Exhibit 8.1
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September 1, 2004 Hong Kong San Diego
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Washington, D.C.
File No. 021832-0025
To: The Persons Listed on Schedule I hereto
Re: Hyundai Auto Receivables Trust 2004-A
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Ladies and Gentlemen:
I. INTRODUCTION.
We have acted as special United States tax counsel to Hyundai Motor Finance
Company, a California corporation ("HMFC"), Hyundai ABS Funding Corporation, a
Delaware corporation ("HABS"), and Hyundai Auto Receivables Trust 2004-A, a
Delaware statutory trust (the "Issuer"), in connection with the issuance and
sale by the Issuer of Class A-1 Notes in an aggregate principal amount of
$155,000,000, Class A-2 Notes in an aggregate principal amount of $215,000,000,
Class A-3 Notes in an aggregate principal amount of $188,000,000, Class A-4
Notes in an aggregate principal amount of $92,100,000, Class B Notes in an
aggregate principal amount of $36,500,000, Class C Notes in an aggregate
principal amount of $26,900,000 and Class D Notes in an aggregate principal
amount of $32,800,000 (collectively, the "Notes"). The Notes are to be issued
under an Indenture (the "Indenture"), dated as of September 1, 2004, between the
Issuer and Citibank, N.A., as Indenture Trustee. The opinions below are rendered
to you pursuant to section 7(j) of the Underwriting Agreement dated August 26,
2004 among HABS, HMFC and Banc of America Securities LLC, as representative of
the several underwriters set forth on Schedule I thereto. Capitalized terms used
and not defined herein have the respective meanings given to them in the
Indenture and the Prospectus (as defined below).
In arriving at the opinions expressed below, we have examined and relied on
originals or copies of certain documents including, but not limited to:
1. the Indenture;
2. the Hyundai Auto Receivables Trusts Asset-Backed Notes
Prospectus, dated August 20, 2004 (the "Base Prospectus");
3. the Hyundai Auto Receivables Trust 2004-A Prospectus Supplement,
dated August 26, 2004 (the "Prospectus Supplement," and together
with the Base Prospectus, the "Prospectus");
September 1, 2004
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4. the Amended and Restated Trust Agreement, dated as of September
1, 2004, among HABS, Wilmington Trust Company, as Owner Trustee,
and HMFC (the "Trust Agreement");
5. the Sale and Servicing Agreement, dated as of September 1, 2004,
among the Issuer, HABS, HMFC and the Indenture Trustee (the "Sale
and Servicing Agreement");
6. the forms of the Notes and the trust certificates (the
"Certificates") to be issued by the Issuer; and
7. certain other documents delivered at the closing of the sale of
the Notes;
as well as such other documents as in our discretion we have deemed necessary,
appropriate or relevant as a basis for the opinions set forth below. In such
examination, we have assumed the genuineness of all signatures, the legal
capacity of all natural persons, the authenticity of all documents submitted to
us as originals, the conformity with originals of all documents submitted to us
as copies thereof, and the authenticity of the originals of such copies. We have
not made an independent investigation of the facts set forth either in the
Prospectus or such other documents that we have examined. We have consequently
assumed in rendering these opinions that the information presented in such
documents or otherwise furnished to us accurately and completely describes, in
all material respects, all facts relevant to the Issuer and its activities and
the issuance of the Notes. We have further assumed that all parties to the
agreements enumerated above will perform in accordance with the terms of such
agreements, without regard to any modifications to the terms of such agreements,
and that there are no agreements, understandings or arrangements other than
those of which we have been informed that would affect our opinions set forth
below. We have also assumed the correctness and completeness of any other
opinion or advice of tax counsel delivered with respect to the Issuer, the Notes
or the Certificates, to the extent the Indenture, the Trust Agreement or other
agreement permit the Issuer to take an action or fail to take an action upon
delivery of such opinion or advice of tax counsel.
