PROSPECTUS
$740,000,000
MMCA Auto Owner Trust 1999-2
$326,000,000 6.30% Class A-1 Asset Backed Notes
$210,000,000 6.80% Class A-2 Asset Backed Notes
$142,000,000 7.00% Class A-3 Asset Backed Notes
$62,000,000 7.55% Class B Asset Backed Notes
MMCA Auto Receivables Trust
Seller
Servicer
<TABLE>
<CAPTION>
Underwriting Discounts
Price* and Commissions Net Proceeds to Seller
----- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 Notes............ $325,643,437.50 (99.890625%) $407,500.00 (0.125%) $325,235,937.50 (99.765625%)
Class A-2 Notes............ $209,934,375.00 (99.968750%) $525,000.00 (0.250%) $209,409,375.00 (99.718750%)
Class A-3 Notes............ $141,977,812.50 (99.984375%) $426,000.00 (0.300%) $141,551,812.50 (99.684375%)
Class B Notes.............. $61,980,625.00 (99.968750%) $217,000.00 (0.350%) $61,763,625.00 (99.618750%)
Total...................... $739,536,250.00 $1,575,500.00 $737,960,750.00
</TABLE>
- -----------
* The price of the notes will also include any interest accrued on
the notes from the date on which the notes are issued.
Interest on and principal of the notes will be payable monthly, on the 15th
or the first business day after the 15th.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 9 OF THIS PROSPECTUS.
THE NOTES REPRESENT OBLIGATIONS OF THE TRUST AND ARE BACKED ONLY BY THE
ASSETS OF THE TRUST. THE NOTES DO NOT REPRESENT OBLIGATIONS OF OR INTERESTS
IN MMCA AUTO RECEIVABLES TRUST, MITSUBISHI MOTORS CREDIT OF AMERICA, INC.
OR ANY OF THEIR AFFILIATES.
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 THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
UNDERWRITERS OF THE CLASS A NOTES
Credit Suisse First Boston J.P. Morgan & Co. Salomon Smith Barney
UNDERWRITERS OF THE CLASS B NOTES
Credit Suisse First Boston
The date of this Prospectus is October 20, 1999
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS............................................... 4
SUMMARY OF TERMS.............................................................................................. 5
RISK FACTORS.................................................................................................. 9
THE TRUST..................................................................................................... 16
Limited Purposes and Limited Assets........................................................................... 16
Capitalization of the Trust................................................................................... 17
The Owner Trustee............................................................................................. 17
PROPERTY OF THE TRUST......................................................................................... 17
MMCA'S CONTRACT PORTFOLIO..................................................................................... 18
Types of Contracts Included in MMCA's Contract Portfolio...................................................... 18
Underwriting Standards........................................................................................ 18
Servicing and Collection Procedures........................................................................... 19
Physical Damage Insurance on MMCA's Contracts................................................................. 19
Delinquency, Credit Loss and Returned Vehicle Loss Experience of MMCA's Contracts............................. 19
THE RECEIVABLES POOL.......................................................................................... 22
Selection Criteria............................................................................................ 23
Characteristics of the Initial Receivables Sold to the Trust on the Closing Date.............................. 24
Payment Methods............................................................................................... 28
Balloon Payment Receivables................................................................................... 29
Defaulted Receivables......................................................................................... 30
Maturity and Prepayment Considerations........................................................................ 30
HOW NOTEHOLDERS CAN COMPUTE THEIR PORTION OF THE AMOUNT OUTSTANDING ON
THE NOTES.................................................................................................. 40
USE OF PROCEEDS............................................................................................... 40
MMCA AUTO RECEIVABLES TRUST................................................................................... 40
THE SERVICER.................................................................................................. 41
TERMS OF THE NOTES............................................................................................ 41
Principal Amount and Interest Rates........................................................................... 41
Interest Payments............................................................................................. 41
Principal Payments............................................................................................ 42
Mandatory Prepayment.......................................................................................... 43
Optional Redemption........................................................................................... 43
The Indenture Trustee......................................................................................... 44
The Yield Supplement Agreement................................................................................ 44
The Yield Supplement Account.................................................................................. 44
The Trust's Bank Accounts..................................................................................... 45
Indenture Cash Flows.......................................................................................... 46
The Negative Carry Account.................................................................................... 48
The Reserve Account and Supplemental Reserve Account.......................................................... 48
Subordination of the Class B Notes............................................................................ 50
Subordination of the Certificates............................................................................. 50
Advances by the Servicer of Amounts Payable on the Receivables................................................ 50
Deposit of Collections on the Receivables to Collection Account............................................... 51
Statements to Noteholders..................................................................................... 51
Book Entry Registration....................................................................................... 53
Issuance of Definitive Notes Upon the Occurrence of Various Circumstances..................................... 56
Terms of the Indenture........................................................................................ 57
THE SALE AND SERVICING AGREEMENT AND THE TRUST AGREEMENT...................................................... 64
Sale and Assignment........................................................................................... 64
The Pre-Funding Period........................................................................................ 66
Mandatory Repurchase of Receivables........................................................................... 67
Servicing Procedures.......................................................................................... 67
Servicing Compensation........................................................................................ 69
Evidence to be Provided as to Servicer's Compliance with its Servicing Obligations............................ 69
Resignation by the Servicer................................................................................... 70
Consequences of Merger, Conversion, Consolidation or Similar Actions by Servicer.............................. 70
Limits on Servicer's Liability................................................................................ 70
Limits on Servicer's Obligations in Connection with Legal Actions............................................. 70
Events of Servicing Termination............................................................................... 70
Rights of Indenture Trustee and Noteholders Upon an Event of Servicing Termination Under the Sale and
Servicing Agreement........................................................................................ 71
Requirements for Amendments of the Sale and Servicing Agreement and the Trust Agreement....................... 71
Requirements for Termination of the Trust..................................................................... 72
Actions to be Taken by Indenture Trustee Upon Termination of the Trust........................................ 73
The Administration Agreement.................................................................................. 73
SOME IMPORTANT LEGAL ASPECTS OF THE RECEIVABLES............................................................... 73
Bankruptcy Considerations..................................................................................... 73
Trust's Rights in the Receivables............................................................................. 73
Security Interests in Vehicles................................................................................ 74
Repossession.................................................................................................. 75
Notice of Sale; Redemption Rights............................................................................. 75
Deficiency Judgments and Excess Proceeds...................................................................... 76
Obligor's Right to Excess Proceeds Upon Sale of a Financed Vehicle............................................ 76
Consumer Protection Laws...................................................................................... 76
Other Limitations............................................................................................. 77
FEDERAL INCOME TAX CONSEQUENCES............................................................................... 77
Tax Treatment of the Notes and the Trust under Federal Income Tax Law......................................... 78
Federal Tax Consequences of Waivers of Events of Default and Amendments of Notes by Noteholders............... 80
Information Reporting and Backup Withholding of Taxes by Indenture Trustee.................................... 80
Tax Consequences to Foreign Investors......................................................................... 81
STATE TAX CONSEQUENCES........................................................................................ 82
ERISA CONSIDERATIONS.......................................................................................... 82
Special ERISA Considerations for Employee Benefit Plans....................................................... 83
Special ERISA Considerations Applicable to Insurance Company General Accounts................................. 84
General Investment Considerations for Employee Benefit Plans.................................................. 84
UNDERWRITING.................................................................................................. 85
LEGAL OPINIONS................................................................................................ 86
REPORTS TO NOTEHOLDERS........................................................................................ 86
WHERE YOU CAN FIND MORE INFORMATION........................................................................... 86
GLOSSARY...................................................................................................... 87
</TABLE>
IMPORTANT NOTICE
ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
You should rely only on information on the notes provided in this
prospectus. We have not authorized anyone to provide you with different
information.
We include cross-references to sections where you can find
additional information. Check the table of contents to locate these
sections.
You can find a glossary of capitalized terms used in this
prospectus beginning on page 87 in this prospectus.
SUMMARY OF TERMS
<TABLE>
<CAPTION>
This summary does not contain all of the information that you should
consider in making your investment decision. To understand all of the terms
of this offering, you should read carefully this prospectus in its
entirety.
<S> <C>
The Trust: MMCA Auto Owner Trust 1999-2
Seller of the Receivables to the Trust: MMCA Auto Receivables Trust
Seller's Address: 6363 Katella Avenue, Cypress, CA 90630-5205
Seller's Telephone Number: (714) 236-1614
Servicer of the Receivables: Mitsubishi Motors Credit of America, Inc.
Indenture Trustee: Bank of Tokyo-Mitsubishi Trust Company
Owner Trustee: Wilmington Trust Company
The Trust Property: The trust property will include:
o the receivables, which are motor vehicle retail
installment sale contracts originated by Mitsubishi
Motors Credit of America, Inc.;
o the security interests in the motor vehicles financed
by the receivables;
o the pre-funding account;
o the payahead account;
o the reserve account;
o the supplemental reserve account;
o the yield supplement account; and
o the negative carry account
</TABLE>
<TABLE>
<CAPTION>
THE TERMS OF THE NOTES
Class A-1 Notes Class A-2 Notes Class A-3 Notes Class B Notes
--------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Principal Amount: $326,000,000 $210,000,000 $142,000,000 $62,000,000
Interest Rate Per
Annum: 6.30% 6.80% 7.00% 7.55%
Interest Accrual
Method: 30/360 30/360 30/360 30/360
Payment Dates: monthly (15th) monthly (15th) monthly (15th) monthly (15th)
First Payment Date: November 15, 1999 November 15, 1999 November 15, 1999 November 15, 1999
Final Payment Date: June 2002 August 2003 May 2004 April 2006
Anticipated Ratings
(Moody's/S&P):* Aaa/AAA Aaa/AAA Aaa/AAA A2/A
- -----------
* It is a condition to the offering of the notes that these ratings be obtained. However, Moody's or S&P in its
discretion may lower or withdraw its rating in the future.
</TABLE>
THE RECEIVABLES
The trust will own two types of receivables:
o receivables that provide for equal monthly payments over their
term; and
o receivables that provide for equal monthly payments plus a
substantially larger final balloon payment.
The principal balance of the receivables as of October 1, 1999 was
$597,789,058.71.
The principal balance of the balloon payments as of October 1,
1999 was $150,966,931.64.
MART expects to sell additional receivables having a principal
balance of approximately $202,210,941.29 to the trust during a pre-funding
period that begins on the date that the notes are issued and ends no later
than March 31, 2000. As of the date any additional receivables are sold to
the trust, the total principal balance of balloon payments under those
additional receivables as a percentage of the total principal balance of
those additional receivables as of that date will not exceed 26%.
PAYMENT SOURCES
On each payment date, the trust will pay the amounts owed by the
trust from the following sources:
o collections on the receivables during the prior month;
o amounts withdrawn from the reserve account and the
supplemental reserve account;
o amounts withdrawn from the yield supplement account and
the negative carry account; and
o advances by the servicer of amounts due on the
receivables but not paid during the prior month.
PRIORITY OF DISTRIBUTIONS
On each payment date, the trust will pay the amounts owed by the
trust in the following order:
(1) payment to the servicer of amounts advanced by
the servicer on previous payment dates;
(2) payment of the servicing fee equal to 1/12th of
1.00% of the total principal balance of the
receivables on the first day of the prior month;
(3) payment of the interest payable on the class A
notes;
(4) payment of the interest payable on the class B
notes;
(5) payment of the principal payable on the Class A
notes;
(6) payment of the principal payable on the Class B
notes; and
(7) any required deposits to the reserve account and
the supplemental reserve account.
If a default under the indenture occurs, the order of the payments
will change. Following a default, the trust will continue to pay the
servicer and the interest on the class A notes in the same order, but will
then pay principal of the class A notes before paying interest on the class
B notes. After the principal of all of the class A notes is paid in full,
the trust will pay interest on and principal of the class B notes.
For further information on the priority of distributions, see
"Terms of the Notes-Indenture Cash Flows" in this prospectus.
PRIORITY OF INTEREST PAYMENTS
On each payment date, the trust will pay interest on the class A
notes ratably based upon the total amount of interest due on each class of
the class A notes. Interest on the class B notes is subordinate to interest
on the class A notes. Interest on the class B notes will not be paid on any
payment date until interest on the class A notes has been paid in full.
However, if an event of default occurs, interest on the class B notes will
not be paid until the principal of the class A notes has been paid in full.
PRIORITY OF PRINCIPAL PAYMENTS
On each payment date, the amount required to be paid as principal
of the notes will equal the sum of:
o the principal scheduled to be paid on the receivables
during the prior month;
o the full prepayments on all receivables received during
the prior month;
o partial prepayments on simple interest receivables
received during the prior month; and
o the entire principal balance of receivables that became
defaulted during the prior month.
The trust will distribute principal of the notes on each payment
date in the following order:
(1) to the class A-1 notes until the class A-1 notes
are paid in full;
(2) to the class A-2 notes until the class A-2 notes
are paid in full;
(3) to the class A-3 notes until the class A-3 notes
are paid in full; and
(4) to the class B notes until the class B notes are
paid in full.
If a default under the indenture occurs, the order of priority for
principal payments will change and the trust will pay principal of all
classes of the class A notes ratably, in proportion to the principal
balance of each class, until all of the class A notes are paid in full.
Principal of the class B notes will not be paid until principal of all of
the class A notes has been paid in full.
CERTIFICATES
In addition to the notes, the trust will issue $60,000,000 of
certificates. The trust will not make any distributions on the certificates
on any payment date until the interest and principal payable on the notes
on that payment date have been paid. The certificates are not being offered
by this prospectus.
CREDIT ENHANCEMENT
The credit enhancement for the notes will be as follows:
o the subordination of the certificates; and
o the reserve account, the supplemental reserve account and
the yield supplement account.
The credit enhancement for the notes is intended to protect you
against losses or delays in payments on your notes by absorbing losses on
the receivables and other shortfalls in cash flows.
RESERVE ACCOUNT AND SUPPLEMENTAL RESERVE ACCOUNT
On each payment date, the trust will use funds in the supplemental
reserve account and the reserve account to pay the following amounts if
collections on the receivables are insufficient to pay those amounts:
(1) first, the amounts due to the servicer; and
(2) then, the interest and principal due on the notes.
On each payment date, the total amount on deposit in the reserve
account and the supplemental reserve account will equal the lesser of (1)
2.75% of the principal balances of the receivables as of the dates on which
the trust acquired them and (2) the principal balance of the notes.
YIELD SUPPLEMENT ACCOUNT
On each payment date, the trust will use funds in the yield
supplement account to cover any shortfall between:
o the weighted average interest rate on the notes plus 3
percentage points; and
o the interest rate on each receivable.
For purposes of calculating this shortfall, the interest rate on a
receivable will be zero if no interest payment on that receivable was due
in the prior month.
OPTIONAL REDEMPTION
The servicer can purchase all of the remaining receivables once
their total principal balance is 10% or less of their principal balances as
of the dates the receivables were sold to the trust. If the servicer
purchases the receivables, the indenture trustee will redeem the notes for
the unpaid principal amount plus the accrued and unpaid interest on the notes.
TAX STATUS
In the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, for
federal income and Delaware and California income and franchise tax purposes:
o the notes will be treated as debt; and
o the trust will not be classified as an association or a
publicly traded partnership taxable as a corporation.
If you purchase a note, you agree to treat it as debt for tax
purposes.
ERISA CONSIDERATIONS
The notes are generally eligible for purchase by employee benefit
plans that are subject to the Employee Retirement Income Security Act of
1974, as amended, or Section 4975 of the Internal Revenue Code of 1986, as
amended. However, fiduciaries of employee benefit plans, including those
investing plan assets, should review the matters discussed under "ERISA
Considerations" in this prospectus and should consult with their legal
advisors before purchasing the notes.
RISK FACTORS
You should consider the following risk factors in deciding whether
to purchase notes.
Absence of Secondary Market The underwriters for the notes may
for Notes Could Limit assist in resales of the notes but
Your Ability to Resell Notes they are not required to do so. A
secondary market for the notes may
not develop. If a secondary market
for the notes does develop, it may
not continue or it may not be
sufficiently liquid to allow you to
resell any of your notes.
Consequently, you must be prepared to
hold your notes until the respective
final maturity dates for the notes.
Interests of Other Persons in Another person could acquire an interest
Receivables and Vehicles Could in a receivable that is superior to the
Reduce the Funds Available to trust's interest in the receivable
Make Payments on the Notes because the servicer will not segregateor
mark the receivables as belonging to
the trust. See "Some ImportantLegal
Aspects of the Receivables-Trust's
Rights in the Receivables." If
another person acquires an interest
in a receivable that is superior to
the trust's interest in the
receivable, the collections on that
receivable will not be available to
make payments on the notes. Another
person could acquire an interest in a
vehicle financed by a receivable that
is superior to the trust's interest
in the vehicle because the servicer
will not amend the certificate of
title or ownership to identify the
trust as the new secured party. See
"Some Important Legal Aspects of the
Receivables-Security Interests in
Vehicles." If another person acquires
an interest in a vehicle that is
superior to the trust's interest in
the vehicle, the proceeds from the
sale of the vehicle will not be
available to make payments on the
notes.
Bankruptcy of MMCA Could Result If MMCA enters a bankruptcy proceeding,
in Losses or Delays in Payments you could experience losses or delays in
on the Notes the payments on your notes. MMCA will
sell the receivables to MART, and
MART will transfer the receivables to
the trust. However, if MMCA enters a
bankruptcy proceeding, the court in
the bankruptcy proceeding could
conclude that the sale of the
receivables by MMCA to MART was not a
"true sale" and that MMCA still owns
the receivables. The court could also
conclude that MMCA and MART should be
consolidated for bankruptcy purposes.
If the court were to reach either of
these conclusions, you could
experience losses or delays in
payments on your notes because:
o the indenture trustee will not be
able to exercise remedies against
MMCA on your behalf without
permission from the court;
o the court may require the
indenture trustee to accept
property in exchange for the
receivables that is of less value
than the receivables;
o tax or other government liens on
MMCA's property that arose before
the transfer of the receivables to
the trust will be paid from the
collections on the receivables
before the collections are used to
make payments on your notes; and
o the indenture trustee may not have
a perfected security interest in
one or more of the vehicles
securing the receivables or cash
collections held by MMCA at the
time that a bankruptcy proceeding
begins.
MART has taken steps in structuring
the transactions described in this
prospectus to minimize the risk that
a court would conclude that the sale
of the receivables to MART was not a
"true sale" or that MMCA and MART
should be consolidated for bankruptcy
purposes. See "MMCA Auto Receivables
Trust" and "Some Important Legal
Aspects of the Receivables-Bankruptcy
Considerations."
Risk that You May Be Required to Potential Prepayment of Notes Due to
Reinvest Your Principal in the Prepayment of Receivables. Prepayments
Notes at a Lower Rate of Return on the receivables by the related
Because of Prepayments on the obligors and purchases of the receivables
Notes by MART and the servicer due to
breaches of representations,
warranties and covenants by MART and
the servicer will accelerate the
payment of principal of your notes.
The extent of this prepayment cannot
be fully predicted. You will bear the
risk that you will have to reinvest
the principal of your notes earlier
than you expected at a rate of
interest that is less than the rate
of interest on your notes. The
obligors on the receivables may
prepay the receivables voluntarily at
any time. The receivables are
required to be prepaid upon the sale,
insured loss or other disposition of
the related vehicle. In addition, if
MMCA breaches certain of its
representations and warranties with
respect to any receivables, MMCA will
be required to repurchase those
receivables from MART, and MART will
be required to repurchase those
receivables from the trust. MMCA will
also be required to purchase
receivables from the trust if it
breaches its servicing obligations
with respect to those receivables.
MMCA will be entitled to purchase all
of the remaining receivables from the
trust once the aggregate principal
balance of the receivables is 10% or
less of the principal balances of the
receivables as of the dates on which
they were sold to the trust.
POTENTIAL PREPAYMENT OF NOTES DUE TO
AN INCENTIVE PROGRAM OFFERED BY MMCA.
Obligors on receivables that provide
for a balloon payment can return the
related vehicle at the end of the
term of the receivable instead of
paying the balloon payment. MMCA will
sell each returned vehicle on behalf
of the trust but expects the amount
realized from the sale of the vehicle
to be less than the related balloon
payment. To reduce losses from
obligors returning their vehicles at
the end of the term of their
receivables instead of paying the
balloon payments, MMCA and its
affiliates offer incentives for the
obligors to prepay their receivables
and return the related vehicles early
if they purchase another vehicle
manufactured by Mitsubishi Motors
Corporation or one of its affiliates.
The incentives may encourage a higher
level of prepayments on the
receivables resulting in a higher
level of prepayments on the notes
than would otherwise be the case. See
"The Receivables Pool-Maturity and
Prepayment Considerations."
Potential Prepayments on Notes Due If the aggregate principal balance of
to Failure to Transfer a the receivables and related amounts
Sufficient Number of Additional transferred to the trust during the
Receivables to the Trust pre-funding period is less than the
amount deposited to the pre-funding
account on the date of the issuance
of the notes, the notes will be
prepaid in the amount of the
shortfall. See "Terms of the
Notes-Mandatory Prepayment." MART's
ability to apply the entire
pre-funding account balance to the
transfer of receivables to the trust
during the pre-funding period depends
on the manufacture, distribution,
sale and financing of motor vehicles
by Mitsubishi Motors Corporation and
its affiliates. MART will not be able
to transfer receivables to the trust
during the pre-funding period unless
MMCA originates those receivables.
MMCA mostly finances vehicles
manufactured by Mitsubishi Motors
Corporation and its affiliates. If
Mitsubishi Motors Corporation and its
affiliates temporarily or permanently
stop manufacturing, distributing,
selling or financing motor vehicles,
then MMCA's ability to originate
receivables for sale to MART will be
adversely affected.
Potential Loss or Prepayments on The addition of receivables during the
Notes Due to Changes in Pool pre-funding period may change the overall
Characteristics characteristics of the pool of
receivables. This change may increase
the risk of losses or delays in
payments on your notes or prepayments
on your notes. The credit criteria
MMCA uses to originate the
receivables to be transferred by MART
to the trust during the pre-funding
period may differ from the credit
criteria used by MMCA in originating
the receivables transferred to the
trust on the date that the notes are
issued. Any changes in those credit
criteria may result in a higher rate
of delinquencies and losses on the
receivables or a higher rate of
prepayment than would otherwise be
the case, affecting the timing and
amount of payment of principal and
interest on your notes.
Potential Loss on Notes Due to You may suffer a loss on your notes if
Limited Assets of the Trust the assets of the trust are insufficient
to pay the principal amount of the
notes in full. The only source of
funds for payments on the notes will
be the assets of the trust. The
assets of the trust are limited to
the receivables and the funds on
deposit in the trust's bank accounts.
The notes will not be insured or
guaranteed by MMCA, including in its
capacity as servicer, or by MART, the
indenture trustee, the owner trustee
or any other person or entity.
Consequently, you must rely for
payment of the notes solely upon
collections on the receivables and
funds on deposit in the trust's bank
accounts. See "Terms of the Notes-The
Reserve Account and Supplemental
Reserve Account."
Class B Notes are Subject to Greater You may suffer a loss on your class B
Credit Risk Because the Class B notes because payments of interest on
Notes are Subordinate to the and principal of the class B notes are
Class A Notes subordinated to payments of interest
and principal of the class A notes.
Interest payments on the class B
notes on each payment date will be
subordinated to servicing fees due to
the servicer and interest payments on
the class A notes. Also, if a default
under the indenture occurs, interest
payments on the class B notes will be
subordinated to the payment of
principal of the class A notes.
Potential Loss on Notes Due Principal payments on the class B
to Nature of Obligors notes will be fully subordinated to
principal payments on the class A
notes. No principal will be paid on
the class B notes until principal of
all of the class A notes has been
paid in full. You may experience
losses on the class B notes if the
protection provided to the class B
notes by the subordination of the
certificates and the funds on deposit
in the reserve account, the
supplemental reserve account, the
negative carry account and the yield
supplement account are insufficient
to protect the class B notes from
losses on the receivables. The
obligors on the receivables to be
transferred by MMCA to MART and by
MART to the trust will include a
higher percentage of borrowers with
limited credit experience than is
included in MMCA's combined portfolio
of receivables. As a result, the
credit loss, repossession,
delinquency and default rates on the
receivables may be higher than the
historical credit loss, repossession,
delinquency and default rates on
MMCA's combined portfolio of
receivables. You may experience
delays in payments or losses on your
notes if (i) the credit loss,
repossession, delinquency or default
rates on such receivables are higher
than expected by MMCA and (ii) the
protection provided to the class A
notes by the subordination of the
class B notes, and provided to all of
the notes by the certificates to be
issued by the trust and the funds on
deposit in the reserve account and
certain other trust accounts, are
insufficient to protect you against
such delays or losses. See "MMCA's
Contract Portfolio-Delinquency,
Credit Loss and Returned Vehicle Loss
Experience of MMCA's Contracts" for
information concerning MMCA's
combined portfolio of receivables.
Potential Loss on Notes Due to The receivables to be transferred to the
Receivables with No Payments trust will include receivables that do
for an Initial Period not require any payments to be made by
obligors for up to 216 days after
origination of the receivable. The
term of receivables with deferred
payments will be extended by the
deferral period and the vehicles will
incur wear and tear during this
period. As a result, the value of the
related vehicles under the deferred
payment receivables will decrease
before the first payment of a
receivable is due in an amount that
is larger than it would have
decreased without a deferral period.
The severity of the credit losses on
these receivables may be higher than
the severity of the credit losses on
MMCA's combined portfolio of
receivables. You may experience
delays in payments or losses on your
notes if (i) the severity of credit
losses on such receivables are higher
than expected by MMCA and (ii) the
protection provided to the class A
notes by the subordination of the
class B notes, and provided to all of
the notes by the certificates to be
issued by the trust and the funds on
deposit in the reserve account and
certain other trust accounts, are
insufficient to protect you against
such delays or losses. See "MMCA's
Contract Portfolio-Delinquency,
Credit Loss and Returned Vehicle Loss
Experience of MMCA's Contracts" for
information concerning MMCA's
combined portfolio of receivables.
Potential Loss on Notes in The obligors on balloon payment
Connection with Sales of Vehicles receivables will not have to pay the
balloon payment if they return the
related vehicle to MMCA at the end of
the term of the receivable. MMCA will
sell the returned vehicle on behalf
of the trust and the trust will use
the proceeds from the sale to make
payments on the notes. You may
experience delays in payments or
losses on your notes if (i) the
proceeds from the sale of the
returned vehicles are less than the
amount of the balloon payments and
(ii) the protection provided to the
class A notes by the subordination of
the class B notes, and provided to
all of the notes by the certificates
to be issued by the trust and the
funds on deposit in the reserve
account and certain other trust
accounts, are insufficient to protect
you against such delays or losses.
See "MMCA's Contract
Portfolio-Delinquency, Credit Loss
and Returned Vehicle Loss Experience
of MMCA's Contracts" for information
concerning MMCA's combined portfolio
of receivables. MMCA expects the
proceeds from the sale of a returned
vehicle to be less than the balloon
payment because MMCA sets the balloon
payments higher than its estimate of
the end of term value of the vehicle
in order to stimulate sales of a
particular model. See "The
Receivables Pool-Balloon Payment
Receivables."
Potential Loss on Notes if MMCA The obligor under a balloon payment
Does Not Refinance Balloon receivable also has the option to
Receivables refinance the balloon payment with
MMCA, subject to the satisfaction of
various conditions. MMCA will be
obligated to provide that financing
to the extent it offers vehicle
financing. No successor to MMCA as
servicer will be obligated to provide
that refinancing. If at any time MMCA
no longer makes refinancing
available, MART may contract with
third parties to do so. If a
refinancing option is not available,
more obligors may return their
vehicles on the date the related
balloon payment is due instead of
refinancing the balloon payment, and
consequently more motor vehicles may
be sold by MMCA on behalf of the
trust for prices less than the
related balloon payments.
Lack of Historical Data Regarding Balloon payment receivables have
the Return Rates of Vehicles matured in large volumes only in recent
Financed by Balloon Receivables years. MMCA therefore does not have
extensive historical information
regarding (a) the percentage of motor
vehicles that will be returned to
MMCA upon the maturity of balloon
payment receivables or (b) MMCA's
loss experience upon resale of those
returned motor vehicles. MMCA expects
that, in the aggregate, the amounts
received by MMCA from the sale of
those vehicles will be less than the
principal amounts of the balloon
payments because MMCA sets balloon
payments higher than its estimate of
the projected end of term value of
the vehicle in order to stimulate
sales of particular models.
Potential Loss on Notes Due to Economic conditions in the states where
Geographic Concentration of the obligors under the receivables reside
Receivables may affect the delinquency, loan loss
and repossession experience of the
trust with respect to the
receivables. Based on the principal
balance of the original pool of
receivables as of the date as of
which the receivables were acquired
by the trust, 11.12% of the
receivables relate to obligors with a
billing address in California, 22.39%
relate to obligors with a billing
address in Texas and 9.75% relate to
obligors with a billing address in
Florida. Accordingly, adverse
economic conditions or other factors
affecting California, Texas or
Florida could have an especially
significant effect on the
delinquency, loan loss or
repossession experience of the trust
and may adversely affect the timing
and amount of payment of principal
and interest on your notes.
Risks in Connection with an Event If a default occurs under the under
of Default Indenture indenture and the maturity dates of the
notes are accelerated, the indenture
trustee may sell the receivables and
prepay the notes in advance of their
respective maturity dates. 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. You also may not be paid
the principal amount of your notes in
full if the assets of the trust are
insufficient to pay the aggregate
principal amount of the notes. In
addition, the acceleration of the
maturity dates will change the order
of priority for the payment of
principal of the different classes of
notes. After the occurrence of an
event of default under the indenture,
distributions to the class B
noteholders become fully subordinated
to the class A noteholders. No
interest on or principal of the class
B notes will be paid after an event
of default has occurred until the
full principal balance of each class
of the class A notes has been paid in
full. See "Terms of the
Notes-Principal Payable." If the
maturity dates of the notes are
accelerated following an event of
default and the indenture trustee
determines that the receivables will
not be sufficient to make scheduled
payments on the notes, all of the
noteholders, voting as a group, will
have the right to vote as to whether
the receivables should be sold. The
proportion of the principal amount of
the class B notes to the aggregate
principal amount of the class A notes
and the class B notes will increase
as principal of the class A notes is
paid. Accordingly, the class A
noteholders may require the consent
of class B noteholders to sell the
receivables. Payments on the class A
notes could be delayed if such
consent is required and not obtained.
