<PAGE>
Filed Pursuant to Rule 424(b)(5)
File Number 333-91557, 333-91557-01
[Conseco Logo]
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 10, 1999)
$575,000,000 (Approximate)
Conseco Finance Corp.
Servicer
Conseco Finance Securitizations Corp.
Seller
Conseco Finance Vehicle Trust 1999-B
Floating Rate Asset-Backed Notes
----------------
The trust will issue three classes of securities, two of which are offered
under this prospectus supplement.
<TABLE>
<CAPTION>
Approximate Interest Underwriting Proceeds to
Class Principal Amount Rate Price to Public Discount Seller
----- ---------------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Class A Notes........... $536,957,000 (1) 100.00% 0.12% 99.88%
Class M Notes........... 38,043,000 (2) 100.00% 0.25% 99.75%
------------ --- ------------ ----------- ---------------
Total................. $575,000,000 $575,000,000 $739,455.90 $574,260,544.10
</TABLE>
- --------
(1) One-month LIBOR plus 0.160%, except as described more fully in this
prospectus supplement.
(2) One-month LIBOR plus 0.420%, except as described more fully in this
prospectus supplement.
The approximate principal amount of the classes of notes listed above may
vary plus or minus 5%. The price to public will be the percentage total in the
table above plus any accrued interest beginning on December 16, 1999.
Consider carefully the risk factors beginning on page S-9 in this prospectus
supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
These notes will be delivered on or about December 16, 1999.
The underwriter named below will offer the notes to the public at the
offering price listed on this cover page and will receive the discount listed
above. See "Underwriting" on page S-45 in this prospectus supplement and "Plan
of Distribution" on page 53 in the prospectus.
----------------
Credit Suisse First Boston
The date of this prospectus supplement is December 10, 1999.
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary of the Terms of the Notes........................................ S-4
Risk Factors............................................................. S-9
The Trust................................................................ S-12
The Trust Property....................................................... S-13
The Contract Pool........................................................ S-15
Conseco Finance Corp..................................................... S-21
Credit Suisse First Boston............................................... S-23
Relationship between the Bank and Credit Suisse Group.................... S-28
Yield and Prepayment Considerations...................................... S-28
Description of the Notes................................................. S-32
Description of the Trust Documents and Indenture......................... S-40
Federal and State Income Tax Consequences................................ S-43
ERISA Considerations..................................................... S-43
Underwriting............................................................. S-45
Legal Matters............................................................ S-46
Annex I.................................................................. A-1
Prospectus
Important Notice about Information Presented in this Prospectus and the
Accompanying Prospectus Supplement...................................... 2
The Trusts............................................................... 3
The Contracts............................................................ 4
Conseco Finance Corp..................................................... 5
Conseco Finance Securitizations Corp..................................... 7
Yield and Prepayment Considerations...................................... 7
Pool Factor.............................................................. 8
Use of Proceeds.......................................................... 9
The Certificates......................................................... 9
The Notes................................................................ 10
Information Regarding the Securities..................................... 17
Description of the Trust Documents....................................... 21
Legal Aspects of the Contracts........................................... 34
Federal Income Tax Consequences.......................................... 39
State Income Tax Consequences............................................ 52
ERISA Considerations..................................................... 53
Plan of Distribution..................................................... 53
Legal Matters............................................................ 54
Experts.................................................................. 54
Glossary................................................................. 56
</TABLE>
You should rely only on the information contained in this prospectus
supplement and the prospectus. Conseco Finance, Conseco Securitizations and the
underwriter have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. Conseco Finance, Conseco Securitizations and the
underwriter are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
This document consists of a prospectus supplement and a prospectus. The
prospectus provides general information about Conseco Finance, about its
commercial truck lending business, and about the securities, some of which will
not be applicable to a particular series,
S-2
<PAGE>
including this series. This prospectus supplement contains more detailed
information about the specific terms of this series of securities. If the
description of the terms of this series of securities varies between this
prospectus supplement and the prospectus, you should rely on the information in
this prospectus supplement.
If you have received a copy of this prospectus supplement and prospectus in
an electronic format, and if the legal prospectus delivery period has not
expired, you may obtain a paper copy of this prospectus supplement and
prospectus from Conseco Finance, Conseco Securitizations or the underwriter by
asking for it.
No prospectus regarding these securities has been or will be prepared in the
United Kingdom pursuant to the United Kingdom Public Offers of Securities
Regulation 1995. These securities may not be offered or sold, or re-offered or
re-sold, to persons in the United Kingdom, except (1) to persons whose ordinary
activities involve them in acquiring, holding, managing and disposing of
investments (as principal or agent) for the purpose of their businesses, or (2)
in circumstances that will not constitute or result in an offer to the public
in the United Kingdom within the meaning of the United Kingdom Public Offers of
Securities Regulation 1995. You may not pass this prospectus supplement and
prospectus, or any other document inviting applications or offers to purchase
securities or offering securities for purchase, to any person in the United
Kingdom who (1) does not fall within article 11 (3) of the Financial Services
Act 1986 (Investment Advisements) (Exemptions) Order 1996 or (2) is not
otherwise a person to whom passing this prospectus supplement and prospectus
would be lawful.
S-3
<PAGE>
SUMMARY OF THE TERMS OF THE NOTES
This summary highlights selected information regarding the notes, and does
not contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of the notes, read this
entire prospectus supplement and the accompanying prospectus. In particular, we
will refer throughout this summary to sections of this prospectus supplement or
the prospectus, or both, which will contain more complete descriptions of the
matters summarized. All these references will be to sections of this prospectus
supplement only unless we note otherwise.
The three classes of securities listed in the table below will be issued by
the trust. The trust will own a pool of contracts financing the purchase of a
variety of commercial trucks and trailers.
<TABLE>
<CAPTION>
Interest Approximate S&P Fitch
Class Rate Principal Amount Rating Rating
- ----- -------- ---------------- ------ -------
<S> <C> <C> <C> <C>
Class A Notes.......................... (1) $536,957,000 A-1+ F1+/AAA
Class M Notes.......................... (2) $ 38,043,000 A-1+ F1+/AA
Class B Certificates................... -- -- -- --
</TABLE>
- --------
(1) One-month LIBOR plus 0.160%, except as described more fully in this
prospectus supplement.
(2) One-month LIBOR plus 0.420%, except as described more fully in this
prospectus supplement.
Conseco Securitizations will not issue or sell the notes unless S&P and Fitch
assign each class the rating listed above.
The rating of each class of notes addresses the likelihood of timely receipt
of interest and ultimate receipt of principal at or before maturity. A security
rating is not a recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the assigning rating agency.
The short-term ratings of the notes are based in part and are dependent on the
rating agencies' assessment of Credit Suisse First Boston, New York Branch's
ability to purchase the notes on January 5, 2001 under the note purchase
agreement. You will be required to tender your notes to the note purchase
agreement counterparty for purchase on that date.
The Class B certificates are not being offered under this prospectus
supplement and prospectus. We are offering all the other classes of securities
listed in the table above. Conseco Finance, or one of its affiliates, initially
will retain the Class B Certificates.
Seller........................ Conseco Finance Securitizations Corp.
Servicer...................... Conseco Finance Corp. Conseco Finance Corp. was
previously named Green Tree Financial
Corporation.
Indenture Trustee............. U.S. Bank Trust National Association, St. Paul,
Minnesota, will be the indenture trustee. For a
more complete description of the indenture
trustee's responsibilities, see "The Notes--The
Indenture Trustee" in the prospectus.
S-4
<PAGE>
Owner Trustee................. Wilmington Trust Company, Wilmington, Delaware.
For a more complete description of the owner
trustee's responsibilities, see "Description of
the Trust Documents--The Trustee" in the
prospectus.
Note Purchase Agreement
Counterparty..................
Credit Suisse First Boston, New York Branch is
the counterparty under a note purchase
agreement with the trust and the indenture
trustee. See "Credit Suisse First Boston" in
this prospectus supplement. The note purchase
agreement counterparty is an affiliate of the
underwriter of the notes. The obligations of
the note purchase agreement counterparty under
the note purchase agreement are solely those of
the note purchase agreement counterparty and
are not guaranteed or insured by any other
entity including the underwriter.
Distribution Date............. The fifteenth day of each month or, if that day
is not a business day, the next business day,
commencing in January 2000. The distribution
date in January 2001 will occur on January 10,
2001.
Record Date................... The business day just before the related
distribution date.
Description of the Notes...... The trust will issue the notes pursuant to the
indenture between the trust and the indenture
trustee. The notes will be debt obligations of
the trust, secured by the contracts and the
other property of the trust.
Distributions on the Distributions on the notes on any distribution
Securities.................... date will be made primarily from amounts
collected on the contracts during the prior
month. On each distribution date the indenture
trustee will apply the amount available to make
distributions on the securities in the
following order of priority:
(1) Interest on the Class A notes;
(2) Interest on the Class M notes;
(3) Principal on the Class A notes;
(4) Principal on the Class M notes;
(5) Any Class A LIBOR carryforward amount;
S-5
<PAGE>
(6) Any Class M LIBOR carryforward amount;
and
(7) Any remaining amount available will be
distributed to the Class B
certificateholders.
No principal will be paid on the Class M notes
until the Class A notes have been retired. You
will be required to tender your notes for
purchase by the note purchase agreement
counterparty on January 5, 2001. The entire
unpaid principal amount of both classes of
notes will be due on January 10, 2001 to the
extent not previously purchased by the note
purchase agreement counterparty or otherwise
paid. It is unlikely that collections on the
contracts will be sufficient to retire the
notes by January 2001. Therefore, you will be
relying on the note purchase agreement
counterparty to purchase your notes on January
5, 2001 in order for you to receive payment in
full on your notes by their maturity date. See
"Description of the Trust Documents and
Indenture--Distributions" for a more detailed
description of the amounts that will constitute
the amount available for any distribution date.
The possible accrual of LIBOR carryforward
amounts is described under "Description of the
Notes--Class A Interest" and "--Class M
Interest." The ratings on the notes do not
address the likelihood of payment of any LIBOR
carryforward amounts.
Note Purchase Agreement and
Mandatory Tender..............
On January 5, 2001, each noteholder will be
required to tender its notes to the note
purchase agreement counterparty for purchase at
a price equal to the unpaid principal balance
of that note, plus all accrued and unpaid
interest thereon, and plus any LIBOR
carryforward amount on that note. The note
purchase agreement counterparty's obligation to
purchase the notes will be governed by the note
purchase agreement. The note purchase agreement
counterparty's obligation to purchase the notes
will be subject to the conditions specified in
the note purchase agreement and described under
"Description of the Notes--Note Purchase
Agreement and Mandatory Tender."
S-6
<PAGE>
Beginning on the distribution date when the
Clean-Up Option............... pool scheduled principal balance of the
contracts is less than 20% of the cut-off date
pool principal balance of the contracts, the
holder of the Class B certificates will have
the right to repurchase all of the outstanding
contracts, at a price sufficient to pay the
aggregate unpaid principal balance of the notes
plus all accrued and unpaid interest.
The Contracts................. The contracts are retail installment sales
contracts and promissory notes for the purchase
of a variety of commercial trucks and trailers.
Conseco Finance and Conseco Securitizations
provide more information about the contracts
and the trucks and trailers in "The Contract
Pool."
Tax Status.................... In the opinion of Conseco Securitizations'
counsel, for federal and Minnesota income tax
purposes, the notes will be characterized as
debt, and the trust will not be characterized
as an association, or publicly traded
partnership, taxable as a corporation. By
purchasing a note, you will agree to treat the
notes as debt. See "Federal and State Income
Tax Consequences" in this prospectus supplement
and "Federal Income Tax Consequences" and
"State Income Tax Consequences" in the
prospectus.
Pre-Funding Account........... If the aggregate principal balance of the
contracts that Conseco Securitizations
transfers to the trust on the closing date is
less than $618,613,843, the indenture trustee
will deposit that difference in a pre-funding
account, and the trust will use those funds to
purchase contracts from time to time until
February 1, 2000. If those funds are not
completely used by February 1, 2000, the
remaining funds will be distributed as
principal on the Class A notes on the February
2000 distribution date.
Final Scheduled Distribution The notes are payable in full on January 10,
Date.......................... 2001, which is 397 days from the date of this
prospectus supplement. Noteholders will be
relying on the note purchase agreement
counterparty to purchase the notes under the
note purchase agreement on January 5, 2001 in
order to receive payment in full on their notes
by the final scheduled distribution date.
S-7
<PAGE>
ERISA Considerations.......... Subject to the conditions described under
"ERISA Considerations," employee benefit plans
that are subject to the Employee Retirement
Income Security Act of 1974 may purchase the
notes.
Reports to Holders of the
Securities....................
Conseco Finance will provide to the holders of
the notes monthly and annual reports about the
notes and the trust. For a more complete
description of the reports you will receive,
please read the section entitled "Description
of the Trust Documents and Indenture--
Statements to Noteholders."
S-8
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the notes.
The trust has limited assets.
Holders of the notes must primarily rely for repayment upon payments on the
contracts and the obligation of the note purchase agreement counterparty under
the note purchase agreement. The trust will not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
contracts. The obligation of the note purchase agreement counterparty under the
note purchase agreement will be subject to the conditions described under
"Description of the Notes--Note Purchase Agreement and Mandatory Tender."
The Class M notes are subordinated.
Distributions of interest on the Class M notes will be subordinated to the
rights of the holders of the Class A notes to receive prior payment of
interest. No principal will be paid on the Class M notes until the Class A
notes have been paid in full. This makes it more likely that the Class M notes
might not receive timely distributions of interest and principal, or might not
receive all the amounts due them.
Conseco Finance has limited delinquency, loan loss and repossession experience.
Conseco Finance began originating installment sales contracts for commercial
trucks and trailers in 1994. Although Conseco Finance has calculated and
presented its delinquency and net loss experience for its servicing portfolio
of truck and trailer loans, you must not assume that the information presented
will reflect actual experience for the contracts owned by the trust. In
addition, you must not assume that the future delinquency, loan loss or
repossession experience of the contracts owned by the trust will be better or
worse than that of Conseco Finance's servicing portfolio. See "The Contract
Pool--Delinquency, Loan Loss and Repossession Information." If the delinquency,
default and loss experience of the contracts owned by the trust is
significantly worse than the historical experience described in this prospectus
supplement, you could suffer a loss on your investment.
Higher than expected delinquencies, higher than expected defaults, or higher
than expected losses after default could result in a loss on your investment.
Payments on the notes will be made primarily from payments on the contracts
and, on January 5, 2001, from the purchase price paid by the note purchase
agreement counterparty under the note purchase agreement. If the obligors on
the contracts do not make timely payments, the trust may not be able to make
timely payment of interest and principal on your note. If an obligor defaults
on a contract, then the trust will be relying on the servicer's ability to
repossess and resell the related truck or trailer.
S-9
<PAGE>
You should consider these risks that might cause higher than expected
delinquencies, defaults or losses:
. Geographic concentration of the contracts increases your exposure to local
economic conditions.
As of the cutoff date, the obligors on approximately 14.62%, 13.15% and
9.74% of the initial contracts, based on principal balance and billing
address of the obligor, were located in Texas, California and Florida,
respectively. See "The Contract Pool." Accordingly, adverse economic
conditions or other factors particularly affecting these states could
adversely affect the delinquency, loan loss or repossession experience of
the trust with respect to the contracts. If the delinquency, default and
loss experience of the contracts owned by the trust is worse than
expected, you could suffer a loss on your investment.
. The trust may not be able to enforce the contracts.
When Conseco Finance originated each contract, it required the customer
to grant Conseco Finance a security interest in the financed truck or
trailer. When Conseco Finance assigns the contracts to Conseco
Securitizations, it will also assign its security interests in the
financed trucks and trailers. Because of the administrative burden and
expense, the documents reflecting the security interest in the trucks and
trailers will not be amended to reflect the assignment of the security
interest. As a result, there is a risk that the trust will not have a
perfected security interest in the trucks and trailers. If Conseco Finance
were no longer the servicer of the contracts and the trust had to begin
enforcing contracts in its own name, either directly or through a
replacement servicer, there is a risk that the trust would be unable to
repossess a truck or trailer following a default on the related contract,
which would result in higher losses on the contract pool. If the loss
experience of the contracts owned by the trust is worse than expected, you
could suffer a loss on your investment.
The trust may not own the contracts.
Conseco Finance will hold the files evidencing the contracts, as servicer on
behalf of the trust. To facilitate servicing and save administrative costs, the
documents will not be physically segregated from other similar documents that
are in Conseco Finance's possession. Conseco Finance will file UCC financing
statements reflecting the assignment of the contracts by Conseco Finance to
Conseco Securitizations, and by Conseco Securitizations to the trust, and its
accounting records and computer systems will also reflect that assignment.
Conseco Finance will stamp each contract to indicate that the contract has been
sold. Despite these precautions, if, through inadvertence or otherwise, any of
the contracts were sold or pledged to another party and that party took
possession of those contracts, then that purchaser or secured party could
acquire an interest in those contracts superior to that of the trust. If the
trust is unable to collect payments on some or all of the contracts, then you
may suffer a loss on your investment.
S-10
<PAGE>
Prepayments on the contracts are unpredictable, and will affect your yield.
The contracts may be prepaid in full or in part at any time before their
scheduled maturity due to various factors, including general and regional
economic conditions and prevailing interest rates. The prepayment experience on
similar contracts varies greatly and the prepayment experience on the contracts
owned by the trust will affect the average life of the notes. You must not
assume that the contracts will prepay at any particular rate, or at a constant
rate. For more information, see "Yield and Prepayment Considerations."
There may be no secondary market for the notes, which means you may have
trouble selling them when you want to.
We cannot assure to you that a secondary market will develop for the notes
or, if a secondary market does develop, that it will provide the holders of any
of the notes with liquidity of investment. We also cannot assure you that if a
secondary market does develop, that it will continue to exist for the term of
the notes.
If Conseco Finance becomes insolvent, you may suffer delays or reductions in
distributions on your notes.
Conseco Finance intends that each transfer of contracts to Conseco
Securitizations will constitute a sale, rather than a pledge of the contracts
to secure indebtedness. However, if Conseco Finance were to become a debtor
under the federal bankruptcy code, it is possible that its creditors, a
bankruptcy trustee or Conseco Finance as debtor-in-possession may argue that
the sale of the contracts was a pledge of the contracts rather than a sale.
This position, if presented to or accepted by a court, could result in a delay
in or reduction of distributions to the holders of the notes.
The case of Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.
1993), contains language to the effect that accounts sold by an entity which
subsequently became bankrupt remained property of the debtor's bankruptcy
estate. Although the contracts constitute chattel paper rather than accounts
under the UCC, sales of chattel paper, like sales of accounts, are governed by
Article 9 of the UCC. If Conseco Finance became a debtor under the federal
bankruptcy code and a court follows the reasoning of the 10th Circuit and
applies this rule to chattel paper, holders of notes could experience a delay
or reduction in distributions.
You will be relying on the note purchase agreement counterparty's credit to
collect full payment on your note by January 2001.
If the note purchase agreement counterparty becomes insolvent or is otherwise
unable or fails to purchase your note on the mandatory tender date, January 5,
2001, you will retain your note and will continue to be entitled to receive
payments of interest and principal in the manner described in this prospectus
supplement. But the maturity date of the notes is on January 10, 2001 and it is
unlikely that collections on the contracts will be sufficient to retire the
notes by that time. If the note purchase agreement counterparty becomes
insolvent, or is
S-11
<PAGE>
otherwise unable or fails for any reason to purchase your note when it is
required to do so, the trust will attempt to make other arrangements for the
payment of the notes by their maturity date but it is unlikely to be able to do
so. Therefore, for payment of the remaining amount outstanding on your note as
of January 2001, you will be relying on the note purchase agreement
counterparty to purchase that note under the note purchase agreement on January
5, 2001. The note purchase agreement counterparty's obligation to purchase the
notes will be subject to and limited by the conditions contained in the note
purchase agreement, which are described under "Description of the Notes--Note
Purchase Agreement and Mandatory Tender."
The short-term ratings on the notes are based in part and are dependent on the
rating agencies' assessment of the note purchase agreement counterparty's
ability to purchase the notes on January 5, 2001.
Any reduction of the rating assigned to the financial strength of the note
purchase agreement counterparty would likely cause a corresponding reduction in
the short-term ratings assigned to the notes. A rating agency may lower its
rating of the notes at any time if it believes any circumstances relevant to
the rating have changed. A reduction in the rating assigned to the notes may
reduce the market value of the notes and may affect your ability to sell them.
Other rating agencies could provide unsolicited ratings on the notes that could
be lower than the requested ratings.
Although Conseco Finance has not requested a rating of the notes from any
rating agencies other than S&P and Fitch, other rating agencies may rate the
notes. These ratings could be higher or lower than the ratings S&P and Fitch
initially give to the notes. There is a risk that a lower rating of your notes
from another rating agency could reduce the market value or liquidity of your
notes.
We have defined terms we use in this prospectus supplement in the "Glossary"
section at the back of the prospectus.
THE TRUST
The following information supplements the information in the prospectus. You
should consider, in addition to the information below, the information under
"The Trusts" in the prospectus.
General
Conseco Finance Vehicle Trust 1999-B is a business trust formed under the
laws of the State of Delaware pursuant to the trust agreement for the
transactions described in this prospectus supplement. After its formation, the
trust will not engage in any activity other than:
(1) acquiring, holding and managing the contracts and the other assets of
the trust and its proceeds;
(2) issuing the notes and the certificates;
S-12
<PAGE>
(3) making payments on the notes and the certificates; and
(4) engaging in other activities that are necessary, suitable or convenient
to accomplish the above or are incidental or connected to those
activities.
The trust will initially be capitalized with equity of approximately
$575,000,000 from the sale of the notes. The Class B certificates initially
will be sold to Conseco Finance or one of its affiliates. The proceeds of the
offering of the notes will be used by the trust to purchase the contracts from
Conseco Securitizations under the sale and servicing agreement among Conseco
Securitizations, Conseco Finance and the trust.
The trust's principal offices are in Wilmington, Delaware, at the address
listed below under "--The Owner Trustee."
Capitalization of the Trust
The following table illustrates the capitalization of the trust as of the
cutoff date, as if the issuance and sale of the notes and certificates had
taken place on that date:
<TABLE>
<S> <C>
Class A notes............................................. $536,957,000
Class M notes............................................. 38,043,000
Class B certificates...................................... 43,613,843(1)
------------
Total................................................... $618,613,843
============
</TABLE>
- --------
(1) The Class B certificates have no stated principal balance. This amount
represents the difference between the principal balance of the contracts
plus any amount deposited in the pre-funding account, and the original
principal balance of the notes.
The Owner Trustee
Wilmington Trust Company is the owner trustee under the trust agreement.
Wilmington Trust Company is a Delaware banking corporation and its principal
offices are located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001. The owner trustee will perform limited
administrative functions under the trust agreement, including making
distributions from the certificate distribution account. The owner trustee's
liability in connection with the issuance and sale of the certificates and the
notes is limited solely to the express obligations of the owner trustee
described in the trust agreement.
THE TRUST PROPERTY
The trust property will consist of:
(1) the contracts;
(2) all rights to receive payments due thereon on or after the cutoff date
and all proceeds from the liquidation of the contracts, excluding
certain insurance premiums, late fees and other servicing charges;
(3) such amounts as from time to time may be held in the collection account
and any other accounts established and maintained by the servicer
pursuant to the sale and servicing agreement;
S-13
<PAGE>
(4) an assignment of the security interests of Conseco Finance in the
trucks and trailers securing the related contracts;
(5) an assignment of the right to receive proceeds from claims on insurance
policies covering the trucks and the obligors; and
(6) all other rights under the trust documents.
See "The Contracts" and "Description of the Trust Documents--Collections" in
the prospectus.
Each note will represent a debt obligation of the trust secured by the trust
property. Each certificate will represent a fractional undivided interest in
the trust property. Pursuant to the indenture the trust will grant a security
interest in the trust property in favor of the indenture trustee for the
noteholders. Any proceeds of such security interest in the trust property would
be distributed according to the indenture, as described under "Description of
the Trust Documents and Indenture--Distributions."
Conseco Finance, as custodian on behalf of the trust, will hold each original
contract, as well as copies of documents and instruments relating to such
contract and evidencing the security interest in the product securing that
contract. To protect the trust's ownership interest in the contracts, we will
file UCC-1 financing statements in Minnesota to give notice of the trust's
ownership of the contracts and the related trust property.
Payments and recoveries in respect of principal and interest on the contracts
will be deposited by the servicer into the collection account, which will be a
segregated trust account maintained at an eligible institution, initially U.S.
Bank National Association, in the name of the indenture trustee, no later than
one business day after receipt. The indenture trustee will, on the fifteenth
day of each month or, if such day is not a business day, the next succeeding
business day, withdraw funds from the collection account for deposit into the
note distribution account and the certificate distribution account. Payments on
deposit in the note distribution account will be applied by the indenture
trustee on each payment date to make the distributions to the noteholders as of
the immediately preceding record date and payments on deposit in the
certificate distribution account will be applied by the owner trustee on each
payment date to make the distributions to the certificateholders as of the
immediately preceding record date, all as described under "Description of the
Trust Documents and Indenture--Distributions."
Following the transfer of the contracts from Conseco Finance to Conseco
Securitizations, and then by Conseco Securitizations to the trust, Conseco
Finance's obligations are limited to:
(1) its obligations as servicer to service the contracts;
(2) its representations and warranties in the sale and servicing agreement
as described under "Description of the Trust Documents--Sale and
Assignment of the Contracts" in the prospectus; and
(3) indemnities and the payment of trustees' fees.
S-14
<PAGE>
Conseco Finance is obligated under the sale and servicing agreement to
repurchase any contract on the first payment date which is more than 90 days
after Conseco Finance becomes aware, or receives written notice from the
indenture trustee or the owner trustee, of any breach of any representation and
warranty in the sale and servicing agreement that materially and adversely
affects the securityholders' interest in the contract if the breach has not
been cured prior to that date. The sale and servicing agreement also provides
that Conseco Finance is obligated to repurchase contracts and to indemnify the
indenture trustee or the owner trustee and the securityholders about other
matters. Conseco Finance is also obligated to pay fees of the owner trustee and
indenture trustee.
THE CONTRACT POOL
General
This prospectus supplement contains information regarding a portion of the
contracts that will be included in the pool as of the closing date. These
initial contracts were originated through November 16, 1999 and will be
transferred to the trust by Conseco Securitizations on the closing date. The
information for each initial contract is as of the cutoff date for that initial
contract, which is December 1, 1999. The initial contracts had an aggregate
principal balance as of the cutoff date of $578,420,843.19. The sale and
servicing agreement provides that additional contracts will be purchased by the
trust on the closing date. We expect that, on the closing date, the initial
contracts and the additional contracts will have an aggregate principal balance
as of the cutoff date of approximately $618,613,843. If Conseco Securitizations
does not deliver initial and additional contracts on the closing date with at
least this aggregate principal balance, the difference will be deposited in the
pre-funding account and used to purchase subsequent contracts after the closing
date, but in no event later than February 1, 2000. Although the additional
contracts sold to the trust on the closing date, and any subsequent contracts
sold to the trust after the closing date, will have characteristics that differ
somewhat from the initial contracts described here, we do not expect that the
characteristics of the additional and subsequent contracts will vary materially
from the initial contracts. In addition, the additional and subsequent
contracts must conform to the representations and warranties in the sale and
servicing agreement.
Conseco Finance purchased all of the contracts from dealers who regularly
originate and sell such contracts to it, or the contracts were originated by
Conseco Finance directly.
Certain Characteristics of the Initial Contracts
The initial contracts:
(1) had a remaining maturity, as of the cutoff date, of at least 1 month,
but not more than 140 months,
(2) had an original maturity of at least 7 months, but not more than 150
months,
(3) had an original principal balance of at least $5,452.61 and not more
than $2,480,780.57,
S-15
<PAGE>
(4) had a remaining principal balance as of the cutoff date of at least
$1,586.43 and not more than $2,381,068.11,
(5) had a contractual rate of interest of at least 6.770% and not more
than 24.00%,
(6) are fully amortizing, level payment obligations, except for (a)
$30,648,677.81 of the initial contracts, or 5.30% of the initial
contracts by cutoff date principal balance, that have a final payment
that is substantially higher than the regular payment amount, and (b)
$32,120,813.08 of the initial contracts, or 5.55% of the initial
contracts by cutoff date principal balance, that do not require monthly
payments for a one- to three-month "skip period" during each calendar
year, and
(7) all financed the purchase of a commercial truck or trailer.
