Prospectus Supplement
(To Prospectus dated August 11, 2006)
BMW Vehicle Owner Trust 2006-A
Issuing Entity
BMW FS Securities LLC
Depositor
BMW Financial Services NA, LLC
Sponsor, Originator, Servicer and Administrator
$1,108,996,000 ASSET BACKED NOTES
5.36344% Class A-1 Notes due September 25, 2007
5.30% Class A-2 Notes due May 26, 2009
5.13% Class A-3 Notes due September 27, 2010
5.07% Class A-4 Notes due August 25, 2011
5.19% Class B Notes due June 25, 2013
The trust's main source of payments on the notes will be loan payments generated
by a portfolio of retail installment sale contracts and promissory notes secured
by BMW passenger cars, BMW light trucks, BMW motorcycles and MINI passenger cars
and vehicles of other manufacturers.
See "Risk Factors" beginning on page S-20 for a discussion of risks that you
should consider in connection with an investment in the notes.
The prospectus supplement does not contain complete information about the
offering of the securities. No one may use this prospectus supplement to offer
and sell the securities unless it is accompanied by the prospectus.
The securities are asset backed securities and represent the obligations of the
issuing entity only and do not represent the obligations of or an interest in
the sponsor, the depositor or any of their affiliates. Neither the securities
nor the receivables are insured or guaranteed by any government agency.
Credit enhancement for the notes consists of excess interest on the receivables,
subordination of the certificates, subordination of the Class B Notes, the
reserve account and the yield supplement overcollateralization amount.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the notes or determined that this
prospectus supplement and the attached prospectus are truthful or complete. Any
representation to the contrary is a criminal offense.
====================================================================================================================================
Initial Final
Principal Price to Underwriting Proceeds to First Payment Scheduled Expected Final
Balance Public Discount Depositor(1) Date(2) Payment Date Payment Date(3)
-------------- -------------- ---------- -------------- ---------------- ------------------ -----------------
Class A-1 Notes $ 323,000,000 100.00000% 0.075% 99.92500% October 25, 2006 September 25, 2007 April 25, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
Class A-1 Notes $ 323,000,000 100.00000% 0.075% 99.92500% October 25, 2006 September 25, 2007 April 25, 2007
Class A-2 Notes $ 308,000,000 99.99882% 0.100% 99.89882% October 25, 2006 May 26, 2009 February 25, 2008
Class A-3 Notes $ 280,000,000 99.99831% 0.150% 99.84831% October 25, 2006 September 27, 2010 April 27, 2009
Class A-4 Notes $ 173,044,000 99.97479% 0.200% 99.77479% October 25, 2006 August 25, 2011 November 25, 2009
Class B Notes $ 24,952,000 99.98115% 0.280% 99.70115% October 25, 2006 June 25, 2013 November 25, 2009
Total $1,108,996,000 $1,108,939,306 $1,386,204 $1,107,553,102
(1) Before deducting expenses expected to be $670,000.
(2) Payment dates for the notes will occur on the 25th day of each month, or
if such date is not a business day, then on the next business day. The
first Payment Date is the first expected distribution date for purposes of
Item 1102(g) of Regulation AB.
(3) Based on the factors set forth under the heading "Maturity and Prepayment
Considerations."
The notes will not be listed on any securities exchange. Currently, there is no
public market for the notes. We expect that delivery of the notes, in book-entry
form, will be made to investors through The Depository Trust Company against
payment in immediately available funds, on or about September 22, 2006.
Joint Bookrunners of the Class A Notes
Barclays Capital Banc of America Securities LLC
Co-Managers of the Class A Notes
Credit Suisse Merrill Lynch & Co. RBS Greenwich Capital
Joint Bookrunners of the Class B Notes
Barclays Capital Banc of America Securities LLC
September 13, 2006
TABLE OF CONTENTS
Page
Important Notice About Information Presented in this
Prospectus Supplement and the Accompanying Prospectus ............ S-3
Summary of Parties to the Transaction .............................. S-4
Summary of Monthly Deposits to and Withdrawals from Accounts ....... S-5
Summary of Monthly Distributions of Available Amounts .............. S-6
Summary of Terms ................................................... S-7
Risk Factors ....................................................... S-20
Defined Terms ...................................................... S-27
The Issuing Entity ................................................. S-27
General .......................................................... S-27
Capitalization of the Issuing Entity ............................... S-28
The Depositor ...................................................... S-28
The Sponsor, Originator, Administrator and Servicer ................ S-28
Affiliations and Related Transactions .............................. S-30
The Owner Trustee and the Indenture Trustee ........................ S-30
The Receivables .................................................... S-30
Assets of the Trust .............................................. S-30
Description of Receivables ....................................... S-32
Composition of the Receivables ................................... S-32
Distribution of the Receivables by APR ............................. S-33
Distribution of the Receivables by Geographic Location ............. S-34
Distribution of the Receivables by Remaining Term
to Scheduled Maturity ............................................ S-35
Distribution of the Receivables by Remaining Principal Balance ..... S-35
Delinquencies, Repossessions and Loan Loss Information ............. S-37
Static Pools ....................................................... S-38
Maturity and Prepayment Considerations ............................. S-39
Weighted Average Lives of the Notes ................................ S-39
Percentage of Initial Class A-1 and Class A-2 Note Principal
at Various ABS Percentages ....................................... S-41
Percentage of Initial Class A-3 and Class A-4 Note Principal
at Various ABS Percentages ....................................... S-42
Percentage of Initial Class B Note Principal at Various
ABS Percentages .................................................. S-44
Note Factors ....................................................... S-46
Statements to Noteholders .......................................... S-46
Use of Proceeds .................................................... S-46
BMW FS' Financing Program .......................................... S-46
Underwriting ....................................................... S-46
The Notes .......................................................... S-47
General .......................................................... S-47
Payments of Interest ............................................. S-47
Payments of Principal ............................................ S-48
Indenture ........................................................ S-49
Notices .......................................................... S-49
Governing Law .................................................... S-50
Minimum Denominations ............................................ S-50
Payments on the Notes .............................................. S-50
Payment of Distributable Amounts ................................. S-50
The Certificates ................................................... S-51
S-1
TABLE OF CONTENTS
(continued)
Page
Credit Enhancement ................................................. S-52
Subordination .................................................... S-52
Reserve Account .................................................. S-52
Overcollateralization ............................................ S-53
Yield Supplement Overcollateralization Amount .................... S-53
Description of the Transfer and Servicing Agreements ............... S-55
The Transfer and Servicing Agreements ............................ S-55
Sale and Assignment of Receivables ............................... S-55
Accounts ......................................................... S-55
Collections ...................................................... S-55
Note Distribution Account ........................................ S-56
Advances ......................................................... S-56
Servicing Compensation ........................................... S-56
Net Deposits ..................................................... S-57
Optional Purchase ................................................ S-57
Removal of Servicer .............................................. S-57
Notes Owned by the Depositor, the Servicer or Affiliates ......... S-57
Duties of the Owner Trustee and the Indenture Trustee ............ S-58
The Owner Trustee and the Indenture Trustee ...................... S-59
Fees and Expenses ................................................ S-59
Legal Proceedings .................................................. S-60
Material Income Tax Consequences ................................... S-60
Tax Characterization of the Trust ................................ S-60
Treatment of the Notes as Indebtedness ........................... S-60
ERISA Considerations ............................................... S-61
Plan of Distribution ............................................... S-62
Legal Opinions ..................................................... S-63
Glossary of Terms .................................................. S-64
Appendix A Static Pool Information ................................. A-1
Annex A Global Clearance, Settlement and Tax
Documentation Procedures ......................................... Annex 1
Initial Settlement ............................................... Annex 1
Secondary Market Trading ......................................... Annex 1
Material U.S. Federal Income Tax Documentation
Requirements ..................................................... Annex 3
S-2
Important Notice About Information Presented in this
Prospectus Supplement and the Accompanying Prospectus
Information about the securities is provided in two separate documents
that provide varying levels of detail: (1) the accompanying prospectus, which
provides general information, some of which may not apply to a particular class
of securities, including your securities; and (2) this prospectus supplement,
which describes the specific terms of your securities.
Cross-references are included in this prospectus supplement and in the
accompanying prospectus which direct you to more detailed descriptions of a
particular topic. You can also find references to key topics in the Table of
Contents beginning on page S-1 in this prospectus supplement and the Table of
Contents beginning on page i in the accompanying prospectus.
In making your investment decision, you should rely only on the
information contained or incorporated by reference in this prospectus supplement
and the attached prospectus. We and the underwriters have not authorized anyone
to provide you with any other information. If you receive any other information,
you should not rely on it.
We and the underwriters are offering to sell the notes only in places
where offers and sales are permitted.
You should not assume that the information contained or incorporated by
reference in this prospectus supplement or the attached prospectus is accurate
as of any date other than the date on the front cover of this prospectus
supplement.
Whenever we use words like "intends," "anticipates" or "expects" or
similar words in this prospectus, we are making a forward-looking statement, or
a projection of what we think will happen in the future. Forward-looking
statements are inherently subject to a variety of circumstances, many of which
are beyond our control and could cause actual results to differ materially from
what we anticipate. Any forward-looking statements in this prospectus supplement
speak only as of the date of this prospectus supplement. We do not assume any
responsibility to update or review any forward-looking statement contained in
this prospectus supplement to reflect any change in our expectation about the
subject of that forward-looking statement or to reflect any change in events,
conditions or circumstances on which we have based any forward-looking
statement.
S-3
Summary of Parties to the Transaction*
-------------------------------------
BMW FINANCIAL
SERVICES NA, LLC
(sponsor, originator,
administrator and servicer)
-------------------------------------
- ---------------- --------------------
servicing of BMW FS ---------------------
receivables SECURITIES LLC Wilmington
- ---------------- (depositor) Trust Company
-------------------- (owner trustee)
---------------------
---------------------------
- --------------------- BMW VEHICLE
DEUTSCHE BANK OWNER TRUST 2006-A
TRUST COMPANY (issuing entity)
AMERICAS ---------------------------
(indenture trustee)
- ---------------------
-------------------
CLASS A-2 NOTES
CLASS A-3 NOTES ----------------
CLASS A-4 NOTES CERTIFICATES
AND ----------------
CLASS B NOTES
-------------------
* This chart provides only a simplified overview of the relations between the
key parties to the transaction. Refer to this prospectus supplement and the
prospectus for a further description.
S-4
Summary of Monthly Deposits to and
Withdrawals from Accounts*
- -------------------------------- ------------ ---------------
Servicer Payments on Obligors on
- -------------------------------- Receivables Receivables
------------- ---------------
- --------------------------------
Principal & Interest on
Receivables
- --------------------------------
- --------------------------------
Servicer Advances
- --------------------------------
- --------------------------------
Reimbursement of
Servicer Advances
- --------------------------------
- --------------------------------
Warranty & Administrative
Purchase Payments
- --------------------------------
- -------------------------------- ------------------- -------------------
Collection Account Withdrawals from Reserve
- -------------------------------- Reserve Account Account
- -------------------------------- ------------------- -------------------
Interest & Deposit to Excess monies from
Principle on Notes Reserve Account Reserve Account
- -------------------------------- ------------------- -------------------
Payments on
Certificates
- --------------------------------
- ----------------- ---------------------- ----------------------
Noteholders Certificateholders Certificateholders
- ----------------- ---------------------- ----------------------
* This chart provides only a simplified overview of the monthly flow of funds.
Refer to this prospectus supplement and the prospectus for a further
description.
S-5
- --------------------------------------------------------------------------------
SUMMARY OF MONTHLY DISTRIBUTIONS OF AVAILABLE AMOUNTS
-----------------------------------
COLLECTION ACCOUNT
-----------------------------------
-----------------------------------
1st SERVICER
(Servicing Fee and non-recoverable
Servicer Advances)
-----------------------------------
- ----------------------------------- -----------------------------------
(pro rata, based on amounts to 2nd CLASS A NOTEHOLDERS
each such class of notes) (accrued and unpaid interest for
the related interest period)
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
(first, to the Class A-1 Notes 3rd NOTEHOLDERS
until paid in full, second to the (First Priority Principal
Class A-2 Notes until paid in Distribution Amount)
full, third to the Class A-3 -----------------------------------
Notes until paid in full, fourth
to the Class A-4 Notes until paid
in full and fifth to the Class B
Notes until paid in full)
- -----------------------------------
-----------------------------------
4th CLASS B NOTEHOLDERS
(accrued and unpaid interest for
the related interest period)
-----------------------------------
- ----------------------------------- -----------------------------------
(first, to the Class A-1 Notes 5th NOTEHOLDERS
until paid in full, second to the (Second Priority Principal
Class A-2 Notes until paid in Distribution Amount)
full, third to the Class A-3 Notes -----------------------------------
until paid in full, fourth to the
Class A-4 Notes until paid in full
and fifth to the Class B Notes
until paid in full)
- -----------------------------------
-----------------------------------
6th RESERVE ACCOUNT
(amount, if any, necessary to
achieve the Specified Reserve
Account Balance)
-----------------------------------
- ----------------------------------- -----------------------------------
(first, to the Class A-1 Notes 7th NOTEHOLDERS
until paid in full, second to the (Regular Principal
Class A-2 Notes until paid in Distribution Amount)
full, third to the Class A-3 Notes -----------------------------------
until paid in full, fourth to the
Class A-4 Notes until paid in full
and fifth to the Class B Notes
until paid in full)
- -----------------------------------
-----------------------------------
8th OWNER TRUSTEE AND INDENTURE TRUSTEE
(any fees and expenses not
paid by the Servicer)
-----------------------------------
-----------------------------------
9th CERTIFICATEHOLDER
(any remaining amounts)
-----------------------------------
- --------------------------------------------------------------------------------
S-6
- --------------------------------------------------------------------------------
Summary of Terms
The following summary contains a brief description of the notes. You will
find a detailed description of the terms of the offering of the notes following
this summary. You should carefully read this entire document and the
accompanying prospectus to understand all of the terms of the offering of the
notes. You should consider both documents when making your investment decision.
RELEVANT PARTIES
Issuing Entity ........... BMW Vehicle Owner Trust 2006-A, which we refer to
as the issuing entity or the trust. The trust will
be established by the trust agreement.
Depositor ................ BMW FS Securities LLC. The depositor's address and
phone number is 300 Chestnut Ridge Road, Woodcliff
Lake, New Jersey, (201) 307-4000.
Sponsor, Seller, Servicer
and Administrator ........ BMW Financial Services NA, LLC. The sponsor's
address and phone number is 300 Chestnut Ridge
Road, Woodcliff Lake, New Jersey 07677, (201)
307-4000.
Indenture Trustee ........ Deutsche Bank Trust Company Americas.
Owner Trustee ............ Wilmington Trust Company.
RELEVANT AGREEMENTS
Indenture ................ The indenture between the issuing entity and the
indenture trustee. The indenture provides for the
terms relating to the notes.
Trust Agreement .......... The trust agreement between the depositor and the
owner trustee. The trust agreement governs the
creation of the trust and provides for the terms
relating to the certificates.
Sale and Servicing
Agreement ................ The sale and servicing agreement among the trust,
the indenture trustee, the servicer and the
depositor. The sale and servicing agreement
governs the transfer of the receivables by the
depositor to the trust and the servicing of the
receivables by the servicer.
Administration
Agreement ................ The administration agreement among the
administrator, the trust and the indenture
trustee. The administration agreement governs the
provision of reports by the administrator and the
performance by the administrator of other
administrative duties for the trust.
Receivables Purchase
Agreement ................ The receivables purchase agreement between the
depositor and the seller. The receivables purchase
agreement governs the sale of the receivables from
BMW Financial Services NA, LLC, as the originator,
to the depositor.
- --------------------------------------------------------------------------------
S-7
RELEVANT DATES
Closing Date ............. Expected to be September 22, 2006.
Cutoff Date .............. Close of business on August 31, 2006.
Collection Period ........ The period commencing on the first day of the
applicable month (or in the case of the first
collection period, the cutoff date) and ending on
the last day of the applicable month.
Payment Dates ............ The trust will pay interest and principal on the
securities on the twenty-fifth day of each month
with amounts received from collections on the
receivables during the immediately preceding
collection period and other amounts available for
such purpose in the applicable trust accounts. If
the twenty-fifth day of the month is not a
business day, payments on the securities will be
made on the next business day. The date that any
payment is made is called a payment date. The
first payment date is specified on the cover of
this prospectus supplement.
Final Scheduled
Payment Dates ............ The final principal payment for each class of
notes is scheduled to be made on the final
scheduled payment dates indicated for each class
of notes on the cover of this prospectus
supplement.
Expected Final Payment
Dates .................... The final principal payment for each class of
notes is expected to be made on the applicable
expected final payment date specified on the front
cover of this prospectus supplement. However, due
to a variety of factors described herein, there
can be no assurance that your class of notes will
be paid in full on an earlier or on a later
payment date. We refer you to "Risk Factors" in
this prospectus supplement and the accompanying
prospectus for discussions of certain of these
factors.
Record Date .............. So long as the notes are in book-entry form, the
trust will make payments on the notes to the
holders of record on the day immediately preceding
the payment date. If the notes are issued in
definitive form, the record date will be the last
day of the month preceding the payment date.
DESCRIPTION OF THE RECEIVABLES
Receivables .............. The trust's main source of funds for making
payments on the notes will be collections on motor
vehicle retail installment sale contracts and
promissory notes, known as the receivables. All of
the receivables are secured by passenger cars,
light trucks and motorcycles manufactured by
Bayerische Motoren Werke Aktiengesellschaft or its
subsidiaries, except that 1.94% by principal
balance of the receivables as of the cutoff date
are secured by vehicles of other manufacturers.
The principal balance of the receivables on the
close of
- --------------------------------------------------------------------------------
S-8
- --------------------------------------------------------------------------------
business on the cutoff date was $1,153,770,268.17.
As of the cutoff date, the receivables had the
following characteristics:
o number of receivables: 62,058
o average principal balance: $18,591.81
o weighted average annual percentage rate:
5.561%
o weighted average original term to maturity:
59.81 months
o weighted average remaining term to maturity:
48.57 months
The receivables owned by the trust are classified
as simple interest receivables. Simple interest
receivables are described in more detail in "The
Receivables" in the accompanying prospectus.
We refer you to "The Receivables" in this
prospectus supplement for more information on the
receivables.
Removal of Pool Assets ... Breaches of Representations and Warranties. Upon
sale to the depositor, the originator will make
certain representations and warranties, and upon
sale to the trust, the depositor will make certain
representations and warranties to the trust. The
depositor is required to repurchase from the
trust, and the originator is required to
repurchase from the depositor, in turn, any
receivable for which a representation or warranty
has been breached.
We refer you to "Description of the Transfer and
Servicing Agreements--Sale and Assignment of the
Receivables" in the prospectus.
Breach of Servicer Covenants. The servicer will be
required to purchase any receivable that breaches
any covenants made by the servicer under the sale
and servicing agreement.
DESCRIPTION OF THE SECURITIES
General .................. The notes consist of the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes, the Class
A-4 Notes and the Class B Notes. The initial
principal balance of each class of notes is
specified on the front cover of this prospectus
supplement.
Payments of interest on the Class B Notes are
subordinated to the payments of interest on and,
in certain circumstances, principal of the Class A
Notes as
- --------------------------------------------------------------------------------
S-9
- --------------------------------------------------------------------------------
described in this prospectus supplement.
The trust will also issue certificates
representing the equity interest in the trust. The
depositor currently does not expect to sell the
certificates, but is not prohibited from doing so.
The depositor is not offering the certificates by
this prospectus supplement. The certificates will
initially be held by BMW FS Securities LLC. Any
information in this prospectus supplement relating
to the certificates is presented solely to provide
you with a better understanding of the notes.
Terms of the Notes ....... In general, noteholders are entitled to receive
payments of interest and principal from the trust
only to the extent that collections from trust
assets are sufficient to make those payments.
Interest and principal collections from trust
assets will be divided among the various classes
of securities in specified proportions. The trust
will pay interest and principal to noteholders of
record as of the preceding record date.
Interest. The interest rate for each class of
notes is set forth on the front cover of this
prospectus supplement. The Class A-1 Notes will
accrue interest on an actual/360 basis from the
previous payment date to, but excluding, the next
payment date, except that the first interest
accrual period will be from the closing date to,
but excluding, October 25, 2006. This means that
the interest due on each payment date will be the
product of:
o the outstanding principal balance of the
Class A-1 Notes,
o the interest rate for the Class A-1 Notes,
and
o the actual number of days since the previous
payment date to, but excluding, the current
payment date or, in the case of the first
payment date, 33 divided by 360
The Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes and the Class B Notes will accrue
interest on a 30/360 basis from the 25th day of
each calendar month to, but excluding, the 25th
day of the succeeding calendar month, except that
the first interest accrual period will be from the
closing date to, but excluding, October 25, 2006.
This means that the interest due on each payment
date will be the product of:
o the outstanding principal balance of the
related class of notes,
o the related interest rate, and
o 30 or, in the case of the first payment
date, 33,
- --------------------------------------------------------------------------------
S-10
- --------------------------------------------------------------------------------
divided by 360.
Each class of Class A Notes will be entitled to
interest at the same level of priority with all
other classes of Class A Notes. If noteholders of
any class do not receive all interest owed to them
on a payment date, the trust will make payments of
interest on later payment dates to make up the
shortfall together with interest on those amounts,
to the extent funds from specified sources are
available to cover the shortfall.
Principal. The trust will pay principal
sequentially to the earliest maturing class of
Class A Notes then outstanding until all Class A
Notes are paid in full and then to the Class B
Notes.
Priority of
Distributions ............ From collections on the receivables during the
prior calendar month and, in the event of a
shortfall in making the payments described in
clauses 1 through 5, amounts withdrawn from the
reserve account, the trust will pay the following
amounts on each payment date in the following
order of priority:
1. to the servicer, the servicing fee and all
unpaid servicing fees from prior collection
periods and amounts in respect of reimbursement
for nonrecoverable servicer advances,
2. to the Class A Noteholders, the accrued
interest on the Class A Notes,
3. to the principal distribution account, the
first priority principal distribution amount,
which will generally be the amount equal to the
excess, if any, of:
o the outstanding principal balance of the
Class A Notes over
o the sum of the aggregate principal balance
of the receivables less the yield supplement
overcollateralization amount,
4. to the Class B Noteholders, accrued and unpaid
interest on the Class B Notes,
5. to the principal distribution account, the
second priority principal distribution amount,
which will generally be the amount equal to the
excess, if any, of:
o the outstanding principal balance of the
notes over
o the sum of the aggregate principal balance
of
- --------------------------------------------------------------------------------
S-11
- --------------------------------------------------------------------------------
the receivables less the yield supplement
overcollateralization amount,
less any amounts previously deposited in the
principal distribution account in accordance with
clause 3 above,
6. to the reserve account, the amount, if any,
necessary to cause the amount on deposit in the
reserve account to equal the specified reserve
account balance, which is the lesser of
$2,772,490.93 and the outstanding principal
balance of the notes,
7. to the principal distribution account, the
regular principal distribution amount, which
will generally be the amount equal to the
excess of:
o the outstanding principal balance of the
notes over
o the sum of the aggregate principal balance
of the receivables less the sum of the
target credit enhancement
overcollateralization amount and the yield
supplement overcollateralization amount,
less any amounts previously deposited in the
principal distribution account in accordance with
clauses 3 and 5 above,
8. to the indenture trustee and the owner trustee,
the indenture trustee fee and owner trustee
fee, respectively, to the extent not paid by
the servicer, and all unpaid indenture trustee
fees and owner trustee fees from prior
collection periods to the extent not otherwise
paid by the servicer, and
9. to the certificateholder, any amounts remaining
in the collection account.
On the Final Scheduled Payment Date of any class
of notes, the amount required to be allocated to
the principal distribution account will include
the amount necessary to reduce the principal
balance of that class of notes to zero.
Distributions from the
Principal Distribution
Account .................. From deposits made to the principal distribution
account, the trust will generally pay principal on
the notes in the following order of priority:
o to the Class A-1 Notes until they are paid
in full,
o to the Class A-2 Notes until they are paid
in
- --------------------------------------------------------------------------------
S-12
- --------------------------------------------------------------------------------
full,
o to the Class A-3 Notes until they are paid
in full,
o to the Class A-4 Notes until they are paid
in full,
o to the Class B Notes until they are paid in
full, and
o to the certificateholder, any funds
remaining.
Change in Priority of
Distribution upon
Certain Events of
Default or an
Acceleration of the
Notes .................... Following the occurrence of any of the events
listed below, the trust will make no distributions
of principal or interest on the Class B Notes
until payment in full of principal and interest on
the Class A Notes. In addition, payments of
principal on the Class A Notes will be made first
to the Class A-1 Notes until the Class A-1 Notes
are paid in full, and then pro rata to the Class
A-2 Notes, the Class A-3 Notes and the Class A-4
Notes.
In general, events of default after the occurrence
of which the order of priority for distributions
will change are limited to events occurring in
connection with the following:
o a default for five days or more in payment
of interest on the controlling class of
notes that has resulted in an acceleration
of the notes,
o a default in the payment of principal on any
note when due that has resulted in an
acceleration of the notes,
o an insolvency or a bankruptcy with respect
to the trust that has resulted in an
acceleration of the notes, or
o any other event of default that results in
the liquidation of the trust.
Following the occurrence of any other event of
default that has resulted in an acceleration of
the notes but has not yet resulted in a
liquidation of the trust, no change will be made
in the priority of payments on the Class A Notes
and the Class B Notes on each payment date until a
liquidation, if any, of the property of the trust.
In addition, upon an event of default, the holders
of a majority of the aggregate outstanding amount
of the notes may accelerate the notes to become
immediately due and payable. Also, upon an event
of default, the
S-13
indenture trustee may liquidate or sell the assets
of the trust provided that:
o the proceeds of the sale or liquidation of
the trust assets would be sufficient to
repay all noteholders in full;
o 100% of the noteholders consent to such sale
or liquidation; or
o the indenture trustee has determined (which
determination may be based solely upon a
certificate of an independent investment
bank provided other than at the indenture
trustee's expense) that the assets of the
trust will be insufficient to continue to
make all required payments of principal and
interest on the notes when due and payable,
and at least 66-2/3% of the aggregate
outstanding amount of notes consent to such
sale or liquidation.
Final Scheduled Payment Dates: The trust must pay
the outstanding principal balance of each class of
notes by its Final Scheduled Payment Date as
specified on the cover page of this prospectus
supplement. We expect, but cannot assure you, that
each class of notes will be paid in full on a
payment date that will occur approximately on the
expected final payment date shown on the cover
page of this prospectus supplement.
Minimum Denominations,
Registration, Clearance
and Settlement ........... The notes of each class shall be issued in U.S.
Dollars in minimum denominations of $1,000 and
integral multiples of $1,000 in excess thereof.
The notes will be issued in book-entry form and
will be registered in the name of Cede & Co., as
the nominee of the Depository Trust Company, the
clearing agency.
Optional Purchase ........ The servicer may cause the trust to redeem any
outstanding securities pursuant to the purchase of
all remaining receivables when the outstanding
aggregate principal balance of the receivables
declines to 10% or less of the original aggregate
principal balance of the receivables as of the
cutoff date.
We refer you to "Description of the Transfer and
Servicing Agreements--Optional Purchase" in this
prospectus supplement for more detailed
information.
Credit Enhancement ....... Credit enhancement is intended to protect you
against losses and delays in payments on your
securities by absorbing losses on the receivables
and other shortfalls in cash flows. The available
credit enhancement is limited. If losses on the
receivables exceed the amount of available credit
enhancement, such losses will not be
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allocated to write down the principal balance of
any class of notes. Instead, the amount available
to make payments on the notes will be reduced to
the extent such losses result in shortfalls in the
amount available to make distributions of interest
and principal.
The credit enhancement for the Class A Notes will
include:
o the subordination of the Class B Notes,
o the reserve account,
o overcollateralization and the yield
supplement overcollateralization amount, and
o the subordination of the certificateholder's
right to receive excess interest.
The credit enhancement for the Class B Notes will
include:
o the reserve account,
o overcollateralization and the yield
supplement overcollateralization amount, and
o the subordination of the certificateholder's
right to receive excess interest.
Subordination of Principal and Interest. As long
as the Class A Notes remain outstanding:
o payments of interest on the Class B Notes
will be subordinated to payments of interest
on the Class A Notes and, in certain
circumstances, to payments of principal on
the Class A Notes, and
o payments of principal on the Class B Notes
will be subordinated to payments of interest
and principal on the Class A Notes.
Reserve Account. On each payment date, the trust
will use funds in the reserve account to cover
shortfalls in payments of the servicing fee and
interest and principal required to be paid on the
notes.
The sale and servicing agreement sets forth the
specified reserve account balance, which is the
amount that is required to be on deposit in the
reserve account. On the closing date, the
depositor will cause to be deposited $2,772,490.93
into the reserve account, which is 0.25% of the
initial aggregate principal balance of the
receivables less the yield supplement
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overcollateralization amount as of the cutoff
date. On each payment date, after making required
payments to the servicer and to the holders of the
notes, the trust will make a deposit into the
reserve account to the extent necessary to
maintain the amount on deposit in the reserve
account at the specified reserve account balance.
For more detailed information about the reserve
account, we refer you to "Credit
Enhancement--Reserve Account" in this prospectus
supplement and the definition of "Specified
Reserve Account Balance" contained in the glossary
to this prospectus supplement.
Overcollateralization. Clause 7 in the "Priority
of Distributions" above results in the application
of all remaining funds, including any excess
interest, to achieve and maintain the target
overcollateralization level. This application will
result in the payment of more principal on the
notes than the amount of principal paid on the
receivables in the related period so long as
excess interest is available for this purpose. As
the principal balance of the notes is paid down to
a target overcollateralization level that is below
the principal balance of the receivables, credit
enhancement in the form of overcollateralization
is created.
The target credit enhancement
overcollateralization amount on each payment date
will be:
the excess of:
(1) the product of (i) 1.25% and (ii) the
outstanding principal balance of the
receivables less the yield supplement
overcollateralization amount with respect to
such payment date, provided that such amount
does not exceed the outstanding principal
balance of the notes
over
(2) the balance required to be on deposit in the
reserve account.
For more detailed information about
overcollateralization, we refer you to "Credit
Enhancement--Overcollateralization" in this
prospectus supplement.
Excess Interest. The certificateholder is entitled
to receive payments of interest collected on the
receivables that are not used by the trust to make
other required payments. The certificateholder's
right to receive this excess interest is
subordinated to the payment of the servicing fee,
reimbursement of nonrecoverable advances, the
payment of principal and interest on the
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notes, the funding of the reserve account and the
payment of indenture trustee and owner trustee
fees.
Yield Supplement
Overcollateralization
Amount ................... On the closing date, the aggregate principal
balance of the receivables as of the cutoff date
will exceed the initial principal balance of the
notes by $44,773,894.22, which is approximately
3.881% of the aggregate principal balance of the
receivables as of the cutoff date. The yield
supplement overcollateralization amount will
decline on each payment date. The yield supplement
overcollateralization amount is intended to
compensate for the low APRs on some of the
receivables.
For detailed information on the yield supplement
overcollateralization amount, we refer you to
"Credit Enhancement--Yield Supplement
Overcollateralization Amount" in this prospectus
supplement.
Advances ................. The servicer will be obligated to advance amounts
to the trust for shortfalls in scheduled payments
of interest on the receivables received from
obligors, in an amount equal to the excess, if
any, of (1) the product of the principal balance
of each receivable as of the first day of the
related collection period and one-twelfth of its
APR, over (2) the amount of interest actually
received from the obligor. To the extent the
servicer determines that any such advance has
become non-recoverable, it will be paid to the
servicer on the related payment date at the same
level of payment priority as the applicable
servicing fee due on such payment date and prior
to all other distributions to be made on such
payment date.
Servicer Compensation .... As compensation for its roles as servicer and
administrator, BMW Financial Services NA, LLC,
will be entitled to a monthly servicing fee
payable on each payment date, equal to the product
of the aggregate principal balance of the
receivables as of the first day of the related
collection period multiplied by a servicing fee
rate equal to 1.00% per annum. In addition, as
additional servicing compensation, the servicer
will be entitled to retain all investment earnings
on amounts on deposit in the trust accounts, and
other fees, expenses and charges received from
obligors on the receivables. The servicing fee
will be payable on each payment date prior to any
other distributions. For more detailed information
about additional servicing compensation, we refer
you to "Description of the Transfer and Servicing
Agreements--Servicing Compensation" in this
prospectus supplement.
Trustee Fee and
Expenses ................. Each trustee will be entitled to a fee (and will
be entitled to be reimbursed for all costs,
expenses and indemnities incurred) in connection
with the performance of its respective duties.
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The indenture trustee will be entitled to an
annual fee equal to $0.00.
The owner trustee will be entitled to an annual
fee equal to $3,000.00.
Such trustee fees (and associated costs, expenses
and indemnities) will be paid directly by the
servicer from amounts received as the servicing
fee. To the extent not paid by the servicer, such
trustee fees, expenses and indemnities are payable
by the trust on each payment date after the
servicing fees are paid on that date and prior to
any distributions to noteholders, but absent the
occurrence of an event of default not in excess of
an aggregate amount per annum equal to $10,000.00.
Any additional amounts owed to the trustees will
be paid only after all amounts owed to noteholders
have been distributed on the related payment date.
Tax Status ............... Subject to important considerations described in
this prospectus supplement and the accompanying
prospectus, Weil, Gotshal & Manges LLP, special
tax counsel to the trust, will deliver its
opinion, subject to the assumptions set forth
therein, that, although there is no authority
directly on point with respect to transactions
similar to those contemplated in the transfer and
servicing agreements, entities with a capital
structure similar to the trust or securities with
terms similar to the notes and certificates:
o the notes will be characterized as debt for
federal income tax purposes, and
o the trust will not be characterized as an
association or a publicly traded partnership
taxable as a corporation for federal income
tax purposes.
If you purchase the notes, you will agree to treat
the notes as debt. The depositor and any
subsequent purchaser of the certificates will
agree to treat the trust:
o as a partnership in which the owners of the
certificates are partners, or
o if there is only one beneficial owner of the
certificates, as a "disregarded entity," for
federal income tax purposes.
We refer you to "Material Income Tax Consequences"
in this prospectus supplement and "Material Income
Tax Consequences--Tax Treatment of Owner Trusts"
in the accompanying prospectus.
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S-18
ERISA Considerations ..... The notes are generally eligible for purchase by
employee benefit plans and individual retirement
accounts, subject to those considerations
discussed under "ERISA Considerations" in this
prospectus supplement and in the accompanying
prospectus.
We refer you to "ERISA Considerations" in this
prospectus supplement and in the accompanying
prospectus. If you are a benefit plan fiduciary
considering purchase of the notes you should,
among other things, consult with your counsel in
determining whether all required conditions have
been satisfied.
Eligibility for Purchase
by Money Market Funds .... The Class A-1 Notes will be eligible for purchase
by money market funds under Rule 2a-7 of the
Investment Company Act of 1940, as amended. A
money market fund should consult its legal
advisers regarding the eligibility of the Class
A-1 Notes under Rule 2a-7 and whether an
investment in the Class A-l Notes satisfies the
fund's investment policies and objectives.
Ratings .................. It is a condition to the issuance of the
securities that the notes will receive the
following ratings from Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies,
Inc. ("Standard & Poor's") and Moody's Investors
Service, Inc. ("Moody's"):
Standard
--------
Class & Poor's Moody's
----- -------- -------
A-1 A-1+ Prime-1
A-2 AAA Aaa
A-3 AAA Aaa
A-4 AAA Aaa
B A N/A
None of the sponsor, depositor, servicer,
administrator, indenture trustee, owner trustee or
any of their affiliates will be required to
monitor any changes to the ratings on these
securities.
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S-19
Risk Factors
You should consider the following risk factors (and the factors set forth
under "Risk Factors" in the accompanying prospectus) in deciding whether to
purchase the notes of any class.
Because the trust has The only sources of funds for payments on the
limited assets, there is securities are the assets of the trust and the
only limited protection reserve account. The securities are not
against potential losses. obligations of, and will not be insured or
guaranteed by, any governmental agency or the
depositor, the sponsor, the originator, the
servicer, any trustee or any of their affiliates.
You must rely solely on payments on the
receivables and amount on deposit in the reserve
account for payments on the notes. Although funds
in the reserve account will be available to cover
shortfalls in payments of interest and principal
on each payment date, the amounts deposited in the
reserve account will be limited. If the entire
reserve account has been used, the trust will
depend solely on current collections on the
receivables to make payments on the notes. Any
excess amounts released from the reserve account
to the depositor will no longer be available to
noteholders on any later payment date. We refer
you to "Credit Enhancement--Reserve Account" in
this prospectus supplement.
Occurrence of events of Payment defaults or the insolvency or dissolution
default under the indenture of the depositor may result in prepayment of the
may result in insufficient notes, which may result in losses. If the trust
funds to make payments on fails to pay principal on the notes when due, or
your notes. fails to pay interest on the notes of the
controlling class within five days of the due
date, the indenture trustee or the holders of the
controlling class of notes outstanding may declare
the entire amount of the notes to be due
immediately. If this happens, the indenture
trustee may be directed to sell the assets of the
trust and prepay the notes. In the event the
indenture trustee sells the receivables under
adverse market conditions, proceeds from the sale
of the receivables may not be sufficient to repay
all of the securities and you may suffer a loss.
You May Suffer Losses Due to The receivables include receivables that have APRs
Receivables with Low APRs. that are less than the interest rates on your
securities. Interest paid on the higher APR
receivables compensates for the lower APR
receivables to the extent such interest is paid by
the trust as principal on your securities and
additional overcollateralization is created.
Excessive prepayments on the higher APR
receivables may adversely impact your securities
by reducing the interest payments available.
The yield supplement overcollateralization amount
takes into account the mix of receivables by APR
S-20
but there is no assurance that the yield
supplement overcollateralization amount will be
sufficient to pay all securities in full.
If you own Class B Notes, The Class B Notes bear greater risk than the Class
you are subject to greater A Notes because payments of interest and principal
credit risk because the on the Class B Notes are subordinate, to the
Class B Notes are extent described below, to payments of interest
subordinate to the Class A and principal on the Class A Notes.
Notes.
Interest payments on the Class B Notes on each
payment date will be subordinated to servicing
fees due to the servicer, nonrecoverable advances
payable to the servicer, interest payments on the
Class A Notes and an allocation of principal
payments to the Class A Notes to the extent the
aggregate principal balance of the Class A Notes
exceeds the receivables balance less the yield
supplement overcollateralization amount.
Principal payments on the Class B Notes will be
fully subordinated to principal payments on the
Class A Notes. No principal will be paid on the
Class B Notes until the Class A Notes have been
paid in full.
You may suffer losses Because the trust has pledged the property of the
because you have limited trust to the indenture trustee to secure payment
control over actions of the on the notes, the indenture trustee may, and at
trust and conflicts of the direction of the required percentage of the
interest between classes of controlling class, which will be the Class A Notes
notes may occur. for so long as any Class A Notes are outstanding
and the Class B Notes after the Class A Notes have
been paid in full, the indenture trustee will,
take one or more of the actions specified in the
indenture relating to the property of the trust,
including a sale of the assets of the trust. In
addition, the holders of a majority of the Class A
Notes, under some circumstances, have the right to
waive events of servicing termination or terminate
the servicer without consideration of the effect
that the waiver or termination would have on the
holders of Class B Notes. The holders of Class B
Notes will not have the ability to waive events of
servicing termination or to remove the servicer
until the Class A Notes have been paid in full.
The occurrence of an event The trust will not make any distributions of
of default under the principal or interest on the Class B Notes until
indenture may delay payments payment in full of principal and interest on the
on the Class B Notes. Class A Notes following:
o an event of default under the indenture
relating to the payment of principal on any
note or the payment of interest on the Class
A Notes which has resulted in acceleration
S-21
of the notes,
o an event of default under the indenture
relating to an insolvency event or a
bankruptcy with respect to the trust which
has resulted in an acceleration of the
notes, or
o a liquidation of the trust assets following
any event of default under the indenture.
This may result in a delay or default in making
payments on the Class B Notes.
Class B Noteholders may not If an event of default occurs under the indenture,
be able to direct the so long as any Class A Notes are outstanding, only
indenture trustee upon an the holders of the Class A Notes may waive that
event of default under the event of default, accelerate the maturity dates of
indenture. the notes or direct or consent to any action under
the indenture. The holders of any outstanding
Class B Notes will not have any rights to direct
or to consent to any action until the Class A
Notes have been repaid in full.
Payment priorities increase Classes of notes that receive payments,
risk of loss or delay in particularly principal payments, before other
payment to certain notes. classes will be repaid sooner than the other
classes and payments to these other classes may be
delayed if collections and amounts on deposit in
the reserve account are inadequate to pay all
amounts payable on all classes of notes on any
payment date. In addition, because principal of
each class of notes will be paid sequentially,
certain classes of notes will be outstanding
longer and therefore will be exposed to the risk
of losses on the receivables during periods after
other classes have been receiving most or all
amounts payable on their notes.
As a result, the yields of the later maturing
classes of Class A Notes and the yields of the
Class B Notes will be sensitive to losses on the
receivables and the timing of those losses. If the
rate and amount of losses exceed your
expectations, and if amounts in the reserve
account are insufficient to cover the resulting
shortfalls, the yield to maturity on your notes
may be lower than anticipated, and you could
suffer a loss.
Classes of notes that receive payments earlier
than expected are exposed to reinvestment risk and
classes of notes that receive principal later than
expected are exposed to greater risk of loss. In
either case, the yields on your notes could be
materially and adversely affected.
S-22
The geographic concentration Economic conditions in the states where obligors
of the obligors and reside may affect delinquencies, losses and
performance of the prepayments on the receivables. The following
receivables may increase the economic conditions may affect payments on the
risk of loss on your receivables:
investment.
o unemployment,
o interest rates,
o inflation rates, and
o consumer perceptions of the economy.
If there is a concentration of obligors and
receivables in particular states, these or any
adverse economic conditions in those states may
affect the performance of the securities more than
if this concentration did not exist. As of the
cutoff date, BMW Financial Services NA, LLC's
records indicate that the titles to the vehicles
relating to the receivables were concentrated in
the following states:
Percentage of
Initial Aggregate
State Principal Balance
----- -----------------
California 21.90%
Texas 10.16%
Florida 8.42%
New York 5.80%
New Jersey 5.22%
No other state constituted more than 5.00% of the
aggregate principal balance of the receivables as
of the cutoff date.
Approximately 21.90% of the outstanding principal
amount of the receivables as of the cutoff date
were titled in California. A large number of
manufacturers and providers of high technology
equipment and services are headquartered in
California. A renewed downturn in this sector
could have a substantial impact on the California
economy and on the performance of receivables
originated in that state.
For a discussion of the breakdown of the
receivables by state, we refer you to "The
Receivables" in this prospectus supplement.
Certain obligors' ability to Extreme weather conditions, such as the recent
make timely payments on the severe hurricanes in Florida and the southeastern
receivables may be adversely United States, and the recent flooding that
affected by extreme weather occurred
conditions.
S-23
in the State of Texas and the State of California
could cause substantial business disruptions,
economic losses, unemployment and an economic
downturn. As a result, the related obligors'
ability to make timely payments could be adversely
affected. The trust's ability to make payments on
the notes could be adversely affected if the
related obligors were unable to make timely
payments.
The potential energy crisis Since 2001, California has experienced
may adversely affect the intermittent energy shortages that have resulted
trust's ability to make in unpredictable rolling blackouts and higher
payments on the notes. energy costs. This potential crisis could someday
spread to other states and affect the entire
nation. The trust's ability to make payments on
the notes could be adversely affected if the
related obligors were unable to make timely
payments.
High energy costs may affect Recently the cost of crude oil reached record
obligors' ability to make highs. Higher energy and fuel costs could reduce
payments. the amount of money that obligors have available
to make monthly payments. Higher energy costs
could also cause business disruptions, which could
cause unemployment and an economic downturn.
Obligors could potentially become delinquent in
making monthly payments or default if they were
unable to make payments due to increased energy or
fuel bills or unemployment. The trust's ability to
make payments on the notes could be adversely
affected if the related obligors were unable to
make timely payments.
The return on your notes The Servicemembers Civil Relief Act, as amended
could be reduced by (the "Relief Act"), provides relief to obligors
shortfalls due to the who enter active military service and to obligors
Servicemembers Civil Relief in reserve status who are called to active duty
Act. after the origination of their receivables. The
response of the United States to the terrorist
attacks on September 11, 2001, the instability of
Afghanistan, the occupation of Iraq and rising
tensions in other regions such as Korea and Iran
may continue to involve military operations that
will increase the number of citizens who have been
called or will be called to active duty. The
Relief Act provides, generally, that an obligor
who is covered by the Relief Act may not be
charged interest on the related receivable in
excess of 6% per annum during the period of the
obligor's active duty. These shortfalls are not
required to be paid by the obligor at any future
time. The servicer is not required to advance
these shortfalls as delinquent payments.
In the event that excess interest on the
receivables and amounts in the reserve account are
not sufficient to cover the reduction of interest
on the
S-24
receivables due to the application of the Relief
Act or similar regulations or legislation, a note
interest carryover shortfall will result. Any such
interest carryover shortfall will be paid in
subsequent periods to the extent of available
funds before payments of principal are made on the
notes and may result in extending the anticipated
maturity of your class of notes or possibly result
in a loss in the absence of sufficient credit
enhancement. In addition, pursuant to the Military
Reservist Relief Act of 1991, under certain
circumstances California residents called into
active duty with the reserves can apply to a court
to delay payments on retail installment contracts,
including the receivables.
The Relief Act also limits the ability of the
servicer to repossess the financed vehicle
securing a receivable during the related obligor's
period of active duty and, in some cases, may
require the servicer to extend the maturity of the
receivable, lower the monthly payments and
readjust the payment schedule for a period of time
after the completion of the obligor's military
service. As a result, there may be delays in
payment and increased losses on the receivables.
Those delays and increased losses will be borne
primarily by the certificates, but if such losses
are greater than anticipated, you may suffer a
loss.
While there are not a significant number of
obligors in active military service as of the
cutoff date the servicer does not maintain data as
to the number of obligors in the military
reserves.
Prepayments on receivables You may receive payment of principal on your notes
may cause prepayments on the earlier than you expected. If that happens, you
notes, resulting in may not be able to reinvest the principal you
reinvestment risk to you. receive at a rate as high as the rate on your
notes. Prepayments on the receivables will shorten
the lives of the notes to an extent that cannot be
predicted. Prepayments may occur for a number of
reasons. Some prepayments may be caused by the
obligors under the receivables. For example,
obligors may:
o make early payments, since receivables will
generally be prepayable at any time without
penalty,
o default, resulting in the repossession and
sale of the financed vehicle,
o damage the vehicle or become unable to pay
due to death or disability, resulting in
payments to the trust under any existing
S-25
physical damage, credit life or other
insurance,
o sell their vehicles or be delinquent or
default on their receivables as a result of
a manufacturer recall.
Some prepayments may be caused by the depositor or
the servicer. For example, the depositor will make
representations and warranties regarding the
receivables, and the servicer will agree to take
or refrain from taking certain actions with
respect to the receivables. If the depositor or
the servicer breaches a representation or warranty
and the breach is material and cannot be remedied,
it will be required to purchase the affected
receivables from the trust. This will result in
the prepayment of the purchased receivables.
The servicer has the option to purchase the
receivables from the trust when the total
outstanding principal balance of the receivables
is 10% or less of the sum of the total outstanding
principal balance of the receivables as of the
cutoff date.
The rate of prepayments on the receivables may be
influenced by a variety of economic, social and
other factors. The depositor maintains limited
historical data with respect to prepayments. For
these reasons, the depositor cannot predict the
actual prepayment rates for the receivables.
Withdrawal or downgrading of A security rating is not a recommendation to buy,
the initial ratings of the sell or hold securities. Similar ratings on
notes will affect the prices different types of securities do not necessarily
for the notes upon resale. mean the same thing. A rating agency may change
its rating of the notes after the notes are issued
if that rating agency believes that circumstances
have changed. Any subsequent change in a rating
will likely affect the price that a subsequent
purchaser would be willing to pay for the notes
and your ability to resell your notes.
The notes are not suitable The notes, and in particular the Class B Notes,
investments for all are not a suitable investment for any investor
investors. that requires a regular or predictable schedule of
payments or payment on specific dates. The notes
are complex investments that should be considered
only by sophisticated investors. We suggest that
only investors who, either alone or with their
financial, tax and legal advisors, have the
expertise to analyze the prepayment, reinvestment
and default risks, the tax consequences of an
investment and the interaction of these factors
should consider investing in the notes.
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Defined Terms
In later sections, we use a few terms that we define either immediately
surrounding the first use of such term or within the text or in the glossary at
the end of this prospectus supplement. These terms appear in bold face on their
first use.
The Issuing Entity
General
The issuing entity, BMW Vehicle Owner Trust 2006-A (which is referred to
in this prospectus supplement as the Trust), is a Delaware statutory trust that
was formed pursuant to the trust agreement between BMW FS Securities LLC, as
depositor (which is referred to in this prospectus supplement as the Depositor),
and Wilmington Trust Company, as owner trustee (which is referred to in this
prospectus supplement as the Owner Trustee). After its formation, the Trust will
not engage in any activity other than:
1. acquiring, holding and managing a pool of motor vehicle retail
installment sale contracts and promissory notes regarding the
Financed Vehicles (which are referred to in this prospectus
supplement as the Receivables) and the other assets of the Trust and
proceeds from those assets,
2. issuing the notes and the certificates,
3. making payments on the notes and the certificates, and
4. engaging in other activities that are necessary, suitable or
convenient to accomplish the foregoing or are incidental to or
connected with those activities.
The Trust may not issue securities other than the notes and certificates.
Except for the notes, the Trust is also prohibited from borrowing money or
making loans to any other person.
Any amendment to the trust agreement to amend, supplement or modify these
permitted activities, or otherwise make any modification that would materially
and adversely affect the noteholders, would require the consent of the holders
of not less than a majority of the aggregate outstanding principal balance of
the notes.
The net proceeds from the sale of the notes will be used by the Trust to
purchase the Receivables from the Depositor pursuant to the sale and servicing
agreement dated as of September 1, 2006 (which is referred to in this prospectus
supplement as the Sale and Servicing Agreement) among the Depositor, BMW
Financial Services NA, LLC ("BMW FS") as seller, servicer, custodian and
administrator, the Trust, and Deutsche Bank Trust Company Americas, as indenture
trustee, and to fund the Reserve Account.
BMW FS, the sponsor of this transaction (which is sometimes referred to in
this prospectus supplement as the Sponsor) will be appointed to act as the
servicer (which is sometimes referred to in this prospectus supplement as the
Servicer) of the Receivables. The Servicer will service the Receivables pursuant
to the Sale and Servicing Agreement, the trust agreement and the owner trust
administration agreement dated as of September 1, 2006 (which is referred to in
this prospectus supplement as the Administration Agreement) among BMW FS, as
administrator (which is sometimes referred to in this prospectus supplement as
the Administrator), the Trust and the Indenture Trustee, and will be compensated
for those services as described under "Description of the Transfer and Servicing
Agreements--Servicing Compensation" in this prospectus supplement and
"Description of the Transfer and Servicing Agreements--Servicing Compensation"
in the accompanying prospectus.
Pursuant to agreements between BMW FS and dealers in BMW Products and
dealers in MINI Products (which are referred to collectively in this prospectus
supplement as Centers), Centers will repurchase from BMW FS those contracts that
do not meet specified representations and warranties made by the Centers. These
Centers' repurchase obligations are referred to in this prospectus supplement as
"Center Recourse." Those representations
S-27
and warranties relate primarily to the origination of the contracts and the
perfection of the security interests in the related financed vehicles, and do
not relate to the creditworthiness of the related retail purchaser of a Financed
Vehicle who entered into a retail installment sales contract with a Center
(each, an Obligor) or the collectability of those contracts. Although the Dealer
Agreements with respect to the Receivables will not be assigned to the Trust,
the Sale and Servicing Agreement will require that any recovery by BMW FS in
respect of any Receivable pursuant to any Center Recourse be deposited in the
collection account to satisfy BMW FS' repurchase obligations under the Sale and
Servicing Agreement. The sales by the Centers of retail installment sale
contracts to BMW FS do not generally provide for recourse against the Centers
for unpaid amounts in the event of a default by an Obligor, other than in
connection with the breach of the foregoing representations and warranties. As
of April 7, 2006, there were approximately 339 BMW passenger car centers, 335
BMW light truck centers, 146 BMW motorcycle dealers and 80 MINI passenger car
dealers located throughout the United States.
Each certificate represents a fractional undivided ownership interest in
the Trust. The trust property includes the Receivables and monies due or
received under the Receivables on or after the date on which the Trust will be
entitled to all amounts received with respect to the Receivables, which is
August 31, 2006 (which we refer to in this prospectus supplement as the Cutoff
Date). In addition, the Trust will own the reserve account which will be
maintained by the Indenture Trustee for the benefit of the noteholders. The
Trust will own no other property other than the Receivables and amounts on
deposit in the various accounts. The Trust's fiscal year end will occur on the
31st day of December each year.
The Trust will be located in the State of Delaware, in care of Wilmington
Trust Company, as Owner Trustee, at the address set forth below under "The Owner
Trustee and the Indenture Trustee."
The Trust property includes the Receivables and monies due or received
under the Receivables after the Cutoff Date. The Reserve Account will be
maintained for the benefit of the noteholders.
Capitalization of the Issuing Entity
The following table illustrates the capitalization of the Trust as of the
Closing Date, as if the issuance and sale of the Notes had taken place on that
date:
Class A-1 Notes......................................... $ 323,000,000
Class A-2 Notes......................................... 308,000,000
Class A-3 Notes......................................... 280,000,000
Class A-4 Notes......................................... 173,044,000
Class B Notes........................................... 24,952,000
--------------
Total.............................................. $1,108,996,000
==============
The Depositor
BMW FS Securities LLC is a wholly owned, limited purpose subsidiary of BMW
FS and was formed on February 27, 2001 in the State of Delaware. The principal
office of the Depositor is located at 300 Chestnut Ridge Road, Woodcliff Lake,
New Jersey 07677 and its telephone number is (201) 307-4000. Additional
information regarding the depositor may be found in the prospectus under the
caption "The Depositor."
The Sponsor, Originator, Administrator and Servicer
BMW Financial Services NA, Inc., the predecessor of BMW Financial Services
NA, LLC, was incorporated on April 23, 1984 in the State of Delaware and, on May
1, 2000, was converted into a limited liability company organized under the laws
of the State of Delaware. The national executive headquarters of BMW FS are
located at 300 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677. Its
telephone number is (201) 307-4000. Its Customer Service Center is located at
5550 Britton Parkway, Hilliard, Ohio 43026. Additional information regarding the
sponsor may be found in the prospectus under "The Sponsor, Originator,
Administrator and Servicer."
S-28
In 1993, BMW FS began selling retail installment sale contracts to
asset-backed commercial paper conduits. In 1999, BMW FS began sponsoring
securitization trusts, and in its capacities as sponsor and originator, has
sponsored more than 6 securitization trusts backed by retail installment sale
contracts, which trusts have issued approximately $8,635,485,000 of securities
in public markets to date, none of which have defaulted, experienced any trigger
events or failed to pay principal in full at maturity.
In addition to securitizing retail installment sale contracts similar to
the Receivables, since 1996, BMW FS has sponsored other securitization entities
backed by pools of wholesale "floorplan" loans to automobile retailers, which
entities have issued approximately $869,000,000 in securities in private markets
to date. Affiliates of BMW FS have sponsored the issuance in public markets of
approximately $1,517,000,000 of securities backed by automobile leases and have
also sold pools of leases to commercial paper conduits. None of the securities
sponsored by BMW FS or its affiliates in those transactions have defaulted,
experienced any trigger events or failed to pay principal in full at maturity.
The sponsor is responsible for originating, pooling and servicing the pool
assets and structuring the securitization transaction. In its roles as
administrator and servicer, BMW FS plays a primary role in the management of the
Trust and each pool of Receivables. In addition, as servicer, BMW FS will be
authorized to exercise certain discretionary powers with regard to the
administration of the Receivables, as described under "The Sponsor, Originator,
Administrator and Servicer--Servicing Experience" in the prospectus.
The following table sets forth a description of the trusts backed by
retail installment sale contracts similar to the Receivables that were sponsored
by BMW FS during the fiscal years 2001, 2002, 2003, 2004 and 2005.
Outstanding
Original Note Principal
Note Principal Final Amount
Name of Issue Date Issued Amount Maturity Date (June 30, 2006)
------------- ----------- ------ ------------- ---------------
BMW Vehicle Owner Trust 2001-A May 18, 2001 $1,581,800,000 May 25, 2006 --
BMW Vehicle Owner Trust 2002-A May 23, 2002 $1,395,365,000 May 25, 2007 --
BMW Vehicle Owner Trust 2003-A April 29, 2003 $1,634,605,000 February 25, 2008 $170,587,772.00(1)
BMW Vehicle Owner Trust 2004-A May 12, 2004 $1,489,833,000 February 25, 2009 $420,394,082.00
BMW Vehicle Owner Trust 2005-A March 23, 2005 $1,438,882,000 January 25, 2010 $778,632,589.00
(1) Paid off August 25, 2006
BMW FS, in its capacity as servicer, began servicing operations in 1993.
In addition to servicing retail installment sale contracts similar to the
Receivables, BMW FS also services the automobile leases and wholesale floorplan
loans securitized in the transactions described above.
The following table, along with the loss and delinquency information and
static pool data included in this prospectus supplement, shows BMW FS's
servicing experience for its entire portfolio of retail installment sale
contracts on automobiles, including contracts sold in securitizations, that BMW
FS continues to service.
December 31, 2005 December 31, 2004 December 31, 2003 December 31, 2002 December 31, 2001 December 31, 2000
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
New 44.14% 49.22% 50.87% 52.92% 58.32% 51.16%
Used 55.86% 50.78% 49.13% 47.08% 41.68% 48.84%
Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
S-29
Additional information regarding BMW FS in its capacities as sponsor,
originator, administrator and servicer may be found under "The Sponsor,
Originator, Administrator and Servicer" and "Description of the Transfer and
Servicing Agreements" in the prospectus.
Affiliations and Related Transactions
The Trust and the depositor are affiliates of the sponsor, the servicer,
the administrator and the originator. There is not currently, and there was not
during the past two years, any material business relationship, agreement,
arrangement, transaction or understanding that is or was entered into outside
the ordinary course of business or is or was on terms other than would be
obtained in an arm's length transaction with an unrelated third party, between
any of the depositor, the Trust and the sponsor.
The Owner Trustee and the Indenture Trustee
Wilmington Trust Company is the Owner Trustee under the trust agreement.
Wilmington Trust Company is a Delaware banking corporation with trust powers
incorporated in 1903. Wilmington Trust Company's principle place of business is
located at 1100 North Market Street, Wilmington, Delaware, 19890. Wilmington
Trust Company has served as owner trustee in numerous asset-backed securities
transactions involving auto receivables.
Wilmington Trust Company is subject to various legal proceedings that
arise from time to time in the ordinary course of business. Wilmington Trust
Company does not believe that the ultimate resolution of any of these
proceedings will have a materially adverse effect on its services as owner
trustee.
Wilmington Trust Company has provided the above information for purposes
of complying with Regulation AB. Other than the above two paragraphs, Wilmington
Trust Company has not participated in the preparation of any other information
contained in this prospectus supplement.
Deutsche Bank Trust Company Americas is the Indenture Trustee under the
Indenture (the Indenture Trustee and the Owner Trustee are collectively referred
to in this prospectus supplement as the Trustees). Deutsche Bank Trust Company
Americas is a New York banking corporation and has its trust office located at
60 Wall Street, New York, New York 10005, Attention: Structured Finance
Services--BMW 2006-A. The fees, expenses and indemnities of the Indenture
Trustee will be paid by the Servicer. The Depositor, the Servicer and their
respective affiliates may maintain normal commercial banking relations with the
Indenture Trustee and its affiliates.
Deutsche Bank Trust Company Americas is a New York banking corporation.
Deutsche Bank Trust Company Americas has acted as indenture trustee on numerous
asset-backed securities transactions, including acting as indenture trustee on
various auto loan and auto lease securitization transactions. While the
structure of the transactions referred to in the preceding sentence may differ
among these transactions, Deutsche Bank Trust Company Americas is experienced in
administering transactions of this kind.
The Receivables
Assets of the Trust
On the Closing Date, the assets of the Trust will include:
1. the Receivables as of the close of business on the Cutoff Date,
2. all rights, benefits, obligations and proceeds arising from or in
connection with the Receivables, including the right to receive
payments collected thereon after the Cutoff Date with respect to the
Receivables,
3. security interests in the Financed Vehicles securing the
Receivables,
4. the related Receivable files,
S-30
5. all rights to insurance proceeds and liquidation proceeds with
respect to the Receivables,
6. certain rights under the receivables purchase agreement dated as of
September 1, 2006 (the "Receivables Purchase Agreement") between the
Depositor and BMW FS, as seller (the "Seller"),
7. funds on deposit from time to time in the Reserve Account, and
8. funds on deposit in the collection account.
The portfolio of new and used BMW and MINI motor vehicle retail
installment sale contracts and promissory notes are referred to in this
prospectus supplement as the Motor Vehicle Contracts or Contracts. Motor Vehicle
Contracts that comprise the Receivables are secured by new or used passenger
cars, motorcycles and light trucks manufactured by Bayerische Motoren Werke
Aktiengesellschaft or its subsidiaries ("BMW AG" and, together with all other
BMW group companies, the "BMW Group") except that 1.94% by principal balance of
the Receivables as of the Cutoff Date are secured by vehicles of other
manufacturers. The Contracts generally were originated by Centers who
participate in BMW FS' vehicle financing program and were acquired by BMW FS or
BMW Bank. See "BMW FS' Financing Program."
The Trust will purchase the Receivables from the Depositor on or about
September 22, 2006 (referred to in this prospectus supplement as the Closing
Date) pursuant to the Sale and Servicing Agreement.
The Depositor will have purchased the Receivables from the Seller pursuant
to the Receivables Purchase Agreement. In the Receivables Purchase Agreement,
the Seller makes specific representations and warranties as of the Closing Date
with respect to the Receivables and agrees to repurchase any Receivable with
respect to which there is a breach of any such representation and warranty if
that breach has a material and adverse effect on the interests of the Depositor
or the Trust in the related Receivable. Under the Sale and Servicing Agreement,
the Depositor will assign all of its rights under the Receivables Purchase
Agreement, including its right to enforce the Setter's repurchase obligations,
to the Trust.
