Tue, 13/03/2018 - 10:19
Burford Capital Limited, a finance and investment management firm focused on law, is to sell its entire investment USD12.8m investment in Teinver for USD107 million in cash, representing an investment gain of USD94.2 million and a return on invested capital of 736 per cent.
Burford’s stake in Teinver stems from an investment in an arbitration matter arising out of the expropriation of two Argentine airlines by Argentina’s government. In July 2017, the arbitration tribunal rendered an award in favour of the claimants; that award entitled Burford to receive more than USD100 million under its funding agreement.
Burford says the sale of this investment is prudent, locking in its gain and accelerating its cash recovery to enable reinvestment of that capital.
The transaction is scheduled to close no later than 22 March 2018. Burford intends to reinvest the proceeds of the transaction in new investment opportunities exhibiting attractive risk/reward characteristics.
The Teinver award is the subject of ongoing annulment proceedings. Annulment (the cancellation of an award) is only available in very limited circumstances of serious error by the arbitration tribunal that Burford does not believe exists here, with only 6 per cent of awards ever rendered by the World Bank’s arbitration institution as having been annulled (and only 3 per cent in the current decade).
Were the award to be annulled, the sale transaction could be rescinded at the option of the buyers, although in that unlikely event, Burford would retain a USD7 million fee and would also have its original entitlement back and be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 Officer, says: “The Teinver 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.”
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