<PAGE>
Filed Pursuant to Rule 424(b)(4)
Registration File No.: 333-39120
PROSPECTUS
$1,656,000,000
MMCA AUTO OWNER TRUST 2000-1
$165,000,000 6.72625% CLASS A-1 ASSET BACKED NOTES
$500,000,000 6.95% CLASS A-2 ASSET BACKED NOTES
$490,000,000 7.00% CLASS A-3 ASSET BACKED NOTES
$384,000,000 7.08% CLASS A-4 ASSET BACKED NOTES
$117,000,000 7.55% CLASS B ASSET BACKED NOTES
MMCA AUTO RECEIVABLES TRUST
SELLER
[MITSUBISHI LOGO]
SERVICER
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS
PRICE* AND PLACEMENT FEES NET PROCEEDS TO SELLER
--------------------------------- ---------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 Notes $ 165,000,000.00 (100.00000%) $ 165,000.00 (0.100%) $ 164,835,000.00 (99.90000%)
Class A-2 Notes $ 499,899,850.00 (99.97997%) $ 850,000.00 (0.170%) $ 499,049,850.00 (99.80997%)
Class A-3 Notes $ 489,989,906.00 (99.99794%) $1,029,000.00 (0.210%) $ 488,960,906.00 (99.78794%)
Class A-4 Notes $ 383,933,145.60 (99.98259%) $ 883,200.00 (0.230%) $ 383,049,945.60 (99.75259%)
Class B Notes .. $ 116,884,497.60 (99.90128%) $ 380,250.00 (0.325%) $ 116,504,247.60 (99.57628%)
----------------- --------------- ----------------
Total ......... $1,655,707,399.20 $3,307,450.00 $1,652,399,949.20
</TABLE>
* The price of the notes will also include any interest accrued on the
notes from the date 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.
$150,000,000 of the class A-2 notes and $250,000,000 of the class A-3 notes
are being sold by MMCA Auto Receivables Trust directly to affiliates of
Merrill Lynch, Pierce, Fenner & Smith Incorporated and are not being offered
by the underwriters.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 6.
THE NOTES REPRESENT OBLIGATIONS OF THE ISSUER AND ARE BACKED ONLY BY THE
ASSETS OF THE ISSUER. 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
SALOMON SMITH BARNEY J.P. MORGAN & CO.
CHASE SECURITIES INC.
DEUTSCHE BANC ALEX. BROWN
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
UNDERWRITERS OF THE CLASS B NOTES
SALOMON SMITH BARNEY J.P. MORGAN & CO.
The date of this Prospectus is August 10, 2000
<PAGE>
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
IMPORTANT NOTICE ABOUT INFORMATION
PRESENTED IN THIS PROSPECTUS ........... iii
SUMMARY OF TERMS......................... 1
RISK FACTORS............................. 6
THE ISSUER............................... 13
Limited Purposes and Limited Assets .... 13
Capitalization of the Issuer............ 14
The Owner Trustee....................... 14
PROPERTY OF THE ISSUER................... 14
MMCA'S CONTRACT PORTFOLIO................ 15
Types of Contracts Included in MMCA's
Contract Portfolio..................... 15
Underwriting Standards.................. 15
Servicing and Collection Procedures .... 16
Physical Damage Insurance on MMCA's
Contracts.............................. 16
Delinquency and Loss Data of MMCA's
Contracts.............................. 16
THE RECEIVABLES POOL..................... 19
Selection Criteria...................... 20
Characteristics of the Receivables
Pool................................... 21
Payment Methods......................... 28
Deferred Payment Receivables ........... 29
Balloon Payment Receivables............. 29
Defaulted Receivables................... 31
Maturity and Prepayment Considerations . 31
HOW NOTEHOLDERS CAN COMPUTE THEIR
PORTION OF THE AMOUNT OUTSTANDING ON
THE NOTES............................... 39
USE OF PROCEEDS.......................... 39
MMCA AUTO RECEIVABLES TRUST.............. 39
THE SERVICER............................. 40
TERMS OF THE NOTES....................... 40
Principal Amount and Interest Rates .... 40
Interest Payments....................... 40
Principal Payments...................... 41
Mandatory Prepayment.................... 42
Optional Redemption..................... 43
The Indenture Trustee................... 43
The Yield Supplement Agreement and
Yield Supplement Account............... 43
The Issuer's Bank Accounts ............. 44
Indenture Cash Flows.................... 45
The Negative Carry Account.............. 47
Yield Supplement Overcollateralization
Amount................................. 48
The Reserve Account..................... 48
Subordination of the Class B Notes ..... 49
Subordination of the Certificates ...... 50
Advances by the Servicer of Amounts
Payable on the Receivables............. 50
Deposit of Collections on the
Receivables to the Collection Account . 50
Statements to Noteholders............... 51
Book Entry Registration................. 52
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......................... 63
Sale and Assignment..................... 63
The Pre-Funding and Reinvestment
Period................................. 65
Mandatory Repurchase of Receivables .... 66
Servicing Procedures.................... 66
Servicing Compensation.................. 68
Evidence to be Provided as to
Servicer's Compliance with its
Servicing Obligations.................. 69
Resignation by the Servicer............. 69
Consequences of Merger, Conversion,
Consolidation or Similar Actions by
Servicer............................... 69
Limits on Servicer's Liability.......... 69
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
i
<PAGE>
PAGE
--------
Requirements for Amendments of the Sale
and Servicing Agreement and the Trust
Agreement.............................. 71
Requirements for Termination of the
Issuer................................. 72
Actions to be Taken by Indenture
Trustee Upon Termination of the
Issuer................................. 72
The Administration Agreement............ 72
SOME IMPORTANT LEGAL ASPECTS OF THE
RECEIVABLES............................. 72
Bankruptcy Considerations............... 73
Issuer's Rights in the Receivables ..... 73
Security Interests in Vehicles.......... 73
Repossession............................ 75
Notice of Sale; Redemption Rights ...... 75
Deficiency Judgments and Excess
Proceeds............................... 75
Obligor's Right to Excess Proceeds Upon
Sale of a Vehicle...................... 75
Consumer Protection Laws................ 76
Other Limitations....................... 77
LEGAL INVESTMENT......................... 77
FEDERAL INCOME TAX CONSEQUENCES.......... 77
Tax Treatment of the Notes and the
Issuer under Federal Income Tax Law ... 77
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 .. 80
STATE TAX CONSEQUENCES................... 81
ERISA CONSIDERATIONS..................... 82
Special ERISA Considerations for
Employee Benefit Plans................. 82
Special ERISA Considerations Applicable
to Insurance Company General Accounts . 83
General Investment Considerations for
Employee Benefit Plans................. 83
UNDERWRITING............................. 84
LEGAL OPINIONS........................... 85
REPORTS TO NOTEHOLDERS................... 85
WHERE YOU CAN FIND MORE INFORMATION ..... 85
GLOSSARY................................. 87
</TABLE>
ii
<PAGE>
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.
iii
<PAGE>
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<PAGE>
SUMMARY OF TERMS
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.
<TABLE>
<CAPTION>
<S> <C> <C>
The Issuer: MMCA Auto Owner Trust 2000-1
Seller of the Receivables to the Issuer: 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 Property of the Issuer: The property of the issuer 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 and reinvestment account;
o the payahead account;
o the reserve account;
o the yield supplement account; and
o the negative carry account.
</TABLE>
THE TERMS OF THE NOTES
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES CLASS B NOTES
------------------- ------------------- ------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Principal Amount: $165,000,000 $500,000,000 $490,000,000 $384,000,000 $117,000,000
Interest Rate Per
Annum: 6.72625% 6.95% 7.00% 7.08% 7.55%
Interest Accrual
Method: actual/360 30/360 30/360 30/360 30/360
Payment Dates: monthly (15th) monthly (15th) monthly (15th) monthly (15th) monthly (15th)
First Payment Date: September 2000 September 2000 September 2000 September 2000 September 2000
Final Payment Date: May 2001 February 2003 June 2004 February 2005 July 2005
Anticipated Ratings
(Moody's/S&P):* P-1/A-1+ Aaa/AAA Aaa/AAA Aaa/AAA A2/A
</TABLE>
------------
* 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.
1
<PAGE>
THE RECEIVABLES
The issuer will own three types of receivables:
o receivables which provide for equal monthly payments over their
term;
o receivables which provide that the first payment is deferred for a
specified period--between 11 and 16 months--and for equal monthly
payments for the remainder of the term of the receivable; and
o receivables which provide for equal monthly payments and one
substantially larger final balloon payment.
None of the receivables with a deferred first payment have a substantially
larger final balloon payment.
On July 31, 2000:
o The principal balance of the receivables was $1,691,514,913.43.
o The principal balance of deferred payment receivables was
$582,305,485.60.
o The principal balance of the balloon payments was $143,850,377.52.
MMCA Auto Receivables Trust--MART--expects to sell additional receivables
having a principal balance of $222,347,151.43 to the issuer by no later than
October 16, 2000. The first payment on all of these additional receivables is
deferred for between 11 and 16 months. The first scheduled payment on these
receivables will be due in February 2001.
On each payment date through May 15, 2001, the issuer intends to use
prepayments on deferred payment receivables--with deferral periods of between
11 and 16 months--to purchase additional receivables from MART. On each
payment date during this period, the issuer will apply prepayments on these
receivables received during the prior month to purchase additional
receivables if payment of those prepayments to noteholders would cause the
principal of the notes to be repaid at a faster rate than would be the case
if those receivables prepaid at the anticipated prepayment rate for
non-deferred payment receivables. None of these additional receivables will
have a deferred first payment.
PAYMENTS ON THE NOTES
SOURCES OF PAYMENTS
On each payment date, the issuer will pay the amounts owed by the issuer
from the following sources:
o collections on the receivables during the prior month;
o amounts withdrawn from the reserve account, 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.
MONTHLY INTEREST PAYMENTS
On each payment date, the issuer will pay interest on the class A notes
based on the total amount of interest due on each class of class A notes
without preference or priority between the classes of class A notes. Interest
on the class B notes is subordinate to interest on the class A notes and will
not be paid on any payment date until accrued interest on the class A notes
has been paid in full.
SEQUENTIAL PAYMENT OF MONTHLY PRINCIPAL AMOUNT
The notes feature sequential payment of principal. No principal will be
paid on any class of class A notes until each class with a lower numerical
designation has been paid in full. No principal will be paid on the class B
notes until all of the class A notes have been paid in full.
On each payment date, the amount required to be paid as principal of the
notes will equal:
o the sum of the outstanding balance of the notes and the certificates
on the last day of the preceding month; minus
o the total principal amount of the receivables on the last day of the
preceding month; minus
o the total yield supplement overcollateralization amount on the last
day of the preceding month; minus
o the amount on deposit in the pre-funding and reinvestment account on
that payment date.
2
<PAGE>
In addition, on the May 15, 2001 payment date, any amounts on deposit in
the pre-funding and reinvestment account will be paid as principal on the
notes.
PRIORITY OF DISTRIBUTIONS
On each payment date, the issuer will make the following payments in the
following order:
(1) payment to the servicer of amounts advanced by the servicer on
previous payment dates;
(2) payment to the servicer of the monthly servicing fee for the prior
month;
(3) payment of the interest payable on all classes of 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-1 notes, until the
class A-1 notes have been paid in full;
(6) payment of the principal payable on the class A-2 notes, until the
class A-2 notes have been paid in full;
(7) payment of the principal payable on the class A-3 notes, until the
class A-3 notes have been paid in full;
(8) payment of the principal payable on the class A-4 notes, until the
class A-4 notes have been paid in full;
(9) payment of the principal payable on the class B notes, until the
class B notes have been paid in full; and
(10) any required deposits to the reserve account.
For further information on the priority of distributions, see "Terms of
the Notes--Indenture Cash Flows."
The order of the payments of interest and principal on the notes will
change if there is a default under the indenture and the maturity of the
notes is accelerated. This change is important to noteholders. Principal will
be paid to all four classes of the class A notes simultaneously--not
sequentially by class--and no interest will be paid on the class B notes
until all of the accrued interest and principal of the class A notes have
been paid.
CERTIFICATES
In addition to the notes, the issuer will issue $144,000,015.15 of
certificates. The issuer 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.
MONTHLY SERVICING FEE
The monthly servicing fee payable to the servicer on each payment date
will equal the sum of:
o 1/12th of 1.00% of the total principal balance of all receivables
other than deferred payment receivables; plus
o 1/12th of 0.25% of the total principal balance of deferred payment
receivables.
CREDIT ENHANCEMENT
The credit enhancement for the notes will be as follows:
o the total yield supplement overcollateralization amount;
o the subordination of the certificates; and
o the reserve 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.
TOTAL YIELD SUPPLEMENT OVERCOLLATERALIZATION AMOUNT
The total principal amount of the notes and certificates on the closing
date, will equal:
o the total principal amount of a combined pool of the receivables
transferred to the issuer on the closing date together with the
pre-funded receivables to be transferred to the issuer on or before
October 16, 2000; minus
o the total yield supplement overcollateralization amount of the
receivables in that combined pool.
3
<PAGE>
On any date, the total yield supplement overcollateralization amount for
the combined pool of receivables will be the sum of the yield supplement
overcollateralization amount for each receivable in the combined pool which
is not a defaulted receivable or which has not been repurchased by MART or
the servicer following a breach of certain representations or warranties.
On any payment date, the yield supplement overcollateralization amount for
any receivable will equal the excess, if any, of:
o the present value of the remaining scheduled payments due on the
receivable discounted at a rate equal to the annual percentage rate
provided in the contract; over
o the present value of the remaining scheduled payments due on the
receivable discounted at a rate equal to 9.5%.
On the closing date, the total yield supplement overcollateralization
amount of the initial receivables will be $111,696,775.02, or 6.21% of the
total principal amount of the notes and certificates on the closing date. On
the closing date, the total yield supplement overcollateralization amount of
a combined pool of the initial receivables and the additional receivables to
be acquired by the issuer on or before October 16, 2000, will be
$113,862,049.71, or 6.33% of the total principal amount of the notes and
certificates on the closing date.
RESERVE ACCOUNT
On each payment date, the issuer will use funds in 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 the closing date, MART will deposit $15,798,181.38 into the reserve
account. On the date on which the issuer acquires the pre-funded receivables
from MART, $2,201,818.77 will be withdrawn from the pre-funding and
reinvestment account and deposited to the reserve account. On each payment
date, available funds remaining after payment of the servicing fee and
interest and principal on the notes will be deposited to the reserve account
until the total amount on deposit in the reserve account equals the lesser
of:
o the product of (a) the total principal balance of the receivables,
minus the total yield supplement overcollateralization amount of the
receivables as of the dates on which the issuer acquired them and
(b) 2.25%; and
o the total principal balance of the notes.
YIELD SUPPLEMENT ACCOUNT
On each payment date, the issuer will use funds in the yield supplement
account in an amount equal to the product of (a) the total principal balance
of deferred payment receivables, minus the yield supplement
overcollateralization amount on those receivables and (b) 6.704% to make
required payments under the indenture, including payments on the notes. This
amount will be used to cover the shortfall in amounts available to make
required payments on the notes due to the absence of collections on deferred
payment receivables during the previous 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 issuer. 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 issuer 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.
4
<PAGE>
ERISA CONSIDERATIONS
The notes are generally eligible for purchase by employee benefit plans
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, and any other person 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.
ELIGIBILITY OF NOTES FOR PURCHASE BY MONEY
MARKET FUNDS
The class A-1 notes are structured to be eligible for purchase by money
market funds under Rule 2a-7 under the Investment Company Act of 1940, as
amended. A money market fund should consult its legal advisors regarding
whether an investment by the money market fund in the class A-1 notes
satisfies the money market fund's investment policies and objectives.
5
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase notes.
ABSENCE OF SECONDARY MARKET FOR The underwriters for the notes may assist in
NOTES COULD LIMIT YOUR ABILITY resales of the notes but they are not
TO RESELL NOTES 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 their final maturity
dates.
INTERESTS OF OTHER PERSONS IN Another person could acquire an interest in
RECEIVABLES AND FINANCED a receivable that is superior to the
VEHICLES COULD REDUCE THE FUNDS issuer's interest in the receivable because
AVAILABLE TO MAKE PAYMENTS ON the servicer will not segregate or mark the
THE NOTES receivables as belonging to the issuer. If
another person acquires an interest in a
receivable that is superior to the issuer'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 issuer's interest in the
vehicle because the servicer will not amend
the certificate of title or ownership to
identify the issuer as the new secured
party. If another person acquires an
interest in a vehicle that is superior to
the issuer's interest in the vehicle, the
proceeds from the sale of the vehicle will
not be available to make payments on the
notes. See "Some Important Legal Aspects of
the Receivables--Security Interests in
Vehicles."
BANKRUPTCY OF MMCA COULD RESULT If MMCA enters a bankruptcy proceeding, you
IN LOSSES OR DELAYS IN PAYMENTS could experience losses or delays in the
ON THE NOTES payments on your notes. MMCA will sell the
receivables to MART, and MART will transfer
the receivables to the issuer. 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 for
bankruptcy purposes and that MMCA still owns
the receivables. The court also could
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 issuer will be paid
from the collections on the receivables
before the collections are used to make
payments on your notes; and
6
<PAGE>
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."
POTENTIAL LOSS ON NOTES DUE TO The first payment on $840,798,718.83, or
RECEIVABLES WITH NO PAYMENTS 49.71% by principal balance of the
FOR AN INITIAL PERIOD receivables to be transferred to the issuer
on the closing date, is deferred for a
specified period. Vehicles financed with
deferred payment receivables will incur wear
and tear during the deferral period. As a
result, the value of the related vehicles
will decrease before the first payment is
due by an amount that is larger than it
would have decreased without a deferral
period. The first payment on
$582,305,485.60, or 34.43% by principal
balance of the receivables to be transferred
to the issuer on the closing date, will not
be due until after the closing date. MMCA
does not have extensive historical data on
the default rate of these types of
receivables. The severity of any credit loss
on a deferred payment receivable will
depend, in part, on the length of the
deferral period. In addition, on or before
October 16, 2000, the issuer will acquire
$222,347,151.43 total principal balance of
additional receivables with a deferred
payment period of between 11 and 16 months.
The first scheduled payment on all of these
receivables is due during February 2001. 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: (1) the severity of credit losses on
these receivables is higher than expected by
MMCA, (2) the protection provided to the
class A notes by the subordination of the
class B notes, and (3) the protection
provided to all of the notes by the
subordination of the total yield supplement
overcollateralization amount, the
certificates and the funds on deposit in the
reserve account, are insufficient to protect
you against such delays or losses. See
"MMCA's Contract Portfolio--Delinquency and
Loss Data of MMCA's Contracts" for
information concerning MMCA's combined
portfolio of receivables.
