Chesswood Closes Purchase of Case Funding
Expands Presence in Specialty Finance Market.
- (1888PressRelease) June 24, 2011 - Chesswood Group Limited announced today that it closed its previously announced transaction for the purchase of Case Funding Inc.("Case Funding") after the close of business on Friday June 10.
While there is limited information on the size of the market, litigation finance in the U.S. is estimated by some media and industry experts to exceed $1 billion at any point in time. Theincreasing costs of litigation and the delays in the process that are often encountered have propelled the growth of this industry.
"Our entry into this growth market with an experienced team will allow us to begin buildingour portfolio immediately. While we have committed US$6 million to the intial portfolio build out, the timing and amounts of the capital contributions will be determined based on our goal of building a long-term sustainable business" said Barry Shafran, President and CEO of the Company.
About Case Funding
Case Funding offers two principal products. Advances are offered to qualified plaintiffs that are in need of cash flow prior to the finalization of the outcome of their case. These advances, with an average advance totaling approximately $10,000, are the more common product offering in the marketplace today. Case Funding also offers litigation attorneys access to working capital loans to support a basket of cases that are in progress, subject to Case Funding's underwriting criteria which includes legal assessments of their cases and credit research and scoring on the borrower. Both products are subject to conservative maximum advance rates based on Case Funding's estimate of settlement proceeds in the case of plaintiffs, and legal fee income in the case of attorneys.
The Company expects to invest approximately US$1.6 million in support of Case Funding's operating costs for the first year, while building critical mass in its portfolio. Typical advance and loan terms range from one to three years depending on the nature of the customer and the underlying case collateral. Plaintiff advances tend to be shorter in duration than attorney loans. Both products offer superior risk-adjusted returns while cash flow can be uneven in the early stages of portfolio growth.
As previously announced, the purchase price for Case Funding was US$1.0 million, of which US$950,000 was satisfied through the issuance to the vendors of 116,438 Company common shares based on the Company's market average trading price, volume adjusted for the 10 days prior to execution of the purchase agreement, of $7.94.
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