Neither Conseco Securitizations nor Conseco Finance may substitute other
contracts for the contracts owned by the trust at any time during the term of
the sale and servicing agreement.
Characteristics of Initial Contracts
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Average Average Weighted Average
% of Outstanding Average Remaining Original Average Loan-to-
Number of Contract Principal Principal Term Scheduled Contract Value
Contracts Pool Balance Balance (1)(2) Term (2) Rate Ratio
--------- -------- ----------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
8,268 93.50% $578,420,843.19 $69,958.98 51.47 57.63 10.71% 94.09%
</TABLE>
- --------
(1) Based on scheduled payments due after the cutoff date and assuming no
prepayments on the initial contracts.
(2) Expressed in number of months.
S-16
<PAGE>
Geographic Concentration of Initial Contracts
<TABLE>
<CAPTION>
% of
Aggregate Contracts
Number of Principal Balance by Outstanding
Contracts as of Outstanding Principal Balance
State Cutoff Date as of Cutoff Date as of Cutoff Date
- ------ --------------- ----------------- -----------------
<S> <C> <C> <C>
Alabama..................... 418 $ 28,514,905.30 4.93%
Alaska...................... 11 567,247.40 0.10
Arizona..................... 146 7,740,275.66 1.34
Arkansas.................... 201 12,293,325.63 2.13
California.................. 1,307 76,080,124.91 13.15
Colorado.................... 54 3,661,508.62 0.63
Connecticut................. 24 2,362,166.22 0.41
Delaware.................... 4 220,932.87 0.04
District of Columbia........ 1 54,683.37 0.01
Florida..................... 939 56,354,017.84 9.74
Georgia..................... 358 22,227,144.23 3.84
Idaho....................... 58 2,427,296.39 0.42
Illinois.................... 100 9,053,972.03 1.57
Indiana..................... 59 7,009,019.99 1.21
Iowa........................ 33 2,418,514.09 0.42
Kansas...................... 61 5,675,527.08 0.98
Kentucky.................... 62 3,735,481.78 0.65
Louisiana................... 196 13,907,409.48 2.40
Maine....................... 15 1,376,202.19 0.24
Maryland.................... 75 6,382,649.96 1.10
Massachusetts............... 25 2,640,392.14 0.46
Michigan.................... 98 16,483,566.17 2.85
Minnesota................... 103 11,483,616.92 1.99
Mississippi................. 281 20,498,716.11 3.54
Missouri.................... 129 11,948,630.73 2.07
Montana..................... 13 489,316.51 0.08
Nebraska.................... 9 438,249.27 0.08
Nevada...................... 71 4,037,597.72 0.70
New Hampshire............... 11 1,108,347.66 0.19
New Jersey.................. 76 11,874,946.75 2.05
New Mexico.................. 68 4,386,981.37 0.76
New York.................... 100 12,847,543.20 2.22
North Carolina.............. 145 10,729,687.08 1.85
North Dakota................ 1 19,677.33 *
Ohio........................ 279 23,642,922.33 4.09
Oklahoma.................... 128 7,903,588.07 1.37
Oregon...................... 87 4,270,539.11 0.74
Pennsylvania................ 113 9,142,303.03 1.58
Rhode Island................ 7 592,583.79 0.10
South Carolina.............. 219 13,939,386.54 2.41
South Dakota................ 35 2,684,121.50 0.46
Tennessee................... 283 24,640,187.27 4.26
Texas....................... 1,302 84,536,976.22 14.62
Utah........................ 178 10,067,511.57 1.74
Vermont..................... 6 719,487.81 0.12
Virginia.................... 90 6,883,002.99 1.19
Washington.................. 177 11,942,738.12 2.06
West Virginia............... 32 1,731,252.68 0.30
Wisconsin................... 55 3,356,065.85 0.58
Wyoming..................... 25 1,318,502.31 0.23
----- --------------- ------
Total..................... 8,268 $578,420,843.19 100.00%
===== =============== ======
</TABLE>
- --------
* Indicates an amount greater than zero but less than 0.005% of the initial
contracts by outstanding principal balance as of the cutoff date.
The geographic concentrations described in this table are based on the
billing address of the obligor listed in Conseco Finance's records.
S-17
<PAGE>
Distribution of Original Contract Amounts of Initial Contracts
<TABLE>
<CAPTION>
Aggregate
Principal
Balance % of Contracts
Number of Outstanding by Outstanding
Contracts as of Cutoff Principal Balance
Original Contract Amount as of Cutoff Date Date as of Cutoff Date
------------------------ ----------------- --------------- -----------------
<S> <C> <C> <C>
Less than $10,000.00...... 38 $ 216,293.37 0.04%
Between $10,000.00 and
$19,999.99............... 674 9,205,636.07 1.59
Between $20,000.00 and
$29,999.99............... 1,051 22,533,018.90 3.90
Between $30,000.00 and
$39,999.99............... 807 24,043,238.26 4.16
Between $40,000.00 and
$49,999.99............... 944 37,498,331.30 6.48
Between $50,000.00 and
$59,999.99............... 641 31,051,888.02 5.37
Between $60,000.00 and
$69,999.99............... 471 27,199,724.17 4.70
Between $70,000.00 and
$79,999.99............... 471 31,680,263.91 5.48
Between $80,000.00 and
$89,999.99............... 716 55,424,753.05 9.58
Between $90,000.00 and
$99,999.99............... 846 73,629,111.49 12.72
Between $100,000.00 and
$109,999.99.............. 701 67,529,451.29 11.67
Between $110,000.00 and
$119,000.99.............. 233 24,248,829.25 4.19
Between $120,000.00 and
$129,999.99.............. 101 11,514,294.53 1.99
Between $130,000.00 and
$139,999.99.............. 46 5,566,070.44 0.96
Between $140,000.00 and
$149,999.99.............. 33 4,180,373.67 0.72
Between $150,000.00 and
$159,999.99.............. 41 5,787,790.20 1.00
Between $160,000.00 and
$169,999.99.............. 36 5,287,220.41 0.91
Between $170,000.00 and
$179,999.99.............. 47 7,530,439.46 1.30
Between $180,000.00 and
$189,999.99.............. 33 5,482,532.22 0.95
Between $190,000.00 and
$199,999.99.............. 24 4,382,108.79 0.76
Between $200,000.00 and
$249,999.99.............. 73 13,923,999.53 2.41
Between $250,000.00 and
$299,999.99.............. 50 12,004,085.75 2.08
Between $300,000.00 and
$349,999.99.............. 45 13,512,737.62 2.34
Between $350,000.00 and
$399,999.99.............. 27 9,007,678.74 1.56
Between $400,000.00 and
$449,999.99.............. 34 12,979,298.49 2.24
Between $450,000.00 and
$499,999.99.............. 15 6,431,472.52 1.11
Between $500,000.00 and
$549,999.99.............. 10 4,988,028.59 0.86
Between $550,000.00 and
$599,999.99.............. 11 5,727,107.43 0.99
Between $600,000.00 and
$649,999.99.............. 4 2,291,812.32 0.40
Between $650,000.00 and
$699,999.99.............. 9 5,646,895.21 0.98
Between $700,000.00 and
$749,999.99.............. 5 3,158,190.27 0.55
Between $750,000.00 and
$799,999.99.............. 2 1,377,780.56 0.24
Between $800,000.00 and
$849,999.99.............. 4 3,060,343.92 0.53
Between $850,000.00 and
$899,999.99.............. 3 2,478,949.21 0.43
Between $900,000.00 and
$949,999.99.............. 2 1,640,202.79 0.28
Between $950,000.00 and
$999,999.99.............. 5 4,378,136.16 0.76
Over $999,999.99.......... 15 21,822,755.28 3.77
----- --------------- ------
Total................... 8,268 $578,420,843.19 100.00%
===== =============== ======
</TABLE>
S-18
<PAGE>
Year of Origination of Initial Contracts
<TABLE>
<CAPTION>
% of Contracts
Aggregate Principal by Outstanding
Year of Number of Contracts Balance Outstanding Principal Balance
Oiginationr as of Cutoff Date as of Cutoff Date as of Cutoff Date
- ----------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
1997................... 1 $ 54,848.92 0.01%
1998................... 1,730 113,576,439.48 19.64
1999................... 6,537 464,789,554.79 80.35
----- --------------- ------
Total................ 8,268 $578,420,843.19 100.00%
===== =============== ======
Distribution of Original Loan-to-Value Ratios of Initial Contracts
<CAPTION>
% of
Contracts
Aggregate Principal by Outstanding
Number of Contracts Balance Outstanding Principal Balance
Loan-to-Value Ratio as of Cutoff Date as of Cutoff Date as of Cutoff Date
- ------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
Less than 61%........... 73 $ 2,229,533.83 0.39%
From 61 to 65%.......... 48 1,941,600.91 0.34
From 66 to 70%.......... 87 2,913,706.90 0.50
From 71 to 75%.......... 127 4,919,801.11 0.85
From 76 to 80%.......... 371 15,001,551.83 2.59
From 81 to 85%.......... 672 33,410,433.45 5.78
From 86 to 90%.......... 1,511 80,855,711.17 13.98
From 91 to 95%.......... 2,290 146,446,736.65 25.32
Over 95%................ 3,089 290,701,767.34 50.25
----- --------------- ------
Total................. 8,268 $578,420,843.19 100.00%
===== =============== ======
</TABLE>
S-19
<PAGE>
Initial Contract Rates
<TABLE>
<CAPTION>
% of Contracts
Aggregate Principal by Outstanding
Number of Contracts Balance Outstanding Principal Balance
Contract Rate as of Cutoff Date as of Cutoff Date as of Cutoff Date
------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
Less than 7.001%.......... 8 $ 705,525.01 0.12%
7.001% to 8.000%......... 211 48,184,144.20 8.33
8.001% to 9.000%......... 841 99,132,887.64 17.14
9.001% to 10.000%........ 1,518 117,524,165.22 20.32
10.001% to 11.000%........ 1,421 95,336,408.21 16.48
11.001% to 12.000%........ 1,402 86,384,304.50 14.93
12.001% to 13.000%........ 1,063 57,089,240.99 9.87
13.001% to 14.000%........ 686 30,157,267.58 5.21
14.001% to 15.000%........ 556 22,795,126.60 3.94
15.001% to 16.000%........ 308 11,679,653.09 2.02
16.001% to 17.000%........ 152 6,045,707.54 1.05
Over 17.000%.............. 102 3,386,412.61 0.59
----- --------------- ------
Total................... 8,268 $578,420,843.19 100.00%
===== =============== ======
Remaining Months to Maturity of Initial Contracts
<CAPTION>
% of Contracts
Aggregate Principal by Outstanding
Number of Contracts Balance Outstanding Principal Balance
Remaining Months to Maturity as of Cutoff Date as of Cutoff Date as of Cutoff Date
- ---------------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
Fewer than 16............. 142 $ 1,847,018.53 0.32%
16 to 30................ 1,310 42,601,529.98 7.37
31 to 45................ 2,414 142,199,539.74 24.58
46 to 60................ 4,062 321,689,996.17 55.62
61 to 75................ 265 33,372,791.68 5.77
76 to 90................ 31 12,501,317.98 2.16
91 to 105................ 6 4,864,662.43 0.84
106 to 120................ 37 16,962,918.57 2.93
121 to 150................ 1 2,381,068.11 0.41
----- --------------- ------
Total................... 8,268 $578,420,843.19 100.00%
===== =============== ======
</TABLE>
S-20
<PAGE>
CONSECO FINANCE CORP.
The following information supplements, and if inconsistent supersedes, the
information in the prospectus under the heading "Conseco Finance Corp." Conseco
Finance Corp. was previously named Green Tree Financial Corporation.
Delinquency, Loan Loss and Repossession Information
The following tables describe information about Conseco Finance's
delinquency, loan loss and repossession experience for each period indicated
for all truck contracts it has purchased and continues to service, including
the contracts which do not meet the criteria for inclusion in the trust
property. Conseco Finance began originating installment sales contracts for
commercial trucks and trailers in 1994. Accordingly, the delinquency, loan loss
and repossession experience presented below may not be indicative of the
experience to be expected from a more seasoned portfolio. The information for
December 31, 1996 and later does not include as delinquent those contracts
whose obligors have entered bankruptcy proceedings and had their scheduled
payment changed under a bankruptcy payment plan, provided that these obligors
are current under their bankruptcy payment plan.
Delinquency Experience
<TABLE>
<CAPTION>
At December 31, At
--------------------------- October 31,
1995 1996 1997 1998 1999
----- ----- ----- ------ -----------
<S> <C> <C> <C> <C> <C>
Number of Contracts Outstanding (1)... 2,528 5,361 9,233 13,272 16,466
Number of Contracts Delinquent (2)
30-59 Days.......................... 123 215 110 258 401
60-89 Days.......................... 33 51 65 75 149
90 Days or More..................... 22 142 204 255 378
----- ----- ----- ------ ------
Total Contracts Delinquent............ 178 408 379 588 928
===== ===== ===== ====== ======
Delinquencies as a Percentage of
Contracts
Outstanding (3)...................... 7.04% 7.61% 4.10% 4.43% 5.64%
</TABLE>
- --------
(1) Excludes contracts already in repossession.
(2) The period of delinquency for the number of contracts delinquent is based
on the number of days payments are contractually past due, assuming 30-day
months. Consequently, a contract due on the first day of a month is not 30
days delinquent until the first day of the next month.
(3) By number of contracts.
S-21
<PAGE>
Loan Loss/Repossession Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
Ten Months
Year Ended December 31, Ended
------------------------------------- October 31,
1995 1996 1997 1998 1999
------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Number of Contracts
Serviced (1).............. 2,562 5,497 9,404 13,562 16,767
Principal Balance of
Contracts (1)............. $98,579 $300,863 $577,477 $949,026 $1,251,918
Contract Liquidations:
Units...................... 10 321 469 443 549
Percentage (2)............. 0.39% 5.84% 4.99% 3.27% 3.27%
Net Losses:
Dollars (3)................ $ 136 $ 5,037 $ 6,626 $ 5,807 $ 10,181
Percentage (4)............. 0.14% 1.67% 1.15% 0.61% 0.81%
</TABLE>
- --------
(1) As of period end. Includes contracts already in repossession.
(2) As a percentage of the total number of contracts being serviced as of
period end.
(3) The calculation of net loss includes unpaid interest to the date of
repossession and all expenses of repossession and liquidation.
(4) As a percentage of the principal balance of contracts being serviced as of
period end.
There can be no assurance that the delinquency, loan loss or repossession
experience of the trust for the contracts will be better than, worse than or
comparable to the experience described above. See "Risk Factors--Conseco
Finance has limited delinquency, loan loss and repossession experience" in this
prospectus supplement.
Recent Developments
Conseco Finance has been served with various lawsuits in the United States
District Court for the District of Minnesota. These lawsuits were filed by a
few of Conseco Finance's stockholders as purported class actions on behalf of
persons or entities who purchased common stock or traded in options of Conseco
Finance during the alleged class periods. These alleged class periods run from
February 1995 to January 1998. One of these lawsuits did not include class
action claims. In addition to Conseco Finance, some of Conseco Finance's
current and former officers and directors are named as defendants in one or
more of the lawsuits. The lawsuits have been consolidated into two complaints,
one relating to an alleged class of purchasers of Conseco Finance's common
stock and the other relating to an alleged class of traders in options for
Conseco Finance's common stock. In addition to these two complaints, a separate
non-class action lawsuit containing similar allegations was also filed.
Plaintiffs in the lawsuits assert claims under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934. In each case, plaintiffs allege that Conseco
Finance and the other defendants violated federal securities laws by, among
other things, making false and misleading statements about Conseco Finance's
current state and Conseco Finance's future prospects, particularly about
prepayment assumptions and performance of some of Conseco Finance's loan
portfolios, which allegedly rendered Conseco Finance's financial statements
false and misleading. Conseco Finance believes that the lawsuits are without
merit and intends to defend the lawsuits vigorously. However, the ultimate
outcome of these lawsuits cannot be predicted with certainty. Conseco Finance
filed motions to dismiss these lawsuits. On August 24, 1999 Conseco Finance's
motions to dismiss were granted with prejudice. On September 21, 22 and 23,
1999 the plaintiffs filed notices of appeal of these dismissals.
S-22
<PAGE>
CREDIT SUISSE FIRST BOSTON
The Bank is a Swiss bank and is one of the largest banking institutions in
the world, with total consolidated assets of approximately SFR 433 billion (USD
280 billion) and total consolidated shareholder's equity of approximately SFR
12.2 billion (USD 7.9 billion), in each case at June 30, 1999. As a leading
global investment bank, the Bank provides a wide range of financial services
from locations around the globe to corporate, institutional and public sector
clients worldwide. The Bank was established on July 5, 1856 and registered in
the Commercial Register of the Canton of Zurich on April 27, 1883 for an
unlimited duration under the name of Schweizerische Kreditanstalt. The Bank's
name was changed to Credit Suisse First Boston on December 11, 1996 (by entry
in the Commercial Register), in connection with a reorganization. The Bank is a
joint stock corporation established under Swiss law. The Bank's registered head
office is in Zurich, and it has additional executive offices and principal
branches located in London, New York, Hong Kong, Singapore and Tokyo.
The Bank's New York branch (the "Branch") is licensed by the Superintendent
of Banks of the State of New York under the New York Banking law. The Branch is
examined by the New York State Banking Department and is subject to banking
laws and regulations applicable to a foreign bank that operates a New York
branch. In addition to being subject to New York State laws and regulations,
the Branch and the Bank are also subject to Federal regulation, primarily under
the International Banking Act of 1978 and the Federal Deposit Insurance
Corporation Improvements Act of 1991, and to examination by the Board of
Governors of the Federal Reserve System.
Credit Suisse Group, which owns 100% of the voting shares of the Bank, is now
principally composed of five business units. The Bank principally consists of
two of these business units, CREDIT SUISSE FIRST BOSTON ("CSFB") and CREDIT
SUISSE ASSET MANAGEMENT ("CSAM"). CSFB is engaged, directly and through
affiliates, in the investment banking, equity, fixed income and derivatives,
and private equity investment businesses on a worldwide basis. CSAM, directly
or through subsidiaries, offers asset management, mutual fund and investment
advisory services to institutional investors worldwide.
The CSFB business unit has four core businesses: (a) the Investment Banking
Division ("IBD"), (b) the Fixed Income and Derivatives Division ("FID"), (c)
the Equity Division and (d) the Private Equity Division ("PED"). IBD serves a
broad range of users and suppliers of capital around the world and provides
financial advisory services. FID is active in fixed income trading (including
foreign exchange and precious metals trading) and derivative and risk
management products. Prior to January 1, 1999, the fixed income business of FID
was conducted by the Fixed Income Division and the derivatives business of FID
was conducted by Credit Suisse Financial Products. These two businesses were
integrated into FID effective January 1, 1999. The Equity Division is active in
equity trading, with trading partners worldwide. Through PED, CSFB and other
Credit Suisse Group entities participate in privately negotiated equity
investments around the world. PED's investments are funded by Credit Suisse
Group rather than by the Bank, and as a result, the
S-23
<PAGE>
Bank does not bear the risks or realize any benefits associated with the
returns on such investments. However, the Bank is responsible for certain
personnel expenses of, and receives certain fee-based income from, PED. The
CSAM business unit is divided into its institutional asset management and
advisory business and its mutual fund activities.
The Bank is not dependent for its existence on any patents or license
agreements that are of significance for the business or profitability of the
Bank. The purpose of the Bank is set forth in its Articles of Association.
The Bank's registered head office is located at Uetlibergstrasse 231, CH-
8045, Zurich, Switzerland, and its telephone number is 41-1-333-5555. The
London Branch is located 5 Cabot Square, London E14 4QR, England, and its
telephone number is 44-171-888-8888. The New York Branch is located at Eleven
Madison Avenue, New York, New York 10010-3629, and its telephone number is
(212) 325-2000. The most recently publicly available audited financial
statements of the Bank are available upon request by calling the Bank at its
Annual Report Hotline at 212-325-2620.
Year 2000
Year 2000 preparations for the Bank are now complete. Business systems,
building systems and infrastructure components are either compliant, or in the
few cases where there are external dependencies beyond the Bank's control,
being managed with contingency arrangements in place. The Bank will be
monitoring events over the millennium weekend from its four Command Centers in
Zurich, London, Singapore, and New York.
Legal Proceedings and Regulatory Examinations
The Financial Supervisory Agency of Japan (the "FSA") recently completed a
formal, on-site examination of the businesses of the Bank, including certain of
its subsidiaries in Japan. During the examination, the FSA examiners questioned
certain derivatives and other transactions entered into by the Bank in Japan
and inquired into certain supervisory and other issues.
Shortly after the commencement of the FSA examination, the management of
Credit Suisse Group, the Bank's parent, became aware of rumors of misconduct by
some of the Bank's employees in connection with the response to the
examination. After a preliminary review by Credit Suisse Group's internal audit
department, Credit Suisse Group promptly engaged outside counsel, Wilmer,
Cutler & Pickering, to conduct a thorough and independent investigation that
disclosed that several managers and other members of the Bank's staff attempted
to interfere with the FSA examination during its initial stages by concealing
and/or destroying documents.
The independent report emphasized that Credit Suisse Group promptly acted to
discover any misconduct and to disclose any wrongdoing to the regulatory
authorities in Japan. Credit Suisse Group and the Bank have accepted
responsibility for remedial measures in various parts of their businesses in
Japan and, having due regard to applicable law and in consultation with the
FSA, Credit Suisse Group and the Bank have taken disciplinary action against
certain employees in Tokyo and London, including termination of employment.
S-24
<PAGE>
On July 29, 1999, Credit Suisse Group and the Bank were notified of the
administrative sanctions imposed by the FSA and the Financial Reconstruction
Commission in Japan ("FRC") as a result of the examination. The administrative
order specifically revokes the license to do business in Japan of the Tokyo
Branch of Credit Suisse Financial Products ("CSFP"), effective on November 30,
1999. Prior to that date, there was a transition period that commenced on
August 5, 1999 and ended on November 29, 1999, during which the CSFP Tokyo
Branch's banking license was restricted to activity required for the transfer
or unwinding of all existing branch business in an orderly manner, and to
carrying out operations incidental thereto.
Other sanctions were imposed on the Tokyo Branch of the Bank and certain of
its other subsidiaries, including the suspension of new business in certain of
the trust and private banking operations in Japan with the right to reapply to
engage in such operations after one year, the suspension of new business in
certain of the securities and investment advisory operations in Japan for one
month, and the establishment at certain of these entities of additional
internal control procedures and other requirements.
Certain recent press reports have stated that the Tokyo District Prosecutor's
office has decided to initiate criminal proceedings against CSFP and one or
more of its former employees. However, neither the Bank nor CSFP has received
notification of any such criminal proceedings from any Japanese authorities.
Regulatory and other authorities in other jurisdictions have or may undertake
their own inquiries into the activities that were the subject of the FSA
examination.
Management of the Bank does not believe that the aggregate liability or other
consequences resulting from regulatory examinations and pending or threatened
legal proceedings against the Bank are likely to have a materially adverse
effect on the consolidated financial condition of the Bank.
S-25
<PAGE>
Selected Financial Data
Unaudited Interim Consolidated Income Statement (Selected Items)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
------------------------------
(in Sfr (in U.S.$
millions) millions)(1)
(unaudited)
<S> <C> <C>
Net interest income....................... 1,406 970
Net commission and service fee income..... 3,190 2,200
Net trading income........................ 3,225 2,224
Net other ordinary income................. 70 48
Net operating income...................... 7,891 5,442
Total operating expenses.................. 5,541 3,821
Gross operating profit.................... 2,350 1,621
Total depreciation and valuation
adjustments.............................. 841 580
Consolidated profit before extraordinary
items and taxes.......................... 1,509 1,041
Consolidated net profit (before minority
interests)............................... 1,117 771
--------------- ---------------
Consolidated net profit (after minority
interests)............................... 1,080 745
=============== ===============
</TABLE>
- --------
(1) Translation of Swiss Francs into U.S. Dollars has been made at the rate of
Sfr1.45 = $1.00 (the June 30, 1999 six-month average exchange rate). Such
translation is provided solely for the convenience of the prospective
investor.
Unaudited Consolidated Balance Sheet (Selected Items)
<TABLE>
<CAPTION>
June 30, 1999
------------------------------------
(in Sfr millions, (in U.S.$ millions
except except
percentages) percentages)(1)
(unaudited)
<S> <C> <C>
Assets
Due from banks........................... 156,141 100,736
Due from customers....................... 71,939 46,412
Securities and precious metals trading
portfolios.............................. 108,389 69,928
Total assets............................. 433,387 279,605
Liabilities and shareholders' equity
Liabilities in respect of money market
paper................................... 18,902 12,195
Due to banks............................. 216,335 139,572
Due to customers, other deposits......... 93,208 60,134
Bonds and mortgage-backed bonds.......... 34,639 22,348
------- -------
Total Liabilities...................... 421,173 271,725
Shareholders' equity
Total shareholders' equity............. 12,214 7,880
Total liabilities and shareholders'
equity................................ 433,387 279,605
------- -------
US Tier 1 ratio(2)....................... 8.4% 8.4%
======= =======
</TABLE>
- --------
(1) Translation of Swiss Francs into U.S. Dollars has been made at the rate of
Sfr1.55 = $1.00 (the June 30, 1999 exchange rate). Such translation is
provided solely for the convenience of the prospective investor.
(2) Tier 1 capital as a percentage of the Bank's risk-weighted assets,
calculated on a consolidated basis in accordance with the recommendations
of the Basle Committee on Banking Supervision of the Bank for International
Settlements. Core capital includes (a) USD 125 million (Sfr 194 million)
perpetual non-cumulative non-voting preferred shares issued by a subsidiary
and sold to unaffiliated investors and (b) USD 1,025 million (Sfr 1,589
million) perpetual non-cumulative non-voting preferred shares held by
Credit Suisse Group as direct investments in subsidiaries of the Bank.
S-26
<PAGE>
Unaudited Consolidated Capitalization
<TABLE>
<CAPTION>
June 30, 1999
----------------------
(in Sfr (in U.S.$
millions) millions)(1)
(unaudited)
<S> <C> <C>
Due to banks........................................... 216,335 139,572
Due to non-bank customers.............................. 95,160 61,393
Bonds and mortgage-backed bonds........................ 34,639 22,348
Other liabilities...................................... 75,039 48,412
Total liabilities.................................... 421,173 271,725
Equity capital and reserves (including minority
interests)............................................ 12,214 7,880
------- -------
Total capitalization................................... 433,387 279,605
======= =======
</TABLE>
- --------
(1) Translation of Swiss Francs into U.S. Dollars has been made at the rate of
Sfr1.55 = $1.00 (the June 30, 1999 exchange rate). Such translation is
provided solely for the convenience of the prospective investor.
Regulation and Supervision
The Bank operates under a license granted by the Swiss Federal Banking
Commission pursuant to the Swiss Federal law on Banks and Savings Bank, of
November 8, 1934, as amended (the "Banking Law"), and its Implementing
Ordinance of May 17, 1972, as amended (the "Implementing Ordinance"). In
addition, CSFB must comply with certain reporting and filing requirements with
regard to the Swiss National Bank (the "National Bank"), in particular in
connection with capital export transactions.
The Swiss Federal Banking Commission, which is the highest bank supervisory
authority and is independent from the National Bank, is responsible for the
supervision of the banking system. Among other things, the Swiss Federal
Banking Commission has the power to grant and withdraw banking licenses, to
enforce the Banking Law, and to prescribe the content and format of audit
reports.