Potential Delays in Payments The payment of principal and interest
on Notes Due to Potential on the notes could be delayed if MMCA,
Computer Program Problems in its capacity as servicer, or the
Beginning in the Year 2000 indenture trustee experience problems
in their computer programs relating
to the year 2000. Many existing
computer programs use only two digits
to identify a year. These programs
could fail or produce erroneous
results during the transition from
the year 1999 to the year 2000 and
afterwards. MMCA has evaluated the
impact of preparing its systems for
the year 2000. It has identified
areas of potential impact and has
implemented conversion efforts. It
believes its mission-critical
applications, including its systems
for operations, collections on the
receivables and servicing the
receivables, are year 2000 compliant.
If MMCA, in its capacity as the
servicer, does not have a computer
system that is year 2000 compliant by
the year 2000, MMCA's ability to
service the receivables may be
materially and adversely affected. If
the indenture trustee does not have a
computer system that is year 2000
compliant by the year 2000, the
indenture trustee's ability to make
distributions on the notes may be
materially and adversely affected.
THE TRUST
LIMITED PURPOSES AND LIMITED ASSETS
MMCA Auto Owner Trust 1999-2 is a business trust formed under the
laws of the State of Delaware under a trust agreement between MART and
Wilmington Trust Company, as owner trustee. The trust's principal offices
are in the State of Delaware in care of the owner trustee, at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890- 0001. The
trust will not engage in any activity other than:
o acquiring, holding and managing the assets of the trust,
including the receivables, and the proceeds of those assets;
o issuing the notes and the certificates;
o making payments on the notes and the certificates; and
o engaging in other activities that are necessary, suitable
or convenient to accomplish any of the other purposes
listed above or that are in any way connected with those
activities.
The trust will be capitalized through the issuance of $740,000,000
of notes and $60,000,000 of certificates. The certificates will entitle
certificateholders to receive distributions of amounts not required to make
payments on the notes or to pay expenses of the trust. The certificates
will be subordinated to the notes to the extent described in this
prospectus. The principal amount of the certificates will be reduced on
each payment date by principal payments made on the certificates. The
certificates are not being offered hereby and will be retained by MART or
an affiliate. It is not anticipated that the trust will have any need for
additional capital resources.
On the Closing Date, the trust will purchase from MART retail
installment contracts originated by MMCA in connection with the financing
of automobiles and light-duty trucks. The purchase will be made under a
sale and servicing agreement in exchange for the proceeds of the notes and
the issuance to MART or an affiliate of the certificates. The trust will
also purchase additional receivables from MART during the Pre-Funding
Period with proceeds from the sale of the notes.
MMCA or a successor will service the receivables, either directly
or through subservicers. The servicer will be paid the servicing fee and
will be reimbursed for any advances that are due and payable to it out of
collections from the receivables prior to distributions to noteholders.
Some other expenses of the trust will be paid by the servicer or by MART as
provided in the sale and servicing agreement. See "The Sale and Servicing
Agreement and the Trust Agreement-Servicing Procedures," "-Servicing
Compensation" and "Terms of the Notes-Indenture Cash Flows."
The servicer, either directly or through subservicers, will hold
the receivables and the certificates of title or ownership relating to the
financed vehicles as custodian for the indenture trustee and the trust.
However, the receivables will not be marked or stamped to indicate that
they have been sold to the trust, and the certificates of title or
ownership for the financed vehicles will not be endorsed or otherwise
amended to identify the trust as the new secured party. Under those
circumstances, the trust's security interest in the receivables and the
financed vehicles may be defeated or may not be perfected in some
jurisdictions. See "Some Important Legal Aspects of the Receivables."
If the protection provided to the noteholders by the subordination
of the certificates and by amounts on deposit in the supplemental reserve
account, the reserve account, the negative carry account and the yield
supplement account is insufficient, the noteholders would have to look for
payment of the notes principally to the receivables that have not
defaulted, the proceeds from the repossession and sale of financed vehicles
which secure defaulted receivables and the proceeds from any recourse
against dealers. In that event, factors such as the trust's not having
perfected security interests in the financed vehicles in all states may
affect the trust's ability to repossess and sell the financed vehicles, and
thus may reduce the proceeds to be distributed to noteholders. Losses on
the receivables or other shortfalls in the proceeds to be distributed to
the noteholders, after withdrawals from the trust accounts, will be
allocated first to the Class B notes because payments on the Class B notes
are subordinate to the payments on the Class A notes. See "Terms of the
Notes-Indenture Cash Flows" and "Some Important Legal Aspects of the
Receivables."
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the trust as
of the Closing Date, after the issuance of the notes and certificates and
the sale of the notes has taken place:
Class A-1 notes............................................. $326,000,000
Class A-2 notes............................................. 210,000,000
Class A-3 notes............................................. 142,000,000
Class B notes............................................... 62,000,000
Certificates................................................ 60,000,000
------------
Total................................................. $800,000,000
============
Because the trust will have no operating history upon its
establishment and will not engage in any business other than acquiring and
holding the receivables and related assets and issuing and distributing
payments on the notes and the certificates, no historical or pro forma
financial statements or ratios of earnings to fixed charges with respect to
the trust have been included in this prospectus.
THE OWNER TRUSTEE
Wilmington Trust Company is the owner trustee under the trust
agreement. The owner trustee's Corporate Trust Office is located at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001.
MART, the servicer and their individual affiliates may have other banking
relationships with the owner trustee and its affiliates in the ordinary
course of their businesses.
PROPERTY OF THE TRUST
Under the indenture, the notes will be secured by the property of
the trust, which will include:
o a pool of motor vehicle retail installment sale contracts
originated during or after May 1996 and rights and
obligations thereunder;
o all monies due under Actuarial Receivables on or after
the related Cutoff Date and all monies received under
Simple Interest Receivables on or after the related
Cutoff Date;
o amounts and property held in or credited to the
collection account, the note payment account, the
payahead account, the reserve account, the negative carry
account and the supplemental reserve account;
o MART's rights in the yield supplement account and the
pre-funding account;
o MART's security interests in the financed vehicles;
o MART's rights to receive proceeds from claims on
insurance policies covering the financed vehicles or the
obligors;
o MART's rights of recourse against the dealers under the
dealer agreements relating to the receivables;
o all of the trust's rights under the sale and servicing
agreement and the purchase agreement, including its right
to cause MMCA and MART to repurchase receivables from the
trust;
o all of MART's rights under the yield supplement
agreement; and
o all proceeds of the foregoing.
MMCA'S CONTRACT PORTFOLIO
TYPES OF CONTRACTS INCLUDED IN MMCA'S CONTRACT PORTFOLIO
MMCA purchases retail installment contracts relating to new
automobiles and light-duty trucks manufactured or distributed by Mitsubishi
Motors and contracts relating to used automobiles and light-duty trucks
manufactured or distributed by Mitsubishi Motors or other motor vehicle
manufacturers. MMCA applies the same underwriting standards to its
purchases of receivables whether or not the related vehicle was
manufactured by Mitsubishi Motors.
MMCA purchases contracts from dealers that regularly sell
contracts to MMCA and also to other finance providers. MMCA purchases the
contracts from the dealers subject to the terms of a dealer agreement with
each dealer. Each dealer agreement requires the dealer to repurchase any
contract that it sold to MMCA for the outstanding principal balance if the
dealer breaches certain of the representations and warranties set forth in
the agreement. Those representations and warranties typically relate to the
origination of the contract and the security interest in the related
automobile or light-duty truck and not to the creditworthiness of the
obligor under the contract.
UNDERWRITING STANDARDS
MMCA's underwriting standards emphasize each prospective obligor's
ability to pay and creditworthiness as well as the asset value of the
automobile or light-duty truck that secures the related contract.
Before purchasing a contract, MMCA reviews credit applications
from applicants that include information about each applicant's income,
residential status, monthly mortgage or rent payments, credit obligations,
bank accounts and other personal information. MMCA also reviews a credit
report from an independent credit bureau which MMCA reviews to determine
the applicant's current credit status and past credit performance. If
necessary, MMCA verifies the employment or the income of an applicant.
MMCA uses a credit scoring system and considers other factors to
reach each credit decision. In November 1996, MMCA introduced a new credit
scoring system for all contracts, replacing the one that had been used
since June 1994. The new credit scoring system first assigns the
application to one of three credit segments: prime, non-prime and limited
credit experience. Each segment considers different credit application and
credit bureau report characteristics or assigns different weighting to some
characteristics that are considered by all segments. This segmentation is
based solely upon the information in the applicant's credit bureau report.
The new credit scoring system identifies those aspects of an applicant's
credit report and credit application and the proposed financing arrangement
that, based upon the specific performance experience of MMCA's portfolio,
are most predictive of the probability that the applicant will pay MMCA as
agreed. MMCA considers attributes other than the credit score in its credit
decision process. These factors include the ratio of income to debt, an
applicant's equity in the automobile or light-duty truck, satisfactory
existing account relationships, excellent recent reported credit history
and availability of an acceptable guarantor. MMCA management sets limits on
the percentage of credit decisions that approve credit to applicants
scoring below company credit score minimums and deny credit to applicants
scoring above those minimums. Where the obligor of a contract is a business
entity, MMCA reviews credit applications that include information about
bank accounts, credit references and financial results of the business
entity. In addition, MMCA obtains and reviews any published credit reports
on the business entity. In some cases, MMCA may require an individual to
guarantee the business' obligation under the contract.
After considering the relevant information, MMCA assesses the
degree of credit risk of a particular application and the decision to grant
or deny credit for a contract is made at the appropriate management level.
The application, if approved, is assigned to one of three credit tiers
reflecting its degree of credit risk. The interest rate for the customer's
account is determined by the credit tier, with the more risky accounts
receiving a higher interest rate.
SERVICING AND COLLECTION PROCEDURES
MMCA measures delinquency by the number of days elapsed from the
date a payment is due under a contract, after giving effect to any
extension of that date by MMCA. MMCA considers a payment to be past due or
delinquent when the obligor fails to make at least 90% of a scheduled
payment by the date the payment is due. MMCA generally begins collection
activities with respect to delinquent contracts through telephone contact
based upon the credit risk initially assigned to each obligor. Obligors
considered to be weaker credits are generally contacted by telephone when
the contract becomes 12 days delinquent. Obligors considered strong credits
with lesser risk are generally contacted when the contract becomes 20 days
delinquent. Computer generated delinquency notices are mailed to all
delinquent obligors on the 12th day of delinquency. MMCA also uses an
automated system of monitoring delinquency, which categorizes delinquent
accounts into different priorities of collection activity, based on the
level of delinquency of each account. Subject to some limitations, MMCA as
servicer is able to extend the dates on which payments on receivables are
due. See "The Sale and Servicing Agreement and the Trust
Agreement-Servicing Procedures."
MMCA's collectors are assigned to specific delinquent obligors and
attempt to contact each one by telephone or by letter based on the length
of delinquency and the history of the account. Repossession procedures
typically begin when a contract becomes between 60 to 75 days delinquent.
Repossession is carried out according to applicable state law and specific
procedures adopted by MMCA.
If the financed vehicle securing a delinquent contract is
repossessed, MMCA charges off the related delinquent contract on the date
on which the proceeds from the sale of the financed vehicle are applied to
the contract balance and the deficiency is determined. If the financed
vehicle cannot be repossessed, MMCA charges off the delinquent contract on
the date on which it determines that it will be unable to recover the
financed vehicle from the obligor. Any deficiencies remaining after
repossession and sale of the related vehicle or after the full charge off
of the related contract are pursued by MMCA to the extent practicable and
legally permitted. MMCA does not charge off losses on sales of financed
vehicles with respect to Balloon Payment Receivables, because those losses
are not credit losses. However, MMCA does charge off losses for the
amortizing monthly installments and the Balloon Payments for Balloon
Payment Receivables. Furthermore, MMCA does not charge off collection
expenses but does charge off repossession and disposition expenses.
Obligors are contacted, and when warranted by individual circumstances,
repayment schedules are established and monitored until the deficiencies
are either paid in full or become impractical to pursue.
PHYSICAL DAMAGE INSURANCE ON MMCA'S CONTRACTS
Each contract requires the obligor to obtain physical damage
insurance covering loss or damage to the related vehicle. The dealer
agreements require that the dealers provide MMCA with written confirmation
that there is physical damage insurance acceptable to MMCA covering each
vehicle at the time that MMCA purchased the related contract from the
dealers. MMCA tracks the ongoing status of insurance by the obligors, and
attempts to cause the obligors to reinstate the insurance if it is allowed
to lapse; nevertheless, there is no assurance that each vehicle will
continue to be covered by physical damage insurance for the entire term
during which the related contract is outstanding.
DELINQUENCY, CREDIT LOSS AND RETURNED VEHICLE LOSS EXPERIENCE OF MMCA'S
CONTRACTS
MMCA's credit scoring system for contracts assigns contracts to
one of three credit segments: prime, non-prime and limited credit
experience. See "-Underwriting Standards." The trust property includes
every limited credit experience contract in MMCA's portfolio as of the
Cutoff Date that is not scheduled to mature in 1999 and satisfies the
selection criteria set forth under "The Receivables Pool-Selection
Criteria."
The following two tables set forth information concerning MMCA's
combined portfolio of contracts, including contracts previously sold which
MMCA continues to service. The delinquency, credit loss and returned
vehicle loss experience by the trust may be different than the delinquency,
credit loss and returned vehicle loss experience of MMCA's combined
portfolio, as reflected in the following two tables, because the
distribution among the three credit segments of the receivables transferred
to the trust on the Closing Date and during the Pre-Funding Period is and
will be different than the distribution among the three credit segments of
the contracts in MMCA's combined portfolio.
The trust property includes every limited experience contract in
MMCA's portfolio as of October 1, 1999 that is not scheduled to mature in
1999 which satisfies the eligibility criteria for inclusion in the trust.
Limited credit experience receivables were 12.52% of the receivables as of
October 1, 1999, representing 8.94% of the aggregate principal balance of
the receivables in the trust. By contrast, as of October 1, 1999, limited
credit experience contracts were 3.575% of the contracts in MMCA's combined
portfolio, representing 3.325% of the aggregate principal balance of the
contracts in MMCA's combined portfolio.
<TABLE>
<CAPTION>
DELINQUENCY EXPERIENCE (1)
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
As of August 31, As of December 31,
---------------- ------------------
<S> <C> <C> <C> <C> <C>
Number of Contracts Outstanding at End of Period............ 129,929 126,714 127,475 120,961 120,008
Delinquencies as a Percent of Contracts Outstanding (2)
30-59 Days............................................... 2.64% 3.30% 3.81% 4.45% 5.18%
60-89 Days............................................... 0.61% 0.98% 1.08% 1.58% 1.70%
90 Days or More.......................................... 0.16% 0.33% 0.29% 0.52% 0.55%
Repossessions as a Percent of Contracts Outstanding (2)(3).. 0.64% 0.65% 0.79% 0.96% 1.43%
</TABLE>
- -----------
(1) The information in the table includes contracts for new and used
automobiles and light-duty trucks owned by MMCA or previously sold
by MMCA which MMCA continues to service. Delinquency numbers are
net of bankrupt accounts and repossessions.
(2) The period of delinquency is based on the number of days more than
10% of a payment is contractually past due after giving effect to
any extension by MMCA. The percent represents delinquent dollars
as a percent of dollars outstanding. MMCA's ability, in its
capacity as servicer, to extend the dates on which payments on
receivables are due is subject to certain limitations. See "The
Sale and Servicing Agreement and the Trust Agreement-Servicing
Procedures."
(3) Repossessions means the vehicle has been repossessed but the sale
proceeds have not yet been applied to the contract balance.
<TABLE>
<CAPTION>
NET CREDIT LOSS AND REPOSSESSION EXPERIENCE (1)
(DOLLARS IN THOUSANDS)
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
Eight Months Ended
August 31, Year Ended December 31,
---------- -----------------------
<S> <C> <C> <C> <C> <C>
Amount Outstanding (2)...................... $1,924,124 $1,878,323 $1,879,226 $1,729,312 $1,650,226
Average Amount Outstanding (3).............. $1,903,447 $1,765,490 $1,805,701 $1,737,477 $1,553,958
Number of Contracts Outstanding............. 129,929 126,714 127,475 120,961 120,008
Average Number of Contracts
Outstanding (3).......................... 128,809 121,790 123,663 122,652 114,938
Charge-offs (4)............................. $30,207 $35,831 $51,325 $72,986 $84,574
Recoveries (5).............................. $5,896 $6,720 $9,490 $13,089 $7,365
Net Losses.................................. $24,311 $29,111 $41,835 $59,897 $77,209
Number of Repossessions (6)................. 2,922 3,209 4,796 7,338 6,682
Number of Repossessions as a Percent of
the Average Number of Contracts
Outstanding (7).......................... 3.40% 3.95% 3.88% 5.98% 5.81%
Net Losses as a Percent of Average Amount
Outstanding (7).......................... 1.92% 2.47% 2.32% 3.45% 4.97%
</TABLE>
- -----------
(1) The information in the table includes contracts for new and used
automobiles and light-duty trucks owned by MMCA or previously sold
by MMCA which MMCA continues to service.
(2) Amount outstanding is the remaining principal balance of the
contracts, including the principal portion of balloon payments
plus any outstanding fees and charges and any accrued and unpaid
interest.
(3) Averages are computed by taking a simple average of the average
for the months outstanding for each period presented.
(4) Charge-offs represent the total aggregate amount due on contracts
that is determined to be uncollectible in the period, less
proceeds from disposition of related vehicles, other than
recoveries described in Note (5). The calculation of charge-offs
for the contracts in the combined portfolio includes both earned
but unpaid finance charges and Balloon Payments.
(5) Recoveries generally consist of amounts received on contracts
following the time at which the contract is charged off net of
collection expenses.
(6) Number of Repossessions means the number of repossessed
automobiles and light-duty trucks in a given period.
(7) Annualized rate. The eight-month period ended August 31, 1999 is
not necessarily indicative of a full year's actual results. MMCA's
credit loss experience is dependent upon the number of
repossessions, the amount outstanding at the time of repossession,
and the resale value of repossessed vehicles. Losses and
delinquencies are affected by, among other things, general and
regional economic conditions and the supply of and demand for
automobiles and
light-duty trucks.
<TABLE>
<CAPTION>
CONTRACTS PROVIDING FOR BALLOON PAYMENTS: LOSS EXPERIENCE ON RETURNED
VEHICLES (1)
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
For Contracts Scheduled to For Contracts Scheduled to
Terminate in the Eight Terminate in the
Months Ended August 31, Year Ended December 31,
------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
Total Number of Final Payment Receivables....... 19,103 13,031 19,723 10,734 1,025
Total Number of Vehicles Returned to MMCA
through August 31, 1999...................... 4,517 3,420 4,750 2,921 418
Return Ratio (2)................................ 23.65% 26.25% 24.08% 27.21% 40.78%
Total Losses on Returned Vehicles Sold
through August 31, 1999 (3).................. $4,885,056 $5,868,943 $7,608,392 $5,831,829 $726,684
Total Number of Returned Vehicles Sold
through August 31, 1999...................... 3,930 3,396 4,704 2,912 417
Average Loss per Returned Vehicle Sold
through August 31, 1999 (3).................. $1,243 $1,728 $1,617 $2,003 $1,743
</TABLE>
- -----------
(1) The information in the table includes automobiles and light-duty
trucks returned upon the expiration of the related contracts and
automobiles and light-duty trucks returned under MMCA's program
that offers attractive terms to owners of automobiles and
light-duty trucks to prepay their accounts in connection with
their respective purchases of a new automobile or light-duty
truck.
(2) The number of vehicles returned to MMCA through August 31, 1999 as
a percentage of the number of Balloon Payment Receivables
scheduled to terminate in the period indicated.
(3) Losses are calculated without deduction for auction or other
disposition expenses on resale.
The percentage of Balloon Payment Receivables to be included in
the trust property that are assigned to the prime, non-prime and limited
credit experience credit segments is different from the corresponding
percentages for the combined portfolio. No assurance can be given that the
performance of the Balloon Payment Receivables will be similar to the
information set forth in the preceding table.
MMCA's loss experience on returned automobiles and light-duty
trucks depends on:
o the number of automobiles and light-duty trucks returned;
o any programs offered by MMCA that permit the early return
of automobiles and light-duty trucks;
o the amount of the related receivables outstanding at the
time the automobiles and light-duty trucks are returned;
and
o the resale value of the returned automobiles and
light-duty trucks.
THE RECEIVABLES POOL
The trust will purchase from MART receivables which consist of a
pool of retail installment sale contracts secured by new and used
automobiles and light-duty trucks. The property to be purchased by the
trust includes rights to receive payments made with respect to the
receivables, as well as security interests in the vehicles and any proceeds
of the sale of the vehicles. MART will purchase the receivables from MMCA
under a purchase agreement and will simultaneously sell the receivables to
the trust under a sale and servicing agreement. Each agreement will provide
for some of the receivables to be sold on the Closing Date. Each of those
agreements will also provide for receivables sales during the Pre-Funding
Period. The receivables sold will be selected from those owned by MMCA
based on the criteria specified in the sale and servicing agreement and
described in this prospectus.
The receivables to be purchased by the trust on the Closing Date
have an aggregate principal balance of $597,789,058.71, calculated as of
the initial Cutoff Date. Balloon Payments comprised $150,966,931.64 of the
aggregate principal balance of those receivables. None of the receivables
included in the trust will have a final scheduled maturity later
than October 31, 2005.
The principal balance of the receivables in the trust on any date
will equal the aggregate principal balance of the receivables in the trust
at the end of the preceding calendar month, or with respect to any date
during October 1999, the principal balance of the receivables in the trust
as of the initial Cutoff Date, less the sum of the following amounts
received
after the end of the preceding month through that date:
o for Simple Interest Receivables, the principal payments
received from obligors;
o for Actuarial Receivables, the principal payments
received from obligors that were due during that month;
o amounts to be remitted by the servicer or MART as the
purchase price for receivables they are required to
repurchase from the trust;
o advances made by the servicer; and
o the principal balance of receivables which defaulted
during that month.
SELECTION CRITERIA
The receivables will be purchased by MMCA from dealers in the
ordinary course of business in accordance with MMCA's underwriting
standards. The receivables were selected and will be selected from MMCA's
portfolio by several criteria, including:
o each receivable is secured by a new or used automobile or
light-duty truck;
o each receivable has an annual percentage rate of at least
0% and not more than 30%;
o each receivable had a remaining maturity of not more than
60 months from the date the first payment is due under
the receivable;
o each receivable had an original principal balance, net of
unearned precomputed finance charges, of not more than
$60,000 and a remaining principal balance of not less
than $100 as of the related Cutoff Date;
o no receivable was more than 30 days delinquent with
respect to more than 10% of a payment as of the related
Cutoff Date;
o no receivable had been pre-paid by more than six monthly
payments as of the related Cutoff Date;
o no financed vehicle had been repossessed as of the
related Cutoff Date;
o each receivable is an installment sale contract;
o each receivable is an Actuarial Receivable or a Simple
Interest Receivable, and may also be a Balloon Payment
Receivable;
o each receivable was originated during or after May 1996;
o if the first payment on a receivable was deferred, the
first payment on that receivable shall be due not later
than 216 days after the date of origination of that
receivable;
o no receivable was due from an obligor who, as of the
related Cutoff Date, was the subject of a proceeding
under the United States Bankruptcy Code; and
o each receivable was originated in the United States by a
dealer for the consumer or commercial sale of a financed
vehicle in the ordinary course of that dealer's business.
In addition, during the Pre-Funding Period, MART will transfer
separate groups of receivables to the trust. Each group of receivables
transferred to the trust during the Pre-Funding Period will have the
following characteristics:
o the weighted average remaining maturity of the
receivables in that group will not be more than 53 months
after the date that group of receivables was transferred
to the trust;
o the aggregate Balloon Payments of the receivables in that
group as a percentage of the aggregate principal balance
of the receivables in that group will not be more than 26%;
o if the first payment on a receivable in that group was
deferred, the deferral period shall not extend for more
than 216 days after origination of that receivable;
o the aggregate principal balance of the limited credit
experience receivables in that group as a percentage of
the aggregate principal balance of the receivables in
that group will be not more than 9%; and
o the aggregate principal balance of the receivables that
allow a deferred first payment in that group as a
percentage of the aggregate principal balance of the
receivables in that group will be not more than 8%.
The receivables transferred to the trust on the Closing Date will
be approximately 75% of the sum of the initial principal amount of the
notes and the initial principal amount of the certificates. The receivables
transferred to the trust during the Pre-Funding Period will have no
required characteristics except for the criteria described in the preceding
paragraph and in "The Sale and Servicing Agreement and the Trust
Agreement-Sale and Assignment." Following each transfer, the aggregate
characteristics of the entire pool of receivables, including the
composition of the receivables, the geographic distribution of the
receivables and the distribution by the annual percentage rate of the
receivables described in the following tables, may vary from those of the
receivables transferred to the trust on the Closing Date. Following the end
of the Pre-Funding Period, MART will file a report with the Securities and
Exchange Commission on Form 8-K containing information comparable to that
contained in the tables set forth below regarding the aggregate
characteristics of the entire pool of receivables.
CHARACTERISTICS OF THE INITIAL RECEIVABLES SOLD TO THE TRUST ON THE CLOSING DATE
The following tables set forth:
o the composition of the initial receivables sold to the
trust on the Closing Date, calculated as of the initial
Cutoff Date; and
o the geographic distribution and distribution by annual
percentage rate of the principal balance of the initial
receivables sold to the trust on the Closing Date,
calculated as of the initial Cutoff Date.
The receivables transferred to the trust on the Closing Date,
calculated as of the initial Cutoff Date, contained Balloon Payment
Receivables of approximately 25.25% of the principal balance of those
receivables. A Balloon Payment receivable may be either a Simple Interest
Receivable or an Actuarial Receivable. See "-Balloon Payment Receivables."
<TABLE>
<CAPTION>
COMPOSITION OF THE INITIAL RECEIVABLES AS OF THE INITIAL CUTOFF DATE
<S> <C>
Balance of Receivables Pool............................................................. $597,789,058.71
Level Pay Balance of Receivables Pool................................................... $446,822,127.07
Balloon Payment Balance of Receivables Pool............................................. $150,966,931.64
Number of Receivables................................................................... 31,328
Average Principal Balance............................................................... $19,081.62
(Range)........................................................................... $132.61 to $53,146.40
Average Original Amount Financed........................................................ $20,425.12
(Range)........................................................................... $2,856.59 to $53,146.40
Average Level Pay Balance............................................................... $14,262.71
(Range)........................................................................... $132.61 to $53,146.40
Average Balloon Payment Principal Balance (1)........................................... $10,883.64
(Range)........................................................................... $2,550.33 to $25,680.56
Average Balloon Payment Principal Balance as a Percentage of the Average Principal
Balance of the Balloon Payment Receivables........................................... 48.65%
Weighted Average Annual Percentage Rate................................................. 7.39%
(Range)........................................................................... 0.00% to 23.95%
Weighted Average Original Term to Maturity.............................................. 52.68 months
(Range)........................................................................... 12 months to 66 months
Weighted Average Remaining Term to Maturity............................................. 48.33 months
(Range)........................................................................... 3 months to 66 months
</TABLE>
- -----------
(1) Based on Balloon Payment Receivables balances only.
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION OF THE INITIAL RECEIVABLES AS OF THE INITIAL CUTOFF DATE
Percentage of
Principal Balance of
STATE (1) Receivables Pool
- -------- ----------------
<S> <C>
Alabama........................................................................................ 2.58%
Alaska......................................................................................... 0.11
Arizona........................................................................................ 0.67
Arkansas....................................................................................... 1.24
California..................................................................................... 11.12
Colorado....................................................................................... 0.49
Connecticut.................................................................................... 2.26
Delaware....................................................................................... 0.47
District of Columbia........................................................................... 0.16
Florida........................................................................................ 9.75
Georgia........................................................................................ 5.36
Hawaii......................................................................................... 0.03
Idaho.......................................................................................... 0.08
Illinois....................................................................................... 5.58
Indiana........................................................................................ 0.72
Iowa........................................................................................... 0.36
Kansas......................................................................................... 0.32
Kentucky....................................................................................... 0.54
Louisiana...................................................................................... 5.34
Maine.......................................................................................... 0.11
Maryland....................................................................................... 3.95
Massachusetts.................................................................................. 0.91
Michigan....................................................................................... 0.50
Minnesota...................................................................................... 0.78
Mississippi.................................................................................... 1.78
Missouri....................................................................................... 0.96
Montana........................................................................................ 0.02%
Nebraska....................................................................................... 0.24
Nevada......................................................................................... 0.16
New Hampshire.................................................................................. 0.17
New Jersey..................................................................................... 2.07
New Mexico..................................................................................... 0.41
New York....................................................................................... 4.96
North Carolina................................................................................. 1.31
North Dakota................................................................................... 0.02
Ohio........................................................................................... 0.91
Oklahoma....................................................................................... 0.80
Oregon......................................................................................... 0.27
Pennsylvania................................................................................... 1.71
Puerto Rico.................................................................................... 0.01
Rhode Island................................................................................... 0.14
South Carolina................................................................................. 3.00
South Dakota................................................................................... 0.02
Tennessee...................................................................................... 1.36
Texas.......................................................................................... 22.39
Utah........................................................................................... 0.17
Vermont........................................................................................ 0.05
Virginia....................................................................................... 2.77
Washington..................................................................................... 0.35
West Virginia.................................................................................. 0.08
Wisconsin...................................................................................... 0.38
Wyoming........................................................................................ 0.02
Military....................................................................................... 0.06
-------------
Total.......................................................................................... 100%
=============
</TABLE>
- -----------
(1) Geographic distribution is based on the current billing addresses
of the obligors.
