Burford Capital Share Discussion Threads

[sweet karolina2] 16/8/2019 13:31

Henchard,

Good find. All cases are different. BUR are on the side of Plaintiffs in this one. The concern is defendants try to settle for less than $900m - it is a big case.

"Burford would commit $15 million in capital, $5 million of which would be paid
out immediately and the remainder would be on call as needed (see below for
details)

Assuming agreement on some details below, Burford has accepted Nicolas’
proposed pricing: 1% of recovery for the first $2.5 million invested and a further
1% for each subsequent $2.75 million invested"

So it looks like this locks in about $18m on a $5m investment even if settlement is below $900m.

If some shocking revelation about the plaintiff came out in discovery, which blew its case out of the water and Defendants said "let's put this before the judge right now or do you want to settle in our favour pay all our costs and pay us $100m for the inconvenience and reputational slur bringing the case has caused", what would be BUR's return on settlement be then I wonder. The same, I guess, as going to trial and losing would be - Zero.

[sweet karolina2] 16/8/2019 13:08

dgdg, adnan,

What is so hard for you to understand about:

Settlement in FAVOUR of your client = win, Settlement in FAVOUR of your client's opponent = lose.

What is then so hard to understand about:

Costs and fees get awarded to the party in whose FAVOUR the settlement was.

You do agree that cost and fees were awarded to Glenmark and Napo agreed to pay them, but could not and therefore made the royalty rebate arrangement - a sign of how broke Napo was.

[eentweedrie] 16/8/2019 13:03

do you speak klingon?

[henchard] 16/8/2019 13:02

Found an interesting thing online, which gives an insight into how BUR was looking to structure one funding.



If you scroll through the document to Exhibit 2405, you'll find Burford's "Confidential Presentation Concerning Aguinda v. Chevron."

pp. 10-12 of that doc look particularly interesting.

Haven't had time to look at the thing properly yet.

[adnan17] 16/8/2019 12:55

And the fact that she spends so much time on a chat where people are either long or short Burford. But yet she has no position, makes it all bizarre.

What stocks do you have a position in?

[sweet karolina2] 16/8/2019 12:54

Well IMHO it is game over on the what was the 2013 case $15.8m was booked against question, but we still need official confirmation from BUR.

Unless there is some genuine alternative explanation, BUR booked $15.8m against an Arbitration Settlement that was in favour of plaintiffs when BUR was funding defendants. As the royalties, which might still have flowed (but did not) were part of the original agreement and those royalties were to be abated by 50% to pay plaintiff's costs and fees (that bit may have come later) these cannot be considered as a beneficial outcome of the settlement IMHO.

BUR did that in the full knowledge, at that point in time, that the Salix Case had also been LOST at jury trial and the 2 losses combined put its client in a diabolical business position - reduced income on a drug it already supplied and an expensive trial cancelled for a drug in development, which would not now produce future incomes (Salix had taken its ball home at that point in time).

That was the position at time of production of 2013 accounts, I see no material changes to that position until after bond issue.

The material change post bond issue was the conversion to $30m of debt, which is a separate very dodgy story and the stench of that may be even worse and it could be that stench that drove Miriam out.

If we consider the Napo 2013 $15.8m as the lose thread, then as it gets pulled (and it will get pulled), the rest really will unravel IMHO.

[adnan17] 16/8/2019 12:54

Doesn't matter whether it's fair or not. That's not what is being discussed. Its you need to pay up as you have Settled.

[dgdg1] 16/8/2019 12:48

But SK you just contradicted yourself as to how you are interpreting things, first you thought it was absurd how Burford gets paid out even if the client accepts any settlement, now you are saying Burford invented their entitlement. But it's clear from the links cited that settlements count as a win whether you like it or not, and that Glenmark settled in 2013. So what's the problem here? That you don't understand why Burford can get such good terms? Firstly, obviously Napo were not stupid when they agreed these terms so they must have calculated that for some reason it made sense. It seems this particular investment of Burford wasn't structured on a no-win-no-fee basis but more like a loan (perhaps with a condition that on a complete loss it would be cancelled, but loss meaning in a final judgement). Burford have stated that they somtimes make loans. Presumably they thought that it was likely that at least one of the cases would succeed which is why they agreed in the first place to make the loan. Also,I can actually understand why Burford insisted in their agreement that a settlement has to count as a win. Since Burford thought they probably would win, they were worried that Napo would agree to a poor settlement (which ultimately did happen) and Burford would be left with nothing - so they insisted on these terms, which Napo clearly considered were acceptable when they agreed them.

[sweet karolina2] 16/8/2019 12:34

mad foetus16 Aug '19 - 12:11 - 11244 of 11246
0 0 0
If you are funding plaintiffs then by definition almost at settlement is a win

I sort of get where you are coming from, but don't 100% agree, but lets go with that.

BUR were funding DEFENDANTS in Glenmark Arbitration.

