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Filed Pursuant To Rule 424(B)(5)
Registration No. 33-99536
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 17, 1995
AFG Receivables Trust, 1996-B
$44,509,260.12 6.60% Asset Backed Certificates, Class A
$2,500,520.23 7.05% Asset Backed Certificates, Class B
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AFG Receivables Corporation
Seller
AutoFinance Group, Inc.
Servicer
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The Asset Backed Certificates (the "Certificates") will represent fractional
undivided interests in the AFG Receivables Trust, 1996-B (the "Trust") to be
formed pursuant to a Pooling and Servicing Agreement to be entered into among
AFG Receivables Corporation, as Seller (the "Seller"), AutoFinance Group,
Inc., as Servicer (the "Servicer"), and Chemical Bank, as Trustee. The
Certificates will be issued in three classes: Class A Certificates
(the "Class A Certificates") with a pass-through rate of 6.60% per
annum (the "Class A Pass-Through Rate") and an aggregate principal
balance of $44,509,260.12; Class B Certificates (the "Class B
Certificates") with a pass-through rate of 7.05% per annum (the
"Class B Pass-Through Rate") and an aggregate principal balance
of $2,500,520.23; and the Class C Certificates (the "Class C
Certificates"). Only the Class A and the Class B Certificates
are hereby being offered (together, the "Securities").
The Underwriters have agreed to purchase from the Seller the Class A
Certificates at 99.453125% of the principal amount thereof and the Class B
Certificates at 99.359375% of the principal amount thereof, subject to the
terms and conditions set forth in the Underwriting Agreement referred to
herein under "Underwriting". The aggregate proceeds to the Seller,
before deducting expenses payable by the Seller estimated at
$315,000, will be $46,749,575.79 plus accrued interest at the
Class A Pass-Through Rate on the Class A Certificates and at
the Class B Pass-Through Rate on the Class B Certificates
from May 15, 1996.
The Underwriters propose to offer the Securities from time to time in negotiated
transactions or otherwise, at prices determined at the time of sale. For
further information with respect to the plan of distribution and any
discounts, commissions or profits that may be deemed underwriting
discounts or commissions, see "Underwriting" herein.
The assets of the Trust will include a pool of retail installment sale contracts
(the "Receivables"), secured by the new and used automobiles and light duty
trucks financed thereby (the "Financed Vehicles"), certain monies due
under the Receivables on and after May 1, 1996 (the "Cutoff Date"),
security interests in the Financed Vehicles and certain other
property, as more fully described herein. The aggregate
principal balance of the Receivables as of the Cutoff Date was
$50,010,404.63. The Class A Certificates and Class B
Certificates will evidence undivided interests in the
Trust of 89% and 5%, respectively.
(Continued on following page)
THE SECURITIES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT INTERESTS
IN OR OBLIGATIONS OF THE SELLER, THE SERVICER OR ANY AFFILIATE OF
EITHER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
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The Securities are offered hereby by the Underwriters named below, subject
to receipt and acceptance by the Underwriters and their right to reject any
order in whole or in part. It is expected that delivery of the Securities will
be made on or about May 29, 1996.
CS First Boston Key Capital Markets, Inc.
The date of this Prospectus Supplement is May 22, 1996.
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(Continued from preceding page)
Principal and interest at the Class A Pass-Through Rate will be distributed to
the Class A Certificateholders, and principal and interest at the Class B
Pass-Through Rate will be distributed to the Class B Certificateholders, in
each case, on the fifteenth day of each month (or, if such day is not a
Business Day, on the next succeeding Business Day), beginning June 17,
1996. Distributions of interest and principal on the Class C
Certificates will be subordinated in priority of payment to interest
and principal due on the Securities to the extent described herein
in the event of defaults and delinquencies on the Receivables.
The final scheduled Distribution Date is April 15, 2001.
The Securities initially will be represented by Certificates registered in the
name of Cede & Co., the nominee of The Depository Trust Company ("DTC"). The
interests of beneficial owners of the Securities will be represented by book
entries on the records of the participating members of DTC. Definitive
Securities will be available only under the limited circumstances described
herein and in the accompanying Prospectus.
There currently is no secondary market for the Securities. CS First Boston
Corporation expects, but is not obligated, to make a market in the
Securities. There is no assurance that any
such market will develop
or continue.
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE SECURITIES, SEE "RISK FACTORS" HEREIN AND IN THE ACCOMPANYING
PROSPECTUS.
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THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE SECURITIES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE SECURITIES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. TO THE EXTENT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT
CONFLICT WITH STATEMENTS IN THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS
SUPPLEMENT SHALL CONTROL.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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SUPPLEMENTAL PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing in this Prospectus Supplement and in the
accompanying Prospectus. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings ascribed to such terms
elsewhere in this Prospectus Supplement or the accompanying Prospectus.
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Issuer . . . . . . . . . . . . . . AFG Receivables Trust, 1996-B (the
"Trust").
Trustee . . . . . . . . . . . . . . Chemical Bank
The Certificates . . . . . . . . . The Certificates consist of three classes,
entitled 6.60% Asset Backed
Certificates, Class A (the "Class A
Certificates"), 7.05% Asset Backed
Certificates, Class B (the "Class B
Certificates") and Asset Backed
Certificates, Class C (the "Class C
Certificates"). Only the Class A
Certificates and the Class B
Certificates (the "Securities") are
being offered hereby.
The Class A Certificates will evidence in
the aggregate an undivided
ownership interest of 89% (the
"Class A Percentage") of the Trust
and the Class B Certificates will
evidence in the aggregate an
undivided ownership interest of 5%
(the "Class B Percentage") of the
Trust. The Class C Certificates
will evidence in the aggregate an
undivided ownership interest of 6%
(the "Class C Percentage") of the
Trust. The Class B Certificates
are subordinated to the Class A
Certificates, except with respect
to certain monies, if any, held in
a reserve account, and are senior
to the Class C Certificates, to the
extent described herein. The Class
C Certificates are not being
offered hereby and shall be held
initially by the Seller. However,
the Seller may sell or transfer the
Class C Certificates or interests
therein to third parties.
Trust Property . . . . . . . . . . The Trust property will include certain
retail installment sale contracts
(the "Receivables"), originated on
or before March 1, 1996, secured by
new or used automobiles and light
trucks (the "Financed Vehicles"),
certain monies due thereunder on or
after May 1, 1996 (the "Cutoff
Date"), security interests in the
Financed Vehicles securing the
Receivables, certain bank accounts
and the proceeds thereof, all
proceeds of the foregoing, any
proceeds from claims on certain
insurance policies, and certain
rights under the Trust Documents.
Receivables . . . . . . . . . . . . The Receivables have, as of the Cutoff
Date, a weighted average annual
percentage rate ("APR") of
approximately 19.92%, a weighted
average original maturity of 56.34
months and a weighted average
remaining maturity of 52.32
months. The Receivables have an
aggregate principal balance of
$50,010,404.63 as of the Cutoff
Date. See "Composition of
Receivables". Each of the
Receivables also have a remaining
term of not more than 58 months and
at least two scheduled payments
will have previously been received
by the Servicer as of the Cutoff
Date.
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Terms of the
Certificates . . . . . . . . . . The principal terms of the Certificates
are as follows:
A. Class A
Pass-Through Rate . . . . . . . . 6.60% per annum, calculated on the basis
of a 360-day year consisting of
twelve 30-day months (the "Class A
Pass-Through Rate").
B. Class B
Pass-Through Rate . . . . . . . . 7.05% per annum, calculated on the basis
of a 360-day year consisting of
twelve 30-day months (the "Class B
Pass-Through Rate").
C. Class C Pass-Through
Return . . . . . . . . . . . . . . As of any Distribution Date the total
amount of scheduled principal and
interest due on the Receivables and
actually received by the Trustee
for the related Collection Period
minus (i) the Servicing Fee, (ii)
the sum of (x) the Class A Interest
Distributable Amount and (y) the
Class A Interest Carryover
Shortfall, if any, (iii) the sum of
(x) the Class B Interest
Distributable Amount and (y) the
Class B Interest Carryover
Shortfall, if any, (iv) the sum of
(x) the Class A Principal
Distributable Amount and (y) the
Class A Principal Carryover
Shortfall, if any, (v) the sum of
(x) the Class B Principal
Distributable Amount and (y) the
Class B Principal Carryover
Shortfall, if any, and (vi) the sum
of (x) the Class C Principal
Distributable Amount and (y) the
Class C Principal Carryover
Shortfall, if any.
D. Certificate
Distribution Date . . . . . . . . The 15th day of each month (or if such
15th day is not a business day, the
next following business day)
commencing June 17, 1996.
E. Certificate Balance . . . . . . The "Class A Certificate Balance" shall
equal, initially, $44,509,260.12
and thereafter shall equal the
initial Class A Certificate Balance
reduced by all principal
distributions on the Class A
Certificates. The "Class B
Certificate Balance" shall equal,
initially, $2,500,520.23 and
thereafter shall equal the initial
Class B Certificate Balance reduced
by all principal distributions on
the Class B Certificates. The
initial Class A Certificate Balance
and the initial Class B
Certificate Balance are referred to
herein together as the "Offered
Certificate Balance."
Credit Enhancement . . . . . . . . Distributions of interest and principal on
the Class B Certificates will be
subordinated in priority of payment
to interest and principal due on
the Class A Certificates to the
extent described herein in the
event of defaults and delinquencies
on the Receivables. The Class B
Certificateholders will not receive
any distributions of interest with
respect to a Collection Period
until the full amount of interest
on the Class A Certificates
relating to such Collection Period
has been deposited in the Class A
Distribution Account, and the Class
B Certificateholders will not
receive any distributions of
principal with respect to such
Collection Period until the full
amount of interest on and principal
of the Class A Certificates
relating to such Collection Period
has been deposited
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in the Class A Distribution Account.
So long as AutoFinance Group, Inc.
is the Servicer, on each of the
first nine Distribution Dates
following the Closing Date, receipt
of the Servicing Fee shall be
subordinate in priority of payment
to payment of interest and
principal on the Securities.
Distributions of interest and
principal on the Class C
Certificates will be subordinated
in priority of payment to interest
and principal due on the Securities
in the event of defaults and
delinquencies on the Receivables.
Spread Account . . . . . . . . . . There will be no initial deposit of funds
to the Spread Account by the Seller
or Servicer. On the initial
Distribution Date and on each
Distribution Date thereafter, if
necessary, the Class C
Certificateholders' pro rata
portion of interest and principal
payments received by the Trust with
respect to the Receivables ("Class
C Distributions"), which will
include the amount otherwise
allocable to the Servicing Fee, so
long as AutoFinance Group, Inc. is
the Servicer, on each of the first
nine Distribution Dates until the
amount in the Spread Account
reaches an amount equal to the
Specified Spread Account Balance,
shall be allocated as described
below. First, the Class C
Distributions shall be deposited
into the Spread Account, until the
amount in the Spread Account
reaches an amount equal to the
Specified Spread Account Balance.
Thereafter, Class C Distributions
otherwise distributable to the
Class C Certificateholders will be
deposited in the Spread Account to
the extent necessary to maintain
the Spread Account at an amount
equal to the Specified Spread
Account Balance. At any time, the
Trustee shall permit all or any
portion of the Class C
Distributions, as requested by the
Seller to be excluded thereafter
from the foregoing deposit
requirements, PROVIDED that, at the
time of such request, the Seller
presents evidence to the Trustee
that the ratings of the Securities
shall not be reduced or withdrawn
as a result of such requested
exclusion. If any such portion of
the Class C Distributions becomes
excluded from such deposit
requirements it shall remain
excluded even if the amounts in the
Spread Account thereafter fall
below the Specified Spread Account
Balance. Amounts in the Spread
Account on any Distribution Date
(after giving effect to all
Securityholder distributions made
on such Distribution Date) in
excess of the Spread Account
Balance, for such Distribution Date
generally will be payable to the
Class C Certificateholders.
The "Specified Spread Account
Balance" with respect to any
Distribution Date will be equal to
(x) 5% of the principal balance of
the Receivables on the Cutoff Date
(such amount, the "5% Level"), and
(y) after the Spread Account has
been initially funded at such 5%
Level, an amount equal to the
lesser of (i) the 5% Level and (ii)
(A) 23% of the Pool Balance as of
the last day of the Collection
Period preceding such Distribution
Date MINUS (B) the excess of the
Pool Balance as of the last day of
the Collection Period preceding
such Distribution Date OVER the
Class A Certificate Balance on such
Distribution Date (after giving
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effect to any distributions on such
Distribution Date); PROVIDED,
HOWEVER, if, as of any Distribution
Date, the three-month average of
(A) the sum of (x) the aggregate
Principal Balances of Receivables
delinquent over 60 days, (y) the
aggregate Principal Balances of
Receivables with respect to which
the related Financed Vehicles have
been repossessed, but such
Receivables have not been charged
off and (z) the aggregate principal
balance of any Receivables the term
of which has been extended, for the
three preceding Collection Periods,
equals or exceeds 2% of the Pool
Balance as of the opening of
business on the first day of the
Collection Period preceding such
Distribution Date, or (B) the
annualized net losses for each of
the three preceding Collection
Periods as a percentage of the Pool
Balance as of the opening of
business on the first day of each
such Collection Period preceding
such Distribution Date, equals or
exceeds 6.5%, then the Specified
Spread Account Balance shall equal
the greater of (1) the amounts
calculated pursuant to the
foregoing provisions of this
definition, and (2) 7.5% of the
remaining Pool Balance, until such
time as the conditions set forth in
this proviso have not been
satisfied for a period of three
consecutive Collection Periods; and
PROVIDED, FURTHER that in no event
shall the balance in the Spread
Account be less than $1,000,208.09
(or, if smaller, the sum of the
then outstanding balances of the
Class A and Class B Certificates).
The Spread Account will be
maintained with the Trustee as a
segregated trust account, but will
not be part of the Trust.
Amounts will be withdrawn from the
Spread Account for distribution
first to the Class A
Certificateholders to the extent of
shortfalls in the amounts available
to make required distributions of
interest on the Class A
Certificates and then to the Class
B Certificateholders to the extent
of shortfalls in the amounts
available to make required
distributions of interest on the
Class B Certificates. Following
the payment of interest and
principal on the Class A
Certificates and the Class B
Certificates, any remaining amounts
will be withdrawn from the Spread
Account for distribution to Class A
Certificateholders to the extent of
shortfalls in the amounts available
to make required distributions of
principal on the Class A
Certificates and then to Class B
Certificateholders to the extent of
shortfalls in the amounts available
to make required distributions of
principal on the Class B
Certificates. Finally, amounts
will be withdrawn from the Spread
Account for distribution to Class C
Certificateholders to the extent of
shortfalls in the amounts available
to make required distributions of
interest and principal on the Class
C Certificates, but only to the
extent such withdrawal would not
reduce the Spread Account below the
Specified Spread Account Balance.
Servicer . . . . . . . . . . . . . The Servicer is an Ohio corporation and a
wholly-owned subsidiary of KeyCorp,
an Ohio financial services holding
company headquartered in Cleveland,
Ohio. The Servicer was newly
formed in 1995 to facilitate the
consummation of a merger, which
became effective September 27,
1995, pursuant to which
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AutoFinance Group, Inc., a
California corporation ("AFG"),
merged with and into the Servicer,
with the Servicer continuing as the
surviving corporation under the
name "AutoFinance Group, Inc." The
Servicer continues the business of
AFG (described as the "Servicer" in
the accompanying Prospectus). The
executive offices of the Servicer
are located at Oakmont Circle 1,
601 Oakmont Lane, Westmont,
Illinois 60559-5549, and its
telephone number is (708) 655-7100.
Servicer Fee . . . . . . . . . . . The Servicer will receive each month a fee
for servicing the Receivables equal
to the product of one-twelfth of
3.50% (the "Servicing Fee Rate")
and the Pool Balance outstanding at
the beginning of the month
immediately preceding such
Distribution Date, PROVIDED,
HOWEVER, so long as AutoFinance
Group, Inc. is the Servicer, on
each of the first nine Distribution
Dates following the Closing Date,
receipt of the Servicing Fee shall
be subordinate in priority of
payment to payment of interest and
principal on the Securities and the
funding of the Specified Spread
Account Balance in the Spread
Account. In addition, the Servicer
may retain out of collections on
the Receivables any late fees,
prepayment fees, and other
administrative fees and expenses
collected during such month, plus
the net reinvestment proceeds, if
any, on payments received in
respect of the Receivables. See
"The Certificates -- Servicing
Compensation."
Tax Status . . . . . . . . . . . . In the opinion of Dewey Ballantine,
special counsel to the Seller, the
Trust will constitute a grantor
trust for federal income tax
purposes and will not be subject to
federal income tax. The Offered
Certificateholders must report
their respective allocable shares
of all income earned on the Trust
assets (other than amounts treated
as "stripped coupons") and may
deduct their respective allocable
shares of reasonable servicing
fees. See "Certain Federal Income
Tax Consequences -- Tax Status of
the Trust." Prospective investors
should note that no rulings have
been or will be sought from the
Internal Revenue Service (the
"Service") with respect to any of
the federal income tax consequences
discussed herein, and no assurance
can be given that the Service will
not take contrary positions. See
"Certain Federal Income Tax
Consequences."
ERISA
Considerations . . . . . . . . . . As described herein, the Class A
Certificates may be purchased by
employee benefit plans that are
subject to the Employee Retirement
Income Security Act of 1974, as
amended ("ERISA"). Because the
Class B Certificates are
subordinated to the Class A
Certificates, Class B Certificates
will not be eligible to be
purchased by investors using the
assets of employee benefit plans
subject to ERISA. Any benefit plan
fiduciary considering purchase of
the Certificates should, among
other things, consult with its
counsel in determining whether all
required conditions have been
satisfied. See "ERISA
Considerations."
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Ratings . . . . . . . . . . . . . . As a condition to the issuance of the
Securities, in addition to the
requirements set forth in the
accompanying Prospectus, the Class
A Certificates must be rated at
least "AA-" by Fitch Investors
Service, Inc. ("Fitch"), "A2" by
Moody's Investors Service, Inc.
("Moody's") and "A" by Standard &
Poor's Ratings Group ("S&P") and
the Class B Certificates must be
rated at least "BBB+" by Fitch,
"Baa3" by Moody's and "BBB" by S&P.
There is no assurance that a rating
will not be lowered or withdrawn by
a rating agency based on a change
in circumstances deemed by such
rating agency to adversely affect
the Securities. See "Rating of the
Securities".
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RISK FACTORS
Prospective investors should consider, in addition to the factors
described under "Risk Factors" in the accompanying Prospectus, the following
factors in connection with a purchase of the Securities.
LIMITED ASSETS; SUBORDINATION. Distributions of interest and
principal on the Class A Certificates will be dependent upon the Total
Available Amount and the funds, if any, in the Spread Account. Distributions
of interest and principal on the Class B Certificates will be subordinated to
the extent described herein in priority of payment to interest and principal
due on the Class A Certificates in the event of defaults and delinquencies on
the Receivables. So long as AutoFinance Group, Inc. is the Servicer, on each
of the first nine Distribution Dates following the Closing Date, receipt of the
Servicing Fee shall be subordinate in priority of payment to payment of
interest and principal on the Securities. Distributions of interest and
principal on the Class C Certificates will be subordinated in priority of
payment to interest and principal and any interest and principal carryover
shortfalls due on the Securities in the event of defaults and delinquencies on
the Receivables. See "The Certificates -- Distributions".
Credit enhancement with respect to the Securities will be provided by
the subordination described above, and the funds, if any, in the Spread
Account. The funds in the Spread Account will consist of amounts otherwise
distributable to holders of the Class C Certificates that are required under
the Trust Documents to be deposited in the Spread Account. The amount
available for distribution to Securityholders on any Distribution Date and the
time necessary for the Spread Account to reach the Specified Spread Account
Balance after the Closing Date will be affected by the delinquency, net loss,
repossession, and prepayment experience of the Receivables and, therefore,
cannot be accurately predicted. In addition, the amounts required to be on
deposit in the Spread Account with respect to any Distribution Date will be
limited to the Specified Spread Account Balance for such Distribution Date.
Amounts on deposit in the Spread Account on any Distribution Date (after giving
effect to all withdrawals therefrom with respect to such date) in excess of the
Specified Spread Account Balance for such Distribution Date will be payable to
the holders of the Class C Certificates and will no longer be subject to any
claims or rights of any Securityholders, regardless of whether there are
sufficient funds paid on the Receivables or on deposit in the Spread Account on
any succeeding Distribution Date to distribute to holders of the Securities the
amounts to which they are entitled on such Distribution Date.
GEOGRAPHIC CONCENTRATIONS. Receivables are concentrated in one or
more states as set forth in this Prospectus Supplement under "The Receivables
- -- Geographic Distribution of the Receivables". Collections of the Receivables
may be adversely affected to the extent one state experiences economic or other
problems to a more significant or greater extreme than other states.
THE TRUST
The following information supplements the information contained under
"The Trusts" in the accompanying Prospectus.
Each Certificate represents a fractional undivided ownership interest
in the Trust. The property of the Trust will include (a) retail installment
sale contracts originated on or before March 1, 1996 with respect to the
Receivables between Dealers and the Obligors of new or used vehicles and light
trucks and (b) all payments due thereunder on or after the Cutoff Date,
exclusive of any amount allocable to the premiums and/or interest thereon for
physical damage insurance. The Receivables were originated by Dealers in
accordance with the Servicer's requirements under agreements with Dealers for
assignment to the Servicer, have been or will be so assigned, and evidence the
indirect financing made available to the Obligors. On or before the Closing
Date, the Servicer will sell the Receivables to the Seller for sale to the
Trust.
The "Pool Balance" at any time represents the aggregate principal
balance of the Receivables at the end of the preceding Collection Period, after
giving effect to all payments (other than Payaheads) received from
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Obligors and any Purchase Amounts to be remitted by the Servicer or the Seller,
as the case may be, for such Collection Period and all losses realized on
Receivables liquidated during such Collection Period. The Pool Balance on the
Cutoff Date is $50,010,404.63 (the "Original Pool Balance").
The following table illustrates the capitalization of the Trust as of
the Cutoff Date, as if the issuance and sale of the Securities had taken place
on such date:
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Class A Certificates $44,509,260.12
Class B Certificates $ 2,500,520.23
Class C Certificates $ 3,000,624.28
Total $50,010,404.63
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TRUSTEE.
Chemical Bank, is the Trustee under the Pooling and Servicing
Agreement. The Trustee is a national banking association, the principal
offices of which are located at 450 West 33rd Street, New York, New York
10001.
THE RECEIVABLES
The following information supplements the information contained under
"The Receivables" in the accompanying Prospectus.
The Receivables were purchased by the Servicer in the ordinary course
of business pursuant to the Servicer's Contract Acquisition Program from
Dealers. The Receivables were or will be selected according to several
criteria, as specified in the accompanying Prospectus. The Receivables were
originated on or before March 1, 1996.
The geographic distribution, composition and distribution by annual
percentage rate of the Receivables are as set forth in the following tables.
The geographic distribution is based on the current mailing addresses as of the
Cutoff Date of the Obligors on the Receivables. Some of the aggregate
percentages in the following tables may not total 100% due to rounding.
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GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES
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Percentage of Aggregate
State Principal Balance
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North Carolina 19.58%
California 15.61%
Texas 10.51%
Arizona 7.88%
Oklahoma 6.93%
Indiana 5.62%
Other(1) 33.87%
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TOTALS: 100.00%
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(1) Includes 40 other states and Washington, D.C. (none of which have a
concentration of Receivables in excess of 5.00% of the Aggregate Principal
Balance):
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COMPOSITION OF THE RECEIVABLES
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Aggregate Principal Balance $50,010,404.63
Number of Receivables 4,144
Average Principal Balance
(Range) $679.74 to $30,816.74 $12,068.15
Average Original Amount Financed
(Range) $3,050.00 to $32,051.38 $12,621.29
Weighted Average APR
(Range) 15.00% to 28.00% 19.92%
Weighted Average Original Term
(Range) 24 months to 60 months 56.34 months
Weighted Average Remaining Term
(Range) 18 months to 58 months 52.32 months
Weighted Average Seasoning
(Range) 2 months to 24 months 4.02 months
Principal Balance Represented by
New Vehicles $12,584,713.64
(Percentage of Aggregate
Principal Balance) 25.16%
Principal Balance Represented by
Used Vehicles $37,425,690.99
(Percentage of Aggregate
Principal Balance) 74.84%
</TABLE>
S-11
<PAGE> 12
DISTRIBUTION BY APR OF THE RECEIVABLES
<TABLE>
<CAPTION>
Percentage
of
Aggregate Aggregate Number Percentage
Principal Principal of by
APR Range Balance Balance Receivables Number
--------- ------- ------- ----------- ------
<S> <C> <C> <C> <C>
Less than 18.00% $ 4,329,432.15 8.66% 307 7.41%
18.00 to 18.99% $15,974,376.99 31.94% 1,237 29.85%
19.00 to 19.99% $ 3,673,359.05 7.35% 261 6.30%
20.00 to 20.99% $ 4,405,830.94 8.81% 370 8.93%
21.00 to 21.99% $14,182,942.83 28.36% 1,216 29.34%
22.00% and above $ 7,444,462.67 14.88% 753 18.17%
-------------- ---------- -------- -----------
TOTALS: $50,010,404.63 100.00% 4,144 100.00%
</TABLE>
DELINQUENCY EXPERIENCE
Indirect Receivables
The following table summarizes the Servicer's delinquency experience on
accounts over 30 days past due on both a number and dollar basis for all
receivables generated under the indirect financing segment of the Servicer's
Contract Acquisition Program. The experience data includes both receivables
which are wholly-owned by the Servicer and receivables which have been
securitized, in each case which are being serviced by the Servicer (excluding
non-liquidated receivables, which are receivables sold to a Trust but being
serviced, for which the related vehicle has been repossessed and not yet
liquidated). Delinquencies as of June 30, 1995 and March 31, 1996 are somewhat
higher than prior comparable periods as reflected on the following table.
