeding if 100% of the holders of the SUBI and any Other SUBIs
consent, excluding the UTI Beneficiaries, the Transferor and any of their
respective affiliates. Each pledgee of the UTI, the SUBIs or any Other SUBI must
give a similar non-petition covenant.
The Transferor and the Trust. Each of the Administrative Agent, the
Transferor, the Owner Trustee, the Indenture Trustee and each Securityholder, by
accepting the related Security, including each Senior Noteholder, by accepting a
beneficial interest in the related Senior Notes, will covenant not to institute
or join in instituting any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceeding, or other similar proceeding against the Transferor or
the Trust for a period of one year and one day after the Senior Notes and the
Certificates have been paid in full; provided, however, that 100% of the Senior
Noteholders, or, if no Senior Notes are then outstanding, the Subordinated
Noteholder, or, if no Notes are then outstanding, 100% of the
Certificateholders, in each case excluding the Transferor and any of its
affiliates, may at any time institute or join in instituting any bankruptcy,
reorganization, insolvency or liquidation proceeding against the Transferor or
the Trust.
Senior Notes or Certificates Owned by the Trust, Transferor, Administrative
Agent or Their Affiliates
Any Senior Notes or Certificates owned by the Trust, the Transferor, the
Administrative Agent or any of their respective affiliates will be entitled to
benefits under the Indenture or the Trust Agreement, as the case may be, equally
and proportionately to the benefits afforded other owners of the Senior Notes or
Certificates, respectively, except that such Senior Notes or Certificates will
be deemed not to be outstanding for the purpose of determining whether the
requisite percentage of Senior Noteholders or Certificateholders, as the case
may be, have given any request, demand, authorization, direction, notice,
consent or other action under the Basic Documents.
Governing Law
The SUBI Trust Agreement and the Trust Agreement will be governed by the
laws of the State of Delaware. The Administration Agreement, the Indenture, the
SUBI Certificate Transfer Agreement, the Issuer SUBI Certificate Transfer
Agreement, the Trust Administration Agreement and the Program Operating Lease
will be governed by the laws of the State of New York.
Fees and Expenses
The Origination Trustee. The Origination Trustee will be entitled to
reasonable compensation for its services with respect to the SUBI Assets, which
will be paid by the Administrative Agent, the amount of which will be agreed
upon from time to time by the Origination Trustee and the Administrative Agent.
The Administrative Agent. As more fully described under "-- The
Administration Agreement -- Servicing Compensation", as compensation for the
servicing of the SUBI Assets and administering the distribution of funds in
respect thereof, the Administrative Agent will be entitled to receive the
Administration Fee on each Payment Date, together with reimbursement of fees and
expenses and any late payment fees now or later in effect or similar charges
paid with respect to the Specified Leases.
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The Administrative Agent will pay all expenses incurred by it in the
performance of its duties under the Administration Agreement, including fees and
disbursements of independent accountants, taxes imposed on the Administrative
Agent and expenses incurred in connection with distributions and reports to the
Trustees. The Administrative Agent will pay the fees and expenses of the
Trustees.
The Indenture Trustee. As more fully described under "Additional Document
Provisions -- The Indenture -- Compensation and Indemnity", the Administrative
Agent or the Administrator will pay the Indenture Trustee compensation for its
services and reimburse it for its reasonable expenses relating thereto.
The Owner Trustee and Paying Agent. The Administrator will pay the Owner
Trustee and each Paying Agent such fees as have been agreed upon among the
Transferor, the Administrator and the Owner Trustee or the Paying Agent, and
will reimburse the Owner Trustee and each Paying Agent for their reasonable
expenses. The Administrator will not be entitled to be reimbursed from the Trust
Estate for the payment of such expenses.
ADDITIONAL LEGAL ASPECTS OF THE ORIGINATION TRUST AND THE SUBIS
The Origination Trust
General
The Origination Trust is a business trust under Delaware law. In a business
trust, the trust property is managed for the profit of the beneficiaries, as
opposed to a common law "asset preservation" trust, where the trustee is charged
with the mere maintenance of trust property. The principal requirement for the
formation of a business trust in Delaware is the execution of a trust agreement
and the filing of a Certificate of Trust with the Secretary of State of the
State of Delaware. The Origination Trust has been so formed. The Origination
Trust has also made trust filings or obtained certificates of authority to
transact business in some states where, in the judgment of the Administrative
Agent, such action may be required.
Because the Origination Trust has been registered as a business trust for
Delaware and other state law purposes, it, like a corporation, may be eligible
to be a debtor in its own right under the United States Bankruptcy Code (the
"Bankruptcy Code"), as further described under "-- Insolvency-Related Matters".
To the extent that the Origination Trust may be eligible for relief under the
Bankruptcy Code or similar applicable state laws (the "Insolvency Laws"), the
Origination Trustee is not authorized to commence a case or proceeding
thereunder. Each of the Origination Trustee, the UTI Beneficiaries and the
holders from time to time of the UTI, the SUBIs and any Other SUBI have agreed
not to institute a case or proceeding against the Origination Trust under any
Insolvency Law for a period of one year and one day after payment in full of all
distributions to holders of the UTI, the SUBIs and any Other SUBI under the
Origination Trust Agreement. See "Additional Document
Provisions -- Miscellaneous Provisions -- Bankruptcy Provisions".
Allocation of Origination Trust Liabilities
The Origination Trust Assets may in the future be comprised of several
portfolios of Other SUBI Assets, together with the SUBI Assets and the UTI
Assets. The UTI Beneficiaries may in the future pledge the UTI as security for
obligations to third-party lenders, and may in the future create and sell or
pledge Other SUBIs in connection with other financings. The Origination Trust
Agreement will permit the Origination Trust, in the course of its activities, to
incur certain liabilities relating to its assets other than the SUBI Assets, or
relating to its assets generally. Pursuant to the Origination Trust Agreement,
as among the beneficiaries of the Origination Trust, an Origination Trust
liability relating to a particular portfolio of Origination Trust Assets will be
allocated to and charged against the portfolio of Origination Trust Assets to
which it belongs. Origination Trust liabilities incurred with respect to the
Origination Trust Assets generally will be borne pro rata among all portfolios
of Origination Trust Assets. The Origination Trustee and the beneficiaries of
the Origination Trust, including the Trust, will be bound by that allocation. In
particular, the Origination Trust Agreement will require the holders from time
to time of the UTI Certificates and any Other SUBI Certificates to waive any
claim they might otherwise have with respect to the SUBI Assets and to fully
subordinate any
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claims to the SUBI Assets in the event that such waiver is not given effect.
Similarly, by virtue of holding Senior Notes or a beneficial interest therein,
Senior Noteholders, and Note Owners will be deemed to have waived any claim they
might otherwise have with respect to the UTI Assets or any Other SUBI Assets.
See "Additional Document Provisions -- The SUBI Trust Agreement -- The SUBIs,
Other SUBIs and the UTI".
The Origination Trust Assets are located in several states, the tax laws of
which vary. Additionally, the Origination Trust may in the future own Leases and
Vehicles located in states other than the states in which it conducts business
as of the date of this prospectus. In the event any state or locality imposes a
tax on the Origination Trust at the entity level, the UTI Beneficiaries have
agreed to indemnify the holders of the SUBI Certificates, the Retained SUBI
Certificates and each Other SUBI Certificate for the full amount of such taxes.
Should the UTI Beneficiaries fail to fulfill their respective indemnification
obligations, amounts otherwise distributable to them as holders of the UTI
Certificates will be applied to satisfy such obligations. However, it is
possible that Senior Noteholders could incur a loss on their investment in the
event the UTI Beneficiaries did not have sufficient assets available, including
distributions in respect of the UTI, to satisfy such state or local tax
liabilities.
The Origination Trust Agreement provides for the UTI Beneficiaries to be
liable as if the Origination Trust were a partnership and the UTI Beneficiaries
were general partners of the partnership to the extent necessary after giving
effect to the payment of liabilities allocated severally to the holders of the
SUBI Certificates, the Retained SUBI Certificates and any Other SUBI
Certificates. However, it is possible that the Senior Noteholders and
Certificateholders could incur a loss on their investment to the extent any such
claim were allocable to the Trust as the holder of the Vehicle SUBI Certificate
or the pledgee of the Lease SUBI Certificate, either because a lien arose in
connection with the SUBI Assets or in the event the UTI Beneficiaries did not
have sufficient assets available, including distributions in respect of the UTI,
to satisfy such claimant or creditor in full.
The SUBIs
The SUBIs will evidence a beneficial interest in the related SUBI Assets.
The SUBIs will represent neither a direct legal interest in the related SUBI
Assets, nor an interest in any Origination Trust Assets other than the related
SUBI Assets. Under the allocation of Origination Trust liabilities described
under "Additional Document Provisions -- The SUBI Trust Agreement -- The SUBIs,
Other SUBIs and the UTI", payments made on or in respect of such other
Origination Trust Assets will not be available to make payments on the Senior
Notes or to cover expenses of the Origination Trust allocable to the SUBI
Assets. Any liability to third parties arising from or in respect of a Specified
Lease or a Specified Vehicle will be borne by the holders of the SUBI Interest,
including the Trust, and the Retained SUBI Interest. If any such liability
arises from a Lease or Vehicle that is an Other SUBI Asset or an UTI Asset, the
SUBI Assets will not be subject to such liability.
Because the Trust's primary asset will be the Vehicle SUBI Certificate and
its rights as a pledgee of the Lease SUBI Certificate, the Trust, and,
accordingly, the Indenture Trustee, will have an indirect beneficial ownership
interest, rather than a security interest, in the SUBI Assets allocable to the
SUBI Interest. Except as otherwise described below or under "Additional Legal
Aspects of the Specified Leases and Specified Vehicles", generally the Trust
will not have a perfected security interest in the SUBI Assets, and in no
circumstances will the Trust have a direct ownership or perfected security
interest in any Specified Vehicle.
The Trust will generally be deemed to own the Vehicle SUBI Certificate and,
through such ownership, to have an indirect beneficial ownership interest in the
Specified Vehicles. If a court of competent jurisdiction were to recharacterize
the sale of the Vehicle SUBI Certificate and the SUBI Interest evidenced thereby
to the Trust, the Trust, or, during the term of the Indenture, the Indenture
Trustee, could instead be deemed to have a perfected security interest in the
Vehicle SUBI Certificate, and certain rights susceptible of perfection under the
UCC, but in no event would the Trust or the Indenture Trustee be deemed to have
a perfected security interest in the Specified Vehicles.
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Because the Trust will not directly own the SUBI Assets, and because its
interest therein will generally be an indirect beneficial ownership interest,
perfected liens of third-party creditors of the Origination Trust in SUBI Assets
will take priority over the interests of the Trust and the Indenture Trustee in
the SUBI Assets. Therefore, a general creditor of the Origination Trust may
obtain a lien on one or more SUBI Assets, regardless of whether its claim would
be allocated to such SUBI Assets under the terms of the Origination Trust
Agreement. Such liens could include liens arising under various federal and
state criminal statutes, certain liens in favor of the Pension Benefit Guaranty
Corporation and judgment liens resulting from successful claims against the
Origination Trust arising from the operation of the Specified Vehicles. See
"Risk Factors -- If ERISA liens are placed on the assets of the trust, you could
suffer a loss in your investment" and "-- Vicarious tort liability may result in
a loss of your investment" and "Additional Legal Aspects of the Specified Leases
and the Specified Vehicles -- Vicarious Tort Liability" for a further discussion
of these risks.
