GWG Holdings, Inc. (NASDAQ: GWGH), headquartered in Dallas, was once a beacon for individuals seeking to convert their life insurance policies into immediate cash. However, the financial landscape for this company has been tumultuous in recent years.
From 2012 to April 2021, GWG actively issued high-yield bonds. Their financial stability began to waver, culminating in a Chapter 11 bankruptcy declaration by April 20, 2022. A closer look at their books from September 30, 2021, reveals a concerning picture: GWG was submerged in about $2 billion in net liabilities, of which a whopping $1.3 billion were L Bonds. The following year, in February 2022, their financial strain was evident when they failed to make payments and interest totaling $13.6 million to their investors.
Come August 1, 2023, a new chapter began with the activation of GWG’s bankruptcy plan. This plan outlined two significant steps:
- The entire liquidation of GWG.
- The birth of two liquidating trusts: the Wind Down Trust and the Litigation Trust.
But here’s the twist: A pivotal decision in this plan was the termination of the GWG L Bonds. In their place, L Bondholders were presented with the “New Series A1 WDT Interests”.
For bondholders, the path ahead diverges:
- If they held their bonds through intermediaries such as banks or brokers, they’re advised to initiate contact for more information.
- Those who held directly should turn to Computershare Trust Company, N.A., the newly-minted transfer agent, for insights and updates.
As GWG navigates these rough waters, they’re left clutching onto four main lifelines or assets:
- Their life insurance policy portfolio.
- Equity stakes in FOXO and Beneficient.
- And potential legal confrontations, with Beneficient being a primary contender.
Yet, the clouds haven’t cleared. To truly bring substantial value back to the L Bonds, GWG’s only hope lies in cashing in on its Beneficient equity or coming out triumphant in its legal endeavors.
The stock situation paints a bleak picture as well. After stepping into the public realm on June 8, 2023, BENF’s stock trajectory took a nosedive from an inaugural $15 to less than $2. A significant blow was dealt on October 3, 2023, when the decision was made to part with their life insurance portfolio for a paltry $10 million. In real terms, this translates to L Bondholders possibly seeing a return of just $7 million – a meager 0.5% of the outstanding $1.3 billion.
Lastly, their stock holdings in other entities like FOXO and Beneficient don’t inspire much confidence either. FOXO’s shares, valued at about $552,000, seem to be on shaky grounds with potential bankruptcy looming. Beneficient, trading at approximately $1.29 per share, also presents a conundrum due to low trading volumes and restrictions.
In a telling assessment, U.S. Bankruptcy Judge Marin Isgur remarked on October 3, 2023, “There is no material recovery that will go out on a percentage basis out of the liquidation of this portfolio [of life insurance policies].” He further noted his belief that the “[GWG] L Bondholders will lose a very large percentage of their investments.”
Haselkorn & Thibaut’s seasoned GWG Holdings L Bonds lawyers represent bond buyers who bought the financial instruments from broker-dealers. Investors who bought L bonds can reach us online or by calling toll-free at 1-800-856-3352 for a free GWG Investor Guide and confidential consultation.
GWG Holdings Wind Down Trust
Table of Contents
The GWG Holdings Wind Down Trust (commonly known as GWG Wind Down Trust) was established as part of GWG Holdings, Inc.’s Chapter 11 bankruptcy plan. Effective as of August 1, 2023, the Trust was formed to manage and liquidate the assets of GWG Holdings and its subsidiaries. Its purpose is solely to liquidate assets, including reported shares, and make distributions to former stakeholders such as bondholders.
- Assets Managed: The Wind Down Trust holds a portfolio that includes the life insurance policies originally owned by GWG Holdings, as well as the company’s equity interests in FOXO and Beneficent.
- Legal Framework: The Trust operates under Texas law and is designed to wind down the business affairs of GWG Holdings.
- Information Portal: There is a dedicated website that provides information to holders of GWG New WDT Interests about the GWG Wind Down Trust.
