The Trust will issue the Notes under the Indenture. We will file a copy of the Indenture with the SEC. We summarize below the material terms of the Notes. This summary is not a complete description of all the provisions of the Notes. This summary supplements the description of the general terms and provisions of the notes of any trust and the related indenture set forth under “Certain Information Regarding the Notes” and “Description of the Indenture” in the prospectus and the description of the Indenture set forth under “The Indenture” in this prospectus supplement. We refer you to those sections.
Note Registration
The Notes will be available for purchase in denominations of $5,000 and integral multiples of $1,000 thereafter. The Notes will initially be issued only in book-entry form.
See “Certain Information Regarding the Notes—Book-Entry Registration” in the prospectus for a further discussion of the book-entry registration system.
Payments of Interest
Interest on the principal amounts of the Notes will accrue at the respective per annum interest rates for the various classes of Notes and will be payable on each Distribution Date to the Noteholders of record as of the related Record Date.
The Notes will bear interest at the following Interest Rates:
• in the case of the Class A-1 Notes, 0.24000% per annum;
• in the case of the Class A-2 Notes, 0.88% per annum;
• in the case of the Class A-3 Notes, 1.38% per annum;
• in the case of the Class A-4 Notes, 1.83% per annum;
• in the case of the Class B Notes, 2.17% per annum;
• in the case of the Class C Notes, 2.46% per annum; and
• in the case of the Class D Notes, 3.15% per annum.
Calculation of Interest. Interest will accrue and will be calculated on the Notes as follows:
• Actual/360. Interest on the Class A-1 Notes will accrue from and including the prior Distribution Date (or, in the case of the first Distribution Date, from and including the Closing Date) to but excluding the current Distribution Date. The interest payable on the Class A-1 Notes on each Distribution Date will equal the product of:
• the principal amount of the Class A-1 Notes as of the preceding Distribution Date (or, in the case of the first Distribution Date, as of the Closing Date), after giving effect to all principal payments made with respect to the Class A-1 Notes on that preceding Distribution Date;
• the Interest Rate applicable to the Class A-1 Notes; and
• the actual number of days elapsed during the period from and including the preceding Distribution Date (or, in the case of the first Distribution Date, from and including the Closing Date) to but excluding the current Distribution Date divided by 360.
• 30/360. Interest on the Notes other than the Class A-1 Notes will accrue from and including the 15th day of the prior calendar month (or, in the case of the first Distribution Date, from and including the Closing Date) to but excluding the 15th day of the current month (assuming each month has 30 days).
The interest payable on the Notes other than the Class A-1 Notes on each Distribution Date will equal the product of:
• the principal amount of that class of Notes as of the preceding Distribution Date (or, in the case of the first Distribution Date, as of the Closing Date), after giving effect to all principal payments made with respect to that class of Notes on that preceding Distribution Date;
• the Interest Rate applicable to that class of Notes; and
• 30 (or, in the case of the first Distribution Date, assuming a Closing Date of February 26, 2015, 19) divided by 360.
Unpaid Interest Accrues. Interest accrued as of any Distribution Date but not paid on such Distribution Date will be due on the next Distribution Date, together with interest on such amount at the Interest Rate applicable to that class (to the extent lawful).
Priority of Interest Payments. The Trust will pay interest on the Notes on each Distribution Date with Available Funds in accordance with the priority set forth under “Application of Available Funds—Priority of Distributions (Pre-Acceleration).” Interest payments to holders of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes will have the same priority. If amounts available to make interest payments on a class of Class A Notes are less than the full amount of interest payable on that class of Notes on a Distribution Date, the related Noteholders will receive their ratable share of that amount, based on the aggregate amount of interest due on that date on each class of Class A Notes. Interest payments to the holders of the Class B Notes will be made only after the interest accrued on each class of Class A Notes and the Priority Principal Distributable Amount, if any, have been paid in full. Interest payments to the holders of the Class C Notes will be made only after the interest accrued on each class of Class A Notes and the Class B Notes and the Priority Principal Distributable Amount and the Secondary Principal Distributable Amount, if any, have been paid in full. Interest payments to the holders of the Class D Notes will be made only after the interest accrued on each class of Class A Notes, the Class B Notes and the Class C Notes and the Priority Principal Distributable Amount, the Secondary Principal Distributable Amount and the Tertiary Principal Distributable Amount, if any, have been paid in full.
An Event of Default will occur if the full amount of interest due on the Notes of the Controlling Class is not paid within five Business Days of the related Distribution Date. The failure to pay interest due on a class of Notes within five Business Days of the related Distribution Date will not be an Event of Default so long as any Notes with a higher alphabetical designation than that class of Notes remain outstanding. See “The Indenture—Rights Upon Event of Default” in this prospectus supplement.
