Leading litigation funder Burford Capital has sold a £9.3m investment in a successful arbitration for £77m while a bid to annul the award is ongoing.
AIM-listed Burford has pioneered the development of the secondary market in litigation investments and told the stock exchange this morning that it regarded the cash sale of this investment as prudent, “locking in its gain on the investment and accelerating its cash recovery to enable reinvestment of that capital”.
The case arose out of the Argentinian government’s expropriation of two Argentine airlines. Last July, an arbitration tribunal ruled that Argentina should pay £233m in damages plus pre- and post-award interest, which remains to be computed.
Burford’s entitlement from the award could be in the range of £101m, and is subject to an ongoing and compounding interest entitlement.
The award is now the subject of annulment proceedings, but Burford said annulment was only available in very limited circumstances of serious error by the arbitration tribunal that it did not believe existed here.
Only 6% of awards ever rendered by the World Bank’s arbitration institution have been annulled.
The stock exchange announcement continued: “Were the award to be annulled, the sale transaction could be rescinded at the option of the buyers, although in that unlikely event Burford would retain a $7m (£5m) fee and would also have its original entitlement back and be free to pursue the claim again.
“Based on the historical speed of annulment proceedings, a decision on annulment would be expected in the second half of 2019 although individual case timing is unpredictable.”
Christopher Bogart, Burford’s chief executive, said: “This transaction represents a further step forward in our development of a secondary market for litigation and arbitration risk.
“It is efficient for us to move investments into the secondary market as they mature, and obtain liquidity to continue to make new investments at the rapid pace we are currently experiencing.
“We believe that the award would have been discounted to achieve resolution of this matter in any event, as is commonplace. Achieving certainty and immediate cash for this investment, at an attractive price, is a highly desirable outcome for us.”