Burford Capital Share Discussion Threads

[divmad] 20/4/2022 06:17

So the matter of the IMF loan package is a non sequitur then?

[donald pond] 19/4/2022 20:55

It is also worth saying that the approach of the judge to damages is likely to be affected by the conduct of the parties. Having clearly done everything they can to delay the denouement, if the defendants come to court with weak arguments I'd say their chances of getting the normal NY interest rate on damages reduced is pretty slim.

[somerset lad] 19/4/2022 20:45

Riverman, I doubt Argentina will settle. As Donald Pond noted a few days ago, politically it is preferable for them to fight to the end rather than to try to justify a deal.

If we put settlement to one side, the questions I think are:

1. Will the Judge determine liability and damages on the summary judgment application? The legal submissions so far suggest to me (DYOR) that there is little dispute on fact and so there is a fair chance. If not, trial is due (subject to availability) 115 days after the summary judgment decision. (The next rounds of documents in the summary judgment application are due on 26 May 2022 and 23 June 2022 and, although not yet clear, I'd expect the Judge to schedule an oral hearing and to take say 3 months after that to write a judgment.)

2. Who will win? The Defendants' strongest argument (combining the first two points they make in their submissions) IMO is that the Repsol shares were not "acquired" until 2014 and so the obligation to make a tender offer arose after the Plaintiffs had ceased to own their shares. DYOR and there is always litigation uncertainty, but personally I would be surprised if this (or the other arguments about Argentinian law) persuaded the Judge that Argentina could make promises to US investors to pay compensation in case of expropriation to get its IPO away and then wriggle out of them (either through the defences or by ordering payment in pesos that have since been devalued).

3. If the Plaintiffs win, how much will they get? I was interested in the documents released on Thursday because they suggest to me that the claim is much more mechanical than the fairly wide ranges I'd seen quoted (e.g. by Numis) implied. This is not a case where the Judge needs to make complex forecasts about how much profit would have been earnt etc.

4. If the Plaintiffs win, will the Defendants appeal? As above, I expect the Defendants to take every step open to them; but the legal points open to them won't become any stronger on appeal than they are now.

5. If the Plaintiffs win, can they enforce? Personally, I think Argentina will struggle to function if every time they touch American jurisdiction (ports, banking system etc.) their assets get seized. So in practice I think they will end up paying.

Then the question is: if you weight all of the factors (risk of failure in the claim, risk that damages are lower than claimed etc.) how does the NPV of the claim rank against a book value of $773m and (as Riverman says) against the market cap?

My personal view (not advice, DYOR) is that BUR was effectively forced by investor criticism to keep the book value of the YPF litigation fixed and that the carrying value of $773m is now very conservative relative to the NPV, but we will soon see.

[riverman77] 19/4/2022 16:46

So even if they settle for half that, say 3bn USD, this is still well in excess of BUR's current market cap of around 2bn USD.

[somerset lad] 19/4/2022 16:38

Looking at the legal submissions that are now on Pacer:

“These calculations result in $7.533 billion in direct damages for Petersen and $898 million in direct damages for Eton Park – again, using a February 13, 2012 notice date” “Defendants217; damages expert Professor Jeffrey Harris did not identify any arithmetic errors in Professor Fischel’s calculations.” “they are a direct result of the scope of the breach and the formula that Defendants purposefully included in the Bylaws (and touted in the IPO prospectus) in order to provide the clear promise of recompense necessary to attract billions of dollars of foreign investment”. “as indirect damages, Petersen should also receive the value that its shares lost between April 16, 2012 and their foreclosure – $156 million”

“the relevant prejudgment interest rate is New York’s 9%” “That rate generates $6.405 billion in prejudgment interest on the tender offer that Petersen should have received and $763 million on the tender offer that Eton Park should have received through September 24, 2021, with prejudgment interest continuing to accrue thereafter” “The additional $156 million Petersen lost as a result of the drop in value of its shares generates prejudgment interest of $133 million through September 24, 2021,”

So the claim for summary judgment for damages + interest up to 24.9.21 is:
Petersen = $14.227bn. Eton Park = $1.661bn
Of which, BUR's potential shares are (I believe) 31.5% and 70% respectively, i.e. 14.227 x 0.315 + 1.661 x 0.7 = $5.64bn

The interest claim to 24.9.21 will need to be updated. Assume hypothetically judgment in the plaintiffs' favour on 24.9.22, a further year at 9% simple interest increases the BUR share of the claim by (0.09 x 0.315 x (7,533 + 133) + 0.09 x 0.7 x 898) = $274m, giving a total value to BUR on my calculations (DYOR as always) of $5.914bn.

To reach your own view on prospects of success, the key document (IMO) is the defendants' legal submissions where they raise six substantive defence points.

[dgovia] 18/4/2022 12:25

Surely they will just sell some more of YPF to these guys as soon as we get any sort of ruling? hxxps://www.gerchen.com

[donald pond] 16/4/2022 10:05

I keep thinking Argentina need to go to trial so the current government isn't accused of giving in to capitalist vultures. The current government will look after itself above all. If they settle the Kirchners will say they surrendered and roll out legal commentators saying they didn't need to and gave up Argentine sovereignty to try to score political points. But if they lose big in court they can blame the Ks and the Yankee courts. Given that their case now appears to be that they always had the right to nationalise without giving compensation (despite saying the opposite in the prospectus) I can't see any other explanation.

[donald pond] 15/4/2022 11:56

Have found ithttps://www.pacermonitor.com/public/case/7977221/Petersen_Energia_Inversora

[djderry] 15/4/2022 11:46

Apologies Donald,in transit,I will pm you.

