<PAGE>
Filed Pursuant to Rule 424(b)(1)
Registration File No.:333-45842,-01
PROSPECTUS
$924,806,000
MMCA AUTO OWNER TRUST 2000-2
$125,000,000 6.72813% CLASS A-1 ASSET BACKED NOTES
$300,000,000 6.72% CLASS A-2 ASSET BACKED NOTES
$260,000,000 6.78% CLASS A-3 ASSET BACKED NOTES
$174,467,000 6.86% CLASS A-4 ASSET BACKED NOTES
$65,339,000 7.42% CLASS B ASSET BACKED NOTES
MMCA AUTO RECEIVABLES TRUST
SELLER
[GRAPHIC OMITTED]
SERVICER
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS
PRICE* AND COMMISSIONS NET PROCEEDS TO SELLER
---------------------------------- --------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 Notes ..... $125,000,000 (100.000000%) $ 125,000 (0.100%) $124,875,000 (99.900000%)
Class A-2 Notes ..... $299,981,880 ( 99.993960%) $ 510,000 (0.170%) $299,471,880 (99.823960%)
Class A-3 Notes ..... $259,992,582 ( 99.997147%) $ 546,000 (0.210%) $259,446,582 (99.787147%)
Class A-4 Notes ..... $174,448,400 ( 99.989339%) $ 453,614 (0.260%) $173,994,786 (99.729339%)
Class B Notes ....... $ 65,323,525 ( 99.976316%) $ 212,352 (0.325%) $ 65,111,173 (99.651316%)
------------ ---------- ------------
Total ............ $924,746,387 $1,846,966 $922,899,421
============ ========== ============
</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.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 5.
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
CHASE SECURITIES INC.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
UNDERWRITER OF THE CLASS B NOTES
SALOMON SMITH BARNEY
The date of this Prospectus is November 10, 2000
<PAGE>
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<PAGE>
TABLE OF CONTENTS
PAGE
---------------
IMPORTANT NOTICE ABOUT
INFORMATION PRESENTED IN
THIS PROSPECTUS ......................... iii
SUMMARY OF TERMS ........................... 1
RISK FACTORS ............................... 5
THE ISSUER ................................. 11
Limited Purposes and Limited Assets...... 11
Capitalization of the Issuer ............ 12
The Owner Trustee ....................... 12
PROPERTY OF THE ISSUER ..................... 12
MMCA'S CONTRACT PORTFOLIO .................. 13
Types of Contracts Included in
MMCA's Contract Portfolio ............ 13
Underwriting Standards .................. 13
Servicing and Collection Procedures ..... 14
Physical Damage Insurance on
MMCA's Contracts ..................... 14
Delinquency and Loss Data of
MMCA's Contracts ..................... 14
THE RECEIVABLES POOL ....................... 17
Selection Criteria ...................... 18
Characteristics of the Receivables
Pool ................................. 19
Payment Methods ......................... 22
Deferred Payment Receivables ............ 22
Balloon Payment Receivables ............. 23
Defaulted Receivables ................... 24
Maturity and Prepayment
Considerations ....................... 24
HOW NOTEHOLDERS CAN
COMPUTE THEIR PORTION OF
THE AMOUNT OUTSTANDING
ON THE NOTES ............................ 32
USE OF PROCEEDS ............................ 32
MMCA AUTO RECEIVABLES
TRUST ................................... 33
THE SERVICER ............................... 33
TERMS OF THE NOTES ......................... 33
Principal Amount and Interest Rates...... 33
Interest Payments ....................... 34
Principal Payments ...................... 35
Optional Redemption ..................... 36
The Indenture Trustee ................... 36
The Yield Supplement Agreement
and Yield Supplement Account ......... 36
The Issuer's Bank Accounts .............. 37
Indenture Cash Flows .................... 38
PAGE
---------------
Yield Supplement
Overcollateralization Amount ......... 40
The Reserve Account ..................... 41
Subordination of the Class B Notes ...... 42
Subordination of the Certificates ....... 42
Advances by the Servicer of Amounts
Payable on the Receivables ........... 42
Deposit of Collections on the
Receivables to the Collection
Account .............................. 43
Statements to Noteholders ............... 43
Book Entry Registration ................. 44
Issuance of Definitive Notes Upon
the Occurrence of Various
Circumstances ........................ 49
Terms of the Indenture .................. 49
THE SALE AND SERVICING
AGREEMENT AND THE TRUST
AGREEMENT ............................... 55
Sale and Assignment ..................... 55
Mandatory Repurchase of
Receivables .......................... 56
Servicing Procedures .................... 56
Servicing Compensation .................. 58
Evidence to be Provided as to
Servicer's Compliance with its
Servicing Obligations ................ 59
Resignation by the Servicer ............. 59
Consequences of Merger, Conversion,
Consolidation or Similar Actions by
Servicer ............................. 59
Limits on Servicer's Liability .......... 60
Limits on Servicer's Obligations in
Connection with Legal Actions ........ 60
Events of Servicing Termination ......... 60
Rights of Indenture Trustee and
Noteholders Upon an Event of
Servicing Termination Under the
Sale and Servicing Agreement ......... 61
Requirements for Amendments of the
Sale and Servicing Agreement and
the Trust Agreement .................. 61
Requirements for Termination of the
Issuer ............................... 62
Actions to be Taken by Indenture
Trustee Upon Termination of the
Issuer ............................... 62
The Administration Agreement ............ 62
i
<PAGE>
PAGE
-----
SOME IMPORTANT LEGAL
ASPECTS OF THE
RECEIVABLES ............................ 63
Bankruptcy Considerations .............. 63
Issuer's Rights in the Receivables ..... 63
Security Interests in Vehicles ......... 63
Repossession ........................... 65
Notice of Sale; Redemption Rights ...... 65
Deficiency Judgments and Excess
Proceeds ............................ 65
Obligor's Right to Excess Proceeds
Upon Sale of a Vehicle .............. 66
Consumer Protection Laws ............... 66
Other Limitations ...................... 67
LEGAL INVESTMENT .......................... 67
FEDERAL INCOME TAX
CONSEQUENCES ........................... 67
Tax Treatment of the Notes and the
Issuer under Federal Income Tax
Law ................................. 68
Federal Tax Consequences of Waivers
of Events of Default and
Amendments of Notes by
Noteholders ......................... 70
PAGE
-----
Information Reporting and Backup
Withholding of Taxes by Indenture
Trustee ............................. 70
Tax Consequences to Foreign
Investors ........................... 71
STATE TAX CONSEQUENCES .................... 72
ERISA CONSIDERATIONS ...................... 72
Special ERISA Considerations for
Employee Benefit Plans .............. 73
Special ERISA Considerations
Applicable to Insurance Company
General Accounts .................... 74
General Investment Considerations
for Employee Benefit Plans .......... 74
UNDERWRITING .............................. 75
LEGAL OPINIONS ............................ 76
REPORTS TO NOTEHOLDERS .................... 76
WHERE YOU CAN FIND MORE
INFORMATION ............................ 76
GLOSSARY .................................. 78
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 78.
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>
<S> <C>
The Issuer: MMCA Auto Owner Trust 2000-2
Seller of the Receivables to the Issuer: MMCA Auto Receivables Trust
Seller's Address: 6363 Katella Avenue, Cypress, California 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 payahead account;
o the reserve account; and
o the yield supplement 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: $125,000,000 $300,000,000 $260,000,000 $174,467,000 $65,339,000
Interest Rate Per
Annum: 6.72813% 6.72% 6.78% 6.86% 7.42%
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: December 2000 December 2000 December 2000 December 2000 December 2000
Final Payment Date: August 2001 July 2003 October 2004 June 2005 August 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.
<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 50 and 480 days--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 has a balloon
payment.
On October 31, 2000:
o The principal balance of the receivables was $1,070,509,928.25.
o The principal balance of the deferred payment receivables was
$217,215,885.28.
o The principal balance of the balloon payments was $107,047,644.89.
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 and the yield supplement
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. For example, no principal will be paid on
the class A-2 notes until the class A-1 notes have 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 of the
receivables on the last day of the preceding month.
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;
2
<PAGE>
(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 $80,418,606 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, on the first day of the
previous month; plus
o 1/12th of 0.25% of the total principal balance of deferred payment
receivables on the first day of the previous month.
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 PRINCIPAL AMOUNT OF THE NOTES AND
CERTIFICATES
The total principal amount of the notes and certificates on the closing
date will equal:
o the total principal amount of the receivables transferred to the
issuer on the closing date; minus
o the total yield supplement overcollateralization amount of the
receivables transferred to the issuer on the closing date.
TOTAL YIELD SUPPLEMENT OVERCOLLATERALIZATION
AMOUNT
On the closing date, the total yield supplement overcollateralization
amount of the receivables will be $65,285,322.65, or 6.49% of the total
principal amount of the notes and certificates on the closing date.
