PE-Backed Bust: J.G. Wentworth

(Reuters) – J.G. Wentworth, a specialty finance company that buys structured settlements and annuities, filed for bankruptcy on Tuesday, saying it had a “prepackaged” reorganization plan supported by more than 90 percent of its lenders.

The company said it filed Chapter 11 petitions for three of its nonoperating parent holding company units in U.S. bankruptcy court in Delaware. It expects to be able to emerge from bankruptcy protection within 30 days or so.

Prepackaged bankruptcies allow companies to shorten their time in court and are often less expensive and onerous than typical Chapter 11 cases because they have agreements from key creditors prior to the bankruptcy.

J.G. Wentworth said in court documents that tightness in the credit markets altered its ability to purchase assets last year, and that it was unable to meet a margin call in the fourth quarter of 2008 as it faced liquidity issues.

The company, based in Bryn Mawr, Pennsylvania, says it is the largest U.S. purchaser of structured settlements and its annuities.

Under its proposed reorganization plan, J.G. Wentworth will be able to reduce its debt load, and receive $100 million in new equity to support ongoing operations, the company said in a statement.

It said its vendors, customers and employees will not be affected by the plan. The company said in court papers that it had 76 employees at the end of last year, after it had laid off about 120 employees in December due to lower volume in its business.

Private equity firm JLL Partners, through an affiliate, owns more than 80 percent of the company, J.G. Wentworth said in court papers. J.G. Wentworth said it is planning to arrange a bankruptcy loan of up to $10 million with its lenders and the JLL affiliate.

The case is In re: JGW Holdco LLC, U.S. Bankruptcy Court, District of Delaware, No. 09-11731.

(Reporting by Emily Chasan; Additional reporting by Jon Stempel; Editing by Richard Chang)