Asset manager GWG Holdings Inc. won court approval late Thursday to tap $10 million in financing even after a bankruptcy judge questioned the loan mechanics and suggested it had a better offer on the table, WSJ Pro Bankruptcy reported. Judge Marvin Isgur of the U.S. Bankruptcy Court in Houston allowed GWG to borrow the emergency loan from National Founders LP after the lender agreed to sweeten some terms. GWG, known for selling life-insurance bonds to individual investors, said in court papers that it needed the lifeline to avoid an imminent liquidation after filing for bankruptcy earlier this week. GWG owes roughly $1.6 billion in financial instruments known as L bonds, which pooled money from bond investors to purchase life-insurance policies on the secondary market, aiming to use the policy payouts when people die to repay those debts. L bonds were largely marketed to individual investors, who bought them after hearing a sales pitch from regional broker-dealers selling the securities on GWG’s behalf. GWG is subject to a continuing Securities and Exchange Commission probe into the company’s accounting and its issuance of L bonds. There are roughly 27,000 bondholders with an average $45,000 investment, according to the company. Scott Alberino, a lawyer for bond trustee Bank of Utah, said in Thursday’s court hearing that GWG’s bankruptcy had left these retail bondholders “in the lurch” and complained about a lack of engagement from the company. The trustee wasn’t notified in advance of the chapter 11 filing despite being the largest creditor of the bankruptcy case, he said.
