by John Darer CLU ChFC MSSC RSP CLTC
The New York Post reports that "JG Wentworth’s owners may have to settle for a discounted payment of their own" in an article published September 27, 2012. J.G. Wentworth is one of the the best-known purchasers of structured settlement payment rights*.
Structured settlement payment rights are established when a structured settlement is created at the conclusion of a legal dispute. Structured settlements provide many benefits to help meet the long term financial needs injured parties and their families. When those needs change and liquidity is needed that cannot be provided from other sources, one option is to go to a settlement purchaser or factoring company, such as the largest advertiser in the space, J.G. Wentworth, to sell some or all of those structured settlement payment rights.
Sellers of structured settlement payment rights never get all of ther money now (as J.G. Wentworth subsidiary Peachtree Settlement Funding once advertised) , because the future payments must be reduced to present value offer with an effective discount factor that takes into account items such as interest rate spreads, credit risks, legal costs to prosecute the transaction.
According to the New York Post, New York private equity firm JLL Partners, has attracted early bids that are as much as 20 percent shy of its $1 billion asking price.
*The Post mistakenly refers to J.G. Wentworth in the in the context of " structured settlement companies". It may be helpful to note that J.G. Wentworth's primary business is acquiring structured settlement payment rights by providing cash to certain sellers of those rights. The transfer must be approved by a judge. Moreover, the process by which those structured settlement payment rights are transferred, is defined in the Internal Revenue Code as a 'structured settlement factoring transaction" [see IRC 5891 (c)(3)]
Source of image: Netanimations
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