Peachtree Settlement Funding will enter the securitization market next year, debuting a structured settlement-backed deal that could reach the $100-million range, followed by a lottery-backed deal later down the line, said Jim Terlizzi, chief operating officer at Peachtree.
The structured settlement deal, which will likely hit market in the first quarter, is backed by lawsuit-associated streams of revenue "being paid over time on account of personal injury claims," said Terlizzi.
Though the lottery-backed securitization has yet to be sized up, Michael Demore of Woodbridge Sterling Capital, the company that pioneered the lottery-backed securitization just over a year ago, said, "From what I understand, they have a fairly large portfolio."
Peachtree has been catching a lot of press lately, challenging the state of Florida's lump-sum offerings to lottery winners. Peachtree contends the offerings are misleading and are - more often than not - a swindle to the winners.
"What they don't do is tell the winner about the tax repercussions," said Terlizzi. "Unfortunately, a lot of poor people are going to have accepted the offer made by the state, and they're going to have an enormous federal tax bill."
When a settlement company engages in a transaction, the company is required to advise the individuals to get counsel, and grants a right of rescission the typical consumer protection add-ons, said Terlizzi.
"They seem to have exempted themselves from all those requirements," Terlizzi remarked.
Though lottery-backed deals are growing in size, and getting done more and more often, it's unlikely that they will ever go to term, said Demore.
"I think they'll be private deals," said Demore. "They're too small for public markets. And the asset class takes some education to understand, it seems, from investors. It's not a generic consumer receivable."
Woodbridge Sterling has closed several deals this year, the most recent in September. The company doesn't expect to price again until the 2000 first quarter.