<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 27, 1999
REGISTRATION NO. 333-81615
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AUTONATION RECEIVABLES CORPORATION
(Originator of the trusts described herein)
(Exact name of registrant as specified in its charter)
DELAWARE 65-092-9038
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
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200 SOUTH ANDREWS AVENUE
FORT LAUDERDALE, FLORIDA 33301
(954) 769-4555
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
KATHLEEN W. HYLE
AUTONATION RECEIVABLES CORPORATION
200 SOUTH ANDREWS AVENUE
FORT LAUDERDALE, FLORIDA 33301
(954) 769-4555
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
FRANK P. NOCCO, ESQ. KENNETH A. WRIGHT, ESQ.
WEIL, GOTSHAL & MANGES LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
767 FIFTH AVENUE 919 THIRD AVENUE
NEW YORK, NEW YORK 10153 NEW YORK, NEW YORK 10022
(212) 310-8000 (212) 735-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable on or after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /x/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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<CAPTION>
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PROPOSED MAXIMUM
AMOUNT TO BE AGGREGATE PROPOSED MAXIMUM
TITLE OF EACH CLASS OF REGISTERED OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED (1)(2) PER UNIT (2)(3) PRICE (3)(4) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Asset-Backed Notes and Certificates................ -- -- $2,000,000,000 $556,000(5)
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</TABLE>
(1) If any registered securities are issued at an original issue discount, then
such greater principal amount as shall result in an aggregate initial
offering price of $2,000,000,000. In no event will the aggregate initial
offering price of securities registered hereunder exceed $2,000,000,000 or
the equivalent thereof in one or more foreign currencies or composite
currencies, including the euro.
(2) Not specified as to each class of securities to be registered pursuant to
General Instruction II.D of Form S-3 under the Securities Act.
(3) The proposed maximum offering price per unit or share will be determined
from time to time by the Registrant in connection with, and at the time of,
the issuance by the Registrant of the securities registered hereunder.
(4) Estimate solely for the purposes of computing the registration fee pursuant
to Rule 457(o) of the Rules and Regulations of the Securities and Exchange
Commission under the Securities Act.
(5) Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED ,
Prospectus Supplement
(To Prospectus dated )
$
ANRC AUTO OWNER TRUST
AUTONATION RECEIVABLES CORPORATION, Seller
AUTONATION FINANCIAL SERVICES CORP., Servicer
THESE SECURITIES ARE HIGHLY STRUCTURED. BEFORE YOU PURCHASE THESE SECURITIES,
BE SURE YOU UNDERSTAND THE STRUCTURE AND THE RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-8 IN THIS PROSPECTUS SUPPLEMENT.
The notes are obligations of ANRC Auto Owner Trust and are backed only by
the assets of the trust. The notes are not obligations of AutoNation
Receivables Corporation, AutoNation Financial Services Corp., any of their
affiliates or any governmental agency.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
THE NOTES:
o The trust is offering four classes of notes.
o The notes are backed by a pledge of the trust's assets. The trust's assets
include fixed rate motor vehicle retail installment sales contracts secured by
new and used automobiles and light-duty trucks.
o The trust will pay interest and principal on the notes on the 15th day of each
month or the first business day after the 15th. The first distribution date is
, .
o will issue an insurance policy that unconditionally and
irrevocably guarantees payments of interest on and principal of the notes to
the extent described in this prospectus supplement.
<TABLE>
<CAPTION>
PRINCIPAL INTEREST FINAL SCHEDULED PRICE TO UNDERWRITING PROCEEDS TO
AMOUNT RATE DISTRIBUTION DATE PUBLIC(1) DISCOUNTS SELLER(2)
<S> <C> <C> <C> <C> <C> <C>
Class A-1 Notes............... $ % , % % %
Class A-2 Notes............... $ % , % % %
Class A-3 Notes............... $ % , % % %
Class A-4 Notes............... $ % , % % %
Total........................ $ $ $ $
</TABLE>
(1) Plus accrued interest, if any, from .
(2) Before deducting expenses estimated to be $ .
The notes are offered subject to availability.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
[ ]
The date of this Prospectus Supplement is
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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WHERE TO FIND INFORMATION IN THESE DOCUMENTS......... S-4
SUMMARY.............................................. S-5
RISK FACTORS......................................... S-8
Lack of performance data due to limited
operating history of AutoNation
Financial Services.................... S-8
Absence of secondary market for the notes
could limit your ability to resell.... S-8
Limited assets of the trust could result in
losses on the notes................... S-8
Potential prepayment of the notes may require
reinvestment of principal at a lower
rate of return........................ S-8
Interests of other persons in contracts and
vehicles could reduce the funds
available to make payments on the
notes................................. S-9
Bankruptcy of AutoNation Financial Services
could result in losses or delays in
payments on the notes due to the power
of bankruptcy courts to provide
equitable relief...................... S-9
Bankruptcy of AutoNation Financial Services
could result in losses or delays in
payments on the notes if the
bankruptcy court follows an adverse
legal decision........................ S-10
Geographic concentration of contracts in
[State], [State] and [State] could
result in losses on the notes......... S-10
Noteholders may not declare events of default
under the indenture or decide the
consequences of events of default..... S-10
Events of default under the indenture could
result in losses or acceleration of
payments on the notes................. S-11
Class A-2 notes, class A-3 notes and class A-4
notes bear additional credit risk..... S-11
Potential computer program problems beginning
in the year 2000 could result in
delays in payments on the notes....... S-11
DESCRIPTION OF THE TRUST............................. S-12
ANRC Auto Owner Trust......................... S-12
Capitalization of the Trust................... S-12
The Owner Trustee............................. S-13
Trust Property................................ S-13
AUTONATION FINANCIAL SERVICES' PORTFOLIO OF MOTOR
VEHICLE CONTRACTS............................. S-13
Origination of Motor Vehicle Contracts........ S-13
Delinquency and Loss Experience............... S-14
DESCRIPTION OF THE CONTRACTS......................... S-16
MATURITY AND PREPAYMENT CONSIDERATIONS............... S-19
USE OF PROCEEDS...................................... S-24
DESCRIPTION OF THE NOTES............................. S-24
Issuance and Registration of the Notes........ S-24
Interest Payments............................. S-24
Principal Payments............................ S-25
Optional Redemption........................... S-25
The Indenture Trustee......................... S-26
Events of Default Under the Indenture......... S-26
DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENTS.................................... S-27
Sale and Assignment of the Contracts.......... S-27
The Accounts.................................. S-28
Payments on Contracts......................... S-28
Distributions................................. S-28
Early Repayment............................... S-30
Payment Priorities of the Notes............... S-30
The Spread Account............................ S-31
Withdrawals from the Spread Account........... S-31
Overcollateralization......................... S-32
Statements to Noteholders..................... S-32
Reports to Noteholders........................ S-32
Servicing Fee................................. S-32
Default by the Servicer; Rights Upon Default
by the Servicer....................... S-33
Amendment..................................... S-33
Termination................................... S-34
Optional Purchase............................. S-34
Payment in Full of Notes...................... S-34
Description of the Administration Agreement... S-35
DESCRIPTION OF THE INSURANCE POLICY.................. S-36
</TABLE>
S-2
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<TABLE>
<S> <C>
DESCRIPTION OF THE INSURER........................... S-37
The Insurer................................... S-37
Financial Information About
the Insurer........................... S-37
Where You Can Obtain Additional Information
About the Insurer..................... S-38
Year 2000 Readiness of the Insurer............ S-38
Financial Strength Ratings of
the Insurer........................... S-38
LEGAL INVESTMENT..................................... S-39
MATERIAL FEDERAL INCOME TAX CONSEQUENCES............. S-39
ERISA CONSIDERATIONS................................. S-39
UNDERWRITING......................................... S-40
LEGAL MATTERS........................................ S-41
EXPERTS.............................................. S-41
GLOSSARY............................................. S-42
</TABLE>
S-3
<PAGE>
WHERE TO FIND INFORMATION IN THESE DOCUMENTS
The accompanying prospectus provides general information about ANRC Auto Owner
Trust , including terms and conditions that are generally applicable to
the securities issued by the trust. The specific terms of your notes are
described in this prospectus supplement.
This prospectus supplement begins with the following two sections, which
describe your notes and the trust:
o Summary provides a brief description of your notes, including important
amounts, dates and other terms and features; and
o Risk Factors describes risks that apply to your notes.
As you read through this prospectus supplement, cross-references will direct you
to more detailed descriptions in the accompanying prospectus and elsewhere in
this prospectus supplement. You can also directly reference key topics by
looking at the table of contents in this prospectus supplement and the
accompanying prospectus.
You can find a glossary where capitalized terms used in this prospectus
supplement are defined beginning on page S-42 in this prospectus supplement.
IF THE DESCRIPTIONS OF YOUR NOTES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT.
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TO UNDERSTAND THE STRUCTURE OF THESE SECURITIES, YOU MUST READ CAREFULLY
THE ACCOMPANYING PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN THEIR
ENTIRETY.
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S-4
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SUMMARY
This summary contains a brief description of the notes. You will find a detailed
description of the terms of the offering of the notes following this summary.
<TABLE>
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Trust: ANRC Auto Owner Trust
Seller of the Contracts: AutoNation Receivables Corporation
Seller's Address: 200 South Andrews Avenue, Fort Lauderdale, Florida 33301
Seller's Telephone Number: (954) 769-4555
Servicer of the Contracts: AutoNation Financial Services Corp.
Subservicer of the Contracts: World Omni Financial Corp.
Owner Trustee:
Indenture Trustee:
Insurer:
Clearance and Settlement: The Depository Trust Company
Assets of the Trust: The trust's assets include:
o fixed rate motor vehicle retail installment sales contracts secured by
new and used automobiles and light-duty trucks;
o collections on the contracts;
o liens on the financed vehicles and the rights to receive proceeds from
claims on insurance policies;
o funds in the accounts of the trust;
o any enhancements issued in favor of the trust; and
o proceeds of these assets.
</TABLE>
The Terms of the Notes:
<TABLE>
<S> <C> <C> <C> <C>
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES
Principal Amount: $ $ $ $
Interest Rate: % p.a. % p.a. % p.a. % p.a.
Interest Accrual Method: actual / 360 30 / 360 30 / 360 30 / 360
Cut-Off Date:
Distribution Dates: monthly (15th) monthly (15th) monthly (15th) monthly (15th)
First Distribution Date:
Final Scheduled Distribution
Date:
distribution date distribution date distribution date distribution date
Anticipated Ratings / / / /
(Moody's/S&P)*
Credit Enhancement: insurance policy, insurance policy, insurance policy, insurance policy,
spread account spread account spread account spread account
and over- and over- and over- and over-
collateralization collateralization collateralization collateralization
CUSIP Number:
ISIN Number:
Common Code:
</TABLE>
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* It is a condition to issuance that both of these ratings be obtained. However,
a rating agency in its discretion may lower or withdraw its rating in the
future.
S-5
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ANRC AUTO OWNER TRUST
ANRC Auto Owner Trust , a Delaware business trust, is offering the notes
to the public. The trust will use the proceeds from the issuance and sale of the
notes to purchase the contracts and deposit funds into the spread account. The
trust will rely upon collections on the contracts and the funds on deposit in
various accounts to make payments on the notes.
THE NOTES
On the closing date the trust will issue four classes of notes. The trust will
use collections on the underlying trust assets to make interest and principal
payments on the notes and to pay a portion of the fees and expenses owed by the
trust, including AutoNation Financial Services Corp.'s fees as servicer. After
the payment of specified fees and expenses, the trust will allocate collections
first to make interest payments on the notes and then to make payments of
principal. In no case will you receive more than the principal and interest owed
to you under the terms described in this prospectus supplement and the
accompanying prospectus.
THE CONTRACTS
The trust's main source of funds for making payments on the notes will be
collections on the contracts. The contracts are retail installment sales
contracts secured by new and used automobiles and light-duty trucks. Each
contract in the trust is a fully-amortizing fixed rate contract with scheduled
level monthly payments of principal and interest.
SEQUENTIAL PAY FEATURE
The notes feature "sequential pay" classes. On each distribution date, the trust
will allocate principal payments on the notes as follows:
o first, the class A-1 notes will receive principal until they are
paid off;
o once the class A-1 notes are paid off, the class A-2 notes will
begin to receive principal until they are paid off;
o once the class A-2 notes are paid off, the class A-3 notes will
begin to receive principal until they are paid off; and
o once the class A-3 notes are paid off, the class A-4 notes will
begin to receive principal until they are paid off.
In addition, the outstanding principal amount of any class, to the extent not
previously paid, will be payable on the applicable final scheduled distribution
date for that class.
CREDIT ENHANCEMENT
Credit enhancement is provided to the notes by the following:
o an insurance policy issued by , a financial guaranty
provider;
o the spread account; and
o overcollateralization.
These forms of credit enhancement are intended to protect you from net losses
and shortfalls in cash flow.
Insurance Policy. On the closing date, the insurer will issue an insurance
policy that unconditionally guarantees the timely payment of interest and the
ultimate payment of principal on the notes.
Spread Account. The spread account serves as a reserve fund upon which the trust
may draw to enhance the likelihood of receipt by noteholders of amounts due them
and to decrease the likelihood of losses. On each distribution date, the trust
will use funds in the spread account to pay the following amounts if collections
on the contracts are insufficient to pay those amounts:
o the servicer's fee and the fees of the trustees;
o interest and principal on the notes; and
o reimbursement for any draws under the insurance policy and other
amounts owed to the insurer.
Overcollateralization. The initial balance of the contracts in the trust will be
$ , which will exceed the initial principal amount of the notes by
$ , or approximately %.
If the cash flow and any credit enhancement do not cover all net losses, your
payments of interest and principal will be reduced and you may suffer a loss of
principal.
S-6
<PAGE>
SCHEDULED PRINCIPAL PAYMENTS AND POTENTIAL EARLY PAYMENTS
The trust expects to pay the entire principal amount of the notes no later than
the final scheduled distribution dates listed below:
Class A-1 ,
Class A-2 ,
Class A-3 ,
Class A-4 ,
However, the trust believes that the outstanding principal amount of each class
of notes will likely be paid in full earlier, and could be paid significantly
earlier than the applicable final scheduled distribution date.
The likelihood of early repayment depends on a variety of factors, including
full repayments of contracts in advance by the related obligors.
OPTIONAL REDEMPTION
The servicer can elect to purchase all of the contracts at any time if their
aggregate principal balance is 10% or less of their aggregate original principal
balance. If the servicer exercises this option, it will deposit the requisite
funds and cause the indenture trustee to apply those funds to redeem the notes
and pay all accrued and unpaid interest and principal on the notes plus other
amounts owed to the servicer, the trustees and the insurer.
TAX STATUS
Weil, Gotshal & Manges LLP is of the opinion that, although there is no specific
authority regarding the characterization for federal income tax purposes of
securities having terms similar to the notes or to an entity similar to the
trust, assuming compliance with the owner trust agreement and the other
transaction documents, on the date of issuance of the notes, for U.S. federal
income tax purposes:
o the notes will be characterized as debt; and
o the trust will not be an association or a publicly traded
partnership taxable as a corporation.
If you purchase the notes, you will agree to treat them as debt for tax
purposes.
ERISA CONSIDERATIONS
The notes are generally eligible for purchase by persons investing assets of
employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974. The administrators of employee benefit plans should review
the matters discussed under "ERISA Considerations" and also should consult with
their legal advisors before purchasing the notes.
ELIGIBILITY OF CLASS A-1 NOTES FOR PURCHASE BY MONEY MARKET FUNDS
The class A-1 notes are structured to be eligible for purchase by money market
funds under Rule 2a-7 under the Investment Company Act of 1940.
S-7
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the notes.
<TABLE>
<S> <C>
LACK OF PERFORMANCE DATA DUE TO LIMITED AutoNation Financial Services began its operations in February
OPERATING HISTORY OF AUTONATION FINANCIAL 1997 and has limited performance data for the motor vehicle
SERVICES retail installment sales contracts it originates. As the
portfolio of contracts originated by AutoNation Financial
Services matures, delinquency percentages and loan losses may
differ from prior performance. We cannot assure you that the
performance of the contracts in the trust will be similar to the
limited historical performance of the portfolio as a whole.
ABSENCE OF SECONDARY MARKET FOR THE NOTES You may be unable to resell your notes due to the absence of a
COULD LIMIT YOUR ABILITY TO RESELL secondary market for the notes. The underwriters may assist in
resales of the notes but are not required to do so. A secondary
market for the notes may not develop. If a secondary market does
develop, it may not continue or it may not be sufficiently liquid
to allow you to resell your notes.
LIMITED ASSETS OF THE TRUST COULD RESULT You may suffer a loss on your notes if the assets of the trust
IN LOSSES ON THE NOTES are insufficient to pay the principal amount of the notes in full
and the insurer defaults in its obligations under the insurance
policy. The only source of funds for payments on the notes will
be the assets of the trust and the insurance policy. The assets
of the trust are limited to the contracts, the funds on deposit
in the trust's bank accounts and rights under the trust's
agreements. You must rely for payment of the notes solely upon
collections on the contracts, funds on deposit in the trust's
bank accounts and payments made under the insurance policy.
Accordingly, you may not look to any assets of AutoNation
Financial Services, the seller, the owner trustee, the indenture
trustee or any of their respective affiliates for payment of the
notes.
POTENTIAL PREPAYMENT OF THE NOTES MAY Possible prepayments of contracts by the related obligors, the
REQUIRE REINVESTMENT OF PRINCIPAL AT A constant level of overcollateralization and possible purchases of
LOWER RATE OF RETURN contracts by the seller or AutoNation Financial Services will
result in the acceleration of principal payments on your notes.
You may not be able to reinvest the principal repaid to you
earlier than expected at a rate of return that is equal to or
greater than the rate of return on your notes.
Although AutoNation Financial Services maintains historical
records on the rate of prepayment on its contracts, those records
are limited due to the relatively short operating history of
AutoNation Financial Services. The obligors on the contracts may
prepay the contracts voluntarily at any time. In addition, the
contracts are required to be prepaid upon the sale, insured loss
or other disposition of the related vehicle.
If AutoNation Financial Services breaches any of its
representations and warranties regarding any contracts,
AutoNation Financial Services will be required to repurchase
those contracts from the seller, and the seller will be required
to repurchase those contracts from the trust. AutoNation
Financial Services will also be required to purchase contracts
from the trust if it breaches its servicing obligations relating
to those contracts. In addition, AutoNation Financial Services
will be entitled to purchase all of the remaining contracts
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
from the trust once the aggregate principal balance of the
contracts is 10% or less of their aggregate principal balance on
the date they were sold to the trust.
INTERESTS OF OTHER PERSONS IN CONTRACTS Another person could acquire an interest in a contract that is
AND VEHICLES COULD REDUCE THE FUNDS superior to the trust's interest in that contract. This could
AVAILABLE TO MAKE PAYMENTS ON THE NOTES occur because AutoNation Financial Services, prior to a default
by the servicer, will not be required to mark the physical
contracts as belonging to the trust. If another person acquires
an interest in a contract that is superior to the trust's
interest, the collections on that contract will not be available
to make payments on the notes.
In addition, another person could acquire an interest in a
vehicle financed by a contract that is superior to the trust's
interest in the vehicle. This could occur because AutoNation
Financial Services will not be required to amend the related
certificate of title to identify the trust as the new secured
party. If another person acquires an interest in a vehicle that
is superior to the trust's interest, the proceeds from the sale
of that vehicle will not be available to make payments on the
notes.
BANKRUPTCY OF AUTONATION FINANCIAL If AutoNation Financial Services enters a bankruptcy proceeding
SERVICES COULD RESULT IN LOSSES OR DELAYS and the insurer defaults in its obligations under the insurance
IN PAYMENTS ON THE NOTES DUE TO THE POWER policy, you could experience losses or delays in the payments on
OF BANKRUPTCY COURTS TO PROVIDE EQUITABLE your notes due to the power of the court in a bankruptcy
RELIEF proceeding to provide equitable relief. AutoNation Financial
Services will sell the contracts to the seller, and the seller
will sell the contracts to the trust. AutoNation Financial
Services and the seller treat these transactions as absolute
transfers. However, if AutoNation Financial Services enters a
bankruptcy proceeding, the court has the power to conclude that
the sale of the contracts by AutoNation Financial Services to the
seller was not a "true sale" and that AutoNation Financial
Services still owns the contracts. The court also has the power
to conclude that AutoNation Financial Services and the seller
should be consolidated for bankruptcy purposes. If the court were
to reach any of these conclusions, you could experience losses or
delays in payments on your notes because:
o the indenture trustee would not be able to exercise remedies
against AutoNation Financial Services on your behalf without
permission from the court;
o the court might require the indenture trustee to accept
property in exchange for the contracts that is of less value
than the contracts;
o the court might prevent the indenture trustee or the
noteholders from taking some actions such as selling the
contracts or appointing a successor servicer;
o the court might sell the contracts and pay off the notes before
their maturity;
o tax or government liens on AutoNation Financial Services'
property that arose before the transfer of the contracts to the
trust would be paid from the collections on the contracts
before the collections were used to make payments on your
notes; and
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C>
o the indenture trustee might not have a perfected security
interest in the vehicles securing the contracts or cash
collections held by AutoNation Financial Services at the time a
bankruptcy proceeding begins.
The seller has taken steps in structuring the trust to minimize
the risk that a court would conclude that the sale of the
contracts to the seller was not a true sale or that AutoNation
Financial Services and the seller should be consolidated for
bankruptcy purposes.
BANKRUPTCY OF AUTONATION FINANCIAL If AutoNation Financial Services enters a bankruptcy proceeding
SERVICES COULD RESULT IN LOSSES OR DELAYS and the insurer defaults in its obligations under the insurance
IN PAYMENTS ON THE NOTES IF THE BANKRUPTCY policy, you could experience losses or delays in the payments on
COURT FOLLOWS AN ADVERSE LEGAL DECISION your notes if the court in a bankruptcy proceeding follows the
reasoning of an adverse legal decision. In a case decided by the
U.S. Court of Appeals for the Tenth Circuit in 1993, the court
concluded that accounts transferred by a seller to a buyer should
be included in the bankruptcy estate of the seller even if the
transfer was a true sale. Our counsel has advised us that the
facts of that case are distinguishable and that the reasoning of
that court appears to be inconsistent with established precedent
and the Uniform Commercial Code. However, if AutoNation Financial
Services enters a bankruptcy proceeding and the court in the
bankruptcy proceeding applies the reasoning of the court in that
case and the insurer defaults in its obligations under the
insurance policy, you could experience losses or delays in the
payments on your notes.
GEOGRAPHIC CONCENTRATION OF CONTRACTS IN Economic conditions in the jurisdictions where the obligors under
[STATE], [STATE] AND [STATE] COULD RESULT the contracts reside may affect the delinquency, loan loss and
IN LOSSES ON THE NOTES repossession experience of the trust relating to the contracts.
Based on the principal balance of the original pool of contracts
on , % of the contracts were originated in [State],
% of the contracts were originated in [State] and % of the
contracts were originated in [State]. Adverse economic conditions
affecting [State], [State] or [State] could have a
disproportionately significant effect on the delinquency, loan
loss and repossession experience of the trust. Adverse economic
conditions in those jurisdictions could also have a negative
impact on the timing and amount of principal and interest
payments on the notes.
NOTEHOLDERS MAY NOT DECLARE EVENTS OF Noteholders may not declare events of default under the indenture
DEFAULT UNDER THE INDENTURE OR DECIDE THE or decide the consequences of events of default if the insurer
CONSEQUENCES OF EVENTS OF DEFAULT has not defaulted under the insurance policy. Except in limited
circumstances in which the insurer defaults under the insurance
policy or upon a bankruptcy event of the insurer, only the
insurer can declare an event of default under the indenture. If
the insurer declares an event of default under the indenture, the
insurer will have the right to cause the liquidation of the trust
and the acceleration of the notes. Following an event of default
under the indenture, the indenture trustee will continue to
submit claims under the insurance policy for any shortfalls in
the amount needed to make payments on the notes. However, the
insurer may instead elect to repay all or any portion of the
outstanding notes, plus any accrued interest.
</TABLE>
S-10
<PAGE>
<TABLE>
<S> <C>
EVENTS OF DEFAULT UNDER THE INDENTURE If an event of default occurs under the indenture resulting in
COULD RESULT IN LOSSES OR ACCELERATION OF the acceleration of the notes, it may shorten the average term
PAYMENTS ON THE NOTES and date of final payment of the notes. You may not be able to
reinvest the principal repaid to you earlier than expected at a
rate of return that is equal to or greater than the rate of
return on your notes. In addition, you may not be paid the
principal amount of your notes in full if the insurer defaults
under the insurance policy and the assets of the trust are
insufficient to pay the principal amount of all the notes in
full.
CLASS A-2 NOTES, CLASS A-3 NOTES AND CLASS The class A-2 notes, the class A-3 notes and the class A-4 notes
A-4 NOTES BEAR ADDITIONAL CREDIT RISK bear more credit risk than the class A-1 notes. Principal
payments on the class A-2 notes will not begin until all
principal on the class A-1 notes has been repaid. Similarly,
principal payments on the class A-3 notes will not begin until
all principal on the class A-2 notes has been repaid.
Additionally, principal payments on the class A-4 notes will not
begin until all principal on the class A-3 notes has been repaid.
If the insurer defaults under the insurance policy after one or
more classes of notes have been fully or partially repaid and
before other classes of notes with a higher numerical designation
have been fully repaid, subsequent losses on the contracts will
have a disproportionately greater effect on those classes of
notes with higher numerical designations.
POTENTIAL COMPUTER PROGRAM PROBLEMS The payment of principal and interest on the notes could be
BEGINNING IN THE YEAR 2000 COULD RESULT IN delayed if AutoNation Financial Services, in its capacity as the
DELAYS IN PAYMENTS ON THE NOTES servicer, or the indenture trustee experience problems in their
computer programs or systems relating to the year 2000. Many
existing computer programs and systems use only two digits to
identify a year. These programs or systems could fail or produce
erroneous results during the transition from the year 1999 to the
year 2000 and afterwards.
If AutoNation Financial Services, in its capacity as the
servicer, does not have computer systems that are year 2000
compliant by the year 2000, the ability of AutoNation Financial
Services to service the contracts may be materially and adversely
affected. If the indenture trustee does not have computer systems
that are year 2000 compliant by the year 2000, its ability to
make distributions on the notes may be materially and adversely
affected.
If World Omni Financial Corp., in its capacity as the
subservicer, does not attain year 2000 compliance for its
significant information technology systems by the year 2000,
World Omni believes that it would be unable to sustain its
current level of performance and customer service. World Omni has
undertaken a comprehensive program to coordinate its compliance
efforts. World Omni does not anticipate that year 2000 issues on
World Omni's part will have a material adverse effect on the
trust, the assets of the trust (including the contracts) or the
servicing of those assets. However, to the extent that World
Omni's systems have year 2000 problems, the amount and timing of
distributions to noteholders could be affected.
</TABLE>
S-11
<PAGE>
DESCRIPTION OF THE TRUST
Capitalized terms are defined in this prospectus supplement and, if not, in the
accompanying prospectus. Definitions are indicated by boldface type. Both the
accompanying prospectus and this prospectus supplement contain an index of
defined terms listing the page numbers where definitions can be found.
ANRC AUTO OWNER TRUST
ANRC Auto Owner Trust is a business trust formed under the laws of
the state of Delaware pursuant to an amended and restated owner trust agreement,
dated as of , between the owner trustee and the seller.
The assets of the trust will include a pool of motor vehicle retail
installment sales contracts, all of which are secured by new and used
automobiles and light-duty trucks, acquired from the seller pursuant to a sale
and servicing agreement, dated as of , among the trust, the
seller and the servicer. The trust has not and will not engage in any business
activity other than the following:
(1) acquiring, holding and managing the contracts and the other assets
of the trust and proceeds therefrom;
(2) issuing the following notes to noteholders:
o the ANRC Auto Owner Trust , % Class A-1
Asset-Backed Notes;
o the ANRC Auto Owner Trust , % Class A-2
Asset-Backed Notes;
o the ANRC Auto Owner Trust , % Class A-3
Asset-Backed Notes; and
o the ANRC Auto Owner Trust , % Class A-4
Asset-Backed Notes;
(3) issuing certificates;
(4) making payments and distributions on the notes; and
(5) engaging in other activities that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto or
connected therewith.
The trust's principal executive offices are located in
, Delaware, in care of the owner trustee at the address
listed below under "--The Owner Trustee."
CAPITALIZATION OF THE TRUST
The trust will initially be capitalized with equity (exclusive of the funds
deposited in the spread account) equal to $ , which is the difference
between the Pool Balance as of the Cut-Off Date and the initial aggregate
principal amount of the notes. The residual interest in the trust (including the
right to receive distributions from the spread account) will initially be held
by the seller.
The following table illustrates the capitalization of the trust as of the
Closing Date :
<TABLE>
<S> <C>
Class A-1 Notes.......................... $
Class A-2 Notes..........................
Class A-3 Notes..........................
Class A-4 Notes..........................
Equity...................................
----------
Total.................................. $
----------
----------
</TABLE>
S-12
<PAGE>
THE OWNER TRUSTEE
will be the owner trustee. The owner trustee is a
Delaware banking corporation with principal offices located at .
The liability of the owner trustee in connection with the issuance and sale
of the notes is limited solely to the express obligations of the owner trustee
set forth in the owner trust agreement and the sale and servicing agreement.
TRUST PROPERTY
The property of the trust will include the following:
(1) the contracts, all of which will have been purchased from the
seller and are secured by financed vehicles;
(2) documents relating to the contracts, including all servicing
records in hard or electronic form;
(3) collections and all other amounts due under the contracts after
the Cut-Off Date;
(4) liens on the financed vehicles and the right to receive proceeds
from claims on any related insurance policies covering the financed
vehicles or the related obligors;
(5) all amounts on deposit in the collection account, the payment
account, the note distribution account and the spread account, including
the principal amount of all Eligible Investments credited to the collection
account and the spread account (but excluding any investment income from
Eligible Investments credited to the collection account, which will be paid
to the servicer);
(6) the right of the seller to cause AutoNation Financial Services to
repurchase any contracts with respect to which it breaches any of its
representations or warranties or its servicing obligations; and
(7) all proceeds of the foregoing.
Pursuant to an indenture, dated as of , between the trust and
, as indenture trustee, the trust will grant a security interest in the
Trust Property in favor of the indenture trustee on behalf of the noteholders
and for the benefit of the insurer in support of the obligations owing to the
insurer under the insurance agreement, dated as of , among the insurer,
the seller, AutoNation Financial Services, the trust, the owner trustee and the
indenture trustee.
AUTONATION FINANCIAL SERVICES' PORTFOLIO OF MOTOR VEHICLE CONTRACTS
ORIGINATION OF MOTOR VEHICLE CONTRACTS
AutoNation Financial Services originates motor vehicle retail installment
sales contracts secured by new and used automobiles and light-duty trucks in
connection with providing financing for the purchase of those vehicles. The
motor vehicle contracts in AutoNation Financial Services' portfolio that were
conveyed to the trust, also known as the receivables pool, are currently
originated from application referrals received from the following dealers:
(1) franchised automotive dealerships or used vehicle megastores owned by
AutoNation, Inc. and the nine used vehicle megastore licensees and (2) seven
third party franchised automotive dealerships. All of the contracts included in
the Trust Property have been sold to the seller by AutoNation Financial Services
from its serviced portfolio and then sold to the trust. See "AutoNation
Financial Services' Portfolio of Motor Vehicle Contracts--Origination of Motor
Vehicle Contracts" in the accompanying prospectus.
As of August 31, 1999, the composition of AutoNation Financial Services'
serviced portfolio was as follows:
<TABLE>
<S> <C>
Aggregate Principal Amount of Contracts...................... $1,664,153,000
Number of Contracts.......................................... 118,580
Percentage of Contracts Secured by New Vehicles.............. 40%(1)
Percentage of Contracts Secured by Used Vehicles............. 60%(1)
Average APR.................................................. 10.92%
Average Original Amount Financed............................. $15,480
Weighted Average Original Term to Maturity................... 58.7 months
Weighted Average Remaining Term to Maturity.................. 52.7 months
Geographic Concentrations (greater than 5%).................. Florida (28.7%), Texas (21.1%),
California (14.5%), Georgia
(7.3%) and
Arizona (6.8%)
</TABLE>
- ------------------
(Footnotes on next page)
S-13
<PAGE>
(Footnotes from previous page)
- ------------------
(1) Percentage determined by principal amount of the contracts.
DELINQUENCY AND LOSS EXPERIENCE
AutoNation Financial Services considers a contract to be delinquent if at
any time $40 or more is past due thereunder. Efforts to collect delinquent
contract payments are made by AutoNation Financial Services' collection
department personnel, collection agencies and attorneys retained by AutoNation
Financial Services. For a description of AutoNation Financial Services'
collection practices and policies see "AutoNation Financial Services' Portfolio
of Motor Vehicle Contracts--Collection Procedures" in the accompanying
prospectus. The percentages of AutoNation Financial Services' serviced portfolio
which represent application referrals from dealerships, used vehicle megastores
and third party dealerships, respectively, may change over time. However,
because each application and the related obligor will be evaluated by AutoNation
Financial Services based on the same underwriting criteria, AutoNation Financial
Services believes that changes over time of the percentage of its serviced
portfolio representing applications referrals from dealerships, used vehicle
megastores and third party dealerships should not have a material adverse affect
on the overall credit quality of the serviced portfolio.
The following tables set forth the delinquency, loss and recovery
experience for each of the periods shown for the portfolio of motor vehicle
contracts originated and serviced by AutoNation Financial Services. The
relatively short amount of time for which AutoNation Financial Services has been
involved in the origination of motor vehicle contracts results in limited
historical performance information with respect to the motor vehicle contracts
it originates and thus, delinquencies and loan losses may differ from existing
levels in the portfolio with the passage of time. Moreover, delinquency and loss
experience may be influenced by a variety of economic, social and other factors.
DELINQUENCY EXPERIENCE OF AUTONATION FINANCIAL SERVICES' MOTOR VEHICLE CONTRACT
PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT AUGUST 31, AT AUGUST 31,
1997 1998 1998 1999
------------------- -------------------- -------------------- ----------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------- --------- -------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Servicing portfolio................ 3,129 $36,777 55,460 $765,081 33,848 $471,494 118,580 $1,664,153
Delinquencies
31-60 days(1)(2)................. 4 $ 43 775 $ 11,321 215 $ 3,033 1,586 $ 22,087
61-90 days(1)(2)................. 1 $ 16 114 $ 1,711 18 305 240 $ 3,421
91+ days(1)(2)................... 1 $ 6 23 $ 341 8 125 37 $ 555
Total delinquencies as a percentage
of servicing portfolio........... 0.19% 0.18% 1.64% 1.75% 0.71% 0.73% 1.57% 1.57%
</TABLE>
- ------------------
(1) Delinquencies include principal amounts only.
(2) The period of delinquency is based on the number of days payments are past
due.
S-14
<PAGE>
LOAN LOSS EXPERIENCE OF AUTONATION FINANCIAL SERVICES' MOTOR VEHICLE CONTRACT
PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
------------------- ----------------------
1997(1) 1998 1998 1999
------- -------- -------- ----------
<S> <C> <C> <C> <C>
Number of motor vehicle contracts outstanding(2)................ 3,129 55,460 33,848 118,580
Period end principal outstanding................................ $36,777 $765,081 $471,494 $1,664,153
Average principal outstanding(3)................................ $16,236 $323,768 $167,701 $1,150,104
Number of gross charge-offs..................................... 0 339 68 1,513
Gross charge-offs(4)............................................ $ 0 $ 946 $ 97.7 $ 6,709
Net charge-offs(5).............................................. $ 0 $ 911 $ 95.2 $ 6,289
Net charge-offs as a percent of average outstanding(6).......... 0% 0.28% 0.09% 0.82%
</TABLE>
- ------------------
(1) Includes information for the period from April 1997 though December 1997.
(2) Number of contracts as of period end.
(3) Computed by taking a simple average of monthly average outstanding principal
amounts for such period.
(4) Gross charge-offs are equal to the remaining principal balance less proceeds
from the sale of repossessed vehicles.
(5) Net charge-offs are equal to gross charge-offs, less recoveries, on motor
vehicle contracts previously charged-off. Net charge-offs exclude expenses
associated with collection, repossession and disposition of motor vehicle
contracts.
(6) Percentages have been annualized for the eight months ended August 31, 1998
and 1999 and are not necessarily indicative of experience for the year.
The delinquency and net loss rates set forth above reflect, among other
factors, the success of AutoNation Financial Services' collection efforts and
general economic conditions. At August 31, 1999, delinquencies for the servicing
portfolio represented 1.57% of the amount of motor vehicle contracts in
AutoNation Financial Services' servicing portfolio or $26.1 million as compared
to 0.73% at August 31, 1998 or $3.5 million. The net losses for the servicing
portfolio as a percentage of average serviced loans outstanding was 0.82% for
the eight months ended August 31, 1999 compared to 0.09% for the eight months
ended August 31, 1998. The increases in the delinquency rates on AutoNation
Financial Services' serviced portfolio since 1997 are consistent with
management's expectation for a portfolio of contracts with equivalent credit
quality and average age of contract as found in AutoNation Financial Services'
serviced portfolio and are consistent with industry experience for an originator
which has been in business for a similar period of time as AutoNation Financial
Services. During the initial period of operations of AutoNation Financial
Services the average age of the contracts in its serviced portfolio has
necessarily increased as the period of time during which AutoNation Financial
Services has been in business has increased. However, the average age of the
contracts in its serviced portfolio should stabilize as contracts begin to
mature and be paid off. As the average age stabilizes, management believes that
the deliquency rate should stabilize as well. This trend is reflected by the
decrease in delinquency rate from December 31, 1998 to August 31, 1999. However,
AutoNation Financial Services has limited performance data for the motor vehicle
retail installment sales contracts it originates. As AutoNation Financial
Services' portfolio of contracts matures, delinquency percentages and loan
losses may differ from prior performance. We cannot assure you that the
performance of the contracts in the trust will be similar to the limited
historical performance of the portfolio set forth above.
S-15
<PAGE>
DESCRIPTION OF THE CONTRACTS
All of the contracts in the receivables pool will be purchased by the
seller from AutoNation Financial Services. All of the contracts have been
originated by AutoNation Financial Services as of the Cut-off Date from loan
application referrals received from dealers. See "AutoNation Financial Services'
Portfolio of Motor Vehicle Contracts" herein and in the accompanying prospectus.
The total principal balance of the contracts in the receivables pool as of the
close of business on , was $ . Each of the contracts
in the trust will be a fixed rate contract where the allocation of each payment
between interest and principal is calculated using the simple interest method.
For a more detailed explanation of this calculation method, see "Description of
the Contracts-Calculation Method" in the accompanying prospectus.
As of the Cut-Off Date, contracts included in the trust were originated in
states, the District of Columbia and other United States territories and
possessions. As of the Cut-Off Date, contracts originated in [State] totaled %
of the trust, contracts originated in [State] totaled % of the trust and
contracts originated in [State] totaled % of the trust. As of the Cut-Off
Date, the aggregate principal balances of the contracts originated in any other
state did not exceed %.
The contracts included in the trust were selected from the motor vehicle
contracts in AutoNation Financial Services' portfolio using the criteria
described below. No selection procedures were used with respect to the contracts
that are materially adverse to the noteholders or the insurer. Contracts
representing % of the Trust Property are secured by new vehicles, and
contracts representing % of the Trust Property are secured by used
vehicles. The seller may not substitute other contracts for the contracts
presently in the trust at any time during the term of the sale and servicing
agreement.
The seller will represent that each contract included in the trust
satisfies several eligibility requirements, including the following:
(1) the contract is secured by a new or used automobile or light-duty
truck;
(2) the contract has an annual percentage rate, also known as an APR, of
at least % and not more than %;
(3) the contract has a remaining maturity as of the Cut-Off Date of not
more than months;
(4) the contract has an original maturity of not more than months;
(5) the contract is a fully-amortizing fixed rate contract which provides
for level scheduled monthly payments determined on the basis of the
simple interest method (except for the first and last payment, which
may be minimally different from the level payments);
(6) the contract has no payment of or more that was or more
days past due as of the Cut-Off Date;
(7) the contract has a remaining principal balance as of the Cut-Off Date
of not more than $ and not less than $ ;
(8) as of the Cut-Off Date, the seller or the servicer has not identified
the related obligor as being the subject of a bankruptcy, insolvency,
reorganization or other similar proceeding;
(9) the contract is a retail installment sales contract;
(10) the contract was originated in the United States of America by a
dealer for the retail sale of a financed vehicle in the ordinary
course of the dealer's business;
(11) the contract requires the related obligor to maintain physical damage
and theft insurance covering the related financed vehicle;
(12) the contract complied with AutoNation Financial Services' credit and
collection policies and procedures at the time of its origination by
AutoNation Financial Services;
(13) the contract does not provide for the substitution, exchange or
addition of any financed vehicle subject to the contract;
S-16
<PAGE>
(14) only one original executed copy of the contract exists; and
(15) the contract constitutes "chattel paper" under the Uniform Commercial
Code as in effect in the applicable jurisdiction.
Set forth below is selected data concerning the contracts as of the Cut-Off
Date which had a Pool Balance of $ .
COMPOSITION OF THE CONTRACTS
<TABLE>
<S> <C>
Aggregate principal balance........................................... $
Number of contracts...................................................
Average principal balance outstanding................................. $
Average original amount financed...................................... $
Original amount financed (range)...................................... to
Weighted average APR.................................................. %
APR (range)........................................................... % to %
Weighted average original term........................................
Original term (range)................................................. to mos.
Weighted average remaining term.......................................
Remaining term (range)................................................ to mos.
</TABLE>
DISTRIBUTION BY APRS OF THE CONTRACTS
<TABLE>
<CAPTION>
% OF
NUMBER OF % OF PRINCIPAL CUT-OFF
APR RANGE CONTRACTS CONTRACTS BALANCE POOL BALANCE
- ----------------------------------------------------------------- --------- --------- --------- ------------
<S> <C> <C> <C> <C>
0.000% to 6.999%...............................................
7.000% to 7.999%...............................................
8.000% to 8.999%...............................................
9.000% to 9.999%...............................................
10.000% to 10.999%...............................................
11.000% to 11.999%...............................................
12.000% to 12.999%...............................................
13.000% to 13.999%...............................................
14.000% to 14.999%...............................................
15.000% to 15.999%...............................................
16.000% to 16.999%...............................................
17.000% to 17.999%...............................................
18.000% to 18.999%...............................................
19.000% to 19.999%...............................................
20.000% to 20.999%...............................................
21.000% and over.................................................
------- ------- ------- ------
Totals......................................................... %(1) %(1)
</TABLE>
- ------------------
(1) Percentages may not add to 100% due to rounding.
S-17
<PAGE>
GEOGRAPHIC CONCENTRATION OF THE CONTRACTS
<TABLE>
<CAPTION>
% OF
NUMBER OF % OF PRINCIPAL CUT-OFF
CONTRACTS CONTRACTS BALANCE POOL BALANCE
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Alabama..........................................................
Arizona..........................................................
California.......................................................
Colorado.........................................................
Florida..........................................................
Georgia..........................................................
Illinois.........................................................
Indiana..........................................................
Iowa.............................................................
Maryland.........................................................
Michigan.........................................................
Minnesota........................................................
Nevada...........................................................
New Jersey.......................................................
North Carolina...................................................
Ohio.............................................................
Pennsylvania.....................................................
South Carolina...................................................
Tennessee........................................................
Texas............................................................
Virginia.........................................................
Washington.......................................................
------- ------- ------- ------
Totals......................................................... 100.00%(1) 100.00%(1)
</TABLE>
- ------------------
(1) Percentages may not add to 100% due to rounding.
Since the largest balance of contract obligors (based on state of
origination) whose contracts were included in the trust as of
were located in [State], [State] and [State], adverse changes in the economic
conditions in these jurisdictions could have a direct impact on the timing and
amount of payments on the notes.
MODEL YEAR CONCENTRATION OF THE CONTRACTS
<TABLE>
<CAPTION>
% OF
NUMBER OF % OF PRINCIPAL CUT-OFF
CONTRACTS CONTRACTS BALANCE POOL BALANCE
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
1993.............................................................
1994.............................................................
1995.............................................................
1996.............................................................
1997.............................................................
1998.............................................................
1999.............................................................
2000.............................................................
Other(1).........................................................
------- ------- ------- ------
Totals......................................................... 100.00%(2) 100.00%(2)
</TABLE>
(Footnotes on next page)
S-18
<PAGE>
(Footnotes from previous page)
- ------------------
(1) Includes all model years comprising less than % by principal balance of
the Pool Balance.
(2) Percentages may not add to 100% due to rounding.
MANUFACTURER CONCENTRATION OF THE CONTRACTS
<TABLE>
<CAPTION>
% OF
NUMBER OF % OF PRINCIPAL CUT-OFF
CONTRACTS CONTRACTS BALANCE POOL BALANCE
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
DaimlerChrysler.......................................
Ford..................................................
General Motors........................................
Honda.................................................
Nissan................................................
Toyota................................................
Other(1)..............................................
------- ------- ------- ------
Totals........................................... 100.00%(2) 100.00%(2)
------- ------
------- ------
</TABLE>
- ------------------
(1) Includes all manufacturers comprising less than % by principal balance of
the Pool Balance.
(2) Percentages may not add to 100% due to rounding.
MATURITY AND PREPAYMENT CONSIDERATIONS
The indenture provides that the noteholders may receive payments of
principal on the 15th day of each month (or if that day is not a business day
(i.e., a Saturday, Sunday, a day on which the insurer is closed or a day on
which banking institutions in New York, New York or in the city in which the
indenture trustee's corporate trust office or the owner trustee's corporate
trust office is located are authorized or obligated by law to be closed), on the
next succeeding business day), but will receive the full outstanding principal
amount of each class of notes no later than (1) in the case of the class A-1
notes, , (2) in the case of the class A-2 notes,
, (3) in the case of the class A-3 notes, and
(4) in the case of the class A-4 notes, .
Contracts are or will be prepayable in full by the obligors at any time
without penalty. See "Maturity and Prepayment Considerations" in the
accompanying prospectus regarding the effects of prepayments on the weighted
average life of the contracts. As the rate of payment of principal of each class
of notes depends primarily on the rate of payment (including prepayments) of the
principal of the contracts, final payment of any class of notes is expected to
occur earlier, and could occur significantly earlier, than the respective Final
Scheduled Distribution Dates for the notes. In addition, the rate of payment of
principal of each class of notes will be affected by the portion of collections
on the contracts relating to the Overcollateralization Amount applied to the
payment of principal of the notes. See "Risk Factors--Potential prepayment of
the notes may require reinvestment of principal at a lower rate of return"
herein.
The trust can make no prediction as to the actual prepayment rates that
will be experienced on the contracts in either stable or changing interest rate
environments. In addition, the rate of payment of principal of each class of
notes will be affected by the incidence of delinquencies, defaults and losses on
the contracts, the level of overcollateralization and by any accelerated
payments made on the notes following an event of default under the indenture.
See "Risk Factors--Events of default under the indenture could result in losses
or acceleration of payments on the notes" herein. In addition, while it is
anticipated that there will be monthly principal and interest collections in an
amount sufficient to pay the outstanding principal amount of each class of notes
on the applicable Final Scheduled Distribution Dates, no assurance can be given
in that regard. Full payment of each class of notes by the applicable Final
Scheduled Distribution Dates depends on, among other things, the payment by
obligors of amounts due under the contracts and the fulfillment of the insurer's
obligations under the insurance policy.
Prepayments on motor vehicle receivables can be measured relative to a
prepayment standard or model. The model used in this prospectus supplement, the
absolute prepayment model, represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool of receivables. The
absolute prepayment model further assumes that all the receivables are the same
size and amortize at the same rate
S-19
<PAGE>
and that each receivable in each month of its life will either be paid as
scheduled or be prepaid in full. For example, in a pool of receivables
originally containing 10,000 receivables, a 1% absolute prepayment model rate
means that 100 receivables prepay each month. The absolute prepayment model does
not purport to be an historical description of prepayment experience or a
prediction of the anticipated rate of prepayment of any pool of receivables,
including the contracts.
The tables captioned "Percent of Initial Class A-1 Note and Class A-2 Note
Principal Balances at Various Absolute Prepayment Model Percentages" and
"Percent of Initial Class A-3 Note and Class A-4 Note Principal Balances at
Various Absolute Prepayment Model Percentages" have been prepared on the basis
of the characteristics of the contracts. Each absolute prepayment model table
assumes that (a) the contracts prepay in full at the specified constant
percentage of the absolute prepayment model monthly, with no defaults, losses or
repurchases, (b) each scheduled monthly payment on the contracts is made on the
last day of each month and each month has 30 days, (c) payments on the notes are
made on each Distribution Date (and each Distribution Date is assumed to be the
15th day of each applicable month), (d) the balance in the spread account on
each Distribution Date is equal to the Spread Account Required Amount and (e)
the servicer does not exercise its option to purchase the contracts. The
contracts have an assumed cut-off date of the Cut-Off Date. Each absolute
prepayment model table indicates the projected weighted average life of each
class of notes and sets forth the percent of the initial principal amount of
each class of notes that is projected to be outstanding after each of the
Distribution Dates shown at various constant absolute prepayment model
percentages.
The absolute prepayment model tables also assume that (a) the contracts
have been aggregated into hypothetical pools with all of the contracts within
each pool having the characteristics set forth below and (b) the level scheduled
monthly payment for each pool (which is based on its principal balance, weighted
average APR, weighted average original term to maturity and weighted average
remaining term to maturity as of the Cut-Off Date) will be such that each pool
will be fully amortized by the end of its remaining term to maturity.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE
AGGREGATE WEIGHTED ORIGINAL TERM REMAINING TERM
PRINCIPAL AVERAGE TO MATURITY TO MATURITY
POOL BALANCE APR (IN MONTHS) (IN MONTHS)
---- --------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
1 $ %
2
3
4
5
</TABLE>
The information included in the following tables represents forward-looking
statements and involves risks and uncertainties that could cause actual results
to differ materially from the results hypothesized in the forward-looking
statements. The actual characteristics and performance of the contracts will
differ from the assumptions used in constructing each absolute prepayment model
table. The assumptions used are hypothetical and have been provided only to give
a general sense of how the principal cash flows might behave under varying
prepayment scenarios. For example, it is very unlikely that the contracts will
prepay at a constant level until maturity or that all of the contracts will
prepay at the same level. Moreover, the diverse terms of contracts within each
of the five hypothetical pools could produce slower or faster principal
distributions than indicated in each absolute prepayment model table at the
various constant absolute prepayment model percentages specified, even if the
original and remaining terms to maturity of the contracts are as assumed. Any
difference between these assumptions and the actual characteristics and
performance of the contracts, or actual prepayment experience, will affect the
percentages of initial balances outstanding over time and the weighted average
lives of each class of notes.
S-20
<PAGE>
PERCENT OF INITIAL CLASS A-1 NOTE AND CLASS A-2 NOTE PRINCIPAL BALANCES
AT VARIOUS ABSOLUTE PREPAYMENT MODEL
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES
----------------------------------- -----------------------------------
ASSUMED ABSOLUTE PREPAYMENT ASSUMED ABSOLUTE PREPAYMENT
MODEL PERCENTAGE(1) MODEL PERCENTAGE(1)
----------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION DATES 0.50% 1.00% 1.50% 2.00% 0.50% 1.00% 1.50% 2.00%
- ------------------------------------- ----- ----- ----- ----- ----- ----- ----- -----
Closing Date.........................
October 15, 1999.....................
November 15, 1999....................
December 15, 1999....................
January 15, 2000.....................
February 15, 2000....................
March 15, 2000.......................
April 15, 2000.......................
May 15, 2000.........................
June 15, 2000........................
July 15, 2000........................
August 15, 2000......................
September 15, 2000...................
October 15, 2000.....................
November 15, 2000....................
December 15, 2000....................
January 15, 2001.....................
February 15, 2001....................
March 15, 2001.......................
April 15, 2001.......................
May 15, 2001.........................
June 15, 2001........................
July 15, 2001........................
August 15, 2001......................
September 15, 2001...................
October 15, 2001.....................
November 15, 2001....................
December 15, 2001....................
January 15, 2002.....................
February 15, 2002....................
March 15, 2002.......................
April 15, 2002.......................
May 15, 2002.........................
June 15, 2002........................
Weighted Average Life
(years)(2) ............ ...........
</TABLE>
- ------------------
(1) An asterisk (*) means a percent of initial note principal balance of more
than zero and less than 0.50%.
(2) The weighted average life of a note is determined by (a) multiplying the
amount of each principal payment of the note by the number of years from the
date of the issuance of the note to the Distribution Date on which the
principal payment is made, (b) adding the results and (c) dividing the sum
by the initial principal balance of the note.
THE ABSOLUTE PREPAYMENT MODEL TABLES HAVE BEEN PREPARED BASED ON THE
ASSUMPTIONS DESCRIBED ABOVE (INCLUDING THE ASSUMPTIONS REGARDING THE
CHARACTERISTICS AND PERFORMANCE OF THE CONTRACTS WHICH WILL DIFFER FROM THE
ACTUAL CHARACTERISTICS AND PERFORMANCE THEREOF) AND SHOULD BE READ IN
CONJUNCTION THEREWITH.
S-21
<PAGE>
PERCENT OF INITIAL CLASS A-3 NOTE AND CLASS A-4 NOTE PRINCIPAL BALANCES
AT VARIOUS ABSOLUTE PREPAYMENT MODEL PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-3 NOTES CLASS A-4 NOTES
-------------------------------- --------------------------------
ASSUMED ABSOLUTE PREPAYMENT ASSUMED ABSOLUTE PREPAYMENT
MODEL PERCENTAGE MODEL PERCENTAGE
-------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION DATES 0.50% 1.00% 1.50% 2.00% 0.50% 1.00% 1.50% 2.00%
- --------------------------------------------- ----- ----- ----- ----- ----- ----- ----- -----
Closing Date.................................
October 15, 1999.............................
November 15, 1999............................
December 15, 1999............................
January 15, 2000.............................
February 15, 2000............................
March 15, 2000...............................
April 15, 2000...............................
May 15, 2000.................................
June 15, 2000................................
July 15, 2000................................
August 15, 2000..............................
September 15, 2000...........................
October 15, 2000.............................
November 15, 2000............................
December 15, 2000............................
January 15, 2001.............................
February 15, 2001............................
March 15, 2001...............................
April 15, 2001...............................
May 15, 2001.................................
June 15, 2001................................
July 15, 2001................................
August 15, 2001..............................
September 15, 2001...........................
October 15, 2001.............................
November 15, 2001............................
December 15, 2001............................
January 15, 2002.............................
February 15, 2002............................
March 15, 2002...............................
April 15, 2002...............................
May 15, 2002.................................
June 15, 2002................................
