Our only material asset and only material source of revenue is our minority ownership position in White Eagle. We do not control White Eagle and rely on third parties to manage it.
We are a holding company and have no material assets other than our minority ownership interest in White Eagle. As a result of the transaction we consummated on August 16, 2019, in which we sold 72.5% of White Eagle to Palomino, we no longer control the operations and decisions of White Eagle. Specifically, we do not control decisions relating to optimizing White Eagle’s life settlement portfolio, including whether to sell policies, buy new policies, and lapse policies, and although we contribute to the payment of premiums, which are funded by Palomino and repaid by us through funds distributed through a waterfall that is set forth in the Second Amended and Restated Agreement of Limited Partnership of White Eagle (the “Partnership Agreement”), we do not control the timing or decisions regarding premium payments.

The distributions from the White Eagle portfolio constitute substantially all of our revenue. We rely on third parties, including Palomino, Palomino JV GP Limited, the general partner of White Eagle, and the manager of the portfolio as selected by the general partner (collectively, the “Majority Owner”), to manage the portfolio. There can be no assurance that the Majority Owner will manage the portfolio in a successful manner. If the Majority Owner does not manage the portfolio successfully, there could be adverse effects on our financial results, liquidity, and performance.

Additionally, the 72.5% owner of White Eagle is entitled to an 11% preferred return (the “Majority Owner’s Preferred Return”) on the sum of (i) 100% of the amounts funded into the White Eagle premium/expense reserve account on its own behalf, (ii) the purchase price of its majority interest in White Eagle, and (iii) the amount necessary to satisfy the amortization payments owed to the 72.5% owner in accordance with the Partnership Agreement.  While Lamington is guaranteed monthly distributions of $333,333 until August 2027 (the “Minimum Return”), any distributions in excess of the Minimum Return are contingent on White Eagle’s ability to pay the Majority Owner’s Preferred Return. There can be no assurance that Lamington will receive distributions in excess of the Minimum Return.

The Series B Notes are subordinated in right of payment to the Series A Notes, and the Profit Participating Notes are subordinated in right of payment to both the Series A Notes and the Series B Notes.
As more fully described in Section 4.03 of the Indenture (the “Payment Priority Waterfall”), any funds held by Lamington in excess of the “Minimum Cash Balance” (as defined in the Indenture) must be applied, after payment of applicable operational and administrative expenses, first to pay accrued but unpaid interest on the Series A Notes, second to pay accrued but unpaid interest on the Series B Notes, third to redeem the Series A Notes in full, fourth to reduce the outstanding principal balance of the Series B Notes to an amount not to exceed US$ 30MM, and thereafter to redeem the remaining Series B Notes and make distributions to the Profit Participating Notes on a pari passu basis.

Additionally, in the event of a “Deemed Liquidation” (as defined in the Indenture), the Series A Notes must be redeemed in full before funds are applied to the Series B Notes, and the Series B Notes must be redeemed in full before funds are applied to the Profit Participating Notes.

If we do not generate sufficient funds to pay “Cash Interest” on the Series A Notes or Series B Notes, accrued interest will be paid as “PIK Interest,” which may impair our ability to repay the Series A Notes or Series B Notes at maturity or to redeem the Series A Notes or Series B Notes in accordance with the Payment Priority Waterfall.
Because we generate substantially all of our operating income from our minority interest in White Eagle, our cash flow and the ability to service our indebtedness depend on the performance of White Eagle’s life settlement portfolio. If our cash balance is insufficient to pay “Cash Interest” (as defined in the Indenture) on the Series A Notes or Series B Notes, accrued interest will be paid as “PIK Interest” (as defined in the Indenture). There can be no assurances that sufficient funds will exist on any interest payment date to pay Cash Interest on the Series A Notes or Series B Notes and the accumulation of capitalized PIK Interest may impair our ability to repay the Series A Notes or Series B Notes at maturity or to redeem the Series A Notes or Series B Notes in accordance with the Payment Priority Waterfall.

The carrying value of our equity investment in White Eagle is derived using the Majority Owner’s valuation, meaning fluctuations in the Majority Owner’s assumptions and projections could lead to dramatic increases or decreases in the carrying value of our investment.
The carrying value of our investment in White Eagle is derived using the Majority Owner’s valuation at period end. Any change in such valuation is required to be reflected in Lamington’s financial statements. Fluctuations in the Majority Owner’s assumptions and projections could cause an increase or decrease in the carrying value of the investment in White Eagle during future financial reporting periods. There can be no assurance the Profit Participating Notes would receive a distribution if Lamington were to liquidate its 27.5% percent interest at the carrying value prescribed in its most recent financial statements.

Delays in payment and non-payment of life insurance policy proceeds to White Eagle can occur for many reasons and any such delays may have a material adverse effect on our business, financial condition, and ability to pay obligations on the Notes.
A number of arguments may be made by former beneficiaries (including but not limited to spouses, ex-spouses and descendants of the insured) under a life insurance policy, the beneficiaries of any trust that once held the policy, the estate or legal heirs of the insured, or the insurance company issuing such policy, to deny or delay payment of proceeds following the death of an insured, including arguments related to lack of mental capacity of the insured, usury, contestability or suicide provisions in a policy. Furthermore, if the death of an insured cannot be verified and no death certificate can be produced, the insurance company may not pay the proceeds of the applicable life insurance policy until the passage of a statutory period (usually five to seven years) for the presumption of death without proof. Such delays in payment or non-payment of policy proceeds to White Eagle may have a material adverse effect on Lamington’s financial condition and ability to pay obligations on the Notes.

