Texas Bankruptcy Judge Approves New Chapter 11 Financing Option for GWG Holdings
New Financing Package Is Still No Guarantee of Financial Recovery for 27,000 L Bond Investors
The Texas Southern Bankruptcy Court has approved a new debtor-in-possession financing package for GWG Holdings. The alternative asset firm, which sold $1.6B of L Bonds to investors, filed for Chapter 11 bankruptcy protection in April 2022. Not long after, a judge at the US Bankruptcy Court in Houston allowed GWG to borrow a $10M emergency loan from National Founders LP to avoid immediate liquidation.
This new verbally approved financing package is for $65M and offers the option to sell GWG’s life insurance asset portfolio for at least $610M—that’s $1B less than what L Bond investors are owed. It takes the place of another $65M financing package deal, includes lower interest rates and fees, and provides other protections. The loan is to be issued by Chapford SMA Partnership LP.
Unfortunately, regardless of the outcome of these bankruptcy proceedings, it will be challenging for L Bond investors to recover much from the bankruptcy process, and this new financing package won’t help much. The Wall Street Journal reports that in the wake of the Chapter 11 filing, some 27,000 GWG L Bond investors are owed $1.3B.
Ex-GWG Chairman Earned $174M As Brokerage Firms Sold More L Bonds
GWG L Bonds were sold by more than 140 regional broker-dealers to customers, including retail investors and retirees, many of whom are now grappling with significant investment losses. These risky, private placements were never suitable for most of these investors, and many now claim they were never fully apprised of all the risks. Visit GWG Holdings, Inc. and GWG Holdings L Bonds for more information.
It is important to note that even as L Bond investors are left fighting to get their money back, according to a Wall Street Journal review, GWG’s former Chairman Brad Heppner and the entities he operated already had managed to garner at least $174M from his “takeover” of the alternative asset firm in 2019. Not only did he allegedly use the network of brokerage firms to increase L Bond sales, but as earlier investors were receiving bond repayments, GWG purportedly moved $230M to his Heppner’s Beneficient Life Group. (The WSJ reports that most of that money went to Heppner and his affiliated entities.)
In 2020, The US Securities and Exchange Commission (SEC) apprised GWG that it was under investigation. After an SEC branch found Beneficient and GWG Holdings had been incorrectly conducting their accounting, both entities had to restate their financials. L Bond sales were frozen during this time. Although GWG eventually tried to get these going again, brokerage firms balked at continuing to sell these complex, speculative investments to customers in the wake of the Commission’s probe and the company’s other problems. Beneficient is no longer affiliated with GWG Holdings.
How Do You Recover Your L Bond Losses?
Seasoned GWG L Bond Investment Law Firm
Our L Bond loss attorneys and investment loss lawyers at Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) represent many investors in Financial Industry Regulatory Authority (FINRA) arbitration against the brokerage firms that marketed and sold them these risky, life settlement-backed bonds.
Our clients seek to recover millions of dollars from these broker-dealers against bond losses. Many of their financial advisors were also registered investment advisers that may have marketed L Bonds under local firm names. Regardless, because these brokers were registered with brokerage firms, they could sell L Bonds to customers.
Call SSEK Law Firm at (800) 259-9010 today to speak with our skilled bond loss lawyers.