<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 1, 1999
CASE EQUIPMENT RECEIVABLES TRUST 1999-B
CASE RECEIVABLES II INC.
SELLER
CASE CREDIT CORPORATION
SERVICER
THE TRUST WILL ISSUE THE FOLLOWING CLASSES OF NOTES,
WHICH ARE OFFERED UNDER THIS PROSPECTUS SUPPLEMENT--
<TABLE>
<CAPTION>
CLASS A NOTES
<S> <C> <C> <C> <C> <C>
A-1 NOTES A-2 NOTES A-3 NOTES A-4 NOTES CLASS B NOTES
Principal Amount $68,629,000 $300,000,000 $100,000,000 $182,371,000 $31,500,000
Interest Rate 5.674% 6.33% 6.66% 6.90% 7.05%
Final Scheduled
Payment Date September 15, 2000 October 15, 2003 June 15, 2004 June 15, 2006 June 15, 2006
Price to
Public(1) 100% 99.9915% 99.9945% 99.99705% 99.99432%
Underwriting
Discount(2) 0.095% 0.14% 0.23% 0.25% 0.35%
Proceeds to
Seller(3) 99.905% 99.8515% 99.7645% 99.74705% 99.64432%
</TABLE>
(1)Plus accrued interest, if any, from September 13, 1999. Total
price to public (excluding such interest)=$682,461,830.86.
(2)Total underwriting discount=$1,281,375.05.
(3)Total proceeds to issuer=$681,180,455.81.
CREDIT ENHANCEMENT
- The trust will also issue $17,500,000 7.05% asset backed
certificates, which are subordinated to the notes.
- A spread account will be established with an initial
balance of $8,074,729.53 (2.50% of the contract value of
the initial receivables) but eventually may be reduced to
2.00% of the aggregate of the initial contract values
applicable to each of the receivables which became part
of the trust.
- A yield supplement account may also be funded for the
trust.
- The Class B Notes are subordinated to the Class A Notes,
and provide additional credit enhancement for the Class A
Notes.
- This prospectus supplement and the accompanying
prospectus related only to the offering of the notes. The
certificates are not offered under these documents.
Delivery of the notes, in book-entry form only, will be made
through The Depository Trust Company, Cedel Bank, societe
anonyme, and the Euroclear System on or about September 13,
1999 against payment in immediately available funds.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-7 IN THIS
PROSPECTUS SUPPLEMENT AND ON PAGE 6 IN THE PROSPECTUS.
The notes represent obligations of the trust only and do not represent
obligations of or interests in Case Receivables II Inc., Case Credit
Corporation or any of their affiliates.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITERS OF THE CLASS A NOTES
MERRILL LYNCH & CO.
BANC OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
UNDERWRITERS OF THE CLASS B NOTES
MERRILL LYNCH & CO. J.P. MORGAN & CO.
SEPTEMBER 1, 1999
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with different information.
We are not offering these securities in any state where the offer is not
permitted.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the securities and with respect to their unsold allotments or
subscriptions. In addition, all dealers selling the securities will deliver a
prospectus supplement and prospectus until November 30, 1999 (90 days after the
commencement of this offering).
We tell you about the securities in two separate documents that
progressively provide more detail: (a) the accompanying prospectus, which
provides general information, some of which may not apply to a particular series
of securities, including your series; and (b) this prospectus supplement, which
describes the specific terms of your series of securities.
If the terms of your series of securities vary between this prospectus
supplement and the prospectus, you should rely on the information in this
prospectus supplement.
We include cross-references in this prospectus supplement and in the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying prospectus provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
prospectus supplement are defined under the caption "Index of Terms" beginning
on page S-45 in this prospectus supplement and under the caption "Index of
Terms" beginning on page 69 in the accompanying prospectus.
---------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Terms.................. S-2
Offered Securities................ S-2
Subordination................... S-2
Closing Date.................... S-2
Indenture Trustee............... S-2
Trustee......................... S-2
Payment Dates................... S-2
Principal Payments.............. S-2
Final Scheduled Maturity Dates.. S-3
Optional Redemption............. S-3
Mandatory Redemption............ S-4
The Initial Receivables......... S-4
Pre-Funding..................... S-4
Negative Carry Account.......... S-4
Credit Enhancement................ S-4
Spread Account.................. S-4
Yield Supplement Account........ S-5
The Certificates................ S-5
Subordination................... S-5
Priority of Distributions......... S-6
Tax Status........................ S-6
ERISA Considerations.............. S-6
Legal Investment.................. S-6
Rating of the Notes............... S-6
Risk Factors...................... S-7
It may not be possible to find a
purchaser for your notes...... S-7
Prepayments could result from
pre-funding................... S-7
The trust is dependent upon Case
Credit and Case for additional
receivables................... S-7
Variations in economic and other
factors may reduce the rate of
creation of additional
receivables................... S-8
Characteristics of the pool of
receivables may change due to
pre-funding................... S-8
Payments on the receivables vary
seasonally.................... S-9
Payments on the Class B Notes
are junior to payments on the
Class A Notes................. S-9
<CAPTION>
PAGE
----
<S> <C>
Prepayments of higher interest
rate receivables could result
in payment shortfalls......... S-10
Case Corporation and Case Credit
Corporation...................... S-11
Year 2000....................... S-11
The Trust......................... S-13
General......................... S-13
Capitalization of the Trust..... S-14
The Trustee..................... S-14
The Receivables Pool.............. S-15
Delinquencies, Repossessions,
and Net Losses................ S-22
Weighted Average Life of the
Notes............................ S-25
Description of the Notes.......... S-30
General......................... S-30
Payments of Interest............ S-30
Payments of Principal........... S-30
Collection Periods and Cutoff
Dates......................... S-33
Record Dates.................... S-33
Mandatory Redemption............ S-33
Optional Redemption............. S-34
Registration of Notes........... S-34
The Indenture Trustee........... S-34
Description of the Certificates... S-35
Description of the Transaction
Agreements....................... S-35
Sale of Receivables............. S-35
Servicing Compensation and
Payment of Expenses........... S-36
Distributions................... S-36
Negative Carry Account.......... S-38
Spread Account.................. S-39
Yield Supplement Account........ S-40
Legal Investment.................. S-41
ERISA Considerations.............. S-41
The Notes....................... S-41
Underwriting...................... S-42
Class A Notes................... S-42
Class B Notes................... S-43
Legal Opinions.................... S-44
Index of Terms.................... S-45
</TABLE>
<PAGE>
SUMMARY OF TERMS
- THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS
SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO
CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE
TERMS OF AN OFFERING OF THE NOTES, READ CAREFULLY THIS ENTIRE PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
- THIS SUMMARY PROVIDES AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOWS AND
OTHER INFORMATION TO AID YOUR UNDERSTANDING AND IS QUALIFIED BY THE FULL
DESCRIPTION OF THESE CALCULATIONS, CASH FLOWS AND OTHER INFORMATION IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
OFFERED SECURITIES
We are offering five classes of notes issued by Case Equipment Receivables Trust
1999-B:
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL INTEREST
CLASS AMOUNT RATE
- --------------- ------------------ -----------
<S> <C> <C>
A-1............ $ 68,629,000 5.674%
A-2............ $ 300,000,000 6.33%
A-3............ $ 100,000,000 6.66%
A-4............ $ 182,371,000 6.90%
B.............. $ 31,500,000 7.05%
</TABLE>
The notes will be book-entry securities clearing through DTC (in the United
States) or Cedel or Euroclear (in Europe) in minimum denominations of $1,000 and
in greater whole-dollar denominations.
SUBORDINATION
The A-1, A-2, A-3 and A-4 Notes are all Class A Notes. The Class B Notes will be
subordinated to the Class A Notes as follows:
- no interest will be paid on the Class B Notes on any payment date until
all interest due on the Class A Notes through that payment date has been
paid in full; and
- no principal will be paid on the Class B Notes on any payment date until
all principal due on the Class A Notes through that payment date has been
paid in full.
CLOSING DATE
September 13, 1999.
INDENTURE TRUSTEE
Harris Trust and Savings Bank.
TRUSTEE
The Bank of New York.
PAYMENT DATES
Payments on the notes will be made on the 15th day of each calendar month (or,
if not a business day, the next business day), beginning with October 15, 1999.
PRINCIPAL PAYMENTS
The aggregate amount of principal payments to be made on all outstanding classes
of notes on each payment date will generally equal the decrease during the prior
collection period in the sum of the contract value of the receivables and
S-2
<PAGE>
the amount on deposit in the trust's pre-funding account. The contract value of
the receivables equals the discounted present value of their scheduled cash
flows, using a discount rate equal to the weighted average annual percentage
rate of all receivables sold to the trust on a particular day. A collection
period is a period the length of a calendar month that ends about nine days
prior to a payment date, however, the first collection period will commence on
August 1, 1999 and end on October 5, 1999.
Principal payments on each payment date generally will be allocated between the
Class A Notes and the Class B Notes so that the ratio of Class B Note principal
to the sum of the contract values of the receivables and the amount on deposit
in the pre-funding account remains constant. However, the following exceptions
to this general rule will apply:
- Until the A-1 Notes have been repaid in full, distributions of principal
to the Class B Notes will be limited to the amount of prepayments on the
receivables during the related collection period. The balance will be
applied to the A-1 Notes.
- Any shortfall in the amount of funds available for principal payments on
any payment date will reduce the principal payment on the Class B Notes
(up to the amount of the full target payment on the Class B Notes) before
the principal payment on the Class A Notes is reduced.
Principal payments on the Class A Notes will generally be made to the holders of
the various classes of Class A Notes sequentially, so that no principal will be
paid on any class of Class A Notes until each class of Class A Notes with a
lower numerical designation has been paid in full. For instance, no principal
will be paid on the A-2 Notes until the A-1 Notes have been paid in full.
See "Description of the Transaction Agreements--Distributions" for additional
detail on some of the calculations described above and for special priority
rules that would apply in a default situation.
FINAL SCHEDULED MATURITY DATES
The outstanding principal amount, if any, of each class of notes will be payable
in full on the payment date falling in the month specified for each below:
<TABLE>
<CAPTION>
FINAL MATURITY
CLASS DATE
- ------------------------ ------------------
<S> <C>
A-1..................... September 2000
A-2..................... October 2003
A-3..................... June 2004
A-4..................... June 2006
B....................... June 2006
</TABLE>
OPTIONAL REDEMPTION
Any notes that remain outstanding on any payment date on which Case Credit
Corporation, as servicer, exercises its clean-up call will be prepaid in whole
on that payment date at a redemption price for each class equal to the
outstanding principal balance of that class of notes, plus accrued and unpaid
interest thereon. The servicer cannot exercise its clean-up call until the
aggregate contract
S-3
<PAGE>
value of the receivables declines to 10% or less of the aggregate initial
contract value of the receivables, as measured for each receivable at the time
of its sale to the trust.
MANDATORY REDEMPTION
The trust will have a pre-funding period. On the payment date on or immediately
following the last day of the pre-funding period, any funds remaining in the
trust's pre-funding account after any purchase of receivables on that date will
be applied to prepay the notes then outstanding in whole or in part in the same
sequence and proportions that would apply in a normal principal distribution.
THE INITIAL RECEIVABLES
On the closing date, we will sell to the trust retail installment contracts with
an aggregate contract value of $287,663,447.88 and full payout leases with an
aggregate contract value of $35,325,733.39, measured as of July 31, 1999.
PRE-FUNDING
We will sell the trust additional retail installment contracts and leases during
a pre-funding period beginning on the closing date and ending not later than the
close of business on the February 2000 payment date.
The trust will pay for the subsequent receivables with funds on deposit in a
pre-funding account established for the trust, with an initial deposit of
$377,010,818.73. We expect to sell subsequent receivables to the trust with an
aggregate contract value approximately equal to the amount deposited in the
pre-funding account. Prior to being used to purchase receivables, funds on
deposit in the pre-funding account will be invested from time to time in highly
rated short-term securities.
The pre-funding period will end earlier than the February 2000 payment date if
and when the balance in the pre-funding account is reduced to less than
$100,000. The pre-funding period will also terminate early if specified defaults
or other adverse events occur. Any balance remaining in the pre-funding account
at the end of the pre-funding period will be payable to the noteholders as
principal.
NEGATIVE CARRY ACCOUNT
We anticipate that the average interest rate earned by the trust on investment
of funds in the pre-funding account may be less than the weighted average
interest rate on the notes. To provide a source of funds to cover any shortfall
resulting from this difference, we will deposit $6,204,895.65 into the trust's
negative carry account.
CREDIT ENHANCEMENT
SPREAD ACCOUNT
As credit enhancement for the notes, the trust will have a spread account. The
spread account will be funded as follows:
- On the closing date, we will deposit $8,074,729.53 (2.50% of the contract
value of the initial receivables) into the spread account.
- On the date of each subsequent sale of receivables to the trust,
S-4
<PAGE>
the indenture trustee will transfer cash or highly rated, short-term
securities having a value approximately equal to 2.50% of the aggregate
contract value of the receivables purchased from the pre-funding account
to the spread account.
- On or after the last day of the pre-funding period, the amount on deposit
in the spread account will be reduced to an amount not less than 2.00% of
the aggregate of the initial contract values applicable to each of the
receivables which became part of the trust, but only if Standard & Poor's
has notified the servicer that the reduction will not result in a decrease
of the original credit rating of the notes.
- On each payment date after any draw has been made on the spread account,
available collections remaining after other more senior payments have been
made will be deposited into the spread account to the extent necessary to
maintain a specified minimum balance.
Funds on deposit in the spread account will be available on each payment date to
cover shortfalls in distributions of interest and principal on the notes.
YIELD SUPPLEMENT ACCOUNT
As further enhancement for the notes, the trust will have a yield supplement
account. However, no deposit is required to be made into the yield supplement
account on or before the closing date. On the date of each subsequent sale of
receivables to the trust, a specified amount based on the annual percentage rate
and contract value of the receivables will be deposited into the yield
supplement account, but only if necessary to maintain the original credit
ratings of the notes.
Prior to each payment date, for any receivable that has either prepaid or been
liquidated during the related collection period, the servicer will calculate the
excess (if any) of the contract value of that receivable over its outstanding
principal balance. Any funds available in the yield supplement account up to the
amount of that excess will be added to the funds available for distribution to
noteholders to the extent that there would otherwise be a shortfall before any
withdrawal from the spread account.
THE CERTIFICATES
On the closing date, the trust will issue certificates to us in an aggregate
principal amount of $17,500,000. We will initially retain the entire principal
amount of the certificates. Distributions of interest on the certificates will
be junior in priority of payment to interest and principal due on the notes, and
no principal will be paid on the certificates until the notes have been repaid
in full.
SUBORDINATION
The subordination of the Class B Notes to the Class A Notes as described herein
will provide additional credit enhancement for the Class A Notes.
S-5
<PAGE>
PRIORITY OF DISTRIBUTIONS
On each payment date, available collections, plus funds transferred from various
trust accounts as described above, will be applied to the following (in the
priority indicated):
(1) administration fees;
(2) interest on the Class A Notes;
(3) interest on the Class B Notes;
(4) to pay principal on the notes in the priority described above under
"Offered Securities-- Principal Payments";
(5) to the spread account, to the extent necessary to maintain a specified
balance;
(6) interest on the certificates;
(7) after the notes have been repaid in full, principal on the certificates;
(8) servicing fees, except that if neither Case Credit nor any of its
affiliates is the servicer, servicing fees will be paid prior to any
other application of funds; and
(9) the remaining balance, if any, to us.
See "Description of the Transaction Agreements--Distributions" for additional
details and for special priority rules that would apply in a default situation.
TAX STATUS
Mayer, Brown & Platt, our special federal tax counsel, is of the opinion that
for federal income tax purposes the notes will be characterized as debt and the
trust will not be characterized as an association (or publicly traded
partnership) taxable as a corporation. Mayer, Brown & Platt, our special
Illinois tax counsel, is also of the opinion that the same characterizations
should apply for Illinois tax purposes as for federal income tax purposes.
ERISA CONSIDERATIONS
Subject to the considerations discussed under "ERISA Considerations," the notes
are eligible for purchase by employee benefit plans.
LEGAL INVESTMENT
The A-1 Notes will be eligible securities for purchase by money market funds
under paragraph (a)(10) of Rule 2a-7 under the Investment Company Act of 1940,
as amended.
RATING OF THE NOTES
The trust will not issue the notes unless the A-1 Notes are rated in the highest
short-term rating category, the A-2 Notes, A-3 Notes and A-4 Notes are rated in
the highest long-term rating category and that the Class B Notes are rated at
least in the "A" category or its equivalent, in each case by at least two
nationally recognized statistical rating agencies.
S-6
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the notes.
<TABLE>
<S> <C>
IT MAY NOT BE POSSIBLE TO
FIND A PURCHASER FOR YOUR
NOTES. The underwriters may assist in resales of the notes,
but they are not required to do so. A trading market
for the notes may not develop. If a trading market does
develop, it might not continue or it might not be
sufficiently liquid to allow you to resell any of your
notes.
PREPAYMENTS COULD RESULT
FROM PRE-FUNDING. If the principal amount of eligible receivables
purchased or directly originated by Case Credit during
the trust's pre-funding period is less than the amount
deposited in the trust's pre-funding account, we will
not have sufficient receivables to sell to the trust
during the pre-funding period. This would result in a
prepayment of principal in an aggregate amount equal to
the amount remaining in the pre-funding account at the
end of the pre-funding period to the noteholders in the
same sequence and proportions that would apply in a
normal principal distribution. Any prepayment will
shorten the weighted average life of the affected
notes. The amount of the notes that will be prepaid is
not known at this time, but the greater the prepayment,
the shorter the weighted average life of the notes.
THE TRUST IS DEPENDENT UPON
CASE CREDIT AND CASE FOR
ADDITIONAL RECEIVABLES. The trust will not be able to purchase receivables from
us during the pre-funding period unless Case Credit
generates eligible receivables which we are able to
purchase from Case Credit. Case Credit's ability to
generate receivables depends primarily upon sales of
agricultural, construction and other equipment
manufactured or distributed by Case. If, during the
pre-funding period, Case were to temporarily or
permanently stop manufacturing or distributing
agricultural, construction and other equipment, the
rate of sales of agricultural, construction and other
equipment manufactured or distributed by Case would
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
decrease. This would adversely affect our ability to
sell receivables to the trust. Case's use of
manufacturer's rebate and other incentive programs may
also affect retail sales, and neither we nor the trust
have any control over Case's future use of such
incentives.
VARIATIONS IN ECONOMIC AND
OTHER FACTORS MAY REDUCE
THE RATE OF CREATION OF
ADDITIONAL RECEIVABLES. The ability of dealers financed by Case Credit to sell
agricultural, construction, and other equipment and
generate receivables through those sales is affected by
the general level of activity in the agricultural,
construction and other industries, including the rate
of North American agricultural production and demand,
weather conditions, commodity prices, consumer
confidence, government subsidies for the agricultural
sector, interest rates, prevailing levels of
construction (especially housing starts) and levels of
total industry capacity and equipment inventory. We
have no basis to predict whether or to what extent
these factors will affect the level of sales of
agricultural, construction or other equipment.
CHARACTERISTICS OF THE POOL
OF RECEIVABLES MAY CHANGE
DUE TO PRE-FUNDING. There will be no required characteristics of the
receivables transferred to the trust during the
pre-funding period, except that each additional
receivable must satisfy the eligibility criteria
specified in the sale and servicing agreement between
us and the trust at the time of its addition.
Additional receivables may be originated at a later
date using credit criteria different from those that
were applied to the initial receivables and may be of a
different credit quality and seasoning. In addition,
following the transfer of subsequent receivables to the
trust, the characteristics of the entire receivables
pool, including the composition of the receivables, the
distribution by annual percentage rate, equipment type,
payment frequency, average maturity, current contract
value and geographic distribution, may vary from those
of the initial receivables. Since the weighted average
life of the notes will be influenced by the rate at
which the principal
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
balances of the receivables are paid, some of these
variations will affect the weighted average life of the
notes. However, the trust will not purchase any
receivables that have a remaining term in excess of 72
months or any receivables that would cause the weighted
average original term of the receivables in the trust
to be greater than 55 months. These requirements are
intended to minimize the effect of the addition of
subsequent receivables on the weighted average life of
the notes.
PAYMENTS ON THE RECEIVABLES
VARY SEASONALLY. Payments on the receivables may be made on a monthly,
quarterly, semiannual, annual or an irregular basis. A
significant portion of the initial receivables
(representing approximately 36.88% of the aggregate
contract value of the initial receivables) are
agricultural equipment sale contracts or leases and
tend to have payment dates that correspond to periods
in which farmers have stronger cash flows. As a result,
the amounts of cash distributed to noteholders may
reflect this seasonality, with higher amounts of
principal paid on the payment dates occurring in the
first and fourth calendar quarters in each year and
relatively lower amounts paid on other payment dates.
PAYMENTS ON THE CLASS B
NOTES ARE JUNIOR TO
PAYMENTS ON THE CLASS A
NOTES. If you buy Class B Notes, your interest payments will
be junior to interest payments on the Class A Notes,
and your principal payments will be junior to principal
payments on the Class A Notes as follows. You will not
receive any interest payments on your Class B Notes on
any payment date until the full amount of interest due
on the Class A Notes through that payment date has been
paid in full. You will not receive any principal
payments on your Class B Notes on any payment date
until all principal payments due on the Class A Notes
through that payment date have been paid (or provided
for) in full.
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C>
PREPAYMENTS OF HIGHER
INTEREST RATE RECEIVABLES
COULD RESULT IN PAYMENT
SHORTFALLS. The receivables are subject to voluntary prepayment.
Upon any prepayment in full of a receivable, the
contract value of that receivable will be reduced to
zero, and the contract value of that receivable will be
added to the amount of principal to be paid on the
notes on the related payment date. However, some
receivables have a contract value that is greater than
their outstanding principal balances. When a receivable
of this type is prepaid, the principal collected
through the prepayment will be less than the resulting
increase in the targeted principal distribution by an
amount roughly equal to the excess of the receivable's
contract value over its outstanding principal balance
immediately prior to the prepayment. See "Description
of the Notes-- Payments of Principal."
To the extent necessary to maintain the initial credit
ratings on the notes, funds will be deposited in the
trust's yield supplement account each time that the
trust buys additional receivables during the
pre-funding period. Those funds, if any, are intended
to make up for potential cash flow shortfalls that
could result from prepayments of this type. Upon such a
prepayment, an amount up to the excess of the contract
value of the prepaid receivable over its outstanding
principal balance prior to the prepayment will be
withdrawn from the yield supplement account and
included in the funds distributed on the related
payment date to the extent there would otherwise be a
shortfall. However, no funds may be required to be
deposited into the yield supplement account, and in any
event any required deposit is expected to be less than
the maximum aggregate cash flow shortfall that might
result if all receivables of this type prepaid. You
might not receive ultimate payment in full of all
amounts due under your notes if the amount of the
shortfalls exceeds the amount of the deposits and other
available credit enhancement and excess collections
available to make up for the shortfalls.
</TABLE>
S-10
<PAGE>
CASE CORPORATION AND CASE CREDIT CORPORATION
Case is a leading worldwide designer, manufacturer, marketer and distributor
of farm equipment and light- to medium-sized construction equipment, which is
sold worldwide predominantly through independent dealers. For the six months
ended June 30, 1999 and the year ended December 31, 1998, Case reported
operating earnings (industrial earnings before interest, taxes, changes in
accounting principles and extraordinary items, including net income of the
finance companies on an equity basis) of $45 million and $296 million,
respectively (compared to $308 million for the six months ended June 30, 1998
and $627 million for the year ended December 31, 1997), and a net loss of $12
million and net income of $64 million, respectively (compared to net income of
$195 million for the six months ended June 30, 1998 and $403 million for the
year ended December 31, 1997) on net sales of approximately $2.4 billion and
$5.7 billion, respectively (compared to $2.9 billion for the six months ended
June 30, 1998 and $5.7 billion for the year ended December 31, 1997). At June
30, 1999, Case's consolidated equity was $2.1 billion.
Case Credit recorded net income of $41 million and $85 million, respectively
for the six months ended June 30, 1999 and the year ended December 31, 1998
(compared to net income of $37 million and $82 million for the six months ended
June 30, 1998 and the year ended December 31, 1997). The $3 million increase in
year-over-year income is primarily due to higher earnings as a result of
increased levels of on-balance-sheet receivables, and improved margins resulting
from the declining interest rate environment. Additionally, higher lease income
from operating leases and higher realized gains from the sale of retail notes
under asset-backed securitization transactions also improved earnings. These
amounts were partially offset by an increase in Case Credit's credit loss
provision as a result of a higher loss-to-liquidation ratio in 1998, combined
with the significant growth in Case Credit's serviced portfolio. In addition,
1998 operating results reflect increased interest expense as a result of higher
average debt levels, as well as increased depreciation of equipment on operating
leases and a higher year-over-year tax rate. Revenues for the first six months
of 1999 were $226 million and for the year ended December 31, 1998 were $377
million (compared to $156 million for the first six months of 1998 and $272
million for the year ended December 31, 1997). At June 30, 1999, total gross
receivables serviced by Case Credit were $7.4 billion, up 28% from June 30,
1998.
YEAR 2000
As used in this "Year 2000" disclosure, the term "CASE" refers to Case
Corporation and its subsidiaries, including Case Credit and its subsidiaries. In
addition, all references to "CASE INDUSTRIAL" reflect the consolidation of all
majority-owned subsidiaries, excluding Case Credit.
Case understands that it is important to its customers and stakeholders that
Case's products, services and internal systems are not adversely affected by the
year 2000. Case has implemented procedures that it deems necessary to safeguard
Case
S-11
<PAGE>
from computer-related issues associated with adverse effects as a result of
improperly recognizing the millennial date change. These procedures include,
where necessary, the inventorying/assessing, planning, constructing/testing, and
implementing/certifying of critical internal-use hardware and software systems,
as well as other embedded systems in Case's manufacturing plants, other
buildings, equipment and other infrastructure. Case believes that these
procedures will adequately address both the information technology and
non-information technology aspects of Case's business. Based upon its review and
efforts to date, Case believes that future external and internal costs to be
incurred for the modification of internal-use software to address year 2000
issues will not have a material adverse effect on Case's financial position,
cash flows or results of operations.
Case believes, based upon its review and efforts to date, that external and
internal remediation costs to be incurred for the modification of internal-use
software to address year 2000 issues will, in the aggregate, approximate $40
million to $45 million. As Case Industrial and Case Credit share many technology
resources and internal-use systems, all the remediation costs to address year
2000 issues will be borne by Case Industrial. As of June 30, 1999, Case
Industrial has incurred approximately $31 million of costs for year 2000
remediation, and Case currently anticipates that remaining year 2000 remediation
costs will approximate $9 million for the balance of 1999 and $3 million in
2000. These cost estimates include the costs of external contractors,
non-capitalizable purchases of software and hardware, and the direct cost of
internal employees working on year 2000 projects. Case maintains a process that
tracks the cost and time of external contractors, however, Case does not
separately track its own internal costs incurred for the year 2000 project.
Internal costs are compiled principally from the related payroll records for
those personnel directly working on the year 2000 effort. Case's cost estimate
does not include the cost of implementing contingency plans, which are in the
process of being developed, and also does not include any potential litigation
or warranty costs relating to year 2000 issues if Case remediation efforts are
not successful.
Case has also undertaken a program to alert its suppliers and dealers of
year 2000 issues. Based on its contracts with suppliers and dealers, Case
believes that a majority of its most important suppliers are year 2000
compliant, and Case anticipates that most of its dealers will be year 2000
compliant by September 30, 1999. Case will continue to work with its remaining
suppliers and its dealers throughout 1999 to secure year 2000 compliance by
December 31, 1999. Based on third-party representations and internal testing,
and subject to Case's ongoing compliance efforts, the costs and uncertainties
relating to timely resolution of year 2000 issues applicable to Case's business
and operations are not reasonably expected by Case to have a material adverse
effect on Case's financial position, cash flows or results of operations. For
those suppliers and dealers that have not adequately responded to Case's year
2000 concerns, Case is following up to ultimately achieve an acceptable level of
compliance within its supply chain. As there can be no assurance that an
S-12
<PAGE>
acceptable level of year 2000 compliance will be achieved, Case is in the
process of developing contingency plans to address potential issues.
Case has completed all steps with regards to year 2000 compliance that it
considers necessary regarding its agricultural and construction equipment and,
as a result, Case has no information to suggest that its agricultural and
construction equipment is not year 2000 compliant. Case believes, based on its
review and testing, that products purchased from Case will accurately determine
chronological dates and accurately perform all calculations and data
manipulations based upon such dates.
Based upon Case's review and efforts to date, Case currently anticipates
completion of critical year 2000 compliance issues by September 30, 1999, and
Case plans to continue integration testing throughout the balance of 1999. If
Case's year 2000 compliance efforts, as well as the efforts of Case's suppliers
and dealers, individually and in the aggregate, are not successful, it could
have a material adverse effect on Case's financial position, cash flows and
results of operations. Factors that could cause actual results to differ include
unanticipated supplier or dealer failures, disruption of utilities,
transportation or telecommunications breakdowns, foreign or domestic
governmental failures, as well as unanticipated failures on our part to address
year 2000 related issues. Case's most reasonably likely worst case scenario in
light of these risks would involve a potential loss in sales resulting from
order, production and shipping delays throughout Case's supply chain caused by
year 2000 related disruptions. The degree of sales loss impact would depend on
the severity of the disruption, the time required to correct it, whether the
sales loss was temporary or permanent, and the degree to which our primary
competition were also impacted by the disruption.
Case is in the process of developing year 2000 contingency plans that will
be designed to mitigate the impact on Case in the event that its year 2000
compliance efforts are not successful. Case's contingency plans are targeted for
a September 30, 1999 completion, with plan audits and testing to continue
throughout the balance of 1999. Case's contingency plans may include the use of
alternative systems and non-computerized approaches to Case's business,
including manual procedures for machine operation, collecting and reporting of
Case's business information, as well as alternative sources of supply. At this
time, Case has not determined whether it will be necessary to stockpile
inventory or supplies as part of its contingency plans.