RISK THAT YOU MAY BE REQUIRED POTENTIAL PREPAYMENT OF NOTES DUE TO
TO REINVEST YOUR PRINCIPAL IN PREPAYMENT OF RECEIVABLES. Prepayments on the
THE NOTES AT A LOWER RATE OF receivables by the related obligors and
RETURN BECAUSE OF PREPAYMENTS purchases of the receivables by MART and the
ON THE NOTES 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.
7
<PAGE>
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 its representations and warranties
with respect to any receivables in a way
that has a material adverse effect on the
noteholders, MMCA will be required to
repurchase those receivables from MART, and
MART will be required to repurchase those
receivables from the issuer. MMCA will also
be required to purchase receivables from the
issuer if it breaches its servicing
obligations with respect to those
receivables. MMCA will be entitled to
purchase all of the remaining receivables
from the issuer once the total 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
issuer.
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 issuer 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 PREPAYMENT OF NOTES DUE TO
PREPAYMENTS OF RECEIVABLES WITH A DEFERRED
FIRST PAYMENT. MMCA began originating deferred
payment receivables with deferment periods in
excess of 11 months in 1999. MMCA does not have
historical data on the rate of prepayment of
this type of deferred payment receivable.
Obligors on receivables may prepay their
receivables in full or in part at any time and
no prediction can be made of the rate at which
obligors on these receivables will make
prepayments. Obligors on deferred payment
receivables may have greater incentive to
refinance their vehicles with other lenders at
more attractive terms--for example, at lower
interest rates--than obligors on non-deferred
payment receivables and use the proceeds to
prepay in full the receivable sold to the
issuer. In addition, some of the obligors on
receivables originated under this program may
use the savings realized by them through not
having to make any payments--for up to 16
months--to prepay the receivables when the
first payment is due. If the rate of prepayment
on these receivables is higher than the rate of
prepayment on the receivables in MMCA's
combined portfolio that do not provide for a
deferred first payment, the level of
prepayments on the notes would be higher than
anticipated.
8
<PAGE>
On each payment date through May 15, 2001,
the issuer intends to use prepayments on
deferred payment receivables--with deferral
periods of between 11 and 16 months--to
purchase additional receivables from MART.
On each payment date during this period, the
issuer will apply prepayments on these
receivables received during the prior month
to purchase additional receivables to the
extent that payment of those prepayments to
noteholders would cause the principal of the
notes to be repaid at a faster rate than
would be the case if those receivables
pre-paid at the anticipated prepayment rate
for non-deferred payment receivables. None
of these additional receivables will be
deferred payment receivables. If MART does
not have sufficient receivables to transfer
to the issuer on the payment date following
the month in which the prepayments are
received, the excess of those prepayments
over the total adjusted principal balance of
the receivables available for purchase will
be deposited to the pre-funding and
reinvestment account until the earlier of
the date sufficient receivables are
available and May 15, 2001. However, such
amounts only will be held in the pre-funding
and reinvestment account--and not paid to
noteholders as an early payment of
principal--if the amount on deposit in the
negative carry account is at least equal to
the maximum amount specified for that
account. If there is a shortfall in the
funds in the negative carry account, MMCA
has the option, but not the obligation, to
deposit funds equal to the shortfall into
the negative carry account. Although MMCA
intends to make these deposits, if MMCA
chooses not to, the excess prepayments on
the deferred payment receivables will be
paid to the noteholders as an early
repayment of principal on the notes.
POTENTIAL PREPAYMENTS ON NOTES If the total principal balance of the
DUE TO FAILURE TO TRANSFER A receivables and related amounts transferred
SUFFICIENT NUMBER OF ADDITIONAL to the issuer during the pre-funding and
RECEIVABLES TO THE ISSUER reinvestment period is less than the amount
deposited to the pre-funding and reinvestment
account, the notes will be prepaid in the
amount of the shortfall. See "Terms of the
Notes--Mandatory Prepayment."
The issuer's ability to apply prepayments on
deferred payment receivables--with deferral
periods of between 11 and 16 months -to
the purchase of receivables from MART during
the pre-funding and reinvestment 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 issuer during
the pre-funding and reinvestment 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, or if there is a sharp decline in
sales of motor vehicles generally, then
MMCA's ability to originate receivables for
sale to MART during the pre-funding and
reinvestment period will be adversely
affected.
POTENTIAL LOSS OR PREPAYMENTS The addition of receivables during the
ON NOTES DUE TO CHANGES IN POOL pre-funding and reinvestment period may
CHARACTERISTICS change the overall characteristics of the
9
<PAGE>
pool of receivables. The addition of these
receivables 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
issuer during the pre-funding and
reinvestment period may differ from the
credit criteria used by MMCA in originating
the receivables transferred to the issuer 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 the
LIMITED ASSETS OF THE ISSUER assets of the issuer 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 issuer. The
assets of the issuer are limited to the
receivables and the funds on deposit in the
issuer'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 issuer's bank
accounts. See "Terms of the Notes--The
Reserve Account."
CLASS B NOTES HAVE GREATER You may suffer a loss on your class B notes
CREDIT RISK BECAUSE THE CLASS B because payments of interest on and principal
NOTES ARE SUBORDINATE TO THE of the class B notes are subordinated to
CLASS A NOTES 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.
Principal payments on the class B 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 total yield supplement
overcollateralization amount, the
subordination of the certificates and the
funds on deposit in the reserve account are
insufficient to protect the class B notes
from losses on the receivables.
POTENTIAL LOSS ON NOTES IN The obligors on balloon payment receivables
CONNECTION WITH SALES OF will not have to pay the balloon payment if
VEHICLES 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 issuer and the issuer 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: (1) the
proceeds from the sale of the returned
vehicles are less than the amount of the
balloon payments, (2) the protection
provided to the class A notes by the
subordination of the class B notes, and (3)
the protection provided to all of the notes
by the total yield supplement
overcollateralization amount, the
certificates and the
10
<PAGE>
funds on deposit in the reserve account, are
insufficient to protect you against these
delays or losses. See "MMCA's Contract
Portfolio--Delinquency and Loss Data 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 refinance
RECEIVABLES the balloon payment with MMCA, if various
conditions are satisfied. 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
issuer for prices less than the related balloon
payments.
POTENTIAL LOSS ON NOTES DUE TO Economic conditions in the states where the
GEOGRAPHIC CONCENTRATION OF obligors under the receivables reside may
RECEIVABLES affect the delinquency, loan loss and
repossession experience of the issuer with
respect to the receivables. Based on the
principal balance of the initial pool of
receivables as of the date as of which the
receivables were acquired by the issuer,
13.34% of the receivables relate to obligors
with a billing address in California and
16.46% relate to obligors with a billing
address in Texas. Accordingly, adverse
economic conditions or other factors
affecting California or Texas could have an
especially significant effect on the
delinquency, loan loss or repossession
experience of the issuer and may adversely
affect the timing and amount of payment of
principal and interest on your notes.
RISKS IN CONNECTION WITH AN If a default occurs under the indenture and
EVENT OF DEFAULT UNDER the maturity dates of the notes are
INDENTURE accelerated, the indenture trustee may sell
the receivables and prepay the notes in
advance of their respective final scheduled
payment 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 issuer are insufficient to
pay the total 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 an event
of default occurs 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 class A
11
<PAGE>
notes has been paid in full. See "Terms of
the Notes--Principal Payments."
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 total 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 this
consent is required and not obtained.
12
<PAGE>
THE ISSUER
LIMITED PURPOSES AND LIMITED ASSETS
MMCA Auto Owner Trust 2000-1, the issuer, 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 issuer'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 issuer
will not engage in any activity other than:
o acquiring and holding the assets of the issuer, 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 issuer will be capitalized through the issuance of $1,656,000,000 of
notes and $144,000,015.15 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 issuer. 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 by this prospectus and will be retained by MART or an affiliate.
On the closing date, the issuer will purchase from MART retail installment
contracts originated by MMCA in connection with the financing of automobiles
and sport-utility vehicles. 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. On or prior to October
16, 2000, the issuer intends to use funds deposited to the pre-funding and
reinvestment account on the closing date to acquire the pre-funded
receivables. All of these receivables will be Long Deferment Period
Receivables. In addition, on each payment date through May 15, 2001 the
issuer intends to use prepayments on Long Deferment Receivables to purchase
additional receivables from MART. On each payment date during this period,
the issuer will apply prepayments on these receivables received during the
prior month to purchase additional receivables to the extent that payment of
those prepayments to noteholders would cause the principal of the notes to be
repaid at a faster rate than would be the case if those receivables pre-paid
at the anticipated pre-payment rate for non-deferred payment receivables.
None of these additional receivables will be deferred payment receivables.
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 issuer 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 for the vehicles as custodian for
the indenture trustee and the issuer. However, the receivables will not be
marked or stamped to indicate that they have been sold to the issuer, and the
certificates of title for the vehicles will not be endorsed or otherwise
amended to identify the issuer as the new secured party. Under those
circumstances, the issuer may not have a perfected security interest in the
receivables and the vehicles in some jurisdictions. See "Some Important Legal
Aspects of the Receivables."
If the protection provided to the noteholders by the total yield
supplement overcollateralization amount, the subordination of the
certificates and by amounts on deposit in the reserve account is
insufficient, the noteholders would have to look for payment of the notes to
the receivables that have not defaulted, the proceeds from the repossession
and sale of vehicles which secure defaulted receivables and
13
<PAGE>
the proceeds from any recourse against dealers. Absent fraud or
misrepresentation by a dealer, the issuer will not have recourse to the
dealer for a default by an obligor on a receivable originated by the dealer.
In that event, factors including the issuer's not having perfected security
interests in the vehicles in all states may affect the issuer's ability to
repossess and sell the vehicles, and thus may reduce the funds distributed to
noteholders. Losses on the receivables or other shortfalls in the funds to be
distributed to the noteholders, after withdrawals from the accounts of the
issuer, will be allocated first to the certificates and then to the Class B
notes because payments on the certificates and 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 ISSUER
The following table illustrates the capitalization of the issuer as of the
closing date, after the issuance of the notes and certificates and the sale
of the notes has taken place:
<TABLE>
<CAPTION>
<S> <C>
Class A-1 notes ...............................$ 165,000,000.00
Class A-2 notes .............................. 500,000,000.00
Class A-3 notes .............................. 490,000,000.00
Class A-4 notes .............................. 384,000,000.00
Class B notes ................................ 117,000,000.00
Certificates ................................. 144,000,015.15
----------------
Total .......................................$1,800,000,015.15
================
</TABLE>
Because the issuer 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 for the issuer have been included in
this prospectus.
THE OWNER TRUSTEE
Wilmington Trust Company is the owner trustee under the trust agreement.
Wilmington Trust Company is a Delaware banking corporation and its principal
offices are located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19801. 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 ISSUER
Under the indenture, the notes will be secured by the property of the
issuer, 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
and the negative carry account;
o MART's rights in the yield supplement account and the pre-funding
and reinvestment account;
o MART's security interests in the vehicles;
o MART's rights to receive proceeds from claims on insurance policies
covering the vehicles or the obligors;
o MART's rights of recourse against the dealers under the dealer
agreements relating to the receivables;
14
<PAGE>
o all of the issuer'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 issuer;
o all of MART's rights under the yield supplement agreement; and
o all proceeds of the above.
MMCA'S CONTRACT PORTFOLIO
TYPES OF CONTRACTS INCLUDED IN MMCA'S CONTRACT PORTFOLIO
MMCA purchases retail installment contracts relating to new automobiles
and sport-utility vehicles manufactured or distributed by Mitsubishi Motors
and contracts relating to used vehicles 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 to other finance providers. MMCA purchases the contracts from the
dealers under 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 specified
representations and warranties. Those representations and warranties
typically relate to the origination of the contract and the security interest
in the related vehicles 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 vehicle 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 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. The 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 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:
o the ratio of income to debt;
o an applicant's equity in the vehicle;
o satisfactory existing account relationships;
o excellent recent reported credit history; and
o availability of an acceptable guarantor.
MMCA management sets limits on the percentage of credit decisions that
approve credit to applicants scoring below MMCA's credit score minimums and
on the percentage of credit decisions that deny credit to applicants scoring
above those minimums. Where the applicant is a business entity, MMCA reviews
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,
15
<PAGE>
MMCA may require an individual to guarantee the business entity's obligation
under the contract. The application, if approved, is assigned to one of the
three credit tiers reflecting its degree of credit risk. The interest rate
for the customer's account is determined by the credit tier, with 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 begins collection activities on delinquent contracts
through telephone contact based upon the credit risk initially assigned to
each obligor. Obligors considered to be weaker credits are contacted by
telephone when the contract becomes 12 days delinquent. Obligors considered
strong credits with lesser risk are 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. Except for 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 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 repossessed vehicle are applied to the contract balance and
the deficiency is determined. If the 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 vehicle from the obligor. Any deficiencies
remaining after repossession and sale of the vehicle or after the full charge
off of the related contract are pursued by MMCA to the extent practicable and
legally permitted. If a vehicle financed with a balloon payment contract is
returned to MMCA at the end of the contract term, MMCA will not charge off
any loss on sale of the vehicle, because that loss is not a credit loss.
However, MMCA does charge off losses on the amortizing monthly installments
and the balloon payments following defaults by obligors and acceleration of
the amounts owed under the 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 contract from the dealers. There is no assurance
that a vehicle will continue to be covered by physical damage insurance for
the entire term during which the related contract is outstanding. In the
event that MMCA determines that an obligor did not obtain acceptable physical
damage insurance covering loss or damage to the related vehicle at any time
during the term of the related contract, MMCA may in its discretion, based in
part or in whole upon the creditworthiness of the obligor, treat the related
receivable as a defaulted receivable.
DELINQUENCY AND LOSS DATA OF MMCA'S CONTRACTS
Delinquency and loss experience of receivables may differ from the loss
experience of MMCA's combined portfolio and may change in the future. The
following tables describe the delinquency and loss
16
<PAGE>
experience of MMCA with its portfolio of contracts. Those contracts include
previously sold contracts which MMCA continues to service. Delinquency and
loss experience may be influenced by a variety of economic, social,
geographic and other factors. There is no assurance that the delinquency,
repossession or loss experience of the receivables will be similar to MMCA's
historical experience described below.
HISTORICAL DELINQUENCY EXPERIENCE. MMCA tracks delinquency information for
periods of 30 to 59 days, 60 to 89 days, and 90 days or more. As of June 30,
2000, delinquencies of between 30 and 59 days as a percentage of contracts
outstanding were about 1.57%. As of June 30, 2000, delinquencies of between
60 and 89 days as a percentage of contracts outstanding were about 0.28%. As
of June 30, 2000, delinquencies of 90 days or more as a percentage of
contracts outstanding were about 0.05%. Additional detail and historical
information on delinquencies is shown in the table below.
In the following delinquency experience table:
o the information includes contracts for new and used vehicles owned
by MMCA or previously sold by MMCA which MMCA continues to service
and delinquency numbers are net of bankrupt accounts and
repossessions;
o 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 and the percent represents delinquent dollars
as a percent of dollars outstanding; and
o repossessions means the vehicle has been repossessed but the sale
proceeds have not yet been applied to the contract balance.
MMCA's ability, in its capacity as servicer, to extend the dates on which
payments on receivables are due is limited. See "The Sale and Servicing
Agreement and the Trust Agreement--Servicing Procedures."
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------------- -------------------------------
2000 1999 1999 1998 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Number of Contracts Outstanding at End of Period ... 196,223 129,377 149,644 127,475 120,961
Delinquencies as a Percent of Contracts Outstanding
30-59 Days ......................................... 1.57% 2.96% 2.50% 3.81% 4.45%
60-89 Days ......................................... 0.28% 0.65% 0.50% 1.08% 1.58%
90 Days or More..................................... 0.05% 0.10% 0.09% 0.29% 0.52%
Repossessions as a Percent of Contracts Outstanding 0.31% 0.52% 0.43% 0.79% 0.96%
</TABLE>
CREDIT LOSS EXPERIENCE. The following table provides information
concerning MMCA's combined portfolio of contracts, including contracts
previously sold which MMCA continues to service. In the following table:
o the information includes contracts for new and used vehicles owned
by MMCA or previously sold by MMCA which MMCA continues to service;
o Amount Outstanding means 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;
o averages are computed by taking a simple average of the average for
the months outstanding for each period presented;
o Charge-offs represent the total amount due on contracts that is
determined to be uncollectible in the period, less proceeds from
disposition of related vehicles, other than recoveries. The
calculation of charge-offs for the contracts in the combined
portfolio includes both earned but unpaid finance charges and
balloon payments;
17
<PAGE>
o Recoveries consist of amounts received on contracts following the
time at which the contract is charged off, net of collection
expenses;
o Number of Repossessions means the number of repossessed vehicles in
a given period;
o The information for the six-month period ended June 30, 2000 is an
annualized rate and is not necessarily indicative of a full year's
actual results; and
o Amounts may not add due to rounding.
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 vehicles.
NET CREDIT LOSS AND REPOSSESSION EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------------- ----------------------------------------
2000 1999 1999 1998 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Amount Outstanding .................. $3,472,917 $1,913,350 $2,401,448 $1,879,226 $1,729,312
Average Amount Outstanding .......... $2,903,790 $1,899,778 $1,954,819 $1,805,701 $1,737,477
Number of Contracts Outstanding ..... 196,223 129,377 149,644 127,475 120,961
Average Number of Contracts
Outstanding ........................ 171,009 128,598 131,009 123,663 122,652
Charge-offs.......................... $ 19,663 $ 25,280 $ 44,494 $ 51,325 $ 72,986
Recoveries........................... $ 3,052 $ 4,714 $ 8,114 $ 9,490 $ 13,089
Net Losses........................... $ 16,611 $ 20,566 $ 36,380 $ 41,835 $ 59,897
Number of Repossessions.............. 1,938 2,230 4,201 4,796 7,338
Number of Repossessions as a Percent
of the Average Number of Contracts
Outstanding ........................ 2.27% 3.47% 3.21% 3.88% 5.98%
Net Losses as a Percent of Average
Amount Outstanding ................. 1.14% 2.17% 1.86% 2.32% 3.45%
</TABLE>
RETURNED VEHICLE LOSS EXPERIENCE. The following table provides information
concerning MMCA's combined portfolio of contracts, including contracts
previously sold which MMCA continues to service. In the following table:
o the information includes vehicles returned upon the expiration of
the related contracts and vehicles returned under MMCA's program
that offers attractive terms to owners of vehicles to prepay their
accounts in connection with their respective purchases of a new
Mitsubishi Motors vehicle;
o Return Ratio means the number of vehicles returned to MMCA through
June 30, 2000 as a percentage of the number of balloon payment
receivables scheduled to terminate in the period indicated; and
o losses are calculated without deduction for auction or other
disposition expenses on resale.
