General Motors Financial (ACF) 10-Q 2008 Q4 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission file number 1-10667

AmeriCredit Corp.

(Exact name of registrant as specified in its charter)

Texas	75-2291093
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

801 Cherry Street, Suite 3900, Fort Worth, Texas 76102

(Address of principal executive offices, including Zip Code)

(817) 302-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨            Accelerated filer  x            Non-accelerated filer  ¨            Smaller Reporting Company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

There were 131,659,061 shares of common stock, $0.01 par value outstanding as of January 31, 2009.

AMERICREDIT CORP.

INDEX TO FORM 10-Q

		Page
Part I.         FINANCIAL INFORMATION
Item 1.	CONDENSED FINANCIAL STATEMENTS (UNAUDITED)	3
	Consolidated Balance Sheets – December 31, 2008 and June 30, 2008	3
	Consolidated Statements of Operations and Comprehensive Operations – Three and Six Months Ended December 31, 2008 and 2007	4
	Consolidated Statements of Cash Flows – Six Months Ended December 31, 2008 and 2007	5
	Notes to Consolidated Financial Statements	6
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	33
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	59
Item 4.	CONTROLS AND PROCEDURES	59
Part II.       OTHER INFORMATION
Item 1.	LEGAL PROCEEDINGS	60
Item 1A.	RISK FACTORS	60
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	60
Item 3.	DEFAULTS UPON SENIOR SECURITIES	60
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	60
Item 5.	OTHER INFORMATION	60
Item 6.	EXHIBITS	61
SIGNATURE		62

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Part I. FINANCIAL INFORMATION

Item 1. CONDENSED FINANCIAL STATEMENTS

AMERICREDIT CORP.

Consolidated Balance Sheets

(Unaudited, Dollars in Thousands)

	December 31, 2008			June 30, 2008
ASSETS
Cash and cash equivalents	$	166,690		$	433,493
Finance receivables, net		12,076,156			14,030,299
Restricted cash – securitization notes payable		883,734			982,670
Restricted cash – credit facilities		164,154			259,699
Property and equipment, net		49,889			55,471
Leased vehicles, net		184,673			210,857
Deferred income taxes		296,490			317,319
Investment in money market fund		20,924
Other assets		310,403			257,402
Total assets	$	14,153,113		$	16,547,210
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Credit facilities	$	1,942,362		$	2,928,161
Securitization notes payable		9,253,487			10,420,327
Senior notes		91,620			200,000
Convertible senior notes		511,150			750,000
Funding payable		4,539			21,519
Accrued taxes and expenses		197,564			216,387
Other liabilities		174,313			113,946
Total liabilities		12,175,035			14,650,340
Commitments and contingencies (Note 10)
Shareholders’ equity:
Preferred stock, $0.01 par value per share; 20,000,000 shares authorized, none issued
Common stock, $0.01 par value per share; 350,000,000 shares authorized; 134,072,345 and 118,766,250 shares issued		1,341			1,188
Additional paid-in capital		186,005			42,336
Accumulated other comprehensive income		(42,128	)		(6,404	)
Retained earnings		1,885,466			1,912,684
		2,030,684			1,949,804
Treasury stock, at cost (2,437,356 and 2,454,534 shares)		(52,606	)		(52,934	)
Total shareholders’ equity		1,978,078			1,896,870
Total liabilities and shareholders’ equity	$	14,153,113		$	16,547,210

The accompanying notes are an integral part of these consolidated financial statements.

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AMERICREDIT CORP.

Consolidated Statements of Operations and Comprehensive Operations

(Unaudited, Dollars in Thousands, Except Per Share Data)

	Three Months Ended December 31,						Six Months Ended December 31,
	2008			2007			2008			2007
Revenue
Finance charge income	$	497,560		$	612,699		$	1,031,533		$	1,224,557
Other income		30,626			40,555			61,702			81,371
Gain on retirement of debt		37,873						38,867
		566,059			653,254			1,132,102			1,305,928
Costs and expenses
Operating expenses		84,344			103,084			168,599			208,049
Depreciation expense – leased vehicles		12,157			8,848			23,071			14,433
Provision for loan losses		288,022			356,513			562,887			601,158
Interest expense		219,063			214,033			414,109			425,294
Restructuring charges, net		2,104			(163	)		2,655			(293	)
		605,690			682,315			1,171,321			1,248,641
(Loss) income before income taxes		(39,631	)		(29,061	)		(39,219	)		57,287
Income tax (benefit) provision		(14,075	)		(9,971	)		(12,001	)		14,558
Net (loss) income		(25,556	)		(19,090	)		(27,218	)		42,729
Other comprehensive loss
Unrealized losses on credit enhancement assets					(34	)					(232	)
Unrealized losses on cash flow hedges		(61,619	)		(45,883	)		(51,694	)		(82,026	)
Foreign currency translation adjustment		(4,635	)		(856	)		(5,920	)		6,544
Income tax benefit		25,169			20,571			21,890			30,831
Other comprehensive loss		(41,085	)		(26,202	)		(35,724	)		(44,883	)
Comprehensive loss	$	(66,641	)	$	(45,292	)	$	(62,942	)	$	(2,154	)
(Loss) earnings per share
Basic	$	(0.21	)	$	(0.17	)	$	(0.23	)	$	0.37
Diluted	$	(0.21	)	$	(0.17	)	$	(0.23	)	$	0.35
Weighted average shares
Basic		120,106,666			114,253,706			118,189,273			114,933,806
Diluted		120,106,666			114,253,706			118,189,273			127,505,633

The accompanying notes are an integral part of these consolidated financial statements.

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AMERICREDIT CORP.

Consolidated Statements of Cash Flows

(Unaudited, in Thousands)

	Six Months Ended December 31,
	2008			2007
Cash flows from operating activities
Net (loss) income	$	(27,218	)	$	42,729
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		58,091			37,460
Accretion and amortization of loan fees		12,024			10,592
Provision for loan losses		562,887			601,158
Deferred income taxes		43,646			(63,211	)
Stock-based compensation expense		7,547			12,552
Amortization of warrants		40,934
Gain on retirement of debt		(39,622	)
Other		6,547			885
Changes in assets and liabilities:
Other assets		(60,305	)		(80,651	)
Accrued taxes and expenses		(8,049	)		36,255
Net cash provided by operating activities		596,482			597,769
Cash flows from investing activities:
Purchases of receivables		(913,555	)		(4,126,287	)
Principal collections and recoveries on receivables		2,237,921			3,119,836
Purchases of property and equipment		(974	)		(6,718	)
Net purchases of leased vehicles					(172,550	)
Investment in money market fund		(115,821	)
Proceeds from money market fund		91,422
Change in restricted cash – securitization notes payable		98,936			20,017
Change in restricted cash – credit facilities		94,216			(8,839	)
Change in other assets		(6,643	)		(390	)
Net cash provided (used) by investing activities		1,485,502			(1,174,931	)
Cash flows from financing activities:
Net change in credit facilities		(967,429	)		(66,096	)
Issuance of securitization notes payable		1,000,000			3,500,000
Payments on securitization notes payable		(2,158,040	)		(3,074,536	)
Retirement of convertible senior notes		(214,473	)
Proceeds from sale of Lehman swaps		10,571
Payment on termination of Lehman swaps		(10,571	)
Debt issuance costs		(9,282	)		(12,414	)
Repurchase of common stock					(127,901	)
Proceeds from issuance of common stock		1,267			13,546
Other net changes		(3,094	)		(345	)
Net cash (used) provided by financing activities		(2,351,051	)		232,254
Net decrease in cash and cash equivalents		(269,067	)		(344,908	)
Effect of Canadian exchange rate changes on cash and cash equivalents		2,264			1,691
Cash and cash equivalents at beginning of period		433,493			910,304
Cash and cash equivalents at end of period	$	166,690		$	567,087

The accompanying notes are an integral part of these consolidated financial statements.

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AMERICREDIT CORP.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries, including certain special purpose financing trusts utilized in securitization transactions (“Trusts”) which are considered variable interest entities. All significant intercompany transactions and accounts have been eliminated in consolidation.

The consolidated financial statements as of December 31, 2008, and for the three and six months ended December 31, 2008 and 2007, are unaudited, and in management’s opinion include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for such interim periods. Certain prior year amounts have been reclassified to conform to the current year presentation. The results for interim periods are not necessarily indicative of results for a full year.

The interim period consolidated financial statements, including the notes thereto, are condensed and do not include all disclosures required by generally accepted accounting principles (“GAAP”) in the United States of America. These interim period financial statements should be read in conjunction with our consolidated financial statements that are included in our Annual Report on Form 10-K for the year ended June 30, 2008.

Recent Developments

We anticipate a number of factors will continue to adversely affect our liquidity in fiscal 2009: (i) higher credit enhancement levels in our securitization transactions caused by a reduction in excess spread due to a higher cost of funds and credit deterioration we are experiencing in our portfolio, (ii) unprecedented disruptions in the capital markets making the execution of securitization transactions more challenging and expensive, (iii) decreasing cash distributions from our securitization Trusts due to weaker credit performance and (iv) the possible restructuring of our credit facilities discussed below.

Throughout calendar year 2008, we have revised our operating plans in an effort to preserve and strengthen our capital and liquidity position and to maintain sufficient capacity on our credit facilities to fund new loan originations until capital market conditions improve for securitization transactions. Under these revised plans, we increased the minimum credit score requirements for new loan originations, decreased our originations infrastructure by closing and consolidating credit center locations,

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selectively decreased the number of dealers from whom we purchase loans and reduced originations and support function headcounts. We have discontinued new originations in our direct lending, leasing and specialty prime platforms, certain partner relationships, and in Canada. Our origination target has been reduced to no more than $100 million per month. We recognized a restructuring charge of $2.7 million during the six months ended December 31, 2008.

We believe that we have sufficient liquidity and warehouse capacity to operate through fiscal 2009. During the quarter ended December 31, 2008, we completed two securitizations, for a total of $1 billion of securitization notes payable, the AmeriCredit Automobile Receivable Trusts (“AMCAR”) 2008-1 and 2008-2. In connection with these securitizations, we utilized the forward purchase commitment agreement with Deutsche Bank AG, Cayman Islands Branch (“Deutsche”) to place the triple-A rated asset-backed securities in these securitization transactions. To place the double-A and single-A rated asset-backed securities we utilized a new funding facility established through agreements with Wachovia Capital Markets, LLC and Wachovia Bank, National Association (together, “Wachovia”), and a purchase agreement with Fairholme Funds, Inc. (“Fairholme”) for the AMCAR 2008-1 and 2008-2 securitizations, respectively. See Note 3 – “Securitizations�� for a discussion of the facility and the purchase agreement. With the completion of AMCAR 2008-1 and 2008-2, we do not anticipate having to access the securitization market again in fiscal 2009. Current conditions in the securitization market include high risk premiums and reduced investor demand, particularly for subordinated securities and securities backed by subprime collateral. Effective December 19, 2008, we executed a letter agreement with Deutsche whereby we mutually agreed to terminate the forward purchase commitment agreement leaving us without a standby source for pricing triple-A rated securities in a securitization transaction. If the asset-backed securities market or the credit markets, in general, do not improve we may be unable in the future to sell asset-backed securities on acceptable terms or at all.

Our credit facilities contain covenants, which if breached, could restrict our ability to borrow under such facilities to fund new loan originations, or in the worst case, could result in events of default under most of our debt agreements. We consider the most restrictive of these covenants to be the (i) the maintenance of an annualized portfolio net credit loss ratio of less than 8.5 percent of average receivables on a rolling six month basis, (ii) maintenance of an average earnings ratio to interest expense for two consecutive fiscal quarters of not less than 1.2 times and (iii) the requirement to repurchase receivables that have been pledged to the master warehouse facility for more than 364 days. Subsequent to December 31, 2008, we breached the 8.5 percent six month net credit loss ratio and a waiver through March 7, 2009 was granted. We are currently negotiating with our credit providers to amend our credit facilities to modify the most restrictive covenants in exchange for a reduction in facility size, lower advance rates and higher pricing among other changes. If we are unable to enter into an amendment, there are several possible outcomes. The credit providers could restructure the facilities to prohibit future borrowings, thereby resulting in our inability to fund new loan originations and the receivables that we currently have pledged to the credit facilities would be used to pay down the outstanding balance of the respective facilities. In the worst case, the

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credit providers could declare an event of default, which would permit the lenders to accelerate the debt, foreclose on the collateral and remove us as servicer. An event of default would also result in a cross default under our senior note and convertible senior note indentures and certain securitizations transactions. Failure to negotiate an amendment would raise substantial doubt about our ability to continue as a going concern.

Recent Accounting Pronouncements and Accounting Changes

In the first quarter of fiscal 2009, we adopted Statement of Financial Accounting Standards No. 157,Fair Value Measurements,(“SFAS No. 157”) for all financial assets and financial liabilities and for all non-financial assets and non-financial liabilities recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure. The adoption of SFAS No. 157 did not have a significant impact on our consolidated financial statements, and the resulting fair values calculated under SFAS No. 157 after adoption were not significantly different than the fair values that would have been calculated under previous guidance. See Note 9 – “Fair Value of Assets and Liabilities” for further details on our fair value measurements.

In October 2008, the Financial Accounting Standards Board (“FASB”) issued Financial Staff Position 157-3,Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active,(“FSP 157-3”). FSP 157-3 clarifies the application of SFAS No. 157 in a market that is not active, and addresses application issues such as the use of internal assumptions when relevant observable data does not exist, the use of observable market information when the market is not active, and the use of market quotes when assessing the relevance of observable and unobservable data. FSP 157-3 is effective for all periods presented in accordance with SFAS No. 157. The adoption of FSP 157-3 did not have a significant impact on our consolidated financial statements or the fair values of our financial assets and liabilities.

In December 2008, the FASB issued Financial Staff Position (“FSP”) Financial Accounting Standard No. 140-4 and FASB Interpretation 46(R)-8,Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities (“FSP FAS 140-4” and “FIN 46(R)-8”). The document increases disclosure requirements for public companies and is effective for reporting periods (interim and annual) that end after December 15, 2008. FSP FAS 140-4 and FIN 46(R)-8 became effective for us on December 31, 2008. The adoption of FSP FAS 140-4 and FIN 46(R)-8 did not have a significant impact on our consolidated financial statements.

