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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: September 3, 1998
(Date of earliest event reported)
ONYX ACCEPTANCE FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 333-51239 33-0639768
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
8001 Irvine Center Drive
6th Floor
Irvine, California 92618
(Address of Principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (949) 450-5500
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Item 5. Other Events.
Reference is hereby made to the Registrant's Registration Statement on
Form S-3 (File No. 333-51239) filed with the Securities and Exchange Commission
(the "Commission") on April 28, 1998 (the "Registration Statement"), pursuant to
which the Registrant registered $1,000,000,000 aggregate principal amount of its
auto loan backed notes and auto loan backed receivables, issuable in various
series, for sale in accordance with the provisions of the Securities Act of
1933, as amended (the "Act"). Reference is also hereby made to the Prospectus
and the related Prospectus Supplement (collectively, the "Prospectus"), which
will be filed with the Commission pursuant to Rule 424(b)(5), with respect to
the Registrant's Auto Loan Backed Notes and Auto Loan Backed Certificates,
Series 1998-B (the "Offered Securities").
The Registrant is filing this Current Report on Form 8-K to file the
Consent of Independent Accountants to the inclusion in the Prospectus of the
accountant's report dated February 3, 1998 in the audit of the consolidated
financial statements of MBIA Insurance Corporation and Subsidiaries. The
Consent of Independent Accountants is set forth in Exhibit 23.4 hereto.
The Registrant is also filing this Current Report on Form 8-K to provide
prospective investors with certain materials which constitute "ABS Term Sheets"
as described in the no-action letter dated February 27, 1995 issued by the
Division of Corporation Finance of the Commission to the Public Securities
Association (the "PSA Letter"), the filing of which materials is a condition of
the relief granted in such letter (such materials being the "ABS Term Sheets").
The ABS Term Sheets were prepared solely by Salomon Smith Barney Inc. in
connection with the offering of the Offered Securities, and the Registrant did
not prepare or participate in the preparation of the ABS Term Sheets. The ABS
Term Sheets are set forth in Exhibit 99.1 hereto.
The assumptions used in preparing the ABS Term Sheets were based upon a
preliminary compilation of the underlying collateral and the estimated principal
amount and other features of the Offered Securities. The actual features of the
Offered Securities and a detailed description of the final composition of the
underlying collateral will be set forth in the Prospectus.
Due to the preliminary nature of the information regarding the
collateral and the structure of the Offered Securities used in preparing the ABS
Term Sheets, no assurance can be given as to either the ABS Term Sheets' or the
underlying assumptions' accuracy, appropriateness or completeness in any
particular context; nor can assurance be given as to whether the ABS Term Sheets
and/or the assumptions upon which they are based reflect present market
conditions or future market performance. These ABS Term Sheets should not be
construed as either projections or predictions or as legal, tax, financial or
accounting advice.
The specific characteristics of the Offered Securities may differ from
those shown in the ABS Term Sheets due to differences between the actual
collateral and the hypothetical collateral used in preparing the ABS Term
Sheets. As noted above, the principal amount and designation of any security
described in the ABS Term Sheets are subject to change prior to issuance.
Please be advised that auto loan backed securities may not be
appropriate for all investors. Potential investors must be willing to assume,
among other things, market price volatility, prepayments, yield curve and
interest rate risks. Investors should make every effort to consider the risks of
these securities.
-2-
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Any statement or information contained in the ABS Term Sheets shall be
deemed to be modified or superseded for purposes of the Prospectus and the
Registration Statement by statements or information contained in the Prospectus.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit No. Description
----------- -----------
23.4 Consent of Independent Accountants
99.1 ABS Term Sheet provided by Salomon Smith Barney Inc.
-3-
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Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
ONYX ACCEPTANCE FINANCIAL CORPORATION
September 8, 1998 By: /s/ REGAN E. KELLY
------------------------------------
Regan E. Kelly
Executive Vice President
-4-
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
23.4 Consent of Independent Accountants
99.1 ABS Term Sheet provided by Salomon Smith Barney Inc.
</TABLE>
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EXHIBIT 23.4
Consent of Independent Accountants
----------------------------------
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EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus Supplement of
Onyx Acceptance Owner Trust 1998-B, of our report dated February 3, 1998, on
our audits of the consolidated financial statements of MBIA Insurance
Corporation and Subsidiaries as of December 31, 1997 and 1996 and for each of
the three years in the period ended December 31, 1997. We also consent to the
reference to our firm under the caption "Experts".
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
September 8, 1998
<PAGE> 1
EXHIBIT 99.1
ABS Term Sheet provided by Salomon Smith Barney Inc.