18
<PAGE>
CONTRACTS PROVIDING FOR BALLOON PAYMENTS: LOSS EXPERIENCE ON RETURNED
VEHICLES
<TABLE>
<CAPTION>
FOR CONTRACTS SCHEDULED TO
TERMINATE IN THE SIX FOR CONTRACTS SCHEDULED
MONTHS TO TERMINATE IN THE
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------------------- ----------------------------------------
2000 1999 1999 1998 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total Number of Balloon Payment
Receivables .......................... 13,300 14,639 25,533 19,723 10,734
Total Number of Vehicles Returned to
MMCA through June 30, 2000............ 2,582 3,606 6,135 4,757 2,928
Return Ratio........................... 19.41% 24.63% 24.03% 24.12% 27.28%
Total Losses on Returned Vehicles Sold
through June 30, 2000 ................ $2,010,002 $4,492,139 $8,250,143 $7,734,842 $5,893,649
Total Number of Returned Vehicles Sold
through June 30, 2000................. 2,005 3,608 6,131 4,737 2,913
Average Loss per Returned Vehicle Sold
through June 30, 2000................. $ 1,002 $ 1,245 $ 1,346 $ 1,633 $ 2,023
</TABLE>
No assurance can be given that the performance of the balloon payment
receivables will be similar to the information provided in the preceding
table.
MMCA's loss experience on returned vehicles depends on:
o the number of vehicles returned;
o any programs offered by MMCA that permit the early return of
vehicles;
o the amount of the related receivables outstanding at the time the
vehicles are returned; and
o the resale value of the returned vehicles.
Because obligors on balloon payment receivables have an option to return
the vehicle to MMCA, MMCA historically has realized losses more frequently
than gains on returned vehicles. Based on results for the contracts included
in the preceding table, from 1997 through 1999, in each year:
o an average of 27.28%, 24.12%, and 24.03%, respectively, of all
vehicles financed with balloon payment receivables which terminated
at or near the end of the scheduled terms were not purchased by the
obligor and were returned to MMCA and subsequently sold by MMCA to a
third party; and
o of those vehicles returned to MMCA on or near the scheduled end of
term of the related contract and which were subsequently sold by
MMCA at auction, substantially all of them were sold for a loss.
THE RECEIVABLES POOL
The issuer will purchase from MART receivables which consist of a pool of
retail installment sale contracts secured by new and used vehicles. The
property to be purchased by the issuer includes rights to receive payments
made on 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 issuer under a sale and servicing agreement. Under the
purchase agreement, MART will purchase receivables from MMCA on the closing
date and during the Pre-Funding and Reinvestment Period. Under the sale and
servicing agreement, MART will transfer those receivables to the issuer on
the date it purchases them from MMCA. The receivables will be selected based
on the criteria specified in the sale and servicing agreement and described
in this prospectus.
The initial receivables have a total principal balance of
$1,691,514,913.43, calculated as of the initial Cutoff Date. Balloon payments
comprised 8.50% of the total principal balance of those receivables. Deferred
payment receivables comprised 34.43% of the total principal balance of the
initial receivables.
19
<PAGE>
None of the receivables transferred to the issuer will have a final
scheduled maturity later than April 2006.
On any date after August 31, 2000, the principal balance of the
receivables will equal the total principal balance of the receivables at the
end of the preceding month 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 issuer;
o advances made by the servicer; and
o the principal balance of receivables which defaulted during that
month.
On any date from the closing date through August 31, 2000, the principal
balance of the receivables will equal the total principal balance of the
receivables as of the initial Cutoff Date less the sum of the preceding
amounts received after the end of July 31, 2000, through that date.
SELECTION CRITERIA
The receivables will be purchased by MMCA from dealers in the ordinary
course of business under 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 vehicle;
o each receivable has an annual percentage rate of at least 0% and not
more than 30%;
o each receivable had not more than 60 payments remaining until the
maturity of 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 for 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 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 will be due not later than 16 months 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 vehicle in the ordinary course
of that dealer's business.
During the Pre-Funding and Reinvestment Period, MART will transfer
separate groups of receivables to the issuer. On or prior to October 16,
2000, MART intends to transfer the pre-funded receivables to the issuer. All
of these receivables are Long Deferment Period Receivables. None of these
receivables are balloon payment receivables.
20
<PAGE>
In addition, on each payment date during the Pre-Funding and Reinvestment
Period, the issuer intends to use prepayments on Long Deferment Period
Receivables received during the prior month to purchase reinvestment
receivables. Each group of receivables acquired by the issuer during the
Pre-Funding and Reinvestment Period with repayments on deferred payment
receivables will have the following characteristics:
o the weighted average number of payments remaining until the maturity
of the receivables in that group will not be more than 60 payments;
o the total balloon payments of the receivables in that group as a
percentage of the total principal balance of the receivables in that
group will not be more than 7.75%;
o none of the receivables in that group will be deferred payment
receivables; and
o the total principal balance of the limited credit experience
receivables in that group as a percentage of the total principal
balance of the receivables in that group will not be more than
3.00%.
The receivables transferred to the issuer during the Pre-Funding and
Reinvestment 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 issuer on the closing date.
Following the end of the Pre-Funding and Reinvestment Period, the issuer will
file a report with the Securities and Exchange Commission on Form 8-K
containing information comparable to that contained in the tables below
regarding the aggregate characteristics of the entire pool of receivables.
CHARACTERISTICS OF THE RECEIVABLES POOL
COMPOSITION. The following tables set forth the composition of the initial
receivables sold to the issuer on the closing date and the composition of a
combined pool of the initial receivables and the pre-funded receivables,
calculated as of the initial Cutoff Date. The initial receivables contained
balloon payment receivables with balloon payments of approximately 8.50% of
the total principal balance of the initial receivables on the initial Cutoff
Date. None of the pre-funded receivables are balloon payment receivables. The
combined pool of the initial receivables and the pre-funded receivables
contains balloon payment receivables with balloon payments of approximately
7.52% of the total principal balance of the receivables in the combined pool,
calculated as of the initial Cutoff Date. A balloon payment receivable may be
either a Simple Interest Receivable or an Actuarial Receivable. The initial
receivables contained deferred payment receivables of approximately 34.43% of
the total principal balance of the initial receivables on initial Cutoff
Date. The combined pool of the initial receivables and the pre-funded
receivables contained deferred payment receivables of approximately 42.04% of
the total principal balance of the receivables in the combined pool,
calculated as of the initial Cutoff Date. All deferred payment receivables
are Simple Interest Receivables. No deferred payment receivable is also a
balloon payment receivable. The pre-funded receivables are all Long Deferment
Period Receivables. As of the initial Cutoff Date, the total principal
balance of the pre-funded receivables was $222,347,151.43. The Average
Balloon Payment Principal Balance is based on balloon payment receivables
balances only. See "--Balloon Payment Receivables."
21
<PAGE>
COMPOSITION OF THE INITIAL RECEIVABLES AS OF THE INITIAL CUTOFF DATE
<TABLE>
<CAPTION>
<S> <C>
Balance of Initial Receivables Pool............................. $1,691,514,913.43
Level Pay Balance of Initial Receivables Pool .................. $1,547,664,535.91
Balloon Payment Balance of Initial Receivables Pool ............ $143,850,377.52
Deferred Payment Balance of Initial Receivables Pool ........... $582,305,485.60
Number of Initial Receivables .................................. 76,387
Average Principal Balance....................................... $22,144.02
(Range)........................................................ $1,014.21 to $52,607.09
Average Original Amount Financed ............................... $22,621.24
(Range)........................................................ $2,344.19 to $52,607.09
Average Level Pay Balance....................................... $20,260.84
(Range)........................................................ $451.58 to $52,607.09
Average Balloon Payment Principal Balance....................... $11,352.72
(Range)........................................................ $196.11 to $23,830.07
Average Deferred Payment Principal Balance ..................... $24,360.17
(Range)........................................................ $1,014.21 to $52,607.09
Average Balloon Payment Principal Balance as a Percentage of
the Average Principal Balance of the Balloon Payment
Receivables in the Initial Receivables Pool.................... 47.12%
Weighted Average Annual Percentage Rate ........................ 6.98%
(Range)........................................................ 0.00% to 23.25%
Weighted Average Original Number of Payments.................... 57.85
(Range)........................................................ 12 to 60
Weighted Average Remaining Number of Payments................... 56.47
(Range)........................................................ 4 to 60
</TABLE>
22
<PAGE>
COMPOSITION OF A COMBINED POOL OF THE INITIAL RECEIVABLES AND
THE PRE-FUNDED RECEIVABLES AS OF THE INITIAL CUTOFF DATE
<TABLE>
<CAPTION>
<S> <C>
Balance of Combined Receivables Pool............................ $1,913,862,064.86
Level Pay Balance of Combined Receivables Pool ................. $1,770,011,687.34
Balloon Payment Balance of Combined Receivables Pool .......... $143,850,377.52
Deferred Payment Balance of Combined Receivables Pool .......... $804,652,637.03
Number of Receivables in Combined Receivables Pool ............ 85,585
Average Principal Balance....................................... $22,362.12
(Range)........................................................ $1,014.21 to $55,510.52
Average Original Amount Financed ............................... $22,808.78
(Range)........................................................ $2,344.19 to $55,510.52
Average Level Pay Balance ...................................... $20,681.33
(Range)........................................................ $451.58 to $55,510.52
Average Balloon Payment Principal Balance....................... $11,352.72
(Range)........................................................ $196.11 to $23,830.07
Average Deferred Payment Principal Balance...................... $24,308.28
(Range)........................................................ $1,014.21 to $55,510.52
Average Balloon Payment Principal Balance as a Percentage of
the Average Principal Balance of the Balloon Payment
Receivables in the Combined Receivables Pool .................. 47.12%
Weighted Average Annual Percentage Rate ........................ 7.25%
(Range)........................................................ 0.00% to 23.25%
Weighted Average Original Number of Payments.................... 57.93
(Range)........................................................ 12 to 60
Weighted Average Remaining Number of Payments................... 56.70
(Range)........................................................ 4 to 60
</TABLE>
23
<PAGE>
GEOGRAPHIC DISTRIBUTION. The following table shows the geographic
distribution of the principal balance of the initial receivables, calculated
as of the initial Cutoff Date. Geographic distribution is based on the
current billing address of the obligors. Percentages may not add to 100% due
to rounding.
GEOGRAPHIC DISTRIBUTION OF THE INITIAL RECEIVABLES
AS OF THE INITIAL CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
PRINCIPAL BALANCE PRINCIPAL BALANCE
OF INITIAL OF INITIAL
STATE RECEIVABLES POOL STATE RECEIVABLES POOL
-------------------- ----------------- -------------------- -----------------
<S> <C> <C> <C>
Alabama.............. 2.52% Montana ............. 0.06%
Alaska............... 0.09 Nebraska ............ 0.29
Arizona.............. 1.51 Nevada .............. 0.64
Arkansas............. 0.64 New Hampshire ....... 0.40
California........... 13.34 New Jersey .......... 2.72
Colorado............. 1.29 New Mexico .......... 0.55
Connecticut.......... 2.07 New York ............ 4.87
Delaware............. 0.35 North Carolina ...... 1.97
District of Columbia. 0.16 North Dakota ........ 0.04
Florida.............. 8.18 Ohio ................ 2.04
Georgia.............. 4.50 Oklahoma ............ 0.77
Hawaii............... 0.02 Oregon .............. 0.83
Idaho................ 0.15 Pennsylvania ........ 2.04
Illinois............. 5.12 Puerto Rico ......... 0.00
Indiana.............. 1.06 Rhode Island ........ 0.27
Iowa................. 0.41 South Carolina ...... 1.64
Kansas............... 0.40 South Dakota ........ 0.11
Kentucky............. 1.11 Tennessee ........... 1.99
Louisiana............ 3.10 Texas ............... 16.46
Maine................ 0.12 Utah ................ 1.05
Maryland............. 3.28 Vermont ............. 0.02
Massachusetts........ 1.48 Virginia ............ 3.10
Michigan............. 0.45 Washington .......... 1.38
Minnesota............ 1.57 West Virginia ....... 0.22
Mississippi.......... 0.91 Wisconsin ........... 1.18
Missouri............. 1.42 Wyoming ............. 0.08
Other ............... 0.03
-----------------
Total ............... 100.00%
=================
</TABLE>
24
<PAGE>
GEOGRAPHIC DISTRIBUTION. The following table shows the geographic
distribution of the principal balance of a combined pool of the initial
receivables and the pre-funded receivables, calculated as of the initial
Cutoff Date. Geographic distribution is based on the current billing
addresses of the obligors. Percentages may not add to 100% due to rounding.
GEOGRAPHIC DISTRIBUTION OF THE COMBINED POOL OF THE INITIAL RECEIVABLES
AND THE PRE-FUNDED RECEIVABLES AS OF THE INITIAL CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
PRINCIPAL BALANCE PRINCIPAL BALANCE
OF COMBINED OF COMBINED
STATE RECEIVABLES POOL STATE RECEIVABLES POOL
-------------------- ----------------- -------------------- -----------------
<S> <C> <C> <C>
Alabama.............. 2.53% Montana ............. 0.07%
Alaska............... 0.09 Nebraska ............ 0.30
Arizona.............. 1.52 Nevada .............. 0.63
Arkansas............. 0.64 New Hampshire ....... 0.39
California........... 14.29 New Jersey .......... 2.59
Colorado............. 1.33 New Mexico .......... 0.57
Connecticut.......... 1.94 New York ............ 4.54
Delaware............. 0.32 North Carolina ...... 1.95
District of Columbia. 0.15 North Dakota ........ 0.04
Florida.............. 7.89 Ohio ................ 2.07
Georgia.............. 4.50 Oklahoma ............ 0.80
Hawaii............... 0.02 Oregon .............. 0.89
Idaho................ 0.18 Pennsylvania ........ 1.82
Illinois............. 5.39 Puerto Rico ......... 0.00
Indiana.............. 1.08 Rhode Island ........ 0.27
Iowa................. 0.39 South Carolina ...... 1.57
Kansas............... 0.41 South Dakota ........ 0.11
Kentucky............. 1.17 Tennessee ........... 1.99
Louisiana............ 3.10 Texas ............... 16.25
Maine................ 0.11 Utah ................ 1.11
Maryland............. 3.11 Vermont ............. 0.02
Massachusetts........ 1.35 Virginia ............ 2.99
Michigan............. 0.40 Washington .......... 1.49
Minnesota............ 1.68 West Virginia ....... 0.21
Mississippi.......... 0.89 Wisconsin ........... 1.21
Missouri............. 1.53 Wyoming ............. 0.09
Other ............... 0.03
-----------------
Total ............... 100.00%
=================
</TABLE>
25
<PAGE>
DISTRIBUTION BY ANNUAL PERCENTAGE RATE. The following table shows the
distribution by annual percentage rate of the principal balance of the
initial receivables, calculated as of the initial Cutoff Date. The Principal
Balance of Initial Receivables Pool means the 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 for those receivables. Percentages may not add to 100% due to
rounding.
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE INITIAL RECEIVABLES AS OF THE
INITIAL CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE
PRINCIPAL OF PRINCIPAL BALANCE OF
ANNUAL PERCENTAGE RATE RANGE NUMBER OF INITIAL BALANCE OF INITIAL INITIAL
(%) RECEIVABLES RECEIVABLES POOL RECEIVABLES POOL
------------------------------ ----------------- ------------------ -----------------------
<S> <C> <C> <C>
0.00 to 1.99................... 20,421 $ 437,017,304.29 25.84%
2.00 to 2.99................... 3,288 67,049,776.47 3.96
3.00 to 3.99................... 3,507 73,333,359.63 4.34
4.00 to 4.99................... 3,944 79,145,393.50 4.68
5.00 to 5.99................... 1,067 20,809,619.89 1.23
6.00 to 6.99................... 3,579 82,531,176.99 4.88
7.00 to 7.99................... 4,631 107,767,697.31 6.37
8.00 to 8.99................... 3,455 83,623,768.01 4.94
9.00 to 9.99................... 20,134 490,665,740.47 29.01
10.00 to 10.99................. 3,853 91,335,452.63 5.40
11.00 to 11.99................. 1,741 37,990,196.97 2.25
12.00 to 12.99................. 2,001 41,425,156.86 2.45
13.00 to 13.99................. 1,773 31,124,362.70 1.84
14.00 to 14.99................. 800 14,154,618.43 0.84
15.00 to 15.99................. 656 11,894,273.11 0.70
16.00 to 16.99................. 465 7,437,585.47 0.44
17.00 to 17.99................. 447 6,857,662.98 0.41
18.00 to 18.99................. 247 3,483,728.48 0.21
19.00 to 19.99................. 128 1,671,888.69 0.10
20.00 to 20.99................. 212 1,762,437.91 0.10
21.00 to 21.99................. 31 342,752.60 0.02
22.00 to 22.99................. 1 31,462.69 0.00
23.00 to 23.99................. 6 59,497.35 0.00
----------------- ------------------ -----------------------
Total.......................... 76,387 $1,691,514,913.43 100.00%
================= ================== =======================
</TABLE>
26
<PAGE>
DISTRIBUTION BY ANNUAL PERCENTAGE RATE. The following table shows the
distribution by annual percentage rate of the principal balance, calculated
as of the initial Cutoff Date, of the receivables in a combined pool which
includes both the initial receivables and the pre-funded receivables. The
Principal Balance of Combined Receivables Pool means the 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 for those receivables. Percentages may not add to
100% due to rounding.