Historically, the Servicer experiences an upward trend in delinquencies in the
latter half of a calendar year followed by a steady improvement in the first
half of the next calendar year. The delinquency level as of June 1995 is
partially the result of the delinquency rate reaching its peak, and its highest
historical level, as of December 1994 of 1.22% and 1.32% on a unit and dollar
basis, respectively. The delinquency level improved through the first half of
calendar 1995 from the peak in December 1994. Consistent with the Servicer's
historical experience, delinquencies began to trend upward again in June 1995,
reaching a peak for calendar 1995 in November 1995. The peak reached in
November 1995 was not as severe as the peak reached in December 1994.
Following the November 1995 peak, the delinquency level has improved through
the first three months of calendar 1996. The higher delinquency levels in
March 1996 compared to March 1995 are consistent with increased levels of
delinquencies as reported by other consumer finance organizations. For a
discussion of the Servicer's delinquency control, collection strategy and
non-liquidated receivables, see "The Servicer-Contract Servicing and
Administration" in the accompanying Prospectus.
S-12
<PAGE> 13
Indirect Receivables
Delinquency Experience
(Dollars in thousands)
<TABLE>
<CAPTION>
As of
March 31,
------------------------------------------------------
1996 1995
-------------------------- -------------------------
Dollars No. of Dollars No. of
Contracts Contracts
------------------------ -------------------------
<S> <C> <C> <C> <C>
Principal Outstanding (1) $277,113 27,439 $228,603 22,321
-------- ------- -------- -------
Delinquencies (2)
30-59 days $ 1,954 176 $ 1,231 118
-------- ------- -------- -------
60-89 days - - - -
-------- ------- -------- -------
90 days or more - - - -
-------- ------- -------- -------
Total Delinquencies $ 1,954 176 $ 1,231 118
======== ======= ======== =======
Total Delinquencies
over 30 Days as a
Percent of
Principal/Contracts 0.71% 0.64% 0.54% 0.53%
======== ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
As of
June 30,
----------------------------------------------------------------------------
1995 1994 1993
----------------------- ------------------------ ------------------------
Dollars No. of Dollars No. of Dollars No. of
Contracts Contracts Contracts
---------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Principal Outstanding (1) $250,375 24,331 $158,365 16,365 $71,629 8,512
-------- ------ -------- ------ ------- -----
Delinquencies (2)
30-59 days $ 2,230 194 $ 811 82 $ 359 49
-------- ------ -------- ------ ------- -----
60-89 days 10 1 - - - -
-------- ------ -------- ------ ------- -----
90 days or more - - - - - -
-------- ------ -------- ------ ------- -----
Total Delinquencies $ 2,240 195 $ 811 82 $ 359 49
======== ====== ======== ====== ======= =====
Total Delinquencies
over 30 Days as a
Percent of
Principal/Contracts 0.89% 0.80% 0.51% 0.50% 0.50% 0.58%
======== ====== ======== ====== ======= =====
<FN>
______________________________
Notes:
(1) Includes receivables that have been sold but which are being
serviced by the Servicer and excludes non-liquidated receivables
(receivables sold but being serviced for which the related
vehicle has been repossessed and not yet liquidated). At March
31, 1996 and 1995, non-liquidated receivables were comprised of
252 receivables aggregating $2,569 thousand and 197 receivables
aggregating $2,006 thousand, respectively. At June 30, 1995,
1994, and 1993, non-liquidated receivables were comprised of 168
receivables aggregating $1,644 thousand, 117 receivables
aggregating $992 thousand, and 68 receivables aggregating $540
thousand, respectively.
(2) The period of delinquency is based on the number of days payments
are contractually past due.
NET CREDIT LOSS EXPERIENCE
The following table summarizes the Servicer's net credit loss
experience for all receivables generated under the indirect
financing segment of the Servicer's Contract Acquisition Program.
The experience data includes both receivables which are
wholly-owned by the Servicer and receivables which have been
securitized, in each case which are being serviced by the
Servicer, but excludes anticipated losses and recoveries for
non-liquidated receivables. Net losses for the year ended June
1995 and for the twelve months ended March 31, 1996 have increased
from prior reported levels as reflected on the following table.
The increased loss experience is believed by the Servicer to be
attributable to the increasing level of consumer indebtedness.
Their greater debt burden has reduced the financial flexibility of
the Servicer's targeted credit segment which has resulted in a
shift in the loss cycle to between the 8th and 10th month of a
contract's life as compared to the Servicer's historical peak loss
cycle of between 12 and 15 months. This shift in the timing of
losses and the increase in the average contract size over the
period has exacerbated loss severity as vehicles tend to
depreciate more rapidly in the early months of a contract's life
when recovery of principal is at its slowest pace. Moreover, the
relative growth rate of Servicer's portfolio has generally slowed
since the end of calendar year 1994. As a result, the percentage
of the portfolio represented by relatively new contracts that have
yet to reach their peak loss cycle has been steadily declining.
Thus, the percentage of contracts in recent months that were in
their peak loss cycle has been higher than in earlier periods,
contributing to increased losses. For a discussion of the
Servicer's charge-off policies with respect to receivables owned
and receivables sold to a Trust but serviced by the Servicer, and
for a discussion of anticipated losses and recoveries with respect
to non-liquidated receivables, See "The Servicer-Contract
Servicing and Administration" in the accompanying Prospectus.
</TABLE>
S-13
<PAGE> 14
Indirect Receivables
Net Credit Loss Experience
(Dollars in thousands)
<TABLE>
<CAPTION>
Twelve Calendar
Months Ended Year Ended
March 31, 1996 June 30,
--------------- ---------------------------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C> <C>
Principal Outstanding (1) $ 277,113 $250,375 $158,365 $71,629
========= ======== ======== =======
Average Principal Outstanding (2) $ 257,250 $206,249 $108,689 $51,059
========= ======== ======== =======
Total Gross Charge Offs (3) $ 22,996 $13,936 $4,738 $2,159
Total Recoveries 5,596 2,816 1,219 551
--------- -------- -------- -------
Total Net Losses $ 17,400 $11,120 $3,519 $1,608
Net Losses as a Percentage of
Principal Outstanding (4) 6.28% 4.44% 2.22% 2.24%
========= ======== ======== =======
Net Losses as a Percentage of
Average Principal Outstanding (4) 6.76% 5.39% 3.24% 3.15%
========= ======== ======== =======
<FN>
- ------------------------------
Notes:
(1) Includes receivables that have been sold but which are being serviced
by the Servicer and excludes non-liquidated receivables (receivables
sold but being serviced for which the related vehicle has been
repossessed and not yet liquidated). At March 31, 1996 and 1995,
non-liquidated receivables were comprised of 252 receivables
aggregating $2,569 thousand and 197 receivables aggregating $2,006
thousand, respectively. At June 30, 1995, 1994 and 1993,
non-liquidated receivables were comprised of 168 receivables
aggregating $1,644 thousand, 117 receivables aggregating $992 thousand,
and 68 receivables aggregating $540 thousand, respectively.
(2) The average end of month principal outstanding for the period.
(3) Excludes anticipated losses associated with non-liquidated receivables.
(4) Net losses for the nine months ended March 31, 1996 and 1995,
respectively, were 5.19% and 3.55%, as a percentage of principal
outstanding, and 5.43% and 4.16%, as a percentage of average principal
outstanding. The Servicer does not believe that such nine-month period
amounts, if annualized, would reflect the net loss experience of the
receivables.
</TABLE>
THE CERTIFICATES
The following information supplements the information
contained under "The Certificates", and "Certain Information
Regarding the Securities" in the accompanying Prospectus. The
following summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the Trust Documents.
THE CERTIFICATES
The Certificates will evidence interests in the Trust created
pursuant to the Pooling and Servicing Agreement. The Class A
Certificates will evidence in the aggregate an undivided ownership
interest of 89% of the Trust (the "Class A Percentage"), the Class B
Certificates will evidence in the aggregate an undivided ownership
interest of
S-14
<PAGE> 15
5% of the Trust (the "Class B Percentage") and the Class C Certificates will
evidence in the aggregate of 6% of the Trust (the "Class C Percentage"). The
Class C Certificates, which are not being offered hereby, will be held
initially by the Seller. However, the Seller may sell or transfer the Class C
Certificates or interests therein to third parties.
THE SERVICER
The Servicer is an Ohio corporation and a wholly-owned subsidiary of
KeyCorp, an Ohio financial services holding company headquartered in Cleveland,
Ohio. The Servicer was newly formed in 1995 to facilitate the consummation of
a merger, which became effective September 27, 1995, pursuant to which
AutoFinance Group, Inc., a California corporation ("AFG"), merged with and into
the Servicer, with the Servicer continuing as the surviving corporation under
the name "AutoFinance Group, Inc." The Servicer continues the business of AFG
(described as the "Servicer" in the accompanying Prospectus). The executive
offices of the Servicer are located at Oakmont Circle 1, 601 Oakmont Lane,
Westmont, Illinois 60559-5549, and its telephone number is (708) 655-7100.
SERVICING COMPENSATION
The Servicer is entitled under the Trust Documents to receive on each
Distribution Date a servicing fee (the "Servicing Fee") for the related
Collection Period equal to one-twelfth of 3.50% (the "Servicing Fee Rate")
multiplied by the Pool Balance as of the first day of such Collection Period,
PROVIDED, HOWEVER, so long as AutoFinance Group, Inc. is the Servicer, on each
of the first nine Distribution Dates following the Closing Date, receipt of the
Servicing Fee shall be subordinate in priority of payment to payment of
interest and principal on the Securities and the funding of the Specified
Spread Account Balance in the Spread Account. The Servicer will retain from
collections a supplemental servicing fee (the "Supplemental Servicing Fee") for
each Collection Period equal to any late fees, prepayment fees and other
administrative fees and expenses collected during the Collection Period plus
reinvestment proceeds on any payments received in respect of Receivables.
DISTRIBUTIONS
The Servicer will be required to remit collections to the Collection
Account within two Business Days of receipt thereof. Such collections shall be
remitted less any payments other than the Servicing Fee owed thereon to the
Servicer.
On or about the tenth calendar day of each month, the Servicer will be
required to inform the Trustee of the amount of aggregate collections on the
Receivables and the aggregate Purchase Amount of Receivables to be purchased by
the Seller or the Servicer, all with respect to the preceding Collection
Period.
The Servicer shall be required to determine prior to each Distribution Date
the Total Available Amount, the Available Interest, the Available Principal,
the Class A Distributable Amount, the Class B Distributable Amount and the
Class C Distributable Amount and, based on the Total Available Amount and the
other distributions to be made on such Distribution Date, as described below,
determine the amount to be distributed to the Certificateholders of each Class.
DETERMINATION OF AVAILABLE AMOUNTS. The "Total Available Amount" for a
Distribution Date (being the funds available for distribution to
Certificateholders of each Class with respect to such Distribution Date in
accordance with the priorities described below other than amounts transferred
from the Spread Account) shall be the sum of the Available Interest and the
Available Principal.
The "Available Interest" for a Distribution Date shall be the sum of the
following amounts with respect to the preceding Collection Period: (i) that
portion of all collections on the Receivables allocable to interest (including
amounts withdrawn from the Payahead Account, but excluding amounts deposited
into the Payahead Account and amounts related to interest on physical damage
insurance); (ii) all proceeds of the liquidation of defaulted Receivables
("Liquidated Receivables"), net of expenses incurred by the Servicer, received
in connection with such liquidation and any amounts required by law to be
remitted to the Obligor on such Liquidated Receivable ("Liquidation Proceeds")
to the extent attributable to interest due thereon in accordance with the
Servicer's customary
S-15
<PAGE> 16
servicing procedures; and (iii) to the extent attributable to accrued interest
thereon, the Purchase Amount of each Receivable that was purchased by the
Seller or Servicer under an obligation which arose during the related
Collection Period, or which was purchased by the Servicer pursuant to the
Optional Purchase.
The "Available Principal" for a Distribution Date shall be the sum of the
following amounts with respect to the preceding Collection Period: (i) that
portion of all collections on the Receivables allocable to principal (including
amounts, without duplication, withdrawn from the Payahead Account, but
excluding amounts deposited into the Payahead Account and amounts related to
principal on physical damage insurance); (ii) all Liquidation Proceeds
attributable to principal in accordance with the Servicer's customary servicing
procedures; (iii) to the extent attributable to principal, the Purchase Amount
received with respect to each Receivable purchased by the Seller or the
Servicer under an obligation which arose during such Collection Period, or
which was purchased by the Servicer pursuant to the Optional Purchase; and (iv)
partial prepayments of any refunded item included in the principal balance of a
Receivable.
The Available Interest and the Available Principal on any Distribution Date
exclude the following:
(i) Amounts representing reimbursement for certain costs and expenses
incurred by the Servicer as provided in the Trust Documents and amounts
retained by the Servicer with respect to the Servicing Fee or Supplemental
Servicing Fee due to the Servicer; and
(ii) All payments and proceeds (including Liquidation Proceeds) of any
Receivable, the Purchase Amount of which has been included in the Total
Distribution Amount in a prior Collection Period.
CALCULATION OF DISTRIBUTABLE AMOUNTS.
The "Class A Distributable Amount" with respect to a Distribution Date shall
be an amount equal to the sum of:
(i) the "Class A Principal Distributable Amount," consisting (without
duplication) of the Class A Percentage of:
(a) the principal portion of all scheduled payments received during
the preceding Collection Period;
(b) except to the extent included in (a) above, the principal portion
of all prepayments in full (and certain partial prepayments) received
during the preceding Collection Period;
(c) the principal balance of each Receivable that was purchased by
the Seller or the Servicer under an obligation that arose during the
preceding Collection Period (except to the extent included in (a) or (b)
above) or which was purchased by the Servicer pursuant to the Optional
Purchase during the preceding Collection Period; and
(d) the principal balance of each Receivable that was liquidated by
the Servicer during the preceding Collection Period, net of the principal
balance of any accounts previously reported as liquidated which have been
reinstated; plus
(ii) the "Class A Interest Distributable Amount," consisting of thirty (30)
days' interest at the Class A Pass-Through Rate (calculated on the basis of
a year consisting of twelve 30-day months) on the Class A Certificate
Balance as of the last day of the preceding Collection Period.
The "Class A Certificate Balance" shall equal the sum of (i) the Class A
Percentage of the Pool Balance and, thereafter, shall equal the initial Class A
Certificate Balance, reduced by all amounts distributed to Class A
Certificateholders and allocable to principal.
S-16
<PAGE> 17
The "Class B Distributable Amount" with respect to a Distribution Date
shall be an amount equal to the sum of:
(i) the "Class B Principal Distributable Amount," consisting (without
duplication) of the Class B Percentage of the amounts set forth under
(i)(a) through (i)(d) above with respect to the Class A Principal
Distributable Amount; plus
(ii) the "Class B Interest Distributable Amount," consisting of thirty (30)
days' interest at the Class B Pass-Through Rate (calculated on the basis of
a year consisting of twelve 30-day months) on the Class B Certificate
Balance as of the last day of the preceding Collection Period.
The "Class B Certificate Balance" shall equal, the sum of (i) the Class B
Percentage of the Pool Balance and, thereafter, shall equal the initial Class B
Certificate Balance, reduced by all amounts distributed to Class B
Certificateholders and allocable to principal.
The "Class C Distributable Amount" with respect to a Distribution Date
shall be an amount equal to the sum of:
(i) the "Class C Principal Distributable Amount", consisting (without
duplication) of the Class C Percentage of the amounts set forth under
(i)(a) through (i)(d) above with respect to the Class A Principal
Distributable Amount, plus
(ii) the "Class C Interest Distributable Amount", consisting of the total
amount of scheduled principal and interest due on the Receivables and
actually received by the Trustee for the related Collection Period minus
(i) the Servicing Fee, (ii) the sum of (x) the Class A Interest
Distributable Amount and (y) the Class A Interest Carryover Shortfall, if
any, (iii) the sum of the Class B Interest Distributable Amount and (y) the
Class B Interest Carryover Shortfall, if any, (iv) the sum of (x) the Class
A Principal Distributable Amount and (y) the Class A Principal Carryover
Shortfall, if any, (v) the sum of (x) the Class B Principal Distributable
Amount and (y) the Class B Principal Carryover Shortfall, if any, and (vi)
the sum of (x) the Class C Principal Distributable Amount and (y) the Class
C Principal Carryover Shortfall, if any.
The "Class A Interest Carryover Shortfall" shall be, as of the close of
business on any Distribution Date, the excess of the Class A Interest
Distributable Amount for such Distribution Date plus any outstanding Class A
Interest Carryover Shortfall from the preceding Distribution Date plus interest
on such outstanding Class A Interest Carryover Shortfall, to the extent
permitted by law, at the Class A Pass-Through Rate from such preceding
Distribution Date through the current Distribution Date, over the amount of
interest that the Class A Certificateholders actually received on such current
Distribution Date.
The "Class B Interest Carryover Shortfall" shall be, as of the close of
business on any Distribution Date, the excess of the Class B Interest
Distributable Amount for such Distribution Date plus any outstanding Class B
Interest Carryover Shortfall from the preceding Distribution Date plus interest
on such outstanding Class B Interest Carryover Shortfall, to the extent
permitted by law, at the Class B Pass-Through Rate from such preceding
Distribution Date through the current Distribution Date, over the amount of
interest that the Class B Certificateholders actually received on such current
Distribution Date.
The "Class A Principal Carryover Shortfall" shall be, as of the close of
business on any Distribution Date, the excess of the Class A Principal
Distributable Amount plus any outstanding Class A Principal Carryover Shortfall
from the preceding Distribution Date over the amount of principal that the
Class A Certificateholders actually received on such current Distribution Date.
The "Class B Principal Carryover Shortfall" shall be, as of the close of
business on any Distribution Date, the excess of the Class B Principal
Distributable Amount plus any outstanding Class B Principal Carryover Shortfall
from the preceding Distribution Date over the amount of principal that the
Class B Certificateholders actually received on such current Distribution Date.
S-17
<PAGE> 18
The "Class C Principal Carryover Shortfall" shall be, as of the close of
business on any Distribution Date, the excess of the Class C Principal
Distributable Amount and any outstanding Class C Principal Carryover Shortfall
on the preceding Distribution Date over the amount of principal that the Class
C Certificateholders received (including amounts deposited in the Spread
Account) on such current Distribution Date.
The "Class C Certificate Balance" shall equal, initially, the Class C
Percentage of the Pool Balance as of the Cutoff Date. Thereafter the Class C
Certificate Balance shall be reduced by all amounts distributed to Class C
Certificateholders (or deposited in the Spread Account) and allocable to
principal.
Calculation of Amounts to be Distributed. Prior to each Distribution Date,
the Servicer will calculate the amount to be distributed to the
Securityholders.
Distributions. On each Distribution Date, the Trustee shall make the
following distributions in the following order of priority to the extent of the
Total Available Amounts for such Distribution Date:
(a) to the Servicer, the Servicing Fee for such Distribution Date and all
unpaid Servicing Fees from prior Collection Periods, PROVIDED, HOWEVER, so long
as AutoFinance Group, Inc. is the Servicer, payment of the Servicing Fee on
each of the first nine Distribution Dates following the Closing Date, and
payment thereafter of all unpaid such Servicing Fees, shall be subordinate in
priority of payment to payment of interest and principal on the Securities and
shall be made in the priority as set forth in clause (f) below;
(b) to the Class A Certificateholders, from the Total Available Amount
remaining after application of clause (a), the sum of (i) the Class A Interest
Distributable Amount for such Distribution Date and (ii) the Class A Interest
Carryover Shortfall, if any, for such Distribution Date;
(c) to the Class B Certificateholders, from the Total Available Amount
remaining after application of clauses (a) and (b), the sum of (i) the Class B
Interest Distributable Amount for such Distribution Date and (ii) the Class B
Interest Carryover Shortfall, if any, for such Distribution Date;
(d) to the Class A Certificateholders, from the Total Available Amount
remaining after application of clauses (a) through (c), the sum of (i) the
Class A Principal Distributable Amount for such Distribution Date and (ii) the
Class A Principal Carryover Shortfall, if any, for such Distribution Date;
(e) to the Class B Certificateholders, from the Total Available Amount
remaining after application of clauses (a) through (d), the sum of (i) the
Class B Principal Distributable Amount for such Distribution Date and (ii) the
Class B Principal Carryover Shortfall, if any, for such Distribution Date;
(f) to the Servicer (if AutoFinance Group, Inc.), from the Total Available
Amount remaining (x) after application of clauses (a) through (e) above, and,
(y) until the amount deposited into the Spread Account reaches an amount equal
to the Specified Spread Account Balance, after the Class C Distributions
pursuant to clauses (g) and (h) below, the sum of (i) the Servicing Fee for
such Distribution Date so long as such Distribution Date is one of the first
nine Distribution Dates following the Closing Date and (ii) all unpaid
Servicing Fees for any of the first nine Distribution Dates following the
Closing Date;
(g) to the Class C Certificateholders, from the Total Available Amount
remaining after application of clauses (a) through (f) above, the sum of (i)
the Class C Principal Distributable Amount for such Distribution Date and (ii)
the Class C Principal Carryover Shortfall, if any, for such Distribution Date;
and
(h) to the Class C Certificateholders, from the Total Available Amount
remaining after application of clauses (a) through (g), the Class C Interest
Distributable Amount for such Distribution Date.
S-18
<PAGE> 19
SUBORDINATION AND SPREAD ACCOUNTS
The rights of the Class B Certificateholders to receive distributions with
respect to the Receivables generally will be subordinated to the rights of the
Class A Certificateholders in the event of defaults and delinquencies on the
Receivables as provided in the Trust Documents, except as described herein. So
long as AutoFinance Group, Inc. is the Servicer on each of the first nine
Distribution Dates following the Closing Date, receipt of the Servicing Fee
shall be subordinate in priority of payment to payment of interest and
principal on the Securities. The rights of the Class C Certificateholders to
receive distributions with respect to the Receivables generally will be
subordinated to the rights of the Securityholders in the event of defaults and
delinquencies on the Receivables as provided in the Trust Documents.
The protection afforded to the Securityholders through subordination will
be effected both by the preferential right of the Securityholders to receive
current distributions with respect to the Receivables and by the establishment
of the Spread Account. In addition, the Spread Account will be available in
the event of defaults and delinquencies on the Receivables to make
distributions on the Class C Certificates, generally to the extent of amounts
remaining after distributions have been made to the Securityholders. No funds
will be deposited in the Spread Account until the initial Distribution Date.
On the initial Distribution Date and each Distribution Date thereafter, if
necessary, the Class C Distributions, which will include the amount otherwise
allocable to the Servicing Fee, so long as AutoFinance Group, Inc. is the
Servicer, on each of the first nine Distribution Dates until the amount in the
Spread Account reaches an amount equal to the Specified Spread Account Balance,
shall first be deposited into the Spread Account until the amount in the Spread
Account reaches an amount equal to the Specified Spread Account Balance.
Thereafter, Class C Distributions will be deposited first in the Spread Account
to the extent necessary to maintain the amounts in such accounts at the
Specified Spread Account Balance. At any time on or after the date on which
the Spread Account equals the Specified Spread Account Balance, the Trustee
shall permit all or any portion of the Class C Distributions, as requested by
the Seller, thereafter be excluded from the foregoing deposit requirements,
PROVIDED that, at the time of such request, the Seller presents evidence to the
Trustee that the ratings of the Securities shall not be reduced or withdrawn as
a result of such requested exclusion. If any such portion of the Class C
Distributions becomes excluded from such deposit requirements it shall remain
excluded even if the amounts in the Spread Account thereafter fall below the
Specified Spread Account Balance.
The Spread Account will not be a part of the Trust and will be a segregated
trust account held by the Trustee. On each Distribution Date, (i) if the
amounts on deposit in the Spread Account are less than the Specified Spread
Account Balance, the Trustee will be required, after payment of any amounts
required to be distributed to holders of the Securities and the payment of the
Servicer Fee due with respect to the related Collection Period (including any
unpaid Servicer Fee with respect to prior Collection Periods), to withdraw from
the Collection Account and deposit first in the Spread Account the amount
remaining in the Collection Account (subject to the possible exclusion of
interest and/or principal referred to in the preceding paragraph) that would
otherwise be distributed to the holders of the Class C Certificates, or such
lesser portion thereof as is sufficient to restore the amounts in the Spread
Account to the Specified Spread Account Balance, and (ii) if the amounts on
deposit in the Spread Account on such Distribution Date (after giving effect to
all deposits or withdrawals therefrom on such Distribution Date) is greater
than or equal to the Specified Spread Account Balance for such Distribution
Date, the Trustee will release and distribute any such excess to the holders of
the Class C Certificates. Upon any such distribution to Class C
Certificateholders, the Offered Certificateholders will have no rights in, or
claims to, such amounts.