----------------------------------------------------
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TERM SHEET
Onyx Acceptance Owner Trust 1998-B
----------------------------------
RETAIL AUTO ABS
$250,000,000 ASSET-BACKED SECURITIES
ONYX ACCEPTANCE FINANCIAL CORPORATION
SELLER
ONYX ACCEPTANCE CORPORATION
SERVICER
$165,000,000 Class A-1 [ ]% Asset-Backed Notes
$72,500,000 Class A-2 [ ]% Asset-Backed Notes
$12,500,000 [ ]% Asset-Backed Certificates
Term Sheet
The information herein is preliminary, and will be superseded by the applicable
prospectus supplement and by any other information subsequently filed with the
Securities and Exchange Commission. The information addresses only certain
aspects of the applicable security's characteristics and thus does not provide a
complete assessment. As such, the information may not reflect the impact of all
structural characteristics of the security. The assumptions underlying the
information, including structure and collateral, may be modified from time to
time to reflect changed circumstances. The attached term sheet is not intended
to be a prospectus and any investment decision with respect to the Notes or
Certificates should be made by you based solely upon all of the information
contained in the final prospectus. Under no circumstances shall the information
presented constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of the securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of such jurisdiction. The securities may
not be sold nor may an offer to buy be accepted prior to the delivery of a final
prospectus relating to the securities. All information described herein is
preliminary, limited in nature and subject to completion or amendment. No
representation is made that the above referenced securities will actually
perform as described in any scenario presented. A final prospectus and
prospectus supplement may be obtained by contacting the Salomon Brothers
Syndicate Desk at (212) 783-3727.
<PAGE> 3
ONYX ACCEPTANCE OWNER TRUST 1998-B
Subject to Revision
TERM SHEET DATED SEPTEMBER 3, 1998
ISSUER............................... Onyx Acceptance Owner Trust 1998-B (the
"TRUST" or the "ISSUER"), a Delaware
business trust to be established
pursuant to a Trust Agreement (as
amended and supplemented from time to
time, the "TRUST AGREEMENT"), between
the Seller, the Owner Trustee and the
Trust Agent.
SELLER............................... Onyx Acceptance Financial Corporation
(the "SELLER"), a wholly- owned, limited
purpose subsidiary of Onyx Acceptance
Corporation ("ONYX").
SERVICER............................. Onyx.
INDENTURE TRUSTEE.................... The Chase Manhattan Bank, as trustee
under the Indenture (the "INDENTURE
TRUSTEE").
OWNER TRUSTEE........................ Bankers Trust (Delaware), as trustee
under the Trust Agreement (the "OWNER
TRUSTEE").
TRUST AGENT.......................... The Chase Manhattan Bank, as agent of
the Owner Trustee under the Trust
Agreement (the "TRUST AGENT").
INSURER.............................. MBIA Insurance Corporation, as Insurer
under the Insurance Agreement (the
"INSURER").
CLOSING DATE......................... The date of initial issuance of the
Notes and the Certificates (the
"CLOSING DATE"), which is expected to
be on or about September 11, 1998.
THE NOTES............................ The Trust will issue Auto Loan Backed
Notes (the "NOTES") pursuant to an
Indenture to be dated as of September 1,
1998 (as amended and supplemented from
time to time, the "INDENTURE"), between
the Issuer and the Indenture Trustee, as
follows: (1) Class A-1 Auto Loan Backed
Notes (the "CLASS A-1 NOTES") in the
aggregate principal amount of
$165,000,000; and (2) Class A-2 Auto
Loan Backed Notes (the "CLASS A-2
NOTES") in the aggregate principal
amount of $72,500,000. The Notes will be
non-recourse obligations of the Trust
and will be secured by certain assets of
the Trust pursuant to the Indenture.
THE CERTIFICATES
AND THE RESIDUAL INTERESTS .......... The Trust will issue Auto Loan Backed
Certificates (the "CERTIFICATES" and,
together with the Notes, the
"SECURITIES") in the aggregate principal
amount of $12,500,000. The Certificates
will represent undivided ownership
interests in the Trust and will be
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issued pursuant to the Trust Agreement.
The Trust will also issue certificates
representing the residual interests in
the Trust (the "RESIDUAL INTERESTS"),
which are not offered hereby.
TRUST PROPERTY....................... The Trust's assets (the "TRUST
PROPERTY") will include: (i) a pool of
fixed rate motor vehicle retail
installment sales contracts (the
"CONTRACTS"), all of which were
purchased from the Seller and secured by
new and used automobiles and light-duty
trucks (the "FINANCED VEHICLES"), (ii)
certain documents relating to the
Contracts, (iii) certain monies received
with respect to the Contracts on or
after September 1, 1998 (the "CUT-OFF
DATE"), (iv) security interests in the
Financed Vehicles and the rights to
receive proceeds from claims on certain
insurance policies covering the Financed
Vehicles or the individual obligors
under each related Contract, (v) all
amounts on deposit in the Collection
Account, the Payment Account, the Note
Distribution Account, the Certificate
Distribution Account, and the Spread
Account, including all Eligible
Investments credited to the Collection
Account and the Spread Account (but
excluding any investment income from
Eligible Investments credited to the
Collection Account, which will be paid
to the Servicer), (vi) the right of the
Seller to cause Onyx to repurchase
certain Contracts under certain
circumstances and (vii) all proceeds of
the foregoing. Pursuant to the
Indenture, the Trust will grant a
security interest in the Trust Property
(excluding the Certificate Distribution
Account) in favor of the Indenture
Trustee on behalf of the Noteholders and
for the benefit of the Insurer in
support of the obligations owing to it
under the Insurance Agreement.
