GWG Holdings, Inc. (“GWG“) or (NASDAQ: GWGH) missed maturity and interest payments that were due on 15th January 2022. It sent out a notice to L Bond owners on the 24th which said that for the company to figure out alternatives to the missed payments would take “at least three to six weeks.” It could even take longer.
A reader of GWG’s communication would gather that they had no intention of making the missed payments even within the grace period of 30 days. This could lead some holders of the L Bonds and trustees to accelerate their Bonds, which would make them due immediately, and as a result, payable, further stretching the company’s resources.
There is growing concern that this acceleration could create a ‘run’ on the company that could be financially ruinous not only for GWG but its L Bondholders as well.
GWG Holdings missed principal payments of $3.25 million and interest payments of $10.35 million due on 15th January 2022, as per the company’s latest filing with the Securities Exchange Commission (SEC). These payments pertained to L Bonds issued by the company.
A grace period of 30 days for these payments had been incorporated in the updated and restated indenture dated 23rd October 2017. Failure to do so, make payments within the grace period, would be classified as a default. This would give the right to holders and trustees holding in excess of 25% in the outstanding principal amount of the Bonds, to accelerate the L Bonds. This acceleration will cause them to become due, and payable, immediately, based on other conditions being satisfied.
It is, of course, a matter of concern as such an event could cause further financial turmoil for GWG as well as the bondholders.
GWG Holdings had earlier, on the 10th of January, suspended the sales of L Bonds which had been one of its chief sources of liquidity.
Just a few days earlier, the news of the resignation of GWG’s independent auditors, Grant Thornton LLP, had been announced. Their resignation was effective 31st December 2021. It was announced by GWG that they would not be in a position to complete its Annual Report in Form 10-K in the stipulated time of 31st March 2022.
What are L Bonds
L Bonds are life insurance bonds that are unrated. They are meant to fund the secondary market purchase of life insurance contracts. They have been known to pay between 1 and 5% of the market price as commission to brokers.
The specialty high-yield bond is the creation of GWG Holdings which has been offering them since 2012. The 2020 offering of L Bonds of a value of $2 billion has gone out to a growing network that comprises advisors from 127 firms, as per a Form 8-K filing of the company.
The maturity of L Bonds offered by GWG has ranged from 2 to 7 years, paying interest from 5.5 to 8.5%.
The underlying security for the L Bonds is the assets of GWG Holdings, along with its largest stockholders pledging their common stock.
They are considered to be unsuitable for investors who either have liquidity needs that could emerge or prefer secure investments. L Bonds are high-risk, speculative, illiquid private placements and hence unsuitable for many investors.
Legal Recourse for GWG Investors
Haselkorn & Thibaut, P.A. (InvestmentFraudLawyers.com) is a national securities law firm that represents investors in a variety of Financial Industry Regulatory Authority (FINRA) arbitration claims nationwide in a bid to recover losses arising out of misconduct of brokerage firms and their registered representatives. It is investigating several cases of losses incurred by holders of L Bonds as missed payments have caused concern to many investors.
If you are an impacted customer, we encourage you to contact their securities arbitration lawyers for a free consultation and to understand your rights and options. You could also reach the firm at 1-800-856-3352.
