following a trust administrator default, to waive the trust administrator default or to terminate the trust administrator; to remove the AART indenture trustee and appoint a successor; and to consent to specified types of amendments to the AART indenture and the transfer agreements and servicing agreements.
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| In exercising any rights or remedies, | ||
| Furthermore, the issuing entity’s failure to make a timely payment of interest will constitute an event of default under the AART indenture only if the failure relates to the controlling class. | ||
SUMMARY OF TRANSACTION PARTIES*
| * | This chart provides only a simplified overview of the relationships |
AFFILIATIONS AND RELATIONSHIPS AMONG TRANSACTION PARTIES
The AART owner trustee isand the ACOLT owner trustee are not an affiliateaffiliates of any of the depositor, the sponsor, the servicer, the trust administrator, the issuing entity, ACOLT, or either the ACOLT indenture trustee or the AART indenture trustee. However, the AART owner trustee and the ACOLT owner trustee and one or more of itstheir affiliates may, from time to time, engage in arm’s-length transactions with the depositor, the sponsor, the servicer, the trust administrator, the issuing entity, ACOLT, the AART indenture trustee, the ACOLT indenture trustee or affiliates of any of them, thatwhich are distinct from its roletheir roles as the AART owner trustee or the ACOLT owner trustee, including transactions both related and unrelated to the securitization of retail motor vehicle instalment sale contracts.automotive leases and leased vehicles. The ACOLT owner trustee and its affiliates, during the past two years, have not engaged in any transactions that are material to this transaction with any of the depositor, the sponsor, the servicer, the trust administrator, the issuing entity, ACOLT or the indenture trusteeaffiliates of any of them that are outside of the ordinary course of business or that are other than at arm’s length. [Add description of specific transactions if material to investors in the notes.]
The AART indenture trustee isand the ACOLT indenture trustee are not an affiliateaffiliates of any of the depositor, the sponsor, the servicer, the trust administrator, the issuing entity, ACOLT or either the AART owner trustee or the ACOLT owner trustee. However, the AART indenture trustee and the ACOLT indenture trustee and one or more of itstheir affiliates may, from time to time, engage in arm’s-length transactions with the depositor, the sponsor, the servicer, the trust administrator, the issuing entity, ACOLT, the ACOLT owner trustee or affiliates of any of them, thatwhich are distinct from its roletheir roles as the ACOLT indenture trustee or the AART indenture trustee, including transactions both related and unrelated to the securitization of retail vehicle instalment sale contracts.automotive leases and leased vehicles. The AART indenture trustee, the ACOLT indenture trustee and itstheir affiliates, during the past two years, have not engaged in any transactions that are material to this transaction with any of the depositor, the sponsor, the servicer, the trust administrator, the issuing entity, ACOLT or the owner trusteeaffiliates of any of them that are outside of the ordinary course of business or that are other than at arm’s length. [Add description of specific transactions if material to investors in the notes.]
[In addition, [ ] will be the swap counterparty. [ ] and [ ], an underwriter for the offered[ ] notes, and the [swap counterparty] [[AART ] owner trustee and the ACOLT owner trustee][AART indenture trustee and the ACOLT indenture trustee] are affiliates and have engagedengage in other similar transactions with each other involving securitizations.]
[Add description of any indirect or indirect ownership of the sponsor by the swap counterparty or its affiliates if material to the investors in the notes.]
The sponsor, the servicer and the depositor are affiliates and may also engage in transactions with each other involving securitizations of retail automotive instalment sales contracts and retail automotive leases, including public offerings and private placements of asset-backed securities, as well as commercial paper conduit financing of retail vehicleautomotive instalment sale contracts and retail automotive leases, including those described in this prospectus supplement and others. [Add description of specific transactions involving the securitized assets or the securitization if material to investors in the notes.] Specifically, the depositor and Ally Bank have entered into an intercompany advance agreement through which the depositor may borrow funds from Ally Bank to fund its general operating expenses and, for some securitization transactions in which the depositor acts as the depositor, to pay for a portion of the receivables,secured notes pursuant to the reserve account initial depositsale and contribution agreement and transaction expenses. Similarly, ACOL LLC and Ally Bank may enter into an intercompany advance agreement, through which ACOL LLC may borrow funds from Ally Bank to fund its general operating expenses. Under theany intercompany advance agreement, the loans will bear a market rate of interest and have documented repayment terms.
On the [initial] closing date, the issuing entity is issuing certificates not offered hereby. The depositor will initially retain the certificates, which representsrepresent the principal equity in the issuing entity. Therefore, the issuing entity is a direct subsidiary of the depositor and an indirect subsidiary of the sponsor. The depositor retains the right to sell all or a portion of the certificates at any time. Following any such sale to an unaffiliated third party, the issuing entity may cease to be an affiliate of either the sponsor or the depositor. The issuing entity has not engaged, and will not engage, in any material transactions with the sponsor or the depositor that are outside of theordinary course of businessor that are other than at arm’s length. [Add disclosure if the trust engages in any transactions with the sponsor or depositor other than those described in the prospectus.]
[SUMMARY OF MONTHLY DEPOSITS TO AND WITHDRAWALS
FROM ACCOUNTS DURING THE REVOLVING PERIOD*ACOLT AND AART ACCOUNTS*
SUMMARY OF MONTHLY DEPOSITS TO AND WITHDRAWALS
FROM ACCOUNTS [DURING THE AMORTIZATION PERIOD]*ACOLT AND AART ACCOUNTS*
See “The Transfer Agreements and Servicing Agreements—Distributions on the Notes—Priorities for Distributions from AART Collection Account[: Amortization Period]” for a description of the relative priorities of each class.
The issuing entity, Ally Auto Receivables Trust 20 --SN , is a statutory trust formed under the laws of the State of Delaware with a fiscal year end of December 31. The trustissuing entity will be established and operated pursuant to a trust agreement dated on or before the anticipated [initial] closing date of , 20 , which is the date the trustissuing entity will initially issue the notes and certificates.
The trustissuing entity will engage in only the following activities:
acquire, hold and manage the receivablessecured notes and other assets of the trust,issuing entity;
issue securities,securities;
[enter into and make payments under the interest rate swaps to the floating rate notes;]
make payments on the securities,securities; and
take any action necessary to fulfill the role of the trustissuing entity in connection with the notes and the certificates.
The trust’sissuing entity’s principal offices are in [ ], Delaware, in care of [ ], as AART owner trustee, at the address listed in ““The AART Owner Trustee”Trustee and the ACOLT Owner Trusteebelow.” below:
Capitalization of the TrustIssuing Entity
The following table illustrates the capitalization of the trustissuing entity as of , 20 ,[ ], 20[ ], the [initial] cutoff date, as if the issuance of the notes and the certificates had taken place on that date:
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Class | ||||
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Class A-2[a] Asset Backed Notes | ||||
[Class A-2b Asset Backed Notes] | ||||
Class A-3[a] Asset Backed Notes | ||||
[Class A-3b Asset Backed Notes] | ||||
Class A-4[a] Asset Backed Notes | ||||
[Class A-4b Asset Backed Notes] | ||||
Class B Asset Backed Notes | ||||
Class C Asset Backed Notes | ||||
Class D Asset Backed Notes | ||||
Asset Backed Certificates | ||||
AART Overcollateralization Amount | ||||
Total Issuing Entity Capitalization | ||||
ACOLT Overcollateralization Amount | ||||
Total Transaction Capitalization |
The amount shown for the certificates is the initial level of overcollateralization. The holders of the certificates will be entitled to receive amounts representing the remaining overcollateralization after repayment of amounts owing on the notes. None of the [Class A-1 Notes and the] Class D Notes orand the certificates are not being offered by this prospectus supplement or the accompanying prospectus. The [Classcertificates represent the equity of the issuing entity and will be issued under the trust agreement. The depositor will initially retain the certificates[, the Class A-1 Notes andNotes] [and the Class D Notes] will be sold in one or more private placements on the closing date or may initially be retained by the depositor. [The Class D Notes will initially be retained by the depositor and a][A]ll of the certificates will initially be retained by the depositor. The depositor will retain the right to sell all. All or a portion of [thethe certificates[, the Class A-1 Notes] [and the Class D Notes and]Notes] may be sold by the certificatesdepositor at any time.
The AART Owner Trustee and the ACOLT Owner Trustee
[ ] isInsert description of the AART owner trustee underand the trust agreement. [ ] is a [ ] and an affiliate of [ ]. Its principal offices are located at [ ].
[ ] has acted asACOLT owner trustee on numerous asset-backed securities transactions, including acting as owner trustee on various auto loan and auto lease securitization transactions. While the structure of the transactions referred to in the preceding sentence may differ among these transactions, [ ] is experienced in administering transactions of this kind. [Add information with respect to the owner trustee.]trustee].
Ally Bank is the sponsor of the transaction set forth in this prospectus supplement and in the accompanying prospectus. Ally Bank has not previously securitized its retail auto receivables in atwo registered offering.offerings in 2012, five registered offerings in 2011 and five registered offerings in 2010. Ally Bank completed two private placement retail auto transactions in 2009 and one private placement lease transaction in 2011. In those retail and lease securitizations, Ally Bank sponsored trusts and issuing entities have issued securities with an aggregate initial principal balance of approximately $16.4 billion. Ally Bank has securitized its wholesale receivables in one registered offering and four private placement transactions in 2010, four registered offerings and one private placement transaction in 2011 and two registered offerings in 2012, with the publicly offered and privately placed notes having an aggregate initial principal balance of approximately $7.8 billion. As of December 31, 2011, none of the prior securitizations sponsored by Ally Bank have defaulted or experienced an early amortization or similar triggering event.
For further details with respect to Ally Bank’s prior retail vehicle instalment sale contractauto lease originations [and securitizations] over the prior five years, see ““Appendix [A][B]—A—Static Pool Data”Data” in this prospectus supplement.
THE RECEIVABLES POOLREPURCHASE HISTORY
[For a series of notes having an initial bona fide offering on or after February 14, 2012:
The following table provides information regarding the demand, repurchase and replacement history with respect to the lease assets securitized by Ally Bank during the period from [ ] to [ ].
Name of Issuing Entity | Check if | Name of | Total Lease | Lease Assets | Lease Assets | Lease Assets | Demand in | Demand | Demand | |||||||||
Ally Auto Receivables Trust 20- CIK # | # $ % | # $ % | # $ % | # $ % | # $ % | # $ % | ||||||||||||
Ally Auto Receivables Trust 20- CIK # | # $ % | # $ % | # $ % | # $ % | # $ % | # $ % | ||||||||||||
Ally Auto Receivables Trust 20- CIK # | # $ % | # $ % | # $ % | # $ % | # $ % | # $ % | ||||||||||||
Total | ||||||||||||||||||
[Insert disclosure regarding the most recent Form ABS-15G filed by the depositor and the CIK number of the depositor.]]
[There have been no demands for repurchase and therefore there is no activity to report under Rule 15Ga-1.]
THE LEASE ASSETS AND THE SECURED NOTES
Criteria Applicable to the Selection of [Initial] ReceivablesLease Assets
The [initial] pool of receivables to be sold toAlly Bank acquires leases and the trustrelated leased vehicles from dealers under a supplemental dealer agreement. Each initial lease and the related leased vehicle included by ACOLT as collateral for the initial secured notes was selected by Ally Bank from Ally Bank’s portfolio of leases originated in the states in which VAULT operates based
on several criteria, including that each receivable:it must meet the following eligibility criteria as of the closing date (except as otherwise noted):
at lease inception the leased vehicle is secured by a new or used car[or used] automobile or light truck,duty truck;
isthe lease has an original scheduled term of [12] to [48] months [and a Simple Interest Receivable,remaining term of not less than [ ] months];
was originated in the United States,
provides for level monthly payments that may vary from one another by no more than $5,
will amortize the Amount Financed over its original term to maturity,
lease was originated or acquired by Ally Bank or its subsidiariesaffiliates in the ordinary course of business,business;
the related dealer is located in the United States and each lessee has a first payment due date on or after , 20 ,billing address in the United States;
was originated on or after , 20 ,the lease provides for level monthly payments, except that the first and last monthly payments may differ from the level payments;
has an original term of [ ] to [ ] months,the lease complies with applicable federal, state and local laws;
hasthe lease represents a remaining termbinding obligation of the lessee;
the lease is in force and not less than [ ] months,terminated;
as of the [initial] cutoff date, the lease was not considered past due;due, that is, the payments due on that receivablelease in excess of $25$25.00 have been received within 30 days of the payment date,date;
no lease asset is a Liquidating Lease Asset;
the lessee is required to maintain physical damage and liability insurance policies;
the lease and the related leased vehicle are legally assigned to ACOLT;
the lease was originated in the United States; and
has an APRthe lessee is required to pay all costs relating to taxes, insurance and maintenance for the leased vehicle.
[Additional lease assets sold by Ally Bank to ACOLT during the revolving period must meet substantially similar criteria. See “Criteria Applicable to the Selection of Additional Lease Assets During the Revolving Period” below. However, these criteria will not greater than [ ]%.
The receivables in the [initial]ensure that each subsequent pool of receivablesadditional lease assets will share the exact characteristics as the initial pool of lease assets. As a result, the composition of the aggregate lease assets will change as additional lease assets are purchased by ACOLT on theeach additional closing date will beduring the same receivables that comprised therevolving period.]
The initial pool of receivables on the [initial] cutoff date.
The [initial] pool of receivableslease assets was selected from Ally Bank’s portfolio of receivableslease assets that meet the criteria described above and other administrative criteria utilized by Ally Bank from time to time. We believe thattime, and no selection procedures believed by Ally Bank to be adverse to ACOLT, the noteholdersACOLT indenture trustee, the ACOLT owner trustee, the holder of the secured notes, the holder of the equity certificates of the ACOLT series and the AART indenture trustee were utilized in selecting the receivables in this [initial] pool of receivables.
[Additional receivables sold to the trust during the revolving period must meet substantially similar criteria. See“Criteria Applicable to Selection of Additional Receivables During the Revolving Period” below. However, these criteria will not ensure that each subsequent pool of additional receivables will share the exact characteristics as the initial pool of receivables. As a result,lease assets from those lease assets of Ally Bank that meet the compositionabove criteria.
Characteristics of the aggregate pool of receivables will change[Initial] Lease Assets
Except as additional receivables are purchased by the issuing entity onotherwise noted, each distribution date during the revolving period.]
The following tables describe the [initial] pool of receivables as of the [initial] cutoff date.
Each of the percentages and averages in the following tables is computed on the basis of the amount financedABS Value of each receivablelease asset as of the [initial] cutoff date. The “Weighted Average Annual Percentage Rate of all Receivables in Pool” and “Weighted Average Annual Percentage Rate of Non-Subvented Receivables in Pool” infollowing tables describe the following table are based on weighting by amount financed and remaining term of each receivable, each[initial] lease assets as of the [initial] cutoff date. The “Weighted Average Original Maturity”Aggregate ABS Value in the tables may not add up to the total capitalization of the issuing entity due to rounding. In the following table is based on weighting by original undiscounted principal balance of each receivable as of its date of origination. “Loan-to-Value Ratio” with respect to a receivable means the amount financed divided by the estimated vehicle value, multiplied by 100. The estimated vehicle value for a new vehicletables and elsewhere in this prospectus supplement,“Lease Residual” is the dealer invoice costlesser of ALG Residual and the Stated Residual Value, in each case, set at
lease inception; and“Adjusted MSRP”is the manufacturer’s suggested retail price or “MSRP” of the vehicle. The estimatedleased vehicle value for a used vehicle isplus the value, received by Ally Bank or GMAC from theat lease inception, of any dealer independently validated by GMAC or Ally Bank, based on a market guide, such as the Blackbook, indicatinginstalled options minus the value of any equipment removed from the vehicleleased vehicle. A“FICO Score”is a measurement, as of lease inception, designed by Fair, Isaac & Company and calculated by the source from which that value was determined. “Weighted Average Loan-to-Value Ratio” major credit bureaus using collected information to assess credit risk. The amount in the column for “average” in the calculation of“Original FICO Score”is based on a weighting by original undiscounted principal balanceABS Value of each receivable as of its date of origination. A FICO score is a measurement determined by Fair, Isaac & Company using information collected by the major credit bureaus to assess credit risk. “Weighted Average FICO Score” is based on a weighting by original undiscounted principal balance of each receivablelease asset as of the [initial] cutoff date [andand excludes receivables with respect tolease assets for which no FICO Score is available or for which the obligor is a business account and receivables for which no FICO Score is available.account. Of the [ ] FICO Scores excluded from the Weighted Averageweighted average FICO Score, ,[ ], or %,[ ]%, are business accounts and the remaining [ ], or [ ]%, or %, are for accounts for which FICO Scores are unavailable. In the table, “Distribution of the [Initial] Receivables PoolLease Assets by Original FICO Score,” those excluded accounts make up the “Business Accounts and Unavailable” category].category.
[To the extent material, insert data regarding the number of lease assets included in the [initial] lease asset pool that have been subject to a waiver, modification or extension, including a description of the type of waiver, modification and extension.]
As used in the following table, the average “Remaining Term (In Months),” average “Seasoning (In Months)” and average “Original Term (In Months)” are the weighted averages of such terms weighted by ABS Value of each lease asset as of the cutoff date. The following tables describe the pool of lease assets as of the cutoff date. [Percentages may not equal 100.00% due to rounding.]
Composition of the [Initial] Receivables Pool—(Total: New and Used)Lease Asset Pool
| Average | Minimum | Maximum | ||||||
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Original Term (In Months) | |||||||||
Original FICO Score | |||||||||
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Composition of the [Initial] Receivables Pool—(New)
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CompositionThe net present value of the [Initial] Receivables Pool—(Used)Lease Residual of the lease assets securing any series of secured notes will constitute less than 65% of the securitized Aggregate ABS Value of those lease assets as of the applicable initial cutoff date [or subsequent cutoff date].
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Distribution of the [Initial] Receivables PoolLease Assets by Annual Percentage Rate—AggregateOriginal Term
| Number of | Percentage of Total Number of Lease Assets | Percentage of Initial ABS Value | Aggregate Lease Residual as a % of Aggregated Adjusted MSRP | |||||||||||||||||||
| [ | ] | [ | ]% | $ | [0.00 | ] | [ | ]% | [ | ]% | ||||||||||||
13 to 24 | [ | ] | [ | ]% | [0.00 | ] | [ | ]% | [ | ]% | |||||||||||||
25 to 36 | [ | ] | [ | ]% | [0.00 | ] | [ | ]% | [ | ]% | |||||||||||||
37 to 39 | [ | ] | [ | ]% | [0.00 | ] | [ | ]% | [ | ]% | |||||||||||||
40 to 48 | [ | ] | [ | ]% | [0.00 | ] | [ | ]% | [ | ]% | |||||||||||||
Total | [ | ] | [ | ]% | $ | [0.00 | ] | [ | ]% | [ | ]% | ||||||||||||
Distribution of [Initial] Lease Assets by Remaining Lease Term
The distribution of the [initial] lease assets as of the cutoff date by remaining lease term was as follows:
Scheduled Lease-End Date | Number of Lease Assets | Percentage of Total Number of Lease Assets | Initial ABS Value | Percentage of Initial ABS Value | Lease Residual as a % of Adjusted MSRP | |||||
[Month, Year] [Month, Year] | ||||||||||
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Total | ||||||||||
Distribution of the [Initial] Receivables PoolLease Assets by State
The [initial] pool of receivableslease assets includes receivableslease assets originated in all 50[ ] states and[and the District of Columbia.Columbia]. The following table sets forth the number and percentage of the Aggregate Amount FinancedInitial ABS Value and total number of lease assets in the states with the largest concentration of receivables.lease assets. No other state accounts for more than %[ ]% and [ ]% of the Aggregate Amount Financed. The following breakdown bytotal number of lease assets and Initial ABS Value, respectively. [Management believes that there are no factors unique to any state is basedor region in which 10% or more of the lease assets are located that may materially impact the issuing entity’s ability to pay principal and interest on the billing addresses of the obligors on the receivables:
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notes.][Note: In accordance with Item 1111(b)(14),Describe economic or other factors specific to any state or region in which obligors in respect of 10% or more of the pool of assets are located will be described to the extent that they may materially impact pool cash flows. This determination will be made] The distribution of the [initial] lease assets as of the cutoff date, based on the specific geographic distributions with respect to, and economic and other circumstances existing at the time of formation of, each pool.]
Distributionbilling address of the [Initial] Receivables Pool by Loan-to-Value Ratiolessee on the lease, was as follows:
| Number of | of Lease Assets | Percentage of Initial ABS Value | |||||||||
[State] | % | $ | ||||||||||
[State] | % | |||||||||||
[State] | % | |||||||||||
[State] | % | |||||||||||
[State] | % | |||||||||||
Other | % | |||||||||||
Total | % | $ | ||||||||||
Distribution of [Initial] Lease Assets by Vehicle Make
The distribution of the [initial] lease assets as of the cutoff date by vehicle make was as follows:
Breakdown by Vehicle | Number of Lease Assets | Percentage of of Lease Assets | Initial ABS Value | Percentage of Initial ABS Value | ||||||||||
| % | $ | % | |||||||||||
| % | % | ||||||||||||
[Make] | % | % | ||||||||||||
[Make] | % | % | ||||||||||||
[Make] | % | % | ||||||||||||
[Make] | % | % | ||||||||||||
Total | % | % | ||||||||||||
Distribution of [Initial] Lease Assets by Model
The distribution of the [initial] lease assets as of the cutoff date by models with representing 5% or more of the Initial ABS Value of the pool of lease assets was as follows:
Breakdown by Vehicle Model | Number of Lease Assets | Percentage of Total Number of Lease Assets | Initial ABS Value | Percentage of Initial ABS Value | ||||||||||
[Model] | % | $ | % | |||||||||||
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[Model] | % | % | ||||||||||||
[Model] | % | % | ||||||||||||
[Model] | % | % | ||||||||||||
Total | % | |||||||||||||
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Distribution of the [Initial] Receivables PoolLease Assets by Original FICO Score
FICO Band | Number of | Cutoff Date | Percentage of Initial | |||||||
Business Accounts and Unavailable | $ | % | ||||||||
| $ | % | ||||||||
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[Criteria Applicable to the Selection of Additional ReceivablesLease Assets During the Revolving Period
The additional receivables sold to the issuing entity during the revolving periodlease assets acquired by Ally Bank and included by ACOLT as collateral for additional secured notes will be selected by Ally Bank from Ally Bank’s portfolio based on several criteria. These criteria, includeincluding that they must meet the requirements that each additional receivable:following eligibility criteria:
at lease inception the leased vehicle is secured by a new or used car[or used] automobile or light truck,duty truck;
isthe lease has an original scheduled term of [12] to [48] months [and a Simple Interest Receivable,remaining term not less than [__] months];
was originated in the United States,
provides for level monthly payments which may vary from one another by no more than $5,
will amortize the Amount Financed over its original term to maturity,
lease was or will be originated or acquired by Ally Bank or its subsidiaries in the ordinary course of business,business;
the related dealer is located in the United States and each lessee has an original term of [ ] to [ ] months, provideda billing address in the United States;
the lease provides for level monthly payments, except that following the addition of all additional receivables on each subsequent cutoff date,first and last monthly payments may differ from the sumlevel payments;
the lease complies with applicable federal, state and local laws;
the lease represents a binding obligation of the Amount Financed of all receivables ever sold to lessee;
the issuing entity with an original termlease is in excess of [ ] months mayforce and not exceed [ ]% of the Aggregate Amount Financed of all receivables ever sold to the issuing entity,terminated;
as of its subsequentthe applicable additional cutoff date, the additional receivable willlease was not be considered past due;due, that is, the payments due on that additional receivablelease in excess of $25 will have$25.00 had been received within 30 days of the payment date,date;
hasno lease asset is a remaining term as of its subsequent cutoff date of not less than [ ] months,Liquidating Lease Asset;
the lessee is required to maintain physical damage and liability insurance policies;
has a final maturity date no later than , 20 .the lease and the related leased vehicle are legally assigned to ACOLT;
the lease was originated in the United States; and
the related lessee is required to pay all costs relating to taxes, insurance and maintenance for the leased vehicle.
The additional receivableslease assets will be selected at from Ally Bank’s portfolio of receivableslease assets that meet the criteria described above and other administrative criteria utilized by Ally Bank from time to time. We believe thattime, and no selection procedures believed by Ally Bank to be adverse to the noteholders will bewere utilized in selecting the additional receivables.lease assets from those leases of Ally Bank that meet the above criteria.]
Terms of the Secured Notes
The secured notes to be sold by Ally Bank to the depositor and by the depositor to the issuing entity will be issued by ACOLT on the closing date. Each secured note:
has the benefit of a first priority security interest in the lease assets;
contains enforceable provisions to render the rights and remedies of secured noteholders adequate for realization against the collateral of the benefits of security;
has a final scheduled distribution date of [ ], 20[ ]; and
will bear interest at a rate, which we refer to as the “Secured Note Rate,” of [ ]% per annum.
Ally Bank, as seller of the secured notes, will make representations and warranties to the depositor regarding the terms of the secured notes described above. The representations and warranties regarding the secured notes will then be assigned by the depositor to the issuing entity. If Ally Bank breaches the representations and warranties regarding the secured notes, it must repurchase any affected secured notes from the issuing entity.
Depositor Review of the Lease Asset Pool
The depositor is required to perform a review (the “pool review”) of the pool of lease assets in order to provide reasonable assurance that the information contained in this prospectus supplement and the accompanying prospectus regarding the pool of lease assets is accurate in all material respects. The pool review entailed consideration of ongoing processes and procedures used by Ally Financial and Ally Bank (the “process review”), as well as the performance of specified actions with respect to disclosure about the pool of lease assets and the underlying data on which that disclosure was based (the “data and disclosure review”). For certain aspects of the pool review, the depositor engaged a third party to assist. The depositor designed the procedures used in the pool review, assumes the responsibility for the sufficiency of those procedures, and attributes to itself all findings and conclusions of the pool review.
For the process review, the depositor monitored internal reports and developments with respect to processes and procedures that are designed to maintain and enhance the quality of decision-making, the quality of originated or acquired lease assets and the accuracy, efficiency and reliability of leasing systems and operations. Ally Financial and Ally Bank have internal functions that carry out these processes and procedures, such as:
[Quality assurance, which tests previously originated or acquired lease assets to check for compliance with applicable underwriting criteria and documentation requirements and accurate entry of data into the principal databases and other management information systems of the sponsor and the servicer (the “information databases”),]
[Lease review, which tests, among other things, the quality of originated portfolios and the adherence of originations to established policies,]
Risk reporting, which monitors losses, delinquencies, credit quality and exceptions to servicing policies, and
Internal audit, which independently performs periodic internal control reviews of various processes including the auto lease origination and reporting system processes.
The first part of the data and disclosure review tested the accuracy of the individual lease data contained in the information databases. The depositor uses the information databases to assemble an electronic data tape containing relevant data on the lease asset pool. From this tape, the depositor constructs the pool composition and stratification tables in“The Lease Assets and the Secured Notes” in this prospectus supplement and verifies the eligibility criteria in“The Lease Assets and the Secured Notes—Criteria Applicable to the Selection of [Initial] Lease Assets” in this prospectus supplement and the representations and warranties in“The Transfer Agreements and Servicing Agreements—Sale and Assignment of Lease Assets and Secured Notes”in the accompanying prospectus.
Through random processes, [ ] lease assets (the “reviewed lease assets”) in the pool were selected. The servicer and the sponsor made available an electronic copy of the pertinent underlying documentation and data records for each reviewed lease asset (collectively, the “lease asset document file”).
First, approximately [ ] different aspects, or data points, of each lease asset document file, values such as [FICO score, origination date and residual value, along with elements such as a certificate of title], were noted. These data points were either compared to the corresponding information in the electronic data tape or evaluated for compliance with an eligibility criterion or a representation and warranty, to determine whether any inaccuracies existed. In some cases, the depositor specified permissible tolerances for variances. Of the approximately [ ] aggregate data points checked, a total of [ ] appeared to be erroneous. [Insert description of errors found.]
In addition, selected values associated with the reviewed lease assets were recomputed to assess their accuracy. The servicer provided records regarding payments made by the related lessees prior to the cutoff date so that the ABS Value and remaining term for each reviewed lease asset could be recomputed. Based on information in the lease asset document file, the residual value for the related financed vehicle was also recomputed. [These recomputations did not indicate any errors.]
A second aspect of the data and disclosure review consisted of a comparison of the statistics contained in“The Lease Assets and the Secured Notes” in this prospectus supplement to data in, or derived from, the information databases. The review consisted of a recalculation from the data in the information databases of the number of leases, monetary amounts, amounts and percentages displayed in“The Lease Assets and the Secured Notes” in this prospectus supplement. Matters not exceeding plus or minus 0.5 percent of the number of contracts, monetary amounts, amounts or percentages were not considered exceptions. This comparison found no exceptions within the specified parameters.
The third aspect of the data and disclosure review evaluated the information contained in the accompanying prospectus regarding the pool of lease assets under“Description of Auto Lease Business of Ally Bank—Acquisition and Underwriting of Motor Vehicle Leases,” “Description of Auto Lease Business of Ally Bank—Determination of
Residual Value,” “The Lease Assets,” “The Servicer—Servicing Procedures,” “The Servicer—Vehicle Disposition Process,” “The Servicer—Vehicle Disposition Process,” “The Transfer Agreements and Servicing Agreements—Sale and Assignment of Lease Assets and Secured Notes,” “The Transfer Agreements and Servicing Agreements—Additional Sales of Lease Assets”and“Legal Aspects of the Secured Notes and the Lease Assets” in the accompanying prospectus. The depositor confirmed with the responsible personnel of the sponsor and the servicer that the description of the business practices, contract terms and legal and regulatory considerations, and the other information with respect to the pool of lease assets, contained in those sections is accurate. The depositor also reviewed internal management reports periodically generated by these personnel that bear on the matters discussed in those sections of the accompanying prospectus.
The depositor has concluded that the findings of the pool review provide it with reasonable assurance that:
the errors identified in the first aspect of the data and disclosure review are not indicative of any systemic problems with the processes within the sponsor and the servicer that generate information regarding lease assets for use in this prospectus supplement and the accompanying prospectus;
| • | the pool composition and stratification tables contained in“The Lease Assets and the Secured Notes” in this prospectus supplement are accurate in all material respects; |
the pool of lease assets satisfies the selection criteria and the representations and warranties in all material respects; and
the disclosure regarding the pool of lease assets contained in the sections of the accompanying prospectus cited in the preceding paragraph is accurate in all material respects.
Exceptions to Underwriting Guidelines
[To the extent required by Item 1111(a)(8) of Regulation AB, if any lease assets in the pool deviate from the disclosed underwriting criteria, or any lease assets in the sample or lease assets otherwise known to deviate if only a sample was reviewed, disclose (1) how those lease assets deviate from the disclosed underwriting criteria, (2) data on the amount and characteristics of those lease assets that did not meet the disclosed standards, (3) which entity or entities determined that those lease assets should be included in the pool, despite not having met the disclosed underwriting standards, and (4) what factors were used to make the determination, such as compensating factors or a determination that the exception was not material. If compensating or other factors were used, provide data on the amount of lease assets in the pool or in the sample that are represented as meeting each such factor and the amount of lease assets that do not meet those factors. If multiple entities are involved in the decision to include lease assets despite not having met the disclosed underwriting standards, this should be described and each participating entity disclosed.]
Delinquencies, Repossessions, BankruptciesDelinquency, Repossession and Net LossesCredit and Residual Loss Data on Ally Bank Lease Assets
For Ally Bank’s entire U.S. consumer automotive portfolio of new and used retail carautomobile and light duty truck receivables,lease assets, the tabletables on the following page showspages show Ally Bank’s experience for both new and used retail car and light truck receivables on a combined basis for:
delinquencies,delinquencies;
repossessions,
bankruptcies,repossessions; and
netcredit and residual losses.
Fluctuations in delinquencies, repossessions bankruptcies and netcredit and residual losses generally follow trends in the overall economic environment and may be affected by such factors as:
competition for obligors,lessees;
the supply and demand for both new and used cars and light trucks,duty trucks;
consumer debt burden per household,household;
personal bankruptcies; and
personal bankruptcies.values at which the residual values are booked.
[Narrative disclosureHistorically, a large portion of quarterly datathe leases in Ally Bank’s U.S. portfolio have been three-year leases. In the recent past, the proportion of four-year leases in Ally Bank’s U.S. portfolio has increased, similar to be added as appropriate]the U.S. automobile lease portfolios for all automobile manufacturers. Four-year leases in Ally Bank’s U.S. portfolio have generally had higher credit losses than leases with shorter terms although the residual loss exposure for four-year leases has been less than for shorter-term leases because residual values were set at lower amounts to reflect the additional depreciation.]
There can be no assurance that the delinquency, repossession bankruptcy and netcredit and residual loss experience on the receivableslease assets will be comparable to that set forth below or that the factors or beliefs described above will remain applicable.
Vehicle Lease Delinquency Information
New and Used Car and Light Truck Contracts | [Nine Month Ended September 30] | Year Ended December 31, | ||||||||||||||||
| 2009 | 2008 | 2008 | 2007 | 2006 | 2005 | |||||||||||||
Total Retail Contracts Outstanding at the End of the Period (excluding bankruptcies) (in thousands) | ||||||||||||||||||
New Vehicles (in thousands) | ||||||||||||||||||
Used Vehicles (in thousands) | ||||||||||||||||||
Total (in thousands) | ||||||||||||||||||
Average Daily Delinquency | ||||||||||||||||||
31-60 Days | % | % | % | % | % | % | ||||||||||||
61-90 Days | % | % | % | % | % | % | ||||||||||||
91 Days or More | % | % | % | % | % | % | ||||||||||||
Repossessions as a Percent of Average Number of Contracts Outstanding (including bankruptcies) | % | % | % | % | % | % | ||||||||||||
Net Losses as a Percent of Liquidations | % | % | % | % | % | % | ||||||||||||
Net Losses as a Percent of Average Gross Receivables | % | % | % | % | % | % | ||||||||||||
Net Losses as a Percent of Average Net Receivables | % | % | % | % | % | % | ||||||||||||
Total Retail Contracts Outstanding at End of the Period (including bankruptcies) (in thousands) | ||||||||||||||||||
Bankruptcies as a Percent of Average Number of Contracts Outstanding (including bankruptcies) | % | % | % | % | % | % | ||||||||||||
“Average Number of Lease Contracts Outstanding” is computed by taking the simple average of the month-end outstanding amount for each period presented. The “Average Daily Delinquency” percentages shown in the following table are each calculated on the basis of the average number of leases delinquent at any time during a month (excluding leases where the related lessee is in bankruptcy), divided by the number of leases outstanding at the end of that month, and averaged for all months in the indicated period. The period of delinquency in this table is based on the number of days that the scheduled monthly payments in excess of $25 are contractually past due (excluding bankruptcies). For the periods after the year ended 2009, Ally Bank will report “Month-End Delinquency” as a replacement for “Average Daily Delinquency.” “Month-End Delinquency Dollars” represent the remaining book value of the assets as of the ledger closing date for the month.
| At or for the Months Ended [ ], | ||||||||||||||||||||
Leases | 20 | 20 | 20 | 20 | 20 | |||||||||||||||
Average Number of Lease Contracts Outstanding (in thousands) | ||||||||||||||||||||
Average Daily Delinquency | ||||||||||||||||||||
31-60 Days | [ | ]% | [ | ]% | [ | ]% | [ | ]% | [ | ]% | ||||||||||
61-90 Days | [ | ]% | [ | ]% | [ | ]% | [ | ]% | [ | ]% | ||||||||||
91 Days or more | [ | ]% | [ | ]% | [ | ]% | [ | ]% | [ | ]% | ||||||||||
Month-End Dollar Delinquency(1) | ||||||||||||||||||||
31-60 Days | [ | ]% | [ | ]% | [ | ]% | [ | ]% | [ | ]% | ||||||||||
61-90 Days | [ | ]% | [ | ]% | [ | ]% | [ | ]% | [ | ]% | ||||||||||
91 Days or more | [ | ]% | [ | ]% | [ | ]% | [ | ]% | [ | ]% | ||||||||||
| (1) | [The information is available for the years ended 2008, 2009, 2010 and 2011; prior year information is not available.] |
Our current practice is generally to write off receivables,leases, other than those with respect to which the related obligorlessee is in bankruptcy, at the point amounts are deemed to be uncollectible, which usually is at the point of repossession. We will normally begin repossession activity once the receivablelease becomes 60 days past due. The “Average Daily Delinquency” percentages shown in
Default and Loss Experience
Averages are computed by taking the preceding table are each calculated on the basissimple average of the average numbermonth-end outstanding amount for each period presented. “Number of receivables delinquent at any time during a month (excluding receivables where the related obligor is in bankruptcy), divided byRepossessions Sold” means the number of receivables outstanding atrepossessed leased vehicles that have been sold by Ally Bank in a given period. “Number of Repossessions Sold” and “Losses on Repossessions” (in each row where they are used) include losses on “skips,” a circumstance in which the endleased vehicle can no longer be found. The number of that month,skips were [[ ] in 2007, [ ] in 2008, [ ] in 2009, [ ] in 2010 and averaged for all months[ ] in the indicated period. The “Net Losses as a Percent of Liquidations” and the “Net Losses as a Percent of Average Gross Receivables” percentages in the preceding table are based on the gross balance of the receivables, which includes unearned finance charges. Liquidations represent all reductions to the receivables based on cash receipts from all sources as well as charge-offs. The “Net Losses as a Percent of Average Net Receivables” percentages in the preceding table are based on2011]. “Lease Balance Outstanding” means the net balancebook value of Ally Bank’s outstanding leases. “Losses on Repossessions” represents the receivables,difference between the net principal balance, which is the gross balance of the receivables less unearned finance charges and unearned rate support. Unearned finance charges for a receivable are theprincipal portion of the remaining monthly payments on that receivable that are attributedplus the Stated Residual Value, of lease contracts determined to interest atbe uncollectible in the stated rate. Unearnedperiod and the net proceeds from disposition of the related leased vehicles, and does not include any post-disposition recoveries. “Manufacturer’s Support Payments” includes both interest rate support, applies to subvented receivables onlywhere the implied lease rate under the lease, upon lease origination, is lower than current market rates, and residual value support, where the Stated Residual Value is higher than the unamortized portionALG Residual upon lease origination.
The “Number of the discount at which the receivable is purchased from the originating dealer. The “BankruptciesRepossessions Sold as a PercentPercentage of Ending Number of Lease Contracts Outstanding,” “Number of Repossessions Sold as a Percentage of Average Number of Lease Contracts Outstanding, (including bankruptcies)” percentages in“Ending Dollar Amount of Lease Balance Outstanding” equals the preceding table represent the numbernet book value of bankruptciesAlly Bank’s outstanding leases, “Losses on the last dayRepossessions (Without Giving Effect to Manufacturer’s Support Payments) as a Percentage of each monthEnding Dollar Amount of Lease Balance Outstanding” and averaged“Losses on Repossessions (Without Giving Effect to Manufacturer’s Support Payments) as a Percentage of Average Dollar Amount of Lease Balance Outstanding” for the indicated period divided by the number of receivables outstanding on the last day of each month and averaged for the indicated period.
The “Repossessions as a Percent of Average Number of Contracts Outstanding (including bankruptcies),” “Net Losses as a Percent of Average Gross Receivables” and “Net Losses as a Percent of Average Net Receivables” for the [nine][ ] months ended [September 30, 2008[ ], 20[ ] and 2009][ ], 20[ ] are reported as annualized rates, which may not reflect the actual annual results.
| At or For the Months Ended , | ||||||||||||||||||||
| 20 | 20 | 20 | 20 | 20 | ||||||||||||||||
Ending Number of Lease Contracts Outstanding | ||||||||||||||||||||
Average Number of Lease Contracts Outstanding | ||||||||||||||||||||
Number of Repossessions Sold | ||||||||||||||||||||
Number of Repossessions Sold as a Percentage of Ending Number of Lease Contracts Outstanding | % | |||||||||||||||||||
Number of Repossessions Sold as a Percentage of Average Number of Lease Contracts Outstanding | % | |||||||||||||||||||
Ending Dollar Amount of Lease Balance Outstanding (in thousands) | $ | $ | $ | $ | $ | |||||||||||||||
Average Dollar Amount of Lease Balance Outstanding (in thousands) | $ | $ | $ | $ | $ | |||||||||||||||
Losses on Repossessions (Without Giving Effect to Manufacturer’s Support Payments) (in thousands) | ||||||||||||||||||||
Average Losses on Repossessions (Without Giving Effect to Manufacturer’s Support Payments) Per Vehicle | ||||||||||||||||||||
Losses on Repossessions (Without Giving Effect to Manufacturer’s Support Payments) as a Percentage of Ending Dollar Amount of Lease Balance Outstanding | % | % | % | % | % | |||||||||||||||
Losses on Repossessions (Without Giving Effect to Manufacturer’s Support Payments) as a Percentage of Average Dollar Amount of Lease Balance Outstanding | % | % | % | % | % | |||||||||||||||
Vehicle Return Experience
The “Net Lossesinformation in the following table includes only returned vehicles sold by Ally Bank and excludes vehicles sold to consumers and repossessed vehicles. Ally Bank believes that substantially all of the leased vehicles in its U.S. lease portfolio are returned to Ally Bank upon scheduled or early termination of the leases. “Scheduled Terminations” does not include lease terminations under Pull Ahead Programs, but “Early Terminations” and “All Terminations” include those terminations. “Full Termination Ratio” is the ratio, expressed as a Percentagepercentage, of Average Net Receivables” represent actual charge-offsthe number of scheduled termination returned vehicles sold during the stated period by Ally Bank over the number of leases scheduled to terminate during the stated period. “Loss/(Gain) versus ALG Residual” equals the net principal balance of leases at termination less the sum of (1) the portion of the Stated Residual Value in excess of ALG Residual, (2) sales proceeds, (3) other proceeds paid by the lessee before account system termination and (4) any amounts waived pursuant to any Pull Ahead Programs, which does not include recoveries from the lessee after account system termination relating to the principal portion of lease payments due and excess mileage and wear charges, if any. For a discussion of recent trends in residual value gains and losses, see“Residual Values—Determination of Residual Value” in this prospectus supplement. We can make no assurances that per unit losses on Ally Bank’s U.S. consumer automotive portfolio of new and used retail car and light truck receivables. Net Losses include the initial write-down to fair market value of all repossessedleased vehicles in the month20 -SN pool will be similar to Ally Bank’s historical experience for its entire lease portfolio, nor can we ascertain whether losses will increase or decrease.
| At or for the Months Ended , | ||||||||||||||||||||
| 20 | 20 | 20 | 20 | 20 | ||||||||||||||||
Total Number of Leases Scheduled to Terminate | ||||||||||||||||||||
Scheduled Terminations | ||||||||||||||||||||
Number of Returned Vehicles | ||||||||||||||||||||
Total ALG Residual of Returned Vehicles (in thousands) | $ | $ | $ | $ | $ | |||||||||||||||
Total ALG Residual of Returned Vehicles as % of Adjusted MSRP | % | % | % | % | % | |||||||||||||||
Full Termination Ratio | % | % | % | % | % | |||||||||||||||
Loss/(Gain) versus ALG Residual (in thousands) | $ | $ | $ | $ | $ | |||||||||||||||
Average Loss/(Gain) versus ALG Residual | $ | $ | $ | $ | $ | |||||||||||||||
Loss/(Gain) versus ALG as a Percentage of Total ALG Residual of Returned Vehicles | % | % | % | % | % | |||||||||||||||
Early Terminations | ||||||||||||||||||||
Number of Returned Vehicles | ||||||||||||||||||||
Total ALG Residual of Returned Vehicles (in thousands) | $ | $ | $ | $ | $ | |||||||||||||||
Total ALG Residual of Returned Vehicles as % of Adjusted MSRP | % | % | % | % | % | |||||||||||||||
Loss/(Gain) versus ALG Residual (in thousands) | $ | $ | $ | $ | $ | |||||||||||||||
Average Loss/(Gain) versus ALG Residual | $ | $ | $ | $ | $ | |||||||||||||||
Loss/(Gain) versus ALG as a Percentage of Total ALG Residual of Returned Vehicles | % | % | % | % | % | |||||||||||||||
All Terminations | ||||||||||||||||||||
Average Loss/(Gain) versus ALG Residual | $ | $ | $ | $ | $ | |||||||||||||||
Loss/(Gain) versus ALG as a Percentage of Total ALG Residual of Returned Vehicles | % | % | % | % | % | |||||||||||||||
Determination of repossession.Residual Value
Ally Bank uses residual values set by Automotive Lease Guide Co. (“ALG”) for the vehicles that it leases for itself. See“Description of Auto Lease Business of Ally Bank—Determination of Residual Value” in the accompanying prospectus.
In 2006 and 2007, Ally Bank reported marginal residual gains versus ALG Residual for all terminations in the aggregate. In 2008, due to the economic downturn, Ally Financial experienced residual value losses as used car values declined, which continued into the early part of 2009. As the used car market recovered in the second half of 2009, Ally Financial once again experienced marginal residual gains. This favorable trend continued in 2010, 2011 and 2012 as Ally Bank reported residual gains in both scheduled and early terminations. We cannot assure you that this trend towards declining residual value losses and increasing residual value gains will continue or that residual value losses experienced in future periods will be greater or less than residual value losses experienced in previous periods.
Pull Ahead Programs and other Early Termination Marketing Programs
Pull Ahead Programs are employed to promote customer loyalty by offering attractive early termination options for leases and to provide lessees with an incentive to purchase or lease new vehicles. These programs are also employed in an attempt to shift vehicles out of peak termination months and to increase the number of off-lease vehicles that are sold or auctioned during those months in which the purchase price for off-lease vehicles tends to be higher. Ally Bank acts as pull ahead agent for the vehicle manufacturers (in such capacity, the “Pull Ahead Agent”) in administering a Pull Ahead Program. Although the vehicle manufacturer or the Pull Ahead Agent, on behalf of the vehicle manufacturers, may commence a Pull Ahead Program, under the servicing agreement only Ally Financial as servicer (or any successor servicer) is permitted to waive, extend or modify the leases subject to the Pull Ahead Program. The terms of the leases do not give any lessee the right to instigate or participate in a Pull Ahead Program.
Under a Pull Ahead Program, the Pull Ahead Agent may elect to permit qualified lessees to terminate their leases prior to their respective scheduled lease end dates without having to make all or a portion of their remaining Monthly Lease Payments. In order to qualify for this program, the lessee must return its leased vehicle to a dealer or the applicable manufacturer’s dealer and purchase or lease a new vehicle from the same manufacturer. The lessee remains obligated to pay all accrued and unpaid monthly lease payments (other than Monthly Lease Payments waived in connection with the Pull Ahead Program) and any applicable excess mileage and excess wear charges based on the original lease terms. Under the pull ahead funding agreement, a lease becomes a Pull Ahead Lease Asset as of the end of the Monthly Period during which the servicer has received actual notice that the lessee elected to terminate the lease prior to its scheduled lease end date by delivery of the leased vehicle to a dealer in connection with the Pull Ahead Program and the related lessee has made payment of all required Monthly Lease Payments and any other required amount pursuant to the Pull Ahead Program. Under the servicing agreement, the servicer permits a lessee to participate in a Pull Ahead Program and modifies the related lease by accepting the Pull Ahead Payment from the Pull Ahead Agent in lieu of receiving all or a portion of the remaining monthly payments from the lessee as
described below. On the first business day of each Monthly Period, the servicer (if the servicer is not Ally Financial) will notify the Pull Ahead Agent of the identity of all lease assets that have become Pull Ahead Lease Assets during the immediately preceding Monthly Period and the aggregate amount of Pull Ahead Payments paid and remaining to be paid for the preceding Monthly Period.
The pull ahead funding agreement will require the Pull Ahead Agent to pay an amount equal to the aggregate amount of the Pull Ahead Payments to the servicer (whether Ally Financial or any successor servicer) for deposit into the ACOLT collection account. Pull Ahead Payments will be due on the second business day of the Monthly Period following any Monthly Period in which a lease asset is deemed to have become a Pull Ahead Lease Asset or, if the Monthly Remittance Condition is satisfied, on the third business day preceding the related distribution date. The servicer, whether Ally Financial or any successor servicer, will be required to deposit the Pull Ahead Payments into the ACOLT collection account on the same day that it is received. The servicer may also direct the Pull Ahead Agent to deposit Pull Ahead Payments directly into the ACOLT collection account. Any failure by Ally Financial, as servicer, to obtain and deposit the Pull Ahead Payments would be a servicer default under the servicing agreement. For a successor servicer, the failure to obtain a Pull Ahead Payment from the Pull Ahead Agent will not be a servicer default, but the failure to deposit any Pull Ahead Payment it receives will be a servicer default. If a servicer default has occurred and remains unremedied, the ACOLT indenture trustee may terminate the servicer. See“The Transfer Agreements and Servicing Agreements—Servicer Default” in the accompanying prospectus. No lessee under a lease asset will be permitted to participate in any Pull Ahead Program unless: (1) the lessee has paid all amounts due and payable by the lessee under the lease on or before the date of the lessee’s election to terminate the lease (other than (A) excess wear and excess mileage charges, which will be charged to the lessee to the extent applicable in accordance with the lease and customary servicing practices, and (B) any remaining Monthly Lease Payments that have been waived pursuant to the Pull Ahead Program); and (2) the Pull Ahead Agent has made all Pull Ahead Payments that were due and payable as described above for all previous Pull Ahead Lease Assets on or prior to the date that is five business days before the date that the lease asset is deemed to have become a Pull Ahead Lease Asset. If the Pull Ahead Agent does not pay all Pull Ahead Payments to or at the direction of the servicer in a timely manner for deposit into the ACOLT collection account, the servicer, whether Ally Financial or any successor servicer, will be required to use commercially reasonable efforts to collect any such unpaid Pull Ahead Payments and deposit them into the ACOLT collection account.
In addition to Pull Ahead Programs, other early termination marketing programs are utilized by vehicle manufacturers to encourage voluntarily early terminations by lessees, including offering incentives in connection with the purchase or lease of a new vehicle to lessees where the manufacturer believes that a vehicle’s sales price is likely to exceed the Stated Residual Value of such vehicle. In connection with early termination marketing programs that are not Pull Ahead Programs, lessees remain obligated to pay all accrued and unpaid monthly lease payments less unearned lease charges, plus any unpaid fees and taxes and any applicable excess mileage and excess wear charges based on the original lease terms to the extent not offset by the excess of the vehicle’s sales price over the Stated Residual Value of the vehicle, as described in the accompanying prospectus under “Description of Auto Lease Business of Ally Bank – Terms of Motor Vehicle Leases.”
Pull Ahead Experience
The average amount of monthly payments waived under the Pull Ahead Program and number of leases with waived payments by the Pull Ahead Agent for the fiscal quarters set forth below are as follows:
Period | Average Amount Per Vehicle Waived | Number of Pull Ahead Lease Contracts Waived | ||||||
Quarter 20 | $ | [0.00 | ] | [0 | ] | |||
Quarter 20 | $ | [0.00 | ] | [0 | ] | |||
Quarter 20 | $ | [0.00 | ] | [0 | ] | |||
Quarter 20 | $ | [0.00 | ] | [0 | ] | |||
Quarter 20 | $ | [0.00 | ] | [0 | ] | |||
Quarter 20 | $ | [0.00 | ] | [0 | ] | |||
Quarter 20 | $ | [0.00 | ] | [0 | ] | |||
Quarter 20 | $ | [0.00 | ] | [0 | ] | |||
Quarter 20 | $ | [0.00 | ] | [0 | ] | |||
Quarter 20 | $ | [0.00 | ] | [0 | ] | |||
Quarter 20 | $ | [0.00 | ] | [0 | ] | |||
Experience under each Pull Ahead Program varies based on the length of the program, the number of Monthly Lease Payments to be waived and the “pull from” period targeted. Over the past few years, the vehicle manufacturers have shifted from assuming all Monthly Lease Payments remaining on a lease during a Pull Ahead Program to assuming less than all remaining Monthly Lease Payments. The number of Monthly Lease Payments assumed by the vehicle manufacturers has steadily declined since 2005. Any Monthly Lease Payments beyond those assumed by the vehicle manufacturers are solely the lessee’s responsibility.
The reduction in the number of Monthly Lease Payments waived by the vehicle manufacturers has reduced the corresponding Pull Ahead Payments collected from the vehicle manufacturer for waived Monthly Lease Payments. The number of lessees participating in the Pull Ahead Programs is also lower than historical levels due to the increased lessee responsibility for remaining Monthly Lease Payments. This is particularly true for lessees with scheduled lease end dates during the later months of the “pull from” period.
Historical programs would typically have had “pull from” periods of seven to eight months in duration with the vehicle manufacturer waiving all remaining Monthly Lease Payments. The most recent program had a “pull from” period of six months with the vehicle manufacturer waiving up to three or four payments. The amount collected per vehicle will also vary based on the current mix of vehicles returned during a given Pull Ahead Program.
THE SERVICER AND THE TRUST ADMINISTRATOR
GMAC,Ally Financial, directly and through its subsidiaries, most notably Ally Servicing LLC, formerly known as Semperian LLC, services prime automobile retail instalment sale contracts and leases acquired or originated by it and others on behalf of banks, credit unions, finance companies and securitized trusts. As of June 30, 2009, GMACDecember 31, 2011, Ally Financial has originated over 6570 securitizations of retail vehicle instalment sale contracts and leases through a combination of registered offerings and privately placed transactions. In those securitizations, GMACAlly Financial has issued securities with an aggregate initial principal balance of over $120$125 billion. For more information regarding the servicer, see“The ServicerServicer”” in the prospectus.
Information regarding Ally Bank’s cumulative net losses with respect to and information regarding historical loanautomotive lease acquisitions and originations by vintage origination year for purchases by the sponsor of automotive leases similar to the lease assets within the preceding five years is included in Appendix [A][B]A of this prospectus supplement. The prepayment speeds with respect to the servicer’s public lease securitizations within the precedingprevious five years is included in Appendix [A][B] ofA to this prospectus supplement.
WEIGHTED AVERAGE LIFE OF THE OFFERED NOTES
The rate of payment of principal on the offered notes is uncertain. Events that could affect the timing of the repayment of principal include (1) Ally Bank’s or the servicer’s repurchase of the lease assets in specified circumstances, such as in the case of breaches of Ally Bank’s representations with respect to the leased assets, (2) early termination of leases, including defaults on the lease assets and casualty losses on the lease vehicles, (3) extensions or deferrals on leases, and delays in the disposition of any returned vehicles, if payments are not advanced by the servicer, (4) early termination of leases under a Pull Ahead Program, (5) the trust administrator’s optional purchase of all remaining secured notes after the Aggregate ABS Value of the lease assets declines to[ ]% or less of the Initial ABS Value of the lease assets, and (6) the servicer’s optional purchase of the remaining lease assets after the Aggregate ABS Value of the lease assets declines to[ ]% or less of the Initial ABS Value of the lease assets. None of these events can be predicted with certainty. The proceeds of early terminations (including payment in respect of the Stated Residual Value of the lease asset) may be in the form of proceeds resulting from
early lease terminations, Insurance Proceeds, liquidation proceeds, Pull Ahead Payments or repurchase payments made by Ally Bank or the servicer.
The following information is provided solely to illustrate the effect of early terminations of the leases on the unpaid principal amounts of the notes and the weighted average lives of the notes under the assumptions stated below, and is not a prediction of the prepayment rates that might actually be experienced with respect to the lease assets.
Prepayments on automotive receivablesmotor vehicle leases can be measured relative toby a prepayment standard or model. The prepayment model used in this prospectus supplement to present the projected weighted average lifeis expressed in terms of each classpercentages of notes, the Absolute Prepayment Model, or“ABS,” a prepayment model that assumes a rateconstant percentage of prepayment each month relative to the original number of receivablesleases in athe pool of receivables. ABS furtherprepays each month. The base prepayment assumption, which we refer to in this prospectus supplement as the“100% Prepayment Assumption,” assumes that all the receivables are uniformoriginal principal balance of the lease assets will prepay as to sizefollows:
(1) In month one, prepayments will occur at [ ]% ABS and maturity and amortize at the same rate and that each receivable inincrease by approximately [ ] ABS each month until reaching [ ]% ABS in the [ ]th month of its lifethe lease term;
(2) Prepayments will either bethen increase by approximately [ ] ABS each month until reaching [ ]% ABS in the [ ]th month of the lease term; and
(3) Prepayments will remain at [ ]% ABS in months [ ] through [ ] of the lease term and decrease to [ ]% ABS in the [ ]th month of the lease term and remain at that level until the lease has been paid as scheduled or be prepaid in full. For example, in a pool of receivables assumed to originally contain 10,000 uniform receivables, a 1%
Neither any ABS rate means that 100 receivables prepay each month. ABS does not purportnor the 100% Prepayment Assumption purports to be a historical description of the prepayment experience or a prediction of the anticipated rate of prepayment of any pool of receivables, including the receivables owned bylease assets. We cannot assure you that the trust.
Asleases will prepay at the rate of payment of principal of each class of notes will depend on the rate of payment, including prepayments,levels of the principal balance of the receivables, final payment of each class of notes could occur significantly earlier than the final scheduled distribution date for that class of notes. Reinvestment risk associated with early payment of the notes will be borne exclusively by the noteholders.100% Prepayment Assumption or at any other rate.
The tables below under the heading“—PercentPercentage of Initial Note Principal Balance Outstanding at Various ABS Percentages”have been prepared on the basis of the indicated ABS percentages.percentage of the 100% Prepayment Assumption. The indicated ABS percentages have been applied to thean initial hypothetical pool of receivables consisting of a[n initial] hypothetical pool of discounted receivables and a[n initial] hypothetical pool of non-discounted receivableslease assets [and to each subsequent hypothetical pool of receivableslease assets acquired during the revolving period].
The ““[initial] hypothetical pool of discounted receivables”lease assets” is a pool of uniform receivableslease assets with aggregate remaining paymentsMonthly Lease Payments in each month, measured as of the [initial] cutoff date, equal to those of the subvented and non-subvented receivableslease assets owned by the trustissuing entity on the closing date with annual percentage rates of the receivables less than or equal to %.date. The table below under the heading ““—Schedule of AnticipatedRemaining Monthly Lease Payments by Month: Receivables Requiring Discounting”and Residual Values” sets forth the anticipated paymentsremaining Monthly Lease Payments and projected Lease Residual values in each month, measured as of the [initial] cutoff date, on the subvented and non-subvented receivables to belease assets owned by the trustACOLT on the [initial] closing date with annual percentage rates of the receivables less than or equal to %.date. The initial[initial] aggregate present value[present value] [ABS Value] of these remaining payments, using a discount rate of %[ ]% per annum to discount the receivables,[initial] lease assets, is equal to $ .$[ ].
The[Each ““[initial]subsequent hypothetical pool of non-discounted receivables”lease assets” is a pool of receivables that have been further disaggregated into [eleven] smaller hypothetical pools having the characteristics set forth in the table below. The level scheduled monthly payment for each of the hypothetical pools is based on aggregate principal balance, annual percentage rate and remaining term to maturity as of the [initial] cutoff date such that each hypothetical pool set forth below will be fully amortized by the end of its remaining term to maturity.
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[Each“subsequent hypothetical pool of receivables”is a pool of receivables,lease assets, consisting of hypothetical pools of subvented receivables and non-subvented receivableslease assets in the same ratio and with the same characteristics in terms of annual percentageimplied lease rate, original term to maturity and remaining term to maturity as were purchased on the initial closing date, that will be acquired on a distributionclosing date during the revolving period.
The purchase price of each subsequent hypothetical pool of subvented receivableslease assets will be equal to the discounted present value of all receivableslease assets in each of those pools—using a %[ ]% per annum discount rate. Each subsequent hypothetical pool of subvented receivables,lease assets, as of the applicable cutoff date, will have assumed aggregate remaining paymentsMonthly Lease Payments in each month that are proportionate to the aggregate remaining paymentsMonthly Lease Payments on the initial hypothetical pool of subvented receivableslease assets as of the initial cutoff date.
The purchase price of each subsequent hypothetical pool of non-subvented receivables will be equal to the aggregate principal balance of all hypothetical receivables in each of those pools. Each subsequent hypothetical pool of non-subvented receivables will also be further disaggregated into smaller hypothetical pools having characteristics identical to the hypothetical pools in the table immediately preceding. The level scheduled monthly payments for each of the subsequent hypothetical pools is based on the aggregate principal balance, annual percentage rate and remaining term to maturity as of each subsequent cutoff date such that each subsequent hypothetical pool will be fully amortized by the end of its remaining term to maturity.]
In addition, the tables below were prepared on the basis of certain assumptions, including that:
(1) as of the cutoff date, [ ] months have elapsed since the inception of each lease;
(2) all Monthly Lease Payments are timely received and no lease is ever delinquent;
(3) no purchase payment is required to be made by the servicer in respect of any lease asset except as set forth below;
(4) no purchase payment is required to be made by the trust administrator in respect of any secured note except as set forth below;
(5) each payment on the leases is made on the last day of each month, whether or not that day is a business day and each month has 30 days;
[(6) there are no credit losses in respect of the lease assets;]
(7) all terminated leases are payments in full of all outstanding Monthly Lease Payments and realization in full of all Lease Residuals;
(8) payments on the notes are made on each distribution date, and each distribution date is assumed to be the fifteenth day of each applicable month whether or not that day is a business day;
(9) interest accrues on the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes, the Class C Notes and the Class D Notes at a fixed interest rate of [ ]%, [ ]%, [ ]%, [ ]%, [ ]%, [ ]% and [ ]%, respectively, per annum and none of the notes accrue interest at a floating rate;
(10) interest accrues on all notes (other than the Class A-1 Notes) based on a 360-day year consisting of twelve 30-day months and interest accrues on the Class A-1 Notes based on actual days elapsed during the period for which interest is payable and a 360-day year;
(11) except as indicated in the following assumptions have been usedtables, the servicer does not exercise its option to purchase the lease assets after the Aggregate ABS Value of the lease assets has declined to [ ]% or less of the Initial ABS Value of the lease assets and the trust administrator does not exercise its [ ]% purchase option with respect to the secured notes;
(12) the closing date occurs on [ ], 20[ ];
(13) no [early amortization event or] event of default occurs under the AART indenture or the ACOLT indenture;
(14) [during the revolving period, the issuing entity invests all amounts available in preparingadditional secured notes secured by additional lease assets;]
(15) [there are no funds in the tables below:accumulation account at any time;]
(18) the Mandatory Prepayment Amount is paid.
The actual characteristics and performance of the receivableslease assets will differ from the assumptions used in constructing the following tables. The assumptionsBecause payments on the leases and sale proceeds of the related leased vehicles will differ from those used are hypothetical and have been provided only to give a general sensein preparing the following tables, distributions of howprincipal on the principal cash flows might behave under varying prepayment scenarios.notes may be made earlier or later than as set forth in the tables. Investors are urged to make their investment decisions on a basis that includes their determination as to anticipated prepayment rates under a variety of the assumptions discussed herein.
It is very unlikely that the receivables will prepay at a constant level of ABS until maturity or that all of receivables will prepay at the same level of ABS. Any difference between each of those assumptions and the actual characteristics and performance of the receivables, or actual prepayment experience, will affect the percentages of initial balances outstanding over time and the weighted average lives of the notes.
The following tables indicate the projected weighted average life of each class of notes and set forth the percent of the initial principal balance of each class of notes that is projected to be outstanding after each of the distribution dates shown at various constant ABS percentages.
[The projected weighted average life of each class of notes has been calculated in accordance with the TALF prepayment assumptions specified in the TALF frequently asked questions dated , 20 and posted on the FRBNY’s website at www.newyorkfed.org.]
Additional information on the effect of prepayment on the notes can be found under“Weighted Average Life of the Securities”in the accompanying prospectus.
PercentPercentage of Initial Note Principal Balance Outstanding at Various ABS Percentages
The following tables set forth the percentages of the unpaid principal balance of each class of notes that would be outstanding after each of the dates shown, based on the rates equal to [0%, 50%, 75%, 100%, 125%, 150% and 175%] of the 100% Prepayment Assumption. As used in the table, “0% Prepayment Assumption” assumes no prepayments on a lease, “50% Prepayment Assumption” assumes that a lease will prepay at 50% of the 100% Prepayment Assumption and so forth.
The weighted average life of a class of offered notes as set forth in each of the tables below is determined by (a) multiplying the amount of each principal payment on a note of that class by the number of years from the date of the issuance of the related note to the related distribution date, (b) adding the results, and (c) dividing the sum by the related initial principal balanceamount of the note. The calculation in the row in each of the tables below labeled “Weighted Average Life To Call (Years) to Call”” assumes that the servicer exercises its [ ]% clean-up call option to purchase the receivableslease assets on the earliest permissible date [but that the depositor does not exercise its [ ]% repurchase option].date. The calculation in the row in each of the tables listed below labeled “Weighted Average Life To Maturity (Years) to Maturity”” assumes that the servicer does not exercise its option to purchase the lease assets and the trust administrator does not exercise its [ ]% clean-up call option.purchase option to purchase the secured notes. If the servicer were to exercise its [ ]% clean-up call option [andor if the depositor does nottrust administrator were to exercise its [ ]% repurchasepurchase option, to purchase the receivables], securityholdersnoteholders would receive all unpaid principal on their notes at the time of the call and the notes would cease to be outstanding. [If the depositor were to exercise its [ ]% repurchase option, the principal balance
Percentage of the pool would decrease by up to [5]% in accordance with the percentage of the pool that was repurchased.]
[Percent of the Initial Note Principal Balance Outstanding—Class A-1 Notes
Distribution Date | [0.00]% | [0.50]% | [1.20]% | [1.30]% | [1.60]% | [1.80]% | ||||||||||||
Closing Date | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | ||||||
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Weighted Average Life (Years) to Maturity | ] |
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PercentPercentage of the Initial Note Principal Balance Outstanding—Class A-2 Notes
Distribution Date | [0.00]% | [0.50]% | [1.20]% | [1.30]% | [1.60]% | [1.80]% | ||||||||||||
Closing Date | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | ||||||
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PercentPercentage of the Initial Note Principal Balance Outstanding—Class A-3 Notes
Distribution Date | [0.00]% | [0.50]% | [1.20]% | [1.30]% | [1.60]% | [1.80]% | ||||||||||||
Closing Date | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | ||||||
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PercentPercentage of the Initial Note Principal Balance Outstanding—Class A-4 Notes
Distribution Date | [0.00]% | [0.50]% | [1.20]% | [1.30]% | [1.60]% | [1.80]% | ||||||||||||
Closing Date | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | ||||||
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Distribution Date | [0.00]% | [0.50]% | [1.20]% | [1.30]% | [1.60]% | [1.80]% | ||||||||||||
Closing Date | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | ||||||
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PercentPercentage of the Initial Note Principal Balance Outstanding—Class C Notes
Distribution Date | [0.00]% | [0.50]% | [1.20]% | [1.30]% | [1.60]% | [1.80]% | ||||||||||||
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The notes will be issued pursuant to the terms of anthe AART indenture, which may be amended and supplemented from time to time, to be dated as of the closing date between the trustissuing entity and the AART indenture trustee. A form of AART indenture was filed as an exhibit to the registration statement of which this prospectus supplement forms a part, but the form of AART indenture does not describe the specific terms of the notes. A copy of the final AART indenture under which the notes are issued will be available to noteholders from the depositor upon request and will be filed with the Securities and Exchange Commission (“SEC”) following simultaneously with or prior to the issuancefiling of the final prospectus for the notes. The following summary, when read in conjunction with the section titled“The Notes”in the accompanying prospectus, describes the material terms of the notes and the AART indenture. Where particular provisions or terms used in the AART indenture are referred to, the actual provisions, including definitions of terms, are incorporated by reference as part of the summary.
The AART indenture trustee is [ ]. [ ] is a [ ]. [ ] has been, and currently is, acting as indenture trustee and trustee for numerous transactions and programs involving pools of auto receivables.lease assets. [Add information with respect to the AART indenture trustee.]
All payments required to be made on the notes will be made monthly on each distribution date.
The principal amount, interest rate and the Final Scheduled Distribution Datefinal scheduled distribution date for [each class of] the offered notes are as set forth on the cover page of this prospectus supplement. The corresponding information for the [Class[the Class A-1 Notes and] theNotes] and Class D Notes, which are not offered hereby, is set forth in the following table:
| [Class A-1 Notes] | Class D Notes | |||||||
Principal | $ | $ | ||||||
Interest | % | % | ||||||
Final | , 20 | , 20 | ||||||
[LIBORLIBOR]
[The interest rates for the floating rate notes and the floating rate payments received by the trustissuing entity on the related interest rate swap will be based on“[One]-Month LIBOR” plus an applicable spread, if any. [One]-Month LIBOR plus an applicable spread.“[One]-Month LIBOR”will be the rate for deposits in U.S. Dollars for a period of [one]one month whichthat appears on the Reuters Screen LIBOR01LIBOR 01 Page as of 11:00 a.m., London time, on the day that is two LIBOR Business Days prior to the preceding distribution date or, in the case of the initial distribution date, on the day that is two LIBOR Business Days prior to the closing date. If that rate does not appear on the Reuters Screen LIBOR01LIBOR 01 Page—or any other page as may replace that page on that service, service—or if that service is no longer offered, any other service for displaying [One]-Month LIBOR or comparable rates as may be selected by the AART indenture trustee afterfor consultation with the depositor—depositor, then [One]-Month LIBOR will be the Reference Bank Rate.]
Payments of Interest
Interest on the unpaid principal balance of each class of notes will accrue at the applicable interest rate and will be paid monthly on each distribution date.
Each distribution date will be a payment date as described in the accompanying prospectus. InterestFor the first distribution date, interest will accrue on the offered notes from and including the closing date to but excluding the first distribution date. For each class of notes,subsequent distribution date, interest will be payableaccrue on eachthe notes from and including the immediately preceding distribution date in an amount equal to but excluding the Note Class Interest Distributable Amount for thatnext distribution date. The interest rate for each class of notes will be a fixed rate[, a floating rate or the combination of a fixed rate and a floating rate if that class has both a fixed rate tranche and a floating rate tranche. For] [For example, the Class A-3A-2 Notes may be divided into fixed and floating rate tranches, in which case the Class A-3aA-2a Notes will be the fixed rate notes and the Class A-3bA-2b Notes will be the floating rate notes.] For each class of notes, interest will be payable on each distribution date in an amount equal to the Note Class Interest Distributable Amount for that distribution date. Interest on [the floating rate notes will be
calculated on the basis of actual days elapsed during the period for which interest is payable and a 360-day year.] Interest on the [fixed rate] notes, other than the Class A-1 Notes, will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Interest onand] the Class A-1 Notes will be calculated on the basis of actual days elapsed during the period for which interest is payable
and a 360-day year. Interest on fixed rate notes (other than the Class A-1 Notes) will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The payment of interest on the Class B Notes is also subordinated in limited circumstances to payments of principal on the Class A Notes, the payment of interest on the Class C Notes is subordinated in limited circumstances to payments of principal on the Class A Notes and the Class B Notes [and the payment of interest on the Class D Notes is subordinated in limited circumstances to payments of principal on the Class A Notes, the Class B Notes and the Class C Notes]. These limited circumstances arise only if a payment of First Priority Principal Distributable Amount, Second Priority Principal Distributable Amount [and Third Priority Principal Distributable Amount] must, respectively, be made as described in “The Transfer Agreements and Servicing Agreements—Distributions—Distribution from AART Collection Account[: Amortization Period]” to the extent payment reduces available funds before the respective interest distributable amount.
Interest payments on the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notesall classes of notes sharing an alphabetical designation will have the same priority. Under some circumstances, the amount available to make these payments could be less than the amount of interest payable on the Class A Notes, the Class B Notes, the Class C Notes or the Class D Notes, as applicable, on any distribution date, in whichdate. In that case, each class of Class A noteholders will receive its ratable share of the aggregate amount available to be distributed in respect of interest on the Class A Notes.this class of notes. Each class’s ratable share of the aggregate amount available will be based upon the aggregate amount of interest due to the Class Athat class of noteholders on that distribution date. See“The Transfer Agreements and Servicing Agreements—Distributions”and“—Reserve Account”Distributions on the Notes”in this prospectus supplement. No interest will be paid on the Class B Notes on any distribution date until all interest due and payable on the Class A Notes has been paid in full, no interest will be paid on the Class C Notes on any distribution date until all interest due and payable on the Class A Notes and the Class B Notes has been paid in full and no interest will be paid on the Class D Notes on any distribution date until all interest due and payable on the Class A Notes, the Class B Notes and the Class CA Notes has been paid in full. The payment of interest on the Class B Notes is also subordinated in limited circumstances to payments of principal of the Class A Notes, the payment of interest on the Class C Notes is subordinated in limited circumstances to payments of principal of the Class A Notes and the Class B Notes, and the payment of interest on the Class D Notes is subordinated in limited circumstances to payments of principal of the Class A Notes, the Class B Notes and the Class C Notes. These limited circumstances arise only if a payment of First Priority Principal Distributable Amount, Second Priority Principal Distributable Amount or Third Priority Principal Distributable Amount must, respectively, be made as described in“The Transfer and Servicing Agreements—Distributions—Priorities for Applications”to the extent the payment reduces available funds below the respective interest distributable amount.
Failure to pay the full Note Class Interest Distributable Amount for the Controlling Class on any distribution date will constitute an Eventevent of Defaultdefault under the AART indenture after a five-day grace period. While any of the Class A Notes remain outstanding, failure to pay interest due on the Class B Notes, the Class C Notes and the Class D Notes and while any of the Class B Notes remain outstanding, failure to pay interest due on the Class C Notes and the Class D Notes and while any of the Class C Notes remain outstanding, failure to pay interest due on the Class D Notes, in each case, after a five-day grace period, will not be an Eventevent of Default.default under the AART indenture. See“The Notes—The AART Indenture—AART Events of Default; Rights Upon AART Event of Default”in the accompanying prospectus.