On any date, the total yield supplement overcollateralization amount for
the receivables will be the sum of the yield supplement overcollateralization
amount for each receivable 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 related contract; over
o the present value of the remaining scheduled payments due on the
receivable discounted at a rate equal to 9.0%.
3
<PAGE>
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:
o first, the amounts due to the servicer; and then
o the interest and principal due on the notes.
On the closing date, MART will deposit $10,052,246.06 into 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 on the closing date, 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) 6.519% 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
closing date. 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.
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.
4
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase notes.
ABSENCE OF SECONDARY MARKET The underwriters for the notes may assist in
FOR NOTES COULD LIMIT YOUR resales of the notes but they are not required
ABILITY TO RESELL NOTES 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 Another person could acquire an interest in a
IN RECEIVABLES AND FINANCED receivable that is superior to the issuer's
VEHICLES COULD REDUCE THE interest in the receivable because the servicer
FUNDS AVAILABLE TO MAKE will not segregate or mark the receivables as
PAYMENTS ON THE NOTES 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 If MMCA is the subject of a bankruptcy proceeding,
RESULT IN LOSSES OR DELAYS you could experience losses or delays in the
PAYMENTS 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 is the
subject of 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
5
<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 The first payment on $314,119,013.02 of the
TO RECEIVABLES WITH DEFERRED receivables, or 29.34% by principal balance of the
FIRST PAYMENTS receivables to be transferred to the issuer on the
closing date, is deferred for a specified period.
The value of the vehicles financed with deferred
payment receivables will be reduced during the
deferral period without any reduction of the
principal balance of the related receivables
because no payments on those receivables will be
made during the deferral period. On the date on
which the first payment is due on a deferred
payment receivable, the difference between the
value of the vehicle and the principal balance of
the related receivable will be larger than would
have been the case had the first payment on the
receivable not been deferred. MMCA does not have
extensive historical data on the default rate of
receivables with deferred first payments. The
severity of any credit loss on a deferred payment
receivable will depend, in part, on the length of
the deferral period. The severity of the credit
losses on these receivables may be higher than the
severity of the credit losses on MMCA's combined
portfolio of receivables. You may experience delays
in payments or losses on your notes if the severity
of credit losses on these receivables is higher
than expected by MMCA and the following are
insufficient to protect you against such delays or
losses:
o the protection provided to the class A notes by
the subordination of the class B notes; and
o the protection provided to all of the notes by:
o the total yield supplement overcollateralization
amount;
o the subordination of the certificates; and
o the funds on deposit in the reserve account.
See "MMCA's Contract Portfolio--Delinquency and
Loss Data of MMCA's Contracts" for information
concerning MMCA's combined portfolio of
receivables.
6
<PAGE>
POTENTIAL PREPAYMENT OF NOTES DUE TO PREPAYMENT OF
RISK THAT YOU MAY BE RECEIVABLES. Prepayments on the receivables by the
REQUIRED TO REINVEST YOUR related obligors and purchases of the receivables
PRINCIPAL IN THE NOTES AT by MART and the servicer due to breaches of
A LOWER RATE OF RETURN representations, warranties and covenants by MART
BECAUSE OF PREPAYMENTS ON and the servicer will accelerate the payment of
THE NOTES principal of your notes. The extent of this
prepayment cannot be fully predicted. You will bear
the risk that you will have to reinvest the
principal of your notes earlier than you expected
at a rate of interest that is less than the rate of
interest on your notes.
The obligors on the receivables may prepay the
receivables voluntarily at any time. The
receivables are required to be prepaid in full 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 closing date.
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 receivables with a deferred first
payment in 1999. MMCA does not have significant
historical data on the rate of prepayment of this
type of 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 deferred payment 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
7
<PAGE>
issuer. 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.
POTENTIAL LOSS ON NOTES DUE You may suffer a loss on your notes if the
TO LIMITED ASSETS OF THE assets of the issuer are insufficient to pay the
ISSUER 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 because
CREDIT RISK BECAUSE THE payments of interest on and principal of the
CLASS B NOTES ARE class B notes are subordinated to payments of
SUBORDINATE TO THE interest on and principal of the class A notes.
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 will
CONNECTION WITH SALES OF not have to pay the balloon payment if they return
VEHICLES 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 the proceeds from the sale
of the returned vehicles are less than the amount
of the balloon payments and if the following are
insufficient to protect you against these delays or
losses:
o the protection provided to the class A notes by
the subordination of the class B notes; and
o the protection provided to all of the notes by:
o the total yield supplement overcollateraliza-
tion amount;
8
<PAGE>
o the subordination of the certificates; and
o the funds on deposit in the reserve account.
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 The obligor under a balloon payment receivable has
MMCA DOES NOT REFINANCE the option to \ refinance the balloon payment with
BALLOON RECEIVABLES MMCA, if various conditions are satisfied. 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 Economic conditions in the states where the
TO GEOGRAPHIC CONCENTRATION obligors under the receivables reside may affect
OF RECEIVABLES the delinquency, loan loss and repossession
experience of the issuer with respect to the
receivables. Based on the principal balance of the
receivables on the closing date, 14.04% of the
receivables relate to obligors with a billing
address in California and 17.05% 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 the
EVENT OF DEFAULT UNDER maturity dates of the notes are accelerated, the
INDENTURE 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
9
<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.
10
<PAGE>
THE ISSUER
LIMITED PURPOSES AND LIMITED ASSETS
MMCA Auto Owner Trust 2000-2, 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 $924,806,000 of
notes and $80,418,606 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.
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
vehicles in some jurisdictions or another party could acquire an interest in
the receivables superior to the interest of the issuer. 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 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."
11
<PAGE>
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:
Class A-1 notes ......... $ 125,000,000
Class A-2 notes ......... 300,000,000
Class A-3 notes ......... 260,000,000
Class A-4 notes ......... 174,467,000
Class B notes ........... 65,339,000
Certificates ............ 80,418,606
--------------
Total ................... $1,005,224,606
==============
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 Cutoff Date
and all monies received under Simple Interest Receivables on or after
the Cutoff Date;
o amounts and property held in or credited to the collection account, the
note payment account, the payahead account and the reserve account;
o MART's rights in the yield supplement 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;
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.
12
<PAGE>
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 contracts 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 vehicle 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 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.
For most decisions about purchasing contracts, MMCA uses its in-house
credit scoring system and considers other factors to reach each credit
decision. MMCA's credit scoring system first assigns the application to one of
three credit segments: prime, non-prime and limited credit experience.
Applicants are placed in a particular segment based solely upon the information
in the applicant's credit bureau report. The credit scoring system identifies
those aspects of an applicant's credit bureau 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 also considers attributes other than
the credit score in its credit decision such as the applicant's ratio of income
to debt and the applicant's equity in the vehicle.
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
bureau reports on the business entity. In some cases, 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.
As an alternative to review under MMCA's credit scoring system, MMCA
allows dealers to use a credit bureau based Fair, Isaac & Co., Inc. -- FICO --
score and related credit bureau report obtained by the dealers from credit
bureaus specified by MMCA. MMCA will purchase the receivable from the dealer if
the applicant's credit bureau report contains characteristics matching the most
predictive characteristics of the MMCA credit scoring system and other
qualifying criteria and if the FICO score meets specified minimums. Upon
purchase of the receivable, MMCA then scores the applicants using the MMCA
scoring system for tracking purposes. Approximately one third of all
receivables purchased by MMCA are approved under this alternative program.
13
<PAGE>
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 period of time the account is
delinquent and the amount of the delinquency. 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, if any, 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 contracts. 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 experience of MMCA with its
portfolio of contracts. Those contracts include previously sold contracts which
MMCA continues to service including contracts with a deferred first payment.