CONTRACTS............................ The Contracts have been purchased by the
Trust from the Seller pursuant to a Sale
and Servicing Agreement dated as of
September 1, 1998 (as amended and
supplemented from time to time, the
"SALE AND SERVICING AGREEMENT"). The
Contracts will include substantially all
of certain fixed rate motor vehicle
installment sales contracts (the
"INITIAL CONTRACTS") which were
originated on or prior to July 31, 1998
(the "STATISTICAL CALCULATION DATE").
The aggregate of the Principal Balances
of the Initial Contracts as of the
Statistical Calculation Date was
$177,186,888 (the "INITIAL POOL
BALANCE"). The aggregate of the
Principal Balances of all of the
Contracts as of the Cut-Off Date (the
"ORIGINAL POOL BALANCE") will be
approximately $250,000,000. The final
pool of Contracts will include
substantially all of the Initial
Contracts, and additional Contracts
originated after the Statistical
Calculation Date and prior to the
Cut-Off Date.
The Initial Contracts had a weighted
average annual percentage rate of
14.726% and a weighted average remaining
term of 56.9 months. Initial Contracts
representing approximately 23.69% of the
Initial Pool Balance allocate interest
and principal in accordance with the
Rule of 78's (the "RULE OF 78'S
CONTRACTS"), and Initial Contracts
representing approximately 76.31% of the
Initial Pool Balance allocate interest
and principal in accordance with the
Simple Interest Method (the "SIMPLE
INTEREST CONTRACTS"). Initial Contracts
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representing approximately 18% of the
Initial Pool Balance are secured by new
Financed Vehicles, and Initial Contracts
representing approximately 82% of the
Initial Pool Balance are secured by used
Financed Vehicles. Initial Contracts
representing approximately 43.45% of the
Initial Pool Balance were originated in
California and Initial Contracts
representing approximately 9.97% of the
Initial Pool Balance were originated in
Florida. No other single state in which
Initial Contracts were originated
represents more than 7.11% of the
Initial Pool Balance. While the
financial and other data for all of the
Contracts in the aggregate will differ
somewhat from the data set forth herein
for the Initial Contracts, data for all
of the Contracts, in the aggregate, will
not vary materially from the data set
forth herein for the Initial Contracts.
All collections of Monthly P&I and all
prepayments on the Contracts collected
by the Servicer will be deposited in or
credited to the Collection Account.
Partial prepayments of Monthly P&I
("PAYAHEADS") on Rule of 78's Contracts
will be transferred on the Servicer
Report Date to the Payahead Account, to
be applied against future scheduled
payments of Monthly P&I. Full
prepayments on Rule of 78's Contracts
and partial and full prepayments on
Simple Interest Contracts will be paid
to Securityholders, as described herein,
on the Distribution Date immediately
following the Collection Period in which
such prepayments are received. On the
Business Day immediately preceding each
Distribution Date, the Servicer will
cause funds equal to the amount of Net
Collections available with respect to
such Distribution Date to be withdrawn
from the Collection Account and
deposited into the Payment Account. On
such Distribution Date, the Indenture
Trustee will distribute the amounts on
deposit in the Payment Account as
required under the Sale and Servicing
Agreement.
DISTRIBUTION DATE.................... The 15th day of each month (or, if such
day is not a Business Day, the next
succeeding Business Day) commencing
October 15, 1998 (each a "DISTRIBUTION
DATE"). A "BUSINESS DAY" is a day other
than a Saturday, Sunday or other day on
which commercial banks located in
California or New York are authorized or
obligated to be closed.
COLLECTION PERIOD.................... A "COLLECTION PERIOD" with respect to a
Distribution Date will be the calendar
month preceding the month in which such
Distribution Date occurs; provided, that
with respect to Liquidated Contracts (as
defined below) the Collection Period
will be the period from but excluding
the sixth Business Day preceding the
immediately preceding Distribution Date
to and including the sixth Business Day
preceding such Distribution Date. With
respect to the first Distribution Date,
the "COLLECTION PERIOD" for Liquidated
Contracts will be the period from and
including the Cut-Off Date to and
including the sixth Business Day
preceding such first Distribution Date.