If an Eventevent of Defaultdefault occurs under the AART indenture and the notes are accelerated, until the time when all events of default have been cured or waived as provided in the AART indenture or following the deposit into the AART collection account of the proceeds of the sale or other disposition of the issuing entity assets after an event of default occurs under the AART indenture, the trustissuing entity will first pay interest duefirst on the Class A Notes, pro rata among the classes or tranches of the Class A Notes based on thetheir respective unpaid principal amount of the Class A Notes as of the preceding payment date,balances, and second pay principal on the Class A Notes sequentially by class starting with the Class A-1 Notes until paid in full, and nofull. No interest will be payable on the Class B Notes until all principal of and interest on the Class A Notes have been paid in full, nofull. No interest will be payable on the Class C Notes until all principal of and interest on the Class A Notes and the Class B Notes have been paid in full, and nofull. No interest will be payable on the Class D Notes until all principal of and interest on the Class A Notes, the Class B Notes and the Class C Notes have been paid in full. See“The Transfer Agreements and Servicing Agreements—Distributions on the Notes—Priorities for Distributions from AART Collection Account[: Amortization Period]”below.
Payments of Principal
[Revolving Period. Principal payments will not be made on the notes during the revolving period. If an Early Amortization Event occurs, the revolving period will end and noteholders will receive payments of principal earlier than expected. See“The Transfer Agreements and Servicing Agreements—The Revolving Period”in this prospectus supplement.]
[Amortization Period][General]Period.] On each distribution date [related to the amortization period], the Aggregate Noteholders’ Principal Distributable Amount will be applied to make principal payments on the notes. Principal payments will be applied to the notes in sequential priority, sowhich means that no principal payments will be made on
any class of notes until all notes with a lower numerical and alphabetical designation have been paid in full. Thus, on each distribution date [related to the amortization period], the Aggregate Noteholders’ Principal Distributable Amount will be applied to the notes as follows:
First, to the Class A-1 Notes, until the Class A-1 Notes are paid in full,full;
Second, to the Class A-2 Notes[, proNotes, [pro rata among the Class A-2a Notes and the Class A-2b Notes,] until the Class A-2 Notes are paid in full],full;
Third, to the Class A-3 Notes[, proNotes, [pro rata among the Class A-3a Notes and the Class A-3b Notes,] until the Class A-3 Notes are paid in full],full;
Fourth, to the Class A-4 Notes, [pro rata among the Class A-4a Notes and the Class A-4b Notes,] until the Class A-4 Notes are paid in full,full;
Fifth, to the Class B Notes, until the Class B Notes are paid in full,full;
Sixth, to the Class C Notes, until the Class C Notes are paid in full,full; and
Seventh, to the Class D Notes, until the Class D Notes are paid in full.
At any time that the principal balances of the notes have been declared due and payable following the occurrence of an Event of Default, until the time when all eventsevent of default have been curedunder the AART indenture or waived as provided infollowing the indenture,deposit into the AART collection account of the proceeds of the sale or other disposition of the issuing entity assets, principal payments payable on theeach class of notes will be made sequentially by class, first on the Class A Notes, sequentially by class, starting with the Class A-1 Notes, until the Class A Notes have been paid in full, and then in the order set forth above for the Class B Notes, the Class C Notes and the Class D Notes.Notes, until all events of default have been cured or waived as provided in the AART indenture.
The remaining outstanding principal balance of each class of notes will be due on the related Final Scheduled Distribution Date.applicable final scheduled distribution date. Failure to pay the full principal amount of a class of notes on or before the applicable Final Scheduled Distribution Datefinal scheduled distribution date will constitute an Eventevent of Default.default under the AART indenture.
RedemptionServicer Purchase Option
If the servicer exercises its option to purchase the receivables whenlease assets on a distribution date after the aggregate receivables principal balanceAggregate ABS Value of the lease assets on the last day of any monthly periodthe related Monthly Period has declined to [ ]% or less of the initial aggregate receivables principal balance,Initial ABS Value of the lease assets, then the outstanding notes, if any, will be redeemed in whole, but not in part, on the same distribution date on which the servicer exercises this option.date. The servicer’s option is described in the accompanying prospectus under“The Transfer Agreements and Servicing Agreements—Termination.Termination—Servicer Purchase Option.”The redemption price for the notes will be equal to the unpaid principal amount of the notes plus accrued and unpaid interest thereon.
Delivery of Notes
The offered notes will be issued on or about the closing date in book entry form through the facilities of The Depository Trust Company (“DTC”), Clearstream and Euroclear against payment in immediately available funds. The registered holders of the notes are sometimes referred to herein as “noteholders.” For additional information with respect to the global notes, Clearstream, Euroclear and book-entry registration, see “Book Entry Registration; Reports to Securityholders—Book-Entry Registration”in the accompanying prospectus.
Controlling Class
For purposes of the Transfer Agreements and the Servicing Agreements, the ““Controlling Class”Class” will be (a) so long as the Class A Notes are outstanding, the Class A Notes, (b) if the Class A Notes are no longer outstanding but the Class B Notes are outstanding, the Class B Notes, (c) if the Class A Notes and the Class B Notes are no longer
outstanding but the Class C Notes are outstanding, the Class C Notes and (d) if the Class A Notes, the Class B Notes and the Class C Notes are no longer outstanding but the Class D Notes are outstanding, the Class D Notes. During
an Eventevent of Default,default under the AART indenture, the holders of a majority of the principal amount of the Controlling Class have the right to direct the AART indenture trustee to takeexercise one or more of the other actionsavailable remedies specified in the AART indenture relating to the property of the trust,issuing entity, including a sale ofselling the receivables.secured notes. See ““The Notes—The AART Indenture—AART Events of Default; Rights Upon AART Event of Default”Default” in the accompanying prospectus. Furthermore, the holders of a majority of the principal amount of the Controlling Class, under certainspecified circumstances, also have the right to waive Servicer Defaultstrust administrator defaults, as described in“The Transfer Agreements and Servicing Agreements—Trust Administrator Default” in the accompanying prospectus or to terminate the servicer as the servicer of the receivables.trust administrator. See“The Transfer Agreements and Servicing Agreements—Rights Upon Trust Administrator Default”and“—Waiver of Past Defaults”and“—Rights upon Servicer Defaults”Defaults of Trust Administrator”in the accompanying prospectus. The Controlling Class has other rights, as specified in the accompanying prospectus.
THE TRANSFER AGREEMENTS AND SERVICING AGREEMENTS
The parties will enter into the Transfer Agreements and Servicing Agreements, which may be amended and supplemented from time to time, to be dated as of the closing date.Agreements. See“The Transfer Agreements and Servicing Agreements”in the accompanying prospectus. The depositor has filed forms of the Transfer Agreements and Servicing Agreements as exhibits to the registration statement of which this prospectus supplement forms a part, but the forms of agreements do not describe the specific terms of the notes. A copyCopies of the final Transfer Agreements and Servicing Agreements for the notes will be available to noteholders from the depositor upon request and will be filed with the SEC followingsimultaneously with or prior to the issuancefiling of the final prospectus for the notes. The following summary, when read in conjunction with the section titled“The Transfer Agreements and Servicing Agreements”in the accompanying prospectus, describes the material terms of the Transfer Agreements and Servicing Agreements. Where particular provisions or terms used in the Transfer Agreements and Servicing Agreements are referred to, the actual provisions, including definitions of terms, are incorporated by reference as part of the summary.
Servicing and Administration Compensation and Payment of Expenses
On each distribution date,Compensation for Servicing the Lease Assets. Ally Financial will act as the servicer of the lease assets. In that capacity, to the extent of available funds, the servicerAlly Financial will be entitled to receive the basic servicing fee [and the additional servicing fee] as described in the prospectus under“The Servicer—Servicing Compensation and Payment of Expenses.”The Basic Servicing Fee Rate will be 1.00% per annum [and the Additional Servicing Fee Rate will be 1.00% per annum]. In addition,
As the servicer, will be entitled to retainAlly Financial also receives supplemental servicing fees, which includes investment earnings on ACOLT trust accounts [other than the accumulation account] and any late fees, disposition fees, prepayment charges and other administrative fees and expenses collected duringor similar charges, and certain other proceeds from lease assets that have terminated. See“The Transfer Agreements and Servicing Agreements—Servicing and Administration Compensation and Payment of Expenses—Servicing of Underlying Leases and Leased Vehicles”in the accompanying prospectus.
Servicing of Liquidating Lease Assets. The servicing agreement provides that Ally Financial, as the servicer, can exercise discretion, consistent with its customary servicing practices and the terms of the servicing agreement, in servicing Liquidating Lease Assets so as to maximize the collection of these Liquidating Lease Assets. In addition, the servicing agreement also provides Ally Financial, as the servicer, with broad discretion to choose to sell, or not to sell, any of the Liquidating Lease Assets. See“Description of Auto Lease Business of Ally Bank”in the accompanying prospectus for a monthly period and any investment earnings on trust accounts[, other thandiscussion of the Accumulation Account] during a monthly period andservicer’s customary servicing practices. The servicer is entitled to reimbursement forof certain expenses it has incurred in assumingconnection with the roleservicing of successor servicer.Liquidating Lease Assets. See “The Transfer Agreements and Servicing Agreements—Servicing and Administration Procedures—Servicer” in the accompanying prospectus.
Compensation for Administering the Secured Notes. Ally Financial will act as the trust administrator for the Trust. In that capacity, Ally Financial will handle all payments, administer defaults and delinquencies and perform other duties relating to the issuing entity. On each distribution date, the issuing entity will pay Ally Financial, as the trust administrator, the administration fee for providing the services. The amount payable on a distribution date with respect to administration fees consists of the administration fee for the previous Monthly Period and unpaid administration fees from prior distribution dates. The monthly “administration fee” is equal to one-twelfth of [0.01]% of the aggregate Secured Note Principal Balance at the opening of business on the first day of the Monthly Period. See“The Transfer Agreements and Servicing Agreements—Servicing and Administration Compensation and Payment of Expenses—Administering the Secured Notes”in the accompanying prospectus.
[The Revolving Period
During the revolving period, noteholders will not receive principal payments. Instead, on each distribution date during the revolving period, the issuing entity will seek to reinvest amounts that would otherwise be distributed as principal in additional receivablessecured notes to be purchased from the depositor. These additional secured notes will be secured by additional lease assets sold by Ally Bank to ACOLT.
The issuing entityAlly Bank will sell and ACOLT will purchase additional receivableslease assets meeting the eligibility requirements described in ““The Receivables Pool—Lease Assets and the Secured Notes—Criteria Applicable to the Selection of Additional Receivables duringLease
Assets During the Revolving Period.Period.”The purchase price for each additional receivablelease asset will be its Receivable Principal Balance. The issuing entitythe Secured Note Percentage of the initial Aggregate ABS Value of those additional lease assets and ACOLT will issue additional secured notes in the same amount. ACOLT will seek to purchase additional receivableslease assets from the depositor in an aggregate amountAlly Bank, with a purchase price equal to the Target Reinvestment Amount,reinvestment amount, to the extent of Available Reinvestment Funds. The depositoravailable funds. Ally Bank will seek to make receivableslease assets available to the issuing entityACOLT as additional receivableslease assets in an amount approximately equal to the amount of the Available Reinvestment Funds,available funds, but it is possible that the depositorAlly Bank will not have sufficient additional receivableslease assets for this purpose. Any portion of the Available Reinvestment Funds whichavailable funds that is not used to purchase additional receivableslease assets on a distribution date during the revolving period will be [depositeddeposited into the Accumulation Account and]accumulation account and applied on subsequent distribution dates in the revolving period to purchase additional receivables. Securityholderslease assets. Noteholders will be notified of the purchase of additional receivableslease assets on Form 10-D.
The amount of additional receivableslease assets and percentage of lease asset pool will be determined by the amount of cash available from payments and prepayments on existing lease assets. There are no stated limits on the amount of additional receivableslease assets allowed to be purchased during the revolving period in terms of either dollars or percentage of the initial lease asset pool. Further, there are no requirements regarding minimum amounts of additional receivableslease assets that can be purchased during the revolving period.
The revolving period consists of the monthly periods beginning with the[ ] monthly period and ending with the[ ] monthly period and the related distribution dates. Reinvestments in additional receivableslease assets will be made on each distribution date related to those monthly periods. The revolving period will terminate sooner if an Early Amortization Eventearly amortization event occurs in one of those monthly periods, in which case the amortization period will begin and no reinvestment in additional receivableslease assets will be made on the related distribution date. During the amortization period, noteholders will be entitled to receive principal payments in accordance with the priorities set forth below in ““—Distributions.Distributions on the Notes.”
An ““Early Amortization Event”early amortization event” will occur if:
[the amount on deposit in the reserve account is less than the Specified Reserve Account BalanceRequired Amount for two consecutive months,months;]
[after payment of the Aggregate Additional Receivables Principal BalanceABS Value of additional lease assets on any distribution date, the amount on deposit in the Accumulation Accountaccumulation account exceeds 1.00% of the Initial Aggregate Receivables Principal Balance,ABS Value of the initial lease assets;]
| • | an AART event of default occurs as described under “The Notes—The AART Indenture—AART Events of Default; Rights upon AART Event of Default” in the accompanying prospectus; or |
| • | a trust administrator default occurs as described under “The Transfer Agreements and Servicing Agreements—Trust Administrator Default” in the accompanying prospectus. |
[The occurrence of an early amortization event is not necessarily a AART event of default.] [Insert any additional disclosure required by Item 1111(g) of Regulation AB.]]
[The Additional Funding Period
[On the [initial] closing date, $[ ] will be deposited from the proceeds of the sale of the notes into the additional funding account which will be included in the issuing entity assets. The amount deposited from the proceeds of the sale of the notes into the additional funding account is not more than [50]% of the proceeds of the offering and represents [ ]% of the initial aggregate ABS Value of the [initial] lease assets (including the expected initial aggregate ABS Value of the subsequent lease assets. During the additional funding period, Ally Bank will sell subsequent lease assets to ACOLT in exchange for the related subsequent secured notes, the depositor will sell subsequent secured notes to the issuing entity and the issuing entity will acquire subsequent secured notes on a funding date, so long as certain conditions precedent are satisfied and the subsequent lease assets satisfy the same eligibility criteria as the lease assets transferred to ACOLT on the [initial] closing date. See “The Lease Assets and the Secured Notes—Criteria Applicable to the Selection of [Initial] Lease Assets” in this prospectus supplement.
Funding dates may occur no more than once per calendar week during the additional funding period. Noteholders will be notified of the purchase of subsequent lease assets on Form 10-D.
The amount of funds withdrawn from the additional funding account for the acquisition of subsequent secured notes on a funding date will be equal to [ ]% of the aggregate ABS Value of the subsequent lease assets being purchased by ACOLT from Ally Bank on that funding date. The underwriting criteria for subsequent lease assets are expected to be substantially the same as those for the [initial] lease assets purchased by ACOLT on the [initial] closing date and thus it is expected that the characteristics of the subsequent lease assets acquired during the additional funding period will not vary materially from the characteristics of the [initial] lease assets on the [initial] closing date.
The additional funding period will begin on the [initial] closing date and will end on the earliest to occur of:
[ ] full calendar months following the [initial] closing date;
an Event of Default occurs,the date on which the amount in the additional funding account is $[ ] or less; or
a Servicer Default occurs.
Thethe occurrence of an Early Amortization Eventa AART event of default.
On the first distribution date following the termination of the additional funding period, the AART indenture trustee will withdraw any remaining funds on deposit in the additional funding account (excluding investment earnings or income) and pay those remaining funds to the noteholders in sequential order of priority beginning with the Class A notes, if the aggregate of those amounts is not necessarily an Event$100,000 or less. If the remaining funds in the additional funding account exceed $100,000, the funds will be paid ratably to the Class B noteholders, until the Class B notes are paid in full, then to the Class C noteholders, until the Class C notes are paid in full and then to the Class D noteholders, until the Class D notes are paid in full.
Amounts on deposit in the additional funding account will be invested by the AART indenture trustee at the direction of Defaultthe trust administrator in specified eligible investments and investment earnings therefrom will be deposited into the AART collection account as part of the Total Available Amount on each distribution date. See “The Transfer Agreements and Servicing Agreements—Investment of Funds” in this prospectus supplement.
In connection with each purchase of subsequent lease assets, officers on behalf of the servicer, the depositor, the trust administrator and the issuing entity will certify that the requirements summarized above are met with regard to that additional funding. Neither the rating agencies hired to rate the notes nor any other person (other than the servicer, the depositor, the trust administrator and the issuing entity) will provide independent verification of that certification.] [Insert any additional disclosure required by Item 1111(g) of Regulation AB.]
Removal of Lease Assets
Following the occurrence of specified uncured breaches of covenants by the servicer, or specified uncured breaches of representations and warranties by Ally Bank, as seller of the lease assets under the indenture.]sale and contribution agreement, Ally Bank or the servicer, as applicable, will be obligated to repurchase one or more lease assets from ACOLT at a price equal to the Warranty Payment or the Administrative Purchase Payment, as applicable. For a description of when repurchases may be required, see “The Transfer Agreements and Servicing Agreements—Sale and Assignment of Lease Assets and Secured Notes” in the accompanying prospectus. See also “Risk Factors—Timing of Principal Payments on Your Notes is Uncertain” in this prospectus supplement. Noteholders will be notified of any repurchase of lease assets by Ally Bank or the servicer from ACOLT on Form 10-D.
Distributions on the Secured Notes
On or before each distribution date, the servicer will transfer all collections on the receivables duringlease assets for the prior month or since the [initial] cutoff date, in the case of the initial distribution date,related Monthly Period to the Collection Account. On [each distribution date duringACOLT collection account. The secured notes will be paid ratably from aggregate collections on the revolving periodentire pool of lease assets and on]withdrawals from the first distribution date [related to the amortization period], thereserve account.
The ACOLT indenture trustee, will transfer all amounts in [the Accumulation Account and]based solely upon a certificate provided by the reserve account to the Collection Account.
The indenture trusteeservicer, will make distributions to the [Accumulation Account, the] Note Distribution Account and the reserveAART collection account fromout of the amounts on deposit in the Collection Account.ACOLT collection account. The amountamounts to be distributed to the [Accumulation Account, the] Note Distribution Account and the reserveAART collection account will be determined in the manner described below.
The chart[s]charts titled [“Summary of Monthly Deposits to and Withdrawals from Accounts During the Revolving Period,”and]“Summary of Monthly Deposits to and Withdrawals from Accounts [During the Amortization Period],”ACOLT and AART Accounts”which [each] appear[s]appear on pages [S-15 and] S-[16]S-22 and S-23 of this prospectus supplement, provide[s]provide a summary of the monthly distributions. [Such][Each]distributions from collections on the lease assets. These summary chart providescharts provide only a simplified overview of the monthly flow of funds. Therefore, you should also read the text of this prospectus supplement and the accompanying prospectus to understand the monthly flow of funds.
Determination of ACOLT Collections. The“ACOLT Collections” for a distribution date will be the sum of:
| (1) | the Monthly Lease Payments received by the servicer during the related Monthly Period with respect to the lease assets (including Applied Payments Ahead but excluding Excess Payments made during the related Monthly Period that are treated as Payments Ahead); |
| (2) | all Pull Ahead Payments received or deposited by the servicer during the related Monthly Period with respect to any lease assets that became Pull Ahead Lease Assets during or prior to the related Monthly Period; |
| (3) | all Warranty Payments received or deposited by the servicer in respect of the lease assets during the related Monthly Period; |
| (4) | all Administrative Purchase Payments received or deposited by the servicer in respect of the lease assets during the related Monthly Period; |
| (5) | all Sale Proceeds received or deposited by the servicer in respect of the lease assets during the related Monthly Period; |
| (6) | any Monthly Payment Advances and Residual Advances with respect to that distribution date; |
| (7) | all Extended Lease Payments received or deposited by the servicer with respect to Extended Leases during the related Monthly Period; |
| (8) | if the servicer has exercised its right to purchase the lease assets as described in “The Transfer Agreements and Servicing Agreements—Termination—Servicer Purchase Option” in the accompanying prospectus, the purchase price for the lease assets that was deposited into the ACOLT collection account by the servicer on that distribution date; |
| (9) | all Insurance Proceeds received with respect to the lease assets during the related Monthly Period; |
| (10) | without double counting any amounts set forth above, the portion of any security deposits with respect to the lease assets deemed to be included as part of ACOLT Collections for the related Monthly Period under the servicing agreement; |
| (11) | all recoveries and early termination payments in respect of such lease assets; and |
| (12) | any other amounts received by the servicer during the related Monthly Period with respect to the lease assets, other than Excluded Amounts, supplemental servicing fees, Excess Payments and Sales and Use Tax Amounts. |
Determination of Available Distribution Amount. The“Available Distribution Amount” for a distribution date will be the sum of:
| (1) | the excess of (A) the sum of (i) all ACOLT Collections received by the servicer on the lease assets during the related Monthly Period and (ii) the Applied Extended Lease Payment Amount for that distribution date, over (B) the Unapplied Extended Lease Payment Amount for that distribution date; plus |
| (2) | the amounts transferred from the reserve account to the ACOLT collection account on that distribution date as described under “—Monthly Withdrawals from and Deposits to the ACOLT Collection Account” below; minus |
| (3) | any Outstanding Advances and liquidation expenses for which the servicer is entitled to reimbursement under the servicing agreement. |
Determination of Monthly Withdrawals and Deposits. On or before the tenth day of each calendar month, or if that day is not a business day, the next business day, the servicer will calculate the Available Distribution Amount and the Reserve Account Required Amount. On that day, the servicer will also calculate the following amounts, among others:
Basedothers, based on activity during the prior monthly period:related Monthly Period:
the Available Interest,
the Available Principal,
| the basic servicing fee [and the additional servicing fee] for the servicer; |
| (2) | the |
| (3) | the Reserve Account |
| (4) | the Secured Note Principal Balance for each secured note; |
| (5) | the aggregate Secured Note Principal Balance; |
| (6) | the Secured Note Monthly Accrued Interest; |
| (7) | the Secured Note Interest Distributable Amount; |
| (8) | the Secured Note Principal Distributable Amount; |
| (9) | the AART Collection Account Shortfall Amount, if any; |
| (10) | the aggregate Outstanding Advances made by the servicer; and |
| (11) | all other amounts required to determine the amounts, if any, to be deposited into or paid from each of the ACOLT collection account, the reserve account and the Payment Ahead Servicing Account. |
the Specified Reserve Account Balance.
Amounts distributable on the upcoming distribution date:
the basic servicing fee,
[the additional servicing fee,]
the Aggregate Noteholders’ Interest Distributable Amount, including the Aggregate Class A Interest Distributable Amount, the Aggregate Class B Interest Distributable Amount, the Aggregate Class C Interest Distributable Amount and the Aggregate Class D Interest Distributable Amount,
[related to the amortization period,] the Aggregate Noteholders’ Priority Principal Distributable Amount, including the First Priority Principal Distributable Amount, the Second Priority Principal Distributable Amount, the Third Priority Principal Distributable Amount and the Fourth Priority Principal Distributable Amount,
deposits into the reserve account,
[related to the amortization period,] the Noteholders’ Regular Principal Distributable Amount, and
[the net amount, if any, payable by the trust under any interest rate swaps[, Senior Swap Termination Payments and Subordinate Swap Termination Payments][ and swap termination amounts], if any, required to be paid on that distribution date.]
[In addition, during the revolving period, the servicer will calculate the following amounts:
the Parity Reinvestment Amount,
the Target Reinvestment Amount,
the Aggregate Additional Receivables Principal Balance, and
on each distribution date, after payment of the Aggregate Additional Receivables Principal Balance for the purchase of additional receivables, the Accumulation Amount as a percentage of the Initial Aggregate Receivables Principal Balance.]
Based on those calculations, the servicer will deliver to the ACOLT indenture trustee a certificate specifying these amounts.
Monthly Withdrawals from and Deposits to the ACOLT Collection Account. On or before each distribution date, the ACOLT indenture trustee, based solely upon a certificate provided by the servicer, will:
withdraw Excess Payments made during the preceding month from the ACOLT collection account and pay these amounts to the servicer or, if required under the servicing agreement, to the Payment Ahead Servicing Account;
transfer from the Payment Ahead Servicing Account (or, if the servicer is not required to make deposits to the Payment Ahead Servicing Account within two business days under the servicing agreement, the servicer will deposit) to the ACOLT collection account the aggregate Applied Payments Ahead for that distribution date;
withdraw from the ACOLT collection account and pay to the servicer any Outstanding Advances and liquidation expenses for which the servicer is entitled to reimbursement under the servicing agreement; and
withdraw from the reserve account and deposit into the ACOLT collection account an amount equal to the lesser of:
| (I) | the Reserve Account Available Amount on that distribution date; and |
| (II) | the excess, if any, of |
(A) the sum, for that distribution date, of the basic servicing fee for the servicer for that distribution date and any unpaid basic servicing fees from prior distribution dates, the Aggregate Secured Note Interest Distributable Amount, the Secured Note Principal Distributable Amount and the AART Collection Account Shortfall Amount on that distribution date, over
(B) the excess of (i) the sum of (x) the ACOLT Collections with respect to the lease assets for that distribution date, plus (y) the Applied Extended Lease Payment Amount for that distribution date, over (ii) the sum of (x) the amount of any Outstanding Advances and liquidation expenses for which the servicer is entitled to reimbursement under the servicing agreement which have been withdrawn and paid to the servicer on that distribution date, plus (y) the Unapplied Extended Lease Payment Amount for that distribution date.
Priorities for Distributions from the ACOLT Collection Account. On each distribution date, after the withdrawals, deposits and transfers described in “—Monthly Withdrawals from and Deposits to the ACOLT Collection Account” in this prospectus supplement have been made, to the extent of the Available Distribution Amount for that distribution date, the ACOLT indenture trustee, based solely upon a certificate provided by the servicer, will make the following distributions from amounts deposited into the ACOLT collection account in the following order of priority:
| (1) | to the servicer, the basic servicing fee and any unpaid basic servicing fees from any preceding distribution date; |
| (2) | to the issuing entity, as holder of the secured notes, pro rata based on the Secured Note Interest Distributable Amount due on each secured note, the Aggregate Secured Note Interest Distributable Amount; |
| (3) | to the issuing entity, as holder of the secured notes, pro rata based on the Secured Note Principal Balance of each secured note [(other than any additional secured note issued on that distribution date)], the Secured Note Principal Distributable Amount; |
| (4) | to the AART collection account, the AART Collection Account Shortfall Amount, if any; |
| (5) | to the reserve account, an amount necessary to cause the Reserve Account Available Amount (after giving effect to any withdrawal from the reserve account on that distribution date) to equal the Reserve Account Required Amount for that distribution date; and |
| [(6) | to the servicer, the additional servicing fee, if any; and] |
| (7) | the remainder to the holder of the ACOLT certificates. |
Distributions on the Notes
On each distribution date, the trust administrator will transfer all payments on the secured notes for that distribution date to the AART collection account. [On each distribution date during the revolving period and on the first distribution date related to the amortization period, the AART indenture trustee will transfer all amounts in the accumulation account to the AART collection account.]
The AART indenture trustee, based solely upon a certificate provided by the trust administrator, will make distributions to [the accumulation account and] the note distribution account from the amounts on deposit in the AART collection account. The amounts to be distributed to [the accumulation account and] the note distribution account will be determined in the manner described below.
The charts titled“Summary of Monthly Deposits to and Withdrawals from ACOLT and AART Accounts,” which appear on pages S-22 and S-23 of this prospectus supplement provide a summary of the monthly distributions. These summary charts provide only a simplified overview of the monthly flow of funds. Therefore, you should also read the text of this prospectus supplement and the accompanying prospectus to understand the monthly flow of funds.
Determination of Available Amounts. The“Total Available Amount” for a distribution date will be the sum of:
| (1) | amounts deposited in the AART collection account with respect to the AART Collection Account Shortfall Amount on or before that distribution date; |
| (2) | all payments on the secured notes held by the issuing entity during the period from and including the last distribution date to but excluding the current distribution date; and |
| [(3) | the amount, if any, paid by the swap counterparty to the issuing entity under any interest rate swap]; and |
| (4) | amounts paid for any secured notes purchased by the trust administrator or the depositor. |
Determination of Monthly Withdrawals and Deposits. On or before the tenth day of each calendar month, or if that day is not a business day, the next business day, the trust administrator will calculate the Total Available Amount based on activity during the related Monthly Period. On that day, the trust administrator will also calculate the following amounts, among others:
| (1) | the administration fee for the trust administrator; |
| (2) | the Aggregate Noteholders’ Interest Distributable Amount, including the Aggregate Class A Interest Distributable Amount, the Aggregate Class B Interest Distributable Amount, the Aggregate Class C Interest Distributable Amount and the Aggregate Class D Interest Distributable Amount; |
| (3) | [for any distribution date related to the amortization period, the First Priority Principal Distributable Amount, the Second Priority Principal Distributable Amount, the Third Priority Principal Distributable Amount and the Fourth Priority Principal Distributable Amount;] |
| (4) | [for any distribution date related to the amortization period, the Noteholders’ Regular Principal Distributable Amount;] |
| [(5) | the net amount, if any, payable by the issuing entity under any interest rate swaps and swap termination amounts, if any, required to be paid on that distribution date;] |
| (6) | the amounts to be paid to the reserve account and to the certificateholders; and |
| (7) | all other amounts required to determine the amounts, if any, to be deposited into or paid from each of the AART collection account and the note distribution account. |
[In addition, during the revolving period, the trust administrator will calculate the amounts required for reinvestment in additional secured notes.]
Based on those calculations, the trust administrator will deliver to the AART indenture trustee a certificate specifying those amounts and instructing the AART indenture trustee to make withdrawals, deposits and payments on that distribution date of the amounts specified below under[“—Priorities for Applications.Distributions from AART Collection Account: Revolving Period]”and] “Priorities for Distribution from AART Collection Account[: Amortization Period].”
On each distribution date, all amounts on deposit in the Note Distribution Accountnote distribution account will be distributed to the noteholders as described in this prospectus supplement and in the accompanying prospectus.
[Priorities for Applications:Distributions from AART Collection Account: Revolving Period.Period: On each distribution date during the revolving period, except as provided below, the AART indenture trustee, based solely upon a certificate provided by the trust administrator, will make the distributions and payments in the following priority, to the extent that funds are available therefor after all prior applications, from the funds available in the [Accumulation Account, the] Collection Account and reserve account:Total Available Amount:
(1) to the servicer,trust administrator, the basic servicingadministration fee for that distribution date and any unpaid administration fees from any preceding distribution date;
[(2) [theto the swap counterparty, the net amount, if any, to be paiddue under the interest rate swaps, to the swap counterparty, other than any swap termination amounts,amounts;]
(3)] to the Note Distribution Accountnote distribution account for payment to the Class A Noteholders, the Aggregate Class A Interest Distributable Amount [and any [senior] swap termination amounts to be paiddue to the swap counterparty on anythe interest rate swaps related to the Class A Notes allocated ratably between the Aggregate Class A Interest Distributable Amount and suchthese [senior] swap termination amounts in proportion to their respective amounts,]amounts];
[(4)] to the Note Distribution Accountnote distribution account for payment to the Class B Noteholders, the Aggregate Class B Interest Distributable Amount,Amount;
[(5)] to the Note Distribution Accountnote distribution account for payment to the Class C Noteholders, the Aggregate Class C Interest Distributable Amount,Amount;
[(6)] to the Note Distribution Accountnote distribution account for payment to the Class D Noteholders, the Aggregate Class D Interest Distributable Amount,Amount;
[(7)] [to to deposit into the Accumulation Account, anaccumulation account, the amount equal to the Parity Reinvestment Amount, which amount will be available for reinvestment in additional receivables,]secured notes,
[(8)] to deposit into the reserve account, the amount requirednecessary to bringcause the amount on deposit therein upReserve Account Available Amount to equal the Reserve Account Required Amount (after giving effect to any distributions from the ACOLT collection account to the Specified Reservereserve account, if any, on that distribution date pursuant to clause (5) under “The Transfer Agreement and Servicing Agreements—Distributions on the Secured Notes—Priorities for Distributions from the ACOLT Collection Account Balance,” above);
[(9)] [to to deposit into the Accumulation Account,accumulation account, an amount equal to the excess, if any, of the Target Reinvestment Amountreinvestment amount over the amount deposited into the Accumulation Accountaccumulation account pursuant to clause (7) above, which amount will be available for reinvestment in additional receivables,]secured notes;
[(10)] [to to the swap counterparty, any Subordinate Swap Termination Payments,]
[(11)] [tosubordinate swap termination payments due under the servicer, the additional servicing fee,interest rate swaps;] and
[(12)](10) to the certificateholder,certificateholders, all remaining amounts.]
Priorities for Applications[:Distributions from AART Collection Account [: Amortization Period].On each distribution date during the amortization period,] except as provided below, the AART indenture trustee, based solely upon a certificate provided by the trust administrator, will make the distributions and payments in the following priority, to the extent that funds are available therefor after all prior applications, from the funds available in the Collection Account and reserve account:Total Available Amount:
(1) to the servicer,trust administrator, the basic servicingadministration fee for that distribution date and any unpaid administration fees from any preceding distribution date;
[(2) [theto the swap counterparty, the net amount, if any, to be paiddue under the interest rate swaps, to the swap counterparty, if any, other than any swap termination amounts,amounts;]
(3)] to the Note Distribution Accountnote distribution account for payment to the Class A Noteholders, the Aggregate Class A Interest Distributable Amount [and any [Senior Swap Termination Payments[senior] swap termination amounts due to the swap counterparty][swap termination amounts to be paid tocounterparty on the swap counterparty] on any interest rate swaps related to the Class A Notes
on any interest rate allocated ratably between the Aggregate Class A Interest Distributable Amount and [these Senior Swap Termination Payments][suchthese [senior] swap termination amounts]amounts in proportion to their respective amounts,]amounts];
[(4)] to the Note Distribution Accountnote distribution account for payment to the noteholders, the First Priority Principal Distributable Amount,Amount;
[(5)] to the Note Distribution Accountnote distribution account for payment to the Class B Noteholders, the Aggregate Class B Interest Distributable Amount,Amount;
[(6)] to the Note Distribution Accountnote distribution account for payment to the noteholders, the Second Priority Principal Distributable Amount,Amount;
[(7)] to the Note Distribution Accountnote distribution account for payment to the Class C Noteholders, the Aggregate Class C Interest Distributable Amount,Amount;
[(8)] to the Note Distribution Accountnote distribution account for payment to the noteholders, the Third Priority Principal Distributable Amount,Amount;
[(9)] to the Note Distribution Accountnote distribution account for payment to the Class D Noteholders, the Aggregate Class D Interest Distributable Amount,Amount;
[(10)] to the Note Distribution Accountnote distribution account for payment to the noteholders, the Fourth Priority Principal Distributable Amount,Amount;
[(11)] to deposit into the reserve account, the amount requirednecessary to bringcause the amount on deposit therein upReserve Account Available Amount to equal the Reserve Account Required Amount (after giving effect to any distributions from the COLT collection account to the Specified Reservereserve account, if any, on that distribution date pursuant to clause (5) under “The Transfer Agreements and Servicing Agreements—Distributions on the Secured Notes—Priorities for Distributions from the ACOLT Collection Account Balance,” above);
[(12)] to the Note Distribution Accountnote distribution account for payment to the noteholders, the Noteholders’ Regular Principal Distributable Amount;
[(13) to the swap counterparty, any subordinate swap termination payments due under the interest rate swaps;] and
(13) to the certificateholders, all remaining amounts.
Amounts deposited in the note distribution account for the payment of principal on the notes will be paid to the noteholders in the order specified above in“The Notes—Payments of Principal,Principal[—Amortization Period].”an amount equal to the Noteholders’ Regular Principal Distributable Amount,
[(13)] [to the swap counterparty, any Subordinate Swap Termination Payments,]
[(14)] [to the servicer, the additional servicing fee], and
[(15)] to the certificateholders, in accordance with their respective certificate interests, all remaining amounts.
Notwithstanding the foregoing, if an Eventevent of Defaultdefault occurs under the AART indenture and the notes are accelerated, until the time when all events of default have been cured or waived as provided in the AART indenture, or following the deposit into the AART collection account of the proceeds of the sale or other disposition of the issuing entity assets following the occurrence of an event of default under the AART indenture, after payment of the administration fee and the net amount payable, if any, to the swap counterparty, other than any swap termination amounts, the issuing entity will use the amounts allocated to the Note Distribution Account pursuant to priorities (3) through [(10)] above to pay interest and principal as follows. The issuing entity will first pay interest on the Class A Notes, pro rata among the Class A Notes and second pay principal on the Class A Notes, sequentially by class, starting with the Class A-1 Notes, until paid in full.
Notes. No interest or principal will be payable on the Class B Notes until all principal of and interest on the Class A Notes have been paid in full, no interest or principal will be payable on the Class C Notes until all principal of and interest on the Class A Notes and the Class B Notes have been paid in full and no interest or principal will be payable on the Class D Notes until all principal of and interest on the Class A Notes, the Class B Notes and the Class C Notes have been paid in full.
Reserve AccountCredit Enhancement
Noteholders will have the benefit of credit enhancement from overcollateralization, a reserve account and, subordination of junior classes of notes. See“Summary—Priority of Distributions—AART Distributions” in this prospectus supplement and“—Distributions on the Notes” below for a description of how losses not covered by credit enhancement or support will be allocated to the offered notes.
Overcollateralization. The“Aggregate Overcollateralization Amount” will be $ , which is the excess of the Initial ABS Value on the cutoff date over the initial outstanding principal balance of the notes. [The application of funds as described in the [ ] priority of distributions is designed to increase over time the amount of overcollateralization as of any distribution date to a target amount, which we refer to as the “aggregate overcollateralization target amount.” The overcollateralization target amount will be [__]% of the initial aggregate ABS Value of the lease assets.] The Aggregate Overcollateralization Amount consists of both the AART Overcollateralization Amount and the ACOLT Overcollateralization Amount.
The“AART Overcollateralization Amount” is $[ ], which equals the excess of the initial aggregate principal amount of secured notes over the initial principal balance of the notes. The“ACOLT Overcollateralization Amount” is $[ ], which equals the excess of the Aggregate Initial ABS Value of the lease assets on the cutoff date over the initial aggregate principal amount of the secured notes. The AART Overcollateralization Amount is represented by the issuing entity certificates and the ACOLT Overcollateralization Amount is represented by the ACOLT certificates.
Reserve Account.Pursuant to the Trust Sale and Servicing Agreement,servicing agreement, the issuing entityservicer will establish the reserve account with the ACOLT indenture trustee. The reserve account will be funded by an initial deposit by the depositor on the closing date of $ ,$[ ], which equals %[ ]% of the initial aggregate receivables principal balance. The“Specified
Reserve Account Balance”will be the lesser of %Initial ABS Value of the initial aggregate receivables principal balance and the aggregate principal balance of the notes.lease assets. On each distribution date the amount withdrawn from the reserve account as described under“—Distributions on the Secured Notes—Monthly Withdrawals from and Deposits to the ACOLT Collection Account” above will constitute part of the amounts available to make payments on the secured notes under the servicing agreement.
The“Reserve Account Required Amount” for any distribution date is an amount equal to the lesser of: (1) the sum of (i) [ ]% of the initial Aggregate ABS Value of the lease assets and (ii) [ ]% of the Aggregate ABS Value at the close of business on the last day of the related Monthly Period; and (2) the outstanding principal balance of the notes.
If the amount on deposit in the reserve account on any distribution date, after giving effect to all other deposits or withdrawals from the reserve account on that distribution date, is greater than the Reserve Account Required Amount for that distribution date, the servicer will be applied aspay the amount of the excess to the holder of the equity certificates of ACOLT. Upon this distribution, none of the issuing entity or the noteholders will have any rights in, or claims to, those amounts.
Subordination of Junior Note Classes. Payments of principal and interest on the Class B Notes are subordinated to payments of principal and interest on the Class A Notes, and payments of principal and interest on the Class C Notes are subordinated to payments of principal and interest on the Class A Notes and the Class B Notes, in each case to the extent described above underbelow in [““—Distributions—Distributions on the Notes—Priorities for Applications[:Distributions from AART Collection Account: Revolving Period”Periodand” and] ““—Distributions—Distributions on the Notes—Priorities for Applications:Distributions from AART Collection Account[: Amortization Period.Period].”
Overcollateralization
As of the closing date, the initial aggregate receivables principal balance will exceed the initial aggregate principal balance of the notes by approximately %, which is $ . Collections on the receivables will be applied to reach or maintain, as applicable, the Overcollateralization Target Amount. [The Overcollateralization Target Amount will be % of the initial aggregate receivables principal balance.] See“The Transfer and Servicing Agreements—Distributions,”above.
Investment of Funds
Collections on the receivableslease assets [and any money held in the Accumulation Account]accumulation account] are held in accounts with eligible depositary institutions, which accounts are subject to the security interest of the AART indenture trustee for the benefit of the noteholders. TheseSuch accounts will be established with the AART indenture trustee. All amounts held in the transaction accounts will be invested at the written direction of the servicer.trust administrator.
The servicertrust administrator will invest and reinvest collections in certainspecified eligible investments. Eligible Investments.“Eligible Investments”generallyinvestments include obligations of the United States certainof America, specified demand deposits, time deposits or certificates of deposit of (subject to certainspecified eligibility requirements) any depository institution or trust company incorporated under the laws of the United States of America or any state thereof (or any domestic branch of a foreign bank) and subject to supervision and examination by Federalfederal or Statestate banking or depository institution authorities; commercial paper having, at the time of the investment or contractual commitment to invest therein, a rating from each of the hired rating agencies rating the notes in the highest investment category for short-term unsecured debt obligations or certificates of deposit granted thereby; investments in money market or common trust funds having a rating from each of the hired rating agencies rating the notes in the highest investment category for short-term unsecured debt obligations or certificates of deposit granted thereby; certain bankers’ acceptances issued by any depository institution or trust company and repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or any agency or instrumentality thereof, the obligations of which are backed by the full faith and credit of the United States;States of America; commercial paper master notes having, at the time of the investment or contractual commitment to invest therein, a rating from each of the hired rating agencies rating the notes in the highest investment category for short-term unsecured debt obligations; and in any other investment permitted by each of the rating agencies ratinghired to rate the notes. If a rating agency ratinghired to rate the notes fails to provide a rating for a specified investment, then an equivalent required deposit rating may be obtained from another nationally recognized statistical rating agency.organization.
Unless otherwise permitted by the rating agencies ratinghired to rate the notes, any such Eligible Investmentseligible investments must mature (A) not later than the business day immediately preceding the next distribution date, or (B) on such next distribution date if either (x) such investment is issued by the institution with which the Note Distribution Accountnote distribution account is then maintained or (y) the AART indenture trustee (so long as the short-term unsecured debt obligations of the AART indenture trustee are rated at least [P-1higher than or equal to a specified level by Moody’s][,] [A-1+each rating agency hired to rate the notes (such specified ratings being “R-1 (middle)” by DBRS, “F1” by Fitch, “P-1” by Moody’s and “A-1+” by Standard & Poor’s] [and] [F-1 by Fitch, if rated by Fitch,]Poor’s, as applicable) on the date such investment is made) shall advanceadvances funds on such distribution date to the Note Distribution Accountnote distribution account in the amount payable on such investment on such distribution date pending receipt thereof to the extent necessary to make distributions on the notes on such distribution date. Unless the AART indenture trustee objects prior to the time an investment is made, the AART indenture trustee shallwill be deemed to have agreed to make such advance with respect to such investment.
The servicertrust administrator is entitled to receive all investment earnings (net of losses and investment expenses)[, except [except for investment earnings on funds in the Accumulation Account]accumulation account].
The activity in the transaction accounts will be verified by the servicertrust administrator and the AART indenture trustee.
[Interest Rate Swaps
General.General. On the closing date, the issuing entity willmay enter into an interest rate swap with a swap counterparty with respect to each floating rate class or tranche of floating rate notes. [The issuing entity may, from time to time, enter into additional interest rate swaps with respect to additional classes of floating rate notes, if any.including those notes initially retained by the depositor or an affiliate of the depositor.] We refer to each of these interest rate swaps as a ““[primary ]swap.swap.”The [primary] swaps are Each primary swap is designed to provide the issuing entity protection against adverse movements in interest rates associated with interest paid on each floating ratethe related class or tranche of floating rate notes.
[Primary] Swaps.Primary Swaps. Under each [primary]primary swap, on the[one business day prior to thethe] distribution date, the issuing entity will be obligated to pay the swap counterparty an amount based on a fixed interest rate and the swap counterparty will be obligated to pay the issuing entity an amount based on a floating interest rate of [One]-Month LIBOR plus an
applicable spread, if any, in each case based upon a notional amount equal to the outstanding principal balance on eachthe related class or tranchetranches of floating rate notes. The amount the issuing entity is obligated to pay will be netted against the amount the swap counterparty is obligated to pay under each [primary]primary swap. Only the net amount will be due from the issuing entity or the swap counterparty, as applicable. The obligations of the issuing entity and the swap counterparty under the [primary] swapseach primary swap are unsecured.
Events of Default/Termination Events.Events. Each [primary]primary swap will provide for specified events of default and termination events. Events of default applicable to the issuing entity include, among others:include:
Thethe issuing entity’s failure to make payments due under the applicable [primary] swap, andprimary swap;
a merger by the issuing entity without an assumption of its obligations under the applicable primary swap;
| • | the occurrence of an event of default (other than a bankruptcy related |
an amendment to the transaction documents that is adverse to the swap counterparty is made without the approval of the swap counterparty where such approval is required.
Events of default applicable to the swap counterparty include, among others:
the failure by the swap counterparty to make payments due under the applicable [primary] swap,primary swap;
the breach by the swap counterparty of the agreement evidencing the applicable [primary] swap,primary swap;
the existence of a misrepresentation by the swap counterparty in the agreement evidencing the applicable [primary] swap,primary swap;
the occurrence of bankruptcy and insolvency events with respect to the swap counterparty,counterparty; and
a merger by the swap counterparty without an assumption of its obligations under the applicable [primary]primary swap.
TerminationCertain termination events, including illegality and specified tax events, will also apply to both the issuing entity and the swap counterparty.
[In the event of the termination of a [primary]primary swap, a termination paymentamount may be due, either to the swap counterparty by the issuing entity out of funds that would otherwise be available to make payments on the notes or to the issuing entity by the swap counterparty. The termination paymentamount will be based on market quotations of
the cost of entering into a swap transaction on substantially the same terms as the [primary]primary swap, in accordance with the procedures set forth in the applicable [primary]primary swap. The termination paymentamount could be substantial if market interest rates and other conditions have changed materially since the issuance of the notes and certificates.notes.]
Replacement of the Swap Counterparty.Counterparty
If an event of default occurs under a [primary]primary swap, the non-defaulting party may elect to terminate that [primary]the applicable primary swap. If certain termination events occur, under a [primary] swap as to which the swap counterparty is the affected party, the swap counterparty must, upon becoming aware of the occurrence of such event, commence using its best efforts not involving any material expenditure to arrange for the substitution of another party as swap counterparty that is satisfactory to the issuing entity so that the termination event ceases to exist. If certain termination events occur under a [primary]primary swap as to which the issuing entity is the affected party, the swap counterparty must, upon request of the issuing entity, commence using its best efforts, not involving any material expenditure, to arrange for the
substitution of another party as swap counterparty that is satisfactory to the issuing entity so that the termination event ceases to exist. If, in either such case, the swap counterparty fails to effect such a substitution within 20 days of the required date for commencement of such best efforts, the [primary]primary swap will terminate on the fifth business day following the expiration of such 20 day period unless the swap counterparty and the issuing entity agree otherwise.
[Moody’sRating Agency Credit Downgrade
If the long-term or short-term ratings of the swap counterparty or any eligible guarantor of the swap counterparty’s obligations under each [primary]primary swap pursuant to an eligible guarantee failsfail to satisfy the Moody’s First Trigger Required Ratings,levels required by [the relevant rating agency], the swap counterparty will be obligated to take one of the following actions within 30 business days after the occurrence of such event, at the swap counterparty’s expense:
post collateral for the benefit of the trust under the ISDA Credit Support Annex (“(“CSA”CSA”); or
obtain an eligible guarantee; or
obtain a substitute swap provider acceptable to the trust to assume the rights and obligations of the swap counterparty under each [primary]primary swap, and replace each [primary]primary swap with a swap transaction on substantially similar terms or with such amendments that the trust consents to in writing. The swap counterparty must receive written confirmationnot have received notice from the applicable hired rating agency that such replacement will not result in a downgrade suspension or withdrawal of anythe then current rating of the notes or certificates.notes.
If the long-term or short-term ratings of the swap counterparty or any eligible guarantor of the swap counterparty’s obligations under each [primary]primary swap pursuant to an eligible guarantee failsfail to satisfy the Moody’s Second Trigger Required Ratings,levels required by [the relevant rating agency], the swap counterparty will be obligated, within 30 business days of such event, at the swap counterparty’s expense, to use commercially reasonable efforts either to (a) obtain a substitute swap provider as described above and receive written confirmationmust not have received notice from the applicable hired rating agency that such replacement will not result in a downgrade suspension or withdrawal of anythe then current ratings of the notes, or certificates, or (b) obtain an eligible guarantee. Following notice to the trust and before obtaining a substitute swap provider or an eligible guarantee, the swap counterparty must also post collateral pursuant to the terms of the CSA until it is replaced by the substitute swap provider or provides an eligible guarantee.
If the swap counterparty fails to take the actions set forth above, a termination event will occur under the [primary] swap and the swap counterparty will be replaced.
“Moody’s First Trigger Required Ratings”means (a) where such entity is the subject of a Moody’s short-term rating, if such rating is “Prime-1” or above and either its long-term, unsecured and unsubordinated debt obligations are rated “A2” or above by Moody’s and (b) where such entity is not the subject of a Moody’s short-term rating, if either its long-term, unsecured and unsubordinated debt obligations are rated “A1” or above by Moody’s.
“Moody’s Second Trigger Required Ratings”means (a) where such entity is the subject of a Moody’s short-term rating, if such rating is “Prime-2” or above and either its long-term, unsecured and unsubordinated debt obligations are rated “A3” or above by Moody’s and (b) where such entity is not the subject of a Moody’s short-term rating, if either its long-term, unsecured and unsubordinated debt obligations are rated “A3” or above by Moody’s.]
[Fitch Downgrade
If the swap counterparty’s long-term debt rating is reduced below “A” or its short-term debt rating is reduced below “F1” by Fitch, but remains at a rating at least equal to “BBB—” (long-term) or “F3” (short-term) by Fitch, then the swap counterparty under the [primary] swap will be obligated to take one of the following actions within 30 days of the date of such downgrade:
post collateral pursuant to the ISDA Credit Support Annex; or
obtain a substitute swap counterparty with Fitch ratings of at least “A” (long-term) and “F1” (short-term) to assume the rights and obligations of the swap counterparty under the [primary] swap acceptable to the trust, which acceptance is not unreasonably withheld; or
provide an eligible guarantee; or
make other appropriate credit support arrangements.
If the swap counterparty’s long-term debt rating is reduced below “BBB—” or its short-term debt rating is reduced below “F3” by Fitch, the swap counterparty will be obligated to undertake actions described in the second, third or fourth bullet points above and may not cure the effect of the ratings reduction by posting collateral pursuant to the first bullet point. If the swap counterparty fails to take the actions set forth above, a termination event will occur under the [primary] swap and the swap counterparty will be replaced.]
[S&P Downgrade
If an S&P Collateralization Event occurs, the swap counterparty will be obligated to post collateral for the benefit of the trust pursuant to the ISDA Credit Support Annex, elect to transfer the [primary] swap to a substitute swap counterparty or procure an eligible guarantee. If an S&P Substitution Event occurs, the swap counterparty will be obligated to post additional eligible collateral pursuant to the ISDA Credit Support Annex within 10 business days and use commercially reasonable efforts to, within 60 calendar days, either transfer the [primary] swap to a substitute swap counterparty or procurehas provided an eligible guarantee. If the swap counterparty fails to take the actions set forth above, a termination event will occur under the [primary]primary swap and the swap counterparty will be replaced.
An“S&P Collateralization Event”is deemed to occur if (a) no S&P Substitution Event has occurred and is continuing with respect to the swap counterparty or any guarantor of the swap counterparty’s obligations under the [primary] swap pursuant to an eligible guarantee, (b) such entity is a bank, broker-dealer, insurance company, derivative products company or structured investment vehicle, (c) any of the notes are outstanding and rated by Standard & Poor’s, and (d) the short-term rating of such entity from Standard & Poor’s is downgraded to “A-2” or, if such entity does not have a short-term rating from Standard & Poor’s, the long-term rating of such entity from Standard & Poor’s is downgraded below “A+”.
An“S&P Substitution Event”is deemed to occur if, at any time when any of the notes are outstanding and rated by Standard & Poor’s, the short-term rating of the swap counterparty or any guarantor of the swap counterparty’s obligations under the [primary] swap pursuant to an eligible guarantee from Standard & Poor’s is withdrawn, suspended or downgraded below “A-1” (if such entity is not a bank, broker-dealer, insurance
company, derivative products company or structured investment vehicle) or below “A-2” (if such entity is a bank, broker-dealer, insurance company, derivative products company or structured investment vehicle) or, if no such short-term rating exists, if the long-term rating of such entity from Standard & Poor’s is withdrawn, suspended or downgraded below “A+” (if such entity is not a bank, broker-dealer, insurance company, derivative products company or structured investment vehicle) or below “BBB+” (if such entity is a bank, broker-dealer, insurance company, derivative products company or structured investment vehicle).
Amendments to Transaction Documents.Documents. The swap counterparty will have the right to consent to amendments under the transaction documents that would materially and adversely affect the interests of the swap counterparty.
[Back-to-Back Swaps.Swaps. On the closing date, [Ally Bank]Ally Investment Management LLC will enter into an interest rate swap with the swap counterparty with respect to each primary swap.swap between the swap counterparty and the issuing entity. We refer to each of these interest rate swaps as a ““back-to-back swap.swap.”Under each back-to-back swap, Ally BankInvestment Management LLC assumes the prepayment risk associated with the related primary swap, which reduces the cost to the trustissuing entity of entering into the related primary swap with the swap counterparty.
TheEach back-to-back swapsswap entered into by [Ally Bank]Ally Investment Management LLC will be separate and independent from the primary swaps.swap. Accordingly, an event of default or termination event under a back-to-back swap resulting in early termination of suchthat back-to-back swap will not cause an early termination of the related primary swap.]
The information under the headings““—Swap Counterparty”and“—The Swap Counterparty Ratings”” below relates to and has been provided by the swap counterparty for use in this prospectus supplement. Except for those sections,the information under “—The Swap Counterparty” below, the swap counterparty and its affiliates have not prepared and do not accept responsibility for this prospectus supplement. The information regarding the swap counterparty in those sections has been furnished solely to provide limited introductory information regarding the swap counterparty and does not purport to be comprehensive.]
Swap Counterparty.
The swap counterparty will be [ ]. [ ] is a [ ].[ ] is an indirect wholly-owned subsidiary of [ ], a [ ]. [Add information with respect to the general character of the business of the swap counterparty.]
Swap Counterparty Ratings.
[The long-term credit rating assigned to the swap counterparty [by Moody’s is currently “[ ][,][.]”] [by Standard and Poor’s is currently “[ ][.]” [and] [by Fitch is currently “[ ].”] The short term credit rating assigned to the swap counterpartyInsert any additional disclosure required by Moody’s is currently [by Moody’s is currently “[ ][,][.]”] [by Standard and Poor’s is currently “[ ][.]” [and] [by Fitch is currently “[ ].”Item 1103(a)(3)(ix) or Item 1115 of Regulation AB.]
Swap Agreement Significance Percentage.Percentage
Based on a reasonable good faith estimate of maximum probable exposure calculated in accordance with Ally Bank’s general risk management procedures, the significance percentage of the interest rate swap agreement is less than 10%.] [To be inserted if applicable—financial information required by Item 1115 of Regulation AB to the extent any providersprovider of derivative instruments is liable or contingently liable to provide payments representing 10% or more of the cash flow.]
The Swap Counterparty. [Depositor Repurchase ] is the swap counterparty. It is organized as a under the laws of [ ]. [Description of the general character of the business of the swap counterparty].]
Trust Administrator Purchase Option
The depositortrust administrator has an option to purchase a portion of the receivables.secured notes. The option may be exercised only one time,on any distribution date on which, and for a groupboth of receivables having a Receivables Principal Balance no greater(but not less than both of) the secured notes at such time as, the Aggregate ABS Value of the lease assets is equal to or less than [ ]% of the initial aggregate receivables principal balance.Initial ABS Value of the lease assets. The purchase price will be at least equal to the Receivables Principal Balanceunpaid principal balance of the
repurchased receivables, secured notes, plus accrued and unpaid interest on the repurchased receivablessecured notes through the end of the calendar month in which the repurchase occurs.purchase occurs, plus any unpaid administration fee after giving effect to a redemption of the secured notes. The amount paid by the depositortrust administrator for the repurchasepurchase will constitute collections on the receivables,secured notes, and will be applied in the same fashionmanner as other collections.]
Distribution of Assets Following Payment in Full of the SecuritiesNotes
Following payment in full of the notes and payment of all liabilities of the trustissuing entity in accordance with applicable law, any remaining assets inof the trust and any remaining amount in the reserve accountissuing entity will be distributed to the holders of the certificates.certificateholders.
Basic Servicing Fee Rate
The Basic Servicing Fee Rate will be 1.00% per annum. | ||
| ||
Only the[Additional Servicing Fee Rate]
[The Additional Servicing Fee Rate will be [1.00]% per annum.]
Administration Fee Rate
The Administration Fee Rate will be 0.01% per annum.
The basic servicing fee [andfee[, the additional servicing fee] and the administration fee will be paid out of collections from the receivables.lease assets. The servicer will also will be entitled to a supplemental servicing fee, which will not be paid out of collections, and will include late fees, disposition fees, prepayment charges, and other administrative fees and expenses collected during the month and investment earnings on the ACOLT trust accounts. The servicer is entitled to be reimbursed out of the receivables cash flows on the lease assets for liquidation expenses and other out-of-pocket costs related to liquidation, not to exceed $[300] per receivable or such greaterin the amount asthat the Servicerservicer determines necessary in accordance with its customary proceduresservicing practices to refurbish and dispose of a repossessed financed vehicle. See“The Transfer Agreements and Servicing Agreements—Servicing and Administration Compensation and Payment of Expenses”in this prospectus supplement and“The Servicer—Transfer Agreements and Servicing Agreements—Servicing and Administration Compensation and Payment of Expenses”in the accompanying prospectus.
Other Fees and Expenses
The following table describes the compensation payable to the rating agencies hired to rate the notes for the period beginning with their retention and ending five years after the closing date. The sponsor will pay the rating agency fees, which include initial fees and surveillance fees. None of these fees will be paid out of the collections on the lease assets. Although we do not anticipate that these fees will change while the notes are outstanding, any
changes after the closing will be disclosed to investors on the issuing entity’s monthly statement to noteholders. None of the hired rating agencies retain any risk of loss with respect to the lease assets.
Rating Agency Fees [ ]
The sponsor and the servicer also do not retain any risk of loss with respect to the lease assets other than any purchase or repurchase obligations resulting from certain breaches of representations and warranties. The depositor will initially retain the certificates, which represent the residual equity interest in the issuing entity. See “The Transfer Agreements and Servicing Agreements—Sale and Assignment of Lease Assets and Secured Notes” in the accompanying prospectus. The sponsor intends to satisfy the FDIC’s risk retention requirement by selecting a separate pool of lease assets in an amount equal to [at least] five percent of the sum of the pool of lease assets sold to ACOLT and the separate pool of lease assets. This retained pool will be selected randomly on the basis of the same criteria used to select the securitized pool. For more information, see “Insolvency Aspects of the Offerings—FDIC Rule” in the accompanying prospectus.
[MONEY MARKET INVESTMENTSINVESTMENTS]
[The Class A-1 Notes will be eligiblestructured to be “eligible securities” for purchase by money market funds under paragraph (a)(10) of Rule 2a-7 under the Investment Company Act of 1940, as amended. Rule 2a-7 includes additional criteria for investments by money market funds including additional requirements relating to portfolio maturity, liquidity and risk diversification. If you are a money market fund contemplating a purchase of Class A-1 Notes, you should consult your counsel before making a purchase.]
The accompanying prospectus describes the general rules that apply to the purchase of offered notes by pension, profit-sharing and other employee benefit plans, as well as individual retirement accounts, and specified types of Keogh Plans and collective investment funds and insurance company general accounts or separate accounts in which these plans and accounts are invested.entities deemed to hold plan assets of any type of the foregoing. We refer to these investors as “benefit“benefit plans,”and each benefit plan that is considering an investment in the offered notes should review“ERISA Considerations”in the accompanying prospectus. We use terms in this section of the accompanying prospectus supplement that have been defined in that section of the accompanying prospectus.
Although there is little guidance on the subject, assuming the notes constitute debt for local law purposes, the depositor believes that, at the time of their issuance, the offered notes should not be treated as an equity interest in the trustissuing entity for purposes of the plan assets regulation. This determination is based in part upon the traditional debt features of the offered notes, including the reasonable expectation of purchasers of offered notes that the offered notes will be repaid when due, as well as the absence of conversion rights, warrants and other typical equity features. The debt treatment of the offered notes for ERISA purposes could change if the trustissuing entity incurred losses. The more subordinated a class of offered notes is the greater the risk of recharacterization is with respect to that class.the class of notes.
However, withoutWithout regard to whether the offered notes are treated as an equity interest for purposes of the plan assets regulation, the acquisition or holding of offered notes by or on behalf of a benefit plan could be considered to give rise to a prohibited transaction if the trust,issuing entity, the depositor, the servicer,trust administrator, the AART indenture trustee, the
AART owner trustee[trustee, ACOLT, ACOL, LLC, the servicer, the ACOLT owner trustee, the ACOLT indenture trustee, the underwriters[, the swap counterparty] or any of their respective affiliates is or becomes a party in interest or a disqualified person with respect to that benefit plan. Certain exemptions from the prohibited transaction rules could be applicable to the purchase and holding of the offered notes by a benefit plan depending on the type and circumstances of the plan fiduciary making the decision to acquire the offered notes. Included among these exemptions are: Prohibited Transaction Class Exemption ((““PTCE”PTCE”) 96-23, regarding transactions effected by “in-house asset managers”; PTCE 95-60, regarding investments by insurance company general accounts; PTCE 91-38, regarding investments by bank collective investment funds; PTCE 90-1, regarding investments by insurance company pooled separate accounts;accounts and PTCE 84-14, regarding transactions effected by “qualified professional asset managers.”
In addition to the class exemptions listed above, the Pension Protection Act of 2006 provides a statutory exemption under Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Internal Revenue Code for prohibited transactions between a benefit plan and a person or entity that is a party in interest to suchthat benefit plan solely by reason of providing services to the benefit plan (other than a party in interest that is a fiduciary, or its affiliate, that has or exercises discretionary authority or control or renders investment adviseadvice with respect to the assets of the benefit plan involved in the transaction), provided that there is adequate consideration for the transaction. Even if the conditions specified in one or more of these exemptions are met, the scope of the relief provided by these exemptions might or might not cover all acts whichthat might be construed as prohibited transactions. There can be no assurance that any of these, or any other exemption, will be available with respect to any particular transaction involving the offered notes, and prospective purchasers that are benefit plans should consult with their advisors regarding the applicability of any such exemption.
By acquiring an offered note, each purchaser and transferee will be deemed to represent and warrant that either (a)(1) it is not acquiring the offered note with the plan assets of a benefit plan or other plan that is subject to any law that is substantially similar to Title I of ERISA or Section 4975 of the Internal Revenue Code or (b)(2) the acquisition and holding of the offered note will not give rise to a non-exempt prohibited transaction under Section 406(a)406 of ERISA or Section 4975 of the Internal Revenue Code or a violation of any substantially similar applicable law.
Employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA) are not subject to ERISA requirements; however, governmentalsuch plans may be subject to comparable federal, state or local law restrictions.
[The trustissuing entity and the underwriters are not relying on the underwriter’s exemption with respect to the purchase of the offered notes by a benefit plan.]
[There are no current legal proceedings pending, or to the best knowledge of management of suchthat entity, threatened, against the trust,issuing entity, the sponsor, VAULT, the servicer, the trust administrator, ACOLT or the depositor that, if determined adversely to such party, would be expected to have a material adverse effect on the performance of the offered notes.
Each of the ACOLT owner trustee, and the AART owner trustee, ACOLT indenture trustee, the AART indenture trustee, the VAULT trustee and [the swap counterparty] has represented to the trustissuing entity that it is not a party to anythere were no material pending legal or other current legal proceedings, nor is its management aware of any legal proceedings threatened, against itinvolving that if determined adversely to such party,entity, which, for that entity, individually or in the aggregate, would be expected to behave a material to investors.]adverse impact on investors in the notes.
FEDERAL INCOME TAX CONSEQUENCES
On the closing date, Kirkland & Ellis LLP, special tax counsel to the depositor, will deliver its opinion that for U.S. federal income tax purposes that the offered notes will constitute indebtedness. Each noteholder, by the acceptance of an offered note, will agree to treat the offered notenotes as indebtedness for federal, state and local income and franchise tax purposes.
The [offeredoffered notes that are fixed rate notes] may be issued with a “de minimis” amount of original issue discount, or ““OID,”for federal income tax purposes. [The floating rate notes will not be issued with any OID.] The rules discussed in the accompanying prospectus requiring a holder to include OID in income under a “constant yield method” are inapplicable to OID which is de minimis. However, a holder of an offered note with a de minimis amount of OID must include such OID in income proportionately as principal payments are made on such offered note. See“Federal Income Tax Consequences—The Notes—Original Issue Discount”in the accompanying prospectus for a general discussion of the federal income tax treatment of OID and its general application to holders of debt instruments.
Kirkland & Ellis LLP has also deliveredwill deliver its opinion that the trustissuing entity will not, for federal income tax purposes, be taxable as an association or publicly traded partnership taxable as a corporation. See“Federal Income Tax Consequences”and“State and Local Tax Consequences”in the accompanying prospectus.
The depositor, the sponsor and the underwriters named below will enter into an Underwriting Agreement, to be dated on or about [ , 20 ] (“underwriting agreement for the “Underwriting Agreement”), with the underwriters.notes offered by this prospectus supplement. Subject to the terms and conditions set forth in the underwriting agreement, the depositor will agree to sell to each of the underwriters named below, and each of the underwriters will severally agree to purchase from the depositor, the principal amount of the offered notes set forth opposite its name below:
Aggregate Principal Amount to be Purchased
| [Class | Class | Class | Class | Class B | Class C | |||||||||||||||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||
None of the sponsor, the depositor, the servicer, the issuing entity or the underwriters make any representation or agreement that it is undertaking or will have undertaken to comply with the requirements of Article 122a of the Capital Requirements Directive 2006/48/EC (as amended by Directive 2009/111/EC) (“CRD”). Noteholders are responsible for analyzing their own regulatory position and are advised to consult with their own advisors regarding the suitability of the notes for investment compliance with the CRD.
The underwriters are responsible for jointly leading and managing the offering of the offered notes.
[Add description [If applicable, add descriptions of non-U.S. underwriters who are not U.S. registered broker-dealers if material to investors in the notes.]
The depositor has been advised by the underwriters that the several underwriters propose initially to offer the [Class A-1 Notes, the] Class A-2 Notes,] the Class A-3A-2[a] Notes, [the Class A-2b Notes,] the Class A-4A-3[a] Notes, [the Class A-3b Notes,] the Class A-4[a] Notes, [the Class A-4b Notes,] the Class B Notes and the Class C Notes to the public at the prices set forth on the cover page of this prospectus supplement, and to dealers at those prices less a selling concession not in excess of the percentage set forth below for each class of offered notes. The underwriters may allow, and those dealers may reallow to other dealers, a subsequent concession not in excess of the percentage set forth below for each class of offered notes. After the initial public offering, the public offering price and these concessions may be changed.
| Selling Concession | Reallowance | |||||||
[Class A-1 Notes] | % | % | ||||||
Class | % | % | ||||||
[Class A-2b Notes] | % | % | ||||||
Class | % | % | ||||||
[Class A-3b Notes] | % | % | ||||||
Class | % | % | ||||||
[Class A-4b Notes] | % | % | ||||||
Class B Notes | % | % | ||||||
Class C Notes | % | % | ||||||
The underwriters may engage in over-allotment transactions, stabilizing transactions, syndicate covering transactions and penalty bids for the offered notes in accordance with Regulation M under the Securities Exchange Act of 1934.1934, as amended.
Over-allotment transactions involve short sales by the underwriters of the offered notes. Short sales involve the sale by the underwriters of a greater number of offered notes than they are required to purchase in the offering. This creates a syndicate short position and the need to engage in syndicate covering transactions to close out the syndicate short position. Short sales may be in the form of “covered” short sales or “naked” short sales.
Covered short sales are sales made in an amount not greater than the underwriters’underwriters over-allotment option to purchase additional offered notes in the offering. The underwriters may close out any covered short position by either exercising their over-allotment option or purchasing the offered notes in the open market. In determining the source of the offered notes to close out the covered short position, the underwriters will consider, among other things, the price of the offered notes available for purchase in the open market as compared to the price at which they may purchase the offered notes through the over-allotment option.
Naked short sales are sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing the offered notes in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the offered notes in the open market after pricing that could adversely affect investors who purchase in the offering.
Stabilizing transactions permit the underwriters to make bids on or purchase the offered notes so long as the stabilizing bids or purchase prices do not exceed a specified maximum.
Syndicate covering transactions involve purchases of the offered notes in the open market after the distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the offered notes originally sold by that syndicate member are purchased in a syndicate covering transaction.
Similar to other purchase transactions, over-allotment transactions, stabilizing transactions, syndicate covering transactions and penalty bids may cause the prices of the offered notes to be higher than they would otherwise be in the absence of these transactions, and may also have the potential effect of preventing or retarding a decline in the market value of the offered notes. Neither the depositor nor any underwriter representsof the underwriters represent that the underwriters will engage in any of these transactions or that these transactions, once commenced, will not be discontinued without notice at any time.
[Each underwriter will provide representations regarding the sale of the offered notes in Europe. See “Plan of Distribution—Matters Relating to the Offering of the Notes in Europe” in the prospectus.]
The depositor will indemnify the underwriters against specified liabilities, including liabilities under the Securities Act.
In the ordinary course of its business, one or more of the underwriters and affiliates have provided, and in the future may provide, investment banking and commercial banking services to the depositor, the issuing entity and their affiliates.
The following chart sets forth information on the aggregate proceeds to the depositor from the sale of the offered notes.
| As a | ||||||
Sale of the Offered Notes Proceeds | $ | |||||
Underwriting Discount on the Offered Notes | $ | |||||
Additional Offering Expenses | $ | |||||
Net Proceeds to Depositor | $ | |||||
Specified matters relating to the offered notes will be passed upon for the trust,issuing entity, the depositor, the servicersponsor and Ally BankFinancial by Richard V. Kent, Esq., Assistant General Counsel to the depositor, and Assistant General Counsel of GMAC,Ally Financial, by Jonathan P. Andrews, GeneralChief Counsel to Ally Bank, by Kirkland & Ellis LLP, counsel to the depositor, the trust,issuing entity, Ally Bank and GMACAlly Financial and by VanCott, Bagley, Cornwall & McCarthy, Utah counsel for Ally Bank. Certain federal income tax matters and certain bankruptcybank insolvency matters will be passed upon for Ally Bank, GMAC, the trustissuing entity and the depositor by Kirkland & Ellis LLP. Specified matters relating to the
offered notes will be passed upon for the underwriters by Mayer Brown LLP. Mayer Brown LLP which has from time to time represented, and is currently representing Ally Bank and its affiliates.affiliates in matters unrelated to the offering of the notes described in this prospectus supplement and the accompanying prospectus.
REPORTS AND ADDITIONAL INFORMATION
For a summary of reports to be provided to securityholders, see“Book-Entry Registration; Reports to Securityholders—Reports to SecurityholdersSecurityholders”” in the accompanying prospectus.
The servicertrust administrator will file with the SEC all required annual reports on Form 10-K, distribution reports on Form 10-D, current reports on Form 8-K and amendments to those reports aboutrelating to the trustissuing entity under Ally Auto Receivables Trust 20 --SN , SEC file number - - .[ ]. These reports will be made available on the world wide web at[WEBSITE ADDRESS TO BE INSERTED]. http://www.ally.com/about/investor/auto-securitization/us/index.html. For further information on how to obtain these reports, see ““Where You Can Find More Information”Information” in the accompanying prospectus.
Subject to the important risks described under “Risk Factors—The FRBNY May Reject TALF Loan Requests and/or Impose Additional TALF Program Requirements,” “Risk Factors—The Requirements of TALF Could Adversely Affect the Market Value of Your Class A Notes and/or Limit Your Ability to Resell Your Class A Notes,” and “Risk Factors—The Risk That the FRBNY May Reject TALF Loan Requests Could Adversely Affect the Liquidity of Your Class A Notes,” the Class A Notes will be eligible collateral under TALF. The Class A Notes and the receivables will satisfy all applicable criteria for securities relating to prime auto retail loans under TALF, and the trust and the sponsor will certify to the FRBNY that they have satisfied, or have undertaken to satisfy, all applicable requirements under TALF, as set forth in the “Certification as to TALF Eligibility for Non-Mortgage-Backed ABS” attached as Appendix A to this prospectus supplement. Furthermore, it is a condition to the issuance of the Class A Notes that the sponsor or issuing entity have received an indication from the FRBNY that the Class A Notes satisfy the FRBNY’s risk assessment requirements under TALF. The applicable criteria and other requirements for eligible collateral are summarized below. The pricing date for the notes is expected to coincide with the [ ] TALF subscription date and the closing date for the notes is expected to coincide with the [ ] TALF settlement date.
As of the [initial] cutoff date, the receivables have the following characteristics:
all of the receivables are U.S. dollar-denominated,
all of the receivables are retail auto loans or retail instalment sale contracts relating to new and used automobiles and light-duty trucks, and do not include exposures that are themselves cash or synthetic asset-backed securities,
all or substantially all of the obligors under the receivables are U.S.-domiciled; “all or substantially all” in this context means 95% or more of the dollar amount of the receivables,
all or substantially all of the credit exposures underlying eligible ABS must be exposures originated by U.S.-organized entities or institutions or U.S. branches or agencies of foreign banks; “all or substantially all” in this context means 95% or more of the dollar amount of the receivables,
all or substantially all of the receivables were originated on or after October 1, 2007; “all or substantially all” in this context means 85% or more of the dollar amount of the receivables, and
the weighted average FICO Score of the receivables at origination (weighted by original principal balance of each receivable) is 680 or greater.