Delinquency and loss experience may be influenced by a variety of economic,
social, geographic and
14
<PAGE>
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 September
30, 2000, delinquencies of between 30 and 59 days as a percentage of contracts
outstanding were about 1.72%. As of September 30, 2000, delinquencies of
between 60 and 89 days as a percentage of contracts outstanding were about
0.29%. As of September 30, 2000, delinquencies of 90 days or more as a
percentage of contracts outstanding were about 0.06%. 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 SEPTEMBER 30, AS OF DECEMBER 31,
------------------------- ---------------------------------------
2000 1999 1999 1998 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Number of Contracts Outstanding at End of
Period ................................. 223,070 130,467 149,644 127,475 120,961
Delinquencies as a Percent of Contracts
Outstanding
30-59 Days ............................. 1.72% 2.98% 2.50% 3.81% 4.45%
60-89 Days ............................. 0.29% 0.55% 0.50% 1.08% 1.58%
90 Days or More ........................ 0.06% 0.15% 0.09% 0.29% 0.52%
Repossessions as a Percent of Contracts
Outstanding ............................ 0.37% 0.59% 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;
15
<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 nine-month period ended September 30, 2000 and
for the nine-month period ended September 30, 1999, expressed as a
percentage, are annualized rates and are 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>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------------------- ---------------------------------------------------
2000 1999 1999 1998 1997
---------------- ---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Amount Outstanding ................. $ 4,045,135 $ 1,937,986 $ 2,401,448 $ 1,879,226 $ 1,729,312
Average Amount Outstanding ......... $ 3,198,203 $ 1,906,515 $ 1,954,819 $ 1,805,701 $ 1,737,477
Number of Contracts Outstanding..... 223,070 130,467 149,644 127,475 120,961
Average Number of Contracts
Outstanding ....................... 184,383 128,963 131,009 123,663 122,652
Charge-offs ........................ $ 30,592 $ 34,234 $ 44,494 $ 51,325 $ 72,986
Recoveries ......................... $ 4,769 $ 6,439 $ 8,114 $ 9,490 $ 13,089
Net Losses ......................... $ 25,823 $ 27,795 $ 36,380 $ 41,835 $ 59,897
Number of Repossessions ............ 3,058 3,258 4,201 4,796 7,338
Number of Repossessions as a
Percent of the Average Number
of Contracts Outstanding .......... 2.21% 3.37% 3.21% 3.88% 5.98%
Net Losses as a Percent of
Average Amount Outstanding ........ 1.08% 1.94% 1.86% 2.32% 3.45%
</TABLE>
RETURNED VEHICLE LOSS EXPERIENCE ON CONTRACTS PROVIDING FOR BALLOON
PAYMENTS. 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
September 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.
16
<PAGE>
CONTRACTS PROVIDING FOR BALLOON PAYMENTS: LOSS EXPERIENCE ON RETURNED VEHICLES
<TABLE>
<CAPTION>
FOR CONTRACTS
SCHEDULED TO
TERMINATE IN THE FOR CONTRACTS SCHEDULED
NINE MONTHS ENDED TO TERMINATE IN THE
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------------------- ---------------------------------------------------
2000 1999 1999 1998 1997
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Total Number of Balloon
Payment Receivables ......... 23,581 21,361 25,532 19,724 10,734
Total Number of Vehicles
Returned to MMCA through
September 30, 2000 .......... 4,901 5,266 6,139 4,758 2,928
Return Ratio ................. 20.78% 24.65% 24.04% 24.12% 27.28%
Total Losses on Returned
Vehicles Sold through
September 30, 2000 .......... $ 4,351,678 $ 6,901,631 $ 8,232,781 $ 7,709,671 $ 5,889,061
Total Number of Returned
Vehicles Sold through
September 30, 2000 .......... 4,181 5,268 6,139 4,739 2,913
Average Loss per Returned
Vehicle Sold through
September 30, 2000 .......... $ 1,041 $ 1,310 $ 1,341 $ 1,627 $ 2,022
</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 contracts 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 24.04%, 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. Under the sale
and servicing agreement, MART will transfer those receivables to the issuer on
the closing date. The receivables will be selected based on the criteria
specified in the sale and servicing agreement and described in this prospectus.
17
<PAGE>
The receivables have a total principal balance of $1,070,509,928.25,
calculated as of the Cutoff Date. Balloon payments comprised 10.00% of the
total principal balance of the receivables. Deferred payment receivables
comprised 20.29% of the total principal balance of the receivables.
None of the receivables transferred to the issuer will have a final
scheduled maturity later than May 31, 2006.
On any date after November 30, 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 November 30, 2000, the principal
balance of the receivables will equal the total principal balance of the
receivables as of the Cutoff Date less the sum of the preceding amounts
received from November 1, 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
pre-computed finance charges, of not more than $60,000 and a remaining
principal balance of not less than $100 as of the Cutoff Date;
o no receivable was more than 30 days delinquent for more than 10% of a
payment as of the Cutoff Date;
o no receivable had been pre-paid by more than six monthly payments as of
the Cutoff Date;
o no vehicle had been repossessed as of the Cutoff Date;
o each receivable is a retail 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 480 days after the date of
origination of that receivable;
o no receivable was due from an obligor who, as of the Cutoff Date, was
the subject of a proceeding under the United States Bankruptcy Code;
o no receivable is due from the United States or any state; and
18
<PAGE>
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 or by MMCA in connection with the refinancing of a
contract.
CHARACTERISTICS OF THE RECEIVABLES POOL
COMPOSITION. The following tables set forth the composition of the
receivables calculated as of the Cutoff Date. The receivables contained balloon
payment receivables with balloon payments of approximately 10.00% of the total
principal balance of the receivables on the Cutoff Date. A balloon payment
receivable may be either a Simple Interest Receivable or an Actuarial
Receivable. The receivables included deferred payment receivables of
approximately 20.29% of the total principal balance of the receivables on
Cutoff Date. All deferred payment receivables are Simple Interest Receivables.
No deferred payment receivable is also a balloon payment receivable. The
Average Balloon Payment Principal Balance is based on balloon payment
receivables balances only. See "--Balloon Payment Receivables."
COMPOSITION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<S> <C>
Balance of Receivables .................................................. $1,070,509,928.25
Level Pay Balance of Receivables ........................................ $963,462,283.36
Balloon Payment Balance of Receivables .................................. $107,047,644.89
Deferred Payment Balance of Receivables ................................. $217,215,885.28
Number of Receivables ................................................... 49,424
Average Principal Balance ............................................... $21,659.72
(Range) ................................................................ $119.44 to $48,544.71
Average Original Amount Financed ........................................ $22,327.42
(Range) ................................................................ $1,745.49 to $48,590.93
Average Level Pay Balance ............................................... $19,493.81
(Range) ................................................................ $119.44 to $48,544.71
Average Balloon Payment Principal Balance ............................... $10,943.33
(Range) ................................................................ $2,343.28 to $20,880.71
Average Deferred Payment Principal Balance .............................. $25,228.33
(Range) ................................................................ $119.44 to $45,406.88
Average Balloon Payment Principal Balance as a Percentage of the Average
Principal Balance of the Balloon Payment Receivables in the Receivables 44.33%
Weighted Average Annual Percentage Rate ................................. 6.76%
(Range) ................................................................ 0.00% to 22.25%
Weighted Average Original Number of Payments ............................ 54.96
(Range) ................................................................ 12 to 60
Weighted Average Remaining Number of Payments ........................... 53.32
(Range) ................................................................ 4 to 60
</TABLE>
19
<PAGE>
GEOGRAPHIC DISTRIBUTION. The following table shows the geographic
distribution of the principal balance of the receivables, calculated as of the
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 RECEIVABLES AS OF THE CUTOFF DATE
PERCENTAGE OF
PRINCIPAL BALANCE
STATE OF RECEIVABLES
------------------------------ --------------------
Alabama ...................... 1.94%
Alaska ....................... 0.07
Arizona ...................... 1.38
Arkansas ..................... 0.77
California ................... 14.04
Colorado ..................... 1.28
Connecticut .................. 2.14
Delaware ..................... 0.38
District of Columbia ......... 0.16
Florida ...................... 7.79
Georgia ...................... 3.68
Hawaii ....................... 0.05
Idaho ........................ 0.14
Illinois ..................... 5.74
Indiana ...................... 0.97
Iowa ......................... 0.34
Kansas ....................... 0.45
Kentucky ..................... 0.85
Louisiana .................... 3.02
Maine ........................ 0.13
Maryland ..................... 3.07
Massachusetts ................ 1.74
Michigan ..................... 0.72
Minnesota .................... 1.40
Mississippi .................. 0.79
Missouri ..................... 1.30
Montana ...................... 0.08
PERCENTAGE OF
PRINCIPAL BALANCE
STATE OF RECEIVABLES
------------------------------ --------------------
Nebraska ..................... 0.28%
Nevada ....................... 0.74
New Hampshire ................ 0.38
New Jersey ................... 3.16
New Mexico ................... 0.46
New York ..................... 5.38
North Carolina ............... 1.69
North Dakota ................. 0.03
Ohio ......................... 2.12
Oklahoma ..................... 0.89
Oregon ....................... 0.66
Pennsylvania ................. 2.72
Rhode Island ................. 0.31
South Carolina ............... 1.55
South Dakota ................. 0.07
Tennessee .................... 1.53
Texas ........................ 17.05
Utah ......................... 0.94
Vermont ...................... 0.04
Virginia ..................... 2.80
Washington ................... 1.25
West Virginia ................ 0.19
Wisconsin .................... 1.24
Wyoming ...................... 0.05
Other ........................ 0.03
------
Total ........................ 100.00%
======
20
<PAGE>
DISTRIBUTION BY ANNUAL PERCENTAGE RATE. The following table shows the
