<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 22, 1997
------------------------------
NAVISTAR FINANCIAL RETAIL RECEIVABLES CORPORATION
-------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-55865 51-0337491
- --------------- ------------------------ --------------------
(State or other (Commission File Number) (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation)
Navistar Financial Retail Receivables Corporation
2850 W. Golf Road
Rolling Meadows, IL 60008
- -------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 734-4000
Former name or former address, if changed since last report: Not applicable
Exhibit Index appears on Page 4
Page 1 of 17
<PAGE>
Item 5. Other Events
------------
Series 1997-A. On April 22, 1997, the registrant made available
to prospective investors a series term sheet setting forth a description of the
collateral pool and the proposed structure of $500,000,000 aggregate principal
amount of Series 1997-A Asset Backed Notes, Class A and Class B, of Navistar
Financial 1997-A Owner Trust. The series term sheet is attached hereto as
Exhibit 99.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
-----------------------------------------------------------------
Exhibit No. Description
- ----------- -----------
Exhibit 99 Series Term Sheet dated April 21, 1997, with respect to the
proposed issuance of the Asset Backed Notes, Class A and Class B,
of Navistar Financial 1997-A Owner Trust.
Page 2 of 17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
NAVISTAR FINANCIAL RETAIL RECEIVABLES
CORPORATION
(Registrant)
Dated: April 22, 1997 By: /s/ R. Wayne Cain
-----------------------------------
Its: Vice President and Treasurer
Page 3 of 17
<PAGE>
INDEX OF EXHIBITS
-----------------
Sequentially
Exhibit Number Exhibit Numbered Page
- ---------------- --------------------------------------- ------------------
Exhibit 99 Series Term Sheet dated April 21, 1997, 5
with respect to the proposed issuance of
the Asset Backed Notes, Class A and Class B,
of Navistar Financial 1997-A Owner Trust.
Page 4 of 17
<PAGE>
Exhibit 99
Navistar Financial 1997-A Owner Trust
Navistar Financial Retail Receivables Corporation
Seller
Navistar Financial Corporation
Servicer
Subject to Revision
Term Sheet Dated April 21, 1997
Chase Securities Inc.
BancAmerica Securities, Inc.
First Chicago Capital Markets, Inc.
<PAGE>
PROCEEDS OF THE ASSETS OF THE TRUST AND AMOUNTS ON DEPOSIT IN THE RESERVE
ACCOUNT, THE NEGATIVE CARRY ACCOUNT AND THE PRE-FUNDING ACCOUNT ARE THE SOLE
SOURCES OF PAYMENTS ON THE SECURITIES. NONE OF THE SECURITIES REPRESENTS AN
INTEREST IN OR OBLIGATION OF, OR IS INSURED OR GUARANTEED BY, NAVISTAR FINANCIAL
CORPORATION, NAVISTAR FINANCIAL RETAIL RECEIVABLES CORPORATION OR ANY OF THEIR
RESPECTIVE AFFILIATES.
THIS TERM SHEET CONTAINS STRUCTURAL AND COLLATERAL INFORMATION WITH RESPECT TO
THE NAVISTAR FINANCIAL 1997-A OWNER TRUST. THE INFORMATION CONTAINED IN THIS
TERM SHEET IS PRELIMINARY AND WILL BE SUPERSEDED IN ITS ENTIRETY BY THE
INFORMATION APPEARING IN THE PROSPECTUS SUPPLEMENT RELATING TO THE NAVISTAR
FINANCIAL 1997-A OWNER TRUST (THE "PROSPECTUS SUPPLEMENT") AND THE RELATED
PROSPECTUS (THE "PROSPECTUS"). THE INFORMATION CONTAINED IN THIS TERM SHEET
ADDRESSES ONLY CERTAIN LIMITED ASPECTS OF THE NOTES' CHARACTERISTICS, AND DOES
NOT PURPORT TO PROVIDE A COMPLETE ASSESSMENT THEREOF. THE INFORMATION CONTAINED
HEREIN THEREFORE MAY NOT REFLECT THE IMPACT OF ALL STRUCTURAL CHARACTERISTICS OF
THE NOTES OR ANY CHANGES MADE TO THE STRUCTURE OF THE NOTES AFTER THE DATE
HEREOF. ADDITIONAL INFORMATION WILL BE CONTAINED IN THE PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. PURCHASERS ARE URGED TO READ BOTH THE PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS.
