Process to Purchase Debt

Transaction Overview

For many creditors, selling their bankruptcy claim is a first-time (or infrequent) activity.  PrimeShares’ professionals will be happy to help educate you on this process and we provide an overview below.

Acceptance of PrimeShares’ Bid Proposal

For the purchase of any private debt instrument, PrimeShares and the seller will execute a standard trade confirmation, confirming relevant terms including:
  • A description of the debt
  • The amount of the claim
  • The agreed-upon Purchase Rate
  • Acknowledgement that the settlement of the transaction is subject to the buyer’s satisfactory  review of the underlying support of the debt and that the claim is valid and enforceable
  • Execution of a Sale and Assignment Agreement with customary representations and warranties acceptable to both buyer and seller.

The Trade Confirmation is a legal document, similar to other purchase agreements that contain agreed-upon purchase price, subject only to verification of stated facts and final documentation.

Execution of Sale and Assignment Agreement

The buyer and seller will execute a Sale and Assignment Agreement documenting representations and warranties of each party that are typical for transactions of Distressed Debt.
Standard representations and warranties of the seller include:
  • The seller has legal title to the claim;
  • The claim is valid, due and owing, undisputed, liquidated and non-contingent no objection to the Claim exists or has been threatened;
  • No payment has been received by seller, or by any third party claiming through seller, in full or partial satisfaction of the claim;
  • Seller has not previously assigned, sold, factored or pledged the claim to any third party, in whole or in part;
  • Seller owns and has title to the claim free and clear of any and all liens, claims, security interests, and encumbrances;
  • This Assignment Agreement constitutes the legal, valid and binding obligation of seller, enforceable against seller in accordance with its terms;
  • The claim is not subject to any claim or right of set-off, reduction, preference, recoupment, impairment, avoidance, disallowance or subordination.

Review of Supporting Documents Evidencing Claim

The buyer will require the seller to provide adequate documentation evidencing that the seller has a valid and enforceable claim against the obligor. The documentation varies according to the type of debt instrument, but typically includes copies of underlying notes, leases, invoices, shipping documents, Bankruptcy Court Orders and Stipulations, etc.

Trade Settlement

The agreed Purchase Price will be paid to the seller via wire transfers within a few business days of the buyers receipt and satisfactory review of a fully executed Assignment Agreement, all requested underlying supporting documentation as well as signature authorization documentation.