</TABLE>
- ------------------
THE ABSOLUTE PREPAYMENT MODEL TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS
DESCRIBED ABOVE (INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND
PERFORMANCE OF THE CONTRACTS WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS
AND PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-22
<PAGE>
PERCENT OF INITIAL CLASS A-3 NOTE AND CLASS A-4 NOTE PRINCIPAL BALANCES
AT VARIOUS ABSOLUTE PREPAYMENT MODEL PERCENTAGES (CONTINUED)
<TABLE>
<CAPTION>
CLASS A-3 NOTES CLASS A-4 NOTES
-------------------------------- --------------------------------
ASSUMED ABSOLUTE PREPAYMENT ASSUMED ABSOLUTE PREPAYMENT
MODEL PERCENTAGE(1) MODEL PERCENTAGE(1)
-------------------------------- --------------------------------
DISTRIBUTION DATES 0.50% 1.00% 1.50% 2.00% 0.50% 1.00% 1.50% 2.00%
- --------------------------------------------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
July 15, 2002................................
August 15, 2002..............................
September 15, 2002...........................
October 15, 2002.............................
November 15, 2002............................
December 15, 2002............................
January 15, 2003.............................
February 15, 2003............................
March 15, 2003...............................
April 15, 2003...............................
May 15, 2003.................................
June 15, 2003................................
July 15, 2003................................
August 15, 2003..............................
September 15, 2003...........................
October 15, 2003.............................
November 15, 2003............................
December 15, 2003............................
January 15, 2004.............................
February 15, 2004............................
March 15, 2004...............................
April 15, 2004...............................
May 15, 2004.................................
June 15, 2004................................
July 15, 2004................................
August 15, 2004..............................
September 15, 2004...........................
October 15, 2004.............................
November 15, 2004............................
December 15, 2004............................
January 15, 2005.............................
February 15, 2005............................
March 15, 2005...............................
Weighted Average Life (years)(2).............
</TABLE>
- ------------------
(1) An asterisk (*) means a percent of initial note principal balance of more
than zero and less than 0.50%.
(2) The weighted average life of a note is determined by (a) multiplying the
amount of each principal payment of the note by the number of years from the
date of the issuance of the note to the Distribution Date on which the
principal payment is made, (b) adding the results and (c) dividing the sum
by the initial principal balance of the note.
THE ABSOLUTE PREPAYMENT MODEL TABLES HAVE BEEN PREPARED BASED ON THE
ASSUMPTIONS DESCRIBED ABOVE (INCLUDING THE ASSUMPTIONS REGARDING THE
CHARACTERISTICS AND PERFORMANCE OF THE CONTRACTS WHICH WILL DIFFER FROM THE
ACTUAL CHARACTERISTICS AND PERFORMANCE THEREOF) AND SHOULD BE READ IN
CONJUNCTION THEREWITH.
S-23
<PAGE>
USE OF PROCEEDS
The net proceeds of the initial sale of the notes will be used by the trust
to purchase the contracts from the seller pursuant to the sale and servicing
agreement and to fund the deposits in the spread account maintained for the
benefit of the noteholders and the insurer. The net proceeds to be received by
the seller from the sale of the contracts to the trust will be used by the
seller to repay indebtedness incurred, or to pay other amounts owed, in
connection with its acquisition of the contracts from AutoNation Financial
Services and to pay other expenses in connection with the pooling of the
contracts and the issuance of the notes. AutoNation Financial Services will use
the proceeds from the sale of the contracts for general corporate purposes.
DESCRIPTION OF THE NOTES
The notes will be issued pursuant to the terms of the indenture. A copy of
the indenture will be filed with the Securities and Exchange Commission
following the issuance of the notes. The following summaries, together with the
summaries contained under "Description of the Securities" and "Description of
the Indenture" in the accompanying prospectus, describe all of the material
terms of the notes and the indenture. However, these summaries do not purport to
be complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the notes and the indenture. Where particular
provisions of or terms used in the indenture are referred to, the actual
provisions (including definitions of terms) are incorporated by reference as
part of the summaries. The following summaries supplement the description of the
general terms and provisions of the indenture set forth under the heading
"Description of the Indenture" in the accompanying prospectus, to which
description reference is hereby made.
ISSUANCE AND REGISTRATION OF THE NOTES
The notes of each class will be offered for purchase in minimum
denominations of $1,000 and integral multiples thereof, except that one note of
each class may be issued in a different denomination. The notes will initially
be represented by one or more physical certificates registered in the name of
Cede & Co., as nominee of The Depository Trust Company, also known as DTC. The
interests of holders of beneficial interests in the global notes will be
available for purchase in book-entry form only. Unless and until the notes are
issued in definitive registered form under the limited circumstances described
herein, no holder of a beneficial interest in a global note will be entitled to
receive a definitive certificate representing that person's interest in the
notes. All references herein to actions by noteholders shall refer to actions
taken by DTC upon instructions from its participating organizations and all
references herein to payments, distributions, notices, reports and statements to
noteholders shall refer to distributions, notices, reports and statements to DTC
or Cede & Co., as the registered holder of the notes, as the case may be, for
distribution to holders of beneficial interests in a global note in accordance
with DTC procedures. See "Description of the Securities--Book-Entry
Registration" and "--Definitive Securities" in the accompanying prospectus.
Unless and until notes in definitive registered form have been issued,
payments on each Distribution Date will be made through the facilities of DTC
and the related Record Date will be the business day prior to that Distribution
Date. If notes in definitive registered form are issued, the related Record Date
will be the last day of the calendar month preceding the Distribution Date. The
final payment of principal of, and interest on, each note will be made only upon
presentation and surrender of the note at the office or agency of the indenture
trustee maintained for that purpose.
INTEREST PAYMENTS
Interest on the outstanding principal amount of each class of notes will
accrue at a per annum rate equal to the applicable interest rate for that class
of notes and, except as otherwise provided herein, will be distributed to the
noteholders monthly on each Distribution Date, commencing , and on the
applicable Final Scheduled Distribution Date. The interest period with respect
to any Distribution Date will be the period from the previous Distribution Date
or, in the case of the first Distribution Date, from and including the Closing
Date, to but excluding the Distribution Date. Interest on the class A-1 notes
will be
S-24
<PAGE>
calculated on the basis of the actual number of days in the related Interest
Accrual Period and a 360-day year. Interest on the class A-2 notes, the class
A-3 notes and the class A-4 notes will be calculated on the basis of a 360-day
year consisting of twelve 30-day months.
The class A-1 notes will bear interest at the rate of % per annum, the
class A-2 notes will bear interest at the rate of % per annum, the
class A-3 notes will bear interest at the rate of % per annum and the
class A-4 notes will bear interest at the rate of % per annum.
Interest accrued but not paid to the holders of any class of notes on any
Distribution Date will be due on the immediately succeeding Distribution Date,
together with, to the extent permitted by applicable law, interest on the
shortfall at the related interest rate for that class of notes. Interest
distributions with respect to the notes will be made as described below under
"Description of the Transfer and Servicing Agreements--Distributions" herein.
PRINCIPAL PAYMENTS
Principal payments will be made to the noteholders, to the extent described
below, on each Distribution Date in an amount equal to the Note Principal
Distributable Amount. See "Description of the Transfer and Servicing
Agreements--Distributions" herein.
Principal payments on the notes will be applied on each Distribution Date
from the note distribution account in the following order of priority:
(1) to the holders of the class A-1 notes until the principal amount
of the class A-1 notes has been reduced to zero;
(2) to the holders of the class A-2 notes until the principal amount
of the class A-2 notes has been reduced to zero;
(3) to the holders of the class A-3 notes until the principal amount
of the class A-3 notes has been reduced to zero; and
(4) to the holders of the class A-4 notes until the principal amount
of the class A-4 notes has been reduced to zero.
The principal amount of each class of notes, to the extent not previously
paid, will be due on the related Final Scheduled Distribution Date for that
class of notes. The actual date on which the outstanding principal amount of any
class of notes is paid is expected to be earlier, and could be significantly
earlier, than the Final Scheduled Distribution Date for that class and will be
based on a variety of factors, including the factors described under "Maturity
and Prepayment Considerations" herein and in the accompanying prospectus.
Any assets remaining in the trust after the payment in full of the notes
and of any amounts owed to the servicer, the trustees and the insurer will be
distributed to the holder of the residual interest in the trust, which initially
will be the seller, pursuant to the terms of the owner trust agreement and the
sale and servicing agreement.
OPTIONAL REDEMPTION
Any outstanding notes will be subject to redemption in whole, but not in
part, on any Distribution Date relating to an Optional Purchase. When the
outstanding principal balance of the contracts has declined to 10% or less of
the original Pool Balance, the servicer may, in its sole discretion, exercise
its option to purchase the Trust Property. If the servicer exercises this
option, the redemption price for each class of notes will equal the unpaid
principal amount of that class of notes plus accrued and unpaid interest thereon
at the applicable interest rate. The servicer will not be permitted to exercise
an optional redemption unless there are sufficient funds to pay all amounts owed
to the insurer, the servicer, the indenture trustee and the owner trustee in
connection with an Optional Purchase. Any optional redemption by the servicer
will effect an early retirement of each outstanding class of notes. See
"Description of the Transfer and Servicing Agreements--Termination" herein.
S-25
<PAGE>
THE INDENTURE TRUSTEE
will be the indenture trustee. The indenture trustee is a
banking corporation and its Corporate Trust Office is located at
.
The indenture trustee will have the rights and duties set forth under
"Description of the Transfer and Servicing Agreements--The Owner Trustee and
Indenture Trustee" in the accompanying prospectus.
EVENTS OF DEFAULT UNDER THE INDENTURE
An event of default under the indenture will include, among other things,
the occurrence of any of the following events:
(1) the delivery to the insurer of a claim for payment under the
insurance policy;
(2) a default for five days or more in the payment of any interest on
any note;
(3) a default in the payment of any principal on the applicable Final
Scheduled Distribution Date for a class of notes;
(4) a default in the observance or performance of any covenant or
agreement of the trust made in the indenture and the continuation of any
default for a period of 30 days after notice thereof is given to the trust
by the indenture trustee or the insurer, or to the trust, the insurer and
the indenture trustee by the holders of at least 25% in principal amount of
the notes then outstanding acting together as a single class, in each case
specifying the event of default and requiring it to be remedied;
(5) the failure of the indenture trustee to have a valid perfected
first priority security interest in the Trust Property;
(6) the failure of the receivables purchase agreement, the sale and
servicing agreement, the owner trust agreement, the administration
agreement, the insurance agreement, the indenture or any of the other basic
documents relating to the transaction, as each may have been amended or
supplemented from time to time, to be in full force and effect at any time;
(7) any representation or warranty made by the trust in the indenture
or in any certificate delivered pursuant thereto or in connection therewith
was incorrect in a material respect as of the time made, and the breach is
not cured within 30 days after notice thereof is given to the trust by the
indenture trustee or the insurer, or to the trust, the insurer and the
indenture trustee by the holders of at least 25% in principal amount of the
notes then outstanding acting together as a single class, in each case
specifying the breach and requiring it to be remedied; or
(8) a Trust Bankruptcy Event;
provided that so long as no Insurer Default shall have occurred and be
continuing, neither the indenture trustee nor the noteholders may accelerate the
notes under the indenture. So long as an Insurer Default shall not have occurred
and be continuing, acceleration of the notes under the indenture will occur only
upon delivery by the insurer to the trust and the indenture trustee of notice
that the notes are immediately due and payable. The failure to pay principal on
a class of notes will not result in the occurrence of an event of default under
the indenture until the Final Scheduled Distribution Date for that class of
notes.
Upon the occurrence of an event of default under the indenture, so long as
an Insurer Default shall not have occurred and be continuing, the insurer will
have the right, but not the obligation, to cause the indenture trustee to
liquidate the Trust Property, in whole or in part, on any date or dates
following the acceleration of the notes due to the event of default as the
insurer, in its sole discretion, shall elect. The insurer may not, however,
cause the indenture trustee to liquidate the Trust Property, in whole or in
part, if the proceeds of the liquidation would not be sufficient to pay all
outstanding principal of, and accrued interest on, the notes unless the event of
default arose from a claim made on the insurance policy or from a Trust
Bankruptcy Event. Following the occurrence of any event of default under the
indenture, the indenture trustee will continue to submit claims under the
insurance policy for any shortfalls in amounts available to make payments or
distributions of guaranteed amounts on the notes. However, following the
occurrence of an event of default under the indenture (so long as an Insurer
Default shall not have occurred and be continuing), the
S-26
<PAGE>
insurer, at its sole option, may elect to pay all or any portion of the
outstanding amount of the notes, plus accrued interest thereon to the date of
the payment. See "Description of the Insurance Policy" herein.
If an Insurer Default has occurred and is continuing, upon the occurrence
of an event of default under the indenture (other than an event of default
occurring solely because of a claim for payments under the insurance policy),
the holders of at least 66 2/3% of the principal amount of the notes then
outstanding may declare the principal of the notes to be immediately due and
payable. If an Insurer Default has occurred and is continuing and an event of
default under the indenture shall have occurred and be continuing (other than an
event of default occurring solely because of a claim for payments under the
insurance policy), the holders of at least 66 2/3% of the principal amount of
the notes will have the right to control the exercise of remedies available with
respect to the event of default, including the right to direct the indenture
trustee to maintain possession of the Trust Property or to liquidate the Trust
Property in whole or in part; provided, however, that those noteholders may not
direct the indenture trustee to liquidate the Trust Property in whole or in part
unless (1) the event of default has occurred because of a Payment Default or a
Trust Bankruptcy Event, and in either case the insurer shall have failed to make
a payment required under the insurance policy in accordance with its terms or
(2)(A) an event of default under the indenture has occurred other than as
described in clause (1), (B) the insurer shall not have failed to make a payment
required under the insurance policy in accordance with its terms and (C) the
proceeds of the sale will be sufficient to pay all principal on the notes,
together with accrued interest thereon, and all amounts owing to the insurer
under the insurance agreement. In the event of a sale of the contracts as
described in clause (2) of the preceding sentence, the insurance policy will not
be available to cover losses to noteholders resulting from the sale and will be
terminated and the insurer will have no further obligation to make any payment
thereunder. See "Risk Factors--Events of default under the indenture could
result in losses or acceleration of payments on the notes" herein.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes selected terms of the sale and servicing
agreement and the owner trust agreement. Copies of the sale and servicing
agreement and the owner trust agreement will be filed with the SEC following the
issuance of the notes. The following summary does not purport to be complete and
is subject to, and qualified in its entirety by reference to, all of the
provisions of the sale and servicing agreement and the owner trust agreement.
Where particular provisions of or terms used in the sale and servicing agreement
or the owner trust agreement are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of the summary. The
following summary supplements the description of the general terms and
provisions of the sale and servicing agreement and the owner trust agreement set
forth under the heading "Description of the Transfer and Servicing Agreements"
in the accompanying prospectus, to which description reference is hereby made.
SALE AND ASSIGNMENT OF THE CONTRACTS
Pursuant to the receivables purchase agreement between the seller and
AutoNation Financial Services, prior to the issuance of the notes, AutoNation
Financial Services will sell and assign to the seller its entire interest in the
contracts and the proceeds thereof, including its security interests in the
financed vehicles. In turn, the seller will sell and assign to the trust,
without recourse, the seller's entire interest in the contracts and the proceeds
thereof, including its security interest in the financed vehicles. Each contract
will be identified in a schedule appearing as an exhibit to the sale and
servicing agreement. Concurrently with the sale and assignment of the contracts,
the trust will pledge the assets acquired by it to the indenture trustee
pursuant to the indenture, and definitive certificates representing the notes
will be delivered to the underwriters of the notes in exchange for payment to
the seller of the net purchase price of the notes. The trust will also pledge
its rights under the sale and servicing agreement to the indenture trustee as
collateral for the notes, and the trust's rights under the sale and servicing
agreement may be enforced directly by the indenture trustee. See "Description of
the Transfer and Servicing Agreements--Sale and Assignment of the Contracts" in
the accompanying prospectus.
S-27
<PAGE>
THE ACCOUNTS
The Collection Account. The indenture trustee will establish and maintain
an account, known as the collection account, in the name of the indenture
trustee into which the servicer will deposit all collections from the related
contracts. Funds in the collection account will be invested in Eligible
Investments by the indenture trustee, acting at the direction of the servicer.
Eligible Investments made with respect to the collection account will mature no
later than the business day preceding the following Distribution Date after they
were invested and any income from amounts on deposit in the collection account
which were invested in Eligible Investments will be paid monthly to the
servicer, unless otherwise directed by the servicer. See "Description of the
Transfer and Servicing Agreements--The Collection Account and Eligible
Investments" in the accompanying prospectus.
The Payment Account. The indenture trustee shall establish and maintain an
account, known as the payment account, in the name of the indenture trustee,
into which amounts released from the collection account for distribution to
noteholders will be deposited prior to the transfer of those amounts to the note
distribution account.
The Note Distribution Account. The indenture trustee will establish and
maintain an account, known as the note distribution account, in the name of the
indenture trustee on behalf of the noteholders, into which amounts released from
the payment account for distribution to noteholders will be deposited and from
which all distributions to noteholders will be made.
The Spread Account. The indenture trustee will establish and maintain an
account, known as the spread account, in the name of the indenture trustee for
the benefit of the noteholders and the insurer as described under "Description
of the Transfer and Servicing Agreements--The Spread Account" and "--Withdrawals
from the Spread Account" herein.
PAYMENTS ON CONTRACTS
All Available Funds relating to the contracts will be deposited in or
credited to the collection account by the servicer within two business days of
the receipt of payments from obligors. Available Funds with respect to a
Distribution Date and the related Collection Period will include the following:
(1) amounts received with respect to the contracts in the related
Collection Period representing monthly principal and interest payments;
(2) full and partial prepayments by the related obligor;
(3) any Net Liquidation Proceeds;
(4) any Net Insurance Proceeds;
(5) any amounts deposited by AutoNation Financial Services or the
seller, as applicable, in the collection account to purchase or repurchase
contracts because of material defects in documents related to the contracts
or breaches of representations or warranties regarding the contracts made
by the seller in the sale and servicing agreement that materially and
adversely affect the interests of the noteholders or the insurer;
(6) any amounts deposited by the servicer in the collection account to
purchase contracts as a remedy for breach of the servicer's
representations, warranties and covenants relating to the servicing of the
contracts; and
(7) any amounts deposited by the servicer in the collection account
pursuant to an Optional Purchase.
DISTRIBUTIONS
On the business day immediately preceding each Distribution Date, the
indenture trustee will cause funds equal to the amount of Available Funds with
respect to that Distribution Date to be withdrawn from the collection account
and deposited into the payment account. On each Distribution Date, the indenture
trustee,
S-28
<PAGE>
based solely on the statement for that Distribution Date received from the
servicer, will apply the Available Funds on deposit in the payment account
available with respect to the related Collection Period together with amounts,
if any, withdrawn from the spread account and any amounts representing payment
of the Insured Payment as described herein, to make the following deposits and
distributions in the following amounts and order of priority:
(1) to the servicer, from Available Funds and amounts, if any,
withdrawn from the spread account, the servicing fee for that Distribution
Date, including any unpaid servicing fees with respect to one or more prior
Distribution Dates;
(2) to the indenture trustee and the owner trustee, from Available
Funds (after giving effect to the reduction in Available Funds described in
clause (1) above) and amounts, if any, withdrawn from the spread account,
any accrued and unpaid fees and expenses of the indenture trustee and the
owner trustee, in each case to the extent those fees and expenses have not
been previously paid by the servicer; provided that such payments pursuant
to this clause (2) will not during any calendar year exceed $ in
the aggregate;
(3) to the insurer, from Available Funds (after giving effect to the
reduction in Available Funds described in clauses (1) and (2) above) and
amounts, if any, withdrawn from the spread account, the insurance premium
(as defined in the insurance agreement) for that Distribution Date owing to
the insurer under the insurance agreement;
(4) to the note distribution account, from Available Funds (after
giving effect to the reduction in Available Funds described in clauses
(1) through (3) above) and amounts, if any, withdrawn from the spread
account and any amounts representing payment of the Insured Payment, the
Note Interest Distributable Amount to be distributed to the holders of
notes at their respective interest rates on a pro rata basis;
(5) to the note distribution account, if the Distribution Date is a
Final Scheduled Distribution Date for any class of notes, the Note
Principal Distributable Amount to the extent of the remaining outstanding
principal amount of that class of notes, from Available Funds (after giving
effect to the reduction in Available Funds described in clauses
(1) through (4) above) and amounts, if any, withdrawn from the spread
account and any amounts representing payment of the Insured Payment, to be
paid to the holders of that class of notes;
(6) to the note distribution account, from Available Funds (after
giving effect to the reduction in Available Funds described in clauses
(1) through (5) above) and amounts, if any, withdrawn from the spread
account and any amounts representing payment of the Insured Payment, the
remaining Note Principal Distributable Amount (after giving effect to the
payment, if any, described in clause (5) above), to be distributed first to
the holders of class A-1 notes until the principal amount of the class A-1
notes has been reduced to zero, then to the holders of class A-2 notes
until the principal amount of the class A-2 notes has been reduced to zero,
then to the holders of class A-3 notes until the principal amount of the
class A-3 notes has been reduced to zero and then to the holders of class
A-4 notes until the principal amount of the class A-4 notes has been
reduced to zero;
(7) to the insurer, from Available Funds (after giving effect to the
reduction in Available Funds described in clauses (1) through (6) above)
and amounts, if any, withdrawn from the spread account, all remaining
amounts owing to the insurer under the insurance agreement;
(8) to the indenture trustee or the owner trustee, if applicable, from
Available Funds (after giving effect to the reduction in Available Funds
described in clauses (1) through (7) above), the amount of any fees and
reasonable expenses not paid under clause (2) above as a result of the
dollar limitation on fees and reasonable expenses set forth in clause (2);
(9) to the indenture trustee or the successor servicer, if applicable,
from Available Funds (after giving effect to the reduction in Available
Funds described in clauses (1) through (8) above), the amount of any
reasonable expenses not paid by the servicer incurred in connection with
reliening documentation relating to financed vehicles;
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(10) to the successor servicer, if applicable, from Available Funds
(after giving effect to the reduction in Available Funds described in
clauses (1) through (9) above), reasonable expenses not paid by the
servicer incurred in connection with the transfer of servicing from the
servicer to the successor servicer and the amount of any additional
servicing fee owing to the successor servicer in excess of the servicing
fee for that Distribution Date;
(11) to the spread account, from Available Funds (after giving effect
to the reduction in Available Funds described in clauses (1) through
(10) above), the amount, if any, required to increase the amount therein to
the Spread Account Required Amount; and
(12) any remaining Available Funds will be distributed to the holder
of the residual interest in the trust, which initially will be the seller.
EARLY REPAYMENT
If the repayment of principal of and interest on the notes is accelerated
following the occurrence of an event of default under the indenture, amounts
collected and, as directed by the insurer, amounts on deposit in the Spread
Account will be applied in the following order of priority:
(1) to the servicer, to pay any unpaid servicing fee;
(2) to the indenture trustee or the owner trustee, as applicable, to
pay any accrued and unpaid fees and reasonable expenses of the indenture
trustee or the owner trustee;
(3) to the noteholders, to pay any accrued and unpaid interest on each
class of notes on a pro rata basis based on the interest accrued (including
interest accrued on past due interest) on each class of notes;
(4) to the noteholders, to pay principal on each class of notes, on a
pro rata basis based on the aggregate principal balance of each class of
notes, until the aggregate principal balance of each class of notes is
reduced to zero;
(5) to the insurer, to pay amounts owing to the insurer under the
insurance agreement or otherwise, including the insurance premium; and
(6) any remaining funds will be distributed to the holder of the
residual interest in the trust.
Amounts on deposit in the spread account on a Distribution Date will be
available to make payments and distributions to the appropriate parties on that
Distribution Date as described under "--Withdrawals from the Spread Account"
herein and to make the payments and distributions, as directed by the insurer,
pursuant to clauses (1) through (5) above upon the occurence of an early
repayment. Under the insurance policy, the insurer is obligated to provide for
payment to the indenture trustee on each Distribution Date of any Insured
Payment.
PAYMENT PRIORITIES OF THE NOTES
The rights of the noteholders to receive distributions with respect to the
contracts will be subordinated to the rights of the servicer (to the extent that
the servicer has not been paid all servicing fees), the indenture trustee and
the owner trustee (to the extent the indenture trustee and the owner trustee
have not received all fees due and payable to them by the servicer) and the
insurer (to the extent the insurer has not received the insurance premium). In
addition, the rights of the noteholders to receive distributions with respect to
the contracts will be subject to the priorities set forth under
"--Distributions" above. The spread account, the Overcollateralization Amount
and the insurance policy are intended to enhance the likelihood of timely
repayment to the noteholders of the full amount of interest and principal owed
to them, and to afford the noteholders limited protection against losses in
respect of the contracts as described in "--The Spread Account,"
"--Overcollateralization" and "Description of the Insurance Policy" below.
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THE SPREAD ACCOUNT
The foregoing protection will be effected both by the preferential right of
the noteholders to receive, to the extent described herein, current
distributions with respect to the contracts, and by the establishment of the
spread account. Amounts held from time to time in the spread account are
intended to enhance the likelihood of receipt by noteholders of amounts due them
and to decrease the likelihood that noteholders will experience losses. The
spread account will be a part of the trust and will be maintained as a
segregated trust account in the name of the indenture trustee. The indenture
trustee will have a perfected security interest therein and in all amounts
deposited in or credited to the spread account as well as to all Eligible
Investments made with those deposits and earnings. On the Closing Date, the
spread account will be funded by the issuer with an initial deposit in cash from
the proceeds of the sale of the notes. Thereafter, the spread account will be
funded by the deposit therein of amounts pursuant to clause (11) under
"--Distributions" above.
Amounts held from time to time in the spread account up to the Spread
Account Required Amount will continue to be held for the benefit of holders of
the notes and the insurer and may be invested in Eligible Investments.
Investment income on funds on deposit in the spread account will be credited to
the spread account. Any loss on investments will be charged to the spread
account.
The Spread Account Required Amount is an amount calculated pursuant to a
formula agreed to by the parties to the insurance agreement and each of the
rating agencies. The Spread Account Required Amount may be calculated pursuant
to any other formula as the parties to the insurance agreement and each of the
rating agencies may agree, and may include any other provisions or contain any
additional requirements as the parties to the insurance agreement may agree,
which each of the rating agencies may require to maintain the ratings of the
notes, and to maintain the rating of the transactions contemplated in the
insurance agreement and the sale and servicing agreement, without consideration
of the insurance policy, at not less than investment grade, as defined by the
rating agencies. The Spread Account Required Amount may increase or decrease
over time, without the consent of any of the noteholders, as a result of floors,
caps and triggers set forth in the insurance agreement. In addition, there can
be no assurance that the Spread Account Required Amount will be reached at any
given time. Consequently, noteholders should not rely on amounts on deposit or
to be deposited in the spread account in evaluating the likelihood that the
notes will be repaid.
WITHDRAWALS FROM THE SPREAD ACCOUNT
Amounts held from time to time in the spread account will be held for the
benefit of the noteholders and the insurer. On each Distribution Date, the
indenture trustee, based solely on the statement for that Distribution Date
received from the servicer, will withdraw funds from the spread account to the
extent that the sum of the amounts to be distributed as set forth in clauses
(1) through (7) under "--Distributions" above with respect to that Distribution
Date exceeds the amount of Available Funds available with respect to that
Distribution Date. The indenture trustee will apply the amount of the withdrawal
to make the deposits and distributions described under "--Distributions" above.
Funds will also be withdrawn from the spread account to reimburse the insurer
for any draws under the insurance policy with respect to any Preference Amount
and, at the direction of the insurer, to make payments and distributions
pursuant to clauses (1) through (5) under "Early Repayment" herein.
If the amount on deposit in the spread account on any Distribution Date
(after giving effect to all deposits thereto or withdrawals therefrom on that
Distribution Date) is greater than the Spread Account Required Amount, the
indenture trustee will distribute any excess first to the insurer, to the extent
of any amounts owing to the insurer pursuant to the insurance agreement, and
then to the holder of the residual interest in the trust. Upon any distributions
to the insurer or the holder of the residual interest in the trust the
noteholders will have no further rights in, or claims to, the distributed
amounts.
None of the noteholders, the indenture trustee, the owner trustee, the
holder of the residual interest in the trust or the insurer will be required to
refund any amounts properly distributed to them, whether or not there are
sufficient funds on any subsequent Distribution Date to make full distributions
to the noteholders. The obligations of the insurer under the insurance policy
will not be diminished or otherwise affected by any amounts distributed to the
insurer as described in the preceding paragraph.
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OVERCOLLATERALIZATION
The Pool Balance as of the Cut-Off Date of $ will exceed the initial
principal amount of the notes by $ , or approximately %. The
Overcollateralization Amount is intended to enhance the likelihood of receipt by
noteholders of amounts due them and to decrease the likelihood that noteholders
will experience losses. Any collections on the contracts relating to the
Overcollateralization Amount will be applied in accordance with the priorities
set forth under "--Distributions" above. Unless offset by losses on the
contracts, the application of those collections is expected to cause the
aggregate principal amount of the notes to decrease at a faster rate than the
Pool Balance decreases, thereby increasing the Overcollateralization Amount.
STATEMENTS TO NOTEHOLDERS
On each Distribution Date, the indenture trustee will include with each
distribution to a noteholder a statement received from the servicer setting
forth for that Distribution Date the information described in the accompanying
prospectus under "Description of the Securities--Statements to Securityholders"
and the following information:
(1) the Spread Account Required Amount and the amount on deposit in
the spread account on that Distribution Date, before and after
giving effect to deposits thereto and withdrawals therefrom to be
made in respect of that Distribution Date; and
(2) the amount of the withdrawal, if any, required to be made from the
spread account by the indenture trustee, as described above under
"--Withdrawals from the Spread Account."
REPORTS TO NOTEHOLDERS
Unless notes in definitive registered form are issued (which will only
occur under the limited circumstances described herein and in the accompanying
prospectus), the servicer will send unaudited monthly and annual reports
concerning the trust to the indenture trustee to be delivered to Cede & Co. as
the nominee of The Depository Trust Company and the registered holder of the
notes. See "--Statements to Noteholders" above and "Description of the
Securities--Statements to Securityholders" in the accompanying prospectus. These
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. DTC will supply these reports to
noteholders in accordance with its procedures. See "Description of the
Securities--Book-Entry Registration" in the accompanying prospectus. Since
owners of beneficial interests in the global notes will not be recognized as
noteholders, DTC will not forward monthly reports to those owners. Copies of
monthly reports may be obtained by owners of beneficial interests in the global
notes by a request in writing addressed to the indenture trustee. None of the
seller, the servicer or the insurer intends to send any of its financial reports
to noteholders.
SERVICING FEE
The servicer will be entitled to compensation for the performance of its
obligations under the sale and servicing agreement. The servicer will be
entitled to receive on each Distribution Date a servicing fee in an amount equal
to the product of (1) one-twelfth of % per annum multiplied by (2) the Pool
Balance as of the end of the Collection Period preceding the related Collection
Period or, in the case of the first Distribution Date, the Pool Balance as of
the Cut-Off Date. As additional compensation, the servicer or its designee will
be entitled to retain all late payment charges, extension fees and similar
charges or fees paid in connection with the contracts. The servicer or its
designee will also receive as servicing compensation reinvestment earnings on
Eligible Investments of funds credited to the collection account. The servicer
will pay from its servicing compensation all expenses incurred by it in
connection with its servicing activities under the sale and servicing agreement
and will not be entitled to reimbursement of its expenses except to the extent
they constitute Liquidation Expenses or expenses recoverable under an applicable
insurance policy.
The sale and servicing agreement requires the servicer to use its best
efforts to collect all payments called for under the terms and provisions of
each of the contracts. The servicer, consistent with the foregoing, will be
permitted, in its discretion, to waive charges and grant extensions as described
under "Description of the Transfer and Servicing Agreements--Waivers and
Extensions" in the accompanying prospectus. The servicer may not, with a few
very limited exceptions, extend the maturity date of a contract if there have
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been more than two credit-related extensions granted on the contract in the
immediately preceding twelve months or if the sum of the terms of all extensions
of the contract would exceed six months. In addition, in no event may an
extension be granted beyond four months before the latest Final Scheduled
Distribution Date for the notes.
DEFAULT BY THE SERVICER; RIGHTS UPON DEFAULT BY THE SERVICER
The events which constitute a default by the servicer under the sale and
servicing agreement will be those events described in the accompanying
prospectus under "Description of the Transfer and Servicing Agreements--Default
by the Servicer."
Upon the occurrence of a default by the servicer, unless an Insurer Default
shall have occurred and be continuing, only the insurer (and not the indenture
trustee or the noteholders) may terminate the servicer under the sale and
servicing agreement. In the event that the servicer is terminated by the
insurer, a successor servicer (other than the indenture trustee) may be
appointed by the insurer and will take over all the responsibilities, duties and
liabilities of the servicer under the sale and servicing agreement and will be
entitled to the same compensation arrangements as was the original servicer.
Until the insurer has appointed a successor servicer, the indenture trustee will
be the successor servicer. In the event that the indenture trustee is unwilling
or unable to so act, it may, with the consent of the insurer, which consent will
not be unreasonably withheld, appoint, or petition a court of competent
jurisdiction for the appointment of, a successor with a net worth of at least
$50,000,000 and whose regular business includes the servicing of automobile and
light-duty truck receivables.
Unless an Insurer Default shall have occurred and be continuing, the
insurer may, on behalf of the noteholders, waive any default by the servicer in
the performance of its obligations under the sale and servicing agreement and
its consequences. The rights of the noteholders to waive defaults by the
servicer under the sale and servicing agreement are as described under
"Description of the Transfer and Servicing Agreements--Rights Upon Default by
the Servicer" in the accompanying prospectus.
If an Insurer Default has occurred and is continuing, upon the occurrence
of a default by the servicer under the sale and servicing agreement, the
indenture trustee acting at the direction of the holders of notes evidencing not
less than 25% of the outstanding principal amount of the notes, acting together
as a single class, may terminate the servicer under the sale and servicing
agreement. Upon the termination of the servicer at the direction of the
noteholders, the indenture trustee or a successor servicer appointed by the
indenture trustee will succeed to all responsibilities, duties and liabilities
of the servicer under the sale and servicing agreement and will be entitled to
similar compensation arrangements; provided, however, that the indenture
trustee, as successor servicer, will not succeed to AutoNation Financial
Services' obligations to purchase contracts under any circumstances. In the
event that the indenture trustee is unwilling or unable to so act, it may
appoint, or petition a court of competent jurisdiction for the appointment of, a
successor with a net worth of at least $50,000,000 and whose regular business
includes the servicing of automobile and light-duty truck receivables. The
successor servicer will have the right to terminate the services of any
subservicer under the related subservicer agreement in respect of the contracts
which the successor servicer will be assuming responsibilities as servicer, and
any termination fees assessed under the related subservicer agreement will be
paid by the predecessor servicer.
AMENDMENT
The sale and servicing agreement, the owner trust agreement and the
administration agreement may be amended by the parties thereto with the consent
of the insurer but without the consent of the noteholders to cure any ambiguity,
correct or supplement any provisions therein which may be inconsistent with any
other provisions therein, or make any other provisions with respect to matters
or questions arising thereunder which are not inconsistent with the provisions
of those agreements; provided that any amendment will not materially and
adversely affect the interest of any noteholder. For a further discussion
regarding amendments to the sale and servicing agreement, the owner trust
agreement and the administration agreement, see "Description of the Transfer and
Servicing Agreement--Amendment" in the accompanying prospectus. Any amendment
shall be deemed not to materially and adversely affect the interest of any
noteholder if the person requesting the amendment obtains (1) a letter from each
rating agency which has rated the notes to the effect that the amendment would
not result in a downgrading or withdrawal of the then current ratings assigned
to the notes by that rating agency and (2) an opinion of counsel to that effect.
The sale and servicing agreement, the
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owner trust agreement and the administration agreement may also be amended by
the parties thereto with the consent of the insurer and, so long as the notes
are outstanding and an Insurer Default has occurred and is continuing, the
holders of notes evidencing not less than a majority of the principal amount of
the notes then outstanding, acting together as a single class for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the sale and servicing agreement, the owner trust agreement or the
administration agreement or of modifying, in any manner, the rights of the
noteholders; provided, however, that no amendment may (1) increase or reduce in
any manner the amount of, or accelerate or delay the timing of, collections of
payments on the related contracts or distributions that are required to be made
for the benefit of the noteholders, (2) reduce the aforesaid percentage of the
noteholders which are required to consent to any amendment of the sale and
servicing agreement, the owner trust agreement or the administration agreement
without the consent of the holders of all the outstanding notes or (3) result in
a taxable event to any of the noteholders for federal income tax purposes or
result in the trust being taxable as a corporation for federal income tax
purposes.
It is intended that the trust will not constitute a separate entity for
federal income tax purposes during the time that the seller holds the entire
equity interest in the trust; provided, however, that at any time that equity
interests in the trust are held by more than one holder, the sale and servicing
agreement, the owner trust agreement and the administration agreement may be
amended, as necessary and in accordance with the preceding paragraph, to reflect
the appropriate treatment of the trust as a partnership for federal income tax
purposes. See "Material Federal Income Tax Consequences" below.
TERMINATION
The obligations of the servicer, the seller, the owner trustee and the
indenture trustee with respect to the related noteholders pursuant to the owner
trust agreement, the sale and servicing agreement or the indenture will
terminate as described under "Description of the Transfer and Servicing
Agreements--Termination" in the accompanying prospectus and as set forth below.
The indenture trustee will give written notice of the termination of the
obligations of the servicer, the seller, the owner trustee or the indenture
trustee to each noteholder of record. The final distribution to each noteholder
will be made only upon surrender and cancellation of that holder's notes at the
office or agency of the indenture trustee specified in the notice of
termination. The indenture trustee will return, or cause to be returned, any
unclaimed funds to the trust.
Promptly following the date on which all principal of and interest on the
notes has been paid in full and the notes have been surrendered to the indenture
trustee, the indenture trustee will, if the insurer has paid any amount in
respect of the notes under the insurance policy that has not been reimbursed to
the insurer, deliver the surrendered notes to the insurer.
OPTIONAL PURCHASE
In order to avoid excessive administrative expenses, the servicer will be
permitted, at its option, to purchase the remaining contracts from the trust on
any Distribution Date as of which the Pool Balance has been reduced to an amount
less than or equal to 10% of the original Pool Balance. The price the servicer
must pay to exercise the Optional Purchase will be equal to the greater of
(1) the sum of (A) the Pool Balance on the date of purchase and (B) any accrued
and unpaid interest on the contracts and (2) the sum of (A) the aggregate unpaid
principal amount of the notes, (B) any accrued and unpaid interest thereon and
(C) all amounts due to the servicer, the owner trustee, the indenture trustee
and the insurer under the sale and servicing agreement, the owner trust
agreement, the indenture, the administration agreement and the insurance
agreement. Any outstanding notes will be redeemed concurrently with an Optional
Purchase as described under "Optional Redemption" above.
PAYMENT IN FULL OF NOTES
Upon the payment in full of all outstanding notes and the satisfaction and
discharge of the indenture, the owner trustee will succeed to all the rights of
the indenture trustee, and the seller will succeed to all the rights of the
noteholders, under the sale and servicing agreement, except as otherwise
provided therein.
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DESCRIPTION OF THE ADMINISTRATION AGREEMENT
Pursuant to the administration agreement, AutoNation Financial Services
will serve as the administrator and will agree, to the extent provided in the
administration agreement, to provide the notices and to perform other
administrative obligations required by the indenture. As compensation for the
performance of the administrator's obligations under the administration
agreement and as reimbursement for its expenses related thereto, the
administrator will be entitled to an annual administration fee of $ .
The administration fee will be paid by the servicer.
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DESCRIPTION OF THE INSURANCE POLICY
The following information has been supplied by , the insurer,
for inclusion in this prospectus supplement. The insurer does not accept any
responsibility for the accuracy or completeness of this prospectus supplement or
any information or disclosure contained herein, or omitted herefrom, other than
with respect to the accuracy of the information regarding the note guaranty
insurance policy and the insurer set forth under the headings "Description of
the Insurance Policy" and "Description of the Insurer" herein. Additionally, the
insurer makes no representation regarding the notes or the advisability of
investing in the notes.
The insurer, in consideration of the payment of a premium and subject to
the terms of the insurance policy, thereby unconditionally and irrevocably
guarantees to any noteholder that an amount equal to each full and complete
Insured Payment will be received from the insurer by the indenture trustee or
its successor on behalf of the noteholders, for distribution by the indenture
trustee to each noteholder of that noteholder's proportionate share of the
Insured Payment.
The insurer's obligations under the insurance policy, with respect to a
particular Insured Payment, will be discharged to the extent funds equal to the
applicable Insured Payment are received by the indenture trustee, whether or not
those funds are properly applied by the indenture trustee. Insured Payments will
be made only at the time set forth in the insurance policy, and no Insured
Payments will be made regardless of any acceleration of the notes, unless the
acceleration is at the sole option of the insurer.
Notwithstanding the foregoing paragraph, the insurance policy does not
cover shortfalls, if any, attributable to the liability of the trust or the
indenture trustee for withholding taxes, if any (including interest and
penalties in respect of any tax liability).
The insurer will pay any Insured Payment that is a Preference Amount on the
business day following receipt on a business day by the insurer's fiscal agent
of the following:
o a certified copy of the order requiring the return of a preference
payment;
o an opinion of counsel satisfactory to the insurer that the order is final
and not subject to appeal;
o an assignment in a form that is reasonably required by the insurer,
irrevocably assigning to the insurer all rights and claims of the
noteholder relating to or arising under the notes against the debtor
which made the preference payment or otherwise with respect to the
preference payment; and
o appropriate instruments to effect the appointment of the insurer as agent
for the noteholder in any legal proceeding related to the preference
payment, which instruments are in a form satisfactory to the insurer;
provided that if these documents are received after 12:00 noon, New York time,
on that business day, they will be deemed to be received on the following
business day. Payments by the insurer will be disbursed to the receiver or the
trustee in bankruptcy named in the final order of the court exercising
jurisdiction on behalf of the noteholder and not to any noteholder directly
unless the noteholder has returned principal or interest paid on the notes to
the receiver or trustee in bankruptcy, in which case that payment will be
disbursed to the noteholder.
The insurer will pay any other amount payable under the insurance policy no
later than 12:00 noon, New York time, on the later of the business day
immediately preceding the Distribution Date on which the related Deficiency
Amount is due or the third business day following receipt in New York, New York
on a business day by , as fiscal agent for the insurer or any
successor fiscal agent appointed by the insurer of a notice from the indenture
trustee specifying the Insured Payment which is due and owing on the applicable
Distribution Date; provided, that if the notice is received after 12:00 noon,
New York time, on that business day, it will be deemed to be received on the
following business day. If any notice received by the insurer's fiscal agent is
not in proper form or is otherwise insufficient for the purpose of making a
claim under the insurance policy, it will be deemed not to have been received by
the insurer's fiscal agent for the purposes of this paragraph, and the insurer
or the fiscal agent, as the case may be, will promptly so advise the indenture
trustee and the indenture trustee may submit an amended notice.
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Insured Payments due under the insurance policy, unless otherwise stated
therein, will be disbursed by the insurer's fiscal agent to the indenture
trustee, on behalf of the noteholders, by wire transfer of immediately available
funds in the amount of the Insured Payment less, in respect of Insured Payments
related to Preference Amounts, any amount held by the indenture trustee for the
payment of the Insured Payment and legally available therefor.
The fiscal agent is the agent of the insurer only and the fiscal agent will
in no event be liable to noteholders for any acts of the fiscal agent or any
failure of the insurer to deposit or cause to be deposited sufficient funds to
make payments due under the insurance policy.
Subject to the terms of the sale and servicing agreement, the insurer will
be subrogated to the rights of each noteholder to receive payments under the
notes to the extent of any payment by the insurer under the insurance policy.
The insurance policy is not cancellable for any reason. The premium on the
insurance policy is not refundable for any reason including payment, or
provision being made for payment, prior to the maturity of the notes.
The insurance policy is being issued under and pursuant to, and will be
construed under, the laws of the State of New York, without giving effect to the
conflict of law principles thereof.
THE INSURANCE POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE
SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
DESCRIPTION OF THE INSURER
THE INSURER
will be the insurer. The insurer is the principal operating
subsidiary of , a New York Stock Exchange listed company.
is not obligated to pay the debts of or claims against the insurer.
The insurer is domiciled in the State of and licensed to do business
in and is subject to regulation under the laws of . has
laws prescribing minimum capital requirements, limiting classes and
concentrations of investments and requiring the approval of policy rates and
forms. State laws also regulate the amount of both the aggregate and individual
risks that may be insured, the payment of dividends by the insurer, changes in
control and transactions among affiliates. Additionally, the insurer is required
to maintain contingency reserves on its liabilities in specified amounts and for
specified periods of time.
FINANCIAL INFORMATION ABOUT THE INSURER
The consolidated financial statements of the insurer, a wholly owned
subsidiary of , and its subsidiaries as of December 31, 1998 and
December 31, 1997 and for each of the three years in the period ended
December 31, 1998, prepared in accordance with generally accepted accounting
principles, included in the Annual Report on Form 10-K of for the
year ended December 31, 1998 and the consolidated financial statements of the
insurer and its subsidiaries as of , 1999 and for the month
periods ended , 1999 and , 1998 included in the
Quarterly Report on Form 10-Q of for the period ended ,
1999, are hereby incorporated by reference into this prospectus supplement and
shall be deemed to be a part hereof. Any statement contained in a document
incorporated by reference herein shall be modified or superseded for purposes of
this prospectus supplement to the extent that a statement contained herein or in
any other subsequently filed document which also is incorporated by reference
herein modifies or supersedes that statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus supplement.
All financial statements of the insurer and its subsidiaries included in
documents filed by pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended, subsequent to the date of this
prospectus supplement and prior to the termination of the offering of the notes
shall be
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deemed to be incorporated by reference into this prospectus supplement and to be
a part hereof from the respective dates of filing those documents.
The tables below present selected financial information of the insurer
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities and generally accepted accounting
principles:
<TABLE>
<CAPTION>
STATUTORY ACCOUNTING
PRACTICES
----------------------------
DECEMBER 31, ,
1998 1999
------------ ------------
(AUDITED) (UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
Admitted Assets........... $ $
Liabilities...............
Capital and Surplus.......
</TABLE>
<TABLE>
<CAPTION>
GENERALLY ACCEPTED
ACCOUNTING PRACTICES
----------------------------
DECEMBER 31, ,
1998 1999
------------ ------------
(AUDITED) (UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
Assets.................... $ $
Liabilities...............
Shareholder's Equity......
</TABLE>
WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION ABOUT THE INSURER
Copies of the financial statements of the insurer incorporated by reference
herein and copies of the insurer's 1998 year-end audited financial statements
prepared in accordance with statutory accounting practices are available,
without charge, from the insurer. The address of the insurer is .
The telephone number of the insurer is .
YEAR 2000 READINESS OF THE INSURER
is actively managing a high-priority year 2000 or Y2K program.
has established an independent Y2K testing lab in its
headquarters, with a committee of business unit managers overseeing the project.
has a budget of $ million for its 1998-2000 Y2K efforts.
Expenditures are proceeding as anticipated, and does not expect the
project budget to materially exceed this amount. has initiated a
comprehensive Y2K plan that includes assessment, remediation, testing and
contingency planning. This plan covers "mission-critical" internally developed
systems, vendor software, hardware and some third party entities through which
conducts its business. Testing to date indicates that functions
critical to the financial guarantee business, both domestic and international,
were Y2K-ready as of December 31, 1998. Additional testing will continue
throughout 1999.
FINANCIAL STRENGTH RATINGS OF THE INSURER
Moody's Investors Service, Inc. rates the financial strength of the insurer
"Aaa."
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., rates the financial strength of the insurer "AAA."
Fitch IBCA, Inc. (formerly known as Fitch Investors Service, L.P.) rates
the financial strength of the insurer "AAA."
Each rating of the insurer should be evaluated independently. The ratings
reflect each respective rating agency's current assessment of the
creditworthiness of the insurer and its ability to pay claims on its policies of
insurance. Any further explanation as to the significance of the above ratings
may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the notes,
and the ratings may be subject to revision or withdrawal at any time by the
rating agencies. Any downward revision or withdrawal of any of the above ratings
may have an adverse effect on the market price of the notes. The insurer does
not guaranty the market price of the notes nor does it guaranty that the ratings
on the notes will not be revised or withdrawn.
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<PAGE>
LEGAL INVESTMENT
The class A-1 notes will be eligible securities for purchase by money
market funds under paragraph (a)(9) of Rule 2a-7 under the Investment Company
Act of 1940, as amended.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Weil, Gotshal & Manges LLP has delivered its opinion, under current law and
subject to the qualifications set forth therein, that upon the issuance of the
notes, although no authority exists directly relating to the proper
characterization of securities similar to the notes or to an entity similar to
the trust, for federal income tax purposes, (1) the notes will be characterized
as debt and (2) the trust will not be characterized as an association or a
publicly traded partnership taxable as a corporation. Each noteholder, by the
acceptance of a note, will agree to treat the notes as indebtedness for federal,
state and local income, single business and franchise tax purposes. See
"Material Federal Income Tax Consequences" in the accompanying prospectus for
additional information concerning the application of federal income tax laws to
the trust and the notes.
ERISA CONSIDERATIONS
Subject to the considerations set forth below and under "ERISA
Considerations" in the prospectus, the notes may be purchased by an employee
benefit plan or an individual retirement account subject to the Employee
Retirement Income Security Act of 1974, as amended, which is generally referred
to as "ERISA" or Section 4975 of the Internal Revenue Code of 1986, as amended.
A fiduciary of a benefit plan must determine that the purchase of a note is
consistent with its fiduciary duties under ERISA and does not result in a
nonexempt prohibited transaction as defined in Section 406 of ERISA or
Section 4975 of the Internal Revenue Code. Section 406 of ERISA prohibits
parties in interest or disqualified persons with respect to a benefit plan from
engaging in transactions (including loans) involving a benefit plan and its
assets unless a statutory or administrative exemption applies to the
transaction. Section 4975 of the Internal Revenue Code imposes excise taxes (or,
in some cases, a civil penalty may be assessed pursuant to section 502(i) of
ERISA) on parties in interest which engage in non-exempt prohibited
transactions. In addition, Title I of ERISA also requires fiduciaries of a
benefit plan subject to ERISA to make investments that are prudent, diversified
and in accordance with the governing plan documents.
The Plan Asset Regulation provides that, as a general rule, the underlying
assets and properties of corporations, partnerships, trusts and some other
entities in which a benefit plan purchases an "equity interest" will be deemed
for purposes of ERISA to be assets of the investing benefit plan unless
exceptions apply. The Plan Asset Regulation defines an "equity interest" as any
interest in an entity other than an instrument that is treated as indebtedness
under applicable local law and which has no substantial equity features.
Although there is very little authority directly on point and there can be no
assurances in this regard, the seller believes that the notes offered hereby
should not be treated as "equity interests" for purposes of the Plan Asset
Regulation. Specifically, the notes (a) are expected to be treated as
indebtedness under local law and will, in the opinion of Weil, Gotshal &
Manges LLP, be treated as debt, rather than equity, for federal tax purposes
(see "Material Federal Income Tax Consequences" herein) and (b) should not be
deemed to have any "substantial equity features." Those conclusions are based,
in part, upon the traditional debt features of the notes, including the
reasonable expectation of purchasers of the notes that the notes will be repaid
when due, as well as the absence of conversion rights, warrants and other
typical equity features. In the event that the insurer's obligations under the
insurance policy cease or otherwise become unavailable, the notes might not be
treated as debt for purposes of ERISA. Accordingly, on the date hereof, and
thereafter, unless the insurer's obligations under the insurance policy cease or
otherwise become unavailable, the acquisition of the notes by benefit plan
investors should not cause the assets of the trust to be treated as Plan Assets
for purposes of Title I of ERISA.
However, the notes may not be purchased with the assets of a benefit plan
if the seller, the servicer, the indenture trustee, the owner trustee or any of
their affiliates (a) has investment or administrative discretion
S-39
<PAGE>
with respect to the benefit plan assets; (b) has authority or responsibility to
give, or regularly gives, investment advice with respect to the benefit plan
assets, for a fee and pursuant to an agreement or understanding that the advice
(1) will serve as a primary basis for investment decisions with respect to the
benefit plan assets and (2) will be based on the particular investment needs for
the benefit plan; or (c) is an employer maintaining or contributing to the
benefit plan.
The Issuer, the servicer or affiliates thereof might be considered or might
become parties in interest with respect to a benefit plan. In either case, the
acquisition or holding of notes by or on behalf of a benefit plan could give
rise to an indirect prohibited transaction within the meaning of ERISA and the
Internal Revenue Code, unless it is subject to one or more exemptions such as
Prohibited Transaction Class Exemption ("OR PTCE") 84-14, which exempts
transactions effected on behalf of a benefit plan by a "qualified professional
asset manager", PTCE 90-1, which exempts transactions involving insurance
company pooled separate accounts, PTCE-91-38, which exempts transactions
involving bank collective investment funds, PTCE 95-60, which exempts
transactions involving insurance company general accounts, or PTCE 96-23, which
exempts transactions effected on behalf of a benefit plan by "in-house asset
managers."
EACH PURCHASER OR TRANSFEREE OF A NOTE THAT IS A BENEFIT PLAN WILL BE
DEEMED TO HAVE REPRESENTED THAT THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF
UNDER AT LEAST ONE OF THE FOREGOING EXEMPTIONS (OR OTHER APPLICABLE EXEMPTION
PROVIDING SUBSTANTIALLY SIMILAR RELIEF) HAVE BEEN SATISFIED.
EACH BENEFIT PLAN FIDUCIARY SHOULD CONSULT WITH ITS ATTORNEYS AND FINANCIAL
ADVISORS AS TO THE PROPRIETY OF AN INVESTMENT IN THE NOTES IN LIGHT OF THE
CIRCUMSTANCES OF THE PARTICULAR BENEFIT PLAN AND THE RESTRICTIONS OF ERISA AND
SECTION 4975 OF THE INTERNAL REVENUE CODE.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
between the seller and the underwriters named below, the seller has agreed to
cause the trust to sell to each of the underwriters, and each of the
underwriters has agreed to purchase, the principal amount of the notes set forth
opposite its name in the table below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
UNDERWRITERS NOTES NOTES NOTES NOTES
- ------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
Total $ $ $ $
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The price to the public, underwriters' discounts and commissions, the
concessions that the underwriters may allow to dealers, and the discounts that
the dealers may reallow to other dealers, each expressed as a percentage of the
principal amount of each class of notes, will be as follows:
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS
PRICE TO DISCOUNTS AND CONCESSIONS BETWEEN
PUBLIC COMMISSIONS(1) TO DEALERS DEALERS
-------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Class A-1 Notes................................ % % % %
Class A-2 Notes................................ % % % %
Class A-3 Notes................................ % % % %
Class A-4 Notes................................ % % % %
</TABLE>
(Footnotes on next page)
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<PAGE>
(Footnotes from previous page)
- ------------------
(1) Includes all items considered by the National Association of Securities
Dealers to be underwriting compensation for purposes of the NASD's Rules of
Fair Practice.
