ITEM 1. BUSINESS
Superior Wholesale Inventory Financing Trust IV (the "Trust" or the "Issuer") was formed pursuant to a Trust Agreement, dated as of November 20, 1997, between Wholesale Auto Receivables Corporation and Chase Manhattan Bank (Delaware), as Owner Trustee. On November 20, 1997, the Trust issued Floating Rate Asset-Backed Certificates, Class A with an aggregate initial certificate balance of $174,000,000. On November 20, 1997, the Trust also issued 6.346% Asset-Backed Term Notes, Series 1997-A and Floating Rate Asset-Backed Term Notes, Series 1997-B in the aggregate principal amount of $500,000,000 and $500,000,000, respectively, and Floating Rate Asset-Backed Revolving Notes, Series 1997-RN1 and Series 1997-RN2 with a specified maximum balance of $1,170,000,000 less the then outstanding balance of the 6.346% Asset-Backed Term Notes, Series 1997-A and $330,000,000, respectively, pursuant to an Indenture, as of November 20, 1997, between the Issuer and The Bank of New York, as Indenture Trustee. For any further information, refer to Prospectus Supplement dated November 14, 1997.
PART II
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Trust was formed pursuant to a trust agreement between Wholesale Auto Receivables Corporation (the "Seller") and Chase Manhattan Bank (Delaware), as Owner Trustee for Superior Wholesale Inventory Financing Trust IV. The Trust has issued the following fixed or floating rate Asset-Backed Notes and Certificates, and acquired certain eligible wholesale finance receivables from the Seller in the aggregate amount as shown below in exchange for Asset-Backed Notes and Asset-Backed Certificates representing undivided interests in the Trust. The Trust's property includes a pool of wholesale receivables generated in a portfolio of revolving financing arrangements with dealers to finance inventories of new and used automobiles and light trucks and collections thereon and certain other property.
Initial Date of Wholesale Sale and Finance Servicing Sale Asset-Backed Asset-Backed Trust Agreement Amount Notes Certificates - ------- ----------- ---------- ------------ ------------ (millions) (millions) (millions)
Superior November 20, $2,174.0 Term Notes $1,000.0 $174.0 Wholesale 1997 Inventory Revolving Financing Notes $1,000.0 Trust IV
General Motors Acceptance Corporation ("GMAC"), the originator of the wholesale receivables, continues to service the receivables for the Trust and receives compensation and fees for such services. Investors receive monthly payments of interest for each type of note and certificate at a fixed or floating monthly interest rate.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CROSS REFERENCE SHEET
Exhibit No. Caption Page - ----------- ------------------------------------------------- ------
-- Superior Wholesale Inventory Financing Trust IV, Independent Auditors' Report, Financial Statements and Selected Quarterly Data for the period November 20, 1997 (inception) through December 31, 1997. --
27.1 Financial Data Schedule for Superior Wholesale Inventory Financing Trust IV (for SEC electronic filing purposes only). --
INDEPENDENT AUDITORS' REPORT
The Superior Wholesale Inventory Financing Trust IV, its Noteholders and Certificateholders, Wholesale Auto Receivables Corporation, Chase Manhattan Bank (Delaware), Owner Trustee, and The Bank of New York, Indenture Trustee:
We have audited the accompanying Statement of Assets, Liabilities and Equity of the Superior Wholesale Inventory Financing Trust IV as of December 31, 1997, and the related Statement of Distributable Income for the period November 20, 1997 (date of inception) to December 31, 1997. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As described in Note 1 to the financial statements, these financial statements were prepared on the basis of cash receipts and disbursements, which is a comprehensive basis of accounting other than generally accepted accounting principles.
