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3. Securitization Trust Debt

9 Months Ended

Sep. 30, 2016

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)	2016 (2)		Principal		2016		2015		2016
	(Dollars in thousands)
CPS 2011-B	September 2018	$	–	$	109,936	$	–	$	10,023		–
CPS 2011-C	March 2019		–		119,400		–		14,785		–
CPS 2012-A	June 2019		–		155,000		–		16,795		–
CPS 2012-B	September 2019		15,515		141,500		14,918		26,758		3.12%
CPS 2012-C	December 2019		18,088		147,000		17,616		30,653		2.42%
CPS 2012-D	March 2020		22,993		160,000		21,925		37,464		1.88%
CPS 2013-A	June 2020		35,972		185,000		34,612		56,583		1.75%
CPS 2013-B	September 2020		46,858		205,000		44,329		70,332		2.23%
CPS 2013-C	December 2020		55,188		205,000		54,212		82,851		4.37%
CPS 2013-D	March 2021		55,371		183,000		53,924		82,337		3.75%
CPS 2014-A	June 2021		64,327		180,000		62,490		92,571		3.31%
CPS 2014-B	September 2021		84,990		202,500		84,231		121,515		2.70%
CPS 2014-C	December 2021		131,011		273,000		130,485		183,802		2.86%
CPS 2014-D	March 2022		142,752		267,500		141,862		198,533		3.08%
CPS 2015-A	June 2022		149,850		245,000		148,903		201,527		2.82%
CPS 2015-B	September 2022		170,369		250,000		169,038		221,587		2.86%
CPS 2015-C	December 2022		229,347		300,000		226,754		283,482		3.26%
CPS 2016-A	March 2023		288,216		329,460		273,762		–		3.49%
CPS 2016-B	June 2023		315,174		332,690		302,687		–		3.69%
CPS 2016-C	September 2023		312,077		318,500		305,021		–		3.25%
		$	2,138,098	$	4,309,486	$	2,086,769	$	1,731,598

_________________

(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 $217.2 million in 2016, $770.2 million in 2017, $536.4 million in 2018, $320.2 million in 2019, $171.1 million in 2020, $54.9 million in 2021 and 3.4 million in 2022.

(2)

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

Debt issuance costs of $13.4 million and $11.6 million as of September 30, 2016 and December 31, 2015, 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 September 30, 2016, 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, 2016, restricted cash under the various agreements totaled approximately $116.4 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.