After the offering is completed, the seller will receive the proceeds,
after deduction of the underwriting and other expenses, listed below:
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS
PROCEEDS TO SELLER AND COMMISSIONS(1)
------------------ ----------------------
<S> <C> <C>
Class A-1 Notes................................... $ ( %) $ ( %)
Class A-2 Notes................................... $ ( %) $ ( %)
Class A-3 Notes................................... $ ( %) $ ( %)
Class A-4 Notes................................... $ ( %) $ ( %)
</TABLE>
- ------------------
(1) Includes all items considered by the National Association of Securities
Dealers to be underwriting compensation for purposes of the NASD's Rules of
Fair Practice.
After the public offering, the public offering price and other selling
terms may be changed by the underwriters. Additional offering expenses payable
by the seller are estimated to be $ .
The underwriters may engage in over-allotment, stabilizing transactions and
syndicate covering transactions with respect to the notes. Over-allotment
transactions involve syndicate sales in excess of the offering size, which
create a syndicate short position. Stabilizing transactions permit bids to
purchase the notes so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the notes in the
open market after the distribution has been completed in order to cover
syndicate short positions. These over-allotment transactions, stabilizing
transactions and syndicate covering transactions may cause the price of the
notes to be higher than it would otherwise be in the absence of these
transactions. Neither the seller nor the underwriters represent that the
underwriters will engage in any of these transactions or that these
transactions, once commenced, will not be discontinued without notice at any
time.
In the ordinary course of business, each underwriter and its affiliates may
have engaged and may engage in investment banking and/or commercial banking
transactions with the seller, its affiliates and the trust. In addition, each
underwriter may from time to time take positions in the notes.
The seller and AutoNation Financial Services have agreed to indemnify the
underwriters against specified liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the
underwriters may be required to make in respect thereof.
LEGAL MATTERS
Relevant legal matters with respect to the notes and with respect to the
federal income tax matters discussed under "Material Federal Income Tax
Consequences" in the accompanying prospectus will be passed upon for the seller
by Weil, Gotshal & Manges LLP, New York, New York. In addition, relevant matters
of Florida law will be passed upon for the trust and the seller by Tripp Scott,
P.A., Fort Lauderdale, Florida. Relevant legal matters with respect to the notes
will be passed upon for the underwriters by Skadden, Arps, Slate, Meagher & Flom
LLP, New York, New York. Relevant legal matters relating to the insurer will be
passed upon for the insurer by .
EXPERTS
The consolidated balance sheets of and subsidiaries as of
December 31, 1998 and 1997 and the related consolidated statements of income,
changes in shareholder's equity, and cash flows for each of the three years in
the period ended December 31, 1998, incorporated by reference in this prospectus
supplement, have been incorporated herein in reliance on the report of
, independent accountants, given on the authority of that firm as
experts in accounting and auditing.
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<PAGE>
GLOSSARY
"AMOUNT FINANCED" means, with respect to a contract, the aggregate amount
advanced by the originator under the contract toward the purchase price of the
related financed vehicle and related costs, including amounts advanced in
respect of accessories, extended service and warranty contracts and other items
customarily financed as part of retail automobile installment sales contracts,
excluding insurance premiums.
"AVAILABLE FUNDS" means, with respect to a Distribution Date and the
related Collection Period, the following:
(1) amounts received with respect to the contracts in the related
Collection Period representing monthly principal and interest payments;
(2) full and partial prepayments by the related obligor;
(3) any Net Liquidation Proceeds;
(4) any Net Insurance Proceeds;
(5) any amounts deposited by AutoNation Financial Services or the
seller, as applicable, in the collection account to purchase or repurchase
contracts because of material defects in documents related to the contracts
or breaches of representations or warranties regarding the contracts made
by the seller in the sale and servicing agreement that materially and
adversely affect the interests of the noteholders or the insurer;
(6) any amounts deposited by the servicer in the collection account to
purchase contracts as a remedy for breach of the servicer's
representations, warranties and covenants relating to the servicing of the
contracts;
(7) any amounts deposited by the servicer in the collection account
pursuant to an Optional Purchase; and
(8) income from Eligible Investments of funds on deposit in the Trust
Accounts.
"CLOSING DATE" means , .
"COLLECTION PERIOD" means, with respect to any Distribution Date, the
calendar month immediately preceding the calendar month in which that
Distribution Date occurs (or, in the case of the first Collection Period, the
period of time since the Cut-Off Date through the last day of the calendar month
immediately preceding the month in which the first Distribution Date occurs).
"CUT-OFF DATE" means , .
"DEFAULTED CONTRACT" means, with respect to any Collection Period, a
contract (1) which, at the end of that Collection Period, is deemed
uncollectible by the servicer in accordance with its customary procedures,
(2) in respect of which all amounts more than one hundred and twenty (120) days
past due represent in the aggregate $40 or more or (3) in respect of which the
related financed vehicle has been repossessed and liquidated, whichever occurs
first.
"DEFICIENCY AMOUNT" means, for any Distribution Date, the sum of (a) the
excess, if any, of (1) the Note Interest Distributable Amount with respect to
all classes of notes for that Distribution Date over (2) the sum of (A) the
Available Funds for that Distribution Date (after giving effect to the
distributions described in clauses (1) through (3) under "Description of the
Transfer and Servicing Agreements--Distributions" above for that Distribution
Date) and (B) the amount to be on deposit in the spread account for that
Distribution Date (after giving effect to any withdrawals to satisfy amounts due
in respect of clauses (1) through (3) under "Description of the Transfer and
Servicing Agreements--Distributions" above for that Distribution Date) and
(b) the Guaranteed Note Principal Amount for that Distribution Date.
"DISTRIBUTION DATE" means the 15th day of each month (or if that day is not
a business day (i.e., a Saturday, Sunday, a day on which the insurer is closed
or a day on which banking institutions in New York, New York or in the city in
which the indenture trustee's corporate trust office or the owner trustee's
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<PAGE>
corporate trust office is located are authorized or obligated by law to be
closed), on the next succeeding business day).
"ELIGIBLE INVESTMENTS" means any one or more of the following obligations
or securities, all of which will be denominated in United States dollars:
(1) direct obligations of, and obligations fully guaranteed as to
timely payment of principal and interest by, the United States of America
or any agency or instrumentality of the United States of America the
obligations of which are backed by the full faith and credit of the United
States of America and, to the extent, at the time of investment, acceptable
to the insurer and each rating agency for securities having a rating
equivalent to the rating of the notes at the Closing Date, the direct
obligations of, or obligations fully guaranteed by, the Federal Home Loan
Mortgage Corporation and the Federal National Mortgage Association;
(2) demand and time deposits in, certificates of deposit of, banker's
acceptances issued by, or federal funds sold by any depository institution
or trust company (including the indenture trustee or the owner trustee)
incorporated under the laws of the United States of America or any state
and subject to supervision and examination by federal and/or state banking
authorities, so long as at the time of the investment or contractual
commitment providing for the investment either (a) the short-term,
unsecured debt obligations of that depository institution or trust company
have credit ratings from Standard & Poor's at least equal to "A-1+" and
from Moody's at least equal to "P-1" or (b) that depository institution is
acceptable to the insurer as evidenced by a letter from the insurer to the
indenture trustee (which acceptability may be revoked at any time by the
insurer) and provided that each investment has an original maturity of no
more than 365 days; provided that any demand and time deposits will be
fully insured by the Federal Deposit Insurance Corporation and any
certificates of deposit must be secured at all times by collateral
described in clause (1) above, the collateral must be held by a third party
and the indenture trustee must have a perfected first priority security
interest in the collateral;
(3) repurchase obligations with a term not to exceed 30 days and with
respect to (a) any security described in clause (1) above or (b) any other
security issued or guaranteed as to timely payment of principal and
interest by an agency or instrumentality of the United States of America,
in either case entered into with any depository institution or trust
company (including the indenture trustee and the owner trustee), acting as
principal, described in clause (2) above; provided, however, that
collateral transferred pursuant to a repurchase obligation must be of the
type described in clause (1) above and must (x) be marked-to-market weekly
at current market price plus accrued interest, (y) pursuant to that
valuation, be equal at all times to 105% of the cash transferred by the
indenture trustee in exchange for the collateral and (z) be delivered to
the indenture trustee or, if the indenture trustee is supplying the
collateral, an agent for the indenture trustee, in such a manner as to
accomplish perfection of a security interest in the collateral by
possession of certificated securities;
(4) commercial paper having the highest rating by Standard & Poor's
and Moody's at the time of the investment;
(5) investments in money market funds or money market mutual funds
registered under the Investment Company Act of 1940, as amended, whose
shares are registered under the Securities Act of 1933, having a rating
from Standard & Poor's and Moody's in the highest investment category
granted thereby, including funds for which the indenture trustee, the owner
trustee or any of their respective affiliates is investment manager or
advisor; and
(6) other obligations or securities acceptable to the insurer, as
evidenced by a letter from the insurer to the indenture trustee (which
acceptability may be revoked at any time by the insurer).
"FINAL SCHEDULED DISTRIBUTION DATE" means the date on or by which the full
outstanding principal amount of each class of notes will be repaid, which
(1) in the case of the class A-1 notes, will be , (2) in the case of
the class A-2 notes, will be , (3) in the case of the class A-3
notes, will be and (4) in the case of the class A-4 notes, will be
.
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<PAGE>
"GUARANTEED NOTE PRINCIPAL AMOUNT" means, for any Distribution Date, the
lesser of (a) the excess, if any, of (1) the Note Principal Distributable Amount
for that Distribution Date over (2) the sum of (A) the Available Funds for that
Distribution Date (after giving effect to the distributions described in clauses
(1) through (4) under "Description of the Transfer and Servicing
Agreements--Distributions" above for that Distribution Date) and (B) the amount
to be on deposit in the spread account for that Distribution Date (after giving
effect to any withdrawals to make the distributions described in clauses
(1) through (5) under "Description of the Transfer and Servicing
Agreements--Distributions" above for that Distribution Date) and (b) the excess,
if any, of (1) the outstanding principal amount of the notes for that
Distribution Date (after giving effect to all payments of principal of the notes
on that Distribution Date other than from an Insured Payment) over (2) the sum
of (A) the Pool Balance as of the last day of the preceding Collection Period
and (B) the amount to be on deposit in the spread account (after giving effect
to any withdrawals to make the distributions described in clauses (1) through
(6) under "Description of the Transfer and Servicing Agreements--Distributions"
above for that Distribution Date); provided, however, on the Final Scheduled
Distribution Date for a class of notes, the Guaranteed Note Principal Amount
will include, without duplication, the outstanding principal amount of that
class of notes on that Final Scheduled Distribution Date (after giving effect to
all distributions of principal on that Final Scheduled Distribution Date other
than from an Insured Payment).
"INSURED PAYMENT" means (a) as of any Distribution Date, any Deficiency
Amount and (b) any Preference Amount.
"INSURER DEFAULT" means the occurrence and continuance of any of the
following events:
(1) the insurer shall have failed to make a payment required under the
insurance policy in accordance with its terms;
(2) the insurer shall have (a) filed a petition or commenced any case
or proceeding in respect of the insurer under any provision or chapter of
the United States Bankruptcy Code or similar state laws, (b) made a general
assignment for the benefit of its creditors or (c) had an order for relief
entered against it under the United States Bankruptcy Code or similar state
laws which is final and nonappealable; or
(3) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (a) appointing a
custodian, trustee, agent or receiver for the insurer or for all or any
material portion of its property or (b) authorizing the taking of
possession by a custodian, trustee, agent or receiver of the insurer (or
the taking of possession of all or any material portion of the property of
the insurer).
"INTEREST ACCRUAL PERIOD" means, with respect to any Distribution Date, the
period from the previous Distribution Date or, in the case of the first
Distribution Date, from and including the Closing Date, to but excluding that
Distribution Date.
"LIQUIDATION EXPENSES" means the reasonable out-of-pocket expenses (not
including overhead expenses) incurred by the servicer in connection with the
collection and realization of the full amounts due under any Defaulted Contract
and the repossession and sale of any property acquired in respect thereof which
are not recoverable under any type of motor vehicle insurance policy.
"MONTHLY SCHEDULED PAYMENT" means, with respect to any contract in any
given month, the amount of the scheduled payment of principal and interest on
the contract for that month, exclusive of any late payment charges or extension
fees.
"NET INSURANCE PROCEEDS" means the proceeds paid by any insurer under a
comprehensive and collision insurance policy related to a contract (other than
funds used for the repair of the related financed vehicle or proceeds released
to the related obligor in excess of the principal balance of the contract, and
all accrued interest thereon and all other amounts due thereunder), after
reimbursement to the servicer of expenses recoverable under that insurance
policy.
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<PAGE>
"NET LIQUIDATION PROCEEDS" means, with respect to any contract that becomes
a Defaulted Contract, the amount received by the servicer in respect of that
contract during or after the Collection Period in which that contract becomes a
Defaulted Contract (excluding Liquidation Expenses with respect to that
contract).
"NOTE INTEREST CARRYOVER SHORTFALL" means, with respect to any Distribution
Date and a class of notes, the sum of (1) the excess, if any, of the Note
Interest Distributable Amount for that class for the immediately preceding
Distribution Date over the amount in respect of interest that is actually
deposited in the note distribution account with respect to that class on the
preceding Distribution Date and (2) to the extent permitted by applicable law,
interest on the amount of interest due but not paid to noteholders of that class
on the preceding Distribution Date at the related interest rate for the related
Interest Accrual Period; provided, however, that the Note Interest Carryover
Shortfall for the first Distribution Date shall be zero.
"NOTE INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date and a class of notes, the sum of (1) an amount equal to the
interest accrued during the related Interest Accrual Period at the related
interest rate for that class of notes on the outstanding principal amount of
that class of notes on the immediately preceding Distribution Date (or, in the
case of the first Distribution Date, on the original principal amount of the
class of notes) and (2) the Note Interest Carryover Shortfall for that class of
notes for that Distribution Date.
"NOTE PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of business of
any Distribution Date, the excess of the Note Principal Distributable Amount for
that Distribution Date over the amount in respect of principal that is actually
paid from the note distribution account on that Distribution Date.
"NOTE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of (1) the Principal Distributable Amount for that
Distribution Date and (2) any outstanding Note Principal Carryover Shortfall for
the immediately preceding Distribution Date; provided that the Note Principal
Distributable Amount will not exceed the aggregate outstanding principal amount
of the notes. Notwithstanding the foregoing, the Note Principal Distributable
Amount on the Final Scheduled Distribution Date for each class of notes will not
be less than the amount that is necessary to reduce the outstanding principal
amount of the related class of notes to zero.
"OPTIONAL PURCHASE" means the purchase by the servicer, at its option, of
the remaining contracts from the trust on any Distribution Date as of which the
Pool Balance has been reduced to an amount less than or equal to 10% of the
original Pool Balance.
"OVERCOLLATERALIZATION AMOUNT" means the amount by which the Pool Balance
as of the Cut-Off Date will exceed the initial principal amount of the notes.
"PARTIES IN INTEREST" means parties in interest or disqualified persons
with respect to an employee benefit plan or an individual retirement account
subject to the Employee Retirement Income Security Act of 1974, as amended.
"PAYMENT DEFAULT" means either (1) a default for five days or more in the
payment of any interest on any note or (2) a default in the payment of any
principal on the applicable Final Scheduled Distribution Date for a class of
notes.
"PLAN ASSET REGULATION" means the United States Department of Labor
regulation (29 CFR Section 2510.3-101) concerning the definition of what
constitutes the assets of an employee benefit plan or an individual retirement
account subject to the Employee Retirement Income Security Act of 1974, as
amended.
"POOL BALANCE" means, as of any date of determination, the aggregate
principal balance of the contracts outstanding, which will be $ as of
the Cut-Off Date.
"PREFERENCE AMOUNT" means any amount previously distributed to a noteholder
on the notes that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
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<PAGE>
"PRINCIPAL BALANCE" means, with respect to a contract, as of any date of
determination, the Amount Financed under the terms of the contract minus that
portion of all Monthly Scheduled Payments and any full or partial prepayments in
respect of the contract received on or prior to the end of the most recently
ended Collection Period and allocable to principal as determined by the
servicer. For purposes of this definition, allocations between interest and
principal of the Monthly Scheduled Payment for each contract by the servicer
shall be made in accordance with the terms of each contract.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Distribution
Date, the amount equal to the sum of the following amounts with respect to the
related Collection Period:
(1) all collections received on contracts (other than Defaulted
Contracts and Purchased Contracts) allocable to principal as determined by
the servicer, including full and partial principal prepayments;
(2) the Principal Balance of all contracts (other than Purchased
Contracts) that became Defaulted Contracts during the related Collection
Period; and
(3) the Principal Balance as of the date of purchase of all contracts
that became Purchased Contracts as of the immediately preceding date of the
servicer's report.
"PURCHASE AMOUNT" means, with respect to a Purchased Contract, the
Principal Balance of the contract as of the date of purchase or repurchase of
the contract by AutoNation Financial Services or the seller, plus accrued and
unpaid interest thereon to the date of purchase or repurchase at the applicable
APR.
"PURCHASED CONTRACT" means a contract that (1) has been repurchased by
AutoNation Financial Services or the seller because of material defects in
documents related to the contract or breaches of representations and warranties
made by the seller in the sale and servicing agreement regarding the contract or
by AutoNation Financial Services in the receivables purchase agreement that
materially and adversely affect the interests of the noteholders or the insurer,
(2) has been purchased by the servicer because of breaches by the servicer of
its servicing covenants or (3) has been purchased by the servicer in the event
of an Optional Purchase.
"SPREAD ACCOUNT REQUIRED AMOUNT" means an amount calculated pursuant to a
formula agreed to by the parties to the insurance agreement and each of the
rating agencies.
"TRUST BANKRUPTCY EVENT" means events of bankruptcy, insolvency,
receivership or liquidation with respect to the trust specified in the
indenture.
"TRUST PROPERTY" means the property of the trust, which consists of the
following:
(1) the contracts, all of which will have been purchased from the
seller and are secured by financed vehicles;
(2) all documents relating to the contracts, including all servicing
records in hard or electronic form;
(3) collections and all other amounts due under the contracts after
the Cut-Off Date;
(4) liens on the financed vehicles and the right to receive proceeds
from claims on any related insurance policies covering the financed
vehicles or the related obligors;
(5) all amounts on deposit in the collection account, the payment
account, the note distribution account and the spread account, including
the principal amount of all Eligible Investments credited to the collection
account and the spread account and any investment income thereon;
(6) the right of the seller to cause AutoNation Financial Services to
repurchase any contracts with respect to which it breaches any of its
representations or warranties or its servicing obligations; and
(7) all proceeds of the foregoing.
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<PAGE>
SUBJECT TO COMPLETION, DATED , 1999
Prospectus Supplement
(To Prospectus dated , 1999)
$
ANRC AUTO OWNER TRUST 1999-A
AUTONATION RECEIVABLES CORPORATION, Seller
AUTONATION FINANCIAL SERVICES CORP., Servicer
- --------------------------------------------------------------------------------
THESE SECURITIES ARE HIGHLY STRUCTURED. BEFORE YOU PURCHASE THESE SECURITIES,
BE SURE YOU UNDERSTAND THE STRUCTURE AND THE RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-8 IN THIS PROSPECTUS SUPPLEMENT.
The notes are obligations of ANRC Auto Owner Trust 1999-A and are backed only
by the assets of the trust. The notes are not obligations of AutoNation
Receivables Corporation, AutoNation Financial Services Corp., any of their
affiliates or any governmental agency.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
- --------------------------------------------------------------------------------
THE NOTES:
o The trust is offering four classes of notes.
o The notes are backed by a pledge of the trust's assets. The trust's assets
include fixed rate motor vehicle retail installment sales contracts secured by
new and used automobiles and light-duty trucks.
o The trust will pay interest and principal on the notes on the 15th day of each
month or the first business day after the 15th. The first distribution date is
, 1999.
o MBIA Insurance Corporation will issue an insurance policy that unconditionally
and irrevocably guarantees payments of interest on and principal of the notes
to the extent described in this prospectus supplement.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL INTEREST FINAL SCHEDULED PRICE TO UNDERWRITING PROCEEDS TO
AMOUNT RATE DISTRIBUTION DATE PUBLIC(1) DISCOUNTS SELLER(2)
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Class A-1 Notes............... $ % , % % %
- --------------------------------------------------------------------------------------------------------------------------------
Class A-2 Notes............... $ % , % % %
- --------------------------------------------------------------------------------------------------------------------------------
Class A-3 Notes............... $ % , % % %
- --------------------------------------------------------------------------------------------------------------------------------
Class A-4 Notes............... $ % , % % %
- --------------------------------------------------------------------------------------------------------------------------------
Total........................ $ $ $ $
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from , 1999.
(2) Before deducting expenses estimated to be $ .
The notes are offered subject to availability.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
CHASE SECURITIES INC.
The date of this Prospectus Supplement is , 1999.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
WHERE TO FIND INFORMATION IN THESE DOCUMENTS......... S-4
SUMMARY.............................................. S-5
RISK FACTORS......................................... S-8
Lack of performance data due to limited
operating history of AutoNation
Financial Services.................... S-8
Absence of secondary market for the notes
could limit your ability to resell.... S-8
Limited assets of the trust could result in
losses on the notes................... S-8
Potential prepayment of the notes may require
reinvestment of principal at a lower
rate of return........................ S-8
Interests of other persons in contracts and
vehicles could reduce the funds
available to make payments on the
notes................................. S-9
Bankruptcy of AutoNation Financial Services
could result in losses or delays in
payments on the notes due to the power
of bankruptcy courts to provide
equitable relief...................... S-9
Bankruptcy of AutoNation Financial Services
could result in losses or delays in
payments on the notes if the
bankruptcy court follows an adverse
legal decision........................ S-10
Geographic concentration of contracts in
Florida, Texas and California could
result in losses on the notes......... S-10
Noteholders may not declare events of default
under the indenture or decide the
consequences of events of default..... S-10
Events of default under the indenture could
result in losses or acceleration of
payments on the notes................. S-11
Class A-2 notes, class A-3 notes and class A-4
notes bear additional credit risk..... S-11
Potential computer program problems beginning
in the year 2000 could result in
delays in payments on the notes....... S-11
DESCRIPTION OF THE TRUST............................. S-12
ANRC Auto Owner Trust 1999-A.................. S-12
Capitalization of the Trust................... S-12
The Owner Trustee............................. S-13
Trust Property................................ S-13
AUTONATION FINANCIAL SERVICES' PORTFOLIO OF MOTOR
VEHICLE CONTRACTS............................. S-13
Origination of Motor Vehicle Contracts........ S-13
Delinquency and Loss Experience............... S-14
DESCRIPTION OF THE CONTRACTS......................... S-15
MATURITY AND PREPAYMENT CONSIDERATIONS............... S-19
USE OF PROCEEDS...................................... S-24
DESCRIPTION OF THE NOTES............................. S-24
Issuance and Registration of the Notes........ S-24
Interest Payments............................. S-24
Principal Payments............................ S-25
Optional Redemption........................... S-25
The Indenture Trustee......................... S-26
Events of Default Under the Indenture......... S-26
DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENTS.................................... S-27
Sale and Assignment of the Contracts.......... S-27
The Accounts.................................. S-28
Payments on Contracts......................... S-28
Distributions................................. S-28
Early Repayment............................... S-30
Payment Priorities of the Notes............... S-30
The Spread Account............................ S-31
Withdrawals from the Spread Account........... S-31
Overcollateralization......................... S-32
Statements to Noteholders..................... S-32
Reports to Noteholders........................ S-32
Servicing Fee................................. S-32
Default by the Servicer; Rights Upon Default
by the Servicer....................... S-33
Amendment..................................... S-33
Termination................................... S-34
Optional Purchase............................. S-34
Payment in Full of Notes...................... S-35
Description of the Administration Agreement... S-35
DESCRIPTION OF THE INSURANCE POLICY.................. S-36
</TABLE>
S-2
<PAGE>
<TABLE>
<S> <C>
DESCRIPTION OF THE INSURER........................... S-37
The Insurer................................... S-37
Financial Information About
the Insurer........................... S-37
Where You Can Obtain Additional Information
About the Insurer..................... S-38
Year 2000 Readiness Disclosure................ S-38
Financial Strength Ratings of
the Insurer........................... S-38
LEGAL INVESTMENT..................................... S-39
MATERIAL FEDERAL INCOME TAX CONSEQUENCES............. S-39
ERISA CONSIDERATIONS................................. S-39
UNDERWRITING......................................... S-40
LEGAL MATTERS........................................ S-41
EXPERTS.............................................. S-41
GLOSSARY............................................. S-42
</TABLE>
S-3
<PAGE>
WHERE TO FIND INFORMATION IN THESE DOCUMENTS
The accompanying prospectus provides general information about ANRC Auto Owner
Trust 1999-A, including terms and conditions that are generally applicable to
the securities issued by the trust. The specific terms of your notes are
described in this prospectus supplement.
This prospectus supplement begins with the following two sections, which
describe your notes and the trust:
o Summary provides a brief description of your notes, including important
amounts, dates and other terms and features; and
o Risk Factors describes risks that apply to your notes.
As you read through this prospectus supplement, cross-references will direct you
to more detailed descriptions in the accompanying prospectus and elsewhere in
this prospectus supplement. You can also directly reference key topics by
looking at the table of contents in this prospectus supplement and the
accompanying prospectus.
You can find a glossary where capitalized terms used in this prospectus
supplement are defined beginning on page S-42 in this prospectus supplement.
IF THE DESCRIPTIONS OF YOUR NOTES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT.
------------------------------------------------------------------------
TO UNDERSTAND THE STRUCTURE OF THESE SECURITIES, YOU MUST READ CAREFULLY
THE ACCOMPANYING PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN THEIR
ENTIRETY.
------------------------------------------------------------------------
S-4
<PAGE>
SUMMARY
This summary contains a brief description of the notes. You will find a detailed
description of the terms of the offering of the notes following this summary.
<TABLE>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Trust: ANRC Auto Owner Trust 1999-A
Seller of the Contracts: AutoNation Receivables Corporation
Seller's Address: 200 South Andrews Avenue, Fort Lauderdale, Florida 33301
Seller's Telephone Number: (954) 769-4555
Servicer of the Contracts: AutoNation Financial Services Corp.
Subservicer of the Contracts: World Omni Financial Corp.
Owner Trustee: The Bank of New York (Delaware)
Indenture Trustee: The Chase Manhattan Bank
Insurer: MBIA Insurance Corporation
Clearance and Settlement: The Depository Trust Company
Assets of the Trust: The trust's assets include:
o fixed rate motor vehicle retail installment sales contracts secured by
new and used automobiles and light-duty trucks;
o collections on the contracts;
o liens on the financed vehicles and the rights to receive proceeds from
claims on insurance policies;
o funds in the accounts of the trust;
o any enhancements issued in favor of the trust; and
o proceeds of these assets.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The Terms of the Notes:
<TABLE>
<S> <C> <C> <C> <C>
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES
Principal Amount: $ $ $ $
Interest Rate: % p.a. % p.a. % p.a. % p.a.
Interest Accrual Method: actual / 360 30 / 360 30 / 360 30 / 360
Cut-Off Date: , 1999 , 1999 , 1999 , 1999
Distribution Dates: monthly (15th) monthly (15th) monthly (15th) monthly (15th)
First Distribution Date: , 1999 , 1999 , 1999 , 1999
Final Scheduled Distribution Date:
distribution date distribution date distribution date distribution date
Anticipated Ratings / / / /
(Moody's/S&P)*
Credit Enhancement: insurance policy, insurance policy, insurance policy, insurance policy,
spread account and spread account and spread account and spread account and
over- over- over- over-
collateralization collateralization collateralization collateralization
CUSIP Number:
ISIN Number:
Common Code:
</TABLE>
- ------------
* It is a condition to issuance that both of these ratings be obtained. However,
a rating agency in its discretion may lower or withdraw its rating in the
future.
S-5
<PAGE>
ANRC AUTO OWNER TRUST 1999-A
ANRC Auto Owner Trust 1999-A, a Delaware business trust, is offering the notes
to the public. The trust will use the proceeds from the issuance and sale of the
notes to purchase the contracts and deposit funds into the spread account. The
trust will rely upon collections on the contracts and the funds on deposit in
various accounts to make payments on the notes.
THE NOTES
On the closing date the trust will issue four classes of notes. The trust will
use collections on the underlying trust assets to make interest and principal
payments on the notes and to pay a portion of the fees and expenses owed by the
trust, including AutoNation Financial Services Corp.'s fees as servicer. After
the payment of specified fees and expenses, the trust will allocate collections
first to make interest payments on the notes and then to make payments of
principal. In no case will you receive more than the principal and interest owed
to you under the terms described in this prospectus supplement and the
accompanying prospectus.
THE CONTRACTS
The trust's main source of funds for making payments on the notes will be
collections on the contracts. The contracts are retail installment sales
contracts secured by new and used automobiles and light-duty trucks. Each
contract in the trust is a fully-amortizing fixed rate contract with scheduled
level monthly payments of principal and interest.
SEQUENTIAL PAY FEATURE
The notes feature "sequential pay" classes. On each distribution date, the trust
will allocate principal payments on the notes as follows:
o first, the class A-1 notes will receive principal until they are
paid off;
o once the class A-1 notes are paid off, the class A-2 notes will
begin to receive principal until they are paid off;
o once the class A-2 notes are paid off, the class A-3 notes will
begin to receive principal until they are paid off; and
o once the class A-3 notes are paid off, the class A-4 notes will
begin to receive principal until they are paid off.
In addition, the outstanding principal amount of any class, to the extent not
previously paid, will be payable on the applicable final scheduled distribution
date for that class.
CREDIT ENHANCEMENT
Credit enhancement is provided to the notes by the following:
o an insurance policy issued by MBIA Insurance Corporation, a
financial guaranty provider;
o the spread account; and
o overcollateralization.
These forms of credit enhancement are intended to protect you from net losses
and shortfalls in cash flow.
Insurance Policy. On the closing date, the insurer will issue an insurance
policy that unconditionally guarantees the timely payment of interest and the
ultimate payment of principal on the notes.
Spread Account. The spread account serves as a reserve fund upon which the trust
may draw to enhance the likelihood of receipt by noteholders of amounts due them
and to decrease the likelihood of losses. On each distribution date, the trust
will use funds in the spread account to pay the following amounts if collections
on the contracts are insufficient to pay those amounts:
o the servicer's fee and the fees of the trustees;
o the insurance premium to the insurer;
o interest and principal on the notes; and
o reimbursement for any draws under the insurance policy and other
amounts owed to the insurer.
Overcollateralization. The initial balance of the contracts in the trust will be
$ , which will exceed the initial principal amount of the notes by
$ , or approximately 1.0%.
If the cash flow and any credit enhancement do not cover all net losses, your
payments of interest and
S-6
<PAGE>
principal will be reduced and you may suffer a loss of principal.
SCHEDULED PRINCIPAL PAYMENTS AND POTENTIAL EARLY PAYMENTS
The trust expects to pay the entire principal amount of the notes no later than
the final scheduled distribution dates listed below:
Class A-1 ,
Class A-2 ,
Class A-3 ,
Class A-4 ,
However, the trust believes that the outstanding principal amount of each class
of notes will likely be paid in full earlier, and could be paid significantly
earlier than the applicable final scheduled distribution date.
The likelihood of early repayment depends on a variety of factors, including
full repayments of contracts in advance by the related obligors.
OPTIONAL REDEMPTION
The servicer can elect to purchase all of the contracts at any time if their
aggregate principal balance is 10% or less of their aggregate original principal
balance. If the servicer exercises this option, it will deposit the requisite
funds and cause the indenture trustee to apply those funds to redeem the notes
and pay all accrued and unpaid interest and principal on the notes plus other
amounts owed to the servicer, the trustees and the insurer.
TAX STATUS
Weil, Gotshal & Manges LLP is of the opinion that, although there is no specific
authority regarding the characterization for federal income tax purposes of
securities having terms similar to the notes or to an entity similar to the
trust, assuming compliance with the owner trust agreement and the other
transaction documents, on the date of issuance of the notes, for U.S. federal
income tax purposes:
o the notes will be characterized as debt; and
o the trust will not be an association or a publicly traded
partnership taxable as a corporation.
If you purchase the notes, you will agree to treat them as debt for tax
purposes.
ERISA CONSIDERATIONS
The notes are generally eligible for purchase by persons investing assets of
employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974. The administrators of employee benefit plans should review
the matters discussed under "ERISA Considerations" and also should consult with
their legal advisors before purchasing the notes.
ELIGIBILITY OF CLASS A-1 NOTES FOR PURCHASE BY MONEY MARKET FUNDS
The class A-1 notes are structured to be eligible for purchase by money market
funds under Rule 2a-7 under the Investment Company Act of 1940.
S-7
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the notes.
<TABLE>
<S> <C>
LACK OF PERFORMANCE DATA DUE TO LIMITED AutoNation Financial Services began its operations in February
OPERATING HISTORY OF AUTONATION FINANCIAL 1997 and has limited performance data for the motor vehicle
SERVICES retail installment sales contracts it originates. As the
portfolio of contracts originated by AutoNation Financial
Services matures, delinquency percentages and loan losses may
differ from prior performance. We cannot assure you that the
performance of the contracts in the trust will be similar to the
limited historical performance of the portfolio as a whole.
ABSENCE OF SECONDARY MARKET FOR THE NOTES You may be unable to resell your notes due to the absence of a
COULD LIMIT YOUR ABILITY TO RESELL secondary market for the notes. The underwriters may assist in
resales of the notes but are not required to do so. A secondary
market for the notes may not develop. If a secondary market does
develop, it may not continue or it may not be sufficiently liquid
to allow you to resell your notes.
LIMITED ASSETS OF THE TRUST COULD RESULT You may suffer a loss on your notes if the assets of the trust
IN LOSSES ON THE NOTES are insufficient to pay the principal amount of the notes in full
and the insurer defaults in its obligations under the insurance
policy. The only source of funds for payments on the notes will
be the assets of the trust and the insurance policy. The assets
of the trust are limited to the contracts, the funds on deposit
in the trust's bank accounts and rights under the trust's
agreements. You must rely for payment of the notes solely upon
collections on the contracts, funds on deposit in the trust's
bank accounts and payments made under the insurance policy.
Accordingly, you may not look to any assets of AutoNation
Financial Services, the seller, the owner trustee, the indenture
trustee or any of their respective affiliates for payment of the
notes.
POTENTIAL PREPAYMENT OF THE NOTES MAY Possible prepayments of contracts by the related obligors, the
REQUIRE REINVESTMENT OF PRINCIPAL AT A constant level of overcollateralization and possible purchases of
LOWER RATE OF RETURN contracts by the seller or AutoNation Financial Services will
result in the acceleration of principal payments on your notes.
You may not be able to reinvest the principal repaid to you
earlier than expected at a rate of return that is equal to or
greater than the rate of return on your notes.
Although AutoNation Financial Services maintains historical
records on the rate of prepayment on its contracts, those records
are limited due to the relatively short operating history of
AutoNation Financial Services. The obligors on the contracts may
prepay the contracts voluntarily at any time. In addition, the
contracts are required to be prepaid upon the sale, insured loss
or other disposition of the related vehicle.
If AutoNation Financial Services breaches any of its
representations and warranties regarding any contracts,
AutoNation Financial Services will be required to repurchase
those contracts from the seller, and the seller will be required
to repurchase those contracts from the trust. AutoNation
Financial Services will also be required to purchase contracts
from the trust if it breaches its servicing obligations relating
to those contracts. In addition, AutoNation Financial Services
will be entitled to purchase all of the remaining contracts
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
from the trust once the aggregate principal balance of the
contracts is 10% or less of their aggregate principal balance on
the date they were sold to the trust.
INTERESTS OF OTHER PERSONS IN CONTRACTS Another person could acquire an interest in a contract that is
AND VEHICLES COULD REDUCE THE FUNDS superior to the trust's interest in that contract. This could
AVAILABLE TO MAKE PAYMENTS ON THE NOTES occur because AutoNation Financial Services, prior to a default
by the servicer, will not be required to mark the physical
contracts as belonging to the trust. If another person acquires
an interest in a contract that is superior to the trust's
interest, the collections on that contract will not be available
to make payments on the notes.
In addition, another person could acquire an interest in a
vehicle financed by a contract that is superior to the trust's
interest in the vehicle. This could occur because AutoNation
Financial Services will not be required to amend the related
certificate of title to identify the trust as the new secured
party. If another person acquires an interest in a vehicle that
is superior to the trust's interest, the proceeds from the sale
of that vehicle will not be available to make payments on the
notes.
BANKRUPTCY OF AUTONATION FINANCIAL If AutoNation Financial Services enters a bankruptcy proceeding
SERVICES COULD RESULT IN LOSSES OR DELAYS and the insurer defaults in its obligations under the insurance
IN PAYMENTS ON THE NOTES DUE TO THE POWER policy, you could experience losses or delays in the payments on
OF BANKRUPTCY COURTS TO PROVIDE EQUITABLE your notes due to the power of the court in a bankruptcy
RELIEF proceeding to provide equitable relief. AutoNation Financial
Services will sell the contracts to the seller, and the seller
will sell the contracts to the trust. AutoNation Financial
Services and the seller treat these transactions as absolute
transfers. However, if AutoNation Financial Services enters a
bankruptcy proceeding, the court has the power to conclude that
the sale of the contracts by AutoNation Financial Services to the
seller was not a "true sale" and that AutoNation Financial
Services still owns the contracts. The court also has the power
to conclude that AutoNation Financial Services and the seller
should be consolidated for bankruptcy purposes. If the court were
to reach any of these conclusions, you could experience losses or
delays in payments on your notes because:
o the indenture trustee would not be able to exercise remedies
against AutoNation Financial Services on your behalf without
permission from the court;
o the court might require the indenture trustee to accept
property in exchange for the contracts that is of less value
than the contracts;
o the court might prevent the indenture trustee or the
noteholders from taking some actions such as selling the
contracts or appointing a successor servicer;
o the court might sell the contracts and pay off the notes before
their maturity;
o tax or government liens on AutoNation Financial Services'
property that arose before the transfer of the contracts to the
trust would be paid from the collections on the contracts
before the collections were used to make payments on your
notes; and
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C>
o the indenture trustee might not have a perfected security
interest in the vehicles securing the contracts or cash
collections held by AutoNation Financial Services at the time a
bankruptcy proceeding begins.
The seller has taken steps in structuring the trust to minimize
the risk that a court would conclude that the sale of the
contracts to the seller was not a true sale or that AutoNation
Financial Services and the seller should be consolidated for
bankruptcy purposes.
BANKRUPTCY OF AUTONATION FINANCIAL If AutoNation Financial Services enters a bankruptcy proceeding
SERVICES COULD RESULT IN LOSSES OR DELAYS and the insurer defaults in its obligations under the insurance
IN PAYMENTS ON THE NOTES IF THE BANKRUPTCY policy, you could experience losses or delays in the payments on
COURT FOLLOWS AN ADVERSE LEGAL DECISION your notes if the court in a bankruptcy proceeding follows the
reasoning of an adverse legal decision. In a case decided by the
U.S. Court of Appeals for the Tenth Circuit in 1993, the court
concluded that accounts transferred by a seller to a buyer should
be included in the bankruptcy estate of the seller even if the
transfer was a true sale. Our counsel has advised us that the
facts of that case are distinguishable and that the reasoning of
that court appears to be inconsistent with established precedent
and the Uniform Commercial Code. However, if AutoNation Financial
Services enters a bankruptcy proceeding and the court in the
bankruptcy proceeding applies the reasoning of the court in that
case and the insurer defaults in its obligations under the
insurance policy, you could experience losses or delays in the
payments on your notes.
GEOGRAPHIC CONCENTRATION OF CONTRACTS IN Economic conditions in the jurisdictions where the obligors under
FLORIDA, TEXAS AND CALIFORNIA COULD RESULT the contracts reside may affect the delinquency, loan loss and
IN LOSSES ON THE NOTES repossession experience of the trust relating to the contracts.
Based on the principal balance of the original pool of contracts
on , 1999, % of the contracts were originated in
Florida, % of the contracts were originated in Texas and %
of the contracts were originated in California. Adverse economic
conditions affecting Florida, Texas or California could have a
disproportionately significant effect on the delinquency, loan
loss and repossession experience of the trust. Adverse economic
conditions in those jurisdictions could also have a negative
impact on the timing and amount of principal and interest
payments on the notes.
NOTEHOLDERS MAY NOT DECLARE EVENTS OF Noteholders may not declare events of default under the indenture
DEFAULT UNDER THE INDENTURE OR DECIDE THE or decide the consequences of events of default if the insurer
CONSEQUENCES OF EVENTS OF DEFAULT has not defaulted under the insurance policy. Except in limited
circumstances in which the insurer defaults under the insurance
policy or upon a bankruptcy event of the insurer, only the
insurer can declare an event of default under the indenture. If
the insurer declares an event of default under the indenture, the
insurer will have the right to cause the liquidation of the trust
and the acceleration of the notes. Following an event of default
under the indenture, the indenture trustee will continue to
submit claims under the insurance policy for any shortfalls in
the amount needed to make payments on the notes. However, the
insurer may instead elect to repay all or any portion of the
outstanding notes, plus any accrued interest.
</TABLE>
S-10
<PAGE>
<TABLE>
<S> <C>
EVENTS OF DEFAULT UNDER THE INDENTURE If an event of default occurs under the indenture resulting in
COULD RESULT IN LOSSES OR ACCELERATION OF the acceleration of the notes, it may shorten the average term
PAYMENTS ON THE NOTES and date of final payment of the notes. You may not be able to
reinvest the principal repaid to you earlier than expected at a
rate of return that is equal to or greater than the rate of
return on your notes. In addition, you may not be paid the
principal amount of your notes in full if the insurer defaults
under the insurance policy and the assets of the trust are
insufficient to pay the principal amount of all the notes in
full.
CLASS A-2 NOTES, CLASS A-3 NOTES AND CLASS The class A-2 notes, the class A-3 notes and the class A-4 notes
A-4 NOTES BEAR ADDITIONAL CREDIT RISK bear more credit risk than the class A-1 notes. Principal
payments on the class A-2 notes will not begin until all
principal on the class A-1 notes has been repaid. Similarly,
principal payments on the class A-3 notes will not begin until
all principal on the class A-2 notes has been repaid.
Additionally, principal payments on the class A-4 notes will not
begin until all principal on the class A-3 notes has been repaid.
If the insurer defaults under the insurance policy after one or
more classes of notes have been fully or partially repaid and
before other classes of notes with a higher numerical designation
have been fully repaid, subsequent losses on the contracts will
have a disproportionately greater effect on those classes of
notes with higher numerical designations.
POTENTIAL COMPUTER PROGRAM PROBLEMS The payment of principal and interest on the notes could be
BEGINNING IN THE YEAR 2000 COULD RESULT IN delayed if AutoNation Financial Services, in its capacity as the
DELAYS IN PAYMENTS ON THE NOTES servicer, or the indenture trustee experience problems in their
computer programs or systems relating to the year 2000. Many
existing computer programs and systems use only two digits to
identify a year. These programs or systems could fail or produce
erroneous results during the transition from the year 1999 to the
year 2000 and afterwards.
If AutoNation Financial Services, in its capacity as the
servicer, does not have computer systems that are year 2000
compliant by the year 2000, the ability of AutoNation Financial
Services to service the contracts may be materially and adversely
affected. If the indenture trustee does not have computer systems
that are year 2000 compliant by the year 2000, its ability to
make distributions on the notes may be materially and adversely
affected.
If World Omni Financial Corp., in its capacity as the
subservicer, does not attain year 2000 compliance for its
significant information technology systems by the year 2000,
World Omni believes that it would be unable to sustain its
current level of performance and customer service. World Omni has
undertaken a comprehensive program to coordinate its compliance
efforts. World Omni does not anticipate that year 2000 issues on
World Omni's part will have a material adverse effect on the
trust, the assets of the trust (including the contracts) or the
servicing of those assets. However, to the extent that World
Omni's systems have year 2000 problems, the amount and timing of
distributions to noteholders could be affected.
</TABLE>
S-11
<PAGE>
DESCRIPTION OF THE TRUST
Capitalized terms are defined in this prospectus supplement and, if not, in the
accompanying prospectus. Definitions are indicated by boldface type. Both the
accompanying prospectus and this prospectus supplement contain an index of
defined terms listing the page numbers where definitions can be found.
ANRC AUTO OWNER TRUST 1999-A
ANRC Auto Owner Trust 1999-A is a business trust formed under the laws of
the state of Delaware pursuant to an amended and restated owner trust agreement,
dated as of , 1999, between the owner trustee and the seller.
The assets of the trust will include a pool of motor vehicle retail
installment sales contracts, all of which are secured by new and used
automobiles and light-duty trucks, acquired from the seller pursuant to a sale
and servicing agreement, dated as of , 1999, among the trust, the
seller and the servicer. The trust has not and will not engage in any business
activity other than the following:
(1) acquiring, holding and managing the contracts and the other assets
of the trust and proceeds therefrom;
(2) issuing the following notes to noteholders:
o the ANRC Auto Owner Trust 1999-A, % Class A-1 Asset-Backed
Notes;
o the ANRC Auto Owner Trust 1999-A, % Class A-2 Asset-Backed
Notes;
o the ANRC Auto Owner Trust 1999-A, % Class A-3 Asset-Backed
Notes; and
o the ANRC Auto Owner Trust 1999-A, % Class A-4 Asset-Backed
Notes;
(3) issuing certificates;
(4) making payments and distributions on the notes; and
(5) engaging in other activities that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto or
connected therewith.
The trust's principal executive offices are located in Newark, Delaware, in
care of the owner trustee at the address listed below under "--The Owner
Trustee."
CAPITALIZATION OF THE TRUST
The trust will initially be capitalized with equity (exclusive of the funds
deposited in the spread account) equal to $ , which is the difference
between the Pool Balance as of the Cut-Off Date and the initial aggregate
principal amount of the notes. The residual interest in the trust (including the
right to receive distributions from the spread account) will initially be held
by the seller.
The following table illustrates the capitalization of the trust as of the
Closing Date:
Class A-1 Notes.............................. $
Class A-2 Notes..............................
Class A-3 Notes..............................
Class A-4 Notes..............................
Equity.......................................
----------
Total...................................... $
----------
----------
S-12
<PAGE>
THE OWNER TRUSTEE
The Bank of New York (Delaware) will be the owner trustee. The owner
trustee is a Delaware banking corporation with principal offices located at
White Clay Center, Route 273, Newark, Delaware 19711.
The liability of the owner trustee in connection with the issuance and sale
of the notes is limited solely to the express obligations of the owner trustee
set forth in the owner trust agreement and the sale and servicing agreement.
TRUST PROPERTY
The property of the trust will include the following:
(1) the contracts, all of which will have been purchased from the
seller and are secured by financed vehicles;
(2) all documents relating to the contracts, including all servicing
records in hard or electronic form;
(3) collections and other amounts due under all contracts after the
Cut-Off Date;
(4) liens on the financed vehicles and the right to receive proceeds
from claims on any related insurance policies covering the financed
vehicles or the related obligors;
(5) all amounts on deposit in the collection account, the payment
account, the note distribution account and the spread account, including
the principal amount of all Eligible Investments credited to the collection
account and the spread account and any investment income thereon;
(6) the right of the seller to cause AutoNation Financial Services to
repurchase any contracts with respect to which it breaches any of its
representations or warranties or its servicing obligations; and
(7) all proceeds of the foregoing.
Pursuant to an indenture, dated as of , 1999, between the
trust and The Chase Manhattan Bank, as indenture trustee, the trust will grant a
security interest in the Trust Property in favor of the indenture trustee on
behalf of the noteholders and for the benefit of the insurer in support of the
obligations owing to the insurer under the insurance agreement, dated as of
, 1999, among the insurer, the seller, AutoNation Financial
Services, the trust, the owner trustee and the indenture trustee.
AUTONATION FINANCIAL SERVICES' PORTFOLIO OF MOTOR VEHICLE CONTRACTS
ORIGINATION OF MOTOR VEHICLE CONTRACTS
AutoNation Financial Services originates motor vehicle retail installment
sales contracts secured by new and used automobiles and light-duty trucks in
connection with providing financing for the purchase of those vehicles. The
motor vehicle contracts in AutoNation Financial Services' portfolio that were
conveyed to the trust, also known as the receivables pool, are currently
originated from application referrals received from the following dealers:
(1) franchised automotive dealerships or used vehicle megastores owned by
AutoNation, Inc. and the nine used vehicle megastore licensees and (2) seven
third party franchised automotive dealerships. All of the contracts included in
the Trust Property have been sold to the seller by AutoNation Financial Services
from its serviced portfolio and then sold to the trust. See "AutoNation
Financial Services' Portfolio of Motor Vehicle Contracts--Origination of Motor
Vehicle Contracts" in the accompanying prospectus. The percentages of its
serviced portfolio which represent application referrals from dealerships, used
vehicle megastores and third party dealerships, respectively, may change over
time. However, because each application and related obligor will be evaluated by
AutoNation Financial Services based on the same underwriting criteria,
AutoNation Financial Services believes that changes over time of the percentages
of its serviced portfolio representing application referrals from dealerships,
used vehicle megastores and third party dealerships should not have a material
adverse effect on the overall credit quality of the serviced portfolio.
S-13
<PAGE>
As of August 31, 1999, the composition of AutoNation Financial Services'
serviced portfolio was as follows:
<TABLE>
<S> <C>
Aggregate Principal Amount of Contracts............ $1,664,153,000
Number of Contracts................................ 118,580
Percentage of Contracts Secured by New Vehicles.... 40%(1)
Percentage of Contracts Secured by Used Vehicles... 60%(1)
Average APR........................................ 10.92%
Average Original Amount Financed................... $15,480
Weighted Average Original Term to Maturity ........ 58.7 months
Weighted Average Remaining Term to Maturity ....... 52.7 months
Geographic Concentrations (greater than 5%)........ Florida (28.7%), Texas (21.1%),
California (14.5%), Georgia (7.3%) and
Arizona (6.8%)
</TABLE>
- ------------------
(1) Percentage determined by principal amount of the contracts.
DELINQUENCY AND LOSS EXPERIENCE
AutoNation Financial Services considers a contract to be delinquent if at
any time $40 or more is past due thereunder. Efforts to collect delinquent
contract payments are made by AutoNation Financial Services' collection
department personnel, collection agencies and attorneys retained by AutoNation
Financial Services. For a description of AutoNation Financial Services'
collection practices and policies see "AutoNation Financial Services' Portfolio
of Motor Vehicle Contracts--Collection Procedures" in the accompanying
prospectus.
The following tables set forth the delinquency, loss and recovery
experience for each of the periods shown for the portfolio of motor vehicle
contracts originated and serviced by AutoNation Financial Services. The
relatively short amount of time for which AutoNation Financial Services has been
involved in the origination of motor vehicle contracts results in limited
historical performance information with respect to the motor vehicle contracts
it originates and thus, delinquencies and loan losses may differ from existing
levels in the portfolio with the passage of time. Moreover, delinquency and loss
experience may be influenced by a variety of economic, social and other factors.
DELINQUENCY EXPERIENCE OF AUTONATION FINANCIAL SERVICES' MOTOR VEHICLE CONTRACT
PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT AUGUST 31, AT AUGUST 31,
1997 1998 1998 1999
------------------- -------------------- -------------------- ----------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------- --------- -------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Servicing portfolio................ 3,129 $36,777 55,460 $765,081 33,848 $471,494 118,580 $1,664,153
Delinquencies
31-60 days(1)(2)................. 4 $ 43 775 $ 11,321 215 $ 3,033 1,586 $ 22,087
61-90 days(1)(2)................. 1 $ 16 114 $ 1,711 18 $ 305 240 $ 3,421
91+ days(1)(2)................... 1 $ 6 23 $ 341 8 $ 125 37 $ 555
Total delinquencies as a percentage
of servicing portfolio........... 0.19% 0.18% 1.64% 1.75% 0.71% 0.73% 1.57% 1.57%
</TABLE>
- ------------------
(1) Delinquencies include principal amounts only.
(2) The period of delinquency is based on the number of days payments are past
due.
S-14
<PAGE>
LOAN LOSS EXPERIENCE OF AUTONATION FINANCIAL SERVICES' MOTOR VEHICLE CONTRACT
PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
------------------- ----------------------
1997(1) 1998 1998 1999
------- -------- -------- ----------
<S> <C> <C> <C> <C>
Number of motor vehicle contracts outstanding(2)................ 3,129 55,460 33,848 118,580
Period end principal outstanding................................ $36,777 $765,081 $471,494 $1,664,153
Average principal outstanding(3)................................ $16,236 $323,768 $167,701 $1,150,104
Number of gross charge-offs..................................... 0 339 68 1,513
Gross charge-offs(4)............................................ $ 0 $ 946 $ 97.7 $ 6,709
Net charge-offs(5).............................................. $ 0 $ 911 $ 95.2 $ 6,289
Net charge-offs as a percent of average outstanding(6).......... 0% 0.28% 0.09% 0.82%
</TABLE>
- ------------------
(1) Includes information for the period from April 1997 though December 1997.
(2) Number of contracts as of period end.
(3) Computed by taking a simple average of monthly average outstanding principal
amounts for such period.
(4) Gross charge-offs are equal to the remaining principal balance less proceeds
from the sale of repossessed vehicles.
(5) Net charge-offs are equal to gross charge-offs, less recoveries, on motor
vehicle contracts previously charged-off. Net charge-offs exclude expenses
associated with collection, repossession and disposition of motor vehicle
contracts.
(6) Percentages have been annualized for the eight months ended August 31, 1998
and 1999 and are not necessarily indicative of experience for the year.
The delinquency and net loss rates set forth above reflect, among other
factors, the success of AutoNation Financial Services' collection efforts and
general economic conditions. At August 31, 1999, delinquencies for the servicing
portfolio represented 1.57% of the amount of motor vehicle contracts in
AutoNation Financial Services' servicing portfolio or $26.1 million as compared
to 0.73% at August 31, 1998 or $3.5 million. The net losses for the servicing
portfolio as a percentage of average serviced loans outstanding was 0.82% for
the eight months ended August 31, 1999 compared to 0.09% for the eight months
ended August 31, 1998. The increases in the delinquency rates on AutoNation
Financial Services' serviced portfolio since 1997 are consistent with
management's expectation for a portfolio of contracts with equivalent credit
quality and average age of contract as found in AutoNation Financial Services'
serviced portfolio and are consistent with industry experience for an originator
which has been in business for a similar period of time as AutoNation Financial
Services. During the initial period of operations of AutoNation Financial
Services the average age of the contracts in its serviced portfolio has
necessarily increased as the period of time during which AutoNation Financial
Services has been in business has increased. However, the average age of the
contracts in its serviced portfolio should stabilize as contracts begin to
mature and be paid off. As the average age stabilizes, management believes that
the delinquency rate should stabilize as well. This trend is reflected by the
decrease in delinquency rate from December 31, 1998 to August 31, 1999. However,
AutoNation Financial Services has limited performance data for the motor vehicle
retail installment sales contracts it originates. As AutoNation Financial
Services' portfolio of contracts matures, delinquency percentages and loan
losses may differ from prior performance. We cannot assure you that the
performance of the contracts in the trust will be similar to the limited
historical performance of the portfolio set forth above.
DESCRIPTION OF THE CONTRACTS
All of the contracts in the receivables pool will be purchased by the
seller from AutoNation Financial Services. All of the contracts have been
originated by AutoNation Financial Services as of the Cut-Off Date from loan
application referrals received from dealers. See "AutoNation Financial Services'
Portfolio of Motor Vehicle Contracts" herein and in the accompanying prospectus.
