ITEM 1. BUSINESS
The Advanta Automobile Receivables Trust 1998-1, (the "Trust" or "Issuer") is a business trust established as of June 1, 1998, pursuant to a Trust Agreement (the "Trust Agreement") between Advanta Auto Receivables Corp. I (the "Seller") and Wilmington Trust Company, acting thereunder not in its individual capacity but solely as trustee under the Trust Agreement (the "Owner Trustee"). The Issuer's only purpose is the issuance of $41,000,000 5.90% Class A-1 Asset Backed Notes and $16,602,000 6.09% Class A-2 Asset Backed Notes (collectively, the "Notes") issued pursuant to an Indenture dated as June 1, 1998 (the "Indenture") between the Trust and Norwest Bank Minnesota, National Association, as indenture trustee and as trust collateral agent (the "Indenture Trust" and the "Trust Collateral Agent"). The Trust also issued $16,247,642 aggregate principal amount of 6.09% Asset Backed Certificates which were not offered but retained by the Seller (the "Certificates"). The assets of the Trust consist primarily of a pool of sub-prime motor vehicle retail installment sale contracts (the "Receivables") purchased by the Seller from Advanta Auto Finance Corporation (the "Registrant" and the "Master Servicer"). Scheduled payments on the Notes are unconditionally and irrevocably guaranteed pursuant to a financial guaranty insurance policy (the "Policy") issued by Financial Security Assurance (the "Certificate Insurer"). The Receivables are serviced by the Master Servicer pursuant to a Sale and Servicing Agreement (the "Sale and Servicing Agreement") dated as of June 1, 1998 among the Issuer, the Seller, the Master Servicer and the Trust Collateral Agent and Subserviced by Nuvell Financial Services Corp. (the "Subservicer"). On June 25, 1998, the Seller sold $57,602,000.00 aggregate principal amount of Receivables to the Issuer in exchange for the Notes and the Issuer sold the Notes pursuant to a public offering, the underwriting of which was managed by Salomon Smith Barney.
The Receivables and the distributions thereon, along with certain insurance proceeds and certain proceeds from liquidation of the Receivables, are the only significant assets of the Issuer. The Notes represent obligations solely of the Issuer. The Notes were registered under a Registration Statement (file no. 333-19733) on Form S-3 declared effective on March 21, 1997.
ITEM 2.
ITEM 2. PROPERTIES
The Issuer neither owns nor leases any physical properties.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Master Servicer is not aware of any material pending legal proceedings involving either the Issuer, the Trustee, the Seller or the Master Servicer with respect to the Notes or the Issuer's property. However, the Seller is a direct subsidiary of the Master Servicer and the Master Servicer is an indirect subsidiary of Advanta Corp., a Delaware
corporation ("Advanta Corp."), a publicly-traded company with its principal executive offices located in Spring House, Pennsylvania. The Master Servicer services Receivables securitized by the Seller.
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 Seller's obligation to repurchase Receivables which are inconsistent with representations and warranties set forth in certain agreements relating to Notes issued by the Trust sponsored by the Registrant as well as the obligations of the Master Servicer pursuant to certain agreements relating to the Notes issued by the Trust.
In addition, on or about March 3, 1999 Advanta Corp. announced that it intends to exit the business of automobile financing.
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 in the Issuer through the solicitation of proxies or otherwise.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Trust is not an issuer of common stock in a corporation, although the Notes have voting rights. The equity of the Trust consists of the beneficial or ownership interest therein for which, to the best knowledge of the Master Servicer, there is no established public trading market.
As of March 29, 1999, there were approximately 3 holders of the Class A-1 Notes and 2 holders of the Class A-2 Notes. The number of holders includes individual participants in security position listings. As of December 15, 1998, 6 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
RESULTS OF OPERATION
On June 25, 1998, the Issuer issued $41,000,000.00 aggregate principal amount of Class A-1 Notes having a fixed rate of 5.90% per annum and $16,602,000.00 aggregate principal amount of Class A-2 Notes having a fixed rate of 6.09% per annum, which are collateralized by Receivables.