The information included in this "Year 2000" section represents
forward-looking statements and involves risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking
statements.
THE TRUST
GENERAL
The trust will be formed pursuant to a trust agreement between us and the
trustee. After its formation, the trust will not engage in any activity other
than
S-13
<PAGE>
- acquiring, holding and managing the receivables, the pre-funding account
and the other assets of the trust and proceeds therefrom,
- issuing the notes and the certificates,
- making payments on the notes and the certificates, and
- engaging in other activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith.
The trust will possess only the following property:
- receivables and related collections;
- bank accounts established for the trust;
- security interests in the equipment financed or leased under the
receivables;
- any property obtained in a default situation under those security
interests;
- rights to proceeds from certain insurance policies covering equipment
financed or leased under the receivables or obligors on the receivables;
and
- our interest in any proceeds from recourse to dealers on receivables,
which will exclude any amounts contained in the dealers' reserve accounts.
The trust's principal offices are in New York, New York, in care of The Bank
of New York, as trustee, at the address listed below under "--The Trustee."
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the trust as of July
31, 1999, as if the issuance and sale of the notes and the certificates had
taken place on that date:
<TABLE>
<S> <C>
Class A-1 5.674% Asset Backed Notes......................... $ 68,629,000
Class A-2 6.33% Asset Backed Notes.......................... $300,000,000
Class A-3 6.66% Asset Backed Notes.......................... $100,000,000
Class A-4 6.90% Asset Backed Notes.......................... $182,371,000
Class B 7.05% Asset Backed Notes............................ $ 31,500,000
7.05% Asset Backed Certificates............................. $ 17,500,000
------------
Total..................................................... $700,000,000
------------
------------
</TABLE>
THE TRUSTEE
The Bank of New York is the trustee under the trust agreement. The Bank of
New York is a New York banking corporation, and its principal offices are
located at 101 Barclay Street, Floor 12E, New York, New York 10286. In the
ordinary course of its business, the trustee and its affiliates have engaged and
may in the future engage
S-14
<PAGE>
in commercial banking or financial advisory transactions with Case Credit and
its affiliates. The Bank of New York (Delaware) will act as co-trustee for the
purpose of complying with certain Delaware legal requirements.
THE RECEIVABLES POOL
The pool of receivables held by the trust will include the initial
receivables purchased on the closing date and any additional receivables
purchased during the trust's pre-funding period.
A number of calculations described in this prospectus supplement, and
calculations required by the agreements governing the trust and the notes, are
based upon the Contract Value of the receivables. "CONTRACT VALUE" means, as of
any calculation date, the present value of the scheduled and unpaid payments on
the receivables discounted monthly at an annual rate equal to (a) in the case of
the initial receivables 8.911%, which is the weighted average annual percentage
rate of the initial receivables as of July 31, 1999 ("APR") and (b) in the case
of the additional receivables, the weighted average annual percentage rate of
the additional receivables sold as of the additional cutoff date designated for
such sale, plus, in either case, any amount of past due payments on the
applicable cutoff date. Any defaulted receivables liquidated by the servicer
through the sale or other disposition of the related equipment or that the
servicer has, after using all reasonable efforts to realize upon the related
equipment, determined to charge off without realizing upon the related equipment
are deemed to have a Contract Value of zero.
The Contract Value of the receivables is generally equivalent to their
outstanding principal amount. However, the Contract Value of any particular
receivable may be greater than or less than its outstanding principal amount,
depending primarily upon whether the annual percentage rate of that receivable
is greater or less than the weighted average annual percentage rate of the
initial receivables as of the initial cutoff date (in the case of an initial
receivable) or the weighted average annual percentage rate of the additional
receivables as of the applicable additional cutoff date (in the case of
additional receivables). If a receivable's annual percentage rate is greater
than the weighted average annual percentage rate used in calculating its
Contract Value, its Contract Value will be greater than its outstanding
principal balance because the discount rate used to determine its Contract Value
is lower than the annual percentage rate that generated the finance charge
component of the scheduled payments that are discounted to determine the
Contract Value. Conversely, if a receivable's annual percentage rate is lower
than the weighted average annual percentage rate used in calculating its
Contract Value, its Contract Value will be less
S-15
<PAGE>
than its outstanding principal balance because the discount rate used to
determine its Contract Value is greater than the annual percentage rate that
generated the finance charge component of the scheduled payments that are
discounted to determine the Contract Value.
The initial receivables were selected and the additional receivables will be
selected from our portfolio using several criteria, including the criteria set
forth in the prospectus under "Characteristics of the Receivables--Selection
Criteria" and the additional criteria that:
(1) each receivable is a retail installment contract or a lease;
(2) each receivable has an annual percentage rate that is equal to or
greater than 3.0%, and as of each additional cutoff date, the weighted
average of (i) the weighted average annual percentage rate of the initial
receivables as of the initial cutoff date and (ii) the weighted average
annual percentage rate of the additional receivables as of the applicable
additional cutoff dates (weighted on the basis of the respective aggregate
Contract Values of the receivables for which each of the weighted average
annual percentage rates in clauses (i) and (ii) above is used to calculate
the Contract Value) will not be less than the weighted average interest rate
on the outstanding notes plus the servicing fee payable to the servicer;
(3) each receivable has a remaining term to maturity of not more than 72
months;
(4) each receivable has a Contract Value as of the applicable cutoff
date that (when combined with the Contract Value of any other receivables
with the same or an affiliated obligor) does not exceed 1% of the aggregate
Contract Value of all the receivables;
(5) after giving effect to each purchase of additional receivables, the
weighted average original term of the receivables in the trust will not be
greater than 55 months; and
(6) after giving effect to each purchase of additional receivables, not
more than 49.00% of the principal balances of the receivables in the trust
will represent contracts for the financing of construction and forestry
equipment and not more than 5% of the principal balances of the receivables
in the trust will represent contracts for the financing of all-terrain
vehicles, snowmobiles or marine vessels collectively.
The receivables as they are constituted on any cutoff date for an addition
of receivables will not deviate from the foregoing characteristics.
Each initial receivable is a precomputed receivable. No initial receivable
has, and no additional receivable will have, a scheduled maturity later than the
date that is six months prior to the final scheduled maturity date for the
notes. No dealer loans will
S-16
<PAGE>
be included in the trust. During the pre-funding period, we will not sell any
additional truck receivables to the trust.
The initial receivables will represent approximately 46.14% of the sum of
initial outstanding principal amount of the notes and the certificate balance.
Except for the criteria described in the preceding paragraphs, there will be no
required characteristics of the additional receivables. Therefore, following the
transfer of additional receivables to the trust, the aggregate characteristics
of all of the receivables in the trust, including the composition of the
receivables, the distribution by annual percentage rate, equipment type, payment
frequency, current Statistical Contract Value and geographic distribution
described in the following tables, may vary from those of the initial
receivables. Following the end of the pre-funding period, we will file a report
on Form 8-K containing information comparable to that contained in the tables
set forth below regarding the aggregate characteristics of all of the
receivables in the trust, after the addition of the additional receivables.
The composition, distribution by annual percentage rate, receivable type,
equipment type, payment frequency, current Statistical Contract Value and
geographic distribution, in each case of the initial receivables as of July 31,
1999, are as set forth in the following tables. For purposes of the data in the
following tables, the "STATISTICAL CONTRACT VALUE" for each receivable has been
calculated as either (a) the sum of the present value of the scheduled and
unpaid payments on the receivable, discounted monthly at an annual rate equal to
its individual APR (instead of the initial cutoff date note APR) plus any amount
of past due payments or (b) the current balance of the receivable on the
servicer's records, depending upon the type of receivable. Totals may not add to
100% due to rounding.
COMPOSITION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
INITIAL
CUTOFF
DATE AGGREGATE WEIGHTED AVERAGE
NOTE STATISTICAL NUMBER OF WEIGHTED AVERAGE AVERAGE STATISTICAL
APR CONTRACT VALUE RECEIVABLES REMAINING TERM ORIGINAL TERM CONTRACT VALUE
- ----------- ------------------- ----------- ---------------- -------------- --------------
<C> <C> <C> <S> <C> <C>
8.99 % $ 323,269,745.63 10,435 48.40 months 50.41 months $30,979.37
</TABLE>
DISTRIBUTION BY RECEIVABLE TYPE OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE AGGREGATE
NUMBER OF STATISTICAL STATISTICAL
RECEIVABLE TYPE RECEIVABLES CONTRACT VALUE CONTRACT VALUE
- -------------------------------------- ----------- ------------------- -------------------
<S> <C> <C> <C>
Retail Installment Contracts.......... 9,723 $ 288,711,982.75 89.31%
Leases................................ 712 34,557,762.88 10.69%
----------- ------------------- -------
Total................................. 10,435 $ 323,269,745.63 100.00%
----------- ------------------- -------
----------- ------------------- -------
</TABLE>
S-17
<PAGE>
DISTRIBUTION BY INITIAL CUTOFF DATE NOTE APR OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE AGGREGATE
NUMBER OF STATISTICAL STATISTICAL
INITIAL CUTOFF DATE NOTE APR RANGE RECEIVABLES CONTRACT VALUE CONTRACT VALUE
- --------------------------------------------- ----------- ----------------- ---------------
<S> <C> <C> <C>
3.000% to 3.999%............................. 399 $ 7,062,714.76 2.18%
4.000% to 4.999%............................. 639 18,411,187.84 5.70
5.000% to 5.999%............................. 516 20,884,310.66 6.46
6.000% to 6.999%............................. 801 21,851,763.08 6.76
7.000% to 7.999%............................. 1,565 50,135,706.11 15.51
8.000% to 8.999%............................. 771 51,930,149.51 16.06
9.000% to 9.999%............................. 1,949 66,570,189.20 20.59
10.000% to 10.999%........................... 2,219 35,721,709.67 11.05
11.000% to 11.999%........................... 552 16,000,807.80 4.95
12.000% to 12.999%........................... 295 8,616,109.67 2.67
13.000% to 13.999%........................... 208 7,283,441.05 2.25
14.000% to 14.999%........................... 157 5,537,442.46 1.71
15.000% to 15.999%........................... 136 5,602,578.92 1.73
16.000% to 16.999%........................... 64 2,251,118.06 0.70
17.000% to 17.999%........................... 163 5,341,387.14 1.65
20.000% to 20.999%........................... 1 69,129.70 0.02
----------- ----------------- -------
Total........................................ 10,435 $ 323,269,745.63 100.00%
----------- ----------------- -------
----------- ----------------- -------
</TABLE>
DISTRIBUTION BY EQUIPMENT TYPE OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE AGGREGATE
NUMBER OF STATISTICAL STATISTICAL
TYPE RECEIVABLES CONTRACT VALUE CONTRACT VALUE
- --------------------------------------------- ----------- ----------------- ---------------
<S> <C> <C> <C>
Agricultural
New........................................ 2,778 $ 54,549,554.91 16.87%
Used....................................... 3,055 64,663,670.42 20.00
Construction
New........................................ 1,917 77,554,617.81 23.99
Used....................................... 1,416 53,948,264.97 16.69
Trucks
New........................................ 266 24,063,361.05 7.44
Used....................................... 729 28,820,213.11 8.92
Forestry
New........................................ 107 10,809,124.13 3.34
Used....................................... 167 8,860,939.23 2.74
----------- ----------------- -------
Total........................................ 10,435 $ 323,269,745.63 100.00%
----------- ----------------- -------
----------- ----------------- -------
</TABLE>
S-18
<PAGE>
DISTRIBUTION BY PAYMENT FREQUENCY OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE AGGREGATE
NUMBER OF STATISTICAL STATISTICAL
FREQUENCY RECEIVABLES CONTRACT VALUE CONTRACT VALUE
- ------------------------------------------- ----------- ------------------- --------------
<S> <C> <C> <C>
Annual(1).................................. 3,591 $ 81,770,721.45 25.29%
Semiannual................................. 391 11,853,229.36 3.67
Quarterly.................................. 82 2,069,597.30 0.64
Monthly.................................... 6,371 227,576,197.52 70.40
----------- ------------------- --------------
Total.................................... 10,435 $ 323,269,745.63 100.00%
----------- ------------------- --------------
----------- ------------------- --------------
</TABLE>
- ---------------------
(1) Approximately 6.70%, 3.80%, 4.24%, 4.16%, 7.06%, 20.47%, 28.18%, 11.51%,
4.64%, 2.05%, 2.25% and 4.93%, of the annual receivables have scheduled
payments within the collection periods relating to the payment dates in
January, February, March, April, May, June, July, August, September,
October, November and December, respectively.
S-19
<PAGE>
DISTRIBUTION BY CURRENT STATISTICAL CONTRACT VALUE OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE AGGREGATE
NUMBER OF STATISTICAL STATISTICAL
STATISTICAL CONTRACT VALUE RANGE RECEIVABLES CONTRACT VALUE CONTRACT VALUE
- --------------------------------------------- ----------- ----------------- ---------------
<S> <C> <C> <C>
$0.00 to $4,999.99........................... 1,452 $ 4,947,345.79 1.53%
$5,000.00 to $9,999.99....................... 1,872 13,299,557.29 4.11
$10,000.00 to $14,999.99..................... 1,344 16,594,940.37 5.13
$15,000.00 to $19,999.99..................... 1,043 18,072,905.94 5.59
$20,000.00 to $24,999.99..................... 760 16,925,679.80 5.24
$25,000.00 to $29,999.99..................... 537 14,772,041.08 4.57
$30,000.00 to $34,999.99..................... 477 15,405,972.19 4.77
$35,000,00 to $39,999.99..................... 387 14,532,220.89 4.50
$40,000,00 to $44,999.99..................... 349 14,807,242.55 4.58
$45,000.00 to $49,999.99..................... 332 15,769,002.17 4.88
$50,000.00 to $54,999.99..................... 306 16,032,574.49 4.96
$55,000.00 to $59.999.99..................... 200 11,519,520.09 3.56
$60,000.00 to $64,999.99..................... 182 11,394,430.20 3.52
$65,000.00 to $69,999.99..................... 175 11,830,054.65 3.66
$70,000.00 to $74,999.99..................... 115 8,319,463.87 2.57
$75,000.00 to $79,999.99..................... 86 6,649,863.30 2.06
$80,000.00 to $84,999.99..................... 80 6,614,149.29 2.05
$85,000.00 to $89,999.99..................... 76 6,665,318.54 2.06
$90,000.00 to $94,000.00..................... 85 7,870,615.74 2.43
$95,000.00 to $99,999.99..................... 74 7,211,900.16 2.23
$100,000.00 to $199,999.99................... 409 53,368,768.79 16.51
$200,000.00 to $299,999.99................... 57 13,730,263.49 4.25
$300,000.00 to $399,999.99................... 28 9,802,460.10 3.03
$400,000.00 to $499,999.99................... 2 835,159.20 0.26
$500,000.00 to $599,999.99................... 4 2,132,405.36 0.66
$600,000.00 to $699,999.99................... 1 654,813.34 0.20
$900,000.00 to $999,999.99................... 1 919,193.63 0.28
Greater than $999,999.99..................... 1 2,591,883.32 0.80
----------- ----------------- -------
Total........................................ 10,435 $ 323,269,745.63 100.00%
----------- ----------------- -------
----------- ----------------- -------
</TABLE>
S-20
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
AGGREGATE AGGREGATE
STATISTICAL STATISTICAL
CONTRACT CONTRACT
STATE(1) VALUE STATE(1) VALUE
- ---------------------------------- ----------- ---------------------------------- -----------
<S> <C> <C> <C>
Alabama........................... 3.19% Nebraska.......................... 1.86%
Alaska............................ 0.03 Nevada............................ 0.92
Arizona........................... 2.28 New Hampshire..................... 0.21
Arkansas.......................... 4.14 New Jersey........................ 1.10
California........................ 3.74 New Mexico........................ 0.71
Colorado.......................... 2.97 New York.......................... 2.21
Connecticut....................... 0.20 North Carolina.................... 1.91
Delaware.......................... 0.23 North Dakota...................... 0.94
Florida........................... 4.79 Ohio.............................. 1.94
Georgia........................... 4.01 Oklahoma.......................... 2.14
Hawaii............................ 0.05 Oregon............................ 1.01
Idaho............................. 1.34 Pennsylvania...................... 2.51
Illinois.......................... 3.36 Rhode Island...................... 0.02
Indiana........................... 1.93 South Carolina.................... 1.63
Iowa.............................. 2.40 South Dakota...................... 2.25
Kansas............................ 2.70 Tennessee......................... 3.27
Kentucky.......................... 1.73 Texas............................. 11.32
Louisiana......................... 1.99 Utah.............................. 1.60
Maine............................. 0.62 Vermont........................... 0.28
Maryland.......................... 1.30 Virginia.......................... 1.04
Massachusetts..................... 0.43 Washington........................ 2.44
Michigan.......................... 2.05 West Virginia..................... 0.39
Minnesota......................... 2.20 Wisconsin......................... 3.20
Mississippi....................... 3.78 Wyoming........................... 0.62
-----------
Missouri.......................... 1.97
Montana........................... 1.04 Total............................. 100.00%
-----------
-----------
</TABLE>
- ---------------------
(1) Based upon billing addresses of the obligors.
S-21
<PAGE>
DELINQUENCIES, REPOSSESSIONS, AND NET LOSSES
Set forth below is certain information concerning Case Credit's experience
pertaining to the entire portfolio of United States retail agricultural,
construction, forestry, truck and other equipment receivables that it services,
including receivables previously sold to trusts under prior asset-backed
securitizations.
Recently, delinquencies, repossessions and net losses have increased as a
result of:
- A decrease in the number of retail agricultural receivables included in
Case Credit's portfolio due to the continued decline in the global
agricultural market and the ongoing overall economic uncertainties in
several emerging markets, combined with a substantial drop year-over-year
of commodity prices and exports of farm commodities, affecting large-scale
production agriculture.
- A related increase in retail construction receivables, which have
traditionally had higher losses than agricultural receivables, as a
percentage of Case Credit's serviced portfolio.
- Case Credit's financing of non-Case dealers on non-Case equipment, which
has initially resulted in higher losses than Case Credit has traditionally
incurred in connection with financing of Case dealers.
In the future, delinquencies, repossessions and net losses on agricultural
contracts may be affected by weather conditions such as flood and drought,
commodity market prices and the level of farmers' income. There can be no
assurance that the delinquency, repossession and net loss experience on the
receivables of the trust will be comparable to that set forth below.
S-22
<PAGE>
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------- ----------------------------- -----------------------------
NUMBER NUMBER NUMBER
OF OF OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
------------- ------------- ------------- ------------- ------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio......... 153,959 $ 4,150.3 145,101 $ 3,623.3 135,211 $ 3,262.4
Period of
Delinquency 31-60
days............. 3,100 104.1 2,649 74.2 2,031 45.9
60 Days or More... 3,251 133.0 2,502 65.3 1,778 36.3
------------- ------------- ------------- ------------- ------------- -------------
Total
Delinquencies.... 6,351 $ 237.1 5,151 $ 139.5 3,809 $ 82.2
Total
Delinquencies as
a Percent of the
Portfolio........ 4.1% 5.7% 3.6% 3.9% 2.8% 2.5%
<CAPTION>
1995 1994
----------------------------- -----------------------------
NUMBER NUMBER
OF OF
CONTRACTS AMOUNT CONTRACTS AMOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Portfolio......... 135,722 $ 3,093.1 128,891 $ 2,641.0
Period of
Delinquency 31-60
days............. 1,927 33.5 1,457 18.4
60 Days or More... 1,509 18.5 855 9.4
------------- ------------- ------------- -------------
Total
Delinquencies.... 3,436 $ 52.0 2,312 $ 27.8
Total
Delinquencies as
a Percent of the
Portfolio........ 2.5% 1.7% 1.8% 1.0%
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30,
-------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
NUMBER NUMBER
OF OF
CONTRACTS AMOUNT CONTRACTS AMOUNT
------------- ------------- ------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Portfolio......... 156,340 $ 4,412.9 149,535 $ 3,891.6
Period of
Delinquency 31-60
days............. 3,002 109.2 2,303 66.0
60 Days or More... 3,688 169.8 2,089 65.6
------------- ------------- ------------- -------------
Total
Delinquencies.... 6,690 $ 279.0 4,392 $ 131.6
Total
Delinquencies as
a Percent of the
Portfolio........ 4.3% 6.3% 2.9% 3.4%
</TABLE>
- ---------------------
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each retail installment sale contract,
including unearned finance and other charges. The information in the table
includes an immaterial amount of retail installment sale contracts on
equipment other than agricultural, forestry, truck and construction
equipment and includes the receivables that remained with Tenneco Credit
Corporation and previously sold contracts that Case Credit continues to
service. Case Credit treats a receivable as delinquent when it is one day
past due.
S-23
<PAGE>
CREDIT LOSS/REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1998 1997 1996 1995 1994 1999 1998
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Average Gross Portfolio
Outstanding During the Period.... $ 3,886.8 $ 3,442.9 $ 3,155.5 $ 2,857.7 $ 2,511.2 $ 4,281.6 $ 3,726.4
Repossessions as a Percent of
Average Gross Portfolio
Outstanding...................... 1.22% 1.20% 1.07% 1.14% 1.33% 1.19% 1.40%
Net Losses as a Percent of
Liquidations(2)(3)(4)............ 0.53% 0.34% 0.15% 0.22% 0.36% 0.82% 0.48%
Net Losses as a Percent of Average
Gross Portfolio
Outstanding(2)(3)(5)............. 0.29% 0.20% 0.08% 0.11% 0.19% 0.42% 0.30%
</TABLE>
- ---------------------
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each retail installment sale contract,
including unearned finance and other charges. The information in the table
includes an immaterial amount of retail installment sale contracts on
equipment other than agricultural, construction, truck and forestry
equipment and includes the receivables that remained with Tenneco Credit
Corporation and previously sold contracts that Case Credit continues to
service.
(2) A portion of the contracts provide for recourse to dealers. Approximately
16%, 25%, 25%, 22%, 22%, 15% and 20% of the aggregate amounts scheduled to
be paid on the contracts acquired during the years ended December 31, 1998,
1997, 1996, 1995 and 1994 and the six months ended June 30, 1999 and 1998,
respectively, provide for recourse to dealers (excluding some contracts
which provide for partial recourse to dealers through the dealers' reserve
accounts). In the event of defaults by the obligor under any such contract,
the contract is required to be repurchased by the dealer for an amount
generally equal to all amounts due and unpaid thereunder. As a result, any
losses under any such contract are incurred by the dealer.
(3) Net losses are equal to the aggregate of the principal balances of all
contracts (plus accrued but unpaid interest thereon) that are determined to
be uncollectible in the period, less any recoveries on contracts charged off
in the period or any prior periods, excluding any losses resulting from
repossession expenses and excluding any recoveries from dealers' reserve
accounts.
(4) Liquidations represent a reduction in the outstanding balances of the
contracts as a result of cash payments and charge-offs.
(5) Percentages have been annualized for the six months ended June 30, 1999 and
June 30, 1998, and are not necessarily indicative of the experience for the
year.
Case Credit has recourse to dealers on a portion of the contracts. This fact
was taken into consideration in determining the principal balance of the
certificates and the required spread account balance. In the event of a dealer's
bankruptcy, a
S-24
<PAGE>
bankruptcy trustee, a creditor or the dealer as debtor in possession might
attempt to characterize recourse sales of contracts as loans to the dealer
secured by the contracts. Such an attempt, if successful, could result in
payment delays or losses on the affected receivables.
As used above, losses are defined as those receivables that are over 120
days past due that Case Credit has determined to charge-off. It is the policy of
Case Credit to treat each receivable that is over 120 days past due as
nonperforming and to review each of these receivables on a case-by-case basis to
determine the amount and need for charge-off. For purposes of the trust,
however, losses are recognized when a receivable is liquidated by the servicer
through the sale of or other disposition of the related equipment, if any, or
when the servicer has, after using all reasonable efforts to realize upon the
related equipment determined to charge-off the receivable without realizing upon
the related equipment.
WEIGHTED AVERAGE LIFE OF THE NOTES
As the rate of payment of principal of the notes depends primarily on the
rate of payment (including prepayments) of the principal balance of the
receivables, final payment of each class of notes could occur significantly
earlier than the final maturity date for that class. You will bear the risk of
being able to reinvest principal payments on your notes at yields at least equal
to the yield on your notes.
Prepayments on retail installment sale contracts can be measured relative to
a prepayment standard or model. The model used in this prospectus supplement is
based on a constant prepayment rate ("CPR"). CPR is determined by the percentage
of principal outstanding at the beginning of a period that prepays during that
period, stated as an annualized rate. The CPR prepayment model, like any
prepayment model, does not purport to be either an historical description of
prepayment experience or a prediction of the anticipated rate of prepayment.
The tables on pages S-27, S-28 and S-29, have been prepared on the basis of
certain assumptions, including that: (a) the receivables prepay in full at the
specified monthly CPR, with no repurchases, (b) each scheduled payment on the
receivables is made on the last day of each collection period, (c) distributions
are made on each payment date in respect of the notes in accordance with the
description set forth under "Description of the Transaction
Agreements--Distributions," (d) the balance in the spread account on any day is
equal to the required spread account balance, (e) the balance in the yield
supplement account on any day is equal to the required yield supplement account
balance, (f) the closing date occurs on September 13, 1999 and (g) the servicer
exercises its option to purchase the receivables on the earliest permitted
payment date. The table indicates the projected weighted average life of each
class of notes and sets forth the percent of the initial principal balance of
each class of notes that is projected to be outstanding after each of the
payment dates shown at various CPR percentages.
S-25
<PAGE>
The table also assumes that the receivables have been aggregated into four
hypothetical pools with all of the receivables within each pool having the
following characteristics:
<TABLE>
<CAPTION>
AGGREGATE WEIGHTED
POOL CONTRACT VALUE AVERAGE APR
- ---------------------------------------- ----------------- -------------
<S> <C> <C>
1....................................... $ 322,989,181.27 8.911%
2....................................... 170,000.000.00 7.917
3....................................... 140,000,000.00 7.917
4....................................... 67,010,818.73 7.917
----------------- -------------
$ 700,000,000.00 8.376%
----------------- -------------
----------------- -------------
</TABLE>
Hypothetical pool 1 has the same Contract Value and cashflow characteristics
as the initial receivables. Hypothetical pools 2, 3 and 4 have a Contract Value
equal in the aggregate to the amount deposited in the trust's pre-funding
account. The cash flow characteristics of hypothetical pools 2, 3 and 4 are
proportionately identical to those of the agricultural and construction
contracts in hypothetical pool 1.
The information included in the following tables represents forward-looking
statements and involves risks and uncertainties that could cause actual results
to differ materially from those in the forward-looking statements. The actual
characteristics and performance of the receivables will differ from the
assumptions used in constructing the tables on pages S-27, S-28 and S-29. The
assumptions used are hypothetical and have been provided only to give a general
sense of how the principal cash flows might behave under varying prepayment
scenarios. For example, it is highly unlikely that the receivables will prepay
at a constant CPR until maturity or that all of the receivables will prepay at
the same CPR. Similarly, the aggregate Contract Value of additional receivables
may be less than the amount deposited in the trust's pre-funding account.
Moreover, the diverse terms of receivables within each of the four hypothetical
pools could produce slower or faster principal distributions than indicated in
the table at the various CPR specified. Any difference between those assumptions
and the actual characteristics and performance of the receivables, or actual
prepayment experience, will affect the percentages of initial balances
outstanding over time and the weighted average lives of the notes.
S-26
<PAGE>
PERCENT OF INITIAL PRINCIPAL AMOUNT OF THE NOTES AT VARIOUS CPR PERCENTAGES
<TABLE>
<CAPTION>
A-1 NOTES A-2 NOTES
--------------------------------- ---------------------------------
PAYMENT DATE 0% 13% 15% 17% 19% 0% 13% 15% 17% 19%
- ------------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date............. 100 100 100 100 100 100 100 100 100 100
October, 1999............ 78 67 64 62 60 100 100 100 100 100
November, 1999........... 65 45 41 37 34 100 100 100 100 100
December, 1999........... 50 20 15 9 4 100 100 100 100 100
January, 2000............ 34 0 0 0 0 100 99 97 96 94
February, 2000........... 19 0 0 0 0 100 94 92 90 88
March, 2000.............. 4 0 0 0 0 100 88 86 84 82
April, 2000.............. 0 0 0 0 0 98 83 81 78 76
May, 2000................ 0 0 0 0 0 95 78 75 72 70
June, 2000............... 0 0 0 0 0 91 72 69 66 63
July, 2000............... 0 0 0 0 0 84 64 61 58 54
August, 2000............. 0 0 0 0 0 78 56 53 50 46
September, 2000.......... 0 0 0 0 0 72 49 46 43 39
October, 2000............ 0 0 0 0 0 68 44 40 37 33
November, 2000........... 0 0 0 0 0 64 39 36 32 28
December, 2000........... 0 0 0 0 0 61 35 31 27 23
January, 2001............ 0 0 0 0 0 57 30 26 22 18
February, 2001........... 0 0 0 0 0 53 26 22 18 14
March, 2001.............. 0 0 0 0 0 50 21 17 13 9
April, 2001.............. 0 0 0 0 0 46 17 13 9 5
May, 2001................ 0 0 0 0 0 42 13 9 4 0
June, 2001............... 0 0 0 0 0 37 8 3 0 0
July, 2001............... 0 0 0 0 0 31 1 0 0 0
August, 2001............. 0 0 0 0 0 24 0 0 0 0
September, 2001.......... 0 0 0 0 0 18 0 0 0 0
October, 2001............ 0 0 0 0 0 14 0 0 0 0
November, 2001........... 0 0 0 0 0 10 0 0 0 0
December, 2001........... 0 0 0 0 0 7 0 0 0 0
January, 2002............ 0 0 0 0 0 3 0 0 0 0
February, 2002........... 0 0 0 0 0 0 0 0 0 0
March, 2002.............. 0 0 0 0 0 0 0 0 0 0
April, 2002.............. 0 0 0 0 0 0 0 0 0 0
May, 2002................ 0 0 0 0 0 0 0 0 0 0
June, 2002............... 0 0 0 0 0 0 0 0 0 0
July, 2002............... 0 0 0 0 0 0 0 0 0 0
August, 2002............. 0 0 0 0 0 0 0 0 0 0
September, 2002.......... 0 0 0 0 0 0 0 0 0 0
October, 2002............ 0 0 0 0 0 0 0 0 0 0
November, 2002........... 0 0 0 0 0 0 0 0 0 0
December, 2002........... 0 0 0 0 0 0 0 0 0 0
January, 2003............ 0 0 0 0 0 0 0 0 0 0
February, 2003........... 0 0 0 0 0 0 0 0 0 0
March, 2003.............. 0 0 0 0 0 0 0 0 0 0
April, 2003.............. 0 0 0 0 0 0 0 0 0 0
May, 2003................ 0 0 0 0 0 0 0 0 0 0
June, 2003............... 0 0 0 0 0 0 0 0 0 0
July, 2003............... 0 0 0 0 0 0 0 0 0 0
August, 2003............. 0 0 0 0 0 0 0 0 0 0
September, 2003.......... 0 0 0 0 0 0 0 0 0 0
October, 2003............ 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(years)(1) 0.30 0.20 0.19 0.18 0.17 1.51 1.10 1.05 1.00 0.96
</TABLE>
- ------------------------------
(1) The weighted average life of an A-1 Note or A-2 Note is determined by: (a)
multiplying the amount of each principal payment on the applicable note by
the number of years from the date of issuance of such note to the related
payment date, (b) adding the results, and (c) dividing the sum by the
related initial principal amount of such note.