ALTHOUGH A REGISTRATION STATEMENT (INCLUDING A PROSPECTUS) RELATING TO THE NOTES
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS EFFECTIVE, THE
PROSPECTUS SUPPLEMENT HAS NOT BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. SALES OF THE NOTES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS
RECEIVED BOTH THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS TERM SHEET
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THE NOTES IN ANY STATE OR OTHER JURISDICTION IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES OR OTHER APPLICABLE LAWS OF ANY SUCH STATE OR
OTHER JURISDICTION. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION.
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<PAGE>
Navistar Financial 1997-A Owner Trust
Navistar Financial Retail Receivables Corporation
Seller
Navistar Financial Corporation
Servicer
Subject to Revision
Term Sheet Dated April 21, 1997
This Term Sheet will be superseded in its entirety by the information appearing
in the Prospectus Supplement and the Prospectus. Capitalized terms used but not
defined herein shall have the meanings specified in the Prospectus Supplement
and the Prospectus. A final Prospectus and Prospectus Supplement may be
obtained by contacting Joy Dunphy at (212) 834-4533.
Issuer................ Navistar Financial 1997-A Owner Trust, a Delaware
business trust to be formed by the Seller and the Owner
Trustee pursuant to the Owner Trust Agreement.
Seller................ Navistar Financial Retail Receivables Corporation.
Servicer.............. Navistar Financial Corporation.
Indenture Trustee..... The Bank of New York, as trustee under the Indenture.
Owner Trustee......... Chase Manhattan Bank Delaware, as owner trustee under
the Owner Trust Agreement.
The Notes............. The Trust will issue Notes as follows:
Class A-1 ____% Asset Backed Notes in the aggregate
principal amount of $85,000,000 (the "Class A-1
Notes").
Class A-2 ____% Asset Backed Notes in the aggregate
principal amount of $221,500,000 (the "Class A-2
Notes").
Class A-3 ____% Asset Backed Notes in the aggregate
principal amount of $176,000,000 (the "Class A-3
Notes;" together with the Class A-1 Notes and the Class
A-2 Notes, the "Class A Notes").
Class B ____% Asset Backed Notes in the aggregate
principal amount of $17,500,000 (the "Class B Notes").
The Class B Notes will be subordinated to the Class A
Notes to the extent described herein and in the
Prospectus Supplement.
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<PAGE>
The Trust will also issue Certificates (the
"Certificates") to the Seller, the Servicer and/or one
of their affiliates who will hold the Certificates.
The Trust Property.... The Trust Property will include a pool of Retail Notes
(the "Receivables"), certain monies due thereunder on
and after (i) for the Initial Receivables, April 1,
1997 and (ii) for any Subsequent Receivables, the
related Cutoff Date that is designated as such by the
Seller, security interests in the vehicles financed
thereby, certain other property and monies on deposit
in certain accounts, including the Pre-Funding Account
and the Negative Carry Account, and the proceeds
thereof, the proceeds, if any, of Dealer Liability,
NITC Purchase Obligations and any Guaranties, any
proceeds from claims on certain insurance policies, the
benefits of any lease assignments and certain rights of
the Seller under the related Purchase Agreement and the
related Custodian Agreement. The aggregate Starting
Receivables Balance for the Initial Receivables is
$411,613,980.45. Additional Retail Notes may be
purchased by the Trust from the Seller from time to
time on or before the July 1997 Distribution Date from
funds on deposit in the Pre-Funding Account. The
Initial Pre-Funded Amount is $88,386,019.55.