In addition, under the Banking Law, a bank's business is subject to
inspection and supervision by independent auditors licensed by the Swiss
Federal Banking Commission. These auditors, who are appointed by the bank's
Board of Directors, perform a full-scope audit of the bank's financial
statements and verify that the bank complies with the provisions of the Banking
Law and the Implementing Ordinance. The audit report is submitted to the bank's
Board of Directors and copies are submitted to the Swiss Federal Banking
Commission. In the event that the audit reveals either violations of law or
other irregularities, the auditors must inform the Swiss Federal Banking
Commission if the violation or irregularity is not cured within a time limit
designated by the auditors, or immediately in the case of serious violations or
irregularities which may jeopardize the security of creditors.
S-27
<PAGE>
RELATIONSHIP BETWEEN THE BANK AND CREDIT SUISSE GROUP
The Bank is part of Credit Suisse Group, which also includes Credit Suisse, a
Swiss bank conducting Swiss domestic banking for individual and corporate
clients and global private banking, and Winterthur, a global insurance company.
Credit Suisse Group is among the world's largest financial institutions and is
active on six continents and in all major financial centers. Credit Suisse
Group is a publicly-held corporation organized in Switzerland, and its
securities are listed on the Swiss Exchange as well as on the Frankfurt and
Tokyo Stock Exchanges.
The five principal business units of Credit Suisse Group have been organized
to operate in the market as separate business units, focused on providing
distinct services to groups of customers. The Bank is comprised of the global
corporate and investment banking and trading business unit under the trade name
CREDIT SUISSE FIRST BOSTON and the institutional asset management business unit
under the trade name CREDIT SUISSE ASSET MANAGEMENT. Credit Suisse is comprised
of the Swiss domestic banking business unit and the global private banking
business unit under the trade names CREDIT SUISSE and CREDIT SUISSE PRIVATE
BANKING, respectively. Both the Bank and Credit Suisse are banks regulated by
the Swiss Federal Banking Commission, and both report to the Swiss National
Bank. On December 15, 1997 Credit Suisse Group and "Winterthur" Swiss Insurance
Company ("Winterthur"), a global insurance company, consummated a merger by
means of an exchange of Credit Suisse Group shares for Winterthur shares. As a
result of the Winterthur merger, Winterthur became the fifth specialized
business unit of Credit Suisse Group. Winterthur is a global insurance group
and one of the largest insurers in Europe.
YIELD AND PREPAYMENT CONSIDERATIONS
The following information supplements the information in the prospectus under
the heading "Yield and Prepayment Considerations."
Weighted Average Life of the Notes
The following information is given solely to illustrate the effect of
prepayments on the contracts on the weighted average life of the notes under
the stated assumptions and is not a prediction of the prepayment rate that
might actually be experienced by the contracts.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of the notes will be
influenced by the rate at which principal on the contracts is paid. Principal
payments on the contracts may be in the form of scheduled amortization or
prepayments, including, for this purpose, liquidations due to default.
S-28
<PAGE>
The base case prepayment model is Conseco Finance management's best estimate
of the prepayment rate that may be experienced on the contracts. Because
Conseco Finance began originating and servicing contracts for trucks only
recently, such estimate is based in part on industry experience with similar
contracts rather than Conseco Finance's experience. There can be no assurance
that the contracts will experience prepayments at such projected rate or in the
manner assumed by the prepayment model.
The model used in this prospectus supplement is the Absolute Prepayment Model
("ABS"), which represents an assumed rate of prepayment each month relative to
the original number of contracts in the contract pool. The base case prepayment
model used here is 1.4% ABS.
ABS DOES NOT PURPORT TO BE AN HISTORICAL DESCRIPTION OF PREPAYMENT EXPERIENCE
OR A PREDICTION OF THE ANTICIPATED RATE OF PREPAYMENT OF ANY POOL OF CONTRACTS,
INCLUDING THE CONTRACTS OWNED BY THE TRUST.
The percentages and weighted average lives in the following tables were
determined assuming that:
(1) scheduled interest and principal payments on the contracts are received
in a timely manner and prepayments are made at the percentages of the
base case prepayment model set forth in the table;
(2) the note purchase agreement counterparty purchases all the notes on
January 5, 2001, as described under "Description of the Notes--Note
Purchase Agreement and Mandatory Tender";
(3) the aggregate principal balance of the initial contracts as of the
cutoff date is $578,420,843.19 and the initial contracts have the
characteristics described in the table following this paragraph;
(4) the additional contracts to be transferred to the trust have the
characteristics described in the table following this paragraph and are
assumed to have their first payments due in February 2000;
(5) no interest shortfalls will arise in connection with prepayments in
full of the contracts;
(6) distributions are made on the notes on the 15th day of each month
commencing in January 2000;
(7) the securities are issued on December 15, 1999; and
(8) one-month LIBOR is 6.500%.
No representation is made that the contracts will not experience
delinquencies or losses.
S-29
<PAGE>
Assumed Characteristics of Initial Contracts as of the Cutoff Date
<TABLE>
<CAPTION>
Balloon Loan
Weighted Average Weighted Average Weighted Average
Aggregate Principal Weighted Average Original Term Remaining Term Amortization Term
Balance Outstanding Contract Rate (Months) (Months) (Months)
------------------- ---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
$ 30,648,677.81 9.11% 55 48 74
91,261,742.02 11.99 38 30 N/A
139,997,222.33 11.18 51 44 N/A
249,321,731.60 10.65 60 55 N/A
40,569,846.11 9.58 75 70 N/A
26,621,623.32 7.94 118 111 N/A
--------------- ----- --- --- ---
Total................. $578,420,843.19 10.71% 58 51 N/A
=============== ===== === === ===
</TABLE>
Assumed Characteristics of Additional Contracts as of the Cutoff Date
<TABLE>
<CAPTION>
Balloon Loan
Weighted Average Weighted Average Weighted Average
Aggregate Principal Weighted Average Original Term Remaining Term Amortization Term
Balance Outstanding Contract Rate (Months) (Months) (Months)
------------------- ---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
$ 2,129,699.03 9.11% 55 55 74
6,341,547.41 11.99 38 38 N/A
9,728,052.55 11.18 51 51 N/A
17,324,735.90 10.65 60 60 N/A
2,819,095.90 9.58 75 75 N/A
1,849,869.21 7.94 118 118 N/A
-------------- ----- --- --- ---
Total................. $40,193,000.00 10.71% 58 51 N/A
============== ===== === === ===
</TABLE>
Based on the foregoing assumptions, the following tables indicate the
projected weighted average lives of each class of notes and shows the
percentages of the original principal balance of each class that would be
outstanding after each of the dates shown, at the indicated ABS prepayment
rates. Investors are urged to make their investment decisions on a basis that
includes their determination as to anticipated prepayment rates under a variety
of the assumptions discussed in this prospectus supplement.
The weighted average life of each class of the notes listed in the tables
below is determined by (1) multiplying the amount of cash distributions in
reduction of the principal balance of that class of securities by the number of
years from the date of issuance of that note to the stated distribution date,
(2) adding the results, and (3) dividing the sum by the initial principal
balance of that class of notes.
S-30
<PAGE>
Percentage of the Original Principal Balance of the Class A
Notes at the Respective Percentages of ABS
Listed Below:
<TABLE>
<CAPTION>
Date 0.5% 1.0% 1.4% 1.7% 2.0%
- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage................................ 100% 100% 100% 100% 100%
January 15, 2000.................................. 97 97 96 96 95
February 15, 2000................................. 95 93 92 92 91
March 15, 2000.................................... 92 90 89 88 86
April 15, 2000.................................... 90 87 85 84 82
May 15, 2000...................................... 87 84 82 80 78
June 15, 2000..................................... 85 81 78 76 74
July 15, 2000..................................... 82 78 75 72 70
August 15, 2000................................... 80 75 72 69 66
September 15, 2000................................ 77 72 68 65 62
October 15, 2000.................................. 75 70 65 62 58
November 15, 2000................................. 72 67 62 58 54
December 15, 2000................................. 70 64 59 55 51
January 15, 2001.................................. 0 0 0 0 0
Weighted Average Life (Years)..................... 0.92 0.88 0.85 0.83 0.81
Percentage of the Original Principal Balance of the Class M
Notes at the Respective Percentages of ABS
Listed Below:
<CAPTION>
Date 0.5% 1.0% 1.4% 1.7% 2.0%
- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage................................ 100% 100% 100% 100% 100%
January 15, 2000.................................. 100 100 100 100 100
February 15, 2000................................. 100 100 100 100 100
March 15, 2000.................................... 100 100 100 100 100
April 15, 2000.................................... 100 100 100 100 100
May 15, 2000...................................... 100 100 100 100 100
June 15, 2000..................................... 100 100 100 100 100
July 15, 2000..................................... 100 100 100 100 100
August 15, 2000................................... 100 100 100 100 100
September 15, 2000................................ 100 100 100 100 100
October 15, 2000.................................. 100 100 100 100 100
November 15, 2000................................. 100 100 100 100 100
December 15, 2000................................. 100 100 100 100 100
January 15, 2001.................................. 0 0 0 0 0
Weighted Average Life (Years)..................... 1.08 1.08 1.08 1.08 1.08
</TABLE>
S-31
<PAGE>
DESCRIPTION OF THE NOTES
The following information supplements, and if inconsistent supersedes, the
information in the prospectus under "The Notes," "Information Regarding the
Securities," and "Description of the Trust Documents."
General
The notes will be issued under to the terms of the indenture, a form of which
has been filed as an exhibit to the registration statement filed with the SEC.
A copy of the indenture, as executed, will be filed with the SEC following the
issuance of the securities. The following summary describes certain terms of
the notes and the indenture. The summary is not complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the notes
and the indenture. The following summary supplements the description of the
general terms and provisions of the notes of any given series and the related
indenture described in the prospectus. U.S. Bank Trust National Association, a
national banking association headquartered in St. Paul, Minnesota, will be the
indenture trustee.
Distributions
Noteholders will be entitled to receive distributions of interest and
principal on each distribution date commencing in January 2000, to the extent
that sufficient funds are available. Distributions on the notes generally will
be made from funds available first in respect of interest on the Class A notes,
then in respect of interest on the Class M notes, then in respect of principal
on the Class A notes, then in respect of principal on the Class M notes, then
in respect of any Class A LIBOR carryforward amount, and then in respect of any
Class M LIBOR carryforward amount, in the manner and order of priority
described in the next three sections and under "Description of the Trust
Documents and Indenture--Distributions."
Class A Interest
Interest on the principal balance of the Class A notes will accrue from
December 16, 1999, or from the most recent distribution date on which interest
has been paid, to but excluding the following distribution date, at the Class A
interest rate. The principal balance of the Class A notes as of any
distribution date for this purpose will be the original principal balance of
that class minus all amounts previously distributed to the noteholders of that
class in respect of principal.
Interest on the Class A notes will be calculated on the basis of the actual
number of days elapsed in a 360-day year.
Interest will be paid on the Class A notes on each distribution date to the
extent of funds available on that distribution date. In the event the funds
available are not sufficient to make a full distribution of interest on the
Class A notes, the amount of the shortfall will be carried forward and added to
the amount of interest payable on the next distribution date.
S-32
<PAGE>
Any amount so carried forward will bear interest at the Class A interest rate,
to the extent legally permissible. The Class A interest rate for any
distribution date will be LIBOR plus 0.160%, but in no case more than 9.96%.
If LIBOR plus 0.160% exceeds 9.96% for any distribution date, then the amount
that would be accrued for that distribution date at the rate per annum equal to
the positive difference between LIBOR plus 0.160% and 9.96%, which we refer to
as the "Class A LIBOR carryforward amount" for that distribution date, will be
payable from the remaining amount available after payment of all interest and
principal on the notes. Any Class A LIBOR carryforward amount not paid on the
distribution date on which it arises will be payable on each subsequent
distribution date, plus interest thereon at the Class A interest rate, until
paid in full. The ratings on the Class A notes do not address the likelihood of
payment of any Class A LIBOR carryforward amounts.
"LIBOR" with respect to any distribution date will be established by the
calculation agent appointed by the Trust (the "Calculation Agent") and will
equal the offered rate for United States dollar deposits for one month that
appears on Telerate Page 3750 as of 11:00 A.M., London time, on the second
LIBOR Business Day prior to such distribution date (a "LIBOR Determination
Date"). "Telerate Page 3750" means the display page so designated on the Dow
Jones Telerate Service (or such other page as may replace that page on that
service, or such other service as may be designated by the Calculation Agent as
the information vendor, for the purpose of displaying London interbank offered
rates of major banks). If such rate appears on Telerate Page 3750, LIBOR will
be such rate. "LIBOR Business Day" as used herein means a day that is both a
business day in New York City and St. Paul, Minnesota and a day on which
banking institutions in the City of London, England are not required or
authorized by law to be closed. If on any LIBOR Determination Date the offered
rate does not appear on Telerate Page 3750, the Calculation Agent will request
each of the reference banks (which shall be major banks that are engaged in
transactions in the London interbank market selected by the Calculation Agent)
to provide the Calculation Agent with its offered quotation for United States
dollar deposits for one month to prime banks in the London interbank market as
of 11:00 A.M., London time, on such date. If at least two reference banks
provide the Calculation Agent with such offered quotations, LIBOR on such date
will be the arithmetic mean, rounded upwards, if necessary, to the nearest
1/100,000 of 1% (.00001%), with five one-millionths of a percentage point
rounded upward, of all such quotations. If on such date fewer than two of the
reference banks provide the Calculation Agent with such offered quotations,
LIBOR on such date will be the arithmetic mean, rounded upwards, if necessary,
to the nearest 1/100,000 of 1% (.00001%), with five one-millionths of a
percentage point rounded upward, of the offered per annum rates that one or
more leading banks in New York City selected by the Calculation Agent are
quoting as of 11:00 A.M., New York City time, on such date to leading European
banks for United States dollar deposits for one month; provided, however, that
if such banks are not quoting as described above, LIBOR for such date will be
LIBOR applicable to the monthly interest period immediately preceding such
monthly interest period. The "Calculation Agent" will initially be the
Indenture Trustee.
S-33
<PAGE>
Class M Interest
Interest on the principal balance of the Class M notes will accrue from
December 16, 1999, or from the most recent distribution date on which interest
has been paid, to but excluding the following distribution date, at the Class M
interest rate. The principal balance of the Class M notes as of any
distribution date for this purpose will be the original principal balance of
that class minus all amounts previously distributed to the noteholders of that
class in respect of principal.
Interest on the Class M notes will be calculated on the basis of the actual
number of days elapsed in a 360-day year.
Interest will be paid on the Class M notes on each distribution date to the
extent of funds available on that distribution after payment of all interest
due on the Class A notes. In the event the funds available are not sufficient
to make a full distribution of interest on the Class M notes, the amount of the
shortfall will be carried forward and added to the amount of interest payable
on the next distribution date. Any amount so carried forward will bear interest
at the Class M interest rate, to the extent legally permissible. The Class M
interest rate for any distribution date will be LIBOR plus 0.420%, but in no
case more than 9.96%.
If LIBOR plus 0.420% exceeds 9.96% for any distribution date, then the amount
that would have accrued for that distribution date at the rate per annum equal
to the positive difference between LIBOR plus 0.420% and 9.96%, which we refer
to as the "Class M LIBOR carryforward amount" for that distribution date, will
be payable from the remaining amount available after payment of interest and
principal on the notes and after payment of any Class A LIBOR carryforward
amount. Any Class M LIBOR carryforward amount not paid on the distribution date
on which it arises will be payable on each subsequent distribution date, plus
interest thereon at the Class M interest rate, until paid in full. The ratings
on the Class M notes do not address the likelihood of payment of any Class M
LIBOR carryforward amounts.
Principal on the Notes
Noteholders will be entitled to receive on each distribution date as payment
of principal, in the manner and order of priority set forth below, an amount
equal to the formula principal distribution amount plus any accelerated
principal distribution amount, both described below, for that distribution
date. Principal will be paid on the Class A notes until the Class A principal
balance has been reduced to zero, and then principal will be paid on the Class
M notes.
The formula principal distribution amount for any distribution date will be
an amount equal to the sum of the following amounts for the related monthly
period, in each case computed in accordance with the method specified in each
contract:
(1) all scheduled payments of principal due on each outstanding contract
during the related monthly period, after adjustments for previous partial
principal prepayments and
S-34
<PAGE>
after any adjustments to a contract's amortization schedule as a result of
a bankruptcy or similar proceeding involving the related obligor,
(2) the scheduled principal balance of each contract which, during the
related monthly period, was purchased by us pursuant to the sale and
servicing agreement on account of a breach of a representation or warranty,
(3) all partial principal prepayments applied and all principal
prepayments in full received on contracts during the related monthly
period,
(4) the scheduled principal balance of each contract that became a
liquidated contract during the related monthly period, plus the amount of
any reduction in the outstanding principal balance of a contract during
such monthly period ordered as a result of a bankruptcy or similar
proceeding involving the related obligor,
(5) without duplication of the foregoing, all collections in respect of
principal on the contracts received during the current month up to and
including the third business day prior to such distribution date, but in no
event later than the 10th day of the month in which such distribution date
occurs, minus
(6) the amount, if any, included in the formula principal distribution
amount for the preceding distribution date by virtue of clause (5) above.
A monthly period for a distribution date is the calendar month immediately
preceding the month in which that distribution date occurs. The scheduled
principal balance of a contract for any monthly period is its principal balance
as specified in its amortization schedule, after giving effect to any previous
partial principal prepayments and to the scheduled payment due on its scheduled
payment date in that month, and after giving effect to any adjustments due to
bankruptcy or similar proceedings. A liquidated contract means any defaulted
contract as to which the servicer has determined that all amounts which it
expects to recover from or on account of such contract through the date of
disposition of the related truck or trailer have been recovered or any
defaulted contract in respect of which the related truck or trailer has been
realized upon and disposed of and the proceeds of such disposition have been
received.
In the event the remaining amount available for a distribution date is not
sufficient to make a full distribution of the formula principal distribution
amount, the amount of such deficiency--the formula principal shortfall for that
distribution date--will be added to the formula principal distribution amount
for the next distribution date. Thus, prior to the maturity date of the notes,
the failure to pay principal on the notes on a distribution date will not
result in an event of default on the notes except to the extent it is caused by
a failure to distribute the amount available in accordance with the priorities
and in the amounts described under "Description of the Trust Documents and
Indenture--Distributions."
Accelerated Principal Distribution Amount
On the closing date, the sum of the aggregate principal balance of the
contracts as of the cutoff date plus the original pre-funded amount, if any,
will exceed the aggregate original
S-35
<PAGE>
principal balance of the notes by approximately $43,613,843, or 7.05% of the
aggregate cutoff date principal balance of the contracts included in the trust
as of the closing date plus the original pre-funded amount, if any. Begining on
the first distribution date, noteholders will also receive an additional
distribution of principal, to the extent there is any amount available
remaining after payment of all interest on the notes and the formula principal
distribution amount, until the distribution date on which a total of $3,093,065
has been paid as additional principal. This accelerated principal distribution
amount will be paid on the Class A notes until retired, and then on the Class M
notes. As a result, the overcollateralization of the notes should increase from
$43,613,843 on the closing date to $46,706,908, or 7.55% of the aggregate
cutoff date principal balance of the contracts included in the trust as of the
closing date plus the original pre-funded amount, if any. If this
overcollateralization is later reduced by losses on the contracts, no further
accelerated principal distribution amounts will be paid in an effort to
maintain the overcollateralization at any specified level.
Subordination of Class M Notes
Payments of interest on the Class M notes will be subordinated to the rights
of the holders of the Class A notes to receive prior payment of interest. No
principal will be paid on the Class M notes until the Class A notes have been
paid in full.
Note Purchase Agreement and Mandatory Tender
On the note purchase date, January 5, 2001, each noteholder will be required
to tender its notes to the note purchase agreement counterparty, Credit Suisse
First Boston, New York Branch, for purchase at a price equal to the unpaid
principal balance of that note, plus all accrued and unpaid interest thereon,
plus any LIBOR carryforward amount.
By your purchase of a note you agree to tender your note to the note purchase
agreement counterparty on the note purchase date, and you agree as a condition
of that transfer to complete any standard transfer documents that may be
necessary to complete the transfer. On the note purchase date the note purchase
agreement counterparty will be required, subject to the conditions described
below, to deposit the required purchase price into a designated trust account
established under the indenture. The indenture trustee will then apply that
amount to pay the applicable purchase price to each tendering noteholder. On
and after the deposit of the required purchase amount by the note purchase
agreement counterparty your rights as noteholder will be limited to tendering
your notes and collecting the purchase price applicable to your notes from the
indenture trustee.
The obligations of the note purchase agreement counterparty with respect to
the note purchase agreement will be general unsecured obligations of the note
purchase agreement counterparty and will not be guaranteed by or enforceable
against any other entity.
If the note purchase agreement counterparty were to fail to deposit the
required purchase price for the notes on the note purchase date, the
noteholders could pursue such
S-36
<PAGE>
remedies as may be available at law or in equity on account of the note
purchase agreement counterparty's default of its obligations with respect to
the note purchase agreement.
However, the note purchase agreement counterparty will have no obligation to
purchase notes on the note purchase date or at any other time if, pursuant to
the indenture:
. bankruptcy proceedings have been commenced with respect to the trust; or
. any default in the payment of interest or principal on the notes has
occurred and is continuing.
If any of these conditions occur as of the note purchase date, the note
purchase agreement counterparty will not purchase any of the notes on or at
any time after the note purchase date. In that event, noteholders would be
unlikely to receive payment in full of their notes by the maturity date of the
notes.
Upon its purchase of all of the notes under the note purchase agreement, the
note purchase agreement counterparty will have the right to put the notes to
an affiliate of Conseco Finance or may cause the maturity date of the notes to
be extended to the date set forth in the indenture.
Book-Entry Registration
Holders of the notes may hold through DTC in the United States or CEDEL or
Euroclear in Europe if they are participants of these systems, or indirectly
through organizations that are participants in these systems.
Cede & Co., as nominee for DTC, will hold the notes. CEDEL and Euroclear
will hold omnibus positions in the notes on behalf of the CEDEL participants
and the Euroclear participants, through customers' securities accounts in
CEDEL's and Euroclear's names on the books of their respective depositaries,
which in turn will hold such positions in customers' securities accounts in
the depositaries' names on the books of DTC.
Transfers between DTC's participating organizations will occur in accordance
with DTC rules. Transfers between CEDEL participants and Euroclear
participants will occur in the ordinary way according to their applicable
rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
participants or Euroclear participants, on the other, will be effected in DTC
according to DTC rules on behalf of the relevant European international
clearing system by its depositary; however, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system according to its rules and
procedures and within its established deadlines, European time. The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment according to
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normal procedures for same-day funds settlement applicable to DTC. CEDEL
participants and Euroclear participants may not deliver instructions directly
to the depositaries.
Because of time-zone differences, credits of securities in CEDEL or Euroclear
for a transaction with a participant will be made during the subsequent
securities settlement processing, dated the business day following the DTC
settlement date, and these credits or any transactions in the securities
settled during the processing will be reported to the relevant CEDEL
participant or Euroclear participant on the business day. Cash received in
CEDEL or Euroclear for sales of securities by or through a CEDEL participant or
a Euroclear participant to a participant will be received with value on the DTC
settlement date but will be available in the relevant CEDEL or Euroclear cash
account only as of the business day following settlement in DTC.
For a description of transfers between persons holding directly or indirectly
through DTC, see "Information Regarding the Securities--Book-Entry
Registration" in the prospectus.
Cedel Bank is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations and
facilitates the clearance and settlement of securities transactions between
CEDEL participants through electronic book-entry changes in accounts of CEDEL
participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in CEDEL in any of 28 currencies,
including United States dollars. CEDEL provides to its CEDEL participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. CEDEL interfaces with domestic markets in several countries. As a
professional depository, CEDEL is subject to regulation by the Luxembourg
Monetary Institute. CEDEL participants are recognized financial institutions
around the world, including underwriters, securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations
and may include the Underwriters. Indirect access to CEDEL is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a CEDEL Participant, either directly
or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in Euroclear in any of 32 currencies, including
United States dollars. The Euroclear System includes various other services,
including securities lending and borrowing, and interfaces with domestic
markets in several countries generally similar to the arrangements for cross-
market transfers with DTC described in Annex I hereto. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium
office, under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation. All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative
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establishes policy for the Euroclear System on behalf of Euroclear
participants. Euroclear participants include banks, including central banks,
securities brokers and dealers and other professional financial intermediaries
and may include the underwriters. Indirect access to the Euroclear System is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law, collectively, the terms and conditions. The terms and conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear Operator
acts under the terms and conditions only on behalf of Euroclear participants
and has no record of or relationship with persons holding through Euroclear
participants.
Distributions with respect to notes held through CEDEL or Euroclear will be
credited to the cash accounts of CEDEL participants or Euroclear participants
in accordance with the relevant system's rules and procedures, to the extent
received by its depositary. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. See
"Federal Income Tax Consequences" in the prospectus and "Global Clearance,
Settlement and Tax Documentation Procedures" in Annex I to this prospectus
supplement. CEDEL or the Euroclear Operator, as the case may be, will take any
other action permitted to be taken by a noteholder under the Indenture on
behalf of a CEDEL participant or Euroclear participant only in accordance with
its relevant rules and procedures and subject to its depositary's ability to
effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of notes among participants of DTC, CEDEL and
Euroclear, they are under no obligation to perform or continue to perform the
procedures and the procedures may be discontinued at any time.
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DESCRIPTION OF THE TRUST DOCUMENTS AND INDENTURE
The following summary describes certain terms of the sale and servicing
agreement and the trust agreement, which together form the trust documents and
the indenture. Forms of the trust documents and indenture have been filed as
exhibits to the registration statement. A copy of each of the trust documents
and indenture will be filed with the SEC following the issuance of the
securities. The summary is not complete and is subject to, and qualified in its
entirety by reference to, all the provisions of the trust documents and
indenture. The following summary supplements the description of the general
terms and provisions of the trust documents and indenture under the prospectus.
Accounts
The servicer will establish and maintain the collection account, in the name
of the indenture trustee on behalf of the noteholders and the
certificateholders, into which all payments made on or for the contracts will
be deposited. The servicer will establish and maintain the note distribution
account, in the name of the indenture trustee on behalf of the noteholders, in
which amounts released from the collection account for distribution to
noteholders will be deposited and from which all distributions to noteholders
will be made. The servicer will also establish and maintain the certificate
distribution account, in the name of the owner trustee on behalf of the
certificateholders, in which amounts released from the collection account for
distribution to certificateholders will be deposited and from which all
distributions to certificateholders will be made. See "Description of the Trust
Documents--Collections" in the prospectus.
Distributions
On each distribution date, the servicer will instruct the indenture trustee
to distribute from the collection account the amount available in the following
order of priority:
(1) if Conseco Finance or an affiliate is no longer the servicer, then to
the servicer, the monthly servicing fee for the related monthly period.
(2) to the servicer, reimbursement for advances made with respect to
delinquent payments that were recovered during the prior monthly period.
(3) to the note distribution account, all accrued interest on the Class A
notes.
(4) to the note distribution account, all accrued interest on the Class M
notes.
(5) to the note distribution account, the formula principal distribution
amount plus any accelerated principal distribution amount, or the note
principal balance, if less, to be paid first to the Class A notes until
retired, and then to the Class M notes until retired.
(6) to the note distribution account, any Class A LIBOR carryforward
amount.
(7) to the note distribution account, any Class M LIBOR carryforward
amount.
(8) if Conseco Finance or an affiliate is the servicer, then to the
servicer, the monthly servicing fee for the related monthly period.
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(9) to the certificate distribution account, the remaining amount
available.
On each distribution date, the indenture trustee or its paying agent will
distribute all amounts on deposit in the note distribution account in payment
of interest and principal on the notes in the manner and priority described
above.
On each distribution date, the owner trustee or its paying agent will
distribute all amounts on deposit in the certificate distribution account in
payment on the Class B certificates.
The amount available with respect to any distribution date means generally
the sum of payments on the contracts due and received during the related
monthly period, prepayments and other unscheduled collections received during
the related monthly period, all collections of principal on the contracts
received during the current month up to and including the third business day
prior to the distribution date but in no event later than the 10th day of the
month in which the distribution date occurs, any amounts deposited in respect
of purchased contracts, and all earnings from the investment of funds in the
collection account, minus, with respect to all distribution dates other than
the distribution date in January 2000, all collections of principal on the
contracts received during the related monthly period up to and including the
third business day prior to the preceding distribution date, but in no event
later than the 10th day of the prior month.
