After Declines, Burford CEO Points to Busy 2020, Cites COVID-19 Claims Ahead
Investors in the litigation funding giant also appeared hopeful for future gains despite a big dip in 2019.
By Dan Packel / April 28, 2020
Chris Bogart, CEO of Buford Capital. (Courtesy photo)
Burford Capital CEO Christopher Bogart on Tuesday sought to minimize the significance of the litigation funder's newly disclosed double-digit dip in revenue and profits for 2019. Instead, he highlighted a third straight year in which the company deployed over $1 billion to back new claims, as well as a busy start to 2020 for cases in the pipeline and investment opportunities from the coronavirus crisis.
The litigation finance giant's fiscal report for 2019 showed operating profits tumbled by 21% and total income dropped by 15%. But Bogart stressed that waiting on the courts—an inherent part of the litigation funding model—necessarily led to unpredictable timing on results.
"I used to run a cable TV business. We knew by the beginning of the year how much money we were going to make at the end of the year," he said. "The way we look at this business is on a cash basis as opposed to an accounting statement business."
That means a focus on continuing to commit and deploy significant amounts of capital to promising matters.
Bogart flagged over $1.6 billion in new commitments by the funder, along with $1 billion deployed over the year, increasing the size of Burford's portfolio to $4.2 billion.
"You sit and then you wait," he said of the business model. "But the ratio of wins and losses is pretty consistent."
Bogart added that the outcomes thus far in 2020 have been particularly satisfying, with court results and arbitration decisions that would yield $800 million in cash, if paid in full.
"Given that we did $1 billion in 2019, we're well ahead of last year's rate," he said.
While acknowledging the company had also deployed at least $1 billion in the last three years, Bogart wouldn't commit to matching that figure again in 2020.
"It all depends on the pace of individual cases, but it's looking like a busy year," he said.
Well before the coronavirus crisis torpedoed economic growth in the U.S. and globally, leaders at Burford and throughout the litigation finance industry had contended that there would be a surge in demand for outside capital in the next recession. Now that it has arrived, the company is fielding more inquiries.
"The world's not seeing huge volume of COVID-19 litigation yet," Bogart said. "What's happening instead is that people who have existing litigation that has nothing to do with COVID-19 but are concerned about liquidity are reaching out."
While some businesses are simply looking to offload the cost of legal fees, others are eager to monetize claims and receive capital based on the expected value of the outcome. Burford says it recently worked with a Fortune 100 company in one such monetization for $75 million.
The expected flood of COVID-19 related claims won't likely arrive until after businesses can quantify their damages, although some insurance coverage lawsuits and fights over force majeure provisions in contracts where the window for performance has passed are already moving forward.
Bogart also said that the August 2019 short-selling attack on the company's stock by investment firm Muddy Waters Research has had little impact on the firm's operations, adding the consequences were primarily on Burford's investors.
"That damage is slowly being rehabilitated," he said.
Burford's stock, which is traded on London's AIM exchange for smaller growth companies, lost roughly half of its value after Muddy Waters released its report calling the company "arguably already insolvent."
The stock price slid throughout February after Burford warned in the beginning of the month that 2019 profits were likely to be lower than the previous year. But value increased by 16.5% from Monday's close on the basis of the company's report, closing trading Tuesday at £474.2.