Terms of the Notes:
A. Interest....... Class A-1 Notes: ____%
Class A-2 Notes: ____%
Class A-3 Notes: ____%
Class B Notes: ____%
Interest on the Notes will accrue at the applicable
Interest Rate from the Closing Date or the most recent
Distribution Date on which interest has been paid to but
excluding the next Distribution Date, and will generally
be payable monthly on the 15th day of each month, or, if
any such day is not a business day, on the next
succeeding business day, commencing on May 15, 1997
(each, a "Distribution Date"). Interest on the Notes
will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
Interest on the Class B Notes will not be paid on any
Distribution Date until interest payments on the Class A
Notes have been paid in full. After an Event of Default
and acceleration of the Notes, no interest will be
payable on the Class B Notes until all principal of and
interest on the Class A Notes has been paid in full.
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<PAGE>
B. Principal....... Principal of the Notes will be payable on each
Distribution Date in an amount equal to the Principal
Distributable Amount for the calendar month preceding
such Distribution Date as follows: 100% to the Class A-1
Notes until the Class A-1 Notes are paid in full;
thereafter, 100% to the Class A-2 Notes until the Class
A-2 Notes are paid in full; thereafter, 100% to the
Class A-3 Notes until the Class A-3 Notes are paid in
full; and thereafter, 100% to the Class B Notes until
the Class B Notes are paid in full. After an Event of
Default and acceleration of the Notes, principal
payments will be made ratably to the Class A Noteholders
according to the amounts due and payable on the Class A
Notes for principal until paid in full and then ratably
to the Class B Noteholders until paid in full. The
"Principal Distributable Amount" for the calendar month
preceding a Distribution Date generally means the
principal portion of all payments due with respect to
the Receivables, the principal portion of all
prepayments received and the principal balance of all
Receivables repurchased by the Seller or purchased by
the Servicer, each during such calendar month.
Each class of Notes will be payable in full on the
applicable Final Scheduled Distribution Date set forth
below (however, the actual payment in full of any class
of Notes could occur sooner):
Class A-1 Notes: May 15, 1998
Class A-2 Notes: January 17, 2000
Class A-3 Notes: March 15, 2002
Class B Notes: January 15, 2004
C. Mandatory
Prepayment...... The Class A-1 Notes will be prepaid in whole or in part
on the Distribution Date on or immediately following the
last day of the Funding Period if any amount remains on
deposit in the Pre-Funding Account on such date, after
giving effect to the purchase of all Subsequent
Receivables, including any such purchase on such date.
Any such prepayment will be made in accordance with the
priorities described above; provided, that if the
remaining Pre-Funded Amount at the time of such
prepayment exceeds $100,000, each class of Notes
(including the Class B Notes) will be prepaid pro rata
based on the initial principal balance of such class.
In addition, the Trust will be obligated to pay a
Noteholders' Prepayment Premium as described in the
Prospectus Supplement with respect to each class of
Notes in connection with such mandatory prepayment if
the remaining Pre-Funded Amount at the time of such
prepayment exceeds $100,000. The Trust's obligation
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<PAGE>
to pay the Noteholders' Prepayment Premium will be
limited to the pro rata portion (based on the
initial principal balance of such class) of funds
that are received from the Seller under the
Pooling and Servicing Agreement as liquidated
damages for the failure to deliver Subsequent
Receivables (and the Seller's obligation to pay
such liquidated damages thereunder is limited to
funds it receives from NFC as liquidated damages
for NFC's failure to deliver Subsequent
Receivables to the Seller). No other assets of the
Trust will be available for the purpose of making
such payment.
D. Redemption............ If the Servicer exercises its option to purchase
the Receivables when the Class A-1 Notes and the
Class A-2 Notes have been paid in full and the
Aggregate Receivables Balance declines to 10% or
less of the Aggregate Starting Receivables
Balance, the holders of the Class A-3 Notes and
the Class B Notes will be redeemed in whole, but
not in part, on any Distribution Date at a
redemption price equal to the unpaid principal
amount of such Notes, plus accrued and unpaid
interest thereon.
The "Aggregate Starting Receivables Balance" means
the Starting Receivable Balances of the Initial
Receivables plus the Starting Receivable Balances
of all Subsequent Receivables as of the related
Cutoff Date.