The total principal balance of the contracts in the receivables pool as of the
close of business on , 1999, was $ . Each of the contracts in
the trust will be a fixed rate contract where the allocation of each payment
between interest and principal is calculated using the simple interest method.
For a more detailed explanation of this calculation method, see "Description of
the Contracts--Calculation Method" in the accompanying prospectus.
S-15
<PAGE>
As of the Cut-Off Date, contracts included in the trust were originated in
states, the District of Columbia and other United States territories and
possessions. As of the Cut-Off Date, contracts originated in Florida totaled %
of the trust, contracts originated in Texas totaled % of the trust and
contracts originated in California totaled % of the trust. As of the Cut-Off
Date, the aggregate principal balances of the contracts originated in any other
state did not exceed %.
The contracts included in the trust were selected from the motor vehicle
contracts in AutoNation Financial Services' portfolio using the criteria
described below. No selection procedures were used with respect to the contracts
that are adverse to the noteholders or the insurer. Contracts representing
% of the Trust Property are secured by new vehicles, and contracts
representing % of the Trust Property are secured by used vehicles. The
seller may not substitute other contracts for the contracts presently in the
trust at any time during the term of the sale and servicing agreement.
The seller will represent that each contract included in the trust
satisfies several eligibility requirements, including the following:
(1) the contract is secured by a new or used automobile or light-duty
truck;
(2) the contract has an annual percentage rate, also known as an APR, of
at least % and not more than %;
(3) the contract has a remaining maturity as of the Cut-Off Date of not
more than 72 months;
(4) the contract has an original maturity of not more than 72 months;
(5) the contract is a fully-amortizing fixed rate contract which provides
for level scheduled monthly payments determined on the basis of the
simple interest method (except for the first and last payments, which
may be minimally different from the level payments);
(6) the contract has no payment of $40 or more that was 31 or more days
past due as of the Cut-Off Date;
(7) the contract has a remaining principal balance as of the Cut-Off Date
of not more than $75,000 and not less than $500;
(8) as of the Cut-Off Date, the seller or the servicer has not identified
the related obligor as being the subject of a bankruptcy, insolvency,
reorganization or other similar proceeding;
(9) the contract is a retail installment sales contract;
(10) the contract was originated in the United States of America by
AutoNation Financial Services;
(11) the contract requires the related obligor to maintain physical damage
and theft insurance covering the related financed vehicle;
(12) the contract complied with AutoNation Financial Services' credit and
collection policies and procedures at the time of its origination by
AutoNation Financial Services;
(13) the related obligor under the contract does not have the right to
substitute, exchange or add any financed vehicle under the contract;
(14) only one original executed copy of the contract exists; and
(15) the contract constitutes "chattel paper" under the Uniform Commercial
Code as in effect in the applicable jurisdiction.
Set forth below is selected data concerning the contracts as of the Cut-Off
Date which had a Pool Balance of $ .
S-16
<PAGE>
COMPOSITION OF THE CONTRACTS
<TABLE>
<S> <C>
Aggregate principal balance........................................... $
Number of contracts...................................................
Average principal balance outstanding................................. $
Average original amount financed...................................... $
Original amount financed (range)...................................... to
Weighted average APR.................................................. %
APR (range)........................................................... % to %
Weighted average original term........................................
Original term (range)................................................. to mos.
Weighted average remaining term.......................................
Remaining term (range)................................................ to mos.
</TABLE>
DISTRIBUTION BY APRS OF THE CONTRACTS
<TABLE>
<CAPTION>
% OF
NUMBER OF % OF PRINCIPAL CUT-OFF
APR RANGE CONTRACTS CONTRACTS BALANCE POOL BALANCE
- ----------------------------------------------------------------- --------- --------- --------- ------------
<S> <C> <C> <C> <C>
0.000% to 6.999%...............................................
7.000% to 7.999%...............................................
8.000% to 8.999%...............................................
9.000% to 9.999%...............................................
10.000% to 10.999%...............................................
11.000% to 11.999%...............................................
12.000% to 12.999%...............................................
13.000% to 13.999%...............................................
14.000% to 14.999%...............................................
15.000% to 15.999%...............................................
16.000% to 16.999%...............................................
17.000% to 17.999%...............................................
18.000% to 18.999%...............................................
19.000% to 19.999%...............................................
20.000% to 20.999%...............................................
21.000% and over.................................................
------- ------- ------- ------
Totals......................................................... %(1) %(1)
</TABLE>
- ------------------
(1) Percentages may not add to 100% due to rounding.
S-17
<PAGE>
GEOGRAPHIC CONCENTRATION OF THE CONTRACTS
<TABLE>
<CAPTION>
% OF
NUMBER OF % OF PRINCIPAL CUT-OFF
CONTRACTS CONTRACTS BALANCE POOL BALANCE
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Alabama.......................................................... % %
Arizona..........................................................
California.......................................................
Colorado.........................................................
Florida..........................................................
Georgia..........................................................
Illinois.........................................................
Indiana..........................................................
Iowa.............................................................
Maryland.........................................................
Michigan.........................................................
Minnesota........................................................
Nevada...........................................................
New Jersey.......................................................
North Carolina...................................................
Ohio.............................................................
Pennsylvania.....................................................
South Carolina...................................................
Tennessee........................................................
Texas............................................................
Virginia.........................................................
Washington.......................................................
------- ------- ------- ------
Totals......................................................... 100.00%(1) 100.00%(1)
</TABLE>
- ------------------
(1) Percentages may not add to 100% due to rounding.
Since the largest balance of contract obligors (based on state of
origination) whose contracts were included in the trust as of ,1999
were located in Florida, Texas and California, adverse changes in the economic
conditions in these jurisdictions could have a direct impact on the timing and
amount of payments on the notes.
MODEL YEAR CONCENTRATION OF THE CONTRACTS
<TABLE>
<CAPTION>
% OF
NUMBER OF % OF PRINCIPAL CUT-OFF
CONTRACTS CONTRACTS BALANCE POOL BALANCE
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
1993............................................................. % %
1994.............................................................
1995.............................................................
1996.............................................................
1997.............................................................
1998.............................................................
1999.............................................................
2000.............................................................
Other(1).........................................................
------- ------- ------- ------
Totals......................................................... 100.00%(2) 100.00%(2)
</TABLE>
(Footnotes on next page)
S-18
<PAGE>
(Footnotes from previous page)
- ------------------
(1) Includes all model years comprising less than % by principal balance of
the Pool Balance.
(2) Percentages may not add to 100% due to rounding.
MANUFACTURER CONCENTRATION OF THE CONTRACTS
<TABLE>
<CAPTION>
% OF
NUMBER OF % OF PRINCIPAL CUT-OFF
CONTRACTS CONTRACTS BALANCE POOL BALANCE
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
DaimlerChrysler....................................... % %
Ford..................................................
General Motors........................................
Honda.................................................
Nissan................................................
Toyota................................................
Other(1)..............................................
------- ------- ------- ------
Totals........................................... 100.00%(2) 100.00%(2)
------- ------
------- ------
</TABLE>
- ------------------
(1) Includes all manufacturers comprising less than % by principal balance of
the Pool Balance.
(2) Percentages may not add to 100% due to rounding.
MATURITY AND PREPAYMENT CONSIDERATIONS
The indenture provides that the noteholders may receive payments of
principal on the 15th day of each month (or if that day is not a business day
(i.e., a Saturday, Sunday, a day on which the insurer is closed or a day on
which banking institutions in New York, New York or in the city in which the
indenture trustee's corporate trust office or the owner trustee's corporate
trust office is located are authorized or obligated by law to be closed), on the
next succeeding business day), but will receive the full outstanding principal
amount of each class of notes no later than (1) in the case of the class A-1
notes, , (2) in the case of the class A-2 notes,
, (3) in the case of the class A-3 notes, and
(4) in the case of the class A-4 notes, .
Contracts are or will be prepayable in full by the obligors at any time
without penalty. See "Maturity and Prepayment Considerations" in the
accompanying prospectus regarding the effects of prepayments on the weighted
average life of the contracts. As the rate of payment of principal of each class
of notes depends primarily on the rate of payment (including prepayments) of the
principal of the contracts, final payment of any class of notes is expected to
occur earlier, and could occur significantly earlier, than the respective Final
Scheduled Distribution Dates for the notes. In addition, the rate of payment of
principal of each class of notes will be affected by the portion of collections
on the contracts relating to the Overcollateralization Amount applied to the
payment of principal of the notes. See "Risk Factors--Potential prepayment of
the notes may require reinvestment of principal at a lower rate of return"
herein.
The trust can make no prediction as to the actual prepayment rates that
will be experienced on the contracts in either stable or changing interest rate
environments. In addition, the rate of payment of principal of each class of
notes will be affected by the incidence of delinquencies, defaults and losses on
the contracts, the level of overcollateralization and by any accelerated
payments made on the notes following an event of default under the indenture.
See "Risk Factors--Events of default under the indenture could result in losses
or acceleration of payments on the notes" herein. In addition, while it is
anticipated that there will be monthly principal and interest collections in an
amount sufficient to pay the outstanding principal amount of each class of notes
on the applicable Final Scheduled Distribution Dates, no assurance can be given
in that regard. Full payment of each class of notes by the applicable Final
Scheduled Distribution Dates depends on, among other things, the payment by
obligors of amounts due under the contracts and the fulfillment of the insurer's
obligations under the insurance policy.
Prepayments on motor vehicle receivables can be measured relative to a
prepayment standard or model. The model used in this prospectus supplement, the
absolute prepayment model, represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool of receivables. The
absolute prepayment model further assumes that all the receivables are the same
size and amortize at the same rate
S-19
<PAGE>
and that each receivable in each month of its life will either be paid as
scheduled or be prepaid in full. For example, in a pool of receivables
originally containing 10,000 receivables, a 1% absolute prepayment model rate
means that 100 receivables prepay each month. The absolute prepayment model does
not purport to be an historical description of prepayment experience or a
prediction of the anticipated rate of prepayment of any pool of receivables,
including the contracts.
The tables captioned "Percent of Initial Class A-1 Note and Class A-2 Note
Principal Balances at Various Absolute Prepayment Model Percentages" and
"Percent of Initial Class A-3 Note and Class A-4 Note Principal Balances at
Various Absolute Prepayment Model Percentages" have been prepared on the basis
of the characteristics of the contracts. Each absolute prepayment model table
assumes that (a) the contracts prepay in full at the specified constant
percentage of the absolute prepayment model monthly, with no defaults, losses or
repurchases, (b) each scheduled monthly payment on the contracts is made on the
last day of each month and each month has 30 days, (c) payments on the notes are
made on each Distribution Date (and each Distribution Date is assumed to be the
15th day of each applicable month), (d) the balance in the spread account on
each Distribution Date is equal to the Spread Account Required Amount and (e)
the servicer does not exercise its option to purchase the contracts. The
contracts have an assumed cut-off date of the Cut-Off Date. Each absolute
prepayment model table indicates the projected weighted average life of each
class of notes and sets forth the percent of the initial principal amount of
each class of notes that is projected to be outstanding after each of the
Distribution Dates shown at various constant absolute prepayment model
percentages.
The absolute prepayment model tables also assume that (a) the contracts
have been aggregated into hypothetical pools with all of the contracts within
each pool having the characteristics set forth below and (b) the level scheduled
monthly payment for each pool (which is based on its principal balance, weighted
average APR, weighted average original term to maturity and weighted average
remaining term to maturity as of the Cut-Off Date) will be such that each pool
will be fully amortized by the end of its remaining term to maturity.
WEIGHTED AVERAGE WEIGHTED AVERAGE
AGGREGATE WEIGHTED ORIGINAL TERM REMAINING TERM
PRINCIPAL AVERAGE TO MATURITY TO MATURITY
POOL BALANCE APR (IN MONTHS) (IN MONTHS)
---- --------- -------- ---------------- ----------------
1 $ %
2
3
4
5
The information included in the following tables represents forward-looking
statements and involves risks and uncertainties that could cause actual results
to differ materially from the results hypothesized in the forward-looking
statements. The actual characteristics and performance of the contracts will
differ from the assumptions used in constructing each absolute prepayment model
table. The assumptions used are hypothetical and have been provided only to give
a general sense of how the principal cash flows might behave under varying
prepayment scenarios. For example, it is very unlikely that the contracts will
prepay at a constant level until maturity or that all of the contracts will
prepay at the same level. Moreover, the diverse terms of contracts within each
of the five hypothetical pools could produce slower or faster principal
distributions than indicated in each absolute prepayment model table at the
various constant absolute prepayment model percentages specified, even if the
original and remaining terms to maturity of the contracts are as assumed. Any
difference between these assumptions and the actual characteristics and
performance of the contracts, or actual prepayment experience, will affect the
percentages of initial balances outstanding over time and the weighted average
lives of each class of notes.
S-20
<PAGE>
PERCENT OF INITIAL CLASS A-1 NOTE AND CLASS A-2 NOTE PRINCIPAL BALANCES
AT VARIOUS ABSOLUTE PREPAYMENT MODEL PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES
----------------------------------- -----------------------------------
ASSUMED ABSOLUTE PREPAYMENT ASSUMED ABSOLUTE PREPAYMENT
MODEL PERCENTAGE(1) MODEL PERCENTAGE(1)
----------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION DATES 0.50% 1.00% 1.50% 2.00% 0.50% 1.00% 1.50% 2.00%
- ------------------------------------- ----- ----- ----- ----- ----- ----- ----- -----
Closing Date.........................
October 15, 1999.....................
November 15, 1999....................
December 15, 1999....................
January 15, 2000.....................
February 15, 2000....................
March 15, 2000.......................
April 15, 2000.......................
May 15, 2000.........................
June 15, 2000........................
July 15, 2000........................
August 15, 2000......................
September 15, 2000...................
October 15, 2000.....................
November 15, 2000....................
December 15, 2000....................
January 15, 2001.....................
February 15, 2001....................
March 15, 2001.......................
April 15, 2001.......................
May 15, 2001.........................
June 15, 2001........................
July 15, 2001........................
August 15, 2001......................
September 15, 2001...................
October 15, 2001.....................
November 15, 2001....................
December 15, 2001....................
January 15, 2002.....................
February 15, 2002....................
March 15, 2002.......................
April 15, 2002.......................
May 15, 2002.........................
June 15, 2002........................
Weighted Average Life
(years)(2) ............ ...........
</TABLE>
- ------------------
(1) An asterisk (*) means a percent of initial note principal balance of more
than zero and less than 0.50%.
(2) The weighted average life of a note is determined by (a) multiplying the
amount of each principal payment of the note by the number of years from the
date of the issuance of the note to the Distribution Date on which the
principal payment is made, (b) adding the results and (c) dividing the sum
by the initial principal balance of the note.
THE ABSOLUTE PREPAYMENT MODEL TABLES HAVE BEEN PREPARED BASED ON THE
ASSUMPTIONS DESCRIBED ABOVE (INCLUDING THE ASSUMPTIONS REGARDING THE
CHARACTERISTICS AND PERFORMANCE OF THE CONTRACTS WHICH WILL DIFFER FROM THE
ACTUAL CHARACTERISTICS AND PERFORMANCE THEREOF) AND SHOULD BE READ IN
CONJUNCTION THEREWITH.
S-21
<PAGE>
]
PERCENT OF INITIAL CLASS A-3 NOTE AND CLASS A-4 NOTE PRINCIPAL BALANCES
AT VARIOUS ABSOLUTE PREPAYMENT MODEL PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-3 NOTES CLASS A-4 NOTES
-------------------------------- --------------------------------
ASSUMED ABSOLUTE PREPAYMENT ASSUMED ABSOLUTE PREPAYMENT
MODEL PERCENTAGE MODEL PERCENTAGE
-------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION DATES 0.50% 1.00% 1.50% 2.00% 0.50% 1.00% 1.50% 2.00%
- --------------------------------------------- ----- ----- ----- ----- ----- ----- ----- -----
Closing Date.................................
October 15, 1999.............................
November 15, 1999............................
December 15, 1999............................
January 15, 2000.............................
February 15, 2000............................
March 15, 2000...............................
April 15, 2000...............................
May 15, 2000.................................
June 15, 2000................................
July 15, 2000................................
August 15, 2000..............................
September 15, 2000...........................
October 15, 2000.............................
November 15, 2000............................
December 15, 2000............................
January 15, 2001.............................
February 15, 2001............................
March 15, 2001...............................
April 15, 2001...............................
May 15, 2001.................................
June 15, 2001................................
July 15, 2001................................
August 15, 2001..............................
September 15, 2001...........................
October 15, 2001.............................
November 15, 2001............................
December 15, 2001............................
January 15, 2002.............................
February 15, 2002............................
March 15, 2002...............................
April 15, 2002...............................
May 15, 2002.................................
June 15, 2002................................
</TABLE>
- ------------------
THE ABSOLUTE PREPAYMENT MODEL TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS
DESCRIBED ABOVE (INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND
PERFORMANCE OF THE CONTRACTS WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS
AND PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
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<PAGE>
PERCENT OF INITIAL CLASS A-3 NOTE AND CLASS A-4 NOTE PRINCIPAL BALANCES
AT VARIOUS ABSOLUTE PREPAYMENT MODEL PERCENTAGES (CONTINUED)
<TABLE>
<CAPTION>
CLASS A-3 NOTES CLASS A-4 NOTES
-------------------------------- --------------------------------
ASSUMED ABSOLUTE PREPAYMENT ASSUMED ABSOLUTE PREPAYMENT
MODEL PERCENTAGE(1) MODEL PERCENTAGE(1)
-------------------------------- --------------------------------
DISTRIBUTION DATES 0.50% 1.00% 1.50% 2.00% 0.50% 1.00% 1.50% 2.00%
- --------------------------------------------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
July 15, 2002................................
August 15, 2002..............................
September 15, 2002...........................
October 15, 2002.............................
November 15, 2002............................
December 15, 2002............................
January 15, 2003.............................
February 15, 2003............................
March 15, 2003...............................
April 15, 2003...............................
May 15, 2003.................................
June 15, 2003................................
July 15, 2003................................
August 15, 2003..............................
September 15, 2003...........................
October 15, 2003.............................
November 15, 2003............................
December 15, 2003............................
January 15, 2004.............................
February 15, 2004............................
March 15, 2004...............................
April 15, 2004...............................
May 15, 2004.................................
June 15, 2004................................
July 15, 2004................................
August 15, 2004..............................
September 15, 2004...........................
October 15, 2004.............................
November 15, 2004............................
December 15, 2004............................
January 15, 2005.............................
February 15, 2005............................
March 15, 2005...............................
Weighted Average Life (years)(2).............
</TABLE>
- ------------------
(1) An asterisk (*) means a percent of initial note principal balance of more
than zero and less than 0.50%.
(2) The weighted average life of a note is determined by (a) multiplying the
amount of each principal payment of the note by the number of years from the
date of the issuance of the note to the Distribution Date on which the
principal payment is made, (b) adding the results and (c) dividing the sum
by the initial principal balance of the note.
THE ABSOLUTE PREPAYMENT MODEL TABLES HAVE BEEN PREPARED BASED ON THE
ASSUMPTIONS DESCRIBED ABOVE (INCLUDING THE ASSUMPTIONS REGARDING THE
CHARACTERISTICS AND PERFORMANCE OF THE CONTRACTS WHICH WILL DIFFER FROM THE
ACTUAL CHARACTERISTICS AND PERFORMANCE THEREOF) AND SHOULD BE READ IN
CONJUNCTION THEREWITH.
S-23
<PAGE>
USE OF PROCEEDS
The net proceeds of the initial sale of the notes will be used by the trust
to purchase the contracts from the seller pursuant to the sale and servicing
agreement and to fund the deposits in the spread account maintained for the
benefit of the noteholders and the insurer. The net proceeds to be received by
the seller from the sale of the contracts to the trust will be used by the
seller to repay indebtedness incurred, or to pay other amounts owed, in
connection with its acquisition of the contracts from AutoNation Financial
Services and to pay other expenses in connection with the pooling of the
contracts and the issuance of the notes. AutoNation Financial Services will use
the proceeds from the sale of the contracts for general corporate purposes. In
addition, AutoNation Financial Services or its affiliates may apply all or any
portion of the net proceeds of this offering to the repayment of debt, including
"warehouse" debt secured by the contracts (prior to their sale to the trust).
One or more of the underwriters (or (1) their respective affiliates or (2)
entities for which their respective affiliates act as administrator and/or
provide liquidity lines) may have acted as a "warehouse lender" to AutoNation
Financial Services or its affiliates, and may receive a portion of the proceeds
as repayment of that "warehouse" debt.
DESCRIPTION OF THE NOTES
The notes will be issued pursuant to the terms of the indenture. A copy of
the indenture will be filed with the Securities and Exchange Commission
following the issuance of the notes. The following summaries, together with the
summaries contained under "Description of the Securities" and "Description of
the Indenture" in the accompanying prospectus, describe all of the material
terms of the notes and the indenture. However, these summaries do not purport to
be complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the notes and the indenture. Where particular
provisions of or terms used in the indenture are referred to, the actual
provisions (including definitions of terms) are incorporated by reference as
part of the summaries. The following summaries supplement the description of the
general terms and provisions of the indenture set forth under the heading
"Description of the Indenture" in the accompanying prospectus, to which
description reference is hereby made.
ISSUANCE AND REGISTRATION OF THE NOTES
The notes of each class will be offered for purchase in minimum
denominations of $1,000 and integral multiples thereof, except that one note of
each class may be issued in a different denomination. The notes will initially
be represented by one or more physical certificates registered in the name of
Cede & Co., as nominee of The Depository Trust Company, also known as DTC. The
interests of holders of beneficial interests in the global notes will be
available for purchase in book-entry form only. Unless and until the notes are
issued in definitive registered form under the limited circumstances described
herein, no holder of a beneficial interest in a global note will be entitled to
receive a definitive certificate representing that person's interest in the
notes. All references herein to actions by noteholders shall refer to actions
taken by DTC upon instructions from its participating organizations and all
references herein to payments, distributions, notices, reports and statements to
noteholders shall refer to distributions, notices, reports and statements to DTC
or Cede & Co., as the registered holder of the notes, as the case may be, for
distribution to holders of beneficial interests in a global note in accordance
with DTC procedures. See "Description of the Securities--Book-Entry
Registration" and "--Definitive Securities" in the accompanying prospectus.
Unless and until notes in definitive registered form have been issued,
payments on each Distribution Date will be made through the facilities of DTC
and the related Record Date will be the business day prior to that Distribution
Date. If notes in definitive registered form are issued, the related Record Date
will be the last day of the calendar month preceding the Distribution Date. The
final payment of principal of, and interest on, each note will be made only upon
presentation and surrender of the note at the office or agency of the indenture
trustee maintained for that purpose.
INTEREST PAYMENTS
Interest on the outstanding principal amount of each class of notes will
accrue at a per annum rate equal to the applicable interest rate for that class
of notes and, except as otherwise provided herein, will be distributed to the
noteholders monthly on each Distribution Date, commencing , 1999 and on the
applicable Final Scheduled Distribution Date. The interest period with respect
to any Distribution Date will be the period from the previous Distribution Date
or, in the case of the first Distribution Date, from and
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<PAGE>
including the Closing Date, to but excluding the Distribution Date. Interest on
the class A-1 notes will be calculated on the basis of the actual number of days
in the related Interest Accrual Period and a 360-day year. Interest on the class
A-2 notes, the class A-3 notes and the class A-4 notes will be calculated on the
basis of a 360-day year consisting of twelve 30-day months.
The class A-1 notes will bear interest at the rate of % per annum, the
class A-2 notes will bear interest at the rate of % per annum, the
class A-3 notes will bear interest at the rate of % per annum and the
class A-4 notes will bear interest at the rate of % per annum.
Interest accrued but not paid to the holders of any class of notes on any
Distribution Date will be due on the immediately succeeding Distribution Date,
together with, to the extent permitted by applicable law, interest on the
shortfall at the related interest rate for that class of notes. Interest
distributions with respect to the notes will be made as described below under
"Description of the Transfer and Servicing Agreements--Distributions" herein.
PRINCIPAL PAYMENTS
Principal payments will be made to the noteholders, to the extent described
below, on each Distribution Date in an amount equal to the Note Principal
Distributable Amount. See "Description of the Transfer and Servicing
Agreements--Distributions" herein.
Principal payments on the notes will be applied on each Distribution Date
from the note distribution account in the following order of priority:
(1) to the holders of the class A-1 notes until the principal amount
of the class A-1 notes has been reduced to zero;
(2) to the holders of the class A-2 notes until the principal amount
of the class A-2 notes has been reduced to zero;
(3) to the holders of the class A-3 notes until the principal amount
of the class A-3 notes has been reduced to zero; and
(4) to the holders of the class A-4 notes until the principal amount
of the class A-4 notes has been reduced to zero.
The principal amount of each class of notes, to the extent not previously
paid, will be due on the related Final Scheduled Distribution Date for that
class of notes. The actual date on which the outstanding principal amount of any
class of notes is paid is expected to be earlier, and could be significantly
earlier, than the Final Scheduled Distribution Date for that class and will be
based on a variety of factors, including the factors described under "Maturity
and Prepayment Considerations" herein and in the accompanying prospectus.
Any assets remaining in the trust after the payment in full of the notes
and of any amounts owed to the servicer, the trustees and the insurer will be
distributed to the holder of the residual interest in the trust, which initially
will be the seller, pursuant to the terms of the owner trust agreement and the
sale and servicing agreement.
OPTIONAL REDEMPTION
Any outstanding notes will be subject to redemption in whole, but not in
part, on any Distribution Date relating to an Optional Purchase. When the
outstanding principal balance of the contracts has declined to 10% or less of
the original Pool Balance, the servicer may, in its sole discretion, exercise
its option to purchase the Trust Property. If the servicer exercises this
option, the redemption price for each class of notes will equal the unpaid
principal amount of that class of notes plus accrued and unpaid interest thereon
at the applicable interest rate. The servicer will not be permitted to exercise
an optional redemption unless there are sufficient funds to pay all amounts owed
to the insurer, the servicer, the indenture trustee and the owner trustee in
connection with an Optional Purchase. Any optional redemption by the servicer
will effect an early retirement of each outstanding class of notes. See
"Description of the Transfer and Servicing Agreements--Termination" herein.
S-25
<PAGE>
THE INDENTURE TRUSTEE
The Chase Manhattan Bank will be the indenture trustee. The indenture
trustee is a New York banking corporation and its Corporate Trust Office is
located at 450 West 33rd Street, 14th Floor, New York, NY 10001.
The indenture trustee will have the rights and duties set forth under
"Description of the Transfer and Servicing Agreements--The Owner Trustee and
Indenture Trustee" in the accompanying prospectus.
EVENTS OF DEFAULT UNDER THE INDENTURE
An event of default under the indenture will include, among other things,
the occurrence of any of the following events:
(1) the delivery to the insurer of a claim for payment under the
insurance policy;
(2) a default for five days or more in the payment of any interest on
any note;
(3) a default in the payment of any principal on the applicable Final
Scheduled Distribution Date for a class of notes;
(4) a default in the observance or performance of any covenant or
agreement of the trust made in the indenture and the continuation of any
default for a period of 30 days after notice thereof is given to the trust
by the indenture trustee or the insurer, or to the trust, the insurer and
the indenture trustee by the holders of at least 25% in principal amount of
the notes then outstanding acting together as a single class, in each case
specifying the event of default and requiring it to be remedied;
(5) the failure of the indenture trustee to have a valid perfected
first priority security interest in the Trust Property;
(6) the failure of the receivables purchase agreement, the sale and
servicing agreement, the owner trust agreement, the administration
agreement, the insurance agreement, the indenture or any of the other basic
documents relating to the transaction, as each may have been amended or
supplemented from time to time, to be in full force and effect at any time;
(7) any representation or warranty made by the trust in the indenture
or in any certificate delivered pursuant thereto or in connection therewith
was incorrect in a material respect as of the time made, and the breach is
not cured within 30 days after notice thereof is given to the trust by the
indenture trustee or the insurer, or to the trust, the insurer and the
indenture trustee by the holders of at least 25% in principal amount of the
notes then outstanding acting together as a single class, in each case
specifying the breach and requiring it to be remedied; or
(8) a Trust Bankruptcy Event;
provided that so long as no Insurer Default shall have occurred and be
continuing, neither the indenture trustee nor the noteholders may accelerate the
notes under the indenture. So long as an Insurer Default shall not have occurred
and be continuing, acceleration of the notes under the indenture will occur only
upon delivery by the insurer to the trust and the indenture trustee of notice
that the notes are immediately due and payable. The failure to pay principal on
a class of notes will not result in the occurrence of an event of default under
the indenture until the Final Scheduled Distribution Date for that class of
notes.
Upon the occurrence of an event of default under the indenture, so long as
an Insurer Default shall not have occurred and be continuing, the insurer will
have the right, but not the obligation, to cause the indenture trustee to
liquidate the Trust Property, in whole or in part, on any date or dates
following the acceleration of the notes due to the event of default as the
insurer, in its sole discretion, shall elect. The insurer may not, however,
cause the indenture trustee to liquidate the Trust Property, in whole or in
part, if the proceeds of the liquidation would not be sufficient to pay all
outstanding principal of, and accrued interest on, the notes unless the event of
default arose from a claim made on the insurance policy or from a Trust
Bankruptcy Event. Following the occurrence of any event of default under the
indenture, the indenture trustee will continue to submit claims under the
insurance policy for any shortfalls in amounts available to make payments or
distributions of guaranteed amounts on the notes. However, following the
occurrence of an event of default under the indenture (so long as an Insurer
Default shall not have occurred and be continuing), the
S-26
<PAGE>
insurer, at its sole option, may elect to pay all or any portion of the
outstanding amount of the notes, plus accrued interest thereon to the date of
the payment. See "Description of the Insurance Policy" herein.
If an Insurer Default has occurred and is continuing, upon the occurrence
of an event of default under the indenture (other than an event of default
occurring solely because of a claim for payment under the insurance policy), the
holders of at least 66 2/3% of the principal amount of the notes then
outstanding may declare the principal of the notes to be immediately due and
payable. If an Insurer Default has occurred and is continuing and an event of
default under the indenture shall have occurred and be continuing (other than an
event of default occurring solely because of a claim for payment under the
insurance policy), the holders of at least 66 2/3% of the principal amount of
the notes will have the right to control the exercise of remedies available with
respect to the event of default, including the right to direct the indenture
trustee to maintain possession of the Trust Property or to liquidate the Trust
Property in whole or in part; provided, however, that those noteholders may not
direct the indenture trustee to liquidate the Trust Property in whole or in part
unless (1) the event of default has occurred because of a Payment Default or a
Trust Bankruptcy Event, and in either case the insurer shall have failed to make
a payment required under the insurance policy in accordance with its terms or
(2)(A) an event of default under the indenture has occurred other than as
described in clause (1), (B) the insurer shall not have failed to make a payment
required under the insurance policy in accordance with its terms and (C) the
proceeds of the sale will be sufficient to pay all principal on the notes,
together with accrued interest thereon, and all amounts owing to the insurer
under the insurance agreement or otherwise. In the event of a sale of the
contracts as described in clause (2) of the preceding sentence, the insurance
policy will not be available to cover losses to noteholders resulting from the
sale and will be terminated and the insurer will have no further obligation to
make any payment thereunder. See "Risk Factors--Events of default under the
indenture could result in losses or acceleration of payments on the notes"
herein.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes selected terms of the sale and servicing
agreement and the owner trust agreement. Copies of the sale and servicing
agreement and the owner trust agreement will be filed with the SEC following the
issuance of the notes. The following summary does not purport to be complete and
is subject to, and qualified in its entirety by reference to, all of the
provisions of the sale and servicing agreement and the owner trust agreement.
Where particular provisions of or terms used in the sale and servicing agreement
or the owner trust agreement are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of the summary. The
following summary supplements the description of the general terms and
provisions of the sale and servicing agreement and the owner trust agreement set
forth under the heading "Description of the Transfer and Servicing Agreements"
in the accompanying prospectus, to which description reference is hereby made.
SALE AND ASSIGNMENT OF THE CONTRACTS
Pursuant to the receivables purchase agreement between the seller and
AutoNation Financial Services, prior to the issuance of the notes, AutoNation
Financial Services will sell and assign to the seller its entire interest in the
contracts and the proceeds thereof, including its security interests in the
financed vehicles. In turn, the seller will sell and assign to the trust,
without recourse, the seller's entire interest in the contracts and the proceeds
thereof, including its security interest in the financed vehicles. Each contract
will be identified in a schedule appearing as an exhibit to the sale and
servicing agreement. Concurrently with the sale and assignment of the contracts,
the trust will pledge the assets acquired by it to the indenture trustee
pursuant to the indenture, and definitive certificates representing the notes
will be delivered to the underwriters of the notes in exchange for payment to
the seller of the net purchase price of the notes. The trust will also pledge
its rights under the sale and servicing agreement to the indenture trustee as
collateral for the notes, and the trust's rights under the sale and servicing
agreement may be enforced directly by the indenture trustee. See "Description of
the Transfer and Servicing Agreements--Sale and Assignment of the Contracts" in
the accompanying prospectus.
S-27
<PAGE>
THE ACCOUNTS
The Collection Account. The indenture trustee will establish and maintain
an account, known as the collection account, in the name of the indenture
trustee into which the servicer will deposit all collections from the related
contracts. Funds in the collection account will be invested in Eligible
Investments by or on behalf of the indenture trustee, acting at the direction of
the servicer. Eligible Investments made with respect to the collection account
will mature no later than the business day preceding the following Distribution
Date after they were invested. Any income from amounts on deposit in the
collection account which were invested in Eligible Investments will be deposited
in or credited to the collection account and any loss resulting from those
investments will be charged to the collection account. See "Description of the
Transfer and Servicing Agreements--The Collection Account and Eligible
Investments" in the accompanying prospectus.
The Payment Account. The indenture trustee shall establish and maintain an
account, known as the payment account, in the name of the indenture trustee,
into which amounts released from the collection account for distribution to
noteholders will be deposited prior to the transfer of those amounts to the note
distribution account.
The Note Distribution Account. The indenture trustee will establish and
maintain an account, known as the note distribution account, in the name of the
indenture trustee on behalf of the noteholders, into which amounts released from
the payment account for distribution to noteholders will be deposited and from
which all distributions to noteholders will be made.
The Spread Account. The indenture trustee will establish and maintain an
account, known as the spread account, in the name of the indenture trustee for
the benefit of the noteholders and the insurer as described under "Description
of the Transfer and Servicing Agreements--The Spread Account" and "--Withdrawals
from the Spread Account" herein.
PAYMENTS ON CONTRACTS
All Available Funds relating to the contracts will be deposited in or
credited to the collection account by the servicer within two business days of
the receipt of payments from obligors. Available Funds with respect to a
Distribution Date and the related Collection Period will include the following:
(1) amounts received with respect to the contracts in the related
Collection Period representing monthly principal and interest payments;
(2) full and partial prepayments by the related obligor;
(3) any Net Liquidation Proceeds;
(4) any Net Insurance Proceeds;
(5) any amounts deposited by AutoNation Financial Services or the
seller, as applicable, in the collection account to purchase or repurchase
contracts because of material defects in documents related to the contracts
or breaches of representations or warranties regarding the contracts made
by the seller in the sale and servicing agreement that materially and
adversely affect the interests of the noteholders or the insurer;
(6) any amounts deposited by the servicer in the collection account to
purchase contracts as a remedy for breach of the servicer's
representations, warranties and covenants relating to the servicing of the
contracts;
(7) any amounts deposited by the servicer in the collection account
pursuant to an Optional Purchase; and
(8) income from Eligible Investments of funds on deposit in the Trust
Accounts.
DISTRIBUTIONS
On the business day immediately preceding each Distribution Date, the
indenture trustee will cause funds equal to the amount of Available Funds with
respect to that Distribution Date to be withdrawn from the collection account
and deposit those funds into the payment account. On each Distribution Date, the
indenture trustee, based solely on the statement for that Distribution Date
received from the servicer, will apply the
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<PAGE>
Available Funds on deposit in the payment account available with respect to the
related Collection Period together with amounts, if any, withdrawn from the
spread account and any amounts representing payment of the Insured Payment as
described herein, to make the following deposits and distributions in the
following amounts and order of priority:
(1) to the servicer, from Available Funds and amounts, if any,
withdrawn from the spread account, the servicing fee for that Distribution
Date, including any unpaid servicing fees with respect to one or more prior
Distribution Dates;
(2) to the indenture trustee and the owner trustee, from Available
Funds (after giving effect to the reduction in Available Funds described in
clause (1) above) and amounts, if any, withdrawn from the spread account,
any accrued and unpaid fees and expenses of the indenture trustee and the
owner trustee, in each case to the extent those fees and expenses have not
been previously paid by the servicer; provided that such payments pursuant
to this clause (2) will not during any calendar year exceed $75,000 in the
aggregate;
(3) to the insurer, from Available Funds (after giving effect to the
reduction in Available Funds described in clauses (1) and (2) above) and
amounts, if any, withdrawn from the spread account, the insurance premium
(as defined in the insurance agreement) for that Distribution Date owing to
the insurer under the insurance agreement;
(4) to the note distribution account, from Available Funds (after
giving effect to the reduction in Available Funds described in clauses
(1) through (3) above) and amounts, if any, withdrawn from the spread
account and any amounts representing payment of the Insured Payment, the
Note Interest Distributable Amount to be distributed to the holders of
notes at their respective interest rates on a pro rata basis;
(5) to the note distribution account, if the Distribution Date is a
Final Scheduled Distribution Date for any class of notes, the Note
Principal Distributable Amount to the extent of the remaining outstanding
principal amount of that class of notes, from Available Funds (after giving
effect to the reduction in Available Funds described in clauses
(1) through (4) above) and amounts, if any, withdrawn from the spread
account and any amounts representing payment of the Insured Payment, to be
paid to the holders of that class of notes;
(6) to the note distribution account, from Available Funds (after
giving effect to the reduction in Available Funds described in clauses
(1) through (5) above) and amounts, if any, withdrawn from the spread
account and any amounts representing payment of the Insured Payment, the
remaining Note Principal Distributable Amount (after giving effect to the
payment, if any, described in clause (5) above), to be distributed first to
the holders of class A-1 notes until the principal amount of the class A-1
notes has been reduced to zero, then to the holders of class A-2 notes
until the principal amount of the class A-2 notes has been reduced to zero,
then to the holders of class A-3 notes until the principal amount of the
class A-3 notes has been reduced to zero and then to the holders of class
A-4 notes until the principal amount of the class A-4 notes has been
reduced to zero;
(7) to the insurer, from Available Funds (after giving effect to the
reduction in Available Funds described in clauses (1) through (6) above)
and amounts, if any, withdrawn from the spread account, all remaining
amounts owing to the insurer under the insurance agreement or otherwise;
(8) to the spread account, from Available Funds (after giving effect
to the reduction in Available Funds described in clauses (1) through
(7) above), the amount, if any, required to increase the amount therein to
the Spread Account Required Amount;
(9) to the indenture trustee or the owner trustee, if applicable, from
Available Funds (after giving effect to the reduction in Available Funds
described in clauses (1) through (8) above), the amount of any fees and
reasonable expenses not paid under clause (2) above as a result of the
dollar limitation on fees and reasonable expenses set forth in clause (2);
(10) to the indenture trustee or the successor servicer, if
applicable, from Available Funds (after giving effect to the reduction in
Available Funds described in clauses (1) through (9) above), the amount
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<PAGE>
of any reasonable expenses not paid by the servicer incurred in connection
with reliening documentation relating to financed vehicles;
(11) to the successor servicer, if applicable, from Available Funds
(after giving effect to the reduction in Available Funds described in
clauses (1) through (10) above), reasonable expenses not paid by the
servicer incurred in connection with the transfer of servicing from the
servicer to the successor servicer and the amount of any additional
servicing fee owing to the successor servicer in excess of the servicing
fee for that Distribution Date; and
(12) any remaining Available Funds will be distributed to the holder
of the residual interest in the trust, which initially will be the seller.
EARLY REPAYMENT
If the repayment of principal of and interest on the notes is accelerated
following the occurrence of an event of default under the indenture, amounts
collected and, as directed by the insurer, amounts on deposit in the Spread
Account will be applied in the following order of priority:
(1) to the servicer, to pay any unpaid servicing fee;
(2) to the indenture trustee or the owner trustee, as applicable, to
pay any accrued and unpaid fees and reasonable expenses of the indenture
trustee or the owner trustee;
(3) to the noteholders, to pay any accrued and unpaid interest on each
class of notes on a pro rata basis based on the interest accrued (including
interest accrued on past due interest) on each class of notes;
(4) to the noteholders, to pay principal on each class of notes, on a
pro rata basis based on the aggregate principal balance of each class of
notes, until the aggregate principal balance of each class of notes is
reduced to zero;
(5) to the insurer, to pay amounts owing to the insurer under the
insurance agreement or otherwise, including the insurance premium; and
(6) any remaining funds will be distributed to the holder of the
residual interest in the trust.
Amounts on deposit in the spread account on a Distribution Date will be
available to make payments and distributions to the appropriate parties on that
Distribution Date as described under "--Withdrawals from the Spread Account"
herein and to make the payments and distributions, as directed by the insurer,
pursuant to clauses (1) through (5) above upon the occurrence of an early
repayment. Under the insurance policy, the insurer is obligated to provide for
payment to the indenture trustee on each Distribution Date of any Insured
Payment.
PAYMENT PRIORITIES OF THE NOTES
The rights of the noteholders to receive distributions with respect to the
contracts will be subordinated to the rights of the servicer (to the extent that
the servicer has not been paid all servicing fees), the indenture trustee and
the owner trustee (to the extent the indenture trustee and the owner trustee
have not received all fees due and payable to them by the servicer) and the
insurer (to the extent the insurer has not received the insurance premium). In
addition, the rights of the noteholders to receive distributions with respect to
the contracts will be subject to the priorities set forth under
"--Distributions" above. The spread account, the Overcollateralization Amount
and the insurance policy are intended to enhance the likelihood of timely
repayment to the noteholders of the full amount of interest and principal owed
to them, and to afford the noteholders limited protection against losses in
respect of the contracts as described in "--The Spread Account,"
"--Overcollateralization" and "Description of the Insurance Policy" below.
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<PAGE>
THE SPREAD ACCOUNT
The foregoing protection will be effected both by the preferential right of
the noteholders to receive, to the extent described herein, current
distributions with respect to the contracts, and by the establishment of the
spread account. Amounts held from time to time in the spread account are
intended to enhance the likelihood of receipt by noteholders of amounts due them
and to decrease the likelihood that noteholders will experience losses. The
spread account will be a part of the trust and will be maintained as a
segregated trust account in the name of the indenture trustee. The indenture
trustee will have a perfected security interest therein and in all amounts
deposited in or credited to the spread account as well as to all Eligible
Investments made with those deposits and earnings. On the Closing Date, the
spread account will be funded by the issuer with an initial deposit in cash from
the proceeds of the sale of the notes. Thereafter, the spread account will be
funded by the deposit therein of amounts pursuant to clause (8) under
"--Distributions" above.
Amounts held from time to time in the spread account up to the Spread
Account Required Amount will continue to be held for the benefit of holders of
the notes and the insurer and may be invested in Eligible Investments.
Investment income on funds on deposit in the spread account will be credited to
the spread account. Any loss on investments will be charged to the spread
account.
The Spread Account Required Amount is an amount calculated pursuant to a
formula agreed to by the parties to the insurance agreement and each of the
rating agencies. The Spread Account Required Amount may be calculated pursuant
to any other formula as the parties to the insurance agreement and each of the
rating agencies may agree, and may include any other provisions or contain any
additional requirements as the parties to the insurance agreement may agree,
which each of the rating agencies may require to maintain the ratings of the
notes, and to maintain the rating of the transactions contemplated in the
insurance agreement and the sale and servicing agreement, without consideration
of the insurance policy, at not less than investment grade, as defined by the
rating agencies. The Spread Account Required Amount may increase or decrease
over time, without the consent of any of the noteholders, as a result of floors,
caps and triggers set forth in the insurance agreement. In addition, there can
be no assurance that the Spread Account Required Amount will be reached at any
given time. Consequently, noteholders should not rely on amounts on deposit or
to be deposited in the spread account in evaluating the likelihood that the
notes will be repaid.
WITHDRAWALS FROM THE SPREAD ACCOUNT
Amounts held from time to time in the spread account will be held for the
benefit of the noteholders and the insurer. On each Distribution Date, the
indenture trustee, based solely on the statement for that Distribution Date
received from the servicer, will withdraw funds from the spread account to the
extent that the sum of the amounts to be distributed as set forth in clauses
(1) through (7) under "--Distributions" above with respect to that Distribution
Date exceeds the amount of Available Funds available with respect to that
Distribution Date. The indenture trustee will apply the amount of the withdrawal
to make the distributions described under "--Distributions" above. Funds will
also be withdrawn from the spread account to reimburse the insurer for any draws
under the insurance policy with respect to any Preference Amount and, at the
direction of the insurer, to make payments and distributions pursuant to clauses
(1) through (5) under "Early Repayment" herein.
If the amount on deposit in the spread account on any Distribution Date
(after giving effect to all deposits thereto or withdrawals therefrom on that
Distribution Date) is greater than the Spread Account Required Amount, the
indenture trustee will distribute any excess first to the insurer, to the extent
of any amounts owing to the insurer pursuant to the insurance agreement or
otherwise, and then to the holder of the residual interest in the trust. Upon
any distributions to the insurer or the holder of the residual interest in the
trust the noteholders will have no further rights in, or claims to, the
distributed amounts.
On or after the occurrence of an event of default under the indenture and
the acceleration of the notes thereunder, and upon the written direction of the
insurer, all, or any portion of, amounts on deposit in the spread account will
be applied to pay amounts described under "--Early Repayment".
None of the noteholders, the indenture trustee, the owner trustee, the
holder of the residual interest in the trust or the insurer will be required to
refund any amounts properly distributed to them, whether or not there are
sufficient funds on any subsequent Distribution Date to make full distributions
to the noteholders. The
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obligations of the insurer under the insurance policy will not be diminished or
otherwise affected by any amounts distributed to the insurer as described in the
preceding paragraph.
OVERCOLLATERALIZATION
The Pool Balance as of the Cut-Off Date of $ will exceed the initial
principal amount of the notes by $ , or approximately 1.0%. The
Overcollateralization Amount is intended to enhance the likelihood of receipt by
noteholders of amounts due them and to decrease the likelihood that noteholders
will experience losses. Any collections on the contracts relating to the
Overcollateralization Amount will be applied in accordance with the priorities
set forth under "--Distributions" above. Unless offset by losses on the
contracts, the application of those collections is expected to cause the
aggregate principal amount of the notes to decrease at a faster rate than the
Pool Balance decreases, thereby increasing the Overcollateralization Amount.
STATEMENTS TO NOTEHOLDERS
On each Distribution Date, the indenture trustee will include with each
distribution to a noteholder a statement received from the servicer setting
forth for that Distribution Date the information described in the accompanying
prospectus under "Description of the Securities--Statements to Securityholders"
and the following information:
(1) the amount on deposit in the spread account on that Distribution
Date, before and after giving effect to deposits thereto and
withdrawals therefrom to be made in respect of that Distribution
Date;
(2) the amount of the withdrawal, if any, required to be made from the
spread account by the indenture trustee, as described above under
"--Withdrawals from the Spread Account"; and
(3) the Spread Account Required Amount for that Distribution Date.
REPORTS TO NOTEHOLDERS
Unless notes in definitive registered form are issued (which will only
occur under the limited circumstances described herein and in the accompanying
prospectus), the servicer will send unaudited monthly and annual reports
concerning the trust to the indenture trustee to be delivered to Cede & Co. as
the nominee of The Depository Trust Company and the registered holder of the
notes. See "--Statements to Noteholders" above and "Description of the
Securities--Statements to Securityholders" in the accompanying prospectus. These
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. DTC will supply these reports to
noteholders in accordance with its procedures. See "Description of the
Securities--Book-Entry Registration" in the accompanying prospectus. Since
owners of beneficial interests in the global notes will not be recognized as
noteholders, DTC will not forward monthly reports to those owners. Copies of
monthly reports may be obtained by owners of beneficial interests in the global
notes by a request in writing addressed to the indenture trustee. None of the
seller, the servicer or the insurer intends to send any of its financial reports
to noteholders.
SERVICING FEE
The servicer will be entitled to compensation for the performance of its
obligations under the sale and servicing agreement. The servicer will be
entitled to receive on each Distribution Date a servicing fee in an amount equal
to the product of (1) one-twelfth of 1.0% per annum multiplied by (2) the Pool
Balance as of the end of the Collection Period preceding the related Collection
Period or, in the case of the first Distribution Date, the Pool Balance as of
the Cut-Off Date. As additional compensation, the servicer or its designee will
be entitled to retain all late payment charges, extension fees and similar
charges or fees paid in connection with the contracts. The servicer will pay
from its servicing compensation all expenses incurred by it in connection with
its servicing activities under the sale and servicing agreement and will not be
entitled to reimbursement of its expenses except to the extent they constitute
Liquidation Expenses or expenses recoverable under an applicable insurance
policy.
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The sale and servicing agreement requires the servicer to use its best
efforts to collect all payments called for under the terms and provisions of
each of the contracts. The servicer, consistent with the foregoing, will be
permitted, in its discretion, to waive charges and grant extensions as described
under "Description of the Transfer and Servicing Agreements--Waivers and
Extensions" in the accompanying prospectus. The servicer may not, with a few
very limited exceptions, extend the maturity date of a contract if there have
been more than two credit-related extensions granted on the contract in the
immediately preceding twelve months or if the sum of the terms of all extensions
of the contract would exceed six months. In addition, in no event may an
extension be granted beyond four months before the latest Final Scheduled
Distribution Date for the notes.
DEFAULT BY THE SERVICER; RIGHTS UPON DEFAULT BY THE SERVICER
The events which constitute a default by the servicer under the sale and
servicing agreement will be those events described in the accompanying
prospectus under "Description of the Transfer and Servicing Agreements--Default
by the Servicer" and any event of default under the insurance agreement.
Upon the occurrence of a default by the servicer, unless an Insurer Default
shall have occurred and be continuing, only the insurer (and not the indenture
trustee or the noteholders) may terminate the servicer under the sale and
servicing agreement. In the event that the servicer is terminated by the
insurer, a successor servicer (other than the indenture trustee) may be
appointed by the insurer and will take over all the responsibilities, duties and
liabilities of the servicer under the sale and servicing agreement and will be
entitled to the same compensation arrangements as was the original servicer.
Until the insurer has appointed a successor servicer, the indenture trustee will
be the successor servicer. In the event that the indenture trustee is unable to
so act, and the insurer has not appointed a successor servicer within 60 days,
the indenture trustee may, with the consent of the insurer, which consent will
not be unreasonably withheld, appoint, or petition a court of competent
jurisdiction for the appointment of, a successor acceptable to the insurer with
a net worth of at least $50,000,000 and whose regular business includes the
servicing of automobile and light-duty truck receivables.
Unless an Insurer Default shall have occurred and be continuing, the
insurer may, on behalf of the noteholders, waive any default by the servicer in
the performance of its obligations under the sale and servicing agreement and
its consequences. The rights of the noteholders to waive defaults by the
servicer under the sale and servicing agreement are as described under
"Description of the Transfer and Servicing Agreements--Rights Upon Default by
the Servicer" in the accompanying prospectus.
Any successor servicer will succeed to all responsibilities, duties and
liabilities of the servicer under the sale and servicing agreement and will be
entitled to similar compensation arrangements; provided, however, that the
indenture trustee, as successor servicer, will not succeed to AutoNation
Financial Services' obligations to purchase contracts under any circumstances.
The indenture trustee as successor servicer will, however, indemnify and hold
harmless the issuer, the seller, the noteholders and the insurer in the event of
a failure by the successor servicer to perform its obligations under the sale
and servicing agreement. The successor servicer will have the right to terminate
the services of any subservicer under the related subservicer agreement in
respect of the contracts which the successor servicer will be assuming
responsibilities as servicer, and any termination fees assessed under the
related subservicer agreement will be paid by the predecessor servicer.
In addition, upon the direction of the insurer, World Omni or any successor
may be terminated as the subservicer of the contracts and the servicer will be
required to transfer and deliver the contracts and any related documents to the
indenture trustee or another custodian designated by the insurer following the
occurrence of any of the following events:
(1) a default by the servicer under the sale and servicing agreement;
(2) specified events of insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings and actions by the
subservicer indicating its insolvency, reorganization pursuant to
bankruptcy or similar proceedings or inability to pay its obligations as
they become due; or
(3) an event of default under the insurance agreement.
AMENDMENT
The sale and servicing agreement, the owner trust agreement and the
administration agreement may be amended by the parties thereto with the consent
of the insurer but without the consent of the noteholders to cure any ambiguity,
correct or supplement any provisions therein which may be inconsistent with any
other
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provisions therein, or make any other provisions with respect to matters or
questions arising thereunder which are not inconsistent with the provisions of
those agreements; provided that any amendment will not materially and adversely
affect the interest of any noteholder. For a further discussion regarding
amendments to the sale and servicing agreement, the owner trust agreement and
the administration agreement, see "Description of the Transfer and Servicing
Agreement--Amendment" in the accompanying prospectus. Any amendment shall be
deemed not to materially and adversely affect the interest of any noteholder if
the person requesting the amendment obtains (1) a letter from each rating agency
which has rated the notes to the effect that the amendment would not result in a
downgrading or withdrawal of the then current ratings assigned to the notes by
that rating agency without regard to the insurance policy and (2) consent of the
insurer. The sale and servicing agreement, the owner trust agreement and the
administration agreement may also be amended by the parties thereto with the
consent of the insurer and, so long as the notes are outstanding and an Insurer
Default has occurred and is continuing, the holders of notes evidencing not less
than a majority of the principal amount of the notes then outstanding, acting
together as a single class, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the sale and
servicing agreement, the owner trust agreement or the administration agreement
or of modifying, in any manner, the rights of the noteholders; provided,
however, that no amendment may (1) increase or reduce in any manner the amount
of, or accelerate or delay the timing of, collections of payments on the related
contracts or distributions that are required to be made for the benefit of the
noteholders, (2) reduce the aforesaid percentage of the noteholders which are
required to consent to any amendment of the sale and servicing agreement, the
owner trust agreement or the administration agreement without the consent of the
holders of all the outstanding notes or (3) result in a taxable event to any of
the noteholders for federal income tax purposes or result in the trust being
taxable as a corporation for federal income tax purposes.
It is intended that the trust will not constitute a separate entity for
federal income tax purposes during the time that the seller holds the entire
equity interest in the trust; provided, however, that at any time that equity
interests in the trust are held by more than one holder, the sale and servicing
agreement, the owner trust agreement and the administration agreement may be
amended, as necessary and in accordance with the preceding paragraph, to reflect
the appropriate treatment of the trust as a partnership for federal income tax
purposes. See "Material Federal Income Tax Consequences" below.
TERMINATION
The obligations of the servicer, the seller, the owner trustee and the
indenture trustee with respect to the related noteholders pursuant to the owner
trust agreement, the sale and servicing agreement or the indenture will
terminate as described under "Description of the Transfer and Servicing
Agreements--Termination" in the accompanying prospectus and as set forth below.