- Monetization: The Trust will take all necessary steps to monetize GWG’s non-litigation assets.
In summary, the GWG Wind Down Trust is a mechanism established to manage and liquidate the assets of the now-bankrupt GWG Holdings, Inc., with the goal of making distributions to its former stakeholders.
In Summary: L Bondholders are in a tight spot. With fluctuating assets and looming legal challenges, the road ahead seems uncertain.
GWG’s bankruptcy has raised questions about the company’s financial management, especially concerning where all the money went. GWG L Bonds are considered high-risk investments because they lack credit rating and insurance. The company is a Dallas-headquartered alternative asset company. Haselkorn & Thibaut currently represent investors who have incurred losses in GWG L Bonds.
Investors holding GWL bonds need to seek immediate legal representation as time limits apply for filing claims. Broker dealers and financial advisors may be liable for investors’ losses due to their failure to disclose that the bonds involves significant risks.
A Deep Dive into GWG Wind Down Trust’s Assets
- Portfolio of Life Insurance Policies
- Latest Move: The Bankruptcy Court greenlit the sale of this portfolio on October 3, 2023, raking in a total of $10 million.
- What It Means for L Bondholders: Expectations suggest they might pocket between $0 and $7 million in total. To put it in perspective, that’s merely 0.5% of the hefty $1.3 billion they’re owed.
- Projected Recovery: 0 – 0.5%
- FOXO Holdings – 4.6 Million Shares
- Stock Status: FOXO’s stocks hover around $0.12 per share as of October 6, 2023.
- Insider Insight: On October 3, Ms. Freeman dropped a bombshell. FOXO’s stocks might not be that lucrative after all. The company isn’t flourishing and is even pondering bankruptcy.
- Projected Recovery: A nearly negligible 0 – 0.00001%
- Stake in Beneficient – 169.7 Million Shares
- Stock Update: Trading at approximately $1.29 per share as of October 6, 2023.
- Financial Health: Beneficient is on shaky ground. Q2 2023 saw them incurring a staggering $1.15 billion loss. Their cash reserves? A mere $4.4 million by July 31, 2023. Tough times have forced them to consider furloughs and layoffs. Excluding goodwill, their net assets stood at $260 million as of June 30, 2023.
- Legal Woes: The SEC has its eye on Beneficient. By June 29, 2023, they served a “Wells Notice,” hinting at potential legal battles tied to their association with GWG Holdings. Moreover, Beneficient’s top brass, including their CEO Brad Heppner, are also under the scanner.
- Sell-off Challenges: Mr. Freeman highlighted the hurdles in offloading these shares. Given the low trading volume, finding a market for a massive 169.7 million shares seems ambitious.
- Projected Recovery: Nominal at best.
- Litigation Proceeds
- Current Scenario: Michael Goldberg, the Litigation Trustee, will chase the “Retained Causes of Action” independent of the GWG Wind Down Trust. Any proceeds from these legal pursuits will solely fund the distributions under the confirmed Plan. However, diverting these funds for other purposes requires a nod from the Bankruptcy Court or the Litigation Trustee’s written consent.
- Projected Recovery: It’s a toss-up!
In Summary: L Bondholders are in a tight spot. With fluctuating assets and looming legal challenges, the road ahead seems uncertain.
Is GWG holdings in trouble?
GWG Holdings filed for bankruptcy on April 20, 2022. The assets that GWG had were shown to be extremely speculative and illiquid as a result of the bankruptcy case.
What is going on with GWG Holdings?
On April 20, 2022, GWG Holdings filed for bankruptcy. The share price of GWG Holdings fell by 49% between November 2021 and March 2022, from $10.51 to $5.14. Then, on January 15, 2022, the due date for GWG’s principal and interest payments on their L Bond issues, they missed them by $3.25 million and $10.35 million, respectively.
Are l Bonds Risky?
Investment products like L Bonds are classified as high risk and frequently illiquid investments. Investment advisors and the brokerage firms that employ them have a responsibility to conduct proper due diligence on these investments and accurately disclose them to their clients. Financial responsibility for losses could ensue from failure to comply.