A "LIQUIDATED CONTRACT" is a Contract
that (i) is the subject of a full
prepayment; (ii) is a Defaulted Contract
with respect to which
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Liquidation Proceeds constituting, in
the Servicer's reasonable judgment, the
final amounts recoverable have been
received and deposited in the Collection
Account; (iii) is paid in full on or
after its Maturity Date; or (iv) has
been a Defaulted Contract for four or
more Collection Periods and as to which
Liquidation Proceeds have not been
deposited in the Collection Account;
provided, however, that in any event a
Contract that is delinquent in the
amount of five monthly installments of
Monthly P&I at the end of a Collection
Period is a Liquidated Contract.
A "DEFAULTED CONTRACT" with respect to
any Collection Period is a Contract (i)
which is, at the end of such Collection
Period, delinquent in the amount of at
least two monthly installments of
Monthly P&I or (ii) with respect to
which the related Financed Vehicle has
been repossessed or repossession efforts
with respect to the related Financed
Vehicle have been commenced.
TERMS OF THE NOTES................... The principal terms of the Notes will be
as described below:
A. Interest......................... The Notes will bear interest: (i) with
respect to Class A-1 Notes, at the rate
of ____% per annum (the "CLASS A-1
RATE"), and (ii) with respect to the
Class A-2 Notes, at the rate of ____%
per annum (the "CLASS A-2 RATE" and,
together with the Class A-1 Rate, the
"INTEREST RATES").
With respect to each Distribution Date,
interest on the principal balances of
the classes of the Notes will accrue at
the respective per annum Interest Rates
during the period from and including the
prior Distribution Date (or in the case
of the first Distribution Date from and
including the Closing Date) to but
excluding the applicable Distribution
Date (each, an "INTEREST ACCRUAL
PERIOD") and will be payable to the
Noteholders monthly on each related
Distribution Date commencing October 15,
1998. Interest on the Notes will be
calculated on the basis of a 360-day
year of twelve 30-day months.
B. Principal........................ Principal of the Notes will be payable
on each Distribution Date in an amount
generally equal to the Note Principal
Distributable Amount for such
Distribution Date. On each Distribution
Date, the Note Principal Distributable
Amount for the related Collection Period
will be applied first, to make payments
of principal on the Class A-1 Notes
until the aggregate principal balance
thereof is reduced to zero, and second,
to make payments of principal on the
Class A-2 Notes until the aggregate
principal balance thereof is reduced to
zero.
The "NOTE PRINCIPAL DISTRIBUTABLE
AMOUNT" means, with respect to any
Distribution Date, the sum of (i) the
portion of the Regular Principal
Distributable Amount allocated to the
Notes for such Distribution Date, (ii)
the Accelerated Principal Distributable
Amount, if any, for such Distribution
Date and (iii) any outstanding Note
Principal Carryover Shortfall for the
immediately preceding Distribution Date;
provided, however, that the Note
Principal Distributable Amount shall not
exceed the aggregate outstanding
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principal amount of the Notes.
Notwithstanding the foregoing, the Note
Principal Distributable Amount on each
Note Final Scheduled Distribution Date
shall not be less than the amount that
is necessary to reduce the outstanding
principal amount of the related class of
Notes to zero.
The "REGULAR PRINCIPAL DISTRIBUTABLE
AMOUNT" means, with respect to any
Distribution Date, the amount equal to
the sum of the following amounts with
respect to the related Collection
Period: (i) collections received on
Contracts (other than Liquidated
Contracts and Purchased Contracts)
allocable to principal as determined by
the Servicer, including full and partial
principal prepayments (other than
partial prepayments on Rule of 78's
Contracts which will be deposited into
the Payahead Account), (ii) the
Principal Balance of all Contracts
(other than Purchased Contracts) that
became Liquidated Contracts during the
related Collection Period, (iii) the
Principal Amount as of the date of
purchase of all Contracts that became
Purchased Contracts as of the
immediately preceding Record Date and
(iv) the aggregate amount of Cram Down
Losses incurred during the related
Collection Period.
The "NOTE PRINCIPAL CARRYOVER SHORTFALL"
means, as of the close of any
Distribution Date, the excess of the
Note Principal Distributable Amount for
such Distribution Date over the amount
in respect of principal that is actually
deposited in the Note Distribution
Account on such Distribution Date.