The Receivables may be prepaid at any time without penalty by the
purchaser or co-purchasers of the Financed Vehicle or any other person or
persons who are obligated to make payments thereunder (each such person is
referred to in this prospectus supplement as an Obligor).
The Receivables were selected from the Seller's portfolio of motor vehicle
retail installment sale contracts and promissory notes based on several
criteria, including the requirement that each Receivable:
1. has an original term of not more than 72 months,
2. has a current principal balance of at least $1,000,
3. has a contractual annual percentage rate specified in the promissory
note associated with each Receivable (which is referred to in this
prospectus supplement as the APR) ranging from 1.00% to 19.50%,
4. provides for level monthly payments that fully amortize the amount
financed over the original term of the related Contract,
5. is not more than 30 days past due as of the Cutoff Date,
6. does not have a final scheduled payment date later than six months
prior to the Final Scheduled Payment Date of the Class B Notes, and
7. does not have any notation in the Servicer's records indicating the
Obligor is the subject of a bankruptcy proceeding.
S-31
Description of Receivables
All of the Receivables were originated by the originator or BMW Bank or
purchased by the originator or BMW Bank from Centers. As of the Cutoff Date,
approximately 29.13% of the Receivables by aggregate principal balance
represented financing of new vehicles and 70.87% of the Receivables by aggregate
principal balance represented financing of used vehicles.
As of the Cutoff Date, approximately 75.14%, 14.33%, 3.99%, 4.60% and
1.94% of the Receivables by aggregate principal balance were BMW passenger cars,
BMW light trucks, BMW motorcycles, MINI passenger cars and vehicles of other
manufacturers, respectively.
The distribution by APR, geographic distribution, distribution by
remaining term and distribution by remaining balance, in each case, of the
Receivables as of the Cutoff Date are as set forth in the following tables. We
refer you to "The Receivables" in the accompanying prospectus for a further
description of the characteristics of the Receivables.
Composition of the Receivables
Aggregate Principal Balance............................ $1,153,770,268.17
Number of Contracts.................................... 62,058
Average Principal Balance Outstanding.................. $18,591.81
Principal Balance (range).......................... $1,000.39 to $204,919.74
Average Original Amount Financed....................... $28,511.56
Original Amount Financed (range)................... $2,150.02 to $224,579.74
Weighted Average APR(1)................................ 5.561%
APR (range)........................................ 1.00% to 19.50%
Weighted Average Original Term(1)...................... 59.81 months
Original Term (range).............................. 12 to 72 months
Weighted Average Remaining Term(1)..................... 48.57 months
Remaining Term (range)............................. 3 to 72 months
Weighted Average FICO Score(1)(2)...................... 712
- ----------
(1) Weighted by principal balance as of the Cutoff Date.
(2) Weighted average FICO score is calculated excluding accounts for which we
do not have a FICO score.
S-32
Distribution of the Receivables by APR
Percentage
of Aggregate
Number of Aggregate Principal
APR Range (%) Receivables Principal Balance Balance(1)
- ------------- ----------- ----------------- ------------
1.00 to 1.50 ............... 3 $107,801.26 0.01%
1.51 to 2.00 ............... 1,883 23,712,827.53 2.06
2.01 to 2.50 ............... 66 1,405,324.47 0.12
2.51 to 3.00 ............... 9,725 210,271,449.18 18.22
3.01 to 3.50 ............... 241 5,989,660.39 0.52
3.51 to 4.00 ............... 15,605 313,228,057.26 27.15
4.01 to 4.50 ............... 601 13,502,301.46 1.17
4.51 to 5.00 ............... 5,669 87,059,018.33 7.55
5.01 to 5.50 ............... 1,887 39,904,082.30 3.46
5.51 to 6.00 ............... 4,436 63,695,869.43 5.52
6.01 to 6.50 ............... 3,046 36,737,997.62 3.18
6.51 to 7.00 ............... 5,195 83,977,817.63 7.28
7.01 to 7.50 ............... 2,297 41,557,672.95 3.60
7.51 to 8.00 ............... 2,900 60,240,408.39 5.22
8.01 to 8.50 ............... 1,113 21,071,638.97 1.83
8.51 to 9.00 ............... 1,679 36,651,062.72 3.18
9.01 to 9.50 ............... 853 16,340,388.81 1.42
9.51 to 10.00 .............. 1,121 21,853,683.85 1.89
10.01 to 10.50 ............. 470 8,825,942.72 0.76
10.51 to 11.00 ............. 617 11,532,420.95 1.00
11.01 to 11.50 ............. 344 6,373,481.14 0.55
11.51 to 12.00 ............. 379 6,190,999.02 0.54
12.01 to 12.50 ............. 238 3,912,091.86 0.34
12.51 to 13.00 ............. 325 6,390,053.34 0.55
13.01 to 13.50 ............. 210 4,898,967.46 0.42
13.51 to 14.00 ............. 276 7,027,834.62 0.61
14.01 to 14.50 ............. 131 2,986,231.28 0.26
14.51 to 15.00 ............. 224 5,661,795.16 0.49
Greater than 15.00 ......... 524 12,663,388.07 1.10
------ ----------------- ------
Totals ................... 62,058 $1,153,770,268.17 100.00%
- ----------
(1) Percentages may not add to 100% because of rounding.
S-33
Distribution of the Receivables by Geographic Location(1)
Percentage
of Aggregate
Number of Aggregate Principal
State Receivables Principal Balance Balance(2)
- ----- ----------- ----------------- ------------
Alabama .................... 487 $9,725,315.24 0.84%
Alaska ..................... 37 616,544.31 0.05
Arizona .................... 945 18,896,853.53 1.64
Arkansas ................... 202 4,045,240.44 0.35
California ................. 13,245 252,729,581.83 21.90
Colorado ................... 949 15,711,512.50 1.36
Connecticut ................ 1,328 21,336,451.71 1.85
Delaware ................... 223 3,734,239.25 0.32
Florida .................... 4,691 97,130,473.88 8.42
Georgia .................... 2,150 41,248,388.46 3.58
Hawaii ..................... 311 5,594,093.99 0.48
Idaho ...................... 81 998,840.56 0.09
Illinois ................... 2,580 53,991,460.07 4.68
Indiana .................... 559 10,759,965.23 0.93
Iowa ....................... 160 3,343,142.37 0.29
Kansas ..................... 342 6,629,947.49 0.57
Kentucky ................... 366 6,729,482.74 0.58
Louisiana .................. 638 12,219,967.61 1.06
Maine ...................... 172 2,317,114.58 0.20
Maryland ................... 1,584 29,144,798.21 2.53
Massachusetts .............. 1,288 21,442,116.30 1.86
Michigan ................... 1,150 21,929,753.57 1.90
Minnesota .................. 793 17,126,073.38 1.48
Mississippi ................ 204 4,043,428.46 0.35
Missouri ................... 766 12,782,409.84 1.11
Montana .................... 57 609,871.93 0.05
Nebraska ................... 166 2,952,107.38 0.26
Nevada ..................... 607 12,688,955.33 1.10
New Hampshire .............. 259 3,723,712.02 0.32
New Jersey ................. 3,555 60,232,333.57 5.22
New Mexico ................. 243 3,721,108.45 0.32
New York ................... 4,100 66,951,088.36 5.80
North Carolina ............. 1,522 28,153,219.62 2.44
North Dakota ............... 8 138,106.90 0.01
Ohio ....................... 1,482 27,006,582.76 2.34
Oklahoma ................... 375 7,008,700.64 0.61
Oregon ..................... 629 10,443,177.03 0.91
Pennsylvania ............... 2,545 41,024,163.65 3.56
Rhode Island ............... 192 2,821,174.12 0.24
South Carolina ............. 631 11,151,322.78 0.97
South Dakota ............... 26 398,671.24 0.03
Tennessee .................. 816 14,115,530.80 1.22
Texas ...................... 5,718 117,278,300.44 10.16
Utah ....................... 214 3,679,141.07 0.32
Vermont .................... 54 775,518.40 0.07
Virginia ................... 1,478 25,838,663.14 2.24
Washington ................. 1,577 28,849,290.61 2.50
West Virginia .............. 73 1,056,536.61 0.09
S-34
Percentage
of Aggregate
Number of Aggregate Principal
State Receivables Principal Balance Balance(2)
- ----- ----------- ----------------- ------------
Wisconsin .................. 450 8,461,407.84 0.73
Wyoming .................... 30 464,387.93 0.04
------ ----------------- ------
Totals ................... 62,058 $1,153,770,268.17 100.00%
- ----------
(1) Based on the state in which the related vehicle is titled.
(2) Percentages may not add to 100% because of rounding.
Distribution of the Receivables by Remaining Term to Scheduled Maturity
Percentage
of Aggregate
Remaining Term to Number of Aggregate Principal
Scheduled Maturity Receivables Principal Balance Balance (1)
- ------------------ ----------- ----------------- ------------
6 months or less............ 2,885 $ 7,740,933.14 0.67%
7 months to 12 months....... 7,801 38,921,264.80 3.37
13 months to 18 months...... 10,347 81,663,306.23 7.08
19 months to 24 months...... 2,421 23,312,263.85 2.02
25 months to 30 months...... 527 7,706,764.41 0.67
31 months to 36 months...... 1,905 31,305,545.17 2.71
37 months to 42 months...... 1,165 21,469,414.66 1.86
43 months to 48 months...... 4,795 99,525,360.53 8.63
49 months to 54 months...... 7,051 182,691,117.94 15.83
55 months to 60 months...... 21,191 592,940,738.12 51.39
Greater than 60 months...... 1,970 66,493,559.32 5.76
------ ----------------- ------
Totals.................... 62,058 $1,153,770,268.17 100.00%
- ----------
(1) Percentages may not add to 100% because of rounding.
Distribution of the Receivables by Remaining Principal Balance
Percentage
of Aggregate
Range of Remaining Number of Aggregate Principal
Principal Balances ($) Receivables Principal Balance Balance (1)
- ---------------------- ----------- ----------------- ------------
1 to 2,500.................. 2,614 $ 4,888,513.37 0.42%
2,501 to 5,000.............. 6,880 26,116,557.81 2.26
5,001 to 7,500.............. 7,448 46,563,905.66 4.04
7,501 to 10,000............. 5,742 49,612,229.95 4.30
10,001 to 12,500............ 3,511 39,225,090.37 3.40
12,501 to 15,000............ 2,787 38,304,399.72 3.32
15,001 to 17,500............ 3,028 49,258,216.56 4.27
17,501 to 20,000............ 3,373 63,369,461.47 5.49
20,001 to 22,500............ 3,610 76,710,071.00 6.65
22,501 to 25,000............ 4,062 96,537,135.70 8.37
25,001 to 27,500............ 4,050 106,346,047.40 9.22
27,501 to 30,000............ 3,689 105,864,126.24 9.18
30,001 to 32,500............ 2,892 90,183,863.83 7.82
32,501 to 35,000............ 2,026 68,267,815.77 5.92
35,001 to 37,500............ 1,462 52,853,179.97 4.58
S-35
Percentage
of Aggregate
Range of Remaining Number of Aggregate Principal
Principal Balances ($) Receivables Principal Balance Balance (1)
- ---------------------- ----------- ----------------- ------------
37,501 to 40,000............ 1,034 40,013,426.05 3.47
40,001 to 42,500............ 788 32,480,772.91 2.82
42,501 to 45,000............ 583 25,500,382.31 2.21
45,001 to 47,500............ 463 21,399,243.94 1.85
47,501 to 50,000............ 442 21,530,266.36 1.87
50,001 to 52,500............ 361 18,470,238.16 1.60
52,501 to 55,000............ 232 12,461,843.72 1.08
55,001 to 57,500............ 218 12,240,676.38 1.06
57,501 to 60,000............ 155 9,094,150.53 0.79
60,001 to 62,500............ 91 5,558,379.67 0.48
62,501 to 65,000............ 79 5,034,435.88 0.44
Greater than 65,000......... 438 35,885,837.44 3.11
Totals.................... 62,058 $1,153,770,268.17 100.00%
- ----------
(1) Percentages may not add to 100% because of rounding.
S-36
Delinquencies, Repossessions and Loan Loss Information
Set forth below is information concerning BMW FS' experience with respect
to its entire portfolio of Contracts, which includes Contracts not owned but
serviced by BMW FS. Credit losses are an expected cost in the business of
extending credit and are considered in BMW FS' rate-setting process. The
following tables set forth the historical delinquency experience and net credit
loss and repossession experience of BMW FS' portfolio of contracts for new and
used automobiles, motorcycles and light trucks.
Delinquency, repossession and loss experience may be influenced by a
variety of economic, social and geographic conditions and other factors beyond
the control of BMW FS. There is no assurance that BMW FS' delinquency,
repossession and loss experience with respect to its retail installment sale
contracts and promissory notes, or the experience of the Trust with respect to
the Receivables, will be similar to that set forth below. If economic conditions
in the future differ from those during the periods referenced in the tables
below, BMW FS' delinquency, repossession and loss experience may be adversely
affected.
The percentages in the tables below have not been adjusted to eliminate
the effect of the growth of BMW FS' portfolio over some of the periods
addressed. Accordingly, the delinquency, repossession and net loss percentages
for some of the periods addressed would be expected to be higher than those
shown if a group of receivables were isolated at a period in time and the
delinquency, repossession and net loss data showed the activity only for that
isolated group over the periods indicated.
In the table below, the period of delinquency as of June 30, 2006 and 2005
and as of December 31, 2005, 2004, 2003, 2002 and 2001 is based on the number of
days more than 20% of a scheduled payment on a cumulative basis is contractually
past due. The information included below under the headings "Delinquencies as a
Percent of Contracts Outstanding--90 days or more" and "Dollar Delinquencies as
a Percent of Principal Amount Outstanding--90 days or more" excludes vehicles
that have been repossessed. There is no assurance that the behavior of the
Receivables will be comparable to BMW FS' experience shown in the following
tables.
S-37
DELINQUENCY EXPERIENCE
(DOLLARS IN THOUSANDS)
Delinquency Experience
-------------------------------------------------------------------------------------------
As of June 30 As of December 31
--------------------- ---------------------------------------------------------------
2006 2005 2005 2004 2003 2002 2001
------- ------- ------- ------- ------- ------- -------
Number of Contracts Outstanding .... 242,537 237,228 235,172 236,038 215,353 183,828 152,871
Delinquencies as a Percent of
Contracts
Outstanding
30-59 days .................... 1.07% 1.03% 1.37% 1.17% 1.27% 1.52% 1.38%
60-89 days .................... 0.20% 0.15% 0.27% 0.20% 0.25% 0.33% 0.25%
90 days or more ............... 0.16% 0.14% 0.19% 0.16% 0.16% 0.17% 0.20%
Total ................... 1.43% 1.32% 1.83% 1.53% 1.67% 2.02% 1.83%
Dollar Delinquencies as a Percent of
Principal Amount Outstanding
30-59 days .................... 1.15% 1.02% 1.43% 1.11% 1.27% 1.43% 1.30%
60-89 days .................... 0.24% 0.16% 0.30% 0.19% 0.26% 0.33% 0.24%
90 days or more ............... 0.16% 0.12% 0.17% 0.14% 0.14% 0.16% 0.17%
Total ................... 1.56% 1.30% 1.90% 1.44% 1.67% 1.91% 1.71%
In the table below, all amounts and percentages, except as indicated, are
based on the principal balances of the contracts net of unearned finance and
other charges. Averages are computed by taking a simple average of year-end
outstanding amounts for each period presented. The information set forth under
the heading "Charge-offs" represents the total aggregate net principal balance
of Contracts determined to be uncollectible in the period less proceeds from
disposition of related vehicles, other than recoveries described in the next
sentence. The information set forth under the heading "Recoveries" generally
includes amounts received from customers with respect to contracts previously
charged-off. The information set forth under the heading "Number of
Repossessions sold" means the number of repossessed financed vehicles that have
been sold by BMW FS in a given period.
Net Credit Loss and Repossession Experience
(dollars in thousands)
------------------------------------------------------------------------------------------
As of June 30 As of December 31
----------------------- ----------------------------------------------------------------
2006 2005 2005 2004 2003 2002 2001
---------- ---------- ---------- ---------- ---------- ---------- ----------
Principal Amount Outstanding ......... $4,745,304 $4,675,364 $4,549,180 $4,751,512 $4,371,333 $3,860,493 $3,206,427
Average Principal Amount Outstanding . $4,647,242 $4,713,438 $4,650,346 $4,561,422 $4,115,913 $3,533,460 $2,836,909
Number of Contracts Outstanding ...... 242,537 237,228 235,172 236,038 215,353 183,828 152,871
Average Number of Contracts
Outstanding .......................... 238,855 236,633 235,605 225,696 199,591 168,350 136,440
Charge-offs--full period actuals ..... $11,449 9,991 $21,051 $21,062 $31,303 $25,275 $19,683
Recoveries ........................... $1,515 2,030 $3,480 $1,856 $11,642 $5,352 $3,613
Net Losses ........................... 9.934 7,961 $17,571 $19,206 $19,660 $19,923 $16,070
Number of Repossessions sold ......... 721 703 1,553 1,600 1,625 1,185 1,019
Number of Repossessions sold as a
percent
of the Average Number of Contracts
Outstanding .......................... 0.30% 0.30% 0.66% 0.71% 0.81% 0.70% 0.75%
Net Losses as a percent of Average
Principal
Amount Outstanding ................... 0.21% 0.17% 0.38% 0.42% 0.48% 0.56% 0.57%
Static Pools
Attached hereto as Appendix A, we have included charts that reflect the
static pool performance of previous securitizations of the sponsor. The
information presented with respect to pools that were established prior to
January 1, 2006 is not to be deemed a part of this prospectus supplement, the
prospectus or the related registration
S-38
statement. We caution you that this pool of Receivables may not perform in a
similar manner to the receivables in other trusts.
Maturity and Prepayment Considerations
For more detailed information regarding maturity and prepayment
considerations with respect to the notes, see "Weighted Average Lives of the
Securities" in the accompanying prospectus and "Risk Factors--You may experience
reduced returns on your investment resulting from prepayments or repurchases of
receivables or early termination of the trust" in the accompanying prospectus.
Except upon the occurrence of an event of default, no principal payments will be
made on the Class A-2 Notes until the Class A-1 Notes have been paid in full; no
principal payments will be made on the Class A-3 Notes until the Class A-2 Notes
have been paid in full; and no principal payments will be made on the Class A-4
Notes until the Class A-3 Notes have been paid in full. We refer you to
"Payments on the Notes" in this prospectus supplement. In addition, no principal
payments will be made on the Class B Notes until the Class A Notes have been
paid in full. However, following an event of default, principal payments will be
made first to the holders of the Class A-1 Notes until they have been paid in
full and after the Class A-1 Notes have been paid in full, principal payments
will be made to the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes
on a pro rata basis, based on the outstanding principal balance of those classes
of notes, until such classes have been paid in full. After the Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes and Class A-4 Notes have been paid in full,
principal payments will be made to the Class B Notes until they have been paid
in full. We refer you to "The Notes--The Indenture--Events of Default; Rights
Upon Event of Default" in the accompanying prospectus for a more detailed
description of the events of default.
Because the rate of payment of principal of each class of Notes depends
primarily on the rate of payment (including prepayments) of the principal
balance of the Receivables, final payment of any class of Notes could occur
significantly earlier than their respective Final Scheduled Payment Date.
Noteholders will bear the risk of being able to reinvest principal payments on
the Notes at yields at least equal to the yield on their respective classes of
Notes. No prediction can be made as to the rate of prepayments on the
Receivables in either stable or changing interest rate environments.
Although the Receivables have different APRs, disproportionate rates of
prepayments between Receivables with APRs greater than or less than 7.00% (which
is referred to as the Required Rate) will generally not affect your yield.
However, higher rates of prepayments of Receivables with higher APRs will
decrease the amount available to cover delinquencies and defaults on the
Receivables and may decrease the amounts available to be deposited in the
Reserve Account.
Weighted Average Lives of the Notes
Prepayments on motor vehicle receivables can be measured relative to a
payment standard or model. The model used in this prospectus supplement, the
Absolute Prepayment Model ("ABS"), represents an assumed rate of prepayment each
month relative to the original number of receivables in a pool of receivables.
ABS further assumes that all the receivables in question are the same size and
amortize at the same rate and that each receivable in each month of its life
will either be paid as scheduled or be paid in full. For example, in a pool of
receivables originally containing 10,000 receivables, a 1% ABS rate means that
100 receivables prepay each month. ABS does not purport to be an historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of receivables, including the Receivables.
As the rate of payment of principal of each class of Notes will depend on
the rate of payment (including prepayments) of the principal balance of the
Receivables, final payment of any class of Notes could occur earlier than its
respective Final Scheduled Payment Date. Reinvestment risk associated with early
payment of the Notes will be borne exclusively by the holders of the Notes.
The ABS Tables have been prepared on the basis of the characteristics of
the Receivables described under "The Receivables" above.
S-39
The ABS Tables assume that:
o the Receivables prepay in full at the specified constant percentage
of ABS monthly, with no defaults, losses or repurchases,
o each scheduled monthly payment on each Receivable is scheduled to be
made and is made on the last day of each month and each month has 30
days,
o payments are made on the Notes on each Payment Date, and each
Payment Date is assumed to be the twenty-fifth day of each
applicable month,
o the balance in the Reserve Account on each Payment Date is the
required amount described under "Credit Enhancement--Reserve
Account",
o except as indicated in the ABS Tables, the Servicer does not
exercise its option to purchase the Receivables on the earliest
Payment Date on which its option may be exercised, and
o the hypothetical pools for the Receivables each have an assumed
cutoff date as of the close of business on August 31, 2006.
The ABS Tables indicate the projected weighted average life of each class
of Notes and set forth the percent of the initial principal balance of each
class of Notes that is projected to be outstanding after each of the Payment
Dates shown at various constant ABS percentages.
The ABS Tables also assume that the Receivables have been aggregated into
hypothetical pools with all of the Receivables within each hypothetical pool
having the characteristics set forth in the tables below and that the level
scheduled monthly payment for each of the pools, based on the aggregate
principal balance, APR, original term to maturity and remaining term to maturity
as of the assumed cutoff date, will be such that each pool will be fully
amortized by the end of its remaining term to maturity.
Receivables
Stated
Aggregate Original Remaining
Principal Term Term
Balance APR (in Months) (in Months)
----------------- ------ ----------- -----------
1....................... $46,662,197.94 5.727% 59 9
2....................... 104,975,570.08 4.857% 58 16
3....................... 39,012,309.58 5.522% 49 32
4....................... 120,994,775.19 5.731% 58 44
5....................... 775,631,856.06 5.402% 60 56
6....................... 66,493,559.32 8.132% 67 64
-----------------
Total................. $1,153,770,268.17
=================
The actual characteristics and performance of the Receivables are expected
to differ from the assumptions used in constructing the ABS Tables. The
assumptions used are hypothetical and have been provided only to give a general
sense of how the principal cash flows might behave under varying prepayment
scenarios. For example, it is unlikely that the Receivables will prepay at a
constant level of ABS until maturity, that all of the Receivables will prepay at
the same level of ABS or that no defaults will occur on the Receivables.
Moreover, the diverse terms of Receivables within each of the hypothetical pools
could produce slower or faster principal distributions than indicated in the ABS
Table at the various percentages of ABS specified, even if the original and
remaining terms to maturity of the Receivables are as assumed. Any difference
between the assumptions and the actual characteristics and performance of the
Receivables, or actual prepayment experience, will affect the percentages of
initial amounts outstanding over time and the weighted average life of each
class of Notes.
S-40
Percentage of Initial Class A-1 and Class A-2 Note Principal
at Various ABS Percentages
Class A-1 Notes Class A-2 Notes
----------------------------------------- ------------------------------------------
Payment Date 0.5% 1.0% 1.6% 2.0% 0.5% 1.0% 1.6% 2.0%
- ------------ ------ ------ ------ ------ ------ ------ ------ ------
Closing Date......................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
October 2006......................... 89.74 87.57 83.67 67.96 100.00 100.00 100.00 100.00
November 2006........................ 79.40 75.19 67.79 50.90 100.00 100.00 100.00 100.00
December 2006........................ 69.09 63.00 52.48 34.53 100.00 100.00 100.00 100.00
January 2007......................... 58.85 51.01 37.77 18.86 100.00 100.00 100.00 100.00
February 2007........................ 48.67 39.22 23.65 3.90 100.00 100.00 100.00 100.00
March 2007........................... 38.52 27.61 10.12 0.00 100.00 100.00 100.00 89.27
April 2007........................... 28.44 16.27 0.00 0.00 100.00 100.00 97.42 75.65
May 2007............................. 18.74 5.57 0.00 0.00 100.00 100.00 85.05 62.78
June 2007............................ 9.24 0.00 0.00 0.00 100.00 94.83 73.31 52.53
July 2007............................ 1.30 0.00 0.00 0.00 100.00 85.39 62.56 42.51
August 2007.......................... 0.00 0.00 0.00 0.00 93.07 76.11 52.17 32.71
September 2007....................... 0.00 0.00 0.00 0.00 84.83 66.97 42.15 23.14
October 2007......................... 0.00 0.00 0.00 0.00 76.62 57.99 32.51 13.80
November 2007........................ 0.00 0.00 0.00 0.00 68.46 49.16 23.24 4.69
December 2007........................ 0.00 0.00 0.00 0.00 60.33 40.48 14.36 0.00
January 2008......................... 0.00 0.00 0.00 0.00 52.25 31.96 5.85 0.00
February 2008........................ 0.00 0.00 0.00 0.00 46.16 25.14 0.00 0.00
March 2008........................... 0.00 0.00 0.00 0.00 40.09 18.42 0.00 0.00
April 2008........................... 0.00 0.00 0.00 0.00 34.05 11.78 0.00 0.00
May 2008............................. 0.00 0.00 0.00 0.00 28.04 5.24 0.00 0.00
June 2008............................ 0.00 0.00 0.00 0.00 22.05 0.00 0.00 0.00
July 2008............................ 0.00 0.00 0.00 0.00 16.09 0.00 0.00 0.00
August 2008.......................... 0.00 0.00 0.00 0.00 10.16 0.00 0.00 0.00
September 2008....................... 0.00 0.00 0.00 0.00 4.26 0.00 0.00 0.00
October 2008......................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 2008........................ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (yrs)(1)....... 0.46 0.40 0.32 0.24 1.46 1.23 1.00 0.84
- ----------
(1) The weighted average life of a note is determined by (x) multiplying the
amount of each principal payment on a note by the number of years from the
date of issuance of the note to the related Payment Date, (y) adding the
results and (z) dividing the sum by the original principal balance of the
note.
This table has been prepared based on the assumptions in this prospectus
supplement (including the assumptions regarding the characteristics and
performance of the Receivables, which may differ from the actual characteristics
and performance of the Receivables) and should be read in conjunction with those
assumptions.
In calculating the Expected Final Maturity Dates shown on the cover to
this prospectus supplement, an ABS percentage of 1.6% was utilized. The actual
Payment Date on which the Class A-1 Notes or Class A-2 Notes are paid in full
may be before or after this date depending on the actual payment experience of
the Receivables.
S-41
Percentage of Initial Class A-3 and Class A-4 Note Principal
at Various ABS Percentages
Class A-3 Notes Class A-4 Notes
---------------------------------------- ------------------------------------------------
Payment Date 0.5% 1.0% 1.6% 2.0% 0.5% 1.0% 1.6% 2.0%
- ------------ ------ ------ ------ ------ ------ ------ ------ ------
Closing Date...................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
October 2006...................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
November 2006..................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
December 2006..................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
January 2007...................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
February 2007..................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
March 2007........................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
April 2007........................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
May 2007.......................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
June 2007......................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
July 2007......................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
August 2007....................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
September 2007.................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
October 2007...................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
November 2007..................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
December 2007..................... 100.00 100.00 100.00 95.40 100.00 100.00 100.00 100.00
January 2008...................... 100.00 100.00 100.00 85.90 100.00 100.00 100.00 100.00
February 2008..................... 100.00 100.00 97.92 76.67 100.00 100.00 100.00 100.00
March 2008........................ 100.00 100.00 89.60 67.70 100.00 100.00 100.00 100.00
April 2008........................ 100.00 100.00 81.47 59.00 100.00 100.00 100.00 100.00
May 2008.......................... 100.00 100.00 73.55 50.56 100.00 100.00 100.00 100.00
June 2008......................... 100.00 98.67 65.83 42.41 100.00 100.00 100.00 100.00
July 2008......................... 100.00 91.69 58.31 34.52 100.00 100.00 100.00 100.00
August 2008....................... 100.00 84.81 51.00 26.92 100.00 100.00 100.00 100.00
September 2008.................... 100.00 78.04 43.89 19.59 100.00 100.00 100.00 100.00
October 2008...................... 98.22 71.38 37.00 12.54 100.00 100.00 100.00 100.00
November 2008..................... 91.79 64.82 30.31 5.74 100.00 100.00 100.00 100.00
December 2008..................... 85.39 58.38 23.83 0.00 100.00 100.00 100.00 98.68
January 2009...................... 79.03 52.05 17.57 0.00 100.00 100.00 100.00 88.53
February 2009..................... 72.69 45.82 11.52 0.00 100.00 100.00 100.00 78.86
March 2009........................ 66.39 39.71 5.65 0.00 100.00 100.00 100.00 69.66
April 2009........................ 60.13 33.72 0.00 0.00 100.00 100.00 99.93 60.95
May 2009.......................... 53.89 27.83 0.00 0.00 100.00 100.00 91.09 52.72
June 2009......................... 48.07 22.34 0.00 0.00 100.00 100.00 82.81 44.98
July 2009......................... 42.28 16.96 0.00 0.00 100.00 100.00 74.87 37.68
August 2009....................... 36.53 11.68 0.00 0.00 100.00 100.00 67.26 30.83
September 2009.................... 30.80 6.49 0.00 0.00 100.00 100.00 59.98 24.43
October 2009...................... 25.10 1.36 0.00 0.00 100.00 100.00 53.05 18.82
November 2009..................... 19.44 0.00 0.00 0.00 100.00 94.09 46.45 13.57
December 2009..................... 13.81 0.00 0.00 0.00 100.00 86.15 40.21 8.69
January 2010...................... 8.21 0.00 0.00 0.00 100.00 78.40 34.30 4.18
February 2010..................... 2.58 0.00 0.00 0.00 100.00 70.83 28.75 0.04
March 2010........................ 0.00 0.00 0.00 0.00 95.11 63.45 23.55 0.00
April 2010........................ 0.00 0.00 0.00 0.00 86.11 56.25 18.70 0.00
May 2010.......................... 0.00 0.00 0.00 0.00 77.16 49.24 14.21 0.00
June 2010......................... 0.00 0.00 0.00 0.00 69.60 43.26 10.21 0.00
July 2010......................... 0.00 0.00 0.00 0.00 62.09 37.43 6.50 0.00
August 2010....................... 0.00 0.00 0.00 0.00 54.63 31.77 3.08 0.00
September 2010.................... 0.00 0.00 0.00 0.00 47.22 26.25 0.00 0.00
October 2010...................... 0.00 0.00 0.00 0.00 39.85 20.90 0.00 0.00
November 2010..................... 0.00 0.00 0.00 0.00 32.53 15.70 0.00 0.00
December 2010..................... 0.00 0.00 0.00 0.00 25.26 10.67 0.00 0.00
S-42
Class A-3 Notes Class A-4 Notes
---------------------------------------- ------------------------------------------------
January 2011...................... 0.00 0.00 0.00 0.00 18.04 5.80 0.00 0.00
February 2011..................... 0.00 0.00 0.00 0.00 10.87 1.09 0.00 0.00
March 2011........................ 0.00 0.00 0.00 0.00 3.75 0.00 0.00 0.00
April 2011........................ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life
(yrs)(1)(2)....................... 2.79 2.43 2.00 1.74 4.03 3.75 3.22 2.79
Weighted Average Life to Call
(yrs)(1)(3)....................... 2.79 2.43 2.00 1.74 3.88 3.55 3.03 2.63
Month of Optional September May November June
Purchase(3)....................... N/A N/A N/A N/A 2010 2010 2009 2009
- ----------
(1) The weighted average life of a note is determined by (x) multiplying the
amount of each principal payment on a note by the number of years from the
date of issuance of the note to the related Payment Date, (y) adding the
results and (z) dividing the sum by the original principal balance of the
note.
(2) This calculation assumes that the Servicer does not exercise its option to
purchase the Receivables.
(3) This calculation assumes that the Servicer exercises its option to
purchase the Receivables.
This table has been prepared based on the assumptions in this prospectus
supplement (including the assumptions regarding the characteristics and
performance of the Receivables, which are expected to differ from the actual
characteristics and performance of the Receivables) and should be head in
conjunction with those assumptions.
In calculating the Expected Final Maturity Dates shown on the cover to
this prospectus supplement, an ABS percentage of 1.6% was utilized. The actual
Payment Date on which the Class A-3 Notes or Class A-4 Notes are paid in full
may be before or after this date depending on the actual payment experience of
the Receivables.
S-43
Percentage of Initial Class B Note Principal at Various ABS Percentages
Class B Notes
-------------------------------------------------------
Payment Date 0.5% 1.0% 1.6% 2.0%
- ------------ ------ ------ ------ ------
Closing Date............................................... 100.00 100.00 100.00 100.00
October 2006............................................... 100.00 100.00 100.00 100.00
November 2006.............................................. 100.00 100.00 100.00 100.00
December 2006.............................................. 100.00 100.00 100.00 100.00
January 2007............................................... 100.00 100.00 100.00 100.00
February 2007.............................................. 100.00 100.00 100.00 100.00
March 2007................................................. 100.00 100.00 100.00 100.00
April 2007................................................. 100.00 100.00 100.00 100.00
May 2007................................................... 100.00 100.00 100.00 100.00
June 2007.................................................. 100.00 100.00 100.00 100.00
July 2007.................................................. 100.00 100.00 100.00 100.00
August 2007................................................ 100.00 100.00 100.00 100.00
September 2007............................................. 100.00 100.00 100.00 100.00
October 2007............................................... 100.00 100.00 100.00 100.00
November 2007.............................................. 100.00 100.00 100.00 100.00
December 2007.............................................. 100.00 100.00 100.00 100.00
January 2008............................................... 100.00 100.00 100.00 100.00
February 2008.............................................. 100.00 100.00 100.00 100.00
March 2008................................................. 100.00 100.00 100.00 100.00
April 2008................................................. 100.00 100.00 100.00 100.00
May 2008................................................... 100.00 100.00 100.00 100.00
June 2008.................................................. 100.00 100.00 100.00 100.00
July 2008.................................................. 100.00 100.00 100.00 100.00
August 2008................................................ 100.00 100.00 100.00 100.00
September 2008............................................. 100.00 100.00 100.00 100.00
October 2008............................................... 100.00 100.00 100.00 100.00
November 2008.............................................. 100.00 100.00 100.00 100.00
December 2008.............................................. 100.00 100.00 100.00 100.00
January 2009............................................... 100.00 100.00 100.00 100.00
February 2009.............................................. 100.00 100.00 100.00 100.00
March 2009................................................. 100.00 100.00 100.00 100.00
April 2009................................................. 100.00 100.00 100.00 100.00
May 2009................................................... 100.00 100.00 100.00 100.00
June 2009.................................................. 100.00 100.00 100.00 100.00
July 2009.................................................. 100.00 100.00 100.00 100.00
August 2009................................................ 100.00 100.00 100.00 100.00
September 2009............................................. 100.00 100.00 100.00 100.00
October 2009............................................... 100.00 100.00 100.00 100.00
November 2009.............................................. 100.00 100.00 100.00 100.00
December 2009.............................................. 100.00 100.00 100.00 100.00
January 2010............................................... 100.00 100.00 100.00 100.00
February 2010.............................................. 100.00 100.00 100.00 100.00
March 2010................................................. 100.00 100.00 100.00 74.18
April 2010................................................. 100.00 100.00 100.00 50.67
May 2010................................................... 100.00 100.00 100.00 29.79
June 2010.................................................. 100.00 100.00 100.00 11.56
July 2010.................................................. 100.00 100.00 100.00 0.00
August 2010................................................ 100.00 100.00 100.00 0.00
September 2010............................................. 100.00 100.00 99.68 0.00
October 2010............................................... 100.00 100.00 80.08 0.00
November 2010.............................................. 100.00 100.00 62.56 0.00
December 2010.............................................. 100.00 100.00 47.13 0.00
S-44
Class B Notes
-------------------------------------------------------
January 2011............................................... 100.00 100.00 33.83 0.00
February 2011.............................................. 100.00 100.00 22.66 0.00
March 2011................................................. 100.00 76.12 13.65 0.00
April 2011................................................. 77.01 45.81 6.81 0.00
May 2011................................................... 28.40 16.70 2.17 0.00
June 2011.................................................. 24.82 14.37 1.38 0.00
July 2011.................................................. 21.23 12.08 0.72 0.00
August 2011................................................ 17.64 9.86 0.19 0.00
September 2011............................................. 14.06 7.71 0.00 0.00
October 2011............................................... 10.51 5.65 0.00 0.00
November 2011.............................................. 6.98 3.67 0.00 0.00
December 2011.............................................. 3.47 1.79 0.00 0.00
January 2012............................................... 0.00 0.00 0.00 0.00
Weighted Average Life (yrs)(1)(2).......................... 4.76 4.67 4.32 3.65
Weighted Average Life to Call (yrs)(1)(3).................. 4.01 3.68 3.18 2.76
Month of Optional Purchase(3).............................. September 2010 May 2010 November 2009 June 2009
- ----------
(1) The weighted average life of a note is determined by (x) multiplying the
amount of each principal payment on a note by the number of years from the
date of issuance of the note to the related Payment Date, (y) adding the
results and (z) dividing the sum by the original principal balance of the
note.
(2) This calculation assumes that the Servicer does not exercise its option to
purchase the Receivables.
(3) This calculation assumes that the Servicer exercises its option to
purchase the Receivables.
This table has been prepared based on the assumptions in this prospectus
supplement (including the assumptions regarding the characteristics and
performance of the Receivables, which may differ from the actual characteristics
and performance of the Receivables) and should be read in conjunction with those
assumptions.
In calculating the Expected Final Maturity Date shown on the cover to this
prospectus supplement, an ABS percentage of 1.6% was utilized. The actual
Payment Date on which the Class B Notes are paid in full may be before or after
this date depending on the actual payment experience of the Receivables.
S-45
Note Factors
The Note Pool Factor with respect to any class of Notes will be a
seven-digit decimal indicating the principal balance of that class of Notes as
of the close of business on the Payment Date in that month as a fraction of the
respective principal balance of that class of Notes as of the Closing Date. The
Servicer will compute the Note Pool Factor each month for each class of Notes.
Each Note Pool Factor will initially be 1.0000000 and thereafter will decline to
reflect reductions in the principal balance of each class of Notes. The portion
of the principal balance of any class of Notes for a given month allocable to a
noteholder can be determined by multiplying the original denomination of the
holder's note by the related Note Pool Factor for that month.
Statements to Noteholders
Pursuant to the Indenture, the Sale and Servicing Agreement, the
Administration Agreement and the Trust Agreement (collectively referred to here
as the Transfer and Servicing Agreements), the noteholders will receive monthly
reports concerning the payments received on the Receivables, the Pool Balance,
the related Note Pool Factors and various other items of information pertaining
to the Trust. Noteholders of record during each calendar year will be furnished
information by the Indenture Trustee or the Owner Trustee, as appropriate, for
tax reporting purposes not later than the latest date permitted by law. The
Indenture Trustee will make the foregoing statements available to the noteholder
each month via its Internet website, which is presently located at
https://www.tss.db.com/inv.
We refer you to "Description of the Transfer and Servicing
Agreements--Statements to Securityholders" in the accompanying prospectus for a
more detailed description of the reports to be sent to noteholders.
Use of Proceeds
The Depositor will use the net proceeds from the sale of the Notes to
purchase the Receivables from BMW FS pursuant to the Receivables Purchase
Agreement and to fund the Reserve Account. The net proceeds to be received by
the Depositor from the sale of the Receivables to the Trust will be used by the
Depositor in connection with its acquisition of the Receivables from BMW FS and
to pay other expenses in connection with the issuance of the Notes. BMW FS will
use the proceeds from the sale of the Receivables for general corporate
purposes. In addition, BMW FS or its affiliates will apply all or a portion of
the net proceeds of this offering to the repayment of debt, including
"warehouse" debt secured by the Receivables prior to their sale to the Trust.
One or more of the Underwriters, or their respective affiliates or entities for
which their respective affiliates act as administrator and/or provide liquidity
lines, has acted as a "warehouse lender" to BMW FS or its affiliates, and will
indirectly receive a portion of the proceeds as repayment of that "warehouse"
debt.
BMW FS' Financing Program
Underwriting
Contracts are originated or purchased by BMW FS in accordance with
underwriting procedures that are intended to assess the applicant's ability to
pay the amounts due on the contract and the adequacy of the financed vehicle as
collateral. BMW FS utilizes predetermined credit score cutoffs and approval
authority levels as credit controls.
BMW FS requires applicants to complete an application form providing
various items of financial information, credit and employment history and other
personal information. Applications are accepted for new and used vehicles from
approved retailers via facsimile, personal delivery or InfoBahn--a BMW intranet
system linking Centers and BMW FS. The application is reviewed for completeness.
Independent verification of information in the application generally is not
required. However, BMW FS will seek verification of some information, including
employment, income and/or residence, under some circumstances, such as discovery
of a discrepancy between information in the application and information in a
credit bureau report. For the year ended December 31, 2005, 83.40% of
applications were approved, 80.21% of which were funded by BMW FS.
S-46
A credit buyer reviews each application that is not automatically approved
through the use of a system of rules and scorecards, as further described under
the caption "BMW FS' Financing Program--Underwriting" in the accompanying
prospectus.
Generally, after a Contract has been approved by BMW FS as described above
and originated by a Center, BMW FS acquires it indirectly by causing it to be
assigned to its affiliate, BMW Bank of North America, except in the case of
Contracts due from residents of certain states (currently Montana and New
Jersey) which are assigned directly to BMW FS. Contracts originated in
connection with the "lease to loan" program and certain refinancings are
originated directly by BMW Bank rather than acquired from Centers.
Additional information regarding BMW FS' Financing Program is set forth
under the caption "BMW FS' Financing Program" in the accompanying prospectus.
The Notes
General
The Notes will be issued pursuant to the terms of the Indenture, a form of
which has been filed as an exhibit to the registration statement. A copy of the
final signed Indenture will be filed with the Securities and Exchange Commission
following the issuance of the Securities. The following summary describes the
material terms of the Notes and the Indenture. The summary does not purport to
be complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Notes and the Indenture. The following summary
supplements the description of the general terms and provisions of the Notes of
any given series and the related Indenture set forth in the accompanying
prospectus.
Payments of Interest
Each class of Notes will constitute Fixed Rate Securities, as that term is
defined under "Certain Information Regarding the Securities--Fixed Rate
Securities" in the accompanying prospectus. Interest on the principal balances
of the classes of the Notes will accrue at the respective per annum interest
rates set forth on the cover of this prospectus supplement and will be payable
to the noteholders monthly on the twenty-fifth day of each month (or, if that
date is not a Business Day, on the next succeeding Business Day) (which is
referred to as a Payment Date) commencing October 25, 2006.
Interest on the outstanding principal balance of the Class A-1 Notes will
accrue at the related interest rate from and including the most recent Payment
Date on which interest has been paid (or from and including the Closing Date
with respect to the first Payment Date) to but excluding the current Payment
Date. Interest on the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes
and the Class B Notes will accrue at the related interest rate from and
including the most recent Payment Date on which interest has been paid (or from
and including the Closing Date with respect to the first Payment Date) to but
excluding the current Payment Date.
Interest on the Class A-1 Notes will be calculated on the basis of the
actual number of days in the related Interest Period divided by 360, and
interest on the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and
the Class B Notes will be calculated on the basis of a 360-day year consisting
of twelve 30-day months. Interest accrued but not paid on any Payment Date will
be due on the next Payment Date, together with interest on that amount at the
applicable interest rate, to the extent lawful. Interest payments on the Notes
will generally be made from Available Amounts and from amounts on deposit in the
Reserve Account, after the Servicing Fee and nonrecoverable Advances, all
accrued and unpaid trustees' fees, any amounts due to the Trustees for their
respective fees and reimbursement of expenses or in respect of indemnification
and other administrative fees of the trust, but only to the extent not otherwise
paid by the Servicer (which are referred to collectively as the Trust Fees and
Expenses); provided, however, that until the Notes have been paid in full, the
annual amount paid to the Trustees out of the Available Amounts prior to
payments on the Notes shall not exceed $10,000.00. We refer you to "Credit
Enhancement---Reserve Account" and "Payments on the Notes" in this prospectus
supplement.
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Interest payments to holders of the Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes will have the same priority. If there are
insufficient Available Amounts after the payment of Trust obligations with
higher priorities, the amount available for interest payments could be less than
the amount of interest payable on the Class A-1 Notes, Class A-2 Notes, Class
A-3 Notes and Class A-4 Notes on any Payment Date, in which case the holders of
such classes of Notes will receive their ratable share (based upon the aggregate
amount of interest due to that class) of the aggregate amount available to be
distributed in respect of interest on such Notes. Interest payments to holders
of the Class B Notes will be subordinated to interest payments and, in limited
circumstances, principal to holders of the Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes.
Payments of Principal
The Final Scheduled Payment Date, and expected final payment date for each
class of notes is set forth on the cover of this prospectus supplement. Payments
of principal on each Payment Date will be made only to the extent of Available
Amounts and the failure to pay principal in full on a class of notes will result
in an event of default only on the related Final Scheduled Payment Date for such
class. The Trust will generally make principal payments to the noteholders on
each Payment Date in an amount equal to the Principal Distribution Amount and
amounts, if any, from the Reserve Account, in accordance with the priorities
described below under "Payments on the Notes--Payment of Distributable Amounts."
Principal payments on the Notes will generally be made on each Payment
Date, in the following order of priority:
1. to the Class A-1 Notes until paid in full,
2. to the Class A-2 Notes until paid in full,
3. to the Class A-3 Notes until paid in full,
4. to the Class A-4 Notes until paid in full, and
5. to the Class B Notes until paid in full.
Notwithstanding the foregoing, following the occurrence and during the
continuation of:
o a default in the payment of any interest on any Note of the
Controlling Class when the same becomes due and payable, which
default continues for a period of five days,
o a default in the payment of principal of or any installment of the
principal on any Note when the same becomes due and payable,
o the bankruptcy of the Trust or the occurrence of other circumstances
relating to the bankruptcy or insolvency of the Trust, as described
in the Indenture, or
o any other event of default that results in a liquidation of the
Trust,
the priority of payments changes following an acceleration of the Notes
(or following the occurrence of any other event of default that results in a
liquidation of the Trust). In particular, the Trust will make no distributions
of principal or interest on the Class B Notes until payment in full of principal
and interest on the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class
A-4 Notes. In addition, principal payments will be made first to the holders of
the Class A-1 Notes until they have been paid in full; thereafter principal
payments will be made to the holders of the Class A-2 Notes, the Class A-3 Notes
and the Class A-4 Notes on a pro rata basis based on the principal balance of
that class of outstanding Notes. Beginning on the Payment Date on which the
Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes have been
paid in full, the remainder of the Principal Distribution Amount, if any, and on
each subsequent Payment Date, 100% of the Principal Distribution Amount, will be
paid to the holders of record of the Class B Notes until the Class B Notes have
been paid in full. Beginning
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on the Payment Date on which all of the Notes have been paid in full, the
remainder of the Principal Distributable Amount, if any, and on each subsequent
Payment Date, 100% of the Principal Distributable Amount, will be paid to the
holders of record of the certificates until the certificates have been paid in
full. Following the occurrence of any other event of default that has resulted
in an acceleration of the Notes but has not yet resulted in a liquidation of the
Trust, no change will be made in the priority of payments on the Class A Notes,
the Class B Notes and the certificates on each payment date until a liquidation,
if any, of the property of the Trust. We refer you to "The Notes--The
Indenture--Events of Default; Rights Upon Event of Default" in the accompanying
prospectus for a more detailed description of what would constitute an event of
default.
The actual Payment Date on which the outstanding principal balance of any
class of Notes is paid in full may be earlier than its Final Scheduled Payment
Date based on a variety of factors, including the factors described under
"Weighted Average Lives of the Securities" in the accompanying prospectus.
If the principal balance of a class of Notes has not been paid in full on
or prior to its Final Scheduled Payment Date, as shown on the front cover of
this prospectus supplement, the Principal Distribution Amount for that Payment
Date will, to the extent the remaining Available Amounts are sufficient, include
an amount sufficient to reduce the unpaid principal balance of that class of
Notes to zero on that Payment Date. We refer you to "Payment on the
Notes--Payment of Distributable Amounts" in this prospectus supplement.
Indenture
Events of Default; Rights upon Event of Default. Upon an event of default,
the Controlling Class of noteholders will have the rights set forth in the
prospectus under "The Notes--The Indenture--Events of Default; Rights Upon Event
of Default." The Indenture Trustee may sell the Receivables subject to the
conditions set forth in the Indenture following an event of default, including a
default in the payment of any principal of or a default for five days or more in
the payment of any interest on any note of the Controlling Class. In the case of
an event of default not involving any default in payment of principal of or
interest on a Class A Note, the Indenture Trustee is prohibited from selling the
Receivables unless one of the conditions set forth in the accompanying
prospectus under "The Notes--The Indenture--Events of Default; Rights Upon Event
of Default" has been satisfied. Following the occurrence of certain Events of
Default under the Indenture, the Trust will make no distributions of principal
or interest on the Class B Notes until payment in full of principal and interest
on the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes. In
addition, payments of principal on the Notes will be made first to the Class A-1
Notes until the Class A-1 Notes are repaid in full, and then pro rata to the
Class A-2 Notes, the Class A-3 and the Class A-4 Notes until each principal
balance is paid in full. If there are any amounts remaining, those amounts will
be used to pay interest and principal on the Class B Notes until the principal
balance is paid in full.
Under the Trust Indenture Act of 1939, as amended (which is referred to in
this prospectus supplement as the TIA), the Indenture Trustee may be deemed to
have a conflict of interest and be required to resign as Indenture Trustee for
the Class A Notes or the Class B Notes or as Indenture Trustee for all of the
Notes if a default occurs under the Indenture and if, within one year of such
default, the Indenture Trustee, or any of its directors or executive officers,
is, or is affiliated with, an underwriter (as defined in the TIA) of any of the
notes. In these circumstances, the Indenture will provide for a successor
indenture trustee to be appointed for the Class A Notes or the Class B Notes or
both, in order that there be separate indenture trustees for the Class A Notes
and the Class B Notes. If the Indenture Trustee resigns as Indenture Trustee for
any class of Notes or for all of the Notes, its resignation will become
effective only after a successor indenture trustee for the Notes or the
applicable class of Notes is appointed and the successor indenture trustee
accepts such appointment.
Notices
Noteholders will be notified in writing by the Indenture Trustee of any
event of default, Servicer Default or termination of, or appointment of a
successor to, the Servicer promptly upon a responsible officer obtaining actual
knowledge of these events.
If Notes are issued other than in book-entry form, those notices will be
mailed to the addresses of noteholders as they appear in the register maintained
by the Indenture Trustee prior to mailing. Those notices will be deemed to have
been given on the date of that publication or mailing.
S-49
Governing Law
The Indenture and the Notes are governed by and shall be construed in
accordance with the laws of the State of New York applicable to agreements made
in and to be performed wholly within that jurisdiction.
Minimum Denominations
The notes of each class shall be issued in U.S. Dollars in minimum
denominations of $1,000 and integral multiples of $1,000 in excess thereof
(except for one Note of each Class which may be issued in a denomination other
than an integral multiple of $1,000). The notes will be issued in book-entry
form and will be registered in the name of Cede & Co., as the nominee of the
Depository Trust Company, the clearing agency.
Payments on the Notes
On or before the 18th calendar day of each month (or, if the 18th day is
not a Business Day, the next succeeding Business Day) (each of which is referred
to as a Determination Date), the Servicer will inform the Owner Trustee and the
Indenture Trustee of, among other things, the amount of funds collected on or in
respect of the Receivables, the amount of Advances to be made by and reimbursed
to the Servicer and the Servicing Fee and other servicing compensation payable
to the Servicer, in each case with respect to the immediately preceding
Collection Period. On or prior to each Payment Date, the Servicer will also
determine the following:
1. Available Amounts,
2. Class A Noteholders' interest distribution,
3. Class B Noteholders' interest distribution,
4. Principal Distribution Amount, and
5. based on the available funds and other amounts available for payment
on the related Payment Date as described below, the amount to be
distributed to the Class A Noteholders and Class B Noteholders.
The Indenture Trustee or the Owner Trustee, as the case may be, will make
payments to the Class A Noteholders and Class B Noteholders out of the amounts
on deposit in the collection account. The amounts to be distributed to the Class
A Noteholders and Class B Noteholders will be determined in the manner described
below.
Payment of Distributable Amounts
Prior to each Payment Date, the Servicer will calculate the amount to be
distributed to the Class A Noteholders, Class B Noteholders and
certificateholders. On each Payment Date, the Servicer will allocate amounts on
deposit in the collection account with respect to the related Collection Period
as described below and will instruct the Indenture Trustee to make the following
payments and distributions from Available Amounts on deposit in the collection
account, and in the event of a shortfall in meeting the payments described in
clauses 1 through 5 below (an "Available Amounts Shortfall") amounts withdrawn
from the Reserve Account, in the following amounts and order of priority:
1. first, to the Servicer, the Servicing Fee, including any unpaid
Servicing Fees with respect to prior Collection Periods, and
non-recoverable Advances,
2. second, to the Class A Noteholders:
o the aggregate amount of interest accrued for the related
Interest Period on each of the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes and Class A-4 Notes at their respective
interest rates on the principal outstanding as of the previous
Payment Date after giving effect to all payments of principal
to the Class A Noteholders on the preceding Payment Date, and
S-50
o the excess, if any, of the amount of interest payable to the
Class A Noteholders on prior Payment Dates over the amounts
actually paid to the Class A Noteholders on those prior
Payment Dates, plus interest on that shortfall to the extent
permitted by law,
3. third, to the Principal Distribution Account, the First Priority
Principal Distribution Amount, if any,
4. fourth, to the Class B Noteholders:
o the aggregate amount of interest accrued for the related
Interest Period on each of the Class B Notes at the interest
rate on the Class B Notes on the principal outstanding as of
the previous Payment Date after giving effect to all payments
of principal to the Class B Noteholders on the preceding
Payment Date, and
o the excess, if any, of the amount of interest payable to the
Class B Noteholders on prior Payment Dates over the amounts
actually paid to the Class B Noteholders on those prior
Payment Dates, plus interest on that shortfall to the extent
permitted by law,
5. fifth, to the Principal Distribution Account, the Second Priority
Principal Distribution Amount, if any,
6. sixth, to the Reserve Account, from Available Amounts remaining, the
amount necessary to cause the amount on deposit in that account to
equal the Specified Reserve Account Balance,
7. seventh, to the Principal Distribution Account, the Regular
Principal Distribution Amount,
8. eighth, to the Indenture Trustee and the Owner Trustee, any accrued
and unpaid Trust Fees and Expenses, in each case to the extent the
fees and expenses have not been previously paid by the Servicer;
provided that until the Notes have been paid in full, the annual
amount paid to the Trustees from Available Amounts pursuant to this
clause (8) shall not exceed $10,000.00, and
9. ninth, any Available Amounts remaining, to the certificateholder.
The Principal Distribution Amount will be allocated among the Notes as
described above under "The Notes--Payments of Principal."
The Certificates
The certificates are not being offered pursuant to this prospectus
supplement and all information presented regarding the certificates is given to
further a better understanding of the Notes. The certificates will be issued
pursuant to the terms of the trust agreement, a form of which has been filed as
an exhibit to the registration statement. A copy of the final signed trust
agreement will be filed with the Securities and Exchange Commission following
the issuance of the securities. The certificates will evidence undivided
ownership interests in the Trust created pursuant to the trust agreement.
The certificateholders will be entitled to receive any excess Available
Amounts remaining on each Payment Date after payments of the Servicing Fee,
Trust Fees and Expenses, payments of interest and principal to the noteholders
and payment, if any, to the Reserve Account.
The trust agreement and the certificates are governed by and shall be
construed in accordance with the laws of the State of Delaware applicable to
agreements made in and to be performed wholly within that jurisdiction.
S-51
Credit Enhancement
The protection afforded to the Class A Noteholders will be effected both
by the preferential right of such noteholders to receive, to the extent
described in this prospectus supplement, current distributions on the
Receivables, the establishment of the Reserve Account, overcollateralization and
the subordination of the certificateholder's right to receive distributions. The
protection afforded to the Class B Noteholders will be effected by the
establishment of the Reserve Account, overcollateralization and the
subordination of the certificateholder's right to receive distributions. The
available credit enhancement is limited. If losses on the Receivables exceed the
amount of available credit enhancement, such losses will not be allocated to
write down the principal balance of any class of Notes. Instead, the amount
available to make payments on the Notes will be reduced to the extent such
losses result in shortfalls in the Available Amounts. If the available credit
enhancement is exhausted by losses on the Receivables, there may be insufficient
funds to pay in full the accrued interest and principal balances of the Notes.
Subordination
The rights of the Class B Noteholders to receive any distributions of
interest or principal is subordinated to payments of interest on the Class A
Notes and, in limited circumstances, payments of principal of the Class A Notes.
To the extent that the Pool Balance less the Yield Supplement
Overcollateralization Amount with respect to a Payment Date has decreased to a
level that is less than the aggregate outstanding principal balance on the Class
A Notes, a First Priority Principal Distribution Amount will be payable prior to
the payment of interest on or principal of the Class B Notes. The
certificateholder is entitled to receive payments of interest collected on the
Receivables which are not used by the Trust to make other required payments. The
certificateholder's right to receive this excess interest is subordinated to all
other payments required to be made on any Payment Date.
Reserve Account
The Reserve Account will be a segregated account in the name of the
Indenture Trustee. The Reserve Account will be created with an initial deposit
by the Depositor on the Closing Date of an amount equal to $2,772,490.93 (which
is referred to as the Reserve Account Initial Deposit). The Reserve Account will
thereafter be funded by depositing in the Reserve Account all Available Amounts
remaining after payments to the Servicer and payments of interest, the First
Priority Principal Distribution Amount and the Second Priority Principal
Distribution Amount, if any, for each Payment Date to the extent necessary to
restore or bring the amounts on deposit in the Reserve Account to the Specified
Reserve Account Balance.
Amounts held from time to time in the Reserve Account will continue to be
held for the benefit of noteholders and may be invested in Eligible Investments.
Investment income on those investments (net of losses and expenses) will be paid
to the Depositor, upon the direction of the Servicer, to the extent that funds
on deposit in the Reserve Account exceed the Specified Reserve Account Balance.
If the amount on deposit in the Reserve Account on any Payment Date (after
giving effect to all deposits to and withdrawals from the Reserve Account on
that Payment Date) is greater than the Specified Reserve Account Balance for
that Payment Date, subject to limitations set forth in the Transfer and
Servicing Agreements, the Indenture Trustee will include the amount of the
excess in the amounts to be distributed to the certificateholder pursuant to
clause (9) under "Payments on the Notes--Payment of Distributable Amounts" in
this prospectus supplement. The noteholders will not have any rights in, or
claims to, amounts distributed to the certificateholder or to the Depositor.
The Servicer may, from time to time after the date of this prospectus
supplement, request each rating agency to consent to a formula for determining
the Specified Reserve Account Balance that is different from that described
above or change the manner by which the Reserve Account is funded, or the
replacement of the Reserve Account with a different form of credit enhancement
in whole or in part. If each rating agency delivers a letter to the Trust to the
effect that the same will not result in a qualification, reduction or withdrawal
of its then current rating of any class of the Notes, then the Specified Reserve
Account Balance will be determined in accordance with the new formula, the
manner of funding will be changed or the Reserve Account will be replaced in
whole or in part, as applicable. The Sale and Servicing Agreement will
accordingly be amended, without the consent of any noteholder, to reflect the
revised arrangement. Promptly after the execution of any such amendment, the
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Administrator shall furnish written notification of the substance of such
amendment to each noteholder, the Indenture Trustee and each Rating Agency.
Amounts held from time to time in the Reserve Account will be held for the
benefit of the noteholders. On each Payment Date, funds will be withdrawn from
the Reserve Account to the extent of any Available Amounts Shortfall with
respect to that Payment Date and will be deposited in the collection account for
distribution to the noteholders.
None of the noteholders, the Indenture Trustee, the Owner Trustee or the
Depositor will be required to refund any amounts properly distributed or paid to
them, whether or not there are sufficient funds on any subsequent Payment Date
to make full distributions to the noteholders.
The Reserve Account and the subordination of the Class B Notes and the
certificates are intended to enhance the likelihood of receipt by Class A
Noteholders of the full amount of principal and interest due them and to
decrease the likelihood that the Class A Noteholders will experience losses.
However, the Reserve Account could be depleted. If the amount required to be
deposited into or required to be withdrawn from the Reserve Account to cover
shortfalls in collections on the Receivables exceeds the amount of available
cash in the Reserve Account, noteholders could incur losses or suffer a
temporary shortfall in the amounts distributed to the noteholders.
Overcollateralization
Payment of the Regular Principal Distribution Amount results in the
application of all remaining funds, including any excess interest to achieve and
maintain the target overcollateralization level. This application will result in
the payment of more principal on the Notes than the amount of principal paid on
the Receivables in the related period so long as excess interest is available
for this purpose. As the principal balance of the Notes is paid down to a target
overcollateralization level that is below the principal balance of the
Receivables, credit enhancement in the form of overcollateralization is created.
The Servicer may, from time to time after the date of this prospectus
supplement, request each rating agency to consent to a formula for determining
the target overcollateralization level that is different from that described
above. If each rating agency delivers a letter to the Trust to the effect that
the same will not result in qualification, reduction or withdrawal of its then
current rating of any class of the Notes, then the target overcollateralization
level will be determined in accordance with the new formula. The Sale and
Servicing Agreement will accordingly be amended, without the consent of any
noteholder, to reflect the revised arrangement. Promptly after the execution of
any such amendment, the Administrator shall furnish written notification of the
substance of such amendment to each noteholder, the Indenture Trustee and each
Rating Agency.