Insolvency-Related Matters
As described under "Additional Document Provisions -- The SUBI Trust
Agreement -- The SUBIs, Other SUBIs and the UTI" and "-- The SUBIs", each holder
or pledgee of the UTI Certificates and any Other SUBI Certificate will be
required to expressly disclaim any interest in the SUBI Assets and to fully
subordinate any claims to the SUBI Assets in the event that disclaimer is not
given effect. Although no assurances can be given, in the unlikely event of the
bankruptcy of RTR I LP, the Transferor believes that the SUBI Assets would not
be treated as part of RTR I LP's bankruptcy estate and that, even if they were
so treated, the subordination by the holders and pledgees of the UTI
Certificates and any Other SUBI Certificate would be enforceable. In addition,
as described under "Risk Factors -- A bankruptcy of the transferor or
administrative agent could delay or limit payments to you", each of RTR I LP,
the Origination Trust, or the Origination Trustee when acting on its behalf, and
the Transferor has taken steps in structuring the transactions described herein
and has undertaken to act throughout the life of such transactions in a manner
intended to ensure that in the event a voluntary or involuntary case is
commenced by or against Ryder under the Insolvency Laws, the separate legal
existence of each of Ryder, on the one hand, and the Origination Trust, RTR I LP
and the Transferor, on the other hand, will be maintained such that none of the
respective assets and liabilities of the Origination Trust, RTR I LP or the
Transferor should be consolidated with those of Ryder.
With respect to RTR I LLC and RTR III LLC, these steps include their
creation as separate limited liability companies under limited liability company
agreements containing certain limitations, including, the requirement that each
must have at all times a managing member that is a corporation with at least two
independent directors, and restrictions on the nature of their businesses and
operations and on their ability to commence a voluntary case or proceeding under
any Insolvency Law without the unanimous affirmative vote of all members,
including each independent member. With respect to RTR I LP and the Transferor,
these steps include their creation as separate, special purpose limited
partnerships, pursuant to limited partnership agreements containing certain
limitations (including, restrictions on the nature of their respective
businesses and on their ability to commence a voluntary case or proceeding under
any Insolvency Law without the unanimous affirmative vote of all members of
their respective general partners, including each independent director of each
managing member).
There can be no assurance, however, that the limitations on the activities
of RTR I LP, the Origination Trust and the Transferor, as well as the
restrictions on their abilities to obtain relief under Insolvency Laws or lack
of eligibility thereunder, as described above, would prevent a court from
concluding that their assets and liabilities should be consolidated with those
of Ryder, if Ryder becomes the subject of a case or proceeding under any
Insolvency Law. On the Closing Date, Brown & Wood LLP, as special counsel to the
Transferor, will deliver an opinion based on a reasoned analysis of analogous
case law -- although there is no precedent based on directly similar facts -- to
the effect that, subject to certain facts, assumptions and qualifications
specified in the opinion, under present reported decisional authority and
applicable statutes to federal bankruptcy cases, if Ryder were to become a
debtor in a case under the Bankruptcy Code, it would not be a proper exercise by
a court of its equitable discretion (a) to disregard the separate legal
existence of any of the Origination Trust, RTR I LP or the Transferor from that
of Ryder and (b) to order the substantive
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consolidation of the assets and liabilities of any of the Origination Trust, RTR
I LP or the Transferor with the assets and liabilities of Ryder. Among other
things, that opinion will assume that each of the Origination Trust, or the
Origination Trustee when acting on its behalf, RTR I LP and the Transferor will
follow certain procedures in the conduct of its affairs, including maintaining
separate records and books of account from those of Ryder, not commingling its
respective assets with those of Ryder, doing business in a separate office from
Ryder and not holding itself out as having agreed to pay, or being liable for,
the debts of Ryder. In addition, that opinion will assume that except as
expressly provided by the Origination Trust Agreement and the Administration
Agreement -- each of which contains terms and conditions consistent with those
that would be arrived at on an arm's length basis between unaffiliated entities
in the belief of the parties thereto -- Ryder generally will not guarantee the
obligations of the Origination Trust, RTR I LP or the Transferor to third
parties, and will not conduct the day-to-day business or activities of any
thereof, other than in its capacity as Administrative Agent acting under and in
accordance with the Administration Agreement. Each of Ryder, the Origination
Trust, RTR I LP and the Transferor intends to follow and has represented that it
will follow these and other procedures related to maintaining the separate
identities and legal existences of each of the Origination Trust, RTR I LP and
the Transferor. Such a legal opinion, however, will not be binding on any court.
If a case or proceeding under any Insolvency Law were to be commenced by or
against any of Ryder, the Origination Trust, RTR I LP or the Transferor, if a
court were to order the substantive consolidation of the assets and liabilities
of any of such entities with those of Ryder or if an attempt were made to
litigate any of the foregoing issues, delays in distributions on the SUBI
Certificates, and possible reductions in the amount of such distributions, to
the Trust -- either directly or, if the Program Operating Lease remains in
effect, indirectly to the extent resulting in delayed or reduced Program
Operating Lease Payments from the Transferor to the Trust -- and therefore to
the Senior Noteholders, could occur. In addition, the SUBI Trust Agreement
provides that if the Transferor becomes bankrupt or insolvent or the Trust is
dissolved -- which could occur as a result of the bankruptcy of the
Transferor -- the SUBI will be terminated and the SUBI Trust Agreement will
terminate with respect to the SUBI. In each case, the Origination Trustee will
be required to distribute the SUBI Assets to the holders of the SUBI
Certificates. Because the Trust has pledged its rights in and to the SUBI
Certificates to the Indenture Trustee, such distribution would be made to the
Indenture Trustee, which would be responsible for retitling the Specified
Vehicles. The cost of that retitling would reduce amounts payable from the SUBI
Assets that are available for payments of interest on and principal of the
Senior Notes, and in that event, the Senior Noteholders could suffer a loss on
their investment.
RTR I LP will treat its conveyance of the SUBI Certificates to the
Transferor as an absolute sale, transfer and assignment of all of its interest
therein for all purposes. However, if a case or proceeding under any Insolvency
Law were commenced by or against RTR I LP, and RTR I LP as debtor-in-possession
or a creditor, receiver or bankruptcy trustee of RTR I LP were to take the
position that the sale, transfer and assignment of the SUBI Certificates by RTR
I LP to the Transferor should instead be treated as a pledge of the SUBI
Certificates to secure a borrowing by RTR I LP, delays in payments of proceeds
of the SUBI Certificates to the Trust, and therefore to the Senior Noteholders,
could occur or, should the court rule in favor of that position, reductions in
the amount of such payments could result. On the Closing Date, Brown & Wood LLP,
as special counsel to the Transferor, will deliver an opinion to the effect
that, subject to certain facts, assumptions and qualifications specified
therein:
- In the event that the Transferor were to become a debtor in a case under
the Bankruptcy Code subsequent to the sale, transfer and assignment of
the Vehicle SUBI Certificate to the Trust, the sale, transfer and
assignment of the Vehicle SUBI Certificate from the Transferor would be
characterized as an absolute sale, transfer and assignment of the SUBI
Certificate from the Transferor to the Trust, and the Vehicle SUBI
Certificate and the proceeds thereof would not be property of the
Transferor's bankruptcy estate;
- In the event that RTR I LP were to become a debtor in a case under the
Bankruptcy Code subsequent to the sale, transfer and assignment of the
SUBI Certificates to the Transferor, the sale, transfer and assignment of
the SUBI Certificates from RTR I LP would be characterized as an absolute
sale,
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transfer and assignment of the SUBI Certificates from RTR I LP to the
Transferor, and the SUBI Certificates and the proceeds thereof would not
be property of RTR I LP's bankruptcy estate; and
- In the event that Ryder were to become a debtor in a case under the
Bankruptcy Code subsequent to Ryder's sale, transfer and assignment of
the Specified Vehicles and Specified Leases to the Origination Trust, the
sale, transfer and assignment of the Specified Vehicles and Specified
Leases from Ryder would be characterized as an absolute sale, transfer
and assignment of the Specified Vehicles and Specified Leases from Ryder
to the Origination Trust, and the Specified Vehicles, the Specified
Leases or the proceeds thereof would not be property of the Ryder's
bankruptcy estate.
As indicated above, however, such a legal opinion is not binding on any court.
As a precautionary measure, the Transferor will take the actions requisite
to obtaining a security interest in the SUBI Certificates as against RTR I LP
which the Transferor will assign to the Trust and the Trust will assign to the
Indenture Trustee. The Indenture Trustee will perfect its security interest in
each SUBI Certificate, which will each be a "certificated security" under the
UCC, by possession. Accordingly, if the conveyance of the SUBI Certificates by
RTR I LP to the Transferor were not respected as an absolute sale, transfer and
assignment, the Transferor, and ultimately the Trust and the Indenture Trustee
as successors in interest, should be treated as a secured creditor of RTR I LP,
although a case or proceeding under any Insolvency Law with respect to RTR I LP
could result in delays or reductions in distributions on the SUBI Certificates
as indicated above, notwithstanding such perfected security interest.
In the event that the Administrative Agent were to become subject to a case
under the Bankruptcy Code, some payments made within one year of the
commencement of such case, including Advances, Reallocation Payments and
payments made with respect to the Titling Grace Period Vehicles which were not
properly retitled during the Titling Grace Period, may be recoverable by the
Administrative Agent as debtor-in-possession or by a creditor or a trustee in
bankruptcy as a preferential transfer from the Administrative Agent. See "Risk
Factors -- A bankruptcy of the transferor or the administrative agent could
delay or limit payments to you".
ADDITIONAL LEGAL ASPECTS OF THE SPECIFIED LEASES AND THE SPECIFIED VEHICLES
Back-up Security Interests
Because the Trust will own the Vehicle SUBI Certificate, the Trust will
have an indirect beneficial interest, rather than a security interest, in the
Vehicle SUBI Assets. The Trust also will be a pledgee of the Lease SUBI
Certificate held by the Transferor which in turn will have an indirect
beneficial interest, rather than a security interest, in the Lease SUBI Assets.
Except as otherwise described below, the Owner Trustee generally will not have a
perfected security interest in the property of the Trust or the SUBI Assets and
in no circumstances will the Owner Trustee have a perfected security interest in
any Specified Vehicle.
As described under "Additional Legal Aspects of the Origination Trust and
the SUBIs", the Indenture Trustee will have a security interest in the SUBI
Certificates perfected by possession.
The SUBI Assets will consist principally of the Specified Leases and the
related Specified Vehicles, subject to the rights of the Obligors under the
Specified Leases. To the extent that the pledge of the Lease SUBI Certificate
were to be viewed as representing a transfer of the assets of the Origination
Trust, the Specified Leases would be "chattel paper" as defined in the UCC.
Pursuant to the UCC, a non-possessory security interest in chattel paper may be
perfected by filing a UCC-1 financing statement with the appropriate filing
office in the state where the debtor has its chief executive office.
Accordingly, as a precaution, UCC-1 financing statements relating to the
Specified Leases will be filed naming:
- the Origination Trust as debtor and the Indenture Trustee as assignee
secured party;
- RTR I LP as debtor and the Indenture Trustee as assignee secured party;
- the Transferor as debtor and the Indenture Trustee as assignee secured
party; and
- the Trust as debtor and the Indenture Trustee as secured party.
Perfection and the effect of perfection or non-perfection of a security interest
in the Specified Vehicles are governed by the certificate of title statutes of
the states in which such Specified Vehicles are located. Because
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of the administrative burden and expense of perfecting an interest in trucks,
tractors and trailers under the certificate of title statutes in the states in
which the Specified Leases were originated, the Indenture Trustee's interest in
the Specified Vehicles will be unperfected, and if the transfer of the Vehicle
SUBI Certificate were to be viewed as a transfer of the Vehicle SUBI Assets, the
Indenture Trustee would only have a perfected security interest in the Specified
Leases. The Indenture Trustee's security interest in the Specified Leases could
be subordinate to the interests of some other parties who take possession of the
Specified Leases. Specifically, the Trust's security interest in a Specified
Lease could be subordinate to the rights of a purchaser of that Specified Lease
who takes possession thereof without knowledge or actual notice of the Trust's
security interest. The Specified Leases will not be stamped to indicate the
precautionary security arrangements. However, the Administration Agreement
requires the Administrative Agent to retain custody of the Specified Leases. To
the extent that a valid lien is imposed by a third party against a Specified
Vehicle, the interest of the lienholder will be superior to the unperfected
beneficial interest of the Trust in that Specified Vehicle. Although the
Administration Agreement will require the Administrative Agent to contest all
such liens and cause the removal of any liens that may be imposed, if any such
liens are imposed against the Specified Vehicles, investors in the Senior Notes
could incur a loss on their investment. For further information relating to
potential liens on the SUBI Assets, see "Additional Document Provisions -- The
Administration Agreement -- Notification of Liens and Claims", "Additional
Document Provisions -- The Administration Agreement -- Custody of Lease
Documents and Certificates of Title" and "Additional Legal Aspects of the
Origination Trust and the SUBIs -- The SUBIs".