Our opinions set forth herein represent and are based on our best judgment
regarding the application of United States federal income tax laws arising under
the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury
regulations promulgated and proposed thereunder, current positions of the
Internal Revenue Service ("IRS") contained in published revenue rulings and
revenue procedures, current administrative positions of the IRS and existing
judicial decisions, all of the foregoing of which are subject to change or
revocation, possibly with retroactive effect. In that regard, we note that no
activity closely comparable to that contemplated by the Issuer has been the
subject of any Treasury regulation, revenue ruling or judicial decision. We
express no opinion as to the laws of any jurisdiction other than the federal
laws of the United States of America. No rulings will be sought from the IRS
with respect to any of the matters discussed herein, and our opinions are not
binding upon the IRS or the courts. Thus, there can be no assurance that the IRS
will not successfully assert positions contrary to those stated in this opinion
letter. Our opinions are also based on certain factual representations and
covenants contained in certain Officer's Certificates of HMFC, as Administrator
of the Issuer, and HABS, dated the date hereof and attached hereto (the
"Officer's Certificates"),
September 1, 2004
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including that, based on the assumptions described therein, the present value of
the cash flows expected to be available for distribution to holders of the
Certificates is approximately $60.754 million.(1) With respect to any
representations contained in the Officer's Certificates that are qualified by
knowledge, we have assumed the accuracy of such representations without respect
to such qualifications. Any change occurring after the date hereof in, or a
variation from, any of the foregoing bases for our opinions could affect the
conclusions expressed below. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax law.
II. SUMMARY OF THE FACTS.
The Issuer. The Issuer is a Delaware statutory trust, established pursuant
to a trust agreement and governed by the Trust Agreement. The Issuer may engage
in certain limited activities, including the following: (i) issuing the Notes
pursuant to the Indenture and issuing the Certificates pursuant to the Trust
Agreement; (ii) paying interest and principal on the Notes and distributions on
the Certificates; (iii) purchasing a pool of motor vehicle retail installment
sale contracts (the "Receivables"); (iv) funding a cash reserve account (the
"Reserve Account"); and (v) engaging in certain other necessary or incidental
activities including those that may be necessary in connection with conservation
of the trust estate and the making of payments to the Certificateholders and the
Noteholders.(2)
Various contractual arrangements exist to help ensure that the Issuer will
not be treated as a corporation for federal income tax purposes. As long as the
Certificates are owned by only one Person,(3) the Trust Agreement provides that
for federal income tax purposes the Issuer will be treated as disregarded as an
entity separate from its owner.(4) If the Certificates are ever owned by more
than one Person, the Trust Agreement provides that the Issuer will then be
treated as a partnership for federal income tax purposes.(5) In addition, HABS
and HMFC have represented that the Issuer will not affirmatively elect to be
classified as an association for federal income tax purposes.(6) Finally, if
there are multiple owners of the Certificates, then certain transfer
restrictions will be imposed that are designed to prevent public trading of the
Certificates (the
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(1) See paragraph 7 of the Officer's Certificate of HABS.
(2) See section 2.03 of the Trust Agreement.
(3) HABS will initially own all of the Certificates.
(4) See section 2.06 of the Trust Agreement, p. A-3 of the Form of Trust
Certificate.
(5) See id.
(6) See Officer's Certificates.
September 1, 2004
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"Transfer Restrictions").(7) Furthermore, the Owner Trustee may not take any
action that would result in the Issuer becoming taxable as a corporation for
federal income tax purposes.(8)
Receivables and Eligible Investments. The motor vehicle retail installment
sale contracts that comprise the Receivables are secured by new or used
automobiles and light-duty trucks and were originated by franchised motor
vehicle dealers rather than the Issuer.(9) The Receivables require monthly level
payments at specified times.(10) In addition to the Receivables, the Indenture
Trustee may invest funds on deposit in the Collection Account and the Reserve
Account in Eligible Investments (as defined in the Sale and Servicing
Agreement).(11) Eligible Investments generally are securities or instruments
issued or guaranteed by highly rated obligors or guarantors.(12)
Payments of Interest. Interest on the principal balances of the classes of
the Notes will accrue at the following fixed rates: Class A-1: 1.78125%, Class
A-2: 2.36%, Class A-3: 2.97%, Class A-4: 3.54%, Class B: 3.46%, Class C: 3.36%
and Class D: 4.10%.(13) Interest will be payable monthly on the 15th day of each
month (or the next succeeding business day), commencing October 15, 2004.(14)
Interest payments to holders of the Class B Notes will be subordinated to
interest payments to the more senior classes and servicing fees due to the
Servicer and, in limited circumstances, principal payments with respect to the
more senior classes. Interest payments to holders of Class C Notes will be
subordinated to interest payments to the more senior classes and servicing fees
due to the Servicer and, in limited circumstances, principal payments with
respect to the more senior classes. Interest payments to holders of Class D
Notes will be subordinated to interest payments to the more senior classes and
servicing fees due to the Servicer, and in limited circumstances, principal
payments with respect to the more senior classes.(15) The Certificates do not
bear interest.