Yield Supplement Overcollateralization Amount
On the Closing Date, the Pool Balance will exceed the initial principal
balance of the Notes, by $44,773,894.22 (which is referred to as the Initial
Yield Supplement Overcollateralization Amount), which is approximately 3.881% of
the aggregate principal balance of the Receivables as of the Cutoff Date. The
Yield Supplement Overcollateralization Amount calculated for each Payment Date
is the sum of the amount for each Receivable equal to the excess, if any, of (x)
the scheduled payments due on the Receivable for each future Collection Period
discounted to present value as of the end of the preceding Collection Period at
the APR of that Receivable over (y) the scheduled payments due on the Receivable
for each future Collection Period discounted to present value as of the end of
the preceding Collection Period at a discount rate equal to the greater of the
APR of that Receivable and the Required Rate. For purposes of the preceding
sentence, future scheduled payments on the Receivables are assumed to be made on
their scheduled due dates without any delay, defaults or prepayments. The Yield
Supplement Overcollateralization Amount is intended to compensate for the low
APRs on some of the Receivables.
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With respect to any Payment Date, the Yield Supplement
Overcollateralization Amount will equal:
Yield Supplement
Overcollateralization
Payment Date Amount
- ------------ ---------------------
Closing Date............................................ $44,773,894.22
October 2006............................................ 43,062,321.68
November 2006........................................... 41,391,210.39
December 2006........................................... 39,760,951.18
January 2007............................................ 38,171,937.69
February 2007........................................... 36,624,213.31
March 2007.............................................. 35,117,538.77
April 2007.............................................. 33,651,692.67
May 2007................................................ 32,225,866.42
June 2007............................................... 30,839,547.38
July 2007............................................... 29,492,158.85
August 2007............................................. 28,183,164.02
September 2007.......................................... 26,911,951.05
October 2007............................................ 25,677,936.99
November 2007........................................... 24,480,561.05
December 2007........................................... 23,319,158.12
January 2008............................................ 22,192,568.21
February 2008........................................... 21,098,100.67
March 2008.............................................. 20,033,646.43
April 2008.............................................. 18,998,089.45
May 2008................................................ 17,989,726.20
June 2008............................................... 17,007,798.29
July 2008............................................... 16,052,382.58
August 2008............................................. 15,123,637.01
September 2008.......................................... 14,221,744.23
October 2008............................................ 13,346,903.01
November 2008........................................... 12,499,332.44
December 2008........................................... 11,679,249.02
January 2009............................................ 10,886,860.41
February 2009........................................... 10,122,342.14
March 2009.............................................. 9,385,873.27
April 2009.............................................. 8,677,644.27
May 2009................................................ 7,997,764.95
June 2009............................................... 7,346,221.67
July 2009............................................... 6,723,058.41
August 2009............................................. 6,128,281.21
September 2009.......................................... 5,561,929.61
October 2009............................................ 5,023,895.67
November 2009........................................... 4,514,138.66
December 2009........................................... 4,032,632.15
January 2010............................................ 3,579,422.29
February 2010........................................... 3,154,612.72
March 2010.............................................. 2,758,364.41
April 2010.............................................. 2,390,896.62
May 2010................................................ 2,052,037.28
June 2010............................................... 1,741,134.08
July 2010............................................... 1,457,700.46
August 2010............................................. 1,201,521.04
September 2010.......................................... 972,399.24
October 2010............................................ 770,149.33
November 2010........................................... 594,543.79
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Yield Supplement
Overcollateralization
Payment Date Amount
- ------------ ---------------------
December 2010........................................... 444,546.25
January 2011............................................ 319,045.07
February 2011........................................... 217,054.64
March 2011.............................................. 138,214.39
April 2011.............................................. 82,088.88
May 2011................................................ 45,534.63
June 2011............................................... 23,332.84
July 2011............................................... 11,224.09
August 2011............................................. 5,378.23
September 2011.......................................... 2,857.59
October 2011............................................ 1,863.36
November 2011........................................... 1,156.15
December 2011........................................... 679.42
January 2012............................................ 372.76
February 2012........................................... 170.68
March 2012.............................................. 55.53
April 2012.............................................. 14.19
May 2012................................................ 4.75
June 2012............................................... 1.68
July 2012............................................... 0.09
August 2012............................................. 0.00
September 2012.......................................... 0.00
Description of the Transfer and Servicing Agreements
The Transfer and Servicing Agreements
The following summary of the Transfer and Servicing Agreements describes
the material terms of the Transfer and Servicing Agreements. The description of
the terms of the Transfer and Servicing Agreements in this prospectus supplement
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, all the provisions of the Transfer and Servicing Agreements.
Forms of the Transfer and Servicing Agreements have been filed as exhibits to
the Registration Statement. Copies of the final signed Transfer and Servicing
Agreements will be filed as current reports on Form 8-K with the Securities and
Exchange Commission following the issuance of the Notes. We refer you to "Where
You Can Find More Information About Your Securities--The Depositor" in the
accompanying prospectus for additional information regarding reports required to
be filed by the Depositor.
Sale and Assignment of Receivables
Information with respect to the conveyance of the Receivables from the
Depositor to the Trust on the Closing Date pursuant to the Sale and Servicing
Agreement is set forth under "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables" in the accompanying prospectus.
Accounts
In addition to the accounts referred to under "Description of the Transfer
and Servicing Agreements--Accounts" in the accompanying prospectus, the Servicer
will also establish and maintain with the Indenture Trustee the Reserve Account
in the name of the Indenture Trustee on behalf of the noteholders.
Collections
The Transfer and Servicing Agreements generally require that the Servicer
deposit all payments on Receivables received from Obligors and all proceeds of
Receivables collected during each Collection Period into the
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collection account not later than two Business Days after receipt. However, so
long as (a)(1) the short-term debt of BMW US Capital, LLC (or the entity that is
the Servicer) is rated in the highest rating category by, or is otherwise
acceptable to, each Rating Agency and (2) no Servicer Default has occurred or
(b)(1) the Servicer obtains a letter of credit, surety bond or insurance policy
under which demands for payment may be made to secure timely remittance of
monthly collections to the collection account and (2) the Trustees are provided
with confirmation from each Rating Agency to the effect that the use of such
alternative remittance schedule will not result in the qualification, reduction
or withdrawal of its then-current rating on any class of securities, the
Servicer may retain such amounts received during a Collection Period until the
Business Day prior to each Payment Date (which is referred to as a Deposit
Date). The Servicer or the Depositor, as the case may be, will remit the
aggregate Warranty Purchase Payments and Administrative Purchase Payments of
Receivables to be purchased from the Trust into the collection account on or
before each Deposit Date. All decisions regarding deposits and withdrawals from
the collection account shall be made by the Servicer and will not be
independently verified. The Servicer will be entitled to withhold, or to be
reimbursed from amounts otherwise payable into or on deposit in the collection
account, amounts previously deposited in the collection account but later
determined to have resulted from mistaken deposits or postings. Except as
described in the Sale and Servicing Agreement, pending deposit into the
collection account, collections may be invested by the Servicer at its own risk
and for its own benefit and will not be segregated from its own funds. We refer
you to "Description of the Transfer and Servicing Agreements--Collections" in
the accompanying prospectus.
Collections on or in respect of a Receivable made during a Collection
Period (including Warranty Purchase Payments and Administrative Purchase
Payments) will be applied first to interest accrued to date, second to principal
until the principal balance is brought current, third to reduce the unpaid late
charges as provided in the Receivable and finally to prepay principal of the
Receivable. We refer you to "Description of the Transfer and Servicing
Agreements--Collections" in the accompanying prospectus.
Note Distribution Account
On or prior to the Closing Date, the Indenture Trustee will establish and
maintain a note distribution account into which amounts released from the
collection account and the Reserve Account for payment to the noteholders will
be deposited and from which all distributions to the noteholders will be made.
The note distribution account will be maintained at an Eligible Institution.
Advances
On or before the related Deposit Date, the Servicer will make a payment
into the collection account of an amount equal to the aggregate of all scheduled
payments of interest that were due during the related Collection Period that
were not collected during such Collection Period (each such payment is referred
to as an Advance), exclusive of amounts that the Servicer has determined would
be nonrecoverable. On each Payment Date, the Servicer shall reimburse itself for
the outstanding amount advanced to the extent of actual collections of late
scheduled payments. In addition, if a Receivable becomes a Liquidated
Receivable, the amount of accrued and unpaid interest on that Receivable (but
not including interest for the current Collection Period) will, up to the amount
of outstanding Advances in respect of that Receivable, be withdrawn from the
collection account and paid to the Servicer in reimbursement of the outstanding
Advances. The Servicer will not be required to make any Advances, to the extent
that it does not expect to recoup the Advance from subsequent collections or
recoveries, which is referred to as a Non-Recoverable Advance. The Servicer will
make all Advances by depositing into the collection account Advances in respect
of a Collection Period on the related Deposit Date. We refer you to "Description
of the Transfer and Servicing Agreements--Advances " in the accompanying
prospectus.
Servicing Compensation
The Servicing Fee, together with any previously unpaid Servicing Fee, will
be paid to the Servicer on each Payment Date solely to the extent of Available
Interest. The Servicer will be entitled to collect and retain as additional
servicing compensation in respect of each Collection Period any late fees,
prepayment charges and any other administrative fees and expenses or similar
charges collected during that Collection Period, plus any investment earnings or
interest earned during that Collection Period from the investment of monies on
deposit in the collection account and the note distribution account. We refer
you to "Description of the Transfer and Servicing
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Agreements--Collections" in this prospectus supplement and "Description of the
Transfer and Servicing Agreements--Servicing Compensation" in the accompanying
prospectus. The Servicer will be paid the Servicing Fee for each Collection
Period on the following Payment Date related to that Collection Period. However,
if it is acceptable to each Rating Agency without a qualification, reduction or
withdrawal in the rating of any class of Notes, the Servicing Fee in respect of
a Collection Period (together with any portion of the Servicing Fee that remains
unpaid from prior Payment Dates) will be paid at the beginning of that
Collection Period out of collections of interest on the Receivables for that
Collection Period. The Servicing Fee will be paid from Available Amounts in
accordance with the priority of payments set forth above under "Payments on the
Notes--Payment of Distributable Amounts."
Net Deposits
As an administrative convenience and as long as specified conditions are
satisfied, for so long as BMW FS is the Servicer, BMW FS will be permitted to
make the deposit of collections, aggregate Advances and amounts deposited in
respect of purchases of Receivables by the Depositor or the Servicer for or with
respect to the related Collection Period net of payments to be made to the
Servicer with respect to that Collection Period. The Servicer, however, will
account to the Owner Trustee and to the noteholders as if all of the foregoing
deposits and payments were made individually. We refer you to "Description of
the Transfer and Servicing Agreements--Net Deposits" in the accompanying
prospectus.
Optional Purchase
The outstanding Notes will be redeemed in whole, but not in part, on any
Payment Date on which the Servicer or any successor to the Servicer exercises
its option to purchase the Receivables. The Servicer or any successor to the
Servicer may purchase the Receivables when the Pool Balance shall have declined
to 10% or less of the Pool Balance as of the Cutoff Date, as described in the
accompanying prospectus under "Description of the Transfer and Servicing
Agreements--Termination" The Redemption Price for the outstanding Notes will be
equal to the unpaid principal balance of the outstanding Notes plus accrued and
unpaid interest on the Notes and for the outstanding certificates will be equal
to the unpaid principal balance of the outstanding certificates plus accrued and
unpaid interest on the certificates, in each case, on the date of the optional
purchase.
Removal of Servicer
The Indenture Trustee may, and at the direction of noteholders evidencing
more than 50% of the voting interests of the Controlling Class shall, terminate
the rights and obligations of the Servicer under the Sale and Servicing
Agreement upon the occurrence of a Servicer Default.
Under those circumstances, authority and power shall, without further
action, pass to and be vested in the Indenture Trustee or a successor Servicer
appointed by the Indenture Trustee under the Sale and Servicing Agreement. The
Indenture Trustee or other successor Servicer will succeed to all the
responsibilities, duties and liabilities of the Servicer in its capacity under
the Sale and Servicing Agreement and will be entitled to the Servicing Fee. If,
however, the servicer becomes a debtor in bankruptcy or, if not eligible to be a
debtor in bankruptcy, becomes the subject of insolvency proceedings, and no
Servicer Default other than the commencement of bankruptcy or insolvency
proceedings has occurred, that Indenture Trustee or the noteholders (or
certificateholders) may not be able to effect a transfer of servicing. In the
event that the Indenture Trustee is unwilling or unable to act, it may appoint
or petition a court of competent jurisdiction to appoint a successor servicer.
Notwithstanding termination under this section, the Servicer shall be entitled
to payment of amounts payable to it, for services rendered prior to termination.
Notes Owned by the Depositor, the Servicer or Affiliates
Any Notes owned by the Depositor, the Servicer or any of their affiliates
will be entitled to equal and proportionate benefits under the Transfer and
Servicing Agreements, except that such Notes will not be considered to be
outstanding for the purpose of determining whether the requisite percentage of
noteholders have given any
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request, demand, authorization, direction, notice, consent or other action under
the Transfer and Servicing Agreements.
Duties of the Owner Trustee and the Indenture Trustee
The Owner Trustee will make no representations as to the validity or
sufficiency of the trust agreement, the Notes or Certificates (other than the
authentication of the Certificates) or of any Receivables or related documents
and is not accountable for the use or application by the Depositor or the
Servicer of any funds paid to the Depositor or the Servicer in respect of the
Notes, the Certificates or the Receivables, or the investment of any monies by
the Servicer before those monies are deposited into the collection account. The
Owner Trustee will not independently verify the Receivables. If no Servicer
Default has occurred, the Owner Trustee is required to perform only those duties
specifically required of it under the trust agreement. In addition to making
distributions to the Certificateholder, those duties generally are limited to
the receipt of the various certificates, reports or other instruments required
to be furnished to the Owner Trustee under the trust agreement, in which case it
will only be required to examine them to determine whether they conform to the
requirements of the trust agreement. The trust agreement says that the Owner
Trustee will not be responsible for knowing about any event unless an officer of
the Owner Trustee has actual knowledge of the event or has received written
notice of the event.
In addition, the Owner Trustee will be under no obligation to exercise any
of the rights or powers vested in it by the trust agreement or to make any
investigation of matters arising under the trust agreement or to institute,
conduct or defend any litigation under the trust agreement or in relation
thereto at the request, order or direction of any of the certificateholders,
unless those certificateholders have offered to the Owner Trustee security or
indemnity reasonably satisfactory to the Owner Trustee against the costs,
expenses and liabilities that may be incurred by the Owner Trustee in connection
with the exercise of those rights.
The Indenture Trustee will make no representations as to the validity or
sufficiency of the Indenture, the Notes (other than authentication of the Notes)
or of any Receivables or related documents, and is not accountable for the use
or application by the Depositor or the Servicer of any funds paid to the
Depositor or the Servicer in respect of the Notes or the Receivables, or the
investment of any monies by the Servicer before those monies are deposited into
the collection account. The Indenture Trustee will not independently verify the
Receivables. If no event of default or Servicer Default has occurred, the
Indenture Trustee is required to perform only those duties specifically required
of it under the Indenture. In addition to making distributions to the
noteholders, those duties generally are limited to the receipt of the various
certificates; reports or other instruments required to be furnished to the
Indenture Trustee under the indenture, in which case it will only be required to
examine them to determine whether they conform to the requirements of the
Indenture. The Indenture says that the Indenture Trustee will not be responsible
for knowing about any event unless an officer of the Indenture Trustee has
actual knowledge of the event or has received written notice of the event.
If required by the TIA, the Indenture Trustee will mail each year to all
noteholders a brief report relating to its eligibility and qualification to
continue as Indenture Trustee under the Indenture and other information relating
to the Receivables. For additional information regarding such reports, see "The
Notes--The Indenture" in the accompanying prospectus.
The Indenture Trustee will be under no obligation to exercise any of the
rights or powers vested in it by the Indenture or to make any investigation of
matters arising under the Indenture or to institute, conduct or defend any
litigation under the Indenture or in relation to the Indenture or that
litigation at the request, order or direction of any of the noteholders, unless
those noteholders have offered to the Indenture Trustee reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred by
the Indenture Trustee in connection with the exercise of those rights. No
noteholder will have any right under the Indenture to institute any proceeding
with respect to the Indenture, other than with respect to the failure by the
Depositor or the Servicer, as applicable, to remit payment. A noteholder's right
to institute any proceeding with respect to the Indenture Trustee is conditioned
upon the noteholder providing the Indenture Trustee with written notice of the
event of default and the holders of the Controlling Class evidencing not less
than 25% of the voting interests of the Controlling Class, voting together as a
single class, have made written request upon the Indenture Trustee to institute
that proceeding in its own name as the Indenture Trustee under the Indenture. No
proceeding shall commence unless the noteholders have offered to the
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Indenture Trustee reasonable indemnity and the Indenture Trustee for 60 days has
neglected or refused to institute that proceeding.
The Owner Trustee and the Indenture Trustee
Wilmington Trust Company will be the Owner Trustee under the trust
agreement. Deutsche Bank Trust Company Americas will be the Indenture Trustee
under the Indenture. The Owner Trustee, the Indenture Trustee and any of their
respective affiliates may hold Notes in their own names or as pledgees.
For the purpose of meeting the legal requirements of some jurisdictions,
the Servicer and the Owner Trustee or the Servicer and the Indenture Trustee, in
each case acting jointly (or in some instances, the Owner Trustee or the
Indenture Trustee acting alone), will have the power to appoint co-trustees or
separate trustees of all or any part of the Trust. In the event of an
appointment of co-trustees or separate trustees, all rights, powers, duties and
obligations conferred or imposed upon the Owner Trustee by the Sale and
Servicing Agreement and the trust agreement or the Indenture Trustee by the
Indenture will be conferred or imposed upon the Owner Trustee or the Indenture
Trustee and each of their respective separate trustees or co-trustees jointly,
or, in any jurisdiction in which the Owner Trustee or the Indenture Trustee will
be incompetent or unqualified to perform specified acts, singly upon that
separate trustee or co-trustee who will exercise and perform those rights,
powers, duties and obligations solely at the direction of the Owner Trustee or
the Indenture Trustee.
The Owner Trustee and the Indenture Trustee may resign at any time, in
which event the Servicer will be obligated to appoint a successor Owner Trustee
or Indenture Trustee, as applicable. The Servicer may also remove the Owner
Trustee or the Indenture Trustee if either ceases to be eligible to continue as
trustee under the trust agreement or the Indenture, as the case may be, becomes
legally unable to act or becomes insolvent. In those circumstances, the Servicer
will be obligated to appoint a successor Owner Trustee or Indenture Trustee, as
applicable. Any resignation or removal of the Owner Trustee or the Indenture
Trustee and appointment of a successor Owner Trustee or Indenture Trustee, as
applicable, will not become effective until acceptance of the appointment by the
successor.
The Servicer will be obligated to pay the fees of the Owner Trustee and
the Indenture Trustee in connection with their duties under the trust agreement
and Indenture, respectively. The Owner Trustee and the Indenture Trustee will be
entitled to indemnification by BMW FS and the Depositor for, and will be held
harmless against, any loss, liability, fee, disbursement or expense incurred by
the Owner Trustee or the Indenture Trustee not resulting from its own willful
misfeasance, bad faith or negligence. The Depositor will be obligated to
indemnify the Owner Trustee and the Indenture Trustee for specified taxes that
may be asserted in connection with the transaction.
Fees and Expenses
The table below sets forth the fees and expenses payable by the trust on each
payment date.
- --------------------------------------------------------------------------------
Party Amount
- --------------------------------------------------------------------------------
Servicer (1) one-twelfth of 1.00% multiplied by the outstanding
principal balance of the Receivables as of the
first day of the related collection period
- --------------------------------------------------------------------------------
Indenture Trustee (2) $0.00 per annum
- --------------------------------------------------------------------------------
Owner Trustee (2) $3,000.00 per annum
- --------------------------------------------------------------------------------
Administrator (3) not to exceed $1,500.00 per annum
- --------------------------------------------------------------------------------
(1) To be paid before any amounts are distributed to noteholders.
(2) To be paid by the Servicer as part of the Servicing Fee. In the event
the Servicer does not fulfill its payment obligations such fees will be paid
before any amounts are distributed to noteholders, but only up to an aggregate
amount equal to $10,000.00 per annum and any remainder will be paid after all
amounts due and owed to noteholders are paid on such payment date, provided that
if an event of default occurs, such $10,000.00 limitation will not apply.
(3) To be included as part of the Servicing Fee unless BMW FS does not
fulfill both roles.
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Legal Proceedings
To the knowledge of the Sponsor and the Depositor, there are no legal
proceedings pending, or governmental proceedings contemplated, against the
Sponsor, the Depositor, the Owner Trustee, the Indenture Trustee, the Servicer
or the trust that would be material to holders of any notes or certificates.
Material Income Tax Consequences
The following is a general discussion of the material federal income tax
considerations of the purchase, ownership and disposition of the Notes. The
discussion is based upon law, regulations, rulings and decisions now in effect,
all of which are subject to change. The discussion below does not purport to
deal with all federal tax considerations applicable to all categories of
investors. It is recommended that investors consult their own tax advisors in
determining the federal, state, local and any other tax consequences to them of
the purchase, ownership and disposition of the Notes. We refer you to the
discussions under "Material Income Tax Consequences--Tax Treatment of Owner
Trusts" and "--State and Local Tax Considerations" in the accompanying
prospectus.
Tax Characterization of the Trust
In the opinion of Weil, Gotshal & Manges LLP, tax counsel to the Trust,
subject to the assumptions set forth therein and although there is no authority
directly on point with respect to transactions similar to those contemplated in
the Transfer and Servicing Agreements, entities with a capital structure similar
to the Trust or Securities with terms similar to the Notes and Certificates:
o the Notes will be characterized as debt for federal income tax
purposes, and
o the Trust will not be characterized as an association (or a publicly
traded partnership) taxable as a corporation for federal income tax
purposes.
If the Trust were taxable as a corporation for federal income tax
purposes, it would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the related Receivables,
which may be reduced by its interest expense on the Notes. Any imposition of
corporate income tax could materially reduce cash available to make payments on
the Notes, and the beneficial owners of the Certificates could be liable for any
corporate income tax that is unpaid by the Trust.
Treatment of the Notes as Indebtedness
The Depositor, each Certificateholder and the beneficial owners of the
Notes will agree by their purchase of the Securities to treat the Notes as debt
for federal income tax purposes. The Depositor and the Servicer and any
subsequent holder of Certificates will agree, to treat the Trust:
o as a partnership for purposes of federal and state income tax,
franchise tax and any other tax measured in whole or in part by
income, with the assets of the partnership being the assets held by
the Trust, the partners of the partnership being the Certificate
owners; and the Notes being debt of the partnership, or
o if a single beneficial owner owns all of the Certificates and none
of the Notes are characterized as equity interests in the Trust, as
disregarded as an entity separate from the Certificate owner for
purpose of federal and state income tax, franchise tax and any other
tax measured in whole or in part by income, with the assets of the
Trust and the Notes treated as assets and indebtedness of the
Certificate owner.
However, the proper characterization of the arrangement involving the
Trust, the Notes, the Depositor and the Servicer is not clear because there is
no authority on transactions closely comparable to the transaction described in
this prospectus supplement.
S-60
ERISA Considerations
Section 406 of ERISA and Section 4975 of the Code prohibit pension,
profit-sharing and other employee benefit plans, as well as individual
retirement accounts and certain types of Keogh Plans (each, a "Benefit Plan"),
from engaging in specified transactions, such as direct or indirect sales or
exchanges or extensions of credit, with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to those
Benefit Plans. A violation of these "prohibited transaction" rules may result in
an excise tax or other penalties and liabilities under ERISA and the Code for
those persons. Title I of ERISA also requires that fiduciaries of a Benefit Plan
subject to ERISA make investments that are prudent, diversified (except if
prudent not to do so) and in accordance with governing plan documents.
If the assets of the Trust were deemed to be assets of a Benefit Plan,
transactions involving the Trust that are described in Section 406 of ERISA or
Section 4975 of the Code might be deemed to constitute prohibited transactions
for which an exemption is not available. Under a regulation issued by the United
States Department of Labor (the "Plan Assets Regulation"), the assets of the
Trust would be treated as plan assets of a Benefit Plan for the purposes of
ERISA and the Code only if the Benefit Plan acquired an "equity interest" in the
Trust and none of the exceptions contained in the Plan Assets Regulation were
applicable. An equity interest is defined under the Plan Assets Regulation as an
interest other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features. Although
there is little guidance on the subject, the Notes should be treated as
indebtedness without substantial equity features for purposes of the Plan Assets
Regulation. This determination is based in part upon the traditional debt
features of the Notes, including the reasonable expectation of purchasers of
Notes that the Notes will be repaid when due, as well as the absence of
conversion rights, warrants and other typical equity features. The debt
treatment of the Notes for ERISA purposes could change if the Trust incurred
losses.
However, even if the Notes are treated as debt for purposes of the Plan
Assets Regulation, the acquisition or holding of Notes by or on behalf of a
Benefit Plan could be considered to give rise to a prohibited transaction if the
Trust or any of its affiliates is or becomes a party in interest or a
disqualified person with respect to a Benefit Plan. In that instance, certain
exemptions from the prohibited transaction rules could be applicable depending
on the type and circumstances of the plan fiduciary making the decision to
acquire a Note. Included among these exemptions are Section 408(b)(17) of ERISA
and Section 4975(d)(20) of the Code, which exempt certain transactions
(including, without limitation, a sale and purchase of securities) between a
benefit plan and a party in interest or a disqualified person so long as (i)
such party in interest or a disqualified person is treated as such solely by
reason of providing services to the benefit plan, (ii) such party in interest or
a disqualified person is not a fiduciary which renders investment advice, or has
or exercises discretionary authority or control, with respect to the plan assets
involved in such transaction, or an affiliate of any such person and (iii) the
benefit plan neither receives less than nor pays more than "adequate
consideration" (as defined in such Sections) in connection with such
transaction. There are other exemptions as well such as: Prohibited Transaction
Class Exemption ("PTCE") 90-1, regarding investments by insurance company pooled
separate accounts; PTCE 95-60, regarding investments by insurance company
general accounts; PTCE 91-38, regarding investments by bank collective
investment finds; PTCE 96-23, regarding transactions affected by "in-house asset
managers"; and PTCE 84-14, regarding transactions effected by "qualified
professional asset managers." Each investor using the assets of a Benefit Plan
which acquires the Notes, or to whom the Notes are transferred, will be deemed
to have represented that the acquisition and continued holding of the Notes will
be covered by one of the exemptions listed above or by another Department of
Labor prohibited transaction class exemption.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements; however, those plans may be subject to
comparable federal, state or local law restrictions.
A plan fiduciary considering the purchase of Notes should consult its tax
and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other related issues and their potential consequences.
S-61
The sale of Notes to a Benefit Plan is in no respect a representation that
this investment meets all relevant legal requirements with respect to
investments by Benefit Plans generally or by a particular Benefit Plan, or that
this investment is appropriate for Benefit Plans generally or any particular
Benefit Plan.
Plan of Distribution
Subject to the terms and conditions set forth in an underwriting
agreement, the Depositor has agreed to cause the Trust to sell to each of the
underwriters named below, and each of the underwriters has severally but not
jointly agreed to purchase, the principal balance of Notes set forth opposite
its name below:
Underwriters Class A-l Notes Class A-2 Notes Class A-3 Notes Class A-4 Notes Class B Notes
- ------------ --------------- --------------- --------------- --------------- -------------
Barclays Capital Inc. ............... $129,200,000 $123,200,000 $112,000,000 $69,217,600 $12,476,000
Banc of America
Securities LLC ...................... $129,200,000 $123,200,000 $112,000,000 $69,217,600 $12,476,000
Credit Suisse Securities
(USA) LLC ........................... $21,533,333 $20,533,333 $18,666,667 $11,536,267 --
Merrill Lynch, Pierce,
Fenner & Smith
Incorporated ........................ $21,533,333 $20,533,333 $18,666,667 $11,536,267 --
Greenwich Capital
Markets, Inc. ....................... $21,533,333 $20,533,333 $18,666,667 $11,536,267 --
Total ........................... $323,000,000 $308,000,000 $280,000,000 $173,044,000 $24,952,000
In the underwriting agreement, the underwriters have agreed, subject to
the terms and conditions set forth in the underwriting agreement, to purchase
all of the Notes if any of the Notes are not purchased. This obligation of the
underwriters is subject to specified conditions precedent set forth in the
underwriting agreement.
The Depositor has been advised by the underwriters that they propose to
offer the Notes to the public initially at the prices set forth on the cover of
this prospectus supplement, and to specified dealers at these prices less the
concessions and reallowance discounts set forth below:
Selling Reallowance
Class Concession Discount
----- ---------- -----------
A-1...................................... 0.0450% 0.0225%
A-2...................................... 0.0600% 0.0300%
A-3...................................... 0.0900% 0.0450%
A-4...................................... 0.1200% 0.0600%
B........................................ 0.1680% 0.0840%
The Depositor and BMW FS have agreed to indemnify the underwriters against
specified liabilities, including liabilities under the Securities Act of 1933,
as amended, or to contribute to payments which the underwriters may be required
to make in respect thereof. In the ordinary course of their respective
businesses, the underwriters and their respective affiliates have engaged and
may engage in various financial advisory, investment banking and commercial
banking transactions from time to time with BMW FS and its affiliates.
The Notes are new issues of securities with no established trading market.
The Depositor has been advised by the underwriters that they intend to make a
market in the Notes as permitted by applicable laws and regulations. The
underwriters are not obligated, however, to make a market in the Notes, and that
market-making may be discontinued at any time without notice at the sole
discretion of the underwriters. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Notes of any class.
The Trust may, from time to time, invest funds in the Accounts in Eligible
Investments acquired from the underwriters.
In connection with the offering of the Notes, the underwriters may engage
in overallotment, stabilizing transactions and syndicate covering transactions.
Overallotment involves sales in excess of the offering size which
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creates a short position for the underwriters. Stabilizing transactions involve
bids to purchase the Notes in the open market for the purpose of pegging, fixing
or maintaining the price of the Notes. Syndicate covering transactions involve
purchases of the Notes in the open market after the distribution has been
completed in order to cover short positions. Stabilizing transactions and
syndicate covering transactions may cause the price of the Notes to be higher
than it would otherwise be in the absence of those transactions. If the
underwriters engage in stabilizing or syndicate covering transactions, they may
discontinue them at any time.
Upon receipt of a request by an investor who has received an electronic
prospectus from an underwriter or a request by that investor's representative
within the period during which there is an obligation to deliver a prospectus,
BMW FS, the Depositor or the underwriters will promptly deliver, or cause to be
delivered, without charge, a paper copy of the prospectus.
Each underwriter will represent that:
o it has not offered or sold and will not offer or sell, prior to the
date six months after their date of issuance, any Notes to persons
in the United Kingdom, except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted in
and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations
1995 (as amended) (the "POS Regulations") or the Financial Services
and Markets Act 2000 (the "FSMA");
o it has complied and will comply with all applicable provisions of
the FSMA with respect to anything done by it in relation to the
Notes in, from or otherwise involving the United Kingdom; and
o it has only communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or inducement
to engage in investment activity (within the meaning of Section 21
of the FSMA) received by it in connection with the issue or sale of
any Notes in circumstances in which Section 21(1) of the FSMA does
not apply.
Legal Opinions
In addition to the legal opinions described in the accompanying
prospectus, legal matters relating to the Notes and federal income tax and other
matters will be passed upon for the Trust by Weil, Gotshal & Manges LLP. Certain
legal matters will be passed upon for the Underwriters by McKee Nelson LLP.
S-63
Glossary of Terms
"ABS Tables" means the tables captioned "Percent of Initial Note Principal at
Various ABS Percentages" which were prepared on the basis of the characteristics
of the Receivables described in this prospectus supplement.
"Administrative Purchase Payment" means an amount equal to a Receivable's unpaid
Principal Balance, plus interest thereon at a rate equal to the sum of the
Interest Rate or Pass Through Rate specified in the related Sale and Servicing
Agreement or Pooling and Servicing Agreement and the Servicing Fee Rate to the
last day of the collection period relating to that purchase.
"Administrative Receivable" means each Receivable that is required to be
purchased from a trust by the servicer due to a breach of the required servicing
procedures with respect to that Receivable.
"Advance" means an amount equal to the aggregate of all scheduled payments of
interest that were due during the related Collection Period that were not
collected during such Collection Period, exclusive of amounts that the Servicer
has determined would be nonrecoverable.
"Available Amounts" means the sum of Available Interest and Available Principal.
"Available Interest" means, for any Payment Date, the sum of the following
amounts (without duplication) allocable to interest received or allocated by the
Servicer on or in respect of the Receivables during the related Collection
Period:
1. that portion of all collections on Receivables allocable to interest
(including the amount, if any, of Advances for that Collection Period, but
excluding the amount, if any, of reimbursements of Advances previously
made to the Servicer),
2. the Administrative Purchase Payments or Warranty Purchase Payments of each
Receivable that became a Warranty Receivable or an Administrative
Receivable, respectively, to the extent attributable to accrued interest
on that Receivable,
3. Recoveries for that Collection Period,
4. investment earnings on the Accounts (other than the collection account and
the Reserve Account) for the related Payment Date,
5. Liquidation Proceeds for that Collection Period to the extent allocable to
interest, and
6. losses on investments deposited by the Servicer;
provided that such amounts shall exclude the following amounts:
o amounts received on a particular Receivable (other than a
Liquidated Receivable) to the extent that the Servicer has
previously made an unreimbursed Advance in respect of that
Receivable, and
o Liquidation Proceeds with respect to a particular Receivable
to the extent of unreimbursed Advances in respect of that
Receivable.
"Available Principal" means, for any Payment Date, the sum of the following
amounts, without duplication, with respect to the related Collection Period:
1. the portion of all collections on Receivables allocable to principal,
2. Liquidation Proceeds for that Collection Period to the extent allocable to
principal, and
S-64
3. that portion allocable to principal of the Administrative Purchase
Payments or Warranty Purchase Payments of all Receivables that became
Warranty Receivables or Administrative Receivables, respectively, during
or in respect of that Collection Period.
provided that such amounts shall exclude the following amounts:
o amounts received on a particular Receivable (other than a
Liquidated Receivable) to the extent that the Servicer has
previously made an unreimbursed Advance in respect of that
Receivable, and
o Liquidation Proceeds with respect to a particular Receivable
to the extent of unreimbursed Advances in respect of that
Receivable.
"Business Day" means any day other than a Saturday, a Sunday or a day on which a
national banking association or a commercial banking institution in the State of
New Jersey, the State of Delaware or the State of New York is authorized or
obligated by law or executive order to remain closed.
"Class A Noteholders" means, collectively, the holders of the Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes and Class A-4 Notes.
"Class B Noteholders" means the holders of the Class B Notes.
"Class A Notes" means the Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes
and Class A-4 Notes.
"Collection Period" means the calendar month immediately preceding any Payment
Date.
"Controlling Class" means with respect to any outstanding Notes, the Class A-1
Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes (voting together as
a single class) as long as such class is outstanding, and thereafter, the Class
B Notes for so long as any Class B Notes are outstanding (in each case,
excluding Notes held by the Depositor, the Servicer or their affiliates).
"Eligible Institution" means (a) the corporate trust department of the Indenture
Trustee or the Owner Trustee or (b) a depository institution organized under the
laws of the United States of America or any State, that (i) has either (A) a
long-term unsecured debt rating of at least "AA-" by Standard & Poor's and
acceptable to Moody's or (B) a short-term unsecured debt rating or certificate
of deposit rating of at least "A-1+" by Standard & Poor's and acceptable to
Moody's and (ii) the deposits of which are insured by the FDIC.
"Eligible Investments" means securities, negotiable instruments or security
entitlements that evidence:
o direct obligations of, and obligations fully guaranteed as to
the full and timely payment by, the United States of America;
o demand deposits, time deposits or certificates of deposit of
any depository institution or trust company incorporated under
the laws of the United States of America or any State (or any
domestic branch of a foreign bank) and subject to supervision
and examination by federal or state banking or depository
institution authorities; provided, however, that at the time
of the investment or contractual commitment to invest therein,
the commercial paper or other short-term unsecured debt
obligations (other than such obligations the rating of which
is based on the credit of a person other than such depository
institution or trust company) thereof shall have a credit
rating from each Rating Agency in the highest investment
category granted thereby;
o commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each
Rating Agency in the highest investment category granted
thereby;
S-65
o investments in money market funds having a rating from each
Rating Agency in the highest investment category granted
thereby (including funds for which the Indenture Trustee or
the Owner Trustee or any of their respective affiliates is
investment manager or advisor);
o bankers' acceptances issued by any depository institution or
trust company referred to in the second clause above;
o repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United
States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit
of the United States of America, in either case entered into
with a depository institution or trust company (acting as
principal) described in the second clause above; and
o any other investment with respect to which the issuing entity,
the Indenture Trustee or the Servicer has received written
notification from each Rating Agency that the acquisition of
such investment will satisfy the conditions of such Rating
Agency.
"Financed Vehicle" means the new or used automobiles, motorcycles and light
trucks securing the Receivables.
"Final Scheduled Payment Date" means the respective final scheduled payment
dates set forth under "Payments on the Notes."
"First Priority Principal Distribution Amount" means, with respect to any
payment date, an amount equal to the excess, if any of:
o the aggregate outstanding principal balance of the Class A
Notes as of the preceding Payment Date (after giving effect to
any principal payments made on the Class A Notes on that
preceding Payment Date) over
o the Pool Balance at the end of the Collection Period preceding
that Payment Date less the Yield Supplement
Overcollateralization Amount with respect to such Payment
Date;
provided however, that the First Priority Principal Distribution
Amount shall not exceed the sum of the aggregate outstanding
principal balance of all of the Notes on that Payment Date (after
giving effect to any principal payments made on the Notes on that
preceding Payment Date); and provided further, that the First
Priority Principal Distribution Amount on and after the Final
Scheduled Payment Date of a class of Class A-1 Notes, Class A-2
Notes, Class A-3 Notes or Class A-4 Notes, as applicable, shall not
be less than the amount that is necessary to reduce the outstanding
principal balance of that class of Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes or Class A-4 Notes, as applicable, to zero.
"Interest Period" means:
o with respect to the Class A-1 Notes, the period from and
including the most recent Payment Date on which interest has
been paid (or, in the case of the first Payment Date, the
Closing Date) to but excluding the next Payment Date, and
o with respect to the Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes and the Class B Notes, the period from and
including the 25th day of the calendar month (or, in the case
of the first Payment Date, from and including the Closing
Date) to but excluding the 25th day of the next calendar
month.
"Liquidation Proceeds" means, with respect to any Receivable that becomes a
Liquidated Receivable, the moneys collected in respect of that Liquidated
Receivable, from whatever source, during or after the Collection Period in which
the Receivable became a Liquidated Receivable, including liquidation of the
related Financed Vehicle, net of
S-66
the sum of any out-of-pocket expenses of the Servicer reasonably allocated to
the liquidation and any amounts required by law to be remitted to the Obligor on
the Liquidated Receivable.
"Liquidated Receivable" means a Receivable with respect to which the earliest of
the following shall have occurred:
o the related Financed Vehicle has been repossessed and
liquidated,
o the related Financed Vehicle has been repossessed in excess of
90 days and has not yet been liquidated,
o the Servicer has determined in accordance with its collection
policies that all amounts that it expects to receive with
respect to the Receivable have been received, or
o the end of the Collection Period in which the Receivable
becomes more than 150 days or more past due.
"Pool Balance" means, with respect to any Payment Date, an amount equal to the
aggregate Principal Balance of the Receivables at the end of the related
Collection Period, after giving effect to all payments of principal received
from Obligors and Administrative Purchase Payments and Warranty Purchase
Payments to be remitted by the Servicer for the related Collection Period, and
after reduction to zero of the aggregate outstanding Principal Balance of all
Receivables that became Liquidated Receivables during such Collection Period.
"Principal Distribution Account" means the administrative subaccount of the note
distribution account established and maintained as the Principal Distribution
Account pursuant to the Sale and Servicing Agreement.
"Principal Distribution Amount" means, with respect to any Payment Date, the sum
of the First Priority Principal Distribution Amount, the Second Priority
Principal Distribution Amount and the Regular Principal Distribution Amount with
respect to that Payment Date.
"Recoveries" means, with respect to any Receivable that becomes a Liquidated
Receivable, monies collected in respect of that Liquidated Receivable, from
whatever source, during any Collection Period following the Collection Period in
which the Receivable became a Liquidated Receivable, net of the sum of any
amounts expended by the Servicer for the account of the Obligor and any amounts
required by law to be remitted to the Obligor.
"Regulation AB" means, Subpart 229.1100-Asset Backed Securities (Regulation AB),
17 C.F.R ss.ss. 229.110-229.1123, as it may be amended from time to time.
"Regular Principal Distribution Amount" means, with respect to any Payment Date,
an amount not less than zero equal to the excess, if any, of:
o an amount equal to (i) the aggregate outstanding principal
balance of all the Notes as of the preceding Payment Date
(after giving effect to any principal payments made on the
Notes on that preceding Payment Date) or the Closing Date (in
the case of the first Payment Date), as the case may be, minus
(ii) the Pool Balance at the end of the Collection Period
preceding such Payment Date less the Yield Supplement
Overcollateralization Amount with respect to such Payment Date
and less the Target Credit Enhancement Overcollateralization
Amount with respect to such Payment Date over
o the sum of the First Priority Principal Distribution Amount
and the Second Priority Principal Distribution Amount with
respect to that Payment Date;
provided however, that the Regular Principal Distribution Amount
shall not exceed the sum of the aggregate outstanding principal
balance of all of the Notes on that Payment Date (after giving
effect to any principal payments made on the Notes on that preceding
Payment Date in respect of the First
S-67
Priority Principal Distribution Amount, if any, and the Second
Priority Principal Distribution Amount, if any); and provided
further, that the Regular Principal Distribution Amount on and after
the Final Scheduled Payment Date of a class of Notes shall not be
less than the amount that is necessary to reduce the outstanding
principal balance of that Class of Notes and all earlier maturing
classes of Notes to zero.
"Second Priority Principal Distribution Amount" means, with respect to any
Payment Date, an amount not less than zero equal to the excess, if any, of:
o an amount equal to (i) the aggregate outstanding principal
balance of all the Notes as of the preceding Payment Date
(after giving effect to any principal payments made on the
Notes on that preceding Payment Date) or the Closing Date (in
the case of the first Payment Date), as the case may be, minus
(ii) the Pool Balance at the end of the Collection Period
preceding such Payment Date less the Yield Supplement
Overcollateralization Amount with respect to such Payment Date
over
o the First Priority Principal Distribution Amount with respect
to that Payment Date;
provided however, that the Second Priority Principal Distribution
Amount shall not exceed the sum of the aggregate outstanding
principal balance of all of the Notes on that Payment Date (after
giving effect to any principal payments made on the Notes on that
preceding Payment Date in respect of the First Priority Principal
Distribution Amount, if any); and provided further, that the Second
Priority Principal Distribution Amount on and after the Final
Scheduled Payment Date of a class of Notes shall not be less than
the amount that is necessary to reduce the outstanding principal
balance of that Class of Notes and all earlier maturing classes of
Notes to zero.
"Servicer Default" means any of the following:
o any failure by the Servicer to deliver to the applicable
Trustee for deposit in any Account any required payment or to
direct the Indenture Trustee to make the required payments
from any Account and that failure continues unremedied for
five Business Days after discovery of that failure by the
Servicer or after the receipt by the Servicer of notice of
that failure,
o any failure by the Servicer to duly observe or perform in any
material respect any other covenants or agreements in the Sale
and Servicing Agreement, which failure materially and
adversely affects the rights of the noteholders, and which
failure continues unremedied for 60 days after discovery of
such failure by a responsible officer of the Servicer or after
the date on which written notice of that failure is given to
the Servicer by (a) the Owner Trustee, (b) the Indenture
Trustee or (c) the holders of Notes representing more than 50%
of the Controlling Class, and
o the occurrence of an Insolvency Event (as defined in the
attached prospectus) of the Servicer.
"Servicing Fee" means, for each Collection Period, the product of (i)
one-twelfth of the Servicing Rate and (ii) the Pool Balance as of the first day
of the related Collection Period or, in the case of the first Payment Date, the
Pool Balance as of the Cutoff Date.
"Servicing Rate" means 1.00%.
"Simple Interest Receivables" means Receivables that make their Scheduled
Payments based on the "simple interest method."
"Specified Reserve Account Balance" means, with respect to any Payment Date, an
amount equal to the lesser of $2,772,490.93 and the aggregate outstanding
principal balance of the Notes.
S-68
"Target Credit Enhancement Overcollateralization Amount" means, with respect to
any Payment Date, the excess, if any, of:
(1) the product of (i) 1.25% and (ii) the outstanding principal
balance of the receivables less the Yield Supplement
Overcollateralization Amount with respect to such Payment
Date, provided that such amount does not exceed the
outstanding principal balance of the Notes as of the preceding
Payment Date (after giving effect to any principal payments
made on the Notes on such preceding Payment Date)
over
(2) the Specified Reserve Account Balance with respect to such
Payment Date.
"Warranty Purchase Payment" means an amount equal to a Receivable's unpaid
Principal Balance, plus interest thereon at a rate equal to the APR to the last
day of the collection period relating to the repurchase.
"Warranty Receivable" means each Receivable that is required to be repurchased
from a trust due to a breach of a representation or warranty regarding such
Receivable.
S-69
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Appendix A
Static Pool Information
BMW Vehicle Owner Trust 2001-A
Static Pool Data*
* not reconciled / audited.
================================================================================
Composition of Original Pool Receivables
Closing Date 18-May-01
Cutoff Date 30-Apr-01
Number of Receivables 64,583
Aggregate Principal Balance $1,489,992,840
Principal Balance
Average Principal Balance $ 23,071
Highest Principal Balance $ 124,262
Lowest Principal Balance $ 126
Original Principal Balance
Average Original Principal Balance $ 26,601
Highest Original Principal Balance $ 196,025
Lowest Original Principal Balance $ 1,207
Annual Percentage Rate (APR)
Weighted Average APR 7.6%
Highest APR 25.0%
Lowest APR 1.1%
Original Term
Weighted Average Original Term 57.2 months
Longest Original Term 66 months
Shortest Original Term 6 months
Remaining Term
Weighted Average Remaining Term 49.4 months
Longest Remaining Term 66 months
Shortest Remaining Term 3 months
Scheduled Weighted Average Life(1) 1.58
Composition of Top 5 States
California 27.2%
Texas 7.7%
New York 6.7%
Florida 6.0%
(No other States constitute more than 5%)
Percentage New and Used Composition
New 47.5%
Used 52.5%
Weighted Average FICO 706
(1) Weighted Average Life shown to call.
================================================================================
End of % of Weighted % by
Period Cumulative Orig Average $ of
Month Date Balance Loss Pool Prepayments APR 31 - 60 Contracts
- ----------------------------------------------------------------------------------------------------------------
1 May-01 $1,434,335,895 $0 0.00% $25,236,512 7.63% $8,302,924 0.58%
2 Jun-01 $1,381,021,978 $0 0.00% $24,971,972 7.61% $9,221,388 0.67%
3 Jul-01 $1,328,451,418 $0 0.00% $23,254,917 7.61% $10,215,846 0.77%
4 Aug-01 $1,276,259,181 $113,248 0.01% $24,249,375 7.60% $10,836,940 0.85%
5 Sep-01 $1,333,475,058 $399,664 0.03% $17,426,761 7.66% $14,198,179 1.06%
6 Oct-01 $1,273,402,175 $769,902 0.05% $28,460,633 7.65% $12,754,233 1.00%
7 Nov-01 $1,218,245,665 $1,170,544 0.08% $27,921,994 7.64% $14,679,864 1.21%
8 Dec-01 $1,166,899,487 $1,581,720 0.11% $23,539,588 7.64% $15,603,444 1.34%
9 Jan-02 $1,109,266,967 $1,992,710 0.13% $29,262,107 7.63% $14,606,470 1.32%
10 Feb-02 $1,059,273,011 $2,315,387 0.16% $24,415,925 7.62% $14,672,286 1.39%
11 Mar-02 $1,005,205,088 $2,648,783 0.18% $25,393,199 7.62% $14,812,644 1.47%
12 Apr-02 $953,511,948 $2,906,492 0.20% $24,900,432 7.61% $12,186,214 1.28%
13 May-02 $905,345,795 $3,334,472 0.22% $22,210,176 7.60% $11,778,643 1.30%
14 Jun-02 $861,155,531 $3,512,792 0.24% $21,359,012 7.60% $10,767,226 1.25%
15 Jul-02 $812,646,449 $4,031,437 0.27% $23,779,369 7.59% $11,304,812 1.39%
16 Aug-02 $767,099,101 $4,398,486 0.30% $22,919,951 7.58% $12,528,635 1.63%
17 Sep-02 $724,917,581 $4,663,146 0.31% $20,149,361 7.58% $13,070,584 1.80%
18 Oct-02 $682,114,212 $4,662,179 0.31% $20,716,890 7.57% $11,647,831 1.71%
19 Nov-02 $644,755,701 $5,160,736 0.35% $17,011,898 7.57% $12,309,358 1.91%
20 Dec-02 $606,347,286 $5,535,453 0.37% $17,487,132 7.57% $13,245,298 2.18%
21 Jan-03 $567,291,011 $5,897,564 0.40% $18,211,148 7.57% $11,276,268 1.99%
22 Feb-03 $534,322,333 $6,192,099 0.42% $14,588,945 7.57% $10,715,092 2.01%
23 Mar-03 $496,664,699 $6,497,809 0.44% $17,523,249 7.57% $9,007,576 1.81%
24 Apr-03 $462,886,987 $6,978,054 0.47% $16,073,125 7.56% $8,850,013 1.91%
25 May-03 $430,357,868 $7,377,999 0.50% $15,724,635 7.56% $9,392,534 2.18%
26 Jun-03 $399,841,277 $7,559,104 0.51% $13,746,280 7.57% $8,669,168 2.17%
27 Jul-03 $368,874,882 $7,689,597 0.52% $14,529,907 7.57% $7,582,263 2.06%
28 Aug-03 $342,060,564 $7,876,401 0.53% $12,081,804 7.57% $7,283,293 2.13%
29 Sep-03 $315,225,002 $8,094,206 0.54% $11,557,256 7.58% $7,658,670 2.43%
30 Oct-03 $289,720,241 $8,241,893 0.55% $10,391,716 7.59% $6,544,027 2.26%
% by % by % by
$ of $ of $ of
Month 61 - 90 Contracts 91 - 120 Contracts 121+ Days Contracts
- ----------------------------------------------------------------------------------
1 $36,583 0.00% $21,942 0.00% $0 0.00%
2 $1,608,722 0.12% $41,202 0.00% $0 0.00%
3 $1,758,736 0.13% $825,271 0.06% $0 0.00%
4 $1,772,207 0.14% $457,687 0.04% $420,516 0.03%
5 $2,044,008 0.15% $741,302 0.06% $503,134 0.04%
6 $2,163,377 0.17% $937,908 0.07% $469,280 0.04%
7 $2,382,941 0.20% $762,094 0.06% $725,383 0.06%
8 $2,557,271 0.22% $764,806 0.07% $683,654 0.06%
9 $3,097,857 0.28% $1,046,943 0.09% $486,757 0.04%
10 $3,388,321 0.32% $1,208,930 0.11% $780,421 0.07%
11 $2,638,757 0.26% $757,404 0.08% $753,992 0.08%
12 $2,489,498 0.26% $394,887 0.04% $806,966 0.08%
13 $1,893,741 0.21% $631,258 0.07% $536,850 0.06%
14 $2,502,368 0.29% $643,045 0.07% $855,207 0.10%
15 $1,811,326 0.22% $537,758 0.07% $682,881 0.08%
16 $1,985,728 0.26% $549,239 0.07% $533,391 0.07%
17 $2,451,127 0.34% $619,763 0.09% $576,706 0.08%
18 $2,712,134 0.40% $448,246 0.07% $567,150 0.08%
19 $2,495,184 0.39% $688,516 0.11% $605,011 0.09%
20 $2,955,183 0.49% $859,795 0.14% $654,759 0.11%
21 $2,007,624 0.35% $512,287 0.09% $758,140 0.13%
22 $2,451,699 0.46% $770,998 0.14% $761,335 0.14%
23 $1,524,868 0.31% $556,917 0.11% $743,631 0.15%
24 $1,681,046 0.36% $326,890 0.07% $770,303 0.17%
25 $1,286,521 0.30% $275,497 0.06% $646,838 0.15%
26 $1,531,501 0.38% $363,302 0.09% $743,563 0.19%
27 $1,731,693 0.47% $264,358 0.07% $796,191 0.22%
28 $1,284,959 0.38% $404,433 0.12% $739,758 0.22%
29 $1,782,399 0.57% $315,642 0.10% $787,338 0.25%
30 $1,236,305 0.43% $474,045 0.16% $770,899 0.27%
End of % of Weighted % by
Period Cumulative Orig Average $ of
Month Date Balance Loss Pool Prepayments APR 31 - 60 Contracts
- ----------------------------------------------------------------------------------------------------------------
31 Nov-03 $268,869,021 $8,464,636 0.57% $8,430,986 7.60% $6,439,858 2.40%
32 Dec-03 $246,931,636 $8,735,861 0.59% $7,961,859 7.61% $6,356,633 2.57%
33 Jan-04 $227,263,926 $8,798,161 0.59% $6,857,335 7.62% $5,676,710 2.50%
34 Feb-04 $209,028,580 $8,923,188 0.60% $6,551,805 7.63% $4,939,793 2.36%
35 Mar-04 $188,688,292 $9,111,415 0.61% $7,280,776 7.64% $4,888,230 2.59%
36 Apr-04 $170,957,713 $9,159,588 0.61% $6,560,881 7.66% $4,513,387 2.64%
37 May-04 $155,111,664 $9,172,625 0.62% $5,097,828 7.67% $4,055,047 2.61%
38 Jun-04 $0 $9,159,588 0.61% $155,111,664 7.68% $4,314,435 0.00%
% by % by % by
$ of $ of $ of
Month 61 - 90 Contracts 91 - 120 Contracts 121+ Days Contracts
- ----------------------------------------------------------------------------------
31 $1,345,810 0.50% $393,376 0.15% $765,223 0.28%
32 $1,246,920 0.50% $334,880 0.14% $783,028 0.32%
33 $901,456 0.40% $352,883 0.16% $755,278 0.33%
34 $601,207 0.29% $265,107 0.13% $731,183 0.35%
35 $847,238 0.45% $108,925 0.06% $648,506 0.34%
36 $626,032 0.37% $179,690 0.11% $579,540 0.34%
37 $416,412 0.27% $140,181 0.09% $596,105 0.38%
38 $857,266 $0 $102,375 $0 $566,108 $0
BMW Vehicle Owner Trust 2002-A
Static Pool Data*
* not reconciled / audited.
================================================================================
Composition of Original Pool Receivables
Closing Date 23-May-02
Cutoff Date 30-Apr-02
Number of Receivables 58,609
Aggregate Principal Balance $1,401,763,032
Principal Balance
Average Principal Balance $ 23,917
Highest Principal Balance $ 219,131
Lowest Principal Balance $ 1,000
Original Principal Balance
Average Original Principal Balance $ 27,107
Highest Original Principal Balance $ 227,850
Lowest Original Principal Balance $ 1,894
Annual Percentage Rate (APR)
Weighted Average APR 6.5%
Highest APR 24.0%
Lowest APR 1.9%
Original Term
Weighted Average Original Term 57.8 months
Longest Original Term 66 months
Shortest Original Term 9 months
Remaining Term
Weighted Average Remaining Term 52 months
Longest Remaining Term 66 months
Shortest Remaining Term 3 months
Scheduled Weighted Average Life(1) 1.60
Composition of Top 5 States
California 24.6%
Texas 7.4%
New York 6.9%
New Jersey 6.5%
Florida 6.2%
Percentage New and Used Composition
New 53.0%
Used 47.0%
Weighted Average FICO 711
(1) Weighted Average Life shown to call.
================================================================================
End of % of Weighted % by
Period Cumulative Orig Average $ of
Month Date Balance Loss Pool Prepayments APR 31 - 60 Contracts
- ---------------------------------------------------------------------------------------------------------------------
1 May-02 $1,349,019,773 $0 0.00% $22,098,249 6.53% $7,055,553 0.52%
2 Jun-02 $1,304,397,235 $2,860 0.00% $18,112,906 6.52% $7,212,445 0.55%
3 Jul-02 $1,254,267,101 $27,232 0.00% $22,098,249 6.51% $8,046,981 0.64%
4 Aug-02 $1,209,298,228 $61,273 0.00% $22,098,249 6.50% $9,691,072 0.80%
5 Sep-02 $1,162,475,588 $201,555 0.01% $22,098,249 6.49% $9,993,400 0.86%
6 Oct-02 $1,114,832,317 $439,178 0.03% $22,098,249 6.48% $10,404,483 0.93%
7 Nov-02 $1,070,960,944 $709,681 0.05% $22,098,249 6.47% $11,644,751 1.09%
8 Dec-02 $1,026,369,688 $1,169,652 0.08% $22,098,249 6.46% $12,265,453 1.20%
9 Jan-03 $981,295,763 $1,476,671 0.11% $22,098,249 6.45% $10,051,165 1.02%
10 Feb-03 $941,074,248 $1,925,144 0.14% $22,098,249 6.44% $10,898,017 1.16%
11 Mar-03 $895,462,171 $2,332,343 0.17% $22,098,249 6.43% $9,705,626 1.08%
12 Apr-03 $850,540,943 $2,790,093 0.20% $22,098,249 6.42% $9,649,428 1.13%
13 May-03 $809,488,139 $3,293,100 0.23% $22,098,249 6.41% $8,590,301 1.06%
14 Jun-03 $768,615,311 $3,614,921 0.26% $22,098,249 6.40% $9,762,962 1.27%
15 Jul-03 $726,509,829 $4,017,516 0.29% $22,098,249 6.40% $9,767,993 1.34%
16 Aug-03 $687,217,942 $4,203,940 0.30% $22,098,249 6.39% $8,767,235 1.28%
17 Sep-03 $647,846,232 $4,525,653 0.32% $22,098,249 6.38% $9,708,272 1.50%
18 Oct-03 $611,068,014 $4,847,518 0.35% $22,098,249 6.37% $9,012,426 1.47%
19 Nov-03 $581,392,427 $5,146,266 0.37% $22,098,249 6.37% $9,397,722 1.62%
20 Dec-03 $548,768,713 $5,530,482 0.39% $22,098,249 6.36% $8,647,792 1.58%
21 Jan-04 $518,234,356 $5,633,326 0.40% $22,098,249 6.36% $7,821,922 1.51%
22 Feb-04 $491,234,681 $5,795,277 0.41% $22,098,249 6.35% $7,279,124 1.48%
% by % by % by
$ of $ of $ of
Month 61 - 90 Contracts 91 - 120 Contracts 121+ Days Contracts
- ----------------------------------------------------------------------------------
1 $69,490 0.01% $0 0.00% $0 0.00%
2 $1,417,917 0.11% $0 0.00% $0 0.00%
3 $1,260,024 0.10% $446,502 0.04% $0 0.00%
4 $1,518,800 0.13% $254,568 0.02% $307,291 0.03%
5 $2,225,354 0.19% $371,348 0.03% $421,594 0.04%
6 $1,681,017 0.15% $858,451 0.08% $327,677 0.03%
7 $2,134,954 0.20% $529,670 0.05% $578,828 0.05%
8 $2,835,835 0.28% $438,564 0.04% $550,551 0.05%
9 $2,453,943 0.25% $575,499 0.06% $419,725 0.04%
10 $1,871,550 0.20% $906,412 0.10% $472,619 0.05%
11 $1,561,314 0.17% $456,337 0.05% $823,701 0.09%
12 $1,594,229 0.19% $365,245 0.04% $421,114 0.05%
13 $1,524,015 0.19% $475,236 0.06% $577,914 0.07%
14 $1,684,520 0.22% $388,726 0.05% $497,789 0.06%
15 $1,744,598 0.24% $514,664 0.07% $533,667 0.07%
16 $1,469,625 0.21% $412,084 0.06% $637,719 0.09%
17 $1,514,130 0.23% $389,576 0.06% $383,446 0.06%
18 $1,130,133 0.18% $267,131 0.04% $732,961 0.12%
19 $1,553,359 0.27% $427,036 0.07% $615,807 0.11%
20 $1,420,851 0.26% $266,398 0.05% $587,446 0.11%
21 $1,292,184 0.25% $288,226 0.06% $522,212 0.10%
22 $863,772 0.18% $304,470 0.06% $546,295 0.11%
End of % of Weighted % by
Period Cumulative Orig Average $ of
Month Date Balance Loss Pool Prepayments APR 31 - 60 Contracts
- ---------------------------------------------------------------------------------------------------------------------
23 Mar-04 $458,586,599 $6,082,356 0.43% $22,098,249 6.35% $7,007,074 1.53%
24 Apr-04 $429,490,771 $6,296,606 0.45% $22,098,249 6.34% $5,759,675 1.34%
25 May-04 $403,839,026 $6,372,514 0.45% $22,098,249 6.34% $5,148,434 1.27%
26 Jun-04 $377,106,590 $6,474,505 0.46% $22,098,249 6.34% $6,147,987 1.63%
27 Jul-04 $352,756,173 $6,616,002 0.47% $22,098,249 6.34% $6,027,715 1.71%
28 Aug-04 $328,763,426 $6,773,785 0.48% $22,098,249 6.33% $5,838,742 1.78%
29 Sep-04 $306,571,792 $6,852,174 0.49% $22,098,249 6.33% $5,608,645 1.83%
30 Oct-04 $286,483,287 $6,868,398 0.49% $22,098,249 6.32% $4,679,985 1.63%
31 Nov-04 $266,101,572 $6,956,801 0.50% $22,098,249 6.32% $4,955,268 1.86%
32 Dec-04 $246,840,892 $6,978,015 0.50% $22,098,249 6.32% $4,327,371 1.75%
33 Jan-05 $228,266,859 $7,039,263 0.50% $22,098,249 6.32% $3,980,862 1.74%
34 Feb-05 $211,618,766 $7,129,057 0.51% $22,098,249 6.32% $4,036,682 1.91%
35 Mar-05 $193,536,250 $7,237,616 0.52% $22,098,249 6.32% $3,792,438 1.96%
36 Apr-05 $177,939,654 $7,382,539 0.53% $22,098,249 6.32% $3,055,517 1.72%
37 May-05 $162,242,824 $7,453,866 0.53% $22,098,249 6.31% $3,001,708 1.85%
38 Jun-05 $148,373,765 $7,499,528 0.54% $22,098,249 6.32% $2,748,675 1.85%
39 Jul-05 $0 $0 0.00% $22,098,249 6.31% $12,668,642 0.00%
% by % by % by
$ of $ of $ of
Month 61 - 90 Contracts 91 - 120 Contracts 121+ Days Contracts
- ----------------------------------------------------------------------------------
23 $773,202 0.17% $122,727 0.03% $574,262 0.13%
24 $930,220 0.22% $300,426 0.07% $322,743 0.08%
25 $699,338 0.17% $284,588 0.07% $398,168 0.10%
26 $839,098 0.22% $272,464 0.07% $379,636 0.10%
27 $824,349 0.23% $226,222 0.06% $480,009 0.14%
28 $768,548 0.23% $260,912 0.08% $407,154 0.12%
29 $793,013 0.26% $275,342 0.09% $438,248 0.14%
30 $726,431 0.25% $326,797 0.11% $510,105 0.18%
31 $730,297 0.27% $243,739 0.09% $462,042 0.17%
32 $928,635 0.38% $307,474 0.12% $525,036 0.21%
33 $568,340 0.25% $182,692 0.08% $527,700 0.23%
34 $643,550 0.30% $114,824 0.05% $446,778 0.21%
35 $350,303 0.18% $127,006 0.07% $466,192 0.24%
36 $520,648 0.29% $84,280 0.05% $336,728 0.19%
37 $557,313 0.34% $155,079 0.10% $315,644 0.19%
38 $471,622 0.32% $125,881 0.08% $364,858 0.25%
39 $2,768,318 0.00% $350,344 0.00% $148,260 0.00%
BMW Vehicle Owner Trust 2003-A
Static Pool Data*
* not reconciled / audited.
