As of November 30, 2019, there were 158,365,275 and 157,757,275 shares of common stock issued and outstanding, respectively, and 608,000 shares of treasury stock.
You should read the following discussion in conjunction with the consolidated financial statements and accompanying notes and the information contained in other sections of this Annual Report on Form 10-K, particularly under the headings "Risk Factors," "Selected Financial Data" and "Business." This discussion and analysis is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. The statements in this discussion and analysis concerning expectations regarding our future performance, liquidity and capital resources, as well as other non-historical statements in this discussion and analysis, are forward-looking statements. See "Cautionary Statement Regarding Forward-Looking Statements." These forward-looking statements are subject to numerous risks and uncertainties, including those described under "Risk Factors." Our actual results could differ materially from those suggested or implied by any forward-looking statements.
On December 13, 2018, White Eagle filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "White Eagle Chapter 11 Case" and, together with the November Chapter 11 Cases, the "Chapter 11 Cases"). The Company obtained waivers from the requisite holders of each of the 8.5% Senior Secured Notes and the New Convertible Notes with respect to the White Eagle Chapter 11 Case, similar to the waivers for the November Chapter 11 Cases, and believes that no defaults, events of default or acceleration of the payment obligations thereunder, including principal or accrued interest, occurred with respect to both the 8.5% Senior Secured Notes and the New Convertible Notes. On September 16, 2019, the Bankruptcy Court entered an order and final decree closing the White Eagle Chapter 11 Case.
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, as Administrative Agent ("CLMG"), as agent, and LNV, as Lender, 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 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").
The WE Investment was consummated, and the White Eagle Revolving Credit Facility was paid off in full and terminated, on August 16, 2019. The payoff totaled $402.5 million, which included payment directly to CLMG by Palomino of $374.2 million and payment to CLMG by White Eagle of $28.3 million, collectively sufficient to repay, under the White Eagle Revolving Credit Facility, the outstanding principal of $368.0 million, accrued and unpaid interest of $21.3 million plus, under the Plan of Reorganization, an early payment amount due to LNV of $7.4 million and lender-allowed claims of $5.8 million. Of the $374.2 million purchase price of the limited partnership, $8.0 million was allocated
In connection with the WE Investment, the Limited Partnership Agreement of White Eagle was amended and restated (the "A&R LPA") to provide for the issuance of the Class A, B and D limited partnership interests, and for funding of an "Advance Facility" to maintain reserves sufficient to fund premiums, certain operating expenses of White Eagle and certain minimum payments to Lamington as the holder of the Class B interests. Pursuant to the A&R LPA, holders of Class A interests are entitled to receive distributions on the amounts paid or contributed by them in relation to the WE Investment and funding of the Advance Facility after payment of premiums on the portfolio policies and other fees and expenses. The A&R LPA provides generally that holders of the Class A and Class B Interests receive distributions of proceeds of the assets of White Eagle based on their 72.5% and 27.5% ownership, respectively, after certain expenses and reserves are funded (including such minimum payments to Lamington totaling approximately $8.0 million per year for the first three (3) years and $4.0 million for the subsequent seven (7) years), provided that commencing after year three (3), such minimum payments will be utilized to repay the Class D Return of $8.0 million, which was advanced at closing, plus the greater of $2.0 million or 11% per annum on such $8.0 million to the extent necessary to fully repay such Class D Return. The minimum payments to the Company will occur regardless of maturities with payments through the premium/expense reserve account when there are no maturity proceeds available for distributions as described below). However, the A&R LPA also provides that all payments to holders of the Class B interests (other than such minimum payments to Lamington during the first eight (8) years following the Closing Date) are fully subordinated to payments in respect of the minimum returns to holders of the Class A and Class D interests (including repayment of all amounts advanced in respect of the Advance Facility) and to any indemnification payments, if any, due to such holders and related indemnified persons pursuant to the indemnities afforded them in and in relation to the A&R LPA, Subscription Agreement, Master Termination Agreement and related documents. As of the closing of the Investment, Lamington Bermuda resigned as manager of the portfolio and was replaced by Jade Mountain or an affiliate thereof.
All terms of the Indenture that were not amended by the Second Supplemental Indenture remain in full force and effect.