Payments of Principal
Priority and Amount of Principal Payments. On each Distribution Date, Noteholders will receive principal in an amount generally equal to the excess, if any, of:
• the sum of the aggregate unpaid principal amount of the Notes as of the close of business on the preceding Distribution Date (or, in the case of the first Distribution Date, as of the Closing Date), after giving effect to all payments made on that preceding Distribution Date, and the Overcollateralization Target Amount for the current Distribution Date; over
• the Pool Balance as of the last day of the related Collection Period.
On each Distribution Date, all Available Funds allocated to payments of principal on the Notes as described in “Application of Available Funds—Priority of Distributions (Pre-Acceleration)” will be aggregated and will be paid out of the Note Payment Account in the following amounts and order of priority:
(1) to the Class A-1 Notes until they have been paid in full;
(2) to the Class A-2 Notes until they have been paid in full;
(3) to the Class A-3 Notes until they have been paid in full;
(4) to the Class A-4 Notes until they have been paid in full;
(5) to the Class B Notes until they have been paid in full;
(6) to the Class C Notes until they have been paid in full; and (7) to the Class D Notes until they have been paid in full.
In no event will the principal paid in respect of a class of Notes exceed the unpaid principal amount of that class of Notes.
If the Notes have been accelerated following the occurrence of an Event of Default, the Trust will pay the funds allocated to the holders of the Notes to pay principal of the Notes, together with amounts that would otherwise be payable to the holders of the Certificates, as described under “Application of Available Funds—Priority of Distributions (Post-Acceleration).”
Final Scheduled Distribution Dates. The principal amount of any class of Notes, to the extent not previously paid, will be due on the Final Scheduled Distribution Date for that class. The Final Scheduled Distribution Dates for the Notes are as follows:
• March 15, 2016 for the Class A-1 Notes;
• March 15, 2018 for the Class A-2 Notes;
• November 15, 2019 for the Class A-3 Notes;
• July 15, 2020 for the Class A-4 Notes;
• October 15, 2020 for the Class B Notes;
• December 15, 2020 for the Class C Notes; and
• September 15, 2021 for the Class D Notes.
The date on which each class of Notes is paid in full is expected to be earlier than the Final Scheduled Distribution Date for that class and could be significantly earlier depending upon the rate at which the Principal Balance of the Receivables are paid.
See “Maturity and Prepayment Considerations—Weighted Average Lives of the Notes” in this prospectus supplement and “Maturity and Prepayment Considerations” in the prospectus for a further discussion of Receivable prepayments.
Credit Enhancement
Subordination. On each Distribution Date, interest and principal payments on the Notes will be subordinated as follows:
• no interest will be paid on the Class B Notes, the Class C Notes or the Class D Notes until all interest due on the Class A Notes through the related Interest Period, including, to the extent lawful, interest on any overdue interest and the Priority Principal Distributable Amount, if any, have been paid in full;
• no interest will be paid on the Class C Notes or the Class D Notes until all interest due on the Class B Notes through the related Interest Period, including, to the extent lawful, interest on any overdue interest and the Priority Principal Distributable Amount and the Secondary Principal Distributable Amount, if any, have been paid in full;
• no interest will be paid on the Class D Notes until all interest due on the Class C Notes through the related Interest Period, including, to the extent lawful, interest on any overdue interest and the Priority Principal Distributable Amount, the Secondary Principal Distributable Amount and the Tertiary Principal Distributable Amount, if any, have been paid in full; and
• no principal will be paid on the Class B Notes, the Class C Notes or the Class D Notes until all principal due on the Class A Notes on that Distribution Date has been paid in full, no principal will be paid on the Class C Notes or the Class D Notes until all principal due on the Class B Notes on that Distribution Date has been paid in full and no principal will be paid on the Class D Notes until all principal due on the Class C Notes on that Distribution Date has been paid in full.
The subordination of the Class B Notes, the Class C Notes and the Class D Notes is intended to decrease the risk of default by the Trust with respect to payments due to the more senior classes of Notes.
Overcollateralization. Overcollateralization represents the amount by which the Pool Balance exceeds the aggregate principal amount of the Notes. Overcollateralization will be available to absorb losses on the Receivables that are not otherwise covered by excess collections on or in respect of the Receivables, if any. The initial amount of overcollateralization will be less than $100. The application of funds as described in clause (12) of “Application of Available Funds—Priority of Distributions (Pre-Acceleration)” is designed to increase over time the amount of overcollateralization as of any Distribution Date to the Overcollateralization Target Amount. The
Overcollateralization Target Amount will be the greater of:
• 0.60% of the Pool Balance as of the last day of the related Collection Period; and
• 0.50% of the Pool Balance as of the Cutoff Date.
