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4. Securitization Trust Debt

9 Months Ended

Sep. 30, 2014

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 at
	Payment	September 30,		Initial		September 30,		December 31,		September 30,
Series	Date (1)	2014 (2)		Principal		2014		2013		2014
	(Dollars in thousands)
Page Five Funding	January 2018	$	5,781	$	46,058	$	3,862	$	9,358		9.28%
CPS 2011-A	April 2018		15,687		104,546		11,665		24,526		2.86%
CPS 2011-B	September 2018		27,632		111,046		27,235		44,433		4.53%
CPS 2011-C	March 2019		35,992		119,400		35,773		56,271		4.92%
CPS 2012-A	June 2019		42,577		155,000		41,703		65,051		3.44%
CPS 2012-B	September 2019		58,409		141,500		57,490		86,254		3.14%
CPS 2012-C	December 2019		64,289		147,000		63,376		93,006		2.48%
CPS 2012-D	March 2020		77,951		160,000		77,234		108,815		2.14%
CPS 2013-A	June 2020		110,393		185,000		109,937		142,842		2.00%
CPS 2013-B	September 2020		133,324		205,000		131,358		172,499		2.45%
CPS 2013-C	December 2020		150,069		205,000		147,671		191,504		2.64%
CPS 2013-D	March 2021		148,167		183,000		144,868		183,000		2.36%
CPS 2014-A	June 2021		159,479		180,000		155,381		–		1.98%
CPS 2014-B	September 2021		192,600		202,500		189,117		–		1.82%
CPS 2014-C (3)	December 2021		182,936		273,000		273,000		–		2.05%
		$	1,405,286	$	2,418,050	$	1,469,670	$	1,177,559

____________

(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 $152.6 million in 2014, $559.0 million in 2015, $386.0 million in 2016, $225.3 million in 2017, $108.1 million in 2018 and $38.7 million in 2019.

(2)

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

(3)

An additional $87.8 million of receivables were pledged to CPS 2014-C in October 2014.

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 September 30, 2014, 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 September 30, 2014, restricted cash under the various agreements totaled approximately $174.6 million, of which $87.8 million represented pre-funding proceeds. 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.