<PAGE> 1
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: November 16, 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
<PAGE> 2
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-C (the "Offered Securities").
The Registrant is 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 letters (such materials being the "ABS Term Sheets").
The ABS Term Sheets were prepared solely by Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") 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 constituency of the
underlying collateral will be set forth in the Prospectus and in a Current
Report on Form 8-K to be filed with the Commission.
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
99.1 ABS Revised Term Sheet provided by Merrill Lynch
-3-
<PAGE> 4
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
November 16, 1998 By: /s/ DON P. DUFFY
------------------------------------
Don P. Duffy
Executive Vice President and Chief Financial Officer
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
99.1 ABS Revised Term Sheet provided by Merrill Lynch
</TABLE>
<PAGE> 1
EXHIBIT 99.1
ABS Revised Term Sheet provided by Merrill Lynch
[Begins on Next Page]
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REVISED TERM SHEET
Onyx Acceptance Owner Trust 1998-C
RETAIL AUTO ABS
$280,000,000 ASSET-BACKED SECURITIES
ONYX ACCEPTANCE FINANCIAL CORPORATION
SELLER
ONYX ACCEPTANCE CORPORATION
SERVICER
$53,000,000 Class A-1 [ ]% Asset-Backed Notes
$70,000,000 Class A-2 [ ]% Asset-Backed Notes
$89,000,000 Class A-3 [ ]% Asset-Backed Notes
$54,000,000 Class A-4 [ ]% Asset-Backed Notes
$14,000,000 [ ]% Asset-Backed Certificates
Revised Term Sheet
The attached information (the "Term Sheet") is privileged and confidential and
is intended for use by the addressee only. The Term Sheet is furnished to you
solely by Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
and not by the issuer of the securities or any of its affiliates. The issuer of
these securities has not prepared or taken part in the preparation of these
materials. Neither Merrill Lynch, the issuer of the securities nor any of its
affiliates makes any representation as to the accuracy or completeness of the
information herein. 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
herein may not be provided by the addressee to any third party other than the
addressee's legal, tax, financial and/or accounting advisors for the purposes of
evaluating said material.
Although a registration statement (including the prospectus) relating to the
securities discussed in this communication has been filed with the Securities
and Exchange Commission and is effective, the final prospectus supplement
relating to the securities discussed in this communication has not been filed
with the Securities and Exchange Commission. This communication shall not
constitute an offer to sell or the solicitation of any offer to buy nor shall
there be any sale of the securities discussed in this communication in any state
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
Prospective purchasers are referred to the final prospectus and prospectus
supplement relating to the securities discussed in this communication for
definitive information on any matter discussed in this communication. A final
prospectus and prospectus supplement may be obtained by contacting the Merrill
Lynch Trading Desk at (212) 449-3659.
Please be advised that asset-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 risk.
Investors should fully consider the risk of an investment in these securities.
If you have received this communication in error, please notify the sending
party immediately by telephone and return the original to such party by mail.
<PAGE> 3
ONYX ACCEPTANCE OWNER TRUST 1998-C
Subject to Revision
TERM SHEET DATED NOVEMBER 13, 1998
ISSUER.......................... Onyx Acceptance Owner Trust 1998-C, a Delaware
business trust. The Trust will be established
by a trust agreement among the Seller, the
Owner Trustee and the Trust Agent. The trust
agreement is referred to herein as the "TRUST
AGREEMENT".
SELLER........................... Onyx Acceptance Financial Corporation, a
wholly-owned, limited purpose subsidiary of
Onyx Acceptance Corporation.
SERVICER......................... Onyx Acceptance Corporation ("ONYX").
INDENTURE TRUSTEE................ The Chase Manhattan Bank, as trustee under the
Indenture.
OWNER TRUSTEE.................... Bankers Trust (Delaware), as trustee under the
Trust Agreement.
TRUST AGENT...................... The Chase Manhattan Bank, as agent of the
Owner Trustee under the Trust Agreement.
INSURER.......................... MBIA Insurance Corporation, as Insurer under
the Insurance Agreement ("MBIA").
CLOSING DATE..................... On or about November 24, 1998.
