TIDMBUR
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 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, +44 (0)20 3530
EMEA and Asia - email 2023
Jim Ballan, Head of Investor Relations, Americas
- email +1 (646) 793 9176
For press inquiries:
David Helfenbein, Vice President, Public Relations
- email +1 (212) 235 6824
Numis Securities Limited - NOMAD and Joint +44 (0)20 7260
Broker 1000
Giles Rolls
Charlie Farquhar
+44 (0)20 7029
Jefferies International Limited - Joint Broker 8000
Graham Davidson
Tony White
+44 (0)20 3207
Berenberg - Joint Broker 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 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 .
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.
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