Concerned about an investment in GWG’s L Bonds?
GWG Holdings, Inc., a financial services company, purchases life insurance policies in the secondary market in the United States, according to its website. It purchases or finances life insurance assets from consumers in the secondary market at a discount to the face value of the policy benefit. The company was reportedly acquired by The Beneficient Company, L.P., in a reverse merger transaction on December 28, 2018.
GWG Holdings has a history of selling L Bonds dating back to January 2012. The company began publicly offering and selling L Bonds in January 2012 under the name “Renewable Secured Debentures”. These debt securities were re-named “L Bonds” in January 2015, according to a June 3, 2020 prospectus. In 2020, the company launched a new offering called the Liquidity Bond 2020, constituting secured debt of GWG Holdings, Inc.
L Bonds were publicly offered and sold on a continuous basis in 2014, 2017 and again in 2020 for a total of $4 billion in principal amount. The most recent offering will reportedly run on a continuous basis through June 2023, according to the prospectus.
In May 2019 the company temporarily suspended the offering of L Bonds as a result of delay in filing certain periodic reports with the SEC, but recommenced sales of the L Bond offering on August 8, 2019.
The bonds apparently have renewal features subject to the right of bondholders to elect to receive payment at maturity. Interest is payable monthly or annually depending on the election of the investor.
The company notes in the prospectus, based on projections the company believe it will have “sufficient cash resources to finance our operations, satisfy our other obligations, and to fund anticipated additional investments in Beneficient through August 14, 2021.”
Risk Factors of GWG L Bonds
- If GWGH becomes unable to issue and sell additional L Bonds to finance its investments in Ben and maintain its portfolio of life insurance policies, the company’s ability to pay interest to L Bond investors and repay the principal of L Bonds at maturity could be adversely affected. Upon maturity, there is an automatic renewal of L Bonds unless investors elect repayment.
- If a significant number of holders of L Bonds and Seller Trust L Bonds demand repayment of those instruments upon maturity instead of renewing them, and at such time GWGH does not have sufficient capital on hand to fund those repayments (and does not otherwise have access to sufficient capital), it may be forced to liquidate some of its life insurance policies or other assets, which could have a material and adverse impact on its results of operation and financial condition.
- GWG Life is a lender to Ben and certain trusts established as part of the alternative financings extended by Ben. These loans are unsecured and the loans to the trusts are subject to intercreditor agreements that limit GWG Life’s ability to enforce its rights under the related loan agreements. These facts present a risk to investors that the security granted by GWG Life for obligations under the L Bonds may be insufficient to repay the L Bonds.
According to the prospectus, a summary of risks include but are not limited to: a continued need to access financing, changes in economic environments including interest rates, the fact that L Bonds are subordinate to senior debt of GWG Holdings including any senior credit facility and other factors. Investments in L Bonds shall be considered illiquid until their stated maturity.
Recovery of Investment Losses
The White Law Group continues to investigate potential securities claims involving broker dealers who may have unsuitably recommended GWG debentures and L bonds to investors.
When a broker overlooks suitability requirements or misleads a client, not only are they potentially liable for investment loss, the brokerage firm that employs such brokers may also be on the hook for losses.
If you invested in GWG’s L Bonds and would like to discuss your litigation options with securities attorneys, please call The White Law Group at 888-637-5510 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.
For more information on The White Law Group, visit https://www.whitesecuritieslaw.com.