Burford Capital Share Discussion Threads

[gusrezo] 19/1/2024 18:53

My point about the "bear case" for Burford is that people are taking for granted that future outcomes of pending cases will follow the same distribution of concluded cases.
But according to the numbers that the company shows in its slides, 70% of concluded cases are settled and 30% go to adjudication. (21% ($278) of deployments go to
adjudication and win in 2.9 years)
But that *excludes* the ongoing cases, and as I told, 2016,2017,2018,2019, has more than 50% of funded cases still ongoing, and I can figure out these cases will NOT be settled, so probably the 70-30 distribution will move to 50-50 or even 40-60 and it seems clear that those cases are not going to be resolver in 2.9 years on average.
So maybe the past is not here a good guide to forecast the future...

[1aconic] 19/1/2024 11:52

"From 2016 on, the only year where recoveries has surpassed invested money in cases funded during the year is 2019" : Excellent! Rather than a bear case I see that as an extremely good thing. In my view it shows that a business in its relative infancy is continuing to strongly grow opportunities (taking into account the very point you highlight that there's typically several years lag on an investment realising). I'd be far more concerned if new investments matched or were lower than realisations in a given year, a possible indication of maturity and stagnation.

Longer duration cases tend to those that go the distance to litigation (where positive results have a much higher payoff) rather than being settled (for lower payoffs) - as DJ points out, there is a classic example of this from 2012 vintage. BUR's contracts also have duration clauses in them, further mitigating the potential for lower IRR on them.

[bradvert] 19/1/2024 11:18

Cases may not be frozen, but the wheels of justice certainly seem to have turned incredibly slowly in the first three quarters of 2023..Cumulative adjudication gains from 2009 to Sep 2023 were $965M. The figure at Dec 2022 was $957M, so a paltry $8M awarded via courts in the nine months reported so far.The equivalent settlement figure for the nine months was a healthier $266M ($1502-$1236)Another way of looking at this; adjudicated gains were 39% of total returns for the 14 years to Sep 2023, but only 3% for the nine months to Sep 2023. I appreciate the numbers will be inherently lumpy, but this does seem anomalous, and doesn't chime with the narrative reported of courts now open and rapidly clearing Covid backlog.(Numbers taken from slide 7 of Q3 presentation, and equivalent slide from AJ Bell presentation)      

[djderry] 19/1/2024 01:07

Hi gusrezo,
I think you may be under a misapprehension. One of the great things about legal assets,is that they all resolve,one way or another.
There is a case yet to resolve from 2012,for example.In your parlance,its ' frozen '.Perhaps you might take a look at it under ' Petersen et al v Republic of Argentina.
2 billion in revenue has come back over the period ,so we can see their track record.A case that goes on longer is no less likely to settle favorably as cases that resolve earlier.
We know the loss rate.It's extremely low.
Approximately one in ten.
And,even among that 10%,they don't ' lose' all their money! Even the losses are not complete losses.
Then,almost 70% of cases are resolved in favour of the Burford client companies.
( of course,it's all down to the due diligence etc,etc,etc.)

They only litigate against those with means to pay and they also run their own legal enforcement agency.
So,the 30% that don't settle,one third,ie,that10% I mentioned earlier is ' lost' ,( but,as I said,it's not a total loss)
The remaining two thirds are where those 200% plus wins come in,the damages, the interest ,the ' cream',as it were.
Of course,I have no issues with those who wish to put forward a bear case but when it's based on patent errors, ie there is no such thing as ' frozen case', ( there were,of course covid delays as with the rest of society)we can see the returns vintage by vintage ( and ,in particular,the propensity of longer running cases to pay off in spectacular style,then the bear case ,as put forward,evaporates.

[extrader] 18/1/2024 23:59

I think auditors would take a pretty dim view of BUR's accounts if it weren't to write down sharpish the value of any case where recovery prospects (post successful litigation) were manifestly poor to non-existent, don't you ?

ATB

[sam55todd] 18/1/2024 23:28

Re: ..that there are many "frozen" cases - whatever they are. This seems to be a new concept in litigation, that a case simply stops without a result. I don't think that happens..

E.g. litigation against some legal entity that goes belly up in a smoke leaving all creditors unhappy? (companies longevity distribution is skewed more towards shorter duration, investopedia says 65% of companies fail in first 10 years). Whatever the court outcome is (if it's even worth pursuing it) - defender may have nothing left by the end of it anyways.
IMV long-running cases might be similar to skeletons in a closet, everyone tries to hide it as far as possible from everyone' eye and forget this nightmare (so many companies hide deteriorating assets they're ashamed of with a very questionable value somewhere deep in a balance sheets).

[tradertrev] 18/1/2024 21:27

gus - I agree that the cases yet to complete may have a different ROIC than the closed cases. They might be higher, lower or the same. However Burford has produced a lot of data in the past showing that longer duration cases tend to have higher ROICs and lower IRRs. Shorter duration cases include the majority of losses (you tend to lose quickly) and quick settlements, which are not always optimal for the funder.
You use a phrase "it can be argued" (sounds a bit like "arguably" which has been used controversially and sloppily in Burford's past!) that there are many "frozen" cases - whatever they are. This seems to be a new concept in litigation, that a case simply stops without a result. I don't think that happens, it's just the wheels of justice grinding slow, but if you have insight into this it would be interesting to read.
Personally, I don't think shareholders have much to fear from these longer duration cases, particularly when the company appears to have good access to capital.