THIS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ON PAGES
S-25 AND S-26 (INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND
PERFORMANCE OF THE RECEIVABLES, WHICH WILL DIFFER FROM THE ACTUAL
CHARACTERISTICS AND PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION
THEREWITH.
S-27
<PAGE>
PERCENT OF INITIAL PRINCIPAL AMOUNT OF THE NOTES AT VARIOUS CPR PERCENTAGES
<TABLE>
<CAPTION>
A-3 NOTES A-4 NOTES
--------------------------------- ---------------------------------
PAYMENT DATE 0% 13% 15% 17% 19% 0% 13% 15% 17% 19%
- ------------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date............. 100 100 100 100 100 100 100 100 100 100
October, 1999............ 100 100 100 100 100 100 100 100 100 100
November, 1999........... 100 100 100 100 100 100 100 100 100 100
December, 1999........... 100 100 100 100 100 100 100 100 100 100
January, 2000............ 100 100 100 100 100 100 100 100 100 100
February, 2000........... 100 100 100 100 100 100 100 100 100 100
March, 2000.............. 100 100 100 100 100 100 100 100 100 100
April, 2000.............. 100 100 100 100 100 100 100 100 100 100
May, 2000................ 100 100 100 100 100 100 100 100 100 100
June, 2000............... 100 100 100 100 100 100 100 100 100 100
July, 2000............... 100 100 100 100 100 100 100 100 100 100
August, 2000............. 100 100 100 100 100 100 100 100 100 100
September, 2000.......... 100 100 100 100 100 100 100 100 100 100
October, 2000............ 100 100 100 100 100 100 100 100 100 100
November, 2000........... 100 100 100 100 100 100 100 100 100 100
December, 2000........... 100 100 100 100 100 100 100 100 100 100
January, 2001............ 100 100 100 100 100 100 100 100 100 100
February, 2001........... 100 100 100 100 100 100 100 100 100 100
March, 2001.............. 100 100 100 100 100 100 100 100 100 100
April, 2001.............. 100 100 100 100 100 100 100 100 100 100
May, 2001................ 100 100 100 100 100 100 100 100 100 100
June, 2001............... 100 100 100 98 85 100 100 100 100 100
July, 2001............... 100 100 91 79 67 100 100 100 100 100
August, 2001............. 100 85 73 60 49 100 100 100 100 100
September, 2001.......... 100 69 56 44 33 100 100 100 100 100
October, 2001............ 100 55 43 32 20 100 100 100 100 100
November, 2001........... 100 45 33 21 10 100 100 100 100 100
December, 2001........... 100 34 22 10 0 100 100 100 100 100
January, 2002............ 100 23 11 0 0 100 100 100 100 94
February, 2002........... 97 12 0 0 0 100 100 100 94 88
March, 2002.............. 85 1 0 0 0 100 100 95 89 83
April, 2002.............. 74 0 0 0 0 100 95 89 83 78
May, 2002................ 63 0 0 0 0 100 90 84 78 73
June, 2002............... 48 0 0 0 0 100 83 77 72 67
July, 2002............... 28 0 0 0 0 100 75 69 64 59
August, 2002............. 9 0 0 0 0 100 67 62 57 53
September, 2002.......... 0 0 0 0 0 96 60 56 51 47
October, 2002............ 0 0 0 0 0 90 55 51 46 42
November, 2002........... 0 0 0 0 0 85 51 47 43 39
December, 2002........... 0 0 0 0 0 80 48 43 39 36
January, 2003............ 0 0 0 0 0 75 44 40 36 32
February, 2003........... 0 0 0 0 0 70 40 36 32 29
March, 2003.............. 0 0 0 0 0 65 36 33 29 0
April, 2003.............. 0 0 0 0 0 60 33 29 0 0
May, 2003................ 0 0 0 0 0 56 30 0 0 0
June, 2003............... 0 0 0 0 0 50 0 0 0 0
July, 2003............... 0 0 0 0 0 43 0 0 0 0
August, 2003............. 0 0 0 0 0 36 0 0 0 0
September, 2003.......... 0 0 0 0 0 30 0 0 0 0
October, 2003............ 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(years)(1) 2.76 2.19 2.11 2.04 1.97 3.70 3.26 3.18 3.10 3.02
</TABLE>
- ------------------------------
(1) The weighted average life of an A-3 Note or A-4 Note is determined by: (a)
multiplying the amount of each principal payment on the applicable note by
the number of years from the date of issuance of the note to the related
payment date, (b) adding the results, and (c) dividing the sum by the
related initial principal amount of the note.
THIS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ON PAGES
S-25 AND S-26 (INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND
PERFORMANCE OF THE RECEIVABLES, WHICH WILL DIFFER FROM THE ACTUAL
CHARACTERISTICS AND PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION
THEREWITH.
S-28
<PAGE>
PERCENT OF INITIAL PRINCIPAL AMOUNT OF THE NOTES AT VARIOUS CPR PERCENTAGES
<TABLE>
<CAPTION>
B NOTES
---------------------------------
PAYMENT DATE 0% 13% 15% 17% 19%
- ------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Closing Date............. 100 100 100 100 100
October, 1999............ 100 97 96 96 96
November, 1999........... 100 94 94 94 93
December, 1999........... 100 92 91 91 90
January, 2000............ 100 89 89 88 87
February, 2000........... 100 87 86 85 84
March, 2000.............. 100 84 83 82 81
April, 2000.............. 100 82 81 80 79
May, 2000................ 88 80 79 77 76
June, 2000............... 86 77 76 74 73
July, 2000............... 83 74 72 71 69
August, 2000............. 80 70 69 67 66
September, 2000.......... 77 67 66 64 62
October, 2000............ 75 65 63 61 60
November, 2000........... 74 63 61 59 58
December, 2000........... 72 61 59 57 55
January, 2001............ 70 58 57 55 53
February, 2001........... 69 56 55 53 51
March, 2001.............. 67 54 53 51 49
April, 2001.............. 66 53 51 49 47
May, 2001................ 64 51 49 47 45
June, 2001............... 62 48 46 45 43
July, 2001............... 59 45 44 42 40
August, 2001............. 56 43 41 39 37
September, 2001.......... 53 40 38 37 35
October, 2001............ 51 38 36 35 33
November, 2001........... 49 37 35 33 31
December, 2001........... 48 35 33 31 30
January, 2002............ 46 33 32 30 28
February, 2002........... 44 32 30 28 27
March, 2002.............. 43 30 28 27 25
April, 2002.............. 41 29 27 25 24
May, 2002................ 39 27 25 24 22
June, 2002............... 37 25 24 22 21
July, 2002............... 34 23 22 20 19
August, 2002............. 31 21 19 18 17
September, 2002.......... 29 19 18 17 15
October, 2002............ 27 18 16 15 14
November, 2002........... 26 17 15 14 13
December, 2002........... 24 16 14 13 12
January, 2003............ 23 14 13 12 11
February, 2003........... 22 13 12 11 11
March, 2003.............. 20 12 12 11 0
April, 2003.............. 19 12 11 0 0
May, 2003................ 18 11 0 0 0
June, 2003............... 16 0 0 0 0
July, 2003............... 14 0 0 0 0
August, 2003............. 12 0 0 0 0
September, 2003.......... 11 0 0 0 0
October, 2003............ 0 0 0 0 0
Weighted Average Life
(years)(1) 2.28 1.83 1.77 1.71 1.66
</TABLE>
- ------------------------------
(1) The weighted average life of a Class B Note is determined by: (a)
multiplying the amount of each principal payment on the applicable note by
the number of years from the date of issuance of the note to the related
payment date, (b) adding the results, and (c) dividing the sum by the
related initial principal amount of the note.
THIS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ON PAGES
S-25 AND S-26 (INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND
PERFORMANCE OF THE RECEIVABLES, WHICH WILL DIFFER FROM THE ACTUAL
CHARACTERISTICS AND PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION
THEREWITH.
S-29
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The following summarizes the material terms of the notes offered hereby and
the indenture pursuant to which they will be issued. The summary does not
purport to be complete and is qualified in its entirety by reference to the
provisions of the notes and the indenture pursuant to which they will be issued.
The following summary supplements, and to the extent it is inconsistent with,
replaces, the description of the general terms and provisions of the notes of
any given series and the related indenture set forth in the prospectus.
PAYMENTS OF INTEREST
Interest on the principal balance of the notes will accrue at the applicable
interest rate and will be payable monthly on each payment date, commencing
October 15, 1999. Interest on the A-1 Notes will be calculated on the basis of
the actual number of days in the applicable interest period and a 360-day year.
Interest on the other notes will be calculated on the basis of a 360-day year of
twelve 30-day months.
If the amount of interest on the Class A Notes payable on any payment date
exceeds the amounts available on that date, the holders of Class A Notes will
receive their ratable share (based upon the total amount of interest due to each
of them) of the amount available to be distributed in respect of interest on the
Class A Notes.
Interest on the Class B Notes will not be paid on any payment date until
interest due on the Class A Notes has been paid in full.
PAYMENTS OF PRINCIPAL
Principal will be paid on the notes on each payment date in an amount
generally equal to the Principal Distribution Amount. For any payment date, the
"PRINCIPAL DISTRIBUTION AMOUNT" will be an amount (not less than zero) equal to
(i) the sum of the Contract Value of all receivables and the Pre-Funded Amount
as of the beginning of the immediately preceding collection period less (ii) the
sum of the Contract Value of all receivables and the Pre-Funded Amount as of the
beginning of the current collection period. On each payment date, the principal
payments will be allocated among the various classes of notes as described
below.
The principal of the Class A Notes will be payable on each payment date.
Principal payments will be due, to the extent of funds available therefor, in an
amount generally equal to the Class A Noteholders' Monthly Principal
Distributable Amount to the holders of the various classes of Class A Notes,
sequentially, so that no principal will be paid on any Class of Class A Notes
until each Class of Class A Notes with a lower numerical designation has been
paid in full. For instance, no principal will be paid on the A-2 Notes until the
A-1 Notes have been paid in full. The principal of the Class B Notes will be due
on each payment date, to the extent of funds available therefor, in an amount
generally equal to the Class B Noteholders'
S-30
<PAGE>
Monthly Principal Distributable Amount. However, no principal payments will be
made on the Class B Notes on any payment date until all amounts due with respect
to the Class A Notes on that payment date have been paid in full.
After an event of default and acceleration of the notes (and, if any notes
remain outstanding, on and after the final scheduled maturity date for the last
of the notes, as specified below), principal payments will be made first to the
holders of the Class A Notes ratably according to the amounts due and payable on
the Class A Notes for principal until paid in full and then to the Class B
Noteholders until the outstanding principal amount of the Class B Notes has been
paid in full.
The final principal payment with respect to each class of notes is due not
later than the payment date in the month specified for each class below:
<TABLE>
<CAPTION>
FINAL MATURITY
CLASS DATE
- ---------------------------------------------------- ------------------
<S> <C>
A-1................................................. September 2000
A-2................................................. October 2003
A-3................................................. June 2004
A-4................................................. June 2006
B................................................... June 2006
</TABLE>
Upon any prepayment in full of a receivable, the Contract Value of that
receivable will be reduced to zero. This results in an increment to the
Principal Distribution Amount for the related payment date equal to the full
Contract Value of the prepaid receivable. However, in circumstances where the
Contract Value of the prepaid receivable exceeded its outstanding principal
balance, the principal collected through the prepayment will be less than the
resulting increment to the Principal Distribution Amount by an amount roughly
equal to the excess of the receivable's Contract Value over its outstanding
principal balance immediately prior to the prepayment. This will generally
happen when the annual percentage rate of the prepaid receivable was greater
than the weighted average annual percentage rate used to calculate its Contract
Value. See "The Receivables Pool."
To the extent necessary to maintain the initial credit ratings on the notes,
funds will be deposited in the trust's yield supplement account each time the
trust buys any additional receivables during the pre-funding period. Any such
funds are intended to cover shortfalls that could result from prepayments of
this type. Upon a prepayment of such a receivable, an amount equal to the excess
of its Contract Value over its outstanding principal balance immediately prior
to the prepayment will be withdrawn from the yield supplement account and
included in the funds distributed on that payment date to the extent that there
are funds available in the yield supplement account and there would otherwise be
a shortfall. However, no funds may be required to be deposited into the yield
supplement account, and in any event any required deposit is expected to be less
than the maximum aggregate shortfall that might result if all receivables of
this type prepaid. Therefore, if a significant number of those
S-31
<PAGE>
receivables prepay, there may be insufficient funds available in the yield
supplement account to cover the resulting shortfall.
As used herein, with respect to any payment date:
"CLASS A NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with
respect to any payment date until the payment date on which the outstanding
amount of the Class A Notes has been reduced to zero, the Principal
Distributable Amount MINUS the Class B Noteholders' Monthly Principal
Distributable Amount.
"CLASS B NOTEHOLDERS' ADJUSTED PRINCIPAL DISTRIBUTABLE AMOUNT" means, with
respect to each payment date, an amount equal to the excess, if any, of: (a) the
outstanding amount of the Class B Notes on the related record date minus any
Class B Noteholders' Principal Carryover Shortfall over (b) the Initial Class B
Percentage of the sum of the outstanding Pool Balance and the amount on deposit
in the trust's pre-funding account (the "PRE-FUNDED AMOUNT") as of the beginning
of the current collection period; PROVIDED, HOWEVER, that if on the related
Record Date any principal of the A-1 Notes remains outstanding, then the Class B
Noteholders' Adjusted Principal Distributable Amount for such payment date shall
not exceed an amount equal to the aggregate unscheduled principal payments on
the receivables received during the related collection period. Notwithstanding
the above, on and after the payment date on which the Class A Notes are reduced
to zero, the Class B Noteholders' Adjusted Principal Distributable Amount shall
be the Principal Distributable Amount less the amount necessary to reduce the
Class A Notes to zero.
"CLASS B NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with
respect to any payment date, the sum of (a) the Class B Noteholders' Adjusted
Principal Distributable Amount for that payment date and (b) without duplication
of any amounts included in (a), the Class B Noteholders' Principal Carryover
Shortfall for that payment date; PROVIDED, HOWEVER, that the sum of clauses (a)
and (b) shall not exceed the outstanding amount of the Class B Notes, and, on
the final maturity date for the Class B Notes, the Class B Noteholders' Monthly
Principal Distributable Amount will include the amount, to the extent of
available funds, necessary to reduce the outstanding amount of the Class B Notes
to zero.
"CLASS B NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, with respect to
any payment date, the excess of the Class B Noteholders' Monthly Principal
Distributable Amount for the preceding payment date over the amount that was
actually deposited in the note distribution account in respect of principal of
the Class B Notes on that preceding payment date.
"INITIAL CLASS B PERCENTAGE" means 4.50%.
"POOL BALANCE" at any time equals the sum of the aggregate Contract Values
of the receivables at the beginning of a collection period, after giving effect
to all payments received from obligors and Purchase Amounts to be remitted by
the servicer
S-32
<PAGE>
or us, as the case may be, with respect to the preceding collection period and
all losses realized on receivables liquidated during that preceding collection
period.
"PRINCIPAL CARRYOVER SHORTFALL" means, with respect to each payment date,
the excess of the Principal Distributable Amount for the preceding payment date
over the amount that was actually deposited in the note distribution account in
respect of principal of the notes on that preceding payment date.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to each payment date,
the sum of (a) the Principal Distribution Amount plus (b) the Principal
Carryover Shortfall.
COLLECTION PERIODS AND CUTOFF DATES
A number of important calculations relating to the receivables will be made
by reference to "cutoff dates" and "collection periods." For instance, the
Contract Value of the initial receivables and each set of additional receivables
that we sell to the trust will be determined as of a related cutoff date. A
cutoff date generally will be the last day of the calendar month prior to the
month during which the sale takes place. The initial cutoff date is July 31,
1999.
Payments on the notes on each payment date will primarily be funded with
collections on the receivables that are received during a related collection
period. Each collection period will be about one month long and will begin and
end as follows. The initial collection period will begin on the initial cutoff
date and end on the sixth day of the first calendar month following the one in
which the closing date falls. Subsequent collections periods will run from the
sixth day of one calendar month to the sixth day of the next calendar month.
RECORD DATES
Payments on the notes will be made on each payment date to holders of record
as of the fourteenth day of the calendar month in which the payment date occurs
or, if definitive notes are issued, the close of business on the last day of the
prior calendar month.
MANDATORY REDEMPTION
On the payment date on or immediately following the last day of the
pre-funding period, any funds remaining in the pre-funding account (after giving
effect to the purchase of all additional receivables, including any receivables
purchased on that date) will be applied to redeem the notes then outstanding in
the same sequence and proportions that would apply if the remaining funds were a
part of the Principal Distribution Amount.
S-33
<PAGE>
OPTIONAL REDEMPTION
Any notes that remain outstanding on any payment date on which the servicer
exercises its clean-up call will be prepaid in whole at the applicable
redemption price on that payment date. The clean-up call cannot be exercised
until the Pool Balance declines to 10% or less of the sum of (i) the Pool
Balance as of the initial cutoff date plus (ii) the aggregate Contract Value of
all additional receivables sold to the trust as of their respective cutoff
dates. The redemption price for any class of notes in connection with any
optional redemption will equal the unpaid principal balance of that class of
notes, plus accrued and unpaid interest thereon.
REGISTRATION OF NOTES
The notes will be cleared through DTC. You may hold your notes through DTC
(in the United States) or Cedel or Euroclear (in Europe) if you are a
participant of those systems, or indirectly through organizations that are a
participant in those systems.
THE INDENTURE TRUSTEE
Harris Trust and Savings Bank is the indenture trustee under the indenture
pursuant to which the notes will be issued. Harris Trust and Savings Bank is an
Illinois banking corporation, and its corporate trust offices are located at 311
West Monroe Street, Chicago, Illinois. In the ordinary course of its business,
the indenture trustee and its affiliates have engaged and may in the future
engage in commercial banking or financial advisory transactions with Case Credit
and its affiliates.
Pursuant to the Trust Indenture Act, the indenture trustee may be deemed to
have a conflict of interest and be required to resign as trustee for either the
Class A Notes or the Class B Notes if a default occurs under the indenture. The
indenture will provide for a successor trustee to be appointed for one or both
Classes of Notes in these circumstances, so that there will be separate trustees
for the Class A Notes and the Class B Notes. In these circumstances, the Class A
Noteholders and Class B Noteholders will continue to vote as a single group. So
long as any amounts remain unpaid with respect to the Class A Notes, only the
trustee for the Class A Noteholders will have the right to exercise remedies
under the indenture (but the Class B Noteholders will be entitled to their share
of any proceeds of enforcement, subject to the subordination of the Class B
Notes to the Class A Notes as described herein). Upon repayment of the Class A
Notes in full, all rights to exercise remedies under the indenture will transfer
to the trustee for the Class B Notes. Any resignation of the original indenture
trustee as described above with respect to any class of notes will become
effective only upon the appointment of a successor trustee for that class of
notes and the successor's acceptance of that appointment.
S-34
<PAGE>
DESCRIPTION OF THE CERTIFICATES
On the closing date, the trust will issue $17,500,000 asset-backed
certificates pursuant to the trust agreement. We will initially purchase the
entire principal amount of the certificates. The certificates will bear interest
at the rate of 7.05% per annum, except that during the pre-funding period no
interest will accrue on a percentage of the certificates balance equal to the
pre-funded amount divided by the outstanding Pool Balance.
Distributions of interest and principal on the certificates will be
subordinated in priority of payment to interest and principal due on the notes
to the extent described herein. Funds on deposit in the spread account and the
yield supplement account will not be available to cover scheduled payments with
respect to the certificates.
DESCRIPTION OF THE TRANSACTION AGREEMENTS
We summarize below some material terms of the agreements under which we will
buy receivables, directly or indirectly, from Case Credit and sell them to the
trust, and under which Case Credit will agree to service the trust's receivables
and administer the trust. This description supplements the disclosure in the
prospectus under the same heading. The following summary does not include all of
the terms of the agreements and is qualified by reference to the actual
agreements.
SALES OF RECEIVABLES
In addition to the initial receivables, we expect to sell the trust
additional receivables having an aggregate Contract Value of approximately
$377,010,818.73, which equals the amount we will deposit in the trust's
pre-funding account. We expect to sell additional receivables to the trust
monthly on dates specified by us during the pre-funding period. The pre-funding
will begin on the closing date and end on the earliest of: (a) the day on which
the amount on deposit in the trust's pre-funding account is reduced to less than
$100,000, (b) the date on which an event of default or a servicer default
occurs, (c) the date on which an insolvency event occurs with respect to us or
the servicer and (d) the close of business on the February 2000 payment date.
Upon any sale of additional receivables to the trust:
(1) the Pool Balance will increase in an amount equal to the aggregate
Contract Value of the additional receivables;
(2) an amount equal to 2.50% of the aggregate Contract Value of the
additional receivables will be withdrawn from the pre-funding account and
deposited in the spread account;
(3) if any deposit into the yield supplement account is required, the
necessary funds will be withdrawn from the pre-funding account and deposited
in the yield supplement account; and
S-35
<PAGE>
(4) an amount equal to the excess of the aggregate Contract Value of the
additional receivables over the sum of the amounts described in clauses (2)
and (3) will be withdrawn from the pre-funding account and paid to us.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicing fee payable to the servicer will accrue at a rate of 1.00% per
annum on the Pool Balance as of the first day of each collection period. The
servicing fee will be paid solely to the extent that there are funds available
to pay it as described under "--Distributions" below.
DISTRIBUTIONS
On each payment date, the servicer will cause payments on the notes and
other trust liabilities to be made from the following sources:
- the aggregate collections on the receivables for the related collection
period, including proceeds of liquidated receivables obtained through the
sale or other disposition of the related equipment, net of expenses
incurred by the servicer in connection with such liquidation and any
amounts required by law to be remitted to the related obligor; however, no
other monies collected on any liquidated receivable during any collection
period after the collection period in which it became a liquidated
receivable will be included in the funds available for distribution;
- collections received after the end of the preceding calendar month on any
additional receivables added to the trust after the end of that month and
on or prior to that payment date;
- any amounts withdrawn from the negative carry account or the yield
supplement account for that payment date;
- earnings from investment of funds held in the trust's bank accounts; and
- the aggregate purchase prices for any receivables repurchased by us or the
servicer.
The aggregate funds available from these sources will be applied in the
following order of priority:
(1) to pay the trust's administrator all accrued and unpaid
administration fees;
(2) to pay interest in the Class Interest Amount on each Class of Class
A Notes;
(3) to pay interest in the Class Interest Amount on the Class B Notes;
S-36
<PAGE>
(4) to pay principal on the notes as follows:
- first, the Class Principal Distributable Amount for each class
of Class A Notes and
- second, the Class B Noteholders' Monthly Principal Distributable
Amount;
(5) to deposit in the spread account, to the extent necessary so that
the balance in that account will not be less than the required balance;
(6) to pay accrued and unpaid interest on the certificates;
(7) after the notes have been repaid in full, to pay principal on the
certificates; and
(8) to pay the servicer its accrued and unpaid servicing fee; provided
that if Case Credit or an affiliate of Case Credit is not the servicer, the
amounts described in this clause (8) will be paid prior to any other
application of funds on deposit in the collection account.
Any remaining funds will be paid to us.
After an event of default and acceleration of the notes (and, if any notes
remain outstanding, on and after the final scheduled maturity date for the last
of the notes), principal payments will be made first to the Class A Noteholders
ratably according to the amounts due on the Class A Notes for principal until
paid in full and then to the Class B Noteholders until the outstanding principal
amount of the Class B Notes has been paid in full.
"CLASS INTEREST AMOUNT" means, with respect to any payment date (the
"current payment date") and any class of notes, an amount equal to the sum of
(i) the aggregate amount of interest accrued on that class of notes at the
applicable interest rate from and including the preceding payment date (or, in
the case of the initial payment date, from and including the closing date) to
but excluding the current payment date plus (ii) the Class Interest Shortfall
for that class of notes and the current payment date.
"CLASS INTEREST SHORTFALL" means, with respect to any payment date (the
"current payment date") and any class of notes, the excess of the Class Interest
Amount for the preceding payment date over the amount in respect of interest on
that class of notes that was actually deposited in the note distribution account
on that preceding payment date, plus interest on that excess, to the extent
permitted by law, at a rate per annum equal to the interest rate on that class
of notes from that preceding payment date to but excluding the current payment
date.
"CLASS PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any class of
Class A Notes on a payment date, the remainder, if any, of the Class A
Noteholders' Monthly Principal Distributable Amount for that payment date after
subtracting the Class Principal Distributable Amount for each class of Class A
Notes having priority
S-37
<PAGE>
of payment over that class of Class A Notes; PROVIDED that (a) in no event shall
the Class Principal Distributable Amount for any class exceed the outstanding
principal amount of that class, and (b) on the final maturity date for each
class, the Class Principal Distributable Amount for that class will include the
amount, to the extent of available funds, necessary (after giving effect to the
other amounts to be deposited in the note distribution account on that payment
date and allocable to principal) to reduce the outstanding principal amount of
that class to zero. For purposes of the foregoing, the various classes of Class
A Notes shall have the following priority (beginning with the highest priority
and descending to the lowest): the A-1 Notes, the A-2 Notes, the A-3 Notes and
the A-4 Notes.
NEGATIVE CARRY ACCOUNT
The servicer will establish and maintain the negative carry account as a
trust account in the name of the indenture trustee for the benefit of the
noteholders. On the closing date, we will make an initial deposit of
$6,204,895.65 into the negative carry account. The amount of that initial
deposit is determined by applying the following "Maximum Negative Carry Amount"
calculation as of the closing date:
"MAXIMUM NEGATIVE CARRY AMOUNT" equals the product of:
(a) the weighted average of the interest rate on each class of the notes
minus 2.50%; multiplied by
(b) the percentage equivalent of a fraction the numerator of which is
the outstanding principal balance of the notes and the denominator of which
is the aggregate outstanding principal balance of the notes and the
certificates; multiplied by
(c) the amount on deposit in the pre-funding account; multiplied by
(d) the fraction of a year represented by the number of days until the
expected end of the pre-funding period, calculated on the basis of a 360-day
year of twelve 30-day months.
On each payment date, the servicer will instruct the indenture trustee to
withdraw from the negative carry account and deposit into the collection account
and include in the funds available for distribution on that payment date an
amount equal to the excess, if any, of
(1) the product of (A) the aggregate interest payable on all of the
notes, multiplied by (B) the Pre-Funded Percentage, as of the immediately
prior payment date, or in the case of the first payment date, the closing
date, minus
(2) investment earnings on the pre-funding account for the related
period.
The "PRE-FUNDED PERCENTAGE" for each collection period is the percentage derived
from the fraction the numerator of which is the balance on deposit in the
pre-funding account and the denominator of which is the sum of the Pool Balance
and the
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<PAGE>
balance on deposit in the pre-funding account, after taking into account all
transfers of additional receivables during that collection period.
If the amount on deposit in the negative carry account on any payment date,
after giving effect to the withdrawal referred to above is greater than the
Maximum Negative Carry Account Balance, the excess will be released to us. All
amounts remaining on deposit in the negative carry account at the end of the
payment date on or immediately following the last day of the pre-funding period
will also be released to us.
SPREAD ACCOUNT
The servicer will establish and maintain the spread account as a trust
account in the name of the indenture trustee for the benefit of the noteholders.
On the closing date, we will make an initial deposit into the spread account of
$8,074,729.53, which equals 2.50% of the aggregate Contract Value of the initial
receivables as of the initial cutoff date. On each day that we sell additional
receivables to the trust, cash or eligible investments having a value
approximately equal to 2.50% of the aggregate Contract Value of those additional
receivables as of their cutoff date will be withdrawn from the pre-funding
account from amounts otherwise distributable to us in connection with the sale
of additional receivables and deposited in the spread account. Finally, on each
payment date, the servicers will transfer additional amounts into the spread
account to the extent that the balance in that account would otherwise be less
than the Specified Spread Account Balance, and funds are available for that
purpose after other higher priority distributions.
