<PAGE>
Registration No. 333-62445
Filed Pursuant to Rule 424(B)(5)
Prospectus Supplement
(To Prospectus Dated October 19, 2000)
Navistar Financial 2000-B Owner Trust
$764,710,097.53 Asset Backed Notes
Navistar Financial Retail Receivables Corporation
Seller
Navistar Financial Corporation
Servicer
Before you purchase any of the notes, you should consider carefully the risk
factors beginning on page S-6 in this prospectus supplement and page 4 in the
prospectus.
The sole source of payments of the notes is the assets of the trust. The notes
are not interests in or obligations of Navistar Financial Retail Receivables
Corporation, Navistar Financial Corporation, or any other person or entity.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
The trust will issue the following classes of notes:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Class A Notes Class B
--------------------------------------------------------------------- Notes
Class A-1 Class A-2 Class A-3 Class A-4
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Principal Amount $140,000,000 $232,400,000 $184,900,000 $178,733,000 $28,677,097.53
------------------------------------------------------------------------------------------------------------------
Interest Rate 6.73% 6.66% 6.67% 6.78% 7.03%
------------------------------------------------------------------------------------------------------------------
Distribution Dates Monthly Monthly Monthly Monthly Monthly
------------------------------------------------------------------------------------------------------------------
First Distribution
Date November 15, 2000 November 15, 2000 November 15, 2000 November 15, 2000 November 15, 2000
------------------------------------------------------------------------------------------------------------------
Final Scheduled
Distribution Date November 15, 2001 October 15, 2003 November 15, 2004 September 17, 2007 September 17, 2007
------------------------------------------------------------------------------------------------------------------
Price to Public 100.000000% 99.994844% 99.986538% 99.985523% 99.999971%
------------------------------------------------------------------------------------------------------------------
Underwriting
Discount 0.110% 0.160% 0.225% 0.275% 0.375%
------------------------------------------------------------------------------------------------------------------
Proceeds to Seller/1/ $139,846,000.00 $232,016,177.46 $184,459,083.76 $178,215,609.07 $28,569,550.10
------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses payable by the Seller, which are estimated to be
$500,000. Total price to public is $764,647,340.26, total underwriting
discount is $1,540,919.87, and total proceeds to the Seller are
$763,106,420.39.
This prospectus supplement and the accompanying prospectus relate only to the
offering of the notes. The certificates issued by the trust are not being
offered under this prospectus supplement and the prospectus.
Credit Enhancement
. A reserve account, with an initial balance of $36,323,729.63.
. The Class B Notes are subordinated to the Class A Notes. Subordination of
the Class B Notes provides additional credit enhancement for the Class A
Notes.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement or the prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
Delivery of the notes will be made only in book-entry form on or about November
1, 2000.
Joint Lead Managers of the Class A Notes
Banc of America Securities LLC Salomon Smith Barney
(Bookrunner)
Co-Managers of the Class A Notes
Banc One Capital Markets, Inc. Chase Securities Inc.
Underwriter of the Class B Notes
Banc of America Securities LLC
--------------
The date of this prospectus supplement is October 19, 2000
<PAGE>
[Intentionally Left Blank]
i
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary................................................................... S-1
The Parties............................................................. S-1
Trust Property.......................................................... S-1
The Notes............................................................... S-2
Priority of Payments.................................................... S-3
Credit Enhancement...................................................... S-3
Servicing Fees.......................................................... S-4
Tax Status.............................................................. S-4
ERISA Considerations.................................................... S-4
Legal Investment........................................................ S-4
Ratings................................................................. S-4
Mailing Address and Telephone Number of Principal Executive Offices..... S-5
Risk Factors.............................................................. S-6
Class B Notes are Subject to Greater Credit Risk Because the Class B
Notes are Subordinated to the Class A Notes............................ S-6
The Trust has Limited Assets to Repay the Notes......................... S-6
Limited Ability to Resell Notes......................................... S-6
The Trust................................................................. S-7
Capitalization of the Trust............................................. S-7
The Owner Trustee....................................................... S-7
The Receivables Pool...................................................... S-7
Use of Proceeds........................................................... S-10
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Servicer............................................................... S-11
Delinquencies, Repossessions and Net Losses.............................. S-11
Weighted Average Life of the Notes......................................... S-14
The Notes.................................................................. S-19
General.................................................................. S-19
Payments of Interest..................................................... S-19
Payments of Principal.................................................... S-20
Optional Redemption...................................................... S-21
Parity and Priority of Notes............................................. S-21
Voting Rights............................................................ S-21
The Transfer and Servicing Agreements...................................... S-21
Servicing Compensation and Payment of Expenses........................... S-21
Distributions............................................................ S-21
Reserve Account.......................................................... S-24
Certain Federal Income Tax Consequences.................................... S-25
ERISA Considerations....................................................... S-25
Underwriting............................................................... S-26
Legal Opinions............................................................. S-27
Index of Terms............................................................. S-28
</TABLE>
ii
<PAGE>
Where to Find Information in this Prospectus Supplement and the Prospectus
We provide information to you about the notes in two separate documents that
provide varying levels of detail:
(a) the prospectus, which provides general information, some of which
may not apply to a particular class of notes, including your series; and
(b) this prospectus supplement, which provides information regarding the
pool of receivables held by the trust and specifies the terms of your
series of notes.
If the terms of your series of notes vary between the prospectus and this
prospectus supplement, you should rely on the information in this prospectus
supplement.
You should rely only on the information provided in the prospectus and this
prospectus supplement. We have not authorized anyone to provide you with other
or different information. You should not assume that the information in the
prospectus and this prospectus supplement is accurate on any date other than
the dates stated on their respective covers.
We are not offering the notes in any state where the offer is not permitted.
Capitalized terms used in this prospectus supplement are defined either in
this prospectus supplement or in the prospectus. You can find a listing of the
pages where capitalized terms used in this prospectus supplement are defined
under the caption "Index of Terms" which appears at the end of the prospectus
and this prospectus supplement.
----------------
iii
<PAGE>
SUMMARY
. This summary highlights selected information from this prospectus supplement
and provides an overview to aid in your understanding of the notes. It does
not contain all of the information that you need to consider in making your
investment decision. To understand the terms of this offering of the notes,
carefully read this entire prospectus supplement and the accompanying
prospectus.
The Parties
Issuer
Navistar Financial 2000-B Owner Trust, a Delaware common law trust, acting by
and through the owner trustee
Seller
Navistar Financial Retail Receivables Corporation, a wholly-owned subsidiary of
Navistar Financial Corporation
Servicer
Navistar Financial Corporation
Indenture Trustee
The Bank of New York
Owner Trustee
Chase Manhattan Bank USA, National Association, as owner trustee under the
Owner Trust Agreement
Administrator
Navistar Financial Corporation
Trust Property
The primary assets of the trust will be:
. a pool of commercial retail loans evidenced by notes secured by new and used
medium or heavy duty trucks, buses or trailers, which will be transferred to
the trust on the closing date
. security interests in the vehicles financed by the receivables and the
proceeds of repossessed vehicles
. amounts held on deposit in certain bank accounts, including the reserve
account
. any proceeds from any guaranties, dealer liability or repurchase obligations
of International Truck and Engine Corporation
. any proceeds from claims on related insurance policies, and
. certain of the Seller's rights under the purchase agreement under which
Navistar Financial Retail Receivables Corporation acquired the receivables
and under the custodian agreement under which Navistar Financial Corporation
holds the documentation related to the receivables.
The Receivables
On the closing date, the trust will acquire the receivables, which had an
initial aggregate principal balance of $764,710,097.53 as of October 1, 2000.
The composition of the receivables as of October 1, 2000 was as follows:
<TABLE>
<S> <C>
Initial Aggregate Receivables Balance $764,710,097.53
Aggregate Original Receivables Balance $812,766,768.15
Number of Receivables 16,390
Average Receivable Balance $46,657.11
Weighted Average APR 9.786%
(Range) 6.73%-21.99%*
Weighted Average
Original Maturity 55.29 months
(Range) 14 to 84 months
Weighted Average Remaining Maturity 51.08 months
(Range) 12 to 72 months
</TABLE>
* Excludes 12 receivables with APRs above 21.99%.
S-1
<PAGE>
The Notes
The trust will issue the following classes of notes:
<TABLE>
<CAPTION>
Aggregate
Principal Interest
Class Amount Rate
-------------------------------------------
<S> <C> <C>
Class A-1 Notes $140,000,000.00 6.73%
-------------------------------------------
Class A-2 Notes $232,400,000.00 6.66%
-------------------------------------------
Class A-3 Notes $184,900,000.00 6.67%
-------------------------------------------
Class A-4 Notes $178,733,000.00 6.78%
-------------------------------------------
Class B Notes $ 28,677,097.53 7.03%
</TABLE>
The sole source of payments on the notes is the assets of the trust. The notes
are not interests in, obligations of or insured or guaranteed by the Owner
Trustee, Navistar Financial Corporation, Navistar Financial Retail Receivables
Corporation or any other person or entity.
Closing Date
November 1, 2000
Distribution Dates
Distributions on the notes will generally be made monthly on the 15th day of
each month or, if the 15th day is not a business day, on the next business day,
starting November 15, 2000.
Interest Payments
The interest rate for each class of notes is specified above.
Interest on the Class A-1 Notes will be calculated on the basis of the actual
number of days in the applicable interest period divided by 360, and interest
on the other classes of notes will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
Interest payments on all classes of the Class A Notes will have the same
priority, while interest payments on the Class B Notes will be subordinated to
the payment of interest on the Class A Notes. After the notes are declared to
be due and payable following the occurrence of an event of default resulting
from the failure to make a payment on 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.
Principal Payments
The amount of principal payable on the notes on each distribution date will
generally equal the principal payments on the receivables plus the outstanding
principal amount of the receivables that were written off during the prior
calendar month. Principal payments on the notes will be paid:
. first, 100% to the Class A-1 Notes until the Class A-1 Notes are paid in
full;
. second, 96.25% to the Class A Notes and 3.75% to the Class B Notes until the
Class A Notes are paid in full; and
. third, 100% to the Class B Notes until the Class B Notes are paid in full.
Principal payments made on the Class A Notes after the Class A-1 Notes have
been paid in full will be applied sequentially to the earliest maturing class
of Class A Notes then outstanding until paid in full.
If the amount on deposit in the reserve account on any distribution date, after
giving effect to the distribution of the funds of the trust available to pay
principal on the notes in accordance with the priorities set forth above, would
be less than $7,647,101 (1% of the initial aggregate principal balance of the
receivables), the trust will pay 100% of the principal payable on the notes to
the holders of the Class A Notes until either the Class A Notes are paid in
full or the amount on deposit in the reserve account equals or exceeds its
required amount. Under these circumstances, principal payments made on the
Class A Notes will be applied sequentially to the earliest maturing class of
Class A Notes then outstanding until paid in full. If principal payments on the
Class B Notes resume because the amount on deposit in the Reserve Account
equals or exceeds the required amount, the trust will pay principal on
S-2
<PAGE>
the notes in accordance with the priorities described in the three bullet
points above.
Also, if the notes are declared to be due and payable following the occurrence
of any event of default, whether due to a failure to make a payment on the
notes or otherwise, the trust will pay 100% of the principal payable on the
notes to the holders of the Class A Notes pro rata among the classes based on
their respective unpaid principal balances until the Class A Notes are paid in
full. After the Class A Notes have been paid in full, the trust will pay 100%
of the principal payable on the notes to the holders of the Class B Notes until
the Class B Notes are paid in full.
Final Scheduled Distribution Dates
The outstanding principal amount of each class of notes will be payable in full
on the distribution date in the calendar month set forth below:
<TABLE>
<S> <C>
Class A-1 Notes: November 2001
Class A-2 Notes: October 2003
Class A-3 Notes: November 2004
Class A-4 Notes: September 2007
Class B Notes: September 2007
</TABLE>
Optional Redemption
The servicer has the option to purchase the receivables on any payment date on
which the aggregate principal balance of the receivables is 10% or less of the
initial aggregate principal balance of the receivables and the Class A-1 Notes,
the Class A-2 Notes and the Class A-3 Notes have been paid in full, at a price
equal to the outstanding principal amount of the Class A-4 Notes and the Class
B Notes plus accrued and unpaid interest thereon. The trust will apply such
payment to the redemption of the
Class A- 4 Notes and the Class B Notes.
Priority of Payments
On each distribution date, collections on the receivables received during the
prior calendar month, amounts advanced by the servicer in respect of delinquent
payments on the receivables and funds transferred from the reserve account
described below, will generally be distributed in the following order of
priority:
. reimbursement to the servicer for prior advances and expenses incurred in
repossessing, refurbishing and selling repossessed vehicles
. servicing fees to the servicer
. interest on the Class A Notes
. interest on the Class B Notes
. principal on the notes as described above
. to the reserve account, the amount, if any, necessary to fund the reserve
account up to its required amount
. distributions on the certificates
See "The Notes--Payments of Interest" in this prospectus supplement for special
priority rules for the payment of interest under certain circumstances.
Credit Enhancement
Credit enhancement provides protection for the notes against losses and delays
in payments on the receivables.
Reserve Account
On the closing date an amount of cash or eligible investments equal to
$36,323,729.63 or 4.75% of the initial aggregate principal balance of the
receivables will be deposited into a reserve account.
The amount in the reserve account will be increased to a specified amount on
each distribution date by the deposit of amounts remaining from monthly
collections on the receivables after payment of any reimbursement for servicer
advances, liquidation expenses and the servicing fees to the servicer and
payments of interest and principal on the notes. Amounts in the reserve account
on any distribution date in excess of the specified amount for that
distribution date will be paid to the holders of the certificates. The amount
that will be required to be on deposit in the reserve account on each
S-3
<PAGE>
payment date will be the lesser of (1) the outstanding principal amount of the
notes and (2) the greater of (a) 5.5% (or 10.0% under certain circumstances
described herein) of the aggregate of the principal balances of the receivables
in the trust as of the last day of the related monthly period and (b) 2.0% of
the initial aggregate principal balance of the receivables.
Funds will be withdrawn from cash in the reserve account on the day preceding
each distribution date to the extent that the funds of the trust otherwise
available to pay interest and principal on the notes (after reimbursement to
the servicer for prior advances and expenses incurred in repossessing,
refurbishing and selling repossessed vehicles and payment of the servicing
fees) is less than amounts payable on the notes (including on the final
maturity date of any class of notes, the outstanding principal amount of such
class). These funds will then be disbursed according to the priority of
distributions described under the caption "Priority of Payments" above.
Subordination of the Class B Notes
The subordination of the Class B Notes to the Class A Notes as described in
this prospectus supplement will provide additional credit enhancement to the
Class A Notes.
Servicing Fees
Navistar Financial Corporation will service the receivables. The trust will pay
the servicer a monthly servicing fee of one-twelfth of 1% of the principal
balance of the receivables as compensation for servicing the receivables. The
servicer will also be entitled to retain any late fees, prepayment charges and
other similar fees and charges collected during the prior month.
Tax Status
Kirkland & Ellis, special tax counsel, is of the opinion that 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.
By accepting a note, you will be deemed to agree to treat the notes as
indebtedness for federal, state and local income and franchise tax purposes.
See "Certain Federal Income Tax Consequences" in this prospectus supplement and
"Certain Federal Income Tax Consequences" and "Certain State Tax Matters" in
the prospectus concerning the application of federal, state and local tax laws.
ERISA Considerations
Subject to the limitations discussed under "ERISA Considerations" in this
prospectus supplement, the notes are available for investment by an employee
benefit plan subject to the Employee Retirement Income Security Act of 1974.
See "ERISA Considerations" in the prospectus and this prospectus supplement for
a description of the limitations on purchases of the notes by employee benefit
plans.
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.
Ratings
The notes will not be issued unless:
. the Class A-1 Notes are rated in the highest rating category for short-term
debt obligations by at least two nationally recognized rating agencies,
. the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes are rated
in the highest rating category for long-term debt obligations by at least
one nationally recognized rating agency, and
. the Class B Notes are rated in the "A" category for long-term debt
obligations or its equivalent by at least one nationally recognized rating
agency.
If circumstances change after the closing date, a rating agency may change its
rating of the notes. If a rating agency lowers its rating of the notes, no one
is obligated to provide additional credit enhancement or to restore the
original rating.
S-4
<PAGE>
Mailing Address and Telephone Number of Principal Executive Offices
The mailing address of Navistar Financial Corporation is 2850 West Golf Road,
Rolling Meadows, Illinois, 60008, telephone (847) 734-4000. The mailing address
of Navistar Financial Retail Receivables Corporation is Corporation Trust
Center, 1209 Orange Street, Wilmington, Delaware, 19801, telephone (302) 658-
7581. The principal office of the trust is in Wilmington, Delaware, in care of
Chase Manhattan Bank USA, National Association, as owner trustee, 1201 Market
Street, Wilmington, Delaware 19801.
S-5
<PAGE>
RISK FACTORS
In addition to the risk factors beginning on page 4 of the prospectus, you
should consider the following risk factors in deciding whether to purchase the
notes.
Class B Notes are The Class B Notes bear greater credit risk than the
Subject to Greater Class A Notes because payments of interest and,
Credit Risk Because the under certain circumstances, principal on the Class
Class B Notes are B Notes is subordinated in priority to the payment
Subordinated to the of interest and principal due on the Class A Notes.
Class A Notes
No interest will be paid on the Class B Notes on
each distribution date until the servicer is paid
its servicing fee and all accrued and unpaid
interest on the Class A Notes has been paid in
full. In addition, if the notes are declared to be
due and payable following the occurrence of an
event of default under the notes resulting from the
failure to make a payment on the notes, no interest
will be paid on the Class B Notes until all
principal and interest on the Class A Notes has
been paid in full. Principal payments on the Class
B Notes will be subordinate to the payment of
principal on the Class A Notes in full after the
notes have been declared to be due and payable
following the occurrence of an event of default.
Principal payments on the Class B Notes will be
subordinated to the payment of principal on the
Class A Notes after any distribution date on which
the amount on deposit in the reserve account would
be less than $7,647,101 (1% of the initial
aggregate principal balance of the receivables),
after giving effect to the payments on such date,
until the Class A Notes are paid in full or the
amount on deposit in the reserve account equals or
exceeds the required amount.
This subordination could result in delays or
reductions in the payment of principal and interest
on the Class B Notes.
The Trust has Limited The sole source of payments on the notes is the
Assets to Repay the assets of the trust, which consist primarily of the
Notes receivables and the reserve account. Noteholders
must rely on payments on the receivables and
available amounts on deposit in the reserve account
for repayment of the notes. Noteholders may suffer
a loss if the assets of the trust are insufficient
to pay principal and interest on the notes. The
notes are not obligations of Navistar Financial
Corporation, Navistar Financial Retail Receivables
Corporation, the owner trustee or any other person
or entity.
Limited Ability to The notes are a new issue of securities for which
Resell Notes there is no existing market. The underwriters may
assist in the resale of the notes, but they are not
required to do so. Any such activities, if
commenced, may be discontinued at any time. A
trading market for the notes may not develop. If a
trading market does develop, it might not continue
or it might not be sufficiently liquid to allow you
to resell any of your notes.
S-6
<PAGE>
THE TRUST
Navistar Financial 2000-B Owner Trust (the "Trust") is a Delaware common law
trust formed pursuant to a Trust Agreement (the "Owner Trust Agreement")
between Navistar Financial Retail Receivables Corporation and the Owner Trustee
dated as of the Closing Date.
The Trust will engage in only the following activities:
. acquiring, holding and managing the receivables and the other assets of
the Trust and proceeds therefrom;
. issuing the Notes and the Certificates;
. making payments or distributions on the Notes and the Certificates; and
. engaging in other activities that are necessary, suitable, desirable or
convenient to accomplish the foregoing or are incidental thereto or
connected therewith.
Capitalization of the Trust
The following table illustrates the capitalization of the Trust as of
October 1, 2000, as if the issuance of the following classes of notes (the
"Notes") had taken place on that date:
<TABLE>
<S> <C>
Class A-1 6.73% Asset Backed Notes.......................... $140,000,000.00
Class A-2 6.66% Asset Backed Notes.......................... 232,400,000.00
Class A-3 6.67% Asset Backed Notes.......................... 184,900,000.00
Class A-4 6.78% Asset Backed Notes.......................... 178,733,000.00
Class B 7.03% Asset Backed Notes.......................... 28,677,097.53
---------------
Total..................................................... $764,710,097.53
===============
</TABLE>
The certificates represent the equity of the Trust (the "Certificates") and
will be issued under the Trust Agreement. The Certificates will initially be
held by the Seller and are not being offered hereby.
The Trust will also hold the Reserve Account.
The Owner Trustee
Chase Manhattan Bank USA, National Association, will serve as owner trustee
under the Owner Trust Agreement (the "Owner Trustee"). Chase Manhattan Bank
USA, National Association, is a national bank and a wholly-owned subsidiary of
The Chase Manhattan Corporation, a Delaware corporation. Its principal offices
are located at 1201 Market Street, Wilmington, Delaware 19801.
THE RECEIVABLES POOL
The commercial retail loans evidenced by notes secured by new and used
medium and heavy duty trucks, buses and trailers (the "Receivables") to be
transferred to the Trust on the Closing Date (the "Receivables Pool") were
originated by Navistar Financial Corporation ("Navistar Financial") and were
selected randomly from the portfolio of Receivables of Navistar Financial and
Truck Retail Instalment Paper Corp., a special purpose, wholly-owned subsidiary
of Navistar Financial based on several criteria, including that each
Receivable:
. has a first payment due date on or before October 31, 2000;
S-7
<PAGE>
. has an original term of 12 to 84 months;
. has a remaining term of 12 to 72 months;
. provides for finance charges at an annual percentage rate of no less
than 6.50%;
. as of October 1, 2000 (the "Cutoff Date"), was not more than 60 days
past due; and
. satisfies the other criteria set forth in the prospectus under "The
Receivables Pools."
The aggregate Receivables Balance of the Receivables as of the Cutoff Date
was $764,710,097.53 (the "Initial Aggregate Receivables Balance"). Some of the
Receivables to be purchased by the Trust were previously sold by Navistar
Financial to Truck Retail Instalment Paper Corp. On the Closing Date, these
Receivables will be repurchased by Navistar Financial prior to their sale to
the Trust.
The composition, distribution by annual percentage rate, distribution by
remaining maturity, distribution by payment terms and geographic distribution
of the Receivables Pool as of the Cutoff Date 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 Receivables Pool
<TABLE>
<CAPTION>
Weighted
Average Weighted Weighted
Annual Initial Aggregate Average Average Average
Percentage Aggregate Original Initial Original Remaining
Rate Receivables Principal Number of Receivables Maturity Maturity
(Range) Balance Balance Receivables Balance (Range) (Range)
---------- --------------- --------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
9.786% $764,710,097.53 $812,766,768.15 16,390 $46,657.11 55.29 51.08
(6.73%- months months
21.99%)(1) (14 to 84 (12 to 72
months) months)
</TABLE>
--------
(1) Range excludes 12 Receivables with APRs above 21.99%.
Distribution by Annual Percentage Rate of the Receivables Pool
<TABLE>
<CAPTION>
Initial Percentage of
Annual Percentage Number of Receivables Initial Aggregate
Rate Range Receivables Balance Receivables Balance
----------------- ----------- --------------- -------------------
<S> <C> <C> <C>
6.50-7.49%.................. 326 $ 14,000,837.26 1.83%
7.50-8.49%.................. 2,401 129,358,038.24 16.92%
8.50-9.49%.................. 6,388 301,925,880.66 39.48%
9.50-10.49%................. 2,561 132,499,678.95 17.33%
10.50-11.49%................. 1,633 76,469,417.28 10.00%
11.50-12.49%................. 959 45,658,702.94 5.97%
12.50-13.49%................. 647 26,199,238.63 3.43%
13.50-14.49%................. 535 15,219,274.42 1.99%
14.50-15.49%................. 432 11,149,250.32 1.46%
15.50-16.49%................. 236 6,078,140.03 0.79%
16.50-17.49%................. 97 2,308,870.25 0.30%
17.50-17.99%................. 55 1,382,585.62 0.18%
18.00% & Over................ 120 2,460,182.93 0.32%
------ --------------- -------
Total...................... 16,390 $764,710,097.53 100.00%
====== =============== =======
</TABLE>
S-8
<PAGE>
Distribution by Remaining Maturity of the Receivables Pool
<TABLE>
<CAPTION>
Remaining Initial Percentage of Initial
Maturity Number of Receivables Aggregate Receivables
(Months) Receivables Balance Balance
--------- ----------- --------------- ---------------------
<S> <C> <C> <C>
1-12...................... 49 $ 630,810.09 0.08%
13-24..................... 1,259 32,723,717.59 4.28%
25-36..................... 2,852 90,110,375.17 11.78%
37-48..................... 3,119 143,043,573.58 18.71%
49-60..................... 6,914 390,126,058.03 51.02%
61-66..................... 429 26,744,436.82 3.50%
67 & Over................. 1,768 81,331,126.25 10.64%
------ --------------- -------
Total..................... 16,390 $764,710,097.53 100.00%
====== =============== =======
</TABLE>
Distribution by Payment Terms of the Receivables Pool
<TABLE>
<CAPTION>
Percentage of Initial
Aggregate Receivables
Type of Receivable Balance
------------------ ---------------------
<S> <C>
Equal Payment Fully Amortizing......................... 56.08%
Equal Payment Balloon.................................. 13.02%
Equal Payment Skip..................................... 4.60%
Level Principal Fully Amortizing....................... 5.26%
Level Principal Balloon................................ 17.48%
Level Principal Skip................................... 0.14%
Other.................................................. 3.41%
-------
Total................................................ 100.00%
=======
</TABLE>
S-9
<PAGE>
The Receivables Pool includes Receivables originated in 48 states and The
District of Columbia. The following table sets forth the percentage of the
Initial Aggregate Receivables Balance in the states with the largest
concentration of Receivables. No other state accounts for more than 1.82% of
the Initial Aggregate Receivables Balance. None of the Receivables were
originated in Alaska or Hawaii.
Geographic Distribution of the Receivables Pool
<TABLE>
<CAPTION>
Percentage of Initial
Aggregate
State(1) Receivables Balance
-------- ---------------------
<S> <C>
Texas.................................................. 9.12%
California............................................. 7.24%
Illinois............................................... 6.55%
Ohio................................................... 6.44%
New York............................................... 5.99%
Pennsylvania........................................... 4.26%
Florida................................................ 4.01%
Minnesota.............................................. 3.63%
Iowa................................................... 3.45%
Georgia................................................ 3.17%
Tennessee.............................................. 3.14%
Maryland............................................... 3.05%
Arkansas............................................... 3.01%
Michigan............................................... 2.82%
Indiana................................................ 2.57%
Wisconsin.............................................. 2.42%
New Jersey............................................. 2.39%
Other.................................................. 26.74%
------
Total................................................ 100.00%
======
</TABLE>
--------
(1) Based on billing addresses of the obligors on the Receivables.
No single obligor accounts for more than 2.00% of the Initial Aggregate
Receivables Balance. As of the Cutoff Date, approximately 82.50% of the Initial
Aggregate Receivables Balance, constituting 72.52% of the aggregate number of
Receivables, represent Receivables secured by new vehicles. The remainder are
secured by used vehicles.
USE OF PROCEEDS
The Seller will use the net proceeds to fund the initial deposit into the
Reserve Account and to purchase the Receivables from Navistar Financial.
Navistar Financial will use the proceeds from its sale of the Receivables to
the Seller for the following purposes:
. to purchase certain of the Receivables from Truck Retail Instalment
Paper Corp.;
. for general working capital purposes;
. to repay amounts owing to International Truck and Engine Corp.
("International") (f/k/a Navistar International Transportation Corp.);
and
. to repay amounts owing to a group of lenders, including several of the
Underwriters or an affiliate, under one or more credit agreements.
S-10
<PAGE>
THE SERVICER
Delinquencies, Repossessions and Net Losses
Set forth below is selected information concerning Navistar Financial'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 Navistar Financial continues to service). Fluctuations in
retail delinquencies, repossessions and losses generally follow cycles in the
overall business environment. Although Navistar Financial believes retail
delinquencies, repossessions and net losses are particularly sensitive to the
industrial sector, which generates a significant portion of the freight tonnage
hauled, Navistar Financial does not track such data and is unable to ascertain
the specific causes of such fluctuations. As a result of the bankruptcy of one
of Navistar Financial's largest obligors, a combined charge of $10.9 million
was taken in 1996 by Navistar Financial and International, $3.8 million of
which was reversed in 1998 by Navistar Financial. The performance of the
serviced portfolio of Retail Notes declined during the nine-month period ended
July 31, 2000. The loss and delinquency percentages for this period exceed the
levels for any of the other periods shown below. Navistar Financial believes
that the significant increase in delinquencies is due to lower operating
margins realized by trucking companies, resulting primarily from higher fuel
costs and secondarily from reductions in overall freight shipments and a
continuing shortage of truck drivers. Although repossessions for the nine-month
period are in line with historical repossessions, losses are significantly
higher; Navistar Financial attributes the increase principally to industry-wide
lower resale values for used trucks. There can be no assurance that the
delinquency, repossession and net loss experience on the Receivables Pool will
be comparable to that set forth below. Due to rounding, the amounts shown for
Navistar Financial and International separately in this table may not add to
the amount shown for Navistar Financial and International combined.
S-11
<PAGE>
<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended October 31, July 31,
-------------------------------------- --------------
NFC Retail Notes 1995 1996 1997 1998 1999 1999 2000
---------------- ------ ------ ------ ------ ------ ------ ------
($ in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Balance
Outstanding at end of
Period................. $2,073 $2,282 $2,282 $2,481 $2,825 $2,715 $2,977
Gross Balance Past Due
as a Percentage of
Gross Balance
Outstanding at end of
Period
31-60 days............. 2.43% 1.99% 2.42% 2.49% 2.87% 3.52% 4.13%
over 60 days........... 0.09% 0.30% 0.60% 0.61% 0.52% 0.62% 1.32%
Average Gross Balance of
Retail Notes
(13 month average)..... $1,809 $2,204 $2,245 $2,339 $2,632 $2,587 $2,844
Net Losses (recoveries):
NFC.................... $ 0.3 $ 5.0 $ 2.1 $ -- $ 5.2 $ 3.6 $ 6.4
International.......... $ 0.6 $ 9.5 $ 3.9 $ 9.9 $ 3.0 $ 1.0 $ 9.7
------ ------ ------ ------ ------ ------ ------
Combined............... $ 0.9 $ 14.5 $ 6.0 $ 9.9 $ 8.2 $ 4.6 $ 16.1
Liquidations minus Net
Losses................. $ 833 $1,002 $1,083 $1,178 $1,193 $ 886 $ 893
Net Losses (recoveries)
as a Percentage of
Liquidations minus Net
Losses:
NFC.................... 0.04% 0.50% 0.19% 0.00% 0.44% 0.41% 0.72%
International.......... 0.07% 0.95% 0.36% 0.84% 0.25% 0.11% 1.08%
------ ------ ------ ------ ------ ------ ------
Combined............... 0.11% 1.45% 0.55% 0.84% 0.69% 0.52% 1.80%
Net Losses (recoveries)
as a Percentage of
Average Gross
Balance(1):
NFC.................... 0.02% 0.23% 0.09% 0.00% 0.20% 0.19% 0.30%
International.......... 0.03% 0.43% 0.18% 0.42% 0.11% 0.05% 0.45%
------ ------ ------ ------ ------ ------ ------
Combined............... 0.05% 0.66% 0.27% 0.42% 0.31% 0.24% 0.75%
Repossessions as a
Percentage of Average
Gross Balance(1)....... 0.92% 3.15% 2.01% 2.31% 1.94% 1.81% 2.48%
</TABLE>
--------
(1) July 31 figures have been annualized.
For purposes of the table set forth above and the following discussion:
. "Gross Balance" means, with respect to a Retail Note as of a specified
date, the unpaid principal balance thereof as of such date plus for a
Retail Note classified by the Servicer as a "finance charge-included
contract," the finance charges included in the payments due on or after
such date.
. "Gross Balance Past Due" means the aggregate Gross Balance for all
Retail Notes that have installments past due by the indicated number of
days.
. "Liquidations" means, with respect to the related period, the aggregate
Gross Balance of Retail Notes outstanding at the beginning of the period
plus the aggregate Gross Balance of Retail Notes acquired during the
period, minus the aggregate Gross Balance of Retail Notes outstanding at
the end of the period.
. "Net Losses" means, with respect to all Retail Notes written off during
the period, the sum of the unpaid principal balances thereof plus
accrued and unpaid interest at the time of repossession of the truck(s),
bus(es) or trailer(s) securing all such written-off Retail Notes, net of
all recoveries with respect to such Retail Notes.
Dealer Liability. Certain of the Retail Notes originated by Navistar
Financial financing vehicles sold by International dealers may contain an
obligation of the dealer to pay Navistar Financial an amount equal to a
percentage of the unpaid principal balance of a defaulted Retail Note if
Navistar Financial repossesses the vehicle within a specified time. After
Navistar Financial repossesses a vehicle, the dealer who originally sold the
vehicle may elect either to repurchase the vehicle for the
S-12
<PAGE>
unpaid principal balance of the Retail Note, or to pay the applicable amount.
The extent of a particular dealer's obligation is adjusted based on several
factors, including:
. the amount of Retail Notes originated by the dealer which are
significantly past due;
. a limitation on the dealer's liability for any single customer;
. whether the financed vehicle was new or used; and
. participation by the dealer in a limited liability program with Navistar
Financial.
Under current market conditions, in most instances Navistar Financial waives
the requirement that a dealer have Dealer Liability with respect to a Retail
Note, and most Retail Notes are nonrecourse to the related dealer. Currently
less than 15% of Retail Notes on the basis of Gross Balance serviced by
Navistar Financial had the benefit of Dealer Liability. For purposes hereof,
all of the dealers' obligations described in the preceeding paragraph are
referred to as a "Dealer Liability." The extent and terms of Dealer Liability
are subject to change as market conditions may require.
International Purchase Obligations. If Navistar Financial repossesses a
vehicle securing a Retail Note within 180 days of default (or longer in certain
limited circumstances) an agreement between Navistar Financial and
International obligates International to purchase the vehicle if it is (1) a
new vehicle which was originally sold by an International dealer, (2) a used
vehicle sold by a dealer under certain programs announced by International from
time to time and (3) a new or used vehicle which was originally sold by
International, in each case for the unpaid principal balance of the related
defaulted Retail Note net of the Limited Liability Amount for such Retail Note
("International Purchase Obligations"). The "Limited Liability Amount" with
respect to any Retail Note is generally equal to the Dealer Liability with
respect to such Retail Note, if any, or if Navistar Financial has waived the
requirement that the related dealer have Dealer Liability with respect to a
Retail Note, the amount of Dealer Liability that would have been associated
with such Retail Note but for such waiver. International resells such vehicles
in accordance with its customary procedures. The aggregate amount of the
International Purchase Obligations in any fiscal year is limited to the extent
that International's aggregate losses upon resale of such repossessed Financed
Vehicles in such year equal either (a) 10.0 percent of liquidations by Navistar
Financial of all outstanding Retail Notes which Navistar Financial, the Seller
or certain of Navistar Financial's affiliates own or in which they have an
economic interest during such fiscal year, or (b) if the aggregate Gross
Balance minus unearned interest of Retail Notes acquired by Navistar Financial
during such fiscal year is less than $50,000,000, then 10.0 percent of the
aggregate Gross Balance at the beginning of such fiscal year of all Retail
Notes which Navistar Financial, the Seller or such affiliates own or in which
they have an economic interest. The agreement between Navistar Financial and
International providing for International Purchase Obligations may be amended
from time to time. Such an amendment could, among other things, (1) modify the
International Purchase Obligations relating to Receivables then outstanding or
(2) otherwise modify, limit or eliminate the International Purchase
Obligations. The rights under the agreement providing for the International
Purchase Obligations are personal to Navistar Financial, and only the proceeds
of such rights (not the rights) will be assigned to the Seller and the Trust
pursuant to the related Transfer and Servicing Agreements. The Seller and the
Trust will not be third-party beneficiaries of such rights and, accordingly,
such rights will not be exercisable by, enforceable by or for the benefit of,
or preserved for the benefit of, the Seller or the Trust.
