Litigation Capital Manag... Share Discussion Threads

[makinbuks] 17/7/2023 13:09

On the point of the need for loan facilities, isn't it the case that, at the point of commitment they need to have funds available in the form of cash or undrawn facilities. If cash flow is positive in the period between commitment and deployment the facilities may prove superfluous but since cases can be lost or delayed they are still required to be in place

[citywolf1] 17/7/2023 12:40

While we wait for the market update would be interested to hear expectations for the year ahead. I'm struggling to see how the next couple of years can be anything other than barnstorming.

In my model I have assumed A$65m of invested cost is realised in FY24. IMV this is a conservative assumption looking at the capital deployed and its maturity profile (p17 of HY pres). There was $95m in the ground as of Feb that was more than 3 years old (o/w $65m was more than 4 years old). Some of this has been realised in HY but a further $25m was over 2 years old which will have rolled forward. Plus there was a further $27m of capital committed but not yet invested in this same group of cases. So essentially during the course of this year we probably have c.$130m or so in the ground that is well over 3 years old - making an assumption of $65m realising quite conservative imv.

If we assume an average return of 1.5x, slightly below historical perf despite the unusually aged cases (so again, conservative), then that means gross profit of $97m. We then need to think about any fund performance fees. I think we could assume a direct/coinvest split of $43m/$22m (there was $124m of third party fund capital over 2 years at HY), which at 35% carry would translate into performance fees of c. $30m. That would leave us with $127m of Gross profit and c. $100m of pre-tax profit.

This could easily be much higher given conservative assumptions on amount realised and multiple (vs ages of cases). FY25 could easily see that bump another 50%+ given the amount of capital we've been putting in the ground. Interested to hear other thoughts.

[74tom] 17/7/2023 10:28

That's a very good point on grossing the fund up rather than taking a proportion of $150m @citywolf1, I'll adjust my calcs. It's good news too as it means they had more capital deployed at 31/12 than I previously thought; $50m * 0.6 = $30m, of which A$6.7m / $4.5m settled in the first half of 2023, returning capital of A$53.1m / $35m of capital.

Yep, I think the timing of deployments vs new fund raises is underappreciated. Raising too much too soon puts pressure on capital commitments & I suspect is the reason behind OBL's inferior case success rate & ROIC metrics; they had to invest in more cases simply because if they didn't then the fund(s) wouldn't be committed in time.

I think a dividend is important due to the fact it's symbolises they are back in a position of financial strength, it doesn't need to be more than 1/2p and would be well covered should they report PAT of >A$50m in FY24. As you say it would attract UK income investors and set LIT apart from MANO.

Very positive to see this case appears to have been settled;

[74tom] 17/7/2023 10:03

Great news on IDA. I'd guess a multiple of invested capital, based on the recent panthera agreement something like 3 - 3.5x $4.65m. Also a chance they managed to negotiate a % of any award though, especially given the financing was agreed mid Covid. 20% of $95m would be a little higher than the MOIC figures.

Either way, if they've won the full amount this will be yet another material win vs a £95m market cap.

[pythian] 17/7/2023 08:51

Nice news,L2B. We should be grateful for your effective trawling!

I think it's worth repeating from your last post:

"Key metrics:
LCM has 97% win rate with overall 150% ROIC at 78% IRR.
OBL has only 76% win rate with overall 115% ROIC at 35% IRR (last 3 years).
BUR has 91% win rate with overall 92% ROIC at 30% IRR."

[l2b] 17/7/2023 06:14

A win for LCM!!

IDA went into trading halt today on ASX for "closure of arbitration proceedings against the United Republic of Tanzania and receipt of the Tribunal’s award"

Reminder LCM funding agreement with IDA for US$5m with case seeking US$95m award.

What's the cut for LCM....?

Announcement:
cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02687201-6A1158600?access_token=83ff96335c2d45a094df02a206a39ff4

Our international arbitration lawyer on the case at Boies Schiller is out "Celebrating a huge treaty win"
www.linkedin.com/posts/timothy-l-foden-6a12496_celebrating-a-huge-treaty-win-with-the-foden-activity-7085692170262728705-BBfW/?utm_source=share&utm_medium=member_ios

[citywolf1] 16/7/2023 14:04

@74tom as I understand the capital commitments will be a bit larger as LIT coinvests 25%/75% alongside the fund rather than within it, so for example the LIT commitment for F1 is effectively US$50m (=150/75%), and for F2 it would be US$100m, assuming they hit $300m target.

However your point about LIT's limited capital requirements due to conservative deployment to date is a good one. This raises the question of capital efficiency. To mitigate this they will hopefully continue to speed up deployment, which I think will happen now team is larger and fund size is growing.

The other point for them to consider is retaining some debt but distributing the excess cash to shareholders either as a buyback or (more likely) through dividends. Funding the business with 100% equity is expensive and not really necessary imv given the risk profile of the assets. Better to have some debt and boost shareholder returns, much like most investment trusts do.The BUR 7% you flag does create some pressure but if LIT can get cash efficiently into cases it will have no issue beating that hurdle given 79% avg IRRs it is achieving.

