TIDMBUR
RNS Number : 3417Z
Burford Capital
14 March 2017
This announcement contains inside information.
14 March 2017
BURFORD REPORTS FURTHER SECONDARY MARKET TRANSACTION
ACTIVITY
Burford Capital Limited ("Burford" or the "Company"), a leading
global finance firm focused on law, announces that on 13 March 2017
it sold further participation interests to institutional investors
in its possible future proceeds in its investment related to the
Petersen claims.
The sales announced today combined with the small sale on 30
December 2016 announced on 3 January 2017 collectively represent
the sale of 10% of Burford's interest in the Petersen claims to a
group of institutional investors for a total sale price of $40
million. The sales imply a market value for the investment of $400
million, approximately 20x Burford's current invested cost, while
permitting Burford to continue to retain 90% of the potential
upside in this matter.
However, given their size and the inherent unpredictability of
litigation, we do not necessarily regard the implied valuation of
these sales as the appropriate carrying value for the remainder of
the investment on Burford's balance sheet. Following final auditor
and audit committee action, we have recorded a carrying value
considerably lower than this implied valuation in our accounts for
the year ended 31 December 2016 published today.
The sales announced today will be included in our financial year
2017 numbers. The implied valuation of these new sales may cause a
further increase in Burford's carrying value of the Petersen
investment given their larger size and thus may cause a
corresponding increase in income for the six months ending 30 June
2017. However, Burford has not yet determined, nor yet consulted
with its auditors about, the impact of these sales on its total
carrying value of the Petersen investment, or the consequent impact
on Burford's financial statements, for the 2017 financial year. We
discuss our approach to valuation in further detail in our annual
report published today. There can be no assurance that the carrying
value of Burford's investments will be reflected in its actual
realizations.
For background to the Petersen claim, please refer to our prior
RNS dated 3 January 2017 and our published annual report for the
year ended 31 December 2016.
Background to Burford's investment valuation process and its
impact on reported earnings
Burford cautions that its earnings for any financial period
partly depend on judgments made by management, which are then
included in the audit process and ultimately determined by
Burford's board of directors. The process for the six months ending
30 June 2017 has not yet commenced and reviews often result in
adjustments to initial expectations. Burford does not currently
intend to update the market further concerning the earnings impact
of these sales prior to the release of its interim results in July
2017.
Burford values transparency in its presentation of financial
results and wants to be clear with investors about its approach to
those results.
Most of Burford's income comes from its litigation finance
business. Within that business, there are two principal sources of
income for accounting purposes, realized gains on investments and
unrealized gains on investments. (Realized and unrealized losses
will naturally negatively affect income and the principles we set
forth here apply equally to losses.)
Realized gains are straightforward: they represent the amount of
profit, net of the return of Burford's invested capital and any
previously recognized unrealized gains, on an investment that has
either resolved entirely or has been settled or adjudicated such
that, in Burford's view, there is no longer litigation risk
associated with the investment. (In the latter event, Burford may
discount the anticipated profit in respect of an investment to
account for any continuing uncertainty as to the recoverability of
any amount.) Burford announces individual investment results that
will produce realized gains separately from its financial results
only when the individual gain is new information which may be
material to Burford.
Unrealized gains are more complex: they represent the fair value
of Burford's investment assets, as determined by Burford's board of
directors in accordance with the requirements of the relevant IFRS
standards, as at the end of the relevant financial reporting
period. There is no active secondary market for litigation risk,
and thus there is generally no market-based approach to assessing
fair value; to the extent that a secondary market transaction does
take place with respect to an investment, the implied value of that
transaction is a key valuation input. In the absence of such a
transaction, we are mindful that the outcome of each matter Burford
finances is likely to be inherently uncertain, may take several
years to conclude and is often difficult to predict with accuracy.
Moreover, litigation matters frequently experience multiple
significant shifts in sentiment during their evolution. Burford
thus eschews fair values based solely on current sentiment, and
focuses on objective events (such as court rulings or settlement
offers) to ground its assessment of fair value.
Burford's board of directors assesses the fair value of
Burford's investments after the close of each financial reporting
period and therefore investors should not expect updates about
potential changes in fair value during the course of any given
reporting period. Following the close of each financial reporting
period, Burford's board determines the fair values of investments
after taking into account the views of management, the operation of
the audit process and input from external experts (as it considers
appropriate). Generally, that process does not conclude finally
until shortly before the release of Burford's financial results for
the relevant period.
Burford is pleased to be followed by a number of research
analysts and we are grateful for their efforts to understand and
explain our business. They perform a valuable role in assessing our
operating performance, the evolution of the litigation finance
market and interpreting other relevant industry developments.
However, prospective investors and other market participants must
appreciate that, due to the confidential, potentially privileged,
long-term and uncertain nature of each investment asset, it is very
difficult for research analysts to project accurately the likely
investment income of the business. Any projections produced by
research analysts are not produced on behalf of Burford and Burford
takes no responsibility for such projections. As a result,
prospective investors and other market participants should not
treat, and Burford does not intend to treat, the financial
projections produced by research analysts as indicative of the
market's expectations of Burford's future financial performance. We
specifically eschew any obligation to correct estimates made by
financial analysts or to inform the market should we come to
believe that our actual performance will diverge from those
estimates. This is, of course, different to the approach taken by
most operating companies, in respect of which research analysts can
produce relatively reliable estimates and the relevant company will
advise the market if it expects to see performance materially
different from the consensus of analyst forecasts. It is important
that investors understand that Burford takes a different approach
as a result of the different nature of its business.
The person responsible for arranging for the release of this
announcement on behalf of the Company is Elizabeth O'Connell,
Managing Director.
For further information, please contact:
Macquarie Capital (Europe) Limited +44 (0)20 3037
- NOMAD and Joint Broker 2000
Jonny Allison
Nicholas Harland
Liberum Capital Limited - Joint +44 (0)20 3100
Broker 2222
Richard Crawley
Jamie Richards
Numis Securities Limited - Joint +44 (0) 20
Broker 7260 1000
Charlie Farquhar
Andrew Holloway
Neustria Partners - Financial +44 (0)20 3021
Communications for Burford Capital 2580
Robert Bailhache [email]
Charles Gorman [email]
Nick Henderson [email]
About Burford Capital
Burford Capital is a leading global finance firm focused on law.
Its businesses include litigation finance and risk management,
asset recovery and a wide range of legal finance and advisory
activities. Burford is publicly traded on the London Stock
Exchange, and it works with law firms and clients around the world
from its principal offices in New York, London and Chicago.
For more information about Burford, visit
www.burfordcapital.com
This information is provided by RNS
The company news service from the London Stock Exchange
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