Litigation funder to list next week with £76m market cap

Cooklin: IPO will be catalyst for accelerated growth

Insolvency litigation funder Manolete is to raise £16.3m when it is admitted to AIM next week, it has announced.

The selling shareholders will realise a further £13.1m after an institutional placing when the listing goes live on 14 December, giving Manolete a market capitalisation of £76m.

Some 27.4% of the shares will be held in public hands.

In the year to 31 March 2018, the company had a turnover of £10.6m – more than double the year before – and an operating profit of £4.1m.

Its £10m facility with HSBC will be doubled upon admission.

Manolete first announced its intention to float in May. As at 30 September 2018, it had invested in 249 cases generating gross recoveries on the 173 completed cases of £28m at an average money multiple of 3.1x.

The average gross recovery of the completed cases is approximately £161,000 per case, and their average duration is less than 12 months.

It prefers to purchase, rather than fund, cases “as it gives the company full control over the management of the case”. This also provides greater protection to the insolvent estate.

An announcement on Friday said the market was a good size: “Over 14,000 corporate insolvencies and 40,000 bankruptcies per year from 2008-2017 provides resilient level of demand with an effective recession hedge.”

Research in 2014, it added, showed that only 7% of cases were acquired or funded, while the Jackson reforms supported litigation financing over alternatives such as conditional fee agreements.

Manolete claimed “first mover advantage” and existing relationships with over 280 insolvency practitioner firms, along with a high level of repeat business, representing some 60% of invested cases.

Founder and chief executive Steven Cooklin said: “When we started in 2009, Manolete was a pioneer in the then nascent market for financing insolvency litigation claims in the UK.

“Since then we have built on this first-mover advantage, becoming a major player in the insolvency litigation financing market, benefitting from extensive relationships with UK insolvency practitioners and their legal advisers…

“Our total case ROI exceeds 200%, delivering returns to insolvency practitioners that are often transformational to creditor recoveries. This alignment of insolvency creditors’ and Manolete shareholders’ interests is fundamental to the success of our business.”

Mr Cooklin predicted that the IPO would act “as the catalyst for accelerated growth”.

Among the benefits highlighted to investors were to “significantly increase” the general volume of business and take on more, higher-value and “in certain situations longer-duration cases”.

Further, Manolete could “selectively make larger initial investments in purchased cases”, and had the “potential” to explore diversification into other jurisdictions and areas of the law closely associated with insolvency.

One of the company’s non-executive directors is Dr Stephen Baister, who was chief bankruptcy registrar from 2004 to 2017.

We reported last month that Australian litigation funder LCM is to delist from the Australian Stock Exchange and join AIM. However, in October, Vannin Capital postponed its plans to float, citing current market conditions.

Meanwhile, litigation funder Juridica is set to appoint liquidators on 20 December and delist the following day as planned to complete a three-year process to close down.

The AIM-listed company, which is chaired by Lord Brennan QC, began winding down in November 2015 citing a lack of scale.

Finally, listed Australian funder IMF Bentham – the parent company of US-based Bentham IMF – has launched a new fund focussed on US litigation finance investments with an initial size of $500m (£392m).

There is potential to increase the fund to $1bn if investors exercise the option to roll over into the second series.

IMF intends to fund its capital commitment from its internal cash resources following the recent completion of an issue of equity and bonds, which raised approximately A$100m (£58m).

Charlie Gollow, Bentham’s US chief executive, said. “In the last three years, we’ve seen a 110% increase in qualified applications for funding in the US and greater interest in larger deals.”

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