Dallas-based financial services firm GWG Holdings files for bankruptcy
Dallas financial services company GWG Holdings Inc. and two of its subsidiaries filed for bankruptcy on Wednesday and sought court approval for a $65 million loan to fund operations while it restructures.
The company’s Chapter 11 filing follows a Securities and Exchange Commission investigation into its accounting practices, according to a regulatory filing. The agency searched for records in February after GWG missed interest payments to bondholders the previous month.
GWG listed more than $2 billion in debt as of Sept. 30, according to its bankruptcy filing. It has 27,700 creditors, many of whom are investors in the company’s L bonds, a high-yield debt instrument that funded the purchase of life insurance policies in the secondary market.
“These actions, including the receipt of additional financing, should strengthen the company’s financial position in the future and help preserve the value of the company’s assets for the benefit of its investors,” the director said. General of GWG Holdings, Murray Holland, in a press release.
GWG Holdings said it reached an agreement with National Founders LP for the bankruptcy loan.
The company began with a focus on secondary life insurance, according to documents filed with a Houston court, but has since expanded to invest in two entities, Ben LP and FOXO Technologies Inc. Ben LP has since became an independent entity, together with GWG Holdings. holding a substantial investment there.
Last year, Ben LP obtained a license under a new Kansas law that allowed chartering and the creation of trust banks. These banks can fund alternative assets held in Kansas trusts and do so quickly through fintech.
Dallas-based Beneficient Company Group LLC is GWG’s largest creditor and owes more than $2.9 million, according to the company’s filing. Beneficient is a financial services company that helps the ultra-rich turn illiquid assets into cash.
In addition to the SEC investigation, GWG Holdings told investors in January that it would suspend sales, interest, maturity, dividend and redemption payments. the the wall street journal reported that GWG was forced to stop selling additional L bonds due to accounting issues and the resignation of its auditor.
Through GWG Holdings subsidiary GWG Life, the company owned and managed life insurance policies with a face value of $1.8 billion at the end of last year.
“At the end of this process, we expect to be on a stronger financial footing for the future, further improving our ability to provide financial solutions to our clients,” Holland said.