================================================================================
Composition of Original Pool Receivables
Closing Date 29-Apr-03
Cutoff Date 31-Mar-03
Number of Receivables 72,311
Aggregate Principal Balance $1,643,640,298
Principal Balance
Average Principal Balance $ 22,730
Highest Principal Balance $ 151,774
Lowest Principal Balance $ 1,002
Original Principal Balance
Average Original Principal Balance $ 27,004
Highest Original Principal Balance $ 155,941
Lowest Original Principal Balance $ 1,184
Annual Percentage Rate (APR)
Weighted Average APR 5.5%
Highest APR 24.6%
Lowest APR 1.0%
Original Term
Weighted Average Original Term 58 months
Longest Original Term 66 months
Shortest Original Term 10 months
Remaining Term
Weighted Average Remaining Term 51.5 months
Longest Remaining Term 66 months
Shortest Remaining Term 3 months
Scheduled Weighted Average Life(1) 1.56
Composition of Top 5 States
California 23.6%
Texas 7.9%
Florida 7.2%
New York 6.1%
New Jersey 4.7%
Percentage New and Used Composition
New 41.3%
Used 58.7%
Weighted Average FICO 709
(1) Weighted Average Life shown to call.
================================================================================
End of % of Weighted % by
Period Cumulative Orig Average $ of
Month Date Balance Loss Pool Prepayments APR 31 - 60 Contracts
- ---------------------------------------------------------------------------------------------------------------------
1 Apr-03 $1,584,831,506 $0 0.00% $24,880,157 5.45% $9,199,344 0.58%
2 May-03 $1,526,865,876 $0 0.00% $23,637,166 5.43% 11,925,834 0.78%
3 Jun-03 $1,467,528,066 $11,824 0.00% $25,186,300 5.42% 11,926,877 0.81%
4 Jul-03 $1,408,281,832 $99,312 0.01% $26,263,269 5.40% 13,910,244 0.99%
5 Aug-03 $1,351,536,400 $449,616 0.03% $25,833,639 5.38% 13,830,204 1.02%
6 Sep-03 $1,294,696,709 $832,537 0.05% $25,705,228 5.36% 14,479,631 1.12%
7 Oct-03 $1,237,824,842 $1,177,815 0.07% $25,969,280 5.34% 14,183,471 1.15%
8 Nov-03 $1,189,362,391 $1,634,542 0.10% $21,418,325 5.33% 13,508,262 1.14%
9 Dec-03 $1,138,057,715 $2,121,975 0.13% $21,992,390 5.31% 14,441,609 1.27%
- ---------------------------------------------------------------------------------------------------------------------
10 Jan-04 $1,088,887,774 $2,444,667 0.15% $21,795,976 5.31% 12,961,376 1.19%
11 Feb-04 $1,045,276,719 $2,775,138 0.17% $18,031,477 5.29% 12,339,716 1.18%
12 Mar-04 $991,738,336 $3,303,647 0.20% $24,697,576 5.27% 11,229,937 1.13%
13 Apr-04 $944,330,586 $3,578,727 0.22% $21,791,502 5.26% 11,407,574 1.21%
14 May-04 $899,541,186 $3,823,499 0.23% $20,494,774 5.25% 10,426,106 1.16%
15 Jun-04 $854,343,399 $4,201,144 0.26% $21,037,759 5.24% 12,883,187 1.51%
% by % by % by
$ of $ of $ of
Month 61 - 90 Contracts 91 - 120 Contracts 121+ Days Contracts
- ----------------------------------------------------------------------------------
1 $34,036 0.00% $44,540 0.00% $0 0.00%
2 1,635,132 0.11% 0 0.00% 44,540 0.00%
3 2,246,754 0.15% 567,208 0.04% 0 0.00%
4 1,814,513 0.13% 410,497 0.03% 372,292 0.03%
5 2,516,470 0.19% 302,580 0.02% 176,770 0.01%
6 2,653,336 0.20% 584,584 0.05% 325,961 0.03%
7 2,409,605 0.19% 786,519 0.06% 452,746 0.04%
8 2,780,672 0.23% 729,336 0.06% 242,677 0.02%
9 2,708,371 0.24% 892,534 0.08% 571,246 0.05%
- ----------------------------------------------------------------------------------
10 2,347,369 0.22% 777,436 0.07% 909,165 0.08%
11 1,645,104 0.16% 611,918 0.06% 836,283 0.08%
12 1,881,708 0.19% 382,887 0.04% 830,435 0.08%
13 1,341,998 0.14% 523,336 0.06% 812,715 0.09%
14 1,336,803 0.15% 424,674 0.05% 816,545 0.09%
15 1,438,644 0.17% 381,904 0.04% 745,700 0.09%
End of % of Weighted % by
Period Cumulative Orig Average $ of
Month Date Balance Loss Pool Prepayments APR 31 - 60 Contracts
- ---------------------------------------------------------------------------------------------------------------------
16 Jul-04 $812,891,613 $4,513,592 0.27% $19,000,162 5.23% 11,446,043 1.41%
17 Aug-04 $769,851,340 $4,804,749 0.29% $20,496,224 5.22% 11,163,930 1.45%
18 Sep-04 $730,798,660 $5,053,050 0.31% $18,430,417 5.22% 10,820,830 1.48%
19 Oct-04 $693,779,732 $5,268,216 0.32% $16,786,264 5.21% 9,129,324 1.32%
20 Nov-04 $655,694,019 $5,586,643 0.34% $17,426,525 5.20% 9,758,341 1.49%
21 Dec-04 $619,328,732 $5,725,693 0.35% $16,206,966 5.19% 9,808,903 1.58%
- ---------------------------------------------------------------------------------------------------------------------
22 Jan-05 $585,945,158 $5,917,868 0.36% $13,946,914 5.18% 9,028,380 1.54%
23 Feb-05 $554,961,620 $6,124,887 0.37% $12,725,709 5.18% 8,002,364 1.44%
24 Mar-05 $520,674,781 $6,338,221 0.39% $14,783,763 5.17% 7,476,847 1.44%
25 Apr-05 $490,046,381 $6,526,978 0.40% $13,517,394 5.17% 6,383,359 1.30%
26 May-05 $460,115,511 $6,759,176 0.41% $12,023,996 5.16% 6,793,623 1.48%
27 Jun-05 $431,367,832 $6,950,756 0.42% $12,347,207 5.16% 6,530,852 1.51%
28 Jul-05 $403,902,068 $7,095,598 0.43% $11,430,373 5.15% 6,884,308 1.70%
29 Aug-05 $375,755,951 $7,130,515 0.43% $11,660,615 5.15% 6,824,652 1.82%
30 Sep-05 $350,888,635 $7,298,589 0.44% $9,728,784 5.14% 5,681,773 1.62%
31 Oct-05 $327,234,980 $7,452,153 0.45% $8,708,653 5.13% 6,074,337 1.86%
32 Nov-05 $304,912,651 $7,693,791 0.47% $8,407,779 5.13% 5,895,890 1.93%
33 Dec-05 $282,911,377 $7,802,423 0.47% $7,922,161 5.12% 5,843,577 2.07%
- ---------------------------------------------------------------------------------------------------------------------
34 Jan-06 $261,281,878 $8,050,753 0.49% $8,240,016 5.11% 5,225,710 2.00%
35 Feb-06 $242,516,480 $8,036,128 0.49% $5,935,497 5.11% 4,378,392 1.81%
35 Mar-06 $221,681,679 $7,991,937 0.49% $6,823,649 5.11% 4,078,184 1.84%
35 Apr-06 $204,595,027 $8,175,654 0.50% $5,569,169 5.10% 3,604,199 1.76%
35 May-06 $186,595,387 $8,318,152 0.51% $5,424,691 5.09% 3,435,182 1.84%
35 Jun-06 $170,587,772 $8,364,220 0.51% $4,358,611 5.08% 2,979,487 1.75%
% by % by % by
$ of $ of $ of
Month 61 - 90 Contracts 91 - 120 Contracts 121+ Days Contracts
- ----------------------------------------------------------------------------------
16 1,938,495 0.24% 483,963 0.06% 672,450 0.08%
17 1,620,232 0.21% 561,570 0.07% 759,060 0.10%
18 2,142,149 0.29% 418,085 0.06% 1,044,315 0.14%
19 1,768,850 0.25% 436,980 0.06% 793,861 0.11%
20 1,455,467 0.22% 574,347 0.09% 710,261 0.11%
21 1,720,546 0.28% 507,042 0.08% 889,676 0.14%
- ----------------------------------------------------------------------------------
22 1,603,370 0.27% 363,111 0.06% 1,070,861 0.18%
23 1,093,755 0.20% 436,746 0.08% 1,061,706 0.19%
24 1,242,910 0.24% 349,089 0.07% 1,119,332 0.21%
25 993,801 0.20% 418,032 0.09% 1,062,906 0.22%
26 1,096,510 0.24% 356,731 0.08% 986,137 0.21%
27 941,303 0.22% 475,112 0.11% 927,026 0.21%
28 971,255 0.24% 203,713 0.05% 981,141 0.24%
29 1,112,219 0.30% 231,498 0.06% 936,356 0.25%
30 1,102,511 0.31% 321,704 0.09% 899,451 0.26%
31 1,175,270 0.36% 286,572 0.09% 884,411 0.27%
32 1,172,495 0.38% 332,839 0.11% 815,117 0.27%
33 1,372,600 0.49% 331,987 0.12% 886,256 0.31%
- ----------------------------------------------------------------------------------
34 936,416 0.36% 393,965 0.15% 921,227 0.35%
35 920,236 0.38% 327,693 0.14% 945,073 0.39%
35 722,395 0.33% 139,444 0.06% 866,462 0.39%
35 645,007 0.32% 194,777 0.10% 723,795 0.35%
35 699,820 0.38% 103,983 0.06% 705,449 0.38%
35 598,436 0.35% 158,904 0.09% 614,645 0.36%
BMW Vehicle Owner Trust 2004-A
Static Pool Data*
* not reconciled / audited.
================================================================================
Composition of Original Pool Receivables
Closing Date 12-May-04
Cutoff Date 30-Apr-04
Number of Receivables 63,802
Aggregate Principal Balance $1,500,000,004
Principal Balance
Average Principal Balance $ 23,510
Highest Principal Balance $ 182,101
Lowest Principal Balance $ 1,004
Original Principal Balance
Average Original Principal Balance $ 26,513
Highest Original Principal Balance $ 182,101
Lowest Original Principal Balance $ 1,941
Annual Percentage Rate (APR)
Weighted Average APR 4.8%
Highest APR 20.0%
Lowest APR 1.0%
Original Term
Weighted Average Original Term 57.9 months
Longest Original Term 66 months
Shortest Original Term 12 months
Remaining Term
Weighted Average Remaining Term 51.3 months
Longest Remaining Term 66 months
Shortest Remaining Term 3 months
Scheduled Weighted Average Life(1) 1.59
Composition of Top 5 States
California 24.5%
Texas 8.02%
Florida 6.87%
New York 6.03%
New Jersey 5.7%
Percentage New and Used Composition
New 44.0%
Used 56.1%
Weighted Average FICO 708
(1) Weighted Average Life shown to call.
================================================================================
End of % of Weighted % by
Period Cumulative Orig Average $ of
Month Date Balance Loss Pool Prepayments APR 31 - 60 Contracts
- ---------------------------------------------------------------------------------------------------------------------
1 May-04 $1,448,831,090 $0 0.00% $20,930,643 4.76% $8,126,383 0.56%
2 Jun-04 $1,394,750,720 $130 0.00% $22,924,313 4.75% 9,615,452 0.69%
3 Jul-04 $1,344,275,394 $38,774 0.00% $21,041,002 4.74% 10,824,729 0.81%
4 Aug-04 $1,290,947,178 $140,102 0.01% $23,508,544 4.74% 10,355,769 0.80%
5 Sep-04 $1,243,017,635 $375,624 0.03% $19,780,224 4.73% 11,070,284 0.89%
6 Oct-04 $1,194,847,669 $665,224 0.04% $21,192,926 4.72% 10,210,365 0.85%
7 Nov-04 $1,145,807,762 $1,102,220 0.07% $21,473,065 4.71% 10,803,422 0.94%
8 Dec-04 $1,098,039,920 $1,562,382 0.10% $20,969,771 4.71% 11,043,387 1.01%
9 Jan-05 $1,052,557,943 $1,844,958 0.12% $19,274,014 4.70% 10,592,558 1.01%
10 Feb-05 $1,010,299,115 $2,080,617 0.14% $17,219,869 4.70% 10,593,327 1.05%
11 Mar-05 $961,252,437 $2,465,683 0.16% $22,014,687 4.68% 10,394,399 1.08%
12 Apr-05 $918,202,053 $2,694,511 0.18% $19,091,671 4.67% 8,636,385 0.94%
13 May-05 $873,946,594 $3,132,480 0.21% $19,507,647 4.67% 9,676,632 1.11%
14 Jun-05 $831,426,812 $3,410,594 0.23% $19,739,137 4.66% 9,816,875 1.18%
15 Jul-05 $791,221,938 $3,563,223 0.24% $17,644,594 4.66% 10,132,425 1.28%
% by % by % by
$ of $ of $ of
Month 61 - 90 Contracts 91 - 120 Contracts 121+ Days Contracts
- -----------------------------------------------------------------------------
1 $32,287 0.00% $0 0.00% $0 0.00%
2 1,628,742 0.12% 0 0.00% 0 0.00%
3 1,445,397 0.11% 784,228 0.06% 0 0.00%
4 1,282,067 0.10% 628,857 0.05% 260,704 0.02%
5 2,031,686 0.16% 328,678 0.03% 542,322 0.04%
6 1,562,692 0.13% 566,953 0.05% 562,755 0.05%
7 1,536,389 0.13% 566,921 0.05% 457,514 0.04%
8 1,867,456 0.17% 640,324 0.06% 511,998 0.05%
9 1,336,722 0.13% 538,796 0.05% 550,512 0.05%
10 1,084,859 0.11% 478,727 0.05% 548,425 0.05%
11 1,617,827 0.17% 456,796 0.05% 545,325 0.06%
12 1,433,765 0.16% 600,955 0.07% 723,878 0.08%
13 1,250,489 0.14% 338,419 0.04% 850,270 0.10%
14 1,500,401 0.18% 287,504 0.03% 600,179 0.07%
15 1,539,665 0.19% 439,803 0.06% 646,466 0.08%
End of % of Weighted % by
Period Cumulative Orig Average $ of
Month Date Balance Loss Pool Prepayments APR 31 - 60 Contracts
- ---------------------------------------------------------------------------------------------------------------------
16 Aug-05 $748,051,790 $3,761,980 0.25% $19,517,883 4.65% 9,686,476 1.29%
17 Sep-05 $709,950,468 $4,003,048 0.27% $16,105,744 4.65% 9,297,836 1.31%
18 Oct-05 $673,997,037 $4,279,424 0.29% $14,491,859 4.64% 10,162,692 1.51%
19 Nov-05 $639,926,386 $4,600,426 0.31% $13,861,691 4.63% 8,826,672 1.38%
20 Dec-05 $605,604,756 $4,800,971 0.32% $13,900,166 4.63% 10,151,644 1.68%
21 Jan-06 $572,075,340 $4,781,219 0.32% $13,153,816 4.63% 9,057,448 1.58%
22 Feb-06 $542,118,401 $4,785,394 0.32% $11,334,825 4.62% 7,169,014 1.32%
23 Mar-06 $507,847,202 $5,023,769 0.33% $13,709,702 4.62% 7,426,979 1.46%
24 Apr-06 $480,071,686 $5,410,250 0.36% $11,057,450 4.62% 6,630,124 1.38%
25 May-06 $449,470,465 $5,679,609 0.38% $11,534,317 4.62% 7,421,939 1.65%
26 Jun-06 $420,934,082 $5,814,231 0.39% $10,637,948 4.62% 5,921,336 1.41%
% by % by % by
$ of $ of $ of
Month 61 - 90 Contracts 91 - 120 Contracts 121+ Days Contracts
- -----------------------------------------------------------------------------
16 2,020,618 0.27% 517,980 0.07% 771,410 0.10%
17 1,512,738 0.21% 468,041 0.07% 868,286 0.12%
18 1,544,408 0.23% 381,834 0.06% 858,650 0.13%
19 1,682,322 0.26% 339,482 0.05% 848,214 0.13%
20 2,070,871 0.34% 383,908 0.06% 726,123 0.12%
21 1,980,402 0.35% 514,723 0.09% 837,408 0.15%
22 1,484,645 0.27% 481,937 0.09% 776,535 0.14%
23 1,092,602 0.22% 461,099 0.09% 756,773 0.15%
24 923,106 0.19% 418,077 0.09% 742,000 0.15%
25 1,162,659 0.26% 216,985 0.05% 808,444 0.18%
26 1,120,817 0.27% 238,165 0.06% 719,313 0.17%
BMW Vehicle Owner Trust 2005-A
Static Pool Data*
* not reconciled / audited.
================================================================================
Composition of Original Pool Receivables
Closing Date 23-Mar-05
Cutoff Date 28-Feb-05
Number of Receivables 65,737
Aggregate Principal Balance $1,500,000,024
Principal Balance
Average Principal Balance $ 22,818
Highest Principal Balance $ 246,678
Lowest Principal Balance $ 1,001
Original Principal Balance
Average Original Principal Balance $ 27,873
Highest Original Principal Balance $ 249,902
Lowest Original Principal Balance $ 1,860
Annual Percentage Rate (APR)
Weighted Average APR 4.5%
Highest APR 21.0%
Lowest APR 1.0%
Original Term
Weighted Average Original Term 58.6 months
Longest Original Term 68 months
Shortest Original Term 11 months
Remaining Term
Weighted Average Remaining Term 51.8 months
Longest Remaining Term 66 months
Shortest Remaining Term 3 months
Scheduled Weighted Average Life(1) 1.52
Composition of Top 5 States
California 25.3%
Texas 9.0%
Florida 7.2%
New York 6.0%
New Jersey 5.1%
Percentage New and Used Composition
New 46.4%
Used 53.6%
Weighted Average FICO 724
(1) Weighted Average Life shown to call.
================================================================================
End of % of Weighted % by
Period Cumulative Orig Average $ of
Month Date Balance Loss Pool Prepayments APR 31 - 60 Contracts
- ---------------------------------------------------------------------------------------------------------------------
1 Mar-05 $1,445,177,948 $0 0.00% $20,302,364 4.48% $7,528,947 0.52%
2 Apr-05 $1,395,279,908 $0 0.00% $18,065,966 4.46% 7,730,169 0.55%
3 May-05 $1,343,654,806 $40,605 0.00% $18,390,249 4.44% 7,865,398 0.59%
4 Jun-05 $1,294,538,780 $150,338 0.01% $18,701,802 4.42% 8,000,774 0.62%
5 Jul-05 $1,246,642,861 $381,009 0.03% $18,157,892 4.40% 10,475,087 0.84%
6 Aug-05 $1,195,911,039 $695,573 0.05% $21,011,458 4.38% 9,743,436 0.81%
7 Sep-05 $1,149,422,153 $831,264 0.06% $18,293,482 4.36% 9,856,316 0.86%
8 Oct-05 $1,104,186,010 $1,115,930 0.07% $17,157,923 4.34% 10,523,168 0.95%
9 Nov-05 $1,061,259,699 $1,372,039 0.09% $16,951,714 4.33% 10,553,827 0.99%
10 Dec-05 $1,017,882,186 $1,949,587 0.13% $16,904,762 4.31% 12,844,507 1.26%
- ---------------------------------------------------------------------------------------------------------------------
11 Jan-06 $975,187,930 $2,054,374 0.14% $16,633,865 4.30% 9,760,522 1.00%
12 Feb-06 $936,630,431 $2,141,747 0.14% $14,474,250 4.28% 9,537,737 1.02%
13 Mar-06 $891,790,133 $2,207,023 0.15% $18,743,311 4.27% 9,104,890 1.02%
14 Apr-06 $855,416,569 $2,943,805 0.20% $15,868,731 4.26% 8,887,975 1.04%
15 May-06 $815,757,483 $3,280,538 0.22% $16,356,883 4.25% 9,479,690 1.16%
16 Jun-06 $778,632,589 $3,674,027 0.24% $14,815,151 4.24% 8,827,406 1.13%
% by % by % by
$ of $ of $ of
Month 61 - 90 Contracts 91 - 120 Contracts 121+ Days Contracts
- -----------------------------------------------------------------------------
1 $377,451 0.03% $0 0.00% $0 0.00%
2 1,275,472 0.09% 8,957 0.00% 0 0.00%
3 1,437,524 0.11% 438,341 0.03% 105,803 0.01%
4 939,530 0.07% 417,781 0.03% 291,460 0.02%
5 882,859 0.07% 296,595 0.02% 269 0.00%
6 1,635,250 0.14% 418,089 0.03% 332,881 0.03%
7 1,733,217 0.15% 621,077 0.05% 502,714 0.04%
8 1,909,677 0.17% 564,754 0.05% 497,255 0.05%
9 2,074,745 0.20% 398,261 0.04% 765,673 0.07%
10 2,363,322 0.23% 686,621 0.07% 704,005 0.07%
- -----------------------------------------------------------------------------
11 2,628,823 0.27% 631,138 0.06% 920,036 0.09%
12 1,498,281 0.16% 498,792 0.05% 966,459 0.10%
13 1,708,838 0.19% 332,008 0.04% 877,706 0.10%
14 1,511,234 0.18% 416,686 0.05% 791,458 0.09%
15 1,961,850 0.24% 375,720 0.05% 783,440 0.10%
16 1,914,566 0.25% 692,418 0.09% 656,224 0.08%
Annex A
Global Clearance, Settlement and
Tax Documentation Procedures
Except in specified circumstances, the globally offered Notes (the "Global
Securities") will be available only in book-entry form. Investors in the Global
Securities may hold the Global Securities through The Depository Trust Company
("DTC" ), Clearstream Banking, societe anonyme ("Clearstream, Luxembourg") or
the Euroclear System ("Euroclear"). The Global Securities will be tradeable as
home market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Clearstream, Luxembourg and Euroclear will be conducted in the ordinary
way in accordance with their normal rules and operating procedures and in
accordance with conventional eurobond practice (i.e., three calendar day
settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedure applicable to
U.S. corporate debt obligations and asset-backed securities issues.
Secondary cross-market trading between Clearstream, Luxembourg or
Euroclear and DTC Participants holding securities will be effected on a
delivery-against-payment basis through the depositaries of Clearstream,
Luxembourg and Euroclear (in that capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless those holders meet specified requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name
of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, Clearstream, Luxembourg
and Euroclear will hold positions on behalf of their participants through their
depositaries, which in turn will hold those positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
DTC settlement practice. Investor securities custody accounts will be credited
with their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Clearstream,
Luxembourg or Euroclear accounts will follow the settlement procedures
applicable to conventional eurobonds, except that there will be no temporary
global security and no "lock-up" or restricted period. Global Securities will be
credited to securities custody accounts on the settlement date against payment
in same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior
asset-backed securities issues in same-day funds.
Trading between Clearstream, Luxembourg and/or Euroclear Participants.
Secondary market trading between Clearstream, Luxembourg Participants or
Euroclear Participants will be settled using the procedures applicable to
conventional eurobonds in same-day funds.
Trading between DTC Depositor and Clearstream, Luxembourg or Euroclear
Participants. When Global Securities are to be transferred from the account of a
DTC Participant to the account of a Clearstream, Luxembourg Participant or a
Euroclear Participant, the purchaser will send instructions to Clearstream,
Luxembourg or Euroclear through a Clearstream, Luxembourg Participant or
Euroclear Participant at least one business day prior to settlement.
Clearstream, Luxembourg or Euroclear will instruct the respective
A-1
Depositary, as the case may be, to receive the Global Securities against
payment. Payment will include interest accrued on the Global Securities from and
including the last coupon payment date to and excluding the settlement date, on
the basis of the actual number of days in that accrual period and a year assumed
to consist of 360 days. For transactions settling on the 31st of the month,
payment will include interest accrued to and excluding the first day of the
following month. Payment will then be made by the respective Depositary to the
DTC Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures to the Clearstream, Luxembourg Participant's or Euroclear
Participant's account. The securities credit will appear the next day (European
time) and the cash debt will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Clearstream, Luxembourg or
Euroclear cash debt will be valued instead as of the actual settlement date.
Clearstream, Luxembourg Participants and Euroclear Participants will need
to make available to the respective clearing systems the funds necessary to
process same-day funds settlement. The most direct means of doing so is to
pre-position funds for settlement, either from cash on hand or existing lines of
credit, as they would for any settlement occurring within Clearstream,
Luxembourg or Euroclear. Under this approach, they may take on credit exposure
to Clearstream, Luxembourg or Euroclear until the Global Securities are credited
to their accounts one day later.
As an alternative, if Clearstream, Luxembourg or Euroclear has extended a
line of credit to them, Clearstream, Luxembourg Participants or Euroclear
Participants can elect not to pre-position funds and allow that credit line to
be drawn upon to finance settlement. Under this procedure, Clearstream Bank
Participants or Euroclear Participants purchasing Global Securities would incur
overdraft charges for one day, assuming they clear the overdraft when the Global
Securities are credited to their accounts. However, interest on the Global
Securities would accrue from the value date. Therefore, in many cases the
investment income on the Global Securities earned during that one-day period may
substantially reduce or offset the amount of those overdraft charges, although
this result will depend on each Clearstream, Luxembourg Participant's or
Euroclear Participant's particular cost-of-funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective European Depositary for the benefit of Clearstream, Luxembourg
Participants or Euroclear Participants. The sale proceeds will be available to
the DTC seller on the settlement date. Thus, to the DTC Participants a
cross-market transaction will settle no differently than a trade between two DTC
Participants.
Trading between Clearstream, Luxembourg or Euroclear Depositor and DTC
Purchaser. Due to time zone differences in their favor, Clearstream, Luxembourg
Participants and Euroclear Participants may employ their customary procedures
for transactions in which Global Securities are to be transferred by the
respective clearing system, through the respective Depositary, to a DTC
Participant. The seller will send instructions to Clearstream, Luxembourg or
Euroclear through a Clearstream, Luxembourg Participant or Euroclear Participant
at least one business day prior to settlement. In these cases, Clearstream,
Luxembourg or Euroclear will instruct the Relevant Depositary, as appropriate,
to deliver the Global Securities to the DTC Participant's account against
payment. Payment will include interest accrued on the Global Securities from and
including the last coupon payment to and excluding the settlement date on the
basis of the actual number of days in that accrual period and a year assumed to
consist of 360 days. For transactions settling on the 31st of the month, payment
will include interest accrued to and excluding the last day of the following
month. The payment will then be reflected in the account of the Clearstream,
Luxembourg Participant or Euroclear Participant the following day, and receipt
of the cash proceeds in the Clearstream, Luxembourg Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). Should the Clearstream,
Luxembourg Participant or Euroclear Participant have a line of credit with its
respective clearing system and elect to be in debt in anticipation of receipt of
the sale proceeds in its account, the back valuation will extinguish any
overdraft incurred over that one-day period. If settlement is not completed on
the intended value date (i.e., the trade fails), receipt of the cash proceeds in
the Clearstream, Luxembourg Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
Finally, day traders that use Clearstream, Luxembourg or Euroclear and
that purchase Global Securities from DTC Participants for delivery to
Clearstream, Luxembourg Participants or Euroclear Participants should note that
these trades would automatically fail on the sale side unless affirmative action
were taken. At least three techniques should be readily available to eliminate
this potential problem:
1. borrowing through Clearstream, Luxembourg or Euroclear for one day
(until the purchase side of the day trade is reflected in their
Clearstream, Luxembourg or Euroclear accounts) in accordance with
the clearing system's customary procedures;
A-2
2. borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the
Global Securities sufficient time to be reflected in their
Clearstream, Luxembourg or Euroclear account in order to settle the
sale side of the trade; or
3. staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is
at least one day prior to the value date for the sale to the
Clearstream, Luxembourg Participant or Euroclear Participant.
Material U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
Clearstream, Luxembourg or Euroclear (or through DTC if the holder has an
address outside the U.S.) will be subject to withholding tax that generally
applies to payments of interest (including original issue discount) on
registered debt issued by U.S. Persons (as defined in the accompanying
prospectus), unless (1) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business in the chain of intermediaries between that beneficial owner and the
U.S. entity required to withhold tax complies with applicable certification
requirements and (2) that beneficial owner takes one of the following steps to
obtain an exemption or reduced tax rate:
Exemption for Non-U.S. Persons (Form W-8BEN). Beneficial owners of Global
Securities that are Non-U.S. Persons generally can obtain a complete exemption
from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign
Status of Beneficial Owner for United States Withholding). If the information
shown on Form W-8BEN changes, a new Form W-8BEN or other appropriate form must
be filed within 30 days of that change.
Exemption for non-U.S. Persons with effectively connected income (Form
W-8ECI). A Non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, generally can obtain an exemption
from the withholding tax by filing Form W-8ECI (Certificate of Foreign Person's
Claim for Exemption from Withholding on Income Effectively Connected with the
Conduct of a Trade or Business in the United States). If the information shown
on Form W-8ECI changes, a new Form W-8ECI or other appropriate form must be
filed within 30 days of that change.
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form W-8BEN). Non-U.S. Persons residing in a country that has a tax
treaty with the United States generally can obtain an exemption or reduced tax
rate depending on the treaty terms by filing Form W-8BEN. Form W-8BEN may be
filed by the Noteowners or their authorized agents.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a
Global Security files by submitting the appropriate form to the person through
whom it holds (the clearing agency, in the case of persons holding directly on
the books of the clearing agency). A Form W-8BEN on which the beneficial owner
of a Global Security provides a U.S. taxpayer identification number generally
remains in effect until a change in circumstances causes any of the information
on the form to be incorrect. A W-8BEN on which a U.S. taxpayer identification is
not provided and a Form W-8ECI generally remain in effect for three calendar
years, absent a change in circumstances causing any information on the form to
be incorrect.
The term "Non-U.S. Person" means any person who is not a U.S. Person (as
defined in the accompanying prospectus).
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of Global Securities. It is
suggested that investors consult their tax advisors for specific tax advice
concerning their holding and disposing of Global Securities
A-3
PROSPECTUS
BMW Vehicle Owner Trusts
Asset Backed Notes
Asset Backed Certificates
BMW FS Securities LLC,
Depositor
BMW Financial Services NA, LLC,
Sponsor, Originator, Administrator and Servicer
----------
The Issuing Entities:
1. A new trust will be formed to issue each series of securities and a
particular trust may issue multiple series of securities;
2. Each trust estate will consist of
o a pool of retail installment sale contracts and/or promissory notes
secured by new or used motor vehicles;
o items representing credit enhancement to be specified in the
applicable prospectus supplement; and
o other assets to be specified in the applicable prospectus
supplement.
The Securities:
1. will be asset-backed securities sold periodically in one or more
series:
2. will be paid only from the assets of the related trust estate and any
form of credit enhancement;
3. will be issued as part of a designated series that may include one or
more classes; and
4. will consist of:
o notes (which will be treated as indebtedness of the trust) and/or
o certificates (which will represent an undivided ownership interest
in the trust).
You should review carefully the factors set forth under "Risk Factors" beginning
on page 10 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus or the applicable prospectus supplement is truthful or complete.
Any representation to the contrary is a criminal offense.
The amounts, prices and terms of each offering of securities will be determined
at the time of sale and will be described in a prospectus supplement that will
be attached to this prospectus.
This prospectus may be used to offer and sell any series of securities only if
accompanied by the prospectus supplement for that series.
The date of this prospectus is August 11, 2006
[THIS PAGE INTENTIONALLY LEFT BLANK]
TABLE OF CONTENTS
Page
Important Notice about Information Presented in this Prospectus and the
Accompanying Prospectus Supplement...........................................1
Copies of the Documents........................................................1
Summary of Terms...............................................................2
Risk Factors..................................................................10
Defined Terms.................................................................19
The Sponsor, Originator, Administrator and Servicer...........................19
The Depositor.................................................................20
The Trustee...................................................................21
Formation of the Issuing Entities.............................................21
Property of the Issuing Entities..............................................22
The Receivables...............................................................23
BMW FS' Financing Program.....................................................24
Use of Proceeds...............................................................27
Where Can You Find More Information About Your Securities.....................27
Weighted Average Lives of the Securities......................................29
Pool Factors and Trading Information..........................................30
The Notes.....................................................................30
General.............................................................30
Principal and Interest on the Notes.................................31
The Indenture.......................................................31
The Certificates..............................................................36
General.............................................................36
Payments of Principal and Interest..................................37
Certain Information Regarding the Securities..................................37
Fixed Rate Securities...............................................37
Floating Rate Securities............................................37
Derivative Arrangements.............................................44
Variable Funding Note...............................................44
Payment Terms.......................................................45
Revolving Period....................................................45
Prefunding Period...................................................45
Book-Entry Registration.............................................46
Definitive Securities...............................................49
Description of the Transfer and Servicing Agreements..........................50
Sale and Assignment of Receivables..................................50
Accounts............................................................51
Servicing Procedures................................................53
Insurance on Financed Vehicles......................................54
Collections.........................................................55
Advances............................................................55
Servicing Compensation..............................................56
Distributions on the Securities.....................................57
Credit and Cash Flow Enhancement....................................57
Net Deposits........................................................59
Statements to Trustees and the Trust................................60
Statements to Securityholders.......................................60
Evidence as to Compliance...........................................61
Certain Matters Regarding the Servicer..............................62
Servicer Default....................................................62
Rights Upon Servicer Default........................................63
Waiver of Past Defaults.............................................63
i
TABLE OF CONTENTS
(continued)
Page
Amendment...........................................................64
List of Securityholders.............................................64
Insolvency Event....................................................64
Payment of Notes....................................................65
Termination.........................................................65
Administration Agreement............................................65
Certain Legal Aspects of the Receivables......................................67
General.............................................................67
Security Interests..................................................68
Repossession........................................................69
Notice of Sale; Redemption Rights...................................70
Deficiency Judgments and Excess Proceeds............................70
Certain Bankruptcy Considerations...................................70
Consumer Protection Laws............................................71
Other Limitations...................................................73
Material Income Tax Consequences..............................................73
Tax Treatment of Owner Trusts.......................................74
Tax Consequences to Owners of the Notes.............................74
Tax Consequences to Owners of the Certificate.......................77
Tax Treatment of Grantor Trusts.....................................81
Reportable Transaction Disclosure...................................87
State and Local Tax Considerations..................................87
ERISA Considerations..........................................................87
Plan of Distribution..........................................................88
Legal Opinions................................................................89
Glossary of Terms.............................................................90
ii
Important Notice about Information Presented in this Prospectus and the
Accompanying Prospectus Supplement
We provide information to you about the securities in two separate
documents that progressively provide varying levels of detail:
o This prospectus, which provides general information, some of which
may not apply to a particular series of securities, including your
series, and
o The accompanying prospectus supplement, which will describe the
specific terms of the offered securities.
We have started with several introductory sections describing the trust
and the securities in abbreviated form, followed by a more complete description
of the terms. The introductory sections are:
o a Summary of Terms--which gives a brief introduction to the
securities to be offered, and
o Risk Factors--which describes briefly some of the risks to investors
of a purchase of the securities.
Whenever we use words like "intends," "anticipates" or "expects" or
similar words in this prospectus, we are making a forward-looking statement, or
a projection of what we think will happen in the future. Forward-looking
statements are inherently subject to a variety of circumstances, many of which
are beyond our control and could cause actual results to differ materially from
what we anticipate. Any forward-looking statements in this prospectus speak only
as of the date of this prospectus. We do not assume any responsibility to update
or review any forward-looking statement contained in this prospectus to reflect
any change in our expectation about the subject of that forward-looking
statement or to reflect any change in events, conditions or circumstances on
which we have based any forward-looking statement, except to the extent required
by law.
The disclosure in this prospectus may be enhanced by the disclosure in the
prospectus supplement.
Incorporation of Certain Documents by Reference
The Securities and Exchange Commission (which we refer to in this
prospectus as the "SEC") allows us to "incorporate by reference" information
filed with it by BMW FS Securities LLC on behalf of a trust, which means that we
can disclose important information to you by referring you to those documents.
The information incorporated by reference is considered to be part of this
prospectus. Information that we file later with the SEC will automatically
update the information in this prospectus. In all cases, you should rely on the
later information over different information included in this prospectus or the
related prospectus supplement. We incorporate by reference any future annual,
monthly or special SEC reports and proxy materials filed by or on behalf of a
trust until we terminate our offering of the securities by that trust.
Copies of the Documents
You may receive a free copy of any or all of the documents incorporated by
reference in this prospectus or incorporated by reference into the accompanying
prospectus supplement if:
o you received this prospectus and the prospectus supplement and
o you request such copies from BMW FS Securities LLC at 300 Chestnut
Ridge Road, Woodcliff Lake, New Jersey 07677 and its telephone
number is (201) 307-4000.
This offer only includes the exhibits to such documents if such exhibits
are specifically incorporated by reference in such documents You may also read
and copy these materials at the public reference facilities of the SEC in
Washington, D.C. located at 450 Fifth Street, N.W., Washington, D.C. 20549
(telephone 1-800-732-0330).
- --------------------------------------------------------------------------------
Summary of Terms
The following summary highlights selected information from this prospectus
and provides a general overview of relevant terns of the securities. You should
read carefully this entire document and the accompanying prospectus supplement
to understand all of the terms of the offering.
Issuing Entity.................... The trust to be formed for each series of
securities. If the trust issues notes and
certificates, it will be formed by a trust
agreement between the depositor and the
trustee of the trust. If the trust issues
only certificates, it will be formed by a
pooling and servicing agreement among the
depositor, the seller, the servicer and the
trustee of the trust.
Depositor......................... BMW FS Securities LLC, a wholly owned,
limited purpose subsidiary of BMW Financial
Services NA, LLC.
Sponsor, Originator,
Administrator and Servicer...... BMW Financial Services NA, LLC, a wholly
owned subsidiary of BMW of North America
LLC. BMW of North America LLC is the
exclusive distributor of BMW passenger cars,
BMW light trucks, BMW motorcycles and BMW
parts and accessories ("BMW Products") and
MINI passenger cars and MINI parts and
accessories ("MINI Products") in the United
States and is a wholly owned subsidiary of
Bayerische Motoren Werke Aktiengesellschaft,
a corporation organized under the laws of
Germany ("BMW AG").
Owner Trustee..................... The owner trustee for each series of
securities will be named in the prospectus
supplement for that series.
Indenture Trustee................. If the trust issues notes, the trustee for
the indenture pursuant to which the notes
will be issued will be named in the
prospectus supplement for that series.
Securities Offered................ Notes--A series of securities may include
one or more classes of notes. Notes of a
series will be issued pursuant to an
indenture.
Certificates--Each series of securities may
include one or more classes of certificates,
whether or not a class of notes is issued as
part of the series. The applicable
prospectus supplement will describe the
following:
o if any notes are issued, the priority of
payments (1) between the notes and
certificates and (2) among different
classes of notes; and
o the priority of payments among different
classes of certificates.
- --------------------------------------------------------------------------------
2
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Terms--The terms of each class of notes and
certificates in a series described in the
applicable prospectus supplement will
include the following:
o the stated principal amount of each
class of notes and the stated
certificate balance of each class of
certificates; and
o the interest rate (which may be fixed,
variable, adjustable or some combination
of these rates) or method of determining
the interest rate.
A class of notes may differ from other
classes of notes and a class of certificates
may differ from other classes of
certificates in one or more aspects.
including:
o timing and priority of payments;
o seniority;
o allocation of losses;
o interest rate or formula for determining
the interest rate;
o amount of interest or principal
payments;
o whether interest or principal will be
payable to holders of the class if
specified events occur;
o the right to receive collections from
designated portions of the receivables
owned by the trust; and
o the ability of holders of a class to
direct the trustee to take specified
remedies.
The Receivables................... Purchasers of motor vehicles often finance
their purchases by entering into retail
installment sale contracts with dealers who
then resell the contracts to finance
companies such as BMW Financial Services NA,
LLC or by entering into promissory notes
with BMW Bank of North America. These
contracts and promissory notes are referred
to as receivables, and the underlying
vehicles are referred to as the financed
vehicles. The purchasers of the financed
vehicles are referred to as the obligors.
The terms of the contracts must meet
specified BMW Financial Services NA, LLC
requirements.
On or before the date the securities of a
series
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3
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are issued, BMW Financial Services NA, LLC
or BMW Bank of North America will sell a
specified amount of receivables to BMW FS
Securities LLC, the depositor. The depositor
will then sell those receivables to the
trust. The sale by the depositor to the
trust will be documented under:
1. a pooling and servicing agreement among
the seller, the servicer and the trustee
(if the trust will be treated as a
grantor trust for federal income tax
purposes); or
2. a sale and servicing agreement among the
seller, the servicer and the trust (if
the trust will be treated other than as
a grantor trust for federal income tax
purposes).
The receivables to be sold by BMW Financial
Services NA, LLC or BMW Bank of North
America will be described in the applicable
prospectus supplement.
The Trust Property................ The property of each trust:
o will be described in the applicable
prospectus supplement;
o will primarily be a pool of
receivables secured by new and used
motor vehicles (which term, for
purposes of this prospectus and each
prospectus supplement, shall include
motorcycles) and amounts due or
collected under the receivables on
or after a specified cutoff date;
and
o will include assets related to the
receivables including:
o security interests in the motor
vehicles;
o proceeds from claims on related
insurance policies;
o the rights of the seller in rebates
of premiums and other amounts
relating to insurance policies and
other items financed under the
receivables;
o the rights of the seller in the
agreements identified in the
applicable prospectus supplement;
o amounts deposited in specified bank
accounts; and
o proceeds from liquidated assets.
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4
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Prefunding........................ If specified in a prospectus supplement, on
the applicable closing date, the depositor
will make a deposit into a prefunding
account from proceeds received from the sale
of the related securities, in an amount that
will be specified in the related prospectus
supplement, but not to exceed 50% of the
proceeds of the offering. Amounts on deposit
in the prefunding account will be used to
purchase additional receivables, which will
be required to have the same eligibility
criteria and general characteristics as the
initial pool of receivables during the
period to be specified in the related
prospectus supplement, which may not exceed
one year from the date of issuance of the
related securities. Any amounts remaining on
deposit in the prefunding account following
the end of the specified prefunding period
will be transferred to the related
collection account and included as part of
available amounts on the next succeeding
payment date or applied to specific classes
of securities as described in the prospectus
supplement.
Revolving Period.................. If specified in a prospectus supplement,
during the period beginning on the related
closing date and ending on the payment date
to be specified in the related prospectus
supplement, which may not exceed three years
from the date of issuance of the related
securities, all amounts that represent
principal collections on the receivables
that otherwise would become principal
distributable amounts on the next related
payment date will instead be used to
purchase additional receivables, which will
be required to have the same eligibility
criteria and general characteristics as the
initial pool of receivables or such other
characteristics as described in the related
prospectus supplement.
A trust may have both a prefunding account
and revolving period. In this event, the
prospectus supplement will specify which
funds will be applied first to the purchase
of additional receivables.
Credit and Cash Flow Enhancement.. The trusts may include features designed to
provide protection from losses on assets of
the trust to one or more classes of
securities. These features are referred to
as credit enhancement. Credit enhancement
may include any one or more of the
following:
o subordination of one or more other
classes of securities or excess
interest;
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5
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o one or more reserve accounts;
o over-collateralization;
o letters of credit or cash collateral
accounts;
o surety bonds;
o guaranteed investment contracts,
interest rate cap or floor
agreements, or interest rate or
currency swap agreements; o
repurchase obligations; or
o cash deposits.
In addition, the trusts may include features
designed to ensure the timely payment of
amounts owed to securityholders. These
features may include any one or more of the
following:
o yield supplement accounts or
agreements or over-collateralization
features related to yield supplement
requirements;
o liquidity facilities; or
o cash deposits.
The specific terms of any credit and cash
flow enhancement applicable to a trust or to
the securities issued by a trust will be
described in detail in the applicable
prospectus supplement.
Servicing Fee..................... BMW Financial Services NA, LLC will act as
servicer for the receivables. In that
capacity, the servicer will handle all
collections, administer defaults and
delinquencies and otherwise service the
receivables. The trust will pay the servicer
a monthly fee equal to a percentage of the
total principal balance of the receivables
at the beginning of the preceding month
specified in the applicable prospectus
supplement. The servicer may also receive
additional servicing compensation in the
form of investment earnings, late fees,
prepayment fees and other administrative
fees and expenses or similar charges
received by the servicer during that month.
Advances.......................... The servicer may be obligated to advance to
the trust interest on receivables that is
due but unpaid by the obligor. In addition,
the servicer may be obligated to advance to
the trust principal of any receivables that
are classified as precomputed receivables
rather than as
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6
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simple interest receivables. The servicer
will not be required to make any advance if
it determines that it will not be able to
recover an advance from an obligor. The
trust will reimburse the servicer from later
collections on the receivables for which it
has made advances, or from collections
generally if the servicer determines that an
advance will not be recoverable with respect
to that receivable.
We refer you to "Description of the Transfer
and Servicing Agreements--Advances" in this
prospectus for more detailed information on
advances and reimbursement of advances.
Optional Purchase................. The servicer may purchase all the
receivables in the trust when the
outstanding aggregate principal balance of
the receivables declines to 10% or less of
the original total principal balance of the
receivables as of the cutoff date (or other
level as may be disclosed in the applicable
prospectus supplement). If the servicer
exercises this option, the notes will be
redeemed.
We refer you to "Description of The Transfer
and Servicing Agreements--Termination" in
this prospectus for more detailed
information on the servicer's optional
purchase of securities.
Changes in Payment Priorities..... Each prospectus supplement will provide a
description of the conditions under which
changes in the priority of payments to
securityholders would be made on any given
payment date.
Removal of Pool Assets............ Each prospectus supplement will provide a
description of the circumstances under which
receivables may or are required to be
removed from the related trust.
Tax Status........................ Grantor Trusts--If a trust is referred to as
a "grantor trust" in the applicable
prospectus supplement, special tax counsel
to the trust will be required to deliver an
opinion that, although there is no authority
directly on point with respect to
transactions similar to those contemplated
in the transfer and servicing agreements or
entities with a capital structure similar to
that of the trust:
1. the trust will be treated as a grantor
trust for federal income tax purposes;
and
2. the trust will not be subject to federal
income tax.
Owner Trust--if a trust is referred to as an
owner trust in the applicable prospectus
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7
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supplement, special tax counsel to the trust
will be required to deliver an opinion for
federal income tax purposes that, although
there is no authority directly on point with
respect to transactions similar to those
contemplated in the transfer and servicing
agreements, entities with a capital
structure similar to the trust or securities
with terms similar to the notes and
certificates:
1. as to the characterization as debt of
the notes issued by the trust; and
2. that the trust will not be characterized
as an association (or a publicly traded
partnership) taxable as a corporation.
If a trust is referred to as an owner trust
in the applicable prospectus supplement:
1. by purchasing a note, you will be
agreeing to treat the note as
indebtedness for tax purposes; and
2. by purchasing a certificate, you will be
agreeing to treat the trust:
o as a partnership in which you are a
partner; or
o if you are the sole beneficial owner
of the certificates, as a
"disregarded entity," for federal
income tax purposes.
Applicable taxing authorities could impose
alternative tax characterizations of the
trust, the notes and the certificates.
However, these characterizations generally
will not result in material adverse tax
consequences to security holders.
We refer you to "Material Income Tax
Consequences" in this prospectus and the
applicable prospectus supplement for more
detailed information on the application of
federal income tax laws.
ERISA Considerations.............. Notes--Notes will generally be eligible for
purchase by employee benefit plans. The
limitations to, and the requirements for,
such purchase will be set forth in the
related prospectus supplement, including
certain representations with respect to
prohibited transactions, which will be
required.
Certificates--Certificates issue d by a
grantor trust or by owner trusts will not be
eligible for purchase by an employee benefit
plan, governmental plan, foreign plan or
individual retirement account unless the
related
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8
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prospectus supplement states otherwise.
We refer you to "ERISA Considerations" in
this prospectus and the applicable
prospectus supplement for more detailed
information regarding the ERISA eligibility
of any class of securities.
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9
Risk Factors
You should consider the following risk factors and the risks described in
the section captioned "Risk Factors" in the applicable prospectus supplement in
deciding whether to purchase securities of any class.
You must rely for repayment The securities represent interests solely in the
only upon payments from the trust or indebtedness of the trust and will not
trust's assets which may not be insured or guaranteed by BMW Financial
be sufficient to make full Services NA, LLC (the servicer), BMW FS
payments on your securities. Securities LLC (the depositor), or any of their
respective affiliates, or the related trustee or
any other person or entity other than the trust.
The only source of payment on your securities
are payments received on the receivables and, if
and to the extent available, any credit or cash
flow enhancement for the trust, including
amounts on deposit in the Reserve Account, if
any, established for that trust. If the
available credit enhancement is exhausted, your
securities will be paid solely from current
distributions on the receivables. In limited
circumstances, the trust will also have access
to the funds in the yield supplement account or
have the benefit of over-collateralization to
provide limited protection against low-interest
receivables.
We refer you to "Description of the Transfer and
Servicing Agreements--Yield Supplement Account"
in this prospectus.
You may experience reduced You may receive payment of principal on your
returns on your investment securities earlier than you expected for the
resulting from prepayments or reasons set forth below. As a result, you may
repurchases of receivables or not be able to reinvest the principal paid to
early termination of the you earlier than you expected at a rate of
trust. return that is equal to or greater than the rate
of return on your securities. Prepayments on the
receivables by the related obligors and
purchases of the receivables by the seller and
the servicer will shorten the lives of the
securities to an extent that cannot be fully
predicted.
In addition, a trust may contain a feature known
as a prefunding account from which specified
funds will be used to purchase additional
receivables after the date the securities are
issued. To the extent all of those funds are not
used by the end of the specified period to
purchase new receivables, those funds will be
used to make payments on the securities. In that
event, you would receive payments on your
securities earlier than expected. Also, the
seller will be required to repurchase
receivables from the trust if there is a breach
of a representation or warranty relating to
those receivables that materially adversely
affects those receivables. Unless otherwise set
forth in the related prospectus supplement, BMW
Financial Services NA, LLC, as servicer, will
also be required to purchase receivables from
the trust if it breaches its servicing
10
obligations with respect to those receivables.
The servicer shall be permitted to purchase all
remaining receivables from the trust when the
outstanding aggregate principal balance of the
receivables is 10% or less of the initial
aggregate principal balance of the receivables
as of the related cutoff date.
Further, the receivables included in the trust
may be prepaid, in full or in part, voluntarily
or as a result of defaults, theft of or damage
to the related vehicles or for other reasons.
The rate of prepayments on the receivables may
be influenced by a variety of economic. social
and other factors in addition to those described
above. The servicer has limited historical
experience with respect to prepayments on
receivables- In addition, the servicer is not
aware of publicly available industry statistics
that detail the prepayment experience for
contracts similar to the receivables. For these
reasons, the servicer cannot predict the actual
prepayment rates for the receivables. You will
bear all reinvestment risk resulting from
prepayments on the receivables and the
corresponding acceleration of payments on the
securities.
The final payment of each class of securities is
expected to occur prior to its scheduled final
payment date because of the prepayment and
purchase considerations described above. If
sufficient funds are not available to pay any
class of notes in full on its final scheduled
payment date, an event of default will occur and
final payment of that class of notes may occur
later than that date.
Interests of other persons in Another person could acquire an interest in a
the receivables and financed receivable that is superior to the trust's
vehicles could be superior to interest in that receivable because the
the trust's interest, which receivables will not be segregated or marked as
may result in reduced payments belonging to the trust. The depositor will cause
on your securities. financing statements to be filed with the
appropriate governmental authorities to perfect
the trust's interest in the receivables.
However, the servicer will continue to hold the
receivables. If another party purchases, or
takes a security interest in, one or more
receivables for new value in the ordinary course
of business and obtains possession of those
receivables without actual knowledge of the
trust's interest because of the failure to
segregate or mark those receivables, the new
purchaser, or secured party, will acquire an
interest in those receivables superior to the
interest of the trust.
11
Another person could acquire an interest in a
vehicle financed by a receivable that is
superior to the trust's interest in the vehicle
because of the failure to identify the trust as
the secured party on the related certificate of
title. While BMW Financial Services NA. LLC will
assign its security interest in the financed
vehicles to the depositor, and the depositor
will assign to the trust its security interests
in the financed vehicles, the servicer will
continue to hold the certificates as custodian
of title or ownership for the vehicles. However,
for administrative reasons, the servicer will
not endorse or otherwise amend the certificates
of title or ownership to identify the trust as
the new secured party. Because the trust will
not be identified as the secured party on any
certificates of title or ownership, the security
interest of the trust in the vehicles may be
defeated through fraud, forgery, negligence or
error and as a result the trust may not have a
perfected security interest in the financed
vehicles in every state.
The possibility that the trust may not have a
perfected security interest in the financed
vehicles may affect the trust's ability to
repossess and sell the financed vehicles or may
limit the amount realized to less than the
amount due by the related obligors. Therefore,
you may be subject to delays in payment and may
incur losses on your investment in the
securities as a result of defaults or
delinquencies by obligors and because of
depreciation in the value of the related
financed vehicles. We refer you to "Certain
Legal Aspects of the Receivables--Security
Interests" in this prospectus.
Receivables that fail to Many federal and state consumer protection laws
comply with consumer regulate consumer contracts, including the
protection laws may he receivables. If any of the receivables does not
unenforceable, which may comply with one or more of these laws, the
result in losses on your servicer may be prevented from or delayed in
investment. collecting amounts due on the receivable. If
that happens, payments on the securities could
be delayed or reduced. Each of BMW FS Securities
LLC and BMW Financial Services NA, LLC will make
representations and warranties relating to the
receivables' compliance with law and the trust's
ability to enforce the contracts. If BMW FS
Securities LLC or BMW Financial Services NA, LLC
breaches any of these representations or
warranties, the trust's sole remedy will be to
require BMW FS Securities LLC to repurchase the
affected receivables. We refer you to "Certain
Legal Aspects of the Receivables--Consumer
Protection Laws" in this prospectus.
12
The bankruptcy of BMW If either BMW Financial Services NA, LLC, the
Financial Services NA, LLC servicer, or BMW FS Securities LLC, the
(servicer) or BMW FS depositor, become subject to bankruptcy
Securities LLC (depositor) proceedings, you could experience losses or
could result in losses or delays in the payments on your securities. BMW
delays in payments on your Financial Services NA, LLC will sell the
securities. receivables to BMW FS Securities LLC, and BMW FS
Securities LLC will in turn transfer the
receivables to the trust. However, if BMW
Financial Services NA, LLC or BMW FS Securities
LLC becomes subject to a bankruptcy proceeding,
the court in the bankruptcy proceeding could
conclude that BMW Financial Services NA, LLC or
BMW FS Securities LLC still owns the receivables
by concluding that the sale to the seller or the
trust was not a "true sale" or, in the case of a
bankruptcy of BMW Financial Services NA. LLC,
that the depositor should be consolidated with
BMW Financial Services NA, LLC for bankruptcy
purposes If a court were to reach this
conclusion, you could experience losses or
delays in payments on your securities as a
result of, among other things:
o the "automatic stay," which prevents
secured creditors from exercising
remedies against a debtor in bankruptcy
without permission from the court and
provisions of the U.S. Bankruptcy Code
that permit substitution for collateral
in limited circumstances;
o tax or government liens on BMW Financial
Services NA, LLC's or BMW FS Securities
LLC's property (that arose prior to the
transfer of a receivable to the trust)
having a prior claim on collections
before the collections are used to make
payments on your securities; and
o the trust not having a perfected
security interesting either one or more
of the financed vehicles securing the
receivables or any cash collections held
by BMW Financial Services-NA, -LLC at
the time BMW Financial Services NA, LLC
becomes the subject of a bankruptcy
proceeding.
The depositor will take steps in structuring
each transaction described in this prospectus
and the applicable prospectus supplement to
minimize the risk that a court would consolidate
the depositor with BMW Financial Services NA,
LLC for bankruptcy purposes or conclude that the
sale of receivables to the seller was not a
"true sale." We refer you to "Certain Legal
Aspects of the Receivables--Certain Bankruptcy
Considerations" in this prospectus.
13
A servicer default may result If a servicer default occurs, the indenture
in additional costs, increased trustee or the noteholders in a given series of
servicing fees by a substitute notes may remove the servicer without the
servicer or a diminution in consent of the owner trustee or the
servicing performance, certificateholders. In the event of the removal
including higher delinquencies of the servicer and the appointment of a
and defaults, any of which may successor servicer, we cannot predict:
have an adverse effect on your
notes
o the cost of the transfer of servicing to
the successor;
o the ability of the successor to perform
the obligations and duties of the
servicer under the servicing agreement;
or
o the servicing fees charged by the
successor.
In addition, the noteholders have the ability,
with some exceptions, to waive defaults by the
servicer.
Furthermore, the indenture trustee or the
noteholders may experience difficulties in
appointing a successor servicer and during any
transition phase it is possible that normal
servicing activities could be disrupted,
resulting in increased delinquencies and/or
defaults on the receivables.
Paying the servicer a fee Because the servicer is paid its base servicing
based on a percentage of the fee based on a percentage of the aggregate
receivables may result in the outstanding amount of the receivables, the fee
inability to obtain a the servicer receives each month will be reduced
successor servicer. as the size of the pool decreases over time. At
some point, if the need arises to obtain a
successor servicer, the fee that such successor
servicer would earn might not be sufficient to
induce a potential successor servicer to agree
to service the remaining receivables in the
pool. In this event a higher servicing fee may
need to be negotiated (with majority noteholder
approval), resulting in less available funds
that may be distributed to noteholders and
certificateholders on a related payment date.
Also if there is a delay in obtaining a
successor servicer, it is possible that normal
servicing activities could be disrupted during
this period, resulting in increased
delinquencies and/or defaults on the
receivables.
The bankruptcy of the servicer In the event of default by the servicer
could delay the appointment of resulting solely from certain events of
a successor servicer or reduce insolvency or the bankruptcy of the servicer, a
payments on your notes court, conservator, receiver or liquidator may
have the power to prevent either the indenture
trustee or the noteholders from appointing a
successor servicer or prevent the servicer from
appointing a sub-servicer, as the case may be,
and delays in the collection of payments on the
receivables may occur. Any delay in the
collection of payments on the receivables
14
may delay or reduce payments to noteholders.
Proceeds of the sale of If so directed by the holders of the requisite
receivables may not be percentage of outstanding notes of a series,
sufficient to pay your following an acceleration of the notes upon an
securities in full. event of default, the indenture trustee will
sell the receivables owned by the trust only in
limited circumstances. However, there is no
assurance that the market value of those
receivables will at any time be equal to or
greater than the aggregate principal amount of
the notes or the sum of the aggregate principal
amount of the notes and the aggregate principal
balance of the certificates. Therefore, upon an
event of default, there can be no assurance that
sufficient funds will be available to repay you
in full. This deficiency will be exacerbated in
the case of any securities where the aggregate
principal balance of the securities exceeds the
aggregate principal balance of the receivables.
Failure to pay principal on The amount of principal required to be paid to
your notes will not constitute the noteholders will generally be limited to
an event of default until amounts available in the collection account (and
maturity. the Reserve Account or other forms of credit or
cash flow enhancement, if any). Therefore, the
failure to pay principal of your notes generally
will not result in the occurrence of an event of
default until the final scheduled payment date
for your notes. We refer you to "The Notes--The
Indenture--Events of Default; Rights Upon Event
of Default" in this prospectus.
Funds held by the servicer Subject to rating agency debt rating thresholds,
that are intended to be used the servicer generally may retain all payments
to make payments on the and proceeds collected on the receivables during
securities may be exposed to a each collection period-The servicer is generally
risk of loss. not required to segregate those funds from its
own accounts until the funds are deposited in
the collection account on each payment date.
Until any collections or proceeds are deposited
into the collection account, the servicer will
be able to invest those amounts for its own
benefit at its own risk. The trust and
securityholders are not entitled to any amount
earned on the funds held by the servicer. If the
servicer does not deposit the funds in the
collection account as required on any payment
date; the trust may be unable to make the
payments owed on your securities.
If the trust enters into a If the trust enters into a currency swap,
currency or an interest rate interest rate swap or a combined currency and
swap, payments on the interest rate swap, its ability to protect
securities will be dependent itself from shortfalls in cash flow caused by
on payments made under the currency or interest rate changes will depend to
swap agreement. a large extent on the terms of the swap
agreement and whether the swap counterparty
performs its obligations under the related swap.
If the trust does not receive the payments it
expects
15
from the swap, the trust may not have adequate
funds to make all payments to securityholders
when due, if ever.
