Factoring with Judgments by Gutierrez Group
This out-of-the-box product uses the concept of Factoring in a very untraditional, Colombian way. Instead of buying regular bills at a discounted price, as traditional Factoring is conceived, we are buying judgments that the Colombian government is obliged to pay.
We buy, at a discounted price, the right to collect a non-recourse judgment against the Colombian Minister of Defense, National Police, General Prosecution, or other public entity, that has been placed by its claimant and won after a process that usually takes between 5 and 8 years. After the claim is decided in favor of the claimant, it is added into the national budget in a first-come, first-served basis, and its payment usually takes another 24 to 36 months, timeframe during which the government shall recognize legal interests.
It is precisely after the judgment is won by the claimant that we intervene, offering to pay the victorious claimant in advance for the right to receive the indemnification that the State is obligated to make, therefore earning the respective interests which will represent a high valuation, allowing all parties to win: the claimant, who shall finally receive the indemnification he’s entitled to and not having to wait any longer; and the investor, who will obtain a financial asset with a high and very secure profit margin.
And who are these claimants? The claimants are usually Colombian individuals, ordinary citizens or members of the army, who have been somehow affected by the internal conflict and that are lawfully entitled to file for an indemnification.
- We’re buying very low risk type of public debt. These type of indemnifications are considered of first national order, meaning that they go in the first bracket of importance in each year’s national budget. This type of debt is comparable to that of a treasury bill, as they both share the same country risk, which has been immensely low during the last decades and even lower now after the peace agreement reached in 2016.
- We count with a wide, highly experienced team of lawyers and financial specialists to thoroughly check and analyze each case. In addition, investors are only asked to disburse their funds when our firm is the lawful and State-acknowledged owner of the right to collect the indemnification, minimizing the assumed risk.
- No intermediaries. Gutierrez Group manages the operation from the beginning to the end; from the investors to the claimants. This one-of-a-kind product has remained predominantly unavailable to investors willing to invest in a more direct manner. Usually, securities brokers use this product as an underlying asset into some of their mutual funds, offering yields 30 to 40% lower than what can be obtained with a firm, like us, that conducts the operation directly
Buying a judgment consists of a very simple 7-step process:
- A judgment is won and its representing lawyer contacts our firm and offers it for us to purchase.
- Negotiation is made with lawyer and discount price is set.
- Legal paperwork is thoroughly analyzed, verified and sent to the respective entity to transfer the economic rights of the judgment from its claimants to our firm.
- After 6-8 weeks, an official notification of ownership of the judgment is received, becoming the new State-acknowledged owners of the debt.
- Only after receiving this document investors are asked to disburse funds and payment to claimants is done.
- Once the investment is placed there’s no need to do anything else other than waiting until the government pays the debt.
- After 18-24 months of waiting, the government pays the debt and investors receive back their principal invested plus the interests generated.
Collection of Principal and Interests
Both principal invested and interests generated during the timeframe of the investment are cashed out at the collection date or, in other words, when the State pays his debt.
The minimum investment stands at U$50,000 and the interest rate offered to investors depends on the amount invested as shown in the table.
Who is Looking After the Investment?
The operation is completely controlled by Gutierrez Group, who constantly co-invests into different judgments. Our team has a vast experience and an outstanding track record in this business, with U$15+ million allocated during the last 6 years into 200+ different judgments, none of which has defaulted.
Even though the final payment by the State depends entirely on its fiscal budget, according to our expertise we can expect the investment to be collected in a timeframe of 12 to 18 months.
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