The Navistar Financial net loss figures set forth above reflect the fact
that Navistar Financial had the benefit of Dealer Liability or International
Purchase Obligations, or both ("Loss Protection") on a
S-13
<PAGE>
substantial portion of the Retail Notes. Navistar Financial applies the same
underwriting standards to the acquisition of Retail Notes without regard to
whether Loss Protection is provided, except the advance rate is generally lower
and customer credit strength is generally higher on loans without Dealer
Liability. Based on its experience, Navistar Financial believes that there is
no material difference between the rates of delinquency and repossession on
Retail Notes with Loss Protection as compared to Retail Notes without Loss
Protection. However, Navistar Financial's net loss experience on Retail Notes
without Loss Protection is higher than that on Retail Notes with Loss
Protection because of the payments made to Navistar Financial by the dealers
and International.
WEIGHTED AVERAGE LIFE OF THE NOTES
Prepayments on medium and heavy duty truck, bus and trailer receivables can
be measured relative to a prepayment standard or model. The model used in this
prospectus supplement, the Absolute Prepayment Model (the "ABS Model"),
represents an assumed rate of prepayment each month relative to the original
number of receivables in a pool of receivables. The ABS Model further assumes
that all the receivables are the same size and amortize at the same rate and
that each receivable in each month of its life will either be paid as scheduled
or prepaid in full. The ABS Model does not purport to be an historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of receivables, including the Receivables. As the rate of payment of
principal of each class of Notes will depend on the rate of payment (including
prepayments) of the principal balance of the Receivables, final payment of any
class of Notes will likely occur significantly earlier than the respective
Final Scheduled Distribution Dates. Reinvestment risk associated with early
payment of the Notes will be borne exclusively by the Noteholders.
The table captioned "Percent of Initial Principal Amount of the Notes
Remaining at Various ABS Percentages" (the "ABS Table") has been prepared on
the basis of characteristics of the Receivables. The ABS Table assumes that (1)
the Receivables prepay in full at the specified constant percentage of ABS
monthly, with no defaults, losses or repurchases, (2) each scheduled monthly
payment on the Receivables is made on the last day of each month and each month
has 30 days, (3) payments on the Notes are made on each Distribution Date, and
each such date is assumed to be the fifteenth day of each applicable month, (4)
the balance in the Reserve Account on each Distribution Date is equal to the
Specified Reserve Account Balance, and (5) except as specified otherwise, the
Servicer does not exercise its option to purchase the Receivables. The ABS
Table indicates the projected weighted average life to maturity of each class
of Notes and the projected weighted average life to the Servicer's optional
redemption and sets forth the percent of the initial principal amount of each
class of Notes that is projected to be outstanding after each of the
Distribution Dates shown at various constant ABS percentages.
The ABS Table also assumes that the Receivables consist of a single Equal
Payment Fully Amortizing Receivable having an assumed Cutoff Date of October 1,
2000 and the following annual percentage rate, original maturity and remaining
maturity:
<TABLE>
<CAPTION>
Initial
Aggregate Annual Original Remaining
Receivables Percentage Maturity Maturity
Balance Rate (In Months) (In Months)
----------- ---------- ----------- -----------
<S> <C> <C> <C>
$764,710,097.53 9.786% 55 51
</TABLE>
The ABS Table further assumes that the first distribution of principal on
the Notes occurs on November 15, 2000, and that the Closing Date is November 1,
2000.
The actual characteristics and performance of the Receivables will differ
from the assumptions used in constructing the ABS Table. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment
S-14
<PAGE>
scenarios. It is very unlikely that the Receivables will prepay at a constant
level of the ABS Model until maturity or that all of the Receivables will
prepay at the same level of the ABS Model. Moreover, the diverse terms of
Receivables differ from the hypothetical Receivable and could produce slower or
faster principal distributions than indicated in the ABS Table at the various
constant percentages of the ABS Model specified, even if the original and
remaining terms to maturity of the Receivables are as assumed. For example, the
Receivables have annual percentage rates that range from 6.73% to 30.00%, and
only 56.08% of the Receivables (by percentage of Initial Aggregate Receivables
Balance) are Equal Payment Fully Amortizing Receivables. Any difference between
such assumptions and the actual characteristics and performance of the
Receivables, or actual prepayment experience, will affect the percentages of
initial balances outstanding over time and the weighted average lives of each
class of Notes.
S-15
<PAGE>
Percent of Initial Principal Amount of the Notes Remaining at Various
ABS Percentages
<TABLE>
<CAPTION>
Class A-1 Notes Class A-2 Notes
------------------------------------------------------------------------------------------
Distribution Distribution
Date 0.00% 1.00% 1.40% 1.80% 2.00% Date 0.00% 1.00% 1.40% 1.80% 2.00%
------------ ----- ----- ----- ----- ----- ---------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing
Date 100% 100% 100% 100% 100% Closing Date 100% 100% 100% 100% 100%
11/15/00 91% 86% 83% 81% 80% 11/15/00 100% 100% 100% 100% 100%
12/15/00 83% 72% 67% 62% 60% 12/15/00 100% 100% 100% 100% 100%
1/15/01 74% 57% 51% 43% 40% 1/15/01 100% 100% 100% 100% 100%
2/15/01 65% 44% 35% 25% 20% 2/15/01 100% 100% 100% 100% 100%
3/15/01 56% 30% 19% 7% 1% 3/15/01 100% 100% 100% 100% 100%
4/15/01 47% 16% 3% 0% 0% 4/15/01 100% 100% 100% 94% 90%
5/15/01 38% 2% 0% 0% 0% 5/15/01 100% 100% 93% 84% 79%
6/15/01 29% 0% 0% 0% 0% 6/15/01 100% 94% 84% 74% 69%
7/15/01 19% 0% 0% 0% 0% 7/15/01 100% 86% 75% 64% 58%
8/15/01 10% 0% 0% 0% 0% 8/15/01 100% 78% 67% 54% 48%
9/15/01 1% 0% 0% 0% 0% 9/15/01 100% 71% 58% 45% 38%
10/15/01 0% 0% 0% 0% 0% 10/15/01 95% 63% 50% 36% 29%
11/15/01 0% 0% 0% 0% 0% 11/15/01 89% 56% 41% 27% 19%
12/15/01 0% 0% 0% 0% 0% 12/15/01 84% 48% 33% 18% 10%
1/15/02 0% 0% 0% 0% 0% 1/15/02 78% 41% 25% 9% 1%
2/15/02 0% 0% 0% 0% 0% 2/15/02 72% 34% 18% 1% 0%
3/15/02 0% 0% 0% 0% 0% 3/15/02 67% 27% 10% 0% 0%
4/15/02 0% 0% 0% 0% 0% 4/15/02 61% 20% 2% 0% 0%
5/15/02 0% 0% 0% 0% 0% 5/15/02 55% 13% 0% 0% 0%
6/15/02 0% 0% 0% 0% 0% 6/15/02 49% 6% 0% 0% 0%
7/15/02 0% 0% 0% 0% 0% 7/15/02 43% 0% 0% 0% 0%
8/15/02 0% 0% 0% 0% 0% 8/15/02 37% 0% 0% 0% 0%
9/15/02 0% 0% 0% 0% 0% 9/15/02 31% 0% 0% 0% 0%
10/15/02 0% 0% 0% 0% 0% 10/15/02 25% 0% 0% 0% 0%
11/15/02 0% 0% 0% 0% 0% 11/15/02 19% 0% 0% 0% 0%
12/15/02 0% 0% 0% 0% 0% 12/15/02 13% 0% 0% 0% 0%
1/15/03 0% 0% 0% 0% 0% 1/15/03 7% 0% 0% 0% 0%
2/15/03 0% 0% 0% 0% 0% 2/15/03 * 0% 0% 0% 0%
3/15/03 0% 0% 0% 0% 0% 3/15/03 0% 0% 0% 0% 0%
4/15/03 0% 0% 0% 0% 0% 4/15/03 0% 0% 0% 0% 0%
5/15/03 0% 0% 0% 0% 0% 5/15/03 0% 0% 0% 0% 0%
6/15/03 0% 0% 0% 0% 0% 6/15/03 0% 0% 0% 0% 0%
7/15/03 0% 0% 0% 0% 0% 7/15/03 0% 0% 0% 0% 0%
8/15/03 0% 0% 0% 0% 0% 8/15/03 0% 0% 0% 0% 0%
9/15/03 0% 0% 0% 0% 0% 9/15/03 0% 0% 0% 0% 0%
10/15/03 0% 0% 0% 0% 0% 10/15/03 0% 0% 0% 0% 0%
11/15/03 0% 0% 0% 0% 0% 11/15/03 0% 0% 0% 0% 0%
12/15/03 0% 0% 0% 0% 0% 12/15/03 0% 0% 0% 0% 0%
1/15/04 0% 0% 0% 0% 0% 1/15/04 0% 0% 0% 0% 0%
2/15/04 0% 0% 0% 0% 0% 2/15/04 0% 0% 0% 0% 0%
3/15/04 0% 0% 0% 0% 0% 3/15/04 0% 0% 0% 0% 0%
4/15/04 0% 0% 0% 0% 0% 4/15/04 0% 0% 0% 0% 0%
5/15/04 0% 0% 0% 0% 0% 5/15/04 0% 0% 0% 0% 0%
6/15/04 0% 0% 0% 0% 0% 6/15/04 0% 0% 0% 0% 0%
7/15/04 0% 0% 0% 0% 0% 7/15/04 0% 0% 0% 0% 0%
8/15/04 0% 0% 0% 0% 0% 8/15/04 0% 0% 0% 0% 0%
9/15/04 0% 0% 0% 0% 0% 9/15/04 0% 0% 0% 0% 0%
10/15/04 0% 0% 0% 0% 0% 10/15/04 0% 0% 0% 0% 0%
11/15/04 0% 0% 0% 0% 0% 11/15/04 0% 0% 0% 0% 0%
12/15/04 0% 0% 0% 0% 0% 12/15/04 0% 0% 0% 0% 0%
1/15/05 0% 0% 0% 0% 0% 1/15/05 0% 0% 0% 0% 0%
Average
Lives
to
Maturity Average Lives to
(yrs) 0.46 0.29 0.25 0.22 0.21 Maturity (yrs) 1.64 1.15 1.00 0.88 0.82
</TABLE>
*Greater than 0.0% and less than 0.5%.
S-16
<PAGE>
Percent of Initial Principal Amount of the Notes Remaining at Various ABS
Percentages
<TABLE>
<CAPTION>
Class A-3 Notes Class A-4 Notes
--------------------------------------------------- ----------------------------------------------------
Distribution Distribution
Date 0.00% 1.00% 1.40% 1.80% 2.00% Date 0.00% 1.00% 1.40% 1.80% 2.00%
---------------- ----- ----- ----- ----- ----- ---------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100% Closing Date 100% 100% 100% 100% 100%
11/15/00 100% 100% 100% 100% 100% 11/15/00 100% 100% 100% 100% 100%
12/15/00 100% 100% 100% 100% 100% 12/15/00 100% 100% 100% 100% 100%
1/15/01 100% 100% 100% 100% 100% 1/15/01 100% 100% 100% 100% 100%
2/15/01 100% 100% 100% 100% 100% 2/15/01 100% 100% 100% 100% 100%
3/15/01 100% 100% 100% 100% 100% 3/15/01 100% 100% 100% 100% 100%
4/15/01 100% 100% 100% 100% 100% 4/15/01 100% 100% 100% 100% 100%
5/15/01 100% 100% 100% 100% 100% 5/15/01 100% 100% 100% 100% 100%
6/15/01 100% 100% 100% 100% 100% 6/15/01 100% 100% 100% 100% 100%
7/15/01 100% 100% 100% 100% 100% 7/15/01 100% 100% 100% 100% 100%
8/15/01 100% 100% 100% 100% 100% 8/15/01 100% 100% 100% 100% 100%
9/15/01 100% 100% 100% 100% 100% 9/15/01 100% 100% 100% 100% 100%
10/15/01 100% 100% 100% 100% 100% 10/15/01 100% 100% 100% 100% 100%
11/15/01 100% 100% 100% 100% 100% 11/15/01 100% 100% 100% 100% 100%
12/15/01 100% 100% 100% 100% 100% 12/15/01 100% 100% 100% 100% 100%
1/15/02 100% 100% 100% 100% 100% 1/15/02 100% 100% 100% 100% 100%
2/15/02 100% 100% 100% 100% 90% 2/15/02 100% 100% 100% 100% 100%
3/15/02 100% 100% 100% 90% 79% 3/15/02 100% 100% 100% 100% 100%
4/15/02 100% 100% 100% 80% 68% 4/15/02 100% 100% 100% 100% 100%
5/15/02 100% 100% 93% 70% 58% 5/15/02 100% 100% 100% 100% 100%
6/15/02 100% 100% 84% 60% 48% 6/15/02 100% 100% 100% 100% 100%
7/15/02 100% 99% 75% 51% 38% 7/15/02 100% 100% 100% 100% 100%
8/15/02 100% 90% 66% 42% 29% 8/15/02 100% 100% 100% 100% 100%
9/15/02 100% 82% 58% 33% 20% 9/15/02 100% 100% 100% 100% 100%
10/15/02 100% 74% 49% 24% 11% 10/15/02 100% 100% 100% 100% 100%
11/15/02 100% 66% 41% 16% 3% 11/15/02 100% 100% 100% 100% 100%
12/15/02 100% 58% 33% 7% 0% 12/15/02 100% 100% 100% 100% 94%
1/15/03 100% 50% 25% 0% 0% 1/15/03 100% 100% 100% 99% 86%
2/15/03 100% 42% 17% 0% 0% 2/15/03 100% 100% 100% 92% 78%
3/15/03 93% 35% 10% 0% 0% 3/15/03 100% 100% 100% 84% 70%
4/15/03 85% 27% 3% 0% 0% 4/15/03 100% 100% 100% 77% 63%
5/15/03 76% 20% 0% 0% 0% 5/15/03 100% 100% 95% 70% 56%
6/15/03 68% 12% 0% 0% 0% 6/15/03 100% 100% 88% 63% 50%
7/15/03 60% 5% 0% 0% 0% 7/15/03 100% 100% 81% 57% 44%
8/15/03 52% 0% 0% 0% 0% 8/15/03 100% 98% 75% 50% 38%
9/15/03 44% 0% 0% 0% 0% 9/15/03 100% 91% 68% 45% 32%
10/15/03 35% 0% 0% 0% 0% 10/15/03 100% 84% 62% 39% 27%
11/15/03 27% 0% 0% 0% 0% 11/15/03 100% 77% 56% 34% 23%
12/15/03 18% 0% 0% 0% 0% 12/15/03 100% 71% 50% 29% 18%
1/15/04 9% 0% 0% 0% 0% 1/15/04 100% 64% 45% 25% 14%
2/15/04 1% 0% 0% 0% 0% 2/15/04 100% 58% 39% 20% 11%
3/15/04 0% 0% 0% 0% 0% 3/15/04 92% 51% 34% 16% 7%
4/15/04 0% 0% 0% 0% 0% 4/15/04 83% 45% 29% 13% 5%
5/15/04 0% 0% 0% 0% 0% 5/15/04 73% 39% 25% 10% 2%
6/15/04 0% 0% 0% 0% 0% 6/15/04 64% 33% 20% 7% 0%
7/15/04 0% 0% 0% 0% 0% 7/15/04 55% 28% 16% 4% 0%
8/15/04 0% 0% 0% 0% 0% 8/15/04 45% 22% 12% 2% 0%
9/15/04 0% 0% 0% 0% 0% 9/15/04 36% 17% 9% * 0%
10/15/04 0% 0% 0% 0% 0% 10/15/04 26% 12% 5% 0% 0%
11/15/04 0% 0% 0% 0% 0% 11/15/04 17% 7% 2% 0% 0%
12/15/04 0% 0% 0% 0% 0% 12/15/04 7% 2% 0% 0% 0%
1/15/05 0% 0% 0% 0% 0% 1/15/05 0% 0% 0% 0% 0%
Average Lives to Average Lives to
Maturity (yrs) 2.85 2.26 2.00 1.77 1.66 Maturity (yrs)3.79 3.45 3.22 2.90 2.72
Average Lives to
10% Call (yrs)3.72 3.35 3.09 2.77 2.57
</TABLE>
*Greater than 0.0% and less than 0.5%.
S-17
<PAGE>
Percent of Initial Principal Amount of the Notes Remaining at Various ABS
Percentages
<TABLE>
<CAPTION>
Class B Notes
--------------------------------------------------------------------------------------------
Distribution
Date 0.00% 1.00% 1.40% 1.80% 2.00%
---------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100%
11/15/00 100% 100% 100% 100% 100%
12/15/00 100% 100% 100% 100% 100%
1/15/01 100% 100% 100% 100% 100%
2/15/01 100% 100% 100% 100% 100%
3/15/01 100% 100% 100% 100% 100%
4/15/01 100% 100% 100% 98% 97%
5/15/01 100% 100% 98% 95% 93%
6/15/01 100% 98% 95% 92% 90%
7/15/01 100% 96% 92% 89% 87%
8/15/01 100% 93% 89% 86% 84%
9/15/01 100% 91% 87% 83% 81%
10/15/01 98% 88% 84% 80% 77%
11/15/01 97% 86% 82% 77% 74%
12/15/01 95% 84% 79% 74% 72%
1/15/02 93% 81% 76% 71% 69%
2/15/02 91% 79% 74% 69% 66%
3/15/02 89% 77% 72% 66% 63%
4/15/02 88% 75% 69% 63% 61%
5/15/02 86% 72% 67% 61% 58%
6/15/02 84% 70% 64% 58% 55%
7/15/02 82% 68% 62% 56% 53%
8/15/02 80% 66% 60% 54% 51%
9/15/02 78% 64% 58% 52% 48%
10/15/02 76% 62% 56% 49% 46%
11/15/02 74% 60% 54% 47% 44%
12/15/02 72% 58% 52% 45% 42%
1/15/03 71% 56% 50% 43% 40%
2/15/03 69% 54% 48% 41% 38%
3/15/03 67% 52% 46% 39% 36%
4/15/03 65% 50% 44% 38% 34%
5/15/03 63% 48% 42% 36% 33%
6/15/03 60% 46% 40% 34% 31%
7/15/03 58% 45% 39% 33% 30%
8/15/03 56% 43% 37% 31% 28%
9/15/03 54% 41% 36% 30% 27%
10/15/03 52% 39% 34% 29% 26%
11/15/03 50% 38% 33% 27% 25%
12/15/03 48% 36% 31% 26% 23%
1/15/04 46% 35% 30% 25% 22%
2/15/04 44% 33% 29% 24% 22%
3/15/04 41% 31% 27% 23% 21%
4/15/04 39% 30% 26% 22% 20%
5/15/04 37% 29% 25% 21% 20%
6/15/04 35% 27% 24% 21% 19%
7/15/04 32% 26% 23% 20% 8%
8/15/04 30% 24% 22% 20% 0%
9/15/04 28% 23% 21% 19% 0%
10/15/04 25% 22% 20% 13% 0%
11/15/04 23% 21% 20% 6% 0%
12/15/04 21% 19% 16% 2% 0%
1/15/05 0% 0% 0% 0% 0%
Average Lives to
Maturity (yrs) 2.95 2.57 2.40 2.20 2.05
Average Lives to
10% Call (yrs) 2.87 2.43 2.21 1.97 1.83
</TABLE>
S-18
<PAGE>
THE NOTES
General
The Notes will be issued pursuant to the terms of an Indenture to be dated
as of the Closing Date between the Owner Trustee and the Indenture Trustee (as
amended and supplemented from time to time, the "Indenture"), a form of which
has been filed as an exhibit to the Registration Statement of which this
prospectus supplement and the prospectus form a part. A copy of the Indenture
will be available to you upon request to the Seller and will be filed with the
SEC following the issuance of the Notes. The following summary describes
certain terms of the Notes and the Indenture. The summary does not purport to
be complete and is subject to, and is qualified in its entirety by reference
to, all of the provisions of the Notes and the Indenture and, to the extent not
inconsistent with the summary below, the prospectus. Where particular
provisions or terms used in the Indenture are referred to, the actual
provisions (including definitions of terms) are incorporated by reference as
part of such summary. The Bank of New York, a New York banking association,
will be the Indenture Trustee. The Notes generally will be available for
purchase in denominations of $1,000 and integral multiples thereof, except
where a smaller amount is required to sell the remaining portion of a class.
For each class of Notes, the "Interest Rate" and the "Final Scheduled
Distribution Date" will be as set forth below.
<TABLE>
<CAPTION>
Interest Rate Final Scheduled
(per annum) Distribution Date
------------- ------------------
<S> <C> <C>
Class A-1 Notes............................. 6.73% November 15, 2001
Class A-2 Notes............................. 6.66% October 15, 2003
Class A-3 Notes............................. 6.67% November 15, 2004
Class A-4 Notes............................. 6.78% September 17, 2007
Class B Notes............................... 7.03% September 17, 2007
</TABLE>
The sole source of payments on the Notes is the Trust Property. The Notes
are not interests in, obligations of or insured or guaranteed by the Owner
Trustee, the Seller, Navistar Financial or any other person or entity.
Payments of Interest
Distributions on the Notes will generally be made monthly on the 15th day of
each month or, if the 15th day is not a business day, on the next business day,
starting November 15, 2000 (each a "Distribution Date"). Interest on the unpaid
principal balance of each class of Notes will accrue at the applicable Interest
Rate from and including the Closing Date or the most recent Distribution Date
on which interest has been paid to but excluding the next Distribution Date.
Interest will be payable monthly on each Distribution Date; provided, however,
that interest on the Class B Notes will not be paid on any Distribution Date
until the Servicer has been reimbursed for prior Monthly Advances and
Liquidation Expenses due plus the Total Servicing Fee and all accrued interest
due and payable on the Class A Notes on that Distribution Date has been paid in
full. Interest on the Class A-1 Notes will be calculated on the basis of the
actual number of days elapsed since the Closing Date or the preceding
Distribution Date divided by 360, and interest on the Class A-2 Notes, Class A-
3 Notes, Class A-4 Notes and the Class B Notes will be calculated on the basis
of a 360-day year consisting of twelve 30-day months.
After the Notes have been declared to be due and payable following the
occurrence of an Event of Default resulting from the failure to make a payment
on 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. Interest
payments to all classes of Class A Notes will have the same priority while
interest on the Class B Notes will not be paid until all accrued interest on
the Class A Notes has been paid in full. If
S-19
<PAGE>
the amount available to pay interest on the Class A Notes is less than the
amount of interest payable thereon, the holders of each class of Class A Notes
will receive their ratable share (based on the aggregate amount of interest due
to such holders) of the amount available to pay interest on the Class A Notes.
Payments of Principal
On each Distribution Date, the Notes will be payable in an amount (the
"Principal Payment Amount") equal to the lesser of (a) the Principal
Distributable Amount for such Distribution Date and (b) the excess, if any, of
the sum of the Available Amount for such Distribution Date and available funds
on deposit in the Reserve Account on such Distribution Date (the "Total
Available Amount") over the sum of the Monthly Advances and Liquidation
Expenses due to the Servicer, the Total Servicing Fee and accrued and unpaid
interest on the Notes due and payable on such Distribution Date. On each
Distribution Date, the Principal Payment Amount will be payable as follows:
(1) first, 100% to the holders of the Class A-1 Notes until the Class A-1
Notes are paid in full;
(2) second, 96.25% to the holders of the Class A Notes (in the case of the
Distribution Date on which the Class A-1 Notes are paid in full, 96.25%
of the remaining Principal Payment Amount) and 3.75% to the holders of
the Class B Notes (in the case of the Distribution Date on which the
Class A-1 Notes are paid in full, 3.75% of the remaining Principal
Payment Amount) until the Class A Notes are paid in full; and
(3) third, 100% to the holders of the Class B Notes (in the case of the
Distribution Date on which the Class A-4 Notes are paid in full, 100%
of the remaining Principal Payment Amount) until the Class B Notes are
paid in full.
Principal payments made on the Class A Notes after the Class A-1 Notes have
been paid in full will be applied sequentially to the earliest maturing class
of Class A Notes then outstanding until paid in full.
If the amount on deposit in the Reserve Account on any Distribution Date
would be, after giving effect to the distribution of the Principal Payment
Amount in accordance with the priorities set forth above, less than $7,647,101
(1.0% of the Initial Aggregate Receivables Balance), then 100% of the Principal
Payment Amount will be payable to the holders of the Class A Notes until either
the Class A Notes are paid in full or the amount on deposit in the Reserve
Account equals or exceeds the Specified Reserve Account Balance. If principal
payments on the Class B Notes resume because the amount on deposit in the
Reserve Account equals or exceeds the required amount, the Trust will pay
principal on the Notes in accordance with the priorities set forth in
paragraphs (1), (2) and (3) above. Under these circumstances, principal
payments made on the Class A Notes will be applied sequentially to the earliest
maturing class of Class A Notes then outstanding until paid in full.
Also, if the Notes are declared to be due and payable following the
occurrence of any Event of Default, whether due to a failure to make a payment
on the Notes or otherwise, 100% of the Principal Payment Amount will be payable
to the holders of the Class A Notes until the Class A Notes are paid in full.
Under these circumstances, principal payments made on the Class A Notes will be
applied ratably to each class of Class A Notes. Thereafter, 100% of the
Principal Payment Amount will be payable to the holders of the Class B Notes on
each Distribution Date until the Class B Notes are paid in full.
Each class of Notes will be payable in full on the applicable Final
Scheduled Distribution Date set forth in the table above.
S-20
<PAGE>
Optional Redemption
If the Aggregate Receivables Balance is 10% or less of the Initial Aggregate
Receivables Balance, the Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes have been paid in full, and the Servicer exercises its option to purchase
the Receivables on any Distribution Date thereafter, the Class A-4 Notes and
the Class B Notes will be redeemed in whole, but not in part, on such
Distribution Date at a redemption price equal to the unpaid principal amount of
those Notes, plus accrued and unpaid interest thereon.
Parity and Priority of Notes
Distribution of principal and interest payments on the Notes will be made in
accordance with the priorities described in "--Payments of Interest" and "--
Payments of Principal" above.
Voting Rights
To the extent the prospectus specifies certain circumstances under which the
consent, approval, direction, or request of a specified percentage in principal
amount of the outstanding Notes must be obtained, given or made, or under which
such a specified percentage are permitted to take an action or give a notice,
then such consent, approval, direction, request, action or notice shall be
valid only if the holders of such specified percentage in principal amount of
(a) all the outstanding Class A Notes and Class B Notes voting together and (b)
the outstanding Class A Notes voting as a single class have voted to give such
consent, approval, direction, request or notice, or take such action.
THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Transfer and Servicing
Agreements. Forms of the Transfer and Servicing Agreements have been filed as
exhibits to the Registration Statement of which this prospectus supplement and
the prospectus form a part. A copy of the Transfer and Servicing Agreements
will be available to you upon request to the Seller. The summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Transfer and Servicing Agreements
and the prospectus. Where particular provisions or terms used in the Transfer
and Servicing Agreements are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summary.
Servicing Compensation and Payment of Expenses
On each Distribution Date, the Servicer will be entitled to receive the
Total Servicing Fee, which consists of the Basic Servicing Fee for the related
Monthly Period and any unpaid Basic Servicing Fees from prior Distribution
Dates. In addition, the Servicer will receive any Supplemental Servicing Fees.
The Basic Servicing Fee Rate will be 1% per annum.
Distributions
Unless the Servicer satisfies the conditions for monthly remittances
described in "The Transfer and Servicing Agreements--Collections" in the
prospectus, it will transfer all collections on the Receivables (including all
Prepayments) to the Collection Account within two Business Days of receipt
thereof. The Indenture Trustee will make distributions to the Note Distribution
Account out of the amounts on deposit in the Collection Account.
Monthly Withdrawals and Deposits. On or before the day that is two Business
Days prior to each Distribution Date, the Servicer will calculate, with respect
to the preceding Monthly Period and the related Distribution Date, the Total
Available Amount, Collected Interest, Collected Principal, the Total Servicing
Fee, the Aggregate Class A Noteholders' Interest Distributable Amount, the
Class B
S-21
<PAGE>
Noteholders' Interest Distributable Amount, the Noteholders' Principal
Distributable Amount and certain other items. Based on such calculations, the
Servicer will deliver to the Indenture Trustee a certificate specifying such
amounts and instructing the Indenture Trustee to make withdrawals, deposits and
payments of the following amounts on the day preceding such Distribution Date:
(1) the amount, if any, to be withdrawn from the Reserve Account and
deposited in the Collection Account;
(2) the amounts to be withdrawn from the Collection Account and paid to the
Servicer in respect of reimbursement of Outstanding Monthly Advances
and payments in respect of Liquidation Expenses with respect to
Receivables which became Liquidating Receivables during the related
Monthly Period (and any unpaid Liquidation Expenses from prior
periods);
(3) the amount to be withdrawn from the Collection Account and paid to the
Servicer in respect of the Total Servicing Fee for such Distribution
Date;
(4) the amounts to be withdrawn from the Collection Account in respect of
the Aggregate Class A Noteholders' Interest Distributable Amount, the
Class B Noteholders' Interest Distributable Amount and the Noteholders'
Principal Distributable Amount and deposited in the Note Distribution
Account for payment to Noteholders on such Distribution Date;
(5) the amount, if any, to be withdrawn from the Collection Account and
deposited in the Reserve Account; and
(6) the amount, if any, to be withdrawn from the Reserve Account and paid
to the Certificateholders.
The amount, if any, to be withdrawn from the Reserve Account and deposited
to the Collection Account on the day preceding any Distribution Date as
specified in clause (1) above will be the lesser of (a) the amount of cash or
other immediately available funds therein on the day preceding such
Distribution Date and (b) the amount, if any, by which (1) the sum of any
reimbursement of Monthly Advances and Liquidation Expenses to the Servicer, the
Total Servicing Fee, the Aggregate Class A Noteholders' Interest Distributable
Amount, the Class B Noteholders' Interest Distributable Amount and the
Noteholders' Principal Distributable Amount exceeds (2) the Available Amount
for such Distribution Date. The amount, if any, to be withdrawn from the
Reserve Account and paid to the Certificateholders as specified in clause (6)
above will equal the amount, if any, by which the amount on deposit in the
Reserve Account after all other deposits and withdrawals on the day preceding
such Distribution Date exceeds the Specified Reserve Account Balance for such
Distribution Date.
Priorities for Withdrawals from Collection Account. Withdrawals of funds
from the Collection Account on the day preceding a Distribution Date will be
made first for reimbursements of Outstanding Monthly Advances and payments in
respect of Liquidation Expenses. Thereafter, withdrawals of funds from the
Collection Account will be made for application as described in clauses (3) and
(4) under "--Distributions--Monthly Withdrawals and Deposits" above, but only
to the extent of the Total Available Amount allocated to such application for
such Distribution Date. In calculating the amounts which can be withdrawn from
the Collection Account and applied as specified in such clauses (3) and (4),
the Indenture Trustee, at the direction of the Servicer, will allocate the
remaining Total Available Amount in the following order of priority:
(1) the Total Servicing Fee;
(2) the Aggregate Class A Noteholders' Interest Distributable Amount;
(3) the Class B Noteholders' Interest Distributable Amount; and
(4) the Noteholders' Principal Distributable Amount.
S-22
<PAGE>
"Aggregate Class A Noteholders' Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of the Class A Noteholders' Interest
Distributable Amounts for all classes of Class A Notes and the Class A
Noteholders' Interest Carryover Shortfall as of the preceding Distribution
Date.
"Class A Noteholders' Interest Carryover Shortfall" means, as of the close
of any Distribution Date, the excess of the Aggregate Class A Noteholders'
Interest Distributable Amount for such Distribution Date over the amount that
was actually deposited in the Note Distribution Account on the day preceding
such current Distribution Date in respect of interest on the Class A Notes.
"Class A Noteholders' Interest Distributable Amount" means (a) with respect
to the Class A-1 Notes and any Distribution Date, the product of (1) the
outstanding principal balance of the Class A-1 Notes on the preceding
Distribution Date after giving effect to all payments of principal in respect
of the Class A-1 Notes on such preceding Distribution Date (or, in the case of
the first Distribution Date, the outstanding principal balance on the Closing
Date) and (2) the product of the Interest Rate for the Class A-1 Notes and a
fraction, the numerator of which is the actual number of days elapsed from the
most recent Distribution Date on which interest has been paid (or the Closing
Date, in the case of the initial period), and the denominator of which is 360,
and (b) with respect to the Class A-2 Notes, the Class A-3 Notes and the Class
A-4 Notes and any Distribution Date, the product of (1) the outstanding
principal balance of such class of Class A Notes on the preceding Distribution
Date after giving effect to all payments of principal in respect of such class
of Class A Notes on such preceding Distribution Date (or, in the case of the
first Distribution Date, the outstanding principal balance on the Closing Date)
and (2) the product of the Interest Rate for such class of Class A Notes and a
fraction, the numerator of which is 30, and the denominator of which is 360
(but, in the case of the first Distribution Date, pro-rated for the number of
days from and including the Closing Date to but excluding such Distribution
Date).
"Class B Noteholders' Interest Carryover Shortfall" means, as of the close
of any Distribution Date, the excess of the Class B Noteholders' Interest
Distributable Amount for such Distribution Date over the amount that was
actually deposited in the Note Distribution Account on the day preceding such
current Distribution Date in respect of interest on the Class B Notes.
"Class B Noteholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of (1) the Class B Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and (2) the Class B
Noteholders' Interest Carryover Shortfall as of the preceding Distribution
Date.
"Class B Noteholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, the product of (1) the outstanding principal
balance of the Class B Notes on the preceding Distribution Date after giving
effect to all payments of principal in respect of the Class B Notes on such
preceding Distribution Date (or, in the case of the first Distribution Date,
the outstanding principal balance on the Closing Date) and (2) the product of
the Interest Rate for the Class B Notes and a fraction, the numerator of which
is 30, and the denominator of which is 360 (but, in the case of the first
Distribution Date, pro-rated for the number of days from and including the
Closing Date to but excluding such Distribution Date).
"Noteholders' Principal Carryover Shortfall" means, for any Distribution
Date, the excess, if any, of the Noteholders' Principal Distributable Amount
for such Distribution Date over the amount actually deposited in the Note
Distribution Account for such Distribution Date in respect of principal.
"Noteholders' Principal Distributable Amount" means, for any Distribution
Date, the sum of (1) the Principal Distributable Amount for such Distribution
Date, (2) the Noteholders' Principal Carryover Shortfall for the immediately
preceding Distribution Date and (3) on the Final Scheduled
S-23
<PAGE>
Distribution Date for a class of Notes, the amount necessary to reduce the
outstanding principal balance of such class of Notes to zero.
"Principal Distributable Amount" means, with respect to any Distribution
Date, the sum of the following items: (a) the principal portion of all
Scheduled Payments due with respect to the related Monthly Period on
Receivables held by the Trust (other than Liquidating Receivables), (b) the
principal portion of all Prepayments received during the related Monthly Period
(except to the extent included in (a) above) and (c) the Receivable Balance of
each Receivable that the Servicer purchased, the Seller repurchased or that
became a Liquidating Receivable during the related Monthly Period (except to
the extent included in (a) or (b) above).
On each Distribution Date, all amounts on deposit in the Note Distribution
Account will be distributed to the Noteholders in the amounts and in accordance
with the priorities described in this prospectus supplement under "The Notes--
Payments of Interest" and "--Payment of Principal."
Reserve Account
Pursuant to the Pooling and Servicing Agreement, the Servicer will establish
a reserve account with the Indenture Trustee (the "Reserve Account"). The
Reserve Account will be funded by a deposit by the Seller of $36,323,729.63 of
cash or eligible investments on the Closing Date, which amount is equal to
4.75% of the Initial Aggregate Receivables Balance (the "Reserve Account
Initial Deposit"). If on the day preceding any Distribution Date the amount on
deposit in the Reserve Account is less than the Specified Reserve Account
Balance, an amount equal to the lesser of such insufficiency and the Available
Amount remaining with respect to such Distribution Date after the payment of
the Total Servicing Fee and the deposit of the Aggregate Class A Noteholders'
Interest Distributable Amount, the Class B Noteholders' Interest Distributable
Amount and the Noteholders' Principal Distributable Amount in the Note
Distribution Account (see "--Distributions--Monthly Withdrawals and Deposits")
shall be deposited in the Reserve Account.
