27,000 GWG Holdings L Bond Investors Left At A Loss

Despite Misgivings, Court Approves $10M Financing for Troubled GWG Holdings

One day after GWG Holdings filed for Chapter 11 bankruptcy protection, Judge Marvin Isgur of the US Bankruptcy Court in Houston approved $10M in financing for the asset manager despite his concerns regarding the mechanics of the loan. The emergency loan will come from National Founders LP.

According to The Wall Street Journal (WSJ), in court papers, GWG said it needed the money to avoid “imminent liquidation.” The Texas-based alternative asset firm owes about $1.6B in L Bonds. Despite being illiquid and high-risk, these high-yield bonds were mainly marketed to individual investors by around 145 regional brokerage firms, including managing broker-dealer Emerson Equity. They earned high commissions of around 8% from the transactions.

GWG Holdings said about 27,000 L bondholders, including retirees, invested around $45K in these junk bonds. L Bonds pooled funds from investors to buy life insurance policies on the secondary market. GWG used policy payouts upon these deaths to repay the money it owed L Bond investors. In February 2022, the company defaulted on $13.6M in principal payments and interest that it owed investors.

The WSJ said that several L Bondholders who appeared in bankruptcy court talked about how they had placed some, if not all, of their retirement funds in these investments. They had been assured that safe assets backed these high-yield investments. Now, they are grappling with what to do.

Our GWG Holdings L Bond investor lawyers represent those who lost money in these high-yield bonds that should have never been sold to them by their brokerage firms. Contact us at Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com).

Judge Deems Loan to GWG Necessary Despite Investor Opposition

Judge Isgur approved the bankruptcy loan despite concerns regarding why the firm needed to send funds to its subsidiaries, DLP Funding IV and DLP Funding VI, which hold its portfolio of life insurance policies.

These special purpose units reportedly need money to make premium payments on the insurance policies to realize their value as people pass away. Also, their assets cannot be sold without lender approval. Besides, GWG Attorney Thomas Kiriakos said that money generated from such a sale would have to go into a lockbox and couldn’t be spent.

Kiriakos estimated that the market value of the policies was about $680M, which exceeds the approximate $382M in secured debt of these subsidiaries. Isgur questioned why GWG Holdings did not sell these portfolios instead. The WSJ said that GWG attorney Thomas Kiriakos contended that selling some policies to pay for other policies’ premiums would result in a “value-destructive fire sale.”

Despite opposition from angry investors, Isgar decided to approve the National Founders loan after the interim amount was lowered from $18M to $10M.

What Should You Do If You Are an L Bond Investor?

GWG Holdings remains under investigation by the US Securities and Exchange Commission (SEC) and has not submitted its regulatory filings over the past two years. Joining a class action securities lawsuit against GWG will not maximize your chances for financial recovery.

Now that the company has filed for bankruptcy, it is important that you file a Financial Industry Regulatory Authority (FINRA) arbitration claim against the broker-dealer that sold you GWG L Bonds.

Skilled GWG Holdings L Bond Attorneys

This is not the kind of legal case you want to pursue without seasoned help from experienced securities lawyers. Call our knowledgeable L Bond lawyers at (800) 259-9010 to request your free, no obligation case consultation. We have helped many investors recover millions of dollars following broker misconduct and negligence.