TIDMBUR
RNS Number : 1242T
Burford Capital
03 January 2017
3 January 2017
BURFORD REPORTS FURTHER SECONDARY MARKET TRANSACTION
ACTIVITY
This announcement contains inside information.
Burford Capital Limited ("Burford" or the "Company"), a leading
global finance firm focused on law, announces that it sold on 30
December 2016 several million dollars in participation interests in
its possible future proceeds in its investment related to the
Petersen claims consistent with its approach to secondary market
transactions discussed in Burford's most recent interim report.
-- The Petersen claims have been progressing well and would have
been expected to have risen in value since Burford's initial
investment regardless of these sales.
-- While the sales themselves are immaterial, the price of the
sales implies a value for Burford's investment that is likely to be
more than ten times Burford's investment to date (of less than $18
million) which, if realized, would make it Burford's most
successful investment to date.
-- Burford is issuing this RNS because the implied valuation of
the sales may cause an increase in Burford's carrying value of the
Petersen investment and thus may cause a corresponding increase in
2016 income. However, Burford has not yet determined, nor yet
consulted with its auditors about, the impact of these sales on its
total carrying value of the Petersen investment or the consequent
impact on Burford's financial statements.
-- These sales provide multiple benefits to Burford, including
risk management and improved capital efficiency. It is possible
that other such sales will occur in the future.
-- There can be no assurance that the carrying value of
Burford's investments will be reflected in its actual
realizations.
Background to the Petersen investment
As discussed in Burford's 2015 annual report, the Petersen
claims relate to the 2012 expropriation by Argentina of a majority
interest in YPF, the New York Stock Exchange-listed energy company
formerly owned by Repsol, the Spanish energy major. At the time of
the expropriation, Repsol owned more than 50% of YPF and the
Petersen Group owned 25% of YPF. After suing, Repsol ultimately
settled its claims and received a payment of approximately $5
billion from Argentina and YPF. Burford has been appointed under
the authority of the Spanish bankruptcy courts to provide financing
to the liquidators of the Petersen Group, which went bankrupt after
the expropriation. The Group's liquidators are now proceeding with
claims against both YPF and Argentina. Those claims are presently
proceeding before the United States District Court for the Southern
District of New York, which earlier this year in a positive
decision largely denied Argentina's and YPF's motions to dismiss
the claims; that decision is now on interlocutory appeal as of
right.
The Petersen claims are high value and if successful could yield
significant returns for Burford while also having a desirable
asymmetric risk/return profile*. However, there is always risk in
litigation matters. We discourage shareholders from attaching
individual value to single matters just because they are large and
potentially profitable. We continue to believe strongly in a
portfolio approach to litigation investing as opposed to focusing
on the individual potential of any single matter, regardless of the
size or return possibility, and we do not ourselves make
predictions about the outcome of any single matter or indeed about
our entire portfolio.
* It is a matter of public record that Burford is entitled to
70% of the recovery in the Petersen matter (from which Burford will
need to pay meaningful expenses which would be expected to reduce
Burford's recovery to something below 60%).
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 judgments made by management, which are then
included in the audit process and ultimately determined by
Burford's board of directors. That review process has not yet
commenced and often results in adjustments to initial expectations.
Burford does not currently intend to update the market further
concerning the earnings impact of these sales prior to the release
of its formal results on 14 March 2017.
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.
For further information, please contact:
Macquarie Capital (Europe) Limited - NOMAD +44 (0)20 3037
and Joint Broker 2000
Jonny Allison
Nicholas Harland
+44 (0)20 3100
Liberum Capital Limited - Joint Broker 2222
Richard Crawley
Jamie Richards
+44 (0) 20 7260
Numis Securities Limited - Joint Broker 1000
Charlie Farquhar
Andrew Holloway
Neustria Partners - Financial Communications +44 (0)20 3021
for Burford Capital 2580
Robert Bailhache [email]
Charles Gorman [email]
Nick Henderson [email]
Burford Capital Limited +1 212 235 6825
Elizabeth O'Connell, CFA, Managing Director
About Burford Capital
Burford Capital is a leading global finance firm focused on law.
Burford's businesses include litigation finance and risk
management, corporate intelligence and judgment enforcement, and a
wide range of law firm financing activities. Burford's equity and
debt securities are publicly traded on the London Stock Exchange,
and it works with lawyers and clients around the world from its
principal offices in New York and London.
For more information about Burford, visit
www.burfordcapital.com
This information is provided by RNS
The company news service from the London Stock Exchange
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(END) Dow Jones Newswires
January 03, 2017 02:00 ET (07:00 GMT)