On December 28, 2018, the Company entered into subscription agreements (the "Subscription Agreements) with several investors (the "Investors"), Pursuant to the Subscription Agreements, the Investors purchased from the Company an aggregate of $5.7 million principal amount of the Company’s 8.5% Senior Secured Notes for an aggregate purchase price of $4.3 million. The transactions were consummated on December 28, 2018.
On May 22, 2019, a settlement (the "Lincoln Benefit Settlement") in the amount of $21.3 million was signed between Lincoln Benefit Life Company ("Lincoln Benefit"), White Eagle and Emergent Capital pursuant to which Lincoln Benefit agreed not to contest the 55 life insurance policies that are presently owned by White Eagle and Emergent Capital agreed to drop its legal action against Allstate Life Insurance Company and settle for $2.0 million. The Lincoln Benefit Settlement relates to six separate legal actions pertaining to the validity of certain White Eagle policies and receivables for maturities of life settlements totaling $39.1 million. The Lincoln Benefit Settlement was approved by the Bankruptcy Court in June 2019.
See Note 22, "Subsequent Events" of the accompanying consolidated financial statements for further information.
The Company’s ability to continue as a going concern is dependent on its ability to meet its liquidity needs through a combination of factors including but not limited to, the receipt of distributions from its investment in its equity investment in White Eagle, and cash on hand.
White Eagle received proceeds of approximately $366.2 million towards the sale of 72.5% of its life settlement and recognized gains of approximately $21.3 million which is included in gains on sale of life settlements in the condensed and consolidated financial statements.
On August 16, 2019, Lamington's capital contribution to White Eagle was an estimated fair value of approximately $138.2 million. The Company performed a valuation at November 30, 2019 resulting in a value of approximately $137.8 million.
Lamington and its subsidiaries' (White Eagle and WEGP) filing of the Chapter 11 Cases was a reconsideration event for Emergent Capital to reevaluate whether consolidation of Lamington and its subsidiaries (White Eagle, WEGP and Lamington Road Bermuda Limited) (collectively, and with Lamington, the "Deconsolidated Entities") continued to be appropriate. Under ASC 810, Consolidation, specifically ASC 810-10-15, consolidation of a majority-owned subsidiary is precluded where control does not rest with the majority owners, for instance, where the subsidiary is in legal reorganization or bankruptcy. Accordingly, when a subsidiary files for bankruptcy, it is appropriate for the parent to
We follow ASC 820, Fair Value Measurements and Disclosures, which defines fair value as an exit price representing the amount that would be received if an asset were sold or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. Level 1 relates to quoted prices in active markets for identical assets or liabilities. Level 2 relates to observable inputs other than quoted prices included in Level 1. Level 3 relates to unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Our investments in life insurance policies, investment in limited partnership and White Eagle Revolving Credit Facility debt are considered Level 3 as there is currently no active market where we are able to observe quoted prices for identical assets/liabilities and our valuation model incorporates significant inputs that are not observable. See Note 15,"Fair Value Measurements" to the accompanying consolidated financial statements for a discussion of our fair value measurement.
We have elected to account for the debt under the White Eagle Revolving Credit Facility, which includes the interest in policy proceeds to the lender, using the fair value method. The fair value of the debt is the estimated amount that would have to be paid to transfer the debt to a market participant in an orderly transaction. We calculated the fair value of the debt using a discounted cash flow model taking into account the stated interest rate of the credit facility and probabilistic cash flows from the pledged policies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, our estimates are not necessarily indicative of the amounts that we, or holders of the instruments, could realize in a current market exchange. The most significant assumptions are the estimates of life expectancy of the insured and the discount rate. The use of assumptions and/or estimation methodologies could have a material effect on the estimated fair values.
Deferred debt costs include costs incurred in connection with acquiring and maintaining debt arrangements. These costs are directly deducted from the carrying amount of the liability in the consolidated balance sheets, are amortized over the life of the related debt using the effective interest method and are classified as interest expense in the accompanying consolidated statement of operations. These deferred costs are related to the Company's 8.5% Convertible Notes, 5% Convertible Notes and 8.5% Senior Secured Notes. The Company did not recognize any deferred debt costs on the White Eagle Revolving Credit Facility given all costs were expensed due to electing the fair value option in valuing the White Eagle Revolving Credit Facility.
