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GWG Reportedly Preparing for Chapter 11 Bankruptcy Protection

GWG Holdings Inc. (Nasdaq: GWGH), a financial services firm and sponsor of non-traded direct investment offerings, is reportedly preparing to file for Chapter 11 bankruptcy protection "in the coming days," according to The Wall Street Journal.

GWG Holdings Inc. (Nasdaq: GWGH), a financial services firm and sponsor of non-traded direct investment offerings, is reportedly preparing to file for Chapter 11 bankruptcy protection “in the coming days,” according to a report by The Wall Street Journal, citing people familiar with the situation. The company reportedly sold $1.6 billion in life insurance bonds through the independent broker-dealer channel.

After missing multiple filing deadlines of its financial statements in recent years, GWG notified the Securities and Exchange Commission on Friday that it was again unable to file its 2021 annual report within the prescribed time period after its former independent registered public accounting firm, Grant Thornton LLP, resigned at the end of 2021. The company said that it was in the process of reviewing potential candidates.

Earlier this year, GWG hired restructuring financial advisor, FTI Consulting Inc., and restructuring legal advisor, Mayer Brown LLP.

In a letter to shareholders from late January, the company said that the restructuring advisors will help the board and management “in identifying and evaluating alternatives with respect to its capital structure and liquidity, as well as available options for maximizing the value of GWGH’s assets and meeting its financial obligations, given the company’s current financing options and current state of its L Bond sales.”

After suspending sales of its L bonds in January, the company failed to make its interest payment of approximately $10.4 million and principal payments of approximately $3.25 million with respect to its L bonds.

Last year, GWG suspended the L bond offering for eight months after missing the SEC filing deadline for its 2020 annual report. The company reopened its L bond offering in December 2021 and then “paused” sales in January 2022 while it “works with its advisors to identify and evaluate options available to the company.”

“We are progressing in our work with financial and legal advisors hired to assist the company’s board of directors and management in identifying and evaluating restructuring alternatives, as well as available options to best conserve and maximize the value of GWGH’s assets for the benefit of our investors and to meet the company’s financial obligations. We expect that the process of identifying and considering various alternatives to take at least another three to four weeks, and may take longer,” the company said in a letter to shareholders on February 14th.

During the eight months it was not selling L bonds, GWG said that it “used liquidity reserves and financings of its assets to fund operations and service debt obligations.”

The firm’s unaudited financial statements from the third quarter of 2021 show its liabilities totaled $2.06 billion, including roughly $1.28 billion of L bonds, and it had $3.49 billion in total assets.

In November 2021, GWG informed investors that it was under investigation by the SEC’s Division of Enforcement after being subpoenaed in October 2020 to produce documents related to its investment products, including its L bonds, as well as other accounting matters.

Following the publication of The Wall Street Journal article on Monday, shares of GWG dropped 21 percent to $4.22.

This story is developing.

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