Vector Group (VGR) is structured as a holding company, but the company's business is selling discount cigarette brands in the United States. Its two largest brands are Grand Prix (29% of volume) and Liggett Select (23%), and the company also sells Pyramid, Eve, and USA. Vector Group also owns a 50% stake in Douglas Elliman, a realtor in the New York metropolitan area, but real estate is such a small contributor to operating earnings that it can basically be ignored for the purposes of analysis here.
Positives
There are few bullish arguments on the stock, but let's address them anyway. First, Vector occupies probably the most attractive niche of the cigarette business: the discount end. Discount cigarettes have been about the only sector of this market to experience volume growth in the last decade, as premium brands are being priced out of the range of lower income smokers. Also, the 1998 litigation settlements with 46 states require only the 3 largest cigarette makers to pay the costs. Vector's Liggett Group is 5th, and as a byproduct has gained a valuable cost advantage against bigger makers like Altria (MO) and RJ Reynolds (RAI). The "big boys" are handcuffed by these costs if they decide to compete in the deep discount cigarette market, a significant competitive advantage for Vector Group.
The second positive is the dividend. Vector Group currently pays a massive 11.4% yield, and it has maintained such a high payout for several years now. It is unlikely that this dividend is sustainable over a long-term period, as last year it represented 122% of free cash flow. Management has been funding it with debt, a bad idea (I'll discuss financial health later).
However, I believe it is more likely than not that a one-year Magic Formula investor would probably be able to collect the full yield, as Vector has been able to sustain operating profits even against some difficult challenges. Dividend investors with a long-term horizon would want to steer clear, though... this is not a yield that is going to hold, and it certainly will not go up over the long term.
Negatives
So that's the case for the stock... now let's get to the negatives, which dwarf the positives, keep Vector Group far out of the MagicDiligence Top Buys portfolio, and in fact should keep MFI investors out of the stock.
First and foremost is the government's shadow war on smoking. Having mostly failed in direct litigation in the 1990's, federal and state governments are now using a more effective stick: Excise taxes. In April of this year, the federal excise tax on a carton of cigarettes was raised from $3.90 to $10.07, a crippling 158% increase. Some states tack on as much as an additional $4/carton. In response, Vector had to increase the wholesale price of its cartons by an average of about $7.50. As a result, revenues have spiked significantly (over 60%), but gross margins have plummeted from the low 40% range to the mid-20's. The net effect has been almost break-even - operating profits have been about flat against pre-increase levels.
The problem, though, is the effect going forward. Higher excise taxes hurt discount brands more than premium ones like Marlboro, as discount customers buy based almost solely on price, while premium brands enjoy customer loyalty and are less price-sensitive. When discount cigarettes get more expensive, it is likely that the low-income buyers they attract will buy fewer packs, or look to alternatives like smokeless tobacco. Vector's volume numbers bear this out: last quarter, Liggett Select suffered a 31% decrease in unit volume, while Grand Prix fell 13%. This is quite the conundrum for Vector, as all of its sales are inside the U.S., and cigarette volume growth (and tax freedom) is almost exclusively overseas.
There are other reasons not to like Vector. The balance sheet is aggressive: About $355 million of debt vs. $300 million in cash, with another $142 million in convertible debt derivatives. Interest is covered by operating earnings just 2 times over, well below the 5 times MagicDiligence likes to see as an absolute minimum. As previously mentioned, free cash flow is not sufficient to service the dividend, yet alone debt obligations. Debt and dividend are being financed with... debt. When you combine shaky financial footing with a very unfavorable regulatory environment, it is a recipe for trouble.
Finally, the company is just ugly to analyze. I count no less then 16 non-operating line items in the income statement (for the past 5 years), with a history of restructuring, unconsolidated side-businesses, and confusing financing. Vector does a bizarre 105:100 stock dividend every year. It engages in the completely unrelated business of residential real estate brokering. In short, it is a difficult business to fully understand, and the ability to understand a business is Warren Buffett's #1 requirement for an investment.
With all of these negatives, MagicDiligence recommends MFI investors steer clear of Vector Group and look elsewhere.
Source
Sunday, February 28, 2010
Monday, February 15, 2010
Earn-out Models for Mergers and Acquisitions
Buyers and sellers often have different views on how much a target is worth and how its value should best be determined. Normally, the valuation of a company is based on both its past performance and its projected future performance. While the seller may be confident of the company's future growth, the buyer may be reluctant to assume the risk of the company failing to perform as expected by paying the seller the whole purchase price upfront. In some cases this problem can be mitigated by the parties agreeing on the introduction of an earn-out provision into the transaction, thus spreading the risk between the seller and buyer.