Amounts held from time to time in the Spread Account will continue to be
held for the benefit of holders of the Securities and holders of the Class C
Certificates in order to effectuate the subordination of the rights of the
holders of the Class C Certificates to the rights of the holders of the
Securities. Funds in the Spread Account shall be invested as provided in the
Trust Documents in Eligible Investments. Investment income (net of investment
losses and expenses) on amounts in the Spread Account will not be available for
distribution to holders of Securities, and will only be distributed to the
Seller.
S-19
<PAGE> 20
"Eligible Investments" for monies deposited in the Spread Account, are
limited to investments acceptable to the rating agency or agencies then rating
the Securities as being consistent with the then-current rating of the
Securities.
The time necessary for the Spread Account to reach and maintain the
Specified Spread Account Balance at any time after the date of issuance of the
Certificates will be affected by the delinquency, net loss, repossession and
prepayment experience of the Receivables and, therefore, cannot be accurately
predicted, nor can there be any assurance that the balance of such account will
reach the Specified Spread Account Balance.
Upon any distribution to the Class C Certificateholders of amounts from the
Spread Account, the Securityholders will not have any rights in, or claims to,
such amounts, regardless of whether there are sufficient funds paid on the
Receivables or on deposit in the Spread Account on any succeeding Distribution
Date to distribute to holders of the Securities the amount to which they are
entitled on such Distribution Date. Amounts on deposit in the Spread Account,
to the extent available, will be withdrawn and deposited in the Collection
Account for the benefit of the Class A Certificateholders, Class B
Certificateholders or the Class C Certificateholders, as described below, in
the following order of priority on each Distribution Date:
(i) an amount equal to the excess of the Class A Interest Distributable
Amount plus the Class A Interest Carryover Shortfall over the Total
Available Amount will be withdrawn from the Spread Account and deposited
for the benefit of the Class A Certificateholders;
(ii) an amount equal to the excess of the Class B Interest Distributable
Amount plus the Class B Interest Carryover Shortfall over the portion of
Total Available Amount remaining after the distribution referred to in
clause (i) will be withdrawn from the Spread Account and deposited for the
benefit of the Class B Certificateholders;
(iii) an amount equal to the excess of the Class A Principal Distributable
Amount plus the Class A Principal Carryover Shortfall over the portion of
Total Available Amount remaining after the distributions referred to in
clauses (i) and (ii) will be withdrawn from the Spread Account and
deposited for the benefit of the Class A Certificateholders;
(iv) an amount equal to the excess of the Class B Principal Distributable
Amount plus the Class B Principal Carryover Shortfall over the portion of
Total Available Amount remaining after the distributions referred to in
clauses (i) through (iii) will be withdrawn from the Spread Account and
deposited for the benefit of the Class B Certificateholders;
(v) to the extent such withdrawal will not reduce the Spread Account below
the Specified Spread Account Balance, an amount equal to the excess of the
Class C Principal Distributable Amount plus the Class C Principal Carryover
Shortfall over the portion of Total Available Amount remaining after the
distributions referred to in clauses (i) through (iv) will be withdrawn
from the Spread Account and deposited for the benefit of the Class C
Certificateholders; and
(vi) to the extent such withdrawal will not reduce the Spread Account below
the Specified Spread Account Balance, an amount equal to the excess of the
Class C Interest Distributable Amount over the portion of Total Available
Amount remaining after the distributions referred to in clauses (i) through
(v) will be withdrawn from the Spread Account and deposited for the benefit
of the Class C Certificateholders.
The subordination of any Certificates and the Spread Account described
above are intended to enhance the likelihood of receipt by certain
Securityholders of the full amount of principal and interest on the Receivables
due them and to decrease the likelihood that such Securityholders will
experience losses. However, in certain circumstances, the Spread Account could
be depleted and shortfalls could result.
S-20
<PAGE> 21
The following chart sets forth an example of the foregoing provisions to a
monthly distribution:
May 1 . . . . . . . Cutoff Date.
May 1-
May 31 . . . . . . . . Collection Period. The Servicer
receives monthly payments,
prepayments, and other proceeds in
respect of the Receivables.
June 10 . . . . . . . The tenth calendar day of the month.
On or about this date the Servicer
notifies the Trustee of, among other
things, the amounts to be
distributed on the Distribution
Date.
June 14 . . . . . . . Record Date. Distributions on the
related Distribution Date are made
to Securityholders of record at the
close of business on this date.
June 17 . . . . . . . Distribution Date (the 15th day of
each month, or if such 15th day is
not a business day, the next
following business day). On or
before this date, the Trustee
distributes to holders of the
Securities and of the Class C
Certificates amounts payable in
respect thereof, pays the Servicer
Fee (if required) and remits amounts
to the Spread Account.
RATINGS OF THE SECURITIES
It is a condition to issuance of the Securities that the Class A
Certificates be rated at least "AA-" by Fitch Investors Service, Inc.
("Fitch"), "A2" by Moody's Investors Service, Inc. ("Moody's") and "A" by
Standard & Poor's Ratings Group ("S&P") and the Class B Certificates must be
rated at least "BBB+" by Fitch, "Baa3" by Moody's and "BBB" by S&P. The
ratings are based primarily on the value of the Receivables, and the credit
enhancement provided by the subordination of the Class B Certificates, by the
subordination of the Class C Certificates, by the creation of the Spread
Account and by the subordination in certain circumstances of the Servicing Fee.
The ratings are not recommendations to purchase, hold or sell the Class A
Certificates or Class B Certificates, inasmuch as such ratings do not comment
as to market price or suitability for a particular investor. There is no
assurance that the ratings will remain for any given period of time or that the
ratings will not be lowered or withdrawn entirely by the rating agencies if in
their judgment circumstances in the future so warrant.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain federal income tax
consequences of the purchase, ownership and disposition of Securities. This
summary is based upon laws, regulations, rulings and decisions currently in
effect, all of which are subject to change. The discussion does not deal with
all federal tax consequences applicable to all categories of investors, some of
which may be subject to special rules. In addition, this summary is generally
limited to investors who will hold the Securities as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code"). Investors should
consult their own tax advisors to determine the federal, state, local and other
tax consequences of the purchase, ownership and disposition of the Securities.
Prospective investors should note that no rulings have been or will be sought
from the Internal Revenue Service (the "Service") with respect to any of the
federal income tax consequences discussed below, and no assurance can be given
that the Service will not take contrary positions.
TAX STATUS OF THE TRUST
In the opinion of Dewey Ballantine, special tax counsel to the Seller, the
Trust will be classified as a grantor trust and not as an association taxable
as a corporation for federal income tax purposes. Each Offered
Certificateholder will be treated as the owner of an interest in the ordinary
income and corpus portions of the Trust.
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<PAGE> 22
For purposes of federal income tax, the Seller will be deemed to have
retained (x) an undivided interest in each Receivable equal to the Class C
Percentage of that Receivable and (y) an additional interest in a fixed portion
of the interest due on each Receivable (the "Retained Yield") equal to the sum
of (i) the Class A Percentage of the difference between the APR of such
Receivable and the sum of the Class A Pass-Through Rate and the Servicing Fee
Rate and (ii) the Class B Percentage of the difference between the APR of such
Receivable and the sum of the Class B Pass-Through Rate and the Servicing Fee
Rate. The Retained Yield will be treated as "stripped coupons" within the
meaning of Section 1286 of the Code. Accordingly, each Offered
Certificateholder will be treated as owning its pro rata percentage interest in
the principal of, and interest payable on, each Receivable (minus the portion
of the interest payable on such Receivable that exceeds the sum of the
applicable pass-through rate on the Offered Certificates and the Servicing Fee
Rate) and such ownership interest in each Receivable will be treated as a
"stripped bond" within the meaning of Section 1286 of the Code.
STATE AND LOCAL TAXATION
The discussion above does not address the tax consequences of purchase,
ownership or disposition of the Offered Certificates under any state or local
tax law. Investors should consult their own tax advisors regarding state and
local tax consequences.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing, or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect to
the plan. ERISA also imposes certain duties on persons who are fiduciaries of
plans subject to ERISA and prohibits certain transactions between a plan and
parties in interest with respect to such plans. Under ERISA, any person who
exercises any authority or control respecting the management or disposition of
the assets of a plan is considered to be a fiduciary of such plan (subject to
certain exceptions not here relevant). A violation of these "prohibited
transaction" rules may generate excise tax and other liabilities under ERISA
and the Code for such persons.
In addition to the matters described below, purchasers of Offered
Certificates that are insurance companies should consult with their counsel
with respect to the recent United States Supreme Court case interpreting the
fiduciary responsibility rules of ERISA, JOHN HANCOCK MUTUAL LIFE INSURANCE CO.
V. HARRIS TRUST AND SAVINGS BANK, 114 S.Ct. 517 (1993). In JOHN HANCOCK, the
Supreme Court ruled that assets held in an insurance company's general account
may be deemed to be "plan assets" for ERISA purposes under certain
circumstances. Prospective purchasers should determine whether the decision
affects their ability to make purchases of the Offered Certificates.
CLASS A CERTIFICATES
Pursuant to a final regulation (the "Final Regulation") issued by the
Department of Labor ("DOL") concerning the definition of what constitutes the
"plan assets" of an employee benefit plan subject to ERISA or the Code, or an
individual retirement account (an "IRA") (collectively referred to as "Benefit
Plans"), the assets and properties of certain entities in which a Benefit Plan
makes an equity investment could be deemed to be assets of the Benefit Plan
unless certain exceptions under the Final Regulation apply or an exemption is
available. If Benefit Plans that purchase the Class A Certificates are deemed
to own an interest in the underlying assets of the Trust, the operations of the
Trust could result in prohibited transactions.
The DOL granted to First Boston an administrative exemption (Prohibited
Transaction Exemption 89-90 (the "Exemption") which generally exempts from the
application of the prohibited transaction provisions of Section 406(a), Section
406(b)(1) and Section 406(b)(2) of ERISA and the excise taxes imposed pursuant
to Sections 4975(a) and (b) of the Code, certain transactions relating to the
servicing and operation of asset pools, including pools of motor vehicle
installment obligations such as the Receivables and the purchase, sale and
holding of asset- backed pass-through certificates, including pass-through
certificates evidencing interests in certain receivables, loans and
S-22
<PAGE> 23
other obligations, such as the Class A Certificates, PROVIDED that certain
conditions set forth in the Exemption are satisfied.
If the general conditions of Section II of the Exemption are satisfied,
the Exemption may provide an exemption from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA (as well as the excise taxes imposed by
Sections 4975(c)(1)(A) through (D) of the Code) in connection with the direct
or indirect sale, exchange or transfer of Class A Certificates by Benefit Plans
in the initial issue of certificates, the holding of Class A Certificates by
Benefit Plans or the direct or indirect acquisition or disposition in the
secondary market of Class A Certificates by Benefit Plans. However, no
exemption is provided from the restrictions of Section 406(a)(1)(E), 406(a)(2)
and 407 of ERISA for the acquisition or holding of a Class A Certificate on
behalf of an "Excluded Plan" by any person who has discretionary authority or
renders investment advice with respect to the assets of such Excluded Plan.
For purposes of the Class A Certificates, an Excluded Plan is a Benefit Plan
sponsored by (1) First Boston, (2) the originators, (3) the Servicer, (4) the
Trustee, (5) the Seller, (6) any Obligor with respect to Receivables
constituting more than 5 percent of the aggregate unamortized principal balance
of the Receivables as of the date of initial issuance and (7) any affiliate or
successor of a person described in (1) to (6) above (the "Restricted Group").
If the specific conditions of paragraph I.B. of Section I of the Exemption
are also satisfied, the Exemption may provide an exemption from the
restrictions imposed by Sections 406(b)(1) and (b)(2) of ERISA and the taxes
imposed by Sections 4975(a) and (b) of the Code by reason of Section
4975(c)(1)(E) of the Code in connection with (1) the direct or indirect sale,
exchange or transfer of Class A Certificates in the initial issuance of Class A
Certificates to a Benefit Plan when the person who has discretionary authority
or renders investment advice with respect to the investment of plan assets in
Class A Certificates is (a) an Obligor with respect to 5 percent or less of the
fair market value of the Receivables or (b) an affiliate of such a person, (2)
the direct or indirect acquisition or disposition in the secondary market of
Class A Certificates by Benefit Plans and (3) the holding of Class A
Certificates by Benefit Plans. As of the date hereof, Seller believes no
Obligor with respect to Receivables included in the Trust constitutes more than
5 percent of the aggregate unamortized principal balance of the Trust.
If the specific conditions of paragraph I.C. of Section I of the Exemption
are satisfied, the Exemptions may provide an exemption from the restrictions
imposed by Sections 406(a), 406(b) and 407(a) of ERISA, and the taxes imposed
by Sections 4975(a) and (b) of the Code by reason of Section 4975(c) of the
Code for transactions in connection with the servicing, management and
operation of the Trust.
The Exemption may provide an exemption from the restrictions imposed by
Section 406(a) and 407(a) of ERISA, and the taxes imposed by Sections 4975(a)
and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code
if such restrictions are deemed to otherwise apply merely because a person is
deemed to be a "party in interest" or a "disqualified person" with respect to
an investing Benefit Plan by virtue of providing services to the Benefit Plan
(or by virtue of having certain specified relationships to such a person)
solely as a result of such Benefit Plan's ownership of Class A Certificates.
The Exemption sets forth the following six general conditions which must
be satisfied for a transaction to be eligible for exemptive relief thereunder.
(1) The acquisition of the certificates by a Benefit Plan is on terms
(including the price for the certificates) that are at least as favorable to
the Benefit Plan as they would be in an arm's length transaction with an
unrelated party;
(2) The rights and interests evidenced by the certificates acquired by
the Benefit Plan are not subordinated to the rights and interest evidenced by
other certificates of the trust;
(3) The certificates acquired by the Benefit Plan have received a rating
at the time of such acquisition that is one of the three highest generic rating
categories from either Standard & Poor's Ratings Group ("S&P"), Moody's
Investors Services, Inc. ("Moody's"), Duff & Phelps Credit Rating Co. ("D&P")
or Fitch Investors Service, Inc. ("Fitch").
S-23
<PAGE> 24
(4) The trustee is not an affiliate of any other member of the Restricted
Group (as defined above);
(5) The sum of all payments made to and retained by the Placement Agent
in connection with the distribution of certificates represents not more than
reasonable compensation for acting as agent with respect to the certificates.
The sum of all payments made and retained by the Seller pursuant to the
assignment of the loans to the trust fund represents not more than the fair
market value of such loans. The sum of all payments made to and retained by
the servicer represents not more than reasonable compensation for such person's
services under the pooling and servicing agreement and reimbursement of such
person's reasonable expenses in connection therewith; and
(6) The Benefit Plan investing in the certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Commission under
the Securities Act of 1933.
It is a condition of issuance of the Class A Certificates that they be
rated A or its equivalent by a nationally recognized rating agency. Before
purchasing a Class A Certificate based on the Exemption, a fiduciary of a
Benefit Plan should itself confirm (1) that such Certificate constitutes a
"certificate" for purposes of the Exemption and (2) that the specific
conditions and other requirements set forth in the Exemption would be
satisfied.
Any Benefit Plan fiduciary considering the purchase of a Class A
Certificate should consult with its counsel with respect to the potential
applicability of ERISA and the Code to such investment. Moreover, each Benefit
Plan fiduciary should determine whether, under the general fiduciary standards
of investment prudence and diversification, an investment in the Class A
Certificates is appropriate for the Benefit Plan, taking into account the
overall investment policy of the Benefit Plan and the composition of the
Benefit Plan's investment portfolio.
CLASS B CERTIFICATES
Because the Class B Certificates are subordinated to the rights and
interest evidenced by the Class A Certificates issued by the Trust, the
Exemption does not apply to the acquisition, holding and resale of the Class B
Certificates using assets of a Benefit Plan subject to ERISA. Class B
Certificates will not be eligible to be acquired using assets of any Benefit
Plan.
S-24
<PAGE> 25
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement with respect to the Securities (the "Underwriting Agreement"), the
Seller has agreed to sell to each of the Underwriters named below (the
"Underwriters"), and each of the Underwriters has severally agreed to purchase,
the principal amount of Securities set forth opposite its name below.
<TABLE>
<CAPTION>
CLASS A CERTIFICATES
PRINCIPAL
UNDERWRITERS AMOUNT
------------ ---------
<S> <C>
CS First Boston Corporation $34,509,000.00
Key Capital Markets, Inc. $10,000,000.00
Total $44,509,000.00*
=============
CLASS B CERTIFICATES
PRINCIPAL
UNDERWRITERS AMOUNT
------------ ---------
CS First Boston Corporation $2,500,000.00
Total $2,500,000.00*
============
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all Securities offered
hereby if any Securities are purchased. The Issuer has been advised by the
Underwriters that they propose to offer the Securities from time to time for
sale in negotiated transactions or otherwise, at prices determined at the time
of sale. The Underwriters may effect such transactions by selling Securities
to or through dealers and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Underwriters and
any purchasers of Securities for whom they may act as agents. In connection
with the sale of the Securities, the Underwriters may be deemed to have
received compensation from the Issuer in the form of underwriting discounts,
and the Underwriters may also receive concessions from purchasers of the
Certificates for whom they may act as agents. The Underwriters and any dealers
that participate with the Underwriters in the distribution of the Securities
may be deemed to be underwriters, and any discounts or commissions received by
them and any profit on the resale of Securities by them may be deemed to be
underwriting discounts or commissions, under the Securities Act of 1933, as
amended.
The Underwriters have informed the Seller that they do not expect
discretionary sales by the Underwriters to exceed 5% of the principal amount of
Securities being offered hereby.
The Seller and the Servicer have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
CS First Boston Corporation is engaged from time to time by KeyCorp, the
parent corporation of the Servicer, to provide investment banking services.
Key Capital Markets, Inc. is a broker-dealer registered as such with the
National Association of Securities Dealers, Inc. and commenced business on
February 26, 1996. The Seller and the Servicer are affiliates of Key Capital
Markets, Inc.
__________________________________
* The Seller has agreed to hold $260.12 principal amount of Class A
Certificates and $520.23 principal amount of Class B Certificates.
S-25
<PAGE> 26
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain
federal income tax and other matters will be passed upon for the Seller by
Dewey Ballantine.
S-26
<PAGE> 27
Prospectus
AFG RECEIVABLES TRUSTS
Asset Backed Certificates
Asset Backed Notes
_______________
AFG RECEIVABLES CORPORATION
Seller
AUTOFINANCE GROUP, INC.
Servicer
The Asset Backed Certificates (the "Certificates") and the Asset
Backed Notes (the "Notes"; and, collectively with the Certificates, the
"Securities") described herein may be sold from time to time in one or more
series, in amounts, at prices and on terms to be determined at the time of sale
and to be set forth in a supplement to this Prospectus (a "Prospectus
Supplement"). Each series of Securities will include either one or more
classes of Certificates or, if Notes are issued as part of a series, one or
more classes of Notes and one or more classes of Certificates, as set forth in
the related Prospectus Supplement.
The Certificates and the Notes, if any, of any series of Securities
will be issued by a trust (a "Trust") to be formed with respect to such series
by AFG Receivables Corporation (the "Seller"), a wholly-owned subsidiary of
AutoFinance Group, Inc. (the "Servicer"). The assets of each Trust (the "Trust
Property") will include a pool of retail installment sales contracts
("Receivables") purchased by the Servicer from motor vehicle dealers and
secured by new and used automobiles and light trucks, as more fully described
herein and in the related Prospectus Supplement. In addition, if so specified
in the related Prospectus Supplement, the Trust Property will include monies on
deposit in one or more trust accounts to be established with an Owner Trustee
or an Indenture Trustee, as the case may be, which may include a Pre-Funding
Account which would be used to purchase additional Receivables (the "Subsequent
Receivables") from the Seller from time to time during the Pre-Funding Period
specified in the related Prospectus Supplement.
Each Trust will be formed pursuant to either (i) a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") to be entered into
among the Seller, the Servicer, in its individual capacity and as Servicer, and
the trustee specified in the related Prospectus Supplement (the "Owner
Trustee") or (ii) a Trust Agreement (the "Trust Agreement") to be entered into
between the Seller and the Owner Trustee. If the Trust is formed pursuant to a
Trust Agreement, a Sale and Servicing Agreement (the "Sale and Servicing
Agreement") will be entered into among the Seller, the Servicer, in its
individual capacity and as Servicer, and the Trust. In either case, the
Pooling and Servicing Agreement or the Trust Agreement and the Sale and
Servicing Agreement are collectively referred to herein as the "Trust
Documents". The Notes, if any, of a series will be issued and secured pursuant
to an Indenture (the "Indenture") between the Trust and the Indenture Trustee
specified in the related Prospectus Supplement (the "Indenture Trustee").
(Continued on following page)
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SECURITIES, SEE "SPECIAL CONSIDERATIONS" HEREIN
AND AS MAY BE SET FORTH IN THE RELATED PROSPECTUS SUPPLEMENT.
------------------
THE CERTIFICATES REPRESENT INTERESTS IN AND THE NOTES REPRESENT
OBLIGATIONS OF THE RELATED TRUST AND DO NOT REPRESENT INTERESTS IN OR
OBLIGATIONS OF THE SERVICER, THE SELLER OR ANY AFFILIATE OF EITHER.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
Retain this Prospectus for future reference. This Prospectus may not
be used to consummate sales of securities offered hereby unless accompanied by
a Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 17, 1995
<PAGE> 28
(Continued from preceding page)
Except as otherwise provided in the related Prospectus Supplement,
each class of Securities of any series will represent the right to receive, or
be secured by, a specified amount of payments of principal and interest on the
related Receivables in the manner described herein and in the related
Prospectus Supplement The right of each class of Securities to receive
payments may be senior or subordinate to the rights of one or more of the other
classes of such series. A series may include two or more classes of
Certificates or Notes which differ as to the timing and priority of payment,
interest rate or amount of distributions in respect of principal or interest or
both. A series may include one or more classes of Certificates or Notes
entitled to distributions in respect of principal, with disproportionate,
nominal or no interest distributions, or to interest distributions, with
disproportionate, nominal or no distributions in respect of principal.
Distributions on Certificates of any series will be subordinated in priority to
payments due on the related Notes, if any, to the extent described herein and
in the related Prospectus Supplement. The Certificates will represent
fractional undivided ownership interests in the related Trust. At the time of
issuance, each series of Securities will be rated investment grade by at least
one Rating Agency.
Each class of Securities will represent the right to receive
distributions or payments in the amounts, at the rates, and on the dates set
forth in the related Prospectus Supplement. The rate of distributions in
respect of principal on Certificates and payment in respect of principal on
Notes, if any, of any class will depend on the priority of payment of such
class and the rate and timing of payments (including prepayments, liquidations
and repurchases of Receivables) on the related Receivables.
Unless otherwise provided in the related Prospectus Supplement, the
Certificates and the Notes, if any, of any series initially will be represented
by certificates and notes registered in the name of Cede & Co., the nominee of
The Depository Trust Company ("DTC"). The interests of beneficial owners of
the Securities will be represented by book entries on the records of the
participating members of DTC. Definitive Securities will be available only
under limited circumstances.
There currently is no secondary market for the Securities. There can
be no assurance that any such market will develop or, if it does develop, that
it will continue. The Securities will not be listed on any securities
exchange.
ii
<PAGE> 29
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR THE RELATED
PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
SELLER, THE SERVICER OR ANY UNDERWRITER. THIS PROSPECTUS AND THE RELATED
PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, ANY SECURITIES OFFERED THEREBY TO ANYONE IN ANY JURISDICTION
IN WHICH THE PERSON MAKING SUCH OFFER AND SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS AND THE RELATED PROSPECTUS SUPPLEMENT
NOR ANY SALE MADE THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SINCE
THE DATE HEREOF.
__________________
AVAILABLE INFORMATION
The Seller, as sponsor of each Trust, has filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement (together
with all amendments and exhibits thereto, referred to herein as the
"Registration Statement") under the Securities Act of 1933, as amended, with
respect to the Securities offered pursuant to this Prospectus. For further
information, reference is made to the Registration Statement which is available
for inspection without charge at the office of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission at Seven World Trade Center, 13th Floor, New
York, New York 10048 and at the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and copies of which may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Certificates or Definitive Notes are
issued, as specified in the related Prospectus Supplement, unaudited monthly
and annual reports, containing information concerning each Trust and prepared
by the Servicer, will be sent on behalf of the Trust to the Owner Trustee for
the Certificateholders, the Indenture Trustee for the Noteholders and Cede &
Co., as registered holder of the Certificates and the Notes and the nominee of
DTC. See "Certain Information Regarding the Securities - Statements to
Securityholders" and "- Book-Entry Registration." Certificateholders and
Noteholders are collectively referred to herein as the "Securityholders." Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. Neither the Seller nor the Servicer
intends to send any of its financial reports to Securityholders. The Servicer,
on behalf of each Trust, will file with the Commission periodic reports
concerning each Trust to the extent required under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Servicer on behalf of each Trust with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the related Securities shall be deemed to be incorporated by
reference into this Prospectus and the related Prospectus Supplement and to be
a part hereof and thereof from the respective dates of filing of such
documents. Any statement contained herein or in a document all or any portion
of which is deemed to be incorporated by reference herein shall be deemed to be
modified or
2
<PAGE> 30
superseded for purposes of this Prospectus and the related Prospectus
Supplement to the extent that a statement contained herein or in any other
subsequently filed document which also is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus or the related Prospectus
Supplement.
