Structured settlement finance company J.G. Wentworth is seeking to close next week on its first securitization of the year, a $103.13 million portfolio of purchased payments from court judgement, annuity and lottery proceeds.
The J.G. Wentworth XXXVII LLC – Fixed Rate Asset-Backed Notes, Series 2016-1 includes a series of Class A notes sized at $91.67 million and $11.46 billion in Class B notes, with most of the supporting pooled assets
Bond rating agency DBRS on Wednesday issued preliminary ‘AAA’ and ‘BBB’ structured ratings on the respective notes, and Moody's Investors Service issued 'AAA' and 'Baa2' provisional ratings.
DBRS reported the initial credit support on the A notes is 17%, including subordination of the B notes along with 5.5% overcollateralization and a 1% cash reserve account, while Moody's listed CE as 16%.
According to DBRS, the structure is “broadly similar” to previous J.G. Wentworth securitizations, although the 2016-1 series has a prefunded account for additional pool asset purchases that was not part of the Wentworth 2015-3 series last December. The prefunding account is set for $46.4 million, or about 45% of the value of the bonds issued – representing about two months of Wentworth origination volume, and is required to be utilized within 90 days of the expected Oct. 27 deal closing, according to DBRS.
J.G. Wentworth is the largest, and perhaps best known, company that purchases claimants’ rights to receive scheduled settlement payments from court agreements, annuities or lotteries. Most of the assets relate to personal injury claims (91.2% of the pool) acquired by Wentworth or its Peachtree Financial subsidiary.
Most of the annuity claims are with high-rated life insurance carriers which have corporate ratings of at least ‘BBB’, such as Metropolitan Life Insurance Co. (14.6% of the pool’s contracts), American General Life Insurance Co., Prudential, MetLife, AllState and Hartford.
The deal is the first for Wentworth this year, despite the fact last December the company had plans to do as many as four securitizations in 2016. The company instead continued having adjusted quarterly consolidated net losses, found itself delisted from the New York Stock Exchange (failing to maintain a minimum capitalization), and also reduced its warehouse lines used to purchase injury settlements and annuities.
In addition, in June the company found favorable market conditions to conduct a $110.8 million, privately placed portfolio asset sale of settlement proceeds in June that was spread out between the second and third quarter.
“J.G. Wentworth will continue to find new avenues for funding in addition to our traditional ABS platform,” said chief executive Stewart Stockdale in June, in a press release statement. “The most recent activity both demonstrates our flexibility in the funding markets and continues to provide the business with adequate levels of liquidity.”
J.G. Wentworth this year expanded its home lending business following its August 2015 acquisition of WestStar Mortgage, which originated conventional, VA and FHA loans in 40 states and Washington, D.C. Wentworth had $26.8 million in second-quarter revenue from home lending, while reporting a $5.4 million decline in revenue from structured settlement payments.