Earn-out Models and Specific Considerations
An earn-out can be described as a deferred portion of the purchase price which is conditional on the target's achievement of certain predetermined operational or financial goals within a specified timeframe. Earn-outs can be structured according to various models in order to base these goals on different parameters. In most cases financial parameters such as net income, gross revenue, earnings before interest and taxes (EBIT) or earnings before interest, taxes, depreciation and amortization (EBITDA) are used. However, other parameters relating to new customers or other business-specific operating parameters may also be used.
Parameters which are easily measurable are used in order to ensure that earn-out models are simple and transparent. Even so, the buyer and the seller often struggle to agree on how the earn-out is to be calculated. For example, a buyer will often argue that the earn-out should be based on EBITDA, while the seller would prefer it to be based on revenue. From the seller's perspective, using revenue as the basis for an earn-out is often seen as advantageous, since a company's revenue cannot be manipulated by the buyer. On the other hand, the EBITDA could be manipulated - for example, by incurring costs which are not in line with past practice. On the other hand, from the buyer's perspective, using EBITDA or net income is preferable since these parameters say more about the company's performance.
In this light, the buyer and the seller sometimes agree on a code of conduct during the earn-out period. According to such codes, the buyer, although now the legal owner of the company, must adhere to certain provisions when operating the company. Irrespective of how the earn-out is structured, it requires the seller to be involved, to some extent, in the company's business during the earn-out period. This is not always disadvantageous for the buyer and the seller's continued engagement with the company may improve future performance. Often, the valuation of a company is based on the seller's continued engagement or reinvestment, and thus the seller's continued involvement may be prerequisite of an earn-out. In such cases, in order to avoid future disputes, the buyer and the seller must have agreed on a clearly defined role for the seller within the company and on how the seller's work is to affect the earn-out.
In cases where the buyer and seller agree on an earn-out model based solely on financial parameters, the seller will require that the buyer keep it informed of the development of the company. As a consequence, the seller will normally also require that the buyer undertake not to take any measures to manipulate the financial results of the company which would reduce the earn-out. For example, if the earn-out is based on EBITDA, the seller and the buyer can agree that the buyer be prohibited from incurring any extraordinary costs or that such costs are be excluded from the calculation of the earn-out. In addition, the seller and the buyer can agree on a budget during the earn-out period, to which the buyer is obliged to adhere for the purposes of the earn-out calculation, thus preventing the buyer from reducing the earn-out by such means. From a seller's perspective, it may also be important to control an eventual transfer of the company or its business during the earn-out period. For instance, should the buyer decide to sell or merge the company with another company within the buyer's group of companies, such a transfer is likely to make it difficult for the company to reach the EBITDA targets required for the earn-out. However, the seller can prevent this problem and allow, for example, an intra-group transfer, provided that the buyer undertakes to keep the company's accounts separate during the earn-out period so that the earn-out may be calculated accurately.
Following the earn-out period, the buyer must allow the seller to verify the buyer's calculation of the earn-out and let the seller make its own calculation of the earn-out. This is rarely contentious. However, problems may arise when the seller and the buyer cannot agree on the calculation of the earn-out. To prevent such disagreements from escalating into full-blown disputes, both parties can benefit from the inclusion of a settlement provision in the earn-out model. Typically, such settlement provisions stipulate that the earn-out calculations are to be finally determined by an independent auditor appointed by the seller and the buyer. The cost of this auditor can be split between the buyer and the seller or borne by either party, depending on what has been negotiated.
Earn-out Models and Specific Considerations
An earn-out can be described as a deferred portion of the purchase price which is conditional on the target's achievement of certain predetermined operational or financial goals within a specified timeframe. Earn-outs can be structured according to various models in order to base these goals on different parameters. In most cases financial parameters such as net income, gross revenue, earnings before interest and taxes (EBIT) or earnings before interest, taxes, depreciation and amortization (EBITDA) are used. However, other parameters relating to new customers or other business-specific operating parameters may also be used.
