4. Securitization Trust Debt

9 Months Ended

Sep. 30, 2012

Notes to Financial Statements

Note 4 - Securitization Trust Debt

(4) Securitization Trust Debt

We have completed a number of securitization transactions that are structured as secured borrowings for financial accounting purposes. The debt issued in these transactions is shown on our Unaudited Condensed Consolidated Balance Sheets as “Securitization trust debt,” and the components of such debt are summarized in the following table:

										Weighted
										Average
	Final	Receivables				Outstanding		Outstanding		Contractual
	Scheduled	Pledged at				Principal at		Principal at		Interest Rate at
	Payment	September 30,		Initial		September 30,		December 31,		September 30,
Series	Date (1)	2012		Principal		2012		2011		2012
	(Dollars in thousands)
CPS 2006-B	January 2013	$	–	$	257,500	$	–	$	6,604		–
CPS 2006-C	June 2013		–		247,500		–		14,873		–
CPS 2006-D	August 2013		–		220,000		–		15,716		–
CPS 2007-A	November 2013		–		290,000		–		34,312		–
CPS 2007-TFC	December 2013		–		113,293		–		7,771		–
CPS 2007-B	January 2014		–		314,999		–		40,916		–
CPS 2007-C	May 2014		18,323		327,499		26,803		52,723		7.31%
CPS 2008-A	October 2014		26,428		310,359		46,611		77,284		8.68%
Page Five Funding	January 2018		25,779		9,174		24,582		36,701		9.45%
CPS 2011-A	April 2018		58,355		100,364		55,229		75,625		4.02%
CPS 2011-B	September 2018		81,551		109,936		76,863		101,268		4.54%
CPS 2011-C	March 2019		98,417		119,400		94,798		119,272		4.97%
CPS 2012-A	June 2019		120,572		155,000		116,809		–		3.51%
CPS 2012-B	September 2019		135,415		141,500		132,701		–		3.04%
CPS 2012-C	December 2019		103,169		147,000		147,000		–		2.34%
		$	668,009	$	2,863,524	$	721,396	$	583,065

_________________

(1) The Final Scheduled Payment Date represents final legal maturity of the securitization trust debt. Securitization trust debt is expected to become due and to be paid prior to those dates, based on amortization of the finance receivables pledged to the Trusts. Expected payments, which will depend on the performance of such receivables, as to which there can be no assurance, are $76.9 million in 2012, $255.9 million in 2013, $176.9 million in 2014, $125.3 million in 2015, $66.6 million in 2016 and $19.8 million in 2017.

All of the securitization trust debt was sold in private placement transactions to qualified institutional buyers. The debt was issued through our wholly-owned bankruptcy remote subsidiaries and is secured by the assets of such subsidiaries, but not by our other assets. Principal of $39.2 million, and the related interest payments, are guaranteed by financial guaranty insurance policies issued by a third party financial institution.

The terms of the securitization agreements related to the issuance of the securitization trust debt and the warehouse credit facilities require that we meet certain delinquency and credit loss criteria with respect to the pool of receivables, and certain of the agreements require that we maintain minimum levels of liquidity and not exceed maximum leverage levels. In addition, certain securitization and non-securitization related debt contain cross-default provisions, which would allow certain creditors to declare a default if a default were declared under a different facility.

We are responsible for the administration and collection of the automobile contracts. The securitization agreements also require certain funds be held in restricted cash accounts to provide additional collateral for the borrowings or to be applied to make payments on the securitization trust debt. As of September 30, 2012, restricted cash under the various agreements totaled approximately $107.2 million. Interest expense on the securitization trust debt consists of the stated rate of interest plus amortization of additional costs of borrowing. Additional costs of borrowing include facility fees, insurance and amortization of deferred financing costs and discounts on notes sold. Deferred financing costs and discounts on notes sold related to the securitization trust debt are amortized using a level yield method. Accordingly, the effective cost of the securitization trust debt is greater than the contractual rate of interest disclosed above.

Our wholly-owned bankruptcy remote subsidiaries were formed to facilitate the above asset-backed financing transactions. Similar bankruptcy remote subsidiaries issue the debt outstanding under our credit facilities. Bankruptcy remote refers to a legal structure in which it is expected that the applicable entity would not be included in any bankruptcy filing by its parent or affiliates. All of the assets of these subsidiaries have been pledged as collateral for the related debt. All such transactions, treated as secured financings for accounting and tax purposes, are treated as sales for all other purposes, including legal and bankruptcy purposes. None of the assets of these subsidiaries are available to pay other creditors.