distribution by annual percentage rate of the principal balance of the
receivables, calculated as of the Cutoff Date. The Principal Balance of
Receivables 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 RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
PRINCIPAL PRINCIPAL
NUMBER OF BALANCE OF BALANCE OF
ANNUAL PERCENTAGE RATE RANGE (%) RECEIVABLES RECEIVABLES RECEIVABLES
---------------------------------- ------------- -------------------- --------------
<S> <C> <C> <C>
0.00000 to 0.99999 ............... 6,087 $ 107,132,324.59 10.01%
1.00000 to 1.99999 ............... 6,512 132,109,218.91 12.34
2.00000 to 2.99999 ............... 753 12,031,057.04 1.12
3.00000 to 3.99999 ............... 5,721 119,179,659.37 11.13
4.00000 to 4.99999 ............... 1,586 34,982,067.19 3.27
5.00000 to 5.99999 ............... 5,848 134,521,389.11 12.57
6.00000 to 6.99999 ............... 2,177 54,913,798.82 5.13
7.00000 to 7.99999 ............... 1,339 34,482,551.31 3.22
8.00000 to 8.99999 ............... 4,507 112,657,700.81 10.52
9.00000 to 9.99999 ............... 3,378 83,598,268.17 7.81
10.00000 to 10.99999 ............. 1,774 42,567,348.74 3.98
11.00000 to 11.99999 ............. 5,020 119,950,298.15 11.20
12.00000 to 12.99999 ............. 848 16,745,463.51 1.56
13.00000 to 13.99999 ............. 1,350 22,679,900.97 2.12
14.00000 to 14.99999 ............. 640 12,658,930.73 1.18
15.00000 to 15.99999 ............. 634 11,769,136.54 1.10
16.00000 to 16.99999 ............. 356 5,921,830.58 0.55
17.00000 to 17.99999 ............. 299 5,181,040.83 0.48
18.00000 to 18.99999 ............. 233 3,885,443.28 0.36
19.00000 to 19.99999 ............. 129 1,719,269.83 0.16
20.00000 to 20.99999 ............. 229 1,757,941.89 0.16
21.00000 to 21.99999 ............. 1 23,682.04 0.00
22.00000 to 22.25000 ............. 3 41,605.84 0.00
----- ------------------ ------
Total ............................ 49,424 $1,070,509,928.25 100.00%
====== ================== ======
</TABLE>
Based on the principal balance of the receivables as of October 31, 2000:
o approximately 94.58% of the total number of receivables, or
approximately 97.28% of the principal balance of the receivables, relate
to new vehicles, substantially all of which were manufactured or
distributed by Mitsubishi Motors;
o approximately 0.03% of the total number of receivables, or approximately
0.03% of the principal balance of the receivables, relate to program
vehicles, substantially all of which were manufactured or distributed by
Mitsubishi Motors; and
o approximately 4.38% of the total number of receivables, or approximately
2.05% of the principal balance of the receivables, relate to used
vehicles, substantially all of which were manufactured or distributed by
Mitsubishi Motors and approximately 1.01% of the total number of
receivables, or approximately 0.63% of the principal balance of the
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
21
<PAGE>
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 94.76% of the
principal balance, calculated as of the Cutoff Date, of the receivables. A
Simple Interest Receivable provides for the amortization of the loan over a
series of fixed level monthly installments. 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.
The remainder of the payment received is allocated to principal. 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 maturity date of
the receivable may be greater or less than the scheduled balloon payment on the
receivable.
Actuarial Receivables, excluding Actuarial Receivables based on the Rule
of 78's, account for approximately 1.38% of the principal balance, calculated
as of the Cutoff Date, of the 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 typically is 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.
Balloon payment receivables account for approximately 22.56% of the
principal balance, calculated as of the Cutoff Date, of the receivables. A
balloon payment receivable may be either a Simple Interest Receivable or an
Actuarial Receivable. See "--Balloon Payment Receivables" below.
The remainder of the principal balance of the receivables were Simple
Interest Receivables that have a cap on the total amount of the interest to be
paid over the term of the receivable or Actuarial Receivables based on the Rule
of 78's. 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. The amount of any refund due to the
obligor on a 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.
DEFERRED PAYMENT RECEIVABLES
Deferred payment receivables account for approximately 20.29% of the
principal balance, calculated as of the Cutoff Date, of the receivables. None
of the deferred payment receivables are balloon payment receivables. The
obligor on a deferred payment receivable is not required to make
22
<PAGE>
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 of 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.
Of the receivables originated with a deferred first payment:
(1)$131,287,490.79 total principal balance of those receivables were
originated with a deferral period of 300 days or greater. $78,807,164.56
total principal balance of these receivables were deferred payment
receivables as of the Cutoff Date.
(2)$89,350,568.91 total principal balance of those receivables were
originated with a deferral period of between 200 and 299 days.
$80,573,018.45 total principal balance of these receivables were
deferred payment receivables as of the Cutoff Date.
(3)$52,368,709.17 total principal balance of those receivables were
originated with a deferral period of between 100 and 199 days.
$52,270,769.21 total principal balance of these receivables were
deferred payment receivables as of the Cutoff Date.
(4)$41,112,244.15 total principal balance of those receivables had a
deferral period of 99 days or less. $5,564,933.06 total principal
balance of these receivables were deferred payment receivables as of the
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 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 the 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 the 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 the 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 receivable;
o subject to various conditions, refinancing the actual balloon payment
due under the receivable; or
o returning the vehicle to MMCA for a credit against the actual amount due
under the receivable equal to the scheduled balloon payment provided in
the receivable, less charges for excess wear
23
<PAGE>
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
receivable 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."
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 of more than 90 days, but not more than 180 days
after the date on which a scheduled payment was due but not paid.
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
24
<PAGE>
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
in full 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
contracts 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 contracts 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 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 22.56% of the principal balance of the receivables,
calculated as of the Cutoff Date, consists of balloon payment receivables.
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
February 28, 2001 and November 10, 2005. The average principal balance of those
balloon payments is $10,943.33, which is approximately 44.33% 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 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;
25
<PAGE>
o each scheduled monthly payment on the receivables is made on the last
day of each month, and each month has 30 days;
o the payments on the notes are made on each payment date, which is
assumed to be the 15th day of each applicable month;
o the date on which receivables will be transferred to the issuer is the
closing date;
o the servicer exercises its option to purchase the receivables at its
earliest opportunity to do so;
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
$65,285,322.65 which is the total yield supplement overcollateralization
amount of the receivables as of the Cutoff Date.
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.
For purposes of creating the ABS tables, the receivables have been
aggregated into different hypothetical pools.
The receivables have been divided into 29 hypothetical pools made up of
receivables that have equal scheduled monthly payments that fully amortize
those receivables. Pools 15 through 29 include receivables with no payments due
for an initial period 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 NUMBER OF
LEVEL TOTAL WEIGHTED ORIGINAL NUMBER REMAINING NUMBER MONTHS UNTIL
PAYMENT PRINCIPAL AVERAGE ANNUAL OF PAYMENTS OF PAYMENTS FIRST PAYMENT
POOL BALANCE PERCENTAGE RATE (IN MONTHS) (IN MONTHS) IS DUE
--------- ------------------ ----------------- ----------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
1 $ 3,212,013.42 6.326% 35 31 0
2 5,081,262.35 14.696 34 30 0
3 44,248,894.05 0.082 36 31 0
4 4,446,416.22 3.561 35 32 0
5 9,838,228.28 12.619 49 46 0
6 96,245,765.23 1.220 48 44 0
7 55,874,310.61 3.870 48 47 0
8 19,999,609.53 5.791 51 46 0
9 2,932,949.62 7.896 48 45 0
10 140,546,167.35 12.590 59 57 0
11 98,746,884.22 1.893 60 57 0
12 99,115,110.55 3.993 60 58 0
13 121,305,376.98 6.040 58 57 0
14 37,698,363.89 8.038 57 55 0
15 5,449,762.08 5.817 56 55 1
16 42,171,117.57 12.076 60 59 1
17 1,391,940.93 9.257 48 48 11
18 20,322,741.08 8.886 48 48 12
19 18,208,052.22 9.466 48 48 12
20 3,575,698.58 12.548 60 60 2
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE NUMBER OF
LEVEL TOTAL WEIGHTED ORIGINAL NUMBER REMAINING NUMBER MONTHS UNTIL
PAYMENT PRINCIPAL AVERAGE ANNUAL OF PAYMENTS OF PAYMENTS FIRST PAYMENT
POOL BALANCE PERCENTAGE RATE (IN MONTHS) (IN MONTHS) IS DUE
--------- ------------------ ----------------- ----------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
21 $ 9,257,448.25 8.881% 60 59 3
22 12,871,435.45 10.478 60 60 3
23 13,048,271.76 11.312 60 60 4
24 6,361,927.43 8.888 59 59 5
25 11,438,697.85 10.503 53 53 5
26 17,136,051.91 8.900 60 60 6
27 12,054,147.96 9.703 60 60 6
28 29,712,865.99 8.886 60 60 7
29 21,170,772.00 9.670 60 60 7
</TABLE>
The receivables also have been divided into eight hypothetical pools made
up of balloon payment receivables. These hypothetical pools have the following
characteristics:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE NUMBER OF
BALLOON TOTAL WEIGHTED ORIGINAL NUMBER REMAINING NUMBER MONTHS UNTIL
PAYMENT PRINCIPAL AVERAGE ANNUAL OF PAYMENTS OF PAYMENTS FIRST PAYMENT
POOL BALANCE PERCENTAGE RATE (IN MONTHS) (IN MONTHS) IS DUE
--------- ------------------ ----------------- ----------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
1 $ 3,072,629.97 5.856% 39 31 0
2 486,895.16 11.629 38 29 0
3 20,988,167.66 5.814 51 45 0
4 3,056,200.92 11.090 49 46 0
5 43,901,052.14 6.855 54 52 0
6 34,050,947.71 12.025 56 54 0
7 947,543.55 7.118 54 52 1
8 544,207.78 12.280 55 53 1
</TABLE>
The actual characteristics and performance of the receivables transferred
to the issuer will differ from the assumptions used in preparing 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. 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.