Priority of Distributions... Distributions of the Total Available Amount to the
Noteholders and the Servicer will generally be
distributed in the following order of priority on
each Distribution Date: (i) the Servicing Fee and
any unpaid Servicing Fee for prior Distribution
Dates ("Total Servicing Fee"); (ii) interest on
the Class A Notes; (iii) interest on the Class B
Notes; (iv) principal on the Class A Notes; and
(v) principal on the Class B Notes. Upon the
occurrence of an Event of Default and the
acceleration of the Notes, the Class A Notes will
be paid in full prior to making any further
payments on or with respect to the Class B Notes.
Reserve Account............. On the Closing Date $21,609,733.97 in cash or
eligible investments will be deposited into the
Reserve Account and on each date during the
Funding Period on which Subsequent Receivables are
to be transferred to the Trust, cash or eligible
investments in an amount equal to at least 5.25%
of the aggregate Starting Receivables Balance of
such Receivables will be deposited into the
Reserve Account. The Reserve Account will be
increased on each Distribution Date by the deposit
in the Reserve Account of amounts remaining after
payment to the Servicer of the Total Servicing Fee
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<PAGE>
and deposits to the Distribution Account of amounts to
be distributed to Noteholders.
Amounts in the Reserve Account on any Distribution
Date (after giving effect to all distributions to be
made to the Servicer and the Noteholders on such
Distribution Date) in excess of the Specified Reserve
Account Balance specified in the Pooling and Servicing
Agreement for such Distribution Date will be paid to
the holders of the Certificates.
Funds will be withdrawn from cash in the Reserve
Account on the day preceding each Distribution Date to
the extent that the Available Amount (after payment of
the Total Servicing Fee) is less than amounts payable
on the Notes.
Pre-Funding Account ..... The Pre-Funding Account will be created with the
deposit of $88,386,019.55 (the "Initial Pre-Funded
Amount"). During the Funding Period, the Seller will
be obligated to sell to the Trust additional
Receivables (the "Subsequent Receivables") having an
aggregate principal balance equal to the Initial Pre-
Funded Amount to the extent that such Subsequent
Receivables have been acquired by the Seller from NFC,
and to deposit the required amounts in the Reserve
Account in connection with such purchase. The "Funding
Period" will be the period from and including the
Closing Date until the earliest of (i) the
Distribution Date on which the amount on deposit in
the Pre-Funding Account (after giving effect to the
purchase of all Subsequent Receivables, including any
such purchase on such date) is less than $100,000,
(ii) the occurrence of an Event of Default under the
Indenture or a Servicer Default under the Pooling and
Servicing Agreement, (iii) the occurrence of certain
events of insolvency with respect to the Seller or the
Servicer and (iv) the close of business on the July
1997 Distribution Date. Any amount remaining in the
Pre-Funding Account at the end of the Funding Period
will be payable as described in the prior discussion
of Mandatory Prepayments.
Negative Carry Account .. The Negative Carry Account will be created with the
deposit by the Seller of $___________ (the "Negative
Carry Account Initial Deposit"). On each Distribution
Date, an amount equal to the Negative Carry Amount for
such Distribution Date will be withdrawn from the
Negative Carry Account and deposited in the Collection
Account. Amounts on deposit in the Negative Carry
Account in excess of the Required Negative Carry
Account Balance will be released to the Seller on each
Distribution Date, and all
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<PAGE>
amounts remaining on deposit in the Negative Carry
Account on the Distribution Date on or immediately
following the last day of the Funding Period (after
giving effect to all withdrawals therefrom on such
Distribution Date) will be released to the Seller. The
"Negative Carry Amount" means, as of any Distribution
Date, the amount by which the total interest payable
to the Noteholders with respect to the pre-funded
portion of the pool exceeds the investment earnings on
the Pre-Funded Amount during the preceding calendar
month. The "Required Negative Carry Account Balance"
means, as of any Distribution Date, the lesser of the
amount then on deposit in the Negative Carry Account
and the maximum negative carry amount for the
remainder of the Funding Period, assuming no further
withdrawals from the Pre-Funding Account and
investment earnings on amounts on deposit therein at a
rate of 2.5%.
Tax Status .............. In the opinion of Kirkland & Ellis, federal tax
counsel, for federal income tax purposes, the Notes
will be characterized as indebtedness and the Trust
will not be characterized as an association (or
publicly traded partnership) taxable as a corporation.