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF A COMBINED POOL
OF THE INITIAL RECEIVABLES AND THE PRE-FUNDED RECEIVABLES AS OF
THE INITIAL CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF PRINCIPAL OF PRINCIPAL
RECEIVABLES IN BALANCE OF BALANCE OF
COMBINED COMBINED COMBINED
ANNUAL PERCENTAGE RATE RANGE RECEIVABLES RECEIVABLES RECEIVABLES
(%) POOL POOL POOL
------------------------------ -------------- ----------------- --------------
<S> <C> <C> <C>
0.00 to 1.99................... 20,421 $ 437,017,304.29 22.83%
2.00 to 2.99................... 3,288 67,049,776.47 3.50
3.00 to 3.99................... 3,508 73,354,792.04 3.83
4.00 to 4.99................... 3,945 79,174,595.95 4.14
5.00 to 5.99................... 1,070 20,876,574.72 1.09
6.00 to 6.99................... 4,334 99,445,387.34 5.20
7.00 to 7.99................... 5,008 116,234,954.90 6.07
8.00 to 8.99................... 6,117 147,035,374.32 7.68
9.00 to 9.99................... 23,742 578,775,332.09 30.24
10.00 to 10.99................. 5,340 128,500,707.24 6.71
11.00 to 11.99................. 2,044 46,131,608.24 2.41
12.00 to 12.99................. 2,002 41,445,386.85 2.17
13.00 to 13.99................. 1,773 31,124,362.70 1.63
14.00 to 14.99................. 800 14,154,618.43 0.74
15.00 to 15.99................. 656 11,894,273.11 0.62
16.00 to 16.99................. 465 7,437,585.47 0.39
17.00 to 17.99................. 447 6,857,662.98 0.36
18.00 to 18.99................. 247 3,483,728.48 0.18
19.00 to 19.99................. 128 1,671,888.69 0.09
20.00 to 20.99................. 212 1,762,437.91 0.09
21.00 to 21.99................. 31 342,752.60 0.02
22.00 to 22.99................. 1 31,462.69 0.00
23.00 to 23.99................. 6 59,497.35 0.00
-------------- ----------------- --------------
Total.......................... 85,585 $1,913,862,064.86 100.00%
============== ================= ==============
</TABLE>
Based on the principal balance of the initial receivables and the
pre-funded receivables as of July 31, 2000:
o approximately 95.26% of the total number of initial receivables, or
approximately 97.58% of the principal balance of the initial
receivables, relate to new vehicles, substantially all of which were
manufactured or distributed by Mitsubishi Motors;
o approximately 95.77% of the total number of receivables in a
combined pool of the initial receivables and the pre-funded
receivables, or approximately 97.86% of the principal balance of
those receivables, relate to new vehicles, substantially all of
which were manufactured or distributed by Mitsubishi Motors;
27
<PAGE>
o approximately 0.07% of the total number of initial receivables, or
approximately 0.05% of the principal balance of the initial
receivables, relate to program vehicles, substantially all of which
were manufactured or distributed by Mitsubishi Motors;
o approximately 0.06% of the total number of receivables in a combined
pool of the initial receivables and the pre-funded receivables, or
approximately 0.05% of the principal balance of those receivables,
relate to program vehicles, substantially all of which were
manufactured or distributed by Mitsubishi Motors;
o approximately 4.68% of the total number of initial receivables, or
approximately 2.37% of the principal balance of the initial
receivables, relate to used vehicles, substantially all of which
were manufactured or distributed by Mitsubishi Motors and
approximately 1.09% of the total number of initial receivables, or
approximately 0.65% of the principal balance of the initial
receivables, relate to other used vehicles; and
o approximately 4.17% of the total number of receivables in a combined
pool of the initial receivables and the pre-funded receivables, or
approximately 2.10% of the principal balance of those receivables,
relate to used vehicles, substantially all of which were
manufactured or distributed by Mitsubishi Motors and approximately
0.98% of the total number of those receivables, or approximately
0.58% of the principal balance of those receivables, relate to other
used vehicles.
Program vehicles are used vehicles which dealers have acquired under a
remarketing program administered by MMCA. This program allows dealers to
offer to purchasers of program vehicles the same rate of interest and terms
offered to new car buyers. Program vehicles are primarily vehicles returned
to MMCA by rental car companies, but also include off-lease MMCA company and
employee lease vehicles and MMCA pool cars.
PAYMENT METHODS
Simple Interest Receivables account for approximately 98.89% of the
principal balance, calculated as of the initial Cutoff Date, of the initial
receivables and approximately 99.02% of the principal balance, calculated as
of the initial Cutoff Date, of a combined pool of the initial receivables and
the pre-funded receivables. A Simple Interest Receivable, like an Actuarial
Receivable, 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 (1) the principal
balance of the receivable actually outstanding, as opposed to scheduled, at
the time of calculation multiplied by (2) the stated annual percentage rate,
and further multiplied by (3) 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.
Actuarial Receivables, excluding Actuarial Receivables based on the Rule
of 78's, account for approximately 0.96% of the principal balance, calculated
as of the initial Cutoff Date, of the initial receivables and approximately
0.85% of the principal balance, calculated as of the initial Cutoff Date, of
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<PAGE>
a combined pool of the initial receivables and the pre-funded receivables.
None of the pre-funded receivables are Actuarial Receivables. 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 have to pay a late payment charge.
Actuarial Receivables based on the Rule of 78's account for approximately
0.14% of the principal balance, calculated as of the initial Cutoff Date, of
the initial receivables and approximately 0.13% of the principal balance,
calculated as of the initial Cutoff Date, of a combined pool of the initial
receivables and the pre-funded receivables. The amount of any refund due to
the obligor on prepayment in full of a Rule of 78's receivable may be
different than the amount of the refund if the receivable were not a Rule of
78's receivable. The excess, if any, of the amount to be refunded to an
obligor on a Rule of 78's receivable over the amount of the refund determined
under the actuarial method will not be available to make payments on the
notes.
The remainder of the initial receivables transferred to the issuer on the
closing date were Simple Interest Receivables that have a cap on the total
amount of the interest to be paid over the term of the receivable. None of
the pre-funded receivables are capped receivables. 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 total amount of interest paid under
the receivable reaches the lifetime cap, no further interest will accrue and
each scheduled payment due later will be applied to the reduction of
principal.
Balloon payment receivables account for approximately 18.05% of the
principal balance, calculated as of the initial Cutoff Date, of the initial
receivables and approximately 15.95% of the principal balance, calculated as
of the initial Cutoff Date, of a combined pool of the initial receivables and
the pre-funded receivables. None of the pre-funded receivables are balloon
payment receivables. A balloon payment receivable may be either a Simple
Interest Receivable or an Actuarial Receivable. See "--Balloon Payment
Receivables" below.
DEFERRED PAYMENT RECEIVABLES
Deferred payment receivables account for approximately 34.43% of the
principal balance, calculated as of the initial Cutoff Date, of the initial
receivables and approximately 42.04% of the principal balance, calculated as
of the initial Cutoff Date, of the combined pool of the initial receivables
and the pre-funded receivables. All of the pre-funded receivables are Long
Deferment Period Receivables. None of the deferred payment receivables are
balloon payment receivables. The obligor on a deferred payment is not
required to make any payments of interest or principal for a period specified
in the related contract. 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. A
receivable ceases to be a deferred payment receivable on the last day of the
calendar month preceding the calendar month in which the first scheduled
payment on that receivable becomes due.
As of the initial Cutoff Dates:
o $582,305,485.60 total principal balance of the initial receivables
were Long Deferment Period Receivables. None of these receivables
had a first payment due before the initial Cutoff Date.
o $804,652,637.03 total principal balance of the receivables included
in the combined pool of the initial receivables and the pre-funded
receivables were Long Deferment Period Receivables. None of these
receivables had a first payment due before the initial Cutoff Date.
BALLOON PAYMENT RECEIVABLES
Balloon payment receivables provide for the receivable to amortize over a
series of equal monthly installments, but also provide for a substantially
larger final scheduled payment of principal, together with
29
<PAGE>
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 actual amount owed by an obligor at the end of term of a balloon
payment receivable may be different than the scheduled balloon payment
provided in the contract. If a balloon payment receivable is a Simple
Interest Receivable, the actual amount owed by the obligor at the end of term
of the receivable may be different than the scheduled balloon payment
provided in the related contract as a result of:
o early payments by the obligor during the term of the receivable
which will reduce the amount owed;
o late payments by the obligor during the term of the receivable which
will increase the amount owed; and
o additional fees and charges that may be owed by the obligor on the
contract, including late charges and any other miscellaneous
charges, which will increase the amount owed.
If a balloon payment receivable is an Actuarial Receivable, the actual
amount owed by the obligor at the end of term of the receivable will be the
scheduled balloon payment set forth in the related contract, increased by any
additional fees and charges that may be owed by the obligor on the contract,
including late charges and other miscellaneous charges.
Upon maturity of a balloon payment receivable, the obligor may satisfy the
amount it owes by:
o paying the actual balloon payment due under the contract;
o subject to various conditions, refinancing the actual balloon
payment due under the contract; or
o returning the vehicle to MMCA for a credit against the actual amount
due under the contract equal to the scheduled balloon payment
provided in the contract, less charges for excess wear and tear and
excess mileage and a disposition fee payable to the servicer, and
paying the excess, if any, of the actual amount due under the
contract over the amount credited by MMCA for the returned vehicle.
If the obligor returns the vehicle to MMCA, acting on behalf of the
issuer, it is anticipated that the issuer will not receive the full amount of
the balloon payment provided in the contract upon the subsequent sale of the
vehicle by MMCA on behalf of the issuer. 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 size of the balloon
payment to above its estimate of the wholesale market value at the end of the
contract's term in order to stimulate sales of particular models by reducing
the amount of the monthly payments under the contract. As a result, the
balloon payment provided in the contract may be higher than the wholesale
market value of the vehicle at the end of term of the contract.
If there is a total loss of the vehicle caused by its theft or physical
damage, MMCA does not require the obligor under a receivable providing for a
balloon payment to pay the difference between the amount owed on the
receivable as of the date of the total loss and the insurance proceeds,
including payment by the obligor of any applicable deductible, received for
the vehicle. MMCA will instead reduce the principal amount of the balloon
payment by that amount.
If the full amount of a balloon payment is not collected upon sale of the
vehicle, 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 which may reduce the amount available to pay
interest on and principal of the notes. None of MMCA, the servicer, MART or
the issuer 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 issuer.
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 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."
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<PAGE>
DEFAULTED RECEIVABLES
A receivable, other than a receivable which has been purchased from the
issuer by MART or the servicer, will be considered to have defaulted if:
o the related 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 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 vehicle or repossessed and held the related 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 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 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
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 issuer
if 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 or lease 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.
Obligors of receivables that allow a deferred first payment, for example,
may prepay their receivables in full or in part at any time. Obligors of
these receivables may refinance their vehicles with other lenders at more
attractive terms, such as lower interest rates, and use the proceeds to
prepay in full the receivable transferred to the issuer.
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 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
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<PAGE>
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 issuer.
Approximately 8.50% of the principal balance of the receivables
transferred to the issuer on the closing date, calculated as of the initial
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 November 5, 2000 and July 30,
2005. The average principal balance of those balloon payments is $11,352.72,
which is approximately 47.12% 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," "Projected Class A-4 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 and reinvestment account
on the closing date is applied in its entirety to the purchase of
the pre-funded receivables on or before October 16, 2000 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 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
issuer is the closing date;
o the servicer exercises its option to purchase the receivables;
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 Motors vehicle, does not extend to the receivables;
and
o the total yield supplement overcollateralization amount of the
hypothetical pools as described below is adjusted to equal
$113,862,049.71, which is the total yield supplement
overcollateralization amount of the combined pool of the initial
receivables and the pre-funded receivables as of the Initial Cutoff
Date.
In addition, on each payment date during the Pre-Funding and Reinvestment
Period, the issuer intends to use prepayments on Long Deferment Period
Receivables received during the prior month to purchase reinvestment
receivables from MART, to the extent that payment of those prepayments as
principal of the notes would cause the principal of the notes to be repaid at
a faster rate than would be the case if these deferred payment receivables
pre-paid at the anticipated pre-payment rate for non-deferred payment
receivables.
On each payment date during the Pre-Funding and Reinvestment Period, the
issuer intends to use prepayments received during the previous month on Long
Deferment Period Receivables to purchase reinvestment receivables having a
total adjusted principal balance equal to the Required Reinvestment Amount
for the prior month. The Required Reinvestment Amount for any payment date
will be determined by comparing:
o the adjusted principal balance of the Long Deferment Period
Receivables at the end of the prior month to the Minimum Adjusted
Principal Balance of Long Deferment Period Receivables for that
month; and
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<PAGE>
o the adjusted principal balance of all of the receivables owned by
the issuer on the last day of the prior month to the Minimum
Adjusted Principal Balance of Receivables for that month.
The Minimum Adjusted Principal Balance of Long Deferment Period
Receivables has been calculated based on the hypothetical pools provided
below assuming the Long Deferment Period Receivables prepay at a rate equal
to 0.5 ABS during the period from the closing date though December 31, 2000
and 2.0 ABS during the period from January 1, 2001 though April 31, 2001. The
Minimum Adjusted Principal Balance of Receivables has been calculated based
on the hypothetical pools provided below assuming that the combined
receivables pool as a whole prepays at a rate equal to 1.3 ABS. The effect of
these assumptions is that the issuer will use pre-payments on Long Deferment
Period Receivables received in any calendar month during the Pre-Funding and
Reinvestment Period to purchase reinvestment receivables to the extent that
pre-payments on Long Deferment Period Receivables in excess of 0.5 ABS during
the period from the closing date though December 31, 2000 and 2.0 ABS during
the period from January 1, 2001 though April 31, 2001 would cause the notes
to pre-pay at a faster rate than would be the case if all of the receivables
pre-paid at a rate of 1.3 ABS.
However, the issuer's obligation to purchase reinvestment receivables on
any payment date during the Pre-Funding and Reinvestment Period will be
subject to the availability of receivables satisfying the selection criteria
in the sale and servicing agreement. Accordingly, the total adjusted
principal balance of reinvestment receivables which the issuer can purchase
on any payment date during the Pre-Funding and Reinvestment Period will be
the lesser of:
o the total adjusted principal balance of receivables available for
purchase on that payment date that satisfy the selection criteria in
the sale and servicing agreement; and
o the Required Reinvestment Amount for that payment date.
If on the business day before any payment date in the Pre-Funding and
Reinvestment Period MART does not have receivables that satisfy the selection
criteria in the sale and servicing agreement with a total adjusted principal
balance equal to the Required Reinvestment Amount for that payment date, the
excess cash either will be deposited into the pre-funding and reinvestment
account until sufficient receivables are available for purchase or paid to
the noteholders as an early payment of principal. The excess cash will be
held in the pre-funding and reinvestment account only if the amount on
deposit in the negative carry account would at least equal the maximum amount
specified for that account after giving effect to the deposit of the excess
cash to the pre-funding and reinvestment account. If there is a shortfall in
the funds in the negative carry account, MMCA has the option, but not the
obligation, to deposit funds in the amount of the shortfall into the negative
carry account. Although MMCA intends to make these deposits, if MMCA chooses
not to do so, the excess cash will be paid to the noteholders as an early
repayment of principal on the notes.
The ABS tables indicate the projected weighted average life of the Class
A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and
the Class B Notes and set forth the percent of the initial principal amount
of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class
A-4 Notes and the Class B Notes that is projected to be outstanding after
each of the payment dates shown at various constant ABS percentages.
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<PAGE>
For purposes of creating the ABS tables, the receivables have been
aggregated into different hypothetical pools.
A combined pool of the initial receivables and the pre-funded receivables
has been divided into 16 hypothetical pools made up of receivables that have
equal scheduled monthly payments that fully amortize those receivables. Pools
13 through 16 include receivables with no payments due for an initial period
of 6 months and which then amortize over the weighted average number of
payments remaining until the maturity of the receivable. These hypothetical
pools have the following characteristics:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE LENGTH OF
LEVEL TOTAL WEIGHTED ORIGINAL NUMBER REMAINING NUMBER DEFERMENT
PAYMENT PRINCIPAL AVERAGE ANNUAL OF PAYMENTS OF PAYMENTS PERIOD
POOL BALANCE PERCENTAGE RATE (IN MONTHS) (IN MONTHS) (IN MONTHS)
--------- -------------- --------------- --------------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
1 $ 2,745,192.01 0.264% 36 34 0
2 5,249,866.40 1.162 48 47 0
3 429,022,245.88 1.899 60 59 0
4 32,497,569.47 3.162 48 44 0
5 1,754,265.93 3.240 35 31 0
6 185,236,400.95 3.964 60 58 0
7 4,403,864.16 7.189 33 29 0
8 17,609,296.52 7.229 46 41 0
9 111,933,356.83 7.318 55 52 0
10 158,045,284.18 12.403 57 55 0
11 11,942,059.79 12.567 47 43 0
12 4,919,648.19 13.572 33 30 0
13 518,700,724.06 10.000 60 60 6
14 88,082,943.25 7.564 48 48 6
15 2,689,680.55 7.506 33 33 6
16 195,179,289.17 9.144 60 60 6
</TABLE>
The initial receivables also have been divided into six hypothetical pools
made up of balloon payment receivables. These hypothetical pools have the
following characteristics:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
BALLOON TOTAL WEIGHTED ORIGINAL NUMBER REMAINING NUMBER
PAYMENT PRINCIPAL AVERAGE ANNUAL OF PAYMENTS OF PAYMENTS
POOL BALANCE PERCENTAGE RATE (IN MONTHS) (IN MONTHS)
--------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
1 $16,715,752.97 7.287% 47 42
2 3,098,282.10 7.410 35 31
3 58,161,815.57 7.479 54 51
4 1,073,998.96 10.817 35 31
5 6,776,338.88 11.220 47 43
6 58,024,189.04 11.993 56 53
</TABLE>
The ABS tables also assume that pre-funded receivables with an assumed
total principal balance of $222,347,151.43 will be transferred to the issuer
on or before October 16, 2000.
The actual characteristics and performance of the receivables transferred
to the issuer 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 initial
34
<PAGE>
receivables and the pre-funded receivables may be different from any
reinvestment receivables transferred to the issuer during the Pre-Funding and
Reinvestment 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 WITH THOSE ASSUMPTIONS.
