Rescue Capital Blog Your Money, Your Way

21Feb/13Off

JG Wentworth “Generates lots of cash” as quoted by David Miller, CEO of JG Wentworth, in today’s WSJ.

Posted by maureen

 

 

JG Wentworth “Generates lots of cash” as quoted by David Miller, CEO of JG Wentworth, in today’s WSJ.

The Federal Reserve, in an effort to revive the U.S. economy, has artificially kept the interest rate levels at a historically low level.  The low interest rate levels have had direct impact not only on the economy but on the structured settlement market.

As interest rates are forced down,  individual investors as well as institutional investors, seeking higher returns, are flocking to riskier assets and may take on too much debt.

JG Wentworth earlier this month took out a $425 million covenant-lite loan and used most of the proceeds to pay shareholders a special dividend.  According to the WSJ, Covenant-lite corporate loans are borrower friendly business loans that don’t require firms to meet traditional performance standards.

JG Wentworth feels they can manage the added debt levels because the firm generates lots of cash and interest rates are low.  The loan that JGW secured resulted in a Moody’s downgrade of its Corporate Family Rating.

The low interest rate levels can also add to the blame for the declining U.S. structured settlement annual premium, a market that has seen its premiums decline since 2008 and whose 2012 levels are the lowest they have been since 1999.  As recently reported, Allstate Life is withdrawing from the structured settlement marketplace.



1Feb/13Off

Liberty Mutual will split structured settlement pays

Posted by maureen

The calendar has turned the page onto a new month.  Along with colder weather, February is bringing Great News from Liberty Life Assurance Company of Boston, "Liberty Life".  Effective today any structured settlement annuity transfer will not be subject to servicing agreements.

That is Liberty mutual will begin splitting the payment stream.   All structured settlement factoring transactions that are subject to IRC 5891 and approved by a state court, will not only receive a lump sum, but will keep their unsold portions coming to them by the annuity issuer.

The process of “servicing” a structured settlement payments arises  when a structured settlement seller enters into a transaction assigning/selling some of their future payments and decides to only sell a portion of his/her annuity.   Often that is selling a portion of a monthly payment stream or a portion of a lump sum.  For example, before February 1st, 2013 if a structured settlement payee decided to sell $500 a month from a $1,000 a month payment stream to a structured settlement purchaser for the next 15 years, the purchaser would receive the full monthly check ($1,000) from the annuity issuer and then be responsible for processing the check and sending to the payee the unsold amount or $500.

Often issues arise when a servicing agreement is in place.  Some of these issues are a lack of transparency from the annuity purchaser to the seller about the process of servicing payments, a delay in receiving their monthly check, and in some instances the inability to receive a truly competitive offer.

To those annuitants who have policies with Liberty Mutual and Liberty Life Assurance Company of Boston and are considering selling some of their structured settlement annuity, you are in the clear.



24Jan/13Off

The Dark cloud that seemed to be following Imperial Settlements may be going out to sea

Posted by maureen

In an earlier post, Imperial Holdings (NYSE: IFT) seemed to have a dark cloud hovering over its Boca Raton, FL offices.  Since going public back in 2011, the company has been plagued with shareholder turmoil, increased competition in the marketplace, and legal problems.

It seems the class action cloud that has been hovering over its office may be drifting out to sea.  Imperial and the related parties “have executed a non-binding term sheet to settle the shareholder class action lawsuits and derivative demands instituted against the Company and certain of its current and former directors and officers.” (Source: Business Wire)

The settlement will cost Imperial a tune of $12 million and the parties were to have entered into settlement agreements this past 15th of January 2013.

Imperial's stock was trading at $4.30 a share at the end of business day today.



23Jan/13Off

Selling your annuity in order to pay for college, good idea or bad?

Posted by maureen

Paying for a college education is a serious consideration for most young adults and their parents.   Now is the time in fact that colleges will soon start sending out acceptance letters and financial aid packages to those who were admitted.

For many looking to pay for their higher education they will turn to the Office of Federal Student Aid and fill out the Free Application for Federal Student Aid (FAFSA).  There is an overview of this program on the government website, http://studentaid.ed.gov/fafsa.   An important note! Start this process as soon as you can, the sooner you apply the greater your chances.

If you are one of a select few to have a structured settlement annuity, should you sell the future payments to pay for college?  The answer is simply NO – not until you have explored all other options first.  This is the answer given by many Judges around the country.  As expressed by a NY Judge In The Matter Of The Petition Of J.G. Wentworth Originations, LLC (Pretto) “However admirable Pretto's intention to obtain a degree… the taking of such a deep discount on her settlement funds is a questionable means of attaining her goal.”

The US Department of Education, the lender for low-interest loans for students, has current rates of 3.4%.  The loan is commonly known as a Stafford Loan.  A Stafford Loan is a student loan offered to those eligible students enrolled in accredited Colleges and Universities.  A current variable student loan that is pegged to the 91-day Treasury bill is less than one percent at .075%.  Graduate students can access student loans at 6.8%.

We estimate industry rates for structured settlement transfers to be on average around 14.5%.  This is much higher than student loan rates currently available.  While some sellers of structured settlement annuities can obtain rates in the single digits, say 8%, those are available to annuities with much larger values and do not comprise the majority of annuities in force.

It is very common for minors involved directly or indirectly during a tort settlement to have a structured settlement designed for them so as to provide a stream of future payments.  From our experience of reviewing thousands of structured settlement annuity policies, a majority of these policies, had college education as a factor; and more oft than not payment streams begin to be dispersed from ages 18-22 or at the age 22 assuming completion of a higher education program.

Looking at the comparable rates, 14.5% vs. 3.4% it doesn’t take a higher education to figure out the better deal.  Explore all of your options first and like and good student – do your homework and obtain multiple structured settlement quotes before choosing a buyer.