IPO Report: JGWPT Holdings (JGW)

Francis Gaskins  |

Post IPO JGWPT Holdings ($JGW) will have acquired JGWPT Common Interests representing a 43.1% interest in JGWPT Holdings, LLC.  JGW is a holding company with no operations.

12 other IPOs scheduled for this week.  The full IPO calendar can be found at IPOpremium.

JGWscheduled a $250 million IPO on the NYSE with a fully diluted (including class B shares) market capitalization of $820 million at a price range midpoint of $20.50 for Friday, November 8, 2013.
The S-1 with price ranges was filed October 28, 2013.  The Manager, Joint managers are  Barclays, Credit Suisse, Deutsche Bank, Jefferies, Keefe, Bruyette & Woods.  The Co-Managers areJMP Securities, Stephens Inc.


JGWP buys structured settlements (see below) with a Moody’s grade of A3.  A3 is the lowest of 7 A ratings, and in the investment business is considered risky.


Valuation Ratios


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% offered

annualizing Sept 3 mos

Cap (mm)





in IPO

JGWPT Holdings (JGW)







Accumulated deficit:  -$184 million.


Avoid JGW on the IPO.  JGW had a down September ’13 quarter relative to the September ’12 quarter, revenue is not predictable, neither is income and the organization chart is confusing.

Dual stock classes

Insiders have excessive voting control, which suggests they do not want to be accountable to public shareholders. 

Recent developments

JGW estimates that total revenue, net income and TRB purchases for the quarter ended September 30, 2013 will be in the following ranges:

Total revenue:
$92 million to $98 million as compared to $108 million for the quarter ended September 30, 2012. The estimated decline in quarterly revenue is due primarily to decreases in unrealized gains on VIE and other finance receivables, long term securitization debt and derivatives as a result of an increased interest rate environment, as well as realized and unrealized gains (losses) on marketable securities, net.

Net income (loss):
($2.0) million to ($0.1) million as compared to $21.2 million for the quarter ended September 30, 2012. The estimated decrease in quarterly net income is due primarily to the decline in total revenue described earlier combined with increases in interest expense as a result of our $575 million term loan that was not outstanding in 2012, general and administrative expense, and provision for losses on finance receivables that were partially offset by a reduction in installment obligations expense and compensation and benefits expense.

Total TRB purchases:
$288 million to $309 million as compared to $282 million for the quarter ended September 30, 2012. The estimated increase in total TRB purchases is primarily driven by an increase in securitized product purchases partially offset by a decline in other purchases.

Adjusted net income

For the quarter ended September 30, 2013 will be in the range of $0.4 million to $1.8 million as compared to $19.7 million for the quarter ended September 30, 2012. The decrease in adjusted net income is primarily due to a decline in revenue and increases in interest expense as a result of our $575 million term loan that was not outstanding in 2012.

Structure settlement business

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JGW is a direct response marketer that provides liquidity to its customers by purchasing structured settlement, annuity and lottery payment streams, as well as interests in the proceeds of legal claims, in the United States.

JGW does not make loans or take consumer credit risk as part of its business but instead purchases future payment streams owed to the customer by a high quality institutional counterparties.

In 2012, 90% of the counterparties to structured settlement payment streams that JGW purchased had an investment grade rating of “A3” or better by Moody’s. A3 is the lowest of the A ratings, ranking 7 of 7.  In the investment business A3 is considered risky.

JGW acts as an intermediary that identifies, underwrites and purchases individual payment streams from its customers, aggregates those payment streams and then finances them in the institutional market at discount rates below its cost to purchase.

JGW believes its scale allows it to operate more efficiently and cost effectively than its competition, generating strong profitability while offering a low-cost source of liquidity for its customers, as compared to alternative sources of liquidity, such as personal loans or cash advances on credit cards.

Two brands

JGW operates two market leading and highly recognizable brands, JG Wentworth and Peachtree, each of which generates a significant volume of inbound inquiries. Brand awareness is critical to its marketing efforts, as there are no readily available lists of holders of structured settlements, annuities or potential pre-settlement customers.

Since 1995, JGW has invested $585 million in marketing to establish its brand names and increase customer awareness through multiple media outlets.

According to Kantar Media, since 2008, both JG Wentworth and Peachtree have spent approximately five-times the amount spent by the nearest industry competitor on television advertising and together have spent over 80% of the total amount spent by all of the major participants in the industry.

As a result of its substantial marketing investment, JGW believes that its core brands, JG Wentworth and Peachtree, are the #1 and/or #2 most recognized brands in their product categories.

In addition, since 1995 JGW has been building proprietary databases of current and prospective customers, which JGW continues to grow through JGW’s significant marketing efforts and which JGW considers a key differentiator from its competitors.

As of July 31, 2013, JGW’s customer databases include more than 121,000 current and prospective structured settlement customers with $31 billion of unpurchased structured settlement payment streams which includes all potential payment streams that customers disclosed to JGW at its initial contact with them.

Since July 31, 2013, JGW has continued to add to its customer databases and to purchase structured settlement payment streams from its customers who may also sell payment streams to others and, therefore, the amount of unpurchased structured settlement payment streams in JGW’s databases may now be greater or smaller.

JGW also maintains databases of pre-settlement and lotteries customers. The strength of JGW’s databases and the resulting predictable pipeline of opportunities is demonstrated by the level of repeat business JGW experiences with its customers. Of the total structured settlement customers JGW has served since 1995, the average customer has completed two separate transactions with JGW. These additional purchasing opportunities come with low incremental acquisition costs.


JGW’s main competitors in the structured settlement payments purchasing market are Stone Street Capital, Imperial Holdings, Novation Capital, SenecaOne, Woodbridge, Symetra Financial and Client First Settlement Funding, none of which have a comparable scale to JGW.

In October 2013, Imperial Holdings announced that it has sold its Structured Settlements business operations.

Dividend policy

No stated intention to pay dividends.

The sponsor

Founded in 1988, JLL Partners, or JLL, is a North American-focused private equity firm with a strategy of making value-oriented, middle market control investments.

The business is presently conducted through JGWPT Holdings, LLC and its direct and indirect subsidiaries.

The current members of JGWPT Holdings, LLC include JLL JGW Distribution, LLC, which is owned by pooled investment vehicles sponsored or managed by JLL, and JGW Holdco, LLC, which is over 99% owned by JLL JGW Distribution, LLC.

These affiliates currently hold in the aggregate an 50.3% economic and voting interest in JGWPT Holdings, LLC and immediately after this offering will hold in the aggregate an 25.9% economic interest and 56.6% voting interest in JGW.

JGW organization chart here.

5% stockholders

JLL Holders, Paul S. Levy & Candlewood Special Situations Fund, LP

Use of proceeds

JGW expects to net $228 million from its IPO.

JGW will use $181.1 million to purchase newly issued JGWPT Common Interests directly from JGWPT Holdings, LLC.  JGW will use the estimated $47.0 million of remaining net proceeds to purchase 2,450,000 JGWPT Common Interests from shareholders.

JGWPT Holdings, LLC, the principal operating company, will use the $181.1 million in net proceeds it receives as follows:

            •           $151.9 million to repay debt

            •           $29.2 million for general corporate purposes, including potential acquisitions

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