The Servicer will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference (other
than exhibits). Requests for such copies should be directed to Blair T. Nance,
Chief Financial Officer, AutoFinance Group, Inc., Oakmont Circle 1, 601 Oakmont
Lane, Suite 350, Westmont, Illinois 60559-5549 (telephone (708) 655-7100).
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<PAGE> 31
PROSPECTUS SUMMARY
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and by reference to the
information with respect to the Securities contained in the related Prospectus
Supplement to be prepared and delivered in connection with the offering of each
series of Securities. Certain capitalized terms used in this Prospectus
Summary are defined elsewhere herein. A listing of the pages on which some of
such terms are defined is found in the "Index of Terms."
<TABLE>
<S> <C>
ISSUER . . . . . . . . . . With respect to each series of Securities, a
trust (the "Trust"), to be formed by the
Seller pursuant to a Pooling and
Servicing Agreement among the Seller, the
Servicer and the Owner Trustee specified
in the related Prospectus Supplement, or
a Trust Agreement between the Seller and
the Owner Trustee specified in the
related Prospectus Supplement. The term
"Owner Trustee" is used herein solely for
purposes of reference and nothing herein
shall characterize each Trust as an
"owner trust" except as specified in the
related Prospectus Supplement.
SELLER . . . . . . . . . . . AFG Receivables Corporation, a wholly-owned
subsidiary of AutoFinance Group, Inc.
SERVICER . . . . . . . . . . AutoFinance Group, Inc.
OWNER TRUSTEE . . . . . . . . The Owner Trustee will be specified in the
related Prospectus Supplement with
respect to any series of Securities.
INDENTURE TRUSTEE . . . . . . The Indenture Trustee for any series of Notes
will be specified in the related
Prospectus Supplement.
SECURITIES OFFERED . . . . . The Securities offered from time to time may
include one or more series of
Certificates and/or one or more series of
Notes, as described herein and in the
related Prospectus Supplement.
THE CERTIFICATES . . . . . . The Certificates may consist of one or more
classes, each of which will be issued
pursuant to a Pooling and Servicing
Agreement or Trust Agreement. Only a
certain class or certain classes of such
Certificates, however, may be offered
hereby and by the related Prospectus
Supplement, as specified in the related
Prospectus Supplement. Each Certificate
will represent a fractional undivided
ownership interest in the Trust. Each
offered Certificate may also represent a
fractional undivided interest in monies
on deposit, if any, in a trust account
(as defined below, the "Pre-Funding
Account") to be established with the
Owner Trustee or Indenture Trustee, as
specified in the related Prospectus
Supplement.
The offered Certificates shall be issued
in fully registered form in denominations
of $1,000 and integral multiples of
$1,000 in excess thereof. Holders of
Certificates ("Certificateholders") will
be able to receive Definitive
Certificates only in the limited
circumstances described herein or in the
related Prospectus Supplement. See
"Certain Information Regarding the
Securities - Book-Entry Registration."
Each class of offered Certificates will
have a stated Certificate Balance (as
defined for each class in the related
Prospectus Supplement) and will accrue
interest on such Certificate Balance at a
specified rate (with respect to each
class of Certificates, the "Pass-Through
Rate"). Each class of offered
Certificates may have a different
Pass-Through Rate,
</TABLE>
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<TABLE>
<S> <C>
which may be a fixed, variable or
adjustable Pass-Through Rate, or any
combination of the foregoing. The
related Prospectus Supplement will
specify the Pass-Through Rate for each
class of offered Certificates, or the
initial Pass-Through Rate and the method
for determining subsequent changes to the
Pass-Through Rate.
A series of Securities may include two or
more classes of Certificates which may
differ as to timing of distributions,
sequential order, priority of payment,
seniority, allocation of loss,
Pass-Through Rate or amount of
distributions in respect of principal or
interest, or as to which distributions of
principal or interest on any class may or
may not be made upon the occurrence of
specified events or on the basis of
collections from designated portions of
the Receivables related to such series.
In addition, a series may include one or
more classes of Certificates ("Strip
Certificates") entitled to (i)
distributions in respect of principal
with disproportionate, nominal or no
interest distributions, or (ii) interest
distributions, with disproportionate,
nominal or no distributions in respect of
principal.
With respect to any series of Securities
including one or more classes of Notes,
distributions in respect of the
Certificates will be subordinated in
priority of payment to payments on the
Notes of such series, to the extent
specified in the related Prospectus
Supplement.
The related Prospectus Supplement may
provide that the property held by the
Owner Trustee or the Indenture Trustee
will include a Pre-Funded Amount to be
held in a Pre-Funding Account (as such
terms are defined in the related
Prospectus Supplement, the "Pre-Funded
Amount" and the "Pre-Funding Account",
respectively). The Pre-Funded Amount in
the Pre-Funding Account will be reduced
during the Funding Period (as such term
is defined in the related Prospectus
Supplement, the "Funding Period") by the
amount thereof used to purchase
Subsequent Receivables in accordance with
the related Pooling and Servicing
Agreement or Trust Agreement. If any
Pre-Funded Amount remains at the end of
the Funding Period, such amount, in
amounts and in a manner specified in the
related Prospectus Supplement, will be
used to prepay some or all classes of the
Certificates. In the event of such
prepayment, the Certificateholders may be
entitled to receive a prepayment premium
in the amount and to the extent provided
in the related Prospectus Supplement.
THE NOTES . . . . . . . . . . Any series of Securities may include one or more
classes of Notes, as specified in the
related Prospectus Supplement, each of
which will be issued pursuant to an
Indenture.
Notes will be available for purchase in
denominations of $1,000 and integral
multiples of $1,000. Holders of Notes
("Noteholders") will be able to receive
Definitive Notes only in the limited
circumstances described herein or in the
related Prospectus Supplement. See
"Certain Information Regarding the
Securities - Book-Entry Registration."
Each class of Notes will have a stated
principal amount and will bear interest
at a rate or rates (with respect to each
class of Notes, the "Interest Rate"), as
specified in the related Prospectus
Supplement, which may be different for
each class of Notes and may be fixed,
variable,
</TABLE>
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<PAGE> 33
<TABLE>
<S> <C>
adjustable or any combination of the
foregoing. The related Prospectus
Supplement will specify the Interest Rate
and the method for determining subsequent
changes to the Interest Rate. Each Note
may also represent a fractional undivided
interest in monies on deposit, if any, in
the Pre-Funding Account to be established
with the Indenture Trustee as specified
in the related Prospectus Supplement.
A series may include two or more classes
of Notes which differ as to the timing
and priority of payment, seniority,
allocations of loss, Interest Rate or
amount of payments of principal or
interest, or as to which payments of
principal or interest may or may not be
made upon the occurrence of specified
events or on the basis collections from
designated portions of the Receivables
for such series. In addition, a series
may include one or more classes of Notes
("Strip Notes") entitled to (i) principal
payments with disproportionate, nominal
or no interest payments or (ii) interest
payments with disproportionate, nominal
or no principal payments.
The related Prospectus Supplement for any
series of Notes may provide that the
property held by the Indenture Trustee
will include a Pre-Funded Amount to be
held in a Pre-Funding Account. The
Pre-Funded Amount in the Pre-Funding
Account will be reduced during the
Funding Period by the amount thereof used
to purchase Subsequent Receivables in
accordance with the related Trust
Agreement. If any Pre-Funded Amount
remains at the end of the Funding Period,
such amount in amounts and in a manner
specified in the related Prospectus
Supplement will be used to partially
redeem some or all classes of the Notes.
In the event of such partial
redemption, the Noteholders may be
entitled to receive a prepayment premium
in the amount and to the extent provided
in the related Prospectus Supplement.
TRUST PROPERTY . . . . . . . The Trust property will include certain retail
installment sale contracts initially
transferred to the Trust (the "Initial
Receivables"), as specified in the
related Prospectus Supplement, secured by
new or used automobiles and light trucks
(the "Initial Financed Vehicles"),
certain monies due thereunder on or after
a date as specified in the related
Prospectus Supplement (the "Initial
Cutoff Date"), security interests in the
Initial Financed Vehicles securing the
Initial Receivables, certain bank
accounts and the proceeds thereof, all
proceeds of the foregoing, any proceeds
from claims on certain insurance
policies, and certain rights under the
Trust Documents. Additional motor
vehicle retail installment sale contracts
(the "Subsequent Receivables") originated
on or before a date as specified in the
related Prospectus Supplement, secured by
additional new or used automobiles and
light trucks (the "Subsequent Financed
Vehicles"), certain monies due thereunder
on or after a date or dates as specified
in the related Prospectus Supplement (the
"Subsequent Cut-Off Date"), security
interests in the Subsequent Financed
Vehicles securing the Subsequent
Receivables, certain bank accounts and
the proceeds thereof, may be purchased by
the Trust from the Seller as specified in
the related Prospectus Supplement, from
funds on deposit in the related
Pre-Funding Account. The Initial
Receivables and any Subsequent
Receivables related to each series of
Securities are hereinafter, collectively,
referred to as the "Receivables" and the
Initial Financed Vehicles and the
Subsequent Financed Vehicles related to
each series of
</TABLE>
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<TABLE>
<S> <C>
Securities are hereinafter, collectively,
referred to as the "Financed Vehicles."
RECEIVABLES . . . . . . . . . The Receivables will be purchased by the Seller
from the Servicer in its individual
capacity, or from a wholly-owned
subsidiary of the Servicer, as specified
in the related Prospectus Supplement,
pursuant to a Purchase Agreement (the
"Purchase Agreement") between the Seller
and the Servicer or its subsidiary
providing for such purchase. The
Receivables comprising the property of
the Trust consist of non-prime retail
automobile installment sales contracts,
with such characteristics, including
their weighted average annual percentage
rate and their weighted average remaining
maturity, as shall be specified in the
related Prospectus Supplement.
YIELD AND PREPAYMENT
CONSIDERATIONS . . . . . . The weighted average life of the Securities of
the related series will be reduced by
full or partial prepayments on the
related Receivables. The Receivables
will generally be prepayable at any time
without penalty. Prepayments (or, for
this purpose, equivalent payments to the
related Trust) may result from payments
by Obligors, liquidations due to default,
the receipt of proceeds from physical
damage or credit insurance, repurchases
by the Servicer, its subsidiary and the
Seller as a result of certain uncured
breaches of representations and
warranties made with respect to the
Receivables, purchases by the Servicer as
a result of certain uncured breaches of
the covenants made by it with respect to
the Receivables, or the Servicer
exercising its option to purchase all of
the remaining Receivables of a Trust.
COLLECTION ACCOUNT . . . . . With respect to each series of Securities, the
Owner Trustee or the Indenture Trustee
will establish and maintain one or more
separate accounts (each, a "Collection
Account") for the benefit of the
Certificateholders and the Noteholders,
if any, in the manner specified in each
related Prospectus Supplement. On each
Distribution Date (as specified in the
related Prospectus Supplement, the
"Distribution Date"), the Owner Trustee
or the Indenture Trustee, as the case may
be, will be required to pass through and
distribute to the Certificateholders, or
pay to the Noteholders, as the case may
be, on the date as specified in the
related Prospectus Supplement from
amounts held in the Collection Account,
the amounts of interest, principal or
otherwise, distributable with respect to
the applicable classes of Certificates
and Notes as specified in the related
Prospectus Supplement.
SUBORDINATION AND
CREDIT ENHANCEMENT . . . . In the event of defaults and delinquencies on
the Receivables, certain distributions of
interest and/or principal with respect to
one or more classes of Securities may be
subordinated in priority of payment to
distributions due on other classes of
Securities as specified in the related
Prospectus Supplement. In addition, to
the extent specified in the related
Prospectus Supplement, one or more
classes of Securities may be entitled to
the benefits of a spread account, a
reserve account, overcollateralization, a
policy of insurance, a letter or letters
of credit, credit or liquidity
facilities, repurchase obligations, third
party payments or other support, cash
deposits or other arrangements, which may
be subject to certain limitations and
exclusions as described in the related
Prospectus Supplement.
</TABLE>
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<TABLE>
<S> <C>
CERTAIN LEGAL ASPECTS OF
THE RECEIVABLES . . . . . . In connection with the sale of the Receivables,
the security interests in the Financed
Vehicles securing the Receivables have
been, or in the case of the Subsequent
Receivables, will be, assigned by the
Seller to the Trust. Due to
administrative burden and expense, the
certificates of title to the Financed
Vehicles will not be amended to reflect
the assignment of such security interests
to the Trust. In the absence of such an
amendment, the Trust may not have a
perfected security interest in the
Financed Vehicles securing the
Receivables in some states.
REPURCHASES AND PURCHASES
OF CERTAIN RECEIVABLES . . The Seller will be obligated to repurchase any
Receivable sold to the Trust as to which
a security interest in the Financed
Vehicle securing such Receivable shall
not have been perfected in favor of the
Servicer or a subsidiary of the Servicer,
if the Owner Trustee or the Indenture
Trustee, as the case may be, determines
such breach shall materially adversely
affect the interest of the Trust in such
Receivable and if such failure or breach
shall not have been cured by the second
Record Date following the discovery by or
notice of such breach. The Seller also
will be obligated to repurchase any
Receivable if the Indenture Trustee or
the Owner Trustee, as the case may be,
determines the interest of the Trust
therein is materially adversely affected
by a breach of any other representation
or warranty made by the Seller with
respect to the Receivable, and if the
breach has not been cured by the last day
of the second month following the
discovery by or notice to the Seller of
the breach.
The Servicer will be obligated to purchase any
Receivable if a perfected security
interest in the related Financed Vehicle
is not maintained . See "Certain Legal
Aspects of the Receivables".
SERVICING . . . . . . . . . . The Servicer will be required to remit
collections (exclusive of any portion of
such collections on any Receivable
allocable to premiums and/or interest
thereon for physical damage insurance
maintained by the Servicer covering any
Financed Vehicle and net of the
Supplemental Servicing Fee (as defined
herein) amounts included in such
collections) to one or more Collection
Accounts established with the Owner
Trustee or the Indenture Trustee as
specified in the related Prospectus
Supplement. As specified in the related
Prospectus Supplement, the Servicer will
receive from the Trust or retain each
month a fee for servicing the Receivables
in an amount out of the collections on
the Receivables. See "The Certificates
-- Servicing Compensation."
OPTIONAL PURCHASE . . . . . . With respect to each series of Securities, the
Servicer may purchase all of the
Receivables held by the related Trust as
of the last day of any month in which the
Pool Balance of such Trust at the close
of business on the Distribution Date in
that month as a percentage of the
Original Pool Balance is 10% or less
(including any Subsequent Receivables).
See "The Certificates -- Termination."
TAX STATUS . . . . . . . . . The anticipated federal income tax consequences
of the purchase, ownership and
disposition of Securities, and the
characterization of each Trust, will be
discussed in the related Prospectus
Supplement based upon the opinion of
counsel to the Seller. See "Certain
Federal Income Tax Consequences."
</TABLE>
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<TABLE>
<S> <C>
ERISA CONSIDERATIONS . . . . Subject to the considerations discussed under
"ERISA Considerations" herein and in the
related Prospectus Supplement, and to the
extent specified in the related
Prospectus Supplement, any Notes included
in the offered Securities will be
eligible for purchase by employee benefit
plans that are subject to the Employee
Retirement Income Security Act of 1974,
as amended ("ERISA"). If no Notes are
included in the offered Securities,
certain Certificates may be eligible for
purchase by employee benefit plans that
are subject to ERISA as specified in the
related Prospectus Supplement. See
"ERISA Considerations" herein and in the
related Prospectus Supplement.
RATINGS . . . . . . . . . . . As a condition of issuance, the offered
Securities of each series will be rated
an investment grade, that is, in one of
its four highest rating categories, by at
least one nationally recognized rating
agency (a "Rating Agency"), as specified
in the related Prospectus Supplement.
The ratings will be based on the
Receivables related to each series, the
terms of the Securities, and the
subordination and any credit enhancement
provided therefor. There is no assurance
that the ratings initially assigned to
such Securities will not be subsequently
lowered or withdrawn by the Rating
Agencies. In the event the rating
initially assigned to any Securities is
subsequently lowered for any reason, no
person or entity will be obligated to
provide any credit enhancement unless
otherwise specified in the related
Prospectus Supplement. The ratings of any
Securities with respect to which a
prepayment premium may be payable do not
evaluate such prepayment premium payable
to such Securityholders or the likelihood
that such prepayment premium will be
paid.
</TABLE>
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RISK FACTORS
LIMITED LIQUIDITY
There is currently no market for the Securities of any series.
There can be no assurance that a secondary market for the Securities will
develop or, if such a market does develop, that it will provide Securityholders
with liquidity of investment or that it will continue for the life of the
Securities.
NATURE OF RECEIVABLES; UNDERWRITING PROCESS AND SUBJECTIVE CREDIT STANDARDS
The underwriting standards applied by the Servicer may not be as
stringent as those of other financial institutions or the finance companies of
motor vehicle manufacturers, since the Servicer actively solicits dealers to
purchase and purchases only non-prime retail automobile installment sale
contracts which may not meet the credit standards of primary lenders. Although
the Servicer believes that it carefully reviews and evaluates each credit
before acceptance, no assurance can be given that the standards employed by the
Servicer will be sufficient to protect the Securityholders from loss due to
default by the Obligors. See "The Servicer -- Contract Acquisition Program".
LIMITED ASSETS; SUBORDINATION
No Trust will have any significant assets or sources of funds other
than the Receivables and, to the extent provided in the related Prospectus
Supplement, a Pre-Funding Account and/or any credit enhancement specified in
the related Prospectus Supplement. The Notes, if any, of any series will
represent obligations solely of, and the Certificates of any series will
represent interests solely in, the related Trust, and neither the Notes nor the
Certificates of any series will be insured or guaranteed by the Seller, the
Servicer, the applicable Owner Trustee, the applicable Indenture Trustee or,
except as specified in the related Prospectus Supplement, any other person or
entity. Consequently, Securityholders must rely for payment upon payments on
the related Receivables and, if and to the extent available, amounts on deposit
in the Pre-Funding Account, if any, and any credit enhancement, if any,
specified in the related Prospectus Supplement. To the extent specified in the
related Prospectus Supplement, distributions with respect to some or all
classes of Certificates may be subordinated in priority of payment to
distributions on the Notes, if any, of such series and distributions on other
classes of Certificates of such series. Any such subordination or credit
enhancement will not cover all contingencies, and losses in excess of such
coverage will be required to be borne directly by the affected Security
holders. In addition, holders of certain classes of Securities of a series may
have the right to take actions that are detrimental to the interests of the
Securityholders of certain other classes of Securities of such series, as
specified in the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS
In connection with the sale and assignment of Receivables to the
related Trust, security interests in the related Financed Vehicles will be
assigned by the Seller to the Trust. In most states, such an assignment is an
effective conveyance of a security interest without amendment of any such
security interest noted on a vehicle's certificate of title, and the assignee
succeeds thereby to the assignor's rights as secured party. However, a
security interest in a motor vehicle registered in most states in which the
Servicer conducts business may be perfected only by causing such vehicle's
certificate of title to be amended to note the security interest of the secured
party. Such notation of a secured party's security interest is generally
effected in such states by depositing with the applicable state motor vehicle
registrar or similar state authority, the vehicle's certificate of title, an
application containing the name and address of such secured party, and the
necessary registration fees.
Because of the administrative burden and expense that would be
entailed in doing so, the certificates of title for the Financed Vehicles
related to any Trust will not be endorsed to identify the Trustee as the
secured party, and will not be deposited with the motor vehicle registrar or
other state authorities in any
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state. In the absence of such action, the Owner Trustee or the Indenture
Trustee, as the case may be, may not have a perfected security interest in the
Financed Vehicles related to such Trust in certain states and, in the event
that another person obtains a perfected security interest in such a Financed
Vehicle subsequent to the transfer of the Receivables to the related Trust,
such person might acquire rights in such Financed Vehicle prior to the rights
of the Trust. The Seller will covenant to repurchase any Receivable if, on the
date of transfer of a Receivable to a Trust a valid, subsisting and enforceable
first priority security interest shall not have been perfected in favor of the
Servicer or a subsidiary of the Servicer, which shall have been assigned to the
Trust, in the related Financed Vehicle. The Servicer will covenant to
repurchase any Receivable if, after the transfer of such Receivable to a Trust
a valid, subsisting and enforceable first priority interest in the name of the
Servicer or a subsidiary of the Servicer is not maintained on behalf of the
Trust in the related Financed Vehicle. See "Certain Legal Aspects of the
Receivables".
INSOLVENCY RISKS
The Servicer or the transferring subsidiary of the Servicer will
intend that any transfer of Receivables to the Seller will constitute a sale,
rather than a pledge of the Receivables to secure indebtedness of the Servicer
or the transferring subsidiary of the Servicer. However, if the Servicer or
the transferring subsidiary of the Servicer were to become a debtor under the
federal bankruptcy code or similar applicable state laws (collectively, the
"Insolvency Laws"), a creditor or trustee in bankruptcy thereof, or the
Servicer or such subsidiary as debtor-in-possession, might argue that such sale
of Receivables was a pledge of Receivables rather than a sale and/or that the
assets and liabilities of the Seller should be consolidated with the assets and
liabilities of the Servicer or the transferring subsidiary of the Servicer.
The Seller has taken and will take steps in structuring the transactions
contemplated hereby and by any Prospectus Supplement that are intended to
minimize the risk that the voluntary or involuntary application for relief
under any Insolvency Law would result in the assets and liabilities of the
Seller being consolidated with the assets and liabilities of any other person.
Nevertheless, if the Servicer or the transferring subsidiary of the Servicer
were to become a debtor under any Insolvency Law, and such positions - that the
transfer of Receivables was a pledge rather than a sale or otherwise should be
treated as part of its bankruptcy estate and/or that the assets and liabilities
of the Seller should be consolidated - were presented to or accepted by a
court, then delays in payments to Securityholders could occur or reductions in
the amounts of such payments could result. In addition, if the transfer of any
Receivables is recharacterized as a pledge, a tax lien, other governmental
lien, or other lien created by operation of law on the property of the Servicer
or the transferring subsidiary of the Servicer, as the case may be, may have
priority over the Trust's interest in such Receivables.
In addition, in a case recently decided by the United States Court
of Appeals for the Tenth Circuit, such Circuit Court found that accounts sold
prior to a bankruptcy should be treated as part of the bankruptcy estate of the
seller of such accounts. If the Servicer or the transferring subsidiary of the
Servicer, as the case may be, were to become a debtor in a bankruptcy
proceeding and a court applied the reasoning of the Circuit Court reflected in
the case described above, delays in payments to Securityholders could occur or
reductions in the amounts of such payments could result.
SOCIAL, ECONOMIC AND OTHER FACTORS
Economic conditions in states where Obligors reside may affect the
delinquency, loan loss and repossession experience of a Trust with respect to
the related Receivables. The related Prospectus Supplement will set forth any
restrictions imposed by any Trust on concentrations of Receivables thereunder.
The ability of the Trust to invest in Receivables is largely dependent upon
whether the Obligors thereunder perform the payment and other obligations
required by such Receivables in order that such Receivables meet the
requirements for transfer to a Trust. The performance by such Obligors may be
affected as a result of a variety of social and economic factors. Economic
factors include, but are not limited to, interest rates, unemployment levels,
the rate of inflation and consumer perception of economic conditions,
generally. However, the Seller is unable to determine and has no basis to
predict whether or to what extent economic or social factors will affect the
performance by any Obligors, or the availability of Subsequent Receivables
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in cases where Subsequent Receivables are to be transferred to a Trust as
specified in the related Prospectus Supplement.
YIELD AND PREPAYMENT CONSIDERATIONS
The weighted average life of the Securities of the related series
will be reduced by full or partial prepayments on the related Receivables. The
Receivables will generally be prepayable at any time without penalty.
Prepayments (or, for this purpose, equivalent payments to the related Trust)
may result from payments by Obligors, liquidations due to default, the receipt
of proceeds from physical damage or credit insurance, repurchases by the
Servicer the transferring subsidiary of the Servicer and the Seller as a result
of certain uncured breaches of representations and warranties made with respect
to the Receivables, purchases by the Servicer as a result of certain uncured
breaches of the covenants made by it with respect to the Receivables, or the
Servicer exercising its option to purchase all of the remaining Receivables of
a Trust.
The Servicer has limited historical experience with respect to
prepayments, has not as of the date of this Prospectus prepared data on
prepayment rates and is not aware of publicly available industry statistics
that set forth principal prepayment experience for retail installment sales
contracts similar to the Receivables. The Servicer can make no prediction as
to the actual prepayment rates that will be experienced on the Receivables.
The Servicer, however, believes that the actual rate of prepayments will result
in a substantially shorter weighted average life than the scheduled weighted
average life of the Receivables. Unless otherwise specified in the related
Prospectus Supplement, the amounts paid to Securityholders will include all
prepayments (which are not amounts representing Payaheads) on the Receivables.
The Securityholders will bear all reinvestment risk resulting from the timing
of payments on the Securities, except to the extent of any prepayment premium,
if any, described in the related Prospectus Supplement.
BOOK-ENTRY REGISTRATION
The Securities will be represented initially by physical
Certificates and Notes registered in the name of Cede & Co., the nominee of
DTC. Securityholders will be entitled to receive definitive Securities only in
certain limited circumstances. See "Certain Information Regarding the
Securities -- Book-Entry Registration."
