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Debt Obligations

9 Months Ended

Dec. 29, 2012

11. Debt Obligations

Debt obligations consist of the following (in thousands):


	December 29,		March 31,
	2012		2012
Securitized financing 2005-1	$	41,024	$	44,726
Securitized financing 2007-1		43,500		46,749
Construction lending lines		—		4,550

	$	84,524	$	96,025

The Company acquired CountryPlace’s securitized financings and construction lending lines during the first quarter of fiscal 2012 as a part of the Palm Harbor acquisition. Acquired securitized financings were recorded at fair value at the time of acquisition, which resulted in a discount, and subsequently are accounted for in a manner similar to ASC 310-30 to accrete the discount.

The Company considers expected prepayments and estimates the amount and timing of undiscounted expected principal, interest and other cash flows for securitized consumer loans receivable held for investment to determine the expected cash flows on securitized financings and the contractual payments. The amount of contractual principal and contractual interest payments due on the securitized financings in excess of all cash flows expected as of the Palm Harbor Acquisition Date cannot be accreted into interest expense (the non-accretable difference). The remaining amount is accreted into interest expense over the remaining life of the obligation (referred to as accretable yield). The following table summarizes securitized financings (in thousands):


	December 29,			March 31,
	2012			2012
Securitized financings – contractual amount	$	106,768		$	117,507
Purchase Discount
Accretable		(22,244	)		(26,032	)
Non-accretable (1)		—			—

Total securitized financings, net	$	84,524		$	91,475

⁽¹⁾	As the contractual payments on acquired securitized financing are determined by the cash collections from the underlying loans, the Company expects that there will not be a non-accretable difference.

Over the life of the loans, the Company continues to estimate cash flows expected to be paid on securitized financings. The Company evaluates at the balance sheet date whether the present value of its securitized financings, determined using the effective interest rate, has increased or decreased. The present value of any subsequent change in cash flows expected to be paid adjusts the amount of accretable yield recognized on a prospective basis over the securitized financing’s remaining life.

The changes in accretable yield on securitized financings were as follows (in thousands):


	Three Months Ended						Nine Months Ended
	December 29,			December 31,			December 29,			December 31,
	2012			2011			2012			2011
Balance at the beginning of the period	$	23,679		$	29,779		$	26,032		$	—
Additions		—			—			—			32,072
Accretion		(1,245	)		(1,521	)		(3,988	)		(3,814	)
Adjustment to cash flows (1)		(190	)		—			200			—

Balance at the end of the period	$	22,244		$	28,258		$	22,244		$	28,258

⁽¹⁾	As the contractual payments on acquired securitized financing are determined by the cash collections from the underlying loans, the Company expects that there will not be a non-accretable difference.

On July 12, 2005, prior to Fleetwood’s acquisition of Palm Harbor and CountryPlace, CountryPlace completed its initial securitization (2005-1) for approximately $141.0 million of loans, which was funded by issuing bonds totaling approximately $118.4 million. The bonds were issued in four different classes: Class A-1 totaling $36.3 million with a coupon rate of 4.23%; Class A-2 totaling $27.4 million with a coupon rate of 4.42%; Class A-3 totaling $27.3 million with a coupon rate of 4.80%; and Class A-4 totaling $27.4 million with a coupon rate of 5.20%. The bonds mature at varying dates beginning in 2006 through 2015 and were issued with an expected weighted average maturity of 4.66 years. For accounting purposes, this transaction was structured as a securitized borrowing. As of December 29, 2012, the Class A-1 and Class A-2 bonds had been retired.

On March 22, 2007, prior to Fleetwood’s acquisition of Palm Harbor and CountryPlace, CountryPlace completed its second securitization (2007-1) for approximately $116.5 million of loans, which was funded by issuing bonds totaling approximately $101.9 million. The bonds were issued in four classes: Class A-1 totaling $28.9 million with a coupon rate of 5.484%; Class A-2 totaling $23.4 million with a coupon rate of 5.232%; Class A-3 totaling $24.5 million with a coupon rate of 5.593%; and Class A-4 totaling $25.1 million with a coupon rate of 5.846%. The bonds mature at varying dates beginning in 2008 through 2017 and were issued with an expected weighted average maturity of 4.86 years. For accounting purposes, this transaction was also structured as a securitized borrowing. As of December 29, 2012, the Class A-1 and Class A-2 bonds had been retired.

CountryPlace’s securitized debt is subject to provisions which may require acceleration of debt repayment. If cumulative loss ratios exceed levels specified in the respective pooling and servicing agreements for the 2005-1 and 2007-1 securitizations, repayment of the principal of the related Class A bonds is accelerated until cumulative loss ratios return to specified levels. During periods when cumulative loss ratios exceed the specified levels, cash collections from the securitized loans in excess of servicing fees payable to CountryPlace and amounts owed to the Class A bondholders, trustee, and surety are applied to reduce the debt. However, principal repayment of the securitized debt, including accelerated amounts, is payable only from cash collections from the securitized loans and no additional sources of repayment are required or permitted. As of December 29, 2012, the cumulative loss ratios were within the specified levels for the 2005-1 and 2007-1 securitized portfolios. The Company expects that the cumulative loss ratio for the 2007-1 securitized portfolio will again exceed its specified level during the remainder of fiscal 2013. The resulting acceleration of securitized debt repayment is not expected to have a material adverse impact on our cash flows. An increase in the specified loss ratio level is scheduled to occur in October 2013, which may ameliorate the situation.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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