(2) Percentages may not add to 100% due to rounding.
<TABLE>
<CAPTION>
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE INITIAL RECEIVABLES AS OF THE INITIAL CUTOFF DATE
Percentage of
Principal
Principal Balance of
Number of Balance of Receivables
ANNUAL PERCENTAGE RATE RANGE (%) Receivables Receivables Pool (1) Pool (2)
- -------------------------------- ----------- -------------------- --------
<C> <C> <C> <C>
0.00 to 0.99................................................. 3,765 $67,702,417.03 11.33%
1.00 to 1.99................................................. 360 6,527,957.25 1.09
2.00 to 2.99................................................. 1,159 18,384,942.68 3.08
3.00 to 3.99................................................. 450 7,400,822.76 1.24
4.00 to 4.99................................................. 3,280 63,610,051.86 10.64
5.00 to 5.99................................................. 3,307 67,595,372.40 11.31
6.00 to 6.99................................................. 3,900 84,703,284.87 14.17
7.00 to 7.99................................................. 2,860 60,989,293.99 10.20
8.00 to 8.99................................................. 2,319 51,826,790.75 8.67
9.00 to 9.99................................................. 1,703 35,741,511.96 5.98
10.00 to 10.99............................................... 1,973 38,182,969.04 6.39
11.00 to 11.99............................................... 1,332 22,696,005.76 3.80
12.00 to 12.99............................................... 809 15,029,476.93 2.51
13.00 to 13.99............................................... 818 11,809,283.34 1.98
14.00 to 14.99............................................... 794 14,051,745.75 2.35
15.00 to 15.99............................................... 461 7,279,029.17 1.22
16.00 to 16.99............................................... 417 6,183,997.40 1.03
17.00 to 17.99............................................... 403 5,424,697.01 0.91
18.00 to 18.99............................................... 400 4,728,022.51 0.79
19.00 to 19.99............................................... 289 2,686,097.97 0.45
20.00 to 20.99............................................... 253 2,286,142.09 0.38
21.00 to 21.99............................................... 151 1,705,128.91 0.29
22.00 to 22.99............................................... 93 918,371.53 0.15
23.00 to 23.99............................................... 32 325,645.75 0.05
----------- ----------------- --------------
Total........................................................ 31,328 $597,789,058.71 100%
=========== ================= ==============
</TABLE>
- -----------
(1) Remaining principal balance for Simple Interest Receivables, and
the present value of scheduled remaining payments for Actuarial
Receivables discounted at a rate equal to the annual percentage
rate with respect to such receivables.
(2) Percentage may not add to 100% due to rounding.
Based on the principal balance of the initial receivables as of
October 1, 1999:
o approximately 86.31% of the total number of receivables,
or approximately 93.09% of the principal balance of the
receivables pool, relate to new automobiles and
light-duty trucks, substantially all of which were
manufactured or distributed by Mitsubishi Motors;
o approximately 7.99% of the total number of receivables,
or approximately 3.46% of the principal balance of the
receivables pool, relate to program automobiles and
light-duty trucks, substantially all of which were
manufactured or distributed by Mitsubishi Motors; and
o approximately 3.27% of the total number of receivables,
or approximately 2.01% of the principal balance of the
receivables pool, relate to used automobiles and
light-duty trucks, substantially all of which were
manufactured or distributed by Mitsubishi Motors and
approximately 2.43% of the total number of receivables,
or approximately 1.44% of the principal balance of the
receivables pool, relate to other used
automobiles and light-duty trucks.
Program automobiles and light-duty trucks are vehicles which dealers have
acquired under a remarketing program administered by MMCA. This program
allows dealers to offer to purchasers of program automobiles and light-duty
trucks the same rate of interest and terms offered to new car buyers.
Program vehicles are primarily automobiles returned to MMCA by rental car
companies, but also include off-lease MMCA company and employee lease
vehicles and MMCA pool cars.
PAYMENT METHODS
Approximately 5.78% of the principal balance of the receivables
transferred to the trust on the Closing Date, calculated as of the Cutoff
Date, was attributable to Actuarial Receivables, excluding Actuarial
Receivables based on the Rule of 78's. An Actuarial Receivable provides for
the amortization of the loan over a series of fixed level monthly
installments. Each monthly installment is deemed to consist of an amount of
interest equal to one-twelfth of the stated annual percentage rate of the
loan multiplied by the scheduled principal balance. The remainder of the
scheduled payment is applied to principal. No adjustment is typically made
in the event of early or late payments, although in the case of a late
payment the obligor may be subject to a late payment charge.
Approximately 94.04% of the principal balance of the receivables
transferred to the trust on the Closing Date, calculated as of the Cutoff
Date, was attributable to Simple Interest Receivables. A Simple Interest
Receivable, like an Actuarial Receivable, also provides for the
amortization of the loan over a series of fixed level monthly installments.
However, unlike the monthly payment under an Actuarial Receivable, each
monthly payment under a Simple Interest Receivable consists of an
installment of interest which is equal to the principal balance of the
receivable actually outstanding, as opposed to scheduled, at the time of
calculation multiplied by the stated annual percentage rate and further
multiplied by the period elapsed, as a fraction of a calendar year, since
the preceding payment of interest was made. As payments are received under
a Simple Interest Receivable, the amount received is applied first to
interest accrued to the date of payment and the balance is applied to
reduce the unpaid principal balance. Accordingly, if an obligor pays a
fixed monthly installment before the date on which the installment is due,
the interest portion of the payment will be less than it would have been
had the payment been made as scheduled, and the principal portion of the
payment will be correspondingly greater. Conversely, if an obligor pays a
fixed monthly installment after the date on which it is due, the interest
portion of the payment will be greater than it would have been had the
payment been made when due and the principal portion of the payment will be
correspondingly less. In either case, the obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the
amount of the final installment is increased or decreased as necessary to
repay the then outstanding principal balance. In the case of a Balloon
Payment Receivable that is also a Simple Interest Receivable, the remaining
principal balance on the due date of the receivable may be greater or less
than the scheduled Balloon Payment on the receivable. In November 1996,
MMCA began phasing out Actuarial Receivables in favor of Simple Interest
Receivables.
The remainder of the initial receivables transferred to the trust
on the Closing Date were either Actuarial Receivables which provide for a
refund of a portion of the interest paid if the receivable is prepaid in
full or Simple Interest Receivables that are subject to a cap on the
aggregate amount of the interest to be paid over the term of the
receivable. The refund upon prepayment in full of these Actuarial
Receivables is determined in accordance with the "Rule of 78's" and the
excess, if any, of the amount that would be due using the Rule of 78's
method over the actuarial method will not be used to make payments due to
noteholders but instead will be paid to the servicer. If the obligor on a
capped receivable consistently makes scheduled payments after the date on
which the scheduled payments are due, the amount of interest accrued over
the term of the loan will be less than would be the case in the absence of
the cap. If, as a result of those delinquencies, the aggregate amount of
interest paid under the receivable reaches the lifetime cap, no further
interest will accrue and each scheduled payment due thereafter will be
applied to the reduction of principal.
Approximately 25.25% of the principal balance of the receivables
transferred to the trust on the Closing Date, calculated as of the initial
Cutoff Date, was attributable to Balloon Payment Receivables. A Balloon
Payment receivable may be either a Simple Interest Receivable or an
Actuarial Receivable. See "-Balloon Payment Receivables" below.
Approximately 7.23% of the principal balance of the receivables
transferred to the trust on the Closing Date, calculated as of the initial
Cutoff Date, was attributable to receivables that allow a deferred first
payment. The obligor on a receivable with a deferred first payment is not
required to make any payments of interest or principal for as long as 216
days from the day of origination of the receivable. On and after the date
the first payment is due, the obligor is required to make monthly payments
on interest and principal under the receivable. The effect of the deferment
of the first payment is to increase the term of the receivable for the
period of the deferment.
BALLOON PAYMENT RECEIVABLES
Balloon Payment Receivables provide for the loan to amortize over
a series of equal monthly installments, but also provide for a
substantially larger final scheduled payment of principal together with one
month's interest. This final payment is known as a "Balloon Payment" and is
due at the end of the term of the receivable. MMCA sets the Balloon Payment
for a particular model of vehicle at the time the contract is entered into.
The net amount actually due from an obligor at the end of term of a Balloon
Payment Receivable may be greater or less than the Balloon Payment as a
result of:
o in the case of a Simple Interest Receivable, early or
late payments by the obligor during the term of the
receivable and the application of day counting
conventions; and
o in the case of a Simple Interest Receivable or an
Actuarial Receivable, additional fees and charges that
may be owed by the obligor with respect to the contract
or the financed vehicle, including charges for excess
wear and tear and excess mileage on the financed vehicle.
Obligors may prepay the receivables in full at any time.
Prepayments may also result from liquidations due to default, the receipt
of insurance proceeds after destruction or theft of the financed vehicle
and purchases of the receivable by MART or the servicer as a result of
uncured breaches of representations and warranties in the sale and
servicing agreement. See "-Maturity and Prepayment Considerations."
Upon maturity of a Balloon Payment Receivable, the related obligor
may satisfy the amount it owes by:
o paying the remaining principal amount of the receivable,
all accrued and unpaid interest, plus any fees, charges,
and other amounts then owing;
o refinancing the net amount then due, which may be greater
or less than the Balloon Payment, subject to several
conditions; or
o selling the related financed vehicle to MMCA or its
assignee for an amount equal to the Balloon Payment, as
reduced by charges for excess wear and tear and excess
mileage and by a disposition fee payable to the servicer,
and paying any excess of the total amount owed under the
receivable over the Balloon Payment to MMCA.
If the obligor sells the financed vehicle to MMCA, acting on
behalf of the trust, it is anticipated that the trust will not receive the
full amount of the Balloon Payment upon the subsequent sale of the financed
vehicle. MMCA sets the Balloon Payment for a particular model at the time
of origination of the related contract by reference to its estimate of the
wholesale market value of the model at the end of the contract's term.
However, in connection with sales incentive programs for particular models,
MMCA may increase the Balloon Payments to levels above its estimate of the
wholesale market values at the end of their respective contract terms, in
order to stimulate sales of particular models by reducing the amount of the
monthly installments which would be owed by obligors.
If there is a total loss of the automobile or light-duty truck
caused by its theft or physical damage, MMCA does not require the obligor
under a receivable providing for a Balloon Payment Receivable to pay the
difference between the amount owed in respect of the receivable as of the
date of the total loss and insurance proceeds, including payment by the
obligor of any applicable deductible, received with respect to the financed
vehicle. MMCA will instead reduce the principal amount of the Balloon
Payment by that amount.
If the full amount owed by an obligor under a Balloon Payment
Receivable is not collected, the shortfall will reduce the Available Funds
available to pay the Total Required Payment and to make any required
transfers from the collection account to the reserve account and the
supplemental reserve account which may reduce the amount available to pay
interest on and principal of the notes. None of MMCA, the servicer, MART or
the trust will have any recourse to the obligor for any shortfall, nor will
MMCA, the servicer or MART be obligated to pay any shortfall to the trust.
DEFAULTED RECEIVABLES
A receivable, other than a receivable which has been purchased
from the trust by MART or the servicer, will be considered to have
defaulted if:
o the related financed vehicle has been repossessed and
liquidated;
o more than 10% of a scheduled payment is 120 or more days
past due as of the end of the month in which the payment
was due and the servicer has not repossessed the related
financed vehicle; or
o the servicer has determined, in accordance with its
customary standards, policies and procedures, that
eventual payment in full, excluding charges for excess
wear and tear or excess mileage, of the receivable is
unlikely and has either repossessed and liquidated the
related financed vehicle or repossessed and held the
related financed vehicle in its repossession inventory
for a period which may not exceed 90 days.
MATURITY AND PREPAYMENT CONSIDERATIONS
The weighted average life of the notes will generally be
influenced by the rate of payment of principal balances of the receivables.
This payment may be in the form of scheduled payments or prepayments.
Prepayments in full on Actuarial Receivables and Simple Interest
Receivables and partial prepayments on Simple Interest Receivables
generally will have the effect of reducing the weighted average life of the
notes. Delinquencies by obligors under Simple Interest Receivables and
extensions and payment deferrals on any type of receivable generally will
have the effect of increasing the weighted average life of the notes.
"Prepayments" for these purposes includes the following circumstances:
o Prepayments in full and partial prepayments. The obligors
may prepay the receivables in full or in part.
o Mandatory prepayments. An obligor may be required to
prepay a receivable because of, among other things, the
sale, insured loss or other disposition of the related
vehicle or the receivable becoming defaulted.
o Repurchases of the receivables by MART or the servicer.
MART or the servicer may be required to repurchase a
receivable from the trust if certain breaches of
representations and warranties occur that materially and
adversely affect the receivable.
In light of the above considerations, there can be no assurance as
to the amount of principal payments that will be made on the notes on each
payment date. The amount will depend, in part, on the amount of principal
collected on the receivables during the preceding calendar month. Any
reinvestment risks resulting from a faster or slower incidence of
prepayment of receivables will be borne entirely by the noteholders.
In addition, if MMCA or any affiliate of MMCA decides to implement
a program that encourages prepayments, prepayments may increase. MMCA
currently maintains a program that offers attractive terms to obligors to
prepay their accounts and return their vehicles early if they purchase a
new vehicle manufactured by Mitsubishi Motors or an affiliate. While this
program may encourage prepayments, the effect on prepayments of the program
and other programs like it cannot be predicted.
Prepayments on the receivables can be measured relative to a
prepayment standard or model. This prospectus uses the Absolute Prepayment
Model ("ABS"). ABS assumes that a certain percentage of the receivables in
a pool will be repaid each month. It also assumes that all the receivables
are the same size and amortize at the same rate. The final assumption is
that each receivable will either be paid as scheduled or be prepaid in full
in any given month. For example, in a pool of receivables originally
containing 10,000 receivables, a 1% ABS rate means that 100 receivables
prepay each month. ABS 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 receivables purchased by the
trust.
Approximately 25.25% of the principal balance of the receivables
transferred to the trust on the Closing Date, calculated as of the Cutoff
Date, consists of Balloon Payments. Accordingly, a portion of the principal
amount of the notes is expected to be paid from Balloon Payments. All of
the Balloon Payments are due between January 4, 2000 and October 11, 2004
and significant payments of principal are likely to be made during that
period. The average principal balance of those Balloon Payments is
approximately $10,883.64, which is approximately 48.65% of the average
principal balance of those receivables.
The tables relating to ABS captioned "Projected Class A-1 Note
Amortization", "Projected Class A-2 Note Amortization", "Projected Class
A-3 Note Amortization" and "Projected Class B Note Amortization" assume
that:
o the Yield Supplement Amount is deposited into the
collection account each period;
o the Negative Carry Amount is deposited into the
collection account each period;
o the amount deposited into the pre-funding account on the
Closing Date is applied in its entirety to the purchase
of contracts transferred to the trust during the
Pre-Funding Period and to make the related deposits to
the reserve account, the yield supplement account and the
payahead account;
o the receivables prepay in full at the specified constant
percentage of ABS monthly, with no defaults, losses or
repurchases;
o if the first payment on a receivable is deferred, no
prepayments are made on that receivable on that
receivable prior to the date the first payment on that
receivable is due;
o each scheduled monthly payment on the receivables is made
on the last day of each month, and each month has 30
days;
o payments on the notes are made on each payment date,
which is assumed to be the 15th day of each applicable
month;
o the first date on which receivables will be transferred
to the trust is the Closing Date;
o the servicer exercises its option to purchase the
receivables; and
o MMCA's program to manage end-of-term risks and mitigate
returned vehicle losses by offering attractive terms to
obligors to prepay their receivables and return their
vehicle early, if they purchase a new Mitsubishi
Motor vehicle, does not extend to the receivables.
The ABS tables indicate the percent of the initial principal
balance of each class of the notes projected to be outstanding after each
of the payment dates.
For purposes of creating the ABS tables, the receivables have been
aggregated into different hypothetical pools.
The receivables to be transferred to the trust on the Closing Date
have been divided into five hypothetical pools made up of receivables that
have equal scheduled monthly payments that fully amortize those
receivables. These hypothetical pools have the following characteristics:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Average Average Average
LEVEL Aggregate Annual Original Term Remaining Term
PAYMENT Principal Percentage to Maturity to Maturity
POOL Balance Rate (in months) (in months)
- ------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
1 ............................................. $11,677,049.73 5.913% 35 18
2 ............................................. $25,189,180.11 7.508% 40 32
3 ............................................. $170,768,888.24 4.785% 48 44
4 ............................................. $195,974,154.49 9.201% 59 56
5 (1)........................................... $43,212,854.50 7.317% 64 64
</TABLE>
- -----------
(1) Includes receivables with no payments due for an initial period of
six months. Thereafter, receivables amortize over 58 months.
The receivables to be transferred to the trust on the Closing Date
also have been divided into four hypothetical pools made up of balloon
payment receivables. These hypothetical pools have the following
characteristics:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Average Average Average
BALLOON Aggregate Annual Original Term Remaining Term
PAYMENT Principal Percentage to Maturity to Maturity
POOL Balance Rate (in months) (in months)
- --- ------- ---- ----------- ----------
<S> <C> <C> <C> <C>
1 .............................................. $10,991,611.81 6.927% 45 16
2 .............................................. $8,028,788.98 7.517% 40 32
3 .............................................. $75,251,449.01 7.082% 48 43
4 .............................................. $56,695,081.84 9.751% 57 55
</TABLE>
The ABS tables also assume that the additional receivables to be
transferred to the trust during the Pre-Funding Period occur in two groups.
The first group, with an assumed aggregate principal balance of
$126,381,838.31, are assumed to be transferred to the trust on December 1,
1999. The second group, with an assumed aggregate principal balance of
$75,829,102.98, are assumed to be transferred to the trust on February 1, 2000.
The receivables to be transferred to the trust on December 1, 1999
have been divided into five hypothetical pools made up of receivables that
have equal monthly payments that fully amortize those receivables. These
hypothetical pools have the following characteristics:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Average Average Average
LEVEL Aggregate Annual Original Term Remaining Term
PAYMENT Principal Percentage to Maturity to Maturity
POOL Balance Rate (in months) (in months)
- ---- ------- ---- ----------- -----------
<S> <C> <C> <C> <C>
1 .............................................. $2,468,708.64 5.913% 35 35
2 .............................................. $5,325,381.66 7.508% 40 40
3 .............................................. $36,103,180.05 4.785% 48 48
4 .............................................. $41,431,962.56 9.201% 59 59
5 (1)............................................ $9,135,864.75 7.317% 64 64
</TABLE>
- -----------
(1) Includes receivables with no payments due for an initial period of
six months. Thereafter, receivables amortize over 58 months.
The receivables to be transferred to the trust during the
Pre-Funding Period also have been divided into four hypothetical pools made
up of balloon payment receivables. These hypothetical pools have the
following characteristics:
<TABLE>
<CAPTION>
Weighted
Weighted Average Weighted
Average Remaining Term Average
BALLOON Aggregate Annual to Original Term
PAYMENT Principal Percentage Maturity to Maturity
POOL Balance Rate (in months) (in months)
- ---- ------- ---- ----------- -----------
<S> <C> <C> <C> <C>
1 .............................................. $2,323,796.46 6.927% 45 45
2 .............................................. $1,697,409.97 7.517% 40 40
3 .............................................. $15,909,318.38 7.082% 48 48
4 .............................................. $11,986,215.84 9.751% 57 57
</TABLE>
The receivables to be transferred to the trust on February 1, 2000
have been divided into five hypothetical pools made up of receivables that
have equal monthly payments that fully amortize those receivables. These
hypothetical pools have the following characteristics:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Average Average Average
LEVEL Aggregate Annual Original Term Remaining Term
PAYMENT Principal Percentage to Maturity to Maturity
POOL Balance Rate (in months) (in months)
- ---- ------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
1 .............................................. $1,481,225.18 5.913% 35 35
2 .............................................. $3,195,228.99 7.508% 40 40
3 .............................................. $21,661,908.03 4.785% 48 48
4 .............................................. $24,859,177.54 9.201% 59 59
5 (1)............................................ $5,481,518.85 7.317% 64 64
</TABLE>
- -----------
(1) Includes receivables with no payments due for an initial period of
six months. Thereafter, receivables amortize over 58 months.
The receivables to be transferred to the trust during the
Pre-Funding Period also have been divided into four hypothetical pools made
up of balloon payment receivables. These hypothetical pools have the
following characteristics:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Average Average Average
BALLOON Aggregate Annual Original Term Remaining Term
PAYMENT Principal Percentage to Maturity to Maturity
POOL Balance Rate (in months) (in months)
- ---- ------- ---- ----------- -----------
<S> <C> <C> <C> <C>
1 ............................................. $1,394,277.88 6.927% 45 45
2 ............................................. $1,018,445.98 7.517% 40 40
3 ............................................. $9,545,591.03 7.082% 48 48
4 ............................................. $7,191,729.50 9.751% 57 57
</TABLE>
The actual characteristics and performance of the receivables in
the trust will differ from the assumptions used in constructing the ABS
tables. The assumptions used are hypothetical and have been provided only
to give a general sense of how the principal cash flow might behave under
varying prepayment scenarios. It is very unlikely that the receivables will
prepay at the same level of ABS. Moreover, the diverse terms of receivables
within each of the hypothetical pools could produce slower or faster
principal distributions than indicated in the ABS tables. In addition, the
characteristics of the receivables transferred to the trust on the Closing
Date are expected to be different from the receivables transferred to the
trust during the Pre-Funding Period. Any difference between those
assumptions and the actual characteristics and performance of the
receivables, or actual prepayment experience, will affect the percentages
of initial balances outstanding over time, as well as collections of
interest and principal of receivables. See "-Selection Criteria."
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS
DESCRIBED ABOVE AND SHOULD BE READ IN CONJUNCTION THEREWITH.
<TABLE>
<CAPTION>
PROJECTED CLASS A-1 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
PAYMENT DATE 0.0% ABS 1.0% ABS 1.3% ABS 1.5% ABS 2.0% ABS
- ------------ -------- -------- -------- -------- --------
Class A-1 Note Balance (%)
<S> <C> <C> <C> <C> <C>
Closing Date............................................. 100 100 100 100 100
November 15, 1999........................................ 98 96 95 95 94
December 15, 1999........................................ 95 92 91 90 88
January 15, 2000......................................... 92 87 85 84 81
February 15, 2000........................................ 90 82 80 78 74
March 15, 2000........................................... 86 77 74 72 66
April 15, 2000........................................... 83 72 68 65 59
May 15, 2000............................................. 80 66 62 59 51
June 15, 2000............................................ 77 61 56 52 43
July 15, 2000............................................ 73 55 50 46 36
August 15, 2000.......................................... 70 50 44 40 28
September 15, 2000....................................... 66 45 38 33 21
October 15, 2000......................................... 63 39 32 27 14
November 15, 2000........................................ 59 34 26 21 6
December 15, 2000........................................ 56 29 20 15 0
January 15, 2001......................................... 52 24 15 9 0
February 15, 2001........................................ 45 16 7 1 0
March 15, 2001........................................... 42 11 2 0 0
April 15, 2001........................................... 38 6 0 0 0
May 15, 2001............................................. 34 1 0 0 0
June 15, 2001............................................ 31 0 0 0 0
July 15, 2001............................................ 27 0 0 0 0
August 15, 2001.......................................... 24 0 0 0 0
September 15, 2001....................................... 20 0 0 0 0
October 15, 2001......................................... 17 0 0 0 0
November 15, 2001........................................ 13 0 0 0 0
December 15, 2001........................................ 10 0 0 0 0
January 15, 2002......................................... 6 0 0 0 0
February 15, 2002........................................ 3 0 0 0 0
March 15, 2002........................................... 0 0 0 0 0
-------- -------- --------- -------- ---------
Weighted Average Life (yrs).............................. 1.26 0.83 0.75 0.70 0.60
======== ======== ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
PROJECTED CLASS A-2 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
PAYMENT DATE 0.0% ABS 1.0% ABS 1.3% ABS 1.5% ABS 2.0% ABS
- ------------ -------- -------- -------- -------- --------
Class A-2 Note Balance (%)
<S> <C> <C> <C> <C> <C>
Closing Date............................................. 100 100 100 100 100
November 15, 1999........................................ 100 100 100 100 100
December 15, 1999........................................ 100 100 100 100 100
January 15, 2000......................................... 100 100 100 100 100
February 15, 2000........................................ 100 100 100 100 100
March 15, 2000........................................... 100 100 100 100 100
April 15, 2000........................................... 100 100 100 100 100
May 15, 2000............................................. 100 100 100 100 100
June 15, 2000............................................ 100 100 100 100 100
July 15, 2000............................................ 100 100 100 100 100
August 15, 2000.......................................... 100 100 100 100 100
September 15, 2000....................................... 100 100 100 100 100
October 15, 2000......................................... 100 100 100 100 100
November 15, 2000........................................ 100 100 100 100 100
December 15, 2000........................................ 100 100 100 100 99
January 15, 2001......................................... 100 100 100 100 88
February 15, 2001........................................ 100 100 100 100 77
March 15, 2001........................................... 100 100 100 92 67
April 15, 2001........................................... 100 100 94 84 57
May 15, 2001............................................. 100 100 86 76 48
June 15, 2001............................................ 100 95 79 67 39
July 15, 2001............................................ 100 88 71 59 30
August 15, 2001.......................................... 100 81 63 51 21
September 15, 2001....................................... 100 74 56 44 12
October 15, 2001......................................... 100 67 49 36 4
November 15, 2001........................................ 100 60 42 29 0
December 15, 2001........................................ 100 54 35 22 0
January 15, 2002......................................... 100 47 28 14 0
February 15, 2002........................................ 100 41 21 8 0
March 15, 2002........................................... 98 34 14 1 0
April 15, 2002........................................... 93 28 8 0 0
May 15, 2002............................................. 87 22 1 0 0
June 15, 2002............................................ 77 13 0 0 0
July 15, 2002............................................ 72 7 0 0 0
August 15, 2002.......................................... 66 2 0 0 0
September 15, 2002....................................... 61 0 0 0 0
October 15, 2002......................................... 56 0 0 0 0
November 15, 2002........................................ 50 0 0 0 0
December 15, 2002........................................ 45 0 0 0 0
January 15, 2003......................................... 39 0 0 0 0
February 15, 2003........................................ 33 0 0 0 0
March 15, 2003........................................... 28 0 0 0 0
April 15, 2003........................................... 21 0 0 0 0
May 15, 2003............................................. 0 0 0 0 0
-------- -------- --------- -------- ---------
Weighted Average Life (yrs).............................. 3.07 2.23 2.00 1.87 1.58
======== ======== ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
PROJECTED CLASS A-3 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
PAYMENT DATE 0.0% ABS 1.0% ABS 1.3% ABS 1.5% ABS 2.0% ABS
- ------------ -------- -------- -------- -------- --------
Class A-3 Note Balance (%)
<S> <C> <C> <C> <C> <C>
Closing Date............................................. 100 100 100 100 100
November 15, 1999........................................ 100 100 100 100 100
December 15, 1999........................................ 100 100 100 100 100
January 15, 2000......................................... 100 100 100 100 100
February 15, 2000........................................ 100 100 100 100 100
March 15, 2000........................................... 100 100 100 100 100
April 15, 2000........................................... 100 100 100 100 100
May 15, 2000............................................. 100 100 100 100 100
June 15, 2000............................................ 100 100 100 100 100
July 15, 2000............................................ 100 100 100 100 100
August 15, 2000.......................................... 100 100 100 100 100
September 15, 2000....................................... 100 100 100 100 100
October 15, 2000......................................... 100 100 100 100 100
November 15, 2000........................................ 100 100 100 100 100
December 15, 2000........................................ 100 100 100 100 100
January 15, 2001......................................... 100 100 100 100 100
February 15, 2001........................................ 100 100 100 100 100
March 15, 2001........................................... 100 100 100 100 100
April 15, 2001........................................... 100 100 100 100 100
May 15, 2001............................................. 100 100 100 100 100
June 15, 2001............................................ 100 100 100 100 100
July 15, 2001............................................ 100 100 100 100 100
August 15, 2001.......................................... 100 100 100 100 100
September 15, 2001....................................... 100 100 100 100 100
October 15, 2001......................................... 100 100 100 100 100
November 15, 2001........................................ 100 100 100 100 94
December 15, 2001........................................ 100 100 100 100 83
January 15, 2002......................................... 100 100 100 100 71
February 15, 2002........................................ 100 100 100 100 60
March 15, 2002........................................... 100 100 100 100 50
April 15, 2002........................................... 100 100 100 91 40
May 15, 2002............................................. 100 100 100 82 30
June 15, 2002............................................ 100 100 90 70 19
July 15, 2002............................................ 100 100 81 61 10
August 15, 2002.......................................... 100 100 73 53 1
September 15, 2002....................................... 100 95 65 44 0
October 15, 2002......................................... 100 86 57 36 0
November 15, 2002........................................ 100 79 49 29 0
December 15, 2002........................................ 100 71 41 21 0
January 15, 2003......................................... 100 63 34 14 0
February 15, 2003........................................ 100 56 27 7 0
March 15, 2003........................................... 100 49 20 0 0
April 15, 2003........................................... 100 41 12 0 0
May 15, 2003............................................. 71 5 0 0 0
June 15, 2003............................................ 62 0 0 0 0
July 15, 2003............................................ 56 0 0 0 0
August 15, 2003.......................................... 51 0 0 0 0
September 15, 2003....................................... 44 0 0 0 0
October 15, 2003......................................... 39 0 0 0 0
November 15, 2003........................................ 32 0 0 0 0
December 15, 2003........................................ 15 0 0 0 0
January 15, 2004......................................... 11 0 0 0 0
February 15, 2004........................................ 0 0 0 0 0
-------- -------- --------- -------- ---------
Weighted Average Life (yrs).............................. 3.86 3.33 3.09 2.89 2.43
======== ======== ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
PROJECTED CLASS B NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
PAYMENT DATE 0.0% ABS 1.0% ABS 1.3% ABS 1.5% ABS 2.0% ABS
- ------------ -------- -------- -------- -------- --------
Class B Note Balance (%)
<S> <C> <C> <C> <C> <C>
Closing Date............................................. 100 100 100 100 100
November 15, 1999........................................ 100 100 100 100 100
December 15, 1999........................................ 100 100 100 100 100
January 15, 2000......................................... 100 100 100 100 100
February 15, 2000........................................ 100 100 100 100 100
March 15, 2000........................................... 100 100 100 100 100
April 15, 2000........................................... 100 100 100 100 100
May 15, 2000............................................. 100 100 100 100 100
June 15, 2000............................................ 100 100 100 100 100
July 15, 2000............................................ 100 100 100 100 100
August 15, 2000.......................................... 100 100 100 100 100
September 15, 2000....................................... 100 100 100 100 100
October 15, 2000......................................... 100 100 100 100 100
November 15, 2000........................................ 100 100 100 100 100
December 15, 2000........................................ 100 100 100 100 100
January 15, 2001......................................... 100 100 100 100 100
February 15, 2001........................................ 100 100 100 100 100
March 15, 2001........................................... 100 100 100 100 100
April 15, 2001........................................... 100 100 100 100 100
May 15, 2001............................................. 100 100 100 100 100
June 15, 2001............................................ 100 100 100 100 100
July 15, 2001............................................ 100 100 100 100 100
August 15, 2001.......................................... 100 100 100 100 100
September 15, 2001....................................... 100 100 100 100 100
October 15, 2001......................................... 100 100 100 100 100
November 15, 2001........................................ 100 100 100 100 100
December 15, 2001........................................ 100 100 100 100 100
January 15, 2002......................................... 100 100 100 100 100
February 15, 2002........................................ 100 100 100 100 100
March 15, 2002........................................... 100 100 100 100 100
April 15, 2002........................................... 100 100 100 100 100
May 15, 2002............................................. 100 100 100 100 100
June 15, 2002............................................ 100 100 100 100 100
July 15, 2002............................................ 100 100 100 100 100
August 15, 2002.......................................... 100 100 100 100 100
September 15, 2002....................................... 100 100 100 100 84
October 15, 2002......................................... 100 100 100 100 66
November 15, 2002........................................ 100 100 100 100 48
December 15, 2002........................................ 100 100 100 100 0
January 15, 2003......................................... 100 100 100 100 0
February 15, 2003........................................ 100 100 100 100 0
March 15, 2003........................................... 100 100 100 100 0
April 15, 2003........................................... 100 100 100 84 0
May 15, 2003............................................. 100 100 64 33 0
June 15, 2003............................................ 100 96 51 0 0
July 15, 2003............................................ 100 85 41 0 0
August 15, 2003.......................................... 100 75 0 0 0
September 15, 2003....................................... 100 64 0 0 0
October 15, 2003......................................... 100 54 0 0 0
November 15, 2003........................................ 100 44 0 0 0
December 15, 2003........................................ 100 0 0 0 0
January 15, 2004......................................... 100 0 0 0 0
February 15, 2004........................................ 97 0 0 0 0
March 15, 2004........................................... 87 0 0 0 0
April 15, 2004........................................... 76 0 0 0 0
May 15, 2004............................................. 0 0 0 0 0
-------- -------- --------- -------- ---------
Weighted Average Life (yrs).............................. 4.51 3.98 3.68 3.56 3.04
======== ======== ========= ======== =========
</TABLE>
HOW NOTEHOLDERS CAN COMPUTE THEIR PORTION OF THE AMOUNT
OUTSTANDING ON THE NOTES
The servicer's monthly report will give the noteholders, a factor
that can be used to compute the portion of the principal amount outstanding
on the notes.