"Specified Reserve Account Balance" with respect to any Distribution Date
means the lesser of (1) the aggregate Note Principal Balance for all classes of
Notes as of such Distribution Date, and (2) the greater of:
(a) 5.5% of the Aggregate Receivables Balance as of the close of business
on the last day of the related Monthly Period, except that if on any
Distribution Date (1) the product (expressed as a percentage) of (A)
twelve and (B) a fraction, the numerator of which is equal to the sum
of the Aggregate Losses plus Liquidation Proceeds for each of the
Monthly Periods which are the fifth, fourth and third Monthly Periods
preceding the Monthly Period related to that Distribution Date, minus
the sum of the Liquidation Proceeds for the Monthly Periods which are
the first, second and third Monthly Periods preceding the Monthly
Period related to such Distribution Date, and the denominator of which
is the sum of the Remaining Gross Balances of all outstanding
Receivables as of the last day of each of the sixth, fifth and fourth
Monthly Periods preceding the Monthly Period related to that
Distribution Date, exceeds 1.5% or (2) the average of the Delinquency
Percentages for the preceding three months exceeds 2.0%, then the
percentage of the Aggregate Receivables Balance referred to in this
clause (a) shall be equal to 10.0%; and
(b) 2.0% of the Initial Aggregate Receivables Balance.
If the amount on deposit in the Reserve Account on any Distribution Date
(after giving effect to all deposits or withdrawals therefrom on the day
preceding that Distribution Date) is greater than the Specified Reserve Account
Balance for that Distribution Date, subject to certain limitations, the
Servicer will instruct the Indenture Trustee to distribute the amount of the
excess to the Certificateholders. Upon any distribution to the
Certificateholders of amounts from the Reserve
S-24
<PAGE>
Account, the Noteholders will not have any rights in or claims to those
amounts. The initial Certificateholders may at any time, without consent of the
Noteholders, sell, transfer, convey or assign in any manner its rights to and
interests in distributions from the Reserve Account, including interest
earnings thereon, provided that certain conditions are satisfied, including:
(1) the action will not result in a reduction or withdrawal of the rating of
any class of the Notes, (2) the Certificateholders provide to the Owner Trustee
and the Indenture Trustee an opinion of independent counsel that the action
will not cause the Trust to be treated as an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes, and (3)
all transferees or assignees agree to take positions for tax purposes
consistent with the tax positions agreed to be taken by the Certificateholders.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Kirkland & Ellis, special tax counsel, for federal income
tax purposes, the Notes will be characterized as debt. Each holder of Notes, by
acceptance of a Note, will be deemed to have agreed to treat the Notes as
indebtedness.
All the Certificates issued on the Closing Date will be issued to the
Seller. Accordingly, the Trust will be characterized as a Tax Non-Entity and
hence a division of the Seller for federal income tax purposes. See "Certain
Federal Income Tax Consequences--Tax Non-Entity Certificates" in the
prospectus. If the Seller sells the Certificates such that more than one person
owns the Certificates or if the Trust issues additional Certificates to persons
other than the Seller, this characterization may change. See "Certain Federal
Income Tax Consequences--Tax Non-Entity Certificates" in the prospectus.
See "Certain Federal Income Tax Consequences" and "Certain State Tax
Matters" in the prospectus.
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
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 Code. For additional information regarding treatment of the Notes
under ERISA, see "ERISA Considerations" in the prospectus.
S-25
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Seller has agreed to sell to each of the Underwriters named below, and each
of the Underwriters has severally agreed to purchase from the Seller, the
principal amount of Notes set forth opposite its name below:
<TABLE>
<CAPTION>
Aggregate Principal Amount of Notes to be Purchased
------------------------------------------------------------------
Class A-1 Class A-2 Class A-3 Class A-4
Underwriter Notes Notes Notes Notes Class B Notes
----------- ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Banc of America
Securities LLC......... $ 38,500,000 $ 63,910,000 $ 50,847,500 $ 49,151,575 $28,677,097.53
Salomon Smith Barney.... $ 38,500,000 $ 63,910,000 $ 50,847,500 $ 49,151,575 --
Banc One Capital
Markets, Inc........... $ 31,500,000 $ 52,290,000 $ 41,602,500 $ 40,214,925 --
Chase Securities Inc.... $ 31,500,000 $ 52,290,000 $ 41,602,500 $ 40,214,925 --
------------ ------------ ------------ ------------ --------------
Total............... $140,000,000 $232,400,000 $184,900,000 $178,733,000 $28,677,097.53
============ ============ ============ ============ ==============
</TABLE>
The Seller has been advised by the Underwriters that they propose initially
to offer the Notes to the public at the prices set forth on the cover page
hereof, and to certain dealers at such prices less a selling concession not in
excess of the percentage set forth below for each class of Notes. The
Underwriters may allow, and such dealers may reallow to certain other dealers,
a subsequent concession not in excess of the percentage set forth below for
each class of Notes. After the initial public offering, the public offering
price and such concessions may be changed.
<TABLE>
<CAPTION>
Selling
Concession Reallowance
---------- -----------
<S> <C> <C>
Class A-1 Notes..................................... 0.066% 0.0396%
Class A-2 Notes..................................... 0.096% 0.0576%
Class A-3 Notes..................................... 0.135% 0.0810%
Class A-4 Notes..................................... 0.165% 0.0990%
Class B Notes....................................... 0.225% 0.1350%
</TABLE>
The Seller has agreed not to offer for sale, sell, contract to sell or
otherwise dispose of, directly or indirectly, or file a registration statement
for, or announce any offering of, any securities collateralized by, or
evidencing an ownership interest in, a pool of Retail Notes (other than the
Notes) for a period of 30 days from the date of this prospectus supplement,
without the prior written consent of Banc of America Securities LLC (the
"Manager").
There is currently no secondary market for the Notes. There can be no
assurance that a secondary market for the Notes will develop or, if it does
develop, that it will continue. The Notes will not be listed on any securities
exchange.
The Manager, on behalf of the Underwriters, may engage in over-allotment
transactions, stabilizing transactions, syndicate covering transactions and
penalty bids with respect to the Notes in accordance with Regulation M under
the Exchange Act. Over-allotment transactions involve syndicate sales in excess
of the offering size which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the Notes so long as the stabilizing bids
do not exceed a specified maximum. Syndicate covering transactions involve
purchases of the Notes in the open market after the distribution has been
completed in order to cover syndicate short positions. Penalty bids permit the
Manager to reclaim a selling concession from a syndicate member when the Notes
originally sold by such syndicate member are purchased in a syndicate covering
transaction.
S-26
<PAGE>
Such over-allotment transactions, stabilizing transactions, syndicate covering
transactions and penalty bids may cause prices of the Notes to be higher than
they would otherwise be in the absence of such transactions. Neither the Trust
nor any of the Underwriters represent that the Manager will engage in any such
transactions nor that such transactions, once commenced, will not be
discontinued without notice.
In the ordinary course of their respective businesses, the Underwriters and
their respective affiliates have engaged and may in the future engage in
commercial banking and investment banking transactions with affiliates of the
Seller, including the Seller's parent, Navistar Financial.
As discussed under "Use of Proceeds," Navistar Financial intends to use a
portion of the proceeds of its sale of the Receivables to the Seller to repay
amounts owing to a group of lenders, including each Underwriter, other than
Salomon Smith Barney, or an affiliate thereof, under one or more credit
agreements. Accordingly, because more than 10% of the net offering proceeds may
be paid to an affiliate of a member of the National Association of Securities
Dealers, Inc., which is participating in the distribution of the Notes, the
offering of the Notes is being made pursuant to the provisions of Article III,
Section 2710(c)(8) of the Rules of the National Association of Securities
Dealers, Inc.
LEGAL OPINIONS
In addition to the legal opinions described in the prospectus, certain legal
matters relating to the Notes will be passed upon for the Underwriters by
Simpson Thacher & Bartlett.
S-27
<PAGE>
INDEX OF TERMS
Set forth below is a list of the capitalized terms defined in this
prospectus supplement and the pages on which the definitions of such terms may
be found herein. Capitalized terms used but not otherwise defined herein shall
have the meanings assigned such terms in the prospectus.
<TABLE>
<S> <C>
ABS Model.................................................................. S-14
ABS Table.................................................................. S-14
Administrator.............................................................. S-1
Aggregate Class A Noteholders' Interest Distributable Amount............... S-23
Certificates............................................................... S-7
Class A Noteholders' Interest Carryover Shortfall.......................... S-23
Class A Noteholders' Interest Distributable Amount......................... S-23
Class B Noteholders' Interest Carryover Shortfall.......................... S-23
Class B Noteholders' Interest Distributable Amount......................... S-23
Class B Noteholders' Monthly Interest Distributable Amount................. S-23
Closing Date............................................................... S-2
Cutoff Date................................................................ S-8
Dealer Liability........................................................... S-13
Distribution Date.......................................................... S-19
Final Scheduled Distribution Date.......................................... S-19
Gross Balance.............................................................. S-12
Gross Balance Past Due..................................................... S-12
Indenture.................................................................. S-19
Indenture Trustee.......................................................... S-1
Initial Aggregate Receivables Balance...................................... S-8
Interest Rate.............................................................. S-19
International.............................................................. S-10
International Purchase Obligations......................................... S-13
Issuer..................................................................... S-1
Limited Liability Amount................................................... S-13
Liquidations............................................................... S-12
Loss Protection............................................................ S-13
Manager.................................................................... S-26
Navistar Financial......................................................... S-7
Net Losses................................................................. S-12
Noteholders' Principal Carryover Shortfall................................. S-23
Noteholders' Principal Distributable Amount................................ S-23
Notes...................................................................... S-7
Owner Trust Agreement...................................................... S-7
Owner Trustee.............................................................. S-1
Principal Distributable Amount............................................. S-24
Principal Payment Amount................................................... S-20
Receivables................................................................ S-7
Reserve Account............................................................ S-24
Reserve Account Initial Deposit............................................ S-24
Seller..................................................................... S-1
Servicer................................................................... S-1
Specified Reserve Account Balance.......................................... S-24
Total Available Amount..................................................... S-20
Trust...................................................................... S-7
</TABLE>
S-28
<PAGE>
Prospectus
Navistar Financial Retail Receivables Asset Trusts
Asset Backed Notes
Asset Backed Certificates
Navistar Financial Retail Receivables Corporation
Seller
Navistar Financial Corporation
Servicer
Before you purchase any of the notes or certificates, you should consider
carefully the risk factors beginning on page 4 in this prospectus.
The sole source of payments on the notes and the certificates is the assets of
the trust. The notes and certificates are not interests in or obligations of
Navistar Financial Retail Receivables Corporation, Navistar Financial
Corporation or any other person or entity.
This prospectus may be used to offer and sell any series of securities only if
accompanied by the prospectus supplement for that series.
The trusts--
. We will form a new trust for each series of asset
backed notes and asset backed certificates.
. The primary assets of each trust will be a pool of
commercial retail loans secured by new and used medium
and heavy duty trucks, buses and trailers and security
interests in the vehicles financed under those
receivables.
. Each trust may also own monies on deposit in a pre-
funding account, which will be used to purchase
additional receivables.
The securities--
. notes will represent indebtedness secured by the
assets of the related trust;
. certificates will represent beneficial interests in
the related trust;
. will be paid only from the assets of the related
trust;
. will represent the right to payments in the amounts
and at the times described in the prospectus
supplement for that series;
. may benefit from one or more forms of credit
enhancement; and
. will be issued as part of a designated series, which
may include one or more classes of notes and one or
more classes of certificates.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
October 19, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Where to Find Information in this Prospectus and the Prospectus
Supplement............................................................... 3
Risk Factors.............................................................. 4
Failure to Obtain a Perfected Security Interest in the Vehicles May
Result in Subordination of the Security Interest........................ 4
A Bankruptcy of Navistar Financial or the Seller May Delay or Reduce
Payments on the Notes................................................... 4
Failure of Navistar Financial or the Seller to Fulfill its Obligations... 5
Unenforceability of Receivables.......................................... 6
Effects of Prepayments and Delayed Payments.............................. 6
Commingling of Monies by the Servicer May Lead to Funds Not Being
Available............................................................... 6
Securities are in Book-Entry Form........................................ 7
The Trusts................................................................ 7
Owner Trusts............................................................. 7
Grantor Trusts........................................................... 7
The Trust Property....................................................... 8
The Trustees............................................................. 9
No Representations; Limited Duties....................................... 10
Limitations on Class A Certificateholders' Ability to Institute
Proceedings............................................................. 10
Fees; Indemnification.................................................... 10
Co-Trustees.............................................................. 10
Resignation; Successor Trustees.......................................... 11
Administration Agreement................................................. 11
The Receivables Pools..................................................... 11
Weighted Average Life of the Securities................................... 14
Pool Factors and Trading Information...................................... 14
Use of Proceeds........................................................... 15
The Seller................................................................ 15
The Servicer.............................................................. 15
The Notes................................................................. 16
General.................................................................. 16
Principal and Interest................................................... 16
Redemption............................................................... 17
The Indenture............................................................ 17
Conditions to Noteholder's Ability to Institute Proceedings.............. 20
Notice to Noteholders of Events of Default............................... 20
Covenant Not to Institute Bankruptcy Proceedings......................... 20
No Personal Liability.................................................... 20
Satisfaction and Discharge of Indenture.................................. 22
The Indenture Trustee.................................................... 22
Owner Certificates........................................................ 22
General.................................................................. 22
Prepayment............................................................... 23
Distributions of Interest and Certificate Balance........................ 23
Class A Certificates...................................................... 24
General.................................................................. 24
Distributions of Interest and Certificate Balance........................ 24
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Certain Information Regarding the Securities.............................. 25
Book-Entry Registration.................................................. 25
Definitive Securities.................................................... 27
Reports to Securityholders............................................... 27
The Transfer and Servicing Agreements..................................... 30
General.................................................................. 30
Sale and Assignment of Receivables....................................... 30
Accounts................................................................. 33
Servicing Compensation and Payment of Expenses........................... 35
Servicing Procedures..................................................... 36
Collections.............................................................. 36
Monthly Advances......................................................... 37
Distributions............................................................ 37
Credit Enhancement....................................................... 40
Net Deposits............................................................. 42
Statements to Trustees and Trust......................................... 42
Evidence as to Compliance................................................ 43
Certain Matters Regarding the Servicer................................... 43
Servicer Default......................................................... 44
Rights Upon Servicer Default............................................. 45
Waiver of Past Defaults.................................................. 45
Amendment................................................................ 46
Owner Trust.............................................................. 46
Termination.............................................................. 46
Optional Purchase........................................................ 47
Certain Legal Aspects of the Receivables.................................. 48
Security Interest in Vehicles............................................ 48
Repossession............................................................. 49
Notice of Sale; Redemption Rights........................................ 49
Deficiency Judgments and Excess Proceeds................................. 50
Laws Governing Credit Transactions....................................... 50
Other Limitations........................................................ 50
Transfer of Vehicles..................................................... 51
Certain Federal Income Tax Consequences................................... 51
General.................................................................. 51
The Notes................................................................ 52
Trust Certificates....................................................... 55
Partnership Certificates................................................. 58
Tax Non-Entity Certificates.............................................. 62
Certain State Tax Matters................................................. 63
The Notes................................................................ 63
Trust Certificates....................................................... 63
Partnership Certificates................................................. 64
Tax Non-Entity Certificates.............................................. 64
Risks of Alternative Characterization.................................... 64
Other States............................................................. 64
ERISA Considerations...................................................... 65
Plan of Distribution...................................................... 67
Legal Opinions............................................................ 68
Owner Trusts/Grantor Trusts............................................... 68
Where You Can Find More Information....................................... 69
Index of Terms............................................................ 70
</TABLE>
2
<PAGE>
WHERE TO FIND INFORMATION IN THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT
We provide information to you about the notes and the certificates in two
separate documents that provide varying levels of detail:
(a) this prospectus, which provides general information, some of which
may not apply to a particular series of securities, including your series.
(b) the prospectus supplement which will provide financial and other
information regarding the pool of receivables held by the trust and will
specify the terms of a particular series of securities, including:
. whether notes or certificates are being offered;
. the timing of interest and principal payments;
. the priority of interest and principal payments;
. information about credit enhancement for each class of the
series, if any;
. the ratings of each class of the series, if any; and
. the method for selling each class of the series.
If the terms of your series of securities vary between this prospectus and
the prospectus supplement for that series, you should rely on the information
in the prospectus supplement.
You should rely only on the information provided in this prospectus and the
prospectus supplement for the related securities. We have not authorized anyone
to provide you with other or different information. You should not assume that
the information in this prospectus and any prospectus supplement is accurate on
any date other than the dates stated on their respective covers.
We are not offering the securities in any state where the offer is not
permitted.
You can find a listing of the pages where capitalized terms used in this
prospectus are defined under the caption "Index of Terms" which appears at the
end of this prospectus.
We include cross-references in this prospectus to captions in this
prospectus where you can find further related discussions.
3
<PAGE>
RISK FACTORS
Failure to Obtain a Perfected Navistar Financial Corporation ("Navistar
Security Interest in the Vehicles Financial") obtains a security interest
May Result in Subordination of the in the vehicles financed by the
Security Interest receivables. Each trust will obtain an
assignment of the security interests in
connection with its acquisition of
receivables. A trust issuing notes will
assign the security interests to the
trustee under the indenture. No amendment
will be made to any certificate of title
of any of the vehicles to reflect the
assignment of the security interest to
the trust or to the indenture trustee. In
some states, an assignment of a security
interest without an amendment to the
certificate of title may not perfect the
security interest of the trust or the
indenture trustee in the financed
vehicle. As a result, the trust's and the
indenture trustee's security interest
could be subordinate to the interests of
a subsequent purchaser of a financed
vehicle or the holder of a perfected
security interest in a financed vehicle.
In addition, Navistar Financial may fail
to obtain a perfected security interest
in a financed vehicle. The trust and the
indenture trustee may not be able to
collect on a defaulted receivable in the
absence of a perfected security interest
in the related financed vehicle.
Even if the trust and the indenture
trustee have a perfected security
interest in the financed vehicles, the
trust's and the indenture trustee's
interests could be jeopardized by:
. fraud or forgery by the vehicle
owner,
. negligence or fraud by Navistar
Financial,
. mistakes by government agencies,
. liens for repairs or unpaid taxes,
and
. confiscation of the vehicle by the
government for illegal activities.
See "Certain Legal Aspects of the
Receivables--Security Interest in
Vehicles" in this prospectus.
A Bankruptcy of Navistar Financial Navistar Financial will sell receivables
or the Seller May Delay or Reduce to Navistar Financial Retail Receivables
Payments on the Notes Corporation (the "Seller"), and the
Seller in turn will sell the receivables
to the trust. However, if Navistar
Financial or the Seller becomes bankrupt,
a court could conclude that the
receivables sold to the trust are not
owned by the trust, but rather are part
of the bankruptcy estate of Navistar
Financial or the Seller either because
the court concludes that the sale of the
receivables from the bankrupt party was
not really a sale but rather a secured
financing or because the court concludes
4
<PAGE>
that the bankrupt party and the owner of
the receivables should be treated as a
single entity rather than separate
entities. If this were to occur, you
could experience delays or reductions in
payments on your securities as a result
of:
. the "automatic stay" provisions of
the U.S. Bankruptcy Code, which
prevent secured creditors from
exercising remedies against a
debtor in bankruptcy and
provisions of the U.S. Bankruptcy
Code that permit substitution of
collateral in certain
circumstances;
. certain tax or government liens on
Navistar Financial's or the
Seller's property (that arose
prior to the transfer of a
receivable to the trust) having a
right to be paid from collections
on the receivables before those
collections are used to make
payments on the securities; and
. the fact that the trust or the
indenture trustee may not have a
perfected security interest in the
financed vehicles or cash
collections on the receivables
held by Navistar Financial at the
time a bankruptcy proceeding
begins.
Failure of Navistar Financial or Navistar Financial, the Seller and their
the Seller to Fulfill its affiliates generally are not obligated to
Obligations make any payments to you on the
securities and do not insure or guarantee
the payment of the receivables or the
securities.
However, Navistar Financial will make
representations and warranties to the
Seller with respect to the
characteristics of the receivables. The
Seller will assign the representations
and warranties to the trust, and the
Seller will make its own representations
and warranties to the trust in connection
with the acquisition of the receivables
by the trust. If Navistar Financial or
the Seller breaches its representations
and warranties and such breach materially
and adversely affects the interests of
the trust or securityholders in one or
more receivables, Navistar Financial will
be obligated to repurchase the applicable
receivables from the trust. If Navistar
Financial or the Seller fails to
repurchase the affected receivables, you
may experience delays or reductions in
payments on your securities. See "The
Transfer and Servicing Agreements--Sale
and Assignment of Receivable."
5
<PAGE>
Unenforceability of Receivables Federal and state laws regulate the
creation and enforcement of loans and
impose specific liabilities on lenders
who violate these laws. In some cases,
these liabilities could affect the
trust's ability to enforce the
receivables. If the violation occurred
prior to the assignment of the receivable
to the trust, Navistar Financial will be
obligated to repurchase the receivable
since Navistar Financial will have
breached its representations and
warranties regarding the receivable. If
Navistar Financial fails to repurchase
the receivable, you may experience delays
or reductions in payments on your
securities. See "Certain Legal Aspects of
the Receivables--Laws Governing Credit
Transactions."
Effects of Prepayments and Delayed The receivables included in each trust
Payments may be prepaid, in full or in part,
without penalty, voluntarily or as a
result of defaults, casualties to the
financed vehicles or other reasons. In
addition, Navistar Financial or the
Seller may be required to repurchase
receivables from a trust as a result of
breaches of its representations and
warranties, and the servicer may have the
right to purchase all of the receivables
from the trust pursuant to a clean-up
call. Each of these prepayments or
purchases will shorten the average life
of the securities. Prepayment rates may
be influenced by a variety of factors and
cannot be predicted with any certainty.
In addition, the servicer may grant
certain rebates, adjustments or
extensions with respect to the
receivables, lengthening the average
remaining term of the receivables and the
average life of your securities.
You will bear any reinvestment risks
resulting from a faster or slower than
anticipated rate of prepayment on the
receivables, repurchases or extension of
the receivables. If you purchase a
security at a discount, a slower than
anticipated rate of principal payments on
your security could result in an actual
yield that is less than the anticipated
yield, and if you purchase a security at
a premium, a faster than anticipated rate
of principal payments on your security
also could result in an actual yield that
is less than the anticipated yield.
Commingling of Monies by the The servicer will generally be required
Servicer May Lead to Funds Not to deposit all collections and proceeds
Being Available of the receivables into a collection
account for a trust within two business
days of receipt. However, if certain
conditions are satisfied, the servicer
will be permitted to hold
6
<PAGE>
collections until shortly before funds
are needed to make required distributions
on the securities. The servicer may
invest these funds at its own risk and
for its own benefit and will not
segregate them from its own funds. If the
servicer fails to deposit the funds as
required on the specified date, you may
experience delays or reductions in
payments on your securities. See
"Description of the Transfer and
Servicing Agreements--Collections on the
Receivables."
Securities are in Book-Entry Form The securities will initially be issued
in book-entry form, represented by global
securities registered in the name of a
nominee for The Depository Trust Company.
So long as the securities remain in book-
entry form, you will not receive a
certificate representing your securities,
and you may only exercise your rights as
a securityholder indirectly through The
Depository Trust Company. See "Certain
Information Regarding the Securities--
Book-Entry Registration" and "Definitive
Securities."
THE TRUSTS
The Seller will establish a common law trust (each, a "Trust") with respect
to each series of securities as more specifically described in the related
prospectus supplement. If the series of securities issued includes one or more
classes of notes ("Notes") and one or more classes of certificates ("Owner
Certificates" and, collectively with the Notes, the "Owner Securities"), then
the Trust will be referred to in this prospectus and any prospectus supplement
as an "Owner Trust." If the series of securities consists solely of two classes
of Certificates, a Class A (the "Class A Certificates") and a Class B (the
"Class B Certificates" and, collectively with the Class A Certificates, the
"Grantor Certificates"), then the Trust will be referred to in this prospectus
and any prospectus supplement as a "Grantor Trust."
Owner Trusts
Each Owner Trust will be formed pursuant to a Trust Agreement (an "Owner
Trust Agreement") to be entered into between Navistar Financial Retail
Receivables Corporation and the trustee of the Owner Trust specified in the
related prospectus supplement (the "Owner Trustee"). The Owner Trust will
acquire the receivables and the Servicer will agree to service the receivables
pursuant to a Pooling and Servicing Agreement (an "Owner Trust Pooling and
Servicing Agreement") among the Seller, Navistar Financial, as Servicer, and
the Owner Trustee specified in the related prospectus supplement. The Notes of
each series of an Owner Trust will be issued and secured pursuant to an
Indenture (the "Indenture") between the Owner Trustee, acting on behalf of the
Owner Trust, and the trustee under the Indenture specified in the related
prospectus supplement (the "Indenture Trustee").
Grantor Trusts
Each Grantor Trust will be formed pursuant to a Pooling and Servicing
Agreement which incorporates the Navistar Financial Grantor Trust Standard
Terms and Conditions of Agreement (together, a "Grantor Trust Pooling and
Servicing Agreement") to be entered into among the
7
<PAGE>
Seller, Navistar Financial, as Servicer, and the Grantor Trustee specified in
the related prospectus supplement (the "Grantor Trustee"). An Owner Trust
Pooling and Servicing Agreement and a Grantor Trust Pooling and Servicing
Agreement are each sometimes referred to as a "Pooling and Servicing
Agreement," and an Owner Trustee and a Grantor Trustee are each sometimes
referred to as a "Trustee."
The Trust Property
With respect to each series of securities, the Seller will transfer certain
property to the trust in exchange for the related securities. The property to
be included in a trust (the "Trust Property") will include a pool of commercial
retail loans (each a "Receivable" and, all the Receivables in that pool, the
"Receivables Pool") secured by new and used medium and heavy duty trucks, buses
and trailers (each a "Financed Vehicle") with an aggregate principal balance as
of a date (the "Cutoff Date") specified in the related prospectus supplement
(the "Initial Aggregate Receivables Balance"), and the following additional
property (the "Related Property"):
. all payments paid on and due under the Receivables on and after the
Cutoff Date;
. such amounts as from time to time may be held in certain separate trust
accounts established and maintained pursuant to the related Pooling and
Servicing Agreement and the proceeds of such accounts;
. security interests in the vehicles financed by the Receivables and, to
the extent permitted by law, any accessions thereto which are financed
by Navistar Financial (the "Financed Vehicles");
. the proceeds of any dealer recourse with respect to defaulted
Receivables,
. the proceeds of any purchase obligations from International Truck and
Engine Corporation ("International") (f/k/a Navistar International
Transportation Corp.) covering the Receivables ("International Purchase
Obligations");
. the proceeds of credit life, credit disability, physical damage or other
insurance policies covering the financed vehicles;
. the proceeds of any personal or commercial guaranties of an obligor's
performance with respect to the Receivables (the "Guaranties");
. the benefit of any lease assignments with respect to the financed
vehicles; and
. certain rights of the Seller under the related Purchase Agreement and
the related Custodian Agreement between the Seller and the Servicer (the
"Custodian Agreement").
If so specified in the related prospectus supplement, the Trust Property of
the Owner Trust will also include monies on deposit in a trust account (the
"Pre-Funding Account") to be established with the Indenture Trustee, which will
be used to purchase additional Receivables (the "Subsequent Receivables") with
an aggregate principal balance approximately equal to the amount on deposit in
the Pre-Funding Account (the "Pre-Funded Amount") and Related Property from the
Seller from time to time during a period specified in the related prospectus
supplement (the "Funding Period"). Subsequent Receivables may be conveyed to an
Owner Trust as frequently as daily during the Funding Period. Any Subsequent
Receivables conveyed to the Owner Trust, together with the Related Property
with respect to the Subsequent Receivables, will also be assets of the Owner
Trust. Any references in this prospectus to Receivables in respect of any Owner
Trust shall include any such Subsequent Receivables. The property of an Owner
Trust may also include a segregated trust account held by the Indenture Trustee
for the benefit of the related holders of the Owner Securities (the "Owner
Securityholders") providing credit enhancement to the Owner Securityholders (a
"Reserve Account"). Any account providing credit enhancement for a series of
Grantor Certificates will not be included in the property of the related
Grantor Trust, but will be held by the Grantor Trustee for the benefit of the
holders of the related Grantor Certificates (a "Subordination Spread Account").
8
<PAGE>
The Servicer will continue to service the Receivables held by each Trust and
will receive fees for such services. See "The Transfer and Servicing
Agreements--Servicing Compensation and Payment of Expenses." To facilitate the
servicing of the Receivables, the Servicer will retain physical possession of
the related Receivables and other documents relating thereto as custodian. Due
to the administrative burden and expense, the certificates of title to the
Financed Vehicles will not be amended to reflect the sale and assignment of the
security interest in the Financed Vehicles to the trust. In the absence of such
an amendment, the trust may not have a perfected security interest in the
Financed Vehicles in all states, which could impair the Trust's ability to
repossess and sell the collateral securing defaulted Receivables. The Trust
will not be responsible for the legality, validity or enforceability of any
security interest in any financed vehicles. See "Risk Factors--Failure to
Obtain a Perfected Security Interest in the Financed Vehicles May Result in
Subordination of the Security Interest," "Certain Legal Aspects of the
Receivables," "The Transfer and Servicing Agreements--Sale and Assignment of
Receivables" and "--The Trustees."
If
. the protection provided to noteholders by any subordination of Owner
Certificates and by any Reserve Account or other credit enhancement,
. the protection provided to holders of Owner Certificates ("Owner
Certificateholders") by any Reserve Account or other credit enhancement,
or
. the protection provided to holders of Class A Certificates ("Class A
Certificateholders") by the subordination of the related Class B
Certificates and by any Subordination Spread Account or other credit
enhancement,
is insufficient such Securityholders would have to look principally to
. the obligors on the related Receivables,
. the proceeds from the repossession and sale of Financed Vehicles which
secure defaulted Receivables,
. the proceeds of dealer recourse with respect to such Receivables, and
. the proceeds, if any, of International Purchase Obligations with respect
to such Receivables.
In such event, certain factors, such as the unavailability of proceeds from
dealer recourse or International Purchase Obligations, and the Trust's not
having a perfected security interest in the Financed Vehicles in all states,
may affect the ability to repossess and sell the Financed Vehicles, and thus
may reduce the proceeds to be distributed to the holders of the securities. See
"The Transfer and Servicing Agreements--Distributions" and "--Credit
Enhancement" and "Certain Legal Aspects of the Receivables."
The principal offices of each trust will be specified in the related
prospectus supplement.
The Trustees
The Trustee for each trust will be specified in the related prospectus
supplement. The Trustee's liability in connection with the issuance and sale of
the securities issued pursuant to the related Trust is limited solely to the
express obligations of such Trustee set forth in the Owner Trust Agreement or
Grantor Trust Pooling and Servicing Agreement, as applicable.
9
<PAGE>
No Representations; Limited Duties
The Trustee will make no representations as to the validity or sufficiency
of any Owner Trust Agreement or Grantor Trust Pooling and Servicing Agreement,
as applicable, the securities or any Receivables or related documents, and will
not be accountable for the use or application by the Seller or Navistar
Financial of any funds paid to the Seller or Navistar Financial in respect of
the securities or the Receivables, or the investment of any monies by the
Servicer before such monies are deposited into the related Certificate
Distribution Account or (in the case of an Owner Trust) the related Note
Distribution Account. The Trustee will not independently verify any
Receivables. With respect to a Grantor Trust, if no Servicer Default has
occurred, the Grantor Trustee will be required to perform only those duties
specifically required of it under the related Grantor Trust Pooling and
Servicing Agreement. Generally, those duties will be limited to the receipt of
the various certificates, reports or other instruments required to be furnished
to the Grantor Trustee, in which case it will only be required to examine them
to determine whether they conform to the requirements of the Grantor Trust
Pooling and Servicing Agreement.
With respect to a Grantor Trust, the Grantor Trustee will be under no
obligation to exercise any of the trusts or powers vested in it by a Grantor
Trust Pooling and Servicing Agreement or to make any investigation of matters
arising thereunder or to institute, conduct or defend any litigation thereunder
or in relation thereto at the request, order or direction of any of the
Certificateholders, unless those Certificateholders have offered to the Grantor
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby.
Limitations on Class A Certificateholders' Ability to Institute Proceedings
No holders of Class A Certificates will have any right under a Grantor Trust
Pooling and Servicing Agreement to institute any proceeding with respect to the
Grantor Trust Pooling and Servicing Agreement unless such holder previously has
given to the Trustee written notice of default and unless the holders of Class
A Certificates evidencing not less than 25% of the voting interest thereof have
made written request upon the Trustee to institute such proceeding in its own
name as Trustee thereunder and have offered to the Trustee reasonable indemnity
and the Trustee for 60 days has neglected or refused to institute any such
proceeding.
Fees; Indemnification
Each Owner Trust Agreement and related Owner Trust Pooling and Servicing
Agreement will provide that the Seller will pay the Trustee's fees. Each
Grantor Trust Pooling and Servicing Agreement will provide that the Servicer
will pay the Trustee's fees. Each Owner Trust Agreement and related Owner Trust
Pooling and Servicing Agreement and each Grantor Trust Pooling and Servicing
Agreement will further provide that the Trustee will be entitled to
indemnification by the Servicer for, and will be held harmless against, any
loss, liability or expense incurred by the Trustee, other than through its own
willful misfeasance, bad faith or negligence (other than errors in judgment) or
by reason of a breach of any of its representations or warranties set forth in
such Owner Trust Agreement and related Owner Trust Pooling and Servicing
Agreement or such Grantor Trust Pooling and Servicing Agreement.
Co-Trustees
For the purpose of meeting the legal requirements of certain local
jurisdictions and for other certain limited purposes, the Trustee, with the
consent of the Servicer, will have the power to appoint co-trustees or separate
trustees of all or any part of each Trust. In the event of such appointment,
all or the specified rights, powers, duties and obligations conferred or
imposed upon the Trustee by an
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Owner Trust Agreement or a Grantor Trust Pooling and Servicing Agreement, as
applicable, will be conferred or imposed upon the Trustee and such separate
trustee or co-trustee jointly, or, in any jurisdiction in which the Trustee
will be incompetent or unqualified to perform certain acts, singly upon such
separate trustee or co-trustee who will exercise and perform such rights,
powers, duties and obligations solely at the direction of the Trustee.
Resignation; Successor Trustees
A Trustee may give notice of its intent to resign at any time, in which
event the Servicer, in the case of a Grantor Trust, or the Administrator, in
the case of an Owner Trust, will be obligated to appoint a successor trustee.
The Administrator (in the case of an Owner Trust) or the Servicer (in the case
of a Grantor Trust) may also remove the Trustee if the Trustee ceases to be
eligible to continue as Trustee under the related Owner Trust Agreement or
Grantor Trust Pooling and Servicing Agreement, as applicable, or if the Trustee
becomes insolvent. In such circumstances, the Administrator or the Servicer
will be obligated to appoint a successor trustee. Any resignation or removal of
a Trustee and appointment of a successor trustee will not become effective and
no such resignation shall be deemed to have occurred until acceptance of the
appointment by the successor trustee.
Administration Agreement
Navistar Financial, in its capacity as administrator (the "Administrator"),
will enter into an agreement (an "Administration Agreement") with each Owner
Trustee and the related Indenture Trustee pursuant to which the Administrator
will agree, to the extent provided in such Administration Agreement, to provide
the notices and to perform other administrative obligations of the Owner
Trustee and the Owner Trust under the Transfer and Servicing Agreements and the
Indenture. As compensation for the performance of the Administrator's
obligations under the Administration Agreement, and as reimbursement for its
expenses related thereto, the Administrator will be entitled to a monthly
administration fee in an amount equal to $1,500 per month, which fee will be
paid by the Servicer out of the Total Servicing Fee.