27
<PAGE>
PROJECTED CLASS A-1 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
CLASS A-1 NOTE BALANCE (%)
------------------------------------------------------------------
PAYMENT DATE 0.50% ABS 1.00% ABS 1.30% ABS 1.50% ABS 2.00% ABS
------------------------------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
November, 2000 ...................... 100 100 100 100 100
December, 2000 ...................... 88 85 83 82 78
January, 2001 ....................... 76 69 65 63 56
February, 2001 ...................... 63 54 48 44 33
March, 2001 ......................... 51 38 30 24 11
April, 2001 ......................... 38 22 12 5 0
May, 2001 ........................... 24 5 0 0 0
June, 2001 .......................... 11 0 0 0 0
July, 2001 .......................... 0 0 0 0 0
--- --- --- --- ---
Weighted Average Life (yrs) ......... 0.38 0.31 0.28 0.26 0.23
</TABLE>
PROJECTED CLASS A-2 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
CLASS A-2 NOTE BALANCE (%)
------------------------------------------------------------------
PAYMENT DATE 0.50% ABS 1.00% ABS 1.30% ABS 1.50% ABS 2.00% ABS
------------------------------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
November, 2000 ...................... 100 100 100 100 100
December, 2000 ...................... 100 100 100 100 100
January, 2001 ....................... 100 100 100 100 100
February, 2001 ...................... 100 100 100 100 100
March, 2001 ......................... 100 100 100 100 100
April, 2001 ......................... 100 100 100 100 95
May, 2001 ........................... 100 100 97 94 86
June, 2001 .......................... 100 95 90 86 76
July, 2001 .......................... 99 88 81 77 66
August, 2001 ........................ 93 81 73 68 56
September, 2001 ..................... 87 74 65 60 46
October, 2001 ....................... 81 66 58 52 37
November, 2001 ...................... 75 59 50 43 27
December, 2001 ...................... 69 52 42 35 18
January, 2002 ....................... 63 45 34 27 8
February, 2002 ...................... 56 38 26 18 0
March, 2002 ......................... 50 30 18 10 0
April, 2002 ......................... 44 23 11 2 0
May, 2002 ........................... 38 16 3 0 0
June, 2002 .......................... 32 9 0 0 0
July, 2002 .......................... 26 3 0 0 0
August, 2002 ........................ 20 0 0 0 0
September, 2002 ..................... 14 0 0 0 0
October, 2002 ....................... 8 0 0 0 0
November, 2002 ...................... 1 0 0 0 0
December, 2002 ...................... 0 0 0 0 0
--- --- --- --- ---
Weighted Average Life (yrs) ......... 1.38 1.15 1.04 0.98 0.84
</TABLE>
28
<PAGE>
PROJECTED CLASS A-3 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
CLASS A-3 NOTE BALANCE (%)
------------------------------------------------------------------
PAYMENT DATE 0.50% ABS 1.00% ABS 1.30% ABS 1.50% ABS 2.00% ABS
------------------------------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
November, 2000 ...................... 100 100 100 100 100
December, 2000 ...................... 100 100 100 100 100
January, 2001 ....................... 100 100 100 100 100
February, 2001 ...................... 100 100 100 100 100
March, 2001 ......................... 100 100 100 100 100
April, 2001 ......................... 100 100 100 100 100
May, 2001 ........................... 100 100 100 100 100
June, 2001 .......................... 100 100 100 100 100
July, 2001 .......................... 100 100 100 100 100
August, 2001 ........................ 100 100 100 100 100
September, 2001 ..................... 100 100 100 100 100
October, 2001 ....................... 100 100 100 100 100
November, 2001 ...................... 100 100 100 100 100
December, 2001 ...................... 100 100 100 100 100
January, 2002 ....................... 100 100 100 100 100
February, 2002 ...................... 100 100 100 100 98
March, 2002 ......................... 100 100 100 100 88
April, 2002 ......................... 100 100 100 100 77
May, 2002 ........................... 100 100 100 93 67
June, 2002 .......................... 100 100 95 84 57
July, 2002 .......................... 100 100 87 76 48
August, 2002 ........................ 100 95 78 67 38
September, 2002 ..................... 100 87 70 59 29
October, 2002 ....................... 100 80 62 50 20
November, 2002 ...................... 100 72 54 42 11
December, 2002 ...................... 95 65 46 34 3
January, 2003 ....................... 88 57 39 26 0
February, 2003 ...................... 81 50 31 19 0
March, 2003 ......................... 74 43 24 11 0
April, 2003 ......................... 67 36 17 4 0
May, 2003 ........................... 60 29 10 0 0
June, 2003 .......................... 52 21 2 0 0
July, 2003 .......................... 46 15 0 0 0
August, 2003 ........................ 40 9 0 0 0
September, 2003 ..................... 34 2 0 0 0
October, 2003 ....................... 28 0 0 0 0
November, 2003 ...................... 22 0 0 0 0
December, 2003 ...................... 15 0 0 0 0
January, 2004 ....................... 9 0 0 0 0
February, 2004 ...................... 3 0 0 0 0
March, 2004 ......................... 0 0 0 0 0
--- --- --- --- ---
Weighted Average Life (yrs) ......... 2.68 2.30 2.10 1.97 1.70
</TABLE>
29
<PAGE>
PROJECTED CLASS A-4 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
CLASS A-4 NOTE BALANCE (%)
------------------------------------------------------------------
PAYMENT DATE 0.50% ABS 1.00% ABS 1.30% ABS 1.50% ABS 2.00% ABS
------------------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
November, 2000 .......... 100 100 100 100 100
December, 2000 .......... 100 100 100 100 100
January, 2001 ........... 100 100 100 100 100
February, 2001 .......... 100 100 100 100 100
March, 2001 ............. 100 100 100 100 100
April, 2001 ............. 100 100 100 100 100
May, 2001 ............... 100 100 100 100 100
June, 2001 .............. 100 100 100 100 100
July, 2001 .............. 100 100 100 100 100
August, 2001 ............ 100 100 100 100 100
September, 2001 ......... 100 100 100 100 100
October, 2001 ........... 100 100 100 100 100
November, 2001 .......... 100 100 100 100 100
December, 2001 .......... 100 100 100 100 100
January, 2002 ........... 100 100 100 100 100
February, 2002 .......... 100 100 100 100 100
March, 2002 ............. 100 100 100 100 100
April, 2002 ............. 100 100 100 100 100
May, 2002 ............... 100 100 100 100 100
June, 2002 .............. 100 100 100 100 100
July, 2002 .............. 100 100 100 100 100
August, 2002 ............ 100 100 100 100 100
September, 2002 ......... 100 100 100 100 100
October, 2002 ........... 100 100 100 100 100
November, 2002 .......... 100 100 100 100 100
December, 2002 .......... 100 100 100 100 100
January, 2003 ........... 100 100 100 100 92
February, 2003 .......... 100 100 100 100 80
March, 2003 ............. 100 100 100 100 68
April, 2003 ............. 100 100 100 100 57
May, 2003 ............... 100 100 100 95 46
June, 2003 .............. 100 100 100 84 35
July, 2003 .............. 100 100 93 74 26
August, 2003 ............ 100 100 84 65 16
September, 2003 ......... 100 100 75 56 7
October, 2003 ........... 100 95 66 47 0
November, 2003 .......... 100 86 58 39 0
December, 2003 .......... 100 77 49 30 0
January, 2004 ........... 100 69 41 22 0
February, 2004 .......... 100 60 33 14 0
March, 2004 ............. 96 52 25 7 0
April, 2004 ............. 87 44 17 0 0
May, 2004 ............... 78 36 10 0 0
June, 2004 .............. 69 28 3 0 0
July, 2004 .............. 60 20 0 0 0
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
CLASS A-4 NOTE BALANCE (%)
------------------------------------------------------------------
PAYMENT DATE 0.50% ABS 1.00% ABS 1.30% ABS 1.50% ABS 2.00% ABS
-------------------------------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
August, 2004 ......................... 43 7 0 0 0
September, 2004 ...................... 34 0 0 0 0
October, 2004 ........................ 27 0 0 0 0
November, 2004 ....................... 20 0 0 0 0
December, 2004 ....................... 13 0 0 0 0
January, 2005 ........................ 7 0 0 0 0
February, 2005 ....................... 0 0 0 0 0
-- - - - -
Weighted Average Lives (yrs) ......... 3.78 3.39 3.13 2.94 2.52
</TABLE>
PROJECTED CLASS B NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
CLASS B NOTE BALANCE (%)
------------------------------------------------------------------
PAYMENT DATE 0.50% ABS 1.00% ABS 1.30% ABS 1.50% ABS 2.00% ABS
------------------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
November, 2000 .......... 100 100 100 100 100
December, 2000 .......... 100 100 100 100 100
January, 2001 ........... 100 100 100 100 100
