GWG L Bond Investors Face Default and Bankcruptcy

GWGH is a company that recently issued specialty high-yield bonds backed by life settlements. These bonds were illiquid investments, and shareholders are unable to sell them on the secondary market. Instead, they must wait until the bonds mature before redeeming their principal. In addition, GWG L bond holders cannot redeem their bonds before their maturity date, and if they do, they must pay a redemption penalty of 6%.

GWGH l bonds are debt securities issued by the GWGH Group. These bonds are unrated and GWG can call them back at any time, without penalty or charge. However, investors who purchase them risk losing their investment, as their coupon distributions are tied to the company’s life insurance contracts. Assumptions about life expectancy are often incorrect, and life insurance companies may go out of business, impacting the price of their common and preferred stock.

A number of financial advisors fielded client inquiries about missed payments but tended to downplay the issue as temporary. Moreover, these brokers pointed out that GWG offers a 30-day grace period after payments become due, so it was possible that the issue would be rectified in the near future. The issue was not affecting other GWG securities. Consequently, the investigation into GWG l bonds will likely have a significant impact on the financial health of the entire industry.

After GWGH discontinued its L bond offering, it began experiencing liquidity problems. In November 2021, GWGH disclosed that it had received a subpoena from the SEC regarding its failure to file annual reports in 2020. This SEC investigation could negatively affect the value of the GWGH securities. Consequently, the company was unable to make payments on the L bonds until February 2022. It eventually went into liquidation.

GWGH issued a specialty high-yield bond backed by life settlements

An investor may have been able to earn a nice profit when GWGH issued a specialty high yield bond backed by life settlements. GWG Holdings, a Dallas financial services firm specializing in alternative assets, issued L Bonds that were used to finance the secondary market purchase of life insurance policies. These bonds are speculative and high-risk, but they offered a relatively high yield of 5.50% to 8.50%. GWGH subsequently suspended sales of the L Bonds, making the bonds very illiquid and speculative.

GWGH is a life settlement company that has been in business for 10 years. The company has paid seniors over $283 million for their life insurance benefits, which is more than two-thirds higher than the surrender value offered by insurance carriers. Moreover, the company has received a “A” rating from the Better Business Bureau, which is normally given to companies that have a good track record of paying policyholders.

GWGH issued a $2 billion L Bond offering in 2020. Brokerages sold the bonds, earning a 5% commission on the bond market price. The bonds mature in two to seven years, and the proceeds of these securities are used for various corporate purposes. The proceeds from the bond sale will be used to maintain the policy portfolio, pay required interest, refinance maturing bonds, and other corporate needs.

GWGH defaulted on interest and principal payments in February

The company was a Dallas-based financial services firm that had been operating in the alternative asset and epigenetics space. The company also had secondary life insurance assets and economic interests in non-affiliated entities. Two of its affiliates filed for chapter 11 protection as well. The default was a result of the company’s failure to meet its interest and principal payments due dates. As part of its restructuring plan, the company engaged law firms, including Mayer Brown, FTI, and PJT. In March, GWGH entered into a waiver under the DLP VI credit agreement. But the company filed for chapter 11 in April, citing a strain on liquidity, suspension of Bond sales, and other logistical and business factors.

Since then, GWG has failed to meet its obligations under the terms of its agreements. The company has repeatedly misled investors into investing in risky investments. In February, the company failed to resume principal and interest payments. The stock price plunged 20% intraday. Emerson Equity repeatedly pushed GWG bonds as safe and low-risk investments, but investors have not seen a recovery. Consequently, the company has ceased communications with investors.

GWGH filed for bankruptcy in 2022

GWGH is a nationwide marketer of financial products and investments. Upon defaulting on all principal and interest payments due Jan. 15, the company engaged law firms Mayer Brown, FTI, and PJT to help it negotiate its debts. In March, the company entered a waiver under the DLP VI credit agreement. By April, the company filed for Chapter 11 protection. The company’s bankruptcy filing comes as its business practices are under investigation by the U.S. Securities and Exchange Commission. The debtors’ chapter 11 filing comes at a time when the company’s financial obligations are mounting and its business practices are not working. Whether the company has a viable plan is unknown.

After the company failed to file its annual reports, GWGH announced that it had filed for bankruptcy. The company blamed the late filing on accounting issues. In addition to its lack of liquidity, the company had stopped selling bonds eight months before filing for bankruptcy. The SEC is investigating GWGH’s filing and attempting to prevent it from going through bankruptcy. The company is currently operating under a liquidation plan.

GWGH sold gwg l bonds

GWGH has paused its L Bond sales in an effort to improve its liquidity. Those who purchased bonds before the end of September could face real losses, as GWG relies heavily on L Bonds to pay its bills. Moreover, the company is not expected to complete an annual financial audit by the SEC deadline by March 31, 2021. Thus, investors should be concerned. This article will discuss the implications of this pause and the repercussions for GWGH and investors.

The L Bonds were sold through Emerson Equity LLC, which partnered with other brokerage firms and sold them directly to retail investors. Some investors may have lost their investment and their coupon distributions if they purchased the bonds. In addition, investors may have difficulty determining the value of an L bond because it is not listed on a securities exchange. Consequently, it is difficult to determine its value on a routine basis.

During the time between April 17 and November 20, 2021, GWG suspended L Bond sales because it failed to file its annual financial statement on time. At the time, GWG was working with its auditors to resolve two accounting questions that were a result of the delayed filing of its annual report for 2020. It has subsequently resigned several of its board members. As a result, investors should avoid investing in the L Bonds.

GWGH has a history of accounting improprieties

As a result of the financial statements filed by GWGH in November 2020, the public may have a better understanding of the company’s future prospects and liquidity. The company has a long history of accounting improprieties, and it may be unable to sell additional L Bonds on favorable terms or in sufficient quantities. The company may also face difficulty in obtaining additional borrowing under its existing debt facilities or from third-party lenders.

Investors who have invested in GWGH are betting on the company’s long-term viability, but their investments are at risk. The company’s balance sheet shows that total outstanding debts are higher than its reported assets. Its reported fair value of life insurance policies is $794.7 million, while cash and investments in alternative assets are 67.7 million. In addition, the company has $1.55 billion in outstanding senior credit facilities and L Bonds.

After consulting with the SEC’s Office of the Chief Accountant, the GWG board of directors recently decided that certain financial statements should no longer be relied upon. The company plans to consolidate its trusts that hold secondary alternative assets. This is a strategic move for GWGH, which has historically provided loan financing to secondary alternative assets as part of its core strategy. However, the company continues to face a history of accounting improprieties, including an extensive history of false and misleading financial statements.

GWGH owes GWG l bond investors huge amounts of money

After its bankruptcy, GWGH has been unable to meet its obligations to its bond investors. The company failed to make its principal and interest payments by the date specified on the credit agreement. Ultimately, the company filed for chapter 11. The bankruptcy court ordered the debtors to suspend their bond sales until their financial situation improves. In May 2017, the debtors engaged Mayer Brown, FTI, and PJT to represent their interests in the case. On March 31, GWGH entered into a waiver under DLP VI credit agreement and filed for chapter 11. The bankruptcy court ruled that GWGH is in violation of the credit agreement because of its lack of liquidity and noticing obligations under the DLP IV credit agreement.

During the course of time, interest rates fluctuate, so an investment in a 10-year bond at 3% interest today could be worth far less a month from now. Moreover, a bond can default on its payments, so if GWG Holdings fails to meet its obligations, it will owe investors millions of dollars. However, GWG Holdings’ board members have denied any wrongdoing and are pursuing legal action to get back the money they owe their investors.

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