On the closing date, the Class A Notes will have the following characteristics:
the Class A Notes will be U.S. dollar-denominated cash (not synthetic) asset-backed securities,
the Class A Notes are not subject to an optional redemption (other than pursuant to a customary clean-up call),
the Class A Notes will be rated in the highest long-term or short-term investment-grade rating category by two or more eligible nationally recognized statistical rating organizations (“NRSROs”), and will not have a credit rating below the highest investment-grade rating category from an eligible NRSRO; “eligible nationally recognized statistical rating organization” in this context means [Fitch][,] [Moody’s] [and] [Standard & Poor’s]; these ratings will be obtained without the benefit of any third-party guarantee and will not be on review or watch for downgrade,
the Class A Notes have been reviewed by the FRBNY in connection with its risk assessment program, and the FRBNY has notified the issuer that the Class A Notes have satisfied the requirements for “eligible collateral” under TALF,
|
the Class A Notes will be held in book-entry form and cleared through DTC, in the name of Cede & Co., as nominee of DTC and will have the following CUSIP numbers: [Class A-1 Notes (CUSIP #[ ]), ]Class A-2 Notes (CUSIP #[ ]), Class A-3 Notes (CUSIP #[ ]), and Class A-4 Notes (CUSIP #[ ]).
It is a condition to the issuance of the Class A Notes that the following will be delivered on or prior to the closing date:
all data (as defined in the TALF frequently asked questions) on the Class A Notes or the receivables that the issuer has provided to any NRSRO has been delivered to the FRBNY,
a written waiver or consent to each NRSRO to which the issuer or sponsor has provided data permitting each NRSRO to share its view of the credit quality of the Class A Notes and the receivables with the FRBNY,
an attestation, in the form prescribed by the FRBNY, from a nationally recognized certified public accounting firm that is registered with the Public Company Accounting Oversight Board, indicating that the Class A Notes are “eligible collateral” under TALF,
a Certification as to TALF Eligibility, in the form attached as Appendix A to this prospectus supplement, executed by the sponsor and the trust,
an undertaking, in the form prescribed by the FRBNY, executed by the sponsor, to indemnify the FRBNY and TALF LLC and their respective affiliates against losses they may suffer if the certifications in the Certification as to TALF Eligibility are untrue, and
rating letters from each of two NRSROs.
If any rating for any class of Class A Notes is lowered or withdrawn by any rating agency rating the Class A Notes or is placed on review or watch for downgrade, then that class of Class A Notes will no longer be eligible collateral for a new TALF loan until, as applicable, the rating is reinstated to the highest long-term or short-term investment grade rating for such rating agency or such review or watch for downgrade is removed. Although the Certification as to TALF Eligibility requires the sponsor and the trust to notify the FRBNY and all registered holders of the Class A Notes upon a determination that certain statements relating to the eligibility of the Class A Notes are no longer correct, neither the sponsor nor the trust is obligated to monitor the characteristics of the receivables set forth above or to recalculate the weighted average life of any class of the Class A Notes based on actual prepayment experience after the closing date or the weighted average FICO score of the obligors or to take actions to cause any ratings assigned to a class of Class A Notes to be reinstated or such review or watch to be removed.
This prospectus supplement does not describe all of the requirements of TALF or the associated risks of obtaining loans under TALF. If you want to obtain a loan under TALF, you should consult your financial and legal advisors regarding the advisability of obtaining a loan under TALF and the requirements of TALF, including whether you are an “eligible borrower” under TALF.
For more information about the risks associated with an investment in the Class A Notes as a result of the requirements of TALF, you should read“Risk Factors—The Requirements of TALF Could Adversely Affect the Market Value of Your Class A Notes and/or Limit Your Ability to Resell Your Class A Notes,” “Risk Factors—The FRBNY May Reject TALF Loan Requests and/or Impose Additional TALF Program Requirements”and“Risk Factors—The Risk That the FRBNY May Reject TALF Loan Requests Could Adversely Affect the Liquidity of Your Class A Notes” in this prospectus supplement.]
GLOSSARY OF TERMS TO PROSPECTUS SUPPLEMENT
The following are definitions of terms used in this prospectus supplement. References to the singular form of defined terms in this prospectus supplement include references to the plural and vice versa. Capitalized terms not defined in this prospectus supplement are defined in the accompanying prospectus.
[“Accumulation Account”100% Prepayment Assumption”means the account so designated, established and maintained pursuant to the Trust Sale and Servicing Agreement. The Accumulation Account is a Designated Account.]defined on page S-39.
[“Accumulation20 -SN pool” is defined on page S-1.
“20 -SN secured notes” is defined on page S-1.
“AART Collection Account Shortfall Amount”means, forwith respect to any distribution date, during the revolving period,excess of (x) the aggregate amountamounts payable from the AART collection account on depositthat distribution date as described under“The Transfer Agreements and Servicing Agreements—Distributions on the Notes—Priorities for Distributions from AART Collection Account” in this prospectus supplement or, following the occurrence of an event of default under the AART indenture, and a declaration that the notes have become immediately due and payable, in each case other than deposits to the reserve account and payments to the certificateholders, over (y) the Total Available Amount for that distribution date, other than any amounts deposited in the AccumulationAART collection account with respect to the AART Collection Account Shortfall Amount for that prior distribution date.
“AART indenture” means the AART 20 -SN indenture, dated as of the open of business onclosing date, between the distribution date.]issuing entity and the AART indenture trustee, as the same may be amended, supplemented or otherwise modified from time to time.
[“Additional Servicing Fee Rate”AART indenture trustee”means 1.00% per annum.] is defined on page S-2.
[“Aggregate Additional Receivables Principal Balance”AART Overcollateralization Amount” is defined on page S-62.
“AART owner trustee” is defined on page S-2.
“ABS” is defined on page S-39.
“ABS Value”means, with respect to a lease asset on any distribution date and the last day of the related Monthly Period:
(a) for each Administrative Lease Asset with respect to which the servicer has paid the Administrative Purchase Payment as of the close of business on the last day of the related Monthly Period under the Servicing Agreement, zero;
(b) for each Warranty Lease Asset with respect to which Ally Bank has paid the Warranty Payment as of the close of business on the last day of the related Monthly Period under the sale and contribution agreement, zero;
(c) for each lease asset that (i) terminated during or prior to the related Monthly Period or reached its scheduled lease end date during or prior to the related Monthly Period, (ii) became a Pull Ahead Lease Asset during or prior to the related Monthly Period, or (iii) became an Extended Lease during or prior to the related Monthly Period but, in each case, that did not become a Liquidating Lease Asset (and neither of the actions described in clauses (a) or (b) above have occurred with respect to that lease asset) during or prior to the related Monthly Period, the Lease Residual;
(d) for each lease asset that became a Liquidating Lease Asset during or prior to the related Monthly Period, zero; and
(e) for each other lease asset not described in clauses (a) through (d) above, the sum of (i) the present value, as of the close of business on the last day of the related Monthly Period (discounted at a rate equal to the Discount Rate for that lease asset and computed on the basis of a 360-day year comprised of twelve 30-day months), of each Monthly Lease Payment (if any) for that lease asset due after the last day of the related Monthly Period, discounted from the first day of the Monthly Period in which the Monthly Lease Payment is due to the last day of the related Monthly Period, (ii) the aggregate amount of past due and unpaid Monthly Lease Payments, if any, for which no Advances have been made for that lease asset and (iii) the present value, as of the close of business on the last day of the related Monthly Period (discounted at a rate equal to the Discount Rate for that lease asset and computed on the basis of a 360-day year comprised of twelve 30-day months), of the Lease Residual for that lease asset, discounted from the first day of the Monthly Period in which the scheduled lease end date for that lease asset occurs to the last day of the related Monthly Period.
“ACOL LLC” is defined on page S-1.
“ACOLT” is defined on page S-1.
“ACOLT Collections” is defined on page S-56.
“ACOLT indenture” means the ACOLT 20 -SN indenture, dated as of the closing date, between ACOLT and the ACOLT indenture trustee, as the same may be amended, supplemented or otherwise modified from time to time.
“ACOLT indenture trustee” is defined on page S-2.
“ACOLT Overcollateralization Amount” is defined on page S-62.
“ACOLT owner trustee” is defined on page S-2.
“Actual Payment” means, with respect to any distribution date and a lease, all payments received by the servicer from or for the account of the lessee during the revolving period,related Monthly Period, except for any Overdue Payments, supplemental servicing fees, Excluded Amounts or payments with respect to Sales and Use Tax Amounts. Actual Payments do not include Applied Payments Ahead.
[“additional closing date” is defined on page S-1.]
[“additional funding account” is defined on page S-5.]
[“additional lease assets” is defined on page S-1.]
[“additional secured notes” is defined on page S-1.]
[“additional servicing fee,” with respect to any distribution date, is the aggregateadditional fee payable to the servicer for services rendered during the related Collection Period, which will be equal to the sum of (1) 1/12th of the
Additional Servicing Fee Rate multiplied by the Aggregate ABS Value of the Receivable Principal Balanceslease assets at the opening of each additional receivable to be purchasedbusiness on the first day of the related Collection Period (or, for the first distribution date, the Additional Servicing Fee Rate multiplied by a fraction, the numerator of which is [ ] and the denominator of which is 360, multiplied by the issuing entity on thatinitial Aggregate ABS Value of the lease assets) and (2) any unpaid additional servicing fee from any prior distribution date.]
[“Additional Servicing Fee Rate” means [1.00] % per annum.]
“Adjusted MSRP” is defined on page S-27.
“administration fee” is defined on page S-53.
“Administration Fee Rate” means [0.01] % per annum.
“Administrative Lease Asset” means a lease asset that the servicer is required to purchase pursuant to the servicing agreement.
“Administrative Purchase Payment” means, with respect to (a) an Administrative Secured Note, an amount equal to the Secured Note Principal Balance, plus accrued interest calculated at the Secured Note Rate, determined as of the close of business on the day which the trust administrator is required to, or, if earlier, elects to, purchase the Administrative Secured Note and (b) an Administrative Lease Asset, the ABS Value of that Administrative Lease Asset as of the close of business on the last day of the Monthly Period prior to the Monthly Period as of which the servicer is required, or, if earlier, elects, to purchase the Administrative Lease Asset.
“Administrative Secured Note” means a Secured Note that the administrator is required to purchase under the Administration Agreement or that the trust administrator has elected to purchase under the Administration Agreement.
“Advance” means, with respect to the lease assets and any distribution date, the amount that the servicer has advanced under the servicing agreement.
“Aggregate Amount Financed”ABS Value”means, with respect to all the [initial] receivablesany group of lease assets, as of any date of determination, an amount equal to the [initial] cutoff date, $ [and with respect to each additional receivable, the aggregatesum of the amount financed for those receivables asABS Values of the applicable cutoff date].all lease assets on that date.
“Aggregate Class Interest Distributable Amounts” means the Aggregate Class A Interest Distributable Amount”Amount, the Aggregate Class B Interest Distributable Amount, the Aggregate Class C Interest Distributable Amount and the Aggregate Class D Interest Distributable Amount, as the context requires.
“Aggregate Class A Interest Distributable Amount” means with respect to any distribution date, the sum of (1) the aggregate of the Note Class Interest Distributable Amount for each class of the Class A Notes as of suchthat distribution date and (2) the Class A Interest Carryover Shortfall as of the preceding distribution date.
““Aggregate Class B Interest Distributable Amount”Amount” means with respect to any distribution date, the sum of (1) the aggregate of the Note Class Interest Distributable Amount as of such distribution date for the Class B Notes as of that distribution date and (2) the Class B Interest Carryover Shortfall as of the preceding distribution date.
““Aggregate Class C Interest Distributable Amount”Amount” means with respect to any distribution date, the sum of (1) the aggregate of the Note Class Interest Distributable Amount as of such distribution date for the Class C Notes as of that distribution date and (2) the Class C Interest Carryover Shortfall as of the preceding distribution date.
““Aggregate Class D Interest Distributable Amount”Amount” means with respect to any distribution date, the sum of (1) the aggregate of the Note Class Interest Distributable Amount as of such distribution date for the Class D Notes as of that distribution date and (2) the Class D Interest Carryover Shortfall as of the preceding distribution date.
“Aggregate Initial ABS Value” means an amount equal to the sum of the Initial ABS Values of all lease assets.
“Aggregate Noteholders’ Interest Distributable Amount”Amount” means for any distribution date, the sum of (1) the Aggregate Class A Interest Distributable Amount with respect to suchas of that distribution date, (2) the Aggregate Class B Interest Distributable Amount as of suchthat distribution date, (3) the Aggregate Class C Interest Distributable Amount as of suchthat distribution date and (4) the Aggregate Class D Interest Distributable Amount as of suchthat distribution date.
““Aggregate Noteholders’ Principal Distributable Amount”Amount” means for any distribution date, [during the amortization period], the sum of the (1) the Noteholders’ Regular Principal Distributable Amount as of suchthat distribution date and (2) the Aggregate Noteholders’ Priority Principal Distributable Amount as of suchthat distribution date. [During the revolving period and for the related distribution dates, the Aggregate Noteholders’ Principal Distributable Amount is zero.]
““Aggregate Noteholders’ Priority Principal Distributable Amount”Amount” means with respect to any distribution date, the sum of (1) the First Priority Principal Distributable Amount, (2) the Second Priority Principal Distributable Amount, (3) the Third Priority Principal Distributable Amount and (4) the Fourth Priority Principal Distributable Amount, each as of such distribution date.
“Aggregate Principal Balance of Non-Subvented Receivables”means, as of any date, the present value as of that date of all scheduled monthly payments on all of the non-subvented receivables (other than Liquidating Receivables) held by the trust on that date which have not been applied on or prior to such date (determined after taking into account any Warranty Payments and Administrative Purchase Payments in respect of such receivables), with each receivable being discounted from the last day of the calendar month in which payments are to become due to that date at the greater of the Discount Rate and the annual percentage rate of the receivable.Amount.
“Aggregate Principal Balance of Subvented Receivables”Overcollateralization Amount”means, as of any date, the present value as of that date of all scheduled monthly payments is defined on all of the subvented receivables (other than Liquidating Receivables) held by the trustpage S-62.
[“aggregate overcollateralization target amount” is defined on that date which have not been applied on or prior to such date (determined after taking into account any Warranty Payments and Administrative Purchase Payments in respect of such receivables), with each receivable being discounted from the last day of the calendar month in which payments are to become due to that date at the greater of the Discount Rate and the annual percentage rate of the receivable.page [S-7] [and S-62].]
“aggregate receivables principal balance”Aggregate Secured Note Interest Distributable Amount”means, as offor any distribution date, an amount equal to the sum of the Aggregate Principal BalanceSecured Note Interest Distributable Amounts for all secured notes on that distribution date.
“ALG”is defined on page S-36.
“ALG Residual” means the expected value of Subvented Receivables anda vehicle at the Aggregate Principal Balancescheduled lease end date of Non-Subvented Receivables, eachthe related lease at lease inception as of such date.determined by the Automotive Lease Guide.
“Ally Financial” is defined on page S-2.
[“amortization period”period” is defined on page S-[4]. S-4.]
[“applicable cutoff date”date” is defined on page S-[3]. S-4.]
“Available Interest”Applied Extended Lease Payment Amount”means, for a distribution date:
thesum, for the prior monthly period, of:
(1) that portion of all collections on the receivables held by the trust, other than Liquidating Receivables, allocablewith respect to interest,
(2) Liquidation Proceeds, to the extent allocable to interest,
(3) the Warranty Payment or the Administrative Purchase Payment for each receivable that the depositor repurchased or the servicer purchased during that monthly period, to the extent allocable to accrued interest thereon, and
(4) [any investment earning on funds deposited in the Accumulation Account,]
(5) [the net amount, if any, paid by the swap counterparty to the trust pursuant to any interest rate swap[,] [and]]
(6)] [in the event that the depositor exercises its option to purchase a portion of the receivables, the interest component of the purchase price paid by the depositor in connection with such exercise,]
except,
that any of the foregoing amounts, to the extent they constitute any of the following, shall be excluded from “Available Interest”:
liquidation expenses as specified in the Pooling and Servicing Agreement as an allowance for amounts charged to the account of the obligor, in keeping with the servicer’s customary procedures, for the refurbishing and disposition of the financed vehicle and other out-of-pocket costs incurred in the liquidation.
For purposes of this definition, references to the prior monthly period shall include, for the initial distribution date, the period sinceamount of any Extended Lease Payments received or deposited by the [initial] cutoffservicer into the ACOLT collection account during or prior to the related Monthly Period in respect of Applied Extended Leases for that distribution date. All of the preceding allocations shall be made in accordance with the servicer’s customary servicing procedures.
“Available Principal”Applied Extended Leases” means, with respect to each distribution date, any Extended Lease that became a Liquidating Lease Asset during the related Monthly Period.
“Applied Payments Ahead”means, forwith respect to a distribution date:date and a lease on which the Actual Payment made by the lessee during the related Monthly Period was less than the Monthly Lease Payment, an amount equal to the lesser of (i) the Payments Ahead with respect to that lease and (ii) the amount by which the Monthly Lease Payment exceeds that Actual Payment.
thesum,for the prior monthly period, of:
(1) that portion of all collections on the receivables held by the trust, other than Liquidating Receivables, allocable to principal,
(2) Liquidation Proceeds to the extent allocable to principal, and
(3) to the extent allocable to principal, the Warranty Payment or the Administrative Purchase Payment for each receivable that the depositor repurchased or the servicer purchased during that monthly period, [and]
(4) [in the event that the depositor exercises its option to purchase a portion of the receivables, the principal component of the purchase price paid by the depositor in connection with such exercise,]
except,
that any of the foregoing amounts, to the extent they constitute any of the following, shall be excluded from “Available Principal”:
liquidation expenses as specified in the Pooling and Servicing Agreement as an allowance for amounts charged to the account of the obligor, in keeping with the servicer’s customary procedures, for the refurbishing and disposition of the financed vehicle and other out-of-pocket costs incurred in the liquidation.
For purposes of this definition, references to the prior monthly period shall include, for the initial distribution date, the period since the [initial] cutoff date. All of the preceding allocations shall be made in accordance with the servicer’s customary servicing procedures.
[““Available Reinvestment Funds”Distribution Amountmeans, as of any distribution date during the revolving period, the aggregate amount of funds remaining after the distributions have been made pursuant to clauses (1) through (6) of“The Transfer and Servicing Agreements—Distributions—Priorities for Applications: Revolving Period.”The Available Reinvestment Funds shall not exceed the Target Reinvestment Amount.]
[“back-to-back swap”is defined on page S-S-57.
[38].“back-to-back swap” is defined on page S-65.]
“basic servicing fee,”with respect to any distribution date, is the product of (1) the Aggregate ABS Value of the lease assets at the opening of business on the first day of the related Monthly Period, (2) 1/12 (or with respect to
the first distribution date, a fraction, the numerator of which is [ ] and the denominator of which is 360), and (3) the Basic Servicing Fee Rate”Rate.
“Basic Servicing Fee Rate” means 1.00% per annum.
“benefit plans” is defined on page S-67.
“Class A Interest Carryover Shortfall”Shortfall” means for the Class A Notes, as of the close of any distribution date, the excess of the Aggregate Class A Interest Distributable Amount for that distribution date,over the amount that was actually deposited in the Note Distribution Accountnote distribution account on that distribution date in respect ofavailable for interest payments for the Class A Notes.
““Class A Notes”Notes” means collectively, the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes.
““Class A-1 Notes”Notes” means the % Asset Backed Notes issued by the issuing entity.
[“Class A-2 Notes” means [collectively,] the Class A-2[a] Notes[and the Class A-2b Notes].]
“Class A-2[a] Notes” means the % Asset Backed Notes, Class A-1A-2[a] issued by the trust.
“Class A-2 Notes”means[, collectively, the Class A-2a Notes and the Class A-2b Notes][the % Asset Backed Notes, Class A-2 issued by the trust].
[“Class A-2a Notes”means the % Asset Backed Notes, Class A-2a issued by the trust.]issuing entity.
[““Class A-2b Notes”Notes” means the Floating Rate Asset Backed Notes, Class A-2b issued by the trust.issuing entity.]
[““Class A-3 Notes”Notes means[, collectively,” means [collectively,] the Class A-3a Notes A-3[a] Notes[and the Class A-3b Notes][the % Asset Backed Notes, Class A-3 issued by the trust].]
[““Class A-3a Notes”A-3[a] Notes” means the % Asset Backed Notes, Class A-3aA-3[a] issued by the trust.]issuing entity.
[““Class A-3b Notes”Notes” means the Floating Rate Asset Backed Notes, Class A3bA-3b issued by the trust.issuing entity.]
[““Class A-4 Notes”Notes” means [collectively,] the Class A-4[a] Notes[and the Class A-4b Notes].]
“Class A-4[a] Notes” means the % Asset Backed Notes, Class A-4A-4[a] issued by the trust.issuing entity.
[“Class A-4b Notes” means the Floating Rate Asset Backed Notes, Class A-4b issued by the issuing entity.]
“Class B Interest Carryover Shortfall”Shortfall” means as of the close of any distribution date, the excess of the Aggregate Class B Interest Distributable Amount for that distribution date,overthe amount that was actually deposited in the Note Distribution Accountnote distribution account on that distribution date in respect ofavailable for interest payments for the Class B Notes.
““Class B Notes”Notes” means the % Asset Backed Notes Class B issued by the trust.issuing entity.
““Class C Interest Carryover Shortfall”Shortfall” means as of the close of any distribution date, the excess of the Aggregate Class C Interest Distributable Amount for that distribution date,overthe amount that was actually deposited in the Note Distribution Accountnote distribution account on that distribution date in respect ofavailable for interest payments for the Class C Notes.
““Class C Notes”Notes” means the % Asset Backed Notes Class C issued by the trust.issuing entity.
““Class D Interest Carryover Shortfall”Shortfall” means as of the close of any distribution date, the excess of the Aggregate Class D Interest Distributable Amount for that distribution date,overthe amount that was actually deposited in the Note Distribution Accountnote distribution account on that distribution date in respect ofavailable for interest payments for the Class D Notes.
““Class D Notes”Notes” means the %[Floating Rate][ %] Asset Backed Notes, Class D issued by the trust.issuing entity.
“Controlling Class” is defined on page S-51.
“CRD” is defined on page S-69.
“Controlling Class”CSA”is defined on page S-S-65.
“cutoff date” means [31]. ], 20[ ].
“cutoff date”data and disclosure review” is defined on page S-30.
“DBRS”means , 20 .DBRS Ltd.
“Discount Rate”means, %with respect to any lease, [the greater of (i) the implicit lease rate and (ii)] [ ]% per annum.
“distribution dates”dates” is defined on page S-[2].S-3.
[“Early Amortization Event”Dodd-Frank Act” is defined on page S-S-11.
“DTC” is defined on page S-51.
[37]“early amortization event” has the meaning set forth above in “The Transfer Agreements and Servicing Agreements—The Revolving Period.” ]
“Eligible Investments”ERISA” is defined on page S-8.
“Excess Payment” means, with respect to any lease asset and any Monthly Period, the excess, if any, of (x) the amount of the payments by or on behalf of the related lessee and received during that Monthly Period (other than prepayments in full in connection with any early termination of a lease) that are not supplemental servicing fees, Excluded Amounts, Sales and Use Tax Amounts or Applied Payments Ahead,over (y) the amounts applied towards any Outstanding Advances and the Monthly Lease Payment for that lease asset in accordance with the servicing agreement.
“Excluded Amounts” means, with respect to any distribution date and any lease asset, the sum of (i) any amounts received by the servicer during the related Monthly Period with respect to any administrative fees and parking tickets and fines on the related leased vehicle, (ii) premiums paid by the servicer or due to the related insurer during the related Monthly Period in connection with the maintenance of insurance with respect to that lease asset, and (iii) any amounts required under applicable law to be paid or refunded to the lessee during the related Monthly Period (including any rebates of premiums with respect to cancellation of any insurance policy or service contract entered into by the lessee).
“Extended Lease” means any lease included in a lease asset that has reached its scheduled lease end date, with respect to which the lessee (x) has paid all Monthly Lease Payments required under the terms of the lease and (y) has agreed with the servicer to extend the term of the lease and to continue making Monthly Lease Payments under that lease in an amount as agreed between the lessee and the servicer in accordance with its customary servicing practices.
“Extended Lease Payments” means, with respect to any Extended Lease and any Monthly Period prior to the Monthly Period in which the related leased vehicle was sold or otherwise disposed of by the servicer, any Monthly Lease Payments due under that Extended Lease after its scheduled lease end date and received by the servicer during the related Monthly Period,minus any payments in respect of Sales and Use Tax Amounts required to be paid with respect to that Extended Lease during that Monthly Period.
“FDIC” is defined on page S-11.
“FDIC Rule” is defined on page S-12.
“FICO Score”is defined on page S-[34].S-27.
““ERISA”means the Employee Retirement Income Security Act of 1974, as amended.
“Final Scheduled Distribution Date”Date” means the final scheduled distribution dateFinal Scheduled Distribution Date (1) for each of the [Class[the Class A-1 Notes, the] Class A-2 Notes,] the Class A-3A-2[a] Notes, [the Class A-2b Notes,] the Class A-4A-3[a] Notes, [the Class A-3b Notes,] the Class A-4[a] Notes, [the Class A-4b Notes,] the Class B Notes and the Class C Notes as set forth on the front cover page of this prospectus supplement[,] [and]supplement, and (2) [for thefor [the Class A-1 Notes the distribution date on , 20 , and (3)] forand] the Class D Notes the distribution dateas set forth on , 20 .page S-2.
““First Priority Principal Distributable Amount”Amount” means with respect to any distribution date, an amount equal to the excess, if any, of (1)(i) the aggregate outstanding principal balance of the Class A Notes as of the
preceding distribution date (after giving effect to any principal payments made on the Class A Notes on such precedingthat date) (or with respect to the first distribution date) over (2)date, on the aggregate receivables principal balance asclosing date),over (ii) the Aggregate ABS Value of the lease assets at the close of business on the last day of the immediately preceding monthly period.related Monthly Period.
[““Fitch”Fitch” means Fitch, Inc.]
[““fixed rate notes”notes” is defined on page S-1.S-2.]
[““floating rate notes”notes” is defined on page S-1.S-2.]
“Fourth Priority Principal Distributable Amount”means, with respect to any distribution date, [related to the amortization period], an amount, not less than zero, equal to the difference between (1) the excess, if any, of (a) the aggregate outstanding principal balance of all of the notes as of the preceding distribution date (after giving effect to any principal payments made on the notes on such preceding distribution date) over (b) the aggregate receivables principal balanceAggregate ABS Value of the lease assets as of the close of business on the last day of the immediately preceding monthly period, and (2) the sum of (a) the First Priority Principal Distributable Amount, if any, with respect to such distribution date, (b) the Second Priority Principal Distributable Amount, if any, with respect to such distribution date, and (c) the Third Priority Principal Distributable Amount, if any, with respect to such distribution date.
“GMAC”information databases” is defined on page S-31.
“Initial ABS Value” means the Aggregate ABS Value of the lease assets on the Cutoff Date, which is $[ ].
[“initial closing date” means , 20 .]
[“initial cutoff date” means , 20 . ]
“[initial] hypothetical pool of lease assets” is defined on page S-39.
“Initial ABS Value” means the Aggregate ABS Value of all lease assets as of the cutoff date, which is $[ ] and, with respect to each lease asset, the sum of (i) the present value, as of the cutoff date (discounted at a rate equal to the Discount Rate for that lease asset and computed on the basis of a 360-day year comprised of twelve 30-day months), of each Monthly Lease Payment (if any) due after the cutoff date, discounted from the first day of the Monthly Period in which that Monthly Lease Payment is due to the cutoff date, (ii) the aggregate amount of past due and unpaid Monthly Lease Payments (if any) for which no Advances have been made, and (iii) the present value, as of the close of business on the cutoff date (discounted at a rate equal to the Discount Rate and computed on the basis of a 360-day year comprised of twelve 30-day months), of the Lease Residual, discounted from the first day of the Monthly Period in which the scheduled lease end date for that lease asset occurs to the cutoff date.
“Insurance Proceeds” means, with respect to a distribution date and a lease asset, all amounts received by the servicer during the related Monthly Period with respect to any insurance policies maintained with respect to that lease asset pursuant to the servicing agreement.
“lease” means any automobile or light duty truck lease sold, assigned, transferred or conveyed to ACOLT, including all other agreements related thereto and all rights and obligations thereunder.
“lease asset”is defined on page S-1.
“[initial] aggregate receivables principal balance”lease asset document file”means $ .
“[initial] cutoff date”means , 20 .
“[initial] hypothetical pool of discounted receivables”is defined on page S-[20].S-31.
“[initial] hypothetical pool of non-discounted receivables”Lease Residual”is defined on page S-[20].S-26.
[““initial aggregate receivables principal balance”means $ .
“LIBOR Business Day”Day” means any day other than a Saturday, Sunday or any other day on which banks in London are required or authorized to be closed.]
“Liquidating Lease Asset” means a lease asset with respect to which any of the following has first occurred during a Monthly Period:
(a) the related leased vehicle was sold or otherwise disposed of by the servicer following repossession thereof or the scheduled or early termination of the related lease;
(b) the related lease reached its scheduled lease end date more than 120 days prior to the end of that Monthly Period and as of the end of that Monthly Period, the related leased vehicle remained unsold;
(c) the related lease became an Extended Lease on its scheduled lease end date, which scheduled lease end date shall have occurred more than 120 days prior to the end of that Monthly Period and as of the end of that Monthly Period, the related leased vehicle remained unsold; or
(d) the servicer’s records, in accordance with its customary servicing practices, disclose that all Insurance Proceeds expected to be received have been received by the servicer following a casualty or other loss with respect to the related leased vehicle.
“Monthly Lease Payment” means, with respect to any lease asset, the amount required to be paid by the lessee under the related lease on or prior to each monthly lease payment date (as that amount may be modified in connection with any permitted modification or extension), minus any payments with respect to Sales and Use Tax Amounts required to be paid pursuant to that lease on or prior to the monthly lease payment date.
“Monthly Payment Advance” means, with respect to each Monthly Period and each lease asset (other than an Administrative Lease Asset, a Warranty Lease Asset or an Extended Lease), an amount advanced by the servicer equal to any shortfall in the Monthly Lease Payment for that lease asset remaining after application of the Applied Payments Ahead under the servicing agreement.
“Monthly Period” means a calendar month (or, in the case of the first Monthly Period, the period from and including the cutoff date to and including [ ]. The “related Monthly Period” for a distribution date is the Monthly Period proceeding the calendar month in which that distribution date occurs.
“Monthly Remittance Condition”means each of the following conditions:
(1) GMACa condition that will be satisfied if (A) Ally Financial is the servicer,
(2) (B) no servicer default has occurred and is continuing, and
(3) (C) either (i) the short-term unsecured debt of the servicer is rated at least [A-1equal to or higher than a specified level by each rating hired to rate the notes (such specified ratings being “R-1 (middle)” by DBRS, “F1” by Fitch, “P-1” by Moody’s or “A-1” by Standard & Poor’s][,] [at least P-1Poor’s, as applicable) or (ii) the servicer has made any other arrangements satisfactory to the rating agencies hired to rate the secured notes or the notes secured by Moody’s] [and] [at least F-1 by Fitch].
[“Moody’s”means Moody’s Investors Services, Inc. ]the secured notes.
“non-subvented receivables”MSRP”is defined on page S-3.S-27.
““Note Class Interest Distributable Amount”Amount” means for any class [or tranche] of notes and any distribution date, theproduct of (1) the outstanding principal balance of that class [or tranche] as of the close of the preceding distribution date, or, in the case of the first distribution date, the outstanding principal balance of that class or tranche[or
tranche] on the closing date, and (2) in the case of (a)(A) the [fixed rate]fixed rate notes other than the Class A-1
Notes, one-twelfth1/12 of the interest rate for that class or tranche,[or tranche], or, in the case of the first distribution date, the interest rate for that class [or tranche]multiplied bya fraction, the numerator of which is [ ] and the denominator of which is 360, and (b)(B) in the case of the floating rate notes and the Class A-1 Notes, [and floating rate notes], the product of the interest rate for that class or tranche[or tranche] for that distribution date and a fraction, the numerator of which is the number of days elapsed from and including the prior distribution date, (or,or, in the case of the first distribution date, from and including the closing date),date, to but excluding that distribution date and the denominator of which is 360.
“Noteholders’ Regular Principal Distributable Amount”means for the notes, with respect to any distribution date, [related to the amortization period], an amount equal to the lesser of:of:
(1)(A) the aggregate outstanding principal balance of the notes as of the close of the immediately preceding distribution date [duringor in the amortization period] reduced bycase of the first distribution date, the outstanding principal balance of the notes on the closing date; and
(B) the excess, if any, of:
(1) the outstanding principal balance of the notes on that distribution date (after giving effect to any Aggregate Noteholders’ Priority Principal Distributable Amount if any, with respect to such distribution date, and
for that date),over(2) the excess, if any, of:
(a) the Principal Distributable Amount over
(b)result of the Aggregate Noteholders’ Priority Principal Distributable Amount, if any, with respect to such distribution date.ABS Value as of the close of business on the last day of the related Monthly Period,minusthe Aggregate Overcollateralization Amount.
[For any distribution date related to the revolving period, the Noteholders’ Regular Principal Distributable Amount is zero.]
Notwithstanding the foregoing, afteron the Final Scheduled Distribution Date for the Class D Notes, the Noteholders’ Regular Principal Distributable Amount willshall equal the greater of (1) the amount specified above and (2) the excess of (x) the outstanding principal balance of thethat class of notes as of the preceding distribution date,over(y) the Aggregate Noteholders’ Priority Principal Distributable Amount with respect to the current distribution date.
““obligors”offered notes” is defined on page S-[3].S-2.
“offered notes”OID”is defined on page S-1.S-68.
[“[“OID”One]-Month LIBOR” is defined on page S-[41].S-49.]
““[One]-Month LIBOR”Original FICO Score” is defined on page S-[29].S-27.
“Overcollateralization Target Amount”means[, with respect to any distribution date,] [the product of] % [multiplied by] the initial aggregate receivables principal balance.
[“Parity Reinvestment Amount”Outstanding Advance”means as of any distribution date (the “current distribution date”) during the revolving period, the excess, if any, of the aggregate principal balance of the notes as of the preceding distribution date or the closing date over the Aggregate Receivables Principal Balance as of the last day of thea Monthly Period and with respect to a lease asset, thesumof all Monthly Payment Advances and Residual Advances made on or prior to that date,minusall payments made or collections received on or prior to that date that are specified in the servicing agreement as reducing Outstanding Advances with respect to that lease asset.
“Overdue Payment” means, with respect to each distribution date and a lease asset, all payments, other than supplemental servicing fees, Excluded Amounts and Sales and Use Tax Amounts, received by the servicer from or for the account of the related lessee during the related Monthly Period, to the current distribution date.]extent of the portion of any Outstanding Advances made with respect to that lease asset.
[“[primary ]swap”Payment Ahead Servicing Account” means the account established and maintained by the servicer, for the benefit of the lessees, in the name of the ACOLT indenture trustee, into which the servicer or the ACOLT indenture trustee will deposit Excess Payments to the extent required by the servicing agreement. The Payment Ahead Servicing Account will not be property of ACOLT.
“Payments Ahead” means, with respect to each distribution date and a lease, the aggregate of all Excess Payments on that lease received during or prior to the related Monthly Period minus the aggregate of all Applied Payments Ahead on that lease that were applied on any prior distribution date.
“pool review”is defined on page S-S-30.
[35].“primary swap” is defined on page S-63.]
“Principal Distributable Amount”process review” is defined on page S-31.
“PTCE” is defined on page S-67.
“Pull Ahead Agent” is defined on page S-36.
“pull ahead funding agreement” means the pull ahead funding agreement, dated as of the closing date, between ACOLT, the Pull Ahead Agent and the ACOLT indenture trustee.
“Pull Ahead Lease Asset” means a lease asset for which the related lessee has elected to terminate the related lease prior to its scheduled lease end date by delivering the related leased vehicle to a dealer pursuant to the terms of an applicable Pull Ahead Program and that lease.
“Pull Ahead Payment”means, with respect to any Pull Ahead Lease Asset and any distribution date, [during the amortization period], theexcesssum of (1) all remaining Monthly Lease Payments due in accordance with the aggregate principal balanceterms of the Class A Notes, Class B Notes, Class C Notesrelated lease, (2) all due and Class D Notes as of the precedingunpaid Monthly Lease Payments, and (3) any Pull Ahead Payment that was due but not paid in full on any prior distribution date (after giving effect to any principal payments made on the notes on such distribution date)over(2) the result of the aggregate receivables principal balance as of the close of business on the last day of the immediately preceding monthly periodminusthe Overcollateralization Target Amount. [On the first distribution date related to the amortization period, the Principal Distributable Amount will also include the Accumulation Amount as of the close of business on the preceding distribution date.]
“receivables”is defined on page S-[3].
“Receivable Principal Balance”Pull Ahead Program”means (A) with respectany program instituted by the Pull Ahead Agent or a vehicle manufacturer pursuant to which the lessee is permitted to terminate a subvented receivable, an amount equallease prior to its scheduled lease end date without payment by the present value aslessee of all or a portion of the close of business onremaining Monthly Lease Payments due in accordance with the applicable cutoff date of all remaining payments due on the subvented receivable which have not been applied prior to the applicable cutoff date, discounted at the Discount Rate from the last dayterms of the calendar month in which each scheduled payment is to become due to that distribution date, and (B) with respect to a non-subvented receivable, an amount equal to the outstanding principal balance of the non-subvented receivable on the applicable cutoff date.related lease.
[“Reference Bank Rate”Rate” means for any distribution date, a rate determined on the basis of the rates at which deposits in U.S. dollars are offered by reference banks as of 11:00 a.m., London time, on the daydate that is two LIBOR Business Days prior to the immediately preceding distribution date (or, in the case of the initial distribution date, the day that is two LIBOR Business Days prior to the [initial] closing date) to prime banks in the London interbank market for a period of one month, in amounts approximately equal to the then outstanding principal amount of the applicable class or tranche[or tranche] of floating rate notes. The reference banks will be four major banks that are engaged in transactions in the London interbank market, selected by the AART indenture trustee after consultation with the depositor. The AART indenture trustee will request the principal London office of each of the reference banks to provide a quotation of its rate. If at least two quotations are provided, the rate will be the arithmetic mean of the quotations, rounded upwards to the nearest one-sixteenth of one percent. If on that date fewer than two quotations are provided as requested, the rate will be the arithmetic mean, rounded upwards to the nearest one-sixteenth of one percent, of the rates quoted by one or more major banks in New York City, selected by the AART indenture trustee after consultation with the depositor, as of 11:00 a.m., New York City time, on that date to leading European banks for U.S. dollar deposits for a period of one month in amounts approximately equal to the principal amount of the then outstanding floating rate notes. If no quotation can be obtained, then [One]-Month LIBOR will be the rate from the prior distribution date.]
“remaining payments”Reserve Account Available Amount” means as of any date of determination, the cash and other eligible investments on deposit in the reserve account on that date of determination.
“Reserve Account Required Amount”is defined on page S-[3].S-62.
[“revolving period”Residual Advance” means on the related distribution date, with respect to any Monthly Period and any lease (1) which terminated by reason of having reached its scheduled lease end date 120 days or more prior to the last day
of that Monthly Period, and (2) for which the related leased vehicle has not been sold during or prior to that Monthly Period, an amount advanced by the servicer equal to the lesser of (x) the Lease Residual for the related leased vehicle, reduced, in the case of any Extended Lease, by the aggregate amount of any Extended Lease Payments with respect to that lease asset received by the servicer since the scheduled lease end date of that lease asset and (y) the amount the servicer, in its sole discretion, has estimated will be recoverable from the sale or other disposition of the leased vehicle related to that lease.
“reviewed lease assets”is defined on page S-S-31.
[4]. “revolving period” is defined on page S-4.]
“sale and contribution agreement” means the sale and contribution agreement, dated as of the closing date, between ACOLT and Ally Bank, as the same may be amended, supplemented or otherwise modified from time to time.
“Sale Proceeds” means, with respect to any lease asset and the distribution date following the Monthly Period in which the related vehicle was sold or otherwise disposed of by the servicer, an amount equal to the sum of the following:
(1) all proceeds from the sale of the related leased vehicle following the termination of the lease, net of amounts withheld by auctions as fees and reimbursable expenses, including any amounts realized from sales to dealers, during the related Monthly Period,plus
(2) if the lease terminated prior to its scheduled lease end date (other than by reason of being a Pull Ahead lease Asset), all amounts paid by the lessee in connection with the early termination under the lease,plus
(3) without duplication of any amounts described inclause (1) or(2), any other amounts (other than Excluded Amounts, supplemental servicing fees, Excess Payments and any Extended Lease Payments on that lease asset) received by the servicer during the related Monthly Period with respect to the lease after its scheduled lease end date, including all amounts collected by the servicer in respect of excess wear and excess mileage charges for the related leased vehicle,minus
(4) the sum of (a) any liquidation expenses with respect to that lease asset, (b) any amounts that are required to be paid or refunded to the lessee or any other person or entity under applicable law and (c) any Sales and Use Tax Amounts payable under the lease.
“Sales and Use Tax Amount” means the portion of each payment under a lease asset that is allocable to fees and sales, use or other taxes or similar payments due under the lease.
“Second Priority Principal Distributable Amount”Amount” means with respect to any distribution date, [related to the amortization period], an amount, not less than zero, equal to the difference between (1)(i) the excess, if any, of (a) the aggregate outstanding principal balance of the Class A Notes and the Class B Notes as of the preceding distribution date (after giving effect to any principal payments made on the Class A Notes and the Class B Notes on suchthat date) (or with respect to the first distribution date, on the closing date),over (b) the Aggregate ABS Value of the lease assets at the close of business of the related Monthly Period, and (ii) the First Priority Principal Distributable Amount, if any, with respect to that distribution date.
“Secured Note Interest Distributable Amount” means, with respect to each secured note and any distribution date, the sum of:
(a) the Secured Note Monthly Accrued Interest for that secured note on that distribution date;
(b) any Secured Note Interest Distributable Amount due but not paid with respect to that secured note on the preceding distribution date) overdate; and
(c) interest on any unpaid Secured Note Interest Distributable Amount specified in clause (b) determined by multiplying
(1) the Secured Note Rate, by
(2) the amount of the unpaid Secured Note Interest Distributable Amount, and by
(3) 1/12.
“Secured Note Monthly Accrued Interest” means, with respect to any distribution date and each secured note, the product of (1) the Secured Note Principal Balance of the secured note at the close of business on the immediately preceding distribution date (after giving effect to the distribution of the Secured Note Principal Distributable Amount on that date in accordance with the servicing agreement or, with respect to the first distribution date, the initial Secured Note Principal Balance of that secured note), (2) 1/12 (or, with respect to the first distribution date, [ ] divided by 360), and (3) the Secured Note Rate.
“Secured Note Percentage” means [ ]%.
“Secured Note Principal Balance” means, with respect to each secured note on any date of determination, an amount equal to (a) 50% of the Secured Note Percentage of the Aggregate Initial ABS Value reduced by (b) all payments prior to that date of determination in respect of principal made to the holder of that secured note.
“Secured Note Principal Distributable Amount” means for any distribution date, the lesser of:
(a) the aggregate receivablesSecured Note Principal Balance at the close of business on the immediately preceding distribution date (after giving effect to any principal balancepayments made on the secured notes on that proceeding distribution date) (or with respect to the first distribution date, on the closing date); and
(b) an amount equal to the excess, if any, of (i) the aggregate Secured Note Principal Balance as of the close of business on the immediately preceding distribution date (after giving effect to any principal payments made on the secured notes on that proceeding distribution date) (or with respect to the first distribution date, on the closing date),over(ii) the result of the Aggregate ABS Value as of the close of business on the last day of the immediately preceding monthly period, and (2)related Monthly Period minus the First PriorityACOLT Overcollateralization Amount for that distribution date.
Notwithstanding the foregoing, on the final scheduled distribution date for the secured notes, the Secured Note Principal Distributable Amount if any, with respectwill also include the amount that is necessary, after giving effect to suchother amounts withdrawn on the distribution date.
[“Senior Swap Termination Payments”means any swap terminationdate and allocable to payments payable byof principal, to reduce the issuing entity as a resultoutstanding principal balance of the termination on an interest rate swap relatingsecured notes to the Class A Notes due to (1) a tax event or illegality under that interest rate swap or (2) any other event of default or termination event under that interest rate swap, unless, in the case of this clause (2), the applicable swap counterparty is the defaulting party or the sole affected party.]zero.
“Specified Reserve Account Balance”Secured Note Rate”is defined on page S-[34].S-30.
[“secured notes” is defined on page S-1.
“Securities Act” has the meaning specified in the accompanying prospectus.
“servicer” is defined on page S-2.
“servicing agreement” means the servicing agreement, dated as of the closing date, between Ally Financial, as the servicer and custodian, ACOLT and the ACOLT indenture trustee, as the same may be amended, supplemented or otherwise modified from time to time.
“Standard & Poor’s” means Standard & Poor’s Ratings Services.]
[“Subordinate Swap Termination Payments”Stated Residual Value”mean any swap termination payments other than Senior Swap Termination Payments payable by means, with respect to a lease asset, the issuing entity as a resultresidual value of the early terminationrelated leased vehicle as set forth in the related lease and established at the time of the interest rate swap relating to the Class A Notes.]lease origination.
“Statutory Trust Statute” is the Delaware Statutory Trust Act, 12 Del. C. §§ 3801, et seq.
[“subsequent cutoff date”is defined on page S-[3].S-4.]
[“subsequent hypothetical pool of receivables”lease assets”is defined on page S-[28].S-39.]
[“subvented receivables”subsequent lease assets”is defined on page S-S-5.]
[3].“subsequent secured notes”is defined on page S-5.]
“supplemental servicing fee” means, with respect to a distribution date, all investment earnings on the ACOLT collection account, the note distribution account, the reserve account, the AART collection account and the Payment Ahead Servicing Account during the Monthly Period related to that distribution date and any late fees, extension fees, check charges, disposition fees, purchase option fees, prepayment charges, early termination fees and other administrative fees and expenses or similar charges with respect to the lease assets, collected (from whatever source) on the lease assets serviced by the servicer during the related Monthly Period.
[“swap counterparty”is defined on page S-[5].S-8.]
[“Target Reinvestment Amount”titling agent”means, as of current distribution date during the revolving period, the excess, if any, of the aggregate principal balance of the notes as of the preceding distribution date or the closing date over the remainder of (1) the Aggregate Receivables Principal Balance as of the last day of the Monthly Period related to the current distribution date minus (2) the Overcollateralization Target Amount.] is defined on page S-2.
“Third Priority Principal Distributable Amount”means with respect to any distribution date, [related to the amortization period], an amount, not less than zero, equal to the difference between (1)(i) the excess, if any, of (a) the aggregate outstanding principal balance of the Class A Notes, the Class B Notes and the Class C Notes as of the preceding distribution date (after giving effect to any principal payments made on the Class A Notes, the Class B Notes and the Class C Notes on such precedingthat date) (or with respect to the first distribution date, on the closing date),over (b) the aggregate receivables principal balanceAggregate ABS Value of the lease assets at the close of business of the related Monthly Period, and (ii) the Second Priority Principal Distributable Amount, if any, with respect to that distribution date.
“Total Available Amount”is defined on page S-59.
“Transfer Agreements and Servicing Agreements” has the meaning specified in the accompanying prospectus.
“trust” is defined on page S-2.
“trust administrator” is defined on page S-2.
“Unapplied Extended Lease Payment Amount” means, with respect to each distribution date, the amount of any Extended Lease Payments deposited into the ACOLT collection account by the servicer during the related Monthly Period in respect of Unapplied Extended Leases.
“Unapplied Extended Leases” means, with respect to each distribution date, any Extended Lease that has not become a Liquidating Lease Asset during or prior to the related Monthly Period.
“VAULT” means Vehicle Asset Universal Leasing Trust, a Delaware statutory trust created under the Statutory Trust Statute under the VAULT Trust Agreement.
“VAULT trust agreement” means the Second Amended and Restated Trust and Servicing Agreement, dated as of March 25, 2004, between Ally Financial, as the servicer and initial beneficiary, and the VAULT Trustee, as the same may be amended, supplemented or otherwise modified from time to time.
“VAULT Trustee” means BNY Mellon Trust of Delaware (formerly known as BNYM (Delaware)) and The Bank of New York (Delaware), as successor to Chase Bank USA, National Association, as trustee of VAULT under the VAULT trust agreement.
“Warranty Lease Asset” means a lease asset that Ally Bank has become obligated to repurchase pursuant to the sale and contribution agreement.
“Warranty Payment” means, with respect to (a) each Warranty Lease Asset, an amount equal to the sum of (1) the ABS Value of that Warranty Lease Asset determined as of the close of business on the last day of the immediately preceding monthly period,Monthly Period prior to the Monthly Period as of which Ally Bank is required (or, if earlier, elects) to repurchase that lease asset, and (2) the sum of (a) the First Priority Principal Distributable Amount, if any,all Outstanding Advances made with respect to such distributionpast due and unpaid Monthly Lease Payments due under that lease asset that remain outstanding on the date of repurchase and (b) each Warranty Secured Note, an amount equal to the Second PrioritySecured Note Principal Distributable Amount, if any, with respect to such distribution date.
CERTIFICATION AS TO TALF ELIGIBILITY
FOR NON-MORTGAGE-BACKED ABS
The issuer andBalance, plus accrued interest calculated at the sponsor (collectively, “we”) hereby certify that:
1. We have reviewed the terms and conditionsSecured Note Rate, determined as of the Term Asset-Backed Securities Loan Facility (“TALF”) provided byclose of business on the Federal Reserve Bank of New York (“FRBNY”). Terms used below that are defined or explained in such terms and conditions, or in FAQs or other interpretative material issued by the FRBNY, shall have the meanings provided in such terms and conditions, FAQs or other interpretative material (such terms and conditions, FAQs or other interpretative material, the “TALF Rules”).
2. After due inquiry by our appropriate officers, agents and representatives, we have determined that the securities offered hereby designated as the [Class A-1 Notes (CUSIP #[ ]), the] Class A-2 Notes (CUSIP #[ ]), the Class A-3 Notes (CUSIP #[ ]) and the Class A-4 Notes (CUSIP #[ ]), constitute eligible collateral under TALF. In particular:
The securities are U.S. dollar-denominated cash (that is, not synthetic) asset-backed securities (“ABS”) that have (or have been provided on a preliminary basis, expected to be confirmed no later than the closing date) a credit rating in the highest long-term or short-term investment-grade rating category from two or more eligible nationally recognized statistical rating organizations (“NRSROs”) and do not have (including on a preliminary basis) a credit rating below the highest investment-grade rating category from an eligible NRSRO. Such ratings were obtained without the benefit of any third-party guarantee and are not on review or watch for downgrade.
The securities are cleared through The Depository Trust Company.
The securities do not bear interest payments that step up or step down to predetermined levels on specific dates.
The securities are not subject to an optional redemption other than a customary clean-up call (as defined in the TALF Rules).
The underlying credit exposures are auto loans (as defined in the TALF Rules) and do not include exposures that are themselves cash ABS or synthetic ABS. At least 95%last day of the dollar amount of the credit exposures underlying the securities are exposures that are both (a) originated by U.S.-organized entities or institutions or U.S. branches or agencies of foreign banks and (b) made to U.S.-domiciled obligors. The average life of the securities is less than or equal to five years.
At least 85% of the dollar amount of the credit exposures underlying the securities were originated on or after October 1, 2007.
3. On or before the date three weeksMonthly Period prior to the subscription date forMonthly Period as of which the ABS, we provideddepositor is required to (or, if earlier, elects to) repurchase such Warranty Secured Note.
“Warranty Secured Note” means a Secured Note that the depositor has become obligated to repurchase (or to use reasonable efforts to enforce the obligation of the servicer to purchase) pursuant to the FRBNY all data on the ABSTransfer Agreements and its underlying exposures that the sponsor or the issuer provided to any NRSRO, whether or not such NRSRO rated the ABS and whether or not such NRSRO is an eligible NRSRO. After such date, we provided to the FRBNY all such data thereafter provided to a NRSRO (whether or not it rated the ABS or is an eligible NRSRO) at the same time or promptly after we provided it to the NRSRO. We have provided to each NRSRO (whether or not it rated the ABS or is an eligible NRSRO) to which the issuer or the sponsor has provided data on the ABS or its underlying exposures a written waiver or consent permitting the NRSRO to share its view of the credit quality of the ABS and its underlying exposures with the FRBNY, and we have delivered to the FRBNY a copy of each such waiver or consent.
4. Pursuant to the TALF Rules, the independent accounting firm that is performing certain procedures for the benefit of the FRBNY in connection with this offering is required, in certain circumstances where fraud or illegal acts are suspected to have occurred, to make reports to the TALF Compliance fraud hotline. We hereby provide our consent to such accounting firm to make such reports and waive any client confidentiality provisions we would otherwise be entitled to under applicable law, rules of accountant professional responsibility or contract.
5. We understand that purchasers of the securities offered hereby that are affiliates of either the originators of assets that are securitized in this offering or the issuer or sponsor of this offering will not be able to use these securities as TALF collateral.
6. We hereby undertake that, until the maturity of the securities offered hereby, we will issue a press release and notify the FRBNY and all registered holders of the securities if we determine that the statements set forth in Item 2 above were not correct when made or have ceased to be correct. We will issue such press release and make such notification no later than 9:00 a.m. on the fourth business day after we make such determination; provided that we undertake to provide same business-day notice of any change in credit rating issued by any eligible NRSRO (including any change in the final rating compared to a preliminary rating) that occurs after pricing of this offering and on or prior to the closing date.
7. We hereby undertake that, until the maturity of the securities offered hereby, we will provide, as promptly as practicable, upon the request of the FRBNY, copies of (i) the Governing Documents for the securities and (ii) the servicer and/or trustee reports or any other similar reports provided or made available to investors in connection with the securities issued. Governing Documents include the instruments and agreements (including any indenture, pooling and servicing agreement, trust agreement, servicing agreement, other similar agreement and other operative document), however denominated, pursuant to which the securities were issued, the assets backing such securities are serviced and collections on such assets are applied, remitted and distributed.
8. We hereby represent and warrant to the FRBNY and TALF LLC that (i) this prospectus supplement and (ii) the prospectus, when taken as whole together with all information provided by us or on our behalf to any nationally recognized statistical rating organization in connection with this offering, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
9. We acknowledge that the FRBNY and TALF LLC (in accepting the securities offered hereby as collateral), will rely upon this certification and will suffer damages if such certification is incorrect. The sponsor (and, if required by the terms of the form referred to below, the sponsor’s direct or indirect ultimate parent) has executed and delivered to the FRBNY an undertaking, in the form prescribed by the FRBNY, under which the sponsor (and, if applicable, its direct or indirect ultimate parent) has agreed to indemnify FRBNY and TALF LLC and their respective affiliates against losses incurred or suffered by them arising out of any misrepresentation or breach of warranty made or to be performed by us in this certification.
10. We hereby jointly and severally agree that, should the securities be pledged to the FRBNY under the Master Loan and Security Agreement established under TALF or purchased by TALF LLC and at any time fail to constitute eligible collateral under TALF (provided that, solely for purposes of the foregoing, the only failure to satisfy the ratings eligibility criteria that shall be considered shall be a failure that arises as a result of the final rating on the securities, upon issuance, being lower than the required ratings for TALF eligibility, not any subsequent downgrades) under the TALF Rules as in effect at the time the securities are issued (a “Warranty Breach”), we shall permit (i) the United States Department of the Treasury (“Treasury”) and its agents, consultants, contractors and advisors, (ii) the Special Inspector General of the Troubled Asset Relief Program, and (iii) the Comptroller General of the United States access to personnel and any books, papers, records or other data in our possession, custody or control to the extent relevant to ascertaining the cause and nature of the Warranty Breach, during normal business hours and upon reasonable notice to the issuer or the sponsor, as theServicing Agreements.
case may be; provided that prior to disclosing any information pursuant to clause (i), (ii) or (iii), the Treasury, the Special Inspector General of the Troubled Asset Relief Program and the Comptroller General of the United States shall have agreed, with respect to documents obtained under this agreement in furtherance of their respective functions, to follow applicable law and regulation (and the applicable customary policies and procedures, including those for inspectors general) regarding the dissemination of confidential materials, including redacting confidential information from the public version of its reports, as appropriate, and soliciting input from the sponsor or the issuer, as applicable, as to information that should be afforded confidentiality. In making this agreement, we understand that Treasury has represented that it has been informed by the Special Inspector General of the Troubled Asset Relief Program and the Comptroller General of the United States that they, before making any request for access or information pursuant to their oversight and audit functions, will establish a protocol to avoid, to the extent reasonably possible, duplicative requests. Nothing in this paragraph shall be construed to limit the authority that the Special Inspector General of the Troubled Asset Relief Program or the Comptroller General of the United States have under law.
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[Certification to be updated to reflect changes to such form of certification released by the FRBNY]]
APPENDIX [A][B]
Static Pool DataA: STATIC POOL DATA
The following information represents static pool data from all loans originated or acquired[(1)] by vintage years for purchases by the sponsor by vintage origination year beginning with 2005,of automotive leases similar to the lease assets during the preceding five years, except for “Prepayment Speeds,” which represents the servicer’s public and private securitizations over the previous five years.years[, and (2) from sponsor’s public securitization[s] in [YEAR[S]]]. The following information is incorporated by reference into the prospectus supplement, except to the extent of information with respect to originations prior to January 2006, which is not a part of the prospectus supplement or the prospectus. In cases ofInformation omitted information from the following tables such omitted information is either unavailable or would only be available with unreasonable effort or expense.
In this Appendix B, actualActual prepayments on a receivablelease are any principalmonthly lease payments related to that receivablelease in excess of the scheduled principalmonthly lease payment for that receivablelease for the applicable period. These include voluntary prepayments, voluntary early terminations, payments from third parties, repurchases, repossession proceeds, funds not recovered due to chargeoffs,charge-offs and servicer advances. However, the “Prepayment Speeds” shown in the tablesfollowing table are the percentage of the actual principal balanceaggregate ABS value of the pool represented by the difference between the actual month-end principal balanceaggregate ABS value of the pool and the scheduled month-end principal balanceaggregate ABS value of the pool. The amount by which the actual principal balanceaggregate ABS value is lower than the scheduled principal balanceaggregate ABS value is the “prepayment amount.” The “prepayment amount” is divided by the scheduled principal balanceaggregate ABS value at month-end and then by the number of months elapsed since the cutoffcut-off date of the respective deal to determine the average prepayment rate. The prepayment rate for the most recent month is determined from the cumulative average prepayment rates for the current and immediately prior month.months. ABS prepayment speeds, on the other hand, are measured as a percentage of the cutoffcut-off date pool balance.
Any reference to a “weighted average” representsaggregate ABS value. The “Cumulative Net Losses (Gains) on Early Term Defaults” and “Cumulative Net Losses (Gains) on Returned Vehicles Sold by Ally Bank” shown in the weighted average at the time of origination of a receivable and is based on the original amount financed, except for the “Weighted Average Remaining Maturity,” which represents the remaining term of the receivable as of [June 30], 2009. The “Net Loss Statistics”following tables represent actual charge-offs, net of recoveries.recoveries, on the vintage years of lease assets. With respect to “Cumulative Net Loss Statistics,Losses (Gains) on Early Term Defaults” and “Cumulative Net Losses (Gains) on Returned Vehicles Sold by Ally Bank,” the amountpercentage presented represents the “Cumulative Net Losses (Gains) on Early Term Defaults” and “Cumulative Net Losses (Gains) on Returned Vehicles Sold by Ally Bank” for the reporting period as well as a percentage of the initial aggregate receivablesABS values.
As used in the following tables, the “Original Term (Months)” is the weighted average of such terms weighted by adjusted principal balance. The “Distributionbalance as of the Receivables Pool by State” representsdate of origination of each lease asset. The calculations with respect to “Initial ABS Value,” “Lease Residual,” “Original Term (In Months),” “Remaining Term (In Months),” “Seasoning (In Months),” “Lease Residual as a % of Initial ABS Value” and “Lease Residual as a % of Adjusted MSRP” exclude lease assets with a Lease Residual of $0. Percentages may not add to 100.00% due to rounding.
[The initial receivables pool statistics for the current state in which the obligor’s billing address is locatedsponsor’s [YEAR[S]] publicly offered securitized pool[s] are presented as of [August 17], 2009.the applicable cut-off date[s].]
We have not included delinquency statistics with respect to each vintage origination year because the information is not available without unreasonable effort or expense. For the sponsor’s U.S. average daily delinquency data as of the years ended 2005, 2006, 200720__, 20__, 20__, 20__ and 2008,20__[, and the [nine][ ] months ended [September 30], 2008[_____ __, 20__ and 2009,20__], see “The Sponsor’s Portfolio Data—Delinquencies, Repossessions, Bankruptcies and Net LossesVehicle Lease Delinquency Information” in the prospectus supplement.[We have included delinquency statistics for the [YEAR[S]] publicly offered securitized pool[s] of the sponsor. The delinquency statistics for these pools represent accounts greater than 60 days delinquent at the reporting date, which is the end of the calendar month.]
We have included the servicer’s prepayment speeds as the sponsor’s prepayment speeds are not available without unreasonable effort or expense. [We have included prepayment speeds for the [YEAR[S]] publicly offered securitized pool[s] of the sponsor.]
Ally Bank [YEAR][YEAR] VINTAGE ACQUISITION DATA
| Cumulative Net Losses on Early Term Defaults | Cumulative Net Losses (Gains) on Returned Vehicles Sold by Ally Bank | |||||||
Quarter | $ | % | $ | % | ||||
2011 Q1 | ||||||||
2011 Q2 | ||||||||
2011 Q3 | ||||||||
2011 Q4 | ||||||||
[2012 Q1] | ||||||||
[YEAR] Vintage OriginationsAcquisitions: Initial Characteristics of Lease Assets
Aggregate Initial ABS Value | $ | |||
Percentage of New Vehicles | % | |||
[Weighted] Average Original FICO Score | ||||
FICO Score Range |
| Average | Minimum | Maximum | ||||||||||
Initial ABS Value | $ | $ | $ | |||||||||
Lease Residual | $ | $ | $ | |||||||||
Original Term (In Months) | ||||||||||||
Lease Residual as a % of Initial ABS Value | % | |||||||||||
Lease Residual as a % of Adjusted MSRP | % | |||||||||||
[YEAR] Vintage Acquisitions: Initial Distribution of Lease Assets by Original Lease Term
Original Term | Number of Lease Assets | Percentage of Total Number of Lease Assets | Initial ABS Value | Percentage of Initial ABS Value | Aggregate Lease Residual as a % of Aggregate Adjusted MSRP | |||||||||||||
0 to 24 | % | $ | % | % | ||||||||||||||
25 to 36 | % | $ | % | % | ||||||||||||||
37 to 39 | % | $ | % | % | ||||||||||||||
40 to 48 | % | $ | % | % | ||||||||||||||
Total | % | $ | % | |||||||||||||||
[YEAR] Vintage Acquisitions: Initial Distribution of Lease Assets by Remaining Lease Term
Scheduled Lease End Date | Number of Lease Assets | Percentage of Total Number of Lease Assets | Initial ABS Value | Percentage of Initial ABS Value | Aggregate Lease Residual as a % of Aggregate Adjusted MSRP | |||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
Total | % | $ | % | |||||||||||||||
[YEAR] Vintage Acquisitions: Initial Distribution of Lease Assets by State
Customer State | Number of Lease Assets | Percentage of Total Number of Lease Assets | Initial ABS Value | Percentage of Initial ABS Value | ||||||||||
[State] | % | $ | % | |||||||||||
[State] | % | $ | % | |||||||||||
[State] | % | $ | % | |||||||||||
[State] | % | $ | % | |||||||||||
[State] | % | $ | % | |||||||||||
Other | % | $ | % | |||||||||||
Total | % | $ | % | |||||||||||
[YEAR] Vintage Acquisitions: Initial Distribution of Lease Assets by Vehicle Make
Vehicle Make | Number of Lease Assets | Percentage of Total Number of Lease Assets | Initial ABS Value | Percentage of Initial ABS Value | ||||||||||
[Make] | % | $ | % | |||||||||||
[Make] | % | $ | % | |||||||||||
[Make] | % | $ | % | |||||||||||
[Make] | % | $ | % | |||||||||||
[Make] | % | $ | % | |||||||||||
[Make] | % | $ | % | |||||||||||
[Make] | % | $ | % | |||||||||||
[Make] | % | $ | % | |||||||||||
Total | % | $ | % | |||||||||||
[YEAR] Vintage Acquisitions: Initial Distribution of Lease Assets by Model
Model | Number of Lease Assets | Percentage of Total Number of Lease Assets | Initial ABS Value | Percentage of Initial ABS Value | ||||||||||
[Model] | % | $ | % | |||||||||||
[Model] | % | $ | % | |||||||||||
[Model] | % | $ | % | |||||||||||
[Model] | % | $ | % | |||||||||||
[Model] | % | $ | % | |||||||||||
[Model] | % | $ | % | |||||||||||
[Model] | % | $ | % | |||||||||||
[Model] | % | $ | % | |||||||||||
Other | % | $ | % | |||||||||||
Total | % | $ | % | |||||||||||
[YEAR] Vintage Acquisitions: Pull Ahead Data
Terminating Quarter | Number of Lease Assets | Average Waived Payments | Total Waived Payments | |||||||
2007 Q1 | $ | $ | ||||||||
2007 Q2 | $ | $ | ||||||||
2007 Q3 | $ | $ | ||||||||
2007 Q4 | $ | $ | ||||||||
2008 Q1 | $ | $ | ||||||||
2008 Q2 | $ | $ | ||||||||
2008 Q3 | $ | $ | ||||||||
2008 Q4 | $ | $ | ||||||||
2009 Q1 | $ | $ | ||||||||
2009 Q2 | $ | $ | ||||||||
2009 Q3 | $ | $ | ||||||||
2009 Q4 | $ | $ | ||||||||
2010 Q1 | $ | $ | ||||||||
2010 Q2 | $ | $ | ||||||||
2010 Q3 | $ | $ | ||||||||
2010 Q4 | $ | $ | ||||||||
2011 Q1 | $ | $ | ||||||||
2011 Q2 | $ | $ | ||||||||
2011 Q3 | $ | $ | ||||||||
2011 Q4 | $ | $ | ||||||||
[2012 Q1] | $ | $ | ||||||||
Total | $ | $ | ||||||||
[YEAR]-SN[_] PUBLIC OFFERING
Initial Aggregate Receivables Principal Balance of [YEAR]-SN[_] Secured Notes of $[ ].
Subvented: $
Non-subvented: $
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[YEAR] VINTAGE ORIGINATIONS: RECEIVABLES POOL CHARACTERISTICS
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[YEAR] VINTAGE ORIGINATIONS: DISTRIBUTION OF THE RECEIVABLES POOL BY
ANNUAL PERCENTAGE RATE
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[YEAR] VINTAGE ORIGINATIONS: DISTRIBUTION OF THE RECEIVABLES POOL BY STATE
| SN[_] Lease Assets of $[_________] | |||||||||||||||||||
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| Monthly Net Losses (Gains) on Early | Monthly Net Losses (Gains) on Returned Vehicles Sold | ||||||||||||||||||
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CAPITAL AUTO RECEIVABLES ASSET TRUSTSby Ally Bank
Prepayment Speeds
Month | Speeds | of Contracts | of Contracts | of Contracts | Number of Contracts | $ | % | $ | % | |||||||||||||||
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[YEAR]-SN[_]: Initial Characteristics of Lease Assets
| Average | Minimum | Maximum | ||||
ABS Value | ||||||
Lease Residual | ||||||
Seasoning (In Months) | ||||||
Remaining Term (In Months) | ||||||
Original Term (In Months) | ||||||
Original FICO Score | ||||||
Lease Residual as a % of Initial ABS Value | ||||||
Lease Residual as a % of Adjusted MSRP | ||||||
Percentage of New Vehicles |
[YEAR]-SN[_]: Initial Distribution of Lease Assets by Original Lease Term
Original Term | Number of Lease Assets | Percentage of Total Number of Lease Assets | Initial ABS Value | Percentage of Initial ABS Value | Aggregate Lease Residual as a % of Aggregate Adjusted MSRP | |||||||||||||
0 to 24 | % | $ | % | % | ||||||||||||||
25 to 36 | % | $ | % | % | ||||||||||||||
37 to 39 | % | $ | % | % | ||||||||||||||
40 to 48 | % | $ | % | % | ||||||||||||||
Total | % | $ | % | |||||||||||||||
[YEAR]-SN[_]: Initial Distribution of Lease Assets by Remaining Lease Term
Scheduled Lease End Date | Number of Lease Assets | Percentage of Total Number of Lease Assets | Initial ABS Value | Percentage of Initial ABS Value | Aggregate Lease Residual as a % of Aggregate Adjusted MSRP | |||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
[____________] | % | $ | % | % | ||||||||||||||
Total | % | $ | % | |||||||||||||||
[YEAR]-SN[_]: Initial Distribution of Lease Assets by State
Customer State | Number of Lease Assets | Percentage of Total Number of Lease Assets | Aggregate Initial ABS Value | Percentage of Initial ABS Value | ||||||||||
[State] | % | $ | % | |||||||||||
[State] | % | $ | % | |||||||||||
[State] | % | $ | % | |||||||||||
[State] | % | $ | % | |||||||||||
[State] | % | $ | % | |||||||||||
[State] | % | $ | % | |||||||||||
Other | % | $ | % | |||||||||||
Total | % | $ | % | |||||||||||
[YEAR]-SN[_]: Initial Distribution of Lease Assets by Vehicle Make
Vehicle Make | Number of Lease Assets | Percentage of Total Number of Lease Assets | Initial ABS Value | Percentage of Initial ABS Value | ||||||||||
[Make] | % | $ | % | |||||||||||
[Make] | % | $ | % | |||||||||||
[Make] | % | $ | % | |||||||||||
[Make] | % | $ | % | |||||||||||
[Make] | % | $ | % | |||||||||||
[Make] | % | $ | % | |||||||||||
[Make] | % | $ | % | |||||||||||
[Make] | % | $ | % | |||||||||||
Total | % | $ | % | |||||||||||
[YEAR]-SN[_]: Initial Distribution of Lease Assets by Model
Model | Number of Lease Assets | Percentage of Total Number of Lease Assets | Initial ABS Value | Percentage of Initial ABS Value | ||||||||||
[Model] | % | $ | % | |||||||||||
[Model] | % | $ | % | |||||||||||
[Model] | % | $ | % | |||||||||||
[Model] | % | $ | % | |||||||||||
[Model] | % | $ | % | |||||||||||
[Model] | % | $ | % | |||||||||||
[Model] | % | $ | % | |||||||||||
[Model] | % | $ | % | |||||||||||
Other | % | $ | % | |||||||||||
Total | % | $ | % | |||||||||||
[YEAR]-SN[_]: Pull Ahead Payments
Month | Pull Ahead Payments | |
[______] | ||
[______] | ||
[______] | ||
[______] | ||
[______] | ||
[______] | ||
[______] | ||
[______] | ||
Total | ||
[YEAR]-SN[_]: Servicer Advances
Month | Residual Advances | Monthly Payment Advances | ||
[______] | ||||
[______] | ||||
[______] | ||||
[______] | ||||
[______] | ||||
[______] | ||||
[______] | ||||
[______] | ||||
Total | ||||
CAPITAL AUTO RECEIVABLES ASSET TRUSTSPrepayment Speeds
Month | �� | [YEAR]-SN[__] | [YEAR]-SN[__] | |
Jan-07 | ||||
Feb-07 | ||||
Mar-07 | ||||
Apr-07 | ||||
May-07 | ||||
Jun-07 | ||||
Jul-07 | ||||
Aug-07 | ||||
Sep-07 | ||||
Oct-07 | ||||
Nov-07 | ||||
Dec-07 | ||||
Jan-08 | ||||
Feb-08 | ||||
Mar-08 | ||||
Apr-08 | ||||
May-08 | ||||
Jun-08 | ||||
Jul-08 | ||||
Aug-08 | ||||
Sep-08 | ||||
Oct-08 | ||||
Nov-08 | ||||
Dec-08 | ||||
Jan-09 | ||||
Feb-09 | ||||
Mar-09 | ||||
Apr-09 | ||||
May-09 | ||||
Jun-09 | ||||
Jul-09 | ||||
Aug-09 | ||||
Sep-09 | ||||
Oct-09 | ||||
Nov-09 | ||||
Dec-09 | ||||
Jan-10 | ||||
Feb-10 | ||||
Mar-10 | ||||
Apr-10 | ||||
May-10 | ||||
Jun-10 | ||||
Jul-10 | ||||
Aug-10 | ||||
Sep-10 | ||||
Oct-10 | ||||
Nov-10 | ||||
Dec-10 | ||||
Jan-11 | ||||
Feb-11 | ||||
Mar-11 | ||||
Apr-11 | ||||
May-11 | ||||
Jun-11 | ||||
Jul-11 | ||||
Aug-11 | ||||
Sep-11 | ||||
Oct-11 | ||||
Nov-11 | ||||
Dec-11 | ||||
Prospectus
ALLY AUTO RECEIVABLES TRUSTS
Asset Backed NotesIssuing Entities
Asset Backed CertificatesNotes
ALLY AUTO ASSETS LLC
Depositor
ALLY BANK
Sponsor
GMACALLY FINANCIAL INC.
Servicer and Trust Administrator
You should consider carefully the risk factors beginning on page 2 in this prospectus.
The notes of any series represent obligations of the issuing entity that issued those notes only. The certificates of any series represent the beneficial interest in the issuing entity that issued those notes only. The certificates and notes issued by any issuing entity do not represent obligations of or interests in, and are not guaranteed by, Ally Auto Assets LLC, Ally Bank, GMAC Inc. or any of their affiliates. Neither the notes nor the receivables are insured or guaranteed by any governmental entity.