PROJECTED CLASS A-1 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
CLASS A-1 NOTE BALANCE (%)
---------------------------------------------------------
PAYMENT DATE 0.5% ABS 1.0% ABS 1.3% ABS 1.5% ABS 2.0% ABS
--------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
August 16, 2000............. 100 100 100 100 100
September 15, 2000.......... 90 86 85 83 80
October 15, 2000............ 79 73 69 67 60
November 15, 2000........... 69 60 54 50 41
December 15, 2000........... 58 46 39 34 22
January 15, 2001............ 48 33 24 18 3
February 15, 2001........... 37 20 9 2 0
March 15, 2001.............. 18 0 0 0 0
April 15, 2001.............. 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Weighted Average Life
(yrs)...................... 0.41 0.35 0.31 0.29 0.25
</TABLE>
PROJECTED CLASS A-2 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
CLASS A-2 NOTE BALANCE (%)
---------------------------------------------------------
PAYMENT DATE 0.5% ABS 1.0% ABS 1.3% ABS 1.5% ABS 2.0% ABS
--------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
August 16, 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 95
March 15, 2001.............. 100 99 94 91 83
April 15, 2001.............. 100 91 85 81 72
May 15, 2001................ 93 83 76 72 61
June 15, 2001............... 87 75 68 63 50
July 15, 2001............... 81 67 59 53 39
August 15, 2001............. 74 59 50 44 29
September 15, 2001.......... 68 52 42 35 18
October 15, 2001............ 62 44 33 26 8
November 15, 2001........... 55 37 25 17 0
December 15, 2001........... 49 29 17 9 0
January 15, 2002............ 43 22 9 0 0
February 15, 2002........... 36 14 1 0 0
March 15, 2002.............. 30 7 0 0 0
April 15, 2002.............. 24 0 0 0 0
May 15, 2002................ 18 0 0 0 0
June 15, 2002............... 12 0 0 0 0
July 15, 2002............... 5 0 0 0 0
August 15, 2002............. 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Weighted Average Life
(yrs)...................... 1.36 1.14 1.05 0.99 0.88
</TABLE>
35
<PAGE>
PROJECTED CLASS A-3 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
CLASS A-3 NOTE BALANCE (%)
---------------------------------------------------------
PAYMENT DATE 0.5% ABS 1.0% ABS 1.3% ABS 1.5% ABS 2.0% ABS
--------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
August 16, 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 98
December 15, 2001........... 100 100 100 100 88
January 15, 2002............ 100 100 100 100 78
February 15, 2002........... 100 100 100 92 68
March 15, 2002.............. 100 100 93 83 59
April 15, 2002.............. 100 100 85 75 50
May 15, 2002................ 100 93 77 67 40
June 15, 2002............... 100 85 69 59 32
July 15, 2002............... 100 78 62 51 23
August 15, 2002............. 99 71 54 43 14
September 15, 2002.......... 93 64 47 35 6
October 15, 2002............ 87 57 40 28 0
November 15, 2002........... 80 51 33 20 0
December 15, 2002........... 74 44 26 13 0
January 15, 2003............ 68 37 19 6 0
February 15, 2003........... 62 31 12 0 0
March 15, 2003.............. 55 24 5 0 0
April 15, 2003.............. 49 17 0 0 0
May 15, 2003................ 43 11 0 0 0
June 15, 2003............... 37 5 0 0 0
July 15, 2003............... 31 0 0 0 0
August 15, 2003............. 25 0 0 0 0
September 15, 2003.......... 19 0 0 0 0
October 15, 2003............ 13 0 0 0 0
November 15, 2003........... 7 0 0 0 0
December 15, 2003........... 1 0 0 0 0
January 15, 2004............ 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Weighted Average Life
(yrs)...................... 2.70 2.30 2.10 1.97 1.71
</TABLE>
36
<PAGE>
PROJECTED CLASS A-4 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
CLASS A-4 NOTE BALANCE (%)
---------------------------------------------------------
PAYMENT DATE 0.5% ABS 1.0% ABS 1.3% ABS 1.5% ABS 2.0% ABS
---------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
August 16, 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........... 100 100 100 100 100
October 15, 2002............. 100 100 100 100 97
November 15, 2002............ 100 100 100 100 87
December 15, 2002............ 100 100 100 100 77
January 15, 2003............. 100 100 100 100 68
February 15, 2003............ 100 100 100 99 58
March 15, 2003............... 100 100 100 90 49
April 15, 2003............... 100 100 98 82 40
May 15, 2003................. 100 100 90 73 32
June 15, 2003................ 100 100 82 65 24
July 15, 2003................ 100 99 74 58 16
August 15, 2003.............. 100 91 66 50 8
September 15, 2003........... 100 83 59 43 1
October 15, 2003............. 100 76 52 35 0
November 15, 2003............ 100 69 45 29 0
December 15, 2003............ 100 62 38 22 0
January 15, 2004............. 93 55 31 15 0
February 15, 2004............ 83 45 23 8 0
March 15, 2004............... 74 38 16 1 0
April 15, 2004............... 67 31 10 0 0
May 15, 2004................. 60 25 4 0 0
June 15, 2004................ 53 19 0 0 0
July 15, 2004................ 46 13 0 0 0
August 15, 2004.............. 39 7 0 0 0
September 15, 2004........... 32 1 0 0 0
October 15, 2004............. 25 0 0 0 0
November 15, 2004............ 7 0 0 0 0
December 15, 2004............ 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Weighted Average Lives
(yrs)....................... 3.89 3.51 3.24 3.05 2.63
</TABLE>
37
<PAGE>
PROJECTED CLASS B NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
CLASS B NOTE BALANCE (%)
---------------------------------------------------------
PAYMENT DATE 0.5% ABS 1.0% ABS 1.3% ABS 1.5% ABS 2.0% ABS
--------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
August 16, 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.......... 100 100 100 100 100
October 15, 2002............ 100 100 100 100 100
November 15, 2002........... 100 100 100 100 100
December 15, 2002........... 100 100 100 100 100
January 15, 2003............ 100 100 100 100 100
February 15, 2003........... 100 100 100 100 100
March 15, 2003.............. 100 100 100 100 100
April 15, 2003.............. 100 100 100 100 100
May 15, 2003................ 100 100 100 100 100
June 15, 2003............... 100 100 100 100 100
July 15, 2003............... 100 100 100 100 100
August 15, 2003............. 100 100 100 100 100
September 15, 2003.......... 100 100 100 100 100
October 15, 2003............ 100 100 100 100 81
November 15, 2003........... 100 100 100 100 60
December 15, 2003........... 100 100 100 100 39
January 15, 2004............ 100 100 100 100 0
February 15, 2004........... 100 100 100 100 0
March 15, 2004.............. 100 100 100 100 0
April 15, 2004.............. 100 100 100 85 0
May 15, 2004................ 100 100 100 67 0
June 15, 2004............... 100 100 95 50 0
July 15, 2004............... 100 100 77 0 0
August 15, 2004............. 100 100 60 0 0
September 15, 2004.......... 100 100 44 0 0
October 15, 2004............ 100 86 0 0 0
November 15, 2004........... 100 44 0 0 0
December 15, 2004........... 100 0 0 0 0
January 15, 2005............ 43 0 0 0 0
February 15, 2005........... 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Weighted Average Life
(yrs)...................... 4.45 4.27 4.06 3.83 3.31
</TABLE>
38
<PAGE>
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 before each
distribution for that class. This factor will be a seven-digit decimal which
the servicer will compute before each distribution for 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 Issuer 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 and reinvestment account. The addition of receivables to the
issuer 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 and reinvestment
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
39
<PAGE>
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
preceding 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 dealers of Mitsubishi Motors vehicles 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 vehicles throughout the United
States manufactured by Mitsubishi Motors and its affiliates. MMSA is a
subsidiary of Mitsubishi Motors, a Japanese corporation that is a worldwide
manufacturer and distributor of motor vehicles and light-duty trucks.
Mitsubishi Motors 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 issuer will issue $1,656,000,000 total principal amount of
asset-backed notes under an indenture to be dated as of August 1, 2000,
between the issuer and Bank of Tokyo-Mitsubishi Trust Company, in its
capacity as indenture trustee.
The notes will be issued in five classes:
o $165,000,000 total principal amount of 6.72625% Class A-1 notes;
o $500,000,000 total principal amount of 6.95% Class A-2 notes;
o $490,000,000 total principal amount of 7.00% Class A-3 notes;
o $384,000,000 total principal amount of 7.08% Class A-4 notes; and
o $117,000,000 total 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 is
qualified in its entirety by reference to the notes, the indenture, the trust
agreement and the sale and servicing agreement, copies of which will be filed
with the Securities and Exchange Commission after the date of issue of the
notes and the certificates.
INTEREST PAYMENTS
The notes will bear interest at the following annual rates:
o the Class A-1 notes: 6.72625%;
40
<PAGE>
o the Class A-2 notes: 6.95%;
o the Class A-3 notes: 7.00%;
o the Class A-4 notes: 7.08%; 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 day of each month. If the 15th day of a month is not
a business day, the payment will be made on the next following business day.
The first payment will be made on September 15, 2000. 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 Class A-1 notes on the basis of the actual
number of days elapsed and a 360-day year and will be calculated on the Class
A-2 notes, the Class A-3 notes, the Class A-4 notes and the Class B 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 September 14, 2000.
Priority of Interest Payments. Funds to make interest payments on the
notes will 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 total Available Funds remaining
are insufficient, the interest will 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 to each class of Class A notes without priority
or preference of any kind among classes based upon the total amount of
interest due on each class of 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 Class A notes will receive its ratable share of the total amount
available to pay interest on the Class A notes and no interest will be paid
on the Class B notes.
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 to the Principal Distribution Amount for that payment
date, with 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."
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;
41
<PAGE>
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;
o after the Class A-3 notes are paid in full, to the holders of the
Class A-4 notes, until the Class A-4 notes have been paid in full;
and
o after the Class A-4 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."
Following an event of default, principal of the Class A notes will be paid
only after the payment of the following:
o amounts due to the servicer; and
o interest due on the Class A notes.
Following an event of default, principal of the Class B notes will be paid
only after 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.
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, May 2001;
o for the Class A-2 notes, February 2003;
o for the Class A-3 notes, June 2004;
o for the Class A-4 notes, February 2005;
o for the Class B notes, July 2005.
The actual date on which the total 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
The pre-funding and reinvestment account will be funded on the closing
date in an amount that MART anticipates will allow the issuer to acquire the
pre-funded receivables and make the required deposits to the reserve account
and the yield supplement account. In addition, during the Pre-Funding and
Reinvestment Period, funds will be deposited into the pre-funding and
reinvestment account to the extent
42
<PAGE>
that the Required Reinvestment Amount for any month during that period
exceeds the total adjusted principal balance of receivables available for
purchase from MMCA and MMCA, at its option, makes any required deposits to
the negative carry account. On the May 15, 2001 payment date, any funds
remaining in the pre-funding and reinvestment 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.
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 YIELD SUPPLEMENT AGREEMENT AND YIELD SUPPLEMENT ACCOUNT
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 issuer on the business day before each payment date. The issuer will
apply those funds to make required payments under the indenture, including
payments on the notes.
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 the first
payment on the deferred payment receivables having an aggregate principal
balance of $582,305,485.60 on the closing date and $804,652,637.03 after the
transfer to the issuer of the pre-funded receivables on or before October 16,
2000 will not have any payments due from the related obligors until February
2001. Accordingly, until the first payment on these receivables is received
from the related obligors, these deferred payment receivables will not
generate any collections which the issuer can apply to make required payments
under the indenture, including payments on the notes. The Yield Supplement
Amount for any payment date has been calculated to cover the shortfall in
collections due to the inclusion of deferred payment receivables in the
receivables owned by the issuer.
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 after the delivery of any required 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
43
<PAGE>
will be determined assuming that future scheduled payments on the deferred
payment 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 and funds in excess of the maximum required balance are
released to MART.
MART Will Make Deposits into the Yield Supplement Account upon the
Transfer of Pre-Funded Receivables to the Issuer. 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 the date on which the
pre-funded receivables are transferred to the issuer, the indenture trustee
will make an additional deposit to the yield supplement account from funds on
deposit in the pre-funding and reinvestment account that otherwise would be
distributable to MART as payment for the receivables sold to the issuer on
that date, unless the yield supplement account has been replaced by an
acceptable letter of credit on or before that date.
THE ISSUER'S BANK ACCOUNTS
The servicer will establish and maintain the pre-funding and reinvestment
account, the payahead account, the 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 and
maintain 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 and maintain the certificate distribution account in
the name of the owner trustee for the exclusive benefit of the
certificateholders.
<TABLE>
<CAPTION>
ACCOUNTS RELATING TO THE ISSUER
------------------------------------------------------------------------------------------------------
<S> <C>
COLLECTION Payments made on receivables and advances made by the servicer will be deposited into
ACCOUNT the collection account.
------------------- ---------------------------------------------------------------------------------
PRE-FUNDING AND The pre-funding initial deposit will be deposited into the pre-funding and reinvestment
REINVESTMENT account on the closing date. During the Pre-Funding and Reinvestment Period, the issuer
ACCOUNT may deposit additional amounts to the pre-funding and reinvestment account to the extent
that the Required Reinvestment Amount for any month during the period exceeds the total
adjusted principal amount of receivables available for purchase from MART.
------------------- ---------------------------------------------------------------------------------
NOTE PAYMENT Amounts released from the collection account for distribution to noteholders will be
ACCOUNT deposited into the note payment account and all payments to noteholders will be made
from this account.
------------------- ---------------------------------------------------------------------------------
CERTIFICATE Amounts released from the collection account for distribution to certificateholders
DISTRIBUTION will be deposited into the certificate distribution account and all distributions to
ACCOUNT certificateholders will be made from this account.
------------------- ---------------------------------------------------------------------------------
PAYAHEAD Early payments by obligors of less than the remaining balance of Actuarial Receivables
ACCOUNT will be deposited into the payahead account until the time as the payment on the receivables
falls due or until those funds are applied to shortfalls in the scheduled payments
for those receivables.
------------------- ---------------------------------------------------------------------------------
</TABLE>
On the closing date, MART will deposit to the payahead account the early
payments as to Actuarial Receivables which were received before the initial
Cutoff Date. On each date during the Pre-Funding and Reinvestment Period on
which receivables are transferred to the issuer, the indenture trustee will
withdraw from the pre-funding and reinvestment account and deposit to the
payahead account any early payments as to Actuarial Receivables transferred
to the issuer on that date which were received before the related date of
transfer.
Funds in the collection account, the pre-funding and reinvestment account,
the payahead account, the 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 will normally be limited
to investments acceptable to each of Moody's and S&P as being consistent with
the ratings of the notes.
44
<PAGE>
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 as to Actuarial Receivables on deposit in
the payahead account.
Any earnings, net of losses and investment expenses, on amounts on deposit
in each account will be paid out as follows:
o any earnings in the collection account will be paid to the
certificateholders;
o any earnings in the payahead account will be paid to the servicer as
additional servicing compensation and will not be available to pay
noteholders; and
o any earnings on, and any amounts released from, the reserve account,
the negative carry account and the yield supplement account will be
distributed to MART and will not be available to pay noteholders,
but only to the extent that the amounts on deposit in those accounts
exceed the required balances of those accounts.
INDENTURE CASH FLOWS
Calculations Made by the Servicer. 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 Principal Distribution Amount;
o the total yield supplement overcollateralization amount;
o the Negative Carry Amount; and
o the Yield Supplement Amount.
Notice to the Indenture Trustee. On or before each payment date, the
servicer will deliver to the indenture trustee a certificate indicating the
deposits to and withdrawals from the collection account, the supplemental
reserve account, the reserve account, the note payment account, the
certificate distribution account and the negative carry account, as
applicable, to be made on that payment date.
STEP 1. DAILY DEPOSITS TO THE COLLECTION ACCOUNT.
On or before each payment date, the servicer will cause all payments on
the receivables and all proceeds of the receivables to be deposited into the
collection account.
STEP 2. MONTHLY WITHDRAWALS FROM THE COLLECTION ACCOUNT TO REIMBURSE
SERVICER ADVANCES.
On each payment date, the indenture trustee will withdraw from the
collection account and pay to the servicer the amounts on deposit in the
collection account that are allocable to reimbursement of servicer advances
in accordance with the sale and servicing agreement.
STEP 3. MONTHLY WITHDRAWALS FROM THE RESERVE ACCOUNT TO REIMBURSE SERVICER
ADVANCES.
On each payment date, the indenture trustee will withdraw from the reserve
account and pay to the servicer an amount equal to the lesser of:
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o the amount on deposit in the 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 servicer advances due to be reimbursed on that payment
date but not reimbursed from funds on deposit in the collection
account under step 2.
STEP 4. MONTHLY WITHDRAWALS FROM THE RESERVE ACCOUNT TO PAY THE TOTAL
REQUIRED PAYMENT.
If on any payment date the Total Required Payment is greater than the
Available Funds on deposit in the collection account after reimbursement of
servicer advances under step 2, 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 under step 2 but
before any deposits or other withdrawals from the 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.
STEP 5. 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; and
o to the certificate distribution account, any remaining Total
Available Funds.
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 provided under "--Monthly
Withdrawals From the Note Payment Account On and After an Acceleration of the
Maturity Dates of the Notes."
STEP 6. 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 less any amounts paid
to the Class A-1 noteholders on that payment date, 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 less any amounts paid
to the Class A-2 noteholders on that payment date, until the Class
A-3 notes have been paid in full;
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o following payment in full of the Class A-3 notes, to the Class A-4
noteholders, the Principal Distribution Amount less any amounts paid
to the Class A-3 noteholders on that payment date, until the Class
A-4 notes have been paid in full; and
o following payment in full of the Class A-4 notes, to the Class B
noteholders, the Principal Distribution Amount less any amounts paid
to the Class A-4 noteholders on that payment date, until the Class B
notes have been paid in full.
STEP 7. WITHDRAWALS FROM THE CERTIFICATE DISTRIBUTION ACCOUNT.
On each payment date, the amount on deposit in the certificate
distribution account, if any, will be distributed to the certificateholders.
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 under 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;
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 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
During the Pre-Funding and Reinvestment Period, the amounts on deposit in
the pre-funding and reinvestment 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 and Reinvestment 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 the
notes.
On the closing date, MART will make an initial deposit of $725,499.28 into
the negative carry account. That amount is equal to the estimated shortfall
of the investment earnings on amounts deposited to the pre-funding and
reinvestment account on the closing date and the interest on the notes
required to be paid in respect of that amount until the pre-funded
receivables are transferred to the issuer. Additional amounts may be
deposited in the negative carry account during the Pre-Funding and
Reinvestment Period. The additional deposits may be made, at MMCA's option,
as a condition to the deposit to the pre-funding and reinvestment account of
the excess cash, if any, equal to the Required Reinvestment Amount for any
month during that period less the total adjusted principal balance of
receivables that satisfy the selection criteria in the sale and servicing
agreement that are available for purchase from MMCA for that month.
If the amount on deposit in the negative carry account on any payment
date, after the withdrawal of the Negative Carry Amount, for that payment
date, is greater than the amount required to be on deposit
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in the negative carry account, the excess will be released to MART. All
amounts remaining on deposit in the negative carry account on the first
payment date after the Pre-Funding and Reinvestment Period, after giving
effect to any withdrawals from that account on that payment date, will be
released to MART.
On any payment date, the amount required to be on deposit in the negative
carry account is equal to the lesser of:
o the initial deposit into the negative carry account, plus the amount
of any subsequent deposits to the negative carry account during the
Pre-Funding and Reinvestment Period, minus the sum of the withdrawal
of the Negative Carry Amount on that payment date and all previous
withdrawals of the Negative Carry Amount; and
o the Maximum Negative Carry Amount as of that payment date.
YIELD SUPPLEMENT OVERCOLLATERALIZATION AMOUNT
The notes and the certificates have the benefit of the total yield
supplement overcollateralization amount. The total principal amount of the
notes and certificates on the closing date will equal the total principal
amount of a combined pool of the initial receivables and the pre-funded
receivables to be transferred to the issuer on or before October 16, 2000,
minus the total yield supplement overcollateralization amount of the
receivables in that combined pool. On any date, the total yield supplement
overcollateralization amount for the combined pool of receivables will be the
sum of the yield supplement overcollateralization amounts for each receivable
in the combined pool which is not a defaulted receivable or which has not
been repurchased by MART or the servicer following a breach of certain
representations or warranties.
On any date, the yield supplement overcollateralization amount for any
receivable will equal the excess, if any, of:
o the present value of the remaining scheduled payments due on the
receivable discounted at a rate equal to the annual percentage rate
provided in the contract; over
o the present value of the remaining scheduled payments due on the
receivable discounted at a rate equal to 9.5%.