In our opinion, such financial statements present fairly, in all material respects, the assets, liabilities and equity arising from cash transactions of the Superior Wholesale Inventory Financing Trust IV at December 31, 1997, and its distributable income and distributions for the period November 20, 1997 (date of inception) to December 31, 1997, on the basis of accounting described in Note 1.
s\ DELOITTE & TOUCHE LLP - ------------------------ DELOITTE & TOUCHE LLP 600 Renaissance Center Detroit, Michigan
March 11, 1998
SUPERIOR WHOLESALE INVENTORY FINANCING TRUST IV
STATEMENT OF ASSETS, LIABILITIES AND EQUITY
December 31, 1997 ----------------------- (in millions of dollars)
ASSETS
Receivables (Note 2) .......................... $2,174.0 --------
TOTAL ASSETS .................................. $2,174.0 ========
LIABILITIES (NOTES 2 and 3)
Asset-Backed Term Notes ....................... $1,000.0
Asset-Backed Revolving Notes .................. 1,000.0 -------- TOTAL LIABILITIES ............................. 2,000.0 ========
EQUITY
Asset-Backed Certificates (NOTES 2 and 3) 174.0 --------
TOTAL LIABILITIES AND EQUITY .................. $2,174.0 ========
Reference should be made to the Notes to Financial Statements.
SUPERIOR WHOLESALE INVENTORY FINANCING TRUST IV
STATEMENT OF DISTRIBUTABLE INCOME
Year Ended December 31, 1997* ------------------------ (in millions of dollars) Distributable Income
Allocable to Interest . . . . . . . . . . $ 6.4 ------
Distributable Income . . . . . . . . . . . $ 6.4 ======
Income Distributed . . . . . . . . . . . . $ 6.4 ======
* Represents the period November 20, 1997(inception) through December 31, 1997.
Reference should be made to the Notes to Financial Statements.
SUPERIOR WHOLESALE INVENTORY FINANCING TRUST IV
NOTES TO FINANCIAL STATEMENTS
NOTE 1. BASIS OF ACCOUNTING
The financial statements of Superior Wholesale Inventory Financing Trust IV (the "Trust") are prepared on the basis of cash receipts and cash disbursements. Such financial statements differ from financial statements prepared in accordance with generally accepted accounting principles in that interest income and the related assets are recognized when received rather than when earned and distributions to Noteholders and Certificateholders are recognized when paid rather than when the respective obligation is incurred. Certain expenses of the Trust are paid by Wholesale Auto Receivables Corporation (the "Seller").
NOTE 2. SALE OF NOTES AND CERTIFICATES
On November 20, 1997, the Trust acquired the Seller's right, title and interest in wholesale finance receivables totaling $2,174.0 million in exchange for two types of Asset-Backed Notes representing indebtedness of the Trust and Asset-Backed Certificates representing equity interests in the Trust. The Asset-Backed Notes include $500.0 million 6.346% Term Notes, Series 1997-A, $500.0 million Floating Rate Term Notes, Series 1997-B and $1,000.0 million Floating Rate Revolving Notes (Series 1997-RN1 and Series 1997-RN2 with a specified maximum balance of $1,170.0 million less the then outstanding balance of the 6.346% Term Notes, Series 1997-A and $330.0 million, respectively). The Asset-Backed Certificates totaled $174.0 million. The Trust property includes certain eligible receivables in accounts included in a pool of accounts, certain receivables generated under each such accounts from time to time secured by new and used automobiles and light trucks, certain monies due or received thereunder, interest rate swaps, basis swaps and certain other property.
NOTE 3. PRINCIPAL AND INTEREST PAYMENTS
In the ordinary course of business, no principal payments will be made on the Term Notes, Series 1997-A until the commencement of the Index Amortization Period which is scheduled to commence on October 1, 1998 at which time principal reductions will be generally made based on a Reference Collateral Pool of 30-year FHLMC Gold 7.50% mortgage participation certificates issued in calendar year 1995. The Term Notes, Series 1997-B are prepayable at anytime (see Note 6). During the Revolving Period, the Trust will make payments of principal on, or additional borrowings (up to the Maximum Revolver Balance) under, the Revolving Notes on a daily basis.