"SPECIFIED SPREAD ACCOUNT BALANCE" means, with respect to any payment date,
the lesser of (a) 2.50% of the Initial Pool Balance and (b) the outstanding
principal amount of the notes. At or after the end of the pre-funding period, we
expect to reduce the percentage specified in clause (a) above from 2.50% to not
less than 2.00%, but before we do so Standard & Poor's must confirm that this
will not result in a reduction or withdrawal of its ratings of any class of
notes. Also, at any time we may reduce or otherwise modify the Specified Spread
Account Balance without the consent of the noteholders if the rating agencies
that have rated the notes confirm in writing that the reduction or modification
will not result in a reduction or withdrawal of their ratings of any class of
notes.
"INITIAL POOL BALANCE" means the sum of (i) the Pool Balance as of the
initial cutoff date plus (ii) the aggregate Contract Value of all additional
receivables sold to the trust as of their respective cutoff dates.
If the amount on deposit in the spread account on any payment date (after
giving effect to all deposits or withdrawals therefrom on that payment date) is
greater than the Specified Spread Account Balance for that payment date, the
excess will be distributed to us. However, if, after giving effect to all
payments made on the notes on that payment date, the sum of the Pool Balance
plus the balance on deposit in the
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<PAGE>
pre-funding account as of the first day of the collection period in which that
payment date occurs is less than the aggregate outstanding principal balance of
the notes and certificates, that excess amount will not be distributed to us and
will be retained in the spread account.
After we receive any amounts duly released from the spread account, the
noteholders will not have any claims to those amounts.
On each payment date, funds will be withdrawn from the spread account and
deposited in the note distribution account to the extent necessary to cover
shortfalls in the Noteholders' Distributable Amount in the same order of
priority applicable to distributions from the collection account. For this
purpose, the "NOTEHOLDERS' DISTRIBUTABLE AMOUNT" for any payment date means the
sum of the Class Interest Amount for each class of notes, the Class Principal
Distributable Amount for each class of Class A Notes and the Class B
Noteholders' Monthly Principal Distributable Amount for that payment date. Funds
on deposit in the spread account will not be used to cover shortfalls in any
distributions to the certificateholders.
YIELD SUPPLEMENT ACCOUNT
The servicer will establish and maintain in the name of the indenture
trustee a yield supplement account for the benefit of the noteholders. However,
no deposit is required to be made into the yield supplement account on or before
the closing date. After the closing date, deposits will only be required to be
made into the yield supplement account on addition cutoff dates and then only if
the Required Yield Supplement Account Balance determined for the subject
addition cutoff date is greater than zero. On each addition cutoff date, cash or
eligible investments having a value equal to any positive Required Yield
Supplement Account Balance for that addition cutoff date (minus any amount then
on deposit in the yield supplement account) will be withdrawn from the
pre-funding account and deposited in the yield supplement account.
Prior to each payment date, the servicer will calculate an amount (the
"AVAILABLE YIELD SUPPLEMENT AMOUNT") equal to the Maximum Yield Supplement
Amount for all receivables that were liquidated or prepaid during the related
collection period, as calculated for each receivable immediately prior to that
liquidation or prepayment. On each payment date, funds on deposit in the yield
supplement account in an amount up to the Available Yield Supplement Amount will
be made available to cover any shortfalls in distributions to noteholders before
any withdrawal is made from the spread account.
Funds on deposit in the yield supplement account may be withdrawn and paid
to us on any day if each of the rating agencies for the notes has confirmed that
such action will not result in a withdrawal or downgrade of its rating of any
class of Notes.
"REQUIRED YIELD SUPPLEMENT ACCOUNT BALANCE" means, for any addition cutoff
date, the excess, if any, of (a) the sum of the Maximum Yield Supplement Amounts
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<PAGE>
for each receivable as of the end of the prior collection period (or the
applicable additional cutoff date for additional receivables being transferred
on that additional cutoff date), over (b) the Expected Excess Spread.
"MAXIMUM YIELD SUPPLEMENT AMOUNT" for each receivable is equal to the
difference (if positive) between (A) the present value on the scheduled and
unpaid payments of the receivable discounted monthly at an annual rate equal to
the annual percentage rate of the initial receivables as of the initial cutoff
date or the annual percentage rate of the additional receivables as of their
addition cutoff date, as applicable, minus (B) the present value of the
scheduled and unpaid payments on the receivable discounted monthly at an annual
rate equal to its individual annual percentage rate.
"EXPECTED EXCESS SPREAD" means, for any addition cutoff date, an amount
determined by the servicer to represent excess cash flows from the receivables
that can reasonably be expected to be available to cover Maximum Yield
Supplement Amounts, provided that each of the rating agencies for the notes has
confirmed that use of such amount determined by the servicer in calculating the
Required Yield Supplement Account Balance for the addition cutoff date will not
result in a withdrawal or downgrade of its rating of any class of notes.
LEGAL INVESTMENT
The A-1 Notes will be eligible for purchase by money market funds under
paragraph (a)(10) of Rule 2a-7 under the Investment Company Act of 1940, as
amended.
ERISA CONSIDERATIONS
THE NOTES
We have been advised that, although there is little guidance on the subject,
the notes should not be treated as "equity interests" in the trust under the
Plan Asset Regulation. As a result, the notes may be purchased by an employee
benefit plan or an individual retirement account (a "PLAN") subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Internal Revenue Code of 1986, as amended.
However, whether or not the notes are treated as equity interests for
purposes of the Plan Asset Regulation, the acquisition or holding of Notes by or
on behalf of a Plan could be considered to give rise to a "prohibited
transaction" if the trust, the servicer or the trustee is or becomes a "party in
interest" or a "disqualified person" with respect to such Plan. Certain
exemptions from the prohibited transaction rules could be applicable to the
purchase and holding of Notes by a Plan depending on the type and circumstances
of the plan fiduciary making the decision to acquire such notes. Included among
these exemptions are: Prohibited Transaction Class Exemption ("PTCE") 75-1,
regarding transactions between registered broker-dealers and plans; PTCE 90-1,
regarding investments by insurance company pooled separate accounts; PTCE 91-38,
regarding investments by bank collective investment funds; PTCE 84-14, regarding
transactions effected by "qualified professional asset managers"; PTCE 95-60,
regarding transactions by insurance company general accounts; and PTCE
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<PAGE>
96-23, regarding certain transactions determined by in-house asset managers. By
its acquisition of a Note, each purchaser shall be deemed to represent and
warrant that its purchase and holding of the note will not give rise to a
nonexempt prohibited transaction under ERISA or the Internal Revenue Code of
1986, as amended.
For additional information regarding treatment of the notes under ERISA, see
"ERISA Considerations" in the prospectus.
UNDERWRITING
CLASS A NOTES
Subject to the terms and conditions set forth in an underwriting agreement
relating to the Class A Notes, we have agreed to cause the trust to sell to each
of the underwriters named below, and each of those underwriters has severally
agreed to purchase, the principal amount of the Class A Notes set forth opposite
its name below:
<TABLE>
<CAPTION>
A-1 NOTES A-2 NOTES
------------ -------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................... $ 11,629,000 $ 50,000,000
Banc of America Securities LLC................................. 11,400,000 50,000,000
Chase Securities Inc........................................... 11,400,000 50,000,000
Credit Suisse First Boston Corporation......................... 11,400,000 50,000,000
J.P. Morgan Securities Inc..................................... 11,400,000 50,000,000
Salomon Smith Barney Inc....................................... 11,400,000 50,000,000
------------ -------------
$ 68,629,000 $ 300,000,000
</TABLE>
<TABLE>
<CAPTION>
A-3 NOTES A-4 NOTES
------------- -------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................... $ 16,750,000 $ 30,621,000
Banc of America Securities LLC................................ 16,650,000 30,350,000
Chase Securities Inc.......................................... 16,650,000 30,350,000
Credit Suisse First Boston Corporation........................ 16,650,000 30,350,000
J.P. Morgan Securities Inc.................................... 16,650,000 30,350,000
Salomon Smith Barney Inc...................................... 16,650,000 30,350,000
------------- -------------
$ 100,000,000 $ 182,371,000
</TABLE>
The underwriters of the Class A Notes have advised us that they propose
initially to offer the Class A Notes to the public at the prices set forth
herein, and to certain dealers at such prices less the initial concession not in
excess of 0.06% per A-1 Note, 0.085% per A-2 Note, 0.14% per A-3 Note and 0.15%
per A-4 Note. The underwriters of the Class A Notes and such dealers may reallow
a concession not in excess of 0.04% per A-1 Note, 0.05% per A-2 Note, 0.085% per
A-3 Note and 0.09% per A-4 Note to certain other dealers. After the initial
public offering of the Class A Notes, the public offering prices and such
concessions may be changed.
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<PAGE>
In the ordinary course of their respective businesses, the underwriters of
the Class A Notes and their respective affiliates have engaged and may in the
future engage in investment banking or commercial banking transactions with Case
Credit and its affiliates.
Merrill Lynch, Pierce, Fenner & Smith Incorporated, on behalf of the
underwriters of the Class A Notes, may engage in stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Rule 104 of
Regulation M under the Exchange Act. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Class A Notes in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the underwriters
of the Class A Notes to reclaim a selling concession from an underwriter of the
Class A Notes or a dealer when the Class A Notes originally sold by that
underwriter or dealer are purchased in a syndicate covering transaction to cover
syndicate short positions. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the Class A Notes to be
higher than it would otherwise be in the absence of such transactions. These
transactions, if commenced, may be discontinued at any time.
CLASS B NOTES
Subject to the terms and conditions set forth in an underwriting agreement
relating to the Class B Notes, we have agreed to cause the trust to sell to each
of the underwriters named below, and each of those underwriters has severally
agreed to purchase, the principal amount of Class B Notes set forth opposite its
name below:
<TABLE>
<CAPTION>
CLASS B NOTES
-------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith,
Incorporated................................... $15,750,000
J.P. Morgan Securities Inc................................ 15,750,000
-------------
$31,500,000
</TABLE>
The underwriters of the Class B Notes have advised us that they propose
initially to offer the Class B Notes to the public at the prices set forth
herein, and to certain dealers at such prices less the initial concession not in
excess of 0.21% per Class B Note. The underwriters of the Class B Notes may
allow and such dealers may reallow a concession not in excess of 0.125% per
Class B Note to certain other dealers. After the initial public offering of the
Class B Notes, the public offering prices and such concessions may be changed.
In the ordinary course of their respective businesses, the underwriters of
the Class B Notes and their respective affiliates have engaged and may in the
future engage in investment banking or commercial banking transactions with Case
Credit and its affiliates.
S-43
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith Incorporated, on behalf of the
underwriters of the Class B Notes, may engage in stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Rule 104 of
Regulation M under the Exchange Act. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Class B Notes in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the underwriters
of the Class B Notes to reclaim a selling concession from an underwriter of the
Class B Notes or a dealer when the Class B Notes originally sold by that
underwriter or dealer are purchased in a syndicate covering transaction to cover
syndicate short positions. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the Class B Notes to be
higher than it would otherwise be in the absence of such transactions. These
transactions, if commenced, may be discontinued at any time.
We will receive proceeds of approximately $649,792,495.01 from the sale of
the Class A Notes (representing approximately 99.81452% of the principal amount
of each Class A Note) after paying the underwriting discount of $1,171,125.05
(representing 0.18% of the principal amount of each Class A Note). We will
receive proceeds of approximately $31,387,960.80 from the sale of the Class B
Notes (representing 99.64432% of the principal amount of each Class B Note)
after paying the underwriting discount of $110,250.00 (representing 0.35% of the
principal amount of each Class B Note). Additional offering expenses are
estimated to be $600,000.
LEGAL OPINIONS
Certain legal matters relating to the notes will be passed upon for the
trust, us and the servicer by Mayer, Brown & Platt. Certain legal matters
relating to the notes will be passed upon for the underwriters by Kirkland &
Ellis. Certain federal income tax, Illinois state tax and other matters will be
passed upon for the trust by Mayer, Brown & Platt.
S-44
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
APR.................................................................................. S-15
Available Yield Supplement Amount.................................................... S-40
Case................................................................................. S-11
Case Industrial...................................................................... S-11
Class A Noteholders' Monthly Principal Distributable Amount.......................... S-32
Class B Noteholders' Adjusted Principal Distributable Amount......................... S-32
Class B Noteholders' Monthly Principal Distributable Amount.......................... S-32
Class B Noteholders' Principal Carryover Shortfall................................... S-32
Class Interest Amount................................................................ S-37
Class Interest Shortfall............................................................. S-37
Class Principal Distributable Amount................................................. S-37
Contract Value....................................................................... S-15
CPR.................................................................................. S-25
ERISA................................................................................ S-41
Expected Excess Spread............................................................... S-41
Initial Class B Percentage........................................................... S-32
Initial Pool Balance................................................................. S-39
Maximum Negative Carry Amount........................................................ S-38
Maximum Yield Supplement Amount...................................................... S-41
Noteholders' Distributable Amount.................................................... S-40
Plan................................................................................. S-41
Pool Balance......................................................................... S-32
Pre-Funded Amount.................................................................... S-32
Pre-Funded Percentage................................................................ S-38
Principal Carryover Shortfall........................................................ S-33
Principal Distributable Amount....................................................... S-33
Principal Distribution Amount........................................................ S-30
PTCE................................................................................. S-41
Required Yield Supplement Account Balance............................................ S-40
Specified Spread Account Balance..................................................... S-39
Statistical Contract Value........................................................... S-17
</TABLE>
S-45
<PAGE>
PROSPECTUS
CASE EQUIPMENT RECEIVABLES TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
CASE RECEIVABLES II INC.
Seller
CASE CREDIT CORPORATION
Servicer
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<S> <C>
CONSIDER CAREFULLY
THE RISK FACTORS
BEGINNING ON PAGE 6
IN THIS PROSPECTUS
AND IN YOUR
PROSPECTUS
SUPPLEMENT.
Notes in your series
represent
obligations only of
the trust that
issues them.
Certificates in your
series will
represent beneficial
interests only in
the trust that
issues them. No one
else is liable for
the payments due on
your securities.
This prospectus may
be used to offer and
sell any series of
securities only if
accompanied by the
prospectus
supplement for that
series.
</TABLE>
THE TRUSTS--
- We (Case Receivables II Inc.) will form a new trust to issue each series
of securities offered by this prospectus.
- The assets of each trust:
<PAGE>
- will be those described below and will primarily be a pool of
receivables of one or more of the following types:
- retail installment sale contracts or loans secured by new or used
agricultural and construction or other equipment,
- leases of similar equipment,
- term loans to equipment dealers secured by rental equipment, rolling
stock or computer systems, and
- unsecured term loans to equipment dealers.
- will also include interests in financed or leased equipment, proceeds
from claims on related insurance policies, and amounts on deposit in
specified bank accounts and may also include other credit
enhancements.
THE SECURITIES--
- will be asset-backed securities issued periodically in designated series
of one or more classes.
- if offered by this prospectus, will be rated in one of the four highest
long-term rating categories or the highest short-term rating category by
at least one nationally recognized rating agency.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
September 1, 1999
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We tell you about the securities in two separate documents that
progressively provide more detail: (a) this prospectus, which provides general
information, some of which may not apply to a particular series of securities,
including your series; and (b) the accompanying prospectus supplement, which
will describe the specific terms of your series of securities, including:
- the timing of interest and principal payments;
- the priority of interest and principal payments;
- financial and other information about the receivables;
- information about credit enhancement for each class;
- the ratings of each class; and
- the method for selling the securities.
IF THE TERMS OF A PARTICULAR SERIES OF SECURITIES VARY BETWEEN THIS
PROSPECTUS AND THE PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN
THE PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the securities in any state where the offer is
not permitted.
We include cross-references in this prospectus and in the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
included in the accompanying prospectus supplement provide the pages on which
these captions are located.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Summary: Overview of
Transactions.................... 5
Risk Factors...................... 6
You will bear the reinvestment
risk and other interest rate
risk if receivables are
prepaid, repurchased or
extended...................... 6
Our bankruptcy or the bankruptcy
of Case Credit Corporation may
cause payment delays or
losses........................ 7
Bankruptcy of an equipment
dealer or broker may cause
payment delays or losses...... 8
Possible liability for third
party claims may cause payment
delays or losses.............. 8
Defaults on the receivables may
cause payment delays or
losses........................ 9
Characteristics of the
Receivables..................... 10
Selection Criteria.............. 10
Interest and Amortization
Types......................... 11
Payment Terms................... 12
Insurance....................... 13
Extension Procedures............ 13
Terms of Leases................. 13
Origination of Receivables........ 14
Credit Approval Process......... 15
Loan/Lease-to-Value Ratio....... 15
Dealer Agreements............... 16
Delinquencies, Repossessions and
Net Losses.................... 17
Use of Proceeds................... 17
Important Parties................. 17
Case Receivables II Inc......... 17
Case Credit Corporation......... 17
Case Corporation................ 18
The Trustee..................... 19
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<S> <C>
The Indenture Trustee........... 19
Description of the Notes.......... 19
Principal and Interest on the
Notes......................... 20
The Indenture................... 20
Description of the Certificates... 24
Administrative Information
About the Securities.......... 25
Denominations................... 25
Fixed Rate Securities........... 25
Floating Rate Securities........ 25
Indexed Securities.............. 26
Book-Entry Registration......... 27
Definitive Securities........... 31
List of Securityholders......... 32
Reports to Securityholders...... 32
Description of the Transaction
Agreements...................... 34
Commercial Paper Program........ 34
Additional Sales of
Receivables................... 36
Accounts........................ 37
Servicing Procedures............ 39
Collections..................... 39
Servicing Compensation.......... 40
Evidence as to Compliance....... 40
Resignation, Liability and
Successors of the Servicer.... 40
Servicer Default................ 41
Rights Upon Servicer Default.... 41
Waiver of Past Defaults......... 42
Amendment....................... 42
Payment of Notes................ 43
Termination..................... 43
Administration Agreement........ 43
Credit and Cash Flow
Enhancement..................... 43
Legal Aspects of the Receivables.. 45
Bankruptcy Considerations
Relating to Case Credit....... 45
Bankruptcy Considerations
Relating to Dealers........... 46
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Perfection and Priority With
Respect to Receivables........ 47
Security Interests in Financed
Equipment..................... 47
Security Interests in Leased
Equipment..................... 48
Bankruptcy Considerations
Relating to a Lessee.......... 49
Repossession.................... 50
Notice of Sale; Redemption
Rights........................ 51
Uniform Commercial Code
Considerations................ 51
Vicarious Tort Liability........ 51
Deficiency Judgments and Excess
Proceeds; Other Limitations... 52
Consumer Protection Laws........ 53
U.S. Federal Income Tax
Consequences.................... 53
<CAPTION>
PAGE
----
<S> <C>
Tax Characterization of the
Trust......................... 54
Tax Consequences to Holders of
the Notes..................... 54
Tax Consequences to Holders of
the Certificates.............. 58
Illinois State Tax Consequences... 64
Treatment of the Notes.......... 64
Classification of Trust as a
Partnership................... 65
Treatment of Nonresident
Certificateholders............ 65
Risks of Alternative
Characterization.............. 65
ERISA Considerations.............. 65
Plan of Distribution.............. 66
Legal Opinions.................... 67
Where You Can Find More
Information..................... 67
Index of Terms.................... 69
</TABLE>
4
<PAGE>
SUMMARY: OVERVIEW OF TRANSACTIONS
[FLOW CHART]
Each series of securities will be issued by a separate trust and will
include:
- one or more classes of notes, representing debt of the trust; and
- one or more classes of certificates, representing ownership interests in
the trust.
Payments on the certificates issued by a trust will be junior in priority to
payments on the related notes. In addition, if a series includes two or more
classes of notes or two or more classes of certificates, each class may differ
as to timing and priority of distributions, seniority, allocations of losses,
interest rates or amount of distributions in respect of principal or interest.
We will disclose the details of these timing, priority and other matters in a
prospectus supplement.
The primary assets of each trust will be a pool of receivables. Each trust
will also include spread accounts or other credit enhancements for the benefit
of some or all of the trust's securities.
We will sell receivables to each trust on the issuance date for that trust's
securities. In addition, to the extent described in the related prospectus
supplement, each trust will have a pre-funding period. In that case, a portion
of the cash raised from the sale of the related securities will be placed in a
pre-funding account. The trust will use that cash to buy additional receivables
from us during a pre-funding period, which will last not more than six months.
Each trust's receivables will be originated directly or indirectly by Case
Credit. We will buy those receivables from Case Credit either directly or
indirectly through another of its subsidiaries. Case Credit continues to service
receivables that are transferred to trusts under one of the agreements entered
into by each trust, subject to removal upon specified servicer defaults. Case
Credit also acts as administrator for each trust.
5
<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER THE FOLLOWING RISK FACTORS IN DECIDING WHETHER TO
PURCHASE THE SECURITIES.
<TABLE>
<S> <C>
YOU WILL BEAR THE The principal payment on any series of securities on
REINVESTMENT RISK AND any payment date will depend mostly upon the amount of
OTHER INTEREST RATE RISK collections received on that trust's receivables during
IF RECEIVABLES ARE a related collection period. As a result, the rate at
PREPAID, REPURCHASED OR which payments on the receivables are received will
EXTENDED. affect the rate at which principal is paid on the
related securities. Each receivable has a fixed payment
schedule, but the actual rate at which payments are
received may vary from that schedule for a number of
reasons.
- Receivables may be voluntarily prepaid, in full
or in part, or obligors may be required to prepay
receivables as a result of defaults, casualties to
the related equipment, death of an obligor or
other reasons. Prepayments of agricultural
equipment retail installment sale contracts or
loans, which will make up a substantial portion of
the receivables in many trusts, have historically
tended to increase during periods in which farmers
have strong cash flows. However, prepayment rates
may be influenced by a variety of factors, and we
cannot predict them with any certainty.
- We or the servicer of the receivables may be
required to repurchase one or more receivables
from a trust. In that case the repurchase price
received by the trust will be treated like a
prepayment of the receivable. This would happen
if we or Case Credit have made inaccurate
representations about a receivable or the
servicer violated specified servicing
obligations.
- The servicer may purchase all of a trust's
receivables after they have paid down to 10% of
their aggregate balance as of the time they were
transferred to the trust. In this case, the
purchase price received by the trust will be
treated like a prepayment of the remaining
receivables.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Each prepayment, repurchase or purchase will shorten
the average life of the related securities. On the
other hand, the payment schedule under a receivable may
be extended or revised by the servicer, which may
lengthen the average life of the related securities.
You will bear any reinvestment risks resulting from a
faster or slower rate of prepayment, repurchase or
extension of receivables held by your trust. If you
purchase a security at a discount, you should consider
the risk that a slower than anticipated rate of
principal payments on your security could result in an
actual yield that is less than the anticipated yield.
Conversely, if you purchase a security at a premium,
you should consider the risk that a faster than
anticipated rate of principal payments on your security
could result in an actual yield that is less than the
anticipated yield.
OUR BANKRUPTCY OR THE Case Credit Corporation will sell receivables to us,
BANKRUPTCY OF CASE CREDIT and we will in turn sell receivables to each trust.
CORPORATION MAY CAUSE However, a court could conclude that we or Case Credit
PAYMENT DELAYS OR LOSSES. Corporation effectively still own the receivables
supporting any series of securities. This could happen
because the court concludes either that the sales
referred to above were not "true sales" or that the
bankrupt party and the owner of the receivables should
be treated as the same person for bankruptcy purposes.
If this were to occur, then you could experience delays
or reductions in payments as a result of:
- the automatic stay which prevents secured
creditors from exercising remedies against a
debtor in bankruptcy without permission from the
court and provisions of the U.S. Bankruptcy Code
that permit substitution of collateral;
- tax or government liens on Case Credit
Corporation's or our property that arose prior to
the transfer of a receivable to the trust having
a right to be paid from collections before the
collections are used to make payments on the
securities;
- rejection by Case Credit or its bankruptcy
trustee of any lease that was deemed to be a "true
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
lease," which would result in the termination of
scheduled payments under that lease; or
- the fact that the trust might not have a
perfected interest in (a) some equipment subject to
certificate of title statutes or (b) any cash
collections on the receivables held by Case Credit
Corporation at the time that a bankruptcy
proceeding begins.
BANKRUPTCY OF AN EQUIPMENT A substantial portion of the receivables was originated
DEALER OR BROKER MAY by equipment dealers or brokers and purchased by Case
CAUSE PAYMENT DELAYS OR Credit Corporation. A portion of those receivables
LOSSES. provide for recourse to the originating broker or
dealer for defaults by the obligors. In addition, Case
dealers have the right to repurchase at any time the
receivables they sell to Case Credit Corporation.
In the event of a dealer or broker's bankruptcy, a
creditor or bankruptcy trustee of the dealer or broker
or the dealer or broker itself might assert that the
sales of receivables to Case Credit Corporation are
loans to the dealer or broker secured by the
receivables. Such an assertion could result in payment
delays and, if successful, losses on the affected
receivables. In those circumstances, a dealer or broker
or its bankruptcy trustee might also be able to reject
any leases originated by the dealer or broker that were
deemed to be "true leases," resulting in the
termination of scheduled payments under those leases.
POSSIBLE LIABILITY FOR The sales of receivables from Case Credit to us and
THIRD PARTY CLAIMS MAY from us to each trust are intended to reduce the
CAUSE PAYMENT DELAYS OR possibility that cash flows from the receivables will
LOSSES. be subject to claims other than the rights of investors
in the securities issued by the trust and of the
parties to the applicable transaction agreements.
However, to the extent that Case Credit or a dealer or
broker violates federal or state consumer protection
laws applicable to the receivables, a trust could be
liable to the obligor, as an assignee of any of the
affected receivables. Under the related transaction
agreements, we must repurchase any affected receivable
from the trust. However, if we fail for any reason to
perform our repurchase obligation,
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
you could experience delays or reductions in payments
on your securities as a result of any liabilities
imposed upon your trust.
Similarly, as to any trust that holds any equipment
subject to leases, state laws differ as to whether
anyone suffering any injury to person or property
involving leased agricultural, construction or other
equipment may bring an action upon which relief may be
granted against the owner of the equipment by virtue of
that ownership. If applicable law permits an action,
and that action is successful, the related trust and
its assets may be subject to liability to any injured
party. You could experience delays or reductions in
payments on your securities if liability of this type
were imposed on your trust, and the coverage provided
by any available insurance is insufficient to cover
that loss.
DEFAULTS ON THE RECEIVABLES You will rely primarily upon collections on the
MAY CAUSE PAYMENT DELAYS receivables in your trust for payments on your
OR LOSSES. securities. Your securities may have the benefit of a
spread account, subordination of one or more other
classes of securities and/or one or more other forms of
credit enhancement specified in the related prospectus
supplement. This credit enhancement will cover losses
and delinquencies on the receivables up to some level.
However, if the level of receivables losses and
delinquencies exceeds the available credit enhancement,
you may experience delays in payments due to you or may
not ultimately receive all interest and principal due
to you.
</TABLE>
9
<PAGE>
CHARACTERISTICS OF THE RECEIVABLES
We will provide information about each trust's pool of receivables in the
related prospectus supplement. The information will include, to the extent
appropriate, the types and composition of the receivables, the distribution by
interest rate or spread over a designated floating rate, type of equipment,
payment frequency and contract value of the receivables and the geographic
distribution of the receivables.
SELECTION CRITERIA
We will select receivables to sell to each trust using several criteria.
These criteria will include that each receivable transferred to a trust must:
(1) be secured by new or used agricultural, construction or other equipment,
or be leases of such equipment, except that receivables that are term
loans to equipment dealers may be secured by other collateral or not be
secured;
(2) be originated in the United States;
(3) provide for payments that fully amortize the amount financed over its
original term to maturity -- which payments may, in the case of any
lease, include a termination value similar to a final balloon payment
payable by either the lessee or the dealer that originated the lease;
(4) not be a non-performing receivable and not have a payment that is more
than 90 days overdue as of the end of the month prior to the day it is
sold to the trust or other material default outstanding; and
(5) not have an obligor that is shown in Case Credit's records as being the
subject of a bankruptcy proceeding.
Additional criteria for any particular trust's receivables may be listed in
the related prospectus supplement. We will not use selection procedures that we
believe to be adverse to you in selecting the receivables for your trust.
Each trust's receivables may include receivables with respect to which the
initial payment has not been made. They may also include interest waiver
receivables, under which interest does not begin to accrue for a designated time
period, as well as receivables originated through special interest rate
financing programs.
If so specified in the related prospectus supplement, the receivables to be
held by a trust may include receivables satisfying the applicable criteria which
were purchased by Case Credit from Tenneco Credit Corporation out of the $1.2
billion pool of retail receivables retained by Tenneco Credit Corporation in
connection with the acquisition by Case Corporation and its subsidiaries of the
farm and construction equipment business of subsidiaries of Tenneco Inc. on June
23, 1994. Except to the extent otherwise provided in the related prospectus
supplement, all discussion in this prospectus relating to the receivables will
apply equally to any receivables purchased by Case Credit from Tenneco Credit
Corporation.
10
<PAGE>
INTEREST AND AMORTIZATION TYPES
A trust's receivables may include fixed rate receivables and floating rate
receivables, as well as receivables that provide for different fixed or floating
interest rates or different formulae to calculate the floating interest rate at
different times during the life of the receivable. Receivables that are loans or
retail installment contracts have an explicit interest rate that is usually
named in the contract that evidences the receivable. Other receivables,
including leases, may not disclose an explicit interest rate, but they have an
implicit interest rate that Case Credit uses to calculate the periodic rental
payments in a way similar to the way that it calculates periodic installment
payments under a retail installment contract or retail installment loan.
All of the receivables in each trust will be either precomputed receivables
or simple interest receivables. The difference between these two types of
receivables is the way that each installment payment is divided between
principal and interest.
Under a precomputed receivable, each installment payment is divided between
interest and principal on a predetermined basis, without regard to the period of
time that has elapsed since the prior payment was made. This allocation is made
either on an actuarial basis or according to a variation on the rule of 78's.