THE TRUSTS
The Seller will establish a Trust with respect to each series of
Securities by selling and assigning the Trust property, as described below, to
the Owner Trustee pursuant to the Trust Documents. Prior to the sale and
assignment of the related Receivables pursuant to the related Trust Documents,
such Trust will have no assets or obligations. Each Trust will not engage in
any business activity other than acquiring and holding the Trust Property,
issuing Certificates and Notes, if any, of such series and distributing
payments thereon.
Each Certificate will represent a fractional undivided ownership
interest in, and each Note, if any, will represent an obligation of, the
related Trust. The property of the Trust will include, among other things, (a)
retail installment sale contracts, as specified in the related Prospectus
Supplement, between dealers (the "Dealers") and retail purchasers (the
"Obligors") of new or used vehicles and light trucks and (b) all payments due
thereunder on or after the Initial Cutoff Date or Subsequent Cutoff Date, as
the case may be, as specified in the related Prospectus Supplement, exclusive
of a portion of such payments allocable to the premiums and/or interest thereon
for physical damage insurance maintained by the Servicer on any Financed
Vehicle. The Receivables were or will be originated by Dealers in accordance
with the Servicer's requirements under agreements with Dealers for assignment
to the Servicer, have been or will be so assigned, and evidence or will
evidence the indirect financing made available to the Obligors. On or before
the closing date, specified in the related Prospectus Supplement, the Servicer
or a subsidiary of the Servicer, as specified in the related Prospectus
Supplement, will sell the Initial Receivables to the Seller for sale to the
Trust. Subsequent Receivables, if any, will be conveyed to the Trust during
the applicable Funding Period, as provided in the related Prospectus
Supplement. Any such Subsequent Receivables will constitute property of the
Trust.
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The property of each Trust also will include (i) such amounts as
from time to time may be held in separate trust accounts (such as, the
"Collection Account," the "Certificate Account" and the "Payahead Account", as
may be specified in the related Prospectus Supplement) established and
maintained pursuant to the Trust Documents, and the proceeds of such accounts;
(ii) security interests in the related Financed Vehicles and any accessions
thereto; (iii) amounts payable to the Servicer under all Dealer Recourse
obligations; (iv) the right to proceeds of credit life, credit disability, and
physical damage insurance policies covering the related Financed Vehicles; (v)
the rights of the Seller under the Trust Documents; (vi) certain rebates of
premiums and other amounts relating to certain insurance policies and other
items financed under the Receivables, and (vii) any and all proceeds of the
foregoing. The property of the Trust does not include any reserve or spread
accounts or any Pre-Funding Account established as set forth in the related
Prospectus Supplement, although the amounts in each such account will be held
by the Owner Trustee or the Indenture Trustee, as the case may be, for the
benefit of the holders of one or more classes of Securities, or any financial
guaranty insurance policy or other form of credit enhancement which may be
issued to or held by the Owner Trustee or the Indenture Trustee for the benefit
of holders of one or more classes of Securities.
The Servicer will service the Receivables held by each Trust, and
will be compensated for acting as the Servicer. See "Description of the
Purchase Agreement and the Trust Documents -- Servicing Compensation." To
facilitate servicing and to minimize administrative burden and expense, the
Servicer will retain physical possession of the Receivables and documents
relating thereto as custodian for the Owner Trustee or the Indenture Trustee,
as the case may be. Due to the administrative burden and expense, the
certificates of title to the Financed Vehicles will not be amended to reflect
the assignment of the security interest in the Financed Vehicles to any Owner
Trustee or Indenture Trustee. In the absence of such amendment, an Owner
Trustee or Indenture Trustee may not have a perfected security interest in the
related Financed Vehicles in all states. See "Certain Legal Aspects of the
Receivables -- Security Interest in Vehicles." The Owner Trustee and any
Indenture Trustee will not be responsible for the legality, validity or
enforceability of any security interest in any Financed Vehicle.
If the protection provided to the holders of any Securities by the
subordination of any Securities or by any credit enhancement is insufficient,
such Securityholders would have to look for payment on their Securities to the
Obligors on the related Receivables, the proceeds from the repossession and
sale of the related Financed Vehicles which secure defaulted Receivables, and
the proceeds from Dealer Recourse obligations (in the event of a breach of the
warranties of such Dealer). In such event, certain factors, such as the Owner
Trustee's or the Indenture Trustee's not having perfected security interests in
the related Financed Vehicles in all states, may affect such Trust's ability to
repossess and sell the collateral securing the Receivables, and thus may reduce
the proceeds to be distributed to Securityholders. See "Certain Legal Aspects
of the Receivables".
THE OWNER TRUSTEE
The Owner Trustee for each Trust will be specified in the related
Prospectus Supplement. The Owner 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 Owner Trustee set forth in the related Trust
Documents. An Owner Trustee may resign at any time, in which event the Seller
or its successor will be obligated to appoint a successor trustee which is
eligible under the related Trust Documents. The Seller also may remove the
Owner Trustee if the Owner Trustee ceases to be eligible to continue as Owner
Trustee under the related Trust Documents or if the Owner Trustee becomes
insolvent. In such circumstances, the Seller will be obligated to appoint a
successor trustee eligible under the related Trust Documents. Any resignation
or removal of an Owner Trustee and appointment of a successor trustee will be
subject to any conditions or approvals specified in the related Prospectus
Supplement and will not become effective until acceptance of the appointment by
the successor trustee.
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THE RECEIVABLES
GENERAL
The Receivables held by each Trust were, or as to Subsequent
Receivables will be, purchased by the Servicer or in certain cases by a
wholly-owned subsidiary of the Servicer, as specified in the related Prospectus
Supplement, in the ordinary course of business pursuant to the Servicer's
Contract Acquisition Program. The underwriting standards of the Servicer's
Contract Acquisition Program emphasize the Obligor's creditworthiness and
ability to repay, as well as the asset value of the Financed Vehicle. Each of
the Receivables held by each Trust (i) was or will be originated in the United
States, (ii) has or will have a contractual Annual Percentage Rate ("APR") that
equals or exceeds 15% or such other percentage as specified in the related
Prospectus Supplement, (iii) provides or will provide for level monthly
payments which provide interest at the APR and fully amortize the amount
financed over an original term no greater than 60 months, (iv) is not more than
one month past due as of the Initial Cutoff Date or Subsequent Cutoff Date, if
any, as the case may be, as set forth in the related Prospectus Supplement, and
(v) is or will be attributable to the purchase of a new or used automobile or
light truck. The Receivables held by each Trust were or will be selected in
order to meet the criteria described above, and in the related Prospectus
Supplement, and no selection procedures believed to be adverse to the
Securityholders of any series were or will be utilized in selecting the
Receivables to be held by each Trust from qualifying retail installment sale
contracts. Any obligation of any Trust to purchase the Subsequent Receivables
shall be subject to such additional conditions as may be specified in the
related Prospectus Supplement.
Information with respect to the Receivables held by each Trust will
be set forth in the related Prospectus Supplement, including, to the extent
appropriate, the composition, distribution by APR, states of origination and
portion secured by new and used vehicles.
DELINQUENCIES, CHARGE-OFF POLICIES AND NET LOSSES
Certain information concerning the Servicer's delinquency and loss
experience with respect to its portfolio of retail installment sale contracts
for new and used automobiles and light trucks acquired pursuant to its Contract
Acquisition Program (which may include receivables previously sold which are
serviced by the Servicer) will be set forth in the related Prospectus
Supplement. Delinquency is recognized by the Servicer on a contractual basis
only. Installment payments must equal or exceed 95% of the scheduled payment
due for a contract to be considered current. The Servicer's collection
policies specifically do not allow payments to be deferred or contracts to be
extended by an Obligor. In addition, contracts are not rewritten unless the
Servicer is mandated to do so in accordance with state or federal law. There
can be no assurance that the delinquency and loss experience on any Receivables
held by any Trust will be comparable to prior experience of the Servicer.
The Servicer's collection and charge-off policies are structured to
address the credit risk of the non-prime automobile credit market. The
Servicer's policies are believed by it to be generally more stringent than the
policies of the major captive finance companies and financial institutions, and
are designed to result in obligors making timely payments to the Servicer. The
Servicer's policies generally result in (i) the commencement of repossession
activities with respect to the vehicle on or about the 30th day of delinquency
for contracts acquired under the Servicer's Contract Acquisition Program and
(ii) the recognition of a loss upon the earlier of retaking of the vehicle or
the 60th day of delinquency. In both cases, these actions generally are
believed by the Servicer to occur earlier than is typical for major captive
finance companies and/or financial institutions.
The Servicer's charge-off policy relating to repossessed vehicles,
bankruptcy and "skip" accounts for contracts owned by the Servicer or a
subsidiary of the Servicer are as follows: For repossessions, a charge is
taken upon taking possession of the vehicle equal to the difference between (x)
the then current outstanding principal balance of the receivable and (y) the
sum of (i) 80% of current wholesale value, as defined by the most commonly used
reference source (i.e. Kelly Blue Book, National Automobile Dealers Association
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Official Used Car Guide, etc.) plus (ii) estimated rebates from the
cancellation of outstanding insurance policies and/or extended service
contracts minus (iii) adjustments for the condition of the collateral. The
initial charge is later adjusted to reflect the actual proceeds from the
disposition of the repossessed collateral, net of the costs incurred in taking,
storing and disposing of the vehicle, and/or actual rebate proceeds. For
accounts on which a bankruptcy notice has been received, a charge equal to the
then current outstanding principal balance is taken upon the earlier of (i) an
obligor allowing the account to become sixty days delinquent or (ii) upon the
Servicer's notice of the results of the bankruptcy proceedings. The initial
charge is then adjusted, if necessary, to reflect the results of the bankruptcy
proceedings. The Servicer classifies the following three types of accounts as
"skip" accounts: if the Servicer is unable to contact or locate an obligor for
a period of approximately 30 days; if the obligor refuses to provide the
Servicer with the location of the collateral; or if the Servicer is unable to
repossess the collateral without a breach of the peace. In these cases, a
charge equal to the then current outstanding principal balance of the contract
is taken. If the Servicer subsequently makes contact with the obligor, current
employment and residence information is obtained primarily to expedite the
repossession of the collateral and/or the Servicer takes legal action to force
the obligor to deliver the vehicle. Upon repossession of the collateral, the
initial charge is adjusted by an estimated recovery equal to (i) 80% of current
wholesale value, as defined by the most commonly used reference source (i.e.
Kelly Blue Book, National Automobile Dealers Association Official Used Car
Guide, etc.) plus (ii) estimated rebates from the cancellation of outstanding
insurance policies and/or extended service contracts minus (iii) adjustments
for the condition of the collateral. Additional adjustments to the initial
charge are made as actual proceeds are received in accordance with the process
described above for repossessions.
Charge-off policies for contracts sold to a Trust but serviced by
the Servicer are consistent with the description above, except the terms of the
Trust Documents require a charge and/or a recovery only to be recognized upon
the sale of the repossessed vehicle, and the charge will be equal to the
difference between the current outstanding principal balance of the contract at
time of repossession and the net proceeds realized from the sale of the vehicle
without regard to estimated proceeds from rebatable items, such as outstanding
insurance policies and/or extended service contracts. When compared to the
Servicer's standard policy, the terms of the Trust Documents result in a timing
difference in the recognition of a loss and a difference in the net charge
recognized. The timing difference results from two factors, the legal
requirement in most states to hold a repossession for a period of time to
provide the Obligor with the opportunity to redeem the collateral prior to its
sale and the period of time from the expiration of this redemption period to
the actual sale date of the vehicle. Generally, the timing difference is
approximately three to four weeks, comprised of approximately two weeks plus
one to two weeks, respectively. The second difference is in the computation of
the charge. As stated above, the Servicer's standard policy for computing the
charge to be taken includes estimated net proceeds from rebatable items such as
outstanding insurance policies and/or extended service contracts. These
estimated proceeds are ignored in computing the charge to be taken for purposes
of the Trust Documents. Proceeds from such items are recognized as recoveries
upon their receipt.
YIELD AND PREPAYMENT CONSIDERATIONS
Interest paid on the Receivables will be passed through or paid, as
the case may be as specified in the related Prospectus Supplement, to
Securityholders on each Distribution Date set forth in the related Prospectus
Supplement, in an amount equal to one-twelfth of the applicable annual
Pass-Through Rate applied to the applicable Certificate Balance or the
applicable annual Interest Rate on the applicable Note Balance on the related
Record Date specified in the Prospectus Supplement. In the event of
prepayments on Receivables, Securityholders will nonetheless be entitled to
receive interest for the full month in which such prepayment occurs.
All the Receivables are prepayable at any time. If prepayments are
received on the Receivables, the actual weighted average life of the
Receivables may be shorter than the scheduled weighted average life (i.e., the
weighted average life assuming that payments will be made as scheduled, and
that no prepayments will be made). (For this purpose, the term "prepayments"
also includes liquidations due to default, as well as receipt of proceeds from
credit life, credit disability, and casualty insurance policies.) Weighted
average
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life means the average amount of time during which each dollar of principal on
a Receivable is outstanding. The payment characteristics of the Receivables
held by a Trust will be specified in the related Prospectus Supplement.
The rate of prepayments on the Receivables may be influenced by a
variety of economic, social, and other factors, including the fact that an
Obligor may not sell or transfer a Financed Vehicle without the consent of the
Servicer. The Servicer believes that the actual rate of prepayments will
result in a substantially shorter weighted average life than the scheduled
weighted average life of the Receivables. Any reinvestment risks resulting
from a faster or slower incidence of prepayment of Receivables will be borne by
the Securityholders of the related Trust. See also "Description of the
Purchase Agreements and the Trust Documents -- Termination" regarding the
Servicer's option to purchase all of the Receivables of a Trust as of the last
day of any month in which the Pool Balance of such Trust at the close of
business on the Record Date as a percentage of the Original Pool Balance
(including any Subsequent Receivables) is 10% or less.
CERTIFICATE AND NOTE FACTORS AND TRADING INFORMATION
The "Certificate Factor" for each class of Certificates will be a
seven-digit decimal which the Servicer will compute each month indicating the
Certificate Balance, as of the close of business on the Distribution Date as
specified in the related Prospectus Supplement in that month as a fraction of
the respective original outstanding principal balances of all of the
Certificates of such series. The Certificate Factor will not change as a
result of the addition of Subsequent Receivables. The "Note Factor" for each
class of Notes, if any, will be a seven-digit decimal which the Servicer will
compute each month indicating the remaining outstanding principal balance with
respect to such Notes as of each Payment Date as specified in the related
Prospectus Supplement as a fraction of the original outstanding principal
balance of such class of Notes. Each Certificate Factor and each Note Factor
will be 1.0000000 as of the Initial Cutoff Date for such series; thereafter,
the Certificate Factor and the Note Factor will decline to reflect reductions
in the Certificate Balance of the applicable class of Certificates and the Note
Factor will decline to reflect reductions in the outstanding principal balance
of the applicable class of Notes, as the case may be, as a result of scheduled
payments collected, prepayments and liquidations of the Receivables (and also
as a result of a prepayment arising from application of the Pre-Funding
Account). The amount of a Certificateholder's pro rata share of the
Certificate Balance for the related class of Certificates can be determined on
any date by multiplying the original denomination of the holder's Certificate
by the applicable Certificate Factor as of the close of business on the most
recent Distribution Date. 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 Note Factor.
Pursuant to each Trust and pursuant to the related Trust Documents,
the Securityholders thereunder will be entitled to receive monthly reports
concerning the payments received on the Receivables, additions of Subsequent
Receivables, if any, and the reduction in the Pre-Funded Amount, if any, the
Certificate Balance, the Note Balance, the Certificate Factor or Certificate
Factors for each class of Certificates, the Note Factor or Note Factors for
each class of Notes and various other items of information with respect to such
series. Securityholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date permitted
by law. See "Certain Information Regarding the Securities - Statements to
Securityholders."
USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of each
series of Securities will be applied to the purchase of Receivables from the
Servicer or from a wholly-owned subsidiary of the Servicer owning such
Receivables, as specified in the related Prospectus Supplement, and, if
specified in the related Prospectus Supplement, to the deposit of the
Pre-Funded Amount, if any, in the Pre-Funding Account and/or to provide for
other forms of credit enhancement specified in the related Prospectus
Supplement.
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THE SELLER
The Seller, a wholly-owned subsidiary of the Servicer, was
incorporated in the State of California in October, 1991. The Seller was
organized for limited purposes, which include purchasing receivables from the
Servicer and transferring such receivables to third parties and any activities
incidental to and necessary or convenient for the accomplishment of such
purposes. The principal executive offices of the Seller are located at Oakmont
Circle 1, 601 Oakmont Lane, Suite 350, Westmont, Illinois 60559-5549. The
telephone number of such offices is (708) 953-6170.
The Seller has taken and will take steps in structuring the
transactions contemplated hereby and in the related Prospectus Supplement that
are intended to make it unlikely that the voluntary or involuntary application
for relief by the Servicer, or any subsidiary of the Servicer transferring
receivables to the Seller, under any Insolvency Law will result in the
consolidation of the assets and liabilities of the Seller with those of the
Servicer or such subsidiary of the Servicer. These steps include the creation
of the Seller as a separate, limited-purpose subsidiary pursuant to Articles of
Incorporation containing certain limitations (including restrictions on the
nature of the Seller's business and a restriction on the Seller's ability to
commence a voluntary case or proceeding under any Insolvency Law without the
unanimous affirmative vote of all of its directors). The Seller's Articles of
Incorporation include a provision that requires the Seller to have two
directors who qualify under the Articles of Incorporation as "Independent
Directors."
If, notwithstanding the foregoing measures a court concluded that
the assets and liabilities of the Seller should be consolidated with the assets
and liabilities of the Servicer, or any subsidiary of the Servicer transferring
receivables to the Seller, in the event of the application of any Insolvency
Law to the Servicer or such subsidiary of the Servicer, or a filing were made
under any Insolvency Law by or against the Seller, or if an attempt were made
to litigate any of the foregoing issues, delays in the distributions on the
Securities (and possible reductions in the amount of such distributions) could
occur.
THE SERVICER
The Servicer is an Ohio corporation and a wholly-owned subsidiary
of KeyCorp, an Ohio financial services holding company headquartered in
Cleveland, Ohio. The Servicer was newly formed in 1995 to facilitate the
consummation of a merger, which became effective September 27, 1995, pursuant
to which AutoFinance Group, Inc., a California corporation ("AFG"), merged with
and into the Servicer, with the Servicer continuing as the surviving
corporation under the name "AutoFinance Group, Inc." The Servicer continues
the business of AFG. AFG was incorporated in November, 1980 in the State of
California. AFG succeeded to the business of a privately owned corporation
begun in 1989, which merged on August 23, 1990 into AFG, and at that time AFG
entered into the business of acquiring and servicing non-prime automotive
receivables. The executive offices of the Servicer are located at Oakmont
Circle 1, 601 Oakmont Lane, Westmont, Illinois 60559-5549, and its telephone
number is (708) 655-7100.
The Servicer is an automotive finance company engaged primarily in
the indirect financing (the purchase of contracts from Dealers) of automotive
purchases by individuals with non-prime credit. The non-prime market segment
is comprised of individuals who are deemed to be relatively high credit risks
due to various factors, including, among other things, the manner in which they
have handled previous credit, the absence or limited extent of their prior
credit history, or their limited financial resources. The Servicer serves as
an alternative source of financing to automotive dealers and offers such
automotive dealers the opportunity for increased sales to customers who
typically do not qualify for financing by the automotive dealers' traditional
financing sources. The Servicer as of June 30, 1994 does business with
approximately 700 franchised new car dealers in 18 states. From time to time,
the Servicer may determine to commence business in additional jurisdictions or
cease doing business in any state in which it presently does business. The
related Prospectus Supplement will specify the geographic distribution of the
specific Receivables included in the related Trust. In certain cases the
Servicer may effect purchases of contracts, or may hold and effect ownership of
contracts, by means of a wholly-owned subsidiary. The related Prospectus
Supplement will specify whether
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any specific Receivables included in the related Trust have been so acquired or
held and the reasons a subsidiary was used by Servicer.
The Servicer has focused its efforts in the non-prime market
because of its ability to evaluate the unique credit risks associated with this
market segment and to effectively service (collect) the resulting receivables.
The Servicer has developed sophisticated processing systems and controls
specifically designed to screen credit applicants and eliminate those whose
credit quality is deteriorating or whose credit characteristics suggest too
great a probability of default. These systems and controls consist of a
comprehensive evaluation process of multiple credit bureau reports as well as
extensive verification processes for screening applicant and dealer provided
information. In addition, the Servicer has developed proactive, rather than
reactive, collection procedures and systems that are designed to ensure that
the customers clearly understand their credit obligations. For example, the
Servicer utilizes a monthly billing system rather than the more conventional
use of coupon books in order to continually remind the customers of their
monthly payment obligations and has established a "welcoming" process that
educates the customers, both orally and in writing, of their obligations.
THE NON-PRIME CREDIT MARKET AND COMPETITION
The non-prime credit market is comprised of individuals who are
deemed to be relatively high credit risks due to various factors, including,
among other things, the manner in which they have handled previous credit, the
absence or limited extent of their prior credit history, or their limited
financial resources. According to the Consumer Bankers Association, total
automobile credit outstanding in 1992 amounted to approximately $259.4 billion,
of which approximately $72.8 billion consisted of personal finance company
portfolios. The Servicer is unaware of any authoritative estimates of the size
of the non-prime portion of this market.
The non-prime credit market is highly fragmented and historically
has been serviced by a variety of financial entities, including captive finance
arms of major automotive manufacturers, banks, savings and loans institutions,
independent finance companies, credit unions, small loan companies, industrial
thrifts and leasing companies. Many of these financial organizations do not
consistently solicit business in, or have withdrawn from, this credit market.
The Servicer believes that captive finance companies generally focus their
marketing efforts on this market when inventory control and/or production
scheduling requirements of their parent organizations dictate a need to enhance
sales volumes and then exit the market once these sales volumes are satisfied.
The Servicer also believes that increased regulatory oversight and capital
requirements imposed by market conditions and governmental agencies have
limited the activities of many banks and savings and loans institutions in this
credit market. In many cases those organizations electing to remain in the
auto finance business have migrated toward higher credit quality customers to
allow reductions in their overhead cost structures. As a result, the non-prime
credit market is primarily serviced by smaller finance organizations that
solicit business when and as their capital resources permit. The Servicer's
strategy is designed to capitalize on the market's lack of a major, consistent
financing source.
BUSINESS STRATEGY AND GROWTH STRATEGY
The Servicer's business strategy is focused upon achieving the
following objectives:
EFFECTIVE EVALUATION OF CREDIT RISK
The Servicer recognizes that while an individual's credit profile
is dynamic, the effective evaluation of the profile is essential to
the accurate assessment of probable performance. The Servicer has
developed, and is constantly refining, the processing systems and
controls specifically designed to support its evaluation process.
The Servicer utilizes these systems and controls to assess each
applicant's ability to repay the amounts due on the contract and
the adequacy of the financed vehicle as collateral.
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CONSISTENCY IN CREDIT DECISIONS
The Servicer has designed and implemented processing systems and
controls and has trained its personnel to achieve the consistent
application of the Servicer's credit standards between its credit
offices and among its credit analysis personnel.
CONTROL OF LOSSES THROUGH EFFECTIVE SERVICING
The Servicer's collection activities incorporate proactive, rather
than traditional reactive, procedures and systems. The objective
of these procedures and systems is to identify and educate those
individuals generally willing to comply with the terms and
conditions of their installment contract, and to emphasize, through
timely follow-up contacts, the Servicer's expectations as to
compliance.
CONTRACT ACQUISITION PROGRAM
The Servicer's Contract Acquisition Program is designed to acquire
automotive contracts through (i) the purchase of such contracts from franchised
new car dealers and (ii) the bulk purchase of receivable portfolios from
financial organizations.
INDIRECT FINANCING
The cornerstone of the Servicer's operations is its indirect
financing of automotive purchases by individuals with non-prime credit.
Targeted to franchised new car dealers in selected markets within the United
States, this service offers dealers the opportunity for increased vehicle sales
to customers who typically do not qualify for financing by the dealers'
traditional financing sources.
DEALER SOLICITATION. The Servicer solicits business from dealers
through its marketing representatives. The Servicer's representatives identify
and target franchised new car dealers that have established, or are considering
establishing, customer solicitation programs designed to attract non-prime
credit consumers. Within each market area, the Servicer's representatives
typically focus upon approximately 20 to 40 primary dealers. Once selected, if
the Dealer is interested in the Servicer's financing program, the Dealer and
the Servicer enter into a non-exclusive written dealer agreement (a "Dealer
Agreement"). The Servicer's Dealer Agreements generally provide that contracts
are sold by the Dealer to the Servicer "without recourse" to the Dealer, except
in limited circumstances including, among others, that: (i) the financed
vehicle is not properly registered showing the Servicer as legal owner; (ii)
the full down payment specified in the contract was not received by the Dealer
in cash; (iii) certain representations and warranties by the Dealer regarding
the contract, the financed vehicle, the contract process and manner of sale are
breached or untrue; or (iv) the Dealer has failed to comply with applicable
law.
