Post by Sapphire Capital on Jul 12, 2008 2:47:15 GMT 4
PRIVATE PLACEMENT MEMORANDUM
NONAME INC.
COMMERCIAL PAPER NOTES
NONAME INC. (“NONAME”) is a special purpose, bankruptcy-remote corporation that is organized under Delaware law and is exempt from regulation under the Investment Company Act of 1940, as amended, pursuant to Section 3(c)(1) thereof. Its activities generally are limited to financing interests in, indebtedness secured by and other rights related to certain kinds of assets and engaging in other activities incidental to providing such financing. The assets in which interests are financed include accounts, general intangibles, chattel paper, instruments, investment property and other financial assets of qualified entities (the “Sellers”) referred to NONAME by Bank (“BANK”), a chartered bank acting through a New York Branch (the related interests, indebtedness and other rights being the “Financial Assets”). NONAME funds its activities through the issuance of its commercial paper notes (the “Notes”).
THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION IN SECTION 4(2) OF THE SECURITIES ACT, AND THE NOTES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES OR “BLUE SKY” LAWS OF ANY STATE. OFFERS AND SALES OF THE NOTES MAY BE MADE ONLY TO INSTITUTIONAL INVESTORS APPROVED AS ACCREDITED INVESTORS SPECIFIED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT (“INSTITUTIONAL ACCREDITED INVESTORS”) BY PLACEMENT AGENT BANK (“PLACEMENT AGENT BANK”) OR ANOTHER PLACEMENT AGENT AUTHORIZED BY NONAME (PLACEMENT AGENT BANK AND EACH SUCH OTHER PLACEMENT AGENT, INDIVIDUALLY, A “PLACEMENT AGENT”) OR TO QUALIFIED INSTITUTIONAL BUYERS AS DEFINED IN RULE 144A PROMULGATED UNDER THE SECURITIES ACT (“QUALIFIED INSTITUTIONAL BUYERS”). BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER THEREOF WILL BE DEEMED (A) TO HAVE REPRESENTED TO NONAME AND THE PLACEMENT AGENTS THAT IT IS (I) AN INSTITUTIONAL ACCREDITED INVESTOR AND THAT THE NOTE IS BEING ACQUIRED FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY FOR OTHER INSTITUTIONAL ACCREDITED INVESTORS FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, ANY PUBLIC DISTRIBUTION THEREOF, OR (II) A QUALIFIED INSTITUTIONAL BUYER ACTING ON BEHALF OF ITSELF OR ANOTHER QUALIFIED INSTITUTIONAL BUYER (AND, IF IT IS A QUALIFIED INSTITUTIONAL BUYER, TO HAVE ACKNOWLEDGED THAT IT IS AWARE THAT THE SELLER MAY RELY ON AN EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PURSUANT TO RULE 144A), AND (B) TO HAVE AGREED THAT ANY RESALE OR OTHER TRANSFER OF A NOTE WILL BE MADE ONLY IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ONLY TO A PLACEMENT AGENT OR THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL INVESTOR APPROVED BY THE PLACEMENT AGENT AS AN INSTITUTIONAL ACCREDITED INVESTOR OR AS A QUALIFIED INSTITUTIONAL BUYER, OR TO A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MADE UNDER RULE 144A. ANY RESALE OR OTHER TRANSFER, OR ATTEMPTED RESALE OR OTHER TRANSFER IN VIOLATION OF THE FOREGOING RESTRICTIONS SHALL BE VOID AND WILL NOT BE RECOGNIZED BY NONAME.
Commercial Paper Ratings*:
Standard & Poor’s Ratings Services A-1
Moody’s Investors Service P-1
Fitch, Inc. F1
*Such ratings are only accurate as of the date hereof, as they have been obtained with the understanding that Standard & Poor’s Ratings Services, Moody’s Investors Service, and Fitch, Inc. will continue to monitor the credit of NONAME and make future adjustments to such ratings to the extent warranted. The ratings may be changed, superseded or withdrawn, and therefore, a prospective purchaser should check the current ratings before purchasing the Notes.
Placement Agent Bank
January 2002
The information set forth herein was obtained from sources that we believe reliable, but we do not guarantee its accuracy. Neither the information, nor any opinion expressed herein, constitutes a solicitation by us or on behalf of NONAME of the purchase or sale of any instruments in any jurisdiction in which such solicitation would be unlawful. The information contained herein will not typically be distributed or updated upon each new sale of commercial paper notes, although updated information will be distributed from time to time. Furthermore, the information contained herein is not intended as a substitution for the investor’s own inquiry into the creditworthiness of NONAME, and investors are encouraged to make such inquiries.
Table of Contents
Page
I. OVERVIEW 3
II. NONAME INC. 4
Business Purpose 4
NONAME Administration 4
Investment Criteria 4
Use of Proceeds 4
Ratings Description 5
NONAME Capitalization 5
Bankruptcy-Remote Structure 5
Repayment of Notes 6
III. TRANSACTION DESCRIPTION 7
Transaction Overview 7
Form of Financial Assets 8
Transaction Mechanics 8
Transaction-Specific Credit Enhancement and Concentration Limits 9
Nature of Commitments; Termination Events 10
Servicers of the Financial Assets 10
Rating Agency Review 10
IV. PROGRAM DOCUMENTS AND CREDIT FACILITIES 11
Overview of NONAME’s Credit and Liquidity Facilities 12
Liquidity Asset Purchase Agreement 12
Liquidity Loan Agreement 13
Credit Support Asset Purchase Agreement 14
Receivables Purchase Agreements 14
Administrative Agreement 15
Management Agreement 15
Security Agreement 15
Termination of CP Issuance 16
Payment Priorities 16
Modifications to the Program 16
V. PRIVATE PLACEMENT 17
VI. THE NOTES 18
General 18
Risks 18
Offering of Notes 18
VII. BANK OF CANADA 19
I. OVERVIEW
NONAME was established for the purpose of issuing Notes to fund the assets of Sellers referred to NONAME by BANK. The assets underlying the Financial Assets funded by NONAME consist of a variety of asset types. The Sellers or their respective affiliates typically are investment grade corporations, but may include a limited number of non-investment grade sellers acceptable to Standard & Poor’s Ratings Services, Fitch, Inc. and Moody’s Investors Service (collectively, the “Rating Agencies”).
The transactions entered into by NONAME generally utilize trusts or other special purpose entities for the purpose of minimizing the effects of bankruptcy or other insolvency events with respect to the related Sellers. The transactions also typically contain transaction-specific credit enhancement sufficient to cover a multiple of historical losses for the purpose of minimizing the effects of defaults on the underlying pools of assets (see “Transaction Description”).
NONAME customarily provides funding for Financial Assets through the issuance of Notes rated A-1/ F1/P-1 by the Rating Agencies. The Notes generally are supported by a transaction-specific liquidity facility with respect to each transaction, an uncommitted program-wide liquidity facility and a program-wide credit enhancement facility (see “Program Documents and Credit Facilities”). Additionally, BANK acts as administrative agent (the “Administrative Agent”) for NONAME under an Administrative Agreement and, in such capacity, coordinates funding activities, interfaces with Sellers, executes documentation and monitors the transactions. NONAME is not affiliated through ownership with BANK, any placement agent or any of their respective affiliates.
Exhibit A: Relevant Parties
1 Financial Assets include interests in the assets of qualified Sellers (see “Transaction Description–Transaction Mechanics”).
2 XYZ Holdings, Inc. owns 100% of the equity in NONAME (see “NONAME INC.–NONAME Capitalization”).
3 XYZ, LLC provides administrative and clerical services (see “Program Documents and Credit Facilities–Management Agreement”).
4 DB acts as the Depositary.
5 NONAME’s commercial paper is rated A-1/F1/P-1 by Standard & Poor’s Ratings Services, Fitch, Inc. and Moody’s Investors Service.
6 BANK acts as Administrative Agent (see “Program Documents and Credit Facilities–Administrative Agreement”).
7 BANK acts as Collateral Agent (see “Program Documents and Credit Facilities–Security Agreement”).
8 BANK acts as Liquidity Agent (see “Program Documents and Credit Facilities–Liquidity Asset Purchase Agreement” and “–Liquidity Loan Agreement”).
9 BANK acts as Credit Support Agent (see “Program Documents and Credit Facilities–Credit Support Asset Purchase Agreement”).
10 Credit Suisse First Boston, Goldman Sachs, Merrill Lynch, and RBC Capital Markets act as Placement Agents.
II NONAME INC.
Business Purpose
NONAME was formed to provide its Sellers with financing for a variety of asset types (including, but not limited to, automobile loans, credit card receivables, trade receivables, consumer and commercial loans, residential mortgage loans, equipment loans and equipment leases). The Sellers typically are banks, finance companies, insurance companies or retail and industrial corporations, and can derive several benefits from such financing, including the following:
• Cost-effective funding;
• Funding diversification; and
• Balance sheet flexibility and beneficial capital management.
Moreover, the multi-seller financing provided by NONAME affords the Sellers the anonymity not enjoyed through certain other funding sources. As such, the Sellers may look to NONAME to provide a core funding component for their capital structures, funding for their seasonal working capital needs or warehouse financing prior to accumulating the volume necessary for issuing term asset-backed securities. The amounts payable by Sellers in respect of NONAME’s financing of the Financial Assets are expected to provide NONAME with a return sufficient to pay the discount or interest rate applicable to the Notes, certain fees charged by NONAME and expenses incurred by NONAME.
NONAME Administration
NONAME has retained BANK to provide services in connection with the structuring, negotiation and acquisition of NONAME’s investments in Financial Assets and the administration and monitoring of the Financial Assets, the related liquidity facilities, and the Credit Support Asset Purchase Agreement (the “Credit Support Agreement”) as well as the issuance, sale and payment of the Notes (see “Program Documents and Credit Facilities–Administrative Agreement”).
