Disability Law

S&P Withdraws J.G. Wentworth Credit Ratings

By Patrick Hindert

Standard & Poor's Rating Services has announced it will no longer rate J.G. Wentworth's counterparty credit and senior secured debt at Wentworth's request. S&P's announcement occurred on March 31, 2009 after Wentworth announced Deutsche Bank had extended a "standstill" agreement but before Wentworth's March 31 deadline to pay $6 million of quarterly interest on separate corporate debt.

The standstill agreement relates to an earlier unpaid $16.9 million margin call on Wentworth's warehouse credit line with Deutsch Bank which Wentworth uses to purchase structured settlements.

Industry sources have informed S2KM:

• Wentworth subsequently missed its March 31 midnight deadline to pay the $6 million of interest on its general corporate debt although a 30 day grace period apparently exists;
• By removing itself from the S&P ratings, Wentworth prevented a probable additional credit downgrade;
• Wentworth's $325 million of general corporate bonds are "almost worthless" and are trading, if at all, for pennies on the dollar.
• Although David Miller remains Chief Executive, Wentworth has hired an outside consultant for advice on debt restructuring.
• Structured settlement asset-backed securities already issued by Wentworth are legally separate from Wentworth and therefore not directly impacted by Wentworth's corporate financial problems.
  

Standard & Poor's Announcement

"On March 31, 2009, Standard & Poor?s Ratings Services removed its ratings on J.G. Wentworth LLC from CreditWatch, where they were placed with negative implications on March 17, 2009. At the same time, we affirmed Wentworth?s ?CC? counterparty credit and senior secured ratings and assigned a negative outlook. Subsequently, the ratings on Wentworth were withdrawn at the company?s request.

"This rating action follows Wentworth?s announcement that it had obtained an extension from Deutsche Bank of the waiver related to its $16.9 million margin call. The extension of this ?standstill? agreement allows Wentworth to fund its business until April 22 without further margin calls. However, subsequent to the expiration of the waiver, the warehouse lender could provide a notice of default, which we believe could lead to a cross-default on Wentworth?s other debt, including the senior secured bank loan. In addition, we believe Wentworth?s ability to continue operating is limited without further financial assistance from private equity owners JLL partners."

Full post as published by Beyond Structured Settlements on April 02, 2009 (boomark / email).