Overcollateralization will be effected by paying an amount of principal on the Notes on the first several Distribution Dates after the Closing Date that is greater than the principal of the Receivables paid by obligors during such time. The amount of this payment on the Notes will be funded primarily from interest collections on the Receivables in excess of the interest paid on the Notes and other fees required to be paid by the Trust, but this payment generally will not be made from funds in the Reserve Account.
Excess Collections. Excess collections for any Distribution Date generally will be the amount by which collections of interest on the Receivables during the related Collection Period exceeds the sum of the Servicing Fee, any Unreimbursed Servicer Advances, should the Indenture Trustee become the successor Servicer, indemnities or transition expenses below the $175,000 aggregate cap and the aggregate Interest Distributable Amount for each class of Notes. Any excess collections will be applied on each Distribution Date, as a component of Available Funds, as described in clause (12) of “Application of Available Funds—Priority of Distributions (Pre-Acceleration)”
to increase over time the amount of overcollateralization as of any Distribution Date to the Overcollateralization
Target Amount. Generally, excess collections will also provide a source of funds to absorb any losses on the Receivables and reduce the likelihood of losses on the Notes.
Reserve Account. The Servicer will establish and maintain with the Indenture Trustee the Reserve Account into which certain excess collections on the Receivables will be deposited and from which amounts may be
withdrawn to pay the monthly Servicing Fees, any unpaid indemnity amounts and unpaid transition expenses due to the Indenture Trustee should it become successor Servicer up to a $175,000 aggregate cap and any Unreimbursed Servicer Advances to the Servicer and to make required payments on the Notes.
The Seller will deposit the Reserve Account Initial Deposit in the Reserve Account on the Closing Date.
On each Distribution Date, the Indenture Trustee will deposit in the Reserve Account, from amounts collected on or in respect of the Receivables during the related Collection Period and not used on that Distribution Date to pay Required Payment Amounts, the amount, if any, by which the Required Reserve Account Amount for that Distribution Date exceeds the amount on deposit in the Reserve Account on that Distribution Date, after giving effect to all required withdrawals from the Reserve Account on that Distribution Date. The amounts on deposit in the Reserve Account will be invested by the Servicer in Permitted Investments. The Reserve Account must be maintained as an Eligible Deposit Account.
On each Determination Date, the Servicer will determine the Reserve Account Draw Amount, if any, for the following Distribution Date. If the Reserve Account Draw Amount for any Distribution Date is greater than zero, the Indenture Trustee will withdraw that amount from the Reserve Account and transfer the amount withdrawn to the Collection Account and apply that amount as described in “Application of Available Funds—Priority of Distributions (Pre-Acceleration).” If the amount required to be withdrawn from the Reserve Account to cover shortfalls in available funds on deposit in the Collection Account exceeds the amount on deposit in the Reserve Account, a temporary shortfall in the amounts distributed to the Noteholders could result. In addition, depletion of the Reserve Account ultimately could result in losses on your Notes.
If the amount on deposit in the Reserve Account on any Distribution Date exceeds the Required Reserve Account Amount for that Distribution Date, after giving effect to all required deposits to and withdrawals from the Reserve Account on that Distribution Date, that excess, first, will be applied to fund any deficiency in the Regular Principal Distributable Amount on that Distribution Date or the amounts described in clauses (13) or (14) of
“Application of Available Funds—Priority of Distributions (Pre-Acceleration)” and, second, will be paid to the Certificateholders. Any amount paid to the Certificateholders will no longer be the property of the Trust. After the payment in full of all accrued and unpaid interest on the Notes and the principal amount of the Notes and the termination of the Trust, any funds remaining on deposit in the Reserve Account will be paid to the
Certificateholders.
A firm of independent certified public accountants will furnish to the Seller, the Owner Trustee and the Indenture Trustee an annual statement attesting to the Servicer’s assessment of its compliance with certain minimum servicing criteria during the preceding 12 months (or, in the case of the first certificate, from the Closing Date), including criteria regarding cash collection and administration. There will be no other independent verification of the deposits to or withdrawals from the Reserve Account.
Optional Prepayment
In order to avoid excessive administrative expense, the Servicer will be permitted, at its option, to purchase all remaining Receivables from the Trust on any Distribution Date if the Pool Balance as of the close of business on the last day of the related Collection Period was 10% or less of the Pool Balance as of the Cutoff Date. The exercise of this right will effect the early retirement of the Notes.
See “The Sale and Servicing Agreement—Optional Purchase of Receivables” in this prospectus supplement for a further discussion of this option.
Controlling Class
So long as any Class A Notes are outstanding, the Class A Notes will be the Controlling Class. As a result,
of the Class A Notes, the Class B Notes will be the Controlling Class. Upon payment in full of the Class B Notes, the Class C Notes will be the Controlling Class. Upon payment in full of the Class C Notes, the Class D Notes will be the Controlling Class.
APPLICATION OF AVAILABLE FUNDS