The then-unpaid principal balance of Term Notes, Series 1997-A and 1997-B will be payable on November 15, 2004 and April 15, 2002, respectively, and the then-unpaid principal balance of the Revolving Notes and Certificates will be payable on November 15, 2004.
SUPERIOR WHOLESALE INVENTORY FINANCING TRUST IV
NOTES TO FINANCIAL STATEMENTS
NOTE 3. PRINCIPAL AND INTEREST PAYMENTS (concluded)
Payments of interest on the Term Notes, Series 1997-A and Series 1997-B, Revolving Notes, Series 1997-RN1 and Certificates are made on the fifteenth day of each month or, if any such day is not a Business Day, on the next succeeding Business Day, (each, a "Distribution Date"), commencing December 15, 1997 (the "Initial Distribution Date"). Payments of interest on the Revolving Notes, Series 1997-RN2 are made on the fifteenth day of January, April, July, and October ("Series 1997-RN2 Quarterly Distribution Date") or, if any such day is not a Business Day, on the next succeeding Business Day, commencing January 15, 1998.
The Term Notes, Series 1997-A interest rate equals a stated rate of 6.346% for each Distribution Date. Interest on the Term Notes accrues from, and including, the most recent Distribution Date to, but excluding, the current Distribution Date.
The Term Notes, Series 1997-B interest rate equals London Interbank Offering Rate (LIBOR) plus 14 basis points per annum for each Distribution Date. Interest on the Term Notes will accrue from, and including, the most recent Distribution Date to, but excluding, the current Distribution Date. The Term Noteholders received interest at a weighted average rate of 5.8275% per annum from November 20, 1997 through December 14, 1997.
The Revolving Notes, Series 1997-RN1 interest rate equals LIBOR plus 23 basis points per annum for each Distribution Date. Interest on the Revolving Notes accrue for the Collection Period (calendar month) immediately preceding each Distribution Date. The Revolving Noteholders received interest at a weighted average rate of 5.9175% per annum from November 20, 1997 through November 30, 1997.
The Revolving Notes, Series 1997-RN2 interest rate equals 3-Month LIBOR plus 20 basis points per annum for each Series 1997-RN2 Quarterly Distribution Date. Interest on the Revolving Notes accrue for the three Collection Periods (three calendar months) immediately preceding each Distribution Date. The Revolving Noteholders accrued interest at a weighted average rate of 6.0750% per annum from November 20, 1997 through December 31, 1997.
The Certificates interest rate equals LIBOR plus 200 basis points per annum for each Distribution Date. Interest on the Certificates accrues from, and including, the most recent Distribution Date to, but excluding, the current Distribution Date. The Certificateholders received interest at a weighted average rate of 7.6875% per annum from November 20, 1997 through December 14, 1997.
SUPERIOR WHOLESALE INVENTORY FINANCING TRUST IV
NOTES TO FINANCIAL STATEMENTS
NOTE 4. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Trust is a party to interest rate basis swap contracts. The interest rate basis swaps, which relate to the Asset-Backed Term Notes, Series 1997-A, and Series 1997-B; Asset-Backed Certificates; and Asset-Backed Revolving Notes, Series 1997-RN1 and Series 1997-RN2, are contractual agreements between the Trust and GMAC to exchange floating interest rate payments (i.e. the Trust pays Prime and receives LIBOR or 3-Month LIBOR, as the case may be, plus 266 basis points, 265 basis points, 266 basis points, 266 basis points and 263 basis points, respectively).
In addition, the interest rate basis swaps will terminate at the time the respective outstanding principal balance of the Term Notes, Revolving Notes or the Certificates has been paid in full. In the event that GMAC gives notice that it has elected not to extend the revolving period of the sale transaction, the notional amount of the interest rate basis swaps would amortize at the same rate as the outstanding balance of the related debt and equity obligations.