We have adopted ASC 718, Compensation-Stock Compensation. ASC 718 addresses accounting for share-based awards, including stock options, restricted stock, performance shares and warrants, with compensation expense measured using fair value and recorded over the requisite service or performance period of the award. The fair value of equity instruments will be determined based on a valuation using an option pricing model that takes into account various assumptions that are subjective. Key assumptions used in the valuation will include the expected term of the equity award taking into account both the contractual term of the award, the effects of expected exercise and post-vesting termination behavior, expected volatility, expected dividends and the risk-free interest rate for the expected term of the award. Compensation expense associated with performance shares is only recognized to the extent that it is probable the performance measurement will be met.
The Company reports a business as held-for-sale when management has approved or received approval to sell the business and is committed to a formal plan, the business is available for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the ensuing year and certain other specified criteria are met. A business
Lamington and its subsidiaries’ (White Eagle and WEGP) filing for reorganization was a reconsideration event for Emergent Capital to reevaluate whether consolidation of Lamington and its subsidiaries (White Eagle, WEGP and Lamington Road Bermuda Limited and together with Lamington, the “Deconsolidated Entities" continued to be appropriate. Under ASC 810, Consolidation, specifically ASC 810-10-15, consolidation of a majority-owned subsidiary is precluded where control does not rest with the majority owners, for instance, where the subsidiary is in legal reorganization or bankruptcy. Accordingly, when a subsidiary files for bankruptcy, it is appropriate for the parent to deconsolidate the subsidiary. Under ASC 810, this loss of control would likely trigger a gain or loss for the parent as the parent would remeasure its retained noncontrolling investment at fair value. We assessed the inherent uncertainties associated with the outcome of the Chapter 11 reorganization process and the anticipated duration thereof, and concluded that it was appropriate to deconsolidate Lamington and its subsidiaries effective on the Petition Date. Effective August 17, 2019, the entities were deemed to have emerged from bankruptcy and were no longer deconsolidated.
On September 16, 2019, the Bankruptcy Court entered an order and final decree closing the White Eagle Chapter 11 Case and on November 25, 2019, the Bankruptcy Court entered an order and final decree closing both of the Lamington and WEGP chapter 11 cases.
ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities was effective for calendar year-end public business entities in 2018. Under the new guidance, 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. Lamington's main subsidiary, White Eagle, carries its life settlements policies and debt under the White Eagle Revolving Credit Facility at fair value, these valuations are based on inputs that are both significant to the fair value measurement and unobservable. As a result, the Company adopted ASU 2016-01 to value its investment in Lamington during the eleven months ended November 30, 2018. The calculation was performed consistent with ASC 820, Fair Value Measurement with changes in fair value recorded in current earnings.
Upon filing for Chapter 11 and the subsequent deconsolidation, transactions with Lamington are no longer eliminated in consolidation and are treated as related party transactions for Emergent Capital up to August 16, 2019. See Note 4 "Condensed and Consolidated Financial Statements For Entities in Bankruptcy" for all transactions between Emergent Capital and Lamington.
Additionally, as a result of our subsidiaries' Chapter 11 Cases, Lamington's and its subsidiaries' (White Eagle, WEGP and Lamington Road Bermuda Limited), financial results are included in the Company’s consolidated results through November 13, 2018, the day prior to the Petition Date. However, ASC 810, Consolidation require that an entity whose financial statements were previously consolidated with those of its parent that files for protection under the U.S. Bankruptcy Code, whether solvent or insolvent, generally must be prospectively deconsolidated from the parent and presented as an equity investment. Therefore, our 2019 results are not comparable with 2018, and the post-petition results are not included in our consolidated results for the twelve months ended November 30, 2019 which ended August 16, 2019. The results of White Eagle represented the Company's core business, and although the results are deconsolidated, the Company will analyze significant activities for the deconsolidated subsidiaries up to the point of deemed closure of the bankruptcy case of August 16, 2019.
Twelve Months Ended November 30, 2019 Compared to Eleven Months Ended November 30, 2018
Income for eleven months ended November 30, 2018 includes net gain on maturity of $53.3 million which is attributable to 20 policies maturity offset by a loss on the deconsolidation of Lamington and related subsidiaries. Income 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.