Investment Criteria
When Financial Assets are financed by NONAME, BANK (as Administrative Agent) generally performs due diligence with respect to the Seller’s credit and collection policies and the underlying asset portfolio’s performance and composition and recommends appropriate levels and forms of over collateralization or other transaction-specific credit enhancement. Transaction terms typically include eligibility criteria, concentration limits, termination events, covenants, representations and warranties and servicing or collection requirements. BANK generally evaluates no less than three years of historical portfolio statistics before recommending a structure for the Financial Assets. Underwriting standards generally are expected to include, as applicable, the requirements that:
• Sellers must meet credit standards set forth in NONAME’s credit policy and procedures;
• Financial Assets must include credit enhancement;
• NONAME generally limits concentration percentages of obligors; and
• Financial Assets must be sufficient to repay the amount invested and yield on such amount.
Use of Proceeds
The proceeds of the Notes will be applied to finance the Financial Assets if such proceeds are not needed to pay maturing Notes or amounts due under the liquidity facilities or the Credit Support Agreement. To the extent that such proceeds are not required for the foregoing purposes, NONAME will invest such proceeds in certain permitted investments.
Ratings Description
The Notes carry the following credit ratings from the following Rating Agencies:
Standard & Poor’s Ratings Services A-1
Moody’s Investors Service P-1
Fitch, Inc. F1
The above ratings are based on, among other things:
• The credit quality of the assets funded by NONAME;
• The structural mechanisms that prevent losses from accruing to investors in the Notes;
• The credit and investment policies creating a diversified portfolio of Financial Assets;
• The ability of BANK to manage the asset-backed commercial paper program; and
• The credit quality of each of the providers of liquidity and credit support.
The Rating Agencies will continue to monitor and evaluate the ratings of the Notes. However, there can be no assurance that NONAME will maintain such ratings in the future. The ratings on the Notes should be evaluated independently from similar ratings on other types of securities. The ratings are not recommendations to buy, sell or hold the Notes and are subject to revision, qualification or withdrawal by the related Rating Agencies at any time.
NONAME Capitalization
NONAME is a wholly owned subsidiary of XYZ Holdings, Inc. Common stock carries a par value of $1.00 per share, and all 1,000 authorized shares are issued and outstanding. As of December 31, 2000, additional paid in capital and retained earnings equaled $24,000.00 and $1,577.00, respectively. Substantially all of NONAME’s revenues are used to pay expenses and dividends. Neither BANK nor any affiliate or subsidiary is an owner of the capital stock of NONAME. NONAME does not intend to borrow money in the ordinary course of business, except through the sale of Notes or via a draw on the Liquidity Loan Agreement.
Bankruptcy-Remote Structure
NONAME is structured as a bankruptcy-remote, special purpose corporation. Its sole purpose is to fund Financial Assets through the issuance of the Notes and related facilities. NONAME contracts with third parties, including BANK and its affiliates, for services related to the conduit and to obtain credit support and liquidity facilities. NONAME is subject to certain provisions in its program documents that limit its business activities, minimize the possibility that it will incur any liabilities (other than the Notes and advances made under any liquidity facility) and inhibit its ability to voluntarily cause itself to become subject to a bankruptcy proceeding, including the requirement that NONAME have no directors affiliated with BANK, either directly or indirectly, and that it not cause itself to become subject to any such proceeding without the approval of all directors.
Additionally, the parties to NONAME’s program documents have agreed not to file or join in the filing of involuntary bankruptcy proceedings against NONAME until the date which is one year and one day after all of the Notes issued by NONAME have been fully paid. Notwithstanding the benefit of these structural protections, any bankruptcy or other insolvency event with respect to NONAME may have a material adverse effect on the repayment of the Notes.
Repayment of the Notes
Discount (or interest) on the Notes is generally expected to be paid at maturity from NONAME’s yield on the Financial Assets financed by such Notes. Funds for repayment of the principal portion of the Notes generally are expected to be obtained at maturity from:
The issuance of new Notes to replace the maturing Notes, to the extent possible;
The collections from the portfolio of underlying assets; and
The liquidity facilities and the Credit Support Agreement, if necessary and available.
(See “Program Documents and Credit Facilities–Liquidity Asset Purchase Agreement,” “–Liquidity Loan Agreement” and “–Credit Support Asset Purchase Agreement”).
Financial Assets will not be financed unless collections are expected to be sufficient in amount to repay the investment in the Financial Assets and the yield, fees and expenses in respect thereof.
III. TRANSACTION DESCRIPTION
Transaction Overview
Transactions entered into by NONAME (including those utilizing trusts or other special purpose entities) generally have two-tier transfer structures for the purpose of affecting a “true sale” and avoiding substantive consolidation of the related Sellers and special purpose entities in any bankruptcy or insolvency of the Sellers. A two-tier structure involves a sale of assets by a Seller to a special purpose entity and the creation of Financial Assets that represent an interest in, indebtedness secured by or other rights related to the underlying portfolio of assets. NONAME generally funds the Financial Assets through the issuance of Notes, though it may use its liquidity facilities or credit support to do so. As indicated in the diagram below, the Notes benefit from transaction-specific liquidity facilities, an uncommitted program-wide liquidity facility, and program-wide credit enhancement.
Exhibit B: Transaction Schematic and Steps
The Seller transfers the assets to the SPE and/or Trust.
NONAME finances the Financial Assets created by the SPE and/or Trust.
Concurrently with the transfer to NONAME, BANK, as Credit Support Agent and Liquidity Agent, increases the program-wide credit enhancement and the uncommitted liquidity facility and arranges the committed transaction-specific liquidity facility.
In order to finance the Financial Assets, NONAME generally issues Notes distributed to investors through the placement agents.
Form of Financial Assets
NONAME structures the Financial Assets in a variety of forms including the following types of transactions with Sellers:
• Undivided interests in discreet amortizing pools of assets;
• Undivided interests in revolving pools of assets;
• Indebtedness secured by assets; and
• Certificates of beneficial ownership.
The form of the Financial Assets is oriented toward the objectives of the Seller, and such form typically has no impact on the credit quality of NONAME’s interest in the Financial Assets.
Transaction Mechanics
Transactions entered into by NONAME generally employ various requirements, limitations and credit standards that are designed to maximize the probability of realizing the full amount of principal, interest, fees, and expenses related to each financing of Financial Assets. In addition to structuring transactions to meet Seller objectives, the structure of each transaction generally is customized to balance the funding needs and business strategy of the related Seller with credit considerations regarding the composition and the performance of the assets. The maximum availability (i.e., maximum amount to be advanced by NONAME for any given transaction) generally is a function of transaction mechanics that normally include:
• Eligibility criteria;
• Concentration limits; and
• Transaction-specific credit enhancement.
Exhibit C: Determining Maximum Availability
Eligibility criteria restrict NONAME from funding certain “ineligible” assets (e.g., defaulted or government receivables).
Excess concentrations (i.e., balances above maximum concentration percentages) are deducted from the eligible asset balance.
NONAME generally advances only against the amount of total assets reduced by the amount of ineligible assets and excess concentrations, less a cushion for transaction-specific credit enhancement.
Transaction-Specific Credit Enhancement and Concentration Limits
To provide credit support against losses, NONAME generally will require each Seller to provide one or more forms of transaction-specific credit enhancement which, when combined with program-wide credit enhancement, are sufficient for NONAME to maintain it’s A-1/F1/P-1 rating. Transaction-specific credit enhancement generally will cover some multiple of historical loss experience. Forms of this credit enhancement include, but are not limited to, one or more of the following:
• Over collateralization (typically developed under dynamic purchase discount mechanisms for revolving structures);
• Subordinated classes of financial assets;
• Third-party credit support (e.g., third-party guaranty, letter of credit, spread account, reserve account, cash collateral account, monoline insurance);
• Excess spread; and
• Swaps, hedges or other structured derivative protection.
As mentioned above, the amount of transaction-specific credit enhancement in any given transaction varies, but generally is structured to cover a multiple of loss experience associated with risks including:
• Obligor default risk (payment default);
• Receivables dilution risk (non-cash adjustments);
• Carrying cost coverage risk (note discount plus fees); and
• Replacement servicer risk (asset servicer cost).
In most instances, the Rating Agencies have developed asset-specific criteria to address the sizing of the transaction-specific credit enhancement to cover the aforementioned risks and other risks. Such criteria generally take into consideration the level, trend and stability of:
• Losses;
• Aging performance;
• Dilution;
• Cash flows;
• Asset/liability mismatches;
• Liquidity of underlying assets; and
• Basis risk and currency risk.
The aggregate amount and form of transaction-specific credit enhancement will vary. Many transactions include the concept of dynamic transaction-specific credit enhancement reserves that could result in the level of transaction-specific credit enhancement being adjusted periodically after the initial purchase based upon the ongoing performance of the portfolio. The transaction-specific credit enhancement generally will be unconditional and irrevocable, but is subject to depletion in the event that losses are greater than anticipated when establishing the amount of transaction-specific credit enhancement.
Additionally, the levels of concentration limits are significant considerations when sizing the reserves. Many NONAME transactions integrate concentration limits in sizing the maximum availability. Such limits are intended to mitigate NONAME’s exposure to individual obligors, industries or geographic regions (among other things). Concentration limits vary by asset type and portfolio characteristics.
Nature of Commitments; Termination Events
NONAME does not provide financing commitments but, rather, agrees to provide financing only to the extent that it can issue Notes on satisfactory terms - that is, NONAME agrees to provide financing only on an “offering basis.” Additionally, each transaction generally includes termination events (the “Termination Events”) designed to protect NONAME’s investment in the event of a material deterioration in the performance of the assets or in the credit quality or performance of the Seller or any separate servicer or collection agent. Termination Events may include portfolio performance tests, Seller or servicer downgrade provisions and financial covenant violations, among other things. The occurrence of a Termination Event may lead to one or more of the following events:
• Increase in transaction-specific credit enhancement;
• Termination of funding for new assets;
• Amortization of Financial Assets;
• Accelerated repayment through application of excess spread or other payment feature;
• Replacement of the servicer or collection agent; and/or
• Funding of the Financial Assets by committed liquidity and/or credit support providers.
Termination Events, which differ by Seller and asset type, generally include at least the following:
• Material adverse portfolio performance;
• Change in control or financial condition;
• Bankruptcy and other insolvency events;
• Remittance and payment defaults; and
• Breach of representations, warranties or covenants.