A failure to pay an amount of interest on the "controlling class" of Notes
(i.e., the most senior class of Notes then outstanding) within thirty-five days
of the due date is an Event of Default under the Indenture.(16) It was
represented to us that it is expected that collections on the
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(7) See section 3.11 of the Trust Agreement (Certificates will not be
transferred or marketed on an "established securities market," prior
consent of Issuer required with respect to certain transfers that raise
public trading concerns, etc.).
(8) See section 6.06 of the Trust Agreement.
(9) See page S-6 of the Prospectus Supplement.
(10) See page 14 of the Base Prospectus.
(11) See section 5.02(b)(v) of the Sale and Servicing Agreement.
(12) See definition of Eligible Investments in Sale and Servicing Agreement.
(13) See Exhibits A-1, A-2, A-3, A-4, B, C and D of Indenture.
(14) See definition of Payment Date in Indenture.
(15) See sections 5.04 and 8.02 of Indenture.
(16) See section 5.01(i) of Indenture.
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Receivables will significantly exceed the funds necessary to make timely
payments of amounts due on the Notes and that it is a remote likelihood that
interest on the Notes will not be paid in full on each monthly payment date.(17)
Payments of Principal. The Issuer will pay principal on the Notes monthly
on the 15th day of each month (or the next succeeding business day), commencing
October 15, 2004, from deposits made to the principal distribution account.(18)
Principal payments on the Notes will generally be made in the following order of
priority: (i) to the Class A-1 Notes until they are paid in full; (ii) to the
Class A-2 Notes until they are paid in full; (iii) to the Class A-3 Notes until
they are paid in full; (iv) to the Class A-4 Notes until they are paid in full;
(v) to the Class B Notes until they are paid in full; (vi) to the Class C Notes
until they are paid in full; and (vii) to the Class D Notes until they are paid
in full.(19) In addition, following certain Events of Default under the
Indenture, the Issuer will make no distributions of principal and interest on
the Class B Notes until payment in full of principal and interest on the Class A
Notes; the Issuer will make no distributions of principal and interest on the
Class C Notes until payment in full of principal and interest on the Class B
Notes; the Issuer will make no distributions of principal and interest on the
Class D Notes until payment in full of principal and interest on the Class C
Notes; and the Issuer will make no distributions on account of the Certificates
until payment in full of principal and interest on the Class D Notes.(20)
Payment of principal on the Class A Notes will be made first to the Class A-1
Notes until payment in full and then pro rata to the Class A-2, Class A-3 and
Class A-4 Notes.(21) The Certificates do not have a principal amount.
The Stated Maturity Dates for the Notes are: September 15, 2005 for the
Class A-1 Notes, September 15, 2007 for the Class A-2 Notes, May 15, 2009 for
the Class A-3 Notes and August 15, 2011 for the Class A-4 Notes, the Class B
Notes, the Class C Notes and the Class D Notes.(22) A failure to pay principal
on a class of Notes on the Stated Maturity Date for such class is an Event of
Default under the Indenture.(23) It was represented to us that the Issuer
expects that collections on the Receivables will significantly exceed the funds
necessary to make timely payments of amounts due on the Notes.(24)
Credit Enhancement. To protect against any defaults or shortages in
payments to be received by the Issuer with respect to the Receivables, credit
enhancement for the Notes will be provided in the form of: (i) subordination and
overcollateralization features with respect to the different classes of Notes;
(ii) the Reserve Account; and (iii) subordination of the
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(17) See Officer's Certificates.
(18) See sections 2.08(b), 3.01 and 8.02(d) of Indenture.
(19) See section 8.02(d) of Indenture.
(20) See section 5.04 of Indenture.
(21) See id.
(22) See Exhibits A-1, A-2, A-3, A-4, B, C and D of Indenture.
(23) See section 5.01 of Indenture.
(24) See Officer's Certificates.
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Certificateholders' right to receive amounts collected on the Receivables in
excess of amounts required to compensate the Servicer, reimburse Advances, and
pay the principal amount of, and interest on, the Notes.