Historically, the Company procured the majority of its life expectancy reports from two life expectancy report providers (AVS Underwriting LLC and 21st Services, LLC) for valuation purposes and used an average or "blending," of the results of the two life expectancy reports to establish a composite mortality factor.
Approximately $37.9 million included in income for the twelve months ended November 30, 2019 represents a gain upon reconsolidation on our investments in previously deconsolidated subsidiaries, compared to a loss of approximately $150.9 million for the eleven months ended November 30, 2018. The amount is reflected in current earnings as change in fair value of investment in deconsolidated subsidiaries. At November 13, 2018, the pre-petition date, the Company valued its investment in Lamington to be $278.4 million, which was equivalent to the Company's book value. This valuation was determined by performing an internal fair value calculation of the assets and liabilities of Lamington under ASC 820, Fair Value Measurement. As a result of the Chapter 11 Cases, consistent with ASC 321, Investments - Equity Securities, the Company subsequently, measured its investment in Lamington at fair value as of November 30, 2018. Further, the Company engaged a third party to perform a quantitative assessment to determine the value of its investment in Lamington. The valuation report showed the fair value of the Company's investment in Lamington to be $128.8 million, which was $150.9 million lower than its pre-petition value. As a result, the Company recognized an impairment on its investment in Lamington at November 30, 2018, the amount is reflected in current earnings as change in fair value of investment in deconsolidated subsidiaries. The fair value of $128.8 million has inherent estimates including, but not limited to, when the Company will emerge from bankruptcy, the estimated discount rate, the value of the debt under the White Eagle Revolving Credit Facility, as well as other factors inherent in the valuation process.
During the eleven months ended November 30, 2018, 20 life insurance policies with face amounts totaling $93.4 million matured. The net gain of these maturities was $53.3 million and is recorded as a change in fair value of life settlements in the consolidated statements of operations for the eleven months ended November 30, 2018. All 20 of the matured polices had served as collateral under the White Eagle Revolving Credit Facility. Proceeds from maturities totaling $95.8 million were received during the eleven months ended November 30, 2018. Of this amount, approximately $76.6 million inclusive of approximately $7.8 million collected during the year ended December 31, 2017 were utilized to repay borrowings, interest and credit facility expenses under the White Eagle Revolving Credit Facility. There were no maturities for the consolidated entities for the twelve months ended November 30, 2019.
Of these two policies owned as of November 30, 2019, all were previously premium financed and are valued using discount rates that range from 13.25% to 15.25%.
The White Eagle Revolving Credit Facility interest expense shows a decrease of approximately $22.8 million for the eleven months ended November 30, 2018 which is attributable to the deconsolidation of subsidiaries.
Of the interest expense of $11.2 million for the twelve months ended November 30, 2019, approximately $5.1 million represents interest on the 5% Convertible Notes and $6.0 million represents interest on 8.5% Senior Secured Notes.
Interest expense on the 8.5% Senior Unsecured Convertible Notes totaled approximately $93,000, including $73,000, $18,000 and $3,000 from interest, amortizing debt discounts and origination costs, respectively, during the twelve months ended November 30, 2019. The note was repaid during the twelve months ended November 30, 2019.
The Company recorded $4.6 million of interest expense on the New Convertible Notes, including $3.5 million, $947,000 and $140,000 from interest, amortization of debt discount and origination costs, respectively, during the eleven months ended November 30, 2018.
See Notes 11, "White Eagle Revolving Credit Facility,", 12, "8.50% Senior Unsecured Convertible Notes," 13, "5% Senior Unsecured Convertible Notes, and 14, "8.5% Senior Secured Notes," to the accompanying consolidated financial statements for further information.
Change in fair value of the White Eagle Revolving Credit Facility (in thousands)
Total income for the deconsolidated subsidiaries was $20.6 million and mainly comprised gain on maturity of $70.3 million which is attributable to the maturity of 18 policies, gain on sale of life settlement of approximately $21.3 million associated with the sale of the limited partnership interests of White Eagle, change in fair value gain of investment in limited partnership of approximately $15.4 million which is attributable to the pickup in value for the assets contributed at closing of the Subscription Agreement, offset by change in fair value of life settlements loss of approximately $16.8 million.