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In January 2009, the FASB issued FSP EITF 99-20-1,Amendments to the Impairment of Guidance of EITF Issue No. 99-20, (“FSP EITF 99-20-1”). FSP EITF 99-20-1 amends the impairment guidance in EITF Issue No. 99-20,Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets, (“EITF 99-20”) to achieve more consistent determination of whether an other-than-temporary impairment has occurred and making the guidance consistent between EITF 99-20 and Statement of Financial Accounting Standards No. 115,Accounting for Certain Investments in Debt and Equity Securities, (“SFAS No. 115”). FSP EITF 99-20-1 is effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively. Retrospective application to a prior interim or annual reporting period is not permitted. The adoption of FSP EITF 99-20-1 did not have a significant impact on our consolidated financial statements.

NOTE 2 – FINANCE RECEIVABLES

Finance receivables consist of the following (in thousands):

	December 31, 2008			June 30, 2008
Finance receivables unsecuritized, net of fees	$	2,644,998		$	3,572,214
Finance receivables securitized, net of fees		10,354,134			11,409,198
Less nonaccretable acquisition fees		(28,359	)		(42,802	)
Less allowance for loan losses		(894,617	)		(908,311	)
	$	12,076,156		$	14,030,299

Finance receivables securitized represent receivables transferred to our special purpose finance subsidiaries in securitization transactions accounted for as secured financings. Finance receivables unsecuritized include $2,156.3 million and $3,327.3 million pledged under our credit facilities as of December 31, 2008, and June 30, 2008, respectively.

Finance receivables are collateralized by vehicle titles and we have the right to repossess the vehicle in the event the consumer defaults on the payment terms of the contract.

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The accrual of finance charge income has been suspended on $837.3 million and $728.8 million of delinquent finance receivables as of December 31, 2008, and June 30, 2008, respectively.

Finance contracts are generally purchased by us from auto dealers without recourse, and accordingly, the dealer usually has no liability to us if the consumer defaults on the contract. Depending upon the contract structure and consumer credit attributes, we may pay dealers a participation fee or we may charge dealers a non-refundable acquisition fee when purchasing individual finance contracts. We record the amortization of participation fees and the accretion of acquisition fees on loans purchased subsequent to June 30, 2004, to finance charge income using the effective interest method. We recorded acquisition fees on loans purchased prior to July 1, 2004, as nonaccretable fees available to cover losses inherent in the loan portfolio.

A summary of the nonaccretable acquisition fees is as follows (in thousands):

	Three Months Ended December 31,						Six Months Ended December 31,
	2008			2007			2008			2007
Balance at beginning of period	$	33,469		$	88,750		$	42,802		$	120,425
Purchase of receivables					109						109
Net charge-offs		(5,110	)		(12,993	)		(14,443	)		(44,668	)
Balance at end of period	$	28,359		$	75,866		$	28,359		$	75,866

A summary of the allowance for loan losses is as follows (in thousands):

	Three Months Ended December 31,						Six Months Ended December 31,
	2008			2007			2008			2007
Balance at beginning of period	$	926,650		$	755,992		$	908,311		$	699,663
Provision for loan losses		288,022			356,513			562,887			601,158
Net charge-offs		(320,055	)		(273,153	)		(576,581	)		(461,469	)
Balance at end of period	$	894,617		$	839,352		$	894,617		$	839,352

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NOTE 3 – SECURITIZATIONS

A summary of our securitization activity and cash flows from special purpose entities used for securitizations is as follows (in thousands):

	Three Months Ended December 31,				Six Months Ended December 31,
	2008		2007		2008		2007
Receivables securitized	$	1,289,082	$	1,025,651	$	1,289,082	$	3,713,833
Net proceeds from securitization		1,000,000		1,000,000		1,000,000		3,500,000
Servicing fees:
Sold		7		52		16		143
Secured financing(a)		61,737		82,236		124,785		163,019
Distributions:
Sold				7,293				7,466
Secured financing		113,436		185,212		284,312		428,839

(a) Servicing fees earned on securitizations accounted for as secured financings are included in finance charge income on the consolidated statements of operations and comprehensive operations.

As of December 31, 2008, and June 30, 2008, we were servicing $10,356.9 million and $11,413.0 million, respectively, of finance receivables that have been transferred or sold to securitization Trusts.

In April 2008, we entered into a one year, $2 billion forward purchase commitment agreement with Deutsche. Under this agreement and subject to certain terms, Deutsche committed to purchase triple-A rated asset-backed securities issued by our sub-prime AMCAR securitization platform in registered public offerings. We utilized $752.8 million of the commitment in conjunction with the execution of our AMCAR 2008-1 and 2008-2 transactions. We paid $20.0 million of upfront commitment fees and issued a warrant to purchase up to 7.5 million shares of our common stock in connection with the agreement. Effective December 19, 2008, we executed a letter agreement with Deutsche whereby the parties mutually agreed to terminate the forward purchase commitment agreement. The remaining unamortized warrant cost of $14.3 million and unamortized commitment fees of $5.8 million at the termination date were amortized to interest expense during the three months ended December 31, 2008. See Note 11—“Warrants” for a discussion of warrants issued by us in connection with this transaction.

In September 2008, we entered into agreements with Wachovia, to establish two funding facilities under which Wachovia would provide total funding of $117.7 million, during the one year term of the facilities, secured by asset-backed securities as collateral. In conjunction with our AMCAR 2008-1 transaction, we obtained funding under these facilities of $48.9 million by pledging double-A rated asset-backed securities (the “Class B Notes”) as collateral and $68.8 million by pledging single-A rated asset-backed securities (the “Class C Notes”) as collateral. Under these funding facilities, we retained the Class B Notes and the Class C Notes issued in the transaction and then sold the retained notes to a special purpose subsidiary, which in turn pledged such retained notes as collateral to secure the funding under the two facilities. Currently, the facilities are fully utilized. At the end of the one year term, the facilities, if not renewed, will amortize in accordance with the securitization transaction until paid off. We paid $1.9 million of upfront

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commitment fees in connection with these facilities, which are being amortized to interest expense over the one year term of the facilities. Unamortized costs of $1.6 million, as of December 31, 2008, are included in other assets on the consolidated balance sheets. See Note 11 - “Warrants” for a discussion of warrants issued by us in connection with this transaction.

On November 24, 2008, we entered into a purchase agreement with Fairholme under which Fairholme purchased $123.2 million of asset-backed securities, consisting of $50.6 million of Class B Notes and $72.6 million of Class C Notes in the AMCAR 2008-2 transaction. We also issued 15,122,670 shares of our common stock, to Fairholme in a non-cash transaction, in exchange for $108.4 million of our Senior Notes due 2015, held by Fairholme, at a price of $840 per $1,000 principal amount of the notes. We recognized a gain of $15.5 million on retirement of debt in the exchange. Fairholme and its affiliates held approximately 19.8% of our outstanding common stock prior to the issuance of the shares described above.

NOTE 4 – INVESTMENT IN MONEY MARKET FUND

We had an investment of $115.8 million in the Reserve Primary Money Market Fund (“the Reserve Fund”), a money market fund which has suspended redemptions and is in the process of liquidating its portfolio of investments. In mid-September 2008, the net asset value of the Reserve Fund decreased below $1 per share as a result of the trustees of the Reserve Fund valuing their investments in Lehman Brothers Holdings Inc. (“LBHI”) debt securities held by the Reserve Fund at zero. Because redemptions of the fund have been suspended and are not readily convertible to cash, we reclassified this investment on our balance sheet from cash equivalents to other assets. We recognized an other-than-temporary impairment of $3.5 million, at September 30, 2008, by valuing the asset at the estimated net asset value of $0.97 per share as published by the Reserve Fund. As each security in the portfolio matures or additional liquidity becomes available within the fund, the Reserve Fund has indicated that interim distributions will be made to the investors in the fund on a pro rata basis. Changes in market conditions could result in further adjustments to the fair value of this investment. As of December 31, 2008, we have received $91.4 million as a partial distribution from the Reserve Fund.

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NOTE 5 – CREDIT FACILITIES

Amounts outstanding under our credit facilities are as follows (in thousands):

	December 31, 2008		June 30, 2008
Master warehouse facility	$	698,615	$	1,470,335
Medium term note facility		750,000		750,000
Call facility				156,945
Prime/Near prime facility		312,507		424,669
Canadian facility		83,150		126,212
Leasing warehouse facility		98,090
	$	1,942,362	$	2,928,161

Further detail regarding terms and availability of the credit facilities as of December 31, 2008, follows (in thousands):

Maturity(a)	Facility Amount		Advances Outstanding		Assets Pledged (e)		Restricted Cash Pledged (f)
Master warehouse facility:
October 2009(b)	$	2,245,000	$	698,615	$	796,419	$	39,196
Medium term note facility:
October 2009(c)		750,000		750,000		854,994		42,562
Prime/Near prime facility:
September 2009(d)		450,000		312,507		396,851		4,308
Canadian facility:
May 2009				83,150		108,011		2,027
Leasing warehouse facility:
June 2009		100,000		98,090		162,676		1,405
	$	3,545,000	$	1,942,362	$	2,318,951	$	89,498

(a) Because the facilities are non-recourse to us, the outstanding debt balance can either be repaid in full or over time based on the amortization of receivables pledged.

(b) See discussion below regarding the bankruptcy of Lehman Brothers Holdings Inc. and its commitment to the master warehouse facility.

(c) This facility is a revolving facility through the date stated above. During the revolving period, we have the ability to substitute receivables for cash, or vice versa.

(d) Subsequent to December 31, 2008, this facility was reduced in size to $350.0 million.

(e) The warehouse facilities are collateralized by finance receivables, while the leasing facility is collateralized by leased assets.

(f) These amounts do not include cash collected on finance receivables pledged of $74.7 million which is also included in restricted cash – credit facilities on the consolidated balance sheets.

Generally, our credit facilities are administered by agents on behalf of institutionally managed commercial paper or medium term note conduits. Under these funding agreements, we transfer finance receivables to our special purpose finance subsidiaries. These subsidiaries, in turn, issue notes to the agents, collateralized by such finance receivables and cash. The agents provide funding under the notes to the subsidiaries pursuant to an advance formula, and the subsidiaries forward the funds to us in consideration for the transfer of finance receivables. While these subsidiaries are included in our consolidated financial statements, these subsidiaries are separate legal entities and the finance receivables and other assets held by these subsidiaries are legally owned by these subsidiaries and are not available to our creditors or our other subsidiaries. Advances under the funding agreements bear interest at commercial paper, LIBOR or prime rates plus specified fees depending upon the source of funds provided by the agents.

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We are required to hold certain funds in restricted cash accounts to provide additional collateral for borrowings under the facilities. Additionally, certain funding agreements contain various covenants requiring minimum financial ratios, asset quality and portfolio performance ratios (portfolio net loss and delinquency ratios, and pool level cumulative net loss ratios) as well as limits on deferment levels. We consider the most restrictive of these covenants to be (i) maintenance of an annualized portfolio net credit loss ratio of less than 8.5 percent of average receivables on a rolling six month basis, (ii) maintenance of an average earnings ratio to interest expense for two consecutive fiscal quarters of not less than 1.2 times and (iii) the requirement to repurchase receivables that have been pledged to the master warehouse facility for more than 364 days. Failure to meet any of these covenants could result in an event of default under these agreements. If an event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interests against collateral pledged under these agreements or restrict our ability to obtain additional borrowings under these agreements. As of December 31, 2008, we were in compliance with all covenants in our credit facilities. Subsequent to December 31, 2008, we breached the 8.5 percent six month net credit loss ratio and a waiver through March 7, 2009 was granted. See Note 1 – “Summary of Significant Accounting Policies – Recent Developments” for further discussion.

On September 15, 2008, LBHI filed a petition in the United States Bankruptcy Court for the Southern District of New York seeking relief under Chapter 11 of the United States Bankruptcy Code. Subsequently, 16 additional affiliates of LBHI (together with LBHI, “Lehman”) filed petitions in the United States Bankruptcy Court for the Southern District of New York seeking relief under Chapter 11 of the United States Bankruptcy Code. Lehman is one of the eleven financial institutions in the syndicate that comprise the master warehouse facility. Lehman’s commitment under the facility was $255 million, which amount will not be available for future borrowing. As of December 31, 2008, we had $24 million outstanding under the Lehman commitment which will be repaid as the outstanding borrowings on the facility are paid off.

The call facility matured in August 2008 and was not renewed. The facility was paid off in October 2008.

The prime/near prime facility was renewed in September 2008 and reduced in size from $1,120.0 million to $450.0 million to align with the suspension of our prime/near prime origination platforms. Subsequent to December 31, 2008, we further reduced the size of the facility to $350.0 million from $450.0 million.

Debt issuance costs are being amortized to interest expense over the expected term of the credit facilities. Unamortized costs of $3.9 million and $6.0 million as of December 31, 2008, and June 30, 2008, respectively, are included in other assets on the consolidated balance sheets.

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NOTE 6 – SECURITIZATION NOTES PAYABLE

Securitization notes payable represents debt issued by us in securitization transactions accounted for as secured financings. Debt issuance costs are being amortized over the expected term of the securitizations; accordingly, unamortized costs of $19.0 million and $19.3 million as of December 31, 2008 and June 30, 2008, respectively, are included in other assets on the consolidated balance sheets.

Securitization notes payable as of December 31, 2008, consists of the following (dollars in thousands):

Transaction	Maturity Date (b)	Original Note Amount		Original Weighted Average Interest Rate		Receivables Pledged		Note Balance
2004-D-F	July 2011	$	750,000	3.1	%	$	82,824	$	76,072
2005-A-X	October 2011		900,000	3.7	%		119,703		108,087
2005-1	May 2011		750,000	4.5	%		113,959		83,055
2005-B-M	May 2012		1,350,000	4.1	%		251,548		221,956
2005-C-F	June 2012		1,100,000	4.5	%		242,240		217,383
2005-D-A	November 2012		1,400,000	4.9	%		359,401		325,096
2006-1	May 2013		945,000	5.3	%		273,987		212,539
2006-R-M	January 2014		1,200,000	5.4	%		634,996		572,951
2006-A-F	September 2013		1,350,000	5.6	%		519,592		470,363
2006-B-G	September 2013		1,200,000	5.2	%		527,716		481,869
2007-A-X	October 2013		1,200,000	5.2	%		599,959		550,886
2007-B-F	December 2013		1,500,000	5.2	%		861,794		789,649
2007-1	March 2016		1,000,000	5.4	%		532,538		527,590
2007-C-M	April 2014		1,500,000	5.5	%		972,019		890,224
2007-D-F	June 2014		1,000,000	5.5	%		707,516		646,288
2007-2-M	March 2016		1,000,000	5.3	%		681,581		644,600
2008-A-F	October 2014		750,000	6.0	%		771,747		616,700
2008-1	January 2015		500,000	8.7	%		616,355		476,355
2008-2	April 2015		500,000	10.5	%		640,832		485,794
BV2005-LJ-1 (a)	May 2012		232,100	5.1	%		35,695		36,967
BV2005-LJ-2 (a)	February 2014		185,596	4.6	%		34,680		36,021
BV2005-3 (a)	June 2014		220,107	5.1	%		54,410		56,298
LB2004-C (a)	July 2011		350,000	3.5	%		38,212		37,191
LB2005-A (a)	April 2012		350,000	4.1	%		54,965		57,104
LB2005-B (a)	June 2012		350,000	4.4	%		74,072		72,978
LB2006-A (a)	May 2013		450,000	5.4	%		133,967		126,273
LB2006-B (a)	September 2013		500,000	5.2	%		183,475		189,163
LB2007-A	January 2014		486,000	5.0	%		234,351		244,035
		$	23,018,803			$	10,354,134	$	9,253,487

(a) Transactions relate to securitization Trusts acquired by us.