February, 2001 .......... 100 100 100 100 100
March, 2001 ............. 100 100 100 100 100
April, 2001 ............. 100 100 100 100 100
May, 2001 ............... 100 100 100 100 100
June, 2001 .............. 100 100 100 100 100
July, 2001 .............. 100 100 100 100 100
August, 2001 ............ 100 100 100 100 100
September, 2001 ......... 100 100 100 100 100
October, 2001 ........... 100 100 100 100 100
November, 2001 .......... 100 100 100 100 100
December, 2001 .......... 100 100 100 100 100
January, 2002 ........... 100 100 100 100 100
February, 2002 .......... 100 100 100 100 100
March, 2002 ............. 100 100 100 100 100
April, 2002 ............. 100 100 100 100 100
May, 2002 ............... 100 100 100 100 100
June, 2002 .............. 100 100 100 100 100
July, 2002 .............. 100 100 100 100 100
August, 2002 ............ 100 100 100 100 100
September, 2002 ......... 100 100 100 100 100
October, 2002 ........... 100 100 100 100 100
November, 2002 .......... 100 100 100 100 100
December, 2002 .......... 100 100 100 100 100
January, 2003 ........... 100 100 100 100 100
February, 2003 .......... 100 100 100 100 100
March, 2003 ............. 100 100 100 100 100
April, 2003 ............. 100 100 100 100 100
May, 2003 ............... 100 100 100 100 100
June, 2003 .............. 100 100 100 100 100
July, 2003 .............. 100 100 100 100 100
August, 2003 ............ 100 100 100 100 100
September, 2003 ......... 100 100 100 100 100
October, 2003 ........... 100 100 100 100 96
November, 2003 .......... 100 100 100 100 74
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
CLASS B NOTE BALANCE (%)
------------------------------------------------------------------
PAYMENT DATE 0.50% ABS 1.00% ABS 1.30% ABS 1.50% ABS 2.00% ABS
------------------------------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
December, 2003 ...................... 100 100 100 100 53
January, 2004 ....................... 100 100 100 100 0
February, 2004 ...................... 100 100 100 100 0
March, 2004 ......................... 100 100 100 100 0
April, 2004 ......................... 100 100 100 99 0
May, 2004 ........................... 100 100 100 81 0
June, 2004 .......................... 100 100 100 63 0
July, 2004 .......................... 100 100 90 46 0
August, 2004 ........................ 100 100 61 0 0
September, 2004 ..................... 100 100 44 0 0
October, 2004 ....................... 100 83 0 0 0
November, 2004 ...................... 100 68 0 0 0
December, 2004 ...................... 100 54 0 0 0
January, 2005 ....................... 100 0 0 0 0
February, 2005 ...................... 100 0 0 0 0
March, 2005 ......................... 0 0 0 0 0
--- --- --- --- --
Weighted Average Life (yrs) ......... 4.33 4.09 3.83 3.66 3.10
</TABLE>
HOW NOTEHOLDERS CAN COMPUTE THEIR PORTION OF THE AMOUNT
OUTSTANDING ON THE NOTES
The servicer's monthly report will give the noteholders a factor that can
be used to compute the portion of the principal amount outstanding on the
notes.
How the Servicer Computes the Factor For Each Class of Notes. The
servicer will compute a separate factor for each class of notes 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 Notes. 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 and liquidations of the receivables.
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 payahead account;
o to make the required deposit into the yield supplement account; and
o to make the required deposit into the reserve account.
32
<PAGE>
MMCA AUTO RECEIVABLES TRUST
MART was established as a business trust in the State of Delaware on May
19, 1999. MMCA is the sole beneficial owner of MART. MART was established for
limited purposes, which include purchasing receivables from MMCA, transferring
the receivables to third parties and any activities related to those purposes.
MART's principal executive offices are located at 6363 Katella Avenue, Cypress,
California 90630-5205. MART's telephone number is (714) 236-1614.
In structuring these transactions MART has taken steps intended to ensure
that the voluntary or involuntary application for relief by MMCA under the
United States Bankruptcy Code or similar state laws will not cause the assets
and liabilities of MART to be consolidated with those of MMCA. These steps
include the maintenance of MART as a separate, limited-purpose entity. The
trust agreement by which MART was formed and which governs MART's activities
restricts the nature of MART's business and MART's ability to commence a
voluntary case or proceeding under any insolvency law without the unanimous
vote of all of its managers. However, there can be no assurance that the
activities of MART would not result in a court concluding that its assets and
liabilities should be consolidated with those of MMCA in an insolvency
proceeding.
MART's counsel has advised that it would not be a proper exercise by a
court of its equitable discretion to disregard the separate existence of MART
and consolidate its assets and liabilities with the assets and liabilities of
MMCA if MMCA filed for bankruptcy protection. MART's counsel has assumed that
MART will follow various procedures in the conduct of its affairs, including
maintaining records and books of account separate from those of MMCA,
refraining from commingling its assets with those of MMCA and refraining from
holding itself out as having agreed to pay, or being liable for, the debts of
MMCA. MART intends to follow and has represented to that counsel that it will
follow these and other procedures related to maintaining its separate legal
identity. However, if MART does not follow those procedures, a court could
conclude that the assets and liabilities of MART should be consolidated with
those of MMCA. If a court were to reach that conclusion, or if a filing were
made under any insolvency law by or against MART, or if an attempt were made to
litigate any of the 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,
California 90630-5205. Its telephone number is (714) 236-1500.
TERMS OF THE NOTES
PRINCIPAL AMOUNT AND INTEREST RATES
The issuer will issue $924,806,000 total principal amount of asset-backed
notes under an indenture to be dated as of November 1, 2000, between the issuer
and Bank of Tokyo-Mitsubishi Trust Company, in its capacity as indenture
trustee.
33
<PAGE>
The notes will be issued in five classes:
o $125,000,000 total principal amount of 6.72813% Class A-1 notes;
o $300,000,000 total principal amount of 6.72% Class A-2 notes;
o $260,000,000 total principal amount of 6.78% Class A-3 notes;
o $174,467,000 total principal amount of 6.86% Class A-4 notes; and
o $65,339,000 total principal amount of 7.42% 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: 6.72813%;
o the Class A-2 notes: 6.72%;
o the Class A-3 notes: 6.78%;
o the Class A-4 notes: 6.86%; and
o the Class B notes: 7.42%.
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 December 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 December 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.
34
<PAGE>
If a default under the indenture occurs, interest payments on the Class B
notes also will be subordinated to amounts due to the indenture trustee as
compensation or indemnity payments and to the payment of principal of the Class
A notes. 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.
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.
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;
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 indenture trustee as compensation or indemnity
payments;
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 indenture trustee as compensation or indemnity
payments;
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.
35
<PAGE>
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, August 2001;
o for the Class A-2 notes, July 2003;
o for the Class A-3 notes, October 2004;
o for the Class A-4 notes, June 2005; and
o for the Class B notes, August 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."
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.
MART will make a deposit to the yield supplement account on the closing date,
in the amount specified in the sale and servicing agreement. The Yield
Supplement Amount will be needed to pay interest on the notes because the first
payment on the deferred payment receivables having an aggregate principal
balance of $217,215,885.28 on the closing date will not be due from the related
obligors until after the closing date. 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
36
<PAGE>
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 or to draw the full amount available
under the letter of credit and deposit those funds in the yield supplement
account.