The "ACCELERATED PRINCIPAL DISTRIBUTABLE
AMOUNT" means, with respect to any
Distribution Date occurring on or after
the Accelerated Principal Commencement
Date, an amount equal to the lesser of
(i) one-twelfth of 2% of the Pool
Balance as of such Distribution Date,
(ii) the amount, if any, by which (a)
the Accelerated Principal Target Level
as of such Distribution Date (after
giving effect to the distribution of the
Regular Principal Distributable Amount
on such Distribution Date) exceeds (b)
the Pool Balance as of such Distribution
Date, and (iii) amounts which would
remain on deposit in the Payment Account
for such Distribution Date after making
all other payments required to be made
on such Distribution Date pursuant to
the Sale and Servicing Agreement without
regard to the inclusion of such amount
as part of the Note Principal
Distributable Amount. The Accelerated
Principal Distributable Amount shall
only be included in the Note Principal
Distributable Amount until all of the
Notes have been paid in full, and shall
not be included in the Certificate
Principal Distributable Amount at any
time. The "ACCELERATED PRINCIPAL
COMMENCEMENT DATE" will mean the first
Distribution Date on which the amount on
deposit in the Spread Account is equal
to or greater than the Spread Account
Maximum (after giving effect to any
deposit thereto on such Distribution
Date). The "ACCELERATED PRINCIPAL TARGET
LEVEL" means, with respect to any
Distribution Date, an amount equal to
the product of (i) 102% multiplied by
(ii) the outstanding aggregate principal
amount of the Notes and the Certificates
as of such Distribution Date (after
giving
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effect to the distribution of the
Regular Principal Distributable Amount
on such Distribution Date).
The outstanding principal amount of the
Class A-1 Notes, to the extent not
previously paid, will be payable on the
Distribution Date occurring in March
2002 (the "CLASS A-1 FINAL SCHEDULED
DISTRIBUTION DATE"), and the outstanding
principal amount of the Class A-2 Notes,
to the extent not previously paid, will
be payable on the Distribution Date
occurring in July 2003 (the "CLASS A-2
FINAL SCHEDULED DISTRIBUTION DATE" and,
together with the Class A-1 Final
Scheduled Distribution Date, the "NOTE
FINAL SCHEDULED DISTRIBUTION DATES").
The actual date on which the aggregate
outstanding principal balance of any
class of Notes is paid is expected to
occur earlier, and could occur
significantly earlier, than the Note
Final Scheduled Distribution Date for
such class, depending on a variety of
factors.
C. Optional Redemption.............. In the event of an Optional Purchase,
each class of Notes, to the extent still
outstanding, will be redeemed in whole,
but not in part, at a redemption price
equal to the unpaid principal amount of
such class of Notes plus accrued and
unpaid interest thereon.
TERMS OF THE CERTIFICATES............ The principal terms of the Certificates
will be as described below:
A. Interest......................... With respect to each Distribution Date,
interest on the Certificate Balance of
the Certificates will accrue at the rate
of _____% (the "CERTIFICATE RATE")
during the Interest Accrual Period and
will be payable to Certificateholders
monthly on each related Distribution
Date commencing October 15, 1998.
Interest on the Certificates will be
calculated on the basis of a 360-day
year of twelve 30-day months.
The "CERTIFICATE BALANCE" will equal
$12,500,000 (the "ORIGINAL CERTIFICATE
BALANCE") on the Closing Date and on any
date thereafter will equal the Original
Certificate Balance reduced by all
distributions of principal previously
made in respect of the Certificates.
Distributions of interest on the
Certificates will be subordinated to
payments of interest on the Notes, and
on a Note Final Scheduled Distribution
Date for a class of Notes, to principal
then due on such class of Notes.
Distributions of principal on the
Certificates will be subordinated to
distributions of interest and principal
on the Notes.
B. Principal........................ No principal will be paid on the
Certificates until all of the Notes have
been paid in full. On such Distribution
Date and each Distribution Date
thereafter, principal of the
Certificates will be payable in an
amount equal to the Certificate
Principal Distributable Amount for such
Distribution Date.
The "CERTIFICATE PRINCIPAL DISTRIBUTABLE
AMOUNT" means, with respect to any
Distribution Date, the sum of (i) the
Certificate Percentage of the Regular
Principal Distributable Amount for such
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Distribution Date and (ii) any
outstanding Certificate Principal
Carryover Shortfall for the immediately
preceding Distribution Date; provided,
however, that the Certificate Principal
Distributable Amount shall not exceed
the Certificate Balance. Notwithstanding
the foregoing, the Certificate Principal
Distributable Amount on the Certificate
Final Scheduled Distribution Date shall
not be less than the amount that is
necessary to reduce the outstanding
principal amount of the Certificates to
zero.
The "CERTIFICATE PRINCIPAL CARRYOVER
SHORTFALL" means, as of the close of any
Distribution Date, the excess of the
Certificate Principal Distributable
Amount over the amount in respect of
principal that is actually deposited in
the Certificate Distribution Account on
such Distribution Date.
The outstanding principal amount of the
Certificates, to the extent not
previously paid, will be payable on the
Distribution Date occurring in March
2005 (the "CERTIFICATE FINAL SCHEDULED
DISTRIBUTION DATE" and, together with
the Note Final Scheduled Distribution
Dates, the "FINAL SCHEDULED DISTRIBUTION
DATES"). The actual date on which the
outstanding Certificate Balance is paid
is expected to occur earlier, and could
occur significantly earlier, than the
Certificate Final Scheduled Distribution
Date, depending on a variety of factors.
