Emergent Capital, through its subsidiaries owns 2 life insurance policies, also referred to as life settlements, with a fair value of $1.3 million and an aggregate death benefit of approximately $12.0 million at November 30, 2019. Additionally, through a subsidiary, the Company owns a 27.5% equity investment, having an estimated fair value of approximately $137.8 million at November 30, 2019, in White Eagle Asset Portfolio, LP ("White Eagle"), which was previously a wholly-owned subsidiary of the Company that holds a portfolio of life settlements. The Company primarily earns income through change in fair value and death benefits from these two polices and change in fair value and distributions from its equity investment in White Eagle.
On February 11, 2019, the Company entered into a Subscription Agreement (the "Subscription Agreement") with Brennan Opportunities Fund I LP (the "Investor"), which is affiliated with Patrick T. Brennan, a member of the Company’s Board of Directors. Pursuant to the Subscription Agreement, the Investor purchased from the Company $967,000 principal amount of the Company’s 8.5% Senior Secured Notes (the "Senior Notes") for a purchase price of $725,250. The transaction was consummated on February 14, 2019.
Historically, the Company has incurred substantial losses, which has resulted in an accumulated deficit of approximately $291.5 million as of November 30, 2019. This amount includes $14.5 million of net income for the twelve months ended November 30, 2019 for which $37.9 million relates to a gain on change in fair value on the investment in deconsolidated subsidiaries as a result of the resolution of their emergence from bankruptcy. Cash flows used in operating activities were $12.4 million for the twelve months ended November 30, 2019 and $41.2 million for the eleven months ended November 30, 2018. As of November 30, 2019, we had approximately $24.3 million of cash and cash equivalents and certificates of deposit of $511,000.
On December 4, 2019 the Company and certain of its subsidiaries entered into a Settlement Agreement and Mutual Release (the "Settlement Agreement") with Sun Life Assurance Company of Canada ("Sun Life") and Wilmington Trust, N.A. as securities intermediary ("Wilmington Trust").
On August 16, 2019, the Company entered into a subscription agreement (the "Subscription Agreement") with Lamington Road ("Class B Limited Partner"), White Eagle, WEGP ("Withdrawing General Partner"), and Palomino JV, L.P. ("Palomino" or "Class A Limited Partner"), in connection with the commitment letter signed on June 22, 2019 with Jade Mountain Partners, LLC ("Jade Mountain"), pursuant to which White Eagle sold to Palomino 72.5% of its limited partnership interests, consisting of all of the newly issued and outstanding Class A and Class D interests, and WEGP sold to an affiliate of Jade Mountain (the "Manager") all of its general partnership interests (collectively, the "WE Investment") for a purchase price of approximately $366.2 million and $8.0 million for the Class A and Class D interests, respectively. Pursuant to the Subscription Agreement, Lamington received 27.5% of the limited partnership interests of White Eagle, consisting of all of the newly issued and outstanding Class B interests in exchange for all of its previously owned White Eagle limited partnership interests with a value of approximately $138.2 million on the closing date.
The proceeds of the WE Investment were used to satisfy in full (i) the White Eagle Revolving Credit Facility , and (ii) DIP Financing extended by CLMG Corp., as Administrative Agent ("CLMG"), as agent, and LNV, LNV Corporation, as Lender ("LNV"), to White Eagle, each in connection with the termination of the White Eagle Revolving Credit Facility and the release of the related liens on the collateral thereunder pursuant to a Master Termination Agreement dated as of August 16 2019 among WEGP, Lamington, White Eagle, Markley Asset Portfolio, LLC, CLMG, as administrative agent, LNV, as initial lender, Wilmington Trust, National Association, in its capacities as securities intermediary, custodian and agent, and Palomino (the "Master Termination Agreement"). The repayment and termination of the White Eagle Revolving Credit Facility and the termination of the DIP Financing, which had not been drawn against, were in accordance with the Plan of Reorganization for Lamington, WEGP and White Eagle approved by the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") with respect to the previously announced voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code of Lamington, WEGP and White Eagle (the "Chapter 11 Cases").
On August 16, 2019, Lamington also entered into (i) a pledge agreement (the "Pledge Agreement") pursuant to which it pledged the 27.5% limited partnership interests of White Eagle owned by it to Palomino and certain other secured parties in support of the payment and indemnification obligations described above, and (ii) an assumption agreement among White Eagle, Lamington, the Company and WEGP (the "Assumption Agreement") pursuant to which Lamington assumed all liabilities and obligations of White Eagle and WEGP as of the closing date of the Transactions, and Lamington, the Company and WEGP agreed to terminate, waive and release any intercompany debt, obligations and liabilities of White Eagle to Lamington, the Company and WEGP. On August 16, 2019, Emergent entered into an indemnification agreement (the "Indemnification Agreement") pursuant to which it indemnified Wilmington Trust, National Association against claims and liabilities that may arise in relation to policies that have matured prior to the Closing Date but as to which Wilmington Trust, National Association has historically held title as securities intermediary.
We have elected to account for the investment in limited partnership using the fair value method. We calculate the fair value of the investment using a present value technique to estimate the fair value of the limited partnership investment. The most significant assumptions are the estimates of life expectancy of the insured for the life insurance policies that are held by the partnership, the stipulated rate of return by the Class A Holder of the partnership, repayment of advances made by the Class A holder on the Company's behalf, distributions to the Company and the discount rate. See Note 10, "Investment in Limited Partnership" and Note 15, "Fair Value Measurements" of the notes to consolidated financial statements for further information.