(b) Maturity date represents final legal maturity of securitization notes payable. Securitization notes payable are expected to be paid based on amortization of the finance receivables pledged to the Trusts.

At the time of securitization of finance receivables, we are required to pledge assets equal to a specified percentage of the securitization pool to support the securitization transaction. Typically, the assets pledged consist of cash deposited to a restricted account and additional receivables delivered to the Trust, which create overcollateralization. The securitization

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transactions require the percentage of assets pledged to support the transaction to increase until a specified level is attained. Excess cash flows generated by the Trusts are added to the restricted cash account or used to pay down outstanding debt in the Trusts, creating overcollateralization until the targeted percentage level of assets has been reached. Once the targeted percentage level of assets is reached and maintained, excess cash flows generated by the Trusts are released to us as distributions from Trusts. Additionally, as the balance of the securitization pool declines, the amount of pledged assets needed to maintain the required percentage level is reduced. Assets in excess of the required percentage are also released to us as distributions from Trusts.

With respect to our securitization transactions covered by a financial guaranty insurance policy, agreements with the insurers provide that if portfolio performance ratios (delinquency, cumulative default or cumulative net loss) in a Trust’s pool of receivables exceed certain targets, the specified credit enhancement levels would be increased.

The securitization transactions insured by some of our financial guaranty insurance providers are cross-collateralized to a limited extent. In the event of a shortfall in the original target credit enhancement requirement for any of these securitization Trusts after a certain period of time, excess cash flows from other transactions insured by the same insurance provider would be used to satisfy the shortfall amount.

At December 31, 2008, we exceeded the cumulative default ratio and cumulative net loss ratio targets in the AmeriCredit Prime Auto Receivable Trust (“APART”) 2007-2-M securitization. Excess cash flows from this Trust are being use to build higher credit enhancement instead of being distributed to us.

During fiscal 2008 and at December 31, 2008, three Long Beach Acceptance Corporation (“LBAC”) securitizations (LB2006-A, LB2006-B and LB2007-A) had delinquency ratios in excess of the targeted levels. Two of these LBAC securitizations (LB2006-B and LB2007-A) also had cumulative net loss and cumulative default ratios in excess of the targeted levels. As part of an arrangement with the insurer of these transactions, the excess cash flows from our other securitizations insured by this insurer were used to fund higher credit enhancement requirements in the LBAC Trusts which exceeded the portfolio performance ratios. The higher required credit enhancement levels in these three LBAC Trusts were reached as of June 30, 2008. Furthermore, three other LBAC securitizations (LB2004-C, LB2005-A and LB2005-B) had delinquency ratios in excess of their targeted levels as of December 31, 2008. Excess cash flows from these trusts are being used to build higher credit enhancement in each respective trust instead of being distributed to us.

Agreements with our financial guaranty insurance providers contain additional specified targeted portfolio performance ratios that are higher than those previously described. If, at any measurement date, the targeted portfolio performance ratios with respect to any insured Trust were to exceed these higher levels, provisions of the agreements permit our financial guaranty insurance providers to terminate our servicing rights to the receivables sold to that Trust.

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NOTE 7 – CONVERTIBLE SENIOR NOTES

In November 2003, we issued $200.0 million of convertible senior notes. During the three months ended September 30, 2008, we repurchased $114.7 million of these convertible notes at a small discount. During the three months ended December 31, 2008, we repurchased the remaining balance of $85.3 million of these convertible notes at a price equal to 100.25% of the principal amount of the notes redeemed.

During the three months ended December 31, 2008, we repurchased on the open market $38.9 million of convertible senior notes due in 2013 at an average price of 37.75% of the principal amount of the notes repurchased. In connection with this transaction, we recorded a gain on retirement of debt of $23.4 million.

NOTE 8 – DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

As of December 31, 2008, and June 30, 2008, we had interest rate swap agreements with underlying notional amounts of $2,894.3 million and $3,181.5 million, respectively. The fair value of our interest rate swap agreements of $162.9 million and $72.7 million as of December 31, 2008 and June 30, 2008, respectively, are included in other liabilities on the consolidated balance sheets. Interest rate swap agreements designated as hedges had unrealized losses of $121.9 million and $70.2 million included in accumulated other comprehensive income as of December 31, 2008, and June 30, 2008, respectively. The ineffectiveness related to the interest rate swap agreements designated as hedges was $1.7 million for the three and six month periods ended December 31, 2008 and was immaterial for the three and six months ended December 31, 2007. We estimate approximately $71.0 million of unrealized losses included in other comprehensive income will be reclassified into earnings within the next twelve months. As of December 31, 2008, we also have interest rate swap agreements that are not designated as hedges with fair values of $25.4 million included in the other assets on the consolidated balance sheets. The change in fair value on these interest rate swap agreements that are not designated as hedges resulted in a $19.3 million and $22.3 million gain for the three and six months ended December 31, 2008, respectively, and are included in interest expense on the consolidated statements of operations.

As of December 31, 2008, and June 30, 2008, our special purpose finance subsidiaries had purchased interest rate cap agreements with underlying notional amounts of $3,321.6 million and $3,173.3 million, respectively. As of December 31, 2008, and June 30, 2008, we had sold interest rate cap agreements with underlying notional amounts of $2,874.8 million and $3,034.3 million, respectively. The fair value of interest rate cap agreements purchased by our special purpose finance subsidiaries of $7.1 million and $36.5 million as of December 31, 2008, and June 30, 2008, respectively, are included in other assets on the consolidated balance sheets. The fair value of interest rate cap agreements sold by us of $7.1 million and $36.4 million as of December 31, 2008, and June 30, 2008, respectively, are included in other liabilities on the consolidated balance sheets.

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Under the terms of our derivative financial instruments, we are required to pledge certain funds to be held in restricted cash accounts as collateral for the outstanding derivative transactions. As of December 31, 2008, and June 30, 2008, these restricted cash accounts totaled $62.1 million and $52.8 million, respectively, and are included in other assets on the consolidated balance sheets.

As described in Note 5 - “Credit Facilities”, Lehman filed for bankruptcy protection on September 15, 2008. Lehman was the hedge counterparty on interest rate swaps with notional amounts of $1,089.7 million. In November 2008, we replaced Lehman as the counterparty on these interest rate swaps. Upon replacement we designated these new swaps as hedges. From the date of Lehman’s bankruptcy until the date of designation, changes in fair market value resulted in losses of $29.8 million and $34.3 million for the three and six months ended December 31, 2008, respectively, and are recorded in interest expense in the consolidated statements of operations.

NOTE 9 – FAIR VALUES OF ASSETS AND LIABILITIES

Effective July 1, 2008, we adopted Statement of Financial Accounting Standards No. 157,Fair Value Measurements (“SFAS 157”), which provides a framework for measuring fair value under GAAP. SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. SFAS 157 also establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels.

There are three general valuation techniques that may be used to measure fair value, as described below:

A) Market approach - Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Prices may be indicated by pricing guides, sale transactions, market trades, or other sources;

B) Cost approach - Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost); and

C) Income approach - Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about the future amounts (includes present value techniques and option-pricing models). Net present value is an income approach where a stream of expected cash flows is discounted at an appropriate market interest rate.

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Assets and liabilities itemized below were measured at fair value:

	December 31, 2008 (in thousands)
	Fair Value Measurements Using
	Level 1 Quoted Prices In Active Markets Identical Assets	Level 2 Significant Other Observable Inputs		Level 3 Significant Unobservable Inputs		Assets / Liabilities At Fair Value		Valuation Technique
Assets
Interest Rate Caps		$	7,069			$	7,069	(A	)
Interest Rate Swaps				$	25,442		25,442	(C	)
Investment in Money
Market Fund					20,924		20,924	(C	)
Total		$	7,069	$	46,366	$	53,435
Liabilities
Interest Rate Swaps				$	162,935	$	162,935	(C	)
Interest Rate Caps		$	7,062				7,062	(A	)
Total		$	7,062	$	162,935	$	169,997

Financial instruments are considered Level 1 when quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Financial instruments are considered Level 2 when inputs other than quoted prices are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Financial instruments are considered Level 3 when their values are determined using prices models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 financial instruments also include those for which the determination of fair value requires significant management judgment or estimation. A brief description of the valuation techniques used for our Level 3 assets and liabilities is provided below and in Note 4 - “Investment in Money Market Fund”.

The table below presents a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

	Interest Rate Swap Agreements			Investment in Money Market Fund			Interest Rate Swap Agreements
Balance at July 1, 2008	$	3,572					$	(76,269	)
Transfers into Level 3				$	115,821
Total realized and unrealized gains
Included in earnings		3,001			(3,475	)		(4,344	)
Included in other comprehensive income								(10,225	)
Purchases, issuances and settlements		(254	)					21,030
Balance at September 30, 2008	$	6,319		$	112,346		$	(69,808	)
Total realized and unrealized gains
Included in earnings		19,270						(31,488	)
Included in other comprehensive income								(75,272	)
Purchases, issuances and settlements		(147	)		(91,422	)		13,633
Balance at December 31, 2008	$	25,442		$	20,924		$	(162,935	)

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Derivatives

The fair values of our interest rate caps are valued based on quoted market prices received from bank counterparties and are classified as Level 2.

Our interest rate swaps are not exchange traded but instead traded in over-the-counter markets where quoted market prices are not readily available. The fair value of derivatives is derived using models that use primarily market observable inputs, such as interest rate yield curves and credit curves. Any derivative fair value measurements using significant assumptions that are unobservable are classified as Level 3, which include interest rate swaps whose remaining terms extend beyond market observable interest rate yield curves. The impacts of the derivative liabilities for our and the counterparties’ non-performance risk to the derivative trades is considered when measuring the fair value of derivative liabilities.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Guarantees of Indebtedness

The payments of principal and interest on our senior notes and convertible senior notes are guaranteed by certain of our subsidiaries. The carrying value of the senior notes and convertible senior notes was $602.8 million and $950.0 million as of December 31, 2008, and June 30, 2008, respectively. See guarantor consolidating financial statements in Note 16.

Limited Corporate Guarantees of Indebtedness

We guaranteed the timely payment of interest and ultimate payment of principal on the Class B and Class C asset-backed securities issued in our AMCAR 2008-2 securitization transaction, up to a maximum of $50.0 million in the aggregate.

Legal Proceedings

As a consumer finance company, we are subject to various consumer claims and litigation seeking damages and statutory penalties, based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, violations of bankruptcy stay provisions, certificate of title disputes, fraud, breach of contract and discriminatory treatment of credit applicants. Some litigation against us could take the form of class action complaints by consumers and/or shareholders. As the assignee of finance contracts originated by dealers, we may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. The relief requested by the plaintiffs varies but can include requests for compensatory, statutory and punitive damages. We believe that we have taken prudent steps to address and mitigate the litigation risks associated with our business activities. In the opinion of management, the ultimate aggregate liability, if any, arising out of any such pending or threatened litigation will not be material to our consolidated financial position, our results of operations, or our statement of cash flows.

NOTE 11 – WARRANTS

In connection with the forward purchase commitment agreement with Deutsche (See Note 3 – “Securitizations”), we issued a warrant to an affiliate of Deutsche under which it may purchase up to 7.5 million shares of our common stock. The warrant may be exercised on or before April 15, 2015 at an exercise price of $12.01 per share. Due to the termination of the agreement with Deutsche, the total value of the warrant, $48.9 million, has been fully amortized to interest expense and additional paid-in capital as of December 31, 2008.

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In connection with the closing of the Wachovia funding facilities (See Note 3 - “Securitizations”), we issued a warrant to Wachovia under which they may purchase up to 1.0 million shares of common stock. The warrant may be exercised on or before September 24, 2015 at an exercise price of $13.55 per share. The total value of the warrant, $8.3 million, is being amortized to interest expense and additional paid in capital over the term of the Wachovia funding facilities. As of December 31, 2008, there was $6.1 million of unamortized cost related to the warrant.

NOTE 12 – INCOME TAXES

We had unrecognized tax benefits of $64.7 million and $57.7 million at December 31, 2008, and June 30, 2008, respectively. The increase is due primarily to an $8.5 million change attributable to current year activity in temporary items. The amount of unrecognized tax benefits, if recognized, that would affect the effective tax rate is $20.7 million and $21.7 million at December 31, 2008, and June 30, 2008, respectively, which includes the federal benefit of state taxes.

We recognize accrued interest and penalties associated with uncertain tax positions as part of the income tax provision. As of July 1, 2008, accrued interest and penalties associated with uncertain tax positions was $9.5 million and $7.4 million, respectively. During the six months ended December 31, 2008, we accrued an additional $2.8 million in potential interest and $0.7 million in potential penalties associated with uncertain tax positions.

At December 31, 2008, we believe that it is reasonably possible that the balance of the gross unrecognized tax benefits could decrease by $0.2 million to $10.5 million in the next twelve months due to ongoing activities with various taxing jurisdictions that we expect may give rise to settlements or the expiration of statutes of limitations. We continually evaluate expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.

