Texas-Based Alternative Asset Firm Sends Letter About Failed Payments on Valentine’s Day
On February 14, 2022, GWG Holdings (GWGH) sent a letter to shareholders letting them know that it defaulted on the $3.25M in principal payments plus $10.35M in interest payments owed to L Bond investors.
The Texas-based alternative asset firm had a 30-day grace period to issue the payments beginning on January 15, 2022. GWG Holdings also stated that redemption requests would continue to be deferred. Now, L Bond investors are left with high-yield junk bonds that are not paying them the income promised. These are alternative investments that cannot be redeemed or sold.
Our skilled L Bond attorneys speak to investors who suffered losses in these risky, illiquid private placements. Unfortunately, it appears that many brokerage firms may have misrepresented the risks when promoting these high-yield bonds. They may even have unsuitably sold them to retail customers and inexperienced investors. Contact Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) today if you invested in L Bonds.
What are L Bonds?
GWG Holdings notified the US Securities and Exchange Commission (SEC) on January 18, 2022, that its failure to pay the $13.6M to shareholders was because of a decrease in L Bond sales. An L Bond is a private placement and an unrated life insurance bond. This type of investment is used to buy and pay for the premiums of life insurance settlement contracts purchased on the secondary market.
It gives the lender a high yield in return for bearing the risk that the benefits or the insurance policy premium may not be paid. L Bonds are illiquid and cannot be sold on the secondary market. Any attempt by an investor to redeem their L Bonds before maturity or the original policy holder’s death or disability will result in a 6% penalty.
Monthly and Maturity Payments to Investors Also on Hold
In its February 14, 2022 letter, GWG notified L Bond shareholders that the Company was looking at restructuring alternatives. It also shared that it was exploring options to “conserve and maximize the value of GWGH’s assets” to benefit investors and meet financial obligations.
GWG Holdings said this process could take another three to four weeks. The alternative asset firm also noted that monthly and maturity payments would not be issued during this process.
According to GWG’s balance sheet, its total outstanding debts — about $327.7M in senior credit facilities and an outstanding total of $1.552 billion in L Bonds —are greater than its reported $794.7 million in fair value of its tangible assets, $67.7 million in cash and restricted cash, and $226.1 million in alternative investments.
Also, the Company’s Form 10-K for the year concluding on December 31, 2020, reported nearly $530M in net losses. GWG stated concerns about being able to raise capital, its “recurring losses,” negative cash flow, and other issues.
FINRA Arbitration for L Bond Investors
GWG L Bonds may have been sold by hundreds of brokerage firms, including Emerson Equity, Aegis Capital, Centaurus Financial, and many others. If you are an L Bond shareholder, your best chance for financial recovery is to file a FINRA arbitration claim against the broker-dealer and their financial advisor that sold you these alternative investments.
SSEK Law Firm can help you explore your legal options. We have represented thousands of investors in recouping their losses. Call (800) 259-9010 today to speak with one of our knowledgeable L Bond attorneys.