THE NOTES........................ The Trust will issue Auto Loan Backed Notes
(the "NOTES") pursuant to an indenture to be
dated as of November 1, 1998 (the "INDENTURE")
between the Issuer and the Indenture Trustee.
The Notes will include the Class A-1 Auto Loan
Backed Notes in the aggregate principal amount
of $53,000,000, the Class A-2 Auto Loan Backed
Notes in the aggregate principal amount of
$70,000,000, the Class A-3 Auto Loan Backed
Notes in the aggregate principal amount of
$89,000,000 and the Class A-4 Auto Loan Backed
Notes in the aggregate principal amount of
$54,000,000. 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................. The Trust will issue Auto Loan Backed
Certificates (the "CERTIFICATES" and, together
with the Notes, the "SECURITIES"), in the
aggregate principal amount of $14,000,000. The
Certificates will represent undivided
beneficial ownership interests in the Trust
and will be issued pursuant to the Trust
Agreement.
THE RESIDUAL INTERESTS........... The Trust will issue certificates representing
the Residual Interests in the Trust. The
Residual Interests are not offered for sale.
TRUST PROPERTY................... The Trust's assets will include:
o 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;
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o certain documents relating to the
Contracts;
o certain monies received with respect to
the Contracts on or after the Cut-Off
Date for such Contracts;
o 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;
o all amounts on deposit in the specified
accounts (excluding any investment
income credited to the Collection
Account, which will be paid to the
Servicer);
o the right of the Seller to cause Onyx to
repurchase certain Contracts under
specified circumstances; and
o 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 MBIA in
support of the obligations owing to MBIA under
the Insurance Agreement.
CONTRACTS........................ The Trust's main source of funds for making
payments on the Securities will be collections
on the Contracts. The Trust will acquire
certain Contracts with a total principal
balance of $218,237,184 as of November 1,
1998. Such Contracts are referred to herein as
the "INITIAL CONTRACTS" and November 1, 1998
is referred to as the "INITIAL CUT-OFF DATE".
The total principal balance of the Initial
Contracts as of the Initial Cut-Off Date is
referred to as the "INITIAL CUT-OFF POOL
Balance".
The Trust will acquire certain additional
Contracts that have been or will be originated
or purchased after the Initial Cut-Off Date
but prior to November 24, 1998. Such Contracts
are referred to herein as the "SUBSEQUENT
CONTRACTS" and November 24, 1998 is referred
to as the "FINAL CUT-OFF DATE". The total
principal balance of the Initial Contracts as
of the Initial Cut-Off Date and the Subsequent
Contracts as of the Final Cut-Off Date, which
will be approximately $280,000,000, is
referred to as the "ORIGINAL POOL BALANCE".
The term "CUT-OFF DATE" as used herein refers
to the Initial Cut-Off Date for the Initial
Contracts and the Final Cut-Off Date for the
Subsequent Contracts.
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As of the Initial Cut-Off Date, the Initial
Contracts had the following characteristics:
<TABLE>
<S> <C>
Weighted average annual percentage rate: 14.89%
Weighted average remaining term: 57.2 months
Contracts that allocate interest and
principal by the rule of 78's or actuarial method: 19.97% (by Initial Cut-Off Pool Balance)
Contracts that allocate interest and
principal by the simple interest method: 80.03% (by Initial Cut-Off Pool Balance)
Contracts secured by new vehicles: 19.61% (by Initial Cut-Off Pool Balance)
Contracts secured by used vehicles: 80.39% (by Initial Cut-Off Pool Balance)
Contracts originated in California:* 37.77% (by Initial Cut-Off Pool Balance)
Contracts originated in Florida:* 10.52% (by Initial Cut-Off Pool Balance)
</TABLE>
* As of the Initial Cut-Off Date, the
aggregate principal balances of Initial
Contracts originated in any other single
state did not exceed 10%.
No Initial Contract has, and no Subsequent
Contract will have, a scheduled maturity date
later than December 31, 2004.
Although the financial and other data for the
Subsequent Contracts will differ somewhat from
the descriptions of the Initial Contracts set
forth above, the characteristics of the
Contracts as a whole will not vary materially
from the characteristics of the Initial
Contracts.