The indenture trustee will give written notice of the termination of the
obligations of the servicer, the seller, the owner trustee or the indenture
trustee to each noteholder of record. The final distribution to each noteholder
will be made only upon surrender and cancellation of that holder's notes at the
office or agency of the indenture trustee specified in the notice of
termination. The indenture trustee will return, or cause to be returned, any
unclaimed funds to the trust.
Promptly following the date on which all principal of and interest on the
notes has been paid in full and the notes have been surrendered to the indenture
trustee, the indenture trustee will, if the insurer has paid any amount in
respect of the notes under the insurance policy that has not been reimbursed to
the insurer, deliver the surrendered notes to the insurer.
OPTIONAL PURCHASE
In order to avoid excessive administrative expenses, the servicer will be
permitted, at its option, to purchase the remaining contracts from the trust on
any Distribution Date as of which the Pool Balance has been reduced to an amount
less than or equal to 10% of the original Pool Balance. The price the servicer
must pay to exercise the Optional Purchase will be equal to the greater of
(1) the sum of (A) the Pool Balance on the date of purchase and (B) any accrued
and unpaid interest on the contracts and (2) the sum of (A) the aggregate unpaid
principal amount of the notes, (B) any accrued and unpaid interest thereon and
(C) all amounts due to the servicer, the owner trustee, the indenture trustee
and the insurer under the sale and servicing agreement, the owner trust
agreement, the indenture, the administration agreement and the insurance
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agreement. Any outstanding notes will be redeemed concurrently with an Optional
Purchase as described under "Optional Redemption" above.
PAYMENT IN FULL OF NOTES
Upon the payment in full of all outstanding notes and the satisfaction and
discharge of the indenture, the owner trustee will succeed to all the rights of
the indenture trustee, and the seller will succeed to all the rights of the
noteholders, under the sale and servicing agreement, except as otherwise
provided therein.
DESCRIPTION OF THE ADMINISTRATION AGREEMENT
Pursuant to the administration agreement, AutoNation Financial Services
will serve as the administrator and will agree, to the extent provided in the
administration agreement, to provide the notices and to perform other
administrative obligations required by the indenture. As compensation for the
performance of the administrator's obligations under the administration
agreement and as reimbursement for its expenses related thereto, the
administrator will be entitled to an annual administration fee of $ .
The administration fee will be paid by the servicer.
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DESCRIPTION OF THE INSURANCE POLICY
The following information has been supplied by MBIA Insurance Corporation,
the insurer, for inclusion in this prospectus supplement. The insurer does not
accept any responsibility for the accuracy or completeness of this prospectus
supplement or any information or disclosure contained herein, or omitted
herefrom, other than with respect to the accuracy of the information regarding
the insurance policy and the insurer set forth under the headings "Description
of the Insurance Policy" and "Description of the Insurer" herein. Additionally,
the insurer makes no representation regarding the notes or the advisability of
investing in the notes.
The insurer, in consideration of the payment of a premium and subject to
the terms of the insurance policy, thereby unconditionally and irrevocably
guarantees to any noteholder that an amount equal to each full and complete
Insured Payment will be received from the insurer by the indenture trustee or
its successors, as indenture trustee for the noteholders, on behalf of the
noteholders, for distribution by the indenture trustee to each noteholder of
that noteholder's proportionate share of the Insured Payment.
The insurer's obligations under the insurance policy, with respect to a
particular Insured Payment, will be discharged to the extent funds equal to the
applicable Insured Payment are received by the indenture trustee, whether or not
those funds are properly applied by the indenture trustee. Insured Payments will
be made only at the time set forth in the insurance policy, and no accelerated
Insured Payments will be made regardless of any acceleration of the notes,
unless the acceleration is at the sole option of the insurer.
Notwithstanding the foregoing paragraph, the insurance policy does not
cover shortfalls, if any, attributable to the liability of the trust or the
indenture trustee for withholding taxes, if any (including interest and
penalties in respect of any liability for withholding taxes).
The insurer will pay any Insured Payment that is a Preference Amount on the
business day following receipt on a business day by the insurer's fiscal agent
of the following:
o a certified copy of the order requiring the return of a preference
payment;
o an opinion of counsel satisfactory to the insurer that the order is final
and not subject to appeal;
o an assignment in a form that is reasonably required by the insurer,
irrevocably assigning to the insurer all rights and claims of the
noteholder relating to or arising under the notes against the debtor
which made the preference payment or otherwise with respect to the
preference payment; and
o appropriate instruments to effect the appointment of the insurer as agent
for the noteholder in any legal proceeding related to the preference
payment, which instruments are in a form satisfactory to the insurer;
provided that if these documents are received after 12:00 noon, New York time,
on that business day, they will be deemed to be received on the following
business day. Payments by the insurer will be disbursed to the receiver or the
trustee in bankruptcy named in the final order of the court exercising
jurisdiction on behalf of the noteholder and not to any noteholder directly
unless the noteholder has returned principal or interest paid on the notes to
the receiver or trustee in bankruptcy, in which case that payment will be
disbursed to the noteholder.
The insurer will pay any other amount payable under the insurance policy no
later than 12:00 noon, New York time, on the later of the Distribution Date on
which the related Deficiency Amount is due or the second business day following
receipt in New York, New York on a business day by State Street Bank and Trust
Company, N.A., as fiscal agent for the insurer or any successor fiscal agent
appointed by the insurer of a notice from the indenture trustee specifying the
Insured Payment which is due and owing on the applicable Distribution Date;
provided, that if the notice is received after 12:00 noon, New York time, on
that business day, it will be deemed to be received on the following business
day. If any notice received by the insurer's fiscal agent is not in proper form
or is otherwise insufficient for the purpose of making a claim under the
insurance policy, it will be deemed not to have been received by the insurer's
fiscal agent for the purposes of this paragraph, and the insurer or the fiscal
agent, as the case may be, will promptly so advise the indenture trustee and the
indenture trustee may submit an amended notice.
Insured Payments due under the insurance policy, unless otherwise stated
therein, will be disbursed by the insurer's fiscal agent to the indenture
trustee, on behalf of the noteholders, by wire transfer of
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immediately available funds in the amount of the Insured Payment less, in
respect of Insured Payments related to Preference Amounts, any amount held by
the indenture trustee for the payment of the Insured Payment and legally
available therefor.
The fiscal agent is the agent of the insurer only and the fiscal agent will
in no event be liable to noteholders for any acts of the fiscal agent or any
failure of the insurer to deposit or cause to be deposited sufficient funds to
make payments due under the insurance policy.
Subject to the terms of the sale and servicing agreement, the insurer will
be subrogated to the rights of each noteholder to receive payments under the
notes to the extent of any payment by the insurer under the insurance policy.
Capitalized terms used in the insurance policy and not otherwise defined in
the insurance policy shall have the meanings set forth in the sale and servicing
agreement as of the date of execution of the insurance policy, without giving
effect to any subsequent amendment or modification to the sale and servicing
agreement unless such amendment or modification has been approved in writing by
the insurer.
The insurance policy is not cancellable for any reason. The premium on the
insurance policy is not refundable for any reason including payment, or
provision being made for payment, prior to the maturity of the notes.
The insurance policy is being issued under and pursuant to, and will be
construed under, the laws of the State of New York, without giving effect to the
conflict of law principles thereof.
THE INSURANCE PROVIDED BY THE INSURANCE POLICY IS NOT COVERED BY THE
PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW
YORK INSURANCE LAW.
A form of the insurance policy is attached to this prospectus supplement as
exhibit A.
DESCRIPTION OF THE INSURER
THE INSURER
MBIA Insurance Corporation, the insurer, is the principal operating
subsidiary of MBIA Inc., a New York Stock Exchange listed company. MBIA Inc. is
not obligated to pay the debts of or claims against the insurer. The insurer is
domiciled in the State of New York and licensed to do business in and is subject
to regulation under the laws of all 50 states, the District of Columbia, the
Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands,
the Virgin Islands of the United States and the Territory of Guam. The insurer
has two European branches, one in the Republic of France and the other in the
Kingdom of Spain. New York has laws prescribing minimum capital requirements,
limiting classes and concentrations of investments and requiring the approval of
policy rates and forms. State laws also regulate the amount of both the
aggregate and individual risks that may be insured, the payment of dividends by
the insurer, changes in control and transactions among affiliates. Additionally,
the insurer is required to maintain contingency reserves on its liabilities in
specified amounts and for specified periods of time.
FINANCIAL INFORMATION ABOUT THE INSURER
The consolidated financial statements of the insurer, a wholly owned
subsidiary of MBIA Inc., and its subsidiaries as of December 31, 1998 and
December 31, 1997 and for each of the three years in the period ended
December 31, 1998, prepared in accordance with generally accepted accounting
principles, included in the Annual Report on Form 10-K of MBIA Inc. for the year
ended December 31, 1998 and the consolidated financial statements of the insurer
and its subsidiaries as of June 30, 1999 and for the six month periods ended
June 30, 1999 and June 30, 1998 included in the Quarterly Report on Form 10-Q of
MBIA Inc. for the period ended June 30, 1999, are hereby incorporated by
reference into this prospectus supplement and shall be deemed to be a part
hereof. Any statement contained in a document incorporated by reference herein
shall be modified or superseded for purposes of this prospectus supplement to
the extent that a statement contained herein or in any other subsequently filed
document which also is incorporated by reference herein modifies or supersedes
that statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus
supplement.
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All financial statements of the insurer and its subsidiaries included in
documents filed by MBIA Inc. pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended, subsequent to the date of this
prospectus supplement and prior to the termination of the offering of the notes
shall be deemed to be incorporated by reference into this prospectus supplement
and to be a part hereof from the respective dates of filing those documents.
The tables below present selected financial information of the insurer
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities and generally accepted accounting
principles:
<TABLE>
<CAPTION>
STATUTORY ACCOUNTING
PRACTICS
----------------------------
DECEMBER 31, JUNE 30,
1998 1999
------------ ------------
(AUDITED) (UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
Admitted Assets........... $ 6,521 $ 6,807
Liabilities............... 4,231 4,468
Capital and Surplus....... 2,290 2,339
</TABLE>
<TABLE>
<CAPTION>
GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
----------------------------
DECEMBER 31, JUNE 30,
1998 1999
------------ ------------
(AUDITED) (UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
Assets.................... $ 7,488 $ 7,429
Liabilities............... 3,211 3,234
Shareholder's Equity...... 4,277 4,195
</TABLE>
WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION ABOUT THE INSURER
Copies of the financial statements of the insurer incorporated by reference
herein and copies of the insurer's 1998 year-end audited financial statements
prepared in accordance with statutory accounting practices are available,
without charge, from the insurer. The address of the insurer is 113 King Street,
Armonk, New York 10504. The telephone number of the insurer is (914) 273-4545.
YEAR 2000 READINESS DISCLOSURE
MBIA Inc. is actively managing a high-priority year 2000 or Y2K program.
MBIA Inc. has established an independent Y2K testing lab in its Armonk
headquarters, with a committee of business unit managers overseeing the project.
MBIA Inc. has a budget of $1.13 million for its 1998-2000 Y2K efforts.
Expenditures are proceeding as anticipated, and MBIA Inc. does not expect the
project budget to materially exceed this amount. MBIA Inc. has initiated a
comprehensive Y2K plan that includes assessment, remediation, testing and
contingency planning. This plan covers "mission-critical" internally developed
systems, vendor software, hardware and some third party entities through which
MBIA Inc. conducts its business. Testing to date indicates that functions
critical to the financial guarantee business, both domestic and international,
were Y2K-ready as of December 31, 1998. Additional testing will continue
throughout 1999.
FINANCIAL STRENGTH RATINGS OF THE INSURER
Moody's Investors Service, Inc. rates the financial strength of the insurer
"Aaa."
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., rates the financial strength of the insurer "AAA."
Fitch IBCA, Inc. (formerly known as Fitch Investors Service, L.P.) rates
the financial strength of the insurer "AAA."
Each rating of the insurer should be evaluated independently. The ratings
reflect each respective rating agency's current assessment of the
creditworthiness of the insurer and its ability to pay claims on its policies of
insurance. Any further explanation as to the significance of the above ratings
may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the notes,
and the ratings may be subject to revision or withdrawal at any time by the
rating agencies. Any downward revision or withdrawal of any of the above ratings
may have an adverse effect on the market price of the notes. The insurer does
not guaranty the market price of the notes nor does it guaranty that the ratings
on the notes will not be revised or withdrawn.
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LEGAL INVESTMENT
The class A-1 notes will be eligible securities for purchase by money
market funds under paragraph (a)(9) of Rule 2a-7 under the Investment Company
Act of 1940, as amended.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Weil, Gotshal & Manges LLP has delivered its opinion, under current law and
subject to the qualifications set forth therein, that upon the issuance of the
notes, although no authority exists directly relating to the proper
characterization of securities similar to the notes or to an entity similar to
the trust, for federal income tax purposes, (1) the notes will be characterized
as debt and (2) the trust will not be characterized as an association or a
publicly traded partnership taxable as a corporation. Each noteholder, by the
acceptance of a note, will agree to treat the notes as indebtedness for federal,
state and local income, single business and franchise tax purposes. See
"Material Federal Income Tax Consequences" in the accompanying prospectus for
additional information concerning the application of federal income tax laws to
the trust and the notes.
ERISA CONSIDERATIONS
Subject to the considerations set forth below and under "ERISA
Considerations" in the prospectus, the notes may be purchased by an employee
benefit plan or an individual retirement account subject to the Employee
Retirement Income Security Act of 1974, as amended, which is generally referred
to as "ERISA" or Section 4975 of the Internal Revenue Code of 1986, as amended.
A fiduciary of a benefit plan must determine that the purchase of a note is
consistent with its fiduciary duties under ERISA and does not result in a
nonexempt prohibited transaction as defined in Section 406 of ERISA or
Section 4975 of the Internal Revenue Code. Section 406 of ERISA prohibits
parties in interest or disqualified persons with respect to a benefit plan from
engaging in transactions (including loans) involving a benefit plan and its
assets unless a statutory or administrative exemption applies to the
transaction. Section 4975 of the Internal Revenue Code imposes excise taxes (or,
in some cases, a civil penalty may be assessed pursuant to section 502(i) of
ERISA) on parties in interest which engage in non-exempt prohibited
transactions. In addition, Title I of ERISA also requires fiduciaries of a
benefit plan subject to ERISA to make investments that are prudent, diversified
and in accordance with the governing plan documents.
The Plan Asset Regulation provides that, as a general rule, the underlying
assets and properties of corporations, partnerships, trusts and some other
entities in which a benefit plan purchases an "equity interest" will be deemed
for purposes of ERISA to be assets of the investing benefit plan unless
exceptions apply. The Plan Asset Regulation defines an "equity interest" as any
interest in an entity other than an instrument that is treated as indebtedness
under applicable local law and which has no substantial equity features.
Although there is very little authority directly on point and there can be no
assurances in this regard, the seller believes that the notes offered hereby
should not be treated as "equity interests" for purposes of the Plan Asset
Regulation. Specifically, the notes (a) are expected to be treated as
indebtedness under local law and will, in the opinion of Weil, Gotshal &
Manges LLP, be treated as debt, rather than equity, for federal tax purposes
(see "Material Federal Income Tax Consequences" herein) and (b) should not be
deemed to have any "substantial equity features." Those conclusions are based,
in part, upon the traditional debt features of the notes, including the
reasonable expectation of purchasers of the notes that the notes will be repaid
when due, as well as the absence of conversion rights, warrants and other
typical equity features. In the event that the insurer's obligations under the
insurance policy cease or otherwise become unavailable, the notes might not be
treated as debt for purposes of ERISA. Accordingly, on the date hereof, and
thereafter, unless the insurer's obligations under the insurance policy cease or
otherwise become unavailable, the acquisition of the notes by benefit plan
investors should not cause the assets of the trust to be treated as Plan Assets
for purposes of Title I of ERISA.
However, the notes may not be purchased with the assets of a benefit plan
if the seller, the servicer, the indenture trustee, the owner trustee or any of
their affiliates (a) has investment or administrative discretion
S-39
<PAGE>
with respect to the benefit plan assets; (b) has authority or responsibility to
give, or regularly gives, investment advice with respect to the benefit plan
assets, for a fee and pursuant to an agreement or understanding that the advice
(1) will serve as a primary basis for investment decisions with respect to the
benefit plan assets and (2) will be based on the particular investment needs for
the benefit plan; or (c) is an employer maintaining or contributing to the
benefit plan.
The Issuer, the servicer or affiliates thereof might be considered or might
become parties in interest with respect to a benefit plan. In either case, the
acquisition or holding of notes by or on behalf of a benefit plan could give
rise to an indirect prohibited transaction within the meaning of ERISA and the
Internal Revenue Code, unless it is subject to one or more exemptions such as
Prohibited Transaction Class Exemption (or PTCE) 84-14, which exempts
transactions effected on behalf of a benefit plan by a "qualified professional
asset manager", PTCE 90-1, which exempts transactions involving insurance
company pooled separate accounts, PTCE-91-38, which exempts transactions
involving bank collective investment funds, PTCE 95-60, which exempts
transactions involving insurance company general accounts, or PTCE 96-23, which
exempts transactions effected on behalf of a benefit plan by "in-house asset
managers."
EACH PURCHASER OR TRANSFEREE OF A NOTE THAT IS A BENEFIT PLAN WILL BE
DEEMED TO HAVE REPRESENTED THAT THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF
UNDER AT LEAST ONE OF THE FOREGOING EXEMPTIONS (OR OTHER APPLICABLE EXEMPTION
PROVIDING SUBSTANTIALLY SIMILAR RELIEF) HAVE BEEN SATISFIED.
EACH BENEFIT PLAN FIDUCIARY SHOULD CONSULT WITH ITS ATTORNEYS AND FINANCIAL
ADVISORS AS TO THE PROPRIETY OF AN INVESTMENT IN THE NOTES IN LIGHT OF THE
CIRCUMSTANCES OF THE PARTICULAR BENEFIT PLAN AND THE RESTRICTIONS OF ERISA AND
SECTION 4975 OF THE INTERNAL REVENUE CODE.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
between the seller and the underwriters named below, the seller has agreed to
cause the trust to sell to each of the underwriters, and each of the
underwriters has agreed to purchase, the principal amount of the notes set forth
opposite its name in the table below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
UNDERWRITERS NOTES NOTES NOTES NOTES
- ------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Chase Securities Inc................. $ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
Total $ $ $ $
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The price to the public, underwriters' discounts and commissions, the
concessions that the underwriters may allow to dealers, and the discounts that
the dealers may reallow to other dealers, each expressed as a percentage of the
principal amount of each class of notes, will be as follows:
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS
PRICE TO DISCOUNTS AND CONCESSIONS BETWEEN
PUBLIC COMMISSIONS(1) TO DEALERS DEALERS
-------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Class A-1 Notes................................ % % % %
Class A-2 Notes................................ % % % %
Class A-3 Notes................................ % % % %
Class A-4 Notes................................ % % % %
</TABLE>
(Footnotes on next page)
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<PAGE>
(Footnotes from previous page)
- ------------------
(1) Includes all items considered by the National Association of Securities
Dealers to be underwriting compensation for purposes of the NASD's Rules of
Fair Practice.
After the offering is completed, the seller will receive the proceeds,
after deduction of the underwriting and other expenses, listed below:
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS
PROCEEDS TO SELLER AND COMMISSIONS(1)
------------------ ----------------------
<S> <C> <C>
Class A-1 Notes................................... $ ( %) $ ( %)
Class A-2 Notes................................... $ ( %) $ ( %)
Class A-3 Notes................................... $ ( %) $ ( %)
Class A-4 Notes................................... $ ( %) $ ( %)
</TABLE>
- ------------------
(1) Includes all items considered by the National Association of Securities
Dealers to be underwriting compensation for purposes of the NASD's Rules of
Fair Practice.
After the public offering, the public offering price and other selling
terms may be changed by the underwriters. Additional offering expenses payable
by the seller are estimated to be $ .
The underwriters may engage in over-allotment, stabilizing transactions and
syndicate covering transactions with respect to the notes. Over-allotment
transactions involve syndicate sales in excess of the offering size, which
create a syndicate short position. Stabilizing transactions permit bids to
purchase the notes so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the notes in the
open market after the distribution has been completed in order to cover
syndicate short positions. These over-allotment transactions, stabilizing
transactions and syndicate covering transactions may cause the price of the
notes to be higher than it would otherwise be in the absence of these
transactions. Neither the seller nor the underwriters represent that the
underwriters will engage in any of these transactions or that these
transactions, once commenced, will not be discontinued without notice at any
time.
In the ordinary course of business, each underwriter and its affiliates may
have engaged and may engage in investment banking and/or commercial banking
transactions with the seller, its affiliates and the trust. In addition, each
underwriter may from time to time take positions in the notes.
The seller and AutoNation Financial Services have agreed to indemnify the
underwriters against specified liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the
underwriters may be required to make in respect thereof.
LEGAL MATTERS
Relevant legal matters with respect to the notes and with respect to the
federal income tax matters discussed under "Material Federal Income Tax
Consequences" in the accompanying prospectus will be passed upon for the seller
by Weil, Gotshal & Manges LLP, New York, New York. In addition, relevant matters
of Florida law will be passed upon for the trust and the seller by Tripp Scott,
P.A., Fort Lauderdale, Florida. Relevant legal matters with respect to the notes
will be passed upon for the underwriters by Skadden, Arps, Slate, Meagher & Flom
LLP, New York, New York. Relevant legal matters relating to the insurer will be
passed upon for the insurer by Kutak Rock, Omaha, Nebraska.
EXPERTS
The consolidated balance sheets of MBIA Insurance Corporation and its
subsidiaries as of December 31, 1998 and 1997 and the related consolidated
statements of income, changes in shareholder's equity, and cash flows for each
of the three years in the period ended December 31, 1998, incorporated by
reference in this prospectus supplement, have been incorporated herein in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
S-41
<PAGE>
GLOSSARY
"AMOUNT FINANCED" means, with respect to a contract, the aggregate amount
advanced by the originator under the contract toward the purchase price of the
related financed vehicle and related costs, including amounts advanced in
respect of accessories, extended service or warranty contracts and other items
customarily financed as part of retail automobile installment sales contracts,
excluding any collision and/or comprehensive insurance premiums.
"AVAILABLE FUNDS" means, with respect to a Distribution Date and the
related Collection Period, the following:
(1) amounts received with respect to the contracts in the related
Collection Period representing monthly principal and interest payments;
(2) full and partial prepayments by the related obligor;
(3) any Net Liquidation Proceeds;
(4) any Net Insurance Proceeds;
(5) any amounts deposited by AutoNation Financial Services or the
seller, as applicable, in the collection account to purchase or repurchase
contracts because of material defects in documents related to the contracts
or breaches of representations or warranties regarding the contracts made
by AutoNation Financial Services in the receivables purchase agreement or
by the seller in the sale and servicing agreement, as applicable, that
materially and adversely affect the interests of the noteholders or the
insurer;
(6) any amounts deposited by the servicer in the collection account to
purchase contracts as a remedy for breach of the servicer's
representations, warranties and covenants relating to the servicing of the
contracts;
(7) any amounts deposited by the servicer in the collection account
pursuant to an Optional Purchase; and
(8) income from Eligible Investments of funds on deposit in the Trust
Accounts.
"CLOSING DATE" means , 1999.
"COLLECTION PERIOD" means, with respect to any Distribution Date, the
calendar month immediately preceding the calendar month in which that
Distribution Date occurs (or, in the case of the first Collection Period, the
period of time from but excluding the Cut-Off Date through the last day of the
calendar month immediately preceding the month in which the first Distribution
Date occurs).
"CUT-OFF DATE" means August 31, 1999.
"DEFAULTED CONTRACT" means, with respect to any Collection Period, a
contract (1) which, at the end of that Collection Period, is deemed
uncollectible by the servicer in accordance with its customary procedures, (2)
in respect of which all amounts more than one hundred and twenty (120) days past
due represent in the aggregate $40 or more, (3) in respect of which the related
financed vehicle has been repossessed and liquidated or (4) in respect of which
the servicer has repossessed and held the related financed vehicle in its
repossession inventory for 91 days or more, whichever occurs first.
"DEFICIENCY AMOUNT" means, for any Distribution Date, the sum of (a) the
excess, if any, of (1) the Note Interest Distributable Amount with respect to
all classes of notes for that Distribution Date over (2) the sum of (A) the
Available Funds for that Distribution Date (after giving effect to the
distributions described in clauses (1) through (3) under "Description of the
Transfer and Servicing Agreements--Distributions" for that Distribution Date)
and (B) the amount to be on deposit in the spread account for that Distribution
Date (after giving effect to any withdrawals to satisfy amounts due in respect
of clauses (1) through (3) under "Description of the Transfer and Servicing
Agreements--Distributions" for that Distribution Date) and (b) the Guaranteed
Note Principal Amount for that Distribution Date.
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<PAGE>
"DISTRIBUTION DATE" means the 15th day of each month (or if that day is not
a business day (i.e., a Saturday, Sunday, a day on which the insurer is closed
or a day on which banking institutions in New York, New York or in the city in
which the indenture trustee's corporate trust office or the owner trustee's
corporate trust office is located are authorized or obligated by law to be
closed), on the next succeeding business day).
"ELIGIBLE INVESTMENTS" means any one or more of the following obligations
or securities, all of which will be denominated in United States dollars:
(1) direct obligations of, and obligations fully guaranteed as to
timely payment of principal and interest by, the United States of America
or any agency or instrumentality of the United States of America the
obligations of which are backed by the full faith and credit of the United
States of America and, to the extent, at the time of investment, acceptable
to the insurer and each rating agency for securities having a rating
equivalent to the rating of the notes at the Closing Date, the direct
obligations of, or obligations fully guaranteed by, the Federal Home Loan
Mortgage Corporation and the Federal National Mortgage Association;
(2) demand and time deposits in, certificates of deposit of, banker's
acceptances issued by, or federal funds sold by any depository institution
or trust company (including the indenture trustee or the owner trustee)
incorporated under the laws of the United States of America or any state
and subject to supervision and examination by federal and/or state banking
authorities, so long as at the time of the investment or contractual
commitment providing for the investment either (a) the short-term,
unsecured debt obligations of that depository institution or trust company
have credit ratings from Standard & Poor's at least equal to "A-1+" and
from Moody's at least equal to "P-1" or (b) that depository institution is
acceptable to the insurer as evidenced by a letter from the insurer to the
indenture trustee (which acceptability may be revoked at any time by the
insurer) and provided that each investment has an original maturity of no
more than 365 days; provided that any demand and time deposits will be
fully insured by the Federal Deposit Insurance Corporation and any
certificates of deposit must be secured at all times by collateral
described in clause (1) above, the collateral must be held by a third party
and the indenture trustee must have a perfected first priority security
interest in the collateral;
(3) repurchase obligations with a term not to exceed 30 days and with
respect to (a) any security described in clause (1) above or (b) any other
security issued or guaranteed as to timely payment of principal and
interest by an agency or instrumentality of the United States of America,
in either case entered into with any depository institution or trust
company (including the indenture trustee and the owner trustee), acting as
principal, described in clause (2) above; provided, however, that
collateral transferred pursuant to a repurchase obligation must be of the
type described in clause (1) above and must (x) be marked-to-market weekly
at current market price plus accrued interest, (y) pursuant to that
valuation, be equal at all times to 105% of the cash transferred by the
indenture trustee in exchange for the collateral and (z) be delivered to
the indenture trustee or, if the indenture trustee is supplying the
collateral, an agent for the indenture trustee, in such a manner as to
accomplish perfection of a security interest in the collateral by
possession of certificated securities;
(4) commercial paper having the highest rating by Standard & Poor's
and Moody's at the time of the investment;
(5) investments in money market funds or money market mutual funds
registered under the Investment Company Act of 1940, as amended, whose
shares are registered under the Securities Act of 1933, having a rating
from Standard & Poor's and Moody's in the highest investment category
granted thereby, including funds for which the indenture trustee, the owner
trustee or any of their respective affiliates is investment manager or
advisor; and
(6) other obligations or securities acceptable to the insurer, as
evidenced by a letter from the insurer to the indenture trustee (which
acceptability may be revoked at any time by the insurer).
"FINAL SCHEDULED DISTRIBUTION DATE" means the date on or by which the full
outstanding principal amount of each class of notes will be repaid, which
(1) in the case of the class A-1 notes, will be ,
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<PAGE>
(2) in the case of the class A-2 notes, will be , (3) in the case of the
class A-3 notes, will be and (4) in the case of the class A-4 notes,
will be .
"GUARANTEED NOTE PRINCIPAL AMOUNT" means, for any Distribution Date, the
lesser of (a) the excess, if any, of (1) the Note Principal Distributable Amount
for that Distribution Date over (2) the sum of (A) the Available Funds for that
Distribution Date (after giving effect to the distributions described in clauses
(1) through (4) under "Description of the Transfer and Servicing
Agreements--Distributions" for that Distribution Date) and (B) the amount to be
on deposit in the spread account for that Distribution Date (after giving effect
to any withdrawals to pay amounts described in clauses (1) through (4) under
"Description of the Transfer and Servicing Agreements--Distributions" for that
Distribution Date) and (b) the excess, if any, of (1) the outstanding principal
amount of the notes for that Distribution Date (after giving effect to all
payments of principal of the notes on that Distribution Date other than from an
Insured Payment) over (2) the sum of (A) the Pool Balance as of the last day of
the preceding Collection Period and (B) the amount to be on deposit in the
spread account (after giving effect to any withdrawals to pay amounts described
in clauses (1) through (6) under "Description of the Transfer and Servicing
Agreements--Distributions" for that Distribution Date); provided, however, on
the Final Scheduled Distribution Date for a class of notes, the Guaranteed Note
Principal Amount will include, without duplication, the outstanding principal
amount of that class of notes on that Final Scheduled Distribution Date (after
giving effect to all distributions of principal on that Final Scheduled
Distribution Date other than from an Insured Payment).
"INSURED PAYMENT" means (a) as of any Distribution Date, any Deficiency
Amount and (b) any Preference Amount.
"INSURER DEFAULT" means the occurrence and continuance of any of the
following events:
(1) the insurer shall have failed to make a payment required to be
made under the insurance policy in accordance with its terms;
(2) the insurer shall have (a) filed a petition or commenced any case
or proceeding in respect of the insurer under any provision or chapter of
the United States Bankruptcy Code or similar state laws, (b) made a general
assignment for the benefit of its creditors or (c) had an order for relief
entered against it under the United States Bankruptcy Code or similar state
laws which is final and nonappealable; or
(3) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (a) appointing a
custodian, trustee, agent or receiver for the insurer or for all or any
material portion of its property or (b) authorizing the taking of
possession by a custodian, trustee, agent or receiver of the insurer (or
the taking of possession of all or any material portion of the property of
the insurer).
"INTEREST ACCRUAL PERIOD" means, with respect to any Distribution Date, the
period from and including the previous Distribution Date or, in the case of the
first Distribution Date, from and including the Closing Date, to but excluding
that Distribution Date.
"LIQUIDATION EXPENSES" means the reasonable out-of-pocket expenses (not
including overhead expenses) incurred by the servicer in connection with the
collection and realization of the full amounts due under any Defaulted Contract
and the repossession and sale of any property acquired in respect thereof which
are not recoverable under any type of motor vehicle insurance policy.
"MONTHLY SCHEDULED PAYMENT" means, with respect to any contract in any
given month, the amount of the scheduled payment of principal and interest on
the contract for that month, exclusive of any late payment charges or extension
fees.
"NET INSURANCE PROCEEDS" means the proceeds paid by any insurer under a
comprehensive and collision insurance policy related to a contract (other than
funds used for the repair of the related financed vehicle or proceeds released
to the related obligor in excess of the principal balance of the contract, and
all accrued interest thereon and all other amounts due thereunder), after
reimbursement to the servicer of expenses recoverable under that insurance
policy.
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<PAGE>
"NET LIQUIDATION PROCEEDS" means, with respect to any contract that becomes
a Defaulted Contract, the amount received by the servicer in respect of that
contract during or after the Collection Period in which that contract becomes a
Defaulted Contract (excluding Liquidation Expenses).
"NOTE INTEREST CARRYOVER SHORTFALL" means, with respect to any Distribution
Date and a class of notes, the sum of (1) the excess, if any, of the Note
Interest Distributable Amount for that class for the immediately preceding
Distribution Date over the amount in respect of interest that is actually
deposited in the note distribution account with respect to that class on the
preceding Distribution Date and (2) to the extent permitted by applicable law,
interest on the amount of interest due but not paid to noteholders of that class
on the preceding Distribution Date at the related interest rate for the related
Interest Accrual Period; provided, however, that the Note Interest Carryover
Shortfall for the first Distribution Date shall be zero.
"NOTE INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date and a class of notes, the sum of (1) an amount equal to the
interest accrued during the related Interest Accrual Period at the related
interest rate for that class of notes on the outstanding principal amount of
that class of notes on the immediately preceding Distribution Date (or, in the
case of the first Distribution Date, on the original principal amount of the
class of notes) and (2) the Note Interest Carryover Shortfall for that class of
notes for that Distribution Date.
"NOTE PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of business of
any Distribution Date, the excess of the Note Principal Distributable Amount for
that Distribution Date over the amount in respect of principal that is actually
paid from the note distribution account on that Distribution Date.
"NOTE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of (1) the Principal Distributable Amount for that
Distribution Date and (2) any outstanding Note Principal Carryover Shortfall for
the immediately preceding Distribution Date; provided that the Note Principal
Distributable Amount will not exceed the aggregate outstanding principal amount
of the notes. Notwithstanding the foregoing, the Note Principal Distributable
Amount on the Final Scheduled Distribution Date for each class of notes will not
be less than the amount that is necessary to reduce the outstanding principal
amount of the related class of notes to zero.
"OPTIONAL PURCHASE" means the purchase by the servicer, at its option, of
the remaining contracts from the trust on any Distribution Date as of which the
Pool Balance has been reduced to an amount less than or equal to 10% of the
original Pool Balance.
"OVERCOLLATERALIZATION AMOUNT" means the amount by which the Pool Balance
as of the Cut-Off Date will exceed the initial principal amount of the notes.
"PARTIES IN INTEREST" means parties in interest or disqualified persons
with respect to an employee benefit plan or an individual retirement account
subject to the Employee Retirement Income Security Act of 1974, as amended.
"PAYMENT DEFAULT" means either (1) a default for five days or more in the
payment of any interest on any note or (2) a default in the payment of any
principal on the applicable Final Scheduled Distribution Date for a class of
notes.
"PLAN ASSET REGULATION" means the United States Department of Labor
regulation (29 CFR Section 2510.3-101) concerning the definition of what
constitutes the assets of an employee benefit plan or an individual retirement
account subject to the Employee Retirement Income Security Act of 1974, as
amended.
"POOL BALANCE" means, as of any date of determination, the aggregate
principal balance of the contracts, which will be $ as of the Cut-Off
Date.
"PREFERENCE AMOUNT" means any amount previously distributed to a noteholder
on the notes that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
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<PAGE>
"PRINCIPAL BALANCE" means, with respect to a contract, as of any date of
determination, the Amount Financed under the terms of the contract minus that
portion of all Monthly Scheduled Payments and any full or partial prepayments in
respect of the contract received on or prior to the end of the most recently
ended Collection Period and allocable to principal as determined by the
servicer. For purposes of this definition, allocations between interest and
principal of the Monthly Scheduled Payment for each contract by the servicer
shall be made in accordance with the terms of each contract.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Distribution
Date, the amount equal to the sum of the following amounts with respect to the
related Collection Period:
(1) all collections received on contracts (other than Defaulted
Contracts and Purchased Contracts) allocable to principal as determined by
the servicer, including full and partial principal prepayments;
(2) the Principal Balance of all contracts (other than Purchased
Contracts) that became Defaulted Contracts during the related Collection
Period; and
(3) the Principal Balance as of the date of purchase of all contracts
that became Purchased Contracts as of the immediately preceding date of the
servicer's report.
"PURCHASE AMOUNT" means, with respect to a Purchased Contract, the
Principal Balance of the contract as of the date of purchase or repurchase of
the contract by AutoNation Financial Services or the seller, plus accrued and
unpaid interest thereon to the date of purchase or repurchase at the applicable
APR.
"PURCHASED CONTRACT" means a contract that (1) has been repurchased by
AutoNation Financial Services or the seller because of material defects in
documents related to the contract or breaches of representations and warranties
made by the seller in the sale and servicing agreement regarding the contract or
by AutoNation Financial Services in the receivables purchase agreement that
materially and adversely affect the interests of the issuer, the indenture
trustee, the owner trustee, the noteholders or the insurer, (2) has been
purchased by the servicer because of breaches by the servicer of its servicing
covenants or (3) has been purchased by the servicer in the event of an Optional
Purchase.
"SPREAD ACCOUNT REQUIRED AMOUNT" means an amount calculated pursuant to a
formula agreed to by the parties to the insurance agreement and each of the
rating agencies.
"TRUST BANKRUPTCY EVENT" means events of bankruptcy, insolvency,
receivership or liquidation with respect to the trust specified in the
indenture.
"TRUST PROPERTY" means the property of the trust, which consists of the
following:
(1) the contracts, all of which will have been purchased from the
seller and are secured by financed vehicles;
(2) all documents relating to the contracts, including the servicing
records in hard or electronic form;
(3) collections and all other amounts due under the contracts after
the Cut-off Date;
(4) liens on the financed vehicles and the right to receive proceeds
from claims on any related insurance policies covering the financed
vehicles or the related obligors;
(5) all amounts on deposit in the collection account, the payment
account, the note distribution account and the spread account, including
the principal amount of all Eligible Investments credited to the collection
account and the spread account and any investment income thereon;
(6) the right of the seller to cause AutoNation Financial Services to
repurchase any contracts with respect to which it breaches any of its
representations or warranties or its servicing obligations; and
(7) all proceeds of the foregoing.
S-46
<PAGE>
EXHIBIT A TO PROSPECTUS SUPPLEMENT
FORM OF NOTE GUARANTY INSURANCE POLICY
OBLIGATIONS: $ POLICY NUMBER: [ ]
ANRC AUTO OWNER TRUST 1999-A,
% ASSET-BACKED NOTES, CLASS A-1
% ASSET-BACKED NOTES, CLASS A-2
% ASSET-BACKED NOTES, CLASS A-3
% ASSET-BACKED NOTES, CLASS A-4
(COLLECTIVELY, THE "OBLIGATIONS")
MBIA Insurance Corporation (the "Insurer"), in consideration of the payment
of the premium and subject to the terms of this Note Guaranty Insurance Policy
(this "Policy"), hereby unconditionally and irrevocably guarantees to any Owner
that an amount equal to each full and complete Insured Payment will be received
from the Insurer by The Chase Manhattan Bank, or its successors, as indenture
trustee for the Owners (the "Indenture Trustee"), on behalf of the Owners, for
distribution by the Indenture Trustee to each Owner of each Owner's
proportionate share of the Insured Payment. The Insurer's obligations hereunder
with respect to a particular Insured Payment shall be discharged to the extent
funds equal to the applicable Insured Payment are received by the Indenture
Trustee, whether or not such funds are properly applied by the Indenture
Trustee. Insured Payments shall be made only at the time set forth in this
Policy, and no accelerated Insured Payments shall be made regardless of any
acceleration of the Obligations, unless such acceleration is at the sole option
of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Issuer or the Indenture
Trustee for withholding taxes, if any (including interest and penalties in
respect of any such liability).
The Insurer will pay any Insured Payment that is a Preference Amount on the
Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of (a) a certified copy of the order requiring the return of a
preference payment, (b) an opinion of counsel satisfactory to the Insurer that
such order is final and not subject to appeal, (c) an assignment in such form as
is reasonably required by the Insurer, irrevocably assigning to the Insurer all
rights and claims of the Owner relating to or arising under the Obligations
against the debtor which made such preference payment or otherwise with respect
to such preference payment and (d) appropriate instruments to effect the
appointment of the Insurer as agent for such Owner in any legal proceeding
related to such preference payment, such instruments being in a form
satisfactory to the Insurer, provided that if such documents are received after
12:00 noon, New York City time, on such Business Day, they will be deemed to be
received on the following Business Day. Such payments shall be disbursed to the
receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner directly
unless such Owner has returned principal or interest paid on the Obligations to
such receiver or trustee in bankruptcy, in which case such payment shall be
disbursed to such Owner.
The Insurer will pay any other amount payable hereunder no later than
12:00 noon, New York City time, on the later of the Distribution Date on which
the related Deficiency Amount is due or the second Business Day following
receipt in New York, New York on a Business Day by State Street Bank and Trust
Company, N.A., as Fiscal Agent for the Insurer, or any successor fiscal agent
appointed by the Insurer (the "Fiscal Agent"), of a Notice (as described below),
provided that if such Notice is received after 12:00 noon, New York City time,
on such Business Day, it will be deemed to be received on the following Business
Day. If any such Notice received by the Fiscal Agent is not in proper form or is
otherwise insufficient for the purpose of making claim hereunder, it shall be
deemed not to have been received by the Fiscal Agent for purposes of this
paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall
promptly so advise the Indenture Trustee and the Indenture Trustee may submit an
amended Notice.
A-1
<PAGE>
Insured Payments due hereunder, unless otherwise stated herein, will be
disbursed by the Fiscal Agent to the Indenture Trustee on behalf of the Owners
by wire transfer of immediately available funds in the amount of the Insured
Payment less, in respect of Insured Payments related to Preference Amounts, any
amount held by the Indenture Trustee for the payment of such Insured Payment and
legally available therefor.
The Fiscal Agent is the agent of the Insurer only, and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit, or cause to be deposited, sufficient funds to
make payments due under this Policy.
Subject to the terms of the Agreement, the Insurer shall be subrogated to
the rights of each Owner to receive payments under the Obligations to the extent
of any payment by the Insurer hereunder.
As used herein, the following terms shall have the following meanings:
"Agreement" means the Sale and Servicing Agreement dated as of
September , 1999 among AutoNation Financial Services Corp., as Servicer
and as Custodian, AutoNation Receivables Corporation, as Seller, ANRC Auto
Owner Trust 1999-A, as Issuer, and the Indenture Trustee as indenture
trustee, without regard to any amendment or supplement thereto, unless such
amendment or supplement has been approved in writing by the Insurer.
"Business Day" means any day other than (a) a Saturday or a Sunday,
(b) a day on which the Insurer is closed or (c) a day on which commercial
banking institutions or savings associations located in New York, New York
or in the city in which the Owner Trustee Corporate Trust Office or the
Corporate Trust Office is located are authorized or obligated by law,
regulation, executive order or governmental decree to be closed.
"Deficiency Amount" means for any Distribution Date, the sum of
(a) the excess, if any, of (i) the Note Interest Distributable Amount with
respect to all Classes of Notes for such Distribution Date over (ii) the
sum of (x) the Available Funds for such Distribution Date (after giving
effect to distributions pursuant to clauses (i), (ii) and (iii) of
Section 4.03(a) of the Agreement for such Distribution Date) and (y) the
amount to be on deposit in the Spread Account for such Distribution Date
(after giving effect to any withdrawals to satisfy amounts due in respect
of clauses (i) through (iii) of Section 4.03(a) of the Agreement for such
Distribution Date) and (b) the Guaranteed Note Principal Amount for such
Distribution Date.
"Guaranteed Note Principal Amount" shall mean for any Distribution
Date, the lesser of (a) the excess, if any, of (i) the Note Principal
Distributable Amount for such Distribution Date over (ii) the sum of
(x) the Available Funds for such Distribution Date (after giving effect to
distributions pursuant to clauses (i) through (iv) of Section 4.03(a) of
the Agreement for such Distribution Date) and (y) the amount to be on
deposit in the Spread Account for such Distribution Date (after giving
effect to any withdrawals to pay amounts pursuant to clauses (i) through
(iv) of Section 4.03(a) of the Agreement for such Distribution Date) and
(b) the excess, if any, of (i) the Outstanding Principal Amount of the
Notes for such Distribution Date (after giving effect to all payments of
principal of the Notes on such Distribution Date other than from an Insured
Payment) over (ii) the sum of (x) the Pool Balance as of the last day of
the preceding Collection Period and (y) the amount to be on deposit in the
Spread Account (after giving effect to any withdrawals to pay amounts
pursuant to clauses (i) through (vi) of Section 4.03(a) of the Agreement
for such Distribution Date); provided, however, on the Final Scheduled
Distribution Date for such Class of Notes, the Guaranteed Note Principal
Amount shall include, without duplication, the Outstanding Principal Amount
of such Class of Notes on such Final Scheduled Distribution Date (after
giving effect to all distributions of principal on such Final Scheduled
Distribution Date other than from an Insured Payment).
"Insured Payment" means (a) as of any Distribution Date, any
Deficiency Amount and (b) any Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by facsimile substantially in the form of Exhibit A
attached hereto, the original of which is subsequently delivered by
registered or certified mail, from the Indenture Trustee specifying the
Insured Payment which shall be due and owing on the applicable Distribution
Date.
"Owner" means each Noteholder (as defined in the Agreement) who, on
the applicable Distribution Date, is entitled under the terms of the
applicable Notes to payment thereunder.
A-2
<PAGE>
"Preference Amount" means any amount previously distributed to an
Owner on the Obligations that is recoverable and sought to be recovered as
a voidable preference by a trustee in bankruptcy pursuant to the United
States Bankruptcy Code (11 U.S.C.), as amended from time to time in
accordance with a final nonappealable order of a court having competent
jurisdiction.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Agreement as of the date of execution
of this Policy, without giving effect to any subsequent amendment to or
modification of the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent may be made
at the address listed below for the Fiscal Agent or such other address as the
Insurer shall specify in writing to the Indenture Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61 Broadway, New
York, New York 10006, Attention: Municipal Registrar and Paying Agency, or such
other address as the Fiscal Agent shall specify to the Indenture Trustee in
writing.
THIS POLICY IS BEING ISSUED UNDER AND PURSUANT TO, AND SHALL BE CONSTRUED
UNDER, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT
OF LAWS PRINCIPLES THEREOF.
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
This Policy is not cancelable for any reason. The premium on this Policy is
not refundable for any reason, including payment, or provision being made for
payment, prior to maturity of the Obligations.
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed and
attested this [ ] day of September, 1999.
MBIA INSURANCE CORPORATION
By ___________________________________
Title ________________________________
Attest:
By ________________________________
Secretary
A-3
<PAGE>
EXHIBIT A
TO NOTE GUARANTY INSURANCE
POLICY NUMBER: [ ]
NOTICE UNDER NOTE GUARANTY
INSURANCE POLICY NUMBER: [ ]
State Street Bank and Trust Company, N.A., as Fiscal Agent
for MBIA Insurance Corporation
15th Floor
61 Broadway
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of [NAME OF TRUSTEE], as trustee
(the "Indenture Trustee"), hereby certifies to State Street Bank and Trust
Company, N.A. (the "Fiscal Agent") and MBIA Insurance Corporation (the
"Insurer"), with reference to Note Guaranty Insurance Policy Number: [ ]
(the "Policy") issued by the Insurer in respect of the $ ANRC Auto
Owner Trust 1999-A, % Asset-Backed Notes, Class A-1, %
Asset-Backed Notes, Class A-2, % Asset-Backed Notes, Class A-3 and
% Asset-Backed Notes, Class A-4 (the "Obligations"), that:
(a) the Indenture Trustee is the indenture trustee under the Sale and
Servicing Agreement dated as of September , 1999 among AutoNation
Financial Services Corp., as Servicer and as Custodian, AutoNation
Receivables Corporation, as Seller, ANRC Auto Owner Trust 1999-A, as
Issuer, and the Indenture Trustee, as indenture trustee for the Owners;
(b) the amount under clause (a)(i) of the definition of Deficiency
Amount for the Distribution Date occurring on [ ] the "Applicable
Distribution Date") is $[ ];
(c) the amount under clause (a)(ii) of the definition of Deficiency
Amount for the Applicable Distribution Date is $[ ];
(d) the excess, if any, of the amount in paragraph (b) above over the
amount in paragraph (c) above for the Applicable Distribution Date is
$[ ], which is the amount due under clause (a) of the definition of
Deficiency Amount for the Applicable Distribution Date;
(e) the amount due under clause (b) of the definition of Deficiency
Amount for the Applicable Distribution Date is $[ ];
(f) the sum of the amounts listed in paragraphs (d) and (e) above is
$[ ] (the "Deficiency Amount");
(g) the amount of previously distributed payments on the Obligations
that is recoverable and sought to be recovered as a voidable preference by
a trustee in bankruptcy pursuant to the Bankruptcy Code in accordance with
a final nonappealable order of a court having competent jurisdiction is
$[ ] (the "Preference Amount");
(h) the total Insured Payment due is $[ ], which amount equals
the sum of the Deficiency Amount and the Preference Amount;
(i) the Indenture Trustee is making a claim under and pursuant to the
terms of the Policy for the dollar amount of the Insured Payment set forth
in (f) above to be applied to the payment of the Deficiency Amount for the
Applicable Distribution Date in accordance with the Agreement and for the
dollar amount of the Insured Payment set forth in (g) above to be applied
to the payment of any Preference Amount; and
<PAGE>
(j) the Indenture Trustee directs that payment of the Insured Payment
be made to the following account by bank wire transfer of federal or other
immediately available funds in accordance with the terms of the Policy:
[TRUSTEE'S ACCOUNT NUMBER].
Any capitalized term used in this Notice and not otherwise defined herein
shall have the meaning assigned thereto in the Policy.
Any Person Who Knowingly And With Intent To Defraud Any Insurance Company Or
Other Person Files An Application For Insurance Or Statement Of Claim Containing
Any Materially False Information, Or Conceals For The Purpose Of Misleading,
Information Concerning Any Fact Material Thereto, Commits A Fraudulent Insurance
Act, Which Is A Crime, And Shall Also Be Subject To A Civil Penalty Not To
Exceed Five Thousand Dollars And The Stated Value Of The Claim For Each Such
Violation.
IN WITNESS WHEREOF, the Indenture Trustee has executed and delivered this
Notice under the Policy as of the [ ] day of [ ], [ ].
[NAME OF TRUSTEE], as Indenture Trustee
By____________________________________
Title_________________________________
<PAGE>
PRINCIPAL OFFICE OF
AUTONATION RECEIVABLES CORPORATION
200 South Andrews Avenue
Fort Lauderdale, Florida 33301
INDENTURE TRUSTEE
The Chase Manhattan Bank
450 West 33rd Street
14th Floor
New York, New York 10001
OWNER TRUSTEE
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
LEGAL ADVISOR TO THE SELLER
AS TO UNITED STATES LAW
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
LEGAL ADVISOR TO THE UNDERWRITERS
AS TO UNITED STATES LAW
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
<PAGE>
PROSPECTUS SUPPLEMENT
ANRC AUTO OWNER TRUST 1999-A
ISSUER
$ %
CLASS A-1 ASSET-BACKED NOTES
$ %
CLASS A-2 ASSET-BACKED NOTES
$ %
CLASS A-3 ASSET-BACKED NOTES
$ %
CLASS A-4 ASSET-BACKED NOTES
AUTONATION RECEIVABLES CORPORATION
SELLER
AUTONATION FINANCIAL SERVICES CORP.
SERVICER
CHASE SECURITIES INC.
UNDERWRITER
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE
TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THESE NOTES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
WE DO NOT CLAIM THE ACCURACY OF THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS AS OF ANY DATE OTHER THAN THE DATES STATED ON THEIR
RESPECTIVE COVERS.
ALL DEALERS WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS OF THESE NOTES AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS. IN ADDITION, ALL DEALERS SELLING THESE NOTES WILL DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS UNTIL .
------------------
<PAGE>
SUBJECT TO COMPLETION, DATED , 1999
- --------------------------------------------------------------------------------
Neither the notes, the certificates nor the underlying
contracts are insured or guaranteed by AutoNation Receivables Corporation,
AutoNation Financial Services Corp. or any governmental agency.
The notes and the certificates will represent obligations of and interests in a
trust only and will not represent obligations of or interests in AutoNation
Receivables Corporation, AutoNation Financial Services Corp. or any of their
affiliates.
This prospectus may be used to offer and sell any series of notes or
certificates only if accompanied by the prospectus supplement for that series.
- --------------------------------------------------------------------------------
Prospectus
ANRC AUTO OWNER TRUSTS
AUTONATION RECEIVABLES CORPORATION, Seller
AUTONATION FINANCIAL SERVICES CORP., Servicer
ASSET-BACKED NOTES AND CERTIFICATES
THE OWNER TRUSTS:
o may periodically issue asset-backed notes and certificates in one or more
series with one or more classes; and
o will own:
o fixed rate motor vehicle retail installment sales contracts secured by
new and used automobiles and light-duty trucks;
o collections on the contracts;
o liens on the financed vehicles and the rights to receive proceeds from
claims on insurance policies;
o funds in the accounts of the trust;
o any enhancements issued in favor of the trust; and
o proceeds of these assets.
THE NOTES:
o will represent obligations of a trust and will be paid only from the assets
of that trust;
o will be rated in one of the four highest rating categories by at least one
nationally recognized rating organization;
o may have one or more forms of enhancement; and
o will be issued as part of a series which may include one or more classes of
notes and certificates.