Subordination and Overcollateralization. As stated above, interest and
principal payments with respect to the junior classes of Notes are generally
subordinated to payments with respect to the more senior classes of Notes. In
addition, payments with respect to the Certificates are generally subordinated
to payments with respect to the Notes. The principal balance of the Receivables
on the Cut-off Date of $807,850,711.24 exceeds the initial principal balance of
the Notes ($746,300,000) by $61,550,711.24. This overcollateralization amount
includes an initial Yield Supplement Overcollateralization Amount of
$38,506,992.79 (the "YSOA").(25) After the Closing Date, the Issuer will
maintain overcollateralization by paying down principal on the Notes to the
extent the outstanding principal amount of the Notes is greater than the excess,
if any, of the Adjusted Pool Balance (defined below) over the Target
Overcollateralization Amount.(26) The Target Overcollateralization Amount with
respect to any Payment Date is equal to the greater of (i) 8% of the Adjusted
Pool Balance, minus amounts on deposit in the Reserve Account (after withdrawals
from the Reserve Account but prior to deposits to the Reserve Account) and (ii)
1.25% of the Adjusted Pool Balance as of the Cut-off Date; provided that the
Target Overcollateralization Amount is not greater than the Adjusted Pool
Balance on such Payment Date.
Reserve Account. On the Closing Date, the Issuer will establish the Reserve
Account and will make a deposit thereto in an amount equal to $5,770,077.89,(27)
which is equal to .75% of (i) the aggregate principal balance of the receivables
as of the Cut-off Date less (ii) the initial YSOA as of the Closing Date (the
"Adjusted Pool Balance").(28) However, the Reserve Account amount will be no
more than the principal balance of outstanding Notes (after giving effect to the
allocation of principal payments on such payment date).(29)
Subordination of the Certificateholders' Right to Receive Excess Amounts.
The weighted average interest rate on the Receivables as of the Cut-off Date
(taking into account the amount of each Receivable) is approximately 7.06%,
which exceeds the sum of the weighted average coupon on the Notes (approximately
2.705%, computed without regard to term) and the 1% servicing fee by
approximately 3.355%, and will also substantially exceed the 4.10% coupon on the
Class D Notes. The right of the Certificateholders to any such excess is
subordinated to the
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(25) Although the YSOA provides additional overcollateralization benefit, the
YSOA is intended to compensate for the low annual percentage rates on some
of the Receivables. The YSOA declines on each payment date in accordance
with a predetermined schedule as the principal amount of the Receivables
decline.
(26) See section 5.05(b) of the Sale and Servicing Agreement and section 8.02(d)
of the Indenture.
(27) See sections 5.02(b) and 5.06 of the Sale and Servicing Agreement.
(28) See section 5.06 of the Sale and Servicing Agreement.
(29) See id.
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rights of the Noteholders to receive payments of principal and interest and any
other amounts payable to the Noteholders.
Form. The Notes are denominated as debt, the Issuer intends that the Notes
be characterized as debt for federal income tax purposes, and the Noteholders,
by their acceptance of the Notes, will agree to treat the Notes as indebtedness
for federal income tax purposes.(30) Moreover, it was represented to us at the
time of the issuance of the Notes that the parties intended to create
unconditional debt obligations of the Issuer and a debtor-creditor relationship
between the Issuer and the holders of the Notes.(31)
Ratings. The Prospectus Supplement indicates that the Notes (except with
respect to the Class D Notes) have received the following ratings by Standard &
Poor's Ratings Services, Moody's Investors Service, Inc. and Fitch, Inc.,
respectively: A-1+, Prime-1 and F1+ for Class A-1; AAA, Aaa and AAA for Class
A-2; AAA, Aaa and AAA for Class A-3; AAA, Aaa and AAA for Class A-4; AA, Aa3 and
AA for Class B; A, A3 and A+ for Class C. The Prospectus Supplement indicates
that the Class D Notes have received a rating of "BBB" by Standard & Poor's
Ratings Services and a rating of "BBB+" by Fitch, Inc.
III. DISCUSSION.
A. The Notes Will Be Treated as Indebtedness for Federal Income Tax
Purposes.
