ITEM 1. BUSINESS
Advanta Business Services Corp. ("ABS") is a wholly-owned subsidiary of Advanta Leasing Holding Corp., a Delaware corporation ("ALHC"). ALHC is a wholly-owned subsidiary of Advanta Corp., a Delaware corporation, ("Advanta Corp.") which is a publicly-traded company based in Spring House, PA. ABS is in the business of originating, acquiring and serving certain leases (the "Leases") and interests in the equipment underlying the leases (the "Equipment"). Advanta Leasing Receivables Corp. IV ("ALRC IV") and Advanta Leasing Receivables Corp. V ("ALRC V," together with ALRC IV, the "Issuers") are wholly-owned subsidiaries of ABS and were formed for the purpose of securitizing the Leases and the Equipment through the issuance of debt securities (the "Notes"). The Issuers acquired their rights to the Leases and Equipment either from ABS directly, pursuant to the Master Contribution Agreement, dated as of May 1, 1997 or pursuant to one or more sale agreements in each case between the Issuers and one or more affiliates of ABS. On April 8, 1998, the Issuers issued notes entitled Equipment Receivables Asset-Backed Notes, Series 1998-1 totalling $360,000,000 principal amount of notes consisting of: the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes, the Class C Notes (collectively, the "Offered Notes") and the Class D Notes (together with the Offered Notes, the "Notes"). The assets of the Issuers consist primarily of Leases, Equipment and a reserve account. The Notes were issued pursuant to the Master Business Receivables Asset Backed Financing Facility Agreement (the "Indenture"), dated as of May 1, 1997, by and among ABS, as servicer, Advanta Leasing Receivables Corp. III and The Chase Manhattan Bank, as trustee. The Offered Notes were sold pursuant to a public offering, the underwriting of which was co-managed by Salomon Smith Barney, Lehman Brothers Inc., Prudential Securities Incorporated and Barclays Capital Inc. (collectively, the "Underwriters"). The Notes represent asset-backed debt obligations of the Issuers, as joint and several obligors. The Notes were registered under a Registration Statement (file no. 333-38575) on Form S-1 declared effective on or about April 8, 1998. As bankruptcy-remote entities, the Issuers' operations are restricted so that (a) they do not engage in business with, or incur liabilities to, any other entity (other than the Trustee on behalf of the holders of the Notes) which may bring bankruptcy proceedings against the Issuers and (b) the risk is diminished that they will be consolidated into the bankruptcy proceedings of any other entity. The Issuers have no other assets except the Leases and the Equipment, and proceeds thereof.
ITEM 2.
ITEM 2. PROPERTIES
None.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Issuers are not aware of any material pending legal proceedings involving the Issuers, the Trustee or the Servicer with respect to the Notes or the Issuers' property. However, ABS and the Issuers are indirect subsidiaries of Advanta Corp.
On January 25, 1999 Advanta Corp. reported that on Friday, January 22, 1999, Fleet Financial Group, Inc. and certain of its affiliates ("Fleet") filed a complaint (the "Complaint") against Advanta Corp. and certain of its affiliates relating to the transaction with Fleet which closed on February 20, 1998 in which Advanta Corp. contributed most of its consumer credit card business to a limited liability company owned by Fleet (the "Fleet Transaction"). The Complaint centers around post-closing adjustments to the transaction and other matters relating to the Fleet Transaction.
Advanta Corp. believes that the lawsuit is inappropriate and without merit and, on February 16, 1999 it filed its answer and counterclaims in which it denies all of the substantive allegations in the Complaint and seeks damages from Fleet. Advanta Corp. does not expect this suit to have any material adverse financial impact on its business.
The ability of Advanta Corp.'s subsidiaries to honor their financial and other obligations is to some extent influenced by the financial condition of Advanta Corp. Such obligations primarily consist of the ABS's or the Issuers' obligations to repurchase mortgage loans which are inconsistent with representations and warranties set forth in certain agreements relating to Notes issued by the Trust sponsored by ABS as well as the obligations of the ABS as servicer pursuant to certain agreements relating to Notes issued by the Trust.