THE CERTIFICATES:
o will represent beneficial interests in a trust and will be paid only from
the assets of that trust;
o may have one or more forms of enhancement;
o will be issued as part of a series which may include one or more classes of
notes and certificates; and
o may be offered to the public or initially retained by the seller or one of
its affiliates.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 1999
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities Exchange Commission is effective. This prospectus is not an offer to
sell these securities and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE INFORMATION IN THIS PROSPECTUS AND THE PROSPECTUS
SUPPLEMENT ............................................................... 3
DESCRIPTION OF THE TRUSTS .................................................... 4
DESCRIPTION OF THE TRUSTEES .................................................. 4
AUTONATION FINANCIAL SERVICES' PORTFOLIO OF MOTOR VEHICLE CONTRACTS .......... 5
Origination of Motor Vehicle Contracts ................................... 5
Underwriting of Motor Vehicle Contracts .................................. 5
Insurance ................................................................ 7
Collection Procedures .................................................... 7
Modifications and Extensions ............................................. 8
Delinquency and Loan Loss Information .................................... 8
DESCRIPTION OF THE CONTRACTS ................................................. 9
The Receivables Pool ..................................................... 9
Calculation Method ....................................................... 9
PREFUNDING ARRANGEMENTS ..................................................... 10
MATURITY AND PREPAYMENT CONSIDERATIONS ...................................... 10
POOL FACTOR AND POOL INFORMATION ............................................ 11
USE OF PROCEEDS ............................................................. 11
DESCRIPTION OF THE SELLER ................................................... 11
DESCRIPTION OF AUTONATION FINANCIAL SERVICES CORP. .......................... 13
Year 2000 Issues ........................................................ 13
DESCRIPTION OF WORLD OMNI FINANCIAL CORP. ................................... 14
DESCRIPTION OF AUTONATION, INC. ............................................. 14
DESCRIPTION OF THE SECURITIES ............................................... 14
The Notes ............................................................... 14
The Certificates ........................................................ 15
Ratings of the Securities ............................................... 15
Principal and Interest on the Securities ................................ 15
Book-Entry Registration ................................................. 16
DTC's Year 2000 Efforts ................................................. 17
Definitive Securities ................................................... 17
List of Securityholders ................................................. 18
Statements to Securityholders ........................................... 18
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS ........................ 20
Sale and Assignment of the Contracts .................................... 20
The Collection Account and Eligible Investments ......................... 21
Other Accounts .......................................................... 21
Payments on Contracts ................................................... 22
Payments and Distributions on the
Securities ......................................................... 22
Credit and Cash Flow Enhancement ........................................ 22
Insurance on Financed Motor Vehicles .................................... 23
Servicer Reports to the Trustees and the Insurer ........................ 23
Optional Purchase of Contracts .......................................... 23
Servicing Fee ........................................................... 23
Waivers and Extensions .................................................. 24
Realization Upon Defaulted Contracts .................................... 24
Evidence as to Compliance ............................................... 24
Material Matters Regarding the Servicer ................................. 24
Defaults by the Servicer ................................................ 25
Rights Upon Default by the Servicer ..................................... 25
Amendment ............................................................... 26
Termination ............................................................. 27
The Owner Trustee and Indenture Trustee ................................. 27
Description of the Administration
Agreement .......................................................... 28
DESCRIPTION OF THE INDENTURE ................................................ 29
Modification of Indenture ............................................... 29
Events of Default Under the Indenture; Rights Upon Event of Default ..... 30
Material Covenants ...................................................... 30
Annual Compliance Statement ............................................. 31
Indenture Trustee's Annual Report ....................................... 31
Satisfaction and Discharge of Indenture ................................. 31
The Indenture Trustee ................................................... 32
LEGAL ASPECTS OF THE CONTRACTS .............................................. 32
Security Interests in the Financed Motor Vehicles ....................... 32
Repossession ............................................................ 33
Notice of Sale; Redemption Rights ....................................... 34
Deficiency Judgments and Excess
Proceeds ........................................................... 34
Consumer Protection Laws ................................................ 35
Other Limitations ....................................................... 35
Repurchase Obligation ................................................... 36
MATERIAL FEDERAL INCOME TAX CONSEQUENCES .................................... 36
Tax Characterization of Each Trust ...................................... 37
Tax Consequences to Holders of the
Notes .............................................................. 37
Taxation of Non-U.S. Holders of Notes ................................... 40
Information Reporting and Backup Withholding ............................ 41
Tax Consequences to Holders of the Certificates ......................... 42
Taxation of Non-U.S. Holders of
Certificates ....................................................... 45
ERISA CONSIDERATIONS ........................................................ 46
UNDERWRITING ................................................................ 47
LEGAL MATTERS ............................................................... 48
REPORTS TO SECURITYHOLDERS .................................................. 48
WHERE YOU CAN FIND MORE INFORMATION ......................................... 48
GLOSSARY .................................................................... 49
</TABLE>
2
<PAGE>
OVERVIEW OF THE INFORMATION IN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT
We provide information about your securities in two separate documents:
(a) this prospectus, which provides general information, some of which may not
apply to a particular series of notes or certificates, including your series;
and (b) the prospectus supplement, which describes the specific terms of your
series, including information about:
o the type of securities offered;
o the timing and amount of interest and principal payments;
o the contracts underlying your securities;
o the credit enhancement for each class;
o the credit ratings; and
o the method for selling the securities.
WHENEVER INFORMATION IN THE PROSPECTUS SUPPLEMENT IS MORE SPECIFIC THAN THE
INFORMATION IN THIS PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus and the
prospectus supplement, including the information incorporated by reference. We
have not authorized anyone to provide you with different information.
We include cross-references in this prospectus and in the prospectus
supplement to captions in these materials where you can find further related
discussions. The preceding table of contents and the table of contents included
in the prospectus supplement provide the pages on which these captions are
located.
You can find a glossary where capitalized terms are defined beginning on
page 49 in this prospectus.
------------------------
------------------------------------------------------------------------
TO UNDERSTAND THE STRUCTURE OF THESE SECURITIES, YOU MUST READ CAREFULLY
THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT IN THEIR ENTIRETY.
------------------------------------------------------------------------
3
<PAGE>
DESCRIPTION OF THE TRUSTS
Each owner trust will from time to time issue asset-backed notes and may
issue asset-backed certificates in one or more series in amounts, at prices and
on terms to be determined at the time of sale and to be set forth in a
supplement to this prospectus.
With respect to each series of securities, AutoNation Receivables
Corporation, a wholly-owned special purpose, bankruptcy remote subsidiary of
AutoNation Financial Services Corp., as seller, will establish a separate trust
pursuant to an owner trust agreement, which may be amended and supplemented from
time to time, between the seller and the owner trustee specified in the related
prospectus supplement for the transactions described herein and in the related
prospectus supplement. The notes will represent indebtedness of the related
trust and will be issued and secured pursuant to an indenture between the trust
and the indenture trustee specified in the related prospectus supplement.
To the extent specified in the related prospectus supplement, the property
of each trust will include:
(1) a pool of motor vehicle retail installment sales contracts, all of
which are secured by new and/or used automobiles and/or light-duty trucks;
(2) documents relating to the contracts, including all servicing
records in hard or electronic form;
(3) collections and all other amounts due under the contracts after
the Cut-Off Date specified in the related prospectus supplement;
(4) liens on the related financed motor vehicles and the rights to
receive proceeds from claims on any related insurance policies covering the
financed motor vehicles or the related obligors;
(5) all amounts on deposit in the applicable trust accounts, including
the related collection account and any other account identified in the
applicable prospectus supplement, including all Eligible Investments
credited thereto (but excluding any investment income from Eligible
Investments which is to be paid to the servicer of the contracts or as
otherwise specified in the related prospectus supplement);
(6) the benefits of any form of credit enhancement identified in the
applicable prospectus supplement;
(7) the right of the seller to cause AutoNation Financial Services to
repurchase any contracts with respect to which it breaches any of its
representations or warranties or its servicing obligations;
(8) any other property specified in the related prospectus supplement;
and
(9) all proceeds of the foregoing.
To the extent specified in the related prospectus supplement, an insurance
policy, reserve fund, spread account or other form of credit enhancement may be
a part of the property of any given trust or may be held by the owner trustee or
the indenture trustee for the benefit of holders of the related securities.
Each trust will be formed in accordance with the laws of the State of
Delaware. Prior to formation, each trust will have no assets or obligations.
After formation, each trust will not engage in any activity other than acquiring
and holding the related contracts, issuing the related securities, distributing
payments in respect thereof and any other activities described herein, in the
related prospectus supplement and in the owner trust agreement. Each trust will
not acquire any contracts or assets other than the Trust Property.
The principal offices of each trust, the owner trustee and the indenture
trustee will be specified in the applicable prospectus supplement.
DESCRIPTION OF THE TRUSTEES
The owner trustee and the indenture trustee for each trust will be
specified in the related prospectus supplement. The owner trustee's and the
indenture trustee's liability in connection with the issuance and sale of the
related securities will be limited solely to the express obligations of the
owner trustee or indenture trustee as set forth in the related owner trust
agreement, the sale and servicing agreement and the indenture. An owner trustee
or indenture trustee with respect to a series of securities may resign or be
removed under the circumstances specified in the related prospectus supplement.
Any resignation or removal of an owner trustee or indenture trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by that successor.
4
<PAGE>
AUTONATION FINANCIAL SERVICES' PORTFOLIO OF MOTOR VEHICLE CONTRACTS
ORIGINATION OF MOTOR VEHICLE CONTRACTS
AutoNation Financial Services originates motor vehicle retail installment
sales contracts secured by new and used automobiles and light-duty trucks in
connection with providing financing for the purchase of those vehicles. Motor
vehicle contracts in AutoNation Financial Services' portfolio are currently
originated from application referrals received from the following dealers:
(1) franchised automotive dealerships or used vehicle megastores owned by
AutoNation, Inc. and nine used vehicle megastore licensees and (2) seven third
party franchised automotive dealerships. AutoNation Financial Services in the
future may contract with additional third party franchised automotive
dealerships or used car dealerships to provide additional application referrals.
AutoNation owns approximately 400 franchise automotive dealerships in 20 states.
These dealerships own and operate franchises granted by 24 manufacturers of
approximately 36 different brands of automobiles and light-duty trucks. In
addition, AutoNation operates 33 AutoNation USA used vehicle megastores and
licenses nine additional AutoNation USA used vehicle megastores in 13 states.
See "Description of AutoNation, Inc."
Each dealer from which AutoNation Financial Services receives application
referrals has entered into a dealer agreement with AutoNation Financial
Services, whereby the applicable dealer represents, among other things, that:
(1) it will comply with federal and state laws regarding motor vehicle
financing;
(2) it will obtain the requisite financial information of the obligor
required to extend credit; and
(3) it will truthfully disclose to AutoNation Financial Services any
applicable financial information, the identity of the obligor and other
specified information in connection with the loan transaction.
All of the contracts included in the Trust Property of a trust will have
been originated by AutoNation Financial Services from application referrals from
dealers or as specified in the related prospectus supplement. Information
relating to AutoNation Financial Services' serviced portfolio of contracts is
described in the accompanying prospectus supplement under "AutoNation Financial
Services' Portfolio of Motor Vehicle Contracts--Origination of Motor Vehicle
Contracts."
UNDERWRITING OF MOTOR VEHICLE CONTRACTS
AutoNation Financial Services focuses its originations on the prime auto
lending market, lending to individuals with better credit histories and thereby
assuming a lower risk of delayed payment or non-payment under the motor vehicle
contracts. AutoNation Financial Services underwrites motor vehicle contracts
referred to it from dealers through its Fort Lauderdale, Florida dealer service
center. The contract processing and underwriting departments at the dealer
service center are open to receive application referrals at all times at which
dealers are open for business.
Dealers submit applications to AutoNation Financial Services for review and
approval either electronically or by facsimile. Electronic credit applications
are submitted via an on-line, real time connection established between the
dealer service center and the dealer. Electronic credit applications transmitted
via the on-line connection allow dealers to enter and transmit the relevant
applicant information directly to the dealer service center without the dealer
service center having to re-enter the information into its system, resulting in
greater efficiency and reduced turnaround time in the application process.
Currently, only AutoNation USA megastores are outfitted with electronic credit
application capabilities. Dealers which do not have on-line capabilities fax
applications to a third party credit application entry company that receives the
applications, enters the information into its computer system and transmits the
application via its own on-line, real time connection to the dealer service
center in the same format as electronic credit applications.
Each applicant for a motor vehicle contract is evaluated individually based
on uniform underwriting standards developed by AutoNation Financial Services.
These underwriting standards are intended to assess a potential obligor's
ability to repay all amounts due under the motor vehicle contract and the
adequacy of the related financed vehicle as collateral, based upon a review of
the information contained in the motor vehicle contract application. The
material credit information required for the motor vehicle contract application
includes the applicant's income, deposit accounts, liabilities, a real time
credit history obtained from a third party credit bureau reporting agency,
employment history and a description of the financed vehicle intended to secure
the motor vehicle contract. The material criteria considered in evaluating the
individual applications are:
(1) stability of the obligor with specific regard to the obligor's
length of residence in his or her current home, occupation, length of
employment and whether the obligor rents or owns his or her home;
5
<PAGE>
(2) the obligor's payment history based on information known directly
by AutoNation Financial Services or provided by various credit reporting
agencies with respect to present and past debt;
(3) a debt service to gross monthly income ratio test;
(4) the principal amount requested under the motor vehicle contract
taking into account the age, type and market value of the related financed
vehicle and term of the motor vehicle contract;
(5) an empirically derived credit score; and
(6) a credit bureau score.
AutoNation Financial Services uses an empirically based credit scoring
process to objectively index the applicant's creditworthiness. The credit
scoring process entails the use of statistics to correlate common
characteristics with credit risk. Through the use of credit scoring, AutoNation
Financial Services is able to evaluate credit profiles in order to quantify
credit risk. AutoNation Financial Services' credit scoring process is
periodically reviewed to ensure its validity. In addition to AutoNation
Financial Services' credit scoring system, AutoNation Financial Services uses
consumer reporting agency scores or credit bureau scores to assist in the
underwriting process. The credit bureau score is a factor in evaluating credit
risk and provides the basis for the credit score. AutoNation Financial Services'
standard guidelines permit retail installment contracts with credit scores of
580 and above to be underwritten. The average credit score of the AutoNation
Financial Services' serviced portfolio as of August 31, 1999 was 694. A credit
analyst reviews each application, taking into account the applicable credit
score and the other criteria set forth above, except for a limited number of
applications which are automatically approved upon satisfaction of higher
thresholds in respect of the above-referenced approval criteria or which are
denied upon failure to satisfy AutoNation Financial Services' minimum thresholds
in respect of the above-referenced approval criteria. The AutoNation Financial
Services scoring process and consumer reporting agency scores are intended to
provide a basis for lending decisions, but are not meant to supersede the
judgment of the credit analyst in weighing and considering all of the
above-referenced approval criteria. On occasion, AutoNation Financial Services
approves loan applications at variance with its standard credit guidelines.
However, to gain approval, a loan application that does not comply with all of
AutoNation Financial Services' guidelines must have strong compensating factors
that demonstrate the ability of the potential obligor to pay all amounts to
become due under the motor vehicle contract. If an application for a motor
vehicle contract is approved after failing to comply with AutoNation Financial
Services' guidelines, the approval generally occurs because the credit analyst
has conditioned the loan on additional requirements, such as a larger down
payment, a reduction in the term of the financing or the addition of a
co-applicant to the motor vehicle contract. However, AutoNation Financial
Services does not revise or recalculate the obligor's credit score to reflect
the strength of a co-applicant. Applicants not meeting AutoNation Financial
Services' underwriting guidelines may be transferred to non-prime financing
sources that have established referral relationships with AutoNation Financial
Services under which AutoNation Financial Services receives a flat referral fee
for each contract originated by the non-prime finance company.
After review of an application, a credit analyst and/or manager notifies
the applicable dealer as to whether the application has been approved (subject
to the receipt of the required documentation), denied or is the subject of a
counter-offer. If the response to the dealer requires a counter-offer from
AutoNation Financial Services (which can include an additional down payment, a
reduction in the term of the financing, or the addition of a co-applicant to the
motor vehicle contract), those stipulations become a condition of the approval.
Subsequent to approval, if AutoNation Financial Services is the chosen source of
financing, AutoNation Financial Services will obtain the necessary documentation
for processing the loan, consisting of the following:
(1) a signed application;
(2) the only original and a copy of the executed motor vehicle
contract;
(3) an agreement by the obligor to provide insurance;
(4) a report of sale or guarantee of title;
(5) an application for registration;
(6) a co-signer notification (if applicable);
(7) a copy of the contract for any supplemental warranty purchased
with respect to the financed vehicle;
(8) acceptable vehicle valuation documentation consisting of the
dealer invoice or sticker for new cars and reference to the most recently
published National Automobile Dealers Association Used Car
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Price Guide or Kelly Blue Book, based on year, make and model of the
related financed vehicle for used cars; and
(9) any other required documentation.
Once the appropriate documentation is obtained for funding, the file
relating to the motor vehicle contract is forwarded to a contract processor for
a pre-funding audit. The contract processor then audits the documents for
completeness and consistency with the application, providing final approval for
purchase of the motor vehicle contract once these requirements have been
satisfied.
The amount advanced pursuant to AutoNation Financial Services' underwriting
guidelines for a motor vehicle contract is determined by the applicant's credit
score. For puposes of determining the advance rate, AutoNation Financial
Services segregates applicants into four tiers based on their credit scores:
(1) tier I and tier II loans do not require a down payment and AutoNation
Financial Services will advance up to 105% of the manufacturers suggested retail
price for a new vehicle or 105% of the "retail" value stated in the most
recently published National Automobile Dealers Association Used Car Price Guide
for a used vehicle, in each case plus taxes and title and license fees on the
vehicle averaging an additional 7%, (2) tier III loans require a minimum
downpayment of 10% and AutoNation Financial Services will advance up to 95% of
the manufacturers suggested retail price for a new vehicle or 95% of the
"retail" value stated in the most recently published National Automobile Dealers
Association Used Car Price Guide for a used vehicle, in each case plus taxes and
title and license fees on the vehicle averaging an additional 7% and (3) tier IV
loans require a minimum downpayment of 15% and AutoNation Financial Services
will advance up to 90% of the manufacturers suggested retail price for a new
vehicle or 90% of the "retail" value stated in the most recently published
National Automobile Dealers Association Used Car Price Guide for a used vehicle,
in each case plus taxes and title and license fees on the financed vehicle
averaging an additional 7%. However, the amount advanced under a motor vehicle
contract may be less, or in limited circumstances more, than the maximum
permissible amount due to a number of factors, including down payment
requirements, trade-in equity and credit score. In addition, in connection with
the financing of new and used vehicles, AutoNation Financial Services will also
finance accessories, extended service contracts and other insurance products
under a motor vehicle contract. Although the advance rate for each motor vehicle
contract in its serviced portfolio is not specifically tracked, AutoNation
Financial Services estimates that the average advance rate of the motor vehicle
contracts is less than 100%.
AutoNation Financial Services performs detailed analyses of its portfolio
of motor vehicle contracts to evaluate the effectiveness of its credit
guidelines and scoring process. If external economic factors, credit delinquency
levels or credit loss levels change, credit guidelines are adjusted to maintain
a level of asset quality deemed acceptable by AutoNation Financial Services'
management. Each day, the credit manager and credit supervisors review a group
of motor vehicle contracts to ensure that credit analysts are following
AutoNation Financial Services' established policies and procedures. AutoNation
Financial Services randomly reviews, on a monthly basis, the quality of the
motor vehicle contracts to ensure compliance with established policies and
procedures. In accordance with its reasonable business judgment, AutoNation
Financial Services' credit underwriting standards may change at any time.
INSURANCE
The motor vehicle contracts require obligors to maintain specific levels
and types of insurance coverage to protect each financed vehicle against loss
due to theft or damage. AutoNation Financial Services requires all financed
vehicles to have insurance coverage, including comprehensive fire, theft and
collision coverage, insuring the financed vehicle in an amount at least equal to
the financed vehicle's fair market value. In addition, AutoNation Financial
Services requires the obligor's public liability and property damage insurance
coverage to meet or exceed the applicable state minimum levels of coverage. All
insurance policies must also require the related insurance company to provide at
least 30 days prior written notice to AutoNation Financial Services before
cancellation. The dealers are responsible for ensuring that each obligor obtains
proper insurance coverage and that AutoNation Financial Services is named as
loss payee.
COLLECTION PROCEDURES
AutoNation Financial Services has established a comprehensive set of
collection policies and procedures, the application of which are performed by
World Omni Financial Corp. pursuant to a subservicing agreement between
AutoNation Financial Services and World Omni. These policies and procedures
utilize an automated collection system to assist in collection efforts and the
prompt investigation and evaluation of the causes of any delinquency. The
automated collection system provides relevant obligor information (for example,
current addresses, phone numbers and loan information), records of all contacts
with obligors and, in some cases,
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automated dialing. This system records the obligor's promise to pay, allows
supervisors to review collection personnel activity, permits supervisors to
modify priorities regarding which obligors to contact and provides extensive
reports concerning motor vehicle contract delinquencies. Pursuant to AutoNation
Financial Services' collection policies and procedures, any obligor whose motor
vehicle contract has become 10 days delinquent is contacted by mail and/or
telephone. In the event that the obligor fails to make a payment sufficient to
bring the scheduled payments current under the motor vehicle contract, personal
telephone contact with the obligor is attempted on or after the 15th day of
delinquency. After a motor vehicle contract is delinquent for 60 days and all
collection efforts have been exhausted, repossession procedures will be
implemented. However, if (1) a motor vehicle contract is deemed uncollectible,
(2) the financed vehicle is deemed by collection personnel to be in danger of
being damaged, destroyed or made unavailable for repossession or (3) the obligor
voluntarily surrenders the financed vehicle, a repossession may occur without
regard to the length or existence of payment delinquency. The majority of
repossessions are conducted by third parties who are engaged in the business of
repossessing vehicles for secured parties. After repossession, the obligor, in
accordance with applicable state law, usually will have an additional 10 to
30 days to redeem the financed vehicle before the financed vehicle is liquidated
at auction. Upon the sale of the repossessed vehicle, AutoNation Financial
Services will pursue any remaining deficiency to the extent deemed practical and
to the extent permitted by law.
Losses may occur in connection with delinquent motor vehicle contracts and
can arise in several ways, including the inability to locate the financed
vehicle or the obligor, uninsured losses or because of a discharge of the
obligor in a bankruptcy proceeding. AutoNation Financial Services' current
collection policies and procedures recognize losses (1) at the time a motor
vehicle contract is deemed uncollectible, (2) during the month $40 or more under
a motor vehicle contract becomes more than 120 days past due or (3) if the
financed motor vehicle has been repossessed and liquidated, whichever occurs
first.
MODIFICATIONS AND EXTENSIONS
AutoNation Financial Services' collection policies and procedures may, on a
case-by-case basis, allow for extensions with respect to the Due Dates of
payments on motor vehicle contracts. With a few very limited exceptions, these
extensions are offered only in the following instances:
(1) if AutoNation Financial Services or its subservicer believes that
the obligor's financial difficulty has been resolved or will no longer
impair the obligor's ability to make future payments;
(2) the extension will result in the obligor's payments being brought
current;
(3) the total credit-related extensions granted on the motor vehicle
contract will not exceed six months in the aggregate or the state maximum,
whichever is lower;
(4) there has been no more than two credit-related extensions granted
on the motor vehicle contract in the immediately preceding twelve months;
and
(5) AutoNation Financial Services (or its assignee) had held the motor
vehicle contract for at least six months.
Any deviation from AutoNation Financial Services' collection policies and
procedures regarding the grant of an extension requires the concurrence of a
collection supervisor, collection manager and account manager.
DELINQUENCY AND LOAN LOSS INFORMATION
Information concerning the experience of AutoNation Financial Services
pertaining to delinquencies, loan losses and recoveries with respect to its
portfolio of motor vehicle contracts (including contracts previously sold which
AutoNation Financial Services continues to service) will be set forth in each
prospectus supplement. There can be no assurance that the delinquency, loan loss
and recovery experience on any contracts related to a series of securities will
be comparable to prior experience or to the information provided.
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DESCRIPTION OF THE CONTRACTS
THE RECEIVABLES POOL
The contracts to be purchased by each trust, also known as the receivables
pool, will be selected by the seller based upon the satisfaction of several
criteria, including that each contract:
(1) is secured by a financed motor vehicle that was insured at the
inception of the loan and, as of the related Cut-Off Date, has not been
repossessed without reinstatement;
(2) has not been identified on the computer files of the seller as
relating to an obligor who was the subject of a bankruptcy proceeding as of
the related Cut-Off Date;
(3) provides for fully amortizing level scheduled monthly payments and
for the accrual of interest at a fixed rate according to the Simple
Interest Method (except for the first and last payment, which may be
minimally different from the level payments); and
(4) satisfies any additional criteria specified in the related
prospectus supplement.
All of the contracts included in the Trust Property of a trust will have been
originated by AutoNation Financial Services based upon application referrals
from dealers or as specified in the related prospectus supplement. The
percentages of its serviced portfolio which represent application referrals from
dealerships, used vehicle megastores and third party dealerships, respectively,
may change over time. However, because each application and related obligor will
be evaluated by AutoNation Financial Services based on the same underwriting
criteria, AutoNation Financial Services believes that changes over time of the
percentages of its serviced portfolio representing application referrals from
dealerships, used vehicle megastores and third party dealerships should not have
a material adverse effect on the overall credit quality of the serviced
portfolio. See "AutoNation Financial Services' Portfolio of Motor Vehicle
Contracts." The seller will not use any selection procedures in selecting the
contracts for each receivables pool that are materially adverse to the
securityholders of any series.
Additional information with respect to the receivables pool securing each
series of securities will be set forth in the related prospectus supplement
including, to the extent appropriate, the composition of the contracts, the
distribution by annual percentage rate, the distribution by the states where the
contracts were originated and the portion of the receivables pool secured by new
vehicles and used vehicles.
CALCULATION METHOD
Each of the contracts included in the Trust Property of a trust will be a
fixed rate contract where the allocation of each payment between interest and
principal is calculated using the Simple Interest Method. For these contracts,
interest accrued as of the Due Date is paid first, and then the remaining
payment is applied to the unpaid principal balance. Accordingly, if an obligor
pays the fixed monthly installment in advance of the Due Date, the portion of
the payment allocable to interest will be less for that period since the
preceding payment will be less than it would be if the payment were made on the
Due Date, and the portion of the payment allocable to reduce the principal
balance will be correspondingly greater. Conversely, if an obligor pays the
fixed monthly installment after its Due Date, the portion of the payment
allocable to interest for the period since the preceding payment will be greater
than it would be if the payment were made on the Due Date, and the portion of
the payment allocable to reduce the principal balance will be correspondingly
smaller. When necessary, an adjustment is made at the maturity of the contract
to the scheduled final payment to reflect the larger or smaller, as the case may
be, allocations of payments to interest or principal under the contract as a
result of early or late payments, as the case may be.
The seller will sell or transfer contracts having an aggregate principal
balance specified in the related prospectus supplement as of the Cut-Off Date to
the applicable trust. The purchase price paid by each trust for each contract
included in the Trust Property of the trust will either reflect the principal
balance of the contract as of the Cut-Off Date calculated under the Simple
Interest Method or another amount as specified in the related prospectus
supplement.
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PREFUNDING ARRANGEMENTS
To the extent provided in the related prospectus supplement for a series of
securities, the related owner trust agreement, the sale and servicing agreement
and the indenture may provide for a prefunding arrangement under which the
related trust commits to subsequently purchase additional contracts from the
seller following the date on which the trust is established and the related
securities are issued for a period not to exceed three months and in an amount
not to exceed 20% of the initial principal balance of the securities. With
respect to a series of securities, the prefunding arrangement will require that
any subsequent contracts transferred to the trust conform to the requirements
and conditions provided in the related sale and servicing agreement including
the requirement that the subsequent contracts satisfy all of the same credit and
underwriting criteria as the initial contracts. If a prefunding arrangement is
utilized in connection with the issuance of a series of securities, the servicer
will establish an account, known as the prefunding account, in the name of the
indenture trustee for the benefit of the securityholders into which a portion of
the net proceeds received from the sale of the securities will be deposited and
from which funds will be released during a specified period to purchase
subsequent contracts from the seller. Upon each conveyance of subsequent
contracts to the applicable trust, an amount equal to the purchase price paid by
the seller to AutoNation Financial Services for the subsequent contracts will be
released from the prefunding account and paid to the seller.
The utilization of a prefunding arrangement for a series of securities is
intended to improve the efficiency of the issuance of the securities and the
sale of the contracts to the related trust through the incremental delivery of
the applicable contracts on the Closing Date and during a specified period
following the Closing Date for that series of securities. Prefunding
arrangements allow for a more even accumulation of the contracts by the seller
and AutoNation Financial Services and the issuance of a larger principal amount
of securities than would be the case without a prefunding arrangement.
Although subsequent contracts will be subject to the same credit criteria
and underwriting guidelines applied with respect to the origination of the
initial contracts, subsequent contracts may be of a different credit quality and
seasoning. The credit quality of the subsequent contracts may vary as a result
of increases or decreases in the credit quality of the related obligors within
the predefined acceptable range, which variations could impact the performance
of the overall pool of contracts. The portfolio of initial contracts will also
be subject to greater seasoning than the subsequent contracts due to the length
of time elapsed from the dates of origination of those contracts and the sale of
those contracts to the related trust. Accordingly, less historical performance
information will be available with respect to the subsequent contacts. Moreover,
following the transfer of subsequent contracts to the applicable trust, the
characteristics of the entire pool of contracts included in the trust may vary
from those of the contracts initially transferred to the trust.
MATURITY AND PREPAYMENT CONSIDERATIONS
The weighted average life of the notes and the certificates of any series
will generally be influenced by the rate at which the principal balances of the
contracts are paid, which payments may be in the form of scheduled payments or
prepayments. Each contract is prepayable in full by the obligor at any time
without penalty. Full and partial prepayments on motor vehicle contracts
included in the Trust Property of a trust will be paid or distributed to the
related securityholders on the next day a principal or interest payment is to be
made (or if that day is not a business day (i.e., a Saturday, Sunday, a day on
which the insurer, if any, is closed or a day on which banking institutions in
New York, New York or in the city in which the indenture trustee's corporate
trust office or the owner trustee's corporate trust office is located are
authorized or obligated by law to be closed), on the next succeeding business
day) following the Collection Period in which they are received. To the extent
that any contract included in the Trust Property of a trust is prepaid in full,
whether by the obligor, or as the result of a purchase by the servicer or a
repurchase by the seller or otherwise, the actual weighted average life of the
contracts included in the Trust Property of the trust will be shorter than a
weighted average life calculation based on the assumptions that payments will be
made on schedule and that no prepayments will be made. Weighted average life
means the average amount of time until the entire principal amount of a contract
is repaid. Full prepayments may also result from liquidations due to default,
receipt of proceeds from theft, physical damage, credit life and credit
disability insurance policies, repurchases by the seller as a result of the
failure of a contract to meet the criteria set forth in the related sale and
servicing agreement or purchases by the servicer as a result of a breach of its
covenants with
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respect to the contracts made by it or its servicing duties in the related sale
and servicing agreement. In addition, early retirement of the securities may be
effected by the servicer exercising its option to purchase the remaining
contracts included in the Trust Property of the trust on any Distribution Date
as of which the Pool Balance (after giving effect to the principal payments and
distributions otherwise to be made on that Distribution Date) has declined to
the percentage of the original Pool Balance specified in the related prospectus
supplement. See "Description of the Transfer and Servicing Agreements-- Optional
Purchase of Contracts."
The rate of full prepayments by obligors on the contracts may be influenced
by a variety of economic, social and other factors. These factors include the
unemployment rate, servicing decisions, seasoning of loans, destruction of
vehicles by accident, loss of vehicles due to theft, sales of vehicles, market
interest rates, the availability of alternative financing and restrictions on
the obligor's ability to sell or transfer the financed motor vehicle securing a
contract without the consent of the servicer. Any full prepayments reduce the
average life of the contracts.
AutoNation Financial Services has a limited operating history and limited
historical experience with respect to prepayments and can make no prediction as
to the actual prepayment rates that will be experienced on the contracts
included in the Trust Property of any trust in either stable or changing
interest rate environments. Securityholders of each series will bear all
reinvestment risk resulting from the rate of prepayment of the contracts
included in the Trust Property of the related trust.
POOL FACTOR AND POOL INFORMATION
For each trust, the Pool Factor will be a six-digit decimal which the
servicer will compute each month indicating the Pool Balance at the end of the
month as a fraction of (1) the Original Pool Balance plus (2) the aggregate
principal balance of any subsequent contracts added to the trust as of the
applicable subsequent Cut-Off Date. The Pool Factor will be 1.000000 as of the
Closing Date; thereafter, the Pool Factor will decline to reflect reductions in
the Pool Balance. The amount of a securityholder's pro rata share of the Pool
Balance for a given month can be determined by multiplying the original
denomination of the holder's security by the Pool Factor for that month.
With respect to each trust, the securityholders of record will receive
monthly reports from the owner trustee or indenture trustee, as applicable,
concerning payments received on the contracts, the Pool Balance, the Pool Factor
and other relevant information. The Depository Trust Company will supply these
reports to securityholders in accordance with its procedures. Since owners of
beneficial interests in a global security of a given series will not be
recognized as securityholders of that series, DTC will not forward monthly
reports to those owners. Copies of monthly reports may be obtained by owners of
beneficial interests in a global security by a request in writing addressed to
the owner trustee or indenture trustee, as applicable. Securityholders of record
during any calendar year will be furnished information for tax reporting
purposes not later than the latest date permitted by federal and/or state law.
See "Description of the Securities--Statements to Securityholders."
USE OF PROCEEDS
The net proceeds from the sale of securities of a given series will be
applied by the applicable trust (1) to purchase the contracts from the seller
pursuant to the related sale and servicing agreement, (2) to deposit any amounts
if applicable, to the prefunding account and to fund any other collateral
accounts and (3) to pay other expenses in connection with the issuance of the
securities. The net proceeds to be received by the seller from the sale of the
contracts to the applicable trust will be used by the seller to repay
indebtedness incurred, or to pay other amounts owed, in connection with its
acquisition of the contracts from AutoNation Financial Services and to pay other
expenses in connection with the pooling of the contracts and the issuance of the
securities. AutoNation Financial Services will use the proceeds from the sale of
the contracts for general corporate purposes.
DESCRIPTION OF THE SELLER
The seller, AutoNation Receivables Corporation, a wholly-owned, special
purpose, bankruptcy remote subsidiary of AutoNation Financial Services, was
incorporated under the laws of the State of Delaware on June 18, 1999 and has a
limited operating history. The seller was organized for the limited purpose of
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purchasing retail installment sales contracts from AutoNation Financial Services
and transferring those contracts to third parties and any activities incidental
to and necessary or convenient for the accomplishment of that purpose. The
principal offices of the seller are located at 200 South Andrews Avenue, Fort
Lauderdale, Florida 33301. The telephone number of the seller's offices is (954)
769-4555.
AutoNation Financial Services and the seller have taken and will take steps
in structuring the transactions contemplated hereby that are intended to ensure
that the voluntary or involuntary application for relief by AutoNation Financial
Services under the United States Bankruptcy Code or similar state laws will not
result in consolidation of the assets and liabilities of the seller with those
of AutoNation Financial Services. These steps include the creation of the seller
as a separate, limited purpose subsidiary pursuant to a certificate of
incorporation containing limitations on the scope of the seller's activities
(including restrictions on the nature of the seller's business and a restriction
on the seller's ability to commence a voluntary case or proceeding under the
Bankruptcy Code or any similar state law without the unanimous affirmative vote
of all of its directors).
In addition, the seller has received the advice of counsel to the effect
that, based on a reasoned analysis of analogous case law (although there is no
precedent based on directly similar facts), subject to the facts, assumptions
and qualifications relied upon by counsel, it would not be a proper exercise by
a court of its equitable discretion to disregard the separate corporate
existence of the seller and to require the consolidation of the assets and
liabilities of the seller with the assets and liabilities of AutoNation
Financial Services in the event of the application of the Bankruptcy Code or any
similar state law to AutoNation Financial Services. However, there can be no
assurance that the activities of the seller would not result in a court
concluding that the assets and liabilities of the seller should be consolidated
with those of AutoNation Financial Services. If a court were to reach that
conclusion, or a filing were made under the Bankruptcy Code or any similar state
law by or against AutoNation Financial Services, or if an attempt were made to
litigate any of the foregoing issues, delays in payments or distributions on any
outstanding series of securities could occur or reductions in the amounts of
payments or distributions could result.
The contracts included in the Trust Property of each trust will have been
sold by AutoNation Financial Services to the seller pursuant to a receivables
purchase agreement between AutoNation Financial Services and the seller or as
specified in the related prospectus supplement. The contracts to be included in
the Trust Property of each trust will be sold by the seller to the applicable
trust pursuant to a sale and servicing agreement. AutoNation Financial Services
and the seller intend that each transfer of contracts by AutoNation Financial
Services to the seller under the applicable receivables purchase agreement or
otherwise will constitute a "true sale" of the contracts to the seller. If a
transfer of contracts constitutes a "true sale," those contracts and the
proceeds thereof would not be part of the bankruptcy estate of AutoNation
Financial Services under Section 541 of the Bankruptcy Code should AutoNation
Financial Services become the subject of a bankruptcy case subsequent to the
transfer of the contracts to the seller.
The seller has received the advice of counsel to the effect that, based on
a reasoned analysis of analogous case law (although there is no precedent based
on directly similar facts), subject to the facts, assumptions and qualifications
relied upon by counsel, in the event that AutoNation Financial Services were to
become the subject of a voluntary or involuntary case under the Bankruptcy Code
subsequent to the transfer of contracts to the seller, the transfer of the
contracts by AutoNation Financial Services to the seller would be characterized
as a "true sale" of the contracts from AutoNation Financial Services to the
seller and the contracts and the proceeds thereof would not form part of
AutoNation Financial Services' bankruptcy estate pursuant to Section 541 of the
Bankruptcy Code.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993),
cert. denied, 114 S. Ct. 554 (1993), the United States Court of Appeals for the
10th Circuit suggested that even where a transfer of accounts from a seller to a
buyer constitutes a "true sale," the accounts would nevertheless constitute
property of the seller's bankruptcy estate in a bankruptcy of the seller. If
AutoNation Financial Services were to be placed into receivership and a court
were to follow the Octagon court's reasoning, securityholders might experience
delays in payment or possibly losses on their investment in the securities.
Counsel has advised the seller that the Octagon case appears to be inconsistent
with established precedent and the Uniform Commercial Code. Accordingly, the
Octagon case should not be binding precedent on a court in a receivership
proceeding.
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DESCRIPTION OF AUTONATION FINANCIAL SERVICES CORP.
AutoNation Financial Services Corp. will act as the servicer with respect
to the contracts. AutoNation Financial Services, a wholly-owned subsidiary of
AutoNation, was incorporated in the State of Delaware on February 6, 1997.
AutoNation Financial Services is dedicated to providing financial products and
services to customers of AutoNation's franchised automotive dealerships and
megastores and to third party dealers. In 1998, its first full year of
operations, AutoNation Financial Services had nearly 62,000 customers and almost
$1 billion in managed assets. The range of AutoNation Financial Services'
products includes retail loan and lease financing, secondary customer referral
programs, vehicle protection and maintenance programs and insurance products.
AutoNation Financial Services is headed by a management team with extensive
experience in the origination and servicing of automobile retail installment
sales contracts and loans. AutoNation Financial Services' principal executive
offices are located at 110 S.E. 6th Street, Fort Lauderdale, Florida 33301.
Currently, AutoNation Financial Services does not intend to directly
service the contracts transferred to the trusts. AutoNation Financial Services
presently delegates the majority of its servicing responsibilities with respect
to its serviced portfolio to World Omni pursuant to a subservicing agreement.
Subject to oversight by AutoNation Financial Services, World Omni currently
handles operational accounting and customer inquiries for AutoNation Financial
Services, as well as all collection activities in respect of delinquent
contracts and, where appropriate, repossesses financed motor vehicles. World
Omni also performs the prefunding file audit with respect to each contract to
verify that all required documentation has been received in connection with each
contract and that the documentation conforms to AutoNation Financial Services'
requirements. In addition, World Omni acts as custodian of the documents
relating to each contract. Pursuant to the subservicing agreement, World Omni
has agreed to service all contracts originated during the term of the
subservicing agreement by AutoNation Financial Services until their maturity in
accordance with AutoNation Financial Services' collection procedures. AutoNation
Financial Services retains responsibility for investing and reinvesting of funds
and reporting. See "AutoNation Financial Services' Portfolio of Motor Vehicle
Contracts--Collection Procedures".
Notwithstanding the delegation by the servicer of its servicing duties to
World Omni, the servicer will remain primarily liable to the trust under the
sale and servicing agreement for the performance of those duties. However, if at
any time World Omni is in default in the performance of its subservicing
obligations and the indenture trustee is unwilling to act as successor servicer,
AutoNation Financial Services would be required to commence servicing its
portfolio itself or to engage a new subservicer to service the portfolio. At the
present time, AutoNation Financial Services does not have the capacity to
service its serviced portfolio, and therefore would be required to engage a new
third party subservicer. If AutoNation Financial Services were required to
engage a new subservicer, the transfer of servicing functions from World Omni to
the successor subservicer could encounter operational and logistical
difficulties that would impair the servicing of the contracts during the
servicing transition period. Industry experience indicates that increases in
delinquencies and defaults on contracts are likely to result immediately
following servicing transfers.
YEAR 2000 ISSUES
AutoNation Financial Services has an ongoing program designed to address
the potential impact of the year 2000 on the ability of AutoNation Financial
Services' computerized information systems to accurately process information
that may be date sensitive. AutoNation Financial Services has identified its
critical data storage and operating systems and has developed plans designed to
ensure the readiness of its systems to process dates beyond the year 2000. It is
anticipated that AutoNation Financial Services' systems will be year 2000
compliant by the end of 1999.
The inability of AutoNation Financial Services, its vendors or the parties
with whom it contracts to address the necessary year 2000 modifications of
computerized information systems could have a material adverse impact on
AutoNation Financial Services' operations and financial results, including its
ability to collect receivables, pay obligations and process loans and obligor
data. Any impact on AutoNation Financial Services could have a material adverse
effect on securityholders.
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DESCRIPTION OF WORLD OMNI FINANCIAL CORP.
World Omni Financial Corp., a Florida corporation and wholly-owned
subsidiary of JM Family Enterprises, Inc., services automobile-related retail
lease, retail installment and wholesale loan portfolios originated by it and
other parties, including AutoNation Financial Services. As of December 31, 1998,
World Omni's serviced portfolio (excluding third parties) consisted of
approximately 424,000 leases and retail contracts with an aggregate outstanding
balance of approximately $8.1 billion. Pursuant to the subservicing agreement,
World Omni acts as subservicer of the motor vehicle contracts originated by
AutoNation Financial Services. As of August 31, 1999, AutoNation Financial
Services' portfolio serviced by World Omni consisted of 126,788 leases and
retail contracts with an outstanding balance of approximately $1.87 billion.
World Omni currently services the contracts through its St. Louis operations
center.
The information provided in the preceding paragraph was provided by World
Omni. None of the trust, the seller or AutoNation Financial Services has made
any independent verification of the accuracy or completeness of that
information.
DESCRIPTION OF AUTONATION, INC.
AutoNation, Inc. is a publicly-held company incorporated in the State of
Delaware. Prior to April 6, 1999, AutoNation was known as Republic Industries,
Inc. AutoNation owns approximately 400 franchised automotive dealerships in 20
states. These dealerships own and operate franchises granted by 24 manufacturers
of approximately 36 brands of automobiles and light-duty trucks. AutoNation also
owns and operates 33 AutoNation USA used vehicle megastores and licenses nine
additional AutoNation USA megastores in 13 states. In addition, AutoNation owns
one of the nation's largest combined rental fleets through its subsidiaries,
Alamo Rent-A-Car, Inc., National Car Rental System, Inc. and CarTemps USA. In
July 1999, AutoNation announced its intention to separate these rental
businesses. Accordingly, AutoNation's rental business segment has been accounted
for as discontinued operations. As of June 30, 1999, AutoNation had total assets
of approximately $9,409.3 million and stockholders' equity of $5,736.8 million.
AutoNation's principal executive offices are located at 110 S.E. 6th Street,
Fort Lauderdale, Florida 33301.
DESCRIPTION OF THE SECURITIES
A series of securities may include one or more classes of notes and
certificates. Each trust will issue the notes and the certificates for a
particular series to the holders of record of the notes and the holders of
record of the certificates, respectively. The following summary, together with
the summaries contained under "Description of the Notes" and, if applicable,
"Description of the Certificates" in the prospectus supplement, describe all of
the material terms of the securities. However, this summary does not purport to
be complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the notes, the certificates, the indenture, the owner
trust agreement and the related prospectus supplement, as applicable.
THE NOTES
Each series may include one or more classes of notes. The notes will be
issued by the related trust pursuant to the terms of an indenture, a form of
which has been filed as an exhibit to the registration statement of which this
prospectus is a part. The related prospectus supplement will specify which class
or classes of notes of a series are being offered thereby.
To the extent specified in the prospectus supplement, notes will be
available for purchase in minimum denominations of $1,000 and in integral
multiples thereof and will be available in book-entry form only. Noteholders
will be able to receive notes in definitive registered form only in the limited
circumstances described herein or in the prospectus supplement. See "Description
of the Securities--Definitive Securities."
Each class of notes will have a stated note principal balance specified in
the related prospectus supplement and will accrue interest on the Note Principal
Balance at the interest rate specified for that class of notes. Each class of
notes may have a different interest rate, which may be a fixed, variable or
adjustable interest rate, or any combination of the foregoing. The related
prospectus supplement will specify the interest
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rate for each class of notes specified as being offered by the prospectus
supplement or the method for determining the interest rate or rates.
With respect to a series that includes two or more classes of notes, as
specified in the related prospectus supplement, each class may differ as to
timing and priority of payments, seniority, allocations of losses, interest
rates or amounts of payments of principal or interest. Payments of principal or
interest in respect of any class or classes may or may not be made upon the
occurrence of specified events or on the basis of collections from designated
contracts. In addition, a series may include one or more classes of Strip Notes.
If the seller, the servicer or a successor thereto exercises its option to
purchase the contracts of a trust in the manner and on the respective terms and
conditions described under "Description of the Transfer and Servicing
Agreements--Termination," the outstanding notes will be redeemed as set forth in
the related prospectus supplement.
THE CERTIFICATES
Each series may also include one or more classes of certificates. The
certificates will be issued by the related trust pursuant to the terms of an
owner trust agreement, the form of which has been filed as an exhibit to the
registration statement of which this prospectus is a part. The related
prospectus supplement will specify which class or classes of certificates, if
any, of a series are being offered thereby.
If specified in the related prospectus supplement, certificates offered to
the public will be available for purchase in minimum denominations of $1,000 and
in integral multiples thereof and will be available in book-entry form only.
Certificateholders will be able to receive certificates in definitive registered
form only in the limited circumstances described herein or in the prospectus
supplement. See "Description of the Securities--Definitive Securities."
Each class of certificates will have a stated certificate principal balance
specified in the related prospectus supplement and may, but need not, accrue
interest on the Certificate Principal Balance at the interest rate specified for
that class of certificates. Each class of certificates may have a different
interest rate, which may be a fixed, variable or adjustable interest rate, or
any combination of the foregoing. The related prospectus supplement will specify
the interest rate for each class of certificates specified as being offered by
the related prospectus supplement or the method for determining the interest
rate or rates.
With respect to a series that includes two or more classes of certificates,
as specified in the related prospectus supplement, each class may differ as to
timing and priority of distributions, seniority, allocations of losses, interest
rates or amounts of distributions in respect of principal or interest.
Distributions of principal or interest in respect of any class or classes of
certificates may or may not be made upon the occurrence of specified events or
on the basis of collections from designated contracts. In addition, a series may
include one or more classes of Strip Certificates.
RATINGS OF THE SECURITIES
It will be a condition to the issuance of each class of securities
specified as being offered by the related prospectus supplement that each class
of securities be rated in one of the four highest generic rating categories
established for the securities by at least one nationally recognized statistical
rating agency and receive the rating specified in the related prospectus
supplement by at least one rating agency.
PRINCIPAL AND INTEREST ON THE SECURITIES
The timing and priority of payment, seniority, allocations of losses,
interest rates and amount of or method of determining payments or distributions
of principal of and interest on each class of securities of a given series will
be described in the related prospectus supplement. The right of holders of any
class of securities to receive payments or distributions of principal and
interest may be senior or subordinate to the rights of holders of any other
class or classes of securities of the related series, as described in the
related prospectus supplement. If specified in the related prospectus
supplement, payments of interest on the securities of a series will be made
prior to payments of principal thereon. To the extent provided in the related
prospectus supplement, a series may include one or more classes of Strip Notes
or Strip Certificates as described above under "Description of the
Securities--The Notes" and "--The Certificates." Each class of securities may
have a different interest rate which may be a fixed, variable or adjustable
interest rate (and
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which may be zero for particular classes of Strip Notes or Strip Certificates),
or may not bear interest, or any combination of the foregoing. One or more
classes of securities of a series may be redeemable in whole or in part under
the circumstances specified in the related prospectus supplement, including as a
result of the servicer exercising its option to purchase the remaining related
contracts.
In the case of a series of securities which includes two or more classes of
securities, the sequential order and priority of payments or distributions in
respect of principal and interest, and any schedule or formula or other
provisions applicable to the determination thereof, of each class will be set
forth in the related prospectus supplement. Payments or distributions in respect
of principal and interest of any class of securities will be made on a pro rata
basis among all the securityholders of that class.
BOOK-ENTRY REGISTRATION
If specified in the related prospectus supplement, each class of securities
offered hereby will be initially represented by one or more global securities
registered in the name of Cede & Co., as nominee for The Depository Trust
Company, also known as DTC. Securityholders may hold beneficial interests in the
securities through DTC directly if they are participants in DTC or indirectly
through organizations which are participants in DTC.
Cede & Co., as nominee for DTC, will hold the global securities of each
series. Transfers between DTC participants will occur in the ordinary way in
accordance with DTC rules.
DTC is a limited purpose trust company organized under the New York Banking
Law, 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 New York Uniform Commercial Code and a "clearing agency"
registered pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of securities transactions between its
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of notes or
certificates. DTC's participants include securities brokers and dealers, banks,
trust companies and clearing corporations which may include underwriters, agents
or dealers with respect to the securities of any class or series. DTC is owned
by a number of its participants and the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Indirect access to the DTC system also is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a DTC participant, either directly or indirectly.
The rules applicable to DTC and its participants are on file with the SEC.
Owners of beneficial interests in securities that are in book-entry form
that are not direct or indirect DTC participants but desire to purchase, sell or
otherwise transfer ownership of, or other interests in, securities may do so
only through DTC's direct and indirect participants. In addition,
securityholders of a given series will receive all distributions of principal
and interest in respect of the securities from the indenture trustee or owner
trustee through DTC participants who in turn will receive them from DTC. Under a
book-entry format, owners of beneficial interests in a global security of a
given series may experience some delay in their receipt of payments, since all
payments will be forwarded by the indenture trustee or owner trustee, as
applicable, to Cede & Co., as nominee of DTC. DTC will forward those payments to
its participants which thereafter will forward them to indirect participants or
owners of beneficial interests in a global security. It is anticipated that the
only "securityholder" in respect of any series will be Cede & Co., as nominee of
DTC. Owners of beneficial interests in a global security of a given series will
not be recognized as securityholders of that series, and owners of beneficial
interests in a global security will be permitted to exercise the rights of
securityholders only indirectly through DTC and its participants who, in turn,
will exercise the rights of owners of beneficial interests in a global security
through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of securities of a
given series among its participants on whose behalf it acts with respect to
those securities and is required to receive and transmit distributions of
principal of, and interest on, those securities. Direct and indirect
participants with which owners of beneficial interests in a global security of a
given series have accounts with respect to the securities of that series
similarly are required to make book-entry transfers and receive and transmit
payments on behalf of their respective owners.
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Accordingly, although owners of beneficial interests in a global security will
not possess securities, those owners will receive payments and will be able to
transfer their interests.
Because DTC can only act on behalf of its direct participants, who in turn
act on behalf of indirect participants and banks, the ability of an owner of a
beneficial interest in a global security of a given series to pledge securities
of that series to persons or entities that do not participate in the DTC system,
or otherwise take actions in respect of those securities, may be limited due to
the lack of a physical certificate for those securities.
DTC has advised the seller that, with respect to each series, it will take
any action permitted to be taken by a securityholder of that series only at the
direction of one or more of its participants to whose account with DTC the
securities of that series are credited. Additionally, DTC has advised the seller
that it will take actions with respect to specified percentages of the
securityholder's interest only at the direction of and on behalf of its
participants whose holdings include undivided interests that satisfy those
specified percentages. DTC may take conflicting actions with respect to other
undivided interests to the extent that those actions are taken on behalf of its
participants whose holdings include those undivided interests.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of securities among participants of DTC, it is under no obligation to
perform or continue to perform these procedures and the foregoing procedures may
be discontinued at any time.
DTC'S YEAR 2000 EFFORTS
DTC management is aware that some computer applications, systems and the
like for processing data that are dependent upon calendar dates, including dates
before, on and after January 1, 2000, may encounter "Year 2000 problems." DTC
has informed its participants and other members of the financial community that
it has developed and is implementing a program so that its computer applications
and systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, 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 is contacting (and will continue to contact) third party
vendors from whom DTC acquires services to: (1) impress upon them the importance
of their services being year 2000 compliant and (2) 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.
DEFINITIVE SECURITIES
The securities of a given series will be issued in fully registered,
certificated form to owners of beneficial interests in a global security or
their nominees rather than to DTC or its nominee, only (1) if the seller, the
applicable owner trustee or indenture trustee or the administrator, as
applicable, advises the owner trustee and indenture trustee in writing that DTC
is no longer willing or able to discharge properly its responsibilities as
depositary with respect to the securities, and the seller, the applicable owner
trustee or indenture trustee or the administrator are unable to locate a
qualified successor, (2) if after the occurrence of an event of default under
the related indenture or an event of default under the related sale and
servicing agreement, owners of beneficial interests in a global security
representing in the aggregate more than 50% of the outstanding principal amount
of the securities of that series advise the applicable owner trustee and
indenture trustee through DTC participants in writing that the continuation of a
book-entry system with respect to the securities through DTC is no longer in the
best interest of those owners or (3) under any other circumstances specified in
the related prospectus supplement.
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Upon the occurrence of any of the events described in the immediately
preceding paragraph, the applicable owner trustee and indenture trustee will be
required to notify all owners of beneficial interests in a global security,
through DTC participants, of the availability through DTC of securities in
definitive registered form. Upon surrender by DTC of the definitive global
securities representing the securities and instructions for re-registration, the
applicable owner trustee and indenture trustee will reissue the securities in
definitive registered form, and thereafter the applicable owner trustee and
indenture trustee will recognize the holders of the definitive registered
securities as securityholders.
Payments or distributions of principal of, and interest on, the securities
will be made by a paying agent directly to holders of securities in definitive
registered form in accordance with the procedures set forth herein and in the
related indenture or the related owner trust agreement. Payments or
distributions on each Distribution Date and on the final scheduled Distribution
Date (as specified in the related prospectus supplement) will be made to holders
in whose names the definitive securities were registered at the close of
business on the Record Date. Payments or distributions will be made by check
mailed to the address of each securityholder as it appears on the register
maintained by the applicable owner trustee or indenture trustee or by other
means to the extent provided in the related prospectus supplement. The final
payment or distribution on any security (whether securities in definitive
registered form or the security registered in the name of Cede & Co.), however,
will be made only upon presentation and surrender of the security at the office
or agency specified in the notice of final payment or distribution to
securityholders.
Securities in definitive registered form will be transferable and
exchangeable at the offices of the applicable owner trustee or indenture
trustee, or at the offices of a transfer agent or registrar named in a notice
delivered to holders of securities in definitive registered form, which shall
initially be the applicable owner trustee or indenture trustee. No service
charge will be imposed for any registration of transfer or exchange, but the
applicable owner trustee, indenture trustee, transfer agent or registrar may
require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith.
LIST OF SECURITYHOLDERS
With respect to the notes of any series, the related indenture trustee will
provide to the issuer and the administrator, if any, (1) not more than five days
after the earlier of (a) each Record Date and (b) three months after the last
Record Date, a list of the names and addresses of the holders of the related
notes as of such Record Date and (2) at any other times that the issuer requests
in writing, within 30 days after receipt by the related indenture trustee of the
request, a list of the names and addresses of the holders of the related notes
as of a date not more than ten days prior to the time the list is furnished.
With respect to the certificates of any series, upon written request of the
issuer, the related owner trustee will provide to the issuer and the
administrator, if any, within 30 days after receipt of the issuer's request a
list of the names and addresses of all certificateholders of record as of the
most recent Record Date. Upon written request by three or more holders of the
certificates of a given series or by holders of certificates evidencing not less
than 25% of the aggregate outstanding principal amount of those certificates,
the related owner trustee will afford the requesting certificateholders access
during business hours to the current list of certificateholders for purposes of
communicating with other certificateholders with respect to their rights under
the related owner trust agreement or under the certificates.