We file income tax returns in the U.S. federal jurisdiction, and various state, local, and foreign jurisdictions. The Internal Revenue Service (“IRS”) completed its examination of our fiscal years 2004 and 2005 consolidated federal income tax returns in the second quarter of fiscal year 2008. The returns for those years are subject to an appeals proceeding, which we anticipate will be concluded by the end of fiscal year 2009. We expect the outcome of the appeals proceeding will not result in a material change to our financial position or results of operations. Our U.S. federal income tax returns prior to fiscal year 2004 are closed. Foreign and U.S. state jurisdictions have statutes of limitations that generally range from three to five years. Our tax returns are currently under examination in various U.S. state jurisdictions.

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Our effective income tax rate was 35.5% and 34.3% for the three months ended December 31, 2008 and 2007, respectively. Our effective income tax rate was 30.6% and 25.4% for the six months ended December 31, 2008 and 2007, respectively. The lower rate for the six months ended December 31, 2007, is primarily a result of revised estimates of our deferred tax assets and liabilities relating to state income tax rates and the exercise of warrants issued in September 2002.

NOTE 13 – RESTRUCTURING CHARGES

As of December 31, 2008, total costs incurred to date related to our restructuring activities in prior years include $41.9 million in personnel-related costs and $72.8 million of contract termination and other associated costs.

A summary of the liabilities, which are included in accrued taxes and expenses on the consolidated balance sheets, for restructuring charges for the six months ended December 31, 2008, is as follows (in thousands):

	Personnel- Related Costs			Contract Termination Costs			Other Associated Costs			Total
Balance at July 1, 2008	$	3,207		$	3,741		$	1,442		$	8,390
Cash settlements		(4,811	)		(1,821	)		(34	)		(6,666	)
Non-cash settlements								(206	)		(206	)
Additions and adjustments		1,746			754			155			2,655
Balance at December 31, 2008	$	142		$	2,674		$	1,357		$	4,173

NOTE 14 – EARNINGS PER SHARE

A reconciliation of weighted average shares used to compute basic and diluted earnings per share is as follows (dollars in thousands, except per share data):

	Three Months Ended December 31,						Six Months Ended December 31,
	2008			2007			2008			2007
Net (loss) income	$	(25,556	)	$	(19,090	)	$	(27,218	)	$	42,729
Interest expense related to 2003 convertible senior notes, net of related tax effects											1,703
Adjusted net (loss) income	$	(25,556	)	$	(19,090	)	$	(27,218	)	$	44,432
Basic weighted average shares		120,106,666			114,253,706			118,189,273			114,933,806
Incremental shares resulting from assumed conversions:
Stock-based compensation and warrants											1,866,622
2003 convertible senior notes											10,705,205
											12,571,827
Diluted weighted average shares		120,106,666			114,253,706			118,189,273			127,505,633
(Loss) earnings per share:
Basic	$	(0.21	)	$	(0.17	)	$	(0.23	)	$	0.37
Diluted	$	(0.21	)	$	(0.17	)	$	(0.23	)	$	0.35

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Basic (loss) earnings per share have been computed by dividing net (loss) income by weighted average shares outstanding.

Diluted loss per share has been computed by dividing net loss by the weighted average shares assuming no incremental shares because all potentially dilutive common stock equivalents are anti-dilutive. Diluted earnings per share has been computed by dividing net income, adjusted for interest expense (net of related tax effects) related to our convertible senior notes issued in November 2003, by the weighted average shares and assumed incremental shares. The treasury stock method was used to compute the assumed incremental shares related to our outstanding stock-based compensation and warrants and will be used to compute the assumed incremental shares related to our convertible senior notes issued in September 2006 once the average market price of the common shares exceeds the conversion price. The average common stock market prices for the periods were used to determine the number of incremental shares. Options to purchase approximately 1.8 million shares of common stock for the six months ended December 31, 2007, were not included in the computation of diluted earnings per share because the option exercise price was greater than the average market price of the common shares. Warrants to purchase approximately 30.0 million shares of common stock for the six months ended December 31, 2007, were not included in the computation of diluted earnings per share because the exercise price was greater than the average market price of the common shares. The if-converted method was used to calculate the impact of our convertible senior notes issued in November 2003 on assumed incremental shares for the six months ended December 31, 2007.

NOTE 15 – SUPPLEMENTAL CASH FLOW INFORMATION

Cash payments for interest costs and income taxes consist of the following (in thousands):

	Six Months Ended December 31,
	2008		2007
Interest costs (none capitalized)	$	348,504	$	414,198
Income taxes		534		79,015

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NOTE 16 – GUARANTOR CONSOLIDATING FINANCIAL STATEMENTS

The payment of principal and interest on our senior notes and convertible senior notes are guaranteed by certain of our subsidiaries (the “Subsidiary Guarantors”). The separate financial statements of the Subsidiary Guarantors are not included herein because the Subsidiary Guarantors are our wholly-owned consolidated subsidiaries and are jointly, severally, fully and unconditionally liable for the obligations represented by the convertible senior notes. We believe that the consolidating financial information for AmeriCredit Corp., the combined Subsidiary Guarantors and the combined Non-Guarantor Subsidiaries provide information that is more meaningful in understanding the financial position of the Subsidiary Guarantors than separate financial statements of the Subsidiary Guarantors.

The consolidating financial statements present consolidating financial data for (i) AmeriCredit Corp. (on a parent only basis), (ii) the combined Subsidiary Guarantors, (iii) the combined Non-Guarantor Subsidiaries, (iv) an elimination column for adjustments to arrive at the information for the parent company and our subsidiaries on a consolidated basis and (v) the parent company and our subsidiaries on a consolidated basis.

Investments in subsidiaries are accounted for by the parent company using the equity method for purposes of this presentation. Results of operations of subsidiaries are therefore reflected in the parent company’s investment accounts and earnings. The principal elimination entries set forth below eliminate investments in subsidiaries and intercompany balances and transactions.

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AmeriCredit Corp.

Consolidating Balance Sheet

December 31, 2008

(Unaudited, in Thousands)

	AmeriCredit Corp.			Guarantors			Non- Guarantors			Eliminations			Consolidated
ASSETS
Cash and cash equivalents				$	47,806		$	118,884					$	166,690
Finance receivables, net					394,958			11,681,198						12,076,156
Restricted cash - securitization notes payable								883,734						883,734
Restricted cash - credit facilities								164,154						164,154
Property and equipment, net	$	5,693			44,196									49,889
Leased vehicles, net					12,253			172,420						184,673
Deferred income taxes		(28,918	)		324,766			642						296,490
Investment in money market fund					20,924									20,924
Other assets		50,586			188,441			71,376						310,403
Due from affiliates		730,957						3,464,686		$	(4,195,643	)
Investment in affiliates		1,916,132			5,382,544			579,786			(7,878,462	)
Total assets	$	2,674,450		$	6,415,888		$	17,136,880		$	(12,074,105	)	$	14,153,113
Liabilities:
Credit facilities							$	1,942,362					$	1,942,362
Securitization notes payable								9,253,487						9,253,487
Senior notes	$	91,620												91,620
Convertible senior notes		511,150												511,150
Funding payable				$	4,559			(20	)					4,539
Accrued taxes and expenses		92,767			37,226			67,571						197,564
Other liabilities		835			173,478									174,313
Due to affiliates					4,195,643					$	(4,195,643	)
Total liabilities		696,372			4,410,906			11,263,400			(4,195,643	)		12,175,035
Shareholders’ equity:
Common stock		1,341			50,775			30,627			(81,402	)		1,341
Additional paid-in capital		186,005			75,878			3,092,853			(3,168,731	)		186,005
Accumulated other comprehensive (loss) income		(42,128	)		(65,207	)		27,216			37,991			(42,128	)
Retained earnings		1,885,466			1,943,536			2,722,784			(4,666,320	)		1,885,466
		2,030,684			2,004,982			5,873,480			(7,878,462	)		2,030,684
Treasury stock		(52,606	)											(52,606	)
Total shareholders’ equity		1,978,078			2,004,982			5,873,480			(7,878,462	)		1,978,078
Total liabilities and shareholders’ equity	$	2,674,450		$	6,415,888		$	17,136,880		$	(12,074,105	)	$	14,153,113

25

AmeriCredit Corp.

Consolidating Balance Sheet

June 30, 2008

(in thousands)

	AmeriCredit Corp.			Guarantors			Non- Guarantors			Eliminations			Consolidated
ASSETS
Cash and cash equivalents				$	361,352		$	72,141					$	433,493
Finance receivables, net					173,077			13,857,222						14,030,299
Restricted cash - securitization notes payable								982,670						982,670
Restricted cash - credit facilities								259,699						259,699
Property and equipment, net	$	5,860			49,611									55,471
Leased vehicles, net					106,689			104,168						210,857
Deferred income taxes		19,244			311,761			(13,686	)					317,319
Other assets		1,372			193,972			62,058						257,402
Due from affiliates		941,157						3,911,745		$	(4,852,902	)
Investment in affiliates		1,967,775			5,908,573			544,169			(8,420,517	)
Total assets	$	2,935,408		$	7,105,035		$	19,780,186		$	(13,273,419	)	$	16,547,210
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Credit facilities							$	2,928,161					$	2,928,161
Securitization notes payable								10,420,327						10,420,327
Senior notes	$	200,000												200,000
Convertible senior notes		750,000												750,000
Funding payable				$	21,561			(42	)					21,519
Accrued taxes and expenses		87,335			55,661			73,391						216,387
Other liabilities		1,203			112,743									113,946
Due to affiliates					4,852,902					$	(4,852,902	)
Total liabilities		1,038,538			5,042,867			13,421,837			(4,852,902	)		14,650,340
Shareholders’ equity:
Common stock		1,188			50,775			30,627			(81,402	)		1,188
Additional paid-in capital		42,336			75,878			3,659,102			(3,734,980	)		42,336
Accumulated other comprehensive (loss) income		(6,404	)		(21,801	)		40,602			(18,801	)		(6,404	)
Retained earnings		1,912,684			1,957,316			2,628,018			(4,585,334	)		1,912,684
		1,949,804			2,062,168			6,358,349			(8,420,517	)		1,949,804
Treasury stock		(52,934	)											(52,934	)
Total shareholders’ equity		1,896,870			2,062,168			6,358,349			(8,420,517	)		1,896,870
Total liabilities and shareholders’ equity	$	2,935,408		$	7,105,035		$	19,780,186		$	(13,273,419	)	$	16,547,210

26

AmeriCredit Corp.

Consolidating Statement of Operations

Three Months Ended December 31, 2008

(Unaudited, in Thousands)

	AmeriCredit Corp.			Guarantors			Non- Guarantors		Eliminations			Consolidated
Revenue
Finance charge income				$	17,282		$	480,278				$	497,560
Other income	$	12,576			376,065			766,376	$	(1,124,391	)		30,626
Gain on retirement of debt		37,873											37,873
Equity in (loss) income of affiliates		(24,614	)		31,785					(7,171	)
		25,835			425,132			1,246,654		(1,131,562	)		566,059
Costs and expenses
Operating expenses		13,420			5,707			65,217					84,344
Depreciation expense - leased vehicles					(758	)		12,915					12,157
Provision for loan losses					47,308			240,714					288,022
Interest expense		37,715			423,139			882,600		(1,124,391	)		219,063
Restructuring charges, net					2,104								2,104
		51,135			477,500			1,201,446		(1,124,391	)		605,690
(Loss) income before income taxes		(25,300	)		(52,368	)		45,208		(7,171	)		(39,631	)
Income tax provision (benefit)		256			(27,754	)		13,423					(14,075	)
Net (loss) income	$	(25,556	)	$	(24,614	)	$	31,785	$	(7,171	)	$	(25,556	)

27

AmeriCredit Corp.

Consolidating Statement of Operations

Three Months Ended December 31, 2007

(Unaudited, in Thousands)

	AmeriCredit Corp.			Guarantors			Non- Guarantors		Eliminations			Consolidated
Revenue
Finance charge income				$	13,363		$	599,336				$	612,699
Other income	$	17,499			676,103			1,295,332	$	(1,948,379	)		40,555
Equity in (loss) income of affiliates		(20,595	)		12,335					8,260
		(3,096	)		701,801			1,894,668		(1,940,119	)		653,254
Costs and expenses
Operating expenses		7,511			10,441			85,132					103,084
Depreciation expense - leased vehicles					8,848								8,848
Provision for loan losses					11,087			345,426					356,513
Interest expense		8,076			703,531			1,450,805		(1,948,379	)		214,033
Restructuring charges, net					(163	)							(163	)
		15,587			733,744			1,881,363		(1,948,379	)		682,315
(Loss) income before income taxes		(18,683	)		(31,943	)		13,305		8,260			(29,061	)
Income tax provision (benefit)		407			(11,348	)		970					(9,971	)
Net (loss) income	$	(19,090	)	$	(20,595	)	$	12,335	$	8,260		$	(19,090	)

28

AmeriCredit Corp.

Consolidating Statement of Operations

Six Months Ended December 31, 2008

(Unaudited, in Thousands)

	AmeriCredit Corp.			Guarantors			Non- Guarantors		Eliminations			Consolidated
Revenue
Finance charge income				$	34,986		$	996,547				$	1,031,533
Other income	$	19,689			655,117			1,306,849	$	(1,919,953	)		61,702
Gain on retirement of debt		38,867											38,867
Equity in (loss) income of affiliates		(13,780	)		94,766					(80,986	)
		44,776			784,869			2,303,396	$	(2,000,939	)		1,132,102
Costs and expenses
Operating expenses		19,664			20,339			128,596					168,599
Depreciation expense - leased vehicles					4,341			18,730					23,071
Provision for loan losses					102,755			460,132					562,887
Interest expense		59,413			725,774			1,548,875		(1,919,953	)		414,109
Restructuring charges, net					2,655								2,655
		79,077			855,864			2,156,333		(1,919,953	)		1,171,321
Income before income taxes		(34,301	)		(70,995	)		147,063		(80,986	)		(39,219	)
Income tax (benefit) provision		(7,083	)		(57,215	)		52,297					(12,001	)
Net (loss) income	$	(27,218	)	$	(13,780	)	$	94,766	$	(80,986	)	$	(27,218	)

29

AmeriCredit Corp.

