Non-Performing Asset Funds Can Purchase FTX Bankruptcy Claims at Maximum Price of 20% in Private OTC Market

02/21/2023 16:29 • Blockchain Buzz • 130 views

It is reported that a person familiar with the matter said that non-performing asset funds can purchase FTX bankruptcy claims at a maximum price of 20% in the private OTC market. After FTX, it now owes $3.1 billion to the 50 largest creditors. In some open bankruptcy markets, the transaction valuation of bad FTX assets is about 16% of the claim face value. The individual claims listed for sale on Xclaim, the platform that provides transaction encryption claims, are up to 27 million US dollars. An anonymous FTX creditor said that the pricing of the private OTC market was similar, and the purchase price of the non-performing asset fund was between 15% and 20% of the nominal value of the claim. “Their purchase is expected to receive funds within five years. If these funds finally receive 25% of the money within five years, this is not a good deal, because the annual recovery rate is only about 5%. I think many of these companies are expected to recover funds equivalent to 50% of the face value of the claim.”

Insiders: FTX bankruptcy claims are sold at 20% in the private OTC market

Interpret the above information:

A person familiar with the matter has reportedly claimed that non-performing asset funds can purchase FTX bankruptcy claims at a maximum price of 20% in the private OTC market. FTX, after filing for bankruptcy, owes $3.1 billion to its 50 largest creditors. In some open bankruptcy markets, bad FTX assets’ transaction valuation is around 16% of the face value of the claim. An anonymous FTX creditor revealed that the purchase price of the fund was between 15% and 20% of the nominal value of the claim.

According to the statement, these funds can expect to receive funds within five years, and if they finally receive 25% of the money within five years, it’s not a good deal because the annual recovery rate is only around 5%. However, many companies expect to recover funds equivalent to 50% of the face value of the claim.

This news underlines the increase in non-performing asset fund investment in the private OTC market. Non-performing assets are those that a bank considers non-performing when it hasn’t recouped the principal and arrears from the borrower for 90 days. The transfer of non-performing assets to AMCs or non-performing asset funds is one of the ways banks dispose of bad loans. Banks typically sell bad loans to asset reconstruction companies for lower prices integrated with debt restructuring agreements.

In the case of FTX, the data shows that this purchase could be useful for any fund willing to make a long-term investment that still requires patience in receiving an adequate return. Firms that specialize in purchasing the distressed assets often gain a higher percentage of revenues for their investors as their inability to recover the household or corporate properties causes depreciation in the prices. These firms are significant players in the property market involved in purchasing bad debts from banks and acting as managers.

In conclusion, Non-performing asset funds can purchase FTX bankruptcy claims at a maximum price of 20% in the private OTC market. While the recovery rate seems fragile, the option remains attractive for long-term investors willing to be patient for the expected 50% recovery rate.

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