Parameters which are easily measurable are used in order to ensure that earn-out models are simple and transparent. Even so, the buyer and the seller often struggle to agree on how the earn-out is to be calculated. For example, a buyer will often argue that the earn-out should be based on EBITDA, while the seller would prefer it to be based on revenue. From the seller's perspective, using revenue as the basis for an earn-out is often seen as advantageous, since a company's revenue cannot be manipulated by the buyer. On the other hand, the EBITDA could be manipulated - for example, by incurring costs which are not in line with past practice. On the other hand, from the buyer's perspective, using EBITDA or net income is preferable since these parameters say more about the company's performance.
In this light, the buyer and the seller sometimes agree on a code of conduct during the earn-out period. According to such codes, the buyer, although now the legal owner of the company, must adhere to certain provisions when operating the company. Irrespective of how the earn-out is structured, it requires the seller to be involved, to some extent, in the company's business during the earn-out period. This is not always disadvantageous for the buyer and the seller's continued engagement with the company may improve future performance. Often, the valuation of a company is based on the seller's continued engagement or reinvestment, and thus the seller's continued involvement may be prerequisite of an earn-out. In such cases, in order to avoid future disputes, the buyer and the seller must have agreed on a clearly defined role for the seller within the company and on how the seller's work is to affect the earn-out.
In cases where the buyer and seller agree on an earn-out model based solely on financial parameters, the seller will require that the buyer keep it informed of the development of the company. As a consequence, the seller will normally also require that the buyer undertake not to take any measures to manipulate the financial results of the company which would reduce the earn-out. For example, if the earn-out is based on EBITDA, the seller and the buyer can agree that the buyer be prohibited from incurring any extraordinary costs or that such costs are be excluded from the calculation of the earn-out. In addition, the seller and the buyer can agree on a budget during the earn-out period, to which the buyer is obliged to adhere for the purposes of the earn-out calculation, thus preventing the buyer from reducing the earn-out by such means. From a seller's perspective, it may also be important to control an eventual transfer of the company or its business during the earn-out period. For instance, should the buyer decide to sell or merge the company with another company within the buyer's group of companies, such a transfer is likely to make it difficult for the company to reach the EBITDA targets required for the earn-out. However, the seller can prevent this problem and allow, for example, an intra-group transfer, provided that the buyer undertakes to keep the company's accounts separate during the earn-out period so that the earn-out may be calculated accurately.
Following the earn-out period, the buyer must allow the seller to verify the buyer's calculation of the earn-out and let the seller make its own calculation of the earn-out. This is rarely contentious. However, problems may arise when the seller and the buyer cannot agree on the calculation of the earn-out. To prevent such disagreements from escalating into full-blown disputes, both parties can benefit from the inclusion of a settlement provision in the earn-out model. Typically, such settlement provisions stipulate that the earn-out calculations are to be finally determined by an independent auditor appointed by the seller and the buyer. The cost of this auditor can be split between the buyer and the seller or borne by either party, depending on what has been negotiated.
Tuesday, December 15, 2009
J.G. Wentworth Funds 1,000th Customer since Equity Infusion
Specialty finance company J.G. Wentworth recently funded its 1,000th structured settlement transaction since receiving a $100 million equity infusion in early June.
According to J.G. Wentworth Chief Executive Officer David Miller, the funding represents a milestone for the company. “Our 1,000th transaction demonstrates J.G. Wentworth’s commitment to help people during these challenging times.”
Mr. Miller said that the scarcity of credit during the past year has severely restricted the ability of the settlement funding industry to purchase periodic payments that customers needed or wanted to sell. Many funding companies, he said, made commitments to purchase payments but did not have the financing to consummate the transaction, leaving their customers without a needed source of liquidity.
“Because of our continuous record of service, strong underwriting culture and leadership position in the industry,” Mr. Miller said, “J.G. Wentworth was able to secure funding in these unprecedented times, and as a result, has been able to fulfill our funding commitments to our customers on a timely and consistent basis.”
Mr. Miller said J.G. Wentworth’s 1,000th funding typified the importance of access to liquidity for the periodic payments that consumers frequently receive as part of a legal settlement. “This gentleman had just won custody of his son. But with his other two boys already living with him in his two bedroom house, he needed to add a new bedroom to his home.” Mr. Miller noted that the client’s periodic payments from a prior legal settlement did not meet his need for immediate cash. “But because we were able to fund several of his payments in advance for him, he was able to raise the cash needed to put a roof over his family’s head.”
Mr. Miller said that with summer over, J.G. Wentworth transaction volume is accelerating. “As the credit markets improve, we anticipate that J.G. Wentworth will once again reach our historical funding levels.”