THE RECEIVABLES POOLS
The Receivables have been or will be originated by Navistar Financial in the
ordinary course of business and in accordance with Navistar Financial's
underwriting standards, which emphasize the prospective purchasers' ability to
pay and creditworthiness, as well as the asset value of the vehicle to be
financed. Navistar Financial's underwriting standards require physical damage
insurance to be maintained on each Financed Vehicle, except in the case of
certain fleet customers which are permitted to be self-insured in accordance
with Navistar Financial's customary procedures.
The Receivables to be held by each Trust will be selected from those
commercial retail loans (collectively, the "Retail Notes") owned by Navistar
Financial by applying several criteria, including (except as otherwise provided
in the prospectus supplement) that each Receivable
. is secured by one or more new or used medium or heavy duty trucks, buses
or trailers,
. was originated in the United States,
. is not more than 60 days past due as of the related Cutoff Date,
. was originated by Navistar Financial, and
. satisfies the other criteria set forth in the related prospectus
supplement.
The related prospectus supplement will specify whether the Receivables in
the Receivables Pool will be selected from all Retail Notes satisfying the
selection criteria
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. on a random basis,
. in reverse order of acquisition by Navistar Financial, or
. by another method.
Navistar Financial will not use criteria believed by it to be adverse to the
Securityholders in selecting the Receivables.
The Receivables will come from one or more of the following categories,
which group the Receivables according to their provisions for the payment of
principal and interest:
. "Equal Payment Fully Amortizing Receivables"--Receivables that provide
for equal monthly payments that fully amortize the amount financed over
its original term to maturity.
. "Equal Payment Skip Receivables"--Receivables that provide for equal
monthly payments in eleven or fewer months of each twelve-month period
that fully amortize the amount financed over its original term to
maturity.
. "Equal Payment Balloon Receivables"--Receivables that provide for equal
monthly payments except that a larger payment becomes due on the final
maturity date for such Receivables.
. "Level Principal Fully Amortizing Receivables"--Receivables that
provide for monthly payments consisting of level principal amounts
together with accrued and unpaid interest on the unpaid Receivable
Balances.
. "Level Principal Skip Receivables"--Receivables that provide for
monthly payments in eleven or fewer months of each twelve-month period
consisting of level principal amounts together with accrued and unpaid
interest on the unpaid Receivable Balances.
. "Level Principal Balloon Receivables"--Receivables that provide for
monthly payments consisting of level principal amounts together with
accrued and unpaid interest on the unpaid Receivable Balances, except
that a larger principal payment becomes due on the final maturity date
for such Receivables.
. "Other Receivables"--Receivables not described above, including
Receivables that provide for level monthly payments in eleven or fewer
months of each twelve-month period that amortize a portion of the amount
financed over its original term to maturity with a larger payment that
becomes due on the final maturity date for such Receivables.
"Scheduled Payment" means a payment which
. is the amount required under the terms of a Receivable in effect as of
the Cutoff Date, except, in the case of any Receivable secured by more
than one Financed Vehicle, including any changes in the terms of such
Receivable resulting from a Full Prepayment with respect to fewer than
all of the Financed Vehicles related thereto,
. is payable by the purchaser or any co-purchaser of the Financed Vehicle
or Financed Vehicles securing such Receivable or by any other Person who
owes payments under such Receivable (all such parties with respect to a
Receivable other than a guarantor being the "Obligor"), and
. includes finance charges which accrue at the APR.
When Scheduled Payment is used with reference to a Distribution Date, it
means the payment which is due in the related Monthly Period; provided,
however, that in the case of the first Monthly Period, the Scheduled Payment
shall include all such payments due from the Obligor on or after the Cutoff
Date.
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"Initial Receivable Balance" means, with respect to a Receivable, the
aggregate amount advanced toward the purchase price of all Financed Vehicles
related to such Receivable, including insurance premiums, service and warranty
contracts, federal excise taxes, sales taxes and other items customarily
financed as part of Retail Notes and related costs, less payments received from
the Obligor prior to the related Cutoff Date allocable (on the basis of the
actuarial method) to principal.
"Initial Gross Receivable Balance" means, with respect to a Receivable as of
the Cutoff Date, the Initial Receivable Balance plus, in the case of a
Receivable classified by the Servicer as a "finance charge--included contract,"
the finance charges included in the Scheduled Payments due on or after the
Cutoff Date.
"Receivable Balance" means, as of the last day of the related Monthly
Period, with respect to any Receivable, the Initial Receivable Balance minus
the sum, in each case computed in accordance with the actuarial method, of
. that portion of all Scheduled Payments due on or after the Cutoff Date
and on or prior to the last day of the related Monthly Period allocated
to principal,
. that portion of all Warranty Payments or Administrative Purchase
Payments with respect to the Receivable allocated to principal,
. any Prepayments applied by the Servicer to reduce the Receivable Balance
of the Receivable and
. that portion of the following received and allocated to principal by the
Servicer: benefits of any lease assignments, proceeds from any insurance
policies covering the Financed Vehicle or Financed Vehicles, Liquidation
Proceeds, proceeds from any dealer recourse, proceeds from any
International Purchase Obligations and proceeds from any Guaranties.
The Obligor on a Receivable secured by multiple Financed Vehicles may prepay an
amount corresponding to the outstanding principal balance for one or more of
such Financed Vehicles and the security interests in such vehicles will
generally be released.
"Aggregate Receivables Balance" means, as of any date, the sum of the
Receivable Balances of all outstanding Receivables (other than Liquidating
Receivables) held by the Trust on such date.
All of the Receivables will be prepayable at any time without penalty to the
Obligor and will contain due on sale provisions. If an Obligor elects to make a
Full Prepayment on a Receivable, the Obligor is entitled to a rebate of the
portion, if any, of the Scheduled Payments attributable to unearned finance
charges. The amount of the rebate is generally determined by one of two
methods, the actuarial method or the "Rule of 78s" method, in accordance with
applicable state law. With minor variations based on state law, the actuarial
method requires the rebate to be calculated on the basis of a constant interest
rate. Under the "Rule of 78s" method, the rebate is calculated on a sum-of-the-
digits basis generally and is always smaller than the corresponding rebate
under the actuarial method. A portion of the Receivables provide for "Rule of
78s" rebates. Distributions to Securityholders will not be affected by "Rule of
78s" rebates under any of the Receivables because such distributions are
determined using the actuarial method.
Information with respect to each Receivables Pool (excluding any Subsequent
Receivables) will be set forth in the related prospectus supplement, including,
to the extent appropriate, the composition, distribution by type of payment
terms, distribution by annual percentage rate ("APR"), distribution by
remaining maturity, geographic distribution and portion of such Receivables
Pool secured by new vehicles and by used vehicles.
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WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the securities will generally be influenced by
the rate at which the principal balances of the related Receivables are paid,
which payment may be in the form of scheduled amortization or prepayments.
Prepayments include, in addition to voluntary prepayments, liquidations due to
defaults and repurchases by the Seller or the Servicer pursuant to the
applicable Pooling and Servicing Agreement, as well as receipt of proceeds from
credit life, credit disability and casualty insurance policies. Any
reinvestment risk resulting from the rate of prepayments of the Receivables and
the distribution of such prepayments to securityholders will be borne entirely
by the securityholders. If the related prospectus supplement provides that the
property of an Owner Trust will include a Pre-Funding Account, the outstanding
Owner Securities will be subject to partial redemption on or immediately
following the end of the Funding Period in an amount and in the manner
specified in the related prospectus supplement. In addition, early retirement
of certain classes of securities with respect to a Trust may be effected by the
exercise by the Servicer of its option to purchase all of the Receivables
remaining in such Trust when the Aggregate Receivables Balance is 10% or less
of the Initial Aggregate Receivables Balance for such Trust. See "The Transfer
and Servicing Agreements--Optional Purchase."
It is generally recognized by the industry that the average actual maturity
of a receivable similar to a Retail Note tends to be less than the average
stated contractual maturity. However, the rate of prepayments on the
Receivables may be influenced by a variety of economic, social and other
factors. Also, Navistar Financial maintains limited records of the historical
prepayment experience of the Retail Notes included in its portfolio and is not
aware of any publicly available statistics that set forth principal prepayment
experience for receivables similar to the Receivables over an extended period
of time. Due to the limitations of the data maintained by Navistar Financial,
no meaningful and accurate historical information regarding prepayments is
available. Therefore, no prediction can be made as to the rate of prepayments
on the Receivables. See also "The Receivables Pools" and "The Transfer and
Servicing Agreements--Collections."
POOL FACTORS AND TRADING INFORMATION
. The "Note Pool Factor" for each class of Notes will be a seven-digit
decimal which the Servicer will compute prior to each distribution with respect
to such Notes indicating the remaining outstanding principal balance of such
Notes, as of the close of such date, as a fraction of the initial outstanding
principal balance of such Notes.
. The "Owner Trust Certificate Pool Factor" for each class of Owner
Certificates will be a seven-digit decimal which the Servicer will compute
prior to each distribution with respect to such Owner Certificates indicating
the remaining certificate balance as of the close of such date, as a fraction
of the initial certificate balance.
. The "Class A Certificate Pool Factor" for each series of Class A
Certificates will be a seven-digit decimal which the Servicer will compute
prior to each distribution with respect to such Class A Certificates indicating
the remaining Class A Certificate Balance as of the close of such date, as a
fraction of the initial Class A Certificate Balance.
Each Note Pool Factor, each Owner Trust Certificate Pool Factor and each
Class A Certificate Pool Factor will initially be 1.0000000; thereafter the
Note Pool Factor, the Owner Trust Certificate Pool Factor and the Class A
Certificate Pool Factor will decline to reflect reductions in the outstanding
principal balance of the Notes, reductions of the certificate balance of the
Owner Certificates, or reductions of the Class A Certificate Balance, as the
case may be. A Noteholder's portion of the aggregate outstanding principal
balance of the related class of Notes is the product of
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(1) the original denomination of such Noteholder's Note and (2) the Note Pool
Factor. An Owner Certificateholder's portion of the aggregate outstanding
certificate balance for the related class of Owner Certificates is the product
of (a) the original denomination of the Owner Certificateholder's Owner
Certificate and (b) the Owner Trust Certificate Pool Factor. A Class A
Certificateholder's portion of the aggregate outstanding Class A Certificate
Balance is the product of (a) the original denomination of the Class A
Certificateholder's Certificate and (b) the Class A Certificate Pool Factor.
With respect to each Owner Trust, the holder or holders of record of the
Notes (each a "Noteholder") will receive reports on or about each Distribution
Date concerning payments received on the Receivables, the Aggregate Receivables
Balance, each Note Pool Factor, and various other items of information. Unless
otherwise provided in the related prospectus supplement, with respect to each
Trust, the holder or holders of record of the Certificates (each a
"Certificateholder") will receive reports on or about each Distribution Date
concerning payments received on the Receivables, the Aggregate Receivables
Balance, each Owner Trust Certificate Pool Factor or Class A Certificate Pool
Factor, as applicable, and various other items of information. Securityholders
of record during any calendar year will be furnished information for tax
reporting purposes not later than the latest date permitted by law. See
"Certain Information Regarding the Securities--Reports to Securityholders."
USE OF PROCEEDS
Unless otherwise provided in the related prospectus supplement, the net
proceeds to be received by the Seller from the sale of the securities (after
any necessary deposit of funds into a Reserve Account or Subordination Spread
Account) will be applied (1) to the purchase of the Receivables from Navistar
Financial and (2) to the extent provided in the related prospectus supplement,
to make the deposit of the Pre-Funded Amount into the Pre-Funding Account. The
related prospectus supplement will specify the purpose for which Navistar
Financial will use the proceeds of each sale of Receivables to the Seller.
THE SELLER
Navistar Financial Retail Receivables Corporation, a wholly-owned subsidiary
of Navistar Financial, was incorporated in the State of Delaware on November
12, 1991. The Seller is organized for the limited purposes of purchasing
receivables from Navistar Financial and transferring such receivables to third
parties, and conducting any activities incidental to necessary or convenient
for the accomplishment of such purposes. The principal executive offices of the
Seller are located at Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801, telephone (302) 658-7581.
THE SERVICER
Navistar Financial, a Delaware corporation, is a wholly-owned subsidiary of
International. Navistar Financial provides:
. retail and lease financing for sales of new and used trucks, buses and
trailers sold by International dealers, non-International dealers and
third parties,
. wholesale financing for International dealers,
. retail financing for sales of new and used trucks and buses by
International and
. selected accounts receivable financing for International.
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Harco National Insurance Company, a wholly-owned consolidated insurance
subsidiary of Navistar Financial, provides commercial physical damage and
liability insurance coverage to International dealers and retail customers and
the public through the independent insurance agency system.
Navistar Financial conducts its financing operations through three district
offices and through its executive and administrative office located at 2850
West Golf Road, Rolling Meadows, Illinois 60008, telephone (847) 734-4000.
The related prospectus supplement will set forth certain information
concerning Navistar Financial's experience in the United States pertaining to
delinquencies, repossessions and net losses on its entire portfolio of Retail
Notes, and it will describe Navistar Financial's current practices with respect
to dealer recourse for defaulted Receivables and International Purchase
Obligations.
THE NOTES
General
With respect to each Owner Trust, one or more classes of Notes will be
issued pursuant to the terms of an Indenture, a form of which has been filed as
an exhibit to the registration statement of which this prospectus forms a part.
The related prospectus supplement will specify which class or classes of Notes
of a series, if any, are being offered. The following summary does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, all of the provisions of the Notes and the Indenture. Where particular
provisions or terms used in the Indenture are referred to, the actual
provisions (including definitions of terms) are incorporated by reference as
part of this summary.
Unless otherwise specified in the related prospectus supplement, Notes
generally will be available for purchase in denominations of $1,000 and
integral multiples thereof, and will be available in book-entry form only.
Noteholders will be able to receive Definitive Notes only in the limited
circumstances described in this prospectus or in the related prospectus
supplement. See "Certain Information Regarding the Securities--Definitive
Securities."
Principal and Interest
Each class of Notes will have a stated principal amount and will bear
interest at the applicable interest rate (the "Interest Rate"). Each class of
Notes may have a different Interest Rate which may be a fixed, variable or
adjustable interest rate, or any combination thereof. The related prospectus
supplement will specify the Interest Rate for each class of Notes, or the
initial Interest Rate and the method for determining subsequent changes to the
Interest Rate.
A series of Owner Securities may include two or more classes of Notes which
differ as to the timing and priority of payment, seniority, allocations of
loss, Interest Rate or amount of payments of principal or interest, or as to
which payments of principal or interest may or may not be made upon the
occurrence of specified events or on the basis of collections from designated
portions of the Receivables Pool. In addition, a series may include one or more
classes of Notes ("Strip Notes") entitled to (1) principal payments with
disproportionate, nominal or no interest payments, or (2) interest payments
with disproportionate, nominal or no principal payments.
The timing and priority of payment, seniority, allocations of loss, Interest
Rate and amount of or method of determining payments of principal and interest
on the Notes will be described in the related prospectus supplement. The right
of holders of any class of Notes to receive payments of principal and interest
may be senior or subordinate to the rights of holders of any other class or
classes of Notes in the series. Payments of interest on the Notes generally
will be made prior to payments of principal thereon. One or more classes of
Notes of a series may be redeemable under the circumstances specified in the
related prospectus supplement.
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Unless otherwise specified in the related prospectus supplement, payments to
Noteholders of all classes within a series in respect of interest will have the
same priority. Under certain circumstances, the amount available for such
payments could be less than the amount of interest payable on the Notes on any
of the dates specified for payments in the related prospectus supplement (each,
a "Distribution Date"), in which case, each class of Noteholders will receive
their ratable share (based upon the aggregate amount of interest due to such
class of Noteholders) of the aggregate amount available to be distributed in
respect of interest on the Notes. See "The Transfer and Servicing Agreements--
Distributions" and "--Credit Enhancement."
In the case of a series of Notes which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination thereof, of each such class will be set forth in the related
prospectus supplement. Unless otherwise specified in the related prospectus
supplement, payments in respect of principal and interest of any class of Notes
will be made on a pro rata basis among all of the Notes of such class.
Redemption
If the Servicer exercises its option to purchase the Receivables of an Owner
Trust on the terms and conditions described below under "The Transfer and
Servicing Agreements--Optional Purchase," the outstanding Notes will be
redeemed. In addition, if the related prospectus supplement provides that the
property of an Owner Trust will include a Pre-Funding Account, the outstanding
Notes will be subject to partial redemption on or immediately following the end
of the Funding Period. In the event of such partial redemption, the Noteholders
may be entitled to receive a prepayment premium from the Owner Trust, in the
amount and to the extent provided in the related prospectus supplement.
The Indenture
A form of Indenture has been filed as an exhibit to the registration
statement of which this prospectus forms a part. The Seller will provide a copy
of the applicable Indenture (without exhibits) to you upon request.
Modification of Indenture Without Noteholder Consent. The Owner Trustee, on
behalf of the Owner Trust, and the Indenture Trustee may, without consent of
the related Noteholders, enter into one or more supplemental indentures to an
Indenture for any of the following purposes:
. to correct or amplify the description of the collateral or add
additional collateral;
. to provide for the assumption of the Notes and the Indenture obligations
by a permitted successor to the Owner Trust;
. to add additional covenants for the benefit of the related
Securityholders, or to surrender any rights or power conferred upon the
Owner Trust;
. to convey, transfer, assign, mortgage or pledge any property to or with
the Indenture Trustee;
. to cure any ambiguity or correct or supplement any provision in the
Indenture or in any supplemental indenture which may be inconsistent
with any other provision in the Indenture, any supplemental indenture or
any of the Transfer and Servicing Agreements or certain other
agreements;
. to provide for the acceptance of the appointment of a successor
Indenture Trustee or to add to or change any of the provisions of the
Indenture as shall be necessary and permitted to facilitate the
administration by more than one trustee;
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. to modify, eliminate or add to the provisions of the Indenture in order
to comply with the Trust Indenture Act of 1939, as amended; and
. to add any provisions to, change in any manner, or eliminate any of the
provisions of, the Indenture or modify in any manner the rights of
Noteholders under such Indenture; provided that any such action shall
not, as evidenced by an opinion of counsel, adversely affect in any
material respect the interests of any related Noteholder.
Modification of Indenture With Noteholder Consent. With respect to each
Owner Trust, unless otherwise specified in the related prospectus supplement,
with the consent of the holders of a majority of the outstanding related Notes
and, if more than one class of Notes in such series is outstanding, the holders
of the majority of the most senior class, the Owner Trustee, on behalf of the
Owner Trust, and the Indenture Trustee may execute a supplemental indenture to
add provisions to, change in any manner or eliminate any provisions of, the
related Indenture, or modify in any manner the rights of the related
Noteholders.
Without the consent of the holder of each outstanding related Note affected
thereby, however, no supplemental indenture will:
. change the due date of any installment of principal of or interest on
any Note or reduce the principal amount thereof, the interest rate
specified thereon or the redemption price with respect thereto or change
any place of payment where or the coin or currency in which any Note or
any interest thereon is payable;
. impair the right to institute suit for the enforcement of certain
provisions of the Indenture regarding payment;
. reduce the percentage of the aggregate amount of the outstanding Notes
the consent of the holders of which is required for (a) any such
supplemental indenture, (b) any waiver of compliance with certain
provisions of the Indenture or of certain defaults thereunder and their
consequences as provided for in the Indenture or (c) certain other
actions described in the Indenture;
. modify any of the provisions of the Indenture in such manner as to
affect the calculation of the amount of any payment of interest or
principal due on any Note on any Distribution Date (including the
calculation of any of the individual components of such calculation);
. modify or alter the provisions of the Indenture regarding the voting of
Notes held by the related Owner Trust, any other obligor on the Notes,
the Seller or an affiliate of any of them;
. modify or alter in certain aspects the definition of the term
"Outstanding" as defined in the related Transfer and Servicing
Agreements or reduce the percentage of the aggregate outstanding amount
of the Notes the consent of the holders of which is required to direct
the Indenture Trustee to sell or liquidate the Receivables if the
proceeds of such sale would be insufficient to pay the principal amount
and accrued but unpaid interest on the outstanding Notes; or
. permit the creation of any lien ranking prior to or on a parity with the
lien of the Indenture with respect to any of the collateral for the
Notes or, except as otherwise permitted or contemplated in the
Indenture, terminate the lien of the Indenture on any such collateral or
deprive the holder of any Note of the security afforded by the lien of
the Indenture.
Events of Default; Rights Upon Event of Default. With respect to each Owner
Trust, unless otherwise specified in the related prospectus supplement, "Events
of Default" under the Indenture will consist of:
. any failure to pay interest on the related Notes as and when the same
becomes due and payable, which failure continues unremedied for five
days;
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. any failure (a) to make any payment of principal on the Notes when due
or (b) to observe or perform in any material respect any other covenants
or agreements in the Indenture, which failure in the case of a default
under clause (b) materially and adversely affects the rights of related
Noteholders, and which failure in either case continues for 30 days
after the giving of written notice of such failure to the Owner Trust
and Seller or the Servicer, as applicable, by the Indenture Trustee or
to the Seller or the Servicer, as applicable, and the Indenture Trustee
by the holders of not less than 25% of the principal amount of the
related Notes;
. failure to pay the unpaid principal balance of any related class of
Notes by the respective final scheduled Distribution Date for such
class; and
. certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings and certain actions by the
Owner Trust indicating its insolvency, reorganization pursuant to
bankruptcy proceedings or inability to pay its obligations.
The amount of principal required to be paid to Noteholders on any Distribution
Date under the related Indenture will generally be limited to amounts available
to be deposited in the Note Distribution Account. Therefore, unless otherwise
specified in the related prospectus supplement, the failure to pay principal on
a class of Notes on any Distribution Date generally will not result in the
occurrence of an Event of Default until the maturity date for such class of
notes.
If an Event of Default should occur and be continuing with respect to the
Notes of any series, the related Indenture Trustee or holders of a majority in
principal amount of such Notes outstanding or, if a series has more than one
class, the holders of the classes of notes designated as having the right may
declare the principal of the Notes to be immediately due and payable. Such
declaration may, under certain circumstances, be rescinded by the holders of a
majority in principal amount of the Notes then outstanding or, if a Series has
more than one class, the holders of the class of notes designated as having the
right.
If the Notes of any series are declared to be due and payable following an
Event of Default with respect thereto, the related Indenture Trustee may
institute proceedings to collect amounts due or foreclose on Trust Property,
exercise remedies as a secured party, sell the Trust Property or elect to have
the Owner Trust maintain possession of the related Receivables and continue to
apply collections on such Receivables as if there had been no declaration of
acceleration. The Indenture Trustee, however, is prohibited from selling the
Trust Property following an Event of Default, unless
. the holders of all the outstanding related Notes consent to such sale,
. the proceeds of such sale are sufficient to pay in full the principal of
and the accrued interest on such outstanding Notes and the certificate
balance of and accrued interest on the Certificates, in each case at the
date of such sale, or
. there has been an Event of Default arising from a failure to make a
required payment of principal or interest on any Notes, and the
Indenture Trustee determines that the Trust Property would not be
sufficient on an ongoing basis to make all payments on the Notes as such
payments would have become due if such obligations had not been declared
due and payable and the Indenture Trustee obtains the consent of the
holders of a majority of the aggregate outstanding amount of the Notes.
Following a declaration of acceleration upon an Event of Default, unless
otherwise specified in the related prospectus supplement,
. Noteholders will be entitled to ratable repayment of principal on the
basis of their respective unpaid principal balances and
. repayment in full of the accrued interest on and unpaid principal
balances of the Notes will be made prior to any further payment of
interest on the Owner Certificates or in respect of the certificate
balance.
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Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with respect
to a series of Notes, the Indenture Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the holders of such Notes, if the Indenture Trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with such
request. Subject to the provisions for indemnification and certain limitations
contained in the Indenture, the holders of a majority in principal amount of
the outstanding Notes in a series or, if a series has more than one class, the
holders of the classes of notes designated as having that right will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee. The holders of a majority in
principal amount of the Notes then outstanding together with, if a series has
more than one class the classes of Notes designated as having that right may,
in certain cases, waive any default with respect thereto, except a default in
the payment of principal or interest or a default in respect of a covenant or
provision of the Indenture that cannot be modified without the waiver or
consent of all of the holders of such outstanding Notes.
Conditions to Noteholder's Ability to Institute Proceedings
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless:
. such holder previously has given to the Indenture Trustee written notice
of a continuing Event of Default,
. the holders of not less than 25% in principal amount of the outstanding
Notes of such series have made written request of the Indenture Trustee
to institute such proceeding in its own name as Indenture Trustee,
. such holder or holders have offered the Indenture Trustee reasonable
indemnity,
. the Indenture Trustee has for 60 days failed to institute such
proceeding, and
. no direction inconsistent with such written request has been given to
the Indenture Trustee during such 60-day period by the holders of a
majority in principal amount of such outstanding Notes.
Notice to Noteholders of Events of Default
If the Indenture Trustee knows that an Event of Default has occurred and is
continuing, the Indenture Trustee will mail to each Noteholder of such Trust
notice of the Event of Default within 30 days after obtaining knowledge of such
Event of Default. Except in the case of a failure to pay principal of or
interest on any Note, the Indenture Trustee may withhold the notice if and so
long as it determines in good faith that withholding the notice is in the
interests of Noteholders.
Covenant Not to Institute Bankruptcy Proceedings
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not, for a period of
one year and one day after the termination of the Indenture, institute against
the related Owner Trust any bankruptcy, reorganization or other proceeding
under any federal or state bankruptcy or similar law.
No Personal Liability
Neither the Indenture Trustee nor the Owner Trustee in its individual
capacity, nor any holder of an Owner Certificate including, without limitation,
the Seller, nor any of their respective owners, beneficiaries, agents,
officers, directors, employees, affiliates, successors or assigns will, in the
absence of an express agreement to the contrary, be personally liable for the
payment of the principal of or interest on the related Notes or for the
agreements and covenants of the related Owner Trust contained in the Indenture.
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Certain Covenants. Each Indenture provides that the related Owner Trust may
not consolidate with or merge into any other entity, unless:
. the entity formed by or surviving such consolidation or merger is
organized under the laws of the United States, any state or the District
of Columbia,
. such entity expressly assumes the Owner Trust's obligation to make due
and punctual payments upon the Notes and the performance or observance
of every agreement and covenant of the Owner Trust under the Indenture,
. no Event of Default shall have occurred and be continuing immediately
after such merger or consolidation,
. any action as is necessary to maintain the lien and security interest
created by the Indenture shall have been completed,
. the Owner Trust has been advised that the rating of the related Notes or
Owner Certificates then in effect would not be reduced or withdrawn by
the Rating Agencies as a result of such merger or consolidation, and
. the Owner Trust has received an opinion of counsel to the effect that,
among other things, such consolidation or merger would have no material
adverse tax consequence to the Owner Trust or to any related
Securityholder.
Each Owner Trust will not, among other things, except as expressly permitted
by the Indenture, the Transfer and Servicing Agreements or certain related
documents for such Owner Trust (collectively, the "Related Documents"):
. sell, convey, transfer, exchange or otherwise dispose of any of the
assets of the Owner Trust,
. claim any credit on or make any deduction from the principal and
interest payable in respect of the related Notes (other than amounts
withheld under the Code or applicable state law) or assert any claim
against any present or former holder of such Notes because of the
payment of taxes levied or assessed upon any part of the Trust Property,
. dissolve or liquidate in whole or in part (to the extent the Owner Trust
may lawfully make such covenant),
. permit the validity or effectiveness of the related Indenture to be
impaired or permit any person to be released from any covenants or
obligations with respect to the related Notes under such Indenture
except as may be expressly permitted thereby,
. permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance to be created on or extend to or otherwise arise upon
or burden the assets of the Owner Trust or any part thereof, or any
interest therein or the proceeds thereof,
. permit the lien of the related Indenture not to constitute a valid first
priority security interest in the Trust Property,
. engage in any activity other than as specified under this prospectus and
the related prospectus supplement, or
. incur, assume or guarantee any indebtedness other than indebtedness
incurred pursuant to the related Notes and the related Indenture or
otherwise in accordance with the Related Documents.
Annual Compliance Statement. Each Owner Trust will be required to file
annually with the related Indenture Trustee a written statement as to the
fulfillment of its obligations under the Indenture.
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Indenture Trustee's Annual Report. The Indenture Trustee will be required,
if and as required by Sections 313(a) and (c) of the Trust Indenture Act of
1939 as in force on the date of the related Pooling and Servicing Agreement
(the "TIA"), to mail to all related Noteholders within sixty days after each
February 1, beginning with the first February 1 after the related closing date
a brief report relating to its eligibility and qualification to continue as
Indenture Trustee under the related Indenture, any amounts advanced by it under
the Indenture, the amount, interest rate and maturity date of certain
indebtedness owing by the Owner Trust to the Indenture Trustee in its
individual capacity, the property and funds physically held by the Indenture
Trustee as such and any action taken by it that materially affects the Notes
and that has not been previously reported. The Indenture Trustee shall also
comply with Section 313(b) of the TIA.
Satisfaction and Discharge of Indenture
The Indenture will be discharged with respect to the related Notes (but not
with respect to the Certificateholders) upon the delivery to the related
Indenture Trustee for cancellation of all such Notes or, with certain
limitations, upon deposit with the Indenture Trustee of funds sufficient for
the payment in full of all of such Notes.
The Indenture Trustee
The Indenture Trustee for a series of Notes will be specified in the related
prospectus supplement. The Indenture Trustee may give notice of its intent to
resign at any time, in which event the Owner Trust will be obligated to appoint
a successor trustee. The Owner Trust may also remove the Indenture Trustee if
the Indenture Trustee ceases to be eligible to continue as such under the
Indenture or if the Indenture Trustee becomes insolvent. In such circumstances,
the Owner Trust will be obligated to appoint a successor trustee. Any
resignation or removal of the Indenture Trustee and appointment of a successor
trustee does not become effective until acceptance of the appointment by the
successor trustee.
OWNER CERTIFICATES
General
The Owner Certificates will be issued pursuant to the terms of an Owner
Trust Agreement, a form of which has been filed as an exhibit to the
registration statement of which this prospectus forms a part. The related
prospectus supplement will specify which class or classes of Owner Certificates
of a series, if any, are being offered. The following summary does not purport
to be complete and is subject to, and qualified in its entirety by reference
to, all of the provisions of the Owner Certificates and the Owner Trust
Agreement. Where particular provisions or terms used in the Owner Trust
Agreement are referred to, the actual provisions (including definitions of
terms) are incorporated by reference as part of this summary.
Unless otherwise specified in the related prospectus supplement, Owner
Certificates will be available for purchase in minimum denominations of $20,000
and in integral multiples of $1,000 in excess thereof and will be available in
book-entry form only. The Owner Certificateholder will be able to receive
Definitive Certificates only in the limited circumstances described in this
prospectus or in the related prospectus supplement. See "Certain Information
Regarding the Securities--Definitive Securities."
Owner Certificates owned by the Seller or its affiliates will be entitled to
equal and proportionate benefits under the Owner Trust Agreement except that
such Owner Certificates will be deemed not to be outstanding for the purpose of
determining whether the requisite percentage of Owner Certificateholders have
given, made or taken any request, demand, authorization, direction, notice,
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consent or other action under the Related Documents (other than the
commencement by the Owner Trust of a voluntary proceeding in bankruptcy as
described in "The Transfer and Servicing Agreements--Owner Trust").
To the extent specified in the related prospectus supplement, distributions
in respect of the Owner Certificates will be subordinated in priority of
payment to payments on the Notes.
Prepayment
If the Servicer exercises its option to purchase the Receivables of an Owner
Trust on the terms and conditions described below under "The Transfer and
Servicing Agreements--Optional Purchase," Owner Certificateholders will receive
an amount in respect of the Owner Certificates as specified in the related
prospectus supplement. In addition, if the related prospectus supplement
provides that the property of an Owner Trust will include a Pre-Funding
Account, Certificateholders may receive a partial prepayment of principal on or
immediately following the end of the Funding Period in an amount and manner
specified in the related prospectus supplement. In the event of such partial
prepayment, the Certificateholders may be entitled to receive a prepayment
premium from the Owner Trust, in the amount and to the extent provided in the
related prospectus supplement.
Distributions of Interest and Certificate Balance
Unless otherwise specified in the related prospectus supplement, each class
of Owner Certificates will have a stated certificate balance and will accrue
interest on such certificate balance at a fixed, variable or adjustable rate
(with respect to each class of Owner Certificates, the "Pass Through Rate").
Each class of Owner Certificates may have a different Pass Through Rate. The
related prospectus supplement will specify the Pass Through Rate and the method
for determining subsequent changes to the Pass Through Rate.
A series of Owner Certificates may include two or more classes of Owner
Certificates which differ as to timing of distributions, sequential order,
priority of payment, seniority, allocation of loss, Pass Through Rate or amount
of distributions in respect of certificate balance or interest, or as to which
distributions in respect of certificate balance or interest on any class may or
may not be made upon the occurrence of specified events or on the basis of
collections from designated portions of the Receivables Pool. In addition, a
series may include one or more classes of Owner Certificates ("Strip
Certificates") entitled to (1) distributions in respect of certificate balance
with disproportionate, nominal or no interest distributions, or (2) interest
distributions, with disproportionate, nominal or no distributions in respect of
certificate balance.
The timing and priority of distributions, seniority, allocations of loss,
Pass Through Rate and amount of or method of determining distributions with
respect to certificate balance and interest (or, where applicable, with respect
to certificate balance only or interest only) on the Owner Certificates of any
series will be described in the related prospectus supplement. Distributions of
interest on the Owner Certificates will be made on the dates specified in the
related prospectus supplement and will be made prior to distributions with
respect to certificate balance. Unless otherwise specified in the related
prospectus supplement, interest on the Owner Certificates will be calculated on
the basis of a 360-day year consisting of twelve 30-day months. Distributions
in respect of any class of Owner Certificates will be subordinate to payments
in respect of the Notes as more fully described in the related prospectus
supplement. Distributions in respect of certificate balance of any class of
Owner Certificates will be made on a pro rata basis among all of the Owner
Certificateholders of such class.
In the case of a series of Owner Certificates which includes two or more
classes of Owner Certificates, the timing, sequential order, priority of
payment or amount of distributions in respect of principal, and any schedule or
formula or other provisions applicable to the determination thereof, of each
such class shall be as set forth in the related prospectus supplement.
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CLASS A CERTIFICATES
General
The Class A Certificates will be issued pursuant to a Pooling and Servicing
Agreement. The following summary does not purport to be complete and is subject
to, and qualified in its entirety by reference to, all of the provisions of the
Class A Certificates and the related Pooling and Servicing Agreement. Where
particular provisions or terms used in the related Pooling and Servicing
Agreement are referred to, the actual provisions (including definitions of
terms) are incorporated by reference as part of this summary.
Each series of Grantor Certificates will consist of two classes, the Class A
Certificates and the Class B Certificates, in each case as designated in the
related prospectus supplement. Each Grantor Certificate will represent an
undivided ownership interest in the related Grantor Trust. Only the Class A
Certificates will be offered by this prospectus and by the related prospectus
supplements. Unless otherwise specified in the related prospectus supplement,
the Class A Certificates will be issued in minimum denominations of $1,000 or
integral multiples thereof and will be available in book-entry form only.
The Grantor Certificates will evidence interests in the Grantor Trust
created pursuant to the related Pooling and Servicing Agreement. For any series
of Grantor Certificates, the Class A Certificates will evidence in the
aggregate an undivided ownership interest equal to a percentage set forth in
the related prospectus supplement (the "Class A Percentage") of the related
Grantor Trust and the Class B Certificates will evidence in the aggregate an
undivided ownership interest equal to a percentage set forth in the related
prospectus supplement (the "Class B Percentage") of the related Grantor Trust.
The "voting interests" of the Class A Certificates will be allocated among the
Class A Certificateholders in accordance with the Class A Certificate Balance
represented thereby, except that in certain circumstances any Class A
Certificates held by the Seller, the Servicer or any of their respective
affiliates shall be excluded from such determination.
