REG - Burford Capital Ltd - Statement on YPF Damages Ruling

Burford CapitalAnnouncement

11/09/2023 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230911:nRSK9319La&default-theme=true

RNS Number : 9319L  Burford Capital Limited  11 September 2023

 

8 September 2023

 

Released out of hours on September 8, 2023, and queued for release via RNS
upon its reopening on September 11, 2023.

 

 

BURFORD CAPITAL STATEMENT ON YPF DAMAGES RULING

Court's Ruling suggests a final judgment of approximately $16 billion against
Argentina

 

Burford Capital Limited, the leading global finance and asset management firm
focused on law, today releases the following statement in connection with the
September 8, 2023 Findings of Fact and Conclusions of Law (the "Ruling")
issued by the United States District Court for the Southern District of New
York (the "Court") in connection with the Petersen and Eton Park cases against
the Republic of Argentina and YPF (the "Case" or the "YPF Litigation").

 

The Ruling follows a prior decision on March 31, 2023 by the Court granting
summary judgment on liability against Argentina and setting for an evidentiary
hearing questions around the date on which Argentina should have made a tender
offer for YPF's shares and the appropriate rate of pre-judgment interest to be
applied.  That evidentiary hearing was held on July 26-28, 2023 and the
Ruling is the Court's decision on the issues raised for hearing.

 

The Court decided the issues raised at the hearing in Petersen's and Eton
Park's (collectively, "Plaintiffs'") favor, holding that the appropriate date
for the tender offer was April 16, 2012 and that pre-judgment interest should
run from May 3, 2012 at a simple interest rate of 8%.

 

The Court has asked the parties to memorialize the Ruling in a proposed
judgment and submit it to the Court, which Petersen and Eton Park will
endeavor to do forthwith.  We discuss below the computation of potential
damages but in round numbers the Court's Ruling implies a judgment against
Argentina of approximately $16 billion.

 

In other words, the Ruling results in a complete win against Argentina at the
high end of the possible range of damages.

 

Jonathan Molot, Burford's Chief Investment Officer who leads Burford's work on
the Case, commented:

 

"We have been pursuing this case since 2015 and it has involved substantial
Burford management time along with the dedicated engagement of a team of some
of the best lawyers on the planet from multiple law firms and world-class
experts (going up against very good lawyers, and winning). Burford is uniquely
positioned to pursue these kinds of cases and secure wins for clients and
substantial returns for shareholders - not only because of the size and scale
of these kinds of cases, but because of the internal and external resources we
can uniquely bring to bear. There is no aspect of this case, from strategy to
minutiae, that did not involve an experienced Burford team spending many
thousands of hours getting to this point. This case represents what Burford is
all about and exemplifies the contribution we make to the civil justice system
- without us, there would be no justice in this complicated and long-running
case for Petersen and Eton Park."

 

Christopher Bogart, Burford's Chief Executive Officer, commented:

 

"In our recent shareholder letter, we referred to the YPF-related assets as
one of Burford's four pillars of value and I'm pleased to see this
extraordinary win and the value it could create for our shareholders once we
complete the litigation process and collect from Argentina. The Ruling is a
major milestone for Burford and we continue to see momentum in our overall
portfolio and continued demand for our capital and services."

 

Introductory matters

 

As is customary in US litigation, the Ruling was released without prior notice
to Burford or the parties by its posting on PACER, the publicly available
official US federal court site, at 10:45am EDT on September 8, 2023, and was
thus public immediately upon release. The Ruling is also available in its
entirety on Burford's IR website at http://investors.burfordcapital.com
(http://investors.burfordcapital.com) for the convenience of investors who did
not wish to register for a PACER account.

 

While Burford offers in this release its views and interpretation of the
Ruling, those are qualified in their entirety by the actual text of the Ruling
and we caution that investors cannot rely on Burford's statements in
preference to the actual Ruling. In the event of any inconsistency between
this release and the text of the actual Ruling, the text of the actual Ruling
will prevail and be dispositive. Burford disclaims, to the fullest extent
permitted by law, any obligation to update its views and interpretation as the
litigation proceeds. Moreover, the Case remains in active litigation and
Argentina has declared its intention to appeal any decision; all litigation
carries significant risks of uncertainty and unpredictability until final
resolution, including the risk of total loss. Finally, Burford is and will
continue to be constrained by legal privilege and client confidences in terms
of the scope of its ability to speak publicly about the Case or the Ruling.

 

Burford also cautions that there are meaningful remaining risks in the Case,
including further proceedings before the Court, appeals, enforcement and
collateral litigation in other jurisdictions. Moreover, litigation matters
often resolve for considerably less than the amount of any judgment rendered
by the courts and to the extent that any settlement or resolution discussions
occur in this Case no public communication about those discussions will be
possible until their conclusion.

 

The Ruling

 

The Court previously held that (i) the bylaws "on their face, required that
the Republic make a tender offer" for Petersen's and YPF's shares; (ii) "the
Republic failed to make the tender offer"; and (iii) the failure "harmed
Plaintiffs because they never received the compensated exit" that the bylaws
promised. Indeed, the Court held that "once the Court decides the legal
issues, the relatively simple facts in this case will demand a particular
outcome" and held that "there is no question of fact as to whether the
Republic breached".