(See box.) In contrast, under a simple interest receivable, each installment
payment is divided between interest and principal based on the actual date on
which a payment is received. The interest component equals the unpaid principal
amount financed, multiplied by the annual interest rate, multiplied by the
fraction of a calendar year that has elapsed since the preceding payment of
interest was made.
Under a simple interest receivable, if an obligor pays a fixed periodic
installment before its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be less
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly greater. Conversely, if an obligor pays a fixed periodic
installment after its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be greater
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. The final installment on a simple interest receivable is
increased or decreased as necessary to adjust for variations in the amounts of
prior installments applied to principal, based upon the date on which they were
made.
11
<PAGE>
________________________________________________________________________________
Under an ACTUARIAL RECEIVABLE, the interest component of each installment equals
the unpaid principal amount financed, multiplied by the annual interest rate,
multiplied by an appropriate fraction. On a receivable that requires payments
every month, the appropriate fraction would be 1/12, since that is the portion
of a year that elapses between the required payment dates. On a receivable that
requires payments every three months, the appropriate fraction would be 3/12, or
1/4.
________________________________________________________________________________
Under a RULE OF 78'S RECEIVABLE, the interest component of each installment is
determined using a method equivalent to the rule of 78's. The rule of 78's is a
method of calculating the unearned portion of the precomputed finance charge on
receivables repayable in substantially equal successive installments of
approximately equal intervals over 12 months. The unearned portion of the
precomputed finance charge at any time is equal to that portion of the finance
charge which the sum of the number of months the obligations are outstanding
after the calculation date (counting 1 month as 1, 2 months as 3 (1 + 2), etc.,
up to 78) bears to 78.
________________________________________________________________________________
If a precomputed receivable is prepaid in full, the obligor is entitled to a
rebate equal to the portion of the total amount of payments that is allocable to
unearned add-on interest. If a simple interest receivable is prepaid, rather
than receive a rebate, the obligor is required to pay interest only to the date
of prepayment. The amount of the rebate on a precomputed receivables is
determined based upon whether the receivable is an actuarial receivable or a
rule of 78's receivable and the requirements of the law of the state where the
obligor is located; however, the rebate for certain precomputed receivables may,
in certain circumstances, be an amount approximately equal to the remaining
scheduled payments of interest that would have been due under a simple interest
receivable for which all payments were made on schedule.
The amount of the rebate under a rule of 78's receivable generally will be
less than the amount of the rebate on an actuarial receivable for the same
amount and generally will be less than the remaining scheduled payments of
interest that would have been due under a simple interest receivable for which
all payments were made on schedule. These amortization features and related
rebates for precomputed receivables should not result in shortfalls of principal
payments on your securities because the portion of the interest payments on
these receivables that give rise to rebate requirements are essentially treated
as principal paydowns for purposes of the securities.
PAYMENT TERMS
Case Credit offers receivables with a variety of repayment or rental
schedules tailored to the applicant's anticipated cash flows, such as annual,
semi-annual, quarterly and monthly payments. Receivables secured by construction
equipment are normally financed with equal monthly payments. However, obligors
can select a "skip payment" schedule, under which payments in up to three
predetermined consecutive
12
<PAGE>
months are "skipped" to coincide with slow work periods. For example,
contractors in areas with colder winters normally elect to skip payments in
January, February and March, in which case the normal twelve payments are
amortized over a nine-month period. Obligors can only make this election at the
time the receivable is originated.
INSURANCE
Obligors are required to obtain and maintain physical damage insurance with
respect to the financed or leased equipment and, in the case of a lease,
liability insurance with respect to the leased equipment. Dealers that sell
receivables to Case Credit are responsible for verifying physical damage
insurance coverage on the equipment at the time the receivable is originated. If
a dealer fails to verify insurance coverage and the obligor did not obtain
insurance coverage at the time the receivable was originated, the dealer will be
responsible for any resulting loss. At the time the receivable is originated,
Case Credit offers customers physical damage insurance and life insurance that
can be financed under the receivable.
EXTENSION PROCEDURES
Case Credit may agree to extend a receivable when payment delinquencies
result from temporary interruptions in an obligor's cash flow. In an extension,
Case Credit moves one or more payments to a future date, which may be before or
after the original final maturity of the receivable. Case Credit charges
obligors an extension fee, which is usually payable at the time a receivable is
extended. The extension fee is generally equal to interest accrued on the unpaid
balance of the receivable during the period that payments are not required to be
made as a result of the extension. Any extension fees paid in connection with
receivables sold to a trust will be paid to that trust.
TERMS OF LEASES
The leases transferred to the trusts will call for two kinds of payments:
rental payments that are due periodically during the term of the lease; and a
termination value payment. Under the leases, the lessee's obligation to make
rental payments is absolute and unconditional, without set-off or counterclaim,
and notwithstanding any damages to, or loss of, the leased equipment or any
other event. However, lessees are not required to make termination value
payments. Instead, the lessee has the option to purchase the leased equipment at
the end of the lease term for an amount equal to the termination value payment.
The termination value payment is in an amount generally equal to the portion
of the original equipment cost that has not been amortized through the principal
component of the periodic rental payments. If a lessee does not elect to
purchase the leased equipment at the end of the lease term, then, under the
leases that are eligible to be transferred to trusts, the dealer that originated
the lease is required to pay the termination value payment and entitled to
obtain the equipment from the lessee. In no case will a trust or Case Credit, as
servicer for any trust, obtain possession of any leased equipment or be entitled
to the proceeds from the sale of such equipment, other than termination value
payments and proceeds of equipment that is repossessed
13
<PAGE>
in a default situation. Consequently, no securities offered by this prospectus
will rely for their payment on the residual value of leased equipment.
14
<PAGE>
ORIGINATION OF RECEIVABLES
Case Credit originates receivables that may be sold to the trusts in several
ways:
- It purchases retail installment contracts and leases from dealers in
agricultural, construction and other equipment manufactured or otherwise
distributed by Case Corporation and other equipment not distributed by
Case Corporation. As of December 31, 1998, there were approximately 1,000
independently owned Case dealer outlets in the United States.
- It finances retail installment contracts and leases originated through one
retail outlet directly owned by Case which are immediately assigned to
Case Credit.
- It purchases retail installment contracts, retail installment loans and
leases from other dealers and through brokers in agricultural,
construction and other equipment.
- It makes, or may in the future make, retail installment loans directly to
purchasers of agricultural, construction and other equipment.
- It makes term loans directly to equipment dealers. These include loans
secured by rental equipment, rolling stock and computer systems and
unsecured loans.
Case Credit finances the following categories of equipment:
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------
Agricultural equipment: tractors, combines, cotton pickers, soil
management equipment, planting and
seeding equipment, hay and forage
equipment, crop care equipment (such as
sprayers and irrigation equipment) and
other related equipment
- ----------------------------------------------------------------------------------
Construction equipment: excavators, backhoes, wheel loaders, skid
steer loaders, tractor loaders,
trenchers, Horizontal directional
drilling equipment, telescopic handlers,
forklifts, compaction equipment,
crawlers, cranes and other related
equipment
- ----------------------------------------------------------------------------------
Other equipment: trucks, commercial vehicles, forestry
equipment, mining equipment, trailers,
all-terrain vehicles, snowmobiles, snow
grooming equipment and marine vessels;
however, receivables relating to
all-terrain vehicles, snowmobiles and
marine vessels will collectively make up
less than 10% of the assets of each trust
- ----------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
CREDIT APPROVAL PROCESS
Case Credit requires each prospective customer to complete a credit
application that lists the applicant's liabilities, income, credit history and
other demographic and personal information. This information is obtained by a
dealer or Case Credit, and in either case is sent to one of four regional
finance offices maintained by Case Credit. The regional finance office then
processes this information and obtains additional information to evaluate the
prospective customer's creditworthiness. The extent of the additional
information varies based primarily on the amount of financing requested. In most
cases, Case Credit obtains a credit bureau report on the applicant from an
independent credit bureau or checks credit references provided by the applicant,
typically banks or finance companies or suppliers that have furnished credit to
the applicant. In some cases, Case Credit obtains audited or certified financial
statements of the applicant.
As part of the credit review process for retail installment contracts,
retail installment loans and leases, Case Credit analyzes data regarding the
applicant and additional information using a credit scoring model. Case Credit
uses a credit scoring model that was developed for Case Credit by Fair, Isaac
and Company, Inc. Case Credit periodically evaluates credit scoring and may
utilize a different credit scoring model for trucks. The models are based on
Case Credit's experience using variables that historically have been predictive
of future loan performance. The credit score is not determinative. The final
credit decision is a subjective determination based on all of the information
gathered. Case Credit also maintains at least a five-year loan history on all
past and present customers it reviews.
Case Credit evaluates creditworthiness based on criteria established by its
management. It uses the same credit criteria for retail installment contracts,
retail installment loans and leases and similar credit criteria for dealer
loans. It also uses the same credit criteria regardless of which of its regional
finance offices reviews the application and whether the related receivable will
be purchased by Case Credit from a dealer, assigned by Case to Case Credit or
take the form of a direct loan by Case Credit to an equipment purchaser.
LOAN/LEASE-TO-VALUE RATIO
The maximum amount that Case Credit will finance under a retail installment
contract, retail installment loan or lease varies based on the obligor's credit
history, the type of equipment financed, whether the equipment is new or used,
the payment schedule and the length of the receivable. The amount financed is
calculated as a percentage of the value of the related equipment, which may not
exceed 105% unless an authorized senior credit manager specifically approves an
exception to this limit. For this purpose, the value of new equipment is based
on the dealer's cost plus freight charges. The value of used equipment is based
on the equipment's "as-is" value reported in the most recent edition of the
North American Equipment Dealers Association guidebook or other comparable
guidebook.
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Exceptions to the 105% limit are unusual. Case Credit makes exceptions only
when the senior credit manager has determined that the obligor will be able to
cover the excess on the basis of the obligor's overall financial condition, as
opposed to from the value of the equipment. There is no overall limit on the
ratio that may be approved by a senior credit manager. The limit in each case
would be based upon the senior credit manager's judgement about the obligor's
overall financial condition.
Case Credit continues to operate under its traditional guidelines and
practices for loan/lease to asset value ratios. Consequently, we do not believe
that those ratios should reasonably be expected to cause any trust to have
credit loss and repossession experience materially different from the historical
experience reflected in the related prospectus supplement.
The maximum amount that Case Credit will finance under a dealer loan is
generally based upon an analysis of the dealer's overall financial condition, in
addition to the value of any collateral. Consequently, there are no requirements
as to the relationship between the amounts of these types of loans and the value
of any collateral.
Any equipment securing a receivable or leased under a receivable depreciates
in value over time. However, Case Credit's practice is to provide for repayment
schedules under the receivables that will generally result in the outstanding
principal balance of a receivable at any time in its life being less than the
anticipated value of the equipment at the time.
DEALER AGREEMENTS
Some of the receivables that Case Credit buys from dealers provide for
recourse to the dealer if the obligor defaults on the receivable. A portion of
the receivables that Case Credit purchases from Case dealers provide for
recourse to the dealer through a reserve account maintained by the dealer with
Case Credit in which the dealer is required to maintain amounts on deposit. Case
Credit will assign to us, and we will assign to the trusts any rights to
recourse against dealers, except for recourse to the dealers' reserve accounts.
The level of recourse to dealers varies, and in some cases a dealer's recourse
obligation is contingent upon Case Credit obtaining the related equipment from
the obligor and presenting it to the dealer.
Even when Case Credit purchases a receivable without recourse to the dealer
for obligor defaults, the selling dealer makes limited representations and
warranties about the receivables. Case Credit will assign to us, and we will
assign to the trusts, any rights against dealers arising as a result of a breach
of these representations and warranties.
We make no representation as to the financial condition of any of the
dealers or about their abilities to perform any repurchase obligations that may
arise.
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DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
We provide you with historical information concerning delinquencies,
repossessions and net losses on the entire portfolio of receivables serviced by
Case Credit in the prospectus supplement for your securities. This information
may exclude any category of receivables not included in your trust.
USE OF PROCEEDS
Each trust will apply the net proceeds from the sale of its securities to
buy receivables from us and to make deposits in various trust accounts,
including any pre-funding account for that trust. We will use that portion of
the net proceeds paid to us to repay outstanding indebtedness under our
asset-backed commercial paper facility or to purchase related receivables from
Case Credit.
IMPORTANT PARTIES
CASE RECEIVABLES II INC.
We will sell receivables to each trust. We are a wholly-owned subsidiary of
Case Credit and were incorporated in the State of Delaware on June 15, 1994. We
were organized for the limited purpose of buying receivables from Case Credit,
transferring those receivables to third parties and any related activities. Our
principal executive offices are located at 475 Half Day Road, Suite 200,
Lincolnshire, Illinois 60069, and our telephone number is (847) 955-1002. You
can find information about our legal separateness from Case Credit, the
restrictions on our activities and possible effects on you if we were to enter
bankruptcy, reorganization or other insolvency proceedings under "Legal Aspects
of the Receivables--Bankruptcy Considerations Relating to Case Credit."
CASE CREDIT CORPORATION
Case Credit Corporation, a Delaware corporation (often referred to as "Case
Credit"), will service the receivables owned by each trust. Case Credit is a
wholly owned finance subsidiary of Case Capital Corporation which is a wholly
owned subsidiary of Case Corporation. Case Credit and its wholly owned Canadian
and Australian operating subsidiaries provide and administer financing for the
retail purchase or lease of new and used agricultural, construction, and other
equipment and other new and used agricultural and construction equipment. Case
offers various retail financing to end-use customers through Case Credit to
facilitate the sale of its products in the United States, Canada and Australia.
However, the trusts will include only receivables of obligors located in the
United States.
Case Credit's business principally involves purchasing retail installment
sale contracts from equipment dealers, including Case and non-Case dealers. In
addition, Case Credit facilitates and finances the sale of insurance products to
retail customers, provides financing for dealers and rental equipment yards, and
also provides other
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retail financing programs for end-use customers in the United States, Canada,
Australia and other parts of the world. Case Credit also provides various
financing options to dealers for a variety of purposes, including inventory,
working capital, real estate acquisitions, construction and remodeling, business
acquisitions, dealer systems and service and maintenance equipment.
Case Credit's headquarters are located at 233 Lake Avenue, Racine, Wisconsin
53403, and its telephone number is (414) 636-6011. Case Credit is subject to the
informational requirements of the Securities Exchange Act. As required by that
act, Case Credit files reports and other information with the SEC. You can find
more information about Case Credit in the reports and other information that are
described under "Where You Can Find More Information."
CASE CORPORATION
Case Corporation, a Delaware corporation (often referred to as "Case"), is a
leading worldwide designer, manufacturer, marketer and distributor of farm
equipment and light- and medium-sized construction equipment. Case's market
position is particularly significant in several product categories, including
loader/ backhoes, skid steer loaders, large, high-horsepower farm tractors and
self-propelled combines. When we refer to Case in this prospectus and any
prospectus supplement, we are referring to Case and its consolidated
subsidiaries.
Case also manufactures and distributes replacement parts for various models
of its farm and construction equipment, many of which are proprietary, to
support products it has sold. Case distributes these parts to dealers and
distributors through a network of parts depots throughout the world.
To facilitate the sale of its products, Case offers wholesale financing to
its dealers and, through Case Credit, offers various types of retail financing
to qualified end-users in the United States, Canada, Australia and other parts
of the world. Wholesale financing consists primarily of floorplan financing and
allows dealers to maintain a representative inventory of products. Retail
financing consists of the financing of retail installment sale contracts, leases
and similar products for the benefit of end-use customers in conjunction with
the purchase of new and used equipment from Case dealers and company-owned
retail stores and is intended to be competitive with financing available from
third parties.
Case products are distributed through an extensive network of independent
dealers and distributors in more than 150 countries worldwide.
On May 15, 1999, Case, Fiat S.p.A., a company organized under the laws of
Italy, New Holland N.V., a company organized under the laws of the Netherlands,
and Fiat Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of Fiat S.p.A., entered into an Agreement and Plan of Merger under
which Fiat Acquisition Corporation will merge into Case, with Case as the
surviving corporation. At the effective time of the merger, Case's common stock
will be converted into the
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right to receive cash and Case will become a wholly-owned subsidiary of Fiat
S.p.A. Consummation of the merger is subject to a number of conditions,
including (1) the adoption of the Agreement and Plan of Merger by the
stockholders of Case entitled to vote on this matter, which has occurred, (2)
the expiration of all applicable regulatory waiting periods and (3) other
customary conditions.
Case's offices are located at 700 State Street, Racine, Wisconsin 53404, and
its telephone number is (414) 636-6011. Case is subject to the informational
requirements of the Securities Exchange Act. As required by that act, Case files
reports and other information with the SEC. You can find more information about
Case in the reports and other information that are described under "Where You
Can Find More Information."
THE TRUSTEE
We will identify the trustee for your trust in your prospectus supplement. A
trustee's liability in connection with the issuance and sale of the related
securities is limited solely to its express obligations under the related
agreements. A trustee may resign at any time, in which event Case Credit, as
servicer, must appoint a successor trustee. The administrator of a trust may
also remove the trustee if the trustee ceases to be eligible to continue as
trustee or if the trustee becomes insolvent. In that case, the administrator
must appoint a successor trustee. No resignation or removal of a trustee or
appointment of a successor trustee will become effective until acceptance of the
appointment by the successor trustee.
THE INDENTURE TRUSTEE
We will identify the indenture trustee for your series of notes in your
prospectus supplement. An indenture trustee may resign at any time, and may be
removed by the trustee if the indenture trustee becomes insolvent or ceases to
be eligible to continue as indenture trustee. If an indenture trustee resigns or
is removed, the trust must appoint a successor indenture trustee. No resignation
or removal of an indenture trustee or appointment of a successor indenture
trustee will become effective until the successor indenture trustee has accepted
its appointment.
DESCRIPTION OF THE NOTES
Each trust will issue one or more classes of notes pursuant to an indenture
between the trust and an indenture trustee. We have filed a form of the
indenture to be used as an exhibit to the registration statement of which this
prospectus is a part. In addition to the notes offered by this prospectus, each
trust may issue one or more additional classes of notes that may be sold in
transactions exempt from registration under the Securities Act or retained by us
or our affiliates. Those additional classes of notes may be issued under the
related indenture or under a separate agreement. We summarize the material terms
of the notes and indentures below. This summary does
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not include all of the terms of the notes and the indentures and is qualified by
reference to the actual notes and indentures.
PRINCIPAL AND INTEREST ON THE NOTES
We will describe the timing and priority of payment, seniority,
redeemability, allocations of losses, interest rate and amount of or method of
determining payments of principal and interest on each class of notes of a
series in the related prospectus supplement. The right of holders of any class
of notes to receive payments of principal and interest may be senior or
subordinate to the rights of holders of any other class or classes of notes of
the same series. Each series may include one or more classes of notes of a type
known as "strip notes." Strip notes are entitled to (a) principal payments with
disproportionate, nominal or no interest payments or (b) interest payments with
disproportionate, nominal or no principal payments. Each class of notes may have
a different interest rate, which may be a fixed or floating rate and may be zero
for strip notes.
THE INDENTURE
MODIFICATION OF INDENTURE. The indenture for each trust may be amended with
the consent of the holders of at least a majority of the outstanding principal
amount of notes of the related series, the trust and the indenture trustee.
However, the following changes may not be made to any indenture without the
consent of each affected noteholder:
(1) any change to the due date of any installment of principal of or
interest on any note or any reduction of the principal amount of any note,
the interest rate for any note or the redemption price for any note, or any
change to the place for or currency of any payment on any note;
(2) any change that impairs the right of a noteholder to take legal
action to enforce payment under the provisions of the indenture;
(3) any reduction in the percentage of noteholders, by aggregate
principal balance, that is required to consent to any amendment or to any
waiver of defaults or compliance with provisions of the indenture;
(4) any modification of the provisions of the indenture regarding the
voting of notes held by us, the applicable trust, any other obligor on the
notes, or any of our respective affiliates;
(5) any reduction in the percentage of noteholders, by aggregate
principal balance, that is required to direct the indenture trustee to sell
or liquidate the receivables if the proceeds of sale would be insufficient
to pay the notes in full, with interest; or
(6) any change that adversely affects the status or priority of the lien
of the indenture on any collateral.
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Also, unless otherwise provided in the applicable prospectus supplement, a
trust and the applicable indenture trustee may enter into supplemental
indentures without obtaining the consent of the noteholders of the related
series, for the purpose of:
(a) changing the related indenture or the rights of noteholders, if the
change will not materially and adversely affect the interests of any
noteholder; or
(b) substituting credit enhancement for any class of notes, if the
applicable rating agencies confirm in writing that the substitution will not
result in the reduction or withdrawal of the rating of those notes or any
other class of securities in the same series.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. Any one of the following
events will be an event of default for the notes in your series, unless
otherwise specified in your prospectus supplement:
- the trust fails to pay any interest on any note within five days after its
due date;
- the trust fails to pay any installment of the principal of any note on its
due date;
- the trust breaches any of its other covenants in the indenture for 30 days
after notice of the breach is given to the trust by the indenture trustee
or to the trust and the indenture trustee by the holders of at least 25%
of the outstanding principal amount of the notes in your series;
- the trust fails to correct a breach of a representation or warranty it
made in the indenture, or in any certificate delivered in connection with
the indenture, that was incorrect in a material respect at the time it was
made, for 30 days after notice of the breach is given to the trust by the
indenture trustee or to the trust and the indenture trustee by the holders
of at least 25% of the outstanding principal amount of the notes in your
series; or
- the trust becomes bankrupt or insolvent or is liquidated.
You should note, however, that until the final scheduled maturity date for
any class of notes, the amount of principal due to noteholders in your series
generally will be limited to amounts available for that purpose. Also, if
specified in the applicable prospectus supplement, the amount of interest due to
noteholders of any class may be limited to amounts available for that purpose.
Therefore, the failure to pay principal or, when applicable, interest on a class
of notes generally will not result in the occurrence of an event of default
until the final scheduled payment date for that class of notes.
If an event of default with respect to the notes of any series occurs and is
not remedied as provided in the applicable indenture, then the principal of the
notes of that series may be declared to be immediately due and payable by the
indenture trustee, holders of a majority in principal amount of those notes or,
if so specified in
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the applicable prospectus supplement, holders of a majority in principal amount
of one or more particular classes of those notes. Unless otherwise specified in
your prospectus supplement, that declaration may be rescinded by holders of a
majority of the outstanding principal amount of the notes of that series, but
only after payment of any past due amounts and cure or waiver of all other
events of default. Noteholders' voting rights may vary by class.
If the notes of any series have been declared due and payable following an
event of default, the indenture trustee for that series 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
applicable trust maintain possession of those receivables and continue to apply
collections on them as if there had been no declaration of acceleration. Unless
otherwise specified in the related prospectus supplement, however, the indenture
trustee is prohibited from selling the related receivables following an event of
default, other than a default in the payment of any principal of or a default in
the payment of any interest on any note that continues for five days or more,
unless (i) the holders of all the outstanding notes of that series consent to
the sale, (ii) the proceeds of the sale are sufficient to pay in full the
principal of and the accrued interest on those notes at the date of such sale or
(iii) the indenture trustee for that series determines that the proceeds of
receivables would not be sufficient on an ongoing basis to make all payments on
those notes as those payments would have become due if those obligations had not
been declared due and payable, and the indenture trustee obtains the consent of
the holders of 66 2/3% of the outstanding principal amount of those notes.
Each indenture will provide that, subject to the duty of the indenture
trustee to act with the required standard of care if an event of default occurs,
the indenture trustee is not required to exercise any of its rights or powers
under the indenture at the request or direction of any of the noteholders, 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 that request. Subject to the provision of adequate
indemnification of the indenture trustee, the holders of a majority of the
outstanding principal amount of the notes of a series (or of one or more classes
of those notes, if so specified in the applicable prospectus supplement) will
have the right to direct the time, method and place for any remedy available to
the indenture trustee.
Unless otherwise specified in the related prospectus supplement, no
noteholder will have the right to take legal action under the related indenture,
unless:
- the noteholder gives the indenture trustee written notice of a continuing
event of default;
- the holders of at least 25% of the outstanding principal amount of notes
of that series have requested in writing that the indenture trustee take
legal action and offered reasonable indemnity to the indenture trustee;
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- the indenture trustee has not received a direction not to take legal
action from the holders of a majority of the outstanding principal amount
of the notes in that series; and
- the indenture trustee has failed to take legal action within 60 days.
In addition, each indenture trustee and the noteholders, by accepting their
notes, will covenant that they will not at any time institute any bankruptcy or
insolvency proceeding against their trust.
None of the trustee for any trust, the related indenture trustee in its
individual capacity, any holder of a certificate representing an ownership
interest in a trust or any of their respective owners, beneficiaries, agents,
officers, directors, employees, affiliates, successors or assigns will be
personally liable for the payment of the principal of or interest on the related
notes or for the agreements of such trust contained in the applicable indenture.
CERTAIN COVENANTS. In its indenture, each trust will agree not to
consolidate with or merge into any other entity, unless:
- the entity formed by or surviving the consolidation or merger is organized
under the laws of the United States or any state,
- that entity expressly assumes the trust's obligations relating to the
notes,
- immediately after the transaction, no event of default would have occurred
and not have been remedied,
- the trust has been advised that the ratings of the notes or the
certificates of the particular series then in effect would not be reduced
or withdrawn by the applicable rating agencies as a result of the
transaction, and
- the trust has received an opinion of counsel to the effect that the
consolidation or merger would have no material adverse tax consequence to
the trust or to any related noteholder or certificateholder.
Each trust will also agree not to take the following actions:
- sell or otherwise dispose of any of its assets, except as permitted by its
transaction documents,
- claim any credit on or make any deduction from the principal and interest
payable in respect of its notes, other than amounts withheld under the
Internal Revenue Code or applicable state law,
- assert any claim against any present or former holder of those notes
because of the payment of taxes levied or assessed upon the trust,
- dissolve or liquidate in whole or in part, except as contemplated by its
transaction documents,
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- permit the validity or effectiveness of its indenture to be impaired or
permit any person to be released from any obligations with respect to the
notes under its indenture, except as may be expressly permitted by its
indenture,
- permit any lien, claim or other encumbrance to affect its assets or any
part of the trust, any interest in its assets or the trust or any related
proceeds, or
- incur, assume or guarantee any indebtedness other than indebtedness
incurred pursuant to its notes and its other transaction documents.
Each trust may engage in only the activities described in the related
prospectus supplement.
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 its indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT. The indenture trustee for each trust
will be required to mail each year to all of the related noteholders a brief
report relating to its eligibility and qualification to continue as indenture
trustee, any amounts advanced by it under the indenture, information about
indebtedness owing by the trust to the indenture trustee in its individual
capacity, any property and funds physically held by the indenture trustee as
such and any action taken by it that materially affects the related notes and
that has not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE. An indenture may be discharged
with respect to the collateral securing the related notes upon the delivery to
the related indenture trustee for cancellation of all of the related notes or
upon deposit with the indenture trustee of funds sufficient for the payment in
full of the notes.
DESCRIPTION OF THE CERTIFICATES
Each trust will issue one or more classes of certificates pursuant to a
trust agreement between us and a trustee. We have filed a form of the trust
agreement to be used as an exhibit to the registration statement of which this
prospectus is a part. A trust's certificates may be offered by this prospectus
or may be sold in transactions exempt from registration under the Securities Act
or retained by us or our affiliates. We summarize the material terms of the
certificates below. This summary does not include all of the terms of the
certificates and is qualified by reference to the actual certificates.
We will describe the timing and priority of payment, seniority,
redeemability, allocations of losses, interest rate and amount of or method of
determining payments of principal and interest on each class of certificates of
a series in the related prospectus supplement. Certificateholders' rights to
receive payments on their certificates will be junior to the payment rights of
noteholders in the same series to the extent described in the applicable
prospectus supplement. In addition, the right of holders of any class of
certificates to receive payments of principal and interest may
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be senior or subordinate to the rights of holders of any other class or classes
of certificates of the same series. Each series may include one or more classes
of certificates of a type known as "strip certificates." Strip certificates are
entitled to (a) principal payments with disproportionate, nominal or no interest
payments or (b) interest payments with disproportionate, nominal or no principal
payments. Each class of certificates may have a different interest rate, which
may be a fixed or floating interest rate and may be zero for strip certificates.
ADMINISTRATIVE INFORMATION ABOUT THE SECURITIES
DENOMINATIONS
We will identify minimum denominations for purchase of securities in the
related prospectus supplement. If we do not specify any denomination, then the
securities will be available for purchase in minimum denominations of $1,000 and
in greater whole-dollar denominations.
FIXED RATE SECURITIES
Each class of securities may bear interest at a fixed or floating rate per
annum. We will identify the applicable interest rate for each class of fixed
rate securities in the applicable prospectus supplement. Interest on each class
of fixed rate securities will be computed on the basis of a 360-day year of
twelve 30-day months, unless we specify a different computation basis in the
applicable prospectus supplement.
FLOATING RATE SECURITIES
Each class of floating rate securities will bear interest for interest
periods specified in the applicable prospectus supplement at a rate per annum
equal to:
- a specified base interest rate, which will be based upon the London
interbank offered rate (commonly known as "LIBOR"), commercial paper
rates, federal funds rates, U.S. Government treasury securities rates,
negotiable certificates of deposit rates or another index rate we specify
in the applicable prospectus supplement;
- plus or minus a "spread" of a number of basis points (I.E., one-hundredths
of a percentage point) we will specify in the applicable prospectus
supplement;
- or multiplied by a "spread multiplier," which is a percentage that we will
specify in the applicable prospectus supplement.
In the prospectus supplement for any floating rate securities we may also
specify either or both of the following for any class:
- a maximum, or ceiling, on the rate at which interest may accrue during any
interest period and
- a minimum, or floor, on the rate at which interest may accrue during any
interest period.
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In addition to any maximum interest rate specified in the applicable prospectus
supplement, the interest rate applicable to any class of floating rate
securities will in no event be higher than the maximum rate permitted by
applicable law.
