GWG Holdings files Chapter 11 plan and disclosure statement

By Sarah Lizee

Olympia, Wash., Dec. 1 – GWG Holdings, Inc. filed a Chapter 11 plan and related disclosure statement with the U.S. Bankruptcy Court for the Southern District of Texas.

As of the initial petition date, GWG had outstanding public L bonds of roughly $1.26 billion, liquidity bonds of about $800,000, and seller trust L bonds of roughly $367 million, for a total amount of about $1.63 billion.

GWG said the plan gives bondholders, who hold the largest amount of outstanding debt issued by the company, the ability to benefit from the value of the company’s life settlements portfolio and its interests in Beneficient Co. Group, LP and FOXO Technologies, Inc.

The company will continue as a going concern after the effective date and will be governed by a new board selected by a committee. The new board will determine whether to retain the company’s interests in Beneficient and FOXO or transfer all or a portion of such interests into a newly formed liquidating trust to the extent necessary to enable the company to comply with or otherwise qualify for an exception to or exemption from the 1940 Act.

In any event, the interests in Beneficient and FOXO will be monetized over time and the proceeds will be reinvested or distributed to holders of certain claims and interests, as determined by the new board.

Additionally, a litigation trust will be established that will be vested with causes of action against the non-released parties as determined by the specially constituted investigations committee of the GWG Holdings board.

Bondholders and other holders of claims and interests will receive preferred equity interests in the reorganized GWG Holdings and will receive distributions, whether through the monetization of certain assets or distributions from the litigation trust, in line with a distribution waterfall.

According to the disclosure statement, holders of other secured claims and other priority claims will be paid in full.

Holders of bond claims will receive their pro rata share of the portfolio proceeds, and new series A preferred stock entitled to cumulative dividends from April 20, 2022 at 9% per annum. Pending cash distributions, such dividends will be payable in kind. The preferred will be subject to mandatory redemption in five years, may be redeemed at any time without penalty at stated value, plus accrued dividends, and, pending any mandatory or optional redemption, will be entitled to cash distributions under the priority of payment waterfall.

Any such initial cash distributions will be applied first to any accrued dividends relating to the period from April 20, 2022 and not reduce principal unless dividends accrued up to the effective date are paid in full.

The debtors and creditors will agree to a cash sweep formula and mechanism for the payment of excess proceeds as cash dividends to the holders of series A preferreds.

The series A stock may be convertible into new common equity at a conversion ratio to be determined by the debtors and creditors.

Holders of general unsecured claims will receive their pro rata share of new series B preferred stock accruing cumulative dividends from the effective date at the rate of 3% per annum. Pending cash distributions, the dividends will be payable in kind. These preferreds are subject to mandatory redemption after eight years and may be redeemed at any time without penalty at stated value plus accrued dividends, and, pending any redemption, will be entitled to cash distributions in line with the waterfall.

Holders of GUC convenience claims will receive payment in full in cash or other treatment leaving the claims unimpaired.

Each holder of a DLP entity general unsecured claim will receive payment in full in cash.

Other than the policy portfolio equity interests, any debtor’s claim against any other debtor will be deemed satisfied.

Intercompany interests will be canceled.

Holders of series 1 and 2 preferred interests will receive their pro rata share of series C and D perpetual preferred stock, respectively. The preferreds will accrue cumulative dividends from the effective date at the rate of 3% per annum. Pending cash distributions, the dividends will be paid in kind. The preferreds may be redeemed at any time at stated value plus accrued dividends and will be entitled to cash distributions under the waterfall.

Holders of common stock will receive their pro rata share of new common stock.

GWG recently lined up with Vida Capital a $630 million senior secured exit facility to refinance its existing debtor-in-possession facility, which is being used to fund the portfolio proceeds amount, the initial trust funding amount and the initial capital amount.

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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