As noted under "Additional Legal Aspects of the Origination Trust and the
SUBIs -- The SUBIs", various liens could be imposed upon all or part of the SUBI
Assets that, by operation of law, would take priority over the Trust's interest
therein. Such liens would include mechanic's, repairmen's, garagemen's and motor
vehicle accident liens and some liens for personal property taxes, in each case
arising with respect to a particular Specified Vehicle, liens arising under
various state and federal criminal statutes and some liens more fully described
under "Risk Factors -- If ERISA liens are placed on the assets of the trust, you
could suffer a loss on your investment" in favor of the Pension Benefit Guaranty
Corporation. Additionally, any perfected security interest of the Trust in all
or part of the property of the Trust could also be subordinate to claims of any
trustee in bankruptcy or debtor-in-possession in the event of a bankruptcy of
the Transferor prior to any perfection of the transfer of the assets sold,
transferred and assigned by the Transferor to the Trust pursuant to the
Agreement, as more fully described under "Risk Factors -- A bankruptcy of the
transferor or the administrative agent could delay or limit payments to you".
Titling Grace Period -- Lack of Perfected Ownership Interest
During the Titling Grace Period, some of the Specified Vehicles will be
titled in the name of Ryder rather than in the name of the Origination Trust or
the Origination Trustee on behalf of the Origination Trust (the "Titling Grace
Period Vehicles"). During the Titling Grace Period, the Administrative Agent
will title the Titling Grace Period Vehicles in the name of the Origination
Trust or the Origination Trustee on behalf of the Origination Trust but no
action will be taken to note the lien of the Transferor on the applicable
certificates of title.
An ownership interest or security interest in a motor vehicle registered in
most states may be perfected against creditors and subsequent purchasers without
notice for valuable consideration only by one or more of the following:
depositing with a state's department of motor vehicles a properly endorsed
certificate of title for the vehicle showing the transferee or secured party as
legal owner or lienholder thereon, filing a sworn notation of lien with the
state's department of motor vehicles and noticing such lien on the certificate
of title, or if the vehicle has not been previously registered, filing an
application in usual form for an original registration together with an
application for registration of the secured party as legal owner or lienholder,
as the case may be, with a state's department of motor vehicles. Therefore, the
Origination Trust and the Transferor may not have a validly perfected ownership
interest and security interest, respectively, in the Titling Grace Period
Vehicles.
As a result, the Origination Trust's and the Transferor's ownership and
security interest, as the case may be, in such a Titling Grace Period Vehicle
will not be perfected and the Transferor's interest in the Titling
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Grace Period Vehicles will be inferior to other creditors or purchasers who have
taken the necessary steps described above. However, Ryder will assign its
ownership interest in the Specified Vehicles subject to the Specified Leases and
will transfer such Vehicles to the Origination Trust on or prior to the Closing
Date, and within the Titling Grace Period will retitle all of the Specified
Vehicles in the name of the Origination Trust or the Origination Trustee on
behalf of the Origination Trust. In many states, an assignment of an ownership
interest is an effective conveyance of an interest without amendment of any
owner noted on a vehicle's certificate of title, and the assignee succeeds
thereby to the assignor's rights as owner. However, the Origination Trust's and
the Transferor's interest in these Specified Vehicles could be defeated through
fraud or negligence, and because the Origination Trust is not yet identified as
the owner on the certificate of title, Ryder's bankruptcy.
Failure to retitle a Titling Grace Period Vehicle in the name of the
Origination Trust or the Origination Trustee on behalf of the Origination Trust
by the end of the Titling Grace Period will require the Administrative Agent to
make a payment equal to the Securitization Value of the related Specified Lease
as of the last day of the Titling Grace Period. See "The Origination
Trust -- Lease Origination and the Titling of Vehicles" and "The Specified
Leases -- Representations, Warranties and Covenants". On or prior to the last
day of the Titling Grace Period the Administrative Agent will provide each
Rating Agency and the Indenture Trustee with an Officer's Certificate of the
Administrative Agent as to the status of the retitling of the Titling Grace
Period Vehicles. Although all of the Specified Vehicles have been or will be,
during the Titling Grace Period, titled in the name of the Origination Trust or
the Origination Trustee on behalf of the Origination Trust, no liens will be
recorded on the related certificates of title. See "-- Back-up Security
Interests".
Vicarious Tort Liability
Although the Origination Trust will own the Specified Vehicles, they will
be operated by the related Obligors and their invitees. State laws differ as to
whether anyone suffering injury to person or property involving a vehicle may
bring an action against the owner of that vehicle merely by virtue of such
ownership.
Following an accident involving a Specified Vehicle, under certain
circumstances the Origination Trust may be the subject of an action for damages
as a result of its ownership of that Specified Vehicle. To the extent that
applicable state law permits such an action, the Origination Trust and the
Origination Trust Assets may be subject to liability. The laws of many states
either do not permit such suits or provide that the lessor's liability is capped
at the amount of any liability insurance that the lessee was required but failed
to maintain. However, in some states, such as New York, liability is joint and
several and there does not appear to be a limit on an owner's liability.
Although the Origination Trust's insurance coverage is substantial, in the
event that all applicable insurance coverage were to be exhausted and damages
were to be assessed against the Origination Trust, claims could be imposed
against the assets of the Origination Trust, including the Specified Vehicles.
However, such claims would not take priority over any SUBI Assets to the extent
that the Trust had a prior perfected security interest therein, such as would be
the case, in certain limited circumstances, with respect to the Specified
Leases, as further described under "-- Back-up Security Interests". If any such
claims were imposed against the assets of the Origination Trust, investors in
the Senior Notes could incur a loss on their investment.
Repossession of Specified Vehicles
In the event that a default by an Obligor has not been cured within a
certain period of time after being sent notice of that default, the
Administrative Agent will ordinarily repossess the related Specified Vehicle.
Some jurisdictions require that a lessee be notified of the default and be given
a time period within which to cure that default prior to repossession.
Generally, this right to cure may be exercised on a limited number of occasions
in any one-year period. In these jurisdictions, if a lessee objects or raises a
defense to repossession, an order must be obtained from the appropriate state
court, and the vehicle must then be repossessed in accordance with that order.
Other jurisdictions permit repossession without notice, but only if the
repossession can be accomplished peacefully. If a breach of the peace cannot be
avoided, judicial action will be required.
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After the Administrative Agent has repossessed a Specified Vehicle, it may
provide the related Obligor with a period of time within which to cure the
default under the related Specified Lease. If, by the end of that period, the
default has not been cured, the Administrative Agent will attempt to sell that
Specified Vehicle. The Termination Proceeds therefrom may be less than the
remaining amounts due under that Specified Lease at the time of default.
Deficiency Judgments
The proceeds of sale of a Specified Vehicle generally will be applied first
to the expenses of resale and repossession and then to the satisfaction of the
amounts due under the related Specified Lease. If the proceeds from the sale do
not equal the Securitization Value of the related Specified Vehicle, the
Administrative Agent may seek a deficiency judgment for the amount of the
shortfall. However, some states impose prohibitions or limitations on a secured
party's ability to seek a deficiency judgment. In these states a deficiency
judgment may be prohibited or reduced in amount if the Obligor was not given
proper notice of the resale or if the terms of resale were not commercially
reasonable. Even if a deficiency judgment is obtained, there is no guaranty that
the full amount of the judgment could be collected. Because a deficiency
judgment is a personal judgment against a defaulting Obligor who generally has
few assets to satisfy a judgment, the practical use of a deficiency judgment is
often limited. Therefore, in many cases, it may not be useful to seek a
deficiency judgment and even if obtained, a deficiency judgment may be settled
at a significant discount.
Representations and warranties will be made in the SUBI Trust Agreement
that each Specified Lease complies with all requirements of law in all material
respects. If any such representation and warranty proves to be incorrect with
respect to a Specified Lease, and is not timely cured, the Administrative Agent
will be required under the Administration Agreement to deposit an amount equal
to the Reallocation Payment in respect of that Specified Lease into the SUBI
Collection Account. See "Additional Document Provisions -- The SUBI Trust
Agreement -- The SUBIs, Other SUBIs and the UTI" and "The Specified Leases --
Representations, Warranties and Covenants" for further information regarding the
foregoing representations and warranties.
Other Limitations
In addition to laws limiting or prohibiting deficiency judgments, numerous
other statutory provisions, including applicable Insolvency Laws, may interfere
with or affect the ability of Ryder to enforce the obligation of the
Administrative Agent to enforce the rights of the Origination Trust under the
Specified Leases. For example, if an Obligor commences bankruptcy proceedings,
the receipt of that Obligor's payments due under the related Specified Lease is
likely to be delayed. In addition, an Obligor who commences bankruptcy
proceedings might be able to assign the related Specified Lease to another party
even though that Specified Lease prohibits assignment.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
General
Some portions of the discussion set forth in this section -- those that
specifically refer to Steel Hector & Davis LLP -- are statements of the opinion
of Steel Hector & Davis LLP, special federal income tax counsel to the
Transferor, as to material federal income tax consequences to Senior
Noteholders. This discussion does not purport to be complete or to deal with all
aspects of federal income taxation or any aspects of state or local taxation
that may be relevant to Senior Noteholders in light of their particular
circumstances, nor to certain types of Senior Noteholders subject to special
treatment under the federal income tax laws (for example, banks, life insurance
companies, tax-exempt organizations and broker-dealers). This discussion is
based upon current provisions of the Internal Revenue Code as of 1986, as
amended (the "Code"), existing and proposed Treasury Department regulations
thereunder (the "Treasury Regulations"), and current administrative rulings,
judicial decisions and other applicable authorities in effect as of the date
hereof, all of which are subject to change, possibly with retroactive effect. In
addition, this summary is generally limited to investors
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who purchase Senior Notes in their initial distribution and who will hold the
Senior Notes as "capital assets" -- generally, property held for
investment -- within the meaning of Section 1221 of the Code.
There are no cases or Internal Revenue Service (the "IRS") rulings with
respect to transactions similar to those described in this prospectus with
respect to the Trust, involving both debt and equity interests issued by a trust
with terms similar to those of the Notes and the Certificates. As a result,
there can be no assurance that the IRS will not challenge the conclusions set
forth below. Furthermore, legislative, judicial or administrative changes may
occur, perhaps with retroactive effect, which could affect the accuracy of the
statements and conclusions set forth below as well as the tax consequences to
Senior Noteholders. The parties do not intend to seek a ruling from the IRS on
any of the issues discussed below. Moreover, there can be no assurance that if
such a ruling were sought, the IRS would rule favorably.
Taxpayers and preparers of tax returns (including those filed by any
partnership or other issuer) 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 is given with respect to events
that have occurred at the time the advice is rendered, is not given with respect
to the consequences of contemplated actions and is directly relevant to the
determination of an entry on a tax return. Accordingly, taxpayers are advised to
consult their respective tax advisors and tax return preparers regarding the
preparation of any item on a tax return, even where the anticipated tax
treatment has been discussed herein. It is recommended that prospective
investors consult their own tax advisors with regard to the federal income tax
consequences of the purchase, ownership and disposition of the Senior Notes, as
well as the tax consequences arising under the laws of any state, foreign
country or other taxing jurisdiction.
This summary does not purport to deal with all aspects of federal income
taxation that may be relevant to Senior Noteholders in light of their personal
investment circumstances.
Senior Notes
General
Tax Characterization of the Trust. In the opinion of Steel Hector & Davis
LLP, special counsel to the Transferor, subject to the assumptions and
qualifications contained in that opinion, under existing law the Trust will not
be classified as an association, or publicly traded partnership, taxable as a
corporation for federal income tax purposes. This opinion is based on the
assumptions that, among other things, the Senior Notes, the Subordinated Notes
and the Certificates will be issued pursuant to the terms of the Basic Documents
and that such terms will be complied with. However, counsel's opinion is not
binding on the IRS and no assurance can be given that such characterization will
prevail. Some contrary characterizations that could be asserted by the IRS are
described below under "-- Possible Alternative Treatment of the Notes or Trust".
