by Structured Settlement Watchdog
On May 7, 2009 a Bankruptcy Code section 1125 Disclosure Statement was issued as part of the Prepetition Solicitation of Votes With respect to the Prepackaged Plan of Reorganization of JGW Holdco, LLC, J.G. Wentworth, LLC and J.G. Wentworth, Inc. This document, a complete copy of which is linked below, was full of interesting pieces of information about the privately held company.
- Company believes it has 50% market share (of the structured settlement factoring market)
- The bankruptcy disclosure cites NSSTA statistics of over $100B in premiums for structured settlements issued in the United States from 1979 through 2007.
- 51,000 guaranteed and life contingent structured settlement transactions since 1995, with aggregate payment streams (as opposed to premiums) of approximately $3.9B.
- The prospective client database, as of December 31, 2008 included approximately 39,900 prospective clients who held un-purchased structured settlements and/or fixed payment annuities.
- Clients of the company complete an average of more than two transactions with the company and/or its non-debtor affiliates.
- The company's brand generates inbound inquiries for its purchasing group. There is no readily available lists of holders of structured settlements or fixed payment annuities so brand awareness is important to growing market share in the company's industry. Over the past 14 years the company and/or its non-debtor affiliates have invested $199MM in marketing to establish the "J.G. Wentworth" brand name and product awareness through multiple media outlets.
- The Company's purchase of structured settlements must be court-approved. As a result of a chapter 11 filing, such courts may be reluctant or unwilling to approve transfers of structured settlements to subsidiary of an entity operating under Chapter 11 protection. Similarly potential customers may be unwilling or reluctant to sell structured settlements to a subsidiary of an entity operating under Chapter 11 protection. Any such loss of business could hamper the Company's efforts to reorganize and improve the Company's profitability.
- There can be no assurances that the current financial climate will improve significantly over the coming months to allow for greater ease of consummating and securitization of structured settlement transactions* (sic) (p46)
Comments
It is the opinion of this author that the factoring problem may be a lot less than it appears due to the level of advertising saturation. The common assumption is that 5% of structures are factored, yet that doesn't bear out with what J.G. Wentworth has supplied to the Bankruptcy Court. If one is to believe the disclosure (on the "their ass is in a sling so they must be telling the truth" theory) there is a clear mismatch between total premiums and total aggregate benefit streams purchased. A more apples to apples comparison would to compare the $3.9B in aggregate payment streams that JG Wentworth acquired to what the $100B in total premiums purchased, although I'd imagine it would be pretty difficult to impossible to get an accurate read on such information.
JG Wentworth has been and still is a leading proponent of "cash now", something that has been proven to be an advertising fraud. Who has not seen smiling Mr.Wemtworth say "get cash now"? Officials of JG Wentworth's trade association, the aforementioned disclosure statement and statements from certain JG Wentworth competitors refute that this is possible. I'd like to know how much of that $200MM in advertising went to the cash now pushing.
J.G. Wentworth states that there is no readily available lists of holders of structured settlements or fixed payment annuities so brand awareness is important to growing market share in the company's industry. Yet as of December 31, 2008 its' "proprietary database" included approximately 39,900 prospective clients who held un-purchased structured settlements and/or fixed payment annuities. How did they acquire these names? Once again these are labeled prospective clients. We are talking about confidential settlements in many cases. What person, or entity is supplying these names and at what price?
Download J.G.WentworthLLC2009-DisclosureStatement
*JG Wentworth mischaracterized a "structured settlement factoring transaction "as a "structured settlement transaction" in the disclosure statement of May 7, 2009
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