Servicers of the Financial Assets
Sellers, or their affiliates generally act as the servicer (the “Servicer”) with respect to the assets. This simplifies the administrative requirements for NONAME and provides fee income for the Servicer. However, BANK, as Administrative Agent, generally has the ability to replace the Servicer upon the occurrence of certain termination events. Duties of the Servicer include the collection of the assets and regular reporting (usually monthly) as to the status of the assets.
Rating Agency Review
NONAME has established specific credit and investment criteria for funding Financial Assets relating to certain sellers, servicers, and asset types. These criteria enable NONAME to enter into certain transactions without receiving prior confirmation from the Rating Agencies (i.e., Post-Review Status). Such confirmations generally state, among other things, that entering into the transactions will not result in a withdrawal, downgrade or other qualification of their ratings on the notes. Conditions placed on NONAME for Post-Review Status differ at each Rating Agency.
Transactions that meet the conditions for Post-Review Status are reviewed by the Rating Agencies after closing. Transactions that do not qualify for Post-Review Status are either reviewed prior to closing, or fully credit enhanced by BANK until the satisfactory completion of the review.
IV. PROGRAM DOCUMENTS AND CREDIT FACILITIES
NONAME has entered into the Program Documents to support its business of financing the Financial Assets and to provide for liquidity and credit support and collateral security for the Notes. The “Program Documents” include the following:
• Liquidity Asset Purchase Agreements;
• Liquidity Loan Agreement;
• Credit Support Asset Purchase Agreement;
• Receivable Purchase Agreements;
• Management Agreement;
• Administrative Agreement;
• Security Agreement;
• Depositary Agreement;
• Commercial Paper Placement Agent Agreements;
• Ancillary documents.
Exhibit D: Significant Parties and Governing Documents
Overview of NONAME’s Credit and Liquidity Facilities
In addition to transaction-specific credit enhancement, NONAME is supported by both credit and liquidity facilities in order to provide support for timely payment of the Notes. These facilities include:
• Transaction-specific liquidity facility;
• Program-wide uncommitted liquidity facility; and
• Program-wide credit support facility.
Exhibit E: NONAME Credit and Liquidity Facilities
Internal/External transaction-specific credit enhancement sized appropriately to (when combined with program-wide credit enhancement) maintain A-1/F1/P-1 ratings (See “Transaction Description–Transaction-Specific Credit Enhancement and Concentration Limits”)
The Credit Support Agreement generally provides a layer of loss protection to the holders of Notes.
Maximum availability based on transaction mechanics (see “Transaction Description–Transaction Mechanics”)
LAPA generally exceeds maximum availability and funds for accrued interest (see “-Liquidity Asset Purchase Agreement” below)
Liquidity Asset Purchase Agreement
Concurrently with entering into each Receivables Purchase Agreement with a Seller, NONAME will enter into a Liquidity Asset Purchase Agreement (“LAPA”) with BANK and/or other financial institutions as liquidity purchasers (each a “Liquidity Purchaser”) providing liquidity support for the Notes issued to fund the related Financial Assets. Each financing of Financial Assets by NONAME is supported by a LAPA sized at 102% of the financing limit established by NONAME under such Receivables Purchase Agreement.
Pursuant to each LAPA, if on any date NONAME does not have sufficient funds to pay maturing Notes, the Liquidity Purchasers will be obligated, subject to the absence of certain bankruptcy and insolvency events with respect to NONAME and certain other limitations, up to the maximum amounts of their respective commitments, to purchase from NONAME (without recourse to NONAME) undivided interests in the related Financial Assets. NONAME generally uses the proceeds from such sales to the Liquidity Purchasers to repay maturing Notes and related liquidity advances under the LLA. The aggregate purchase price of these undivided interests usually is governed by a funding formula specified in each LAPA that generally limits the obligation to make purchases under the LAPA by performing both an asset and a liability test, generally in the following format:
Draws generally shall not exceed the lesser of:
• The sum of (x) the aggregate outstanding amounts advanced to the Seller by NONAME pursuant to the related Receivables Purchase Agreement and (y) an amount intended to cover accrued yield (i.e., the liability test); and
• An amount equal to the total amount of unimpaired assets (i.e., the asset test), with impairment determined on a case by case basis under the terms of each LAPA*
*In certain transactions, the asset test is discounted to provide Liquidity Purchasers a measure of over collateralization.
Liquidity Purchasers will be protected from losses exclusively by the remaining transaction-specific credit enhancement and payments made in respect of the Financial Assets. Exhibit F provides a schematic a draw scenario under the LAPA.
Exhibit F: Liquidity Asset Purchase Agreement Mechanics
Liquidity Loan Agreement
In order to provide NONAME additional flexibility in meeting its liquidity needs, BANK and NONAME have entered into an uncommitted program-wide Liquidity Loan Agreement (the “LLA”). Each time a LAPA is executed, the loan amount limit under the LLA is increased to reflect the new aggregate prospective face amount of the Notes. Pursuant to the LLA, BANK may (but is not obligated to) make short-term advances to NONAME to enable it to pay maturing Notes. Advances under the LLA are made in the form of loans to NONAME and are pari passu with the Notes in payment priority. This duplicate source of liquidity may provide funds to NONAME in case of a short-term disruption in the commercial paper market, as it allows for funding via a loan rather than a purchase. However, there can be no assurance that funds will be available under the LLA, as it is an uncommitted facility.
Credit Support Asset Purchase Agreement
BANK, as Credit Support Agent, provides a Credit Support Agreement in favor of NONAME, which serves as program level credit support for the Notes. The Credit Support Agreement is sized at a minimum of 10% of the face amount of the Notes, but may be increased for any given transaction if deemed necessary by the Rating Agencies. The full amount of the enhancement provided by the Credit Support Agreement is available to support the Notes. Credit Support Agreement advances are made via asset purchases, with BANK currently as the sole “Credit Support Provider”. BANK has the right to syndicate the Credit Support Agreement to eligible institutions acceptable to the Rating Agencies. NONAME generally will use funds advanced by the Credit Support Provider to retire the Notes and repay liquidity advances under the LLA. The amount available under the Credit Support Agreement will at all times be equal to the greater of:
• $25,000,000 (floor amount); and
• 10% of the face amount of NONAME’s Notes, plus all unpaid advances under the LLA, plus the aggregate unrecovered commitments of transactions awaiting approval by the Rating Agencies (“fully wrapped deals”), less any purchase of assets under the Credit Support Agreement which have not been repaid.
Pursuant to the Credit Support Agreement, if on any date any of the Notes mature and NONAME does not otherwise have the funds for payment of those Notes (such as from issuance of replacement Notes, from collections on the underlying assets, from the transaction-specific credit enhancement or from the liquidity facilities), the Credit Support Provider will be obligated to purchase undivided interests in the Financial Assets to retire the Notes, subject to the limits described above. Once the Credit Support Provider has funded the maximum amount available under the Credit Support Agreement, no additional funds will be available under the Credit Support Agreement to cover shortfalls on the Notes.
The Credit Support Provider will purchase undivided interests in Financial Assets pursuant to the Credit Support Agreement (after giving effect to any amounts made available concurrently under the transaction-specific credit enhancement and the liquidity facilities) if it is assured that additional proceeds from the transaction-specific credit enhancement or the related LAPA would not be available to NONAME with respect to such Financial Assets. In certain cases, the Credit Support Provider may provide additional credit support with respect to a particular Seller (e.g., as mandated by the Rating Agencies for additional enhancement or for transactions awaiting review).
Receivables Purchase Agreements
NONAME has retained BANK as Administrative Agent to refer potential Sellers to NONAME from time to time. NONAME will typically finance the Financial Assets of Sellers pursuant to a receivables purchase agreement or other investment agreement (each a “Receivables Purchase Agreement”) entered into with each such Seller. The purchase price paid by NONAME for such Financial Assets will be determined pursuant to the Receivables Purchase Agreement based on various factors, generally including the amount of over collateralization available for reserves to cover various items including losses, yield and certain fees.
In connection with the Financial Assets that are financed pursuant to a Receivables Purchase Agreement, NONAME is entitled to receive a portion of the collections on the underlying assets representing the yield with respect to such Financial Assets, in an amount sufficient to make timely interest payments in respect of the Notes issued. Generally, the remainder of NONAME’s portion of such collections will be reinvested in new assets of the same Seller (unless the related Financial Assets are not revolving) until financing under the Receivables Purchase Agreement is terminated. For administrative convenience, the Seller or an affiliate of the Seller normally acts as NONAME’s servicing agent to collect amounts due and otherwise enforce the obligations of the underlying obligors and remit the proceeds (usually net of a servicing fee) for reinvestment or to NONAME.
Under certain circumstances, NONAME will cease to finance the Financial Assets or to reinvest collections in new assets. Each Receivables Purchase Agreement will specify those circumstances or termination events that will, among other things, be related to the Seller’s compliance with the terms of the Receivables Purchase Agreement and the performance of the related assets.
Purchasers of Notes should rely exclusively on the Financial Assets, the related LAPA and any funds available under any transaction-specific credit enhancement and the Credit Support Agreement for repayment of the Notes.
Administrative Agreement
NONAME has retained BANK to provide services in connection with the structuring, administration and monitoring of the Financial Assets, the liquidity facilities, the Credit Support Agreement and the issuance, sale and payment of the Notes. BANK’s responsibilities generally include:
• Making recommendations with respect to NONAME’s credit and investment policy;
• Identifying investment opportunities;
• Structuring and executing Receivables Purchase Agreements and all related documentation;
• Negotiating liquidity and credit support;
• Monitoring portfolio performance; and
• Authorizing the issuance of Notes.
Management Agreement
NONAME has retained XYZ, LLC (the “Managing Agent”) to provide certain administrative and clerical services. As Managing Agent for NONAME, XYZ, LLC’s responsibilities generally include:
• Maintaining general accounting records and preparing financial statements;
• Retaining an accounting firm to audit NONAME’s financial statements;
• Providing corporate bookkeeping and maintenance services;
• Maintaining books and records of the issuance, sale, and repayment of Notes; and
• Preparing monthly management reports relating to the issuer’s cash flows and profitability.