[sweet karolina2] 16/8/2019 12:31

"The terms of the Agreements included a return on funds advanced, depending upon the amount of time lapsed from the initial funding, in the event Napo was successful in any part of its litigation or arbitration. In October 2014, after a successful outcome in the litigation, Napo and the Purchaser restructured what had become the existing debt under Agreements into a note (the “Financing Agreement”) with a principal amount of $30,000,000 due January 1, 2017"

Where is the successful outcome. Glenmark got most of what it wanted and its costs and fees. The royalties came from the existing agreement not as a result of the settlement and in any event Glenmark never paid any royalties, however we need to look at it from the perspective of what was known at the time of the 2013 Accounts publication:

Glenmark case: Settlement in favour of Napo's opponent - Napo pays costs and fees

Salix case: Loss at Jury trial.

Marking Napo as the ZERO it should have been would produce a large loss for 2013 full year.

Bond issue planned for Jul!!!!

Having issued the bonds without anyone rumbling the fact that BUR had booked $15.8m when it should have been a ZERO. The problem then becomes how to cover it up - very much in INVESCO and Woodford's interest that this does all blow up in their faces. So a debt due in 2017 is created to give time to bury the skeletons in the Jaguar merger.

Was it the stench of the cover up that made Miriam leave in highly unusual circumstances on or before 3 Nov or was it fear and guilt over the accounting and securities fraud or some other reason. Maybe the SFO will be asking her that question soon.

What is clear though is there were only 2 Napo cases Glenmark arbitration and Salix there is no 3rd case to search for. Will BUR try to claim Glenmark loss was really what it booked a $15.8m return against?

I don't know what would be more damaging:

Admitting to accounting and securities fraud back in 2014 or

Trying to claim on the basis of 2 lost cases, which were known results at the time of the 2013 report publication, it was still justifiable to book $15.8m in 2013.

[achenaton] 16/8/2019 12:17

SETTLEMENT = WIN

Is the matter of £15.8m settled?

[mad foetus] 16/8/2019 12:11

If you are funding plaintiffs then by definition almost at settlement is a win

[luckymouse] 16/8/2019 12:08

wonder what that Qverity thing would look like on you lot lol
probably blow the needle off the dial :D

[sweet karolina2] 16/8/2019 12:07

Thanks that makes everything very clear.

I think we now understand why the BUR business model is so successful. The deal seems to be lose one case and on top of the fees and costs you have to pay to the other side you pay us 6 times as much but if you lose a second case you only by us a third of what you paid for losing the first case.

No wonder IMF Bentham, with its no win no fee model, only makes a fraction of the profits BUR does - it clearly has nothing to do with BUR aggressive revenue recognition after all. Indeed the dubious ROIC's MW highlights on cases won pale into insignificance compared to the returns BUR makes when its clients LOSE!

It is no wonder BUR have to keep raising debt and equity in order to provide the funds for the massive queue of potential litigants who want a deal like that.

[achenaton] 16/8/2019 12:06

Re post 11235


Remember - for the purpose of litigation finance: Settlement = Win

On that basis, Glenmark = settlement (December 2013) = win for Burford

Where does the $30,000,000 referred to below come from? Is it funds advanced + return on funds advanced? If not, then what?


hxxps://jaguarhealth.gcs-web.com/node/7681/html

Section headed
"Napo Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements"

Read the Notes under that section, in particular:


8. Debt and Warrants
The following is a summary of the debt issued by Napo.

Litigation Debt
In December 2011 and April 2013, Napo entered into a Forward Purchase Agreement(s) (together, the “Agreements221;) with a third party (the “PurchaserR21;) to provide funding for Napo’s litigation activities with Salix and its arbitration with Glenmark Pharmaceuticals Limited. The terms of the Agreements included a return on funds advanced, depending upon the amount of time lapsed from the initial funding, in the event Napo was successful in any part of its litigation or arbitration. In October 2014, after a successful outcome in the litigation, Napo and the Purchaser restructured what had become the existing debt under Agreements into a note (the “Financing Agreement”) with a principal amount of $30,000,000 due January 1, 2017, and Napo recognized a gain on the restructuring of the debt. The loan under the Financing Agreement accrues interest monthly at 18% per annum, with monthly accrued interest added to principal on the first day of the following month.

From July 2014 to March 2016, a portion of the royalties received by Napo from the Salix Collaboration Agreement was paid into a control account for the benefit of the Purchaser and such funds reduced the outstanding balance on the Financing Agreement. In March 2016, subsequent to the settlement of the litigation with Salix and the return of the licensed assets to Napo, the Purchaser and Napo entered into an amendment to the Financing Agreement which provided for payments by Napo to the Purchaser of 10% of net sales of Mytesi® on a quarterly basis.