Grantor Certificates owned by the Seller or its affiliates will be entitled
to equal and proportionate benefits under the related Pooling and Servicing
Agreement except that such Grantor Certificates will be deemed not to be
outstanding for the purpose of determining whether the requisite percentage of
Grantor Certificateholders have given, made or taken any request, demand,
authorization, direction, notice, consent or other action under the Related
Documents.
Unless otherwise specified in the related prospectus supplement, Class A
Certificates will be available in book-entry form only, and Class A
Certificateholders will be able to receive Definitive Certificates only in the
limited circumstances described in this prospectus or in the related prospectus
supplement. See "Certain Information Regarding the Securities--Definitive
Securities."
If the Servicer exercises its option to purchase the Receivables of a
Grantor Trust on the terms and conditions described below under "The Transfer
and Servicing Agreements--Optional Purchase," Class A Certificateholders will
receive an amount in respect of the Class A Certificates as specified in the
related prospectus supplement.
Distributions of Interest and Certificate Balance
With respect to each series of Class A Certificates, on each Distribution
Date, interest will be passed through to the holders of record of Class A
Certificates (the "Class A Certificateholders") as of the day immediately
preceding such Distribution Date (or, if Definitive Certificates are issued,
the last day of the preceding Monthly Period) (the "Record Date") at the Pass
Through Rate (as defined in the related Prospectus Supplement) on the Class A
Certificate Balance. Interest on the Class A Certificates will accrue from the
most recent Distribution Date on which interest has been paid to but excluding
the current Distribution Date, and will be payable to the extent of funds
available from (1) the Class A Percentage of the Collected Interest, (2) the
Subordination Spread Account and (3) the Class B Distributable Amount.
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With respect to each series of Class A Certificates, on each Distribution
Date, the Grantor Trustee will pass through and distribute pro rata to Class A
Certificateholders as of the Record Date, all Scheduled Payments of principal,
the principal portion of all Full Prepayments and Partial Prepayments received
during the related Monthly Period in each case to the extent of funds available
from (1) the Class A Percentage of the Collected Principal, (2) the
Subordination Spread Account and (3) the remainder of the Available Amount. See
"The Receivables Pools."
The timing and priority of distributions, Pass Through Rate and amount of or
method of determining distributions with respect to certificate balance and
interest on the Class A Certificates of any series will be described in the
related prospectus supplement. Interest will be passed through to the holders
of the Class A Certificates on the Distribution Dates specified in the related
prospectus supplement and will be made prior to distributions with respect to
certificate balance. Each class of Grantor Certificates may have a different
Pass Through Rate. The related prospectus supplement will specify the Pass
Through Rate for the Class A Certificates, or the initial Pass Through Rate and
the method for determining changes to the Pass Through Rate. Unless otherwise
specified in the related prospectus supplement, interest on the Class A
Certificates will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. Distributions in respect of certificate balance of the
Class A Certificates of any series will be made on a pro rata basis among all
of the related Class A Certificateholders.
CERTAIN INFORMATION REGARDING THE SECURITIES
Book-Entry Registration
The Depository Trust Company ("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 UCC
and a "clearing agency" registered pursuant to Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-
entries, thereby eliminating the need for physical movement of certificates.
"Participants" include securities brokers and dealers, banks, trust companies,
clearing corporations or other Persons for whom from time to time DTC effects
book entry transfers and pledges of securities deposited with DTC. 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 ("Indirect
Participants").
Unless otherwise specified in the related prospectus supplement, each class
of securities will initially be represented by one or more notes or
certificates, in each case registered in the name of the nominee of DTC
(together with any successor depository, the "Depository"). Unless and until
Definitive Securities are issued under the limited circumstances described in
this prospectus or in the related prospectus supplement, no person acquiring a
beneficial interest in a security (a "Security Owner") (other than the Seller)
will be entitled to receive a physical certificate representing a Security.
Unless otherwise specified in the related prospectus supplement, Security
Owners (other than the Seller) that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of,
or other interests in, securities may do so only through Participants and
Indirect Participants. In addition, Security Owners having a beneficial
interest in Notes will receive all distributions of principal and interest and
Security Owners having a beneficial interest in Certificates will receive all
distributions in respect of interest and certificate balance through
Participants and Indirect Participants. DTC's nominee will be Cede & Co.
("Cede"). Cede is expected to be the
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holder of record of the securities that are not retained by the Seller. Under a
book-entry format, Security Owners may experience some delay in their receipt
of payments, since such payments will be forwarded by the trustees to Cede, as
nominee for DTC. DTC will forward such payments to its Participants, which
thereafter will forward them to Indirect Participants or Security Owners.
Except for the Seller, it is anticipated that the only "Noteholder" and
"Certificateholder" will be Cede, as nominee of DTC. Security Owners having a
beneficial interest in Notes will not be recognized by the Indenture Trustee as
Noteholders, as such term is used in the Indenture, and such Security Owners
will be permitted to exercise the rights of Noteholders only indirectly through
DTC and its Participants. Likewise, Security Owners having a beneficial
interest in Certificates will not be recognized by the related Trustee as
Certificateholders as such term is used in each related Owner Trust Agreement
or Grantor Trust Pooling and Servicing Agreement, as the case may be, and such
Security Owners will be permitted to exercise the rights of Certificateholders
only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (collectively, the "Rules"), DTC is required to make book-entry
transfers of securities among Participants on whose behalf it acts with respect
to the securities and to receive and transmit distributions of principal of,
and interest on, the Notes and distributions in respect of interest and
certificate balance on the Certificates. Participants and Indirect Participants
with which Security Owners have accounts with respect to the securities
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective Security Owners. Accordingly,
although Security Owners will not possess securities, the Rules provide a
mechanism by which Participants will receive payments and will be able to
transfer Security Owners' interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of Security
Owners to pledge securities to persons or entities that do not participate in
the DTC system, or to otherwise act with respect to such securities, may be
limited due to the lack of a physical certificate for such securities.
DTC has advised the Seller that it will take any action permitted to be
taken by a Noteholder under the related Indenture or a Certificateholder under
the related Owner Trust Agreement or Grantor Trust Pooling and Servicing
Agreement, as applicable, only at the direction of one or more Participants to
whose accounts with DTC the Notes or Certificates are credited. DTC may take
conflicting actions with respect to other undivided interests to the extent
that such actions are taken on behalf of Participants whose holdings include
such undivided interests.
All references in this prospectus to actions by Securityholders refer to
actions taken by DTC upon instructions from the Participants and all references
in this prospectus to distributions, notices, reports and statements to
Securityholders refer to distributions, notices, reports and statements to DTC
or Cede, as the case may be, for distribution to Security Owners in accordance
with DTC's procedures with respect thereto. See "Definitive Securities" below.
Except as required by law, neither the Seller, the Trustee nor the Indenture
Trustee (as applicable) will have any liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of
the securities of any series held by Cede, as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
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Definitive Securities
Unless otherwise specified in the related prospectus supplement, securities
(other than securities held by the Seller) will be issued in fully registered,
certificated form ("Definitive Notes" or "Definitive Certificates," as the case
may be, and, collectively, the "Definitive Securities") to Security Owners, or
their respective nominees, rather than to DTC or its nominee, only if
. the Administrator, in the case of an Owner Trust, or the Seller, in the
case of a Grantor Trust, advises the appropriate Trustee or the
Indenture Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as depository with respect to
such securities and the Administrator or the Seller, as applicable, is
unable to locate a qualified successor,
. the Administrator or the Seller, as applicable, at its option, advises
the appropriate Trustee or the Indenture Trustee in writing that it
elects to terminate the book-entry system through DTC or
. after the occurrence of an Event of Default or a Servicer Default,
holders representing at least a majority of the outstanding principal
amount of such securities (or, in the case of the Class A Certificates,
holders representing in the aggregate not less than 51% of the voting
interest of the Class A Certificates of such series) advise the
Indenture Trustee, Owner Trustee or Grantor Trustee, as applicable, and
DTC through Participants in writing that the continuation of a book-
entry system through DTC (or a successor thereto) is no longer in the
best interest of the holders of such securities.
The "voting interests" of the Class A Certificates will be allocated among
the holders of Class A Certificates in accordance with the Class A Certificate
Balance represented thereby, except that in certain circumstances any Class A
Certificates held by the Seller, the Servicer or any of their respective
affiliates shall be excluded from such determination.
Upon the occurrence of any event described in the immediately preceding
paragraph, the appropriate Trustee or the Indenture Trustee will be required to
notify DTC of the availability of Definitive Securities. Upon surrender by DTC
of the definitive certificates representing the securities and receipt of
instructions for re-registration, the appropriate Trustee or the Indenture
Trustee will reissue such securities as Definitive Securities to holders
thereof.
Distributions on or in respect of the Definitive Securities will be made in
accordance with the procedures set forth in the related Indenture, the related
Owner Trust Agreement or the related Grantor Trust Pooling and Servicing
Agreement, as applicable, directly to holders of Definitive Securities in whose
names the Definitive Securities were registered at the close of business on the
day before the related Distribution Date or, with respect to Class A
Certificates, the last day of the preceding Monthly Period. Such distributions
will be made by check mailed to the address of such holder as it appears on the
register maintained by the Indenture Trustee or the appropriate Trustee, as
applicable. The final payment on any Definitive Security, however, will be made
only upon presentation and surrender of such Definitive Security at the office
or agency specified in the notice of final distribution to the holders of such
class.
Definitive Securities will be transferable and exchangeable at the offices
of the appropriate trustee or of a registrar named in a notice delivered to
holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the appropriate trustee or the
Indenture Trustee may require payment of a sum sufficient to cover any tax or
other governmental charge imposed.
Reports to Securityholders
On or before each Distribution Date, the Servicer will prepare and provide
to the Indenture Trustee a statement to be delivered to the related Noteholders
on such Distribution Date and, on or prior to each Distribution Date, the
Servicer will prepare and provide to the Trustee a statement to be
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delivered to the related Certificateholders (other than Class B
Certificateholders). Each such statement to be delivered to the Noteholders
will include the following information as to the Notes with respect to such
Distribution Date or the period since the previous Distribution Date, and each
such statement to be delivered to Certificateholders will include the
following information as to the Certificates for the same period:
Information Applicable to all Trusts:
(1) the amount of the distribution allocable to interest on or with
respect to each class of securities;
(2) the Aggregate Receivables Balance as of the close of business on the
last day of such Monthly Period;
(3) the amount of the Total Servicing Fee paid to the Servicer with
respect to the related Monthly Period;
(4) the amount of Aggregate Losses for the related Monthly Period;
(5) the Delinquency Percentage for the related Monthly Period; and
(6) the sum of all Administrative Purchase Payments and all Warranty
Payments made for the related Monthly Period.
Information Applicable to Owner Trusts:
(1) the amount of the distribution allocable to principal of each class
of the Notes and to the certificate balance of each class of Owner
Certificates;
(2) the aggregate outstanding principal balance and the Note Pool Factor
for each class of Notes, and the certificate balance and the Owner Trust
Certificate Pool Factor for each class of Owner Certificates, each after
giving effect to all payments reported under (1) above on such date;
(3) the amount paid to the Servicer or distributed to Noteholders and
Owner Certificateholders from amounts on deposit in the Reserve Account or
from other forms of credit enhancement;
(4) the Interest Rate or Pass Through Rate for the next period for any
class of Notes or Owner Certificates with variable or adjustable rates;
(5) the balance of any Reserve Account on such date, after giving effect
to distributions or deposits made on such date, and the change in such
balance from that of the prior Distribution Date;
(6) for each such date during the Funding Period, the remaining Pre-
Funded Amount; and
(7) for the first such date that is on or immediately following the end
of the Funding Period, the amount of any remaining Pre-Funded Amount that
has not been used to fund the purchase of Subsequent Receivables and is
being passed through as payments of principal on the securities.
Information Applicable to Grantor Trusts:
(1) the amount of the distribution allocable to the certificate balance;
(2) the Class A Certificate Balance and the Class A Certificate Pool
Factor for the Class A Certificates, each after giving effect to all
payments reported under (1) above on such date;
(3) the amount of the Class A Interest Carryover Shortfall and Class A
Principal Carryover Shortfall on such Distribution Date and the change in
such amounts from those of the prior Distribution Date;
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(4) the Class A Percentage of the Total Servicing Fee;
(5) the balance of any Subordination Spread Account on such Distribution
Date, after giving effect to distributions or deposits made on such date,
and the change in such balance from that of the prior Distribution Date;
and
(6) the amount otherwise distributable to the Class B Certificateholders
that is distributed to Class A Certificateholders on such Distribution
Date.
After the end of each calendar year during the term of each Trust, the
Indenture Trustee, the Owner Trustee or the Grantor Trustee will mail to each
holder of a class of securities who at any time during such calendar year has
been a Securityholder, and received any payment thereon, a statement containing
certain information for the purposes of such Securityholder's preparation of
federal income tax returns for the relevant taxable year. See "Certain Federal
Income Tax Consequences."
"Aggregate Losses" with respect to a Monthly Period and the related
Distribution Date will equal the sum of (1) the aggregate of the Receivable
Balances of all Receivables in a Trust newly designated during such Monthly
Period as Liquidating Receivables and (2) the aggregate principal portion of
Scheduled Payments due but not received with respect to all such Receivables
prior to the date any such Receivable was designated a Liquidating Receivable
minus Liquidation Proceeds collected during such Monthly Period with respect to
all Liquidating Receivables.
The "Delinquency Percentage" with respect to a Monthly Period will equal the
aggregate Remaining Gross Balance of all outstanding Receivables which have
installments past due 61 days or more as of the last day of such Monthly
Period, determined in accordance with the Servicer's normal practices,
expressed as a percentage of the aggregate Remaining Gross Balance of
outstanding Receivables on the last day of such Monthly Period.
With respect to any Trust, the "Remaining Gross Balance" as of the last day
of any Monthly Period, with respect to any Receivable in such Trust (other than
a Liquidating Receivable), will be equal to:
. the Initial Gross Receivable Balance
minus
. the sum of the following:
. all payments received by the Servicer from or for the account of the
Obligor which are not late fees, prepayment charges or certain other
similar fees or charges,
. any Warranty Payment or Administrative Purchase Payment with respect
to such Receivable,
. any Prepayments applied to reduce the Initial Gross Receivable
Balance of any such Receivable,
. proceeds received by the Servicer from any insurance policies with
respect to such Receivable and
. for any Receivable not classified by the Servicer as a "finance
charge-included contract," the portion of the payments specified in
the preceding clauses allocable in accordance with the actuarial
method to finance charges;
provided, however, that the Remaining Gross Balance of any Receivable that has
been designated a Liquidating Receivable during the related Monthly Period
shall equal zero.
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"Liquidation Proceeds" are proceeds of the liquidation of any Receivable (a
"Liquidating Receivable") as to which (1) the Servicer (a) has reasonably
determined in accordance with its customary servicing procedures that eventual
payment of amounts owing on such Receivable is unlikely, or (b) has repossessed
the Financed Vehicle or Financed Vehicles securing such Receivable or (2) any
related Scheduled Payment is at least 210 days past due.
Unless otherwise provided in the related prospectus supplement and unless
and until Definitive Securities are issued, monthly, quarterly and annual
unaudited reports containing information concerning the Receivables will be
prepared by the Servicer and sent on behalf of each Trust only to Cede, as
nominee for DTC and the registered holder of the securities. Such reports will
not constitute financial statements prepared in accordance with generally
accepted accounting principles. Each Trust will file with the SEC such periodic
reports as are required under the Exchange Act and the rules and regulations of
the SEC thereunder.
THE TRANSFER AND SERVICING AGREEMENTS
General
Except as otherwise specified in the related prospectus supplement, the
following summary describes certain terms of:
(1) the Purchase Agreement applicable to each Trust pursuant to which
the Seller will purchase Receivables from Navistar Financial;
(2) the Owner Trust Pooling and Servicing Agreement pursuant to which
each Owner Trust will acquire the Receivables purchased by the Seller under
the related Purchase Agreement and the Servicer will agree to service such
Receivables;
(3) the Owner Trust Agreement pursuant to which each Owner Trust will be
created and Owner Certificates will be issued;
(4) the Grantor Trust Pooling and Servicing Agreement pursuant to which
(a) each Grantor Trust will be created, (b) such Grantor Trust will acquire
the Receivables purchased by the Seller under the related Purchase
Agreement, (c) the Servicer will agree to service such Receivables and (d)
Grantor Certificates will be issued; and
(5) with respect to each Owner Trust, the Administration Agreement
pursuant to which Navistar Financial will undertake certain administrative
duties with respect to such Owner Trust and the Owner Trustee.
The term "Transfer and Servicing Agreements" means (1) with respect to any
Owner Trust, the Purchase Agreement, the Owner Trust Pooling and Servicing
Agreement, the Owner Trust Agreement, the Indenture and the Administration
Agreement and (2) with respect to any Grantor Trust, the Purchase Agreement and
the Grantor Trust Pooling and Servicing Agreement. Forms of the Transfer and
Servicing Agreements have been filed as exhibits to the registration statement
of which this prospectus forms a part. The Seller will provide a copy of the
Transfer and Servicing Agreements (without exhibits) upon request. This summary
does not purport to be complete and is subject to, and qualified in its
entirety by reference to, all of the provisions of the Transfer and Servicing
Agreements. Where particular provisions or Servicing Agreements are referred
to, the actual provisions are incorporated by reference as part of such
summary.
Sale and Assignment of Receivables
On the closing date specified in the related prospectus supplement (the
"Closing Date"), pursuant to a Purchase Agreement between Navistar Financial
and the Seller (a "Purchase Agreement"), Navistar Financial will sell and
assign to the Seller, without recourse:
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. its entire interest in the related Receivables, including its security
interests in the Financed Vehicles,
. the proceeds of certain insurance policies,
. the proceeds of any dealer recourse with respect to the Receivables,
. the proceeds of International Purchase Obligations with respect to the
Receivables,
. the proceeds of any Guaranties and the benefit of any lease assignments
with respect to the Financed Vehicles.
On the Closing Date, pursuant to the applicable Pooling and Servicing
Agreement, the Seller will transfer and assign to the Owner Trust or the
Grantor Trustee, as applicable, without recourse, its entire interest in the
assets it acquired pursuant to the Purchase Agreement and the Custodian
Agreement.
Each Receivable with respect to a Trust will be identified in a schedule
which will be on file at the locations set forth in an exhibit to the
applicable Pooling and Servicing Agreement (a "Schedule of Receivables"). The
Indenture Trustee, Owner Trustee or Grantor Trustee, as applicable,
concurrently with such transfer and assignment, will execute, authenticate and
deliver the related securities to the Seller in exchange for such Receivables.
The Seller will sell the Certificates (other than those Certificates it is
retaining) and (if applicable) the Notes to the respective underwriters set
forth in the related prospectus supplement. See "Plan of Distribution." Unless
otherwise provided in the related prospectus supplement, the Seller will apply
the net proceeds received from the sale of the securities to fund the Reserve
Account or Subordination Spread Account and, to the extent specified in the
related prospectus supplement, to the deposit of the Pre-Funded Amount into the
Pre-Funding Account, and then to the purchase of the related Receivables from
Navistar Financial. The remainder of the purchase price for the Receivables
will be funded by an intercompany loan from Navistar Financial. The related
prospectus supplement for a given Owner Trust will specify whether and under
what terms Subsequent Receivables and Related Property will be acquired by the
Seller from Navistar Financial and transferred by the Seller to the Owner Trust
from time to time during the Funding Period on the dates specified as transfer
dates in the related prospectus supplement (each, a "Subsequent Transfer
Date").
In each Purchase Agreement, Navistar Financial will represent and warrant to
the Seller, among other things, that:
. the information provided in the related Schedule of Receivables is
correct in all material respects;
. the Obligor on each Receivable is required to maintain physical damage
insurance covering the Financed Vehicle in accordance with Navistar
Financial's normal requirements, except for certain fleet customers
which Navistar Financial, in accordance with its customary procedures,
permits to be self-insured;
. as of the related Closing Date or the applicable Subsequent Transfer
Date, if any, the related Receivables are free and clear of all security
interests, liens, charges and encumbrances (except from security
interests, liens, charges or encumbrances which may arise from
accessions to the Financed Vehicles not financed by Navistar Financial)
and no offsets, defenses or counterclaims have been asserted or
threatened;
. as of the Closing Date or the applicable Subsequent Transfer Date, if
any, each of such Receivables is or will be secured by a first perfected
security interest in favor of Navistar Financial in the Financed Vehicle
or Financed Vehicles related thereto; and
. each related Receivable, at the time it was originated complied, and as
of the related Closing Date or the applicable Subsequent Transfer Date,
if any, complies, in all material respects with applicable federal and
state laws.
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In each applicable Pooling and Servicing Agreement, the Seller will assign the
representations and warranties of Navistar Financial, as set forth above, to
the Owner Trust or the Grantor Trustee, as applicable, and will represent and
warrant to the Owner Trust or the Grantor Trustee, as applicable, that the
Seller has taken no action which would cause such representations and
warranties of Navistar Financial to be false in any material respect as of the
Closing Date or the applicable Subsequent Transfer Date, if any.
As of the last day of the second (or, if the Seller elects, the first) month
following the discovery by the Seller, the Servicer, the Trustee or (if
applicable) the Indenture Trustee of a breach of any representation or warranty
of the Seller or Navistar Financial that materially and adversely affects the
interests of the related Trust or Securityholders in any Receivable, the
Seller, unless the breach is cured, will repurchase such Receivable (a
"Warranty Receivable") from the Trust at a price equal to the sum of:
. all remaining Scheduled Payments on such Receivable,
plus
. all past due Scheduled Payments with respect to which a Monthly Advance
has not been made,
. all outstanding Monthly Advances on such Receivable and
. an amount equal to any reimbursements of outstanding Monthly Advances
made to the Servicer with respect to such Receivable from the proceeds
of other Receivables,
minus
. the rebate, calculated in accordance with the actuarial method, that
would be payable to the Obligor on such Receivable were the Obligor to
prepay such Receivable in full on such day and
. any proceeds of the liquidation of such Receivable previously received
(to the extent applied to reduce the Receivable Balance of such
Receivable) (the "Warranty Payment").
The Seller or Navistar Financial, as applicable, will be entitled to receive
any amounts held by the Servicer with respect to such Warranty Receivable. The
repurchase obligation constitutes the sole remedy available to the
Securityholders, the Trustee, and, as applicable, the Indenture Trustee for any
such uncured breach.
In each applicable Pooling and Servicing Agreement, the Servicer will
covenant that
. except as contemplated in such Agreement, the Servicer will not release
any Financed Vehicle from the security interest,
. the Servicer will do nothing to impair the rights of the
Securityholders, the Trustee, or, as applicable, the Indenture Trustee
in the related Receivables and
. the Servicer will not amend any such Receivable such that the Initial
Receivable Balance, the APR or the total number of Scheduled Payments is
altered or such that the final scheduled payment on such Receivable will
be due later than the last day of the Monthly Period preceding the
latest final scheduled distribution date on any securities or such other
date as is set forth in the related prospectus supplement.
As of the last day of the second (or, if the Servicer so elects, the first)
month following the discovery by the Servicer, the Trustee or (if applicable)
the Indenture Trustee of a breach of any covenant that materially and adversely
affects any Receivable and unless such breach is cured in all material
respects, the Servicer will, with respect to such Receivable (an
"Administrative Receivable"):
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. release all claims for reimbursement of Monthly Advances made on such
Administrative Receivable, and
. purchase such Administrative Receivable from the Trustee, as applicable,
at a price equal to the sum of all remaining Scheduled Payments on such
Administrative Receivable,
plus
. an amount equal to any reimbursements of outstanding Monthly Advances
made to the Servicer with respect to such Administrative Receivable from
the proceeds of other Receivables and
. all past due Scheduled Payments with respect to which a Monthly Advance
has not been made,
minus
. the rebate, calculated in accordance with the actuarial method, that
would be payable to the Obligor on such Administrative Receivable were
the Obligor to prepay such Administrative Receivable in full on such day
(the "Administrative Purchase Payment").
In addition, the Servicer will be entitled to retain any amounts held by the
Servicer with respect to such Administrative Receivable. This repurchase
obligation constitutes the sole remedy available to the Securityholders, the
Trustee and, as applicable, the Indenture Trustee for any such uncured breach.
Pursuant to each applicable Pooling and Servicing Agreement, the related
Trust or Trustee will designate the Servicer as custodian to maintain
possession, as the Owner Trust's or Grantor Trustee's agent, as applicable, of
the related Retail Notes and any other documents relating to the Receivables.
To assure uniform quality in servicing both the Receivables and the Servicer's
own portfolio of receivables, as well as to facilitate servicing and save
administrative costs, the documents will not be physically segregated from
other similar documents that are in the Servicer's possession or otherwise
stamped or marked to reflect the transfer to the related Trust so long as the
Servicer is the custodian of such documents. However, Uniform Commercial Code
("UCC") financing statements reflecting the sale and assignment of such
Receivables to the Owner Trust or Grantor Trustee, as applicable, will be
filed, and the Servicer's accounting records and computer files will reflect
such sale and assignment. Because such Receivables will remain in the
Servicer's possession and will not be stamped or otherwise marked to reflect
the assignment to the Owner Trust or Grantor Trustee, as applicable, if a
subsequent purchaser takes physical possession of the Receivables without
knowledge of the assignment, the Owner Trust's or Grantor Trustee's interests
in such Receivables could be defeated.
Accounts
With respect to each Trust, the Servicer will establish and maintain with
the Indenture Trustee or the Grantor Trustee, as applicable, one or more
accounts, (1) in the name of the Indenture Trustee on behalf of the related
Securityholders in the case of an Owner Trust, and (2) in the name of the
Grantor Trustee on behalf of the Grantor Certificateholders in the case of a
Grantor Trust, into which all payments made on or with respect to the related
Receivables will be deposited (a "Collection Account"). With respect to each
Owner Trust, the Servicer will also establish and maintain for each series (1)
an account, in the name of the Indenture Trustee on behalf of the related
Noteholders, in which amounts released from the Collection Account and any Pre-
Funding Account or Reserve Account or other credit enhancement for payment to
such Noteholders will be deposited and from which all distributions to such
Noteholders will be made (the "Note Distribution Account"), and (2)
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an account, in the name of the Owner Trustee on behalf of the related Owner
Certificateholders, in which amounts released from the Collection Account and
any Pre-Funding Account or Reserve Account or other credit enhancement for
distribution to such Owner Certificateholders will be deposited and from which
all distributions to such Certificateholders will be made (a "Certificate
Distribution Account"). With respect to each Grantor Trust, the Servicer will
also establish in the name of the Grantor Trustee on behalf of the Grantor
Certificateholders an account, in the name of the Grantor Trustee on behalf of
the related Grantor Certificateholders, in which amounts released from the
Collection Account and any Subordinated Spread Account or other credit
enhancement for payment to such Grantor Certificateholders will be deposited
and from which all distributions to such Certificateholders will be made (also,
a "Certificate Distribution Account").
For any series of securities, funds in the Collection Account, the Note
Distribution Account, any Pre-Funding Account, any Reserve Account and any
Subordination Spread Account and other accounts identified as such in the
related prospectus supplement (collectively, the "Designated Accounts") will be
invested as provided in the applicable Pooling and Servicing Agreement in
Eligible Investments. "Eligible Investments" are generally limited to
investments acceptable to the rating agencies rating the related securities at
the request of the Seller (the "Rating Agencies") as being consistent with the
rating of such securities. Eligible Investments generally are limited to
obligations or securities that mature before the next Distribution Date or, in
the case of the Note Distribution Account, the next Distribution Date. To the
extent permitted by the Rating Agencies, funds in any Reserve Account may be
invested in Notes of the related series so long as those Notes will not mature
prior to the date of the next distribution with respect to the Notes. Except as
otherwise specified in the related prospectus supplement, such Notes will not
be sold to meet any shortfalls unless they are sold at a price equal to or
greater than the unpaid principal balance thereof if, following such sale, the
amount on deposit in any Reserve Account would be less than the Specified
Reserve Account Balance. Thus, the amount of cash in any Reserve Account at any
time may be less than the balance of the Reserve Account. If the amount
required to be withdrawn from any Reserve Account to cover shortfalls in
collections on the Receivables exceeds the amount of cash in the Reserve
Account, a temporary shortfall in the amounts distributed to the Noteholders
and Owner Certificateholders could result, which could result in an increase in
the average life of the Owner Securities. Except as otherwise specified in the
related prospectus supplement, investment earnings on funds deposited in the
Designated Accounts, net of losses and investment expenses (collectively,
"Investment Earnings"), will be payable to the Seller.
The Designated Accounts will be maintained as Eligible Deposit Accounts;
provided, however, that
. each Collection Account will be maintained with the Indenture Trustee or
the Grantor Trustee, as applicable, so long as
. the Indenture Trustee's or Grantor Trustee's short-term unsecured
debt obligations have a rating of P-1 by Moody's Investors Service,
Inc. ("Moody's") and a rating of A-1+ by Standard & Poor's Ratings
Services ("S&P")(the "Required Deposit Rating") or
. such accounts are maintained in the trust department of the
Indenture Trustee or Grantor Trustee and
. unless otherwise provided in the related prospectus supplement, each
Collection Account, each Note Distribution Account and each Certificate
Distribution Account, as applicable, will initially be maintained in the
trust department of the related Indenture Trustee or Grantor Trustee, as
applicable.
If the Indenture Trustee's or Grantor Trustee's debt obligations do not have
the Required Deposit Rating and such accounts are not maintained in their
respective trust departments, the Servicer will,
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with the Indenture Trustee or Grantor Trustee's assistance as necessary, cause
the applicable Collection Account to be moved to a bank whose short-term
unsecured debt obligations have the Required Deposit Rating.
"Eligible Deposit Account" means either
. a segregated account with an Eligible Institution or
. a segregated trust account with the corporate trust department of a
depository institution organized under the laws of the United States of
America or any one of the states thereof or the District of Columbia (or
any domestic branch of a foreign bank), having corporate trust powers
and acting as trustee for funds deposited in such account, so long as
any of the securities of such depository institution have a credit
rating from each Rating Agency in one of its generic rating categories
which signifies investment grade.
"Eligible Institution" means, with respect to a Trust,
. the corporate trust department of the related Indenture Trustee or the
Grantor Trustee, as applicable, or
. a depository institution organized under the laws of the United States
of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), (1) which has either (A) a
long-term unsecured debt rating acceptable to the Rating Agencies or (B)
a short-term unsecured debt rating or certificate of deposit rating
acceptable to the Rating Agencies and (2) whose deposits are insured by
the FDIC.
Any other accounts to be established with respect to a Trust will be
described in the related prospectus supplement.
Servicing Compensation and Payment of Expenses
With respect to each Trust, unless otherwise provided in the related
prospectus supplement, on each Distribution Date, the Servicer will receive a
servicing fee (the "Basic Servicing Fee") for the preceding Monthly Period
equal to one-twelfth of the Basic Servicing Fee Rate specified in the related
prospectus supplement multiplied by the Aggregate Receivables Balance of all
Receivables held by such Trust as of the first day of such Monthly Period. On
each Distribution Date, the Servicer will be paid the Basic Servicing Fee and
any unpaid Basic Servicing Fees from all prior Distribution Dates
(collectively, the "Total Servicing Fee") to the extent of funds available
therefor. In addition, unless otherwise provided in the related prospectus
supplement, with respect to each Trust, the Servicer will be entitled to
receive any late fees, prepayment charges or certain similar fees and charges
collected during a Monthly Period (the "Supplemental Servicing Fee"). A
"Monthly Period" with respect to a Distribution Date will be the calendar month
preceding the month in which such Distribution Date occurs.
The foregoing amounts are intended to compensate the Servicer for performing
the functions of a third party servicer of truck, bus and trailer receivables
as an agent for their beneficial owner, including collecting and posting all
payments, responding to inquiries of Obligors on the Receivables, investigating
delinquencies, sending payment coupons to Obligors, reporting tax information
to Obligors, paying costs of collections and policing the collateral. Such
amounts will also compensate the Servicer for its services as the Receivables
Pool administrator, including making Monthly Advances, accounting for
collections, furnishing monthly and annual statements to the Trustee and the
Indenture Trustee with respect to distributions and generating federal income
tax information for the Trust and the Securityholders. Such amounts also will
reimburse the Servicer for certain taxes, the fees of the Trustee and the
Indenture Trustee, accounting fees, outside auditor fees, data processing costs
and other costs incurred in connection with administering the related
Receivables Pool. The Servicer will not be required to pay Federal, state and
local income and franchise taxes, if any, of the Owner Trust or any
Securityholder.
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Servicing Procedures
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by any Trust and will, consistent with the
related Pooling and Servicing Agreement, follow such collection procedures as
it follows with respect to its own Retail Notes. See "Certain Legal Aspects of
the Receivables." The Servicer is authorized to grant certain rebates,
adjustments or extensions with respect to a Receivable. However, if any such
modification of a Receivable alters the Initial Receivable Balance, the APR or
the total number of Scheduled Payments, the Servicer will be obligated to
purchase such Receivable.
If the Servicer determines that eventual payment in full of a Receivable is
unlikely, the Servicer will follow its normal practices and procedures to
realize upon the Receivable, including the repossession and disposition of the
Financed Vehicle securing the Receivable at a public or private sale, or the
taking of any other action permitted by applicable law. The Servicer will be
entitled to receive an amount specified in the applicable Pooling and Servicing
Agreement as an allowance for amounts charged to the account of the Obligor, in
keeping with the Servicer's customary procedures, for repossession,
refurbishing and disposition of any Financed Vehicle and other out-of-pocket
costs related to the liquidation (collectively, "Liquidation Expenses").
Collections
The Servicer will deposit all payments received from Obligors, all proceeds
of insurance policies, Guaranties, dealer recourse and International Purchase
Obligations, and all Liquidation Proceeds collected during each Monthly Period
with respect to the Receivables held by any Trust into the appropriate
Collection Account not later than two Business Days after receipt. However, if:
. the Servicer satisfies the requirements for monthly remittances of such
collections established by the rating agencies initially rating the
securities, and upon satisfaction of such requirements, the rating
agencies that initially rated the securities reaffirm the rating of the
securities at the level at which they would be rated if collections were
remitted within two Business Days,
. the short-term unsecured debt of the Servicer is rated at least A-1+ by
S&P and P-1 by Moody's or
. a standby letter of credit has been issued by an Eligible Institution
which, as of each date during the period that the Servicer is making
monthly remittances of collections, has an undrawn amount at least equal
to 150% of all Scheduled Payments due for the latest Monthly Period
ended prior to the next succeeding Distribution Date (and the aggregate
amount of unremitted collections does not at any time exceed 90% of the
undrawn amount of such letter of credit),
then, so long as Navistar Financial is the Servicer and, provided that no Event
of Default exists, the Servicer will not be required to deposit such amounts
into the appropriate Collection Account until the Business Day preceding the
Distribution Date. Pending deposit into the Collection Account, collections may
be employed by the Servicer at its own risk and for its own benefit and will
not be segregated from its own funds.
Collections on a Receivable held by any Trust made during a Monthly Period
(including Warranty Payments and Administrative Purchase Payments) which are
not late fees, prepayment charges or certain other similar fees or charges will
be applied first to any outstanding Monthly Advances made by the Servicer with
respect to such Receivable, and then to the Scheduled Payment. Collections on a
Receivable remaining after such applications will be deemed a "Prepayment."
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A "Full Prepayment" is a Prepayment of the entire Receivable or of the
entire principal balance outstanding with respect to any Financed Vehicle
related thereto. Upon a Full Prepayment, the Obligor is entitled to a "rebate"
of the unearned finance charges contained in the remaining Scheduled Payments,
which will not accrue due to the prepayment.
A "Partial Prepayment" is a Prepayment other than a Full Prepayment the
amount of which is equal to one or more Scheduled Payments and which results in
a rebate to the Obligor of unearned finance charges in accordance with the
Servicer's customary procedures.
A Partial Prepayment is applied to reduce the remaining Scheduled Payments
of the related Receivable in inverse order of maturity, beginning with the
final Scheduled Payment. The Servicer's general practice with respect to a Full
Prepayment is to require payment by the Obligor of accrued and unpaid finance
charges through the date on which such Full Prepayment is received and to
rebate the remaining finance charges. The Servicer will not reimburse any Trust
for the difference between such accrued and unpaid finance charges and the
amount of finance charges that would have been payable under the actuarial
method if such Full Prepayment were made at the end of the billing month under
the related Receivable.