If anything, he said, demand among customers has increased. “The depressed funding levels of the past year were solely a function of the credit markets,” Mr. Miller said. “The scarcity of credit which has so profoundly affected our industry also has impacted our traditional customer base, leading to increased demand for liquidity. We are delighted to celebrate this milestone and our continuing ability to assist with our customers’ needs.”
Source
According to J.G. Wentworth Chief Executive Officer David Miller, the funding represents a milestone for the company. “Our 1,000th transaction demonstrates J.G. Wentworth’s commitment to help people during these challenging times.”
Mr. Miller said that the scarcity of credit during the past year has severely restricted the ability of the settlement funding industry to purchase periodic payments that customers needed or wanted to sell. Many funding companies, he said, made commitments to purchase payments but did not have the financing to consummate the transaction, leaving their customers without a needed source of liquidity.
“Because of our continuous record of service, strong underwriting culture and leadership position in the industry,” Mr. Miller said, “J.G. Wentworth was able to secure funding in these unprecedented times, and as a result, has been able to fulfill our funding commitments to our customers on a timely and consistent basis.”
Mr. Miller said J.G. Wentworth’s 1,000th funding typified the importance of access to liquidity for the periodic payments that consumers frequently receive as part of a legal settlement. “This gentleman had just won custody of his son. But with his other two boys already living with him in his two bedroom house, he needed to add a new bedroom to his home.” Mr. Miller noted that the client’s periodic payments from a prior legal settlement did not meet his need for immediate cash. “But because we were able to fund several of his payments in advance for him, he was able to raise the cash needed to put a roof over his family’s head.”
Mr. Miller said that with summer over, J.G. Wentworth transaction volume is accelerating. “As the credit markets improve, we anticipate that J.G. Wentworth will once again reach our historical funding levels.”
If anything, he said, demand among customers has increased. “The depressed funding levels of the past year were solely a function of the credit markets,” Mr. Miller said. “The scarcity of credit which has so profoundly affected our industry also has impacted our traditional customer base, leading to increased demand for liquidity. We are delighted to celebrate this milestone and our continuing ability to assist with our customers’ needs.”
Source
Saturday, November 28, 2009
Fairfield Funding Hires New Staff to Accommodate Company’s Structured Settlement Division Growth while Continuing a High Level of Customer Service
Fairfield Funding, Georgia’s leading provider of structured settlement and annuity purchasing services, has hired new staff to accommodate the tremendous growth in the structured settlement division and improve customer service. David Gentile and Piotr Lubczynski have just joined the growing Atlanta based financial company. They both have extensive experience in customer relations and account management.
Scott Dingman, Managing Partner at Fairfield Funding, says: “we are very excited with the tremendous growth in our structured settlement division. In order to ensure that we are continuing to provide our customers with the highest level of service we are very pleased to announce that Piotr and David have joined the Fairfield family.”
The structured settlement funding segment is very specialized and given the high number of players within the space, it is also very competitive. Fairfield Funding’s growth was achieved thanks to the attention to details, fast execution and above all excellent customer care. The structured settlement company is a direct funder and in combination with a continuous focus on streamlining operating costs, the financial firm is able to pass considerable savings on customers. Attentive customer service combined with lower costs explains the current successful growth.
Fairfield Funding extensive suite of structured settlement funding services includes cash for annuity, cash for settlement, cash for structured settlement payments, cash for lottery, pre-settlement, life settlement, and other annuities. The goal of the experienced funding services team is to deliver funding solutions targeted to clients’ individual and unique needs and allowing them to get the most cash from their structured settlement. In most cases the friendly Fairfield Funding consulting team recommends its clients to keep as much as possible of their structured settlement payments and only use the minimal amount to reach their financial needs. Structured settlements can be converted into cash payments either in full or in part. By choosing to sell portions of a structured settlement, the transaction can be customized so that both a lump sum of cash is received while the steady cash flow provided by the annuity payments continues.
“I really enjoy working closely with each customer to develop a solution that fits their current needs.” Piotr Lubczynski.
Fairfield Funding (a Division of APIS) is a full service funding company specializing in the purchasing and funding of structured settlements, life settlements, pre-settlement, lottery, and other annuities. Collectively, Fairfield Funding management has over 50 years of experience in the financial services arena. The Atlanta based company is specialized in meeting the short-term financial needs of its clients through low cost funding transactions. Savings from low operating costs are passed on to its clients.
