Bond interest payments were tied to the payout in the event that the life insurance policies were bought on the secondary market. The value of GWG’s portfolio could decline, which could make it so that GWG Holdings would be unable to pay interest to the holders of its L bonds if the insured party outlived their expected life expectancy or the insurance company holding the policy went bankrupt. Let’s read more about all things regarding L Bond below.
What Is a Private Placement?
When shares or bonds are sold off-market to institutions and investors who have been hand-selected, it is known as a private placement. It is a less regulated alternative to an initial public offering (IPO) for a business looking to raise money for growth. Private placement saves time and money by avoiding the need for a bond agency credit rating when an issuer is selling bonds.
Are Dividends Paid on Bonds?
No, only shares of stock pay dividends; bonds do not. A percentage of a company’s income is delivered per share as dividends, However, those who own bonds receive recurring payments from them. These are interest payments on the bond’s principal, known as coupons, and they typically have a fixed interest rate.
Innocent L Bonds:
Any bond rating company did not rate the L bonds. “Investing in our L Bonds may be considered speculative and carries a significant degree of risk, including the chance of losing your entire investment,” their issuer, GWG Holdings, wrote in prospectuses.
The secondary market acquisition of life insurance contracts was financed by an L bond issued by GWG Holdings. L Bonds were sold by GWG Holdings between 2012 and 2021. GWG, however, submitted a chapter 11 petition in 2022 to deal with its more than $2 billion in liabilities.