On each payment date, after giving effect to payments on that date, the
amount required to be on deposit in the yield supplement account or to be
available under an acceptable letter of credit will be an amount equal to the
sum of all projected Yield Supplement Amounts for all future payment dates,
which will be determined assuming that future scheduled payments on the
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.
THE ISSUER'S BANK ACCOUNTS
The servicer will establish and maintain 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 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>
<S> <C>
ACCOUNTS RELATING TO THE ISSUER
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COLLECTION ACCOUNT Payments made on receivables and advances made by the servicer will be
deposited into the collection account.
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NOTE PAYMENT Amounts released from the collection account for distribution to noteholders
ACCOUNT will be deposited into the note payment account and all payments to noteholders
will be made from this account.
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CERTIFICATE Amounts released from the collection account for distribution to
DISTRIBUTION certificateholders will be deposited into the certificate distribution account and
ACCOUNT all distributions to certificateholders will be made from this account.
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PAYAHEAD Early payments by obligors of less than the remaining balance of Actuarial
ACCOUNT Receivables will be deposited into the payahead account until the time 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 on Actuarial Receivables which were received before the Cutoff Date.
Funds in the collection account, the payahead account, the reserve
account, and the yield supplement account will be invested in the types of
investments permitted by the sale and servicing agreement, which normally will
be limited to investments acceptable to each of Moody's and S&P as being
consistent with the ratings of the notes. Investments permitted by the sale and
servicing agreement will be limited to obligations or securities that mature
not later than the business day immediately preceding the next payment date or
the date on which payment is due, in the case of early payments 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;
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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;
o any earnings on amounts on deposit in the yield supplement account will
be paid to MART and will not be available to pay noteholders; and
o any earnings on, and any amounts released from, the reserve account will
be distributed to MART and will not be available to pay noteholders, but
only to the extent that the amount on deposit in the reserve account
exceeds the required balance of the reserve account.
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 Yield Supplement Amount; and
o the amount on deposit in the reserve account and the specified balance
for the reserve account.
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 yield supplement
account, the reserve account, the note payment account and the certificate
distribution 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:
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:
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o the amount on deposit in the reserve account on that payment date,
calculated after any reimbursement of advances under step 3 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;
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.
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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.
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 $1,005,224,606, which is
equal to the adjusted principal balance of the receivables on the closing date.
On the closing date, the total yield supplement overcollateralization
amount of the receivables will be $65,285,322.65 or 6.49% of the total
principal amount of the notes and certificates on the closing date.
On any date, the total yield supplement overcollateralization amount for
the receivables will be the sum of the yield supplement overcollateralization
amounts for each receivable 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 related contract; over
o the present value of the remaining scheduled payments due on the
receivable discounted at a rate equal to 9.0%.
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
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defaulted receivables deplete 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 required to be 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 to the Class B notes because payments on the
certificates and the Class B notes are subordinate to 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 $10,052,246.06. That amount is equal to 1.00% of the adjusted
principal balance of the receivables pool as of the Cutoff Date.
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
Specified Reserve Balance, 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 payments on the Class A notes.
MART 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.
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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 amounts due to the indenture trustee as compensation or
indemnity payments and to the payment of principal of the Class A notes.
Principal of the Class B notes will be subordinated to the payment of
amounts due to the indenture trustee as compensation or indemnity payments, 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.
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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; 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:
(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;
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(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;
(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; and
(14) the total purchase amount of receivables repurchased by MART or
purchased by the servicer during the preceding calendar month.
Each amount set forth in clauses (1), (2), (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.
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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 depositories, which, in turn, will hold
those positions in accounts as DTC participants.
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.
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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.
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
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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 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.
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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 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
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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:
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
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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.
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, voting as a group, 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
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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 662/3% 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.
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;
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.
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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;
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 shall
otherwise be acceptable to each of Moody's and S&P.
The indenture trustee may resign at any time by so notifying the issuer.
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.
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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.
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 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.
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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:
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;
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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.
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 receivables, including its security interests
in the related vehicles. On the closing date, MART will sell and assign to the
issuer, without recourse, MART's entire interest in the receivables, including
its security interests in the related vehicles. Each of the receivables
conveyed by MART to the issuer will be identified in a schedule attached to the
sale and servicing agreement.
The receivables will be sold and assigned by MMCA to MART and sold and
assigned by MART to the issuer on the closing date. The owner trustee will, at
the same time as the sale and assignment of the receivables, execute,
authenticate and deliver the certificates. The net proceeds received from the
sale of the notes on the closing date will be applied to the purchase of the
receivables and to the deposits required to be made to the reserve account, the
payahead account and the yield supplement account.
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 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;
o on the closing date, 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 the closing date, each of the receivables 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.
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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 the payment in full of any securities rated by
Moody's or S&P 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."
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.
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
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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 April 30,
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 deferred payment 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 90 days after that payment was due,
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 requires the servicer to charge off a
receivable in conformity with its normal practice. It also requires 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 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
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balance of 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 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 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.
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LIMITS ON SERVICER'S LIABILITY
The sale and servicing agreement will provide that the servicer will be
liable only to the extent of the obligations specifically undertaken by it
under the sale and servicing agreement and will have no other obligations or
liabilities under the sale and servicing agreement.
LIMITS ON SERVICER'S OBLIGATIONS IN CONNECTION WITH LEGAL ACTIONS
The sale and servicing agreement will also provide that the servicer will
be under no obligation to appear in, prosecute or defend any legal action that
is not incidental to the servicer's responsibilities under the sale and
servicing agreement and that, in its opinion, may cause it to incur any expense
or liability. The servicer may, however, at its expense undertake any
reasonable action that it may deem necessary or desirable in respect of the
interests of the noteholders and the certificateholders under the sale and
servicing agreement.
EVENTS OF SERVICING TERMINATION
The following events will constitute events of servicing termination under
the sale and servicing agreement:
o any failure by the servicer to deliver to the owner trustee or the
indenture trustee the monthly certificate detailing the collections and
distributions for any calendar month, which failure continues beyond the
earlier of three business days from the date the servicer's certificate
was due to be delivered and the related payment date;
o any failure by the servicer to deliver to the collection account or any
other account, any required payment or deposit under the sale and
servicing agreement, which failure continues unremedied for five
business days, or, in the case of a payment or deposit to be made no
later than a payment date, the failure to make the payment or deposit by
the payment date;
o any failure by the servicer duly to observe or perform in any material
respect any other covenant or agreement in the notes, the certificates
or the sale and servicing agreement, which failure materially and
adversely affects the rights of noteholders or certificateholders and
which continues unremedied for 30 days after written notice of the
failure is given to the servicer by the indenture trustee or the owner
trustee, or to MART, the servicer, the owner trustee and the indenture
trustee by the holders of notes or certificates 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.
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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
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.
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.
For purposes of the two preceding paragraphs, any notes or certificates
owned by MART, the servicer, or any of their respective affiliates will not be
considered to be outstanding.
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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 or the
Specified Reserve Balance, without the consent of all adversely affected
noteholders or certificateholders;
o reduce the aforesaid percentage of the notes and the certificates which
is required to consent to any amendment, without the consent of all
noteholders or certificateholders affected by the amendment;
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.
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.
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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.
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 that 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.
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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.
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
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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 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. In some circumstances, 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
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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.
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
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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.
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.
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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.
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.
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The adjusted issue price of a note is the sum of its issue price plus
prior accruals of OID, reduced by the total payments made with respect to the
note in all prior periods, other than qualified stated interest payments. The
present value of the remaining payments is determined on the basis of three
factors:
o the original yield to maturity of the note, determined on the basis of
compounding at the end of each accrual period and properly adjusted for
the length of the accrual period,
o events which have occurred before the end of the accrual period and
o the assumption that the remaining payments will be made in accordance
with the original assumption.
The effect of this method is to increase the rate at which a noteholder
includes OID in income to take into account prepayments on the receivables at a
rate that exceeds the anticipated rate of prepayments, and to decrease (but not
below zero) for any period the rate at which a noteholder includes OID in
income to take into account prepayments with respect to the receivables at a
rate that is slower than the anticipated rate of prepayments. Although OID will
be reported to noteholders based on the anticipated rate of prepayments, no
representation is made to noteholders that receivables will be prepaid at that
rate or at any other rate.
A holder of a note that acquires the note for an amount that exceeds its
stated redemption price will not include any OID in gross income. A holder of a
note which acquires the notes for an amount that is less than its stated
redemption price will be required to include OID in gross income, but a
subsequent holder who purchases a note for an amount that exceeds its adjusted
issue price will be entitled, as will an initial holder who pays more than a
note's issue price, to reduce the amount of OID included in income in each
period by the amount of OID multiplied by a fraction, the numerator of which
is:
o the purchaser's adjusted basis in the note immediately after purchase
thereof minus
o the adjusted issue price of the note;
and the denominator of which is:
o all amounts remaining to be paid on the note after the purchase date,
other than qualified stated interest, minus
o the adjusted issue price of the note.