The Purchaser has a security interest (the “Security Interest”) on all Napo assets, including 2,666,666 shares of Jaguar owned by Napo, these shares were transferred to the Purchaser upon the closing of the merger (see Note 13). The Financing Agreement requires that any funds Napo receives from sales of assets, recoveries, etc. be used to pay interest or principal on the Financing Agreement.

All principal and interest on the Financing Agreement was due on January 1, 2017. The outstanding balance owed was $56,087,914 and $51,256,639 as of June 30, 2017, and December 31, 2016, respectively, inclusive of accrued interest added to principal of $25,882,276 and $20,588,503 at June 30, 2017 and December 31, 2016 respectively. The amounts owed under the Financing Agreement were settled in connection with the Company’s merger with Jaguar (see Note 13).


12. Litigation Settlements

Salix
In May 2011, the Company sued Salix in the New York County Supreme Court of the State of New York with regard to Salix’s performance under the Salix Collaboration Agreement. The litigation ultimately went to trial in February 2014 and the jury found for the defendant, Salix. The Company filed an appeal of the litigation. On March 4, 2016, Napo and Salix entered into a Settlement, Termination, Asset Transfer and Transition Agreement—the “Asset Transfer Agreement”. The Asset Transfer Agreement settled the litigation between the companies and terminated the Salix Collaboration Agreement. In addition, all rights to crofelemer previously licensed to Salix, including with respect to the FDA approved drug, Mytesi®, were transferred to Napo, along with certain regulatory and other documentation. Napo received inventories of Mytesi® drug product, active pharmaceutical ingredient and crude plant latex (CPL) used in the manufacture of Mytesi®, as well as 490 hectacres of land in Peru for which it recognized a gain on settlement of $1,888,319 during the year ended December 31, 2016. The Asset Transfer Agreement also provides that Salix (now owned by Valeant Pharmaceuticals International) will receive a portion of the proceeds of any sale of the Company (an acquisition of Napo by Jaguar, that meets the conditions as defined in the Asset Transfer Agreement is excluded) or a portion of any payments made by the Company’s licensees, sublicensees or partners of the reverted crofelemer rights or other transferred assets in the former Salix territories, in each case after the deduction of a fixed amount.

Glenmark
In December 2013, Napo and Glenmark Pharmaceuticals Limited settled an arbitration proceeding between the parties (the Settlement Agreement). In the Settlement Agreement, amongst other things, with respect to Glenmark’s unresolved claim for legal fees and costs in the arbitration proceeding, Glenmark and Napo agreed that Napo will make payment to Glenmark in the amount of $2,500,000 in full satisfaction of Glenmark’s claim for legal fees and costs in the arbitration. The full payment will be deferred and offset against future royalty payments due under Article 5 of the Glenmark Collaboration Agreement which addresses royalty payments to Napo, with 50% of each royalty payment due to Napo under Article 5 being paid and the other 50% being offset against the amount Napo has agreed to pay for legal fees and costs, until the full $2,500,000 offset. As of June 30, 2017, Napo has received no royalty payments from Glenmark and therefore has made no payments toward the $2,500,000.

[riverman77] 16/8/2019 12:06

Just ignore the minute by minute volatility full stop - come back in a couple of years and see where it is then.

[gettingrichslow] 16/8/2019 12:02

Bbms, so you didn’t answer my question. You were evasive. Try again without being defensive, evasive or persuasive!!?

[mad foetus] 16/8/2019 11:53

If you ignore the minute by minute volatility, the daily chart is starting to show a bit of base building. Need institutional buying to start a leg up, suspect that will come in the next few weeks but big money doesn't rush

[wardy333] 16/8/2019 11:51

A/Ts working it over again, the City doing what is does best.

[ozzmosiz] 16/8/2019 11:47

stock price shot up over 20% - it's 12-14% up since the RNS.
Market is impressed.

[trident5] 16/8/2019 11:35

They should have got a strong external accountant on an interim basis, whilst looking for a permanent solution.

The market is not impressed.

[henchard] 16/8/2019 11:29

The one governance change BUR has announced that happens "with immediate effect" is Jim Kilman replacing Elizabeth O'Connell as CFO.

I can see why this fails to impress critics.

"Mr. Kilman knows Burford well, having been its principal investment banker at Morgan Stanley, and has been serving as a senior adviser to Burford since his departure from Morgan Stanley in 2016."

So his independence is readily questionable.

"Mr. Kilman has agreed to serve for up to two years as CFO ..." and "Ms. O'Connell will be fully available to assist Mr. Kilman as he assumes the CFO role" suggests a period of grace of up to two years before the possibility of a truly independent 'outside' CFO coming in.

I thought it curious that BUR added the superfluous information that "Charles Utley will continue to serve as Burford's Chief Accounting Officer" and the even-more-superfluous information that "Mr. Utley is an English accountant."

[achenaton] 16/8/2019 11:23

read the notes.
Glenmark was a settlement in December 2013.
settlement = win for the purposes of litigation finance.