J.G. Wentworth is readying $129 million of bonds backed by structured settlements and annuities.

It’s the sponsor’s 45th term transaction since 1997, and the first since 2014 that does not include any lottery receivables. 

Two tranches of notes will be issued in the transaction, J.G. Wentworth XXXVIII LLC, Fixed Rate Asset Backed Notes, Series 2017:  a $115.46 million senior tranche provisionally rated Aaa by Moody’s Investors Service; $13.28 million subordinate tranche is rated Baa3.

The class A notes benefit from 15.25% (as a percentage of the assets) subordination in the form of the class B notes (9.75%) and issuer interest (5.50%).

All of the notes are expected to be repaid by December 2040.

They are will be backed by a pool of court-ordered transfers of structured settlements and assignable annuity streams, as well as $64.37 million (50% of the initial balance of the notes) in cash that will be used to purchase additional receivables.

That’s a large prefunding account, compared with recent J.G. Wentworth transactions, which means there’s a greater risk of changes in the composition of the pool that are adverse to investors. However, the sponsor is required to get confirmation from Moody’s that any receivables it adds would not negatively impact the credit ratings.

If the issuer is unable to get a green light from Moody’s, the funds in the prefunding account will instead be applied to make principal payments on the notes.

At closing, structured settlements will account for 96.5% of receivables and annuities 3.5%.

Among other ratings considerations, the pool of obligors, all insurance companies, is somewhat concentrated, with the top two accounting for around 23.3% of the present value of the receivables, and the top five accounting for 44.1%.

Most of the obligors (79.2%) have financial strength ratings of A3 or higher. However, the remaining obligors (8.8%) are affiliates of Genworth Life and Annuity Insurance, which Moody’s rates just Ba2 and has under review for a possible downgrade.

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