Expense of approximately $72.4 million was significantly impacted by change in fair value of the White Eagle Revolving Credit Facility of approximately $17.1 million, interest expense of $28.3 million, reorganization cost of $14.0 million, loss on
On May 22, 2019, a settlement in the amount of $21.3 million was signed among Lincoln Benefit Life Company ("Lincoln Benefit"), White Eagle and Emergent Capital pursuant to which Lincoln Benefit, agreed to not to contest the 55 life insurance policies that are presently owned by White Eagle and Emergent Capital agreed to drop its legal action against Allstate Life Insurance Company and settle for $2.0 million. The settlements relates to six separate legal actions pertaining to the validity of certain policies held by White Eagle and receivables for maturities of life settlement totaling $39.1 million. The settlement of the litigation, was approved by the Bankruptcy Court in June 2019, and, as such the receivable for maturities of life settlement was adjusted to reflect the reduction which resulted in approximately $17.8 million recorded as change in fair value of life settlements for the twelve months ended November 30, 2019.
On October 18, 2018, 21st Services, announced revisions to its underwriting methodology, which revisions have generally been understood to lengthen the average reported life expectancy furnished by this life expectancy provider by 9%. On October 29, 2018, AVS also announced revisions to its underwriting methodology without an estimated impact, which resulted in an average lengthening of the life expectancies by approximately 13%.
In November 2018, White Eagle decided to no longer utilize the results of life expectancy reports furnished by AVS for valuation purposes and will procure its life expectancy reports solely from 21st Services on a periodic basis and expects to continue to lengthen life expectancies furnished by 21st Services that have not been re-underwritten using their updated methodology. Up to August 16, 2019, White Eagle received 326 updated life expectancy reports from 21st Services. These life expectancies reported an average lengthening of life expectancies of 23.45% based on this sample, which is significantly higher than the 9% impact first communicated by 21st Services and has significantly impacted the results for the twelve months ended November 30, 2019 by approximately $57.6 million.
As of November 30, 2018, White Eagle owned 586 policies with an estimated fair value of $505.2 million with an aggregate death benefit of these life settlements of $2.8 billion. All 586 policies were pledged as collateral for the White Eagle
Revolving Credit Facility. The Company also recorded a $27.7 million receivable for maturity of life settlements at November 30, 2018 relating to policies pledged as collateral the White Eagle Revolving Credit Facility.
Of these 586 policies owned as of November 30, 2018, 512 were previously premium financed and are valued using discount rates that range from 12.25% - 19.25%. The remaining 74 policies are valued using discount rates that range from 12.25% - 13.75%.
See Note 15 "Fair Value Measurements" to the accompanying consolidated financial statements for further information.
Total expenses from continuing operations for the twelve months ended December 31, 2017 were mainly comprised of interest expense of $16.8 million on the White Eagle Revolving Credit Facility; $9.2 million on the 8.5% Convertible Notes; $2.1 million on the 5% Convertible Notes; $2.8 million on the 15% Senior Secured Notes; $1.4 million on the 8.5% Senior Secured Notes, $2.0 million loss on extinguishment of debt, and a change in the fair value of the White Eagle Revolving Credit Facility of $4.5 million.
During the eleven months ended November 30, 2018, 20 life insurance policies with face amounts totaling $93.4 million matured, compared to 13 policies with face amounts of $67.2 million for the twelve months ended December 31, 2017. The net gain of these maturities was $53.3 million and $35.9 million for 2018 and 2017, respectively, and is recorded as a change in fair value of life settlements in the consolidated statements of operations for the eleven months ended November 30, 2018 and twelve months ended December 31, 2017. All 20 of the maturities served as collateral under the White Eagle Revolving Credit Facility. Proceeds from maturities totaling $95.8 million were received during the eleven months ended November 30, 2018. Of this amount, approximately $76.6 million inclusive of approximately $7.8 million collected during the year ended December 31, 2017 were utilized to repay borrowings, interest and credit facility expenses under the White Eagle Revolving Credit Facility.
The Company recorded approximately $2.8 million of interest expense on the 15% Senior Secured Notes, which includes $2.6 million of interest and $184,000 of amortizing debt issuance costs, respectively, during the twelve months ended December 31, 2017. The 15% Senior Secured Notes were repaid and canceled on July 28, 2017 in connection with the 2017 recapitalization.
