GWG Holdings bondholder group seeks conversion of case to Chapter 7

By Sarah Lizee

Olympia, Wash., June 22 – A small group of GWG Holdings, Inc. bondholders is seeking conversion of the company’s Chapter 11 bankruptcy case to Chapter 7, according to a motion filed Tuesday with the U.S. Bankruptcy Court for the Southern District of Texas.

“We are keenly aware that this request is out of the ordinary, but we believe there are valid and ample reasons for it,” said the group, which holds a small amount of the company’s series L bonds.

The bondholders said GWG has just two employees and three non-tangible financial assets and won’t be able to reorganize under Chapter 11.

The firm’s primary asset is a portfolio of secondary life insurance policies that are pledged as collateral to the senior lenders who are owed about $400 million. The remaining equity value, estimated at $300 million, needs to be realized quickly for the benefit of L bond holders, who are owed about $1.6 billion, the group said.

“The longer this portfolio is held, the more policy premiums have to be paid,” the bondholders said.

The group noted that annual premiums are estimated at $80 million per year, all of which is paid via the debtor-in-possession facility.

“Each payment from the DIP means less equity collateral for the L bond holders,” the group added.

The other two assets are minority stakes in two other companies, which the bondholders say should be liquidated in an orderly fashion as soon as possible.

GWG is a life insurance company based in Dallas. The company filed bankruptcy on April 20 under Chapter 11 case number 22-90032.

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