Security Agreement
Pursuant to the Security Agreement, NONAME has granted a security interest in its right, title and interest in and to all of the Financial Assets and certain other assets (exclusive of assets sold under any LAPA or under the Credit Support Agreement) to BANK, as Collateral Agent, for the benefit of and to secure its obligation to secured parties including:
• Each holder of Notes;
• Each Liquidity Lender;
• Each Liquidity Purchaser;
• Specified providers of Seller-specific credit enhancement;
• Each Credit Support Purchaser; and
• Swap Counterparties
Under the terms of the Security Agreement, the Collateral Agent may enforce such security interest upon a default by NONAME in payment of the Notes or in certain other circumstances, including the nonpayment of certain obligations under the Liquidity Loan Agreement and the occurrence of certain trigger events set forth in its program documents.
Termination of CP Issuance
NONAME’s Security Agreement and its other program documents generally contain program-wide trigger events that would result in its inability to issue Notes, either permanently or temporarily. Such events include:
• Bankruptcy or other insolvency event with respect to NONAME;
• The program documents are no longer enforceable against NONAME; or
• Use of greater than 20% of the Credit Asset Purchase Agreement for 5 or more days.
Payment Priorities
Upon the occurrence of a default under the Security Agreement or a trigger event under NONAME’s program documents, proceeds from Financial Assets (exclusive of those sold to liquidity and credit providers) generally will be applied first on a pro rata basis to the LLA lenders and holders of Notes for the following:
• Principal and accrued interest in respect of LLA advances; and
• Unpaid face amount of the Notes
Subsequent to the full repayment of the holders of Notes and lenders under the LLA, the remaining proceeds generally will be allocated in the following order:
• To fees and expenses under the LLA;
• To the Collateral Agent in respect of indemnities and reasonably incurred expenses;
• To the Liquidity Purchasers in respect of the purchase price of percentage interests, accrued yield, costs, expenses, indemnities and fees; and
• To the purchasers under the Credit Support Agreement in respect of the purchase price of percentage interests, accrued yield, costs, expenses, indemnities and fees.
The holders of Notes may experience delays in payment, and might not be repaid in full, if NONAME’s assets in combination with amounts available under the liquidity facilities and the Credit Support Agreement are insufficient for such payment.
Modifications to the Program
NONAME will not make any material modifications to its documents, operating procedures, investment criteria or credit facilities without receiving consent from the Rating Agencies that the modification will not affect the then current ratings of the Notes and providing a supplement to this Private Placement Memorandum.
V. PRIVATE PLACEMENT
The Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption from registration provided by Section 4(2) thereof, which exempts transactions by an issuer not involving any public offering.
The Notes are being offered by NONAME only to
• Institutional investors that qualify as accredited investors specified in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act (“Institutional Accredited Investors”); or
• Qualified institutional buyers within the meaning of Rule 144A under the Securities Act (“Qualified Institutional Buyers”).
Any purchaser of Notes must be able to bear the economic risk of its investment therein for an indefinite period of time up to the maturity of such Notes because, inasmuch as the Notes are not registered under the Securities Act, a secondary market for the Notes may not exist. Neither NONAME nor any other Person has any obligation to register the Notes, and the Notes cannot be resold unless they are subsequently registered under the Securities Act or an exemption from registration is available.
In order to preserve the private offering exemption, the Notes are being sold on the condition that no resale or other transfer of the Notes or any interest therein may be made by a purchaser of the Notes, except:
• To a Placement Agent;
• Through a Placement Agent to an institutional investor believed by the Placement Agent to be an Institutional Accredited Investor or a Qualified Institutional Buyer; or
• To a Qualified Institutional Buyer in a transaction made pursuant to Rule 144A.
Any other resale or transfer, or attempted resale or other transfer shall be null and void and of no legal effect. The transfer of a Note through a Placement Agent will be granted only if the transfer is made to an Institutional Accredited Investor or Qualified Institutional Buyer in accordance with the requirements applicable to an initial sale of Notes or the then-current rules and regulations under the Securities Act.
The Notes will bear legends stating that they have not been registered under the Securities Act and are subject to the above restrictions on transfer. By purchasing the Notes offered hereby, each investor shall be deemed to have agreed to these restrictions and to have represented to NONAME and the Placement Agents that:
• It is an Institutional Accredited Investor or a Qualified Institutional Buyer acting on behalf of itself or another Qualified Institutional Buyer; and
• If it is an Institutional Accredited Investor, it is acquiring such Notes for its own account (and not for the account of others) or as fiduciary for other Institutional Accredited Investors, for investment, and not with a view to, or for sale in connection with, any public distribution.
Each prospective purchaser is hereby offered the opportunity, prior to purchasing any Note, to ask questions of and receive answers from the Administrative Agent and the Placement Agent concerning the terms and conditions of the offering and to obtain additional relevant information, to the extent NONAME or the Placement Agent possesses the same or NONAME can acquire it without unreasonable effort or expense. Inquiries concerning such additional information should be directed to:
[Placement Agent Bank, 123 XYZ Street, New York, New York 10006, Attention: Commercial Paper Product Manager, telephone: ].
VI. THE NOTES
General
The Notes will be sold on either a discount basis or on an interest-bearing basis and will be issued in either certificated form or book-entry form evidenced by a master commercial paper note registered in the name of The Depository Trust Company. The Notes will be sold in minimum denominations of $250,000 and integral multiples of $1,000 in excess thereof with maturities of up to 270 days from the date of issuance. The maximum amount of Notes that may be outstanding at any time will depend on the aggregate outstanding investment in Financial Assets pursuant to the relevant Receivables Purchase Agreements (exclusive of Financial Assets financed under the liquidity facilities and the Credit Support Agreement). The Notes are not redeemable or subject to voluntary prepayment by NONAME prior to maturity.
The Notes will be issued by NONAME under an arrangement with Bankers Trust Company, which will act as issuing and paying agent and depositary with respect to the Notes (in such capacity, the “Depositary”). The face amount of each Note will be paid upon maturity in immediately available funds, to the extent available, (i) upon presentation of Notes which were issued in certificated form at the office of the Depositary at , New York 10006, Attention: Commercial Paper Issuance, or (ii) by transfers automatically effected through the records of The Depository Trust Company with respect to Notes which were issued in book-entry form and included in the Commercial Paper Program of The Depository Trust Company. If funds available to the Depositary for payment of the Notes are insufficient to pay such Notes in full, the Depositary will notify NONAME and Administrative Agent. In turn, the Administrative Agent will request the purchasers under the LAPA and/or the Credit Support Agreement or the lenders under the relevant Liquidity Loan Agreement to make purchases or loans thereunder and will transfer any related funds received to the Depositary. If an insufficiency still exists, the Depositary will pay all Notes pro rata according to their respective face amounts to the extent of the funds available to it.
Risks
NONAME was formed in . There can be no assurance that NONAME’s investments in Financial Assets are or will remain diversified. At the request of any prospective purchaser of Notes, NONAME will provide current information as to the number of Sellers, their industries, and the nature of the assets underlying the Financial Assets financed by NONAME.
Transaction-specific credit enhancement, concentration limits and the availability of the liquidity facilities and the Credit Support Agreement are expected to reduce, but do not eliminate, the risk of losses to NONAME and the risk of nonpayment of maturing Notes in the event of Seller bankruptcies or defaults on the Financial Assets financed by NONAME. If substantial obligor defaults should occur, the availability under the relevant liquidity facilities and the Credit Support Agreement might not be sufficient for the payment of all maturing Notes. In such a case, collections on the assets would be applied to pay maturing Notes pursuant to the Security Agreement, and a delay in payment or loss could occur.
Offering of Notes
The Notes are being offered on a continuing and nonexclusive basis by NONAME through [Placement Agent] and other placement agents. As compensation for services rendered in connection with the sale of the Notes, NONAME has agreed to pay commissions to [Placement Agent]. NONAME also has agreed to indemnify or contribute to [Placement Agent] for certain liabilities, including certain liabilities under the Securities Act.
VII. BANK
The following information relates to and has been obtained from BANK. The delivery of this information shall not create any implication that there has been no change in the affairs of BANK since the date hereof or that the information contained or referred to below is correct as of any time subsequent thereto.
BANK and its subsidiaries provide banking and financial services in and internationally. BANK, which was established in is the largest chartered bank in . The Bank Act is the charter of BANK and governs BANK’s operations. Under the Bank Act, BANK may engage in and carry on such business generally as it relates to the business of banking. The Office of the Superintendent of Financial Institutions monitors compliance with the provisions of the Bank Act.
BANK Financial Group is a diversified financial services company providing personal banking services (e.g., deposit and checking services, personal and mortgage lending, credit card services, brokerage services, mutual funds), corporate and investment banking services (e.g., lending, capital markets activities, cash management, corporate finance services, foreign exchange and trade services), wealth management, insurance and transaction processing services. The company employs over people who serve more than personal, business and public sector customers in North America and over countries around the world.
BANK’s corporate headquarters is located at , and its telephone number is : .
In the United States, BANK maintains two federally-licensed branches in , an agency in , and representative offices in . BANK also owns several bank and non-bank subsidiaries in the United States and has an international network with approximately offices in more than countries. BANK’s Common Shares are listed on stock exchanges in , and its Preferred Shares are listed on stock exchanges in . The trading symbol on such exchanges is “ .”
At July 31, 2001, BANK had total consolidated assets of US$ , total consolidated customer loans and mortgages (including non-accrual loans and net of allowance for possible credit losses and unearned income) of US$ , total consolidated liabilities of US , total customer deposits of US and total shareholders’ equity of US$ , based on its most recent financial statements and notes, which may be unaudited, prepared in accordance with generally accepted accounting principles in .
So long as BANK has any obligations as a liquidity purchaser under any liquidity facility or as a Credit Support Provider under the Credit Support Agreement, copies of its Annual Report will be mailed to each person to whom this Private Placement Memorandum is delivered, upon written request to BANK at U.S.A. Headquarters, , or to , telephone or on its website at
If additional information is required about NONAME or there are questions about its structure or its operations, call or write to:
NONAME INC.