Termination of a swap A swap agreement may be terminated if particular
agreement and the inability to events occur. Most of these events are generally
locate a replacement swap beyond the control of the trust or the swap
counterparty may cause counterparty. If an event of default under a
termination of the trust. swap agreement occurs and the trustee is not
able to assign the swap agreement to another
party. obtain a swap agreement on substantially
the same terms or is unable to establish any
other arrangement satisfactory to the rating
agencies. the trustee may terminate the swap
agreement. In addition, the trust may terminate
and the trustee would then sell the assets of
the trust. It is impossible to predict how long
it would take to sell the assets of the trust.
Some of the possible adverse consequences of a
sale of the assets of the trust are:
o the proceeds from the sale of assets
under those circumstances may not be
sufficient to pay all amounts owed to
you:
o amounts available to pay you will be
further reduced if the trust is required
to make a termination payment to the
swap counterparty;
o termination of the swap agreement may
expose the trust to currency or interest
rate risk, further reducing amounts
available to pay you;
o the sale may result in payments to you
significantly earlier than expected; and
o a significant delay in arranging a sale
of the trust's assets could result in a
delay in principal payments. this would,
in turn, increase the weighted average
lives of the securities and could reduce
the return on your securities.
Additional information about termination of the
trust and sale of the trust's assets, including
a description of how the proceeds of a sale
would be distributed will be included in the
applicable prospectus supplement. Any swap
agreement involves risk. A trust will be exposed
to this risk should it use this mechanism. For
this reason, only investors capable of
understanding these risks should invest in the
securities. You are strongly urged to consult
with your financial advisors before deciding to
invest in the securities if a swap is involved.
The rating of a third party If a trust enters into any third party credit
credit enhancement provider enhancement arrangement, the rating agencies
may affect the ratings of the that
securities.
16
rate the trust's securities will consider the
provisions of arrangement and the rating of any
third party credit enhancement provided. If a
rating agency downgrades the debt rating of any
third party credit provider, it is also likely
to downgrade the rating of the securities. Any
downgrade in the rating of the securities could
have severe adverse consequences on their
liquidity or market value.
You may have difficulty The securities are not expected to be listed on
selling your securities and/or any securities exchange. Therefore, in order to
obtaining your desired price sell your securities, you must first locate a
due to the absence of a willing purchaser. In addition, currently, no
secondary market. secondary market exists for the securities. We
cannot assure you that a secondary market will
develop. The underwriters of any series of
securities may make a secondary market for the
securities by offering to buy the securities
from investors that wish to sell. However, any
underwriters agreeing to do so will not be
obligated to offer to buy the securities and
they may stop making offers at any time.
Because the securities are in Because the securities will be issued in
book-entry form, your rights book-entry form, you will be required to hold
can only be exercised your interest in the securities through The
indirectly. Depository Trust Company in the United States,
or Clearstream Banking, societe anonyme, or the
Euroclear System in Europe. Transfers of
interests in the securities within The
Depository Trust Company, Clearstream,
Luxembourg or Euroclear must be made in
accordance with the usual rules and operating
procedures of those systems. So long as the
securities are in book-entry form, you will not
be entitled to receive a physical note or
certificate representing your interest. The
securities will remain in book-entry form except
in the limited circumstances described under the
caption "Certain Information Regarding the
Securities--Book-Entry Registration." Unless and
until the securities cease to be held in
book-entry form, the trustee will not recognize
you as a "noteholder" or "certificateholder." As
a result, you will only be able to exercise the
rights of securityholders indirectly through The
Depository Trust Company (if in the United
States) and its participating organizations, or
Clearstream, Luxembourg and Euroclear (in
Europe) and their participating organizations.
Holding the securities in book-entry form could
also limit your ability to pledge your
securities to persons or entities that do not
participate in The Depository Trust Company,
Clearstream, Luxembourg or Euroclear and to take
other actions that require a physical note or
certificate representing the securities.
Interest and principal on the securities will be
paid by the trust to The Depository Trust
Company as the record holder of -the securities
while they are held in book-
17
entry form. The Depository Trust Company will
credit payments received from the trust to the
accounts of its participants which, in turn,
will credit those amounts to securityholders
either directly or indirectly through indirect
participants. This process may delay your
receipt of principal and interest payments from
the trust.
Possible Prepayment Due to If so disclosed in the applicable prospectus
Inability to Acquire supplement, a trust may agree to buy additional
Subsequent Receivables. receivables from the depositor after the closing
date. The number of receivables that the
depositor has to sell depends on its ability to
acquire additional receivables which, in turn,
is affected by, among other things. the number
of financed vehicles sold. The number of
financed vehicles sold is affected by a variety
of factors, including interest rates,
unemployment levels, the rate of inflation and
consumer perception of economic conditions
generally. If the full amount deposited on the
closing date for the purpose of purchasing
additional receivables from the depositor cannot
be used for that purpose during the specified
period, all remaining monies will be applied as
a mandatory prepayment of a designated class or
classes of securities. We refer you to
"Description of the Transfer and Servicing
Agreements--Credit and Cash Flow
Enhancement--Pre-funding feature."
18
Defined Terms
In later sections, we use a few terms that we define either immediately
surrounding the first use of such term or within the text or in the glossary at
the end of this prospectus. These terms appear in bold face on their first use.
The Sponsor, Originator, Administrator and Servicer
BMW Financial Services NA, Inc., the predecessor of BMW Financial Services
NA, LLC ("BMW FS"), was incorporated on April 23, 1984 in the State of Delaware
and, on May 1, 2000, was converted into a limited liability company organized
under the laws of the State of Delaware. BMW FS is a wholly owned subsidiary of
BMW of North America, LLC ("BMW NA"). BMW FS provides retail and wholesale
financing, retail leasing and other financial services to authorized centers and
their customers throughout the United States. BMW NA is based in Woodcliff Lake,
New Jersey and is engaged in the wholesale distribution of BMW passenger cars,
BMW light trucks, BMW motorcycles and MINI passenger cars throughout the United
States. BMW NA is an indirect wholly owned subsidiary of BMW AG, a German
corporation that is an international manufacturer and distributor of passenger
cars, light trucks and motorcycles.
The national executive headquarters of BMW FS are located at 300 Chestnut
Ridge Road, Woodcliff Lake, New Jersey 07677. Its telephone number is (201)
307-4000. Its Customer Service Center is located at 5550 Britton Parkway,
Hilliard, Ohio 43016.
BMW FS serves as sponsor, originator, administrator and servicer in its
securitization program.
Securitization Experience
BMW FS sponsors securitization programs for retail lease and receivables
contracts and has sold lease and loan contracts to asset-backed commercial paper
conduits since 1993. BMW FS has had an active public securitization program
involving retail installment sale contracts since 1999 and sponsored its first
public securitized lease transaction in 2000. Additionally, BMW FS has been
privately securitizing its wholesale automotive dealer inventory accounts since
2000 in private 144A floorplan transactions.
BMW FS and BMW Bank of North America ("BMW Bank") in the past have
originated all receivables in each securitized asset pool in the ordinary course
of its business, but may in the future include in securitized asset pools
receivables originated by other unaffiliated parties. For a description of the
selection criteria used in selecting the asset pool to be securitized, see "The
Receivables" in this prospectus. BMW FS engages one of the selected underwriters
of the related securities to assist in structuring the transaction based on the
forecasted cash flows of the pool and to determine class sizes and average lives
based on current market conditions.
Origination
BMW FS and its wholly owned subsidiary, BMW Bank of North America, Inc.
("BMW Bank") have been engaged in the business of automobile and motorcycle
leasing and financing since 1993 and 1999, respectively. Products include
operating leases and loans to end user customers and direct inventory and
facility financing to authorized retailers.
Each of BMW FS and/or BMW Bank currently purchases motor vehicle retail
installment sale contracts and promissory notes (the "Motor Vehicle Contracts"
or "Contracts") directly from authorized dealers in BMW Products and MINI
Products ("Centers") and other dealers throughout the United States. The
Contracts are originated by Centers and other dealers (each, a "Dealer") who
regularly sell those Contracts to BMW FS, BMW Bank or other finance sources. BMW
FS and BMW Bank purchase Contracts in accordance with its established
underwriting procedures, subject to the terms of its agreement (each of which we
refer to in this prospectus as a "Dealer Agreement") with each Center or other
dealer. In most cases BMW FS purchases contracts from BMW Bank, but may purchase
contracts from other originators. The Contracts are purchased in accordance with
BMW FS's underwriting procedures. Certain Contracts (currently the "lease to
loan" program and certain refinancings) are originated directly by BMW FS or BMW
Bank rather than acquired from Centers.
19
In addition, BMW FS and/or BMW Bank may also purchase motor vehicle retail
installment sale contracts and promissory notes directly from third party
originators not affiliated with BMW FS. If BMW FS or BMW Bank purchases such
contracts, the underwriting procedures applicable to such motor vehicle retail
installment contracts and promissory notes will be described in the related
prospectus supplement.
Servicing Experience
BMW FS services all of the receivables it originates, including
receivables sold in securitizations and other structured financings. BMW FS has
been the servicer for its public retail securitization program since 1999. BMW
FS will be responsible for all servicing functions for the Receivables. We refer
to BMW FS in this capacity as the servicer. In addition, the servicer, at its
discretion and in accordance with its customary servicing practices, has the
option to waive any prepayment charge, late payment charge or any other similar
fees that may be collected in the ordinary course of servicing any Receivable.
In addition, the servicer, at its discretion and in accordance with its
customary servicing practices, may grant payment extensions, to the extent
permissible; provided, that no such extension shall extend the final payment
date on any Receivable beyond the last day of the related collection period, as
specified in the applicable Sale and Servicing Agreement. All required
information regarding any material third-party providers will be disclosed
either in the related prospectus supplement or in subsequent required filings
with the SEC.
Information concerning BMW FS' experience pertaining to delinquencies,
repossessions and net losses on its portfolio of new and used retail motor
vehicle receivables (including receivables previously sold that BMW FS continues
to service) will be set forth in each prospectus supplement. There can be no
assurance that the delinquency, repossession and net loss experience on any
Receivables Pool will be comparable to prior experience or to the information in
any prospectus supplement.
For a description of BMW FS's servicing experience for its entire
portfolio of Contracts, including contracts sold in securitizations, that BMW FS
continues to service, see "The Sponsor, Originator, Administrator and Servicer"
in the prospectus supplement.
The Depositor
BMW FS Securities LLC, referred to in this prospectus as the Depositor, a
wholly owned subsidiary of BMW FS, was formed on February 27, 2001 in the State
of Delaware. The principal office of the Depositor is located at 300 Chestnut
Ridge Road, Woodcliff Lake, New Jersey 07677 and its telephone number is (201)
307-4000.
The Depositor was organized primarily for the purpose of acquiring retail
installment sale contracts and promissory notes similar to the Receivables and
associated rights from BMW FS and BMW Bank, causing the issuance of securities
similar to the Securities and engaging in related transactions. The Depositor's
limited liability company agreement limits the activities of the Depositor to
the foregoing purposes and to any activities related to, incidental to, and
necessary, convenient or advisable for those purposes (including repurchase
obligations for breaches of representations and warranties regarding
Receivables). Other than the obligation to obtain the consent of the Depositor
with respect to amendments to the related trust agreement or other consent
rights given to the holder of the residual interest in the related trust, the
payment of organizational expenses of the related trust and the appointment of a
successor paying agent for the related trust, the Depositor will have no ongoing
duties with respect to each trust.
The limited liability company agreement of the Depositor include
requirements for its special member to have at least one independent director,
extensive corporate separateness covenants and restrictions on its permitted
corporate functions (including on its ability to borrow money or incur debts),
all of which are designed to prevent the consolidation of the assets of the
Depositor with those of either BMW FS or any affiliate of BMW FS in the event of
a bankruptcy or insolvency proceeding of BMW FS or such other affiliated entity.
In addition, the depositor itself may not file a voluntary petition for
bankruptcy or insolvency protection in either Federal or any state court without
the consent of the all of its members, including the independent directors of
its special member.
The Depositor may retain the Certificates.
20
The Trustee
The trustee for each Trust (the "Trustee") or the trustee under any
Indenture pursuant to which notes are issued (the "Indenture Trustee") will be
specified in the applicable prospectus supplement. The Trustee's or the
Indenture Trustee's liability in connection with the issuance and sale of the
related Securities is limited solely to the express obligations of that Trustee
or Indenture Trustee set forth in the related Trust Agreement, Pooling and
Servicing Agreement, Sale and Servicing Agreement or Indenture, as applicable. A
Trustee or Indenture Trustee may resign at any time, in which event the
Servicer, or its successor, will be obligated to appoint a successor Trustee or
Indenture Trustee, as applicable. The Administrator of a Trust that is not a
grantor trust may also remove a Trustee or Indenture Trustee that becomes
insolvent or otherwise ceases to be eligible to continue in that capacity under
the related Trust Agreement, Sale and Servicing Agreement or Indenture, as
applicable. The Servicer for a Trust that is a grantor trust may remove a
Trustee that becomes insolvent or otherwise ceases to be eligible to continue in
that capacity under the related Pooling and Servicing Agreement. In those
circumstances, the Servicer or, in the case of a series that includes notes, the
Administrator, as the case may be, will be obligated to appoint a successor
Trustee. Any resignation or removal of a Trustee or Indenture Trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor.
The issuing entity is required under the Transfer and Servicing Agreements
(as defined below) to cause BMW FS, in its capacity as administrator (the
"Administrator") to indemnify the indenture trustee against any and all loss,
liability or expense (including attorneys' fees and expenses) incurred by it in
connection with the administration of the applicable Trust and the performance
of its duties under the indenture, the sale and servicing agreement or any other
Transfer and Servicing Agreement. The indenture trustee shall notify the issuing
entity and the Administrator promptly of any claim for which it may seek
indemnity; provided, that, failure by the indenture trustee to provide such
notification shall not relieve the issuing entity or the Administrator of its
obligations under the indenture if no prejudice to the issuing entity or the
Administrator shall have resulted from such failure. Neither the issuing entity
nor the Administrator need reimburse any expense or indemnify against any loss,
liability or expense incurred by the indenture trustee through the indenture
trustee's own willful misconduct, negligence or bad faith.
The indenture trustee may resign at any time by so notifying the issuing
entity and each rating agency. The holders of a majority of outstanding notes of
the controlling class may remove the indenture trustee if the indenture trustee
is adjudged a bankrupt or insolvent, a receiver or other public officer takes
charge of the indenture trustee or its property, the indenture trustee otherwise
becomes incapable of acting, or the indenture trustee breaches any
representation, warranty or covenant made by it under any Transfer and Servicing
Agreement. No resignation or removal of the indenture trustee and no appointment
of a successor indenture trustee shall become effective until the acceptance of
appointment by the successor indenture trustee pursuant to the indenture.
Formation of the Issuing Entities
The Depositor will establish each issuing entity, each of which is
referred to in this prospectus as a Trust, pursuant to a trust agreement (as
amended and supplemented from time to time, each a "trust agreement") or a
pooling and servicing agreement (as amended from time to time, each a "pooling
and servicing agreement"), as applicable.
The terms of each series of notes or certificates issued by each Trust and
additional information concerning the assets of each Trust and any applicable
credit or cash flow enhancement will be set forth in a prospectus supplement to
this prospectus. The notes and certificates are collectively referred to in this
prospectus as the "Securities."
It is expected that each Trust will be structured, and each Transfer and
Servicing Agreement will contain non-petition clauses, whereunder all applicable
parties covenant not to institute any bankruptcy or insolvency proceedings (or
take any related actions) against either the applicable Trust or the Depositor
at any time in connection with any obligations relating to the related Notes or
any of the Transfer and Servicing Agreements.
See "The Notes--The Indenture--Particular Covenants" in this prospectus
for additional information regarding permissible activities of or restrictions
on each issuing entity.
21
Property of the Issuing Entities
The property of each Trust will consist of a pool of retail installment
sale contracts originated on or after the date indicated in the applicable
prospectus supplement between dealers in Centers or other dealers and retail
purchasers (which we refer to in this prospectus as the "Obligors") and/or
promissory notes executed by Obligors made payable to BMW Bank or BMW FS. These
contracts are referred to as the Receivables and evidence the direct or indirect
financing made available by BMW Financial Services NA, LLC ("BMW FS") and BMW
Bank to the Obligors. The Receivables will be secured by the Financed Vehicles
and all principal and interest payments made on or after the applicable cutoff
date (each, a "Cutoff Date") and other property, all as specified in the
applicable prospectus supplement. "New" vehicles may include "demonstration"
vehicles, which are not titled in some states and may be classified as new
vehicles in those states.
Unless otherwise disclosed in the applicable prospectus supplement, the
Receivables will be originated by Centers in accordance with BMW FS'
requirements under agreements with Centers governing the assignment of the
Receivables to BMW FS or BMW Bank, as applicable (each, a "Dealer Agreement").
BMW FS or BMW Bank, as applicable, will purchase the Receivables of each pool in
the ordinary course of business pursuant to the Dealer Agreements. In some
cases, BMW FS will acquire the Receivables from other persons, including BMW
Bank.
On or before the closing date, which is the date of the initial issuance
of any series of Securities, BMW FS or BMW Bank will sell the Receivables
comprising the related pool to the Depositor, and the Depositor will sell those
Receivables to the related Trust pursuant to, if the Trust is to be treated
other than as a grantor trust for federal income tax purposes, the related sale
and servicing agreement among the Depositor, the Servicer and the Trust (as
amended and supplemented from time to time, each a "Sale and Servicing
Agreement") or, if the Trust is to be treated as a grantor trust for federal
income tax purposes, the related Pooling and Servicing Agreement. BMW FS will
service the Receivables.
In addition to the Receivables, the property of each Trust will also
include the following:
1. amounts that may be held in separate trust accounts
established and maintained by the Servicer with the Trustee
pursuant to the related Sale and Servicing Agreement or
Pooling and Servicing Agreement;
2. security interests in the Financed Vehicles and any related
property,
3. the rights to proceeds from claims on physical damage, credit
life and disability insurance policies covering the Financed
Vehicles or the Obligors;
4. BMW FS' (or BMW Bank's) right to receive payments from Dealers
obligated to repurchase Receivables from BMW FS which do not
meet specified representations made by the Centers;
5. the Depositor's right under, as applicable, the Sale and
Servicing Agreement, the Pooling and Servicing Agreement, the
Purchase Agreement and the Yield Supplement Agreement, if any;
6. the Depositor's right to realize upon any property,
including the right to receive future net liquidation
proceeds, that secured a Receivable; and
7. all proceeds of the foregoing.
Various forms of credit and cash flow enhancement may be used to benefit
holders of the related Securities, including a Reserve Account. In limited
circumstances, if required by the applicable rating agencies, a Trust will also
have access to the funds in a Yield Supplement Account or have the benefit of
over-collateralization to provide limited protection against low-interest
receivables.
22
The Receivables
BMW FS or BMW Bank will purchase or originate the Receivables in the
ordinary course of business in accordance with BMW FS' underwriting standards.
The Receivables to be held by each Trust will be randomly selected from those
motor vehicle retail installment sale contracts and/or promissory notes in BMW
FS' or BMW Bank's portfolio that meet several criteria. These criteria provide
that each Receivable was originated in the United States and the Obligor is not
a federal, state or local governmental entity.
In addition, the related prospectus supplement will provide additional
selection criteria, if any, which may include, among other things, original term
to maturity, percentage by principal balance of the Receivables of types of
vehicles, geographic location, percentage by principal balance of the
Receivables of new vehicles and used vehicles, credit score, original term to
maturity, remaining term to maturity, date of origination and contractual annual
percentage rate.
Each Receivable will provide for the allocation of payments (each, a
"Scheduled Payment") according to:
o the simple interest method;
o the "actuarial" method; or
o the "sum of periodic balances" or "sum of monthly payments."
Simple Interest Receivables. Payments on Simple Interest Receivables,
using the simple interest method, will be applied first to interest accrued
through the date immediately preceding the date of payment and then to unpaid
principal. Accordingly, if an Obligor pays an installment before its due date,
the portion of the payment. allocable to interest for the payment period will be
less than if the payment had been made on the due date, the portion of the
payment applied to reduce the principal balance will be correspondingly greater,
and the principal balance will be amortized more rapidly than scheduled.
Conversely, if an Obligor pays an installment after its due date, the portion of
the payment allocable to interest for the payment period will be greater than if
the payment had been made on the due date, the portion of the payment applied to
reduce the principal balance will be correspondingly less, and the principal
balance will be amortized more slowly than scheduled, in which case a larger
portion of the principal balance may be due on the final scheduled payment date.
No adjustment to the scheduled monthly payments is made in the event of early or
late payments, although in the case of late payments the Obligor may be subject
to a late charge.
Actuarial Receivables. An Actuarial Receivable, using the actuarial
method, provides for amortization of the contract over a series of fixed level
monthly installments. Each scheduled payment is deemed to consist of an amount
of interest equal to 1/12 of the stated annual percentage rate (which we refer
to in this prospectus as the "APR") of the Receivable multiplied by the
scheduled principal balance of the Receivable and an amount of principal equal
to the remainder of the Scheduled Payment. No adjustment to the scheduled
monthly payments is made in the event of early or late payments, although in the
case of late payments the Obligor may be subject to a late charge.
Rule of 78s Receivables. A Rule of 78s Receivable, using the sum of
periodic balances or sum of monthly payments, provides for the payment by the
Obligor of a specified total amount of payments, payable in monthly installments
on the related due date, which total represents the principal amount financed
and finance charges in an amount calculated on the basis of the related APR for
the term of that Receivable. The rate at which the amount of finance charges is
earned and, correspondingly, the amount of each Scheduled Payment allocated to
reduction of the outstanding principal balance of a Rule of 78s Receivable, are
calculated in accordance with the Rule of 78s. Under the Rule of 78s, the
portion of each payment allocable to interest is higher during the early months
of the term of a Rule of 78s Receivable and lower during later months than that
under a constant yield method for allocating payments between interest and
principal. Notwithstanding the foregoing, all payments received by the Servicer
on or in respect of the Rule of 78s Receivables will be allocated pursuant to
the related Transfer and Servicing Agreement, as the case may be, on an
actuarial basis. No adjustment is made in the event of early or late payments,
although in the case of late payments the Obligor may be subject to a late
charge.
23
In the event of a prepayment in full, either voluntarily or as a result of
the receipt of liquidation proceeds, of a Precomputed Receivable, a "rebate"
will be made to the Obligor of that portion of the total amount of payments
under the Receivable allocable to "unearned" interest charges. In the event of
the prepayment in full, either voluntarily or as a result of the receipt of
liquidation proceeds, of a Simple Interest Receivable, a "rebate" will not be
made to the Obligor, but the Obligor will be required to pay interest only to
the date immediately preceding the date of prepayment. The amount of a rebate
under a Precomputed Receivable will always be less than or equal to the
remaining scheduled payments of interest that would have been due under a Simple
Interest Receivable for which all remaining payments were made on schedule.
Payments to securityholders will not be affected by rebates under the Rule of
78s Receivables because pursuant to the related Transfer and Servicing Agreement
the payments will be determined using the actuarial method.
Unless otherwise provided in the related prospectus supplement, each Trust
will account for the Rule of 78s Receivables as if those Receivables were
Actuarial Receivables. Amounts received upon prepayment in full of a Rule of 78s
Receivable in excess of the then outstanding principal balance of the Receivable
and accrued interest on the Receivable (calculated pursuant to the actuarial
method) will not be paid to the noteholders or passed through to the
certificateholders of the applicable series but will be deemed to be an excess
amount and released to the Seller or otherwise applied as set forth in the
related prospectus supplement.
The Receivables generally will provide for level monthly payments that
fully amortize the amount financed over the Receivables original term to
maturity. Additional information with respect to each pool of Receivables, as
well as static pool information regarding the pools related to previously issued
series of securities, will be set forth in the related prospectus supplement.
BMW FS' Financing Program
General
Each of BMW FS, referred to in this prospectus as the originator, and BMW
Bank currently purchases motor vehicle retail installment sale contracts and
promissory notes (the "Motor Vehicle Contracts" or "Contracts") directly from
authorized Centers and other dealers throughout the United States. The Contracts
are originated by Centers and other dealers who regularly sell those Contracts
to BMW FS, BMW Bank or other finance sources. BMW FS and BMW Bank purchase
Contracts in accordance with its established underwriting procedures, subject to
the terms of its Dealer Agreement with each Center or other dealer. In some
cases BMW FS may purchase contracts from other originators, such as BMW Bank.
Certain Contracts (currently the "lease to loan" program and certain
refinancings) are originated directly by BMW Bank rather than acquired from
Centers.
Each Dealer Agreement, among other things, obligates the related Center or
other dealer to repurchase any Contract BMW FS or BMW Bank financed for the
outstanding principal balance of that Contract, if the Center or other dealer
breaches specific representations and warranties as set forth in the Dealer
Agreement. The representations and warranties typically relate to the
origination of the Contract and the security interest in the related Financed
Vehicle and not the creditworthiness of the Obligor under the Contract.
Each of BMW FS and BMW Bank currently purchases Contracts relating to new
and used vehicles manufactured by BMW AG as well as a small percentage of
non-BMW used vehicles. BMW FS and BMW Bank apply the same underwriting standards
to its purchases of Contracts whether or not the Contract relates to a vehicle
manufactured by BMW AG. See "--Plan of Distribution" in this prospectus. In the
case of BMW vehicles, each of BMW FS and BMW Bank in many cases purchases
Contracts with APRs that are lower than those it would otherwise require,
pursuant to incentive finance programs intended to increase new and used BMW
vehicle sales.
Set forth below is a description of current underwriting and collection
policies and practices of BMW FS, which also originates Contracts for BMW Bank.
These policies and practices are subject to change from time to time.
24
Underwriting
Contracts are originated or purchased by BMW FS in accordance with
underwriting procedures that are intended to assess the applicant's ability to
pay the amounts due on the contract and the adequacy of the financed vehicle as
collateral. BMW FS utilizes predetermined credit score cutoffs and approval
authority levels as credit controls.
BMW FS requires applicants to complete an application form providing
various items of financial information, credit and employment history and other
personal information. Applications are accepted for new and used vehicles from
approved retailers via facsimile or InfoBahn - a BMW intranet system linking
Centers and BMW FS. The application is reviewed for completeness. Independent
verification of information in the application generally is not required.
However, BMW FS will seek verification of some information, including
employment, income and/or residence, under some circumstances, such as discovery
of a discrepancy between information in the application and information in a
credit bureau report.
A credit buyer reviews each application that is not automatically approved
through the use of a system of rules and scorecards. Credit buyers have credit
authority levels of "1", "2," "3," "4," "5," "6," "7" or "8," depending on their
level of seniority. The credit buyer's review includes an evaluation of the
customer demographics income and collateral; review of a credit bureau report on
the applicant from an independent credit bureau, use of internet verification
tools and a review of the applicant's credit score based on a credit scoring
system or "scorecard" developed for BMW FS. This internal scoring system, which
has been in use since 1997 and is based on a combination of BMW FS' own internal
credit scoring process and the models developed by Fair, Isaac and Company,
Inc., calculates a score based on data in a credit application that, based on
the past performance of BMW FS' contract portfolio, appear to be indicative of
the degree of likelihood that an applicant will make scheduled payments to BMW
FS. BMW FS implemented electronic decision-making models in 2005 that have
increased the percentage of contracts automatically approved. This
decision-making model evaluates the application, based on certain criteria,
including the applicant's credit history and likelihood of delinquency. This
enhances BMW FS' ability to review an application and establish the probability
that the proposed retail installment contract will be paid in accordance with
its terms.
Upon review of the application, the applicant's credit score and credit
bureau report, an assessment is made regarding the relative degree of credit
risk. The current application system used by BMW FS to process applications
provides review/decline indicators to assist the credit buyer in the review of
applications. BMW FS' guidelines provide that an applicant's credit score will
be highly considered by the credit buyer in determining whether to extend
credit. Besides the credit score, BMW FS also considers the applicant's debt to
income ratio, the applicant's equity in the financed vehicle and other
attributes as part of the decision making process. BMW FS' management sets
limits on the approval of applications scoring below the company's minimum
scores. In the case of a complete application scoring above a certain level of
the scoring system, the application may be subject to an automated credit
approval process which does not require review and approval by a credit buyer.
Applicants that score below a minimum score established by BMW FS management may
not be approved by credit buyers with Level 1 credit authority. These applicants
may be approved by a credit buyer with Level 2 or Level 3 credit authority (or
in some cases only by credit buyers with a higher level of authority) based on
the presence of certain factors, up to and including a guarantee by the Center,
the customer's history with BMW FS, employment stability and additional security
deposits. A credit buyer with Level 1 credit authority may not disapprove
without management review applicants that score above the specified minimum.
Such applicants may be disapproved under specific circumstances, which include
recent bankruptcy of the customer, incomplete or incorrect credit references,
excessive debt and delinquent credit obligations.
In commercial transactions, BMW FS requires an individual to guarantee the
business' obligations under the Contract, otherwise it will obtain a Dun and
Bradstreet report and two years of audited financial statements, bank account
statements and credit references.
BMW FS generally does not provide financing to applicants with previous
bankruptcies. However, BMW FS' guidelines do permit financing for these
applicants under some circumstances, for example, if the customer has
re-established credit for at least 24 months and has had no 30-day delinquencies
in that period.
25
The amount of a Contract generally will not exceed:
o with respect to a new vehicle, 110% of the manufacturer's
suggested retail price ("MSRP") for the vehicle, or
o with respect to a used vehicle, 105% of the retail price
reported for the vehicle that is stated in the most recent
edition of the National Automotive Dealers Association Used
Car Guide or the Kelly Blue Book,
plus in each case options, dealer-installed accessories, various taxes and fees
incurred in connection with the sale and, in some cases, insurance policies,
extended service contracts and other items. Team leaders or credit managers may
approve contracts exceeding advance guidelines set forth above on a case by case
basis.
Upon the maturity of a lease financing, the customer has the option to
refinance or purchase the financed vehicle from BMW FS. The same underwriting
and credit procedures described above apply to any financing offered to these
obligors. A portion of the Receivables may be secured by used vehicles that
derive from this lease to loan program.
Dealer Agreements
Each Center or other dealer that originated Motor Vehicle Contracts sold
to BMW FS pursuant to a Dealer Agreement has made representations and warranties
with respect to the Motor Vehicle Contracts and the security interest in the
related financed vehicles. These representations and warranties typically do not
relate to the creditworthiness of the Obligors or the collectibility of the
Motor Vehicle Contracts. Upon breach of any representation or warranty made by a
Center, BMW FS would have a right of recourse against that Center to require it
to repurchase the related Motor Vehicle Contract. Generally, the Dealer
Agreements do not provide for recourse against the Center in the event of a
default by the Obligor.
Physical Damage and Liability Insurance
Each Contract requires the Obligor to obtain physical damage insurance
covering loss or damage to the financed vehicle. The Dealer Agreements include a
requirement that the Centers provide BMW FS or BMW Bank with written evidence
that physical damage and liability insurance covers the financed vehicle at
least in the amount required by the Contract at the time the Contract is
purchased by BMW FS or BMW Bank, as applicable. The amounts of insurance
required by the Contracts are at least equal to the amounts required by
applicable state law, subject to customary deductibles. BMW FS does not "force
place" insurance.
Certified Pre-Owned Program
Some of the Receivables may be secured by used BMW vehicles that were sold
pursuant to the Certified Pre-Owned BMW Vehicle Program ("CPO"). CPO was
established by BMW NA in 1996 to create customer and Center demand for off-lease
used BMW vehicles and to enhance the value of off-lease BMW vehicles. To qualify
for CPO, a vehicle must pass an inspection conducted by the related Center based
on standards set by BMW NA. For CPO vehicles, BMW NA provides a limited warranty
for two years or 50,000 miles (whichever comes first) that becomes effective
upon the expiration of the original four year/50,000 mile (whichever comes
first) new car warranty. Each CPO vehicle also is covered by the BMW Roadside
Assistance Program which is identical to that offered on new vehicles. CPO is
actively marketed by BMW NA through its sales force and is advertised using both
broadcast and print media.
Servicing
BMW FS, as the servicer, measures delinquency by the number of days
elapsed from the date a payment is due under the Contract (each such date
referred to in this prospectus as a "Due Date"). BMW FS considers a payment to
be past due or delinquent when an Obligor fails to make at least 80% of a
scheduled payment by the related Due Date. BMW FS generally begins collection
activities with respect to a delinquent Contract through telephone contact. An
automated system supports BMW FS' collection activities to monitor delinquencies
and to track the contacts with the obligors.
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BMW FS assigns collectors to specific Obligors and attempts to contact the
delinquent Obligor by telephone or by letter based on the term of delinquency
and the history of the account. Repossession procedures typically begin when a
Contract becomes 60 to 90 days delinquent. Repossessions are carried out
pursuant to applicable state law and specific procedures adopted by BMW FS.
BMW FS' deferment policy allows a total of four deferments over the life
of the Contract.
BMW FS' current policy is to generally charge off a Contract on the
earlier of:
o the date on which the proceeds of sale of the financed vehicle
are applied to the Contract balance; and
o the month in which the Contract reaches its 150th day of
delinquency.
Any deficiencies remaining after repossession and sale of the related
financed vehicle or after full charge-off of the related Contract are pursued by
BMW FS to the extent practicable and legally permitted. Obligors are contacted,
and when warranted by individual circumstances, repayment schedules are
established and monitored until the deficiencies are either paid in full or
become impractical to pursue.
Use of Proceeds
Each Trust will use the net proceeds from the sale of the Securities of a
given series to purchase Receivables from the Depositor and to fund any related
Reserve Account or other accounts of the Trust. The Depositor will purchase
Receivables from BMW FS from the net proceeds it receives from any Trust. Unless
specified in the related prospectus supplement, there are no other expenses
incurred in connection with the selection and acquisition of the pool assets
that will be payable from offering proceeds, nor are there any such material
expenses that would be paid by a transaction party.
Where Can You Find More Information About Your Securities
The Issuing Entity--The Trustees will provide to securityholders (which
shall be Cede & Co. ("Cede") as the nominee of DTC, unless Definitive Securities
are issued under the limited circumstances described in this prospectus)
unaudited monthly and annual reports concerning the Receivables and other
specified matters. We refer you to "Description of the Transfer and Servicing
Agreements--Statements to Securityholders" and "--Evidence as to Compliance" in
this prospectus. Unless definitive securities are issued under the limited
circumstances described in this prospectus, the sole holder of record shall be
Cede & Co. ("Cede"), as the nominee of The Depository Trust Company ("DTC").
Copies of these reports may be obtained at no charge at the offices specified in
the applicable prospectus supplement.
The Depositor--BMW FS Securities LLC, as depositor of the Receivables, has
filed with the SEC a registration statement on Form S-3 under the Securities Act
of 1933 (the "Securities Act") of which this prospectus forms apart. The
registration statement is available for inspection without charge at the public
reference facilities maintained at the principal office of the SEC at 100 F
Street, N.E., Washington, D.C. 20549. You may obtain information on the
operation of the SEC's public reference rooms by calling the SEC at (800)
SEC-0330. You may obtain copies of SEC filings at prescribed rates by writing to
the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C.
20549. The SEC also maintains a website (http://www.sec.gov) that contains
reports, registration statements, proxy and information statements and other
information regarding issuers that file electronically with the SEC using the
SEC's Electronic Data Gathering Analysis and Retrieval system (commonly known as
EDGAR). All reports filed by the Depositor may be found on EDGAR filed under
registration number 333-133845, and all reports filed with respect to each Trust
under that number plus the applicable serial tag number. Copies of the operative
agreements relating to the Securities will also be filed with the SEC on EDGAR
under the registration number shown above.
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The depositor on behalf of the trust of the related series will file the
reports required under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). These reports include
(but are not limited to):
o Reports on Form 8-K (Current Report), following the issuance
of the series of securities of the related trust, including as
Exhibits to the Form 8-K (1) the transaction agreements or
other documents specified in the related prospectus
supplement;
o Reports on Form 8-K (Current Report), following the occurrence
of events specified in Form 8-K requiring disclosure, which
are required to be filed within the time-frame specified in
Form 8-K related to the type of event;
o Reports on Form 10-D (Asset-Backed Issuer Distribution
Report), containing the distribution and pool performance
information required on Form 10-D, which are required to be
filed 15 days following the payment date specified in the
related prospectus supplement; and
o Report on Form 10-K (Annual Report), containing the items
specified in Form 10-K with respect to a fiscal year, and the
items required pursuant to Items 1122 and 1123 of Regulation
AB of the Act.
The depositor does not intend to file with the SEC any reports required
under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act with respect to a
trust following completion of the reporting period required by Rule 15d-1 or
Regulation 15D under the Exchange. Unless specifically stated in the report, the
reports and any information included in the report will neither be examined nor
reported on by an independent public accountant. Each Trust formed by the
depositor will have a separate file number assigned by the SEC, which unless
otherwise specified in the related prospectus supplement is not available until
filing of the final prospectus supplement related to the series. Reports filed
with respect to a Trust with the SEC after the final prospectus supplement is
filed will be available under Trust's specific number, which will be a series
number assigned to the file number of the Depositor shown above.
The distribution and pool performance reports filed on Form 10-D will be
forwarded to each securityholder as specified in "Description of the Transfer
and Servicing Agreements--Statements to Securityholders" in this prospectus. For
the time period that each Trust is required to report under the Exchange Act,
the Depositor, on behalf of each Trust, will file the Trusts' annual reports on
Form 10-K, distribution reports on Form 10-D, any current reports on Form 8-K,
and amendments to those reports with the SEC. Such reports will be available on
a website as indicated in the related Prospectus Supplement, as soon as
reasonably practicable after such reports are filed with the SEC.
Static Pool Data--Static pool data with respect to the delinquency,
cumulative loss and prepayment data for each Trust will be attached as an
appendix to each prospectus supplement or will be made available through a
website. If static pool data is available through a website, the prospectus
supplement related to each series will contain the website address to obtain
this information. Except as stated below, the static pool data provided through
any website will be deemed part of this prospectus and the registration
statement of which this prospectus is a part from the date of the related
prospectus supplement.
Notwithstanding the foregoing, the following information shall not be
deemed part of the prospectus or the registration statement of which this
prospectus is a part:
o with respect to information regarding prior securitized pools
of the Depositor that do not include the currently offered
pool, information regarding prior securitized pools that were
established before January 1, 2006; and
o with respect to information regarding the pool described in
the related prospectus supplement, information about the pool
for periods before January 1, 2006.
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Copies of the static pool data presented on a website and deemed part of
this prospectus may be obtained upon written request by the securityholders of
the related series at the address specified in the related prospectus
supplement. Copies of information related to the period prior to January 1, 2006
may also be obtained upon written request.
Weighted Average Lives of the Securities
The weighted average lives of the Securities of any series will generally
be influenced by the rate at which the principal balances of the related
Receivables are paid, which payment may be in the form of scheduled amortization
or prepayments. For this purpose, the term prepayments includes prepayments in
full, partial prepayments (including those related to rebates of extended
warranty contract costs and insurance premiums), liquidations due to default as
well as receipts of proceeds from physical damage, credit life and disability
insurance policies and repurchases or purchases by the Depositor or BMW FS, as
the case may be, of particular Receivables for administrative reason or for
breaches of representations and warranties. The term weighted average life means
the average amount of time during which each dollar of principal of a Receivable
is outstanding.
All of the Receivables will be prepayable at any time without penalty to
the Obligor. However, partial prepayments on the Precomputed Receivables made by
Obligors will not be paid on the dates specified in the applicable prospectus
supplement (each such date referred to in this prospectus as a "payment date")
following the collection period specified in the applicable prospectus
supplement (each such period referred to in this prospectus as a "collection
period") in which they were received but will be retained and applied towards
payments due in later collection periods. If prepayments in full are received on
the Precomputed Receivables or if full or partial prepayments are received on
the Simple Interest Receivables, the actual weighted average life of the
Receivables may be shorter than the scheduled weighted average life of the
Receivables. The rate of prepayment of motor vehicle retail installment sale
contracts and promissory notes are influenced by a variety of economic, social
and other factors, including the fact that an Obligor generally may not sell or
transfer the Financed Vehicle securing a Receivable without the consent of the
Servicer.
No prediction can be made as to the rate of prepayment on the Receivables
in either stable or changing interest rate environments. BMW FS maintains
limited records of the historical prepayment experience of the motor vehicle
retail installment sale contracts and promissory notes included in its
portfolio. However, no assurance can be given that prepayments on the
Receivables will conform to historical experience and no prediction can be made
as to the actual prepayment experience on the Receivables. The rate of
prepayment on the Receivables may also be influenced by the structure of the
related Contract. In addition, under some circumstances, the Depositor or
Servicer will be obligated to repurchase Receivables from a given Trust pursuant
to the related Sale and Servicing Agreement or Pooling and Servicing Agreement
as a result of breaches of particular representations and warranties or
covenants. We refer you to "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables" and "--Servicing Procedures." We
also refer you to "Description of the Transfer and Servicing
Agreements--Termination" regarding the Servicer's option to purchase the
Receivables from a given Trust. Any reinvestment risk resulting from the rate of
prepayments of the Receivables and the payment of prepayments to securityholders
will be borne entirely by the securityholders. In addition, early retirement of
the Securities may be effected by the exercise of the option of the Servicer, or
any successor to the Servicer, to purchase all of the Receivables remaining in a
Trust when the outstanding balance of the pool is 10% or less of the initial
balance of the pool as of the Cutoff Date (or other level as may be disclosed in
the applicable prospectus supplement).
In addition, pursuant to agreements between the originator and the
Centers, each Center is obligated to repurchase from BMW FS Contracts which do
not meet particular representations and warranties made by that Center (these
Center repurchase obligations are referred to in this prospectus as "Dealer
Recourse"). These representations and warranties relate primarily to the
origination of the retail installment sale contracts and promissory notes, as
applicable, and the perfection of the security interests in the related Financed
Vehicles. and do not typically relate to the creditworthiness of the related
Obligors or the collectibility of the Contracts. Although the Dealer Agreements
with respect to the Receivables will not be assigned to the Trustee, the related
Sale and Servicing Agreement or Pooling and Servicing Agreement will require
that BMW FS deposit any recovery in respect of any Receivable pursuant to any
Dealer Recourse in the related Collection Account. The sales by the Centers of
retail installment sale contracts to the originator do not generally provide for
recourse against the Centers for unpaid amounts in the event of a default by an
Obligor thereunder, other than in connection with the breach of
29
the foregoing representations and warranties. We refer you to "Description of
the Transfer and Servicing Agreements--Sale and Assignment of Receivables" and
"--Servicing Procedures" in this prospectus.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Securities of a given series on
each payment date, since the amount of principal payments will depend, in part,
on the amount of principal collected on the related pool of Receivables during
the applicable collection period. No prediction can be made as to the actual
prepayment experience on the Receivables, and any reinvestment risks resulting
from a faster or slower rate of prepayment of Receivables will be borne entirely
by the securityholders of a given series. We refer you to "Risk Factors--You may
experience reduced returns on your investment resulting from prepayments,
repurchases or earn termination of the trust" in this prospectus.
The applicable prospectus supplement may set forth additional information
regarding the maturity and prepayment considerations applicable to the
particular pool of Receivables and the related series of Securities.
Pool Factors and Trading Information
The "note pool factor" for each class of notes will be a seven-digit
decimal which the Servicer will compute prior to each payment with respect to
that class of notes. The note pool factor represents the remaining outstanding
principal amount of that class of notes, as of the close of business on a
payment date, after giving effect to payments made on such payment date, as a
fraction of the initial outstanding principal amount of that class of notes. The
"certificate pool factor" for each class of certificates will be a seven-digit
decimal which the Servicer will compute prior to each payment with respect to
that class of certificates indicating the remaining Certificate Balance of that
class of certificates, as of the close of business on a payment date, after
giving effect to payments made on such payment date, as a fraction of the
original Certificate Balance of that class of certificates.
Each note pool factor and each certificate pool factor will initially be
1.0000000 and thereafter will decline to reflect reductions in the outstanding
principal amount of the applicable class of notes, or the reduction of the
Certificate Balance of the applicable class of certificates, as the case may be.
A noteholder's portion of the aggregate outstanding principal amount of the
related class of notes is the product of:
o the original denomination of that noteholder's note; and
o the applicable note pool factor.
A certificateholder's portion of the aggregate outstanding Certificate
Balance for the related class of certificates is the product of:
o the original denomination of that certificateholder's
certificate; and
o the applicable certificate pool factor.
The securityholders will receive monthly reports concerning payments
received on the Receivables, the outstanding balance of the related pool, each
certificate pool factor or note pool factor, as applicable, and various other
items of information.
The Notes
General
With respect to each Trust that issues notes, one or more classes of notes
of the related series will be issued pursuant to the terms of an indenture (the
"Indenture"). A form of the Indenture has been filed as an exhibit to the
registration statement of which this prospectus is a part. The following summary
describes the material terms of the Notes and the Indenture. The summary does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the notes and the Indenture.
30
Each class of notes will initially be represented by one or more notes, in
each case registered in the name of the nominee of DTC, except as set forth
below. Notes will be available for purchase in the denominations specified in
the applicable prospectus supplement in book-entry form only. The Depositor has
been informed by DTC that DTC's nominee will be Cede, unless another nominee is
specified in the applicable prospectus supplement. Accordingly, that nominee is
expected to be the sole holder of record of the notes of each class. No
noteholder will be entitled to receive a physical certificate representing a
note until Definitive Notes are issued under the limited circumstances described
in this prospectus or in the applicable prospectus supplement. All references in
this prospectus and in the applicable prospectus supplement to actions by
noteholders refer to actions taken by DTC upon instructions from DTC
Participants and all references in this prospectus and in the applicable
prospectus supplement to payments, notices, reports and statements to
noteholders refer to payments, notices, reports and statements to DTC or its
nominee, as the registered holder of the notes, for distribution to noteholders
in accordance with DTC's procedures. We refer you to "Certain Information
Regarding the Securities--Book-Entry Registration" and "--Definitive Securities"
in this prospectus.
Principal and Interest on the Notes
The applicable prospectus supplement will describe the timing and priority
of payment, seniority, allocations of losses, the Interest Rate and amount of or
method of determining payments of principal and interest on each class of notes
of a given series. The rights of holders of any class of notes to receive
payments of principal and interest may be senior or subordinate to the rights of
holders of any other class or classes of notes of that series. Payments of
interest on a class of notes will generally be made prior to payments of
principal on the class A series may include one or more classes of notes
entitled to either principal payments with disproportionate, nominal or no
interest payments or interest payments with disproportionate, nominal or no
principal payments (which we refer to in this prospectus as the "Strip Notes").
Each class of notes may have a different Interest Rate, which may be a fixed,
variable or adjustable Interest Rate (and which may be zero for some classes of
Strip Notes), or any combination of the foregoing. The applicable prospectus
supplement will specify the Interest Rate for each class of notes of a given
series or the method for determining the Interest Rate. We refer you to "Certain
Information Regarding the Securities--Fixed Rate Securities" and "--Floating
Rate Securities" in this prospectus. One or more classes of notes of a series
may be redeemable in whole or in part, including as a result of the Servicer
exercising its option to purchase the related Receivables remaining in the
applicable pool or other early termination of the related trust. Noteholders
will not have the ability to cause a redemption of their notes by the issuing
entity.
One or more classes of notes of a given series may have fixed principal
payment schedules, in the manner and to the extent set forth in the applicable
prospectus supplement. Noteholders of those notes would be entitled to receive
as payments of principal on any given payment date the amounts set forth on that
schedule with respect to those notes.
To the extent provided in the related prospectus supplement, payments of
interest to noteholders of two or more classes within a series may have the same
priority. Under some circumstances, on any payment date the amount available for
those payments could be less than the amount of interest payable on the notes.
If this is the case, each class of noteholders will receive its ratable share
(based upon the aggregate amount of interest due to that class of noteholders)
of the aggregate amount of interest available for payment on the notes. We refer
you to "Description of the Transfer and Servicing Agreements--Distributions on
the Securities " and "--Credit and Cash Flow Enhancement" in this prospectus.
If a series of notes includes two or more classes of notes, the sequential
order and priority of payment in respect of principal and interest, and any
schedule or formula or other provisions, of each of those classes will be set
forth in the applicable prospectus supplement. Payments of principal and
interest within any class of notes will be made on a pro rata basis among all
the noteholders of that class.
The Indenture
Modification of Indenture. If a Trust has issued notes pursuant to an
Indenture, the Trust and the Indenture Trustee may, with the consent of the
holders of a majority of the outstanding notes of the related series (or
relevant class or classes of notes of the series), execute a supplemental
indenture to add provisions to, change in any manner
31
or eliminate any provisions of, the related Indenture, or modify (except as
provided below) in any manner the rights of the related noteholders.
Without the consent of the holder of each outstanding affected note, no
supplemental indenture will:
1. change:
o the due date of any installment of principal of or interest on
that note or reduce the principal amount of that note;
o the Interest Rate for that note or the redemption price for
that note;
o provisions of the Indenture relating to the application of
collections on, or proceeds of a sale of, the trust estate to
payments of principal and interest on the note; or
o any place of payment where or the coin or currency in which
that note or any interest on that note is payable;
2. impair the right to institute suit for the enforcement of specified
provisions of the related Indenture regarding payment;
3. reduce the percentage of the aggregate amount of the outstanding
notes of a series of notes, the consent of the holders of which is
required for any supplemental indenture or any waiver of compliance
with specified provisions of the related Indenture or of specified
defaults and their consequences as provided for in that Indenture;
4. modify or alter the provisions of the related Indenture regarding
the voting of notes held by the applicable Trust, any other obligor
on those notes, the Depositor or an affiliate of any of them;
5. reduce the percentage of the aggregate outstanding amount of notes,
the consent of the holders of which is required to direct the
related Indenture Trustee to sell or liquidate the Receivables if
the proceeds of that sale would be insufficient to pay the principal
amount of and accrued but unpaid interest on the outstanding notes
of that series;
6. reduce the percentage of the aggregate principal amount of notes
required to amend the sections of the related Indenture that specify
the applicable percentages of aggregate principal amount of the
notes of a series necessary to amend the Indenture or other
specified agreements; or
7. permit the creation of any lien ranking prior to or on a parity with
the lien of the related Indenture with respect to any of the
collateral for that note or, except as otherwise permitted or
contemplated in the Indenture, terminate the lien of that Indenture
on any of the collateral or deprive the holder of any note of the
security afforded by the lien of the Indenture.
The Trust and the applicable Indenture Trustee may also enter into
supplemental indentures, without obtaining the consent of the noteholders of the
related series, for the purpose of, among other things, adding any provisions to
or changing in any manner or eliminating any of the provisions of the related
Indenture or of modifying in any manner the rights of those noteholders;
provided that that action will not adversely affect in any material respect the
interest of any of those noteholders.
Events of Default; Rights Upon Event of Default. With respect to the notes
of a given series in the related prospectus supplement, "Events of Default"
under the related indenture will consist of the occurrence and continuation of
any of the following:
1. a default for five days or more in the payment of any interest on
any of the notes of the class or classes specified in the prospectus
supplement when the same becomes due and payable;
32
2. a default in the payment of the principal of or any installment of
the principal of any of the notes when the same becomes due and
payable;
3. a default in the observance or performance in any material respect
of any covenant or agreement of the applicable Trust made in the
related Indenture and the continuation of the default for a period
of 30 days after written notice is given to that Trust by the
applicable Indenture Trustee or to that Trust and the applicable
indenture Trustee by the holders of at least 25% in principal amount
of the most senior notes then outstanding (or relevant class or
classes of notes);
4. any representation or warranty made by the applicable Trust in the
related Indenture or in any certificate delivered pursuant to the
related Indenture or in connection therewith having been incorrect
in a material respect as of the time made, and the breach not having
been cured within 30 days after written notice is given to that
Trust by the applicable Indenture Trustee or to that Trust and the
applicable Indenture Trustee by the holders of at least 25% in
principal amount of the most senior notes then outstanding (or
relevant class or classes of notes); or
5. particular events of bankruptcy, insolvency, receivership or
liquidation of the applicable Trust.
However, the amount of principal required to be paid to noteholders of an
affected series under the related Indenture will generally be limited to amounts
available to be deposited in the related Collection Account. Therefore, the
failure to pay any principal on any class of notes generally will not result in
the occurrence of an Event of Default until the final scheduled payment date for
that class of notes. The failure to pay interest to holders of a subordinated
class of notes on a particular payment date will generally not constitute an
Event of Default. In addition, as described below, following the occurrence of
an Event of Default (other than an Event of Default related to the failure to
make required payments) and acceleration of the maturity of the notes, the
Indenture Trustee is not required to sell the assets of the Trust, and the
Indenture Trustee may sell the assets of the related Trust only after meeting
requirements specified in the Indenture. Under those circumstances, even if the
maturity of the notes has been accelerated, there may not be any funds to pay
the principal owed on the notes.
If an Event of Default should occur and be continuing with respect to the
notes of any series, the related Indenture Trustee or holders of a majority in
principal amount of the most senior notes then outstanding (or relevant class or
classes of notes) may declare the notes to be immediately due and payable. This
declaration may be rescinded by the holders of a majority in principal amount of
the most senior notes then outstanding (or relevant class or classes of notes)
if:
(i) the issuing entity has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
(A) all payments of principal of and interest on the Notes and
all other amounts that would then be due on such Notes if the
Event of Default giving rise to such acceleration had not
occurred; and
(B) all sums paid by the Indenture Trustee hereunder and the
reasonable compensation, expenses and disbursements of the
Indenture Trustee and its agents and counsel and the
reasonable compensation, expenses and disbursements of the
Owner Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such
acceleration, have been cured or waived
If the notes of any series are due and payable following an Event of
Default on those notes, the related Indenture Trustee may:
o institute proceedings to collect amounts due or foreclose on Trust
property;
o exercise remedies as a secured party;
o sell the assets of the related trust; or
33
o elect to have the applicable Trust maintain possession of those
Receivables and continue to apply collections on those Receivables
as if there had been no declaration of acceleration.
Unless otherwise specified in the applicable prospectus supplement, the
Indenture Trustee is prohibited from selling the assets of the related trust
following an Event of Default (other than a default in the payment of any
principal on any note of a particular series or a default for five days or more
in the payment of any interest on the most senior notes of a particular series),
unless:
o the holders of the notes of the related series then outstanding (or
relevant class or classes of notes) consent to the sale; or
o the proceeds of the sale are sufficient to pay in full the principal
of and the accrued interest on all outstanding notes of the related
series at the date of the sale; or
o the Indenture Trustee determines that the proceeds from the sale of
the Trust Estate will not be sufficient on an ongoing basis to make
all payments on the outstanding notes of the related series as those
payments would have become due if the obligations had not been
declared due and payable, and the Indenture Trustee obtains the
consent of the holders of 66?% of the aggregate outstanding amount
of the most senior notes then of the related series outstanding (or
relevant class or classes of notes).
If an Event of Default occurs and is continuing and the Indenture Trustee
has actual knowledge of such Event of Default, the Indenture Trustee shall mail
to each Noteholder notice of the Event of Default within 30 days after it
occurs. Except in the case of an Event of Default in payment of principal of or
interest on any Note (including payments pursuant to the mandatory redemption
provisions of such Note), the Indenture Trustee may withhold the notice to
Noteholders if and so long as a committee of its officers in good faith
determines that withholding the notice is in the best interests of Noteholders.
Subject to the provisions of the applicable Indenture relating to the
duties of the related Indenture Trustee, if an Event of Default occurs and is
continuing with respect to a series of notes, the Indenture Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the holders of the notes, if the Indenture
Trustee reasonably believes it will not be adequately indemnified against the
costs, expenses and liabilities that might be incurred by it in complying with
the request. Subject to the provisions for indemnification and other limitations
contained in the related Indenture, the holders of a majority of the aggregate
principal amount of the most senior notes of the related series then outstanding
(or relevant class or classes of notes of the series) will have the right to
direct the time, method and place of conducting any proceeding or any remedy
available to the applicable Indenture Trustee, and the holders of at least 51%
of the aggregate principal amount of the most senior notes of the related series
then outstanding (or relevant class or classes of notes) may, in some cases,
waive a default, except a default in the deposit of collections or other
required amounts, any required payment from amounts held in any trust account in
respect of amounts due on the notes, payment of principal or interest or a
default in respect of a covenant or provision of the Indenture which cannot be
modified without the waiver or consent of all the holders of the outstanding
notes of the related series.
Any notes owned by the Depositor, the Servicer or any of their affiliates
will be entitled to equal and proportionate benefits under the Transfer and
Servicing Agreements, except that such notes while unpledged will not be
considered to be outstanding for the purpose of determining whether the
requisite percentage of noteholders have given any request, demand,
authorization, direction, notice, consent or other action under the Indenture.
Unless otherwise specified in the related prospectus supplement, no holder
of a note of any series will have the right to institute any proceeding with
respect to the related Indenture, unless:
1. the holder of a note or notes previously has given to the applicable
Indenture Trustee written notice of a continuing Event of Default;
2. the Event of Default arises from the Servicer's failure to remit
payments when due or the holders of not less than 25% of the
aggregate principal amount of the most senior notes of the related
series then
34
outstanding (or relevant class or classes of notes) have requested
in writing that the Indenture Trustee institute the proceeding in
its own name as Indenture Trustee;
3. the holder or holders of notes have offered the Indenture Trustee
reasonable indemnity;
4. the Indenture Trustee has for 60 days failed to institute a
proceeding; and
5. no direction inconsistent with such written request has been given
to the Indenture Trustee during such 60 day period by the holders of
a majority of the aggregate principal amount of the most senior
notes of the related series then outstanding (or relevant class or
classes of notes).
In addition, each Indenture Trustee and the related noteholders, by
accepting the related notes, will covenant that they will not at any time
institute against the applicable Trust any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
With respect to any Trust, neither the related Indenture Trustee nor the
related Trustee in its individual capacity, nor any holder of a certificate
representing an ownership interest in that Trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, successors or
assigns will, in the absence of an express agreement to the contrary, be
personally liable for the payment of the principal of or interest on the related
notes or for the agreements of that Trust contained in the applicable Indenture.
Particular Covenants. Each Indenture will provide that the related Trust
may not consolidate with or merge into any other entity, unless, among other
things,
1. the entity formed by or surviving the consolidation or merger is
organized under the laws of the United States or any state;
2. that entity expressly assumes the Trust's obligation to make due and
punctual payments upon the notes of the related series and the
performance or observance of every agreement and covenant of the
Trust under the Indenture;
3. no Event of Default shall have occurred and be continuing
immediately after the merger or consolidation;
4. each rating agency delivers a letter to the Indenture Trustee to the
effect that the consideration or merger will not result in a
qualification, reduction or withdrawal of its then current rating on
any class of notes;
5. that Trust has received an opinion of counsel to the effect that the
consolidation or merger would have no material adverse tax
consequence to the Trust or to any related noteholder or
certificateholder,
6. the parties take any action necessary to maintain the lien and
security interest created by the Indenture; and
7. the Indenture Trustee has received an officer's certificate and an
opinion of counsel stating that the consolidation or merger comply
with the terms of the Indenture and all conditions precedent
provided in the Indenture have been complied with.
Each Trust will not, so long as any notes are outstanding, among other
things,
o except as expressly permitted by the applicable Indenture, the
applicable Transfer and Servicing Agreements or other specified
documents with respect to that Trust, sell, transfer, exchange or
otherwise dispose of any of the assets of the Trust unless directed
to do so by the Indenture Trustee;
o claim any credit on or make any deduction from the principal of and
interest payable on the notes of the related series (other than
amounts withheld under the Internal Revenue Code of 1986, as amended
("Code") or applicable state law) or assert any claim against any
present or former holder of those notes because of the payment of
taxes levied or assessed upon the Trust;
35
o except as expressly permitted by the Transfer and Servicing
Agreements, dissolve or liquidate in whole or in part;
o permit the validity or effectiveness of the related Indenture to be
impaired or permit any person to be released from any covenants or
obligations with respect to the notes under the Indenture except as
may be expressly permitted by the Indenture;
o permit any lien or other encumbrance to be created on or extend to
or otherwise arise upon or burden the assets of the Trust or any
part of the Trust, or any interest in the assets of the Trust or the
proceeds of those assets; or
o assume or incur any indebtedness other than the related notes or as
expressly permitted by the related Indenture or the Transfer and
Servicing Agreement.
No Trust may engage in any activity other than as specified in this
prospectus or in the applicable prospectus supplement.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the related Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee for each Trust
will be required to mail each year to all related noteholders a brief report
relating to its eligibility and qualification to continue as Indenture Trustee
under the related Indenture, any amounts advanced by it under the Indenture, the
amount, interest rate and maturity date of specified indebtedness owing by the
Trust to the applicable Indenture Trustee in its individual capacity. The
property and funds physically held by the Indenture Trustee and any action taken
by it that materially affects the related notes and that has not been previously
reported.
Satisfaction and Discharge of Indenture. An Indenture will be discharged
with respect to the collateral securing the related notes upon the delivery to
the related Indenture Trustee for cancellation of all of those notes or, with
specified limitations, upon deposit with the Indenture Trustee of funds
sufficient for the payment in full of all the notes.
The Certificates
General
With respect to each Trust that issues certificates, one or more classes
of certificates of the related series will be issued pursuant to the terms of a
Trust Agreement or a Pooling and Servicing Agreement, a form of each of which
has been filed as an exhibit to the registration statement of which this
prospectus form a part. The following summary describes the material terms of
the certificates and the Trust Agreement or the Pooling and Servicing Agreement,
as applicable. The summary does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all the provisions of the
certificates and the Trust Agreement or Pooling and Servicing Agreement, as
applicable.
Except for the certificates, if any, of a given series purchased by the
Depositor, each class of certificates will initially be represented by one or
more certificates registered in the name of the nominee for DTC, except as set
forth below. Except for the certificates, if any, of a given series purchased by
the Depositor, the certificates will be available for purchase in the
denominations specified in the applicable prospectus supplement in book-entry
form only. The Depositor has been informed by DTC that DTC's nominee will be
Cede, unless another nominee is specified in the applicable prospectus
supplement. Accordingly, that nominee is expected to be the holder of record of
the certificates of any series that are not purchased by the Depositor. No
certificateholder (other than a Trust) will be entitled to receive a physical
certificate representing a certificate until Definitive Certificates are issued
under the limited circumstances described in this prospectus or in the
applicable prospectus supplement. All references in this prospectus and in the
applicable prospectus supplement to actions by certificateholders refer to
actions taken by DTC upon instructions from DTC Participants and all references
in this prospectus and in the applicable prospectus
36
supplement to distributions, notices, reports and statements to
certificateholders refer to distributions, notices, reports and statements
given, made or sent to DTC or its nominee, as the case may be, as the registered
holder of the certificates, for distribution to certificateholders in accordance
with DTC's procedures with respect to the certificates. We refer you to "Certain
Information Regarding the Securities--Book-Entry Registration" and "--Definitive
Securities" in this prospectus. Any certificates of a given series owned by the
Depositor or its affiliates will be entitled to equal and proportionate benefits
under the applicable Trust Agreement, except that those certificates will be
deemed not to be outstanding for the purpose of determining whether the
requisite percentage of certificateholders have given any request, demand,
authorization, direction, notice, consent or other action under the Transfer and
Servicing Agreements (other than the commencement by the related Trust of a
voluntary proceeding in bankruptcy as described below under "Description of the
Transfer and Servicing Agreements--Insolvency Event").