Characterization of the Senior Notes as Indebtedness. The Transferor and
the Owner Trustee will agree, and the Senior Noteholders will agree by their
purchase of Senior Notes, to treat the Senior Notes for federal, state and local
income and franchise tax purposes as indebtedness, secured by the assets of the
Trust. However, the SUBI Certificate Transfer Agreement generally refers to the
transfer of the Vehicle SUBI Certificate as an "absolute sale, transfer and
assignment," and the Transferor will treat the SUBI Certificate Transfer
Agreement, for some non-tax accounting purposes, as causing a transfer of an
ownership interest in the Vehicle SUBI Certificate and not as creating a debt
obligation.
For U.S. federal income tax purposes, the economic substance of a
transaction often determines its tax consequences. The form of a transaction,
while a relevant factor, is generally not conclusive evidence of the economic
substance of the transaction. In appropriate circumstances, the courts have
allowed the IRS, as well as taxpayers, in more limited circumstances, to treat a
transaction in accordance with its economic substance, as determined under U.S.
federal income tax law, even though the participants have characterized the
transaction differently for non-tax purposes. In Commissioner v. Danielson, 378
F.2d 771 (3d Cir. 1967) ("Danielson"), the Third Circuit Court of Appeals
substantially limited the circumstances in which a taxpayer for tax purposes
could ignore the form of a transaction. Some courts have followed this decision
while others have not. Danielson related to the treatment of a bargained-for
allocation of purchase price, which
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various taxpayers were characterizing in different ways, and the application of
the Danielson rationale to the Senior Notes, where all of the parties have
agreed on a consistent tax characterization of the transaction, is arguably not
appropriate. However, in United States v. Scharrer, 229 B.R. 210 (M.D. Fla.
1999), the District Court, citing Danielson, reversed a bankruptcy court's
decision that a purported sale of lease payments was a borrowing, on the grounds
that the form of the transaction was a sale rather than a borrowing. While the
facts of the case differ from those involving the Senior Notes, the case extends
Danielson to sale/borrowing transactions. Nevertheless, it is the opinion of
Steel Hector & Davis LLP, special counsel to the Transferor, that in a properly
presented case, the Danielson doctrine would not prevent a determination of the
tax characterization of the Senior Notes based on the economic substance of the
transaction.
In the opinion of Steel Hector & Davis LLP, special tax counsel to the
Transferor, subject to the assumptions and qualifications contained in that
opinion, under existing law the Senior Notes will be treated as indebtedness for
federal income tax purposes. The discussion below assumes this characterization
of the Senior Notes is correct.
Stated Interest. Stated interest on the Senior Notes will be taxable as
ordinary income for federal income tax purposes when received or accrued in
accordance with a Senior Note Owner's method of tax accounting.
Original Issue Discount. A Senior Note will be treated as issued with
Original Issue Discount ("OID") if the excess of its stated redemption price at
maturity over its issue price equals or exceeds a de minimis amount equal to
1/4 of 1 percent of stated redemption price at maturity multiplied by the number
of complete years based on the anticipated weighted average life of the Senior
Note to its maturity. It is expected that the Senior Notes will be issued with
de minimis OID. Generally, the issue price of a Senior Note should be the first
price at which a substantial amount of the Senior Notes included in the issue of
which the Senior Note is a part is sold to other than bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. The stated redemption price at maturity of a
Senior Note is expected to equal the principal amount of the related Senior
Note. Any amount not treated as OID because it is de minimis OID must be
included in income -- generally as gain from the sale of that Senior Note -- as
principal payments are received on the related Senior Notes in the proportion
that each such payment bears to the original principal balance of that Senior
Note.
If the Senior Notes are issued with OID, Senior Noteholders generally will
be required to include OID in income for each accrual period in advance of
receipt of the cash representing that OID. A holder of a debt instrument issued
with OID is required to recognize as ordinary income the amount of OID on the
debt instrument as such discount accrues, in accordance with a constant yield
method. Because the payments on the Senior Notes may be accelerated by reason of
prepayments on or the sale of some of the SUBI Assets, the periodic accrual of
OID, other than de minimis OID, may have to be determined under section
1272(a)(6) of the Code by taking into account both the prepayment assumption
used in pricing the Senior Notes and the prepayment experience. The amount of
OID that will accrue on a Senior Note during an accrual period -- generally the
period between interest payments or compounding dates -- is the excess, if any,
of the sum of
- the present value of all payments remaining to be made on the Senior Note
as of the close of the accrual period, and
- the payments during the accrual period of amounts included in the stated
redemption price of the Senior Note,
over the adjusted issue price of the Senior Note at the beginning of the accrual
period. An accrual period is the period over which OID accrues, and may be of
any length, provided that each accrual period is no longer than one year and
each scheduled payment of interest or principal occurs on either the last day or
the first day of an accrual period. The Trust intends to report OID on the basis
of an accrual period that corresponds to the interval between Payment Dates. The
adjusted issue price of a Senior Note is the sum of its issue price plus prior
accruals of OID, reduced by the total payments made with respect to that Senior
Note in all prior
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periods, other than qualified stated interest payments. The present value of the
remaining payments is determined on the basis of three factors:
- the original yield to maturity of the Senior Note, determined on the
basis of compounding at the end of each accrual period and properly
adjusted for the length of the accrual period,
- events which have occurred before the end of the accrual period, and
- the assumption that the remaining payments will be made in accordance
with the original prepayment assumption.
No regulations have been issued under section 1272(a)(6) so it is not clear if
that section of the Code would apply to the Senior Notes if they are treated as
having OID.
The effect of this method is to increase the portions of OID required to be
included in income by a Senior Noteholder to take into account prepayments on
the Specified Leases at a rate that exceeds the original prepayment assumption,
and to decrease -- but not below zero for any period -- the portions of OID
required to be included in income by a Senior Noteholder to take into account
prepayments on or the sale of some of the SUBI Assets at a rate that is slower
than the original prepayment assumption. Although OID will be reported to Senior
Noteholders based on the original prepayment assumption, no representation is
made to Senior Noteholders that Specified Leases will be prepaid at that rate or
at any other rate.
The holder of a Senior Note that has a fixed maturity date of not more than
one year from the issue date of that Senior Note (a "Short-Term Note") may be
subject to special rules. An accrual basis holder of a Short-Term Note, and some
cash method holders, including regulated investment companies, as set forth in
Section 1281 of the Code, generally would be required to report interest income
as interest accrues on a straight-line basis over the term of each interest
period. Other cash basis holders of a Short-Term Note would, in general, be
required to report interest income as interest is paid, or, if earlier, upon the
taxable disposition of the Short-Term Note. However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Some
special rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
Market Discount. The Senior Notes, whether or not issued with OID, will be
subject to the "market discount rules" of Section 1276 of the Code. In general,
these rules provide that if the Senior Note Owner purchases a Senior Note, as
the case may be, at a market discount -- that is, a discount from its stated
redemption price at maturity, which is generally the stated principal
balance -- or if the related Senior Notes were issued with OID, its original
issue price, as adjusted for accrued original issue discount that exceeds a de
minimis amount specified in the Code, and thereafter (a) recognizes gain upon a
disposition, or (b) receives payments of principal, the lesser of (1) that gain
or principal payment or (2) the accrued market discount, will be taxed as
ordinary interest income. Generally, the accrued market discount will be the
total market discount on the related Senior Note multiplied by a fraction, the
numerator of which is the number of days the Senior Note Owner held that Senior
Note and the denominator of which is the number of days from the date the Senior
Note Owner acquired that Senior Note until its maturity date. The Senior Note
Owner of a Senior Note may elect, however, to determine accrued market discount
under the constant-yield method.
Limitations imposed by the Code which are intended to match deductions with
the taxation of income may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
Senior Note with accrued market discount. A Senior Note Owner may elect to
include market discount in gross income as it accrues and, if that Senior Note
Owner makes such an election, is exempt from this rule. Any such election will
apply to all debt instruments acquired by the taxpayer on or after the first day
of the first taxable year to which that election applies. The adjusted basis of
a Senior Note subject
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to that election will be increased to reflect market discount included in gross
income, thereby reducing any gain or increasing any loss on a sale or taxable
disposition.
Total Accrual Election. A Senior Note Owner may elect to include in gross
income all interest that accrues on a Senior Note using the constant-yield
method described above under the heading "-- Original Issue Discount", with
modifications described below. For purposes of this election, interest includes
stated interest, acquisition discount, OID, de minimis OID, market discount, de
minimis market discount and unstated interest, as adjusted by any amortizable
bond premium (described below under "-- Amortizable Bond Premium") or
acquisition premium.
In applying the constant-yield method to a Senior Note with respect to
which this election has been made, the issue price of the Senior Note will equal
the electing Senior Note Owner's adjusted basis in the Senior Note immediately
after its acquisition, the issue date of the Senior Note will be the date of its
acquisition by the electing Senior Note Owner, and no payments on the Senior
Note will be treated as payments of qualified stated interest. This election
will generally apply only to the Senior Note with respect to which it is made
and may not be revoked without the consent of the IRS. Senior Note Owners should
consult with their own advisers as to the effect in their circumstances of
making this election.
Amortizable Bond Premium. In general, if a Senior Note Owner purchases a
Senior Note at a premium -- that is, an amount in excess of the amount payable
upon maturity -- that Senior Note Owner will be considered to have purchased
that Senior Note with "amortizable bond premium" equal to the amount of such
excess. That Senior Note Owner may elect to amortize that bond premium as an
offset to interest income and not as a separate deduction item as it accrues
under a constant-yield method over the remaining term of the Senior Note. That
Senior Note Owner's tax basis in the Senior Note will be reduced by the amount
of the amortized bond premium. Any such election shall apply to all debt
instruments, other than instruments the interest on which is excludible from
gross income, held by the Senior Note Owner at the beginning of the first
taxable year for which the election applies or thereafter acquired and is
irrevocable without the consent of the IRS. Bond premium on a Senior Note held
by a Senior Note Owner who does not elect to amortize the premium will decrease
the gain or increase the loss otherwise recognized on the disposition of the
Senior Note. The Treasury Regulations specifically exclude debt instruments that
are subject to Section 1272(a)(6) of the Code from the amortizable bond premium
rules contained in those regulations (see the discussion of Section 1272(a)(6)
in "-- Original Issue Discount" above).
Disposition of Senior Notes. A Senior Note Owner's adjusted tax basis in a
Senior Note will be its cost, increased by the amount of any OID, market
discount, acquisition discount and gain previously included in income with
respect to the Senior Note, and reduced by the amount of any payments on the
Senior Note that is not qualified stated interest and the amount of bond premium
previously amortized with respect to the Senior Note. A Senior Note Owner will
generally recognize gain or loss on the sale or retirement of a Senior Note
equal to the difference between the amount realized on the sale or retirement
and the tax basis of the Senior Note. Such gain or loss will be capital gain or
loss, except to the extent attributable to accrued but unpaid interest or as
described above under "-- Market Discount", and will be long-term capital gain
or loss if their Senior Note was held for more than one year. In addition, if
the Section 1272(a)(6) rules apply, any OID that has not accrued at the time of
payment in full of a Senior Note will be treated as ordinary income.
Subject to the OID and market discount rules discussed above and to the
one-year holding period requirement for long-term capital gain treatment, any
such gain or loss generally will be long-term capital gain or loss, provided the
Senior Note was held as a capital asset. The maximum federal income tax rate
applicable to capital gains and ordinary income for corporations is 35%. The
maximum ordinary federal income tax rate for individuals, estates and trusts is
39.6%, whereas the maximum long-term capital gains rate for such taxpayers is
20%. Under the Taxpayer Relief Act of 1997, the maximum rates on long-term
capital gains will be reduced further in the year 2001 and thereafter for some
individual taxpayers that meet specified conditions. Each prospective investor
should consult its tax advisor concerning these tax law changes.