Statements to Noteholders
On or before each distribution date, the servicer will prepare and provide to
the indenture trustee a statement to be delivered to the noteholders on such
distribution date. These statements will be based on the information in the
related servicer's report describing information required under the trust
documents. Each statement to be delivered to noteholders will include the
following information as to the notes, for the distribution date or the period
since the previous distribution date, as applicable:
(1) the amount of the distribution allocable to interest on or with
respect to each class of notes;
(2) the amount of the distribution allocable to principal on or with
respect to each class of notes;
(3) the aggregate outstanding principal balance and the pool factor for
each class of notes after giving effect to all payments reported under (2)
above on such date;
(4) the interest shortfall, if any, for each class of notes, and the
change in such amounts from the preceding statement;
(5) the LIBOR carryforward amount, if any, with respect to each class of
notes, and the change in such amounts from the preceding statement.
(6) the number and aggregate principal balances of delinquent contracts,
the number of trucks and trailers repossessed, the number of repossessed
trucks and trailers
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remaining in inventory and the number of contracts that became liquidated
contracts with respect to the immediately preceding monthly period; and
(7) the aggregate amount of servicer advances made by the servicer for
such distribution date, and the aggregate amount paid to the servicer as
reimbursement of servicer advances made on prior distribution dates.
Each amount shown under subclauses (1) through (5) will be expressed as a
dollar amount per $1,000 of the initial principal amount of the notes.
Unless and until definitive notes are issued, the reports will be sent on
behalf of the trust to Cede & Co., as registered holder of the notes and the
nominee of DTC. Note owners may receive copies of these reports upon written
request, together with a certification that they are note owners and payment of
any expenses associated with the distribution of such reports, from the
indenture trustee. See "Reports to Securityholders" and "Information Regarding
the Securities" in the prospectus.
Within the required period of time after the end of each calendar year, the
indenture trustee will furnish to each person who at any time during the
calendar year was a noteholder, a statement as to the aggregate amounts of
interest and principal paid to such noteholder, information regarding the
amount of servicing compensation received by the servicer and other information
as we deem necessary to enable the noteholder to prepare its tax returns. See
"Federal and State Income Tax Consequences" in this prospectus supplement.
Clean-Up Option
Beginning on the distribution date when the pool scheduled principal balance
is less than 20% of the cut-off date pool principal balance, the holder of the
Class B certificate will have the right to repurchase or arrange for the
repurchase of all outstanding contracts at a price equal to the greater of:
(1)the sum of:
(a) 100% of the scheduled principal balance of each contract, other
than any contract as to which the related truck or trailer has
been repossessed and whose fair market value is included in clause
(b) below as of the final distribution date, and
(b) the fair market value of any acquired property, as determined by
the servicer; and
(2) the aggregate fair market value, as determined by the servicer of
all of the assets of the trust, plus, in each case, any unpaid
interest at the applicable interest rate on each class of notes,
as well as one month's interest at the applicable contract rate on
the scheduled principal balance of each contract.
This amount will be distributed on the distribution date occurring in the
month following the date of repurchase.
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Since the terms of the notes call for their mandatory tender on January 5,
2001, and the final distribution date is January 10, 2001, the provisions
described under "--Clean-Up Option" will be relevant to you only if the pool
scheduled principal balance declines to less than 20% of the cutoff date pool
principal balance on or before the December 2000 distribution date.
Administrator
Conseco Financial Servicing Corporation, a Delaware corporation, as
administrator, will provide the notices and perform other administrative
obligations required by the indenture and the trust agreement. The
administrator, a subsidiary of Conseco Finance, will enter into an
administration agreement with the trust and the indenture trustee describing
its duties and obligations as administrator.
FEDERAL AND STATE INCOME TAX CONSEQUENCES
The following is a general discussion of federal and state income tax
consequences relating to the purchase, ownership, and disposition of the notes.
The discussion is based upon the current provisions of the Internal Revenue
Code of 1986, the Treasury regulations promulgated thereunder, and judicial or
ruling authority, all of which are subject to change, which change may be
retroactive. For additional information regarding federal and state income tax
consequences, see "Federal Income Tax Consequences--Owner Trust Series" and
"State Income Tax Consequences" in the prospectus.
You should consult your own tax advisors to determine the federal, state,
local and other tax consequences of the purchase, ownership and disposition of
the notes. You should note that no rulings have been or will be sought from the
IRS with respect to any of the federal income tax consequences discussed herein
or in the prospectus, and no assurance can be given that the IRS will not take
contrary positions. Moreover, there are no cases or IRS rulings on transactions
similar to those described herein with respect to the trust, involving both
debt and equity interests issued by a trust with terms similar to those of the
notes and the certificates. You are urged to consult your own tax advisors in
determining the federal, state, local, foreign and any other tax consequences
to you of the purchase, ownership and disposition of the notes.
In the opinion of our counsel, for federal and Minnesota income tax purposes,
the notes will be characterized as debt and the trust will not be characterized
as an association or a publicly traded partnership taxable as a corporation.
The notes will not be issued with original issue discount.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, and
Section 4975 of the Internal Revenue Code, prohibit a pension, profit-sharing
or other employee benefit plan, as well as individual retirement accounts and
certain types of Keogh Plans-- each of which we refer to as a benefit plan--
from engaging in certain transactions with persons that are parties in interest
under ERISA or disqualified persons under the Internal
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Revenue Code for that benefit plan. A violation of these prohibited transaction
rules may result in an excise tax or other penalties and liabilities under
ERISA and the Internal Revenue Code for these persons. Title I of ERISA also
requires that fiduciaries of a benefit plan subject to ERISA make investments
that are prudent, diversified, except if prudent not to do so, and in
accordance with governing plan documents.
Some transactions involving the purchase, holding or transfer of the
securities might be deemed to constitute prohibited transactions under ERISA
and the Internal Revenue Code if assets of the trust were deemed to be assets
of a benefit plan. Under a regulation issued by the United States Department of
Labor called 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
Internal Revenue Code only if the Benefit Plan acquires an equity interest in
the trust and none of the exceptions contained in the plan assets regulation is
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. We believe
that the notes should be treated as indebtedness without substantial equity
features for purposes of the plan assets regulation. However, without regard to
whether the notes are treated as an equity interest for such purposes, the
acquisition or holding of notes by or on behalf of a benefit plan could be
considered to give rise to a prohibited transaction if the trust, the owner
trustee or the indenture trustee, the owner of collateral, the underwriter, or
any of their respective affiliates is or becomes a party in interest or a
disqualified person with respect to the benefit plan. In such case, certain
exemptions from the prohibited transaction rules could be applicable depending
on the type of asset invested and the position of the plan fiduciary making the
decision to acquire a note. Included among these exemptions are:
. PTCE 90-1, regarding investments by insurance company pooled separate
accounts;
. PTCE 95-60, regarding transactions effected by insurance company
general accounts;
. PTCE 91-38, regarding investments by bank collective investment funds;
. PTCE 84-14, regarding transactions effected by qualified professional
asset managers; and
. PTCE 96-23, regarding transactions effected by in-house asset
managers.
Employee benefit plans that are governmental plans, as defined in Section
3(32) of ERISA and some church plans, as defined in Section 3(33) of ERISA are
not subject to ERISA requirements. These plans may, however, be subject to the
provisions of other applicable federal and state laws, including, for any
governmental or church plan qualified under Section 401(a) of the Internal
Revenue Code and exempt from taxation under Section 501(a) of the Internal
Revenue Code, the prohibited transaction rules set forth in Section 503 of the
Internal Revenue Code.
A plan fiduciary considering the purchase of notes should consult its tax
and/or legal advisors regarding whether the assets of the trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
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UNDERWRITING
The underwriter has agreed, subject to the terms and conditions of the
underwriting agreement, to purchase the Class A and Class M notes from Conseco
Securitizations.
The underwriting agreement provides that the underwriter is obligated to
purchase all of the notes, if any of the notes are purchased.
Conseco Securitizations has been advised by the underwriter that the
underwriter proposes initially to offer the notes to the public at the
respective offering prices shown on the cover page of this prospectus
supplement and to certain dealers at this price less a concession not in excess
of the respective amounts set forth in the table below, expressed as a
percentage of the related principal balance.
The underwriter may allow and dealers may reallow a discount not in excess of
the respective amounts listed in the table below to certain other dealers.
<TABLE>
<CAPTION>
Selling Reallowance
Class Concession Discount
----- ---------- -----------
<S> <C> <C>
A................................................... 0.06% 0.03%
M................................................... 0.06% 0.03%
</TABLE>
The underwriter may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934. Over-allotment involves syndicate
sales in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the notes in the open market after
the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the underwriter 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 and penalty bids may cause
the prices of the notes to be higher than they would otherwise be in the
absence of such transactions. These transactions, if commenced, may be
discontinued at any time.
The notes are a new issue of securities with no established trading market.
Conseco Securitizations has been advised by the underwriter that the
underwriter intends to make a market in the notes, but underwriter is not
obligated to make such a market and may discontinue market making at any time
without notice. No assurance can be given as to the liquidity of the trading
market for the notes.
The underwriting agreement provides that Conseco Finance and Conseco
Securitizations will indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, or will contribute to
payments the underwriter may be required to make.
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The underwriter has represented, warranted and agreed that:
(1) it has not offered or sold and, prior to the expiration of the period
of six months from the closing date, will not offer or sell any notes to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments,
as principal or agent for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to
the public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995;
(2) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation
to the notes in, from or otherwise involving the United Kingdom; and
(3) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of
the notes to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995 or is a person to whom such document may otherwise lawfully be issued
or passed on.
The notes have not been and will not be registered under the Securities and
Exchange Law of Japan and the underwriter has agreed that it will not offer or
sell any of the notes, directly or indirectly, in Japan or to, or for the
benefit of, any resident of Japan, which term means any person resident in
Japan, including any corporation or other entity organized under the laws of
Japan, except under an exemption from the registration requirements of, and
otherwise in compliance with, the Securities and Exchange Law of Japan and any
other applicable laws, regulations and ministerial guidelines of Japan.
Upon receipt of a request by an investor who has received an electronic
prospectus supplement and prospectus from the underwriter or a request by such
investor's representative within the period during which there is an obligation
to deliver a prospectus supplement and prospectus, Conseco Securitizations and
the underwriter will promptly deliver, or cause to be delivered, without
charge, a paper copy of the prospectus supplement and prospectus.
LEGAL MATTERS
The legality of the notes and consequences of the federal and Minnesota
income tax matters discussed under "Federal and State Income Tax Consequences"
will be passed upon for Conseco Finance and Conseco Securitizations by Dorsey &
Whitney LLP. The validity of the notes will be passed upon for the underwriter
by Brown & Wood LLP, New York, New York.
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the notes will be available only in
book-entry form, which are called global notes. Investors in the global notes
may hold such global notes through any of DTC, CEDEL or Euroclear. The global
securities will be tradeable as home market instruments in both the European
and U.S. domestic markets. Initial settlement and all secondary trades will
settle in same-day funds.
Secondary market trading between investors holding global notes through CEDEL
and Euroclear will be conducted in the ordinary way in accordance with their
normal rules and operating procedures and according to conventional eurobond
practice for example, seven calendar day settlement.
Secondary market trading between investors holding global notes through DTC
will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
participants holding notes will be effected on a delivery-against-payment basis
through the respective Depositaries of CEDEL and Euroclear, in such capacity
and DTC participants.
Non-U.S. holders of global notes will be subject to U.S. withholding taxes
unless the holders meet certain requirements and deliver appropriate U.S. tax
documents to the securities clearing organizations or their participants.
Initial Settlement
All global notes will be held in book-entry form by DTC in the name of Cede &
Co. as nominee of DTC. Investors' interests in the global notes will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective
depositaries, which in turn will hold such positions in accounts as DTC
participants.
Investors electing to hold their global notes through DTC will follow the
settlement practices applicable to United States corporate debt obligations.
Investors' securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their global notes through CEDEL or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary global security and no lock-
up or restricted period. Global notes will be credited to the securities
custody accounts on the settlement date against payments in same-day funds.
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Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to be sure that settlement can be made on the desired
value date.
Trading between DTC participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to book-entry
securities in same-day funds.
Trading between CEDEL and/or Euroclear participants. Secondary market trading
between CEDEL participants or Euroclear participants will be settled using the
procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When global
notes are to be transferred from the account of a DTC participant to the
account of a CEDEL participant or a Euroclear participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL participant or
Euroclear participant at least one business day prior to settlement. CEDEL or
Euroclear, as applicable, will instruct its depositary to receive the global
notes against payment. Payment will include interest accrued on the global
notes from and including the last coupon payment date to and excluding the
settlement date. Payment will then be made by such depositary to the DTC
participant's account against delivery of the global notes. After settlement
has been completed, the global notes will be credited to the applicable
clearing system and by the clearing system, in accordance with its usual
procedures, to the CEDEL participant's or Euroclear participant's account. The
global notes credit will appear the next day European time and the cash debit
will be back-valued to, and the interest on the global notes will accrue from,
the value date, which would be the preceding day when settlement occurred in
New York. If settlement is not completed on the intended value date, for
example, the trade fails, the CEDEL or Euroclear cash debit will be valued
instead as of the actual settlement date.
CEDEL participants and Euroclear participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the global
securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL participants or Euroclear participants can elect not to pre-
position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, CEDEL participants or Euroclear participants
purchasing global notes would incur overdraft charges for one day, assuming
they cleared the overdraft when the global notes were credited to their
accounts. However, interest on the global notes would accrue from the value
date. Therefore, in many cases the investment income on the global notes earned
during that one-day period may
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substantially reduce or offset the amount of such overdraft charges, although
this result will depend on each CEDEL participant's or Euroclear participant's
particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending global notes to the
respective Depositary for the benefit of CEDEL participants or Euroclear
participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC participant a cross-market transaction will
settle no differently than a trade between two DTC participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to time zone
differences in their favor, CEDEL participants and Euroclear participants may
employ their customary procedures for transactions in which global notes are to
be transferred by the respective clearing systems, through their respective
depositaries, to a DTC participant. The seller will send instructions to CEDEL
or Euroclear through a CEDEL participant or Euroclear participant at least one
business day prior to settlement. In these cases, CEDEL or Euroclear will
instruct their respective depositaries, as appropriate, to deliver the notes to
the DTC participant's account against payment. Payment will include interest
accrued on the global notes from and including the last coupon payment date to
and excluding the settlement date. The payment will then be reflected in the
account of the CEDEL participant or Euroclear participant the following day,
and receipt of the cash proceeds in the CEDEL participant's or Euroclear
participant's account would be back-valued to the value date, which would be
the preceding day, when settlement occurred in New York. Should the CEDEL
participant or Euroclear participant have a line of credit with its clearing
system and elect to be in debit in anticipation of receipt of the sale proceeds
in its account, the bank-valuation will extinguish any overdraft charges
incurred over that one-day period. If settlement is not completed on the
intended value date, for example the trade fails, receipt of the cash proceeds
in the CEDEL participant's or Euroclear participant's account would instead be
valued as of the actual settlement date. Finally, day traders that use CEDEL or
Euroclear and that purchase global notes from DTC participants for delivery to
CEDEL participants or Euroclear participants should note that these trades
would automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
(a) borrowing through CEDEL or Euroclear for one day, until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts in
accordance with the clearing system's customary procedures;
(b) borrowing the global notes in the U.S. from a DTC participant no
later than one day prior to settlement, which would give the global notes
sufficient time to be reflected in their CEDEL or Euroclear account in
order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC participant is at least
one day prior to the value date for the sale to the CEDEL participant or
Euroclear participant.
A-3
<PAGE>
U.S. Federal Income Tax Documentation Requirements
A beneficial owner of global notes holding securities through CEDEL or
Euroclear, or through DTC if the holder has an address outside the U.S. will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest, including original issue discount on registered debt issued by U.S.
persons, unless
(1) each clearing system, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business in
the chain of intermediaries between such beneficial owner and the U.S.
entity required to withhold tax complies with applicable certification
requirements and
(2) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption of non-U.S. Persons (Form W-8). Beneficial owners of notes that
are non-U.S. persons generally can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 Certificate of Foreign Status
and a certificate under penalties of perjury, the Tax Certificate that such
beneficial owner is,
. not a controlled foreign corporation within the meaning of Section
957(a) of the IRS code that is related, within the meaning of
Section 864(d)(4) of the code) to the trust or the Transferor and
. not a 10 percent shareholder within the meaning of Section
871(h)(3)(B) of the IRS code of the trust or the transferor. If the
information shown on Form W-8 or the Tax Certificate changes, a new
Form W-8 or Tax Certificate, as the case may be, must be filed
within 30 days of such change.
Exemption for non-U.S. person with effectively connected income (Form
4224). A non-U.S. person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States can obtain an
exemption from the withholding tax by filing Form 4224, Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States.
Exemption or reduced rate for non-U.S. persons resident in treaty
countries (Form 1001).Non-U.S. persons that are beneficial owners of notes
residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate, depending on the treaty terms by
filing Form 1001, Ownership, Exemption or Reduced Rate Certificate. If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer alternatively files Form W-8. Form 1001 may be
filed by the beneficial owner of notes or such owner's agent.
Exemption for U.S. Persons (Form W-9). U.S. persons can obtain a complete
exemption from the withholding tax by filing Form W-9 Payer's Request for
Taxpayer Identification Number and Certification.
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a
global security or, in the case of a Form 1001 or a Form 4224 filer, the
owner's agent, files by
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<PAGE>
submitting the appropriate form to the person through whom it holds the
security, the clearing agency, in the case of persons holding directly on
the books of the clearing agency. Form W-8 and Form 1001 are effective for
three calendar years and Form 4224 is effective for one calendar year.
A U.S. person is:
(1) a citizen or resident of the United States,
(2) a corporation or partnership organized in or under the laws of the
United States, any stock thereof or the District of Columbia, or
(3) an estate or trust the income of which is includible in gross income
for United States tax purposes, regardless of its source.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of the global notes. You
are advised to consult your own tax advisors for specific tax advice concerning
your holding and disposing of global notes.
A-5
<PAGE>
[Conseco Logo]
PROSPECTUS
Conseco Finance Corp.
Servicer
Conseco Finance Securitizations Corp.
Seller
Conseco Finance Vehicle Trusts
Asset-Backed Certificates
Asset-Backed Notes
(Issuable in Series)
----------------
We are offering asset-backed certificates and asset-backed notes under this
prospectus and a prospectus supplement. A prospectus supplement will be
prepared separately for each series of securities offered. A prospectus
supplement may offer asset-backed certificates, or asset-backed notes, or both.
Conseco Finance Securitizations Corp. will form a trust for each series and
deposit a pool of contracts in the trust, and the trust will issue the
securities of that series. Payments of principal and interest on the securities
of any series will depend primarily on payments made on the related pool of
contracts. The securities of any series may comprise several different classes.
A trust may also issue one or more other classes of certificates or notes that
will not be offered under this prospectus.
The right of each class of securities within a series to receive payments may
be senior or subordinate to the rights of one or more of the other classes of
securities. In addition, a series of securities may include one or more classes
which on the one hand are subordinated to one or more classes of securities,
while on the other hand are senior to one or more classes of securities. The
rate of principal and interest payment on the securities of any class will
depend on the priority of payment of that class and the rate and timing of
payments on the contracts owned by that trust.
----------------
The securities will represent interests in, or obligations of, the related
trust and will not represent any interest in or obligation of Conseco Finance
Corp., Conseco Finance Securitizations Corp. or any of their affiliates, except
as specified in the prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
----------------
This prospectus may not be used to consummate sales of any securities unless
accompanied by a prospectus supplement for that series.
Prospectus date is December 10, 1999.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We tell you about the securities in two separate documents that progressively
provide more detail: (1) this prospectus, which provides general information,
some of which may not apply to a particular series of securities, including
your series; and (2) the prospectus supplement for the particular terms of your
series of securities.
If the terms of your series of securities described in the prospectus
supplement varies from this prospectus, you should rely on the information in
your prospectus supplement.
You should rely only on the information contained in this document or
information to which we have referred you. We have not authorized anyone to
provide you with information that is different. This document may only be used
where it is legal to sell these securities.
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<PAGE>
To understand all of the terms of the certificates, read this entire
prospectus and the accompanying prospectus supplement. We have also defined
terms in the "Glossary" section at the back of this prospectus.
THE TRUSTS
For each series of securities, Conseco Securitizations will establish a trust
under either (1) a pooling and servicing agreement among Conseco Finance as
servicer, Conseco Securitizations, as seller, and a trustee specified in the
prospectus supplement, the trustee, or (2) a trust agreement between Conseco
Finance, as depositor, and a trustee specified in the related prospectus
supplement, the owner trustee, and a related sale and servicing agreement among
Conseco Securitizations, as seller, Conseco Finance, as servicer, and the
trust. For any trust, the related pooling and servicing agreement, or the
related trust agreement and sale and servicing agreement, as applicable, are
referred to herein as the related trust documents. Before the sale and
assignment of the related contracts under the related trust documents, the
trust will have no assets or obligations. The trust will not engage in any
business activity other than acquiring and holding the trust property issuing
the certificates and the notes, if any, of such series and distributing
payments thereon.
Each certificate will represent a fractional undivided interest in, and each
note, if any, will represent an obligation of, the related trust. The property
of each trust will include:
(1) a contract pool, as described in "The Contracts";
(2) all monies paid or payable thereon on or after the cutoff date;
(3) such amounts as from time to time may be held in the collection
account, including all investments in the collection account and all
income from the investment of funds and all proceeds and certain
other accounts, as described in "Description of the Trust Documents--
Collections";
(4) an assignment of our security interests in the products securing the
related contracts, as described in "The Contracts";
(5) an assignment of the right to receive proceeds from claims on some
insurance policies covering the products or obligors; and
(6) specific other rights under the related trust documents.
The trust property will also include, if so specified in the prospectus
supplement, monies on deposit in a pre-funding account to be established with
the indenture trustee or the trustee, which will be used to purchase subsequent
contracts from Conseco Securitizations from time to time, and as frequently as
daily, during the pre-funding period specified in the related prospectus
supplement. Any subsequent contracts so purchased will be included in the
related contract pool forming part of the trust property, subject to the prior
rights of the related indenture trustee and the noteholders therein. In
addition, to the extent specified in the prospectus supplement, a form of
credit enhancement may be issued to or held by the trustee or the indenture
trustee for the benefit of holders of one or more classes of securities.
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<PAGE>
The servicer will service the contracts held by each trust and will receive
fees for such services. See "Description of the Trust Documents--Servicing
Compensation." Unless we specify otherwise in the prospectus supplement,
Conseco Finance, on behalf of each trust, will hold the original installment
sales contract or promissory note as well as copies of documents and
instruments relating to each contract and evidencing the security interest in
the product securing each contract. In order to protect the trust's ownership
interest in the contracts, we will file a UCC-1 financing statement in
Minnesota and Delaware to give notice of such trust's ownership of the related
contracts and the related trust property.
The Trustee
The trustee or owner trustee, as applicable, for each trust will be specified
in the prospectus supplement. The trustee's liability in connection with the
issuance and sale of the securities of such series will be limited solely to
the express obligations of such trustee set forth in the related trust
documents. A trustee may resign at any time, in which event Conseco
Securitizations will be obligated to appoint a successor trustee. Conseco
Securitizations may also remove the trustee if the trustee ceases to be
eligible to continue as trustee under the related trust documents or if the
trustee becomes insolvent. In such circumstances, Conseco Securitizations will
be obligated to appoint a successor trustee. Any resignation or removal of a
trustee and appointment of a successor trustee will be subject to any
conditions or approvals specified in the prospectus supplement and will not
become effective until acceptance of the appointment by the successor trustee.
THE CONTRACTS
Each pool of contracts in a trust will consist of retail installment sales
contracts and promissory notes to finance the purchase of trucks of the types
described in the next paragraph. The contracts will be originated or purchased
by us on an individual basis in the ordinary course of business. Except as we
specify otherwise in the prospectus supplement, the contracts will be fully
amortizing and will bear interest at a fixed or variable rate.
The products financed by the contracts included in a contract pool will
include only trucks. Any trust whose securities are offered under this
prospectus will include only contracts secured by commercial trucks and
trailers. Because we have less extensive experience in underwriting and
servicing retail installment sales contracts for trucks, we have no basis upon
which to distinguish the expected delinquency, default or prepayment experience
of contracts secured by different types of products.
4
<PAGE>
CONSECO FINANCE CORP.
General
Conseco Finance Corp. was formerly known as Green Tree Financial Corporation.
It is a Delaware corporation that, as of December 31, 1998, had stockholders'
equity of approximately $2.2 billion. Through its various divisions, it
purchases, pools, sells and services retail conditional sales contracts for
manufactured housing, retail installment sales contracts for home improvements,
and installment sales contracts for a variety of consumer products and
commercial equipment. It also purchases, pools, sells and services home equity
loans. Conseco Finance is the largest servicer of government-insured
manufactured housing contracts and conventional manufactured housing contracts
in the United States. Servicing functions are performed through Conseco Finance
Servicing Corp., its wholly owned subsidiary. Through its principal offices in
St. Paul, Minnesota, and service centers throughout the United States, it
serves all 50 states. It began financing FHA-insured home improvement loans in
April 1989 and conventional home improvement loans in September 1992. It also
purchases, pools and services installment sales contracts for various consumer
products. Its principal executive offices are located at 1100 Landmark Towers,
St. Paul, Minnesota 55102-1639 (telephone (651) 293-3400). Its annual report on
Form 10-K for the year ended December 31, 1998 and, when available, subsequent
quarterly and annual reports are available upon written request.
The SEC allows Conseco Finance to incorporate by reference some of the
information it files with it, which means that it can disclose important
information to you by referring you to those documents. The information that it
incorporates by reference is considered to be part of this prospectus, and
later information filed with the SEC will automatically update and supersede
this information. Conseco Finance is incorporating by reference the following
documents into this prospectus and the prospectus supplement:
. Conseco Finance Corp.'s annual report on Form 10-K for the year ended
December 31, 1998.
. Conseco Finance Corp.'s quarterly report on Form 10Q for the quarter
ended June 30, 1999.
Conseco Finance will provide you, upon your written or oral request, a copy
of any or all of the documents incorporated by reference in this prospectus,
exhibits to those documents. Please direct your requests for copies to John
Dolphin, Director of Investor Relations, 11825 Pennsylvania Street, Carmel,
Indiana 46032, telephone number (317) 817-6100.
All documents filed by the servicer, on behalf of any trust, under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, after the
date of this prospectus and before the termination of the offering of the
securities issued by that trust, will be incorporated by reference into this
prospectus.
5
<PAGE>
Federal securities law requires the filing of information with the
Securities and Exchange Commission, including annual, quarterly and special
reports and other information. You can read and copy these documents at the
public reference facility maintained by the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549. You can also read and copy
such reports, proxy statements and other information at the following regional
offices of the SEC:
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite
New York, NY 10048 1400
Chicago, IL 60661
Please call the SEC at 1-800-SEC-0330 for more information about the public
reference rooms or visit the SEC's web site at http://www.sec.gov to access
available filings.
Purchase of Contracts
Conseco Finance arranges to purchase qualifying contracts originated by
dealers located throughout the United States. Conseco Finance's personnel
contact dealers and explain Conseco Finance's available financing plans,
terms, prevailing rates and credit and financing policies. If the dealer
wishes to utilize Conseco Finance's available customer financing, the dealer
must make an application for dealer approval.