Neither the owner trust agreement nor the indenture will provide for the
holding of annual or other meetings of securityholders.
STATEMENTS TO SECURITYHOLDERS
With respect to each series of securities, on each Distribution Date the
applicable owner trustee or indenture trustee will include with each payment or
distribution to each securityholder a statement setting forth for that
Distribution Date the following information (and any additional information so
specified in the related prospectus supplement):
(1) the amount of the distribution on or with respect to each class of
the securities allocable to principal;
(2) the amount of the distribution on or with respect to each class of
the securities allocable to interest;
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(3) the aggregate distribution amount for that Distribution Date;
(4) the premiums payable to the related third-party insurer pursuant
to the related financial guarantee insurance policy, if any, the balance of
any fund or account with respect to any credit or liquidity enhancement on
that Distribution Date, after giving effect to changes thereto on that
Distribution Date and the amount to be deposited in the spread account, if
any;
(5) the number of, and aggregate amount of monthly principal and
interest payments due on, the related contracts which are delinquent as of
the end of the related Collection Period presented in 30-day increments;
(6) the aggregate servicing fee paid to the servicer with respect to
the related contracts for the related Distribution Date;
(7) the amount available in the collection account for payment of the
aggregate amount payable or distributable on the securities, the amount of
the servicing fee, the amount of any principal or interest shortfall with
respect to each class of securities and the amount required from any
applicable insurer pursuant to the related insurance policy to pay any
shortfall;
(8) the aggregate amount of proceeds received by the servicer, net of
recoverable out-of-pocket expenses, in respect of a contract which is a
Defaulted Contract;
(9) the number and net outstanding balance of contracts for which the
related financed motor vehicle has been repossessed; and
(10) the Pool Balance.
DTC will supply these reports to securityholders in accordance with its
procedures. Since owners of beneficial interests in a global security of a given
series will not be recognized as securityholders of that series, DTC will not
forward monthly reports to those owners. Copies of monthly reports may be
obtained by owners of beneficial interests in a global security by a request in
writing addressed to the owner trustee or indenture trustee, as applicable.
Within a reasonable period of time after the end of each calendar year
during the term of each trust, but not later than the latest date permitted by
law, the applicable owner trustee or indenture trustee and the paying agent will
furnish to each person who on any Record Date during that calendar year was a
registered securityholder a statement containing relevant information for the
purposes of preparing securityholder federal income tax returns. See "Material
Federal Income Tax Consequences."
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DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes the material terms of (1) each sale and
servicing agreement pursuant to which a trust will purchase contracts from the
seller and the servicer will agree to service those contracts, (2) each owner
trust agreement pursuant to which a trust will be created and certificates will
be issued and (3) each administration agreement pursuant to which AutoNation
Financial Services or another party specified in the related prospectus
supplement will undertake specified administrative duties with respect to a
trust. Forms of the sale and servicing agreement, the owner trust agreement and
the administration agreement have been filed as exhibits to the registration
statement of which this prospectus is a part. This summary does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
all the provisions of each applicable sale and servicing agreement, owner trust
agreement and administration agreement and the related prospectus supplement.
SALE AND ASSIGNMENT OF THE CONTRACTS
Sale and Assignment by AutoNation Financial Services. Prior to the issuance
of a series of securities by the related trust, pursuant to a receivables
purchase agreement, AutoNation Financial Services will sell and assign to the
seller, without recourse, its entire interest in the contracts of the related
receivables pool, including its security interest in the related financed motor
vehicles, and any proceeds thereof.
Sale and Assignment by the Seller. Prior to the issuance of a series of
securities by the related trust, the seller will sell and assign to the
applicable owner trustee of that trust, without recourse, pursuant to a sale and
servicing agreement, the seller's entire interest in the contracts and the
proceeds thereof, including its security interests in the related financed motor
vehicles. Each contract will be identified in a schedule appearing as an exhibit
to the sale and servicing agreement. The applicable owner trustee of the trust
will not independently verify the existence and qualification of any contracts.
The owner trustee or indenture trustee in respect of the trust will,
concurrently with the sale and assignment, execute, authenticate and deliver the
definitive notes and/or certificates representing the related securities.
Use of Proceeds. The net proceeds received from the sale of the securities
of a given series will be applied to the purchase of the related contracts from
the seller and, to the extent specified in the related prospectus supplement, to
make the required initial deposit into any reserve fund, spread account or with
respect to any other credit or liquidity enhancement.
Representations and Warranties of the Seller. Pursuant to each sale and
servicing agreement, the seller will represent to the applicable owner trustee
and the trust for the benefit of holders of the securities and any applicable
insurer that:
(1) each contract to be included in the Trust Property of a trust
contains customary and enforceable provisions such that the rights and
remedies of the holder thereof shall be adequate for realization against
the collateral of the benefits of the security;
(2) each contract and the sale of the related financed motor vehicle
at the time it was made complied in all material respects with all
requirements of applicable federal, state and local laws and regulations
thereunder, including usury laws, the Federal Truth-in-Lending Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Federal
Trade Commission Act, the Fair Debt Collection Practices Act, the Fair
Credit Billing Act, the Magnuson-Moss Warranty Act, the Federal Reserve
Board's Regulations B and Z, the Soldiers' and Sailors' Civil Relief Act of
1940, state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code, and any other consumer credit, equal opportunity and
disclosure laws applicable to that contract and sale;
(3) each contract constitutes the legal, valid and binding payment
obligation in writing of the obligor, enforceable by the holder thereof in
all respects in accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency, reorganization, liquidation and other
similar laws and equitable principles relating to or affecting the
enforcement of creditors' rights generally;
(4) as of the Closing Date, each contract was secured by a validly
perfected first priority security interest in the financed motor vehicle in
favor of the seller as secured party or all necessary action with respect
to the contract has been taken to perfect a first priority security
interest in the related financed motor vehicle in favor of the seller as
secured party, which security interest, in either case, is assignable and
has been so assigned by the seller to the trust;
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(5) as of the Closing Date, the seller had good and marketable title
to and was the sole owner of each contract free of liens, claims,
encumbrances and rights of others;
(6) as of the Closing Date, there are no rights of rescission, offset,
claim, counterclaim or defense, and the seller has no knowledge of the same
being asserted or threatened, with respect to any contract;
(7) as of the Cut-Off Date, the seller has not received notice that
any obligor under a contract has filed for bankruptcy, and to the best of
the seller's knowledge without any independent investigation, no obligor
under a contract is in bankruptcy or similar proceedings;
(8) as of the Closing Date, the seller has no knowledge that a
default, breach, violation or event permitting acceleration under the terms
of any contract exists, and the seller has no knowledge that a continuing
condition that with notice or lapse of time would constitute a default,
breach, violation or event permitting acceleration under the terms of any
contract exists, and the seller has not waived any of the foregoing;
(9) each contract requires that the obligor thereunder obtain
comprehensive and collision insurance covering the financed motor vehicle;
(10) each contract was originated by AutoNation Financial Services;
(11) no adverse selection procedures were utilized in selecting the
contracts;
(12) scheduled payments under each contract have been applied in
accordance with the method for allocating principal and interest set forth
in the contract (the Simple Interest Method);
(13) there is only one original of each contract in existence, and the
original is being held by the servicer or its agent on behalf of the trust
and any applicable insurer; and
(14) each contract and/or the seller satisfies any additional
conditions or requirements set forth in the related prospectus supplement,
as applicable.
As of the last day of the Collection Period following the Collection Period
(or, if the seller elects, the last day of the Collection Period) during which
the seller becomes aware or receives written notice from the applicable owner
trustee or the servicer that a contract does not meet any of the criteria
required by the sale and servicing agreement, and the failure materially and
adversely affects the interests of the trust, the securityholders or any
applicable insurer in the contract, the seller, unless it cures the failed
criterion, will repurchase the contract from the applicable owner trustee at the
price specified in the related prospectus supplement and, if applicable, all
amounts due to any applicable insurer. The repurchase obligation will constitute
the sole remedy available to the securityholders or the applicable owner trustee
for the failure of a contract to meet any of the criteria set forth in the sale
and servicing agreement.
THE COLLECTION ACCOUNT AND ELIGIBLE INVESTMENTS
With respect to each trust, the servicer or the indenture trustee will
establish and maintain one or more accounts, known collectively as the
collection account, in the name of the related indenture trustee on behalf of
the related noteholders and certificateholders into which all payments made on
or with respect to the related contracts will be deposited. Funds in the
collection account will be invested in Eligible Investments by the indenture
trustee, acting at the direction of the servicer. Eligible Investments are
limited to investments acceptable to each rating agency rating the applicable
securities and which are consistent with the rating of those securities.
Eligible Investments made with respect to the collection account will mature no
later than the business day immediately preceding the next following
Distribution Date and income from amounts on deposit in the collection account
which are invested in Eligible Investments will be paid to the servicer monthly
unless otherwise directed by the servicer.
OTHER ACCOUNTS
Any other Trust Accounts to be established with respect to a trust will be
described in the related prospectus supplement. For any series of securities,
funds in any related reserve fund or any other Trust Accounts as may be
identified in the related prospectus supplement will be invested in Eligible
Investments as provided in the related sale and servicing agreement or
indenture.
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PAYMENTS ON CONTRACTS
With respect to each trust, all collections on the contracts will be
deposited into or credited to the collection account by the servicer within two
business days of the receipt of payments from obligors or as specified in the
related prospectus supplement. Those collections will include the following:
(1) amounts received with respect to the contracts in the related
Collection Period representing monthly principal and interest payments;
(2) full and partial prepayments;
(3) Net Liquidation Proceeds and Net Insurance Proceeds;
(4) any amounts deposited by AutoNation Financial Services or the
seller, as applicable, in the collection account to purchase or repurchase
contracts because of material defects in documents related to the contracts
or breaches of representations or warranties regarding the contracts made
by AutoNation Financial Services in the receivables purchase agreement or
the seller in the sale and servicing agreement that materially and
adversely affect the interests of the securityholders, the applicable trust
or any applicable insurer;
(5) any amounts deposited by the servicer in the collection account to
purchase contracts as to which the servicer has breached its servicing
covenants in a manner that materially and adversely affect the interests of
the securityholders, the applicable trust or any applicable insurer;
(6) any amounts deposited by the servicer into the collection account
as a result of that entity exercising its right under limited circumstances
to purchase all or a portion of the contracts; and
(7) any other amounts specified in the related prospectus supplement.
PAYMENTS AND DISTRIBUTIONS ON THE SECURITIES
With respect to each series of securities, beginning on the Distribution
Date specified in the related prospectus supplement, payments and distributions
of principal of and interest on (or, where applicable, of principal or interest
only) each class of securities entitled thereto will be made by the applicable
indenture trustee to the noteholders and by the applicable owner trustee to the
certificateholders of that series. The timing, calculation, allocation, order,
source, priorities of and requirements for all payments and distributions to
each class of securities of the series will be set forth in the related
prospectus supplement.
With respect to each trust, on each Distribution Date collections on the
related contracts will be withdrawn from the related collection account and will
be paid and distributed to the securityholders as provided in the related
prospectus supplement. Credit enhancement will be available to cover any
shortfalls in the amount available for payment or distribution to the
securityholders on that Distribution Date to the extent specified in the related
prospectus supplement. If specified in the related prospectus supplement,
payments or distributions in respect of one or more classes of securities of the
applicable series may be subordinate to payments or distributions in respect of
one or more other classes of securities of that series.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements, if
any, and the provider thereof, if applicable, with respect to each class of
securities of a given series, will be set forth in the related prospectus
supplement. If and to the extent provided in the related prospectus supplement,
credit and cash flow enhancement with respect to a trust or any class or classes
of securities may include any one or more of the following: a surety bond or
financial guarantee insurance policy provided by a third-party insurer,
subordination of one or more classes of securities to one or more other classes
of securities, a reserve fund, a spread account, a yield maintenance account,
overcollateralization, letters of credit, credit or liquidity facilities,
guaranteed investment contracts, swaps or other interest rate protection
agreements, repurchase obligations, cash deposits, other agreements or
arrangements with respect to third party payments, or other support as may be
described in the related prospectus supplement or any combination of the
foregoing. If specified in the applicable prospectus supplement, credit or cash
flow enhancement for a class of securities may cover one or more other classes
of securities of the same series, and credit or cash flow enhancement for a
series of securities may cover one or more other series of securities.
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The presence of credit enhancement for the benefit of any class or series
of securities is intended to enhance the likelihood of receipt by the
securityholders of that class or series of the full amount of principal and
interest due thereon and to decrease the likelihood that those securityholders
will experience losses. Any form of credit enhancement will have limitations and
exclusions from coverage thereunder, which will be described in the related
prospectus supplement. The credit enhancement for a class or series of
securities will not provide protection against all risks of loss and may not
guarantee repayment of the entire principal balance and interest thereon. If
losses occur which exceed the amount covered by any credit enhancement or which
are not covered by any credit enhancement, securityholders of any class or
series will bear an allocable share of deficiencies, as described in the related
prospectus supplement. In addition, if a form of credit enhancement covers more
than one class or series of securities, securityholders of any given class will
be subject to the risk that the credit enhancement will be exhausted by the
claims of securityholders of other classes or series.
INSURANCE ON FINANCED MOTOR VEHICLES
Each obligor on a contract will be required to maintain insurance covering
physical damage to the obligor's financed motor vehicle in an amount not less
than the lesser of its maximum insurable value or the unpaid principal balance
under the contract. AutoNation Financial Services will be required to be named
as loss payee under the policy of insurance obtained by the obligor. Each
financed motor vehicle will be required to be insured against loss and damage
due to fire, theft, transportation, collision and other risks covered by
comprehensive coverage. Since obligors may choose their own insurers to provide
the required coverage, the specific terms and conditions of their policies vary.
SERVICER REPORTS TO THE TRUSTEES AND THE INSURER
The servicer will perform monitoring and reporting functions for the
applicable indenture trustee, owner trustee and any insurer, including the
preparation and delivery on a specified periodic date set forth in the related
sale and servicing agreement of a statement setting forth the amounts on deposit
in the collection account, the sources of those amounts and the amounts to be
paid to securityholders. The statement will also include information regarding
the contracts, including the number and outstanding principal balance of all
Defaulted Contracts and the number of contracts purchased by the servicer or
repurchased by the seller.
OPTIONAL PURCHASE OF CONTRACTS
Each sale and servicing agreement will provide that the servicer will have
the option to purchase the remaining contracts included in the Trust Property of
a trust on any Distribution Date as of which the related Pool Balance (after
giving effect to the principal payments and distributions otherwise to be made
on that Distribution Date) has declined to the percentage of the Original Pool
Balance specified in the related prospectus supplement. Any optional purchase
must be effected at the price specified in the related prospectus supplement, if
applicable, plus all amounts due to any applicable insurer. In addition,
AutoNation Financial Services or the seller will be required to purchase or
repurchase, respectively, contracts in the event that specified representations
and warranties regarding the contracts made by AutoNation Financial Services or
the seller, respectively, are incorrect in any manner that materially and
adversely affects the interest therein of the securityholders, the applicable
trust or any applicable insurer. Additionally, the servicer will be required to
purchase contracts as to which the servicer has breached its servicing covenants
in any manner that materially and adversely affects the interest of the
securityholders, the applicable trust or any applicable insurer.
SERVICING FEE
The servicer will be entitled to compensation for the performance of its
obligations under each sale and servicing agreement. If specified in the related
prospectus supplement, the servicer will be entitled to receive on each
Distribution Date a servicing fee in an amount equal to the product of
(1) one-twelfth of a specified percentage per annum (as set forth in the related
prospectus supplement) multiplied by (2) the Pool Balance as of the end of the
Collection Period preceding the related Collection Period or, in the case of the
first Distribution Date, the Original Pool Balance. If specified in the related
prospectus supplement, the servicer or its designee shall be entitled to retain,
as additional compensation, all late payment charges, extension fees and similar
items paid in respect of the contracts. The servicer or its designee may also be
entitled to receive,
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as servicing compensation, reinvestment earnings on Eligible Investments. The
servicer shall pay all expenses incurred by it in connection with its servicing
activities under the sale and servicing agreement and will not be entitled to
reimbursement of its expenses except to the extent they constitute Liquidation
Expenses or expenses recoverable under an applicable insurance policy.
WAIVERS AND EXTENSIONS
Each sale and servicing agreement will require the servicer to use its best
efforts to collect all payments called for and due under the terms and
provisions of the related contracts held by each trust. Subject to any
limitations set forth in the related prospectus supplement, the servicer,
consistent with its normal procedures, will be permitted, in its discretion, to
(1) waive any late payment charges in connection with delinquent payments on a
contract, (2) waive any prepayment charges, (3) grant an extension in order to
work out a default or an impending default; provided that, with a few very
limited exceptions, following the extension there will have been no more than
two extensions of the related contract in the last twelve months and the sum of
the terms of all extensions of the contract does not exceed six months or
(4) take any other action specified in the related prospectus supplement.
REALIZATION UPON DEFAULTED CONTRACTS
The servicer will liquidate any contract with respect to which a default
has occurred and such contract continues to be in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. A
liquidation may occur through repossession or sale of the financed motor vehicle
securing the applicable contract or otherwise. In connection with a repossession
or other conversion, the servicer will follow the normal and usual procedures
adopted by holders of motor vehicle retail installment sales contracts. In this
regard, the servicer may sell the financed motor vehicle at an auction or other
public or private sale, and may take any other action permitted by applicable
law.
EVIDENCE AS TO COMPLIANCE
Each sale and servicing agreement will provide that a firm of independent
public accountants will annually furnish to the related owner trustee, indenture
trustee and, if applicable, the related insurer, a statement as to compliance by
the servicer during the preceding twelve months (or, in the case of the first
statement, from the applicable Closing Date) with specified standards relating
to the servicing of the applicable contracts, the servicer's accounting records
and computer files with respect thereto and other matters.
Each sale and servicing agreement will also provide for annual delivery to
the related owner trustee, indenture trustee and, if applicable, the related
insurer, of a certificate signed by an authorized officer of the servicer
stating that the servicer has fulfilled its obligations under the sale and
servicing agreement throughout the preceding twelve months (or, in the case of
the first certificate, from the Closing Date) or, if there has been a default in
the fulfillment of any obligation, describing the default. The servicer will
also give the related owner trustee, indenture trustee and, if applicable, the
related insurer, notice of any events of termination of the servicer under the
related sale and servicing agreement.
Copies of the statements and certificates described above may be obtained
by securityholders by a request in writing addressed to the applicable owner
trustee or indenture trustee.
MATERIAL MATTERS REGARDING THE SERVICER
Each sale and servicing agreement will provide that the servicer may not
resign from its obligations and duties as servicer thereunder except upon
determination that the servicer's performance of its duties is no longer
permissible under applicable law. No resignation of the servicer will become
effective until the related owner trustee, indenture trustee or a successor
servicer has assumed the servicer's servicing obligations and duties under the
sale and servicing agreement. See "--The Owner Trustee and Indenture Trustee."
Each sale and servicing agreement will further provide that neither the
servicer nor any of its directors, officers, employees and agents will be under
any liability to the related trust or the related securityholders for taking any
action or for refraining from taking any action pursuant to the sale and
servicing agreement or for errors in judgment; provided, however, that neither
the servicer nor any other person described above will be protected against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or
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negligence in the performance of duties or by reason of reckless disregard of
obligations and duties thereunder. In addition, the sale and servicing agreement
will provide that the servicer is under no obligation to appear in, prosecute or
defend any legal action that is not incidental to the servicer's servicing
responsibilities under the sale and servicing agreement and that, in its
opinion, may cause it to incur any expense or liability. The servicer may,
however, undertake any reasonable action that it may deem necessary or desirable
in respect of the sale and servicing agreement and the rights and duties of the
parties thereto and the interests of the securityholders thereunder. Any
indemnification or reimbursement of the servicer could reduce the amount
otherwise available for distribution to securityholders.
Any corporation into which the servicer may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the servicer is a party or any corporation succeeding to the business of the
servicer, or, with respect to the servicer's obligation as the servicer, will be
the successor of the servicer under the sale and servicing agreement.
DEFAULTS BY THE SERVICER
A default by the servicer under the sale and servicing agreement may
include any of the following:
(1) any failure by the servicer to deposit in or credit to the
collection account any amount required to be so deposited or credited,
which failure continues unremedied for three business days after discovery
by the servicer or receipt by the servicer of written notice from the
applicable owner trustee or indenture trustee, or, if applicable, the
related insurer;
(2) any failure by the servicer or the seller duly to observe or
perform in any material respect any other covenants or agreements of the
servicer or the seller in the sale and servicing agreement, which failure
materially and adversely affects the rights of securityholders or the
applicable owner trustee or indenture trustee, or, if applicable, the
related insurer, and which continues unremedied for 30 days after the
seller, the trust or the servicer has knowledge of the failure or the
giving of written notice of the failure (A) to the servicer or the seller,
as the case may be, by the applicable owner trustee or indenture trustee,
or, if applicable, the related insurer or (B) to the servicer or the
seller, as the case may be, and to the applicable owner trustee or
indenture trustee by holders of securities evidencing not less than 25% in
principal amount of those securities, acting together as a single class,
or, if applicable, the related insurer;
(3) specified events of insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings and actions by the
servicer or seller indicating its insolvency, reorganization pursuant to
bankruptcy or similar proceedings or inability to pay its obligations as
they become due;
(4) any breach of any of the representations and warranties of the
servicer or the seller (except for any breaches relating to contracts
repurchased by the seller or the servicer) which breach has a material
adverse effect on the related securityholders or, if applicable, the
related insurer and which continues for 30 days after the giving of notice
of the breach to the seller or the servicer, as the case may be, by the
applicable owner trustee or indenture trustee or the holders of securities
evidencing not less than 25% in principal amount of those securities,
acting together as a single class, or, if applicable, the related insurer;
(5) if applicable, the reasonable determination by the insurer that
the quality of performance of the servicer is not in compliance with either
the terms of the sale and servicing agreement or that the servicer's
performance is not adequate, as measured in accordance with industry
standards, in respect of all motor vehicle contracts serviced by the
servicer; and
(6) any other event specified in the related prospectus supplement.
RIGHTS UPON DEFAULT BY THE SERVICER
Matters relating to the termination of the related servicer's rights and
obligations and the waiver of any defaults by the related servicer under the
related sale and servicing agreement will be as described in the accompanying
prospectus supplement under "Description of the Transfer and Servicing
Agreements--Default by the Servicer; Rights Upon Default by the Servicer."
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Obligations of the Owner Trustee or Indenture Trustee. With respect to each
trust, the applicable owner trustee or indenture trustee will be under no
obligation to exercise any of the trusts or powers vested in it by the sale and
servicing agreement or to make any investigation of matters arising thereunder
or to institute, conduct or defend any litigation thereunder or in relation
thereto at the request, order or direction of any of the securityholders, unless
those securityholders have offered to the owner trustee or indenture trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby. No securityholder will have any right
under the sale and servicing agreement to institute any proceeding with respect
thereto, unless the securityholder previously has given to the owner trustee or
indenture trustee, as applicable, written notice of default and unless
(1) holders of notes of the related series evidencing not less than 25% of the
principal amount of those notes then outstanding and (2) holders of certificates
of the related series evidencing not less than 25% of the principal amount of
those certificates then outstanding, in either case with the consent of the
related insurer, if any, have made written request upon the owner trustee or
indenture trustee to institute a proceeding in its own name as owner trustee or
indenture trustee thereunder and have offered to the owner trustee or indenture
trustee reasonable indemnity and the owner trustee or indenture trustee for 30
days has neglected or refused to institute any proceedings.
AMENDMENT
Each of the sale and servicing agreement, the owner trust agreement and the
administration agreement may be amended by the parties thereto with the consent
of the related insurer, if any, but without the consent of the related
securityholders, to cure any ambiguity, correct or supplement any provisions
therein which may be inconsistent with any other provisions therein, or add any
other provisions with respect to matters or questions arising thereunder which
are not inconsistent with the provisions of the sale and servicing agreement,
the owner trust agreement and the administration agreement; provided that any
action will not materially and adversely affect the interest of any of the
securityholders. Any amendment will be deemed not to materially and adversely
affect the interest of any securityholder if the person requesting the amendment
obtains (1) a letter from each rating agency rating the applicable securities to
the effect that the amendment would not result in a downgrading or withdrawal of
the ratings then assigned to the applicable securities by that rating agency and
(2) an opinion of counsel to that effect.
The sale and servicing agreement, the owner trust agreement and the
administration agreement may also be amended by the parties thereto with the
consent of (1) subject to the rights, if any, of the applicable insurer as
described in the related prospectus supplement, the holders of notes of the
related series evidencing not less than a majority of the principal amount of
those notes then outstanding, acting together as a single class and (2) the
holders of certificates of the related series evidencing not less than a
majority of the principal amount of those certificates then outstanding, acting
together as a single class, and in either case with the consent of the related
insurer, if any, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the sale and servicing agreement,
the owner trust agreement or the administration agreement or of modifying in any
manner the rights of the related noteholders or certificateholders; provided,
however, that no amendment may (1) increase or reduce in any manner the amount
of, or accelerate or delay the timing of, collections of payments on the related
contracts or distributions that are required to be made for the benefit of the
noteholders or certificateholders, (2) reduce the aforesaid percentage of the
notes or certificates of any series which are required to consent to any
amendment, without the consent of the holders of all the outstanding notes or
certificates, as the case may be, of that series or (3) result in a taxable
event to any of the securityholders for federal income tax purposes or result in
the trust being taxable as a corporation for federal income tax purposes.
It is intended that the trust will not constitute a separate entity for
federal income tax purposes during the time that the seller holds the entire
equity interest in the trust; provided, however, that at any time that equity
interests in the trust are held by more than one holder, the sale and servicing
agreement, the owner trust agreement and the administration agreement may be
amended, as necessary and in accordance with the preceding paragraph, to reflect
the appropriate treatment of the trust as a partnership for federal income tax
purposes. See "Material Federal Income Tax Consequences" below.
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TERMINATION
With respect to each trust, the obligations of the seller, the servicer,
the related owner trustee and indenture trustee pursuant to the sale and
servicing agreement, the owner trust agreement and the administration agreement
will terminate upon the earlier of (1) the maturity or other liquidation of the
last related contract and the disposition of any amounts received upon
liquidation of any remaining contracts or other assets that are part of the
related Trust Property and (2) (a) the payment to noteholders and
certificateholders of the related series of all amounts required to be paid to
them pursuant to the sale and servicing agreement, the owner trust agreement and
the administration agreement and the disposition of all property held as part of
the related trust, (b) if applicable, the termination of the related insurance
policy in accordance with its terms and the surrender of the insurance policy to
the related insurer for cancellation, (c) the payment of all amounts owed to the
owner trustee or indenture trustee under the sale and servicing agreement, the
owner trust agreement, the administration agreement and the indenture and
(d) if applicable, the payment of all amounts owed to the related insurer in
connection with the related insurance policy.
To the extent specified in the related prospectus supplement, in order to
avoid excessive administrative expense, the servicer will be permitted at its
option to purchase the remaining contracts included in the Trust Property of a
trust on any Distribution Date as of which the related Pool Balance (after
giving effect to the principal payments and distributions otherwise to be made
on that Distribution Date) has declined to the percentage of the Original Pool
Balance specified in the related prospectus supplement at the price specified in
the related prospectus supplement. The applicable owner trustee or indenture
trustee will give written notice of termination to each securityholder of
record. The final payment or distribution to any securityholder will be made
only upon surrender and cancellation of the securityholder's security at an
office or agency of the applicable owner trustee or indenture trustee specified
in the notice of termination. The applicable owner trustee or indenture trustee
will return, or cause to be returned, any unclaimed funds to the trust.
THE OWNER TRUSTEE AND INDENTURE TRUSTEE
With respect to each trust, neither the applicable owner trustee nor the
indenture trustee will make any representations as to the validity or
sufficiency of the related sale and servicing agreement, the related owner trust
agreement, the related administration agreement, the related indenture, the
securities or any related contracts or related documents. As of the applicable
Closing Date, neither the applicable owner trustee nor the indenture trustee
will have examined the contracts. If no event of default has occurred under the
indenture, the owner trustee and indenture trustee will be required to perform
only those duties specifically required of it under the related sale and
servicing agreement, the related owner trust agreement, the related
administration agreement or the related indenture, as applicable. Generally,
those duties are limited to the receipt of the various certificates, reports or
other instruments required to be furnished to the owner trustee or indenture
trustee under the related sale and servicing agreement, the related owner trust
agreement, the related administration agreement or the related indenture, as
applicable, the making of payments or distributions to securityholders in the
amounts specified in certificates provided by the servicer and, if applicable,
drawing on the related insurance policy if required to make payments or
distributions to securityholders.
Each owner trustee and indenture trustee, and any of their affiliates, may
hold securities in their own names. In addition, for the purpose of meeting the
legal requirements of local jurisdictions, each owner trustee and indenture
trustee (in some circumstances, acting jointly with the servicer) will have the
power to appoint co-trustees or separate trustees of all or any part of the
related Trust Property. In the event of the appointment of co-trustees or
separate trustees, all rights, powers, duties and obligations conferred or
imposed upon the owner trustee or indenture trustee by the related sale and
servicing agreement, the related owner trust agreement, the related
administration agreement or the related indenture, as applicable, will be
conferred or imposed upon the owner trustee or indenture trustee and the
separate trustee or co-trustee jointly, or, in any jurisdiction in which the
owner trustee or indenture trustee is incompetent or unqualified to perform
specified acts, singly upon the separate trustee or co-trustee who will exercise
and perform any rights, powers, duties and obligations solely at the direction
of the owner trustee or indenture trustee.
Each applicable owner trustee and indenture trustee may resign at any time,
in which event a successor trustee will be appointed pursuant to the terms of
the related sale and servicing agreement, the related owner trust agreement, the
related administration agreement or the related indenture, as applicable. Each
applicable owner trustee and indenture trustee may be removed if it ceases to be
eligible to continue in its capacity
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under the related sale and servicing agreement, the related owner trust
agreement, the related administration agreement or the related indenture, as
applicable, or if the owner trustee or indenture trustee becomes insolvent. Any
resignation or removal of the owner trustee or indenture trustee and appointment
of a successor will not become effective until acceptance of the appointment by
the successor trustee.
Each applicable owner trustee and indenture trustee will be entitled to a
fee which will be payable by the servicer either on an annual basis or any other
basis specified in the related prospectus supplement. The related sale and
servicing agreement, the related owner trust agreement, the related
administration agreement and the related indenture, as applicable, will further
provide that the owner trustee and indenture trustee will be entitled to
indemnification by the servicer for, and will be held harmless against, any
loss, liability or expense incurred by the owner trustee or indenture trustee
not resulting from the owner trustee's or indenture trustee's own willful
misfeasance, bad faith or negligence or by reason of breach of any of their
respective representations or warranties set forth in the related sale and
servicing agreement, the related owner trust agreement, the related
administration agreement or the related indenture, as applicable.
AutoNation Financial Services may maintain other banking relationships with
each applicable owner trustee and indenture trustee in the ordinary course of
business.
DESCRIPTION OF THE ADMINISTRATION AGREEMENT
AutoNation Financial Services or another party specified in the related
prospectus supplement, in its capacity as administrator, may enter into an
administration agreement, which may be amended and supplemented from time to
time, with the trust and the related indenture trustee pursuant to which the
administrator will agree, to the extent provided in the administration
agreement, to provide the notices and to perform other administrative
obligations required by the related indenture. With respect to any trust, as
compensation for the performance of the administrator's obligations under the
applicable administration agreement and as reimbursement for its expenses
related thereto, the administrator will be entitled to a monthly administration
fee in an amount to be set forth in the related prospectus supplement. Any
administration fee will be paid by the servicer.
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DESCRIPTION OF THE INDENTURE
The following summary describes some of the terms of each indenture
pursuant to which the notes of a series will be issued. A form of indenture has
been filed as an exhibit to the registration statement of which this prospectus
is a part. This summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of each applicable
indenture and the related prospectus supplement.
MODIFICATION OF INDENTURE
The trust and the indenture trustee may, subject to the rights, if any, of
the applicable insurer described in the related prospectus supplement, with the
consent of the noteholders of the related series evidencing not less than a
majority of the principal amount of those notes then outstanding acting as a
single class, and with the consent of the related insurer, if any, execute a
supplemental indenture for the purpose of adding provisions to, changing in any
manner or eliminating any provisions of, the related indenture, or modifying
(except as provided below) in any manner the rights of the related noteholders.
With respect to the notes of a given series, without the consent of the
holder of each outstanding note affected thereby, no supplemental indenture
will:
(1) change the due date of any installment of principal of, or
interest on, any note or reduce the principal amount thereof, the interest
rate specified thereon or the redemption price with respect thereto or
change any place of payment or the coin or currency in which any note or
any interest thereon is payable;
(2) impair the right to institute suit for the enforcement of
specified provisions of the related indenture regarding payment;
(3) reduce the percentage of the aggregate amount of the outstanding
notes of the series, the consent of the holders of which is required for
any supplemental indenture or the consent of the holders of which is
required for any waiver of compliance with specified provisions of the
related indenture or of defaults thereunder and their consequences as
provided for in the indenture;
(4) modify or alter the provisions of the related indenture regarding
the voting of notes held by the applicable trust, any other obligor on the
notes, the seller or an affiliate of any of them;
(5) reduce the percentage of the aggregate outstanding amount of the
notes, the consent of the holders of which is required to direct the
related indenture trustee to sell or liquidate the contracts if the
proceeds of the sale would be insufficient to pay the principal amount and
accrued but unpaid interest on the outstanding notes of the series;
(6) decrease the percentage of the aggregate principal amount of the
notes required to amend the sections of the related indenture which specify
the applicable percentage of aggregate principal amount of the notes of the
series necessary to amend the indenture or the other related agreements;
(7) permit the creation of any lien ranking prior to or pari passu
with the lien of the related indenture with respect to any of the
collateral for the notes or, except as otherwise permitted or contemplated
in the indenture, terminate the lien of the indenture on any collateral or
deprive the holder of any note of the security afforded by the lien of the
indenture;
(8) result in a taxable event to any noteholder for federal income tax
purposes; or
(9) to the extent provided in the related prospectus supplement, add
provisions to, change in any manner or eliminate any provisions of, the
related indenture, or modify in any manner the rights of the related
noteholders, relating to any other matters specified in the related
prospectus supplement.
The related trust and the applicable indenture trustee may also enter into
supplemental indentures, without obtaining the consent of the noteholders of the
related series but with the consent of the related insurer, if any, for the
purpose of, among other things, adding any provisions to or changing in any
manner or eliminating any of the provisions of the related indenture or of
modifying in any manner the rights of those noteholders; provided that (1) the
action will not (A) as evidenced by an opinion of counsel, materially
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and adversely affect the interest of any noteholder or (B) as confirmed by each
rating agency rating the notes of the related series, cause the then current
rating assigned to any class of notes to be withdrawn or reduced and (2) an
opinion of counsel as to applicable tax matters is delivered.
EVENTS OF DEFAULT UNDER THE INDENTURE; RIGHTS UPON EVENT OF DEFAULT
With respect to the notes of a given series, an event of default under the
related indenture may consist of:
(1) a default for five days or more in the payment of any interest on
any note of that series;
(2) a default in the payment of the principal of, or any installment
of the principal of, any note of that series when the same becomes due and
payable;
(3) a default in the observance or performance of any covenant or
agreement of the applicable trust made in the related indenture and the
continuation of any default for a period of 30 days after notice thereof is
given to the trust by the applicable indenture trustee or, if applicable,
the related insurer, or to the trust and the indenture trustee by the
holders of at least 25% of the principal amount of the notes of that series
then outstanding acting together as a single class;
(4) any representation or warranty made by the trust in the related
indenture or in any certificate delivered pursuant thereto or in connection
therewith was incorrect in any material respect as of the time made, and
that breach has not been cured within 30 days after notice thereof is given
to the trust by the applicable indenture trustee or, if applicable, the
related insurer, or to the trust, the related insurer, if any, and the
indenture trustee by the holders of at least 25% of the principal amount of
the notes of that series then outstanding acting together as a single
class;
(5) specified events of bankruptcy, insolvency, receivership or
liquidation of the applicable trust; or
(6) other events, if any, set forth in the related prospectus
supplement.
The failure to pay principal on a class of notes generally will not result in
the occurrence of an event of default under the indenture until the final
scheduled Distribution Date for that class of notes.
With respect to each series that includes notes, the rights and remedies of
the related indenture trustee, the related holders of the notes and the related
insurer, if any, will be described in the related prospectus supplement.
MATERIAL COVENANTS
Each indenture will provide that the related trust may not consolidate with
or merge into any other entity, unless:
(1) the entity formed by or surviving any consolidation or merger is
organized under the laws of the United States, any state thereof or the
District of Columbia;
(2) the entity expressly assumes the trust's obligation to make due
and punctual payments on the notes of the related series and the
performance or observance of every agreement and covenant of the trust
under the indenture;
(3) no event of default under the indenture shall have occurred and be
continuing immediately after the merger or consolidation;
(4) the trust has been advised that the ratings of the securities of
the applicable series then in effect would not be reduced or withdrawn by
any rating agency as a result of the merger or consolidation;
(5) the trust has received an opinion of counsel to the effect that
the consolidation or merger would have no material adverse tax consequence
to the trust or to any holder of the securities of the trust; and
(6) any other conditions specified in the related prospectus
supplement have been satisfied.
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Additionally, the related indenture will provide that each trust will not,
among other things:
(1) except as expressly permitted by the applicable indenture, the
applicable sale and servicing agreement, the applicable owner trust
agreement, the applicable administration agreement or the other related
documents with respect to the trust, sell, transfer, exchange or otherwise
dispose of any of the assets of the trust;
(2) claim any credit on or make any deduction from the principal and
interest payable in respect of the notes of the related series (other than
amounts withheld under the Internal Revenue Code of 1986, as amended, or
applicable state law) or assert any claim against any present or former
holder of the notes because of the payment of taxes levied or assessed upon
the trust;
(3) dissolve or liquidate in whole or in part;
(4) permit the validity or effectiveness of the related indenture to
be impaired or permit any person to be released from any covenants or
obligations with respect to the notes under the indenture except as may be
expressly permitted thereby;
(5) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on or extend to or otherwise
arise upon or burden the assets of the trust or any part thereof, or any
interest therein or the proceeds thereof; or
(6) incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the related notes and the related
indenture, or otherwise in accordance with the related documents with
respect to the trust.
ANNUAL COMPLIANCE STATEMENT
Each trust will be required to file annually with the related indenture
trustee a written statement as to the fulfillment of its obligations under the
indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT
The indenture trustee for each trust will be required to mail each year to
all related noteholders a brief report setting forth the following:
(1) its eligibility and qualification to continue as indenture trustee
under the related indenture;
(2) if the related indenture requires the indenture trustee to make
advances, any amount advanced by it under the indenture;
(3) the amount, interest rate and maturity date of any indebtedness
owing by the trust to the applicable indenture trustee in its individual
capacity;
(4) the property and funds physically held by the indenture trustee in
its capacity as indenture trustee; and
(5) any action taken by it that materially affects the related notes
and that has not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE
An indenture will be discharged with respect to the collateral securing the
related notes upon the delivery to the related indenture trustee for
cancellation of all the related notes or, subject to specified limitations, upon
deposit with the indenture trustee of funds sufficient for the payment in full
of all of the notes.
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THE INDENTURE TRUSTEE
Additional matters relating to the indenture trustee are described under
"Description of the Transfer and Servicing Agreements--The Owner Trustee and
Indenture Trustee."
LEGAL ASPECTS OF THE CONTRACTS
The transfer of the contracts by AutoNation Financial Services to the
seller, and by the seller to the applicable trust, and the pledge thereof to an
indenture trustee, the perfection of the security interests in the contracts and
the enforcement of rights to realize on the related financed motor vehicles as
collateral for the contracts are subject to a number of federal and state laws,
including the Uniform Commercial Code as in effect in various states. The
servicer and the seller will take the actions described below to perfect the
rights of the applicable owner trustee and the indenture trustee in the
contracts.
Under each sale and servicing agreement or indenture, as applicable, the
applicable owner trustee or indenture trustee initially will have custody of the
contracts included in the Trust Property of a trust following the sale of the
contracts to the related trust and the pledge thereof to the related indenture
trustee, and will hold the contracts as bailee for the benefit of the trust or
as secured party. The servicer or a subservicer may be appointed by the
applicable owner trustee or indenture trustee to act as the custodian of the
contracts. Upon the appointment of the servicer or a subservicer as the
custodian, physical possession of the contracts will shift from the owner
trustee or indenture trustee to the servicer or the subservicer, as applicable.
While the contracts will not be physically marked to indicate the ownership
interest thereof by the trust, appropriate UCC-1 financing statements reflecting
the sale and assignment of the contracts by AutoNation Financial Services to the
seller and by the seller to the trust will be filed to perfect that interest and
give notice of the trust's ownership interest in, and the indenture trustee's
security interest in, the contracts. If, through inadvertence or otherwise, any
of the contracts were sold to another party who purchased the contracts in the
ordinary course of its business and took possession of the contracts, the
purchaser would acquire an interest in the contracts superior to the interests
of the trust and the indenture trustee if the purchaser acquired the contracts
in good faith, for value and without actual knowledge of the trust's and the
indenture trustee's interests in the contracts.
SECURITY INTERESTS IN THE FINANCED MOTOR VEHICLES
Obtaining Security Interests in Financed Motor Vehicles. In all states in
which the contracts have been originated, retail installment sales contracts
such as the contracts evidence the credit sale of automobiles and/or light-duty
trucks by dealers to consumers. The contracts also constitute personal property
security agreements and include grants of security interests in the vehicles
under the applicable Uniform Commercial Code. Perfection of security interests
in the vehicles is generally governed by the motor vehicle registration laws of
the state in which the vehicle is located. In most states, a security interest
in an automobile or a light-duty truck is perfected by obtaining the certificate
of title to the financed motor vehicle or notation of the secured party's lien
on the vehicle's certificate of title. The seller will warrant to the related
trust in the sale and servicing agreement that AutoNation Financial Services has
taken all steps necessary to obtain a perfected first priority security interest
with respect to all financed motor vehicles securing the contracts and that the
security interest has been assigned to the trust. If AutoNation Financial
Services fails, because of clerical errors or otherwise, to effect or maintain
the notation of the security interest on the certificate of title relating to a
financed motor vehicle, the trust may not have a first priority security
interest in that financed motor vehicle.
Perfection of Security Interests in Financed Motor Vehicles. The seller
will sell the contracts and assign the security interest in each financed motor
vehicle to the related trust. However, because of the administrative burden and
expense, the servicer, the seller and the trust will not amend any certificate
of title to identify the trust as the new secured party on the certificates of
title relating to the financed motor vehicles. Accordingly, AutoNation Financial
Services will continue to be named as the secured party on the certificates of
title relating to the financed motor vehicles. In most states, assignments such
as those under the receivables purchase agreement and the sale and servicing
agreement relating to each trust, together with a
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perfected security interest in the related financed vehicles, is an effective
conveyance of the security interests in the financed vehicles without amendment
of the lien noted on the related certificate of title, and the new secured party
succeeds to the assignor's rights as the secured party. However, there exists a
risk in not identifying the related trust as the new secured party on the
certificate of title that, through fraud or negligence, the security interest of
the trust could be released or primed.
In the absence of fraud or forgery by the financed motor vehicle owner or
administrative error by state recording officials, notation of the lien of
AutoNation Financial Services will be sufficient to protect the related trust
against the rights of subsequent purchasers of a financed motor vehicle or
subsequent lenders who take a security interest in a financed motor vehicle. If
there are any financed motor vehicles as to which AutoNation Financial Services
has failed to perfect the security interest assigned to the related trust, that
security interest would be subordinate to, among others, subsequent purchasers
of the financed motor vehicles and holders of perfected security interests.
Under the laws of most states, the perfected security interest in a
financed motor vehicle would continue for four months after a vehicle is moved
to a state other than the state in which it is initially registered and
thereafter until the vehicle owner re-registers the vehicle in the new state. A
majority of states require surrender of a certificate of title to re-register a
vehicle. Therefore, the servicer will provide the department of motor vehicles
or other appropriate state or county agency of the state of relocation with the
certificate of title so that the owner can effect the re-registration. If the
financed motor vehicle owner moves to a state that provides for notation of a
lien on the certificate of title to perfect the security interests in the
financed motor vehicle, absent clerical errors or fraud, AutoNation Financial
Services would receive notice of surrender of the certificate of title if its
lien is noted thereon. Accordingly, the secured party will have notice and the
opportunity to re-perfect the security interest in the financed motor vehicle in
the state of relocation. If the financed motor vehicle owner moves to a state
which does not require surrender of a certificate of title for registration of a
motor vehicle, re-registration could defeat perfection. In the ordinary course
of servicing its portfolio of motor vehicle installment sales contracts,
AutoNation Financial Services takes steps to effect re-perfection upon receipt
of notice of registration or information from the obligor as to relocation.
Similarly, when an obligor under a contract sells a financed motor vehicle, the
servicer must provide the owner with the certificate of title, or the servicer
will receive notice as a result of its lien noted thereon and accordingly will
have an opportunity to require satisfaction of the related contract before
release of the lien. Under each sale and servicing agreement, the servicer, at
its expense, will be obligated to take appropriate steps to maintain the
continuous perfection of the security interest of AutoNation Financial Services
in the financed motor vehicle.
Under the laws of most states, statutory liens such as liens for unpaid
taxes, liens for towing, storage and repairs performed on a motor vehicle, motor
vehicle accident liens and liens arising under various state and federal
criminal statutes take priority over a perfected security interest in a financed
motor vehicle. The Internal Revenue Code also grants priority to federal tax
liens over the lien of a secured party. The laws of most states and federal law
permit the confiscation of motor vehicles by governmental authorities under some
circumstances if used in or acquired with the proceeds of unlawful activities,
which may result in the loss of a secured party's perfected security interest in
a confiscated vehicle. With respect to each trust, the seller will represent in
each sale and servicing agreement that, as of the initial issuance of the
securities of the related series, no state or federal liens exist with respect
to any financed motor vehicle securing payment on any related contract. However,
liens could arise, or a confiscation could occur, at any time during the term of
a contract. It is possible that no notice will be given to the servicer in the
event that a lien arises or a confiscation occurs, and any lien arising or
confiscation occurring after the related Closing Date would not give rise to the
seller's repurchase obligations under the related sale and servicing agreement.
REPOSSESSION
In the event of a default by an obligor, the holder of the related retail
installment sales contract has all the remedies of a secured party under the
Uniform Commercial Code, except as specifically limited by other state laws.
Among the Uniform Commercial Code remedies, the secured party has the right to
repossess a financed vehicle by self-help means, unless that means would
constitute a breach of the peace or is otherwise limited by applicable state
law. Unless a financed vehicle is voluntarily surrendered, self-help
repossession is
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accomplished simply by retaking possession of the financed vehicle. In cases
where the obligor objects or raises a defense to repossession, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and the financed vehicle must then be recovered in
accordance with that order. In some jurisdictions, the secured party is required
to notify the obligor of the default and the intent to repossess the collateral
and to give the obligor a time period within which to cure the default prior to
repossession. Generally, this right to cure may only be exercised on a limited
number of occasions during the term of the related contract. Other jurisdictions
permit repossession without prior notice if it can be accomplished without a
breach of the peace (although in some states, a course of conduct in which the
creditor has accepted late payments has been held to create a right by the
obligor to receive prior notice). In many states, after the financed vehicle has
been repossessed, the obligor may reinstate the related contract by paying the
delinquent installments and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of a default by the obligor, some jurisdictions require that
the obligor be notified of the default and be given a time period within which
the obligor may cure the default prior to repossession. Generally, this right of
reinstatement may be exercised on a limited number of occasions in any one-year
period.
The Uniform Commercial Code and other state laws require the secured party
to provide the obligor with reasonable notice of the date, time and place of any
public sale and/or the date after which any private sale of the collateral may
be held. In addition, some states also impose substantive timing requirements on
the sale of repossessed vehicles and/or various substantive timing and content
requirements relating to those notices. In some states, after a financed vehicle
has been repossessed, the obligor may redeem the collateral by paying the
delinquent installments and other amounts due. The obligor has the right to
redeem the collateral prior to actual sale or entry by the secured party into a
contract for sale of the collateral by paying the secured party the unpaid
principal balance of the obligation, accrued interest thereon, reasonable
expenses for repossessing, holding and preparing the collateral for disposition
and arranging for its sale, plus, in some jurisdictions, reasonable attorneys'
fees and legal expenses. In some other states, the obligor may redeem the
collateral by payment of delinquent installments on the unpaid principal balance
of the related obligation.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the repossessed vehicles generally will be
applied first to the expenses of resale and repossession and then to the
satisfaction of the indebtedness. While some states impose prohibitions or
limitations on deficiency judgments if the net proceeds from resale do not cover
the full amount of the indebtedness, a deficiency judgment can be sought in
those states that do not prohibit or limit those judgments. However, the
deficiency judgment would be a personal judgment against the obligor for the
shortfall, and a defaulting obligor can be expected to have very little capital
or sources of income available following repossession. Therefore, in many cases,
it may not be useful to seek a deficiency judgment or, if one is obtained, it
may be settled at a significant discount. In addition to the notice requirement,
the Uniform Commercial Code requires that every aspect of the sale or other
disposition, including the method, manner, time, place and terms, be
"commercially reasonable." Generally, courts have held that when a sale is not
"commercially reasonable," the secured party loses its right to a deficiency
judgment.
The Uniform Commercial Code also permits the debtor or other interested
party to recover for any loss caused by noncompliance with the provisions of the
Uniform Commercial Code. In addition, prior to a sale, the Uniform Commercial
Code permits the debtor or other interested person to prohibit the secured party
from disposing of the collateral if it is established that the secured party is
not proceeding in accordance with the "default" provisions under the Uniform
Commercial Code.
Occasionally, after resale of a repossessed vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the
Uniform Commercial Code requires the creditor to remit the surplus to any holder
of a subordinate lien with respect to the vehicle or if no subordinate
lienholder exists, the Uniform Commercial Code requires the creditor to remit
the surplus to the obligor.
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CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the
Soldiers' and Sailors' Civil Relief Act of 1940, state adoptions of the National
Consumer Act and of the Uniform Consumer Credit Code, state motor vehicle retail
installment sales acts, state "lemon" laws and other similar laws. Also, state
laws impose finance charge ceilings and other restrictions on consumer
transactions and require contract disclosures in addition to those required
under federal law. These requirements impose specific statutory liabilities upon
creditors who fail to comply with their provisions. In some cases, this
liability could affect an assignee's ability to enforce consumer finance
contracts such as the contracts described above.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
has the effect of subjecting any assignee of the seller in a consumer credit
transaction (and related creditors and their assignees) to all claims and
defenses which the obligor in the transaction could assert against the seller.
Liability under the FTC rule is limited to the amounts paid by the obligor under
the contract, and the holder of the contract may also be unable to collect any
balance remaining due thereunder from the obligor. The FTC rule is generally
duplicated by the Uniform Consumer Credit Code, other state statutes or the
common law in some states.
Most of the contracts will be subject to the requirements of the FTC rule.
Accordingly, each trust, as holder of the related contracts, will be subject to
any claims or defenses that the purchaser of the applicable financed motor
vehicle may assert against the seller of the financed motor vehicle. As to each
obligor, those claims are limited to a maximum liability equal to the amounts
paid by the obligor on the related contract. The seller will represent in each
sale and servicing agreement that each of the contracts, and the sale of the
related financed motor vehicle thereunder, complied with all material
requirements of applicable laws and the regulations issued pursuant thereto.
Any shortfalls or losses arising in connection with the matters described
in the three preceding paragraphs, to the extent not covered by amounts payable
to the securityholders from amounts available under a credit enhancement
mechanism, could result in losses to securityholders.
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the Uniform Commercial Code and related laws violate the
due process protections provided under the 14th Amendment to the Constitution of
the United States. Courts have generally upheld the notice provisions of the
Uniform Commercial Code and related laws as reasonable or have found that the
repossession and resale by the creditor do not involve sufficient state action
to afford constitutional protection to borrowers.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including the Bankruptcy Code and similar
state laws, may interfere with or affect the ability of a secured party to
realize upon collateral or to enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the Bankruptcy Code, a court may prevent a creditor
from repossessing a vehicle, and, as part of the rehabilitation plan, reduce the
amount of the secured indebtedness to the market value of the vehicle at the
time of bankruptcy (as determined by the court), leaving the creditor as a
general unsecured creditor for the remainder of the indebtedness. A bankruptcy
court may also reduce the monthly payments due under a contract or change the
rate of interest and time of repayment of the indebtedness.
Under the terms of the Soldiers' and Sailors' Relief Act of 1940, an
obligor who enters the military service after the origination of the obligor's
contract (including an obligor who is a member of the National Guard or is in
reserve status at the time of the origination of the obligor's contract and is
later called to active duty) may not be charged interest above an annual rate of
6% during the period of the obligor's active duty status, unless a court orders
otherwise upon application of the lender. In addition, pursuant to the
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Military Reservist Relief Act, under some circumstances, California residents
called into active duty with the reserves can delay payments on retail
installment sales contracts, including the contracts described above, for a
period, not to exceed 180 days, beginning with the order to active duty and
ending 30 days after release. It is possible that the foregoing could have an
effect on the ability of the servicer to collect the full amount of interest
owing on some of the contracts. In addition, the acts described above impose
limitations that would impair the ability of the servicer to repossess an
affected contract during the obligor's period of active duty status. Thus, in
the event that an affected contract is in default, there may be delays and
losses occasioned by the inability to exercise the trust's rights with respect
to the related financed motor vehicle in a timely fashion.
Any shortfalls or losses arising in connection with the matters described
in the two preceding paragraphs, to the extent not covered by amounts payable to
the securityholders from amounts available under a credit enhancement mechanism,
could result in losses to securityholders.
REPURCHASE OBLIGATION
Under each sale and servicing agreement, the seller will make
representations and warranties relating to the validity, subsistence, perfection
and priority of the security interest in each related financed motor vehicle as
of the related Closing Date. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of the Contracts." Accordingly, if any defect
exists in the perfection of the security interest in any financed motor vehicle
as of the Closing Date and that defect adversely affects the related trust's
interest in the related contract, the defect would constitute a breach of a
warranty under the sale and servicing agreement and would create an obligation
of the seller to repurchase the contract unless the breach is cured.