Source
Scott Dingman, Managing Partner at Fairfield Funding, says: “we are very excited with the tremendous growth in our structured settlement division. In order to ensure that we are continuing to provide our customers with the highest level of service we are very pleased to announce that Piotr and David have joined the Fairfield family.”
The structured settlement funding segment is very specialized and given the high number of players within the space, it is also very competitive. Fairfield Funding’s growth was achieved thanks to the attention to details, fast execution and above all excellent customer care. The structured settlement company is a direct funder and in combination with a continuous focus on streamlining operating costs, the financial firm is able to pass considerable savings on customers. Attentive customer service combined with lower costs explains the current successful growth.
Fairfield Funding extensive suite of structured settlement funding services includes cash for annuity, cash for settlement, cash for structured settlement payments, cash for lottery, pre-settlement, life settlement, and other annuities. The goal of the experienced funding services team is to deliver funding solutions targeted to clients’ individual and unique needs and allowing them to get the most cash from their structured settlement. In most cases the friendly Fairfield Funding consulting team recommends its clients to keep as much as possible of their structured settlement payments and only use the minimal amount to reach their financial needs. Structured settlements can be converted into cash payments either in full or in part. By choosing to sell portions of a structured settlement, the transaction can be customized so that both a lump sum of cash is received while the steady cash flow provided by the annuity payments continues.
“I really enjoy working closely with each customer to develop a solution that fits their current needs.” Piotr Lubczynski.
Fairfield Funding (a Division of APIS) is a full service funding company specializing in the purchasing and funding of structured settlements, life settlements, pre-settlement, lottery, and other annuities. Collectively, Fairfield Funding management has over 50 years of experience in the financial services arena. The Atlanta based company is specialized in meeting the short-term financial needs of its clients through low cost funding transactions. Savings from low operating costs are passed on to its clients.
Source
Sunday, November 15, 2009
Planning is key to success
Australian consumers like to think of themselves as financially literate people, able to assess financial products and make an informed choice. Paul Ryan disagrees.
Ryan is a founder of a website called Home Loan Hints, which offers borrowers an opportunity to ask questions about mortgages.
Ryan says: “It is true that we know more about finance than we did a decade ago but we are still not good at doing the preparation before going out to get a loan or reviewing the loan. We are not good on the detail. Ask people what their home loan or credit card interest rate is and most can't tell you.”
Ryan is also the head of non-bank lender and broker Opportune Home Loans. He says he set up Home Loan Hints without any Opportune branding because he felt that borrowers needed an independent source of advice. He has assembled a panel of home-loan experts to answer the questions.
The questions and answers stay on the site so browsers can consult them. Questions cover whether to fix loans, buying investment properties, the pros and cons of reverse mortgages, government grants, insurance and how to work out loan serviceability.
Ryan recommends borrowers attend to a few important matters before they go looking for a home loan. “Many young borrowers have no idea about their credit rating. Apart from the past couple of years, credit has been very easy to get and people have become accustomed to applying for multiple credit cards and store finance. They do not realise that each time they apply for credit it goes on their credit file.
“Their credit rating is something they have to look after," he says. "They should get a copy of their credit rating and make sure there are no mistakes on it.”
Ryan says savings are critical. Most lenders now require a minimum 5 per cent of “genuine” savings before they will consider providing mortgage finance. That means deposits that did not come from government grants or gifts from parents.
Borrowers need to look at different loan options and work out what features they want. “People need to assess this question critically. A lot of people end up paying a premium for redraw and offset functions they never use. A cheap, basic variable-rate loan might serve them just as well,” he says.
Ryan says lenders will assess the borrower's ability to service a loan based on interest rates that are 2 percentage points higher than the current rates. People can easily check that out for themselves. “People ask a lot about costs involved in making additional payments, paying a loan out early and so on. This is after they have taken the loan out. These are things that should be checked out before signing a contract.
“They should have a plan to review their loan on a regular basis, either with the lender, a broker or on their own. They need to keep a list of their requirements when they borrow and then refer back to that list to make sure the loan is meeting their needs."
How to bridge the gap
Finding bridging finance is one of the most difficult tasks a property buyer can face, says Opportune Home Loans director Paul Ryan. “Bridging finance is expensive and
hard to find. If you have bought a new property before the old one is sold, the first thing you have to do is negotiate a long settlement period on the purchase and
arrange the sale of the old property as quickly as possible.”
