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JG Wentworth “Generates lots of cash” as quoted by David Miller, CEO of JG Wentworth



sell settlement paymentsJG 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.

Posted by maureen