Total Accrual Election. As an alternative to separately accruing stated
interest, OID, de minimis OID, market discount, de minimis market discount,
unstated interest, premium, and acquisition premium, a holder of a note may
elect to include all income that accrues on the note using the constant yield
method. If a noteholder makes this election, income on a note will be
calculated as though:
o the issue price of the note were equal to the noteholder's adjusted
basis in the note immediately after its acquisition by the noteholder;
o the note were issued on the noteholder's acquisition date; and
o none of the interest payments on the note were "qualified stated
interest."
A noteholder may make this election for a note that has premium or market
discount, respectively, only if the noteholder makes, or has previously made,
an election to amortize bond premium or to include market discount in income
currently. See "--Market Discount" and "--Amortizable Bond Premium."
Market Discount. The notes, whether or not issued with OID, will be
subject to the market discount rules of the tax code. In general, these rules
provide that if the beneficial owner purchases a note at a discount (if the
discount exceeds a de minimis amount specified in the tax code) from its stated
redemption price at maturity or, if the notes were issued with OID, its
adjusted issue price, and
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thereafter (1) recognizes gain upon a disposition, or (2) receives payments of
principal, the lesser of (x) the gain or principal payment or (y) the accrued
market discount will be taxed as ordinary interest income and not as capital
gain. Generally, the accrued market discount will be the total market discount
on the note multiplied by a fraction equal to:
o the number of days the beneficial owner held the note, divided by
o the number of days from the date the beneficial owner acquired the note
until its maturity date.
The beneficial owner may elect, however, to determine accrued market discount
under the constant yield method.
Limitations imposed by the tax code which are intended to match deductions
with the taxation of income may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
note with market discount. A beneficial owner of a note may elect to include
market discount in gross income as it accrues and, if it makes this election,
is exempt from this rule. This election will apply to all debt instruments
acquired by the taxpayer on or after the first day of the first taxable year to
which the election applies. The adjusted basis of a note subject to the
election will be increased to reflect market discount included in gross income,
thereby reducing any gain or increasing any loss on a sale or other taxable
disposition.
Amortizable Bond Premium. In general, if a beneficial owner of a note
purchases a note at a premium--that is, an amount in excess of the amount
payable upon the maturity of that note--that beneficial owner will be
considered to have purchased the note with "amortizable bond premium" equal to
the amount of the excess. The beneficial owner of a note may elect to amortize
bond premium as an offset to interest income, and not as a separate deduction
item, as it accrues under a constant yield method over the remaining term of
the note. That beneficial owner's tax basis in the note will be reduced by the
amount of the amortized bond premium. Any election will apply to all debt
instruments, other than instruments the interest on which is excludible from
gross income, held by that beneficial owner at the beginning of the first
taxable year for which the election applies or later acquired, and cannot be
revoked without the consent of the IRS. Bond premium on a note held by a
beneficial owner who does not elect to amortize the premium will decrease the
gain or increase the loss otherwise recognized on the disposition of the note.
Disposition of Notes. A beneficial owner of a note's adjusted tax basis
will be its cost, increased by the amount of any OID, market discount and gain
previously included in income with respect to the note, and reduced by the
amount of any payment on the note that is not qualified stated interest and the
amount of bond premium previously amortized with respect to the note. A
beneficial owner will generally recognize gain or loss on the sale or
retirement of a note equal to the difference between the amount realized on the
sale or retirement and the tax basis of the note. The gain or loss will be
capital gain or loss--except to the extent attributable to OID not previously
accrued, accrued but unpaid interest, or as described above under "--Market
Discount"--and will be long-term capital gain or loss if the note was held for
more than one year. In addition, if the prepayable obligation rules apply, any
OID that has not accrued at the time of the payment in full of a note will be
treated as ordinary income.
FEDERAL TAX CONSEQUENCES OF WAIVERS OF EVENTS OF DEFAULT AND AMENDMENTS OF
NOTES BY NOTEHOLDERS
The indenture permits the noteholders to waive an event of default under
the indenture or rescind an acceleration of the notes in some circumstances
upon a vote of the requisite percentage of noteholders. Any waiver or
rescission under the indenture, or any amendment of the terms of the notes,
could be treated for federal income tax purposes as a constructive exchange by
a noteholder of the notes for new notes, upon which gain or loss would be
recognized.
INFORMATION REPORTING AND BACKUP WITHHOLDING OF TAXES BY INDENTURE TRUSTEE
The indenture trustee will be required to report annually to the IRS, and
to each beneficial owner of a note, the amount of interest paid on the notes
and the amount withheld for federal income taxes
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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.
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.
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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.
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.
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<PAGE>
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 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."
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<PAGE>
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 Salomon Smith Barney Inc. and 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>
Salomon Smith Barney Inc. ............... $ 77,000,000 $186,000,000 $164,000,000 $108,467,000 $65,339,000
Chase Securities Inc. ................... 16,000,000 38,000,000 32,000,000 22,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ...................... 16,000,000 38,000,000 32,000,000 22,000,000
Morgan Stanley & Co. Incorporated ....... 16,000,000 38,000,000 32,000,000 22,000,000
------------ ------------ ------------ ------------ -----------
Total ................................... $125,000,000 $300,000,000 $260,000,000 $174,467,000 $65,339,000
============ ============ ============ ============ ===========
</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. 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, Salomon Smith Barney Inc., as sole
underwriter for the class B notes has 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 class A notes and the certificates.
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% 99.900000% 0.060% 0.040%
Class A-2 notes ..................... 0.170% 99.823960% 0.102% 0.060%
Class A-3 notes ..................... 0.210% 99.787147% 0.126% 0.080%
Class A-4 notes ..................... 0.260% 99.729339% 0.156% 0.080%
Class B notes ....................... 0.325% 99.651316% 0.195% 0.120%
-------------- -------------------
Total for all of the notes ......... $ 1,846,965.95 $ 922,899,421.43
============== ===================
</TABLE>
The transaction expenses payable by MART are estimated to be $877,150.
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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<PAGE>
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.
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 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.
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.
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<PAGE>
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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<PAGE>
GLOSSARY
ABS means the Absolute Prepayment Model.
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 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; and
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
Cutoff Date.
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.
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
scheduled amortization of the 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 November 15, 2000.
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<PAGE>
CUTOFF DATE means October 31, 2000.
DEFERRED PAYMENT RECEIVABLE means any receivable for which no scheduled
payment is due until a date more than 50 days but less than 480 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.
INITIAL POOL BALANCE means the principal balance of the receivables pool
as of the Cutoff Date.
RECEIVABLES means the receivables having a total principal balance of
$1,070,509,928.25 as of the Cutoff Date 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.
MART means MMCA Auto Receivables Trust.
MITSUBISHI MOTORS means Mitsubishi Motors Corporation and its affiliates.
MMCA means Mitsubishi Motors Credit of America, Inc.
MMSA means Mitsubishi Motor Sales of America, Inc.
MONTHLY ACCRUED NOTE INTEREST means, 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) all classes of the notes, collectively, the sum of
the Monthly Accrued Note Interest for each class.
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.
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.
SIMPLE INTEREST RECEIVABLES are receivables that provide for the
amortization of the amount financed under each receivable over a series of
fixed 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, and an amount of principal equal to the
remainder of the monthly installment.
SPECIFIED RESERVE BALANCE means, for any payment date, an amount equal to
the lesser of:
(1) the sum of 2.25% of the adjusted principal balance of the receivables
on the closing date, calculated as of the Cutoff Date; and
(2) the outstanding principal amount of the notes on that payment date,
after giving effect to any principal payment made on that payment date.
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<PAGE>
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 9.0%.
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<PAGE>
PROSPECTUS
$924,806,000
MMCA AUTO OWNER TRUST 2000-2
$125,000,000 6.72813% CLASS A-1 ASSET BACKED NOTES
$300,000,000 6.72% CLASS A-2 ASSET BACKED NOTES
$260,000,000 6.78% CLASS A-3 ASSET BACKED NOTES
$174,467,000 6.86% CLASS A-4 ASSET BACKED NOTES
$65,339,000 7.42% CLASS B ASSET BACKED NOTES
MMCA AUTO RECEIVABLES TRUST
SELLER
[GRAPHIC OMITTED]
SERVICER
UNDERWRITERS OF THE CLASS A NOTES
SALOMON SMITH BARNEY
CHASE SECURITIES INC.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
UNDERWRITER OF THE CLASS B NOTES
SALOMON SMITH BARNEY
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 February 8, 2001.