Ryan says the most popular bridging loan with the loan writers he knows is St George’s Relocation Home Loan. The loan is structured so the borrower only
borrows the amount of the deposit for the new property at purchase and then draws down the balance at settlement.
Source
Ryan is a founder of a website called Home Loan Hints, which offers borrowers an opportunity to ask questions about mortgages.
Ryan says: “It is true that we know more about finance than we did a decade ago but we are still not good at doing the preparation before going out to get a loan or reviewing the loan. We are not good on the detail. Ask people what their home loan or credit card interest rate is and most can't tell you.”
Ryan is also the head of non-bank lender and broker Opportune Home Loans. He says he set up Home Loan Hints without any Opportune branding because he felt that borrowers needed an independent source of advice. He has assembled a panel of home-loan experts to answer the questions.
The questions and answers stay on the site so browsers can consult them. Questions cover whether to fix loans, buying investment properties, the pros and cons of reverse mortgages, government grants, insurance and how to work out loan serviceability.
Ryan recommends borrowers attend to a few important matters before they go looking for a home loan. “Many young borrowers have no idea about their credit rating. Apart from the past couple of years, credit has been very easy to get and people have become accustomed to applying for multiple credit cards and store finance. They do not realise that each time they apply for credit it goes on their credit file.
“Their credit rating is something they have to look after," he says. "They should get a copy of their credit rating and make sure there are no mistakes on it.”
Ryan says savings are critical. Most lenders now require a minimum 5 per cent of “genuine” savings before they will consider providing mortgage finance. That means deposits that did not come from government grants or gifts from parents.
Borrowers need to look at different loan options and work out what features they want. “People need to assess this question critically. A lot of people end up paying a premium for redraw and offset functions they never use. A cheap, basic variable-rate loan might serve them just as well,” he says.
Ryan says lenders will assess the borrower's ability to service a loan based on interest rates that are 2 percentage points higher than the current rates. People can easily check that out for themselves. “People ask a lot about costs involved in making additional payments, paying a loan out early and so on. This is after they have taken the loan out. These are things that should be checked out before signing a contract.
“They should have a plan to review their loan on a regular basis, either with the lender, a broker or on their own. They need to keep a list of their requirements when they borrow and then refer back to that list to make sure the loan is meeting their needs."
How to bridge the gap
Finding bridging finance is one of the most difficult tasks a property buyer can face, says Opportune Home Loans director Paul Ryan. “Bridging finance is expensive and
hard to find. If you have bought a new property before the old one is sold, the first thing you have to do is negotiate a long settlement period on the purchase and
arrange the sale of the old property as quickly as possible.”
Ryan says the most popular bridging loan with the loan writers he knows is St George’s Relocation Home Loan. The loan is structured so the borrower only
borrows the amount of the deposit for the new property at purchase and then draws down the balance at settlement.
Source
Wednesday, October 28, 2009
Debt Settlement Industry Benefits from Self-Regulation Effort
Responding to New York Attorney General Andrew Cuomo’s recent subpoenas to 14 debt settlement firms and the growing outcry from consumer protection organizations over industry practices, debt settlement companies now have access to online employee training that teaches counselors how to run an ethical – and profitable – business that delivers real value to the client. Industry experts and consumeradvocates have collaborated to develop the comprehensive e-learning curriculum, The training program accepts Mr. Cuomo’s challenge to rein in the renegade elements within our industry,” said Global Debt Systems spokesperson Boun Vilailath. “People facing financial hardship, who are just trying to do the right thing, should not be victimized. Debt settlement is a valuable tool that can help many people in debt … but not most people in debt. The program teaches companies how to implement a checklist approach for screening prospective debt settlement clients that eliminates ill-suited applicants and identifies potential problems that could arise for viable program candidates. That process mandates that the consumer make an informed acceptance of those risks before entering a debt settlement program.”
The program also advocates for a simplified, results-based fee structure using a contingency fee model similar to that of a plaintiff’s attorney. The fee structure should facilitate the consumer’s quick completion of the program and require payments to the debt settlement company only after a settlement has been negotiated and accepted by all parties. The debt counselor provides easily defined services with predictable costs, similar to a real estate agent, to represent and facilitate the buyers and sellers of settled debt.