COMMERCIAL PAPER NOTES
NONAME INC. (“NONAME”) is a special purpose, bankruptcy-remote corporation that is organized under Delaware law and is exempt from regulation under the Investment Company Act of 1940, as amended, pursuant to Section 3(c)(1) thereof. Its activities generally are limited to financing interests in, indebtedness secured by and other rights related to certain kinds of assets and engaging in other activities incidental to providing such financing. The assets in which interests are financed include accounts, general intangibles, chattel paper, instruments, investment property and other financial assets of qualified entities (the “Sellers”) referred to NONAME by Bank (“BANK”), a chartered bank acting through a New York Branch (the related interests, indebtedness and other rights being the “Financial Assets”). NONAME funds its activities through the issuance of its commercial paper notes (the “Notes”).
THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION IN SECTION 4(2) OF THE SECURITIES ACT, AND THE NOTES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES OR “BLUE SKY” LAWS OF ANY STATE. OFFERS AND SALES OF THE NOTES MAY BE MADE ONLY TO INSTITUTIONAL INVESTORS APPROVED AS ACCREDITED INVESTORS SPECIFIED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT (“INSTITUTIONAL ACCREDITED INVESTORS”) BY PLACEMENT AGENT BANK (“PLACEMENT AGENT BANK”) OR ANOTHER PLACEMENT AGENT AUTHORIZED BY NONAME (PLACEMENT AGENT BANK AND EACH SUCH OTHER PLACEMENT AGENT, INDIVIDUALLY, A “PLACEMENT AGENT”) OR TO QUALIFIED INSTITUTIONAL BUYERS AS DEFINED IN RULE 144A PROMULGATED UNDER THE SECURITIES ACT (“QUALIFIED INSTITUTIONAL BUYERS”). BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER THEREOF WILL BE DEEMED (A) TO HAVE REPRESENTED TO NONAME AND THE PLACEMENT AGENTS THAT IT IS (I) AN INSTITUTIONAL ACCREDITED INVESTOR AND THAT THE NOTE IS BEING ACQUIRED FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY FOR OTHER INSTITUTIONAL ACCREDITED INVESTORS FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, ANY PUBLIC DISTRIBUTION THEREOF, OR (II) A QUALIFIED INSTITUTIONAL BUYER ACTING ON BEHALF OF ITSELF OR ANOTHER QUALIFIED INSTITUTIONAL BUYER (AND, IF IT IS A QUALIFIED INSTITUTIONAL BUYER, TO HAVE ACKNOWLEDGED THAT IT IS AWARE THAT THE SELLER MAY RELY ON AN EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PURSUANT TO RULE 144A), AND (B) TO HAVE AGREED THAT ANY RESALE OR OTHER TRANSFER OF A NOTE WILL BE MADE ONLY IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ONLY TO A PLACEMENT AGENT OR THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL INVESTOR APPROVED BY THE PLACEMENT AGENT AS AN INSTITUTIONAL ACCREDITED INVESTOR OR AS A QUALIFIED INSTITUTIONAL BUYER, OR TO A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MADE UNDER RULE 144A. ANY RESALE OR OTHER TRANSFER, OR ATTEMPTED RESALE OR OTHER TRANSFER IN VIOLATION OF THE FOREGOING RESTRICTIONS SHALL BE VOID AND WILL NOT BE RECOGNIZED BY NONAME.
Commercial Paper Ratings*:
Standard & Poor’s Ratings Services A-1
Moody’s Investors Service P-1
Fitch, Inc. F1
*Such ratings are only accurate as of the date hereof, as they have been obtained with the understanding that Standard & Poor’s Ratings Services, Moody’s Investors Service, and Fitch, Inc. will continue to monitor the credit of NONAME and make future adjustments to such ratings to the extent warranted. The ratings may be changed, superseded or withdrawn, and therefore, a prospective purchaser should check the current ratings before purchasing the Notes.
Placement Agent Bank
January 2002
The information set forth herein was obtained from sources that we believe reliable, but we do not guarantee its accuracy. Neither the information, nor any opinion expressed herein, constitutes a solicitation by us or on behalf of NONAME of the purchase or sale of any instruments in any jurisdiction in which such solicitation would be unlawful. The information contained herein will not typically be distributed or updated upon each new sale of commercial paper notes, although updated information will be distributed from time to time. Furthermore, the information contained herein is not intended as a substitution for the investor’s own inquiry into the creditworthiness of NONAME, and investors are encouraged to make such inquiries.
Table of Contents
Page
I. OVERVIEW 3
II. NONAME INC. 4
Business Purpose 4
NONAME Administration 4
Investment Criteria 4
Use of Proceeds 4
Ratings Description 5
NONAME Capitalization 5
Bankruptcy-Remote Structure 5
Repayment of Notes 6
III. TRANSACTION DESCRIPTION 7
Transaction Overview 7
Form of Financial Assets 8
Transaction Mechanics 8
Transaction-Specific Credit Enhancement and Concentration Limits 9
Nature of Commitments; Termination Events 10
Servicers of the Financial Assets 10
Rating Agency Review 10
IV. PROGRAM DOCUMENTS AND CREDIT FACILITIES 11
Overview of NONAME’s Credit and Liquidity Facilities 12
Liquidity Asset Purchase Agreement 12
Liquidity Loan Agreement 13
Credit Support Asset Purchase Agreement 14
Receivables Purchase Agreements 14
Administrative Agreement 15
Management Agreement 15
Security Agreement 15
Termination of CP Issuance 16
Payment Priorities 16
Modifications to the Program 16
V. PRIVATE PLACEMENT 17
VI. THE NOTES 18
General 18
Risks 18
Offering of Notes 18
VII. BANK OF CANADA 19
I. OVERVIEW
NONAME was established for the purpose of issuing Notes to fund the assets of Sellers referred to NONAME by BANK. The assets underlying the Financial Assets funded by NONAME consist of a variety of asset types. The Sellers or their respective affiliates typically are investment grade corporations, but may include a limited number of non-investment grade sellers acceptable to Standard & Poor’s Ratings Services, Fitch, Inc. and Moody’s Investors Service (collectively, the “Rating Agencies”).
The transactions entered into by NONAME generally utilize trusts or other special purpose entities for the purpose of minimizing the effects of bankruptcy or other insolvency events with respect to the related Sellers. The transactions also typically contain transaction-specific credit enhancement sufficient to cover a multiple of historical losses for the purpose of minimizing the effects of defaults on the underlying pools of assets (see “Transaction Description”).
NONAME customarily provides funding for Financial Assets through the issuance of Notes rated A-1/ F1/P-1 by the Rating Agencies. The Notes generally are supported by a transaction-specific liquidity facility with respect to each transaction, an uncommitted program-wide liquidity facility and a program-wide credit enhancement facility (see “Program Documents and Credit Facilities”). Additionally, BANK acts as administrative agent (the “Administrative Agent”) for NONAME under an Administrative Agreement and, in such capacity, coordinates funding activities, interfaces with Sellers, executes documentation and monitors the transactions. NONAME is not affiliated through ownership with BANK, any placement agent or any of their respective affiliates.
Exhibit A: Relevant Parties
1 Financial Assets include interests in the assets of qualified Sellers (see “Transaction Description–Transaction Mechanics”).
2 XYZ Holdings, Inc. owns 100% of the equity in NONAME (see “NONAME INC.–NONAME Capitalization”).
3 XYZ, LLC provides administrative and clerical services (see “Program Documents and Credit Facilities–Management Agreement”).
4 DB acts as the Depositary.
5 NONAME’s commercial paper is rated A-1/F1/P-1 by Standard & Poor’s Ratings Services, Fitch, Inc. and Moody’s Investors Service.
6 BANK acts as Administrative Agent (see “Program Documents and Credit Facilities–Administrative Agreement”).
7 BANK acts as Collateral Agent (see “Program Documents and Credit Facilities–Security Agreement”).
8 BANK acts as Liquidity Agent (see “Program Documents and Credit Facilities–Liquidity Asset Purchase Agreement” and “–Liquidity Loan Agreement”).
9 BANK acts as Credit Support Agent (see “Program Documents and Credit Facilities–Credit Support Asset Purchase Agreement”).
10 Credit Suisse First Boston, Goldman Sachs, Merrill Lynch, and RBC Capital Markets act as Placement Agents.
II NONAME INC.
Business Purpose
NONAME was formed to provide its Sellers with financing for a variety of asset types (including, but not limited to, automobile loans, credit card receivables, trade receivables, consumer and commercial loans, residential mortgage loans, equipment loans and equipment leases). The Sellers typically are banks, finance companies, insurance companies or retail and industrial corporations, and can derive several benefits from such financing, including the following:
• Cost-effective funding;
• Funding diversification; and
• Balance sheet flexibility and beneficial capital management.
Moreover, the multi-seller financing provided by NONAME affords the Sellers the anonymity not enjoyed through certain other funding sources. As such, the Sellers may look to NONAME to provide a core funding component for their capital structures, funding for their seasonal working capital needs or warehouse financing prior to accumulating the volume necessary for issuing term asset-backed securities. The amounts payable by Sellers in respect of NONAME’s financing of the Financial Assets are expected to provide NONAME with a return sufficient to pay the discount or interest rate applicable to the Notes, certain fees charged by NONAME and expenses incurred by NONAME.
NONAME Administration
NONAME has retained BANK to provide services in connection with the structuring, negotiation and acquisition of NONAME’s investments in Financial Assets and the administration and monitoring of the Financial Assets, the related liquidity facilities, and the Credit Support Asset Purchase Agreement (the “Credit Support Agreement”) as well as the issuance, sale and payment of the Notes (see “Program Documents and Credit Facilities–Administrative Agreement”).
