UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of
Earliest Event Reported): October 29, 2007
CREDIT ACCEPTANCE CORPORATION
(Exact name of registrant as specified in its charter)
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| Michigan
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000-20202
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38-1999511 |
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(I.R.S. Employer
Identification No.) |
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25505 West Twelve Mile Road, Suite 3000,
Southfield, Michigan
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48034-8339 |
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| (Address of principal executive offices)
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(Zip Code) |
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Registrant’s telephone number, including area code: 248-353-2700
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
TABLE OF CONTENTS
Item 1.01 Entry Into a Material Definitive Agreement.
The information set forth below under Item 2.03 is hereby incorporated by reference into this Item
1.01.
Item 2.02. Results of Operations and Financial Condition.
On October 30, 2007, Credit Acceptance Corporation (the “Company”), issued a press release
announcing its financial results for the three and nine month period ended September 30, 2007. The
press release is attached as Exhibit 99(b) to this Form 8-K and incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off- Balance Sheet
Arrangement of a Registrant.
On October 29, 2007, the Company entered into a $100.0 million asset-backed non-recourse secured
financing. The parties to this transaction are the Company, as servicer, Credit Acceptance Auto
Dealer Loan Trust 2007-2, as issuer (the “trust”), Credit Acceptance Funding LLC 2007-2, as seller
(“Funding 2007-2”), Wachovia Capital Markets, LLC and J.P Morgan Securities Inc., as initial
purchasers, Wells Fargo Bank, National Association, as trust collateral agent, indenture trustee
and backup servicer, and XL Capital Assurance, Inc., as the insurer.
The terms and conditions of this transaction are set forth in the agreements attached hereto as
Exhibits 4(f)(95) through 4(g)(1), which agreements are incorporated herein by reference. This
transaction is also summarized in a press release issued by the Company on October 29, 2007, which
is attached hereto as Exhibit 99(a) and is incorporated herein by reference.
In connection with the financing, the Company conveyed, for cash and the sole membership interest
in Funding 2007-2, dealer loans having a net book value of approximately $125.0 million to Funding
2007-2, which, in turn, conveyed the dealer loans to the trust (a special purpose trust formed for
purposes of the transaction) that issued $100.0 million in notes to qualified institutional
investors in a private transaction exempt from the registration requirements of the Securities Act
of 1933. Accordingly, the notes have not been and will not be registered under the Securities Act
of 1933 and may not be offered or sold in the United States absent registration or an applicable
exemption from registration requirements.
The notes will bear interest at an effective fixed rate of 6.27%. A financial insurance policy has
been issued in connection with the transaction. The policy guarantees the timely payment of
interest and ultimate repayment of principal on the final scheduled distribution date. The
proceeds of the initial conveyance to Funding 2007-2 were used by the Company to purchase dealer
loans, on an arm’s-length basis, from its warehouse facility. Through October 15, 2008, the Company
may be required, and is likely, to convey additional dealer loans to Funding 2007-2, which will be
conveyed by Funding 2007-2 to the trust. After October 15, 2008, the debt outstanding under this
facility will begin to amortize. The total expected term of the
facility is 26 months. The
expected annualized cost of the secured financing, including underwriter’s fees, the insurance
premium and other costs is approximately 8.0%.
The secured financing creates loans for which the trust is liable and which are secured by all the
assets of the trust and of Funding 2007-2. Such loans are non-recourse to the Company, even though
the trust, Funding 2007-2 and the Company are consolidated for financial reporting purposes. The
Company receives a monthly servicing fee paid out of collections equal to 6% of the collections
received with respect to the conveyed dealer loans. Except for the Company’s servicing fee and
payments due to dealer-partners, the Company does not receive, or have any rights in, any portion
of such collections until the trust’s underlying indebtedness is paid in full, either through
collections or through a prepayment of the indebtedness. Thereafter, remaining collections would be
paid over to Funding 2007-2 as the sole beneficiary of the trust where they would be available to
be distributed to the Company as the sole member of Funding 2007-2, or the Company may choose to
cause Funding 2007-2 to repurchase the remaining dealer-partner advances from the trust and then
dissolve, whereby the Company would become the owner of such remaining collections. The Company
might also cause Funding 2007-2’s beneficial interest in the trust to be sold and financed under
its credit facility with Variable Funding Capital Company LLC.
The financing may be accelerated upon the occurrence of an “indenture event of default.” An
“indenture event of default” includes: a default by the trust in the payment of interest or
principal when due; any breach of covenant or any material breach of representation or warranty
that is not cured within the specified time following notice; the occurrence of certain bankruptcy
or insolvency events involving the trust or Funding 2007-2; a draw on the financial insurance
policy; the failure of collections on the transferred assets to be more than a threshold percentage
of projected collections for three consecutive collection periods; a transfer by Funding 2007-2 of
its ownership of the trust (other than as permitted by the transaction documents); the failure of
Funding 2007-2 to observe in any material respect any of its limited purpose covenants after giving
effect to notice and grace periods; the failure of the trustee to have a valid and perfected first
priority security interest in the trust property if such failure has not been cured within ten
business days; and the cessation of any transaction document to be in full force and effect.