Whether an instrument represents debt or equity for U.S. federal income tax
purposes depends on the facts and circumstances of the particular situation and
no one factor is determinative.(32) Among the factors to be considered are: (i)
whether the instrument is payable within a reasonable period of time and on a
fixed maturity date; (ii) whether the payment of principal and interest is
dependent upon the earnings or the discretion of the issuer; (iii) whether the
claim of the holder of the instrument will have priority over the claims of
holders of all classes of equity of the issuer; (iv) whether the instrument
gives the holder voting or management powers; (v) whether a default in the
payment of principal or interest accelerates the maturity of the instrument and
creates the right in the holder to enforce payment thereof; (vi) whether the
issuer has an adequate capital structure; (vii) whether it is reasonable for the
holder of the instrument to anticipate the payment of principal and interest;
and (viii) whether at the time of issuance the parties intend to create a
debtor-creditor relationship.(33) The analysis of these factors serves to
determine whether the economic reality of the holder's investment in the
instrument is consistent with risk capital subject solely to the performance of
the corporation's business, or is a bona fide loan, repayment of which is
reasonably expected, and may be compelled to be made in full.
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(30) See section 2.13 and Exhibits A-1, A-2, A-3, A-4, B, C and D of Indenture.
(31) See Officer's Certificates.
(32) See John Kelley Co. v. Commissioner, 326 U.S. 521 (1943); Rev. Rul. 68-54,
1968-1 C.B. 69.
(33) See Rev. Rul. 68-54, 1968-1 C.B. at 70.
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Whether the Notes are in substance debt of the Issuer also depends on which
party to the transactions holds the "substantial incidents of ownership" of the
collateral. The courts have identified a variety of factors that must be
considered in making that determination.(34) The decided cases have also focused
on the distinction between a true sale of a right to future income and an
assignment of anticipated income as collateral to a lender (with the assignor
remaining liable to the lender on the underlying obligation).(35) Here, the
important considerations are: which party bears the burdens of ownership of
property that is formally owned by the issuer of the instrument (i.e., the risk
of loss from the Receivables), which party holds the benefits of ownership of
the property (i.e., the potential for income or gain from the Receivables) and
the Issuer's retention of liability to the holders of the Notes.
An analysis of these factors demonstrates that the Notes will be treated as
debt for federal income tax purposes.
1. Indicia of Indebtedness.
All of the Notes have final maturity dates of less than seven years from
the issue date, fixed principal amounts, and stated non-contingent interest that
is payable monthly at rates ranging from 1.78125% to no greater than 4.10%. The
Issuer has no discretion regarding the payment of these principal and interest
amounts. As indicated above, Noteholder claims will have priority over claims of
the Certificateholders as the Certificates are subordinated to the Notes. The
Notes do not confer on the Noteholders any management powers or voting rights
with respect to the election of officers or board members of the Issuer or HABS
or their affiliates or the business operations of these entities. It was
represented to us that it is expected that collections on the Receivables will
significantly exceed the funds necessary to make timely payments of amounts due
on the Notes. Moreover, the most subordinated Notes, the Class D Notes, will be
rated at least BBB and BBB+ by the rating agencies. Thus, it is reasonable to
anticipate the payment of principal and interest on all of the Notes in a timely
manner. The Notes are denominated as debt and it was represented to us that it
is intended that the Notes create unconditional obligations of the Issuer and
that the issuance of the Notes will create a debtor-creditor relationship. The
Noteholders, by their acceptance of the Notes, will agree to treat the Notes as
indebtedness for federal income tax purposes. In addition, to the knowledge of
HABS and HMFC, none of the initial beneficial owners of the Notes will be
related to the Issuer, directly or indirectly, other than being related as a
creditor as a result of the acquisition of the Notes.
A failure to pay an amount of interest on the "controlling class" of Notes
within thirty-five days of the payment due date or a failure to pay principal on
a class of Notes on their Stated Maturity Date is an Event of Default under the
Indenture. Upon the occurrence of an Event of Default, the Indenture Trustee or
holders of a majority in principal amount of the most senior
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(34) See Town & Country Food Co. v. Commissioner, 51 T.C. 1049 (1969), acq.,
1969-2 C.B. xxv; United Surgical Steel Co. v. Commissioner, 54 T.C. 1215
(1970), acq., 1971-2 C.B. 3; G.C.M. 39584 (December 3, 1986).
(35) See Watts Copy Systems, Inc. v. Commissioner, T.C. Memo. 1994-124 (1994);
see also, Priv. Ltr. Rul. 8643002 (June 20, 1986).