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Information Reporting and Backup Withholding
The Indenture Trustee will be required to report annually to the IRS, and
to each Senior Noteholder, the amount of interest paid on the Senior Notes, and
the amount withheld for federal income taxes, if any, for each calendar year,
except as to exempt recipients -- generally, corporations, tax-exempt
organizations, qualified pension and profit-sharing trusts, individual
retirement accounts, or nonresident aliens who provide certification as to their
status. Each Senior Noteholder, other than Senior Noteholders who are not
subject to the reporting requirements, will be required to provide, under
penalty of perjury, a certificate containing the Senior Noteholder's name,
address, correct federal taxpayer identification number -- which would include a
social security number -- and a statement that the Senior Noteholder is not
subject to backup withholding. Should a non-exempt Senior Noteholder fail to
provide the required certification or should the IRS notify the Indenture
Trustee or the Trust that the Senior Noteholder has provided an incorrect
federal taxpayer identification number or is otherwise subject to backup
withholding, the Indenture Trustee will be required to withhold, or cause to be
withheld, 31% of the interest otherwise payable to the Senior Noteholder, and
remit the withheld amounts to the IRS as a credit against the Senior
Noteholder's federal income tax liability.
Tax Consequences to Foreign Investors
The following information describes the United States federal income tax
treatment of investors that are not U.S. persons (each, a "Foreign Person"). The
term "Foreign Person" means any person other than (a) a citizen or resident of
the United States that is a natural person, (b) a corporation or partnership for
federal income tax purposes organized in or under the laws of the United States
or any state thereof or the District of Columbia, other than a partnership that
is not treated as a "United States person" within the meaning of that term as it
is used in the Code or the Treasury Regulations, (c) an estate whose income is
subject to United States federal income tax regardless of its source of income,
or (d) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in the Treasury
Regulations, certain trusts in existence on August 20, 1996, and treated as
United States persons under the Code and the Treasury Regulations prior to such
date, that elect to continue to be treated as United States persons under the
Code or the Treasury Regulations will not be Foreign Persons.
- Interest paid or accrued to a Foreign Person that is not effectively
connected with the conduct of a trade or business within the United
States by the Foreign Person, will generally be considered "portfolio
interest" and generally will not be subject to United States federal
income tax and withholding tax, as long as the Foreign Person (1) is not
actually or constructively a "10% percent shareholder" of the Trust or
Ryder, or a "controlled foreign corporation" with respect to which the
Trust or Ryder is a "related person" within the meaning of the Code, and
(2) provides an appropriate statement (Form W-8), signed under penalty of
perjury, certifying that the Senior Note Owner is a Foreign Person and
providing that Foreign Person's name and address. If the information
provided in this statement changes, the Foreign Person must so inform the
Indenture Trustee within 30 days of that change. The statement generally
must be provided in the year a payment occurs or in either of the two
preceding years. If the interest were not portfolio interest, then it
would be subject to United States federal income and withholding tax at a
rate of 30 percent unless reduced or eliminated pursuant to an applicable
income tax treaty.
- Any capital gain realized on the sale or other taxable disposition of a
Senior Note by a Foreign Person will be exempt from United States federal
income and withholding tax, provided that (1) the gain is not effectively
connected with the conduct of a trade or business in the United States by
the Foreign Person, and (2) in the case of an individual Foreign Person,
the Foreign Person is not present in the United States for 183 days or
more in the taxable year and some other requirements are met.
- If the interest, gain or income on a Senior Note held by a Foreign Person
is effectively connected with the conduct of a trade or business in the
United States by the Foreign Person, the Senior Note Owner (although
exempt from the withholding tax previously discussed if a duly executed
Form 4224 is
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furnished) generally will be subject to United States federal income tax
on the interest, gain or income at regular federal income tax rates. In
addition, if the Foreign Person is a foreign corporation, it may be
subject to a branch profits tax equal to 30 percent of its "effectively
connected earnings and profits" within the meaning of the Code for the
taxable year, as adjusted for certain items, unless it qualifies for a
lower rate under an applicable tax treaty.
Withholding Regulations
On October 6, 1997, the Treasury Department issued final regulations (the
"Withholding Regulations") which make some modifications to the withholding,
backup withholding and information reporting rules described above. The
Withholding Regulations attempt to unify certification requirements and modify
reliance standards. The Withholding Regulations will generally be effective for
payments made after December 31, 2000, subject to some transition rules.
Prospective investors are urged to consult their own tax advisors regarding the
effect of the Withholding Regulations on their purchase, ownership and
disposition of the Senior Notes.
Possible Alternative Treatment of the Senior Notes
Although, as described above, it is the opinion of Steel Hector & Davis LLP
that the Senior Notes will properly be characterized as debt for federal income
tax purposes, such opinion will not be binding on the IRS and thus no assurance
can be given that such a characterization shall prevail. If the IRS were to
contend successfully that the Senior Notes did not represent debt for federal
income tax purposes, certain adverse tax consequences to the Trust and the
holders of Senior Notes could result. For example, the Trust would likely be
considered a "publicly-traded partnership", and as a result treated for U.S. tax
purposes as an association taxed as a corporation. In addition, income to
certain tax-exempt entities (including pension funds) generally would be
"unrelated business taxable income", and income to foreign U.S. holder of Senior
Notes generally would be subject to U.S. withholding tax and reporting
requirements. While the Transferor strongly believes that any challenge by the
IRS, if made, would be unsuccessful, there can be no assurance of this result.
Prospective investors are advised to consult with their own tax advisors
regarding the federal income tax consequences of the purchase, ownership and
disposition of the Senior Notes.
DELAWARE AND FLORIDA TAX CONSEQUENCES
General
Set forth below is a summary of some state income tax consequences of the
purchase, ownership and disposition of the Senior Notes. This discussion is not
comprehensive and is based upon current law, administrative rulings, judicial
decisions and other applicable authorities in effect as of the date hereof, all
of which are subject to change, possibly with retroactive effect. There can be
no assurance that state income tax authorities will not challenge the
conclusions stated below, and no ruling from state income tax authorities has
been or will be sought on any of the issues discussed below. Because of the
variation in each state's income tax laws, it is impossible to predict tax
consequences to the holders of the Senior Notes in all states. Holders of the
Senior Notes are urged to consult their own tax advisors with respect to state
tax consequences arising out of the purchase, ownership and disposition of the
Senior Notes.
Delaware
The Transferor has been organized as a Delaware business trust. In the
opinion of Richards, Layton & Finger P.A., special Delaware counsel to the
Trust, assuming that the Senior Notes are treated as debt for federal income tax
purposes, the Senior Notes will be treated as debt for Delaware state income tax
purposes. Assuming further that none of the Origination Trust, the Transferor or
the Trust will be classified as an association, or a publicly traded
partnership, taxable as a corporation for federal income tax purposes, none of
the Origination Trust, the Transferor or the Trust will be subject to the
Delaware state income tax at the entity level. Further, in the opinion of
Richards, Layton & Finger P.A., Senior Note Owners not otherwise subject to
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taxation in Delaware would not become subject to taxation in Delaware solely
because of a Senior Note Owner's ownership of a Senior Note.
Florida
Ryder is organized under the laws of, and its headquarters is located in,
the State of Florida. The Florida Administrative Code includes a rule (the "Loan
Rule"), promulgated under the Florida Income Tax Code, which provides that a
financial organization earning or receiving interest from loans secured by
tangible property located in Florida will be deemed to be conducting business or
earning or receiving income in Florida, and will be subject to Florida corporate
income tax irrespective of the place of receipt of that interest. A "financial
organization" is defined to include any bank, trust company, savings bank,
industrial bank, land bank, safe deposit company, private bank, savings and loan
association, credit union, cooperative bank, small loan company, sales finance
company or investment company. If the Loan Rule were to apply to an investment
in the Senior Notes, then a financial organization investing in the Senior Notes
would be subject to Florida corporate income tax on a portion of its income at a
maximum rate of 5.5%, and would be required to file an income tax return in
Florida, even if it has no other Florida contacts. Steel Hector & Davis LLP,
special counsel to the Transferor, is of the opinion that, if the matter were
properly presented to a court having jurisdiction, and assuming interpretation
of relevant law on a basis consistent with existing authority, that court would
hold that the Loan Rule would not apply to an investment in the Senior Notes or
the receipt of interest thereon by a financial organization with no other
Florida contacts. Consequently, prospective investors are urged to consult their
own tax advisers as to the applicability of Florida taxation to their
investments in the Senior Notes and to their ability to offset any such Florida
tax against any other state tax liabilities that such investors might have.
On the Closing Date, Steel Hector & Davis LLP will also render an opinion
that (i) the Trust will not be classified as an association taxable as a
corporation for Florida income tax purposes and (ii) the Senior Notes will be
treated as debt for Florida income tax law, and (iii) Senior Note Owners not
otherwise subject to taxation in Florida would not become subject to Florida
income taxation solely because of a Senior Note Owner's ownership of a Senior
Note.
Miscellaneous
In the event that any state or locality imposes a tax on the Origination
Trust, the Transferor or the Trust at the entity level, the UTI Beneficiaries
have agreed to indemnify the holders of the SUBIs for the full amount of such
taxes. If the UTI Beneficiaries should fail to fulfill their respective
indemnification obligations, amounts otherwise distributable to them as holders
of the UTI will be used to satisfy these indemnification obligations. However,
it is possible that the Senior Noteholders could incur a loss on their
investment in the event the UTI Beneficiaries did not have sufficient assets
available, including distributions on the UTI, to satisfy these state or local
tax liabilities.
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE DO NOT PURPORT TO
ADDRESS THE APPLICABILITY OF STATE TAX LAWS OTHER THAN THE TREATMENT OF THE
TRUST AND THE SENIOR NOTE OWNERS UNDER THE LAWS OF FLORIDA AND DELAWARE AND MAY
NOT BE APPLICABLE DEPENDING UPON A SENIOR NOTE OWNER'S PARTICULAR TAX SITUATION.
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE SENIOR
NOTES, INCLUDING THE TAX CONSEQUENCES UNDER FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
General
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes some restrictions on employee benefit or other plans subject to ERISA or
Section 4975 of the Code ("Plans") and on persons who are parties in interest or
disqualified persons (collectively, "Parties in Interest") with respect to those
Plans, that could affect purchases of the Senior Notes by or on behalf of Plans.
Some employee
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benefit plans, such as governmental plans and church plans, if no election has
been made under Section 410(d) of the Code, are not subject to the requirements
of ERISA or Section 4975 of the Code and assets of those plans may be invested
in Senior Notes without regard to the ERISA considerations described below,
subject to the provisions of other applicable federal and state law, including,
for any government or church plan qualified under Section 401(a) of the Code and
exempt from taxation under Section 501(a) of the Code, the prohibited
transaction rules set forth in Section 503 of the Code.
Investments by most Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification, requirements respecting delegation of investment authority and
the requirement that a Plan's investment be made in accordance with the
documents governing the Plan.
Prohibited Transactions
Some transactions involving the Trust might be deemed to constitute or give
rise to prohibited transactions under ERISA and Section 4975 of the Code if
assets of the Trust were deemed to be assets of a Plan. Under a regulation
issued by the United States Department of Labor (the "Plan Assets Regulation"),
the assets of the Trust would be treated as plan assets of a Plan for purposes
of ERISA and the Code only if the Plan acquires an "equity interest" in the
Trust and none of the exceptions contained in the Plan Assets Regulation is
applicable. An equity interest is defined under the Plan Assets Regulation as an
interest in an entity other than an instrument which is treated as indebtedness
under applicable local law and which has no substantial equity features.
Although there is no guidance under ERISA on how this definition applies
generally, or in particular to a security like the Senior Notes, the Transferor
believes that the Senior Notes should be treated as indebtedness without
substantial equity features for purposes of the Plan Assets Regulation. However,
without regard to whether the Senior Notes are treated as an equity interest for
such purposes, the acquisition or holding of Senior Notes by or on behalf of a
Plan could be considered to give rise to a prohibited transaction if the Trust,
a Trustee, any Certificateholder, or any of their affiliates, is or becomes a
Party in Interest with respect to that Plan. In that case, some exemptions from
the prohibited transaction rules could be applicable, depending on the type and
circumstances of the Plan fiduciary making the decision to acquire a Senior
Note. Included among these exemptions are: Prohibited Transaction Class
Exemption ("PTCE") 90-1, which exempts some transactions involving insurance
company pooled separate accounts, PTCE 95-60, which exempts some transactions
involving insurance company general accounts, PTCE 91-38, which exempts some
transactions involving bank collective investment funds, PTCE 96-23, which
exempts some transactions effected on behalf of a Plan by an "in-house asset
manager", and PTCE 84-14, which exempts some transactions effected on behalf of
a Plan by a "qualified professional asset manager".