Consolidating Statement of Operations

Six Months Ended December 31, 2007

(Unaudited, in Thousands)

	AmeriCredit Corp.		Guarantors			Non- Guarantors		Eliminations			Consolidated
Revenue
Finance charge income			$	45,569		$	1,178,988				$	1,224,557
Other income	$	32,857		1,130,193			2,132,789	$	(3,214,468	)		81,371
Equity in income of affiliates		39,356		77,109					(116,465	)
		72,213		1,252,871			3,311,777		(3,330,933	)		1,305,928
Costs and expenses
Operating expenses		12,194		28,994			166,861					208,049
Depreciation expense - leased vehicles				14,433								14,433
Provision for loan losses				16,862			584,296					601,158
Interest expense		16,142		1,166,771			2,456,849		(3,214,468	)		425,294
Restructuring charges, net				(293	)							(293	)
		28,336		1,226,767			3,208,006		(3,214,468	)		1,248,641
Income before income taxes		43,877		26,104			103,771		(116,465	)		57,287
Income tax provision (benefit)		1,148		(13,252	)		26,662					14,558
Net income	$	42,729	$	39,356		$	77,109	$	(116,465	)	$	42,729

30

AmeriCredit Corp.

Consolidating Statement of Cash Flows

Six Months Ended December 31, 2008

(Unaudited, in Thousands)

	AmeriCredit Corp.			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(27,218	)	$	(13,780	)	$	94,766		$	(80,986	)	$	(27,218	)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		1,896			26,757			29,438						58,091
Accretion and amortization of loan fees					(1,573	)		13,597						12,024
Provision for loan losses					102,755			460,132						562,887
Deferred income taxes		52,932			2,312			(11,598	)					43,646
Stock-based compensation expense		7,547												7,547
Amortization of warrants		40,934												40,934
Gain on retirement of debt		(39,622	)											(39,622	)
Other		(81	)		16,432			(9,804	)					6,547
Equity in (loss) income of affiliates		13,780			(94,766	)					80,986
Changes in assets and liabilities:
Other assets		(52,654	)		(4,769	)		(2,882	)					(60,305	)
Accrued taxes and expenses		8,641			(8,972	)		(7,718	)					(8,049	)
Net cash provided by operating activities		6,155			24,396			565,931						596,482
Cash flows from investing activities:
Purchases of receivables					(913,555	)		(411,286	)		411,286			(913,555	)
Principal collections and recoveries on receivables					153,205			2,084,716						2,237,921
Net proceeds from sale of receivables					411,286						(411,286	)
Purchases of property and equipment					(974	)								(974	)
Investment in money market fund					(115,821	)								(115,821	)
Proceeds from money market fund					91,422									91,422
Change in restricted cash - securitization notes payable								98,936						98,936
Change in restricted cash - credit facilities								94,216						94,216
Change in other assets					80,530			(87,173	)					(6,643	)
Net change in investment in affiliates		5,920			601,866			(35,628	)		(572,158	)
Net cash provided by investing activities		5,920			307,959			1,743,781			(572,158	)		1,485,502
Cash flows from financing activities:
Net change in credit facilities								(967,429	)					(967,429	)
Issuance of securitization notes payable								1,000,000						1,000,000
Payments on securitization notes payable								(2,158,040	)					(2,158,040	)
Retirement of convertible senior notes		(214,473	)											(214,473	)
Proceeds from sale of Lehman swaps					10,571									10,571
Payment on termination of Lehman swaps					(10,571	)								(10,571	)
Debt issuance costs		(56	)		(2,158	)		(7,068	)					(9,282	)
Proceeds from issuance of common stock		1,267						(566,250	)		566,250			1,267
Other net changes		(3,094	)											(3,094	)
Net change in due (to) from affiliates		210,201			(642,557	)		435,762			(3,406	)
Net cash used by financing activities		(6,155	)		(644,715	)		(2,263,025	)		562,844			(2,351,051	)
Net increase (decrease) in cash and cash equivalents		5,920			(312,360	)		46,687			(9,314	)		(269,067	)
Effect of Canadian exchange rate changes on cash and cash equivalents		(5,920	)		(1,186	)		56			9,314			2,264
Cash and cash equivalents at beginning of period					361,352			72,141						433,493
Cash and cash equivalents at end of period	$			$	47,806		$	118,884		$			$	166,690

31

AmeriCredit Corp.

Consolidating Statement of Cash Flows

Six Months Ended December 31, 2007

(Unaudited, in Thousands)

	AmeriCredit Corp.			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	42,729		$	39,356		$	77,109		$	(116,465	)	$	42,729
Adjustments to reconcile net income to net cash (used) provided by operating activities:
Depreciation and amortization		167			20,698			16,595						37,460
Accretion and amortization of loan fees					8,075			2,517						10,592
Provision for loan losses					16,862			584,296						601,158
Deferred income taxes		(78,564	)		59,208			(43,855	)					(63,211	)
Stock-based compensation expense		12,552												12,552
Other					1,647			(762	)					885
Equity in income of affiliates		(39,356	)		(77,109	)					116,465
Changes in assets and liabilities:
Other assets		(9,960	)		(67,990	)		(2,701	)					(80,651	)
Accrued taxes and expenses		21,931			9,809			4,515						36,255
Net cash (used) provided by operating activities		(50,501	)		10,556			637,714						597,769
Cash flows from investing activities:
Purchases of receivables					(4,126,287	)		(3,977,176	)		3,977,176			(4,126,287	)
Principal collections and recoveries on receivables					79,643			3,040,193						3,119,836
Net proceeds from sale of receivables					3,977,176						(3,977,176	)
Purchases of property and equipment		1,412			(8,130	)								(6,718	)
Net purchases of leased vehicles					(172,550	)								(172,550	)
Change in restricted cash - securitization notes payable					(11	)		20,028						20,017
Change in restricted cash - credit facilities								(8,839	)					(8,839	)
Change in other assets					(9,037	)		8,647						(390	)
Net change in investment in affiliates		(1,103	)		(598,045	)		(8,317	)		607,465
Net cash provided (used) by investing activities		309			(857,241	)		(925,464	)		607,465			(1,174,931	)
Cash flows from financing activities:
Net change in credit facilities								(66,096	)					(66,096	)
Issuance of securitization notes payable								3,500,000						3,500,000
Payments on securitization notes payable								(3,074,536	)					(3,074,536	)
Debt issuance costs								(12,414	)					(12,414	)
Repurchase of common stock		(127,901	)											(127,901	)
Proceeds from issuance of common stock		13,546						606,362			(606,362	)		13,546
Other net changes		(344	)		(1	)								(345	)
Net change in due (to) from affiliates		158,344			496,821			(659,685	)		4,520
Net cash provided by financing activities		43,645			496,820			293,631			(601,842	)		232,254
Net (decrease) increase in cash and cash equivalents		(6,547	)		(349,865	)		5,881			5,623			(344,908	)
Effect of Canadian exchange rate changes on cash and cash equivalents		6,547			749			18			(5,623	)		1,691
Cash and cash equivalents at beginning of period					899,386			10,918						910,304
Cash and cash equivalents at end of period	$			$	550,270		$	16,817		$			$	567,087

32

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

We are a leading independent auto finance company specializing in purchasing retail automobile installment sales contracts originated by franchised and select independent dealers in connection with the sale of used and new automobiles. We generate revenue and cash flows primarily through the purchase, retention, subsequent securitization and servicing of finance receivables. As used herein, “loans” include auto finance receivables originated by dealers and purchased by us. To fund the acquisition of receivables prior to securitization, we use available cash and borrowings under our credit facilities. We earn finance charge income on the finance receivables and pay interest expense on borrowings under our credit facilities.

We, through wholly-owned subsidiaries, periodically transfer receivables to securitization trusts (“Trusts”) that issue asset-backed securities to investors. We retain an interest in these securitization transactions in the form of restricted cash accounts and overcollateralization whereby more receivables are transferred to the Trusts than the amount of asset-backed securities issued by the Trusts as well as the estimated future excess cash flows expected to be received by us over the life of the securitization. Excess cash flows result from the difference between the finance charges received from the obligors on the receivables and the interest paid to investors in the asset-backed securities, net of credit losses and expenses.

Excess cash flows from the Trusts are initially utilized to fund credit enhancement requirements in order to attain specific credit ratings for the asset-backed securities issued by the Trusts. Once predetermined credit enhancement requirements are reached and maintained, excess cash flows are distributed to us, or in a securitization utilizing a senior subordinated structure, may be used to accelerate the repayment of certain subordinated securities. In addition to excess cash flows, we receive monthly base servicing fees and we collect other fees, such as late charges, as servicer for securitization Trusts. For securitization transactions that involve the purchase of a financial guaranty insurance policy, credit enhancement requirements will increase if targeted portfolio performance ratios are exceeded. Excess cash flows otherwise distributable to us from Trusts in which the portfolio performance ratios were exceeded and from other Trusts which may be subject to limited cross-collateralization provisions are accumulated in the Trusts until required levels of credit enhancement are reached and maintained. Senior subordinated securitizations typically do not utilize portfolio performance ratios.

We structure our securitization transactions as secured financings. Accordingly, following a securitization, the finance receivables and the related securitization notes payable remain on the consolidated balance sheets. We recognize finance charge and fee income on the receivables and interest expense on the securities issued in the securitization transaction and record a provision for loan losses to cover probable loan losses on the receivables.

33

Recent Developments

We anticipate a number of factors will continue to adversely affect our liquidity in fiscal 2009: (i) higher credit enhancement levels in our securitization transactions caused by a reduction in excess spread due to a higher cost of funds and credit deterioration we are experiencing in our portfolio, (ii) unprecedented disruptions in the capital markets making the execution of securitization transactions more challenging and expensive, (iii) decreasing cash distributions from our securitization Trusts due to weaker credit performance and (iv) the possible restructuring of our credit facilities discussed below.

Throughout calendar year 2008, we have revised our operating plans in an effort to preserve and strengthen our capital and liquidity position and to maintain sufficient capacity on our credit facilities to fund new loan originations until capital market conditions improve for securitization transactions. Under these revised plans, we increased the minimum credit score requirements for new loan originations, decreased our originations infrastructure by closing and consolidating credit center locations, selectively decreased the number of dealers from whom we purchase loans and reduced originations and support function headcounts. We have discontinued new originations in our direct lending, leasing and specialty prime platforms, certain partner relationships, and in Canada. Our origination target has been reduced to no more than $100 million per month. We recognized a restructuring charge of $2.7 million during the six months ended December 31, 2008.

We believe that we have sufficient liquidity and warehouse capacity to operate through fiscal 2009. During the quarter ended December 31, 2008, we completed two securitizations, for a total of $1 billion of securitization notes payable, the AmeriCredit Automobile Receivable Trusts (“AMCAR”) 2008-1 and 2008-2. In connection with these securitizations, we utilized the forward purchase commitment agreement with Deutsche Bank AG, Cayman Islands Branch (“Deutsche”) to place the triple-A rated asset-backed securities in these securitization transactions. To place the double-A and single-A rated asset-backed securities we utilized a new funding facility established through agreements with Wachovia Capital Markets, LLC and Wachovia Bank, National Association (together, “Wachovia”), and a purchase agreement with Fairholme Funds, Inc. (“Fairholme”) for the AMCAR 2008-1 and 2008-2 securitizations, respectively. With the completion of AMCAR 2008-1 and 2008-2, we do not anticipate having to access the securitization market again in fiscal 2009. Current conditions in the securitization market include high risk premiums and reduced investor demand, particularly for subordinated securities and securities backed by subprime collateral. Effective December 19, 2008, we executed a letter agreement with Deutsche whereby we mutually agreed to terminate the forward purchase commitment agreement leaving us without a standby source for pricing triple-A rated securities in a securitization transaction. If the asset-backed securities market or the credit markets, in general, do not improve we may be unable in the future to sell asset-backed securities on acceptable terms or at all.

34

Our credit facilities contain covenants, which if breached, could restrict our ability to borrow under such facilities to fund new loan originations, or in the worst case, could result in events of default under most of our debt agreements. We consider the most restrictive of these covenants to be the (i) the maintenance of an annualized portfolio net credit loss ratio of less than 8.5 percent of average receivables on a rolling six month basis, (ii) maintenance of an average earnings ratio to interest expense for two consecutive fiscal quarters of not less than 1.2 times and (iii) the requirement to repurchase receivables that have been pledged to the master warehouse facility for more than 364 days. Subsequent to December 31, 2008, we breached the 8.5 percent six month net credit loss ratio and a waiver through March 7, 2009 was granted. We are currently negotiating with our credit providers to amend our credit facilities to modify the most restrictive covenants in exchange for a reduction in facility size, lower advance rates and higher pricing among other changes. If we are unable to enter into an amendment, there are several possible outcomes. The credit providers could restructure the facilities to prohibit future borrowings, thereby resulting in our inability to fund new loan originations and the receivables that we currently have pledged to the credit facilities would be used to pay down the outstanding balance of the respective facilities. In the worst case, the credit providers could declare an event of default, which would permit the lenders to accelerate the debt, foreclose on the collateral and remove us as servicer. An event of default would also result in a cross default under our senior note and convertible senior note indentures and certain securitizations transactions. Failure to negotiate an amendment would raise substantial doubt about our ability to continue as a going concern.

35

RESULTS OF OPERATIONS

Three Months Ended December 31, 2008 as compared to Three Months Ended December 31, 2007

Changes in Finance Receivables:

A summary of changes in our finance receivables is as follows (in thousands):

	Three Months Ended December 31,
	2008			2007
Balance at beginning of period	$	14,062,845		$	16,377,528
Loans purchased		320,830			1,759,890
Loans repurchased from gain on sale Trusts					18,401
Liquidations and other		(1,384,543	)		(1,803,615	)
Balance at end of period	$	12,999,132		$	16,352,204
Average finance receivables	$	13,547,116		$	16,409,662

The decrease in loans purchased during the three months ended December 31, 2008, as compared to the three months ended December 31, 2007, was primarily due to the implementation of revised operating plans.

The average new loan size decreased to $17,618 for the three months ended December 31, 2008, from $19,318 for the three months ended December 31, 2007, due to reduced purchases of prime/near prime loans under revised operating plans as well as a decrease in the loan to value ratio. The average annual percentage rate for finance receivables purchased during the three months ended December 31, 2008, increased to 17.1% from 15.3% during the three months ended December 31, 2007, due to increased pricing on new loan originations as a result of higher funding costs.

Net Margin:

Net margin is the difference between finance charge and other income earned on our receivables and the cost to fund the receivables as well as the cost of debt incurred for general corporate purposes.

