Asta Funding Announces New Joint Venture in Personal Injury Financing

Debt buyer Asta Funding, Inc., (Nasdaq: ASFI) announced Wednesday the formation of Pegasus Funding, LLC, a joint venture with Manhattan-based Pegasus Legal Funding, LLC (PLF), an established personal injury financing provider.

On December 28, 2011, Asta, through a newly-formed subsidiary, ASFI Pegasus Holdings, LLC (APH), executed the Pegasus Operating Agreement with PLF, in which a subsidiary of Asta, Fund Pegasus, LLC, (Fund Pegasus), will loan up to $21.8 million per year to PLF for a term of five (5) years all of which is secured by the assets of Pegasus. These loans will provide financing for the personal injury litigation claims and operating expenses of Pegasus.

Pegasus will be actively managed by experienced personal injury litigation funders, Max Alperovich and Alexander Khanas, who will rely upon strict underwriting criteria to provide legal funding to personal injury plaintiffs prior to the settlement of their claims or their resolution in court. The Pegasus business model entails the outlay of non-recourse advances to a plaintiff with an agreed-upon fee structure to be repaid from the plaintiff’s recovery. Typically such advances to a plaintiff approximate 10-20% of the anticipated recovery. These funds are generally used by the plaintiff for a variety of urgent necessities, ranging from surgical procedures to everyday living expenses.

Pegasus’s profits and losses will be distributed at 80% to APH and 20% to PLF. These distributions will be made only after the repayment of Fund Pegasus’ principal amount loaned, plus an amount equal to overhead advances calculated at 9% of principal for each case settled. While the over-all returns to the joint venture are currently estimated to be in excess of 20% per annum, APH reserves the right to terminate Pegasus if returns to APH, for any rolling twelve (12) month period, after the first year of operations do not exceed 15%.

As of today, Asta has advanced approximately $4 million in personal injury financing, along with the advancement of $360,000 for overhead expenses. These loans have been assumed directly by Pegasus and the proceeds thereof assigned by Asta to Fund Pegasus.

Gary Stern, Chairman, President and CEO of Asta commented, “We are very excited about our financial commitment to this joint venture, and in particular, about the future prospects of the personal injury financing space. During these past 3 years, the dearth of attractive consumer credit card receivable portfolios has given management the firm initiative to proactively seek profitable alternative asset classes for investment. For the past 2 plus years, we have deliberately and carefully scrutinized the personal injury financing business, and many of the respected firms which populate its ranks. After considerable due diligence, we elected to enter this market by way of a joint venture with PLF and its experienced and talented management team. Our relatively sizable cash resources, will allow us to continue to look into other asset classes, as a complement to our traditional business model of acquiring distressed receivable portfolios. This new investment in personal injury financing, along with our new credit facility with Bank Leumi gives us the flexibility to utilize internal resources and external financing for future growth. We believe the business of personal injury financing offers growth potential for us and we will continue to explore other asset classes to achieve this goal.”

Based in Englewood Cliffs, NJ, Asta Funding, Inc., is a leading consumer receivable asset management company that specializes in the purchase, management and liquidation of performing and non-performing consumer and other receivables.