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REG - Burford Capital Ltd - Update on 2022 Business Activity

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RNS Number : 1377T  Burford Capital Limited  16 March 2023

 

15 March 2023

 

Released via Form 6-K on March 15, 2023 and queued for release via RNS upon
its reopening on March 16, 2023.

 

 

BURFORD CAPITAL PROVIDES UPDATE ON STRONG 2022 BUSINESS ACTIVITY

 

Burford Capital Limited ("Burford"), the leading global finance and asset
management firm focused on law, today releases an update on its 2022 business
activity. We also discuss in this release the status and timing of Burford's
Annual Report on Form 20-F which will reflect the impact of anticipated
modifications to our fair value methodology discussed in more detail below. In
addition, we have released a 2022 Business Review which is available at
http://www.rns-pdf.londonstockexchange.com/rns/1377T_1-2023-3-15.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/1377T_1-2023-3-15.pdf)  and
on the Burford Capital website at http://investors.burfordcapital.com
(http://investors.burfordcapital.com) .

 

Burford is hosting two conference calls for investors. The first will be today
at 5.30pm EDT / 9.30pm GMT and the second will be at 10.00am EDT / 2.00pm GMT
tomorrow. Further details are provided at the end of this release.

 

2022 business highlights(1)

 

 •            Robust cash receipts of more than $300 million in 2022
 •            Meaningful upswing in portfolio activity as courts resume fully normal
              operations post-pandemic
                                    o                     Burford-only capital provision-direct realizations up 33% to $350 million
                                                          (2021: $264 million)
                                    o                     More than 30 trials and final merits hearings already scheduled for 2023
                                                          (nearly three times the number of such hearings in 2022) and are already
                                                          seeing positive outcomes:
              §                                                                                  Settlement in February paid cash of $90 million to Burford on a Group-wide
                                                                                                 basis
              §                                                                                  Trial win in February would result in $67 million of proceeds Group-wide if
                                                                                                 upheld and paid in full
              §                                                                                  Arbitration award in March would result in $52 million of proceeds to one of
                                                                                                 our private funds if upheld and paid in full
              §                                                                                  Successful appellate resolution in March would result in approximately $400
                                                                                                 million of proceeds Group-wide and approximately $100 million on a
                                                                                                 Burford-only basis
 •            Record-breaking levels of new business on both a Group-wide and especially on
              a Burford-only basis as we continue to pivot in favor of balance sheet
              investing for our highest returning assets
 •            Solid liquidity at year-end 2022, benefiting from realizations, collections
              and external capital raising
 •            Interim dividend of 6.25¢ per ordinary share declared payable in June 2023

              (1) US GAAP requires us to present financial statements that consolidate some
              of the limited partner interests in private funds we manage as well as assets
              held on our balance sheet where we have a partner or minority investor. We
              refer to this presentation as "consolidated". We strive to provide a view of
              Burford as a stand-alone business (i.e., eliminating the impact of these
              private funds) by furnishing information on a non-GAAP basis that eliminates
              the effect of this consolidation. We refer to this presentation as
              "Burford-only". In addition, we strive to provide supplemental information
              that presents the totality of our legal finance activities by furnishing
              information on a non-GAAP basis that reflects the contribution of both our
              consolidated and non-consolidated private funds. We refer to this presentation
              as "Group-wide". For additional information, see "Definitions and Use of
              Non-GAAP Financial Measures and Alternative Performance Measures" later in
              this release.

 

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

 

"Burford had a strong 2022, with record new business activity and meaningful
cash generation and portfolio activity. We are happy to report that we believe
the lingering effects of the pandemic on courts and legal processes are
finally falling away. Indeed, we may well be at a turning point for the
portfolio, with a very significant level of activity - more than 30 trials and
final merits hearings, almost three times as many as last year - scheduled for
2023."