Payments of Principal and Interest
The timing and priority of payments, seniority, allocations of losses, the
Pass Through Rate and amount of or method of determining payments with respect
to principal and interest of each class of certificates will be described in the
applicable prospectus supplement Payments of interest on those certificates will
be made on the related payment dates. To the extent provided in the applicable
prospectus supplement, a series may include one or more classes of Strip
Certificates. Each class of certificates may have a different Pass Through Rate,
which may be a fixed, variable or adjustable Pass Through Rate (and which may be
zero for some classes of Strip Certificates) or any combination of the
foregoing. The applicable prospectus supplement will specify the Pass Through
Rate for each class of certificates of a given series or the method for
determining the Pass Through Rate. We also refer you to "Certain Information
Regarding the Securities--Fixed Rate Securities" and "--Floating Rate
Securities" in this prospectus. Payments in respect of the certificates of a
given series that includes notes may be subordinate to payments in respect of
the notes of that series as more fully described in the applicable prospectus
supplement. The rights of holders of any class of certificates to receive
payments of principal and interest may also be senior or subordinate to the
rights of holders of any other class or classes of certificates of that series
as more fully described in the applicable prospectus supplement. Payments in
respect of principal of and interest on any class of certificates will be made
on a pro rata basis among all the certificateholders of that class.
In the case of a series of certificates that includes two or more classes
of certificates, the timing, sequential order, priority of payment or amount of
payments in respect of interest and principal, and any schedule or formula or
applicable other provisions, of each class shall be as set forth in the
applicable prospectus supplement.
If and as provided in the applicable prospectus supplement, amounts
remaining on deposit in the Collection Account after all required payments to
the related securityholders have been made may be released to the Depositor, BMW
FS (in any of its capacities hereunder) or one or more third party credit or
liquidity enhancement providers.
Certain Information Regarding the Securities
Fixed Rate Securities
Any class of Securities (other than some classes of Strip Notes or Strip
Certificates) may be Fixed Rate Securities or Floating Rate Securities, as more
fully described below and in the applicable prospectus supplement. Each class of
Fixed Rate Securities will bear interest at the applicable per annum Interest
Rate or Pass Through Rate, as the case may be, specified in the applicable
prospectus supplement. Interest on each class of Fixed Rate Securities will be
computed on the basis of a 360-day year consisting of twelve 30-day months or
other day count basis as is specked in the applicable prospectus supplement. We
refer you to "The Notes--Principal and Interest on the Notes" and "The
Certificates--Payments of Principal and Interest."
Floating Rate Securities
Interest Rate Basis. Each class of Floating Rate Securities will bear
interest during each applicable Interest Period at a rate per annum (referred to
in this prospectus as the "Base Rate"), which will be on an index, which shall
be one or more of the following: (a) LIBOR ("LIBOR Securities"), (b) the
Commercial Paper Rate ("Commercial Paper Rate Securities"), (c) the Treasury
Rate ("Treasury Rate Securities"), (d) the Federal Funds Rate
37
("Federal Funds Rate Securities"), (e) the CD Rate ("CD Rate Securities") or (f)
the Prime Rate ("Prime Rate Securities"). In addition, a Floating Rate Security
may bear interest at a rate determined by reference to the lowest of two or more
Base Rates. The Base Rate for any Floating Rate Security will in turn be
determined, if applicable, by reference to the Index Maturity specified in the
applicable prospectus supplement. The interest rate on each Floating Rate
Security will be calculated by reference to such Base Rate, plus or minus the
Spread, if any, and/or multiplied by the Spread Multiplier, if any, in each case
as specified in the applicable prospectus supplement.
Interest Reset Dates. Each applicable prospectus supplement will specify
the Interest Reset Period and Interest Reset Date for each class of Floating
Rate Securities. Unless otherwise specified in the applicable prospectus
supplement, the Interest Reset Date will be, in the case of Floating Rate
Securities which reset:
(1) daily, each Business Day;
(2) weekly, the Wednesday of each week (with the exception of weekly
reset Treasury Rate Securities which will reset the Tuesday of each
week except as described below);
(3) monthly, the third Wednesday of each month;
(4) quarterly, the third Wednesday of March, June, September and
December of each year,
(5) semiannually, the third Wednesday of the two months specified in the
applicable prospectus supplement; or
(6) annually, the third Wednesday of the month specified in the
applicable prospectus supplement.
Unless otherwise specified in the related prospectus supplement, if any
Interest Reset Date for any Floating Rate Security would otherwise be a day that
is not a Business Day, the applicable Interest Reset Date will be postponed to
the next succeeding day that is a Business Day, except that in the case of a
floating Rate Security as to which LIBOR is an applicable Base Rate, if that
Business Day falls in the next succeeding calendar month, that Interest Reset
Date will be the immediately preceding Business Day. In addition, in the case of
a floating Rate Security for which the Treasury Rate is an applicable Interest
Rate Basis, if the Interest Determination Date would otherwise fall on an
Interest Reset Date, then the applicable Interest Reset Date will be postponed
to the next succeeding Business Day.
Except as set forth above or in the applicable prospectus supplement, the
interest rate in effect on each date will be:
o if the date is an Interest Reset Date, the interest rate determined
on the related Interest Determination Date, as defined below,
immediately preceding that Interest Reset Date, or
o if the day is not an Interest Reset Date, the interest rate
determined on the related Interest Determination Date immediately
preceding the most recent Interest Reset Date.
Interest Payments. The interest payment dates will be specified in the
applicable prospectus supplement. Unless otherwise specified in the related
prospectus supplement, if any payment date for a Floating Rate Security (other
than the final payment date) would otherwise be a day that is not a Business
Day, that payment date will be the next succeeding day that is a Business Day
except that in the case of a Floating Rate Security as to which LIBOR is the
applicable Base Rate, if the Business Day falls in the next succeeding calendar
month, the applicable payment date will be the immediately preceding Business
Day. If the final payment date of a Floating Rate Security falls on a day that
is not a Business Day, the payment of principal, premium, if any, and interest
will be made on the next succeeding Business Day, and no interest on that
payment shall accrue for the period from and after that scheduled payment date.
Floating Rate Securities may accrue interest on an "Actual/360" basis, an
"Actual/Actual" basis, or a "30/360" basis, in each case as specified in the
applicable prospectus supplement. For Floating Rate Securities calculated on
38
an Actual/360 basis and Actual/Actual basis, accrued interest for each Interest
Period will be calculated by multiplying:
(1) the face amount of the Floating Rate Security;
(2) the applicable interest rate; and
(3) the actual number of days in the related Interest Period, and
dividing the resulting product by 360 or 365, as applicable (or,
with respect to an Actual/Actual basis Floating Rate Security, if
any portion of the related Interest Period falls in a leap year, the
product of (1) and (2) above will be multiplied by the sum of (x)
the actual number of days in that portion of that Interest Period
falling in a leap year divided by 366 and (y) the actual number of
days in that portion of that Interest Period falling in a non-leap
year divided by 365).
For Floating Rate Securities calculated on a 30/360 basis, accrued
interest for an Interest Period will be computed on the basis of a 360-day year
consisting of twelve 30-day months, irrespective of how many days are actually
in that Interest Period. With respect to any Floating Rate Security that accrues
interest on a 30/360 basis, if any payment date, including the related final
payment date, falls on a day that is not a Business Day, the related payment of
principal or interest will be made on the next succeeding Business Day as if
made on the date that payment was due, and no interest will accrue on the amount
so payable for the period from and after that payment date.
Maximum and Minimum Interest Rates. As specified in the applicable
prospectus supplement, Floating Rate Securities of a given class may also have
either or both of the following (in each case expressed as a rate per annum):
o a maximum limitation, or ceiling, on the rate at which interest may
accrue during any Interest Period, which may be an available funds
cap rate (referred to in this prospectus as the Maximum Interest
Rate); and
o a minimum limitation, or floor, on the rate at which interest may
accrue during any Interest Period (referred to in this prospectus as
the Minimum Interest Rate).
In addition to any Maximum Interest Rate that may be applicable to any class of
Floating Rate Securities, the interest rate applicable to any class of Floating
Rate Securities will in no event be higher than the maximum rate permitted by
applicable law, as the same may be modified by United States law of general
application.
Calculation Agent. If so disclosed in the related prospectus supplement, a
Trust with respect to which a class of Floating Rate Securities will be issued
will appoint, and enter into agreements with, a calculation agent (each, a
"Calculation Agent") to calculate Interest Rates on each class of Floating Rate
Securities. The applicable prospectus supplement will set forth the identity of
the Calculation Agent for each class of Floating Rate Securities of a given
series, which may be the related Trustee or Indenture Trustee with respect to
that series. All determinations of interest by the Calculation Agent shall, in
the absence of manifest error, be conclusive for all purposes and binding on the
holders of Floating Rate Securities of a given class. All percentages resulting
from any calculation on Floating Rate Securities will be rounded to the nearest
one hundred-thousandth of a percentage point, with five one millionths of a
percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be
rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting
from that calculation on Floating Rate Securities will be rounded to the nearest
cent (with one-half cent being rounded upwards).
CD Rate Securities. Each CD Rate Security will bear interest at the rates
calculated with reference to the CD Rate and the Spread or Spread Multiplier, if
any, specified in that CD Rate Security and in the applicable prospectus
supplement.
Unless otherwise indicated in the applicable prospectus supplement, CD
Rate will mean, with respect to any Interest Determination Date relating to a CD
Rate Security or any Interest Determination Date for a Floating Rate Security
for which the interest rate is determined with reference to the CD Rate,
39
(1) the rate on the applicable Interest Determination Date for
negotiable United States dollar certificates of deposit having the
Index Maturity specified in the applicable prospectus supplement as
published in H.15(519) under the heading "CDs (secondary market),"
or
(2) if the rate referred to in clause (1) above is not published prior
to 3:00 P.M., New York City time, on the related Calculation Date,
then the CD Rate on the applicable Interest Determination Date will
be the rate for negotiable United States dollar certificates of
deposit of the Index Maturity designated in the applicable
prospectus supplement as published in H.15 Daily Update (as defined
below), or other recognized electronic source used for the purpose
of displaying the applicable rate, under the heading "CDs (secondary
market)."
(3) if the rate referred to in clause (2) above is not so published by
3:00 P.M., New York City time, on the related Calculation Date, then
the CD Rate for the applicable Interest Determination Date will be
the rate calculated by the Calculation Agent as the arithmetic mean
of the secondary market offered rates as of 10:00 A.M., New York
City time, on the applicable Interest Determination Date of three
leading nonbank dealers in negotiable United States dollar
certificates of deposit in The City of New York selected by the
Calculation Agent for negotiable United States dollar certificates
of deposit of major United States money market banks for negotiable
certificates of deposit with a remaining maturity closest to the
Index Maturity designated in the applicable prospectus supplement in
an amount that is representative for a single transaction in that
market at that time.
(4) if the dealers selected by the Calculation Agent are not quoting as
set forth in clause (3) above, the CD Rate on the applicable
Interest Determination Date will be the rate in effect on the
applicable Interest Determination Date.
Commercial Paper Rate Securities. Each Commercial Paper Rate Security will
bear interest at the rates calculated with reference to the Commercial Paper
Rate and the Spread or Spread Multiplier, if any, specified in that Commercial
Paper Rate Security and in the applicable prospectus supplement.
Unless otherwise indicated in the applicable prospectus supplement,
Commercial Paper Rate will mean, with respect to any Interest Determination Date
relating to a Commercial Paper Rate Security or any Interest Determination Date
for a Floating Rate Security for which the interest rate is determined with
reference to the Commercial Paper Rate,
(1) the Money Market Yield on the applicable Interest Determination Date
of the rate for commercial paper having the Index Maturity specified
in the applicable prospectus supplement as published in H.15(519)
under the caption "Commercial Paper-Nonfinancial," or
(2) if the rate referred to in clause (1) above is not published by 3:00
P.M., New York City time, on the related Calculation Date, then the
Commercial Paper Rate will be the Money Market Yield on the
applicable Interest Determination Date of the rate for commercial
paper having the Index Maturity specified in the applicable
prospectus supplement published in H.15 Daily Update, or other
recognized electronic source for the purpose of displaying the
applicable rate under the heading "Commercial Paper--Nonfinancial."
(3) if by 3:00 P.M. New York City time, on the related Calculation Date,
the Commercial Paper Rate is not yet published in either H.15(519)
or H.15 Daily Update, then the Commercial Paper Rate for the
applicable Interest Determination Date will be calculated by the
Calculation Agent as the Money Market Yield of the arithmetic mean
of the offered rates at approximately 11:00 A.M., New York City
time, on the applicable Interest Determination Date of three leading
dealers of United States commercial paper in The City of New York
selected by the Calculation Agent for commercial paper having the
Index Maturity specified in the applicable prospectus supplement
placed for industrial issuers whose bond rating is "Aa" or the
equivalent, by a nationally recognized securities rating
organization.
40
(4) If the dealers selected by the Calculation Agent are not quoting as
mentioned in clause (3) above, the Commercial Paper Rate determined
on the applicable Interest Determination Date will be the rate in
effect on the applicable Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage rounded
upward to the nearest one hundred-thousandth of a percentage point) calculated
in accordance with the following formula:
Money Market Yield = D x 360 x 100
----------------
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the Interest Period for which interest is being calculated
(from and including the last preceding Interest Payment Date for which interest
on the relevant Floating Rate Security has been paid or provided for, or from
the closing date, if applicable, and to but excluding the next following
Interest Payment Date for such Note).
Federal Funds Rate Securities. Each Federal Funds Rate Security will bear
interest at the rates calculated with reference to the Federal Funds Rate and
the Spread or Spread Multiplier, if any, specified in that Federal Funds Rate
Security and in the applicable prospectus supplement.
Unless otherwise provided in the applicable prospectus supplement,
"Federal Funds Rate" means, with respect to any Interest Determination Date
relating to Federal Funds Rate Security or any Interest Determination Date for a
Floating Rate Security for which the interest rate is determined with reference
to the Federal Funds Rate,
(1) the rate on the applicable Interest Determination Date for United
States dollar federal funds as published in H.15(519) under the
heading "Federal Funds (Effective)" as displayed on Bridge Telerate,
Inc. or any successor service on page 120 or any other page as may
replace the applicable page on the service ("Telerate Page 120").
(2) if the rate referred to in clause (1) above does not appear on
Telerate Page 120 or is not published prior to 3:00 P.M., New York
City time, on the related Calculation Date, the Federal Funds Rate
for the applicable Interest Determination Date will be the rate on
the applicable Interest Determination Date for United States dollar
federal funds published in H.15 Daily Update, or other recognized
electronic source for the purpose of displaying the applicable rate
under the heading "Federal Funds (Effective)."
(3) if the Federal Funds Rate is not so published by 3:00 P.M., New York
City time, on the related Calculation Date, the Federal Funds Rate
for the applicable Interest Determination Date will be calculated by
the Calculation Agent as the arithmetic mean of the rates for the
last transaction in overnight United States dollar federal funds
arranged by three leading brokers of United States dollar federal
funds transactions in The City of New York selected by the
Calculation Agent before 9:00 A.M., New York City time, on the
applicable Interest Determination Date.
(4) If brokers so selected by the Calculation Agent are not quoting as
mentioned in clause (3) above, the Federal Funds Rate for the
applicable Interest Determination Date will be the Federal Funds
Rate in effect on the applicable Interest Determination Date.
LIBOR Securities. Each LIBOR Security will bear interest at the rates
calculated with reference to LIBOR and the Spread or Spread Multiplier, if any,
specified in that LIBOR Security and in the applicable prospectus supplement.
Unless otherwise provided in the applicable prospectus supplement, "LIBOR"
means:
1. If "LIBOR Telerate" is specified in the applicable prospectus
supplement, or if neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable prospectus supplement as the method for
calculating LIBOR, LIBOR will be the rate for deposits in the Index
Currency having the Index Maturity designated in the applicable
prospectus supplement, commencing on the second London Banking Day
immediately
41
following the applicable Interest Determination Date that appears on
the Designated LIBOR Page specified in the applicable prospectus
supplement as of 11:00 A.M., London time, on the applicable Interest
Determination Date, or
2. If "LIBOR Reuters" is specified in the applicable prospectus
supplement, LIBOR will be the arithmetic mean of the offered rates
for deposits in the Index Currency having the Index Maturity
designated in the applicable prospectus supplement, commencing on
the second London Banking Day immediately following the applicable
Interest Determination Date, that appear on the Designated LIBOR
Page specified in the applicable prospectus supplement as of 11:00
A.M., London time, on the applicable Interest Determination Date, if
at least two offered rates appear (except as provided in the
following sentence). If the Designated LIBOR Page by its terms
provides for only a single rate, then the single rate will be used.
The following procedures will be followed if LIBOR cannot be determined as
described above:
(1) With respect to an Interest Determination Date on which fewer than
two offered rates appear, or no rate appears, as the case may be, on
the applicable Designated LIBOR Page, LIBOR for the applicable
Interest Determination Date will be the rate calculated by the
Calculation Agent as the arithmetic mean of at least two quotations
obtained by the Calculation Agent after requesting the principal
London offices of each of four major reference banks in the London
interbank market, as selected by the Calculation Agent, to provide
the Calculation Agent with their offered quotations for deposits in
the Index Currency for the period of the Index Maturity designated
in the applicable prospectus supplement, commencing on the second
London Banking Day immediately following the applicable Interest
Determination Date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on the applicable Interest
Determination Date and in a principal amount that is representative
for a single transaction in the applicable Index Currency in that
market at that time. If at least two quotations are provided, LIBOR
determined on the applicable Interest Determination Date will be the
arithmetic mean of those quotations.
(2) If fewer than two quotations referred to in clause (1) above are
provided, LIBOR determined on the applicable Interest Determination
Date will be rate calculated by the Calculation Agent as the
arithmetic mean of the rates quoted at approximately 11:00 A.M. (or
another time specified in the applicable prospectus supplement), in
the applicable Principal Financial Center, on the applicable
Interest Determination Date, by three major banks, in that Principal
Financial Center selected by the Calculation Agent for loans in the
Index Currency to leading European banks, having the Index Maturity
designated in the applicable prospectus supplement and in a
principal amount that is representative for a single transaction in
the Index Currency in that market at that time.
(3) If the banks so selected by the Calculation Agent are not quoting as
mentioned in clause (2) above, LIBOR for the applicable Interest
Determination Date will be LIBOR in effect on the applicable
Interest Determination Date.
"Designated LIBOR Page" means either:
o if "LIBOR Telerate" is designated in the applicable prospectus
supplement or neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable prospectus supplement as the method for
calculating LIBOR, the display on Bridge Telerate, Inc. or any
successor service on the page designated in the applicable
prospectus supplement or any page as may replace the designated page
on that service for the purpose of displaying the London interbank
rates of major banks for the applicable Index Currency.
o if "LIBOR Reuters" is designated in the applicable prospectus
supplement, the display on Reuters Monitor Money Rates Service or
any successor service on the page designated in the applicable
prospectus supplement or any page that may replace that designated
page on that service for the purpose of displaying London interbank
rates of major banks for the applicable Index Currency.
42
Treasury Rate Securities. Each Treasury Rate Security will bear interest
calculated with reference to the Treasury Rate and the Spread or Spread
Multiplier, it any, specified in the Treasury Rate Security and in the
applicable prospectus supplement.
Unless otherwise indicated in the applicable prospectus supplement,
Treasury Rate will mean, with respect to any Interest Determination Date
relating to a Treasury Rate Security or any Interest Determination Date for a
Floating Rate Security for which the interest rate is determined with reference
to the Treasury Rate,
(1) the rate from the auction held on the applicable Interest
Determination Date ("Auction") of direct obligations of the United
States ("Treasury Bills") having the Index Maturity specified in the
applicable prospectus supplement, under the heading "INVESTMENT
RATE" on the display on Bridge Telerate, Inc., or any successor
service on page 56 or any other page as may replace page 56 of that
service ("Telerate Page 56") or page 57 or any other page as may
replace page 57 of that service ("Telerate Page 57").
(2) If the rate described in clause (1) above is not so published by
3:00 P.M., New York City time, on the related Calculation Date, the
Treasury Rate for the applicable Interest Determination Date will be
the Bond Equivalent Yield (as defined below) of the rate for the
applicable Treasury Bills as published in H.15 Daily Update, or
other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "U.S.
Government Securities/Treasury Bills/Auction High."
(3) If the rate described in clause (2) above is not so published by
3:00 P.M., New York City time, on the related Calculation Date, the
Treasury Rate for the applicable Interest Determination Date will be
the Bond Equivalent Yield of the auction rate of the applicable
Treasury Bills announced by the United States Department of the
Treasury.
(4) If the rate described in clause (3) above is not announced by the
United States Department of the Treasury, or if the Auction is not
held, the Treasury Rate for the applicable Interest Determination
Date will be the Bond Equivalent Yield of the rate on the applicable
Interest Determination Date of Treasury, Bills having the Index
Maturity specified in the applicable prospectus supplement published
in H.15(519) under the caption "U.S.
Government Securities/Treasury Bills/Secondary Market."
(5) If the rate described in clause (4) above is not so published by
3:00 P.M., New York City time, on the related Calculation Date, the
Treasury Rate for the applicable Interest Determination Date will be
the rate on the applicable Interest Determination Date of the
applicable Treasury Bills as published in H.15 Daily Update, or
other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "U.S.
Government Securities/Treasury Bills/Secondary Market."
(6) If the rate described in clause (5) above is not so published by
3:00 P.M., New York City time, on the related Calculation Date, the
Treasury Rate for the applicable Interest Determination Date will be
the rate for the applicable Interest Determination Date calculated
by the Calculation Agent as the Bond Equivalent Yield of the
arithmetic mean of the secondary market bid rates, as of
approximately 3:30 P.M., New York City time, on the applicable
Interest Determination Date, of three primary United States
government securities dealers, selected by the Calculation Agent,
for the issue of Treasury Bills with a remaining maturity closest to
the Index Maturity specified in the applicable prospectus
supplement.
(7) If the dealers selected by the Calculation Agent are not quoting as
described in clause (6) above, the Treasury Rate for the applicable
Interest Determination Date will be the rate in effect on the
applicable Interest Determination Date.
"Bond Equivalent Yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
Money Market Yield = D x N x 100
-------------
360 - (D x M)
43
where "D" refers to the applicable per annum rate for Treasury Bills quoted on a
bank discount basis, "N" refers to 365 or 366, as the case may be, and "M"
refers to the actual number of days in the interest period for which interest is
being calculated.
Prime Rate: Unless otherwise indicated in the applicable prospectus
supplement, Prime Rate will mean, with respect to any Interest Determination
Date relating to a Prime Rate Security or any Interest Determination Date for a
Floating Rate Security for which the interest rate is determined with reference
to the Prime Rate,
(1) the rate on the applicable Interest Determination Date as published
in H.15(519) under the heading "Bank Prime Loan," or
(2) if the rate referred to in clause (1) is not so published by 5:00
P.M., New York City time, on the day that is one New York Business
Day following the Interest Reset Date, the rate on the applicable
Interest Determination Date published in H.15 Daily Update, or such
other recognized electronic source used for the purpose of
displaying the applicable rate under the caption "Bank Prime Loan,"
or
(3) if the rate referred to in clause (2) is not so published by 5:00
P.M., New York City time, on the day that is one New York Business
Day following the Interest Reset Date, the rate calculated by the
calculation agent as the arithmetic mean of the rates of interest
publicly announced by at least four banks that appear on the Reuters
Screen US PRIME 1 Page as the particular bank's prime rate or base
lending rate as of 11:00 A.M., New York City time, on the applicable
Interest Determination Date, or
(4) if fewer than four rates described in clause (3) are shown by 3:00
P.M., New York City time, on the related Calculation Date on the
Reuters Screen US PRIME 1 Page, the rate on the applicable Interest
Determination Date calculated by the calculation agent as the
arithmetic mean of the prime rates or base lending rates quoted on
the basis of the actual number of days in the year divided by a
360-day year as of the close of business on the applicable Interest
Determination Date by three major banks, which may include
affiliates of the calculation agent, in The City of New York
selected by the calculation agent (as specified in the applicable
prospectus supplement), or
(5) if the banks selected by the calculation agent (as specified in the
applicable prospectus supplement) are not quoting as mentioned in
clause (4), the Prime Rate for the applicable Prime Rate Interest
Determination Date will be the Prime Rate in effect on the next
preceding Prime Rate Interest Determination Date for which the Prime
Rate may be determined as provided above.
Reuters Screen US PRIME 1 Page means the display on the Reuters Money 3000
Service or any successor service on the "US PRIME 1 Page" or any other page as
may replace the US PRIME 1 Page on such service for the purpose of displaying
prime rates or base lending rates of major United States banks.
Derivative Arrangements
The Trust may also include a derivative arrangement for the payment of
interest on the Securities of a series or any class of Securities. A derivative
arrangement may include an interest rate cap or floor agreement or an interest
rate or currency swap agreement. The type of derivative arrangement, if any, for
a series of Securities or class of Securities, as well as a description of the
provider of such derivative arrangement, will be described in the applicable
prospectus supplement.
Variable Funding Note
The applicable prospectus supplement for a Trust may provide that the
Trust will issue one or more classes of notes in the applicable series that have
particular targeted maturity dates. In order to have sufficient funds available
on such targeted maturity dates, the Trust may also concurrently issue
amortizing floating notes, known as variable funding notes. These variable
funding notes will not be offered or sold to the public under that prospectus
supplement and this prospectus, but their existence and material terms will be
disclosed in the related prospectus supplement.
44
Interest Rate Flexibility For a Variable Funding Note. Unless otherwise
provided in the related prospectus supplement, interest accrued on any class of
variable funding notes will be payable pari passu with interest due on the most
senior class or classes of securities issued by that Trust. The prospectus
supplement may provide that the a variable funding note may have different rates
of interest than the other classes of securities being issued by that Trust,
which may be fixed or floating. The related prospectus supplement will specify
the interest rate for each such class and the method, if any, for determining
subsequent changes to the interest rate.
Payment Terms
The applicable prospectus supplement for a Trust may provide that one or
more classes of Securities will be payable on an interest only or principal only
basis. In addition, the Securities may include two or more classes that differ
as to timing, sequential order, priority of payment, Interest Rate or amount of
distributions of principal or interest or both. Distributions of principal or
interest or both on any class of Securities may be made upon the occurrence of
specified events; in accordance with a schedule or formula, or on the basis of
collections from designated assets of the Trust. A series may include one or
more classes of Securities, as to which accrued interest will not be distributed
but rather will be added to the principal or specified balance of the Security
on each payment date.
Revolving Period
The applicable prospectus supplement for a Trust may provide that all or a
portion of the principal collected on the Receivables may be applied by the
Trustee to the acquisition of subsequent Receivables during the period specified
in the related prospectus supplement, rather than used to distribute payments of
principal to securityholders during that period. The revolving period will be no
longer than three years. The related prospectus supplement will specify the
percentage of the asset pool represented by the revolving period and the maximum
amount of additional assets that may be acquired during the revolving period, in
each case, to the extent determinable. These securities would then possess an
interest only period or limited amortization period, also commonly referred to
as a revolving period, which will be followed by an amortization period, during
which principal would be paid. Any revolving period may terminate prior to the
end of the specified period and result in earlier than expected principal
repayment of the securities upon occurrence of certain events to be set forth in
the related prospectus supplement. In addition, the related prospectus
supplement will specify any limitation on the ability of the sponsor or
depositor to add assets and the requirements for assets that may be added to the
pool.
Prefunding Period
The applicable prospectus supplement for a Trust may provide on the
closing date a portion of the proceeds specified in the related prospectus
supplement received from the sale of the applicable notes and/or certificates
will be deposited into a segregated prefunding account. The related prospectus
supplement also will specify the percentage of the asset pool represented by the
prefunding period. Following the closing date, and continuing until the date
specified in the related prospectus supplement, commonly referred to as a
prefunding period, the Trust will have the ability to purchase additional
Receivables from the depositor to the extent there are sufficient funds on
deposit in the related prefunding account. If all of the monies originally
deposited in the segregated account are not used by the end of the specified
period, all remaining monies will be applied as a mandatory prepayment of a
designated class or classes of Securities.
Any transfer of Receivables must occur within a specified period, not to
exceed one year. If a Trust elects federal income tax treatment as a grantor
trust, the prefunding period will be limited to three months. Any prefunding
period may terminate prior to the end of the specified period and result in
earlier than expected principal repayment of one or more classes of securities
specified in the related prospectus supplement upon occurrence of certain events
to be set forth in the related prospectus supplement. In addition, the related
prospectus supplement will specify any limitation on the ability of the sponsor
or depositor to add assets and the requirements for assets that may be added to
the pool.
45
Book-Entry Registration
Each class of Securities offered by this prospectus will be represented by
one or more certificates registered in the name of Cede, as nominee of DTC.
securityholders may hold beneficial interests in Securities through DTC (in the
United States) or Clearstream Banking, societe anonyme (formerly Cedelbank),
which is referred to in this prospectus as Clearstream, Luxembourg or the
Euroclear System (in Europe or Asia), which is referred to in this prospectus as
Euroclear directly if they are participants of those systems, or indirectly
through organizations which are participants in those systems.
No securityholder will be entitled to receive a certificate representing
that person's interest in the Securities, except as set forth below. Unless and
until Securities of a class are issued in fully registered certificated form
under the limited circumstances described below, all references in this
prospectus to actions by noteholders, certificateholders or securityholders
shall refer to actions taken by DTC upon instructions from DTC Participants, and
all references in this prospectus to distributions, notices, reports and
statements to noteholders, certificateholders or securityholders shall refer to
distributions, notices, reports and statements to Cede, as the registered holder
of the Securities, for distribution to securityholders in accordance with DTC
procedures. Therefore, it is anticipated that the only noteholder,
certificateholder or securityholder will be Cede, as nominee of DTC.
securityholders will not be recognized by the related Trustee as noteholders,
certificateholders or securityholders as those terms will be used in the
relevant agreements, and securityholders will only be permitted to exercise the
rights of holders of Securities of the related class indirectly through DTC and
DTC Participants, as further described below.
Clearstream, Luxembourg and Euroclear will hold omnibus positions on
behalf of their participants, which are referred to in this prospectus as
Clearstream, Luxembourg Participants and Euroclear Participants, respectively,
through customers' securities accounts in their respective names on the books of
their respective depositaries, which are referred to collectively in this
prospectus as the Depositaries, which in turn will hold those positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between Clearstream, Luxembourg Participants and Euroclear
Participants will occur in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream,
Luxembourg Participants or Euroclear Participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depositary. However, each of these
cross-market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in that system in
accordance with its rules and procedures and within its established deadlines.
The relevant European international clearing system will, if the transaction
meets its settlement requirements. deliver instructions to its Depositary to
take action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Clearstream,
Luxembourg Participants and Euroclear Participants may not deliver instructions
directly to the Depositaries.
Because of time-zone differences, credits of securities received in
Clearstream, Luxembourg or Euroclear as a result of a transaction with a DTC
Participant will be made during subsequent securities settlement processing and
dated the business day following the DTC settlement date. Those credits or any
transactions in those securities settled during that processing will be reported
to the relevant Euroclear Participant or Clearstream, Luxembourg Participant on
that business day Cash received in Clearstream, Luxembourg or Euroclear as a
result of sales of Securities by or through a Clearstream, Luxembourg
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Clearstream, Luxembourg or Euroclear cash account only as of the business day
following settlement in DTC.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to Section 17A of the Securities Exchange Act of
1934. DTC was created to hold securities for its participating members ("DTC
Participants") and to facilitate the clearance and settlement of securities
46
transactions between DTC Participants through electronic book-entries, thereby
eliminating the need for physical movement of certificates. DTC Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations which may include underwriters, agents or dealers with respect to
the Securities of any class or series. Indirect access to the DTC system also is
available to the Indirect DTC Participants, either directly or indirectly
through relationships with DTC Participants. The rules applicable to DTC and DTC
Participants are on file with the SEC.
Securityholders that are not DTC Participants or Indirect DTC Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Securities may do so only through DTC Participants and Indirect
DTC Participants. DTC Participants will receive a credit for the Securities on
DTC's records. The ownership interest of each securityholder will in turn be
recorded on respective records of the DTC Participants . and Indirect DTC
Participants. Securityholders will not receive written confirmation from DTC of
their purchase, but securityholders are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the DTC Participant or Indirect DTC
Participant through which the securityholder entered into the transaction.
Transfers of ownership interests in the Securities of any class will be
accomplished by entries made on the books of DTC Participants acting on behalf
of securityholders.
To facilitate subsequent transfers, all Securities deposited by DTC
Participants with DTC will be registered in the name of Cede, as nominee of DTC.
The deposit of Securities with DTC and their registration in the name of Cede
will effect no change in beneficial ownership. DTC will have no knowledge of the
actual securityholders and its records will reflect only the identity of the DTC
Participants to whose accounts those Securities are credited, which may or may
not be the securityholders. DTC Participants and Indirect DTC Participants will
remain responsible for keeping account of their holdings on behalf of their
customers. While the Securities of a series are held in book-entry form,
securityholders will not have access to the list of securityholders of that
series, which may impede the ability of securityholders to communicate with each
other.
Conveyance of notices and other communications by DTC to DTC Participants,
by DTC Participants to Indirect DTC Participants and by DTC Participants and
Indirect DTC Participants to securityholders will be governed by arrangements
among them, subject to any statutory or regulatory requirements that may be in
effect from time to time.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among DTC
Participants on whose behalf it acts with respect to the Securities and is
required to receive and transmit payments of principal of and interest on the
Securities. DTC Participants and Indirect DTC Participants with which
securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit those payments on
behalf of their respective securityholders.
DTC's practice is to credit DTC Participants' accounts on each payment
date in accordance with their respective holdings shown on its records, unless
DTC has reason to believe that it will not receive payment on that payment date.
Payments by DTC Participants and Indirect DTC Participants to securityholders
will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of that DTC
Participant and not of DTC, the related Indenture Trustee or Trustee (or any
paying agent appointed by the Indenture Trustee or Trustee), the Depositor or
the Servicer, subject to any statutory or regulatory requirements that may be in
effect from time to time. Payment of principal of and interest on each class of
Securities to DTC will be the responsibility of the related Indenture Trustee or
Trustee (or any paying agent), disbursement of those payments to DTC
Participants will be the responsibility of DTC and disbursement of those
payments to the related securityholders will be the responsibility of DTC
Participants and Indirect DTC Participants. DTC will forward those payments to
its DTC Participants which thereafter will forward them to Indirect DTC
Participants or securityholders.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect DTC Participants and some other banks, a securityholder may
be limited in its ability to pledge Securities to persons or entities that do
not participate in the DTC system, or otherwise take actions with respect to
those Securities due to the lack of a physical certificate for those Securities.
47
DTC has advised the Depositor that it will take any action permitted to be
taken by a securityholder only at the direction of one or more DTC Participants
to whose account with DTC the Securities are credited. Additionally, DTC has
advised the Depositor that it will take those actions with respect to specified
percentages of the securityholders' interest only at the direction of and on
behalf of DTC Participants whose holdings include undivided interests that
satisfy those specified percentages. DTC may take conflicting actions with
respect to other undivided interests to the extent that those actions are taken
on behalf of DTC Participants whose holdings include those undivided interests.
Neither DTC nor Cede will consent or vote with respect to the Securities.
Under its usual procedures, DTC will mail an "Omnibus Proxy" to the related
Indenture Trustee or Trustee as soon as possible after any applicable record
date for that consent or vote. The Omnibus Proxy will assign Cede's consenting
or voting rights to those DTC Participants to whose accounts the related
Securities are credited on that record date (which record date will be
identified in a listing attached to the Omnibus Proxy).
Clearstream, Luxembourg, incorporated under the laws of Luxembourg as a
professional depository, holds securities for its customers and facilitates the
clearance and settlement of securities transactions between Clearstream,
Luxembourg customers through electronic book-entry changes in accounts of
Clearstream, Luxembourg customers, thereby eliminating the need for physical
movement of certificates. Transactions may be settled by Clearstream, Luxembourg
in any of 36 currencies, including United States dollars. Clearstream,
Luxembourg provides to its customers, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream, Luxembourg also
deals with domestic securities markets in over 30 countries through established
depository and custodial relationships. Clearstream, Luxembourg is registered as
a bank in Luxembourg, and is subject to regulation by the Commission de
Surveillance du Secteur Financier, "CSSF," which supervises Luxembourg banks.
Clearstream, Luxembourg's customers are world-wide financial institutions
including underwriters, securities brokers and dealers, banks, trust companies
and clearing corporations. Clearstream, Luxembourg's U.S. customers are limited
to securities brokers and dealers, and banks. Currently, Clearstream, Luxembourg
has approximately 2,000 customers located in over 80 countries, including all
major European countries, Canada, and the United States. Indirect access to
Clearstream, Luxembourg is available to other institutions that clear through or
maintain a custodial relationship with an account holder of Clearstream,
Luxembourg. Clearstream, Luxembourg has established an electronic bridge with
Euroclear S.A./N.V. as the Operator of the Euroclear System in Brussels to
facilitate settlement of trades between Clearstream, Luxembourg and Euroclear.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear System and to clear and settle transactions between Euroclear
Participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 27 currencies, including United States
dollars. The Euroclear System includes various other services, including
securities lending and borrowing, and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC described above. The Euroclear System is operated by
Euroclear S.A./N.V., which is referred to in this prospectus as the Euroclear
Operator, under contract with Euroclear Clearance System S.C., a Belgian
cooperative corporation, referred to in this prospectus as the Cooperative. All
operations are conducted by the Euroclear Operator, and all Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with the Euroclear
Operator, not the Cooperative. The Cooperative establishes policy for the
Euroclear System on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include any underwriters,
agents or dealers with respect to any class or series of Securities offered by
this prospectus. Indirect access to the Euroclear System is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The Euroclear Operator has a banking license from the Belgian Banking and
Finance Commission. As such, it is regulated and supervised by the Belgian
Banking and Finance Commission and the National Bank of Belgium.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law, generally referred to as the Terms and Conditions. The Terms and Conditions
govern
48
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants, and has no record
of or relationship with persons holding through Euroclear Participants.
Payments with respect to Securities held through Clearstream, Luxembourg
or Euroclear will be credited to the cash accounts of Clearstream, Luxembourg
Participants or Euroclear Participants in accordance with the relevant system's
rules and procedures, to the extent received by its Depositary. Those payments
will be subject to tax withholding in accordance with relevant United States tax
laws and regulations. We refer you to "Material Income Tax Consequences" in this
prospectus. Clearstream, Luxembourg or the Euroclear Operator, as the case may
be, will take any other action permitted to be taken by a securityholder on
behalf of a Clearstream, Luxembourg Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect those actions on its behalf through DTC.
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of Securities among DTC
Participants, Clearstream Luxembourg Participants and Euroclear Participants,
they are under no obligation to perform or continue to perform those procedures
and those procedures may be discontinued at any time.
Definitive Securities
The notes, if any, and the certificates of a given series will be issued
in fully registered, certificated form to noteholders or certificateholders or
their respective nominees, rather than to DTC or its nominee, only if:
1. DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to those Securities and
the Depositor, the Administrator or the Trustee is unable to locate
a qualified successor (and if it is the Depositor or the
Administrator that has made that determination, the Depositor or
that Administrator so notifies the applicable Trustee in writing);
2. the Depositor or the Administrator or the Trustee, as applicable, at
its option, with the consent of the applicable DTC Participants,
elects to terminate the book-entry system through DTC; or
3. after the occurrence of an Event of Default or a Servicer Default
with respect to those Securities, holders representing at least a
majority of the outstanding principal amount of the notes or the
certificates, as the case may be, of that series, acting together as
a single class, advise the applicable Trustee through DTC in writing
that the continuation of a book-entry system through DTC (or its
successor) with respect to those notes or certificates is no longer
in the best interests of the holders of those Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the applicable Trustee or Indenture Trustee will be required to
notify all applicable securityholders of a given series through DTC Participants
of the availability of definitive securities. Upon surrender by DTC of the
definitive notes or certificates representing the corresponding Securities and
receipt of instructions for re-registration, the applicable Trustee or Indenture
Trustee will reissue those Securities as definitive notes or definitive
certificates, as applicable, to those noteholders or certificateholders, as
applicable.
Payments of principal of, and interest on, the definitive securities will
thereafter be made by the applicable Trustee or Indenture Trustee in accordance
with the procedures set forth in the related Indenture or the related Trust
Agreement or Pooling and Servicing Agreement, as applicable, directly to holders
of definitive securities in whose names the definitive securities were
registered at the close of business on the applicable record date specified for
those Securities in the applicable prospectus supplement. Those payments will be
made by check mailed to the address of that holder as it appears on the register
maintained by the applicable Trustee or Indenture Trustee. The final payment on
any definitive security, however, will be made only upon presentation and
surrender of that definitive security at the office or agency specified in the
notice of final payment to the applicable securityholders.
49
The applicable Trustee or the Indenture Trustee will provide notice to the
applicable securityholders not less than 15 nor more than 30 days prior to the
date on which final payment is expected to occur.
Definitive securities will be transferable and exchangeable at the offices
of the applicable Trustee or of a registrar named in a notice delivered to
holders of definitive securities. No service charge will be imposed for any
registration of transfer or exchange, but the applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
Description of the Transfer and Servicing Agreements
The following summary describes the material terms of each Sale and
Servicing Agreement or Pooling and Servicing Agreement pursuant to which a Trust
will purchase Receivables from the Depositor and the Servicer will agree to
service those Receivables, each Trust Agreement (or in the case of a grantor
trust, the Pooling and Servicing Agreement) pursuant to which a Trust will be
created and certificates will be issued and each Administration Agreement
pursuant to which BMW FS will undertake specified administrative duties with
respect to a Trust that issues notes (collectively, the "Transfer and Servicing
Agreements"). Forms of the Transfer and Servicing Agreements have been filed as
exhibits to the registration statement of which this prospectus forms a part.
The provisions of any of the Transfer and Servicing Agreements may differ in
non-material respects from those described in this prospectus and, if so, will
be described in the applicable prospectus supplement. This summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to. all the provisions of the Transfer and Servicing Agreements.
Sale and Assignment of Receivables
On or prior to the closing date specified with respect to any given Trust
in the applicable prospectus supplement, BMW FS or BMW Bank will sell and assign
to the Depositor, without recourse, pursuant to a purchase agreement, its entire
interest in the Receivables comprising the related Receivables Pool, including
the security interests in the Financed Vehicles. On the closing date, the
Depositor will transfer and assign to the applicable Trustee on behalf of the
Trust, without recourse, pursuant to a Sale and Servicing Agreement or a Pooling
and Servicing Agreement, as applicable, its entire interest in the Receivables
comprising the related Receivables Pool, including its security interests in the
related Financed Vehicles. Each Receivable will be identified in a schedule
appearing as an exhibit to the related Sale and Servicing Agreement or Pooling
and Servicing Agreement, but the existence and characteristics of the related
Receivables will not be verified by the related Trustee. The applicable Trustee
will, concurrently with the transfer and assignment, on behalf of the Trust,
execute and deliver the related notes and/or certificates. The net proceeds
received from the sale of the certificates and the notes of a given series will
be applied to the purchase of the related Receivables from the Depositor and, to
the extent specified in the applicable prospectus supplement, to make any
required initial deposit into the Reserve Account, the Prefunding Account and
the Yield Supplement Account, if any.
Unless otherwise provided in the related prospectus supplement, BMW FS, as
the originator, (or BMW Bank, as applicable) pursuant to a purchase agreement,
and the Depositor, pursuant to a Sale and Servicing Agreement or a Pooling and
Servicing Agreement, will represent and warrant, among other things, that:
1. the information provided in the related schedule of Receivables is
true and correct in all material respects;
2. at the time of origination of each Receivable, the related Obligor
on each Receivable is required to maintain physical damage insurance
covering the Financed Vehicle in accordance with the originator's
(or BMW Bank's) normal requirements;
3. as of the applicable closing date, each of those Receivables is or
will be secured by a first priority perfected security interest in
favor of the originator (or BMW Bank, as applicable) in the Financed
Vehicle;
50
4. to the best of its knowledge, as of the applicable closing date, the
related Receivables are free and clear of all security interests,
liens, charges and encumbrances and no offsets, defenses or
counterclaims have been asserted or threatened;
5. each related Receivable, at the time it was originated, complied
and, as of the applicable closing date, complies in all material
respects with applicable federal and state laws, including, consumer
credit, truth-in-lending, equal credit opportunity and disclosure
laws; and
6. any other representations and warranties that may be set forth in
the applicable prospectus supplement are true and correct in all
material respects.
Unless otherwise provided for in the related prospectus supplement, as of
the last day of the second (or, if the Depositor so elects, the first)
collection period following the discovery by or notice to the Depositor of a
breach of any representation or warranty of the Depositor that materially and
adversely affects the interests of the related securityholders in any
Receivable, the Depositor, unless the breach is cured, will repurchase that
Warranty Receivable from that Trust and, pursuant to the related purchase
agreement, BMW FS (or BMW Bank, as applicable) will purchase that Warranty
Receivable from the Depositor, at a price equal to the Warranty Purchase Payment
for that Receivable. This repurchase obligation will constitute the sole remedy
available to the securityholders or the Trust for any uncured breach by the
Depositor. The obligation of the Depositor to repurchase a Receivable will not
be conditioned on performance by BMW FS of its obligation to purchase that
Receivable from the Depositor pursuant to the related purchase agreement.
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Depositor and each Trust will designate the Servicer as custodian
to maintain possession as that Trust's agent of the related retail installment
sale contracts and/or promissory notes and any other documents relating to the
Receivables. To assure uniform quality in servicing both the Receivables and the
Servicer's (or BMW Bank's, as applicable) own portfolio of motor vehicle retail
installment sale contracts and promissory notes, as well as to facilitate
servicing and reduce administrative costs, the documents evidencing the
Receivables will not be physically segregated from other motor vehicle retail
installment sale contracts and promissory notes of the Servicer, or those which
the Servicer services for others, or marked to reflect the transfer to the
related Trust as long as BMW FS is servicing the Receivables. However, Uniform
Commercial Code, as in effect in the applicable jurisdiction (the "UCC")
financing statements reflecting the sale and assignment of the Receivables by
BMW FS (or BMW Bank, as applicable) to the Depositor and by the Depositor to the
applicable Trust will be filed, and the respective accounting records and
computer files of BMW FS (or BMW Bank, as applicable) and the Depositor will
reflect that sale and assignment. The Depositor, or the Servicer on behalf of
the Depositor, will be responsible for maintaining such perfected security
interest through the filing of continuation statements or amended financing
statements, as applicable. Because the Receivables will remain in the Servicer's
possession and will not be stamped or otherwise marked to reflect the assignment
to the Trustee, if a subsequent purchaser were able to take physical possession
of the Receivables without knowledge of the assignment, the Trust's interest in
the Receivables could be defeated. In addition, in some cases, the Trustee's
security interest in collections that have been received by the Servicer but not
yet remitted to the related Collection Account could be defeated. We refer you
to "Certain Legal Aspects of the Receivables--Security Interests" in this
prospectus.
Accounts
With respect to each Trust that issues notes, the Servicer will establish
and maintain with the related Trustee or Indenture Trustee one or more accounts
(each designated as a Collection Account), in the name of the Trustee or
Indenture Trustee on behalf of the related securityholders, into which payments
made on or with respect to the related Receivables and amounts released from any
Yield Supplement Account, Reserve Account, Prefunding Account or other form of
credit enhancement will be deposited for payment to the related securityholders.
With respect to each Trust that does not issue notes, the Servicer will also
establish and maintain a Collection Account and any other Account in the name of
the related Trustee on behalf of the related certificateholders.
If so provided in the related prospectus supplement, the Servicer will
establish for each series of Securities an additional account, to be designated
as a Payahead Account, in the name of the related Trustee or, if that Trust
issues notes, the Indenture Trustee, into which, to the extent required by the
Sale and Servicing Agreement or
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Pooling and Servicing Agreement, Payments Ahead will be deposited until the time
as the related payment becomes due. Until that time as Payments Ahead are
transferred from the Payahead Account to a Collection Account, they will not
constitute collected interest or collected principal and will not be available
for payment to the applicable noteholders or certificateholders. The Payahead
Account will initially be maintained with the applicable Indenture Trustee or
Trustee.
Any other accounts to be established with respect to a Trust, including
any Yield Supplement Account or any Reserve Account, will be described in the
applicable prospectus supplement.
For any series of Securities, funds in the related Accounts will be
invested, at the direction of the Servicer, as provided in the related Sale and
Servicing Agreement or Pooling and Servicing Agreement in Eligible Investments.
"Eligible Investments" mean, at any time, any one or more of the following
obligations and securities:
(a) direct obligations of, and obligations fully guaranteed as to
the full and timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of
any depository institution or trust company incorporated under
the laws of the United States of America or any State (or any
domestic branch of a foreign bank)and subject to supervision
and examination by federal or state banking or depository
institution authorities; provided, however, that at the time
of the investment or contractual commitment to invest therein,
the commercial paper or other short-term unsecured debt
obligations (other than such obligations the rating of which
is based on the credit of a person other than such depository
institution or trust company) thereof shall have a credit
rating from each rating agency in the highest investment
category granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each
rating agency in the highest investment category granted
thereby;
(d) investments in money market funds having a rating from each
rating agency in the highest investment category granted
thereby (including funds for which the Indenture Trustee or
the Owner Trustee or any of their respective affiliates is
investment manager or advisor);
(e) bankers' acceptances issued by any depository institution or
trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United
States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit
of the United States of America, in either case entered into
with a depository institution or trust company (acting as
principal) described in clause (b) above; and
(g) any other investment with respect to which the Trust, the
Indenture Trustee or the Servicer has received written
notification from each rating agency that the acquisition of
such investment will satisfy the conditions of such rating
agencies.
Eligible Investments are generally limited to investments acceptable to
the rating agencies rating the Securities as being consistent with the rating of
those Securities, including obligations of the Servicer and its affiliates, to
the extent consistent with that rating. Except as described below or in the
related prospectus supplement, Eligible Investments are limited to obligations
or securities that mature on or before the next payment date for that series.
However, to the extent permitted by the rating agencies, funds in any Account,
except the Collection Account, may be invested in obligations or securities that
will not mature prior to the next payment date with respect to those
certificates or notes and will not be sold to meet any shortfalls. Thus, the
amount of cash in any Reserve Account or the
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Yield Supplement Account at any time maybe less than the balance of the Reserve
Account or the Yield Supplement Account, as the case may be. If the amount
required to be withdrawn from any Reserve Account or the Yield Supplement
Account to cover shortfalls in collections on the related Receivables (as
provided in the applicable prospectus supplement) exceeds the amount of cash in
the Reserve Account or the Yield Supplement Account, as the case may be, a
temporary shortfall in the amounts paid to the related noteholders or
certificateholders could result, which could, in turn, increase the average life
of the notes or the certificates of that series. Investment earnings on funds
deposited in the Accounts, net of losses and investment expenses, shall be
released to the Servicer or the Depositor on each payment date and shall be the
property of the Servicer or the Depositor, as the case may be.
For each Trust, the Accounts will be maintained with the related Indenture
Trustee or the Trustee so long as it is an Eligible Institution. If the related
Indenture Trustee or the Trustee, as the case may be, ceases to be an Eligible
Institution, then the Servicer shall, with the assistance of the Indenture
Trustee or the Trustee as may be necessary, cause each Account to be moved to an
Eligible Institution.
Servicing Procedures
Each Sale and Servicing Agreement or Pooling and Servicing Agreement will
provide that the Servicer, for the benefit of each Trust, shall manage, service,
administer and make collections on the Receivables (other than Administrative
Receivables and Warranty Receivables) with reasonable care, using that degree of
skill and attention that the Servicer exercises with respect to all comparable
motor vehicle retail installment sales contracts that it services for itself or
others. The Servicer's duties shall include collection and posting of all
payments, responding to inquiries of Obligors or by federal, state or local
government authorities with respect to the Receivables, investigating
delinquencies, sending payment coupons to Obligors, reporting tax information to
Obligors in accordance with its customary practices, policing the collateral,
accounting for collections and furnishing monthly and annual statements to the
Trustees with respect to distributions, generating federal income tax
information, making Advances and performing the other duties specified in the
related Sale and Servicing Agreement. The Servicer shall follow its customary
standards, policies and procedures and shall have full power and authority,
acting alone, to do any and all things in connection with such managing,
servicing, administration and collection that it may deem necessary or
desirable. Without limiting the generality of the foregoing, the Servicer shall
be authorized and empowered to execute and deliver, on behalf of itself, each
Trust, the Trustees, the related securityholders or any of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge and all other comparable instruments, with respect to the Receivables
and the Financed Vehicles. The Servicer is authorized to commence, in its own
name or in the name of the related, a legal proceeding to enforce a defaulted
Receivable or to commence or participate in a legal proceeding (including
without limitation a bankruptcy proceeding) relating to or involving a
Receivable, including a defaulted Receivable. If the Servicer commences or
participates in such a legal proceeding in its own name, the related Trust will
be deemed to have automatically assigned, solely for the purpose of collection
on behalf of the party retaining an interest in such Receivable, such Receivable
and the other related property of the trust with respect to such Receivable to
the Servicer for purposes of commencing or participating in any such proceeding
as a party or claimant. The Servicer is also authorized and empowered under each
Sale and Servicing Agreement or Pooling and Servicing Agreement to execute and
deliver in the Servicer's name any notices, demands, claims, complaints,
responses, affidavits or other documents or instruments in connection with any
such proceeding. If in any enforcement suit or legal proceeding it shall be held
that the Servicer may not enforce a Receivable on the grounds that it shall not
be a real party in interest or a holder entitled to enforce such Receivable, the
Owner Trustee on behalf of the related Trust shall, at the Servicer's expense
and written direction, take steps to enforce such Receivable, including bring
suit in its name or the name of the Trust, the Indenture Trustee, the related
noteholders or the related certificateholders. The owner trustee on behalf of
the related Trust is required to furnish the Servicer with any powers of
attorney and other documents and take any other steps which the Servicer may
deem necessary or appropriate to enable the Servicer to carry out its servicing
and administrative duties under the Sale and Servicing Agreement or Pooling and
Servicing Agreement.
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by any trust and will, consistent with the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, follow
the collection procedures it follows with respect to comparable motor vehicle
retail installment sale contracts it services for itself and others.
The Servicer will be authorized to grant, in some circumstances. rebates,
adjustments or extensions with respect to a Receivable, but shall not, except
pursuant to an order of a court of competent jurisdiction, waive the
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right to collect the unpaid balance of any Receivable. However, if any
modification of a Receivable extends the maturity of a Receivable beyond the
final scheduled maturity date of the last maturing security issued by the
applicable Trust, as set forth in the applicable prospectus supplement, the
Servicer will be obligated to purchase the Receivable as described below.
In addition, the Servicer will covenant that, except as otherwise
contemplated in the related agreement (including the provisions in the
immediately two preceding paragraphs) and except as permitted by the Servicer's
credit and collection policies:
1. it will not release any Financed Vehicle from the security interest
granted in the related Receivable;
2. it will do nothing to impair the rights of the securityholders in
the Receivables;
3. it will not alter the APR of any Receivable; and
4. it will not extend the maturity of a Receivable beyond the final
scheduled maturity date of the last maturing security issued by the
applicable Trust.
The Servicer or the Trustee shall inform the other party and the Indenture
Trustee promptly upon the discovery-of any breach by the Servicer of the above
obligations that would materially and adversely affect any Receivable. Unless
the breach is cured by the last day of the second collection period following
the discovery (or, if the Servicer so elects, the last day of the first
collection period following the discovery), the Servicer is required to purchase
any Administrative Receivable materially and adversely affected by the breach
from the Trust at a price equal to the Administrative Purchase Payment for that
Receivable or at another price as set forth in the related prospectus
supplement.
Upon the purchase of any Administrative Receivable, the Servicer will for
all purposes of the related Sale and Servicing Agreement or the Pooling and
Servicing Agreement, as applicable, be deemed to have released all claims for
the reimbursement of outstanding Advances trade in respect of that
Administrative Receivable. This purchase obligation will constitute the sole
remedy available to the securityholders or the Trustee for any uncured breach by
the Servicer.
If the Servicer determines that eventual payment in full of a Receivable
is unlikely, the Servicer will follow its normal practices and procedures to
recover all amounts due upon that Receivable, including repossessing and
disposing of the related Financed Vehicle at a public or private sale, or taking
any other action permitted by applicable law. We refer you to "Certain Legal
Aspects of the Receivables" in this prospectus.
Insurance on Financed Vehicles
Each Receivable requires the related Obligor to maintain specific levels
and types of insurance coverage to protect the Financed Vehicle against losses.
The originator requires evidence of insurance coverage by the Obligors at the
time of origination of the Receivables, but performs no verification of
continued coverage after origination. The originator will not be obligated to
make payments to the Trust for any loss as to which third party insurance has
not been maintained, except to the extent of its obligations under the related
purchase agreement. Since the Obligors may select their own insurers to provide
the requisite coverage, the specific terms of their policies may vary. The
originator will not be required to monitor the maintenance of insurance. A
failure by an Obligor to maintain physical damage insurance will constitute a
default under the related Receivable. We refer you to "The
Receivables--Underwriting of Motor Vehicle Loans" in this prospectus. In the
event that the Obligor fails to maintain any required insurance and this failure
results in a shortfall in amounts to be distributed to noteholders which is not
covered by amounts on deposit in the Reserve Account or by subordination of
payments on the certificates to the extent described in this prospectus, the
securityholders could suffer a loss on their investment.
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Collections
With respect to each Trust, the Servicer will deposit all payments on
Receivables received from Obligors and all proceeds of Receivables collected
during the applicable collection period into the Collection Account not later
than two Business Days after receipt However, if each condition to making
monthly deposits as may be required by the related Sale and Servicing Agreement
or Pooling and Servicing Agreement (including, the satisfaction of specified
ratings criteria by the Servicer and the absence of any Servicer Default) is
satisfied, the Servicer may retain these amounts until the Business Day
immediately preceding the related payment date. The Servicer will be entitled to
withhold, or to be reimbursed from amounts otherwise payable into or on deposit
in the Collection Account, amounts previously deposited in the Collection
Account but later determined to have resulted from mistaken deposits or
postings. Except in some circumstances described in the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, pending deposit into the
Collection Account, collections may be employed by the Servicer at its own risk
and for its own benefit and will not be segregated from its own funds.
The Servicer or the Depositor, as the case may be, will remit the
aggregate Warranty Purchase Payments and Administrative Purchase Payments of
Receivables to be purchased from the Trust, if any, to the Collection Account on
the Business Day immediately preceding the related payment date.
If the Servicer were unable to remit the funds as described above,
securityholders might incur a loss. To the extent set forth in the applicable
prospectus supplement, the Servicer may, in order to satisfy the requirements
described above, obtain a letter of credit or other security for the benefit of
the related Trust to secure timely remittances of collections on the related
Receivables and payment of the aggregate Warranty Purchase Payments and
Administrative Purchase Payments with respect to Receivables required to be
repurchased by the Depositor or the Servicer, as applicable.
Collections on or in respect of a Receivable made during a collection
period (including Warranty Purchase Payments and Administrative Purchase
Payments) which are not late fees, extension fees or other similar fees or
charges will be applied first to any outstanding Advances made by the Servicer
with respect to the Receivable, and then to the related Scheduled Payment. Any
collections on or in respect of a Receivable remaining after those applications
will be considered an excess payment. Excess payments constituting a prepayment
in full of Precomputed Receivables and any excess payments relating to Simple
Interest Receivables will be applied as a prepayment in respect of the
Receivable. All other excess payments in respect of Precomputed Receivables will
be held by the Servicer (or if the Servicer has not satisfied particular
requirements, deposited in the Payahead Account), as a Payment Ahead.
Advances
Unless otherwise provided in the related prospectus supplement, if the
Scheduled Payment due on a Precomputed Receivable (other than an Administrative
Receivable or a Warranty Receivable) is not received in full by the end of the
month in which it is due, whether as the result of any extension granted to the
Obligor or otherwise, the amount of Payments Ahead, if any, not previously
applied with respect to the Precomputed Receivable, shall be applied by the
Servicer to the extent of the shortfall and the Payments Ahead shall be reduced
accordingly. If any shortfall remains, the Servicer will make a Precomputed
Advance to the Trust in an amount equal to the shortfall. The Servicer will not
be obligated to make a Precomputed Advance to the extent that it determines, in
its sole discretion, that the Precomputed Advance will not be recovered from
subsequent collections on or in respect of the related Precomputed Receivable.
All Precomputed Advances shall be reimbursable to the Servicer, without
interest, if and when a payment relating to a Receivable with respect to which a
Precomputed Advance has previously been made is subsequently received (other
than from Administrative Purchase Payments). Upon the determination by the
Servicer that reimbursement from the preceding source is unlikely, it will be
entitled to recover unreimbursed Precomputed Advances from collections on or in
respect of other Precomputed Receivables.
In addition, if the Scheduled Payment on a Simple Interest Receivable,
other than an Administrative Receivable or a Warranty Receivable, is not
received in full by the end of the month in which it is due, the Servicer shall,
subject to the limitations set forth below, make a Simple Interest Advance to
the Trust in an amount with respect to the Simple Interest Receivable equal to
the product of the Principal Balance of the Simple Interest Receivable as of
55
the first day of the related collection period and one-twelfth of its APR minus
the amount of interest actually received on the Simple Interest Receivable
during the related collection period, exclusive of amounts that the Servicer has
determined would be nonrecoverable. On each payment date, the Servicer shall
reimburse itself for the outstanding amount advanced to the extent of actual
collections of late scheduled payments. In addition, if a Receivable becomes a
Liquidated Receivable, the amount of accrued and unpaid interest on that
Receivable (but not including interest for the current collection period) will,
up to the amount of outstanding Simple Interest Advances in respect of that
Receivable, be withdrawn from the Collection Account and paid to the Servicer in
reimbursement of the outstanding Simple Interest Advances. No advances of
principal will be made with respect to Simple Interest Receivables. The Servicer
will not be obligated to make a Simple Interest Advance, to the extent that it
determines, in its sole discretion, that Simple Interest Advance will not be
recovered from subsequent collections on or in respect of the related Simple
Interest Receivable.