All contracts that Conseco Finance purchases are written on forms provided
or approved by Conseco Finance and are purchased on an individually approved
basis in accordance with Conseco Finance's guidelines. The dealer submits the
customer's credit application and purchase order to Conseco Finance's office
where an analysis of the creditworthiness of the proposed buyer is made. The
analysis includes a review of the applicant's paying habits, length and
likelihood of continued employment and certain other procedures. Conseco
Finance's underwriting guidelines focus primarily on the obligor's ability to
repay the loan rather than the collateral value of the product financed. The
maximum loan amount for an obligor will depend on a variety of factors,
including the type of product, whether the product is new or used, the
obligor's debt-to-income ratio, and the manufacturer's invoice price of the
product, plus certain dealer-installed accessories, sales taxes, title fees,
registration fees, and other items. Generally, the maximum permissible debt-
to-income ratio, based on the monthly loan payments, is between 55% and 65%,
the maximum loan-to-invoice ratio, for new products, ranges from 100% to 125%,
and the maximum loan-to-sales-price ratio, for used products is typically 90%
subject to further limitation based on a standard assumed value for such a
used product. Management may revise these guidelines from time to time, and
the underwriting guidelines may be exceeded in some cases with the approval of
Conseco Finance's management. Accordingly, some of the contracts included in a
trust may not conform in all respects to the criteria described above. Conseco
Finance will generally finance premiums for the term of the contract on
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<PAGE>
optional credit life, accident and health and extended warranty insurance, up
to 20% of the sales price of the product, and may finance premiums for required
physical damage insurance on the product. If the application meets our
guidelines and the credit is approved, we purchase the contract when the
customer accepts delivery of the product.
Loss and Delinquency Information
Each prospectus supplement will include loss and delinquency experience for
our entire servicing portfolio of consumer product contracts. However, there
can be no assurance that the experience will be indicative of the performance
of the contracts included in a particular contract pool.
CONSECO FINANCE SECURITIZATIONS CORP.
Conseco Securitizations is a wholly owned subsidiary of Conseco Finance. It
was formed on September 10, 1999. Conseco Securitizations may only engage in
the business of acquiring pools of loans from Conseco Finance and transferring
those loans to trusts such as the trusts described in this prospectus, and
activities incidental or related thereto. The principal executive offices of
Conseco Securitizations are located at 300 Landmark Towers, St. Paul, Minnesota
55102-1639 and its telephone number is (651) 293-3400.
Conseco Securitizations has taken and will take steps in conducting its
business that are intended to make it unlikely that a bankruptcy of Conseco
Finance would result in the consolidation of the assets and liabilities of
Conseco Finance and Conseco Securitizations. These steps include the creation
of Conseco Securitizations as a separate, limited-purpose corporation pursuant
to a certification of incorporation containing restrictions on the permissible
business activities of Conseco Securitizations, requiring that Conseco
Securitizations have on its board of directors at least two directors who are
independent of Conseco Finance, and requiring that all business transactions or
corporate actions outside of the ordinary course of business be approved by the
independent directors.
YIELD AND PREPAYMENT CONSIDERATIONS
The remittance rates and the weighted average contract rate of the contracts
for each series of certificates are listed in the prospectus supplement.
Unless Conseco Finance specifies otherwise in the prospectus supplement, many
of the contracts will be simple interest installment sales contracts and
promissory notes. Payments on simple interest obligations are applied first to
interest accrued through the payment date, and the remainder is applied to
reduce the unpaid principal balance. Accordingly, if an obligor pays an
installment before its due date, the portion of the payment allocable to
interest for the period will be less than if the payment had been made on the
due date, the portion of the payment applied to reduce the principal balance
will be correspondingly greater, and the principal balance will be amortized
more rapidly than scheduled.
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<PAGE>
Conversely, if an obligor pays an installment after its due date, the portion
of the payment allocable to interest will be greater than if the payment had
been made on the due date, the portion of the payment applied to reduce the
principal balance will be correspondingly less, and the principal balance will
be amortized slower than scheduled, in which case a larger portion of the
principal balance may be due on the final scheduled payment date. Any interest
shortfalls resulting from early payment or prepayment of a contract will be
funded by collections on other contracts or, to the extent collections are
insufficient, by payments under the applicable form of credit enhancement, if
any, described in the prospectus supplement.
The contracts will be prepayable, without premium or penalty, by obligors at
any time. Prepayments, or, for this purpose, equivalent payments to a trust,
also may result from liquidations due to default, receipt of proceeds from
insurance policies, repurchases by us due to breach of a representation or
warranty, or as a result of our or the servicer exercising its option to
purchase the contract pool. See "Description of the Trust Documents." The rate
of prepayments on the contracts may be influenced by a variety of economic,
social and other factors. No assurance can be given that prepayments on the
contracts will conform to any estimated or actual historical experience, and no
prediction can be made as to the actual prepayment rates which will be
experienced on the contracts. certificateholders and noteholders will bear all
reinvestment risk resulting from the timing of payments of principal on the
certificates or the notes, as the case may be.
POOL FACTOR
The pool factor for each class of certificates will be an eight-digit decimal
which the servicer will compute indicating the principal balance for the
certificates as of each distribution date, after giving effect to all
distributions of principal made on each distribution date, as a fraction of the
original principal balance of for the certificates. The pool factor for each
class of notes, if any, will be an eight-digit decimal which the servicer will
compute indicating the remaining outstanding principal balance for the notes as
of each distribution date, after giving effect to all distributions of
principal on such distribution date as a fraction of the initial outstanding
principal balance of the class of notes. Each pool factor will initially be
1.00000000; after that, the pool factor will decline to reflect reductions in
the outstanding principal balance of the applicable class of certificates or
notes, as the case may be. The amount of a certificateholder's pro rata share
of the principal balance for the related class of certificates can be
determined by multiplying the original denomination of the certificateholder's
certificate by the then applicable pool factor. The amount of a noteholder's
pro rata share of the aggregate outstanding principal balance of the applicable
class of notes can be determined by multiplying the original denomination of
such noteholder's note by the then applicable pool factor.
For each trust, on each distribution date, the related certificateholders and
noteholders will receive periodic reports from the trustee stating the pool
factor and containing various other items of information. Unless and until
definitive certificates or definitive notes are
8
<PAGE>
issued, the reports will be sent on behalf of the trust to the trustee and the
indenture trustee, if any, and Cede & Co., as registered holder of the
certificates and the notes and the nominee of DTC. Certificate owners and note
owners may receive such reports, upon written request, together with a
certification that they are certificate owners or note owners and payment of
any expenses associated with the distribution of such reports, from the trustee
and the indenture trustee, if any, at the addresses specified in the prospectus
supplement. See "Information Regarding the Securities--Statements to
Securityholders."
USE OF PROCEEDS
Unless we specify otherwise in the prospectus supplement, the net proceeds to
be received by the trust from the sale of each series of securities will be
used to pay to us the purchase price for the contracts and to make the deposit
of the pre-funded amount into the pre-funding account, if any, to repay
warehouse lenders and/or to provide for other forms of credit enhancement
specified in the prospectus supplement. The net proceeds to be received by us
will be used to pay our warehouse loans, and any additional proceeds will be
added to our general funds and used for general corporate purposes.
THE CERTIFICATES
General
For each trust, one or more classes of certificates of a given series will be
issued under the trust documents to be entered into among Conseco
Securitizations, as seller, Conseco Finance, as servicer, and the trustee,
forms of which have been filed as exhibits to the registration statement of
which this prospectus forms a part. Where particular provisions of or terms
used in the trust documents are referred to, the actual provisions are
incorporated by reference as part of this summary.
Unless we specify otherwise in the prospectus supplement, each class of
certificates will initially be represented by a single certificate registered
in the name of the nominee of DTC, together with any successor depository
selected by Conseco Securitizations, the depository. See "Information Regarding
the Securities--Book-Entry Registration." Unless we specify otherwise in the
prospectus supplement, the certificates evidencing interests in a trust will be
available for purchase in denominations of $1,000 initial principal amount and
integral multiples thereof, except that one certificate evidencing an interest
in such trust may be issued in a denomination that is less than $1,000 initial
principal amount. Certificates may be transferred or exchanged without the
payment of any service charge other than any tax or governmental charge payable
in connection with such transfer or exchange. Unless we specify otherwise in
the prospectus supplement, the trustee will initially be designated as the
registrar for the certificates.
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Distributions of Interest and Principal
The timing and priority of distributions, seniority, allocations of loss,
pass-through rate and amount of or method of determining distributions with
respect to principal and interest, or, where applicable, for principal only or
interest only on the certificates of any series will be described in the
prospectus supplement. Distributions of interest on the certificates will be
made on the dates specified in the related prospectus supplement and, unless we
specify otherwise in the prospectus supplement, will be made prior to
distributions with respect to principal. A series may include one or more
classes of stripped certificates entitled to:
(1) distributions in respect of principal with disproportionate, nominal
or no interest distribution, or
(2) interest distributions, with disproportionate, nominal or no
distributions in respect of principal.
Each class of certificates may have a different pass-through rate, which may be
a fixed, variable or adjustable pass-through rate, and which may be zero for
certain classes of stripped certificates, or any combination of the these. The
prospectus supplement will specify the pass-through rate for each class of
certificate, or the initial pass-through rate and the method for determining
the pass-through rate. Unless we specify otherwise in the prospectus
supplement, interest on the certificates will be calculated on the basis of a
360-day year consisting of twelve 30-day months. Unless we specify otherwise in
the prospectus supplement, distributions for the certificates will be
subordinate to payments for the notes, if any, as more fully described in the
prospectus supplement. Distributions for principal of any class of certificates
will be made on a pro rata basis among all of the certificateholders of such
class.
In the case of a series of certificates which includes two or more classes of
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 described in the prospectus supplement.
THE NOTES
General
For each series of securities, one or more classes of notes issued under 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. Unless we specify
otherwise in the prospectus supplement, no notes will be issued as a part of
any series. The following summary is not 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 the following summary will be supplemented in whole or
in part by the prospectus supplement. Where particular provisions of or terms
used in the indenture are referred to, the actual provisions including
definition of terms are incorporated by reference as part of this summary.
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<PAGE>
Unless we specify otherwise in the prospectus supplement, each class of notes
will initially be represented by a single note registered in the name of the
nominee of the depository. See "Certain Information Regarding the Securities--
Book-Entry Registration." Unless we specify otherwise in the prospectus
supplement, notes will be available for purchase in denominations of $1,000 and
integral multiples of $1,000. Notes may be transferred or exchanged without the
payment of any service charge other than any tax or governmental charge payable
for such transfer or exchange. Unless we provide otherwise in the prospectus
supplement, the indenture trustee will initially be designated as the registrar
for the notes.
Principal and Interest on the Notes
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 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 class or classes of
notes of such series, or any class of certificates, as described in the
prospectus supplement. A series may include one or more classes of stripped
notes entitled to:
(1) principal payments with disproportionate, nominal or no interest
payment, or
(2) interest payments with disproportionate, nominal or no principal
payments.
Each class of notes may have a different interest rate, which may be a fixed,
variable or adjustable interest rate, and which may be zero for some classes of
notes, or any combination of these. The prospectus supplement will specify the
interest rate for each class of notes, or the initial interest rate and the
method for determining the interest rate. One or more classes of notes of a
series may be redeemable under the circumstances specified in the prospectus
supplement.
Unless we specify otherwise in the prospectus supplement, payments for
interest to noteholders of all classes within a series will have the same
priority. Under some circumstances, the amount available for these payments
could be less than the amount of interest payable on the notes on any of the
dates we specify for payments in the prospectus supplement, 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.
In the case of a series of securities which includes two or more classes of
notes, the sequential order and priority of payment for principal and interest,
and any schedule or formula or other provisions applicable to the
determination, of each class will be described in the prospectus supplement.
Unless we specify otherwise in the 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 the class.
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The Indenture
A form of indenture has been filed as an exhibit to the registration
statement of which this prospectus forms a part. Conseco Finance will provide a
copy of the applicable indenture, without exhibits, upon request to a holder of
notes issued under the indenture.
Modification of Indenture Without Noteholder Consent. Each trust and related
indenture trustee, on behalf of the trust, may, without consent of the
noteholders, enter into one or more supplemental indentures for any of the
following purposes:
(1) to correct or amplify the description of the collateral or add
additional collateral;
(2) to provide for the assumption of the note and the indenture
obligations by a permitted successor to the trust;
(3) to add additional covenants for the benefit of the applicable
noteholders;
(4) to convey, transfer, assign, mortgage or pledge any property to or
with the indenture trustee;
(5) to cure any ambiguity or correct or supplement any provision in the
indenture or in any supplemental indenture;
(6) 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 or any supplemental indenture which may be inconsistent with any
other provision of the indenture as shall be necessary and permitted to
facilitate the administration by more than one trustee;
(7) to modify, eliminate or add to the provisions of the indenture in
order to comply with the Trust Indenture Act of 1939; and
(8) 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 the indenture; provided that any action specified in this
clause (8) shall not, as evidenced by an opinion of counsel, adversely
affect in any material respect the interests of any noteholder unless
noteholder consent is otherwise obtained as described below.
Modifications of Indenture With Noteholder Consent. Each trust, with the
consent of the holders representing a majority of the principal balance of the
outstanding notes, a note majority, the owner trustee and the indenture trustee
may execute a supplemental indenture to add provisions, to change in any manner
or eliminate any provisions of, the indenture, or modify in any manner the
rights of the noteholders.
Without the consent of the holder of each outstanding note affected, no
supplemental indenture may:
(1) 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 or change the manner of
calculating any payment, any place of payment where, or the coin or
currency in which any note or any interest is payable;
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(2) impair the right to institute suit for the enforcement of certain
provisions of the indenture regarding payment;
(3) reduce the percentage of the aggregate amount of the outstanding
notes the consent of the holders of which is required for any the
supplemental indenture or the consent of the holders of which is required
for any waiver of compliance with certain provisions of the indenture or of
certain defaults thereunder and their consequences as provided for in the
indenture;
(4) modify or alter the provisions of the indenture regarding the voting
of notes held by the trust, any other obligor on the notes, Conseco
Securitizations, Conseco Finance or an affiliate of any of them;
(5) 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 contracts if the proceeds of
such sale would be insufficient to pay the principal amount and accrued but
unpaid interest on the outstanding notes;
(6) decrease the percentage of the aggregate principal amount of the
notes required to amend the sections of the indenture which specify the
applicable percentage of aggregate principal amount of the notes necessary
to amend the indenture or other applicable agreements; or
(7) permit the creation of any lien ranking prior to or on a parity with
the lien of the indenture for 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 of the 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. For each trust, unless we
specify otherwise in the prospectus supplement, events of default under the
indenture will consist of:
(1) a default for five days or more in the payment of any interest on any
note;
(2) a default in the payment of the principal of or any installment of
the principal of any note when the note becomes due and payable;
(3) a default in the observance or performance in any material way of any
covenant or agreement of the trust made in the indenture, or any
representation or warranty made by the trust in the indenture or in any
certificate delivered under the indenture or in connection with the
indenture having been incorrect as of the time made, and the continuation
of any such default or the failure to cure such breach of a representation
or warranty for a period of 30 days after notice thereof is given to the
trust by the indenture trustee or to the trust and the indenture trustee by
the holders of at least 25% in principal amount of the notes then
outstanding; or
(4) certain events of bankruptcy, insolvency, receivership or liquidation
of the Trust.
However, the amount of principal due and payable on any class of notes on any
payment date prior to the final scheduled payment date, if any, for such class
will generally be
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determined by amounts available to be deposited in the note distribution
account for such distribution date. Therefore, unless we specify otherwise in
the prospectus supplement, the failure to pay principal on a class of notes
generally will not result in the occurrence of an event of default unless the
class of notes has a final scheduled payment date, and then not until such
final scheduled payment date for the class of notes.
Unless we specify otherwise in the prospectus supplement, if an event of
default should occur and be continuing for the notes of any series, the related
indenture trustee or a note majority may declare the principal of the notes to
be immediately due and payable. Such declaration may, under certain
circumstances, be rescinded by a note majority.
Unless we specify otherwise in the prospectus supplement, if the notes of any
series have been declared due and payable following an event of default, the
related indenture trustee may institute proceedings to collect amounts due or
foreclose on trust property, exercise remedies as a secured party, sell the
related contracts or elect to have the trust maintain possession of the
contracts and continue to apply collections on the contracts as if there had
been no declaration of acceleration. Unless we specify otherwise in the
prospectus supplement, the indenture trustee, however, will be prohibited from
selling the related contracts following an event of default, unless:
(1) the holders of all the outstanding related notes consent to such
sale;
(2) the proceeds of such sale are sufficient to pay in full the principal
of and the accrued interest on such outstanding notes at the date of such
sale; or
(3) the indenture trustee determines that the proceeds of the contracts
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 66 2/3% of the aggregate outstanding amount of
the notes.
Unless otherwise specified in the related prospectus supplement, following a
declaration upon an event of default that the notes are immediately due and
payable,
(1) Noteholders will be entitled to ratable repayment of principal on the
basis of their respective unpaid principal balances and
(2) 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
or principal on the certificates.
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
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provisions for indemnification and certain limitations contained in the
indenture, a note majority in a series will have the right to direct the time,
method and place of conducting any proceeding or any remedy available to the
indenture trustee, and a note majority 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.
No holder of a note of any series will have the right to institute any
proceeding with respect to the related indenture, unless:
. that 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 the outstanding notes.
If an event of default occurs and is continuing and if it is known to the
indenture trustee, the indenture trustee will mail to each noteholder notice of
the event of default within 90 days after it occurs. Except in the case of a
failure to pay principal of or interest on any notes, 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 the noteholders.
In addition, each indenture trustee and the related noteholders, by accepting
the related notes, will covenant that they will not at any time institute
against Conseco Securitizations, Conseco Finance or the related trust any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
Neither the indenture trustee nor the trustee in its individual capacity, nor
any holder of a certificate including, without limitation, Conseco
Securitizations, Conseco Finance, 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 notes or for any agreement or covenant
of the trust contained in the indenture.
Covenants. Each indenture will provide that the trust may not consolidate
with or merge into any other entity, unless:
(1) the entity formed by or surviving such consolidation or merger is
organized under the laws of the United States or any state,
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(2) such entity expressly assumes the trust's obligation to make due and
punctual payments upon the notes and the performance or observance of every
agreement and covenant of the trust under the indenture,
(3) no event of default shall have occurred and be continuing immediately
after the merger or consolidation,
(4) the trustee has been advised that the then current rating of the
related notes or certificates then in effect would not be reduced or
withdrawn by the rating agencies as a result of the merger or
consolidation,
(5) the trustee has received an opinion of counsel stating that the
consolidation or merger would have no material adverse tax consequence to
the trust or to any related note owner or certificate owner.
Each trust may not:
(1) except as expressly permitted by the indenture, the trust documents
or certain related documents for such trust, collectively, the related
documents, sell, transfer, exchange or otherwise dispose of any of the
assets of the trust,
(2) claim any credit on or make any deduction from the principal and
interest payable on the notes, other than amounts withheld under the IRS
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 the trust,
(3) dissolve or liquidate in whole or in part,
(4) permit the validity or effectiveness of the related indenture to be
impaired or permit any person to be released from any covenants or
obligations for the related notes under the indenture except as may be
expressly permitted thereby, or
(5) except as expressly permitted by the related documents, 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 trust or any part thereof, or any interest therein or
proceeds thereof.
No trust may engage in any activity other than as specified under the section
of the related prospectus supplement entitled "The Trust." No trust may incur,
assume or guarantee any indebtedness other than indebtedness incurred pursuant
to the notes and the indenture or otherwise in accordance with the related
documents.
Annual Compliance Statement. Each 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.
Indenture Trustee's Annual Report. The indenture trustee will be required to
mail each year to all related noteholders 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 trust to
the indenture trustee in its individual capacity, the property and funds
physically
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held by the indenture trustee and any action taken by it that materially
affects the notes and that has not been previously reported. Note owners may
receive reports upon written request, together with a certification that they
are note owners and payment of reproduction and postage expenses associated
with the distribution of such reports, from the indenture trustee at the
address specified in the prospectus supplement.
Satisfaction and Discharge of Indenture. The indenture will be discharged
with respect to the collateral securing the related notes 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
prospectus supplement. The indenture trustee may resign at any time, and
Conseco Securitizations as the seller will be obligated to appoint a successor
trustee. Conseco Securitizations may also remove the indenture trustee if the
indenture trustee ceases to be eligible to continue under the indenture or if
the indenture trustee becomes insolvent. In such circumstances, Conseco
Securitizations will be obligated to appoint a successor trustee. Any
resignation or removal of the indenture trustee and appointment of a successor
trustee will be subject to any conditions or approvals, if any, specified in
the prospectus supplement and will not become effective until acceptance of the
appointment by a successor trustee.
INFORMATION REGARDING THE SECURITIES
Book-Entry Registration
Unless we provide otherwise in the prospectus supplement, the securities of
each series will be registered in the name of Cede & Co., the nominee of DTC.
DTC is a limited-purpose trust company organized under the laws of the State of
New York, a member of the Federal Reserve System, a clearing corporation within
the meaning of the New York Uniform Commercial Code, and a clearing agency
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
accepts securities for deposit from its participating organizations and
facilitates the clearance and settlement of securities transactions between
participants in such securities through electronic book-entry changes in
accounts of participants, eliminating the need for physical movement of
certificates. participants include securities brokers and dealers, banks and
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
Certificate owners and note owners who are not participants but desire to
purchase, sell or otherwise transfer ownership of securities may do so only
through participants, unless and until definitive certificates or definitive
notes, each as defined below, are issued. In addition, certificate owners and
note owners will receive all distributions of principal of, and interest on,
the securities from the trustee or the indenture trustee, as applicable,
through DTC and
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participants. Certificate owners and note owners will not receive or be
entitled to receive certificates representing their respective interests in the
securities, except under the limited circumstances described below and specific
other circumstances, if any, as may be specified in the prospectus supplement.
Unless and until definitive securities are issued, it is anticipated that the
only certificateholder of the certificates and the only noteholder of the
notes, if any, will be Cede & Co., as nominee of DTC. Certificate owners and
note owners will not be recognized by the trustee as certificateholders or by
the indenture trustee as noteholders as those terms are used in the related
trust documents or indenture. Certificate owners and note owners will be
permitted to exercise the rights of certificateholders or noteholders, as the
case may be, only indirectly through participants and DTC.
For any series of securities, while the securities are outstanding, except
under the circumstances described below, under the rules, regulations and
procedures creating and affecting DTC and its operations, DTC is required to
make book-entry transfers among participants on whose behalf it acts with
respect to the securities and is required to receive and transmit distributions
of principal of, and interest on, the securities. participants with whom
certificate owners or note owners have accounts with respect to securities are
similarly required to make book-entry transfers and receive and transmit such
distributions on behalf of their respective certificate owners and note owners.
Accordingly, although certificate owners and note owners will not possess
securities, the rules provide a mechanism by which certificate owners and note
owners will receive distributions and will be able to transfer their interests.
For any series of securities, unless we specify otherwise in the prospectus
supplement, certificates and notes will be issued in registered form to
certificate owners and note owners or their nominees, rather than to DTC, the
certificates and notes being referred to in this prospectus as definitive
certificates and definitive notes, respectively, only if:
(1) DTC, the seller or the servicer advises the trustee or the indenture
trustee, as the case may be, in writing that DTC is no longer willing or
able to discharge properly its responsibilities as nominee and depository
with respect to the certificates or the notes, and the seller, the
servicer, the trustee or the indenture trustee, as the case may be, is
unable to locate a qualified successor,
(2) the seller or the administrator at its sole option has advised the
trustee or the indenture trustee, as the case may be, in writing that it
elects to terminate the book-entry system through DTC and
(3) after the occurrence of a servicer termination event, the holders
representing a majority of the certificate balance, a certificate majority
or a note majority advises the trustee or the indenture trustee, as the
case may be, through DTC, that continuation of a book-entry system is no
longer in their best interests.
Upon issuance of definitive certificates or definitive notes to certificate
owners or note owners, the certificates or notes will be transferable directly,
and not exclusively on a book-
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entry basis and registered holders will deal directly with the trustee or the
indenture trustee, as the case may be, for transfers, notices and
distributions.
DTC has advised the seller that, unless and until definitive certificates or
definitive notes are issued, DTC will take any action permitted to be taken by
a certificateholder or a noteholder under the related trust documents or
indenture only at the direction of one or more participants to whose DTC
accounts the certificates or notes are credited. DTC has advised us that DTC
will take the action for any fractional interest of the certificates or the
notes only at the direction of and on behalf of the participants beneficially
owning a corresponding fractional interest of the certificates or the notes.
DTC may take actions, at the direction of the related participants, for some
certificates or notes which conflict with actions taken for other certificates
or notes.
Issuance of certificates and notes in book-entry form rather than as physical
certificates or notes may adversely affect the liquidity of certificates or
notes in the secondary market and the ability of the certificate owners or note
owners to pledge them. In addition, since distributions on the certificates and
the notes will be made by the trustee or the indenture trustee to DTC and DTC
will credit such distributions to the accounts of its participants, with the
participants further crediting such distributions to the accounts of indirect
participants or certificate owners or note owners, certificate owners and note
owners may experience delays in the receipt of such distributions.
Statements to Securityholders
On or before each distribution date, the servicer will prepare and provide to
the trustee a statement to be delivered to the related certificateholders on
distribution date. On or prior to each distribution date, the servicer will
prepare and provide to the indenture trustee a statement to be delivered to the
related noteholders on the distribution date. These statements will be based on
the information in the related servicer's certificate setting forth information
required under the trust documents. Unless otherwise specified in the
prospectus supplement, each statement to be delivered to certificateholders
will include the following information for the certificates on that
distribution date or the period since the previous distribution date, as
applicable, and each statement to be delivered to noteholders will include the
following information as to the notes on the distribution date or the period
since the previous distribution date:
(1) the amount of the distribution allocable to interest on or for each
class of securities;
(2) the amount of the distribution allocable to principal on or for each
class of securities;
(3) the principal balance and the pool factor for each class of
certificates and the aggregate outstanding principal balance and the pool
factor for each class of notes, after giving effect to all payments
reported under (2) above on that date;
(4) the amount of the servicing fee paid to the servicer for the related
monthly period or periods, as the case may be;
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(5) the pass-through rate or interest rate for the next period for any
class of certificates or notes with variable or adjustable rates;
(6) the amount of advances made by the servicer for the distribution
date, and the amount paid to the servicer on that distribution date as
reimbursement of advances made on previous distribution dates;
(7) the amount, if any, distributed to certificateholders and noteholders
applicable to payments under the related form of credit enhancement, if
any; and
(8) any other information as may be specified in the prospectus
supplement.
Each amount set forth under subclauses (1), (2), (4) and (6) for certificates
or notes will be expressed as a dollar amount per $1,000 of the initial
principal balance of the certificates or notes, as applicable.
Unless and until definitive certificates or definitive notes are issued, the
reports for a series of securities will be sent on behalf of the related trust
to the trustee, the indenture trustee and Cede & Co., as registered holder of
the certificates and the notes and the nominee of DTC. Certificate owners and
note owners may receive copies of the reports upon written request, together
with a certification that they are certificate owners or note owners, as the
case may be, and payment of reproduction and postage expenses associated with
the distribution of the reports, from the trustee or the indenture trustee, as
applicable. See "--Book-Entry Registration" in this prospectus.
Within the prescribed period of time for tax reporting purposes after the end
of each calendar year during the term of a trust, the trustee and the indenture
trustee, as applicable, 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.
DTC will convey such information to its participants, who in turn will convey
the information to their related indirect participants in accordance with
arrangements among DTC and the participants. Certificate owners and note owners
may receive the reports upon written request, together with a certification
that they are certificate owners or note owners and payment of reproduction and
postage expenses associated with the distribution of the information, from the
trustee, for certificate owners, or from the indenture trustee, for note
owners, at the addresses specified in the prospectus supplement. See "Federal
Income Tax Consequences."
Lists of Securityholders
Unless we provide otherwise in the prospectus supplement, for each series of
certificates, at that time, if any, as definitive certificates have been
issued, the trustee will, upon written request by three or more
certificateholders or one or more holders of certificates evidencing not less
than 25% of the principal balance of the certificate within five business days
after provision to the trustee of a statement of the applicants' desire to
communicate with other certificateholders about their rights under the related
trust documents or the certificates and a copy of the communication that the
applicants propose to transmit, afford
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such certificateholders access during business hours to the current list of
certificateholders for purposes of communicating with other certificateholders
with respect to their rights under the trust documents. Unless otherwise
specified in the prospectus supplement, the trust documents will not provide
for holding any annual or other meetings of certificateholders.
