- US judge supports claims by Burford’s clients
- Case relates to nationalisation of YPF in 2012
- Company could take a 40% share of compensation
Long-suffering investors in litigation finance provider Burford Capital (BUR:AIM) received an early Easter gift with the news late last week that a US court had decided in the firm’s favour in a long-running legal dispute with the Argentinian government.
The shares jumped 30% to 754p just before the closing bell on Friday and added as much as another 300p or 42% to £10.74 in early trading. At 957p, that’s a two-day advance of 65%.
WHY IS THE COURT DECISION GOOD NEWS?
Burford provides finance for people and firms fighting legal cases on the basis that it gets paid out a share of the compensation if the case is successful.
It also takes an equity interest in cases using its own money and on behalf of other investors who want exposure to the litigation finance market.
The Argentina case dates back to the forced nationalization of the country’s oil company YPF in 2012 which breached its listing agreement.
When state-owned YPF originally floated on the Buenos Aires and New York stock exchanges in 1993, the Argentine government promised not to renationalize the company or, if it did, to pay a high price through a tender offer.
Burford has been backing two major shareholders in YPF in their fight for compensation, Peterson and Eton Park, and Friday’s news means the Argentinian government has to pay billions of dollars in damages plus interest.
The company has released a statement saying the total consideration could be between $5 billion and $8.4 billion before interest, calculated at between 6% and 8%.
Although Burford hasn’t revealed the amount of its own likely payout, analyst Julian Roberts at investment bank Jefferies believes it could be close to 40% of any settlement.
MORE SUCCESS FOR LITIGATION FINANCE
This morning also saw the announcement by Litigation Capital Management (LIT:AIM) of the realization and cash receipt of its investment in the legal case against Comet Group.
LCM had funded the liquidator of Comet Group, and following a positive High Court ruling last December it was entitled to a £30.4 million payout which represented a £22 million gross profit on its original £8.4 million investment in the case.