How the Servicer Computes the Factor For Each Class of Notes. The servicer
will compute a separate factor for each class of notes prior to each
distribution for that class. This factor will be a seven-digit decimal
which the servicer will compute prior to each distribution with respect to
that class of notes indicating the remaining outstanding principal amount
of that class of notes, as of the applicable payment date. The servicer
will compute the factor after giving effect to payments to be made on that
payment date, as a fraction of the initial outstanding principal amount of
that class of notes.
Portion of the Outstanding Amount of the Notes. For each note, the portion
outstanding is the product of:
o the original denomination of the note; and
o the factor relating to that class of notes computed by
the servicer in the manner described above.
The Factors Described Above Will Decline as the Trust Makes
Payments on the Securities.
Each of the factors described above will initially be 1.0000000.
They will decline as the principal amount of the applicable class of notes
is reduced by scheduled payments, prepayments, liquidations of the
receivables and prepayment arising from application of funds in the
pre-funding account. The addition of receivables to the trust will not
change any of
these factors.
USE OF PROCEEDS
The net proceeds from the sale of the notes will be applied:
o to the purchase of the receivables;
o to make the required deposit into the pre-funding account;
o to make the required deposit into the negative carry account;
o to make the required deposit into the payahead account;
o to make the required deposit into the yield supplement
account; and
o to make the required deposit into the reserve account.
MMCA AUTO RECEIVABLES TRUST
MART was established as a business trust in the State of Delaware
on May 19, 1999. MMCA is the sole beneficial owner of MART. MART was
established for limited purposes, which include purchasing receivables from
MMCA, transferring the receivables to third parties and any activities
related to those purposes. MART's principal executive offices are located
at 6363 Katella Avenue, Cypress, California 90630-5205. MART's telephone
number is (714) 236-1614.
In structuring these transactions MART has taken steps intended to
ensure that the voluntary or involuntary application for relief by MMCA
under the United States Bankruptcy Code or similar state laws will not
cause the assets and liabilities of MART to be consolidated with those of
MMCA. These steps include the maintenance of MART as a separate,
limited-purpose entity. The trust agreement by which MART was formed and
which governs MART's activities restricts the nature of MART's business and
MART's ability to commence a voluntary case or proceeding under any
insolvency law without the unanimous vote of all of its managers. However,
there can be no assurance that the activities of MART would not result in a
court concluding that its assets and liabilities should be consolidated
with those of MMCA in an insolvency proceeding.
MART's counsel has advised that it would not be a proper exercise
by a court of its equitable discretion to disregard the separate existence
of MART and consolidate its assets and liabilities with the assets and
liabilities of MMCA if MMCA filed for bankruptcy protection. MART's counsel
has assumed that MART will follow various procedures in the conduct of its
affairs, including maintaining records and books of account separate from
those of MMCA, refraining from commingling its assets with those of MMCA
and refraining from holding itself out as having agreed to pay, or being
liable for, the debts of MMCA. MART intends to follow and has represented
to that counsel that it will follow these and other procedures related to
maintaining its separate legal identity. However, if MART does not follow
those procedures, a court could conclude that the assets and liabilities of
MART should be consolidated with those of MMCA. If a court were to reach
that conclusion, or if a filing were made under any insolvency law by or
against MART, or if an attempt were made to litigate any of the foregoing
issues, delays in payments on the notes or reductions in the amounts of the
payments could result.
THE SERVICER
MMCA is a Delaware corporation which primarily provides retail and
wholesale financing, retail leasing and other financial services to
authorized Mitsubishi Motors automobile and light-duty truck dealers and
their customers in the United States. MMCA was incorporated in August 1990
and commenced operations in March 1991.
MMCA is a wholly-owned subsidiary of MMSA, a California
corporation which is engaged in the wholesale distribution of automobiles
and light-duty trucks throughout the United States manufactured by
Mitsubishi Motors Corporation and its affiliates. MMSA is a subsidiary of
Mitsubishi Motors Corporation, a Japanese corporation that is a worldwide
manufacturer and distributor of motor vehicles and light-duty trucks.
Mitsubishi Motors Corporation owns 97.20% of the stock of MMSA. Mitsubishi
Corporation, a Japanese corporation that is a worldwide general trading
company, owns 2.00% of the stock of MMSA. Mitsubishi International
Corporation, a New York corporation that is a worldwide trading company and
a wholly-owned subsidiary of Mitsubishi Corporation, owns 0.80% of the
stock of MMSA.
MMCA's national headquarters is located at 6363 Katella Avenue,
Cypress, CA 90630-5205. Its telephone number is (714) 236-1500.
TERMS OF THE NOTES
PRINCIPAL AMOUNT AND INTEREST RATES
The trust will issue $740,000,000 aggregate principal amount of
asset-backed notes under an indenture to be dated as of October 1, 1999,
between the trust and Bank of Tokyo-Mitsubishi Trust Company, in its
capacity as indenture trustee.
The notes will be issued in four classes:
o $326,000,000 aggregate principal amount of 6.30% Class
A-1 notes;
o $210,000,000 aggregate principal amount of 6.80% Class
A-2 notes;
o $142,000,000 aggregate principal amount of 7.00% Class
A-3 notes; and
o $62,000,000 aggregate principal amount of 7.55% Class B
notes.
A form of the indenture has been filed as an exhibit to the
registration statement of which this prospectus forms a part. The following
summary does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the notes, the indenture, the trust agreement
and the sale and servicing agreement.
INTEREST PAYMENTS
The notes will bear interest at the following annual rates:
o the Class A-1 notes: 6.30%;
o the Class A-2 notes: 6.80%;
o the Class A-3 notes: 7.00%; and
o the Class B notes: 7.55%.
Interest on the outstanding principal amount of each class of
notes will accrue at the applicable interest rate and will be payable to
the applicable noteholders on the 15th of each month. If the 15th of the
month is not a business day, the payment will be made on the next following
business day. The first payment will be made on November 15, 1999. Payments
will be made to noteholders as of each record date. The record date will be
the business day preceding each payment date. However, if notes in fully
registered, certificated form are issued, the record date will become the
15th day of the preceding month, or if that day is not a business day, the
preceding business day.
Calculation of interest. Interest will accrue during each interest period
and will be calculated on the notes on the basis of a 360-day year of
twelve 30-day months. Interest accrued as of any payment date but not paid
on that payment date will be due on the next payment date, together with
interest on that amount at the applicable interest rate, to the extent
lawful.
Interest Periods. Interest payable on the notes on each payment date will
accrue from the 15th of the month preceding the payment date through the
14th of the month of the payment date. For the first payment date, interest
will accrue from the Closing Date through November 14, 1999.
Priority of Interest Payments. Funds to make interest payments on the
notes will generally come from the Available Funds remaining after the
payment of the servicing fee for the related month plus any portion of the
servicing fee that remains unpaid from prior months. If the Available Funds
remaining are insufficient, the interest will be paid from amounts on
deposit in the supplemental reserve account. If those funds are
insufficient also, interest will then be paid from amounts on deposit in
the reserve account.
Interest payments on all of the Class A notes will have the same
priority of payment and will be paid ratably based upon the total amount of
interest due on each class of the Class A notes. Interest on the Class B
notes is subordinate to interest on the Class A notes. No interest will be
paid on the Class B notes on any payment date until interest on the Class A
notes has been paid in full. If the amount available for interest payments
is less than the amount of interest payable on the Class A notes on any
payment date, each class of the Class A notes will receive its ratable
share of the aggregate amount available to pay interest on the Class A
notes and no interest will be paid on the Class B notes. Additionally, if a
default under the indenture occurs, interest payments on the Class B notes
also will be subordinated to the payment of principal of the Class A notes.
Events of Default Under the Indenture. An event of default under the
indenture will occur if the full amount of interest due on all classes of
notes is not paid within five days after the payment date on which the
interest is due. No distributions will be made on the certificates on any
payment date until the interest and principal payable on the notes on that
payment date are paid in full.
PRINCIPAL PAYMENTS
On each payment date, principal payments will be made to the
noteholders in an amount equal in the aggregate to the Principal
Distribution Amount for that payment date, subject to several limitations.
Certificateholders will not be entitled to receive payments of principal
until all classes of notes have been paid in full. See "-Indenture Cash
Flows" and "-The Reserve Account and Supplemental Reserve Account."
On each payment date the Principal Distribution Amount will be
paid:
o to the holders of the Class A-1 notes, until the Class
A-1 notes have been paid in full;
o after the Class A-1 notes are paid in full, to the
holders of the Class A-2 notes, until the Class A-2 notes
have been paid in full;
o after the Class A-2 notes are paid in full, to the
holders of the Class A-3 notes, until the Class A-3 notes
have been paid in full; and
o after the Class A-3 notes are paid in full, to the
holders of the Class B notes, until the Class B notes
have been paid in full.
Events of Default Under the Indenture. Payments on the notes may be
accelerated upon an event of default under the indenture. If this occurs,
the order of priority for principal payments on the notes will change.
Amounts available to pay principal of the Class A notes will be paid to the
holders of each class of Class A notes in proportion to the principal
balance of that class to the sum of the principal balances of all of the
Class A notes, until all of the Class A notes are paid in full. See
"-Indenture Cash Flows-Monthly Withdrawals From the Note Payment Account On
and After an Acceleration of the Maturity Dates of the Notes." Principal of
the Class B notes will be paid only after the payment of the following:
o amounts due to the servicer;
o interest due on the Class A notes;
o principal in full of all of the Class A notes; and
o interest due on the Class B notes.
The noteholders will be paid in full before any distributions may
be made on the certificates.
Scheduled Final Payment Dates. Any outstanding principal balance of each
class of notes will be payable in full on the final payment date in the
months specified below:
o for the Class A-1 notes, June 2002;
o for the Class A-2 notes, August 2003;
o for the Class A-3 notes, May 2004; and
o for the Class B notes, April 2006.
The actual date on which the aggregate outstanding principal
amount of any class of notes is paid may be earlier or later than these
dates due to a variety of factors, including those described under "Risk
Factors-Risk that You May Be Required to Reinvest Your Principal in the
Notes at a Lower Rate of Return Because of Prepayments on the Notes" and
"The Receivables Pool-Maturity and Prepayment Considerations."
MANDATORY PREPAYMENT
On the payment date on or immediately following the last day of
the Pre-Funding Period, any funds remaining in the pre-funding account,
after giving effect to the purchase of all receivables purchased during the
Pre-Funding Period, exclusive of any net earnings from the investment of
funds on deposit in the pre-funding account, will be applied to pay
principal of the notes then outstanding in the same sequence and
proportions that would apply if the remaining funds were a part of the
Principal Distribution Amount. Although the pre-funding account will be
funded in an amount that MART anticipates will allow the trust to acquire
receivables during the Pre-Funding Period in an aggregate principal amount
approximately equal to the amount on deposit in the pre-funding account, it
is unlikely that the aggregate principal amount of those receivables will
exactly equal the amount on deposit in the pre-funding account, and it is
likely that at least a nominal amount of principal will be prepaid to the
noteholders at the end of the Pre-Funding Period.
OPTIONAL REDEMPTION
All of the outstanding notes and certificates will be redeemed on
any payment date on which the servicer exercises its option to purchase the
receivables. The servicer may purchase the receivables on any payment date
on which the principal balance of the receivables pool as of the end of the
preceding calendar month is 10% or less of the Initial Pool Balance. The
redemption price will be equal to the unpaid principal amount of the notes
plus accrued and unpaid interest on the notes, together with the unpaid
principal amount of the certificates.
THE INDENTURE TRUSTEE
Bank of Tokyo-Mitsubishi Trust Company, a New York banking
corporation, will be the indenture trustee. The indenture trustee's
Corporate Trust Office is located at 1251 Avenue of the Americas, New York,
New York 10020-1104. MART, the servicer, and their respective affiliates
may have other banking relationships with the indenture trustee and its
affiliates in the ordinary course of their businesses. The Bank of
Tokyo-Mitsubishi, Ltd., an affiliate of the indenture trustee, is
participating in the offering of the notes being offered hereby by acting
as an advisor to MART. For its services, The Bank of Tokyo-Mitsubishi, Ltd.
will receive a fee of $100,000 to be paid from the underwriting discounts
and commissions.
THE YIELD SUPPLEMENT AGREEMENT
Simultaneously with the sale and assignment of the receivables by
MMCA to MART, MMCA and MART will enter into the yield supplement agreement.
The yield supplement agreement will obligate MMCA to pay any Yield
Supplement Amount to the trust on the business day before each payment
date.
THE YIELD SUPPLEMENT ACCOUNT
Payments of the Yield Supplement Amount due under the yield
supplement agreement will be secured by funds on deposit in the yield
supplement account. The yield supplement account has been established
because (1) some of the receivables in the trust will not have any payments
due from the related obligors until some time after the first payment date
of the notes and (2) some of the receivables owned by the trust will have
an annual percentage rate which is lower than the minimum annual percentage
rate MART and MMCA have agreed is required to cover interest on the notes,
the 1% servicing fee and anticipated losses on defaulted receivables. This
minimum annual percentage rate has been set at the weighted average
interest rate on the notes plus 3 percentage points. However, if MMCA
either obtains a letter of credit securing timely payment to the indenture
trustee of amounts due from MMCA under the yield supplement agreement or
otherwise satisfies several other conditions satisfactory to each of
Moody's and S&P, then subject to the delivery of certain tax opinions the
yield supplement account may be terminated. Any letter of credit related to
the yield supplement agreement will be issued by a bank that has a debt
rating sufficient to maintain the rating of each class of notes at the
initial level at which it was rated by each of Moody's and S&P. If the
rating of the letter of credit bank that issues the letter of credit is
reduced below either of those ratings, the indenture trustee will be
required to obtain a suitable replacement letter of credit, to obtain funds
in the required amount for deposit in the yield supplement account or to
draw the full amount available under the letter of credit and deposit those
funds in the yield supplement account.
On each payment date, after giving effect to payments on that
date, the amount required to be on deposit in the yield supplement account
or to be available under an acceptable letter of credit will be an amount
equal to the sum of all projected Yield Supplement Amounts for all future
payment dates, which will be determined assuming that future scheduled
payments on the receivables are made on the dates they are scheduled. The
amount on deposit in the yield supplement account will decrease as payments
are made from that account with respect to the Yield Supplement Amounts and
funds in excess of the maximum required balance are released to MART.
MART Will Make Deposits into the Yield Supplement Account upon each
Transfer of Receivables to the Trust. MART will make an initial deposit to
the yield supplement account on the Closing Date, in the amount specified
in the sale and servicing agreement. On each subsequent date on which
receivables are transferred to the trust, the indenture trustee will make
an additional deposit to the yield supplement account from funds on deposit
in the pre-funding account that otherwise would be distributable to MART as
payment for the receivables sold to the trust on that date, unless the
yield supplement account has been replaced by an acceptable letter of
credit on or before that date.
THE TRUST'S BANK ACCOUNTS
The servicer will establish and maintain the following trust
accounts:
o a collection account into which payments made on
receivables and advances made by the servicer will be
deposited;
o a pre-funding account into which $202,210,941.29 will be
deposited on the Closing Date;
o a note payment account into which amounts released from
the collection account for distribution to noteholders
will be deposited and from which all payments to
noteholders will be made;
o a certificate distribution account into which amounts
released from the collection account for distribution to
certificateholders will be deposited and from which all
distributions to certificateholders will be made; and
o a payahead account into which early payments by obligors
of less than the remaining balance of Actuarial
Receivables will be deposited until the time as the
payment on such receivables falls due or until those
funds are applied to shortfalls in the scheduled payments
with respect to those receivables.
The servicer will establish the pre-funding account, the payahead
account, the reserve account, the supplemental reserve account and the
yield supplement account in the name of the indenture trustee for the
benefit of the noteholders and the certificateholders. The servicer will
establish the note payment account and the negative carry account in the
name of the indenture trustee for the exclusive benefit of the noteholders.
The servicer will establish the certificate distribution account in the
name of the owner trustee for the exclusive benefit of the certificateholders.
On the Closing Date, MART will deposit to the payahead account the
early payments with respect to Actuarial Receivables which were received
prior to the Cutoff Date. On each date during the Pre-Funding Period on
which receivables are transferred to the trust, the indenture trustee will
withdraw from the pre-funding account and deposit to the payahead account
any early payments with respect to Actuarial Receivables transferred to the
trust on that date which were received before the related date of transfer.
Funds in the collection account, the pre-funding account, the
payahead account, the reserve account, the supplemental reserve account,
the negative carry account and the yield supplement account will be
invested in the types of investments permitted by the sale and servicing
agreement, which generally will be limited to investments acceptable to
each of Moody's and S&P as being consistent with the ratings of the notes.
Investments permitted by the sale and servicing agreement will be limited
to obligations or securities that mature not later than the business day
immediately preceding the next payment date or the date on which payment is
due, in the case of early payments with respect to Actuarial Receivables on
deposit in the payahead account. Any earnings, net of losses and investment
expenses, on amounts on deposit in the collection account will be paid to
the certificateholders. Any earnings, net of losses and investment
expenses, on amounts on deposit in the payahead account will be paid to the
servicer as additional servicing compensation and will not be available to
pay noteholders. Any earnings, net of losses and investment expenses on,
and any amounts released from, the reserve account, the supplemental
reserve account, the negative carry account and the yield supplement
account will be distributed to MART and will not be available to pay
noteholders. However, earnings on amounts on deposit in the reserve
account, the supplemental reserve account and the negative carry account
will be distributed to MART only to the extent that the amounts on deposit
in those accounts exceed the required balances of those accounts.
INDENTURE CASH FLOWS
Deposits to the Collection Account; Calculations Made by the
Servicer; Notice to the Indenture Trustee. On or before each payment date,
the servicer will cause all payments on the receivables and all proceeds of
the receivables in the collection account received by the servicer during
the prior calendar month to be deposited into the collection account, other
than amounts payable to the servicer for advances. On or before the seventh
business day, but no later than the tenth calendar day of each month, the
servicer will calculate the following for the payment date occurring in
that month:
o the Available Funds;
o the Total Available Funds;
o the servicing fee for that payment date plus any portion
of the servicing fee that remains unpaid from prior
payment dates;
o the Accrued Note Interest;
o the Scheduled Principal;
o the Principal Distribution Amount;
o the Negative Carry Amount; and
o the Yield Supplement Amount.
On or before each payment date, the servicer will deliver to the
indenture trustee a certificate setting forth the deposits to and
withdrawals from the collection account, the supplemental reserve account
and the reserve account to be made on that payment date.
Withdrawals from the Supplemental Reserve Account and the Reserve Account
to Reimburse Advances. On each payment date, the indenture trustee will
withdraw from the supplemental reserve account and pay to the servicer an
amount equal to the lesser of:
o the amount on deposit in the supplemental reserve account
on that payment date, calculated before giving effect to
any deposits or withdrawals on or relating to that
payment date; and
o the amount of advances due to be reimbursed on that
payment date but not reimbursed from funds on deposit in
the collection account.
If the amount on deposit in the supplemental reserve account is
insufficient to fully reimburse the servicer for advances due to be
reimbursed on the applicable payment date, the indenture trustee will
withdraw from the reserve account and pay to the servicer an amount equal
to the lesser of:
o the amount on deposit in the reserve account on that
date, calculated before giving effect to any deposits or
withdrawals from the reserve account on or relating to
that payment date; and
o the amount, if any, of advances due to be reimbursed on
that payment date but not reimbursed from funds on
deposit in the collection account or the supplemental
reserve account.
Withdrawals from the Supplemental Reserve Account and the Reserve Account
to pay the Total Required Payment. If on any payment date the Total
Required Payment is greater than the Available Funds, the indenture trustee
will withdraw from the supplemental reserve account and deposit in the
collection account an amount equal to the lesser of:
o the amount on deposit in the supplemental reserve account
on that payment date, calculated after any reimbursement
of advances but before any deposits or other withdrawals
from the supplemental reserve account relating to that
payment date; and
o the amount, if any, by which the Total Required Payment
exceeds the Available Funds for that payment date.
If the amount on deposit in the supplemental reserve account is
insufficient to make up a shortfall in the Available Funds to pay the Total
Required Payment, the indenture trustee will withdraw from the reserve
account and deposit in the collection account an amount equal to the lesser
of:
o the amount on deposit in the reserve account on that
payment date, calculated after any reimbursement of
advances but before any deposits or other withdrawals
relating to that payment date; and
o the amount, if any, by which the Total Required Payment
for that payment date exceeds the sum of the Available
Funds and amounts withdrawn from the supplemental reserve
account to pay the Total Required
Payment.
The Available Funds on any payment date will exclude all payments
and proceeds of any receivables the purchase amount of which has been
included in the Available Funds for a prior calendar month.
Monthly Withdrawals from Collection Account. On each payment date, the
indenture trustee will withdraw the Total Available Funds for the preceding
calendar month from the collection account and make deposits, distributions
and payments in the amounts and in the order of priority specified below:
o to the servicer, the servicing fee due on that payment
date, together with any portion of the servicing fee that
remains unpaid from prior payment dates;
o to the note payment account, the Accrued Note Interest
for each class of notes;
o to the note payment account, the Principal Distribution
Amount;
o to the reserve account, the amount required to bring the
amount in the reserve account up to the Specified Reserve
Balance;
o to the supplemental reserve account, the amount required
to bring the amount in the supplemental reserve account
up to the Maximum Supplemental Reserve Amount; and
o to the certificate distribution account, any remaining
Total Available Funds.
On each payment date, the amount on deposit in the certificate
distribution account will be distributed to the certificateholders.
Notwithstanding the foregoing, following an acceleration of the
maturity dates of the notes following the occurrence of an event of default
under the indenture, the Total Available Funds will be deposited in the
note payment account for distribution in the order of priority set forth
under "-Monthly Withdrawals From the Note Payment Account On and After an
Acceleration of the Maturity Dates of the Notes."
Monthly Withdrawals From the Note Payment Account. On each payment date,
unless the maturity dates of the notes have been accelerated following the
occurrence of an event of default under the indenture, all amounts on
deposit in the note payment account will be paid in the following order
of priority:
o to the Class A noteholders, the Accrued Note Interest on
the applicable class of the Class A notes;
o to the Class B noteholders, the Accrued Note Interest on
the Class B notes;
o to the Class A-1 noteholders, the Principal Distribution
Amount until the Class A-1 notes have been paid in full;
o following payment in full of the Class A-1 notes, to the
Class A-2 noteholders, the Principal Distribution Amount
until the Class A-2 notes have been paid in full;
o following payment in full of the Class A-2 notes, to the
Class A-3 noteholders, the Principal Distribution Amount
until the Class A-3 notes have been paid in full; and
o following payment in full of the Class A-3 notes, to the
Class B noteholders, the Principal Distribution Amount
until the Class B notes have been paid in full.
Monthly Withdrawals From the Note Payment Account On and After an
Acceleration of the Maturity Dates of the Notes. On each payment date
occurring on or after the acceleration of the maturity dates of the notes
following the occurrence of an event of default under the indenture, all
amounts on deposit in the note payment account will be paid in the
following order of priority:
o to the indenture trustee, amounts due as compensation or
indemnity payments pursuant to the terms of the
indenture;
o to the servicer, the amounts accrued and unpaid in
respect of the servicing fee plus any portion of the
servicing fee that remains unpaid from prior payment
dates;
o to the noteholders of all classes of the Class A notes,
without priority or preference of any kind, the Accrued
Note Interest on each class of the Class A notes pro rata
in proportion to the respective amount of interest
due to each of the Class A notes;
o to the noteholders of all classes of the Class A notes
without priority or preference of any kind, all unpaid
principal of the Class A notes pro rata in proportion to
the respective principal balances of each class of the
Class A notes until each class of the Class A notes has
been paid in full;
o to the noteholders of the Class B notes, the Accrued Note
Interest on the Class B notes;
o to the noteholders of the Class B notes, unpaid principal
of the Class B notes until the Class B notes have been
paid in full; and
o to the certificate distribution account, any amount
remaining in the note payment account after each class of
notes has been paid in full.
THE NEGATIVE CARRY ACCOUNT
On the Closing Date, MART will make an initial deposit of
$3,367,054.40 into the negative carry account. That amount is equal to the
Maximum Negative Carry Amount as of the Closing Date.
During the Pre-Funding Period, the amounts on deposit in the
pre-funding account will earn interest at a rate that is less than the
weighted average interest rate on the notes. The amount on deposit in the
negative carry account is intended to cover that shortfall. On each payment
date during the Pre-Funding Period, the indenture trustee will withdraw the
Negative Carry Amount for that payment date from the negative carry account
and deposit that amount to the collection account as a part of the funds
available to pay interest on notes.
THE RESERVE ACCOUNT AND SUPPLEMENTAL RESERVE ACCOUNT
On the Closing Date, MART will make an initial deposit to the
reserve account of cash or investments permitted by the sale and servicing
agreement having a value of $896,683.59. That amount is equal to 0.15% of
the principal balance of the initial receivables pool as of the Cutoff
Date. On each subsequent date on which receivables are transferred to the
trust, cash or investments permitted by the sale and servicing agreement
having a value approximately equal to 0.15% of the aggregate principal
balance as of the related Cutoff Date of the receivables transferred on
that date will be withdrawn from the pre-funding account and deposited in
the reserve account.
On or before each payment date, the indenture trustee will make
the following payments and deposits from funds in the supplemental reserve
account:
o to the servicer, an amount equal to any shortfall between
the aggregate amount of advances that are due and payable
to the servicer on that payment date and the aggregate
amount of the collections on the receivables that are
paid to the servicer on that payment date as
reimbursement for those advances; and
o to the collection account, an amount equal to any
shortfall between the Total Required Payment for that
payment date and the Available Funds allocable to pay the
Total Required Payment.
If there are insufficient funds in the supplemental reserve
account on a particular payment date, the indenture trustee will make up
any shortfall with funds in the reserve account which will be applied in
the same order of priority.
