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3. Securitization Trust Debt

6 Months Ended

Jun. 30, 2018

(3) Securitization Trust Debt

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:

											Weighted
											Average
		Final	Receivables				Outstanding		Outstanding		Contractual
		Scheduled	Pledged at				Principal at		Principal at		Interest Rate
		Payment	June 30,		Initial		June 30,		December 31,		at June 30,
Series		Date (1)	2018 (2)		Principal		2018		2017		2018
		(Dollars in thousands)
	CPS 2013-B	September 2020		–		205,000		–		18,407		–
	CPS 2013-C	December 2020		–		205,000		–		25,559		–
	CPS 2013-D	March 2021		19,366		183,000		17,737		24,917		5.57%
	CPS 2014-A	June 2021		24,224		180,000		21,894		30,521		4.74%
	CPS 2014-B	September 2021		35,335		202,500		33,419		44,516		4.09%
	CPS 2014-C	December 2021		56,842		273,000		55,081		71,174		4.22%
	CPS 2014-D	March 2022		63,322		267,500		61,433		79,099		4.52%
	CPS 2015-A	June 2022		70,365		245,000		68,531		87,194		4.09%
	CPS 2015-B	September 2022		83,535		250,000		82,450		102,873		4.11%
	CPS 2015-C	December 2022		115,839		300,000		114,701		141,362		4.52%
	CPS 2016-A	March 2023		150,370		329,460		148,789		180,761		4.82%
	CPS 2016-B	June 2023		170,132		332,690		166,163		201,199		4.99%
	CPS 2016-C	September 2023		172,255		318,500		168,262		203,504		4.57%
	CPS 2016-D	April 2024		128,194		206,325		125,394		149,671		3.46%
	CPS 2017-A	April 2024		139,256		206,320		135,994		161,892		3.62%
	CPS 2017-B	December 2023		167,524		225,170		155,525		186,594		3.13%
	CPS 2017-C	September 2024		172,642		224,825		163,372		197,155		3.05%
	CPS 2017-D	June 2024		169,697		196,300		160,527		189,277		2.90%
	CPS 2018-A	March 2025		176,804		190,000		168,757		–		2.98%
	CPS 2018-B	December 2024		198,546		201,823		194,653		–		3.46%
			$	2,114,248	$	4,742,413	$	2,042,682	$	2,095,675

_________________

(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 $468.4 million in 2018, $760.0 million in 2019, $458.5 million in 2020, $234.5 million in 2021, $90.4 million in 2022, $18.9 million in 2023.

(2)

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

Debt issuance costs of $12.0 million and $12.5 million as of June 30, 2018 and December 31, 2017, 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 June 30, 2018, 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, 2018, restricted cash under the various agreements totaled approximately $119.9 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.

On July 17, 2018 we completed our third securitization transaction of 2018. In the transaction, qualified institutional buyers purchased $230.3 million of asset-backed notes secured by $239.9 million in automobile receivables purchased by us. The sold notes, issued by CPS Auto Receivables Trust 2018-C, consist of five classes. Ratings of the notes were provided by Standard & Poor’s and DBRS and were based on the structure of the transaction, the historical performance of similar receivables and our experience as a servicer. The weighted average yield on the notes is approximately 4.18%.