Additionally, in the sale and servicing agreement, the servicer will make
affirmative covenants regarding, among other things, the maintenance of the
security interest of AutoNation Financial Services in each financed motor
vehicle, the breach of which would create an obligation of the servicer to
purchase any affected contract from the related trust unless the breach is
cured.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of the notes
and the certificates of any series. The summary does not purport to deal with
United States federal income tax consequences or special rules that are
applicable to holders such as dealers in securities or foreign currency, banks,
other financial institutions, insurance companies, real estate investment
trusts, regulated investment companies, tax exempt entities, persons that hold
the notes or the certificates as a position in a "straddle," or as part of a
synthetic security or "hedge," "conversion transaction" or other integrated
investment, persons that have a "functional currency" other than the U.S. dollar
and investors in pass-through entities. Except to the extent discussed below,
this discussion is not applicable to Non-U.S. Holders (as defined below). In
addition, this summary is generally limited to investors who will hold the notes
and the certificates as "capital assets" (generally, property held for
investment) within the meaning of Section 1221 of the Internal Revenue Code of
1986, as amended. Prospective investors are encouraged to consult their own tax
advisors in determining the federal, state, local, foreign, alternative minimum,
estate and gift and any other tax consequences to them of the purchase,
ownership and disposition of the notes and the certificates.
The following summary is based upon current provisions of the Internal
Revenue Code, the Treasury regulations promulgated thereunder and judicial or
ruling authority, all of which are subject to change, which change may be
retroactive. Moreover, there are no cases or Internal Revenue Service rulings on
many of the issues discussed below or on similar transactions involving debt
instruments and equity issued by a trust with terms similar to those of the
notes and the certificates, respectively, and no ruling on any of the issues
discussed below will be sought from the Internal Revenue Service. The opinions
of our counsel (described below) are not binding on the IRS or the courts. As a
result, the IRS may disagree with all or a part of the discussion below. For
purposes of the following summary, references to the trust, the notes, the
certificates and related terms, parties and documents shall be deemed to refer,
unless otherwise specified herein, to each trust and the notes, certificates and
related terms, parties and documents applicable to that trust.
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PERSONS CONSIDERING THE PURCHASE OF NOTES OR CERTIFICATES SHOULD CONSULT
THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF THE UNITED STATES FEDERAL
TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING
UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
TAX CHARACTERIZATION OF EACH TRUST
Our tax counsel has prepared or reviewed the statements in the prospectus
under the heading "Material Federal Income Tax Consequences" herein and is of
the opinion that, to the extent that such statements constitute matters of law
or legal conclusions and except to the extent qualified herein, those statements
are correct in all material respects. In addition, upon the sale of each series,
our tax counsel will deliver an opinion, subject to the assumptions and
qualifications set forth therein, that under current law, the trust on the date
of the sale of the securities 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 assumption that the terms of the owner
trust agreement and related documents will be complied with, and on counsel's
conclusions that (1) the trust does not have the characteristics necessary for a
business trust to be classified as an association taxable as a corporation and
(2) either the nature of the income of the trust will exempt it from the rule
regarding the taxation of publicly traded partnerships as corporations or the
trust will otherwise qualify for an exemption from the rules governing publicly
traded partnerships.
Opinions of counsel are not binding on the IRS. If the trust were taxable
as a corporation for federal income tax purposes, the trust would be subject to
corporate income tax on its taxable income. The trust's taxable income would
include all its income on the contracts, possibly reduced by its interest
expense on some or all of the classes of notes. Any corporate income tax could
materially reduce cash available to make payments on the notes and distributions
on the certificates. In addition, certificateholders could be liable for any tax
that is unpaid by the trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The parties to the indenture have
agreed, and the noteholders by their purchase of notes will be deemed to have
agreed, to treat the notes as debt for United States federal income tax
purposes. Upon the issuance of each Series, our tax counsel will deliver an
opinion, subject to the assumptions and qualifications set forth therein, that,
although there is no specific authority with respect to the characterization for
federal income tax purposes of securities having terms similar to the notes, the
notes (other than notes held by the trust, the insurer, if any, or any of their
respective affiliates) will be characterized as debt for United States federal
income tax purposes. The discussion below assumes this characterization of the
notes is correct.
Stated Interest. Payments of "qualified stated interest" (defined below)
are includible as ordinary interest income by a holder of a debt obligation at
the time those payments are received or accrued in accordance with the holder's
regular method of tax accounting. The stated interest on the notes will
constitute qualified stated interest and, as a result, the stated interest will
be includible as ordinary income by each U.S. Holder either at the time those
payments are received or accrued depending upon whether the U.S. Holder is a
cash or accrual basis taxpayer, respectively.
Original Issue Discount. Unless a note is a Short-Term Note (as described
below), it will be treated as issued with original issue discount, also known as
OID, if the excess of the note's "stated redemption price at maturity" over the
issue price equals or exceeds a de minimis amount equal to 1/4 of 1 percent of
the note's stated redemption price at maturity multiplied by the number of
complete years (based on the anticipated weighted average life of a note) to its
maturity. A holder of a note must include OID in gross income as ordinary
interest income as it accrues under a method taking into account an economic
accrual of the discount regardless of the holder's normal method of tax
accounting. In general, OID must be included in income in advance of the receipt
of the cash representing that income. The amount of any de minimis OID must be
included in income as principal payments are received on a note, in the
proportion that each payment bears to the original principal amount of the note.
The issue price of a note will generally be the initial offering price at
which a substantial amount of the notes are sold for money (other than sales to
bond houses and brokers). The trust intends to treat the issue
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price as including, in addition, the amount paid by the noteholder for accrued
interest, if any, that relates to a period prior to the Closing Date. Under
applicable Treasury regulations governing the accrual of OID, the stated
redemption price at maturity is the sum of all payments on the note other than
any "qualified stated interest" payments. Qualified stated interest is generally
defined as interest that is unconditionally payable at least annually based upon
a single fixed rate or certain variable rates.
The holder of a note issued with OID must include in gross income, for all
days during its taxable year on which it holds that note, the sum of the "daily
portions" of the OID. The daily portions are computed by allocating to each day
during a taxable year a pro rata portion of the OID that accrued during the
relevant accrual period(s). In the case of an obligation the principal on which
is subject to prepayment as a result of prepayments on the underlying collateral
such as the notes, OID is computed by taking into account the anticipated rate
of prepayments assumed in pricing the debt instrument. The Prepayment Assumption
that will be used in determining the rate of accrual of OID, premium and market
discount, if any, will be provided in the related prospectus supplement. The
amount of OID that will accrue during an accrual period (generally the period
between interest payments or compounding dates) is the excess, if any, of the
sum of (a) the present value of all payments remaining to be made on the note as
of the close of the accrual period and (b) the payments during the accrual
period of amounts included in the stated redemption price of the note, over the
"adjusted issue price" of the note as of the beginning of the accrual period. An
"accrual period" is the period over which OID accrues, and may be of any length,
provided that each accrual period is no longer than one year and each scheduled
payment of interest or principal occurs on either the last day or the first day
of an accrual period. The trust intends to report OID on the basis of an accrual
period that corresponds to the interval between Distribution Dates. The adjusted
issue price of a note is the sum of its issue price plus prior accruals of OID,
reduced by the total payments made with respect to the note in all prior
periods, other than payments of qualified stated interest. The present value of
the remaining payments is determined on the basis of three factors: (1) the
original yield to maturity of the note (determined on the basis of compounding
at the end of each accrual period and properly adjusted for the length of the
accrual period), (2) events which have occurred before the end of the accrual
period and (3) the original Prepayment Assumption.
The effect of this method is to increase the portions of OID required to be
included in income by a noteholder to take into account prepayments on the
contracts at a rate that exceeds the Prepayment Assumption, and to decrease (but
not below zero for any period) the portions of OID required to be included in
income by a noteholder to take into account prepayments with respect to the
contracts at a rate that is slower than the Prepayment Assumption. Although OID
will be reported to noteholders based on the Prepayment Assumption, no
representation is made to noteholders that the contracts will be prepaid at that
rate or at any other rate.
Acquisition Premium on Notes. A U.S. Holder of a note issued with OID which
acquires the note other than at original issuance for an amount that exceeds the
adjusted issue price of the note but is less than or equal to the sum of all
remaining amounts then payable under the note other than qualified stated
interest will be considered to have paid an "acquisition premium." Under the
acquisition premium rules, the amount of OID which a U.S. Holder must include in
income with respect to the note for any taxable year will be reduced by the
portion of the acquisition premium properly allocable to that year.
Bond Premium. Generally, if a U.S. Holder acquires a note for an amount
that exceeds the sum of all remaining amounts then payable under the note (other
than qualified stated interest), the U.S. Holder may elect to treat the excess
as "amortizable bond premium."
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If the bond premium is amortized, the amount of stated interest on the note
that must be included in the U.S. Holder's income for each period ending on an
interest payment date or at the maturity date, as the case may be, will (except
as Treasury regulations may otherwise provide) be reduced by the portion of bond
premium allocable to that period based on the note's yield to maturity. If an
election to amortize bond premium is not made, a U.S. Holder will receive a tax
benefit from the premium only in computing the U.S. Holder's gain or loss upon
the sale or other taxable disposition of the note, or upon the full or partial
payment of principal.
An election to amortize bond premium will apply to amortizable bond premium
on all notes and other bonds the interest on which is includible in the U.S.
Holder's gross income and that are held at, or acquired after, the beginning of
the U.S. Holder's taxable year as to which the election is made. The election
may be revoked only with the consent of the IRS. A U.S. Holder which elects to
amortize bond premium must reduce its adjusted basis in the note by the amount
of the allowable amortization.
Market Discount on Notes. If a U.S. Holder acquires a note at a "market
discount," some or all of any gain recognized by the U.S. Holder upon a
subsequent sale or other disposition of the note, or upon the full or partial
payment of principal, may be treated as ordinary income, and not capital gain.
Subject to a statutory de minimis exception, "market discount" is the excess, if
any, of (1) the stated redemption price at maturity of a debt obligation (or in
the case of a note issued with OID, the "revised issue price") over (2) the
taxpayer's adjusted tax basis in the debt obligation immediately after its
acquisition. The "revised issue price" of a debt obligation generally equals the
sum of its issue price and the total amount of OID includible in the gross
income of all holders for periods before the acquisition of the debt obligation
by the current holder (without regard to any reduction in that income resulting
from any prior purchase at an acquisition premium) and less any cash payments
(other than qualified stated interest) already made in respect of the debt
obligation.
In the case of a note acquired by a U.S. Holder at the note's original
issue, that note will not be considered to have been purchased by the holder at
a market discount if the purchase price paid for the note equals or exceeds the
note's issue price.
A U.S. Holder of a note acquired at a market discount may elect to amortize
the market discount into income, through the use of either the straight-line
inclusion method or the elective constant yield method. The election will apply
to all notes and other obligations acquired by the electing holder at a market
discount during the taxable year for which the election is made, and all
subsequent taxable years, unless the IRS consents to a revocation of the
election. If an election is made to include market discount in income currently,
the basis of the note in the hands of the holder will be increased by the market
discount thereon as it is included in income.
Unless a U.S. Holder which acquires a note at a market discount elects to
amortize the market discount into income, any gain recognized upon a subsequent
disposition of the notes (other than in connection with some nonrecognition
transactions), or upon the full or partial payment of principal, will be treated
as ordinary income to the extent of the amount of the market discount that would
otherwise have been amortized into income as of the disposition (utilizing the
straight-line method). In addition, a U.S. Holder may be required to defer
deductions for any interest paid on indebtedness incurred or continued to
purchase or carry the note in an amount not exceeding the deferred income, until
that income is realized.
The Clinton administration's 1999 budget proposal includes a provision
which, if passed, would require accrual basis taxpayers to include market
discount in income as it accrues. Under this proposal, a noteholder's yield for
purposes of determining and accruing market discount would be limited to the
greater of (1) the original yield to maturity of the note plus 5 percent or (2)
the applicable federal rate at the time the holder acquired the note plus 5
percent. There can be no certainty, however, as to whether this provision of the
Clinton administration's budget proposal will be enacted or what its effective
date would be.
Total Accrual Election. As an alternative to separately accruing stated
interest, OID, de minimis OID, market discount, de minimis market discount, bond
premium and acquisition premium, a holder of a note (other than a Short-Term
Note, as described below) may elect to include all income that accrues on the
note using the constant yield method. If a noteholder makes this election,
income on a note will be calculated as
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though (1) the issue price of the note were equal to the noteholder's adjusted
basis in the note immediately after its acquisition by the noteholder; (2) the
note were issued on the noteholder's acquisition date; and (3) none of the
interest payments on the note were "qualified stated interest." A noteholder may
make this election for a note that has premium or market discount, respectively,
only if the noteholder makes, or has previously made, an election to amortize
bond premium or to include market discount in income currently. See "--Market
Discount" and "--Amortizable Bond Premium."
Short-Term Notes. A holder of a Short Term Note may be subject to special
rules. An accrual basis holder of a Short-Term Note (and some cash method
holders as set forth in Section 1281 of the Internal Revenue 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 Internal Revenue 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. Special
rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
Sale or Other Disposition. If a noteholder sells a note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale (not including accrued but unpaid interest not previously
included in income) and the holder's adjusted tax basis in the note. The
adjusted tax basis of a note to a particular noteholder will equal the holder's
cost for the note, increased by any market discount, acquisition discount, OID
and gain previously included by the noteholder in income with respect to the
note and decreased by the amount of bond premium, if any, previously amortized
and by the amount of principal payments previously received by the noteholder
with respect to the note. Any gain or loss and any gain or loss realized upon
prepayment of a note (other than unamortized OID, whether or not accrued) will
be capital gain or loss if the note was held as a capital asset, except for gain
representing accrued interest, accrued market discount or OID not previously
included in income and will be long-term capital gain or loss if the holder held
the note for more than one year. The maximum rate of federal income taxation on
net long-term capital gain realized by a non-corporation is 20%. Capital losses
generally may be used only to offset capital gains.
TAXATION OF NON-U.S. HOLDERS OF NOTES
Payments of interest (including OID, if any), principal and premium, if
any, on the notes to any Non-U.S. Holder will not be subject to United States
federal withholding tax, providing that, in the case of interest, that person
(1) does not own, actually or constructively, 10% or more of the total combined
voting power of all classes of the trust's or the seller's equity that is
entitled to vote, (2) is not a controlled foreign corporation related, directly
or indirectly, to the trust or the seller through equity ownership and (3) is
not a bank receiving interest described in Section 881(c)(3)(A) of the Internal
Revenue Code, and provided that the statement requirement described in the next
sentence has been fulfilled with respect to the beneficial owner.
Sections 871(h) and 881(c) of the Internal Revenue Code require that, in order
to obtain the exemption from withholding tax described in the previous sentence,
either the beneficial owner of the note, or a Financial Institution and that is
holding the note on behalf of the beneficial owner, file a statement with the
relevant United States withholding agent to the effect that the beneficial owner
of the note is not a United States person. Under temporary Treasury regulations
which apply to both stated interest and sale or exchange proceeds if either is
paid with respect to a note on or before December 31, 2000, the requirement will
be fulfilled if (1) the beneficial owner of a note certifies on IRS Form W-8,
under penalties of perjury, that it is not a United States person and provides
its name and address and (2) any Financial Institution holding the note on
behalf of the beneficial owner files a statement with the relevant United States
withholding agent to the effect that it has received the statement described
above from the noteholder (and furnishes the relevant United States withholding
agent with a copy thereof). Recently issued Final Regulations also provide that
the
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requirement of Sections 871(h) and 881(c) generally will be fulfilled if
beneficial owners (including partners of some foreign partnerships, as well as
some foreign partnerships) meet the two conditions set forth in the preceding
sentence. However, a beneficial owner that is a foreign estate or trust (or
fiduciary thereof), a foreign partnership that has entered into a withholding
agreement with the IRS, or a Non-U.S. Holder holding a note through its United
States branch will be required to provide its "taxpayer identification number"
in addition to its name and address on Form W-8. Foreign partnerships and their
partners should consult their tax advisors regarding possible additional
reporting requirements.
Notwithstanding the foregoing, if interest or other income received with
respect to the note is effectively connected with a United States trade or
business conducted by a Non-U.S. Holder, the noteholder, although exempt from
the withholding tax described in the preceding paragraph, may be subject to
United States federal income tax on the interest in the same manner as if it
were a U.S. Holder. In addition, if the noteholder is a corporation, it may be
subject to a branch profits tax equal to 30% (or a lower treaty rate) of its
effectively connected earnings and profits for the taxable year, subject to
adjustments.
A Non-U.S. Holder will not be subject to United States federal income tax
on gain realized on the sale, exchange or other disposition of a note, unless
(1) the noteholder is an individual who is present in the United States for
183 days or more in the taxable year of disposition, and either (a) the
individual has a "tax home" (as defined in Internal Revenue Code Section
911(d)(3)) in the United States (unless the gain is attributable to a fixed
place of business in a foreign country maintained by the individual and has been
subject to foreign tax of at least 10%) or (b) the gain is attributable to an
office or other fixed place of business maintained by the individual in the
United States or (2) the gain is effectively connected with the conduct by the
noteholder of a trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The indenture trustee will be required to report annually to the IRS, and
to each noteholder of record, relevant information, including the noteholder's
name, address and taxpayer identification number (either the noteholder's Social
Security number or its employer identification number, as the case may be), the
aggregate amount of principal and interest paid and the amount of tax withheld,
if any.
In the event a U.S. Holder subject to the reporting requirements described
above fails to supply its correct taxpayer identification number in the manner
required by applicable law or underreports its tax liability, "backup"
withholding of tax equal to 31% of each payment of interest and principal on the
notes may be required. This backup withholding is not an additional tax and may
be credited against the noteholder's United States federal income tax liability,
provided that the required information is furnished to the IRS.
Under current Treasury regulations, information reporting and backup
withholding will not apply to payments made to a noteholder that is a Non-U.S.
Holder if the certifications required by Section 871(h) and 881(c) of the
Internal Revenue Code (described above) are received, provided that the payer
does not have actual knowledge that the payee is a United States person.
The Final Regulations modify the backup withholding and information
reporting procedures in some respects for payments made after December 31, 2000.
Prospective investors are urged to consult their tax advisors regarding the
application of the backup withholding and information reporting rules.
Possible Alternative Treatments of the Notes. If, contrary to the opinion
of our tax counsel, the IRS successfully asserted that one or more of the notes
did not represent debt for federal income tax purposes, the notes might be
treated as equity interests in the trust. If so treated, the trust might be
taxable as a corporation with the adverse consequences described above (and the
trust would not be able to reduce its taxable income by deductions for interest
expense on notes recharacterized as equity). Alternatively, except as otherwise
provide in the related prospectus supplement, the trust might be treated as a
publicly traded partnership that would not be taxable as a corporation because
it would meet the qualifying income tests. Nonetheless, treatment of the notes
as equity interests in a publicly traded partnership could have adverse tax
consequences to some holders. For example, the interest paid to some tax-exempt
entities (including pension funds) would be subject to tax as "unrelated
business taxable income," income to foreign holders generally would be
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subject to U.S. tax and U.S. tax return filing and withholding requirements, and
individual holders might be subject to limitations on their ability to deduct
their share of trust expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
The following describes the material federal income tax consequences to the
trust and the certificateholders in the event that equity interests in the trust
are held by two or more persons.
Treatment of the Trust as a Partnership. With respect to any series of
certificates held by two or more parties, the seller and the servicer will
agree, and the certificateholders will be deemed to have agreed by their
purchase of certificates, to treat the trust as a partnership for purposes of
federal and state income tax, franchise tax and any other tax measured in whole
or in part by income, with the assets of the partnership being the assets held
by the trust, the partners of the partnership being the seller and the
certificateholders, and the notes being debt of the partnership. However, the
proper characterization of the arrangement involving the trust, the
certificates, the notes, the seller and the servicer is not clear because there
is no authority on transactions closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the certificates generally have features characteristic of debt, the
certificates might be considered debt of the seller or the trust. Any
alternative characterization would not result in materially adverse tax
consequences to certificateholders as compared to the consequences from
treatment of the certificates as equity in a partnership, described below. The
following discussion assumes that the certificates represent equity interests in
a partnership.
Partnership Taxation. Assuming that the trust is classified as a
partnership, the trust will not be subject to federal income tax. Rather, each
certificateholder will be required to separately take into account such holder's
allocated share of income, gains, losses, deductions and credits of the trust.
The trust's income will consist primarily of interest and finance charges earned
on the contracts (including appropriate adjustments for market discount, OID and
bond premium) and any gain upon collection or disposition of contracts. The
trust's deductions will consist primarily of interest accruing with respect to
the notes, servicing and other fees, and losses or deductions upon collection or
disposition of contracts.
The tax items of a partnership are allocable to the partners in accordance
with the Internal Revenue Code, Treasury regulations and the partnership
agreement (here, the owner trust agreement and related documents). The owner
trust agreement will provide, in general, that the certificateholders will be
allocated taxable income of the trust for each month equal to the sum of
(1) the interest that accrues on the certificates in accordance with their terms
for that month, including interest accruing at the applicable interest rate for
that month and interest on amounts previously due on the certificates but not
yet distributed; (2) any trust income attributable to discount on the contracts
that corresponds to any excess of the principal amount of the certificates over
their initial issue price; (3) prepayment premium payable (if any) to the
certificateholders for that month; and (4) any other amounts of income payable
to the certificateholders for that month. The allocation described above will be
reduced by any amortization by the trust of premium on contracts that
corresponds to any excess of the issue price of certificates over their
principal amount. All remaining taxable income of the trust will be allocated to
the seller. Based on the economic arrangement of the parties, this approach for
allocating trust income should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not require a
greater amount of income to be allocated to certificateholders. Moreover, even
under the foregoing method of allocation, certificateholders may be allocated
income equal to the entire interest rate relating to the certificates plus the
other items described above even though the trust might not have sufficient cash
to make current cash distributions of that amount. Thus, cash basis holders will
in effect be required to report income from the certificates on the accrual
basis and certificateholders may become liable for taxes on trust income even if
they have not received cash from the trust to pay those taxes. In addition,
because tax allocations and tax reporting will be done on a uniform basis for
all certificateholders but certificateholders may be purchasing certificates at
different times and at different prices, certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the trust.
Certificateholders will be required to report items of income, loss and
deduction allocated to them by the trust in the taxable year in which or with
which the taxable year of the trust to which those allocations relate
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ends. The Internal Revenue Code prescribes rules for determining the taxable
year of the trust. It is likely that, under these rules, the taxable year of the
trust will be the calendar year. However, in the event that all of the
certificateholders possessing a 5 percent or greater interest in the equity or
the profits of the trust share a taxable year that is other than the calendar
year, the trust would be required to use that year as its taxable year.
All of the taxable income allocated to a certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated business
taxable income" generally taxable to the holder under the Internal Revenue Code.
Limitations on Losses and Deductions. In the event that losses or
deductions are allocated to certificateholders in the circumstances described
above, the following rules will apply. Under the "passive activity" rules of the
Internal Revenue Code, any loss allocated to a certificateholder which is a
natural person, estate, trust, closely held "C" corporation, or personal service
corporation would be a passive activity loss while, for purposes of those rules,
income allocated to that certificateholder would be "portfolio income."
Limitations regarding the deductibility of passive activity losses are imposed
under the Internal Revenue Code. Moreover, any losses allocated to a
certificateholder may be capital losses.
An individual taxpayer's share of expenses of the trust (including fees to
the servicer but not interest expense) would be miscellaneous itemized
deductions and thus allowable as a deduction only to the extent that in the
aggregate all of those expenses exceed two percent of the individual taxpayer's
adjusted gross income. Furthermore, some otherwise allowable itemized deductions
will be reduced, but not by more than 80%, by an amount equal to 3% of the
individual's adjusted gross income in excess of a statutorily defined threshold.
Therefore, those deductions might be disallowed to the individual in whole or in
part and might result in the holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to the holder over the life of
the trust.
The trust intends to make all tax calculations relating to income and
allocations to certificateholders on an aggregate basis. If the IRS were to
require these calculations to be made separately for each contract, the trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on certificateholders.
Discount and Premium. It is believed that the contracts were not issued
with OID, and, therefore, the trust should not have OID income. However, the
purchase price paid by the trust for the contracts may be greater or less than
the remaining principal balance of the contracts at the time of purchase. If so,
the contracts will have been acquired at a premium or discount, as the case may
be. (As indicated above, the trust will make this calculation on an aggregate
basis, but might be required to recompute it on a contract-by-contract basis.)
If the trust acquires the contracts at a market discount or premium, the
trust will elect to include any discount in income currently as it accrues over
the life of the contracts or to offset any premium against interest income on
the contracts. As indicated above, a portion of the market discount income or
premium deduction may be allocated to certificateholders.
Section 708 Termination. Under Section 708 of the Internal Revenue Code,
the trust will be deemed to terminate for federal income tax purposes if 50% or
more of the capital and profits interests in the trust are sold or exchanged
within a 12-month period. If a termination of the trust occurs, the trust will
be considered to contribute its assets to a new partnership in exchange for an
interest in the new partnership and immediately thereafter, the terminated
partnership will be considered to have distributed interests in the new
partnership to all of its partners (including the purchasing partner who caused
the termination) in proportion to their interests in the terminated partnership
in liquidation of the terminated partnership. The trust will not comply with the
technical requirements that might apply when a constructive termination occurs.
As a result, the trust may be subject to tax penalties and may incur additional
expenses if it is required to comply with those requirements. Furthermore, the
trust might not be able to comply due to lack of data.
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Distributions to Certificateholders. Certificateholders generally will not
recognize gain or loss with respect to distributions from the trust. A
certificateholder will, however, recognize gain to the extent any money
distributed exceeds the certificateholder's adjusted basis in the certificates
(as described below under "--Disposition of Certificates") immediately before
distribution, and a certificateholder will recognize loss upon termination of
the trust or termination of the certificateholder's interest in the trust if the
trust only distributes money to the certificateholder and the amount distributed
is less than the certificateholder's adjusted basis in the certificates. Any
resulting gain or loss would be long-term capital gain or loss if the holding
period of the certificates were more than one year, assuming that the
certificates are held as capital assets.
Disposition of Certificates. Generally, gain or loss will be recognized on
a sale of certificates in an amount equal to the difference between the amount
realized and the seller's tax basis in the certificates sold. A
certificateholder's tax basis in a certificate will generally equal the holder's
cost increased by the holder's share of trust income (includible in income) and
decreased by any distributions received with respect to that certificate. In
addition, both the tax basis in the certificates and the amount realized on a
sale of a certificate would include the holder's share of the notes and other
liabilities of the trust. A holder acquiring certificates at different prices
may be required to maintain a single aggregate adjusted tax basis in those
certificates, and, upon sale or other disposition of some of the certificates,
allocate a portion of the aggregate tax basis to the certificates sold (rather
than maintaining a separate tax basis in each certificate for purposes of
computing gain or loss on a sale of that certificate). Assuming the certificates
are held as capital assets, the gain or loss will be capital gain or loss and
will be long-term capital gain or loss if the certificates are held for more
than one year.
Any gain on the sale of a certificate attributable to the holder's share of
unrecognized accrued market discount on the contracts would generally be treated
as ordinary income to the holder and would give rise to special tax reporting
requirements. The trust does not expect to have any other assets that would give
rise to special reporting requirements. Thus, to avoid those special reporting
requirements, the trust will elect to include market discount income as it
accrues.
If a certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the certificates that exceeds the aggregate
cash distributions with respect thereto, the excess will generally give rise to
a capital loss upon the retirement of the certificates.
Allocations Between Transferors and Transferees. In general, the trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the certificateholders in
proportion to the principal amount of certificates owned by them as of the close
of the last day of that month. As a result, a holder purchasing certificates may
be allocated tax items (which will affect its tax liability and tax basis)
attributable to periods before the actual transaction.
The use of a monthly convention may not be permitted by existing Treasury
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the trust might be reallocated among the certificateholders. The seller is
authorized to revise the trust's method of allocation between transferors and
transferees to conform to a method permitted by future Treasury regulations.
Section 754 Election. In the event that a certificateholder sells its
certificates at a profit (loss), the purchasing certificateholder will have a
higher (lower) basis in the certificates than the selling certificateholder had.
The tax basis of the trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the trust were to file an election under Section 754 of
the Internal Revenue Code. In order to avoid the administrative complexities
that would be involved in keeping accurate accounting records, as well as
potentially onerous information reporting requirements, the trust will not make
this election. As a result, certificateholders might be allocated a greater or
lesser amount of trust income than would be appropriate based on their own
purchase price for certificates.
Administrative Matters. The owner trustee is required to keep or have kept
complete and accurate books of the trust. The books will be maintained for
financial reporting and tax purposes on an accrual basis and
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the fiscal year of the trust, if not the calendar year, will be set forth in the
related prospectus supplement. The owner trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
trust and will report each certificateholder's allocable share of items of trust
income and expense to holders and the IRS on Schedule K-1. The trust will
provide the Schedule K-1 information to nominees that fail to provide the trust
with the information statement described below and those nominees will be
required to forward the relevant information to the beneficial owners of the
certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the trust or be subject to penalties unless the
holder notifies the IRS of all inconsistencies.
Under Section 6031 of the Internal Revenue Code, any person that holds
certificates as a nominee at any time during a calendar year is required to
furnish the trust with a statement containing relevant information on the
nominee, the beneficial owners and the certificates so held. This information
includes (1) the name, address and taxpayer identification number of the nominee
and (2) as to each beneficial owner (A) the name, address and taxpayer
identification number of that person, (B) whether that person is a United States
person, a tax-exempt entity or a foreign government, an international
organization, or any wholly-owned agency or instrumentality of either of the
foregoing and (C) relevant information on certificates that were held, bought or
sold on behalf of that person throughout the year. In addition, brokers and
financial institutions that hold certificates through a nominee are required to
furnish directly to the trust information as to themselves and their ownership
of certificates. A clearing agency registered under Section 17A of the Exchange
Act is not required to furnish an information statement to the trust. The
information referred to above for any calendar year must be furnished to the
trust on or before the following January 31. Nominees, brokers and financial
institutions that fail to provide the trust with the information described above
may be subject to penalties.
The seller will be designated as the tax matters partner in the related
owner trust agreement and, in that capacity, will be responsible for
representing the certificateholders in any dispute with the IRS. The Internal
Revenue Code provides for administrative examination of a partnership as if the
partnership were a separate and distinct taxpayer. Generally, the statute of
limitations for partnership items does not expire before three years after the
date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the trust by the appropriate
taxing authorities could result in an adjustment of the returns of the
certificateholders, and, under some circumstances, a certificateholder may be
precluded from separately litigating a proposed adjustment to the items of the
trust. An adjustment could also result in an audit of a certificateholder's
returns and adjustments of items not related to the income and losses of the
trust. While the certificateholders may participate in any adjudicative process
that is undergone at the trust level in arriving at this determination, the
certificateholders will be precluded from separately litigating a proposed
adjustment to the items of the trust. As the tax matters partner, the seller may
enter into a binding settlement on behalf of all certificateholders with a less
than 1 percent interest in the trust (except for any group of certificateholders
with an aggregate interest of 5 percent or more in trust profits that elects to
form a notice group or certificateholders who otherwise notify the IRS that the
seller is not authorized to settle on their behalf). In the absence of a
proceeding at the trust level, a certificateholder under some circumstances may
pursue a claim for credit or refund on its own behalf by filing a request for
administrative adjustment of a trust item. Each certificateholder is advised to
consult its own tax advisor with respect to the impact of these procedures on
its particular case.
TAXATION OF NON-U.S. HOLDERS OF CERTIFICATES
It is not clear whether the trust would be considered to be engaged in a
trade or business in the United States for purposes of federal withholding taxes
with respect to Non-U.S. Holders of certificates because there is no clear
authority dealing with that issue under facts substantially similar to those
described herein. Although it is not expected that the trust would be engaged in
a trade or business in the United States for these purposes, the trust will
withhold as if it were so engaged in order to protect the trust from possible
adverse consequences of a failure to withhold. The trust expects to withhold on
the portion of its taxable income that is allocable to Non-U.S. Holders of
certificates pursuant to Section 1446 of the Internal Revenue Code, as if that
income were effectively connected to a U.S. trade or business, at a rate of 35%
for Non-U.S. Holders of certificates that are taxable as corporations and 39.6%
for all other Non-U.S. Holders of certificates. The Final Regulations or
subsequent adoption of Treasury regulations or the issuance of other
45
<PAGE>
administrative pronouncements may require the trust to change its withholding
procedures. In determining a holder's withholding status, the trust may rely on
IRS Form W-8, IRS Form W-9 or the holder's certification of nonforeign status
signed under penalties of perjury.
Each Non-U.S. Holder of a certificate might be required to file a U.S.
individual or corporate income tax return (including, in the case of a
corporation, the branch profits tax) on its share of the trust's income. Each
Non-U.S. Holder of a certificate must obtain a taxpayer identification number
from the IRS and submit that number to the trust on Form W-8 in order to assure
appropriate crediting of the taxes withheld. A Non-U.S. Holder of a certificate
generally would be entitled to file with the IRS a claim for refund with respect
to taxes withheld by the trust, taking the position that no taxes were due
because the trust was not engaged in a U.S. trade or business. However, interest
payments made (or accrued) to a Non-U.S. Holder of a certificate generally will
be considered guaranteed payments to the extent those payments are determined
without regard to the income of the trust. If these interest payments are
properly characterized as guaranteed payments, then the interest will not be
considered "portfolio interest." As a result, a Non-U.S. Holder of a certificate
will be subject to United States federal income tax and withholding tax at a
rate of 30 percent, unless reduced or eliminated pursuant to an applicable
treaty. In that case, a Non-U.S. Holder of a certificate would only be entitled
to claim a refund for that portion of the taxes in excess of the taxes that
should be withheld with respect to the guaranteed payments.
Backup Withholding. Distributions made on the certificates and proceeds
from the sale of the certificates will be subject to a "backup" withholding tax
of 31% if, in general, the certificateholder fails to comply with relevant
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Internal Revenue Code.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH
REGARD TO THE UNITED STATES FEDERAL TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP
OR DISPOSITION OF INTERESTS IN THE NOTES OR THE CERTIFICATES, AS WELL AS THE
GIFT, ESTATE, ALTERNATIVE MINIMUM TAX CONSEQUENCES AND THE TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN COUNTRY OR OTHER TAXING
JURISDICTION.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended, which is generally referred to as "ERISA" and Section 4975 of the
Internal Revenue Code prohibit a pension, profit-sharing or other employee
benefit plan, as well as individual retirement accounts and some types of Keogh
Plans, from engaging in transactions involving "plan assets" with persons that
are "parties in interest" under ERISA or "disqualified persons" under the
Internal Revenue Code with respect to that benefit plan. ERISA also imposes
duties on persons who are fiduciaries of benefit plans subject to ERISA and
prohibits transactions between a benefit plan and parties in interest with
respect to those benefit plans. Under ERISA, any person who exercises any
authority or control with respect to the management or disposition of the assets
of a benefit plan is considered to be a fiduciary of that benefit plan (subject
to exceptions not here relevant). A violation of these "prohibited transaction"
rules may result in an excise tax or other penalties and liabilities under ERISA
and the Internal Revenue Code for those persons.
Transactions involving a trust might be deemed to constitute prohibited
transactions under ERISA and the Internal Revenue Code with respect to a benefit
plan that purchased notes or certificates if assets of the trust were deemed to
be assets of the benefit plan. Under the Plan Asset Regulation, the assets of a
trust would be treated as plan assets of a benefit plan for the purposes of
ERISA and the Internal Revenue Code if the benefit plan acquired an "equity
interest" in the trust and none of the exceptions contained in the Plan Assets
Regulation was applicable. An equity interest is defined under the Plan Assets
Regulation as an interest other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features. The likely treatment in this context of notes and certificates of a
given series will be discussed in the related prospectus supplement.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
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<PAGE>
Based on the reasoning of the United States Supreme Court in John Hancock
Life Ins. Co. v. Harris Trust and Sav. Bank, 114 S. Ct. 517 (1993), an insurance
company's general account may be deemed to include assets of the benefit plans
investing in the general account (e.g., through the purchase of an annuity
contract), and the insurance company might be treated as a "party-in-interest"
with respect to a benefit plan by virtue of the investment. Any purchaser that
is an insurance company using the assets of an insurance company general account
should also note that the Small Business Job Protection Act of 1996 added new
Section 401(c) of ERISA relating to the status of the assets of insurance
company general accounts under ERISA and Section 4975 of the Internal Revenue
Code. Pursuant to Section 401(c), the Department of Labor was required to issue
final regulations not later than December 31, 1997 with respect to insurance
policies issued on or before December 31, 1998 that are supported by an
insurer's general account. These regulations are to provide guidance on which
assets held by the insurer constitute "plan assets" for purposes of the
fiduciary responsibility provisions of ERISA and Section 4975 of the Internal
Revenue Code. Section 401(c) also provides that, except in the case of avoidance
of these regulations and actions brought by the Secretary of Labor relating to
breaches of fiduciary duties that also constitute breaches of state or federal
criminal law, until the date that is 18 months after these regulations become
final, no liability under the fiduciary responsibility and prohibited
transaction provisions of ERISA and Section 4975 may result on the basis of a
claim that the assets of the general account of an insurance company constitute
the plan assets of any plan.
As of the date hereof, proposed regulations have been issued by the
Department of Labor and final regulations are expected to be issued in the near
future, although the timing and nature of any final regulation is uncertain. It
should be noted that if these regulations are adopted substantially in the form
in which proposed, these regulations may not exempt assets of insurance company
general accounts from treatment as "plan assets" after December 31, 1998. The
plan asset status of insurance company separate accounts is unaffected by new
Section 401(c) of ERISA, and separate account assets continue to be treated as
the plan assets of any plan invested in a separate account.
DUE TO THE COMPLEXITIES OF THE "PROHIBITED TRANSACTION" RULES AND THE
PENALTIES IMPOSED UPON PERSONS INVOLVED IN PROHIBITED TRANSACTIONS, IT IS
IMPORTANT THAT THE FIDUCIARY OF ANY BENEFIT PLAN CONSIDERING THE PURCHASE OF
SECURITIES CONSULT WITH ITS TAX AND LEGAL ADVISORS REGARDING WHETHER THE ASSETS
OF THE RELATED TRUST WOULD BE CONSIDERED PLAN ASSETS, THE POSSIBILITY OF
EXEMPTIVE RELIEF FROM THE PROHIBITED TRANSACTION RULES AND OTHER ISSUES AND
THEIR POTENTIAL CONSEQUENCES.
ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF A BENEFIT PLAN IS IN NO RESPECT A
REPRESENTATION BY A TRUST OR ANY OTHER PARTY THAT THIS INVESTMENT MEETS ALL
RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY ANY PARTICULAR
BENEFIT PLAN OR THAT THE INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR BENEFIT
PLAN. EACH BENEFIT 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 BENEFIT PLAN AND THE RESTRICTIONS OF ERISA AND
SECTION 4975 OF THE INTERNAL REVENUE CODE.
UNDERWRITING
Subject to the terms and conditions set forth in one or more underwriting
agreements with respect to the securities of a series, the seller will agree to
cause the related trust to sell to the underwriter(s) named therein and in the
related prospectus supplement, and each of the underwriters will severally agree
to purchase, the principal amount of each class of securities, as the case may
be, of the related series set forth in the related underwriting agreement and in
the related prospectus supplement.
In the underwriting agreement with respect to any given series of
securities, the applicable underwriter(s) will agree, subject to the terms and
conditions set forth therein, to purchase all the securities offered by the
related prospectus supplement if any of those securities are purchased.
Each prospectus supplement will either (1) set forth the price at which
each class of securities being offered thereby initially will be offered to the
public and any concessions that may be offered to dealers participating in the
offering of the securities or (2) specify that the related securities are to be
resold by the
47
<PAGE>
underwriter(s) in negotiated transactions at varying prices to be determined at
the time of sale. After the initial public offering of any securities, the
public offering prices and concessions may be changed.
Each underwriting agreement will provide that AutoNation Financial Services
and the seller will indemnify the related underwriters against specified civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
or contribute to payments the several underwriters may be required to make in
respect thereof. The place and time of delivery for any series of securities in
respect of which this prospectus is delivered will be set forth in the
accompanying prospectus supplement.
Pursuant to each underwriting agreement with respect to a given series of
securities, the closing of the sale of any class of securities subject to the
underwriting agreement will be conditioned on the closing of the sale of all
other classes of securities of that series.
LEGAL MATTERS
Relevant legal matters relating to the issuance of the securities of any
series will be passed upon for the related trust and the seller by Weil, Gotshal
& Manges LLP, New York, New York. Relevant legal matters relating to the
issuance of the securities will be passed upon for the underwriters by Skadden,
Arps, Slate, Meagher & Flom LLP, New York, New York. In addition, relevant
matters of Florida law will be passed upon for the related trust and the seller
by Tripp Scott, P.A., Fort Lauderdale, Florida.
REPORTS TO SECURITYHOLDERS
Unless and until securities in definitive registered form are issued,
monthly and annual reports containing information concerning the trust and
prepared by the servicer will be sent on behalf of the trust to Cede & Co., as
nominee of DTC and the registered holder of the related global securities,
pursuant to the sale and servicing agreement. These reports will not constitute
financial statements prepared in accordance with generally accepted accounting
principles. The servicer does not intend to send any financial reports of
AutoNation Financial Services to securityholders. The servicer will file with
the SEC any periodic reports with respect to the trust which are required under
the Exchange Act and the rules and regulations of the SEC thereunder.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement with the SEC relating to the securities.
This prospectus is part of the registration statement, but the registration
statement includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. You may also request copies of these documents, upon payment of a
duplicating fee, by writing to the SEC. Please call the SEC at (800) SEC-0330
for further information on the operation of the public reference rooms. Our
filings with the SEC are also available to the public on the SEC's Internet site
(http://www.sec.gov).
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the most recently printed information rather than contradictory
information included in this prospectus or the related prospectus supplement.
As a recipient of this prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents (unless the
exhibits are specifically incorporated by reference), at no cost, by writing or
calling us at: (954) 769-4555.
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<PAGE>
GLOSSARY
"CERTIFICATE PRINCIPAL BALANCE" means, with respect to each class of
certificates, the stated certificate principal balance specified in the related
prospectus supplement.
"CLOSING DATE" means, with respect to any series of securities, the date of
initial issuance of that series of securities.
"COLLECTION PERIOD" has the meaning set forth in the applicable prospectus
supplement.
"CUT-OFF DATE" has the meaning set forth in the applicable prospectus
supplement.
"DEFAULTED CONTRACT" has the meaning set forth in the applicable prospectus
supplement.
"DISTRIBUTION DATE" means, with respect to any series of securities, the
day on which a principal or interest payment is to be made on those securities
(or if that day is not a business day (i.e., a Saturday, Sunday, a day on which
the insurer, if any, is closed or a day on which banking institutions in New
York, New York or in the city in which the indenture trustee's corporate trust
office or the owner trustee's corporate trust office is located are authorized
or obligated by law to be closed), on the next succeeding business day).
"DUE DATE" means, with respect to a motor vehicle contract, the date upon
which a payment on that motor vehicle contract is due.
"ELIGIBLE INVESTMENTS" has the meaning set forth in the applicable
prospectus supplement.
"FINAL REGULATIONS" means the final Treasury regulations which apply to
interest (including OID) and sale or exchange proceeds paid with respect to a
note after December 31, 2000.
"FINANCIAL INSTITUTION" means any securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business.
"LIQUIDATION EXPENSES" means the reasonable out-of-pocket expenses (not
including overhead expenses) incurred by the servicer in connection with the
collection and realization of the full amounts due under any Defaulted Contract
and the repossession and sale of any property acquired in respect thereof which
are not recoverable under any type of motor vehicle insurance policy.
"NET INSURANCE PROCEEDS" means the proceeds paid by any insurer under a
comprehensive and collision insurance policy related to a contract (other than
funds used for the repair of the related financed vehicle or proceeds released
to the related obligor in excess of the principal balance of the contract, and
all accrued interest thereon and all other amounts due thereunder), after
reimbursement to the servicer of expenses recoverable under that insurance
policy.
"NET LIQUIDATION PROCEEDS" means, with respect to any contract that becomes
a Defaulted Contract, the amount received by the servicer in respect of that
contract during or after the Collection Period in which that contract becomes a
Defaulted Contract (excluding Liquidation Expenses).
"NON-U.S. HOLDER" means a beneficial owner of a note or certificate, as the
case may be, other than a U.S. Holder or an individual subject to rules
applicable to former citizens and residents of the United States. To the extent
provided in Treasury regulations, a trust which was in existence on August 20,
1996 (other than a trust treated as owned by the grantor under subpart E of part
I of subchapter J of chapter 1 of the Internal Revenue Code), and which was
treated as a United States person on August 19, 1996, may elect to continue to
be treated as a U.S. person (and, therefore, a U.S. Holder) notwithstanding the
previous sentence.
"NOTE PRINCIPAL BALANCE" means, with respect to each class of notes, the
stated note principal balance specified in the related prospectus supplement.
"ORIGINAL POOL BALANCE" means, with respect to any trust, the aggregate
principal balance of the related contracts as of the applicable Cut-Off Date.
"PLAN ASSET REGULATION" means the United States Department of Labor
regulation (29 CFR Section 2510.3-101) concerning the definition of what
constitutes the assets of an employee benefit plan or an individual retirement
account subject to the Employee Retirement Income Security Act of 1974, as
amended.
"POOL BALANCE" means, with respect to any trust as of any date of
determination, the aggregate principal balance of the related contracts.
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"POOL FACTOR" means, with respect to any trust, a six-digit decimal which
the servicer will compute each month indicating the Pool Balance at the end of
the month as a fraction of (1) the Original Pool Balance plus (2) the aggregate
principal balance of any subsequent contracts added to the trust as of the
applicable subsequent Cut-Off Date.
"PREPAYMENT ASSUMPTION" means the method used to assume the anticipated
rate of prepayments in pricing a debt instrument.
"RECORD DATE" means, with respect to any Distribution Date or final
scheduled Distribution Date, the close of business on the business day
immediately prior to that Distribution Date or final scheduled Distribution
Date.
"SHORT-TERM NOTE" means any note that has a fixed maturity date of not more
than one year from the issue date of that note.
"SIMPLE INTEREST METHOD" means the method of calculating interest due on a
motor vehicle contract on a daily basis based on the actual principal balance of
the contract on that date.
"STRIP CERTIFICATES" means any class of certificates entitled to (1)
principal distributions with disproportionate, nominal or no interest
distributions or (2) interest distributions with disproportionate, nominal or no
principal distributions.
"STRIP NOTES" means any class of notes entitled to (1) principal
distributions with disproportionate, nominal or no interest distributions or (2)
interest distributions with disproportionate, nominal or no principal
distributions.
"TRUST ACCOUNTS" means the collection account and any other accounts to be
established with respect to a trust, including any prefunding account, reserve
fund, spread account or yield supplement account, which accounts will be
described in the related prospectus supplement.
"TRUST PROPERTY" means, to the extent specified in the related prospectus
supplement, the property of each trust, which will include:
(1) a pool of motor vehicle retail installment sales contracts, all of
which are secured by new and/or used automobiles and/or light-duty trucks;
(2) documents relating to the contracts, including all servicing
records in hard or electronic form;
(3) collections and all other amounts due under the contracts after
the Cut-Off Date specified in the related prospectus supplement;
(4) liens on the related financed motor vehicles and the rights to
receive proceeds from claims on any related insurance policies covering the
financed motor vehicles or the related obligors;
(5) all amounts on deposit in the applicable trust accounts, including
the related collection account and any other account identified in the
applicable prospectus supplement, including all Eligible Investments
credited thereto (but excluding any investment income from Eligible
Investments which is to be paid to the servicer of the contracts or as
otherwise specified in the related prospectus supplement);
(6) the benefits of any form of credit enhancement identified in the
applicable prospectus supplement;
(7) the right of the seller to cause AutoNation Financial Services to
repurchase any contracts with respect to which it breaches any of its
representations or warranties or its servicing obligations;
(8) any other property specified in the related prospectus supplement;
and
(9) all proceeds of the foregoing.
"U.S. HOLDER" means a beneficial owner of a note or certificate, as the
case may be, that is for United States federal income tax purposes a citizen or
resident of the United States, a corporation, partnership or other entities
created or organized in or under the laws of the United States, or any
political subdivision thereof, an estate the income of which is subject to
United States federal income taxation regardless of its source or a trust with
respect to which a court in the United States is able to exercise primary
authority over its administration and one or more U.S. persons have the
authority to control all of its substantial decisions.
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PRINCIPAL OFFICE OF
AUTONATION RECEIVABLES CORPORATION
200 South Andrews Avenue
Fort Lauderdale, Florida 33301
INDENTURE TRUSTEE
OWNER TRUSTEE
LEGAL ADVISOR TO THE SELLER
AS TO UNITED STATES LAW
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
LEGAL ADVISOR TO THE UNDERWRITERS
AS TO UNITED STATES LAW
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
<PAGE>
PROSPECTUS SUPPLEMENT
ANRC AUTO OWNER TRUST
ISSUER
$ %
CLASS A-1 ASSET-BACKED NOTES
$ %
CLASS A-2 ASSET-BACKED NOTES
$ %
CLASS A-3 ASSET-BACKED NOTES
$ %
CLASS A-4 ASSET-BACKED NOTES
AUTONATION RECEIVABLES CORPORATION
SELLER
AUTONATION FINANCIAL SERVICES CORP.
SERVICER
[ ]
UNDERWRITER
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE
TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THESE NOTES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
WE DO NOT CLAIM THE ACCURACY OF THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS AS OF ANY DATE OTHER THAN THE DATES STATED ON THEIR
RESPECTIVE COVERS.
ALL DEALERS WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS OF THESE NOTES AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS. IN ADDITION, ALL DEALERS SELLING THESE NOTES WILL DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS UNTIL .
------------------
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee............................................ $ 556,000
Printing and Engraving...................................... 50,000
Trustees' Fees.............................................. 100,000
Legal Fees and Expenses..................................... 700,000
Blue Sky Fees and Expenses.................................. 0
Accountants' Fees and Expenses.............................. 50,000
Rating Agency Fees.......................................... 200,000
Miscellaneous Fees.......................................... 50,000
------------
Total.................................................. $ 1,706,000
------------
------------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Set forth below are certain provisions of law and a brief summary of the
relevant provisions of the Certificate of Incorporation and By-Laws of
AutoNation Receivables Corporation (the "Company"). The general effect of such
provisions is to provide indemnification to officers and directors of such
corporation for actions taken in good faith on behalf of the corporation.
Section 145 of the General Corporation Law of Delaware provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe the person's conduct was
unlawful; provided that the termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent will not create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that the person's
conduct was unlawful.
In addition, a Delaware corporation may indemnify officers and directors in
an action by or in the right of the corporation under the same conditions,
except that no indemnification is permitted without judicial approval if the
officer or director is adjudged to be liable to the corporation. Where an
officer or director is successful on the merits or otherwise in the defense of
any action referred to above, the corporation must indemnify such officer or
director against the expenses that such officer or director actually and
reasonably incurred.
The Certificate of Incorporation of the Company provides that a director of
the Company will not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii) under Section
174 of the General Corporation Law of the State of Delaware or (iv) for any
transaction from which the director derived an improper personal benefit.
The By-laws of the Company provide that each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal,
II-1
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administrative or investigative ("proceeding"), by reason of the fact that he or
she is or was a director, officer, agent or other employee (to the extent
authorized by action of the Company's Board of Directors) of the Company (which
term includes any predecessor corporation of the Company) or is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation or of a partnership, limited liability company, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans ("indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent, will
be indemnified and held harmless by the Company to the fullest extent authorized
by the General Corporation Law of the State of Delaware, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment), against all expenses, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification willcontinue as to an indemnitee who has
ceased to be a director, officer, employee or agent and will inure to the
benefit of the indemnitee's heirs, executors and administrators. Expenses
incurred by agents in defending in any action, suit or proceeding, whether
civil, criminal, administrative or investigative may be paid by the Company upon
such terms and conditions, if any, as the Board of Directors deems appropriate.
In addition, the By-laws of the Company allow it to maintain insurance, to
protect itself and any director, officer, employee or agent of the Company,
against any expense, liability or loss, whether or not the Company would have
the power to indemnify such person against such expense, liability or loss under
the General Corporation Law of Delaware.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<S> <C> <C>
1.1 -- Form of underwriting agreement.*
4.2 -- Form of owner trust agreement of ANRC Auto Owner Trust between the seller and the owner trustee.*
4.3 -- Form of indenture between ANRC Auto Owner Trust and the indenture trustee (including forms of
notes).*
5.1 -- Opinion of Weil, Gotshal & Manges LLP re: legality.*
8.1 -- Opinion of Weil, Gotshal & Manges LLP re: tax matters.*
10.1 -- Form of sale and servicing agreement among the seller, the servicer and the indenture trustee.*
10.2 -- Form of administration agreement among ANRC Auto Owner Trust , the seller, the servicer and the
indenture trustee.*
23.1 -- Consent of Weil, Gotshal & Manges LLP (contained in Exhibit 5.1).*
23.2 -- Consent of Weil, Gotshal & Manges LLP (contained in Exhibit 8.1).*
24.1 -- Power of attorney.*
25.1 -- Form T-1 of indenture trustee.*
</TABLE>
- ------------------
* previously filed.
(B) FINANCIAL STATEMENTS
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
(a) Rule 415 Offerings. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
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<PAGE>
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
(b) Filings Incorporating Subsequent Exchange Act Documents by Reference.
The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the trust's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Request for Acceleration of Effective Date. Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) Registration Statement Permitted by Rule 430A. The undersigned
registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this amendment
No. 3 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fort Lauderdale, State of
Florida, on September 24, 1999.
AUTONATION RECEIVABLES CORPORATION,
as originator of the trusts
By: /s/ KATHLEEN W. HYLE
-----------------------------------
Kathleen W. Hyle
President and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON
SEPTEMBER 24, 1999 BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ------------------------------------------ ------------------------------------------------------------------
<S> <C>
/s/ KATHLEEN W. HYLE President (Chief Executive Officer) and Director
- ------------------------------------------
Kathleen W. Hyle
/s/ PETER H. SORENSON* Director
- ------------------------------------------
Peter H. Sorenson
/s/ JAMES O. COLE* Secretary and Director
- ------------------------------------------
James O. Cole
/s/ LELAND F. WILSON* Treasurer (Chief Financial Officer and Principal Accounting
- ------------------------------------------ Officer)
Leland F. Wilson
*By: /s/ KATHLEEN W. HYLE
--------------------------------------
Kathleen W. Hyle
Attorney-in-fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
EXHIBIT DESCRIPTION NUMBER
- ------- --------------------------------------------------------------------------------------------- -------
<S> <C> <C> <C>
1.1 -- Form of underwriting agreement.*
4.2 -- Form of owner trust agreement of ANRC Auto Owner Trust between the seller and the
owner trustee.*
4.3 -- Form of indenture between ANRC Auto Owner Trust and the indenture trustee
(including forms of notes).*
5.1 -- Opinion of Weil, Gotshal & Manges LLP re: legality.*
8.1 -- Opinion of Weil, Gotshal & Manges LLP re: tax matters.*
10.1 -- Form of sale and servicing agreement among the seller, the servicer and the indenture
trustee.*
10.2 -- Form of administration agreement among ANRC Auto Owner Trust , the seller, the
servicer and the indenture trustee.*
23.1 -- Consent of Weil, Gotshal & Manges LLP (contained in Exhibit 5.1).*
23.2 -- Consent of Weil, Gotshal & Manges LLP (contained in Exhibit 8.1).*
24.1 -- Power of attorney.*
25.1 -- Form T-1 of indenture trustee.*
</TABLE>
- ------------------
* previously filed.