The reserve account and the supplemental reserve account will be
funded on each payment date with the Available Funds remaining after
payment of interest and principal of the notes on that payment date, in the
following order of priority:
o to the reserve account, an amount, equal to the excess,
if any, of the Specified Reserve Balance for that payment
date over the amount on deposit in the reserve account;
and
o to the supplemental reserve account, an amount equal to
the excess, if any, of the Maximum Supplemental Reserve
Amount for that payment date over the amount on deposit
in the supplemental reserve account.
If amounts on deposit in the reserve account and the supplemental
reserve account on any date exceed the required balances in those accounts,
after giving effect to withdrawals on that payment date, the excess will be
withdrawn and paid to MART. The noteholders will not have any rights in, or
claims to, any of those amounts paid to MART.
Amounts in the reserve account and the supplemental reserve
account are intended to enhance the likelihood of receipt by noteholders of
amounts due them and to decrease the likelihood that the noteholders will
experience losses. If the amount withdrawn from the reserve account and the
supplemental reserve account on any payment date to reimburse the servicer
for advances and to cover shortfalls in Available Funds exceeds the amount
on deposit in the reserve account and the supplemental reserve account, a
shortfall in the amounts distributed to the noteholders could result. In
addition, depletion of the reserve account and the supplemental reserve
account ultimately could result in losses to noteholders, as noteholders
will have no recourse to the assets of MART as a source of payment. Losses
on the receivables or other shortfalls in the proceeds to be distributed to
the noteholders, after withdrawals from the trust accounts, will be
allocated first to the Class B notes because payments on the Class B notes
are subordinate to the payments on the Class A notes.
The servicer may request each of Moody's and S&P to approve a
reduction in the Specified Reserve Balance or the Maximum Supplemental
Reserve Amount or a change in the manner in which the reserve account or
the supplemental reserve account is funded. If each of Moody's and S&P
confirms that the requested action will not result in the qualification,
reduction or withdrawal of its then-current rating of any class of notes,
then the required balance of the account will be reduced and the indenture
will be amended without the consent of any noteholders to reflect the
change in the required balances of the accounts. A reduction in the
Specified Reserve Balance will also require the delivery of several tax
opinions to the effect that, among other things, the reduction will not
adversely affect the characterization of the notes for federal income tax
purposes.
SUBORDINATION OF THE CLASS B NOTES
The rights of the Class B noteholders to be paid interest and
principal are subordinated to the rights of the Class A noteholders to be
paid interest and, in some cases principal. Interest on the Class B notes
is paid on each payment date after servicing fees due to the servicer and
interest due on the Class A notes. However, if an event of default under
the indenture occurs, interest on the Class B notes also will be
subordinated to the payment of principal of the class A notes.
Principal of the Class B notes will be subordinated to the
servicing fees, interest on Class A notes, interest on the Class B notes,
and the payment of principal of the Class A notes. No principal will be
paid on the Class B notes until the principal of the Class A notes has been
paid in full.
SUBORDINATION OF THE CERTIFICATES
The rights of certificateholders to receive distributions are
subordinated to the rights of noteholders to receive payments of interest
and principal. Funds on deposit in the collection account will be applied
to the reimbursement of advances made by the servicer, the payment to the
servicer of Rule of 78's payments and the servicing fee plus any portion of
the servicing fee that remains unpaid from prior payment dates, the Accrued
Note Interest on the notes and principal payable on the notes on each
payment date and to making the required deposits to the reserve account and
the supplemental reserve account before distributions on the certificates.
In addition, following the occurrence of an event of default under the
indenture that has resulted in an acceleration of the notes, the
noteholders will be entitled to be paid in full before the
certificateholders are entitled to any distributions. The foregoing
subordination of the certificates is intended to enhance the likelihood of
receipt by noteholders of amounts due them and to decrease the likelihood
that the noteholders will experience losses. See "-Indenture Cash Flows."
ADVANCES BY THE SERVICER OF AMOUNTS PAYABLE ON THE RECEIVABLES
If the monthly collection of interest and principal of an
Actuarial Receivable and amounts in the payahead account allocable to that
receivable are less than the scheduled payment due, the servicer will make
an advance of the remaining amount on the related payment date.
The servicer will be reimbursed for each of these advances:
o on each subsequent payment date from any payments made by
or on behalf of the related obligor to the extent those
payments are allocable to the reimbursement of the
advance; and
o on the payment date following the calendar month in which
the related receivable becomes defaulted, out of
collections on other receivables.
In addition, the servicer will make an advance for any portion of
a Balloon Payment for the calendar month in which the Balloon Payment
becomes due if the entire scheduled payment has not been received by the
servicer, including amounts in the payahead account allocable to the
Balloon Payment.
The servicer will be reimbursed for any advance relating to a
Balloon Payment on each payment date following the payment date on which
the advance was made:
o out of payments by or on behalf of the related obligor to
the extent those payments are allocable to the
reimbursement of the advance; and
o out of collections on other receivables to the extent of
any losses allocable to the Balloon Payment that the
servicer has recorded in its books and records during the
preceding calendar month, but only to the extent the
Balloon Payment and the advance have not otherwise been
reimbursed.
If MMCA is replaced in its capacity as servicer, the successor
servicer will not be required to make advances. In the absence of advances
by the servicer, noteholders must rely for payment of the notes upon the
following:
o payments on the receivables, including sales proceeds of
financed vehicles returned to the servicer for sale;
o payments under the yield supplement agreement and the
yield supplement account;
o withdrawals from the negative carry account; and
o available amounts on deposit in the reserve account and
the supplemental reserve account.
See "-Indenture Cash Flows" and "-The Reserve Account and
Supplemental Reserve Account."
DEPOSIT OF COLLECTIONS ON THE RECEIVABLES TO COLLECTION ACCOUNT
The servicer will deposit the payments and proceeds on the
receivables, other than extension or deferral fees collected on the
receivables that are payable to the servicer under the sale and servicing
agreement, into the collection account not later than two business days
after receipt unless (a) the servicer has a rating acceptable to each of
Moody's and S&P with respect to its short-term indebtedness, MMCA is the
servicer, and no events of servicing termination have occurred or (b) the
trust shall have received written notice from each of Moody's and S&P that
no outstanding rating on any class of notes would be lowered or withdrawn
as a result, in which case those amounts will be paid into the collection
account on the business day before each payment date. MART and the servicer
will also deposit into the collection account on each payment date the
purchase amount of each receivable required to be repurchased or purchased
by either of them pursuant to an obligation that arose during the related
calendar month. The servicer will be entitled to be reimbursed for the
amounts previously deposited in the collection account but later determined
to have resulted from mistaken deposits or posting or checks returned
unpaid for insufficient funds or other reasons from amounts otherwise
payable into the collection account or amounts on deposit in the collection
account.
In those cases where a subservicer is servicing a receivable under
a subservicing agreement, the servicer will cause the subservicer to remit
to the collection account the amounts collected by that subservicer on or
with respect to the receivables being serviced by it, within the period
after receipt, and subject to the limitations, described above.
As an administrative convenience, unless the servicer is required
to remit collections within two business days of receipt, the servicer will
be permitted to make the deposit of collections and purchase amounts for or
with respect to the related calendar month, net of distributions to be made
to the servicer, with respect to the related calendar month. The servicer,
however, will account to the indenture trustee and the noteholders as if
all deposits, distributions and transfers were made individually.
STATEMENTS TO NOTEHOLDERS
On or prior to each payment date, the servicer will prepare and
provide to the indenture trustee a statement to be delivered to the
noteholders. Each of those statements to be delivered to noteholders will
include the following information as to the notes with respect to that
payment date and the preceding calendar month:
(1) the amount of the payment allocable to principal of each class of
notes;
(2) the amount of the payment allocable to interest on or with respect
to each class of notes;
(3) the Yield Supplement Amount;
(4) the amount of the servicing fee due on that payment date plus any
portion of the servicing fee that remains unpaid from prior
payment dates;
(5) the aggregate outstanding principal amount of each class of the
notes and the applicable note pool factor, after giving effect to
payments on that payment date;
(6) the principal balance of the receivables pool, the principal
balance of the receivables pool exclusive of the aggregate
principal balance of Balloon Payments and the aggregate principal
balance of the Balloon Payments calculated as of the close of
business on the last day of the preceding calendar month;
(7) the cumulative amount of interest due but not paid to the
noteholders of each class on that payment date and on prior
payment dates plus interest on such overdue interest at the
applicable note interest rate, to the extent permitted by law;
(8) the cumulative amount of principal due but not paid to the
noteholders of each class on that payment date and on prior
payment dates;
(9) with respect to receivables that became defaulted during the
related calendar month, the aggregate amount of the excess of the
principal balance of those contracts, including any principal of a
Balloon Payment, over the net proceeds from the liquidation of
those contracts;
(10) the balance of the reserve account on that payment date, after
giving effect to changes in the balance on that payment date;
(11) the balance of the supplemental reserve account on that payment
date, after giving effect to changes in the balance on that
payment date;
(12) the advances by the servicer, if any;
(13) the aggregate purchase amount of receivables repurchased by MART
or purchased by the servicer during the preceding calendar month;
(14) for each payment date during the Pre-Funding Period and the
payment date that is on or immediately following the end of the
Pre-Funding Period, (A) the amount, if any, withdrawn from the
pre-funding account to purchase receivables during the preceding
calendar month, (B) the remaining amount on deposit in the
pre-funding account, if any, (C) the Negative Carry Amount, if
any, for the preceding calendar month, and (D) the amount
remaining on deposit in the negative carry account after all
withdrawals made on that payment date; and
(15) for the payment date on or immediately following the end of the
Pre-Funding Period, the remaining amount on deposit in the
pre-funding account, if any, that has not been used to fund the
purchase of receivables after March 31, 2000 and is being passed
through as payments of principal of the notes.
Each amount set forth in clauses (1), (2), (3), (4), (7) and (8) of this
paragraph will be expressed in the aggregate and as a dollar amount per
$1,000 of original denomination of the notes or class of notes, as
applicable. Copies of those statements may be obtained by the beneficial
owners of the notes by a request in writing addressed to the indenture
trustee.
Within a reasonable period of time after the end of each calendar
year, but not later than the latest date permitted by law, the indenture
trustee will furnish to each person who at any time during that calendar
year was a noteholder a statement prepared for the purposes of that
noteholder's preparation of federal income tax returns. See "Federal Income
Tax Consequences" and "-Book Entry Registration."
BOOK ENTRY REGISTRATION
Beneficial owners of notes may hold their notes through DTC in the
United States or through Cedelbank, societe anonyme or Euroclear in Europe
if they are participants of those systems, or indirectly through
organizations that are participants in those systems.
The notes of each class will be offered for purchase in minimum
denominations of $1,000 and integral multiples of $1,000. They will be
represented initially by one or more physical notes registered in the name
of Cede & Co. as nominee of The Depository Trust Company. No person
acquiring a beneficial ownership interest in the notes will receive a
definitive note registered in that person's name unless definitive notes
are issued under the limited circumstances described in this prospectus.
Unless and until definitive notes are issued, all references to actions by
noteholders refer to actions taken by DTC upon instructions from its
participating organizations. All references to payments, notices, reports
and statements to noteholders will refer to payments, notices, reports and
statements to DTC or Cede & Co., as the registered holder of the notes, for
payment or distribution to beneficial owners of the notes in accordance
with DTC's procedures. See "-Book Entry Registration" and "-Issuance of
Definitive Notes Upon the Occurrence of Various Circumstances."
DTC is a limited purpose trust company organized under the laws of
the State of New York, 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 under Section 17A of the Securities Exchange
Act of 1934, as amended. DTC was created to hold securities for its direct
participants and to facilitate the clearance and settlement of securities
transactions between those direct participants through electronic
book-entries, thereby eliminating the need for physical movement of
securities. Direct DTC participants include securities brokers and dealers,
banks, trust companies and clearing corporations, and may include other
organizations. Indirect participation in the DTC system is also available
to others such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a direct participant. The
deposit of notes with DTC and their registration in the name of Cede & Co.
does not change their beneficial ownership. DTC does not know the actual
beneficial owners of the notes; DTC's records reflect only the identity of
the direct participants to whose accounts the notes are credited, which may
or may not be the beneficial owners. The DTC participants will remain
responsible for keeping account of their holdings on behalf of their
customers.
Beneficial owners of notes will receive all payments of principal
and interest on the notes through direct or indirect participants. DTC will
forward those payments to its direct participants which thereafter will
forward them to indirect participants or beneficial owners of notes. Under
a book-entry format, beneficial owners of notes may experience some delay
in their receipt of payments, since those payments will be forwarded to
Cede & Co. as nominee of DTC. Beneficial owners of notes will not be
recognized by the indenture trustee as noteholders, as that term is used in
the indenture. Beneficial owners of notes can exercise the rights of
noteholders only indirectly through DTC and its direct and indirect
participants. Because DTC can act only on behalf of direct participants,
who in turn act on behalf of indirect participants, and on behalf of
various banks, trust companies and other persons approved by it, the
absence of physical notes may limit the ability of a beneficial owner of a
note to pledge the notes to persons or entities that do not participate in
the DTC system.
Communications by DTC to direct participants, by direct
participants to indirect participants and by any participants to beneficial
owners of the notes will be governed by arrangements between them, subject
to any applicable statutory or regulatory requirements. Payments by DTC
participants to beneficial owners of the notes will be governed by standing
instructions and customary practices, as is the case with securities held
for the accounts of customers in bearer form or registered in "street
name." They will be the responsibility of the DTC participant and not of
DTC, the indenture trustee, the owner trustee, MART or the servicer,
subject to any applicable statutory or regulatory requirements. Payment of
principal and interest to DTC is the responsibility of the indenture
trustee, disbursement of those payments to direct participants shall be the
responsibility of DTC and disbursement of those payments to beneficial
owners shall be the responsibility of the direct participants.
Purchases of notes under the DTC system must be made by or through
direct participants, which will receive a credit for the notes on DTC's
records. Each actual beneficial owner's interest in the notes is in turn to
be recorded on the applicable DTC participant's records. Beneficial owners
of notes will not receive written confirmation from DTC of their purchase,
but those beneficial owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of
their holdings, from the DTC participant through which the beneficial owner
entered into the transaction. Transfers of ownership interests in the notes
are to be accomplished by entries made on the books of DTC participants
acting on behalf of beneficial owners of notes. Beneficial owners of notes
will not receive physical notes representing their ownership interest in
notes, except if the use of the book-entry system for the notes is
discontinued.
Neither DTC nor Cede & Co. will comment or vote with respect to
the notes. DTC has advised MART that it will take any action permitted to
be taken by a noteholder under the indenture only at the direction of one
or more direct participants to whose accounts with DTC the notes are
credited. Additionally, DTC has advised MART that the indenture requires
that with respect to any action that may be taken only by noteholders
representing a specified percentage of the aggregate outstanding principal
amount of the notes, DTC will take that action only at the direction of and
on behalf of direct participants whose holdings include undivided interests
that satisfy that specified percentage. Under its usual procedures, DTC
will mail an "omnibus proxy" to the indenture trustee as soon as possible
after any applicable record date with respect to a consent or vote. The
omnibus proxy will assign Cede & Co.'s consenting or voting rights to those
direct participants to whose accounts the notes will be credited on that
record date, who will be identified on a listing attached to the omnibus
proxy.
DTC may discontinue providing its services as securities
depository with respect to the notes at any time by giving reasonable
notice to the indenture trustee. Under those circumstances, if a successor
securities depository is not obtained, definitive notes are required to be
printed and delivered. MART may decide to discontinue use of the system of
book-entry transfers through DTC or a successor securities depository. In
that event, definitive notes will be delivered to noteholders. See
"-Issuance of Definitive Notes Upon the Occurrence of Various
Circumstances."
Cedelbank and Euroclear will hold omnibus positions on behalf of
the Cedelbank customers and the Euroclear participants, respectively. This
will be done through customers' securities accounts in Cedelbank's and
Euroclear's names on the books of their respective depositaries which in
turn will hold those positions in customers' securities accounts in the
depositaries' names on the books of DTC.
Transfers within DTC between direct participants will occur in
accordance with DTC rules. Transfers between Cedelbank customers and
Euroclear participants will occur in the ordinary way in accordance with
their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or
indirectly through DTC, through Cedelbank or Euroclear will be effected in
DTC in accordance with DTC rules through the relevant European
international clearing system through its depositary; however, those
cross-market transactions will require delivery of instructions to the
relevant European international clearing system by the counterparty in that
system in accordance with its rules and procedures and within its
established deadlines, which are based on European time. The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with
normal procedures for same-day funds settlement applicable to DTC.
Cedelbank customers and Euroclear participants may not deliver instructions
directly to the depositaries.
Because of time-zone differences, credits of securities in
Cedelbank or Euroclear as a result of a transaction with a DTC participant
will be made during the subsequent securities settlement processing day,
dated the business day following the DTC settlement date, and those credits
or any transactions in the securities settled during that processing day
will be reported to the relevant customer of or participant in Cedelbank or
Euroclear on that business day. Cash received in Cedelbank or Euroclear as
a result of sales of securities by or through a customer of or participant
in Cedelbank or Euroclear to a DTC participant will be received with value
on the DTC settlement date but will be available in the relevant Cedelbank
or Euroclear cash account only as of the business day following settlement
in DTC.
The information in this section concerning DTC and DTC's
book-entry system has been obtained from sources that MART believes to be
reliable, but MART takes no responsibility for the accuracy of the
information.
Cedelbank is incorporated under the laws of Luxembourg as a
professional depository. Cedelbank holds securities for its customers and
facilitates the clearance and settlement of securities transactions between
Cedelbank customers through electronic book-entry changes in accounts of
Cedelbank customers, thereby eliminating the need for physical movement of
certificates. Transactions may be settled by Cedelbank in any of 36
currencies, including United States dollars. Cedelbank provides to its
Cedelbank customers, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedelbank interfaces with
domestic markets in several countries. As a professional depository,
Cedelbank is subject in Luxembourg to regulation and supervision by the
Commission for the Supervision of the Financial Sector. Cedelbank customers
are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations and may include any
of the underwriters of any trust securities. Indirect access to Cedelbank
is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Cedelbank customer, either directly or indirectly.
The Euroclear system was created in 1968 to hold securities for
participants of the Euroclear system and to clear and settle transactions
between Euroclear participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers
of securities and cash. Transactions may now be settled in any of 34
currencies, including United States dollars. The Euroclear system includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to
the arrangements for cross-market transfers with DTC described above. The
Euroclear system is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York, under contract with Euroclear Clearance
System, S.C., a Belgian cooperative corporation. All operations are
conducted by Morgan Guaranty's Belgium office, and all Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with Morgan
Guaranty's Belgium office, not Euroclear Clearance System, which
establishes policy for the Euroclear system on behalf of Euroclear
participants, which include banks, central banks, securities brokers and
dealers and other professional financial intermediaries and may include the
underwriters. Indirect access to the Euroclear system is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear participant, either directly or indirectly.
Morgan Guaranty's Belgium office is the Belgian branch of a New
York banking corporation which is a member bank of the Federal Reserve
System. As such, it is regulated and examined by the Board of Governors of
the Federal Reserve System and the New York State Banking Department, as
well as the Belgian Banking Commission.
The Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear system and applicable Belgian
law govern the securities clearance accounts and cash accounts maintained
with Morgan Guaranty's Belgium office, transfers of securities and cash
within the Euroclear system, withdrawal of securities and cash from the
Euroclear system, and receipts of payments with respect to securities in
the Euroclear system. All securities in the Euroclear system are held on a
fungible basis without attribution of specific securities to specific
securities clearance accounts. Morgan Guaranty's Belgium office, as the
operator of Euroclear, acts under the Terms and Conditions only on behalf
of Euroclear participants and has no record of or relationship with persons
holding through those organizations.
Payments on notes held through Cedelbank or Euroclear will be
credited to the cash accounts of customers of or participants in Cedelbank
or Euroclear in accordance with the relevant system's rules and procedures,
to the extent received by its depositary. Those payments will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. See "Federal Income Tax Consequences."
Cedelbank or Morgan Guaranty's Belgium office, as operator of
Euroclear, as the case may be, will take any other action permitted to be
taken by a noteholder under the related agreement on behalf of a Cedelbank
customer or Euroclear participant only in accordance with its relevant
rules and procedures and subject to its depositary's ability to effect
those actions on its behalf through DTC.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among participants of
DTC, Cedelbank and Euroclear, they are under no obligation to perform or
continue to perform those procedures and those procedures may be
discontinued at any time.
DTC management is aware that some computer applications, systems,
and the like for processing 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 is has developed and is implementing a program so
that its 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 of the provision of services, including telecommunication and
electrical utility service providers, among others. DTC has informed its
participants and other members of the financial community that it is
contacting (and will continue to contact) third party vendors from whom DTC
acquires services to: (i) impress upon them the importance of such services
being Year 2000 compliant and (ii) determine the extent of their efforts
for Year 2000 remediation (and, as appropriate, testing) of their services.
In addition, DTC is in the process of developing such contingency plans as
it deems appropriate.
According to DTC, the foregoing information with respect to DTC
has been provided for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
ISSUANCE OF DEFINITIVE NOTES UPON THE OCCURRENCE OF VARIOUS CIRCUMSTANCES
The notes of each class will be issued in fully registered,
certificated form to noteholders or their nominees, rather than to DTC or
its nominee or a successor clearing agency, only if:
o the trust, the administrator or the servicer advises the
indenture trustee in writing that DTC or its successor is
no longer willing or able to discharge properly its
responsibilities as depository with respect to the notes
and the indenture trustee or the administrator is unable
to locate a qualified successor;
o the administrator, at its option, elects to terminate the
book-entry system through DTC or its successor; or
o after the occurrence of an event of default under the
indenture or an event of servicing termination under the
sale and servicing agreement, the beneficial owners of
the notes representing at least 51% of the aggregate
outstanding principal amount of the notes advise the
indenture trustee and DTC or its successor in writing
that the continuation of a book-entry system through DTC
or its successor is no longer in the best interest of the
beneficial owners of the notes.
Upon the occurrence of any of these events, DTC is required to
notify all of its direct participants and the indenture trustee of the
availability through DTC of notes in fully registered, certificated form.
Upon surrender by DTC of the physical certificates representing the notes
and receipt by the indenture trustee of instructions for re-registration,
the indenture trustee will reissue the notes in fully registered,
certificated form, and thereafter the indenture trustee will recognize the
holders of those notes as noteholders.
Payments of principal of and interest on the notes in fully
registered, certificated form will be made by the indenture trustee
directly to noteholders in accordance with the procedures set forth in this
prospectus and in the indenture. Payments of principal and interest on each
payment date will be made to noteholders in whose names the notes in fully
registered, certificated form were registered at the close of business on
the preceding record date. Those payments will be made by check mailed to
the address of that noteholder as it appears on the register maintained by
the indenture trustee. The final payment on any note in fully registered,
certificated form, however, will be made only upon presentation and
surrender of the note in that form at the office or agency specified in the
notice of final payment mailed to noteholders.
Notes in fully registered, certificated form will be transferable
and exchangeable at the offices of the indenture trustee. No service charge
will be imposed for any registration of transfer or exchange, but the
indenture trustee may require payment of a sum sufficient to cover any tax
or other governmental charge imposed in connection therewith.
TERMS OF THE INDENTURE
Events of Default Under the Indenture. The events of default under
the indenture consist of:
o a default for five days or more in the payment of
interest on any note when it becomes due and payable;
o a default in the payment of principal of, or any
installment of principal of, any note when it becomes due
and payable including, with respect to each class of
notes, on the final payment date of such class;
o a default in the observance or performance of any
material covenant or agreement of the trust made in the
indenture other than those dealt with specifically
elsewhere as an event of default and the continuation of
any such default for a period of 60 days after notice is
given to the trust by the indenture trustee or to the
trust and the indenture trustee by the holders of at
least 25% of the aggregate principal amount of the notes;
o any representation or warranty made by the trust in the
indenture or in any certificate delivered pursuant to the
indenture having been incorrect in any material respect
as of the time made, and such breach not having been
cured within 30 days after notice is given to the trust
by the indenture trustee or to the trust and the
indenture trustee by the holders of at least 25% of the
aggregate principal amount of the notes; or
o certain events of bankruptcy, insolvency, receivership or
liquidation of the trust. (Indenture, Section 5.1).
Under the Trust Indenture Act of 1939, the indenture trustee may
be deemed to have a conflict of interest and be required to resign as
trustee for either the Class A notes or the Class B notes if a default
occurs under the indenture. In these circumstances, the indenture will
provide for a successor trustee to be appointed for one or both of the
Class A notes and Class B notes, in order that there be separate trustees
for each of the Class A notes and the Class B notes.
If an indenture trustee relating to any class of notes resigns,
its resignation will become effective only after a successor indenture
trustee for that class of notes is appointed and the successor accepts the
appointment.
Noteholders holding at least a majority of the aggregate principal
amount of the notes outstanding may waive any past default or event of
default under the indenture prior to the declaration of the acceleration of
the maturity of the notes. Notwithstanding that, they may not waive a
default in payment of principal of or interest on any of the notes or of
any covenant or provision in the indenture which cannot be modified or
amended without unanimous consent of the noteholders. (Indenture, Section
5.12). Any waivers could be treated, for federal income tax purposes, as a
constructive exchange of the notes by the noteholders for deemed new notes
upon which gain or loss would be recognized.
Remedies Following an Event of Default Under the Indenture. If an event of
default under the indenture should occur and be continuing, the indenture
trustee or the holders of a majority of the aggregate outstanding principal
amount of the notes, voting as a group, may declare the principal of the
notes to be immediately due and payable. The declaration may be rescinded
by the holders of a majority of the aggregate principal amount of the notes
before a judgment or decree for payment of the amount due has been obtained
by the indenture trustee if:
o the trust has deposited with the indenture trustee an
amount sufficient to pay (x) all interest on and
principal of the notes as if the event of default under
the indenture giving rise to the declaration had not
occurred and (y) all amounts advanced by the indenture
trustee and its costs and expenses; and
o all events of default under the indenture, other than the
nonpayment of principal of the notes that has become due
solely by that acceleration, have been cured or waived.
(Indenture, Section 5.2).
Any rescission could be treated, for federal income tax purposes, as a
constructive exchange of the notes by the noteholders for deemed new notes
upon which gain or loss would be recognized.
If the notes have been declared due and payable following an event
of default under the indenture, the indenture trustee may institute
proceedings to collect amounts due, exercise remedies as a secured party,
including foreclosure or sale of the trust property, or elect to maintain
the trust property and continue to apply proceeds from the trust property
as if there had been no declaration of acceleration. The indenture trustee
may not, however, sell the trust property following an event of default
under the indenture, other than a default in the payment of any principal
or a default for five days or more in the payment of any interest on the
notes, unless:
o 100% of the noteholders consent;
o the proceeds of the sale will be sufficient to pay in
full the principal of and the accrued interest on all of
the then outstanding notes; or
o the indenture trustee determines that the trust property
would not be sufficient on an ongoing basis to make all
payments on the notes as those payments would have become
due if those obligations had not been declared due and
payable, and the indenture trustee obtains the consent of
holders of 66 2/3% of the aggregate principal amount of
the outstanding notes, voting as a group, to the sale.
The indenture trustee may, but need not, obtain and rely upon an opinion of
an independent accountant or investment banking firm as to whether the
trust property will suffice to pay interest on and principal of the notes
on an ongoing basis. (Indenture, Sections 5.4 and 5.5).
If the trust property is sold after an event of default under the
indenture has occurred under the circumstances described in the preceding
paragraph pursuant to the direction of the indenture trustee or the
noteholders, the proceeds of that sale will be distributed:
o first, to the indenture trustee for amounts due as
compensation or indemnity payments under the indenture;
o second, to the servicer for amounts due in respect of
accrued and unpaid servicing fees and unreimbursed
advances;
o third, to the Class A noteholders pro rata for interest
which is due and unpaid;
o fourth, to the Class A noteholders pro rata for principal
which is due and unpaid;
o fifth, to the Class B noteholders for interest which is
due and unpaid; and
o sixth, to the Class B noteholders for principal which is
due and unpaid.
Any remaining amounts will be distributed to the
certificateholders for amounts due and unpaid in accordance with the terms
of the trust agreement and the sale and servicing agreement. (Indenture,
Section 5.4).
If an event of default occurs under the indenture and is
continuing with respect to the notes, the indenture trustee will not be
required to exercise any of its rights or powers at the request or
direction of any of the noteholders if it reasonably believes it will not
be adequately indemnified against the costs, expenses and liabilities which
might be incurred by it in complying with that request. (Indenture,
Sections 6.1 and 6.2). The holders of at least a majority of the aggregate
principal amount of the outstanding notes, voting as a group, will have the
right to direct the time, method and place of conducting any proceeding or
any remedy available to the indenture trustee with respect to the notes or
exercising any trust power conferred on the indenture trustee.
A noteholder will not have the right to institute any proceeding
with respect to the indenture unless:
o the noteholder has given written notice to the indenture
trustee of a continuing event of default under the
indenture;
o the holders of not less than 25% of the aggregate
principal amount of the outstanding notes have made a
written request of the indenture trustee to institute a
proceeding in its own name as indenture trustee;
o the noteholder has offered the indenture trustee
reasonable indemnity;
o the indenture trustee has for 60 days failed to institute
the requested proceeding; and
o no direction inconsistent with that written request has
been given to the indenture trustee during that 60-day
period by the holders of a majority of the aggregate
principal amount of the outstanding notes (Indenture,
Section 5.6).
Neither the indenture trustee nor the owner trustee in their
respective individual capacities, nor any holder of a certificate, nor any
of their respective owners, beneficiaries, agents, officers, directors,
employees, successors or assigns will, in the absence of an express
agreement to the contrary, be personally liable for the payment of interest
on or principal of the notes or for the agreements of the trust and the
owner trustee, in its capacity as trustee, contained in the indenture.