DISTRIBUTION DATE................ Interest and principal on the Notes and the
Certificates will be payable on the 15th day
of each month. If the 15th day of a month is
not a business day, then the payment for that
month will be made on the next business day.
The first payment will be due on December 15,
1998.
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 required to be closed.
TERMS OF THE NOTES:
A. INTEREST..................... Class A-1 Rate: ______% per annum.
Class A-2 Rate: ______% per annum.
Class A-3 Rate: ______% per annum.
Class A-4 Rate: ______% per annum.
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 and will be
payable to the Noteholders monthly on each
related Distribution Date commencing December
15, 1998. Interest on the Notes will be
calculated on the basis of a 360-day year of
twelve 30-day months, with the exception of
the Class A-1 Notes, with respect to which
interest will be calculated on the basis of a
360-day year and the actual number of days in
the related accrual period.
B. PRINCIPAL.................... The Trust will make payments of principal on
the Notes monthly, on each Distribution Date,
in an amount generally equal to the Note
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Principal Distributable Amount for such
Distribution Date. No principal payments will
be made on the Class A-2 Notes until the Class
A-1 Notes have been paid in full; no principal
payments will be made on the Class A-3 Notes
until the Class A-2 Notes have been paid in
full; and no principal payments will be made
on the Class A-4 Notes until the Class A-3
Notes have been paid in full.
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 principal
amount of the Notes. Notwithstanding the
foregoing, the Note Principal Distributable
Amount on the Final Scheduled Distribution
Date for each class of Notes 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 Contracts that allocate
principal and interest based on the rule of
78's or the actuarial method, representing
payments not due in such Collection Period,
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
Balance 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
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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 effect to the distribution of
the Regular Principal Distributable Amount on
such Distribution Date).
A "CRAM DOWN LOSS" means, with respect to a
Contract, if a court of appropriate
jurisdiction in an insolvency proceeding shall
have issued an order reducing the amount owed
on such Contract or otherwise modifying or
restructuring the scheduled payments to be
made on such Contract, an amount equal to (i)
the excess of the Principal Balance of such
Contract immediately prior to such order over
the Principal Balance of such Contract as so
reduced and/or (ii) if such court shall have
issued an order reducing the effective rate of
interest on such Contract, the excess of the
Principal Balance of such Contract immediately
prior to such order over the net present value
of the scheduled payments as so modified or
restructured.
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
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 principal and interest
at the end of a Collection Period shall be
deemed to be a Liquidated Contract and shall
be deemed to have a balance of zero.
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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 principal and
interest 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.
The Trust must pay the outstanding principal
amount of each class of Notes, to the extent
not previously paid, by the following dates:
<TABLE>
<CAPTION>
CLASS FINAL SCHEDULED DISTRIBUTION DATE
----- ---------------------------------
<S> <C>
A-1 December 15, 1999
A-2 September 15, 2001
A-3 April 15, 2002
A-4 December 15, 2003
</TABLE>
The final scheduled Distribution Dates set
forth above are referred to herein as the
"FINAL SCHEDULED DISTRIBUTION DATE" for each
class of Notes. The outstanding principal
balance of each class of Notes is expected be
paid in full earlier, and could be paid
significantly earlier, than the Final
Scheduled Distribution Date for such class,
depending on a variety of factors.
C. MANDATORY PARTIAL REDEMPTION.. If the proceeds from the sale of the
Securities is greater than the Original Pool
Balance, the Trust will partially redeem the
Class A-1 Notes on the first Distribution
Date. In such event, the Indenture Trustee
will distribute principal to the Class A-1
Noteholders in an amount equal to the excess
of the proceeds over the Original Pool
Balance.
TERMS OF THE CERTIFICATES:
A. INTEREST..................... Certificate Rate: ______% per annum.
Interest on the Certificates will accrue
monthly at the Certificate Rate and will be
payable to Certificateholders monthly on each
related Distribution Date commencing December
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
$14,000,000 (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 on each Distribution
Date. On the Final Scheduled Distribution Date
for a class of Notes, interest on the
Certificates will be subordinated to payments
of principal then due on such class of Notes.
