buying notes from institutional investors - Posted by dan w

Posted by David Butler on January 31, 2002 at 19:41:41:

Hello Dan,

In general, the gut response would generally be, “Malarkey”. Two questions are all that should matter to a serious note seller…

  1. how much will you pay for my note?
  2. how soon can I get the cash?

But, you have presented what may be a special situation here, and there is a great deal left unsaid!

Obviously, a seller, just like you and I, can demand whatever they want. From your side of the fence, I would first analyse the purpose in making such a request. I would simply ask “why”. “I want to buy, we have a deal, and I have the cash. What does a license have to do with that? In fact, what does my P & L have to do with it? I’m not buying your business, nor am I asking you to finance any part of the deal?!” So, what’s the story here?"

In this case, I suspect it will have something to do with the fact that they are “institutional” and may have several bases they need to cover, or feel like they need to cover. I don’t want to get into exploring all of what those possibilities might be at this juncture, due to time restraints, and the fact that at this point, the conjecture may be pointless.

I will say that it’s not that abnormal in an institutional situation, to bring up some of these issues. Also, the fact that they are selling nonperforming paper. There are possibile securities issues that may very well be at play, some possible investor suitability issues, and issues related to selling off paper that lacks “holder-in-due course” defenses. They might also want to be clear what your actual role in the transaction is… for example, are you the end-buyer, or simply “pipelining” the paper upstream? In many instances, I would argue that this last point is completely irrelevant - but again, here, this is a special situation with some issues that need to be explored.

Easier and faster to just ask the questions directly from the horse’s mouth.

Hope that helps for now, though!

David P. Butler

buying notes from institutional investors - Posted by dan w

Posted by dan w on January 28, 2002 at 16:44:24:

I have purchased notes in default from local banks in the past and I am currently attempting to purchase notes which are in default from a large national lender. The lender and I have come to a verbal agreement on the price of several notes however, I am having a difficult time getting them to provide written confirmation of the note prices and getting them to set up a closing/sale date.

The most recent snag is a request for indepth information on my company including Business financials, YTD P&L Proof of entity, Attorney and CPA contacts, Broker licences and loan servicing platform. I am told this is required information to become an approved note buyer.

I have two registered llcs a 3yr old property management company and a 5 yr old mortgage company.

I am seeking direction from someone who has traveled this path. Is this a normal request on the institutional lenders part or unnecessary, uncommon or abnormal hoops?

How can I gain control of this transaction with a positive result?

I am looking forward to feedback.

Dan