Investment Dealers' Digest, a publication of Sourcemedia, is the weekly magazine more investment bankers turn to for essential news that helps them identify market opportunities and new deal structures.
Securitization is the practice of reselling regular payments made by consumers on mortgages, credit cards student loans and, among other things. factored structured settlement payments
In a May 26, 2008 article by Aleksandrs Rozens entitled "The Future of Securitization", John Calamari, CFO of JG Wentworth, was quoted as saying that his firm has done $1.7 billion worth of deals since 1997. On the one hand that seems like an enormous number, yet for a company that claims to be the undisputed leader in the industry that's an annual amount of only $154,545,454.55 employing a straight average
However, there is something more revealing and important quoted from Rozen's article
"Initially, the firm (J.G. Wentworth) had to structure to bonds with 16% subordination, a level of protection, but today the deals are done with 5.5% subordination, suggesting investors and rating agencies are more comfortable with the unusual collateral. "It is the perfect product for pensions, insurance companies and big banks," says Calamari.
What that says is that structured settlements are funded with annuities from what are perceived to be financially secure insurance companies. You've got the CFO of the biggest "cash now pusher" out there unequivocably supporting the financial viability of structured settlements.
What the article also reveals is that J.G. Wentworth is peddling these securitizations to insurance companies, although it is unknown whether any of the insurance companies issuing structured settlement annuities are involved. If these companies are involved in any way the question is why have they not used their buying power to influence the bad advertising and solicitation practices in the factoring industry that affect the most vulnerable and gullible of consumers.
This connection between "cash now pushers" and the pension plans, insurance companies and big banks will will eventually hit the mainstream press. It's not a matter of if, but a matter of when. If you are buying such securitizations do you want to be caught in the vortex?