The Servicer's representatives train the Dealer's personnel in the
Servicer's finance programs. This training is continuous since dealerships
generally experience a relatively high degree of personnel turnover. The
training provided by the Servicer is designed to assist the Dealer in
identifying consumers who will qualify for financing by the Servicer and
structuring transactions that meet the Servicer's requirements. The Servicer's
representatives reside in their assigned market territories to facilitate the
servicing of their Dealers.
In the event that an individual elects to finance the purchase
through a Dealer, the Dealer will submit a customer's credit application to the
Servicer and other financing sources for a review of the customer's credit
worthiness and proposed transaction terms. Such reviews generally take into
account, among other things, the individual's credit history and capacity to
pay, residence and job stability. After reviewing the credit application, each
finance source will notify the Dealer whether it is willing to purchase the
contract and, if so, under what conditions. If more than one finance source
has offered to purchase the contract, the
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Dealer typically will select the source based on an analysis of the "buy rate,"
or the interest rate, fees and other terms and conditions stipulated by the
finance source.
CREDIT EVALUATION PROCEDURES. The Servicer has developed
sophisticated processing systems and controls specifically designed to support
its evaluation process of non-prime credit applicants. This process consists
of a comprehensive evaluation of multiple credit bureau reports in order to
eliminate individuals whose credit quality is deteriorating, suggests too great
a probability of default or whose credit experience is too limited for the
Servicer to assess the probability of performance. The Servicer also may
require verification of certain applicant and/or Dealer provided information
prior to making its credit decision. This verification process in many
instances requires submission of supporting documentation and is performed
solely by Servicer personnel.
After receiving the applicant's credit application, the information
extracted from the credit bureau reports, the application and the proposed
transaction are reviewed on the basis of the Servicer's credit and transaction
structure criteria and the credit decision is made. This decision may be to
(i) approve the application; (ii) approve the application with conditions; or
(iii) decline the application. The credit analyst documents the decision and
the Dealer is automatically notified by facsimile transmission.
LOSS EXPOSURE MANAGEMENT. The Servicer has designed its finance
programs to limit the loss exposure on each transaction. The degree of
exposure in any transaction is a function of: (i) the extent of credit granted
compared to the value of the underlying collateral; (ii) the possibility of
physical damage to, or the loss of, the collateral; and (iii) the potential for
any legal impediment to the collection of the obligation or the repossession of
the collateral. The Servicer seeks to control loss exposure by: (i) limiting
the credit it is willing to extend based upon its assessment of the value of
the underlying collateral; (ii) requiring physical damage insurance to be
maintained at all times to protect its financial interest; and (iii)
determining whether the applicant has sufficient disposable income to meet such
applicant's existing obligations, including the obligations resulting from the
proposed transaction.
Upon purchase of the contract, the Servicer acquires a security
interest in the vehicle financed. Unless otherwise specified in the related
Prospectus Supplement, all contracts purchased by the Servicer are fully
amortizing and provide for equal payments over the term of the contract
(typically 24 to 60 months). The portions of such payments allocable to
principal and interest are, for payoff and deficiency purposes, determined in
accordance with the law of the state in which the contract was originated. In
the event that state law provides for more than one method of allocating
principal and interest, the terms of the acquired contract are applied.
CONTRACT PROCESSING. Upon submission by the Dealer of the contract
and related documentation, the Servicer completes a series of processes and
procedures which are designed to: (i) substantiate the accuracy of information
critical to the Servicer's original credit decision; (ii) verify that the
contract submitted by the Dealer complies with both the conditions under which
the credit approval was granted and the Servicer's transaction structure
criteria; and (iii) confirm that the documentation complies with the Servicer's
loss management requirements. These processes and procedures include the
verification of employment, income, collateral and insurance prior to the
contract being released for purchase.
CONTRACT PURCHASE. Upon a contract being released for purchase, the
Servicer prepares and issues a check to the Dealer in the appropriate amount,
and issues a "welcome" letter to the obligor. This letter provides the obligor
with the Servicer's mailing address and telephone number for future reference,
and advises the obligor that a billing statement will be mailed approximately
15 days prior to each payment due date.
BULK PURCHASES OF CONTRACTS
The Servicer's Contract Acquisition Program includes the bulk
purchase of receivables from financial organizations. Bulk purchase portfolio
candidates are subjected to a detailed evaluation performed solely by the
Servicer personnel. While this evaluation process differs substantially from
the indirect financing
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process described above, the objectives are the same: assessment of the
probability of performance in accordance with the terms of the contract and
limitation of loss exposure on each transaction. Purchase agreements between
the Servicer and the financial organization typically are non-recourse to the
financial organization, except that such organization is obligated to
repurchase contracts that do not meet certain limited representations and
warranties. To date, the Servicer has completed two bulk purchases of
receivables. The collection performances of each such bulk purchase has been
as expected based on analyses conducted by the Servicer at the time of purchase
of each such portfolio. The principal amount of each such portfolio has been
reduced substantially to zero. The related Prospectus Supplement may describe
further the Servicer's evaluation criteria for bulk purchased receivables if
such receivables are included in the Receivables related thereto.
CONTRACT SERVICING AND ADMINISTRATION
The Servicer's contract servicing and administration activities
relate to the administration and collection of the contracts and have been
specifically tailored to the unique challenges of non-prime credits. Through
such services, the Servicer: (i) collects payments; (ii) accounts for and posts
all payments received; (iii) responds to obligor inquiries; (iv) takes all
necessary action to maintain the security interest granted in the financed
vehicle; (v) investigates delinquencies and communicates with the obligor to
obtain timely payments; (vi) reports tax information to the obligor; (vii)
monitors the contract and its related collateral; and (viii) when necessary,
repossesses and disposes of the financed vehicle.
The Servicer's activities incorporate proactive, rather than
traditional reactive, procedures and systems. For example, the Servicer has
established a "welcoming" process through which the Servicer attempts to
educate obligors, both orally and in writing, upon the Servicer's purchase of
their contract. This process is designed to ensure that obligors clearly
understand their credit obligations, including their responsibility to maintain
insurance coverage on the financed vehicle. This process also includes a
detailed review of the terms of the contract with particular emphasis on the
amount and due date of the obligor's payment obligation and the Servicer's
expectations as to the timely receipt of payments.
In addition, the Servicer utilizes a monthly billing statement
system (rather than the more conventional use of payment coupon books) to
remind obligors of their monthly payment obligations. This system also serves
as an early warning mechanism in the event the obligor has failed to notify the
Servicer of an address change. The Servicer also contacts the obligors
substantially earlier than is customary in the industry, commencing within 24
hours of an obligor's due date (as compared to the more conventional initial
contact between the 17th and 21st day) and continuing until payment has been
received. The Servicer believes that early and frequent contact with the
obligor reinforces the individual's obligation and the Servicer's expectation
for timely payment and serves to expedite payments.
DELINQUENCY CONTROL AND COLLECTION STRATEGY
The Servicer's customer service management personnel review any
account that reaches 15 days of delinquency to assess the collection efforts to
date and to refine, if appropriate, the collection strategy. The Servicer does
not allow contracts to be extended or re-written or payments to be deferred.
The Servicer's policies therefore limit its available remedies to the
collection of monies due. The Servicer's customer service personnel, together
with senior management, generally will design a collection strategy that
includes a specific deadline within which the obligation must be collected.
Accounts that have not been collected during such period are again reviewed,
and, unless there are specific circumstances which warrant further collection
efforts, the account is assigned to outside agencies for repossession.
Repossessed vehicles are generally resold by the Servicer through wholesale
auctions which are attended principally by dealers. Regardless of the actions
taken or circumstances surrounding a specific delinquent account, any account
which reaches 60 days of delinquency is charged-off and the obligor is pursued,
subject to any legal limitations, for both the collateral and deficiency.
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Except for repossessions, policies for charging-off an account do
not differ based upon whether a receivable is owned by the Servicer or the
transferring subsidiary of the Servicer, or was sold to a Trust but is being
serviced by the Servicer. For receivables wholly-owned by the Servicer or the
transferring subsidiary of the Servicer, repossession losses are recognized
upon repossession of the vehicle based on the difference between the
outstanding principal balance of the receivable and the estimated sales
proceeds and rebates of insurance and/or extended service contracts. The
initial charge is then adjusted for actual sales proceeds, net of the costs
incurred in taking, storing and disposing of the vehicle, and/or actual rebate
proceeds. For receivables previously sold to a Trust but serviced by the
Servicer, repossession losses are recognized upon the sale of the repossessed
vehicle based on the difference between the outstanding principal balance and
the net sales proceeds. Upon repossession but prior to the sale of the related
vehicle, these contracts are considered to be "non-liquidated receivables."
Additionally, repossession losses on receivables sold to a Trust but serviced
by the Servicer give no effect to estimated rebates of insurance and/or
extended service contracts; proceeds from such items subsequent to the sale of
the repossessed vehicle are recognized as recoveries upon their receipt.
Accordingly, non-liquidated receivables are not reflected in the Servicer's
delinquency experience nor are losses prior to sale or recoveries for insurance
and other rebatable items prior to receipt reflected in the Servicer's loss
experience.
Contracts acquired as a result of a bulk purchase are subject to
the same contract servicing and administration activities, policies and
procedures with two exceptions. First, the Servicer's "welcoming" process is
limited to written communication with contract obligors and is adjusted to
reflect the contract status at the date of portfolio purchase. Second,
delinquencies in excess of 60 days may not be charged-off if the individual has
indicated a willingness to bring the account current within an acceptable
period of time. The Servicer's initial tolerance for delinquencies in excess
of 60 days is based upon the condition of the portfolio at the time of purchase
and the effectiveness of the seller's servicing activity. This tolerance level
is reduced typically over a period of between three to twelve months as
customers adjust to the Servicer's collection policies and procedures. At the
end of this adjustment period, the accounts are fully subject to the Servicer's
standard policies and procedures.
During the evaluation of the bulk purchased portfolios, the
Servicer develops loss estimates which are based, in part, on the value of the
underlying collateral and a review of the contract files. The Servicer's
purchase price for the contract portfolios purchased in bulk includes, among
other valuation adjustments for credit and other risks, an initial loss
allowance for the contracts. As bulk purchased receivables are charged-off,
the losses are charged to the related valuation loss reserve until such reserve
is fully depleted. These valuation loss reserves have been sufficient to date
to cover all losses incurred on bulk purchased portfolios.
THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of
a given series will be issued pursuant to Trust Documents to be entered into
among the Seller, the Servicer, the Owner Trustee and the Indenture Trustee, if
any, forms of which have been filed as exhibits to the Registration Statement
of which this Prospectus forms a part. The following summary does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, all of the material provisions of such forms of Trust Documents.
Each class of Certificates will initially be represented by a
single Certificate registered in the name of Cede & Co., the nominee of DTC
(together with any successor depository selected by the Seller, the
"Depository"). See "Certain Information Regarding the Securities -- Book-Entry
Registration." 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
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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. The Owner Trustee will initially be designated as the registrar for
the Certificates.
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, with respect to
principal only or interest only) on the Certificates of any series will be
described in the related Prospectus Supplement. Distributions of interest on
the Certificates will be made on the dates specified in the related Prospectus
Supplement (each, a "Distribution Date") and, except to the extent specified in
the related Prospectus Supplement, will be made prior to distributions with
respect to principal. A series may include one or more classes of Strip
Certificates entitled to (i) distributions in respect of principal with
disproportionate, nominal or no interest distribution, or (ii) 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 Strip Certificates), or any combination of the
foregoing. The related 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. Interest on the Certificates
will be calculated on the basis of a 360-day year consisting of twelve 30-day
months. Distributions in respect to the Certificates will be subordinate to
payments in respect of the Notes, if any, as more fully described in the
related Prospectus Supplement. Distributions in respect of 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 set forth in the related Prospectus Supplement.
THE NOTES
GENERAL
A series of Securities may include one or more classes of Notes
issued pursuant to the terms of an Indenture, a form of which has been filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.
Notes will be issued as a part of any series if and as specified in the related
Prospectus Supplement. The following summary does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all of the
provisions of the Notes and the Indenture, a form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part,
and the following summary may be supplemented by the related 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." Notes will
be available for purchase in denominations of $1,000 and integral multiples
thereof. Notes 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. The Indenture Trustee will initially be
designated as the registrar for the Notes of any series.
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 related Prospectus Supplement.
The right of holders of any class of Notes to receive payments of principal and
interest may be senior or subordinate to the rights of holders of any class or
classes of Notes of such series,
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or any class of Certificates, as described in the related Prospectus
Supplement. Except to the extent provided in the related Prospectus
Supplement, payments of interest on the Notes will be made prior to payments of
principal thereon. A series may include one or more classes of Strip Notes
entitled to (i) principal payments with disproportionate, nominal or no
interest payment, or (ii) 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 certain classes of Strip Notes), or any combination of the foregoing.
The related 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 related Prospectus Supplement.
In the case of a series of Securities which includes two or more
classes of Notes, the sequential order and priority of payments in respect of
principal and interest on any of the dates specified for payments in the
related Prospectus Supplement (each, a "Payment Date"), and any schedule or
formula or other provisions applicable to the determination thereof, of each
such class will be set forth in the related Prospectus Supplement.
THE INDENTURE
A form of Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The Seller will
provide a copy of the applicable Indenture (without exhibits) upon request to
any holder of Notes issued thereunder.
MODIFICATION OF INDENTURE WITHOUT NOTEHOLDER CONSENT. With respect
to each Trust, with the consent of the Seller and the Servicer, but without the
consent of the related Noteholders, and with notice to the applicable Rating
Agencies, the Indenture Trustee (on behalf of such Trust) may enter into one or
more supplemental indentures for any of the following purposes: (i) to correct
or amplify the description of the collateral or add additional collateral; (ii)
to evidence and provide for the assumption of the Note and the Indenture
obligations by a permitted successor to the Trust; (iii) to add additional
covenants for the benefit of the related Noteholders, or to surrender any
rights or power conferred upon the Trust; (iv) to convey, transfer, assign,
mortgage or pledge any property to or with the Indenture Trustee; (v) to cure
any ambiguity or correct or supplement any provision in the Indenture or in any
supplemental indenture; (vi) to evidence and provide for the acceptance of the
appointment of a successor Indenture Trustee or to add to or change any of the
provisions of the Indenture as shall be necessary and permitted to facilitate
the administration by more than one trustee; (vii) to modify, eliminate or add
to the provisions of the Indenture in order to comply with the Trust Indenture
Act of 1939, as amended; and (viii) to add any provisions to, change in any
manner, or eliminate any of the provisions of, the Indenture or modify in any
manner the rights of Noteholders under such Indenture; provided that any action
specified in this clause (viii) shall not, as evidenced by an opinion of
counsel, adversely affect in any material respect the interests of any related
Noteholder.
MODIFICATIONS OF INDENTURE WITH NOTEHOLDER CONSENT. With respect
to each Trust, with the consent of the Seller and the Servicer, and the holders
representing a majority of the aggregate principal balance of the outstanding
related Notes (a "Note Majority"), and with notice to the applicable Rating
Agencies, the Indenture Trustee may execute a supplemental indenture to add
provisions to change in any manner or eliminate any provisions of, the related
Indenture, or modify in any manner the rights of the related Noteholders.
Without the consent of the issuer of any credit enhancement, if
any, as specified in a Prospectus Supplement, and the holder of each
outstanding related Note affected thereby, however, no supplemental indenture
may: (i) change the due date of any installment of principal of or interest on
any Note or reduce the principal amount thereof, the interest rate specified
thereon or the redemption price with respect thereto or change the manner of
calculating any such payment or any place of payment where the coin or currency
in which any Note or any interest thereon is payable or impair the right to
institute suit for the enforcement of certain provisions of the Indenture
regarding payment; (ii) reduce the percentage of the aggregate amount
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of the outstanding Notes the consent of the holders of which is required for
any such 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; (iii) modify or alter the provisions of the Indenture regarding the
voting of Notes held by the related Trust, any other obligor on the Notes, the
Seller or an affiliate of any of them; (iv) reduce the percentage of the
aggregate outstanding amount of the Notes the consent of the holders of which
is required to direct the Indenture Trustee to sell or liquidate the
Receivables if the proceeds of such sale would be insufficient to pay the
principal amount and accrued but unpaid interest on the outstanding Notes; (v)
modify any provision except to increase the percentage of the aggregate
principal amount of the Notes required to amend the sections of the Indenture
or to add provisions which specify the applicable percentage of aggregate
principal amount of the Notes necessary to amend the Indenture or certain other
related agreements; or (vi) permit the creation of any lien ranking prior to or
on a parity with the lien of the Indenture with respect to any of the
collateral for the Notes or, except as otherwise permitted or contemplated in
the Indenture, terminate the lien of the Indenture on any such collateral or
deprive the holder of any Note of the security afforded by the lien of the
Indenture.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to
each Trust, "Events of Default" under the Indenture will consist of: (i) any
failure to pay interest on the related Notes as and when the same becomes due
and payable, which failure continues unremedied for five days; (ii) any failure
to make any required payment of principal on the Notes when the same becomes
due and payable; (iii) any representation or warranty of the Trust made in the
Indenture or in any certificate or other writing delivered pursuant thereto or
in connection therewith, proving to have been incorrect in any material respect
as of the time the same was made and the incorrectness of which materially and
adversely affects the rights of the related Noteholders and continues to be
incorrect; (iv) any failure to observe or perform in any material respect any
other covenants or agreements in the Indenture, which failure materially and
adversely affects the rights of the related Noteholders and continues for 30
days after the giving of written notice of such failure to the Seller or the
Servicer, as applicable, by the Indenture Trustee or to the Seller or the
Servicer, as applicable, and the Indenture Trustee by the holders of not less
than 25% of the principal amount of the related Notes; and (iv) certain events
of insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings and certain actions by the Trust indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations. 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 determined by the amount available to be
deposited in the Note Distribution Account for such Payment Date. Therefore,
the failure to pay principal on a class of Notes generally will not result in
the occurrence of an Event of Default unless such class of Notes has a final
scheduled Payment Date, and then not until such final scheduled Payment Date
for such class of Notes.
If an Event of Default should occur and be continuing with respect
to the Notes of any series, the related Indenture Trustee or 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.
If the Notes of any series have been declared due and payable
following an Event of Default with respect thereto, the related Indenture
Trustee may institute proceedings to collect amounts due or foreclose on Trust
Property, exercise remedies as a secured party, sell the related Receivables or
elect to have the Trust maintain possession of such Receivables and continue to
apply collections on such Receivables as if there had been no declaration of
acceleration. The Indenture Trustee, however, will be prohibited from selling
the related Receivables following an Event of Default, unless (i) the holders
of all the outstanding related Notes consent to such sale; (ii) 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 (iii) the
Indenture Trustee determines that the proceeds of the Receivables 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
representing 66-2/3% of the aggregate principal balance of the outstanding
related Notes. Following a declaration upon an Event of Default that the Notes
are immediately due and payable, (i) Noteholders will be entitled to ratable
repayment of principal on the basis of their respective unpaid principal
balances and (ii) repayment in full of the accrued interest on and unpaid
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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 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 or for the appointment of
a receiver or trustee or for any other remedy thereunder, unless (i) such
holder previously has given to the Indenture Trustee written notice of a
continuing Event of Default, (ii) 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, (iii) such holder or holders have offered the Indenture Trustee
reasonable indemnity, (iv) the Indenture Trustee has for 60 days failed to
institute such proceeding and (v) no direction inconsistent with such written
request has been given to the Indenture Trustee during such 60-day period by
the holders of a majority in principal amount of such outstanding Notes.
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 Note, the Indenture
Trustee may withhold the notice if and so long as it determines in good faith
that withholding the notice is in the interests of the Noteholders.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not, for a period of
one year after the payment of all of the Notes issued by such Trust, institute
against the related Trust any bankruptcy, reorganization or other proceeding
under any federal or state bankruptcy or similar law.
Neither the Indenture Trustee nor the Owner Trustee in its
individual capacity, nor any holder of a Certificate including, without
limitation, the Seller, nor any of their respective owners, beneficiaries,
agents, officers, directors, employees, affiliates, successors or assigns will,
in the absence of an express agreement to the contrary, be personally liable
for the payment of the related Notes or for any agreement or covenant of the
related Trust contained in the Indenture.
CERTAIN COVENANTS. Each Indenture will provide that the related
Trust may not consolidate with or merge into any other entity, unless (i) the
entity formed by or surviving such consolidation or merger is organized under
the laws of the United States, any state or the District of Columbia, (ii) 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, (iii) no Event of Default shall
have occurred and be continuing immediately after such merger or consolidation,
(iv) the Owner 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 any Rating Agency as a result of such merger or consolidation, (v) the
issuer of any credit enhancement, if any, as specified in the related
Prospectus Supplement, has consented to such merger or consolidation and (vi)
the Owner Trustee has received an opinion of counsel to the effect that such
consolidation or merger will not have any material adverse tax consequence to
the Trust or to any related Noteholder or Certificateholder.
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Each Trust will not, among other things, (i) except as expressly
permitted by the Indenture, the Purchase Agreement, 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, (ii) claim any credit on or make any deduction from the principal
and interest payable in respect of the related Notes (other than amounts
withheld under the Internal Revenue Code of 1986, as amended, 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, (iii)
permit the validity or effectiveness of the related Indenture to be impaired or
permit any person to be released from any covenants or obligations with respect
to the related Notes under such Indenture except as may be expressly permitted
thereby or (iv) 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 will incur, assume or guarantee any indebtedness other than indebtedness
incurred pursuant to the related Notes and the related Indenture or otherwise
in accordance with the Related Documents.
ANNUAL COMPLIANCE STATEMENT. Each 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 held by the Indenture Trustee as such and any action taken by it
that materially affects the Notes and that has not been previously reported.
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 related Prospectus Supplement. The Indenture Trustee for one series of
Notes may serve as the Owner Trustee with respect to another series of
Securities. The Indenture Trustee may resign at any time, in which event the
Seller will be obligated to appoint a successor trustee eligible under the
Indenture. The Seller may also remove the Indenture Trustee, if the Indenture
Trustee ceases to be eligible to continue as such under the Indenture or if the
Indenture Trustee becomes insolvent. In such circumstances, the Seller will be
obligated to appoint a successor trustee eligible under the Indenture. Any
resignation or removal of the Indenture Trustee and appointment of a successor
trustee will be subject to any conditions or approvals, including the approval
of the issuer of any credit enhancement, if any, specified in the related
Prospectus Supplement and will not become effective until acceptance of the
appointment by a successor trustee.
CERTAIN INFORMATION REGARDING THE SECURITIES
BOOK-ENTRY REGISTRATION
The Securities of each series initially 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 ("Participants") and
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facilitates the clearance and settlement of securities transactions between
Participants in such securities through electronic book-entry changes in
accounts of Participants, thereby 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 ("indirect participants").
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 Owner Trustee or the Indenture Trustee,
as applicable, through DTC and 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 such other circumstances, if any, as may be
specified in the related 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 Owner 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.
With respect to 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 (the
"Rules"), 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.
With respect to any series of Securities, except as specified in
the related Prospectus Supplement, Certificates and Notes (if any) will be
issued in registered form to Certificate Owners and Note Owners, or their
nominees, rather than to DTC (such Certificates and Notes being referred to
herein as "Definitive Certificates" and "Definitive Notes," respectively), only
if (i) the Seller advises the Owner 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, is unable to locate a qualified
successor, (ii) the Seller at its sole option has advised the Owner Trustee or
the Indenture Trustee, as the case may be, in writing that it elects to
terminate the book- entry system through DTC or (iii) after the occurrence of
an Event of Default, the holders representing a majority of the Certificate
Balance (a "Certificate Majority") or a Note Majority advises the Owner 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, such Certificates or Notes will be transferable directly (and not
exclusively on a book-entry basis) and registered holders will deal directly
with the Owner Trustee or the Indenture Trustee, as the case may be, with
respect to 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 the
Seller that DTC will take such action with respect to any fractional interest
of the Certificates or the Notes only at the direction of and on behalf of such
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Participants beneficially owning a corresponding fractional interest of the
Certificates or the Notes. DTC may take actions, at the direction of the
related Participants, with respect to some Certificates or Notes which conflict
with actions taken with respect to 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 Owner
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 prior to each Distribution Date, the Servicer will prepare
and provide to the Owner Trustee a statement to be delivered to the related
Certificateholders on such Distribution Date. On or prior to each Payment
Date, the Servicer will prepare and provide to the Indenture Trustee a
Statement to be delivered to the related Noteholders on such Payment Date.
Such statements will be based on the information in the related Servicer's
Certificate setting forth certain information required under the Trust
Documents (the "Servicer's Certificate"). Each such statement to be delivered
to Certificateholders will include the following information as to the
Certificates with respect to such Distribution Date or the period since the
previous Distribution Date, as applicable, and each such statement to be
delivered to Noteholders will include the following information as to the Notes
with respect to such Payment Date or the period since the previous Payment
Date, as applicable:
(i) the amount of the distribution allocable to interest on
or with respect to each class of Securities;
(ii) the amount of the distribution allocable to principal on
or with respect to each class of Securities;
(iii) the Certificate Balance and the Certificate Factor for each
class of Certificates and the aggregate outstanding principal balance and, if
applicable, the Note Factor for each class of Notes, after giving effect to all
payments reported under (ii) above on such date;
(iv) the amount of the Servicing Fee paid to the Servicer with
respect to the related Monthly Period or Periods, as the case may be;
(v) the Pass-Through Rate, Interest Rate or other applicable
rate of return, if any, for the next period for any class of Certificates or
Notes with variable or adjustable rates;
(vi) the amount, if any, distributed to Certificateholders and
Noteholders applicable to payments under any credit enhancement; and
(vii) such other information as may be specified in the related
Prospectus Supplement.
