Investor Lawyers Blog
Investors in securities sold by GWG Holdings (“GWGH”), including L Bonds, preferred stock, and common stock (listed on Nasdaq under the ticker symbol GWGH), may have legal claims, including possible claims if their investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the stockbroker or advisor.
According to an article that appeared in The Wall Street Journal on April 4, 2022 GWGH is reportedly preparing to file for Chapter 11 bankruptcy in the coming days. A bankruptcy filing would likely cause delays in payments of interest and principal to holders of GWGH L Bonds, and might also imperil the repayment of principal in whole or in part.
GWGH reportedly has about $1.6 billion in principal value of L Bonds outstanding. While no one knows for sure where L Bond investors will land in the event of a bankruptcy, the publication Investment News has reported that one anonymous GWGH L bond investor estimates that the GWG L Bonds would be worth 20 to 30 cents on the dollar if GWGH files for bankruptcy.
The possible bankruptcy is just the latest adverse event surrounding GWGH. Only last week, GWGH announced that it could not timely make its annual report filing with the Securities and Exchange Commission. GWGH has now failed to timely file annual reports with the SEC in three of the past four years. Further complicating matters, GWGH currently has no auditor. It last auditor, Grant Thornton, resigned in December 2021.
As previously discussed on this blog, on February 14, 2022 GWGH officially defaulted on its obligations to L Bond investors and confirmed in a letter to investors that it will not be making monthly interest or maturity payments on its GWGH L Bonds, or accepting redemption requests, while it continues to identify and evaluate restructuring alternatives with its advisors. Now it appears that this unspecified “restructuring alternative” will be a declaration of bankruptcy.
GWGH L Bonds are high-yield life insurance bonds used to finance the purchase of life insurance on the secondary market. Any type of investment in the secondary life insurance market is an extremely risky investment. While GWCH reportedly has close to $1 billion in tangible assets, the company also has over $1.5 billion in outstanding L Bonds, plus $327.7 million owed in senior credit facilities.
GWGH is a Dallas-based financial services firm that offers a variety of ‘services including life insurance and alternative investments. GWGH sold millions of dollars’ worth of L Bonds over the past several years, including sales to public investors through brokerage firms. L Bonds are a financial product that purportedly offers higher yields than typical publicly traded bonds. L Bonds are sold by life insurance companies that buy back the policies from policyholders. The bonds are supposed to help finance the purchase of the policies. According to a prospectus published by GWGH for the offering of $2 billion of L Bonds, the bonds were sold with varying maturity terms ranging from 2 years to 7 years, with interest rates ranging from 5.50% to 8.50%.
Broker dealers are required to perform adequate due diligence on any investment they recommend. They must ensure that all recommendations are suitable for the investor. Recommendations should be in line with the investor’s age, risk tolerance, net worth, and investment experience. If brokerage firms fail to adequately disclose risks or make unsuitable investment recommendations can be held liable for investment losses.
Investors who wish to discuss a possible claim involving GWGH securities may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).
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