Change in Fair Value of Investment in Limited Partnership - ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities requires that a reporting entity should account for its equity investments that are not consolidated or accounted for under the equity method at fair value, with changes to fair value recorded in current earnings. White Eagle previously valued its life settlement policies at fair value whose valuation are based on inputs that are both significant to the fair value measurement and unobservable. The Company now holds an equity investment of 27.5% in White Eagle whose only assets are these life settlement. Additionally, the investment includes a mezzanine financing which the Company assumed at closing which repayment by, and ultimate distributions to, the Company are based on a prescribed waterfall with a guaranteed 11% return to the majority owner partner. The Company recognizes income from monthly distribution from the limited partnership as prescribed by the Subscription Agreement.
Outstanding debt as of November 30, 2019 included $75.8 million of 5% Senior Unsecured Convertible Notes and $47.6 million of 8.5% Senior Secured Notes.
Significant decrease in SG&A expense was primarily a combination of an increase in insurance costs of $195,000 offset by a decrease in professional fees of $3.0 million, a decrease in other SG &A of $913,000 and a decrease in legal expense of $117,000.
The White Eagle Revolving Credit Facility incurred a loss of approximately $53.6 million, for the period November 14, 2018 to November 30, 2018, which is mainly attributable to assumptions incorporated due to the Chapter 11 filing of the entity. This amount is shown as an increase to White Eagle Credit Facility's expenses on the statement of operations for the period ended November 30, 2018. Outstanding principal under the White Eagle Credit Facility at November 30, 2018 was $363.8 million of outstanding principal.
Net loss from continuing operations for the eleven months ended November 30, 2018 was $169.9 million as compared to a loss of $3.2 million for the twelve months ended December 31, 2017. The following is our analysis of net loss for the eleven months ended November 30, 2018 compared to twelve months ended December 31, 2017 (in thousands).
Income from continuing operations for the eleven months ended November 30, 2018 was a loss, which was significantly impacted by a negative change in fair value of life settlements as a result of changes made by the provider of life expectancy reports. This impact is approximately $124.0 million.
The New Convertible Note Indenture provides for customary events of default, which include (subject in certain cases to customary grace and cure periods), among others: nonpayment of principal or interest; breach of covenants or other agreements in the New Convertible Note Indenture; defaults or failure to pay certain other indebtedness; and certain events of bankruptcy or insolvency. Generally, if an event of default occurs and is continuing under the New Convertible Note Indenture, the trustee or the holders of at least 25% in aggregate principal amount of the New Convertible Notes then outstanding may declare all unpaid principal plus accrued interest on the New Convertible Notes immediately due and payable, subject to certain conditions set forth in the New Convertible Note Indenture. In addition, holders of the New Convertible Notes may require the Company to repurchase the New Convertible Notes upon the occurrence of certain designated events at a repurchase price of 100% of the principal amount of the New Convertible Notes, plus accrued and unpaid interest.
In connection with the Transaction Closing, the Company paid each Senior Secured Note Holder 5% of the face amount of the 15% Senior Secured Notes held by such Senior Secured Note Holder as of immediately prior to the Transaction Closing, plus all accrued but unpaid interest of such 15% Senior Secured Notes through the date of the Transaction Closing, pursuant to
On January 10, 2018, the Company dissolved Red Falcon Trust, an indirect subsidiary of the Company ("Red Falcon"). On the same date, the Company also commenced the process of appointing a liquidator to liquidate Blue Heron Designated Activity Company, a direct subsidiary of the Company ("Blue Heron"). The completion of liquidation formalities of Blue Heron under Irish law is took several months. Both Red Falcon and Blue Heron were inactive subsidiaries of the Company.
On December 28, 2018, the Company received a commitment letter (the "Commitment Letter") from Ironsides Partners LLC, an entity affiliated with Robert Knapp, a member of the Board, for an aggregate investment, at the Company’s election, of up to $2.0 million principal amount of 8.5% Senior Secured Notes for an aggregate purchase price of up to $1.5 million no later than January 31, 2019. The Commitment Letter contains certain conditions precedent to Ironsides’ obligations to purchase such Senior Notes. On January 30, 2019, the Company entered into a Note Purchase Agreement (the "Note Purchase Agreement")with Ironsides Partners Special Situations Master Fund III L.P. (the "Investor"), which is affiliated with Robert Knapp, a member of the Company’s Board of Directors. Pursuant to the Note Purchase Agreement, the Investor purchased from the Company $2.0 million principal amount of the Company’s 8.5% Senior Secured Notes for a purchase price of $1.5 million.
million, amortization of discount and deferred cost for the 8.5% Senior Secured Notes of $1.1 million, amortization of discount and deferred cost for the 8.5% Convertible Notes of $21,000, stock based compensation of $375,000, and a net positive change in the components of operating assets and liabilities of $2.9 million. This $2.9 million change in operating assets and liabilities is partially attributable to a $168,000 decrease in other liabilities, a $835,000 decrease in accounts payable and accrued expenses, offset by a $3.2 million increase in current tax liabilities, a $226,000 increase in interest payable on the 8.5% Senior Secured Noted and a $516,000 increase in prepaid and other assets.