Each amount set forth pursuant to subclauses (i), (ii), (iv), (vi)
and (vii) with respect to Certificates or Notes will be expressed as a dollar
amount per $1,000 of the initial Certificate Balance or the initial principal
balance of the Notes, as applicable.
Unless and until Definitive Certificates or Definitive Notes are
issued, such reports with respect to a series of Securities will be sent on
behalf of the related Trust to the Owner 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 such
reports upon written request, together with a certification
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that they are Certificate Owners or Note Owners, as the case may be, and
payment of any expenses associated with the distribution of such reports, from
the Owner Trustee or the Indenture Trustee, as applicable. See "Reports to
Securityholders" and "--Book-Entry Registration" above.
Within the prescribed period of time for tax reporting purposes
after the end of each calendar year during the term of a Trust, the Owner
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 return. See "Certain Federal Income Tax Consequences."
LIST OF SECURITYHOLDERS
At such time, if any, as Definitive Certificates have been issued,
the Owner Trustee will, upon written request by three or more
Certificateholders or one or more holders of Certificates evidencing not less
than 25% of the Certificate Balance, within five Business Days after provision
to the Owner 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 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. The Trust Documents will not provide for holding any
annual or other meetings of Certificateholders.
At such 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 with respect to their rights under the Indenture. The Indenture
will not provide for holding any annual or other meetings of Noteholders.
DESCRIPTION OF THE PURCHASE AGREEMENTS AND THE
TRUST DOCUMENTS
The following summary describes certain terms of the Purchase
Agreements (each a "Purchase Agreement") pursuant to which the Seller will
purchase Receivables from the Servicer or a subsidiary of the Servicer, as
specified in the related Prospectus Supplement, and certain terms of either (i)
the Pooling and Servicing Agreements or (ii) the Sale and Servicing Agreements
and the Trust Agreements (in either case collectively referred to as the "Trust
Documents") pursuant to which the Seller will sell and assign such Receivables
to a Trust and the Servicer will agree to service such Receivables on behalf of
the Trust, and pursuant to which such Trust will be created and Certificates
will be issued. Forms of the Purchase Agreement and the Trust Documents have
been filed as exhibits to the Registration Statement of which this Prospectus
forms a part. The Seller will provide a copy of such agreements (without
exhibits) upon request to a Securityholder described therein. This summary
does not purport to be complete and is subject to, and qualified in its
entirety by reference to, all of the provisions of the forms of Purchase
Agreement and the Trust Documents.
SALE AND ASSIGNMENT OF RECEIVABLES
On or prior to the Closing Date with respect to a series of
Securities specified in the related Prospectus Supplement, the Servicer or a
subsidiary of the Servicer, as specified in the related Prospectus Supplement,
will enter into a Purchase Agreement with the Seller pursuant to which the
Servicer or its subsidiary will, on or prior to such Closing Date, sell and
assign to the Seller, without recourse, its entire
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interest in and to the related Receivables, (exclusive of any portion of
payments on such Receivables allocable to premiums and/or interest thereon for
physical damage insurance maintained by the Servicer on the Financed Vehicles)
including its security interest in the Financed Vehicles securing such
Receivables and its rights to receive all payments on, or proceeds with respect
to, such Receivables to the extent paid or payable after the applicable Cutoff
Date. Pursuant to the Purchase Agreement, the Servicer or its subsidiary will
agree that, upon the occurrence of a Repurchase Event under the related Trust
Documents with respect to any of the Receivables of a Trust, the Owner Trustee
will be entitled to require the Servicer or its subsidiary to repurchase such
Receivables from the Trust. Such rights of the Trust under the Purchase
Agreement will constitute part of the property of the Trust and may be enforced
directly by the Owner Trustee. In addition, the Owner Trustee will pledge such
rights to the Indenture Trustee as collateral for the Notes, if any, and such
rights may be enforced directly by the Indenture Trustee.
On the Closing Date, the Seller will sell and assign to the Owner
Trustee, without recourse, the Seller's entire interest in the related
Receivables and the proceeds thereof, (exclusive of any portion of payments on
such Receivables allocable to premiums and/or interest thereon for physical
damage insurance maintained by the Servicer on the Financed Vehicles) including
its security interest in the Financed Vehicles. Each Receivable transferred by
the Seller to the Trust will be identified in a schedule appearing as an
exhibit to the related Trust Documents (the "Schedule of Receivables").
Concurrently with such sale and assignment, the Owner Trustee will execute and
deliver the related certificates representing the Certificates to or upon the
order of the Seller, and the Owner Trustee will execute and the Indenture
Trustee will authenticate and deliver the Notes, if any, to or upon the order
of the Seller.
In the Purchase Agreement, the Servicer or its subsidiary will
represent and warrant to the Seller, and in the Trust Documents, the Seller
will represent and warrant to the Owner Trustee or the Indenture Trustee, as
the case may be, among other things, that (i) the information provided with
respect to the Receivables is correct in all material respects; (ii) the
Obligor on each Receivable is required to maintain physical damage insurance in
accordance with the Servicer's normal requirements; (iii) at the date of
issuance of the Certificates and any Notes, the Initial Receivables and on the
applicable Subsequent Transfer Date, if any, the related Subsequent
Receivables, as the case may be, are free and clear of all security interests,
liens, charges and encumbrances and no offsets, defenses, or counterclaims
against it have been asserted or threatened; (iv) at the date of issuance of
the Certificates and any Notes, and on the applicable Subsequent Transfer Date,
if any, each of the Initial Receivables or Subsequent Receivables, as the case
may be, is or will be secured by a first perfected security interest in the
Financed Vehicle in favor of Servicer; and (v) each Receivable, at the time it
was originated, complied, and at the date of issuance of the Certificates and
any Notes, and on the applicable Subsequent Transfer Date, if any, the related
Subsequent Receivables, as the case may be, complies in all material respects
with applicable federal and state laws, including consumer credit, truth in
lending, equal credit opportunity and disclosure laws.
As of the last day of the second (or, if the Seller elects, the
first) month following the discovery by or notice to the Seller of a breach of
any representation or warranty of the Seller which the Owner Trustee or the
Indenture Trustee, as the case may be, determines materially and adversely
affects the interests of the Securityholders in a Receivable, the Seller,
unless it cures the breach, will be required to purchase the Receivable from
the Owner Trustee, and Servicer or the transferring subsidiary of the Servicer
will be required to purchase the Receivable from the Seller, at a price equal
to the amount of outstanding principal and accrued interest of the Receivable
(including one month's interest thereon, in the month of payment, at the APR
less the Servicing Fee Rate), after giving effect to the receipt of any moneys
collected (from whatever source) on such Receivable, if any (such price is
hereinafter referred to as the "Purchase Amount"). The purchase obligation
will constitute the sole remedy available to the Securityholders or the Trustee
for any such uncured breach.
CUSTODY OF RECEIVABLE FILES
Pursuant to the Trust Documents, the Servicer will service and
administer the Receivables. The Trust Documents will also designate the
Servicer as custodian to maintain possession, as the Owner Trustee's
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and Indenture Trustee's, if any, agent, of the retail installment sale
contracts and any other documents relating to the Receivables. To assure
uniform quality in servicing both the Receivables and the Servicer's own
portfolio of receivables, as well as to facilitate servicing and save
administrative costs, the documents will not be physically segregated from
other similar documents that are in the Servicer's possession or otherwise
stamped or marked to reflect the transfer to a Trust so long as Servicer is
servicing the Receivables. However, Uniform Commercial Code financing
statements reflecting the sale and assignment of the Receivables to the Seller
and by the Seller to the Owner Trustee will be filed, and the Servicer's
accounting records and computer systems will be marked to reflect such sale and
assignment. Because the Receivables will remain in the Servicer's possession
and will not be stamped or otherwise marked to reflect the assignment to the
Owner Trustee, if a subsequent purchaser were able to take physical possession
of the Receivables without knowledge of the assignment, the Owner Trustee's
interest in the Receivables could be defeated. See "Certain Legal Aspects of
the Receivables -- Security Interests in Vehicles".
ACCOUNTS
The Servicer will establish two accounts in the name of the Owner
Trustee or the Indenture Trustee, as specified in the related Prospectus
Supplement, on behalf of the Securityholders, the first into which certain
payments made on or with respect to the Receivables will be deposited (the
"Collection Account"), and the second from which all distributions with respect
to the Receivables and the Securities will be made (the "Distribution
Account"). The Collection Account shall be maintained with the Owner Trustee
or the Indenture Trustee, if the Securities include any Notes, so long as (i)
its short-term unsecured debt obligations have a rating no lower than A-1 by
Standard & Poor's Ratings Group or P-1 by Moody's Investors Service or such
other rating as may be specified in the related Prospectus Supplement (the
"Required Deposit Rating") or (ii) such Account is maintained in the trust
department of the Owner Trustee or the Indenture Trustee, as the case may be.
If the short-term unsecured debt obligations of such Owner Trustee or Indenture
Trustee do not have the Required Deposit Rating, the Servicer shall, with such
Owner Trustee's or Indenture Trustee's assistance as necessary, be required to
cause the Collection Account to be moved to a bank whose short-term unsecured
debt obligations have such a rating or moved to the trust department of such
Owner Trustee or Indenture Trustee. The Collection Account and the Certificate
Account shall initially be maintained in the trust department of the Owner
Trustee or the Indenture Trustee, as the case may be.
The Servicer will also establish an additional account (the
"Payahead Account") in the name of the Owner Trustee or the Indenture Trustee,
into which early payments by or on behalf of the Obligors which constitute
neither scheduled payments, full prepayments, nor certain partial prepayments
as described below ("Payaheads") will be deposited until such time as the
payment falls due. The Payahead Account will be established initially and
maintained with the Owner Trustee or the Indenture Trustee for so long as (i)
its short-term unsecured debt obligations have the Required Deposit Rating or
(ii) such Account is maintained in its trust department.
In addition, the Servicer will establish as additional segregated
trust accounts, if specified in the related Prospectus Supplement, a
Pre-Funding Account and one or more spread accounts or reserve accounts in the
name of the Owner Trustee or the Indenture Trustee on behalf of the
Securityholders.
SERVICING PROCEDURES
The Servicer will be required to make reasonable efforts to collect
all payments due with respect to the Receivables and will be required to
continue such collection procedures as it follows with respect to its own
automotive retail installment sale contracts, in a manner consistent with the
Trust Documents. If the Servicer determines that eventual payment in full of a
Receivable is unlikely, the Servicer will follow its normal practices and
procedures to realize upon the Receivable, including the repossession and
disposition of the Financed Vehicle securing the Receivable at a public or
private sale, or the taking of any other action permitted by applicable law.
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COLLECTIONS
The Servicer will be required to deposit all payments on
Receivables received (exclusive of any portion of such payments on such
Receivables allocable to the premium and/or interest thereon for physical
damage insurance maintained by the Servicer covering any Financed Vehicle and
net of the Supplemental Servicing Fee amounts included in such payments) and
all proceeds of Receivables collected during each Collection Period (net of any
amounts payable to the Servicer as servicing compensation, if specified in the
related Prospectus Supplement) into the Collection Account as specified in the
related Prospectus Supplement. The Servicer, the transferring subsidiary of
the Servicer or the Seller, as the case may be, will be required to remit the
aggregate Purchase Amount of Receivables to be purchased from the Trust to the
Collection Account on the Business Day immediately preceding the Distribution
Date.
For purposes of the Trust Documents, collections on a Receivable
made during a Collection Period are required to be applied first to the
scheduled payment thereof. To the extent that such collections on a Receivable
during a Collection Period exceed the scheduled payment on such Receivable, the
collections (other than Payaheads) are required to be applied to prepay the
Receivable in full. Except in the case of simple interest Receivables, if the
collections are insufficient to prepay the Receivable in full, they generally
are required to be treated as Payaheads until such later Collection Period as
such Payaheads may be applied either to the scheduled payment or to prepay the
Receivable in full.
SUBSEQUENT RECEIVABLES
Subject to the conditions described below, if specified in the
related Prospectus Supplement, the Seller will designate Subsequent Receivables
to be sold to the Trust during the Funding Period, as of each Subsequent Cutoff
Date. Any conveyance of Subsequent Receivables is subject to the following
conditions, among others: (i) each such Subsequent Receivable must satisfy the
eligibility criteria specified in the Purchase Agreement; (ii) none of the
Servicer, the transferring subsidiary of the Servicer or the Seller will select
such Subsequent Receivables in a manner that it believes is adverse to the
interests of the Securityholders; (iii) the Servicer, the transferring
subsidiary of the Servicer and the Seller will deliver certain opinions of
counsel to the Trustee and the Rating Agencies with respect to the validity of
the conveyance of such Subsequent Receivables; (iv) as of the related
Subsequent Cutoff Date, the Receivables, including any Subsequent Receivables
to be conveyed by the Seller as of such Subsequent Cutoff Date, will satisfy
the criteria described in related Prospectus Supplement and (v) the Rating
Agencies shall not have notified the Seller in writing that following such
addition any Securities will no longer be rated at least at the investment
grade rating specified in the related Prospectus Supplement by the applicable
Rating Agencies.
Any Subsequent Receivables may have been originated by the Servicer
using credit criteria different from those which were applied to the Initial
Receivables, and which meet the conditions referred to above.
SERVICING COMPENSATION
The Servicer is entitled under the Trust Documents to receive or
retain, as specified in the related Prospectus Supplement on each Distribution
Date a servicing fee (the "Servicing Fee") for the related Collection Period at
the rate specified in the related Prospectus Supplement (the "Servicing Fee
Rate") multiplied by the Pool Balance as of the first day of such Collection
Period. The Servicer is also entitled to retain from collections a
supplemental servicing fee (the "Supplemental Servicing Fee") for each
Collection Period equal to any late fees, prepayment fees and other
administrative fees and expenses collected during the Collection Period plus
reinvestment proceeds on any payments received in respect of Receivables. The
Servicer, in its discretion at its election, may defer receipt of all or any
portion of the Servicing Fee or Supplemental Servicing Fee for any Collection
Period to and until a later Collection Period for any reason, including in
order to avoid a shortfall in any payments due on any Securities. Any such
deferred amount shall be payable to (or may be retained from subsequent
collections by) the Servicer on demand.
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The Servicing Fee and the Supplemental Servicing Fee (collectively,
the "Servicer Fee") are intended to compensate the Servicer for performing the
functions of a third-party servicer of the Receivables as an agent for the
Securityholders, including collecting and posting all payments, responding to
inquiries of Obligors on the Receivables, investigating delinquencies,
reporting tax information to Obligors, paying costs of collections and policing
the collateral. The Servicer Fee will also compensate the Servicer for
administering the Receivables, including accounting for collections, furnishing
monthly and annual statements to the Owner Trustee and any Indenture Trustee
with respect to distributions and generating federal income tax information for
the Trust. The Servicer Fee also will reimburse the Servicer for certain
taxes, the Trustee's fees, accounting fees, outside auditor fees, data
processing costs and other costs incurred in connection with administering the
Receivables.
MANDATORY PREPAYMENT
To the extent a Pre-Funding Account is specified in the related
Prospectus Supplement, the Securities will be prepaid in part on the
Distribution Date on which the Funding Period ends (or on the Distribution Date
immediately following the last day of the Funding Period, if the Funding Period
does not end on a Distribution Date) in the event that any amount remains on
deposit in the Pre-Funding Account after giving effect to the purchase of
Subsequent Receivables, if any, on such Distribution Date. The aggregate
principal amount of Securities to be prepaid will be an amount equal to the
amount then on deposit in the Pre-Funding Account in such portions as specified
in the related Prospectus Supplement. In such event, a limited recourse
mandatory prepayment premium (the "Prepayment Premium") will be payable by the
Trust to the offered Securityholders if the aggregate principal amount of the
offered Securities to be prepaid pursuant to such mandatory prepayment exceeds
such threshold amount as will be specified in the related Prospectus
Supplement. The amount of such Prepayment Premium will be specified in the
related Prospectus Supplement. The Trust's obligation to pay the Prepayment
Premium shall be limited to funds which are received from the Seller under the
Purchase Agreement as liquidated damages for the failure to deliver Subsequent
Receivables. No other assets of the Trust will be available for the purpose of
making such payment. The ratings of any Securities do not evaluate the
Prepayment Premium or the likelihood that the Prepayment Premium will be paid.
DISTRIBUTIONS
With respect to each Trust, beginning on the Distribution Date or
Payment Date, as applicable, specified in the related 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
Owner Trustee or the Indenture Trustee, as applicable, to the Securityholders.
The timing, calculation, allocation, order, source and priorities of, and
requirements for, all distributions to each class of Certificateholders and all
payments to each class of Noteholders will be set forth in the related
Prospectus Supplement.
CREDIT ENHANCEMENT
The amounts and types of credit enhancement, and the provider of
any credit enhancement, if any, with respect to each class of Securities will
be set forth in the related Prospectus Supplement. If and to the extent
provided in the related Prospectus Supplement, credit enhancement may be in the
form of the subordination of one or more classes of Securities, a spread
account or other type of reserve account, overcollateralization, financial
guaranty insurance policy, letter of credit, credit or liquidity facility,
repurchase obligation, third party payment or other support, cash deposit or
such other arrangement, or any combination of two or more of the foregoing, as
may be described in the related Prospectus Supplement. If specified in the
applicable Prospectus Supplement, credit enhancement for a series of Securities
may cover one or more other series of Securities.
The presence of credit enhancement is intended to enhance the
likelihood of receipt by the credit enhanced Securityholders of the full amount
of principal and interest due thereon and to decrease the likelihood that such
Securityholders will experience losses. The credit enhancement for a class of
Securities
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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 credit enhancement or which are not covered by
any credit enhancement, Securityholders will bear their allocable share of
deficiencies. In addition, if a form of credit enhancement covers more than
one series of Securities, Securityholders of any such series will be subject to
the risk that such credit enhancement will be exhausted by the claims of
Securityholders of other series.
EVIDENCE AS TO COMPLIANCE
The Trust Documents will provide that a firm of independent public
accountants will furnish to the Owner Trustee and the Indenture Trustee, if
any, on or before October 31 of each year, beginning in the calendar year
following the establishment of the related Trust, a statement as to compliance
by the Servicer during the preceding twelve months ended June 30 (or, for the
initial report with respect to any Securities for such longer or shorter period
as shall have elapsed from the date of issuance of the related Securities) with
certain standards relating to the servicing of the Receivables, the Servicer's
accounting and computer systems with respect thereto, and certain other
matters.
The Trust Documents will also provide for delivery to the Owner
Trustee and the Indenture Trustee, if any, on or before October 31 of each
year, commencing in the calendar year following the establishment of the
related Trust, of a certificate signed by an officer of the Servicer stating
that the Servicer has fulfilled its obligations under the applicable Trust
Documents throughout the preceding twelve months ended June 30 (or, for the
initial report with respect to any Securities for such longer or shorter period
as shall have elapsed from the date of issuance of the related Securities) or,
if there has been a default in the fulfillment of any such obligation,
describing each such default.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Owner Trustee or the
Indenture Trustee, as the case may be.
CERTAIN MATTERS REGARDING THE SERVICER
The Trust Documents will provide that the initial Servicer may not
resign from its obligations and duties as Servicer thereunder, except upon a
determination that the Servicer's performance of such duties is no longer
permissible under applicable law. No such resignation will become effective
until the Owner Trustee or a successor servicer has assumed the Servicer's
servicing obligations and duties under the Trust Documents.
The Trust Documents will further provide that neither the Servicer,
nor any of its directors, officers, employees, and agents will be under any
liability to any Trust or any Securityholders for taking any action or for
refraining from taking any action pursuant to the Trust Documents, or for
errors in judgment; provided, however, that neither the Servicer nor any such
person will be protected against any liability that would otherwise be imposed
by reason of willful misfeasance, bad faith or negligence (except for errors in
judgment) in the performance of duties, or by reason of reckless disregard of
obligations and duties thereunder. In addition, the Trust Documents will
provide that the Servicer is under no obligation to appear in, prosecute or
defend any legal action that is not incidental to the Servicer's servicing
responsibilities under the Trust Documents and that, in its opinion, may cause
it to incur any expense or liability. The Servicer may, however, undertake any
reasonable action that it may deem necessary or desirable in respect of the
Trust Documents, the rights and duties of the parties thereto and the interests
of the Securityholders thereunder. In such event, the legal expenses and costs
of such action and any liability resulting therefrom will be expenses, costs
and liabilities of the Servicer, and the Servicer will not be entitled to be
reimbursed therefor out of any Account held by the Owner Trustee or the
Indenture Trustee, as applicable.
Any entity into which the Servicer or the Seller, as the case may
be, may be merged or consolidated, or any entity resulting from any merger,
conversion or consolidation to which the Servicer or the Seller, as the case
may be, is a party, or any entity succeeding to the business of the Servicer or
the Seller,
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as the case may be, which assumes the obligations of the Servicer or the
Seller, as the case may be, will be the successor of the Servicer or the
Seller, as the case may be, under the Trust Documents. The Servicer may at any
time perform certain specific duties as Servicer through other subcontractors.
EVENTS OF DEFAULT
"Events of Default" under the Pooling and Servicing Agreements or
the Sale and Servicing Agreements, as the case may be, will consist of (i) any
failure by the Servicer to deliver to the Owner Trustee or the Indenture
Trustee, as applicable, (x) for distribution to the Securityholders, or deposit
in an applicable spread account or reserve account, any required payment, which
failure continues unremedied for three Business Days or (y) the Servicer's
Certificate on the related Determination Date that shall continue unremedied
for a period of ten Business Days, in either case (x) or (y) after written
notice from the Owner Trustee or the Indenture Trustee, as applicable, is
received by the Servicer or after discovery by an officer of the Servicer; (ii)
any failure by the Seller or the Servicer duly to observe or perform in any
material respect any other covenant or agreement in the Trust Documents which
failure materially and adversely affects the rights of Securityholders and
which continues unremedied for 90 days after the giving of written notice of
such failure (1) to the Seller or the Servicer, as applicable, by the Owner
Trustee or the Indenture Trustee, or (2) to the Seller or the Servicer, as
applicable, and to the Owner Trustee or the Indenture Trustee by
Securityholders evidencing not less than 25% of a class of Securities
constituting at least 25% of the then Pool Balance for such series; and (iii)
certain events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings with respect to the Servicer indicating its
insolvency, reorganization pursuant to bankruptcy proceedings, or inability to
pay its obligations.
RIGHTS UPON EVENT OF DEFAULT
As long as an Event of Default under the Pooling and Servicing
Agreements or the Sale and Servicing Agreements, as the case may be, remains
unremedied, the Owner Trustee or the Indenture Trustee or the Securityholders
evidencing not less than 51% of a class of Securities constituting at least 51%
of the then Pool Balance for such series may terminate all the rights and
obligations of the Servicer under the Trust Documents, whereupon the Owner
Trustee will succeed to all the responsibilities, duties, and liabilities of
the Servicer under the Trust Documents and will be entitled to similar
compensation arrangements. If, however, a bankruptcy trustee or similar
official has been appointed for the Servicer, and no Event of Default other
than such appointment has occurred, such trustee or official may have the power
to prevent the Owner Trustee, the Indenture Trustee or the Securityholders from
effecting a transfer of servicing. In the event that the Owner Trustee is
unable to act as successor Servicer, it may appoint, or petition a court of
competent jurisdiction for the appointment of, a successor with a net worth of
at least $75,000,000 and whose regular business includes the servicing of
automotive receivables. The Owner Trustee, or any person appointed as
successor Servicer, shall be the successor in all respects to the predecessor
Servicer under the Trust Documents and all references therein to the Servicer
shall apply to such successor Servicer. The Owner Trustee may make such
arrangements for compensation to be paid, which in no event may be greater than
the servicing compensation to the Servicer, as Servicer, under the Trust
Documents.
WAIVER OF PAST DEFAULTS
The Securityholders evidencing not less than 51% of a class of
Securities constituting at least 51% of the then Pool Balance for such series
may waive any default by the Servicer in the performance of its obligations
under the Trust Documents and its consequences, except a default in making any
required deposits to the Collection Account or the Certificate Account or
Payahead Account in accordance with the Trust Documents. No such waiver shall
impair the Securityholders' rights with respect to subsequent defaults.
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AMENDMENT
The Trust Documents may be amended by the Seller, the Servicer, and
the Owner Trustee and/or the Indenture Trustee, as applicable, without the
consent of any Securityholders, to cure any ambiguity, correct or supplement
any provision therein which may be inconsistent with any other provision
therein, or make any other provisions with respect to matters or questions
arising under such Trust Documents which are not inconsistent with the
provisions of the Trust Documents; provided that such action will not, in the
opinion of counsel satisfactory to the Owner Trustee or the Indenture Trustee,
as applicable, materially and adversely affect the interest of any
Securityholder. The Trust Documents may also be amended by the Seller, the
Servicer, and the Owner Trustee and/or the Indenture Trustee with the consent
of the Securityholders evidencing not less than 51% of a class of Securities
constituting at least 51% of the then Pool Balance for such series, or, if
less, 51% of the outstanding Securities for the affected class with respect to
which a Trust Document is to be amended, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Trust Documents or of modifying in any manner the rights of
Certificateholders; provided, however, that no such amendment may (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that are required to be
made on any Security or change the Pass-Through Rate, the Interest Rate, any
spread account or reserve account balance or other credit enhancement with
respect to such Securities or (ii) reduce the aforesaid percentage of
Securities required to consent to any such amendment, without the consent of
the holders of all Securities of such class. Notwithstanding the foregoing,
however, no consent of any Securityholder shall be required in connection with
any amendment of any class of Securities which are wholly-owned by the Seller,
or in order for the Seller to sell, assign, transfer or otherwise dispose of
the any Securities or any interest therein, owned by the Seller. In addition,
the related Prospectus Supplement may specify other amendments or exclusions,
such as amendments to permit all or any portion of the interest and/or
principal payable to a subordinated class of Certificateholders to be excluded
from a spread account, which do not require the consent of all of the
Securityholders under the Trust Documents.
