Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) represent investors who have suffered losses in GWG L Bonds. These high-yield bonds were issued by Dallas-based alternative asset firm GWG Holdings, Inc. (NASDAQ: GWGH) from 2012 until April 2021.
Now, L bond investors may be looking at significant losses in the wake of GWG’s Chapter 11 bankruptcy filing on April 20, 2022, and its other recent financial and regulatory woes. According to unaudited financial statements, as of September 30, 2021, GWG Holdings had over $2B in total liabilities, including nearly $1.3B of L Bonds. In February 2022, the company defaulted on $13.6M in payments plus interest that it owes investors.
老练的 GWG Holdings L Bond 律师
Our seasoned GWG Holdings L Bonds attorneys represent investors whose broker-dealers sold them these financial instruments. Please contact SSEK Law Firm today at (800) 259-9010 or contact us online.
What Are L Bonds?
L Bonds are risky investments that are unrated, speculative, and illiquid. Sold in denominations of $1K, a minimum investment of $25K was required. These private placements were used to buy life insurance policies on the secondary market. Policyholders were then to be paid more than the policy's surrender value. Meanwhile, the GWG Holdings L Bonds sought to give the bondholder a greater yield in return for taking on the risk that the benefits or premiums might never be paid.
However, L Bonds were never suitable for retail investors, including many retirees, elderly investors, and conservative investors. Not only that, but also, there is nothing unique to making an L Bond. It is presumably a marketing tool that allowed GWG to refer to them as “life bonds.” However, L Bonds have certain features that can impact investors' risks and potential rewards.
GWG L Bonds: A Detailed Look at These Risky High-Yield Bonds
The GWG Holdings L Bonds are:
- High in interest: These investments have a maturity duration of 6 months to 7 years. The longer the term, the higher the interest rate offered. As of December 2020, GWG offered rates between 4.25% and 9%.
- Callable: GWG can repurchase an L Bond whenever it wants without penalty. Meanwhile, the investor would lose the investment, including coupon payments that would be missed because the bond was repurchased early.
- Unlisted: They are not tradable on any stock exchange. Depending on the maturity date or whether GWG Holding ever decided to buy an L Bond back, an investor who bought these high-yield bonds could be left holding them for years. Also, there is no way for an investor to regularly gauge the value of an L bond because there is no trading data available to the public.
- Cannot be sold: GWG Holding L bond investors are not allowed to offload their investment early even if they need liquidity or no longer want to be exposed to a risk of default. The only reason an L Bond holder could redeem their investment was in the event of insolvency, death, or disability, and there would be a 6% penalty.
- Supposedly secured by collateral: In reality, the only real assets that GWG Holdings owns are interests in subsidiary companies. GWG was merely a holding company that solely owned GWG Life, LLC. The latter’s only tangible assets are its subsidiaries: GWG DLP Funding II, LLC and GWG DLP Funding III, LLC. These two are the supposed owners of the enterprise’s actual assets, including the bought life insurance policies.
- Junior debt for GWG Holdings: A recent prospectus disclosed that GWG owes other lenders a significant amount of debt that is senior to L Bonds.
- Auto-renewable: Unless an L bond investor gives notice ahead of the maturity date, the bond is renewed automatically and replaced with a new one with the same terms and interest rate being offered. (Over 50% of outstanding GWG L bonds are not repaid at maturity but are replaced with a new bond.)
- Sold by Emerson Equity: GWG Holding L bonds were sold by managing broker-dealer Emerson Equity, which partnered with other brokerage firms to sell them to customers. These investors would pay Emerson and the other firm up to 8% in commissions.
Class Action Lawsuit Against GWG Holdings
In a class action securities lawsuit filed in early 2022, investor plaintiffs accused GWG Holdings board chairman Brad K. Heppner of setting up the L Bond distribution platform to make himself money. They contend that in 2018, the company stopped investing in life insurance policies and instead started investing in The Beneficient Company Group, LP.
The investors allege that they were not fully apprised of where their money was going. Meanwhile, from 2018 to 2020, L Bond sales rose by 65%. In 2020, GWG Holdings began selling a $2B L Bond offering marketed by a huge network of independent brokerage firms to their customers. Between August 2020 and April 2021, the company sold $350M of these high-yield bonds.
GWG Holdings L Bonds Investors Lose Millions of Dollars
Suppose you are an L Bond investor and want to maximize your chances for full financial recovery. In that case, it is vital that you file your own claim for damages through FINRA arbitration rather than joining a class action case.
GWG Holdings owes L Bond investors millions of dollars, but they are also not getting the income they were promised. Their redemption payments are suspended, and they have no way of getting rid of their bonds.
Seasoned Securities Attorneys If you were sold GWG L Bonds by a broker at Aegis Capital, Emerson Equity, Centaurus Financial, NI Advisors, Center Street Securities, or another firm, contact us online or ask to speak with one of our GWG L Bond investment lawyers at (800) 259-9010 today.
