Accelerates GWG’s growth, financial
capability and diversification
GWG Holdings, Inc. (Nasdaq: GWGH) and The Beneficient Company
Group, L.P. (BEN) today announced an agreement between BEN and Jon
Sabes, Chairman and CEO of GWG, and Steven Sabes, a director
of GWG, pursuant to which GWG and BEN will significantly expand
their strategic partnership. Through a series of transactions, the
expanded partnership enhances and accelerates one of the most
innovative service and liquidity providers in the rapidly growing
alternative asset industry.
BEN and GWG launched their strategic
relationship through a transaction that was completed on December
28, 2018 (the “Prior Transaction”). The Prior Transaction furthered
both companies’ long-term objectives to expand the scope of the
respective products and services they each provide to investors in
alternative assets. As a result of the Prior Transaction, GWG holds
approximately 86% of common partnership units of BEN and a $193
million commercial loan receivable from BEN. In addition, GWG
issued approximately 27 million shares of its common stock and
issued $367 million in L Bonds to certain trusts (the “Seller
Trusts”) that sold the BEN common partnership units to GWG.
As a result of the Prior Transaction and the transaction announced
today, BEN will own approximately 7.6%, and the Seller Trusts will
own approximately 79% and the voting control, of GWG’s outstanding
common stock.
Details of the Expanded
Partnership
Under the agreement to expand the partnership
between BEN and GWG, GWG’s founding shareholders – CEO Jon Sabes
and Steven Sabes – agreed to transfer all of their GWG common stock
to BEN and a limited liability company (SPV)— controlled by an
entity related to Thomas O. Hicks and whose members include
entities related to Brad K. Heppner and Hicks—in exchange for cash
and a passive interest in the SPV, which also owns approximately 7%
of the BEN founders’ interest in BEN.
As part of the agreement the companies expect
that:
- GWG will expand its offerings to include BEN’s Interchange
Trust and Exchange Trust liquidity products to provide investors
liquidity from illiquid alternative assets, including private
equity, private real estate, and other alternative asset funds, to
obtain yield from a diversified portfolio of institutionally
managed alternative investment holdings;
- GWG and BEN will continue to align their financial, strategic
and operational resources and expand GWG’s capital
markets capabilities;
- GWG will continue to grow and diversify its balance sheet
exposure to alternative assets through the issuance of BEN
liquidity products;
- BEN will obtain an expanded platform to more quickly address
market needs in the underserved alternative asset liquidity market;
and
- GWG will continue offering L Bonds, which support a more
diversified, higher yielding portfolio of institutionally managed
alternative investment holdings.
BEN and GWG expect to realize significant
strategic benefits under this expanded partnership, and accelerate
the companies’ growth through an aligned operational focus on core
competencies.
Jon Sabes intends to step down as GWG’s Chairman
and CEO and transition his full-time efforts to its to-be-formed
wholly-owned subsidiary InsurTech Holdings, LLC, which includes the
Life Epigenetics and YouSurance businesses. As part of that effort,
it is anticipated that, following the completion of the
transaction:
- GWG will capitalize InsurTech Holdings;
- InsurTech Holdings will explore further opportunities to
capitalize the Life Epigenetics and YouSurance business as
operations commence in 2019; and
- GWG and InsurTech Holdings will explore opportunities for
InsurTech Holdings, Life Epigenetics and YouSurance to become
independent of GWG on commercially reasonable terms.
Changes in GWG’s Executive Team and
Board of Directors
Following completion of the transaction, it is
expected that:
- Jon Sabes will be available as an executive advisor to the GWG
leadership team as he focuses his efforts on his role as CEO of
InsurTech Holdings, LLC.
- Murray Holland, a Trust Advisor of the Seller Trusts, will
become Chief Executive Officer of GWG.
- GWG’s board will be expanded from seven to up to thirteen
members, and individuals serving on BEN’s current board of
directors, including Brad K. Heppner and Thomas O. Hicks, will
replace the current members of GWG’s board. The current members of
BEN’s leadership team can be found at
www.beneficient.com/leadership.htm.
Jon Sabes said, “Founding and building GWG has
been the highlight of my business career to date. The opportunity
to expand GWG’s financial services platform with BEN and its
leadership team exceeds my expectations. The time has come for the
business of earning non-correlated returns from illiquid
alternative assets to be taken to the next level of success – and
BEN aligned with GWG is the team to do just this. While at the same
time, our technology businesses - Life Epigenetics and YouSurance -
need my full attention as we plan full operationalization in
2019.”
Brad K. Heppner, Chairman and CEO of BEN, said,
“Our expanded relationship with GWG is a compelling next step for
BEN, providing valuable financial, strategic and operational
resources to launch our liquidity products at scale. We have
established BEN as a distinct financial services platform,
providing a comprehensive suite of innovative lending and liquidity
products that are capable of meeting the rapidly growing liquidity
demands from more than one million high net worth individual
investors and small-to-medium institutional owners of alternative
assets. Further, we are delighted to build an even stronger working
relationship with GWG’s employees and investor constituencies, as
we collectively build a team that is second to none.”
Murray Holland said, “I am proud to have the
opportunity to lead the GWG business and to build on its many
accomplishments. GWG provides to BEN many financial, strategic and
operational benefits that we believe will enhance the companies’
abilities to build value for all of their stakeholders.”
