Greenhaven Road Capital - Burford Capital: YPF Case Payout Is A '$6.2B Holding'

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Burford's largest “holding” is a judgement against Argentina related to the YPF case, for which Burford is in charge of pursuing the payout.If Burford were to collect the full $6.2B (not including ...

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One Fortune 50 company partnered with Burford last year for a $325M commitment to their case. Right now, Burford is the only funder with that scale. CEOs, CFOs, and General Counsels like collecting bonuses. If that","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4585":"ETF&股票定投概念","BK4201":"综合性石油与天然气企业","BK4588":"碎股","BUR":"Burford Capital Ltd.","YPF":"阿根廷YPF","BK4164":"特殊金融服务"},"translate_title":"格林黑文路资本——伯福德资本：YPF案件支付是“62亿美元控股”","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"BUR":1,"YPF":1},"content_text":"Burford's largest “holding” is a judgement against Argentina related to the YPF case, for which Burford is in charge of pursuing the payout.If Burford were to collect the full $6.2B (not including post-judgement interest accruing at ~5% per year), this windfall would be worth $28 per share.While the YPF judgment is a massive asset for Burford, it is far from the only case that should start gaining more traction in the near term.   Galeanu Mihai/iStock via Getty Images The following segment was excerpted from this fund letter.   Burford Capital Limited (NYSE:BUR) As the ancient Greeks said, “The wheels of justice turn slowly, but grind exceedingly fine.” As a litigation financer, Burford has funded a large portfolio of legal cases that are working their way through the legal process. Their largest “holding” is a judgement against Argentina related to the YPF case, for which Burford is in charge of pursuing the payout. If Burford were to collect the full $6.2B (not including post-judgement interest accruing at ~5% per year), this windfall would be worth $28 per share. To be clear, especially given Argentina’s history in cases of this type, it is my expectation that Burford will take a haircut in a negotiated settlement. Interestingly, Burford’s CIO Jonothan Molot appears on the visitor logs for senior Argentinian officials… at least they are talking. While the YPF judgment is a massive asset for Burford, it is far from the only case that should start gaining more traction in the near term. Despite receiving $242M of proceeds from $135M of pre-2020 vintage deployments in 2023, Burford still has ~$782M of deployments remaining in that vintage that we should start seeing flow through the P&L in the form of realizations as courts are now fully re-opened and cases delayed by the pandemic conclude. Similar to the inevitable growth of KKR, excluding a change of law limiting litigation finance, I believe that Burford should continue to grow because of corporate manager incentives. They are solving two problems, particularly for public companies. First, legal cases are a drain on current year P&L. Thus, if a CEO or CFO wants to preserve this year’s earnings, they can have Burford pay the legal expenses, resulting in “found money.” It is easy to see a CEO hugging the General Counsel and CFO when they tell him/her that they found the money to “save” the year simply by partnering with Burford. The second problem is that the market does not generally attribute value to pending legal cases, and GAAP accounting does not help. However, if you sell a portion of the potential outcome to Burford for cash, the market does value that. Want to “strengthen” your balance sheet, at least optically, for the market or lenders? Sell a part of your case to Burford. One Fortune 50 company partnered with Burford last year for a $325M commitment to their case. Right now, Burford is the only funder with that scale. CEOs, CFOs, and General Counsels like collecting bonuses. If that means giving up some future economics to Burford, which is playing the justice-turns-slowly game, so be it. With these dynamics, I think demand will grow. Ultimately, shareholder returns will come down to Burford’s case-selection abilities, which historically have been outstanding. Since inception, only 8% of deployments have gone to adjudication and lost, resulting in a ~85% loss of capital to those line items. In contrast, 73% of deployments reached a settlement returning an average of 58% (23% IRR), and the remaining 19% reached a winning adjudication returning an average of 247% (49% IRR). Time will tell if these high returns continue, but there is a lot of upside potential that is not being priced into shares today. The CEO seems to agree with his recent $5M purchase.   This document, which is being provided on a confidential basis, shall not constitute an offer to sell or the solicitation of any offer to buy which may only be made at the time a qualified offeree receives a confidential private placement memorandum (“PPM”), which contains important information (including investment objective, policies, risk factors, fees, tax implications, and relevant qualifications), and only in those jurisdictions where permitted by law. In the case of any inconsistency between the descriptions or terms in this document and the PPM, the PPM shall control. These securities shall not be offered or sold in any jurisdiction in which such offer, solicitation or sale would be unlawful until the requirements of the laws of such jurisdiction have been satisfied. This document is not intended for public use or distribution. While all the information prepared in this document is believed to be accurate, MVM Funds LLC (“MVM”), Greenhaven Road Capital Partners Fund GP LLC (“Partners GP”), and Greenhaven Road Special Opportunities GP LLC (“Opportunities GP”) (each a “relevant GP” and together, the “GPs”) make no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors, appearing in the document. An investment in the Fund/Partnership is speculative and involves a high degree of risk. Opportunities for withdrawal/redemption and transferability of interests are restricted, so investors may not have access to capital when it is needed. 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Other events which were not taken into account may occur and may significantly affect the returns or performance of the Fund/Partnership. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. The enclosed material is confidential and not to be reproduced or redistributed in whole or in part without the prior written consent of the relevant GP. The information in this material is only current as of the date indicated, and may be superseded by subsequent market events or for other reasons. Statements concerning financial market trends are based on current market conditions, which will fluctuate. Any statements of opinion constitute only current opinions of the GPs, which are subject to change and which the GPs do not undertake to update. Due to, among other things, the volatile nature of the markets, and an investment in the Fund/Partnership may only be suitable for certain investors. Parties should independently investigate any investment strategy or manager, and should consult with qualified investment, legal, and tax professionals before making any investment. The Fund/Partnership are not registered under the Investment Company Act of 1940, as amended, in reliance on exemption(s) thereunder. Interests in each Fund/Partnership have not been registered under the U.S. Securities Act of 1933, as amended, or the securities laws of any state, and are being offered and sold in reliance on exemptions from the registration requirements of said Act and laws. The references to our largest positions and any positions listed in the Appendix are not based on performance. All of our positions will be available upon a reasonable request. All hyperlinks contained herein are not endorsements and we are not responsible for such links or the content therein.  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