Investment Criteria
When Financial Assets are financed by NONAME, BANK (as Administrative Agent) generally performs due diligence with respect to the Seller’s credit and collection policies and the underlying asset portfolio’s performance and composition and recommends appropriate levels and forms of over collateralization or other transaction-specific credit enhancement. Transaction terms typically include eligibility criteria, concentration limits, termination events, covenants, representations and warranties and servicing or collection requirements. BANK generally evaluates no less than three years of historical portfolio statistics before recommending a structure for the Financial Assets. Underwriting standards generally are expected to include, as applicable, the requirements that:
• Sellers must meet credit standards set forth in NONAME’s credit policy and procedures;
• Financial Assets must include credit enhancement;
• NONAME generally limits concentration percentages of obligors; and
• Financial Assets must be sufficient to repay the amount invested and yield on such amount.
Use of Proceeds
The proceeds of the Notes will be applied to finance the Financial Assets if such proceeds are not needed to pay maturing Notes or amounts due under the liquidity facilities or the Credit Support Agreement. To the extent that such proceeds are not required for the foregoing purposes, NONAME will invest such proceeds in certain permitted investments.
Ratings Description
The Notes carry the following credit ratings from the following Rating Agencies:
Standard & Poor’s Ratings Services A-1
Moody’s Investors Service P-1
Fitch, Inc. F1
The above ratings are based on, among other things:
• The credit quality of the assets funded by NONAME;
• The structural mechanisms that prevent losses from accruing to investors in the Notes;
• The credit and investment policies creating a diversified portfolio of Financial Assets;
• The ability of BANK to manage the asset-backed commercial paper program; and
• The credit quality of each of the providers of liquidity and credit support.
The Rating Agencies will continue to monitor and evaluate the ratings of the Notes. However, there can be no assurance that NONAME will maintain such ratings in the future. The ratings on the Notes should be evaluated independently from similar ratings on other types of securities. The ratings are not recommendations to buy, sell or hold the Notes and are subject to revision, qualification or withdrawal by the related Rating Agencies at any time.
NONAME Capitalization
NONAME is a wholly owned subsidiary of XYZ Holdings, Inc. Common stock carries a par value of $1.00 per share, and all 1,000 authorized shares are issued and outstanding. As of December 31, 2000, additional paid in capital and retained earnings equaled $24,000.00 and $1,577.00, respectively. Substantially all of NONAME’s revenues are used to pay expenses and dividends. Neither BANK nor any affiliate or subsidiary is an owner of the capital stock of NONAME. NONAME does not intend to borrow money in the ordinary course of business, except through the sale of Notes or via a draw on the Liquidity Loan Agreement.
Bankruptcy-Remote Structure
NONAME is structured as a bankruptcy-remote, special purpose corporation. Its sole purpose is to fund Financial Assets through the issuance of the Notes and related facilities. NONAME contracts with third parties, including BANK and its affiliates, for services related to the conduit and to obtain credit support and liquidity facilities. NONAME is subject to certain provisions in its program documents that limit its business activities, minimize the possibility that it will incur any liabilities (other than the Notes and advances made under any liquidity facility) and inhibit its ability to voluntarily cause itself to become subject to a bankruptcy proceeding, including the requirement that NONAME have no directors affiliated with BANK, either directly or indirectly, and that it not cause itself to become subject to any such proceeding without the approval of all directors.
Additionally, the parties to NONAME’s program documents have agreed not to file or join in the filing of involuntary bankruptcy proceedings against NONAME until the date which is one year and one day after all of the Notes issued by NONAME have been fully paid. Notwithstanding the benefit of these structural protections, any bankruptcy or other insolvency event with respect to NONAME may have a material adverse effect on the repayment of the Notes.
Repayment of the Notes
Discount (or interest) on the Notes is generally expected to be paid at maturity from NONAME’s yield on the Financial Assets financed by such Notes. Funds for repayment of the principal portion of the Notes generally are expected to be obtained at maturity from:
The issuance of new Notes to replace the maturing Notes, to the extent possible;
The collections from the portfolio of underlying assets; and
The liquidity facilities and the Credit Support Agreement, if necessary and available.
(See “Program Documents and Credit Facilities–Liquidity Asset Purchase Agreement,” “–Liquidity Loan Agreement” and “–Credit Support Asset Purchase Agreement”).
Financial Assets will not be financed unless collections are expected to be sufficient in amount to repay the investment in the Financial Assets and the yield, fees and expenses in respect thereof.
III. TRANSACTION DESCRIPTION
Transaction Overview
Transactions entered into by NONAME (including those utilizing trusts or other special purpose entities) generally have two-tier transfer structures for the purpose of affecting a “true sale” and avoiding substantive consolidation of the related Sellers and special purpose entities in any bankruptcy or insolvency of the Sellers. A two-tier structure involves a sale of assets by a Seller to a special purpose entity and the creation of Financial Assets that represent an interest in, indebtedness secured by or other rights related to the underlying portfolio of assets. NONAME generally funds the Financial Assets through the issuance of Notes, though it may use its liquidity facilities or credit support to do so. As indicated in the diagram below, the Notes benefit from transaction-specific liquidity facilities, an uncommitted program-wide liquidity facility, and program-wide credit enhancement.
Exhibit B: Transaction Schematic and Steps
The Seller transfers the assets to the SPE and/or Trust.
NONAME finances the Financial Assets created by the SPE and/or Trust.
Concurrently with the transfer to NONAME, BANK, as Credit Support Agent and Liquidity Agent, increases the program-wide credit enhancement and the uncommitted liquidity facility and arranges the committed transaction-specific liquidity facility.
In order to finance the Financial Assets, NONAME generally issues Notes distributed to investors through the placement agents.
Form of Financial Assets
NONAME structures the Financial Assets in a variety of forms including the following types of transactions with Sellers:
• Undivided interests in discreet amortizing pools of assets;
• Undivided interests in revolving pools of assets;
• Indebtedness secured by assets; and
• Certificates of beneficial ownership.
The form of the Financial Assets is oriented toward the objectives of the Seller, and such form typically has no impact on the credit quality of NONAME’s interest in the Financial Assets.
Transaction Mechanics
Transactions entered into by NONAME generally employ various requirements, limitations and credit standards that are designed to maximize the probability of realizing the full amount of principal, interest, fees, and expenses related to each financing of Financial Assets. In addition to structuring transactions to meet Seller objectives, the structure of each transaction generally is customized to balance the funding needs and business strategy of the related Seller with credit considerations regarding the composition and the performance of the assets. The maximum availability (i.e., maximum amount to be advanced by NONAME for any given transaction) generally is a function of transaction mechanics that normally include:
• Eligibility criteria;
• Concentration limits; and
• Transaction-specific credit enhancement.
Exhibit C: Determining Maximum Availability
Eligibility criteria restrict NONAME from funding certain “ineligible” assets (e.g., defaulted or government receivables).
Excess concentrations (i.e., balances above maximum concentration percentages) are deducted from the eligible asset balance.
NONAME generally advances only against the amount of total assets reduced by the amount of ineligible assets and excess concentrations, less a cushion for transaction-specific credit enhancement.
Transaction-Specific Credit Enhancement and Concentration Limits
To provide credit support against losses, NONAME generally will require each Seller to provide one or more forms of transaction-specific credit enhancement which, when combined with program-wide credit enhancement, are sufficient for NONAME to maintain it’s A-1/F1/P-1 rating. Transaction-specific credit enhancement generally will cover some multiple of historical loss experience. Forms of this credit enhancement include, but are not limited to, one or more of the following:
• Over collateralization (typically developed under dynamic purchase discount mechanisms for revolving structures);
• Subordinated classes of financial assets;
• Third-party credit support (e.g., third-party guaranty, letter of credit, spread account, reserve account, cash collateral account, monoline insurance);
• Excess spread; and
• Swaps, hedges or other structured derivative protection.
As mentioned above, the amount of transaction-specific credit enhancement in any given transaction varies, but generally is structured to cover a multiple of loss experience associated with risks including:
• Obligor default risk (payment default);
• Receivables dilution risk (non-cash adjustments);
• Carrying cost coverage risk (note discount plus fees); and
• Replacement servicer risk (asset servicer cost).
In most instances, the Rating Agencies have developed asset-specific criteria to address the sizing of the transaction-specific credit enhancement to cover the aforementioned risks and other risks. Such criteria generally take into consideration the level, trend and stability of:
• Losses;
• Aging performance;
• Dilution;
• Cash flows;
• Asset/liability mismatches;
• Liquidity of underlying assets; and
• Basis risk and currency risk.
The aggregate amount and form of transaction-specific credit enhancement will vary. Many transactions include the concept of dynamic transaction-specific credit enhancement reserves that could result in the level of transaction-specific credit enhancement being adjusted periodically after the initial purchase based upon the ongoing performance of the portfolio. The transaction-specific credit enhancement generally will be unconditional and irrevocable, but is subject to depletion in the event that losses are greater than anticipated when establishing the amount of transaction-specific credit enhancement.
Additionally, the levels of concentration limits are significant considerations when sizing the reserves. Many NONAME transactions integrate concentration limits in sizing the maximum availability. Such limits are intended to mitigate NONAME’s exposure to individual obligors, industries or geographic regions (among other things). Concentration limits vary by asset type and portfolio characteristics.
Nature of Commitments; Termination Events
NONAME does not provide financing commitments but, rather, agrees to provide financing only to the extent that it can issue Notes on satisfactory terms - that is, NONAME agrees to provide financing only on an “offering basis.” Additionally, each transaction generally includes termination events (the “Termination Events”) designed to protect NONAME’s investment in the event of a material deterioration in the performance of the assets or in the credit quality or performance of the Seller or any separate servicer or collection agent. Termination Events may include portfolio performance tests, Seller or servicer downgrade provisions and financial covenant violations, among other things. The occurrence of a Termination Event may lead to one or more of the following events:
• Increase in transaction-specific credit enhancement;
• Termination of funding for new assets;
• Amortization of Financial Assets;
• Accelerated repayment through application of excess spread or other payment feature;
• Replacement of the servicer or collection agent; and/or
• Funding of the Financial Assets by committed liquidity and/or credit support providers.
Termination Events, which differ by Seller and asset type, generally include at least the following:
• Material adverse portfolio performance;
• Change in control or financial condition;
• Bankruptcy and other insolvency events;
• Remittance and payment defaults; and
• Breach of representations, warranties or covenants.