Each trust that issues floating rate securities will appoint a calculation
agent to calculate interest rates on each class of its floating rate securities.
The applicable prospectus supplement will identify the calculation agent for
each class of floating rate securities in the offered series. Determinations of
interest by a calculation agent will be binding on the holders of the related
floating rate securities, in the absence of manifest error. All percentages
resulting from any calculation of the rate of interest on a floating rate
security will be rounded, if necessary, to the nearest 1/100,000 of 1%
(.0000001), with five one-millionths of a percentage point rounded upward,
unless we specify a different rounding rule in the related prospectus
supplement.
INDEXED SECURITIES
We may also specify in any prospectus supplement that any class of
securities of the related series will be "indexed securities." In that case, the
principal amount payable at the final scheduled payment date for that class
would be determined by reference to an index related to:
- the difference in the rate of exchange between United States dollars and a
currency or composite currency specified in the prospectus supplement;
- the difference in the price of a specified commodity on specified dates;
- the difference in the level of a specified stock index, which may be based
on U.S. or foreign stocks on specified dates; or
- another objective price or economic measure described in the prospectus
supplement.
We will disclose the manner of determining the principal amount payable on
any indexed security and historical and other information concerning the index
used in that determination in the applicable prospectus supplement, together
with information concerning tax consequences to the holders of the indexed
securities. This may include alternate means to calculate an index if a third
party that initially calculates or announces the index ceases to do so or
changes the basis upon which the index is calculated.
Unless we specify otherwise in the applicable prospectus supplement,
interest on an indexed security will be payable based on the amount designated
in the prospectus supplement as the "face amount" of the indexed security. We
will also specify in the applicable prospectus supplement whether the principal
amount of any indexed security that would be payable upon redemption or
repayment prior to the applicable final scheduled payment date would be its face
amount, its principal amount based on the applicable index at the time of
redemption or repayment or some other amount.
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BOOK-ENTRY REGISTRATION
THE CLEARING ORGANIZATIONS. We will specify in the related prospectus
supplement whether or not investors may hold their securities in book-entry
form, directly or indirectly, through one of three major securities clearing
organizations:
- in the United States, The Depository Trust Company (commonly known as
"DTC"); or
- in Europe, either Cedel Bank, societe anonyme (commonly known as "Cedel")
or Euroclear (also known as the "Euroclear System").
Each of these entities holds securities for its participating organizations and
facilitates the clearance and settlement of securities transactions between its
participants through electronic book-entry changes in the participants'
accounts. This eliminates the need for physical movement of certificates
representing the securities.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, 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 Section 17A of the Securities Exchange Act. DTC
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Indirect access to the
DTC system is also available to others, such as securities brokers and dealers,
banks, and trust companies that clear through or maintain a custodial
relationship with a DTC participant, either directly or indirectly. The rules
applicable to DTC and its participants are on file with the SEC.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. It settles transactions in a number of currencies, including United
States dollars. Cedel provides its participants, among other things, services
for safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. Cedel interfaces with
domestic markets in several countries. As a professional depository, Cedel is
subject to regulation by the Luxembourg Monetary Institute. Cedel's participants
are recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the underwriters of any series
of securities. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel participant, either directly or indirectly.
Euroclear was created in 1968. It settles transactions in a number of
currencies, including United States dollars. Euroclear includes various other
services, including securities lending and borrowing. Euroclear interfaces with
domestic markets in many countries generally similar to the arrangements for
cross-market transfers with DTC described below. Euroclear is operated by Morgan
Guaranty Trust Company of New
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York, Brussels, Belgium office, under contract with Euroclear Clearance System,
Societe Cooperative, a Belgian cooperative corporation. All operations are
conducted by Euroclear's operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear operator,
not the cooperative. The board of the cooperative establishes policy for the
Euroclear System. Euroclear participants include banks (including central
banks), securities brokers and dealers and other professional financial
intermediaries and may include the underwriters of any series of securities.
Indirect access to Euroclear is also available to other firms that maintain a
custodial relationship with a Euroclear participant, either directly or
indirectly.
The Euroclear operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related operating procedures of the Euroclear System. These Terms and Conditions
govern transfers of securities and cash within Euroclear, withdrawal of
securities and cash from Euroclear, and receipts of payments with respect to
securities in Euroclear. All securities in the Euroclear System are held on a
fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear operator acts under the Terms and
Conditions only on behalf of Euroclear participants and has no record of or
relationship with persons holding through Euroclear participants.
BOOK-ENTRY CLEARANCE MECHANICS. If book-entry arrangements are made, then a
nominee for DTC will hold global certificates representing the securities. Cedel
and Euroclear will hold omnibus positions on behalf of their respective
participants, through customers' securities accounts in Cedel's and Euroclear's
names on the books of their respective depositaries, which in turn will hold
positions in customers' securities accounts in the depositaries' names on the
books of DTC.
Transfers between DTC's participants will occur in accordance with DTC
rules. Transfers between Cedel's participants and Euroclear's participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
participants or Euroclear participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its depositary. However, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to
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its depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Cedel participants and Euroclear participants may not deliver instructions
directly to Cedel's and Euroclear's depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date. Credits or other transactions in securities
settled during any processing will be reported to the relevant Cedel participant
or Euroclear participant on that business day. Cash received in Cedel or
Euroclear as a result of sales of securities by or through a Cedel participant
or a Euroclear participant to a DTC participant will be received with value on
the DTC settlement date but will be available in the relevant Cedel or Euroclear
cash account only as of the business day following settlement in DTC.
Purchases of securities under the DTC system must be made by or through DTC
participants, which will receive a credit for the securities on DTC's records.
The ownership interest of each actual securityholder is in turn to be recorded
on the DTC participants' and indirect participants' records.
Securityholders will not receive written confirmation from DTC of their
purchase, but securityholders are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the DTC participant or indirect participant through which the
securityholder entered into the transaction. Transfers of ownership interests in
the securities are to be accomplished by entries made on the books of DTC
participants acting on behalf of securityholders. Securityholders will not
receive certificates representing their ownership interest in securities, unless
the book-entry system for the securities is discontinued. Because of this,
unless and until definitive securities for such series are issued,
securityholders will not be recognized by the applicable indenture trustee or
trustee as "noteholders," "certificateholders" or "securityholders," as the case
may be. Hence, unless and until definitive securities are issued,
securityholders will only be able to exercise their rights as securityholders
indirectly through DTC and its participating organizations.
To facilitate subsequent transfers, all securities deposited by DTC
participants with DTC are registered in the name of DTC's nominee. The deposit
of securities with DTC and their registration in the name of its nominee effects
no change in beneficial ownership. DTC has no knowledge of the actual
securityholders of the securities. Its records reflect only the identity of the
DTC participants to whose accounts such securities are credited, which may or
may not be the securityholders. The DTC participants are responsible for keeping
account of their holdings on behalf of their customers.
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Notices and other communications conveyed by DTC to DTC participants, by DTC
participants to indirect participants, and by DTC participants and indirect
participants to securityholders are governed by arrangements among them and any
statutory or regulatory requirements that are in effect from time to time.
Neither DTC nor its nominee will consent or vote with respect to securities.
Under its usual procedures, DTC mails an omnibus proxy to the issuer as soon as
possible after the record date, which assigns its nominee's consenting or voting
rights to those DTC participants to whose accounts the securities are credited
on the record date (identified in a listing attached thereto).
Principal and interest payments on securities cleared through DTC will be
made to DTC. DTC's practice is to credit participants' accounts on the
applicable payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive payment
on the payment date. Payments by DTC participants to securityholders will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name" and will be the responsibility of the DTC participant and not of
DTC, the trustee or us, subject to any statutory or regulatory requirements that
are in effect from time to time. Payment of principal and interest to DTC is the
responsibility of the trustee, disbursement of those payments to DTC
participants is the responsibility of DTC, and disbursement of the payments to
securityholders is the responsibility of DTC participants and indirect
participants.
Principal and interest payments on securities held through Cedel or
Euroclear will be credited to the cash accounts of Cedel participants or
Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its depositary. Those payments will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations, as described below in "U.S. Federal Income Tax Consequences." Cedel
or the Euroclear operator, as the case may be, will take any other action
permitted to be taken by a securityholder under a related agreement on behalf of
a Cedel participant or Euroclear participant only in accordance with its
relevant rules and procedures and subject to its depositary's ability to effect
such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of securities among participants of DTC, Cedel and
Euroclear, they are under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
We obtained the information in this section concerning DTC, Cedel and
Euroclear and their respective book-entry systems from sources that we believe
to be reliable, but we take no responsibility for its accuracy.
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DEFINITIVE SECURITIES
Notes or certificates that are initially cleared through DTC will be issued
in definitive, fully registered, certificated form to investors or their
respective nominees, rather than to DTC or its nominee, only if:
- the administrator for any trust advises the related indenture trustee or
the related trustee, as applicable, in writing that DTC is no longer
willing or able to discharge properly its responsibilities as depository
with respect to such securities, and the administrator is unable to locate
a qualified successor,
- the administrator, at its option, elects to terminate the book-entry
system through DTC or
- after the occurrence of an event of default or a servicer default with
respect to a series of securities, securityholders representing at least a
majority of the outstanding principal amount of the notes or the
certificates, as the case may be, in that series advise the applicable
trustee through DTC in writing that the continuation of a book-entry
system through DTC (or a successor thereto) with respect to the notes or
certificates is no longer in the best interest of their holders.
If any of these events occur, the applicable trustee will be required to
notify all holders of the securities in the affected series through clearing
organization participants of the availability of definitive securities. Upon
surrender by DTC of the definitive certificates representing the corresponding
securities and receipt of instructions for re-registration, the applicable
trustee will reissue the securities to the securityholders as definitive
securities.
Principal and interest payments on all definitive securities will be made by
the applicable trustee in accordance with the procedures set forth in the
related indenture or the related trust agreement, as applicable, directly to
holders of definitive securities in whose names the definitive securities were
registered at the close of business on the applicable record date specified for
the securities in the related prospectus supplement. Those payments will be made
by check mailed to the address of each holder as it appears on the register
maintained by the applicable trustee. The final payment on any definitive
security, however, will be made only upon presentation and surrender of the
definitive security at the office or agency specified in the notice of final
distribution to the applicable securityholders.
Definitive securities will be transferable and exchangeable at the offices
of the applicable trustee or of a registrar named in a notice delivered to
holders of definitive securities. No service charge will be imposed for any
registration of transfer or exchange, but the applicable trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection with a transfer or exchange.
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LIST OF SECURITYHOLDERS
Three or more holders of the notes of any series or one or more holders of
notes evidencing at least 25% of the aggregate outstanding principal balance of
the notes of a series may, by written request to the related indenture trustee,
obtain access to the list of all noteholders maintained by the indenture trustee
for the purpose of communicating with other noteholders with respect to their
rights under the related indenture or the notes. The indenture trustee may elect
not to afford the requesting noteholders access to the list of noteholders if it
agrees to mail the desired communication or proxy, on behalf of and at the
expense of the requesting noteholders, to all noteholders of their series.
Three or more holders of the certificates of any series or one or more
holders of certificates evidencing at least 25% of the aggregate outstanding
balance of the certificates of a series may, by written request to the related
trustee, obtain access to the list of all certificateholders maintained by the
trustee for the purpose of communicating with other certificateholders with
respect to their rights under the related trust agreement or the certificates.
REPORTS TO SECURITYHOLDERS
On or prior to each payment date for the securities of a trust, the servicer
for the trust will prepare and provide to the trust's indenture trustee a
statement to be delivered to the related noteholders and to the trustee a
statement to be delivered to the related certificateholders on the payment date.
Each of these statements will include, to the extent applicable to the
particular series or class or securities, the following information (and any
other information specified in the related prospectus supplement) with respect
to the payment date or the period since the previous payment date:
(1) the amount of any principal payment on each class of securities;
(2) the amount of any interest payment on each class of securities;
(3) the aggregate balance of receivables in the trust at the end of the
preceding collection period;
(4) the aggregate outstanding principal balance and the note pool
factor for each class of notes, and the aggregate outstanding balance and
the certificate pool factor for each class of such certificates, each after
giving effect to all payments reported under clause (1) above;
(5) the amount of the servicing fee paid to the servicer for the
related collection period;
(6) the interest rate for the next period for any floating rate
securities;
(7) the amount of the administration fee paid to the administrator for
the related collection period;
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(8) the amount of the net losses on receivables, if any, for the
related collection period;
(9) the aggregate purchase price paid for receivables, if any, that
were repurchased or purchased by us or the servicer in the related
collection period;
(10) the balance on deposit in any spread account or the amount
available under any other credit enhancement on the payment date, after
giving effect to any changes on that date;
(11) for each payment date during a pre-funding period, the remaining
balance in the pre-funding account; and
(12) for the first payment date that is on or immediately following the
end of a pre-funding period, the amount of any remaining balance in the
pre-funding account that has not been used to fund the purchase of
receivables and is being paid as principal on the securities.
Each amount described in subclauses (1), (2), (5) and (7) will be expressed
as a dollar amount per $1,000 of the initial principal balance of the related
notes or certificates.
The note pool factor for each class of notes will be a seven-digit decimal
indicating the remaining outstanding principal balance of such class of notes,
as of each payment date (after giving effect to payments to be made on such
payment date), as a percentage of the initial outstanding principal balance of
such class of notes. Similarly, the certificate pool factor for each class of
certificates will be a seven-digit decimal indicating the remaining balance of
such class of certificates, as of each payment date (after giving effect to
distributions to be made on such payment date), as a fraction of the initial
outstanding balance of such class of certificates. Each note pool factor and
each certificate pool factor will initially be 1.0000000 and will decline over
time to reflect reductions in the outstanding balance of the applicable class of
notes or certificates.
A noteholder's portion of the aggregate outstanding principal balance of the
related class of notes is the product of (i) the original denomination of the
noteholder's note and (ii) the applicable note pool factor. A
certificateholder's portion of the aggregate outstanding balance of the related
class of certificates is the product of (a) the original denomination of such
certificateholder's certificate and (b) the applicable certificate pool factor.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each trust, the applicable trustee
will mail to each person who at any time during such calendar year has been a
securityholder with respect to such trust and received any payment thereon, a
statement containing certain information for the purposes of such
securityholder's preparation of Federal income tax returns.
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DESCRIPTION OF THE TRANSACTION AGREEMENTS
We summarize below the material terms of the agreements under which we will
buy receivables, directly or indirectly, from Case Credit and sell them to each
trust, and under which Case Credit will agree to service the trust's receivables
and administer the trust. We will disclose any additional material terms
relating to a particular trust's agreements in the related prospectus
supplement. We have filed forms of these agreements as exhibits to the
registration statement of which this prospectus is a part. The following summary
does not include all of the terms of the agreements and is qualified by
reference to the actual agreements.
COMMERCIAL PAPER PROGRAM
We buy a significant portion of the receivables that we will sell to most
trusts prior to the closing date for the particular trust. In connection with an
asset-backed commercial paper program that we established in August 1994, we
entered into a Receivables Purchase Agreement dated as of August 1, 1994, and
subsequently amended, with Case Credit. Under that agreement, we generally buy
from Case Credit on a monthly basis all retail installment contracts meeting our
eligibility requirements that Case Credit originated in the preceding calendar
month. We expect to sell most of the contracts that we buy from Case Credit
under this arrangement to a trust that will issue securities offered under this
prospectus.
If Case Credit elects to sell us any retail installment contracts under this
agreement in a month, Case Credit is obligated to sell to us all of the eligible
retail installment contracts originated by Case Credit in the preceding month,
unless the aggregate balance of the contract would exceed the purchase limit
under the agreement. In that case, Case Credit must use procedures to select the
contracts to be sold that are not adverse to our interests.
Under the 1994 Receivables Purchase Agreement, we buy retail installment
contracts and related security interests without recourse to Case Credit for
defaults by the obligors. However, Case Credit represents and warrants to us on
each monthly purchase date as to the retail installment contracts being sold on
that date, among other things, that:
(1) each of the retail installment contracts meets our eligibility
requirements;
(2) the information Case Credit has provided to us about the retail
installment contracts is correct in all material respects;
(3) the obligor on each of the retail installment contracts is required
to maintain physical damage insurance covering the financed equipment in
accordance with Case Credit's normal requirements;
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(4) as of the purchase date, the retail installment contracts are free
and clear of all security interests, liens, charges and encumbrances, and no
offsets, defenses or counterclaims have been asserted or threatened;
(5) as of the purchase date, each of the retail installment contracts is
or will be secured by a first priority perfected security interest in the
financed equipment in favor of Case Credit; and
(6) each of the retail installment contracts complied at the time it was
originated and complies as of the purchase date with applicable Federal and
state laws in all material respects, including consumer credit, truth in
lending, equal credit opportunity and disclosure laws.
If Case Credit breaches any of these representations or warranties, Case
Credit must repurchase from us any retail installment contract materially and
adversely affected by the breach at a price equal to the contract's balance on
the settlement date immediately succeeding the month in which such repurchase
obligation arises. The repurchase obligation is the sole remedy available to us
for any such breach.
While we hold the contracts that we buy from Case Credit under this
arrangement, we borrow against them under a Loan and Security Agreement dated as
of August 1, 1994, and subsequently amended, between us and Case Equipment Loan
Trust 1994-B. Under the Loan and Security Agreement, Case Equipment Loan Trust
1994-B has agreed to make or increase the principal amount of a loan to us on a
monthly basis. In return, we have granted the trust a security interest in the
retail installment contracts we have purchased as described above and that have
not been previously released, along with some other collateral. The trust
obtains funds to make these loans by issuing commercial paper notes or borrowing
under a Liquidity Agreement among the trust, a group of banks and The Chase
Manhattan Bank, as administrative agent.
Under the Loan and Security Agreement, we have the right to obtain the
release of retail installment contracts and related rights from the lien of the
Loan and Security Agreement for the purpose of transferring those contracts to a
trust that will issue securities for offer under this prospectus. Prior to any
transfer, we must obtain written confirmation from the applicable rating
agencies that the transfer will not result in the withdrawal or downgrade of the
current ratings on the outstanding securities issued by Case Equipment Loan
Trust 1994-B. Also, after giving effect to the transfer and related
transactions, the outstanding principal amount of loans outstanding under the
Loan and Security Agreement must not exceed an amount based on the aggregate
balance of the retail installment contracts pledged under the Loan and Security
Agreement. In connection with any release of retail installment contracts from
the lien of the Loan and Security Agreement, we are required to deposit into the
related collection account an amount equal to the aggregate balance of the
retail installment contracts being released, plus accrued interest at the
applicable interest rates to the release date.
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ADDITIONAL SALES OF RECEIVABLES
In addition to retail installment contracts that we buy from Case Credit on
a monthly basis as described above, we may also buy receivables from Case Credit
to transfer to a trust on the closing date for that trust under a separate
purchase agreement. We buy those receivables on substantially the same terms as
under the 1994 Receivables Purchase Agreement, as described above. Case Credit
may also sell receivables to another one of its subsidiaries, and we may buy the
receivables from the subsidiary on substantially the same terms as our purchases
from Case Credit.
We then sell receivables that we have bought from Case Credit (or a Case
Credit subsidiary) to a trustee, for the benefit of one of the trusts, pursuant
to a sale and servicing agreement. These sales are also made without recourse.
The related trustee will, concurrently with this sale, execute and deliver the
related notes and certificates. The trust will apply the net proceeds received
from the sale of its notes and certificates to pay us for the related
receivables, and, to the extent specified in the related prospectus supplement,
to make a deposit in a pre-funding account and initial deposits in other trust
accounts. If there is a pre-funding account, then we will buy additional
receivables from Case Credit, and sell them to the trust from time to time
during a pre-funding period, as described further in the related prospectus
supplement.
If we breach any of our representations or warranties made in a sale and
servicing agreement, and our breach is not cured by the last day of the second
(or, if we elect, the first) month following the discovery by or notice to the
trustee of the breach, we will repurchase any receivable materially and
adversely affected by our breach as of such last day at a price equal to the
contract value of the receivable, as specified in the related prospectus
supplement. Our obligation to repurchase any receivable with respect to which
any representation or warranty has been breached is subject to Case Credit's
repurchase of the receivable. This repurchase obligation is the only remedy
available to the noteholders, the indenture trustee, the certificateholders or
the trustee for any trust for any uncured breach.
Under each sale and servicing agreement, Case Credit, as servicer, will
continue to service the receivables held by the related trust and will receive
fees for its services. In order to assure uniform quality in servicing the
receivables and to reduce administrative costs, we and each trust will designate
the servicer as custodian to maintain possession, as the agent for each trust,
of the receivables and related documents. However, notes evidencing any
unsecured dealer loans that we sell to a trust will be delivered to the related
indenture trustee. The obligors on the receivables are not notified that their
receivables have been sold by Case Credit to us or by us to the trust. However,
Case Credit marks its accounting records to reflect these sales, and Uniform
Commercial Code financing statements reflecting the sales are filed.
Under each sale and servicing agreement, the servicer has an option to
purchase all of the remaining receivables held by the trust after their
aggregate contract values
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fall below 10% of the sum of the contract values of all of the trust's
receivables, measured for each receivable at the time of its sale to the trust.
ACCOUNTS
Case Credit, as servicer, will establish and maintain the following bank
accounts for each trust:
- a collection account, into which all payments made on or with respect to
the related receivables will be deposited;
- a note distribution account, into which amounts available for payment to
the noteholders will be deposited and from which those payments will be
made;
- a certificate distribution account, into which amounts available for
payment to the certificateholders will be deposited and from which those
payments will be made; and
- if so specified in the prospectus supplement, a pre-funding account.
We will describe any other accounts to be established for a trust in the
related prospectus supplement.
Funds held in a trust's bank accounts will be invested in the following
types of investments:
(a) direct obligations of, or obligations fully guaranteed as to timely
payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
domestic depository institution or trust company or any domestic branch of a
foreign bank that is subject to supervision and examination by federal or
state banking or depository institution authorities, in each case where the
issuer has at the time of the investment or contractual commitment to invest
short-term credit ratings from each of the applicable rating agencies in its
highest investment category;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest, a rating from each of the applicable
rating agencies in its highest investment category;
(d) investments in money market funds having a rating from each of the
applicable rating agencies in its highest investment category, including
funds for which the indenture trustee or the trustee or any of their
respective affiliates is investment manager or advisor;
(e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a direct
obligation of, or fully guaranteed as to timely payment by, the United
States of America or any of its agencies or instrumentalities the
obligations of which are
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backed by the full faith and credit of the United States of America, in
either case entered into with a depository institution or trust company
(acting as principal) described in clause (b); and
(g) any other investment permitted by each of the applicable rating
agencies as set forth in writing delivered to the indenture trustee.
Investments described in clauses (d) and (g) will be made only so long as
making such investments will not require the trust to register as an investment
company, in accordance with the Investment Company Act of 1940. During any
pre-funding period, no investments in money market funds will be made with funds
in any account other than the collection account. Also, so long as they meet the
criteria listed above, these investments may include securities issued by us or
our affiliates or trusts originated by us or our affiliates. Except as described
below with respect to spread accounts, the investments made in each trust's bank
accounts are limited to obligations or securities that mature on or before the
business day preceding the next payment date.
In the unlikely event of defaults on investments made in a trust's bank
accounts, investors in the securities could experience losses or payment delays.
Earnings from these investments, net of losses and investment expenses, will be
deposited in the applicable collection account on each payment date and treated
as collections on the related receivables.
Each trust's bank accounts will be maintained in one of the following forms:
- as segregated accounts with (a) the corporate trust department of the
related indenture trustee or the related trustee, or (b) a depository
institution organized under the laws of the United States of America, any
state or the District of Columbia (or any domestic branch of a foreign
bank) (1) which has either (A) a long-term unsecured debt rating or
certificate of deposit rating acceptable to the applicable rating agencies
or (B) a short-term unsecured debt rating or certificate of deposit rating
acceptable to the applicable rating agencies and (2) whose deposits are
insured by the FDIC;
- as segregated trust account with the corporate trust department of a
depository institution organized under the laws of the United States of
America, any state or the District of Columbia (or any domestic branch of
a foreign bank), having corporate trust powers and acting as trustee for
funds deposited in such account, so long as any of the securities of such
depository institution have a credit rating from each applicable rating
agency in one of its generic rating categories which signifies investment
grade; or
- as any other segregated account the deposit of funds which has been
approved by the applicable rating agencies.
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SERVICING PROCEDURES
Case Credit, as servicer, will agree to make reasonable efforts to collect
all payments on the receivables held by each trust in a manner consistent with
the related sale and servicing agreement, and to use the collection procedures
it follows with respect to comparable agricultural, construction and other
equipment receivables it services for itself or others. Consistent with its
normal procedures, the servicer may, in its discretion, arrange with the obligor
on a receivable to extend or modify the payment schedule. However, no such
arrangement will be permitted to extend the final payment date of any receivable
beyond the final scheduled maturity date specified for the related securities in
the applicable prospectus supplement unless the servicer purchases the
receivable from the trust for a purchase price equal to its contract value.
If the servicer forecloses on the collateral for a receivable, the servicer
may sell the collateral at public or private sale, or take any other action
permitted by applicable law. When appropriate, in connection with its servicing
obligations, the servicer may require the applicable indenture trustee to
deliver all or a portion of one or more notes evidencing unsecured dealer loans.
The servicer will return any such notes to the applicable indenture trustee when
the servicer no longer needs it, unless the related loan has been paid in full.
COLLECTIONS
The servicer will deposit all payments received on a trust's receivables
during each collection period specified in the related prospectus supplement
into the related collection account within two business days after receipt.
However, at any time when (a) Case Credit is the servicer, (b) there exists no
servicer default and (c) each other condition to making deposits less frequently
than daily as may be specified by the applicable rating agencies or set forth in
the related prospectus supplement is satisfied, the servicer will not be
required to deposit payments into the collection account until on or before the
business day preceding the applicable payment date. Pending deposit into the
collection account, the servicer may invest collections at its own risk and for
its own benefit, and the collections will not be segregated from its own funds.
If the servicer were unable to remit such funds, securityholders might incur a
loss. To the extent described in the related prospectus supplement, the servicer
may, in order to satisfy the requirements described above, obtain a letter of
credit or other security for the benefit of the related trust to secure timely
remittances of collections on the related receivables.
At any time when the servicer is permitted to remit collections once a
month, the servicer will be permitted to make that deposit net of distributions
to be made to the servicer with respect to the same collection period. The
servicer, however, will account to the indenture trustee, the trustee, the
noteholders and the certificateholders with respect to each trust as if all
deposits, distributions and transfers were made individually.
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SERVICING COMPENSATION
With respect to each trust, the servicer will be entitled to receive a
servicing fee for each collection period in an amount equal to a percentage per
annum specified in the related prospectus supplement of the aggregate contract
value of the trust's receivables as of the first day of the collection period.
The servicing fee will be paid solely from the sources, and at the priority,
specified in the related prospectus supplement.
EVIDENCE AS TO COMPLIANCE
Each sale and servicing agreement will require that a firm of independent
public accountants furnish to the related trustee and indenture trustee annually
a statement as to compliance by the servicer during the preceding twelve months
(or in the case of the first such certificate, from the applicable closing date)
with specified standards relating to the servicing of the applicable
receivables, the servicer's accounting records and computer files and certain
other matters.
Each sale and servicing agreement will also require that an officer of the
servicer deliver to the related trust and indenture trustee, substantially
simultaneously with the delivery of the accountants' statement, a certificate
stating that the servicer has fulfilled its obligations under the sale and
servicing agreement throughout the preceding twelve months (or, in the case of
the first such certificate, from the closing date) or, if there has been a
default in the fulfillment of any such obligation, describing each such default.
Securityholders may obtain copies of such statements and certificates by
written request addressed to the applicable trustee.
RESIGNATION, LIABILITY AND SUCCESSORS OF THE SERVICER
Case Credit will not be permitted to resign from its obligations and duties
as servicer for any trust, except upon determination that Case Credit's
performance of such duties is no longer permissible under applicable law. No
resignation will become effective until the related indenture trustee or a
successor servicer has assumed Case Credit's servicing obligations and duties.
Neither the servicer nor any of its directors, officers, employees and
agents will be under any liability to any trust or the related noteholders or
certificateholders for taking any action or for refraining from taking any
action under the applicable sale and servicing agreement or for errors in
judgment. However, none of the listed parties will be protected against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence in the performance of the servicer's duties thereunder or by
reason of reckless disregard of its obligations and duties thereunder. In
addition, the servicer will not be under any obligation to appear in, prosecute
or defend any legal action that is not incidental to the servicer's servicing
responsibilities under the related sale and servicing agreement and that, in its
opinion, may cause it to incur any expense or liability.
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Upon compliance with procedural requirements specified in the related sale
and servicing agreement, any of the following entities will be the successor of
the servicer under that sale and servicing agreement:
- any entity into which the servicer may be merged or consolidated, or any
entity resulting from any merger or consolidation to which the servicer is
a party,
- any entity succeeding to the business of the servicer, or
- any corporation 50% or more of the voting stock of which is owned,
directly or indirectly, by Case or Case Credit, which assumes the
obligations of the servicer.
SERVICER DEFAULT
The following events will constitute "servicer defaults" under each sale and
servicing agreement:
- the servicer fails to make required deposits or to direct the indenture
trustee to make required distributions, subject to a three business day
cure period after discovery or notice;
- we or the servicer breach our respective obligations under the sale and
servicing agreement, subject to materiality limitations and a 60 day cure
period after notice; and
- bankruptcy or insolvency of the servicer or us.