 

 

New business

 

 2
 •            Group-wide new commitments of $1.2 billion (2021: $1.1 billion)
                                    o                     Burford-only new commitments of $746 million (2021: $595 million(1))
 •            Group-wide deployments of $928 million (2021: $842 million)
                                    o                     Burford-only deployments of $477 million (2021: $448 million)

              (1) The $595 million for Burford-only new commitments in 2021 is presented net
              of the warehousing activity as discussed in the annual report on Form 20-F for
              the year ended December 31, 2021 filed with the US Securities and Exchange
              Commission on March 29, 2022 (which presents $594 million for Burford-only new
              commitments in 2021 due to rounding differences).

2022 was a strong year for new business, with new commitments and deployments
both setting new records. In addition to undertaking more new commitments than
in 2021 on both a Group-wide and a Burford-only basis, there was greater
diversification than in the prior year, which included a global antitrust
portfolio matter to which we deployed $350 million, comprised of $212 million
on our balance sheet. Furthermore, with the Burford balance sheet now
underwriting 75% of new core legal finance assets, historically our most
profitable, Burford-only capital provision-direct deployments excluding the
global antitrust portfolio matter increased 94% to $457 million in 2022 (2021:
$235 million).

 

Portfolio activity and returns

 

 •            Burford-only capital provision-direct realizations of $350 million (2021: $264
              million)
 •            Burford-only capital provision-direct realized gains of $137 million (2021:
              $128 million)

Both the volume and the value of case realizations picked up in 2H 2022,
building on the incremental progress Burford previously reported for 1H 2022,
as courts and legal processes continued to return to normal after the
disruption caused by the Covid-19 pandemic during 2020 and 2021. Group-wide
realizations were recognized across 60 capital provision-direct assets that
concluded in 2022, up from 50 capital provision-direct assets that concluded
in the prior year. On a Burford-only basis, realizations were recognized from
over 50 resolutions in 2022, as compared to 37 resolutions in 2021.

 

Realized losses remained very low, suggesting that portfolio activity has not
yet normalized. Burford-only gross realized losses of $14 million represented
1.0% of average capital provision-direct deployed cost during the year ended
December 31, 2022, as compared to $9 million and 0.8% of average capital
provision-direct deployed cost during the year ended December 31, 2021.

 

The positive development in the global antitrust portfolio matter we indicated
in our 1H 2022 interim results generated a partial realization during 2H 2022
of $258 million on a Group-wide basis and $161 million on a Burford-only
basis. Due to the rapidity of its resolution, while this partial realization
generated $52 million in realized gains on a Burford-only basis and a 42% IRR,
its ROIC was only 48% - but it is hard to complain about 42% IRRs on large
matters. The speed and capital intensity of this partial realization had the
effect of reducing our Burford-only cumulative ROIC to 88% (2021: 93%). Our
cumulative Burford-only IRR decreased modestly by around 30 basis points
during the six months ended December 31, 2022 to 29% (June 30, 2022: 30%;
December 31, 2021: 30%), principally due to the delay in the payment of a $23
million receivable (the payment of which is not considered at risk but awaits
the resolution of some collateral litigation).

 

In 2022, we saw further encouraging activity in our ongoing portfolio in a
number of capital provision-direct assets as post-pandemic courts and legal
processes continued to normalize. 2023 is off to a good start, with over 30
trials or final merits hearings scheduled, almost three times as many as
actually occurred in 2022. In the year to date, one of our cases has already
paid $90 million of cash proceeds to Burford on a Group-wide basis. In another
matter we saw a trial verdict in our client's favor, which would, if upheld
and paid, produce $67 million of proceeds on a Group-wide basis. A third
matter resulted in an arbitration award which would, if upheld and paid,
produce $52 million of proceeds to one of our non-consolidated private funds
if upheld and paid in full. Finally, a fourth matter has seen a successful
appellate resolution and would produce approximately $400 million in
Group-wide proceeds (including to Burford's non-consolidated private funds)
and approximately $100 million in Burford-only proceeds.