B. PRINCIPAL.................... No principal will be paid on the Certificates
until all of the Notes have been paid in full.
On the Distribution Date that the Notes are
paid in full, and on each succeeding
Distribution Date, the Trust will make
payments of principal on the Certificates in
an amount equal to
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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
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 Final
Scheduled Distribution Date for the
Certificates shall not be less than the amount
that is necessary to reduce the outstanding
principal amount of the Certificates to zero.
The "CERTIFICATE PERCENTAGE" means (i) for
each Distribution Date prior to the
Distribution Date on which the principal
amount of the Class A-4 Notes is reduced to
zero, 0%, (ii) on the Distribution Date on
which the principal amount of the Class A-4
Notes is reduced to zero, (a) 0% until the
principal amount of the Class A-4 Notes has
been reduced to zero and (b) with respect to
any remaining portion of the Regular Principal
Distributable Amount, 100%; and (iii) for each
Distribution Date after the Distribution Date
on which the principal amount of the Class A-4
Notes is reduced to zero, 100%.
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 Trust must pay the outstanding principal
amount of the Certificates, to the extent not
previously paid, by April 15, 2005. This date
is referred to herein as the "FINAL SCHEDULED
DISTRIBUTION DATE" for the Certificates. The
outstanding principal balance of the
Certificates is expected be paid in full
earlier, and could be paid significantly
earlier, than the Final Scheduled Distribution
Date for the Certificates, depending on a
variety of factors.
OPTIONAL PURCHASE................ The Servicer may, but is not obligated to,
purchase the Contracts on any Distribution
Date on which the principal balance of the
Contracts has declined to 10% or less of the
Original Pool Balance. If the Servicer
exercises this purchase option, all of the
Notes then outstanding will be redeemed, and
all of the Certificates then outstanding will
be prepaid.
THE SPREAD ACCOUNT............... The Indenture Trustee will establish a
segregated trust account, entitled "Spread
Account - OT 1998-C, The Chase Manhattan Bank,
Indenture Trustee", for the benefit of the
Securityholders and MBIA (the "SPREAD
ACCOUNT"). The Spread Account will be an asset
of the Trust. The Securityholders will be
afforded certain limited protection against
losses on the Contracts by the establishment
of the Spread Account.
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On each Distribution Date, Net Collections
remaining after required distributions have
been made in respect of the Servicer, the
Owner Trustee, the Indenture Trustee, the
Trust Agent, 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 (i) the Servicing Fee and certain fees of
the Indenture Trustee, the Owner Trustee and
the Trust Agent, and (ii) interest and
principal on the Securities. If the amount on
deposit in the Spread Account on any
Distribution Date (after giving effect to all
deposits thereto and 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, and then to the holders of the
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 INSURANCE POLICY............. On the Closing Date, MBIA will issue an
insurance policy in favor of the Indenture
Trustee, for the benefit of the
Securityholders. The insurance policy issued
by MBIA is referred to herein as the "POLICY",
and the insurance agreement pursuant to which
the Policy is issued is referred to as the
"INSURANCE AGREEMENT".
Pursuant to the Policy, MBIA will irrevocably
and unconditionally guarantee payment of
interest and principal due on the Notes and
the Certificates. MBIA's obligations under the
Policy will be discharged to the extent that
amounts due under the Policy are received by
the Indenture Trustee, whether or not such
amounts are properly applied by the Indenture
Trustee.
MBIA 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.
MBIA may elect, in its sole discretion, to pay
in whole or in part such principal due upon
acceleration. In addition, MBIA 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 collecting on
the Contracts. As compensation for its
services, the Servicer will receive a monthly
fee equal to the product of one-twelfth of 1%
per annum multiplied by the Pool Balance as of
the end of the immediately preceding
Collection Period (the "SERVICING FEE"). As
additional compensation, the Servicer will be
entitled to any late fees and other
administrative fees and expenses or
9
<PAGE> 11
similar charges collected with respect to the
Contracts. The Servicer or its designee will
also receive as servicing compensation net
investment earnings on Eligible Investments of
funds credited to the Collection Account.