RIGHTS UPON SERVICER DEFAULT
If a servicer default under a sale and servicing agreement occurs and
remains unremedied, the related indenture trustee or holders of notes of the
related series evidencing at least 25% in outstanding principal amount of such
notes (or of one or more particular classes of such notes, if specified in the
related prospectus supplement) may terminate all the rights and obligations of
the servicer under the sale and servicing agreement. In that event, the
indenture trustee or a successor servicer appointed by the indenture trustee
will succeed to all the responsibilities, duties and liabilities of the servicer
under the sale and servicing agreement and will be entitled to similar
compensation arrangements. If, however, a bankruptcy trustee or similar official
has been appointed for the servicer, and no servicer default other than that
appointment has occurred, the trustee or other official may have the power to
prevent the indenture trustee or noteholders from effecting a transfer of
servicing.
If the indenture trustee is unwilling or 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 $100,000,000 and whose
regular business includes the servicing of equipment receivables. The indenture
trustee may make arrangements for compensation to be paid to the successor
servicer, but the compensation may in no event be greater than the servicing fee
provided for under
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the sale and servicing agreement. Neither the trustee nor the certificateholders
have the right to remove the servicer if a servicer default occurs when any
notes of the same series remain outstanding.
WAIVER OF PAST DEFAULTS
With respect to each trust, unless otherwise provided in the related
prospectus supplement, the holders of notes evidencing at least a majority in
principal amount of the then outstanding notes of the related series may, on
behalf of all noteholders and certificateholders, waive any default by the
servicer in the performance of its obligations under the related sale and
servicing agreement and its consequences, except a default in making any
required deposits to or payments from any of the trust accounts. Therefore, the
noteholders have the ability to waive defaults by the servicer which could
materially adversely affect the certificateholders. In addition, unless
otherwise provided in the related prospectus supplement, the holders of the
related certificates evidencing at least a majority of the outstanding
certificate balance may, on behalf of all noteholders and certificateholders,
waive any servicer default that does not adversely affect the related indenture
trustee or noteholders. None of these waivers will impair the noteholders' or
certificateholders' rights with respect to subsequent defaults.
AMENDMENT
Unless otherwise provided in the related prospectus supplement, each of a
trust's transaction agreements may be amended by the parties to the agreement,
without the consent of the related noteholders or certificateholders, so long as
such action will not, in the opinion of counsel satisfactory to the related
indenture trustee and the related trustee, materially and adversely affect the
interest of any of the trust's noteholders or certificateholders. In addition,
unless otherwise provided in the related prospectus supplement, each of a
trust's transaction agreements may be amended by the parties to the agreement,
without the consent of the related noteholders or certificateholders, to
substitute or add credit enhancement for any class of securities, so long as the
applicable rating agencies confirm in writing that such substitution or addition
will not result in a reduction or withdrawal of the rating of any class of
securities in the related series.
Unless otherwise specified in the related prospectus supplement, each of a
trust's transaction agreements may be amended by the parties to the agreement,
with the consent of the indenture trustee, the holders of notes evidencing at
least a majority in principal amount of then outstanding notes of the related
series and the holders of certificates of such series evidencing at least a
majority of the certificate balance. However, no such amendment may (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the related receivables or distributions that are
required to be made for the benefit of such noteholders or certificateholders or
(b) reduce the required percentage of the notes or
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certificates that are required to consent to any such amendment, without the
consent of the holders of all the outstanding notes or certificates, as the case
may be, of such series.
PAYMENT OF NOTES
Upon the payment in full of all outstanding notes of a given series and the
satisfaction and discharge of the related indenture, the related trustee will
succeed to all the rights of the indenture trustee, and the certificateholders
will succeed to all the rights of the noteholders, under the related sale and
servicing agreement, except as otherwise provided therein in the sale and
servicing agreement.
TERMINATION
With respect to each trust, our obligations and the obligations of the
servicer, the related trustee and the related indenture trustee pursuant to the
trust's transaction agreements will terminate upon (a) the maturity or other
liquidation of the last related receivables and the disposition of any amounts
received upon liquidation of any such remaining receivables and (b) the payment
to noteholders and certificateholders of the related series of all amounts
required to be paid to them pursuant to the transaction agreements. The servicer
will provide notice of any termination of a trust to the applicable trustee and
the indenture trustee. Within five business days of the receipt of notice from
the servicer, the trustee will mail notice of such termination to the
certificateholders. The indenture trustee will mail notice of any such
termination to the noteholders.
ADMINISTRATION AGREEMENT
Case Credit will enter into an administration agreement with each trust and
the related indenture trustee under which Case Credit will act as administrator
for the trust. The administrator will perform on behalf of the trust
administrative obligations required by the related indenture. Unless otherwise
specified in the prospectus supplement for any trust, as compensation for the
performance of the administrator's obligations under the administration
agreement and as reimbursement for its related expenses, the administrator will
be entitled to a quarterly administration fee in an amount equal to $500.
CREDIT AND CASH FLOW ENHANCEMENT
We will describe the amounts and types of credit enhancement arrangements
and the provider of the credit enhancements, if applicable, with respect to each
class of securities of a given series in the related prospectus supplement.
Credit enhancement may be in the form of subordination of one or more classes of
securities, spread accounts, over-collateralization, letters of credit, credit
or liquidity facilities, surety bonds, guaranteed investment contracts, swaps or
other interest rate protection agreements, repurchase obligations, other
agreements with respect to third party
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payments or other support, cash deposits or such other arrangements as may be
described in the related prospectus supplement or any combination of two or more
of the foregoing. Credit enhancement for a class of securities may cover one or
more other classes of securities of the same series, and credit enhancement for
a series of securities may cover one or more other series of securities. Any
credit enhancement that constitutes a guarantee of the applicable securities
will be separately registered under the Securities Act unless exempt from such
registration.
The presence of a spread account and other forms of credit enhancement for
the benefit of any class or series of securities is intended to enhance the
likelihood of receipt by the securityholders of the full amount of principal and
interest due on their securities and to decrease the likelihood that the
securityholders will experience losses. The credit enhancement for a class or
series of securities generally will not provide protection against all risks of
loss and will not guarantee repayment of the entire principal balance, with
interest. If losses occur which exceed the amount covered by any credit
enhancement or which are not covered by any credit enhancement, securityholders
of any class or series will bear their allocable share of deficiencies, as
described in the related prospectus supplement. In addition, if a form of credit
enhancement covers more than one class or series of securities, securityholders
of any one class or series will be subject to the risk that the credit
enhancement will be exhausted by the claims of securityholders of other classes
or series.
We may replace the credit enhancement for any class of securities with
another form of credit enhancement without the consent of securityholders, if
the applicable rating agencies confirm in writing that the substitution will not
result in the reduction or withdrawal of their rating of any class of securities
of the related series.
SPREAD ACCOUNT. If so provided in the related prospectus supplement, the
servicer will establish for a series or class of securities a spread account,
which will be maintained in the name of the applicable indenture trustee. We may
initially fund any spread account by a deposit on the applicable closing date in
an amount set forth in the related prospectus supplement. As further described
in the related prospectus supplement, the amount on deposit in the spread
account may be increased on each payment date up to a balance specified in the
related prospectus supplement by the deposit of collections on the related
receivables remaining after all higher priority payments on that payment date.
We will describe in the related prospectus supplement the circumstances and
manner under which distributions may be made out of the spread account to
holders of securities, to us or to any of our transferees or assignees.
To the extent permitted by the applicable rating agencies, funds in a
trust's spread account may be invested in securities that will not mature prior
to the next payment date. As a result, the amount of cash in a spread account at
any time may be less than the balance of the spread account. If the amount
required to be withdrawn from any spread account to cover shortfalls in
collections on the related receivables
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(as provided in the related prospectus supplement) exceeds the amount of cash in
the spread account, a temporary shortfall in the amounts distributed to the
related noteholders or certificateholders could result, which could, in turn,
increase the average life of the related securities.
We may at any time, without consent of the securityholders, sell or
otherwise transfer our rights to any spread account, if (a) the applicable
rating agencies confirm in writing that doing so will not result in a reduction
or withdrawal of the rating of any class of securities, (b) we provide to the
trustee and the indenture trustee a written opinion from independent counsel to
the effect that the transfer will not cause the trust to be treated as an
association or publicly traded partnership taxable as a corporation for Federal
income tax purposes and (c) the transferee or assignee agrees in writing to take
positions for tax purposes consistent with the tax positions agreed to be taken
by us.
LEGAL ASPECTS OF THE RECEIVABLES
BANKRUPTCY CONSIDERATIONS RELATING TO CASE CREDIT
We and Case Credit will take steps in structuring the transactions described
in this prospectus that are intended to ensure that the voluntary or involuntary
application for relief by Case Credit under the United States Bankruptcy Code or
other insolvency laws will not result in consolidation of our assets and
liabilities with those of Case Credit. These steps include our creation as a
separate, limited-purpose subsidiary pursuant to a certificate of incorporation
containing restrictions on the nature of our business and a restriction on our
ability to commence a voluntary case or proceeding under any insolvency law
without the unanimous affirmative vote of all our directors. However, there can
be no assurance that our activities would not result in a court concluding that
our assets and liabilities should be consolidated with those of Case Credit in a
proceeding under any insolvency law.
In addition, the indenture trustee, the trustee, all noteholders and all
certificateholders will covenant that they will not at any time institute
against us any bankruptcy, reorganization or other proceeding under any federal
or state bankruptcy or similar law.
Case Credit will warrant that each sale of receivables by Case Credit to us
is a valid sale. If Case Credit were to become a debtor in a bankruptcy case,
and a creditor or trustee-in-bankruptcy or Case Credit itself were to take the
position that any sale of receivables to us should instead be treated as a
pledge of the receivables to secure a borrowing by Case Credit, then delays in
payments of collections of receivables to us could occur. If the court ruled in
favor of the creditor, trustee or Case Credit, reductions in the amount of such
payments could result. Also, under these circumstances, Case Credit's bankruptcy
trustee, or Case Credit as debtor-in-possession, will, for a period of time,
have the opportunity to reject any
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lease that is deemed a true lease, which would result in a cancellation of the
remaining scheduled payments under the lease.
If any transfer of receivables to us by Case Credit is treated as a pledge
instead of a sale, a tax or government lien on the property of Case Credit
arising before the transfer of a receivable to us may have priority over our
interest in the receivable. If those transfers are treated as sales, the
receivables would not be part of Case Credit's bankruptcy estate and would not
be available to Case Credit's creditors, except under limited circumstances. In
addition, while Case Credit is the servicer, cash collections on the receivables
may, under some circumstances, be commingled with the funds of Case Credit and,
in the event of the bankruptcy of Case Credit, a trust may not have a perfected
interest in those collections.
In a 1993 case decided by the U.S. Court of Appeals for the Tenth Circuit,
OCTAGON GAS SYSTEM, INC. V. RIMMER, the court determined that "accounts," as
defined under the Uniform Commercial Code, would be included in the bankruptcy
estate of a transferor regardless of whether the transfer is treated as a sale
or a secured loan. Although the receivables are not likely to be viewed as
accounts, many of the accounts are "chattel paper." The rationale behind the
OCTAGON holding is equally applicable to chattel paper. The circumstances under
which the OCTAGON ruling would apply are not fully known and the extent to which
the OCTAGON decision will be followed in other courts or outside of the Tenth
Circuit is not certain. If the holding in the OCTAGON case were applied in a
Case Credit bankruptcy, however, even if the transfer of receivables by Case
Credit to us and by us to the trust were treated as a sale, the receivables
would be part of Case Credit's bankruptcy estate and would be subject to claims
of some of its creditors and delays and reductions in payments to us and
securityholders could result.
BANKRUPTCY CONSIDERATIONS RELATING TO DEALERS
A substantial portion of the receivables was originated by Case dealers and
purchased by Case Credit. A significant portion of those receivables provide for
recourse to the originating dealer for defaults by the obligors. In addition,
Case dealers retain the right to repurchase at any time the receivables they
sell to Case Credit. In the event of a Case dealer's bankruptcy, a creditor or
bankruptcy trustee of the Case dealer or the Case dealer itself might attempt to
characterize the sales of receivables to Case Credit as loans to the Case dealer
secured by the receivables. Such an attempt, if successful, could result in
payment delays or losses on the affected receivables. However, in connection
with the sale of the receivables by Case Credit to us, Case Credit has warranted
that at the time of such sale it had good title to the receivables. Furthermore,
in the event of a Dealer's bankruptcy, a Dealer or its bankruptcy trustee might
also be able to reject any leases originated by the Dealer that were deemed to
be "true leases" resulting in the termination of scheduled payments under those
leases.
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PERFECTION AND PRIORITY WITH RESPECT TO RECEIVABLES
A purchaser of retail installment contracts, retail installment loans or
leases who gives new value and takes possession of the chattel paper that
evidences the retail installment contracts or leases in the ordinary course of
the purchaser's business may have priority over the interest of the related
trust in the retail installment contracts or leases. Any sale of retail
installment contracts or leases that had been sold to a trust would be a
violation of Case Credit's contractual obligations.
SECURITY INTERESTS IN FINANCED EQUIPMENT
In some states, retail installment sale contracts like the ones that may be
included in your trust evidence the credit sale of agricultural, construction
and other equipment. In those states, the contracts also constitute personal
property security agreements and include grants of security interests in the
equipment under the applicable Uniform Commercial Code, as do retail installment
loans made directly by Case Credit. Perfection of security interests in the
equipment is generally governed by the Uniform Commercial Code. However, under
the laws of some other states, perfection of security interests in some
agricultural, construction or other equipment, including trucks, may be governed
by certificate of title registration laws of the state in which the equipment is
located.
Case Credit takes or requires the applicable dealer to take appropriate
action under the laws of each state in which financed equipment is located to
perfect Case Credit's security interest in the equipment. We are required to
repurchase from each trust any retail installment contract or retail installment
loan as to which necessary perfection actions have not been taken prior to the
time of sale to the trust, if the failure to take those actions will materially
adversely affect the interest of the trust in the receivable and the failure is
not cured within a specified grace period. Similarly, Case Credit is required to
repurchase any such receivable if the failure occurred prior to the sale of the
receivable from Case Credit to us. In addition, Case Credit, as the servicer, is
required to take appropriate steps to maintain perfection of security interests
in the financed equipment and is obligated to purchase the related receivable if
it fails to do so. However, because Case Credit does not obtain subordination
agreements from other secured lenders when making dealer loans, any security
interests obtained in connection with those loans may not have first priority
status.
Due to administrative burden and expense, no action will be taken to record
the transfer of security interests from Case Credit to us or from us to the
trust. In most states, an assignment like the sales from Case Credit to us and
from us to each trust is effective to convey a security interest, without any
action to record the transfer of record. In those states, the proper initial
filing of the financing statement relating to the equipment, or, if applicable,
the notation of Case Credit's lien on the certificates of title, will be
sufficient to protect the related trust against the rights of subsequent
purchasers of financed equipment or subsequent lenders who take a security
interest in financed equipment. However, by not identifying a trust as the
secured party on the
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financing statement or certificate of title, the security interest of the trust
in financed equipment could be defeated through fraud or negligence.
In addition, under the laws of most states, liens for repairs performed on
the equipment and liens for unpaid taxes take priority over even a perfected
security interest in equipment. We will represent to each trust that, as of the
date the related receivable is sold to such trust, each security interest in
financed equipment is or will be prior to all other present liens on and
security interests in the financed equipment. However, liens for repairs or
taxes could arise at any time during the term of a receivable. Also, error,
fraud or forgery by the equipment owner or the servicer or administrative error
by state or local agencies could impair a trust's security interest. Neither we
nor the servicer must repurchase a receivable if any of the occurrences
described above, other than any action by the servicer, result in the trust's
losing the priority of its security interest or its security interest in the
financed equipment after the date the security interest was assigned to the
trust.
Under the laws of most states, a perfected security interest in equipment
would continue for four months after the equipment is moved to a state other
than the state in which a financing statement was filed initially to perfect the
security interest, or, if applicable, in which the equipment is initially
registered. With respect to any equipment that is subject to a certificate of
title under the laws of the state in which it is located, a majority of states
generally require a surrender of a certificate of title to re-register the
equipment. Accordingly, a secured party must surrender possession if it holds
the certificate of title to the equipment, or, in the case of equipment
registered in a state providing for the notation of a lien on the certificate of
title but not possession by the secured party, the secured party would receive
notice of surrender if the security interest is noted on the certificate of
title. Thus, the secured party would have the opportunity to re-perfect its
security interest in the equipment in the state of relocation. In states that do
not require a certificate of title for registration of equipment,
re-registration could defeat perfection.
SECURITY INTERESTS IN LEASED EQUIPMENT
When we sell leases to a trust, we also assign to the trust any security or
ownership interest that we hold in the leased equipment. Each lease is either a
"true lease" or a lease intended for security (often referred to as a "finance
lease"). Whether we are deemed to hold a security interest or an ownership
interest in particular leased equipment depends in part upon whether the related
lease is a "true lease" or not.
- --------------------------------------------------------------------------------
"TRUE LEASE" = the lessor (I.E., the originating dealer and its assigns) is
deemed to be the beneficial owner of the leased equipment.
"FINANCE LEASE" (not a true lease) = the lessee is deemed to be the beneficial
owner, and the lessor (or its assignee) is deemed to hold a security interest in
the leased equipment.
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Under applicable state law standards, any lease transferred to a trust that
has a nominal termination value should be deemed to be a finance lease. While
the term "nominal" is not clearly defined for this purpose, it is clear that any
lease with a $1 termination value should be treated as a finance lease. The
treatment of other leases as finance leases or true leases under applicable
state law is less certain, and the applicable prospectus supplement will specify
the extent to which any leases included in the property of the related trust are
thought to be finance leases or true leases or are of uncertain classification.
Case Credit requires dealers that originate leases to obtain a precautionary
first priority perfected security interest in the leased equipment, in case the
leases are deemed to be finance leases. These security interests are transferred
to Case Credit when it purchases the related leases. When Case Credit originates
a lease directly, it also obtains a precautionary first priority perfected
security interest in the leased equipment. As a result of these actions, for
leases that are deemed to be finance leases, Case Credit and its assigns will
have a very similar position to the one described above with respect to retail
installment contracts, and the same repurchase obligations apply if there is no
first priority perfected security interest.
Case Credit also obtains a security interest in leased equipment against
originating Case dealers in case the leased equipment is deemed to be owned by
the dealer, which would be the case for any lease that is deemed to be a true
lease, and the transfer of the leased equipment from the dealer to Case Credit
is not deemed to be a true sale. However, that security interest may not in all
cases have first priority status. The related prospectus supplement will specify
if any leases that might be true leases will be included in the property of a
trust and, if so, whether any filings will be made to perfect a first priority
security interest in the related leased equipment against Case Credit and us, in
case the transfer of such leased equipment from Case Credit to us, or from us to
the applicable trust, respectively, is deemed not to be a true sale. Due to
administrative burden and expense, it is anticipated that those filings (if any)
will cover only a portion of the leased equipment. Competing liens arising in
favor of creditors of the originating dealer, Case Credit or we could take
priority over the interests of the applicable trust in that leased equipment if
the originating dealer, Case Credit or we were not deemed to have made a true
sale and any security interest in the leased equipment granted to Case Credit,
us or the trust, respectively, was not perfected or did not have first priority
status. Also, Case Credit does not obtain a perfected security interest in
leased equipment against originating non-Case dealers.
BANKRUPTCY CONSIDERATIONS RELATING TO A LESSEE
If the lessee under any lease included in the property of a trust becomes a
debtor in federal bankruptcy proceedings or any similar applicable state law
proceedings, the trust may be delayed or prevented from enforcing some of its
rights under the leases and obtaining possession of the leased equipment from
the lessee. The precise
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treatment of a lease in bankruptcy proceedings generally will depend upon
whether the bankruptcy court finds the lease to be a true lease or a finance
lease.
If a given lease is a "finance lease," its treatment in bankruptcy will be
similar to the treatment of a retail installment contract. The trust will have a
bankruptcy claim equal to the outstanding amount of the deemed "loan" to the
lessee, which claim will generally have the benefit of a perfected security
interest in the leased equipment, subject to the qualifications set out under
"--Security Interests in Financed Equipment" above. If a given lease is a true
lease, the lessee's bankruptcy trustee or the lessee will, for a period of time,
have the opportunity to either assume or reject the lease. The precise length of
this period of time will be difficult to predict in any given case, and the
bankruptcy trustee or the lessee will have possession of the leased equipment
during such period.
If a lease is assumed, the bankruptcy trustee or the lessee must:
- cure any default, other than a default based on the lessee's bankruptcy or
financial condition, and possibly other non-monetary defaults; or
- provide adequate assurance of a prompt cure; and,
- if there has been a prepetition default, provide adequate assurance of
future performance under the lease.
If a lease is rejected:
- the scheduled payments due thereafter under the lease will be canceled;
- the trust will generally be able to obtain possession of the leased
equipment; and
- the trust will be entitled to assert an unsecured claim for damages
resulting from the rejection of the lease.
REPOSSESSION
Upon a default by an equipment purchaser, the holder of a retail installment
sale contract, loan or a lease that is treated as a personal property security
interest, has all the remedies of a secured party under the Uniform Commercial
Code, except where specifically limited by other state laws. Under those
remedies, the secured party may perform self-help repossession unless it would
constitute a breach of the peace. Self-help is the method employed by the
servicer in most cases and is accomplished simply by retaking possession of the
financed or leased equipment. Some jurisdictions require that the obligor be
notified of the default and be given time to cure the default prior to
repossession. Generally, the right of reinstatement may be exercised on a
limited number of occasions in any one-year period. 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 equipment must then be repossessed in accordance with that order.
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NOTICE OF SALE; REDEMPTION RIGHTS
The Uniform Commercial Code and other state laws require a secured party to
provide an obligor with reasonable notice of the date, time and place of any
public sale and/or the date after which any private sale of collateral may be
held. The obligor has the right to redeem the collateral prior to actual sale by
paying the secured party the unpaid principal balance of the obligation plus
reasonable expenses for repossessing, holding and preparing the collateral for
disposition and arranging for its sale, plus, in some jurisdictions, reasonable
attorneys' fees, or, in some states, by payment of delinquent installments or
the unpaid balance.
UNIFORM COMMERCIAL CODE CONSIDERATIONS
Many states have adopted a version of Article 2A of the Uniform Commercial
Code that purports to codify many provisions of existing common law. Although
there is little precedent regarding how Article 2A will be interpreted, it may,
among other things, limit the enforceability of any "unconscionable" lease or
"unconscionable" provision in a lease, provide a lessee with remedies, including
the right to cancel the lease, for certain lessor breaches or defaults, and may
add to or modify the terms of "consumer leases" and leases where the lessee is a
"merchant lessee." However, Case Credit will represent in each sale and
servicing agreement that, to the best of its knowledge, each lessee has accepted
the equipment leased to it and, after reasonable opportunity to inspect and
test, has not notified Case Credit of any defects. Article 2A does, however,
recognize typical commercial lease "hell or high water" rental payment clauses
and validates reasonable liquidated damages provisions in the event of lessor or
lessee defaults. Article 2A also recognizes the concept of freedom of contract
and permits the parties in a commercial context a wide degree of latitude to
vary provisions of the law.
VICARIOUS TORT LIABILITY
Although each trust will or may own the leased equipment related to each
lease purchased by that trust that is treated as a true lease, the leased
equipment will be operated by the related lessees and their respective invitees.
State laws differ as to whether anyone suffering injury to person or property
involving leased agricultural, construction or other equipment may bring an
action upon which relief may be granted against the owner of the equipment by
virtue of that ownership. To the extent applicable law permits such an action
and such an action is successful, the related trust and its assets may be
subject to liability to the injured party. If vicarious liability were imposed
on a trust as owner of leased equipment, and the coverage provided by any
available insurance is insufficient to cover the loss, you could incur a loss on
your investment.
Lessees are required to obtain and maintain physical damage insurance and
liability insurance. Dealers are responsible for verifying physical damage
insurance on the leased equipment at the time the lease is originated. If a
dealer fails to verify
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physical damage insurance coverage and the lessee did not obtain insurance
coverage at the time the lease was originated, the dealer is required to
repurchase the lease. If insurance has lapsed or has not been maintained in full
force and effect, the dealers will not be obligated to repurchase the lease.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS; OTHER LIMITATIONS
The proceeds of resale of equipment generally will be applied first to the
expenses of resale and repossession and then to the satisfaction of the
indebtedness. Some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness. In other states, a deficiency judgment against the debtor can be
sought for the shortfall. However, because a defaulting obligor may have very
little capital or sources of income available following repossession, in many
cases it may not be useful to seek a deficiency judgment. If one is obtained, it
may be uncollectible or settled at a significant discount.
Occasionally, after resale of the equipment and payment of all expenses and
all indebtedness, there is a surplus of funds. In that case, the Uniform
Commercial Code requires the creditor to remit the surplus to any holder of a
lien on the equipment or, if no such lienholder exists, to the former owner of
the equipment.
Courts have applied general equitable principles to secured parties pursuing
repossession and 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.
In several cases, obligors have asserted that the self-help remedies of
secured parties under the Uniform Commercial Code 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
Uniform Commercial Code 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 borrowers. As to leases, some
jurisdictions require that a lessee be notified of a default and given a time
period within which to cure the default prior to repossession of leased
equipment.
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 11, 12 or 13 proceeding under the federal bankruptcy law, a court may
prevent a creditor from repossessing equipment, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the market
value of the equipment at the time of bankruptcy (as determined by the court),
leaving the creditor as a general unsecured creditor for the remainder of the
indebtedness. A bankruptcy court may also reduce the monthly
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payments due under a contract or change the rate of interest and time of
repayment of the indebtedness.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders, lessors and servicers involved in
consumer finance. 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 and lessors who fail to comply with their
provisions. In some cases, this liability could affect an assignee's ability to
enforce consumer finance contracts. Some of the receivables may be deemed to be
consumer finance contracts under applicable federal or state laws.
Case Credit warrants to us upon each sale of receivables that each
receivable sold complies with all requirements of law in all material respects.
We make similar warranties to each trustee. Accordingly, if an obligor has a
claim against the related trust for violation of any law and such claim
materially and adversely affects the trust's interest in a receivable, the
violation would be a breach of our warranties and would create an obligation on
our part to repurchase the receivable unless the breach is cured. Our obligation
to repurchase any receivables in these circumstances is subject to Case Credit's
repurchase of the receivables. If the claim existed at the time Case Credit sold
the receivable to us, the violation would also be a breach of Case Credit's
warranties, and Case Credit would be required to repurchase the receivable
unless the breach is cured.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material Federal income tax consequences
of the purchase, ownership and disposition of the notes and certificates. This
summary is based upon current provisions of the Internal Revenue Code of 1986,
called the "CODE", proposed, temporary and final Treasury regulations
thereunder, and published rulings and court decisions currently in effect. The
current tax laws and the current regulations, rulings and court decisions may be
changed, possibly retroactively. The portions of this summary which relate to
matters of law or legal conclusions represent the opinion of Mayer, Brown &
Platt, special Federal tax counsel for each trust, as qualified in this summary.
Mayer, Brown & Platt have prepared or reviewed the statements in this prospectus
under the heading "U.S. Federal Income Tax Consequences," and are of the opinion
that they are correct in all material respects.
The following summary does not furnish information in the level of detail or
with the attention to an investor's specific tax circumstances that would be
provided by an investor's own tax advisor. For example, it does not discuss the
tax consequences of the purchase, ownership and disposition of the notes and
certificates by investors that are subject to special treatment under the
Federal income tax laws, including banks
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and thrifts, insurance companies, regulated investment companies, dealers in
securities, holders that will hold the notes or certificates as a position in a
"straddle" for tax purposes or as a part of a "synthetic security" or
"conversion transaction" or other integrated investment comprised of the notes
or certificates and one or more other investments, trusts and estates and
pass-through entities, the equity holders of which are any of these specified
investors. In addition, the discussion regarding the notes and certificates is
limited to the Federal income tax consequences of the initial investors and not
a purchaser in the secondary market and to investors who have purchased notes
and who hold those notes as capital assets within the meaning of Section 1221 of
the Code.
Each trust will be provided with an opinion of Mayer, Brown & Platt
regarding certain Federal income tax matters discussed below. An opinion of
Mayer, Brown & Platt, however, is not binding on the Internal Revenue Service,
called the "IRS," or the courts. Moreover, there are no cases or IRS rulings on
similar transactions involving both debt and equity interests issued by a trust
with terms similar to those of the notes and the certificates. As a result, the
IRS may disagree with all or a part of the discussion below. No ruling on any of
the issues discussed below will be sought from the IRS. For purposes of the
following summary, references to the trust, the notes, the certificates and
related terms, parties and documents refer, unless otherwise specified, to each
trust and the notes, certificates and related terms, parties and documents
applicable to that trust.
TAX CHARACTERIZATION OF THE TRUST
Mayer, Brown & Platt is of the opinion that the trust will not be an
association (or publicly traded partnership) taxable as a corporation for
Federal income tax purposes. This opinion is based on the assumption of
compliance by all parties with the terms of the trust agreement and related
documents.
If the trust were taxable as a corporation for Federal income tax purposes,
the trust would be subject to corporate income tax on its taxable income. The
trust's taxable income would include all its income on the receivables, possibly
reduced by its interest expense on the notes. Any corporate income tax imposed
on the trust could materially reduce cash available to make payments on the
notes and distributions on the certificates, and certificateholders could be
liable for any tax that is unpaid by the trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. We will agree, and if you purchase
notes, you will agree by your purchase of the notes, to treat the notes as debt
for Federal, state and local income and franchise tax purposes. Mayer, Brown &
Platt is of the opinion that the notes will be classified as debt for Federal
income tax purposes. The discussion below assumes the notes are classified as
debt for Federal income tax purposes.
