GWG Holdings undertakes financial restructuring

June 2022 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

June 2022 Issue

In a move designed to strengthen its financial position and enhance the value of its assets, financial services firm GWG Holdings, Inc., along with its subsidiaries GWG Life, LLC and GWG Life USA, LLC, has filed for Chapter 11 bankruptcy protection.

Filing for insolvency in the US Bankruptcy Court for the Southern District of Texas, GWG is reportedly $2bn in debt, which includes $1.6bn in outstanding bonds. The company has stated that its insolvency is due to its inability to access financial markets, and regulatory issues connected to the US Securities and Exchange Commission’s (SEC’s) investigation into GWG’s accounting practices.

In 2020, the SEC began an investigation into “certain accounting matters” with GWG and how it issued bonds. The following year, the regulator noted that GWG had filed certain financial statements late, which led the company to cease issuing bonds over a period of eight months, taking a significant hit to its liquidity as a result.

GWG is also facing legal action from investors; shareholders having accused the company of misusing investor funds and of failing to disclose that it was under investigation by the SEC.

In addition to the Chapter 11 filing, GWG has secured a debtor-in-possession (DIP) credit agreement to facilitate the restructuring process, subject to court approval, and has filed a motion with the bankruptcy court for approval of this financing. The DIP credit agreement is structured as a multiple draw term loan facility in an aggregate principal amount of approximately $65m and will be provided by National Founders LP.

Moreover, the proceeds of all or a portion of the DIP credit agreement may be used for, among other things, general corporate purposes, including working capital and permitted acquisitions, administrative costs, premiums, expenses and fees of the transactions contemplated by the Chapter 11 cases, for payment of court approved adequate protection obligations and other such purposes consistent with the DIP credit agreement.

“These steps, including the receipt of additional financing, are expected to strengthen our company’s financial position going forward and help preserve the value of our assets for the benefit of investors,” added Murray T. Holland, chairman, president and chief executive of GWG.

In addition, while it moves as quickly as possible through the restructuring process, GWG has filed

with the bankruptcy court a series of customary motions seeking to maintain business as usual operations. Approval of these ‘first day’ motions, which GWG expects to receive in short order, will help facilitate a smooth transition into the Chapter 11 process.

Serving as restructuring counsel to GWG is Mayer Brown LLP, with PJT Partners LP serving as financial adviser and FTI Consulting, Inc. serving as restructuring adviser.

Based in Dallas, Texas, GWG, through its subsidiary GWG Life, LLC, owns and manages a diverse portfolio of life insurance policies that includes $1.8bn in face value of life insurance policy benefits.

Mr Holland concluded: “At the end of this process, we expect to be on stronger financial footing for the future, further enhancing our ability to provide financial solutions to our customers, preserving and enhancing the value of our assets for our investors, and positioning us to pursue additional business opportunities in the insurance space.”

Fraser Tennant