Covenants by the Trust under the Indenture. The trust will not, among
other things:
o sell, transfer, exchange or otherwise dispose of any of
the assets of the trust, except as expressly permitted by
the indenture, the sale and servicing agreement, the
trust agreement or related documents;
o claim any credit on or make any deduction from the
principal or interest payable in respect of the notes,
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
notes because of the payment of taxes levied or assessed
upon the trust;
o dissolve or liquidate in whole or in part;
o permit the validity or effectiveness of the indenture to
be impaired;
o 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 by the indenture;
o 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 any assets
of the trust, or any interest in those assets or their
proceeds;
o permit the lien of the indenture not to constitute a
valid, first priority security interest in the trust
property, other than with respect to any such tax,
mechanics or other lien; (Indenture, Section 3.8)
o engage in any activities other than financing, acquiring,
owning, pledging and managing the contracts as
contemplated by the indenture, the sale and servicing
agreement, the trust agreement and other related
documents and incidental activities; (Indenture, Section
3.12)
o incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the notes, or otherwise
in accordance with the indenture, the sale and servicing
agreement, the trust agreement and other related
documents; (Indenture, Section 3.13)
o make any payments to certificateholders in respect of
their certificates for any calendar month unless the
Total Required Payment and any deposits required to be
made to the reserve account and the supplemental reserve
account have been provided for; or (Indenture, Section 2.8)
o fail to or fail to cause the servicer to deliver to the
indenture trustee on or before each payment date the
disbursement and payment instructions as required
pursuant to the indenture. (Sale and Servicing Agreement,
Section 4.11)
Replacement of Indenture Trustee. Noteholders holding not less than a
majority of the aggregate principal amount of the outstanding notes, may
remove the indenture trustee without cause by so notifying the indenture
trustee and the trust, and following that removal the trust may appoint a
successor indenture trustee. Any successor indenture trustee must at all
times satisfy the requirements of Section 310(a) of the Trust Indenture Act
of 1939, as amended, and must have a combined capital and surplus of at
least $50,000,000 and a long-term debt rating of investment grade by each
of Moody's and S&P or otherwise acceptable to each of Moody's and S&P.
(Indenture, Sections 6.8 and 6.11)
The indenture trustee may resign at any time by so notifying the
trust and the noteholders. The trust will be required to remove the
indenture trustee if the indenture trustee:
o ceases to be eligible to continue as the indenture
trustee;
o is adjudged to be bankrupt or insolvent;
o comes under the charge of a receiver or other public
officer; or
o otherwise becomes incapable of acting.
Upon the resignation or required removal of the indenture trustee,
the trust will be required promptly to appoint a successor indenture
trustee. (Indenture, Section 6.8)
Duties of Indenture Trustee Under the Indenture. The indenture trustee:
o will perform the duties and only the duties as are
specifically set forth in the indenture;
o may in the absence of bad faith, rely on certificates or
opinions furnished to the indenture trustee which conform
to the requirements of the indenture and on the truth of
the statements and the correctness of the opinions
expressed in those certificates or opinions; and
o will examine any of those certificates and opinions which
are specifically required to be furnished to the
indenture trustee by the indenture to determine whether
or not they conform to the requirements of the indenture.
However, upon the continuance of an event of default under the
indenture, the indenture trustee will be required to exercise the rights
and powers vested in it by the indenture and use the same degree of care
and skill in the exercise of those rights and powers as a prudent person
would exercise or use under the circumstances in the conduct of that
person's own affairs. (Indenture, Section 6.1).
Compensation and Indemnity of the Indenture Trustee under the Indenture.
The trust will:
o pay to the indenture trustee from time to time reasonable
compensation for its services;
o reimburse the indenture trustee for all expenses,
advances and disbursements reasonably incurred; and
o indemnify the indenture trustee for, and hold it harmless
against, any and all losses, liability or expense,
including attorneys' fees, incurred by it in connection
with the performance of its duties.
The indenture trustee will not be indemnified against any loss,
liability or expense incurred by it through its own willful misconduct,
negligence or bad faith, although the indenture trustee will not be liable:
o for any error of judgment made by it in good faith unless
it is proved that the indenture trustee was negligent in
ascertaining the pertinent facts;
o with respect to any action it takes or omits to take in
good faith in accordance with a direction received by it
from noteholders in accordance with the terms of the
indenture; and
o for interest on any money received by it except as the
indenture trustee and the trust may agree in writing.
The indenture trustee will not be deemed to have knowledge of any
event of default under the indenture unless an officer of the indenture
trustee has actual knowledge or has received written notice of the event of
default in accordance with the provisions of the indenture. (Indenture,
Sections 6.1 and 6.7)
Indenture Trustee's Access to Noteholder Lists. If notes are issued in
fully registered, certificated form and the indenture trustee is not the
registrar for the notes, the trust will furnish or cause to be furnished to
the indenture trustee a list of the names and addresses of the noteholders:
o as of each record date, within five days after the record
date; and
o as of not more than 10 days before that list is
furnished, within 30 days after receipt by the trust of a
written request for that list. (Indenture, Section 7.1)
Annual Compliance Statement to be Provided by Trust to Indenture Trustee.
The trust will be required to file annually with the indenture trustee a
written statement as to the fulfillment of its obligations under the
indenture. (Indenture, Section 3.9).
Requirements for Satisfaction and Discharge of Indenture. The indenture
will be discharged with respect to the collateral securing the notes upon
the delivery to the indenture trustee for cancellation of all the notes or,
with several limitations, including receipt of various opinions with
respect to tax matters, upon deposit with the indenture trustee of funds
sufficient for the payment in full of all of the notes, including interest
and any fees due and payable to the owner trustee or the indenture trustee.
(Indenture, Section 4.1).
Requirements for Modification of Indenture. Without the consent of the
noteholders, the owner trustee, on behalf of the trust, and the indenture
trustee, upon request by the trust, may execute a supplemental indenture
for the purpose of, among other things, adding to the covenants of the
trust, curing any ambiguity, correcting or supplementing any provision
which may be inconsistent with any other provision or making any other
provision with respect to matters or questions arising under the indenture
which will not be inconsistent with other provisions of the indenture;
provided that:
o the action will not, (1) as evidenced by an opinion of
counsel materially adversely affect the interests of any
noteholder and (2) as confirmed by each of Moody's and
S&P rating any class of notes, cause the then-current
rating assigned to any class of notes to be withdrawn,
reduced or qualified, and
o an opinion of counsel as to various tax matters is
delivered. (Indenture, Section 9.1).
The owner trustee, on behalf of the trust, and the indenture
trustee, upon request by the trust, may also enter into supplemental
indentures, with the consent of not less than a majority of the aggregate
principal amount of the outstanding notes, voting as a group, and with
prior written notice to each of Moody's and S&P, for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions of the indenture or of modifying in any manner the rights of
noteholders; provided, that:
o the action will not, (1) as evidenced by an opinion of
counsel, materially adversely affect the interests of any
noteholder and (2) as confirmed by each of Moody's and
S&P, cause the then-current rating assigned to any of the
affected class of notes to be withdrawn, reduced or
qualified, and
o an opinion of counsel as to various tax matters is
delivered. (Indenture, Section 9.1).
Any opinion of counsel referred to in this paragraph or the preceding one may
be rendered by internal counsel to MART or the servicer.
Without the consent of the holder of each outstanding note
affected thereby, however, no supplemental indenture may:
o change the final payment date for any class of notes or
the date on which any installment of principal of or
interest on any note is due or reduce the principal
amount of any note, the specified interest rate of any
note or the redemption price of any note, change the
provisions of the indenture relating to the application
of collections on, or the proceeds of the sale of, the
trust property to payment of principal of or interest on
the notes, or change any place of payment where, or the
coin or currency in which, any note or any interest on
the notes is payable;
o impair the right to institute suit for the enforcement of
various provisions of the indenture regarding payment;
o reduce the percentage of the aggregate outstanding
principal amount of the notes the consent of the holders
of which is required for any supplemental indenture or
for any waiver of compliance with various provisions of
the indenture, or of various defaults under the
indenture, and their consequences as provided for in the
indenture;
o modify or alter the provisions of the indenture regarding
the voting of notes held by the trust, MART, the servicer
or an affiliate of any of them;
o reduce the percentage of the aggregate outstanding
principal amount of the notes the consent of the holders
of which is required to direct the indenture trustee to
sell or liquidate the trust property if the proceeds of
that sale would be insufficient to pay the principal
amount and accrued but unpaid interest on the notes and
the certificates;
o modify any provision of the indenture specifying a
percentage of the aggregate principal amount of the notes
necessary to amend the indenture, the sale and servicing
agreement, the trust agreement or any other related
documents except to increase any percentage specified in
the indenture or to provide that various additional
provisions of the indenture, the sale and servicing
agreement, the trust agreement or any other related
documents cannot be modified or waived without the
consent of the holder of each outstanding note affected
by the modification;
o modify any provisions of the indenture in a manner as to
affect the calculation of the amount of any payment of
interest or principal due on any note on any payment date
or to affect the rights of the holders of notes to the
benefit of any provisions for the mandatory prepayment of
the notes contained in the indenture; or
o permit the creation of any lien ranking prior to or on a
parity with the lien of the indenture with respect to any
of the trust property or, except as otherwise permitted
or contemplated in the indenture, terminate the lien of
the indenture on any of that collateral or deprive the
holder of any note of the security afforded by the lien
of the indenture. (Indenture, Section 9.2).
The trust agreement will require the owner trustee to give the
certificateholders 30 days' written notice of any proposed supplemental
indenture if it materially adversely affects the certificateholders or if
any noteholders' consent to the proposed supplemental indenture is required
and provides that the owner trustee will not enter into the amendment
unless certificateholders holding a majority of the certificate balance
including, for this purpose, certificates held by MART or any affiliate of
MART, consent in writing. (Trust Agreement, Section 4.1).
THE SALE AND SERVICING AGREEMENT AND THE TRUST AGREEMENT
We have summarized below some of the important terms of the sale
and servicing agreement and the trust agreement. We will file copies of
those agreements with the Securities and Exchange Commission after we issue
the notes and the certificates. This summary is not a complete description
of all of the provisions of those agreements and is subject to those
agreements in their entirety.
SALE AND ASSIGNMENT
Concurrent with the issuance of the notes, and pursuant to the
purchase agreement, MMCA will sell and assign to MART, without recourse,
its entire right, title and interest in, to and under the initial
receivables to be purchased by the trust on the Closing Date, including its
security interests in the related financed vehicles. At the time of
issuance of the notes, MART, pursuant to the sale and servicing agreement,
will sell and assign to the trust, without recourse, MART's entire interest
in the initial receivables, including its security interests in the related
financed vehicles. Each of the initial receivables conveyed by MART to the
trust will be identified in a schedule attached to the sale and servicing
agreement. The initial receivables will be sold and assigned by MMCA to
MART and sold and assigned by MART to the trust as of the Cutoff Date. The
owner trustee will, concurrently with the sale and assignment of the
receivables, execute, authenticate and deliver the certificates. The net
proceeds received from the sale of the notes on the Closing Date will be
applied to the purchase of the receivables and to the deposits required to
be made to the reserve account, the pre-funding account, the negative carry
account, the payahead account and the yield supplement account.
It is anticipated that additional receivables will be conveyed to
the trust monthly on dates specified by MART occurring during the
Pre-Funding Period. MART will designate as a Cutoff Date the date as of
which particular additional receivables are conveyed to the trust. On or
before each transfer of additional receivables to the trust during the
Pre-Funding Period, MMCA will sell and assign to MART, without recourse,
its entire right, title and interest in, to and under the additional
receivables to be transferred by MART to the trust on that date, including
MMCA's security interests in the related financed vehicles. On each of
those dates, subject to the conditions described below, MART will sell and
assign to the trust, without recourse, MART's entire interest in the
additional receivables sold on that date designated by MART as of the
related Cutoff Date.
Upon the conveyance of receivables to the trust during the
Pre-Funding Period:
(1) the principal balance of the receivables pool will
increase in an amount equal to the aggregate principal
balance of the receivables as of the related Cutoff Date;
(2) an amount equal to 0.15% of the aggregate principal
balance of the receivables sold on that date will be
withdrawn from the pre-funding account and deposited in
the reserve account;
(3) an amount equal to any early payments with respect to
Actuarial Receivables which were received before the
related Cutoff Date will be withdrawn from the
pre-funding account and transferred to the payahead
account;
(4) an amount equal to the projected Yield Supplement Amounts
for all future payment dates for the receivables conveyed
to the trust on that date will be withdrawn from the
pre-funding account and deposited in the yield supplement
account unless the yield supplement account has been
replaced by an acceptable letter of credit on or before
that date; and
(5) an amount equal to the excess of the aggregate principal
balance of the receivables transferred to the trust on
that date over the sum of the amounts described in
clauses (2), (3) and (4) of this paragraph will be
withdrawn from the pre-funding account and paid to MART.
Any conveyance of receivables during the Pre-Funding Period is subject
to the satisfaction, on or before the date of conveyance, of the following
conditions precedent, among others:
o each of the receivables transferred to the trust on that
date must satisfy the eligibility criteria specified in
the sale and servicing agreement (see "The Receivables
Pool-Selection Criteria");
o MART must not have selected those receivables in a manner
that it believes is adverse to the interests of the
trust, the noteholders or the certificateholders;
o the applicable reserve account deposit for that date must
have been made;
o the applicable payahead account deposit for that date
must have been made;
o the applicable yield supplement account deposit for that
date must have been made;
o MART must have executed and delivered to the trust, with
a copy to the indenture trustee, a written assignment
conveying those receivables to the trust, including a
schedule identifying the receivables;
o MART must have delivered various opinions of counsel to
the owner trustee, the indenture trustee, the
representative of the underwriters, and each of Moody's
and S&P with respect to the transfer of those
receivables; and
o the owner trustee, the indenture trustee and each of
Moody's and S&P must have received written notification
from MART of the addition of all receivables transferred
to the trust on that date.
In addition, each group of receivables transferred to the trust
during the Pre-Funding Period will have the following characteristics:
o the weighted average remaining maturity of the
receivables in that group will not be more than 53 months
after the date that the group of receivables was
transferred to the trust;
o the aggregate Balloon Payments of the receivables in that
group as a percentage of the aggregate principal balance
of the receivables in that group will not be more than 26%;
o the aggregate principal balance of the limited credit
experience receivables in that group as a percentage of
the aggregate principal balance of the receivables in
that group will be not more than 9%; and
o the aggregate principal balance of the receivables that
allow a deferred first payment in that group as a
percentage of the aggregate principal balance of the
receivables in that group will be not more than 8%.
Except for the criteria described in the two preceding paragraphs,
there will be no required characteristics of receivables transferred to the
trust after the Closing Date. Therefore, following the transfer of
receivables to the trust on any date during the Pre-Funding Period, the
aggregate characteristics of the entire pool of receivables may vary from
those of the receivables transferred to the trust on the Closing Date. See
"Risk Factors" and "The Receivables Pool."
In the purchase agreement, MMCA will represent and warrant to
MART, and in the sale and servicing agreement, MART will represent and
warrant to the trust, among other things, that:
o the information provided in the schedule of receivables
transferred to the trust on the Closing Date attached to
the sale and servicing agreement and each schedule of
receivables transferred to the trust on any date during
the Pre-Funding Period attached to the related assignment
is and will be correct in all material respects;
o MMCA shall have determined whether or not the obligor on
each contract has maintained physical damage insurance,
which shall not be force-placed insurance, covering the
financed vehicle in accordance with its normal
requirements;
o on any date that receivables are transferred to the
trust, the receivables are free and clear of all security
interests, liens, charges, and encumbrances and no
setoffs, defenses, or counterclaims against it have been
asserted or threatened;
o on any date that receivables are transferred to the
trust, each of the receivables is or will be secured by a
perfected first priority security interest in the
financed vehicle in favor of MMCA; and
o each receivable, at the time it was originated, complied,
and complies or will comply in all material respects with
applicable federal and state laws, including consumer
credit, truth in lending, equal credit opportunity
and disclosure laws.
The noteholders, the trust, the indenture trustee, the
certificateholders and the owner trustee will have no recourse against MMCA
or MART for breach of any of the foregoing representations and warranties
with respect to a receivable other than the right to require MMCA and MART
to repurchase the receivable. See "-Mandatory Repurchase of Receivables."
The owner trustee, the indenture trustee, the trust and the servicer will
covenant in the sale and servicing agreement not to institute or join in
the institution of any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceeding, or other similar proceeding against MART for a
period of one year and a day after any securities rated by Moody's or S&P
were issued by MART or by a trust for which MART was the depositor.
To assure uniform quality in servicing the contracts and to reduce
administrative costs, the trust will appoint the servicer as initial
custodian of the contracts. The servicer, in its capacity as custodian,
will hold the receivables and all documents and instruments relating to the
contracts, either directly or through subservicers, on behalf of the
indenture trustee and the trust. The contracts will not be stamped or
otherwise marked to reflect the sale and assignment of the receivables to
the trust and will not be segregated from other receivables held by the
servicer or the subservicers. However, Uniform Commercial Code financing
statements reflecting the sale and assignment of the receivables by MMCA to
MART and by MART to the trust will be filed, and the servicer's accounting
records and computer systems will be marked to reflect that sale and
assignment. See "The Trust" and "Some Important Legal Aspects of the
Receivables."
THE PRE-FUNDING PERIOD
The trust will pay the purchase price for receivables to be
transferred to the trust during the Pre-Funding Period with funds on
deposit in the pre-funding account. MART will deposit an amount equal to
$202,210,941.29 in the pre-funding account on the Closing Date. MART
expects to sell receivables to the trust after the Closing Date with an
aggregate principal balance approximately equal to $202,210,941.29. Before
being used to purchase receivables or to pay holders of the notes as
described under "Terms of the Notes-Mandatory Prepayment," funds on deposit
in the pre-funding account will be invested in investments as permitted by
the sale and servicing agreement. The net earnings from the investment of
funds on deposit in the pre-funding account will be transferred to the
collection account on a monthly basis on the business day preceding each
payment date.
The Pre-Funding Period is expected to begin on the Closing Date
and to end on March 31, 2000, but will end earlier if:
o the amount of funds on deposit in the pre-funding account
is reduced to less than $100,000 because of purchases of
additional receivables;
o there is an event of default under the indenture;
o there is an event of servicing termination under the sale
and servicing agreement; or
o MART or the servicer becomes subject to various
insolvency events.
Any funds remaining on deposit in the pre-funding account at the
end of the Pre-Funding Period will be payable to the noteholders as
described under "Terms of the Notes-Mandatory Prepayment."
MANDATORY REPURCHASE OF RECEIVABLES
In the event of a breach or failure to be true of any
representation or warranty with respect to the receivables described in
"-Sale and Assignment," which breach or failure materially and adversely
affects the interest of the trust in a receivable, MART, unless that breach
or failure has been cured by the last day of the calendar month which
includes the 60th day after the date on which MART becomes aware of, or
receives written notice from the owner trustee or the servicer of, the
breach or failure, will be required to repurchase the receivable from the
trust, and MMCA will be required to repurchase the receivable from MART.
The purchase amount will be payable on the payment date immediately
following that calendar month. The obligation of MART to repurchase a
receivable will not be conditioned on performance by MMCA of its obligation
to repurchase a receivable. The repurchase obligation will constitute the
sole remedy available to the noteholders, the trust, the indenture trustee,
the certificateholders or the owner trustee against MART and MMCA for any
uncured breach or failure.
The purchase amount of a receivable to be purchased on any payment
date will equal the sum of (a) the outstanding principal balance of the
receivable as of the first day of the preceding calendar month and (b) the
accrued and unpaid interest on the principal balance at the annual
percentage rate of the receivable from the date a payment was last made on
the receivable through the date on which payment was due for that
receivable in the preceding calendar month. This calculation will be made
after giving effect to the receipt of monies collected on the contract in
the preceding calendar month.
SERVICING PROCEDURES
The servicer will make reasonable efforts to collect all payments
due with respect to the receivables in a manner consistent with the sale
and servicing agreement and will exercise the degree of skill and care that
the servicer exercises with respect to comparable motor vehicle receivables
owned and/or serviced by the servicer for itself or others.
Although it has no current plans to do so, the servicer may enter
into subservicing agreements with servicers that are eligible under the
sale and servicing agreement for the subservicing of receivables. Any
subservicing agreements will contain provisions substantially identical to
those contained in the sale and servicing agreement and may contain other
provisions that are not inconsistent with the terms of the sale and
servicing agreement. The servicer may terminate a subservicing agreement
and either service the related receivables directly or enter into a new
subservicing agreement for the receivables with another subservicer,
provided that any subservicer must be eligible to act as servicer.
Notwithstanding any subservicing agreement, the servicer will remain
obligated and liable to the trust and the owner trustee for servicing and
administering the receivables in accordance with the sale and servicing
agreement as if the servicer alone were servicing the receivables. All
references in this prospectus to actions required or permitted to be taken,
or restrictions on actions to be taken, by the servicer apply equally to
actions by a subservicer. References in this prospectus to amounts received
by the servicer include amounts received by a subservicer.
To be eligible to act as a servicer or subservicer under the sale
and servicing agreement, a person must, at the time of its appointment as
servicer or as a subservicer:
o have a net worth of not less than $50,000,000;
o be servicing a portfolio of motor vehicle retail
installment sale contracts and/or motor vehicle loans;
o be legally qualified, and have the capacity, to service
the receivables;
o have demonstrated the ability professionally and
competently to service a portfolio of motor vehicle
retail installment sale contracts and/or motor vehicle
loans similar to the receivables in accordance with
standards of skill and care that are consistent with
prudent industry standards; and
o be qualified and entitled to use under a license or other
written agreement, and agree to maintain the
confidentiality of, the software which the servicer or
any subservicer uses in connection with performing its
duties and responsibilities under the sale and servicing
agreement or the related subservicing agreement or obtain
the right to use, or develop at its own expense, software
which is adequate to perform its duties and
responsibilities under the sale and servicing agreement
or the related subservicing agreement.
The servicer will covenant in the sale and servicing agreement
that:
(1) the financed vehicle securing each receivable will not be
released from the security interest granted by the
receivable in whole or in part, except as contemplated by
the sale and servicing agreement;
(2) the servicer will not and will not permit any subservicer
to impair in any material respect the rights of the
trust, the indenture trustee, the noteholders, the owner
trustee or the certificateholders in the receivables or
otherwise amend or alter the terms of a contract if, as a
result of that amendment or alteration, the interests of
the trust, the noteholders, the indenture trustee, the
owner trustee, or the certificateholders under the sale
and servicing agreement would be materially adversely
affected; and
(3) the servicer will not increase or decrease the number or
amount of scheduled payments or the amount financed under
a contract, or extend, rewrite or otherwise modify the
payment terms of a contract; provided, however, that the
servicer may extend any contract for credit-related
reasons that would be acceptable to the servicer with
respect to comparable motor vehicle receivables that it
services for itself or others in accordance with its
customary standards if the cumulative extensions with
respect to any contract shall not cause the term of that
contract to extend beyond October 1, 2005; provided
further, that the extensions, in the aggregate, do not
exceed two months for each twelve months of the original
term of the contract.
If the servicer breaches any covenant described in the preceding
paragraph that materially and adversely affects a receivable, the servicer
will be required to purchase the receivable from the trust. That purchase
obligation is the sole remedy against the servicer for any uncured breach,
except for the indemnities of the servicer specified in the sale and
servicing agreement. The servicer's obligation to purchase a receivable in
the case of a breach does not apply if the breach has been cured by the
last day of the calendar month which includes the 60th day after the date
on which the servicer becomes aware of, or receives written notice of, the
breach.
The sale and servicing agreement will generally require the
servicer to charge off a receivable in conformity with its normal practice.
It will also generally require the servicer to follow its normal collection
practices and procedures that are consistent with the standard of care
required by the sale and servicing agreement to realize upon any
receivable. Currently, MMCA charges off a receivable at the time that the
related financed vehicle has been repossessed and sold, or at the time as
MMCA determines that it will not recover the financed vehicle. The servicer
may sell the financed vehicle securing the receivable at judicial sale, if
any, or take any other action permitted by law. See "Some Important Legal
Aspects of the Receivables." The net proceeds of the sale will be deposited
in the collection account at the time and in the manner described above.
The sale and servicing agreement will also require the servicer to
make advances, for which the servicer will be reimbursed in the manner
described under "Terms of the Notes-Advances by the Servicer of Amounts
Payable on the Receivables."
The sale and servicing agreement will provide that the servicer
will defend and indemnify the trust, the indenture trustee, the owner
trustee, the noteholders, the certificateholders and MART against any and
all costs, expenses, losses, damages, claims, and liabilities, including
reasonable fees and expenses of counsel and expenses of litigation, arising
out of or resulting from the use, ownership or operation by the servicer or
any of its affiliates of any financed vehicle, or in respect of any
negligence, willful misfeasance or bad faith of the servicer in the
performance of its duties-other than errors in judgment-or by reason of
reckless disregard of its obligations and duties, under the sale and
servicing agreement or under any of the documents to which it is a party.
The servicer's obligations to indemnify the trust, the indenture trustee,
the owner trustee, the noteholders, MART and the certificateholders for the
servicer's actions or omissions will survive the removal of the servicer,
but will not apply to any action or omission of a successor servicer.
SERVICING COMPENSATION
The servicer will be entitled to receive a servicing fee for
servicing the receivables each calendar month, in an amount equal to the
product of one-twelfth of 1.00% and the principal balance of the
receivables pool as of the first day of the calendar month. The servicer
will also be entitled to receive, as additional servicing compensation,
earnings, net of losses and investment expenses, on amounts on deposit in
the payahead account, Rule of 78's payments, all disposition fees paid with
respect to receivables providing for Balloon Payments, all administrative
fees and charges, and all late payment fees paid with respect to the
receivables, other than fees paid in connection with extension or deferral
of payments on a receivable, which will be deposited in the collection
account. The servicing fee, together with any portion of the servicing fee
that remains unpaid from prior payment dates, will be paid to the servicer
on each payment date.
The servicing fee and the additional servicing compensation will
compensate the servicer for performing the functions of a third party
servicer of contracts and for administering the receivables on behalf of
the noteholders and the certificateholders, including collecting payments,
accounting for collections, furnishing monthly and annual statements to the
indenture trustee and the owner trustee with respect to distributions,
responding to inquiries of obligors, investigating delinquencies, and
providing collection and repossession services in cases of obligor default.
In addition, the servicing fee and the additional servicing compensation
will further compensate the servicer for various taxes, accounting fees,
outside auditor fees, data processing costs, and other costs incurred by
the servicer under the sale and servicing agreement in connection with
administering and servicing the receivables.
EVIDENCE TO BE PROVIDED AS TO SERVICER'S COMPLIANCE WITH ITS SERVICING
OBLIGATIONS
The sale and servicing agreement will provide that a firm of
independent certified public accountants, who may provide audit and other
services to the servicer, MART or MMCA, will furnish to the indenture
trustee and the owner trustee, on or before March 31 of each year,
beginning March 31, 2000, a report of examination as to compliance by the
servicer during the 12 months-or shorter period in the case of the first
report-ended the preceding December 31 with various standards relating to
the servicing of the receivables.
The sale and servicing agreement will also provide for delivery to
the indenture trustee and the owner trustee, on or before March 31 of each
year, beginning March 31, 2000, of a certificate signed by an officer of
the servicer stating that to the best of that officer's knowledge the
servicer has fulfilled its obligations under the sale and servicing
agreement throughout the 12 months ended the preceding December 31 or, if
there has been a default in the fulfillment of any such obligation,
describing each of those defaults.
Beneficial owners of the notes may obtain copies of those
statements and certificates by written request addressed to the indenture
trustee.
RESIGNATION BY THE SERVICER
The sale and servicing agreement will provide that the servicer
may not resign from its obligations and duties as servicer, except upon a
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 indenture trustee or a successor servicer has
assumed the servicer's servicing obligations and duties under the sale and
servicing agreement and becomes the administrator under the administration
agreement.
CONSEQUENCES OF MERGER, CONVERSION, CONSOLIDATION OR SIMILAR ACTIONS
BY SERVICER
Any legal successor to the servicer, whether by merger,
consolidation or purchase and assumption of all or substantially all of the
business of the servicer, will become the servicer under the sale and
servicing agreement, provided that any such successor must be eligible to
be servicer under the sale and servicing agreement.
LIMITS ON SERVICER'S LIABILITY
The sale and servicing agreement will provide that the servicer
will be liable only to the extent of the obligations specifically
undertaken by it under the sale and servicing agreement and will have no
other obligations or liabilities under the sale and servicing agreement.
LIMITS ON SERVICER'S OBLIGATIONS IN CONNECTION WITH LEGAL ACTIONS
The sale and servicing agreement will also provide that the
servicer will be under no obligation to appear in, prosecute or defend any
legal action that is not incidental to the servicer's 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, at its
expense undertake any reasonable action that it may deem necessary or
desirable in respect of the interests of the noteholders and the
certificateholders under the sale and servicing agreement.
EVENTS OF SERVICING TERMINATION
The following events will constitute events of servicing
termination under the sale and servicing agreement:
o any failure by the servicer to deliver to the owner
trustee or the indenture trustee the monthly certificate
detailing the collections and distributions for any
calendar month, which failure continues beyond the
earlier of three business days from the date the
servicer's certificate was due to be delivered and the
related payment date;
o any failure by the servicer to deliver to the collection
account or any other account, any required payment or
deposit under the sale and servicing agreement, which
failure continues unremedied for five business days, or,
in the case of a payment or deposit to be made no later
than a payment date, the failure to make the payment or
deposit by the payment date;
o any failure by the servicer duly to observe or perform in
any material respect any other covenant or agreement in
the notes, the certificates or the sale and servicing
agreement, which failure materially and adversely affects
the rights of noteholders or certificateholders and which
continues unremedied for 30 days after written notice of
the failure is given to the servicer by the indenture
trustee or the owner trustee, or to MART, the servicer,
the owner trustee and the indenture trustee by the
holders of notes or certificates, as applicable,
evidencing not less than 25% in aggregate principal
amount of the outstanding notes;
o various events of bankruptcy, receivership, insolvency,
readjustment of debt, marshalling of assets and
liabilities, or similar proceedings with respect to MART
or the servicer and various actions by MART or the
servicer indicating its insolvency or reorganization
pursuant to bankruptcy, receivership, conservatorship,
insolvency, or similar proceedings; and
o failure of the servicer to be eligible to act as servicer
under the sale and servicing agreement.