Completion of the transaction is subject to the
satisfaction of certain additional customary conditions and is
expected to occur on or before April 30, 2019.
Additional details regarding the transactions
are contained in a Form 8-K to be filed by GWG with the Securities
and Exchange Commission.
GWG to Restate Third Quarter 2018 Financial Report to
Reflect Initial BEN Closing and Expects a Delay in
the Filing of the 10-K for 2018
GWG intends to restate its third quarter 2018
financial statements to reflect the initial closing in the two-step
closing of the Prior Transaction with BEN. The initial closing of
the Prior Transaction, which occurred on August 10, 2018, was
subject to a potential unwind unless and until there was a final
closing. Because of the potential for an unwind, GWG took the
position, after discussion with its independent registered public
accounting firm, that the transaction should be treated as a single
transaction at the final closing and therefore its third quarter
financial statement should not reflect the initial closing. The
transaction was fully disclosed in the footnotes to GWG’s third
quarter financial statements. The final closing took place on
December 28, 2018.
In preparation for filing its 10-K for 2018, GWG
requested guidance from the SEC on the accounting position that the
Prior Transaction be treated as a single transaction upon the final
closing. The SEC concluded that the initial closing should have
been treated as a separate transaction and that the offsetting
assets and liabilities should have been reflected on GWG’s third
quarter financial statements. Accordingly, GWG’s audit committee
has determined that GWG will restate its financial statements for
the three and nine months ending September 30, 2018. As a
result, related press releases, earnings releases, and investor
communications describing GWG’s financial statements for these
periods should no longer be relied upon.
The restatement is largely balance sheet related
and does not impact previously reported net loss attributable to
common shareholders or stockholders’ equity.
GWG anticipates that it will soon file an
amended Quarterly Report on Form 10-Q for the period
ended September 30, 2018, to amend and restate its financial
statements.
As a result of the accounting for certain assets
and liabilities exchanged in the transaction with BEN and BEN’s
on-going financial statement audit, GWG notes that it will not be
able to file its Annual Report on Form 10-K for the year ended
December 31, 2018 or the financial statements and other information
required to be filed on a Form 8-K/A related to the Prior
Transaction on a timely basis. GWG is working diligently to resolve
these issues and expects to file these reports as soon as
practicable.
Additional details regarding the restatement are
contained in a Form 8-K to be filed by GWG with the Securities and
Exchange Commission.
About The Beneficient Company
Group, L.P. (BEN)Based in Dallas, BEN provides liquidity
products and services to the owners of alternative assets and
illiquid investment funds. BEN offers an array of liquidity
products to mid-to-high net worth individuals, family offices and
small-to-mid-size institutional investors. In addition to liquidity
offerings, BEN plans to offer a variety of services; including,
custody and clearing of alternative assets, fund and trust
administration, retirement funds and insurance services for
covering risks attendant to owning or managing alternative assets.
For more information about BEN,
visit www.beneficient.com.
About GWG Holdings, Inc.
(GWG)GWG Holdings, Inc. (Nasdaq: GWGH), is the parent
company of GWG Life, Life Epigenetics and YouSurance. GWG
Life is a leading provider of liquidity to owners of life insurance
in the secondary market. GWG owns a portfolio of alternative life
insurance assets equaling $1.96 billion in face value of policy
benefits as of September 30, 2018. Life Epigenetics is
commercializing epigenetic technology for the longevity life
insurance industry and other industries. YouSurance is a digital
life insurance agency working to embed epigenetic testing into life
insurance products to provide consumers a value-added ecosystem
that supports their health and wellness. For more information about
GWG, visit www.gwgh.com.
Cautionary Statement Regarding Forward-Looking
StatementsThis press release contains forward-looking
statements that involve substantial risks and uncertainties. All
statements, other than statements of historical facts, included in
this press release regarding our strategy, future operations,
future financial position, future revenue, projected costs,
prospects, plans and objectives of management are forward-looking
statements. The words "anticipate," "believe," "estimate,"
"expect," "intend," "may," "plan," "would," "target" and similar
expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain these
identifying words. These forward-looking statements include, among
other things, statements about the (i) projected financial
performance of Beneficient and/or GWG Holdings; (ii) completion of
the transaction described herein; (iii) expected development of the
business of Beneficient and/or GWG Holdings; (iv) execution of the
business plans and strategies of Beneficient and/or GWG Holdings,
(v) anticipated timeframe for restating our third quarter 2018
financial statements, filing our Annual Report on Form 10-K for the
year ended December 31, 2018 and filing the information required to
be filed on a Form 8-K/A related to the Prior Transaction. We may
not actually achieve the expectations disclosed in our
forward-looking statements, and you should not place undue reliance
on our forward-looking statements. Actual results or events could
differ materially from the expectations disclosed in the
forward-looking statements that we make. More information
about potential factors that could affect our business and
financial results is contained in our filings with
the Securities and Exchange Commission. Additional information
will also be set forth in our future quarterly reports on Form
10-Q, annual reports on Form 10-K and other filings that we make
with the Securities and Exchange Commission. We do not intend,
and undertake no duty, to release publicly any updates or revisions
to any forward-looking statements contained herein.
Contact:
For GWG Holdings Dan Callahan(612) 746-1935
For The Beneficent Company Mark
Semer or Daniel Yunger Kekst CNC (212) 521-4800
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