GWG Bankruptcy Update: Questions Remain as to When, or If, GWG L Bond Investors Will Receive Future Distributions

GWG has notified the bankruptcy court that it intends to exercise enter into an agreement to refinance (the “Vida Option”) rather than sell its portfolio of life insurance policies (the “Sale Option.”) The bankruptcy court is expected to approve GWG’s plan of action.

In connection with seeking court approval, GWG disclosed to the Court that it believes that its portfolio of life insurance policies is currently worth no more than $610 million.

Specifically, the debtors argued that there was “no reason to believe that exercising the Sale Option and conducting a sales process is likely to generate any bids in excess of the $610 million nominal stalking horse bid under the Sale Option.”  Despite extensive marketing, no potential bidders have been willing to commit to paying more than the $610 million stalking horse bid. Move over, GWG stated that “[s]hifting market conditions have reduced the likelihood that any bidder, even if one existed, would be willing to outbid the stalking horse bid under the Sale Option.”

According to GWG’s modeling, the residual interest in the portfolio of life insurance policies is expected to provide it with a net present value of at least $59.26 million.

The Official Committee of Bondholders is concerned that GWG’s exercise of the Vida Option is the first step in GWG’s effort to launch a new, unproven start-up asset management business that would be run by the debtors’ existing management team and be built on the backs of the L bondholders, using the L Bondholders’ collateral (“GWG 2.0”).

The Official Committee of Bondholders believes that the debtors “have not established they should be afforded the privilege of seeking reinvestments in GWG 2.0.”  They have argued that [a]mong other things, [GWG] (i) already squandered the Bondholders’ investments through an apparently unsustainable business model, (ii) exacerbated their financial woes by the questionable transfers of hundreds of millions of dollars to the Beneficient Company Group, L.P. (“Ben”) that have yet to result in a material cash return for the benefit of the Debtors’ estates and (iii) are subject to an investigation by the Securities and Exchange Commission (the “SEC Investigation”).

According to GWG’s filings, the Vida Option will result in approximately $72 million in net borrowed cash proceeds (the “Vida Net Proceeds”).

With the possibility of GWG 2.0 now on the table, the Official Committee of Bondholders is concerned that the Debtors will seek to use the Vida Net Proceeds to capitalize GWG 2.0 instead of providing cash distributions to GWG L bondholders.

GWG L Bond investors remain concerned that they won’t see any of their remaining invested capital.

As of the bankruptcy filing on April 20, 2022, GWG Holdings, Inc. had over $1.6 billion in outstanding GWG L Bond obligations, mainly owed to retail investors.

Iorio Altamirano LLP, a law firm that represents retail investors, is representing many GWG L Bond investors against brokerage firms across the country to recover investment losses and damages sustained by those firms’ recommendations to invest in GWG L Bonds. Based on the law firm’s investigation, there appears to have been widespread negligence and misconduct by many brokers and broker-dealers across the country.

Investors who purchased GWG L Bonds through a financial advisor are encouraged to contact Iorio Altamirano LLP (gwglawyer.com) for a free and confidential consultation and to review their legal rights. We can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.

About GWG L Bonds

An L bond is a financial product created by GWG Holdings, Inc. (GWGH). The L Bonds are speculative, high-risk, illiquid, and unrated alternative investment offerings.

Initially, GWG Holdings pooled money from bond investors to purchase life insurance policies on the secondary market, paid the policy premiums, and then collected the death benefit when the insured individual passed away. However, beginning in 2018, GWG Holdings used the investor capital to invest in a new business model, exposing the company to riskier alternative assets. Many GWG L Bond investors were utterly unaware that GWG materially reoriented its business model, which, in our view, made it a much bigger credit risk. Additionally, many GWG L bond investors were not told by their financial advisors that GWG used investor capital to pay out the high distributions owed to other GWG L Bond investors in a Ponzi-like scheme.

GWG Holdings, Inc., which stopped making interest and maturity payments to GWG L Bond investors in January 2022, filed for Chapter 11 bankruptcy in April 2022.

Many GWG L Bond investors are skeptical that they will receive any significant portion of their principal back. Investment News has reported that one anonymous GWG L bond investor estimates that the GWG L Bonds may now be worth 20 to 30 cents on the dollar.

Broker-dealers and brokers are required to make investment recommendations that are suitable and in the best interest of their customers. Brokerage firms and financial advisors must also disclose all material facts and risks of a security when making a recommendation. Firms and brokers must also conduct reasonable due diligence on products they offer before recommending them to any clients. When a firm or advisor fails to meet these standards of conduct, they can be held liable for damages.

For the latest on Iorio Altamirano LLP’s investigation of GWG L Bonds, including a key event timeline, visit our firm’s investigation pageIorio Altamirano LLP’s Investigation of GWG L Bonds.

See Also:

GWG L Bond Investor Recovers Losses After Filing a FINRA Arbitration Claim

GWG Could Sell Its Portfolio of Life Insurance Policies for $610 Million, $1 Billion Less Than It Owes to GWG L Bond Investors

Western International Securities Denies Violating Regulation Best Interest in Recommending and Selling Risky and Illiquid GWG L Bonds to Retail Investors

Newbridge Securities Corporation’s Customers Who Purchased GWG L Bonds Are Worried About Their Invested Capital

Law Firm Investigating Dempsey Lord Smith, LLC for the Sale of GWG L Bonds and GPB Capital Funds

Law Firm Investigating National Securities Corporation for the Sale of GWG L Bonds and GPB Capital Funds

Certified Financial Planner Board Suspends Western International Securities Broker Patrick Egan After SEC Charges Related to Selling GWG L Bonds

Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Western International Securities, Inc.

New York Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Great Point Capital LLC

Law Firm Investigating the Sale of GWG L Bonds to Retail Investors by Aegis Capital Corp

GWG Holdings, Inc. to be Delisted from The Nasdaq Stock Market; Law Firm Investigates Legal Claims for GWG L Bond Investors   

GWG L Bond Investors Seek Recourse After GWG Holdings, Inc. Files for Chapter 11 Bankruptcy

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have invested in L Bonds offered by GWG Holdings, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (855) 430-4010.

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