[syoun2] 18/1/2024 21:05

I will take a look again at the data but think you are not telling the right story

[syoun2] 18/1/2024 21:01

Some very good points there. Do you have some numbers to represent that, would be very interested to see. I have seen there case numbers by years and what’s resolved or not. They were a lot smaller value then so not necessarily a big issue. But get your point.

[gusrezo] 18/1/2024 16:54

the bear case about Burford is that there're still pending cases that are 10 years old.
From 2016 on, the only year where recoveries has surpassed invested money in cases funded during the year is 2019(taking into account closed and open cases, not just closed cases as the company does to estimate the ROIC). More than 50% of the cases from 2016,2017,and so on are still ongoing.
And this is before substracting internal costs (staff, rentals,etc). It can be argued that there're many "frozen" cases whose results are uncertain and it's not clear whether the ROIC on those cases will be similar to the closed cases....
At some point the company should explain what's going on with those cases, because I think the Covid delays is less and less a credible reason...

[syoun2] 18/1/2024 16:20

I believe Burford average investment was $20 million but in recent years they’re investing in bigger cost cases. Does anyone know number of the bigger investments ? I think I remember a $100 million a few years ago. We must be due one of the big investments to come in soon. Maybe they had another big investment to fund.

[hohum1] 18/1/2024 15:05

Kaos3 - Whenever BUR writes a new piece of business, they need to have the full funding in place, unless it is a multi case contract (such as they had with BT a while back). They cannot ‘over commit’ in the way that PE forms routinely do, as they have no control over when existing cases might settle. The management have decided that it is better to pay 8-9% for debt finance and keep 100% of the earnings from successful cases. They now prefer this to the ‘2&20̵7;3rd party funds, such BOF and the sovereign wealth fund, which effectively meant that they gained a 2% fee but then gave away 80% of the successful case earnings.

[kaos3] 17/1/2024 16:08

i would like them to stop growing with the debt - as they have the critical mass. now it is about velocity of money recycling and above all profitability

like W Buffett and GEICO. restricted capital access clears the minds and improves visibility

why .. without debt it would be easier for me to see neto productivity of their operations

eg . capital turnover - speed or months
brutto and netto profitability

in P and L and free cash flow margin of the entire porfolio

but that is just me... i get that

[rider75] 17/1/2024 15:44

Not really as it is about half of that in percentage. But I woouldnt be afraid, they may choose between more rapid growth , or waiting for the cash inflows to reinvest, and between bond issuance for "Burf only" investment, and gathering investments through is funds, latter results in lower return.

[dekle] 17/1/2024 15:10

Doesn’t the interest they are paying on the bonds get offset by the interest accumulating on the Argentine award allowing them to invest the anticipated receipts earlier. Rather than wait until they actually receive any monies?

[bestace] 17/1/2024 10:54

Pay off their RCF? Since when have they had a RCF?

[donald pond] 17/1/2024 08:56

Agree with that kaos. I've never known a company issue so many results which the management say are great and the market are left baffled by. I've written to them with extensive suggestions on how they should improve the presentation of results

[kaos3] 17/1/2024 08:53

their web page is kind of complicated to myself.

as i am supid i see BUR as a black box. good input into it all around. good management so far. but i care about what is this black box giving out /to us/.


here i fail to get it. small divi. menwhile so much cash produced and distributed around. i hope i will one day get it so i remain invested.

[kirkie001] 17/1/2024 08:49

dgdg1 - "general corporate purposes" is a legal phrase used in prospectuses - being so wide as to permit most things, without risk of buyers going back to the prospectus and saying "you didn't use it for that purpose". Utterly standard wording.

Do we know what the new issuance has done to the spreads / prices of the existing listed debt?

[donald pond] 17/1/2024 08:46

For a company with at least 2 full time IR bods they really fail to do simple things very often

[kaos3] 17/1/2024 08:45

i sold my trading too. but i expect a no big news slide for a few weeks

[donald pond] 17/1/2024 08:45

https://x.com/donaldpond6/status/1747534056600772781?s=46&t=YfR7OyhMlqZLtI-h86iCxA

[dgdg1] 17/1/2024 08:42

Donald, do you have a link to Bloomberg where they say it's for a tender offer, I couldn't find it. Also it seems strange that they would reveal more to Bloomberg than what they put in the RNS, and why wouldn't they put this information in the RNS? Actually I found the announcement that it's for "general corporate purposes" a bit disconcerting. They could easily have said it's for investment in more cases as they have huge demand for investment, but they didn't, which makes it sound like a cash-flow problem. Not that it's necessarily a disaster as it's probably just short term timing issue between funds arriving and going out, but still a bit of a negative. (Unless it really is to fund a buyback.)