Valentine’s Day 2022, whatever else it may have brought, did bring to shareholders of GWG Holdings (GWG) a letter from the company disclosing its default on payments of $3.25 million in principal and $10.35 million in interest payments to investors of L Bonds.
This information was shared by GWG after they had exhausted the 30-day grace period permitted for the payments. Perhaps as a corollary, they also specified that they would continue to defer requests for redemption.
Investors are becoming concerned about missing payments and filing claims. They were misled into believing that this was a low-risk investment. GWG Holdings was marketed as a disruptive and innovative product in the life insurance market, but investors may have been misled.
Haselkorn & Thibaut (InvestmentFraudLawyers.com) is currently investigating GWG Holdings and broker-dealers that sold their products. For a free consultation about investment loss recovery options, including lawsuits or FINRA claims, investors can call 1-800-856-3352.
As a result, holders of L Bonds are left high and dry. Their investments are not yielding the income that was promised. At the same time, they have no way of realizing the money locked in these securities as these are non-traded alternate investments.
In the 18th January notification sent by GWG to the Securities Exchange Commission (SEC), it has been specified that their inability to pay $13.6 million to shareholders was precipitated by a decline in the sale of L Bonds.
The Valentine’s Day letter informs shareholders that various options were being considered to protect shareholders’ interest and meet financial obligations and that various restructuring alternatives were on the table to “conserve and maximize the value of GWG’s assets.”
The letter further stated that no monthly or maturity payments would take place while this process was going on and that it could take up to 4 weeks for a decision.
Understanding L Bonds
An L Bond is an unrated life insurance bond and sold as a private placement. An investment of this nature is used for buying and paying for the premiums of secondary market-purchased life insurance settlement contracts.
In return for bearing the risk of non-payment of the premium or benefits of an insurance policy, the lender, the one buying the bonds, gets a higher yield. It needs to be understood that it is an illiquid investment and not a traded instrument. A penalty of 6% results from the redemption of an L Bond before maturity, or before the death or disability of the policyholder.
L Bonds of GWG were being sold by many brokerage firms, including well-known ones like Centaurus Financial, Emerson Equity, and Aegis Capital.
It does seem that many brokerage firms have sold these illiquid placements quite indiscriminately, including to people with a low appetite for risk who should not have been sold these investments.
GWG Holdings’ financial position
GWG has $1.552 billion in outstanding L Bonds and $327.7 million in senior credit facilities on its Balance Sheet. The fair value of its tangible assets, on the other hand, is only $794.7 million, apart from $67.7 million in cash as well as restricted cash, and alternative investments that add up to $226.1 million.
The Form K filed for the year ended 31st December 2020, had reported net losses of $530 million. Concerns had also been expressed about various issues like its ability to raise fresh capital, negative cash flows, and losses that were being incurred repeatedly.
The recovery process for GWG investors
If you are an L Bond investor, the best course of action for you might be to file a FINRA (Financial Industry Regulatory Authority) arbitration claim for recovery against the broker-dealer selling you the security, with the help of a suitably experienced attorney, like the ones with Haselkorn & Thibaut, P.A.
Our skilled investment fraud lawyers are in touch with several people who have been at the receiving end in L Bond investments.
To speak to one of our experienced attorneys and understand your options, call us on 1-800-856-3352 or reach us through our contact page.