GWG Holdings (NASDAQ: GWGH) sold $1.6 billion of bonds backed with life settlements through a network of independent broker-dealers. Sources say that GWG Holdings Inc. is getting ready for Chapter 11 bankruptcy protection. This could be as soon as this week.
GWG, an alternative asset management firm that issued high-yield bonds called L Bonds, has had a difficult time and repeatedly missed the deadline for filing audited financial statements over the past few years. It failed to pay $13.6 million in principal and interest payments for its L Bonds series in January. defaulted on those bonds.
Investors who purchased GWG L Bonds through brokers will likely sue those who sold them.
Matthew Thibaut, Esq., a partner of Haselkorn & Thibaut (InvestmentFraudLawyers.com) with over 20 years of investment-related litigation and arbitration experience commented that based on the calls we are getting recently, it appears that some financial advisors that were marketing GWG-related investments (and GWG L-Bonds in particular) were not accurately representing the level of risk associated with these high-yield securities. They opened a GWG investor hotline at 1-800-856-3352.
A source in the industry who requested anonymity confirmed that the company was planning to file for bankruptcy. This news was first reported by the Wall Street Journal on Monday morning.
GWG Holdings indicated that bankruptcy protection was the next step at the end of last week. GWG filed a Friday filing with the Securities and Exchange Commission stating that it could not file its 2021 annual reports and financial statements due to Grant Thornton’s resignation.
If the auditor is not available after three months, it indicates that bankruptcy filings are likely.
GWG spokeswoman, however, declined to comment on the company’s plans to file for Chapter 11 bankruptcy protection.
GWG will file for bankruptcy to punish investors in $1.6 billion worth of bonds. One GWG investor asked not to be identified, but he said that the L Bonds were worth between 20 and 30 cents per dollar.
GWG Holdings shares fell more than 20% this week to trade at $3.12 per unit just minutes afternoon. In October, the latest share price peak was $10.90.
GWG’s website states that Emerson Equity, a San Mateo broker-dealer that specializes in private placements, serves as the managing broker-dealer. In traditional investment banking terms, the managing broker-dealer acts in the same way as a lead underwriter. Emerson Equity was not the only broker-dealer that could have sold this product. There were many other registered investment advisors and broker-dealers who could have.
As institutional investors seek higher yields and diversification in this low-interest-rate environment, there’s been an increasing demand for life Settlements. Life settlement payouts are now generally higher than in the past because of this increased demand.