Market risk is mitigated because the derivatives are used to hedge a portfolio of underlying debt and equity obligations. Credit risk of the instruments is limited to payments due from GMAC. The interest rate basis swaps had a positive fair value of $2.4 million at December 31, 1997. The notional amount of the interest rate basis swaps approximates the outstanding balance in the Asset-Backed Notes and Asset-Backed Certificates.
The Trust is also a party to an interest rate swap. The interest rate swap, which relates to the Asset-Backed Term Notes, Series 1997-A, is a contractual agreement between the Trust and AIG Financial Products Corp. (the "Interest Rate Swap Counterparty") and Morgan Stanley Capital Services, Inc. (the "Contingent Interest Rate Swap Counterparty") to exchange floating for fixed interest rate payments. Upon the occurrence of a payment default by the Interest Rate Swap Counterparty, the interest rate swap will not terminate, but rather the Contingent Interest Rate Swap Counterparty will assume all the rights and obligations of the Interest Rate Swap Counterparty. In addition, the interest rate swap will terminate at the time the outstanding principal balance of the Term Notes, Series 1997-A has been paid in full.
Market risk is mitigated because the derivative is used to hedge an underlying debt obligation. Credit risk of the instrument is limited to payments due from the Interest Rate Swap Counterparty and the Contingent Interest Rate Swap Counterparty. The interest rate swap had a positive fair value of $4.4 million at December 31, 1997.
The notional amount of the interest rate swap approximates the outstanding balance in the Term Notes, Series 1997-A.
SUPERIOR WHOLESALE INVENTORY FINANCING TRUST IV
NOTES TO FINANCIAL STATEMENTS
NOTE 5. FEDERAL INCOME TAX
The Trust is classified as a division of the Seller, and therefore is not taxable as a corporation for federal income tax purposes. Each Noteholder, by acceptance of a Note agrees to treat the Note as indebtedness in the Trust for federal, state and local income and franchise tax purposes. The Seller as owner of the Certificates is the tax owner of the assets in the Trust for federal, state and local income and franchise tax purposes.
NOTE 6. SUBSEQUENT EVENTS
On February 17, 1998, the Seller declared a Payment Period for the Floating Rate Asset-Backed Term Notes, Series 1997-B. The outstanding principal balance of $500.0 million along with interest was paid on March 16, 1998.
SUPERIOR WHOLESALE INVENTORY FINANCING TRUST IV
SUPPLEMENTARY FINANCIAL DATA (unaudited)
SUMMARY OF QUARTERLY DISTRIBUTABLE INCOME
1997 Quarters Interest - ------------------------------------ ----------------------- (in millions of dollars)
Fourth quarter*..................... $ 6.4 ------- Total ......................... $ 6.4 =======
* Represents the period November 20, 1997 (inception) through December 31, 1997.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (1) FINANCIAL STATEMENTS.
Included in Part II, Item 8, of Form 10-K.
(a) (2) FINANCIAL STATEMENT SCHEDULES.
All schedules have been omitted because they are not applicable or because the information called for is shown in the financial statements or notes thereto.
(a) (3) EXHIBITS (Included in Part II of this report).
-- Superior Wholesale Inventory Financing Trust IV Financial Statements for the period November 20, 1997 (inception) through December 31, 1997.
27.1 Financial Data Schedule for Superior Wholesale Inventory Financing Trust IV (for SEC electronic filing purposes only).
(b) REPORTS ON FORM 8-K.
No current reports on Form 8-K have been filed by the Trust from inception through December 31, 1997.
ITEMS 2, 3, 4, 5, 6, 9, 10, 11, 12 and 13 are not applicable and have been omitted.
SIGNATURE
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Owner Trustee has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SUPERIOR WHOLESALE INVENTORY FINANCING TRUST IV
by: Chase Manhattan Bank (Delaware) ------------------------------------ (Owner Trustee, not in its individual capacity but solely as Owner Trustee on behalf of the Issuer.)
s\ Dennis Kelly ----------------------------- Trust Officer
Date: March 23, 1998 -----------------