Each Noteholder by the acceptance of a Note will agree
to treat the Notes as indebtedness.
ERISA Considerations .... Although there is little guidance on the subject, the
Seller believes the Notes should be treated as
indebtedness without substantial equity features for
the purposes of the Plan Assets Regulation. Therefore,
the Notes are available for investment by a Benefit
Plan, subject to a determination by such Benefit
Plan's fiduciary that the Notes are suitable
investments for such Benefit Plan under ERISA and the
Internal Revenue Code.
Legal Investment ........ The Class A-1 Notes will be eligible securities for
purchase by money market funds under Rule 2a-7 under
the Investment Company Act of 1940, as amended.
Ratings ................. It is a condition to the issuance of the Notes that
the Class A-1 Notes be rated in the highest rating
category for short-term debt obligations by at least
two nationally recognized rating agencies, and the
Class A-2 and Class A-3 Notes be rated in the highest
rating category for long-term debt obligations, and
the Class B Notes be rated in the "A" category or its
equivalent, by at least one nationally recognized
rating agency.
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<PAGE>
THE RECEIVABLES POOL
The Initial Receivables
The Receivables to be transferred to the Trust on the Closing Date
(the "Initial Receivables") were originally acquired by Navistar Financial
Corporation ("NFC") from (i) Navistar International Transportation Corp.
("NITC") dealers, (ii) other dealers, including those selling other
manufacturers' vehicles and equipment and (iii) retail customers. Certain of the
Initial Receivables were sold by NFC to Truck Retail Instalment Paper Corp.
("TRIP"), a special purpose, wholly owned subsidiary of NFC, and will be
repurchased by NFC from TRIP as of the Closing Date for resale to the Seller.
The Initial Receivables were selected randomly for inclusion in the Receivables
Pool from those Retail Notes in NFC's portfolio of owned Retail Notes which
satisfied several criteria, including that each Initial Receivable (i) has a
first payment due date on or before April 30, 1997, (ii) has an original term to
maturity of 12 to 84 months and a remaining term to maturity of 12 to 72 months,
(iii) provides for finance charges at an APR of no less than 7.00%, (iv) as of
April 1, 1997, was not more than 60 days past due and (v) satisfies the other
criteria set forth in the Prospectus under the caption "The Receivables
Pools."
The composition, distribution by annual percentage rate, distribution
by remaining maturity, distribution by payment terms and geographic distribution
of the Initial Receivables are as set forth in the following tables. Due to
rounding, the percentages shown in these tables may not add to 100.00%.
Composition of the Initial Receivables
<TABLE>
<CAPTION>
Weighted Weighted
Weighted Average Aggregate Average Average Average
Annual Percentage Starting Aggregate Number Starting Original Remaining
Rate of Receivables Receivables Original Principal of Receivable Maturity Maturity
(Range) Balance Balance Receivables Balance (Range) (Range)
- -------------------- --------------- ------------------ ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
10.234% $411,613,980.45 $472,652,987.22 8,581 $47,968.07 53.04 months 47.80 months
(7.20%-24.99%)(1) (12 to 84 (12 to 72
months) months)
- -------------
</TABLE>
(1) Excludes twenty Receivables with APRs above 24.99%.