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class of Notes may declare the Notes to be immediately due and payable. Although
it is possible that interest payments on subordinated classes of Notes may not
be paid in full each month, it was represented to us that the likelihood of this
happening is remote. In addition, any such interest not timely paid will be due
and payable no later than the Stated Maturity Date on the particular Notes.
Where unpaid or deferred interest is due and payable no later than a certain
fixed date in the future, courts have generally upheld debt characterization for
federal income tax purposes.(36)
The Issuer's capital structure further supports treating the Notes as debt
for federal income tax purposes. The HABS Officer's Certificate provides that,
based on certain assumptions as provided therein, the present value of the cash
flows that are expected to be available to the Certificates, on the date the
Notes are issued, is approximately $60.754 million. The Certificates constitute
equity of the Trust and the present value of such cash flows represents
approximately 7.53% of the Trust's initial capitalization. The Certificates
represent a residual interest in the Reserve Account, which provides credit
support for the Notes and will, on the Closing Date, equal .75% of the Adjusted
Pool Balance (as of the Cut-off Date), and collections on the Receivables in
excess of the payments on the Notes and other expenses of the Issuer. The
adequacy of such equity and credit support is reflected in the very high credit
ratings received on the Notes, including BBB and BBB+ on the most subordinated
Notes, the Class D Notes. Finally, courts have recognized that finance companies
are likely to have higher debt-to-equity ratios than other businesses.(37)
The foregoing analysis supports the conclusion that the Notes will be
treated as indebtedness for United States federal income tax purposes.
2. The Burdens and Benefits of Ownership of the Receivables are not
Borne by the Noteholders.
Payments of principal and interest on the Notes are dependent upon
available cash collected from the Receivables. However, the Noteholders will be
protected from losses on the Receivables as a result of the credit enhancement
features, including subordination features, overcollateralization amounts and
the Reserve Account, which all protect the Noteholders' rights to receive
payments. As indicated above, the obligations of the Issuer with respect to the
Notes are substantially overcollateralized and the Notes are highly rated by the
rating agencies. "Overcollateralization" has been recognized as being
characteristic of a loan.(38) Consequently, holders of the Notes have
substantial protection against losses.
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(36) See, e.g., Tomlinson v. The 1661 Corp., 377 F.2d 291, 294 (5th Cir. 1967)
(debentures that paid cumulative interest held to be debt even though the
corporation rarely, if ever, paid interest currently).
(37) See, e.g., P.M. Finance Corp. v. Comm'r, 302 F.2d 786, 788 (3rd Cir. 1962);
Jaeger Auto Finance Co. v. Nelson, 191 F. Supp. 693, 698 (E.D. Wis. 1961).
(38) See, e.g., United Surgical Steel Co., 54 T.C. at 1227-31; Yancey Brothers
Co. v. United States, 319 F. Supp. 441, 446 (N.D. Ga. 1970).
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Likewise, the benefits of ownership of the Receivables inure solely to the
Issuer and not to the Noteholders. The Noteholders are only entitled to receive
their fixed principal and interest payments on the Notes, whereas the
Certificateholders are entitled to receive all collections on the Receivables in
excess of the amounts necessary to pay interest and principal due to the
Noteholders. Thus, if payments on the Receivables exceed the amounts currently
projected, such excess should inure solely to the benefit of the
Certificateholders.
The foregoing discussion demonstrates that the Notes exhibit
characteristics consistent with bona fide debt that is expected or may be
compelled to be repaid in full and that the Certificates and the Reserve Account
are reasonably expected to absorb the economic risk associated with the
performance of the underlying Receivables that secure the Notes. Accordingly, it
is our opinion that, although there is no direct governing authority, for United
States federal income tax purposes the Notes will be treated as indebtedness.
B. The Trust Will Not Be Treated as an Association or Publicly Traded
Partnership, Taxable as a Corporation for Federal Income Tax Purposes.
An entity that is not organized as a corporation nevertheless will be
treated as an "association" for federal income tax purposes if it is an entity
that must be treated as a corporation under one of the eight categories in
Treasury Regulation Section 301.7701-2(b). Two such categories are relevant
here,(39) the first of which is an entity that files an appropriate election (or
such an election has been filed on its behalf) to be treated as an
association.(40) As indicated above, the Trust Agreement and the form of Trust
Certificate provide that, for federal income tax purposes, as long as a single
Person owns the Certificates, it is intended and agreed that the Issuer will be
treated as disregarded as an entity separate from its owner, and if two or more
Persons own the Certificates, the Issuer will be treated as a partnership. In
addition, the Officer's Certificates provide that the Issuer will not file an
election to be treated as a corporation for federal income tax purposes.(41)
Thus, the Issuer will not be treated as an "association" for United States
federal income tax purposes.