C. Optional Prepayment.............. In the event of an Optional Purchase,
the Certificates will be prepaid in
whole, but not in part, at a prepayment
price equal to the Certificate Balance
plus accrued and unpaid interest thereon
at the Certificate Rate.
THE SPREAD ACCOUNT................... The Securityholders will be afforded
certain limited protection against
losses in respect of the Contracts by
the establishment of a segregated trust
account in the name of the Indenture
Trustee for the benefit of the
Securityholders and the Insurer (the
"SPREAD ACCOUNT"). The Spread Account
will be a part of the Trust.
On each Distribution Date, Net
Collections remaining after required
distributions have been made in respect
of the Servicer, the Noteholders, the
Certificateholders and the Insurer will
be deposited in the Spread Account, up
to a maximum amount calculated as the
parties to the Insurance Agreement and
the Rating Agencies may agree (the
"SPREAD ACCOUNT MAXIMUM"). On each
Distribution Date, funds will be
withdrawn from the Spread Account to
cover any shortfalls in amounts
available to pay the Servicing Fee,
certain fees of the Indenture Trustee,
Owner Trustee and Trust Agent, and
interest and principal required to be
paid on the Securities. If the amount on
deposit in the Spread Account on any
Distribution Date (after giving effect
to all deposits thereto or withdrawals
therefrom on such Distribution Date) is
greater than the Spread Account Maximum,
the Indenture Trustee will distribute
any excess first, to the Insurer, to the
extent of any amounts owing to the
Insurer pursuant to the Insurance
Agreement, then to the holders of the
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Residual Interests in the Trust. Upon
any such distributions to the Insurer or
the holders of the Residual Interests,
the Securityholders will have no further
rights in, or claims to, such amounts.
THE POLICY........................... On the Closing Date, the Insurer will
issue the Policy in favor of the
Indenture Trustee for the benefit of the
Securityholders pursuant to an Insurance
and Reimbursement Agreement (the
"INSURANCE AGREEMENT"), dated as of the
Closing Date, by and among the Insurer,
the Trust, Onyx, the Seller and the
Indenture Trustee.
Pursuant to the Policy, the Insurer will
irrevocably and unconditionally
guarantee payment to the Indenture
Trustee, for the benefit of the
Noteholders and the Certificateholders,
of (i) on each Distribution Date, the
Note Interest Distributable Amount and
the Certificate Interest Distributable
Amount, respectively, and (ii) on each
Final Scheduled Distribution Date with
respect to a class of Notes or the
Certificates, the outstanding principal
amount of such class of Notes or the
Certificates on such Final Scheduled
Distribution Date. The Insurer's
obligations under the Policy will be
discharged to the extent that amounts
paid by the Insurer under the Policy are
received by the Indenture Trustee,
whether or not such Policy Claim Amounts
are properly applied by the Indenture
Trustee.
The Policy will not guarantee payments
of principal on any class of Notes or on
the Certificates at any time other than
the payment of the outstanding principal
amount of a class of Notes or of the
Certificates on the Final Scheduled
Distribution Date for such class of
Notes or the Certificates, and will not
guarantee payment of any Accelerated
Principal Distributable Amount or any
amounts which become due on an
accelerated basis as a result of (a) a
default by the Trust, (b) the occurrence
of an Indenture Event of Default under
the Indenture or (c) any other cause.
The Insurer may elect, in its sole
discretion, to pay in whole or in part
such principal due upon acceleration. In
addition, the Insurer may elect, in its
sole discretion, to pay all or a portion
of certain shortfalls of funds available
to make certain distributions of
principal on the Notes or the
Certificates on a Distribution Date.
SERVICING FEE........................ The Servicer will be responsible for
managing, administering, servicing, and
making collections on the Contracts.
Compensation to the Servicer will
consist of a monthly fee (the "SERVICING
FEE"), payable by the Trust to the
Servicer on each Distribution Date, in
an amount equal to the product of
one-twelfth of 1% per annum (the
"SERVICING FEE RATE") multiplied by the
Pool Balance as of the end of the
Collection Period preceding the related
Collection Period. As additional
compensation, the Servicer will be
entitled to any late fees and other
administrative fees and expenses or
similar charges collected with respect
to the Contracts. The Servicer or its
designee will also receive as servicing
compensation investment earnings on
Eligible Investments of funds credited
to the Collection Account.
9
<PAGE> 11
OPTIONAL PURCHASE.................... The Servicer, or any successor to the
Servicer, may, but will not be obligated
to, purchase all of the Contracts in the
Trust, and thereby cause early
retirement of all outstanding
Securities, on any Distribution Date as
of which the Pool Balance is 10% or less
of the Original Pool Balance (an
"OPTIONAL PURCHASE").
