General Motors 2010 Annual Report Download - page 195

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these agreements to
be immediately due and payable, enforce their interests against collateral pledged under these agreements or restrict GM Financial’s
ability to obtain additional borrowings under this facility. At December 31, 2010 GM Financial was in compliance with all covenants
in its credit facilities. Refer to Note 15 for additional discussion on GM Financial’s restricted cash.
Securitization Notes Payable
Securitization notes payable represents debt issued by GM Financial in securitization transactions. Debt issuance costs are
amortized over the expected term of the securitizations on an effective yield basis. As a result of the acquisition, GM Financial
recorded a purchase price premium of $133 million that is being amortized over the expected term of the notes. At December 31, 2010
unamortized purchase price premium of $107 million is included in Securitization notes payable.
The following table summarizes securitization notes payable at December 31, 2010 (dollars in millions):
Transaction Maturity Dates (a)
Original
Note
Amounts
Original
Weighted
Average
Interest
Rates
Total
Receivables
Pledged
Note
Balance
2006.................. May2013 – January 2014 $ 945 -1,350 5.2% - 5.6% $ 600 $ 537
2007.................. October 2013 – March 2016 $1,000 -1,500 5.2% - 5.5% 1,715 1,610
2008 (b) ............... October 2014 – April 2015 $ 500 - 750 6.0% -10.5% 911 501
2009.................. January 2016 – July 2017 $ 227 - 725 2.7% - 7.5% 715 494
2010.................. June 2016 – January 2018 $ 200 - 850 2.2% - 3.8% 3,014 2,683
BV2005 (c) ............ May2012 – June 2014 $ 186 - 232 4.6% - 5.1% 27 28
LB2006 (c) ............ May2013 – January 2014 $ 450 - 500 5.0% - 5.4% 174 168
$7,156 $6,021
Purchase accounting premium ........................................................................... 107
Total securitization notes payable ........................................................................ $6,128
(a) Maturity date represents final legal maturity of securitization notes payable. Securitization notes payable are expected to be paid
based on amortization of the finance receivables pledged to the trusts.
(b) Note balance does not include asset-backed securities of $65 million pledged to the bank funding facilities.
(c) Transactions relate to certain special purpose financing trusts acquired by GM Financial.
At the time of securitization of finance receivables, GM Financial is required to pledge assets equal to a specified percentage of the
securitization pool to support the securitization transaction. The assets pledged consist of cash deposited to a restricted account and
additional receivables delivered to the trust, which create overcollateralization. The securitization transactions require the percentage
of assets pledged to support the transaction to increase until a specified level is attained. Excess cash flows generated by the trusts are
added to the restricted cash account or used to pay down outstanding debt in the trusts, creating overcollateralization until the targeted
percentage level of assets has been reached. Once the targeted percentage level of assets is reached and maintained, excess cash flows
generated by the trusts are released to GM Financial as distributions from trusts. As the balance of the securitization pool declines, the
amount of pledged assets needed to maintain the required percentage level is reduced. Assets in excess of the required percentage are
also released to GM Financial as distributions from trusts.
Securitization Notes Payable Covenants
With respect to GM Financial’s securitization transactions covered by a financial guaranty insurance policy, agreements with the
insurers provide that if portfolio performance ratios (delinquency, cumulative default or cumulative net loss) in a trust’s pool of
receivables exceed certain targets, the specified credit enhancement levels would be increased.
General Motors Company 2010 Annual Report 193