On the closing date, the total yield supplement overcollateralization
amount of the initial receivables will be $111,696,775.02 or 6.21% of the
total principal amount of the notes and certificates on the closing date. On
the closing date, the total yield supplement overcollaterization amount of a
combined pool of the initial receivables and the additional receivables to be
acquired by the issuer on or before October 16, 2000, will be
$113,862,049.71, or 6.33% of the total principal amount of the notes and
certificates on the closing date.
The total yield supplement overcollateralization amount 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. The
total yield supplement overcollateralization amount has been provided because
some of the receivables owned by the issuer 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 monthly servicing
fee and anticipated losses on defaulted receivables. If the losses on
defaulted receivables depletes the collections on the receivables represented
by the total yield supplement overcollateralization amount, shortfalls in
Available Funds may occur. If such losses also deplete the amount on deposit
in the reserve account, a shortfall in the amounts distributed to the
noteholders could result. Losses on the receivables or other shortfalls in
the amounts to be distributed to the noteholders will, after depletion of the
collections on the receivables represented by the total yield supplement
overcollateralization amount, and depletion of the reserve account, be
allocated first to the certificates and then Class B notes because payments
on the certificates and the Class B notes are subordinate to the payments on
the Class A notes.
THE 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 $15,798,181.38. On the date on which the
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issuer acquires the pre-funded receivables from MART, $2,201,818.77 will be
withdrawn from the pre-funding and reinvestment account and deposited to the
reserve account. That amount is equal to 1.00% of the adjusted principal
balance of the initial receivables pool as of the initial Cutoff Date. On the
date on which the pre-funded receivables are transferred to the issuer, cash
or investments permitted by the sale and servicing agreement having a value
approximately equal to 1.00% of the adjusted principal balance of the
pre-funded receivables as of the related Cutoff Date will be withdrawn from
the pre-funding and reinvestment 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 reserve account:
o to the servicer, an amount equal to any shortfall between the total
amount of advances that are due and payable to the servicer on that
payment date and the total 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.
The 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 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.
If amounts on deposit in the reserve account on any date exceed the
required balances in those accounts, after giving effect to withdrawals made
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 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 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, a shortfall in the amounts distributed to the
noteholders could result. In addition, depletion of the 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 amounts to be distributed to the
noteholders will, after depletion of the reserve account, be allocated first
to the certificates and then to the Class B notes because payments on the
certificates and 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 a change in the manner in which the 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
on each payment date. Following an event of default under the indenture, 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 all accrued
interest and all of the principal of the Class A notes. Interest on the Class
B notes will be 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.
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Principal of the Class B notes will be subordinated to the payment of the
servicing fee, interest on the Class A notes, interest on the Class B notes
and 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 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
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
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 payment made by an obligor in respect 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; 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 advance any portion of a balloon payment
not received in the calendar month in which the balloon payment is due, less
any 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 repossessed
vehicles or vehicles relating to balloon payment receivables that
are 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.
See "--Indenture Cash Flows" and "--The Reserve Account."
DEPOSIT OF COLLECTIONS ON THE RECEIVABLES TO THE COLLECTION ACCOUNT
The servicer will deposit the payments and proceeds on the receivables,
other than extension or deferral fees collected on the receivables which are
payable to the servicer, into the collection account not later than two
business days after receipt unless:
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(1) the servicer has a rating acceptable to each of Moody's and S&P on
its short-term indebtedness, MMCA is the servicer, and no events
of servicing termination have occurred; or
(2) the issuer 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.
On each payment date, MART and the servicer also will deposit into the
collection account the purchase amount of each receivable required to be
repurchased or purchased by either of them during the preceding calendar
month. The servicer will be entitled to be reimbursed for the amounts
previously deposited in the collection account but which are 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 within two
business days of receipt.
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 the
related calendar month, net of distributions to be made to the servicer. 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 before 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 for 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 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 total outstanding principal amount of each class of 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 total yield
supplement overcollateralization amount, and the adjusted
principal balance of the receivables pool calculated as of the
close of business on the last day of the preceding calendar
month;
(7) the principal balance of the receivables pool exclusive of the
total principal balance of balloon payments, and the total
principal balance of the balloon payments calculated as of the
close of business on the last day of the preceding calendar
month;
(8) the principal balance of the deferred payment receivables
calculated as of the close of business on the last day of the
preceding calendar month;
(9) 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 the overdue interest at the
applicable note interest rate, to the extent permitted by law;
(10) the cumulative amount of principal due but not paid to the
noteholders of each class on that payment date and on prior
payment dates;
(11) for receivables that became defaulted during the related calendar
month, the total 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;
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(12) the balance of the reserve account on that payment date, after
giving effect to changes in the balance on that payment date;
(13) the advances by the servicer, if any;
(14) the total purchase amount of receivables repurchased by MART or
purchased by the servicer during the preceding calendar month;
(15) for each payment date during the Pre-Funding and Reinvestment
Period and the payment date that is on or immediately following
the end of the Pre-Funding and Reinvestment Period, (A) the
amount, if any, withdrawn from the pre-funding and reinvestment
account to purchase receivables during the preceding calendar
month, (B) the amount, if any, deposited to the pre-funding and
reinvestment account during the preceding calendar month, (C) the
remaining amount on deposit in the pre-funding and reinvestment
account, if any, (D) the Negative Carry Amount, if any, for the
preceding calendar month, (E) the amount of any deposits to the
negative carry account during the month in which the payment date
occurs, and (F) the amount remaining on deposit in the negative
carry account after all withdrawals made on that payment date;
and
(16) for the payment date on or immediately following the end of the
Pre-Funding and Reinvestment Period, the remaining amount on
deposit in the pre-funding and reinvestment account, if any, that
has not been used to fund the purchase of receivables and is
being passed through as payments of principal of the notes.
Each amount set forth in clauses (1), (2), (3), (4), (9) and (10) 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
Each class of notes will be represented by one or more notes, in each case
registered in the name of Cede & Co. as nominee of The Depository Trust
Company. The notes will be available for purchase in book-entry form only.
Accordingly, Cede & Co. will be the holder of record of the notes. No person
acquiring a beneficial ownership interest in the notes will be entitled to
receive a definitive note registered in that person's name unless and until
definitive notes are issued under the limited circumstances described in this
prospectus. All references in this prospectus to:
o actions by noteholders of any class refer to actions taken by DTC
upon instructions from its participating organizations; and
o distributions, notices, reports and statements to the noteholders of
any class will be made to DTC or Cede & Co., as the registered
holder of that class, for distribution to the noteholders of that
class according to DTC procedures.
Investors in the global notes may hold them through any of DTC,
Clearstream Banking Luxembourg S.A. or the Euroclear System. The global notes
will be tradeable as home market instruments in both the European and U.S.
domestic markets. Initial settlement and all secondary trades will settle in
same-day funds.
INITIAL SETTLEMENT OF THE GLOBAL NOTES. Investors' interests in the global
notes will be represented through financial institutions acting on their
behalf as direct and indirect participating members of DTC. As a result,
Clearstream Banking and Euroclear will hold positions on behalf of their
customers or participants through their respective depositaries, which, in
turn, will hold those positions in accounts as DTC participants.
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Investors electing to hold their global notes through DTC will follow the
settlement practices applicable to U.S. corporate debt obligations.
Investors' securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their global notes through Clearstream Banking
or Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global
security and no lock-up or restricted period. Global notes will be credited
to the securities custody accounts on the settlement date against payment in
same-day funds.
If any of DTC, Clearstream Banking or Euroclear should stop its services,
the administrative agent would seek an alternative depository, if available,
or cause the issuance of definitive notes to noteholders or their nominees in
the manner described under "--Issuance of Definitive Notes Upon the
Occurrence of Various Circumstances."
Except as required by law, none of the servicer, the indenture trustee or
the owner trustee will have any liability:
o for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the notes held by DTC's
nominee; or
o for maintaining, supervising or reviewing any records relating to
those beneficial ownership interests.
SECONDARY MARKET TRADING OF THE GLOBAL NOTES. Since the purchaser
determines the place of delivery, it is important to establish at the time of
the trade where both the purchaser's and seller's accounts are located to
ensure that settlement can be made on the desired value date.
Secondary market trading between DTC participants will be settled using
the procedures applicable to U.S. corporate debt obligations in same-day
funds.
Secondary market trading between Clearstream Banking customers or
Euroclear participants will be settled using the procedures applicable to
conventional eurobonds in same-day funds.
When global notes are to be transferred from the account of a DTC
participant to the account of a Clearstream Banking customer or Euroclear
participant:
o the purchaser sends instructions to Clearstream Banking or Euroclear
through a Clearstream Banking customer or Euroclear participant at
least one business day before settlement;
o Clearstream Banking or Euroclear instructs its depositary to receive
the global notes against payment, which includes interest accrued on
the global notes from and including the last coupon payment date to
and excluding the settlement date;
o that depositary credits payments to the DTC participant's account
against delivery of the global notes; and
o after settlement has been completed, the depositary credits the
global notes to the relevant clearing system, which, in turn, under
its usual procedures, credits those global notes to that customer's
or participant's account.
The securities credit will appear the next day, European time, and the cash
debit will be back-valued to, and the interest on the global notes will
accrue from, the value date--which would be the preceding day when settlement
occurred in New York. If settlement is not completed on the intended value
date, which means the trade fails, the Clearstream Banking or Euroclear cash
debit will be valued instead as of the actual settlement date.
Clearstream Banking customers and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to
pre-position funds for settlement, either from cash on hand or existing lines
of credit, as they would for any settlement occurring within Clearstream
Banking or Euroclear. Under this approach, they may take on credit exposure
to Clearstream Banking or Euroclear until the global notes are credited to
their accounts one day later.
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As an alternative, if Clearstream Banking or Euroclear has extended a line
of credit to them, Clearstream Banking customers or Euroclear participants
can elect not to pre-position funds and allow that credit line to be drawn
upon to finance settlement. Under this procedure, Clearstream Banking
customers or Euroclear participants purchasing global notes would incur
overdraft charges for one day, assuming they cleared the overdraft when the
global notes were credited to their accounts. However, interest on the global
notes would accrue from the value date. So the investment income on the
global notes earned during that one-day period may substantially reduce or
offset the amount of the overdraft charges, although this result will depend
on each Clearstream Banking customer's or Euroclear participant's particular
cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can use their usual procedures for sending global notes to the
respective depositary for the benefit of Clearstream Banking customers or
Euroclear participants. The sale proceeds will be available to the DTC seller
on the settlement date. In this way, to the DTC participant, a cross-market
transaction will settle no differently than a trade between two DTC
participants.
Due to time zone differences in their favor, Clearstream Banking customers
and Euroclear participants may use their customary procedures for
transactions in which global notes are to be transferred by the respective
clearing system, through the respective depositary, to a DTC participant.
Trading usually occurs as follows:
o the seller sends instructions to Clearstream Banking or Euroclear
through a Clearstream Banking customer or Euroclear participant at
least one business day before settlement;
o Clearstream Banking or Euroclear instructs its depositary to deliver
the bonds to the DTC participant's account against payment, which
includes interest accrued on the global notes from and including the
last coupon payment date to and excluding the settlement date; and
o the payment is reflected in the account of the Clearstream Banking
customer or Euroclear participant the next day, and receipt of the
cash proceeds in the Clearstream Banking customer's or Euroclear
participant's account is back-valued to the value date--the
preceding day when settlement occurred in New York.
Should the Clearstream Banking customer or Euroclear participant have a line
of credit with its clearing system and elect to be in debit in anticipation
of receipt of the sale proceeds in its account, the back-valuation will
cancel out any overdraft charges incurred over that one-day period. If
settlement is not completed on the intended value date, which means the trade
fails, receipt of the cash proceeds in the Clearstream Banking customer's or
Euroclear participant's account would instead be valued as of the actual
settlement date.
Finally, day traders that use Clearstream Banking or Euroclear and that
purchase global notes from DTC participants for delivery to Clearstream
Banking customers or Euroclear participants should note that these trades
would automatically fail on the sale side unless affirmative action were
taken. At least three techniques should be readily available to eliminate
this potential problem:
o borrowing through Clearstream Banking or Euroclear for one
day--until the purchase side of the day trade is reflected in their
Clearstream Banking or Euroclear accounts--under the clearing
system's customary procedures;
o borrowing the global notes in the U.S. from a DTC participant no
later than one day before settlement which would give the global
notes sufficient time to be reflected in their Clearstream Banking
or Euroclear account to settle the sale side of the trade; or
o staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC participant is
at least one day before the value date for the sale to the
Clearstream Banking customer or Euroclear participant.
Those persons who are not participants, either directly or indirectly, but
who desire to purchase, sell or otherwise transfer ownership of, or other
interest in, the notes may do so only through direct and
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indirect participants. In addition, noteholders will receive all
distributions of principal and interest from the indenture trustee through
the participants who, in turn, will receive them from DTC. Under a book-entry
format, noteholders may experience some delay in their receipt of payments,
since those payments will be forwarded by the indenture trustee to DTC's
nominee. DTC will forward those payments to its participants which, then,
will forward them to indirect participants or noteholders. The only
noteholder will be DTC's nominee. Noteholders will not be recognized by the
indenture trustee as noteholders and noteholders will be permitted to
exercise the rights of noteholders only indirectly through DTC and its
participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to:
o make book-entry transfers of securities among participants on whose
behalf it acts as to the securities; and
o receive and transmit distributions of principal and interest on the
securities.
Participants and indirect participants with which securityholders have
accounts as to their respective securities similarly are required to:
o make book-entry transfers; and
o receive and transmit the payments on behalf of their respective
securityholders.
Accordingly, although securityholders will not possess their respective
securities, the rules provide a mechanism by which participants will receive
payments and will be able to transfer their interests.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and some banks, the ability of a
securityholder to pledge securities to persons or entities that do not
participate in the DTC system, or otherwise take actions related to the
securities, may be limited due to the lack of a physical certificate for
those securities.
DTC will advise the indenture trustee that it will take any action
permitted to be taken by a noteholder under the indenture only at the
direction of one or more participants to whose accounts with DTC the notes
are credited. DTC may take conflicting actions related to other undivided
interests to the extent that those actions are taken on behalf of
participants whose holdings include those undivided interests.
Non-U.S. holders of global notes will be liable for U.S. withholding taxes
unless the holders meet specified requirements and deliver appropriate U.S.
tax documents to the securities clearing organizations or their participants.
THE DEPOSITORIES. 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 the provisions of Section 17A of
the Securities Exchange Act of 1934, as amended. DTC was created to hold
securities for its participants and facilitate the clearance and settlement
of securities transactions between participants through electronic
book-entries to eliminate the need for physical movement of certificates.
Participants in the DTC system:
o include securities brokers and dealers, who may include any of the
underwriters of securities of the issuer, banks, trust companies and
clearing corporations; and
o may include other organizations.
Indirect access to the DTC system also is available to others, such as
banks, brokers, dealers and trust companies, that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Clearstream Banking Luxembourg S.A. is incorporated under the laws of
Luxembourg as a professional depository. Clearstream Banking holds securities
for its customers and facilitates the
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clearance and settlement of securities transactions between Clearstream
Banking customers through electronic book-entry changes in accounts of
Clearstream Banking customers to eliminate the need for physical movement of
certificates. Transactions may be settled by Clearstream Banking in any of 36
currencies, including United States dollars. Clearstream Banking provides to
its Clearstream Banking customers, among other things, services for
safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. Clearstream Banking
interfaces with domestic markets in several countries. As a professional
depository, Clearstream Banking is subject in Luxembourg to regulation by and
supervision by the Commission for the Supervision of the Financial Sector.
Clearstream Banking customers:
o are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and some other organizations; and
o may include any of the underwriters of any securities of the issuer.
Indirect access to Clearstream Banking is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Clearstream Banking customer, either directly
or indirectly.
Euroclear was created in 1968 to hold securities for its participants and
to clear and settle transactions between Euroclear participants through
simultaneous electronic book-entry delivery against payment to eliminate the
need for physical movement of certificates and the risk from transfers of
securities and cash that are not simultaneous.
The Euroclear system has subsequently been extended to clear and settle
transactions between Euroclear participants and counterparties both in
Clearstream Banking and in many domestic securities markets. Transactions may
be settled in any of 34 currencies. In addition to safekeeping, custody and
securities clearance and settlement, the Euroclear system includes securities
lending and borrowing and money transfer services. 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 that establishes policy on behalf of Euroclear
participants. The Euroclear operator is the Belgian branch of a New York
banking corporation which is a member bank of the Federal Reserve System. As
such, it is regulated and examined by the Board of Governors of the Federal
Reserve System and the New York State Banking Department, as well as the
Belgian Banking Commission.
All operations are conducted by the Euroclear operator and all Euroclear
securities clearance accounts and cash accounts are accounts with the
Euroclear operator. They are governed by the Terms and Conditions Governing
Use of Euroclear and the related Operating Procedures of the Euroclear system
and applicable Belgian law. These govern all transfers of securities and
cash, both within the Euroclear system, and receipts and withdrawals of
securities and cash. All securities in the Euroclear system are held on a
fungible basis without attribution of specific certificates to specific
securities clearance accounts.
Euroclear participants:
o include banks, including central banks, securities brokers and
dealers and other professional financial intermediaries; and
o may include any of the underwriters of any securities of the issuer.
Indirect access to the Euroclear system is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear
participant, either directly or indirectly. The Euroclear operator acts under
the Terms and Conditions Governing Use of Euroclear, the related Operating
Procedures of the Euroclear system and applicable Belgian law only on behalf
of Euroclear participants and has no record of or relationship with persons
holding through Euroclear participants.
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:
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o the issuer, 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 for
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, beneficial owners of notes representing at least 51% of
the total 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 afterwards
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 related
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,
for each class of notes, on the final payment date of that class;
o a default in the observance or performance of any material covenant
or agreement of the issuer made in the indenture other than those
dealt with specifically elsewhere as an event of default and the
continuation of any of these defaults for a period of 60 days after
notice is given to the issuer by the indenture trustee or to the
issuer and the indenture trustee by the holders of at least 25% of
the total principal amount of the notes;
o any representation or warranty made by the issuer in the indenture
or in any certificate delivered under the terms of the indenture
having been incorrect in any material respect as of the time made,
and the breach not having been cured within 30 days after notice is
given to the issuer by the indenture trustee or to the issuer and
the indenture trustee by the holders of at least 25% of the total
principal amount of the notes; or
o events of bankruptcy, insolvency, receivership or liquidation of the
issuer.
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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 total 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. 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 total 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 total 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 issuer has deposited with the indenture trustee an amount
sufficient to pay (A) 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 (B) 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.
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 property of the issuer, or elect to maintain the
property of the issuer and continue to apply proceeds from the property of
the issuer as if there had been no declaration of acceleration. The indenture
trustee may not, however, sell the property of the issuer 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 outstanding
notes; or
o the indenture trustee determines that the property of the issuer
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 total
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
property of the issuer will suffice to pay interest on and principal of the
notes on an ongoing basis.
