“Continued losses” at third-party funder Therium Capital as it waits for cases to conclude are set to contribute to increasing losses at its parent company, investors were warned yesterday.
But they were also told that demand is strong and there are good longer-term prospects for the funder.
In an interim management statement to the Stock Exchange, City of London Group plc (COLG) said that the outlook for Therium’s portfolio of cases is “encouraging”, but it was encountering “significant delays in case resolutions” – and therefore in receiving its “performance fees”.
COLG is a financial services group focused on providing merchant banking services to finance the SME and professional services sectors.
The lack of major case resolutions before the company’s year-end on 31 March was one of the reasons that COLG’s loss in the second half of the year was likely to exceed the £1.3m recorded in the first half, it said. The share price has fallen by nearly two-thirds over the past year, and closed yesterday at 27.5p.
But the statement emphasised that “Therium has continued to see strong demand for case funding and consequently has been easily able to allocate capital for the funds raised in 2013”.
As previously reported, Therium is in talks to establish an international joint venture to fund commercial litigation cases, and the statement said that “concluding this venture has taken longer than initially expected”. Further, Therium is in “active discussions” with two groups of investors to establish its next two litigation funds.
Therium is 50% owner of Novitas Loans, a specialist legal market lender. The statement said: “[Novitas] continues to expand profitably and has been successful in attracting new forms of finance and launching new lending products to law firms and their clients. The loan book continues to grow significantly.”
Last autumn, Novitas began working with Just Costs Solicitors on its cash advance scheme, which enables law firms to draw down on up to 70% of their likely recoverable costs once they have successfully settled personal injury, clinical negligence and industrial disease cases. It lent over £1m in the scheme’s first three months.