Servicers of the Financial Assets
Sellers, or their affiliates generally act as the servicer (the “Servicer”) with respect to the assets. This simplifies the administrative requirements for NONAME and provides fee income for the Servicer. However, BANK, as Administrative Agent, generally has the ability to replace the Servicer upon the occurrence of certain termination events. Duties of the Servicer include the collection of the assets and regular reporting (usually monthly) as to the status of the assets.
Rating Agency Review
NONAME has established specific credit and investment criteria for funding Financial Assets relating to certain sellers, servicers, and asset types. These criteria enable NONAME to enter into certain transactions without receiving prior confirmation from the Rating Agencies (i.e., Post-Review Status). Such confirmations generally state, among other things, that entering into the transactions will not result in a withdrawal, downgrade or other qualification of their ratings on the notes. Conditions placed on NONAME for Post-Review Status differ at each Rating Agency.
Transactions that meet the conditions for Post-Review Status are reviewed by the Rating Agencies after closing. Transactions that do not qualify for Post-Review Status are either reviewed prior to closing, or fully credit enhanced by BANK until the satisfactory completion of the review.
IV. PROGRAM DOCUMENTS AND CREDIT FACILITIES
NONAME has entered into the Program Documents to support its business of financing the Financial Assets and to provide for liquidity and credit support and collateral security for the Notes. The “Program Documents” include the following:
• Liquidity Asset Purchase Agreements;
• Liquidity Loan Agreement;
• Credit Support Asset Purchase Agreement;
• Receivable Purchase Agreements;
• Management Agreement;
• Administrative Agreement;
• Security Agreement;
• Depositary Agreement;
• Commercial Paper Placement Agent Agreements;
• Ancillary documents.
Exhibit D: Significant Parties and Governing Documents
Overview of NONAME’s Credit and Liquidity Facilities
In addition to transaction-specific credit enhancement, NONAME is supported by both credit and liquidity facilities in order to provide support for timely payment of the Notes. These facilities include:
• Transaction-specific liquidity facility;
• Program-wide uncommitted liquidity facility; and
• Program-wide credit support facility.
Exhibit E: NONAME Credit and Liquidity Facilities
Internal/External transaction-specific credit enhancement sized appropriately to (when combined with program-wide credit enhancement) maintain A-1/F1/P-1 ratings (See “Transaction Description–Transaction-Specific Credit Enhancement and Concentration Limits”)
The Credit Support Agreement generally provides a layer of loss protection to the holders of Notes.
Maximum availability based on transaction mechanics (see “Transaction Description–Transaction Mechanics”)
LAPA generally exceeds maximum availability and funds for accrued interest (see “-Liquidity Asset Purchase Agreement” below)
Liquidity Asset Purchase Agreement
Concurrently with entering into each Receivables Purchase Agreement with a Seller, NONAME will enter into a Liquidity Asset Purchase Agreement (“LAPA”) with BANK and/or other financial institutions as liquidity purchasers (each a “Liquidity Purchaser”) providing liquidity support for the Notes issued to fund the related Financial Assets. Each financing of Financial Assets by NONAME is supported by a LAPA sized at 102% of the financing limit established by NONAME under such Receivables Purchase Agreement.
Pursuant to each LAPA, if on any date NONAME does not have sufficient funds to pay maturing Notes, the Liquidity Purchasers will be obligated, subject to the absence of certain bankruptcy and insolvency events with respect to NONAME and certain other limitations, up to the maximum amounts of their respective commitments, to purchase from NONAME (without recourse to NONAME) undivided interests in the related Financial Assets. NONAME generally uses the proceeds from such sales to the Liquidity Purchasers to repay maturing Notes and related liquidity advances under the LLA. The aggregate purchase price of these undivided interests usually is governed by a funding formula specified in each LAPA that generally limits the obligation to make purchases under the LAPA by performing both an asset and a liability test, generally in the following format:
Draws generally shall not exceed the lesser of:
• The sum of (x) the aggregate outstanding amounts advanced to the Seller by NONAME pursuant to the related Receivables Purchase Agreement and (y) an amount intended to cover accrued yield (i.e., the liability test); and
• An amount equal to the total amount of unimpaired assets (i.e., the asset test), with impairment determined on a case by case basis under the terms of each LAPA*
*In certain transactions, the asset test is discounted to provide Liquidity Purchasers a measure of over collateralization.
Liquidity Purchasers will be protected from losses exclusively by the remaining transaction-specific credit enhancement and payments made in respect of the Financial Assets. Exhibit F provides a schematic a draw scenario under the LAPA.
Exhibit F: Liquidity Asset Purchase Agreement Mechanics
Liquidity Loan Agreement
In order to provide NONAME additional flexibility in meeting its liquidity needs, BANK and NONAME have entered into an uncommitted program-wide Liquidity Loan Agreement (the “LLA”). Each time a LAPA is executed, the loan amount limit under the LLA is increased to reflect the new aggregate prospective face amount of the Notes. Pursuant to the LLA, BANK may (but is not obligated to) make short-term advances to NONAME to enable it to pay maturing Notes. Advances under the LLA are made in the form of loans to NONAME and are pari passu with the Notes in payment priority. This duplicate source of liquidity may provide funds to NONAME in case of a short-term disruption in the commercial paper market, as it allows for funding via a loan rather than a purchase. However, there can be no assurance that funds will be available under the LLA, as it is an uncommitted facility.
Credit Support Asset Purchase Agreement
BANK, as Credit Support Agent, provides a Credit Support Agreement in favor of NONAME, which serves as program level credit support for the Notes. The Credit Support Agreement is sized at a minimum of 10% of the face amount of the Notes, but may be increased for any given transaction if deemed necessary by the Rating Agencies. The full amount of the enhancement provided by the Credit Support Agreement is available to support the Notes. Credit Support Agreement advances are made via asset purchases, with BANK currently as the sole “Credit Support Provider”. BANK has the right to syndicate the Credit Support Agreement to eligible institutions acceptable to the Rating Agencies. NONAME generally will use funds advanced by the Credit Support Provider to retire the Notes and repay liquidity advances under the LLA. The amount available under the Credit Support Agreement will at all times be equal to the greater of:
• $25,000,000 (floor amount); and
• 10% of the face amount of NONAME’s Notes, plus all unpaid advances under the LLA, plus the aggregate unrecovered commitments of transactions awaiting approval by the Rating Agencies (“fully wrapped deals”), less any purchase of assets under the Credit Support Agreement which have not been repaid.
Pursuant to the Credit Support Agreement, if on any date any of the Notes mature and NONAME does not otherwise have the funds for payment of those Notes (such as from issuance of replacement Notes, from collections on the underlying assets, from the transaction-specific credit enhancement or from the liquidity facilities), the Credit Support Provider will be obligated to purchase undivided interests in the Financial Assets to retire the Notes, subject to the limits described above. Once the Credit Support Provider has funded the maximum amount available under the Credit Support Agreement, no additional funds will be available under the Credit Support Agreement to cover shortfalls on the Notes.
The Credit Support Provider will purchase undivided interests in Financial Assets pursuant to the Credit Support Agreement (after giving effect to any amounts made available concurrently under the transaction-specific credit enhancement and the liquidity facilities) if it is assured that additional proceeds from the transaction-specific credit enhancement or the related LAPA would not be available to NONAME with respect to such Financial Assets. In certain cases, the Credit Support Provider may provide additional credit support with respect to a particular Seller (e.g., as mandated by the Rating Agencies for additional enhancement or for transactions awaiting review).
Receivables Purchase Agreements
NONAME has retained BANK as Administrative Agent to refer potential Sellers to NONAME from time to time. NONAME will typically finance the Financial Assets of Sellers pursuant to a receivables purchase agreement or other investment agreement (each a “Receivables Purchase Agreement”) entered into with each such Seller. The purchase price paid by NONAME for such Financial Assets will be determined pursuant to the Receivables Purchase Agreement based on various factors, generally including the amount of over collateralization available for reserves to cover various items including losses, yield and certain fees.
In connection with the Financial Assets that are financed pursuant to a Receivables Purchase Agreement, NONAME is entitled to receive a portion of the collections on the underlying assets representing the yield with respect to such Financial Assets, in an amount sufficient to make timely interest payments in respect of the Notes issued. Generally, the remainder of NONAME’s portion of such collections will be reinvested in new assets of the same Seller (unless the related Financial Assets are not revolving) until financing under the Receivables Purchase Agreement is terminated. For administrative convenience, the Seller or an affiliate of the Seller normally acts as NONAME’s servicing agent to collect amounts due and otherwise enforce the obligations of the underlying obligors and remit the proceeds (usually net of a servicing fee) for reinvestment or to NONAME.
Under certain circumstances, NONAME will cease to finance the Financial Assets or to reinvest collections in new assets. Each Receivables Purchase Agreement will specify those circumstances or termination events that will, among other things, be related to the Seller’s compliance with the terms of the Receivables Purchase Agreement and the performance of the related assets.
Purchasers of Notes should rely exclusively on the Financial Assets, the related LAPA and any funds available under any transaction-specific credit enhancement and the Credit Support Agreement for repayment of the Notes.
Administrative Agreement
NONAME has retained BANK to provide services in connection with the structuring, administration and monitoring of the Financial Assets, the liquidity facilities, the Credit Support Agreement and the issuance, sale and payment of the Notes. BANK’s responsibilities generally include:
• Making recommendations with respect to NONAME’s credit and investment policy;
• Identifying investment opportunities;
• Structuring and executing Receivables Purchase Agreements and all related documentation;
• Negotiating liquidity and credit support;
• Monitoring portfolio performance; and
• Authorizing the issuance of Notes.
Management Agreement
NONAME has retained XYZ, LLC (the “Managing Agent”) to provide certain administrative and clerical services. As Managing Agent for NONAME, XYZ, LLC’s responsibilities generally include:
• Maintaining general accounting records and preparing financial statements;
• Retaining an accounting firm to audit NONAME’s financial statements;
• Providing corporate bookkeeping and maintenance services;
• Maintaining books and records of the issuance, sale, and repayment of Notes; and
• Preparing monthly management reports relating to the issuer’s cash flows and profitability.