This Report on Form 10-K contains forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The most significant among these risks and uncertainties is the uncertainty of the legal process.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter has been submitted to a vote of the holders of beneficial interests of the Issuers or the Notes through the solicitation of proxies or otherwise.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The sole holder of ABS's Common Stock is ALHC. The sole holder of the Issuers' Common Stock is ABS. There is currently no market for such Common Stock nor is it anticipated that such a market will develop.
As of March 26, 1999, there were approximately 16 holders of the Class A-1 Notes, 18 holders of the Class A-2 Notes, 3 holders of the Class A-3 Notes, 19 holders of the Class A-4 Notes, 2 holders of the Class B Notes and 2 holders of the Class C Notes. The number of holders includes individual participants in security position listings. As of December 15, 1998, 8 monthly distributions had been made to the holders of the Notes.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not Applicable.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On April 8, 1998, the Issuers issued $72,000,000 aggregate principal amount of Class A-1 Notes having a fixed rate per annum of 5.77%, $190,000,000 aggregate principal amount of Class A-2 Notes having a fixed rate per annum of 5.82%, $23,300,000 aggregate principal amount of Class A-3 Notes having a fixed rate per annum of 5.93%, $45,900,000 aggregate principal amount of Class A-4 Notes having a fixed rate per annum of 5.98%, $18,938,000 aggregate principal amount of Class B Notes having a fixed rate per annum of 6.10% and $9,862,000 aggregate principal amount of Class C Notes having a fixed rate per annum of 6.49%, which were collateralized by the Leases, Equipment and the reserve account. The Class D Notes were not publicly offered and are principal only notes which do not bear interest. The sale of the Leases and Equipment to the Issuers, the issuance of the Notes and the simultaneous delivery of the Notes to the Underwriters, has been accounted for as a sale. The value of the Notes issued by the Issuers equaled the value of the assets pledged as collateral for the Notes. Accordingly, there was no income to the Issuers resulting from the aforementioned transaction.
CAPITAL RESOURCES AND LIQUIDITY
The Issuers' primary sources of funds with respect to the Notes will be the receipt of interest on and principal with respect to the Leases and Equipment. The management of ABS believes that the Issuers will have sufficient liquidity and capital resources to pay all amounts on the Notes as they become due and all other anticipated expenses of the Issuers. The Issuers do not have, nor will they have in the future, any significant sources of capital for payment of the Notes and its operating expenses other than the receipt of
interest on and principal on the Leases and Equipment. The Notes represent asset-backed debt obligations solely of the Issuers.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Not Applicable.
ITEM 9.
ITEM 9. CHANGE IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes of accountants or disagreements on according or financial disclosures between the Issuers and its accountants.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
The following individuals comprise the board of directors and the officers of the Advanta Business Services Corp.:
The following individuals comprise the board of directors and the officers of Advanta Leasing Receivables Corp. IV:
The following individuals comprise the board of directors and the officers of Advanta Leasing Receivables Corp. V:
All directors and officers hold office for the term of one year and until their successors are elected and qualified, subject to earlier termination by removal or resignation.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Not Applicable. The Trust does not have employees.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth (i) the name and address of each entity owning more than 5% of the outstanding principal amount of the Equipment Receivables Asset-Backed Notes, Series 1999-1, Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes and Class C Notes; (ii) the principal amount of each class of Offered Notes and (iii) the percent that the principal amount of each Class of Offered Notes owned represents of the outstanding principal amount of each Class of the Offered Notes, respectively. The information set forth in the table is based upon information obtained by the Issuers from the Depository Trust Company.
ABS and the Issuers are not aware of any Schedules 13D or 13G filed with the Securities and Exchange Commission in respect of the Notes.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not Applicable.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements: Not Applicable. 2. Financial Statement Schedules. Not Applicable. 3. Exhibits:
The Servicer is required to prepare an Annual Statement as to Compliance for the year ended December 31, 1998 and mail such statement to the Trustee on or before the last day of March, 1999. The Annual Statement as to Compliance is included herewith as Exhibit 28.1.
