GWG Holdings reaches settlement with official bondholder committee

By Sarah Lizee

Olympia, Wash., March 13 – GWG Holdings, Inc. has reached a settlement with its official committee of bondholders and L Bond Management LLC, which will form the basis for the debtors’ soon-to-be-filed amended Chapter 11 plan, according to a statement filed by the committee on Saturday.

The committee told the U.S. Bankruptcy Court for the Southern District of Texas that the parties hoped to file an amended plan by March 14 but expect to file it by no later than March 17. They will seek approval of the disclosure statement at a March 20 hearing.

Two trusts

The plan will provide for the debtors to be liquidated and for the creation of two liquidating trusts.

The first trust will take the needed steps to wind down the business affairs of the debtors and maximize the value of their non-litigation assets, including the debtors’ equity interests in the Beneficient Co. Group. LP and its subsidiaries, the newly formed entity that will hold the policy portfolio, and FOXO Technologies, Inc.

The trustee for the wind-down trust will be the debtors’ chief executive officer and chief restructuring officer, Jeffrey S. Stein, or an affiliate of his.

The wind-down trust will issue trust interests in six series to all holders of claims against and equity interests in the debtors who are not being paid in full in cash on the effective date of the plan.

Distributions to each holder of the trust interests will be in line with the priority set forth in the mediation agreement, which provides for distributions to bondholders ahead of distributions to other stakeholders.

The second trust will receive all non-released litigation assets of the debtors as well as the debtors’ interest in any insurance policies covering directors and officers of the debtors.

The trustee for the litigation trust will have discretion to prosecute or settle such claims, with bankruptcy court approval required in some circumstances, and will be appointed by the bondholder committee.

The trustee will be an independent, third-party fiduciary with no affiliation with any committee member nor a bondholder.

Proceeds will be distributed to the wind-down trust for further distribution to holders of trust interests in line with the waterfall, which provides for distributions to bondholders and general unsecured creditors on a pari passu basis after satisfaction of any allowed diminution in collateral value claims of the indenture trustee arising from the adequate protection liens granted under the debtor-in-possession financing orders.

Beneficient

Beneficient and affiliates will not receive a release under the plan, and all potential claims and causes of action held by the debtors’ estates against Beneficient, and any other party that is not released under the plan, will be assigned to and pursued by the litigation trust on and following the effective date.

However, the debtors and the creditor proponents may engage in further negotiations with Beneficient.

If a settlement is reached before the confirmation hearing, the debtors will file a separate motion seeking approval of the settlement.

The plan will be able to be confirmed and its effective date able to occur whether or not a settlement is reached with Beneficient.

If a settlement is approved, the terms will be implemented without any re-solicitation of the plan.

L Bond Management settlement

L Bond Management has agreed to subordinate 15% of claims on account of the bonds held by the trusts named in the mediation agreement on whose behalf L Bond Management acts to other bondholder claims.

In exchange, L Bond Management and some of its related parties will receive a full release of any and all civil claims held by the debtors’ estates against them.

Broker-dealer settlement

Broker-dealers and registered investment advisers who sold public L bonds may elect to receive a release from the debtors of any estate causes of action in exchange for paying the debtors cash in the amount equal to 30% of all value received by such electing broker-dealer from the debtors on account of the sale of public L bonds and a mutual release of all claims held by such broker-dealer against the debtors.

Any broker-dealer may opt in to the settlement by submitting an election notice and making the requisite payment within 90 days following the plan’s effective date.

Any payments received on account of the broker-dealer settlement will be allocated to the litigation trust.

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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