Monthly Advances
Unless otherwise provided in the related prospectus supplement, if the full
Scheduled Payment due on any Receivable is not received by the end of the month
in which it is due, the Servicer will be obligated to make an advance (a
"Monthly Advance") to the related Trust equal to the amount of such shortfall
to the extent that the Servicer, in its sole discretion, expects to recoup such
Monthly Advance from subsequent collections or recoveries on such Receivable.
The Servicer will be reimbursed for any Monthly Advances from subsequent
payments or collections relating to such Receivables. Upon the determination by
the Servicer that reimbursement from the preceding sources is unlikely, the
Servicer will be entitled to recoup its Monthly Advances from collections on
other Receivables in the Trust.
Distributions
General. With respect to each Trust, beginning on the Distribution Date
specified in the related prospectus supplement, distributions of principal and
interest and distributions in respect of certificate balance and interest on
each class of securities entitled thereto will be made by the Indenture Trustee
or the Trustee, as applicable, to the Securityholders. The timing, calculation,
allocation, order, source, priorities of and requirements (1) for all payments
and distributions to each class of Owner Securityholders and (2) for all
distributions on the Class A Certificates will be made as set forth in this
prospectus, in the related prospectus supplement and in the related Pooling and
Servicing Agreement.
Distributions on Owner Securities. With respect to each Owner Trust, on the
day preceding each Distribution Date, collections on the Receivables will be
transferred from the Collection Account to the Note Distribution Account and
the Certificate Distribution Account for distribution to Owner Securityholders
on the Distribution Date. Various forms of credit enhancement may be available
to cover any shortfalls in the amount available for distribution on such date
to the extent specified in the related prospectus supplement. Distributions in
respect of principal and certificate balance of Owner Certificates will be
subordinate to distributions in respect of interest, and distributions in
respect of the Owner Certificates will be subordinate to payments in respect of
the Notes, as more fully described in the related prospectus supplement.
Distributions on Grantor Certificates. With respect to each series of
Grantor Certificates, on or before each Distribution Date, the Servicer or the
Grantor Trustee, as the case may be, will transfer
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the portion of collections on the related Receivables which constitute all or a
portion of Scheduled Payments for the related Monthly Period and all
Prepayments to the related Certificate Distribution Account. The Grantor
Trustee shall make distributions to the Grantor Certificateholders out of the
amounts on deposit in the Certificate Distribution Account. The amount to be
distributed to the Grantor Certificateholders shall be determined in the manner
described below.
With respect to any series of Grantor Certificates, the "Class A
Distributable Amount" with respect to a Distribution Date will equal the sum of
(1) the "Class A Principal Distributable Amount," consisting of the Class A
Percentage of the following items, each computed in accordance with the
actuarial method: (a) the principal portion of all Scheduled Payments due
during the related Monthly Period on Receivables held by the related Grantor
Trust (other than Liquidating Receivables), (b) the principal portion of all
Prepayments received during the related Monthly Period (except to the extent
included in (a) above) and (c) the Receivable Balance of each Receivable that
the Servicer elected or became obligated to purchase, the Seller became
obligated to repurchase or that became a Liquidating Receivable during the
related Monthly Period (except to the extent included in (a) or (b) above), and
(2) the "Class A Interest Distributable Amount," consisting of one month's
interest at the Pass Through Rate on the Class A Certificate Balance as of the
last day of the related Monthly Period.
The "Class A Certificate Balance" with respect to any series of Grantor
Certificates will equal, initially, the Class A Percentage of the Initial
Aggregate Receivables Balance and, thereafter, except as provided in the
related Pooling and Servicing Agreement, will equal such initial Class A
Certificate Balance reduced by all distributions of Class A Principal
Distributable Amounts actually made to the Class A Certificateholders.
With respect to any series of Grantor Certificates, the "Class B
Distributable Amount" with respect to a Distribution Date will be an amount
equal to the sum of (1) the "Class B Principal Distributable Amount,"
consisting of the Class B Percentage of the amounts set forth under (1) in the
second preceding paragraph with respect to the Class A Principal Distributable
Amount, and (2) the "Class B Interest Distributable Amount," consisting of (a)
one month's interest at the Pass Through Rate on the Class B Certificate
Balance as of the last day of the related Monthly Period and (b) all Prepayment
Surplus with respect to the Receivables.
The "Class B Certificate Balance" with respect to any series of Grantor
Certificates will equal, initially, the Class B Percentage of the Initial
Aggregate Receivables Balance and, thereafter, will equal the initial Class B
Certificate Balance, reduced by (1) all distributions of Class B Principal
Distributable Amounts actually made on or prior to such date to the holders of
the Class B Certificates or deposited on or prior to such date in the
Subordination Spread Account, not including the Subordination Initial Deposit,
(2) the current Class A Principal Carryover Shortfall and (3) any shortfalls
from prior Distribution Dates in principal distributions to the holders of the
Class B Certificate (the "Class B Certificateholders" and, together with the
Class A Certificate holders, the "Grantor Certificateholders").
Before each Distribution Date, the Servicer will calculate the amount to be
distributed to the Class A Certificateholders. The Class A Certificateholders
will receive on each Distribution Date, to the extent of available funds, an
amount equal to the sum of the Class A Distributable Amount and any outstanding
Class A Interest Carryover Shortfall (plus, to the extent permitted by law, one
month's interest on such Class A Interest Carryover Shortfall at the applicable
Pass Through Rate from such preceding Distribution Date to the current
Distribution Date) and Class A Principal Carryover Shortfall (each as defined
below). Such sum shall be paid from the Class A Percentage of the Collected
Interest (available after payment of the Total Servicing Fee and any unpaid
Total Servicing Fees with respect to prior Monthly Periods) and the Class A
Percentage of the Collected Principal. On each Distribution Date on which such
sum exceeds the related Class A Percentage of
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the Collected Interest (after payment of the Total Servicing Fee and any unpaid
Total Servicing Fees with respect to prior Monthly Periods), the Class A
Certificateholders will be entitled to receive such excess: first, from the
related Class B Percentage of the Collected Interest, second, if such amounts
are insufficient, from amounts on deposit in the related Subordination Spread
Account, and third, if such amounts are insufficient, from the Class B
Percentage of the Collected Principal.
With respect to any series of Grantor Certificates, the "Class A Interest
Carryover Shortfall" as of the close of any Distribution Date means the excess
of (a) the Class A Interest Distributable Amount for such Distribution Date
plus any outstanding Class A Interest Carryover Shortfall from the preceding
Distribution Date, plus one month's interest on such outstanding Class A
Interest Carryover Shortfall, to the extent permitted by law, at the applicable
Pass Through Rate from such preceding Distribution Date through the current
Distribution Date, over (b) the amount of interest that was actually deposited
in the Certificate Distribution Account on such current Distribution Date in
respect of interest on the Class A Certificates.
With respect to any series of Grantor Certificates, on each Distribution
Date, the sum of the Class A Principal Distributable Amount and any outstanding
Class A Principal Carryover Shortfall shall be paid from the Class A Percentage
of the Collected Principal to the extent remaining after application as
described in the preceding paragraph. On each Distribution Date on which the
sum of the Class A Principal Distributable Amount and any outstanding Class A
Principal Carryover Shortfall from the preceding Distribution Date exceeds the
Class A Percentage of the Collected Principal remaining after application as
described in the preceding paragraph on such Distribution Date, the Class A
Certificateholders will be entitled to receive such excess: first, to the
extent remaining after application as described in the preceding paragraph,
from the related Class B Percentage of the Collected Principal, second, if such
amounts are insufficient, from amounts on deposit in the related Subordination
Spread Account, and third, if such amounts are insufficient, from any Collected
Interest remaining after application as described in the preceding paragraph.
With respect to any series of Grantor Certificates, the "Class A Principal
Carryover Shortfall" as of the close of any Distribution Date means the excess
of (a) the Class A Principal Distributable Amount plus any outstanding Class A
Principal Carryover Shortfall from the preceding Distribution Date over (b) the
amount of principal that was actually deposited in the Certificate Distribution
Account on such current Distribution Date in respect of certificate balance.
The holders of the Class B Certificates will be entitled to receive on any
Distribution Date an amount equal to the sum of the Class B Interest
Distributable Amount and the Class B Principal Distributable Amount (and any
shortfalls from prior Distribution Dates in payments to the Class B
Certificateholders), after giving effect to (1) amounts required to pay the
Total Servicing Fee payable to the Servicer on such Distribution Date, and (2)
any amounts required to be distributed to the holders of Class A Certificates
pursuant to the subordination of the rights of the holders of Class B
Certificates.
Determination of Available Amount. The "Available Amount" for each
Distribution Date will be the sum of the Collected Interest and the Collected
Principal.
The "Collected Interest" with respect to each series of securities for each
Distribution Date will be the sum, with respect to the related Monthly Period
and in each case computed in accordance with the actuarial method, of: (1) that
portion of all collections on the Receivables held by the related Trust (other
than Liquidating Receivables) allocable to interest or to Prepayment Surplus,
(2) all Liquidation Proceeds to the extent attributable to interest in
accordance with the Servicer's customary procedures, (3) that portion of all
Monthly Advances made by the Servicer allocable to interest due on the
Receivables and (4) the Warranty Payment, the Administrative Purchase Payment
or the Optional Purchase Proceeds of each Receivable that the Seller
repurchased or the Servicer purchased during such related Monthly Period, to
the extent attributable to accrued interest or Prepayment Surplus thereon.
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The "Collected Principal" with respect to each series of securities for each
Distribution Date will be the sum, with respect to the related Monthly Period
and in each case computed in accordance with the actuarial method, of: (1) that
portion of all collections on the Receivables held by the related Trust (other
than Liquidating Receivables) allocable to principal, (2) all Liquidation
Proceeds to the extent attributable to principal in accordance with the
Servicer's customary procedures, (3) that portion of all Monthly Advances made
by the Servicer allocable to principal on the Receivables, (4) the Warranty
Payment, the Administrative Purchase Payment or the Optional Purchase Proceeds
received with respect to each Receivable that the Seller repurchased or the
Servicer purchased during such related Monthly Period to the extent
attributable to principal and (5) the principal portion of all Prepayments.
The Collected Interest and the Collected Principal with respect to each
series of Securities on any Distribution Date will exclude: (1) amounts
received on any Receivable to the extent that the Servicer has previously made
an unreimbursed Monthly Advance and (2) Liquidation Proceeds with respect to a
particular Receivable to the extent of any unreimbursed Monthly Advances and
Liquidation Expenses.
With respect to any series of securities, the "Prepayment Surplus" with
respect to any Distribution Date on which a prepayment is to be applied with
respect to a Receivable, will equal that portion of such prepayment, net of any
rebate to the Obligor of the portion of the Scheduled Payments attributable to
unearned finance charges, which is not attributable to principal in accordance
with the actuarial method.
Credit Enhancement
The amounts and types of credit enhancement arrangements and the provider
thereof, if applicable, with respect to each class of securities will be set
forth in the related prospectus supplement. If and to the extent provided in
the related prospectus supplement, credit enhancement may be in the form of:
. subordination of one or more classes of securities,
. Reserve Accounts,
. Subordination Spread Accounts,
. overcollateralization,
. letters of credit,
. credit or liquidity facilities,
. repurchase obligations,
. third party payments or other support,
. cash deposits,
. or any combination of the above.
If specified in the related prospectus supplement, credit enhancement for a
class or series of securities may cover one or more other classes or series of
securities.
Credit enhancement will increase the likelihood of receipt by the
Securityholders of the full amount of principal or certificate balance, as the
case may be, and interest due thereon and decrease the likelihood of losses.
Unless otherwise specified in the related prospectus supplement, the credit
enhancement for a class of securities will not provide protection against all
risk of loss and
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will not guarantee repayment of the entire principal balance or certificate
balance, as the case may be, and interest thereon. If losses occur which exceed
the amount of or which are not covered by any credit enhancement,
Securityholders will bear their allocable share of deficiencies. In addition,
if a form of credit enhancement covers more than one class or series of
securities, Securityholders of any such class or series will be subject to the
risk that such credit enhancement will be exhausted by the prior claims of
Securityholders of the other classes or series covered by the credit
enhancement.
Owner Trust: Reserve Account. If so provided in the related prospectus
supplement, with respect to each Owner Trust, pursuant to the Owner Trust
Pooling and Servicing Agreement, the Seller will establish for a series an
account, as specified in the related prospectus supplement (the "Reserve
Account"), which will be maintained with the Indenture Trustee.
Unless otherwise provided in the related prospectus supplement, the Reserve
Account will be included in the property of the related Owner Trust and will be
a segregated trust account held by the Indenture Trustee for the benefit of
Securityholders. Unless otherwise provided in the related prospectus
supplement, the Reserve Account will be funded by an initial deposit by the
Seller on the Closing Date of the Reserve Account Initial Deposit (as defined
in the related prospectus supplement). As further described in the related
prospectus supplement, the amount on deposit in the Reserve Account will be
increased on each Distribution Date thereafter until the amount in the Reserve
Account reaches an amount specified in the related prospectus supplement (the
"Specified Reserve Account Balance") by the deposit into the Reserve Account of
the amount of collections on the related Receivables remaining on each such
Distribution Date after the payment of the Total Servicing Fee and the
distributions to the Securityholders required on such date. Amounts on deposit
in the Reserve Account in excess of the Specified Reserve Account Balance will
be distributed as described in the related prospectus supplement. Upon any
release of amounts from the Reserve Account, the Securityholders will not have
any rights in, or claims to, such amounts.
Grantor Trust: Subordination of the Class B Certificates; Subordination
Spread Account. In the case of a Grantor Trust, the rights of the Class B
Certificateholders to receive distributions with respect to the Receivables
will be subordinated to the rights of the Class A Certificateholders in the
event of defaults and delinquencies on the Receivables as provided in the
related Grantor Trust Pooling and Servicing Agreement. The protection afforded
to the Class A Certificateholders will be effected both by the preferential
right of the Class A Certificateholders to receive current distributions with
respect to the Receivables and by the establishment of the Subordination Spread
Account. The Subordination Spread Account will be created with an initial
deposit by the Seller of the Subordination Initial Deposit (as defined in the
related prospectus supplement) and will thereafter be increased by deposit
therein of amounts otherwise distributable to Class B Certificateholders until
the amount in the Subordination Spread Account reaches an amount specified in
the related prospectus supplement (the "Specified Subordination Spread Account
Balance"). Thereafter, amounts otherwise distributable to the Class B
Certificateholders will be deposited in the Subordination Spread Account to the
extent necessary to restore the amount in the Subordination Spread Account to
the Specified Subordination Spread Account Balance. Amounts on deposit in the
Subordination Spread Account in excess of the Specified Subordination Spread
Account Balance will be distributed as described in the related prospectus
supplement. Upon any release of amounts from the Subordination Spread Account,
the Securityholders will not have any rights in, or claims to, such amounts.
Unless otherwise specified in the related prospectus supplement, a
Subordination Spread Account will not be included in the related Grantor Trust
but will be a segregated trust account held by the Grantor Trustee. Amounts
held from time to time in the Subordination Spread Account will continue to be
held for the benefit of holders of the Grantor Certificates. Funds in the
Subordination Spread Account will be invested as provided in the related
Grantor Trust Pooling and Servicing
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Agreement. See "The Transfer and Servicing Agreements--Accounts." The Seller
will be entitled to receive all investment earnings on amounts in the
Subordination Spread Account. Investment income on amounts in the Subordination
Spread Account will not be available for distribution to the holders of the
Certificates or otherwise subject to any claims or rights of the holders of the
Certificates.
If on any Distribution Date the holders of the Class A Certificates do not
receive the sum of the Class A Distributable Amount, the Class A Interest
Carryover Shortfall (including interest thereon) and the Class A Principal
Carryover Shortfall for such Distribution Date (after giving effect to any
amounts applied to such deficiency which were withdrawn from the Subordination
Spread Account and the Class B Distributable Amount), the holders of the Class
B Certificates will not receive any portion of the Available Amount.
The subordination of the Class B Certificates and the Subordination Spread
Account will increase the likelihood of receipt by the Class A
Certificateholders of the full amount of principal and interest on the
Receivables due them and decrease the likelihood of losses. However, in certain
circumstances, the Subordination Spread Account could be depleted and
shortfalls could result.
The amounts available for distribution to Grantor Certificateholders as
described above could be reduced if certain indemnification or reimbursement
payments were required to be made from the Certificate Distribution Account as
described under "The Transfer and Servicing Agreements--Monthly Advances," "--
Certain Matters Regarding the Servicer" and "The Trusts--The Trustees."
Net Deposits
Owner Trusts. For so long as the conditions described above under "--
Collections" are satisfied and the Servicer is not required to remit
collections within two Business Days of receipt thereof, then (1) as an
administrative convenience the Servicer will be permitted to make the deposit
of collections, aggregate Monthly Advances, Warranty Purchase Payments and
Administrative Purchase Payments net of distributions to be made to the
Servicer with respect to the related Monthly Period, provided, however, that
the Servicer will account to the Indenture Trustee, the Owner Trustee and the
Owner Securityholders as if all deposits, distributions and other remittances
were made individually, and (2) the Servicer may retain collections allocable
to the Notes or the Note Distribution Account until the day preceding the
related Distribution Date, and pending deposit into the Collection Account,
such collections may be employed by the Servicer at its own risk and for its
own benefit and will not be segregated from its own funds. On or before each
Distribution Date, the Servicer, the Seller, the Indenture Trustee and the
Owner Trustee will make all distributions, deposits and other remittances with
respect to the Notes or into the Note Distribution Account of an Owner Trust
for the periods since the previous distribution was to have been made.
Grantor Trusts. For so long as the conditions described above under "--
Collections" are satisfied and the Servicer is not required to remit
collections within two Business Days of receipt thereof, as an administrative
convenience the Servicer will be permitted to make the deposit of collections,
aggregate Monthly Advances, Warranty Purchase Payments and Administrative
Purchase Payments, net of distributions to be made to the Servicer with respect
to the related Monthly Period. Similarly, the Seller is entitled to net its
payment obligations to the Grantor Trustee against any amounts distributable on
the Class B Certificates on any Distribution Date. The Servicer, however, will
account to the Grantor Trustee and the Grantor Certificateholders as if all
deposits, distributions and other remittances were made individually.
Statements to Trustees and Trust
Prior to each Distribution Date with respect to each Trust, the Servicer
will provide to the applicable Trustee and (if applicable) the Indenture
Trustee as of the close of business on the last
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day of the preceding Monthly Period a statement setting forth substantially the
same information as is required to be provided in the periodic reports provided
to securityholders described under "Certain Information Regarding the
Securities--Reports to Securityholders."
Evidence as to Compliance
Each related Pooling and Servicing Agreement will provide that a firm of
independent public accountants will furnish to the Owner Trust and the
Indenture Trustee or the Grantor Trustee, as applicable, on or before February
1 of each year, beginning the first February 1 which is at least twelve months
after the related Closing Date, a statement as to compliance by the Servicer
during the twelve months ended the preceding October 31 (or in the case of the
first such certificate, the period from the Closing Date to October 31 of such
year) with certain standards relating to the servicing of the Receivables, the
Servicer's accounting records and computer files with respect thereto and
certain other matters.
Each related Pooling and Servicing Agreement will also provide for delivery
to the Owner Trust and the Indenture Trustee or the Grantor Trustee, as
applicable, on or before February 1 of each year, beginning the first February
1 which is at least twelve months after the related Closing Date, of a
certificate signed by an officer of the Servicer stating that the Servicer has
fulfilled its obligations under such Pooling and Servicing Agreement throughout
the twelve months ended the preceding October 31 (or in the case of the first
such certificate, the period from the Closing Date to October 31 of such year)
or, if there has been a default in the fulfillment of any such obligation,
describing each such default. The Servicer has agreed to give the Indenture
Trustee and the related Trustee notice of certain Servicer Defaults under the
applicable Pooling and Servicing Agreement.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Indenture Trustee or
the Trustee, as applicable.
Certain Matters Regarding the Servicer
Each Pooling and Servicing Agreement will provide that Navistar Financial
may not resign from its obligations and duties as Servicer thereunder except
upon determination that Navistar Financial's performance of such duties is no
longer permissible under applicable law. No such resignation will become
effective until the related Indenture Trustee, Grantor Trustee or a successor
servicer has assumed Navistar Financial's servicing obligations and duties
under the related Transfer and Servicing Agreements.
Each Pooling and Servicing Agreement will further provide that neither the
Servicer nor any of its directors, officers, employees and agents will be under
any liability to the related Trust or the related Securityholders for taking
any action or for refraining from taking any action pursuant to the related
Transfer and Servicing Agreements or for errors in judgment; except that
neither the Servicer nor any such person will be protected against any
liability that would otherwise be imposed by reason of wilful misfeasance, bad
faith or negligence (except errors in judgment) in the performance of the
Servicer's duties thereunder or by reason of reckless disregard of its
obligations and duties thereunder. In addition, each Pooling and Servicing
Agreement will provide that the Servicer is under no obligation to appear in,
prosecute or defend any legal action that is not incidental to the Servicer's
servicing responsibilities under the related Transfer and Servicing Agreements
and that, in its opinion, may cause it to incur any expense or liability. The
Servicer may, however, undertake any reasonable action that it may deem
necessary or desirable in respect of the related Transfer and Servicing
Agreements and the rights and duties of the parties thereto and the interests
of the Securityholders thereunder. In such event, the legal expenses and costs
of such action and any liability resulting therefrom will be expenses, costs
and liabilities of the related Trust, and the Servicer
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will be entitled to be reimbursed therefor out of the related Collection
Account in the case of an Owner Trust or the related Certificate Distribution
Account in the case of a Grantor Trust. Any such indemnification or
reimbursement will reduce the amount otherwise available for distribution to
the Securityholders.
Under the circumstances specified in each Pooling and Servicing Agreement,
any entity into which the Servicer or the Seller, as the case may be, may be
merged or consolidated, or any entity resulting from any merger or
consolidation to which the Servicer or the Seller, as the case may be, is a
party, or any entity succeeding to the business of the Servicer or, with
respect to its obligations as Servicer, any corporation 50% or more of the
voting stock of which is owned, directly or indirectly, by Navistar
International Corporation, a Delaware corporation ("NIC"), which corporation or
other entity in each of the foregoing cases assumes the obligations of the
Servicer or the Seller, as the case may be, will be the successor of the
Servicer or the Seller, as the case may be, under such Pooling and Servicing
Agreement. The Servicer may at any time subcontract any duties as Servicer
under any Pooling and Servicing Agreement to any corporation in which more than
50% of the voting stock is owned, directly or indirectly, by NIC. In the event
of any such subcontract, the Servicer will remain responsible for the
subcontractor's performance in accordance with such Pooling and Servicing
Agreement.
Servicer Default
Except as otherwise provided in the related prospectus supplement, a
"Servicer Default" under each Pooling and Servicing Agreement will consist of:
. any failure by the Servicer to deliver to the Indenture Trustee for
deposit in any of the Designated Accounts or to the Owner Trustee for
deposit in the Certificate Distribution Account any required payment or
to direct the Indenture Trustee to make any required distributions
therefrom, or any failure by the Servicer to deliver to the Grantor
Trustee for distribution to the Grantor Certificateholders any required
payment, in each case which failure continues unremedied for five
Business Days after the earlier of written notice from the Indenture
Trustee or the Trustee, as applicable, is received by the Servicer or
discovery of such failure by an officer of the Servicer;
. any failure by the Servicer or the Seller, as the case may be, duly to
observe or perform in any material respect any other covenant or
agreement in such Pooling and Servicing Agreement or the related
Purchase Agreement, Owner Trust Agreement or Indenture, as applicable,
which failure materially and adversely affects the rights of the
Noteholders or the Certificateholders and which continues unremedied for
60 days after the giving of written notice of such failure (A) to the
Servicer or the Seller, as the case may be, by the Indenture Trustee or
the Trustee, as applicable, or (B) to the Servicer or the Seller, as the
case may be, and to the Indenture Trustee and the Trustee, as
applicable, by, in the case of an Owner Trust, the holders of Notes
evidencing not less than 25% of the outstanding principal amount of the
Notes in that series then outstanding, together with, if there is more
than one class of Notes in that series outstanding, not less than 25% of
the outstanding principal amount of the most senior class of that series
(or, if the Notes have been paid in full, by the holders of Owner
Certificates evidencing not less than 25% of the voting interests of
such series) and, in the case of a Grantor Trust, the holders of Class A
Certificates evidencing not less than 25% of the voting interest
thereof; and
. certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings with respect to the
Servicer or the Seller and certain actions by the Servicer or the Seller
indicating its insolvency, reorganization pursuant to bankruptcy
proceedings, or inability to pay its obligations (each, an "Insolvency
Event").
A "Business Day" is any day other than a Saturday, Sunday or any other day
on which banks in New York, New York or Chicago, Illinois may, or are required
to, remain closed.
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Rights Upon Servicer Default
As long as a Servicer Default under a Pooling and Servicing Agreement
remains unremedied, either:
. in the case of an Owner Trust, the related Indenture Trustee or holders
of related Notes evidencing not less than a majority in principal amount
of the Notes in that series then outstanding Notes, together with, if
there is more than one class of Notes in that series outstanding, the
holders of a majority of the most senior class of that series (or, if
the Notes have been paid in full and the Indenture has been discharged
in accordance with its terms, by the Owner Trustee or holders of Owner
Certificates evidencing not less than a majority of the voting interests
thereof) or
. in the case of a Grantor Trust, the related Grantor Trustee or holders
of Class A Certificates evidencing a majority of the voting interests
thereof, as applicable,
may, in addition to other rights and remedies available in a court of law or
equity to damages, injunctive relief and specific performance, terminate all
the rights and obligations of the Servicer under such Pooling and Servicing
Agreement, whereupon such Indenture Trustee or Grantor Trustee, as applicable,
will succeed to all the responsibilities, duties and liabilities of the
Servicer under such agreements and will be entitled to similar compensation
arrangements. If, however, a bankruptcy trustee or similar official has been
appointed for the Servicer, and no Servicer Default other than such appointment
has occurred, such trustee or official may have the power to prevent the
Indenture Trustee or the Noteholders, or the Grantor Trustee or Class A
Certificateholders, as applicable, from effecting a transfer of servicing.
In the event that the Indenture Trustee or the Grantor Trustee, as
applicable, is unwilling or unable to so act, it may appoint, or petition a
court of competent jurisdiction for the appointment of, a successor with a net
worth of at least $100,000,000 and whose regular business includes the
servicing of medium and heavy duty truck receivables. The Indenture Trustee or
the Grantor Trustee, as applicable, may make such arrangements for compensation
to be paid, which in no event may be greater than the servicing compensation to
the Servicer under such related Pooling and Servicing Agreement.
Waiver of Past Defaults
In the case of:
. each Owner Trust, the holders of related Notes evidencing at least a
majority of the outstanding principal amount of the Notes in that series
then outstanding, together with, if there is more than one class of
Notes in that series outstanding, the holders of a majority of the most
senior class of that series (or, if all of the Notes have been paid in
full and the Indenture has been discharged in accordance with its terms,
the holders of related Owner Certificates evidencing not less than a
majority of the voting interests thereof), or
. each Grantor Trust, the holders of Class A Certificates evidencing not
less than a majority of the voting interest thereof may, on behalf of
all such Securityholders, waive any default by the Servicer in the
performance of its obligations under the applicable Pooling and
Servicing Agreement and its consequences, except a Servicer Default in
making any required deposits to or payments from the related Collection
Account, Note Distribution Account or Certificate Distribution Account
in accordance with the applicable Pooling and Servicing Agreement. No
such waiver will impair such Securityholders' rights with respect to
subsequent defaults.
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Amendment
Each of the Transfer and Servicing Agreements may be amended by the parties
thereto without the consent of the related Securityholders:
. to cure any ambiguity,
. to correct or supplement any provision therein that may be defective or
inconsistent with any other provision therein or in any of the Transfer
and Servicing Agreements or certain other agreements,
. to add or supplement any credit enhancement for the benefit of
Securityholders (provided that if any such addition affects any class of
Securityholders differently than any other class of Securityholders,
then such addition will not, as evidenced by an opinion of counsel,
adversely affect in any material respect the interests of any class of
Securityholders),
. to add to the covenants, restrictions or obligations of the Seller, the
Servicer, the related Trustee or the Indenture Trustee, or
. to add, change or eliminate any other provisions of such agreement in
any manner that will not, as evidenced by an opinion of counsel,
adversely affect in any material respect the interests of the
Securityholders.
Each such Agreement may also be amended by the parties thereto with the
consent of the holders of at least a majority in principal amount of the Notes
outstanding in that series or, if there is more than one class in that series,
the holders of the classes of Notes given that right, and the holders of such
Certificates evidencing at least a majority of the certificate balance in the
case of an Owner Trust or a majority of the voting interests thereof in the
case of a Grantor Trust for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of such agreement or of
modifying in any manner the rights of such Securityholders; except that no such
amendment may
. increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collection of payments on Receivables or distributions
that are required to be made on any Note or Certificate, any Interest
Rate, any Pass Through Rate, the Specified Reserve Account Balance or
the Specified Subordination Spread Account Balance, as applicable, or
. reduce the required percentage of holders of a class or series of
securities to consent to any such amendment without the consent of all
of the holders of such class or series of securities.
Owner Trust
With respect to each Owner Trust, each Owner Trust Agreement will provide
that the Owner Trustee shall not have the power to commence a voluntary
proceeding in bankruptcy relating to the related Owner Trust without the
unanimous prior approval of all Owner Certificateholders (including the Seller)
unless the Owner Trustee reasonably believes that such Owner Trust is
insolvent.
Termination
With respect to each Trust, the respective obligations and responsibilities
of the Servicer, the Seller, the related Trustee and (if applicable) the
Indenture Trustee pursuant to the Transfer and Servicing Agreements will
terminate
. in the case of an Owner Trust, upon the earlier of
. the maturity or other liquidation of the last related Receivable and
the disposition of any amounts received upon liquidation of any such
remaining Receivables or
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. the payment to related Securityholders of all amounts required to be
paid to them pursuant to the Transfer and Servicing Agreements and
. in the case of a Grantor Trust, upon the distribution to the Grantor
Certificateholders of all amounts required to be distributed to them
pursuant to the related Grantor Trust Pooling and Servicing Agreement.
Optional Purchase
Unless otherwise provided in the related prospectus supplement, in order to
avoid excessive administrative expense, the Servicer, or its successor, will be
permitted at its option to purchase from each Trust, as of the last day of any
Monthly Period, if the then outstanding Aggregate Receivables Balance of the
Receivables held by such Trust is 10% or less of the sum of the Pre-Funded
Amount, if any, and the Initial Aggregate Receivables Balance, all remaining
Receivables at a price equal to
. if the Servicer's long term unsecured debt rating from Moody's is less
than Baa3 at the time that it seeks to exercise such option, at a price
equal to the appraised value for such Receivables, plus the appraised
value of any other property held by the Trust less Liquidation Expenses,
so long as such amount is sufficient to redeem the outstanding Notes and
pay the certificate balance and the Certificateholders' Interest
Distributable Amount for the Distribution Date related to the Monthly
Period in which such option is exercised, or
. if the Servicer's long term unsecured debt rating from Moody's is equal
to or higher than Baa3 at the time that it seeks to exercise such
option, the aggregate Administrative Purchase Payments for such
Receivables plus the appraised value of any other property held as part
of the Trust less Liquidation Expenses (collectively, "Optional Purchase
Proceeds"), all as of the end of such Monthly Period.
As more fully described in the related prospectus supplement with respect to an
Owner Trust, any related outstanding Notes will be redeemed concurrently
therewith and the subsequent distribution to related Owner Certificateholders
of all amounts required to be distributed to them pursuant to the Owner Trust
Agreement will effect early retirement of the Owner Certificates. Proceeds from
the Servicer's purchase will be treated as Collected Principal and Collected
Interest with respect to the Receivables and will be distributed to the
Securityholders on the related Distribution Date.
With respect to each Owner Trust, the Indenture Trustee will give written
notice of redemption to each related Noteholder of record and the Owner Trustee
will give written notice of termination to each related Owner Certificateholder
of record. With respect to each Grantor Trust, the Grantor Trustee will give
written notice of termination to each related Class A Certificateholder of
record. The final distribution to any Owner Securityholder will be made only
upon surrender and cancellation of such Noteholder's Note at an office or
agency of the Indenture Trustee specified in the notice of redemption or such
Certificateholder's Certificate at an office or agency of the Trustee specified
in the notice of termination. With respect to each Owner Trust, after payment
to the Indenture Trustee, the Owner Trustee, the Owner Securityholders and the
Servicer of all amounts required to be paid under each of the related Pooling
and Servicing Agreement, Indenture and Owner Trust Agreement, unless otherwise
provided in the related prospectus supplement, any amounts on deposit in the
related Reserve Account and the related Collection Account (after all other
distributions required to be made from such accounts have been made) shall be
paid to the Seller and any other assets remaining in such Owner Trust shall be
distributed to the Seller.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Security Interest in Vehicles
In all states in which the Receivables have been originated, Retail Notes
such as the Receivables evidence the financing by Navistar Financial of new and
used medium and heavy duty trucks, buses and/or trailers sold by dealers or
International to purchasers. The Retail Notes also constitute personal property
security agreements and include grants of security interests in the Financed
Vehicles under the UCC. Perfection of security interests in the vehicles is
generally governed by the motor vehicle registration laws of the state in which
the vehicle is located. In all states in which the Receivables are originated,
ownership of a vehicle is established by means of a certificate of title, which
is issued by the department of motor vehicles or other applicable governmental
agency upon receipt of a properly completed application and relevant
accompanying documents. In most states in which the Receivables have been
originated, a security interest in a vehicle is perfected by a notation of the
secured party's lien on the vehicle's certificate of title. In a minority of
other states, a security interest in a vehicle is perfected by a filing of the
secured party's lien with the secretary of state, and no notation is made on
the vehicle's certificate of title. When Navistar Financial originates Retail
Notes it will cause the certificates of title for the Financed Vehicles related
to such Retail Notes to be filed in the appropriate jurisdiction pursuant to
applicable law. Navistar Financial will be noted on such certificates of title
as lienholder.
As a result of the procedures described above, Navistar Financial will be
the secured party of record with respect to Financed Vehicles related to Retail
Notes. Pursuant to each Purchase Agreement, Navistar Financial will assign its
security interest in the Financed Vehicles securing the related Receivables to
the Seller, and pursuant to the applicable Pooling and Servicing Agreement, the
Seller will assign its security interest in the Financed Vehicles securing such
Receivables to the Owner Trust or the Grantor Trustee, as applicable. However,
because of the administrative burden and expense, neither the Servicer nor the
Trustee will amend any certificate of title to identify the Trust as the new
secured party on such certificate of title relating to a Financed Vehicle.
Also, the Servicer will continue to hold any certificates of title relating to
the vehicles in its possession as custodian for the Seller and the applicable
Trustee pursuant to a custodian agreement. See "The Transfer and Servicing
Agreements--Sale and Assignment of Receivables."
In most states, an assignment is an effective conveyance of a security
interest without amendment of any lien noted on a vehicle's certificate of
title, and the assignee succeeds thereby to the assignor's rights as secured
party. In the absence of fraud or forgery by the vehicle owner, negligence or
fraud by Navistar Financial or the Servicer or administrative error by state or
local agencies, the notation of Navistar Financial's lien on the certificates
of title for Financed Vehicles related to the Retail Notes will be sufficient
to protect the related Trust against the rights of subsequent purchasers of a
Financed Vehicle from an Obligor or subsequent lenders to an Obligor who take a
security interest in a Financed Vehicle.
If there are any Financed Vehicles as to which Navistar Financial failed to
obtain a perfected security interest, its security interest would be
subordinate to subsequent purchasers of the Financed Vehicles and holders of
perfected security interests. Such a failure, however, would constitute a
breach of the warranties of Navistar Financial under the applicable Purchase
Agreement and, to the extent such breach materially and adversely affects the
interests of the related Trust or Securityholders in the related Receivables
would create an obligation of Navistar Financial to repurchase the related
Receivable unless the breach is cured. Navistar Financial will have no
obligation to repurchase a Receivable with respect to which the Trust's
security interest, or the priority of its security interest, in the related
Financed Vehicle is lost because of fraud or liens for taxes or repairs unpaid
by the Obligor on the related Financed Vehicle. See "The Transfer and Servicing
Agreements--Sale and Assignment of Receivables." Similarly, the security
interest of the related Trust in the vehicle could be defeated through fraud or
negligence.
