Dallas financial services firm GWG Holdings Inc. and two of its subsidiaries filed for bankruptcy Wednesday and sought court approval of a $65 million loan to fund its operations while it restructures.
The company’s Chapter 11 filing follows a Securities and Exchange Commission investigation into its accounting practices, according to a regulatory filing. The agency sought records in February after GWG missed interest payments to bondholders the month before.
GWG listed debts of more than $2 billion as of Sept. 30, according to its bankruptcy filing. It has 27,700 creditors, many of whom are investors in the company’s L Bonds, a high-yielding debt instrument that financed the purchase of life insurance policies on the secondary market.
“These steps, including the receipt of additional financing, are expected to strengthen the company’s financial position going forward and help preserve the value of the company’s assets for the benefit of its investors,” said GWG Holdings chief executive Murray Holland in a statement.
GWG Holdings said it has an agreement with National Founders LP for the bankruptcy loan.
The company began with a focus on secondary life insurance, according to documents filed with a court in Houston, but has since expanded to invest in two entities, Ben LP and FOXO Technologies Inc. Ben LP has since become an independent entity, with GWG Holdings holding a substantial investment in it.
Last year, Ben LP was licensed under a new Kansas law that allowed for the chartering and creation of trust banks. These banks can finance alternative assets held in Kansas trusts and do it quickly with financial technology.
Dallas-based Beneficient Company Group LLC is GWG’s largest creditor and is owed over $2.9 million, according to the company’s filing. Beneficient is a financial services firm that helps the ultra-wealthy turn nonliquid assets into cash.
In addition to the SEC investigation, GWG Holdings told investors in January that it would pause its sales, interest, maturity, dividend and redemption payments. The Wall Street Journal reported that GWG was forced to stop selling additional L Bonds because of the accounting problems and resignation of its auditor.
Through GWG Holdings’ subsidiary, GWG Life, the company owned and managed life insurance policies with a face value of $1.8 billion as of late last year.
“At the end of this process, we expect to be on stronger financial footing for the future, further enhancing our ability to provide financial solutions to our customers,” Holland said.