During the twelve months ended December 31, 2017, the fair value of the White Eagle Revolving Credit Facility was impacted by increased borrowings, the lengthening of life expectancies of certain insureds' underlying policies pledged under the White Eagle Revolving Credit Facility and a slight increase in the discount rate used to value the facility.
Net income from our discontinued structured settlement operations for the twelve months ended November 30, 2019 was a loss of approximately $2.4 million as compared to a net loss of $29,000 for the eleven months ended November 30, 2018. Total income from our discontinued structured settlement operations was $2.4 million compared to $17,000 for the twelve months ended November 30, 2019 and eleven months ended November 30, 2018, respectively. Income for fiscal 2019 was negatively impacted by change in fair value of investment in affiliates of approximately $2.4 million. This investment was held by our structured settlement subsidiary whose primary activities were discontinued in 2013 with the sale of the structured settlement assets and this investment in affiliates was the only portion remaining. The remaining $2.4 million was written off as a result of ongoing restructuring plans in the fourth quarter of fiscal 2019, the Company decided not to continue to pursue this line of investment.
Total expenses from our discontinued structured settlement operations were income of $21,000 for the twelve months ended November 30, 2019 compared to expense of $46,000 incurred during the eleven months ended November 30, 2018.
Our consolidated financial statements have been prepared assuming the realization of assets and the satisfaction of liabilities in the normal course of business, as well as continued compliance with the covenants contained in the indentures governing our 5% Convertible Notes, 8.5% Senior Secured Notes and other financing arrangements.
Pursuant to the Settlement Agreement, 31 life insurance policies with face totaling $163.5 million issued by Sun Life were canceled in exchange for a lump sum payment of $36.1 million. The settlement included two policies held by the Company outside of White Eagle with an aggregate face value of $12.0 million, 28 policies held by White Eagle with an aggregate face value of $141.5 million and one policy with a face value of $10.0 million in receivable for maturity for White Eagle. Of this amount, approximately $12.7 million was received by the Company, $13.4 million was paid to White Eagle and $10.0 million was paid to Wilmington Trust for the maturity receivable. With this settlement, the Company no longer owns any life insurance policies and hence no future obligation for premium payments.
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 include $14.5 million of net income for the twelve months ended November 30, 2019 for which $37.9 million relates to 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.
As of the filing date of this Form 10-K, we had approximately $22.2 million of cash and cash equivalents inclusive of certificates of deposit of $513,000. In considering our forecast for the next twelve months with the current cash balance as of the filing of this Form 10-K, the Company has sufficient resources to meet its liquidity needs for the foreseeable future.
In connection with the WE Investment, the A&R LPA provides generally that holders of the Class A and Class B Interest holders receive distributions of proceeds of the assets of White Eagle based on their 72.5% and 27.5% ownership, respectively, after certain expenses and reserves are funded (including such minimum payments to Lamington totaling approximately $8.0 million per year for the first three (3) years and $4.0 million for the subsequent seven (7) years, provided that commencing after year three (3), such minimum payments will be utilized to satisfy the Class D Return of $8.0 million, which was advanced at closing, plus the greater of $2.0 million or 11% per annum on such $8.0 million to the extent necessary to fully repay such Class D Return. The minimum payments to the Company will occur regardless of maturities with payments through the premium/expense reserve account when there are no maturity proceeds available for distribution as described below). However, the A&R LPA also provides that all payments to holders of the Class B interests (other than such minimum payments to Lamington during the first eight (8) years following the Closing Date) are fully subordinated to payments in respect of the minimum returns to holders of the Class A and Class D interests (including repayment of all amounts advanced in respect of the Advance Facility).
Although the WE Investment provides guaranteed payments of $8.0 million per year for the first three (3) years and $4.0 million for the subsequent seven (7) years to the Company, irrespective of maturities, there can be no assurance as to when proceeds from maturities of the policies in the WE Investment will be distributed to the Company. Delays will impact the timing of distribution since the Class A Shares must meet their 11% return as well as repayments for any advance to the premium reserve on the Company's behalf.
White Eagle is the borrower under a $370.0 million (as amended on December 29, 2016) revolving credit facility, with Imperial Finance and Trading, LLC, as the initial servicer, the initial portfolio manager and guarantor, Lamington Road Bermuda Ltd., as portfolio manager, LNV Corporation, as initial lender, the other financial institutions party thereto as lenders, and CLMG Corp., as administrative agent for the lenders. Effective August 16, 2019, all outstanding principal and interest under the White Eagle Revolving Credit Facility was repaid.
