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3. Securitization Trust Debt

3 Months Ended

Mar. 31, 2017

We have completed many 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:

	Final Scheduled Payment	Receivables Pledged at March 31,		Initial		Outstanding Principal at March 31,		Outstanding Principal at December 31,		Weighted Average Contractual Interest Rate at March 31,
Series	Date (1)	2017 (2)		Principal		2017		2016		2017
	(Dollars in thousands)
CPS 2012-C	December 2019	$	–	$	147,000	$	–	$	14,421		–
CPS 2012-D	March 2020		15,920		160,000		14,443		17,865		1.88%
CPS 2013-A	June 2020		25,391		185,000		23,845		28,661		1.71%
CPS 2013-B	September 2020		34,073		205,000		31,760		37,570		2.18%
CPS 2013-C	December 2020		41,253		205,000		40,751		46,830		4.89%
CPS 2013-D	March 2021		41,847		183,000		40,236		46,345		4.28%
CPS 2014-A	June 2021		49,623		180,000		47,812		54,988		3.63%
CPS 2014-B	September 2021		67,362		202,500		66,722		75,140		3.12%
CPS 2014-C	December 2021		104,233		273,000		103,419		116,280		3.27%
CPS 2014-D	March 2022		113,895		267,500		113,507		127,307		3.48%
CPS 2015-A	June 2022		122,123		245,000		122,207		134,466		3.10%
CPS 2015-B	September 2022		140,289		250,000		139,941		153,893		3.11%
CPS 2015-C	December 2022		190,437		300,000		190,367		207,636		3.54%
CPS 2016-A	March 2023		242,144		329,460		240,391		262,260		3.90%
CPS 2016-B	June 2023		271,079		332,690		264,265		284,752		3.92%
CPS 2016-C	September 2023		274,132		318,500		267,108		285,618		3.48%
CPS 2016-D	December 2023		194,366		206,325		188,640		200,221		2.80%
CPS 2017-A	April 2024		203,701		206,320		199,838		–		3.00%
		$	2,131,868	$	4,196,295	$	2,095,252	$	2,094,253

_________________

(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 $648.9 million in 2017, $670.8 million in 2018, $421.9 million in 2019, $234.5 million in 2020, $102.1 million in 2021, $17.1 million in 2022.

(2)

Includes repossessed assets that are included in Other assets on our Unaudited Condensed Consolidated Balance Sheet.

Debt issuance costs of $13.2 million and $13.4 million as of March 31, 2017 and December 31, 2016, respectively, have been excluded from the table above. These debt issuance costs are presented as a direct deduction to the carrying amount of the securitization trust debt on our Unaudited Condensed Consolidated Balance Sheets.

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.

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. As of March 31, 2017, we were in compliance with all such covenants.

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, to be applied to make payments on the securitization trust debt or as pre-funding proceeds from a term securitization prior to the purchase of additional collateral. As of March 31, 2017, restricted cash under the various agreements totaled approximately $129.2 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, 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.