Stefano Sola

What can you tell me about the timing of your latest deal? Why did J.G. Wentworth see this as the best time to tap the market?

After completing our $252 million ABS transaction in April, we monitored the capital markets to assess opportunities to tap the markets again. In this period there were a number of interesting factors playing out in the markets. Initially during May and June, we noticed a general slowdown in investor appetite for debt product, which we attributed mainly to the state of affairs in Europe and market concerns surrounding the outcome.

Spreads were seeing some pressure, but seemed to hold firm, while this potential widening was also mitigated by the decline in benchmark rates. Subsequently, as European concerns subdued, we saw investor demand increase given a general limited primary supply. In fact, pay downs of existing deals were outpacing ABS supply in the primary market. Investors were looking to diversify away from auto and consumer-related new issues into different asset classes, while also looking at opportunities to play in longer duration paper with strong and predictable cash flows.

The contribution of tightening spreads, lower benchmark rates, investor demand for underwritten JGW receivables, appetite for longer duration assets and lack of supply, coupled with strong demand for our product in the secondary market, were all factors that played a role in determining the opportunity to access the market with our new deal.

Did the deal go as planned? Was it upsized or downsized?

The deal went exactly as planned. It was a static pool of receivables and we did not change the pool during the marketing period.

Was this an unwrapped asset-backed securitization?

It was unwrapped. We did use monoline insurance wraps up until 2007. Our investor base is extremely sophisticated and they understand the underlying asset class and its strong attributes, so they are extremely comfortable with buying the underlying asset risk and not the insurance risk, thus eliminating the need for an insurance wrap.

Has there been a lot of investor interest? What do investors want to know about the deal?

Investor interest for this deal was strong. Both our existing investor base and new investors looking at our deals for the first time were very comfortable with our origination and underwriting process, as well as the positive attributes of this asset class. Investors generally focus on two main aspects of our deals: one is the structure of the deal, but more importantly, the second is our origination, underwriting and legal process when buying the receivables. Investors want to understand how the firm approaches these aspects of buying receivables and understand why our process is stronger and tighter than the general marketplace and how this translates into deal performance on their end.

We have issued over 20 ABS deals since 1997, totaling over $2.5 billion. Our established history in the sector, coupled with strong and predictable cash flows, no prepayment risk and zero losses in interest or principal in our deals are all factors that underline the process. Investors look at all these factors when making investment decisions.

Has investor based broadened, slimmed down, changed? It is smaller than the last $252 million issuance in April.

The number of investors in our deals has increased and has broadened. Since the beginning of the year, we have seen a steady increase in investor demand for JGW paper both from existing investors as well as new ones from a broader background. These new investors who looked at the space for the first time were focused on due diligence before committing to play in it and are now comfortable. Although the April deal was larger in size, we were extremely happy to see an increased interest both in number and dollar amount for our latest offering.

What new buyers are in the market?

Given the nature of our ABS deals, including the term of the deals and fixed coupons, we continue to see strong demand from insurance companies and money managers as these characteristics fit in well with their investment mandates. We are currently seeing a broader interest coming from hedge funds and also specialized insurance funds, which tend to play in both the senior and the subordinated class in our structures, and see the opportunity to add the annuity asset class to their broader insurance related holdings in their funds.

Is the collateral in this deal different from previous securitizations?

As the major market player in the structured settlement and annuity space, we accumulate portfolios which are predictable. The collateral in this last deal was very similar to our April deal, and the collateral in the April deal was very similar to the one before that. Basically it is the same type of collateral time and time again!

Was the road show for this deal different than road shows for previous deals? How so?

We did execute a broader road show for this transaction then we did for previous deals and we believe that this helped broaden our investor base. In past deals we did not go physically on the road. We made a decision with our bankers to go on the road in the US and Europe and have one-on-one meetings with investors to dig deep into the annuity asset class, as well as explain our process to underwrite them. Road show stops included New York, Boston and London. The last couple of years have been hard for both issuers and investors and it was important to have the opportunity to discuss on a one-on-one basis the attributes of our deals, the stable performance through this difficult period and our underwriting and legal process, which have made and continue to make these deals perform so strongly.

What was the strategy behind retaining the $8.9 million residual notes? Is that the way it's been done in the past?

Our firm has always retained the residual in all our ABS deals.

When does J.G. Wentworth plan to come to market again?

If we look back to pre-crisis years, we were issuing securitizations on a quarterly basis. Our intention is to continue to access the capital market on a regular basis. We have become more active in the markets these last six months with two deals totaling over $350 million. Our intention is to build up to a steady and predictable schedule for our investors; however, as always, it's too early to give any details on our next deal.

Why did you choose UBS and Jefferies to co-arrange the deal? Why was UBS tapped as the bookrunner and structuring agent?

We have a strong and long standing relationship with both UBS and Jefferies. We were very comfortable that they could be strong partners in both the structuring process of the deal, as well as their placement capabilities to institutional investors. We were looking to continue to tap new diversified sources of capital both in the US and abroad for our product and we believe that the combination of UBS and Jefferies helped us achieve this in an optimal manner.