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Our net margin as reflected on the consolidated statements of operations is as follows (in thousands):

	Three Months Ended December 31,
	2008			2007
Finance charge income	$	497,560		$	612,699
Other income		30,626			40,555
Interest expense		(219,063	)		(214,033	)
Net margin	$	309,123		$	439,221

Net margin as a percentage of average finance receivables is as follows:

	Three Months Ended December 31,
	2008		2007
Finance charge income	14.6	%	14.8	%
Other income	0.9		1.0
Interest expense	(6.4	)	(5.2	)
Net margin as a percentage of average finance receivables	9.1	%	10.6	%

The decrease in net margin for the three months ended December 31, 2008, as compared to the three months ended December 31, 2007, was mainly a result of an increase in funding costs primarily from the acceleration of unamortized warrant costs of $14.3 million and unamortized commitment fees of $5.8 million related to the early termination of the Deutsche forward purchase agreement.

Revenue:

Finance charge income decreased by 18.8% to $497.6 million for the three months ended December 31, 2008, from $612.7 million for the three months ended December 31, 2007, primarily due to the 17.4% decrease in average finance receivables. The effective yield on our finance receivables decreased to 14.6% for the three months ended December 31, 2008, from 14.8% for the three months ended December 31, 2007. The effective yield represents finance charges and fees taken into earnings during the period as a percentage of average finance receivables and may be lower than the contractual rates of our finance contracts due to finance receivables in nonaccrual status.

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Other income consists of the following (in thousands):

	Three Months Ended December 31,
	2008		2007
Investment income	$	7,413	$	16,604
Leasing income		11,803		10,555
Late fees and other income		11,410		13,396
	$	30,626	$	40,555

Investment income decreased as a result of lower invested cash balances and lower investment rates.

Gain on retirement of debt for the three months ended December 31, 2008 was $37.9 million. We repurchased on the open market, $38.9 million of convertible senior notes due in 2013 at an average price of 37.75%. In connection with this transaction, we recorded a gain on retirement of debt of $23.4 million. We also issued 15,122,670 shares of our common stock, to Fairholme in a non-cash transaction, in exchange for $108.4 million of our Senior Notes due 2015, held by Fairholme, at a price of $840 per $1,000 principal amount of the Notes. We recognized a gain of $15.5 million on retirement of debt in the exchange.

Costs and Expenses:

Operating Expenses

Operating expenses decreased by 18.2% to $84.3 million for the three months ended December 31, 2008, from $103.1 million for the three months ended December 31, 2007, as a result of cost savings from revised operating plans. Our operating expenses are predominately related to personnel costs that include base salary and wages, performance incentives and benefits as well as related employment taxes. Personnel costs represented 71.8% and 79.1% of total operating expenses for the three months ended December 31, 2008 and 2007, respectively.

Operating expenses as an annualized percentage of average finance receivables were 2.5% for the three months ended December 31, 2008 and 2007, respectively.

Provision for Loan losses

Provisions for loan losses are charged to operations to bring our allowance for loan losses to a level which management considers adequate to absorb probable credit losses inherent in the portfolio of finance receivables. The provision for loan losses recorded for the three months ended December 31, 2008 and 2007, reflects inherent losses on receivables originated during those quarters and changes in the amount of inherent losses on receivables originated in prior periods. The provision for loan losses decreased to $288.0 million for the three months ended December 31, 2008, from $356.5 million for the three months ended December 31, 2007, primarily as a result of a lower level of receivables originated during the three months ended December 31, 2008, partially offset by higher expected future losses due to weaker economic conditions. As an annualized percentage of average finance receivables, the provision for loan losses was 8.4% and 8.6% for the three months ended December 31, 2008 and 2007, respectively.

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Interest Expense

Interest expense increased to $219.1 million for the three months ended December 31, 2008, from $214.0 million for the three months ended December 31, 2007. Average debt outstanding was $12,637.7 million and $15,589.9 million for the three months ended December 31, 2008 and 2007, respectively. Our effective rate of interest paid on our debt increased to 6.9% for the three months ended December 31, 2008, compared to 5.4% for the three months ended December 31, 2007, due to principal paydown of older securitizations with lower interest cost and acceleration of the amortization of the Deutsche warrant of $14.3 million and commitment fees of $5.8 million.

Taxes

Our effective income tax rate was 35.5% and 34.3% for the three months ended December 31, 2008 and 2007, respectively.

Other Comprehensive Loss:

Other comprehensive loss consisted of the following (in thousands):

	Three Months Ended December 31,
	2008			2007
Unrealized losses on credit enhancement assets				$	(34	)
Unrealized losses on cash flow hedges	$	(61,619	)		(45,883	)
Canadian currency translation adjustment		(4,635	)		(856	)
Income tax benefit		25,169			20,571
	$	(41,085	)	$	(26,202	)

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Cash Flow Hedges

Unrealized losses on cash flow hedges consisted of the following (in thousands):

	Three Months Ended December 31,
	2008			2007
Unrealized losses related to changes in fair value	$	(76,959	)	$	(45,065	)
Reclassification of net unrealized losses (gains) into earnings		15,340			(818	)
	$	(61,619	)	$	(45,883	)

Unrealized losses related to changes in fair value for the three months ended December 31, 2008 and 2007, were due to changes in the fair value of interest rate swap agreements that were designated as cash flow hedges for accounting purposes. The fair value of the interest rate swap agreements fluctuate based upon changes in forward interest rate expectations.

Unrealized gains or losses on cash flow hedges of our floating rate debt are reclassified into earnings when interest rate fluctuations on securitization notes payable or other hedged items affect earnings.

Canadian Currency Translation Adjustment

Canadian currency translation adjustment losses of $4.6 million and $0.9 million for the three months ended December 31, 2008 and 2007, respectively, were included in other comprehensive loss. The translation adjustment is due to the change in the value of our Canadian dollar denominated assets related to the change in the U.S. dollar to Canadian dollar conversion rates during the three months ended December 31, 2008 and 2007.

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Six Months Ended December 31, 2008 as compared to Six Months Ended December 31, 2007

A summary of changes in our finance receivables is as follows (in thousands):

	Six Months Ended December 31,
	2008			2007
Balance at beginning of period	$	14,981,412		$	15,922,458
Loans purchased		900,120			3,999,509
Loans repurchased from gain on sale Trusts					18,401
Liquidations and other		(2,882,400	)		(3,588,164	)
Balance at end of period	$	12,999,132		$	16,352,204
Average finance receivables	$	14,045,482		$	16,298,629

The decrease in loans purchased during the six months ended December 31, 2008, as compared to the six months ended December 31, 2007, was primarily due to the implementation of revised operating plans.

The average new loan size decreased to $17,718 for the six months ended December 31, 2008, from $19,229 for the six months ended December 31, 2007, due to reduced purchases of prime/near prime loans under the revised operating plans as well as a decrease in the loan to value ratio. The average annual percentage rate for finance receivables purchased during the six months ended December 31, 2008, increased to 16.8% from 15.3% during the six months ended December 31, 2007, due to increased pricing on new loan originations as a result of higher funding costs.

Net Margin:

Net margin is the difference between finance charge and other income earned on our receivables and the cost to fund the receivables as well as the cost of debt incurred for general corporate purposes.

Our net margin as reflected on the consolidated statements of operations is as follows (in thousands):

	Six Months Ended December 31,
	2008			2007
Finance charge income	$	1,031,533		$	1,224,557
Other income		61,702			81,371
Interest expense		(414,109	)		(425,294	)
Net margin	$	679,126		$	880,634

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Net margin as a percentage of average finance receivables is as follows:

	Six Months Ended December 31,
	2008		2007
Finance charge income	14.5	%	14.9	%
Other income	0.9		1.0
Interest expense	(5.8	)	(5.2	)
Net margin as a percentage of average finance receivables	9.6	%	10.7	%

The decrease in net margin for the six months ended December 31, 2008, as compared to the six months ended December 31, 2007, was mainly a result of an increase in funding costs primarily from the acceleration of unamortized warrant costs of $14.3 million and unamortized commitment fees of $5.8 million related to the early termination of the Deutsche forward purchase agreement.

Revenue:

Finance charge income decreased by 15.8% to $1,031.5 million for the six months ended December 31, 2008, from $1,224.6 million for the six months ended December 31, 2007, primarily due to the 13.8% decrease in average finance receivables. The effective yield on our finance receivables decreased to 14.5% for the six months ended December 31, 2008, from 14.9% for the six months ended December 31, 2007. The effective yield represents finance charges and fees taken into earnings during the period as a percentage of average finance receivables and may be lower than the contractual rates of our finance contracts due to finance receivables in nonaccrual status.

Other income consists of the following (in thousands):

	Six Months Ended December 31,
	2008		2007
Investment income	$	12,339	$	35,561
Leasing income		23,748		17,183
Late fees and other income		25,615		28,627
	$	61,702	$	81,371

Investment income decreased as a result of lower invested cash balances and lower investment rates combined with a $3.5 million loss on our investment in the Reserve Primary Money Market Fund (“the Reserve Fund”).

Gain on retirement of debt for the six months ended December 31, 2008 was $38.9 million. We repurchased on the open market, $38.9 million of convertible senior notes due in 2013 at an average price of 37.75% and $114.7 million of convertible senior notes due in 2023 at an average price of 98.90%. In connection with these transactions, we recorded a gain on retirement of debt of $24.4 million. We also issued 15,122,670 shares of our common stock, to Fairholme in a non-cash transaction, in exchange for $108.4 million of our Senior Notes due 2015, held by Fairholme, at a price of $840 per $1,000 principal amount of the Notes. We recognized a gain, of $15.5 million on retirement of debt in the exchange.

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Costs and Expenses:

Operating Expenses

Operating expenses decreased by 18.9% to $168.6 million for the six months ended December 31, 2008, from $208.0 million for the six months ended December 31, 2007, as a result of cost savings from the revised operating plan. Our operating expenses are predominately related to personnel costs that include base salary and wages, performance incentives and benefits as well as related employment taxes. Personnel costs represented 71.4% and 78.1% of total operating expenses for the six months ended December 31, 2008 and 2007, respectively.

Operating expenses as an annualized percentage of average finance receivables were 2.4% for the six months ended December 31, 2008, as compared to 2.5% for the six months ended December 31, 2007.

Provision for Loan losses

Provisions for loan losses are charged to operations to bring our allowance for loan losses to a level which management considers adequate to absorb probable credit losses inherent in the portfolio of finance receivables. The provision for loan losses recorded for the six months ended December 31, 2008 and 2007, reflects inherent losses on receivables originated during those quarters and changes in the amount of inherent losses on receivables originated in prior periods. The provision for loan losses decreased to $562.9 million for the six months ended December 31, 2008, from $601.2 million for the six months ended December 31, 2007, primarily as a result of a lower level of receivables originated during the six months ended December 31, 2008, partially offset by higher expected future losses due to weaker economic conditions. As an annualized percentage of average finance receivables, the provision for loan losses was 7.9% and 7.3% for the six months ended December 31, 2008 and 2007, respectively.

Interest Expense

Interest expense decreased to $414.1 million for the six months ended December 31, 2008, from $425.3 million for the six months ended December 31, 2007. Average debt outstanding was $13,097.7 million and $15,481.7 million for the six months ended December 31, 2008 and 2007, respectively. Our effective rate of interest paid on our debt increased to 6.3% for the six months ended December 31, 2008, compared to 5.4% for the six months ended December 31, 2007, due to principal paydown of older securitizations with lower interest cost and acceleration of the amortization of the Deutsche warrant of $14.3 million and commitment fees of $5.8 million.

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Taxes

Our effective income tax rate was 30.6% and 25.4% for the six months ended December 31, 2008 and 2007, respectively. The lower rate for the six months ended December 31, 2007, is primarily a result of revised estimates of our deferred tax assets and liabilities relating to state income tax rates and the exercise of warrants issued in September 2002.

Other Comprehensive Loss:

Other comprehensive loss consisted of the following (in thousands):

	Six Months Ended December 31,
	2008			2007
Unrealized losses on credit enhancement assets				$	(232	)
Unrealized losses on cash flow hedges	$	(51,694	)		(82,026	)
Canadian currency translation adjustment		(5,920	)		6,544
Income tax benefit		21,890			30,831
	$	(35,724	)	$	(44,883	)

Cash Flow Hedges

Unrealized losses on cash flow hedges consisted of the following (in thousands):

	Six Months Ended December 31,
	2008			2007
Unrealized losses related to changes in fair value	$	(87,184	)	$	(77,767	)
Reclassification of net unrealized losses (gains) into earnings		35,490			(4,259	)
	$	(51,694	)	$	(82,026	)

Unrealized losses related to changes in fair value for the six months ended December 31, 2008 and 2007, were due to changes in the fair value of interest rate swap agreements that were designated as cash flow hedges for accounting purposes. The fair value of the interest rate swap agreements fluctuates based upon changes in forward interest rate expectations.

Unrealized gains or losses on cash flow hedges of our floating rate debt are reclassified into earnings when interest rate fluctuations on securitization notes payable or other hedged items affect earnings.

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Canadian Currency Translation Adjustment

Canadian currency translation adjustment losses of $5.9 million and gains of $6.5 million for the six months ended December 31, 2008 and 2007, respectively, were included in other comprehensive loss. The translation adjustment is due to the change in the value of our Canadian dollar denominated assets related to the change in the U.S. dollar to Canadian dollar conversion rates during the six months ended December 31, 2008 and 2007.

CREDIT QUALITY

Generally, we provide financing in relatively high-risk markets, and, therefore, anticipate a corresponding high level of delinquencies and charge-offs.

The following tables present certain data related to the receivables portfolio (dollars in thousands):

	December 31, 2008			June 30, 2008
Principal amount of receivables, net of fees	$	12,999,132		$	14,981,412
Nonaccretable acquisition fees		(28,359	)		(42,802	)
Allowance for loan losses		(894,617	)		(908,311	)
Receivables, net	$	12,076,156		$	14,030,299
Number of outstanding contracts		995,799			1,094,915
Average carrying amount of outstanding contract (in dollars)	$	13,054		$	13,683
Allowance for loan losses and nonaccretable acquisition fees as a percentage of receivables		7.1	%		6.3	%

The allowance for loan losses and nonaccretable acquisition fees as a percentage of receivables increased to 7.1% as of December 31, 2008, from 6.3% as of June 30, 2008, as a result of higher expected future losses due to weaker economic conditions and significantly lower recovery rates on repossessed collateral.