Unless we provide otherwise in the prospectus supplement, for each series of
notes, if any, at that time, if any, as definitive notes have been issued, the
indenture trustee will, upon written request by three or more noteholders or
one or more holders of notes evidencing not less than 25% of the aggregate
principal balance of the related notes, within five business days after
provision to the indenture trustee of a statement of the applicants' desire to
communicate with other noteholders about their rights under the related
indenture or the notes and a copy of the communication that the applicants
propose to transmit, afford such noteholders access during business hours to
the current list of noteholders for purposes of communicating with other
noteholders about their rights under the indenture. Unless otherwise specified
in the prospectus supplement, the indenture will not provide for holding any
annual or other meetings of noteholders.
DESCRIPTION OF THE TRUST DOCUMENTS
Except as we specify otherwise in the prospectus supplement, the following
summary describes certain terms of the transfer agreement between Conseco
Finance and Conseco Securitizations, and of either the pooling and servicing
agreements or the sale and servicing agreements and the trust agreements--in
either case collectively referred to as the trust documents--pursuant to which
Conseco Securitizations will sell and assign contracts to a trust and the
servicer will agree to service those contracts on behalf of the trust, and
pursuant to which such trust will be created and certificates will be issued.
Forms of the trust documents have been filed as exhibits to the registration
statement of which this prospectus forms a part. We will provide a copy of the
agreements, without exhibits upon request to a holder of securities. This
summary is not complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the trust documents. Where particular
provisions or terms used in the trust documents are referred to, the actual
provisions, including definitions of terms are incorporated by reference as
part of that summary.
Sale and Assignment of the Contracts
On the closing date, Conseco Finance will sell and assign to Conseco
Securitizations, without recourse, its entire interest in the related contracts
and the proceeds thereof, including its security interests in the related
products, and Conseco Securitizations will immediately re-transfer the
contracts and related assets to the trust. Each contract transferred by Conseco
Securitizations to the trust will be identified in a schedule appearing as an
exhibit to the trust documents. At the same time as such sale and assignment,
the trustee will execute and deliver the certificates representing the
certificates to or upon the order of the seller, and the trustee will execute
and the indenture trustee will authenticate and deliver the notes, if any, to
or upon our order.
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Except as we specify otherwise in the prospectus supplement, Conseco Finance
will make certain warranties in the trust documents with respect to each
contract as of the closing date, including that:
(a) as of the cutoff date, the most recent scheduled payment was made or
was not delinquent more than 59 days;
(b) no provision of a contract has been waived, altered or modified in
any respect, except by instruments or documents contained in the contract
file;
(c) each contract is a legal, valid and binding obligation of the obligor
and is enforceable in accordance with its terms, except as may be limited
by laws affecting creditors' rights generally;
(d) no contract is subject to any right of rescission, set-off,
counterclaim or defense;
(e) the related vehicle is covered by insurance naming Conseco Finance as
an additional insured party;
(f) each contract has been originated by a dealer or us in the ordinary
course of such dealer's, or our business and, if originated by a dealer,
was purchased by us in the ordinary course of business;
(g) no contract was originated in or is subject to the laws of any
jurisdiction whose laws would make the transfer of the contract or an
interest therein to the trustee pursuant to the trust documents or pursuant
to the notes or certificates unlawful;
(h) each contract complies with all requirements of law;
(i) no contract has been satisfied, subordinated to a lower lien ranking
than its original position in whole or in part or rescinded and the vehicle
has not been released from the lien of the contract in whole or in part;
(j) each contract creates a valid and enforceable first priority security
interest in favor of Conseco Finance in the vehicle and such security
interest has been assigned to the trustee;
(k) all parties to each contract had capacity to execute such contract;
(l) no contract has been sold, assigned or pledged to any other person
and prior to the transfer of the contracts by Conseco Finance to Conseco
Securitizations, and then by Conseco Securitizations to the trustee,
Conseco Finance had good and marketable title to each contract free and
clear of any encumbrance, equity, loan, pledge, charge, claim or security
interest, and was the sole owner and had full right to transfer the
contract to Conseco Securitizations;
(m) as of the cutoff date, there was no default, breach, violation or
event permitting acceleration under any contract, except for payment
delinquencies permitted by clause (a) above, no event which with notice and
the expiration of any grace or cure period would constitute a default,
breach, violation or event permitting acceleration under the contract, and
Conseco Finance has not waived any of the these;
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(n) as of the closing date there were, to the best of our knowledge, no
liens or claims which have been filed for work, labor or materials
affecting the product securing a contract, which are or may be liens prior
or equal to the lien of the contract;
(o) each contract is a fully-amortizing loan and provides for level
payments over the term of the contract;
(p) each contract contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for
realization against the collateral of the benefits of the security;
(q) the description of each contract set forth in the schedule of
contracts delivered to the trustee is true and correct; and
(r) there is only one original of each contract, other than the copy in
the possession of the obligor.
Our warranties will be made as of the execution and delivery of the related
trust documents and will survive the sale, transfer and assignment of the
related contracts and other trust property to the trust but will speak only as
of the date made.
Conseco Finance is obligated to repurchase, for the repurchase price set
forth in the next sentence, any contract on the first business day after the
first determination date which is more than 90 days after Conseco Finance
becomes aware, or should have become aware, or its receipt of written notice
from the trustee or the servicer, of a breach of any representation or warranty
by Conseco Finance in the trust documents that materially adversely affects the
trust's interest in any contract if the breach has not been cured. The
repurchase price for any contract will be the remaining principal amount
outstanding on the contract on the date of repurchase plus accrued and unpaid
interest thereon at its contract rate to the date of such repurchase. This
repurchase obligation constitutes the sole remedy available to the trust and
the securityholders for a breach of a representation or warranty under the
trust documents with respect to the contracts, but not for any other breach of
Conseco Finance's obligations under the trust documents.
Upon our purchase of a contract due to a breach of a representation or
warranty, the trustee will convey the contract and the related trust property
to us.
Custody of Contract Files
Unless we specify otherwise specified in the prospectus supplement, Conseco
Finance initially will be appointed to act as custodian for the contract files
of each trust. Prior to the appointment of any custodian other than Conseco
Finance, the trust and institution specified in the prospectus supplement shall
enter into a custodian agreement pursuant to which the such institution will
agree to hold the contract files on behalf of the related trust. Any such
custodian agreement may be terminated by the trust on 30 days' notice to such
institution.
To facilitate servicing and save administrative costs, the documents will not
be physically segregated from other similar documents that are in Conseco
Finance's possession. UCC financing statements will be filed in Minnesota
reflecting the sale and
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assignment of the contracts by Conseco Finance to Conseco Securitizations, and
by Conseco Securitizations to the trustee, and our accounting records and
computer systems will also reflect such sale and assignment. In addition, the
contracts that are in our possession will be stamped or otherwise marked to
indicate that the contracts have been sold to the related trust. Despite these
precautions, if, through inadvertence or otherwise, any of the contracts were
sold to another party, or a security interest therein were granted to another
party that purchased, or took such security interest in any of the contracts in
the ordinary course of its business and took possession of the contracts, the
purchaser, or secured party could acquire an interest in the contracts superior
to the interest of the related trust if the purchaser, or secured party
acquired, or took a security interest in the contracts for new value and
without actual knowledge of such trust's interest. See "Legal Aspects of the
Contracts--Rights in the Contracts."
Collections
For each trust, the servicer will establish one or more collection accounts
in the name of the trustee or, in the case of any series including one or more
classes of notes, in the name of the indenture trustee for the benefit of the
related securityholders. If we so specify in the prospectus supplement, the
trustee will establish and maintain for each series a certificate distribution
account, in the name of the trustee on behalf of the related
certificateholders, in which amounts released from the collection account and
any pre-funding account and any amounts received from any source of credit
enhancement for distribution to the certificateholders will be deposited and
from which all distributions to such certificateholders will be made. For any
series including one or more classes of notes, the indenture trustee will
establish and maintain for each series a note distribution 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 and any
amounts received from any source of credit enhancement for payment to such
noteholders will be deposited and from which all distributions to such
noteholders will be made. The collection account, the certificate distribution
account if any, and the note distribution account if any, are referred to
collectively as the designated accounts. Any other accounts to be established
with respect to a trust will be described in the prospectus supplement.
Each designated account will be an eligible account maintained with the
trustee, the indenture trustee and/or other depository institutions. Eligible
account means any account which is:
(1) an account maintained with an eligible institution;
(2) a segregated trust account maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the
benefit of the trustee, which depository institution or trust company has
capital and surplus, or, if such depository institution or trust company is
a subsidiary of a bank holding company system, the capital and surplus of
the bank holding company of not less than $50,000,000 and the securities of
such depository institution, or, if such depository institution is a
subsidiary of a bank holding
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company system and such depository institution's securities are not rated,
the securities of the bank holding company has a credit rating from each
rating agency rating such series of notes and/or certificates, a rating
agency in one of its generic credit rating categories which signifies
investment grade; or
(3) an account that will not cause any rating agency to downgrade or
withdraw its then-current rating assigned to the securities, as confirmed
in writing by each rating agency.
Eligible institution means any depository institution organized under the laws
of the United States or any state, the deposits of which are insured to the
full extent permitted by law by the Bank Insurance Fund, currently administered
by the Federal Deposit Insurance Corporation, whose short-term deposits have
been rated in a rating category acceptable to the rating agencies, or whose
unsecured long-term debt has been rated in a rating category acceptable to the
rating agencies. On the closing date specified in the prospectus supplement,
the servicer will cause to be deposited in the collection account all payments
on the contracts received by the servicer after the cutoff date and on or prior
to the second business day preceding the closing date.
The servicer will deposit all payments on the contracts held by any trust
received directly by the servicer from obligors and all proceeds of contracts
collected directly by the servicer during each monthly period into the
collection account no later than one business day after receipt.
Notwithstanding the foregoing and unless otherwise provided in the prospectus
supplement, the servicer may utilize an alternative remittance schedule, if the
servicer provides to the trustee and the indenture trustee written confirmation
from each rating agency that such alternative remittance schedule will not
result in the downgrading or withdrawal by the rating agency of the rating(s)
then assigned to the securities. We will also deposit into the collection
account on or before the deposit date the purchase amount of each contract to
be purchased by it for breach of a representation or warranty.
For any series of securities, funds in the designated accounts and any other
accounts identified in the related prospectus supplement will be invested, as
provided in the related trust documents, at the direction of the servicer in
United States government securities and certain other high-quality investments
meeting the criteria specified in the related trust documents are called
eligible investments. Eligible investments shall mature no later than the
business day preceding the applicable distribution date for the monthly period
to which such amounts relate. Investments in eligible investments will be made
in the name of the trustee or the indenture trustee, as the case may be, and
the investments will not be sold or disposed of prior to their maturity.
Unless we specify otherwise in the prospectus supplement, collections or
recoveries on a contract other than late fees or certain other similar fees or
charges received during a monthly period and purchase amounts deposited with
the trustee before a distribution date will be applied first to any outstanding
monthly advances made by the servicer for that
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contract, and then to interest and principal on the contract in accordance with
the terms of the contract.
Servicing Procedures
The servicer will make reasonable efforts, consistent with the customary
servicing procedures employed by the servicer with respect to contracts owned
or serviced by it, to collect all payments due with respect to the contracts
held by any trust and, in a manner consistent with the trust documents, will
follow its customary collection procedures with respect to secured consumer
loans that it services for itself and others.
Under the trust documents, the servicer will be required to use its best
efforts to repossess or otherwise comparably convert the ownership of any
product securing a contract, with respect to which the servicer has determined
that payments thereunder are not likely to be resumed as soon as practicable
after default on such contract. The servicer is authorized to follow such of
its normal collection practices and procedures as it deems necessary or
advisable to realize upon any contract. The servicer may repossess and sell the
product securing such contract at judicial sale, or take any other action
permitted by applicable law. See "Legal Aspects of the Contracts." The servicer
will be entitled to recover all reasonable expenses incurred by it in
connection therewith. The proceeds of such realization, net of such expenses
will be deposited in the collection account at the time and in the manner
described above under "--Collections."
The trust documents will provide that the servicer will indemnify and defend
the trustee, the indenture trustee, the trust and the securityholders against,
among other things, any and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation, or in respect of any action taken or failed to be taken by the
servicer with respect to any portion of the trust property in violation of the
provisions of the trust documents. The servicer's obligations to indemnify the
trustee, the indenture trustee, the trust and the securityholders for the
servicer's actions or omissions will survive the removal of the servicer but
will not apply to any action or omission of a successor servicer.
Servicing Compensation
Unless we specify otherwise in the prospectus supplement, for each series of
securities, the servicer will be entitled to receive the servicing fee for each
monthly period in an amount equal to the product of one-twelfth of the
servicing rate and the aggregate principal balance of the contracts as of the
first day of such monthly period. The servicer also will be entitled to collect
and retain any late fees or other administrative fees or similar charges
allowed by the terms of the contracts or applicable law. Unless we provide
otherwise in the prospectus supplement, the servicing rate will equal .75% per
annum calculated on the basis of a 360-day year consisting of twelve 30-day
months. As long as we are the servicer, the servicing fee and any additional
servicing compensation will be paid out of collections on or with respect to
the contracts after the required distributions to noteholders and
certificateholders. If we are no longer the servicer, the servicing fee and any
additional
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servicing compensation will be paid out of collections on or with respect to
the contracts prior to distributions to certificateholders and noteholders.
Unless we specify otherwise in the prospectus supplement, a monthly period for
any distribution date is the calendar month immediately preceding the month in
which the distribution date occurs.
Conseco Finance, as servicer, will be required to pay all expenses incurred
by it in connection with its servicing activities, including fees, expenses and
disbursements of the trustee, the indenture trustee, the custodian and
independent accountants, taxes imposed on the servicer and expenses incurred in
connection with distributions and reports to certificateholders and
noteholders, except certain expenses incurred in connection with realizing upon
the contracts.
Distributions
For each trust, beginning on the distribution date specified in the
prospectus supplement, distributions of principal and interest, or, where
applicable, of principal or interest only on each class of securities entitled
thereto will be made by the trustee or the indenture trustee, as applicable, to
the certificateholders and the noteholders. The timing, calculation,
allocation, order, source, priorities of and requirements for all distributions
to each class of certificateholders and all payments to each class of
noteholders will be described in the prospectus supplement.
Unless we specify otherwise in the prospectus supplement, on the third
business day prior to each distribution date, the servicer will determine the
amount available and the amounts to be distributed on the notes and
certificates for such distribution date. Except as we specify otherwise in the
prospectus supplement, the amount available for any distribution date will be
equal to:
(1) the funds on deposit in the collection account at the close of
business on the last day of the related monthly period, plus
(2) any advances to be made by the servicer with respect to delinquent
payments, plus
(3) any repurchase amounts to be deposited by us for contracts to be
repurchased due to a breach of a representation or warranty, minus
(4) any amounts paid by obligors in the related monthly period, but to be
applied in respect of a regular monthly payment due in a subsequent monthly
period, minus
(5) any amounts incorrectly deposited in the collection account.
Unless we specify otherwise in the prospectus supplement, on each distribution
date, prior to making distributions in respect of the notes and certificates,
the amount available will be applied, first, if we are is no longer the
servicer, to pay the servicing fee to the successor servicer, and second, to
reimburse the servicer, including Conseco Finance for any advances made with
respect to a prior monthly period and subsequently recovered and for any
advances previously made that the servicer has determined are uncollectible
advances.
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Enhancement
The amounts and types of enhancement arrangements and the provider thereof,
if applicable, for each class of securities will be described in the prospectus
supplement. If and to the extent provided in the prospectus supplement,
enhancement may be in the form of a financial guaranty insurance policy, letter
of credit, Conseco Finance guaranty, cash reserve fund, derivative product, or
other form of enhancement, or any combination thereof, as may be described in
the prospectus supplement. If specified in the prospectus supplement,
enhancement for a class of securities of a series may cover one or more other
classes of securities in such series, and accordingly may be exhausted for the
benefit of a particular class and thereafter be unavailable to such other
classes. Further information regarding any provider of enhancement, including
financial information when material, will be included in the prospectus
supplement.
The presence of enhancement may be intended to enhance the likelihood of
receipt by the certificateholders and the noteholders of the full amount of
principal and interest due thereon and to decrease the likelihood that the
certificateholders and the noteholders will experience losses, or may be
structured to provide protection against changes in interest rates or against
other risks, to the extent and under the conditions specified in the related
prospectus supplement. Unless otherwise specified in the prospectus supplement,
the enhancement for a class of securities will not provide protection against
all risks of loss and will not guarantee repayment of the entire principal and
interest thereon. If losses occur which exceed the amount covered by any
enhancement or which are not covered by any enhancement, securityholders will
bear their allocable share of deficiencies. In addition, if a form of
enhancement covers more than one class of securities of a series,
securityholders of any such class will be subject to the risk that the
enhancement will be exhausted by the claims of securityholders of other
classes.
Advances
Unless otherwise specified in the prospectus supplement, the servicer will be
obligated to make advances each month of any scheduled payments on the
contracts included in a trust that were due but not received during the prior
monthly period. The servicer will be entitled to reimbursement of an advance
from available funds in the collection account for the related trust, (1) when
the delinquent payment is recovered by the trust, or (2) when the servicer has
determined that such advance has become an uncollectible advance. The servicer
will be obligated to make an advance only to the extent that it determines that
such advance will be recoverable from subsequent funds available therefor in
the collection account for the related trust.
Evidence as to Compliance
On or before March 31 of each year the servicer will deliver to each trustee
and each indenture trustee a report of a nationally recognized accounting firm
stating that such firm has examined certain documents and records relating to
the servicing of contracts serviced by the servicer under pooling and servicing
agreements or sale and servicing agreements similar to the trust documents and
stating that, on the basis of such procedures, such
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servicing has been conducted in compliance with the applicable trust documents,
except for any exceptions described in that report. A copy of the statement may
be obtained by any certificate owner or note owner upon compliance with the
requirements described above. See "Information Regarding the Securities--
Statements to Securityholders" above.
Matters Regarding the Servicer
Unless we provide otherwise in the prospectus supplement, our appointment as
servicer under the trust documents will continue until such time as we resign
or are terminated, or until such time, if any, as a servicer termination event
shall have occurred under the trust documents. The trust documents will provide
that the servicer may not resign from its obligations and duties as servicer
thereunder, except upon a determination, as evidenced by an opinion of
independent counsel, delivered and acceptable to the trustee and the indenture
trustee, that by reason of a change in legal requirements its performance of
such duties would cause it to be in violation of the legal requirements in a
manner which would result in a material adverse effect on the servicer. No such
resignation will become effective until a successor servicer has assumed the
servicing obligations and duties under the trust documents.
Unless otherwise provided in the prospectus supplement, any corporation or
other entity into which the servicer may be merged or consolidated, resulting
from any merger or consolidation to which the servicer is a party, which
acquires by conveyance, transfer or lease substantially all of the assets of
the servicer or succeeds to all or substantially all the business of the
servicer, where the servicer is not the surviving entity, which corporation or
other entity assumes every obligation of the servicer under each trust
document, will be the successor to the servicer under the related trust
documents; provided, that:
(1) such entity is an eligible servicer, and
(2) immediately after giving effect to such transaction, no servicer
termination event and no event which, after notice or lapse of time, or
both, would become a servicer termination event shall have occurred and be
continuing.
Indemnification and Limits on Liability
Unless we specify otherwise in the prospectus supplement, the trust documents
will provide that the servicer will be liable only to the extent of the
obligations specifically undertaken by it under the trust documents and will
have no other obligations or liabilities thereunder. The trust documents will
further provide that neither the servicer nor any of its directors, officers,
employees and agents will have any liability to the trust, the
certificateholders or the noteholders, except as provided in the trust
documents, for any action taken or for refraining from taking any action
pursuant to the trust documents, other than any liability that would otherwise
be imposed by reason of the servicer's breach of the trust documents or willful
misfeasance, bad faith or negligence, including errors in judgment in the
performance of its duties, or by reason of reckless disregard of obligations
and duties under the trust documents or any violation of law.
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The servicer may, with the prior consent of the trustee and the indenture
trustee, if any, delegate duties under the related trust documents to any of
its affiliates. In addition, the servicer may at any time perform the specific
duty of repossessing products through subcontractors who are in the business of
servicing consumer receivables. The servicer may also perform other specific
duties through subcontractors; provided, however, that no such delegation of
such duties by the servicer shall relieve the servicer of its responsibility.
Servicer Termination Events
Except as we specify otherwise in the prospectus supplement, servicer
termination events under the trust documents will include:
(1) any failure by the servicer to deliver to the indenture trustee for
distribution to the noteholders or to the trustee for distribution to the
certificateholders any required payment which continues unremedied for 5
days, or such other period specified in the related prospectus supplement
after the giving of written notice;
(2) any failure by the servicer duly to observe or perform in any
material respect any other of its covenants or agreements in the trust
documents that materially and adversely affects the interests of
securityholders, which, in either case, continues unremedied for 30 days
after the giving of written notice of such failure of breach;
(3) any assignment or delegation by the servicer of its duties or rights
under the trust documents, except as specifically permitted under the trust
documents, or any attempt to make such an assignment or delegation;
(4) certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings regarding the servicer; or
(5) the servicer is no longer an eligible servicer, as defined in the
trust documents. Notice shall mean notice to the servicer by the trustee,
the indenture trustee, if any, or us, or notice to us, the servicer, the
indenture trustee, if any, and the trustee by the holders of securities
representing interests aggregating not less than 25% of the outstanding
principal balance of the securities issued by the trust.
Unless we specify otherwise in the prospectus supplement, if a servicer
termination event occurs and is continuing, the trustee, the indenture trustee,
or the holders of at least 25% in aggregate principal balance of the
outstanding securities issued by the trust, by notice then given in writing to
the servicer, and to the trustee and the indenture trustee if given by the
securityholders may terminate all of the rights and obligations of the servicer
under the trust documents. Immediately upon the giving of the notice, and, in
the case of a successor servicer other than the trustee, the acceptance by the
successor servicer of its appointment, all authority of the servicer will pass
to the trustee or other successor servicer. The trustee, the indenture trustee
and the successor servicer may set off and deduct any amounts owed by the
servicer from any amounts payable to the outgoing servicer.
On and after the time the servicer receives a notice of termination, the
trustee or any backup servicer specified in the prospectus supplement, will be
the successor in all respects
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to the servicer and will be subject to all the responsibilities, restrictions,
duties and liabilities of the servicer under the trust documents; provided,
however, that the successor servicer shall have no liability any obligation
which was required to be performed by the prior servicer prior to the date that
the successor servicer becomes the servicer or any claim of a third party,
including a securityholder, based on any alleged action or inaction of the
prior servicer. Notwithstanding the termination, the servicer shall be entitled
to payment of amounts payable to it prior to the termination, for services
rendered prior to the termination. No termination will affect in any manner
Conseco Finance's obligation to repurchase contracts for breaches of
representations or warranties under the trust documents. In the event that the
trustee would be obligated to succeed the servicer but is unwilling or unable
to act, it may appoint, or petition to a court of competent jurisdiction for
the appointment of a servicer. Pending the appointment, the trustee is
obligated to act in the capacity. The trustee and the successor servicer may
agree upon the servicing compensation to be paid, which in no event may be
greater than the compensation to the servicer under the trust documents.
Upon any termination of, or appointment of a successor to, the servicer, the
trustee and the indenture trustee, if any, will each give prompt written notice
to certificateholders and noteholders, respectively, at their respective
addresses appearing in the certificate register or the note register and to
each rating agency.
Amendment
Unless we provide otherwise in the prospectus supplement, the trust documents
may be amended by us, the servicer, the trustee and the indenture trustee, if
any, but without the consent of any of the securityholders, to cure any
ambiguity or to correct or supplement any provision, provided that the action
will not, in the opinion of counsel, which may be our internal counsel or the
servicer reasonably satisfactory to the trustee and the indenture trustee,
materially and adversely affect the interests of the securityholders. The trust
documents may also be amended by us, the servicer and the trustee and the
indenture trustee, and a certificate majority and a note majority, if
applicable, for the purpose of adding any provisions to or changing or
eliminating any of the provisions of the trust documents or of modifying the
rights of the certificateholders or the noteholders. No amendment may (1)
increase or reduce the amount of, or accelerate or delay the timing of,
collections of payments on the related contracts or distributions that are
required to be made on any related certificate or note or the related interest
rate, or (2) reduce the percentage of the certificate balance evidenced by
certificates or of the aggregate principal amount of notes then outstanding
required to consent to any amendment, without the consent of the holders of all
certificates or all notes, as the case may be, then outstanding.
Termination
The obligations created by the trust documents will terminate upon the date
calculated as specified in the trust documents, generally upon:
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(1) the later of the final payment or other liquidation of the last
contract subject thereto and the disposition of all property acquired upon
repossession of any product; and
(2) the payment to the securityholders of all amounts held by the
servicer or the trustee and required to be paid to the securityholders
pursuant to the trust documents.
Unless we provide otherwise in the prospectus supplement, for each series of
securities, in order to avoid excessive administrative expense, we and the
servicer each will be permitted, at its option, to purchase from the trust, on
any distribution date immediately following any monthly period as of the last
day of which the pool schedule principal balance is equal to or less than 10%,
or other percentage as may be specified in the prospectus supplement of the
cutoff date principal balance, all remaining contracts in the related trust and
the other remaining trust property at a price equal to the aggregate of the
purchase amounts and the appraised value of any other remaining trust property.
The exercise of this right will effect an early retirement of the related
certificates and notes.
Unless we specify otherwise in the prospectus supplement, for each series of
securities, the trustee will give written notice of the final distribution for
the certificates to each certificateholder of record and the indenture trustee
will give written notice of the final payment for the notes, if any, to each
noteholder of record. The final distribution to any certificateholder and the
final payment to any noteholder will be made only upon surrender and
cancellation of the holder's certificate or note at the office or agency of the
trustee, for certificates, or of the indenture trustee, for notes, specified in
the notice of termination. Any funds remaining in the trust, after the trustee
or the indenture trustee has taken certain measures to locate a
certificateholder or noteholder, as the case may be, and the measures have
failed, will be distributed to The United Way, and the certificateholders and
noteholders, by acceptance of their certificates and notes, will waive any
rights for the funds.
The Trustee
The trustee or owner trustee, as applicable, for each trust will be specified
in the prospectus supplement. The trustee, in its individual capacity or
otherwise, and any of its affiliates may hold certificates or notes in their
own names or as pledgee. In addition, for the purpose of meeting the legal
requirements of certain jurisdictions, the trustee, with the consent of the
servicer, shall have the power to appoint co-trustees or separate trustees of
all or any part of the trust. In the event of the appointment, all rights,
powers, duties and obligations conferred or imposed upon the trustee by the
related trust documents will be conferred or imposed upon the trustee and the
separate trustee or co-trustee jointly, or, in any jurisdiction where the
trustee is incompetent or unqualified to perform certain acts, singly upon the
separate trustee or co-trustee who shall exercise and perform the rights,
powers, duties and obligations solely at the direction of the trustee.
The trustee of any trust may resign at any time, in which event Conseco
Securitizations
will be obligated to appoint a successor trustee. Conseco Securitizations may
also remove
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the trustee, if the trustee ceases to be eligible to serve, becomes legally
unable to act, is adjudged insolvent or is placed in receivership or similar
proceedings. In those circumstances, Conseco Securitizations will be obligated
to appoint a successor trustee. Any resignation or removal of the trustee and
appointment of a successor trustee will not become effective until acceptance
of the appointment by the successor trustee.
Duties of the Trustee
The trustee will make no representation as to the validity or sufficiency of
any trust document, the certificates or the notes, other than its execution of
the certificates and the notes, the contracts or any related documents, and
will not be accountable for the use or application by the servicer of any funds
paid to the servicer in respect of the certificates, the notes or the contracts
prior to deposit in the related collection account.
The trustee will be required to perform only those duties specifically
required of it under the trust documents. Generally, those duties will be
limited to the receipt of the various certificates, reports or other
instruments required to be furnished by the servicer to the trustee under the
trust documents, in which case it will only be required to examine the
certificates, reports or instruments to determine whether they conform
substantially to the requirements of the trust documents.