This prospectus may be used to offer and sell any securities only if accompanied by the accompanying prospectus supplement.
You should consider carefully the risk factors set forth under “Risk Factors” in this prospectus, beginning on page 1. The notes of any series represent obligations of the issuing entity that issued those notes only. The notes and certificates issued by any issuing entity do not represent obligations of or interests in, and are not guaranteed by, Ally Auto Assets LLC, Ally Bank, Ally Financial Inc., Ally Central Originating Lease Trust, Ally Central Originating Lease LLC, or any of their affiliates. Neither the notes nor the secured notes are insured or guaranteed by any governmental entity. This prospectus may be used to offer and sell notes only if accompanied by the accompanying prospectus supplement. | The Issuing Entities— The depositor will form a new issuing entity (each one of them a “trust” or the “issuing entity”) to issue each series of notes. The primary assets of each issuing entity will be: • a series of non-recourse secured notes secured by new or used automobile and light duty truck leases and the related leased vehicles and all moneys due on the secured notes on and after the closing day; • the lease assets, including payments under leases and amounts received upon sale of leased vehicles; • proceeds from claims on any insurance policies relating to the leases and the leased vehicles; • any recourse against dealers on the leases; • rights of ACOLT under the VAULT trust agreement (solely with respect to the vehicles that are included in the related lease assets), the sale and contribution agreement, the servicing agreement and the other documents relating to the applicable series of ACOLT; • the related ACOLT reserve account and all proceeds thereof; • rights of the issuing entity under the administration agreement, the pooling agreement, the trust sale agreement, the ACOLT indenture and the other documents relating to the issuing entity; and • rights of the issuing entity under derivatives agreements, if the issuing entity enters into any derivatives agreements. The Notes— • will represent indebtedness of the issuing entity that issued those notes; • will be paid only from the assets of the issuing entity that issued those notes and other available funds, including amounts on deposit in any reserve account for that issuing entity; • will represent the right to payments in the amounts and at the times described in the accompanying prospectus supplement; • may benefit from one or more forms of credit enhancement; and • will be issued as part of a designated series, which will include one or more classes of notes. Neither the SEC nor any state securities commission has approved or disapproved these notes or determined that this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is June 5, 2012 |
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Servicing and Administration Compensation and Payment of Expenses | 50 | |||
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LEGAL ASPECTS OF THE | 64 | |||
Security Interest in the Secured Notes and the Leases and Leased Vehicles | 64 | |||
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You should consider the following risk factors in deciding whether to purchase the securities.
The issuing entity will pay principal on the notes monthly during the amortization period, and any remaining principal balance on each note will be due on its final scheduled distribution date. The issuing entity will pay principal on the notes with funds available from collections on the lease assets, which include lease payments and proceeds from the sale of related leased vehicles, and from the amount on deposit in the reserve account. | ||||
| The | ||||
| Ally Bank’s losses on lease assets will be a function of the amount of leases that default and the relationship between the lease residual and the net sale proceeds received for the leased vehicle upon its sale. For a description of how Ally Bank sets residual values, see “Description of Auto Lease Business of Ally Bank—Determination of Residual Value” in this prospectus. There can be no assurance as to how closely the lease residual of a leased vehicle at lease inception will approximate the market value or net sale proceeds received upon the sale of that leased vehicle. We expect that, in general, if the market value exceeds the residual value stated in the lease, the lessee or the originating dealer is likely to purchase the leased vehicle rather than return it. Conversely, if the market value is less than the residual value stated in the lease, the leased vehicle is generally more likely to be returned, resulting in a loss on the sale of that leased vehicle. As a result of such a loss, there may be insufficient funds to pay the notes in full. | ||||
| Lack of First Priority Liens on Delay Payments on the | If the security interests in the | |||
| (1) | a bankruptcy trustee of ACOLT, VAULT, the | |||
| (2) | a subsequent purchaser of the | |||
| (3) | a holder of a perfected security | |||
| (4) | a person who became a lien creditor with respect to the leases, leased vehicles or secured notes. | |||
| The issuing entity and the AART indenture trustee may not be able to collect on | ||||
The trust and the indenture trustee may not be able to collect on a defaulted receivable in the absence of a perfected security interest in a vehicle financed by the receivable. Even if the trust and the indenture trustee were to have a perfected security interest in the financed vehicles, events could jeopardize that interest, such as:
| the secured notes in the absence of a perfected security interest in the related leases and leased vehicles. Even if the issuing entity and the AART indenture trustee were to have a perfected security interest in the leases and leased vehicles, events could jeopardize the enforceability of that interest, such as: | ||||
| (1) | fraud or forgery by the vehicle | |||
| (2) | negligence or fraud by the | |||
| (3) | mistakes by | |||
| (4) | liens for repairs or unpaid | |||
See “Legal Aspects of the Receivables—Security Interest in Vehicles” in this prospectus.
Financing statements will be filed in favor of the trust, the depositor and the indenture trustee for each pool of receivables sold to a trust. The financing statements will perfect the security interests of the depositor, the trust and the indenture trustee in the pool of receivables. However, GMAC will serve as the custodian of the receivables and will not physically segregate or mark the receivables to indicate that they have been sold to the depositor, sold by the depositor to the trust or pledged by the trust to the indenture trustee. See “The Transfer and Servicing Agreements—Sale and Assignment of Receivables” in this prospectus.
If another party purchases or takes a security interest in the receivables
| (5) | the exercise of legal rights of governmental agencies under various criminal statutes; | |||
| (6) | the application of consumer protection laws; | |||
| (7) | rights and defenses of obligors made under the vehicle leases; and | |||
| (8) | bankruptcy of the obligor. | |||
| See“Legal Aspects of the Secured Notes and the Lease Assets—Security Interest in the Secured Notes and the Leases and Leased Vehicles”in this prospectus for other events that could jeopardize that interest. | ||||
| Ally Bank, the depositor and the AART indenture trustee will file financing statements with respect to the secured notes sold to the issuing entity. The financing statements will perfect the security interest of the depositor, the issuing entity and the AART indenture trustee in the secured notes. The AART indenture trustee will also perfect its security interest in the secured notes by having ACOLT deliver possession of the secured notes to the AART indenture trustee or a custodian thereof. See“Legal Aspects of the Secured Notes and the Lease Assets—Security Interest in the Secured Notes and the Leases and Leased Vehicles” in this prospectus. | ||||
| If any other party purchases or perfects a first priority security interest in the leases: | ||||
| (1) | for value, | |||
| (2) | in the ordinary course of business, and | |||
| (3) | without actual knowledge of Ally Bank’s, the depositor’s, the | |||
then that purchaser or secured party will acquire an interest in the receivables that is senior to the trust’s and the indenture trustee’s interest, and the collections on those receivables may not be available to make payments on your securities
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A prepayment, repurchase, purchase or liquidation of the receivables, including liquidation of defaulted receivables, could shorten the average life of the securities secured by those receivables. A variety of unpredictable economic, social and other factors influence prepayment rates.
You will bear all reinvestment risk resulting from a faster or slower rate of prepayment, repurchase or extension of the receivables held by your trust, unless otherwise provided in the prospectus supplement for that trust.
Limited Enforceability of the | Federal and state consumer protection laws regulate the creation and enforcement of consumer | |||
affect an assignee’s ability to enforce |
| You May Receive an Early Return of Your Investment or Incur a Shortfall in the Return of Your Investment Following an Event the AART Indenture or the ACOLT Indenture | If an event of default occurs under the AART indenture, the holders of a majority of the aggregate principal balance of the | |||
| ||||
| Ally Bank, the | ||||
| Ally Bank, the trust administrator, the servicer, ACOLT, the depositor and their respective affiliates | |||
that materially and adversely affects any | ||||
| If Ally Bank, the servicer or the trust administrator, as applicable, fails to repurchase or | ||||
| The Assets of Each Are the Only Source of Payment for the | No | |||
| look to the | ||||
| The Servicer Has Discretion Over the Servicing of the Manner in Which the Servicer Applies that Discretion May Impact the Amount and Timing of Funds Available to Pay Principal and Interest on the Notes | The servicer has discretion in servicing the | |||
| Temporary Commingling of Funds by the Servicer Prior to Their Deposit into the Collection Account or Delays in Payment on the Notes | The servicer receives collections on the | |||
| The Bankruptcy or Replacement of the Servicer May Reduce or Delay Payments on the Notes | If | |||
| The Ratings for the in Scope, May Be Unsolicited, May Not Continue and Do Not Consider the Suitability of the | We expect to hire rating agencies to rate the notes for each | |||
| will ultimately pay principal in | ||||
For each series of securities, the depositor will establish a separate issuing entity under a trust agreement by selling and assigning the trust property described below to the trustissuing entity in exchange for the securities issued by the trust. Each series of securities will include one or more classes of asset backed notes and one or more classes of asset backed certificates. The accompanying prospectus supplement for a trust will specify which class or classes of notes and certificates included in each series will be offered to investors.
The trust propertyprimary assets of each trustissuing entity will include:be:
a poolseries of retail instalment sale contracts and direct purchase money loans fornon-recourse secured notes secured by new andor used carsautomobile and light trucks,duty truck leases and the related leased vehicles and all Scheduled Paymentsmoneys due thereunderon the secured notes on and after the cutoff date or dates to be specified in the prospectus supplement, in the case of Scheduled Interest Receivables, and all payments received thereunder on and after the cutoff date or dates, in the case of Simple Interest Receivables, in each case exclusive of any amount allocable to the premium for physical damage collateral protection insurance required by the servicer or Ally Bank,closing day;
the lease assets, including payments under leases and amounts and investmentsreceived upon sale of those amounts as from time to time may be held in separate trust accounts established and maintained pursuant to the Trust Sale and Servicing Agreement for that trust and the proceeds of those accounts,leased vehicles;
security interests in the financed vehicles and,proceeds from claims on any insurance policies relating to the extent permitted by law, any accessions thereto,leases and the leased vehicles;
any recourse against dealers on the receivables,leases;
rights of ACOLT under the VAULT trust agreement (solely with respect to the vehicles that are included in the related lease assets), the sale and contribution agreement, the servicing agreement and the other documents relating to the applicable series of ACOLT;
the rightrelated ACOLT reserve account and all proceeds thereof;
rights of the issuing entity under the pooling agreement, the trust sale agreement, the administration agreement, the ACOLT indenture and the other documents relating to proceeds of credit life, credit disability, physical damage or other insurance policies covering the financed vehicles,issuing entity; and
specified rights of the depositorissuing entity under derivatives agreements, if the Pooling and Servicing Agreement for that trust.issuing entity enters into any derivatives agreements.
To the extent specified in the prospectus supplement for the trust, aissuing entity, an AART reserve account or other form of credit enhancement may be held by the AART owner trustee or the AART indenture trustee for the benefit of the holders of the trust’sissuing entity’s securities. The AART reserve account, if any, for a series of securities may not be included in the property of the issuing trustentity but may instead be a segregated trust account held by the AART indenture trustee or other applicable party for the benefit of the holders of the trust’sissuing entity’s securities. See “The Transfer Agreements and Servicing Agreements—Credit Enhancement” in this prospectus.
The activities of each trustissuing entity will be limited to:
acquiring, managing and holding the receivablessecured notes and the other assets of the trustissuing entity and the proceeds from those assets,assets;
issuing securities and making payments and distributions on them,them;
engaging in other activities that are necessary, suitable or convenient to accomplish any of the foregoing or are incidental to or connected with these activities,activities; and
any other activities not inconsistent with the foregoing that areas may be described in the accompanying prospectus supplement.
The servicertrust administrator will continue to serviceadminister the receivablessecured notes held by each trustissuing entity and will receive fees for theseits administrative services. See “The Servicer—Transfer Agreements and Servicing Agreements—Servicing and Administration Compensation and Payment of Expenses” in this prospectus. To facilitate the servicing of the receivables, the trust will authorize GMAC, as custodian, to retain physical possession of the
receivables held by each trust and other documents relating thereto as custodian for the trust. Due to the administrative burden and expense, the certificates of title to the financed vehicles will not be amended to reflect the sale and assignment of the security interest in the financed vehicles to the depositor or the trust or the pledge of these security interests by the trust to the indenture trustee. In the absence of an amendment, the trust and the indenture trustee may not have a perfected security interest in the financed vehicles in all states.
None of the trust, the indenture trustee nor the owner trustee will be responsible for the legality, validity or enforceability of any security interest in any financed vehicle. See “Legal Aspects of the Receivables” and “The Transfer and Servicing Agreements—Sale and Assignment of Receivables” in this prospectus.
The principal offices of each trustissuing entity will be specified in the accompanying prospectus supplement.
The AART owner trustee for each trustissuing entity will be specified in the accompanying prospectus supplement. The AART owner trustee may, in the name of the trust,issuing entity, conduct the business of the trust,issuing entity, make and execute contracts and other instruments on behalf of the trustissuing entity and sue and be sued on behalf of the trust.issuing entity. The consent of certificateholders representing at least a majority of the voting interests of certificateholders as of the close of the preceding distribution date is needed to require the AART owner trustee to take action. Upon notification to the certificateholders, and unless such certificateholders have notified theThe AART owner trustee that such consent is withheld, the owner trustee maywill not initiate or compromise any action or claim involving the trust,issuing entity, amend the indenture or administration agreement or appoint certain successor agents. Theagents unless the AART owner trustee has provided prior notification to the certificateholders and the certificateholders have not withheld their consent or provided alternative direction. The AART owner trustee will be required to give prompt written notice to the certificateholders upon any termination of, or appointment of a successor to, the servicer.trust administrator.
Unless the depositor is the sole certificateholder, on each distribution date, the AART owner trustee or other paying agent under the trust agreement will be required to distribute to the certificateholders amounts equal to the amounts deposited in the certificate distribution account pursuant to the trust sale and servicingadministration agreement on or prior to suchthat distribution date. The AART owner trustee or other paying agent will also be required to send each certificateholder the statement provided to the AART owner trustee by the servicertrust administrator pursuant to the trust sale and servicingadministration agreement on suchthat distribution date; provideddate, except that no such distributions to the certificateholders will be required to be made and no such statements will be required to be sent by the AART owner trustee if and for so long as the depositor is the sole certificateholder. The AART owner trustee or any other paying agent will retain from amounts otherwise distributable to the certificateholders sufficient funds for the payment of any tax that the issuing entity is legally owed by the trust.required under applicable law to withhold from that payment. The AART owner trustee will maintain or cause to be maintained the books of the trustissuing entity on a calendar year basis on the accrual method of accounting, deliver to each certificateholder the information required to enable each certificateholder to prepare its federal income tax return, file such tax returns relating to the trustissuing entity and make such elections as may from time to time be required or appropriate under any applicable state or federal statute, rule or regulation so as to maintain the appropriate trust characterization of the issuing entity for federal income tax purposes.
The AART owner trustee does not have any obligation to independently verify or confirm any underlying data. If the AART owner trustee receives notice from the AART indenture trustee or applicable noteholders of a servicertrust administrator default and subsequent termination of the servicer’strust administrator’s obligations under the Transferadministration agreement and Servicing Agreements, the servicer mayAART indenture, the trust administrator must transfer to the AART owner trustee for administration by it of all cash amounts held at that time by the servicertrust administrator for deposit.
The AART owner trustee’s liability in connection with the issuance and sale of the securities is limited solely to the express obligations of the AART owner trustee set forth in the trust agreement governing that trust.issuing entity. The AART owner trustee will not be liable for the default or failure of any of issuing entity, trust administrator or other trustees to carry out their respective obligations under any Transfer and servicing agreement nor will the administrator,AART owner trustee be liable under any Transfer and servicing agreement under any circumstances, except for its own negligent action, its own negligent failure to act or its own willful misconduct in the performance of any act. The AART owner trustee may resign at any time, in which event the trust administrator, or its successor, will be obligated to appoint a successor trustee. The trust administrator may also remove the AART owner trustee if the AART owner trustee ceases to be eligible to continue as AART owner trustee under the trust agreement or if the AART owner trustee becomes insolvent. In those circumstances, the trust administrator will be obligated to appoint a successor trustee. Any resignation or removal of a AART owner trustee and appointment of a successor trustee will not become effective until acceptance of the appointment by the successor trustee. Costs associated with the termination of the AART owner trustee and the appointment of a successor will be borne by the trust administrator. Except as described further in “The Notes—The AART Indenture—AART Events of Default; Rights Upon AART Event of Default” in this prospectus, there are no indemnification provisions that entitle the AART owner trustee to be indemnified from the cash flow that would otherwise be used to pay the securities.
The ACOLT owner trustee will be specified in the accompanying prospectus supplement. The ACOLT owner trustee may, in ACOLT’s name, conduct ACOLT’s business, make and execute contracts and other instruments on behalf of ACOLT and sue and be sued on behalf of ACOLT. The consent of ACOLT certificateholders is needed to require the ACOLT owner trustee to take action. The ACOLT owner trustee will not initiate or compromise any action or claim involving ACOLT or appoint successor agents, unless the ACOLT owner trustee has provided prior notification to the ACOLT certificateholders and the ACOLT certificateholders have not withheld their consent or provided alternative direction.
The ACOLT owner trustee does not have any independent obligation to verify or confirm any underlying data. The ACOLT owner trustee’s liability is limited solely to the express obligations of the ACOLT owner trustee set forth in the ACOLT declaration of trust. The ACOLT owner trustee will not be liable for the default or failure of any of ACOLT, the servicer or other trustees to carry out their respective obligations under any of the transaction documents,Transfer Agreements and servicing agreements nor will the ACOLT owner trustee be liable under any transaction documentTransfer Agreements and servicing agreements under any circumstances, except for its own negligent action, its own negligent failure to act or its own willful misconduct in the performance of any act. An ACOLT owner trustee may resign at any time, in which event the servicer, or its successor, will be obligated to appoint a successor owner trustee. The
administrator of a trust servicer may also remove the ACOLT owner trustee if the ACOLT owner trustee ceases to be eligible to continue as ACOLT owner trustee under the ACOLT declaration of trust agreement or if the ACOLT owner trustee becomes insolvent. In those circumstances, the administratorservicer will be obligated to appoint a successor owner trustee. Any resignation or removal of an ACOLT owner trustee and appointment of a successor owner trustee will not become effective until acceptance of the appointment by the successor owner trustee. Costs associated with the termination of the ACOLT owner trustee and the appointment of a successor will be borne by the servicer. Although, generally,Except as described further in “The Secured Notes—The ACOLT Indenture—ACOLT Events of Default; Rights Upon ACOLT Event of Default” in this prospectus, there are no indemnification provisions that entitle the ACOLT owner trustee is not entitled to be indemnified from the cash flow that would otherwise be used to pay the securities, if an Event of Default occurs and the servicer fails to satisfy its indemnification obligations under the trust agreement, the owner trustee may be entitled to be indemnified from the trust estate.securities.
The AART indenture trustee for a series of notes will be specified in the accompanying prospectus supplement. The trustissuing entity will grant to the AART indenture trustee all right, title and interest of the trustissuing entity in, to and under the collateral listed on the schedule of receivables.secured notes. That grant will include all rights and powers, but none of the obligations, if any, of the trustissuing entity under any agreement or instrument included in the collateral, including the immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of the receivablessecured notes included in the collateral and all other monies payable under the collateral.
On each distribution date, the AART indenture trustee is required to notify the holder of the note distribution account to distribute to the noteholders all amounts on deposit in that account in respect of the related Monthly Period other than investment earnings, which the servicertrust administrator is entitled to retain. If required by the Trust Indenture Act of 1939, as amended, the AART indenture trustee shallwill mail to each noteholder summaries of any necessary information, documents or reports. So long as no default or event of default is continuing, the AART indenture trustee or other account holder is required to invest and reinvest all funds in the AART collection account and theany AART reserve account in eligible investments.Eligible Investments.
If any default occurs in the making of any payment or performance under any agreement or instrument that is part of the trustissuing entity estate, the AART indenture trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate proceedings. If a default occurs and is continuing and if it is known to a responsible officer of the AART indenture trustee, the AART indenture trustee is required to mail to each noteholder notice of the default within the later of (a) 90 days after it occurs and (b) 10ten business days after it isbecomes known to a responsible officer of the AART indenture trustee. Except in the case of a default in payment of principal of or interest on any note, the AART indenture trustee may withhold the notice if and so long as a committee of its responsible officers in good faith determines that withholding the notice is in the interests of noteholders.
Subject to the payment of its fees and expenses pursuant to the AART indenture, the AART indenture trustee may, and when required by the provisions of the AART indenture shall,will, execute instruments to release property from the lien of the AART indenture, or convey the AART indenture trustee’s interest in the same. The AART indenture trustee will be required, at such time as there are no notes outstanding and all sums due to the AART indenture trustee have been paid and all amounts owing under each applicable third party instrument have been paid, to release any remaining portion of the trustissuing entity estate that secured the notes and the other secured obligations from the lien of the AART indenture and, where any such portion of the issuing entity estate is registered in the name of the AART indenture trustee, re-convey such property, and release to the trustissuing entity or any other person entitled thereto any funds then on deposit in the designated accounts.Designated Accounts. The AART indenture trustee shallwill release property from the lien of the AART indenture only upon receipt by it of an issuing entity request and an officer’s certificate and an opinion of counsel, confirmation that the AART indenture trustee has paid all amounts owing under each AART note and each applicable third party instrument and, if required by the Trust Indenture Act of 1939, as amended, independent certificates in accordance therewith.
The trustissuing entity and the AART indenture trustee may, when authorized by an issuing entity order, with prior notice to the rating agencies hired to rate the notes and with the consent of the holders of not less than a majority of the outstanding amount of the Controlling Class, enter into supplemental indentures for the purpose of materially changing the rights of the noteholders. The AART indenture trustee may in its discretion determine whether or not any notes would be affected (such that the consent of each noteholder would be required) by any supplemental indenture proposed and any
such determination will be binding upon the holders of all notes, whether authenticated and delivered thereunder before or after the date upon which such supplemental indenture becomes effective.
Upon sufficient notice prior to the redemption date from the servicertrust administrator or trust,issuing entity, the AART indenture trustee, based on suchthis notice, will be required to withdraw from the AART collection account and deposit into the note distribution account, on the redemption date, the aggregate redemption price of the notes, whereupon all such notes shallwill be due and payable on the redemption date.
The AART indenture trustee will not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers so long as the AART indenture trustee’s conduct does not constitute willful misconduct, negligence or bad faith. In addition, the AART indenture trustee will not be liable for interest on any money received by it except if it agrees in writing with the trustissuing entity and will have no liability or responsibility for the acts or omissions of any other party to any of the transaction documents. The AART indenture trustee does not have any obligation to independently verify or confirm any underlying data.
The AART indenture trustee may give notice of its intent to resign at any time, in which event the trustissuing entity will be obligated to appoint a successor AART indenture trustee. The trustissuing entity may also remove the AART indenture trustee if the AART indenture trustee ceases to be eligible to continue as AART indenture trustee under the AART indenture or if the AART indenture trustee becomes insolvent or otherwise becomes incapable of acting. In these circumstances, the trustissuing entity will be obligated to appoint a successor AART indenture trustee. The holders of a majority in outstanding amount of the Controlling Class also have the right to remove the AART indenture trustee and appoint a successor.successor AART indenture trustee. Any resignation or removal of the AART indenture trustee and appointment of a successor AART indenture trustee does not become effective until acceptance of the appointment by the successor AART indenture trustee. Although, generally,Costs associated with the termination of the AART indenture trustee is not entitledwill be borne by the trust administrator. Except as described further in “The Notes—The AART Indenture—AART Events of Default; Rights Upon AART Event of Default” in this prospectus, there are no indemnification provisions that entitle the AART indenture trustee to be indemnified from the cash flow that would otherwise be used to pay the securities other than if an AART Event of Default occurs and the servicertrust administrator fails to satisfy its indemnification obligations under the AART indenture then the AART indenture trustee may be entitled to be indemnified from the trust estate.
The AART indenture trustee for each trustissuing entity will be required to mail each year to all noteholders for that trust,AART issuing entity, to the extent required under the Trust Indenture Act, a brief report relating to its eligibility
and qualification to continue as AART indenture trustee under the trust’sissuing entity’s indenture, a description of any amounts advanced by it under the AART indenture, the amount, interest rate and maturity date of some types of indebtedness owing by the trustissuing entity to the AART indenture trustee in its individual capacity, the property and funds physically held by the AART indenture trustee and any action taken by it that materially affects the notes and that has not been previously reported.
The receivables in each pool of receivables have been or will be acquired or originated by Ally Bank directly from automobile and light truck dealers pursuant to agreements with General Motors dealers, dealerships affiliated with General Motors dealers and dealerships not affiliated with General Motors. See “The Depositor” and “The Servicer” in this prospectus.
The receivables have been or will be originated by Ally Bank or by participating dealers in accordance with Ally Bank’s requirements under the dealer agreements. The receivables have been or will be acquired or originated in accordance with Ally Bank’s or its affiliates’ underwriting standards in the ordinary course of business. These underwriting standards evaluate purchases based on among other things, the following criteria:
the prospective purchaser’s prior experience with Ally Bank and its affiliates,
the length of time the prospective purchaser’s credit has been reported,
the type of credit the prospective purchaser established,
the asset value of the vehicle and the prospective purchaser’s amount of equity in the vehicle,
the term of the receivable, and
the prospective purchaser’s overall creditworthiness and ability to pay.
Ally Bank’s standards also require physical damage insurance to be maintained on each financed vehicle.
The sponsor’s process of acquiring receivables begins, in general, with the application by a customer for financing of a motor vehicle manufactured by General Motors or another manufacturer at the point of purchase from a franchised General Motors dealer or a dealer not affiliated with General Motors. Applications are initiated through websites established and maintained by the sponsor or its affiliates. Applications are also initiated by fax.
The application evaluation process begins with the placement of each application into one of 22 categories or scorecard segments based upon the extent of experience and quality of performance of the applicant in respect of prior motor vehicle financings serviced on behalf of Ally Bank or its affiliates. Ally Bank, through its affiliates, then applies a proprietary credit scoring algorithm designed specifically for GMAC and its subsidiaries by a third party credit scoring company and referred to as a scorecard, to evaluate each application. Inputs used by the algorithms include (1) credit bureau scores; (2) severity and aging of delinquency; (3) percentage utilization of available credit; (4) loan-to-value ratio of the loan being applied for; and (5) payment-to-income ratio. In assigning a score, the scorecards weight most heavily the credit bureau score, the loan-to-value ratio and the credit utilization percentage. The output of the scorecards is referred to as “odds.” The “odds” predict the statistical likelihood that a severe delinquency or loss will occur with respect to that receivable at some point during its term, but do not predict the performance of any receivable with certainty. In the evaluation process, Ally Bank, through its affiliates, also checks lists maintained by the Office of Foreign Assets Control and credit bureau reports and performs fraud and duplicate application checks.
The scorecards are evaluated and updated on a periodic basis in order to account for changes in the perceived impact of specific inputs on applicant creditworthiness. The most recent scorecard redevelopment was completed and implemented in July 2007. A significant tool in the evaluation and updating process is the quarterly comparison of the “odds” across the portfolios of Ally Bank and its affiliates for retail instalment sale contracts to such portfolios’ actual performance.
Management believes that application decisions are made, on average, within 30 minutes, either through an entirely automated process or through a combination of an automated process and an analyst review. As of August 2009, automatic approvals represent approximately 20% to 25% of application volume. For 2008, automatic approvals represented approximately 28% of application volume. At this time, Ally Bank does not automatically decline any applications and all applications not automatically approved are reviewed by an Ally Bank credit analyst. For approved applications, buy rates applicable to the instalment sale contracts are assigned on the basis of the “odds” in accordance with pricing tiers that are managed by GMAC and approved by Ally Bank’s pricing committee.
Some receivables are originated under incentive programs sponsored by General Motors, for which the financing rates are below the standard rates at which Ally Bank otherwise offers financing under retail contracts. Those receivables are referred to as subvented receivables.
Because the rates on the subvented receivables are lower than would otherwise be offered by Ally Bank, Ally Bank purchases those receivables from the dealers at a discount and General Motors pays the present value of the difference between the customer’s subvented rate and Ally Bank’s standard rate to GMAC and GMAC forwards such amount to Ally Bank.
The percentage of subvented receivables in each pool will be disclosed in the applicable prospectus supplement. Subvention is not taken into account by Ally Bank when determining the “odds” credit scoring. For additional information on subvented receivables and pools, see “The Sponsor’s Portfolio Data—Delinquencies, Repossessions, Bankruptcies and Net Losses” and “Static Pool Data” in the prospectus supplement.
The sponsor may use programs developed and maintained by the sponsor or third parties that would allow it to complete the entire contracting process electronically. The resulting contracts will be electronically signed by the related obligors and maintained by the sponsor or third parties in electronic form only.
The receivables to be held by each trust will be selected from Ally Bank’s portfolio for inclusion in a pool of receivables by the criteria as set forth in the accompanying prospectus supplement.
Each receivable is classified as either a Scheduled Interest Receivable or a Simple Interest Receivable. If an obligor elects to prepay a Scheduled Interest Receivable in full, the obligor is entitled to a rebate of the portion of the Scheduled Payments attributable to unearned finance charges. The amount of that rebate is determined using a method of calculation referred to as the Rule of 78s, or Sum-of-the-Digits, except where applicable state law requires use of the actuarial method. Using the Rule of 78s, a rebate is determined by multiplying the total interest scheduled to be paid over the life of a loan by a number equal to the sum of the digits from one to the number of scheduled payments remaining at the time of prepayment and dividing by a number equal to the sum of the digits from one to the total number of payments specified in the original loan agreement. All allocations to noteholders and certificateholders of collections on Scheduled Interest Receivables are made using the actuarial method, which allocates payments of principal at a more rapid rate than does the Rule of 78s. Therefore, distributions to noteholders and certificateholders will not be adversely affected by Rule of 78s rebates. A substantial portion of each pool of receivables will initially consist of Simple Interest Receivables. The portion of a pool of receivables that initially consists of Scheduled Interest Receivables, if any, will be specified in the accompanying prospectus supplement.
Payments pursuant to a Simple Interest Receivable are allocated between finance charges and principal based on the actual date on which a payment is received. Late payments, or early payments, on a Simple Interest Receivable may result in the obligor making a greater- or smaller-number of payments than originally scheduled. The amount of additional payments required to pay the outstanding principal balance in full generally will not exceed the amount of an originally scheduled payment. If an obligor elects to prepay a Simple Interest Receivable in full, the obligor will not receive a rebate attributable to unearned finance charges. Instead, the obligor is required to pay finance charges only to, but not including, the date of prepayment. The amount of finance charges on a Simple Interest Receivable that would have accrued from and after the date of prepayment if all monthly payments had been made as scheduled will generally be greater than the rebate on a Scheduled Interest Receivable that provides for a Rule of 78s rebate, and will generally be equal to the rebate on a Scheduled Interest Receivable that provides for an actuarial rebate. The portion of a pool of receivables which consists of Simple Interest Receivables will be specified in the accompanying prospectus supplement.
Information for each pool of receivables will be set forth in the applicable prospectus supplement, including, to the extent appropriate:
aggregate amount financed,
number of contracts in the pool,
average amount financed,
weighted average standardized credit score,
range and distribution of standardized credit scores,
weighted average APR,
distribution by APR,
weighted average loan-to-value ratio,
distribution by loan-to-value ratios,
weighted average original maturity,
weighted average remaining maturity,
percentage of pool secured by contracts with original terms of less than or equal to 60 months,
percentage of pool secured by contracts with original terms greater than 60 months,
percentage of new vehicles in pool,
percentage of used vehicles in pool,
percentage of subvented receivables in pool, and
percentage of non-subvented receivables in pool.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the securities will generally be influenced by the rate at which the principal balances of the receivables securing the securities are paid, which payment may be in the form of scheduled amortization or prepayments. For this purpose, the term “prepayment” includes charge-offs, liquidations due to defaults and repurchases by the depositor or Ally Bank or purchases by the servicer pursuant to the Trust Sale and Servicing Agreement, as well as receipt of proceeds from credit life and casualty insurance policies. All of the receivables are prepayable at any time without penalty to the obligor. The rate of prepayment of automotive receivables is influenced by a variety of economic, social and other factors, including the fact that an obligor generally may not sell or transfer the financed vehicle securing a receivable without the consent of the servicer. Any reinvestment risk resulting from prepayment of receivables will be borne entirely by the holders of securities. See also “Legal Aspects of the Receivables—Transfer of Vehicles” in this prospectus.
If provided for in the accompanying prospectus supplement, the weighted average life of the securities will also be influenced by the ability of the trust to reinvest collections on the receivables during the Revolving Period. The ability of the trust to reinvest those proceeds will be influenced by the availability of suitable receivables for the trust to purchase and the rate at which the principal balances of the receivables are paid.
A variety of unpredictable economic, social and other factors influence collection rates and the availability of suitable receivables. You will bear all reinvestment risk resulting from a faster or slower rate of reinvestment in receivables by the trust, unless otherwise provided in the prospectus supplement for that trust.
POOL FACTORS AND TRADING INFORMATION
Each Note Pool Factor and each Certificate Pool Factor will initially be 1.0000000. Thereafter the Note Pool Factor and the Certificate Pool Factor will decline to reflect reductions in the outstanding principal balance of the notes, or the reduction of the Certificate Balance of the certificates, as the case may be. A noteholder’s portion of the aggregate outstanding principal balance of a class of notes is the product of:
(1) the original denomination of the noteholder’s note, and
(2) the Note Pool Factor.
A certificateholder’s portion of the aggregate outstanding Certificate Balance for a class of certificates is the product of:
(1) the original denomination of the certificateholder’s certificate, and
(2) the Certificate Pool Factor.
For each trust, the noteholders will receive reports on or about each payment date concerning payments received on the receivables, the Aggregate Receivables Principal Balance, each Note Pool Factor and various other items of information. Noteholders of record during any calendar year will be furnished information for tax reporting purposes not later than the latest date permitted by law. See “Book-Entry Registration; Reports to Securityholders—Reports to Securityholders.” Unless otherwise provided in the accompanying prospectus supplement, for each trust, the certificateholders will receive reports on or about each distribution date concerning payments received on the receivables, the Aggregate Receivables Principal Balance, each Certificate Pool Factor and various other items of information. Certificateholders of record during any calendar year will be furnished information for tax reporting purposes not later than the latest date permitted by law. See “Book-Entry Registration; Reports to Securityholders—Reports to Securityholders” in this prospectus.
Unless otherwise provided in the accompanying prospectus supplement, the net proceeds to be received by the depositor from the sale of the securities of a given series will be applied to the purchase of the receivables from Ally Bank.
Ally Bank is the sponsor of the transactions set forth in this prospectus and in the applicableaccompanying prospectus supplement.
Ally Bank was incorporated in 2004 under the laws of the State of Utah relating to industrial loan corporations under the name “GMAC Automotive Bank,” and changed its name to “GMAC Bank” in 2006. In December 2008, GMAC Bank converted into a Utah-chartered commercial nonmember bank and in AprilMay 2009 further changed its name to “Ally Bank.” Ally Bank is subject to regulation primarily by the Federal Deposit Insurance Corporation (“FDIC”) and the Utah Department of Financial Institutions.
The sponsor is a wholly owned indirect subsidiary of GMAC.Ally Financial. On December 24, 2008, and in connection with the conversion of Ally Bank into a Utah-chartered commercial nonmember bank, GMACAlly Financial and IB Finance Holding Company, LLC or “(“IB Finance,”) were each approved by the Board of Governors of the Federal Reserve System (“FRB”) as bank holding companies under the Bank Holding Company Act of 1956, as amended. IB Finance is the direct holding company for Ally Bank and is a subsidiary of GMAC.Ally Financial. As a result, GMACAlly Financial and IB Finance are now subject to the supervision and examination of the FRB.
Ally Bank has its principal office at 6985 Union Park Center, Suite 435, Salt Lake City,Midvale, Utah 84047, Tel. No. (801) 790-5000, and administrative offices at 1100 Virginia Drive, Ft. Washington, Pennsylvania 19034.
Ally Bank provides a wide variety of automotive financial services to and through franchised General Motors dealers, dealerships not affiliated with General Motors and to other dealerships in which franchised General Motors dealers have an interest and to the customers of those dealerships. In these lines of business, Ally Bank principally finances the acquisition and resale by franchised General Motors dealers and dealerships not affiliated with General Motors of various new and used automotive and non-automotive products, manufactured by General Motors or its subsidiaries and associates, and acquires from those dealers instalment obligations covering retail sales and leases of new and used General Motors products as well as those of other manufacturers.vehicles. Ally Bank also provides dealer equipment facilities financing, residential mortgage financing and wholesale and retail financing.
Ally Bank’s financing operations are organized into two segments—automotive and mortgage products. The products and services offered by Ally Bank’s automotive financing operations include the funding of retail instalment sale contracts, direct purchase money loans and leases, extension of term loans, dealer floor planfloorplan financing and other lines of credit.
In the retail market, Ally Bank provides vehicle financing to consumers through automotive dealerships, primarily those franchised by General Motors, under the Ally Bank and GMAC Bank brand names.name. In most cases, Ally Bank purchases retail instalment sale contracts and lease contracts for new and used vehicles and other products from franchised General Motors affiliated or Chrysler affiliated dealers. Ally Bank also finances new and used products of other manufacturers.
In the wholesale market, Ally Bank finances the acquisition and resale by franchised General Motors dealers and dealerships not affiliated with General Motors of various new automotive and nonautomotive products manufactured by General Motors or its subsidiaries and associates as well as those of other manufacturers.products.
Ally Bank has been actively acquiring or originating assets, including retail instalment sale contracts, direct purchase money loans and leases and loans to dealers for the financing of dealer inventory, since its incorporation in 2004. Ally Bank began securitizing its retail assets in 2009.2009, wholesale assets in 2010 and lease assets in 2011.
When Ally Bank securitizes automotive retail instalment sale contracts, lease assets and wholesale finance receivables, it may retain an interest in the sold assets. These interests may take the form of asset-backed securities, including senior and subordinated interests in the form of investment grade, non-investment grade or unrated securities.
Ally Bank will select the receivableslease assets from its U.S. portfolio of new and used retail car and light trucks receivablesduty truck lease assets using the methodology described in the accompanying prospectus supplement. See “The Receivables Pool—Lease Assets and the Secured Notes—Criteria Applicable to the Selection of Lease Assets” and, if applicable, “The Lease Assets and the Secured Note—Criteria Applicable to the Selection of Initial ReceivablesLease Assets”” and“The Lease Assets and if applicable, “The Receivables Pool—the Secured Note—Criteria Applicable to the Selection of Additional ReceivablesLease Assets During the Revolving PeriodPeriod”” in the accompanying prospectus supplement.
None of Ally Bank, GMACAlly Financial or any of their respective affiliates other than the issuing entity will be obligated to make, or otherwise guarantee, any principal, interest or other payment on the notes or the certificates.
Ally Auto Assets LLC, a wholly-owned subsidiary of Ally Bank, was organized in the Statestate of Delaware on August 18, 2009. The depositor, a limited liability company, is organized for the limited purposes of purchasing receivablesretail instalment sale contracts, direct purchase money loans, leases and other sale contracts and instalment obligations related to motor vehicles, monies due thereunder, security interests in any related vehicles and other collateral securing such obligations, proceeds from claims on insurance policies related thereto and notes, certificates and other interests secured by any of the foregoing from Ally Bank, transferring the receivablespurchased assets to third parties, forming trusts and engaging in similar activities for multiple securitizations of retail instalment sale contracts and leases on an ongoing basis. The principal executive offices of the depositor are located at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
The depositor and the securitization transactions are structured in a manner intended to make it unlikely thatlimit or eliminate the ability of the FDIC, acting as conservator or receiver for Ally Bank, will reclaim, recover or recharacterize the transfer of the receivablesto exercise authority with respect to the depositor or otherwise disaffirm, repudiate or avoid the pooling and servicing agreementssecured notes and the transactions contemplated thereby.transaction documents. This structure includes the creation of the depositor as a separate, limited-purpose subsidiary pursuant to a limited liability company agreement containing various limitations. These limitations include restrictions on the nature of the depositor’s business and a restriction on the depositor’s ability to commence a voluntary case or proceeding under the United States Bankruptcy Code or similar applicable state laws without the unanimous affirmative vote of all of its directors. At any time that any notes or securities of any subsidiary of the depositor or any other indebtedness of the depositor is outstanding, the depositor is required to have at least one director who qualifies under its limited liability company agreement as an “Independent Director.”
If, notwithstanding the foregoing measures, the FDIC concluded that it should exercise its authority with respect to the receivableslease assets or the transaction documents, or a filing were made under the United States Bankruptcy Code or similar applicable state laws by or against the depositor, or an attempt were made to litigate the issue of substantive consolidation with respect to the depositor and Ally Bank, then delays in distributions on the notes and the certificates, and possible reductions in the amount of these distributions, could occur. See also “Insolvency Aspects of the Receivables—Payments of the Notes and CertificatesOfferings” in this prospectus.
Securities issued by a trust may be sold by the depositor in private placements or other nonregistered offerings and will not be offered by this prospectus and by the accompanying prospectus supplement. The depositor may also retain all or a portion of the certificates and may also retain all or a portion of one or more classes of notes issued by each trust as described in the accompanying prospectus supplement. In addition, the depositor may have ongoing obligations to repurchase warranty receivablessecured notes from the trust, to participate in the transfer of additional receivablessecured notes from the originator to a trust during a revolving period, or to authorize, execute or file financing statements relating to the receivables,secured notes, all as further described in “The Transfer Agreements and Servicing Agreements.”
On the closing date GMAC(or on the initial closing date in a revolving transaction), Ally Financial Inc., a Delaware corporation, will be appointed theunder a servicing agreement as servicer of the poollease assets Ally Bank sells to ACOLT under a sale and contribution agreement. Ally Financial will be appointed as trust administrator of retail instalment sale contractsthe secured notes to be owned by the trust pursuant to a Pooling and Servicing Agreement amongissuing entity under the servicer,administration agreement. Ally Financial will also have serviced the lease assets on behalf of Ally Bank andas the depositor.owner of those lease assets prior to their transfer to ACOLT. Ally Financial also acts as titling agent as described in “Vehicle Asset Universal Leasing Trust.” The depositor will transfer and assign to the applicable trust,issuing entity, without recourse, its entire interest in the receivables,secured notes, including its rights under the Poolingpooling agreement and Servicing Agreement, pursuant tounder a Trust Sale and Servicing Agreement amongtrust sale agreement between the depositor the servicer and the trust. GMAC also will have serviced those retail instalment sale contracts on behalfissuing entity.
General Motors Acceptance Corporation, the predecessor of Ally Bank prior to the transfer under the Pooling and Servicing Agreement.
GMACFinancial, was incorporated in 1919 under the New York Banking Law relating to investment companies. GMACGeneral Motors Acceptance Corporation relinquished that status and became a Delaware corporation on January 1, 1998. GMACAlly Financial has its principal and administrativeexecutive offices at 200 Renaissance Center, Detroit, Michigan 48265, Tel. No. 313-656-0600. It provides services from hundreds of locations around the world. In July 2006, GMACGeneral Motors Acceptance Corporation converted to a Delaware limited liability company and changed its name to GMAC LLC. In June 2009, GMAC LLC converted to a Delaware corporation and changed its name to GMAC Inc. On May 10, 2010, GMAC Inc. changed its name to Ally Financial Inc.
On November 30, 2006, General Motors sold 51% of the common equity interests of GMACAlly Financial to FIM Holdings LLC.a consortium of investors, led by an affiliate of Cerberus Capital Management, L.P. We refer to that transaction as the “Acquisition.” FIM Holdings LLC is an investment vehicle formed for the purpose of the Acquisition by Cerberus FIM Investors, LLC and wholly-owned subsidiaries of Aozora Bank Limited, Citigroup Inc. and The PNC Financial Services Group, Inc.
On December 24, 2008, and in connection with the conversion of GMAC Bank into a Utah-chartered commercial nonmember bank, GMACAlly Financial and IB Finance Holding Company, LLC, or “IB Finance,” were each approved by the Board of Governors of the Federal Reserve System, or the “FRB,”FRB as bank holding companies under the Bank Holding Company Act of 1956, as amended. IB Finance is a subsidiary of GMACAlly Financial and the direct holding company for GMAC’sAlly Financial’s bank depository institution, GMAC Bank, which is now known as Ally Bank. As
Since becoming a conditionbank holding company, Ally Financial has received various investments from the U.S. Department of the Treasury, the “Treasury,” in connection with the Treasury’s Supervisory Capital Assessment Program. Most recently, on December 30, 2010, the Treasury converted a portion of its existing mandatorily convertible preferred stock, the “MCP Stock,” into common stock. Following the conversion of the MCP Stock, the Treasury continued to this approval,hold the FRB required that certain changes be made to GMAC’s ownership structure. Specifically,majority of Ally Financial’s outstanding common stock, with minority interests held by affiliates of Cerberus Capital Management L.P., a subsidiary affiliate of General Motors, was required to reduce its ownership interest in GMAC to less than 10% of the votinga trust whose beneficiary is General Motors and total equity of GMAC and FIM Holdings was required to reduce the aggregate direct and indirect investments to no greater than approximately 22.02% of the voting equity of GMAC. The foregoing requirements could change if GMAC’s equityholders and the FRB agree to any modifications.various other third party investors.
GMAC,Ally Financial, directly and through its subsidiaries, most notably Semperian,Ally Servicing LLC, services prime and non-prime automobile retail instalment sale contracts and retail motor vehicle leases acquired or originated by it and others on behalf of banks, credit unions, finance companies and securitized trusts. GMACissuers of asset-backed securities. Ally Financial and Semperian,Ally Servicing LLC have entered into a subservicing agreement under which GMACAlly Financial has engaged Semperian,Ally Servicing LLC’s services with respect to the trusts.issuing entities. In the event of any removal of GMACAlly Financial as the servicer, Semperian,Ally Servicing LLC will no longer be involved in the servicing of the receivables.
SemperianAlly Servicing LLC, or “SemperianAlly Servicing,” is a wholly-owned subsidiary of GMAC. Semperian,Ally Financial. Ally Servicing, a Delaware limited liability company, was originally incorporated as AccuTel, Inc. on April 8, 1999. On July 21, 2005, AccuTel changed its name to Semperian.Semperian, Inc. Semperian, Inc. subsequently converted to a limited liability company. On August 23, 2010, Semperian LLC changed its name to Ally Servicing LLC.
SemperianAlly Servicing has its principal office at 2000 Town Center, Suite 2200, Southfield, Michigan 48075, Tel. No. 248-948-7702.
Since 1999, SemperianAlly Servicing has acted as a sub-servicer for GMAC,Ally Financial, and has assumed increased servicing responsibilities over time. Currently, SemperianAlly Servicing acts as a sub-servicer for the entire U.S. portfolio of retail instalment sale contracts and retail motor vehicle leases serviced by GMAC. SemperianAlly Financial. Ally Servicing performs its sub-servicing operations from centers located in Midland, Texas; Knoxville, Tennessee; Jacksonville, Florida; Roseville, Minnesota; Greeley, Colorado; Charlotte, North Carolina; Lewisville, Texas; Little Rock, Arkansas; Auburn Hills, MichiganArkansas and Wichita, Kansas.
A table in the accompanying prospectus supplement under “The Sponsor’s Portfolio Data—Delinquencies, Repossessions Bankruptcies and Net LossesCredit and Residual Loss Data on Ally Bank Lease Assets” sets forth the size and composition of the total portfolio of retail motor vehicle instalment sale contractsleases of Ally Bank for which GMACAlly Financial has provided servicing in each of the last fourfive years.
SomeAs part of the principal functions of the servicer are tracking the balances of outstanding receivables, notifying obligors of the amounts and due dates of their required payments, communicating with obligors regarding their accounts, seeking to collect overdue payments and, where necessary, charging off receivables and foreclosing upon and liquidating the related motor vehicle. Subject to its customary standards, policies and procedures, comparable to practices followed by the servicer in servicing receivables for itself or other third parties, and to its obligation under the transaction documents to make reasonable efforts to collect all payments due on the receivables,lease assets and to dispose of leased vehicles, the servicer has discretion to grant rebates, adjustments or extensions on a receivable. However, if that modification of a receivable alters the Amount Financed, the APR, the total number of Scheduled Payments, in the case of a Scheduled Interest Receivable, or the number of originally scheduled due dates, in the case of a Simple Interest Receivable, so the last Scheduled Payment, in the case of a Scheduled Interest Receivable, or the last scheduled due date, in the case of a Simple Interest Receivable, occurs after the final scheduled distribution date, the servicer will be obligated to purchase that receivable. Authority to exercise that discretion within established guidelines resides with the individual agents, subject to supervisory review.
The servicer is allowed, for example, without the prior consent of the depositor, the trust,issuing entity, the AART or ACOLT indenture trustee, the AART or ACOLT owner trustee, or any other person, to establish the means and timing for contacting obligorslessees in respect of overdue payments, foreclose onrepossess the vehicles securing the receivables,leases, deliver notices, demands, claims, complaints, responses or other documents in connection with any proceedings, execute any instruments of satisfaction or cancellation, or of partial or full release or discharge of underlying obligors,lessees, grant extensions, rebates or adjustments on a receivable,lease, and waive any prepayment, late payment, or any other fees or charges that may be collected in the ordinary course of servicing such receivables.leases. The servicer is not liable for the exercise of discretion made in good faith and in accordance with its established servicing procedures.
The servicer maintains the account information with respect to each serviced account. That information resides on a centralized accounts receivable system that is currently maintained by Electronic Data Systems Corporation, or “EDS,”HP Enterprise Services, and for which GMACAlly Financial has a right of use pursuant tounder a perpetual license. The servicer is also responsible for maintaining title records with respect to vehicles securing serviced contracts together with the related contract. ThoseAs of the date of this prospectus, those documents are maintained for the servicer by PDP Group, Inc. at a facility in Baltimore,Hunt Valley, Maryland. Images of those documents are maintained on systems maintained at and accessible from locations different from the locations of the physical documents. Each contract included in a securitized pool is marked on the applicable computer files to indicate its transfer to the applicable trust.issuing entity.
The servicer will make reasonable efforts to collect all payments due on the receivablesleases held by any trustissuing entity and will, consistent with the accompanying Pooling and Servicing Agreement and Trust Sale and Servicing Agreement,applicable servicing agreement, follow the collection procedures it follows for comparable motor vehicle receivablesautomotive leases that it services for itself or others. See “Legal Aspects of the ReceivablesSecured Notes and the Lease Assets” in this prospectus.
The servicer produces and mails a monthly statement of account, or electronically delivers notification of statement availability through its website, to lessees prior to the due date of the related payment. Payments may be made either by check or through an automated clearing house (ACH) debit of the lessee’s account.
If the payment remains outstanding, the servicer mails an initial notice of overdue payment to the obligorlessee on or about the eighth day following the due date.
ObligorsLessees whose payment remains delinquent for a specified period following the payment due date are assigned to the lowcollections groups based on their risk collections group. Whileprofile, which is formulated from an algorithm tied to the lessee’s payment history. Lessees initially receive an automated voice message notifying them of the delinquency. If a payment remains outstanding, most accounts are subsequently assigned to the low risk collections group, between five and 15 days past due, the determinations as to the exact timing of that assignment is made based on the application of an algorithm to the payment history of that obligor in respect of the relevant account. The low risk collection teams contact obligorswhich contacts lessees using an automated dialing system.system. Currently, 100% of the low risk collections are outsourced to Genpact and Sykes Enterprises, Incorporated, or “Sykes” (formerly ICT Group), third parties with which SemperianAlly Servicing contracts for the provision of collection related services. Genpact and ICTSykes act under the direct supervision of SemperianAlly Servicing and are required to follow the servicer’s servicing policies. Genpact has been providing this service to SemperianAlly Servicing since July 2008. In February 2010, Sykes acquired ICT hasGroup, which had been providing this service to SemperianAlly Servicing since April 2007.
Based on the algorithm, responsibility for calls on these accounts progressprogresses to the early high risk collections group at differing times but generally at no later than 31 days past due. The early high risk collection teams attempt to establish contact with the obligorlessee by telephone and continue to attempt to obtain payment. Currently, approximately 80%all of the early high risk collections are outsourced to Genpact and ICT and 20% are handled by the servicer.Sykes.
BasedDepending on the algorithm, responsibility for calls on theserisk profile, delinquent accounts typically progress from the early high risk collections group to the high risk collections group at differing times but generally at 46 to 47between 30 and 60 days past due. Currently, all high risk collections are performed by the servicer. The high risk collection teams attempt to establish contact with the obligorlessee by telephone and continue to attempt to obtain payment. Currently, the majority of accounts ranging from 46 to 59 days past due are outsourced to Teleperformance, a third party with which Ally Servicing contracts for the provision of collection related services. Teleperformance acts under the direct supervision of Ally Servicing and is required to follow the servicer’s servicing policies. Teleperformance has been providing this service to Ally Servicing since December 2009. Collection activity for the remaining accounts ranging from 46 to 59 days past due and for accounts in excess of 59 days past due is performed by Ally Servicing.
Insurance Required to be Maintained by Lessees
Each lease requires the lessee to maintain automobile bodily injury and property damage liability insurance that names Ally Financial as an additional insured. Each lease further requires the lessee to maintain (all risks) comprehensive and collision insurance covering damage to the leased vehicle and naming Ally Financial as loss payee.
Waivers, Modifications and Extensions
Subject to its customary standards, policies and procedures comparable to practices followed by the servicer in servicing automotive leases for itself and for third parties, and to its obligation under the transaction documents to make reasonable efforts to collect payments on the leases, the servicer has discretion to grant waivers, extensions or other modifications on leases. In the case of extensions, occasionally, a lessee requests an extension of a lease contract for one or more months during the period of time between the original specified maturity of the lease and the time at which the lessee negotiates a new lease for a different vehicle. Ally Financial may extend the performance of the lessee’s obligations on a monthly basis up to a maximum of four months if the lessee is not in default on any of its obligations under the lease and if the lessee agrees to continue to make monthly payments. If Ally Financial, as servicer, extends performance on the lease and determines to make a Residual Advance on the Extended Lease, the Residual Advance will be made at the same time as it would have been made if Ally Financial had not extended the lease. See “The Transfer Agreements and Servicing Agreements—Advances by the Servicer.”
If the servicer grants any waiver, modification or extension on any lease in violation of the prohibitions described in “The Transfer Agreements and Servicing Agreements—Sale and Assignment of Lease Assets and Secured Notes—Sale and Assignment of Lease Assets,” it will be obligated to repurchase that lease from ACOLT.
Collection and Repossession Procedures
If the servicer determines that eventual payment in full of a receivablelease is unlikely, the servicer will follow its normal practices and procedures to realize upon the receivable,lease, including the repossession and disposition of the financedleased vehicle securing the receivable at a public or private sale, or the taking of any other action permitted by applicable law. The servicer will be entitled to receive its liquidation expenses as specified in the Pooling and Servicing Agreementservicing agreement as an allowance for amounts charged to the account of the obligor,lessee, in keeping with the servicer’s customary procedures, for refurbishing and disposition of the financedleased vehicle and other out-of-pocket costs incurred in the liquidation.
Accounts for which the servicer has made a determination to repossess the vehicle are referred to an outside repossession company located in the area of the obligorlessee or in some cases, to a national provider. Those repossession companies are generally small local operations whose sole function is to repossess the related motor vehicle. In some areas, accounts issued for repossession are assigned to a service provider who oversees the repossession activity of their subcontractor. The service provider is responsible for the activity of the subcontractor. Typically, once the car is repossessed, a letter is sent to the obligorlessee to inform them of the repossession, an affidavit of repossession is produced and title is obtained. Generally, the vehicle is then sold at auction (traditional auction or SmartAuction), although, at GMAC’sAlly Financial’s discretion, to maximize net proceeds, limited repairs and or refurbishing may be performed prior to sale. See “—Vehicle Disposition Process” below for more information.
The net sale proceeds are applied to reduce the balance owing by the obligor.lessee inclusive of excess mileage or wear pursuant to the contractual terms of the lease agreement. Excess proceeds, if any, are remitted to Ally Financial, as servicer on behalf of ACOLT, the obligor.owner of the beneficial interest in the vehicle. Deficiency balances along with excess mileage and wear charges, if any, are charged off. Following charge off, the account is assigned to the asset recovery center, located in Lewisville, Texas, for evaluation and possible further attempts to collect amounts owing by the obligor.lessee. There is an exception to that process for obligorslessees in bankruptcy.
The retail instalment sale contracts require
In some situations a lessee may become delinquent and is willing but unable to bring his/her account current. In this situation, at the discretion of Ally Financial, but subject to specific guidelines, one or more payments under the relevant lease may be deferred, provided that each obligorthe lessee pays a deferral fee. If Ally Financial agrees to defer lease payments, it must make Advances on the receivables obtaindeferred lease.
Leased vehicles may be returned to an authorized dealer or purchased directly by the dealer or lessee at maturity or upon early termination, or may be repossessed upon default.
Ally Bank, through its affiliate Ally Financial, uses three remarketing channels to dispose of vehicles: direct sales to dealers or lessees, SmartAuction (Ally Financial’s proprietary wholesale internet auction) and physical auctions. The primary objectives of the vehicle disposition process are to maximize sales proceeds while minimizing expense.
Each lessee has the option to purchase the leased vehicle upon scheduled termination of the lease at the price stated in the applicable lease. If the lessee does not exercise this option, the vehicle is offered for sale to the dealer to which the leased vehicle was returned. These sales are priced using an estimation of market value with minimal remarketing expense associated with this channel as vehicles are not moved or reconditioned by Ally Financial prior to sale. Vehicles not bought directly by the lessee or dealer are remarketed via SmartAuction and physical auctions. These sales involve interactive bidding based on a floor price. Off-lease vehicles are generally sold via SmartAuction within 25 days of the date the lessee returns the leased vehicle to the dealer and via physical auction within 60 days of the return date. The entire vehicle disposition process generally takes an average of 26 days from the return of the vehicle.
Off-lease vehicles are returned to an authorized dealer who is responsible for reporting the return to Ally Financial and providing a completed vehicle odometer statement and deciding whether to purchase the vehicle. If the vehicle is not purchased under the direct to dealer/lessee channel, a vehicle condition/inspection report is completed by a third-party vendor hired by Ally Financial. Lessees are responsible for excess wear and/or mileage based on the condition/inspection report. Once a vehicle inspection has been completed, most vehicles are offered for sale via SmartAuction. If the vehicle is sold, Ally Financial electronically collects proceeds from the purchasing dealer. The purchasing dealer is responsible for picking up the vehicle from the storing location, which is typically another dealership. As of the date of this prospectus a majority of off-lease vehicles not bought directly by the dealer/lessee are sold via SmartAuction. The remaining vehicles are shipped to physical auction locations and either sold in a “closed” auction (open to General Motors dealers only) or an “open” auction (open to all licensed dealers).
At the physical auction location, Ally Financial will recondition the vehicle and make repairs to the vehicle only if an employee of Ally Financial at the auction reasonably expects this work would increase the net proceeds on the sale of the vehicle. Generally, this practice results in only a limited amount of basic repairs, such as glass replacement and the repair of other safety-related damage.
An employee of Ally Financial at the auction site is responsible for handling Ally Bank’s decisions with respect to the vehicles sold at the auction, including approving repair orders, setting auction dates and determining whether bids received at auction should be accepted. When the vehicle is sold, Ally Financial electronically collects proceeds from the auction. The purchasing dealer is responsible for all transportation costs.
VEHICLE ASSET UNIVERSAL LEASING TRUST
In 1996, Ally Financial created Vehicle Asset Universal Leasing Trust, known as VAULT, a Delaware statutory trust, to act as a nominee on the certificates of title to vehicles titled in various states. VAULT has no operations, and its sole purpose is to act as a repository of titles to vehicles purchased by its trust beneficiaries. VAULT is named as the nominee for the beneficial owner of the leased vehicle on the certificate of title for each leased vehicle that secures the secured notes. Ally Financial, Central Originating Lease Trust, ACOLT, Ally Bank, General Motors, Central Originating Lease Trust II and Multi-Use Lease Entity Trust are the current beneficiaries of VAULT and the beneficial owners of the leased vehicles owned by VAULT. Ally Bank will be the initial beneficial
owner of the leased vehicles that are collateral for the secured notes. There may be additional beneficiaries under the VAULT trust agreement from time to time. As nominee, VAULT holds only legal title to the leased vehicles. The beneficial owner retains all rights and obligations related to the leased vehicles. Pursuant to the VAULT trust agreement, Ally Financial services the leased vehicles owned by VAULT on behalf of the beneficiaries of VAULT.
Under the VAULT trust agreement, Ally Financial, as VAULT servicer, acts as agent of the VAULT Trustee and performs administrative duties with respect to the certificates of title relating to the vehicles titled in the name of VAULT. Under a VAULT transfer direction, Ally Bank, in its capacity as a beneficiary of VAULT, will transfer to ACOLT its beneficial interest in the leased vehicles titled in the name of VAULT that secure each series of secured notes by directing VAULT to hold the legal title to that portion of the VAULT trust estate as nominee for the benefit of ACOLT. ACOLT will therefore have the sole beneficial interest in the leased vehicles relating to each pool of lease assets securing a series of secured notes. Under a VAULT security agreement, VAULT will pledge its legal title to the vehicles relating to the lease assets to the holders of a series of secured notes to secure ACOLT’s obligations under those secured notes. The VAULT trustee receives its annual fee for its duties as VAULT trustee and Ally Financial receives its annual fee for its duties as titling agent under the VAULT trust agreement under a VAULT fee letter between the VAULT trustee, Ally Financial and ACOLT.
VAULT has taken steps in structuring the transactions contemplated in this prospectus and any related prospectus supplement that are intended to limit or eliminate the ability of the FDIC, acting as conservator or receiver for Ally Bank, to exercise authority with respect to the lease assets, the VAULT transfer direction and the transaction documents. This structure includes the creation of VAULT as a separate, limited-purpose subsidiary under a declaration of trust containing certain limitations. These limitations include restrictions on the nature of VAULT’s business and a restriction on VAULT’s ability to commence a voluntary case or proceeding under the Bankruptcy Code or similar applicable state laws.
If, notwithstanding the foregoing measures, the FDIC concluded that it should exercise authority with respect to Ally Bank’s beneficial interest in the leased vehicles or the transaction documents, or a filing were made under the Bankruptcy Code or similar applicable state laws by or against VAULT, or an attempt were made to litigate the issue of substantive consolidation with respect to VAULT and Ally Bank, then delays in distributions on the notes and the certificates, and possible reductions in the amount of the distributions, could occur.
See also “Insolvency Aspects of the Offerings” in this prospectus.
ALLY CENTRAL ORIGINATING LEASE TRUST
ACOLT is a special purpose Delaware statutory trust formed on March 23, 2010, which acquires vehicles and related consumer leases from Ally Bank. ACOLT finances its acquisitions of each pool of vehicles and related consumer leases through the issuance of one or more secured notes and equity certificates. Each pool of leases and the related vehicles that secure a series of secured notes is allocated to a separate series interest under the ACOLT Declaration of Trust and is not an asset of, or allocated as security to, any other series of secured notes or to the equity interest in ACOLT. Each secured note will be issued to Ally Bank by ACOLT. All of the secured notes in a series will be paid ratably by the collections on the entire related pool of lease assets. As described in the accompanying prospectus supplement, each secured note will represent a significant majority of the purchase price of the related leases and leased vehicles. ACOLT’s equity certificates represent the remaining portion.
ACOLT has taken steps in structuring the transactions contemplated in this prospectus and any related prospectus supplement that are intended to limit or eliminate the ability of the FDIC, acting as conservator or receiver for Ally Bank, to exercise authority with respect to the lease assets and the transaction documents. This structure includes the creation of ACOLT as a separate, limited-purpose subsidiary under a declaration of trust containing certain limitations. These limitations include restrictions on the nature of ACOLT’s business and a restriction on ACOLT’s ability to commence a voluntary case or proceeding under the Bankruptcy Code or similar applicable state laws.
If, notwithstanding the foregoing measures, the FDIC concluded that it should exercise authority with respect to the lease assets or the transaction documents, or a filing were made under the Bankruptcy Code or similar applicable state laws by or against ACOLT, or an attempt were made to litigate the issue of substantive consolidation with respect to Ally Bank and ACOLT, then delays in distributions on the notes, and possible reductions in the amount of the distributions, could occur. See also “Insolvency Aspects of the Offerings” in this prospectus.
Recourse against ACOLT on the secured notes is limited to the assets of the related series interest and each series of secured notes in ACOLT is secured by, among other things, a security interest in the entire related pool of leases and leased vehicles.
DESCRIPTION OF AUTO LEASE BUSINESS OF ALLY BANK
Acquisition and Underwriting of Motor Vehicle Leases
Ally Bank leases automobiles and light duty trucks to retail customers and acquires such leases and the related leased vehicles through agreements with automobile and light duty truck dealerships and affiliated leasing companies. See “The Sponsor” in this prospectus. Dealers are not responsible for the customer’s performance during the lease period nor for the value of the vehicle at the scheduled lease end date. Manufacturers may elect to sponsor retail leasing programs to increase vehicle sales, including establishing below-market lease rates and/or establishing residual values in excess of those values published in residual guide books that have been used by Ally Bank and its affiliates.
Ally Bank’s process of acquiring leases begins, in general, with the application by a customer for a lease of a motor vehicle at a participating dealer. Applications are initiated through websites established and maintained by the sponsor or its affiliates or third parties. Applications may also be initiated by fax.
In May 2011, Ally Bank and Ally Financial implemented a revised underwriting process in which applications are reviewed solely by Ally Financial credit underwriters. These credit underwriters use the Ally Bank underwriting standards when evaluating applications on behalf of Ally Bank. Previously, all applications had been reviewed first by Ally Financial, and then applications intended for Ally Bank were reviewed separately by Ally Bank. The revised process enables expedited review while applying Ally Bank’s credit standards. As the underwriting is done on behalf of Ally Bank and as Ally Bank retains the right to review all lease contracts and require Ally Financial to purchase any that fail to meet Ally Bank’s standards, we generally refer in this prospectus to Ally Bank rather than Ally Financial when describing the underwriting process.
The application evaluation process begins with the placement of each application into one of several analytical categories or “segments,” based on specified aspects of the applicant’s credit profile and of the related vehicle. Ally Bank then evaluates each application by applying a proprietary credit scoring algorithm. Ally Financial and a third party credit scoring company designed the credit scoring algorithm.
The output of the credit scoring algorithm is referred to as the “odds.” The odds predict the statistical likelihood that a loss will occur with respect to that lease asset, but do not predict the performance of any lease asset with certainty. Ally Bank uses the odds to sort applicants into several different credit tiers. Concurrently with this process, Ally Bank takes other steps to gather information regarding the applicant, such as checking lists maintained by the Office of Foreign Assets Control and performing fraud and duplicate application checks.
Once the information is gathered, Ally Bank analyzes the application to determine whether to approve it. These determinations are made judgmentally on the basis of all of the information available to Ally Bank, including the following:
the odds and the applicant’s credit tier,
the length of time the prospective applicant’s credit has been reported,
the type of credit the prospective applicant has established in its credit file,
the net capitalized cost on the lease agreement and the dealer invoice price of the leased vehicle,
the term of the lease, and
the prospective applicant’s overall creditworthiness and ability to pay.
Ally Bank’s standards also require physical damage insurance coveringto be maintained on each leased vehicle.
Applications are evaluated and decisions are made either through an entirely automated process or through manual review by a credit underwriter. Ally Bank developed its automated process in order to expedite the review of applications. The automated process approves applications with various combinations of credit factors that Ally Bank has observed over time will receive credit underwriter approval. As a result, there are many clusters of credit factors that will lead to an automated approval, rather than one or a few sets of benchmark characteristics. Automated approvals are limited to the highest quality credit tiers. However, even in the highest quality credit tier, a significant portion of approved applications are approved by credit underwriters rather than by the automated process.
The sponsor may use programs developed and maintained by the sponsor or third parties that would allow it to complete the entire leasing process electronically. The resulting leases will be electronically signed by the related obligors and maintained by the sponsor or third parties in electronic form only.
Leases that are acquired under incentive programs sponsored by vehicle manufacturers, typically have implied lease rates that, upon lease origination, are below current market rates or Stated Residual Values that are higher than the ALG Residual (as defined below).
Once the lease agreement, title application, insurance form, odometer statement and various other forms have been completed by the dealer, Ally Bank or its affiliate directs the dealer to title the vehicle securingin the name of VAULT, as nominee, and to record a lien in favor of Ally Bank or Ally Financial, as its agent, on the vehicle’s certificate of title. The dealer sends the appropriate paperwork to Ally Bank or its affiliate. Ally Bank or its affiliate then enters essential information into the centralized database after which billing statements are automatically generated and mailed monthly to the lessee. Several processing centers are responsible for the processing of monthly payments, while Ally Bank’s or its affiliates’ branches take charge of all collection efforts against delinquent lessees.
Prior to transferring possession of a vehicle to a lessee, the dealer must:
collect the first monthly payment, including a refundable security deposit unless the lessee qualifies for the SmartLease Loyalty Program or other marketing programs, in which case both may be waived;
verify that the lessee has purchased at least the minimum physical damage and public liability insurance coverage; and
ensure that all required license fees, registration fees and up-front taxes are paid.
Fees and taxes are included in the lessee’s monthly payment, including acquisition fees and documentation expenses. The dealer is responsible for titling and registering the vehicle, unless the applicable state’s motor vehicle department permits or requires the lessee to submit the title and registration documentation.
Ally Bank has established a series of policies, or “underwriting criteria,” that apply to the review of a credit application. The underwriting criteria contain guidelines for many attributes of an application, such as a maximum payment-to-income ratio and minimum credit score and, for lower credit quality applicants, maximum debt-to-income ratio. Some, but not all, of these guidelines will vary according to the credit tier of the applicant or the term of the proposed lease, with a higher credit tier or a shorter lease term generally having a more permissive guideline.
Credit underwriters have a limited ability to approve exceptions to the guidelines contained in the underwriting criteria. Exceptions to the credit policies must be approved by credit underwriters with appropriate credit authority. Approved applicants that do not comply with all credit guidelines typically have strong compensating factors that indicate a high ability of the applicant to make lease payments. For example, underwriting exceptions may include allowing a longer term or a greater ratio of payment to income or debt to income than the standard allowances for such criteria. Ally Bank monitors exceptions to the guidelines, with the goals of limiting exceptions to a small portion of approved applications and rarely permitting more than a single exception for any lease. Information regarding lease assets in a securitized pool that constituted exceptions to the guidelines will be disclosed in the accompanying prospectus supplement under“The Lease Assets and Secured Notes—Exceptions to Underwriting Guidelines.”
In conjunction with the revision of underwriting processes in May 2011, Ally Bank modified several of the thresholds in its underwriting guidelines beyond which it considered approved applications to constitute exceptions. As a result, a limited range of approved applications that would previously have been considered to conform to the underwriting guidelines instead are treated as exceptions. Only those lease assets which Ally Bank considered at the time of acquisition to constitute exceptions will be reported as exceptions in the accompanying prospectus supplement. Ally Bank does not believe that the number of lease assets it acquires in this limited range has increased since the thresholds were modified, but the change in exception policy is likely to result in increased levels of exceptions being reported for pools of lease assets for which a larger proportion have been originated under the modified thresholds.
Determination of Residual Value
Historically, Ally Bank and its affiliates used residual values from the Automotive Lease Guide to set residual values on vehicles at the time of lease acquisition. The Automotive Lease Guide is an independent publication of vehicle residual values and is frequently used for comparison purposes by the vehicle leasing industry. We refer to the expected value of a vehicle at the scheduled lease end date of the related lease as determined by the Automotive Lease Guide at the date specified in the prospectus supplement as the “ALG Residual.” Prior to August 2009, Ally Bank and its affiliates calculated the residual value stated in each receivable.lease, which we refer to as the “Stated Residual Value,” by adding a percentage of the manufacturer’s suggested retail price or “MSRP” to the ALG Residual of that vehicle. The percentage of MSRP added to the ALG Residual varied according to the level of lease payments desired by the applicable manufacturer and Ally Bank as well as other factors, such as the vehicle model being leased and the mileage level per year specified in the lease. The maximum allowable residual value with respect to a new leased vehicle is the MSRP for the base vehicle plus options. We use the concept “Lease Residual,” which is the lesser of the Stated Residual Value and the ALG Residual, to establish the ABS Value of the lease assets.
Beginning in August 2009, to mitigate residual exposure at lease termination, Ally Bank and its affiliates elected to risk adjust the ALG Residual for leased vehicles. Risk adjustments to ALG Residual are determined at lease inception and are based on past residual performance of Ally Bank’s portfolio. Currently, the maximum risk-adjusted residual values are 100% of the ALG Residual. Risk adjustments are applied on a model basis and may be as low as 90% of ALG Residual given historical residual performance. We cannot assure you that Ally Bank will continue to risk-adjust ALG Residuals.
Ally Bank distributes residual value tables based on residual values from the Automotive Lease Guide to its affiliates and franchised dealers bi-monthly. The tables provide residual value percentages for each new vehicle available for lease terms of 12, 24, 27, 30, 36, 39 and 48 months. If a term and corresponding residual value percentage are not published, the dealer will interpolate the number by averaging the nearest published data above and below the desired term.
Each lease and related leased vehicle is purchased from the dealer by Ally Bank for its “capitalized cost,” which may exceed the MSRP. The capitalized cost represents the present value (as of the acquisition date) of the monthly payments due on a lease and the Stated Residual Value discounted at an obligorimplied lease rate. Each lease provides for level monthly payments except for the first and last monthly payments, and the monthly payments on a lease are generally due on the same day of each month.
A lease may terminate before its scheduled termination date—which we call an early termination— in one of the following ways: a voluntary early termination by the lessee under a Pull Ahead Program or otherwise, or a liquidation due to a default under the lease or a casualty loss of the leased vehicle.