FEDERAL INCOME TAX STATUS........ In the opinion of Andrews & Kurth L.L.P., 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" in the Prospectus
Supplement and in the Prospectus, the Notes
are eligible for purchase by employee benefit
plans that are subject to ERISA. However,
neither an employee benefit plan subject to
ERISA or Section 4975 of the Internal Revenue
Code of 1986 nor an individual retirement
account is eligible to purchase the
Certificates. 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........................... At the Closing Date, Standard & Poor's Ratings
Services and Moody's Investors Service, Inc.
will rate the Notes and the Certificates in
the highest rating category for such
securities. The ratings of the Notes and the
Certificates will be based substantially on
the issuance of the Policy by MBIA.
REGISTRATION OF THE SECURITIES... Initially, the Securities will be in the form
of one or more certificates registered in the
name of Cede & Co., as the nominee of The
Depository Trust Company. If you acquire an
interest in the Notes or the Certificates
through The Depository Trust Company, you will
not 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 Initial Cut-Off Date which had an Initial Cut-Off Pool Balance of
$218,237,184. Data concerning all of the Contracts will be available to
purchasers of the Securities at or before the initial delivery of the Securities
and will be filed with the SEC on Form 8-K within 15 days after the initial
delivery of the Securities. While the financial and other data for the
Subsequent Contracts will differ somewhat from the data below for the Initial
Contracts, the characteristics of the Contracts as a whole will not vary
materially from the characteristics of the Initial Contracts described below.
COMPOSITION OF THE INITIAL CONTRACTS
<TABLE>
<S> <C>
Aggregate principal balance......................................................... $218,237,184
Number of Contracts....................................................................... 17,979
Average principal balance outstanding................................................. $12,138.45
Average original amount financed...................................................... $12,209.96
Original amount financed (range)........................................... 1,179.81 to 63,591.08
Weighted average APR 14.89% APR (range).......................................... 4.97% to 27.00%
Weighted average original term............................................................. 57.75
Original term (range)............................................................... 6 to 72 mos.
Weighted average remaining term............................................................ 57.11
Remaining term (range).............................................................. 5 to 72 mos.
</TABLE>
DISTRIBUTION BY APRS OF THE INITIAL CONTRACTS
<TABLE>
<CAPTION>
NUMBER OF % OF % OF INITIAL
INITIAL INITIAL PRINCIPAL CUT-OFF
APR RANGE CONTRACTS CONTRACTS BALANCE POOL BALANCE
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
0.000% to 7.000% ...................... 6 0.03 55,475 0.03
7.001% to 8.000% ...................... 213 1.18 3,629,859 1.66
8.001% to 9.000% ...................... 642 3.57 10,392,841 4.76
9.001% to 10.000% ..................... 927 5.16 13,708,457 6.28
10.001% to 11.000% ..................... 871 4.84 12,609,609 5.78
11.001% to 12.000% ..................... 1,025 5.70 14,083,678 6.45
12.001% to 13.000% ..................... 1,260 7.01 16,964,679 7.77
13.001% to 14.000% ..................... 1,606 8.93 21,081,842 9.66
14.001% to 15.000% ..................... 1,887 10.50 23,802,869 10.91
15.001% to 16.000% ..................... 1,822 10.13 22,962,385 10.52
16.001% to 17.000% ..................... 1,773 9.86 20,892,272 9.57
17.001% to 18.000% ..................... 1,674 9.31 18,606,567 8.53
18.001% to 19.000% ..................... 1,064 5.92 10,973,331 5.03
19.001% to 20.000% ..................... 928 5.16 9,121,916 4.18
20.001% to 21.000% ..................... 1,356 7.54 13,159,185 6.03
21.001% and over ....................... 925 5.14 6,192,219 2.84
----------- ----------- ----------- ------------
Totals ....................... 17,979 100.00%* 218,237,184 100.00%*
</TABLE>
- ----------------
* Percentages may not add to 100% because of rounding.
