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3. Securitization Trust Debt

3 Months Ended

Mar. 31, 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 at
	Payment	March 31,		Initial		March 31,		December 31,		March 31,
Series	Date (1)	2018 (2)		Principal		2018		2017		2018
	(Dollars in thousands)
CPS 2013-B	September 2020	$	17,882	$	205,000	$	15,089	$	18,407		2.08%
CPS 2013-C	December 2020		22,318		205,000		21,936		25,559		6.15%
CPS 2013-D	March 2021		22,804		183,000		21,146		24,917		5.31%
CPS 2014-A	June 2021		28,297		180,000		26,161		30,521		4.50%
CPS 2014-B	September 2021		40,715		202,500		38,976		44,516		3.86%
CPS 2014-C	December 2021		64,831		273,000		63,405		71,174		4.02%
CPS 2014-D	March 2022		71,801		267,500		70,473		79,099		4.32%
CPS 2015-A	June 2022		79,551		245,000		78,174		87,194		3.93%
CPS 2015-B	September 2022		93,331		250,000		92,899		102,873		3.84%
CPS 2015-C	December 2022		129,017		300,000		127,836		141,362		4.32%
CPS 2016-A	March 2023		165,582		329,460		164,649		180,761		4.66%
CPS 2016-B	June 2023		188,408		332,690		184,355		201,199		4.72%
CPS 2016-C	September 2023		190,875		318,500		186,387		203,504		4.28%
CPS 2016-D	April 2024		140,642		206,325		138,114		149,671		3.28%
CPS 2017-A	April 2024		152,891		206,320		149,832		161,892		3.44%
CPS 2017-B	December 2023		183,726		225,170		172,409		186,594		2.99%
CPS 2017-C	September 2024		189,969		224,825		181,471		197,155		2.92%
CPS 2017-D	June 2024		183,453		196,300		175,130		189,277		2.81%
CPS 2018-A	March 2025		187,493		190,000		183,672		–		2.91%
		$	2,153,586	$	4,540,590	$	2,092,115	$	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 $695.4 million in 2018, $682.8 million in 2019, $412.6 million in 2020, $211.2 million in 2021, $66.3 million in 2021, $11.7 million in 2022.

(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 March 31, 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 March 31, 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 March 31, 2018, restricted cash under the various agreements totaled approximately $130.8 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 April 16, 2018 we completed our second securitization transaction of 2018. In the transaction, qualified institutional buyers purchased $201.8 million of asset-backed notes secured by $205.0 million in automobile receivables purchased by us. The sold notes, issued by CPS Auto Receivables Trust 2018-B, consist of five classes. Ratings of the notes were provided by Standard & Poor’s and Kroll Bond Rating Agency 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 3.98%.