SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
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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) April 10, 2008
CONSUMER PORTFOLIO SERVICES, INC.
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(Exact Name of Registrant as Specified in Charter)
CALIFORNIA 0-51027 33-0459135
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
16355 Laguna Canyon Road, Irvine, CA 92618
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (949) 753-6800
Not Applicable
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(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 (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
The information contained in Item 2.03 of this report is hereby incorporated by
reference into this Item 1.01.
On April 10, 2008, the registrant ("CPS") and its wholly owned subsidiary CPS
Receivables LLC ("Subsidiary") entered into a series of agreements under which
Subsidiary purchased from CPS, and sold to CPS Auto Receivables Trust 2008-A, a
Delaware statutory trust (the "Trust") approximately $310.4 million of subprime
automotive receivables (the "Receivables").
CPS disclaims any implication that the agreements relating to such transactions
are other than agreements entered into in the ordinary course of CPS's business.
ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
CPS, Subsidiary, the Trust and others on April 10, 2008 entered into a series of
agreements that, among other things, created long-term obligations that are
material to CPS, Subsidiary and the Trust. Under these agreements (i) CPS sold
the Receivables to Subsidiary, (ii) Subsidiary sold the Receivables to the
Trust, (iii) the Trust pledged the Receivables, to Wells Fargo Bank, N.A.
("Wells"), as indenture trustee for benefit of the holders of the Notes (as
defined below), and for benefit of the Insurer (as defined below), (iv) the
Trust issued and sold $244.4 million of asset-backed Notes, in four classes
(such Notes collectively, the "Notes"), (v) an insurance company, Financial
Security Assurance Inc.(the "Insurer"), issued a policy (the "Policy")
guaranteeing payment of principal and interest on the Notes, and (vi) a cash
deposit (the "Reserve Account") in the amount of 3.00% of the aggregate balance
of the Receivables was pledged for the benefit of the Insurer.
Security for the repayment of the Notes consists of the Receivables, and the
rights to payments relating to such receivables. The Receivables were originated
or purchased by CPS and CPS will act as the servicer of the Receivables. Credit
enhancement for the Notes consists of over-collateralization, the Reserve
Account, and the Policy, which guarantees the obligations of the Trust to pay
interest on, and repay the principal balance of, the Notes. Wells will act as
collateral agent and trustee on behalf of the secured parties, and is the backup
servicer.
The Notes are obligations only of the Trust, and not of Subsidiary nor of CPS.
Nevertheless, the Notes are properly treated as long-term debt obligations of
CPS. The sale and issuance of the Notes, treated as secured financings for
accounting and tax purposes, are treated as sales for all other purposes,
including legal and bankruptcy purposes. None of the assets of the Trust or
Subsidiary are available to pay other creditors of CPS or its affiliates.
The Trust holds a fixed pool of amortizing assets. The Trust is obligated to pay
principal and interest on the Notes on a monthly basis. Interest is payable at
fixed rates on the outstanding principal balance of each of the four classes of
the Notes, and principal is payable by reference to the aggregate principal
balance of the Receivables (adjusted for chargeoffs and prepayments, among other
things) and agreed required over-collateralization. Principal is payable
serially; that is, all payable principal is directed first to the class A-1
Notes until such class is paid in full, then to the class A-2 Notes until such
class is paid in full, and so on. The following table sets forth the interest
rates and initial principal amounts of the four classes of Notes:
Interest
Note Class Amount Rate
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A-1 $39.130 million 3.4695%
A-2 $95.059 million 4.95%
A-3 $88.220 million 6.48%
A-4 $22.000 million 7.13%
The 2008-A transaction has initial credit enhancement consisting of a cash
deposit and subordinated interests in the aggregate amount of 24.25% of the
original receivable pool balance. That enhancement level is to be supplemented
by accelerated payment of principal on the Notes to reach a combined level of
27.75% of the then-outstanding receivable pool balance.
At such time as the aggregate outstanding principal balance of the 2008-A
Receivables is less than 10% of the initial aggregate balance of $310.4 million,
CPS will have the option to purchase the Trust estate at fair market value,
provided that such purchase price is sufficient to cause the Notes to be
redeemed and paid in full, and to cause other obligations of the Trust to be
met.
If an event of default were to occur under the agreements, the Insurer would
have the right to accelerate the maturity of the Notes, and the required amount
of the Reserve Account would increase to an amount equal to the outstanding
aggregate principal balance of the Notes. Such increase would have the effect of
redirecting to the Reserve Account the cash proceeds of the Receivables that
otherwise would be released to Subsidiary, until such time, if any, as the
Reserve Account reached the increased required level. Events of default include
pool performance ratios, in addition to such events as failure to make required
payments on the Notes, breaches of warranties, representations or covenants
under any of the agreements or specified bankruptcy-related events. In addition,
if the Receivables (pledged as security for the Notes) were to experience net
loss ratios, delinquency ratios, or default rates that are higher than specified
levels, the existence of such a "trigger event" would also increase the Reserve
Account requirements, though to a lesser extent, which would also have the
effect of redirecting to the Reserve Account certain cash proceeds of the
Receivables that otherwise would be released to Subsidiary.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Three exhibits are furnished:
EXHIBIT NUMBER DESCRIPTION
4.27 Indenture re Notes issued by CPS Auto Receivables Trust 2008-A.
4.28 Sale and Servicing Agreement dated as of March 1, 2008.
99.1 Consumer Portfolio Services, Inc. April 11, 2008 press
release.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CONSUMER PORTFOLIO SERVICES, INC.
Dated: April 15, 2008 By: /s/ Robert E. Riedl
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Robert E. Riedl
Senior vice president and chief
investment officer
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
4.27 Indenture re Notes issued by CPS Auto Receivables Trust 2008-A.
4.28 Sale and Servicing Agreement dated as of March 1, 2008.
99.1 Consumer Portfolio Services, Inc. April 11, 2008 press
release.