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Delinquency

The following is a summary of managed finance receivables that are (i) more than 30 days delinquent, but not yet in repossession, and (ii) in repossession, but not yet charged off (dollars in thousands):

	December 31, 2008				December 31, 2007
	Amount		Percent		Amount		Percent
Delinquent contracts:
31 to 60 days	$	1,017,246	7.8	%	$	1,111,368	6.8	%
Greater-than-60 days		541,566	4.2			486,688	3.0
		1,558,812	12.0			1,598,056	9.8
In repossession		44,727	0.3			60,174	0.3
	$	1,603,539	12.3	%	$	1,658,230	10.1	%

An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. Delinquencies in our managed receivables portfolio may vary from period to period based upon the average age or seasoning of the portfolio, seasonality within the calendar year and economic factors. Due to our target customer base, a relatively high percentage of accounts become delinquent at some point in the life of a loan and there is a high rate of account movement between current and delinquent status in the portfolio.

Delinquencies in finance receivables, as a percentage, were higher at December 31, 2008, as compared to December 31, 2007, as a result of weaker economic conditions and an increase in the average age or seasoning of the portfolio.

Deferrals

In accordance with our policies and guidelines, we, at times, offer payment deferrals to consumers whereby the consumer is allowed to move up to two delinquent payments to the end of the loan generally by paying a fee (approximately the interest portion of the payment deferred, except where state law provides for a lesser amount). Our policies and guidelines limit the number and frequency of deferments that may be granted. Additionally, we generally limit the granting of deferments on new accounts until a requisite number of payments have been received. Due to the nature of our customer base and policies and guidelines of the deferral program, approximately 50% of accounts historically comprising the managed portfolio received a deferral at some point in the life of the account.

An account for which all delinquent payments are deferred is classified as current at the time the deferment is granted and therefore is not included as a delinquent account. Thereafter, such account is aged based on the timely payment of future installments in the same manner as any other account.

Contracts receiving a payment deferral as an average quarterly percentage of average finance receivables outstanding were 7.7% and 6.4% for the six months ended December 31, 2008 and 2007, respectively. Contracts receiving a payment deferral increased as a result of weaker economic conditions and related budgetary stress on our consumer base.

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The following is a summary of deferrals as a percentage of receivables outstanding:

	December 31, 2008		June 30, 2008
Never deferred	70.9	%	75.3	%
Deferred:
1-2 times	24.2		20.6
3-4 times	4.9		3.7
Greater than 4 times			0.4
Total deferred	29.1		24.7
Total	100.0	%	100.0	%

We evaluate the results of our deferment strategies based upon the amount of cash installments that are collected on accounts after they have been deferred versus the extent to which the collateral underlying the deferred accounts has depreciated over the same period of time. Based on this evaluation, we believe that payment deferrals granted according to our policies and guidelines are an effective portfolio management technique and result in higher ultimate cash collections from the portfolio.

Changes in deferment levels do not have a direct impact on the ultimate amount of finance receivables charged off by us. However, the timing of a charge-off may be affected if the previously deferred account ultimately results in a charge-off. To the extent that deferrals impact the ultimate timing of when an account is charged off, historical charge-off ratios and loss confirmation periods used in the determination of the adequacy of our allowance for loan losses are also impacted. Increased use of deferrals may result in a lengthening of the loss confirmation period, which would increase expectations of credit losses inherent in the loan portfolio and therefore increase the allowance for loan losses and related provision for loan losses. Changes in these ratios and periods are considered in determining the appropriate level of allowance for loan losses and related provision for loan losses.

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Charge-offs

The following table presents charge-off data with respect to our finance receivables portfolio (dollars in thousands):

	Three Months Ended December 31,						Six Months Ended December 31,
	2008			2007			2008			2007
Repossession charge-offs	$	401,873		$	368,421		$	765,402		$	658,408
Less: Recoveries		(149,283	)		(161,646	)		(300,606	)		(303,213	)
Mandatory charge-offs (a)		72,575			79,387			126,228			150,980
Net charge-offs	$	325,165		$	286,162		$	591,024		$	506,175
Net charge-offs as an annualized percentage of average receivables:		9.5	%		6.9	%		8.3	%		6.2	%
Recoveries as a percentage of gross repossession charge-offs:		37.1	%		43.9	%		39.3	%		46.1	%

(a) Mandatory charge-offs includes accounts 120 days delinquent that are charged off in full with no recovery amounts realized at time of charge-off and the net write-down of finance receivables in repossession to the net realizable value of the repossessed vehicle when the repossessed vehicle is legally available for sale.

Net charge-offs as an annualized percentage of average finance receivables outstanding may vary from period to period based upon the average age or seasoning of the portfolio and economic factors. The increase in net charge-offs for the three and six months ended December 31, 2008, respectively as an annualized percentage of average finance receivables, as compared to the three and six months ended December 31, 2007, respectively, was a result of weaker economic conditions combined with a significant decline in wholesale auction values for used cars.

LIQUIDITY AND CAPITAL RESOURCES

General

Our primary sources of cash are finance charge income, servicing fees, distributions from securitization Trusts, borrowings under credit facilities, transfers of finance receivables to Trusts in securitization transactions and collections and recoveries on finance receivables. Our primary uses of cash are purchases of finance receivables, repayment of credit facilities and securitization notes payable, funding credit enhancement requirements for securitization transactions and credit facilities, repayment of senior notes and convertible senior notes, operating expenses and income taxes.

We used cash of $913.6 million and $4,126.3 million for the purchase of finance receivables during the six months ended December 31, 2008 and 2007, respectively. These purchases were funded initially utilizing cash and credit facilities and our strategy is to subsequently obtain long-term financing for these receivables in securitization transactions.

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Credit Facilities

In the normal course of business, in addition to using our available cash, we pledge receivables and borrow under our credit facilities to fund our operations and repay these borrowings as appropriate under our cash management strategy.

As of December 31, 2008, credit facilities consisted of the following (in millions):

Facility Type	Maturity (a)	Facility Amount		Advances Outstanding
Master warehouse facility	October 2009	$	2,245.0	$	698.6
Medium term note facility	October 2009 (b)		750.0		750.0
Prime/Near prime facility (c)	September 2009		450.0		312.5
Canadian credit facility	May 2009				83.2
Lease warehouse facility	June 2009		100.0		98.1
		$	3,545.0	$	1,942.4

(a) Because the facilities are non-recourse to us, the outstanding debt balance can either be repaid in full or over time based on the amortization of receivables pledged.

(b) This facility is a revolving facility through the date stated above. During the revolving period, we have the ability to substitute receivables for cash, or vice versa.

(c) The prime/near prime facility was renewed in September 2008 and reduced in size from 1,120.0 million to $450.0 million. Subsequent to December 31, 2008, this facility was reduced in size to $350.0 million.

We are required to hold certain funds in restricted cash accounts to provide additional collateral for borrowings under the facilities. Additionally, certain funding agreements contain various covenants requiring minimum financial ratios, asset quality and portfolio performance ratios (portfolio net loss and delinquency ratios, and pool level cumulative net loss ratios) as well as limits on deferment levels. We consider the most restrictive of these covenants to be (i) maintenance of an annualized portfolio net credit loss ratio of less than 8.5 percent of average receivables on a rolling six month basis, (ii) maintenance of an average earnings ratio to interest expense for two consecutive fiscal quarters of not less than 1.2 times and (iii) the requirement to repurchase receivables that have been pledged to the master warehouse facility for more than 364 days. Failure to meet any of these covenants could result in an event of default under these agreements. If an event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interests against collateral pledged under these agreements or restrict our ability to obtain additional borrowings under these agreements or may remove us as servicer. As of December 31, 2008, we were in compliance with all covenants in our credit facilities. Subsequent to December 31, 2008, we breached the 8.5 percent six month net credit loss ratio and a waiver through March 7, 2009 was granted. See “Recent Developments” for further discussion.

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On September 15, 2008, Lehman Brothers Holdings Inc. (“LBHI”) filed a petition in the United States Bankruptcy Court for the Southern District of New York seeking relief under Chapter 11 of the United States Bankruptcy Code. Subsequently, 16 additional affiliates of LBHI (together with LBHI, “Lehman”) filed petitions in the United States Bankruptcy Court for the Southern District of New York seeking relief under Chapter 11 of the United States Bankruptcy Code. Lehman is one of the eleven financial institutions in the syndicate that comprise the Master warehouse facility. Lehman’s commitment under the facility was $255 million. As of December 31, 2008, we had $24 million outstanding under the Lehman commitment which will be repaid as the outstanding borrowings on the facility are paid off.

Securitizations

We have completed 65 securitization transactions through December 31, 2008, excluding securitization Trusts entered into by BVAC and LBAC prior to their acquisition by us. The proceeds from the transactions were primarily used to repay borrowings outstanding under our credit facilities.

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A summary of the active transactions is as follows (in millions):

Transaction	Date	Original Amount		Balance at December 31, 2008
2004-D-F	November 2004		750.0	$	76.1
2005-A-X	February 2005		900.0		108.1
2005-1	April 2005		750.0		83.0
2005-B-M	June 2005		1,350.0		222.0
2005-C-F	August 2005		1,100.0		217.4
2005-D-A	November 2005		1,400.0		325.1
2006-1	March 2006		945.0		212.5
2006-R-M	May 2006		1,200.0		573.0
2006-A-F	July 2006		1,350.0		470.3
2006-B-G	September 2006		1,200.0		481.9
2007-A-X	January 2007		1,200.0		550.9
2007-B-F	April 2007		1,500.0		789.6
2007-1	May 2007		1,000.0		527.6
2007-C-M	July 2007		1,500.0		890.2
2007-D-F	September 2007		1,000.0		646.3
2007-2-M	October 2007		1,000.0		644.6
2008-A-F	May 2008		750.0		616.7
2008-1	October 2008		500.0		476.3
2008-2	November 2008		500.0		485.8
BV2005-LJ-1	February 2005		232.1		37.0
BV2005-LJ-2	July 2005		185.6		36.0
BV2005-3	December 2005		220.1		56.3
LB2004-C	December 2004		350.0		37.2
LB2005-A	June 2005		350.0		57.1
LB2005-B	October 2005		350.0		73.0
LB2006-A	May 2006		450.0		126.3
LB2006-B	September 2006		500.0		189.2
LB2007-A	March 2007		486.0		244.0
Total active securitizations		$	23,018.8	$	9,253.5

We structure our securitization transactions as secured financings. Finance receivables are transferred to a securitization Trust, which is one of our special purpose finance subsidiaries, and the Trusts issue one or more series of asset-backed securities (securitization notes payable). While these Trusts are included in our consolidated financial statements, these Trusts are separate legal entities; thus the finance receivables and other assets held by these Trusts are legally owned by these Trusts, are available to satisfy the related securitization notes payable and are not available to our creditors or our other subsidiaries.

At the time of securitization of finance receivables, we are required to pledge assets equal to a specified percentage of the securitization pool to provide credit enhancement required for specific credit ratings for the asset-backed securities issued by the Trusts.

Generally, we employ two types of securitization structures. The structure we have utilized most frequently involves the purchase of a financial guaranty insurance policy issued by an insurer. The financial guaranty insurers used by us in the past are facing financial stress and have been downgraded by the

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rating agencies due to risk exposures on insurance policies that guarantee mortgage debt and related structured products and several of the financial guaranty insurers we have utilized in the past, have decided to no longer issue insurance policies on asset-backed securities. As a result, there is little demand for securities guaranteed by insurance, particularly securities backed by sub-prime collateral, and we do not anticipate utilizing this structure in the foreseeable future.

The second type of securitization structure we use and the structure we anticipate utilizing for the foreseeable future, involves the sale of subordinated asset-backed securities in order to provide credit enhancement for the senior asset-backed securities. In November 2008, we entered into a senior subordinated securitization, AMCAR 2008-2, that has initial cash deposit and overcollateralization requirements of 24.5%. This level of credit enhancement requires significantly greater use of our capital than in similar securitization transactions we have completed in the past. Increases or decreases to the credit enhancement level required in future securitization transactions will depend in part, on the net interest margin of the finance receivables transferred, the collateral characteristics of the finance receivables transferred, credit performance trends of our finance receivables, our financial condition and the economic environment.

In April 2008, we entered into a one year, $2 billion forward purchase commitment agreement with Deutsche. Under this agreement and subject to certain terms, Deutsche committed to purchase triple-A rated asset-backed securities issued by our sub-prime AMCAR securitization platform in registered public offerings. We utilized $752.8 million of the commitment in conjunction with the execution of our AMCAR 2008-1 and 2008-2 transactions. We paid $20.0 million of upfront commitment fees and issued a warrant to purchase up to 7.5 million shares of our common stock in connection with the agreement. Effective December 19, 2008, we executed a letter agreement with Deutsche whereby the parties mutually agreed to terminate the forward purchase commitment agreement. The remaining unamortized warrant cost of $14.3 million and unamortized commitment fees of $5.8 million at the termination date were amortized to interest expense during the three months ended December 31, 2008.

In September 2008, we entered into agreements with Wachovia, to establish two funding facilities under which Wachovia would provide total funding of $117.7 million, during the one year term of the facilities, secured by asset-backed securities as collateral. In conjunction with our AMCAR 2008-1 transaction, we obtained funding under these facilities of $48.9 million by pledging double-A rated asset-backed securities (the “Class B Notes”) as collateral and $68.8 million by pledging single-A rated asset-backed securities (the “Class C Notes”) as collateral. Under these funding facilities, we retained the Class B Notes and the Class C Notes issued in the transaction and then sold the retained notes to a special purpose subsidiary, which in turn pledged such retained notes as collateral to secure the funding under the two facilities. Currently, the facilities are fully utilized. At the end of the one year term, the facilities, if not renewed, will amortize in accordance with the securitization transaction until paid off. We paid $1.9 million of upfront commitment fees in connection with these facilities, which are being amortized to interest expense over the one year term of the facilities. Unamortized costs of $1.6 million, as of December 31, 2008, are included in other assets on the consolidated balance sheets.

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On November 24, 2008, we entered into an agreement with Fairholme under which Fairholme purchased $123.2 million of asset-backed securities, consisting of $50.6 million of Class B Notes and $72.6 million of Class C Notes in the AMCAR 2008-2 transaction. We also issued 15,122,670 shares of our common stock, to Fairholme in a non-cash transaction, in exchange for $108.4 million of our Senior Notes due 2015, held by Fairholme, at a price of $840 per $1,000 principal amount of the notes. We recognized a gain of $15.5 million on retirement of debt in the exchange. Fairholme and its affiliates held approximately 19.8% of our outstanding common stock prior to the issuance of the shares described above.

