Circuit City Stores has prepared a term deal that will mark the beginning of a regular pattern of issuance of new auto-loan product for the company.

Its Richmond, Va.-based CarMax Group unit will make its first venture into the public market with a $500 million auto loan transaction in late August or early September. The deal will mark the first time CarMax has securitized outside of the commercial paper market, and will shore up a one-two vanilla punch of cars and cards for Circuit City.

Banc of America Securities will lead manage the deal, with First Union Capital Markets and Goldman, Sachs & Co. acting as co-managers. The bonds will be issued from CarMax Auto Owner Trust 1999-1, while CarMax Auto Receivables will act as seller and CarMax Auto Superstores, Inc. will service the accounts. The deal consists of four A tranches, plus a tranche of certificates, which Banc of America will sole manage in the sale.

CarMax purchases, reconditions, and sells used cars and light trucks, mostly in the southeastern U.S. First North American Credit, based in Atlanta, provides financing for most of the CarMax loans.

Keith Browning, chief financial officer at CarMax, said that while the company does have new-car franchises at some of its locations - several new car agreements exist with DaimlerChrysler Corp. - he described the upcoming deal as containing more than 90% of used car auto loans.

Because ratings analysts traditionally define collateral from used cars as subprime debt, Browning was making efforts to convince rating agencies that the CarMax auto loans are prime quality.

"We had to spend a long time with them demonstrating how our portfolio performs like new cars," he said. Despite these efforts, Browning said CarMax might seek a financial guaranty to ensure the bonds are triple-A rated. - SK

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