 

Thus, the Court held that "Plaintiffs were damaged by the Republic because
Plaintiffs were entitled to receive a tender offer that would have provided
them with a compensated exit but did not".

 

The Court previously held that the damages to be awarded will consist of
the tender offer price under Formula D of the bylaws calculated in US dollars
as of a constructive notice date that is 40 days prior to Argentina taking
control and triggering the tender offer obligation. The Court said it must
decide as a factual matter whether the operative notice date for the
calculation is 40 days before April 16, 2012, when the Presidential
intervention decree was implemented, or 40 days before May 7, 2012, when the
Argentine legislature took follow-up action.  In the Ruling, the Court
concluded that April 16, 2012 was the appropriate date.

 

The calculation of damages using a notice date that is 40 days before the
April 16, 2012 takeover was included in Plaintiffs' publicly filed summary
judgment brief and would imply tender offer consideration of approximately
$7.5 billion for Petersen and $900 million for Eton Park, before interest.

 

The Court also previously reserved for determination the prejudgment interest
rate that would run from the date of the breach in 2012 through the issuance
of a final judgment in 2023. The Court accepted that "the commercial rate
applied by the Argentine courts is the appropriate measure" and noted that
Plaintiffs had pleaded that that rate was "between 6% and 8%", but "the Court
reserves judgment on the precise rate it will utilize".  After the hearing,
the Court ultimately applied an 8% rate from May 3, 2012 until the date of the
judgment, and thereafter interest will accrue at the applicable US federal
rate until payment.

 

Subject to final computations by the parties' experts, that finding implies
interest of approximately $6.8 billion for Petersen and $815 million for Eton
Park, yielding a total judgment of approximately $14.3 billion for Petersen
and $1.7 billion for Eton Park, or $16 billion in total.

 

Investors may find notable the Court's commentary on Burford's role in the
case:

 

The Court also rejects the Republic's effort to inject Burford Capital into
these proceedings. This remains a case brought by plaintiffs against a
defendant for its wrongful conduct towards them, and the relevant question is
what the Republic owes Plaintiffs to compensate them for the loss of the use
of their money, not what Plaintiffs have done or will do with what they are
owed. The Republic owes no more or less because of Burford Capital's
involvement. Furthermore, the Republic pulled the considerable levers
available to it as a sovereign to attempt to take what it should have paid for
and has since spared no expense in its defense. If Plaintiffs were required to
trade a substantial part of their potential recovery to secure the financing
necessary to bring their claims, in Petersen's case because it was driven to
bankruptcy, and litigate their claims to conclusion against a powerful
sovereign defendant that has behaved in this manner, this is all the more
reason to award Plaintiffs the full measure of their damages.

 

Next steps

 

The Court has asked the parties to submit a proposed judgment reflecting the
Ruling, which Plaintiffs will endeavor to do promptly.  Once that judgment
issues, Argentina has indicated its intention to appeal.

 

There is also a process for seeking reconsideration from the District Court of
its own ruling, although such motions rarely prevail as they are being made to
the same judge who decided the matter originally.

 

Once the Court issues its final judgment, that judgment will be appealable as
of right to the Second Circuit Court of Appeals.

 

The Second Circuit presently is taking around a year to resolve appeals once
filed, although there is meaningful deviation from that mean. The District
Court's judgment would be enforceable while the appeal is pending unless
Argentina posts a bond to secure its performance, which we consider unlikely,
or unless a court grants a relatively unusual stay.

 

Following the Second Circuit's decision, either party can seek review from the
Supreme Court of the United States. The Supreme Court accepts cases only on a
discretionary basis and we believe the likelihood of it accepting a commercial
case of this nature that does not present a contested issue of law is quite
low, particularly given that Argentina has already once in this Case
unsuccessfully sought Supreme Court review.

 

With an enforceable judgment in hand, Plaintiffs will either need to negotiate
a resolution of the matter with Argentina, which would certainly result in
what would likely be a substantial discount to the judgment amount in exchange
for agreed payment, or engage in an enforcement campaign against Argentina
which would likely be of extended duration relying on Burford's and its
advisors' judgment enforcement expertise. Burford will not provide publicly
any information about its enforcement or settlement strategies.

 

Burford's position

 

Burford has different economic arrangements in each of the Petersen and Eton
Park cases.

 

At bottom, on a net basis, we expect that the Burford balance sheet will be
entitled to around 35% of any proceeds generated in the Petersen case and
around 73% of any proceeds generated in the Eton Park case.

 

In the Petersen case, Burford is entitled by virtue of a financing agreement
entered into with the Spanish insolvency receiver of the Petersen bankruptcy
estate to 70% of any recovery obtained in the Petersen case. That 70%
entitlement is not affected by Burford's spending on the cases, which is for
Burford's account; it is a simple division of any proceeds. From that 70%,
certain entitlements to the law firms involved in the case and other case
expenses will need to be paid, reducing that number to around 58%.