Security Agreement
Pursuant to the Security Agreement, NONAME has granted a security interest in its right, title and interest in and to all of the Financial Assets and certain other assets (exclusive of assets sold under any LAPA or under the Credit Support Agreement) to BANK, as Collateral Agent, for the benefit of and to secure its obligation to secured parties including:
• Each holder of Notes;
• Each Liquidity Lender;
• Each Liquidity Purchaser;
• Specified providers of Seller-specific credit enhancement;
• Each Credit Support Purchaser; and
• Swap Counterparties
Under the terms of the Security Agreement, the Collateral Agent may enforce such security interest upon a default by NONAME in payment of the Notes or in certain other circumstances, including the nonpayment of certain obligations under the Liquidity Loan Agreement and the occurrence of certain trigger events set forth in its program documents.
Termination of CP Issuance
NONAME’s Security Agreement and its other program documents generally contain program-wide trigger events that would result in its inability to issue Notes, either permanently or temporarily. Such events include:
• Bankruptcy or other insolvency event with respect to NONAME;
• The program documents are no longer enforceable against NONAME; or
• Use of greater than 20% of the Credit Asset Purchase Agreement for 5 or more days.
Payment Priorities
Upon the occurrence of a default under the Security Agreement or a trigger event under NONAME’s program documents, proceeds from Financial Assets (exclusive of those sold to liquidity and credit providers) generally will be applied first on a pro rata basis to the LLA lenders and holders of Notes for the following:
• Principal and accrued interest in respect of LLA advances; and
• Unpaid face amount of the Notes
Subsequent to the full repayment of the holders of Notes and lenders under the LLA, the remaining proceeds generally will be allocated in the following order:
• To fees and expenses under the LLA;
• To the Collateral Agent in respect of indemnities and reasonably incurred expenses;
• To the Liquidity Purchasers in respect of the purchase price of percentage interests, accrued yield, costs, expenses, indemnities and fees; and
• To the purchasers under the Credit Support Agreement in respect of the purchase price of percentage interests, accrued yield, costs, expenses, indemnities and fees.
The holders of Notes may experience delays in payment, and might not be repaid in full, if NONAME’s assets in combination with amounts available under the liquidity facilities and the Credit Support Agreement are insufficient for such payment.
Modifications to the Program
NONAME will not make any material modifications to its documents, operating procedures, investment criteria or credit facilities without receiving consent from the Rating Agencies that the modification will not affect the then current ratings of the Notes and providing a supplement to this Private Placement Memorandum.
V. PRIVATE PLACEMENT
The Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption from registration provided by Section 4(2) thereof, which exempts transactions by an issuer not involving any public offering.
The Notes are being offered by NONAME only to
• Institutional investors that qualify as accredited investors specified in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act (“Institutional Accredited Investors”); or
• Qualified institutional buyers within the meaning of Rule 144A under the Securities Act (“Qualified Institutional Buyers”).
Any purchaser of Notes must be able to bear the economic risk of its investment therein for an indefinite period of time up to the maturity of such Notes because, inasmuch as the Notes are not registered under the Securities Act, a secondary market for the Notes may not exist. Neither NONAME nor any other Person has any obligation to register the Notes, and the Notes cannot be resold unless they are subsequently registered under the Securities Act or an exemption from registration is available.
In order to preserve the private offering exemption, the Notes are being sold on the condition that no resale or other transfer of the Notes or any interest therein may be made by a purchaser of the Notes, except:
• To a Placement Agent;
• Through a Placement Agent to an institutional investor believed by the Placement Agent to be an Institutional Accredited Investor or a Qualified Institutional Buyer; or
• To a Qualified Institutional Buyer in a transaction made pursuant to Rule 144A.
Any other resale or transfer, or attempted resale or other transfer shall be null and void and of no legal effect. The transfer of a Note through a Placement Agent will be granted only if the transfer is made to an Institutional Accredited Investor or Qualified Institutional Buyer in accordance with the requirements applicable to an initial sale of Notes or the then-current rules and regulations under the Securities Act.
The Notes will bear legends stating that they have not been registered under the Securities Act and are subject to the above restrictions on transfer. By purchasing the Notes offered hereby, each investor shall be deemed to have agreed to these restrictions and to have represented to NONAME and the Placement Agents that:
• It is an Institutional Accredited Investor or a Qualified Institutional Buyer acting on behalf of itself or another Qualified Institutional Buyer; and
• If it is an Institutional Accredited Investor, it is acquiring such Notes for its own account (and not for the account of others) or as fiduciary for other Institutional Accredited Investors, for investment, and not with a view to, or for sale in connection with, any public distribution.
Each prospective purchaser is hereby offered the opportunity, prior to purchasing any Note, to ask questions of and receive answers from the Administrative Agent and the Placement Agent concerning the terms and conditions of the offering and to obtain additional relevant information, to the extent NONAME or the Placement Agent possesses the same or NONAME can acquire it without unreasonable effort or expense. Inquiries concerning such additional information should be directed to:
[Placement Agent Bank, 123 XYZ Street, New York, New York 10006, Attention: Commercial Paper Product Manager, telephone: ].
VI. THE NOTES
General
The Notes will be sold on either a discount basis or on an interest-bearing basis and will be issued in either certificated form or book-entry form evidenced by a master commercial paper note registered in the name of The Depository Trust Company. The Notes will be sold in minimum denominations of $250,000 and integral multiples of $1,000 in excess thereof with maturities of up to 270 days from the date of issuance. The maximum amount of Notes that may be outstanding at any time will depend on the aggregate outstanding investment in Financial Assets pursuant to the relevant Receivables Purchase Agreements (exclusive of Financial Assets financed under the liquidity facilities and the Credit Support Agreement). The Notes are not redeemable or subject to voluntary prepayment by NONAME prior to maturity.
The Notes will be issued by NONAME under an arrangement with Bankers Trust Company, which will act as issuing and paying agent and depositary with respect to the Notes (in such capacity, the “Depositary”). The face amount of each Note will be paid upon maturity in immediately available funds, to the extent available, (i) upon presentation of Notes which were issued in certificated form at the office of the Depositary at , New York 10006, Attention: Commercial Paper Issuance, or (ii) by transfers automatically effected through the records of The Depository Trust Company with respect to Notes which were issued in book-entry form and included in the Commercial Paper Program of The Depository Trust Company. If funds available to the Depositary for payment of the Notes are insufficient to pay such Notes in full, the Depositary will notify NONAME and Administrative Agent. In turn, the Administrative Agent will request the purchasers under the LAPA and/or the Credit Support Agreement or the lenders under the relevant Liquidity Loan Agreement to make purchases or loans thereunder and will transfer any related funds received to the Depositary. If an insufficiency still exists, the Depositary will pay all Notes pro rata according to their respective face amounts to the extent of the funds available to it.
Risks
NONAME was formed in . There can be no assurance that NONAME’s investments in Financial Assets are or will remain diversified. At the request of any prospective purchaser of Notes, NONAME will provide current information as to the number of Sellers, their industries, and the nature of the assets underlying the Financial Assets financed by NONAME.
Transaction-specific credit enhancement, concentration limits and the availability of the liquidity facilities and the Credit Support Agreement are expected to reduce, but do not eliminate, the risk of losses to NONAME and the risk of nonpayment of maturing Notes in the event of Seller bankruptcies or defaults on the Financial Assets financed by NONAME. If substantial obligor defaults should occur, the availability under the relevant liquidity facilities and the Credit Support Agreement might not be sufficient for the payment of all maturing Notes. In such a case, collections on the assets would be applied to pay maturing Notes pursuant to the Security Agreement, and a delay in payment or loss could occur.
Offering of Notes
The Notes are being offered on a continuing and nonexclusive basis by NONAME through [Placement Agent] and other placement agents. As compensation for services rendered in connection with the sale of the Notes, NONAME has agreed to pay commissions to [Placement Agent]. NONAME also has agreed to indemnify or contribute to [Placement Agent] for certain liabilities, including certain liabilities under the Securities Act.
VII. BANK
The following information relates to and has been obtained from BANK. The delivery of this information shall not create any implication that there has been no change in the affairs of BANK since the date hereof or that the information contained or referred to below is correct as of any time subsequent thereto.
BANK and its subsidiaries provide banking and financial services in and internationally. BANK, which was established in is the largest chartered bank in . The Bank Act is the charter of BANK and governs BANK’s operations. Under the Bank Act, BANK may engage in and carry on such business generally as it relates to the business of banking. The Office of the Superintendent of Financial Institutions monitors compliance with the provisions of the Bank Act.
BANK Financial Group is a diversified financial services company providing personal banking services (e.g., deposit and checking services, personal and mortgage lending, credit card services, brokerage services, mutual funds), corporate and investment banking services (e.g., lending, capital markets activities, cash management, corporate finance services, foreign exchange and trade services), wealth management, insurance and transaction processing services. The company employs over people who serve more than personal, business and public sector customers in North America and over countries around the world.
BANK’s corporate headquarters is located at , and its telephone number is : .
In the United States, BANK maintains two federally-licensed branches in , an agency in , and representative offices in . BANK also owns several bank and non-bank subsidiaries in the United States and has an international network with approximately offices in more than countries. BANK’s Common Shares are listed on stock exchanges in , and its Preferred Shares are listed on stock exchanges in . The trading symbol on such exchanges is “ .”
At July 31, 2001, BANK had total consolidated assets of US$ , total consolidated customer loans and mortgages (including non-accrual loans and net of allowance for possible credit losses and unearned income) of US$ , total consolidated liabilities of US , total customer deposits of US and total shareholders’ equity of US$ , based on its most recent financial statements and notes, which may be unaudited, prepared in accordance with generally accepted accounting principles in .
So long as BANK has any obligations as a liquidity purchaser under any liquidity facility or as a Credit Support Provider under the Credit Support Agreement, copies of its Annual Report will be mailed to each person to whom this Private Placement Memorandum is delivered, upon written request to BANK at U.S.A. Headquarters, , or to , telephone or on its website at
If additional information is required about NONAME or there are questions about its structure or its operations, call or write to: