GWG files amended plan; disclosure statement set for March 10

By Sarah Lizee

Olympia, Wash., Feb. 13 – GWG Holdings, Inc. filed an amended Chapter 11 plan and disclosure statement on Friday with the U.S. Bankruptcy Court for the Southern District of Texas.

The debtors filed an initial plan on Dec. 1, understanding that there was agreement among several of the debtors’ constituencies on the general framework of the plan, but that significant issues still remained open.

As such, a disclosure statement hearing hadn’t been scheduled. Instead, the debtors began mediation in late January. The mediation is ongoing, and GWG said it would file a further amended plan if a global resolution is reached.

According to a redline of the amended plan, the company will no longer continue to operate as a going concern following the effective date of the plan. A wind-down trust will be established for monetizing assets.

Other secured claims, other priority claims, general unsecured convenience claims an DLP entity general unsecured claims are unimpaired under the plan.

Holders of bond claims will receive their pro rata share of portfolio proceeds, provided that the allowed claim of the indenture trustee will be satisfied first prior to any further pro rata distributions.

Holders of bond claims will also receive their pro rata share of new series A preferred stock entitled to cumulative dividends from April 20, 2022 at 9% per annum, payable in kind pending cash distributions. The preferreds 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.

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 3% per annum, payable in kind pending cash distributions. 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.

Other than policy portfolio equity interests, which will be transferred to the wind-down trust, any debtor’s claim against another debtor will be deemed satisfied.

Intercompany interests will be canceled.

Holders of series 1 preferred interests will receive their pro rata share of new series C preferred stock, accruing cumulative dividends at 3% per annum, payable in kind pending cash distributions. They 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 series 2 preferred interests will receive their pro rata share of new series D perpetual preferred stock accruing cumulative dividends at 3% per annum, payable in kind pending cash distributions. These preferreds will be redeemable 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 common stock will receive their pro rata share of new common stock in the wind-down debtor. Holders will only be entitled to cash distributions upon the satisfaction and redemption of the new preferred stock.

The disclosure statement hearing is scheduled for March 10.

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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