A Plan fiduciary considering the purchase of Senior Notes should consult
its tax and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences. Acceptance
of subscriptions for Senior Notes on behalf of plans is in no respect a
representation by the Transferor, the Trust, Ryder or any other party that this
investment meets all relevant legal requirements with respect to investments by
any particular plan or that such investment is appropriate for any particular
plan. Each plan fiduciary should consult with its attorneys and financial
advisors as to the propriety of an investment in light of the circumstances of
the particular plan and the restrictions of ERISA and Section 4975 of the Code.
Each purchaser or transferee of a Senior Note, by its acceptance of that
Senior Note, will be deemed to have represented that (A) such transferee is not,
and will not acquire the Senior Note on behalf or with the assets of, any
"employee benefit plan" as defined in Section 3(3) of ERISA or any other "plan"
as defined in Section 4975(e)(1) of the Code, or (B) the transferee's
acquisition and holding of the Senior Note is covered by PTCE 84-14, PTCE 90-1,
PTCE 91-38, PTCE 95-60, PTCE 96-23 or a similar exemption.
RATINGS OF THE SENIOR NOTES
The Senior Notes will be issued only if the Class A-1 Notes are rated in
the highest short-term rating category and the other Senior Notes are rated in
the highest long-term category by each Rating Agency. The
103
<PAGE> 104
ratings of the Senior Notes will be based primarily upon the value of the
Specified Leases, the Reserve Fund, the Residual Value Surplus Account and the
terms of the Subordinated Notes and the Certificates. There can be no assurance
that any such rating will not be lowered or withdrawn by the assigning Rating
Agency if, in its judgment, circumstances so warrant. In the event that a rating
with respect to the Senior Notes is qualified, reduced or withdrawn, no person
or entity will be obligated to provide any additional credit enhancement with
respect to the Senior Notes.
The ratings of the Senior Notes should be evaluated independently from
similar ratings on other types of securities. A rating is not a recommendation
to buy, sell or hold the Senior Notes, inasmuch as such a rating does not
comment as to market price or suitability for a particular investor. The ratings
of the Senior Notes address the likelihood of the payment of principal of and
interest on the Senior Notes pursuant to their terms.
There can be no assurance as to whether any agency other than the assigning
Rating Agency will rate the Senior Notes or, if one does, what rating will be
assigned by such other rating agency. A rating on the Senior Notes by another
rating agency, if assigned at all, may be lower than the ratings assigned to the
Senior Notes by the assigning Rating Agency.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
relating to the Senior Notes (the "Underwriting Agreement"), the Transferor has
agreed to sell to the underwriters named below (the "Underwriters"), for whom
Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as representative
(the "Representative"), and the Underwriters have agreed to purchase, severally
but not jointly, the following principal amounts of the Senior Notes.
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5
UNDERWRITER SENIOR NOTES SENIOR NOTES SENIOR NOTES SENIOR NOTES SENIOR NOTES
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith $21,000,000 $47,250,000 $40,500,000 $39,750,000 $63,675,000
Incorporated .................
First Union Securities, Inc. ............. 3,500,000 7,875,000 6,750,000 6,625,000 10,612,500
Salomon Smith Barney Inc. ................ 3,500,000 7,875,000 6,750,000 6,625,000 10,612,500
----------- ----------- ----------- ----------- -----------
Total............................ $28,000,000 $63,000,000 $54,000,000 $53,000,000 $84,900,000
=========== =========== =========== =========== ===========
</TABLE>
The Underwriting Agreement provides, subject to conditions precedent, that
the Underwriters will be obligated to purchase all the Senior Notes if any are
purchased. The Underwriting Agreement provides that if there is an event of
default by an Underwriter, in some circumstances the purchase commitments of the
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated. The Underwriters have agreed to reimburse the Transferor for some
of its expenses incurred in connection with the offering of the Senior Notes.
The Transferor has been advised by the Representative that the Underwriters
propose initially to offer the Senior Notes to the public at the respective
offering prices set forth on the cover hereof and to certain dealers at such
prices less a selling concession not to exceed the percentage of the principal
amount of the Senior Notes set forth below, and that the Underwriters may allow
and such dealers may reallow a reallowance discount not to exceed the percentage
of the principal amount of the Senior Notes set forth below.
<TABLE>
<CAPTION>
REALLOWANCE
CLASS OF SENIOR NOTES SELLING CONCESSION DISCOUNT
- --------------------- ------------------ --------------------
<S> <C> <C>
Class A-1........................................... 0.12% 0.07%
Class A-2........................................... 0.135% 0.08%
Class A-3........................................... 0.15% 0.09%
Class A-4........................................... 0.18% 0.11%
Class A-5........................................... 0.195% 0.12%
</TABLE>
The Transferor and Ryder have jointly and severally agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act of 1933, or contribute to payments which the Underwriters may be
required to make in respect thereof.
104
<PAGE> 105
Upon receipt of a request by an investor who has received an electronic
Prospectus from the Transferor, its affiliates or an Underwriter, or of a
request by such investor's representative, within the period during which there
is an obligation to deliver a Prospectus, the Transferor or the Underwriters
will promptly deliver, or cause to be delivered, without charge, a paper copy of
the Prospectus.
Until the distribution of the Senior Notes is completed, the rules of the
SEC may limit the ability of the Underwriters and certain selling group members
to bid for and purchase Senior Notes. As an exception to these rules, the
Underwriters are permitted to engage in certain transactions that stabilize the
price of the Senior Notes. Such transactions may consist of bids and purchases
for the purpose of pegging, fixing or maintaining the price of such classes of
Senior Notes.
Neither the Transferor nor the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the prices of the Senior Notes. In addition, neither
the Transferor nor the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Transferor has been advised by the Underwriters that they presently
intend to make a market in the Senior Notes; however, they are not obligated to
do so, any market-making may be discontinued at any time, and there can be no
assurance that an active public market for the Senior Notes will develop.
LEGAL MATTERS
Steel Hector & Davis LLP, Miami, Florida, will pass on the legality of the
Senior Notes for the Transferor. The Transferor is also being advised on various
other legal matters, including federal income tax matters relating to the Senior
Notes, by Steel Hector & Davis LLP. Richards, Layton & Finger P.A., Wilmington,
Delaware, will act as Delaware counsel to the Transferor. Various legal matters
with respect to insolvency issues relating to the Senior Notes will be passed
upon for the Transferor by Brown & Wood LLP, San Francisco, California. Brown &
Wood LLP will act as counsel for the Underwriters. Brown & Wood LLP has rendered
services to the Transferor and its affiliates in connection with the
establishment of the Origination Trust and in some matters not related to the
Senior Notes offered by this prospectus.
EXPERTS
The balance sheets of Ryder Truck Rental LT as of December 31, 1998 and
1997 and the related statements of operations, changes in trust equity and cash
flows for the year ended December 31, 1998 and period from July 23, 1997 (date
of inception) through December 31, 1997 have been included in this prospectus
and in the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, appearing elsewhere in this
prospectus, and upon the authority of that firm as experts in accounting and
auditing.
The balance sheet of Ryder Vehicle Lease Trust 1999-A as of September 9,
1999 has been included in this prospectus and in the registration statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
appearing elsewhere in this prospectus, and upon the authority of that firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Transferor, as originator of the Trust, Ryder Funding LP, as originator
of the Origination Trust, the Origination Trust, as issuer of the SUBIs, and the
Trust, as issuer of the Notes, have filed with the SEC a Registration Statement
on Form S-1 (together with all amendment and exhibits thereto, the "Registration
Statement"), of which this prospectus is a part, under the Securities Act of
1933, with respect to the Senior Notes being offered by this prospectus. This
prospectus does not contain all of the information set forth in the Registration
Statement, some parts of which have been omitted in accordance with the rules
and regulations of the SEC. For further information, reference is made to the
Registration Statement, which is available for
105
<PAGE> 106
inspection without charge at the public reference facilities of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the
regional offices of the SEC at Suite 1400, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661-2511 and Suite 1300, Seven World Trade Center,
New York, New York 10048. Copies of such information can be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The SEC maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC at http://www.sec.gov. The Administrative
Agent, on behalf of the Trust, will also file or cause to be filed with the SEC
such periodic reports as are required under the Exchange Act, and the rules and
regulations of the SEC thereunder.
106
<PAGE> 107
INDEX OF PRINCIPAL TERMS
Set forth below is a list of capitalized terms used in this Offering
Circular and the pages on which the definitions of those terms may be found.