If one of the events of servicing termination occurs and is not
remedied, either the indenture trustee or the holders of notes evidencing
not less than 51% of the aggregate principal amount of the outstanding
notes will have the right to remove the servicer. If the servicer is
removed, either the indenture trustee will act as successor servicer or the
indenture trustee will appoint a successor servicer.
The holders of notes evidencing not less than 51% of the aggregate
principal amount of the outstanding notes or the holders of certificates
evidencing not less than 51% of the certificate balance, in the case of any
default which does not adversely affect the indenture trustee or the
noteholders may, on behalf of all noteholders and certificateholders, as
applicable, waive any event of servicing termination under the sale and
servicing agreement except an event resulting from the failure to make any
required deposit to or payment from any account. For purposes of the
foregoing, any notes or certificates owned by MART, the servicer, or any
affiliate will not be considered to be outstanding.
The indenture trustee will have no obligation to notify
noteholders of any event which, with lapse of time to cure, would become an
event of servicing termination under the sale and servicing agreement,
until after the expiration of any applicable cure period, subject to the
obligation of the indenture trustee to deliver to each noteholder a copy of
any certificate received by the indenture trustee from the servicer under
the sale and servicing agreement notifying the indenture trustee of any
event which constitutes or, with the giving of notice or lapse of time or
both, would become, an event of servicing termination under the sale and
servicing agreement. See "-Rights of Indenture Trustee and Noteholders Upon
an Event of Servicing Termination Under the Sale and Servicing Agreement."
RIGHTS OF INDENTURE TRUSTEE AND NOTEHOLDERS UPON AN EVENT OF SERVICING
TERMINATION UNDER THE SALE AND SERVICING AGREEMENT
As long as an event of servicing termination under the sale and
servicing agreement remains unremedied, the indenture trustee or the
holders of notes evidencing not less than a majority of the aggregate
principal amount of the outstanding notes may terminate the servicer's
rights and obligations under the sale and servicing agreement. Thereafter,
the indenture trustee or a servicer meeting the requisite eligibility
standards, which may be an affiliate of the indenture trustee, appointed by
the indenture trustee will succeed to all the responsibilities, duties, and
liabilities of the original servicer. The successor servicer will then be
entitled to the compensation payable to the servicer. If the indenture
trustee is unwilling or legally unable so to act, the indenture trustee may
appoint, or petition a court of competent jurisdiction to appoint, a person
eligible to act as servicer as successor to the outgoing servicer under the
sale and servicing agreement. In no event may the servicing compensation to
be paid to that successor be greater than the servicing compensation
payable to the servicer under the sale and servicing agreement. In the
event of the bankruptcy of the servicer, the bankruptcy trustee or the
servicer, as debtor in possession, may have the power to prevent a
termination of the servicer's rights and obligations under the sale and
servicing agreement.
REQUIREMENTS FOR AMENDMENTS OF THE SALE AND SERVICING AGREEMENT AND
THE TRUST AGREEMENT
Both the sale and servicing agreement and the trust agreement may
be amended by the parties without the consent of the noteholders or the
certificateholders, to cure any ambiguity, to correct or supplement any
provision of either agreement which may be inconsistent with any other
provision of that agreement, and to add, change or eliminate any other
provisions of either agreement which are not inconsistent with the
provisions of that agreement; provided that the action will not, as
evidenced by an opinion of counsel-which may be given by internal counsel
to MART or the servicer-to the indenture trustee and the owner trustee,
materially and adversely affect the interest of any noteholder or
certificateholder or, with respect to the trust agreement, have adverse tax
consequences.
The sale and servicing agreement may be amended by the parties 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 or
for the purpose of modifying the rights of noteholders or
certificateholders, with the consent of the indenture trustee, the holders
of notes evidencing not less than 51% of the aggregate principal amount of
then outstanding notes, voting as a group, and the holders
of certificates evidencing not less than 51% of the certificate balance.
The trust agreement may be amended by the parties for the purpose
of adding any provisions to or changing in any manner, or eliminating any
of the provisions of the trust agreement, or for the purpose of modifying
the rights of noteholders or certificateholders, with the consent of the
indenture trustee, MART, the holders of notes evidencing not less than a
majority of the aggregate principal amount of the then outstanding notes,
voting as a group, and the holders of certificates evidencing not less than
a majority of the certificate balance.
However, no amendment of either agreement may:
o increase or reduce in any manner the amount of, or
accelerate or delay the timing of, or change the
allocation or priority of, collections of payments on
receivables or distributions that are required to be made
on any note or certificate, or change any interest rate
of any note, the Specified Reserve Balance or the Maximum
Supplemental Reserve Amount, without the consent of all
adversely affected noteholders or certificateholders;
o reduce the aforesaid percentage of the notes and the
certificates which is required to consent to any
amendment, without the consent of all noteholders or
certificateholders affected by the amendment; or
o with respect to any amendment to the sale and servicing
agreement or the trust agreement, adversely affect the
ratings of any class of notes by Moody's and S&P without
the consent of holders of notes evidencing not less than
66 2/3% of the aggregate principal amount of the then
outstanding notes of that class.
Additionally, with respect to an amendment of the trust agreement,
an opinion of counsel to the effect that the amendment will not have
specified adverse tax consequences will be furnished to the indenture
trustee and the owner trustee. See "Terms of the Notes-Book Entry
Registration."
REQUIREMENTS FOR TERMINATION OF THE TRUST
The trust will terminate and be of no further force and effect
upon the earlier of:
o payment to noteholders and certificateholders of all
amounts required to be paid to them pursuant to the
indenture, the trust agreement and the sale and servicing
agreement; and
o the payment date following the month which is one year
after the maturity or other liquidation of the last
receivable and the disposition of any amounts received
upon liquidation of any property remaining in the trust
in accordance with the terms and priorities set forth in
the indenture, the trust agreement and the sale and
servicing agreement.
In order to avoid excessive administrative expense, the servicer
will be permitted, at its option, if the principal balance of the
receivables pool as of the close of business on the last day of a calendar
month has declined to 10% or less of the Initial Pool Balance, to purchase
from the trust, on any payment date occurring in a subsequent calendar
month, all remaining receivables in the trust at a purchase price equal to
the outstanding principal amount of the notes and the certificates, in each
case plus accrued and unpaid interest thereon. The exercise of this right
will effect early retirement of the notes and the certificates.
ACTIONS TO BE TAKEN BY INDENTURE TRUSTEE UPON TERMINATION OF THE TRUST
The indenture trustee will give written notice of termination of
the trust to each noteholder of record. The final distribution to any
noteholder will be made only upon surrender and cancellation of that
holder's note, whether a note in fully registered, certificated form or one
or more physical notes representing the notes, at the office or agency of
the indenture trustee specified in the notice of termination. Any funds
remaining in the trust, after the indenture trustee has taken various
measures to locate a noteholder and the measures have failed, will be
distributed to MART or as otherwise provided in the sale and servicing
agreement and the trust agreement.
THE ADMINISTRATION AGREEMENT
MMCA, in its capacity as administrator, will enter into an
administration agreement with the trust and the indenture trustee. Under
the administration agreement, the administrator will agree 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 relating to the administration agreement, the administrator will
be entitled to a monthly administration fee to be paid by the servicer.
SOME IMPORTANT LEGAL ASPECTS OF THE RECEIVABLES
BANKRUPTCY CONSIDERATIONS
MMCA and MART intend that each transfer of receivables by MMCA to
MART be structured such that the receivables and the related proceeds would
not be part of MMCA's bankruptcy estate under Section 541 of the United
States Bankruptcy Code should MMCA become the subject of a bankruptcy case
after the transfers of the receivables to MART. This is known as a "true
sale." Legal counsel has advised MART that if MMCA were to become the
subject of a voluntary or involuntary case under the United States
Bankruptcy Code, the receivables and their proceeds would not be part of
MMCA's bankruptcy estate under Section 541 of the United States 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 estate in a
bankruptcy of the seller. If MMCA ever becomes subject to a bankruptcy
proceeding and the court follows the Octagon court's reasoning, you could
experience losses or delays in payments on your notes. Counsel to MART has
advised MART that the reasoning of the Octagon case appears to be
inconsistent with other precedent. In addition, the Permanent Editorial
Board of the Uniform Commercial Code has issued PEB Commentary No. 14,
which characterizes the Octagon court's interpretation of Article 9 of the
Uniform Commercial Code as erroneous. That commentary states that nothing
in Article 9 is intended to prevent the transfer of ownership of accounts
or chattel paper.
TRUST'S RIGHTS IN THE RECEIVABLES
The receivables are "chattel paper" as defined in the Uniform
Commercial Code. Under the Uniform Commercial Code, for most purposes, a
sale of chattel paper is treated in a manner similar to a transaction
creating a security interest in chattel paper. Following transfers of the
receivables, MMCA and MART will cause financing statements to be filed with
the appropriate governmental authorities to perfect the interest of MART
and the trust, as the case may be, in the receivables.
Under the sale and servicing agreement, the servicer will hold the
receivables, either directly or through subservicers, as custodian for the
indenture trustee and the trust following the sale and assignment of the
receivables to the trust on any date. MART will take the action as is
required to perfect the rights of the indenture trustee and the trust in
the receivables. The receivables will not be stamped, or otherwise marked,
to indicate that they have been sold to the trust. If, through inadvertence
or otherwise, another party purchases or takes a security interest in the
receivables for new value in the ordinary course of business and takes
possession of the receivables without actual knowledge of the trust's
interest, the purchaser or secured party will acquire an interest in the
receivables superior to the interest of the trust.
The servicer will be obligated to take those actions which are
necessary to protect and perfect the trust's interest in the receivables
and their proceeds.
SECURITY INTERESTS IN VEHICLES
In all states in which the receivables have been originated,
retail installment sale contracts evidence the credit sale of automobiles
and light-duty trucks by dealers to obligors; the contracts also constitute
personal property security agreements and include grants of security
interests in the financed vehicles under the Uniform Commercial Code.
Perfection of security interests in the financed vehicles is generally
governed by the motor vehicle registration laws of the state in which the
vehicle is located. In most states in which the receivables have been
originated, a security interest in a vehicle is perfected by notation of
the secured party's lien on the vehicle's certificate of title, including
California and Texas, the states in which the largest number of obligors
are located.
MMCA will assign its security interests in the financed vehicles
securing the related receivables to MART and MART will subsequently assign
its security interests in the financed vehicles to the trust. However,
because of the administrative burden and expense, the servicer, MART 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
vehicles. Also, the servicer will continue to hold any certificates of
title relating to the financed vehicles in its possession as custodian for
the trust.
In most states, assignments together with a perfected security
interest in the chattel paper are an effective conveyance of a security
interest in the vehicles subject to the chattel paper without amendment of
any lien noted on a vehicle's certificate of title, and the assignee
succeeds to the assignor's rights as secured party. In the absence of fraud
or forgery by the vehicle owner or the servicer or administrative error by
state or local agencies, the notation of MMCA's lien on the certificates of
title will be sufficient to protect the trust against the rights of
subsequent purchasers of a financed vehicle or subsequent lenders who take
a security interest in a financed vehicle. If there are any financed
vehicles as to which MMCA failed to obtain a perfected security interest,
its security interest would be subordinate to, among others, subsequent
purchasers of the financed vehicles and holders of perfected security
interests. Such a failure would constitute a breach of MMCA's warranties
under the purchase agreement and of MART's warranties under the sale and
servicing agreement and would create an obligation of MMCA and of MART to
purchase the related receivable if such breach materially adversely affects
the interest of the trust in the receivable. By not identifying the trust
as the secured party on the certificate of title, the trust's interest in
the chattel paper may not have the benefit of the security interest in the
financed vehicle in all states or such security interest could be defeated
through fraud or negligence. MART will assign its rights under the purchase
agreement to the trust. If the trust does not have a perfected security
interest in a financed vehicle, its ability to realize on such financed
vehicle in the event of a default may be adversely affected.
Under the laws of most states, a perfected security interest in a
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, including California, generally require surrender of a
certificate of title to re- register a vehicle. Accordingly, a secured
party must surrender possession if it holds the certificate of title to the
vehicle, or, in the case of vehicles registered in states providing for the
notation of a lien on the certificate of title but not possession by the
secured party, the secured party would receive notice of surrender if the
security interest is noted on the certificate of title. Thus, the secured
party would have the opportunity to re-perfect its security interest in the
vehicle in the state of relocation. In states that do not require a
certificate of title for registration of a motor vehicle, re-registration
could defeat perfection. In the ordinary course of servicing receivables,
MMCA takes steps to effect re-perfection upon receipt of notice of
re-registration or information from the obligor as to relocation.
Similarly, when an obligor sells a vehicle, MMCA must either surrender
possession of the certificate of title or it will receive notice as a
result of its lien noted on the certificate of title and, as such, will
have an opportunity to require satisfaction of the receivable before
release of the lien. The servicer will be obligated to take appropriate
steps, at the servicer's expense, to maintain perfection of security
interests in the financed vehicles.
Under the laws of most states, including California and Texas,
liens for repairs performed on a motor vehicle and liens for certain unpaid
taxes take priority over even a perfected security interest in a financed
vehicle. The Internal Revenue Code of 1986, as amended, also grants
priority to certain federal tax liens over the lien of a secured party.
Federal law and the laws of some states permit the confiscation of motor
vehicles under certain circumstances if used in unlawful activities, which
may result in the loss of a secured party's perfected security interest in
the confiscated motor vehicle. With respect to each trust, MMCA will
represent to MART and MART will represent to the trust that the trust's
security interest in each financed vehicle is or will be prior to all other
present liens (other than tax liens and liens that arise by operation of
law) and security interests in, the financed vehicle. However, liens for
repairs or taxes, or the confiscation of a financed vehicle, could arise or
occur at any time during the term of a receivable. No notice will be given
to the trustee, certificateholders, and the indenture trustee or
noteholders in the event such a lien arises or confiscation occurs. Neither
MART nor the servicer will have any obligation to repurchase a receivable
as to which any of the aforementioned occurrences result in the trust
losing the priority of its security interest or its security interest in
such financed vehicle after the date a receivable is sold to the trust.
REPOSSESSION
In the event of default by a purchaser of a financed vehicle, the
holder of the retail installment sale contract has all the remedies of a
secured party under the Uniform Commercial Code, except where specifically
limited by other state laws. Under the Uniform Commercial Code, remedies of
a secured party include the right to repossession by self-help, unless
repossession would constitute a breach of the peace. Unless a vehicle is
voluntarily surrendered, self-help repossession is the method employed by
MMCA in the majority of instances in which a default occurs and is
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 vehicle must then be repossessed
in accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by an obligor, some jurisdictions 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 a defaulting obligor with reasonable notice of the
date, time, and place of any public sale and/or the date after which any
private sale of the collateral may be held. The obligor has the right to
redeem the collateral prior to actual sale by paying the secured party the
unpaid principal balance of the obligation plus reasonable expenses for
repossessing, holding, and preparing the collateral for disposition and
arranging for the sale, plus, in some jurisdictions, reasonable attorneys'
fees, or, in some states, by payment of delinquent installments or the
unpaid balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of a repossessed vehicle generally will be
applied first to the expenses of resale and repossession and then to the
satisfaction of the indebtedness of the obligor on the related receivable.
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 such judgments. However, the deficiency judgment
would be a personal judgment against a defaulting obligor, who can be
expected to have very limited capital or 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 or not paid at all. MMCA generally seeks to recover
any deficiency existing after repossession and sale of a financed vehicle.
OBLIGOR'S RIGHT TO EXCESS PROCEEDS UPON SALE OF A FINANCED VEHICLE
Occasionally, after resale of a financed vehicle and payment of
all expenses and indebtedness, there is a surplus of funds. In that case,
the Uniform Commercial Code requires the lender to remit the surplus to any
holder of any lien with respect to the vehicle sold or if no such
lienholder exists or there are remaining funds, the Uniform Commercial Code
requires the lender to remit the surplus to the former obligor.
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 Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and
Z, state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code, and state motor vehicle retail installment sales
acts, retail installment sales acts, and other similar laws. Also, state
laws impose finance charge ceilings and other restrictions on consumer
transactions and require contract disclosures in addition to those required
under federal law. Such requirements impose specific statutory liabilities
upon creditors who fail to comply with their provisions. In some cases,
this liability could affect an assignee's ability to enforce consumer
finance contracts such as the receivables.
The so-called holder-in-due-course rule of the Federal Trade
Commission, also known as the FTC rule, the provisions of which are
generally duplicated by the Uniform Consumer Credit Code, other state
statutes, or the common law in some states, has the effect of subjecting a
seller, and certain related lenders and their assignees, in a consumer
credit transaction and any assignee of the seller to all claims and
defenses which the buyer in a transaction could assert against the seller
of the goods. Liability under the FTC rule is limited to the amounts paid
by the buyer, and may result in the inability of the holder of the contract
to collect all or a portion of the balance remaining due from the buyer
under that contract. Most of the receivables will be subject to the
requirements of the FTC rule. Accordingly, the trust, as holder of the
related receivables, will be subject to any claims or defenses that a
purchaser of a financed vehicle may assert against the seller of the
financed vehicle. Such claims are limited to a maximum liability equal to
the amounts paid by the obligor on the receivable.
Under most state motor vehicle dealer licensing laws, sellers of
motor vehicles are required to be licensed to sell motor vehicles at retail
sale. Furthermore, Federal Odometer Regulations promulgated under the Motor
Vehicle Information and Cost Savings Act require that all sellers of new
and used vehicles furnish a written statement signed by the seller
certifying the accuracy of the odometer reading. If a seller is not
properly licensed or if an Odometer Disclosure Statement was not provided
to the purchaser of the related financed vehicle, the obligor may be able
to assert a defense against the seller of the vehicle. If an obligor were
successful in asserting one of these claims or defenses, it would
constitute a breach of MMCA's and MART's representations and warranties
under the purchase agreement and the sale and servicing agreement and would
create an obligation of MMCA and MART to repurchase the receivable unless
the breach is cured. See "The Sale and Servicing Agreement and the Trust
Agreement-Sale and Assignment."
Courts have imposed general equitable principles on secured
parties pursuing repossession of collateral or litigation involving
deficiency balances. These equitable principles may have the effect of
relieving an obligor from some or all of the legal consequences of a
default.
In several cases, obligors 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 consumers.
MMCA and MART will warrant that each receivable complies with all
requirements of law in all material respects. Accordingly, if an obligor
has a claim against the trust for violation of any law and such claim
materially and adversely affects the trust's interest in a receivable, the
violation would constitute a breach of warranty and would create an
obligation of MMCA and MART to repurchase the affected receivable unless
the breach is cured. See "The Sale and Servicing Agreement and the Trust
Agreement-Mandatory Repurchase of Receivables."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency
judgments, numerous other statutory provisions, including the United States
Bankruptcy Code and related state laws, may interfere with or affect the
ability of a lender to realize upon collateral or enforce a deficiency
judgment. For example, in a Chapter 13 proceeding under the United States
Bankruptcy Code, a court may prevent a lender from repossessing a motor
vehicle, and, as part of the rehabilitation plan, reduce the amount of the
secured indebtedness to the market value of the motor vehicle at the time
of bankruptcy, as determined by the court, leaving the lender as a general
unsecured creditor for the remainder of the indebtedness. A bankruptcy
court may also reduce the monthly payments due under a contract or change
the rate of interest and time of repayment of the indebtedness.
FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a summary of some of the United States federal
income tax consequences of the purchase, ownership and disposition of the
notes. This discussion is based upon current provisions of the tax code,
existing and proposed Treasury regulations under the tax code, current
administrative rulings, judicial decisions and other applicable authorities
in effect as of the date of this prospectus, all of which are subject to
change, possibly with retroactive effect. There can be no assurance that
the IRS will not challenge the conclusions reached in this prospectus, and
no ruling from the IRS has been or will be sought on any of the issues
discussed below.
This summary does not purport to deal with all aspects of federal
income taxation that may be relevant to beneficial owners of notes in light
of their personal investment circumstances nor, except for some limited
discussions of particular topics, to some types of beneficial owners of
notes subject to special treatment under the federal income tax laws (e.g.,
financial institutions, broker-dealers, life insurance companies and
tax-exempt organizations). This information is directed to beneficial
owners who hold the notes as "capital assets" within the meaning of Section
1221 of the tax code.
TAX TREATMENT OF THE NOTES AND THE TRUST UNDER FEDERAL INCOME TAX LAW
Tax Status of the Notes and the Trust. On the Closing Date, Skadden, Arps,
Slate, Meagher & Flom LLP will render its opinion that for federal income
tax purposes under existing law, subject to customary assumptions and
qualifications:
o the notes will be treated as debt; and
o the trust will not be classified as an association or a
publicly traded partnership taxable as a corporation.
MART, the owner trustee and the indenture trustee have agreed, and the
noteholders will agree by their purchase of notes, to treat the notes for
federal, state and local income and franchise tax purposes as indebtedness
of the trust.
Stated Interest. Stated interest on the notes will be taxable as ordinary
income for federal income tax purposes when received or accrued in
accordance with a beneficial owner's method of tax accounting.
Original Issue Discount. A note will be treated as issued with original
issue discount or "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 to its maturity based
on the anticipated weighted average life of a note.
In general, OID, if any, will equal the difference between the
stated redemption price at maturity of a note and its issue price. 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. In general, OID must be included in income in advance of the
receipt of the cash representing that income. The amount of OID on a note
will be considered to be zero if it is less than a de minimis amount
determined as described above.
The issue price of a note will generally be the initial offering
price at which a substantial amount of the notes are sold. The trust
intends to treat the issue price as including, in addition, the amount paid
by the noteholder for accrued interest that relates to a period prior to
the Closing Date. The stated redemption price at maturity generally will
equal the principal amount of the Note.
The holder of a note issued with OID must include in gross income
for each taxable year the OID accrued for each day during its taxable year
on which it holds the note. The daily portions are determined by
calculating the OID for the accrual period and then allocating to each day
a pro rata portion of the OID that accrued during the accrual period. The
trust intends to report OID on the basis of an accrual period that
corresponds to the interval between payment dates.
OID on the notes will be computed by taking into account the
anticipated rate of prepayments assumed in pricing the notes, which will be
1.30% ABS. The amount of OID that will accrue during an accrual period will
equal:
o the present value of all payments remaining to be made on
the note as of the close of the accrual period, plus the
payments during the accrual period of amounts included in
the stated redemption price of the note, minus
o the "adjusted issue price" of the note at the beginning of
the accrual period.
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 qualified stated interest
payments. The present value of the remaining payments is determined on the
basis of three factors:
o 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,
o events which have occurred before the end of the accrual
period and
o the assumption that the remaining payments will be made
in accordance with the original assumption.
The effect of this method is to increase the rate at which a
noteholder includes OID in income to take into account prepayments on the
receivables at a rate that exceeds the anticipated rate of prepayments, and
to decrease (but not below zero) for any period the rate at which a
noteholder includes OID in income to take into account prepayments with
respect to the receivables at a rate that is slower than the anticipated
rate of prepayments. Although OID will be reported to noteholders based on
the anticipated rate of prepayments, no representation is made to
noteholders that receivables will be prepaid at that rate or at any other
rate.
A holder of a note that acquires the note for an amount that
exceeds its stated redemption price will not include any OID in gross
income. A holder of a note which acquires the notes for an amount that is
less than its stated redemption price will be required to include OID in
gross income, but a subsequent holder who purchases a note for an amount
that exceeds its adjusted issue price will be entitled, as will an initial
holder who pays more than a note's issue price, to reduce the amount of OID
included in income in each period by the amount of OID multiplied by a
fraction, the numerator of which is:
o the purchaser's adjusted basis in the note immediately
after purchase thereof minus
o the adjusted issue price of the note; and the denominator
of which is:
o all amounts remaining to be paid on the note after the
purchase date, other than qualified stated interest,
minus
o the adjusted issue price of the note.
Total Accrual Election. As an alternative to separately accruing stated
interest, OID, de minimis OID, market discount, de minimis market discount,
unstated interest, premium, and acquisition premium, a holder of a note 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 though:
o the issue price of the note were equal to the
noteholder's adjusted basis in the note immediately after
its acquisition by the noteholder;
o the note were issued on the noteholder's acquisition
date; and
o 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."
Market Discount. The notes, whether or not issued with OID, will be
subject to the market discount rules of the tax code. In general, these
rules provide that if the beneficial owner purchases a note at a discount
(if the discount exceeds a de minimis amount specified in the tax code)
from its stated redemption price at maturity or, if the notes were issued
with OID, its adjusted issue price, and thereafter (1) recognizes gain upon
a disposition, or (2) receives payments of principal, the lesser of (x) the
gain or principal payment or (y) the accrued market discount will be taxed
as ordinary interest income and not as capital gain. Generally, the accrued
market discount will be the total market discount on the note multiplied by
a fraction equal to:
o the number of days the beneficial owner held the note,
divided by
o the number of days from the date the beneficial owner
acquired the note until its maturity date.
The beneficial owner may elect, however, to determine accrued market
discount under the constant yield method.
Limitations imposed by the tax code which are intended to match
deductions with the taxation of income may defer deductions for interest on
indebtedness incurred or continued, or short-sale expenses incurred, to
purchase or carry a note with market discount. A beneficial owner of a note
may elect to include market discount in gross income as it accrues and, if
it makes this election, is exempt from this rule. This election will apply
to all debt instruments acquired by the taxpayer on or after the first day
of the first taxable year to which the election applies. The adjusted basis
of a note subject to the election will be increased to reflect market
discount included in gross income, thereby reducing any gain or increasing
any loss on a sale or other taxable disposition.
Amortizable Bond Premium. In general, if a beneficial owner of a note
purchases a note at a premium-that is, an amount in excess of the amount
payable upon the maturity of that note-that beneficial owner will be
considered to have purchased the note with "amortizable bond premium" equal
to the amount of the excess. The beneficial owner of a note may elect to
amortize bond premium as an offset to interest income, and not as a
separate deduction item, as it accrues under a constant yield method over
the remaining term of the note. That beneficial owner's tax basis in the
note will be reduced by the amount of the amortized bond premium. Any
election will apply to all debt instruments, other than instruments the
interest on which is excludible from gross income, held by that beneficial
owner at the beginning of the first taxable year for which the election
applies or later acquired, and cannot be revoked without the consent of the
IRS. Bond premium on a note held by a beneficial owner who does not elect
to amortize the premium will decrease the gain or increase the loss
otherwise recognized on the disposition of the note.
Disposition of Notes. A beneficial owner of a note's adjusted tax basis
will be its cost, increased by the amount of any OID, market discount and
gain previously included in income with respect to the note, and reduced by
the amount of any payment on the note that is not qualified stated interest
and the amount of bond premium previously amortized with respect to the
note. A beneficial owner will generally recognize gain or loss on the sale
or retirement of a note equal to the difference between the amount realized
on the sale or retirement and the tax basis of the note. The gain or loss
will be capital gain or loss-except to the extent attributable to OID not
previously accrued, accrued but unpaid interest, or as described above
under "-Market Discount"-and will be long-term capital gain or loss if the
note was held for more than one year. In addition, if the prepayable
obligation rules apply, any OID that has not accrued at the time of the
payment in full of a note will be treated as ordinary income.
FEDERAL TAX CONSEQUENCES OF WAIVERS OF EVENTS OF DEFAULT AND AMENDMENTS OF
NOTES BY NOTEHOLDERS
The indenture permits the noteholders to waive an event of default
under the indenture or rescind an acceleration of the notes in some
circumstances upon a vote of the requisite percentage of noteholders. Any
waiver or rescission under the indenture, or any amendment of the terms of
the notes, could be treated for federal income tax purposes as a
constructive exchange by a noteholder of the notes for new notes, upon
which gain or loss would be recognized.
INFORMATION REPORTING AND BACKUP WITHHOLDING OF TAXES BY INDENTURE TRUSTEE
The indenture trustee will be required to report annually to the
IRS, and to each beneficial owner of a note, the amount of interest paid on
the notes and the amount withheld for federal income taxes for each
calendar year, except as to exempt recipients which are generally
corporations, tax-exempt organizations, qualified pension and
profit-sharing trusts, individual retirement accounts, or nonresident
aliens who provide certification as to their status. Each beneficial owner
of note, other than beneficial owners who are not subject to the reporting
requirements will be required to provide, under penalties of perjury, a
certificate containing the beneficial owner's name, address, correct
federal taxpayer identification number-which includes a social security
number-and a statement that the beneficial owner is not subject to backup
withholding. Should a non-exempt beneficial owner fail to provide the
required certification or should the IRS notify the indenture trustee or
the trust that the beneficial owner has provided an incorrect federal
taxpayer identification number or is otherwise subject to backup
withholding, the indenture trustee will be required to withhold, or cause
to be withheld, 31% of the interest otherwise payable to the beneficial
owner, and remit the withheld amounts to the IRS as a credit against the
beneficial owner's federal income tax liability.
TAX CONSEQUENCES TO FOREIGN INVESTORS
The following information describes the U.S. federal income tax
treatment of investors that are not U.S. persons, which are any persons
other than:
o citizens or residents of the United States;
o corporations, partnerships or other entities treated as
corporations or partnerships for United States federal
income tax purposes organized in or under the laws of the
United States, any state or the District of Columbia,
unless, in the case of a partnership or entity treated as
a partnership, Treasury regulations provide otherwise;
o estates the income of which is includible in gross income
for U.S. federal income tax purposes, regardless of
source; or
o trusts if a U.S. court is able to exercise primary
supervision over the administration of the trusts and one
or more U.S. persons has authority to control all
substantial decisions of the trust.