 

Cash and capital

 

We generated record cash receipts from Burford-only capital provision-direct
assets during 2022, up 28% to $296 million (2021: $231 million). Total
Burford-only cash receipts from operations were $328 million, up 17% (2021:
$281 million). Deployments continued at higher pre-pandemic levels, while our
Burford-only liquidity position remained solid at $210 million of cash and
cash equivalents and marketable securities at December 31, 2022 (December 31,
2021: $315 million).

 

In 2022, we raised more than $1 billion in new external capital, including the
closing of two new private funds and a new senior unsecured debt issuance.

 

Our Burford-only capital provision asset due from settlement balance at
December 31, 2022 was $115 million, the majority of which we expect to convert
into cash during 2023. Of the $63 million of Burford-only due from settlement
receivables at December 31, 2021, 60% was collected in cash during the year
ended December 31, 2022. The majority of the amount not yet collected from the
December 31, 2021 balance related to a $23 million single litigation matter
concluded in our counterparty's favor. However, a pending collateral
litigation is delaying receipt of our payment; that collateral litigation does
not relate to our entitlement.

 

Fair value and our financial statements

 

Burford's approach to its required fair value accounting for legal finance
assets has historically been based on the occurrence of objective events in
the underlying litigation matter. We have not adjusted fair value based on the
passage of time or our internal assessment of how a case is progressing; we
wait for the court or tribunal to make a decision, and then we mark up or down
the asset value based on that decision using a detailed methodology that we
have developed over time. Instead of starting with the expected outcome and
moving backwards with a discounted value, we have been starting with our cash
deployments and moving forwards based on events, either case milestones or
transactions.

 

For some time, we have been expanding our data science capabilities and
undertaking probabilistic modeling of our portfolio, including as previously
disclosed at our 2021 Investor Event. As we do so, we continue to consider the
possibility that over time our modeling may form a part of our valuation
approach. For the last six months, we have been engaged with the staff of the
US Securities and Exchange Commission (the "SEC") regarding the fair value of
legal finance assets, including the acceptability of our historical valuation
methodology under US GAAP. We are very pleased with the amount of time and
attention the SEC staff has put into this effort, which has included
accounting staff at the most senior levels of the SEC.

 

As a result, and with the benefit of those discussions and the ongoing
expansion of our probabilistic modeling, we are engaged in modifications to
our fair value approach. We are in the process of finalizing that approach,
whereupon we will apply it to our capital provision assets and ask Ernst &
Young LLP to audit it, with the completion of the audit driving the timetable
for the publication of our audited financial statements for the year ended
December 31, 2022. Because our revised approach is yet to be finalized, we
cannot comment on its likely outcome, but our methodology will still rely
heavily on objective adjudicative events as it does today.

 

While we would obviously have preferred this process to have occurred some
months earlier so as not to disrupt the release of our audited annual
financial statements, we are pleased with these developments, which should put
to rest the years of investor discussion we have had about this issue. Burford
is the industry leader, and it is only appropriate that we be the vehicle for
the resolution of a valuation methodology - and given that US GAAP and IFRS
are essentially identical when it comes to fair value principles, we would
expect this methodology to be the industry standard. We look forward to
providing further detail upon publication of our audited financial statements
and our annual report on Form 20-F for the year ended December 31, 2022 (the
"2022 Annual Report"), which we expect to be within the next 45-60 days
following the date of this announcement.

 

Burford has always considered and managed the business on a cash basis and
provided significant amounts of data to investors to enable them to do the
same (as we have today). These events have no impact on the management and
operation of the business, which is well positioned for a strong 2023.

 