Under the laws of most states, the 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
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thereafter until the vehicle owner re-registers the vehicle in the new state. A
majority of states generally require surrender of a certificate of title to re-
register a vehicle. Accordingly, a secured party must surrender possession if
it holds the certificate of title to the vehicle or, in the case of vehicles
registered in states providing for the notation of a lien on the certificate of
title but not possession by the secured party, the secured party would receive
notice of surrender if the security interest is noted on the certificate of
title. Thus, the secured party would have the opportunity to re-perfect its
security interest in the vehicle in the state of relocation. In states that do
not require surrender of a certificate of title for registration of a motor
vehicle, re-registration could defeat perfection. In the ordinary course of
servicing receivables, the Servicer takes steps to effect re-perfection upon
receipt of notice of re-registration or information from the Obligors as to
relocation. Similarly, when an Obligor sells a vehicle, the Servicer must
surrender possession of the certificate of title or will receive notice as a
result of its lien noted thereon and accordingly will have an opportunity to
require satisfaction of the related Receivables before release of the lien.
Under each applicable Pooling and Servicing Agreement, the Servicer is
obligated to take appropriate steps, at the Servicer's expense, to maintain
perfection of security interests in the Financed Vehicles.
Under the laws of most states, liens for repairs, storage of a motor vehicle
and unpaid taxes take priority over a perfected security interest in a financed
vehicle. The laws of certain states and federal law also permit the
confiscation of motor vehicles by governmental authorities under certain
circumstances if used in unlawful activities, which may result in the loss of a
secured party's perfected security interest in the confiscated motor vehicle.
Under each Purchase Agreement, Navistar Financial will represent to the Seller
that, as of the date of issuance of the related securities, each security
interest in a Financed Vehicle is or will be prior to all other present liens
(other than tax liens and other liens that arise by operation of law) upon and
security interests in such Financed Vehicle. The Seller will assign such
representation, among others, to the applicable Trustee pursuant to the related
Pooling and Servicing Agreement. However, liens for repairs or taxes, or the
confiscation of a Financed Vehicle, could arise at any time during the term of
a Receivable. No notice will be given to the applicable Trustee or, as
applicable, the Indenture Trustee or the Securityholder if such a lien or
confiscation arises.
Repossession
In the event of default by vehicle purchasers, the holder of the Retail Note
has all the remedies of a secured party under the UCC, except where
specifically limited by other state laws. Among the UCC remedies, the secured
party has the right to perform self-help repossession unless such act would
constitute a breach of the peace. The Servicer often uses self-help which is
accomplished simply by retaking possession of the Financed Vehicle. In the
event of default by the Obligor, some jurisdictions require that the Obligor be
notified of the default and be given a time period to cure the default prior to
repossession. 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. A secured party may be held
responsible for damages caused by a wrongful repossession of a vehicle.
Notice of Sale; Redemption Rights
The UCC and other state laws require the secured party to provide the
Obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. 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 its sale, plus, in some jurisdictions, reasonable
attorneys' fees, or, in some states, by payment of past due installments or the
unpaid balance.
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Deficiency Judgments and Excess Proceeds
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. In many instances, the remaining principal amount of such
indebtedness will exceed such proceeds. While some states impose prohibitions
or limitations on deficiency judgments if the net proceeds from resale do not
cover the full amount of the indebtedness, a deficiency judgment can be sought
in those states that do not prohibit or limit such judgments. However, the
deficiency judgment would be a personal judgment against the Obligor for the
shortfall, and a defaulting Obligor can be expected to have very little capital
or sources of income available following repossession. Therefore, in many
cases, it may not be useful to seek a deficiency judgment or, if one is
obtained, it may be settled at a significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and
indebtedness owed to a creditor, there is a surplus of funds. In that case, the
UCC requires such creditor to remit the surplus to other holders of a lien with
respect to the vehicle or if no such lienholders exist or there are remaining
fund after such remittance, the UCC requires such creditor to remit the surplus
to the former owner of the vehicle.
Laws Governing Credit Transactions
Numerous federal and state laws and regulations impose substantial
requirements upon creditors and servicers involved in credit transactions.
These laws include the Equal Credit Opportunity Act, the Federal Reserve
Board's Regulation B, the Soldiers' and Sailors' Civil Relief Act of 1940, and
state sales finance and other similar laws. Also, state laws impose finance
charge ceilings and other restrictions on credit transactions and require
contract disclosures not required under federal law. These requirements impose
specific statutory liabilities upon creditors who fail to comply with their
provisions. In some cases, this liability could affect an assignee's ability to
enforce the Retail Notes. Failure to comply with such laws and regulations
could impose liability on the Trust in excess of the amount of the Receivable.
Courts have imposed general equitable principles upon secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may relieve an Obligor from some or all of the legal
consequences of a default.
Under each Purchase Agreement, Navistar Financial will represent to the
Seller that each Receivable complies with all requirements of law in all
material respects. The Seller will assign such representation to the related
Owner Trust or Grantor Trustee, as applicable. Accordingly, if an Obligor has a
claim against the related Trust for violation of any law and such claim
materially and adversely affects such Trust's interest in a Receivable, such
violation will constitute a breach of representation and will create an
obligation to repurchase the Receivable unless the breach is cured. See "The
Transfer and Servicing Agreements--Sale and Assignment of Receivables."
Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing the Financed Vehicle or reduce the amount of the
secured indebtedness to the market value of the Financed Vehicle at the time of
bankruptcy, leaving the creditor as a general unsecured creditor for the
remainder of the indebtedness. A bankruptcy court may also reduce the monthly
payments due under a Retail Note or change the rate of finance charges or time
of repayment of the indebtedness.
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Transfer of Vehicles
The Receivables prohibit the sale or transfer of a Financed Vehicle without
the Servicer's consent and permit the Servicer to accelerate the maturity of
the Receivable upon a sale or transfer without the Servicer's consent. The
Servicer will not consent to a sale or transfer and will require prepayment of
the Receivable. Although the Servicer, as agent of the Trustee, may enter into
a transfer of equity agreement with the secondary purchaser for the purpose of
effecting the transfer of the vehicle, the new obligation will not be included
in the related Receivables Pool.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
Set forth below is a discussion of the anticipated material United States
federal income tax consequences of the purchase, ownership and disposition of
the Notes and Certificates offered hereunder. This discussion is based upon
current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury regulations thereunder, current
administrative rulings, judicial decisions and other applicable authorities.
There are no cases or Internal Revenue Service ("IRS") rulings on similar
transactions involving both debt and equity interests issued by a trust with
terms similar to those of the securities. As a result, 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. Furthermore, legislative, judicial or administrative
changes may occur, perhaps with retroactive effect, which could affect the
accuracy of the statements and conclusions set forth in this prospectus as well
as the tax consequences to Securityholders.
This discussion does not purport to deal with all aspects of federal income
taxation that may be relevant to the Securityholders in light of their personal
investment circumstances nor, except for certain limited discussions of
particular topics, to certain types of holders 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 prospective purchasers who purchase securities in
the initial distribution thereof, who are citizens or residents of the United
States, including domestic corporations and partnerships, and who hold the
securities as "capital assets" within the meaning of Section 1221 of the Code.
You Should Consult Your Own Tax Advisors And Tax Return Preparers Regarding The
Preparation Of Any Item On A Tax Return, Even Where The Anticipated Tax
Treatment Has Been Discussed In This Prospectus. You Should Consult With Your
Own Tax Advisors As To The Federal, State, Local, Foreign And Any Other Tax
Consequences To You Of The Purchase, Ownership And Disposition Of Securities.
The following discussion addresses securities falling into four general
categories: (1) Notes (other than Strip Notes or any other series of Notes
specifically identified as receiving different tax treatment in the related
prospectus supplement) which the Seller, the Servicer and the Noteholders will
agree to treat as indebtedness secured by the related Receivables, (2)
Certificates representing interests in a trust which the Seller, the Servicer
and the applicable Certificateholders will agree to treat as equity interests
in a grantor trust (a "Tax Trust"), (3) Certificates (including Strip
Certificates) and Strip Notes, representing interests in a trust which the
Seller, the Servicer and the applicable holders will agree to treat as equity
interests in a partnership (a "Tax Partnership"), and (4) Certificates, all of
which are owned by the Seller, representing interests in a trust which the
Seller and the Servicer will agree to treat as a division of the Seller and
hence disregarded as a separate entity (a "Tax Non-Entity"), in each case for
purposes of federal, state and local income and franchise taxes. Certificates
issued by a Tax Trust are referred to in this prospectus as "Trust
Certificates", Certificates (including Strip Certificates) and Strip Notes
issued by a Tax Partnership are referred to in this prospectus as "Partnership
Certificates," and certificates issued by a Tax Non-Entity are referred to
herein as "Tax Non-Entity Certificates." The prospectus supplement for
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each series of Certificates will indicate whether the related trust is a Tax
Trust, a Tax Partnership or a Tax Non-Entity. For purposes of this discussion,
references to a "Certificateholder" are to the beneficial owner of a Trust
Certificate, Partnership Certificate or Tax Non-Entity Certificate, as the
context may require.
The Notes
Characterization as Debt. With respect to each series of Notes (except for
Strip Notes and any series which is specifically identified as receiving
different tax treatment in the related prospectus supplement), regardless of
whether such Notes are issued by a Tax Trust, a Tax Partnership or a Tax Non-
Entity, Kirkland & Ellis, special tax counsel to the Seller ("Tax Counsel"),
will deliver its opinion to the effect that, although no specific authority
exists with respect to the characterization for federal income tax purposes of
securities having the same terms as the Notes, based on the terms of the Notes,
the transactions relating to the Receivables as set forth in this prospectus,
and the discussions of Trust Certificates, Partnership Certificates and Tax
Non-Entity Certificates below, the Notes will be treated as debt for federal
income tax purposes. The Seller, the Servicer and each Noteholder, by acquiring
an interest in a Note, will agree to treat the Notes as indebtedness for
federal, state and local income and franchise tax purposes. See "--Trust
Certificates--Classification of Trusts and Trust Certificates," "--Partnership
Certificates--Classification of Partnerships and Partnership Certificates" or
"--Tax Non-Entity Certificates--Classification of Tax Non-Entities and Tax Non-
Entity Certificates" below for a discussion of the potential federal income tax
consequences to Noteholders if the IRS were successful in challenging the
characterization of a Tax Trust, a Tax Partnership or a Tax Non-Entity, as
applicable, for federal income tax purposes.
Interest Income to Noteholders. Based on the foregoing opinion, and assuming
the Notes are not issued with original issue discount ("OID"), the stated
interest on the Notes will be taxable as ordinary income for federal income tax
purposes when received by Noteholders utilizing the cash method of accounting
and when accrued by Noteholders utilizing the accrual method of accounting.
Interest received on the Notes may constitute "investment income" for purposes
of certain limitations of the Code concerning the deductibility of investment
interest expense.
Original Issue Discount. In general, OID is the excess of the "stated
redemption price at maturity" of a debt instrument over its "issue price,"
unless such excess falls within a statutorily defined de minimis exception. A
Note's "stated redemption price at maturity" is the aggregate of all payments
required to be made under the Note through maturity except "qualified stated
interest." "Qualified stated interest" is generally interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at fixed intervals of one year or less during the entire term of the
instrument at certain specified rates. The "issue price" will be the first
price at which a substantial amount of the Notes are sold, excluding sales to
bond holders, brokers or similar persons acting as underwriters, placement
agents or wholesalers.
Although it is not anticipated that any series of Notes will be issued at a
greater than de minimis discount, a series of Notes may nevertheless be deemed
to have been issued with OID. For example, under Treasury regulations, interest
payments on Notes may be deemed not to be payments of "qualified stated
interest" because (1) Noteholders do not have default remedies ordinarily
available to holders of debt instruments and (2) no penalties are imposed on
the Seller or the applicable Trust as a result of any failure to make timely
interest payments. If a series of Notes does not pay qualified stated interest,
all of the taxable income thereon would be includible in income as OID. In
addition, the IRS could take the position under section 1272(a)(6) of the Code
that a series of Notes has OID.
The holder of a Note that is treated as having OID (including a cash method
holder) would be required to include OID on that Note in income for Federal
income tax purposes on a constant yield basis, resulting in the inclusion of
income in advance of the receipt of cash attributable to that
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income. These treatments would not significantly affect an accrual method
holder of Notes, although such treatments would somewhat accelerate taxable
income to a cash method holder by in effect requiring such holder to report
interest income on the accrual method. Finally, even if a Note has OID falling
within the de minimis exception, the holder must include such OID in income
proportionately as principal payments are made on such Note.
A holder of a Note which has a fixed maturity date not more than one year
from the issue date of such Note (a "Short-Term Note") will generally not be
required to include OID on the Note in income as it accrues, provided such
holder is not an accrual method taxpayer, a bank, a broker or dealer that holds
the Note as inventory, a regulated investment company or common trust fund, or
the beneficial owner of certain pass-through entities specified in the Code, or
provided such holder does not hold the instrument as part of a hedging
transaction, or as a stripped bond or stripped coupon. Instead, the holder of a
Short-Term Note would include the OID accrued on the Note in gross income upon
a sale or exchange of the Note or at maturity, or if such Note is payable in
installments, as principal is paid thereon. Such a holder would be required to
defer deductions for any interest expense on an obligation incurred to purchase
or carry the Short-Term Note to the extent it exceeds the sum of the interest
income, if any, and OID accrued on such Note. However, a holder may elect to
include OID in income as it accrues on all obligations having a maturity of one
year or less held by the holder in that taxable year or thereafter, in which
case the deferral rule of the preceding sentence will not apply. For purposes
of this paragraph, OID accrues on a Short-Term Note on a ratable (straight-
line) basis, unless the holder irrevocably elects (under regulations to be
issued by the Treasury Department) with respect to such obligation to apply a
constant interest method, using the holder's yield to maturity and daily
compounding.
A holder who purchases a Note after the initial distribution thereof at a
discount that exceeds a statutorily defined de minimis amount will be subject
to the "market discount" rules of the Code, and a holder who purchases a Note
at a premium will be subject to the bond premium amortization rules of the
Code.
Disposition of Notes. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of the Note to a particular Noteholder will equal the
holder's cost for the Note, increased by any OID and market discount previously
included by such Noteholder in income with respect to the Note and decreased by
any bond premium previously amortized and any principal payments previously
received by such Noteholder with respect to such Note. Any such gain or loss
will be capital gain or loss if the Note was held as a capital asset, except
for gain representing accrued interest or accrued market discount not
previously included in income. Capital gain or loss will be long-term if the
Note was held by the holder for more than one year and otherwise will be short-
term. Any capital losses realized generally may be used by a corporate taxpayer
only to offset capital gains, and by an individual taxpayer only to the extent
of capital gains plus $3,000 of other income.
Information Reporting and Backup Withholding. Each Tax Trust, Tax
Partnership or Tax Non-Entity, as the case may be, will be required to report
annually to the IRS, and to each related Noteholder of record, the amount of
interest paid on the Notes (and the amount of interest withheld for federal
income taxes, if any) for each calendar year, except as to exempt holders
(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 holder will be required to
provide to the related Tax Trust, Tax Partnership or Tax Non-Entity, under
penalties of perjury, a certificate containing the holder's name, address,
correct federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt Noteholder fail to
provide the required certification, the Tax Trust, Tax Partnership or Tax Non-
Entity will be required to withhold, from interest otherwise payable to the
holder, 31% of such interest and remit the withheld amount to the IRS as a
credit against the holder's federal income tax liability.
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The IRS has issued new regulations governing the backup withholding and
information reporting requirements. The new regulations are generally effective
for payments made after December 31, 2000. Noteholders should consult their tax
advisors with respect to the impact, if any, of the new regulations.
Because the Seller will treat each Tax Trust as a grantor trust, each Tax
Partnership as a partnership, each Tax Non-Entity as a division of Seller and
all Notes (except Strip Notes and others as specifically identified in the
related prospectus supplement) as indebtedness for federal income tax purposes,
the Seller will not comply with the tax reporting requirements that would apply
under any alternative characterizations of a Tax Trust, Tax Partnership or Tax
Non-Entity.
Tax Consequences to Foreign Noteholders. If interest paid (or accrued) and
OID accrued to a Noteholder who is a nonresident alien, foreign corporation or
other non-United States person (a "foreign person") is not effectively
connected with the conduct of a trade or business within the United States by
the foreign person, the interest and OID (if any) generally will be considered
"portfolio interest," and generally will not be subject to United States
federal income tax and withholding tax, as long as the foreign person (1) is
not actually or constructively a "10 percent shareholder" of the related Tax
Trust, Tax Partnership or the Seller (including a holder of 10% of the
applicable outstanding Certificates) or a "controlled foreign corporation" with
respect to which the related Tax Trust, Tax Partnership or the Seller is a
"related person" within the meaning of the Code, and (2) provides an
appropriate statement, signed under penalties of perjury, certifying that the
beneficial owner of the Note is a foreign person and providing that foreign
person's name and address. If the information provided in this statement
changes, the foreign person must so inform the related Tax Trust, Tax
Partnership or Tax Non-Entity within 30 days of such change. If such interest
were not portfolio interest, then it would be subject to United States federal
income and withholding tax at a rate of 30 percent unless reduced or eliminated
pursuant to an applicable tax treaty.The IRS has issued new regulations
governing withholding, backup withholding and information reporting
requirements. The new regulations are generally effective for payments made
after December 31, 2000. Foreign persons should consult their tax advisors with
respect to the effect, if any, of the new regulations.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (1) the gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person, and (2) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
If the interest, gain or income on a Note held by a foreign person is
effectively connected with the conduct of a trade or business in the United
States by the foreign person, the holder (although exempt from the withholding
tax previously discussed if an appropriate statement is furnished) generally
will be subject to United States federal income tax on the interest, gain or
income at regular federal income tax rates. In addition, if the foreign person
is a foreign corporation, it may be subject to a branch profits tax equal to 30
percent of its "effectively connected earnings and profits" within the meaning
of the Code for the taxable year, as adjusted for certain items, unless it
qualifies for a lower rate under an applicable tax treaty.
Under current Treasury regulations, backup withholding (imposed at a rate of
31%) will not apply to payments made in respect of a Note held by a foreign
person if the certifications described above are received, provided in each
case that the related Tax Trust, Tax Partnership or Tax Non-Entity or the
paying agent, as the case may be, does not have actual knowledge that the payee
is a U.S. person. The IRS has issued new regulations governing the backup
withholding and information reporting requirements. The new regulations are
generally effective for payments made after December 31, 2000. Noteholders who
are foreign persons should consult their tax advisors with respect to the
effect, if any, of the new regulations.
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Trust Certificates
Classification of Trusts and Trust Certificates. With respect to each series
of Certificates identified in the related prospectus supplement as Trust
Certificates, Tax Counsel will deliver its opinion to the effect that the
related Tax Trust will not be taxable as an association or publicly traded
partnership taxable as a corporation, but should be classified as a grantor
trust under sections 671 through 679 of the Code. For each such series, the
Seller, the Servicer and the Certificateholders will express in the Indenture
and the Pooling and Servicing Agreement and on the Trust Certificates their
intent that, for federal, state and local income and franchise tax purposes,
the Trust Certificates will represent an equity interest in the Tax Trust. The
Seller and each Certificateholder, by acquiring an interest in any such Trust
Certificate, will agree to treat such Trust Certificates as an equity interest
in the Tax Trust, for federal, state and local income and franchise tax
purposes. However, the proper characterization of the arrangement involving the
Tax Trust, the Trust Certificates, the Seller and the Servicer is not clear
because there is no authority on transactions closely comparable to that
contemplated in this prospectus.
Although Tax Counsel will opine that each such Tax Trust should properly be
characterized as a grantor trust for federal income tax purposes, such opinion
is not binding on the IRS or the courts and no assurance can be given that this
characterization would prevail. If the IRS were to contend successfully that
any such Tax Trust is not a grantor trust, such Tax Trust should be classified
for federal income tax purposes as a partnership which is not taxable as a
corporation. The income reportable by the holders of such Trust Certificates as
partners could differ from the income reportable by the holders of such Trust
Certificates as grantors of a grantor trust. However, it is not expected that
such differences would be material. See "--Partnership Certificates."
If, however, the IRS were to contend successfully that a Tax Trust is an
association taxable as a corporation for federal income tax purposes, such Tax
Trust would be subject to federal and state income tax at corporate rates on
the income from the Receivables (reduced by deductions, including interest on
any Notes unless the Notes were treated as an equity interest). Any such
corporate income tax could materially reduce or eliminate cash that would
otherwise be distributable with respect to the related Trust Certificates and
any related Notes. The Certificateholders and, if the Notes were also treated
as an equity interest in the taxable corporation, the Noteholders could be
liable for any such tax to the extent it is not paid by the related Tax Trust.
However, as described above, in the opinion of Tax Counsel, each Tax Trust will
not be classified as an association taxable as a corporation.
If a Tax Trust were classified for federal income tax purposes as a
partnership, the IRS might contend that it is a "publicly traded partnership"
taxable as a corporation. However, in the opinion of Tax Counsel, even if a Tax
Trust were treated as a publicly traded partnership, such Tax Trust would not
be taxable as a corporation because it would meet certain qualifying income
tests. Nonetheless, if the Tax Trust were treated as a publicly traded
partnership, certain holders could suffer adverse tax consequences. For
example, certain holders might be subject to certain limitations on their
ability to deduct their share of such Tax Trust's expenses.
Despite Tax Counsel's opinion that a Tax Trust should be classified as a
grantor trust, the lack of cases or rulings on similar transactions, as
discussed above, permits a variety of alternative characterizations in addition
to the position to be taken that the Trust Certificates represent equity
interests in a grantor trust. For example, because Trust Certificates will have
certain features characteristic of debt, the Trust Certificates might be
considered indebtedness of a Tax Trust or the Seller. Except as described
above, any such characterization would not result in materially adverse tax
consequences to Certificateholders as compared to the consequences from
treatment of Trust Certificates as equity in a trust, described below. The
following discussion assumes that Trust Certificates represent equity interests
in a grantor trust.
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Grantor Trust Treatment. As a grantor trust, a Tax Trust will not be subject
to federal income tax. Assuming that the Receivables are not characterized as
"stripped bonds" or otherwise recharacterized, in Tax Counsel's opinion each
Certificateholder will be required to report on its federal income tax return
its pro rata share of the entire income from the Receivables and any other
property in the related Tax Trust for the period during which it owns a Trust
Certificate, including interest or finance charges earned on the Receivables
and any gain or loss upon collection or disposition of the Receivables, in
accordance with such Certificateholder's method of accounting. A
Certificateholder using the cash method of accounting should take into account
its pro rata share of income as and when received by the Trustee. A
Certificateholder using an accrual method of accounting should take into
account its pro rata share of income as it accrues or is received by the
Trustee, whichever is earlier.
Assuming that the market discount rules do not apply, the portion of each
payment to a Certificateholder that is allocable to principal on the
Receivables will represent a recovery of capital, which will reduce the tax
basis of such Certificateholder's undivided interest in the Receivables. In
computing its federal income tax liability, a Certificateholder will be
entitled to deduct, consistent with its method of accounting, its pro rata
share of interest paid on any related Notes, reasonable servicing fees, and
other fees paid or incurred by the related Tax Trust as provided in section 162
or 212 of the Code. If a Certificateholder is an individual, estate or trust,
the deduction for such Certificateholder's pro rata share of such fees will be
allowed only to the extent that all of such Certificateholder's miscellaneous
itemized deductions, including servicing and other fees, exceed 2% of such
Certificateholder's adjusted gross income. In addition, in the case of
Certificateholders who are individuals, certain otherwise allowable itemized
deductions will be reduced, but not by more than 80%, by an amount equal to 3%
of the Certificateholder's adjusted gross income in excess of a statutorily
defined threshold. Because the Servicer will not report to Certificateholders
the amount of income or deductions attributable to miscellaneous charges, such
Certificateholders may effectively underreport their net taxable income. See
"Treatment of Fees" below for a discussion of other possible consequences if
amounts paid to the Servicer exceed reasonable compensation for services
rendered.
Treatment of Fees. The Servicer intends to report income to
Certificateholders on the assumption that the Certificateholders own a 100%
interest in all of the principal and interest derived from the related
Receivables. However, a portion of the amounts paid to the Servicer or the
Seller may exceed reasonable fees for services rendered. There are no
authoritative guidelines, for federal income tax purposes, as to the maximum
amount of compensation that may be considered reasonable for servicing the
Receivables or performing other services, in the context of this or similar
transactions; accordingly, Tax Counsel is unable to give an opinion on this
issue. If amounts paid to the Servicer or the Seller exceed reasonable
compensation for services provided, the Servicer or the Seller or both may be
viewed as having retained, for federal income tax purposes, an ownership
interest in a portion of each interest payment with respect to certain
Receivables. As a result, such Receivables may be treated as "stripped bonds"
within the meaning of the Code.
To the extent that the Receivables are characterized as "stripped bonds,"
the income and deductions of the related Tax Trust allocable to
Certificateholders would not include the portion of the interest on the
Receivables treated as having been retained by the Servicer or the Seller, as
the case may be, and such Tax Trust's deductions would be limited to reasonable
servicing fees, interest paid on any related Notes and other fees. In addition,
a Certificateholder would not be subject to the market discount and premium
rules discussed below with respect to the stripped Receivables, but instead
would be subject to the OID rules of the Code. However, if the price at which a
Certificateholder were deemed to have acquired a stripped Receivable is less
than the remaining principal balance of such Receivable by an amount which is
less than a statutorily defined de minimis amount, such Receivable would not be
treated as having OID. In general, under Treasury regulations
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it appears that the amount of OID on a Receivable treated as a "stripped bond"
will be de minimis if it is less than 1/4 of 1% for each full year remaining
after the purchase date until the final maturity of the Receivable, although
the IRS could take the position that the weighted average maturity date, rather
than the final maturity date, should be used in performing this calculation. If
the amount of OID is de minimis under this rule, the actual amount of discount
on such a Receivable would be includible in income as principal payments are
received on the Receivable.
If the OID on a Receivable were not treated as de minimis, a
Certificateholder would be required to include any OID in income as it accrues,
regardless of when cash payments are received, using a method reflecting a
constant yield on the Receivables. It is possible that the IRS could assert
that a prepayment assumption should be used in computing the yield of a
stripped Receivable. If a stripped Receivable is deemed to be acquired by a
Certificateholder at a significant discount, such prepayment assumption could
accelerate the accrual of income by a Certificateholder. No representation is
made, nor is Tax Counsel able to give an opinion, that Receivables will prepay
at any particular rate. You are urged to consult your own tax advisors
regarding the likelihood that a portion of the amounts paid to the Servicer or
Seller might be characterized other than as compensation for services rendered
for federal income tax purposes.
It is also possible that any fees deemed to be excessive could be
recharacterized as deferred purchase price payable to the Seller by
Certificateholders in exchange for the related Receivables. The likely effect
of such recharacterization would be to increase current taxable income to a
Certificateholder.
Discount and Premium. The following discussion generally assumes that the
fees and other amounts payable to the Servicer and the Seller will not be
recharacterized as being retained ownership interests in the Receivables (as
discussed above). A purchaser of a Trust Certificate should be treated as
purchasing an interest in each Receivable and any other property in the related
Tax Trust at a price determined by allocating the purchase price paid for the
Trust Certificate among the Receivables and other property in proportion to
their fair market values at the time of purchase of the Trust Certificate.
It is believed that the Receivables were not and will not be issued with OID
and, therefore, a Tax Trust should not have OID income. However, the purchase
price paid by said Tax Trust for the Receivables may be greater or less than
the remaining principal balance of the Receivables at the time of purchase. If
so, the Receivables will have been acquired at a premium or market discount, as
the case may be. The market discount on a Receivable will be considered to be
zero if it is less than the statutorily defined de minimis amount.
Any gain on the sale of a Trust Certificate attributable to the holder's
share of unrecognized accrued market discount on the related Receivables would
generally be treated as ordinary income to the holder. Moreover, a holder who
acquires a Trust Certificate representing an interest in Receivables acquired
at a market discount may be required to defer a portion of any interest expense
otherwise deductible with respect to indebtedness incurred or maintained to
purchase or carry the Trust Certificate until the holder disposes of the Trust
Certificate in a taxable transaction. Instead of recognizing market discount,
if any, upon a disposition of Trust Certificates (and deferring any applicable
interest expense), a holder may elect to include market discount in income
currently as the discount accrues. The current inclusion election, once made,
applies to all market discount obligations acquired on or after the first day
of the first taxable year to which the election applies, and may not be revoked
without the consent of the IRS.
In the event that a Receivable is treated as purchased at a premium (i.e.,
the allocable portion of the Certificateholder's purchase price for the related
Trust Certificate exceeds the remaining principal balance of the Receivable),
such premium will be amortizable by a Certificateholder as an offset to
interest income (with a corresponding reduction in basis) under a constant
yield method over the
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term of the Receivable if the Certificateholder makes an election. Any such
election will apply to all debt instruments held by the Certificateholder
during the year in which the election is made and to all debt instruments
acquired thereafter.
Disposition of Trust Certificates. Generally, capital gain or loss will be
recognized on a sale of Trust Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Trust
Certificates sold. A Certificateholder's tax basis in a Trust Certificate will
generally equal his cost increased by any OID and market discount previously
included in income, and decreased by any bond premium previously amortized and
by the amount of principal payments previously received on the Receivables. Any
gain on the sale of a Trust Certificate attributable to the holder's share of
unrecognized accrued market discount on the related Receivables would generally
be treated as ordinary income to the holder, unless a Certificateholder makes
the special election described under "Discount and Premium" above.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Trust Certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the Trust Certificates.
Backup Withholding. Distributions made on Trust Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, as discussed above with respect to the Notes, the Certificateholder
fails to comply with certain identification procedures, unless the holder is an
exempt recipient under applicable provisions of the Code.
Tax Consequences to Foreign Trust Certificateholders. Interest attributable
to Receivables which is received by a Certificateholder which is a foreign
person will generally not be subject to the normal 30% withholding tax imposed
with respect to such payments, provided that such Certificateholder is not
engaged in a trade or business in the United States and such Certificateholder
fulfills the certification requirements discussed above under "The Notes--Tax
Consequences to Foreign Noteholders."
Partnership Certificates
Classification of Partnerships and Partnership Certificates. With respect to
each series of Certificates identified in the related prospectus supplement as
Partnership Certificates, the Seller and the Servicer will agree, and the
holders of the Certificates issued by such Tax Partnership will agree by their
purchase of such Partnership Certificates, to treat the Tax Partnership as a
partnership for purposes of federal, state and local income and franchise tax
purposes, with the partners of such Partnership being the Certificateholders
and/or the Seller (in its capacity as recipient of distributions from the
Reserve Account), and any related Notes being debt of such Tax Partnership.
However, the proper characterization of the arrangement involving the Tax
Partnership, the Partnership Certificates, the Seller and the Servicer is not
clear because there is no authority on transactions closely comparable to that
contemplated in this prospectus.
If the Tax Partnership were classified as an association taxable as a
corporation for federal income tax purposes, such Tax Partnership would be
subject to corporate income tax. Any such corporate income tax could materially
reduce or eliminate cash that would otherwise be distributable with respect to
the Partnership Certificates (and Certificateholders could be liable for any
such tax that is unpaid by such Tax Partnership). However, upon the issuance of
each series of Partnership Certificates, Tax Counsel will deliver its opinion
generally to the effect that such Tax Partnership will not be classified as an
association taxable as a corporation.
Even if a Tax Partnership were not classified as an association taxable as a
corporation, it could be subject to corporate income tax if it were a "publicly
traded partnership" taxable as a corporation. However, in the opinion of Tax
Counsel, even if such Tax Partnership were treated as a publicly
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traded partnership, it would not be taxable as a corporation because it would
meet certain qualifying income tests. Nonetheless, if a Tax Partnership were
treated as a publicly traded partnership and the Partnership Certificates were
treated as equity interests in such a partnership, certain holders could suffer
adverse consequences. For example, certain holders might be subject to certain
limitations on their ability to deduct their share of the Tax Partnership's
expenses.
Despite Tax Counsel's opinion that a Tax Partnership will be classified as a
partnership and not as an association or publicly traded partnership taxable as
a corporation, the lack of cases or rulings on similar transactions, as
discussed above, permits a variety of alternative characterizations in addition
to the position to be taken that the Partnership Certificates represent equity
interests in a partnership. For example, because the Partnership Certificates
will have certain features characteristic of debt, the Partnership Certificates
might be considered indebtedness of the Tax Partnership or the Seller. Except
as described above, any such characterization would not result in materially
adverse tax consequences to Certificateholders as compared to the consequences
from treatment of the Partnership Certificates as equity in a partnership,
described below. The following discussion assumes that the Partnership
Certificates represent equity interests in a partnership.
Partnership Taxation. As a partnership, a Tax Partnership will not be
subject to federal income tax, but each Certificateholder will be required to
take into account such holder's allocated share of income, gains, losses,
deductions and credits of the Tax Partnership. The Tax Partnership's income
will consist primarily of interest and finance charges earned on the related
Receivables (including appropriate adjustments for market discount, OID, and
bond premium) and any gain upon collection or disposition of such Receivables.
The Tax Partnership's deductions will consist primarily of interest paid or
accrued with respect to any related Notes, servicing and other fees, and losses
or deductions upon collection or disposition of the related Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (with respect
to any series of Partnership Certificates, the Owner Trust Agreement and other
related documents). The Owner Trust Agreement for a Tax Partnership will
provide that the Certificateholders will be allocated taxable income of the
related Tax Partnership for each month equal to their allocable share of the
sum of (1) the Pass Through Rate, if any, on the related Partnership
Certificates for such month; (2) an amount equivalent to interest that accrues
during such month on amounts previously due on such Partnership Certificates
but not yet distributed; (3) any Tax Partnership income attributable to
discount on the related Receivables that corresponds to any excess of the
principal amount of the Partnership Certificates over their initial issue
price; and (4) any Prepayment Surplus payable to holders of the Partnership
Certificates for such month. If the Tax Partnership issues any Strip Notes or
Strip Certificates, it will also provide that the related Certificateholders
will be allocated taxable income of such Tax Partnership for each month in the
amounts described in the related prospectus supplement. All taxable income of
the Tax Partnership remaining after the allocations to the Certificateholders
will be allocated to the Seller. It is believed that the allocations described
above will be valid under applicable Treasury regulations, although no
assurance can be given that the IRS would not require a greater amount of
income to be allocated to Certificateholders. Moreover, even under the
foregoing a Certificateholder may be allocated net income in an amount that
exceeds the amount of cash distributed to such Certificateholder. Thus, cash
method holders will in effect be required to report income from the Partnership
Certificates on the accrual method. In addition, because tax allocations and
tax reporting will be done on a uniform basis for all Certificateholders but
Certificateholders may be purchasing Partnership Certificates at different
times and at different prices, Certificateholders may be required to report on
their tax returns taxable income that is greater or less than the amount
reported to them by the related Tax Partnership.
Additionally, if the Tax Partnership were deemed to be engaged in a trade or
business for purposes of section 512 of the Code, all of the taxable income
allocated to a Certificateholder that is
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a pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will likely constitute "unrelated
business taxable income" generally taxable to such a holder under the Code. In
any event, most of the income allocated to such Certificateholders will be
taxable under the rules applicable to unrelated debt financed income.
An individual taxpayer may generally deduct miscellaneous itemized
deductions (which do not include interest expense) only to the extent they
exceed 2% of adjusted gross income and certain additional limitations may
apply. Those limitations would apply to an individual Certificateholder's share
of expenses of a Tax Partnership (including fees to the Servicer) and might
result in such holder being taxed on an amount of income that exceeds the
amount of cash actually distributed to such holder over the life of such Tax
Partnership.
