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4. Securitization Trust Debt

6 Months Ended

Jun. 30, 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:

										Weighted Average
										Contractual
	Final	Receivables				Outstanding		Outstanding		Interest
	Scheduled	Pledged at				Principal at		Principal at		Rate at
	Payment	June 30,		Initial		June 30,		December 31,		June 30,
Series	Date (1)	2013		Principal		2013		2012		2013
	(Dollars in thousands)
CPS 2008-A	October 2014	$	–	$	310,359	$	–	$	40,713		–
Page Five Funding	January 2018		15,902		46,058		14,631		21,251		9.42%
CPS 2011-A	April 2018		38,441		100,364		35,026		48,368		3.70%
CPS 2011-B	September 2018		57,385		109,936		57,535		70,863		4.72%
CPS 2011-C	March 2019		71,483		119,400		71,437		88,269		5.05%
CPS 2012-A	June 2019		82,727		155,000		82,751		105,485		3.61%
CPS 2012-B	September 2019		107,205		141,500		103,442		122,329		3.19%
CPS 2012-C	December 2019		115,057		147,000		110,018		135,219		2.51%
CPS 2012-D	March 2020		137,136		160,000		131,283		160,000		2.07%
CPS 2013-A	June 2020		176,266		185,000		172,764		–		1.80%
CPS 2013-B	September 2020		138,512		205,000		205,000		–		2.24%
		$	940,114	$	1,679,617	$	983,887	$	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 $193.4 million in 2013, $335.0 million in 2014, $236.4 million in 2015, $143.3 million in 2016, $69.1 million in 2017 and $6.7 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.

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. As of June 30, 2013, 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 June 30, 2013, restricted cash under the various agreements totaled approximately $122.9 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.