11
<PAGE> 13
GEOGRAPHIC CONCENTRATION OF THE INITIAL CONTRACTS
<TABLE>
<CAPTION>
% OF
NUMBER % OF INITIAL
OF INITIAL INITIAL PRINCIPAL CUT-OFF
CONTRACTS CONTRACTS BALANCE POOL BALANCE
------ ------ ----------- ------
<S> <C> <C> <C> <C>
Alabama ...................... 1 0.01 9,548 0.00
Arizona ...................... 832 4.63 9,921,616 4.55
California ................... 6,719 37.37 82,423,853 37.77
Colorado ..................... 579 3.22 6,425,556 2.94
Florida ...................... 1,904 10.59 22,951,630 10.52
Georgia ...................... 1,319 7.34 17,469,924 8.01
Idaho ........................ 115 0.64 993,003 0.46
Illinois ..................... 1,454 8.09 18,269,339 8.37
Indiana ...................... 390 2.17 4,727,367 2.17
Iowa ......................... 3 0.02 27,718 0.01
Kansas ....................... 14 0.08 172,782 0.08
Kentucky ..................... 22 0.12 243,033 0.11
Maryland ..................... 1 0.01 9,805 0.00
Maine ........................ 1 0.01 11,097 0.01
Michigan ..................... 982 5.46 12,153,114 5.57
Missouri ..................... 20 0.11 194,249 0.09
Montana ...................... 3 0.02 39,433 0.02
Nevada ....................... 577 3.21 6,983,643 3.20
New Jersey ................... 581 3.23 7,116,152 3.26
New York ..................... 5 0.03 57,873 0.03
North Carolina ............... 124 0.69 1,737,958 0.80
Ohio ......................... 1 0.01 15,128 0.01
Oklahoma ..................... 58 0.32 627,590 0.29
Oregon ....................... 644 3.58 6,518,017 2.99
South Carolina ............... 35 0.19 402,114 0.18
Tennessee .................... 37 0.21 541,544 0.25
Texas ........................ 662 3.68 9,117,345 4.18
Utah ......................... 15 0.08 148,543 0.07
Virginia ..................... 4 0.02 70,045 0.03
Washington ................... 877 4.88 8,858,165 4.06
------ ------ ----------- ------
Totals ............. 17,979 100.00%* 218,237,184 100.00%*
</TABLE>
- ----------------
* Percentages may not add to 100% because of rounding.
12
<PAGE> 14
DELINQUENCY AND LOAN LOSS INFORMATION
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 SEPTEMBER 30, AT SEPTEMBER 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 73,502 649,563 62,977 1,176,153 115,151
Delinquencies
30-59 days(1)(2)... $ 1,608 153 $ 5,022 478 $ 11,902 1,211 9,467 974 15,565 1,643
60-89 days(1)(2)... 470 35 1,816 162 3,370 346 2,904 296 4,114 413
90+ days(1)(2) .... 547 42 1,279 111 3,742 316 2,920 264 4,103 383
Total delinquencies
as a percent of
servicing
portfolio ......... 1.20% 1.14% 2.03% 1.96% 2.51% 2.55% 2.35% 2.44% 2.02% 2.12%
</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 1.10% and 0.60% at September 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>
NINE MONTHS ENDED
------------------------
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------- ------------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Number of motor vehicle contracts
outstanding ........................... 20,156 38,275 73,502 62,977 115,151
Period end outstanding ................ $ 218,207 $ 400,665 $ 757,277 $ 649,563 $1,176,153
Average outstanding ................... $ 141,029 $ 311,340 $ 563,343 $ 518,898 $ 945,077
Number of gross charge-offs ........... 197 987 2,161 1,466 2,740
Gross charge-offs ..................... $ 548.2 $ 5,789.2 $ 13,076.1 $ 8,987.4 $ 14,827.4
Net charge-offs(1) .................... $ 528.7 $ 5,066.1 $ 11,433.9 $ 7,881.1 $ 12,575.7
Net charge-offs as a percent of average
outstanding ......................... .37% 1.63% 2.03% 2.03% 1.77%
</TABLE>
- ----------
(1) Net charge-offs are gross charge-offs minus recoveries of motor vehicle
contracts previously charged off.
13
