Securitization Notes Payable
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Jun. 30, 2012
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Securitization Notes Payable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securitization Notes Payable | SECURITIZATION NOTES PAYABLE Securitization notes payable represents debt issued by us in securitization transactions. In connection with the merger with GM, we recorded a purchase accounting premium that is being amortized to interest expense over the expected term of the notes. Amortization for the six months ended June 30, 2012 and 2011 was $18.7 million and $42.5 million, respectively. At June 30, 2012, unamortized purchase accounting premium of $23.8 million is included in securitization notes payable. Debt issuance costs of $24.6 million and $16.3 million, as of June 30, 2012 and December 31, 2011, respectively, which are included in other assets, are amortized to interest expense over the expected term of securitization notes payable. Securitization notes payable as of June 30, 2012, consists of the following (dollars in thousands):
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At the time of securitization of finance receivables, we are required to pledge assets equal to a specified percentage of the securitization pool to support the securitization transaction. Typically, the assets pledged consist of cash deposited to a restricted account and additional receivables delivered to the Trust, which create overcollateralization. The securitization transactions require the percentage of assets pledged to support the transaction to increase until a specified level is attained. Excess cash flows generated by the Trusts are added to the restricted cash account or used to pay down outstanding debt in the Trusts, creating overcollateralization until the targeted percentage level of assets has been reached. Once the targeted percentage level of assets is reached and maintained, excess cash flows generated by the Trusts are released to us as distributions from Trusts. Additionally, as the balance of the securitization pool declines, the amount of pledged assets needed to maintain the required percentage level is reduced. Assets in excess of the required percentage are also released to us as distributions from Trusts. With respect to our securitization transactions covered by a financial guaranty insurance policy, agreements with the insurer provide that if portfolio performance ratios (delinquency, cumulative default or cumulative net loss) in a Trust’s pool of receivables exceed certain targets, the specified credit enhancement levels would be increased. Agreements with our financial guaranty insurance provider contain additional specified targeted portfolio performance ratios that are higher than those described in the preceding paragraph. If, at any measurement date, the targeted portfolio performance ratios with respect to any insured Trust were to exceed these higher levels, provisions of the agreements permit our financial guaranty insurance provider to declare the occurrence of an event of default and terminate our servicing rights to the receivables transferred to that Trust. As of June 30, 2012, no such servicing right termination events have occurred with respect to any of the Trusts formed by us. |