TIDMBUR
RNS Number : 4879H
Burford Capital
13 March 2018
This announcement contains inside information.
13 March 2018
BURFORD SELLS TEINVER INVESTMENT FOR $107 MILLION, A 736%
RETURN
Burford Capital Limited ("Burford" or "the Company"), a leading
global finance and investment management firm focused on law, today
announces that it has entered into a definitive agreement to sell
its entire entitlement in the Teinver matter for $107 million in
cash. Burford's investment in the Teinver matter is $12.8 million.
Thus, the sale represents an investment gain of $94.2 million and a
return on invested capital of 736%.
The Teinver matter represents an investment in an arbitration
matter arising out of the expropriation of two Argentine airlines
by Argentina's government. In July 2017, the arbitration tribunal
rendered an award in favour of the claimants; that award entitled
Burford to receive more than $100 million under its funding
agreement. For further background to the Teinver matter, please
refer to our RNS dated 24 July 2017 and our interim report for the
six months ended 30 June 2017.
Burford continues to pioneer development of the secondary market
in litigation investments and regards the sale of this investment
as prudent, locking in its gain on the investment and accelerating
its cash recovery to enable reinvestment of that capital.
While Burford does not release individual investment carrying
values, we can say that the Teinver investment is carried well
below the sale price, and thus we expect to show a realized gain
from this transaction in our interim results for the six months
ended 30 June 2018, to be published in July 2018.
The transaction is scheduled to close no later than 22 March
2018. Burford intends to reinvest the proceeds of the transaction
in new investment opportunities exhibiting attractive risk/reward
characteristics.
The Teinver award is the subject of ongoing annulment
proceedings. Annulment (the cancellation of an award) is only
available in very limited circumstances of serious error by the
arbitration tribunal that we do not believe exist here, with only
6% of awards ever rendered by the World Bank's arbitration
institution having been annulled (and only 3% in the current
decade). Were the award to be annulled, the sale transaction could
be rescinded at the option of the buyers, although in that unlikely
event Burford would retain a $7 million fee and would also have its
original entitlement back and be free to pursue the claim again.
Based on the historical speed of annulment proceedings a decision
on annulment would be expected in the second half of 2019 although
individual case timing is unpredictable.
Christopher Bogart, Burford's Chief Executive Officer,
commented:
"The Teinver transaction represents a further step forward in
our development of a secondary market for litigation and
arbitration risk. It is efficient for us to move investments into
the secondary market as they mature, and obtain liquidity to
continue to make new investments at the rapid pace we are currently
experiencing. We believe that the award would have been discounted
to achieve resolution of this matter in any event, as is
commonplace. Achieving certainty and immediate cash for this
investment, at an attractive price, is a highly desirable outcome
for us."
The person responsible for arranging for the release of this
announcement on behalf of the Company is Elizabeth O'Connell, Chief
Financial Officer.
For further information, please contact:
Burford Capital Limited
Elizabeth O'Connell, CFA, Chief +1 212 235
Financial Officer 6825
Macquarie Capital (Europe) Limited +44 (0)20 3037
- NOMAD and Joint Broker 2000
Jonny Allison
Nicholas Harland
Liberum Capital Limited - Joint +44 (0)20 3100
Broker 2222
Richard Crawley
Jamie Richards
Numis Securities Limited - Joint +44 (0)20 7260
Broker 1000
Charles Farquhar
Jonathan Abbott
Neustria Partners - Financial Communications +44 (0)20 3021
for Burford Capital 2580
Robert Bailhache [email]
Charles Gorman [email]
Nick Henderson [email]
Background to Burford's investment valuation process and its
impact on reported earnings
Burford cautions that its earnings for any financial period
partly depend on judgements made by management, which are then
included in the audit process and ultimately determined by
Burford's board of directors. The process for the six months ending
30 June 2018 has not yet commenced and reviews often result in
adjustments to initial expectations. Burford does not currently
intend to update the market further concerning the earnings impact
of this sale prior to the release of its interim results in July
2018.
Burford values transparency in its presentation of financial
results and wants to be clear with investors about its approach to
those results.
Most of Burford's income comes from its litigation finance
business. Within that business, there are two principal sources of
income for accounting purposes, realized gains on investments and
unrealized gains on investments. (Realized and unrealized losses
will naturally negatively affect income and the principles we set
forth here apply equally to losses.)
Realized gains are straightforward: they represent the amount of
profit, net of the return of Burford's invested capital and any
previously recognized unrealized gains, on an investment that has
either resolved entirely or has been settled or adjudicated such
that, in Burford's view, there is no longer litigation risk
associated with the investment. (In the latter event, Burford may
discount the anticipated profit in respect of an investment to
account for any continuing uncertainty as to the recoverability of
any amount.) Burford announces individual investment results that
will produce realized gains separately from its financial results
only when the individual gain is new information which may be
material to Burford.
Unrealized gains are more complex: they represent the fair value
of Burford's investment assets, as determined by Burford's board of
directors in accordance with the requirements of the relevant IFRS
standards, as at the end of the relevant financial reporting
period. There is no active secondary market for litigation risk,
and thus there is generally no market-based approach to assessing
fair value; to the extent that a secondary market transaction does
take place with respect to an investment, the implied value of that
transaction is a key valuation input. In the absence of such a
transaction, we are mindful that the outcome of each matter Burford
finances is likely to be inherently uncertain, may take several
years to conclude and is often difficult to predict with accuracy.
Moreover, litigation matters frequently experience multiple
significant shifts in sentiment during their evolution. Burford
thus eschews fair values based solely on current sentiment, and
focuses on objective events (such as court rulings or settlement
offers) to ground its assessment of fair value.
Burford's board of directors assesses the fair value of
Burford's investments after the close of each financial reporting
period and therefore investors should not expect updates about
potential changes in fair value during the course of any given
reporting period. Following the close of each financial reporting
period, Burford's board determines the fair values of investments
after taking into account the views of management, the operation of
the audit process and input from external experts (as it considers
appropriate). Generally, that process does not conclude finally
until shortly before the release of Burford's financial results for
the relevant period.
Burford is pleased to be followed by a number of research
analysts and we are grateful for their efforts to understand and
explain our business. They perform a valuable role in assessing our
operating performance, the evolution of the litigation finance
market and interpreting other relevant industry developments.
However, prospective investors and other market participants must
appreciate that, due to the confidential, potentially privileged,
long-term and uncertain nature of each investment asset, it is very
difficult for research analysts to project accurately the likely
investment income of the business. Any projections produced by
research analysts are not produced on behalf of Burford and Burford
takes no responsibility for such projections. As a result,
prospective investors and other market participants should not
treat, and Burford does not intend to treat, the financial
projections produced by research analysts as indicative of the
market's expectations of Burford's future financial performance. We
specifically eschew any obligation to correct estimates made by
financial analysts or to inform the market should we come to
believe that our actual performance will diverge from those
estimates. This is, of course, different to the approach taken by
most operating companies, in respect of which research analysts can
produce relatively reliable estimates and the relevant company will
advise the market if it expects to see performance materially
different from the consensus of analyst forecasts. It is important
that investors understand that Burford takes a different approach
as a result of the different nature of its business.
About Burford Capital
Burford Capital is a leading global finance and investment
management firm focused on law. Its businesses include litigation
finance and risk management, asset recovery and a wide range of
legal finance and advisory activities. Burford is publicly traded
on the London Stock Exchange, and it works with law firms and
clients around the world from its principal offices in New York,
London, Chicago and Singapore.
For more information about Burford: www.burfordcapital.com
This information is provided by RNS
The company news service from the London Stock Exchange
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