Are GWG L bonds secured?
The GWG Holdings, Inc. assets and a pledge of all of the common stock by our largest stockholders serve as security for the L Bonds.
What are GWG L bonds?
GWG Holdings L bonds are considered to be a high risk investment since they are speculative, illiquid, and unrated. An initial investment of $25,000 was needed for the $1,000 denominations. Surprisingly, the private placements (bonds GWG Holdings) were utilized to purchase life insurance contracts in the other markets. The company would then sell bonds on the life insurance assets. Also, insurers received more cash than the surrender value of their policies. However, the GWG L Bonds intended to offer bondholders a higher yield in exchange for accepting the chance that premiums or benefits would never be granted.
The GWG Holdings L Bonds, on the other hand, were not appropriate for individual retail investors, which included several retirees, the elderly, and conservative investors. That is not all, but making L Bonds isn’t particularly uncommon. GWG was able to call them “life bonds,” apparently as a promotional tool. On the other hand, L Bonds have some characteristics that can affect investors’ risks and possible returns.
The L Bonds issued by GWG Holdings are as follows:
- They had high-interest rates: Such investments pay a high rate of return and have a time to maturity of six to seven years. The bigger the annual rate paid, the longer the duration. GWG issued rates ranging from 4.25 % to 9% by December 2020.
- They were callable: The company could buy back an L Bond at any time without incurring a charge. However, the buyer could lose their investment, along with any coupon distributions that could be missed due to the bond’s early repurchase.
- Unlisted: The L bonds are not traded on any securities exchange because they are unlisted. Investors who purchased such high-yield bonds may be stuck holding the bonds for years, depending on the maturity period and if GWG decides to repurchase them. Furthermore, since no public trading information is provided, an investor cannot determine the worth of the L bond on a routine basis.
- Cannot be sold: Investors in GWG Holdings L bonds are not permitted to sell their bonds early, even if they require cash or do not wish to be vulnerable to default risk. The only time an L Bond owner could get their money back was if the company went bankrupt, died, or became disabled, and there was a 6% charge.
- Auto-renewable: Except when an L bondholder provides notice before the maturity period, the L bond will automatically renew and be replaced with another new one with similar terms and interest rates. More than half of all GWG L bondswere not redeemed at expiry; instead, they were replaced with another new bond.)
- Bonds were secured by collateral: GWG Holdings’ sole genuine assets are shares in subsidiary firms, which are allegedly backed by collateral. GWG Life, LLC was fully owned by GWG, which was a parent corporation. GWG DLP Funding III, LLC, and GWG DLP Funding II, LLC were the only actual assets of the company. The two are alleged proprietors of the company’s real assets, including the purchased insurance policies.
- GWG Holdings’ junior debt: GWG owes several lenders a considerable level of debt which is senior to the L Bonds, according to a recent disclosure.
- Offered by Emerson Equity LLC: Emerson Equity, a management broker-dealer that teamed with several other brokerage companies to offer the bonds to investors, offered GWG L bonds. Investors could pay around 8% in commissions to Emerson Equity LLC and other firms.
Are L bonds a good investment?
For most investors, GWG L Bonds are not a good investment because was considered both an alternative and high risk investment. It should not have been sold to conservative investors. Currently, GWG has filed for bankruptcy protection and it is unknown if investors will get their principal returned, let alone make a profit or interest payments. The bonds are based on life insurance policies. Currently, L Bonds from GWG Holdings has priced pennies on the dollar in the secondary market and are considered high-risk junk bonds.
Brokerage firms that sold GWG L bonds are being sued for bad sales practices and misrepresenting the products. Currently, FINRA and the Securities and exchange commission (SEC) are investigating. Most people will be looking at investment losses and the latest GWG Life reviews from investors has been negative.
What are bond payouts?