* Incorporated by reference to the Exhibit of the same designation filed on the Form S-1 registration statement declared effective on or about April 8, 1998 and also Incorporated by reference from previously filed Current Reports on Form 8-K listed below
(b) Reports on Form 8-K.
Ten reports on Form 8-K have been filed by the Issuers during the period covered by this report.
(c) See "Item 14(a)(3) - Exhibits."
(d) Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ADVANTA BUSINESS SERVICES CORP.
as Registrant and Servicer
By: /s/ Charles H. Podowski --------------------------------------------- Name: Charles H. Podowski Title: President, Chief Executive Officer and Director
Dated: March 31, 1999
ADVANTA LEASING RECEIVABLES CORP. IV
as Registrant
By: /s/ Michael Coco --------------------------------------------- Name: Michael Coco Title: Vice President and Chief Executive Officer
ADVANTA LEASING RECEIVABLES CORP. V.
as Registrant
By: /s/ Michael Coco --------------------------------------------- Name: Michael Coco Title: Vice President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf on the Registrants and in the capacities and on the dates indicated.
ADVANTA BUSINESS SERVICES CORP.
By: /s/ Dennis Alter ------------------------------------------- Name: Dennis Alter Title: Director
Date: March 31, 1999
By: /s/ Charles H. Podowski ------------------------------------------- Name: Charles H. Podowski Title: President, Chief Executive Officer and Director Date: March 31, 1999
By: /s/ Edward E. Millman ------------------------------------------- Name: Edward E. Millman Title: Senior Vice President and Chief Financial Officer
Date: March 31, 1999
By: /s/ Cole B. Silver ------------------------------------------- Name: Cole B. Silver Title: Senior Vice President, Secretary
Date: March 31, 1999
ADVANTA LEASING RECEIVABLES CORP. IV.
By: /s/ John Paris ------------------------------------------- Name: John Paris Title: President and Director
Date: March 31, 1999
By: /s/ Michael Coco ------------------------------------------- Name: Michael Coco Title: Vice President, Chief Executive Officer and Director
Date: March 31, 1999
By: /s/ Mark Shapiro ------------------------------------------- Name: Mark Shapiro Title: Treasurer
Date: March 31, 1999
By: /s/ Janis C. George ------------------------------------------- Name: Janis C. George Title: Vice President, Assistant Secretary and Director
Date: March 31, 1999
By: /s/ Cole B. Silver ------------------------------------------- Name: Cole B. Silver Title: Secretary
Date: March 31, 1999
By: /s/ George Deehan ------------------------------------------- Name: George Deehan Title: Director
Date: March 31, 1999
ADVANTA LEASING RECEIVABLES CORP. V.
By: /s/ John Paris ------------------------------------------- Name: John Paris Title: President and Director
Date: March 31, 1999
By: /s/ Michael Coco ------------------------------------------- Name: Michael Coco Title: Vice President, Chief Executive Officer and Director
Date: March 31, 1999
By: /s/ Mark Shapiro ------------------------------------------- Name: Mark Shapiro Title: Treasurer
Date: March 31, 1999
By: /s/ Janis C. George ------------------------------------------- Name: Janis C. George Title: Vice President, Assistant Secretary and Director
Date: March 31, 1999
By: /s/ Cole B. Silver ------------------------------------------- Name: Cole B. Silver Title: Secretary
Date: March 31, 1999
By: /s/ George Deehan ------------------------------------------- Name: George Deehan Title: Director
Date: March 31, 1999
EXHIBIT INDEX
* Incorporated by reference to the Exhibit of the same designation filed with ABS's and the Issuers' Form S-1 registration statement declared effective on or about April 8, 1998 and also Incorporated by reference from previously filed Current Reports on Form 8-K listed herein.