White Eagle is dependent on the creditworthiness of the life insurance companies that issued the policies comprising the White Eagle portfolio. If a life insurance company defaults on its obligation to pay death benefits on a policy, White Eagle—and thus Lamington, through its limited partnership interest in White Eagle—would experience a loss of investment, which may have a material adverse effect on Lamington’s financial condition and ability to repay the Notes.
The value of, and any cash flow produced by, our investment in White Eagle, is dependent on the creditworthiness of the life insurance companies that issued the policies in the White Eagle portfolio. The failure or bankruptcy of any such life insurance company could have a material adverse impact on its financial condition and results of operation.

In general, a life insurance company’s business tends to track macro-economic and market conditions that are beyond its control, including extended economic recessions or interest rate changes. Adverse economic conditions and volatility in the financial markets may have a material adverse effect on a life insurance company’s business and credit rating, financial condition and operating results, and an issuing life insurance company may default on its obligation to pay death benefits on the life insurance policies that White Eagle owns. In such event, White Eagle—and thus Lamington, through its limited partnership interest in White Eagle—would experience a loss of investment, which could have a material adverse effect on Lamington’s investment in White Eagle and financial condition and ability to repay the Notes.

We may be unable to repurchase the Notes upon a “Deemed Liquidation.”
Upon the occurrence of a “Deemed Liquidation” (as defined in the Indenture), we are required to redeem all of the outstanding Notes at a price equal to the outstanding principal amount of the applicable Series of Notes, plus accrued and unpaid interest thereon.  However, it is possible that we will not have sufficient funds at the time of a Deemed Liquidating to make the required redemption of the Notes or that restrictions in our then-existing debt instruments will not allow such redemptions.

The Notes are unsecured and effectively subordinated to any of our future secured indebtedness.
The Notes are general unsecured obligations ranking junior in right of payment to any future secured indebtedness. While we do not currently have any existing secured indebtedness, the Indenture governing the Notes does not prohibit us from incurring secured indebtedness. In the event Lamington is declared bankrupt, becomes insolvent or is liquidated or reorganized, any secured indebtedness will be entitled to payment in full from our assets securing such indebtedness, to the extent of the value of such assets, before any payment may be made with respect to the Notes, and the unpaid amount of such indebtedness, if any, after such collateral is exhausted would generally constitute additional unsecured indebtedness. Holders of the Notes will participate in Lamington’s remaining assets ratably with all holders of Lamington’s unsecured indebtedness who are deemed to be in the same class as the Notes.

The ability to transfer the Notes is restricted and may be further limited by the absence of an active trading market.
The Notes may not be transferred unless the transferee is, directly or indirectly 100% owned by, either a “Qualified Person” (as defined in the Indenture) or a person resident or citizen of the United States. Moreover, while the Series A Notes, Series B Notes, and “Trust Certificates” (as defined in the Indenture) are currently listed on the Vienna Stock Exchange, an active trading market for the securities has not developed and may not develop in the future, and if an active trading market does develop, there is no guarantee that it will continue. Historically, the market for non-investment grade debt has been subject to severe disruptions that have caused substantial volatility in the prices of the securities similar to the Series A Note, Series B Notes, and Grantor Trust Certificates.  The market for these securities may experience similar disruptions and any such disruptions may adversely affect the liquidity in that market or the prices at which the securities may be sold. 

We may repurchase the Series A Notes and/or Series B Notes through Open Market Repurchases on a non-pro rata basis and may elect to use available cash to repurchase the Series B Notes while the Series A Notes remain outstanding. 
Under the Indenture, Lamington has the option (subject to approval by the Board) to repurchase Series A Notes and/or Series B Notes in transactions effected (i) on or through any securities exchange or quotation service on which the Series A Notes and/or Series B Notes may be listed or quoted at the time of such transaction, (ii) in the over-the-counter market, (iii) in negotiated transactions with brokers, dealers, agents, and/or principals, and/or (iv) through the exercise of options, and any such transaction may involve crosses and/or block trades (“Open Market Repurchases”). Such Open Market Repurchases may be affected at fixed prices, at prevailing market prices at the time of purchase, at negotiated prices, or any combination thereof.

Lamington is under no obligation to perform Open Market Repurchases on a pro rata basis. We may, for instance, negotiate Open Market Repurchases to purchase Series A Notes from one Holder without extending the same offer to all Series A Holders. The effect of this ability means certain Series A Notes and/or Series B Notes may be retired before, and at prices different than, other Notes within the same Series. 

Our ability to make Open Market Repurchases is also not constrained by the relative payment priorities of the Notes under the Indenture’s “Payment Priority Waterfall.” As such, we may elect to use available cash to repurchase Series B Notes even though Series A Notes remain outstanding. In the event Lamington does engage in Open Market Repurchases of the Series A Notes and/or Series B Notes, cash applied in respect of such repurchases will reduce funds available for distribution under the Payment Priority Waterfall.