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4. Securitization Trust Debt

3 Months Ended

Mar. 31, 2013

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:

	Final Scheduled	Receivables Pledged at				Outstanding Principal at		Outstanding Principal at		Weighted Average Contractual Interest Rate at
	Payment	March 31,		Initial		March 31,		December 31,		March 31,
Series	Date (1)	2013		Principal		2013		2012		2013
	(Dollars in thousands)
CPS 2008-A	October 2014	$	14,094	$	310,359	$	35,652	$	40,713		9.05%
Page Five Funding	January 2018		19,076		46,058		18,151		21,251		9.43%
CPS 2011-A	April 2018		44,425		100,364		41,667		48,368		3.83%
CPS 2011-B	September 2018		65,808		109,936		64,791		70,863		4.65%
CPS 2011-C	March 2019		80,190		119,400		80,772		88,269		5.07%
CPS 2012-A	June 2019		93,543		155,000		95,319		105,485		3.64%
CPS 2012-B	September 2019		118,141		141,500		111,722		122,329		3.14%
CPS 2012-C	December 2019		127,147		147,000		122,001		135,219		2.45%
CPS 2012-D	March 2020		148,404		160,000		146,604		160,000		2.00%
CPS 2013-A	June 2020		114,561		185,000		185,000		–		1.77%
		$	825,389	$	1,474,617	$	901,679	$	792,497

(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 $280.0 million in 2013, $270.0 million in 2014, $185.0 million in 2015, $111.6 million in 2016, $48.0 million in 2017 and $6.9 million in 2018.

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 $11.9 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. As of March 31, 2013, we were in compliance with all such covenants. 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 March 31, 2013, restricted cash under the various agreements totaled approximately $139.1 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.