 

Burford has, however, sold 38.75% of its entitlement in the Petersen case to
third party investors, reducing Burford's net share of proceeds to around 35%
(58% x 61.25%).

 

In the Eton Park case, there is both a funding agreement and a monetization
transaction. The net combined impact of those transactions is that Burford
would expect to receive around 73% of any proceeds. Burford has not sold any
of its Eton Park entitlement.

 

In both Petersen and Eton Park, the numbers above are approximations and will
vary somewhat depending on the ultimate level of case costs by the end of the
Case, as we expect continued significant spending on the Case.

 

 

For further information, please contact:

 

 Burford Capital Limited
 For investor and analyst inquiries:
 Robert Bailhache, Head of Investor Relations, EMEA and Asia - email  +44 (0)20 3530 2023
 (mailto:rbailhache@burfordcapital.com)
 Jim Ballan, Head of Investor Relations, Americas - email             +1 (646) 793 9176
 (mailto:JBallan@burfordcapital.com)
 For press inquiries:
 David Helfenbein, Vice President, Public Relations - email           +1 (212) 235 6824
 (mailto:dhelfenbein@burfordcapital.com)

 Numis Securities Limited - NOMAD and Joint Broker                    +44 (0)20 7260 1000
 Giles Rolls
 Charlie Farquhar

 Jefferies International Limited - Joint Broker                       +44 (0)20 7029 8000
 Graham Davidson
 Tony White

 Berenberg - Joint Broker                                             +44 (0)20 3207 7800
 Toby Flaux
 James Thompson
 Arnav Kapoor

 

 

About Burford Capital

Burford Capital is the leading global finance and asset management firm
focused on law. Its businesses include litigation finance
(https://www.burfordcapital.com/) and risk management, asset recovery and a
wide range of legal finance and advisory activities. Burford is publicly
traded on the New York Stock Exchange (NYSE: BUR) and the London Stock
Exchange (LSE: BUR), and it works with companies and law firms around the
world from its offices in New York, London, Chicago, Washington, DC,
Singapore, Dubai, Sydney and Hong Kong.

 

For more information, please visit www.burfordcapital.com
(http://www.burfordcapital.com) .

 

 

This announcement does not constitute an offer to sell or the solicitation of
an offer to buy any ordinary shares or other securities of Burford.

 

This announcement does not constitute an offer of any Burford private fund.
Burford Capital Investment Management LLC, which acts as the fund manager of
all Burford private funds, is registered as an investment adviser with the US
Securities and Exchange Commission. The information provided in this
announcement is for informational purposes only. Past performance is not
indicative of future results. The information contained in this announcement
is not, and should not be construed as, an offer to sell or the solicitation
of an offer to buy any securities (including, without limitation, interests or
shares in any of Burford private funds). Any such offer or solicitation may be
made only by means of a final confidential private placement memorandum and
other offering documents.

 

 

Forward-looking statements

This announcement contains "forward-looking statements" within the meaning of
Section 21E of the US Securities Exchange Act of 1934, as amended, regarding
assumptions, expectations, projections, intentions and beliefs about future
events. These statements are intended as "forward-looking statements". In some
cases, predictive, future-tense or forward-looking words such as "aim",
"anticipate", "believe", "continue", "could", "estimate", "expect",
"forecast", "guidance", "intend", "may", "plan", "potential", "predict",
"projected", "should" or "will" or the negative of such terms or other
comparable terminology are intended to identify forward-looking statements,
but are not the exclusive means of identifying such statements. In addition,
Burford and its representatives may from time to time make other oral or
written statements which are forward-looking statements, including in its
periodic reports that Burford files with, or furnishes to, the US Securities
and Exchange Commission, other information made available to Burford's
security holders and other written materials. By their nature, forward-looking
statements involve known and unknown risks, uncertainties and other factors
because they relate to events and depend on circumstances that may or may not
occur in the future. Burford cautions you that forward-looking statements are
not guarantees of future performance and are based on numerous assumptions,
expectations, projections, intentions and beliefs and that Burford's actual
results of operations, including its financial position and liquidity, and the
development of the industry in which it operates, may differ materially from
(and be more negative than) those made in, or suggested by, the
forward-looking statements contained in this announcement. Significant factors
that may cause actual results to differ from those Burford expects include,
among others, (i) uncertainty relating to adverse litigation outcomes and the
timing of resolution of litigation matters and (ii) those discussed under
"Risk Factors" in Burford's annual report on Form 20-F for the year ended
December 31, 2022 filed with the US Securities and Exchange Commission on May
16, 2023 and other reports or documents that Burford files with, or furnishes
to, the US Securities and Exchange Commission from time to time. In addition,
even if Burford's results of operations, including its financial position and
liquidity, and the development of the industry in which it operates are
consistent with the forward-looking statements contained in this announcement,
those results of operations or developments may not be indicative of results
of operations or developments in subsequent periods.

 

Except as required by law, Burford undertakes no obligation to update or
revise the forward-looking statements contained in this announcement, whether
as a result of new information, future events or otherwise.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  STRLMMFTMTMBMAJ