On a personal level I'd rather they had some debt *and* invested all of the cash as the ROI can't really be beat. But I understand the value of a divi to UK income funds and attracting them will be a big part of getting the share rerated I suspect.

[waterfall city] 16/7/2023 13:38

Presumably as the cases in the funds settle they get paid out rather than reinvested within the fund, if thats the case then yes the earlier fund payouts could well go a long way to finance the later larger funds.

[74tom] 16/7/2023 12:18

Re. BUR, it's notable that their gross debt is now up to $1.56b with an average annualised coupon of 6.97%, so will cost them ~$110m per annum going forward. Of course that could be offset by Peterson cash if / when Argentina pay up. However, in the meantime that's quite a headwind

[74tom] 16/7/2023 12:12

Good to know on the 44988 ;)

The debt financing discussion is interesting. I do question how much debt is actually needed given LIT's measured approach to growing AUM vs other listed peers + the 75/25 structure of the funds.

LIT' capital requirement for full deployment of fund 1 = $37.5m

Fund 2 at last reported close of USD273m = $68m

Fund 1 was 60% deployed at 31/12, so $15m was required to fully fund it.

Therefore a further $83m was required to fund both.

Year to date, at least A$80m / USD55M of cash inflows have been received from 5 settlements, after deducting overheads & tax you're left with ~USD35m of inflows, pre new fund deployments.

So the remaining Fund 1 deployments can be made via these cash inflows, as can a decent chunk of Fund 2.

As the remaining direct investments plus Fund 1 cases from 2020 onwards mature, what quantum of debt do we think is needed to enable deployments in a potential USD500m Fund 3 (LIT share $125m)?

It doesn't appear inconceivable that Fund 3 could be funded via Fund 1 + early Fund 2?

[citywolf1] 15/7/2023 15:11

Could be if they could sort the structuring out. Having a lump sum repayment rather than coupon payments suits the cashflow profile of the asset class well. The current yields for most seem to be around the 7% mark so pretty reasonable. The Northleaf facility is on the expensive side but as the AUM and track record continue to develop it should be incrementally easier to secure debt financing

[waterfall city] 15/7/2023 14:32

The 44988 buy trade was mine, it didn't show up until hours layer which seemed odd!
Separately I wonder if ZDPs could work as an alternative to debt finance, which has become a lot more expensive in this environment,noting Burfords recent 9% offering, from 6% previously.

[jackson83] 13/7/2023 21:29

will 70p hold next week lol

we NEED RNS ON DIRECTORS BUYING OR WE GOING SUB 50P'S

[jackson83] 13/7/2023 21:26

LET SEE IF THE DIRECTORS BUY ANY ? NOPE RED FLAGSS

TIME TO SELL

NO news expected so expect a sell off / exit .. SHARE PRICE TO DRIFT .. DOWN..


I will add at 60p's soon / next week / month

GET YOUR sell ORDER IN EARLY Friday / tomorrow lads



rebut in at 65p soon

[jackson83] 13/7/2023 18:52

TIME TO SELL
NO news expected so expect a sell off / exit .. SHARE PRICE TO DRIFT .. DOWN..


I will add at 60p's soon / next week / month

[jackson83] 13/7/2023 15:31

TIME TO SELL
NO news expected so expect a sell off / exit .. SHARE PRICE TO DRIFT .. DOWN..


I will add at 60p's soon / next week / month

[citywolf1] 13/7/2023 15:24

Based on previous years' announcements tomorrow morning looks like a good bet for the market update. As we know, record results are already baked in and there is a strong outlook for the year ahead. Probably the most interesting unknown is how the deployment rate has fared for H2. If it has continued like H1 we won't be far off the F3 raise needing to kick-off

[74tom] 13/7/2023 15:14

STRONG SUPPORT AT 80P, I'M NOT SURPRISED GIVEN THE IMPENDING RECORD RESULTS & CASH INFLOWS.

NEXT STOP SURELY 100P

@Flagon, I was reading the case notes a few weeks back, a very unusual situation there. The new expert witness certainly appears to have calibre given they were former deputy director at the UK Competition Commission.

[jackson83] 13/7/2023 14:52

TIME TO SELL

SHARE PRICE HOLDING UP WELL TODAY ?


IF ORE WHEN WE SEE 60P'S


I WILL TOP UP

[flagon] 13/7/2023 10:41

Been looking at the Govia Thameslink litigation case.

Link :

An expert witness has resigned due to taking a 6-month sabbatical so things have been delayed somewhat. A new expert witness has been appointed.

Next waypoint is a case management conference on 12/10/23. There is a lot more information on the Competition Appeal Tribunal website.

Link :

[boozey] 12/7/2023 23:38

We Must Be due aN update Very sooN

[jackson83] 12/7/2023 11:02

FUNKY FINANCE all the WAY BABY , DARK SUNGLASSES , A WIG ON HIS HEAD & now delisted his posts that is Mateos ? king of crooks / shorters ... remember he vanished after dumping it all & went short .. luck has it for him