Soreide Law Group is investigating prospective investor lawsuits against financial advisors that recommended GWG Holdings Inc. L Bonds to investors. Notably, GWG Holdings failed to make required principal and interest payments to investors last month. Here’s more about GWG Holdings L Bonds, including how a securities attorney may be able to help you potentially recover your losses.
Who Is GWG Holdings?
GWG Holdings Inc. (Nasdaq: GWGH) is a Dallas, Texas-based financial services firm that purportedly leads the field in liquidity solutions not linked to trading markets. The company also claims to be a service provider for illiquid investment owners.
What Are L Bonds?
GWG Holdings is the issuer of the L Bond, a speculative and risky high-yield bond whose sales have been suspended effective January 10, 2022. L Bonds are unrated life insurance bonds that typically fund secondary-market life insurance contract purchases. Evidently, since 2012, GWG has offered L Bonds with 2-7 maturities paying 5.5-8.5 percent interest.
GWG Holdings Suspends L Bond Sales
According to an SEC disclosure dated January 18, 2022, GWG Holdings’ Board of Directors authorized the company’s management to retain a legal advisor to help determine alternatives to the company’s capital structure and liquidity.
Evidently, GWG Holdings indicates in this and other filings that it depends on sales of L Bonds to remain liquid. The company stopped selling L Bonds throughout most of 2021 because of an untimely filing of an Annual Report on Form 10-K for 2020. In November of 2021, after addressing matters with SEC, the company resumed L Bond sales but obtained less-than-ideal results. GWG Holdings anticipated suspending L Bonds this year because of its projected late filing of an Annual Report on Form 10-K for 2021 and because its independent public accounting firm, Grant Thornton, declined to stand for reappointment.
GWG Holdings Fails To Make Principal And Interest Payments On L Bonds
Notably, according to the filing, GWG Holdings reportedly failed to make a January 15, 2022 interest payment of $10,350,000. It also was unable to make $3,250,000 in principal payments.
GWG Holdings refers to an October 2017 Amended and Restated Indenture, in which GWG Life LLC is the guarantor, and Bank of Utah is a trustee. This Indenture permits GWG Holdings thirty days to make those interest and maturity payments. The Indenture states that the company will default if it fails to make payment by the conclusion of that 30-day grace period.
If GWG Holdings defaults, the trustee and noteholders holding 25 percent or more in aggregate outstanding principal of L Bonds can opt for acceleration. With acceleration, L Bonds would be “immediately due and payable.” However, principal and interest payments on L Bonds are subject to the Indenture subordination provisions, which benefit senior debt holders.
Financial Advisors Making Unsuitable Recommendations, Misrepresentations Of L Bonds
Since L Bonds carry significant risks, they are not suitable for all investors. Potentially, one or more financial advisors made unsuitable recommendations of GWG Holdings L Bonds to investors with low-risk tolerances, conservative investment objectives, or liquidity needs. A financial advisor’s misrepresentation of the safety of L Bonds, or failure to consider an investor’s suitability profile when recommending or selling those products, can amount to negligence, a breach of fiduciary duty, and other sales practice violations.
With the recent filing, L Bond investors, including those who wanted principal protection and interest payments, must wait weeks to months before learning what will happen to their money.
Have You Experienced Losses By Investing In L Bonds?
Suppose a financial advisor or securities broker misrepresented L Bonds, or they unreasonably recommended these products to you. In that case, you could potentially bring a lawsuit against the financial professional and their firm to recover your losses. To learn more, contact Soreide Law Group at (888) 760-6552 and speak with an experienced securities lawyer about your situation. Soreide Law Group represents clients on a contingency fee basis and advances all costs. The law firm has recovered compensation for hundreds of United States investors wronged by securities brokers and financial advisors.