Each Tax Partnership intends to make all tax calculations relating to income
and allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Receivable, a Tax
Partnership might be required to incur additional expense but it is believed
that there would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Receivables were not and will
not be issued with OID and, therefore, a Tax Partnership should not have OID
income. However, the purchase price paid by such Tax Partnership for the
related Receivables may be greater or less than the remaining principal balance
of such Receivables at the time of purchase. If so, the Receivables will have
been acquired at a premium or market discount, as the case may be. As indicated
above, each Tax Partnership will make this calculation on an aggregate basis,
but might be required to recompute it on a Receivable by Receivable basis.
Each Tax Partnership will make an election that will result in any market
discount on the related Receivables being included in income currently as such
discount accrues over the life of such Receivables. As indicated above, a
portion of such market discount income will be allocated to Certificateholders.
Section 708 Termination. Under Section 708 of the Code, a Tax Partnership
will be deemed to terminate for federal income tax purposes if 50% or more of
the capital and profits interests in such Tax Partnership are sold or exchanged
within a 12-month period. If such a termination occurs, a Tax Partnership will
be considered to contribute all of its assets to a new Tax Partnership in
exchange for all of the interests in the new Tax Partnership. Immediately
thereafter, the original Tax Partnership will be deemed to distribute the
interests in the new Tax Partnership to the purchasing Certificateholder and
all remaining Certificateholders in proportion to their interests in the
original Tax Partnership in liquidation of the original Tax Partnership. A Tax
Partnership will not comply with certain technical requirements that might
apply when such a constructive termination occurs. As a result, such Tax
Partnership may be subject to certain tax penalties and may incur additional
expenses if it is required to comply with those requirements. Furthermore, a
Tax Partnership might not be able to comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale or other taxable disposition of Partnership Certificates
in an amount equal to the difference between the amount realized and the
seller's tax basis in the Partnership Certificates sold. A Certificateholder's
tax basis in a Partnership Certificate will generally equal his cost increased
by his share of the related Tax Partnership's income (includible in his income)
for the current and prior taxable years and decreased by any distributions
received with respect to such Partnership Certificate. In addition, both tax
basis in the Partnership Certificates and the amount realized on a sale of a
Partnership Certificate would include the holder's share of any related Notes
and other liabilities of such Tax Partnership. A holder acquiring Partnership
Certificates of the same series at different prices may be required to maintain
a single aggregate adjusted tax basis in such Partnership Certificates, and,
upon
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a sale or other taxable disposition of some of the Partnership Certificates,
allocate a pro rata portion of such aggregate tax basis to the Partnership
Certificates sold (rather than maintaining a separate tax basis in each
Partnership Certificate for purposes of computing gain or loss on a sale or
other taxable disposition of that Partnership Certificate).
Any gain on the sale or other taxable disposition of a Partnership
Certificate attributable to the holder's share of unrecognized accrued market
discount on the related Receivables would generally be treated as ordinary
income to the holder and would give rise to special tax reporting requirements.
No Tax Partnership expects to have any other assets that would give rise to
such special reporting requirements. Thus, to avoid those special reporting
requirements, each Tax Partnership will elect to include market discount in
income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Partnership Certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the Partnership
Certificates.
Allocations Between Transferors and Transferees. In general, each Tax
Partnership's taxable income and losses will be determined monthly and the tax
items for a particular calendar month will be apportioned among the
Certificateholders in proportion to the principal amount of the Partnership
Certificates or a fractional share of the Strip Notes or Strip Certificates
owned by them as of the first Record Date following the end of such month. As a
result, a holder purchasing Partnership Certificates may be allocated tax items
(which will affect its tax liability and tax basis) attributable to periods
before its actual purchase.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of a Tax Partnership might be reallocated among the Certificateholders. The
Trustee is authorized to revise a Tax Partnership's method of allocation
between transferors and transferees to conform to a method permitted by future
regulations.
Section 754 Election. In the event that a Certificateholder sells its
Partnership Certificate for greater (less) than its adjusted basis therefor,
the purchasing Certificateholder will have a higher (lower) basis in the
Partnership Certificates than the selling Certificateholder had. The tax basis
of the related Tax Partnership's assets would not be adjusted to reflect that
higher (or lower) basis unless such Tax Partnership were to file an election
under Section 754 of the Code. In order to avoid the administrative
complexities that would be involved in keeping accurate accounting records, as
well as potentially onerous information reporting requirements, a Tax
Partnership will not make such an election. As a result, Certificateholders
might be allocated a greater or lesser amount of Tax Partnership income than
would be based on their own purchase price for Partnership Certificates.
Administrative Matters. For each Tax Partnership, the related Trustee is
required to maintain complete and accurate books of each Tax Partnership. Such
books will be maintained for financial reporting and tax purposes on an accrual
basis and the fiscal year of each Tax Partnership will be the calendar year.
The Trustee will file a partnership information return (IRS Form 1065) with the
IRS for each taxable year of such Tax Partnership and will report each
Certificateholder's allocable share of items of Tax Partnership income and
expense to holders and the IRS on Schedule K-1. Any person that holds
Partnership Certificates as a nominee at any time during a calendar year is
required to furnish the related Tax Partnership with a statement containing
certain information on the nominee, the beneficial owners and the Partnership
Certificates so held. Each Tax Partnership will provide the Schedule K-1
information to nominees that fail to provide such Tax Partnership with the
information statement described in the preceding sentence and such nominees
will be required to forward such information to the beneficial owners of the
related Partnership Certificates. Generally,
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holders must file tax returns that are consistent with the information return
filed by the related Tax Partnership or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
The Seller, as the tax matters partner for each Tax Partnership, will be
responsible for representing the Certificateholders in any dispute with the
IRS. The Code provides for administrative examination of a partnership as if
the partnership were a separate and distinct taxpayer. Generally, the statute
of limitations for partnership items does not expire before three years after
the date on which the partnership information return is filed. Any adverse
determination following an audit of the return of a Tax Partnership by the
appropriate taxing authorities could result in an adjustment of the returns of
the Certificateholders and, under certain circumstances, a Certificateholder
may be precluded from separately litigating a proposed adjustment to the items
of the related Tax Partnership. An adjustment could result in an audit of a
Certificateholder's returns and adjustments of items not related to the income
and losses of the related Tax Partnership.
Tax Consequences to Foreign Certificateholders. It is not clear whether any
Tax Partnership would be considered to be engaged in a trade or business in the
United States for purposes of federal withholding taxes with respect to non-
U.S. persons because there is no clear authority regarding that issue under
facts substantially similar to those described in this prospectus. Although it
is not expected that any Tax Partnership would be engaged in a trade or
business in the United States for such purposes, such Tax Partnership will
withhold as if it were so engaged in order to protect such Tax Partnership from
possible adverse consequences of a failure to withhold. It is expected that
each Tax Partnership will withhold on the portion of its taxable income that is
allocable to foreign Certificateholders, as if such income were effectively
connected to a U.S. trade or business, at a rate of 35% for foreign holders
that are taxable as corporations and 39.6% for all other foreign holders.
Subsequent adoption of Treasury regulations or issuance of other administrative
pronouncements may require a Tax Partnership to change its withholding
procedures. In determining a holder's non-U.S. status, a Tax Partnership may
generally rely on the holder's certification of non-U.S. status signed under
penalties of perjury.
Each foreign holder might be required to file a U.S. individual or corporate
income tax return and pay tax (including, in the case of a corporation, the
branch profits tax) on its share of the related Tax Partnership's income. Each
foreign holder must obtain a taxpayer identification number from the IRS and
submit that number to the related Tax Partnership on Form W-8 in order to
assure appropriate crediting of the taxes withheld. A foreign holder generally
would be entitled to file with the IRS a claim for refund with respect to taxes
withheld by the related Partnership, taking the position that no taxes were due
because such Tax Partnership was not engaged in a U.S. trade or business.
However, the IRS may assert that the tax liability should be based on gross
income, and no assurance can be given as to the appropriate amount of tax
liability.
Backup Withholding. Distributions made on any Partnership Certificates and
proceeds from the sale of such Partnership Certificates will be subject to a
"backup" withholding tax of 31% if, as discussed above with respect to the
Notes, the Certificateholder fails to comply with certain identification
procedures, unless the holder is an exempt recipient under applicable
provisions of the Code.
Tax Non-Entity Certificates
Classification of Tax Non-Entities and Tax Non-Entity Certificates. With
respect to Certificates identified in the related prospectus supplement as Tax
Non-Entity Certificates and which are entirely owned by the Seller, the Seller
and the Servicer will agree, pursuant to the "check-the-box" Treasury
Regulations, to treat the Tax Non-Entity as a division of the Seller, and hence
a disregarded entity, for federal income tax purposes. In other words, for
federal income tax purposes, the Seller will be treated as the owner of all the
assets of the Tax Non-Entity and the obligor of all the liabilities of the
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Tax Non-Entity. Under the "check-the-box" Treasury Regulations, unless it is
treated as a Tax Trust for federal income tax purposes, an unincorporated
domestic entity with more than one equity owner is automatically classified as
a Tax Partnership for federal income tax purposes. If the trust is classified
as a Tax Non-Entity when all its equity interests are wholly-owned by the
Seller and if Certificates are then sold or issued in any manner which results
in there being more than one Certificateholder, the trust will be treated as a
Tax Partnership.
If Certificates are issued to more than one person, the Seller and the
Servicer will agree, and the applicable Certificateholders will agree by their
purchase, to treat the trust as a Tax Partnership for purposes of federal,
state and local income and franchise tax purposes, with the partners of such
partnership being the Certificateholders (including the Seller) and the Notes
being debt of such partnership.
Risks of Alternative Characterization. If a Tax Non-Entity were an
association or a "publicly traded partnership" taxable as a corporation for
federal income tax purposes, it would be subject to corporate income tax as
discussed above under "--Partnership Certificates--Classification of
Partnerships and Partnership Certificates."
CERTAIN STATE TAX MATTERS
Most of the activities to be undertaken by the Servicer will take place in
the State of Illinois. The State of Illinois imposes a state income tax on
individuals, corporations, partners in partnerships and beneficiaries of trusts
earning income in, or as residents of, the State of Illinois. The State of
Illinois imposes a Personal Property Replacement Income Tax ("Illinois
Replacement Tax") on individuals, corporations, partnerships and trusts earning
income in, or as residents of, the State of Illinois. The State of Illinois
also imposes a franchise tax on corporations doing business in Illinois. Most
of the activities to be undertaken by the Servicer in servicing and collecting
the Receivables will take place in Illinois and, if such activities were
attributed to a Tax Partnership, could result in the imposition of the Illinois
Replacement Tax on such Tax Partnership. This discussion is based upon present
provisions of Illinois statutes and the regulations promulgated thereunder, and
applicable judicial or ruling authority, all of which are subject to change,
which change may be retroactive. No ruling on any of the issues discussed below
has been or will be sought from the Illinois Department of Revenue.
The Notes
If the Notes are characterized as indebtedness for federal income tax
purposes, in the opinion of Tax Counsel, although the matter is not free from
doubt, this treatment would also apply for Illinois tax purposes. If the Notes
are characterized as debt, Noteholders not otherwise subject to taxation in
Illinois will not, although the matter is not free from doubt, become subject
to such taxes solely because of their ownership of Notes. Noteholders already
subject to taxation in Illinois, however, could be required to pay tax on or
measured by interest income (including original issue discount, if any)
generated by, and on gain from the disposition of, the Notes.
Trust Certificates
If the arrangement created by the Trust Agreement is a Tax Trust which is
treated as a grantor trust under sections 671 through 679 of the Code for
federal income tax purposes, in the opinion of Tax Counsel, although the matter
is not free from doubt, the same treatment would also apply for Illinois tax
purposes. In such case, the Tax Trust should not be treated as earning income
in the State of Illinois, but rather should be viewed as a passive holder of
investments and, as a result, should not be subject to the Illinois Replacement
Tax (which, if applicable, could possibly result in reduced distributions to
Noteholders and Certificateholders).
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Partnership Certificates
If the arrangement created by the Trust Agreement is a Tax Partnership which
is treated as a partnership (not taxable as a corporation) for federal income
tax purposes, the same treatment would also apply for Illinois tax purposes. In
such case, the Tax Partnership should not be treated as earning income in the
State of Illinois but rather should be viewed as a passive holder of
investments and, as a result, should not be subject to the Illinois Replacement
Tax (which, if applicable, could possibly result in reduced distributions to
Noteholders and Certificateholders).
Under current law, Certificateholders that are nonresidents of the State of
Illinois and are not otherwise subject to Illinois income tax and Illinois
Replacement Tax should not be subject to Illinois income tax and Illinois
Replacement Tax on income from a Tax Trust or a Tax Partnership. In any event,
classification of the arrangement as a "grantor trust" or a "partnership" would
not cause a Certificateholder not otherwise subject to taxation in Illinois to
pay Illinois tax on income beyond that derived from the Certificates.
Certificateholders already subject to taxation in Illinois, however, could be
required to pay tax on or measured by interest income (including original issue
discount, if any) generated by, and on gain from the disposition of, Notes and
Certificates.
Tax Non-Entity Certificates
If the arrangement created by the Trust Agreement is a Tax Non-Entity
treated as a division of the Seller, and hence a disregarded entity, for
federal income tax purposes, the same treatment would also apply for Illinois
tax purposes. In such case, the Seller will be treated as the owner of all the
assets and the obligor of all the liabilities of the Tax Non-Entity. As a
result, the Tax Non-Entity should not be treated as earning income in the State
of Illinois and should not be subject to the Illinois Replacement Tax (which,
if applicable, could possibly result in reduced distributions to Noteholders
and Certificateholders).
Risks of Alternative Characterization
If Trust Certificates, Partnership Certificates or Tax Non-Entity
Certificates were instead treated as ownership interests in an association
taxable as a corporation or a "publicly traded partnership" taxable as a
corporation for federal income tax purposes, then the hypothetical entity could
be subject to the Illinois income tax, the Illinois Replacement Tax, or the
Illinois franchise tax (which, if applicable, could result in reduced
distributions to Noteholders and Certificateholders). A Noteholder or
Certificateholder not otherwise subject to tax in Illinois should not itself
become subject to Illinois income tax or Illinois Replacement Tax as a result
of its mere ownership of an interest in such an entity.
Other States
Certain servicing and collection activities will be undertaken by the
Servicer in other jurisdictions throughout the United States, including
California, Georgia, New Jersey, Ohio, Texas and Wisconsin, and by the
Indenture Trustee in Delaware. The above discussion does not address the tax
treatment of any Tax Trust, Tax Partnership, Tax Non-Entity, Notes,
Certificates, Noteholders or Certificateholders under any of these, or any
other, state or local tax laws. You are urged to consult with your own tax
advisors regarding the state and local tax treatment of any Tax Trust, Tax
Partnership or Tax Non-Entity, as well as any state and local tax consequences
from purchasing, holding and disposing of Notes or Certificates.
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ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans, all as defined at Section 3(3) of
ERISA or described in Section 4975(e)(i) of the Code (each a "Benefit Plan,"
collectively, "Benefit Plans"), from engaging in certain transactions with
persons that are "parties in interest" under ERISA or "disqualified persons"
under the Code with respect to such Benefit Plan. A violation of these
"prohibited transaction" rules may generate excise tax and other liabilities
under ERISA and the Code for such persons. For purposes of the "prohibited
transaction" rules and the following discussion, certain insurance company
accounts, bank collective funds and other entities whose assets include
significant investment by Benefit Plans are treated as if they are investing
directly on behalf of each such Benefit Plan, under a regulation issued by the
U.S. Department of Labor (the "Plan Assets Regulation").
The acquisition or holding of securities by or on behalf of a Benefit Plan
could in some circumstances be considered to give rise to a prohibited
transaction if the Seller, the applicable Trustee, the Servicer or any of their
respective affiliates is or becomes a party in interest or a disqualified
person with respect to such Benefit Plan. Certain exemptions from the
prohibited transaction rules granted by the U.S. Department of Labor ("DOL")
could be applicable to the purchase and holding of securities by a Benefit Plan
depending on the type and circumstances of the plan fiduciary making the
decision to acquire such securities. Included among these exemptions are:
Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding investments by
insurance company pooled separate accounts; PTCE 91-38, regarding investments
by bank collective investment funds; and PTCE 84-14, regarding transactions
effected by "qualified professional asset managers." In addition, it is
anticipated that an applicable Underwriter's Exemption as discussed below will
apply to the purchase of Class A Certificates.
Certain transactions involving a Trust might also be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased securities if assets of the Trust were deemed to be assets of
the Benefit Plan. Under the Plan Assets Regulation, the assets of the Trust
would be treated as plan assets of a Benefit Plan for the purposes of ERISA and
the Code only if the Benefit Plan acquired an "equity interest" in the Trust
and none of the exceptions contained in the Plan Assets Regulation was
applicable. An equity interest is defined under the Plan Assets Regulation as
an interest other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features.
The likely treatment under the Plan Assets Regulation of Owner Securities
will be discussed in the related prospectus supplement. It is anticipated that
Notes issued by an Owner Trust will not be subject to the Plan Assets
Regulation and that they will therefore be available for investment by a
Benefit Plan subject to a determination by the fiduciary of such Benefit Plan
that such purchase will not constitute a nonexempt prohibited transaction and
is otherwise an appropriate investment. It is not anticipated that Owner
Certificates will be available for purchase by a Benefit Plan.
It is anticipated that the purchase of Class A Certificates by Benefit Plans
will subject the related Grantor Trust to the Plan Assets Regulation. However,
unless otherwise provided in an related prospectus supplement, Class A
Certificates issued by a Grantor Trust will be made available for purchase by a
Benefit Plan in reliance on an administrative exemption (an "Underwriter's
Exemption") which has been granted by the DOL to the underwriter specified in
the related prospectus supplement. The Underwriter's Exemption prevents the
application of certain of the prohibited transaction and conflict of interest
rules of ERISA with respect to the initial purchase, the holding and the
subsequent resale by Benefit Plans of certificates in pass-through trusts with
respect
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to which such underwriter is the sole underwriter or the manager or co-manager
of the underwriting syndicate and that consist of certain receivables, loans
and other obligations that meet the conditions and requirements of such
Underwriter's Exemption. The receivables covered by an Underwriter's Exemption
include motor vehicle installment obligations such as the Receivables. An
Underwriter's Exemption will apply only if specific conditions are met. Unless
otherwise provided in the related prospectus supplement, the Seller believes
that an Underwriter's Exemption will apply to the acquisition and holding of
each series of Class A Certificates by Benefit Plans and that all conditions of
such Underwriter's Exemption other than those within the control of the
investors have been or will be met.
Among the conditions which must be satisfied for an Underwriter's Exemption
to apply to the acquisition by a Benefit Plan of Class A Certificates are the
following:
(1) The acquisition of the Class A Certificates by a Benefit Plan is on
terms (including the price for the Certificates) that are at least as
favorable to the Benefit Plan as they would be in an arm's-length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Class A Certificates
acquired by the Benefit Plan are not subordinated to the rights and
interests evidenced by other certificates of the related Grantor Trust;
(3) The Class A Certificates acquired by the Benefit Plan have received
a rating at the time of such acquisition that is in one of the three
highest generic rating categories from Standard & Poor's Ratings Services,
Moody's Investors Service, Inc. or Fitch, Inc. (formerly named Fitch IBCA,
Inc.);
(4) The sum of all payments made to the related underwriters in
connection with the distribution of such Class A Certificates represents
not more than reasonable compensation for underwriting such Class A
Certificates. The sum of all payments made to and retained by the Seller
pursuant to the sale of the Receivables to the related Grantor Trust
represents not more than the fair market value of such Receivables. The sum
of all payments made to and retained by the Servicer represents not more
than reasonable compensation for the Servicer's services as servicer under
the related Agreement and reimbursement of the Servicer's reasonable
expenses in connection therewith;
(5) The Grantor Trustee is not an "affiliate" (as defined in the
exemption) of any other member of the Restricted Group (as defined below);
(6) The Benefit Plan investing in the Class A Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of the
SEC under the Securities Act of 1933, as amended (the "Securities Act");
and
(7) The related Grantor Trust satisfies the following requirements:
(a) the corpus of such Grantor Trust consists solely of assets of
the type which have been included in other investment pools,
(b) certificates in such other investment pools have been rated in
one of the three highest generic rating categories of Standard & Poor's
Ratings Services, Moody's Investors Service, Inc., or Fitch, Inc.
(formerly named Fitch IBCA, Inc.) for at least one year prior to the
Benefit Plan's acquisition of Class A Certificates, and
(c) certificates evidencing interests in such other investment pools
have been purchased by investors other than Benefit Plans for at least
one year prior to any Benefit Plan's acquisition of Class A
Certificates.
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<PAGE>
Certain transactions are not covered by an Underwriter's Exemption or any
other exception. An Underwriter's Exemption does not exempt the acquisition and
holding of Class A Certificates by Benefit Plans sponsored by the Seller, the
underwriters, the Grantor Trustee, the Servicer or any "obligor" (as defined in
the Exemption) with respect to Receivables included in the related Grantor
Trust constituting more than 5% of the aggregate unamortized principal balance
of the assets in such Grantor Trust or any affiliate of such parties (the
"Restricted Group"). Unless otherwise provided in the related prospectus
supplement, as of the date thereof, Receivables attributable to a single
Obligor included in any Grantor Trust will not constitute more than five
percent of the aggregate unamortized principal balance of such Grantor Trust.
Moreover, the exemptive relief from the self-dealing/conflict of interest
prohibited transaction rules of ERISA is available only if, among other
requirements:
. the person who has discretionary authority or renders investment advice
with respect to the investment of a Benefit Plan's assets in the Class A
Certificates (or such person's affiliate) is not an Obligor with respect
to more than five percent of the fair market value of the assets
contained in the related Grantor Trust,
. a Benefit Plan's investment in such Class A Certificates does not exceed
25% of all of the Class A Certificates of such series outstanding at the
time of the acquisition,
. immediately after the acquisition, no more than 25% of the assets of a
Benefit Plan with respect to which the person who has discretionary
authority or renders investment advice are invested in certificates
representing an interest in a trust containing assets sold or serviced
by the same entity and
. in the case of the acquisition of Class A Certificates in connection
with their initial issuance, at least 50% of such Class A Certificates
are acquired by persons independent of the Restricted Group and at least
50% of the aggregate interest in the related Grantor Trust is acquired
by persons independent of the Restricted Group.
An applicable Underwriter's Exemption will also apply to transactions in
connection with the servicing, management and operation of the related Grantor
Trust, provided that, in addition to the general requirements described above,
(a) such transactions are carried out in accordance with the terms of a binding
pooling and servicing agreement and (b) the pooling and servicing agreement is
provided to, or described in all material respects in the prospectus or private
placement memorandum provided to investing Benefit Plans before the Plans
purchase Class A Certificates issued by the related Grantor Trust. Each Grantor
Trust Pooling and Servicing Agreement will be a pooling and servicing agreement
as defined in the Underwriter's Exemption. All transactions relating to the
servicing, management and operations of each Grantor Trust will be carried out
in accordance with the related Grantor Trust Pooling and Servicing Agreement,
and such Grantor Trust Pooling and Servicing Agreement will be described in all
material respects in "The Transfer and Servicing Agreements" and in the related
prospectus supplement.
If you are a Benefit Plan fiduciary considering the purchase of securities,
you should consult with your counsel with respect to whether a Trust will be
deemed to hold plan assets and the applicability of the Underwriter's Exemption
or another exemption from the prohibited transaction rules and determine on its
own whether all conditions have been satisfied and whether the securities are
an appropriate investment for a Benefit Plan under ERISA and the Code.
PLAN OF DISTRIBUTION
Upon the terms and subject to the conditions set forth in an underwriting
agreement (the "Underwriting Agreement") with respect to each Trust, the Seller
will agree to sell to each of the underwriters named therein and in the related
prospectus supplement, and each of such underwriters
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<PAGE>
will severally agree to purchase from the Seller, the principal amount of each
class of securities of the related series set forth therein and in the related
prospectus supplement.
In each Underwriting Agreement, the several underwriters will agree, subject
to the terms and conditions set forth therein, to purchase all the securities
described therein which are offered hereby and by the related prospectus
supplement if any such securities are purchased. In the event of a default by
any such underwriter, each Underwriting Agreement will provide that, in certain
circumstances, purchase commitments of the nondefaulting underwriters may be
increased or the Underwriting Agreement may be terminated.
The related prospectus supplement will either:
. set forth the price at which each class of securities being offered
thereby will be offered to the public and any concessions that may be
offered to certain dealers participating in the offering of such
securities or
. specify that the related securities are to be resold by the Underwriters
in negotiated transactions at varying prices to be determined at the
time of such sale. After the initial public offering of any securities,
the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that Navistar Financial and the
Seller will indemnify the underwriters against certain liabilities, including
liabilities under the Securities Act.
The Indenture Trustee may, from time to time, invest the funds in the
Designated Accounts in Eligible Investments acquired from the underwriters.
Under each Underwriting Agreement, the closing of the sale of any class of
securities subject thereto will be conditioned on the closing of the sale of
all other such classes.
The place and time of delivery for the securities will be set forth in the
related prospectus supplement.
LEGAL OPINIONS
Certain legal matters relating to the Notes and the Certificates will be
passed upon for each Trust, the Seller and the Servicer by Steven K. Covey,
Esq., General Counsel of the Seller and the Servicer, and by Kirkland & Ellis,
special counsel to the Seller, each Trust and the Servicer. Certain federal
income tax matters will be passed upon for the Servicer, each Trust and the
Seller by Kirkland & Ellis.
OWNER TRUSTS/GRANTOR TRUSTS
This prospectus provides for the issuance and sale of securities by both
Owner Trusts and Grantor Trusts pursuant to various prospectus supplements.
Each prospectus supplement will provide for the issuance and sale of either:
. Owner Securities issued pursuant to an Owner Trust or
. Class A Certificates issued pursuant to a Grantor Trust.
Where appropriate, this prospectus distinguishes the terms, conditions and
other information which would be applicable to Owner Securities and Owner
Trusts only or to Class A Certificates and
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<PAGE>
Grantor Trusts only. No prospectus supplement will contain information which
represents a fundamental change from the information contained in this
prospectus.
WHERE YOU CAN FIND MORE INFORMATION
The Seller, as originator of each Trust filed a registration statement
relating to the securities with the Securities and Exchange Commission (the
"SEC"). This prospectus is part of a registration statement, but the
registration statement includes additional information.
The Seller will file with the SEC all required annual, monthly and special
SEC reports and other information required about any Trust it originates.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room at 450 Fifth Street, Washington, D.C. 20549.
You can request copies of these documents, upon the payment of a duplicating
fee, by writing to the SEC. Please call the SEC at (800) SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings are
also available to the public on the SEC Internet site (http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information that the Seller
files with it, which means that the Seller can disclose important information
to you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus. Information that the
Seller files later with the SEC will automatically update the information in
this prospectus. In all cases, you should rely on the later information over
different information included in this prospectus or a prospectus supplement.
The Seller incorporates by reference any future annual, monthly and special
reports and proxy materials filed by or on behalf of the Trust with the SEC
until we terminate offering the securities.The Seller's Annual Report on Form
10-K for the fiscal year ended October 31, 1999 (File No. 33-50291) was filed
with the SEC pursuant to the Exchange Act and is incorporated by reference into
and made a part of this prospectus. The Seller is not required to file reports
pursuant to Section 13(a) or 15(d) of the Exchange Act, except for the filing
of Current Reports on Form 8-K dated November 15, 1999, December 15, 1999,
December 17, 1999, January 15, 2000, February 15, 2000, February 22, 2000,
February 29, 2000, March 9, 2000, March 24, 2000, March 30, 2000, May 3, 2000,
May 30, 2000, June 27, 2000, July 31, 2000, September 5, 2000, September 28,
2000, and October 17, 2000 which are incorporated by reference into and made a
part of this prospectus.
As a recipient of this prospectus, you may request a copy of any document
the Seller incorporates by reference into this prospectus, except exhibits to
the documents (unless the exhibits are specifically incorporated by reference),
at no cost, by writing or calling: Navistar Financial Retail Receivables
Corporation, 2850 West Golf Road, Rolling Meadows, Illinois 60008, attention
Corporate Secretary, telephone (847) 734-4000.
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INDEX OF TERMS
The following is a list of the defined terms used in this prospectus and any
accompanying prospectus supplement and the pages on which the definitions of
such terms may be found in this prospectus.
<TABLE>
<CAPTION>
Page
------
<S> <C>
Administration Agreement................................................. 11
Administrative Purchase Payment.......................................... 33
Administrative Receivable................................................ 32
Administrator............................................................ 11
Aggregate Losses......................................................... 29
Aggregate Receivables Balance............................................ 13
APR...................................................................... 13
Available Amount......................................................... 39
Basic Servicing Fee...................................................... 35
Benefit Plan............................................................. 65
Business Day............................................................. 44
Cede..................................................................... 25
Certificate Distribution Account......................................... 34
Certificateholder........................................................ 15, 52
Class A Certificate Balance.............................................. 38
Class A Certificate Pool Factor.......................................... 14
Class A Certificateholders............................................... 9, 24
Class A Certificates..................................................... 7
Class A Distributable Amount............................................. 38
Class A Interest Carryover Shortfall..................................... 39
Class A Interest Distributable Amount.................................... 38
Class A Percentage....................................................... 24
Class A Principal Carryover Shortfall.................................... 39
Class A Principal Distributable Amount................................... 38
Class B Certificate Balance.............................................. 38
Class B Certificateholders............................................... 38
Class B Certificates..................................................... 7
Class B Distributable Amount............................................. 38
Class B Interest Distributable Amount.................................... 38
Class B Percentage....................................................... 24
Class B Principal Distributable Amount................................... 38
clearing agency.......................................................... 25
clearing corporation..................................................... 25
Closing Date............................................................. 30
Code..................................................................... 51
Collected Interest....................................................... 39
Collected Principal...................................................... 40
Collection Account....................................................... 33
Custodian Agreement...................................................... 8
Cutoff Date.............................................................. 8
Definitive Certificates.................................................. 27
Definitive Notes......................................................... 27
Definitive Securities.................................................... 27
Delinquency Percentage................................................... 29
Depository............................................................... 25
</TABLE>
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<TABLE>
<CAPTION>
Page
----
<S> <C>
Designated Accounts........................................................ 34
Distribution Date.......................................................... 17
DOL........................................................................ 65
DTC........................................................................ 25
Eligible Deposit Account................................................... 35
Eligible Institution....................................................... 35
Eligible Investments....................................................... 34
Equal Payment Balloon Receivables.......................................... 12
Equal Payment Fully Amortizing Receivables................................. 12
Equal Payment Skip Receivables............................................. 12
ERISA...................................................................... 65
Events of Default.......................................................... 18
Exchange Act............................................................... 25
Financed Vehicles.......................................................... 8
foreign person............................................................. 54
Full Prepayment............................................................ 37
Funding Period............................................................. 8
Grantor Certificateholders................................................. 38
Grantor Certificates....................................................... 7
Grantor Trust.............................................................. 7
Grantor Trust Pooling and Servicing Agreement.............................. 7
Grantor Trustee............................................................ 8
Guaranties................................................................. 8
Illinois Replacement Tax................................................... 63
Indenture.................................................................. 7
Indenture Trustee.......................................................... 7
Indirect Participants...................................................... 25
Initial Aggregate Receivables Balance...................................... 8
Initial Gross Receivable Balance........................................... 13
Initial Receivable Balance................................................. 13
Insolvency Event........................................................... 44
Interest Rate.............................................................. 16
International.............................................................. 8
International Purchase Obligations......................................... 8
Investment Earnings........................................................ 34
IRS........................................................................ 51
Level Principal Balloon Receivables........................................ 12
Level Principal Fully Amortizing Receivables............................... 12
Level Principal Skip Receivables........................................... 12
Liquidating Receivable..................................................... 30
Liquidation Expenses....................................................... 36
Liquidation Proceeds....................................................... 30
Monthly Advance............................................................ 37
Monthly Period............................................................. 35
Moody's.................................................................... 34
Navistar Financial......................................................... 4
NIC........................................................................ 44
Note Distribution Account.................................................. 33
Note Pool Factor........................................................... 14
Noteholder................................................................. 15
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Notes..................................................................... 7
Obligor................................................................... 12
OID....................................................................... 52
Optional Purchase Proceeds................................................ 47
Other Receivables......................................................... 12
Owner Certificateholders.................................................. 9
Owner Certificates........................................................ 7
Owner Securities.......................................................... 7
Owner Securityholders..................................................... 8
Owner Trust............................................................... 7
Owner Trust Agreement..................................................... 7
Owner Trust Certificate Pool Factor....................................... 14
Owner Trust Pooling and Servicing Agreement............................... 7
Owner Trustee............................................................. 7
Partial Prepayment........................................................ 37
Participants.............................................................. 25
Partnership Certificates.................................................. 51
Pass Through Rate......................................................... 23
Plan Assets Regulation.................................................... 65
Pooling and Servicing Agreement........................................... 8
Pre-Funded Amount......................................................... 8
Pre-Funding Account....................................................... 8
Prepayment................................................................ 36
Prepayment Surplus........................................................ 40
PTCE...................................................................... 65
Purchase Agreement........................................................ 30
Rating Agencies........................................................... 34
Receivable................................................................ 8
Receivable Balance........................................................ 13
Receivables Pool.......................................................... 8
Record Date............................................................... 24
Related Documents......................................................... 21
Related Property.......................................................... 8
Remaining Gross Balance................................................... 29
Required Deposit Rating................................................... 34
Reserve Account........................................................... 8, 41
Restricted Group.......................................................... 67
Retail Notes.............................................................. 11
Rules..................................................................... 26
S&P....................................................................... 34
Schedule of Receivables................................................... 31
Scheduled Payment......................................................... 12
SEC....................................................................... 69
Securities Act............................................................ 66
Security Owner............................................................ 25
Seller.................................................................... 1, 4
Servicer.................................................................. 1
Servicer Default.......................................................... 44
Short-Term Note........................................................... 53
Specified Reserve Account Balance......................................... 41
Specified Subordination Spread Account Balance............................ 41
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Strip Certificates......................................................... 23
Strip Notes................................................................ 16
Subordination Spread Account............................................... 8
Subsequent Receivables..................................................... 8
Subsequent Transfer Date................................................... 31
Supplemental Servicing Fee................................................. 35
Tax Counsel................................................................ 52
Tax Non-Entity............................................................. 51
Tax Non-Entity Certificates................................................ 51
Tax Partnership............................................................ 51
Tax Trust.................................................................. 51
TIA........................................................................ 22
Total Servicing Fee........................................................ 35
Transfer and Servicing Agreements.......................................... 30
Trust...................................................................... 7
Trust Certificates......................................................... 51
Trust Property............................................................. 8
Trustee.................................................................... 8
UCC........................................................................ 33
Underwriter's Exemption.................................................... 65
Underwriting Agreement..................................................... 67
voting interests........................................................... 24
Warranty Payment........................................................... 32
Warranty Receivable........................................................ 32
</TABLE>
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Prospectus Supplement
$764,710,097.53
Navistar Financial 2000-B Owner Trust
$140,000,000 Class A-1
6.73% Asset Backed Notes
$232,400,000 Class A-2
6.66% Asset Backed Notes
$184,900,000 Class A-3
6.67% Asset Backed Notes
$178,733,000 Class A-4
6.78% Asset Backed Notes
$28,677,097.53 Class B
7.03% Asset Backed Notes
Navistar Financial Retail Receivables Corporation
Seller
Navistar Financial Corporation
Servicer
Joint Lead Managers of the Class A Notes
Banc of America Securities LLC Salomon Smith Barney
(Bookrunner)
Co-Managers of the Class A Notes
Banc One Capital Markets, Inc. Chase Securities Inc.
Underwriter of the Class B Notes
Banc of America Securities LLC
October 19, 2000
You should rely only on the information provided in the prospectus and this
prospectus supplement. We have not authorized anyone to provide you with other
or different information. You should not assume that the information in the
prospectus and this prospectus supplement is accurate on any date other than
the dates stated on their respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the Class A Notes or the Class B Notes and with respect to
their unsold allotments or subscriptions. In addition, all dealers selling the
Class A Notes or the Class B Notes will deliver a prospectus supplement and
prospectus until January 17, 2001.
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