The second relevant category of entities treated as corporations are
"publicly traded partnerships." An entity will be treated as a publicly traded
partnership taxable as a corporation for federal income tax purposes if: (i) it
is a partnership for federal income tax purposes, (ii) its ownership interests
are (A) traded on an established securities market or (B) are readily tradable
on a secondary market or the substantial equivalent thereof (in either such
circumstance,
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(39) A statutory trust is not an entity that must be treated as a corporation
under Treas. Reg. Secs. 301.7701-2(b)(1), (3), (4), (5), (6) or (8). An
entity must be treated as a corporation under Treas. Reg. Sec.
301.7701-2(b)(7) if it is a "publicly traded partnership" or a "taxable
mortgage pool". An entity will not be a taxable mortgage pool if 50% or
less of its assets consist of real estate mortgages. The determination of
whether an entity is a publicly traded partnership is discussed below.
(40) See Treas. Reg. Secs. 301.7701-2(b)(2), 301.7701-3.
(41) The Owner Trustee has also agreed that it will not take any action that, to
its actual knowledge, would result in the Trust becoming taxable as a
corporation for federal income tax purposes.
September 1, 2004
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"publicly traded") and (iii) less than 90% of its gross income from a taxable
year consists of passive-type income, including interest that is not derived in
the conduct of a financial business.(42) If two or more Persons ever own the
Certificates, the Issuer will be treated as a partnership by the parties, but
the Transfer Restrictions ensure that the Certificates will not be "publicly
traded." Accordingly, the Issuer will not be treated for United States federal
income tax purposes as a publicly traded partnership taxable as a corporation.
IV. OPINIONS.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, although there is no direct governing authority, for United
States federal income tax purposes (i) the Notes will be treated as indebtedness
and (ii) the Issuer will not be treated as an association or a publicly traded
partnership, taxable as a corporation. In addition, it is our opinion that, as
of the date hereof, based on the facts and assumptions and subject to the
limitations set forth in the Prospectus, the statements under the heading
"Material United States Federal Income Tax Consequences," in the Prospectus,
insofar as they purport to summarize certain provisions of the statutes or
regulations referred to therein, are accurate summaries in all material
respects.
Except as set forth above, we express no other opinion as to any federal,
state, local or foreign tax or other consequences of the transactions described
herein. This opinion letter is furnished only to you and is solely for your
benefit in connection with the issuance of the Notes. This opinion letter may
not be used, relied upon, circulated, furnished, quoted or otherwise referred to
by anyone else or for any other purpose without our prior written consent in
each instance, which may be granted or withheld in our sole discretion.
Very truly yours,
/s/ Latham & Watkins LLP
- ------------------------
(42) See Code Sec. 7704; Treas. Reg. Sec. 301.7701-2(b)(7). It appears that the
income of the Issuer will consist solely of interest income derived from
passive ownership of the Receivables and any cash or cash-equivalents held
by the Issuer and thus such income should not be considered derived by a
financial business. We have not attempted to determine whether each of the
Receivables and Eligible Investments purchased by the Issuer should be
characterized as debt for United States federal income tax purposes. We
understand, however, that each Receivable that will be purchased by the
Issuer provides for fixed payments consisting of principal and interest at
a fixed rate and provides for normal creditors' remedies for nonpayment of
principal and interest. We further understand that Eligible Investments are
obligations that are issued or guaranteed by highly rated issuers or
guarantors.
September 1, 2004
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SCHEDULE I
Hyundai ABS Funding Corporation
10550 Talbert Avenue
Fountain Valley, California 92708
Hyundai Motor Finance Company
10550 Talbert Avenue
Fountain Valley, California 92708
Hyundai Auto Receivables Trust 2004-A
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Citibank, N.A.
111 Wall Street, 14th Floor, Zone 3
New York, New York 10005
Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.
55 Water Street
New York, New York 10041
Fitch, Inc.
1 State Street Plaza
New York, New York 10004
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10017
Banc of America Securities LLC, Individually
and as Representative of the Several Underwriters
214 North Tryon Street
Charlotte, North Carolina 28255-0001