Notes from the Bankruptcy Claims Sales presentation at the Orange County Credit Professionals Group.
Speaker was Sandra A. Larratt-Smith, from Swing Bridge Capital. Sandra acts as a broker between buyers and sellers. She would be an excellent person to contact if you are approached by a vulture investor to sell your bankruptcy claim. She can ensure that you are getting the best price by finding out what is happening with other investors in the marketplace. Phone: 310-622-2929.
- Vulture Investors are looking for internal rates of return of about 12-20%.
- If an investor buys your bankruptcy claim the only reason you would need to pay them any money back is if your bankruptcy claim gets reduced in size. If your claim increases in size, your contract should be written to obligate the investor to buy the rest of the claim at the original cost.
- This market has increased quite a bit in the last few years. It is now a pretty normal course of business, so don’t be scared about being approached by a buyer wanting to purchase bankruptcy claims. You have more power than you did before.
- Investors generally focus on large bankruptcy cases regarding publicly held companies. They tend to buy claims in excess of $100,000.
- Best time to sell, after the schedules have been filed in the bankruptcy is when the action starts happening. This tells the vulture investors who is set for payment, and who is the best risk to buy. The prices will go up after schedules are filed. If you have an administrative claim or reclaimation claim, you can expect to be paid more on the dollar than the other trade creditors.
- There is no federal agency that regulates these vulture investors. A Trade Claims Buyers Association was set up by several of the investors as a result of some bad players in the market.
- If you sell your claim, you should be paid within the week. The contract is not in effect until you get paid.
- Determining price: Trade claims are usually priced at 10 to 20% less than bonds. Check the current bond trading info at sites like nasdbondinfo.com.