We note the following risk factors. Notwithstanding our present belief, we do
not know at this time whether there will be a material change in our asset
values as a result of this new approach. Our audited financial statements and
other disclosures in the 2022 Annual Report may differ materially from prior
disclosures as a result of our new fair value methodology. In addition, in
connection with implementing our new fair value methodology, we may be
required to recast or restate our historical financial statements and/or
disclose a material weakness in our internal controls in connection with these
changes. We could be unable to complete our audited financial statements and
file the 2022 Annual Report prior to May 15, 2023, following which we would be
in default under the SEC and NYSE rules, although a further six-month period
is generally available to cure such defaults. If we are unable to file the
2022 Annual Report with the SEC on a timely basis or our audited financial
statements and related disclosures differ materially from the information in
this announcement, the trading price of our securities and our access to the
capital markets could be adversely affected. In addition, under the terms of
the indentures governing our senior notes issued in private placement
transactions pursuant to Rule 144A and Regulation S under the Securities Act
of 1933, as amended, we are obligated to provide audited financial statements
to the holders of such senior notes by April 30, 2023. Our inability to do so
would constitute an event of default under the indentures governing such
senior notes if unremedied for 60 days following requisite written notice.
Accordingly, our inability to complete our audited financial statements in a
timely manner could require us to seek an amendment or waiver of the reporting
covenant in the indentures governing such senior notes. If we were unable to
do so, we would need to refinance such indebtedness, and there can be no
assurance that we would be able to do so on a timely basis or on satisfactory
terms, if at all.

 

Annual general meeting and dividend

 

Once we have completed the fair value review process and released our annual
report on Form 20-F for the year ended December 31, 2022, we will schedule our
annual general meeting. We are not anticipating anything other than routine,
recurring business for this year's annual general meeting.

 

In order to continue our regular flow of semi-annual dividends, the board of
directors has declared an interim dividend of 6.25¢ per ordinary share
payable on June 16, 2023 to shareholders of record on May 26, 2023 (with an
ex-dividend date of May 25, 2023).

 

YPF-related assets

 

As previously disclosed, summary judgment motions in the YPF-related cases
have been fully briefed and are pending before the United States District
Court for the Southern District of New York as of June 23, 2022. As of the
date hereof, the parties are awaiting the next step in the case, which could
be an oral argument on the summary judgment motions or a written decision on
those motions. As ever with litigation, it is difficult to predict the timing
of the next step in the cases or the outcome of the summary judgment motions.

 

Given the potential significance of a summary judgment decision, we provide
here information with respect to the procedure that Burford intends to follow
subsequent to the release of a summary judgment decision by the court. That
decision - like US federal court decisions generally - is expected to be made
publicly available without any advance notice to Burford or the parties to the
case through the Public Access to Court Electronic Records (PACER) system at
www.pacer.uscourts.gov (http://www.pacer.uscourts.gov) . When Burford becomes
aware of the release of a decision on PACER, given that many shareholders do
not have access to PACER, Burford will endeavor to release a public statement
promptly about the fact that a decision has been released, without any details
about its outcome or contents. Burford will also thereafter endeavor to post
the decision on its website. However, depending on the timing of the release
of the decision, there can be no assurance that either of those events will
occur rapidly and the process of generating an unexpected public release will
inevitably incur some delay.

 

It is reasonable to expect that a summary judgment decision, in this case,
would be voluminous and complex. Burford will only be able to provide any
substantive public comment on the decision after it and its litigation counsel
have had sufficient time to undertake a review and analysis of it. As such, it
is very unlikely that such a comment will occur on the day the decision is
released.

 

Investor and Analyst Conference Calls

 

Burford will host two management conference calls to maximize the opportunity
for investor and analyst participation in a management conference call in both
time zones of our dual listings. Management's prepared remarks for both
conference calls will be pre-recorded to ensure equivalent disclosure, while
the question-and-answer session in each event will be real-time.

 

First conference call

 

Burford's first conference call for investors and analysts will occur at
5.30pm EDT / 9.30pm GMT on Wednesday, March 15, 2023. For this conference
call, we encourage audio webcast pre-registration at:
https://www.investis-live.com/burfordcapital/63b5b0eeaeebb9120002ff8e/raboe
(https://www.investis-live.com/burfordcapital/63b5b0eeaeebb9120002ff8e/raboe)
.

 

The dial-in number for the conference call is +1 646 664-1960 (US local) / +44
(0)20 3936 2999 (UK local) / +44 (0)20 3936 2999 (all other locations) and the
access code is 055968. To minimize the risk of delayed access, participants
who have not pre-registered are urged to dial into the conference call by 5.10
pm EDT / 9.10pm GMT.