Each lease agreement provides that the lessor may terminate the lease and retake the vehicle if the lessee defaults. Events of default under the lease agreement include, but are not limited to, the occurrence of the following:
the lessee fails to make a payment when due;
the lessee fails to maintain required insurance coverage;
the servicerlessee fails to maintain or repair the vehicle as required by the lease agreement;
the lessee violates the transfer of interest provisions of the lease agreement;
the lessee breaches any agreements in the lease and that breach significantly impairs the prospect of payment, performance or realization of the lessor’s interest in the vehicle;
the lessee made a material misrepresentation on his or her lease agreement; or
the lessee does any other act that is a default under a lease agreement under applicable law.
Upon default, the lessor or assignee may butterminate the lease agreement and the lessee is not obligatedresponsible for any payments otherwise required upon early termination of the lease.
Each lease agreement may be terminated by the lessee at any time before its scheduled lease end date. If a lease agreement is terminated early, the lessee must return the vehicle to purchase collateral protection insurance, which consists of obtainingAlly Bank or its affiliate or to any reasonable address Ally Bank or its affiliate designates and complete an odometer disclosure statement. Except for leases terminated under a new policy onPull Ahead Program, upon early termination the obligor’s behalf. If collateral protection insurance is obtained, the servicer increases the required payments under the related account bylessee will owe an amount equal to the costtotal unpaid monthly payments, less unearned lease charges, plus any unpaid fees and taxes and charges for excess mileage and excess wear, to the extent not offset by the excess of the insurance.vehicle’s sales price over the Stated Residual Value of the vehicle, all as stated in the lease agreement. For leases terminated early under a Pull Ahead Program, lessees are only responsible for any accrued but unpaid monthly lease payments and payment of the excess wear and excess mileage charges as described below under “—Pull Ahead Programs” in this prospectus. Each lease agreement provides that the lessee may, at its own expense, obtain from an independent third party acceptable to Ally Bank or its affiliate a professional appraisal of the vehicle’s wholesale value that could be realized at sale. The appraised value will be binding and used as the sales price when determining whether or not there is any surplus.
All of the leases are closed-end leases. Under a closed-end lease, at the end of its term, if the lessee does not elect to purchase the vehicle by exercise of the purchase option contained in the lease agreement, the lessee is required to return the vehicle to Ally Bank or its affiliate or any reasonable address Ally Bank or its affiliate designates. After the vehicle is returned, an inspection will be completed by either the dealer or a third party inspection company. As with an early termination by the lessee, the lessee must complete an odometer disclosure statement and pay for excess mileage and excess wear charges and other items that may be due under the lease. The lessee is not required to pay the deficiency, if any, between the vehicle’s sale price and its residual value.
The securitized pools relating to offerings madelessee may exercise the purchase option under this prospectus contain large numbersthe lease agreement at the scheduled lease end date by paying the purchase price stated in the lease agreement. The purchase price is established by the dealer at lease inception and is described in the “Purchase Option at End of individual retail instalment sale contracts entered into by obligors located throughoutLease Term” section of the United States. This factor requireslease agreement. Leases originated since 2009 include a $2,500 premium in the purchase option over the contract residual value.
Vehicle Maintenance; Excess Wear and Excess Mileage
Each lease provides that the servicerlessee is responsible for all maintenance, repair, service and operating expenses of those contracts have a breadth and scale of operations that may not be required to effectively service many other types of assets.the leased vehicle. In addition, the securitylessee is responsible under the related lease for all excess damage to the leased vehicle and for its loss, seizure or theft. At the scheduled lease end date of the lease, if the lessee does not purchase the leased vehicle, the lease requires the lessee to pay Ally Bank the estimated cost to repair any damage to the vehicle that is deemed to be “excess wear.” Excess wear generally includes such items as inoperative mechanical and electrical parts, damage to the body, lights, trim or paint, missing equipment, parts and accessories, and similar items.
Each lease also specifies a selected mileage level per year, which is one of the factors taken into account by Ally Bank in establishing the residual value for a leased vehicle. For more information on the determination of residual values, see
“—Determination of Residual Value” above. If the lessee does not purchase the leased vehicle at the end of the lease term, the lease requires the lessee to pay Ally Bank an excess mileage charge for each contract is a motor vehicle. The processingmile the vehicle has been driven in excess of the selected mileage level.
If the lessee fails to maintain the vehicle as required under the lease or to pay excess wear or excess mileage charges, the vehicle sale price could be reduced, in turn reducing amounts available to pay the secured notes and maintenance of title and other information related to those motor vehicles requires specific systems capabilities and experience. In addition, foreclosure upon those assets when appropriate requires knowledge and experience as to the methods for taking possession of and retitling the motor vehicle and contacts with the network of auctioneers through which the foreclosed vehicles are liquidated.notes.
CollectionsPull Ahead Programs
The servicer will deposit collections into the collection account held by the indenture trustee within two business days of receipt. However, the servicer may retain these amounts until the distribution date at any time that (a) the Monthly Remittance ConditionA Pull Ahead Program is satisfied, or (b) arrangements are made which are acceptable to the rating agencies. Pending deposit into the Collection Account, collections may bea marketing program employed by the servicer at its own riska vehicle manufacturer to encourage current lessees to purchase or lease new vehicles. More information regarding Pull Ahead Programs and for its own benefit and will not be segregated from its own funds. In such case, all gains and losses resulting from the investment of those fundsrelated Pull Ahead Payments will be for the account of the servicer and will not alter in any respect the amount that the servicer is obligated to remit to the collection account in respect of collections on the following distribution date.
Collections on a Scheduled Interest Receivable made during a monthly period, other than an Administrative Receivable or a Warranty Receivable, which are not late fees, prepayment charges or other similar fees or charges will be applied to the Scheduled Payment. Any Excess Payment will be held by the servicer or, if the servicer has not satisfied conditions (a) or (b) describedprovided in the preceding paragraph, will be deposited in the Paymentaccompanying prospectus supplement under “Residual Values—Pull Ahead Servicing Account,Programs and will be treated as a Payment Ahead, except as described in the following sentence. If and to the extent that an Excess Payment (1) together with any unapplied Payments Ahead exceeds the sum of three Scheduled Payments, or (2) constitutes, either alone or together with any previous unapplied Payments Ahead, full prepayment, then that portion of the Excess Payment shall not be deemed a Payment Ahead and shall instead be applied as a full or partial Prepayment.
Collections made during a monthly period on Simple Interest Receivables, other than Administrative Receivables or Warranty Receivables, which are not late fees or other similar fees or charges, will be applied to principal and interest on all of these receivables.
Collections on Administrative Receivables and Warranty Receivables, including Administrative Purchase Payments and Warranty Payments, will generally be applied in the manner described in the preceding two paragraphs, except that unapplied Payments Ahead on a Scheduled Interest Receivable will be made to the servicer or the depositor, as applicable.Early Termination Marketing Programs.”
Servicing Compensation and Payment of ExpensesTHE LEASE ASSETS
On each distribution date,General
Ally Bank or its affiliates purchase new and used leases and related vehicles from dealers under a supplemental dealer agreement. Ally Bank selects the servicerlease assets to be included in the pools of leases securing series of secured notes from among the lease assets originated in the states in which VAULT operates, based on the eligibility criteria set forth in “The Lease Assets and the Secured Notes—Criteria Applicable to the Selection of Lease Assets” and, if applicable, “The Lease Assets and the Secured Note—Criteria Applicable to the Selection of Initial Lease Assets” and“The Lease Assets and the Secured Note—Criteria Applicable to the Selection of Additional Lease Assets During the Revolving Period”in the accompanying prospectus supplement. No SmartLease Plus Accounts, Paid in Full Leases or agreements constituting electronic chattel paper will receivebe included in the following servicing fees:
a basic servicing fee for the prior month, equal to one-twelfth of the Basic Servicing Fee Ratepool unless otherwise specified in the accompanying prospectus supplement.
Information for each pool of motor vehicles and related leases will be set forth in the applicable prospectus supplement, multipliedincluding, to the extent appropriate:
aggregate ABS Value,
number of leases in the pool,
average ABS Value,
average Lease Residual;
percentage of all vehicles in the pool that were new vehicles at lease inception;
weighted average standardized credit score,
range and distribution of standardized credit scores,
weighted average original term, and
weighted average remaining term.
Representations, Warranties and Covenants
Pursuant to the sale and contribution agreement by which Ally Bank sells the lease assets that secure the secured notes to ACOLT, Ally Bank will make representations and warranties as to the lease assets on which ACOLT will rely in accepting the lease assets, including representations that each of the lease assets satisfies the eligibility criteria described in “The Lease Assets and the Secured Notes—Criteria Applicable to the Selection of Lease Assets” or, if applicable, “The Lease Assets and the Secured Note—Criteria Applicable to the Selection of Initial Lease Assets” and“The Lease Assets and the Secured Note—Criteria Applicable to the Selection of Additional Lease Assets During the Revolving Period”in the accompanying prospectus supplement. In addition Ally Bank will make the following representations and warranties, among others:
upon conveyance of the lease asset by the Aggregate Receivables Face Amount dealer to Ally Bank, (1) Ally Bank has good title in and to the lease and the amounts due thereunder, (2) VAULT has (or all necessary and appropriate action has been commenced that would result in VAULT having) good title to the related vehicle, and (3) Ally Bank owns and has good title to all of the beneficial interest in each related vehicle, in each case free of any lien;
no lease was originated in, or is subject to the laws of, any jurisdiction whose laws would make unlawful the sale, transfer, assignment or pledge of such lease and related vehicle pursuant to any applicable dealer agreement or transaction document described therein;
each lease was underwritten in substantial conformance with underwriting guidelines applied to similar leases acquired by Ally Bank for its own account;
as of the first dayrespective sale date, to the best of Ally Bank’s knowledge, the lease assets are free and clear of all filed security interests, liens, charges and encumbrances on account of work, labor, or materials other than tax liens or other liens that monthly period,arise by operation of law and no offsets, defenses or counterclaims have been asserted or threatened;
there is only one original executed copy of each lease;
the aggregate Initial ABS Value of the lease assets is an amount specified in the related sale and contribution agreement;
since the applicable cut-off date, no provision of a lease has been or will be waived, altered or modified in any respect, except in accordance with the servicer’s customary servicing procedures and the servicing agreement;
each lease was originated on or after a date specified in the related sale and contribution agreement;
the information set forth in a lease asset schedule to be supplied as part of a related sale and contribution agreement is true and correct in all material respects;
each lease is denominated in U.S. dollars;
The secured notes will be issued under the terms of a form of ACOLT indenture, which has been filed as an exhibit to the registration statement of which this prospectus forms a part. The following summary, together with the related description in the accompanying prospectus supplement, describes the material terms of the secured notes and the ACOLT indenture. Where particular provisions or terms used in the ACOLT indenture are referred to, the actual provisions, including definitions of terms, are incorporated by reference as part of this summary. The prospectus supplement may contain additional information relating to the ACOLT indenture and the secured notes issued pursuant to the ACOLT indenture.
Ally Bank will acquire the secured notes in each series from ACOLT or, if applicable, another special purpose Delaware statutory trust to be identified in the accompanying prospectus supplement. Recourse on each secured note is limited to and is secured by a perfected lien on and an undivided security interest in a pool of leases, the related leased vehicles and other related assets. For each series of secured notes, one or more secured notes will be issued for the lease assets acquired on the initial closing date and one secured note will be issued for each pool of lease assets acquired on any additional closing dates. Secured notes in a series may also be issued with interest rates or other terms that correspond to the securities being issued by the issuing entity if the prospectus supplement so provides. However, all secured notes in a series will be paid ratably from collections on the entire pool of lease assets securing those secured notes.
The lease assets have been or will be acquired or originated by Ally Bank from participating dealers in accordance with Ally Bank’s underwriting requirements. The lease assets have been or will be acquired or originated by Ally Bank in the ordinary course of business and in accordance with its underwriting standards, which evaluate the prospective lessee’s ability to pay and creditworthiness, as well as the expected residual value of the vehicle to be financed. Ally Bank’s underwriting standards also generally require physical damage insurance to be maintained on each leased vehicle.
The lease assets to be included in the pool securing a series of secured notes will be selected using several criteria, which consist of those criteria described in “The Transfer Agreements and Servicing Agreements—Sale and Assignment of Lease Assets and Secured Notes” in this prospectus and any other criteria set forth in the accompanying prospectus supplement.
Terms of the Secured Notes under the ACOLT Indenture
The following summary, together with the related description in the accompanying prospectus supplement, describes the material terms of the secured notes. Where particular provisions or terms used in the ACOLT indenture are referred to, the actual provisions, including definitions of terms, are incorporated by reference as part of this summary.
Each secured note held by an issuing entity is secured by:
a pool of leases for new or used cars and light duty trucks and all beneficial interest in the related vehicles under the VAULT trust agreement, and all moneys due thereunder on and after the cut-off date and with respect to the vehicles and, to the extent permitted by law, all accessions to the related vehicles;
the right to proceeds of physical damage, credit life, credit disability or other insurance policies covering the related vehicles or lessees;
any unpaid basic servicing fees from all prior distribution dates, andrecourse against dealers on the lease assets;
specified rights of ACOLT in the ACOLT Basic Documents, solely with respect to leases, leased vehicles and other specified assets relating to the secured notes; and
amounts and investments of those amounts as from time to time may be held in separate trust accounts established and maintained pursuant to the ACOLT indenture pursuant to which the secured notes owned by the issuing entity were issued and the proceeds thereof.
The sole source for payment of the secured notes is the collateral described above and any other servicing feesfunds that may from time to time be pledged to secure the payment of the secured notes.
Interest on secured notes accrues from and including the issue date for the secured notes, to but excluding the date on which the Secured Note Principal Balance of the secured notes is reduced to zero, at the annual rate specified in the ACOLT indenture.
Each holder of a secured note agrees by acceptance of a secured note (or interest therein) that no recourse may be taken, directly or indirectly, with respect to the obligations of ACOLT, the ACOLT owner trustee or the ACOLT indenture trustee on the secured notes or under the ACOLT indenture or any certificate or other writing delivered in connection herewith or therewith, against (i) the ACOLT owner trustee or the ACOLT indenture trustee, each in its individual capacity, (ii) ACOLT’s equityholders or (iii) ACOLT or the assets of any other series of ACOLT. The holder also agrees to look solely to the collateral for that secured note, including available amounts on deposit in any designated ACOLT reserve account, and any other property pledged as security for the secured note in payment of the indebtedness thereunder. However, nothing limits any right of the holder of a secured note to accelerate the maturity of the secured note upon default, subject to any grace periods, to bring suit and obtain a judgment against ACOLT on the secured note, except that until one year and a day after payment in full of the secured notes the sole recourse for that judgment is limited to the lease asset collateral and any other security for the secured note, to enforce the security interest of the holder or otherwise realize upon the collateral securing the secured note, including available amounts on deposit in any designated ACOLT reserve account, or any other property pledged as security to secure the obligations represented by the secured notes.
Each secured note will be discharged upon the delivery to the ACOLT indenture trustee of the secured note for cancellation of the secured note or, with certain limitations, upon deposit with the ACOLT indenture trustee of funds sufficient for the payment in full of the secured note.
Each holder of a secured note, by its acceptance of the secured note, agrees that it will not, prior to the date which is one year and one day after the payment in full of the secured note and any other obligations of or interest in ACOLT, petition or otherwise cause ACOLT to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against ACOLT under any federal or state bankruptcy, insolvency, reorganization or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of ACOLT or any substantial part of its property, or ordering the winding up or liquidation of the affairs of ACOLT.
A form of ACOLT indenture has been filed as an exhibit to the registration statement of which this prospectus forms a part. We will provide a copy of the applicable ACOLT indenture without exhibits upon request to a holder of notes issued under the AART indenture. The following summary, together with any related description in the accompanying prospectus supplement, describes the material terms of the ACOLT indenture.
Modification of ACOLT Indenture Without the Secured Noteholder’s Consent. For each ACOLT indenture, ACOLT and the ACOLT indenture trustee may, without consent of the AART indenture trustee, as holder of the secured notes of a particular series, but with prior notice to the rating agencies hired to rate the secured notes, if any, or the notes, enter into one or more supplemental indentures for any of the following purposes:
(1) to correct or amplify the description of the property subject to the lien of the ACOLT indenture or add additional property subject to the lien of the ACOLT indenture;
(2) to provide for the assumption of the secured notes and the ACOLT indenture obligations by a permitted successor to ACOLT;
(3) to add additional covenants for the benefit of the secured noteholders;
(4) to convey, transfer, assign, mortgage or pledge any property to or with the ACOLT indenture trustee;
(5) to cure any ambiguity or correct or supplement any provision in the ACOLT indenture or in any supplemental indenture that may be inconsistent with any other provision of the ACOLT indenture, in any supplemental indenture or in any other ACOLT Basic Document;
(6) to evidence and provide for the acceptance of the appointment of a successor or additional ACOLT indenture trustee or to add to or change any of the provisions of the ACOLT indenture as will be necessary and permitted to facilitate the administration by more than one ACOLT indenture trustee;
(7) to modify, eliminate or add to the provisions of the ACOLT indenture in order to comply with the Trust Indenture Act of 1939, as amended; or
(8) to add any provisions to, change in any manner, or eliminate any of the provisions of, the ACOLT indenture or modify in any manner the rights of the holders of secured notes under the ACOLT indenture; provided that any action specified in this clause (8) occurs pursuant to a written order of ACOLT and will not, as evidenced by an opinion of counsel, adversely affect in any material respect the interests of the secured noteholders unless the consent of the AART indenture trustee, as holder of the secured notes, is otherwise obtained as described in the next section of this prospectus.
Modification of ACOLT Indenture With the Secured Noteholder’s Consent. For each ACOLT indenture, ACOLT and the ACOLT indenture trustee may execute a supplemental indenture to add provisions to, change in any manner or eliminate any provisions of, the ACOLT indenture, or modify in any manner the rights of the secured noteholders, with the consent of the holders of a majority in aggregate principal amount of the outstanding secured notes and such other requirements, if any, as may be disclosed in the applicable prospectus supplement.
Without the consent of the AART indenture trustee, as holder of each outstanding secured note which would be affected, however, no supplemental indenture will:
(1) change the due date of any installment of principal of or interest on any secured note or reduce the principal amount of any secured note, the interest rate specified thereon or change any place of payment where or the coin or currency in which any secured note or any interest thereon is payable or modify any of the provisions of the ACOLT indenture in a manner as to affect the calculation of the amount of any payment of interest or principal due on any secured note on any payment date;
(2) impair the right to institute suit for the enforcement of specified provisions of the ACOLT indenture regarding payment of principal or interest on any secured note;
(3) reduce the percentage of the aggregate principal amount of the outstanding secured notes, the consent of the holders of which is required for any supplemental indenture or the consent of the holders of which is required for any waiver of compliance with specified provisions of the ACOLT indenture or of specified defaults thereunder and their consequences as provided for in the ACOLT indenture;
(4) modify any of the provisions of the ACOLT indenture regarding the voting of secured notes held by ACOLT, Ally Bank, the servicer or any affiliate of any of them;
(5) reduce the percentage of the aggregate principal amount of the outstanding secured notes required to direct the ACOLT indenture trustee to sell or liquidate the assets of ACOLT if the proceeds of that sale would be insufficient to pay the principal amount and accrued but unpaid interest on the outstanding secured notes;
Servicing fees(6) amend the sections of the ACOLT indenture to decrease the minimum percentage of the aggregate principal amount of the outstanding secured notes necessary to amend the ACOLT indenture or any of the other ACOLT Basic Documents;
(7) modify any of the provisions of the ACOLT indenture to change the calculation of the amount of any payment of interest or principal due on any payment date; or
(8) permit the creation of any lien ranking prior to or on a parity with the lien of the ACOLT indenture on any part of the assets of ACOLT or, except as otherwise permitted or contemplated in the ACOLT indenture, terminate the lien of the ACOLT indenture on that collateral or deprive any of the secured noteholders of the security afforded by the lien of the ACOLT indenture.
ACOLT Events of Default; Rights Upon ACOLT Event of Default. For each ACOLT indenture, ACOLT Events of Default under the ACOLT indenture will be paid outconsist of:
(1) any failure to pay interest on the secured notes as and when the same becomes due and payable, which failure continues unremedied for five business days;
(2) except as provided in clause (3), any failure to pay any principal on the secured notes as and when required in accordance with the ACOLT Basic Documents, which failure continues unremedied for 30 days after the giving of funds available for that purpose. The prospectus supplement will specifywritten notice of the relative priorityfailure (X) to the servicer by the ACOLT indenture trustee or (Y) to the servicer and the ACOLT indenture trustee by the holders of basic servicing fees andnot less than 25% of the aggregate principal amount of the outstanding secured notes;
(3) failure to pay in full the Secured Note Principal Balance of the secured notes by the final maturity date of the secured notes;
(4) any failure to observe or perform in any material respect any other servicing fees.
The basic servicing feecovenants or agreements of ACOLT in the ACOLT indenture other than the FDIC Rule Covenant, which failure materially and adversely affects the rights of secured noteholders, and continues unremedied for each monthly period and any portion30 days after the giving of written notice of the basic servicing fee that remains unpaid from prior distribution dates will be paid at the beginning of that monthly period out of collections for that monthly period. In addition, for each trust,failure (X) to ACOLT and Ally Bank (or the servicer, will retainas applicable) by the ACOLT indenture trustee or (Y) to ACOLT, Ally Bank (or the servicer, as applicable) and the ACOLT indenture trustee by the holders of not less than 25% of the aggregate principal amount of the outstanding secured notes;
(5) events of bankruptcy, insolvency or receivership for ACOLT indicating its insolvency, reorganization pursuant to bankruptcy proceedings or inability to pay its obligations; and
(6) any late fees, prepayment chargesother events or similar fees and charges collected during a monthly period and any investment earnings on trust accounts during a monthly period, subject to any limitationscircumstances set forth in the applicable prospectus supplement.
If an ACOLT Event of Default occurs and is continuing, either the ACOLT indenture trustee or the holders of not less than a majority of the aggregate principal balance of the outstanding secured notes then outstanding, may declare the unpaid principal and accrued and unpaid interest of the secured notes to be immediately due and payable. This declaration may, under specified circumstances, be rescinded by the AART indenture trustee, as holder of the secured notes.
If the secured notes of any series are declared due and payable following an ACOLT Event of Default, then, in lieu of the ACOLT indenture trustee maintaining the assets of the ACOLT trust estate and continuing to apply collections on the lease assets as if there had been no declaration of acceleration, the ACOLT indenture trustee may:
(1) institute proceedings to collect amounts due and payable on the secured notes;
(2) institute proceedings for complete or partial foreclosure on the collateral with respect to the ACOLT indenture and the VAULT security agreement;
(3) exercise remedies as a secured party; or
(4) sell all or a portion of the ACOLT trust estate in specified circumstances following the procedures set forth in the ACOLT indenture and the ACOLT Basic Documents.
In that event, any money or property collected by the ACOLT indenture trustee will be applied:
(1) first, to the ACOLT indenture trustee for unpaid fees, expenses and indemnification due to it under the ACOLT indenture, if any,
(2) next, to the ACOLT owner trustee for amounts due to it, not including amounts due for payments to the holders of the equity interest of ACOLT, under the ACOLT Declaration of Trust; and
(3) the remainder to the ACOLT collection account for distribution in the following priority: (i) payment in full of the accrued and unpaid interest on the secured notes; (ii) payment in full of the unpaid principal balance of the secured notes; (iii) to the AART collection account for payment of any shortfalls of amounts on deposit therein; and (iv) the remainder will be distributed in accordance with the instructions of the holder of the equity interests of ACOLT.
The foregoingACOLT indenture trustee, however, is prohibited from selling or liquidating the assets of ACOLT following an ACOLT Event of Default, unless:
| (1) | (A) the AART indenture trustee, as holder of the secured notes, consents to the sale or liquidation; |
| (B) | the proceeds of the sale are sufficient to pay in full the principal of and the accrued interest on the secured notes at the date of the sale or liquidation; or |
| (C) | (X) there has been a default in the payment of interest, principal or other amounts on the secured notes, |
| (Y) the ACOLT indenture trustee determines that the assets of ACOLT will not continue to provide sufficient funds on an ongoing basis to make all payments on the secured notes as the payments would have become due if the obligations had not been declared due and payable, and |
| (Z) the ACOLT indenture trustee obtains the consent of the AART indenture trustee, as holder of the secured notes; and |
(2) 10 days prior written notice of the sale or liquidation of the least assets has been given to the credit rating agencies that have been hired to rate the related notes.
Following a declaration upon an ACOLT Event of Default that the secured notes are immediately due and payable, the secured notes will be entitled to ratable repayment of principal of and interest on or after the respective due dates as provided in the ACOLT indenture and the secured notes (in the case of redemption, if applicable, on or after the redemption date).
Subject to the provisions of the ACOLT indenture relating to the duties of the ACOLT indenture trustee, if an ACOLT Event of Default occurs and is continuing with respect to the secured notes, the ACOLT indenture trustee will be under no obligation to exercise any of the rights or powers under the ACOLT indenture at the request or direction of any of the holders of the secured notes, unless such holders shall have offered to the ACOLT indenture trustee security or indemnity satisfactory to the ACOLT indenture trustee against the costs, expenses and liabilities which might be incurred by it in complying with the request. Subject to the provisions for indemnification and to limitations contained in the ACOLT indenture, the holders of a majority of the aggregate principal balance of the outstanding secured notes in a series will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the ACOLT indenture trustee and the holders of a majority of the aggregate principal balance of the outstanding secured notes in that series may, in specified cases, waive any default with respect thereto, except a default in the payment of principal or interest or a default in respect of a covenant or provision of the ACOLT indenture that cannot be modified without the waiver or consent of all of the holders of the outstanding secured notes in that series.
No holder of a secured note in any series will have the right to institute any proceeding regarding the ACOLT indenture, unless:
(1) the holder has given to the ACOLT indenture trustee written notice of a continuing ACOLT Event of Default;
(2) the holders of not less than 25% of the aggregate principal balance of the outstanding secured notes in a series have made written request to the ACOLT indenture trustee to institute the proceeding in its own name as ACOLT indenture trustee;
(3) the holder or holders have offered the ACOLT indenture trustee reasonable indemnity;
(4) the ACOLT indenture trustee has for 60 days failed to institute the proceeding; and
(5) no direction inconsistent with the written request has been given to the ACOLT indenture trustee during the 60-day period by the holders of a majority of the aggregate principal amount of the outstanding secured notes.
If a default occurs and is continuing regarding the ACOLT trust estate and if it is known to a responsible officer of the ACOLT indenture trustee, the ACOLT indenture trustee will mail to each trust are intendedholder of the secured notes, notice of the default within the later of 90 days after it occurs and ten business days after it becomes known to compensatea responsible officer of the ACOLT indenture trustee. Except in the case of a failure to make any required payment of principal of or interest on any secured note, the ACOLT indenture trustee may withhold the notice beyond the 90-day period if and so long as it determines in good faith that withholding the notice is in the interests of secured noteholders.
In addition, each of the ACOLT indenture trustee and the holders of the secured notes, by accepting the secured notes, will covenant that they will not, for a period of one year and one day after payment in full of the secured notes, institute against ACOLT any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law.
Neither the ACOLT indenture trustee nor the ACOLT owner trustee in its individual capacity, nor any holder of any equity interests in ACOLT including, without limitation, the depositor, nor any of their respective owners, beneficiaries, agents, officers, directors, employees, affiliates, or any successors or assigns of the ACOLT indenture trustee or the ACOLT owner trustee will, in the absence of an express agreement to the contrary, be personally liable for the payment of the principal of or interest on the secured notes or for the agreements of ACOLT contained in the ACOLT indenture.
Material Covenants. The ACOLT indenture provides that ACOLT may not consolidate with or merge into any other entity, unless:
(1) the entity formed by or surviving the consolidation or merger is organized under the laws of the United States, any state or the District of Columbia;
(2) the entity expressly assumes ACOLT’s obligation to make due and timely payments on the notes and the performance or observance of every agreement and covenant of ACOLT under the ACOLT indenture;
(3) no ACOLT Event of Default has occurred and is continuing immediately after the merger or consolidation;
(4) none of the servicer, the ACOLT owner trustee and the ACOLT indenture trustee have been advised that the rating of the secured notes will be reduced or withdrawn by the rating agencies hired to rate the secured notes as a result of the merger or consolidation;
(5) any action necessary to maintain the lien and security interest created by the ACOLT indenture has been taken; and
(6) ACOLT has delivered an opinion of counsel to the effect that the consolidation or merger would have no material adverse tax consequence to ACOLT or any secured noteholder.
ACOLT will not, among other things, except as expressly permitted by the ACOLT Basic Documents:
(1) sell, transfer, exchange or otherwise dispose of any of the assets of ACOLT except as provided in the ACOLT indenture and the ACOLT Basic Documents;
(2) claim any credit on or make any deduction from the principal and interest payable in respect of the secured notes, other than amounts withheld under the Internal Revenue Code or applicable state law, or assert any claim against any present or former secured noteholder because of the payment of taxes levied or assessed upon any part of ACOLT;
(3) voluntarily commence any insolvency, readjustment of debt, marshaling of assets and liabilities or other proceeding, or apply for performingan order by a court or agency or supervisory authority for the functionswinding-up or liquidation of its affairs;
(4) permit the validity or effectiveness of the ACOLT indenture or any other ACOLT Basic Document to be impaired or permit the liens of the ACOLT indenture or the VAULT security agreement to be amended, hypothecated, subordinated, terminated or discharged, or permit any person to be released from any covenants or obligations regarding the secured notes under the ACOLT indenture except as may be expressly permitted by the ACOLT indenture;
(5) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than the lien of the ACOLT indenture) to be created on or extend to or otherwise arise upon or burden the assets of the ACOLT trust estate or any part of its assets, or any interest in its assets or the proceeds thereof; or
(6) permit the liens of the ACOLT indenture or the VAULT security agreement to not constitute a valid security interest in the collateral thereunder.
ACOLT may not engage in any business or activity other than as specified under “The Secured Notes.” ACOLT will also not issue, assume or guarantee any indebtedness other than indebtedness incurred pursuant to the secured notes and the ACOLT indenture or otherwise in connection with the ACOLT Basic Documents.
Each issuing entity will comply with its obligations in the FDIC Rule Covenant. See“Insolvency Aspects of the Offerings—FDIC Rule.”
Annual Compliance Statement. ACOLT will be required to file annually with the ACOLT indenture trustee an officer’s certificate as to ACOLT’s activities and performance under the ACOLT indenture.
Satisfaction and Discharge of ACOLT Indenture. The ACOLT indenture will be discharged upon the delivery to the ACOLT indenture trustee for cancellation of all of ACOLT’s secured notes or, subject to limitations, upon deposit with the ACOLT indenture trustee of funds sufficient for the payment in full of all secured notes. The ACOLT indenture trustee will continue to act as ACOLT indenture trustee under the ACOLT indenture for the benefit of the secured noteholders until all payments in respect of the secured notes and interest due to the secured noteholders have been paid in full.
The ACOLT indenture trustee for a series of secured notes will be specified in the accompanying prospectus supplement. The ACOLT indenture trustee may give notice of its intent to resign at any time, in which event ACOLT will be obligated to appoint a successor trustee. ACOLT may also remove the ACOLT indenture trustee if the ACOLT indenture trustee ceases to be eligible to continue under the ACOLT indenture or if the ACOLT indenture trustee becomes insolvent or otherwise becomes incapable of acting. In those circumstances, the ACOLT will be obligated to appoint a successor ACOLT indenture trustee. The holders of a thirdmajority of the aggregate principal amount of the secured notes also have the right to remove the ACOLT indenture trustee and appoint a successor. Costs associated with the termination of the ACOLT indenture trustee will be borne by the servicer. There are no indemnification provisions that entitle the ACOLT indenture trustee to be indemnified from cash flow that otherwise would be used to pay the securities. Any resignation or removal of the ACOLT indenture trustee and appointment of a successor trustee does not become effective until acceptance of the appointment by the successor trustee.
The ACOLT indenture trustee will not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers so long as the ACOLT indenture trustee’s conduct does not constitute willful misconduct, negligence or bad faith. In addition, the ACOLT indenture trustee will not be liable for interest on any money received by it except if it agrees in writing with ACOLT and will have no liability or responsibility for the acts or omissions of any other party to any of the basic documents. The ACOLT indenture trustee does not have any obligation to independently verify or confirm any underlying data.
Delinquencies, Repossessions and Charge Offs
The primary sources of payment on the secured notes are payments due on the underlying leases and the proceeds of sale of the leased vehicles at lease termination.
As a result, the accompanying prospectus supplement sets forth information concerning the composition of the secured notes being sold to the depositor, information concerning the leases and leased vehicles and information concerning Ally Bank’s experience in the United States pertaining to delinquencies on leases of automobiles and light duty trucks and repossessions and charge off information relating to its entire leased vehicle portfolio. There can be no assurance that the performance of the secured notes or the delinquency, repossession and charge off experience on any portfolio of leases and leased vehicles will be comparable to prior experience.
Ally Financial’s Responsibilities as Servicer and Trust Administrator
Ally Financial is the trust administrator of the secured notes for the issuing entity. Ally Financial also acts as the servicer of automobile receivablesthe leases and leased vehicles. Ally Financial, as an agentservicer, is responsible for their beneficial owner, including:
collecting andcalculating the ABS Value of each lease asset, posting all payments
and responding to inquiries of obligors onlessees, investigating delinquencies, monitoring the receivables,
investigating delinquencies,
sending payment couponsstatus of insurance policies with respect to obligors,
reporting tax information to obligors,the leases and
policing the collateral.
These amounts will also compensate the servicer for its services as the pool of receivables administrator, including vehicles, accounting for collections, remarketing returned vehicles and furnishing monthly and annual statements to the owner trusteeACOLT and the indenture trustee for distributions and generatingreporting federal income tax and other information for the lease assets. For a discussion of the responsibilities of the servicer, see “Description of Auto Lease Business of Ally Bank” and “The Lease Assets” in this prospectus. For a discussion of the responsibilities of the trust administrator, see “The Transfer Agreements and Servicing Agreements—Servicing and Administration Procedures.”
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The primary sources of payment on a series of secured notes will be the Monthly Lease Payments on the leases and amounts received upon sale of the leased vehicles securing that series. As a result, the weighted average life of the securities issued by any issuing entity will generally be influenced by the rate at which the leases securing the related series of secured notes terminate early, causing a prepayment on the secured notes owned by that issuing
entity. All of the leases may be terminated early at any time upon payment by the lessee of the (1) remaining Monthly Lease Payments less any unearned finance charges for the lease and (2) excess mileage and excess wear charges, if any. Ally Bank, as agent for any applicable vehicle manufacturers, may also elect to offer Pull Ahead Programs with respect to the leases, which would permit early terminations under leases without the payment by the lessees of all or a portion of these remaining Monthly Lease Payments. The implementation of a Pull Ahead Program by any applicable vehicle manufacturer or Ally Bank will have the effect of increasing the rate of early termination of the leases. For more information on the Pull Ahead Program, see “Description of Auto Lease Business of Ally Bank—Pull Ahead Programs” in this prospectus. For more information on the amount of time generally required to dispose of off-lease vehicles, see “The Servicer—Vehicle Disposition Process.”
Although early terminations are primarily caused by the early return or purchase of leased vehicles by lessees under a Pull Ahead Program or otherwise, early terminations may also include liquidation due to a default under the lease or a casualty loss of the leased vehicle. Upon early termination of a lease in any pool, the series of secured notes related to that pool will be repaid pro rata on the next distribution date.
In addition, payments made by the servicer or by Ally Bank as seller of the lease assets as a result of a purchase by the servicer or Ally Bank of the lease asset from ACOLT due to a breach of a representation or warranty of the servicer or Ally Bank will be treated by the servicer as an early termination of the lease.
The secured notes and the notes may be prepaid in full if the servicer exercises its option to purchase the lease assets after the Aggregate ABS Value of the lease assets declines to the level described in “The Transfer Agreements and Servicing Agreements—Termination” in this prospectus and “Weighted Average Live of the Notes” in the accompanying prospectus supplement.
Any reinvestment risk resulting from prepayment of secured notes will be borne entirely by the holders of securities.
If a revolving period is provided for in the accompanying prospectus supplement, the weighted average life of the securities will also be influenced by the ability of ACOLT to reinvest payments received on the lease assets during the revolving period. The ability of ACOLT to reinvest those payments will be influenced by the availability of suitable additional lease assets for ACOLT to purchase and the rate at which the ABS Values of the lease assets are paid.
If there is a partial prepayment on a lease, these amounts will not be applied to prepay the related secured notes. Instead, if the Monthly Remittance Condition is satisfied, the servicer will retain these amounts and apply them, pro rata, to pay principal and interest on the related secured notes as these amounts become due and payable until that lease is terminated and the related secured notes are due and payable in full. If the Monthly Remittance Condition is not satisfied, the servicer will deposit partial prepayments into the Payment Ahead Servicing Account within two business days after it receives these prepayments.
All of the leases have been or will be originated or acquired from dealers using Ally Bank’s underwriting standards. The depositor can make no assurance that the leases will experience the same rate of early termination as Ally Bank’s historical early termination or loss experience for leases in its portfolio. There can be no assurance that Ally Bank will continue to dispose of off-lease vehicles in the manner and within the time periods described in “The Servicer—Vehicle Disposition Process” in this prospectus. Moreover, there can be no assurance that the servicer will make an Advance or, if made, that the Advance will be sufficient to pay in full any series or class of notes on the final scheduled payment date for that series or class. Therefore, any series or class of securities issued by an issuing entity may mature significantly later than its targeted maturity date.
POOL FACTORS AND TRADING INFORMATION
Each Note Pool Factor will initially be 1.0000000. Thereafter the Note Pool Factor will decline to reflect reductions in the outstanding principal balance of the notes. A noteholder’s portion of the aggregate outstanding principal balance of a class of notes is the product of:
(1) the original denomination of the noteholder’s note; and
(2) the Note Pool Factor.
For each issuing entity, the noteholders will receive reports on or about each payment date concerning payments received on the secured notes, the aggregate Secured Note Principal Balance for that issuing entity, each Note Pool Factor and various other items of information. Noteholders of record during any calendar year will be furnished information for tax reporting purposes not later than the latest date permitted by law. See “Book-Entry Registration; Reports to Securityholders—Reports to Securityholders.” Unless otherwise provided in any offering memorandum supplement for the certificates, for each trust, the certificateholders will receive reports on or about each distribution date concerning payments received on the secured notes, the certificate balance and various other items of information. Certificateholders of record during any calendar year will be furnished information for tax reporting purposes not later than the noteholders. These amounts also will reimburselatest date permitted by law. See “Book Entry Registration; Reports to Securityholders—Reports to Securityholders” in this prospectus.
Unless otherwise provided in the servicer for taxes,accompanying prospectus supplement, the feesnet proceeds to be received by the depositor from the sale of the owner trustee and the indenture trustee, accounting fees, outside auditor fees, data processing costs and other costs incurred in connection with administering the poolsecurities of receivables.
The owner trustee, acting on behalf of the trust has discretiona given series will be applied to decide whether to engage any person (such as the servicer, the administrator or any third party) in assisting the trust in performing its duties under the indenture.purchase secured notes from Ally Bank.
For each trust,issuing entity, one or more classes of notes will be issued pursuant tounder the terms of an indenture, a form of which has been filed as an exhibit to the registration statement of which this prospectus forms a part. The following summary, together with the related description in the accompanying prospectus supplement, describes the material terms of the form of notes and the form of indenture. Where particular provisions or terms used in the indenture are referred to, the actual provisions, including definitions of terms, are incorporated by reference as part of this summary. The prospectus supplement may contain additional information relating to a specific AART indenture and the series issued pursuant to that indenture.
Each class of notes issued by an issuing entity will initially be represented by one or more notes, in each case registered in the name of the nominee of DTC, in the United States, or Clearstream or Euroclear, in Europe, except as set forth belowbelow. and will be available for purchase in denominations of $1,000 and integral multiples of $1,000 in book-entry form only or in such other form and denomination as is described in the applicable prospectus supplement. The depositor has been informed by DTC that DTC’s nominee will be Cede & Co. Accordingly, unless the accompanying prospectus supplement specifies that the notes will be issued in definitive form, Cede & Co. is expected to be the holder of record of the notes.
Unless and until definitive notes are issued under the limited circumstances described in this prospectus or as may be described in the accompanying prospectus supplement, no noteholder will be entitled to receive a physical certificate representing a note. AllUnless otherwise indicated, all references in this prospectus to actions by
noteholders refer to actions taken by DTC upon instructions from its participating organizations. AllUnless and until definitive notes are issued under the limited circumstances described in this prospectus or as may be described in the accompanying prospectus supplement, all references in this prospectus to distributions, notices, reports and statements to noteholders refer to distributions, notices, reports and statements to DTC or Cede & Co., as the registered holder of the notes, as the case may be, for distribution to noteholders in accordance with DTC’s procedures with respect thereto. See “Book-EntryBook Entry Registration; Reports to Securityholders—Book-Entry Registration” and “—Definitive SecuritiesNotes” in this prospectus.
Principal and Interest on the Notes
The timing and priority of payment, seniority, allocations of loss, interest rate and amount of or method of determining payments of principal and interest on the notes will be described in the accompanying prospectus supplement.
Each class of notes may have a different interest rate, which may be a fixed, floating or adjustable interest rate, and which may be zero for specified classes of Strip Notes.rate.
The accompanying prospectus supplement will specify the interest rate for each class of notes, or the initial interest rate and the method for determining the interest rate, as applicable. Floating rate notes generally will accrue interest based on either one-month LIBOR or three-month LIBOR, plus an applicable spread. TheIf floating rate notes are offered, the method for determining one-month LIBOR or three-month LIBOR, as appropriate, will be specified in the accompanying prospectus supplement.
The right of holders of any class of notes to receive payments of principal and interest may be senior or subordinate to the rights of holders of any other class or classes of notes in the series. The terms of that subordination will be described in the accompanying prospectus supplement. Under most circumstances, payments of interest on the notes will be made prior to payments of principal. A series may include one or more classes of Strip Notes entitled to (1) principal payments with disproportionate, nominal or no interest payment or (2) interest payments with disproportionate, nominal or no principal payments.on them. Each class of notes may have a different interest rate, which may be a fixed, variable or adjustable interest rate and which may be zero for specified classes of Strip Notes, or any combination of the foregoing. One or more classes of notes of a series may be redeemable under the circumstances specified in the accompanying prospectus supplement.
Payments to noteholdersThe accompanying prospectus supplement will specify the relative priority of all classes within a series in respectpayments of interest will have the same priority or such varying priorities as may be disclosed in the applicable prospectus supplement.on each class of notes. Under some circumstances, the amount available for these payments of interest could be less than the amount of interest payable on thea particular class of notes on any of the payment dates specified for anythat class of notes in the accompanying prospectus supplement. In that case, eachnoteholders of that class of noteholders will receive their ratable share, based upon the aggregate amount of interest due to that class of noteholders, of the aggregate amount available to be distributed in respect of interest on the notes. See “The Transfer Agreements and Servicing Agreements—Distributions” and “—Credit Enhancement” in this prospectus.
In the case of a series of notes that includes two or more classes of notes, the sequential order and priority of payment in respect of principal and interest, and any schedule or formula or other provisions applicable to the determination thereof,of principal and interest, of each class will be set forth in the accompanying prospectus supplement. Unless otherwise specified in the accompanying prospectus supplement, paymentsPayments in respect of principal and interest of any class of notes will be made on a pro rata basis among all of the notes of that class.class or in such other priorities as may be disclosed in the applicable prospectus supplement. Notes legally and/or beneficially owned by the depositor or its affiliates will be entitled to equal and proportionate benefits under the AART indenture, except that those notes that are both legally and beneficially owned by the depositor or its affiliates will be deemed not to be outstanding for the purpose of determining whether the requisite percentage of noteholders have given any request, demand, authorization, direction, notice, consent or other action under the AART Related Documents. If more than one class of notes in a series is issued by an issuing entity and the voting rights of the classes are different regarding voting on any matters, including giving any request, demand, authorization, direction, notice, consent or other action under the Related Documents, thesedocuments for that issuing entity, those rights will be described in the accompanying prospectus supplement.
If an AART Event of Default occurs and is continuing for any trustissuing entity and if it is known to the AART indenture trustee, the AART indenture trustee will mail to each noteholder of that trustissuing entity notice of the AART Event of Default within the later of 90 days after it occurs.occurs or ten days after it is known to a responsible officer of the AART indenture trustee. Except in the case of a failure to make any required payment of principal of or of interest on any note, the AART indenture trustee may withhold the notice beyond the 90-day period if and so long as it determines in good faith that withholding the notice is in the interests of noteholders.
If so provided in the related prospectus supplement, each class or tranche of floating rate notes may have the benefits of one or more derivative agreements, which may be currency or interest rate swaps, interest rate caps, interest collars or guaranteed investment contracts with various counterparties. In general, the issuing entity will receive payments from counterparties to the derivative agreements in exchange for the issuing entity’s payments to them, to the extent required under the derivative agreements. The specific terms of a derivative agreement applicable to a class or tranche of floating rate notes and a description of the related counterparty will be included in the related prospectus supplement.
A form of AART indenture has been filed as an exhibit to the registration statement of which this prospectus forms a partpart. The depositor will provide a copy of the applicable indenture without exhibits upon request to a holder of notes issued thereunder.under that AART indenture. The following summary, together with theany related description in the accompanying prospectus supplement, describes the material terms of the form ofAART indenture.
Modification of AART Indenture Without Noteholder Consent.Consent. Each trustissuing entity and AART indenture trustee for that issuing entity, on behalf of that trust,issuing entity, may, without consent of the noteholders of that issuing entity, but with prior notice to the rating agencies hired to rate the notes, enter into one or more supplemental indentures for any of the following purposes:
(1) to correct or amplify the description of the collateral or add additional collateral,collateral;
(2) to provide for the assumption of the notes and the AART indenture obligations by a permitted successor to the trust,issuing entity;
(3) to add additional covenants of the issuing entity for the benefit of the noteholders or to surrender any right or power conferred upon the issuing entity;
(4 )(4) to convey, transfer, assign, mortgage or pledge any property to or with the AART indenture trustee,trustee;
(5) to cure any ambiguity or correct or supplement any provision in the AART indenture or in any supplemental indenture whichthat may be inconsistent with any other provision of the AART indenture or in any supplemental indenture or in any other AART Related Document,Document;
(6) to evidence and provide for the acceptance of the appointment of a successor or additional AART indenture trustee or to add to or change any of the provisions of the AART indenture as shallwill be necessary and permitted to facilitate the administration of the trusts by more than one trustee,indenture trustee;
(7) to modify, eliminate or add to the provisions of the AART indenture in order to comply with the Trust Indenture Act of 1939, as amended, andamended;
(8) to modify, eliminate or add provisions to the AART indenture as permitted by the FDIC Rule Covenant; or
(9) to add any provisions to, change in any manner, or eliminate any of the provisions of, the AART indenture or modify in any manner the rights of noteholders under that AART indenture; provided that any action specified in this clause (8) shall(9) occurs pursuant to a written order of the issuing entity and will not, as evidenced by an opinion of counsel, adversely affect in any material respect the interests of any noteholder of that trust’s other noteholdersissuing entity unless noteholder consent is otherwise obtained as described in the next section of this prospectus.prospectus and the rating agencies hired to rate the notes are provided with prior notice to such amendment.
Modification of AART Indenture With Noteholder Consent.Consent. For each trust,issuing entity, the trustissuing entity and the AART indenture trustee may execute a supplemental indenture to add provisions to, change in any manner or eliminate any provisions of, the AART indenture, or modify in any manner the rights of the noteholders, with the consent of the holders of a majority in principal amount of the Controlling Class and such other requirements, if any, as may be disclosed in the applicable prospectus supplement.
Without the consent of the holder of each outstanding note which would be affected, however, no supplemental indenture will:
(1) change the due date of any instalmentinstallment of principal of or interest on any note or reduce the principal amount of any note, the interest rate specified thereon or the redemption price with respect thereto or change any place of payment where or the coin or currency in which any note or any interest thereon is payable or modify any of the provisions of the indenture in a manner as to affect the calculation of the amount of any payment of interest or principal due on any note on any payment date,payable;
(2) impair the right to institute suit for the enforcement of specified provisions of the AART indenture regarding payment of principal or interest on any note,note;
(3) reduce the percentage of the aggregate principal amount of the Controlling Class, the consent of the holders of which is required for any supplemental indenture or the consent of the holders of which is required for any waiver of compliance with specified provisions of the AART indenture or of specified defaults thereunder and their consequences as provided for in the indenture,AART indenture;
(4) modify any of the provisions of the AART indenture regarding the votingtreatment of notes held by the trust,issuing entity, any other obligor on the notes, the depositor or an affiliate of any of them when determining whether the requisite percentage of noteholders have taken any actions;
(5) reduce the percentage of the aggregate outstanding principal amount of the notes the consent of the holders of which is required to direct the AART indenture trustee to sell or liquidate the assets of the trustissuing entity if the proceeds of that sale would be insufficient to pay the principal amount and accrued but unpaid interest on the outstanding notes,notes;
(6) amendmodify the sectionsamendment provisions of the AART indenture to decrease the minimum percentage of the aggregate principal amount of the outstanding notes necessary to amend the AART indenture or any of the other AART Related Documents;
(7) modify any of the provisions of the AART indenture to change the calculation of the amount of any payment of interest or principal due on any payment date,date; or
(8) permit the creation of any lien ranking prior to or on a parity with the lien of the AART indenture on any part of the assets of the trustissuing entity or, except as otherwise permitted or contemplated in the AART indenture, terminate the lien of the AART indenture on that collateral or deprive the holder of any note of the security afforded by the lien of the AART indenture.
AART Events of Default; Rights Upon AART Event of Default.Default. For each trust,issuing entity, AART Events of Default under the related AART indenture will consist of:
(1) any failure to pay interest on the notes (or, if so specified in the accompanying prospectus supplement, on the Controlling Class of the notes) as and when the same becomes due and payable, which failure continues unremedied for five days,days;
(2) except as provided in clause (3), any failure (A) to make any required paymentinstalment of principal on the notes as and when the same becomes due and payable, or (B) to observe or perform in any material respect any other covenants or agreements in the indenture, which failure in the case of a default under clause (2)(B) materially and adversely affects the rights of noteholders, and which failure in either case continues unremedied for 30 days after the giving of written notice of the failure (X) to the depositor (or the trust and to the depositor or the servicer,administrator, as applicable,applicable) by the AART indenture trustee or (Y) to the depositor or(or the servicer,trust administrator, as applicable,applicable) and the AART indenture trustee by the holders of not less than 25% of the aggregate principal amount of the Controlling Class,Class;
(3) failure to pay the unpaid principal balance of any class of notes on or prior to the respective final scheduled payment date for that class,class;
(4) any failure to observe or perform in any material respect any other covenants or agreements of the issuing entity in the AART indenture, other than the FDIC Rule Covenant, which failure materially and adversely affects the rights of noteholders, and which failure continues unremedied for 30 days after the giving of written notice of the failure (X) to the depositor (or the trust administrator, as applicable) by the AART indenture trustee or (Y) to the depositor (or the trust administrator, as applicable) and the AART indenture trustee by the holders of not less than 25% of the aggregate principal amount of the Controlling Class;
(4)(5) events of bankruptcy, insolvency or receivership for the trustissuing entity indicating its insolvency, reorganization pursuant to bankruptcy proceedings or inability to pay its obligations,obligations; and
(5)(6) any other events and circumstances set forth in the applicable prospectus supplement.
However, theThe amount of principal required to be paid to noteholders under the AART indenture governing a class of notes will generally be limited to amounts available to be deposited in the Note Distribution Account.
note distribution account. Therefore, the failure to pay principal on a class of notes generally will not result in the occurrence of an AART Event of Default unless that class of notes has a final scheduled payment date, and then not until the occurrence of the final scheduled payment date for that class of notes.
If an AART Event of Default should occuroccurs and beis continuing for the notes of any series, the AART indenture trustee or holders of a majority in principal amount of the Controlling Class then outstanding may declare the unpaid principal and accrued and unpaid interest of the notes to be immediately due and payable. This declaration may, under specified circumstances, be rescinded by the holders of a majority in principal amount of the Controlling Class.
If the notes of any series are declared due and payable following an AART Event of Default, then in lieu of the AART indenture trustee maintaining the assets of the trustissuing entity and continuing to apply collectionspayments on the receivablessecured notes as if there had been no declaration of acceleration, the AART indenture trustee may:
(1) institute proceedings to collect amounts due, includingall amounts due on foreclosed property,the notes;
(2) institute proceedings for the complete or partial foreclosure on the collateral securing the notes,notes;
(3) exercise remedies as a secured partyparty; or
(4) sell the assets of the trust.issuing entity.
In that event, any money or property collected by the AART indenture trustee shallwill be applied:
(1) first, to the AART indenture trustee for fees, expenses and indemnification due to it under the AART indenture and not paid, if any,any;
(2) next, to the AART owner trustee for amounts due to it, not including amounts due for payments to the certificateholders under the trust agreement andor the AART Related Documents,Documents; and
(3) the remainder to the Collection AccountAART collection account for distribution pursuant to the AART Related Documents.
The AART indenture trustee, however, is prohibited from selling or liquidating the receivablessecured notes following an AART Event of Default, unless:
(1)
| (1) | (A) the holders of all the outstanding notes consent to the sale or liquidation; |
| (B) | the proceeds of the sale are sufficient to pay in full the principal of and the accrued interest on the outstanding notes at the date of the sale or liquidation and make all distributions from the AART collection account as described in the administration agreement; or |
(B) the proceeds
| (C) | (X) there has been a default in the payment of |
| (Y) the AART indenture trustee determines that the secured notes will not continue to provide sufficient funds on an ongoing basis to make all payments on the notes as the payments would have become due if the obligations had not been declared due and payable, and |
(C) (i) there has been a default in the payment of interest or principal on the notes,
(ii) the indenture trustee determines that the receivables will not continue to provide sufficient funds on an ongoing basis to make all payments on the notes as the payments would have become due if the obligations had not been declared due and payable, and
(Z) the AART indenture trustee obtains the consent of the holders of 66 2/3% of the aggregate outstanding amount of the Controlling Class; and (2) 10 days prior written notice of the sale or liquidation of the secured notes has been given to the credit rating agencies that have Following a declaration upon an AART Event of Default that the notes are immediately due and payable, (X) the noteholders of each class will be entitled to Subject to the provisions of the AART indenture relating to the duties of the AART indenture trustee, if an AART Event of Default occurs and is continuing with respect to a series of notes, the AART indenture trustee will be under no obligation to exercise any of the rights or powers under the AART indenture at the request or direction of any of the holders of those notes, No holder of a note of any series will have the right to institute any proceeding regarding the AART indenture governing their notes, unless: (1) the holder (2) the holders of not less than 25% in aggregate principal amount of the Controlling Class have made written request of the AART indenture trustee to institute the proceeding in its own name as AART indenture (3) the holder or holders have offered the AART indenture trustee reasonable (4) the AART indenture trustee has for 60 days failed to institute the (5) no direction inconsistent with the written request has been given to the AART indenture trustee during the 60-day period by the holders of a majority in aggregate principal amount of the Controlling Class. If a default occurs and is continuing regarding any (iii) the indenture trustee obtains the consent of the holders of 66 2/3% of the aggregate outstanding amount of the Controlling Class,ratedbeen hired to rate the related notes.ratable repayment of principal and interest in the priority specified in the accompanying prospectus supplement on the basis of their respective unpaid principal balances or shallwill have such other or additional rights as provided for in the applicable prospectus supplement and (Y) repayment in full of the accrued interest on and unpaid principal balances of the notes will be made prior to any further distribution of interestdistributions on the certificates or in respect of the Certificate Balance.certificates.ifunless such holders shall have offered the AART indenture trustee reasonably believes it will not be adequately indemnifiedsecurity or indemnity satisfactory to the AART indenture trustee against the costs, expenses and liabilities which might be incurred by it in complying with the request. Subject to the provisions for indemnification and to limitations contained in the AART indenture, the holders of a majority in aggregate principalof the outstanding amount of the Controlling Class, will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the AART indenture trustee and the holders of a majority in aggregate principalof the outstanding amount of the Controlling Class, may, in specified cases, waive any default with respect thereto, except a default in the payment of principal or interest or a default in respect of a covenant or provision of the AART indenture that cannot be modified without the waiver or consent of all of the holders of those outstanding notes.previously has given to the AART indenture trustee written notice of a continuing AART Event of Default,Default;trustee,trustee;indemnity,indemnity;proceeding,proceeding; andtrustissuing entity and if it is known to a responsible officer of the AART indenture trustee, the AART indenture trustee will mail to each noteholder of that trustissuing entity notice of the default within the later of (a) 90 days after it occurs and (b) 10 days after it is known to a responsible officer of the AART indenture trustee. Except in the case of a failure to make any required payment of principal of or interest on any note, the AART indenture trustee may withhold the notice beyond the 90-day period if and so long as it determines in good faith that withholding the notice is in the interests of noteholders.
In addition, each AART indenture trustee and the noteholders for that trust,issuing entity, by accepting the notes, will covenant that they will not, for a period of one year and one day after the termination of the trust agreementAART indenture for the notes issued by that trust,issuing entity, institute against the trustissuing entity or depositor, any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law.
Neither the AART indenture trustee nor the AART owner trustee in its individual capacity, nor any holder of a certificate including, without limitation, the depositor, nor any of their respective owners, beneficiaries, agents, officers, directors, employees, affiliates, or any successors or assigns of the AART indenture trustee or the AART owner trustee will, in the absence of an express agreement to the contrary, be personally liable for the payment of the principal of or interest on the notes or for the agreements of the trustissuing entity contained in the AART indenture.
Rights Upon ACOLT Events of Default. Upon an event of default under the ACOLT indenture of which a responsible officer of the AART indenture trustee has actual knowledge, the AART indenture trustee must give prompt written notice of such default to the holders of the notes. The noteholders whose notes evidence a majority of the outstanding aggregate principal amount of the Controlling Class as of the close of the preceding distribution date (or, if all of the notes have been paid in full and the AART indenture has been discharged in accordance with its terms, AART certificateholders whose certificates evidence not less than a majority of the voting interests as of the close of the preceding distribution date) may, on behalf of all such noteholders and certificateholders, instruct the AART indenture trustee as holder of the secured notes (i) to waive any default by ACOLT, the servicer or any other party to the ACOLT Basic Documents in the performance of its obligations under any applicable ACOLT Basic Document and its consequences, except a default in making any required deposits to or payments from any of the accounts in accordance with the AART indenture, (ii) to enter into any amendment, supplement, waiver or other understanding with respect to the ACOLT Basic Documents or (iii) to take any other action so directed by such Controlling Class or such certificateholders, as applicable. If a waiver, amendment, supplement or action under an ACOLT Basic Document requires the consent or approval of a supermajority (such as 66 2/3%) or all of the holders of the secured notes, then the consent of a like percentage of noteholders will be required to take that action or execute that waiver, amendment or supplement.
Material Covenants.Covenants. Each AART indenture provideswill provide that the trustissuing entity it binds may not consolidate with or merge into any other entity, unless:
(1) the entity formed by or surviving the consolidation or merger is organized under the laws of the United States, any state or the District of Columbia,Columbia;
(2) the entity expressly assumes the trust’sissuing entity’s obligation to make due and punctual payments on the notes and the performance or observance of every agreement and covenant of the trustissuing entity under the indenture,AART indenture;
(3) no AART Event of Default has occurred and is continuing immediately after the merger or consolidation,consolidation;
(4) the trustissuing entity has not been advised that the rating of the notes or certificates then in effect would not be reduced or withdrawn by the rating agencies hired to rate the notes or certificates as a result of the merger or consolidation,consolidation;
(5) any action necessary to maintain the lien and security interest created by the AART indenture has been taken,taken; and
(6) the trustissuing entity has receiveddelivered to the AART indenture trustee an opinion of counsel to the effect that the consolidation or merger would have no material adverse tax consequence to the trustissuing entity or to any noteholder or certificateholder.
Each trustissuing entity will not, among other things, except as expressly permitted by the AART Related Documents:
(1) sell, transfer, exchange or otherwise dispose of any of the assets of the trust,issuing entity;
(2) claim any credit on or make any deduction from the principal and interest payable in respect of the notes, other than amounts withheld under the Internal Revenue Code or applicable state law, or assert any claim against any present or former holder of the notes because of the payment of taxes levied or assessed upon the trust,issuing entity;
(3) dissolvevoluntarily commence any insolvency, readjustment of debt, marshaling of assets and liabilities or liquidate in wholeother proceeding, or in part,apply for an order by a court or agency or supervisory authority for the winding up or liquidation of its affairs;
(4) permit the validity or effectiveness of the AART indenture or any other AART Related Document to be impaired, permit the lien of the AART indenture to be impairedamended, hypothecated, subordinated, terminated or discharged or permit any person to be released from any covenants or obligations regarding the notes under the AART indenture except as may be expressly permitted by the indenture, orAART indenture;
(5) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than the lien of the AART indenture) to be created on or extend to or otherwise arise upon or burden the assets of the trustissuing entity or any part of its assets, or any interest in its assets or the proceeds thereof.thereof; or
(6) permit the lien of the AART indenture to not constitute a valid security interest in the trust estate thereunder.
A trustAn issuing entity may not engage in any activity other than as specified under “The TrustsIssuing Entities” abovein this prospectus or “The Issuing Entity” in the applicable prospectus supplement. No trustissuing entity will incur, assume or guarantee any indebtedness other than indebtedness incurred pursuant to the notes it issues and the AART indenture which binds it or otherwise in accordance with the AART Related Documents.
Each issuing entity will comply with its obligations in the FDIC Rule Covenant. See“Insolvency Aspects of the Offerings—FDIC Rule.”
FDIC Rule Covenant. The FDIC Rule imposes a number of requirements on the issuing entity, the depositor, ACOLT, ACOL LLC, the trust administrator, the sponsor or the servicer, and each such party agrees to facilitate compliance with these requirements by complying with its obligations in the FDIC Rule Covenant. See“Insolvency Aspects of the Offerings—FDIC Rule.” Each AART indenture contains an FDIC Rule Covenant, which requires, among other things, that:
(1) payment of principal and interest on the securitization obligations must be primarily based on the performance of the financial assets transferred to the issuing entity;
(2) information describing the financial assets, obligations, capital structure, compensation of the relevant parties and historical performance data must be made available to the investors, including (i) information about the obligations and securitized financial assets in compliance with Regulation AB, (ii) information about the transaction structure, performance of the obligations, priority of payments, subordination features, representations and warranties regarding the financial assets, remedies, liquidity facilities, credit enhancement, waterfall triggers and policies governing delinquencies, servicer advances, loss mitigation and write offs, (iii) information with respect to the credit performance of the obligations and financial assets on an ongoing basis, and (iv) the compensation paid to the originator, sponsor, rating agency, third-party advisor, broker and servicer and changes to such amounts paid, and the extent to which the risk of loss is retained by any of them;
(3) the sponsor must retain an economic interest in a material portion (not less than five percent) of the credit risk of the financial assets, which threshold may be adjusted to comply with Section 941(b) of the Dodd-Frank Act when such section becomes effective;
(4) the obligation in the securitization cannot be predominantly sold to an affiliate (other than a wholly-owned subsidiary consolidated for accounting and capital purposes with the sponsor) or insider of the sponsor;
(5) the sponsor must identify in its financial asset data bases and otherwise account for the financial assets transferred as specified by the FDIC Rule; and
(6) if the sponsor is acting as servicer, custodian or paying agent, the sponsor must not comingle collections for more than two business days. See“Insolvency Aspects of the Offerings—FDIC Rule.”
Each noteholder by accepting a note will acknowledge and agree that the purpose of the FDIC Rule Covenant is to facilitate compliance with the FDIC Rule by Ally Bank, ACOLT, ACOL LLC, the trust administrator, the depositor, the servicer and the issuing entity, and that the provisions set forth in the FDIC Rule Covenant will have the effect and meanings that are appropriate under the FDIC Rule as such meanings change over time on the basis of evolving interpretations of the FDIC Rule.
Annual Compliance Statement.Statement. Each trustissuing entity will be required to file annually with the AART indenture trustee for that trustissuing entity a written statement as to the fulfillment of its obligations under the AART indenture.
Satisfaction and Discharge of Indenture.AART Indenture. The indenture for each trustissuing entity will be discharged for notes upon the delivery to the trust’sAART indenture trustee for cancellation of all of the trust’sissuing entity’s notes or, subject to limitations, upon deposit with the AART indenture trustee of funds sufficient for the payment in full of all notes. The AART indenture trustee will continue to act as AART indenture trustee under the AART indenture and the Trust Sale and Servicing Agreementadministration agreement for the benefit of certificateholders until all payments in respect of Certificate Balance and interest due to the certificateholderscertificates have been paid in full.
For each trust,issuing entity, one or more classes of certificates may be issued pursuant to the terms of a trust agreement, a form of which has been filed as an exhibit to the registration statement of which this prospectus forms a part. The certificates issued by each issuing entity may be sold in transactions exempt from registration under the Securities Act or retained by the depositor or its affiliates. The following summary, together with the related description in the accompanying prospectus supplement, describes the material terms of the certificates and the trust agreement. Where particular provisions or terms used in the trust agreement are referred to, the actual provisions, including definitions of terms, are incorporated by reference as part of this summary.
Each class of certificates to be sold by the certificate underwriters, as specified in the accompanying prospectus supplement, will initially be represented by a single certificate registered in the name of the DTC, except as set forth below. Any certificates offered under the accompanying prospectus supplement will be available for purchase in minimum denominations of $20,000 and integral multiples of $1,000 in excess thereof in book-entry form only or as otherwise disclosed in the applicable prospectus supplement and resales or other transfers of the certificates will not be permitted in amounts of less than $20,000 or as otherwise disclosed in the applicable prospectus supplement. The depositor has been informed by DTC that DTC’s nominee will be Cede & Co. Accordingly, Cede & Co. is expected to be the holder of record of any offered certificates that are not retained by the depositor. Unless and until definitive certificates are issued under the limited circumstances described in this prospectus or in the accompanying prospectus supplement, no certificateholder, other than the depositor, will be entitled to receive a physical certificate representing a certificate. In that case, all references in this prospectus to actions by certificateholders refer to actions taken by DTC upon instructions from the DTC participants and all references in this prospectus to distributions, notices, reports and statements to certificateholders refer to distributions, notices, reports and statements to DTC or Cede & Co., as the registered holder of the certificates, as the case may be, for distribution to certificateholders in accordance with DTC’s procedures with respect thereto. See “Book-Entry Registration; Reports to Securityholders —Book-Entry Registration” and “—Definitive Securities” in this prospectus. Certificates owned by the depositor or its affiliates will be entitled to equal and proportionate benefits under the trust agreement, except that, unless all those certificates are owned by the depositor and its affiliates, thethose certificates will be deemed not to be outstanding for purposes of determining whether the requisite percentage of certificateholders have given any request, demand, authorization, direction, notice, consent or other action under the RelatedAART Basic Documents other than commencement by the trustissuing entity of a voluntary proceeding in bankruptcy as described in “The Transfer and Servicing Agreements—Insolvency EventEvents.”
Under the trust agreement, the trust,issuing entity, and the AART owner trustee on its behalf, and itsthe certificateholders, by accepting the certificates issued by that issuing entity, will covenant that they will not, for a period of one year and one day after the termination of the trust agreement, institute against the depositor any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law.
Distributions of Interest and Certificate Balance
The timing and priority of distributions, seniority, allocations of loss, Pass Through Rate and amount of or method of determining distributions on the Certificate Balance and interest, or, where applicable, on the Certificate Balance only or interest only, on the certificates of any series will be described in the accompanying prospectus supplement. Distributions of interest on the certificates will be made on the distribution dates
specified in the accompanying prospectus supplement and will be made prior to distributions on the Certificate Balance. A series may include one or more classes of Strip Certificates, entitled to (1) distributions in respect of Certificate Balance with disproportionate, nominal or no interest distributions, or (2) interest distributions, with disproportionate, nominal or no distributions in respect of Certificate Balance. Each class of certificates may have a different Pass Through Rate, which may be a fixed, variable or adjustable Pass Through Rate, and which may be zero for specified classes of Strip Certificates, or any combination of the foregoing. The accompanying prospectus supplement will specify the Pass Through Rate for each class of certificate, or the initial Pass Through Rate and the method for determining the Pass Through Rate. Unless otherwise specified in the accompanying prospectus supplement, interest on the certificates will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Distributions in respect of the certificates will be subordinate to payments in respect of the notes as more fully described in the accompanying prospectus supplement. Distributions in respect of Certificate Balance of any class of certificates will be made on a pro rata basis among all of the certificateholders of that class.
In the case of a series of certificates which includes two or more classes of certificates, the timing, sequential order, priority of payment or amount of distributions in respect of principal, and any schedule or formula or other provisions applicable to the determination thereof, of each class shall be as set forth in the accompanying prospectus supplement.
BOOK-ENTRY REGISTRATION; REPORTS TO SECURITYHOLDERS
Unless otherwise specified in the accompanying prospectus supplement, securityholders that are not DTC participants or indirect DTC participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, securities may do so only through DTC participants and indirect DTC participants. In addition, securityholders will receive all distributions of principal and interest from the AART owner trustee or AART indenture trustee, as applicable through DTC participants. Under a book-entry format, securityholders may experience some delay in their receipt of payments since these payments will be forwarded by the AART owner trustee or AART indenture trustee, as applicable, to Cede & Co., as nominee for DTC. DTC will forward these payments to its DTC participants, which thereafter will forward them to indirect DTC participants or securityholders. Except for the depositor, it is anticipated that the only noteholder and certificateholder will be Cede & Co., as nominee of DTC. Securityholders will not be recognized by the trustee as noteholders, or certificateholders, as that term is used in the trust agreement andAART indenture as applicable, and securityholders will be permitted to exercise thetheir rights ofas securityholders only, or indirectly through DTC and its DTC participants.
Because DTC can only act on behalf of DTC participants, who in turn act on behalf of indirect DTC participants and certain banks, the ability of securityholders to pledge securities to persons or entities that do not participate in the DTC system or to otherwise act with respect to the securities may be limited due to the lack of a physical certificate for the securities.
DTC has advised the depositor that it will take any action permitted to be taken by a noteholder under the associated AART indenture or a certificateholder under the associated trust agreement only at the direction of one or more DTC participants to whose accounts with DTC the notes or certificates are credited. DTC may take conflicting actions relating to other undivided interests to the extent that these actions are taken on behalf of DTC participants whose holdings include these undivided interests.
In addition to holding notes through DTC participants or indirect DTC participants of DTC in the United States as described above, holders of book-entry notes may hold their notes through Clearstream or Euroclear in Europe if they are participants of these systems, or indirectly through organizations which are participants in these systems. Clearstream Banking, S.A. is incorporated under the laws of Luxembourg as a professional depository and is subject to regulation by the Luxembourg Monetary Institute. The Euroclear system is owned by
Euroclear Clearance System Public Limited Company and operated through a license agreement by Euroclear Bank S.A./N.V., a bank incorporated under the laws of the Kingdom of Belgium, the Euroclear Operator. The Euroclear Operator is regulated and examined by the Belgium Banking and Finance Commission and the National Bank of Belgium.
Clearstream and Euroclear will hold omnibus positions on behalf of their participants through customers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their respective depositaries which in turn will hold these positions in customers’ securities accounts in the depositaries’ names on the books of DTC. Clearstream participants and Euroclear participants may not deliver instructions directly to the depositaries.
Distributions on notes held through Clearstream or Euroclear will be credited to the cash accounts of Clearstream participants or Euroclear participants in accordance with the relevant system’s rules and procedures, to the extent received by its depositary. These distributions will be subject to tax reporting in accordance with relevant United States tax laws and regulations. See “Federal Income Tax Consequences—The Notes—Information Reporting and Backup Withholding” in this prospectus. Clearstream or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a noteholder under the indenture or other AART Related Document on behalf of a Clearstream participant or Euroclear participant only in accordance with its relevant rules and procedures and subject to its depositary’s ability to effect these actions on its behalf through DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of notes among participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform these procedures and these procedures may be discontinued at any time.
Except as required by law, neithernone of the trust,issuing entity, the depositor, the servicer, thetrust administrator the AART owner trustee noror the AART indenture trustee will have any liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of the notes or the certificates of any series held by Cede & Co., as nominee for DTC, by Clearstream or by Euroclear in Europe, or for maintaining, supervising or reviewing any records relating to these beneficial ownership interests.
Any notes and certificates originally issued in book-entry form will be issued in fully registered, certificated form as definitive notes or definitive certificates, as the case may be, to noteholders certificateholders or their respective nominees, rather than to DTC or its nominee, only if:
(1) the associated administrator advises the appropriate trustee in writing that DTC is no longer willing or able to discharge properly its responsibilities as depository for these securitiesnotes and the trustissuing entity is unable to locate a qualified successor,
(2) the administrator, at its option, elects to terminate the book-entry system through DTC,
(3) after the occurrence of an AART Event of Default or a Servicer Default,trust administrator default, holders representing at least a majority of the aggregate principal amount of the Controlling Class advise the appropriate trustee through DTC in writing that the continuation of a book-entry system through DTC, or a successor thereto, is no longer in the best interest of the holders of these securities,notes, or
(4) with respect tofor a specific series, the conditions, if any, described in the applicable prospectus supplement are satisfied.
Upon the occurrence of any event described in the immediately preceding paragraph, the appropriate trustee will be required to notify DTC of the availability of definitive notes or definitive certificates, as the case may be.notes. DTC shall notify all the note owners or certificate owners, as applicable, of the availability of definitive notes or
definitive certificates, as the case may be.notes. Upon surrender by DTC of the definitive certificates representing the securitiesnotes and receipt of instructions for re-registration, the appropriateAART indenture trustee will reissue these securitiesnotes as definitive notes to holders thereof.
In addition to the foregoing, the accompanying prospectus supplement may provide that any series or definitive certificates, as the caseclass of notes may be to holders thereof.issued in definitive form only.