The Servicer will make all Advances by depositing into the related
Collection Account an amount equal to the aggregate of the Precomputed Advances
and Simple Interest Advances due in respect of a collection period on the
Business Day immediately preceding the related payment date. The related
prospectus supplement will set forth the provisions to be contained in the
related Sale and Servicing Agreement with regard to the applicable dates when
Advances must be deposited into the related Collection Account.
Servicing Compensation
Unless otherwise provided in the applicable prospectus supplement, the
Servicer will be entitled to receive as compensation for services rendered an
amount equal to the aggregate Principal Balance of the Receivables as of the
first day of the related collection period multiplied by the applicable
Servicing Fee Rate (which is referred to in this prospectus supplement as the
"Base Servicing Fee") for each collection period. The Base Servicing Fee
(together with any portion of the Base Servicing Fee that remains unpaid from
prior payment dates) will be paid solely to the extent of amounts available for
that purpose as set forth in the applicable prospectus supplement. However, the
Base Servicing Fee will be paid prior to the payment of available amounts to the
noteholders or the certificateholders of the given series.
Unless otherwise provided in the applicable prospectus supplement, the
servicer will also be entitled to collect and retain any late fees, prepayment
charges and other administrative fees or similar charges allowed by applicable
law with respect to the related Receivables and any interest earned during a
collection period from the investment of monies in the Collection Account as a
Supplemental Servicing Fee. Payments by or on behalf of Obligors will be
allocated to scheduled payments and late fees and other charges in accordance
with the Servicer's normal practices and procedures. In addition, the Servicer
will be entitled to reimbursement from any given Trust for specified
liabilities. The Servicer will be paid the Base Servicing Fee for each
collection period on the payment date related to that collection period prior to
the payment of interest on any class of notes or certificates. However, if each
rating agency for a series of notes or certificates confirms that it will not
reduce the rating of any class of notes or certificates in that series, as the
case may be, the Base Servicing Fee in respect of a collection period (together
with any portion of the Base Servicing Fee that remains unpaid from the prior
payment dates) will be paid at the beginning of that collection period out of
collections of interest on the related Receivables.
The Base Servicing Fee and the Supplemental Servicing Fee (collectively,
the "Total Servicing Fee") will compensate the Servicer for performing the
functions of a third party servicer of motor vehicle receivables as an agent for
the beneficial owner of those Receivables, including collecting and posting all
payments, responding to inquiries of Obligors on the Receivables, investigating
delinquencies, sending payment statements to Obligors, reporting tax information
to Obligors, paying costs of collections and policing the collateral. The Total
Servicing Fee also will compensate the Servicer for administering the particular
pool of Receivables, including making Advances, accounting for collections and
furnishing monthly statements to the related Trustee and Indenture Trustee with
respect to payments. The Total Servicing Fee also will reimburse the Servicer
for specified taxes, the fees of the related Trustee and Indenture Trustee, if
any, accounting fees, outside auditor fees, data processing costs and other
costs incurred in connection with administering the applicable pool of
Receivables.
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Distributions on the Securities
With respect to each series of Securities, beginning on the payment date
specified in the applicable prospectus supplement, payments of principal of and
interest (or, where applicable, of principal or interest only) on each class of
those Securities entitled to payments of principal and interest will be made by
the applicable Indenture Trustee to the noteholders and by the applicable
Trustee to the certificateholders of that series. The timing, calculation,
allocation, order, source, priorities of and requirements for all payments to
each class of noteholders and all payments to each class of certificateholders
of that series will be set forth in the applicable prospectus supplement.
With respect to each Trust, on each payment date, collections on the
related Receivables will be withdrawn from the related Collection Account, based
upon information provided by the Servicer, and will be paid to the noteholders
and/or certificateholders to the extent provided in the applicable prospectus
supplement. Credit enhancement, such as a Reserve Account, may be available to
cover any shortfalls in the amount available for payment to the securityholders
on that date to the extent specified in the applicable prospectus supplement. As
more fully described in the applicable prospectus supplement,
1. payments of principal of a class of Securities of a given series
will be subordinate to payments of interest on that class;
2. payments in respect of one or more classes of certificates of that
series may be subordinate to payments in respect of notes, if any,
of that series or other classes of certificates of that series; and
3. payments in respect of one or more classes of notes of that series
may be subordinated to payments in respect of other classes of notes
of that series.
Credit and Cash Flow Enhancement
The amounts and types of credit and cash flow enhancement arrangements and
the applicable provider, with respect to each class of Securities of a given
series, if any, will be set forth in the applicable prospectus supplement. If
and to the extent provided in the applicable prospectus supplement, credit and
cash flow enhancement may be in the form of subordination of one or more classes
of Securities, excess interest, Reserve Accounts, Yield Supplement Accounts,
over-collateralization to cover either or both credit risk or yield enhancement,
letters of credit, cash collateral accounts, surety bonds, guaranteed investment
contracts, currency or interest rate swap agreements, certain repurchase
obligations, cash deposits, credit or liquidity facilities or any combination of
the foregoing. If specified in the applicable prospectus supplement, credit or
cash flow enhancement for a class of Securities may cover one or more other
classes of Securities of the same series.
The presence of a Reserve Account and other forms of credit enhancement
for the benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the securityholders of that class or series of the full
amount of principal and interest due on those Securities and to decrease the
likelihood that that securityholders will experience losses. Credit or cash flow
enhancement for a class or series of Securities will not provide protection
against all risks of loss and will not guarantee repayment of the entire
principal of and interest on those Securities. If losses occur which-exceed the
amount covered by any credit enhancement or which are not covered by any credit
enhancement, securityholders of any class or series will bear their allocable
share of deficiencies, as described in the applicable prospectus supplement. In
addition, if a form of credit enhancement covers more than one class of
Securities, securityholders of any of that class will be subject to the risk
that that credit enhancement will be exhausted by the claims of securityholders
of other classes.
Subordination of Principal and Interest. As further described in the
related prospectus supplement, payments of interest on certain classes of notes
will be subordinated to payments of interest on other classes of more senior
notes, and, in certain circumstances, to payments of principal on such classes
of more senior notes. In addition, payments of principal on certain classes of
notes will be subordinated to payments of interest and principal on other
classes of more senior notes.
57
Excess Interest. More interest is expected to be paid by the obligors in
respect of the receivables than is necessary to pay the related servicing fee,
trustee fees and expenses, and interest on the notes for each payment period, as
described in the accompanying prospectus supplement. Any such excess in interest
payments from obligors will serve as additional credit enhancement.
Reserve Account. If provided in the applicable prospectus supplement,
pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Depositor or a third party will establish for a series or class
of Securities an account, as specified in the applicable prospectus supplement,
which may be designated as a "Reserve Account" (the "Reserve Account"), which
will be maintained with the related Trustee or Indenture Trustee, as applicable.
Unless otherwise specified in the prospectus supplement, the Reserve Account
will be funded by an initial deposit by the Depositor or a third party on the
closing date in the amount set forth in the applicable prospectus supplement
(the "Reserve Account Initial Deposit"). To the extent provided in the
applicable prospectus supplement, the amount on deposit in the Reserve Account
will be increased on each payment date thereafter up to the Specified Reserve
Account Balance (as defined in the applicable prospectus supplement) by the
deposit in the Reserve Account of the amount of collections on the related
Receivables remaining on each payment date after all specified payments on that
date have been made. The applicable prospectus supplement will describe the
circumstances and manner under which payments may be made out of the Reserve
Account, either to holders of the Securities covered by that prospectus
supplement or to the Depositor or a third party. Monies on deposit in the
Reserve Account may be invested in Eligible Investments under the circumstances
and in the manner described in the related Sale and Servicing Agreement or the
Pooling and Servicing Agreement.
Yield Supplement Account. A "Yield Supplement Account" may be established
with respect to any class or series of Securities. The terms relating to any
Yield Supplement Account will be set forth in the applicable prospectus
supplement. Each Yield Supplement Account will be designed to hold funds to be
applied by the related Trustee or, if that Trust issues notes, the related
Indenture Trustee, to provide payments to securityholders in respect of
Receivables that have APRs less than the Required Rate. Unless otherwise
specified in the applicable prospectus supplement, each Yield Supplement Account
will be maintained with the same entity with which the related Collection
Account is maintained and will be created on the related closing date with an
initial deposit in an amount and by the Depositor or other person specified in
the applicable prospectus supplement.
On each payment date, the related Trustee or Indenture Trustee will
transfer to the Collection Account from monies on deposit in the Yield
Supplement Account an amount specified in the applicable prospectus supplement
(which is referred to in this prospectus as a "Yield Supplement Deposit") in
respect of the Receivables having APRs less than the Required Rate for that
payment date. Unless otherwise specified in the applicable prospectus
supplement, amounts on deposit on any payment date in the Yield Supplement
Account in excess of the Required Yield Supplement Amount, as specified in the
applicable prospectus supplement, after giving-effect to all payments to be made
on that payment date, will be released to the Depositor. The Depositor or other
person specified in the applicable prospectus supplement will not have any
obligation after the related closing date to deposit any amounts into the Yield
Supplement Account after the related closing date even if the amount on deposit
in that account is less than the Required Yield Supplement Amount. Monies on
deposit in the Yield Supplement Account may be invested in Eligible Investments
under the circumstances and in the manner described in the related Pooling and
Servicing Agreement or Trust Agreement.
Over-collateralization. Over-collateralization is the excess of the
aggregate principal balance of the Receivables over the aggregate principal
balance of the Securities. Over-collateralization may be created by the initial
or subsequent deposit of Receivables or may build over time from the application
of certain excess cash amounts generated by the Receivables to accelerate the
amortization of the applicable class or classes of Securities.
Letter of Credit. A letter of credit, which will be issued by a bank or
other financial institution, may be issued in a maximum amount which may be
permanently reduced as draws are made or may be replenished as previous draws
are repaid from certain excess cash amounts generated by the Receivables. Draws
may be made to cover shortfalls generally in collections, with respect to
particular types of shortfalls such as those due to particular types of losses
or with respect to specific situations such as shortfalls in amounts necessary
to pay current interest.
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Cash Collateral Account. The prospectus supplement may provide that upon
the occurrence of an event of default by the Servicer, a segregated cash
collateral account may be established as security for the Servicer's obligations
under the Sale and Servicing Agreement or the Pool and Servicing Agreement, as
the case may be.
Surety Bond. The prospectus supplement may provide that the Trust enter
into agreements with an insurer for the purpose of guaranteeing payments of
principal and/or interest on the Securities. If, on the date so specified in the
prospectus supplement, the amount on deposit in the Collection Account after
giving effect to all amounts deposited to or payable from a Payahead Account, a
prefunding account or a capitalized interest agreement with respect to the
related payment date, is less than the sum of the Base Servicing Fee, and
amounts due to securityholders on the related payment date, the Trustee by
delivering a notice to the insurer shall demand payment under the surety bond in
an amount equal to the deficiency. The applicable prospectus supplement will
describe the circumstances and manner under which payments may be made under the
surety bond, either to securityholders, or the Trustee or the Indenture Trustee,
as the case may be.
Guaranteed Investment Contracts. Specified available funds may be invested
under a guaranteed investment contract issued by an insurance company, financial
institution or other entity.
Derivative Agreements. If specified in a related prospectus supplement, a
Trust may enter into one or more currency or interest rate swap agreements to
reduce its exposure to currency and/or interest rate risks or to offset basis
risk between Receivables that pay based on one index and Securities that pay
based on a different index. Each Trust may also purchase an interest rate cap
agreement to protect against interest rate risks. In addition, and if specified
and described in the related prospectus supplement, the related Trust may enter
into derivative agreements that can take the form of an interest rate floor
agreement. Each such currency swap, floor or cap agreement will be entered into
with a counterparty acceptable to the rating agencies and will contain such
terms as are usual and customary for derivative transactions of these type. The
related prospectus supplement will set forth the material provisions of each
such swap, floor or cap agreement and will contain certain information regarding
each counterparty. In addition, the related prospectus supplement will set forth
the "significance estimate" and "significance percentage" of such derivative
agreement and all other information (including financial information pertaining
to the counterparty, to the extent required) as set forth in Regulation AB Items
1115(a) and (b).
Repurchase Obligations. Each Dealer Agreement obligates the related Center
or other dealer to repurchase any Contract BMW FS or BMW Bank financed for the
outstanding principal balance of that Contract, if the Center or other dealer
breaches specific representations and warranties as set forth in the Dealer
Agreement. The representations and warranties typically relate to the
origination of the Contract and the security interest in the related Financed
Vehicle and not the creditworthiness of the Obligor under the Contract. In
addition, the Seller will be required to repurchase Receivables from the trust
if there is a breach of a representation or warranty relating to those
Receivables that materially adversely affects those Receivables. Unless
otherwise set forth in the related prospectus supplement, the Servicer may also
be required to purchase Receivables from the trust if it breaches certain of its
servicing obligations with respect to those Receivables.
Cash Deposits. The depositor may fund accounts or may otherwise provide
cash deposits to provide additional funds that may be applied to make payments
on the securities issued by the trust. Any such arrangements will be disclosed
in the accompanying prospectus supplement.
Credit or Liquidity Facilities. Issued by a financial institution or other
entity, any such facility will cover specified losses on the receivables or
shortfalls in payments due on specified securities issued by the applicable
trust, if so provided in the related prospectus supplement.
Net Deposits
As an administrative convenience, as long as specified conditions are
satisfied, the Servicer will be permitted to make the deposit of collections,
aggregate Advances and Administrative Purchase Payments for any Trust for or
with respect to the related collection period net of payments to be made to the
Servicer with respect to that collection period. The Servicer may cause to be
made a single, net transfer to the Collection Account. The Servicer, however,
will account to the Trustee, any Indenture Trustee, the noteholders, if any, and
the certificateholders with respect to
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each Trust as if all deposits, payments and transfers were made individually.
With respect to any Trust that issues both certificates and notes, if the
related payment dates are not the same for all classes of Securities, all
distributions, deposits or other remittances made on a payment date will be
treated as having been distributed, deposited or remitted on the same payment
date for the applicable collection period for purposes of determining other
amounts required to be distributed, deposited or otherwise remitted on a payment
date.
Statements to Trustees and the Trust
On a date on or prior to each payment date, to be specified in the
applicable prospectus supplement, the Servicer will provide to the applicable
Indenture Trustee, if any, and the applicable Trustee a statement setting forth
with respect to a series of Securities substantially the same information that
is required to be provided in the periodic reports provided to securityholders
of that series described under "--Statements to Securityholders" below.
Statements to Securityholders
With respect to each series of Securities that includes notes, on or prior
to each payment date, the Servicer will prepare and provide to the related
Indenture Trustee a statement to be delivered to the related noteholders on that
payment date. In addition, on or prior to each payment date, the Servicer will
prepare and provide to the related Trustee of each Trust, a statement to be
delivered to the certificateholders. Each statement to be delivered to
securityholders will include (to the extent applicable) the following
information (and any other information so specified in the applicable prospectus
supplement) as to the notes of that series and as to the certificates of that
series with respect to that payment date:
1. the amount of the payment allocable to the principal amount of each
class of those notes and to the Certificate Balance of each class of
those certificates;
2. the amount of the payment allocable to interest on each class of
Securities of that series;
3. the amount of the distribution allocable to the Yield Supplement
Deposit, if any;
4. the number of and the aggregate Principal Balance of the Receivables
as of the close of business on the first day and last day of the
related collection period after giving effect to payments allocated
to principal reported under clause (1) above;
5. the amount of the Total Servicing Fee paid to the Servicer with
respect to the related collection period;
6. the Interest Rate or Pass Through Rate for the Interest Period
relating to the succeeding payment date for any class of notes or
certificates of that series with variable or adjustable rates;
7. the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest
Carryover Shortfall and the Certificateholders' Principal Carryover
Shortfall (each as defined in the applicable prospectus supplement),
if any, in each case as applicable to each class of Securities;
8. the note pool factor for each class of those notes, and the
Certificate Balance and the certificate pool factor for each class
of those certificates, each after giving effect to all payments
reported under clause (1) above on that date;
9. the amount of non-recoverable Advances on that payment date;
10. the balance of any related Reserve Account on that date, after
giving effect to changes to the related Reserve Account on that date
and the amount of those changes;
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11. the amount of fees and expenses to be paid by the applicable Trust
to each Trustee and Indenture Trustee, if not directly paid by the
servicer;
12. the Available Amounts, as that term is defined in the prospectus
supplement;
13. the amount available under the Servicer's letter of credit, surety
bond or insurance policy, as provided in the Sale and Servicing
Agreement, if any, and the amount as a percentage of the aggregate
Principal Balance of the Receivables as of the last day of that
collection period;
14. payments to and from third party credit enhancement providers, if
any;
15. amounts, if any, on deposit in the prefunding account and the amount
withdrawn from the prefunding account since the previous payment
date to purchase additional Receivables;
16. amounts, if any, on deposit in the Yield Supplement Account after
giving effect to changes thereto on that date and the amount of
those changes;
17. the applicable record date, determination date, accrual period and
payment date for each class of Securities of that series;
18. the pool characteristics as of the last day of the related
collection period, including, but not limited to, the weighted
average Interest Rate and weighted average remaining term to
maturity;
19. delinquency and loss information for the related collection period;
and
20. any addition or removal of Receivables in connection with a
prefunding or revolving period (and, in the case of additions, any
material changes in the solicitation, credit-granting, underwriting,
origination, acquisition or pool selection criteria or procedures,
as applicable, used to originate, acquire or select the new
Receivables).
Each amount set forth in subclauses (1), (2), (5) and (7) above will be
expressed in the aggregate and as a dollar amount per $1,000 of the original
principal amount of each class of notes or the original Certificate Balance of
each class of certificates, as the case may be.
Copies of the statements may be obtained by the securityholders by
delivering a request in writing addressed to the applicable Trustee at its
address set forth in the applicable prospectus supplement.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each Trust, the applicable Trustee
will mail to each person who at any time during that calendar year has been a
securityholder with respect to that Trust and received any payment a statement
containing information for the purposes of that securityholder's preparation of
federal income tax returns. We refer you to "Material Income Tax Consequences"
in this prospectus.
Evidence as to Compliance
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that a firm of independent public accountants will furnish to the
related Trust and Indenture Trustee or Trustee, as applicable, annually a
statement as to compliance in all material respects by the Servicer during the
preceding twelve months (or, in the case of the first statement, from the
applicable closing date, which may be longer than twelve months) with specified
standards relating to the servicing of the applicable Receivables.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
also provide for delivery to the related Trust and Indenture Trustee or Trustee,
as applicable, substantially simultaneously with the delivery of those
accountants' statement referred to above, of a certificate signed by an officer
of the Servicer stating that the Servicer has fulfilled its obligations under
the Sale and Servicing Agreement or Pooling and Servicing Agreement, as
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applicable, throughout the preceding twelve months (or, in the case of the first
certificate, from the closing date) in all material respects or, if there has
been a default in the fulfillment of any obligation, describing each default.
The Servicer has agreed to give each Indenture Trustee and each Trustee notice
of specified Servicer Defaults under the related Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable.
Copies of the statements and certificates may be obtained by
securityholders by a request in writing addressed to the applicable Trustee.
Certain Matters Regarding the Servicer
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that BMW FS may not resign from its obligations and duties as Servicer
under those documents, except upon BMW FS' determination that its performance of
those duties is no longer permissible under applicable law. No resignation will
become effective until the related Indenture Trustee or Trustee, as applicable,
or a successor servicer has assumed BMW FS' servicing obligations and duties
under the related Sale and Servicing Agreement or Pooling and Servicing
Agreement.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
further provide that neither the Servicer nor any of its directors, officers,
employees or agents will be under any liability to the related Trust or the
related noteholders or certificateholders for taking any action or for
refraining from taking any action pursuant to the related Sale and Servicing
Agreement or Pooling and Servicing Agreement or for errors in judgment; except
that neither the Servicer nor any person will be protected against any liability
that would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of the Servicer's duties under that document or by
reason of reckless disregard of its obligations and duties under that document.
In addition, each Sale and Servicing Agreement and Pooling and Servicing
Agreement will provide that the Servicer is not obligated to appear in,
prosecute or defend any legal action that is not incidental to the Servicer's
servicing responsibilities under the related Sale and Servicing Agreement or
Pooling and Servicing Agreement and that, in its opinion, may cause it to incur
any expense or liability. The Servicer may, however, undertake any reasonable
action that it may deem necessary or desirable in respect of the related Sale
and Servicing Agreement or Pooling and Servicing Agreement with respect to the
rights and duties of the parties to the related Sale and Servicing Agreement or
Pooling and Servicing Agreement and the interests of the securityholders under
the applicable agreement. In that event, the legal expenses and costs of that
action and any liability resulting from that course of action will be expenses,
costs and liabilities of the Servicer, and the Servicer will not be entitled to
be reimbursed for those costs and liabilities.
Under the circumstances specified in each Sale and Servicing Agreement and
Pooling and Servicing Agreement, any entity into which the Servicer may be
merged or consolidated, or any entity resulting from any merger or consolidation
to which the Servicer is a parry, or any entity succeeding to all or
substantially all of the business of the Servicer will be the successor of the
Servicer under the related Sale and Servicing Agreement or Pooling and Servicing
Agreement.
The related prospectus supplement will set for the provisions to be
contained in the related Sale and Servicing Agreement or Pooling and Servicing
Agreement regarding how transition expenses will be funded.
Servicer Default
Except as otherwise provided in the related prospectus supplement, a
Servicer Default under each Sale and Servicing Agreement and Pooling and
Servicing Agreement will consist of the following:
1. any failure by the Servicer to deposit in or credit to any Account
any required payment or make the required payments from any Account
and that failure continues unremedied for five Business Days after
discovery of that failure by the Servicer or after receipt of
written notice by the Servicer;
2. failure on the part of the Servicer duly to observe or perform, in
any material respect, any covenants or agreements of the Servicer
set forth in the Sale and Servicing Agreement or the Pooling and
Servicing Agreement, which failure (i) materially and adversely
affects the rights of the Securityholders and (ii) continues
unremedied for a period of 60 days after discovery of such failure
by the Servicer or after the
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date on which written notice of such failure requiring the same to
be remedied shall have been given to the Servicer by any of the
Owner Trustee, the Indenture Trustee or securityholders evidencing
not less than 50% of the outstanding amount of the most senior class
of Securities then outstanding;
3. the occurrence of an Insolvency Event with respect to the Servicer.
Rights Upon Servicer Default
In the case of any Trust that has issued notes, unless otherwise provided
in the related prospectus supplement, so long as a Servicer Default under a Sale
and Servicing Agreement remains unremedied, the related Indenture Trustee or
holders of notes of the related series evidencing not less than 50% of the
principal amount of the most senior class of notes then outstanding may
terminate all the rights and obligations of the Servicer under the Sale and
Servicing Agreement, and at that time the Indenture Trustee or a successor
servicer appointed by the Indenture Trustee will succeed to all the
responsibilities, duties and liabilities of the Servicer under the Sale and
Servicing Agreement and will be entitled to similar compensation arrangements.
In the case of any Trust that has not issued notes, or the notes have been
discharged in accordance with their terms, unless otherwise provided in the
related prospectus supplement, as long as a Servicer Default under the related
Sale and Servicing Agreement or Pool and Servicing Agreement remains unremedied,
the related Trustee or holders of certificates of the related series evidencing
not less than 50% of the principal amount of the certificates then outstanding
(but excluding for purposes of that calculation and action all certificates held
by the Depositor, the Servicer or any of their affiliates), acting together as a
single class, may terminate all the rights and obligations of the Servicer under
the related Sale and Servicing Agreement or Pooling and Servicing Agreement, and
at that time the Trustee or a successor servicer appointed by the Trustee will
succeed to all the responsibilities, duties' and liabilities of the Servicer in
its capacity under the Sale and Servicing Agreement and will be entitled to
similar compensation arrangements.
However, if the Servicer becomes a debtor in bankruptcy or, if not
eligible to be a debtor in bankruptcy, becomes the subject of insolvency
proceedings, and no Servicer other than the commencement of a bankruptcy or
insolvency proceedings has occurred, that Indenture Trustee, those noteholders,
that Trustee or those certificateholders, as applicable, may not be able to
effect a transfer of servicing as described above. If that Indenture Trustee or
Trustee is unwilling or unable to so act, it may appoint, or petition a court of
competent jurisdiction for the appointment of, a successor servicer with a net
worth of at least $50,000,000 and whose regular business includes the servicing
of motor vehicle receivables. The related Indenture Trustee or the Trustee, or
any person appointed as successor servicer, will be the successor in all
respects to the predecessor Servicer under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement and all references in the related
Sale and Servicing Agreement or Pooling and Servicing Agreement to the Servicer
shall apply to that successor servicer. Notwithstanding termination, the
Servicer will be entitled to payment of specified amounts payable to it prior to
the termination for services it rendered prior to the termination. Upon payment
in full of the principal of and interest on the notes, the certificateholders
will succeed to the rights of the noteholders with respect to removal of the
Servicer.
Waiver of Past Defaults
With respect to each Trust that has issued notes, unless otherwise
provided in the applicable prospectus supplement:
o the holders of not less than a majority of the most senior class of
Securities then outstanding (but excluding for purposes of calculation
and action all Securities held by the Depositor, the Servicer or any
of their affiliates); or
o in the case of any Servicer Default that does not adversely affect the
related Indenture Trustee or the related noteholders, the holders of
certificates of that series (or relevant class or classes of
certificates of the series) evidencing a majority of the aggregate
Certificate Balance of those certificates then outstanding (but
excluding for purposes of calculation and action all certificates held
by the Depositor, the Servicer or any of their affiliates),
may, on behalf of all those noteholders or certificateholders, waive any default
by the Servicer in the performance of its obligations under the related Sale and
Servicing Agreement and its consequences, except a Servicer Default in
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making any required deposits to the related Collection Account in accordance
with that Sale and Servicing Agreement. With respect to each Trust that has not
issued notes, holders of certificates of that series evidencing a majority of
the aggregate Certificate Balance of those certificates then outstanding (or
relevant class or classes of certificates but excluding for purposes of
calculation and action all certificates held by the Depositor, the Servicer or
any of their affiliates), may, on behalf of all those certificateholders, waive
any default by the Servicer in the performance of its obligations under the
related Pooling and Servicing Agreement, except a Servicer Default in making any
required deposits to the related Account in accordance with the related Pooling
and Servicing Agreement. No waiver will impair those noteholders' or
certificateholders' rights with respect to subsequent defaults.
Amendment
Unless otherwise provided in the related prospectus supplement, each of
the Transfer and Servicing Agreements may be amended by the parties to that
Transfer and Servicing Agreement, without the consent of the related noteholders
or certificateholders, for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of that Transfer Agreement
and Servicing Agreement or of modifying in any manner the rights of the
securityholders thereunder; provided, that any amendment will not, as evidenced
by an opinion of counsel, adversely affect in any material respect the interests
of the securityholder; provided, however, that the amendment shall be deemed not
to materially and adversely affect the interests of any securityholder, and no
opinion shall be required, if the rating agencies confirm that the amendment
will not result in the withdrawal, qualification or reduction of the then
current ratings of the Securities.
Each of the Transfer and Servicing Agreements may also be amended from
time to time by the patties to that Transfer and Servicing Agreement with the
consent of the noteholders evidencing at least a majority of the Note Balance
and the certificateholders evidencing a majority of the Certificate Balance, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Transfer and Servicing Agreements or of modifying
in any manner the rights of the securityholders; provided, that the amendment
may not:
o increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on or in respect of the
Receivables or distributions that are required to be made for the
benefit of the securityholders; or
o reduce the aforesaid percentage of the notes or certificates that is
required to consent to the amendment, without the consent of the
holders of all of the outstanding notes or certificates, as
applicable.
List of Securityholders
Three or more holders of the certificates of any class in a series or one
or more holders of those certificates of that class evidencing not less than 51%
of the Certificate Balance of those certificates may, by written request to the
related Trustee, obtain access to the list of all certificateholders maintained
by that Trustee for the purpose of communicating with other certificateholders
with respect to their rights under the related Trust Agreement or Pooling and
Servicing Agreement or under those certificates.
No Transfer and Servicing Agreement will provide for the holding of annual
or other meetings of securityholders.
Insolvency Event
Each Trust Agreement will provide that the related Trustee does not have
the power to commence a voluntary proceeding in bankruptcy with respect to the
related Trust without the unanimous prior approval of all certificateholders
(including the Depositor) of that Trust and the delivery to that Trustee by each
certificateholder (including the Depositor) of a certificate certifying that
that certificateholder reasonably believes that that Trust is insolvent.
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Payment of Notes
Upon the payment in full of all outstanding notes of a given series and
the satisfaction and discharge of the related Indenture, the related Trustee
will succeed to all the rights of the Indenture Trustee, and the
certificateholders of that series will succeed to all the rights of the
noteholders of that series, under the related Sale and Servicing Agreement.
except as otherwise provided in the Sale and Servicing Agreement.
Termination
The respective obligations of the Depositor, the Servicer, the originator
(so long as BMW FS has rights or obligations under the related Transfer and
Servicing Agreement), the related Trustee and the related Indenture Trustee, as
the case may be, pursuant to a Transfer and Servicing Agreement will terminate
upon the earlier of:
o the maturity or other liquidation of the last Receivable and the
disposition of any amounts received upon liquidation of any
remaining Receivables;
o the payment to securityholders of all amounts required to be paid to
them pursuant to the related agreement; or
o the purchase by the Servicer, pursuant to the terms of the Sale and
Servicing Agreement of all of the Receivables as of the end of any
collection period after the aggregate Principal Balance of the
Receivables in that pool is reduced to 10% or less of the initial
aggregate Principal Balance of such Receivables as of the related
Cutoff Date (plus, if specified in the related prospectus
supplement, any amounts on deposit in a prefunding account) (or
other level as may be provided in the applicable prospectus
supplement) for an amount equal to the Redemption Price.
The Trustee will give written notice of termination to each securityholder
of record. The final distribution to any securityholder will be made only upon
surrender and cancellation of that holder's Security at any office or agency of
the Trustee specified in the notice of termination. Any funds remaining in the
Trust, after the Trustee has taken measures to locate a securityholder set forth
in the related Transfer and Servicing Agreement and those measures have failed,
will be distributed, subject to applicable law to the Depositor.
Upon termination of any Trust, the assets of that Trust will be liquidated
and the proceeds from any liquidation, and amounts held in related Accounts,
will be applied to pay the notes and the certificates of the related series in
full, to the extent of amounts available.
As more fully described in the applicable prospectus supplement, any
outstanding notes of the related series will be redeemed concurrently with any
of the events specified above and the subsequent payment to the related
certificateholders of all amounts required to be paid to them pursuant to the
applicable Trust Agreement or Pooling and Servicing Agreement will effect early
retirement of the certificates of that series.
Administration Agreement
The Administrator will enter into an agreement (as amended and
supplemented from time to time, an "Administration Agreement") with each Trust
that issues notes and the related Indenture Trustee.
Under each Administration Agreement, the Administrator will agree to
perform all the duties of the related Trust and the owner trustee under the Sale
and Servicing Agreement, the Indenture, the Trust Agreement and the other
related agreements to which the Trust is a party. The Administrator will monitor
the performance of the Trust and shall advise the owner trustee when action is
necessary to comply with the respective duties of such Trust and the owner
trustee under such agreements. The Administrator shall prepare for execution by
each Trust or the owner trustee, or shall cause the preparation by other
appropriate persons of, all such documents, reports, notices, filings,
instruments, certificates and opinions that it shall be the duty of such Trust
or the owner trustee to prepare, file or deliver.
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In addition, the Administrator shall take (or cause to be taken) all
appropriate action that each Trust or the owner trustee is required to take
pursuant to the related Indenture including, among other things:
o the preparation of or obtaining of the documents and
instruments required for execution and authentication of the
notes and delivery of the same to the Indenture Trustee;
o the notification of noteholders and the rating agencies of the
final principal payment on the notes;
o the preparation of definitive notes in accordance with the
instructions of the applicable clearing agency;
o the preparation, obtaining or filing of the instruments,
opinions and certificates and other documents required for the
release of collateral;
o the maintenance of an office in the city of New York, for
registration of transfer or exchange of the notes;
o the duty to cause newly appointed paying agents, if any, to
deliver to the Indenture Trustee the instrument specified in
the Indenture regarding funds held in Trust;
o the direction to the Indenture Trustee to deposit monies with
paying agents, if any, other than the Indenture Trustee;
o the obtaining and preservation of each Trust's qualifications
to do business in each state where such qualification is
required,
o the preparation of all supplements and amendments to the
Indenture and all financing statements, continuation
statements, instruments of further assurance and other
instruments and the taking of such other action as are
necessary or advisable to protect the related Trust estate;
o the delivery of the opinion of counsel on the closing date and
the annual delivery of opinions of counsel as to the Trust
estate, and the annual delivery of the officer's certificate
and certain other statements as to compliance with the
Indenture;
o the notification of the Indenture Trustee and the rating
agencies of each Servicer Default and, if such Servicer
Default arises from the failure of the Servicer to perform any
of its duties or obligations under the servicing agreement
with respect to the Receivables, the taking of all reasonable
steps available to remedy such failure;
o the notification of the Indenture Trustee of the appointment
of a successor servicer;
o the notification of the Indenture Trustee and the rating
agencies of each Event of Default under the Indenture;
o the monitoring of the related Trust's obligations as to the
satisfaction and discharge of the Indenture and the
preparation of an officer's certificate and the obtaining of
the opinion of counsel and the independent certificate
relating thereto;
o the compliance with the Indenture with respect to the sale of
the Trust estate in a commercially reasonable manner if an
event of default shall have occurred and be continuing;
o the preparation of all required documents and delivery notice
to noteholders of the removal of the Indenture Trustee and the
appointment of a successor indenture trustee;
66
o the preparation and delivery to the Indenture Trustee for
delivery to each noteholder such information as may be
required to enable such holder to prepare its federal and
state income or franchise tax returns;
o the preparation and, after execution by the related Trust, the
filing with the SEC, any applicable state agencies and the
Indenture Trustee of documents required to be filed on a
periodic basis with, and summaries thereof as may be required
by rules and regulations prescribed by, the SEC and any
applicable state agencies and the transmission of such
summaries, as necessary, to the noteholders);
o the opening of one or more accounts in the related Trust's
name and the taking of all other actions necessary with
respect to investment and reinvestment of funds in the
accounts;
o the preparation of issuer requests, the obtaining of opinions
of counsel and the certification to the Indenture Trustee with
respect to the execution of supplemental indentures and the
mailing to the noteholders of notices with respect to such
supplemental indentures;
o the duty to notify noteholders and the rating agencies of
redemption of the notes or to cause the Indenture Trustee to
provide such notification pursuant to an optional purchase by
the Servicer; and
o the preparation and delivery of all officer's certificates,
opinions of counsel and independent certificates with respect
to any requests by the issuer to the Indenture Trustee to take
any action under the Indenture.
In addition, and unless otherwise specified in the related prospectus
supplement, it will be the obligation of the Administrator to:
o pay the related trustee fees for each Trust;
o reimburse each Trustee and Indenture Trustee for its expenses,
disbursements and advances incurred by each such trustee in
accordance with the Indenture or Trust Agreement, as
applicable, except any such expense, disbursement or advance
as may be attributable to its willful misconduct, negligence
or bad faith; and
o indemnify each Trustee and Indenture Trustee and their
respective agents for, and hold them harmless against, any
loss, liability or expense incurred without negligence (with
respect to the Indenture Trustee), or gross negligence (with
respect to the owner trustee or the Delaware trustee), willful
misconduct or bad faith on their part, arising out of or in
connection with the acceptance or administration of the
transactions contemplated by the applicable agreements,
including the reasonable costs and expenses of defending
themselves against any claim or liability in connection with
the exercise or performance of any of their powers or duties
thereunder.
The foregoing obligations of the Administrator with respect to the Trustee
and Indenture Trustee will survive the termination of the Administration
Agreement.
As compensation for the performance of the Administrator's obligations
under the applicable Administration Agreement and as reimbursement for its
expenses related thereto, the Administrator will be entitled to a monthly
administration fee in an amount that will be set forth in the applicable
prospectus supplement, which fee may be paid by the Servicer out of the Total
Servicing Fee.
Certain Legal Aspects of the Receivables
General
The transfer of the Receivables to the applicable Trustee, the perfection
of the security interests in the Receivables and the enforcement of rights to
realize on the Financed Vehicles as collateral for the Receivables are
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subject to a number of federal and state laws, including the UCC as in effect in
various states. The Servicer and the Depositor will take the action described
below to perfect the rights of the applicable Trustee in the Receivables. If
another party purchases (including the taking of a security interest in) the
Receivables for new value in the ordinary course of its business, without actual
knowledge of the Trust's interest, and takes possession of the Receivables, that
purchaser would acquire an interest in the Receivables superior to the interest
of the Trust.
Security Interests
General. In states in which retail installment sale contracts or
promissory notes, including the Receivables, evidence the credit sale of motor
vehicles by dealers to obligors, the contracts also constitute personal property
security agreements and include grants of security interests in the vehicles
under the applicable UCC. Perfection of security interests in financed motor
vehicles is generally governed by the motor vehicle registration laws of the
state in which the vehicle is located. In most states, a security interest in a
motor vehicle is perfected by obtaining possession of the certificate of title
to the motor vehicle or notation of the secured party's lien on the motor
vehicle's certificate of title.
All retail installment sale contracts and promissory notes acquired from
Centers name BMW Bank as obligee or assignee and as the secured party, except in
the case of Contracts due from residents of certain states (currently Montana
and New Jersey) which name BMW FS as obligee or assignee and as the secured
party. BMW FS also takes all actions necessary under the laws of the state in
which the related Financed Vehicle is located to perfect its security interest
in that Financed Vehicle, including, where applicable, having a notation of its
lien recorded on the related certificate of title and obtaining possession of
that certificate of title. Because the originator continues to service the
contracts as Servicer under the Sale and Servicing Agreement or the Pooling and
Servicing Agreement, as applicable, the Obligors on the contracts will not be
notified of the sale from BMW FS to the Depositor or the sale from the Depositor
to the related Trust.
Perfection. Pursuant to the related purchase agreement, the originator
will sell and assign its security interest in the Financed Vehicles to the
Depositor and, with respect to each Trust, pursuant to the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, as applicable, the
Depositor will assign its security interest in the Financed Vehicles to that
Trust. However, because of the administrative burden and expense, none of the
originator, the Depositor or the related Trustee will amend any certificate of
title to identify that Trust as the new secured party on that certificate of
title relating to a Financed Vehicle. However, UCC financing statements with
respect to the transfer to the Depositor of BMW FS' security interest in the
Financed Vehicles and the transfer to the Trustee of the Depositor's security
interest in the Financed Vehicles will be filed. In addition, the Servicer will
continue to hold any certificates of title relating to the Financed Vehicles in
its possession as custodian for that Trust pursuant to the related Sale and
Servicing Agreement or Pooling and Servicing Agreement. We refer you to
"Description of the Transfer and Servicing Agreements--Sale and Assignment of
Receivables" in this prospectus.
In most states, an assignment of contracts and interest in motor vehicles
such as that under each purchase agreement or each Sale and Servicing Agreement
or Pooling and Servicing Agreement is an effective conveyance of a security
interest without amendment of any lien noted on a motor vehicle's certificate of
title, and the assignee succeeds to the assignor's rights as secured party.
Although re-registration of the motor vehicle is not necessary to convey a
perfected security interest in the Financed Vehicles to the Trust, the security
interest of that Trust in the vehicle could be defeated through fraud or
negligence because the Trust will not be listed as lienholder on the
certificates of title. In those states, in the absence of fraud or forgery by
the motor vehicle owner or the Servicer or administrative error by state or
local agencies, the notation of BMW Bank's or BMW FS', as applicable, lien on
the certificates of title will be sufficient to protect that Trust against the
rights of subsequent purchasers of a Financed Vehicle or subsequent lenders who
take a security interest in a Financed Vehicle. In each purchase agreement, BMW
FS will represent and warrant, and in each Sale and Servicing Agreement or
Pooling and Servicing Agreement, the Depositor will represent and warrant, that
it has taken all action necessary to obtain a perfected security interest in
each Financed Vehicle. If there are any Financed Vehicles as to which BMW FS
failed to obtain and assign to the Depositor a perfected security interest, the
security interest of the Depositor would be subordinate to, among others,
subsequent purchasers of the Financed Vehicles and holders of perfected security
interests in the Financed Vehicles, To the extent that failure has a material
and adverse effect on the Trust's interest in the related Receivables, however,
it would constitute a breach of the warranties of BMW FS under the related
purchase agreement or the Depositor under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement.
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Accordingly, pursuant to the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, the Depositor would be required to repurchase the related
Receivable from the Trust and, pursuant to the related purchase agreement, BMW
FS would be required to purchase that Receivable from the Depositor, in each
case unless the breach was cured. Pursuant to each Sale and Servicing Agreement
and Pooling and Servicing Agreement, the Depositor will assign to the related
Trust its rights to cause BMW FS to purchase that Receivable under the related
purchase agreement. We refer you to "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables" and "Risk Factors--Interests of
other persons in the receivables and financed vehicles could be superior to the
trust's interest, which may result in reduced payments on your securities" in
this prospectus.
Continuity of Perfection. Under the laws of most states, the perfected
security interest in a motor vehicle would continue for four months after the
motor vehicle is moved to a state that is different from the one in which it is
initially registered and thereafter until the owner re-registers the motor
vehicle in the new state. A majority of states generally require surrender of a
certificate of title to reregister a motor vehicle. In those states (for
example, California) that require a secured party to hold possession of the
certificate of title to maintain perfection of the security interest, the
secured party would learn of the re-registration through the request from the
obligor under the related installment sales contract or promissory note to
surrender possession of the certificate of title. In the case of motor vehicles
registered in states providing for the notation of a lien on the certificate of
title but not possession by the secured party (for example, Texas), the secured
party would receive notice of surrender from the state of re-registration if the
security interest is noted on the certificate of title. Thus, the secured party
would have the opportunity to re-perfect its security interest in the vehicle in
the state of relocation. However, these procedural safeguards will not protect
the secured party if through fraud, forgery or administrative error, the debtor
somehow procures a new certificate of title that does not list the secured
party's lien. Additionally, in states that do not require a certificate of title
for registration of a motor vehicle, re-registration could defeat perfection. In
the ordinary course of servicing the Receivables, BMW FS will take steps to
effect re-perfection upon receipt of notice of re-registration or information
from the Obligor as to relocation. Similarly, when an Obligor sells a Financed
Vehicle, BMW FS must surrender possession of the certificate of title or will
receive notice as a result of its lien noted on the certificate of title and
accordingly will have an opportunity to require satisfaction of the related
Receivable before release of the lien. Under each Sale and Servicing Agreement
and Pooling and Servicing Agreement, the Servicer will be obligated to take
appropriate steps, at the Servicer's expense, to maintain perfection of security
interests in the Financed Vehicles and will be obligated to purchase the related
Receivable if it fails to do so and that failure has a material and adverse
effect on the Trust's interest in the Receivable.
Priority of Liens Arising by Operation of Law. Under the laws of most
states (including California), liens for repairs performed on a motor vehicle
and liens for unpaid taxes take priority over even a perfected security interest
in a Financed Vehicle. The Code also grants priority to specified federal tax
liens over the lien of a secured party. The laws of some states and federal law
permit the confiscation of motor vehicles by governmental authorities under some
circumstances if used in unlawful activities, which may result in the loss of a
secured party's perfected security interest in the confiscated vehicle. BMW FS
will represent and warrant to the Depositor in each purchase agreement, and the
Depositor will represent and warrant to the Trust in each Sale and Servicing
Agreement and Pooling and Servicing Agreement, that, as of the related closing
date, each security interest in a Financed Vehicle is prior to all other present
liens (other than tax liens and other liens that arise by operation of law) upon
and security interests in that Financed Vehicle. However, liens for repairs or
taxes could arise, or the confiscation of a Financed Vehicle could occur, at any
time during the term of a Receivable. No notice will be given to the Trustee,
any Indenture Trustee, any noteholders or any certificateholders in respect of a
given Trust if a lien arises or confiscation occurs that would not give rise to
the Depositor's repurchase obligation under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement or BMW FS' repurchase obligation
under the related purchase agreement.
Repossession
In the event of default by an Obligor, the holder of the related retail
installment sale contract or promissory note has all the remedies of a secured
party under the UCC, except where specifically limited by other state laws.
Among the UCC remedies, the secured party has the right to perform repossession
by self-help means, unless it would constitute a breach of the peace or is
otherwise limited by applicable state law. Unless a motor vehicle financed by
BMW FS is voluntarily surrendered, self-help repossession is the method employed
by BMW FS in
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most states and is accomplished simply by retaking possession of the Financed
Vehicle. In cases where an Obligor objects or raises a defense to repossession,
or if otherwise required by applicable state law, a court order must be obtained
from the appropriate state court, and that vehicle must then be recovered in
accordance with that order. In some jurisdictions, the secured party is required
to notify that Obligor of the default and the intent to repossess the collateral
and to give that Obligor a time period within which to cure the default prior to
repossession. In some states, an Obligor has the right to reinstate its contract
and recover the collateral by paying the delinquent installments and other
amounts due.
Notice of Sale; Redemption Rights
In the event of default by an Obligor under a retail installment sale
contract or promissory note, some jurisdictions require that the obligor be
notified of the default and be given a time period within which to cure the
default prior to repossession. Generally, this right of cure may only be
exercised on a limited number of occasions during the term of the related
contract.
The UCC and other state laws require the secured party to provide an
Obligor with reasonable notice of the date, time and place of any public sale or
other disposition and/or the date after which any private sale or other
disposition of the collateral may be held. In most states, an Obligor has the
right to redeem the collateral prior to actual sale by paying the secured party
the unpaid principal balance of the obligation, accrued interest on the
obligation plus reasonable expenses for repossessing, holding and preparing the
collateral for disposition and arranging for its We, plus, in some
jurisdictions, reasonable attorneys' fees. In some states, an Obligor has the
right to redeem the collateral prior to actual sale by payment of delinquent
installments or the unpaid balance.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of motor vehicles generally will be applied first
to the expenses of resale and repossession and then to the satisfaction of the
indebtedness. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness, a deficiency judgment can be sought in those states that do not
prohibit or limit those judgments. In addition to the notice requirement
described above, the UCC requires that every aspect of the sale or other
disposition, including the method, manner, time, place and terms, be
"commercially reasonable." Generally, courts have held that when a sale is not
"commercially reasonable," the secured party loses its right to a deficiency
judgment. However, the deficiency judgment would be a personal judgment against
the Obligor for the shortfall, and a defaulting obligor can be expected to have
very little capital or sources of income available following repossession.
Therefore, in many cases, it may not be useful to seek a deficiency judgment or,
if one is obtained, it may be settled at a significant discount or be
uncollectible. In addition, the UCC permits the obligor or other interested
party to recover for any loss caused by noncompliance with the provisions of the
UCC. Also, prior to a sale, the UCC permits the Obligor or other interested
person to prohibit the secured party from disposing of the collateral if it is
established that the secured party is not proceeding in accordance with the
"default" provisions under the UCC. Occasionally, after resale or other
disposition of a repossessed vehicle and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a subordinate lien with respect
to that vehicle or if no lienholder exists, the UCC requires the creditor to
remit the surplus to the Obligor.
Certain Bankruptcy Considerations
In structuring the transactions contemplated by this prospectus, the
Depositor has taken steps that are intended to make it unlikely that the
voluntary or involuntary application for relief by BMW FS, as the originator,
under the United States Bankruptcy Code or similar applicable state laws
(collectively, "Insolvency Laws"), will result in consolidation of the assets
and liabilities of the Depositor with those of the originator. These steps
include the creation of the Depositor as a wholly owned, limited purpose
subsidiary pursuant to its limited liability company agreement containing
limitations, including restrictions on the nature of the Depositor's business
and on its ability to commence a voluntary case or proceeding under any
Insolvency Law without the unanimous affirmative vote of all of its directors.
In addition, to the extent that the Depositor granted a security interest in the
Receivables to the Trust, and that interest was validly perfected before the
bankruptcy or insolvency of BMW FS and was not taken or granted in contemplation
of insolvency or with the intent to hinder, delay or defraud BMW FS or its
creditors, that
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security interest should not be subject to avoidance, and payments to the Trust
with respect to the Receivables should not be subject to recovery by a creditor
or trustee in bankruptcy of BMW FS.
However, delays in payments on the Securities and possible reductions in
the amount of those payments could occur if.
(A) a court were to conclude that the assets and liabilities of the
Depositor should be consolidated with those of BMW FS in the event
of the application of applicable Insolvency Laws to BMW FS;
(B) a filing were made under any Insolvency Law by or against the
Depositor; or
(C) an attempt were to be made to litigate any of the foregoing issues.
On each closing date, counsel to the Depositor will give an opinion to the
effect that, based on a reasoned analysis of analogous case law (although there
is no precedent based on directly similar facts), and, subject to, facts,
assumptions and qualifications specified in the opinion and applying the
principles set forth in the opinion, in the event of a voluntary or involuntary
bankruptcy case in respect of BMW FS under Title 11 of the United States
Bankruptcy Code at a time when BMW FS was insolvent, the property of the
Depositor would not properly be substantively consolidated with the property of
the estate of BMW FS. Among other things, that opinion will assume that each of
the Depositor and BMW FS will follow specified procedures in the conduct of its
affairs, including maintaining records and books of account separate from those
of the other, refraining from commingling its assets with those of the other,
and refraining from holding itself out as having agreed to pay, or being liable
for, the debts of the other. The Depositor and BMW FS intend to follow these and
other procedures related to maintaining their separate corporate identities.
However, there can be no assurance that a court would not conclude that the
assets and liabilities of the Depositor should be consolidated with those of BMW
FS.
BMW FS will warrant in each purchase agreement that the sale of the
related Receivables by it to the Depositor is a valid sale. Notwithstanding the
foregoing, if BMW FS were to become a debtor in a bankruptcy case, a court could
take the position that the sale of Receivables to the Depositor should instead
be treated as a pledge of those Receivables to secure a borrowing of BMW FS. If
a court were to reach this conclusion, or a filing were made under any
Insolvency Law by or against the Depositor, or if an attempt were made to
litigate any of the foregoing issues, delays in payments on the certificates
(and possible reductions in the amount of payments) could occur. In addition, if
the transfer of Receivables to the Depositor is treated as a pledge instead of a
sale, a tax or government lien on the property of BMW FS arising before the
transfer of a Receivable to the Depositor may have priority over the Depositor's
interest in that Receivable. Also, while BMW FS is the Servicer, cash
collections on the Receivables may be commingled with general funds of BMW FS
and, in the event of a bankruptcy of BMW FS, a court may conclude that the Trust
does not have a perfected interest in those collections.
The originator and the Depositor will treat the transactions described in
this prospectus as a sale of the Receivables to the Depositor.
Consumer Protection Laws
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers involved
in consumer finance. These laws include the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Servicemembers Civil Relief Act, as amended, the Military Reservist
Relief Act of 1991, the Texas Consumer Credit Code, state adoptions of the
National Consumer Act and of the Uniform Consumer Credit Code and state motor
vehicle retail installment sales acts and other similar laws. Also, state laws
impose finance charge ceilings and other restrictions on consumer transactions
and require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon creditors who
fail to comply with their provisions. In some cases, this liability could affect
an assignee's ability to enforce consumer finance contracts including the
Receivables.
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The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, other statutes or the common law in some states,
has the effect of subjecting a seller, and specified creditors and their
assignees, in a consumer credit transaction to all claims and defenses that the
obligor in the transaction could assert against the seller of the goods.
Liability under the FTC Rule is limited to the amounts paid by the obligor under
the contract, and the holder of the contract may also be unable to collect any
balance remaining due under that contract from the obligor. The FTC Rule is
generally duplicated by the Uniform Consumer Credit Code, other state statutes
or the common law in certain states.
Most of the Receivables will be subject to the requirements of the FTC
Rule. Accordingly, each Trust, as holder of the related Receivables, will be
subject to any claims or defenses that the purchaser of the applicable Financed
Vehicle may assert against the seller of the related Financed Vehicle. As to
each Obligor, these claims are limited to a maximum liability equal to the
amounts paid by the Obligor on the related Receivable. Under most state motor
vehicle dealer licensing laws, sellers of motor vehicles are required to be
licensed to sell motor vehicles at retail sale. Furthermore, federal odometer
regulations promulgated under the Motor Vehicle Information and Cost Savings Act
require that all sellers of new and used vehicles furnish a written statement
signed by the seller certifying the accuracy of the odometer reading. If the
seller is not properly licensed or if a written odometer disclosure statement
was not provided to the purchaser of the related Financed Vehicle, an obligor
may be able to assert a defense against the seller of the vehicle. If an Obligor
were successful in asserting any of those claims or defenses, that claim or
defense would constitute a breech of the Depositor's representations and
warranties under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement and a breach of BMW FS' warranties under the related
purchase agreement and would, if the breach materially and adversely affects the
Receivable or the interests of the securityholders, create an obligation of the
Depositor and BMW FS, respectively, to repurchase the Receivable unless the
breach is cured. We refer you to "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables" in this prospectus.
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to borrowers.
From time to time, BMW FS has been involved in litigation under consumer
protection laws. In addition, substantially all of the motor vehicle contracts
originated by BMW FS in California after 1990 (the "California Contracts")
provided that the contract may be rescinded by the related Center if the Center
is unable to assign the contract to a lender within ten days of the date of the
contract. As of the date of this prospectus, the ten-day rescission period had
run in respect of all of the California Contracts in which the rescission
provision appears. Although there is authority, which is not binding upon any
court, providing that a conditional sale contract containing such a provision
does not comply with California law and would render the contract unenforceable,
to the Depositor's and BMW FS' knowledge, the issue has not been presented
before any California court. On the closing date, the Depositor will receive an
opinion of counsel to the effect that all of the California Contracts are
enforceable under California law and applicable federal laws.
The originator and the Depositor will represent and warrant under each
purchase agreement and each Sale and Servicing Agreement and Pooling and
Servicing Agreement, as applicable, that each Receivable complies with all
requirements of law in all material respects. Accordingly, if an Obligor has a
claim against a Trust for violation of any law and that claim materially and
adversely affects that Trust's interest in a Receivable, that violation would
constitute a breach of the representations and warranties of the originator's
under the purchase agreement and the Depositor under the related Sale and
Servicing Agreement or Pooling and Servicing Agreement and would create an
obligation of the originator and the Depositor to repurchase the Receivable
unless the breach is cured. We refer you to "Description of the Transfer and
Servicing Agreements--Sale and Assignment of Receivables" in this prospectus.
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Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a motor vehicle and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
vehicle at the time of bankruptcy (as determined by the court), leaving the
creditor as a general unsecured creditor for the remainder of the indebtedness.
A bankruptcy court may also reduce the monthly payments due under a contract or
change the rate of interest and time of repayment of the indebtedness.
Under the terms of the Servicemembers Civil Relief Act, as amended (the
"Relief Act"), an Obligor who enters the military service after the origination
of that Obligor's Receivable (including an Obligor who is a member of the
National Guard or is in reserve status at the time of the origination of the
Obligor's Receivable and is later called to active duty) may not be charged
interest above an annual rate of 6% during the period of that Obligor's active
duty status, unless a court orders otherwise upon application of the lender. In
addition, some states, including California, allow members of its national guard
to apply to a court to delay payments on any contract obligation if called into
active service by the Governor. It is possible that the foregoing could have an
effect on the ability of the Servicer to collect the full amount of interest
owing on some of the Receivables. In addition, both the Relief Act and the laws
of some states, including California, New York and New Jersey, imposes
limitations that would impair the ability of the Servicer to repossess the
released Financed Vehicle during the Obligor's period of active duty status.
Thus, if that Receivable goes into default, there may be delays and losses
occasioned by the inability to exercise the Trust's rights with respect to the
Receivable and the related Financed Vehicle in a timely fashion.
Any shortfall pursuant to either of the two preceding paragraphs, to the
extent not covered by amounts payable to the securityholders from amounts on
deposit in the related Reserve Account or from coverage provided under any other
credit enhancement mechanism, could result in losses to the securityholders.
Material Income Tax Consequences
The following is a discussion of the anticipated material federal income
tax consequences of the purchase, ownership and disposition of the notes and the
certificates of any series, to the extent it relates to matters of law or legal
conclusions. This discussion represents the opinion of Tax Counsel to the Trust,
subject to the qualifications set forth in this prospectus. The summary does not
purport to deal with federal income tax consequences applicable to all
categories of investors, some of which may be subject to special rules. For
example, it does not discuss the tax treatment of noteholders or
certificateholders that are insurance companies regulated investment companies,
dealers in securities, S-corporations, banks, thrifts, other financial
institutions, broker-dealers, tax-exempt organizations, real estate investment
trusts and persons that hold certificates or notes as part of a straddle,
hedging or conversion transaction or to a person or entity holding an interest
in a holder. Moreover, there are no cases or Internal Revenue Service ("IRS")
rulings on similar transactions involving both debt and equity interests issued
by a trust with terms similar to those of the notes and the certificates. As a
result, the IRS may disagree with all or a part of the discussion below. It is
suggested that prospective investors consult their own tax advisors in
determining the federal, state, local, foreign and any other tax consequences to
them of the purchase, ownership and disposition of the notes and the
certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated under the Code and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. No ruling on any of the
issues discussed below will be sought from the IRS. For purposes of the
following summary, references to the Trust, the notes, the certificates and
related terms, parties and documents shall be deemed to refer to each Trust and
the notes, certificates and related terms, parties and documents applicable to
that Trust. The federal income tax consequences to certificateholders will vary
depending on whether the Trust is treated as a partnership (or a "disregarded
entity," in the event that there is a single beneficial owner of the
Certificates) or a grantor trust under the Code. The prospectus supplement for
each series of certificates will specify, and each trust will receive an opinion
of Tax Counsel regarding:
73
o whether the Trust will be treated as a partnership, or a disregarded
entity, or a grantor trust; and
o the tax characterization of the notes and certificates.
An opinion of Tax Counsel, however, is not binding on the IRS or the
courts.
Tax Treatment of Owner Trusts
Tax Characterization of the Trust
The following general discussion of the anticipated federal income tax
consequences of the purchase, ownership and disposition of the notes and the
certificates of a Trust referred to as an "owner trust" in the applicable
prospectus supplement (an "Owner Trust"), subject to the qualifications set
forth in this prospectus. These statements are intended as an explanatory
discussion of the related federal income tax matters affecting investors
generally, but do not purport to furnish information in the level of detail or
with the attention to an investor's specific tax circumstances that would be
provided by an investor's own tax advisor. Accordingly, it is suggested that
each investor consult its own tax advisor with regard to the tax consequences to
it of investing in notes or certificates.
Tax Counsel will deliver its opinion that, although there is no authority
directly on point with respect to transactions similar to those contemplated in
the Transfer and Servicing Agreements or entities with a capital structure
similar to the Trust, an Owner Trust will not be an association or publicly
traded partnership taxable as a corporation for federal income tax purposes.
This opinion will be based on the assumption that the terms of the Related
Documents will be complied with, and on Tax Counsel's conclusion that the nature
of the income of the Trust will exempt it from the rule that some publicly
traded partnerships are taxable as corporations.
If the Owner Trust were taxable as a corporation for federal income tax
purposes, the Trust would be subject to corporate income tax on its taxable
income. The Trust's taxable income would include all its income on the
Receivables, possibly reduced by its interest expense on some or all of the
classes of notes. Any corporate income tax could materially reduce cash
available to make payments on the notes and the certificates, and
certificateholders could be liable for any tax of this type that is not paid by
the Trust.
Tax Consequences to Owners of the Notes
Treatment of the Notes as Indebtedness. The Depositor will agree, and the
noteholders and beneficial owners of the notes (the "Note Owners") will, by
their purchase of notes, be deemed to have agreed, to treat the notes as debt
for federal income tax purposes. Except as otherwise provided in the related
prospectus supplement, Tax Counsel will deliver its opinion that, although there
is no authority directly on point with respect to transactions similar to those
contemplated in the Transfer and Servicing Agreements or entities with a capital
structure similar to the Trust or with instruments similar to the notes, the
notes will be classified as debt for federal income tax purposes. The discussion
below assumes this characterization of the notes is correct.
OID, etc. The discussion below assumes that all payments on the notes are
denominated in U.S. dollars, and that the notes are not indexed securities or
Strip Notes (as defined in this prospectus). Moreover, the discussion assumes
that the interest formula for the notes meets the requirements for "qualified
stated interest" under Treasury regulations (the "OID regulations") relating to
original issue discount ("OID"), and that any OID on the notes (i.e., any excess
of the principal amount of the notes over their issue price) does not exceed a
de minimis amount (i.e., 1/4% of their principal amount multiplied by the number
of full years included in determining their term), all within the meaning of the
OID regulations. In determining whether any OID on the notes is de minimis, the
Depositor expects to use a reasonable assumption regarding prepayments (a
"Prepayment Assumption") to determine the weighted average maturity of the
notes. If these conditions are not satisfied with respect to any given series of
notes, additional tax considerations with respect to those notes will be
disclosed in the applicable prospectus supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the notes will not be considered issued
with OID. The stated interest on the notes will be taxable to a Note Owner as
74
ordinary interest income when received or accrued in accordance with that Note
Owner's method of tax accounting. Under the OID regulations, the Note Owner of a
note issued with a de minimis amount of OID must include that OID in income, on
a pro rata basis, as principal payments are made on the note. A purchaser who
buys a note for more or less than its principal amount will generally be
subject, respectively, to the premium amortization or market discount rules of
the Code.
The Note Owner of a note that has a fixed maturity date of not more than
one year from the issue date of that note (a "Short-Term Note") may be subject
to special rules. An accrual basis Note Owner of a Short-Term Note (and some
cash method Note Owners, including regulated investment companies, as set forth
in Section 1281 of the Code) generally would be required to report interest
income as interest accrues on a straight-line basis or under a constant yield
method over the term of each interest period. Other cash basis Note Owners of a
Short-Term Note would, in general, be required to report interest income as
interest is paid (or, if earlier, upon the taxable disposition of the Short-Term
Note). However, a cash basis Note Owner of a Short-Term Note reporting interest
income as it is paid may be required to defer a portion of any interest expense
otherwise deductible on indebtedness incurred to purchase the Short-Term Note
until the taxable disposition of the Short-Term Note. A cash basis Note Owner
that is not required to report interest income as it accrues under Section 1281
may elect to accrue interest income on all nongovernment debt obligations with a
term of one year or less, in which case the Note Owner would not be subject to
the interest expense deferral rule referred to in the preceding sentence.