Source
The program also advocates for a simplified, results-based fee structure using a contingency fee model similar to that of a plaintiff’s attorney. The fee structure should facilitate the consumer’s quick completion of the program and require payments to the debt settlement company only after a settlement has been negotiated and accepted by all parties. The debt counselor provides easily defined services with predictable costs, similar to a real estate agent, to represent and facilitate the buyers and sellers of settled debt.
Source
Thursday, October 15, 2009
Cecil Hotel Courting Affordable Housing Buyer
After a protracted fight with the city over its status on the residential hotel list, the owners of Main street's Cecil Hotel are negotiating a deal to sell the 600-room structure to a group that would primarily operate it as affordable housing.
Fred Cordova, a Vice President at Colliers and a member of hotel ownership group 640 South Main Partners, LLC, said today that the sale is "a compromise solution that might reasonable satisfy all the parties."
The parties involved in two suits involving the hotel jointed filed a request with the court on August 12, asking that a scheduling conference be postponed while a potential sale is negotiated, "upon the closing of which the buyer will be required to use the Hotel primarily for affordable housing."
Bill Lanting, General Manager of the Cecil and head of the Lanting Hotel Group, says that such a deal is far from done. "There are, and have been, continuing discussions with interested buyers - as has been the case since I got involved with the property two years ago - but I can assure you that nothing is in a "final negotiations" stage," he said via email this afternoon.
The August 12 filing says that the owners are "in final negotiations for the execution of a non-binding letter of intent."
Cordova's group bought the 1927 hotel in May of 2007 for $28.5 million. He declined to disclose the price that was being negotiated for the current sale, or to say who the potential buyer would be. (Disclosure: Cordova has contributed opinion pieces to blogdowntown)
The lawsuit between the ownership group and the city stems from the structure's inclusion on the City's residential hotel list.
A city ordinance passed in 2008 -- and previously instituted on an interim ordinance in 2006 -- requires that residential hotels provide replacement housing units for any rooms converted from residential to transient use.
The Cecil group filed a suit against the City disputing the hotel' residential designation. That case is now before the United States District Court. Tenants of the Cecil represented by LACAN filed a countersuit, looking to retain the residential status.
Cordova said he believed that the potential buyer was still working out a business plan for the structure, but that he expected the Cecil's boutique Stay Hotel to remain in operation.
The filing says that the City and LACAN have agreed to good faith negotiations toward a settlement of the cases should a sale go through.
So is the filing and possible sale a sign that Cordova's group gave up on its case? No, but "it's the least bitter pill with the least risk," he said. "There is motivation on everyone's part to resolve the impasse."
Source
Fred Cordova, a Vice President at Colliers and a member of hotel ownership group 640 South Main Partners, LLC, said today that the sale is "a compromise solution that might reasonable satisfy all the parties."
The parties involved in two suits involving the hotel jointed filed a request with the court on August 12, asking that a scheduling conference be postponed while a potential sale is negotiated, "upon the closing of which the buyer will be required to use the Hotel primarily for affordable housing."
Bill Lanting, General Manager of the Cecil and head of the Lanting Hotel Group, says that such a deal is far from done. "There are, and have been, continuing discussions with interested buyers - as has been the case since I got involved with the property two years ago - but I can assure you that nothing is in a "final negotiations" stage," he said via email this afternoon.
The August 12 filing says that the owners are "in final negotiations for the execution of a non-binding letter of intent."
Cordova's group bought the 1927 hotel in May of 2007 for $28.5 million. He declined to disclose the price that was being negotiated for the current sale, or to say who the potential buyer would be. (Disclosure: Cordova has contributed opinion pieces to blogdowntown)
The lawsuit between the ownership group and the city stems from the structure's inclusion on the City's residential hotel list.
A city ordinance passed in 2008 -- and previously instituted on an interim ordinance in 2006 -- requires that residential hotels provide replacement housing units for any rooms converted from residential to transient use.
The Cecil group filed a suit against the City disputing the hotel' residential designation. That case is now before the United States District Court. Tenants of the Cecil represented by LACAN filed a countersuit, looking to retain the residential status.
Cordova said he believed that the potential buyer was still working out a business plan for the structure, but that he expected the Cecil's boutique Stay Hotel to remain in operation.
The filing says that the City and LACAN have agreed to good faith negotiations toward a settlement of the cases should a sale go through.
So is the filing and possible sale a sign that Cordova's group gave up on its case? No, but "it's the least bitter pill with the least risk," he said. "There is motivation on everyone's part to resolve the impasse."
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