FEDERAL INCOME TAX STATUS............ In the opinion of Andrews & Kurth L.L.P.
("TAX COUNSEL") for federal income tax
purposes, the Notes will be
characterized as debt, and the Trust
will not be characterized as an
association (or a publicly traded
partnership) taxable as a corporation.
Each Noteholder, by the acceptance of a
Note, will agree to treat the Notes as
indebtedness and each Certificateholder,
by the acceptance of a Certificate, will
agree to treat the Trust as a
partnership in which the
Certificateholders are partners for
federal income tax purposes.
ERISA CONSIDERATIONS................. Subject to the considerations discussed
under "ERISA Considerations" herein and
in the Prospectus, the Notes will be
eligible for purchase by employee
benefit plans that are subject to the
Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). Any
benefit plan fiduciary considering
purchase of the Notes should, among
other things, consult with its counsel
in determining whether all required
conditions have been satisfied.
The Certificates may not be acquired by
any employee benefit plan subject to
ERISA or Section 4975 of the Internal
Revenue Code of 1986, as amended (the
"Code") or by an individual retirement
account. 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.
RATING............................... It is a condition of issuance of the
Notes and the Certificates that each
class of the Notes, and the
Certificates, be rated in the highest
rating category for such Securities by
Standard & Poor's and Moody's. The
ratings of the Notes and the
Certificates will be based substantially
on the issuance of the Policy by the
Insurer.
REGISTRATION OF THE SECURITIES....... The Securities will initially be
represented by one or more certificates
registered in the name of Cede & Co.
("CEDE"), as the nominee of The
Depository Trust Company ("DTC"). No
person acquiring an interest in a
Security through the facilities of DTC
(a "SECURITY OWNER") will be entitled to
receive a Definitive Security, except in
the event that Definitive Securities are
issued in certain limited circumstances.
10
<PAGE> 12
THE CONTRACTS
Set forth below is certain data concerning the Initial Contracts as of
the Statistical Calculation Date which had an Initial Pool Balance of
$177,186,887.85. Data concerning all of the Contracts will be set forth in the
Prospectus Supplement. While the financial and other data for all of the
Contracts in the aggregate will differ somewhat from the data below for the
Initial Contracts, data for all of the Contracts will not vary materially from
the data concerning the Initial Contracts described below.
COMPOSITION OF THE INITIAL CONTRACTS
Aggregate principal balance................... $177,186,887.85
Number of Contracts........................... 14,735
Average principal balance outstanding......... $12,024.90
Average original amount financed.............. $12,105.00
Original amount financed (range).............. $975.57 to $74,003.15
Weighted average APR.......................... 14.726%
APR (range)................................... 1.90% to 27.85%
Weighted average original term................ 57.6 months
Original term (range)......................... 6 to 72 months
Weighted average remaining term............... 56.9 months
Remaining term (range)........................ 6 to 72 months
DISTRIBUTION BY APRS OF THE INITIAL CONTRACTS
NUMBER OF % OF % OF
INITIAL INITIAL PRINCIPAL INITIAL
APR RANGE CONTRACTS CONTRACTS BALANCE POOL BALANCE
--------- --------- --------- ------- ------------
0.000% to 7.000%.......... 6 0.04% $ 64,574 0.04%
7.001% to 8.000%.......... 192 1.30 3,213,336 1.81
8.001% to 9.000%.......... 643 4.36 9,369,389 5.29
9.001% to 10.000%......... 854 5.80 12,379,467 6.99
10.001% to 11.000%........ 826 5.61 11,555,500 6.52
11.001% to 12.000%........ 918 6.23 12,653,188 7.14
12.001% to 13.000%........ 1,020 6.92 13,411,655 7.57
13.001% to 14.000%........ 1,235 8.38 16,034,038 9.05
14.001% to 15.000%........ 1,461 9.92 18,451,599 10.41
15.001% to 16.000%........ 1,439 9.77 17,674,249 9.97
16.001% to 17.000%........ 1,420 9.64 16,821,738 9.49
17.001% to 18.000%........ 1,305 8.86 14,294,836 8.07
18.001% to 19.000%........ 852 5.78 8,808,420 4.97
19.001% to 20.000%........ 780 5.29 7,287,394 4.11
20.001% to 21.000%........ 1,112 7.55 10,905,809 6.15
21.001% and over.......... 672 4.56 4,261,695 2.41
------- ------ ------------ ------
Totals.......... 14,735 100.00% 177,186,888 100.00%
11
<PAGE> 13
GEOGRAPHIC CONCENTRATION OF THE INITIAL CONTRACTS
NUMBER % OF % OF