Distributions of principal of, and interest on, the definitive securitiesnotes will thereafter be made in accordance with the procedures set forth in the associated indenture or associated trust agreement, as applicable, directly to holders of definitive securitiesnotes in whose names the definitive securitiesnotes were registered at the close of business on the last day of the preceding monthly period.related Monthly Period. These distributions will be made by wire transfer or by check mailed to the address of that holder as it appears on the register maintained by the AART indenture trustee or owner trustee, as applicable.trustee. The final payment on any definitive security, however, will be made only upon presentation and surrender of the definitive security at the office or agency specified in the notice of final distribution to the holders of that class.
Definitive securitiesnotes will be transferable and exchangeable at the offices of the appropriate trustee or of a registrar named in a notice delivered to holders of definitive securities.notes. No service charge will be imposed for any registration of transfer or exchange, but the appropriate trustee may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection with the transfer or exchange.
For each trust,issuing entity, on or prior to each payment date, the servicertrust administrator will prepare and provide to the AART indenture trustee a statement to be deliveredmade available to the noteholders on that payment date and on or prior to each distribution date, the servicertrust administrator will prepare and provide to the AART owner trustee a statement to be delivered to the certificateholders. Each statement to be deliveredmade available to noteholders will include the information set forth below as to the notes for that distributionthe payment date or the period since the previous distributionpayment date on those notes, as applicable. Each statement to be deliveredmade available to certificateholders will include the information set forth below as to the certificates for that distribution date or the period since the previous distribution date, as applicable:
(1) applicable distribution dates used to calculate distributions on the securities;
(2) the amount of the distribution allocable to principal of each class of the notes and to the Certificate Balance of each class of certificates,notes;
(2)(3) the amount of the distribution allocable to interest on or for each class of securities,
(3) the Aggregate Receivables Principal Balance as of the close of business on the last day of the preceding monthly period,notes;
(4) the aggregateamount of the distribution allocable to the certificateholders, if applicable;
(5) the net amount, if any, of any payments to be made by the issuing entity or to be received by the issuing entity under any derivative agreement;
(6) the outstanding principal balance of each class of notes and the Note Pool Factor for each class of notes andeach as of the Certificate Balancebeginning of the period and the Certificate Pool Factor for each class of certificates, each after giving effect to all payments reported under (1)clauses (2) and (3) above, and to allany reinvestments reported under (15) below on that date,clause (16) below;
(5)(7) the amount of the Class A Interest Carryover Shortfall, the Class B Interest Carryover Shortfall and the Class C Interest Carryover Shortfall, if any, and the change in each of these amounts from the preceding Distribution Date;
(8) the amount of the administration fee paid to the trust administrator and servicing fee paid to the servicer for the related monthly period;
(9) the interest rate or pass-through rate, if any, for the next period for each class of notes;
(10) the Secured Note Rate;
(11) the aggregate amount in the Payment Ahead Servicing Account or on deposit with the servicer as Payments Ahead and the change in that amount from the previous statement, as the case may be,be;
(6)(12) the amount ofon deposit in any reserve account, if any, after giving effect to any withdrawals or deposits on that date and the servicing fees paid to the servicer for the prior monthly period or periods, as the case may be,
(7) theapplicable reserve account required amount, if any, and purpose of any other fees or expenses accrued or paid,applicable, on that date;
(8) the interest rate or Pass Through Rate for the next period for any class of notes or certificates with variable or adjustable rates,
(9)(13) the amount, if any, distributed to noteholders and certificateholders from amounts on deposit in the reserve account or from other forms of credit enhancement,
(10)(14) the aggregate amount if any, accrued or paidof Advances made by the servicer under the servicing agreement with respect to the reserve account orrelated monthly period;
(15) the amount of any other forms of credit enhancement,
(11) the Noteholders’ Interest Carryover Shortfall, the Noteholders’ Principal Carryover Shortfall, the Certificateholders’ Interest Carryover ShortfallPull Ahead Payments made by Ally Bank, in its capacity as agent for vehicle manufacturers, under any Pull Ahead Funding Agreement and the Certificateholders’ Principal Carryover Shortfall, each as defined innumber of lease assets that became Pull Ahead Lease Assets during the accompanying prospectus supplement, ifrelated Monthly Period;
(16) the current and aggregate amount of any residual or credit losses on the lease assets during the related monthly period and since the change in these amounts from the preceding statement,applicable cut-off date;
(12) the balance of the reserve account, if any, on that date, after giving effect to changes in that reserve account on that date,
(13) the amount, if any, of excess cash distributed from the reserve account to the depositor,
(14)(17) the amount, if any, reinvested in additional receivableslease assets during the Revolving Period,revolving period, if any,any;
(15)(18) if applicable, whether the Revolving Periodrevolving period has terminated early due to the occurrence of an early amortization event, as described in the accompanying prospectus supplement,supplement;
(16)(19) if applicable, the balance in the accumulation account, after giving effect to changes in that accumulation account on that date, as described in the accompanying prospectus supplement,supplement;
(17) cash flows received during the related collection period and their sources,
(18)(20) the number and dollar amountAggregate ABS Value of receivableslease assets at the beginning and end of the applicable collection period,Monthly Period, and updated pool composition information as of the end of the collection period,Monthly Period, such as weighted average coupon, weighted average life, weighted average remaining term, prepayment rates, cumulative net losses and prepayments,gains on returned vehicles sold by Ally Bank and number of leases terminated;
(19)(21) delinquency and loss information for the period and any material changes in determining or defining delinquencies, charge-offs and uncollectible accounts,accounts;
(20) the amount(22) purchase price of receivables with respectlease assets repurchased by Ally Bank due to which material breaches of pool asset representations or warranties or transaction covenants have occurred, andcovenants;
(21)(23) purchase price of lease assets repurchased by the servicer due to any material modifications, extensions or waivers relating to the terms of, or fees, penalties or payments on, poollease assets during the distribution period or that, cumulatively, have become material over time.time;
(24) if applicable for a revolving transaction, material changes in the solicitation, credit-granting, underwriting, origination, acquisition or pool selection criteria or procedures used to acquire or select the lease assets; and
(25) if applicable for a revolving transaction, information regarding the issuance, if any, of new asset-backed securities backed by any series of secured notes and any related pool of lease assets.
In addition, for each trust,issuing entity, the AART indenture Trustee will mail each year the indenture trustee will send by email, facsimile or, if requested by the indenture trustee, first class mail a brief report, as described in “The AART Indenture Trustee” in this prospectus, to all noteholders for that trust.issuing entity.
Within the prescribed period of time for tax reporting purposes after the end of each calendar year during the term of the trust,administration agreement, the trusteesAART indenture trustee and AART owner trustee of that issuing entity will mail to each holder of a class of securities who at any time during that calendar year has been a securityholder and received any payment thereon, a statement containing information for the purposes of that securityholder’s preparation of federal income tax returns. As long as the holder of record of the securities is Cede & Co., as nominee of DTC, beneficial owners of the securities will receive tax and other information from DTC participants and indirect DTC participants rather than from the trustees. See “Federal Income Tax Consequences” in this prospectus.AART indenture trustee.
THE TRANSFER AGREEMENTS AND SERVICING AGREEMENTS
The following summary describes the material terms of the Transfer Agreements and Servicing Agreementsservicing agreements relating to ACOLT and each trustissuing entity consisting of:
(1) the Pooling and Servicing Agreementpooling agreement pursuant to which the depositor will purchase receivablessecured notes from Ally Bank and the servicer will agree to service the receivables,Bank;
(2) the custodiantrust sale agreement under which an issuing entity will acquire the secured notes from the depositor;
(3) the administration agreement, pursuant to which GMAC, asthe trust administrator will agree to administer the secured notes;
(4) the trust agreement under which the issuing entity will be created and certificates of the issuing entity will be issued;
(5) the sale and contribution agreement pursuant to which Ally Bank will sell the lease assets to ACOLT; and
(6) the servicing agreement pursuant to which the servicer agrees to service the lease assets and the custodian will agreeagrees to act as custodian for the documents evidencing the receivables,lease assets.
(3)
We refer to these agreements as the Trust Sale“Transfer Agreements and Servicing Agreement pursuant to which a trust will acquire the receivables from the depositor and agree to the servicing of the receivables by the servicer and the appointment of GMAC as custodian,
(4) the trust agreement pursuant to which the trust will be created and certificates will be issued, and
(5) the administration agreement pursuant to which GMAC will undertake administrative duties for the trust.
Agreements.” Forms of the Transfer and Servicing Agreements in the above listthese agreements have been filed as exhibits to the registration statement of which this prospectus forms a part. The depositor will provide a copy of the Transfer Agreements and Servicing Agreements,servicing agreements, without exhibits, upon request to a holder of securities described in the Transfer Agreements and Servicing Agreements.servicing agreements. Where particular provisions or terms used in the Transfer Agreements and Servicing Agreementsservicing agreements are referred to, the actual provisions, including definitions of terms, are incorporated by reference as part of this summary.
Sale and Assignment of ReceivablesLease Assets and Secured Notes
Sale and Assignment of Lease Assets. Ally Bank will sell and assign to the depositor,ACOLT, without recourse except as described below, its entire interest in the receivables,a pool of lease assets, including its securitybeneficial interests in the financedrelated leased vehicles, pursuantunder a sale and contribution agreement. Each lease asset sold to a Pooling and Servicing Agreement among Ally Bank, GMAC, as servicer, and the depositor. The depositor will transfer and assign to the applicable trust, without recourse, its entire interest in the receivables, including its security interests in the financed vehicles, pursuant to a Trust Sale and Servicing Agreement among the depositor, the servicer and the trust. Each receivable of a trustACOLT will be identified in a schedule whichthat will be on file at the locations set forth in an exhibit to the associated Trust sale and contribution agreement. ACOLT will, concurrently with the transfer and assignment of the lease assets to it, execute and deliver the secured notes to Ally Bank (and, unless otherwise provided in the accompanying prospectus supplement, the certificate to ACOL LLC) in exchange for the lease assets. In the sale and contribution agreement, Ally Bank will make representations and warranties about each lease and related vehicle included as collateral for a series of secured notes as described in “The Lease Assets—Representations, Warranties and Covenants.” If applicable, the accompanying prospectus supplement will provide the terms, conditions and manner under which additional lease assets will be sold by Ally Bank to ACOLT during the revolving period, if any. Each lease and related vehicle included as collateral for a series of secured notes must meet the eligibility criteria described in “The Lease Assets and the Secured Notes—Criteria Applicable to the Selection of Lease Assets” or, if applicable, “The Lease Assets and the Secured Note—Criteria Applicable to the Selection of Initial Lease Assets” or“The Lease Assets and the Secured Note—Criteria Applicable to the Selection of Additional Lease Assets During the Revolving Period”in the accompanying prospectus supplement.
If Ally Bank breaches any representation or warranty with respect to any lease asset, Ally Bank will repurchase that lease asset from ACOLT at a price equal to the Warranty Payment as of the last day of the second, or if Ally Bank so elects, the first, Monthly Period after Ally Bank discovered or was informed of the breach and the secured notes will be prepaid pro rata in the amount of the Warranty Payment. The repurchase, if it occurs as required in the sale and contribution agreement, constitutes the sole remedy available to ACOLT, the ACOLT indenture trustee, the depositor, the issuing entity and the AART indenture trustee, as holder of the secured notes, for any uncured breaches. Securityholders will be notified of any repurchase of lease assets by Ally Bank from ACOLT on Form 10-D.
In the servicing agreement, the servicer has made the following covenants, among others:
it will, in accordance with its customary servicing practices and, where applicable, the VAULT trust agreement, take such steps as are necessary to establish and maintain (1) the enforceable ownership interest of VAULT, (2) ACOLT’s beneficial ownership interest and (3) the perfection of the AART indenture trustee’s security interest, in each case, in the vehicles related to the lease assets;
except as otherwise expressly contemplated by the servicing agreement and the VAULT trust agreement, it will maintain VAULT as the legal title holder of the vehicles related to the leases;
it will not impair the rights of ACOLT, the ACOLT indenture trustee, the ACOLT owner trustee, ACOL LLC, the issuing entity or the AART indenture trustee in the lease assets;
it will use commercially reasonable efforts to pay all amounts it has received from lessees with respect to Sales and Use Tax Amounts to the applicable taxing authorities and cause any lease asset to be released from the lien of any applicable state taxing authority; and
it will not waive, extend or otherwise modify any lease to the extent that such waiver, extension or modification (i) impairs the applicable interests of VAULT, ACOLT, the holders of the secured
notes or ACOLT indenture trustee in any lease, (ii) reduces the aggregate dollar amount of the Monthly Lease Payments due under any lease, (iii) extends the term of any lease beyond the last day of the sixth Monthly Period immediately preceding the final maturity date of the related secured note, or (iv) modifies the amounts due from the lessee upon the termination of any lease (other than a reductions in the payment made by the lessee to purchase the related vehicle if the servicer has determined that the reduction is reasonably likely to maximize the sale proceeds received in connection with the sale or liquidation of such vehicle, or a waiver of one or more Monthly Lease Payments for any lease being terminated under the Pull Ahead Program if Ally Bank has fully complied with the Pull Ahead Funding Agreement for that lease).
Ally Financial, as servicer, will agree under each servicing agreement that the ACOLT owner trustee, ACOLT, the holder of the residual certificate in ACOLT, the holders of the secured notes and the issuing entity and their respective successors and permitted assigns are third-party beneficiaries of the servicing agreement.
As of the last day of the second, or if the servicer so elects the first, Monthly Period following the date on which the servicer has discovered or received notice of a breach of any covenant that materially and adversely affects any lease asset, unless the breach is cured in all material respects, the servicer will make an Administrative Purchase Payment for that lease asset and the secured notes will be prepaid pro rata in the amount of the Administrative Purchase Payment. This repurchase obligation, if fulfilled, constitutes the sole remedy against the servicer available to ACOLT, the ACOLT indenture trustee, the ACOLT owner trustee, ACOL LLC or the AART indenture trustee, as holder of the secured notes, for any uncured breach. Securityholders will be notified of any repurchase of lease assets by the servicer from ACOLT on Form 10-D.
Pursuant to each servicing agreement, Ally Financial will act as custodian to maintain custody and control, as ACOLT’s agent, of the lease assets owned by ACOLT and any other documents relating to the lease assets. Uniform Commercial Code financing statements reflecting the sale and assignment of the lease assets to ACOLT and the pledge of the lease assets by ACOLT to the ACOLT indenture trustee will be filed, and the servicer’s accounting records and computer files will reflect that sale and assignment.
Sale and Servicing Agreement.Assignment of Secured Notes. Ally Bank will sell and assign to the depositor, without recourse except as described below, its entire interest in a series of secured notes, including its security interests in the leases and leased vehicles, under a pooling agreement. The depositor will transfer and assign to the applicable issuing entity, without recourse except as described below, its entire interest in the secured notes owned by that issuing entity, including its security interests in the leases and leased vehicles, under a trust sale agreement between the depositor, and the issuing entity. Each secured note transferred to an issuing entity will be identified in a schedule that will be on file at the locations set forth in an exhibit to the associated trust sale agreement. The issuing entity will, concurrently with the transfer and assignment, execute and deliver the trust’s notes and certificatesissued by that issuing entity to the depositor in exchange for the receivables.secured notes. The depositor will sell the securities offered by this prospectus and the accompanying prospectus supplement which may or may not include all securities of a series, to the respective underwriters set forthnamed in the accompanying prospectus supplement. See “Plan of Distribution” in this prospectus.
TheIf applicable, the accompanying prospectus supplement will provide the terms, conditions and manner under which additional receivablesthe aggregate Secured Note Principal Balance of a given series of secured notes will be increased as new lease assets are sold by Ally Bank to ACOLT during the revolving period, if any.
In each pooling agreement, Ally Bank will make representations and warranties as to the secured notes to the depositor. Such representations and warranties will include the following:
each secured note in a series, has created or will create a valid, binding and enforceable first priority security interest in favor of Ally Bank or the ACOLT indenture trustee on behalf of Ally Bank in the related pool of lease assets which is assignable by Ally Bank to the depositor, contains customary and byenforceable provisions so as to render the depositor torights and remedies of the trust duringholder of the Revolving Period, if any.
In each Poolingsecured note adequate for realization against the collateral of the benefits of the security, and Servicing Agreement, Ally Bank will represent and warrant toyield interest at the depositor, among other things, that:
the information providedrate established in the schedulesecured note;
no secured note has been satisfied, subordinated or rescinded and the lease assets securing each secured note have not been released from the lien of receivables exhibit to the Trust Sale and Servicing Agreement is correctrelated ACOLT indenture in all material respects,whole or in part;
the obligor on each receivable is required to maintain physical damage insurance covering the financed vehicle in accordance with Ally Bank’s normal requirements,
as of the respective sale date, to the best of itsAlly Bank’s knowledge, the receivablessecured notes are free and clear of all filed security interests, liens, charges and encumbrances on account of work, labor, or materials other than tax liens andor other liens that arise by operation of law and no offsets, defenses or counterclaims have been asserted or threatened,
as of the respective sale date, each receivable is or will be secured by a first perfected security interest in favor of Ally Bank in the financed vehicle,threatened; and
each receivable, atno secured note was issued under, or is subject to, the time it was originated complied,laws of any jurisdiction the laws of which would make unlawful the sale, transfer and asassignment of such secured note under the respective sale date complies, in all material respects with applicable federalrelated Transfer Agreements and state laws, including, without limitation, consumer credit, truth-in-lending, equal credit opportunity and disclosure laws.Servicing Agreements.
In the Trust Sale and Servicing Agreement,trust sale agreement, the depositor will assign the representations and warranties of Ally Bank, as set forth above,made in the pooling agreement, to the trust,issuing entity and will represent and warrant to the trustissuing entity that the depositor has taken no action whichthat would cause theAlly Bank’s representations and warranties of Ally Bank to be false in any material respect as of the respective sale date.
As of the last day of the second, or, if the depositor elects the first, month following the discovery by the depositor, or receipt of notice by the servicer,depositor from Ally Bank, the trust administrator, the AART owner trustee or the AART indenture trustee, of a breach of any representation or warranty of the depositor or Ally Bank that materially and adversely affects the interests of the securityholders in any receivable,secured note, the depositor, unless the breach is cured in all material respects, will repurchase, or will enforce the obligation of Ally Bank under the Pooling and Servicing Agreementpooling agreement to repurchase, the Warranty Receivablesecured note from the trustissuing entity at a price equal to the AART Warranty Payment. The repurchase constitutes the sole remedy against the depositor or Ally Bank as applicable, will be entitled to receive any amounts held by the servicer or in the Payment Ahead Servicing Account for that Warranty Receivable. The repurchase obligation constitutes the sole remedy available to the trust,issuing entity, the noteholders, the AART indenture trustee, the certificateholders, or the AART owner trustee, or any other interested party for any uncured breaches.
In each Pooling and Servicing Agreement,administration agreement, the servicertrust administrator will covenant that:
except as contemplated in thatthe administration agreement and the servicerother Transfer Agreements and servicing agreements, the trust administrator will not release in whole or in part any financed vehiclepart of the ACOLT trust estate from the security interest securing the receivable,related secured note; and
the servicerit will do nothing tonot impair the rights or security interest of the depositor, the issuing entity , the AART indenture trustee, the AART owner trustee, the noteholders, or the certificateholders or any other interested party in and to the receivables,secured notes and
other property transferred pursuant to the servicer will not amend or otherwise modify any receivable so thatrelated pooling agreement and the Amount Financed, the APR, the total number of Scheduled Payments, in the case of a Scheduled Interest Receivable, or the number of originally scheduled due dates, in the case of a Simple Interest Receivable, is altered or so that the last Scheduled Payment, in the case of a Scheduled Interest Receivable, or the last scheduled due date, in the case of a Simple Interest Receivable, occurs after the final scheduled distribution date.related trust sale agreement.
As of the last day of the second, or, if the servicertrust administrator so elects the first, month following the discovery bydate on which the servicer, the owner trusteetrust administrator has discovered or the indenture trusteereceived notice of a breach of any covenant that materially and adversely affects any receivable andsecured note, unless the breach is cured in all material respects, the servicertrust administrator will make an Administrative Purchase Payment for the Administrative Receivable. The servicer will be entitled to receive any amounts held by the servicer or in the Payment Ahead Servicing Account for the Administrative Receivable.that secured note. This repurchase obligation constitutes the sole remedy against the trust administrator available to the trust,depositor, the issuing entity, the AART indenture trustee, the AART owner trustee the noteholders and the certificateholdersor any other interested party for any uncured breaches.breach.
Pursuant to each Trust Sale and Servicing Agreement,administration agreement, the trust administrator will agree to GMAC acting as custodian to maintain possession, as the trust’s agent, of the retail instalment sale contracts, purchase money loansaccounts and any other documentsrecords relating to the receivables. To assure uniform quality in servicing both the receivables and GMAC’s own portfolio of receivables, as well as to facilitate servicing and save administrative costs, the
documents will not be physically segregated from other similar documents that are in GMAC’s possession nor will the documents be stamped or marked to reflect the transfer to the trust so long as GMAC is the custodian of these documents. However,secured notes. Uniform Commercial Code financing statements reflecting the sale and assignment of the receivablessecured notes to the trustissuing entity and the pledge of the secured notes by the trustissuing entity to the AART indenture trustee will be filed, and Ally Bank’sthe trust administrator’s accounting records and computer files will reflect thethat sale and assignment. Because the receivables will remain in the possession of GMAC, as custodian, and will not be stamped or otherwise marked to reflect the assignment to the trust or the pledge to the indenture trustee, if a subsequent purchaser were able to take physical possession of the receivables without knowledge of the assignment, the trust’s and the indenture trustee’s interests in the receivables could be defeated.
Additional Sales of ReceivablesLease Assets
InIf the accompanying prospectus supplement so provides, in addition to receivableslease assets that the depositor buys from Ally Bank sells to ACOLT on a closing date as described above in this subsection, the depositorunder “—Sale and Assignment of Lease Assets and Secured Notes—Sale and Assignment of Lease Assets,” Ally Bank may also buy receivables from Ally Banksell lease assets to transfer to a trustACOLT on one or more later dates for that trust asunder the related sale and contribution agreement during any revolving period described further in the applicableaccompanying prospectus supplement. The depositorrevolving period will not exceed three years in length from the initial closing date. Ally Bank would buysell those receivableslease assets on substantially the same terms as under the pooling and servicing agreement forthat it sold the initial closing. The depositor would then sell receivables thatLease Assets on the depositor has bought from Ally Bank to a trust, pursuant to a trust sale and servicing agreement. initial closing date.
On the initial closing date, the trustissuing entity will apply the net proceeds received from the sale of its notes and certificates to pay the depositor for the receivablessecured notes that are being sold to that trust,issuing entity, the depositor will pay Ally Bank for the secured notes sold to it and ACOLT will issue the secured notes to Ally Bank in payment for the lease assets sold to it. To the extent specified in the accompanying prospectus supplement, toAlly Bank will make a deposit in an additional funding account and the issuing entity will make initial deposits in other trust accounts. If there is an additional funding account, then the depositorACOLT will buy additional receivableslease assets from Ally Bank and sell them to the trust from time to time during thean additional funding period, as described further in the related prospectus supplement. If the depositor receives a tax opinion confirming the tax status of the trust, itissuing entity, Ally Bank may also sell additional receivableslease assets to a trustACOLT at a later closing date and, concurrently with this sale, the ACOLT indenture trustee will increase the aggregate Secured Note Principal Balance of the secured notes held by the applicable issuing entity by a corresponding amount and the AART indenture trustee will execute and deliver additional notes and certificates of the trustissuing entity to fund the increase in Secured Note Principal Balance of secured notes. Securityholders will be notified of the purchase of additional lease assets during the revolving period or additional receivables.funding period on Form 10-D.
ACOLT Trust Accounts. For each trust,series of secured notes, the servicer will establish and maintain the following accounts:
one or more Collection Accounts,ACOLT collection accounts, in the name of the ACOLT indenture trustee on behalf of the ACOLT indenture trustee, the ACOLT owner trustee, ACOL LLC and the AART indenture trustee, into which all payments made on or with respect to the lease assets will be deposited;
a Payment Ahead Servicing Account in the name of the ACOLT indenture trustee on behalf of the lessees, which will not be property of ACOLT, into which all Payments Ahead will be deposited if the Monthly Remittance Condition is not satisfied;
| • | if specified in the accompanying prospectus supplement, an ACOLT reserve account, which will be a segregated trust account held by the ACOLT indenture trustee on behalf of the AART indenture trustee, the ACOLT indenture trustee, the ACOLT owner trustee and ACOL LLC, into which amounts described under “The Transfer Agreements and Servicing Agreements—Distributions on the Secured Notes—Priorities for Distributions from the ACOLT Collection Account” in the accompanying prospectus supplement; |
any other accounts to be established with respect to the secured notes described in the accompanying prospectus supplement.
The Payment Ahead Servicing Account will initially be maintained in the trust department of the ACOLT indenture trustee or, if applicable, by such other party as is identified in the accompanying prospectus supplement.
If specified in the accompanying prospectus supplement, the servicer will establish and maintain an ACOLT reserve account, which will be held by the ACOLT indenture trustee for the benefit of the AART indenture trustee, the ACOLT indenture trustee, the ACOLT owner trustee and ACOL LLC and which will not be included in the property of ACOLT. The ACOLT reserve account will be funded by an initial deposit by the noteholders on the closing date in the amount set forth in the accompanying prospectus supplement and on each distribution date
thereafter up to the Reserve Account Required Amount, as defined in the accompanying prospectus supplement. On each distribution date, the servicer will deposit into the ACOLT reserve account the amount of collections on the lease assets remaining on each distribution date after the payment of the total servicing fee due to the servicer and the distributions and allocations required under the ACOLT indenture on that date. Amounts on deposit in the ACOLT reserve account will be applied to make payments to the AART indenture trustee, the ACOLT indenture trustee, the ACOLT owner trustee and ACOL LLC on the secured notes and shortfalls in the AART collection accounts and to the servicer. Generally, to the extent that amounts on deposit in the ACOLT reserve account exceed the Reserve Account Required Amount, that excess may be paid to ACOL LLC under the ACOLT indenture. Upon any distribution to ACOL LLC of amounts from the reserve account, neither the noteholders nor the certificateholders will have any rights in, or claims to, those amounts.
For each series of secured notes, funds in the ACOLT collection account and any ACOLT reserve account and such other accounts as may be designated in the accompanying prospectus supplement will be invested as provided in the servicing agreement in Eligible Investments. Eligible Investments are generally limited to investments acceptable to the rating agencies hired to rate the issuing entity’s notes at the request of the depositor as being consistent with the rating of the notes. Eligible Investments generally are limited to obligations or securities that mature no later than the business day preceding the next distribution date or, the next distribution date, in the case of investments in the institutions in which the applicable account is maintained or the account owner, the short-term unsecured debt of which has a specified rating, has agreed to advance funds, if necessary, on any distribution date. Eligible Investments in the ACOLT reserve account will only be sold to meet shortfalls if the servicer has directed the ACOLT indenture trustee to sell the investments and the investments are sold for a price at least equal to or greater than unpaid principal balance thereof. If the amount required to be withdrawn from any ACOLT reserve account to cover shortfalls in collections on the lease assets, as provided in the accompanying prospectus supplement, exceeds the amount of cash in the ACOLT reserve account, a temporary shortfall in the amounts distributed to the secured notes could result, which could, in turn, increase the average life of the secured notes. Investment earnings on funds deposited in the ACOLT trust accounts, net of losses and investment expenses, will be payable to the servicer or such other party as is designated in the accompanying prospectus supplement.
Any other accounts to be established for a series of secured notes will be described in the accompanying prospectus supplement.
Issuing Entity Accounts. For each issuing entity, the trust administrator will establish and maintain the following accounts:
one or more AART collection accounts, in the name of the AART indenture trustee on behalf of the noteholders and the certificateholders of that issuing entity, into which all payments made on or forwith respect to the receivablessecured notes owned by that issuing entity will be deposited,deposited;
a Note Distribution Account,note distribution account, in the name of the AART indenture trustee on behalf of the related noteholders of that issuing entity, in which amounts released from the Collection AccountAART collection account and any reserve account or other credit enhancement for payment to the noteholders will be deposited and from which all distributions to the noteholders will be made,made;
if specified in theany accompanying prospectus supplement,offering memorandum, a Certificate Distribution Account,certificate distribution account, in the name of the owner trustee on behalf of the certificateholders of that issuing entity, in which amounts released from the Collection AccountAART collection account and any AART reserve account or other credit enhancement for distribution to the certificateholders will be deposited and from which all distributions to thethose certificateholders will be made,made; and
if the receivables to be purchased by the trust include Scheduled Interest Receivables, a Payment Ahead Servicing Account in the name of the indenture trustee, which will not be property of the trust, into which to the extent required by the Trust Sale and Servicing Agreement, early payments by or on behalf of obligors on Scheduled Interest Receivables which do not constitute either Scheduled Payments or Prepayments will be deposited until payment becomes due,
if specified in the accompanying prospectus supplement, a reserve account, which will be a segregated trust account held by the indenture trustee, in which funds will be deposited by the depositor and from which payments to the noteholders, the certificateholders, the servicer and, in some cases, the depositor, will be made, and
any other accounts to be established with respect to securities of the trustissuing entity will be described in the accompanying prospectus supplement.
The Payment Ahead Servicing Account will initially be maintainedFor any series of securities, funds in the trust department ofAART collection account, the indenture trustee or bynote distribution account and any AART reserve account and such other partyaccounts as is identified in the applicable prospectus supplement.
If specifiedmay be designated in the accompanying prospectus supplement the servicer will establish and maintain a reserve account, which will be held by the indenture trustee for the benefit of noteholders and certificateholders and which will not be included in the property of the trust. The reserve account will be funded by an initial deposit by the depositor on the closing date in the amount set forth in the accompanying prospectus supplement and on each distribution date thereafter up to the Specified Reserve Account Balance, as defined in the accompanying prospectus supplement. On each distribution date, the servicer will deposit into the reserve account the amount of collections on the receivables remaining on each distribution date after the payment of the total servicing fee, amounts payable by the trust under any interest rate swaps, if any, and the distributions and allocations to the noteholders and the certificateholders required on that date. Amounts on deposit in the reserve account will be applied to make payments to noteholders, certificateholders and the servicer. Generally, to the extent that amounts on deposit in the reserve account exceed the Specified Reserve Account Balance, that excess may be paid to the depositor. Upon any distribution to the depositor of amounts from the reserve account, neither the noteholders nor the certificateholders will have any rights in, or claims to, those amounts.
For any series, funds in the Designated Accounts will be invested as provided in the Trust Sale and Servicing Agreementadministration agreement in Eligible Investments. Eligible Investments for a trust are
generally limited to investments acceptable to the rating agencies then rating that trust’shired to rate the issuing entity’s notes and certificates at the request of the depositor as being consistent with the rating of the notes and certificates.notes. Eligible Investments generally are limited to obligations or securities that mature no later than the business day preceding the next distribution date or, in the case of the Note Distribution Account,note distribution account, the next payment date for the notes. To the extent permitted by the rating agencies hired to rate the notes, funds in any AART reserve account may be invested in the trust’s notes, which will not mature prior to the next payment date, and Eligible Investments, which may have longer maturities under specificspecified conditions described in the applicable prospectus supplement. NotesEligible Investments will only be sold to meet shortfalls if they are sold for a price at least equal to the lesser of the price described or statedas specified in the applicable prospectus supplement or the unpaid principal balance of the notes unless, following the sale, the amount on deposit in the reserve account would be at least equal to the Specified Reserve Account Balance for that reserve account. Thus, the amount of cash in any reserve account at any time may be less than the balance of the reserve account.supplement. If the amount required to be withdrawn from any AART reserve account to cover shortfalls in collectionspayments on the receivables,secured notes, as provided in the accompanying prospectus supplement, exceeds the amount of cash in theany AART reserve account, a temporary shortfall in the amounts distributed to the noteholders or certificateholders could result, which could, in turn, increase the average life of the notes or the certificates. Investment earnings on funds deposited in the Designated Accounts and the Payment Ahead Servicing Account,issuing entity accounts, net of losses and investment expenses, will be payable to the servicertrust administrator or such other party as ismay be designated in the accompanying prospectus supplement.
Any other accounts to be established for an issuing entity will be described in the accompanying prospectus supplement.
Eligible Accounts. The Designated Accountsissuing entity accounts and ACOLT trust accounts will be maintained as either of two types of accounts. The first type of account is a segregated account with an eligible institution. Eligible institutions are:
(1) the corporate trust department of the ACOLT indenture trustee, the ACOLT owner trustee, or the AART indenture trustee or the AART owner trustee, as applicable, or
(2) a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia, or any domestic branch of a foreign bank, as long as that depository institution:
(A) has either (X) a long-term unsecured debt rating acceptable to the rating agencies or (Y) a short-term unsecured debt rating or certificate of deposit rating acceptable to the rating agencies, and
| (A) | has either (X) a long-term unsecured debt rating acceptable to the rating agencies hired to rate the applicable series of notes or (Y) a short-term unsecured debt rating or certificate of deposit rating acceptable to the rating agencies hired to rate the applicable series of notes, and |
(B) has its deposits insured by the Federal Deposit Insurance Corporation or any successor thereto.
| (B) | has its deposits insured by the Federal Deposit Insurance Corporation or any successor thereto. |
The second type of account is a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia, or any domestic branch of a foreign bank. This depository institution must have corporate trust powers and act as trustee for funds deposited in the account and the securities of that depository institution must have a credit rating from each rating agency then rating that institution in one of its generic rating categories which signifies investment grade.
Any other accountsServicing and Administration Compensation and Payment of Expenses
Servicing of Underlying Leases and Leased Vehicles. In addition to be establishedacting as trust administrator of the secured notes, Ally Financial also acts as servicer for the leases and leased vehicles under a trustservicing agreement with ACOLT.
Under the servicing agreement, Ally Financial will be describedreceive for the servicing of each pool of lease assets:
a monthly basic servicing fee equal to one-twelfth of the basic servicing fee rate specified in the accompanying prospectus supplement multiplied by the ABS Value of the lease assets held by ACOLT as of the first day of that month;
if specified in the applicable prospectus supplement, a monthly additional servicing fee equal to one-twelfth of the additional servicing fee rate specified in the accompanying prospectus supplement, multiplied by the ABS Value of the lease assets held by ACOLT as of the first day of that month;
a supplemental servicing fee in the form of all investment earnings and any late fees, prepayment charges and other administrative fees and expenses or similar charges;
any unpaid basic servicing fees from all prior distribution dates to the extent of funds available for that purpose; and
any other servicing fees disclosed in the applicable prospectus supplement.
Servicing fees will be paid out of funds available for that purpose. The accompanying prospectus supplement will specify the relative priority of basic servicing fees and any other servicing fees.
The basic servicing fee for each Monthly Period and any portion of the basic servicing fee that remains unpaid from prior distribution dates will be paid out of collections for that Monthly Period. In addition, for each issuing entity, the servicer will retain any late fees, prepayment charges or similar fees and charges collected during a Monthly Period and any investment earnings on ACOLT trust accounts during a Monthly Period, subject to any limitations set forth in the applicable prospectus supplement.
The lease asset servicing fees described above are intended to compensate the servicer for performing the function of a servicer of leases and leased vehicles, including:
tracking balances of outstanding leases and collection and posting of all payments;
responding to inquiries of lessees;
remarketing returned leased vehicles;
investigating delinquencies;
sending billing statements or coupon books to lessees;
reporting required tax information (if any) to lessees;
policing the vehicles;
monitoring the status of insurance policies for the lessees and the vehicles;
accounting for collections and furnishing monthly and annual statements regarding distributions;
generating federal income tax information;
giving, on a timely basis, any required notices or instructions to the ACOLT owner trustee under the ACOLT Declaration of Trust and giving any required instructions to VAULT under the VAULT trust agreement; and
performing the other duties specified in the servicing agreement or in any other ACOLT Basic Document.
These amounts will also compensate the servicer for its services as servicer of the pool of lease assets, including making Advances, accounting for collections, furnishing monthly and annual statements to the ACOLT
owner trustee and the ACOLT indenture trustee and generating federal income tax information for ACOLT and the holders of the secured notes. These amounts will also reimburse the Servicer for its expenses incurred in connection with its responsibilities under the servicing agreement for taxes, the fees of the ACOLT owner trustee and the ACOLT indenture trustee, accounting fees, outside auditor fees, data processing costs and other costs incurred in connection with administering the leases and the leased vehicles.
Administering the Secured Notes. For each issuing entity, on each distribution date, the trust administrator of the secured notes will receive an administration fee for the related Monthly Period equal to one-twelfth of the administration fee rate specified in the accompanying prospectus supplement multiplied by the aggregate principal balance of all secured notes held by the issuing entity as of the first day of that month, subject to any limitations set forth in the applicable prospectus supplement. On each distribution date, the trust administrator will be paid the administration fee and any unpaid administration fees from all prior distribution dates to the extent funds are available. All administration fees for each month, together with any portion of administration fees that remains unpaid from prior distribution dates, may be paid monthly out of money in a collection account at the issuing entity.
The secured note administration fee described above is intended to compensate the trust administrator for performing the functions of a third party servicer of secured notes as an agent for their beneficial owner, including:
collecting and posting all payments on the secured notes;
investigating delinquencies;
accounting for payments and furnishing monthly and annual statements to the depositor and any other person designated in the administration agreement regarding distributions;
generating federal income tax information;
giving any required notices or instructions to the depositor or the AART owner trustee; and
performing the other duties specified in the administration agreement.
These amounts also will reimburse the trust administrator for taxes, the fees of the AART owner trustee and the AART indenture trustee, accounting fees, outside auditor fees, data processing costs and other costs incurred in connection with administering the secured notes.
Servicing and Administration Procedures
Servicer. The servicer will make reasonable efforts to collect all payments due on the lease assets held by ACOLT and will, consistent with the accompanying servicing agreement, follow the collection procedures it follows for comparable automobile lease assets that it services for itself and others. See “Legal Aspects of the Secured Notes and the Lease Assets” in this prospectus. The servicer is authorized to grant rebates, adjustments or extensions on a lease as described under “Transfer Agreements and Servicing Agreements—Sale and Assignment of Lease Assets and Secured Notes—Sale and Assignment of Lease Assets.”
If the servicer determines that eventual payment in full of a lease asset is unlikely, the servicer will follow its normal practices and procedures to realize upon the lease asset, including the repossession and disposition of the related vehicle at a public or private sale, or the taking of any action permitted by applicable law. The servicer will also have the discretion whether to sell or retain the lease asset. The servicer will be entitled to receive its liquidation expenses as specified in the servicing agreement as an allowance for amounts charged to the account of the lessee, in keeping with the servicer’s customary procedures, for refurbishing and disposition of the related vehicle and other out-of-pocket costs incurred in the liquidation. See “The Servicer—Vehicle Disposition Process” in this prospectus.
Trust Administrator. The trust administrator will make reasonable efforts to collect all payments due on the secured notes held by any issuing entity and will, consistent with the accompanying Transfer Agreements and servicing agreements and in the accompanying prospectus supplement, follow the collection procedures it follows for comparable property that it services for itself and others. See “Legal Aspects of the Secured Notes and the Lease Assets” in this prospectus.
If the trust administrator determines that eventual payment in full of a secured note is unlikely, the trust administrator will follow its normal practices and procedures to realize upon the secured note, including the taking of any action permitted by applicable law.
The servicer will deposit collections into the ACOLT collection account and the AART collection account within two business days of receipt. However, the servicer may retain these amounts until the distribution date at any time that:
(1) the Monthly Remittance Condition is satisfied; or
(2) arrangements are made that are acceptable to the rating agencies hired to rate the securities.
Pending deposit into the ACOLT collection account and the AART collection account, collections may be employed by the servicer at its own risk and for its own benefit and will not be segregated from its own funds. In such case, all gains and losses resulting from the investment of those funds will be for the account of the servicer and will not alter in any respect the amount that the servicer is obligated to remit to the ACOLT collection account or the AART collection account in respect of collections on the following distribution date or payment date, as applicable. See also “Insolvency Aspects of the Offerings” in this prospectus.
Collections on any lease assets, other than those with respect to which Administrative Purchase Payments or Warranty Payments are required to be or have been paid by Ally Bank, as seller of the lease assets, or the servicer, that are not (1) late fees, prepayment charges or other similar fees or charges, (2) amounts received by the servicer with respect to any administrative fees, parking tickets or fines, (3) rebates on insurance premiums or other amounts required by applicable law to be paid or refunded to lessees or (4) fees and sales, use or other taxes or payments due under that lease, will be applied first to any Outstanding Advances made by the servicer on that lease and then to the Monthly Lease Payment. The servicer will apply funds in the Payment Ahead Servicing Account for any lease asset to any shortfall in the Monthly Lease Payment for that lease asset. Any Excess Payment will be held by the servicer or, if the servicer has not satisfied the Monthly Remittance Condition, will be deposited into the Payment Ahead Servicing Account and will be treated as a Payment Ahead.
Collections on lease assets for which Administrative Purchase Payments or Warranty Payments have been made will generally be applied in the manner described in the preceding paragraph, except that unapplied payments on these lease assets will be made to the servicer or the depositor, as applicable.
If the Monthly Remittance Condition is satisfied, the servicer will retain any partial prepayment on a lease that it receives prior to its scheduled payment date other than a prepayment in full received in connection with early termination of a lease. If the Monthly Remittance Condition is not satisfied, the servicer will deposit partial prepayments into the Payment Ahead Servicing Account within two business days of receipt of the prepayments. The servicer will include the partial prepayment in distributions to the secured notes on the distribution date after the scheduled payment date for the lease for which the partial payment was made.
The servicer, in its sole discretion, may (but shall have no obligation to) make an Advance under the servicing agreement to cover the shortfalls of collections on the leases and leased vehicles specified below.
Monthly Payment Advances. For each lease asset other than an Extended Lease or a lease asset that has been repurchased due to a breach of a representation, warranty or covenant, if there is a shortfall in the Monthly Lease Payment on that lease asset, after application of Payments Ahead on the lease assets applied in the current month, then the servicer may (but shall have no obligation to) advance an amount equal to that shortfall. If the
Monthly Remittance Condition is not satisfied, the servicer will deposit any Advances to cover these Monthly Lease Payment shortfalls in the ACOLT collection account on the second business day of the following Monthly Period. If the Monthly Remittance Condition is satisfied, the servicer will deposit any Advances in the ACOLT collection account on or before the business day before the related payment date.
The servicer automatically makes Advances of Monthly Lease Payments for all lease assets that are not in default.
Residual Advances. For each lease that terminated by having reached its scheduled lease end date 120 days or more prior to the end of that month and for which the related vehicle that has not been sold during or prior to that month, the servicer in its sole discretion, may (but shall have no obligation to) advance an amount equal to the lesser of (1) the Lease Residual for the related vehicle, reduced, in the case of any lease asset that is an Extended Lease, by the aggregate amount of any Extended Lease Payments on that lease asset received by the servicer since the scheduled lease end date of that lease asset, and (2) the amount that the servicer, in its sole discretion, has estimated will be recoverable from the sale or other disposition of the vehicle related to that lease. If the Monthly Remittance Condition is satisfied, the servicer will deposit any Advances in the ACOLT collection account on or before the related payment date. If the Monthly Remittance Condition is not satisfied, the servicer will deposit any Advances to cover these Lease Residual shortfalls in the ACOLT collection account on the second business day of the following month.
Subject to the release of its claim for reimbursement, the servicer will be reimbursed for Outstanding Advances on a lease asset from collections and recoveries on that lease asset.
When the servicer determines that it will not recover any Outstanding Advances on any lease asset from collections and recoveries on that lease asset, the servicer will be entitled to be reimbursed from any collections and recoveries from any other lease assets in the same series of lease assets.
ACOLT Distributions. For each series of secured notes, beginning on the payment date or distribution date, as applicable, specified in the accompanying prospectus supplement, distributions on the secured notes will, based solely upon a certificate provided by the servicer, be made by the ACOLT indenture trustee or the ACOLT owner trustee or other paying agent, as applicable, from collections on the lease assets and other amounts in the applicable ACOLT collection account to the applicable AART collection account. Credit enhancement, such as an ACOLT reserve account, may be available to cover any shortfalls in the amount available for distribution on that date to the extent specified in the accompanying prospectus supplement. The AART indenture trustee or the AART owner trustee or other certificate paying agent, as applicable, will, based solely upon a certificate provided by the trust administrator, apply these distributions to the noteholders and the certificateholders as described below and in the accompanying prospectus supplement. The timing, calculation, allocation, order, source, priorities of and requirements for all distributions to the AART collection account and the holders of secured notes will be set forth in the accompanying prospectus supplement.
AART Distributions. For each issuing entity, beginning on the payment date or distribution date, as applicable, specified in the accompanying prospectus supplement, distributions of principal and interest on the notes, if any, and distributions in respect of Certificate Balance and interest on the certificates if any, will, based solely upon a certificate provided by the trust administrator, be made by the AART indenture trustee or the AART owner trustee or other certificate paying agent, as applicable, to the noteholders and the certificateholders. The AART indenture trustee or the owner trustee, or other certificate paying agent, as applicable, will make distributions to the noteholders and certificateholders of record on the Record Date. The timing, calculation, allocation, order, source, priorities of and requirements for all payments to each class of noteholders and all distributions to each class of certificateholders will be set forth in the accompanying prospectus supplement.
For each trust,issuing entity, on each payment date and distribution date, collectionspayments on the receivablessecured notes will be transferred from the Collection AccountAART collection account to the Note Distribution Accountnote distribution account and the Certificate Distribution Account, if applicable, for distribution to noteholders and certificateholders as and to the extent described in the accompanying prospectus supplement. Credit enhancement, like asuch as an AART reserve account, willmay be available to cover any shortfalls in the amount available for distribution on that date to the extent specified in the accompanying
prospectus supplement. Distributions in respect of principal and Certificate Balance will be subordinate to distributions in respect of interest, and distributions in respect of the certificates will be subordinate to payments in respect of the notes, as more fullyfurther described in the accompanying prospectus supplement.
The amounts and types of credit enhancement arrangements and the provider of credit enforcementenhancement arrangements, if applicable, for each series or class of securities will be set forth in the accompanying prospectus supplement. If and to the extent provided in the accompanying prospectus supplement, credit enhancement may be provided at either the ACOLT trust or the issuing entity level and may be in the form of any of the following or a variation of or combination of two or more of the following:
Subordination of Interests.Interests. The AART indenture may provide that one or more classes of securities maywill be subordinated in priority of payments to one or more other classes of securities. Subordinated classes of securities will be allocated available funds only after all or the applicable portion of the obligations of the senior classes of securities have been paid. This subordination provides credit enhancement to the senior classes of securities, and could result in reduced or delayed payments of principal or interest to the subordinated classes of securities.
AART Reserve Account.Account. Amounts on deposit in thean AART reserve account, if any, will be applied to make payments to noteholders and certificateholders, in accordance with the priority of payments to the extent those amounts remain unsatisfied after the application of collections and other available funds in accordance with the priority of payments. TheAn AART reserve account would provide credit enhancement by adding an additional potential source of funds available to make payments on the securities.
ACOLT Reserve Account. Amounts on deposit in the ACOLT reserve account, if any, will be applied to make payments to the secured noteholders in accordance with the priority of payments to the extent those amounts remain unsatisfied after the application of collections and other available funds in accordance with the priority of payments. An ACOLT reserve account provides credit enhancement by adding an additional potential source of funds available to make payments on the securities.secured notes.
Overcollateralization.Overcollateralization. The aggregate principal balanceAggregate ABS Value of all Receivableslease assets securing the secured notes held by the trust,issuing entity, discounted by a factor determined as described in the accompanying prospectus supplement, will exceed the aggregate principal balance of the securities issued by the trustABS Value by an amount indicated in the accompanying prospectus supplement. See
“Summary—The Receivables—Credit Enhancement—Overcollateralization” in the accompanying prospectus supplement. This excess creates credit enhancement by allowing for some amount of losses on the receivableslease assets before a shortfall in funds available to make payments on the securities would occur.
Cash Advances, Deposits or Letters of Credit.Credit. The depositor may fund accounts in addition to theany AART reserve account, or may otherwise provide cash advances, deposits or establish letters of credit to provide additional funds that can be applied to make payments on the securities issued by the trust.issuing entity. ACOL LLC may fund accounts in addition to an ACOLT reserve account or may otherwise provide cash advances or deposits to provide additional funds that can be applied to make payments on the secured notes issued by ACOLT. Any such arrangements will be disclosed in the accompanying prospectus supplement.
Insurance Policy from a Monoline Financial Guarantor.Guarantor. The notes may be insured through an insurance policy from a monoline financial guarantor. Any such arrangements will be disclosed in the accompanying prospectus supplement. An insurance policy from a monoline financial guarantor creates credit enhancement because, should the trust failif an issuing entity fails to make payments on the notes, the monoline financial guarantor will have an unconditional and irrevocable obligation to pay those amounts not paid by the trust.that issuing entity.
If specified in the applicable prospectus supplement, credit enhancement for a series of securities may cover one or more other series of securities.
The presence of aany AART reserve account, ACOLT reserve account and other forms of credit enhancement is intended to enhance the likelihood of receipt by the noteholders and the certificateholders of the full amount of principal or Certificate Balance, as the case may be, and interest due thereon and to decrease the likelihood that the noteholders and the certificateholders will experience losses. The credit enhancement for a class of securities, other than an insurance policy issued by a monoline financial guarantor, will not provide protection against all risks of loss and will not guarantee repayment of the
entire principal balance, or Certificate Balance, if any, as the case may be, andor interest thereon. Such an insurance policy will provide protection to the holders of a specified series or class only if and to the extent disclosed in the applicable prospectus supplement. If shortfalls in available funds occur and exceed the amount covered by any credit enhancement or are not covered by any credit enhancement, securityholders will bear their allocable share of those deficiencies. In addition, if a form of credit enhancement covers more than one class or series of securities, securityholders of a given class or series will be subject to the risk that the credit enhancement will be fully or partially exhausted by application to those other classes or series of securities.
Servicer. As an administrative convenience during monthly periods in whichmonths when the servicer is permitted to hold payments on receivableslease assets until the distribution date, the servicer willmay also be permitted to make the depositdeposits of collections, aggregate Advances and any Warranty Purchase Payments and Administrative Purchase Payments for any monthly periodmonth net of distributions to be made to the servicer from the applicable trust for that monthly period.series of secured notes for that month. Similarly, the servicer may cause to be mademake a single, net transfer from the Collection AccountACOLT collection account to the Payment Ahead Servicing Account, or vice versa. The servicer, however, will account to the ACOLT indenture trustee and the ACOLT owner trustee the noteholders and the certificateholders for each trust as if all deposits, distributions and transfers were made individually. In addition, in connection with any trustseries of secured notes at any time that the servicer is not required to remit collections on a daily basis, the servicer may retain collections allocable to the secured notes orand the Note Distribution AccountAART collection account until the next payment date, and pending deposit into the Collection Account orAART collection account for the Note Distribution Account, thesecured notes, these collections may be employed by the servicer at its own risk and for its own benefit and will not be segregated from its own funds. On each payment date, the servicer, the depositor, theACOLT indenture trustee and the ACOLT owner trustee will make all distributions, deposits and other remittances on thea series of secured notes or the Note Distribution Account of a trust for the periods since the previous distribution was to have been made. If payment dates do not coincide with distribution dates, all distributions, deposits or other remittances made on a payment date will be treated as having been distributed, deposited or remitted on the distribution date for the applicable monthly periodmonth for purposes of determining other amounts required to be distributed, deposited or otherwise remitted on that distribution date.
Trust Administrator. As an administrative convenience, the trust administrator may deposit payments on the secured notes and any payments received upon the repurchase of any secured note, for any issuing entity net of distributions to be made to the trust administrator for that issuing entity for the corresponding period. The trust administrator, however, will account to the AART indenture trustee, the AART owner trustee, the noteholders and the certificateholders of each issuing entity as if all deposits, distributions and transfers were made individually. On each payment date, the depositor, the trust administrator, AART indenture trustee and the AART owner trustee will make all distributions, deposits and other remittances for the notes to the note distribution account of an issuing entity for the periods since the previous distribution was to have been made. If payment dates do not coincide with distribution dates, all distributions, deposits or other remittances made on a payment date will be treated as having been distributed, deposited or remitted on the distribution date for the applicable month for purposes of determining other amounts required to be distributed, deposited or otherwise remitted on that distribution date.
Statements to Trustees and TrustIssuing Entity
Prior to each payment date and distribution date, for each issuing entity the trust the serviceradministrator will provide to the AART indenture trustee and the AART owner trustee as of the close of business on the last day of the preceding monthly periodrelated Monthly Period a statement setting forth substantially the same information as is required to be provided in the periodic reports provided to securityholders on thatthe date described under “Book Entry Registration; Reports to Securityholders—Reports to Securityholders” in this prospectus.
ACOLT Indenture Trustee. Each Trust Sale and Servicing Agreementservicing agreement will provide that a firm of independent public accountants will furnish to the trust and the servicer on or before March 15 (or, if such day is not a business day, the next succeeding business day) of each year, beginning March 15 of the first calendar year following the closing date, a statement as to compliance by the servicer during the preceding twelve months ended December 31, or in the case of the first of these certificates, the period from the closing date to December 31 of that year, with standards relating to the servicing of the receivables, the servicer’s accounting records and computer files relating to those receivables and other specified matters, provided that, if the trust is not required to file periodic reports under the Securities Exchange Act of 1934 or any other law, the statement may be furnished to the owner trustee and the indenture trustee on or before April 30 of each year.
Each Trust Sale and Servicing Agreement will also provide for delivery to the ACOLT indenture trustee, the ACOLT owner trustee, the holder of the ACOLT equity certificate and the AART indenture trustee, as holder of the secured notes, on or before March 15 (or, if such day is not a business day, the next succeeding business day) of each year, beginning March 15 of the first calendar year following the closing date, of a certificate signed by an officer of the servicer dated as of December 31 of the immediately preceding calendar year, stating that a review of the activities of the servicer during that preceding 12 month period (or with respect to the first such certificate, such period as shall have elapsed from the closing date to the date of such certificate) and of the
servicer’s performances under the servicing agreement and the other ACOLT Basic Documents has been made under such officer’s supervision, and stating to the best of such officer’s knowledge based on such review, that the servicer has fulfilled in all material respects all its obligations under such agreements throughout such period, or, if there has been a default in any material respect in the fulfillment of any obligation, each default known to such officer and the nature and status thereof. The certificate may be provided as a single certificate making the required statements as to more than one servicing agreement. If the issuing entity is not required to file periodic reports under the Securities Exchange Act of 1934, or any other law, the statement may be furnished on or before April 30 of each year.
Copies of these certificates may be obtained by the AART indenture trustee, as holder of the secured notes, or the holder of the ACOLT equity certificate by a request in writing addressed to the applicable ACOLT indenture trustee or ACOLT owner trustee.
In each servicing agreement, the servicer will agree to give the rating agencies hired to rate the notes, the ACOLT indenture trustee, the ACOLT owner trustee, ACOL LLC and the AART indenture trustee, as holder of the secured notes, notice of any event which with the giving of notice or the lapse of time, or both, unless cured, would become a servicer default.
AART Indenture Trustee. Each administration agreement will provide that a firm of independent public accountants will furnish to the issuing entity and the trust administrator on or before March 15 (or, if such day is not a business day, the next succeeding business day) of each year, beginning March 15 of the first calendar year following the closing date, a report as to compliance by the trust administrator during the preceding twelve months ended December 31, or, in the case of the first such report, the period from the closing date to December 31 of that year, with certain standards relating to the administration of the secured notes, the trust administrator’s accounting records and computer files for the secured notes and certain other matters; provided that if the issuing entity is not required to file periodic reports under the Securities Exchange Act of 1934, or any other law, the statement may be furnished on or before April 30 of each year.
Each administration agreement will also provide for delivery to the AART owner trustee and the AART indenture trustee, on or before March 15 of each year, beginning the first March 15 of the following calendar year, of a certificate signed by an officer of the trust administrator stating that the servicertrust administrator has fulfilled in all material respects its obligations under the Trust Sale and Servicing Agreement and the Pooling and Servicing Agreementadministration agreement throughout the preceding twelve months ended December 31, or in the case of the first of these certificates,certificate, the period from the closing date to December 31 of that year, or, if there has been a default in any material respect in the fulfillment of anany obligation, describing each default,default. The certificate may be provided that, ifas a single certificate making the trustrequired statements as to more than one administration agreement. If the issuing entity is not required to file periodic reports under the Securities Exchange Act of 1934, or any other law, the statement may be furnished to the owner trustee and the indenture trustee on or before April 30 of each year. The certificate may be provided as a single certificate making the required statements as to more than one Trust Sale and Servicing Agreement.
Copies of thethese statements and certificates may be obtained by securityholders by a request in writing addressed to the applicable AART indenture trustee or AART owner trustee.
In each Trust Sale and Servicing Agreement,administration agreement, the depositortrust administrator will agree to give the rating agencies hired to rate the notes, the AART indenture trustee and the AART owner trustee notice of any event which with the giving of notice or the lapse of time, or both, unless cured, would become a Servicer Default. In addition, the depositor will agree to give the indenture trustee, the owner trustee anddefault by the trust notice of specified covenant breaches which with the giving of notice or lapse of time, or both, unless cured, would constitute a Servicer Default.administrator.
Changes to Servicer; Servicer Indemnification and Proceedings
Each Trust Sale and Servicing Agreementservicing agreement will provide that GMACAlly Financial may not resign from its obligations and duties as servicer under the Trust Sale and Servicing Agreement and under the Pooling and Servicing Agreement,servicing agreement, except upon a determination that GMAC’sAlly Financial’s performance of thesethe duties asof servicer is no longer permissible under applicable law. If at the time of resignation a successor servicer has not accepted appointment, the ACOLT indenture trustee will assume GMAC’sAlly Financial’s servicing obligations and duties under the Transfer and Servicing Agreements. Costs associated with the resignation of the servicer and the appointment of a successor will be borne by the trust.servicing agreements.
Each Trust Sale and Servicing Agreementservicing agreement will further provide that, except as specifically provided otherwise, neither the servicer nor any of its directors, officers, employees and agents will be underhave any liability to ACOLT, the trust orACOLT
owner trustee, and the noteholders or certificateholdersAART indenture trustee for taking any action or for refraining from taking any action
pursuant to under the Transfer and Servicing Agreementsservicing agreement or any other ACOLT Basic Document for the indentureapplicable series of secured notes or for errors in judgment. Neither the servicer nor any of thesethe other persons named in the immediately preceding sentence will be protected against any liability that would otherwise be imposed by reason of wilful misfeasance, bad faith or negligence—except errors in judgment—in the performance of the servicer’s duties under the Trust Sale and Servicing Agreementservicing agreement or by reason of reckless disregard of its obligations and duties thereunder. Each Trust Sale and Servicing Agreementservicing agreement will further provide that the servicer and its directors, officers, employees and agents will be reimbursed by (x) the indenture trustee or theACOLT owner trustee for any contractual damages, liability or expense incurred by reason of that trustee’s wilfulwillful misfeasance, bad faith or gross negligence—except errors in judgment—in the performance of the ACOLT owner trustee’s duties thereunder or under the related ACOLT indenture or ACOLT Declaration of Trust or by reason of reckless disregard of its obligations and duties thereunder or under the related ACOLT indenture or ACOLT Declaration of Trust and (y) the ACOLT indenture trustee for any contractual damages, liability or expense incurred by reason of the ACOLT indenture trustee’s willful misfeasance, bad faith or negligence—except errors in judgment—in the performance of thatthe ACOLT indenture trustee’s duties under the Trust Sale and Servicing Agreementthereunder or any ACOLT Basic Document or by reason of reckless disregard of its obligations and duties underthereunder or any ACOLT Basic Document. The AART indenture trustee and the Trust Sale and Servicing AgreementACOLT owner trustee will not be liable to the servicer for any damages in the nature of special, indirect or underconsequential damages, however styled, including lost profits, even if either or both of them have been advised of the trust agreementlikelihood of such loss or the indenture.damage. In addition, each Trust Sale and Servicing Agreementservicing agreement will provide that the servicer is under no obligation to appear in, prosecute or defend any legal action that is not incidental to the servicer’s servicing responsibilities under the Transfer and Servicing Agreementsservicing agreements and that, in its opinion, may cause it to incur any expense or liability. The servicer may, however, undertake any reasonable action that it may deem necessary or desirable in respect of the Transfer Agreements and Servicing Agreementsservicing agreements or any other ACOLT Basic Document and the rights and duties of the parties theretoand the interests of the ACOLT indenture trustee, the ACOLT owner trustee, ACOL LLC, and the AART indenture trustee, as holder of the secured notes, thereunder. If the servicer undertakes any action, the legal expenses and costs of the action and any liability resulting therefrom will be payable from collections received on the lease assets securing the applicable series of secured notes and the servicer will be entitled to reimbursement out of the ACOLT collection account for the related issuing entity. Any indemnification or reimbursement will reduce the amount otherwise available for distribution to the secured notes.
Under the circumstances specified in each servicing agreement, any entity (i) into which the servicer may be merged or consolidated, (ii) resulting from any merger or consolidation to which the servicer is a party, (iii) succeeding to the business of the servicer, or (iv) 25% or more of the voting interests of which are owned, directly or indirectly, by Ally Financial or General Motors, which in each of the foregoing cases assumes the obligations of the servicer under the servicing agreement, will be the successor of the servicer under that servicing agreement. So long as Ally Financial acts as servicer, the servicer may at any time delegate any duties as servicer under any servicing agreement to any entity in which more than 25% of the voting interests are owned, directly or indirectly, by General Motors or Ally Financial in the aggregate. The servicer may at any time perform specific duties as servicer through independent contractors or subcontractors who are in the business of servicing or providing services to the servicers of motor vehicle retail leases, provided that no such delegating, independent contracting or subcontracting will relieve the servicer of its responsibility for those duties.
A servicer default under each servicing agreement will consist of:
(1) any failure by the servicer to deposit any required distribution, payment, transfer or deposit into any ACOLT account, including, when Ally Financial is servicer, obtaining and depositing Pull Ahead Payments, or when another entity is servicer, depositing Pull Ahead Payments if obtained, or to direct the ACOLT indenture trustee to make any required distribution from any ACOLT account, which failure continues unremedied for five business days after (x) written notice thereof is received by the servicer or (y) after discovery of that failure by an officer of the servicer;
(2) any failure by the servicer to duly observe or perform in any material respect any other covenant or agreement in the servicing agreement, or the other ACOLT Basic Documents (other than the FDIC Rule Covenant) which failure materially and adversely affects the rights of the secured noteholders and which continues unremedied for 90 days after (x) written notice thereof is received by the servicer or (y) discovery of the failure by an officer of the servicer;
(3) events of bankruptcy, insolvency or receivership of the servicer by the servicer indicating its insolvency, reorganization pursuant to bankruptcy proceedings, or inability to pay its obligations; or
(4) or any other events or circumstances that are disclosed as servicer defaults under the accompanying prospectus supplement.
Notwithstanding the foregoing, there will be no servicer default where a servicer default would otherwise exist under clause (1) above for a period of ten business days or under clause (2) for a period of 60 days if the delay or failure giving rise to the default was caused by an act of God or other similar occurrence. Upon the occurrence of any of those events, the servicer will not be relieved from using its best efforts to perform its obligations in a timely manner in accordance with the terms of the servicing agreement and the sale and contribution agreement and the servicer will provide the ACOLT indenture trustee, the ACOLT owner trustee, ACOL LLC and the AART indenture trustee, as holder of the secured notes, prompt notice of that failure or delay by it, together with a description of its efforts to so perform its obligations.
As long as a servicer default under a servicing agreement remains unremedied, the ACOLT indenture trustee may terminate all the rights and obligations of the servicer under the servicing agreement, at which time the ACOLT indenture trustee will succeed to all the responsibilities, duties and liabilities of the servicer under those agreements and will be entitled to similar compensation arrangements. If the ACOLT indenture trustee is unwilling to so act, it may, and if it is unable to so act, it will appoint, or petition a court of competent jurisdiction for the appointment of, a successor with a net worth of at least $100,000,000, having the long-term unsecured debt rating specified in the servicing agreement, and whose regular business includes the servicing of motor vehicle instalment contracts, leases or similar receivables and which satisfies the other criteria set forth in the servicing agreement. The ACOLT indenture trustee may make those arrangements for compensation to be paid, which in no event may be greater than the servicing compensation to the servicer under the servicing agreement.
Waiver of Past Defaults of Servicer
For each series of secured notes, the AART indenture trustee, as holder of the secured notes, may waive any default by the servicer in the performance of its obligations under the servicing agreement and its consequences. No waiver will impair the AART indenture trustee’s rights, as holder of the secured notes, for subsequent defaults.
Changes to Trust Administrator; Trust Administrator Indemnification and Proceedings
Each administration agreement will provide that Ally Financial may not resign from its obligations and duties as trust administrator under the administration agreement, except upon a determination that Ally Financial’s performance of those duties is no longer permissible under applicable law. That resignation will not become effective until the AART indenture trustee or a successor trust administrator has assumed Ally Financial’s administrative obligations and duties under the Transfer Agreements and servicing agreements relating to each issuing entity.
Each administration agreement will further provide that, except as specifically provided otherwise, neither the trust administrator nor any of its directors, officers, employees and agents will have any liability to the issuing entity or the noteholders or certificateholders of that issuing entity for taking any action or for refraining from taking any action under the Transfer Agreements and servicing agreements relating to that issuing entity or the AART indenture or for errors in judgment. Neither the trust administrator nor any of the other persons named in the immediately preceding sentence will be protected against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or negligence —except errors in judgment—in the performance of the trust administrator’s duties thereunder or by reason of reckless disregard of its obligations and duties thereunder. Each administration agreement will further provide that the trust administrator and its directors, officers, employees and
agents will be reimbursed by the AART indenture trustee or the AART owner trustee, as applicable, for any contractual damages, liability or expense incurred by reason of that trustee’s willful misfeasance, bad faith or negligence (gross negligence in the case of the AART Owner Trustee)—except errors in judgment—in the performance of that trustee’s duties thereunder or by reason of reckless disregard of its obligations and duties thereunder or under the trust agreement or the AART indenture. The AART indenture trustee and the AART owner trustee will not be liable to the trust administrator for any damages in the nature of special, indirect or consequential damages, however styled, including lost profits, even if either or both of them have been advised of the likelihood of such loss or damage. In addition, each administration agreement will provide that the trust administrator is under no obligation to appear in, prosecute or defend any legal action that is not incidental to the trust administrator’s administrative responsibilities under the Transfer Agreements and servicing agreements relating to each issuing entity and that, in its opinion, may cause it to incur any expense or liability. The trust administrator may, however, undertake any reasonable action that it may deem necessary or desirable in respect of the Transfer Agreements and servicing agreements and the rights and duties of the parties and the interests of the noteholders and the certificateholders thereunder. If the servicertrust administrator undertakes any action, the legal expenses and costs of the action and any liability resulting therefrom will be expenses, costs and liabilities of the trust,issuing entity, and the servicertrust administrator will be entitled to be reimbursed out of the Collection Account.AART collection account for that issuing entity. Any indemnification or reimbursement will reduce the amount otherwise available for distribution to the noteholders and the certificateholders.
Under the circumstances specified in each Trust Sale and Servicing Agreement,administration agreement, any entity (i) into which the servicertrust administrator may be merged or consolidated, or any entity(ii) resulting from any merger or consolidation to which the servicertrust administrator is a party, or any entity(iii) succeeding to the business of the servicertrust administrator, or for its obligations as servicer, any entity 50%(iv) 25% or more of the voting interests of which are owned, directly or indirectly, by Ally Financial or General Motors, or by GMAC or more than 15% ofin the voting interests are owned, directly or indirectly, by General Motors and Cerberus Capital Management, L.P.,aggregate, which entity in each of the foregoing cases assumes the obligations of the servicertrust administrator under any Trust Sale and Servicing Agreement and any Pooling and Servicing Agreement,the administration agreement, will be the successor of the servicertrust administrator under such Trust Sale and Servicing Agreement and the Pooling and Servicing Agreement.that administration agreement. So long as GMACAlly Financial acts as servicer,trust administrator, the servicertrust administrator may at any time subcontractdelegate any duties as servicertrust administrator under any Trust Sale and Servicing Agreement and any Pooling and Servicing Agreementadministration agreement to any entity in which more than 50%25% of the voting interests are owned, directly or indirectly, by General Motors or by GMAC or more than 15% ofAlly Financial in the voting interests are owned, directly or indirectly, by General Motors and Cerberus Capital Management, L.P. or to any entity that agrees to conduct these duties in accordance with the servicer’s servicing guidelines and any Trust Sale and Servicing Agreement.aggregate. The servicertrust administrator may at any time perform specific duties as servicertrust administrator through independent contractors or subcontractors who are in the business of servicing receivables similaror providing services to the receivables,servicers of motor vehicle retail leases, provided that no delegationsuch delegating, independent contracting or subcontracting will relieve the servicertrust administrator of its responsibility for thesethose duties.
ServicerTrust Administrator Default
Servicer DefaultsA trust administrator default under each Trust Sale and Servicing Agreementadministration agreement will consist of:
(1) any failure by the servicertrust administrator to make any required distribution, payment, transfer or deposit ordeliver to direct the AART indenture trustee to makefor deposit into any of the AART collection account or note distribution account, any required distribution, which failure continues unremedied for five Business Daysbusiness days after (x) written notice from the AART indenture trustee or the AART owner trustee is received by the servicertrust administrator or after(y) discovery of thethat failure by an officer of the servicer,trust administrator;
(2) any failure by the servicertrust administrator to duly observe or perform in any material respect any other covenant or agreement in the Trust Sale and Servicing Agreement, the Pooling and Servicing Agreement, the trustadministration agreement or the AART indenture (other than the FDIC Rule Covenant), which failure materially and adversely affects the rights of the noteholders or the certificateholders and which continues unremedied for 90 days after the giving of written notice of thethat failure to the servicertrust administrator, by the AART indenture trustee or the AART owner trustee or to the servicer, theAART indenture trustee andor the AART owner trustee by holders of not less than 25% in principal amount of the Controlling Class or after discovery of the failure by an officer of the servicer,Class;
(3) events of bankruptcy, insolvency or receivership of the servicer or actionstrust administrator by the servicertrust administrator indicating its insolvency, reorganization pursuant to bankruptcy proceedings, or inability to pay its obligations, andobligations; or
(4) any other events or circumstances that are disclosed as Servicer Defaults intrust administrator defaults under the accompanying prospectus supplement.
Notwithstanding the foregoing, there will be no Servicer Defaulttrust administrator default where a Servicer Defaulttrust administrator default would otherwise exist under the clause (1) above for a period of 10 Business Daysten business days or under clause (2) for a period of 60 days if the delay or failure giving rise to the Servicer Defaultdefault was caused by an act of God or other similar occurrence. Upon the occurrence of any of thesethose events, the servicertrust administrator will not be relieved from using its best efforts to perform its obligations in a timely manner in accordance with the terms of the Pooling and Servicing Agreementadministration agreement and the Trust Sale and Servicing Agreement and the servicertrust administrator will provide the AART indenture trustee, the AART owner trustee, the depositor and the securityholders prompt notice of thethat failure or delay by it, together with a description of its efforts to so perform its obligations.
Rights upon ServicerUpon Trust Administrator Default
As long as a Servicer Defaulttrust administrator default under a Trust Sale and Servicing Agreementan administration agreement remains unremedied, the AART indenture trustee or holders of notes evidencing not less than a majority in principal amount of the Controlling Class may terminate all the rights and obligations of the servicer under the Trust Sale and Servicing Agreement and the Pooling and Servicing Agreement. Ifor, if the notes have been paid in full and the AART indenture has been discharged with respect thereto, the AART owner trustee or the holders of certificates evidencing not less than a majority of the aggregatevoting interests of the outstanding Certificate Balance of all certificates other than certificates owned by the trust,depositor, the depositor,issuing entity, Ally Bank the servicer or any of their respective affiliates, may effect the termination of the servicer’s rights and obligations. In either case, upon the termination ofterminate all the rights and obligations of the servicer,trust administrator under the administration agreement, at which time the AART indenture trustee will succeed to all the responsibilities, duties and liabilities of the servicertrust administrator under thethose agreements and will be entitled to similar compensation arrangements. If however, a bankruptcy trustee or similar official has been appointed for the servicer, and no Servicer Default other than the appointment has occurred, the trustee or official may have the power to prevent the indenture trustee or the noteholders from effecting a transfer of servicing. If theAART indenture trustee is unwilling to so act, it may, and if it is unable to so act, it will appoint, or petition a court of competent jurisdiction for the appointment of, a successor with a net worth of at least $100,000,000 and whose regular business includes the servicing of automotive loans, leases or similar receivables and which satisfies the other criteria set forth in the Trust Sale and Servicing Agreement.administration agreement. The AART indenture trustee may make those arrangements for compensation to be paid, which in no event may be greater than the servicingadministration compensation to the servicertrust administrator under the Trust Sale and Servicing Agreement.administration agreement.
Waiver of Past Defaults of Trust Administrator
For each trust,issuing entity, the holders ofevidencing at least a majority in principal amount of the Controlling Class may, on behalf of all thethose noteholders and certificateholders, waive any trust administrator default by the servicer in the performance of its obligations under the Pooling and Servicing Agreement and the Trust Sale and Servicing Agreementadministration agreement and its consequences. However, the holders cannot waive a Servicer Defaultdefault by the trust administrator in making any required deposits to or payments from any of the Designated Accountsissuing entity accounts or the Certificate Distribution Account in accordance with the Trust Sale and Servicing Agreement.administration agreement. No waiver will impair the noteholders’ or certificateholders’ rights regarding subsequent defaults.
EachFor each issuing entity, each of the Transfer Agreements and Servicing Agreementsservicing agreements relating to the issuing entity and ACOLT and each issuing entity agreement may be amended by the parties thereto without the consent of the noteholders or certificateholders:certificateholders of that issuing entity:
to cure any ambiguity,ambiguity;
to correct or supplement any provision of those agreementsin that agreement that may be defective or inconsistent with any other provision of those agreementsin the agreement or in any other Related Document,related agreement;
to add or supplement any credit, liquidity or other enhancement arrangement for the benefit of noteholders or certificateholders of that issuing entity, provided that if anythe addition affects any class of noteholders or certificateholders differently fromthan any other class of noteholders or certificateholders, then thethat addition will not, as evidenced by an opinion of counsel, adversely affect in any material respect the interests of any class of noteholders or certificateholders,certificateholders;
to add to the covenants, restrictions or obligations of the depositor, the trust administrator, the AART owner trustee, the AART indenture trustee, the servicer, the ACOLT owner trustee or the ACOLT indenture trustee,trustee; or
to add, change or eliminate any other provisions of thoseany of these agreements in any manner that will not, as evidenced by an opinion of counsel, adversely affect in any material respect the interests of the noteholders or the certificateholders.certificateholders of that issuing entity.