Interest paid or accrued to a non-U.S. person that is not
effectively connected with the conduct of a trade or business within the
United States by the non-U.S. person will generally be considered
"portfolio interest" and generally will not be subject to U.S. federal
income tax and withholding tax, as long as the non-U.S. person:
o is not actually or constructively a "10 percent
shareholder" of the trust or a "controlled foreign
corporation" with respect to which the trust is a
"related person" within the meaning of the tax code, and
o provides an appropriate statement, signed under penalties
of perjury, certifying that the beneficial owner of a
note is a non-U.S. person and providing that non-U.S.
person's name and address.
If the information provided in this statement changes, the
non-U.S. person must so inform the indenture trustee within 30 days of the
change. The statement generally must be provided in the year a payment
occurs or in either of the two preceding years. If the interest were not
portfolio interest, then it would be subject to U.S. federal income and
withholding tax at a rate of 30 percent unless reduced or eliminated under
an applicable income tax treaty.
Any capital gain realized on the sale or other taxable disposition
of a note by a non-U.S. person will be exempt from U.S. federal income and
withholding tax, provided that:
o the gain is not effectively connected with the conduct of
a trade or business in the United States by the non- U.S.
person, and
o in the case of an individual non-U.S. person, the
non-U.S. person is not present in the United States for
183 days or more in the taxable year and several other
requirements are met.
If the interest, gain or income on a note held by a non-U.S.
person is effectively connected with the conduct of a trade or business in
the United States by the non-U.S. person, the beneficial owner of a note,
although exempt from the withholding tax previously discussed if a duly
executed Form 4224 is furnished, generally will be subject to U.S. federal
income tax on the interest, gain or income at regular federal income tax
rates. In addition, if the non-U.S. person is a foreign corporation, it may
be subject to a branch profits tax under the tax code equal to 30 percent
of its "effectively connected earnings and profits" for the taxable year,
as adjusted for specified items, unless it qualified for a lower rate under
an applicable tax treaty.
Recent Treasury regulations could affect the procedures to be
followed by a non-U.S. person in complying with the United States federal
withholding, backup withholding, and information reporting rules. The
regulations will generally be effective for payments made after December
31, 2000. Prospective investors are advised to consult their own tax
advisors regarding the effect, if any, of the regulations on the purchase,
ownership and disposition of the notes.
STATE TAX CONSEQUENCES
Set forth below is a summary of some of the state income tax
consequences of the purchase, ownership and disposition of the notes.
Because of the variation in each state's income tax laws, it is impossible
to predict tax consequences to noteholders in all states. Noteholders are
urged to consult their tax advisors with respect to state tax consequences
arising
out of the purchase, ownership and disposition of the notes.
The trust has been organized as a Delaware business trust, and
MART and the servicer are headquartered in the State of California. In the
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, assuming that the
notes are treated as debt for
federal income tax purposes:
o the notes will be treated as debt for Delaware and
California income and franchise tax purposes,
o the trust will not be subject to Delaware or California
income or franchise taxes at the entity level, and
o noteholders not otherwise subject to taxation in
California or Delaware, respectively, would not become
subject to taxation in California or Delaware,
respectively, solely because of a noteholder's ownership
of a note.
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
NOTEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF
ACQUIRING, HOLDING AND DISPOSING OF NOTES, INCLUDING THE TAX CONSEQUENCES
UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended,
and the tax code impose restrictions on:
o employee benefit plans (as defined in Section 3(3) of
ERISA);
o plans described in Section 4975(e)(1) of the tax code,
including individual retirement accounts or Keogh Plans;
o any entities whose underlying assets include plan assets
by reason of a plan's investment in those entities; and
o persons who have specified relationships to one of the
benefit plans described in the preceding clauses, who are
called "Parties-in-Interest" under ERISA and
"Disqualified Persons" under the tax code.
In addition, the general account of an insurance company may be
deemed to include assets of employee benefit plans investing in its general
account and the insurance company might be treated as a Party-in-Interest
with respect to an employee benefit plan by virtue of that type of
investment. ERISA also imposes duties on persons who are fiduciaries of
employee benefit plans subject to ERISA.
ERISA and the tax code prohibit some transactions between a
employee benefit plan and Parties-in-Interest or Disqualified Persons with
respect to that employee benefit plan. A violation of these prohibited
transaction rules may give rise to the imposition of an excise tax under
the tax code or the imposition of a civil penalty under ERISA on all
parties to the transaction, other than the employee benefit plan but
including the person who caused the employee benefit plan to engage in the
transaction, and may give rise to the obligation to correct the prohibited
transaction, unless a statutory, regulatory or administrative exemption is
available.
SPECIAL ERISA CONSIDERATIONS FOR EMPLOYEE BENEFIT PLANS
If assets of the trust were deemed to be assets of an employee
benefit plan for purposes of ERISA and the tax code, some transactions
involving the trust might be deemed to constitute prohibited transactions.
Under a regulation issued by the United States Department of Labor relating
to assets of employee benefit plans, the assets of the trust would be
treated as plan assets of an employee benefit plan that invested in the
trust for purposes of ERISA and the tax code if the employee benefit plan
acquires an "Equity Interest" in the trust and none of the exceptions
contained in the regulation is applicable.
Under this regulation, a security is treated as Equity Interest
only if it is not treated as a debt security under applicable local law or
it has substantial equity features. Although there is very little direct
guidance from the Department of Labor on this point, because the notes (1)
are expected to be treated as indebtedness under local law and will, in the
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, be treated as debt,
rather than equity, for federal tax purposes (see "Federal Income Tax
Consequences"), and (2) should not be deemed to have any "substantial
equity features," the notes should not be treated as an Equity Interest for
purposes of the plan assets regulation. This conclusion is 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.
Whether or not the notes are treated as an Equity Interest, if an
employee benefit plan acquires the notes, a prohibited transaction could
arise if the trust, the owner trustee, the indenture trustee, any holder of
the certificates or any of their respective affiliates, is or becomes a
Party in Interest or a Disqualified Person with respect to that employee
benefit plan. These prohibited transactions may, however, be eligible for
an exemption from the liabilities that would otherwise be applicable under
ERISA and the tax code. The availability of one or more of these exemptions
will generally depend on the type of employee benefit plan fiduciary making
the decision to acquire a note. Included among these exemptions are:
o Prohibited Transaction Class Exemption 90-1, regarding
investments by insurance company pooled separate
accounts;
o Prohibited Transaction Class Exemption 91-38, regarding
investments by bank collective investment funds;
o Prohibited Transaction Class Exemption 84-14, regarding
transactions effected by "qualified professional asset
managers;"
o Prohibited Transaction Class Exemption 95-60, regarding
investments by insurance company general accounts; and
o Prohibited Transaction Class Exemption 96-23, regarding
investments effected by "in-house asset managers."
A violation of the prohibited transaction rules may result in the
imposition of an excise tax and other liabilities under ERISA and the tax
code unless one or more statutory, regulatory or administrative exemptions
is available. Each benefit plan and each government plan subject to a
federal, state or local law substantially similar to ERISA, by its
acceptance of a note, will be deemed to represent that an exemption applies
to its acquisition, holding and disposition of the note.
SPECIAL ERISA CONSIDERATIONS APPLICABLE TO INSURANCE COMPANY GENERAL ACCOUNTS
Investors should note that special rules are applicable to the
assets of insurance company general accounts under ERISA and Section 4975
of the tax code. The Department of Labor is required to issue final
regulations with respect to insurance policies issued on or before December
31, 1998 that are supported by an insurer's general account. The
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 tax code. These rules also
provide that, until the date that is 18 months after the regulations become
final, no person will be subject to liability under the fiduciary
responsibility and prohibited transaction provisions of ERISA and Section
4975 of the tax code on the basis of a claim that the assets of the general
account of an insurance company constitute the assets of any plan. This
exception does not apply to actions intended to avoid the application of
the regulation or to actions brought by the Secretary of Labor relating to
specified breaches of fiduciary duties that also constitute breaches of
state or federal criminal law. The plan asset status of insurance company
separate accounts is unaffected by these new rules and separate account
assets continue to be treated as the assets of any plan invested in the
separate account. Insurance companies should consult with their counsel
regarding the potential impact of these new rules on their purchase of
notes.
As of the date of this prospectus, the Department of Labor has
issued only proposed regulations. If the regulations are adopted
substantially in the form in which proposed, the regulations may not exempt
the assets of insurance company general accounts from treatment as "plan
assets" of plans holding policies issued after December 31, 1998. The
proposed regulations should not, however, adversely affect the
applicability of Prohibited Transaction Class Exemption 95-60 to purchases
of notes.
GENERAL INVESTMENT CONSIDERATIONS FOR EMPLOYEE BENEFIT PLANS
Prior to making an investment in the notes, prospective benefit
plan investors should consult with their legal advisors concerning the
impact of ERISA and the tax code and the potential consequences of that
investment with respect to their specific circumstances. In this regard,
each employee benefit plan fiduciary should take into account, among other
considerations:
o whether the fiduciary has the authority to make the
investment;
o the composition of the benefit plan's portfolio with
respect to diversification by type of asset;
o the benefit plan's funding objectives;
o the tax effects of the investment; and
o whether under the general fiduciary standards of
investment prudence and diversification an investment in
the notes is appropriate for the benefit plan, taking
into account the overall investment policy of the benefit
plan and the composition of the benefit plan's investment
portfolio.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement, MART has agreed to sell to each of the underwriters named below
in this paragraph, and each of the underwriters, for whom Credit Suisse
First Boston Corporation is acting as representative, has severally agreed
to purchase from MART, the principal amount of the notes set forth opposite
its name below:
<TABLE>
<CAPTION>
Principal Principal Principal Principal
Amount Amount Amount Amount
of Class A-1 of Class A-2 of Class A-3 of Class B
UNDERWRITERS Notes Notes Notes Notes
- ------------ ----- ----- ----- -----
<S> <C> <C> <C> <C>
Credit Suisse First Boston Corporation...... $108,668,000 $70,000,000 $47,334,000 $62,000,000
J. P. Morgan Securities Inc................. 108,666,000 70,000,000 47,333,000 0
Salomon Smith Barney Inc.................... 108,666,000 70,000,000 47,333,000 0
------------ ----------- ----------- -----------
Total....................................... $326,000,000 $210,000,000 $142,000,000 $62,000,000
============ ============ ============ ===========
</TABLE>
In the underwriting agreement, the several underwriters have
agreed, subject to the terms and conditions set forth in the underwriting
agreement, to purchase all the notes offered hereby if any of the notes are
purchased. In the event of a default under the underwriting agreement by
any underwriter, the underwriting agreement provides that, in some
circumstances, purchase commitments of the non-defaulting underwriters may
be increased or the underwriting agreement may be terminated.
The underwriting discounts and commissions of the underwriters,
the selling concessions that the underwriters may allow to some dealers and
the discounts that some dealers may reallow to some other dealers, each
expressed as a percentage of the principal amount of the Class A-1 notes,
the Class A-2 notes, the Class A-3 notes and the Class B notes, will be as
follows:
<TABLE>
<CAPTION>
Underwriting
Discounts and Net Proceeds Selling
Commissions to the Seller Concessions Reallowance
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Class A-1 notes................................ 0.125% 99.765625% 0.075% 0.050%
Class A-2 notes................................ 0.250% 99.718750% 0.150% 0.100%
Class A-3 notes................................ 0.300% 99.684375% 0.180% 0.125%
Class B notes.................................. 0.350% 99.618750% 0.210% 0.125%
Total for all of the notes.................. $1,575,500.00 $737,960,750.00
============= =================
</TABLE>
The Bank of Tokyo-Mitsubishi, Ltd., an affiliate of the indenture trustee,
is participating in the offering of the notes being offered hereby by
acting as an advisor to MART. For its services, The Bank of
Tokyo-Mitsubishi, Ltd. will receive a fee of $100,000 to be paid from the
underwriting discounts and commissions.
The transaction expenses payable by MART are estimated to be $897,207.
The representative of the underwriters has informed MART that it
does not expect discretionary sales by the underwriters to exceed 5% of the
principal amount of the notes being offered hereby.
The underwriters may engage in over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids in
accordance with Regulation M of the Securities Exchange Act of 1934, as
amended. Over-allotment involves syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions
permit bids to purchase the underlying security so long as the stabilizing
bids do not exceed a specified maximum. Syndicate covering transactions
involve purchases of the securities in the open market after the
distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member when the securities originally sold by
such syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the
securities to be higher than it would be in the absence of such
transactions.
The closing of the sale of the notes is conditioned on the
issuance of the certificates.
The indenture trustee may, from time to time, invest the funds in
the trust accounts in investments permitted by the sale and servicing
agreement acquired from the underwriters.
In the ordinary course of business, the underwriters and their
affiliates have engaged and may engage in investment banking and commercial
banking transactions with the servicer and its affiliates.
MMCA and MART 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.
Upon receipt of a request by an investor who has received an
electronic prospectus from an underwriter or a request by the investor's
representative within the period during which there is an obligation to
deliver a prospectus, MART or the underwriters will promptly deliver, or
cause to be delivered, without charge, a paper copy of the prospectus.
LEGAL OPINIONS
The validity of the notes and federal income tax matters will be
passed upon for MART by Skadden, Arps, Slate, Meagher & Flom LLP, New York,
New York. Brown & Wood LLP, San Francisco, California, will act as counsel
to the underwriters.
REPORTS TO NOTEHOLDERS
Unless and until definitive notes are issued under the limited
circumstances described under "Terms of the Notes-Issuance of Definitive
Notes Upon the Occurrence of Various Circumstances," all notices, reports
and statements to noteholders, including any monthly and annual reports
concerning the trust and the receivables, will be prepared by the servicer
and sent on behalf of the trust only to DTC or Cede & Co. as nominee of DTC
and registered holder of the notes. See "Terms of the Notes-Principal
Amount and Interest Rates," "-Book Entry Registration" and "-Issuance of
Definitive Notes Upon the Occurrence of Various Circumstances." Those
notices, reports and statements will not contain audited financial
statements with respect to the trust. The servicer also does not intend to
send any financial reports of the servicer or MART to noteholders.
WHERE YOU CAN FIND MORE INFORMATION
MART, as originator of the trust, filed with the Securities and
Exchange Commission a registration statement under the Securities Act of
1933 relating to the notes. This prospectus is part of the registration
statement, but the registration statement includes additional information,
including forms of some of the agreements discussed in this prospectus.
The servicer, on behalf of MART in its capacity as originator of
the trust, will file or cause to be filed with the Securities and Exchange
Commission periodic reports with respect to the trust as may be required
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission.
You may read and copy any notices, reports, statements or other
information the servicer files or causes to be filed at the Securities and
Exchange Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can request copies of these documents, upon
payment of a duplicating fee, by writing to the Securities and Exchange
Commission. Please call the Securities and Exchange Commission at (800)
SEC-0330 for further information on the operation of the public reference
rooms. Our filings with the Securities and Exchange Commission are also
available to the public without charge on the Securities and Exchange
Commission's Internet site (http://www.sec.gov), which contains reports,
proxy and information statements, and other information regarding issuers
that file publicly with the Securities and Exchange Commission.
GLOSSARY
"Accrued Note Interest" means, with respect to any payment date
and each class of notes, the sum of the Monthly Accrued Note Interest and
the Interest Carryover Shortfall for the class for that payment date.
"Actuarial Receivables" means receivables which provide for
amortization of the loan over a series of fixed level monthly installments.
Each monthly installment, including the monthly installment representing
the final payment on the receivable, consists of an amount of interest
equal to 1/12 of the annual percentage rate of the loan multiplied by the
scheduled principal balance of the receivable, and an amount of principal
equal to the remainder of the monthly installment.
"Available Funds" means, with respect to a payment date:
(1) an amount equal to the sum of the following amounts with
respect to the preceding calendar month:
o all collections on the contracts, including amounts
withdrawn from the payahead account;
o the proceeds of sale by the trust of any financed vehicle
sold by the trust upon termination of a Balloon Payment
Receivable;
o all proceeds of the liquidation of receivables which
became defaulted receivables during the preceding
calendar month, net of expenses incurred by the servicer
in connection with such liquidation and any amounts
required by law to be remitted to the obligor on any
defaulted receivable;
o any recoveries in respect of contracts that became
defaulted in prior calendar months;
o all extension and deferral fees paid with respect to the
contracts;
o the purchase amount of each receivable purchased from the
trust during or before the preceding calendar month, net
of applicable expenses;
o all advances made by the servicer;
o the Yield Supplement Amount for that payment date;
o the Negative Carry Amount for that payment date;
o partial prepayments of any refunded item included in the
principal balance of a contract, such as extended
warranty protection plan costs, or physical damage,
credit life, disability insurance premiums, or any
partial prepayment which causes a reduction in the
obligor's periodic payment to an amount below the
scheduled payment as of the related cutoff date;
o the net earnings on funds on deposit in the pre-funding
account to the extent deposited to the collection account
on that payment date by the indenture trustee; and
o with respect to the payment date on or immediately
following the last day of the Pre-Funding Period, any
funds remaining in the pre-funding account, calculated
after giving effect to the purchase of all receivables
purchased by the trust during the Pre-funding Period,
minus
(2) the aggregate amount of the funds described in clause (1)
above that are used in the related calendar month to
reimburse servicer advances that are due and payable on
that payment date.
"Balloon Payment" means, with respect to a Balloon Payment
Receivable, the final payment which is due at the end of the term of the
receivable.
"Balloon Payment Receivable" means a receivable that provides for
the amortization of the entire amount financed under the receivable to one
substantially larger final payment which is due at the end of the term of
the receivable.
"Closing Date" means October 28, 1999.
"Cutoff Date" means, (A) with respect to receivables transferred
to the trust on the Closing Date, October 1, 1999, and (B) with respect to
receivables transferred to the trust after the Closing Date and during the
Pre-Funding Period, the date, which will be on or before the date of
transfer, as of which the trust will be entitled to collections of the
receivables transferred on that date.
"Initial Pool Balance" means the sum of (a) the principal balance
of the receivables pool as of October 1, 1999, plus (b) the aggregate
principal balance of all contracts transferred to the trust after that
date, calculated as of their respective Cutoff Dates.
"Interest Carryover Shortfall" means, with respect to any payment
date and any class of notes, the excess of the sum of the Monthly Accrued
Note Interest for the preceding payment date and any outstanding Interest
Carryover Shortfall from the close of business on the preceding payment
date, over the amount in respect of interest that is actually deposited in
the note payment account on the preceding payment date with respect to that
class, plus interest on the excess, to the extent permitted by law, at the
applicable note interest rate for the related interest period.
"Maximum Negative Carry Amount" means, as of any date of
determination, the product of (1) the Weighted Average Rate as of such date
minus 2.50%, multiplied by (2) the product of the Note Percentage as of
such date and the pre-funded amount as of such date after giving effect to
any withdrawals from the pre-funding account on such date, multiplied by
(3) the percentage equivalent of a fraction, the numerator of which is the
actual number of days until the expected end of the Pre- Funding Period and
the denominator of which is 360.
"Maximum Supplemental Reserve Amount" with respect to any payment
date will be an amount equal to the lesser of:
(1) the sum of (x) 2.00% of the aggregate principal balance
of the receivables sold to the trust on the Closing Date,
calculated as of the initial Cutoff Date, and (y) 2.00%
of the principal balances of the receivables transferred
to the trust after the Closing Date, but on or before
that payment date, calculated as of the related Cutoff
Dates; and
(2) an amount equal to (x) the outstanding principal amount
of the notes on that payment date, after giving effect to
any principal payment made on that payment date less (y)
the amount on deposit in the reserve account on that
payment date, after giving effect to all deposits and
withdrawals from the reserve account on that payment date.
"MART" means MMCA Auto Receivables Trust.
"Mitsubishi Motors" means Mitsubishi Motors Corporation and
its affiliates.
"MMCA" means Mitsubishi Motors Credit of America, Inc.
"MMSA" means Mitsubishi Motor Sales of America, Inc.
"Monthly Accrued Note Interest" means, with respect to any payment
date and (a) any class of notes, interest accrued for the related interest
period at the applicable interest rate for that class on the aggregate
principal balance of the notes of that class as of the immediately
preceding payment date, after giving effect to all payments of principal to
noteholders on or before that preceding payment date, or, in the case of
the first payment date, the initial principal amount of the notes; and (b)
the notes collectively, the sum of Monthly Accrued Note Interest for each
class.
"Negative Carry Amount" will be calculated by the servicer for any
payment date as the difference (if positive) between (1) the product of (a)
the Monthly Accrued Note Interest for that payment date, multiplied by (b)
the Pre-Funded Percentage as of the immediately preceding payment date, or
in the case of the first payment date, the Closing Date, minus (2) the net
investment earnings on the pre-funded amount for the related collection
period (or in the case of the first payment date, from the Closing Date
until October 31, 1999).
"Note Percentage" means, as of any payment date, the percentage
equivalent of a fraction, the numerator of which is the aggregate principal
amount of the notes as of that payment date, and the denominator of which
is an amount equal to the sum of the aggregate principal amount of the
notes as of that payment date and aggregate principal amount of the
certificates as of that payment date, in each case after giving effect to
any payment of principal of that payment date.
"Pre-Funded Percentage" means, as of any date of determination,
the percentage equivalent of a fraction, the numerator of which is the
pre-funded amount and the denominator of which is the sum of the principal
balance of the receivables pool and the pre-funded amount, in each case as
of that date after taking into account all withdrawals from the pre-funding
account and all transfers of contracts transferred to the trust after the
Closing Date on or before that date.
"Pre-Funding Period" means a period beginning on the Closing Date
and ending on the earliest of (a) the last day of the collection period on
which the pre-funded amount (after giving effect to any transfers therefrom
in connection with the transfer of receivables to the trust after the
Closing Date and on or before such date) is less than $100,000, (b) the
date on which an event of default or an event of servicing termination
occurs, (c) the date on which an insolvency event occurs with respect to
the seller or the servicer and (d) the close of business on March 31, 2000.
"Principal Carryover Shortfall" means, as of the close of business
on any payment date, the excess of the Principal Distribution Amount and
any outstanding Principal Carryover Shortfall from the preceding payment
date over the amount in respect of principal that is actually deposited in
the note payment account on that payment date.
"Principal Distribution Amount" means, with respect to any payment
date, the sum of:
o the Scheduled Principal for that payment date, including,
in the case of a Balloon Payment Receivable, the amount
owed by an obligor with respect to a Balloon Payment;
o any outstanding Principal Carryover Shortfall as of the
close of business on the preceding payment date; and
o with respect to the payment date on or immediately
following the end of the Pre-Funding Period, any funds
remaining in the pre-funding account, after giving effect
to the purchase of all contracts transferred to the trust
after the Closing Date, including any purchase on the
last day of the Pre-Funding Period, exclusive of any net
earnings from the investment of funds on deposit in the
pre-funding account.
However, the Principal Distribution Amount shall not exceed the outstanding
aggregate principal balance of the notes; and provided further, that, on
the final payment date for each class of notes, the principal required to
be deposited in the note payment account will include the amount necessary,
after giving effect to the other amounts to be deposited in the note
payment account on that payment date and allocable to principal, to reduce
the outstanding principal amount of that class of
notes to zero.
"Required Negative Carry Account Balance" means, as of any payment
date, an amount equal to the lesser of (x) the initial deposit into the
negative carry account minus all previous withdrawals of the Negative Carry
Amount from the negative carry account, including any withdrawals of the
Negative Carry Amount from that account on that payment date and (y) the
Maximum Negative Carry Amount as of that payment date. If the amount on
deposit in the negative carry account on any payment date, after giving
effect to the withdrawal of the Negative Carry Amount, if any, for that
payment date, is greater than the Required Negative Carry Account Balance,
the excess will be released to MART. All amounts remaining on deposit in
the negative carry account on the payment date on or immediately following
the last day of the Pre-Funding Period, after giving effect to all
withdrawals from that account on that payment date for deposit to the
collection account on that payment date, will be released to MART.
"Scheduled Principal" means, with respect to any payment date,
the sum of:
(1) (A) collections of principal of Simple Interest
Receivables received during the related calendar month,
including collections of principal attributable to
Balloon Payment Receivables-unless an advance has
previously been made with respect to the Balloon
Payment-and charges for excess wear and tear and excess
mileage and (B) advances made on that payment date with
respect to Balloon Payments on Simple Interest
Receivables that are Balloon Payment Receivables;
(2) the principal portion of each scheduled payment,
including a Balloon Payment Receivable, due on any
Actuarial Receivable during the related calendar month;
(3) without duplication of amounts taken into account under
(1) or (2), the outstanding principal balance of (A)
contracts prepaid in full during the related calendar
month, and (B) contracts which became defaulted during
the related calendar month;
(4) the purchase amount of each contract that was repurchased
by MART or purchased by the servicer during that calendar
month, to the extent attributable to principal;
(5) the proceeds of any other sale of a receivable to the extent
allocable to principal; and
(6) partial prepayments attributable to any refunded item
included in the amount financed, such as extended
warranty protection plan costs or physical damage, credit
life, disability insurance premiums, or any partial
prepayment which causes a reduction in the obligor's
periodic payment to be below the scheduled payment
as of the related Cutoff Date;
provided, however, that in calculating the Scheduled Principal, (A) all
payments and proceeds, including liquidation proceeds, of any purchased
contracts the purchase amount of which has been included in Scheduled
Principal in a prior collection period, which shall be paid to MART or the
servicer, as applicable, and (B) all amounts released from the pre-funding
account will be excluded.
"Simple Interest Receivables" are receivables that provide for the
amortization of the amount financed under each receivable over a series of
fixed level monthly installments. However, unlike the monthly installment
under an Actuarial Receivable, each monthly installment consists of an
amount of interest which is calculated on the basis of the outstanding
principal balance of the receivable multiplied by the stated annual
percentage rate and further multiplied by the period elapsed, as a fraction
of a calendar year, since the preceding payment of interest was made. As
payments are received under a Simple Interest Receivable, the amount
received is applied first to interest accrued to the date of payment and
the balance is applied to reduce the unpaid principal balance.
"Specified Reserve Balance" means, with respect to any payment
date, an amount equal to the lesser of:
(1) the sum of (x) 0.75% of the aggregate principal balance
of the contracts transferred to the trust on the Closing
Date calculated as of the initial Cutoff Date, and (y)
0.75% of the principal balances of contracts transferred
to the trust after that date on or before that payment
date, calculated as of the related Cutoff Dates; and
(2) the outstanding principal amount of the notes on that
payment date, after giving effect to any principal
payment made on that payment date.
"Total Available Funds" for a payment date is an amount equal to
the Available Funds for that payment date plus the amounts, if any,
deposited by the indenture trustee to the collection account from the
supplemental reserve account and the
reserve account on that payment date.
"Total Required Payment" means, with respect to any payment date,
the sum of (i) the total due and unpaid servicing fee, (ii) the Accrued
Note Interest and (iii) the Principal Distribution Amount with respect to
that payment date.
"Weighted Average Rate" means, with respect to any date of
determination, a per annum rate equal to (1) the sum of (a) the product of
(x) the outstanding principal amount of the Class A-1 notes on that date
and (y) the Class A-1 rate, plus (b) the product of (x) the outstanding
principal amount of the Class A-2 notes on that date and (y) the Class A-2
rate, plus (c) the product of (x) the outstanding principal amount of the
Class A-3 notes on that date and (y) the Class A-3 rate, plus (d) the
product of (x) the outstanding principal amount of the Class B notes on
that date and (y) the Class B rate, divided by (2) the outstanding
principal amount of the notes on that date.
"Yield Supplement Amount" with respect to any payment date will be
determined by aggregating with respect to all of the receivables the
amount, calculated by the servicer with respect to each receivable, other
than (i) a defaulted receivable that has defaulted or a receivable
purchased by the servicer or repurchased by MART for the calendar months
after the calendar month in which the receivable became defaulted or was
purchased or repurchased, as the case may be, or (ii) any receivable sold
by the indenture trustee following an event of default under the indenture
for calendar months after the calendar month in which the receivable is
sold by the indenture trustee, equal to the product of (x) one-twelfth
times (y) an amount equal to the difference, if positive, between (1)
interest on that receivable's principal balance as of the first day of the
related calendar month at a rate equal to the sum of (A) the Weighted
Average Rate as of the first day of the related calendar month and (B)
3.00%, which percentage represents the servicing rate plus 2.00%, and (2)
interest on that receivable's principal balance as of the first day of the
related calendar month at the annual percentage rate on the contract. For
purposes of the definition of "Yield Supplement Amount," the annual
percentage rate on a contract will be deemed to be zero until the first day
of the calendar month in which the first payment under the contract is due.
Beginning with the first day of the calendar month in which the first
payment of the contract is due, the annual percentage rate on the contract
will be the rate specified in the contract.
PROSPECTUS
$740,000,000
MMCA Auto Owner Trust 1999-2
$326,000,000 6.30% Class A-1 Asset Backed Notes
$210,000,000 6.80% Class A-2 Asset Backed Notes
$142,000,000 7.00% Class A-3 Asset Backed Notes
$62,000,000 7.55% Class B Asset Backed Notes
MMCA Auto Receivables Trust
Seller
Servicer
Underwriters of the Class A Notes
Credit Suisse First Boston
J.P. Morgan & Co.
Salomon Smith Barney
Underwriters of the Class B Notes
Credit Suisse First Boston
You should rely only on the information contained in or
incorporated by reference in this prospectus. We have not authorized anyone
to provide you with different information.
We are not offering the notes in any state where the offer of the
notes is not permitted.
We do not claim the accuracy of the information in this prospectus
as of any date other than the date stated on the cover of this prospectus.
Dealers will deliver a prospectus when acting as underwriters of
the notes and with respect to their unsold allotments or subscriptions. In
addition, all dealers that effect transactions in the notes, whether or not
participating in the offering of the notes, will be required to deliver a
prospectus until January 18, 2000.