 

In addition to being available through the audio webcast, an accompanying 2022
business update presentation for investors and analysts will also be made
available on the Burford Capital website prior to the conference call:
http://investors.burfordcapital.com (http://investors.burfordcapital.com) .

 

Following the first conference call, a replay facility for this event will be
available until Thursday, March 30, 2023, by dialling +1 845 709-8569 (US
local) / +44 (0)20 3936 3001 (UK local) / +44 (0)20 3936 3001 (all other
locations) and using the replay access code 697297. A replay facility will
also be accessible through the webcast at:
https://www.investis‑live.com/burfordcapital/63b5b0eeaeebb9120002ff8e/raboe
(https://www.investis-live.com/burfordcapital/63b5b0eeaeebb9120002ff8e/raboe)
.

 

Second conference call

 

Burford's second conference call for investors and analysts will occur at
10.00am EDT / 2.00pm GMT on Thursday, March 16, 2023. For this conference
call, we encourage audio webcast pre-registration at:
https://www.investis-live.com/burfordcapital/640b4ffc3e92bb0c00da171e/sjedc
(https://www.investis-live.com/burfordcapital/640b4ffc3e92bb0c00da171e/sjedc)
.

 

The dial-in number for the conference call is +1 646 664-1960 (US local) / +44
(0)20 3936 2999 (UK local) / +44 (0)20 3936 2999 (all other locations) and the
access code is 640912. To minimize the risk of delayed access, participants
who have not pre-registered are urged to dial into the conference call by 9.40
am EDT / 1.40pm GMT.

 

In addition to being available through the audio webcast, an accompanying 2022
business update presentation for investors and analysts will also be made
available on the Burford Capital website prior to the conference call:
http://investors.burfordcapital.com (http://investors.burfordcapital.com) .

 

Following the conference call, a replay facility for this event will be
available until Thursday, March 30, 2023, by dialling +1 845 709-8569 (US
local) / +44 (0)20 3936 3001 (UK local) / +44 (0)20 3936 3001 (all other
locations) and using the replay access code 904879. A replay facility will
also be accessible through the webcast at:
https://www.investis-live.com/burfordcapital/640b4ffc3e92bb0c00da171e/sjedc
(https://www.investis-live.com/burfordcapital/640b4ffc3e92bb0c00da171e/sjedc)
.

 

 

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) .

 

 

Reconciliations

 

Reconciliation of consolidated to Burford-only and Group-wide proceeds from
resolution of asset in early 2023

                                                   For the year to date March 15, 2023 (unaudited)
                                                                        Elimination of
                                                                        third-party
 ($ in millions)                                   Consolidated         interests              Burford-only         Other funds         BOF-C         Group-wide
 Settlement in February, cash proceeds received     74                   (34)                   40                   16                  34            90

 

 

Reconciliation of consolidated to Burford-only and Group-wide proceeds if
favorable trial verdict is upheld and paid

                                                                        For the year to date March 15, 2023 (unaudited)
                                                                                             Elimination of
                                                                                             third-party
 ($ in millions)                                                        Consolidated         interests              Burford-only         Other funds         BOF-C         Group-wide
 Favorable trial verdict, proceeds if win is upheld and paid in full     50                   (22)                   28                   17                  22            67

 

 

Reconciliation of consolidated to Burford-only and Group-wide estimated
proceeds if successful appellate resolution is upheld and paid

                                                                               For the year to date March 15, 2023 (unaudited)
                                                                                                    Elimination of
                                                                                                    third-party
 ($ in millions)                                                               Consolidated         interests              Burford-only         Other funds         BOF-C         Group-wide
 Appellate resolution, estimated proceeds if win is upheld and paid in full     160                  (60)                   100                  260                 40            400

 

 

Reconciliation of consolidated to Burford-only and Group-wide deployments

                                                                     Elimination of
                                                                     third-party
 ($ in millions)                                     Consolidated    interests         Burford-only    Other funds    BOF-C    Group-wide
 For the year ended December 31, 2022 (unaudited)     727             (250)             477             302            149      928
 For the year ended December 31, 2021                 674             (226)             448             255            139      842