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OID, INDEXED SECURITIES, ETC. The discussion below assumes that all
payments on the notes are denominated in U.S. dollars, and that the notes are
not indexed securities or strip notes. Additionally, the discussion assumes that
the interest formula for the notes meets the requirements for "qualified stated
interest" under Treasury regulations, called the "OID REGULATIONS," relating to
original issue discount, or "OID." This discussion assumes that any OID on the
notes is a DE MINIMIS amount, within the meaning of the OID Regulations. Under
the OID Regulations, the notes will have OID to the extent the principal amount
of the notes exceeds their issue price. Further, if the notes have any OID, it
will be DE MINIMIS if it is less than 1/4% of the principal amount of the notes
multiplied by the number of full years included in their term. If these
conditions are not satisfied with respect to any given series of notes and as a
result the notes are treated as issued with OID, additional tax considerations
for these notes will be disclosed in the applicable prospectus supplement.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, except as
discussed below, the notes will not be considered issued with OID. If you buy
notes, you will be required to report as ordinary interest income the stated
interest on the notes when received or accrued in accordance with your method of
tax accounting. Under the OID Regulations, if you hold a note issued with a DE
MINIMIS amount of OID, you must include this OID in income, on a pro rata basis,
as principal payments are made on the note. If you purchase a note for more or
less than its principal amount, you will generally be subject, respectively, to
the premium amortization or market discount rules of the Code.
If you have purchased a note that has a fixed maturity date of not more than
one year from the issue date of the note, called a "SHORT-TERM NOTE", you may be
subject to special rules. Under the OID Regulations, all stated interest on a
Short-Term Note will be treated as OID. If you are an accrual basis holder of a
Short-Term Note or a cash basis holder specified in Section 1281 of the Code,
including regulated investment companies, you will generally be required to
report interest income as OID accrues on a straight-line basis over the term of
each interest period. If you are a cash basis holder of a Short-Term Note other
than those specified in Section 1281, you will, in general, be required to
report interest income as interest is paid, or, if earlier, upon the taxable
disposition of the Short-Term Note. However, if you are a cash basis holder of a
Short-Term Note reporting interest income as it is paid, you may be required to
defer a portion of any interest expense otherwise deductible on indebtedness
incurred to purchase or carry the Short-Term Note. This interest expense would
be deferred until the taxable disposition of the Short-Term Note. If you are a
cash basis taxpayer, you may elect under Section 1281 of the Code to accrue
interest income on all nongovernment debt obligations with a term of one year or
less. If you have so elected, you would include OID on the Short-Term Note in
income as it accrues, but you would not be subject to the interest expense
deferral rule. Special
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rules not discussed in this summary apply to a Short-Term Note purchased for
more or less than its principal amount.
SALE OR OTHER DISPOSITION. If you sell a note, you will recognize gain or
loss in an amount equal to the difference between the amount realized on the
sale and your adjusted tax basis in the note. The adjusted tax basis of a note
will equal your cost for the note, increased by any market discount, OID and
gain previously included in your income with respect to the note and decreased
by the amount of premium, if any, previously amortized and by the amount of
principal payments you have previously received with respect to the note. Any
gain or loss will be capital gain or loss, except for gain representing accrued
interest and accrued market discount not previously included in income. Capital
losses generally may be used by a corporate taxpayer only to offset capital
gains, and by an individual taxpayer only to the extent of capital gains plus
$3,000 of other income. In the case of an individual taxpayer, any capital gain
on the sale of a note will be taxed at a maximum rate of 39.6% if the note is
held for not more than 12 months and at a maximum rate of 20% if the note is
held for more than 12 months.
FOREIGN HOLDERS. If you are a nonresident alien, foreign corporation or
other non-United States person, called a "FOREIGN PERSON," any interest paid or
accrued to you will generally be considered "PORTFOLIO INTEREST," and generally
will not be subject to United States Federal income tax and withholding tax, if
the interest is not effectively connected with the conduct of a trade or
business within the United States by you and you:
- are not actually or constructively a "10 percent shareholder" of the trust
or us, including a holder of 10% of the outstanding certificates, or a
"controlled foreign corporation" with respect to which we or the trust are
a "related person" within the meaning of the Code; and
- satisfy the statement requirement set forth in section 871(h) and section
881(c) of the Code and the regulations thereunder.
To satisfy this statement requirement, you, or a financial institution holding
the note on your behalf, must provide, in accordance with specified procedures,
a paying agent of the trust with a statement to the effect that you are not a
United States person. Currently these requirements will be met if you provide
your name and address, and certify, under penalties of perjury, that you are not
a United States person (which certification may be made on an IRS Form W-8 or on
new IRS Form W-8BEN), or if a financial institution holding the note on your
behalf certifies, under penalties of perjury, that the required statement has
been received by it and furnishes a paying agent with a copy of the statement.
Under recently finalized Treasury regulations, called the "FINAL REGULATIONS,"
the statement requirement may also be satisfied with other documentary evidence
with respect to an offshore account or through certain foreign intermediaries.
The Final Regulations will generally be effective for payments
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made after December 31, 2000. We recommend that you consult your own tax
advisors regarding the Final Regulations.
If you are a foreign person and interest paid or accrued to you is not
"portfolio interest," then it will be subject to a 30% withholding tax unless
you provide the trust or its paying agent, as the case may be, with a properly
executed:
- IRS Form 1001, or new IRS Form W-8BEN, claiming an exemption from
withholding tax or a reduction in withholding tax under the benefit of a
tax treaty, or
- IRS Form 4224, or new IRS Form W-8ECI, stating that interest paid on the
note is not subject to withholding tax because it is effectively connected
with your conduct of a trade or business in the United States.
If you are a foreign person engaged in a trade or business in the United
States and interest on the note is effectively connected with the conduct of the
trade or business, although you will be exempt from the withholding tax
discussed above, you will be subject to United States Federal income tax on your
interest on a net income basis in the same manner as if you were a United States
person. In addition, if you are a foreign corporation, you may be subject to a
branch profits tax equal to 30%, or lower treaty rate, of your effectively
connected earnings and profits for the taxable year, subject to adjustments.
If you are a foreign person, any capital gain realized by you on the sale,
redemption, retirement or other taxable disposition of a note by you will be
exempt from United States Federal income and withholding tax; PROVIDED that:
- the gain is not effectively connected with the conduct of a trade or
business in the United States by you, and
- if you are an individual foreign person, you have not been present in the
United States for 183 days or more in the taxable year.
BACKUP WITHHOLDING. If you are not an exempt holder including a
corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident, you will be required to provide,
under penalties of perjury, a certificate containing your name, address, correct
federal taxpayer identification number and a statement that you are not subject
to backup withholding. If you are not an exempt holder and you fail to provide
the required certification, the trust will be required to withhold 31% of the
amount otherwise payable to you, and remit the withheld amount to the IRS as a
credit against your Federal income tax liability. The Final Regulations make
modifications to the backup withholding rules. We recommend that you consult
your own tax advisors regarding the Final Regulations.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion
of Mayer, Brown & Platt, the IRS successfully asserted that one or more of the
notes did not
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represent debt for Federal income tax purposes, the notes might be treated as
equity interests in the trust. In this case, the trust would be treated as a
publicly traded partnership. This publicly traded partnership would not,
however, be taxable as a corporation because it would meet certain qualifying
income tests. Nonetheless, treatment of the notes as equity interests in a
publicly traded partnership could have adverse tax consequences to you. For
example, if you are a foreign person, income to you might be subject to U.S. tax
and U.S. tax return filing and withholding requirements, and if you are an
individual holder, you might be subject to certain limitations on your ability
to deduct your share of trust expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
The following discussion applies only to the extent certificates are offered
in a related prospectus supplement. Until that time, because the certificates
will be held solely by us or one of our affiliates, under current Treasury
regulations, the trust will be disregarded as an entity separate from us or one
of our affiliates, for Federal income tax purposes.
TREATMENT OF THE TRUST AS A PARTNERSHIP. We and the servicer will agree,
and you will agree by your purchase of certificates, to treat the trust as a
partnership for purposes of Federal and state income tax, franchise tax and any
other tax measured in whole or in part by income. The assets of the partnership
will be the assets held by the trust, the partners of the partnership will be
the certificateholders, including us in our capacity as recipient of
distributions from any account specified in the related prospectus supplement in
which we have an interest, and the notes will be debt of the partnership.
However, the proper characterization of the arrangement involving the trust, the
certificates, the notes, us and the servicer is not clear because there is no
authority on transactions closely comparable to this arrangement.
A variety of alternative characterizations are possible. For example,
because the certificates have certain features characteristic of debt, the
certificates might be considered our debt or debt of the trust. Any such
characterization should not result in materially adverse tax consequences to
certificateholders compared to the consequences from treatment of the
certificates as equity in a partnership, described below. The following
discussion assumes that the certificates represent equity interests in a
partnership.
INDEXED SECURITIES, ETC. The following discussion assumes that all payments
on the certificates are denominated in U.S. dollars, none of the certificates
are indexed securities or strip certificates and a series of securities includes
a single class of certificates. If these conditions are not satisfied with
respect to any given series of certificates, additional tax considerations with
respect to those certificates will be disclosed in the applicable prospectus
supplement.
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PARTNERSHIP TAXATION. As a partnership, the trust will not be subject to
Federal income tax. Rather, you will be required to separately take into account
your accruals of guaranteed payments from the trust and your allocated share of
other income, gains, losses, deductions and credits of the trust. The trust's
income will consist primarily of interest and finance charges earned on the
receivables, including appropriate adjustments for market discount, OID and
premium, and any gain upon collection or disposition of receivables. The trust's
deductions will consist primarily of interest accruing on the notes, guaranteed
payments on the certificates, servicing and other fees, and losses or deductions
upon collection or disposition of receivables.
Under the trust agreement, interest payments on the certificates, including
interest on amounts previously due on the certificates but not yet distributed,
will be treated as "guaranteed payments" under Section 707(c) of the Code.
Guaranteed payments are payments to partners for the use of their capital and,
in the present circumstances, are treated as deductible to the trust and as
ordinary income to you. The trust will have a calendar year tax year and will
deduct the guaranteed payments under the accrual method of accounting. If you
use a calendar year tax year, you will be required to include the accruals of
guaranteed payments in income in your taxable year that corresponds to the year
in which the trust deducts the payments. If you use a taxable year other than a
calendar year, you will be required to include the payments in income in your
taxable year that includes the December 31 of the trust year in which the trust
deducts the payments. It is possible that guaranteed payments will not be
treated as interest for all purposes of the Code.
In addition, the trust agreement will provide, in general, that you will be
allocated taxable income of the trust for each collection period equal to the
sum of:
- any trust income attributable to discount on the receivables that
corresponds to any excess of the principal amount of the certificates over
their initial issue price;
- prepayment premium, if any, payable to you for such month; and
- any other amounts of income payable to you for the month.
This allocation will be reduced by any amortization by the trust of premium on
receivables corresponding to any excess of the issue price of certificates over
their principal amount. All remaining items of income, gain, loss and deduction
of the trust will be allocated to us.
Based upon the economic arrangement of the parties, this approach for
accruing guaranteed payments and allocating trust income should be permissible
under applicable Treasury regulations. However, no assurance can be given that
the IRS would not require a greater amount of income to be allocated to you.
Moreover, even under the method of allocation described above, you may be
subject to tax on income equal to the interest rate on the certificates PLUS the
other items described above even though the trust might not have sufficient cash
to make current cash distributions of
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this amount. Thus, if you are a cash basis taxpayer, you will in effect be
required to report income from the certificates on the accrual basis and you may
become liable for taxes on trust income even if you have not received cash from
the trust to pay those taxes. In addition, because tax allocations and tax
reporting will be done on a uniform basis for all certificateholders but
certificateholders may be purchasing certificates at different times and at
different prices, you may be required to report on your tax returns taxable
income that is greater or less than the amount reported to you by the trust.
Most of the guaranteed payments and taxable income allocated to a
certificateholder that is a pension, profit-sharing or employee benefit plan or
other tax-exempt entity, including an individual retirement account, will
constitute "unrelated debt-financed income" generally taxable to the holder
under the Code.
Your share of expenses of the trust, including fees to the servicer but not
interest expense, would be miscellaneous itemized deductions. These deductions
might be disallowed to you in whole or in part and, as a result, you might be
taxed on an amount of income that exceeds the amount of cash actually
distributed to you over the life of the trust. It is not clear if these rules
would apply to a certificateholder who accrues guaranteed payments.
The trust intends to make all tax calculations for income and allocations to
certificateholders on an aggregate basis. If the IRS were to require that these
calculations be made separately for each receivable, the trust might be required
to incur additional expense, but it is believed that there would not be a
material adverse effect on you.
DISCOUNT AND PREMIUM. The purchase price paid by the trust for the
receivables may be greater or less than the remaining principal balance of the
receivables at the time of purchase. If so, the receivables will have been
acquired at a premium or discount, respectively. As indicated above, the trust
will make this calculation on an aggregate basis, but might be required to
recompute it on a receivable-by-receivable basis.
If the trust acquires the receivables at a market discount or premium, the
trust will elect to include any discount in income currently as it accrues over
the life of the receivables or to offset any premium against interest income on
the receivables. As indicated above, a portion of any market discount income or
premium deduction may be allocated to you.
SECTION 708 TERMINATION. Under Section 708 of the Code, the trust will be
deemed to terminate for Federal income tax purposes if 50% or more of the
capital and profits interests in the trust are sold or exchanged within a
12-month period. Under current Treasury regulations, if a termination occurs,
the trust will be considered to have contributed the assets of the trust,
constituting the old partnership, to a new partnership in exchange for interests
in the new partnership. Such interest would be deemed distributed to the
partners of the old partnership in liquidation
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thereof. The trust will not comply with certain technical requirements that
might apply if a constructive termination occurs. As a result, the trust may be
subject to certain tax penalties and may incur additional expenses if it is
required to comply with those requirements. Furthermore, the trust might not be
able to comply due to lack of data.
DISPOSITION OF CERTIFICATES. Generally, capital gain or loss will be
recognized on a sale of certificates in an amount equal to the difference
between the amount realized and your tax basis in the certificates sold. Your
tax basis in a certificate will generally equal your cost for the certificate
increased by your share of trust income and accruals of guaranteed payments
(includible in income) and decreased by any distributions received by you with
respect to the certificate. In addition, both the tax basis in the certificates
and the amount realized on a sale of a certificate would include your share of
the notes and other liabilities of the trust. If you acquire certificates at
different prices, you may be required to maintain a single aggregate adjusted
tax basis in the certificates, and, upon sale or other disposition of some of
the certificates, allocate a pro rata portion of the aggregate tax basis to the
certificates sold rather than maintaining a separate tax basis in each
certificate for purposes of computing gain or loss on a sale of that
certificate.
Any gain on the sale of a certificate attributable to your share of
unrecognized accrued market discount on the receivables would generally be
treated as ordinary income to you and would give rise to special tax reporting
requirements. The trust does not expect to have any other assets that would give
rise to these special reporting requirements. Thus, to avoid those special
reporting requirements, the trust will elect to include market discount in
income as it accrues.
If you are required to recognize an aggregate amount of income, not
including income attributable to disallowed itemized deductions described above,
over the life of the certificates that exceeds the aggregate cash distributions
paid to you on the certificates, this excess will generally give rise to a
capital loss upon the retirement of the certificates.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the trust's
taxable income and losses will be determined monthly and the tax items and
accruals of guaranteed payments for a particular calendar month will be
apportioned among the certificateholders in proportion to the principal amount
of certificates owned by them as of the close of the last day of such month. As
a result, you may be allocated tax items and accruals of guaranteed payments,
which will affect your tax liability and tax basis, attributable to periods
before you purchased your certificates.
The use of a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed, or only applies to
transfers of less than all of the partner's interest, taxable income or losses
and accruals of guaranteed payments of the trust might be reallocated among the
certificateholders. We are authorized to revise the trust's method of allocation
between transferors and transferees to conform to a method permitted by future
Treasury regulations.
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SECTION 754 ELECTION. If a certificateholder sells its certificates at a
profit (loss), the purchasing certificateholder will have a higher (lower) basis
in the certificates than the selling certificateholder had. The tax basis of the
trust's assets will not be adjusted to reflect that higher (or lower) basis
unless the trust were to file an election under Section 754 of the Code. In
order to avoid the administrative complexities that would be involved in keeping
accurate accounting records, as well as potentially onerous information
reporting requirements, the trust will not make this election. As a result, you
might be allocated a greater or lesser amount of trust income than would be
appropriate based upon your own purchase price for certificates.
ADMINISTRATIVE MATTERS. The trustee is required to keep or have kept
complete and accurate books of the trust. These books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the trust will be the calendar year. The trustee will file a partnership
information return on IRS Form 1065 with the IRS for each taxable year of the
trust and will report each certificateholder's accruals of guaranteed payments
and allocable share of items of trust income and expense to certificateholders
and the IRS on Schedule K-1. The trust will provide the Schedule K-1 information
to nominees that fail to provide the trust with the information statement
described below and these nominees will be required to forward such information
to the beneficial owners of the certificates. Generally, you must file tax
returns that are consistent with the information return filed by the trust or be
subject to penalties unless you notify the IRS of all inconsistencies.
Under Section 6031 of the Code, any person that holds certificates as a
nominee at any time during a calendar year is required to furnish the trust with
a statement containing certain information on the nominee, the beneficial owners
and the certificates so held. This information includes the name, address and
taxpayer identification number of the nominee, and, as to each beneficial owner:
- the name, address and taxpayer identification number of that person,
- whether that person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly-owned
agency or instrumentality of a foreign government or an international
organization, and
- certain information on certificates that were held, bought or sold on
behalf of that person throughout the year.
In addition, brokers and financial institutions that hold certificates through a
nominee are required to furnish directly to the trust information regarding
themselves and their ownership of certificates. A clearing agency registered
under Section 17A of the Securities Exchange Act is not required to furnish this
information statement to the trust. The information referred to above for any
calendar year must be furnished to the trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the trust
with the information described above may be subject to penalties.
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We will be designated as the tax matters partner in the trust agreement and,
as such, will be responsible for representing you in any dispute with the IRS.
The Code provides for administrative examination of a partnership as if the
partnership were a separate and distinct taxpayer. Generally, the statute of
limitations for partnership items does not expire before three years after the
date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the trust by the appropriate
taxing authorities could result in an adjustment of your tax returns, and, under
certain circumstances, you may be precluded from separately litigating a
proposed adjustment to the items of the trust. An adjustment could also result
in an audit of your tax returns and adjustments of items not related to the
income and losses of the trust.
TAX CONSEQUENCES TO FOREIGN CERTIFICATEHOLDERS. It is not clear whether the
trust would be considered to be engaged in a trade or business in the United
States for purposes of Federal withholding taxes on non-U.S. persons because
there is no clear authority dealing with this issue under facts substantially
similar to ours. Although it is not expected that the trust would be engaged in
a trade or business in the United States for these purposes, the trust will
withhold as if it were so engaged in order to protect the trust from possible
adverse consequences of a failure to withhold. The trust expects to withhold
pursuant to Section 1446 of the Code, on the portion of its taxable income
allocable to foreign certificateholders as if this income were effectively
connected to a U.S. trade or business, at a rate of 35% for foreign
certificateholders that are taxable as corporations and 39.6% for all other
foreign certificateholders. Subsequent adoption of Treasury regulations or the
issuance of other administrative pronouncements may require the trust to change
its withholding procedures. In determining a certificateholder's nonforeign
status, the trust may rely on IRS Form W-8, new IRS Form W-8BEN, IRS Form W-9 or
the certificateholder's certification of nonforeign status signed under
penalties of perjury.
Each foreign certificateholder might be required to file a U.S. individual
or corporate income tax return and pay U.S. income tax on the amount computed
therein, including, in the case of a corporation, the branch profits tax, on its
share of accruals of guaranteed payments and the trust's income. Each foreign
certificateholder must obtain a taxpayer identification number from the IRS and
submit that number to the trust on Form W-8 or new IRS Form W-8BEN in order to
assure appropriate crediting of the taxes withheld. A foreign certificateholder
generally would be entitled to file with the IRS a claim for refund for taxes
withheld by the trust, taking the position that no taxes were due because the
trust was not engaged in a U.S. trade or business. However, the IRS may assert
that additional taxes are due, and no assurance can be given as to the
appropriate amount of tax liability.
BACKUP WITHHOLDING. Distributions made on the certificates and proceeds
from the sale of the certificates will be subject to a "backup" withholding tax
of 31% if, in general, you fail to comply with certain identification
procedures, unless you are an exempt recipient under applicable provisions of
the Code. The Final Regulations
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discussed above contain modifications to the backup withholding and information
reporting rules. We recommend that you consult your own tax advisors regarding
the Final Regulations. See "--Tax Consequences to Holders of the Notes--Backup
Withholding."
ILLINOIS STATE TAX CONSEQUENCES
The following is a summary of the material Illinois income tax consequences
of the purchase, ownership and disposition of the notes and certificates. This
summary is based upon current provisions of Illinois statutes and regulations,
and applicable judicial or ruling authority. The current Illinois statutes and
regulations, and judicial and ruling authority may be changed, possibly
retroactively. The portions of the following summary that relate to matters of
law or legal conclusions represent the opinion of Mayer, Brown & Platt, special
Illinois tax counsel for each trust subject to the qualifications set forth in
this summary. Mayer, Brown & Platt have prepared or reviewed the statements in
this prospectus under the heading "Illinois State Tax Consequences" and are of
the opinion that they are correct in all material respects.
Each trust will be provided with an opinion of Illinois tax counsel
regarding Illinois income tax matters discussed below. An opinion of Illinois
tax counsel, however, is not binding on the Illinois Department of Revenue,
called the "IDOR", or the courts. Additionally, there are no cases or IDOR
rulings on similar transactions involving both debt and equity interests issued
by a trust with terms similar to those of the notes and the certificates. As a
result, the IDOR may disagree with all or a part of the discussion below. No
ruling on any of the issues discussed below will be sought from the IDOR.
The State of Illinois imposes a state income tax on individuals,
corporations, partners in partnerships and beneficiaries of trusts earning
income in, or as residents of, the State of Illinois. The State of Illinois
imposes a Personal Property Replacement Income Tax, called the "ILLINOIS
REPLACEMENT TAX", on individuals, corporations, partnerships and trusts earning
income in, or as residents of, the State of Illinois. The State of Illinois also
imposes a franchise tax on corporations doing business in Illinois. If the
certificates were treated as equity interests in a partnership, the partnership
may be subject to the Illinois Replacement Tax.
TREATMENT OF THE NOTES
If the notes are characterized as indebtedness for Federal income tax
purposes, in the opinion of Illinois tax counsel, although the matter is not
free from doubt, this treatment would also apply for Illinois tax purposes. If
the notes are characterized as debt, noteholders not otherwise subject to
taxation in Illinois will not, although the matter is not free from doubt,
become subject to such taxes solely because of their ownership of notes.
Noteholders already subject to taxation in Illinois, however, could be required
to pay tax on, or measured by, interest income, including original issue
discount, if any, generated by, and on gain from the disposition of, notes.
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CLASSIFICATION OF TRUST AS A PARTNERSHIP
If a trust were treated as a partnership, not taxable as a corporation, for
Federal income tax purposes, in the opinion of Illinois tax counsel, although
the matter is not free from doubt, the same treatment would also apply for
Illinois tax purposes. In such case, the partnership may be treated as earning
income in the State of Illinois and therefore would be subject to the Illinois
Replacement Tax. If this tax were applicable, distributions to noteholders and
certificateholders could be reduced.
TREATMENT OF NONRESIDENT CERTIFICATEHOLDERS
Under current law, certificateholders that are nonresidents of the State of
Illinois and are not otherwise subject to Illinois income tax and Illinois
Replacement Tax should not be subject to Illinois income tax and Illinois
Replacement Tax on income from a trust. In any event, classification of the
arrangement as a partnership would not cause a certificateholder not otherwise
subject to taxation in Illinois to pay Illinois tax on income beyond that
derived from the certificates. Certificateholders already subject to taxation in
Illinois, however, could be required to pay tax on, or measured by, interest
income, including original issue discount, if any, generated by, and on gain
from the disposition of, notes and certificates.
RISKS OF ALTERNATIVE CHARACTERIZATION
If the trust were instead treated as an association taxable as a corporation
or a "publicly traded partnership" taxable as a corporation for Federal income
tax purposes, then the trust could be subject to the Illinois income tax, the
Illinois Replacement Tax, or the Illinois franchise tax. If any of these taxes
were applicable, distributions to certificateholders could be reduced.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "BENEFIT PLAN"), from engaging
in certain transactions with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Internal Revenue Code with respect to the
Benefit Plan. A violation of these "prohibited transaction" rules may result in
an excise tax or other penalties and liabilities under ERISA and the Code for
these persons.
Certain transactions involving the trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased notes or certificates if assets of the trust were deemed to be
assets of the Benefit Plan. Under a regulation issued by the United States
Department of Labor relating to plan assets, the assets of the trust would be
treated as plan assets of a Benefit Plan for the purposes of ERISA and the Code
only if the Benefit Plan acquired an "equity interest" in the trust and none of
the exceptions contained in the plan assets
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regulation was applicable. An equity interest is defined under the plan assets
regulation as an interest other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features. The likely treatment in this context of notes and certificates of a
given series will be discussed in the related prospectus supplement.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
A plan fiduciary considering the purchase of securities of a given series
should consult its tax and/or legal advisors regarding whether the assets of the
related trust would be considered plan assets, the possibility of exemptive
relief from the prohibited transaction rules and other issues and their
potential consequences.
PLAN OF DISTRIBUTION
We will enter into one or more underwriting agreements with respect to the
notes of each series and an underwriting agreement with respect to the
certificates of a given series, if offered under this prospectus. In each
underwriting agreement, we will agree to cause the related trust to sell to the
underwriters, and each of the underwriters will severally agree to purchase, the
principal amount of each class of notes and certificates, as the case may be, of
the related series set forth in the underwriting agreement and in the related
prospectus supplement. In each of the underwriting agreements with respect to
any given series of securities, the several underwriters will agree, subject to
the terms and conditions set forth therein, to purchase all the notes and
certificates, as the case may be, described therein which are offered hereby and
by the related prospectus supplement if any of such notes and certificates, as
the case may be, are purchased.
Each prospectus supplement will either set forth the price at which each
class of notes and certificates, as the case may be, being offered thereby will
be offered to the public and any concessions that may be offered to certain
dealers participating in that offering, or specify that the related notes and
certificates 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 notes and certificates the public offering prices and
concessions may be changed.
Each underwriting agreement will provide that we and Case Credit will
indemnify the underwriters against certain civil liabilities, including
liabilities under the Securities Act, or contribute to payments the several
underwriters may be required to make in respect thereof.
Each trust may, from time to time, invest the funds in its trust accounts in
eligible investments acquired from underwriters.
Pursuant to each of the underwriting agreements with respect to a given
series of securities, the closing of the sale of each class of securities
subject to any of those
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agreements will be conditioned on the closing of the sale of all other classes
subject to any of those agreements. 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 securities of any series will be
passed upon for the related trust, us and the servicer by Mayer, Brown & Platt,
Chicago, Illinois and New York, New York. Richard S. Brennan, General Counsel
and Secretary of Case is also a partner at Mayer, Brown & Platt.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the securities with the
Securities and Exchange Commission. This prospectus is part of the registration
statement, but the registration statement includes additional information.
We will file with the SEC all required annual, monthly and special SEC
reports and other information about any trust we originate.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. You can request copies of these documents, upon payment of a duplicating
fee, by writing to the SEC. Please call the SEC at (800) SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings are
also available to the public on the SEC Internet site (http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information that we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus. Information that we file later with
the SEC will automatically update the information in this prospectus. In all
cases, you should rely on the later information over different information
included in this prospectus or the accompanying prospectus supplement. We
incorporate by reference any future annual, monthly and special SEC reports and
proxy materials filed by or on behalf of any trust until we terminate offering
the securities.
Our Annual Report on Form 10-K for the fiscal year ended December 31, 1998
(File No. 33-99298) was filed with the SEC pursuant to the Securities Exchange
Act and is incorporated into this prospectus by reference and made a part
hereof. Since that time, we have not been, nor are we currently, required to
file reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act,
except for the filing of Current Reports on Form 8-K in connection with the
trusts it originates. Our Current Reports on Form 8-K dated January 13, 1999,
January 15, 1999, February 15, 1999, March 8, 1999, March 15, 1999, March 22,
1999, April 15, 1999, May 15, 1999, June 15, 1999,
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July 13, 1999, July 15, 1999 and August 15, 1999 are incorporated into this
prospectus by reference and made a part hereof.
As a recipient of this prospectus, you may request a copy of any document we
incorporate by reference, except exhibits to the documents (unless the exhibits
are specifically incorporated by reference), at no cost, by writing or calling:
Case Receivables II Inc., 475 Half Day Road, Lincolnshire, Illinois 60069,
Attention: Vice President (Telephone (847) 955-0228). You may also access the
servicer's Internet site at (http://www.casecorp.com).
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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 herein.
<TABLE>
<S> <C>
Benefit Plan............................................................... 65
Code....................................................................... 53
ERISA...................................................................... 65
Final Regulations.......................................................... 56
foreign person............................................................. 56
IDOR....................................................................... 64
Illinois Replacement Tax................................................... 64
IRS........................................................................ 54
OID........................................................................ 55
OID Regulations............................................................ 55
portfolio interest......................................................... 56
Short-Term Note............................................................ 55
</TABLE>
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CASE EQUIPMENT RECEIVABLES TRUST 1999-B
ASSET BACKED NOTES
CASE RECEIVABLES II INC.
SELLER
CASE CREDIT CORPORATION
SERVICER
$68,629,000 CLASS A-1 NOTES
$300,000,000 CLASS A-2 NOTES
$100,000,000 CLASS A-3 NOTES
$182,371,000 CLASS A-4 NOTES
$31,500,000 CLASS B NOTES
----------------------------
PROSPECTUS SUPPLEMENT
----------------------------
UNDERWRITERS OF THE CLASS A NOTES
MERRILL LYNCH & CO.
BANC OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
UNDERWRITERS OF THE CLASS B NOTES
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with different information.
We are not offering the notes in any state where the offer is not permitted.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the Class A Notes or the Class B Notes and with respect to their
unsold allotments or subscriptions. In addition, all dealers selling the Class A
Notes or the Class B Notes will deliver a prospectus supplement and prospectus
until November 30, 1999 (90 days after the commencement of the offering).