Each agreementof these agreements may also be amended by the parties thereto with the consent of (1) the holders of at least a majority in outstanding principal amount of the Controlling Class, in the case of the pooling agreement, the trust sale agreement and the administration agreement and (2) the holders of at least a majority in principal amount of the Controlling Class and, if any person other than the depositor or its affiliate or, in the case of the ACOLT servicing agreement, ACOL LLC, holds any certificates, the holders of at least a majority of the voting interests of the certificates in the case of the trust agreement and (3) the AART indenture trustee, as holder of the secured notes, in the case of the ACOLT servicing agreement and the sale and contribution agreement, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the agreement or of modifying in any manner the rights of the noteholders or certificateholders. Nothe certificateholders, as applicable.
Among other things, no amendment may:
(1) increase or reduce the interest rate or principal amount of any note or change any distribution date or the final scheduled distribution date of any note or distributions on the certificatesmay, without the consent of all noteholders:
(1) change the holder thereof, any interest rate, any Pass Through Rate or the Specified Reserve Account Balance,
(2) adversely affect the ratingdue date of any series by any rating agency withoutinstalment of principal of or interest on the consent of two-thirds ofnotes; reduce the principal amount of the outstandingnotes, the interest rate applicable to the notes, or the voting interestsredemption price of the outstanding certificates, as appropriate,notes; change any place of payment where any notes or any distribution on the series,notes is payable; or
(3)(2) reduce the stated percentage required of noteholders or certificateholders to consent to any amendmentof the amendments set forth above without the consent of all of the noteholders or certificateholders, as the case may be.and certificateholders.
The ACOLT Declaration of Trust provides that neither ACOLT nor the ACOLT owner trustee has the power to commence a voluntary proceeding in bankruptcy relating to ACOLT without the approval of all ACOLT certificateholders. Under no circumstance will the ACOLT owner trustee commence any bankruptcy proceeding prior to the date that is one year and one day after the termination of ACOLT. In each servicing agreement, the servicer will agree that it will not, for a period of one year and one day after the payment in full of all related secured notes, institute against ACOLT any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law.
Each trust agreement will provide that the AART owner trustee does not have the power to commence a voluntary proceeding in bankruptcy relating to the trustissuing entity without the unanimous prior approval of all certificateholders, including the depositor. Under no circumstance, however, will the AART owner trustee commence any bankruptcy proceeding prior to the date that is one year and one day after the termination of the trust.issuing entity. In the Trust Sale and Servicing Agreement,administration agreement for each issuing entity, the servicerdepositor and the trust administrator will agree that the depositor will covenant that theyand the trust administrator will not, for a period of one year and one day after the final distribution foron the notes and the certificates to the Note Distribution Account or the Certificate Distribution Account, as applicable,issued by that issuing entity, institute against the trust any bankruptcy, reorganizationthat issuing entity or other proceeding under any federal or state bankruptcy or similar law. In the Pooling and Servicing Agreement, Ally Bank will covenant that it will not, for a period of one year and one day after the final distribution for the notes and the certificates to the Note Distribution Account or the Certificate Distribution Account, as applicable, institute against the trust or the depositorACOLT any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law.
Certificateholder Liability; Indemnification
ACOLT Certificateholders. Under each trust agreement,the ACOLT Declaration of Trust, certificateholders will be entitled to the same limitation ofhave no personal liability extended to stockholdersfor any liability or obligation of for profit corporations under the General Corporation Law of Delaware.ACOLT.
Each Trust Sale and Servicing Agreement providesservicing agreement will provide that the servicer will indemnify (1) ACOLT, the ACOLT indenture trustee and the ACOLT owner trustee from and against any loss, liability, expense, damagetaxes that may be asserted against them for the transactions contemplated in the ACOLT transaction documents, other than taxes for the sale of the lease assets or costsecured notes, the ownership of the lease assets or the receipt of payments on secured notes or other compensation, (2) ACOLT, the ACOLT indenture trustee, the ACOLT owner trustee, ACOL LLC and the AART indenture trustee, as holder of the secured notes, against all losses arising out of the use or incurredoperation by any lessee or by the servicer or any affiliate of the servicer of any vehicle related to a leased asset securing a secured note in connection withthe applicable series, (3) ACOLT, the ACOLT indenture trustee, the ACOLT owner trustee, ACOL LLC and the AART indenture trustee, as holder of the
secured notes, against losses arising out of the negligence, willful misfeasance or bad faith of the servicer in the performance of its duties under the servicing agreement and the other ACOLT transaction documents or by reason of its reckless disregard of its obligations and duties set forth in those agreements and (4) the ACOLT indenture trustee and the ACOLT owner trustee against all losses arising out of the acceptance or performance of its duties pursuant tounder the Transfer and Servicing Agreements,transaction documents, including any judgment, award, settlement, reasonable attorneys’ fees and other costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim. Neither the ACOLT indenture trustee nor ACOLT owner trustee will be so indemnified if thethose acts or omissions or alleged acts or omissions constitute wilfulwillful misfeasance, bad faith or negligence by the ACOLT indenture trustee or the ACOLT owner trustee, as applicable. In addition,
AART Certificateholders. Under each trust agreement, certificateholders will be entitled to the servicersame limitation of personal liability extended to stockholders of for profit corporations under the Delaware General Corporation Law.
Each administration agreement will indemnifyprovide that the trust administrator will indemnify: (1) the AART indenture trustee, the AART owner trustee, the issuing entity, the noteholders of the applicable series and the certificateholders of the applicable series from and against any and all losses arising out of or resulting from the use, ownership or operation of any vehicle related to that series by VAULT, ACOLT, Ally Bank, the trust administrator or any affiliate of any of them; (2) the AART indenture trustee, the AART owner trustee and the issuing entity against any taxes that may be asserted against them for the transactions contemplated in the AART Related Documents, other than taxes on the sale of the secured notes, the issuance and sale of the notes and certificates, the ownership of the secured notes, income taxes arising out of distributions on the notes and certificates, and fees and other compensation payable to such person; (3) the AART indenture trustee, the AART owner trustee, the noteholders, the certificateholders and the certificateholdersissuing entity, against all losses arising out of the negligence, wilfulwillful misfeasance or bad faith of the servicertrust administrator in the performance of its duties under the Transfer and Servicing Agreements and the indentureadministration agreement or by reason of its reckless disregard of its obligations and duties thereunder. The servicer will also indemnifyset forth in those agreements; and (4) the partiesAART indenture trustee and the AART owner trustee against any taxes that may be asserted againstall losses arising out of the parties foracceptance or performance of its duties under the transactions contemplated inAART Related Documents, the Trust Sale and Servicing Agreement, other than taxes onperformance of the sale of receivables or securities,AART owner trustee’s duties under the ownership of receivablestrust agreement or the receiptperformance of payments on securitiesthe AART indenture trustee or other compensation.the AART owner trustee’s duties under the AART Related Documents, except to the extent that such loss is due to willful misfeasance, bad faith or negligence of the AART indenture trustee or the AART owner trustee, as applicable.
Each trustissuing entity will terminate upon the final distribution by the AART indenture trustee and the AART owner trustee of all monies and other property of the trustissuing entity in accordance with the terms of the trust agreement, the AART indenture and the Trust Sale and Servicing Agreement,trust sale agreement, including in the case of the exercise by the servicerServicer of its repurchase option as described below in this section of this prospectus.the following paragraph. Upon termination of the trustissuing entity and payment or deposit into the Note Distribution Account and the Certificate Distribution Account of all amounts to be paid to the securityholders, any remaining assets of the trustissuing entity and any amounts remaining on deposit in theany AART reserve account for that issuing entity will be paid to the depositor.
Servicer Purchase Option. In order to avoid excessive administrative expense, if the outstanding Aggregate Receivables Principal BalanceABS Value of the receivableslease assets related to secured notes held by a trustan issuing entity is less than or equal to 10% of the initial Aggregate Receivables Principal Balance or such othera percentage threshold specified in the applicable prospectus supplement, the servicer, or its successor, or if specified in the applicable prospectus supplement, if the servicer does not exercise the option, a holder of all of the certificates, that is not the trust, the depositor or any affiliate thereof will be permitted to purchase from that trustACOLT all remaining receivableslease assets in the related pool and other ACOLT trust assets.assets related thereto. This purchase is at the option of the servicer or its successor, and would be calculatedoccur as of the last daypayment date following the date on which the required percentage of any monthly period.Aggregate ABS Value is reached. The purchase price paid by the servicer or its successor, would be equal to the greaterAggregate ABS Value of the Aggregate Receivables Principal Balancepool of lease assets on the date of purchase. If the servicer exercises this option, all outstanding secured notes will be retired and discharged and the funds received from the servicer will be applied to redeem any outstanding notes and, if specified in the accompanying prospectus supplement, the certificates at a price equal to their remaining principal balance, plus accrued and unpaid interest for these receivables plus the appraised value of any other property held as part of the trust and the sum of the basic servicing fee for the related monthly period, the unpaid principal of the outstanding notes and the unpaid balance of the certificates plus, for all securities, accrued and unpaid interest thereon through but excluding the related Distribution Date, and any amounts payable by the trust under any interest rate swaps. For purposes of calculating the unpaid balance of the notes and certificates in the immediately preceding sentence, the Certificate Balance will not be reduced for principal losses incurred by the noteholders or certificateholders as of the close of the preceding Distribution Date. As further described in the accompanying prospectus supplement, any outstanding notes will be redeemed concurrently therewith and thethereon. Any subsequent distribution to certificateholders of all amounts required to be distributed to them pursuant to the trust agreement will effect early retirement of the certificates. The indenture trusteeservicer will give written notice of redemptionthe repurchase of the pool of lease assets to each noteholder of recordthe ACOLT indenture trustee, the VAULT Trustee and the owner trustee will give written notice of termination to each certificateholder of record. The final distribution to any noteholder or certificateholder will be made only upon surrender and cancellation of that noteholder’s note at an office or agencyholder of the indenture trustee specified in the notice of redemption or that certificateholder’s certificate at an office or agency of the owner trustee specified in the notice of termination.secured notes.
GMAC, in its capacity as administrator, will enter into an administration agreement with each trust and the indenture trustee pursuant to which GMAC, as administrator, will agree, to the extent provided in the administration agreement, to provide the notices and to perform other administrative obligations required by the indenture. For each trust, as compensation for the performance of the administrator’s obligations under the administration agreement and as reimbursement for its expenses thereto, GMAC, as administrator, will be entitled to an administration fee in an amount equal to $1,500 per month or such other amount as is specified in the applicable prospectus supplement. The servicer will pay the administration fee.
LEGAL ASPECTS OF THE RECEIVABLESSECURED NOTES AND THE LEASE ASSETS
Security Interest in the Secured Notes and the Leases and Leased Vehicles
For all stateseach issuing entity, the AART indenture trustee will be the holder of a first priority security interest in the secured notes for the benefit of the holders of the notes and, to the extent provided in the AART indenture, the certificates. Each secured note is secured by a first priority security interest in a pool of underlying leases and leased vehicles, running to the benefit of the holder of the secured notes. The parties to the transaction will take the following steps to effect the perfection of these security interests.
Security Interests in the Secured Notes. The secured notes will be issued by ACOLT to Ally Bank in definitive form only or in such other form as may be specified in the applicable prospectus supplement. Until secured notes are released from the lien of the AART indenture, ACOLT will agree to deliver secured notes only upon the direction of the AART indenture trustee. The AART indenture trustee will perfect its security interest in the secured notes assuming that they may be considered to be “chattel paper,” “certificated securities,” “promissory notes” or “payment intangibles” under the Uniform Commercial Code.
The depositor will perfect its interest in the secured notes by Ally Bank’s sale of the secured notes to the depositor and by ACOLT’s consent and acknowledgment to the depositor that it recognizes the depositor as the purchaser of the secured notes. The depositor will also perfect its interest by filing a UCC-1 financing statement with the appropriate state authority in Utah, the jurisdiction in which Ally Bank is organized.
The issuing entity will perfect its interest in the secured notes by the depositor’s transfer of the secured notes to the issuing entity and by ACOLT’s consent and acknowledgment to the issuing entity that it recognizes the issuing entity as the transferee of the secured notes. The issuing entity will also perfect its interest by filing a UCC-1 financing statement with the appropriate state authority in Delaware, in the jurisdiction in which the receivablesdepositor is organized.
The AART indenture trustee will have its security interest in the secured notes perfected by the filing of a UCC-1 financing statement by the trust administrator with the appropriate state authority in the jurisdiction in which the issuing entity was formed—in this case Delaware. The AART indenture trustee will also perfect its security interest in the secured notes by having ACOLT deliver possession of the secured notes to the AART indenture trustee or to a custodian as the AART indenture trustee directs. By taking these steps, the secured notes will have been originated, retail instalment sale contracts evidenceeffectively transferred to the creditAART indenture trustee and the AART indenture trustee will have a perfected security interest in the secured notes if the transfer of the secured notes is considered the transfer or sale of automobiles and light trucks by dealers to purchasers. The contracts also constitute personal property security agreements and include grantsan interest in chattel paper or certificated securities or promissory notes, or the transfer of security interestsan interest in the vehiclespayment intangibles, under the Uniform Commercial Code. If the transfer of the secured notes from Ally Bank would originateto the receivables directly,depositor is considered the purchase money loans would besale of a payment intangible or the sale of promissory notes, under the Uniform Commercial Code the depositor’s security interest in the secured notes is automatically perfected upon attachment.
Under the Uniform Commercial Code, a successor holder of secured debt will maintain the original holder’s valid lien on the collateral securing that debt. Therefore, to the extent that Ally Bank has a valid lien on the underlying leases and leased vehicles, the AART indenture trustee, as pledgee and successor holder of the debt evidenced by a promissory notethe secured notes, will maintain Ally Bank’s lien on this collateral.
Ally Bank’s security interest in the leases and security agreement. Perfection of securityleased vehicles will, moreover, be assigned and transferred by Ally Bank to the depositor, by the depositor to the issuing entity, and by the issuing entity to the AART indenture trustee at the same time as the interests in the vehicles is generally governedsecured notes owned by that issuing entity are transferred. As a precautionary step, the motor vehicle registration lawsUCC-1 financing statements referred to in the second through fourth paragraphs of the state in which the vehicle is located. In all states in which the receivables have been originated, a security interest in a vehicle is perfectedthis section will include Ally Bank’s lien as additional collateral covered by notation of the secured party’s lien on the vehicle’s certificate of title.these financing statements.
For each trust, pursuant toSecurity Interest in the Pooling and Servicing Agreement,Leases. Under the Uniform Commercial Code, the leases are chattel paper or payment intangibles. Ally Bank will assignas lienholder perfects its security interest in the financed vehicles securingleases both by filing a UCC-1 financing statement against ACOLT in Delaware, the receivablesjurisdiction in which ACOLT was formed, and by taking possession of the leases. However, Ally Financial will serve as the custodian of the leases and will not physically segregate or mark the leases to indicate that they have been sold to ACOLT or that they have been pledged by ACOLT as security for the secured notes.
Security Interest in the Leased Vehicles. Legal title to the depositorleased vehicles is held by VAULT, as nominee for Ally Bank, Ally Bank and pursuantACOLT. As nominee, VAULT consents to Ally Bank’s grant of a security interest in the Trust Saleleased vehicles. Under the Uniform Commercial Code, the filing of a financing statement is not required to perfect a security interest in property subject to certificate of title statutes covering automobiles, unless the automobiles are considered to be inventory held for sale or lease by a debtor or leased by the debtor as lessor and Servicing Agreement, the depositor will assigndebtor is in the business of selling or leasing goods of that kind. Ally Bank, as lienholder, perfects its security interest in the financedleased vehicles, securingby being designated, or by designating Ally Financial, as agent for Ally Bank, as the receivablesfirst lienholder on each vehicle certificate of title. Ally Bank also perfects its security interest in the leased vehicles by filing a UCC-1 financing statement against VAULT in the jurisdiction in which VAULT was formed, Delaware.
ERISA Liens and Vicarious Tort Liability. Liens in favor of the PBGC could attach to the trustlease assets owned by ACOLT and VAULT if Ally Bank and the trust will pledge its interest to the indenture trustee. However, because of the administrative burden and expense, no certificate of title will be amended to identify the trust as the new secured party relating to a financed vehicle or the interest of theACOLT indenture trustee in the financed vehicle. Also, GMAC will hold any certificates of title relating to the vehicles in its possession as custodian for the depositor and trust pursuant todid not have a custodian agreement entered into pursuant to the Pooling and Servicing Agreement and Trust Sale and Servicing Agreement. See “The Transfer and Servicing Agreements—Sale and Assignment of Receivables” in this prospectus.
An assignment of the nature of the assignment contained in each of the Pooling and Servicing Agreement and the Trust Sale and Servicing Agreement is an effective conveyance of a security interest without amendment of any lien noted on a vehicle’s certificate of title, and the assignee succeeds by the assignment to the assignor’s rights as secured party. In the absence of fraud or forgery by the vehicle owner or Ally Bank or administrative error by state or local agencies, in most states the notation of Ally Bank’sprior lien on the certificateslease assets and could be used to satisfy unfunded pension obligations of title will be sufficient to protect the trust against the rights of subsequent purchasersany member of a financedcontrolled group that includes Ally Bank and its affiliates under its defined benefit pension plans. In addition, some states allow a party that incurs an injury involving a vehicle from an obligor or subsequent lenders to an obligor who take a securitysue the owner of the vehicle merely because of that ownership. See “Legal Aspects of the Secured Notes and the Lease Assets—Vicarious Liability.” ACOLT and VAULT may be subject to these lawsuits as owners of the lease assets. However, the ACOLT indenture trustee and in respect of VAULT’s interest in a financed vehicle. If there are any financedthe vehicles, as to which Ally Bank failed to obtainthe AART indenture trustee will have a perfected security interest in the lease assets that will be senior in priority to the interests in the lease assets of the PBGC or judgment lien creditors.
Each lease included in the lease assets will name Ally Bank as the lessor or as the assignee of the lessor. The vehicles included in the lease assets will be titled in the name of VAULT and initially will be 100% beneficially owned by Ally Bank or Ally Financial. Ally Bank will transfer its beneficial interest in these vehicles to ACOLT as described in “Vehicle Asset Universal Lease Trust” in this prospectus. The certificate of title for each vehicle will name Ally Bank or Ally Financial, as agent for Ally Bank, as lienholder, which will perfect Ally Bank’s security interest would be subordinate to, among others, subsequent purchasers of the financed vehicles and holders of perfected security interests. This failure, however, would constitute a breach of the warranties of Ally Bank under the Pooling and Servicing Agreement and, if the interests of the securityholders in the receivable are materially and adversely affected, would create an obligation of Ally Bank to repurchase that receivable unless the breach is cured. Similarly, the security interest of the trust in the vehicle could be defeated through fraud or negligence and, because the trust is not identifiedissuing entity, as the secured party on the certificate of title, by the bankruptcy petitionholder of the obligor.
Under the lawssecured notes, in that vehicle pledged by ACOLT to secure repayment of most states, the perfected security interest in a vehicle would continue for four months after a vehicle is moved to a state other than the state in which it is initially registered and thereafter until the
vehicle owner re-registers the vehicle in the new state. A majority of states generally require surrender of a certificate of title to re-register a vehicle. Accordingly, a secured party must surrender possession if it holds the certificate of title to the vehicle or, in the case of vehicles registered in states providing for the notation of a lien on the certificate of title but not possession by the secured party, the secured party would receive notice of surrender of the certificate of title from the state department of motor vehicles. Thus, the secured party would have the opportunitynotes. In addition, ACOLT will take all steps necessary to re-perfectperfect its security interest in the vehicles inlease, the state of relocation. In states that do not require surrender of a certificate of title for registration of a motor vehicle, re-registration could defeat perfection. In the ordinary course of servicing receivables, the servicer takes steps to effect re-perfection upon receipt of notice of re-registration or information from the obligors as to relocation. Similarly, when an obligor sells a vehicle, the servicer must surrender possession of the certificate of title or will receive notice as a result of its lien noted thereon and accordingly will have an opportunity to require satisfaction of the receivable before release of the lien. Under each Pooling and Servicing Agreement, the servicer is obligated to take appropriate steps, at the servicer’s expense, to maintain perfection of security interests in the financed vehicles.
Under the laws of most states, liens for repairs performed on a motorrelated vehicle and liens for unpaid taxes take priority over even aall other rights and assets included in each lease asset. When Ally Bank’s perfected security interest in a financed vehicle. The Internal Revenue Code also grantsthe lease assets is assigned to the issuing entity in connection with the transfer and pledge of the secured notes by Ally Bank and the depositor and pledged by the issuing entity to the AART indenture trustee, then the AART indenture trustee’s perfected security interest in the lease assets for the benefit of the holders of the notes and certificates issued by the issuing entity will be senior in priority to some federal taxthe interests of any other creditors of ACOLT, Ally Bank, the depositor, the issuing entity or the AART indenture trustee, including any judgment liens or liens arising after that date in favor of the PBGC or judgment lien creditors (but subject to events and circumstances as discussed elsewhere in this prospectus, including in the “Risk Factors” section of this prospectus.
Limitations on AART Indenture Trustee’s Lien. Various liens could be imposed upon the leased vehicles, that, by operation of law, would take priority over Ally Bank’s and, therefore, the lien ofAART indenture trustee’s interest in these assets. These liens could include, among others, mechanics’, repairmen’s and garagemen’s liens and certain liens for personal property taxes, in each case arising on a secured party. Theparticular leased vehicle. In addition, the laws of somecertain states and federal law permit the confiscation of motor vehicles by governmental authorities to confiscate vehicles under somecertain circumstances if they are used in unlawful activities, which may result in the loss of a secured party’s perfected security interest in the confiscated motor vehicle. Under each Pooling and Servicing Agreement, Ally Bank will have represented to the depositor that, as of the respective sale date, each receivable is or will be secured by a first perfected security interest in favor of Ally Bank in the financed vehicle. The depositor will have assigned the representation, among others, to the owner trustee pursuant to the Trust Sale and Servicing Agreement. However,These liens, for repairs or taxes, or the confiscation of a financedleased vehicle, could arise at any time during the term of a receivable. Nothe lease, and without notice will bebeing given to the AART owner trustee, the AART indenture trustee, the trust, the noteholders or certificateholders.
In addition, any perfected security interest of the certificateholders ifAART indenture trustee in all or part of the property of the issuing entity could be subordinate to claims of any conservator, receiver, trustee in bankruptcy or debtor in possession in the event of a lienconservatorship, receivership bankruptcy or confiscation arises.other proceeding involving of Ally Bank, the depositor or the issuing entity, or to the claims of a creditor that has perfected its security interest, prior to any perfection of the transfer of the assets transferred by Ally Bank to the depositor under the pooling agreement, by the depositor to the issuing entity under the trust sale agreement or by the perfection of the security interest of the AART indenture trustee.
Repossession of Leased Vehicles
In the event ofthat a default by vehicle purchasers, the holder of the retail instalment sale contract or purchase money loan has all the remediesa lessee of a secured party under the Uniform Commercial Code, except where specifically limited by other state laws. Among the Uniform Commercial Code remedies,leased vehicle has not been cured within a certain period of time after notice, the servicer as agent on behalf of the secured party, has the right to perform self-help repossession unless the act would constitute a breach of the peace. Self-help is the method employed by the servicer, as agent on behalf of the secured party, in most cases and is accomplished simply by retakingwill ordinarily retake possession of the financedthat leased vehicle. In the event of default by the obligor, someSome jurisdictions require that the obligorlessee be notified of the default and be given a time period within which he mayto cure the default prior to repossession. Generally, thethis right of reinstatementto cure may be exercised on a limited number of occasions in any one-year period. In cases wherethese jurisdictions, if the obligorlessee objects or raises a defense to repossession, or if otherwise required by applicable state law, a courtan order must be obtained from the appropriate state court, and the vehicle must then be repossessed in accordance with that order. A secured partyOther jurisdictions, including Michigan, permit repossession without notice to the lessee, but only if the repossession can be accomplished peacefully. If a breach of the peace cannot be avoided, judicial action is required, and the lessor typically must seek a writ of possession or replevin in a state court action or pursue other judicial action to repossess that leased vehicle.
After the servicer has repossessed a leased vehicle, it may provide the lessee with a period of time within which to cure the default under the lease. If by the end of that period the default has not been cured, the servicer will attempt to sell the leased vehicle. As a result of those delays, the net charged-off vehicle proceeds may be held responsible for damages causedless than the remaining amounts due under the lease at the time of default by a wrongful repossession of a vehicle.
Notice of Sale; Redemption Rights
The Uniform Commercial Code and other state laws require the secured party to provide the obligor with reasonable notice of the date, time and place of any public sale or the date after which any private sale of the collateral may be held. In addition, a consent order between the servicer and the Federal Trade Commission imposes similar requirements for the giving of notice for any sale. The obligor has the right to redeem the collateral prior to actual sale by paying the secured party the unpaid principal balance of the obligation plus reasonable expenses for repossessing, holding and preparing the collateral for disposition and arranging for its sale, plus, in some jurisdictions, reasonable attorneys’ fees, or, in some states, by payment of delinquent instalments or the unpaid balance.lessee.
Deficiency Judgments and Excess Proceeds
The proceeds of resalesale of the financedleased vehicles generally will be applied first to the expenses of resalethe sale and repossession and then to the satisfaction of amounts due under the indebtedness. In many instances, the remaining principal amount of the indebtedness will exceed the proceeds.lease. While some states impose prohibitions or limitations on deficiency judgments if the net proceeds from resalesale do not cover the full amount of amounts due under the indebtedness,lease, a deficiency judgment can be sought in those states, including Michigan, that do not prohibit directly or limit thesethose judgments. However,In some states, however, including Michigan, a lessee may be allowed an offsetting recovery for any amount not recovered at sale because the terms of the sale were not commercially reasonable. In any event, the deficiency judgment would be a personal judgment against the obligorlessee for the shortfall, and a defaulting obligor can be expected tolessee might have very little capital or sources of income available following repossession. Therefore, in many cases, it may not be useful to seek a deficiency judgment. Because it is a personal judgment or,against a lessee who may have few if any assets remaining after the repossession, even if one is obtained, it may be settled at a significant discount.discount or it may be impossible to collect all or any portion of it.
Occasionally, after resaleCourts have applied general equitable principles in litigation relating to repossession and deficiency balances. These equitable principles may have the effect of relieving a lessee from some or all of the legal consequences of a vehicle and paymentdefault.
In several cases, consumers have asserted that the self-help remedies of all expenses and all indebtedness, there is a surplus of funds. In that case,lessors violate the Uniform Commercial Code requiresdue process protection provided under the creditor to remit the surplus to any holder of a lien on the vehicle or if no lienholder exists or there are remaining funds, the Uniform Commercial Code and a consent order between the servicer and the Federal Trade Commission require the creditor to remit the surplusFourteenth Amendment to the former ownerConstitution of the vehicle.United States. Courts have generally found, however, that repossession and resale by a lessor do not involve sufficient state action to afford constitutional protection to consumers.
Numerous federal and state consumer protection laws and related regulations impose substantial requirements upon lenderslessors and servicers involved in consumer finance. These laws includeleasing. The federal Consumer Leasing Act of 1976 and Regulation M, issued by the Truth-in-Lending Act, the Equal Credit Opportunity Act,Board of Governors of the Federal Trade Commission Act,Reserve System, for example, require that a number of disclosures be made at the Fair Credit Reporting Act,time a vehicle is leased, including, among other things, all amounts due at the Fair Debt Collection Procedures Act, the Magnuson-Moss Warranty Act, the FRB’s Regulations B and Z, the Servicemembers Civil Relief Acttime of 2003, the Texas Consumer Credit Code, state adoptionsorigination of the National Consumer Act andlease, a description of the Uniform Consumer Credit Code and state sales finance and other similar laws. Also, state laws impose finance charge ceilings and other restrictions on consumer transactions and require contract disclosures in addition to those required under federal law. These requirements impose specific statutory liabilities upon creditors who fail to comply with their provisions. In some cases, thislessee’s liability could affect an assignee’s ability to enforce consumer finance contracts, includingat the receivables. If a seller of receivables is not liable for indemnifying the trust as assigneeend of the receivables from the seller, failure to comply could impose liability on an assignee in excess oflease term, the amount of any periodic payments, the receivable.
The so-called “holder-in-due-course rule”circumstances under which the lessee may terminate the lease prior to the end of the Federal Trade Commission,lease term and the provisionscapitalized cost of which are generally duplicated bythe vehicle and a warning regarding possible charges for early termination. All states have adopted Article 2A of the Uniform Commercial Code, other state statutes or the common law, has the effect of subjecting a seller in a consumer credit transaction, and some creditors and their assignees,which provides protection to all claims and defenses which the obligor in the transaction could assert against the depositor. Liability under the holder-in-due-course rule is limited to the amounts paid by the obligor under the contractlessees through certain implied warranties and the holder of theright to cancel a lease contract may also be unablerelating to collect any balance remaining due thereunder from the obligor.
Most of the receivables will be subject to the requirements of the holder-in-due-course rule. The trust, as holder of the receivables, will be subject to any claims or defenses that the purchaser of the financed vehicle may assert against the seller of the financed vehicle. These claims are limited to a maximum liability equal to the amounts paid by the obligor on the receivable. If an obligor were successful in asserting these claims or defenses, these claims or defenses would constitute a breach of Ally Bank’s warranties under the Pooling and Servicing Agreement and may create an obligation of Ally Bank to repurchase the receivable unless the breach is cured in all material respects. See “The Transfer and Servicing Agreements—Sale and Assignment of Receivables” in this prospectus.
defective goods. Courts have imposedapplied general equitable principles upon secured parties pursuingin litigation relating to repossession and litigation involving deficiency balances. These equitable principles may have the effect of relieving an obligora lessee from some or all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of secured parties under the Uniform Commercial Code and lawslessors violate the due process protectionsprotection provided under the 14thFourteenth Amendment to the Constitution of the United States. Courts have generally upheld the notice provisions of the Uniform Commercial Code and laws as reasonable or have found that the repossession and resale by the creditor do not involve sufficient state action to afford constitutional protection to consumers.
Several states, including Michigan, have adopted so-called “Lemon Laws” providing redress to consumers who purchase or lease a vehicle which remains out of conformance with its manufacturer’s warranty after a specified number of attempts to correct a problem or after a specific time period. A successful claim under a Lemon Law could result in, among other things, the termination of the lease and/or the refunding to the lessee of some portion of the payments paid by them.
Under each Poolingsale and Servicing Agreement,contribution agreement, Ally Bank will represent to the depositorACOLT that each receivablelease complies with all requirements of law in all material respects. All of ACOLT’s rights with respect to that representation will be among the rights securing the secured notes that are sold by Ally Bank to the depositor. The depositor, in turn, will have assignedsell the representation, among others,secured notes to the trust.issuing entity under each trust sale agreement. Accordingly, if an obligora lessee has a claim against the trustissuing entity for violation of any law and that claim materially and adversely affects the trust’sissuing entity’s interest in a receivable, thesecured note, this violation may create an obligation to prepay the secured note in the amount of the lease asset repurchase the receivableprice unless the breach is cured in all material respects. See “The Transfer and Servicing Agreements—Sale and Assignment
State laws differ as to whether anyone suffering injury to person or property involving a leased vehicle may bring an action against the owner of the Receivablesvehicle merely by virtue of that ownership. To the extent that applicable state law permits such an action and is not preempted by the Federal Safe Accountable, Flexible, and Efficient Transportation Equity Act of 2005 (the “Transportation Act”), ACOLT, VAULT and the lease assets may be subject to liability to that injured party. However, the laws of many states either (1) do not permit these types of suits, or (2) provide that the lessor’s liability is capped at the amount of any liability insurance that the lessee was required to, but failed to, maintain (except for some states, such as New York, where liability is joint and several). Under the laws of the State of New York, the holder of title of a motor vehicle, including an origination trust as lessor, may be considered an “owner” and thus may be held jointly and severally liable with the lessee for the negligent use or operation of that motor vehicle. It is not clear whether there is a limit on an owner’s liability. In the context of the denial of a motion brought by a defendant to dismiss a claim based on the negligent use or operation of a motor vehicle, the Supreme Court of New York ruled that a finance company acting as an agent for an origination trust may be considered an “owner” of a motor vehicle and thus subject to joint and several liability with the lessee for the negligent use or operation of the leased motor vehicle for the duration of a lease.
The Transportation Act provides that an owner of a motor vehicle that rents or leases the vehicle to a person will not be liable under the law of a state or political subdivision by reason of being the owner of the vehicle, for harm to persons or property that results or arises out of the use, operation or possession of the vehicle during the period of the rental or lease, if (1) the owner (or an affiliate of the owner) is engaged in this prospectus.the trade or business of renting or leasing motor vehicles; and (2) there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner). This provision of the Transportation Act was effective upon enactment and applies to any action commenced on or after August 10, 2005. The Transportation Act is intended to preempt state and local laws that impose possible vicarious tort liability on entities owning motor vehicles that are rented or leased and it is expected that the Transportation Act should reduce the likelihood of vicarious liability being imposed on a titling trust. State and federal courts considering whether the Transportation Act preempts state laws permitting vicarious liability have generally concluded that these laws are preempted with respect to cases commenced on or after August 10, 2005. One New York lower court, however, has reached a contrary conclusion in a recent case involving a leasing trust. This New York court concluded that the preemption provision in the Transportation Act was an unconstitutional exercise of congressional authority under the Commerce Clause of the United States Constitution and, therefore, did not preempt New York law regarding vicarious liability. New York’s appellate court overruled the trial court and upheld the constitutionality of the Transportation Act. New York’s highest court, the Court of Appeals, dismissed the appeal. In a 2008 decision relating to a case in Florida, the U.S. Court of Appeals for the
11th Circuit upheld the constitutionality of the Transportation Act, and the plaintiffs’ petition seeking review of the decision by the U.S. Supreme Court was denied. While the outcome in these cases upheld federal preemption under the Transportation Act, there are no assurances that future cases will reach the same conclusion.
Servicemembers Civil Relief Act
The Servicemembers Civil Relief Act and similar state laws may provide relief to members of the Army, Navy, Air Force, Marines, National Guard, Reservists, Coast Guard and officers of the U.S. Public Health Service assigned to duty with the military, on active duty, who have entered into an obligation, such as a lease contract for a lease of a vehicle, before entering into military service and provide that under some circumstances the lessor may not terminate the lease contract for breach of the terms of the contract, including nonpayment. Furthermore, under the Servicemembers Civil Relief Act, a lessee may terminate a lease of a vehicle at any time after the lessee’s entry into military service or the date of the lessee’s military orders (as described below) if: (1) the lease is executed by or on behalf of a person who subsequently enters military service under a call or order specifying a period of not less than 180 days (or who enters military service under a call or order specifying a period of 180 days or less and who, without a break in service, receives orders extending the period of military service to a period of not less than 180 days); or (2) the lessee, while in the military, executes a lease of a vehicle and thereafter receives military orders for a permanent change of station outside of the continental United States or to deploy with a military unit for a period of not less than 180 days. No early termination charge may be imposed on the lessee for such termination. No information can be provided as to the number of leases that may be affected by these laws. In addition, current military operations of the United States, including military operations in Iraq and the Middle East, have increased and may continue to increase the number of citizens who are in active military service, including persons in reserve status who have been called or will be called to active duty. These laws may impose limitations that would impair the ability of the servicer to repossess a defaulted vehicle during the lessee’s period of active duty status. Thus, if that lease goes into default, there may be delays and losses occasioned by the inability to exercise the issuing entity’s rights with respect to the lease and the related leased vehicle in a timely fashion.
In addition to the laws limiting or prohibiting deficiency judgments, numerous other statutory provisions, including federal bankruptcy laws and related state laws, may interfere with or affect the ability of a secured party to realize upon collateralenforce its rights under an automobile or to enforce a deficiency judgment.light duty truck lease. For example, inif a Chapter 13 proceeding underlessee commences bankruptcy proceedings, the federal bankruptcy law, a court may prevent a creditor from repossessing the financed vehicle, and, as partlessor’s receipt of the rehabilitation plan, reduce the amount of the secured indebtedness to the market value of the financed vehicle at the time of bankruptcy, leaving the creditor as a general unsecured creditor for the remainder of the indebtedness. A bankruptcy court may also reduce the monthlyrelated payments due under the lease is likely to be delayed. In addition, a contract or changelessee who commences bankruptcy proceedings might be able to assign the rate of finance charge and time of repayment oflease to another party even though the indebtedness.
The receivables prohibit the sale or transfer of a financed vehicle without the servicer’s consent and permit the servicer to accelerate the maturity of the receivable upon a sale or transfer without the servicer’s consent. The servicer will not consent to a sale or transfer and will require prepayment of the receivable. Although the servicer, as agent of each owner trustee, may enter into a transfer of equity agreement with the secondary purchaser for the purpose of effecting the transfer of the vehicle, the new obligation will not be included in the pool of receivables.lease prohibits assignment.
INSOLVENCY ASPECTS OF THE RECEIVABLESOFFERINGS
Potentially Applicable Insolvency Regimes
Three different legal regimes for the resolution or reorganization of insolvent companies could be applicable to the entities involved in an offering of notes:
The Federal Deposit Insurance Act, or “FDIA,” provides that the Federal Deposit Insurance Corporation, or “FDIC,” can be appointed as the receiver or conservator for an insured depository institution that becomes insolvent, is in an unsound condition, violates its bylaws or regulations or engages in similar activity. Thus, if these circumstances occur to Ally Bank, the FDIC could be appointed as receiver (which term, as used herein with respect to the FDIA, should be understood also to encompass the role of conservator).
The federal Bankruptcy Code is available for any “person” that is eligible to be a “debtor” pursuant to Section 109 of the Bankruptcy Code. Ally Bank would not be eligible to be a debtor under the Bankruptcy Code, but each of Ally Financial and the depositor would be eligible debtors. There is some question as to whether ACOLT and each issuing entity would qualify as a “person” under the Bankruptcy Code, as the only trusts that have been permitted to seek protection under the Bankruptcy Code are “business trusts.”
The Dodd-Frank Wall Street Reform and Consumer Protection Act established the Orderly Liquidation Authority, or “OLA,” under which the FDIC is authorized to act as receiver of a “covered financial company” and, under certain circumstances, its subsidiaries, except that insolvencies of insured depository institutions will continue to be governed by the FDIA. For a company to be classified as a covered financial company, the Secretary of the Treasury must make several determinations, including that the company is in default or in danger of default and that the failure of the company and its resolution under the Bankruptcy Code would have serious adverse effects on financial stability in the United States. We cannot predict whether, if Ally Financial were in default or in danger of default, it would be classified as a covered financial company. If Ally Financial were so classified, then the depositor or an issuing entity could, under the circumstances specified in the Dodd-Frank Act, also be subject to FDIC receivership under OLA as a covered subsidiary.
Consequences of Insolvency Regimes for Payments on the Notes
The FDIC, as receiver under the FDIA or OLA, and a bankruptcy trustee or a debtor-in-possession under the Bankruptcy Code, have broadly similar powers. The exercise of these powers could result in losses or delays in payment on the notes.
If an offering failed to qualify for the safe harbor described under “—FDIC Rule,” the FDIC as receiver under the FDIA could assert that Ally Bank’s sale of lease assets to ACOLT or its sale of secured notes to the depositor should be recharacterized as a pledge of lease assets or secured notes, respectively, to secure a borrowing of Ally Bank, and the FDIC could seek to recover or reclaim the lease assets or secured notes.
The possibility also exists that the FDIC as receiver could seek to apply the doctrine of substantive consolidation to consolidate the assets and liabilities of either ACOLT or the depositor and, in turn, the trust with the assets and liabilities of Ally Bank.
Independently or in conjunction with the assertion of either of these positions, the FDIC as receiver could seek to:
repudiate the obligations of Ally Bank under the transaction documents;
require ACOLT or the issuing entity, as assignee of the depositor, to go through an administrative claims procedure to establish its rights to payments collected on the lease assets or the secured notes, respectively;
request a stay of proceedings to liquidate claims or otherwise enforce contractual and legal remedies against Ally Bank; or
impose a statutory injunction that would automatically prevent the ACOLT indenture trustee, the AART indenture trustee and other transaction parties from exercising their rights, remedies and interests for up to 90 days.
In addition to an FDIA receivership of Ally Bank, it is possible that ACOLT, the depositor or an issuing entity (each, a “special purpose entity”) could (a) become a debtor in a voluntary or involuntary case under the Bankruptcy Code or state insolvency regimes or (b) become subject to a receivership under OLA. The bankruptcy trustee or debtor-in-possession in such a bankruptcy case or, in certain cases, the FDIC as receiver under OLA could seek to:
in a bankruptcy case, reject the executory obligations of the debtor under the transaction documents;
under OLA, repudiate the obligations of the special purpose entity under the transaction documents;
enforce the “automatic stay” to prevent creditors from exercising remedies against a debtor;
effect a substitution of collateral in certain circumstances;
enable certain tax or governmental liens on the lease assets (that arose prior to the transfer of a lease asset to ACOLT) to have a prior claim on collections before the collections are used to make payments on the secured notes or notes; or
assert that the trust does not have a perfected security interest in (a) the leases, (b) one or more of the leased vehicles or (c) any cash collections held by the servicer at the time the servicer becomes the subject of a bankruptcy proceeding.
Despite the broad similarity of OLA to the Bankruptcy Code, OLA differs on its face from the Bankruptcy Code in many respects. To address some of these differences, the FDIC in July 2011 adopted a regulation confirming that the treatment under OLA of preferential transfers is intended to be consistent with similar provisions in and doctrines developed under the Bankruptcy Code. In January 2011 the Acting General Counsel of the FDIC issued an advisory opinion to the same effect with respect to the treatment of standard contractual provisions meant to foster the bankruptcy-remote treatment of special purpose entities such as ACOLT, the depositor and the issuing entity. The advisory opinion does not bind the FDIC or its Board of Directors and could be withdrawn or modified in the future. There can be no assurance that future regulations or, with respect to the matters covered by the advisory opinion, subsequent FDIC actions in an OLA proceeding involving Ally Financial or any special purpose entity will not be contrary to these developments. Moreover, many provisions of OLA and other parts of Dodd-Frank will be implemented or interpreted through rulemaking by the appropriate federal regulatory agencies. As such, in many respects, the ultimate impact of the OLA provisions of Dodd-Frank, and of Dodd-Frank overall, will not be known for an extended period of time.
Bankruptcy of the TrustIssuing Entity
It is unclear as to whether a trust, such as the trustissuing entity is eligible to be the subject of a bankruptcy case. If it is, then the trustissuing entity may be subject to a declaration of bankruptcy, receivershipliquidation or other similar proceedingreorganization under federal bankruptcy law.
Only a “person” as defined in the Bankruptcy Code can be a debtor eligible for federal bankruptcy relief. The Bankruptcy Code defines “person” to include“include” a “corporation” and “corporation” to include“include” a “business trust”.trust.” The legislative history of the Bankruptcy Code, however, indicates that the term “person” does not otherwise include a trust. Therefore, the Trust’sissuing entity’s eligibility as a debtor under the Bankruptcy Code depends on whether or not it would be found to be a business trust“business trust” by the court determining eligibility.
Case law indicates that whether or not a statutory trust will qualify as a business trust depends on whether the trust is actually operating a business or at least has a business or profit-making objective. Some cases have required additional elements, such as the transferability of the beneficial interests in the trust. Other decisions have highlighted whether the trust was created for the benefit and profit of investor beneficiaries.
A reasonable argument can be made that the trustan issuing entity engages in activities that will makequalify it qualify as a business trust, and thus, a “corporation” and a “person” eligible to be a “debtor” under federal bankruptcy law. The trustEach issuing entity is arguably structured as an enterprise for profit. Interests in the trusteach issuing entity may be sold and transferred. The trustEach issuing entity will acquire financial assets from the depositor, sell notes and certificates, invest and reinvest collections from such financial assets in other financial assets pending distributions to noteholders and certificateholders, and perform ancillary business activities with the ultimate purpose of creating profita profitable return for the noteholders certificateholders,and enhancing the sponsor,value of the depositor andinvestment of the servicer.certificateholders.
If the trusta bankruptcy case were to be subject to bankruptcy proceedings,commenced against an issuing entity, noteholders and certificateholders could experience losses or delays in the payments on the securities as explained in “Insolvency Aspects of the Receivables—Payments on the Notes and Certificates” in this prospectus.above.
If, on the other hand, a court were to find that the trustan issuing entity does not qualify as an eligible “debtor” under the Bankruptcy Code, then such court would likely dismiss any actions against the trustissuing entity that are predicated on the trustissuing entity being eligible as a “debtor” pursuant to Section 109 of the Bankruptcy Code.
RegardlessIssuing Entity Receivership under OLA
If the issuing entity were placed in receivership under OLA as a covered subsidiary of whether or notAlly Financial, and the FDIC were to repudiate the notes issued by the trust, is itself an eligible debtor, the possibility exists that a court may applyFDIC would be liable for compensatory damages. The damages would be no greater than the doctrine of substantive consolidation to consolidate the assets and liabilitiesprincipal balance of the trust with the assets and liabilitiesnotes plus accrued interest as of the sponsordate the FDIC was appointed receiver plus, to the extent of the amount by which value of the property that secured the notes exceeds the principal amount of the notes and accrued interest through the date of repudiation or disaffirmance, for the depositor additional accrued interest to the date of repudiation or disaffirmance. However, creditors of the issuing entity in such a situation would not be entitled to receive more than the amount that would have been payable to such creditors if the issuing entity had instead been liquidated under Chapter 7 of the Bankruptcy Code.
Servicer Bankruptcy Proceeding or OLA Receivership
Finally, it is possible that the servicer or trust administrator could become subject to a bankruptcy proceeding or an OLA resolution. The bankruptcy trustee or debtor-in-possession in such a bankruptcy case or, in certain cases, the FDIC as receiver under OLA could seek to:
in a bankruptcy proceeding initiated againstcase, reject the sponsorexecutory obligations of the debtor under the transaction documents;
under OLA, repudiate the obligations of the servicer or trust administrator under the transaction documents; or
enforce the “automatic stay.”
In such a situation, any collections received by the servicer on the lease assets that the servicer has not yet transferred to the ACOLT collection account, as of the commencement of the case, may be subject to the automatic stay. Additionally, a delay or reduction in the amounts available to make payments on the notes may result if the servicer, the bankruptcy trustee or the depositor. ThereFDIC as receiver is unable to specifically identify such collections and there are circumstances in which a court has consolidated assets of a non-debtor withcompeting claims on those of a debtor. It appears that the legal principles involved in consolidating the assets of a non-debtor with those of a debtor are the same principles involved in consolidating two debtors. A court, however, may be more reluctant to apply substantive consolidation in such a circumstance becausefunds by other creditors of the practical and jurisdictional problems that might arise from a consolidation.servicer or trust administrator.
Measures To Avoid Insolvency of Special Purpose Entities
The transaction documents contain provisions, and the sponsor and the depositor haveeach special purpose entity has taken steps in structuring the transactions contemplated by this prospectus, that are intended to make it unlikely thatin the case of either (a) a receivership of Ally Bank under the FDIA or (b) a voluntary or involuntary application for relief bycase in which a special purpose entity was the depositor or the trustdebtor under the United States Bankruptcy Code or similar applicable state laws, that a court would result inapprove consolidation of the assets and liabilities of the depositora special purpose entity with those of the trust.Ally Bank. These steps include the creation of the depositor,each special purpose entity under its respective formation documents as a limited-purpose entity pursuantthat is subject to a limited liability company agreement containing various limitations. The formation documents of the trust contain analogous provisions. These limitations also include restrictions on the nature of the depositor’s and trust’s business of each special purpose entity and a restriction on the depositor’s and the trust’s ability of each special purpose entity to commence a voluntary case or proceeding under the United States Bankruptcy Code or similar proceeding under applicable state laws without, in the case of the depositor, the unanimous affirmative vote of all of its directors or, in the directorscase of ACOLT, the approval of the depositor,ACOLT, owner trustee and ACOL LLC, or, in the case of the issuing entity, the AART owner trustee, the noteholders and the certificateholders, in the case of the trust. Under some circumstances, thecertificateholders. The depositor is required to have at least one director who qualifies under its limited liability company agreement as an “Independent Director.”
If, notwithstanding the foregoing measures, a court were to conclude There can be no assurance that the assets and liabilities of the trust shouldmeasures described herein will be consolidated with the assets and liabilities of the depositor in the event the depositor wereeffective or that they will prevent any special purpose entity from being subject to become a bankrupt debtor or an attempt were made to litigate the consolidation issue, then delays in distributions on the notes and the certificates, and possible reductions in the amount of those distributions, could occur. See also “Insolvency Aspects of the Receivables—Payments on the Notes and Certificates” in this prospectus.FDIC receivership under OLA.
The transaction documents also contain covenants pursuant to which the ARRT indenture trustee, the owner trusteetrust administrator and the sponsor agree not to acquiesce, petition, invoke or otherwise cause any of the depositor or the trustspecial purpose
entities to be subject to a case under any federal or state bankruptcy, insolvency or other similar proceeding before the date that is one year and one day after the repayment of all notes. Similarly, the notestransaction documents contain covenants pursuant to which the ACOLT indenture trustee, the servicer, the trust administrator and the certificates. Pursuantsponsor agree not to its organizational documents, the affirmative vote of all the members of the board of directors of the depositor is required for the depositoracquiesce, petition, invoke or otherwise cause ACOLT to be subject to proceedingsa case under any federal or state bankruptcy, insolvency or other similar proceeding before the date that is one year and one day after the repayment of all secured notes.
The FDIC has adopted a regulation entitled “Treatment of financial assets transferred in connection with a securitization or participation” (the “FDIC Rule”). The FDIC Rule contains four different safe harbors, each of which limits the powers that the FDIC can exercise in the insolvency of an insured depository institution when it is appointed as receiver or conservator (and references in this section to the FDIC are in its capacity as such). See “—Consequences of Insolvency Regimes for Payments on the Notes” in this prospectus for a discussion of the FDIC’s powers. To qualify for a safe harbor, the securitization or participation must satisfy the preconditions specified for that type of transaction. If one or more of these preconditions are not met, the limitations imposed by the FDIC Rule on the FDIC’s powers would not apply. There are two safe harbors that could apply to a securitization under this prospectus. One safe harbor applies to transactions that meet the conditions for sale accounting treatment, and the other applies to transactions that do not meet the conditions for sale accounting treatment. It is not clear whether the FDIC would evaluate the accounting treatment on the closing date, the date of insolvency or another date.
To qualify for a safe harbor, the securitization or participation must satisfy the preconditions specified for the type of transaction. If one or more of these preconditions are not met, the limitations imposed by the FDIC Rule on the FDIC’s powers would not apply. The preconditions imposed by the FDIC Rule include provisions that are required to be adjudicated bankruptcontained in the documentation for the securitization. These provisions limit the structural features of the transaction in specified ways and impose obligations on one or insolvent,more of the issuing entity and the depositor (which entities are jointly considered to be the “issuing entity” for purposes of the FDIC Rule), the servicer, the trust administrator and the sponsor to make specified disclosures, provide ongoing reporting on specified items and define specified aspects of the relationships among the parties. In order to satisfy the requirements of the FDIC Rule to include these provisions in the documentation, each AART indenture will contain a covenant (the “FDIC Rule Covenant”) that contains the requisite provisions and that obligates the issuing entity to perform each of the specified obligations, other than those obligations that are specifically assigned exclusively to the servicer, or the trust administrator or the sponsor. See “The Notes—The AART Indenture—FDIC Rule Covenant.” Each Transfer Agreement and servicing agreement and each ACOLT indenture will obligate the depositor, the sponsor, the trust administrator and the servicer to consentperform its specified functions under the FDIC Rule Covenant. The failure of the issuing entity to perform its obligations under the FDIC Rule Covenant will not constitute an event of default, nor will the failure of the servicer or the trust administrator to perform their respective obligations under the FDIC Rule Covenant constitute a servicer default or trust administrator default, respectively. However, the noteholders and the AART indenture trustee for each issuing entity will retain the right to exercise any such proceedings,other remedies permitted by the AART indenture or applicable law in respect of these breaches.
If the FDIC is appointed as conservator or receiver for an insured depository institution that has effected a securitization that is covered by the FDIC Rule, there are several possible series of events that could occur. The FDIC will succeed to the obligations of the depository institution, whether as servicer, trust administrator, sponsor or otherwise. If the transaction satisfies the conditions for sale accounting treatment, then the FDIC could disaffirm or repudiate the ongoing contractual obligations of Ally Bank. However, the FDIC could not seek to reclaim or recover the lease assets or other financial assets transferred to the issuing entity. If the transaction does not satisfy the conditions for sale accounting treatment, and the FDIC becomes the servicer, the trust administrator or otherwise controls distributions of collections, the FDIC would have the choice of whether or not to pay or apply collections from the financial assets in accordance with the applicable securitization documents. If the FDIC chooses not to pay or apply the collections, it will be in monetary default, and the AART indenture trustee (at the direction of the holders of 25% of the aggregate principal amount of the Controlling Class), the servicer, the trust administrator or a noteholder will be entitled to deliver a notice to the FDIC requesting the exercise of contractual rights under the transaction documents because of the FDIC’s monetary default. If the FDIC does not cure the monetary default within ten business days, then the FDIC will have consented to the exercise of those contractual rights. However, the FDIC is not required to take any limited liability company action in furtheranceother than providing consents, waivers and execution of any such action.transfer documents.
Payments onAs Ally Bank is not the Notes and Certificates
If the sponsor, the depositorservicer or the trust becomes subject to conservatorship, receivership, bankruptcy or other insolvency proceedings, noteholdersadministrator for its securitizations and certificateholders could experience losses or delays in the paymentscollections on the notes and certificates. The sponsor will sell the receivableslease assets do not pass through accounts at Ally Bank before being transferred to the depositor, andcollection account, we do not believe that the depositor will in turn transferFDIC would have the receivablespower to appoint itself as servicer or trust administrator or to control those collections or to cause a monetary default to occur.
Another series of events for transactions that do not satisfy the conditions for sale accounting could occur if, following an insolvency, the FDIC seeks to exercise its power to repudiate contracts. The FDIC Rule gives the FDIC the choice, following repudiation, either to pay damages within ten business days or to permit the exercise of contractual rights. If the FDIC elects to pay damages, it is obligated to pay noteholders an amount equal to the trust. However, ifpar value of the sponsor,notes outstanding on the depositor or the trust becomes subject to a conservatorship, receivership, bankruptcy or other insolvency proceeding, anddate of appointment of the FDIC as conservator or receiver, less any payments of principal received by the noteholders through the date of repudiation, plus unpaid, accrued interest through the date of repudiation in accordance with the transaction documents to the extent actually received through collections received through the date of repudiation. If the damages paid by the FDIC do not include interest from the date of repudiation to the date of payment, the AART indenture provides that the AART indenture trustee, at the direction of the servicer or the courttrust administrator, as applicable, should apply available funds from the reserve account and the collection account to pay such shortfall. However, upon payment of these damages, the FDIC Rule provides that “all liens or claims on the financial assets created pursuant to the securitization documents shall be released.” If the FDIC were to assert successfully that the lien of the indenture trustee on the reserve account and the collection account were released and the assets in those accounts were transferred to the FDIC, then noteholders would suffer a loss.
Damages paid by the FDIC will be distributed to noteholders on the earlier of (1) the next distribution date on which such damages could be distributed and (2) the earliest practicable date that the AART indenture trustee could declare a special distribution date, subject to applicable provisions of the AART indenture, applicable law and the procedures of any applicable clearing agency. The AART indenture trustee will be authorized and instructed to maintain possession and control of any reserve account, the collection account and all amounts on deposit therein. If the date on which damages are to be distributed to noteholders is not a regular distribution date, then the amount of interest payable to the noteholders will be prorated to such date, as provided in the bankruptcy proceeding, as applicable, wereAART indenture. The servicer or trust administrator will instruct the AART indenture trustee to takeuse amounts on deposit in any reserve account and the position thatAART collection account, in addition to the sale of receivablesamounts paid by the sponsorFDIC, to pay amounts owing to noteholders.
The transfers by Ally Bank of the depositor orsecured notes and the issuance by each issuing entity of the depositornotes are intended to satisfy all the trust, as the case may be, should be recovered, reclaimed or recharacterized in the caseapplicable conditions of the FDIC or treated asRule, and the issuing entity will state in the AART indenture its belief that those preconditions will have been met. As the FDIC Rule is a pledgenewly adopted and untested regulation, its interpretation remains uncertain. If any provision of the receivables to secure a borrowing ofFDIC Rule is amended, or any interpretive guidance regarding the sponsorFDIC Rule is provided by the FDIC or the depositor by concluding that the sale to the depositor or the trust was not a “true sale” and that as a result thereof, the sponsor or the depositor effectively still owns the receivables, or the trust should be consolidated with the depositor for bankruptcy purposes, then noteholders and certificateholders could experience losses or delays in payments on the notes and certificatesits staff, as a result of among other things:which an issuing entity determines that an amendment to the FDIC Rule Covenant is necessary or desirable, then that issuing entity and the indenture trustee will be authorized to amend the FDIC Rule Covenant in accordance with such FDIC Rule amendment or guidance. No noteholder consent will be required.
the “automatic stay” which prevents creditors from exercising remedies against a debtor in bankruptcy or a depository institution in conservatorship or receivership in certain circumstances,
in the case of a bankruptcy proceeding, provisionsOne of the U.S. Bankruptcy Code that permit substitution of collateral in certain circumstances,
in the case of conservatorship or receivershippreconditions imposed by the FDIC Rule is a “risk retention” requirement. Unless otherwise specified in the authorityapplicable prospectus supplement, the sponsor intends to satisfy this risk retention requirement in each securitization by selecting a separate pool of lease assets in an amount equal to five percent of the FDICsum of the pool of lease assets sold to repudiate contracts including the transaction documents,
certain tax or government liensissuing entity and the separate retained pool of lease assets. Each of these retained pools will be selected randomly on the sponsor’sbasis of the same criteria used to select the securitized pool. Upon the effective date of regulations required under Section 15G of the Securities Exchange Act, the FDIC Rule Covenant allows the sponsor to adjust the amount of credit risk that it retains, or the depositor’s property (that arose priorterms under which such credit risk is retained, to the transfer of a receivable to the trust) having a prior claim on collections before the collections are used to make payments on your securities, and
the trust not having a perfected security interest in (a) one or more of the vehicles securing the receivables or (b) any cash collections heldgreatest extent elected by the sponsor, so long as the sponsor’s retention is in compliance with applicable law. The sponsor must also give notice to the noteholders within a reasonable time after the sponsor changes the amount or the depositor atterms under which credit risk is retained, and the time the sponsor or the depositor becomes the subject of a bankruptcy proceeding or conservatorship or receivership, as applicable.
The depositor, in additionparties to the sponsor andAART indenture are entitled to amend the trust, and consistentFDIC Rule Covenant to comply with the transaction documents, will take steps in structuring each transaction described in this prospectus to minimize the risk that a court would consolidate the trust with the depositor for bankruptcy purposes or conclude that the sale of receivables to the depositor and the trust, as applicable, was not a “true sale.” See “The Depositor” in this prospectus.regulation’s minimum requirements without noteholder consent.
If the servicer becomes subject to bankruptcy or other insolvency proceedings, noteholders and certificateholders could experience losses or delays in the payments on the notes and certificates. Any collections received by the servicer on the receivables which the servicer has not yet transferred to the collection account as of the commencement of a bankruptcy or other insolvency proceeding may be subject to the automatic stay imposed by the bankruptcy court. Additionally, a delay or reduction in the amounts available to make payments on the notes and certificates may result if, in the event of a bankruptcy of the servicer, the servicer or the bankruptcy trustee is unable to specifically identify such collections and there are competing claims on those funds by other creditors of the servicer.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the material federal income tax consequences of the purchase, ownership and disposition of the notes and the certificates of any series, to the extent it relates to matters of law or legal conclusions with respect thereto, represents the opinion of Tax Counsel to each Tax Trust, Tax Partnership or Tax Non-Entity with respect to the related series on the material matters associated with such consequences, subject to the qualifications set forth in this prospectus and the accompanying prospectus supplement.
Qualifications on Opinion of Tax Counsel
This discussion is based upon current provisions of the Internal Revenue Code, existing and proposed Treasury Regulationsregulations thereunder, current administrative rulings, judicial decisions and other applicable authorities. There are no cases or Internal Revenue Service rulings on similar transactions involving both debt and equity interests issued by a trustan issuing entity with terms similar to those of the notes and the certificates.notes. As a result, there can be no assurance that the IRS will not challenge the conclusions reached in this prospectus, and no ruling from the IRS has been or will be sought on any of the issues discussed below. Furthermore, legislative, judicial or administrative changes may occur, perhaps with retroactive effect, which could affect the accuracy of the statements and conclusions set forth in this prospectus as well as the tax consequences to noteholders and certificateholders.
The following discussion does not purport to deal with all aspects of federal income taxation that may be relevant to the noteholders and certificateholders in light of their personal investment circumstances nor, except for limited discussions of particular topics, to holders subject to special treatment under the federal income tax laws, e.g., financial institutions, broker-dealers, life insurance companies regulated investment companies, tax-exempt organizations, holders whose functional currency is not the United States dollar, and holders that hold the notes or certificates as part of a conversion transaction, hedge or hedging transaction, straddle, synthetic security or other integrated transaction for United States federal income tax purposes. This information is directed to prospective purchasers who purchase notes or certificates in the initial distribution thereof, who are citizens or residents of the United States, including domestic corporations and partnerships, and who hold the notes or certificates as “capital assets” within the meaning of Section 1221 of the Internal Revenue Code.The depositor suggests that prospective investors consult with their tax advisors as to the federal, state, local, foreign and any other tax considerations to them of the purchase, ownership and disposition of notes or certificates.notes. The following discussion does not purport to furnish information in the level of detail or with the attention to a prospective investor’s specific tax circumstances that would be provided by a prospective investor’s own tax advisor.
The following discussion addresses notes and certificates falling into four general categories:
(1) notes other than Strip Notes or any other series of notes specifically identified as receiving different tax treatment in the accompanying prospectus supplement, which the depositor, the servicertrust administrator and the noteholders will agree to treat as indebtedness secured by the receivables,secured notes.
(2) certificates representing interests in a trust which the depositor, the servicer and the applicable certificateholders will agree to treat as equity interests in a grantor trust,
(3) certificates including Strip Certificates and Strip Notes, representing interests in a trust which the depositor, the servicer and the applicable holders will agree to treat as equity interests in a partnership, and
(4) certificates, all of which are owned by the depositor, representing interests in a trust which the depositor and the servicer will agree to treat as a division of the depositor and hence disregarded as a separate entity, in each case for federal income tax purposes and applicable state and local income and franchise tax purposes.
The prospectus supplement for each series of certificates will indicate whether the associated trust is a Tax Trust, Tax Partnership or Tax Non-Entity. Because the depositor will treat each Tax Trust as a grantor trust, each Tax Partnership as a partnership, and each Tax Non-Entity as a division of depositor, for federal income tax purposes, the depositor will not comply with the tax reporting requirements that would apply under any alternative characterizations of a Tax Trust, Tax Partnership or Tax Non-Entity. For purposes of this discussion, references to a “holder” are to the beneficial owner of a note, Trust Certificate, Partnership Certificate or Tax Non-Entity Certificate, as the context may require.
The following discussion of the material federal income tax consequences of the purchase, ownership and disposition of the notes of any series regardless of whether the notes are issued by a Tax Trust, Tax Partnership or Tax Non-Entity, except for Strip Notes and any other series of notes which is specifically identified as receiving different tax treatment in the accompanying prospectus supplement, to the extent it relates to matters of law or legal conclusions with respect thereto, represents the opinion of Tax Counsel with respect to the related series of notes on the material matters associated with those consequences, subject to the qualifications set forth in this prospectus and the accompanying prospectus supplement. In addition, Tax Counsel has prepared or reviewed the statements in this prospectus under the heading “Federal Income Tax Consequences—The Notes,” and is of the opinion that such statements are correct. Such statements do not purport to furnish information in the level of detail or with the attention to a prospective investor’s specific tax circumstances that would be provided by a prospective investor’s own tax advisor.
Characterization as Debt.Indebtedness. For each series of notes, except for Strip Notes and any series which is specifically identified as receiving different tax treatment in the accompanying prospectus supplement, regardless of whether the notes are issued by a Tax Trust or a Tax Partnership or a Tax Non-Entity, prior to the sale of each series of notes, Tax Counsel will deliver its opinion to the effect that the notes will be treated as debtindebtedness for federal income tax
purposes. Any such opinion may be subject to qualifications and assumptions as set forth therein.herein. The seller, the depositor, the servicertrust administrator and each noteholder, by acquiring an interest in a note, will agree to treat the notes as indebtedness for federal, state and local income and franchise tax purposes. See “Trust Certificates—Classification of Trusts and Trust Certificates”, “Partnership Certificates—Classification of Partnerships and Partnership Certificates” or “Tax Non-Entity Certificates—Classification of Tax Non-Entity and Tax Non-Entity Certificates” for a discussion of the potential federal income tax consequences for noteholders if the IRS were successful in challenging the characterization of a Tax Trust, a Tax Partnership or a Tax Non-Entity, as applicable, for federal income tax purposes.
Treatment of Stated Interest.Interest. Assuming the notes are treated as debtindebtedness for federal income tax purposes and are not issued with OID, the stated interest on a note will be taxable to a noteholder as ordinary income when received or accrued in accordance with the noteholder’s method of tax accounting. Interest received on a note may constitute “investment income” for purposes of some limitations of the Internal Revenue Code concerning the deductibility of investment interest expense.
Original Issue Discount.Discount. A series of notes will be issued with OID only if specified in the applicable prospectus supplement. In general, OID is the excess of the “stated redemption price at maturity” of a debt instrument over its “issue price,” unless that excess falls within a statutorily definedde minimis exception. A note’s “stated redemption price at maturity” is the aggregate of all payments required to be made under the note through maturity except “qualified stated interest.” Qualified stated interest is generally interest that is unconditionally payable in cash or property, other than debt instruments of the trust,issuing entity, at fixed intervals of one year or less during the entire term of the instrument at specified rates. The “issue price” will be the first price at which a substantial amount of the notes are sold, excluding sales to bond holders, brokers or similar persons acting as underwriters, initial purchasers, placement agents or wholesalers.
If a note were treated as being issued with OID, a noteholder would be required to include OID in income as interest over the term of the note under a constant yield method. In general, OID must be included in income in advance of the receipt of cash representing that income. Thus, each cash distribution would be treated as an amount already included in income, to the extent OID has accrued as of the date of the interest distribution and is not allocated to prior distributions, or as a repayment of principal. This treatment would have no significant effect on noteholders using the accrual method of accounting. However, cash method noteholders may be required to report income on the notes in advance of the receipt of cash attributable to that income. Even if a note has OID falling within thede minimis exception, the noteholder must include that OID in income proportionately as principal payments are made on that note.
A holder of a Short-Term Note will generally not be required to include OID on the Short-Term Note in income as it accrues, provided the holder of the note is not an accrual method taxpayer, a bank, a broker or dealer that holds the note as inventory, a regulated investment company or common trust fund, or the beneficial owner of pass-through entities specified in the Internal Revenue Code, or provided the holder does not hold the instrument as part of a hedging transaction, or as a stripped bond or stripped coupon. Instead, the holder of a Short-Term Note would include the OID accrued on the note in gross income upon a sale or exchange of the note or at maturity, or if the note is payable in instalments, as principal is paid thereon. A holder of a Short-Term Note would be required to defer deductions for any interest expense on an obligation incurred to purchase or carry the note to the extent it exceeds the sum of the interest income, if any, and OID accrued on the note. However, a holder may elect to include OID in income as it accrues on all obligations having a maturity of one year or less held by the holder in that taxable year or thereafter, in which case the deferral rule of the preceding sentence will not apply. For purposes of this paragraph, OID accrues on a Short-Term Note on a ratable, straight-line basis, unless the holder irrevocably elects, under regulations to be issued by the Treasury Department, to apply a constant interest method to such obligation, using the holder’s yield to maturity and daily compounding.
A holder who purchases a note after the initial distribution thereof at a discount that exceeds a statutorily definedde minimis amount will be subject to the “market discount” rules of the Internal Revenue Code, and a holder who purchases a note at a premium will be subject to the bond premium amortization rules of the Internal Revenue Code.
Market Discount.Discount. The notes, whether or not issued with OID, will be subject to the “market discount rules” of Section 1276 of the tax code. In general, these rules provide that if a noteholder acquires a note at a market discount (that is, a discount from its stated redemption price at maturity or, if the notes were issued with OID, its original issue price plus any accrued OID that exceeds ade minimis amount) and thereafter recognizes gain upon a disposition or receives payments of principal, then such gain or principal payment, to the extent of the accrued market discount, will be taxed as ordinary interest income to the noteholder.
Generally, the accrued market discount will be the total market discount on the note multiplied by a fraction, the numerator of which is the number of days the noteholder held the note and the denominator of which is the number of days from the date the noteholder acquired the note until its maturity date. The noteholder may elect, however, to determine accrued market discount under the constant yield method.
A noteholder that incurs or continues indebtedness to acquire a note at a market discount may also be required to defer the deduction of all or a portion of the interest on the indebtedness until the corresponding amount of market discount is included in income. A noteholder may elect to include market discount in gross income as it accrues and, if the noteholder properly makes such an election, is generally exempt from this rule. Any such election will apply to all debt instruments acquired by the taxpayer on or after the first day of the first taxable year to which such election applies. The adjusted basis of a note subject to such election will be increased to reflect market discount included in gross income, thereby reducing any gain or increasing any loss on a sale or other taxable disposition of the note.
Amortizable Bond Premium.Premium. In general, if a noteholder purchases a note at a premium (that is, an amount in excess of the amount payable upon the maturity thereof), such noteholder will be considered to have purchased such note with “amortizable bond premium” equal to the amount of such excess. The noteholder may elect to amortize such bond premium as an offset to interest income and not as a separate deduction item as it accrues under a constant yield method over the remaining term of the note. Such noteholder’s tax basis in the note will be reduced by the amount of the amortized bond premium. Any such election, properly made, will apply to all debt instruments (other than instruments the interest on which is excludible from gross income) held by the noteholder at the beginning of the first taxable year for which the election applies or thereafter acquired and is irrevocable without the consent of the IRS. Bond premium on a note held by a noteholder who does not elect to amortize the premium will remain a part of such noteholder’s tax basis in such note and will decrease the gain or increase the loss otherwise recognized on a sale or other taxable disposition of the note.
Disposition of Notes.Notes. If a noteholder sells a note, the holder will recognize gain or loss in an amount equal to the difference between the amount realized on the sale and the holder’s adjusted tax basis in the note. The adjusted tax basis of the note to a particular noteholder will equal the holder’s cost for the note, increased by any OID and market discount previously included by the noteholder in income from the note and decreased by any bond premium previously amortized and any principal payments previously received by the noteholder on the note. Any gain or loss will be capital gain or loss if the note was held as a capital asset, except for gain representing accrued interest or accrued market discount not previously included in income. Capital gain or loss will be long-term if the note was held by the holder for more than one year and otherwise will generally be short-term. Any capital losses realized generally may be used by a corporate taxpayer only to offset capital gains, and by an individual taxpayer only to the extent of capital gains plus $3,000 of other income.
Net Investment Income. Recently enacted legislation generally imposes a tax of 3.8% on the “net investment income” of certain individuals, trusts and estates for taxable years beginning after December 31, 2012. Among other items, net investment income generally includes gross income from interest and net gain attributable to the disposition of certain property, less certain deductions. United States holders should consult their own tax advisors regarding the possible implications of this legislation in their particular circumstances.
Information Reporting and Backup Withholding.Withholding. Each Tax Trust, Tax Partnership and Tax Non-Entity will be required to report annually to the IRS, and to each noteholder of record, the amount of interest paid on the notes, and the amount of interest withheld for federal income taxes, if any, for each calendar year, except as to exempt holders which are generally, corporations, tax-exempt organizations, qualified pension and profit-sharing trusts, individual retirement accounts, or nonresident aliens who provide certification as to their status. Each holder will be required to provide to the Tax Trust, Tax Partnership or Tax Non-Entity, under penalties of perjury, a certificate containing the holder’s name, address, correct federal taxpayer identification number and a statement that the holder is not subject to backup withholding. If a nonexempt noteholder fails to provide the required certification, the Tax Trust, Tax Partnership or Tax Non-Entity will be required to withhold, from interest otherwise payable to the holder, the percentage of that interest specified in the Internal Revenue Code (currently 28%) and remit the withheld amount to the IRS as a credit against the holder’s federal income tax liability.
Because the depositor will treat each Tax Trust as a grantor trust, each Tax Partnership as a partnership, each Tax Non-Entity as a division of the depositor and all notes, except Strip Notes andfor any other series of notes specifically identified as receiving different tax treatment in the accompanying prospectus supplement, as indebtedness for federal income tax purposes, the depositor will not comply with the tax reporting requirements that would apply under any alternative characterizations of a Tax Trust, Tax Partnership or Tax Non-Entity.
Tax Consequences to Foreign Noteholders.Noteholders. If interest paid or accrued to a noteholder who is a Foreign Person is not effectively connected with the conduct of a trade or business within the United States by the Foreign Person, the interest generally will be considered “portfolio interest,” and generally will not be subject to United States federal income tax and withholding tax, as long as the Foreign Person satisfies certain requirements of the Internal Revenue Code, including the requirements that the Foreign Person:
(1) is not (A) actually or constructively a “10 percent shareholder” of a Tax Trust, Tax Partnership or the depositor, including a holder of 10 percent of the applicable outstanding certificates, or(B) a “controlled foreign corporation” with respect to which the Tax Trust, Tax Partnership or the depositor is a “related person” within the meaning of the Internal Revenue Code or (C) a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, and
(2) provides an appropriate statement, signed under penalties of perjury, certifying that the beneficial owner of the note is a Foreign Person and providing that Foreign Person’s name and address. If the information provided in this statement changes, the Foreign Person must so inform the Tax Trust or Tax Partnership within 30 days of the change.