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<PAGE>
<TABLE>
<CAPTION>
Distribution by Annual Percentage Rate of the Initial Receivables
Percentage of
Annual Percentage Number of Starting Receivables Aggregate Starting
Rate Range Receivables Balance Receivables Balance
- ----------------- ----------- -------------------- -------------------
<S> <C> <C> <C>
7.00-8.49%...... 1,100 $ 59,706,495.60 14.51%
8.50-9.49%...... 2,113 120,677,476.01 29.32%
9.50-10.49%..... 1,892 104,063,809.83 25.28%
10.50-11.49%..... 1,004 46,523,007.83 11.30%
11.50-12.49%..... 641 27,698,728.00 6.73%
12.50-13.49%..... 539 21,891,781.42 5.32%
13.50-14.49%..... 448 13,295,353.32 3.23%
14.50-15.49%..... 323 7,591,009.44 1.84%
15.50-16.49%..... 227 4,745,771.50 1.15%
16.50-17.49%..... 57 1,148,919.77 0.28%
17.50% & Over.... 237 4,271,627.73 1.04%
Total....... 8,581 $411,613,980.45 100.00%
</TABLE>
Distribution by Remaining Maturity of the Initial Receivables
<TABLE>
<CAPTION>
Percentage of
Remaining Maturity Number of Starting Receivables Aggregate Starting
(Months) Receivables Balance Receivables Balance
- ------------------ ----------- -------------------- --------------------
<S> <C> <C> <C>
1-12.............. 206 $ 3,769,467.82 0.92%
13-24............. 1,589 29,812,946.43 7.24%
25-36............. 1,702 58,923,818.80 14.32%
37-48............. 1,785 106,248,720.39 25.81%
49-60............. 2,869 186,081,332.04 45.21%
61-66............. 106 6,994,542.36 1.70%
67 & Over......... 324 19,783,152.61 4.81%
Total........ 8,581 $411,613,980.45 100.00%
</TABLE>
Distribution by Payment Terms of Initial Receivables
<TABLE>
<CAPTION>
Percentage of
Aggregate Starting
Type of Receivable Receivables Balance
---------------------------------- -------------------
<S> <C>
Equal Payment Fully Amortizing.... 67.62%
Equal Payment Balloon............. 10.09%
Equal Payment Skip................ 5.71%
Level Principal Fully Amortizing.. 5.21%
Level Principal Balloon........... 7.73%
Level Principal Skip.............. 0.59%
Other............................. 3.05%
Total........................ 100.00%
</TABLE>
The Receivables Pool includes Receivables originated in 48 states and
The District of Columbia. The following table sets forth the percentage of the
Aggregate Starting Receivables Balance in the states with the largest
concentration of Receivables. No other state accounts for more than 3.00% of the
aggregate Starting Receivables Balance of the Initial Receivables. None of the
Receivables were originated in Alaska or Hawaii.
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<PAGE>
Geographic Distribution of the Initial Receivables
<TABLE>
<CAPTION>
Percentage of
Aggregate Starting
Receivables
State(1) Balance
--------------------------- --------------------
<S> <C>
Texas...................... 8.03%
California................. 7.72%
Illinois................... 6.94%
Ohio....................... 6.86%
New York................... 4.92%
Florida.................... 4.80%
Tennessee.................. 3.62%
Indiana.................... 3.31%
Pennsylvania............... 3.13%
Other...................... 50.65%
Total.................... 100.00%
</TABLE>
- ----------------
(1) Based on billing addresses of the obligors on the Initial Receivables.
No single obligor accounts for more than 1.46% of the aggregate
Starting Receivables Balance of the Initial Receivables. As of April 1, 1997,
approximately 71.64% of the aggregate Starting Receivables Balance of the
Initial Receivables, constituting 62.39% of the aggregate number of Initial
Receivables, represent Receivables secured by new vehicles. The remainder are
secured by used vehicles.
The Subsequent Receivables
Any transfer of Subsequent Receivables is subject to the satisfaction,
on or before the related subsequent transfer date, of certain conditions
precedent described in the Prospectus and the Prospectus Supplement. Each
Subsequent Receivable must satisfy the eligibility criteria specified in the
Pooling and Servicing Agreement at the time of its addition. The Subsequent
Receivables, however, need not satisfy any other eligibility criteria.
Subsequent Receivables may be originated by NITC dealers, other dealers or NFC
at a later date using credit criteria different from those that were applied to
the Initial Receivables and may be of a different credit quality and seasoning.
In addition, following the transfer of Subsequent Receivables to the Trust, the
characteristics of the Receivables, including the composition of the
Receivables, the distribution by APR, equipment type, payment frequency, average
maturity, current Receivable Balance and geographic distribution, may vary from
those of the Initial Receivables; provided, however, there will be a requirement
that, after giving effect to the transfer of Subsequent Receivables to the
Trust, the weighted average APR of the Receivables in the Trust be not less than
9.75% and that the aggregate principal balance of all Receivables owing from any
single Obligor not exceed 2% of the aggregate principal balance of the
Receivables in the Trust. Since the weighted average life of the Notes will be
influenced by the rate at which the principal balances of the Receivables are
paid, some of these variations will affect the weighted average life of each
class of Notes. The requirements that no Subsequent Receivables have a remaining
term in excess of 72 months and that on each Subsequent Transfer Date the
weighted average remaining maturity of the Receivables in the Trust will not be
greater than 52 months are
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<PAGE>
intended to minimize the effect of the addition of Subsequent Receivables on the
weighted average life of the Notes.