[donald pond] 15/4/2022 10:42

I also think that argument is the same as the one the Supreme Court rejected. This isn't a case about ownership of assets in Argentina but about compliance with the offering document of a company listed on NYSE. If that is still Argentinas approach they've got no chance

[donald pond] 15/4/2022 08:34

Have you got a link to them dj? From seba's summary it seems that the Argentine case rests of the expropriation law passed in Argentina trumping everything else. I can't see that working.If it did any country in the world could seize any asset at any time inside its own territory with no repercussions. If that is their argument it is very weak.

[djderry] 15/4/2022 08:15

Most interesting read in the motions by plaintiffs and defendants for summary judgement.I'm a little surprised that YPF's fourteenth and sixteenth defense is still harping on about holding the trial in Argentina.
Meanwhile,Burford raises over $700 million dollars in two weeks.Business as usual.

[gusrezo] 14/4/2022 18:29

Bogart at the recent Shares Magazine event:

[donald pond] 11/4/2022 09:09

That's a seriously heavyweight NED appointment btw

[flare1] 11/4/2022 05:45

Next key date is the Summary Judgement Motions which will be filed on 14 April. After that there will be a six week delay until the Summary Judgement Responses which is scheduled for 26 May.

According to the FY 2021 Earnings Call Transcript - 3rd April 2022, "What this means is, that you're going to be able to see more about this case because the summary judgment filings and the summary judgment proceedings are public open court matters instead of the discovery, which is not something that happens in open court. So what's going to happen is the parties are going to file their summary judgment motions in the middle of April. The plaintiffs will put in a motion saying we have a strong case, and we should win and the defendants will put into motion that says the plaintiffs case is terrible and they should lose. And those motions will be legal argument and they'll be accompanied by expert reports and other evidence. Then each side will respond to the other side's motions; that happens at the end of May. And then each side gets one round of further reply, and that happens in the third week of June. And that's a completely traditional legal briefing schedule. Once those three rounds of legal briefing is complete, then the court will decide whether and when to schedule oral argument and then will go off and write a decision about the summary judgment motions. It’s possible for the court to resolve the case entirely on summary judgment without ever holding a trial or it's also possible that the court will not resolve the case and send it to trial".

[syoun2] 08/4/2022 20:01

Have I understood correctly the first public information on Peterson will be next Thursday?

[planit2] 08/4/2022 18:24

In the presentation they seemed happy a lot more case information will be available this year due to the proceedings/disclosures being more public.

[al101uk] 08/4/2022 01:02

OK, I'll rephrase that to the risk adjusted value of the case would be considered by Burford to be higher.

I guess you're making the point for me, the market value isn't necasarily the only view to be taken and could be somewhat misaligned with Burfords view of the case.

[williamcooper104] 07/4/2022 23:29

Argentina hadn't defaulted on its debts when the last portion of the claim was sold of - in fact it had then (amusingly) sold a 100 year bond (it lasted 3 years before defaulting) There's an argument that sov default won't impair Burs ability to collect in a reasonable time frame - but I doubt you could sell that to the market if you were trying to sell it now I've no clue what the market value would be but struggle to feel it could be a lot higher

[williamcooper104] 07/4/2022 23:26

Yep, most cases are held at cost - the carrying value of Peterson is inferred from the last position sold of You can't infer a probability of success from balance sheet NAV

[williamcooper104] 07/4/2022 23:24

I think that's a crude taking the max Bur could win, discounting that at some cost of equity type rate and then comparing that PV to what BUR have on balance sheet and working out the implied probability - or using a simple cost of interest discount rate It's meant to point to huge latest upside

[al101uk] 07/4/2022 21:35

Burford really can't win can they.

Every analyst and their dog were claiming that Burford was artificially increasing profits by marking up unrealised gains, MW go one step further and say it's all a big ponzi scheme and Burford are bankrupt. Still others claim their biggest cases shouldn't even be considered in any valuation.

So Burford very cautiously mark up the YPF case and... "they only give it 23% chance of success" is the cry.

How exactly do these people want the company to price an as yet unresolved case where the magnitude of the potential gain could be transformational?

At the point of sale the YPF case was earlier in it's development, I would imagine the market value of the case today would be greater than it was back then.

[lazg] 07/4/2022 19:03

Got the numbers wrong, but the point still stands:

_"Yet, YPF has already been a success. Burford has invested $45 million in total and has sold off 38.75% of its entitlement for $236 million in cash proceeds; the rest is held on its balance sheet at $775 million. The payout of the case will be either $0 or up to $6 billion (the mid-point estimate is ~$3.35 billion). In other words, the $775 million on balance sheet implies that Burford is estimating a 23% chance of success."_

This is a wierd analysis, they did not sell it at that price because they think it has a 23% Chance of success.

1) 236 million now are worth more than many more millions later
2) having other american firms involved makes it more likely that a US judge wont let Argentina of the hook. They are increasing their liquidation chances.
3) maybe they wanted 236 million of cashflow to invest in other cases, creating leverage

Poor analysis by seeking alpha

[donald pond] 07/4/2022 19:03

I think they have to value it at something. The reality is probably that there is a very high probability of success, that the range of possible damages is wide, and the speed at which any judgment could be enforced I SC uncertain. How that equates to 24% is open to speculation

[lazg] 07/4/2022 18:56

I don't know what this means. What I do know is that no lawyer could assess the probability of success to that level of precision. So it must mean something else. Maybe its the ratio of what they will receive if the case is successfull?

Actually, if any metric was applicable the case was already more than 1000% successful in that they bought it for 20 million and sold 40% of it for 200 million or so.