The trustee will be under no obligation to exercise any of the rights or
powers vested in it by the trust documents or to institute, conduct, or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the certificateholders or noteholders, unless the
certificateholders or noteholders have offered the trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby. No certificateholder nor any noteholder will have any right
under the trust documents to institute any proceeding for the trust documents,
unless the holder has given the trustee written notice of default and unless
the holders of certificates evidencing not less than 25% of the certificate
balance or the holders of notes evidencing not less than 25% of the aggregate
principal balance of the notes then outstanding, as the case may be, have made
written request to the trustee to institute the proceeding in its own name as
trustee and have offered to the trustee reasonable indemnity, and the trustee
for 30 days after the receipt of the notice, request and offer to indemnify has
neglected or refused to institute any proceedings.
Administrator
If an administrator is specified in the prospectus supplement, the
administrator will enter into an agreement, the administration agreement,
pursuant to which such administrator will agree, to the extent provided in the
administration agreement, to provide the notices and to perform other
administrative obligations required by the related indenture and the trust
agreement.
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LEGAL ASPECTS OF THE CONTRACTS
Rights in the Contracts
The contracts are chattel paper as defined in the UCC as in effect in the
State of Minnesota. Pursuant to the UCC, an ownership interest in chattel paper
may be perfected by possession or by filing a UCC-1 financing statement in the
state where the seller's principal executive office is located. Accordingly,
financing statements covering the contracts will be filed by Conseco
Securitizations in Minnesota.
The servicer will be obligated from time to time to take such actions as are
necessary to continue the perfection of each trust's interest in the related
contracts and the proceeds. Conseco Finance will warrant in the trust documents
for the contracts held by the related trust and the trustee will pledge the
right to enforce the warranty to the indenture trustee as collateral for the
notes, if any, that, as of the closing date, the contracts have not been sold,
pledged or assigned by it to any other person, and that it has good and
indefeasible title and is the sole owner free of any liens and that,
immediately upon the transfer of the contracts to the trust pursuant to the
related trust document, the trust will have good and indefeasible title to and
will be the sole owner of the contracts, free of any liens. In the event of an
uncured breach of any of the warranties in the trust documents that materially
and adversely affects the related trust's, certificateholders' or noteholders'
interest in any contract, a repurchase event, we will be obligated to
repurchase the contract.
Unless we provide otherwise in the prospectus supplement, Conseco Finance
will hold the contract files on behalf of each trust. To facilitate servicing
and save administrative costs, the documents will not be physically segregated
from other similar documents that are in our possession. UCC financing
statements will be filed in Minnesota reflecting the sale and assignment of the
contracts to the trustee, and our accounting records and computer systems will
also reflect the sale and assignment. In addition, the contracts will be
stamped or otherwise marked to indicate that the contracts have been sold to
the related trust. Despite these precautions, if, through inadvertence or
otherwise, any of the contracts were sold to another party, or a security
interest therein were granted to another party that purchased, or took the
security interest in any of the contracts in the ordinary course of its
business and took possession of the contracts, the purchaser, or secured party
would acquire an interest in the contracts superior to the interest of the
related trust if the purchaser, or secured party acquired or took a security
interest in the contracts for new value and without actual knowledge of the
trust's interest. See "Description of the Trust Documents--Custody of Contract
Files."
Security Interests in the Products
Perfection of security interests in vehicles is generally governed by the
motor vehicle registration laws of the state in which the vehicle is located.
Under these laws security
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interests in vehicles are perfected by notation of the secured party's lien on
the certificate of title or by actual possession of the certificate of title,
depending on the law of the state wherein the purchaser resides. Nonetheless,
security interests in certain vehicles, or related products such as certain
trailers must be perfected by the filing of a UCC financing statement, naming
the obligor as debtor and us as secured party. With respect to the products
financed by the contracts referred to in this prospectus, i.e., trucks and
related trailers, it is our practice to take the action required to perfect our
security interest under the laws of the state in which the product is located.
In the event of clerical errors, administrative delays or otherwise, actions
sufficient to perfect may not have been taken for a product and the security
interest may be subordinate to the interests of, among others, subsequent
purchasers of the product, holders of perfected security interests in the
product, and the trustee in bankruptcy of the obligor.
The events would, however, give rise to a repurchase event and obligate us to
repurchase the affected contract if the interests of the related
certificateholders, noteholders or trust were materially and adversely
affected.
Under the related trust document, we will assign the security interests in
the products to the owner trustee on behalf of the related trust. However,
because of the administrative burden and expense that would be entailed in
doing so, none of Conseco Securitizations, Conseco Finance or the trustee will
be required, except to the extent provided below, to amend the certificates of
title or UCC financing statements to identify the trustee as the new secured
party and, accordingly, we will continue to be named as the secured party on
the certificates of title or UCC financing statements relating to the products.
The servicer will be required to note the interest of the related trust on the
certificates of title for the products or to amend the UCC financing statements
only upon a servicer termination event. In most states, an assignment such as
that under the related trust documents should be an effective transfer of a
security interest without amendment of any lien noted on the related
certificate of title or financing statement, and the assignee should succeed to
the assignor's status as the secured party. In the absence of fraud or forgery
by the obligor or administrative error by state recording officials, the
notation of the lien on the certificate of title or the UCC financing statement
should be sufficient to protect the related trust against the rights of
subsequent purchasers of a product or subsequent lenders who take a security
interest in the related product. However, in the absence of an amendment, the
security interest of the related trust in the related products might be
defeated by, among others, the trustee in our bankruptcy or the obligor.
However, failure would give rise to a repurchase event and obligate us to
repurchase the affected contract if the interests of the related
certificateholders, noteholders or trust were materially and adversely
affected.
In most states, a perfected security interest in a product subject to
certificate of title or a financing statement continues for four months after
the product is moved to a different state and thereafter until the owner re-
registers the product in the new state, but in no event beyond the surrender of
the certificate of title. A majority of states require surrender of a
certificate of title to re-register a product. Accordingly, the secured party
must surrender possession if it holds the certificate of title to the product.
In the case of products registered in states which provide for notation of a
lien but not possession of the certificate of title by
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the holder of the security interest in the related product, the secured party
should receive notice of surrender if the security interest in the product is
noted on the certificate of title. Accordingly, the secured party should have
the opportunity to re-perfect its security interest in the product in the state
of relocation. In states that do not require a certificate of title for
registration of a product, re-registration could defeat perfection.
In the ordinary course of servicing our portfolio, it is our practice to
effect the re-perfection upon receipt of notice of re-registration or
information from the obligor as to relocation. Similarly, when an obligor sells
a product subject to a certificate of title, we must surrender possession of
the certificate of title or receive notice as a result of its lien noted
thereon and accordingly should have an opportunity to require satisfaction of
the related contract before release of the lien.
Under the laws of most states, liens for repairs performed on a product and
liens for unpaid taxes take priority over even a perfected security interest in
a product. Conseco Finance will represent, in the related trust document that,
immediately prior to the sale, assignment and transfer to the related trust,
each contract held by such trust was secured by a valid, subsisting and
enforceable first priority perfected security interest in its favor, as secured
party. However, liens for taxes, judicial liens or liens arising by operation
of law could arise at any time during the term of a contract. In addition, the
laws of certain states and federal law permit the confiscation of motor
vehicles and certain other consumer products 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
product. No notice will be given to the owner trustee, indenture trustee,
certificateholders or noteholders in the event that a lien or confiscation
arises, and if the lien arises or confiscation occurs after the date of
issuance of any series of certificates and notes, neither we nor the servicer
will be required to repurchase or purchase the related contract.
Repossession
In the event of default by an obligor, the owner of an installment sales
contract or installment loan has all the remedies of a secured party under the
UCC, except where specifically limited by other state laws. The remedies of a
secured party under the UCC include the right to repossession by self-help
means, unless the means would constitute a breach of the peace. Self-help
repossession is the method employed by us in most cases and is accomplished
simply by taking possession of the product. 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 within which the obligor may 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 product must then be
repossessed in accordance with that order. If a breach of the peace cannot be
avoided, judicial action is required. A secured party may be held responsible
for damages caused by a wrongful repossession of a product, including a
wrongful repossession
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conducted by an agent of the secured party. In many states, a product may be
repossessed without notice to the obligor, but only if the repossession can be
accomplished without a breach of the peace.
Notice of Sale; Redemption Rights
The UCC and various other state laws require a secured party who has
repossessed the collateral securing an obligation to provide an 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 entire unpaid time balance of the obligation, less any
unaccrued finance charges plus accrued default charges, reasonable expenses for
repossessing, holding and preparing the collateral for disposition and
arranging for its sale, plus, to the extent provided in the financing
documents, reasonable attorneys' fees, or in some states, by payment of
delinquent installments or the unpaid principal balance of the related
obligation.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of products generally will be applied first to the
expenses of repossession and resale and then to the satisfaction of the related
contract. 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 other states that do not
prohibit or limit such judgments, subject to satisfaction of statutory
procedural requirements by the holder of the obligation. However, any
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. In many cases, it may
not be useful to seek a deficiency judgment or, if one is obtained, it may be
settled at a significant discount or not paid at all. We generally seeks to
recover any deficiency existing after repossession and sale of a product.
Occasionally, after resale of a repossessed products, and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the law
of most states requires the secured party to remit the surplus to any holder of
another lien for the product, if proper notification of demand for proceeds is
received prior to distribution, or, if no lienholder exists, to remit the
surplus to the former owner of the product.
Consumer Protection Laws
Numerous Federal and state consumer protection laws and related regulations
impose substantive and disclosure requirements upon lenders and servicers
involved in consumer finance. Some of the Federal laws and regulations include
the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Magnuson-Moss Warranty Act, and the Federal Reserve Board's
Regulations B and Z.
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In addition to Federal law, state consumer protection statutes regulate,
among other things, the terms and conditions of retail installment contracts
and promissory notes pursuant to which purchasers finance the acquisition of
consumer products. These laws place finance charge ceilings on the amount that
a creditor may charge in connection with financing the purchase of a consumer
product. These laws also impose other restrictions on consumer transactions and
require contract disclosures in addition to those required under federal law.
These requirements impose specific statutory liabilities upon creditors who
fail to comply. In some cases, this liability could affect the ability of an
assignee, such as the related trust, to enforce consumer finance contracts such
as the contracts. The credit practices rule of the FTC imposes additional
restrictions on contract provisions and credit practices.
The FTC's so-called holder-in-due-course rule has the effect of subjecting
persons that finance consumer credit transactions, and certain related lenders
and their assignees to all claims and defenses which the purchaser could assert
against the seller of the goods and services. An assignee's affirmative
liability to pay money to such aggrieved purchaser in the event of a successful
claim is limited to amounts paid by the purchaser under the consumer credit
contract. The assignee's ability to collect any balance remaining due
thereunder is subject to these claims and defenses. Accordingly, each trust, as
assignee of the related contracts, will be subject to claims or defenses, that
the purchaser of the related product may assert against the seller of the
product.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an obligor from some or all of the
legal consequences of a default.
We will warrant in the related trust document that as of the date of
origination each contract held by the related trust complied with all
requirements of applicable law in all material respects. Accordingly, if the
trust's interest in a contract were materially and adversely affected by a
violation of any law, the violation would constitute a repurchase event and
would obligate us to repurchase the contract unless the breach were cured. See
"Description of the Trust Documents--Sale and Assignment of the Contracts."
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 lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
proceeding under Chapter 13 of the U.S. Bankruptcy Code of 1978, as amended, a
court may prevent a lender from repossessing collateral, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the collateral at the time of bankruptcy, as determined by the
court, leaving the party providing financing as a general unsecured creditor
for the remainder of the indebtedness. A bankruptcy court may also reduce the
monthly payments due under a contract, change the rate of interest and time of
repayment of the indebtedness or substitute collateral securing the
indebtedness.
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FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal income tax
consequences relating to the purchase, ownership, and disposition of the
securities. The discussion is based upon the current provisions of the Internal
Revenue Code of 1986, the treasury regulations promulgated thereunder and
judicial or ruling authority, all of which are subject to change, which change
may be retroactive. The discussion does not deal with federal income tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. Investors are encouraged to consult their own tax
advisors for the federal, state, local, and any other tax consequences of the
purchase, ownership, and disposition of the securities.
Dorsey & Whitney LLP, our counsel, has delivered an opinion regarding federal
income tax matters discussed below. Counsel to the seller identified in the
prospectus supplement will deliver an opinion regarding tax matters applicable
to each series of securities. The opinion, however, is not binding on the IRS
or the courts. The opinion of counsel will specifically address only those
issues specifically identified below as being covered by the opinion; however,
the opinion of counsel also will state that the additional discussion set forth
below accurately describes counsel's advice for material tax issues. No ruling
on any of the issues discussed below will be sought from the IRS.
Many aspects of the federal tax treatment of the purchase, ownership and
disposition of the securities of any series will depend upon whether the trust
created with respect to that series is structured as an owner trust, treated as
a partnership for federal income tax purposes or as a grantor trust. The
prospectus supplement for each series of securities will indicate whether the
trust created for that series will be treated as a partnership or as a grantor
trust. The following discussion deals first with series for which the trust has
been structured as an owner trust treated as a partnership, and then with
series for which the trust has been structured as a grantor trust.
Owner Trust Series
Tax Status of the Trust
For each series of securities which includes both notes and certificates,
counsel will deliver its opinion that the trust will not be an association or
publicly traded partnership taxable as a corporation for federal income tax
purposes. As a result, in the opinion of counsel, the trust itself will not be
subject to federal income tax but, each certificateholder will be required to
take into account its distributive share of items of income and deduction,
including deductions for distributions of interest to the noteholders of the
trust as though the items had been realized directly by the certificateholder.
This opinion will be based on the assumption that the terms of the trust
agreement and related documents will be complied with, and on counsel's
conclusion that the nature of the income of the trust will exempt it from the
rule that some publicly traded partnerships are taxable as corporations. There
are no cases or IRS rulings on transactions involving a trust issuing both debt
and equity interests
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with terms similar to those of the notes and the certificates. As a result, the
IRS may disagree with all or a part of this discussion.
If the trust were taxable as a corporation for federal income tax purposes,
the trust would be subject to corporate income tax on its taxable income. The
trust's taxable income would include all its income on the contracts, possibly
reduced by its interest expense on the notes. Any corporate income tax could
materially reduce cash available to make payments on the notes and
distributions on the certificates.
Tax Consequences to Noteholders
Treatment of the Notes as Indebtedness. The owner trustee, on behalf of the
trust, will agree, and the noteholders will agree by their purchase of notes,
to treat the notes as debt for federal income tax purposes. Counsel will
deliver its opinion that the notes will be classified as debt for federal
income tax purposes. The discussion below assumes this characterization of the
notes is correct.
Interest Income on the Notes. Interest on the notes will be taxable as
ordinary interest income when received by noteholders utilizing the cash-basis
method of accounting and when accrued by noteholders utilizing the accrual
method of accounting. Under the applicable regulations, the notes would be
considered issued with original issue discount if the stated redemption price
at maturity of a note, generally equal to its principal amount as of the date
of issuance plus all interest other than qualified stated interest payable
prior to or at maturity exceeds the original issue price, in this case, the
initial offering price at which a substantial amount of the notes are sold to
the public. Any OID would be considered de minimis under the OID regulations if
it does not exceed 1/4% of the stated redemption price at maturity of a note
multiplied by the number of full years until its maturity date. It is
anticipated that the notes will not be considered issued with more than de
minimis OID. Under the OID regulations, an owner of a note issued with a de
minimis amount of OID must include the OID in income, on a pro rata basis, as
principal payments are made on the note.
While it is not anticipated that the notes will be issued with more than de
minimis OID, it is possible that they will be so issued or will be deemed to be
issued with OID. This deemed OID could arise, for example, if interest payments
on the notes are not deemed to be qualified stated interest because the notes
do not provide for default remedies ordinarily available to holders of debt
instruments or do not contain terms and conditions that make the likelihood of
late payment or nonpayment a remote contingency. Based upon existing authority,
the trust will treat interest payments on the notes as qualified stated
interest under the OID regulations. If the notes are issued or are deemed to be
issued with OID, all or a portion of the taxable income to be recognized with
respect to the notes would be includible in the income of noteholders as OID.
Any amount treated as OID would not, however, be includible again when the
amount is actually received. If the yield on a class of notes were not
materially different from its coupon, this treatment would have no significant
effect on noteholders using the accrual method of accounting. However, cash
method noteholders may
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be required to report income for the notes in advance of the receipt of cash
attributable to that income.
A noteholder must include OID in income as interest over the term of the
notes under a constant yield method. In general, OID must be included in income
in advance of the receipt of cash representing that income. Each noteholder is
encouraged to consult its own tax advisor regarding the impact of the OID rules
if the notes are issued with OID.
Market Discount. The notes, whether or not issued with original issue
discount, will be subject to the market discount rules of Section 1276 of the
IRS code. In general, these rules provide that if a noteholder purchases the
note at a market discount, for example, a discount from its original issue
price plus any accrued original issue discount that exceeds a de minimis amount
specified in the IRS code, and thereafter recognizes gain upon a disposition,
the lesser of the gain or the accrued market discount will be taxed as ordinary
interest income. Market discount also will be recognized and taxable as
ordinary interest income as payments of principal are received on the notes to
the extent that the amount of the payments does not exceed the accrued market
discount. Generally, the accrued market discount will be the total market
discount on the note multiplied by a fraction, the numerator of which is the
number of days the noteholder held the note and the denominator of which is the
number of days after the date the noteholder acquired the note until and
including its maturity date. The noteholder may elect, however, to determine
accrued market discount under the constant-yield method, which election shall
not be revoked without the consent of the IRS.
Limitations imposed by the IRS code which are intended to match deductions
with the taxation of income may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
note with accrued market discount. A noteholder may elect to include market
discount in gross income as it accrues and, if the noteholder makes such an
election, is exempt from this rule. The adjusted basis of a note subject to the
election will be increased to reflect market discount included in gross income,
thereby reducing any gain or increasing any loss on a sale or taxable
disposition. Any election to include market discount in gross income as it
accrues shall apply to all debt instruments held by the noteholder at the
beginning of the first taxable year to which the election applies or thereafter
acquired and is irrevocable without the consent of the IRS.
Amortizable Bond Premium. In general, if a noteholder purchases a note at a
premium (i.e., an amount in excess of the amount payable upon the maturity
thereof), the noteholder will be considered to have purchased the note with
amortizable bond premium equal to the amount of the excess. The noteholder may
elect to deduct the amortizable bond premium as it accrues under a constant-
yield method over the remaining term of the note. The noteholder's tax basis in
the note will be reduced by the amount of the amortizable bond premium
deducted. Amortizable bond premium for a note will be treated as an offset to
interest income on that note, and a noteholder's deduction for amortizable bond
premium that a note will be limited in each year to the amount of interest
income derived for that Note for that year. Any election to deduct amortizable
bond premium shall apply to all debt instruments (other than instruments the
interest on which is excludible from gross income)
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held by the noteholder at the beginning of the first taxable year to which the
election applies or thereafter acquired and is irrevocable without the consent
of the IRS. Bond premium on a note held by a noteholder who does not elect to
deduct the premium will decrease the gain or increase the loss otherwise
recognized on the disposition of the note.
Disposition of Notes. If a noteholder sells a note, the noteholder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the noteholder's adjusted tax basis in the note. The
adjusted tax basis of a note to a particular noteholder generally will equal
the noteholder's cost for the note, increased by any market discount, OID and
gain previously included by that noteholder in income for the note and
decreased by principal payments previously received by that noteholder and the
amount of bond premium previously amortized for the note. Any gain or loss will
be capital gain or loss if the note was held as a capital asset, except for
gain representing accrued interest and accrued market discount not previously
included in income, and will be short-term, mid-term or long-term capital gain
or loss depending upon whether the note was held for more or less than one year
or for more than eighteen months. Capital losses generally may be used only to
offset capital gains.
Foreign Holders. Generally, interest paid to a noteholder who is a
nonresident alien individual or a foreign corporation and who does not hold the
note in connection with a United States trade or business will be treated as
portfolio interest and will be exempt from the 30% withholding tax. The
noteholder will be entitled to receive interest payments on the notes free of
United States federal income tax provided that the noteholder periodically
provides the indenture trustee, or other person who would otherwise be required
to withhold tax with a statement certifying under penalty of perjury that the
noteholder is not a United States person and providing the name and address of
that noteholder and will not be subject to federal income tax on gain from the
disposition of a note unless the noteholder is an individual who is present in
the United States for 183 days or more during the taxable year in which the
disposition takes place and some other requirements are met.
Tax Administration and Reporting. The indenture trustee will furnish to each
noteholder with each distribution a statement showing the amount of the
distribution allocable to principal and to interest. Reports will be made
annually to the IRS and to holders of record that are not excepted from the
reporting requirements regarding the information as may be required for the
interest and original issue discount, with respect to the notes.
Backup Withholding. Under certain circumstances, a noteholder may be subject
to backup withholding at a 31% rate. Backup withholding may apply to a
noteholder who is a United States person if the holder, among other
circumstances, fails to furnish their social security number or other taxpayer
identification number to the indenture trustee. Backup withholding may apply,
under some circumstances, to a noteholder who is a foreign person if the
noteholder fails to provide the indenture trustee or the noteholder's
securities broker with the statement necessary to establish the exemption from
federal income and withholding tax on interest on the note. Backup withholding,
however, does not apply to payments on a note made to some exempt recipients,
such as corporations and tax-exempt organizations,
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and to certain foreign persons. Noteholders should consult their tax advisors
for additional information concerning the potential application of backup
withholding to payments received by them for a note.
On October 6, 1997, the treasury department issued new regulations which make
some modifications to the withholding, backup withholding and information
reporting rules described above. The new regulations attempt to unify
certification requirements and modify reliance standards, and will generally be
effective for payments made after December 31, 2000, subject to some transition
rules. You are urged to consult your own tax advisors regarding the new
regulations.
Possible Alternative Treatment of the Notes. If, contrary to the opinion of
counsel, the IRS successfully asserted that the notes did not represent debt
for federal income tax purposes, the notes might be treated as equity interests
in the trust. If so treated, the trust would be treated as a publicly traded
partnership that would not be taxable as a corporation because it would meet
some qualifying income tests. Nonetheless, treatment of the notes as equity
interests in that type of partnership could have adverse tax consequences to
some holders. For example, income to foreign holders generally would be subject
to federal tax and federal tax return filing and withholding requirements,
income to some tax-exempt entities would be unrelated business taxable income,
and individual holders might be subject to some limitations on their ability to
deduct their share of trust expenses.
Tax Consequences to Certificateholders
Treatment of the Trust as a Partnership. We, the general partner and the
owner trustee will agree, and the certificateholders will agree by their
purchase of certificates, to treat the trust as a partnership for purposes of
federal and state income tax, franchise tax and any other tax measured in whole
or in part by income, with the assets of the partnership being the assets held
by the trust, the partners of the partnership being the certificateholders and
the general partner, and the notes being debt of the partnership. The proper
characterization of the arrangement involving the trust, the certificates, the
notes, Conseco Securitizations, Conseco Finance and the servicer, however, is
not certain because there is no authority on transactions closely comparable to
that contemplated herein.
A variety of alternative characterizations are possible. For example, because
the certificates have certain features characteristic of debt, the certificates
might be considered debt of the trust. This characterization would not result
in materially adverse tax consequences to certificateholders as compared to the
consequences from treatment of the certificates as equity in a partnership as
discussed in the following paragraphs. The following discussion assumes that
the certificates represent equity interests in a partnership.
Partnership Taxation. As a partnership, the trust will not be subject to
federal income tax. Each certificateholder will be required to separately take
into account the holder's allocated share of income, gains, losses, deductions
and credits of the trust. The trust's income will consist primarily of interest
and finance charges earned on the contracts, including appropriate adjustments
for market discount, OID and bond premium and any gain
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upon collection or disposition of the contracts. The trust's deductions will
consist primarily of interest accruing for the notes, servicing and other fees,
and losses or deductions upon collection or disposition of the contracts.
The tax items of a partnership are allocable to the partners in accordance
with the IRS code, treasury regulations and the partnership agreement, here,
the trust agreement and related documents. The trust agreement will provide, in
general, that the certificateholders will be allocated taxable income of the
trust for each month equal to the sum of:
(1) the interest that accrues on the certificates according to their terms
for that month, including interest accruing at the pass-through rate
for that month and interest on amounts previously due on the
certificates but not yet distributed;
(2) any trust income attributable to discount on the contracts that
corresponds to any excess of the principal amount of the certificates
over their initial issue price;
(3) prepayment premium payable to the certificateholders for that month;
and
(4) any other amounts of income payable to the certificateholders for that
month.
Although it is not anticipated that the certificates will be issued at a price
which exceeds their principal amount, allocations of trust income to the
certificateholders will be reduced by any amortization by the trust of premium
on contracts that corresponds to any excess of the issue price of certificates
over their principal amount. All remaining taxable income of the trust will be
allocated to the general partner. Based on the economic arrangement of the
parties, this approach for allocating trust income should be permissible 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. Even under this method of allocation, certificateholders
may be allocated income equal to the entire pass-through rate plus the other
items described above even though the trust might not have sufficient cash to
make current cash distributions of that amount. Cash basis holders will in
effect be required to report income from the certificates on the accrual basis,
and certificateholders may become liable for taxes on trust income even if they
have not received cash from the trust to pay these taxes. In addition, because
tax allocations and tax reporting will be done on a uniform basis for all
certificateholders but certificateholders may be purchasing 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 trust.
All of the taxable income allocated to a certificateholder that is a pension,
profit sharing or employee benefit plan or other tax-exempt entity, including
an individual retirement account will constitute unrelated business taxable
income generally taxable to the holder under the IRS code.
A certificateholder's share of expenses of the trust, including fees to the
servicer but not interest expense will be miscellaneous itemized deductions. An
individual, an estate, or a trust that holds a certificate either directly or
through a pass-through entity will be allowed to deduct the expenses under
Section 212 of the IRS code only to the extent that, in the
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aggregate and combined with specific other itemized deductions, they exceed 2%
of the adjusted gross income of the certificateholder. In addition, Section 68
of the IRS code provides that the amount of itemized deductions, including
those provided for in Section 212 of the IRS code otherwise allowable for the
taxable year for an individual whose adjusted gross income exceeds a threshold
amount determined under the IRS code ($126,600 in 1999, in the case of a joint
return) will be reduced by the lesser of:
(1) 3% of the excess of adjusted gross income over the specified
threshold amount; or
(2) 80% of the amount of itemized deductions otherwise allowable for the
taxable year.
To the extent that a certificateholder is not permitted to deduct servicing
fees allocable to a certificate, the taxable income of the certificateholder
attributable to that certificate will exceed the net cash distributions related
to that income. Certificateholders may deduct any loss on disposition of the
contracts to the extent permitted under the IRS code.
Discount and Premium. It is believed that the contracts were not issued with
OID, and therefore, the trust should not have OID income. The purchase price
paid by the trust for the contracts may exceed the remaining principal balance
of the contracts at the time of purchase. If the trust is deemed to acquire the
contracts at such a premium or at a market discount, the trust will elect to
offset any premium against interest income on the contracts or to include any
discount in income currently as it accrues over the life of the contracts. The
trust will make this premium or market discount calculation on an aggregate
basis but may be required to recompute it on a contract-by-contract basis. As
indicated above, a portion of this premium deduction or market discount income
may be allocated to certificateholders.
Distributions to Certificateholders. Certificateholders generally will not
recognize gain or loss for distributions from the trust. A certificateholder
will recognize gain, to the extent that any money distributed exceeds the
certificateholder's adjusted basis in its certificates as described below under
"Disposition of Certificates" immediately before the distribution. A
certificateholder will recognize loss upon termination of the trust or
termination of the certificateholder's interest in the trust if the trust only
distributes money to the certificateholder and the amount distributed is less
than the certificateholder's adjusted basis in the certificates. This gain or
loss generally will be capital gain or loss if the certificates are held as
capital assets and will be long-term gain or loss if the holding period of the
certificates is more than one year.