THE SERVICER
Delinquencies, Repossessions and Net Losses
Set forth below is certain information concerning NFC's experience in
the United States pertaining to delinquencies, repossessions and net losses on
its entire portfolio of Retail Notes (including Retail Notes previously sold
which NFC continues to service). Fluctuations in retail delinquencies,
repossessions and losses generally follow cycles in the overall business
environment. Although NFC believes retail delinquencies, repossessions and net
losses are particularly sensitive to the industrial sector, which generates a
significant portion of the freight tonnage hauled, NFC does not track such data
and is unable to ascertain the specific causes of such fluctuations. There can
be no assurance that the delinquency, repossession and net loss experience on
the Receivables Pool will be comparable to that set forth below. Due to
rounding, the amounts shown for NFC and NITC separately in this table may not
add to the amount shown for NFC and NITC combined.
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<PAGE>
<TABLE>
<CAPTION>
Three Months
------------
NFC Retail Notes Year Ended October 31, Ended January 31,
- ---------------- ------------------------------------------------------ -----------------
1992 1993 1994 1995 1996(1) 1996 1997
------- -------- ------- --------------- --------- --------- ------
($ in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Balance Outstanding at end of
Period................................. $1,330 $ 1,437 $1,653 $2,073 $2,282 $2,140 $2,247
Gross Balance Past Due as a
Percentage of Gross Balance
Outstanding at end of Period
31-60 days.......................... 1.03% 0.67% 0.41% 2.43% 1.99% 1.88% 3.57%
over 60 days........................ 0.19% 0.09% 0.06% 0.09% .30% .29% .90%
Average Gross Balance.................... $1,320 $ 1,341 $1,515 $1,809 $2,204 $2,109 $2,263
Net Losses
NFC................................. $ 2.3 $ (0.1) $ 0.6 $ 0.3 $ 5.0 $ -- $ 0.2
NITC................................ 10.5 4.8 0.6 0.6 9.5 -- 0.6
Combined............................ 12.8 4.7 1.2 0.9 14.5 -- 0.8
------ ------- ------ ------ ------ ------ ------
Liquidations minus Net Losses............
$ 794 $ 713 $ 790 $ 833 $1,002 $ 231 $ 258
Net Losses as a Percentage of
Liquidations minus Net Losses
NFC................................. 0.29% (0.01)% 0.08% 0.04% .50% -- .07%
NITC................................ 1.32% 0.67% 0.07% 0.07% .95% -- .24%
Combined............................ 1.61% 0.66% 0.15% 0.11% 1.45% -- .31%
------ ------- ------ ------ ------ ------ ------
Net Losses as a Percentage of
Average Gross Balance (2)
NFC................................. 0.18% 0.00% 0.04% 0.02% .23% -- .02%
NITC................................ 0.79% 0.35% 0.04% 0.03% .43% -- .12%
Combined............................ 0.97% 0.35% 0.08% 0.05% .66% -- .14%
------ ------- ------ ------ ------ ------ ------
Repossessions as a Percentage of
Average Gross Balance (2).............. 3.70% 1.95% 0.97% 0.92% 3.15% .90% 1.43%
</TABLE>
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(1) The information presented herein for the year ended October 31, 1996
includes the effect of the bankruptcy of one of NFC's largest obligors,
with obligations under Retail Notes covering approximately 720 vehicles. As
adjusted to eliminate the impact of that obligor's bankruptcy, the Combined
Net Losses, Combined Net Losses as a Percentage of Liquidations minus Net
Losses, Combined Net Losses as a Percentage of Average Gross Balance and
Repossessions as a Percentage of Average Gross Balance for the same period
would have been $4.0 million, 0.39%, 0.18% and 1.64%, respectively.
(2) January 31 figures have been annualized.
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