TERMINATION
The respective obligations of the Seller, the Servicer, the Owner
Trustee and the Indenture Trustee pursuant to the Trust Documents will
terminate upon (i) the maturity or other liquidation of the last Receivable and
the disposition of any amounts received upon liquidation of any remaining
Receivables in such Trust and (ii) the payment to the Securityholders of all
amounts required to be paid to them pursuant to the Trust Documents. In order
to avoid excessive administrative expenses, the Servicer, or its successor, is
permitted at its option to purchase from any Trust, as of the last day of any
month as of which the Pool Balance is 10% or less of the original Pool Balance
(including any Subsequent Receivables), all remaining Receivables at a price
equal to the aggregate of the Purchase Amounts thereof as of such last day.
Exercise of such right will effect early prepayment of the Securities. The
Owner Trustee or the Indenture Trustee, as applicable, will give written notice
of termination to each Securityholder of record. The final distribution to any
Securityholder will be made only upon surrender and cancellation of such
holder's Security at any office or agency of the Owner Trustee or the Indenture
Trustee specified in the notice of termination. Any funds remaining in the
Trust, after the Owner Trustee or the Indenture Trustee, as applicable, has
taken certain measures to locate a Securityholder and such measures have
failed, will be distributed to the American Cancer Society, Chicago Division.
DUTIES OF THE OWNER TRUSTEE AND INDENTURE TRUSTEE
The Owner Trustee and any Indenture Trustee will make no
representations as to the validity or sufficiency of the Trust Documents, the
Certificates (other than the authentication of the Certificates) or the Notes
or any Receivables or related documents, and is not accountable for the use or
application by the Servicer of any funds paid to the Seller or the Servicer in
respect of the Certificates, the Notes or the Receivables. The Owner Trustee
and any Indenture Trustee have not independently verified the Receivables. If
no Event of Default has occurred, the Owner Trustee or the Indenture Trustee is
required to perform only those duties specifically required of it under the
Trust Documents. Generally, those duties are limited to the
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receipt of the various certificates, reports or other instruments required to
be furnished to the Owner Trustee or the Indenture Trustee under the Trust
Documents, in which case it is only required to examine them to determine
whether they conform to the requirements of the Trust Documents. The Owner
Trustee and any Indenture Trustee shall not be charged with knowledge of a
breach of a representation or warranty, or a failure by the Servicer to perform
its duties under the Trust Documents which failure constitutes an Event of
Default unless the Owner Trustee or the Indenture Trustee obtains actual
knowledge of such breach or such failure as specified in the Trust Documents.
The Owner Trustee and any Indenture Trustee are under no obligation
to exercise any of the rights or powers vested in them by the Trust Documents
or to make any investigation of matters arising thereunder or to institute,
conduct or defend any litigation thereunder or in relation thereto at the
request, order or direction of any of the Securityholders, unless such
Securityholders have offered to the Owner Trustee or the Indenture Trustee, as
the case may be, reasonable security or indemnity against the costs, expenses
and liabilities that may be incurred therein or thereby. No Securityholder
will have any right under the Trust Documents to institute any proceeding with
respect to such Trust Document or any related agreement, unless such holder
previously has given to the Owner Trustee or the Indenture Trustee written
notice of default and unless the Securityholders then outstanding evidencing
not less than 25% of a class of Securities constituting at least 25% of the
then Pool Balance for such series have made written request upon the Owner
Trustee or the Indenture Trustee to institute such proceeding in its own name
as Owner Trustee or Indenture Trustee thereunder and have offered to the Owner
Trustee or Indenture Trustee reasonable indemnity and the Owner Trustee or
Indenture Trustee for 30 days has neglected or refused to institute any such
proceeding.
THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE
The Owner Trustee and any Indenture Trustee for each Trust will be
specified in the related Prospectus Supplement. The Owner Trustee or the
Indenture Trustee, in its individual capacity or otherwise, may hold Securities
in its own name or as pledgee. For the purpose of meeting the legal
requirements of certain jurisdictions, the Servicer and the Owner Trustee
acting jointly (or in some instances, the Owner Trustee acting alone) shall
have the power to appoint co-trustees or separate trustees of all or any part
of the Trust. In the event of such appointment, all rights, powers, duties,
and obligations conferred or imposed upon the Owner Trustee by the Trust
Documents shall be conferred or imposed upon the Owner Trustee and such
separate trustee or co-trustee jointly, or, in any jurisdiction in which the
Owner Trustee shall be incompetent or unqualified to perform certain acts,
singly upon such separate trustee or co-trustee who shall exercise and perform
such rights, powers, duties and obligations solely at the direction of the
Owner Trustee.
The Owner Trustee and any Indenture Trustee may resign at any time,
in which event the Seller will be obligated to appoint a successor trustee.
The Seller may also remove the Owner Trustee if the Owner Trustee ceases to be
eligible to continue as such under the Trust Documents, becomes legally unable
to act or becomes insolvent. In such circumstances, the Seller will be
obligated to appoint a successor trustee. Any resignation or removal of the
Owner Trustee and appointment of a successor trustee does not become effective
until acceptance of the appointment by the successor trustee. Any Indenture
Trustee may be removed as set forth in the related Prospectus Supplement.
The Trust Documents will provide that the Servicer will pay the
Owner Trustee's and any Indenture Trustee's fees. The Trust Documents will
further provide that the Owner Trustee and any Indenture Trustee will be
entitled to indemnification by the Seller and the Servicer for, and will be
held harmless against, any loss, liability, fee, disbursement or expense
incurred by the Owner Trustee or any Indenture Trustee not resulting from its
own willful misfeasance, bad faith or negligence (other than by reason of a
breach of any of its representations or warranties set forth in the Trust
Documents). The Trust Documents will further provide that the Servicer will
indemnify the Owner Trustee and any Indenture Trustee for certain taxes that
may be asserted in connection with the transaction.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTERESTS IN VEHICLES
In all states in which the Receivables have been originated, retail
installment sale contracts such as the Receivables evidence the credit sale of
automobiles and light trucks by dealers to obligors; the contracts also
constitute personal property security agreements and include grants of security
interests in the vehicles under the applicable Uniform Commercial Code (the
"UCC") in such states. Each Receivable prohibits the sale or transfer of the
Financed Vehicle without the Servicer's consent.
Perfection of security interests in the vehicles is generally
governed by the motor vehicle registration laws of the state in which the
vehicle is located. In the states in which a majority of the Receivables have
been originated, a security interest in a vehicle generally may be perfected
only by causing such vehicle's certificate of title to be amended to note the
security interest of the secured party. Such notation of a secured party's
security interest is generally effected in such states by depositing with the
applicable state motor vehicles registrar, or similar authority, along with any
necessary registration fees, the vehicle's certificate of title and an
application containing the name and address of the secured party.
Pursuant to the Purchase Agreement, the Servicer, or a subsidiary
of the Servicer then owning the Receivables, as specified in the related
Prospectus Supplement, will assign its security interests in the Financed
Vehicles securing the Receivables to the Seller and, pursuant to the Trust
Documents, the Seller will assign its security interests in the Financed
Vehicles securing the Receivables to the Owner Trustee. However, because of
the administrative burden and expense, the Servicer, the subsidiary of the
Servicer, the Seller and the Owner Trustee will not amend any certificate of
title to identify the Trust as the new secured party on the certificates of
title relating to the Financed Vehicles. Also, the Servicer will continue to
hold any certificates of title relating to the Financed Vehicles in its
possession as custodian for the Owner Trustee pursuant to the Trust Documents.
In most states, assignments such as those under the Purchase
Agreement and the Trust Documents are an effective conveyance of a security
interest without amendment of any security interest noted on a vehicle's
certificate of title, and the assignee succeeds thereby to the assignor's
rights as secured party. In the absence of fraud or forgery by the vehicle
owner or the Servicer or administrative error by state or local agencies, the
notation of the Servicer's security interest on the certificates of title or
the Servicer's possession of the certificate of title, will be sufficient to
protect the Trust against the rights of subsequent purchasers of a Financed
Vehicle or subsequent lenders who take a security interest in a Financed
Vehicle. If there are any Financed Vehicles as to which a perfected security
interest was not obtained, the Trust's security interest would be subordinate
to, among others, subsequent purchasers of the Financed Vehicles and holders of
perfected security interests. Such a failure, however, would constitute a
breach of the Servicer's or Servicer's subsidiary's warranties under the
Purchase Agreement and of the Seller's warranties under the Trust Documents and
would create an obligation of the Servicer or the Servicer's subsidiary under
the Purchase Agreement and of the Seller under the Trust Documents to purchase
the related Receivable unless the breach is cured. The Seller will assign its
rights under the Purchase Agreement to the Trust. By not identifying the Trust
as the secured party on the certificate of title, the security interest of the
Trust in the Financed Vehicle could be defeated through fraud or negligence.
Under the laws of most states, the perfected security interest in a
vehicle would continue for four months after a vehicle is moved to a state
other than the state in which it is initially registered and thereafter until
the vehicle owner re-registers the vehicle in the new state. A majority of
states generally require surrender of a certificate of title to re-register a
vehicle; accordingly, a secured party must surrender possession if it holds the
certificate of title to the vehicle, or, in the case of vehicles registered in
states providing for the notation of a security interest on the certificate of
title but not possession by the secured party, the secured party would receive
notice of surrender if the security interest is noted on the certificate of
title. Thus, the secured party would have the opportunity to re-perfect its
security interest in the vehicle in the state of relocation. In states that do
not require a certificate of title for registration of a motor vehicle,
re-registration
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could defeat perfection. In the ordinary course of servicing receivables, the
Servicer takes steps to effect re-perfection upon receipt of notice of
re-registration or information from the Obligor as to relocation. Similarly,
when an Obligor sells a vehicle, the Servicer must surrender possession of the
certificate of title or will receive notice as a result of its security
interest noted thereon and accordingly will have an opportunity to require
satisfaction of the related Receivable before release of the security interest.
Under the Trust Documents, the Servicer is obligated to take appropriate steps,
at the Servicer's expense, to maintain perfection of security interests in the
Financed Vehicles.
Under the laws of most states, liens for repairs performed on, and
for storage of, a motor vehicle and liens for certain unpaid taxes take
priority over even a perfected security interest in a Financed Vehicle. The
Internal Revenue Code of 1986, as amended, also grants priority to certain
federal tax liens over the security interest of a secured party. The laws of
certain states and federal law permit the confiscation of motor vehicles under
certain circumstances if used in unlawful activities, which may result in the
loss of a secured party's perfected security interest in the confiscated motor
vehicle. The Servicer will represent to the Seller and the Seller will
represent to the Trust that each security interest in a Financed Vehicle is or
will be prior to all other present liens (other than tax liens and liens that
arise by operation of law) upon and security interests in such Financed
Vehicle. However, liens for repairs or taxes, or the confiscation of a
Financed Vehicle, could arise or occur at any time during the term of a
Receivable. No notice will be given to the Owner Trustee, the Indenture
Trustee, if any, or any Securityholders in the event such a lien arises or
confiscation occurs.
REPOSSESSION
In the event of a default by vehicle purchasers, the holder of the
retail installment sale contract has all the remedies of a secured party under
the UCC, except where specifically limited by other laws. The UCC remedies of
a secured party include the right to repossession by self-help means, unless
such means would constitute a breach of the peace. Unless a vehicle is
voluntarily surrendered, self-help repossession is the method employed by the
Servicer in the majority of instances in which a default occurs and is
accomplished by retaking possession of the financed vehicle. In cases where
the Obligor objects or raises a defense to repossession, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and the vehicle must then be repossessed in accordance
with that order. In certain states under certain circumstances after the
vehicle has been repossessed, the Obligor may reinstate the contract by paying
the delinquent installments on the contract and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
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. Generally, this
right of reinstatement may be exercised on a limited number of occasions in any
one-year period.
The UCC and other state laws require the secured party to provide
the Obligor with reasonable notice of the date, time, and place of any public
sale and/or the date after which any private sale of the collateral may be
held. In some states the Obligor has the right to redeem the collateral prior
to actual sale by paying the secured party the unpaid principal balance of the
obligation plus reasonable expenses for repossessing, holding, and preparing
the collateral for disposition and arranging for this sale, plus, in some
jurisdictions, reasonable attorneys' fees, or, in some other states, by payment
of delinquent installments or the unpaid balance. Repossessed vehicles are
generally resold by the Servicer through automobile auctions which are attended
principally by automotive dealers.
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DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the repossessed vehicles generally will
be applied to the expenses of resale and repossession and then to the
satisfaction of the indebtedness of the Obligor on the Receivable. While some
states impose prohibitions or limitations on deficiency judgments if the net
proceeds from resale do not cover the full amount of the indebtedness, a
deficiency judgment can be sought in those states that do not prohibit or limit
such judgments. However, the deficiency judgment would be a personal judgment
against the Obligor for the shortfall, and a defaulting Obligor can be expected
to have very little capital or sources of income available following
repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount.
Occasionally, after resale of a vehicle and payment of all expenses
and indebtedness, there is a surplus of funds. In that case, the UCC requires
the lender to remit the surplus to any other holder of any lien with respect to
the vehicle or, if no such lienholder exists or there are remaining funds, the
UCC requires the lender to remit the surplus to the former Obligor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers involved
in consumer finance. These laws include 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, the Federal Reserve Board's Regulations B and Z, state
adaptations of the National Consumer Act and of the Uniform Consumer Credit
Code, and state motor vehicle retail installment sales acts, retail installment
sales acts and other similar laws. Also, state laws impose finance charge
ceilings and other restrictions on consumer transactions and require contract
disclosures in addition to those required under federal law. These
requirements impose specific statutory liabilities upon creditors who fail to
comply with their provisions. In some cases, this liability could affect an
assignee's (such as the Trust's) ability to enforce consumer finance contracts
such as the Receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade
Commission (the "FTC Rule"), the provisions of which are generally duplicated
by the Uniform Consumer Credit Code, state statutes or the common law in
certain states, has the effect of subjecting a seller (and certain related
lenders and their assignees, such as the Trust) in a consumer credit
transaction and any assignee of the seller to all claims and defenses which the
obligor in the transaction could assert against the seller of the goods.
Liability under the FTC Rule is limited to the amounts paid by the obligor
under the contract, and the holder of the contract may also be unable to
collect any balance remaining due thereunder from the obligor.
Most of the Receivables will be subject to the requirements of the
FTC Rule. Accordingly, the Owner Trustee, as holder of the Receivables, will
be subject to any claims or defenses that the purchaser of the Financed Vehicle
may assert against the seller of the Financed Vehicle. Such claims are limited
to a maximum liability equal to the amounts theretofore paid by the obligor on
the Receivable. Under most state motor vehicle dealer licensing laws, sellers
of motor vehicles are required to be licensed to sell motor vehicles at retail
sale. Furthermore, Federal Odometer Regulations promulgated under the Motor
Vehicle Information and Cost Savings Act require that all sellers of new and
used vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. If a seller is not properly licensed or if
an Odometer Disclosure Statement was not provided to the purchaser of the
related financed vehicle, the obligor may be able to assert a defense against
the seller of the vehicle.
Courts have imposed general equitable principles on secured parties
pursuing repossession of collateral or litigation involving deficiency
balances. These equitable principles may have the effect of relieving an
obligor from some or all of the legal consequences of a default.
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In several cases, obligors have asserted that the self-help
remedies of secured parties under the UCC and related laws violate the due
process protections provided under the 14th Amendment to the Constitution of
the United States. Courts have generally upheld the notice provisions of the
UCC and related laws as reasonable or have found that the repossession and
resale by the creditor do not involve sufficient state action to afford
constitutional protection to consumers.
The Servicer, the transferring subsidiary of the Servicer and the
Seller will warrant under the Purchase Agreement and the Trust Documents,
respectively, that each Receivable complies with all requirements of law in all
material respects. Accordingly, if an Obligor has a claim against the Trust
for violation of any law and the Owner Trustee or the Indenture Trustee, as the
case may be, determines such claim materially and adversely affects the Trust's
interest in a Receivable, such violation would constitute a breach of warranty
under the Purchase Agreement and the Trust Documents and would create an
obligation of the Servicer and the Seller to repurchase the Receivable unless
the breach is cured.
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 Chapter 13 proceeding under the federal bankruptcy law, a court
may prevent a lender from repossessing a motor vehicle, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the motor vehicle at the time of bankruptcy (as determined by
the court), leaving the 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 or change the rate of interest
and time of repayment of the indebtedness.
TRANSFERS OF VEHICLES
The Receivables prohibit the sale or transfer of the vehicle
securing a Receivable without the Servicer's consent and permit the Servicer to
accelerate the maturity of the Receivable upon a sale or transfer without its
consent. The Servicer generally will not consent to a sale or transfer without
prepayment of the Receivable. However, in certain circumstances the Servicer
may enter into a transfer of equity agreement with the secondary purchaser for
the purpose of effecting the transfer of the Financed Vehicle.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The anticipated federal income tax consequences of the purchase,
ownership and disposition of each series of Securities will be discussed in the
related Prospectus Supplement. Such discussion will not purport to deal with
federal income tax consequences applicable to all categories of investors, some
of which may be subject to special rules. Investors should consult their own
tax advisors in determining the federal, state, local and any other tax
consequences to them of the purchase, ownership and disposition of the
Securities.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a
pension, profit sharing, or other employee benefit plan from engaging in
certain transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect to
the plan. ERISA also imposes certain duties on persons who are fiduciaries of
plans subject to ERISA and prohibits certain transactions between a plan and
parties in interest with respect to such plans. Under ERISA, any person who
exercises any authority or control respecting the management or disposition of
the assets of a plan is considered to be a fiduciary of such plan (subject to
certain exceptions not here relevant). A violation of these "prohibited
transaction" rules may generate excise tax and other liabilities under ERISA
and the Code for such persons.
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In addition to the matters described in the related Prospectus
Supplement, purchasers of Securities that are insurance companies should
consult with their counsel with respect to the recent United States Supreme
Court case interpreting the fiduciary responsibility rules of ERISA, JOHN
HANCOCK MUTUAL LIFE INSURANCE CO. V. HARRIS TRUST AND SAVINGS BANK, 114 S.Ct.
517 (1993). In JOHN HANCOCK, the Supreme Court ruled that assets held in an
insurance company's general account may be deemed to be "plan assets" for ERISA
purposes under certain circumstances. Prospective purchasers should determine
whether the decision affects their ability to make purchases of the Securities.
Certain transactions involving a Trust might be deemed to
constitute prohibited transactions under ERISA and the Code with respect to a
Benefit Plan that purchased Securities if assets of the related Trust were
deemed to be assets of the Benefit Plan. The likely treatment of the
Securities under ERISA and the Code will be discussed in the related Prospectus
Supplement.
Any Benefit Plan fiduciary considering the purchase of Securities
should consult with its counsel with respect to the potential applicability of
ERISA and the Code to such investment. Moreover, each Benefit Plan fiduciary
should determine whether, under the general fiduciary standards of investment
prudence and diversification, an investment in any Securities is appropriate
for the Benefit Plan, taking into account the overall investment policy of the
Benefit Plan and the composition of the Benefit Plan's investment portfolio.
RATINGS
As a condition of issuance, the offered Securities of each series
will be rated an investment grade, that is, in one of its four highest rating
categories, by at least one nationally recognized rating agency (a "Rating
Agency") as specified in the related Prospectus Supplement. The ratings will
be based on the Receivables related to each series, the terms of the
Securities, and the subordination and any credit enhancement provided therefor.
There is no assurance that the ratings initially assigned to such Securities
will not be subsequently lowered or withdrawn by the Rating Agencies. In the
event the rating initially assigned to any Securities is subsequently lowered
for any reason, no person or entity will be obligated to provide any credit
enhancement unless otherwise specified in the related Prospectus Supplement.
The ratings of any Securities with respect to which a prepayment premium may be
payable do not evaluate such prepayment premium payable to such Securityholders
or the likelihood that such prepayment premium will be paid.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") with respect to each Trust, the Seller will
agree to sell to each of the underwriters named therein and in the related
Prospectus Supplement, and each of such underwriters will severally agree to
purchase from the Seller, the principal amount of each class of Securities of
the related series set forth therein and in the related Prospectus Supplement.
In each Underwriting Agreement, the several underwriters will
agree, subject to the terms and conditions set forth therein, to purchase all
the Securities described therein which are offered hereby and by the related
Prospectus Supplement if any of such Securities are purchased. In the event of
a default by any such underwriter, each Underwriting Agreement will provide
that, in certain circumstances, purchase commitments of the nondefaulting
underwriters may be increased or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at
which each class of Securities being offered thereby will be offered to the
public and any concessions that may be offered to certain dealers participating
in the offering of such Securities, or (ii) specify that the related Securities
are to be resold by the underwriters in negotiated transactions at varying
prices to be determined at the time of such sale. After the initial public
offering of any Securities, the public offering price and such concessions may
be changed.
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Each Underwriting Agreement will provide that the Seller will
indemnify the underwriters against certain liabilities, including liabilities
under the Securities Act.
The Owner Trustee or the Indenture Trustee, if any, may, from time
to time, invest funds held by it in any accounts in Eligible Investments
acquired from one or more of the underwriters.
Under each Underwriting Agreement, the closing of the sale of any
class of Securities subject thereto will be conditioned on the closing of the
sale of all other classes.
The place and time of delivery for the Securities in respect of
which this Prospectus is delivered will be set forth in the related Prospectus
Supplement.
LEGAL OPINIONS
Certain legal matters relating to the Certificates and, if
applicable, the Notes will be passed upon for the Seller and the Servicer by
Baker & McKenzie, and for the underwriters named in the related Prospectus
Supplement by Dewey Ballantine, New York, New York.
44
<PAGE> 72
INDEX OF TERMS
Set forth below is a list of the defined terms used in this
Prospectus and the pages on which the definitions of such terms may be found.
<TABLE>
<S> <C>
APR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Certificate Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Certificate Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Certificate Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Dealer Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Definitive Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Definitive Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Distribution Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 23
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Financed Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FTC Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Independent Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Initial Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Initial Financed Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . 6
Initial Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Insolvency Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 17
Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Note Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Note Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Obligors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Payahead Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Payaheads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Pooling and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . 1
Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Prepayment Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Prospectus Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Purchase Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 44
</TABLE>
45
<PAGE> 73
<TABLE>
<S> <C>
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . 2
Related Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Required Deposit Rating . . . . . . . . . . . . . . . . . . . . . . . . . 32
Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Sale and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . 1
Schedule of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 31
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Servicer Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Servicer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 29
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Strip Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Strip Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Subsequent Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . . . . 6
Subsequent Financed Vehicles . . . . . . . . . . . . . . . . . . . . . . 6
Subsequent Receivables . . . . . . . . . . . . . . . . . . . . . . . . 1, 6
Supplemental Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . 34
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trust Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 31
Trust Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
UCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
46
<PAGE> 74
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER
OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE
HAS BEEN ANY CHANGE IN THE AFFAIRS OF THE SELLER SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Supplemental Prospectus Summary............. S-3
Risk Factors................................ S-9
The Trust................................... S-9
The Receivables............................. S-10
The Certificates............................ S-14
Ratings of the Securities................... S-21
Certain Federal Income Tax Consequences..... S-21
ERISA Considerations........................ S-22
Underwriting................................ S-25
Legal Opinions.............................. S-26
PROSPECTUS
Available Information....................... 2
Reports to Securityholders.................. 2
Incorporation of Certain Documents by
Reference................................. 2
Prospectus Summary.......................... 4
Risk Factors................................ 10
The Trusts.................................. 12
The Receivables............................. 14
Yield and Prepayment Considerations......... 15
Certificate and Note Factors and Trading
Information............................... 16
Use of Proceeds............................. 16
The Seller.................................. 17
The Servicer................................ 17
The Certificates............................ 22
The Notes................................... 23
Certain Information Regarding the
Securities................................ 27
Description of the Purchase Agreements and
the Trust Documents....................... 30
Certain Legal Aspects of the Receivables.... 39
Certain Federal Income Tax Consequences..... 42
ERISA Considerations........................ 42
Ratings..................................... 43
Plan of Distribution........................ 43
Legal Opinions.............................. 44
Index of Terms.............................. 45
</TABLE>
------------------
UNTIL AUGUST 20, 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT),
ALL DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES DESCRIBED IN THIS
PROSPECTUS SUPPLEMENT, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
AFG Receivables Trust
1996-B
$44,509,260.12
6.60% Asset Backed Certificates,
Class A
$2,500,520.23
7.05% Asset Backed Certificates,
Class B
AFG Receivables Corporation
Seller
AutoFinance Group, Inc.
Servicer
PROSPECTUS SUPPLEMENT
CS First Boston
Key Capital Markets, Inc.
- ------------------------------------------------------