The sale of the Receivables to the Issuer, the issuance of the Notes and the simultaneous delivery of the Notes to the Issuer for sale pursuant to a public offering, the underwriting of which was co-managed by Salomon Smith Barney has been accounted for as a sale of the Notes. The value of the Notes issued by the Issuer equaled the value of the Receivables conveyed to the Issuer by the Seller. Accordingly, there was no income to the Issuer resulting from the aforementioned transaction.
CAPITAL RESOURCES AND LIQUIDITY
The Issuer's primary sources of funds with respect to the Notes will be receipts of interest on and principal of the Receivables, along with certain insurance proceeds and certain proceeds from the liquidation of the Receivables. The respective managements of the Seller and the Master Servicer believe that the Issuer 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 Issuer. The Issuer does not have, nor will it have in the future, any significant source of capital for payment of the Notes and its operating expenses other than the receipt of interest on and principal of the Receivables, certain
insurance proceeds and certain proceeds obtained from the liquidation of the Receivables and any payments made by the Certificate Insurer. The Issuer is a limited purpose trust. The Notes represent obligations solely of the Issuer.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Not Applicable.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes of accountants or disagreements on accounting or financial disclosures between the Issuer and its accountants.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Issuer does not have any directors or officers.
The following individuals comprise the board of directors and officers of the Registrant:
Name Position
David E. Plante President Mark Shapiro Vice President and Treasurer Janice C. George Vice President and Director James Shreero Vice President and Director John Calamari Assistant Treasurer and Director Mark Dunsheath Vice President and Director Francis B. Jacobs II Director
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Not Applicable. The Issuer 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 Advanta Automobile Receivables Trust 1998-1, Class A-1 Notes ("Class A-1 Notes"), and Class A-2 Notes ("Class A-2 Notes"), (ii) the principal amount of each Class of Notes and (iii) the percent that the principal amount of each Class of Notes owned represents of the outstanding principal amount of such Class of Notes. The information set forth in the table is based upon information obtained by the Issuer from Depository Trust Company. The Registrant is not aware of any Schedules 13D or 13G filed with the Securities and Exchange Commission in respect of the Notes.
AMOUNT OWNED (All Dollar Amounts are in Thousands) NAME AND ADDRESS PRINCIPAL PERCENT
Class A-1 Notes - --------------- Bank of America-Personal Trust (NationsBank N.A.) 555 S. Flower Street, Level C Los Angeles, CA 90071
10,000 24.39%
Boston Safe Deposit and Trust Company c/o Mellon Bank N.A. Three Mellon Bank Center, Room 153-3015 Pittsburgh, PA 15259 21,000 51.22%
The First National Bank of Maryland 9th Floor - M/C 109-911 110 So. Paca Street Baltimore, MD 21201 10,000 24.39%
Class A-2 Notes - --------------- Bankers Trust Company c/o BT Services Tennessee Inc. 648 Grassmere Park Drive Nashville, TN 37211 15,252 91.86%
Bank One Trust Company, N.A. 235 W. Schrock Road Brooksedge Village Westerville, OH 43081 1,350 8.13%
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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: As the Issuer was established as of June 25, 1998, the Master Servicer is obligated to prepare an Annual Statement as to Compliance for the year ended December 31, 1998, and mail such statement to the Noteholders on or before the last day of March, 1998 and Independent Certified Public Accounts are required to prepare an annual report pertaining to the compliance of the Master Servicer with its servicing obligations pursuant to the Sale and Servicing Agreement on or before the last day of March, 1998. The Annual Statement as to Compliance is included herewith as Exhibit 28.1 and the Annual Independent Certified Public Accountants' Report is included herewith as Exhibit 28.2.