When you purchase a bond, you are borrowing money from an organization. In return, the organization promises to pay you interest payments, similar to stock dividend payments, for a certain period of time. The interest rate, also called the coupon, is paid twice a year, and you will receive your principal back when the bond matures, also called principal payments. These payments provide you with predictable income that doesn’t fluctuate with market movements. In addition, most bonds pay interest twice a year, but some can pay more frequently. It is unlikely you will see many pay monthly interest.
Suppose you bought a $10,000 bond with a five percent coupon rate. This bond will pay you the interest rate twice a year, for a total of twelve payments of $125 over the term of the bond. Each of these payments is equal to 7% of the original investment. You’ll get your money back in thirty years. To invest in bonds, you must understand the risks and how interest rates affect bond prices. The amount of interest you’ll get back is directly proportional to the duration of your bond, the credit rating of the issuing entity, and prevailing interest rates.
Investing in bonds can be risky because they are long-term investments, and interest rates fluctuate over time. If you purchase a 10-year bond paying 3% interest, it will be worth less a month later. In addition, you may be at risk of default if the issuer can’t pay you. In such a scenario, you’re at risk of losing both the interest payments and the principal.
GWG Holdings is being sued in a class-action lawsuit by L Bond investors
Investor claimants accused GWG Holdings board chairman Brad K. Heppner of putting up the L Bond marketing platform to gain money in a class action stocks fraud lawsuit launched in early 2022. According to them, the corporation ceased participating in life insurance plans in 2018 but instead switched to The Beneficient Company Group, LP.
Also, the investors claim they weren’t given complete information about where their cash was going. Surprisingly, L Bond sales increased by 65% between 2018 and 2020. GWG Holdings started marketing a $2 billion L Bond issuance to its clients in 2020 through a large chain of independent brokerage companies. The business sold $350 million in high-yield bonds from August 2020 to April 2021.
GWG Holdings L Bond investors have lost millions of dollars.
Assume you’re an L Bond buyer looking to increase your prospects of a complete financial recovery. In such a situation, instead of joining the class-action lawsuit, you should file your civil claim via FINRA arbitration.
GWG Holdings owe L Bondholders huge amounts of money, but L Bond investors are still not receiving the anticipated interest payments. In addition to the GWG Holdings suspended interest payments, maturity payments and their redemption payouts have been halted, and they cannot sell their bonds.
Why should you consider FINRA arbitration individually if you invested in GWG L bonds?
The information gathered strongly suggests that GWG deceived buyers in a number of ways. It involves lying to investors about its financial status and the risks associated with the L bonds. Many had no idea of the risk or the association to life insurance policies. To recuperate their losses, the majority of buyers file individual lawsuits with FINRA arbitration.
- Possibility of financial recovery: Investors who purchased the L bonds can enhance their chances of recovering their money by pursuing individual FINRA arbitration. Those who hire their attorneys can be represented to seek compensation through FINRA arbitration from the financial services firm that sold them the GWG L bond.
- Potential of fast resolution: Pursuing the case through FINRA arbitration will result in a quick resolution, which will enable investors to recoup their investment. According to FINRA, its arbitrations are typically quick compared to court cases.
- Bring a suit against Emerson Equity and GWG: Besides the class action against GWG Holding, you can as well file a civil suit against the company and Emerson Equity. Evidence shows that most of the L Bond purchasers have complaints against Emerson Equity LLC. Individual investors can institute cases against GWG Holdings through FINRA arbitration.
Contact our experienced securities lawyers
Financial advisors and brokerage firms are responsible to make adequate due diligence on both the client’s risk and portfolio objectives to make sure the investment products meet them. We are hearing from GWG L bond owners that they did not understand the risk associated with alternative assets.
If you bought GWG L Bonds from any broker at Emerson Equity LLC, Aegis Capital, NI Advisors, Centaurus Financial, Center Street Securities, or any other brokerage firms should contact Haselkorn & Thibaut online or speak to GWG L Bond investment attorneys at 1-800-856-3352 for a free confidential consultation.
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