 

 

Reconciliation of consolidated to Burford-only capital provision-direct
deployments

                                                       For the year ended December 31, 2022  (unaudited)
                                                                               Elimination of
                                                                               third-party               Other
 ($ in millions)                                       Consolidated            interests                 adjustments((1))            Burford-only
 Capital provision-direct deployments                   605                     (147)                     (1)                         457
 Capital provision-direct deployments                   -                       -                         -                           -

of the global antitrust portfolio matter
 Capital provision-direct deployments                   605                     (147)                     (1)                         457

excluding the global antitrust portfolio matter

 

                                                       For the year ended December 31, 2021
                                                                             Elimination of
                                                                             third-party             Other
 ($ in millions)                                       Consolidated          interests               adjustments((2))          Burford-only
 Capital provision-direct deployments                   674                   (225)                   (1)                       448
 Capital provision-direct deployments                   252                   (39)                    -                         213

of the global antitrust portfolio matter
 Capital provision-direct deployments                   422                   (186)                   (1)                       235

excluding the global antitrust portfolio matter

1.     Other adjustments are due to capital deployed but not yet
allocated.

2.     Other adjustments are for distributed in-kind asset.

 

 

Reconciliation of consolidated to Burford-only realizations and realized gains
to capital provision-direct assets, in each case, inclusive of related net
realizations from, and related movement on, financial liabilities at fair
value through profit and loss

                                                                                   For the year ended December 31, 2022 (unaudited)
                                                                                                          Elimination of
                                                                                                          third-party              Other
 ($ in millions)                                                                   Consolidated           interests                adjustments((1))           Burford-only
 Realizations, including related net realizations from financial liabilities at     406                    (56)                     -                          350
 fair value through profit and loss
 Realized gains, including related gain on financial liabilities at fair value      162                    (25)                     -                          137
 through profit and loss
 Gross realized losses                                                              15                     (1)                      -                          14

                                                                                   For the year ended December 31, 2021
                                                                                                          Elimination of
                                                                                                          third-party              Other
 ($ in thousands)                                                                  Consolidated           interests                adjustments((2))           Burford-only
 Realizations, including related net realizations from financial liabilities at     374                    (109)                    (1)                        264
 fair value through profit and loss
 Realized gains, including related gain on financial liabilities at fair value      137                    (9)                      -                          128
 through profit and loss
 Gross realized losses on cases concluded during the year                           9                      -                        -                          9

1.     Other adjustments are due to realizations from subparticipations.

2.     Other adjustments are for distributed in-kind asset.

 

 

 

Reconciliation of consolidated to Burford-only and Group-wide partial
realization related to development in global antitrust portfolio matter

                                                                              For the six months ended December 31, 2022 (unaudited)
                                                                                                          Elimination of
                                                                                                          third-party
 ($ in millions)                                                                     Consolidated         interests              Burford-only         Other funds         BOF-C         Group-wide
 Partial realization related to development in global antitrust portfolio             189                  (28)                   161                  69                  28            258
 matter, including related net realization on financial liabilities at fair
 value through profit and loss

 Realized gains related to development in global antitrust portfolio matter,          60                   (8)                    52                   -                   8             60
 including related net realization on financial liabilities at fair value
 through profit and loss

 

 

Reconciliation of consolidated to Burford-only cash and cash equivalents and
marketable securities

                                      At December 31,
                                      2022 (unaudited)                                            2021
                                                          Elimination of                                            Elimination of
                                                          third-party                                               third-party
 ($ in millions)                      Consolidated        interests             Burford-only      Consolidated      interests           Burford-only
 Cash and cash equivalents             108                 (34)                  74                180               (40)                140
 Marketable securities                 136                 -                     136               175               -                   175
 Total cash and cash equivalents       244                 (34)                  210               355               (40)                315

and marketable securities

 

 