Section 708 Termination. Under Section 708 of the IRS code, the trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the trust are sold or exchanged within a 12-
month period. Under treasury regulations, if a termination occurs, the trust
will be considered to have contributed the assets of the trust the old
partnership to a new partnership in exchange for interests in the new
partnership. The interests would be deemed distributed to the partners of the
old
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partnership in liquidation, which would not constitute a sale or exchange for
United States federal income tax purposes.
Disposition of Certificates. If a certificateholder sells a certificate, the
certificateholder generally will recognize capital gain or loss in an amount
equal to the difference between the amount realized on the sale and the
seller's tax basis in the certificate. A certificateholder's tax basis in a
certificate generally will equal the certificateholder's cost increased by the
certificateholder's share of trust income and decreased by any distributions
received with respect to the certificate. In addition, both the tax basis in
the certificate and the amount realized on a sale of a certificate would
include the certificateholder's share of the notes and other liabilities of the
trust. A certificateholder acquiring certificates at different prices may be
required to maintain a single aggregate adjusted tax basis in these
certificates, and, upon sale or other disposition of some of these
certificates, allocate a portion of the aggregate tax basis to the certificates
sold, rather than maintain a separate tax basis in each certificate for
purposes of computing gain or loss on a sale of that certificate.
Any gain on the sale of a certificate attributable to the certificateholder's
share of unrecognized accrued market discount on the contracts would generally
be treated as ordinary income to the certificateholder and would give rise to
special tax reporting requirements. The trust does not expect to have any other
assets that would give rise to special reporting requirements. To avoid those
special reporting requirements, the trust 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 in the paragraphs above over the life of the certificates that
exceeds the aggregate cash distributions, the excess generally will give rise
to a capital loss upon the retirement of the certificates.
Allocations Between Transferors and Transferees. In general, the trust'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 certificates owned by them as of the
close of the related record date. As a result, a certificateholder purchasing a
certificate may be allocated tax items, which will affect the
certificateholder's tax liability and tax basis attributable to periods before
the certificateholder actually owns the certificate. The use of this convention
may not be permitted by existing regulations. If a monthly convention is not
permitted, or only applies to transfers of less than all of the
certificateholder's interest, taxable income or losses of the trust may be
reallocated among the certificateholders. The general partner is authorized to
revise the trust'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 a
certificate at a profit or loss, the purchasing certificateholder will have a
higher or lower basis in the certificate than the selling certificateholder
had. The tax basis of the trust's assets will not be adjusted to reflect that
higher or lower basis unless the trust files an election under Section 754 of
the IRS code. In order to avoid the administrative complexities that would be
involved in
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keeping accurate accounting records, as well as potentially onerous information
reporting requirements, the trust will not make that election. As a result,
certificateholders may be allocated a greater or lesser amount of trust income
than would be appropriate based on their own purchase price for certificates.
Administrative Matters. Under an administration agreement, the trustee will
monitor the performance of the following responsibilities of the trust by other
service providers. The trust is required to keep or have kept complete and
accurate books of the trust. The books will be maintained for financial
reporting and tax purposes on an accrual basis and the fiscal year of the trust
will be the calendar year. The trust will file a partnership information return
(IRS Form 1065) with the IRS for each taxable year of the trust and will report
each certificateholder's allocable share of items of trust income and expense
to certificateholders and the IRS on Schedule K-1. The trust will provide the
Schedule K-1 information to nominees that fail to provide the trust with
specific required information statements relating to identification of
beneficial owners of certificates and the nominees will be required to forward
the information to the beneficial owners. Generally, certificateholders must
file tax returns that are consistent with the information return filed by the
trust or be subject to penalties unless the certificateholder notifies the IRS
of any inconsistencies.
We or our subsidiaries as identified in the prospectus supplement will be
designated as the tax matters partner in the trust agreement and, will be
responsible for representing the certificateholders in any dispute with the
IRS. The IRS 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 the trust by the
appropriate taxing authorities could result in an adjustment of the returns of
the certificateholders, and, under specific circumstances, a certificateholder
may be precluded from separately litigating a proposed adjustment to the items
of the trust. An adjustment could also result in an audit of a
certificateholder's returns and adjustments of items not related to the income
and losses of the trust.
Tax Consequences to Foreign Certificateholders. It is not clear whether the
trust will be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes for non-U.S. persons because
there is no clear authority dealing with that issue under facts substantially
similar to those described in this prospectus. Although it is not expected that
the trust will be engaged in a trade or business in the United States for those
purposes, the trust will withhold as if it were so engaged in order to protect
the trust from possible adverse consequences of a failure to withhold. It is
expected that the trust will withhold on the portion of its taxable income that
is allocable to foreign certificateholders under Section 1446 of the IRS code,
as if the 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 certificateholders. Subsequent adoption of treasury
regulations or the issuance of other administrative pronouncements may require
the trust to change its withholding procedures. In determining a
certificateholder's nonforeign
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status, the trust may rely on Form W-8, Form W-9 or the certificateholder's
certification of nonforeign status signed under penalties of perjury.
Each foreign certificateholder might be required to file a U.S. individual or
corporate income tax return, including, in the case of a corporation, the
branch profits tax on its share of the trust's income. Each foreign
certificateholder must obtain a taxpayer identification number from the IRS and
submit that number to the trust on Form W-8 in order to assure appropriate
crediting of the taxes withheld. A foreign certificateholder generally will be
entitled to file with the IRS a claim for refund for the taxes withheld by the
trust, taking the position that no taxes are due because the trust is not
engaged in a U.S. trade or business. However, the IRS may assert that
additional taxes are due, and no assurance can be given as to the appropriate
amount of tax liability.
Backup Withholding. Under specific circumstances, a certificateholder may be
subject to backup withholding at a 31% rate. See the discussion above under
"Tax Consequences to Noteholders--Backup Withholding."
Grantor Trust Series
Tax Status of the Trust
For the series of securities which includes only certificates, unless we
specify otherwise in the prospectus supplement, counsel will deliver its
opinion that the trust will be classified as a grantor trust for federal income
tax purposes and not as an association which is taxable as a corporation. The
trust will be classified as a trust regardless of whether we are considered to
retain an interest in the contracts, as discussed below. While a retained
interest might be viewed as a second class of beneficial interest in the trust
and Treasury Regulations Section 301.7701-4(c) generally provides that an
investment trust with more than one class of ownership interest will be
classified as an association taxable as a corporation or a partnership, that
regulation would treat the trust as a grantor trust because there will be no
power under the pooling and servicing agreement to vary the investment of the
certificateholders, the purpose of the trust will be to facilitate direct
investment in the contracts, and the existence of multiple classes of ownership
interests in the trust will be incidental to that purpose.
Tax Consequences to Certificateholders
Because the trust will be classified as a grantor trust, each
certificateholder, including any holder of a subordinated certificate will, in
the opinion of counsel, be treated for federal income tax purposes as the owner
of an undivided interest in the contracts and other trust property.
Accordingly, subject to the discussion below of certain limitations on
deductions and the stripped bond rules of the IRS code, each certificateholder
must report on its federal income tax return its pro rata share of the entire
income from the contracts and other trust property, and may deduct its pro rata
share of the fees paid by the trust, at the same time as the items would be
reported under the certificateholder's tax accounting method if it held
directly a pro rata interest in the assets of the trust and received and paid
directly the amounts received and paid by the trust. A certificateholder's
share of expenses of the trust
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will be miscellaneous itemized deductions subject to certain limits on
deductibility. See the discussion above under "Owner Trust Series--Tax
Consequences to Certificateholders--Partnership Taxation."
A purchaser of a certificate will be treated as purchasing an interest in
each contract in the trust at a price determined by allocating the purchase
price paid for the certificate among all contracts in proportion to their fair
market values at the time of purchase of the certificate. To the extent that
the portion of the purchase price of a certificate allocated to a contract is
greater than or less than the portion of the principal balance of the contract
allocable to the certificate, that interest in the contract will be deemed to
have been acquired with premium or discount. See the discussions above under
"Owner Trust Series --Tax Consequences to Noteholders--Market Discount" and "--
Amortizable Bond Premium."
The treatment of any discount will depend on whether the discount represents
original issue discount or market discount. It is not anticipated that the
contracts will have original issue discount, unless they are subject to the
stripped bond rules of the IRS code described below. If the contracts are
subject to the stripped bond rules of the IRS code, the market discount rules
discussed above may not apply.
Subordinated Certificates. If the subordinated certificateholders receive
distributions of less than their share of the trust's receipts of principal or
interest, the shortfall amount, because of the subordination of the
subordinated certificates, holders of subordinated certificates would probably
be treated for federal income tax purposes as if they had:
(1) received as distributions their full share of such receipts;
(2) paid over to the senior certificateholders an amount equal to the
shortfall amount; and
(3) retained the right to reimbursement of those amounts to the extent
available from future collections on the contracts.
Under this analysis, (a) subordinated certificateholders would be required to
accrue as current income any interest or OID income of the trust that was a
component of the shortfall amount, even though the amount was in fact paid to
the senior certificateholders, (b) a loss would only be allowed to the
subordinated certificateholders when their right to receive reimbursement of
the shortfall amount became worthless, and (c) reimbursement of the shortfall
amount prior to a claim of worthlessness would not be taxable income to
subordinated certificateholders because the amount was previously included in
income. Those results should not significantly affect the inclusion of income
for subordinated certificateholders on the accrual method of accounting, but
could accelerate inclusion of income to subordinated certificateholders on the
cash method of accounting by, in effect, placing them on the accrual method.
The character and timing of loss deductions is unclear.
Under current IRS interpretations of applicable treasury regulations, we
would be able to sell or otherwise dispose of any subordinated certificates.
Accordingly, we may offer subordinated certificates for sale to investors.
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Stripped Certificates. Some classes of certificates may be subject to the
stripped bond rules of Section 1286 of the IRS code and for purposes of this
discussion will be referred to as stripped certificates. In general, a stripped
certificate will be subject to the stripped bond rules where there has been a
separation of ownership of the right to receive some or all of the principal
payments on a contract from ownership of the right to receive some or all of
the related interest payments. Certificates will constitute stripped
certificates and will be subject to these rules under various circumstances,
including the following:
(1) if any servicing compensation is deemed to exceed a reasonable
amount;
(2) if two or more classes of certificates are issued representing the
right to non-pro rata percentages of the interest or principal payments on
the contracts; or
(3) if certificates are issued which represent the right to interest only
payments or principal only payments.
Although not entirely clear, each stripped certificate should be considered
to be a single debt instrument issued on the day it is purchased for purposes
of calculating any original issue discount. Original issue discount for a
stripped certificate, must be included in ordinary gross income for federal
income tax purposes as it accrues in accordance with the constant-yield method
that takes into account the compounding of interest and the accrual of income
may be in advance of the receipt of any cash attributable to the income. See
"Owner Trust Series--Tax Consequences to Noteholders--Interest Income on the
Notes" above. For purposes of applying the original issue discount provisions
of the IRS code, the issue price of a stripped certificate will be the purchase
price paid by the holder thereof and the stated redemption price at maturity
may include the aggregate amount of all payments to be made for the stripped
certificate whether or not denominated as interest. The amount of original
issue discount for a stripped certificate may be treated as zero under the
original issue discount de minimis rules described above. Under rules similar
to those provided in Rev. Proc. 91-49, applicable only to mortgages secured by
real property, a certificateholder may be required to account for any discount
on a stripped certificate as market discount rather than original issue
discount if either (1) the amount of original issue discount for the
certificate was treated as zero under the original issue discount de minimis
rule when the certificate was stripped; or (2) no more than 100 basis points,
including any amount of servicing in excess of reasonable servicing is stripped
off of the contracts.
When an investor purchases more than one class of stripped certificates, it
is currently unclear whether for federal income tax purposes the classes of
stripped certificates should be treated separately or aggregated for purposes
of applying the original issue discount rules described above.
It is possible that the IRS may take a contrary position for some or all of
the foregoing tax consequences. For example, a holder of a stripped certificate
may be treated as the owner of:
(1) as many stripped bonds or stripped coupons as there are scheduled
payments of principal and/or interest on each contract, or
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(2) a separate installment obligation for each contract representing the
stripped certificate's pro rata share of principal and/or interest payments
to be made.
In addition, if a trust issues more than one class of certificates with
different pass-through rates, a holder of the certificate may be treated as the
owner of a stripped bond with a rate equal to the lowest pass-through rate and
a stripped coupon representing the excess of the pass-through rate on that
certificate over the lowest pass-through rate. As a result of these possible
alternative characterizations, investors should consult their own tax advisors
regarding the proper treatment of stripped certificates for federal income tax
purposes.
The servicing fee to be received by the servicer and the fee for the
enhancement, provided for a series of certificates may be questioned by the IRS
for some certificates or contracts as exceeding a reasonable fee for the
services being performed in exchange therefor, and a portion of the servicing
compensation could be recharacterized as an ownership interest retained by the
servicer or other party in a portion of the interest payments to be made under
the contracts. In this event, a certificate might be treated as a stripped
certificate subject to the stripped bond rules of Section 1286 of the IRS code
and the original issue discount provisions rather than to the market discount
and premium rules.
Disposition of Certificates. If a certificate is sold, gain or loss will be
recognized equal to the difference between the amount realized on the sale and
the certificateholder's adjusted tax basis in the certificate. See the
discussion above under "Owner Trust Series--Tax Consequences to Noteholders--
Disposition of Notes."
Foreign Holders. Generally, interest paid to a certificateholder who is a
nonresident alien individual or a foreign corporation and who does not hold the
certificates in connection with a United States trade or business will be
treated as portfolio interest. See the discussion above under "Owner Trust
Series--Tax Consequences to Noteholders--Foreign Holders."
Tax Administration and Reporting
The trustee will furnish to each certificateholder with each distribution a
statement showing the amount of the distribution allocable to principal and to
interest. In addition, the trustee will furnish, within a reasonable time after
the end of each calendar year, to each certificateholder who was a
certificateholder at any time during that year, information regarding the
amount of servicing compensation received by the servicer and the other factual
information as we deem necessary to enable certificateholders to prepare their
tax returns. Reports will be made annually to the IRS and to holders of record
that are not excepted from the reporting requirements regarding information as
may be required for the interest and original issue discount for the
certificates.
Backup Withholding
Under some circumstances, a certificateholder may be subject to backup
withholding at a 31% rate. See the discussion above under "Owner Trust Series--
Tax Consequences to Noteholders--Backup Withholding."
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STATE INCOME TAX CONSEQUENCES
The activities to be undertaken by the servicer in servicing and collecting
the contracts will take place in Minnesota. The State of Minnesota imposes an
income tax on individuals, trusts and estates and a franchise tax measured by
net income on corporations. This discussion of Minnesota taxation is based upon
current statutory provisions and the regulations promulgated, and applicable
judicial or ruling authority, all of which are subject to change, which may be
retroactive. No ruling on any of the issues discussed below will be sought from
the Minnesota Department of Revenue.
Owner Trust Series
If the notes are treated as debt for federal income tax purposes, in the
opinion of counsel this treatment will also apply for Minnesota tax purposes.
Noteholders not otherwise subject to Minnesota income or franchise taxation
would not become subject to this tax solely because of their ownership of the
notes. Noteholders already subject to income or franchise taxation in Minnesota
could, however, be required to pay that tax on all or a portion of the income
generated from ownership of the notes.
If the trust is treated as a partnership, not taxable as a corporation for
federal income tax purposes, in the opinion of counsel the trust would also be
treated as a partnership for Minnesota income tax purposes. The partnership
would not be subject to Minnesota taxation. Certificateholders that are not
otherwise subject to Minnesota income or franchise taxation would not become
subject to this tax solely because of their interests in the partnership.
Certificateholders already subject to income or franchise taxation in Minnesota
could, however, be required to pay this tax on all or a portion of the income
from the partnership.
If the certificates are treated as ownership interests in an association or
publicly traded partnership taxable as a corporation for federal income tax
purposes, in the opinion of counsel this treatment would also apply for
Minnesota income and franchise tax purposes. Under this treatment, the trust
would be subject to the Minnesota franchise tax measured by net income, which
could result in reduced distributions to certificateholders. Certificateholders
that are not otherwise subject to Minnesota income or franchise taxation would
not become subject to this tax solely because of their interests in the
constructive corporation. Certificateholders already subject to income or
franchise taxation in Minnesota could, however, be required to pay this tax on
all or a portion of the income from the constructive corporation.
Grantor Trust Series
If the trust is treated as a grantor trust for federal income tax purposes,
in the opinion of counsel the trust would also be treated as a grantor trust
for Minnesota income tax purposes. The trust therefore would not be subject to
Minnesota taxation. Certificateholders that are not otherwise subject to
Minnesota income or franchise taxation would not become subject to the tax
solely because of their interests in the trust. Certificateholders already
subject to
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income or franchise taxation in Minnesota could, however, be required to pay
that tax on all or a portion of the income from the trust.
Because state tax laws vary, it is not possible to describe the tax
consequences to the noteholders and certificateholders in all of the states.
Noteholders and certificateholders are therefore urged to consult their own tax
advisors for the state tax treatment of the notes and certificates and income
derived therefrom.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, and
Section 4975 of the IRS code prohibit a pension, profit sharing or other
employee benefit plan, the benefit plan from engaging in some transactions
involving plan assets with persons that are parties in interest under ERISA or
disqualified persons under the IRS code for the benefit plan. ERISA also
imposes some duties and some prohibitions on persons who are fiduciaries of
plans subject to ERISA. Under ERISA, generally any person who exercises any
authority or control for the management or disposition of the assets of a
benefit plan is considered to be a fiduciary of the plan. A violation of these
prohibited transaction rules may generate excise tax and other liabilities
under ERISA and the IRS code for those persons.
Some transactions involving the related trust might be deemed to constitute
prohibited transactions under ERISA and the IRS code for a benefit plan that
purchased securities if assets of the related trust were deemed to be assets of
the benefit plan. Under a regulation issued by the United States Department of
Labor, the plan assets regulation, the assets of a trust would be treated as
plan assets of a benefit plan for the purposes of ERISA and the IRS 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 of notes and
certificates will be discussed in the related prospectus supplement.
Employee benefit plans that are governmental plans, as defined in Section
3(32) of ERISA and some church plans, as defined in Section 3(33) of ERISA are
not subject to ERISA requirements.
A benefit plan fiduciary considering the purchase of securities should
consult its tax and/or legal advisors regarding whether the assets of the trust
would be considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential consequences.
PLAN OF DISTRIBUTION
On the terms and conditions described in an underwriting agreement for each
trust, we will agree to sell to each of the underwriters named and in the
prospectus supplement, and
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each of the underwriters will severally agree to purchase from the seller, the
principal amount of each class of securities of the related series described
and in the prospectus supplement.
In each underwriting agreement, the several underwriters will agree, subject
to the terms and conditions set forth, to purchase all the securities described
which are offered and by the prospectus supplement of the securities are
purchased. In the event of a default by any underwriter, each underwriting
agreement will provide that, in some circumstances, purchase commitments of the
nondefaulting underwriters may be increased, or the underwriting agreement may
be terminated.
Each prospectus supplement will either:
(1) set forth the price at which each class of securities being offered
will be offered to the public and any concessions that may be offered to
some dealers participating in the offering of the securities; or
(2) 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 the sale.
After the initial public offering of any securities, the public offering price
and the concessions may be changed.
Each underwriting agreement will provide that we will indemnify the
underwriters against some 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 will be conditioned on the closing of the sale of all other classes.
The place and time of delivery for the securities for which this prospectus
is delivered will be described in the related prospectus supplement.
LEGAL MATTERS
Some matters relating to validity of the certificates and the notes will be
passed upon by our counsel as identified in the prospectus supplement. The
validity of the certificates and the notes will be passed upon for the
underwriters named in the prospectus supplement by the counsel for the
underwriters identified in the prospectus supplement.
EXPERTS
The consolidated financial statements of Conseco Finance as of December 31,
1998 and for the year ended December 31, 1998 are incorporated by reference in
this prospectus in
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reliance on the report of PricewaterhouseCoopers LLP, independent accountants
given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Conseco Finance, formerly known as
Green Tree Financial Corporation, as of December 31, 1997 and for each of the
years in the two-year period ended December 31, 1997 are incorporated by
reference in this prospectus and in the registration statement in reliance upon
the report of KPMG LLP, independent certified public accountants, incorporated
by reference in this prospectus, and upon the authority of KPMG LLP as experts
in accounting and auditing.
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GLOSSARY
For the purposes of this prospectus and the prospectus supplement, the
following terms will have the following meanings:
"Amount available" with respect to any distribution date, means generally the
sum of payments on the contracts due and received during the preceding month,
prepayments and other unscheduled collections received during the preceding
month, any amounts deposited in respect of purchased contracts, any interest
rate cap payment, any guaranty payment, and all earnings from the investment of
funds in the collection account.
"Certificateholders' distributable amount" means, for any distribution date,
the sum of the certificateholders' interest distributable amount and the
certificateholders' principal distributable amount.
"Certificateholders' interest carryover shortfall" means, for any
distribution date, the excess of the certificateholders' monthly interest
distributable amount for the preceding distribution date and any outstanding
certificateholders' interest carryover shortfall on the preceding distribution
date, over the amount in respect of interest at the pass-through rate that is
actually deposited in the certificate distribution account on such preceding
distribution date, plus interest on such excess, to the extent permitted by
law, at the pass-through rate from such preceding distribution date to but
excluding the current distribution date.
"Certificateholders' interest distributable amount" means, for any
distribution date, the sum of the certificateholders' monthly interest
distributable amount for such distribution date and the certificateholders'
interest carryover shortfall for such distribution date.
"Certificateholders' monthly interest distributable amount" means, for any
distribution date, interest accrued at the pass-through rate on:
(1) the certificate principal balance and
(2) the aggregate unreimbursed certificate principal liquidation losses on
each prior distribution date, in each case after giving effect to all
payments of principal to the certificateholders on the immediately
preceding distribution date.
"Certificateholders' monthly principal distributable amount" means, for any
distribution date prior to the distribution date on which the notes are paid in
full, zero; and with respect to any distribution date commencing on the
distribution date on which the notes are paid in full, the formula principal
distribution amount, less, on the distribution date on which the notes are paid
in full, the portion thereof payable on the notes.
"Certificate principal balance" equals the original certificate principal
balance, reduced by all amounts allocable to principal previously distributed
to certificateholders minus any unreimbursed certificate principal liquidation
losses.
"Certificateholders' principal distributable amount" means, for any
distribution date, the sum of the certificateholders' monthly principal
distributable amount for such distribution
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date and the certificateholders' unpaid principal shortfall as of the close of
the preceding distribution date; provided, however, that the
certificateholders' principal distributable amount shall not exceed the
certificate principal balance plus any unreimbursed certificate principal
liquidation losses. In addition, on the final scheduled distribution date, the
principal required to be deposited into the certificate distribution account
shall not be less than the amount that is necessary, after giving effect to the
other amounts to be deposited in the certificate distribution account on such
distribution date and allocable to principal, to reduce to zero the certificate
principal balance plus the unreimbursed certificate principal liquidation
losses.
"Certificate principal liquidation loss" means, for any distribution date,
the amount by which the aggregate principal balance of the notes and the
certificate principal balance exceeds the pool scheduled principal balance,
after giving effect to all distributions of principal on such distribution
date.
"Certificateholders' unpaid principal shortfall" means, as of the close of
any distribution date, the excess of the certificateholders' monthly principal
distributable amount and any outstanding certificateholders' unpaid principal
shortfall from the preceding distribution date, over the amount in respect of
principal that is actually deposited in the certificate distribution account.
The "formula principal distribution amount" for any distribution date (but
subject to the last sentence of this definition) will generally be equal to the
sum of the following amounts with respect to the monthly period, in each case
computed in accordance with the method specified in each contract:
(1) all scheduled payments of principal due on each outstanding contract
during the related monthly period, after adjustments for previous partial
principal prepayments and after any adjustments to a contract's
amortization schedule as a result of a bankruptcy or similar proceeding
involving the related obligor,
(2) the scheduled principal balance of each contract which, during the
related monthly period, was purchased by us pursuant to the sale and
servicing agreement on account of a breach of a representation or warranty,
(3) all partial principal prepayments applied and all principal
prepayments in full received on contracts during the related monthly
period,
(4) the scheduled principal balance of each contract that became a
liquidated contract during the related monthly period, plus the amount of
any reduction in the outstanding principal balance of a contract during
such monthly period ordered as a result of a bankruptcy or similar
proceeding involving the related obligor,
(5) without duplication of the foregoing, all collections in respect of
principal on the contracts received during the current month up to and
including the third business day prior to such distribution date, but in no
event later than the 10th day of the month in which such distribution date
occurs, minus
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(6) the amount, if any, included in the formula principal distribution
amount for the preceding distribution date by virtue of clause (5) above.
"Liquidated contract" means any defaulted contract as to which the servicer
has determined that all amounts which it expects to recover from or on account
of such contract through the date of disposition of the real property have been
recovered; provided that any defaulted contract in respect of which the real
property has been realized upon and disposed of and proceeds of such
disposition have been received shall be deemed to be a liquidated contract.
"Noteholders' distributable amount" means, for any distribution date, the sum
of the noteholders' interest distributable amount and the noteholders'
principal distributable amount.
"Noteholders' interest carryover shortfall" means, for any distribution date,
the excess of the noteholders' monthly interest distributable amount for the
preceding distribution date and any outstanding noteholders' interest carryover
shortfall on such preceding distribution date, over the amount in respect of
interest that is actually deposited in the note distribution account on the
preceding distribution date, plus interest on the amount of interest due but
not paid to noteholders on the preceding distribution date, to the extent
permitted by law, at the respective interest rate for each class of notes for
the applicable monthly interest period.
"Noteholders' interest distributable amount" means, for any distribution
date, the sum of the noteholders' monthly interest distributable amount for
such distribution date and the noteholders' interest carryover shortfall for
the distribution date.
"Noteholders' monthly interest distributable amount" means, for any
distribution date, interest accrued for the monthly interest period on each
class of notes at the respective interest rate for such class on:
(1) the outstanding principal balance of the notes of such class and
(2) the aggregate unreimbursed principal liquidation losses of the class
on each prior distribution date, in each case after giving effect to
all payments of principal to the noteholders of the class on the
immediately preceding distribution date.
"Noteholders' monthly principal distributable amount" means, for any
distribution date, the noteholders' percentage of the formula principal
distribution amount plus the aggregate unreimbursed principal liquidation
losses of each class of notes.
"Noteholders' percentage" means, 100% until and including the distribution
date on which the aggregate principal balance of the notes are paid in full and
0% thereafter.
"Noteholder's principal distributable amount" means, for any distribution
date, the sum of the noteholders' monthly principal distributable amount for
the distribution date and the noteholders' unpaid principal shortfall as of the
close of the preceding distribution date;
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provided, however, that the noteholders' principal distributable amount shall
not exceed the outstanding principal balance of the notes, and provided
further, that the noteholders' principal distributable amount on the final
scheduled distribution date shall not be less than the amount that is
necessary, after giving effect to other amounts to be deposited in the note
distribution account on such distribution date and allocable to principal, to
reduce the outstanding principal balances, including all unreimbursed principal
liquidation losses, of all classes of notes to zero.
"Noteholders' unpaid principal shortfall" means, as of the close of any
distribution date, the excess of the noteholders' monthly principal
distributable amount and any outstanding noteholders' unpaid principal
shortfall from the preceding distribution date over the amount in respect of
principal that is actually deposited in the note distribution account on such
distribution date.
"Principal balance" means, with respect to any determination date and any
class of notes, the original principal balance of a class minus all amounts
previously distributed in respect of principal of the class and minus any
unreimbursed principal liquidation losses of such class.
"Purchased contract" means a contract that:
. we have become obligated to repurchase (or, under specified
circumstances, has elected to repurchase) as a result of an uncured
breach by us of a representation or warranty made by us for that
contract or
. the servicer has become obligated to repurchase, or, under specific
circumstances, has elected to repurchase, as a result of an uncured
breach of the covenants made by it with respect to such contract.
"Principal liquidation loss" means, for any distribution date and any class
of notes, the amount by which the aggregate principal balance of the class and
each junior class and the certificate principal balance, after giving effect to
any principal liquidation losses imposed on such junior classes and
certificates, exceeds the pool scheduled principal balance, after giving effect
to all distributions of principal on such distribution date.
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[CONSECO LEGO]