At November 30, 2019, there was $75.8 million in aggregate principal amount of the Company’s 5.0% Senior Unsecured Convertible Notes due 2023 (the "New Convertible Notes" or "5% Convertible Notes") outstanding. For a description of the New Convertible Notes see Note 12, "5.0% Senior Unsecured Convertible Notes," of the accompanying consolidated financial statements for further information.
In July 2017, the Company caused to be issued the New Convertible Notes in an aggregate amount of approximately $75.8 million pursuant to the New Convertible Note Indenture. The terms of the New Convertible Notes are governed by the New Convertible Note Indenture, which provides, among other things, that the New Convertible Notes are unsecured senior obligations of the Company and will mature on February 15, 2023. The New Convertible Notes bear interest at a rate of 5% per annum from the issue date, payable semi-annually on August 15 and February 15 of each year, beginning on August 15, 2017.
On December 11, 2019 the Company redeemed $8.0 million principal amount of the 5.0% Convertible Notes in exchange for cash consideration of $4.8 million inclusive of unpaid interest. Upon such redemption, the Convertible Notes were surrendered and canceled.
At November 30, 2019, there was $47.6 million in aggregate principal amount of the Company’s 8.5% Senior Secured Notes due 2021 outstanding (the "8.5% Senior Secured Notes"). For a description of the 8.5% Senior Secured Notes see Note 14, "8.5% Senior Secured Notes," of the accompanying consolidated financial statements for further information.
that certain Exchange Participation Agreement dated April 7, 2017 among the Company and Senior Secured Note Holders representing 100% of the aggregate outstanding principal amount of the 15% Senior Secured Notes.
On August 11, 2017, the Company entered into a Securities Purchase Agreement with Brennan Opportunities Fund
(i) remove from the assets pledged to the secured parties under the Amended and Restated Senior Secured Indenture, 65% of the equity and certain other assets of Blue Heron; and (ii) reflect the pledge by the Company, in favor of the secured parties under the Indenture, of the promissory note dated as of December 29, 2016 in the principal sum of $69.6 million issued by OLIPP IV, LLC to Blue Heron and subsequently assigned to the Company.
At November 30, 2019, the outstanding principal of the 8.5% Senior Secured Notes was $47.6 million with a carrying value of $45.7 million, net of unamortized debt issuance cost of $362,000.
During the eleven months ended November 30, 2018, operating activities used cash of $41.2 million. Our net loss of $170.0 million was adjusted for the following: change in fair value of investment in deconsolidated subsidiaries of approximately $150.9 million, attributable to the deconsolidation of Lamington and its subsidiaries due to the Chapter 11 cases, White Eagle Revolving Credit Facility financing costs and fees of $927,000, which represent fees associated with the White Eagle Revolving Credit Facility withheld by the lender and added to the outstanding loan balance, amortization of discount and deferred cost for the 5% Convertible Notes of $1.1 million, amortization of discount of deferred cost for the 8.5% Senior Secured Notes of $244,000, amortization of discount and deferred cost for the 8.5% Convertible Notes of $76,000, stock based compensation of $562,000, change in fair value of life settlement gains of $46.9 million that is mainly attributable to maturities of 20 policies, change in fair value of White Eagle Revolving Credit Facility gain of $70.9 million that is mainly attributable to increased borrowings, the lengthening of life expectancies of certain insureds underlying policies pledged as collateral in the facility and an increase in the discount rates, and a net negative change in the components of operating assets and liabilities of $10,000. This $10,000 change in operating assets and liabilities is partially attributable to a $316,000 decrease in interest payable on the 5.0% Convertible Notes, a $1.0 million decrease in other liabilities, offset by a $877,000 increase in accounts payable and accrued expenses, and a $496,000 increase in interest payable on the 8.5% Senior Secured Noted.
Net cash provided by financing activities for the twelve months ended November 30, 2019 was $5.3 million resulted from proceeds from the issue of 8.5% Senior Secured Notes of approximately $6.5 million offset by repayment of outstanding principal under the 8.5% Convertible Notes of approximately $1.2 million.
The following table summarizes our contractual obligations as of November 30, 2019 (in thousands):