Reconciliation of consolidated proceeds from capital provision assets to
Burford-only cash receipts

                                                                              For the year ended December 31,
 ($ in thousands)                                                             2022 (unaudited)               2021
 Consolidated proceeds from capital provision assets                           387,786                        396,415
 Less: Elimination of third-party interests                                    (81,857)                       (139,826)
 Burford-only total proceeds from capital provision assets                     305,929                        256,589
 Burford-only proceeds from capital provision-direct assets                    295,636                        231,413
 Burford-only proceeds from capital provision-indirect assets                  10,293                         25,176
 Burford-only total proceeds from capital provision assets                     305,929                        256,589
 Consolidated asset management income((1))                                     9,116                          14,396
 Plus: Eliminated income from funds                                            27,669                         11,641
 Burford-only asset management income                                          36,785                         26,037
 Less: Non-cash adjustments((2))                                               (22,026)                       (7,538)
 Burford-only proceeds from asset management income                            14,759                         18,499
 Burford-only proceeds from marketable security interest and dividends         3,585                          2,625
 Burford-only proceeds from asset recovery fee for services                    734                            2,386
 Burford-only proceeds from insurance receipts                                 2,979                          1,367
 Burford-only proceeds from asset management and other services                22,057                         24,877
 Cash receipts                                                                 327,986                        281,466

1.     The consolidated asset management income for the year ended
December 31, 2022 is preliminary and unaudited and, as a result, potentially
subject to adjustment, which could be material.

2.     Adjustments for the change in asset management receivables accrued
during the applicable period but not yet received at the end of such period.

 

 

Reconciliation of consolidated to Burford-only due from settlement of capital
provision assets

                              At December 31,
                              2022 (unaudited)                                            2021
                                                  Elimination of                                            Elimination of
                                                  third-party                                               third-party
 ($ in millions)              Consolidated        interests             Burford-only      Consolidated      interests           Burford-only
 Due from settlement of        117                 (2)                   115               86                (23)                63

capital provision assets

 

 

 

 

Definitions and Use of Non-GAAP Financial Measures and Alternative Performance
Measures

 

Burford reports its financial results in accordance with US GAAP, which
requires Burford to present financial statements that consolidate some of the
limited partner interests in private funds it manages as well as assets held
on its balance sheet where Burford has a partner or minority investor.
Therefore, for purposes of various presentations of Burford's financial
results:

 

 •            Consolidated refers to assets, liabilities and activities that include those
              third-party interests, partially owned subsidiaries and special purpose
              vehicles that Burford is required to consolidate under US GAAP. At the date of
              this announcement, the major entities where there is also a third-party
              partner in, or owner of, those entities include BCIM Strategic Value Master
              Fund, LP, Burford Opportunity Fund C LP, Burford Advantage Master Fund LP,
              Colorado Investments Limited ("Colorado") and several other entities in which
              Burford holds investments where there is also a third-party partner in, or
              owner of, those entities.
 •            Burford-only refers to assets, liabilities and activities that pertain only
              to Burford on a proprietary basis, excluding any third-party interests and the
              portions of jointly owned entities owned by others.
 •            Group-wide refers to the totality of assets managed by Burford, including
              those portions of the private funds owned by third parties and including
              private funds that are not consolidated into Burford's consolidated financial
              statements. Group-wide is therefore the sum of Burford-only and
              non-controlling interests in consolidated and non-consolidated private funds.
              Group-wide does not include third-party interests in capital provision assets,
              the economics of which have been sold to those third parties, that do not meet
              the criteria to be recognized as a sale under US GAAP. This includes the
              third-party interests in Colorado and other capital provision asset
              subparticipations.

 

Burford subdivides its capital provision assets into two categories:

 

 •            Direct, which includes all of Burford's capital provision assets that Burford
              has originated directly (i.e., not through participation in a private fund)
              from its balance sheet. Burford also includes direct (i.e., not through
              participation in a private fund) complex strategies assets in this category.
 •            Indirect, which includes Burford's balance sheet's participations in two of
              its private funds (i.e., BCIM Strategic Value Master Fund, LP and Burford
              Advantage Master Fund LP).

