GWG gets OK to refinance portfolio, line up $630 million exit loan

By Sarah Lizee

Olympia, Wash., Oct. 28 – GWG Holdings, Inc. gained approval from the U.S. Bankruptcy Court for the Southern District of Texas to refinance its policy portfolio, rather than sell it.

On July 19, the court entered a final debtor-in-possession financing order and authorized the debtors to enter into a DIP option agreement, which provided a “one-way sale put option” that obligates the final DIP lenders to provide a $574 million stalking horse bid for the debtors’ policy portfolio if the debtors choose to sell it.

On Oct. 4, the debtors entered into an agreement with Vida Capital, which granted the debtors the option to refinance, rather than sell, the policy portfolio.

If exercised, the Vida option would require Vida to provide a replacement DIP facility to refinance in full the existing DIP facility, and a senior secured exit facility of up to $630 million.

The exercise deadline for both the sale option and the Vida option was set for Oct. 31.

GWG said the Vida option is expected to provide about $2.3 million more in up-front cash proceeds than the debtors’ estates would receive under the sale option.

The company said it also provides the debtors’ stakeholders with an opportunity to realize additional value, calculated on a present value basis, with a median of about $93.64 million from the run-off of the policy portfolio, assuming a sale of the portfolio at year seven of the refinancing, with the ultimate monetization strategy subject to the determination of the holder of the policy portfolio following the Chapter 11 cases, be it the reorganized debtors, a liquidating trust, or some other entity.

In contrast, under the sale option, the debtors would forego that opportunity for additional value, and all residual value in the policy portfolio would inure solely to the benefit of the third-party purchaser.

GWG is a life insurance company based in Dallas. The company filed bankruptcy on April 20, 2022 under Chapter 11 case number 22-90032.

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