any reason, will be limited to the greater of $1 million or 2% of the aggregate principal amount of all notes out- standing at the end of the previous quarter. See “Description of the Notes.”
Because the notes will have no sinking fund, collateral security, insurance or guarantee, you may lose all or a part of your investment in the notes if we do not have enough cash to pay the notes.
There is no sinking fund, collateral security, insurance or guarantee of our obligation to make payments on the notes. The notes are not secured by any of our assets. We will not contribute funds to a separate account, commonly known as a sinking fund, to make interest or principal payments on the notes. The notes are not certifi- cates of deposit or similar obligations of, and are not guaranteed or insured by, any depository institution, the Fed- eral Deposit Insurance Corporation, the Securities Investor Protection Corporation, or any other governmental or private fund or entity. Therefore, if you invest in the notes, you will have to rely only on our cash flow from opera- tions and other sources of funds for repayment of principal at maturity or redemption and for payment of interest when due. Our cash flow from operations could be impaired under the circumstances described under “—Risks Related to Our Business”. If our cash flow from operations and other sources of funds are not sufficient to pay any amounts owed under the notes, then you may lose all or part of your investment.
The notes will automatically renew unless you request repayment.
Upon maturity, the notes will be automatically renewed for the same term as your maturing note and at an interest rate that we are offering at that time to other investors with similar aggregate note portfolios for notes of the same term, unless we notify you prior to the maturity date that we intend to repay the notes or you notify us within 15 days after the maturity date that you want your notes repaid. This 15 day period will be automatically extended if you would otherwise be required to make the repayment election at a time when we have determined that a post-effective amendment to the registration statement of which this prospectus is a part must be filed with the Securities and Exchange Commission, but such post-effective amendment has not yet been declared effective. If notes with the same term are not then being offered, the interest rate upon renewal will be the rate specified by us on or before the maturity date, or the rate of the existing note if no such rate is specified. The interest rate on your renewed note may be lower than the interest rate of your original note. Any requests for repurchases after your notes are renewed will be subject to contractual restrictions that presently prohibit us from making any such repurchases and, in any event, to limitations on the amount of notes we would be willing to repurchase in any ca- lendar quarter.
Because we have substantial indebtedness that is senior to the notes, our ability to pay the notes may be im- paired.
We have now and, after we sell these notes, will continue to have a substantial amount of indebtedness. At June 30, 2011 and September 30, 2010, we had approximately $717.9 million and $855.5 million of debt out- standing, respectively, comprising (in thousands):
June 30, 2011
September 30, 2010
Warehouse lines of credit (1)
Subordinated renewable notes
Residual interest financing (1)
Securitization trust debt (1)
Senior secured debt, related party
Total on balance sheet debt
Debt obligations of our special purpose entities
Debt obligations of our special purpose entities where the securitization transactions were structured
as sales for accounting purposes
Our debt to net worth ratio at June 30, 2011 was negative 88.8 (including all debt issued by off-balance sheet special purpose entities our debt to net worth ratio was negative 95.9 and excluding all securitization trust debt, our debt to net worth ratio was negative 19.8), and our ratio of earnings to fixed charges, including interest expense on the above-mentioned debt, was 0.73. Our debt to net worth ratio at September 30, 2010 was 47.6 (in-
Total on and off-balance sheet debt
Off-balance sheet securitization trust