 

Burford also uses certain unaudited alternative performance measures,
including:

 

 •            Internal rate of return ("IRR") is a discount rate that makes the net present
              value of a series of cash flows equal to zero and is expressed as a percentage
              figure. Burford computes IRR on concluded (including partially concluded)
              legal finance assets by treating that entire portfolio (or, when noted, a
              subset thereof) as one undifferentiated pool of capital and measuring actual
              and, if necessary, estimated inflows and outflows from that pool, allocating
              costs appropriately. IRRs do not include unrealized gains or losses.
 •            Return on invested capital ("ROIC") from a concluded asset is the absolute
              amount of realizations from such asset in excess of the amount of expenditure
              incurred in funding such asset divided by the amount of expenditure incurred,
              expressed as a percentage figure. ROIC is a measure of Burford's ability to
              generate absolute returns on its assets. Some industry participants express
              returns on a multiple of invested capital ("MOIC") instead of a ROIC basis.
              MOIC includes the return of capital and, therefore, is 1x higher than ROIC. In
              other words, 70% ROIC is the same as 1.70x MOIC.

 

Non-GAAP financial measures and other unaudited alternative performance
measures Burford uses include:

 

 •            Commitment refers to the amount of financing Burford agrees to provide for a
              legal finance asset. Commitments can be definitive (requiring Burford to
              provide funding on a schedule or, more often, when certain expenses are
              incurred) or discretionary (allowing Burford to provide funding after
              reviewing and approving a future matter). Unless otherwise indicated,
              commitments include deployed cost and undrawn commitments.
 •            Deployment refers to funding provided for an asset, which adds to Burford's
              deployed cost of such asset.
 •            Deployed cost refers to the amount of funding Burford has provided for an
              asset at the applicable point in time.
 •            Realization: A legal finance asset is realized when the asset is concluded
              (i.e., when litigation risk has been resolved). A realization will result in
              Burford receiving cash or, occasionally, non-cash assets or recognizing a due
              from settlement receivable, reflecting what Burford is owed on the asset.
 •            Realized gain / (loss) reflects the total amount of gain or loss generated by
              a legal finance asset when it is realized, calculated as realized proceeds
              less deployed cost, without regard for any previously recognized fair value
              adjustment.
 •            Unrealized gain / (loss) represents the fair value of Burford's assets over or
              under their funded cost, as determined in accordance with the requirements of
              the applicable US GAAP standards, for the relevant financial reporting period
              (consolidated statement of operations) or cumulatively (consolidated statement
              of financial position).

 

For additional information with respect to non-GAAP financial measures and
unaudited alternative performance measures, see Burford's annual report on
Form 20-F filed with the US Securities and Exchange Commission on March 29,
2022 and Burford's interim report on the Form 6-K for the six months ended
June 30, 2022 furnished to the US Securities and Exchange Commission on August
9, 2022 and, in each case, made available on Burford's website at
https://investors.burfordcapital.com (https://investors.burfordcapital.com) .
Non-GAAP financial measures should not be considered in isolation form, as a
substitute for, or superior to, financial measures calculated in accordance
with US GAAP.

 

 

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 sent 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) impacts resulting from changes to Burford's valuation policy
for capital provision assets, including any requirement to recast or restate
Burford's historical financial statements and/or disclose a material weakness
in internal controls in connection with these changes, (ii) the successful
completion of audit and other procedures and other conditions necessary to
issue Burford's audited financial statements and to file Burford's annual
report on Form 20-F for the year ended December 31, 2022 with the SEC, and
(iii) those discussed under "Risk Factors" in Burford's annual report on Form
20-F for the year ended December 31, 2021 filed with the US Securities and
Exchange Commission on March 29, 2022, Burford's interim report on Form 6-K
furnished to the US Securities and Exchange Commission on August 9, 2022 and
other reports or documents that Burford files with, or furnishes to, the SEC
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.

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