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If the property of the issuer is sold after an event of default under the
indenture has occurred, 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.
If an event of default occurs under the indenture and is continuing on 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. The holders of at least a majority of the total 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 as to the notes or exercising any trust power
conferred on the indenture trustee.
A noteholder will not have the right to institute any proceeding as 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 total 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 total principal amount of the outstanding notes.
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 be personally liable for the payment of interest
on or principal of the notes or for the agreements of the issuer and the
owner trustee, in its capacity as trustee, contained in the indenture.
Covenants by the Issuer under the Indenture. The issuer will not, among
other things:
o sell, transfer, exchange or otherwise dispose of any of its assets,
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 issuer;
o dissolve or liquidate in whole or in part;
o permit the validity or effectiveness of the indenture to be
impaired;
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o permit any person to be released from any covenants or obligations
as 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 issuer, 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 property of the issuer, other than
for any tax, mechanics or other lien;
o engage in any activities other than financing, acquiring, owning and
pledging the contracts as contemplated by the indenture, the sale
and servicing agreement, the trust agreement and other related
documents and incidental activities;
o incur, assume or guarantee any indebtedness other than indebtedness
incurred under the notes, or otherwise in accordance with the
indenture, the sale and servicing agreement, the trust agreement and
other related documents;
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
have been provided for; or
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 by the indenture.
Replacement of Indenture Trustee. Noteholders holding not less than a
majority of the total principal amount of the outstanding notes, may remove
the indenture trustee without cause by so notifying the indenture trustee and
the issuer, and following that removal the issuer 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.
The indenture trustee may resign at any time by so notifying the issuer
and the noteholders. The issuer 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
issuer will be required promptly to appoint a successor indenture trustee.
Duties of Indenture Trustee Under the Indenture. The indenture trustee:
o will perform the duties 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.
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Compensation and Indemnity of the Indenture Trustee under the
Indenture. The issuer 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 for 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 issuer 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 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 issuer 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 issuer of a written request for that list.
Annual Compliance Statement to be Provided by Issuer to Indenture
Trustee. The issuer will be required to file annually with the indenture
trustee a written statement as to the fulfillment of its obligations under
the indenture.
Requirements for Satisfaction and Discharge of Indenture. The indenture
will be discharged as 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 on 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.
Requirements for Modification of Indenture. Without the consent of the
noteholders, the owner trustee, on behalf of the issuer, and the indenture
trustee, upon request by the issuer, may execute a supplemental indenture for
the purpose of, among other things, adding to the covenants of the issuer,
curing any ambiguity, correcting or supplementing any provision which may be
inconsistent with any other provision or making any other provision as 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, 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.
The owner trustee, on behalf of the issuer, and the indenture trustee,
upon request by the issuer, may also enter into supplemental indentures, with
the consent of noteholders holding not less than a majority of the total
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:
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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 class of notes to be withdrawn, reduced or
qualified; and
o an opinion of counsel as to various tax matters is delivered.
Any opinion of counsel referred to in this paragraph or the preceding one may
be rendered by internal counsel to MART or the servicer.
However, no supplemental indenture may do any of the following without the
consent of the holder of each outstanding note affected by that supplemental
indenture:
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 property of the
issuer 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 total 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 issuer, MART, the servicer or an affiliate of
any of them;
o reduce the percentage of the total 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 property of the
issuer 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
total 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 on any of the property of the issuer 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.
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.
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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.
SALE AND ASSIGNMENT
Together with the issuance of the notes, and under the terms of the
purchase agreement, MMCA will sell and assign to MART its entire right, title
and interest in, to and under the initial receivables to be purchased by the
issuer on the closing date, including its security interests in the related
vehicles. At the time the notes are issued, MART will sell and assign to the
issuer, without recourse, MART's entire interest in the initial receivables,
including its security interests in the related vehicles. Each of the initial
receivables conveyed by MART to the issuer 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 issuer on the initial Cutoff Date. The owner
trustee will, at the same time as the sale and assignment of the initial
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, including the pre-funded
receivables, and to the deposits required to be made to the reserve account,
the pre-funding and reinvestment account, the negative carry account, the
payahead account and the yield supplement account.
It is anticipated that the pre-funded receivables will be conveyed to the
issuer on or prior to October 16, 2000. In addition, during the Pre-Funding
and Reinvestment Period, the issuer may use prepayments on Long Deferment
Period Receivables to purchase reinvestment receivables from MART. MART will
designate as a related Cutoff Date the date as of which particular additional
receivables are conveyed to the issuer. On or before each transfer of
reinvestment receivables to the issuer during the Pre-Funding and
Reinvestment 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 issuer on that date, including MMCA's
security interests in the related vehicles. On each of those dates, under the
conditions described below, MART will sell and assign to the issuer, without
recourse, MART's entire interest in the reinvestment receivables sold on that
date designated by MART as of the related Cutoff Date.
Upon the conveyance of the pre-funded receivables to the issuer:
(1) the principal balance of the receivables pool, the total yield
supplement overcollateralization amount and the adjusted
principal balance of the receivables pool will increase in an
amount equal to the principal balance, yield supplement
overcollateralization amount and the adjusted principal balance
of the pre-funded receivables, as of the related Cutoff Date,
respectively;
(2) an amount equal to 1.00% of the adjusted principal balance of the
pre-funded receivables will be withdrawn from the pre-funding and
reinvestment account and deposited in the reserve account; and
(3) an amount equal to the projected Yield Supplement Amounts for all
future payment dates for the pre-funded receivables will be
withdrawn from the pre-funding and reinvestment 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.
All of the pre-funded receivables are Long Deferment Period Receivables.
None of the pre-funded receivables are balloon payment receivables.
On each payment date during the Pre-Funding and Reinvestment Period, the
issuer intends to use prepayments on Long Deferment Period Receivables
received during the prior month to purchase additional receivables from MART.
On each payment date during this period, the issuer will apply
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prepayments on Long Deferment Period Receivables received during the prior
month to purchase additional receivables to the extent that payment of those
prepayments to noteholders would cause the principal of the notes to be
repaid at a faster rate than would be the case if those receivables pre-paid
at the anticipated prepayment rate for non-deferred payment receivables. None
of these additional receivables will be deferred payment receivables. Each
group of additional receivables acquired by the issuer during the Pre-Funding
and Reinvestment Period with prepayments on Long Deferment Period Receivables
will have the following characteristics:
o the weighted average number of payments remaining until the maturity
of the receivables in that group will not be more than 60 payments;
o the total balloon payments of the receivables in that group as a
percentage of the total principal balance of the receivables in that
group will not be more than 7.75%;
o none of the receivables in that group will be deferred payment
receivables; and
o the total principal balance of the limited credit experience
receivables in that group as a percentage of the total principal
balance of the receivables in that group will be not more than
3.00%.
Any conveyance of receivables during the Pre-Funding and Reinvestment
Period requires the satisfaction, on or before the date of conveyance, of the
following conditions precedent, among others:
o each of the receivables transferred to the issuer 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 issuer, 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 issuer, with a copy to
the indenture trustee, a written assignment conveying those
receivables to the issuer, including a schedule identifying the
receivables;
o MART must have delivered opinions of counsel relating to the
transfer of those receivables to the owner trustee, the indenture
trustee, the representative of the underwriters, and each of Moody's
and S&P; 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 issuer on that date.
Except for the criteria described in the two preceding paragraphs, there
will be no required characteristics of receivables transferred to the issuer
after the closing date. For this reason, following the transfer of
receivables to the issuer on any date during the Pre-Funding and Reinvestment
Period, the aggregate characteristics of the entire pool of receivables may
vary from those of the receivables transferred to the issuer 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
issuer, among other things, that:
o the information provided in the schedule of receivables transferred
to the issuer on the closing date attached to the sale and servicing
agreement and each schedule of receivables transferred to the issuer
on any date during the Pre-Funding and Reinvestment Period attached
to the related assignment is and will be correct in all material
respects;
o each contract requires the related obligor to maintain physical
damage insurance covering the financed vehicle, in the amount
determined by MMCA in accordance with its customary procedures;
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o on any date that receivables are transferred to the issuer, 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 issuer, each of
the receivables is or will be secured by a perfected first priority
security interest in the 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 issuer, the indenture trustee, the certificateholders
and the owner trustee will have no recourse against MMCA or MART for breach
of any of these representations and warranties as 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 issuer 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 issuer will appoint the servicer as initial
custodian of the contracts. The servicer, in its capacity as custodian, will
hold all documents and instruments relating to the contracts, either directly
or through subservicers, on behalf of the indenture trustee and the issuer.
The contracts will not be stamped or otherwise marked to reflect the sale and
assignment of the receivables to the issuer 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 issuer will be filed, and
the servicer's accounting records and computer systems will be marked to
reflect that sale and assignment. See "The Issuer" and "Some Important Legal
Aspects of the Receivables."
THE PRE-FUNDING AND REINVESTMENT PERIOD
The issuer will pay the purchase price for the pre-funded receivables with
funds deposited in the pre-funding and reinvestment account on the closing
date. MART will deposit the pre-funding initial deposit in the pre-funding
and reinvestment account on the closing date. MART expects to sell the
pre-funded receivables to the issuer on or before October 16, 2000. Before
being used to purchase receivables or to pay noteholders, funds on deposit in
the pre-funding and reinvestment account will be invested in investments as
permitted by the sale and servicing agreement. See "Terms of the
Notes--Mandatory Prepayment."
On each payment date during the Pre-Funding and Reinvestment Period, the
issuer will be required to purchase reinvestment receivables having a total
adjusted principal balance equal to the Required Reinvestment Amount.
However, the issuer's obligation to purchase reinvestment receivables on
any payment date during the Pre-Funding and Reinvestment Period will be
subject to the availability of receivables satisfying the selection criteria
in the sale and servicing agreement. Accordingly, the total adjusted
principal balance of reinvestment receivables which the issuer will purchase
on any payment date during the Pre-Funding and Reinvestment Period will be
the lesser of:
o the total adjusted principal balance of receivables available for
purchase on that payment date that satisfy the selection criteria in
the sale and servicing agreement; and
o the Required Reinvestment Amount for that payment date.
If on the business day before any payment date through May 15, 2001 MART
does not have receivables that satisfy the selection criteria in the sale and
servicing agreement with a total adjusted principal balance equal to the
Required Reinvestment Amount for that payment date, the excess cash
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either will be deposited to the pre-funding and reinvestment account until
sufficient receivables are available for purchase or paid to the noteholders
as an early payment of principal. The excess cash will be held in the
pre-funding and reinvestment account only if the amount on deposit in the
negative carry account would at least equal the maximum amount specified for
that account after giving effect to the deposit of the excess cash to the
pre-funding and reinvestment account. If there is a shortfall in the funds in
the negative carry account, MMCA has the option, but not the obligation, to
deposit funds in the amount of the shortfall into the negative carry account.
Although MMCA intends to make these deposits, if MMCA chooses not to make the
deposit, the excess cash will be paid to the noteholders as an early
repayment of principal on the notes.
The net earnings from the investment of funds on deposit in the
pre-funding and reinvestment account will be transferred to the collection
account on a monthly basis on the business day preceding each payment date.
The Pre-Funding and Reinvestment Period is expected to begin on the
closing date and to end on May 15, 2001, but will end earlier if:
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 a party to various insolvency events.
Any funds remaining on deposit in the pre-funding and reinvestment account
at the end of the Pre-Funding and Reinvestment 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 of any representation or warranty as to the
receivables, which materially and adversely affects the interest of the
issuer 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 issuer, and MMCA will be required to
repurchase the receivable from MART for an amount equal to the purchase
amount of the receivable. See "--Sale and Assignment."
The purchase amount will be payable on the payment date immediately
following that calendar month. The purchase amount of a receivable to be
purchased on any payment date will equal the sum of:
o the outstanding principal balance of the receivable as of the first
day of the preceding calendar month; and
o 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.
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 issuer, the indenture trustee, the certificateholders or the
owner trustee against MART and MMCA for any uncured breach or failure.
SERVICING PROCEDURES
The servicer will make reasonable efforts to collect all payments due on
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
for comparable motor vehicle receivables owned and/or serviced by the
servicer for itself or others.
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MMCA performs certain of its serving functions utilizing employees of its
parent, MMSA. Although it has no current plans to do so, the servicer may
enter into subservicing agreements with servicers unaffiliated with MMCA 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 issuer 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 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; and
- agree to maintain the confidentiality of that software, 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 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 issuer, 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 issuer, 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 for comparable motor
vehicle receivables that it services for itself or others in
accordance with its customary standards if the cumulative
extensions on any contract shall not cause the term of that
contract to extend beyond February 2007; provided further, that
the extensions, in total, do not exceed two months for each
twelve months of the original term of the contract; and
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- if the obligor on a Long Deferment Period Receivable has made one
or more partial prepayments on the receivable on or before the
date the first scheduled payment was due under that receivable,
the Servicer may, at any time on or before May 15, 2001, modify
the terms of the receivable including reducing the amount of the
scheduled payments. However, the servicer may not:
o change the annual percentage rate of the receivable; or
o change the date on which the final scheduled payment under
the receivable was due from the date specified in the related
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 issuer. 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 normally requires the servicer to charge
off a receivable in conformity with its normal practice. It will usually also
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 vehicle has been repossessed
and sold, or at the time as MMCA determines that it will not recover the
vehicle. The servicer may sell the 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:
o the issuer;
o the indenture trustee;
o the owner trustee;
o the noteholders;
o the certificateholders; and
o MART
against any and all 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
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 issuer, 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 the sum of 1.00% of the total principal balance of the
receivables--other than deferred payment receivables, plus 0.25% of the total
principal balance of
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deferred payment receivables, in each case, as of the first day of the
calendar month. A receivable ceases to be a deferred payment receivable on
the last day of the calendar month prior to the calendar month in which the
first scheduled payment on that receivable becomes due. 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, all disposition fees paid as to receivables providing for balloon
payments, all administrative fees and charges, and all late payment fees paid
as 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 as 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, 2001, 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, 2001, 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--or shorter period in the case of the first
report--ended the preceding December 31 or, if there has been a default in
the fulfillment of any of those obligations, 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 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.
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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 evidencing not less than 25% of the total principal
amount of the outstanding notes, or 25% of the certificate balance,
as applicable;
o various events of bankruptcy, receivership, insolvency, readjustment
of debt, marshalling of assets and liabilities, or similar
proceedings as to MART or the servicer and various actions by MART
or the servicer indicating its insolvency or reorganization under
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 total 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 total 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, according 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
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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 total 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, as
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 total principal amount of then outstanding notes, voting as a
group, and the holders of certificates evidencing not less than 51% of the
certificate balance.
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 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 total 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, without
the consent of all adversely affected noteholders or
certificateholders;
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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;
o 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 total principal amount of the then outstanding notes
of that class as to any amendment to the sale and servicing
agreement or the trust agreement; or
o amend the provisions of the trust agreement setting forth the
permitted activities of the trust.
Additionally, as 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 ISSUER
The issuer 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 under 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 with the issuer 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 issuer, on any
payment date occurring in a subsequent calendar month, all remaining
receivables transferred to the issuer 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 ISSUER
The indenture trustee will give written notice of termination of the
issuer 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 with the
issuer, 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 issuer 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
The discussion below examines the material legal aspects of the
receivables under applicable federal and state laws including the laws of
California and Texas, the states in which the largest number of obligors
reside.
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BANKRUPTCY CONSIDERATIONS
MMCA and MART intend that each transfer of receivables by MMCA to MART be
structured so 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 were to become part of 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.
ISSUER'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 issuer, 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 issuer following the sale and assignment of the
receivables to the issuer on any date. MART will take the action as is
required to perfect the rights of the indenture trustee and the issuer in the
receivables. The receivables will not be stamped, or otherwise marked, to
indicate that they have been sold to the issuer. 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 issuer's
interest, the purchaser or secured party will acquire an interest in the
receivables superior to the interest of the issuer.
The servicer will be obligated to take those actions which are necessary
to protect and perfect the issuer'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 vehicles by dealers to
obligors; the contracts also constitute personal property security agreements
and include grants of security interests in the vehicles under the Uniform
Commercial Code. Perfection of security interests in the vehicles is usually
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. In California and
Texas, a security interest in a vehicle is perfected by recording the
security interest on the vehicle's certificate of title.
MMCA will assign its security interests in the vehicles securing the
related receivables to MART and MART will subsequently assign its security
interests in the vehicles to the issuer. However, because of the
administrative burden and expense, MMCA, the servicer, MART and the issuer
will not amend any certificate of title to identify the issuer as the new
secured party on the certificates of title relating to the vehicles. Also,
the servicer will continue to hold any certificates of title relating to the
vehicles in its possession as custodian for the issuer.
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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 issuer against the rights of subsequent purchasers of a vehicle
or subsequent lenders who take a security interest in a vehicle. If there are
any 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 vehicles and holders of perfected security interests.
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 the breach materially adversely affects the interest of
the issuer in the receivable. By not identifying the issuer as the secured
party on the certificate of title, the issuer's interest in the chattel paper
may not have the benefit of the security interest in the vehicle in all
states or the security interest could be defeated through fraud or
negligence. MART will assign its rights under the purchase agreement to the
issuer. If the issuer does not have a perfected security interest in a
vehicle, its ability to realize on the 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 vehicle brought
into California will be perfected under the laws of the state which issued
the certificate of title until four months after the vehicle was removed from
that state. The security interest in a vehicle brought into Texas will remain
perfected for four months after the vehicle first enters Texas and will then
become unperfected if no action is taken to perfect the vehicle in Texas. A
majority of states, including California, require surrender of a certificate
of title to re-register a vehicle. If a vehicle brought into Texas from
another state is required to be registered in Texas, satisfactory evidence of
title is required before the vehicle can be sold or transferred in Texas.
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, 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
vehicles.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes may take priority over even a perfected
security interest in a vehicle. California gives priority to those liens
given by statute or rule of law. In Texas, liens for work intended to enhance
or preserve the value of the vehicle, such as a mechanic's lien, may take
priority over even a perfected security interest in that vehicle. The
Internal Revenue Code of 1986, as amended, also grants priority to some
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 some
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.
MMCA will represent to MART and MART will represent to the issuer that the
issuer's security interest in each 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 vehicle. However, liens for repairs or taxes,
or the confiscation of a vehicle, could arise or occur at any time during the
term of a receivable. No notice will
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be given to the owner trustee, certificateholders, and the indenture trustee
or noteholders in the event 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 preceding occurrences result in the issuer losing the
priority of its security interest or its security interest in the vehicle
after the date a receivable is sold to the trust.
REPOSSESSION
In the event of default by a purchaser of a 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 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. 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.