Certain special rules apply if a Short-Term Note is purchased for more or less
than its principal amount.
Sale or Other Disposition. If a Note Owner sells a note, the Note Owner
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the Note Owner's adjusted tax basis in the note.
The adjusted tax basis of a note will equal the Note Owner's cost for the note,
increased by any market discount, acquisition discount, OID and gain previously
included in income by that Note Owner with respect to the note and decreased by
the amount of bond premium, if any, previously amortized and by the amount of
payments of principal and OID previously received by that Note Owner with
respect to that note. Any such gain or loss, and any gain or loss recognized on
a prepayment of the notes, will be capital gain or loss if the note was held as
a capital asset, except for gain representing accrued interest and accrued
market discount not previously included in income. Capital losses generally may
be used only to offset capital gains.
Foreign Owners. Interest paid (or accrued) to a Note Owner who is a
Foreign Owner generally will be considered "portfolio interest," and generally
will not be subject to United States federal income tax and withholding tax if
the interest is not effectively connected with the conduct of a trade or
business within the United States by the Foreign Owner and:
1. the Foreign Owner is not actually or constructively a "10 percent
shareholder" of the Trust or the Depositor (including a holder of
10% of the outstanding certificates issued by the Trust) or a
"controlled foreign corporation" with respect to which the Trust or
the Depositor is a "related person" within the meaning of the Code;.
2. the Foreign Owner is not a bank receiving interest described in
Section 881(c)(3)(A) of the Code;
3. the interest is not contingent interest described in Section
871(h)(4) of the Code; and
4. the Foreign Owner does not bear specified relationships to any
certificateholder.
To qualify for the exemption from taxation, the Foreign Owner must provide
the applicable Trustee or other person who is otherwise required to withhold
U.S. tax with respect to the notes with an appropriate statement, on Form W-8BEN
or a similar form, signed under penalty of perjury, certifying that the Note
Owner is a Foreign Owner and providing the Foreign Owner's name and address. If
a note is held through a securities clearing organization or other financial
institution, the organization may provide the relevant signed statement to the
withholding agent; in that case, however, the signed statement must be
accompanied by a Form W-8BEN or substitute form provided by the Foreign Owner
and the Foreign Owner must notify the financial institution acting on its behalf
of any changes to the information on the Form W-8BEN, or substitute form, within
30 days of that change. If interest paid to a Foreign Owner is not considered
portfolio interest, then it will be subject to United States federal income and
withholding tax at a rate of 30 percent, unless reduced or eliminated pursuant
to an applicable tax treaty.
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In order to claim the benefit of any applicable tax treaty, the Foreign Owner
must provide the applicable Trustee or other person who is required to withhold
U.S. tax with respect to the notes with an appropriate statement on Form W-8BEN
or substitute form, signed under penalty of perjury, certifying that the Foreign
Owner is entitled to benefits under the treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a Foreign Owner will be exempt from United
States federal income and withholding tax, provided that:
o the gain is not effectively connected with the conduct of a trade or
business in the United States by the Foreign Owner; and
o in the case of an individual Foreign Owner, the Foreign Owner is not
present in the United States for 183 days or more during the taxable
year of disposition.
As used in this prospectus, a "U.S. Person" means:
1. a citizen or resident of the United States;
2. an entity treated for United States federal income tax purposes as a
corporation or a partnership organized in or under the laws of the
United States or any state thereof or the District of Columbia;
3. an estate, the income of which is includible in gross income for
federal income tax purposes regardless of its source; or
4. a trust if:
(a) a court within the U.S. is able to exercise primary
supervision over the administration of the trust and one
or more United States persons have authority to control
all substantial decisions of the trust; or
(b) the trust was in existence on August 20, 1996 and is
eligible to elect, and has made a valid election, to be
treated as a U.S. Person despite not meeting the
requirements of clause (a).
A "Foreign Owner " means a person other than a U.S. Person and persons
subject to rules applicable to certain former citizens or residents of the
United States.
Backup Withholding. Each Note Owner (other than an exempt Note Owner which
includes a corporation, tax-exempt organization, qualified pension and
profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident) will be required to
provide, under penalty of perjury, a certificate on Form W-9 providing the Note
Owner's name, address, correct federal taxpayer identification number and a
statement that the Note Owner is not subject to backup withholding. Should a
nonexempt Note Owner fail to provide the required certification, the Trust will
be required to withhold from the amount otherwise payable to the Note Owner, and
remit the withheld amount to the IRS. The amount withheld would be credited
against the Note Owner's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the opinion
of Tax Counsel, the IRS successfully asserted that one or more of the notes did
not represent debt for federal income tax purposes, the notes might be treated
as equity interests in the Trust. If so treated, the Trust might be taxable as a
corporation with the adverse consequences described above (and the taxable
corporation would not be able to reduce its taxable income by deductions for
interest expense on notes recharacterized as equity). Alternatively, and most
likely in the view of Tax Counsel, the Trust might be treated as a publicly
traded partnership that would not be taxable as a corporation because it would
meet specified qualifying income tests. Nonetheless, treatment of the notes as
equity interests in a publicly traded partnership could have adverse tax
consequences to some Note Owners. For example, income to some tax-exempt
entities (including pension funds) may be "unrelated business taxable income,"
income to Foreign Owners may be subject to U.S. tax and cause Foreign Owners to
be subject to U.S. tax return filing and withholding
76
requirements, and individual Note Owners might be subject to some limitations on
their ability to deduct their share of trust expenses.
Tax Consequences to Owners of the Certificate
Treatment of the Trust as a Partnership. Except as otherwise provided in
the related prospectus supplement, Tax Counsel to the Trust is of the opinion
that for federal income tax purposes the Notes will constitute debt and, if the
Certificates are held by more than one person, the Trust will constitute a
partnership. However, the proper characterization of the arrangement involving
the Trust, the certificates, the notes, the Depositor and the Servicer is not
clear because there is no authority on transactions closely comparable to that
contemplated in this prospectus. The Depositor and the Servicer will agree, and
the beneficial owners of the certificates (the "Certificate Owners") will agree
by their purchase of certificates, to treat the Owner Trust as a partnership (or
as an entity disregarded as separate from the Certificate Owner in the event
that there is a single Certificate Owner) for purposes of federal and state
income tax, franchise tax and any other tax measured in whole or in part by
income. Unless otherwise specified in the applicable prospectus supplement, if
the Owner Trust is treated as a partnership, the assets of the partnership would
be the assets held by the Trust, the partners of the partnership would be the
Certificate Owners (including the Depositor in its. capacity as recipient of
payments from the Reserve Account), and the notes would be debt of the
partnership.
A variety of alternative characterizations are possible. For example,
because the certificates have features characteristic of debt, the certificates
might be considered debt of the Depositor or the Trust. Any characterization of
this type generally would not result in materially adverse tax consequences to
Certificate Owners as compared to the consequences from treatment of the
certificates as equity in a partnership, described below. The following
discussion assumes that the certificates represent equity interests in a
partnership. The applicable prospectus supplement will disclose the tax
considerations relevant to any certificates not intended to constitute equity
interests in a partnership.
Partnership Taxation. As a partnership, the Owner Trust will not be
subject to federal income tax. Rather, each Certificate Owner will be required
to separately take into account that Owner's allocated share of income, gains,
losses, deductions and credits of the Owner Trust. The Trust's income will
consist primarily of interest and finance charges earned on the Receivables
(including appropriate adjustments for market discount, OID and bond premium)
and any gain upon collection or disposition of Receivables. The Trust's
deductions will consist primarily of interest accruing with respect to the
notes, servicing and other fees, and losses or deductions upon collection or
disposition of Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). In the Trust Agreement, the Certificate
Owners will agree that the yield on a certificate is intended to qualify as a
"guaranteed payment" and not as a distributive share of partnership income. A
guaranteed payment would be treated by a Certificate Owner as ordinary income,
but may well not be treated as interest income. The Trust Agreement will provide
that, to the extent that the treatment of the yield on a Certificate as a
guaranteed payment is not respected, the Certificate Owners of each class of
certificates will be allocated taxable income of the Trust for each month equal
to the sum of:
1. the interest that accrues on the certificates in accordance with
their terms for that month, including interest accruing at the Pass
Through Rate for that month and interest on amounts previously due
on the certificates but not yet paid;
2. any Trust income attributable to discount on the Receivables that
corresponds to any excess of the principal amount of the
certificates over their initial issue price;
3. prepayment premium payable to the Certificate Owners for that month;
and
4. any other amounts of income payable to the Certificate Owners for
that month.
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That allocation will be reduced by any amortization by the Trust of
premium on Receivables that corresponds to any excess of the initial issue price
of certificates over their initial principal amount. All remaining taxable
income of the Trust will be allocated to the Depositor. Except as provided
below, losses and deductions generally will be allocated to the Certificate
Owners only to the extent the Certificate Owners are reasonably expected to bear
the economic burden of those losses or deductions. Any losses allocated to
Certificate Owners could be characterized as capital losses, and the Certificate
Owners generally would only be able to deduct those losses against capital gain
income, and deductions would be subject to the limitations set forth below.
Accordingly, a Certificate Owner's taxable income from the Trust could exceed
the cash it is entitled to receive from the Trust.
Based on the economic arrangement of the parties, this approach for
allocating Trust income and loss should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not require a
greater amount of income to be allocated to Certificate Owners. Moreover, even
under the foregoing method of allocation, Certificate owners may be allocated
income equal to the entire Pass Through Rate plus the other items described
above even though the Trust might not have sufficient cash to make current cash
payments of that amount. Thus, cash basis Certificate Owners will, in effect, be
required to report income from the certificates on the accrual basis and
Certificate Owners may become liable for taxes on Trust income even if they have
not received cash from the Trust to pay those taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
Certificate Owners but Certificate Owners may be purchasing certificates at
different times and at different prices, Certificate Owners may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the Trust.
For each taxable year of the Certificate Owner, the Certificate Owner will
be required to report items of income, loss and deduction allocated to them by
the Owner Trust for the Trust's taxable year that ends on or before the last day
of that taxable year of the Certificate Owner. The Code prescribes rules for
determining the taxable year of the Trust. It is likely that, under these rules,
the taxable year of the Trust will be the calendar year. However, in the event
that all of the Certificate Owners possessing a 5 percent or greater interest in
the equity or profits (excluding for this purpose amounts treated as guaranteed
payments) of the Trust share a taxable year that is other than the calendar
year, the Trust could be required to use that year as its taxable year.
A significant portion of the taxable income allocated to a Certificate
Owner that is a pension, profit sharing or employee benefit plan or other
tax-exempt entity (including an individual retirement account) generally will
constitute "unrelated business taxable income" taxable to that Certificate Owner
under the Code.
An individual taxpayer's share of expenses of the Owner Trust (including
fees to the Servicer but not interest expense) would be miscellaneous itemized
deductions. Those deductions might be disallowed to the individual in whole or
in part and might result in that Certificate Owner being taxed on an amount of
income that exceeds the amount of cash actually paid to that Certificate Owner
over the life of the Trust.
The Owner Trust intends to make all tax calculations relating to income
and allocations to Certificate Owners on an aggregate basis. If the IRS were to
require that those calculations be made separately for each Receivable, the
Trust might be required to incur additional expense but it is believed that
there would not be a material adverse effect on Certificate Owners.
Discount and Premium. It is believed that the Receivables were not issued
with OID, and, therefore, the Owner Trust should not have OID income. However,
the purchase price paid by the Trust for the Receivables may be greater or less
than the remaining principal balance of the Receivables at the time of purchase.
If so, the Receivables will have been acquired at a premium or discount, as the
case may be. (As indicated above, the Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the Owner Trust acquires the Receivables at a market discount or
premium, the Trust will elect to include that discount in income currently as it
accrues over the life of the Receivables or to offset the premium against
interest income on the Receivables. As indicated above, a portion of the market
discount income or premium deduction may be allocated to Certificate Owners.
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Section 708 Termination. Under Section 708 of the Code, the Owner Trust
will be deemed to terminate for federal income tax purposes if 50% or more of
the capital and profits interests in the Trust are sold or exchanged within a
12-month period. If that termination occurs, the Trust will be considered to
transfer all of its assets and liabilities to a new partnership in exchange for
an interest in the new partnership, after which the Trust would be deemed to
distribute interests in the new partnership to Certificate Owners (including the
purchasing partner who caused the termination) in liquidation of the terminated
partnership. The Trust will not comply with technical requirements that might
apply when a constructive termination occurs. As a result, the Trust may be
subject to tax penalties and may incur additional expenses if it is required to
comply with those requirements. Furthermore, the Trust might not be able to
comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the certificates sold.
A Certificate Owner's tax basis in a certificate will generally equal the
Certificate Owner's cost increased by the Certificate Owner's share of Trust
income (includible in income) and decreased by any payments received with
respect to that certificate. In addition, both the tax basis in the certificates
and the amount realized on a sale of a certificate would include the Certificate
Owner's share of the notes and other liabilities of the Trust. A Certificate
Owner acquiring certificates at different prices may be required to maintain a
single aggregate adjusted tax basis in those certificates, and, upon sale or
other disposition of some of the certificates, allocate a portion of that
aggregate tax basis to the certificates sold (rather than maintaining a separate
tax basis in each certificate for purposes of computing gain or loss on a sale
of that certificate).
Any gain on the sale of a certificate attributable to the holder's share
of unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Owner Trust does not expect to have any other assets
that would give rise to those special reporting requirements. Thus, to avoid
those special reporting requirements, the Trust will elect to include market
discount in income as it accrues.
If a Certificate Owner is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the certificates that exceeds the aggregate
cash payments with respect to the Certificates, the excess will generally give
rise to a capital loss upon the retirement of the certificates.
Allocations Between Transferors and Transferees. In general, the Owner
Trust's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the Certificate Owners
in proportion to the principal amount of certificates owned by them as of the
close of the last day of that month. As a result, a Certificate Owner purchasing
certificates may be allocated tax items (which will affect its tax liability and
tax basis) attributable to periods before the Certificate Owner actually owned
the certificates.
The use of a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Owner Trust might be reallocated among the Certificate Owners. The
Depositor is authorized to revise the Owner Trust's method of allocation between
transferors and transferees to conform to a method permitted by future
regulations.
Section 754 Election. In the event that a Certificate Owner sells its
certificates at a profit (loss), the purchasing Certificate Owner will have a
higher (or lower) basis in the certificates than the selling Certificate Owner
had. The tax basis of the Owner Trust's assets will not be adjusted to reflect
that higher (or lower) basis unless there is a "substantial basis reduction"
within the meaning of Section 734 of the Code or unless the trust were to file
an election under Section 754 of the Code. If the trust qualifies as a
"securitization partnership" within the meaning of Section 743(f) of the Code,
it cannot have a substantial basis reduction that would require an adjustment
with respect to the sale of the certificates. With respect to the election under
Section 754 of the Code, in order to avoid the administrative complexities that
would be involved in keeping accurate accounting records, as well as potentially
onerous information reporting requirements, the Owner Trust will not make that
election. As a result, Certificate Owners might be allocated a greater or lesser
amount of trust income than would be appropriate based on their own purchase
price for certificates.
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Administrative Matters. The Trustee is required to keep or have kept
complete and accurate books of the Owner Trust. These books will be maintained
for financial reporting and tax purposes on an accrual basis and the fiscal year
of the Trust will be set forth in the applicable prospectus supplement. The
Trustee will file a partnership information return (IRS Form 1065) with the IRS
for each taxable year of the Trust during which the Owner Trust is treated as a
partnership for federal income tax purposes, and for each such taxable year will
report each Certificate Owner's allocable share of items of Trust income and
expense to holders and the IRS on Schedule K-1. The Trust will provide the
Schedule K-1 information to nominees that fail to provide the Trust with the
information statement described below and those nominees will be required to
forward that information to the Certificate Owners. Generally, Certificate
Owners must file tax returns that are consistent with the information return
filed by the Trust or be subject to penalties unless the Certificate Owner
timely notifies the IRS of all those inconsistencies.
Under Section 6031 of the Code, any person that holds certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing specified information on the nominee, the Certificate
Owners and the certificates so held. The information includes (1) the name,
address and taxpayer identification number of the nominee and (2) as to each
Certificate Owner (x) the name, address and identification number of that
person, (y) whether that person is a U.S. person, a tax-exempt entity or a
foreign government, an international organization, or any wholly owned agency or
instrumentality of any of the foregoing, and (z) specified information on
certificates that were held, bought or sold on behalf of that person throughout
the year. In addition, brokers and financial institutions that hold certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of certificates. A clearing agency registered
under Section 17A of the Securities and Exchange Act of 1934 is not required to
furnish any information statement of this type to the Trust. The information
referred to above for any calendar year must be furnished to the Trust on or
before the following January 31. Nominees, brokers and financial institutions
that fail to provide the Trust with the information described above may be
subject to penalties.
The Depositor will be designated as the tax matters partner in the related
Trust Agreement, and as the tax matters partner is designated to receive notice
on behalf of, and to provide notice to those Certificate Owners not receiving
notice from, the IRS, and to represent the Certificate Owners in certain
disputes with the IRS. The Code provides for administrative examination of a
partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information return is
filed. Any adverse determination following an audit of the return of the Trust
by the appropriate taxing authorities could result in an adjustment of the
returns of the Certificate Owners, and, under some circumstances, a Certificate
Owner may be precluded from separately litigating a proposed adjustment to the
items of the Trust. As the tax matters partner, the Depositor may enter into a
binding settlement on behalf of certain Certificate Owners. It is suggested that
each Certificate Owner consult its own tax advisor with respect to the impact of
these procedures on its particular case.
Tax Consequences to Foreign Certificate Owners. It is not clear whether
the Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to Certificate
Owners who are not U.S. Persons ("Foreign Certificate Owners") because there is
no clear authority dealing with that issue under facts substantially similar to
those described in this prospectus. Although it is not expected that the Owner
Trust would be engaged in a trade or business in the United States for those
purposes, the Trust will withhold as if it were so engaged in order to protect
the Trust from possible adverse consequences of a failure to withhold. The Trust
expects to withhold on the portion of its taxable income that is allocable to
Foreign Certificate Owners pursuant to Section 1446 of the Code, as if that
income were effectively connected to a U.S. trade or business, at the highest
rate of tax applicable to their domestic counterparts in the case of Foreign
Certificate Owners that are corporations, individuals, trusts and estates,
respectively. Subsequent adoption of Treasury regulations or the issuance of
other administrative pronouncements may require the Trust to change its
withholding procedures. In determining a holder's withholding status, the Trust
may rely on IRS Form W-8BEN (or any applicable successor form), IRS Form W-9 or
the holder's certification of nonforeign status signed under penalties of
perjury.
Each Foreign Certificate Owner might be required to file a U.S. individual
or corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the Trust's income. Each Foreign Certificate
Owner must obtain a taxpayer identification number from the IRS and submit that
number to the Trust on Form W-8BEN (or any applicable successor form) in order
to assure appropriate crediting of the taxes withheld. A
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Foreign Certificate Owner generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a Foreign
Certificate Owner generally will be considered guaranteed payments to the extent
those payments are determined without regard to the income of the Trust. If
these interest payments are properly characterized as guaranteed payments, then
the interest will not be considered "portfolio interest," in which case
Certificate Owners would be subject to United States federal income tax and
withholding tax at a rate of 30 percent, unless reduced or eliminated pursuant
to an applicable treaty. In that case, a Foreign Certificate Owner would only be
entitled to claim a refund for that portion of the taxes, if any, in excess of
the taxes that should be withheld with respect to the guaranteed payments.
Backup Withholding. Payments made on the certificates and proceeds from
the sale of the certificates will be subject to a backup withholding tax if, in
general, the Certificate Owner fails to comply with specified identification
procedures, unless the holder is an exempt recipient under applicable provisions
of the Code. We refer you to "--Tax Consequences to Owners of the Notes--Backup
Withholding" above.
Tax Treatment of Grantor Trusts
Tax Characterization of the Trust as a Grantor Trust. The following
general discussion of the anticipated federal income tax consequences of the
purchase, ownership and disposition of the certificates of a Trust referred to
as a "grantor trust" in the applicable prospectus supplement (a "Grantor
Trust"). It is intended as an explanatory discussion of the possible effects of
the classification of any Trust as a grantor trust for federal income tax
purposes on investors generally, but does not purport to furnish information in
the level of detail or with the attention to an investor's specific tax
circumstances. Accordingly, it is suggested that each investor consult its own
tax advisors with regard to the tax consequences to it of investing in
certificates of a Grantor Trust ("Grantor Trust Certificates").
Tax Counsel will deliver its opinion that the Trust will not be classified
as an association taxable as a corporation and that, although there is no
authority directly on point with respect to transactions similar to those
contemplated in the Transfer and Servicing Agreements or entities with a capital
structure similar to the Trust, the Trust will be classified as a grantor trust
under the Code. In this case, beneficial owners of Grantor Trust Certificates
(referred to as "Grantor Trust Certificateholders") could be considered to own
either:
o an undivided interest in a single debt obligation held by the
Grantor Trust and having a principal amount equal to the total
stated principal amount of the Receivables and an interest rate
equal to the relevant Pass Through Rate; or
o an interest in each of the Receivables and other Trust property.
The determination of whether the economic substance of a property transfer
is a sale or a loan secured by the transferred property has been made by the IRS
and the courts on the basis of numerous factors designed to determine whether
the transferor has relinquished and the transferee has obtained substantial
incidents of ownership in the property. Among those factors, the primary factors
examined are whether the transferee has the opportunity to gain if the property
increases in value and has the risk of loss if the property decreases in value.
The relevant pooling and servicing agreement will express the intent of
the Depositor to sell, and the Grantor Trust Certificateholders to purchase, the
Receivables, and the Depositor and each Grantor Trust Certificateholder, by
accepting a beneficial interest in a Grantor Trust Certificate, will agree to
treat the Grantor Trust Certificates as ownership interests in the Receivables
and any other Trust property.
Treatment as Debt Obligation. If a Grantor Trust Certificateholder was
considered to own an undivided interest in a single debt obligation, the
principles described under "--Tax Treatment of Owner Trusts--Tax Consequences to
Owners of the Notes" would apply. Each Grantor Trust Certificateholder, rather
than reporting its share of the interest accrued on each Receivable, would, in
general, be required to include in income interest accrued or received on the
principal amount of the Grantor Trust Certificates at the relevant Pass Through
Rate in accordance with its usual method of accounting.
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The Grantor Trust Certificates would be subject to OID rules, described
below under "--Stripped Bonds and Stripped Coupons" and "--Original Issue
Discount." In determining whether any OID on the Grantor Trust Certificates is
de minimis, the Depositor expects to use a reasonable Prepayment Assumption to
determine the weighted average life of the Grantor Trust Certificates. OID
includible in income for any accrual period (generally, the period between
payment dates) would generally be calculated using a Prepayment Assumption and
an anticipated yield established as of the date of initial sale of die Grantor
Trust Certificates and would increase or decrease to reflect prepayments at a
faster or slower rate than anticipated. The Grantor Trust Certificates would
also be subject to the market discount provisions of the Code to the extent that
a Grantor Trust Certificateholder purchased those certificates at a discount
from the initial issue price (as adjusted to reflect prior accruals of OID).
The remainder of the discussion in this prospectus assumes that a Grantor
Trust Certificateholder will be treated as owning an interest in each Receivable
and the proceeds from each Receivable, any right to receive Yield Supplement
Deposits and any other Trust property, although for administrative convenience,
the Servicer will report information on an aggregate basis as though all of the
Receivables were a single obligation. The amount and, in some instances,
character, of the income reported to a Grantor Trust Certificateholder may
differ under this method for a particular period from that which would be
reported if income were reported on a precise asset-by-asset basis.
Characterization. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in each of the Receivables in the
Trust, any right to receive Yield Supplement Deposits, and any other Trust
property. Any amounts received by a Grantor Trust Certificateholder in lieu of
amounts due with respect to any Receivable because of a default or delinquency
in payment will be treated for federal income tax purposes as having the same
character as the payments they replace.
For federal income tax purposes, the Depositor will be treated as having
retained a fixed portion of the interest due on each Receivable having an annual
percentage rate in excess of the sum of the applicable Pass Through Rate and the
Servicing Rate (each, a "High Yield Receivable") equal to the difference
between:
o the annual percentage rate of the Receivable; and
o the sum of the applicable Pass Through Rate and the Servicing Rate
(the "Retained Yield"). The Retained Yield will be treated as
"stripped coupons" within the meaning of Section 1286 of the Code,
and the Stripped Receivables will be treated as "stripped bonds." We
refer you to "--Stripped Bonds and Stripped Coupons" below.
Accordingly, each Grantor Trust Certificateholder will be treated as
owning its pro rata percentage interest of the Yield Supplement Account and the
principal of, and interest payable on, each Receivable (minus the Retained Yield
on the High Yield Receivables).
Those Receivables that bear interest at a rate which is less than or equal
to the sum of the applicable Pass Through Rate and the Servicing Rate (the "Low
Yield Receivables") will not be treated as stripped bonds. Instead, Yield
Supplement Deposits will be payable to eliminate the difference between the
actual yield on each Low Yield Receivable and the yield the Receivable would
have had if its interest rate had equated the sum of the applicable Pass Through
Rate and the Servicing Rate. We refer you to "--Yield Supplement Deposits"
below.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with that Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Receivables in the Trust represented by Grantor Trust Certificates,
including interest. OID, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption, late payment charges received by the Servicer and
any gain recognized upon collection or disposition of the Receivables (but not
including any portion of the Retained Yield). A Grantor Trust Certificateholder
will also be required to report under its usual method of accounting any
payments received from any Yield Supplement Account to the extent that these
payments are treated as income. Under Sections 162 or 212 of the Code, each
Grantor Trust Certificateholder will be entitled to deduct its pro rata share of
Base Servicing Fees, prepayment fees, assumption fees, any loss recognized upon
an assumption and late payment charges retained by the Servicer, provided that
those amounts are reasonable compensation for services rendered to the Trust.
Grantor Trust Certificateholders that are individuals, estates or trusts will be
entitled to deduct
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their share of expenses only to the extent those expenses plus all other Code
Section 212 expenses exceed two percent of its adjusted gross income. In
addition, Grantor Trust Certificateholders who are individuals may be subject to
additional deduction limitations based on adjusted gross income.
A Grantor Trust Certificateholder using the cash method of accounting must
take into account its pro rata share of income and deductions as and when
collected by or paid to the Servicer. A Grantor Trust Certificateholder using an
accrual method of accounting must take into account its pro rata share of income
and deductions as they become due or are paid to the Servicer, whichever is
earlier. Because interest accrues on the Receivables over differing monthly
periods and is paid in arrears and interest collected on a Receivable generally
is paid to certificateholders in the following month, the amount of interest
accruing to a Grantor Trust Certificateholder during any calendar month will not
equal the interest distributed in that month. The actual amount of discount on a
Receivable will be includible in income as principal payments are received on
the Receivables. If the Base Servicing Fees paid to the Servicer are deemed to
exceed reasonable servicing compensation, the amount of that excess could be
considered as an ownership interest retained by the Servicer (or any person to
whom the Servicer assigned for value all or a portion of the Base Servicing
Fees) in a portion of the interest payments on the Receivables. The Receivables
would then be subject to the "stripped bond" and "stripped coupons" rules of the
Code discussed below.
Discount and Premium. In determining whether a Grantor Trust
Certificateholder, has purchased its interest in the Receivables held by the
related Trust at a discount or premium and whether the Receivables have OID,
market discount, or amortizable premium, a portion of the purchase price of a
Certificate should be allocated to the Grantor Trust Certificateholder's
undivided interest in accrued but unpaid interest, amounts collected at the time
of purchase but not distributed, and rights to receive Yield Supplement
Deposits. As a result, the portion of the purchase price allocable to a Grantor
Trust Certificateholder's undivided interest in the Receivables will be
increased or decreased, as applicable, and the potential OID, market discount,
or amortizable premium on the Receivables could be increased or decreased
accordingly.
Premium. A Grantor Trust Certificateholder that acquires an interest in
Receivables at a premium over the "stated redemption price at maturity" of the
Receivables may elect to amortize that premium under a constant interest method.
Amortizable bond premium will be treated as an offset to interest income on that
Grantor Trust Certificate. The basis for that Grantor Trust Certificate will be
reduced to the extent that amortizable premium is applied to offset interest
payments. It is not clear whether a reasonable prepayment assumption should be
used in computing amortization of premium allowable under Section 171 of the
Code. With some exceptions, a Grantor Trust Certificateholder that makes this
election for a Grantor Trust Certificate that is acquired at a premium will be
deemed to have made an election to amortize bond premium with respect to all
debt instruments having amortizable bond premium that the Grantor Trust
Certificateholder holds during the year of the election or thereafter. Absent an
election to amortize bond premium, the premium will be deductible as an ordinary
loss upon disposition of the Certificate or pro rata as principal is paid on the
Receivables.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Grantor Trust Certificate acquired at a premium
should recognize a loss if a Receivable prepays in full, equal to the difference
between the portion of the prepaid principal amount of that Receivable that is
allocable to the Grantor Trust Certificate and the portion of the adjusted basis
of the Grantor Trust Certificate that is allocable to that Receivable. If a
reasonable prepayment assumption is used to amortize that premium, it appears
that that loss would be available, if at all, only if prepayments have occurred
at a rate faster than the reasonable assumed prepayment rate. It is not clear
whether any other adjustments would be required to reflect differences between
an assumed prepayment rate and the actual rate of prepayments.
Stripped Bonds and Stripped Coupons. Although the tax treatment of
stripped bonds is not entirely clear, based on recent guidance from the IRS,
each purchaser of a Grantor Trust Certificate will be treated as the purchaser
of a stripped bond (to the extent that the Receivables consist of High Yield
Receivables) which generally should be treated as a single debt instrument
issued on the day it is purchased for purposes of calculating any original issue
discount. Generally, under applicable Treasury regulations (the "Section 1286
Treasury Regulations"), if the discount on a stripped bond is larger than a de
minimis amount (as calculated for purposes of the OID rules of the Code), that
stripped bond will be considered to have been issued with OID. We refer you to
"--Original Issue Discount." Based on the preamble to the Section 1286 Treasury
Regulations, the Trust intends to take the position that, although the matter is
not entirely clear, the interest income on the certificates at the sum of the
Pass Through
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Rate and the portion of the Servicing Rate that does not constitute excess
servicing will be treated as "qualified stated interest" within the meaning of
the Section 1286 Treasury Regulations. In this case, the amount of OID on a High
Yield Receivable will equal the amount by which the purchase price of a High
Yield Receivable is less than the portion of the remaining principal balance of
the Receivable allocable to the interest acquired.
Original Issue Discount. The IRS has stated in published rulings that, in
circumstances similar to those described in this prospectus, the special rules
of the Code relating to OID will be applicable to a Grantor Trust
Certificateholder's interest in those Receivables meeting the conditions
necessary for these rules to apply. Generally, a Grantor Trust Certificateholder
that acquires an undivided interest in a Receivable issued or acquired with OID
must include in gross income the sum of the "daily portions," as defined below,
of the OID on that Receivable for each day on which it owns a Grantor Trust
Certificate, including the date of purchase but excluding the date of
disposition. In the case of an original Grantor Trust Certificateholder, the
daily portions of OID with respect to a Receivable generally would be determined
as follows. A calculation will be made of the portion of OID that accrues on the
Receivable during each successive monthly accrual period (or shorter period in
respect of the date of original issue or the final payment date). This will be
done, in the case of each full monthly accrual period, by adding:
o the present value of all remaining payments to be received on the
Receivable under the Prepayment Assumption used in respect of the
Receivables; and
o any payments received during that accrual period, and subtracting
from that total the "adjusted issue price" of the Receivable at the
beginning of that accrual period.
No representation is made that the Receivables will prepay at any prepayment
assumption. The "adjusted issue price" of a Receivable at the beginning of the
first accrual period is the amount of the purchase price paid by the Grantor
Trust Certificateholder for the Grantor Trust Certificate that is allocable to
the Receivable, and the "adjusted issue price" of a Receivable at the beginning
of a subsequent accrual period is the "adjusted issue price" at the beginning of
the immediately preceding accrual period plus the amount of OID allocable to
that accrual period and reduced by the amount of any payment on the Receivable
(other than "qualified stated interest") made at the end of or during that
accrual period. The OLD accruing during that accrual period will then be divided
by the number of days in the period to determine the daily portion of OID for
each day in the period. With respect to an initial accrual period shorter than a
full monthly accrual period, the daily portions of OID must be determined
according to a reasonable method, provided that that method is consistent with
the method used to determine the yield to maturity of the Receivables.
If the amount of OID is de minimis under the rule set forth above, a High
Yield Receivable would not be treated as having OID. The actual amount of
discount on a High Yield Receivable would be includible in income as principal
payments are received on the Receivable, in the proportion that each principal
payment bears to the total principal amount of the Receivable.
With respect to the Receivables, the method of calculating OID as
described above will cause the accrual of OID to either increase or decrease
(but never below zero) in any given accrual period to reflect the fact that
prepayments are occurring at a faster or slower rate than the prepayment
assumption used in respect of the Receivables. Subsequent purchasers that
purchase Receivables at more than a de minimis discount should consult their tax
advisors with respect to the proper method to accrue that OED.
Yield Supplement Deposits. The proper Federal income tax characterization
of the Yield Supplement Deposits is not clear. Moreover, the sum of the income
and deductions properly reportable by a Grantor Trust Certificateholder in any
taxable year may not equal the amounts that would be reportable if a Grantor
Trust Certificateholder held instead of an interest in the Receivables and the
Yield Supplement Account either a debt instrument bearing interest at the
applicable Pass Through Rate or an interest in a trust holding Receivables each
of which bears interest at a rate at least equal to the sum of the Pass Through
Rate plus the Servicing Rate. It is likely that the right to receive Yield
Supplement Deposits will be treated as a separate asset purchased by each
Grantor Trust Certificateholder, in which case a portion of each Grantor Trust
Certificateholder's purchase price or other tax basis in the Grantor Trust
Certificate equal to the fair market value of the right to receive the Yield
Supplement
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Deposits should be allocated to the right to receive payments of Yield
Supplement Deposits. The right to receive Yield Supplement Deposits may be
treated as a loan made by a Grantor Trust Certificateholder to the Depositor in
an amount equal to the present value, discounted at a rate equal to the sum of
the applicable Pass Through Rate and the Servicing Rate, of the projected Yield
Supplement Deposits. In that event, a portion of the Yield Supplement Deposits
generally representing a yield equal to the applicable Pass Through Rate plus
the Servicing Rate on the discounted value should be treated as interest
includible in income as accrued or received, and the remainder should be treated
as a return of the principal amount of the deemed loan. Alternatively, it is
possible that the entire amount of each Yield Supplement Deposit should be
included in income as accrued or received, in which event a Grantor Trust
Certificateholder should also be entitled to amortize the portion of its
purchase price allocable to its right to receive Yield Supplement Deposits. The
method of calculating that amortization is unclear, and could result in the
inclusion of greater amounts of income than a Grantor Trust Certificateholder's
actual yield on a Receivable. Alternatively, it is possible that the Yield
Supplement Deposits could be treated as payments adjusting the purchase price of
the Low Yield Receivables, rather than as a separate asset. In that event, a
Grantor Trust Certificateholder could be treated as having purchased each Low
Yield Receivable at a discount (which may consist of imputed interest, market
discount, or both) that, combined with the actual coupon rate of the Receivable,
produces a yield equal to the sum of the applicable Pass Through Rate and the
Servicing Rate. It is not clear whether, and to what extent, the amounts
includible in income or amortizable under any of these methods would be adjusted
to take account of prepayments on the Receivables. Moreover, it is possible that
the IRS might contend that none of the above methods is appropriate, and that
income with respect to the Yield Supplement Account should be reported by a
Grantor Trust Certificateholder in some other manner. In addition, to the extent
that the amounts payable from the Yield Supplement Account decline during any
period by reason of prepayments on the Receivables, it is possible that a
portion of the amount amortizable by the Grantor Trust Certificateholder during
that period would be treated as a capital loss (which would not offset ordinary
income), rather than as an ordinary deduction. It is suggested that Grantor
Trust Certificateholders consult their tax advisors regarding the appropriate
method of accounting for income attributable to the Yield Supplement Account.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules of
Sections 1276 through 1278 of the Code to the extent an undivided interest in a
Receivable is considered to have been purchased at a "market discount."
Generally, the amount of market discount is equal to the excess of the portion
of the principal amount of that Receivable allocable to that Grantor Trust
Certificateholder's undivided interest in the Receivable over that holder's tax
basis in that interest. Market discount with respect to a Receivable will be
considered to be zero if the amount allocable to the Receivable is less than
0.25% of the Receivables stated redemption price at maturity multiplied by the
weighted average maturity remaining after the date of purchase. Treasury
regulations implementing the market discount rules have not yet been issued;
therefore, it is suggested that investors consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of that payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described in
the relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with respect to which there is OID, the
amount of market discount that accrues during any accrual period would be equal
to the product of:
o the total remaining market discount; and
o a fraction, the numerator of which is the OID accruing during the
period and the denominator of which is the total remaining OID at
the beginning of the accrual period.
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If a Grantor Trust Certificate is issued with respect to which there is no
OID, the amount of market discount that accrues during a period is equal to the
product of:
o the total remaining market discount; and
o a fraction, the numerator of which is the amount of stated interest
paid during the accrual period and the denominator of which is the
total amount of stated interest remaining to be paid at the
beginning of the accrual period.
For purposes of calculating market discount under any of the above methods in
the case of instruments, such as the Grantor Trust Certificates that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing those instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate
purchased at a discount or premium in the secondary market.
A Grantor Trust Certificate holder who acquired a Grantor Trust
Certificate at a market discount also may be required to defer a portion of its
interest deductions for the taxable year attributable to any indebtedness
incurred or continued to purchase or carry that Grantor Trust Certificate
purchased with market discount. For these purposes, the de minimis rule referred
to above applies. Any deferred interest expense would not exceed the market
discount that accrues during that taxable year and is, in general, allowed as a
deduction not later than the year in which the market discount is includible in
income. If that holder elects to include market discount in income currently as
it accrues on all market discount instruments acquired by the holder in that
taxable year or thereafter, the interest deferral rule described above will not
apply.
Election to Treat All Interest as OID. The OID regulations permit a
Grantor Trust Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method. If that election were to be made
with respect to a Grantor Trust Certificate with market discount, the Grantor
Trust Certificateholder would be deemed to have made an election to include in
income currently market discount with respect to all other debt instruments
having market discount that such Grantor Trust Certificateholder acquires during
the year of the election or thereafter. Similarly, a Grantor Trust
Certificateholder that makes this election for a Grantor Trust Certificate that
is acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that such Grantor Trust Certificateholder owns or acquires. We refer you
to "--Premium" above. The election to accrue interest, discount and premium on a
constant yield method with respect to a Grantor Trust Certificate is irrevocable
except with the approval of the IRS.
Sale or Exchange of a Grantor Trust Certificate. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the owner's
adjusted tax basis in the Grantor Trust Certificate. The adjusted tax basis
generally will equal the seller's purchase price for the Grantor Trust
Certificate, increased by any market discount, OID and gain previously included
in the seller's gross income with respect to the Grantor Trust Certificate, and
reduced by the amount of any premium, if any, previously amortized and by the
amount of any payments of principal and OID on the Grantor Trust Certificate
previously received by the seller. That gain or loss will be capital gain or
loss to an owner for which a Grantor Trust Certificate is a "capital asset"
within the meaning of Section 1221, and will be long-term or short-term
depending on whether the Grantor Trust Certificate has been owned for the
long-term capital gain holding period (currently more than one year).
Foreign Persons. Generally, interest or OID paid by the person required to
withhold tax under Section 1441 or 1442 of the Code to:
o a Grantor Trust Certificateholder that is not a U.S. Person (as
defined under "--Tax Treatment of Owner Trusts--Tax Consequences to
Owners of the Notes-Foreign Owners") (a "Foreign Grantor Trust
Certificateholder"); or
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o a person holding on behalf of a Foreign Grantor Trust
Certificateholder, as well as accrued OID recognized by the Foreign
Grantor Trust Certificateholder on the sale or exchange of that
Grantor Trust Certificate
will not be subject to withholding to the extent that a Grantor Trust
Certificate evidences ownership in Receivables issued after July 18, 1984 by
natural persons, if that Foreign Grantor Trust Certificateholder complies with
specified identification requirements (including delivery of a statement, signed
by the Foreign Grantor Trust Certificateholder under penalties of perjury,
certifying that that Foreign Grantor Trust Certificateholder is not a U.S.
Person and providing the name and address of that Foreign Grantor Trust
Certificateholder). Additional restrictions apply to Receivables where the
obligor is not a natural person in order to qualify for the exemption from
withholding.
Although it is not entirely clear, it is likely that amounts received by a
Foreign Grantor Trust Certificateholder that are attributable to payments of
Yield Supplement Deposits generally would not be subject to withholding tax. It
is suggested that Foreign Grantor Trust Certificateholders consult their tax
advisors regarding the withholding tax consequences of amounts received on the
Grantor Trust Certificates that are attributable to payments of Yield Supplement
Deposits.
Information Reporting and Backup Withholding. The Servicer will furnish or
make available, within a reasonable time after the end of each calendar year, to
each person who was a Grantor Trust Certificateholder at any time during that
year, that information as may be deemed necessary or desirable to assist Grantor
Trust Certificateholders in preparing their federal income tax returns, or to
enable holders to make that information available to beneficial owners or
financial intermediaries that hold Grantor Trust Certificates as nominees on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that that person has not reported all interest and
dividend income required to be shown on its federal income tax return, 30%
backup withholding may be required with respect to any payments. Any amounts
deducted and withheld from a payment to a recipient would be allowed as a credit
against that recipient's federal income tax liability.
Reportable Transaction Disclosure
In certain circumstances, a U.S. Holder of Notes or Certificates who
disposes of such investment in a transaction resulting in the recognition by
such holder of significant losses in excess of certain threshold amounts may be
obligated to disclose its participation in such transaction in accordance with
regulations issued by the Treasury Department governing tax shelters and other
potentially tax-motivated transactions. Investors should consult their tax
advisors concerning any possible disclosure obligation under such regulations
with respect to the disposition of such securities.
State and Local Tax Considerations
Potential holders should consider the state and local income tax
consequences of the purchase, ownership and disposition of the certificates and
notes. State and local income tax laws may differ substantially from the
corresponding federal law, and this discussion does not purport to describe any
aspect of the income tax laws of any state or locality. Therefore, potential
holders should consult their own tax advisors with respect to the various state
and local tax consequences of an investment in the certificates and notes.
ERISA Considerations
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and some types of Keogh Plans (each a "Benefit Plan"), from engaging in
transactions involving "plan assets" with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to that
Benefit Plan. ERISA also imposes duties on persons who are fiduciaries of
Benefit Plans subject to ERISA and prohibits specified transactions between a
Benefit Plan and parties in interest with respect to those Benefit Plans. Under
ERISA, any person who exercises any authority or control with respect to the
management or disposition of the assets of a Benefit Plan is considered to be a
fiduciary of that Benefit Plan (subject to exceptions
87
not here relevant). A violation of these "prohibited transaction" rules may
result in an excise tax or other penalties and liabilities under ERISA and the
Code for those persons. Certain exemptions from the prohibited transaction rules
could be applicable to the purchase and holding of Securities by a Benefit Plan
depending on the type and circumstances of the plan fiduciary making the
decision to acquire the Securities. Potentially available exemptions would
include, without limitation, Prohibited Transaction Class Exemption ("PTCE")
90-1, which exempts certain transactions involving insurance company pooled
separate accounts; PTCE 95-60, which exempts certain transactions involving
insurance company general accounts; PTCE 91-38, which exempts certain
transactions involving bank collective investment funds; PTCE 84-14, which
exempts certain transactions effected on behalf of a plan by a "qualified
professional asset manager", and PTCE 96-23, which exempts certain transactions
effected on behalf of a plan by an "in-house asset manager." Insurance company
general accounts should also discuss with their legal counsel the availability
of exemptive relief under Section 401(c) of ERISA. A purchaser of Securities
should be aware, however, that even if the conditions specified in one or more
exemptions are met, the scope of the relief provided by the applicable exemption
or exemptions might not cover all acts that might be construed as prohibited
transactions.
Some transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased notes or certificates if assets of the Trust were deemed to be
assets of the Benefit Plan. Under a regulation issued by the United States
Department of Labor (the "Plan Assets Regulation"), the assets of a Trust would
be treated as plan assets of a Benefit Plan for the purposes of ERISA and the
Code only if the Benefit Plan acquired an "equity interest" in the Trust and
none of the exceptions contained in the Plan Assets Regulation was applicable.
An equity interest is defined under the Plan Assets Regulation as an interest
other than an instrument which is treated as indebtedness under applicable
local. law and which has no substantial equity features. The likely treatment.
in this context of notes and certificates of a given series will be discussed in
the applicable prospectus supplement.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and some church plans (as defined in Section 3(33) of ERISA) are
not subject to ERISA requirements nor to Section 4975 of the Code. However,
governmental plans may be subject to state or local laws that impose similar
requirements. In addition, governmental plans and church plans that are
"qualified" under Section 401(a) of the Code are subject to restrictions with
respect to prohibited transactions under Section 503(a)(1 )(8) of the Code, the
sanction for violation being loss of "qualified" status.
Due to the complexities of the "prohibited transaction" rules and the
penalties imposed upon persons involved in prohibited transactions, it is
important that the fiduciary of any Benefit Plan considering the purchase of
Securities consult with its tax and/or legal advisors regarding whether the
assets of the related Trust would be considered plan assets, the possibility of
exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
Plan of Distribution
On the terms and conditions set forth in an underwriting agreement with
respect to the notes, if any, of a given series and an underwriting agreement
with respect to the certificates of that series, the Depositor will agree to
cause the related Trust to sell to the underwriters named in the underwriting
agreements and in the applicable prospectus supplement, and each of those
underwriters will severally agree to purchase, the principal amount of each
class of notes and certificates, as the case may be, of the related series set
forth in the underwriting agreements and in the applicable prospectus
supplement.
In each of the underwriting agreements with respect to any given series of
Securities, the several underwriters will agree, subject to the terms and
conditions set forth in the underwriting agreements, to purchase all the notes
and certificates, as the case may be, described in the underwriting agreements
which are offered by this prospectus and by the applicable prospectus supplement
if any of those notes and certificates, as the case may be, are purchased.
88
Each prospectus supplement will either:
o set forth the price at which each class of notes and certificates,
as the case may be, being offered by that prospectus supplement will
be offered to the public and any concessions that may be offered to
some dealers participating in the offering of those notes and
certificates; or
o specify that the related notes and certificates, as the case may be,
are to be resold by the underwriters in negotiated transactions at
varying prices to be determined at the time of that sale.
After the initial public offering of those notes and certificates, those
public offering prices and those concessions may be changed.
Each underwriting agreement will provide that the Sponsor and the
Depositor will indemnify the underwriters against specified civil liabilities,
including liabilities under the Securities Act, or contribute to payments the
several underwriters may be required to make in respect of the specified civil
liabilities.
Each Trust may, from time to time, invest the funds in its Accounts in
Eligible Investments acquired from the underwriters or from the Depositor.
Pursuant to each underwriting agreement with respect to a given series of
Securities, the closing of the sale of any class of Securities subject to that
underwriting agreement will be conditioned on the closing of the sale of all
other classes of Securities of that series.
The place and time of delivery for the Securities in respect of which this
prospectus is delivered will be set forth in the applicable prospectus
supplement.
Legal Opinions
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust, the Depositor and the Servicer by counsel
specified in the applicable prospectus supplement. In addition, certain United
States federal tax and other matters will be passed upon for the related Trust
by counsel specified in the applicable prospectus supplement. Certain legal
matters will be passed upon for the Underwriters by counsel specified in the
applicable prospectus supplement.
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Glossary of Terms
"Accounts" means, with respect to any trust, the collective reference to the
collection account, any yield supplement account, any prefunding account and any
reserve fund that may be identified in the applicable prospectus supplement.
"Actuarial Receivables" means Receivables that make their Scheduled Payments
based on the "actuarial method" described in this prospectus under "The
Receivables--Actuarial Receivables."
"Administrative Purchase Payment" means with respect to a:
o Precomputed Receivable: an amount equal to:
(a) the sum of:
(i) all remaining Scheduled Payments (plus any applicable
yield maintenance payments);
(ii) an amount equal to any reimbursements of Advances made
by the Servicer with respect to the Precomputed
Receivable from collections on or in respect of other
Receivables; and
(iii) all past due Scheduled Payments for which an Advance has
not been made;
minus
(b) all Payments Ahead in respect of the Precomputed Receivable
held by the Servicer or on deposit in the Payahead Account;
and
o Simple Interest Receivable: an amount equal to its unpaid Principal
Balance, plus interest thereon at a rate equal to the sum of the
Interest Rate or Pass Through Rate specified in the related Sale and
Servicing Agreement or Pooling and Servicing Agreement and the
Servicing Fee Rate to the last day of the collection period relating
to that purchase.
"Administrative Receivable" means each Receivable that is required to be
purchased from a trust by the servicer due to a breach of the required servicing
procedures with respect to that Receivable.
"Business Day" means, unless otherwise specified in the applicable prospectus
supplement:
o for United States dollar denominated Securities for which
LIBOR is not an applicable Interest Rate Basis, a New York
Business Day;
or United States dollar denominated Securities for which LIBOR is an
applicable Interest Rate Basis, a day that is both a London Business
Day and a New York Business Day;
o for non-United States dollar denominated Securities (other
than Securities denominated in euro) for which LIBOR is not an
applicable Interest Rate Basis, a day that is both a Principal
Financial Center Business Day and a New York Business Day;
o for non-United States dollar denominated Securities (other
than Securities denominated in euro) for which LIBOR is an
applicable Interest Rate Basis, a day that is all of (1) a
Principal Financial Center Business Day; (2) a New York
Business Day; and (3) a London Business Day;
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o for euro denominated Securities for which LIBOR is not an
applicable Interest Rate Basis, a day that is both a TARGET
Business Day and a New York Business Day;
o for euro denominated Securities for which LIBOR is an
applicable Interest Rate Basis, a day that is all of (1) a
TARGET Business Day; (2) a New York Business Day; and (3) a
London Business Day.
"Calculation Date" means, for any Interest Determination Date, the earlier of
(i) the tenth calendar day after the applicable Interest Determination Date, or,
if that day is not a Business Day, the next succeeding Business Day, or (ii) the
Business Day preceding the applicable Interest Payment Date or final scheduled
payment date, as the case may be.
"Certificate Balance" means, for any class of certificates and as of any payment
date, the original certificate balance of that class (which will be specified in
the related prospectus supplement), as reduced by all amounts distributed on or
prior to that payment date on such class of certificates and allocable to
principal.
"Dealer Recourse" means the obligation of the respective Dealer to repurchase
those Receivables that do not meet the required representations and warranties
made by Centers.
"DTC Participants" means entities that participate and are members of the DTC
clearing system.
"Eligible Institution," means a depository institution or trust company:
o the short-term unsecured debt obligations of which have a rating of
"P-1" by Moody's and a rating of "A-1+" by Standard & Poor's; or
o having corporate trust powers and organized under the laws of the
United States, any state thereof, the District of Columbia or the
Commonwealth of Puerto Rico which has a long-term deposit rating
from Moody's of at least "Baa3" or from Standard & Poor's of at
least "BBB-" (or such lower rating as either rating agency shall
approve in writing).
"Event of Default" means any of the events of default set forth in the related
indenture, as more fully set forth and listed under "The Notes--the
Indenture--Events of Default; Rights Upon Event of Default" in this prospectus.
"Financed Vehicle" means each new or used motor vehicle, including motorcycles,
that was purchased by the related Obligor and which that secures the related
Receivable.
"Fixed Rate Securities" means notes or certificates that bear interest at a
fixed rate per annum.
"Floating Rate Securities" means notes or certificates that bear interest at a
variable or adjustable rate per annum.
"H.15(519)" means the weekly statistical release designated as H.15(519) or any
successor publication, published by the Board of Governors of the Federal
Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through the
world-wide-web site of the Board of Governors of the Federal Reserve System at
http://www.federalreserve.gov/releases/H15/update/, or any successor site or
publication.
"Index Currency" means the currency specified in the applicable prospectus
supplement as the currency for which LIBOR will be calculated. If no currency is
specified in the applicable prospectus supplement, the Index Currency will be
United States dollars.
"Index Maturity" means the period to maturity of the instrument or obligation
with respect to which the Base Rate will be calculated.
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"Indirect DTC Participants" means the entities, such as such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a DTC Participant.
"Insolvency Event" means any event of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings indicating an
entity's insolvency, reorganization pursuant to bankruptcy proceedings or
inability to pay its obligations.
"Interest Determination Date" means the date on which the applicable interest
rate for one or more classes of Floating Rate Securities will be determined for
the next succeeding Interest Period. The Interest Determination Dates will be as
follows:
o The Interest Determination Date for the CD Rate, the Commercial
Paper Rate and the Federal Funds Rate will be the second Business
Day preceding each Interest Reset Date for the related Floating Rate
Security;
o The Interest Determination Date for LIBOR will be the second London
Banking Day preceding each Interest Reset Date;
o The Interest Determination Date for the Treasury Rate will be the
day in the week in which the related Interest Reset Date falls on
which day Treasury Bills, as defined below, are normally auctioned.
Treasury Bills are normally sold at auction on Monday of each week,
unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday, except that the auction may
be held on the preceding Friday; provided, however, that if an
auction is held on the Friday of the week preceding the related
Interest Reset Date, the related Interest Determination Date will be
that preceding Friday; and provided further, that if an auction
falls on any Interest Reset Date, then the related Interest Reset
Date will instead be the first Business Day following that auction.
"Interest Period" means, the period during which interest will accrue on each
applicable class of securities with respect to a related payment date.
"Interest Rate" means the interest rate on a class of notes, to be specified in
the related prospectus supplement.
"Interest Reset Date" means the date on which the Interest Rates will be reset.
"Interest Reset Period" means the specified period, whether daily, weekly,
monthly, quarterly, semiannually or annually during which the Interest Rate will
be reset.
"London Business Day" means any day on which commercial banks are open for
business (including dealings in designated Index Currency) in London.
"New York Business Day" means any day other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which commercial banks are authorized or
required by law, regulation or executive order to close in The City of New York.
"Pass Through Rate" means the rate of interest on a class of certificates to be
specified in the related prospectus supplement.
"Payments Ahead" means any early payments made by or on behalf of Obligors on
Precomputed Receivables.
"Pool Balance " means the aggregate Principal Balance of the Receivables in a
pool.
"Precomputed Advance" means the amount required to be advanced by the servicer
with respect to shortfalls in the Scheduled Payment due on a Precomputed
Receivable. See, Description of the Transfer and Servicing Agreements--Advances"
in this prospectus.
"Precomputed Receivables" means, collectively, the Rule of 78s Receivables and
the Actuarial Receivables.
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"Principal Balance" means, with respect to any Receivable as of any date, equals
the original principal balance of such Receivable minus the sum of (1) in the
case of a Precomputed Receivable, that portion of all Scheduled Payments due on
or prior to that date allocable to principal, computed in accordance with the
actuarial method, (2) in the case of a Simple Interest Receivable, that portion
of all Scheduled Payments actually received on or prior to that date allocable
to principal, (3) any Warranty Purchase Payment or Administrative Purchase
Payment with respect to the Receivable allocable to principal (to the extent not
included in clauses (1) and (2) above and (4) any Prepayments or other payments
applied to reduce the unpaid principal balance of the Receivable (to the extent
not included in clauses (1) and (2) above).
"Principal Financial Center" means, unless otherwise specified in the applicable
prospectus supplement:
o the capital city of the country issuing the Specified Currency
except that with respect to United States-dollars, Australian
dollars, Canadian dollars, Deutsche marks, Dutch guilders, South
African rand and Swiss francs, the Principal Financial Center will
be The City of New York, Sydney and Melbourne, Toronto, Frankfurt,
Amsterdam, Johannesburg and Zurich, respectively; or
o the capital city of the country to which the Index Currency relates,
except that with respect to United States dollars, Canadian dollars,
Deutsche marks, Dutch guilders, Portuguese escudos. South African
rand and Swiss francs, the Principal Financial Center will be the
City of New York, Toronto, Frankfurt, Amsterdam, London,
Johannesburg and Zurich, respectively.
"Principal Financial Center Business Day" means a day other than a day on which
commercial banks are authorized or required by law, regulation or executive
order to close in the Principal Financial Center of the country issuing the
Specified Currency.
"Rebate" means the amount, calculated on an actuarial basis, that would be
payable to an Obligor on a Precomputed Receivable were the related Obligor to
prepay such Receivable in full on the applicable day.
"Receivables" means the pool of retail installment sale contracts and promissory
notes regarding the Financed Vehicles, between the respective Dealer and the
related Obligor.
"Redemption Price" means the aggregate unpaid principal amount of the
outstanding notes and certificates on the date of such optional purchase or
auction, as applicable, plus accrued and unpaid interest on the notes and
certificates.
"Required Rate" means, with respect to any class of Securities, the sum of the
related Pass Through Rate or related Interest Rate plus the Servicing Fee Rate,
each as specified in the applicable prospectus supplement.
"Required Yield Supplement Amount" means the amount to be set forth in the
related prospectus supplement that is required to be on deposit in a Yield
Supplement Account with respect to any given payment date.
"Rule of 78s Receivables" means Receivables that make their Scheduled Payments
based on "sum of periodic balances" or "sum of monthly payments" described under
"The Receivables--Rule of 78s Receivables."
"Servicer Default" means the occurrence of any of the events set forth in the
related Sale and Servicing Agreement, as more fully set forth and listed under
"Description of the Transfer and Servicing Agreements--Servicer Default" in this
prospectus.
"Servicing Fee Rate" means the specified percent per annum to be set forth in
each prospectus supplement that will be used to calculate the Base Servicing Fee
due to the servicer as compensation for services rendered.
"Simple Interest Receivables" means Receivables that make their Scheduled
Payments based on the "simple interest method" described in this prospectus
under "The Receivables--Simple Interest Receivables."
93
"Specified Currency" means the currency in which a particular Security is
denominated (or, if the currency is no longer legal tender for the payment of
public and private debts, any other currency of the relevant country which is
then legal tender for the payment of pubic and private debts).
"Spread" means is the number of basis points to be added to or subtracted from
the related Base Rate applicable to the applicable Floating Rate Securities.
"Spread Multiplier" means the percentage of the related Base Rate applicable to
one or more classes of Floating Rate Securities by which that Base Rate will be
multiplied to determine the applicable interest rate on those Floating Rate
Securities.
"Strip Certificates" means any class of certificates entitled either to
principal payments with disproportionate, nominal or no payments in respect of
interest, or interest payments with disproportionate, nominal or no principal
payments.
"Supplemental Servicing Fee" means the late fees, prepayment charges and other
administrative fees or similar charges allowed by applicable law with respect to
the related Receivables and any interest earned during a collection period from
the investment of monies in the collection account that the servicer is
permitted to retain as additional servicing compensation.
"TARGET Business Day" means a day on which the Trans-European Automated
Real-time Gross Settlement Express Transfer (TARGET) System is open.
"Transfer and Servicing Agreements" means, with respect to any trust, the
collective reference to the related Indenture, the Sale and Servicing Agreement,
the Administration Agreement and the Trust Agreement.
"Warranty Purchase Payment" means with respect to a:
o Precomputed Receivable: an amount equal to:
(a) the sum of:
(i) all remaining Scheduled Payments;
(ii) all past due Scheduled Payments for which an Advance has
not been made,
(iii) all outstanding Advances made by the Servicer in respect
of the Precomputed Receivable; and
(iv) an amount equal to any reimbursements of outstanding
Advances made to the Servicer with respect to the
Precomputed Receivable from collections made on or in
respect of other Receivables,
minus
(b) the sum of:
(i) of all Payments Ahead in respect to that Warranty
Receivable held by the Servicer or on deposit in the
Payahead Account;
(ii) the rebate, calculated on an actuarial basis, that would
be payable to the Obligor on the Precomputed Receivable
were the Obligor to prepay the Precomputed Receivable in
full on that day (a "Rebate"); and
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(iii) any proceeds of the liquidation of the Precomputed
Receivable previously received (to the extent applied to
reduce the Principal Balance of the Precomputed
Receivable) and
o Simple Interest Receivable: an amount equal to its unpaid Principal
Balance, plus interest thereon at a rate equal to the APR to the
last day of the collection period relating to the repurchase.
"Warranty Receivable" means each Receivable that is required to be repurchased
from a trust due to a breach of a representation or warranty regarding such
Receivable.
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No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in or
incorporated by reference in this prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the depositor or any underwriter. Neither the delivery of this prospectus nor
any sale made hereunder shall under any circumstances create an implication that
there has been no change in the affairs of the depositor or the receivables
since the date thereof. This prospectus does not constitute an offer or
solicitation by anyone in any state in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation.
BMW FS Securities LLC
Depositor
BMW Financial
Services NA, LLC
Sponsor, Originator, Servicer and Administrator
Until December 12, 2006 (90 days after the date of this prospectus), all dealers
effecting transactions in the notes, whether or not participating in this
distribution, may be required to deliver a prospectus. This delivery requirement
is in addition to the obligation of dealers to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
BMW Vehicle Owner
Trust 2006-A
Issuing Entity
$323,000,000
5.36344% Asset Backed Notes,
Class A-1
$308,000,000
5.30% Asset Backed Notes,
Class A-2
$280,000,000
5.13% Asset Backed Notes,
Class A-3
$173,044,000
5.07% Asset Backed Notes,
Class A-4
$24,952,000
5.19% Asset Backed Notes,
Class B
--------------------------------------
PROSPECTUS SUPPLEMENT
--------------------------------------
Joint Bookrunners of the Class A Notes
Barclays Capital
Banc of America Securities LLC
Co-Managers of the Class A Notes
Credit Suisse
Merrill Lynch & Co.
RBS Greenwich Capital
Joint Bookrunners of the Class B Notes
Barclays Capital
Banc of America Securities LLC
September 13, 2006
================================================================================