How does the buyout process work?
The buyout process is comprised of a number of steps.
- Execution of Non-Disclosure Agreement
- Acquisition of trading transaction data
- Lake Avenue analyzes data and determines fair valuation
- Lake Avenue presents firm with purchase offer
- Execution of Purchase Agreement and Payment
How long does the buyout process typically take?
The buyout process can take as little as one week from beginning to closing the transaction. The time frame is dependent on the availability of a firm’s trading data. If data is not immediately available internally, Lake Avenue will work with relevant external parties such as fund administrators or custodians to obtain the data. Lake Avenue’s analysis can be completed within a day or two of data acquisition. The entire process can be completed in one to three weeks.
Does Lake Avenue purchase entire portfolios or specific claims?
In general, Lake Avenue purchases portfolios in their entirety, enabling sellers to maximize the buyout amount. Lake Avenue is not limited in its capacity to bid, however, and is able to purchase particular claims, for instance an individual fund or account. Funds do not need to close in order to monetize claims. If a fund manager would like to immediately monetize claims, Lake Avenue will make a purchase offer tailored to the particular situation.
What information does Lake Avenue require to make a purchase offer?
Lake Avenue requests transaction data for trading activity as far back as possible, to a fund’s inception, if it is available. If transaction history is not available since inception, Lake Avenue requests as much data as possible. Upon execution of the non-disclosure agreement, Lake Avenue will provide details of the transactional data we need to conduct our analysis, including specific fields and holdings positions. The more data we have the better as these typically result in larger bids.
How long does the purchase process take?
As soon as the non-disclosure agreement is executed, and the transaction data is obtained, a formal purchase offer can be presented within a day. The data analysis process typically happens very quickly but the acquisition of data may vary due to the location of the data, whether internally available or at an outside provider. A complete transaction can take as little as one week or a few weeks on the longer side.
How does Lake Avenue value the potential claims?
Lake Avenue, through the use of proprietary valuation model, examines the currently available settlements as well as the breadth of the portfolio, to determine potential eligibility for future settlement payments. Lake Avenue utilizes recognized loss calculations to analyze current settlement eligibility and makes a bid based on this analysis.
What happens to claims that have already been submitted on behalf of my fund?
Claims that have already been submitted, either internally or by a service provider, will be taken into account during the bid process and will be assigned to Lake Avenue upon execution of a purchase agreement. Third party providers will be compensated for their services according to any existing agreements, if applicable.
What happens to the proceeds from the buyout?
Once a purchase agreement is executed, Lake Avenue Capital will allocate the purchase funds according to the firm’s specifications. Lake Avenue Capital will provide detailed accounting showing dollar amounts for each account and proceeds can be wired directly to those accounts.
Is selling the rights to future recoveries legal?
Yes, the process of executing an agreement to purchase the rights to future recoveries is fully in compliance of all applicable laws.