Litigation Capital Manag... Share Discussion Threads

[williamcooper104] 22/2/2021 16:01

The interest rate reflects the fact that no one else would lend them money on normal senior debt terms

[bigbadaussiebear] 22/2/2021 15:11

Boo hoo 8% for 4 years while allowing them to get another $150m USD from their third party funds clients.

$150m USD x 35% performance fee + the return on this $50m = over $100m return in 4 years when the fund matures for what? $20m in interest payments..

And this doesn't even consider the $150m funds under management they already have + existing balance sheet investments

[dekle] 22/2/2021 15:08

In my opinion the interest rate is a reflection of the strength of the current business. I'm sure the results must have been aired to the lender in deciding the level of interest and potential.

[williamcooper104] 22/2/2021 15:01

My reading is that it's 8 percent based on current Libor - so will be say libor plus say 780bps If libor goes up then the interest payable goes up too and will be greater than 8 percent There's probably a libor floor too - such that if libor falls below zero there's no interest cost reduction Note that CCC rated bonds give less yield than this

[williamcooper104] 22/2/2021 14:57

Nuts 13 percent is an equity cost but with all the risk to shareholders of debt Would have been better issuing prefs or just simple equity I'd like to get 8 percent pay and 13 IRR

[djderry] 22/2/2021 13:25

I am in two minds regarding today's announcement of a new credit facility.On the positive side,it indicates that LIT is poised for growth and that they see clear opportunities.This I believe is a positive,not only for LIT ,but for BUR,where I am much more heavily invested.
The issue,then,is price.In a low-interest rate environment,8% seems a bit steep.Why not issue bonds,or have I missed something?
The profit sharing is quite acceptable at a max of 13%,in my view.
Of course,it has to work for all three parties,the litigant,the litigation finance company and the lender.

[bigbadaussiebear] 22/2/2021 12:08

The Credit Facility, together with LCM's existing resources, provides LCM with flexible capital structure for the foreseeable future to meet our most conservative assessment of the expected demand for LCM's litigation finance needs, as well as LCM's GAR Fund co-funding obligations, including any anticipated potential upsizing."

They are pretty much telling the market this capital is to up size the assets under management...

[speny] 22/2/2021 12:05

Results due on 16th March, so we should have a far clearer picture then.

[makinbuks] 22/2/2021 11:51

Pretty expensive deal it seems to me. I don't understand "a LIBOR based based rate of 8%", is that LIBOR +8 or LIBOR + something = 8 currently or is it a fixed 8%? Similarly if the bonus has a cap at 13% for everything does that include LIBOR movement?

Its spun as being all about growth, but the market reaction suggests its maybe more to do with meeting existing obligations. Worrying

[speny] 22/2/2021 11:29

This is a long term hold for me, as see vast potential upside from current levels. Im debating whether to add before results on 16th March, but may wait, as this is already one of my largest holdings. However if the share price drops a closer to 60p, I'll be very tempted to add more.

[adamb1978] 22/2/2021 11:19

I'm not concerned about the lack of upward movement in the share price. The new fund structure will help them increase returns to shareholders, assuming they deliver returns even vaguely in the direction of previous returns.

Sometimes with small-caps it can take a while for value to become apparent, partly because whilst certain investors will do the digging etc to find areas of 'cheapness', for a large number of others, as well as market commentators, they rely on screens to flag things up.

I'm confident that in a year or two the share price will be materially higher here, and if the price slips into the 50s towards my in-price then I'll increase my already relatively-full position

[bigbadaussiebear] 22/2/2021 11:09

Half the business is in Australia and we have no community transmission of Covid19 here and life is as it was more or less.

I'm pretty sure the UK courts are working with a few delays.. OBL on the ASX has pushed a few cases due to conclude in FY21 into FY22 but that's hardly an issue for long term investors.

I wish I could buy this stock on margin because I would if I could...

When I first invested in 2017 they were a small company with $16m AUD in cash and investments at cost with a $35m AUD market cap.

This year they will be managing $300m-400m in assets including about $80m of their own capital.

Best of all they won't be diluting shareholders in the short to medium term as they scale the business

[bigbadaussiebear] 22/2/2021 10:55

Oh a short term trader.. Never mind... No idea why I was engaging in discourse with someone who will never have the gonads to hold for 500% to 1000% gains in 5 to 10 years time

[dekle] 22/2/2021 10:46

Hope you are right, managed to sell about 3rd of my holding last week but now in a bit of a loss. I will buy back when if the price drops further to average down. However, until the courts are open fully and have caught up I guess it's a waiting game.

[robsy2] 22/2/2021 10:44

Hmmh
No reaction here? Either they are tight lipped and careful because they are just getting on with making money and are solid or they are struggling a bit.The sector seems a bit troubled. I have a feeling that maybe business throughput is slowing up. Maybe courts are slowing down hearings,the travel ban must be a drag on activity. having operations in different and distant jurisdictions must be more difficult . The company seems quite tight lipped to me.I have a sizeable holding here and am patient but feel like we need some good news here. Let's see what the results reveal.

[bigbadaussiebear] 22/2/2021 10:42

Market is wrong. I bought more. And when the ASX opens tomorrow I will be closing a position to add more here.

You do the math on 35% performance fees for the $150m Usd they have under management.. And any potential upsizing of the assets under management... Which is the reason for this facility.

If the market was right I wouldn't be making any money as a value investor... But it often is and I'm there buying...

[dekle] 22/2/2021 10:38

So far the market doesn't seem to see as positive

[bigbadaussiebear] 22/2/2021 10:31

Who cares if a bond would have been better this company is lining up the ducks for huge profits.. This $50m will give them leverage and they will earn their own returns on it as a balance sheet investment.

That $50m will earn them 100%+ IRR in 3-4 years and give them the chance to leverage another $200m in a fund that they will earn 35% performance fees on.

[dekle] 22/2/2021 10:00

Would a bond have been better at 8%?

[bigbadaussiebear] 22/2/2021 09:55

$250m USD fund which they will get a 35% return on + a return on their co-fund share...

It's all about leverage..

This $50m will earn them a bucket load in 3-4 years

[bigbadaussiebear] 22/2/2021 09:53

You guys don't realise the $50m USD will allow them to co-fund a $250m USD second fund at 20%

So it allows them to leverage their asset management business...