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S&P Affirms First Merchants Auto Trust AAA Ratings

14 July 1997

S&P Affirms First Merchants Auto Trust AAA Ratings

    NEW YORK, July 14 -- Standard & Poor's today has affirmed its
triple-'A' ratings on First Merchants Auto Trust's three publicly rated auto
receivable-backed transactions following the company's Chapter XI bankruptcy
filing on Friday (see list below). The aggregate amount of rated debt totals
approximately $360 million as of May 31, 1997. Standard & Poor's does not
expect any interruption in bond payments as the transactions are insured by
unconditional, irrevocable bond insurance policies provided by Financial
Security Assurance Inc. (FSA; triple-'A' claims-paying ability).  These
policies guarantee the timely payment of interest and principal and losses, if
any, will not be material to FSA's financial condition.
    On April 16, First Merchants Acceptance Corp. announced that it had
discovered unauthorized accounting entries. The accounting irregularities
caused the company to be in violation of certain covenants under its bank line
of credit and its securitizations. On July 8, the company announced that it
had defaulted under its secured senior loan agreement with its bank group
(which expired by its terms on June 30) and that its bank group had ceased
honoring checks. First Merchants Acceptance Corp. also reported that it was in
default on its subordinated reset notes, which are not rated by Standard &
Poor's.
    Deerfield, Ill.-based First Merchants Acceptance Corp. is a sub-prime auto
finance company. Founded in 1991, its portfolio of retail auto installment
sales contracts had grown to approximately $710 million at April 30, 1997 from
$94 million at Dec. 31, 1994, Standard & Poor's said. -- CreditWire

    PUBLIC RATINGS AFFIRMED
                                                             Rating
    First Merchants Auto Trust 1996-B*
     $82.27 million pass-thru series 1996-B due 2000 class A-1 AAA
     $30.56 million pass-thru series 1996-B due 2001 class A-2 AAA
     $4.7 million class certificates due 2002                  AAA
    First Merchants Auto Trust 1996-C*
     $101 million pass-thru series 1996-C due 2000 class A-1   AAA
     $37.89 million pass-thru series 1996-C due 2001 class A-2 AAA
     $5.79 million class certificates due 2003                 AAA
    First Merchants Auto Trust 1997-1*
     $68 million pass-thru series 1997-1 due 2000 class A-1    AAA
     $29.6 million pass-thru series 1997-1 due 2001 class A-2  AAA

    *These transactions are insured by Financial Security Assurance Inc.

SOURCE  Standard & Poor's CreditWire