If the interest were not portfolio interest or if applicable certification requirements were not satisfied, then the interest would be subject to United States federal income and withholding tax at a rate of 30% unless reduced or eliminated pursuant to an applicable tax treaty. The IRS has issued new regulations governing backup withholding and information reporting requirements.
Any capital gain realized on the sale, redemption, retirement or other taxable disposition of a note by a Foreign Person will be exempt from United States federal income and withholding tax, provided thatthat:
(1) the gain is not effectively connected with the conduct of a trade or business in the United States by the Foreign Person, and
(2) in the case of a foreign individual, the Foreign Person is not present in the United States for 183 days or more in the taxable year.
If the interest, gain or income on a note held by a Foreign Person is effectively connected with the conduct of a trade or business in the United States by the Foreign Person, the holder, although exempt from the withholding tax previously discussed if an appropriate statement is furnished, generally will be subject to United States Federalfederal income tax on the interest, gain or income at regular federal income tax rates. In addition, if the Foreign Person is a foreign corporation, it may be subject to a branch profits tax equal to 30% of the Foreign Person’s “effectively connected earnings and profits” within the meaning of the Internal Revenue Code for the taxable year, as adjusted for specified items, unless the Foreign Person qualifies for a lower rate under an applicable tax treaty.
The following discussion ofForeign Account Tax Compliance. Congress recently enacted legislation that significantly changes the material federal income tax consequences of the purchase, ownershipreporting requirements imposed on certain Foreign Persons, including certain foreign financial institutions and disposition of the certificates of any series identified in the accompanying prospectus supplement as Trust Certificates, to the extent it relates to matters of law or legal conclusions with respect thereto, represents the opinion of Tax Counsel with respect to the related series of Trust Certificates on the material matters associated with those consequences, subject to the qualifications set forth in this prospectus and the accompanying prospectus supplement. In addition, Tax Counsel has prepared or reviewed the statements in this prospectus under the heading “Federal Income Tax Consequences—Trust Certificates,” and is of the opinion that such statements are correct. Such statements do not purport to furnish information in the level of detail or with the attention to a prospective investor’s specific tax circumstances that would be provided by a prospective investor’s own tax advisor.
Classification of Trusts and Trust Certificates. For each series of certificates identified in the accompanying prospectus supplement as Trust Certificates, prior to the sale of each series of Trust Certificates, Tax Counsel will deliver its opinion to the effect that the Tax Trust will not be taxable as an association or publicly traded partnership taxable as a corporation, but will be classified as a grantor trust under Sections 671 through 679 of the Internal Revenue Code. Any such opinion may be subject to qualifications and assumptions as set forth therein. For each series of Trust Certificates, the depositor and the certificateholders will express in the trust agreement and on the Trust Certificates their intent that, for federal, state and local income and franchise tax purposes, the Trust Certificates will represent an equity interest in the Tax Trust.
Although Tax Counsel has opined that each Tax Trust will properly be characterized as a grantor trust for federal income tax purposes, that opinion is not binding on the IRS or the courts, and no assurance can be given that this characterization would prevail. If the IRS were to contend successfully that any Tax Trust is not a grantor trust, the Tax Trust will be classified for federal income tax purposes as a partnership which is not taxable as a corporation. The income reportable by the holders of Trust Certificates as partners could differ from the income reportable by the holders of Trust Certificates as grantors of a grantor trust. However, it is not expected that any differences would be material. If a Tax Trust were classified for federal income tax purposes as a partnership, the IRS might contend that it is a “publicly traded partnership” taxable as a corporation. If the IRS were to contend successfully that a Tax Trust is a publicly traded partnership taxable as a corporation for federal income tax purposes, such Tax Trust would be subject to federal and applicable state income tax at corporate rates on the income from the receivables, reduced by deductions, including interest on any notes unless the notes were treated as an equity interest. See “Partnership Certificates—Classification of Partnerships and Partnership Certificates” below.
Despite Tax Counsel’s opinion that a Tax Trust will be classified as a grantor trust, the lack of cases or IRS rulings on similar transactions, as discussed above, permits a variety of alternative characterizations in addition to the position to be taken that the Trust Certificates represent equity interests in a grantor trust. For example, because Trust Certificates will have some features characteristic of debt, the Trust Certificates might be considered indebtedness of a Tax Trust, the depositor or the trust. Except as described above, any such characterization would not result in materially adverse tax consequences to certificateholders as compared to the consequences from treatment of Trust Certificates as equity in a trust, described below. The following discussion assumes that Trust Certificates represent equity interests in a grantor trust.
Grantor Trust Treatment. As a grantor trust, a Tax Trust will not be subject to federal income tax. Subject to the discussion below under “Treatment of Fees or Payments,” in Tax Counsel’s opinion each certificateholder will be required to report on the certificateholder’s federal income tax return its pro rata share of the entire income from the receivables and any other property in the Tax Trust for the period during which it owns a Trust Certificate, including interest or finance charges earned on the receivables and any gain or loss upon collection or disposition of the receivables, in accordance with the certificateholder’s method of accounting. A certificateholder using the cash method of accounting will generally take into account its pro rata share of income as and when received by the owner trustee. A certificateholder using an accrual method of accounting will generally take into account its pro rata share of income as it accrues or is received by the owner trustee, whichever is earlier.
Assuming that the market discount rules do not apply, the portion of each payment to a certificateholder that is allocable to principal on the receivables will represent a recovery of capital, which will reduce the tax basis of the certificateholder’s undivided interest in the receivables. In computing its federal income tax liability, the certificateholder will be entitled to deduct, consistent with the certificateholder’s method of accounting, its pro rata share of interest paid on any notes, reasonable servicing fees, and other fees paid or incurred by the Tax Trust. If a certificateholder is an individual, estate or trust, the deduction for the certificateholder’s pro rata share of such fees will be allowed only to the extent that all of such certificateholder’s miscellaneous itemized deductions, including servicing and other fees, exceed 2% of the certificateholder’s adjusted gross income. In addition, in the case of certificateholders who are individuals, certain otherwise allowable itemized deductions will be reduced, but not by more than 80%, by an amount equal to 3% of the certificateholder’s adjusted gross income in excess of a statutorily defined threshold. Such limitation on itemized deductions is being phased out over time beginning in tax years after 2005 and will be fully phased out for tax years beginning after 2009, but under a sunset provision, such limitation would be fully restored to taxable years beginning after 2010. Because the Tax Trust will not report to certificateholders the amount of income or deductions attributable to miscellaneous charges, a certificateholder may effectively underreport the certificateholder’s net taxable income. See “Treatment of Fees or Payments” below for a discussion of other possible consequences if amounts paid to the servicer exceed reasonable compensation for services rendered.
Treatment of Fees or Payments. It is expected that income will be reported to certificateholders on the assumption that the certificateholders own a 100% interest in all of the principal and interest derived from the receivables. However, a portion of the amounts paid to the servicer or the depositor may exceed reasonable fees for services. There are no authoritative guidelines, for federal income tax purposes, as to the maximum amount of compensation that may be considered reasonable for servicing the receivables or performing other services in the context of this or similar transactions; accordingly, Tax Counsel is unable to give an opinion on this issue. If amounts paid to the servicer or the depositor exceed reasonable compensation for services provided, the servicer or the depositor or both may be viewed as having retained, for federal income tax purposes, an ownership interest in a portion of each interest payment or certain receivables. As a result, such receivables may be treated as “stripped bonds” within the meaning of the Internal Revenue Code.
To the extent that the receivables are characterized as “stripped bonds,” the income of the Tax Trust allocable to certificateholders would not include the portion of the interest on the receivables treated as having been retained by the servicer or the depositor, as the case may be, and the Tax Trust’s deductions would be limited to reasonable servicing fees, interest paid on any notes and other fees. In addition, a certificateholder
would not be subject to the market discount and premium rules discussed below with respect to the stripped receivables, but instead would be subject to the OID rules of the Internal Revenue Code. However, if the price at which a certificateholder were deemed to have acquired a stripped receivable is less than the remaining principal balance of the receivable by an amount which is less than a statutorily definedde minimis amount, the receivable would not be treated as having OID.investment funds. In general, it appears that the amount of OID on a receivable treated as a “stripped bond” will bede minimis if it is less than 1/4 of 1% for each full year remaining after the purchase date until the final maturity of the receivable, although the IRS could take the position that the weighted average maturity date, rather than the final maturity date, should be used in performing this calculation. If the amount of OID wasde minimis under this rule, the actual amount of discount on a receivable would be includible in income as principal payments are received on the receivable.
If the OID on a receivable were not treated asde minimis, a certificateholder would be required to include any OID in income as it accrues, regardless of when cash payments are received, using a method reflecting a constant yield on the receivables. It is possible that the IRS could assert that a prepayment assumption should be used in computing the yield of a stripped receivable. If a stripped receivable is deemed to be acquired by a certificateholder at a significant discount, the use of a prepayment assumption could accelerate the accrual of income by a certificateholder.
It is also possible that any fees deemed to be excessive could be recharacterized as deferred purchase price payable to the depositor by certificateholders in exchange for the receivables. The likely effect of such recharacterization would be to increase current taxable income to a certificateholder.
Discount And Premium. The following discussion generally assumes that the fees and other amounts payable to the servicer and the depositor will not be recharacterized as being retained ownership interests in the receivables, as discussed above. A purchaser of a Trust Certificate should be treated as purchasing an interest in each receivable and any other property in the Tax Trust at a price determined by allocating the purchase price paid for the Trust Certificate among the receivables and other property in proportion to their fair market values at the time of purchase of the Trust Certificate.
It is believed that the receivables were not and will not be originated with OID; therefore, a Tax Trust should not have OID income. However, the purchase price paid by the Tax Trust for the receivables may be greater or less than the remaining principal balance of the receivables at the time of purchase. If so, the receivables will have been acquired at a premium or market discount, as the case may be. The market discount on a receivable will be considered to be zero if it is less than the statutorily definedde minimis amount.
Any gain on the sale of a Trust Certificate attributable to the holder’s share of unrecognized accrued market discount on the receivables would generally be treated as ordinary income to the holder. Moreover, a holder who acquires a Trust Certificate representing an interest in receivables acquired at a market discount may be required to defer a portion of any interest expense otherwise deductible on indebtedness incurred or maintained to purchase or carry the Trust Certificate until the holder disposes of the Trust Certificate in a taxable transaction. Instead of recognizing market discount, if any, upon a disposition of Trust Certificates and deferring any applicable interest expense, a holder may elect to include market discount in income currently as the discount accrues. The current inclusion election, once made, applies to all market discount obligations acquired on or after the first day of the first taxable year to which the election applies, and may not be revoked without the consent of the IRS.
In the event that a receivable is treated as purchased at a premium, that is, the allocable portion of the certificateholder’s purchase price for the Trust Certificate exceeds the remaining principal balance of the receivable, the premium will be amortizable by a certificateholder as an offset to interest income, with a corresponding reduction in basis, under a constant yield method over the term of the receivable if the certificateholder makes an election. Any such election will apply to all debt instruments held by the certificateholder during the year in which the election is made and to all debt instruments acquired thereafter.
Disposition of Trust Certificates. Generally, capital gain or loss will be recognized on a sale of Trust Certificates in an amount equal to the difference between the amount realized and the depositor’s tax basis in the Trust Certificates sold. A certificateholder’s tax basis in a Trust Certificate will generally equal the certificateholder’s cost increased by any OID and market discount previously included in income, and decreased by any bond premium previously amortized and by the amount of principal payments previously received on the receivables held by the Tax Trust. Any gain on the sale of a Trust Certificate attributable to the holder’s share of unrecognized accrued market discount on the receivables would generally be treated as ordinary income to the certificateholder, unless the certificateholder makes the special election described under “Discount and Premium” above.
If a certificateholder is required to recognize an aggregate amount of income, not including income attributable to disallowed itemized deductions described above, over the life of the Trust Certificates that exceeds the aggregate cash distributions, that excess will generally give rise to a capital loss upon the retirement of the Trust Certificates.
Backup Withholding. Distributions made on Trust Certificates and proceeds from the sale of the certificates will be subject to a “backup” withholding tax at the rate specified in the Internal Revenue Code (currently 28%) if, as discussed above in connection with the notes, the certificateholder fails to comply with identification procedures, unless the holder is an exempt recipient under applicable provisions of the Internal Revenue Code.
Tax Consequences to Foreign Trust Certificateholders. Interest attributable to receivables which is received by a certificateholder which is a Foreign Person will generally not be subject to the normal 30% withholding tax could be imposed on those payments provided thatmade to any such certificateholder is not engaged in a trade Foreign Persons unless such Foreign Person complies with certain reporting requirements regarding its direct and indirect U.S. shareholders and/or business in the United States and thatU.S. accountholders. Such withholding could apply to payments regardless of whether they are made to such certificateholder fulfills the certification requirements discussed above under “The Notes—Tax Consequences to Foreign Noteholders.”
The following discussion of the material federal income tax consequences of the purchase, ownership and disposition of the certificates of any series identified in the accompanying prospectus supplement as Partnership Certificates, to the extent it relates to matters of law or legal conclusions with respect thereto, represents the opinion of Tax Counsel with respect to the related series of Partnership Certificates on the material matters associated with those consequences, subject to the qualifications set forth in this prospectus and the accompanying prospectus supplement. In addition, Tax Counsel has prepared or reviewed the statements in this prospectus under the heading, “—Partnership Certificates,” and is of the opinion that such statements are correct. Such statements do not purport to furnish information in the level of detail or with the attention to a prospective investor’s specific tax circumstances that would be provided by a prospective investor’s own tax advisor.
Classification of Partnerships and Partnership Certificates. For each series of certificates identified in the accompanying prospectus supplement as Partnership Certificates, the depositor and the servicer will agree, and the certificateholders will agree by their purchase of the Partnership Certificates, to treat the Tax Partnership as a partnership for federal income tax purposes and applicable state and local income and franchise tax purposes, with the partners of the Partnership being the certificateholders and the depositor,Person in its capacity as recipienta holder of distributionsa note or in a capacity of holding a note for the account of another. These rules were generally to be effective with respect to payments made after December 31, 2012, but would exempt from the reserve account, and any notes beingwithholding payment on, or proceeds in respect of, debt of such Tax Partnership. However, the proper characterization of the arrangement involving the Tax Partnership, the Partnership Certificates, the depositor and the servicer is not clear because there is no authority on transactions closely comparable to that contemplated in this prospectus and accompanying prospectus supplement.
If the Tax Partnership were classified as an association taxable as a corporation for federal income tax purposes, the Tax Partnership would be subject to corporate income tax. Any corporate income tax could materially reduce or eliminate cash that would otherwise be distributableinstruments outstanding on the Partnership Certificates and certificateholders could be liable for any tax that is unpaid by the Tax Partnership. However, prior to the sale of
each series of Partnership Certificates, Tax Counsel will deliver its opinion that the Tax Partnership will not be classified as an association taxable as a corporation. Any such opinion may be subject to qualifications and assumptions as set forth therein. Even if a Tax Partnership were not classified as an association taxable as a corporation, it would be subject to corporate income tax if it were a “publicly traded partnership” taxable as a corporation. However, in the opinion of Tax Counsel, even if the Tax Partnership were treated as a publicly traded partnership, it would not be taxable as a corporation because the Tax Partnership would intend to meet qualifying income tests or other exceptions under Section 7704 of the Internal Revenue Code. Nonetheless, if a Tax Partnership were treated as a publicly traded partnership and the Partnership Certificates were treated as equity interests in that type of partnership, some holders could suffer adverse consequences. For example, some holders might be subject to limitations on their ability to deduct their share of the Tax Partnership’s expenses or to use expenses from other sources to offset their share of the Tax Partnership’s income.
Despite Tax Counsel’s opinion that a Tax Partnership will be classified as a partnership and not as an association or publicly traded partnership taxable as a corporation, the lack of cases or rulings on similar transactions, as discussed above, permits a variety of alternative characterizations in addition to the position to be taken that the Partnership Certificates represent equity interests in a partnership. For example, because the Partnership Certificates will have some features characteristic of debt, the Partnership Certificates might be considered indebtedness of the Tax Partnership, the depositor or the issuer. However, in Tax Counsel’s opinion, any such characterization would not result in materially adverse tax consequences to certificateholders as compared to the consequences from treatment of the Partnership Certificates as equity in a partnership, described below. Indeed, classification of the certificates as indebtedness would result in favorable tax consequences to certain holders, particularly foreign persons. Nonetheless, because Tax Counsel believes that it is more likely that Partnership Certificates will be treated as equity in partnership, and the parties will treat the certificates as representing partnership equity, the following discussion assumes that the Partnership Certificates represent equity interests in a partnership.
Partnership Taxation. A Tax Partnership will not be subject to federal income tax, but each certificateholder will be required to separately take into account such holder’s allocable share of income, gains, losses, deductions and credits of the Tax Partnership. The Tax Partnership’s income will consist primarily of interest and finance charges earned on the receivables, including appropriate adjustments for market discount, OID, and bond premium, and any gain upon collection or disposition of the receivables. The Tax Partnership’s deductions will consist primarily of interest paid or accrued on the notes, servicing and other fees, and losses or deductions upon collection or disposition of the receivables.
The tax items of a partnership are allocable to the partners in accordance with the Internal Revenue Code, Treasury Regulations and, for any series of Partnership Certificates, the trust agreement and related documents. Each trust agreement for a Tax Partnership will provide that the Tax Partnership will allocate items of income, gain, deduction and loss to the certificateholders in accordance with their economic interests in the Trust.
In addition, each trust agreement for a Tax Partnership will provide that the certificateholders will be allocated their allocable share for each month of the entire amount of interest expense paid by the Tax Partnership on any notes. If the Tax Partnership issues any Strip Notes or Strip Certificates, it will also provide that the certificateholders will be allocated taxable income of such Tax Partnership for each month in the amounts described in the accompanying prospectus supplement. All taxable income of the Tax Partnership remaining after the allocations to the certificateholders will be allocated to the depositor. It is believed that the allocations to certificateholders will be valid under applicable Treasury Regulations, although no assurance can be given that the IRS would not require a greater amount of income to be allocated to certificateholders. Moreover, even under the foregoing method of allocation, certificateholders may be allocated income equal to the entire Pass Through Rate plus the other items of income, gain, deduction and loss of the Tax Partnership, and holders of Strip Notes or Strip Certificates may be allocated income equal to the amount described in the accompanying prospectus supplement, even though the Tax Partnership is only obligated to distribute interest to certificateholders at the Pass Through Rate on the Certificate Balance. Thus, cash basis holders will in effect be
required to report income from the Partnership Certificates on the accrual method. In addition, because tax allocations and tax reporting will be done on a uniform basis for all certificateholders but certificateholders may be purchasing Partnership Certificates at different times and at different prices, certificateholders may be required to report on their tax returns taxable income that is greater or less than the amount reported to them by the Tax Partnership.
Additionally, all of the taxable income allocated to a certificateholder that is a pension, profit sharing or employee benefit plan or other tax-exempt entity, including an individual retirement account, will constitute “unrelated business taxable income” generally taxable to such a holder under the Internal Revenue Code.
An individual taxpayer may generally deduct miscellaneous itemized deductions, which do not include interest expense, only to the extent they exceed 2% of adjusted gross income, and, additional limitations may apply. Those limitations would apply to an individual certificateholder’s share of expenses of a Tax Partnership, including fees to the servicer, and might result in the holder being taxed on an amount of income that exceeds the amount of cash actually distributed to such holder over the life of such Tax Partnership.
Each Tax Partnership intends to make all tax calculations relating to income and allocations to certificateholders on an aggregate basis. If the IRS were to require that calculations be made separately for each receivable, a Tax Partnership might be required to incur additional expense, but it is believed that there would not be a material adverse effect on certificateholders.
Discount and Premium. It is believed that the receivables were not and will not be originated with OID and, therefore, that a Tax Partnership should not have OID income. However, the purchase price paid by the Tax Partnership for the receivables may be greater or less than the remaining principal balance of the receivables at the time of purchase. If so, the receivables will have been acquired at a premium or market discount, as the case may be. As indicated above, each Tax Partnership will make this calculation on an aggregate basis, but might be required to recompute it on a receivable by receivable basis.
Each Tax Partnership will make an election that will result in any market discount on the receivables being included in income currently as such discount accrues over the life of the receivables. As indicated above, a portion of the market discount income will be allocated to certificateholders.
Section 708 Termination. Under Section 708 of the Internal Revenue Code, a Tax Partnership will be deemed to terminate for federal income tax purposes if 50% or more of the capital and profits interests in such Tax Partnership are sold or exchanged within a 12-month period. If a termination occurs, a Tax Partnership will be considered to contribute all of its assets to a new partnership followed by a liquidation of the original Tax Partnership. A Tax Partnership will not comply with the technical requirements that might apply when such a constructive termination occurs. As a result, the Tax Partnership may be subject to tax penalties and may incur additional expenses if it is required to comply with those requirements. Furthermore, a Tax Partnership might not be able to comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be recognized on a sale of Partnership Certificates in an amount equal to the difference between the amount realized and the depositor’s tax basis in the Partnership Certificates sold. A certificateholder’s tax basis in a Partnership Certificate will generally equal the certificateholder’s cost increased by the certificateholder’s share of the Tax Partnership’s income, includible in the certificateholder’s income, for the current and prior taxable years and decreased by any distributions received on such Partnership Certificate. In addition, both tax basis in the Partnership Certificates and the amount realized on a sale of a Partnership Certificate would include the holder’s share of any notes and other liabilities of the Tax Partnership. A holder acquiring Partnership Certificates of the same series at different prices must maintain a single aggregate adjusted tax basis in the Partnership Certificates, and, upon a sale or other disposition of some of the Partnership Certificates, allocate a pro rata portion of the aggregate tax basis to the Partnership Certificates sold, rather than maintaining a separate tax basis in each Partnership Certificate for purposes of computing gain or loss on a sale of that Partnership Certificate.
If a certificateholder is required to recognize an aggregate amount of income not including income attributable to disallowed itemized deductions described above over the life of the Partnership Certificates that exceeds the aggregate cash distributions on the Partnership Certificates, that excess will generally give rise to a capital loss upon the retirement of the Partnership Certificates.
Allocations Between Transferors and Transferees. In general, each Tax Partnership’s taxable income and losses will be determined monthly and the tax items for a particular calendar month will be apportioned among the certificateholders in proportion to the Certificate Balance of the Partnership Certificates or a fractional share of the Strip Notes or Strip Certificates owned by them as of the first Record Date following the end of the month. As a result, a holder purchasing Partnership Certificates may be allocated tax items, which will affect the certificateholder’s tax liability and tax basis, attributable to periods before the certificateholder’s actual purchase.
The use of a monthly convention may not be permitted by existing regulations. If a monthly convention is not allowed or only applies to transfers of less than all of the certificateholder’s interest, taxable income or losses of a Tax Partnership might be reallocated among the certificateholders. The owner trustee is authorized to revise a Tax Partnership’s method of allocation between transferors and transferees to conform to a method permitted by future regulations.
Section 754 Election. In the event that a certificateholder sells a Partnership Certificate for greater or less than the certificateholder’s adjusted basis therefor, the purchasing certificateholder will have a higher or lower basis, as the case may be, in the Partnership Certificates than the selling certificateholder had. The tax basis of the Tax Partnership’s assets generally will not be adjusted to reflect that higher or lower basis unless the Tax Partnership were to file an election under Section 754 of the Internal Revenue Code. In order to avoid the administrative complexities that would be involved in keeping accurate accounting records, as well as potentially onerous information reporting requirements, a Tax Partnership will not make such an election. As a result, certificateholders might be allocated a greater or lesser amount of Tax Partnership income than they would be if such amounts were based on their own purchase price for Partnership Certificates.
Administrative Matters. For each Tax Partnership, the owner trustee is required to maintain complete and accurate books of such Tax Partnership. Such books will be maintained for financial reporting and tax purposes on an accrual basis, and the fiscal year of each Tax Partnership will be the calendar year. The owner trustee will file a partnership information return, IRS Form 1065, with the IRS for each taxable year of the Tax Partnership and will report each certificateholder’s allocable share of items of Tax Partnership income and expense to holders and the IRS on Schedule K-1. Any person that holds Partnership Certificates as a nominee at any time during a calendar year is required to furnish the Tax Partnership with a statement containing information on the nominee, the beneficial owners and the Partnership Certificates so held. Each Tax Partnership will provide the Schedule K-1 information to nominees that fail to provide the Tax Partnership with the information referenced in the preceding sentence, and such nominees will be required to forward such information to the beneficial owners of the Partnership Certificates. Generally, holders must file tax returns that are consistent with the information return filed by the Tax Partnership or be subject to penalties unless the holder notifies the IRS of all such inconsistencies.
The depositor, as the tax matters partner for each Tax Partnership, will be responsible for representing the certificateholders in any dispute with the IRS. The Internal Revenue Code provides for administrative examination of a partnership as if the partnership were a separate taxpayer. Generally, the statute of limitations for partnership items does not expire until threedate two years after the date on which the partnership information return is filed or deemed filed. Any adverse determination following an audit of the return of a Tax Partnership by the appropriate taxing authorities could result in an adjustment of the returns of the certificateholders, and, under some circumstances, a certificateholder may be precluded from separately litigating a proposed adjustment to the items of the Tax Partnership. An adjustment could result in an audit of a certificateholder’s returns and adjustments of items not related to the income and losses of the Tax Partnership.
Tax Consequences to Foreign Certificateholders. It is not clear whether any Tax Partnership would be considered to be engaged in a trade or business in the United States for purposes of federal withholding taxesenactment (March 18, 2010). A recent Internal Revenue Service publication states that those rules are now effective with respect to Foreign Persons because there is no clear authoritypayments made after December 31, 2013. The IRS recently published proposed Treasury Regulations in respect to this legislation which would exempt from withholding any
payment on that issue under facts substantially similardebt instruments outstanding on January 1, 2013. The proposed Treasury Regulations have not been adopted as final. Although proposed Treasury Regulations have been issued, the scope and application of this legislation remain unclear. As a result, potential investors are encouraged to those described inconsult with their tax advisors regarding the possible implications of this prospectus and the accompanying prospectus supplement. Although it is not expected that any Tax Partnership would be engaged in a trade or businesslegislation on an investment in the United States for those purposes, each Tax Partnership will withhold as if it were so engaged in order to protect the Tax Partnership from possible adverse consequences of a failure to withhold. It is expected that each Tax Partnership will withhold at a rate of 35% on the portion of its taxable income that is allocable to a certificateholder that is a Foreign Person as if such income were effectively connected with a United States trade or business. In determining a holder’s non-foreign status, a Tax Partnership may generally rely on the holder’s certification of non-foreign status signed under penalties of perjury.notes.
Each Foreign Person might be required to file a United States individual or corporate income tax return and pay tax, including, in the case of a corporation, the branch profits tax, on such Foreign Person’s share of the Tax Partnership’s income. Each Foreign Person must obtain a taxpayer identification number from the IRS and submit that number to the Tax Partnership on the applicable Form W-8 in order to assure appropriate crediting of the taxes withheld. A Foreign Person generally would be entitled to file with the IRS a claim for refund for taxes withheld by the Tax Partnership, taking the position that no taxes were due because the Tax Partnership was not engaged in a U.S. trade or business. However, the IRS may assert that the tax liability should be based on gross income, and no assurance can be given as to the appropriate amount of tax liability.
Backup Withholding. Distributions made on any Partnership Certificates and proceeds from the sale of such Partnership Certificates will be subject to a “backup” withholding tax of at the rate specified in the Internal Revenue Code (currently 28%) if, as discussed above in connection with the notes, the certificateholder fails to comply with identification procedures, unless the holder is an exempt recipient under applicable provisions of the Internal Revenue Code.
Classification of Tax Non-Entity and Tax Non-Entity Certificates. For each series of certificates identified in the accompanying prospectus supplement as Tax Non-Entity Certificates and which are entirely owned by the depositor, the depositor and the servicer will agree, pursuant to the “check-the-box” Treasury Regulations, to treat the Tax Non-Entity as a division of the depositor, and hence a disregarded entity, for federal income tax purposes. In other words, for federal income tax purposes, the depositor will be treated as the owner of all the assets of the Tax Non-Entity and the obligor of all the liabilities of the Tax Non-Entity. Under the “check-the-box” Treasury Regulations, unless it is treated as a Tax Trust for federal income tax purposes, an unincorporated domestic entity with more than one equity owner is automatically classified as a Tax Partnership for federal income tax purposes. If the trust is classified as a Tax Non-Entity when all its equity interests are wholly owned by the depositor and if certificates are then sold or issued in any manner which results in there being more than one certificateholder, the trust will be treated as a Tax Partnership.
If certificates are issued to more than one person, the depositor and the servicer will agree, and the certificateholders will agree by their purchase, to treat the trust as a Tax Partnership for federal income tax purposes and applicable state and local income and franchise tax purposes, with the partners of such partnership being the certificateholders, including the depositor, and the notes being debt of such partnership.
Risks of Alternative Characterization. If a Tax Non-Entity were an association or a “publicly traded partnership” taxable as a corporation for federal income tax purposes, it would be subject to corporate income tax as discussed above under “Partnership Certificates—Classification of Partnerships and Partnership Certificates.”
Tax Shelter Disclosure and Investor List Requirements
Treasury Regulations directed at abusive tax shelter activity appear to apply to transactions not conventionally regarded as tax shelters. Such Treasury Regulations require taxpayers to report certain information on IRS Form 8886 if they participate in a “reportable transaction” and to retain certain information related to such transactions. Organizers and promoters of the transaction are required to maintain records including investor lists containing identifying information and to furnish those records to the IRS upon demand.
A transaction may be a “reportable transaction” based upon any of several indicia, one or more of which may be present with respect to your investment. The Internal Revenue Code imposes significant penalties for failure to comply with these disclosure requirements. Prospective investors should be aware that the transferor and other participants in the transaction intendintent to comply with such disclosure and investor list requirements. Prospective investors should consult their own tax advisors concerning any possible disclosure obligation with respect to their investment.
STATE AND LOCAL TAX CONSEQUENCES
The above discussion does not address the tax treatment of any Tax Trust, Tax Partnership, Tax Non-Entity, notes certificates,or noteholders or certificateholders under any state or local tax laws. The activities to be undertaken by the servicer in servicing and collecting the receivableslease payments will take place throughout the United States and, therefore, many different tax regimes potentially apply to different portions of these transactions. Prospective investors are urged to consult with their tax advisors regarding the state and local tax treatment of any Tax Trust, Tax Partnership or Tax Non-Entity as well as any state and local tax consequences for them of purchasing, holding and disposing of notes or certificates.notes.
Section 406 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”ERISA”) and Section 4975 of the Internal Revenue Code prohibit a pension, profit-sharing or other employee benefit plan, as well as individual retirement accounts, and specified types of Keogh Plans and collective investment funds or insurance company general or separate accounts in which these plans and accounts are invested—entities deemed to hold plan assets of any of the foregoing—we refer to each of these as a “benefit plan”—from engaging in specified transactions with persons that are “parties in interest” under ERISA or “disqualified persons” under the Internal Revenue Code with respect to that benefit plan. A violation of these “prohibited transaction” rules may result in an excise tax or other penalties and liabilities under ERISA and the Internal Revenue Code for these persons.persons or fiduciaries of such benefit plan. Benefit plans that are governmental plans as defined in Section 3(32) of ERISA and specified church plans as defined in Section 3(33) of ERISA are not subject to ERISA requirements. However, governmentalsuch plans may be subject to comparable federal, state or local law restrictions.
The acquisition or holding of notes or certificates by or on behalf of a benefit plan could be considered to give rise to a prohibited transaction if the servicer, the depositor, the issuing entity, the trust the administrator, the ACOLT owner trustee, the AART owner trustee, the ACOLT indenture trustee, the AART indenture trustee, the underwriters or any of our respective affiliates is or becomes a party in interest or a disqualified person with respect to that benefit plan. Exemptions from the prohibited transaction rules could apply to the purchase and holding of the notes or certificates by a benefit plan depending on the type and circumstances of the plan fiduciary making the decision to acquire the notes or certificates.notes. These exemptions include: Prohibited Transaction Class Exemption (“PTCE”) 96-23, regarding transactions effected by “in-house asset managers;” PTCE 95- 60,95-60, regarding investments by insurance company general accounts; PTCE 91-38, regarding investments by bank collective investment funds; PTCE 90-1, regarding investments by insurance company pooled separate accounts; and PTCE 84-14, regarding transactions effected by “qualified professional asset managers.”
In addition to the class exemptions listed above, the Pension Protection Act of 2006 provides a statutory exemption under Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Internal Revenue Code for prohibited transactions between a benefit plan and a person or
entity that is a party in interest to such benefit plan solely by reason of providing services to the benefit plan (other than a party in interest that is a fiduciary, or its affiliate, that has or exercises discretionary authority or control or renders investment advise with respect to the assets of the benefit plan involved in the transaction), provided that there is adequate consideration for the transaction. Even if the conditions specified in one or more of these exemptions are met, the scope of the relief provided by these exemptions might or might not cover all acts which might be construed as prohibited transactions. There can be no assurance that any of these, or any other exemption, will be available with respect to any particular transaction involving the notes, or certificates, and prospective purchasers that are benefit plans should consult with their advisors regarding the applicability of any such exemption.
Each purchaser and transferee of notes will be deemed to represent and warrant that either (a) it is not acquiring the notes with the assets of a benefit plan or other plan that is subject to any law that is substantially similar to Title I of ERISA or Section 4975 of the Internal Revenue Code or (b) the acquisition and holding of the notes will not give rise to a nonexempt prohibited transaction under Section 406(a)406 of ERISA or Section 4975 of the Internal Revenue Code or a violation of any substantially similar applicable law. Additional or alternative representations would apply in the event certificates are offered hereunder. If applicable, those representations will be specified in the accompanying prospectus supplement.
In addition, despite the application of one of the foregoing exemptions to the purchase and/or holding of a note, or certificate, transactions involving the trust might be deemed to constitute prohibited transactions under ERISA and the Internal Revenue Code with respect to a benefit plan that purchased securities if assets of the trust were deemed to be assets of the benefit plan. Under a regulation issued by the U.S. Department of Labor, as modified by Section 3(42) of ERISA (the “plan“plan assets regulation”regulation”), the assets of the trust would be treated as plan assets of a benefit plan for the purposes of ERISA and the Internal Revenue Code only if the benefit plan acquired an “equity interest” in the trust and none of the exceptions contained in the plan assets regulation applied. An equity interest is defined under the plan assets regulation as an interest other than an instrument that is treated as indebtedness under applicable local law and that has no substantial equity features. It is likely that the certificates will be treated as an equity interest for these purposes and will therefore not be generally available for purchase by benefit plans. For additional information regarding the equity or debt treatment of notes, see “ERISA Considerations”“ERISA Considerations” in the prospectus supplement. Subject to the restrictions in the preceding paragraphs, notes that are debt instruments will be available for purchase by benefit plans.
It is not anticipated that securities to be offered under this prospectus will be eligible for relief from the prohibited transaction rules of ERISA and the plan assets regulation in reliance on the administrative exemptions that have been granted by the Department of Labor to specified initial underwriters (the “underwriter’s exemption”). If the trustissuing entity and underwriters determine it may be appropriate to rely on the underwriter’s exemption with respect to any series of securities to be offered under this prospectus, the conditions for such relief will be enumerated under “ERISA Considerations”“ERISA Considerations” in the applicable prospectus supplement.
For more information, including whether the underwriter’s exemption is likely to provide relief for a particular class of notes, or certificates, see “ERISA Considerations”“ERISA Considerations” in the applicable prospectus supplement. If you are a benefit plan fiduciary considering the purchase of the notes, or certificates, you should consult with your counsel with respect to whether the assets of the trust will be deemed to be plan assets and the applicability of the underwriter’s exemption or another exemption from the prohibited transaction rules and determine on your own whether all conditions have been satisfied and whether the notes or certificates are an appropriate investment for a benefit plan under ERISA and the Internal Revenue Code.
On the terms and conditions set forth in one or more underwriting agreements for each trust, the depositor will agree to sell to each of the underwriters named in the underwriting agreements and in the accompanying prospectus supplement, and each of the underwriters will severally agree to purchase from the depositor, the principal amount of each class of securities of the series set forth in the underwriting agreements and in the accompanying prospectus supplement.
In each underwriting agreement, each of the underwriters will severally agree, subject to the terms and conditions set forth in the underwriting agreements, to purchase all the securities described in the underwriting agreements which are offered by this prospectus and by the accompanying prospectus supplement if any of these securities are purchased. In the event of a default by any underwriter, each underwriting agreement will provide that, in some circumstances, purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.
Each prospectus supplement will either:
(1) set forth the price at which each class of securities being offered will be offered to the public and any concessions that may be offered to dealers participating in the offering of these securities, or
(2) specify that the securities are to be resold by the underwriters in negotiated transactions at varying prices to be determined at the time of sale.
After the initial public offering of any securities, the public offering price and the concessions may be changed. The depositor may also sell the securities to one or more purchasers directly or through agents.
Each underwriting agreement will provide that the depositor and, if specified in the prospectus supplement, the sponsor will indemnify the underwriters against specified liabilities, including liabilities under the Securities Act.
The indenture trustee may, from time to time, invest the funds in the Designated Accounts in Eligible Investments acquired from the underwriters.
Under each underwriting agreement, the closing of the sale of any class of securities will be conditioned on the closing of the sale of all other classes or, if less than all other classes, only those classes disclosed in the applicable prospectus supplement.
The place and time of delivery for the securities in respect of which this prospectus is delivered will be set forth in the accompanying prospectus supplement.
Matters Relating to the Offering of the Notes in Europe
To the extent provided for in the accompanying prospectus supplement, in relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each a “Relevant Member State”), each underwriter will represent and agree that, with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of the offered notes to the public in that Relevant Member State other than:
(a) to any legal entity which is a qualified investor as defined in the Prospectus Directive;
(b) to fewer than 100 or, if the Relevant Member State has implemented the provisions of 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the depositor for any such offer; or
(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of offered notes will require the issuing entity or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
For the purpose of this provision, the expression “an offer of the offered notes to the public” in relation to any of the offered notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe to the offered notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means
Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State; the expression “2010 PD Amending Directive” means Directive 2010/73/EU; countries comprising the “European Economic Area” are Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.
United Kingdom. Each underwriter has represented, warranted and agreed that:
(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of any notes in circumstances in which section 21(1) of the FSMA does not apply to the issuing entity; and
(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the notes in, from or otherwise involving the United Kingdom.
Certain legal matters relating to the notes and the certificates will be passed upon for the trust,issuing entity, the depositor, GMACAlly Financial and Ally Bank by Richard V. Kent, Esq., Assistant General Counsel to the depositor and Assistant General Counsel of GMAC,Ally Financial, by Jonathan P. Andrews, GeneralChief Counsel to Ally Bank, and by Kirkland & Ellis LLP, counsel to the depositor, the trust, GMACissuing entity, Ally Financial and Ally Bank and by VanCott, Bagley, Cornwall & McCarthy, Utah counsel for Ally Bank. Certain federal income tax matters and bankruptcyinsolvency matters will be passed upon for Ally Bank, the trustissuing entity and the depositor by Kirkland & Ellis LLP.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the securities with the Securities and Exchange Commission under the Securities Act of 1933, as amended. This prospectus is part of the registration statement, but the registration statement includes additional information.
The servicer will file with the SEC all annual, monthly and current SEC reports, reports on assessment of compliance with servicing criteria, registered public accounting firm attestation reports, servicer compliance statements, and other information about the issuing entity that is required to be filed.
You may read and copy any reports, statements or other information we file at the SEC’s public reference room in Washington, D.C. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at (800) SEC-0330 for further information on the operation of the public reference rooms. Our SEC filings are also available to the public on the SEC Internet site, http://www.sec.gov.
The SEC allows us to “incorporate by reference” information we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus. We incorporate by reference any SEC reports and materials filed by or on behalf of each issuing entity since the end of the latest fiscal year. We also incorporate by reference any future SEC reports and materials filed by or on behalf of each issuing entity until we terminate our offering of the securities issued by that issuing entity. Information that we file later with the SEC will automatically update the information in this prospectus. In all cases, you should rely on the later information over different information included in this prospectus or the accompanying prospectus supplement.
As a recipient of this prospectus, you may request a copy of any document we incorporate by reference, except exhibits to the documents not specifically incorporated by reference, at no cost, by writing to us at: Ally Bank, 6985 Union Park Center, Suite 435, Salt Lake City,Midvale, Utah 84047 or by calling us at: (801) 790-5000.
GLOSSARY OF TERMS TO PROSPECTUS
The following are definitions of terms used in this prospectus. References to the singular form of defined terms in this prospectus include references to the plural and vice versa.
“AART Administrative Payment” means with respect to a secured note, an amount equal to the Secured Note Principal Balance, plus accrued interest calculated at the Secured Note Rate, determined as of the close of business on the last day of the Monthly Period prior to the Monthly Period as of which the trust administrator is required to (or, if earlier elects to) purchase that secured note.
“AART Events of Default” has the meaning set forth in “The Notes—The AART Indenture—AART Events of Default; Rights Upon AART Events of Default.”
“AART indenture” has the meaning assigned to that term in the accompanying prospectus supplement.
“AART indenture trustee” means the entity identified as indenture trustee in the AART indenture, not individually but solely in its capacity as indenture trustee.
“AART Related Documents” means the AART indenture, the trust sale agreement, the administration agreement and other similar associated documents for an issuing entity.
“AART Warranty Payment” means, with respect to each secured note, an amount equal to the Secured Note Principal Balance, plus accrued interest calculated at the Secured Note Rate, determined as of the close of business on the last day of the Monthly Period prior to the Monthly Period as of which the depositor is required to (or, if earlier, elects to) repurchase the secured note.
“ABS Value” has the meaning assigned to that term in the accompanying prospectus supplement.
“ACOLT Basic Documents” means the ACOLT Declaration of Trust, the ACOLT Declaration Supplement, the VAULT trust agreement, the VAULT transfer direction, the ACOLT Designation, the VAULT security agreement, the sale and contribution agreement, the ACOLT indenture, the servicing agreement, the Pull Ahead Funding Agreement, the secured notes and the equity certificates of ACOLT.
“ACOLT Custodian” means Ally Financial, or another custodian named from time to time in the servicing agreement.
“ACOLT Declaration of Trust” means the Declaration of Trust by Deutsche Bank Trust Company Delaware, as ACOLT owner trustee, dated as of April 7, 2010, acknowledged, accepted and agreed to by ACOL LLC, as the same may be amended and supplemented from time to time.
“ACOLT Declaration Supplement” means, for each issuing entity, the ACOLT Supplement to the Declaration, dated as of the closing date, between the ACOLT owner trustee and ACOL LLC, as residual certificateholder.
“ACOLT Designation” means the Designation of Trust Beneficiary and Creation of Series of Beneficial Interest, dated as of April 7, 2010, among BNY Mellon Trust of Delaware, as successor to Chase Bank USA, National Association (f/k/a Chase Manhattan Bank USA, National Association), as trustee, Ally Financial, as servicer and initial trust beneficiary and ACOLT.
“ACOLT Events of Default” has the meaning set forth in “The Secured Notes—The ACOLT Indenture—ACOLT Events of Default; Rights Upon ACOLT Event of Default.”
“ACOLT indenture” has the meaning assigned to that term in the accompanying prospectus supplement.
“ACOLT indenture trustee” means the entity designated as indenture trustee in the ACOLT indenture, not individually but solely in its capacity as indenture trustee.
“Acquisition” has the meaning set forth in “The Servicer.”
“Administrative Purchase Payment” means, for any Administrative Receivable:
(1)has the meaning assigned to that term in the case of a Scheduled Interest Receivable, the sum of
(A) all remaining Scheduled Payments on the receivable, and
(B) all past due Scheduled Payments, less the rebate that would be payable to the obligor on the receivable were the obligor to prepay the receivable in full on that day.
(2) in the case of a Simple Interest Receivable, a payment equal to the Amount Financed less that portion of all payments made on or prior to the last day of the prior monthly period allocable to principal.
“Administrative Receivable” means a receivable which the servicer is required to purchase as a result of a breach of a covenant which materially and adversely affects any receivable held by a trust pursuant to the Pooling and Servicing Agreement or which the servicer has elected to repurchase pursuant to the Trust Sale and Servicing Agreement.accompanying prospectus supplement.
“Aggregate Amount Financedadministration agreement” means, for each issuing entity, the aggregate Amount Financed underadministration agreement, dated as of the receivables held by aclosing date, among Ally Financial, as trust as specifiedadministrator, the depositor and the issuing entity.
“Advance” has the meaning assigned to that term in the accompanying prospectus supplement.
“Aggregate Receivables Face AmountABS Value” means for each trust as of any date,has the sum ofmeaning assigned to that term in the Principal Balances of all outstanding receivables, other than Liquidating Receivables, held by the trust that date.accompanying prospectus supplement.
“Aggregate Receivables Principal BalanceALG Residual” has the meaning set forth in the accompanying prospectus supplement.“Description of Auto Lease Business of Ally Bank—Determination of Residual Value.”
“Amount FinancedAlly Financial” means forAlly Financial Inc., a receivable, the aggregate amount advanced toward the purchase price of the financed vehicle, including accessories, insurance premiums, serviceDelaware corporation, formerly known as GMAC Inc., GMAC LLC and warranty contractsGeneral Motors Acceptance Corporation, and other items customarily financed as part of retail automobile instalment sale contractsits successors and purchase money loans and related costs less:
(1) (A) in the case of a Scheduled Interest Receivable, payments due from the obligor prior to the cutoff date allocable to principal, and
(B) in the case of a Simple Interest Receivable, payments received from the obligor prior to the cutoff date allocable to principal, and
(2) any amount allocable to the premium for physical damage collateral protection insurance covering the financed vehicle required by Ally Bank or the servicer.
“APR” means, for a receivable, the annual percentage rate.assigns.
“BasicAlly Servicing Fee Rate” means, for a trust,has the Basic Servicing Fee Rate specifiedmeaning set forth in the accompanying prospectus supplement.“The Servicer.”
“Business DayAutomotive Lease Guide” means any day other than a Saturday, Sunday or any other day on which banks in New York, New York, Detroit, Michigan or Chicago, Illinois may, or are required to, remain closed.
“Certificate Balance” meansthe guide published by Automotive Lease Co. setting forth anticipated residual values for each trustvarious makes and each classmodels of certificates as of any date,motor vehicles under the aggregate principal balance of such class of certificates, reduced by all previous payments to the certificateholders of such class in respect of principal of such certificates.circumstances described therein.
“Certificate Distribution AccountBankruptcy Code” means title 11 of the United States Code, as amended from time to time.
“benefit plan” has the meaning set forth in “ERISA Considerations.”
“certificate distribution account” means any account so designated and established and maintained pursuant to the Trust Sale and Servicing Agreement.a trust agreement.
“Certificate Pool Factor” means, for each class of certificates, a seven-digit decimal which the servicertrust administrator will compute prior to each distribution on the certificates indicating the remaining Certificate Balancecertificate balance as of the close of that date, as a fraction of the initial Certificate Balance.certificate balance.
“Collection AccountClass A Interest Carryover Shortfall” means any account so designated, and established pursuanthas the meaning assigned to that term in the Trust Sale and Servicing Agreement.accompanying prospectus supplement.
“Class B Interest Carryover Shortfall” has the meaning assigned to that term in the accompanying prospectus supplement.
“Class C Interest Carryover Shortfall” has the meaning assigned to that term in the accompanying prospectus supplement.
“Class D Interest Carryover Shortfall” has the meaning assigned to that term in the accompanying prospectus supplement.
“Controlling Class” means, for any series of Securities,securities, the class or classes of securities of that series designated in the related prospectus supplement.supplement or, if only one class of securities is offered by the related prospectus supplement, the offered securities.
“Designated Accounts” means the Collection Account,AART collection account, the Note Distribution Account, and anynote distribution account, ACOLT reserve account, the AART reserve account, if any, and the ACOLT collection account and any other accounts so identified in the accompanying prospectus supplement and for which the funds on deposit are invested in Eligible Investments.
“Distribution DateEligible Investments” means generally investments (1) that are acceptable to the date or dates specified inhired rating agencies rating the accompanying prospectus supplement on whichissuing entity’s notes and certificates at the trust makes payments onrequest of the depositor as being consistent with the rating of the notes and (2) that mature no later than the certificates.business day preceding the next payment date or distribution date or payment date, in the case of the AART collection account, the note distribution account and any AART reserve account, and no later than the business day preceding the next distribution date or, the next distribution date, in the case of investments in the institutions in which the applicable account is maintained or the account owner, the short-term unsecured debt of which has a specified rating, has agreed to advance funds, if necessary, on any distribution date, in the case of the ACOLT collection account and the ACOLT reserve account, as applicable.
“Eligible InvestmentsERISA” has the meaning specifiedset forth in “ERISA Considerations.”
“ERISA Affiliate” means a corporation, trade or business that is, along with Ally Financial, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in Section 414 of the Internal Revenue Code or Section 4001 of ERISA.
“Excess Payment” has the meaning assigned to that term in the accompanying prospectus supplement.
“Events of DefaultExtended Lease” has the meaning assigned to that term in the accompanying prospectus supplement.
“Extended Lease Payments” has the meaning assigned to that term in the accompanying prospectus supplement.
“FDIC” has the meaning set forth in “The Notes—The Indenture—Events of Default; Rights Upon Event of DefaultSponsor.”
“Excess PaymentFDIC Rule” has the meaning set forth in “Insolvency Aspects of the Offering—FDIC Rule.”
“FDIC Rule Covenant” has the meaning set forth in “Insolvency Aspects of the Offering—FDIC Rule.”
“Fitch” means for a Scheduled Interest Receivable, the portion of a payment on the receivable in excess of the Scheduled Payment thereon which is not late fees, prepayment charges or other similar fees or charges.Fitch, Inc.
“Foreign Person” means a nonresident alien, foreign corporation or other non-United States person.person or entity.
“FRB” has the meaning set forth in “The Sponsor.”
“FSMA” has the meaning set forth in “Plan of Distribution—Matters Relating to the Offering of the Notes in Europe.”
“General Motors” means General Motors Corporation,Company, and its successors and assigns, or General Motors Company,LLC, and its successors and assigns.
“GMACIB Finance” means GMAC Inc., and its successors and assigns.has the meaning set forth in “The Sponsor.”
“Liquidation ProceedsInitial ABS Value” means for a Liquidating Receivable, all amounts realized for that receivable, net of amounts that are required to be refundedwith respect to the obligorpool of lease assets securing the secured notes issued pursuant to an ACOLT indenture, the aggregate ABS Value of such pool as of the cut-off date specified in the accompanying prospectus supplement.
“Internal Revenue Code” means the United States Internal Revenue Code of 1986, as amended.
“IRS” means the Internal Revenue Service.
“issuing entity” is defined on that receivable.the cover page.
“Lease Asset” means a Program Lease and the Vehicle related thereto
“Lease Residual” has the meaning set forth in “Description of the Auto Lease Business of Ally Bank—Determination of Residual Value.”
“Liquidating ReceivablesLease Asset” means a receivable:has the meaning assigned to that term in the accompanying prospectus supplement.
(A) as“MCP Stock” has the meaning set forth in “The Servicer.”
“Monthly Lease Payment” has the meaning assigned to whichthat term in the serviceraccompanying prospectus supplement.
“Monthly Period” has (1) reasonably determined,the meaning assigned to that term in accordance with customary servicing procedures, that eventual payment of amounts owing on that receivable is unlikely, or (2) repossessed and disposed of the financed vehicle, and
(B) that the servicer has charged off.accompanying prospectus supplement.
“Monthly Remittance Condition” has the meaning specifiedassigned to that term in the accompanying prospectus supplement.
“Note Distribution AccountMSRP” means any account so designated and established and maintained pursuant tohas the Trust Sale and Servicing Agreement.meaning set forth in “Description of the Auto Lease Business of Ally Bank—Determination of Residual Value.”
“Note Pool Factor” means, for each class of notes, a seven-digitseven digit decimal which the servicertrust administrator will compute prior to each distribution for the notes indicating the remaining outstanding principal balance of the notes, as of the close of the distribution date, as a fraction of the initial outstanding principal balance of the notes.
“OID” means original issue discount.
“Outstanding Advance” has the meaning assigned to that term in the accompanying prospectus supplement.
“Paid in Full Lease” means a lease for which all monthly payments have been made as of the related closing date but which is not, as of the closing date, a Liquidating Lease Asset.
“Partnership Certificates” means certificates including Strip Certificates, and Strip Notes issued by a Tax Partnership. References to a holder of these certificates shall be toare the beneficial owner thereof.
The “Pass Through Rate,” if any, for any class of certificates, will be specified in the accompanying prospectus supplement.
“Payment Ahead” means, for a Scheduled Interest Receivable, any Excess Payment, not representing prepayment in full of the receivable, that is of an amount so that the sum of the Excess Payment, together with any unapplied Payments Ahead, is equal to or less than three times the Scheduled Payment.
“Payment Ahead Servicing Account” means any account so designated and established and maintained pursuant to the Trust Sale and Servicing Agreement.servicing agreement.
“Pooling and Servicing AgreementPayments Ahead” has the meaning assigned to that term in the accompanying prospectus supplement.
“PBGC” means the Pension Benefit Guaranty Corporation.
“PDP” means PDP Group, Inc.
“plan assets regulation” has the meaning set forth in “ERISA Considerations.”
“pooling agreement” means, for each trust,issuing entity, the Pooling and Servicing Agreementpooling agreement, dated as of the closing date, amongbetween Ally Bank GMAC, as servicer, and the depositor, as amended and supplemented from time to time.
“PrepaymentsProgram Lease” means Excess Paymentsautomobile and light truck leases sold, assigned, transferred or conveyed to ACOLT, including all other than a Payment Ahead.
“Prepayment Surplus” means, on any distribution date on which a Prepayment is to be applied for a Scheduled Interest Receivable, that portion of the Prepayment, net of any rebate to the obligor of the portion of the Scheduled Payments attributable to unearned finance charges, which is not allocable to principal.
“Principal Balance” means, as of any date for any receivable, the Amount Financed minus the sum of either:
(1) in the case of a Scheduled Interest Receivable,
(A) that portion ofagreements related thereto and all Scheduled Payments due on or prior to that date allocable to principal,
(B) any Warranty Payment or Administrative Purchase Payment received on or prior to such date to the extent allocable to principal,rights and
(C) any Prepayment applied by the servicer to reduce the Principal Balance of that receivable, or
(2) in the case of a Simple Interest Receivable,
(A) that portion of all payments received from the related obligor on or prior to that date allocable to principal, and
(B) any Warranty Payment or Administrative Purchase Payment received on or prior to such date to the extent allocable to principal.
“Related Documents” means the indenture, the Transfer and Servicing Agreements and other similar and associated documents for a trust. obligations thereunder.
“PTCE” has the meaning set forth in “ERISA Considerations.”
“Pull Ahead Agent” has the meaning assigned to that term in the accompanying prospectus supplement.
“Pull Ahead Funding Agreement” means, for each issuing entity, the Pull Ahead Funding Agreement, dated as of the closing date, between ACOLT, the ACOLT indenture trustee and the Pull Ahead Agent as amended and supplemented from time to time.
“Pull Ahead Lease Asset” has the meaning assigned to that term in the accompanying prospectus supplement.
“Pull Ahead Payment” has the meaning assigned to that term in the accompanying prospectus supplement.
“Pull Ahead Program” has the meaning assigned to that term in the accompanying prospectus supplement.
“Record Date” means, for any distribution date, the close of business on the date immediately preceding the distribution date, or if definitive securities are issued, the last day of the preceding monthly period.related Monthly Period.
“Revolving PeriodRelevant Implementation Date” has the meaning set forth in “Plan of Distribution—Matters Relating to the Offering of the Notes in Europe.”
“Relevant Member State” has the meaning set forth in “Plan of Distribution—Matters Relating to the Offering of the Notes in Europe.”
“sale and contribution agreement” means, for each issuing entity, the sale and contribution agreement, dated as of the closing date, between Ally Bank and ACOLT, as amended and supplemented from time specifiedto time.
“Sales and Use Tax Amount” has the meaning assigned to that term in the accompanying prospectus supplement during which the trust will reinvest collections in additional receivables rather than distributing collections to you. The Revolving Period may not be longer than one year from the date of an issuance of a series of securities.supplement.
“Scheduled Interest ReceivablesSecured Note Principal Balance” means receivables pursuanthas the meaning assigned to whichthat term in the payments due from the obligors during any month are allocated between finance charges and principal on a scheduled basis, without regard to the period of time which has elapsed since the preceding payment was made, using the actuarial method.accompanying prospectus supplement.
“Scheduled PaymentSecured Note Rate” means, for a Scheduled Interest Receivable,has the payment set forthmeaning assigned to that term in that receivable due from the obligor during any month.accompanying prospectus supplement.
“Securities Act” means the United States Securities Act of 1933, as amended.
“Servicer Default” has the meaning set forth in “The Transfer Agreements and Servicing Agreements—-Servicer DefaultsServicer Default.”
“servicing agreement” means, for each issuing entity, the servicing agreement, dated as of the closing date, between Ally Financial, as servicer, ACOLT and the ACOLT indenture trustee, as amended and supplemented from time to time.
“Short-Term Note” means a note whichthat has a fixed maturity date not more than one year from the issueissuance date of that note.
“Simple Interest ReceivablesSmartLease Plus Account” means receivablesa lease as to which provide for the allocationlessee makes a single upfront payment that entitles him or her to use the related vehicle until the termination date of payments between finance charges and principal based on the actual date on whichlease (effectively, a payment is received.“single payment” lease).
“Strip CertificatesStated Residual Value” means one or more classeshas the meaning set forth in “Description of certificates entitled to disproportionate, nominal or no distributionsAuto Lease Business of Certificate Balance or interest.Ally Bank—Determination of Residual Value.”
“Strip NotesSykes” means one or more classes of notes entitled to disproportionate, nominal or no distributions of principal or interest.has the meaning set forth in “The Servicer—Servicing Procedures.”
“Tax Counsel” means Kirkland & Ellis LLP, as special tax counsel to the depositor.
“Tax Non-Entity” means a trust in which all of the certificates of that trust which are owned by the depositor, and the depositor and the servicer agree to treat the trust as a division of the depositor and hence disregarded as a separate entity for purposes of federal, state and local income and franchise taxes.
“Tax Non-Entity Certificates” means certificates issued by a Tax Non-Entity. References to a holder of these certificates shall be to the beneficial owner thereof.
“Tax Partnership” means a trust in which the depositor, the servicer and the applicable holders agree to treat certificates including Strip Certificates, and Strip Notes as equity interests in a partnership for purposes of federal, state and local income and franchise taxes.
“Tax Trust” means a trust in which the depositor, the servicer and the applicable certificateholders agree to treat the certificates of the trust as equity interests in a grantor trust for purposes of federal, state and local income and franchise taxes.
“Transfer Agreements and Servicing Agreements” means, for each trust,has the Poolingmeaning set forth in “The Transfer and Servicing Agreement,Agreements.”
“Transportation Act” has the meaning set forth in “Legal Aspects of the Secured Notes and the Lease Assets—Vicarious Liability.”
“Treasury” has the meaning set forth in “The Servicer.”
“Treasury Regulations” means regulations issued by the U.S. Department of the Treasury under the Internal Revenue Code.
“Trust SaleAdministrator” has the meaning assigned to that term in the accompanying prospectus supplement.
“Trust Administrator default” has the meaning set forth in “The Transfer Agreements and Servicing Agreement, the trust agreement and the administration agreement.Agreements—Trust Administrator Default.”
“Trust Certificates” means certificates issued by a Tax Trust. References to a holder of these certificates shall beare to the beneficial owner thereof.
“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended.
“Trust Sale and Servicing Agreementtrust sale agreement” means, for each issuing entity, the trust sale agreement, dated as of the closing date, between the depositor and the issuing entity.
“UCC” means the Uniform Commercial Code as in effect in the relevant jurisdiction from time to time.
“underwriter’s exemption” has the meaning set forth in “ERISA Considerations.”
“VAULT” means Vehicle Asset Universal Leasing Trust, Salea Delaware statutory trust created under the Statutory Trust Statute under the VAULT trust agreement.
“VAULT security agreement” means the VAULT Pledge and ServicingSecurity Agreement, dated as of the closing date, amongby VAULT and made in favor of the holders of the secured notes.
“VAULT transfer direction” means, for each issuing entity, the Transfer Direction and Allocation Notice, dated as of the closing date, between the VAULT Trustee, Ally Bank, as trust beneficiary, Ally Financial, as servicer, ACOL LLC, as residual certificateholder, the ACOLT owner trustee, ACOLT, as trust beneficiary and transferee, and the depositor and the issuing entity, as secured noteholders.
“VAULT trust agreement” means the Second Amended and Restated Trust and servicing agreement, dated as of March 25, 2004, between Ally Financial, as servicer and initial beneficiary, and the VAULT Trustee, as the same may be amended, and supplemented or otherwise modified from time to time.
“Warranty PaymentVAULT Trustee” has the meaning assigned to that term in the accompanying prospectus supplement.
“Vehicle” means foran automobile or light truck that is or has been leased under a Warranty Receivable:
(1)Program Lease and that is or will be titled in the casename of a Scheduled Interest Receivable,VAULT and with respect to which Ally Bank is the sum of:
(A) all remaining Scheduled Payments on that receivable, plus
(B) all past due Scheduled Payments,
minus the sum of:
(A) the rebate that would be payable to the obligor on that receivable were the obligor to prepay that receivable in full on that day, and
(B) any Liquidation Proceeds for that receivable previously received, to the extent applied to reduce the Principal Balance of that receivable, or
(2) in the case of a Simple Interest Receivable, the Amount Financed minus the sum of:
(A) that portion of all payments received on or prior to the last day of the prior monthly period allocable to principal, and
(B) any Liquidation Proceeds for that receivable, to the extent applied to reduce the Principal Balance of that receivable.trust beneficiary.
“Warranty ReceivablePayment” means a receivable which must be repurchased by eitherhas the depositor or Ally Bank as a result of a breach of a representation or warranty formeaning assigned to that receivable which materially and adversely affectsterm in the interests of any securityholder in that receivable.accompanying prospectus supplement.
No dealer, salesman or other person has been authorized to give any information or to make any representations not contained in this prospectus supplement and the prospectus and, if given or made, suchthat information or those representations must not be relied upon as having been authorized by the depositor, the servicer, the trust administrator or the underwriters. This prospectus supplement and the prospectus do not constitute an offer to sell, or a solicitation of an offer to buy, the securities offered hereby to anyone in any jurisdiction in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make any such offer or solicitation. Neither the delivery of this prospectus supplement and the prospectus nor any sale made hereunderunder this prospectus supplement and the prospectus shall, under any circumstances, create an implication that information herein or thereinin those documents is correct as of any time since the date of this prospectus supplement or the prospectus.
Until the expiration of the 90 days after the date of this prospectus supplement all dealers effecting transactions in the notes, whether or not participating in this distribution, may be required to deliver a prospectus supplement and the associated prospectus.prospectus to which it relates. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus supplement and prospectus when acting as underwriters for their unsold allotments or subscriptions.
Ally Auto Receivables
Trust 20 - -SN
Issuing Entity
$
Asset Backed Notes, Class A
$
Asset Backed Notes, Class B
$
Asset Backed Notes, Class C
Ally Auto Assets LLC
Depositor
Ally Bank
Sponsor
GMACAlly Financial Inc.
Servicer and Trust Administrator
PROSPECTUS
SUPPLEMENT
[Underwriters]Underwriters for the
Class A Notes:
Underwriters for the
Class B Notes and the
Class C Notes
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in connection with the offering of the term notes, other than underwriting discounts and commissions, described in this Registration Statement:
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Securities and Exchange Commission registration fee | $ | 114.60 | ||
Printing and engraving costs | * | |||
Legal fees | * | |||
Trustee fees and expenses | * | |||
Accountant’s fees | * | |||
Rating Agencies’ fees | * | |||
Miscellaneous expenses | * | |||
|
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Total | $ | 114.60 |
| * | To be filed by Amendment. |
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Amended and Restated Limited Liability Company Agreement of Ally Auto Assets LLC provides that Ally Auto Assets LLC will indemnify and advance expenses to every officer and director and, in some cases, to members to the fullest extent permitted by applicable law, against all amounts (including judgments, fines, payments in settlement, attorneys’ fees and other expenses) reasonably incurred by any of them in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that the person is or was an officer, director or member, as applicable, of Ally Auto Assets LLC. Further, the Amended and Restated Limited Liability Company Agreement of Ally Auto Assets LLC provides that Ally Auto Assets LLC may purchase and maintain insurance on behalf of its officers and directors against liabilities asserted against them in their capacities as officers and directors, respectively. Section 18-108 of the Delaware Limited Liability Company Act provides that a Delaware limited liability company may, and shall have the power to, indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever, subject to standard restrictions, if any, as are set forth in its limited liability company agreement.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A list of exhibits filed herewith or incorporated by reference is contained in the Exhibit Index which is incorporated herein by reference.
| ITEM 17. UNDERTAKINGS. |
(a) As to Rule 415:
TheEach of the undersigned registrant on Form S-3, Ally Central Originating Lease Trust, and the undersigned registrant on Form S-3, Ally Auto Assets LLC, hereby undertakes:
| (a) | As to Rule 415: |
(1) To file, during any period in which offers or sales are being made of the securities registered hereby, a post-effective amendment to this registration statement:
(i)
| (i) | to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 as amended (the “Securities Act”); |
II-1
| (ii) | to reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment hereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
(ii) to reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment hereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) to include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement;
| (iii) | to include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; |
provided,however, that the undertakings set forth in clauses (i), (ii) and (iii) above do not apply if the information required to be included in a post-effective amendment by those clauses is contained in reports filed with or furnished to the Commission by the applicable registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, that are incorporated by reference in this registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) (§ 230.424(b)) that is part of this registration statement;provided, further, however, that clauses (i) and (ii) above will not apply if the information required to be included in a post-effective amendment is provided pursuant to Item 1100(c) of Regulation AB (§229.1100(c)).
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act to any purchaser,
(i) If the applicable registrant is relying on Rule 430B (§ 230.430B): (A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) (§ 230.424(b)(3)) shall be deemed to be part of this registration statement as of the date the filed prospectus was deemed part of and included in this registration statement; and
| (A) | Each prospectus filed by the applicable registrant pursuant to Rule 424(b)(3) (§ 230.424(b)(3)) shall be deemed to be part of this registration statement as of the date the filed prospectus was deemed part of and included in this registration statement; and |
| (B) | Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) (§ 230.424(b)(2), (b)(5), or (b)(7)) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) ((§ 230.415(a)(1)(i), (vii), or (x)) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in this registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initialbona fide offering thereof.Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supercede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or |
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(ii) If the applicable registrant is subject to Rule 430C (§ 230.430C), each prospectus filed pursuant to Rule 424(b) as part of this registration statement, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§ 230.430(a)), shall be deemed to be part of and
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included in this registration statement as of the date it is first used after effectiveness.Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of theeither registrant under the Securities Act to any purchaser in the initial distribution of the securities:
TheEach undersigned registrant undertakes that in a primary offering of securities of the applicable undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the applicable undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the applicable undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§ 230.424);
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the applicable undersigned registrant or used or referred to by the applicable undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the applicable undersigned registrant or its securities provided by or on behalf of the applicable undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the applicable undersigned registrant to the purchaser.
| (b) | As to documents subsequently filed that are incorporated by reference: |
TheEach of the undersigned registrantregistrants hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the applicable registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initialbona fide offering thereof.
| (c) |
The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
| As to indemnification: |
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the applicable registrant pursuant to the provisions described under Item 15 above, or otherwise, each of the registrantundersigned registrants has been advised that in the opinion of the Securities and Exchange Commission such
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indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by theeither registrant of expenses incurred or paid by a director, officer or controlling person of the applicable registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the applicable registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
| As to qualification of Trust Indentures under Trust Indenture Act of 1939 for delayed offerings: |
TheEach of the undersigned registrantregistrants hereby undertakes to file an application for the purpose of determining the eligibility of the indenture trustee to act under subsection (a) of Section 310 of the Trust Indenture Act (“Act”) in accordance with the rules and regulations prescribed by the Securities and Exchange Commission under Section 305(b)(2) of the Act.
| As to Rule 430A: |
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For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by either of the registrantundersigned registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fide offering thereof.
| As to Regulation AB: |
TheEach of the undersigned registrantregistrants hereby undertakes:undertakes that:
(1) That, forFor purposes of determining any liability under the Securities Act, each filing of the annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934, as amended, of a third party that is incorporated by reference in the registration statement in accordance with Item 1100(c)(1) of Regulation AB (17 CFR 229.1100(c)(1)) shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fide offering thereof.
(2) That, except as otherwise provided by Item 1105 of Regulation AB (17 CFR 229.1105), information provided in response to that Item pursuant to Rule 312 of Regulation S-T (17 CFR 232.312) through the specified Internet address in the prospectus is deemed to be a part of the prospectus included in the registration statement.
(3) To provide to any person without charge, upon request, a copy of the information provided in response to Item 1105 of Regulation AB pursuant to Rule 312 of Regulation S-T through the specified Internet address as of the date of the prospectus included in the registration statement if a subsequent update or change is made to the information.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Detroit, State of Michigan, on the 27th5th day of November 2009.June, 2012.
| ALLY AUTO ASSETS LLC |
| / |
Name: Ryan C. Farris |
| Title: President |
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed on November 27, 2009June 5, 2012 by the following persons in the capacities indicated.
Signature | Title | |
* | President and Director (Principal Executive Officer) | |
| Ryan C. Farris | ||
* | Vice President and Director | |
* | Vice President and Director | |
* | ||
| Vice President and Director (Principal Financial Officer) | |
* | Vice President and Director | |
* | Director | |
| Richard E. Damman | ||
| * | Controller (Principal Accounting Officer) | |
| *By: | /s/ | |
Name: Title: Attorney-in-Fact | ||
| * | The undersigned, by signing his name hereto, does hereby sign this Registration Statement on behalf of the above-indicated officer or director of the registrant pursuant to the Power of Attorney signed by such officer or director. |
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EXHIBIT INDEXPursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Charlotte, State of North Carolina, on the 5th day of June, 2012.
| ALLY CENTRAL ORIGINATING LEASE TRUST |
| By: ALLY CENTRAL ORIGINATING LEASE LLC, on behalf of Ally Central Originating Lease Trust |
| /s/ Bradley J. Brown |
| Name: Bradley J. Brown |
| Title: President |
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed on June 5, 2012 by the following persons in the capacities indicated.
| Signature | Title | |
| * | President and Director (Principal Executive Officer) | |
| Bradley J. Brown | ||
| * | Vice President and Director (Principal Financial Officer) | |
| Ryan C. Farris | ||
| * | Vice President and Director | |
| Matthew T. St. Charles | ||
| * | Vice President and Director | |
| James T. Houghton | ||
| * | Director | |
| David J. Brophy | ||
| * | Controller (Principal Accounting Officer) | |
| Pamela M. Surhigh | ||
| *By: | /s/ Richard V. Kent | |
Name: Richard V. Kent Title: Attorney-in-Fact |
| * | The undersigned, by signing his name hereto, does hereby sign this Registration Statement on behalf of the above-indicated officer or director of the registrant pursuant to the Power of Attorney signed by such officer or director. |
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EXHIBIT INDEX
Exhibit Index | Description | |||
| 1.1 | Form of Underwriting | |||
| 3.1 | Amended and Restated Limited Liability Company Agreement of Ally Auto Assets LLC entered into | |||
| 3.2 | Declaration of Trust, dated as of April 7, 2010, by Deutsche Bank Trust Company Delaware and acknowledged, accepted and agreed to by ACOL LLC.* | |||
| | 3.3 | Form of | ||
| | 4.1 | Form of | ||
| ||||
| 4.2 | Form of AART Indenture between the issuing entity and the AART indenture trustee. *** | |||
| 4.3 | Form of ACOLT 20 -SN Indenture between ACOLT and the ACOLT indenture trustee. *** | |||
| 5.1 | Opinion of Kirkland & Ellis LLP with respect to legality of Secured Notes and the Notes. | |||
| 8.1 | Opinion of Kirkland & Ellis LLP with respect to tax matters of the Notes. | |||
| 23.1 | Consent of Kirkland & Ellis LLP
| |||
| 24.1 | Powers of Attorney.* | |||
| 24.2 | Power of Attorney.* | |||
| 25.1 | Statement of Eligibility of the Indenture Trustee for the Notes secured by the Secured Notes.** | |||
| 25.2 |
| Statement of
| ||
| 99.1 | Form of Transfer Direction and ACOLT Allocation Notice re: Transfer of Beneficial Interest in VAULT and Notice of Allocation of Lease Assets from Ally Bank and ACOL LLC to ACOLT Ally Financial, the Depositor and the VAULT Trustee. *** | |||
| 99.2 | Form of VAULT Pledge and Security Agreement by VAULT.*** | |||
| 99.3 | Form of ACOLT 20 -SN Sale and Contribution Agreement between ACOLT and Ally Bank.*** | |||
| 99.4 | Form of ACOLT 20 -SN Servicing Agreement between ACOLT and Ally Financial and acknowledged and accepted by the ACOLT indenture trustee.*** | |||
| 99.5 | Form of ACOLT 20 -SN Pull Ahead Funding Agreement among ACOLT, Ally Bank and the ACOLT indenture trustee.*** | |||
| 99.6 | Form of Pooling Agreement between Ally Bank and the Depositor.*** | |||
| 99.7 | Form of Trust Sale Agreement between the Depositor and the issuing entity.*** | |||
| 99.8 | Form of Administration Agreement among Ally Financial, the | |||
| * | Filed herewith. |
| ** | To be filed in accordance with Section 305(b)(2) of the Trust Indenture Act of 1939. |
| *** | To be filed by |
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