Exhibit No. Description - ----------- ----------- *3.1 Certificate of Incorporation of the Advanta Auto Finance Corporation *3.2 By-laws of the Advanta Auto Finance Corporation *4 Sale and Servicing Agreement 28.1. Annual Statement as to Compliance for the year ended December 31, 1998 28.2 Annual Independent Certified Public Accountants' Report. *99.1 Monthly Reports for the payment periods ending June, July, August, September, October, November and December 1998
*Incorporated by reference to the Exhibit of the same designation filed with the Issuer's Form S-3 registration statement declared effective March 21, 1997 and also Incorporated by reference from previously filed current Reports on Form 8-K listed below.
(b) Reports on Form 8-K.
8 reports on Form 8-K have been filed by the Issuer during the period covered by this report.
Date of Reports on Form 8-K ITEMS REPORTED/ FINANCIAL STATEMENTS FILED
July 9, 1998 Initial Current Report on Form 8-K filed with respect to the Issuance of the Notes
December 30, 1998 Monthly Report for June 1998 Monthly Period relating to Advanta Automobile Receivables Trust 1998-1 Class A-1 Asset-Backed Notes and Class A-2 Asset-Backed Notes
December 30, 1998 Monthly Report for July 1998 Monthly Period relating to Advanta Automobile Receivables Trust 1998-1 Class A-1 Asset-Backed Notes and Class A-2 Asset-Backed Notes
December 30, 1998 Monthly Report for August 1998 Monthly Period relating to Advanta Automobile Receivables Trust 1998-1 Class A-1 Asset-Backed Notes and Class A-2 Asset-Backed Notes
December 30, 1998 Monthly Report for September 1998 Monthly Period relating to Advanta Automobile Receivables Trust 1998-1 Class A-1 Asset-Backed Notes and Class A-2 Asset-Backed Notes
December 30, 1998 Monthly Report for November 1998 Monthly Period relating to Advanta Automobile Receivables Trust 1998-1, Class A-1 Asset-Backed Notes and Class A-2 Asset-Backed Notes
January 4, 1999 Monthly Report for the October 1998 Monthly Periods relating to Advanta Automobile Receivables Trust 1998-1, Class A-1 Asset-Backed Notes and Class A-2 Asset-Backed Notes
January 4, 1999 Monthly Report for the December 1998 Monthly Periods relating to Advanta Automobile Receivables Trust 1998-1, Class A-1 Asset-Backed Notes and Class A-2 Asset-Backed Notes
(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 Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
ADVANTA AUTO FINANCE CORPORATION as Registrant and Master Servicer and on behalf of
Advanta Automobile Receivables Trust 1998-1
By: /s/ David E. Plante ------------------------------ Name: David E. Plante Title: President
March 31, 1999
Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ Janice C. George ------------------------------------------ Name: Janice C. George Title: Vice President and Director Date: March 31, 1999
By: /s/ James Shreero ------------------------------------------ Name: James Shreero Title: Vice President and Director Date: March 31, 1999
By: /s/ John Calamari ------------------------------------------ Name: John Calamari Title: Assistant Treasurer and Director Date: March 31, 1999
By: /s/ Mark Dunsheath ------------------------------------------- Name: Mark Dunsheath Title: Vice President and Director Date: March 31, 1999
INDEX TO EXHIBITS (ITEM 14(c))
Exhibit No. Description - ----------- ----------- *3.1 Certificate of Incorporation of the Advanta Auto Finance Corporation *3.2 By-laws of the Advanta Auto Finance Corporation *4 Sale and Servicing Agreement 28.1 Annual Statement as to Compliance for the year ended December 31, 1998 28.2 Annual Independent Certified Public Accountants' Report. *99.1 Monthly Reports for the payment periods ending June, July, August, September, October, November and December 1998.
* Incorporated by reference to the Exhibit of the same designation filed with the Issuer's Form S-3 registration statement declared effective March 21, 1997 and also Incorporated by reference from previously filed Current Reports on Form 8-K listed herein.