AutoNation 2001 Annual Report Download - page 69

Until December 2001, the Company securitized installment loan receivables
through a commercial paper warehouse facility with unrelated financial
institutions. In September 2001, the Company decreased the capacity of the
commercial paper warehouse facility from $1.0 billion to $625.0 million. The
warehouse facility had a renewable 364-day term and required an annual
securitization transaction to reduce indebtedness. During 2001 and 2000, the
Company sold installment loan finance receivables of $397.5 million and $580.1
million, respectively, under this program, net of retained interests. The
Company retains responsibility for servicing the loans for which it is paid a
servicing fee. The Company in turn has a sub-servicing arrangement with a third
party. The Company also retained a subordinated interest in the sold receivables
and the rights to future cash flows arising from the receivables after the
investors received their contractual return. The Company provided additional
credit enhancement in the form of a reserve fund. In December 2001, in
conjunction with the Company's exit of the loan underwriting business, the
Company terminated this facility.
Until December 2001, the Company also securitized installment loan
receivables through the issuance of asset-backed notes through non-consolidated
qualified special purpose entities under a shelf registration statement.
Proceeds from these notes were used to repay commercial paper outstanding under
the warehouse facility and to finance additional loans held by the Company. In
August 2001, the Company amended the shelf registration statement to provide
aggregate capacity of $2.0 billion. During 2001 and 2000, the Company issued
$850.0 million and $691.7 million, respectively, in asset-backed notes under
this program, net of retained interests. The Company provides credit
enhancements related to these notes in the form of a 1% over-collateralization,
a reserve fund and a third party surety bond. The Company retains responsibility
for servicing the loans for which it is paid a servicing fee. The Company in
turn has a sub-servicing arrangement with a third party. Included in Other
Current Liabilities and Other Liabilities at December 31, 2001, is the current
portion of the net servicing liability of $3.0 million and the long term portion
of the net servicing liability of $12.4 million, respectively, relating to these
arrangements. The servicing liability relates to loans that have been sold and
continue to be serviced by the Company. The servicing liability is the present
value, discounted at 7.4%, of the estimated excess of future sub-servicing costs
over the future estimated servicing income. At December 31, 2001, $1.3 billion
was outstanding under this program, net of retained interests. With the
Company's decision to exit the loan underwriting business, the Company does not
intend to utilize the remaining capacity under this program. Substantially all
of the beneficial interests in the debt of the qualified special purpose
entities are held by unrelated third parties. The investors and the
securitization trusts have no recourse to the Company's assets for failure of
debtors to pay when due, except to the extent of the Company's remaining
investments in securitizations.
During 2001 and 2000, the Company recognized a pre-tax gain on the
securitization of installment loan receivables of $7.6 million and $.8 million,
respectively, which has been included in Loan and Lease Underwriting Losses
(Income), Net in the Consolidated Income Statements.
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AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of cash flows received from securitization transactions for the
years ended December 31 were as follows:
2001 2000
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Proceeds from securitizations under warehouse facility...... $397.5 $580.1