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
1999-A SUBI..................................... 15
Accrual Period.................................. 48
Administration Agreement........................ 19
Administration Fee.............................. 80
Administrative Agent............................ 19
Administrative Agent Defaults................... 81
Administrator................................... 17
Advance......................................... 78
Aggregate Cutoff Date Securitization Value...... 38
Annual Termination Option....................... 27
Available Funds................................. 55
Available Funds Shortfall Amount................ 55
Available Principal Distribution Amount......... 49
Bankruptcy Code................................. 88
Basic Documents................................. 48
Business Day.................................... 48
Casualty Proceeds............................... 77
Casualty Termination Lease...................... 50
Cede............................................ 47
Cedelbank....................................... 51
Cedelbank Participants.......................... 51
Certificate Balance............................. 49
Certificate Distribution Account................ 63
Certificate Rate................................ 60
Certificates.................................... 16
Closing Date.................................... 16
Code............................................ 95
Collection Period............................... 54
Collections..................................... 74
Conditional Prepayment Rate..................... 44
Contingent and Excess Liability Insurance....... 64
Cooperative..................................... 53
CPR............................................. 44
Cutoff Date..................................... 22
Cutoff Date Securitization Value................ 32
Daily Advance Reimbursements.................... 78
Default Termination Lease....................... 50
Defaulted Vehicle............................... 75
Definitive Notes................................ 48
Deposit Date.................................... 62
Depositaries.................................... 51
Determination Date.............................. 54
Disposition Expenses............................ 75
Distribution Accounts........................... 63
DTC............................................. 47
ERISA........................................... 102
Euroclear....................................... 51
Euroclear Operator.............................. 53
Euroclear Participants.......................... 51
Excess Amounts.................................. 55
Exchange Act.................................... 36
Expired Vehicle................................. 75
Final Payment Date.............................. 43
Financial Component............................. 29
Financial Component Advances.................... 78
Fixed Charge.................................... 29
Foreign Person.................................. 100
</TABLE>
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Full Financial Component Advance................ 78
Indenture....................................... 16
Indenture Default............................... 64
Indenture Trustee............................... 16
Indirect Participants........................... 51
Initial Certificate Balance..................... 16
Initial Deposit................................. 62
Initial Securities Balance...................... 57
Initial Senior Note Balance..................... 16
Initial Subordinated Note Balance............... 16
Insolvency Laws................................. 88
Insurance Casualty Proceeds..................... 77
Insurance Proceeds.............................. 77
Insured Vehicles................................ 25
Interest Rate................................... 48
IRS............................................. 96
Issuer SUBI Certificate Transfer Agreement...... 22
Lease........................................... 24
Lease Default................................... 37
Lease SUBI...................................... 15
Lease SUBI Assets............................... 21
Lease SUBI Certificate.......................... 16
Lease Term...................................... 25
Leases.......................................... 19
Loan Rule....................................... 102
Loss............................................ 73
Maintenance Provider............................ 19
Maturity Date................................... 24
Monthly Period.................................. 80
Monthly Remittance Condition.................... 74
Net Book Value.................................. 32
Non-Petition Parties............................ 87
Note Distribution Account....................... 63
Note Factor..................................... 47
Notes........................................... 16
Obligor......................................... 18
Obligor Vehicles................................ 75
OID............................................. 97
Optimal Principal Distributable Amount.......... 50
Optional Purchase............................... 57
Optional Purchase Price......................... 57
Origination Trust............................... 15
Origination Trust Agreement..................... 19
Origination Trust Assets........................ 19
Origination Trustee............................. 19
Other SUBI...................................... 15
Other SUBI Assets............................... 71
Other SUBI Certificates......................... 19
Other SUBI Supplement........................... 71
Owner Trustee................................... 17
Partial Financial Component Advance............. 78
Partial Financial Component Payment............. 75
Participants.................................... 51
Parties in Interest............................. 102
Payment Date.................................... 48
Payment Date Advance Reimbursement.............. 56
Permitted Investments........................... 64
</TABLE>
107
<PAGE> 108
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Plan Assets Regulation.......................... 103
Plans........................................... 102
Principal Carryover Shortfall................... 49
Principal Distribution Amount................... 49
Program Operating Lease......................... 16
Program Operating Lease Default................. 59
Program Operating Lease Payments................ 59
Program Operating Lease Termination Date........ 59
PTCE............................................ 103
Quarterly Principal Distributable Amount........ 49
Rating Agency................................... 16
Reallocation Payment............................ 42
Record Date..................................... 48
Redemption Price................................ 57
Registration Statement.......................... 105
Representative.................................. 104
Required Deposit Rating......................... 63
Reserve Fund.................................... 61
Reserve Fund Draw Amount........................ 62
Reserve Fund Requirement........................ 62
Residual Value.................................. 32
Residual Value Losses........................... 76
Residual Value Surplus.......................... 76
Residual Value Surplus Account.................. 62
Residual Value Surplus Draw Amount.............. 62
Retained Administration Payment................. 61
Retained Certificate Distribution Amount........ 55
Retained SUBI Certificate....................... 22
Retained SUBI Interest.......................... 16
RTR I LLC....................................... 19
RTR I LP........................................ 15
RTR II LLC...................................... 19
RTR II LP....................................... 15
RTR III LLC..................................... 23
Ryder........................................... 15
Ryder System.................................... 23
Sales Proceeds.................................. 76
Sales Proceeds Advance.......................... 78
Salvage Casualty Proceeds....................... 77
Schedule A...................................... 24
Securities...................................... 16
Securities Balance.............................. 49
Securitization Rate............................. 32
Securitization Value............................ 32
Securityholders................................. 16
Senior Note Balance............................. 49
Senior Note Distribution Amount................. 57
Senior Note Owner............................... 50
Senior Noteholders.............................. 48
</TABLE>
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Senior Notes.................................... 16
Short-Term Note................................. 98
Special Event Purchase.......................... 77
Specified Leases................................ 15
Specified Vehicles.............................. 15
SUBI............................................ 15
SUBI Assets..................................... 15
SUBI Certificate Transfer Agreement............. 22
SUBI Certificates............................... 16
SUBI Collection Account......................... 61
SUBI Interest................................... 16
SUBI Supplement................................. 21
SUBI Trust Agreement............................ 21
Subordinated Note Balance....................... 49
Subordinated Note Rate.......................... 60
Subordinated Noteholder......................... 62
Subordinated Notes.............................. 16
Substitute Vehicle.............................. 25
Taxes........................................... 27
Termination Proceeds............................ 76
Termination Value............................... 28
Termination Value Payment....................... 28
Terms and Conditions............................ 54
Titling Grace Period............................ 21
Titling Grace Period Vehicles................... 93
TLSA............................................ 24
Total Monthly Payment........................... 29
Transferor...................................... 16
Transferor Certificate.......................... 17
Treasury Regulations............................ 96
Trust........................................... 16
Trust Administration Agreement.................. 17
Trust Agent..................................... 19
Trust Agreement................................. 16
Trust Estate.................................... 18
U.S. Bank....................................... 19
UCC............................................. 51
Underwriters.................................... 104
Underwriting Agreement.......................... 104
UTI............................................. 15
UTI Assets...................................... 71
UTI Beneficiaries............................... 15
UTI Certificates................................ 19
Vehicle SUBI.................................... 15
Vehicle SUBI Assets............................. 18
Vehicle SUBI Certificate........................ 16
Vehicles........................................ 19
Withholding Regulations......................... 101
</TABLE>
108
<PAGE> 109
Ryder Vehicle Lease Trust 1999-A
and Ryder Truck Rental LT
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report for Ryder Vehicle Lease Trust
1999-A.................................................... F-2
Ryder Vehicle Lease Trust 1999-A Balance Sheet.............. F-3
Ryder Vehicle Lease Trust 1999-A Notes to Balance Sheet..... F-4
Independent Auditors' Report for Ryder Truck Rental LT...... F-5
Ryder Truck Rental LT Balance Sheet......................... F-6
Ryder Truck Rental LT Statement of Operations............... F-7
Ryder Truck Rental LT Statement of Changes in Trust
Equity.................................................... F-8
Ryder Truck Rental LT Statement of Cash Flows............... F-9
Ryder Truck Rental LT Notes to Financial Statements......... F-10
</TABLE>
F-1
<PAGE> 110
Independent Auditors' Report
Chase Manhattan Bank Delaware,
as Owner Trustee for
Ryder Vehicle Lease Trust 1999-A:
We have audited the accompanying balance sheet of Ryder Vehicle Lease Trust
1999-A as of September 9, 1999. This financial statement is the responsibility
of the Trust's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit of a balance sheet includes examining, on a test basis,
evidence supporting the amounts and disclosures in that balance sheet. An audit
of a balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Ryder Vehicle Lease Trust 1999-A as
of September 9, 1999 in conformity with generally accepted accounting
principles.
KPMG LLP
Miami, Florida
September 9, 1999
F-2
<PAGE> 111
Ryder Vehicle Lease Trust 1999-A
Balance Sheet
September 9, 1999
<TABLE>
<S> <C>
ASSETS
Cash...................................................... $1,000
------
Total assets.............................................. $1,000
======
LIABILITIES & TRUST EQUITY
Contributed Capital....................................... $1,000
------
Total liabilities and trust equity........................ $1,000
======
</TABLE>
See accompanying notes to balance sheet.
F-3
<PAGE> 112
Ryder Vehicle Lease Trust 1999-A
Notes To Balance Sheet
September 9, 1999
(1) ORGANIZATION
Ryder Vehicle Lease Trust 1999-A (the "Trust"), a Delaware business trust,
was formed on June 21, 1999. The purpose and responsibilities of the Trust are
described in the Amended and Restated Trust Agreement among Ryder Funding LP and
Chase Manhattan Bank Delaware, as owner trustee.
The Trust is organized under Chapter 38 of the Delaware Business Trust Act.
The purpose of the Trust is to conserve Trust assets and collect and disburse
the periodic income from such assets. In order to achieve this purpose the Trust
will a) issue securities, b) acquire a special unit of beneficial interest
("SUBI") in Ryder Truck Rental LT, c) collect payments on the lease of the SUBI,
d) make payments on the securities, e) enter into and perform obligations to
which it is a party, and f) engage in other transactions necessary, incidental
to or connected with any of the foregoing activities.
Ryder Truck Rental LT (the "Origination Trust") was created by Ryder Truck
Rental, Inc. ("RTR") and acts as a custodian nominee holder of vehicle titles to
facilitate transfers of ownership of vehicles in connection with
securitizations. The Origination Trust reduces costs associated with
securitizations by eliminating the time and expense of re-titling vehicles upon
transfer of ownership of the vehicles to an issuer trust in a securitization.
RTR purchases vehicles that are nominally titled in the name of the Origination
Trust. The Origination Trust is a passive entity that is acting as a custodian
and serving as a nominee holder of record title to vehicles, with beneficial
ownership and use of the vehicles being vested in the holders of beneficial
interests in the trust. The initial beneficial interest in the Origination Trust
is held by entities which are wholly owned by RTR. Such beneficial ownership
interest in the vehicles is evidenced by ownership of 100% of the undivided
trust interest ("UTI") in the assets titled in the name of the Origination Trust
by RTR.
From time to time, and in connection with securitization transactions, the
owners of the UTI certificates will direct the Origination Trust to remove
certain vehicles from the UTI and transfer beneficial ownership of those
vehicles to a special unit of beneficial interest (a vehicle SUBI).
Concurrently, RTR will contribute the related commercial lease contracts to the
Origination Trust and direct the Origination Trust to transfer beneficial
ownership of those lease contracts to a special unit of beneficial interest (a
lease SUBI). A vehicle SUBI and lease SUBI represent the beneficial ownership
interest transferred to an issuer trust in a securitization,
The Trust will use the proceeds from the issuance and sale of senior notes
and other securities to purchase a vehicle SUBI. Payment of the senior notes
will be secured by the vehicle SUBI and a security interest in lease contracts
through the lease SUBI.
When the senior notes and other securities are issued, the Trust and Ryder
Funding LP (the "Transferor") will enter into a program operating lease, under
which the Transferor will make payments on the program operating lease in an
amount generally equal to certain financial component and termination value
payments made on or for the specified lease contracts and specified vehicles.
The Trust will apply these collected payments to pay interest on and
principal of the senior notes and other securities in accordance with their
terms. Payments of interest and principal on the senior notes and other
securities will be largely dependent upon receipt of payments on the program
operating lease, which is dependent upon payments on the underlying lease
contracts.
On September 9, 1999 Ryder Funding LP contributed $1,000 for the initial
undivided trust interests.
(2) INCOME TAXES
Neither the Trust nor any sub-trust constitutes a separate entity for
Federal income tax purposes or for state income or franchise purposes.
Accordingly, no taxes are provided for, as trust income is passed through to the
beneficiaries of the Trust.
F-4
<PAGE> 113
Independent Auditors' Report
RTRT Inc.,
as Trustee of
Ryder Truck Rental LT:
We have audited the accompanying balance sheets of Ryder Truck Rental LT as
of December 31, 1998 and 1997, and the related statements of operations, changes
in trust equity and cash flows for the year ended December 31, 1998 and for the
period from July 23, 1997 (date of inception) through December 31, 1997. These
financial statements are the responsibility of the Trust'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 the audit to obtain
reasonable assurance about 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.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ryder Truck Rental LT as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the year ended December 31, 1998 and for the period from inception through
December 31, 1997 in conformity with generally accepted accounting principles.
KPMG LLP
Miami, Florida
September 9, 1999
F-5
<PAGE> 114
Ryder Truck Rental LT
Balance Sheets
June 30, 1999 (unaudited) and
December 31, 1998 and 1997
<TABLE>
<CAPTION>
December 31,
June 30, ---------------
1999 1998 1997
----------- ------ ------
(unaudited)
<S> <C> <C> <C>
ASSETS
Cash...................................................... $76,176 75,055 75,000
------- ------ ------
Total assets.............................................. $76,176 75,055 75,000
======= ====== ======
LIABILITIES & TRUST EQUITY
Trust Equity.............................................. $76,176 75,055 75,000
------- ------ ------
Total liabilities and trust equity........................ $76,176 75,055 75,000
======= ====== ======
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 115
Ryder Truck Rental LT
Statements of Operations
Six months ended June 30, 1999 (unaudited),
Year ended December 31, 1998 and
Period from July 23, 1997 (date of inception) through December 31, 1997
<TABLE>
<CAPTION>
Six Months
ended Year Ended Inception to
June 30, December 31, December 31,
1999 1998 1997
-------------- ------------ ------------
(unaudited)
<S> <C> <C> <C>
REVENUE:
Interest income....................................... $1,121 55 0
------ --- ---
Total revenue......................................... 1,121 55 0
------ --- ---
EXPENSES:
Total expenses........................................ 0 0 0
------ --- ---
Net income............................................ $1,121 55 0
====== === ===
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 116
Ryder Truck Rental LT
Statements of Changes in Trust Equity
Six Months Ended June 30, 1999
(unaudited), Year ended December 31, 1998
and period from July 23, 1997 (date of inception) through December 31, 1997
<TABLE>
<CAPTION>
Capital Retained Trust
Contributions Earnings Equity
------------- -------- ------
<S> <C> <C> <C>
Inception -- July 23, 1997.................................. $ -- -- --
Capital contributions....................................... 75,000 -- 75,000
Net income.................................................. -- -- --
------- ----- ------
Balance at December 31, 1997................................ 75,000 -- 75,000
Net income.................................................. -- 55 55
------- ----- ------
Balance at December 31, 1998................................ 75,000 55 75,055
Net income (unaudited)...................................... -- 1,121 1,121
------- ----- ------
Balance at June 30, 1999
(unaudited)............................................... $75,000 1,176 76,176
======= ===== ======
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE> 117
Ryder Truck Rental LT
Statements of Cash Flows
Six Months Ended June 30, 1999 (unaudited),
Year ended December 31, 1998 and
Period from July 23, 1997 (date of inception) through December 31, 1997
<TABLE>
<CAPTION>
Six Months Year Ended Inception to
Ended June 30, December 31, December 31,
1999 1998 1997
-------------- ------------ ------------
(unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES --
Net income............................................ $ 1,121 55 --
------- ------ ------
Net cash provided by operating activities............. 1,121 55 --
------- ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES --
Payment of note receivable............................ -- -- 75,000
------- ------ ------
Net cash provided by financing activities............. -- -- 75,000
------- ------ ------
Net increase in cash.................................. 1,121 55 75,000
CASH AT BEGINNING OF PERIOD............................. 75,055 75,000 0
------- ------ ------
CASH AT END OF PERIOD................................... $76,176 75,055 75,000
======= ====== ======
NON-CASH FINANCING ACTIVITIES --
</TABLE>
During the period ended December 31, 1997, an initial capital contribution of
$75,000 was recorded in exchange for a non-interest bearing note receivable.