OF INITIAL INITIAL PRINCIPAL INITIAL
CONTRACTS CONTRACTS BALANCE POOL BALANCE
---------- --------- --------- ------------
Arizona............. 831 5.64% $ 10,085,299 5.69%
California.......... 6,252 42.43 76,980,496 43.45
Colorado............ 326 2.21 3,843,779 2.17
Connecticut......... 1 0.01 7,527 0.00
Florida............. 1,483 10.06 17,667,415 9.97
Georgia............. 992 6.73 12,605,291 7.11
Idaho............... 58 0.39 524,022 0.30
Illinois............ 973 6.60 12,124,728 6.84
Indiana............. 282 1.91 3,143,579 1.77
Iowa................ 1 0.01 4,068 0.00
Kentucky............ 4 0.03 30,431 0.02
Maryland............ 1 0.01 13,813 0.01
Massachusetts....... 1 0.01 12,830 0.01
Michigan............ 731 4.96 9,282,476 5.24
Missouri............ 21 0.14 254,900 0.14
Montana............. 2 0.01 23,166 0.01
Nevada.............. 602 4.09 7,314,318 4.13
New Jersey.......... 121 0.82 1,416,856 0.80
New York............ 6 0.04 60,555 0.03
Oregon.............. 482 3.27 4,479,582 2.53
Pennsylvania........ 2 0.01 20,574 0.01
Tennessee........... 9 0.06 125,901 0.07
Texas............... 529 3.59 7,343,205 4.14
Utah................ 13 0.09 126,870 0.07
Virginia............ 2 0.01 24,771 0.01
Washington.......... 1,010 6.85 9,670,437 5.46
------ ------ ------------ ------
Totals.... 14,735 100.00% 177,186,888 100.00%
12
<PAGE> 14
DELINQUENCY AND LOAN LOSS INFORMATION
The following tables set forth information with respect to the
experience of Onyx relating to delinquencies, loan losses and recoveries for the
portfolio of Motor Vehicle Contracts owned and serviced by Onyx on an annual
basis commencing December 31, 1995. The tables include delinquency information
relating to those Motor Vehicle Contracts that were purchased, originated, sold
and serviced by Onyx. All of the Motor Vehicle Contracts were originally
purchased by Onyx from Dealers, or originated by Onyx or a subsidiary of Onyx,
in accordance with credit underwriting criteria established by Onyx. In February
1994, Onyx commenced its operations as a purchaser and servicer of motor vehicle
retail installment sales contracts. Thus, Onyx has historical performance for
only a limited time period with respect to the Motor Vehicle Contracts it
purchases and originates and thus delinquencies and loan losses may increase
from existing levels in the portfolio with the passage of time. Delinquency and
loan loss experience may be influenced by a variety of economic, social and
other factors.
DELINQUENCY EXPERIENCE OF ONYX MOTOR VEHICLE CONTRACT PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31, AT JUNE 30, AT JUNE 30,
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
AMOUNT NO AMOUNT NO AMOUNT NO AMOUNT NO AMOUNT NO
------ -- ------ -- ------ -- ------ -- ------ --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Servicing portfolio.. $218,207 20,156 $400,665 38,275 $757,277 73,502 $564,922 54,243 $1,009,246 98,918
Delinquencies
30-59 DAYS(1)(2)... $ 1,608 153 $ 5,022 478 $ 11,902 1,211 $ 7,023 699 $ 9,041 921
60-89 DAYS(1)(2)... 470 35 1,816 162 3,370 346 1,981 178 2,473 244
90+ DAYS(1)(2)..... 547 42 1,279 111 3,742 316 2,591 229 3,552 332
Total delinquencies as
a percent of servicing
portfolio... 1.20% 1.14% 2.03% 1.96% 2.51% 2.55% 2.05% 2.04% 1.49% 1.51%
</TABLE>
- ----------
(1) Delinquencies include principal amounts only, net of repossessed
inventory. Repossessed inventory as a percent of the servicing portfolio
was .43%, .48% and 1.17% at December 31, 1995, 1996 and 1997,
respectively, and 1.27% and .73% at June 30, 1997 and 1998 respectively.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
LOAN LOSS EXPERIENCE OF ONYX MOTOR VEHICLE CONTRACT PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------- -------------------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Number of Motor Vehicle Contracts
outstanding ...................... 20,156 38,275 73,502 54,243 98,918
Period end outstanding.............. $218,207 $400,665 $757,277 $564,922 $1,009,246
Average outstanding................. $141,029 $311,340 $563,343 $475,141 $ 875,657
Number of gross charge-offs......... 197 987 2,161 864 1,756
Gross charge-offs................... $ 548.2 $ 5,789.2 $ 13,076.1 $ 5,308.8 $ 9,374.8
Net charge-offs(1).................. $ 528.7 $ 5,066.1 $ 11,433.9 $ 4,611.0 $ 7,917.2
Net charge-offs as a percent of
average outstanding............... .37% 1.63% 2.03% 1.94% 1.81%
- ----------
</TABLE>
(1) Net charge-offs are gross charge-offs minus recoveries of Motor Vehicle
Contracts previously charged off.
13