In California, the secured party must give written notice to a defaulting
obligor at least fifteen days before a public sale or before the day on or
after which any private sale of the collateral is to be made. Texas requires
the secured party to provide a defaulting obligor with reasonable notice of
the time and place of any public sale and/or the time after which any private
sale of the collateral may be held. In both Texas and California, 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, and reasonable attorney's fees and
legal expenses.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of a repossessed vehicle will usually 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 these 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 will normally seek to recover any deficiency existing after repossession
and sale of a vehicle.
OBLIGOR'S RIGHT TO EXCESS PROCEEDS UPON SALE OF A 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 on the vehicle sold or if no lienholder exists or there
are remaining funds, the Uniform Commercial Code requires the lender to remit
the surplus to the former obligor.
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CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers
involved in consumer finance. These laws include:
o the Truth-in-Lending Act;
o the Equal Credit Opportunity Act;
o the Federal Trade Commission Act;
o the Fair Credit Reporting Act;
o the Fair Debt Collection Practices Act;
o the Magnuson-Moss Warranty Act;
o the Federal Reserve Board's Regulations B and Z;
o state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code; and
o 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. Those 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 like 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 have been 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 some 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 fall under the requirements of the FTC rule.
Also, the issuer, as holder of the related receivables, will be liable to any
claims or defenses that a purchaser of a vehicle may assert against the
seller of the vehicle. Those 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 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 be 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 often 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.
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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 issuer for violation of any law and the claim materially
and adversely affects the issuer'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.
LEGAL INVESTMENT
The class A-1 notes are structured to be eligible for purchase by money
market funds under Rule 2a-7 under the Investment Company Act of 1940, as
amended. A money market fund should consult its legal advisors regarding
whether an investment by the money market fund in the class A-1 notes
satisfies the money market fund's investment policies and objectives.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion 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 ISSUER UNDER FEDERAL INCOME TAX LAW
Tax Status of the Notes and the Issuer. 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 issuer 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 issuer.
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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 issuer 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 issuer 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 1.3% 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:
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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
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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 penalty 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 issuer 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.
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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
issuer or a "controlled foreign corporation" with respect to which
the issuer 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 issuer 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 issuer 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.
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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 and some 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 an 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 an excise tax under the tax code or 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 issuer were deemed to be assets of an employee benefit
plan for purposes of ERISA or the tax code, some transactions involving the
issuer 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 issuer would be treated as plan
assets of an employee benefit plan that invested in the issuer for purposes
of ERISA and the tax code if the employee benefit plan acquired an "Equity
Interest" in the issuer and none of the exceptions contained in the
regulation were applicable.
Under this regulation, a security is treated as Equity Interest unless it
is treated as a debt security under applicable local law and it has no
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
issuer, 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 excise tax and penalties that would otherwise be
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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 penalties 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 published final regulations effective January
5, 2000 with respect to insurance policies issued on or before December 31,
1998 that are supported by an insurer's general account. As a result of these
regulations, assets of an insurance company general account will not be
treated as "plan assets" for purposes of the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code to the extent such assets
relate to contracts issued to employee benefit plans on or before December
31, 1998 and the insurer satisfies various conditions. Section 401(c) also
provides that, until July 5, 2001, 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 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. The regulations do not 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.
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UNDERWRITING
Under the terms and conditions set forth in the class A underwriting
agreement for the class A notes and in the class B underwriting agreement for
the class B notes, MART has agreed to sell to each of the underwriters named
below in this paragraph, and each of the underwriters, for whom Salomon Smith
Barney Inc. 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 PRINCIPAL
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
OF CLASS A-1 OF CLASS A-2 OF CLASS A-3 OF CLASS A-4 OF CLASS B
UNDERWRITERS NOTES NOTES NOTES NOTES NOTES
------------------------------------- ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
<C>
SALOMON SMITH BARNEY INC.............. $ 58,500,000 $105,000,000 $ 50,000,000 $146,000,000 $ 58,500,000
J.P. MORGAN SECURITIES INC............ 58,500,000 105,000,000 50,000,000 146,000,000 58,500,000
CHASE SECURITIES INC.................. 12,000,000 35,000,000 35,000,000 23,000,000 0
DEUTSCHE BANK SECURITIES INC.......... 12,000,000 35,000,000 35,000,000 23,000,000 0
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED.............. 12,000,000 35,000,000 35,000,000 23,000,000 0
MORGAN STANLEY & CO. INCORPORATED .... 12,000,000 35,000,000 35,000,000 23,000,000 0
------------ ------------ ------------ ------------ -----------
TOTAL................................. $165,000,000 $350,000,000 $240,000,000 $384,000,000 $117,000,000
============ ============ ============ ============ ===========
</TABLE>
In the class A underwriting agreement, the several underwriters for the
class A notes have agreed, in accordance with the terms and conditions set
forth in the class A underwriting agreement, to purchase all the class A
notes offered hereby, with the exception of the portion of class A-2 notes
and the class A-3 notes being sold directly to affiliates of Merrill Lynch,
Pierce, Fenner & Smith Incorporated. The closing of the sale of the class A
notes is conditioned upon the issuance of the class B notes and the
certificates. In the event of a default under the class A underwriting
agreement by any underwriter that is a party to the class A underwriting
agreement, the class A underwriting agreement provides that, in some
circumstances, purchase commitments of the non-defaulting underwriters may be
increased or the class A underwriting agreement may be terminated.
In the class B underwriting agreement, the several underwriters for the
class B notes have agreed, in accordance with the terms and conditions set
forth in the class B underwriting agreement, to purchase all the class B
notes offered hereby. The closing of the sale of the class B notes is
conditioned upon the issuance of the certificates. In the event of a default
under the class B underwriting agreement by any underwriter that is a party
to the class B underwriting agreement, the class B underwriting agreement
provides that, in some circumstances, purchase commitments of the
non-defaulting underwriters may be increased or the class B 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, the Class A-4 notes and the Class B notes, will
be as follows:
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND NET PROCEEDS SELLING
PLACEMENT FEES TO THE SELLER CONCESSIONS REALLOWANCE
-------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
Class A-1 notes............ 0.100% 99.90000% 0.060% 0.040%
Class A-2 notes............ 0.170% 99.80997% 0.100% 0.060%
Class A-3 notes............ 0.210% 99.78794% 0.130% 0.080%
Class A-4 notes............ 0.230% 99.75259% 0.140% 0.080%
Class B notes.............. 0.325% 99.57628% 0.195% 0.120%
Total for all of the
notes.................... $3,307,450.00 $1,652,399,949.20
============== ================
</TABLE>
The transaction expenses payable by MART are estimated to be $1,020,000.
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.
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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 that syndicate member are purchased in a
syndicate covering transaction to cover syndicate short positions. Those
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 those transactions.
In addition, MART has agreed to cause the issuer to sell directly to an
affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated a total
principal amount of $50,000,000 of Class A-2 notes and to sell to another
affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated a total
principal amount of $100,000,000 of Class A-2 notes and $250,000,000 of Class
A-3 notes. Each affiliate has agreed in a separate note purchase agreement to
purchase at the public offering price set forth in this prospectus. MART has
agreed to pay to Merrill Lynch, Pierce, Fenner & Smith Incorporated as
placement agent a placement fee of 0.170% of the principal amount of the
Class A-2 notes and 0.210% of the principal amount of the Class A-3 notes
purchased by the affiliates.
The indenture trustee may, from time to time, invest the funds in the
accounts of the issuer 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 and the placement
agent against specified liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the
underwriters or the placement agent may be required to make.
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 issuer and the receivables, will be prepared by the servicer
and sent on behalf of the issuer only to DTC or Cede & Co. as nominee of DTC
and registered holder of the notes. Those notices, reports and statements
will not contain audited financial statements for the issuer. The servicer
also does not intend to send any financial reports of the servicer or MART to
noteholders. See "Terms of the Notes--Principal Amount and Interest Rates,"
"--Book Entry Registration" and "--Issuance of Definitive Notes Upon the
Occurrence of Various Circumstances."
WHERE YOU CAN FIND MORE INFORMATION
MART, as originator of the issuer, 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.
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The servicer, on behalf of MART in its capacity as originator of the
issuer, will file or cause to be filed with the Securities and Exchange
Commission periodic reports for the issuer 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.
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GLOSSARY
"Accrued Note Interest" means, for 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" mean receivables which provide for amortization of
the loan over a series of fixed level monthly installments. Actuarial
Receivables which are also Balloon Payment Receivables amortize the
receivable to the Balloon Payment. Each monthly installment, including the
monthly installment representing the Balloon Payment, 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.
"Adjusted Principal Balance" means, for any receivable and on any date,
the principal balance of that receivable, minus the Yield Supplement
Overcollateralization Amount for that receivable, as of that date.
"Available Funds" means, for any payment date:
(1) an amount equal to the sum of the following amounts for the
preceding calendar month:
o all collections on the contracts, including amounts withdrawn from
the payahead account;
o the proceeds of sale by the issuer of any vehicle sold by the issuer
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 the 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 as to the contracts;
o the purchase amount of each receivable purchased from the issuer
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, like 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 and
reinvestment account to the extent deposited to the collection
account on that payment date by the indenture trustee; and
o on the payment date on or immediately following the last day of the
Pre-Funding and Reinvestment Period, any funds remaining in the
pre-funding and reinvestment account, calculated after giving effect
to the purchase of all receivables purchased by the issuer during
the Pre-Funding and Reinvestment Period,
minus
(2) the sum of the 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,
minus
(3) if the payment date occurs during the Pre-Funding and Reinvestment
Period, the sum of the total principal balance of reinvestment
receivables transferred to the issuer on that payment date and the
Excess Cash, if any, deposited to the pre-funding and reinvestment
account on the business day preceding the payment date.
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"Balloon Payment" means, as 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 August 16, 2000.
"Cutoff Date" means, as to receivables transferred to the issuer, (1) on
the Closing Date, July 31, 2000, and (2) during the Pre-Funding and
Reinvestment Period, the date which will be on or before the date of
transfer, as of which the issuer will be entitled to collections of the
receivables.
"Deferred Payment Receivable" means any receivable for which no scheduled
payment is due until a date more than 50 days from the date of the contract.
A receivable will no longer be considered a deferred payment receivable
beginning on the last day of the calendar month preceding the calendar month
in which the first scheduled payment is due.
"Excess Cash" means, for any payment date, the excess, if any, of the
Required Reinvestment Amount for that payment date, over the total Adjusted
Principal Balance of receivables satisfying the selection criteria in the
sale and servicing agreement that are available to be transferred to the
issuer on that payment date.
"Initial Pool Balance" means the sum of (a) the principal balance of the
receivables pool as of the initial Cutoff Date, plus (b) the total principal
balance of all receivables transferred to the issuer during the Pre-Funding
and Reinvestment Period, calculated as of the related Cutoff Dates.
"Initial Receivables" means the receivables having a total principal
balance of $1,691,514,913.43 that will be transferred to the issuer on the
Closing Date.
"Interest Carryover Shortfall" means, on 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 as 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.
"Long Deferment Period Receivable" means a Deferred Payment Receivable for
which the first payment is deferred for between 11 and 16 months. The first
scheduled payment on Long Deferment Period Receivables is due during February
2001.
"Maximum Negative Carry Amount" means, the sum of (1) $725,499.28 until
October 16, 2000, and zero after that date, and (2) the product of the
product of (x) the weighted average interest rate on the notes as of that
date minus 2.5%, multiplied by (y) the product of the Note Percentage as of
that date and the amount, if any, of Excess Cash on deposit in the
pre-funding and reinvestment account as of that date, multiplied by (z) the
percentage equivalent of a fraction, the numerator of which is the actual
number of days until the expected end of the Pre-Funding and Reinvestment
Period and the denominator of which is 360.
"MART" means MMCA Auto Receivables Trust.
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<PAGE>
"Minimum Adjusted Principal Balance of Long Deferment Period Receivables"
means, the amount shown in the table below for each of the following dates:
<TABLE>
<CAPTION>
DATE AMOUNT
------------------ -------------------
<S> <C> <C>
August 16, 2000 $ 799,807,920.74
September 15, 2000 $ 785,099,775.07
October 16, 2000 $ 770,412,172.80
November 15, 2000 $ 755,745,724.75
December 15, 2000 $ 741,101,050.39
January 15, 2001 $ 726,478,777.87
February 15, 2001 $ 699,647,936.91
March 15, 2001 $ 673,217,501.48
April 16, 2001 $ 647,192,745.10
May 15, 2001 $ 621,579,000.78
</TABLE>
"Minimum Adjusted Principal Balance of Receivables" means, the amount
shown in the table below for each of the following dates:
<TABLE>
<CAPTION>
DATE AMOUNT
------------------ ---------------------
<S> <C> <C>
August 16, 2000 $ 1,800,000,015.15
September 15, 2000 $ 1,774,476,772.64
October 16, 2000 $ 1,749,181,383.62
November 15, 2000 $ 1,724,117,154.08
December 15, 2000 $ 1,699,287,430.10
January 15, 2001 $ 1,674,695,598.28
February 15, 2001 $ 1,650,345,086.21
March 15, 2001 $ 1,605,221,083.11
April 16, 2001 $ 1,560,539,474.86
May 15, 2001 $ 1,516,306,554.52
</TABLE>
"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, for 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 total 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 the 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 and Excess Cash 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 and Excess Cash Amount for the
related collection period (or in the case of the first payment date, from the
Closing Date until August 31, 2000).
"Note Percentage" means, as of any payment date, the percentage equivalent
of a fraction, the numerator of which is the total principal amount of the
notes as of that payment date, and the denominator of which is an amount
equal to the sum of the total principal amount of the notes as of that
payment date and the total 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.
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<PAGE>
"Pre-Funded and Excess Cash Amount" means, as of any date, the amount on
deposit in the pre-funding and reinvestment account on such date exclusive of
any interest and other income (net of losses and expenses) on amounts on
deposit in the pre-funding and reinvestment account.
"Pre-Funded and Excess Cash Percentage" means, as of any date, the
percentage equivalent of a fraction, the numerator of which is the Pre-Funded
and Excess Cash Amount and the denominator of which is the sum of the
principal balance of the receivables pool and the Pre-Funded and Excess Cash
Amount, in each case as of that date after taking into account all
withdrawals from the pre-funding and reinvestment account and all transfers
of contracts transferred to the issuer after the Closing Date on or before
that date.
"Pre-Funded Receivables" means Long Deferment Period Receivables having a
total principal balance of $222,347,151.43 as of the initial Cutoff Date,
which MART intends to transfer to the issuer on or prior to October 16, 2000.
"Pre-Funding and Reinvestment Period" means a period beginning on the
Closing Date and ending on the earliest of (a) the date on which an event of
default or an event of servicing termination occurs, (b) the date on which an
insolvency event occurs as to the seller or the servicer and (d) the close of
business on May 15, 2001.
"Pre-Funding Initial Deposit" means $230,470,027.84.
"Principal Distribution Amount" means, for any payment date:
o the sum of the outstanding balance of the notes and the certificates
on the last day of the preceding month; minus
o the total principal amount of the receivables on the last day of the
preceding month; minus
o the total yield supplement overcollateralization amount on the last
day of the preceding month; minus
o the amount on deposit in the pre-funding and reinvestment account on
that payment date.
On the last day of the Pre-Funding and Reinvestment Period, the Principal
Distribution Amount also will include all amounts remaining in the
pre-funding and reinvestment account.
"Reinvestment Receivables" means additional receivables purchased by MART
from MMCA and transferred by MART to the issuer during the Pre-Funding and
Reinvestment Period with prepayments on Long Deferment Period Receivables.
"Required Reinvestment Amount" means, for any payment date, an amount
equal to the lesser of (i) the excess, if any, of (a) the Minimum Adjusted
Principal Balance of Long Deferment Period Receivables, as of the last day of
the preceding calendar month, over (b) the sum of (x) the total Adjusted
Principal Balance of Long Deferment Period Receivables, as of the last day of
the preceding calendar month, (y) the total Adjusted Principal Balance of
Reinvestment Receivables, and (z) the Pre-Funded and Excess Cash Amount as of
the last day of the preceding collection period, and (ii) the excess, if any,
of the Minimum Adjusted Principal Balance of Receivables, over the Adjusted
Principal Balance of all of the receivables then owned by the issuer, in each
case, as of the last day of the preceding calendar month.
"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. 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.
"Specified Reserve Balance" means, for any payment date, an amount equal
to the lesser of:
(1) the sum of (x) 2.25% of the Adjusted Principal Balance of the
initial receivables transferred to the issuer on the Closing Date,
calculated as of the initial Cutoff Date, and (y) 2.25% of the
Adjusted Principal Balances of subsequent receivables transferred
to the issuer after that date, calculated as of the related Cutoff
Dates; and
90
<PAGE>
(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 reserve account on
that payment date.
"Total Required Payment" means, for any payment date, the sum of:
(1) the total due and unpaid servicing fee;
(2) the Accrued Note Interest; and
(3) the Principal Distribution Amount on that payment date.
"Total Yield Supplement Overcollateralization Amount" means, for any
payment date, the sum of the Yield Supplement Overcollateralization Amounts
with respect to all receivables, other than defaulted receivables or
receivables purchased by the servicer or repurchased by MART.
"Yield Supplement Amount" for any payment date, will be determined by
aggregating for all of the Deferred Payment Receivables, other than (i) a
defaulted receivable or a receivable purchased by the servicer or repurchased
by MART, 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, the amount
equal to the product of (x) one-twelfth multiplied by (y) the adjusted
principal balance of that receivable on the first day of the preceding
calendar month and multiplied by (z) the weighted average interest rate on
the notes and the certificates on the Closing Date plus 0.25%.
"Yield Supplement Overcollateralization Amount" means, for any payment
date and any receivable other than a defaulted receivable or a receivable
purchased by the servicer or repurchased by MART, the excess, if any, of:
o the present value of the remaining scheduled payments due on the
receivable discounted at a rate equal to the annual percentage rate
provided in the contract; over
o the present value of the remaining scheduled payments due on the
receivable discounted at a rate equal to 9.5%.
91
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<PAGE>
PROSPECTUS
$1,656,000,000
MMCA AUTO OWNER TRUST 2000-1
$165,000,000 6.72625% CLASS A-1 ASSET BACKED NOTES
$500,000,000 6.95% CLASS A-2 ASSET BACKED NOTES
$490,000,000 7.00% CLASS A-3 ASSET BACKED NOTES
$384,000,000 7.08% CLASS A-4 ASSET BACKED NOTES
$117,000,000 7.55% CLASS B ASSET BACKED NOTES
MMCA AUTO RECEIVABLES TRUST
SELLER
[MITSUBISHI LOGO]
SERVICER
UNDERWRITERS OF THE CLASS A NOTES
SALOMON SMITH BARNEY
J.P. MORGAN & CO.
CHASE SECURITIES INC.
DEUTSCHE BANC ALEX. BROWN
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
UNDERWRITERS OF THE CLASS B NOTES
SALOMON SMITH BARNEY
J.P. MORGAN & CO.
You should rely only on the information contained 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 for 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
November 14, 2000.