Cash flows related to securitization transactions were as follows (in millions):

	Six Months Ended December 31,
	2008		2007
Initial credit enhancement deposits:
Restricted cash	$	25.8	$	64.0
Overcollateralization		289.1		213.8
Distributions from Trusts:
Gain on sale Trusts				7.5
Secured financing Trusts		284.3		428.8

The agreements with the insurers of our securitization transactions covered by a financial guaranty insurance policy provide that if portfolio performance ratios (delinquency, cumulative default or cumulative net loss) in a Trust’s pool of receivables exceed certain targets, the specified credit enhancement levels would be increased.

The securitization transactions insured by some of our financial guaranty insurance providers are cross-collateralized to a limited extent. In the event of a shortfall in the original target credit enhancement requirement for any of these securitization Trusts after a certain period of time, excess cash flows from other transactions insured by the same insurance provider would be used to satisfy the shortfall amount.

At December 31, 2008, we exceeded the cumulative default ratio and cumulative net loss ratio targets in the AmeriCredit Prime Auto Receivable Trust (“APART”) 2007-2-M securitization. Excess cash flows from this Trust are being use to build higher credit enhancement instead of being distributed to us.

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During fiscal 2008 and at December 31, 2008, three Long Beach Acceptance Corporation (“LBAC”) securitizations (LB2006-A, LB2006-B and LB2007-A) had delinquency ratios in excess of the targeted levels. Two of these LBAC securitizations (LB2006-B and LB2007-A) also had cumulative net loss and cumulative default ratios in excess of the targeted levels. As part of an arrangement with the insurer of these transactions, the excess cash flows from our other securitizations insured by this insurer were used to fund higher credit enhancement requirements in the LBAC Trusts which exceeded the portfolio performance ratios. The higher required credit enhancement levels in these three LBAC Trusts were reached as of June 30, 2008. Furthermore, three other LBAC securitizations (LB2004-C, LB2005-A and LB2005-B) had delinquency ratios in excess of their targeted levels as of December 31, 2008. Excess cash flows from these trusts are being used to build higher credit enhancement in each respective trust instead of being distributed to us.

The agreements that we enter into with our financial guaranty insurance providers in connection with securitization transactions contain additional specified targeted portfolio performance ratios (delinquency, cumulative default and cumulative net loss) that are higher than the limits referred to above. If, at any measurement date, the targeted portfolio performance ratios with respect to any insured Trust were to exceed these additional levels, provisions of the agreements permit the financial guaranty insurance providers to terminate our servicing rights to the receivables sold to that Trust. In addition, the servicing agreements on certain insured securitization Trusts are cross-defaulted so that a default under one servicing agreement would allow the financial guaranty insurance provider to terminate our servicing rights under all servicing agreements for securitization Trusts in which they issued a financial guaranty insurance policy. Additionally, if these higher targeted portfolio performance levels were exceeded, the financial guaranty insurance providers may elect to retain all excess cash generated by other securitization transactions insured by them as additional credit enhancement. This, in turn, could result in defaults under our other securitizations and other material indebtedness. Although we have never exceeded these additional targeted portfolio performance ratios, and do not anticipate violating any event of default triggers for our securitizations, there can be no assurance that our servicing rights with respect to the automobile receivables in such Trusts or any other Trusts will not be terminated if (i) such targeted portfolio performance ratios are breached, (ii) we breach our obligations under the servicing agreements, (iii) the financial guaranty insurance providers are required to make payments under a policy, or (iv) certain bankruptcy or insolvency events were to occur. As of December 31, 2008, no such termination events have occurred with respect to any of the Trusts formed by us.

Convertible Senior Notes

In November 2003, we issued $200.0 million of convertible senior notes. During the three months ended September 30, 2008, we repurchased $114.7 million of these convertible notes at a small discount. During the three months ended December 31, 2008, we repurchased the remaining balance of $85.3 million of these convertible notes at a price equal to 100.25% of the principal amount of the notes redeemed.

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During the three months ended December 31, 2008, we repurchased on the open market $38.9 million of convertible senior notes due in 2013 at an average price of 37.75% of the principal amount of the notes repurchased. In connection with this transaction, we recorded a gain on retirement of debt of $23.4 million.

Contractual Obligations

As of December 31, 2008, we had liabilities, included in accrued taxes and expenses on the consolidated balance sheets, associated with uncertain tax positions of $84.0 million. Due to uncertainty regarding the timing of future cash flows associated with those liabilities, a reasonable estimate of the period of cash settlement is not determinable.

Recent Accounting Pronouncements and Accounting Changes

In the first quarter of fiscal 2009, we adopted Statement of Financial Accounting Standards No. 157,Fair Value Measurements, (“SFAS No. 157”) for all financial assets and financial liabilities and for all non-financial assets and non-financial liabilities recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure. The adoption of SFAS No. 157 did not have a significant impact on our consolidated financial statements, and the resulting fair values calculated under SFAS No. 157 after adoption were not significantly different than the fair values that would have been calculated under previous guidance.

In October 2008, the Financial Accounting Standards Board (“FASB”) issued Financial Staff Position 157-3,Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active, (“FSP 157-3”). FSP 157-3 clarifies the application of SFAS No. 157 in a market that is not active, and addresses application issues such as the use of internal assumptions when relevant observable data does not exist, the use of observable market information when the market is not active, and the use of market quotes when assessing the relevance of observable and unobservable data. FSP 157-3 is effective for all periods presented in accordance with SFAS No. 157. The adoption of FSP 157-3 did not have a significant impact on our consolidated financial statements or the fair values of our financial assets and liabilities.

In December 2008, the FASB issued Financial Staff Position (“FSP”) Financial Accounting Standard No. 140-4 and FASB Interpretation 46(R)-8,Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities (“FSP FAS 140-4” and “FIN 46(R)-8”). The document increases disclosure requirements for public companies and is effective for reporting periods (interim and annual) that end after

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December 15, 2008. FSP FAS 140-4 and FIN 46(R)-8 became effective for us on December 31, 2008. The adoption of FSP FAS 140-4 and FIN 46(R)-8 did not have a significant impact on our consolidated financial statements.

In January 2009, the FASB issued FSP EITF 99-20-1, Amendments to the Impairment of Guidance of EITF Issue No. 99-20, (“FSP EITF 99-20-1”). FSP EITF 99-20-1 amends the impairment guidance in EITF Issue No. 99-20,Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets, (“FSP EITF 99-20”) to achieve more consistent determination of whether an other-than-temporary impairment has occurred and making the guidance consistent between FSP EITF 99-20 and Statement of Financial Accounting Standards No. 115,Accounting for Certain Investments in Debt and Equity Securities, (“SFAS No. 115”). FSP EITF 99-20-1 is effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively. Retrospective application to a prior interim or annual reporting period is not permitted. The adoption of FSP EITF 99-20-1 did not have a significant impact on our consolidated financial statements.

INTEREST RATE RISK

Fluctuations in market interest rates impact our credit facilities and securitization transactions. Our gross interest rate spread, which is the difference between interest earned on our finance receivables and interest paid, is affected by changes in interest rates as a result of our dependence upon the issuance of variable rate securities and the incurrence of variable rate debt to fund our purchases of finance receivables.

Credit Facilities

Finance receivables purchased by us and pledged to secure borrowings under our credit facilities bear fixed interest rates. Amounts borrowed under our credit facilities bear interest at variable rates that are subject to frequent adjustments to reflect prevailing market interest rates. To protect the

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interest rate spread within each credit facility, our special purpose finance subsidiaries are contractually required to purchase interest rate cap agreements in connection with borrowings under our credit facilities. The purchaser of the interest rate cap agreement pays a premium in return for the right to receive the difference in the interest cost at any time a specified index of market interest rates rises above the stipulated “cap” rate. The purchaser of the interest rate cap agreement bears no obligation or liability if interest rates fall below the “cap” rate. As part of our interest rate risk management strategy and when economically feasible, we may simultaneously sell a corresponding interest rate cap agreement in order to offset the premium paid by our special purpose finance subsidiary to purchase the interest rate cap agreement and thus retain the interest rate risk. The fair value of the interest rate cap agreement purchased by the special purpose finance subsidiary is included in other assets and the fair value of the interest rate cap agreement sold by us is included in other liabilities on our consolidated balance sheets.

Securitizations

The interest rate demanded by investors in our securitization transactions depends on prevailing market interest rates for comparable transactions and the general interest rate environment. We utilize several strategies to minimize the impact of interest rate fluctuations on our gross interest rate margin, including the use of derivative financial instruments and the regular sale or pledging of receivables to securitization Trusts.

In our securitization transactions, we transfer fixed rate finance receivables to Trusts that, in turn, sell either fixed rate or floating rate securities to investors. The fixed rates on securities issued by the Trusts are indexed to market interest rate swap spreads for transactions of similar duration or various London Interbank Offered Rates (“LIBOR”) and do not fluctuate during the term of the securitization. The floating rates on securities issued by the Trusts are indexed to LIBOR and fluctuate periodically based on movements in LIBOR. Derivative financial instruments, such as interest rate swap and cap agreements, are used to manage the gross interest rate spread on these transactions. We use interest rate swap agreements to convert the variable rate exposures on securities issued by our securitization Trusts to a fixed rate, thereby locking in the gross interest rate spread to be earned by us over the life of a securitization. Interest rate swap agreements purchased by us do not impact the amount of cash flows to be received by holders of the asset-backed securities issued by the Trusts. The interest rate swap agreements serve to offset the impact of increased or decreased interest paid by the Trusts on floating rate asset-backed securities on the cash flows to be received by us from the Trusts. We utilize such arrangements to modify our net interest sensitivity to levels deemed appropriate based on our risk tolerance. In circumstances where the interest rate risk is deemed to be tolerable, usually if the risk is less than one year in term at inception, we may choose not to hedge potential fluctuations in cash flows due to changes in interest rates. Our special purpose finance subsidiaries are contractually required to

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purchase a financial instrument to protect the net spread in connection with the issuance of floating rate securities even if we choose not to hedge our future cash flows. Although the interest rate cap agreements are purchased by the Trusts, cash outflows from the Trusts ultimately impact our retained interests in the securitization transactions as cash expended by the securitization Trusts will decrease the ultimate amount of cash to be received by us. Therefore, when economically feasible, we may simultaneously sell a corresponding interest rate cap agreement to offset the premium paid by the Trust to purchase the interest rate cap agreement. The fair value of the interest rate cap agreements purchased by the special purpose finance subsidiaries in connection with securitization transactions are included in other assets and the fair value of the interest rate cap agreements sold by us are included in other liabilities on our consolidated balance sheets. Changes in the fair value of the interest rate cap agreements are reflected in interest expense on our consolidated statements of operations and comprehensive operations.

We have entered into interest rate swap agreements to hedge the variability in interest payments on our most recent securitization transactions. Portions of these interest rate swap agreements are designated and qualify as cash flow hedges.

Management monitors our hedging activities to ensure that the value of derivative financial instruments, their correlation to the contracts being hedged and the amounts being hedged continue to provide effective protection against interest rate risk. However, there can be no assurance that our strategies will be effective in minimizing interest rate risk or that increases in interest rates will not have an adverse effect on our profitability. All transactions are entered into for purposes other than trading.

FORWARD LOOKING STATEMENTS

The preceding Management’s Discussion and Analysis of Financial Condition and Results of Operations section contains several “forward-looking statements.” Forward-looking statements are those that use words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “may,” “likely,” “should,” “estimate,” “continue,” “future” or other comparable expressions. These words indicate future events and trends. Forward-looking statements are our current views with respect to future events and financial performance. These forward-looking statements are subject to many assumptions, risks and uncertainties that could cause actual results to differ significantly from historical results or from those anticipated by us. The most significant risks are detailed from time to time in our filings and reports with the Securities and Exchange Commission including our Annual Report on Form 10-K for the year ended June 30, 2008. It is advisable not to place undue reliance on our forward-looking statements. We undertake no obligation to, and do not, publicly update or revise any forward-looking statements, except as required by federal securities laws, whether as a result of new information, future events or otherwise.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Because our funding strategy is dependent upon the issuance of interest-bearing securities and the incurrence of debt, fluctuations in interest rates impact our profitability. Therefore, we employ various hedging strategies to minimize the risk of interest rate fluctuations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Interest Rate Risk” for additional information regarding such market risks.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Such controls include those designed to ensure that information for disclosure is communicated to management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure.

The CEO and CFO, with the participation of management, have evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2008. Based on their evaluation, they have concluded that the disclosure controls and procedures are effective.

Internal Control Over Financial Reporting

There were no changes made in our internal control over financial reporting during the three months ended December 31, 2008, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Limitations Inherent in all Controls

Our management, including the CEO and CFO, recognize that the disclosure controls and internal controls (discussed above) cannot prevent all errors or all attempts at fraud. Any controls system, no matter how well crafted and operated, can only provide reasonable, and not absolute, assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in any control system, no evaluation or implementation of a control system can provide complete assurance that all control issues and all possible instances of fraud have been or will be detected.

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Part II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

As a consumer finance company, we are subject to various consumer claims and litigation seeking damages and statutory penalties, based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, violations of bankruptcy stay provisions, certificate of title disputes, fraud, breach of contract and discriminatory treatment of credit applicants. Some litigation against us could take the form of class action complaints by consumers and/or shareholders. As the assignee of finance contracts originated by dealers, we may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. The relief requested by the plaintiffs varies but can include requests for compensatory, statutory and punitive damages. We believe that we have taken prudent steps to address and mitigate the litigation risks associated with our business activities. In the opinion of management, the ultimate aggregate liability, if any, arising out of any such pending or threatened litigation will not be material to our consolidated financial position, our results of operations or our statement of cash flows.

Item 1A. RISK FACTORS

In addition to the other information set forth in this report, the factors discussed in Part I, Item 1, “Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2008, should be carefully considered as these risk factors could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition and/or operating results.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not Applicable

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The matters voted upon by the shareholders and the details of the votes cast by the shareholders on those matters at the Annual Meeting of Shareholders held on October 28, 2008, were reported in Part II, Item 4 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed with the Commission on November 10, 2008.

Item 5. OTHER INFORMATION

Not Applicable

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Item 6. EXHIBITS

10.31	Restricted Stock Unit Agreement
31.1	Officers’ Certifications of Periodic Report pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1	Officers’ Certifications of Periodic Report pursuant to Section 906 of Sarbanes-Oxley Act of 2002

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AmeriCredit Corp.
	(Registrant)
Date: February 6, 2009	By:	/s/ Chris A. Choate
		(Signature)
		Chris A. Choate
		Executive Vice President, Chief Financial Officer and Treasurer

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