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Imperial Plans IPO

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A life settlement financing company hopes to raise up to $287.5 million through an initial public offering (IPO).

Imperial Holdings Inc., Boca Raton, Fla., plans to list itself on the New York Stock Exchange under the symbol IFT. To date, it has not announced the timing or pricing of its stock offering.

The offering is being underwritten by FBR Capital Markets & Company, Arlington, Va.

The company was founded in 2006 and reported an $8.6 million net loss on $97 million in revenue for 2009, according to the registration statement it filed filed with U.S. Securities and Exchange Commission. The company’s income comes from making loans to finance policy premiums as well as from loan fees and fees from referring agents.

Imperial also buys structured settlements and sells the structured settlement assets to other parties.

“With the net proceeds of this offering, we intend to fund our future premium finance transactions with equity financing instead of debt financing, thereby substantially reducing the cost of operating this business and increasing its profitability,” Imperial says in its filing.

Since 2008, Imperial’s premium financing costs have increased significantly, the company says. The company’s financing costs increased to 30.5% per year during the first quarter this year, up from 14.5% in 2007, the company says.

Slate Capital L.L.C., a unit of American International Group Inc., New York (NYSE:AIG), has agreed to buy up to $250 million in structured settlements each year from now until 2013, Imperial says. “We also have other parties to whom we have sold structured settlement assets in the past, and to whom we believe we can sell assets in the future,” the company says.

The number of structured settlement transactions the company has engaged in increased to

396 in 2009, from 276 in 2008.

Imperial says it uses guidelines that reduce the risk that it will help finance “stranger-originated life insurance” (STOLI), but it says it still could be affected by state and insurer efforts to deal with STOLI arrangements.

“Although we obtain representations and warranties from the insured, policyholders and referring agents, we may not know whether the applicants for any of our policies have made any material misrepresentations or omissions on the policy applications, or whether the policy owner has a valid insurable interest in the insured, and as such, the policies securing our loans are subject to the risk of contestability or rescission,” Imperial says.

Imperial also notes that it depends on the ability of the life insurers that issued the policies involved in premium financing arrangements to pay claims. About half of the premium finance loans the company has issued are secured by policies from 3 insurers, the company says.


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