See accompanying notes to financial statements.
F-9
<PAGE> 118
Ryder Truck Rental LT
Notes To Financial Statements
December 31, 1998 and 1997
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Ryder Truck Rental LT (the "Origination Trust"), a Delaware business trust,
was formed on July 24, 1997. The purpose and responsibilities of the Origination
Trust are described in the Amended and Restated Trust Agreement among RTR I L.P.
and RTR II L.P., each of which is a Delaware limited partnership, as
beneficiaries, RTRT, Inc., a Delaware corporation, as trustee, Delaware Trust
Capital Management, Inc. and U.S. Bank National Association as trust agent. The
grantors of the Origination Trust are affiliates of Ryder Truck Rental, Inc.
("RTR").
The Origination Trust was created by RTR and acts as a custodian nominee
holder of vehicle titles to facilitate transfers of ownership of vehicles in
connection with securitizations. The Origination Trust reduces costs associated
with securitizations by eliminating the time and expense of retitling vehicles
upon transfer of ownership of the vehicles to an issuer trust in a
securitization. RTR purchases vehicles that are nominally titled in the name of
the Origination Trust. The Origination Trust is a passive entity that is acting
as a custodian and serving as a nominee holder of record title to vehicles, with
beneficial ownership and use of the vehicles being vested in the holders of
beneficial interests in the trust. The initial beneficial interest in the
Origination Trust is held by entities which are wholly owned by RTR. Such
beneficial ownership interest in the vehicles is evidenced by ownership of 100%
of the undivided trust interest ("UTI") in the assets titled in the name of the
Origination Trust by RTR.
From time to time, and in connection with securitization transactions, the
owners of the UTI certificates will direct the Origination Trust to remove
certain vehicles from the UTI and transfer beneficial ownership of those
vehicles to a special unit of beneficial interest (a vehicle SUBI).
Concurrently, RTR will contribute the related commercial lease contracts to the
Origination Trust and direct the Origination Trust to transfer beneficial
ownership of those lease contracts to a special unit of beneficial interest (a
lease SUBI). The vehicle SUBI and lease SUBI represent the beneficial ownership
interest transferred to an issuer trust in a securitization.
RTR funds the initial purchase of the vehicles and records the vehicles as
assets on its balance sheet. The Origination Trust does not provide any
consideration to RTR when titles to the vehicles are transferred to it other
than a beneficial interest in the assets for which title has been transferred,
and accordingly such vehicles are not recorded as assets on the balance sheet of
the Origination Trust.
As of December 31, 1998 the Origination Trust held title to 6,530 vehicles,
of which 2,239 have been transferred to a vehicle SUBI.
In order to allow the Origination Trust to meet certain state licensing
requirements, the grantors of the Origination Trust contributed $75,000 to the
trust pursuant to a capital contribution agreement. The agreement provides that
such capital shall be permanent and refundable only in the event of the
liquidation of the Origination Trust.
(2) INCOME TAXES
Neither the Origination Trust nor any sub-trust constitutes a separate
entity for Federal income tax purposes or for state income or franchise
purposes. Accordingly, no taxes are provided on trust income as it is passed
through to the Origination Trust beneficiaries.
F-10
<PAGE> 119
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in some limited circumstances, the globally offered Senior Notes
(the "Global Securities") will be available only in book-entry form. Investors
in the Global Securities may hold such Global Securities through any of DTC,
Cedelbank or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedelbank and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice, including seven calendar day settlement.
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedelbank or Euroclear and DTC
Participants holding Senior Notes will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedelbank and Euroclear, in that
capacity, and as DTC Participants.
Non-U.S. holders, as described below, of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name of
Cede, as nominee of DTC. Investors' interests in the Global Securities will be
represented through financial institutions acting on their behalf as direct and
indirect Participants in DTC. As a result, Cedelbank and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedelbank or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in the
same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading Between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading Between Cedelbank and/or Euroclear Participants. Secondary market
trading between Cedelbank Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading Between DTC Seller and Cedelbank or Euroclear Purchaser. When
Global Securities are to be transferred from the account of a DTC Participant to
the account of a Cedelbank Participant or a Euroclear Participant, the purchaser
will send instructions to Cedelbank or Euroclear through a Cedelbank Participant
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<PAGE> 120
or Euroclear Participant at least one business day prior to settlement.
Cedelbank or Euroclear will instruct the respective Depositary, as the case may
be, to receive the Global Securities against payment. Payment will include
interest accrued on the Global Securities from and including the last coupon
payment date to and excluding the settlement date, on the basis of actual days
elapsed and a 360-day year. Payment will then be made by the respective
Depositary to the DTC Participant's account against delivery of the Global
Securities. After settlement has been completed, the Global Securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Cedelbank Participant's or
Euroclear Participant's account. The Global Securities credit will appear the
next day, European time, and the cash debit will be back-valued to, and the
interest on the Global Securities will accrue from, the value date -- which
would be the preceding day when settlement occurred in New York. If settlement
is not completed on the intended value date, i.e., the trade fails, the
Cedelbank or Euroclear cash debit will be valued instead as of the actual
settlement date.
Cedelbank Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Cedelbank or Euroclear. Under
this approach, they may take on credit exposure to Cedelbank or Euroclear until
the Global Securities are credited to their accounts one day later.
As an alternative, if Cedelbank or Euroclear has extended a line of credit
to them, Cedelbank Participants or Euroclear Participants can elect not to
pre-position funds and allow that credit line to be drawn upon to finance the
settlement. Under this procedure, Cedelbank Participants or Euroclear
Participants purchasing Global Securities would incur overdraft charges for one
day, assuming they cleared the overdraft when the Global Securities were
credited to their accounts. However, interest on the Global Securities would
accrue from the value date. Therefore, in many cases the investment income on
the Global Securities earned during that one-day period may substantially reduce
or offset the amount of such overdraft charges, although this result will depend
on each Cedelbank Participant's or Euroclear Participant's particular cost of
funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedelbank Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading Between Cedelbank or Euroclear Seller and DTC Purchaser. Due to
time zone differences in their favor, Cedelbank Participants and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing systems,
through the respective Depositaries, to a DTC Participant. The seller will send
instructions to Cedelbank or Euroclear through a Cedelbank Participant or
Euroclear Participant at least one business day prior to settlement. In these
cases, Cedelbank or Euroclear will instruct the respective Depositaries, as
appropriate, to deliver the Global Securities to the DTC Participant's account
against payment. Payment will include interest accrued on the Global Securities
from and including the last coupon payment date to and excluding the settlement
date on the basis of actual days elapsed and a 360-day year. The payment will
then be reflected in the account of the Cedelbank Participant or Euroclear
Participant the following day, and receipt of the cash proceeds in the Cedelbank
Participant's or Euroclear Participant's account would be back-valued to the
value date -- which would be the preceding day, when settlement occurred in New
York. Should the Cedelbank Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debt in
anticipation of receipt of the sale proceeds in its account, the back-valuation
will extinguish any overdraft charges incurred over that one-day period. If
settlement is not completed on the intended value date, i.e., the trade fails,
receipt of the cash proceeds in the Cedelbank Participant's or Euroclear
Participant's account would instead be value as of the actual settlement date.
Finally, day traders that use Cedelbank or Euroclear and that purchase
Global Securities from DTC Participants for delivery to Cedelbank Participants
or Euroclear Participants should note that these trades
A-2
<PAGE> 121
would automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
- borrowing through Cedelbank or Euroclear for one day -- until the
purchase side of the day trade is reflected in their Cedelbank or
Euroclear accounts -- in accordance with the clearing system's customary
procedures;
- borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedelbank or
Euroclear account in order to settle the sale side of the trade; or
- staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the Cedelbank Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding through Cedelbank or
Euroclear, or through DTC if the holder has an address outside the U.S., will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest, including original issue discount, on registered debt issued by U.S.
Persons, unless:
- each clearing system, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business in
the chain of intermediaries between that beneficial owner and the U.S.
entity required to withhold tax complies with applicable certification
requirements, and
- that beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate.
Exemption for Non-U.S. Persons -- Form W-8. Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Certificate of Foreign Status on Form W-8. If
the information shown on Form W-8 or the Tax Certificate changes, a new Form W-8
or Tax Certificate, as the case may be, must be filed within 30 days of that
change.
Exemption for Non-U.S. Person with Effectively Connected Income -- Form
4224. A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing a certificate of Exemption from Withholding of Tax on
Income Effectively Connected with the Conduct of a Trade or Business in the
United States on Form 4224.
Exemption or Reduced Rate for Non-U.S. Persons Resident in Treaty
Countries -- Form 1001. Non-U.S. Persons that are beneficial owners of Global
Securities residing in a country that has a tax treaty with the United States
can obtain an exemption or reduced tax rate, depending on the treaty terms, by
filing an Ownership, Exemption or Reduced Rate Certificate on Form 1001. If the
treaty provides only for a reduced rate, withholding tax will be imposed at that
rate unless the filer alternatively files Form W-8. Form 1001 may be filed by
the Senior Note Owner or his agent.
Exemption for U.S. Persons -- Form W-9. U.S. Persons can obtain a complete
exemption from the withholding tax by filing a Payer's Request for Taxpayer
Identification Number and Certification on Form W-9.
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds --
the clearing agency, in the case of persons holding directly on the books of the
clearing agency. Form W-8 and form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
A-3
<PAGE> 122
The term "U.S. Person" means:
- a citizen or resident of the United States,
- a corporation, partnership or other entity organized in or under the laws
of the United States or any state or political subdivision thereof (other
than a partnership that is not treated as a United States person under
any applicable Treasury regulations),
- an estate whose income is subject to United States federal income tax,
regardless of its source, or
- a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who
have authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in regulations,
some trusts in existence on August 20, 1996 and treated as United States persons
prior to such date that elect to continue to be so treated also shall be
considered U.S. Persons.
This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Global Securities.
A-4
<PAGE> 123
$282,900,000
(RYDER LOGO)
RYDER VEHICLE LEASE TRUST 1999-A
RYDER FUNDING LP
Transferor
RYDER TRUCK RENTAL, INC.
Administrative Agent
ASSET BACKED SENIOR NOTES:
$28,000,000 6.165% CLASS A-1 NOTES
$63,000,000 6.43% CLASS A-2 NOTES
$54,000,000 6.68% CLASS A-3 NOTES
$53,000,000 6.89% CLASS A-4 NOTES
$84,900,000 7.13% CLASS A-5 NOTES
----------------
PROSPECTUS
----------------
MERRILL LYNCH & CO.
FIRST UNION SECURITIES, INC.
SALOMON SMITH BARNEY
You should rely only the information contained in this prospectus. We have not
authorized anyone to provide you with different information.
We are not offering the Senior Notes in any state where the offer is not
permitted.
