Thank you, littleblackduck, for your analysis.
Here is some feedback:
1)Burford Repayment
-You have assumed “Burford take 50% payment up to $100mcapped value”
-If you read this page, https://www.burfordcapital.com/insights-news-events/insights-research/pricing-risk-structuring-agreements-and-the-cost-of-legal-finance-capital/, you will see that Burford say:
“So how do we price risk? In many ways we act just like lawyers considering matters to take on contingency. Lawyers recognize that every case is different—understanding the particular client, the circumstances of the matter and the jurisdiction is crucial. The cost of our capital ranges, but ultimately it’s priced competitively according to the risks of the individual matter.
When assessing and pricing risk, we consider a number of factors:
1.If a case is about to be filed or has only recently been filed, we don’t have the full story of the case—so the case will be considered higher risk.
2.The damages must be realistic and supported by evidence.
3.Risk diversification. A single-case investment will by definition have a binary risk—versus a matter that is part of a portfolio, where risk is diversified across numerous matters.
In these terms, the highest-risk investment isa single matter financed in the early stages of the case where Burford is paying all fees and expenses. Because there is only one case, the risk is binary (meaning the finance provider would lose its entire investment if the case loses); and because the case has not progressed, it’s difficult to understand the entire story and fully assess the potential risk. Such a case represents the upper limits of Burford’s pricing, at about 30-40% of the recoveries.”
-From this article from just last year, “Burford Eyes 37,000% Return in $16 Billion Argentina Award” - https://news.bloomberglaw.com/business-and-practice/burford-eyes-37-000-return-in-16-billion-win-over-argentina#:~:text=Burford%20Capital%20%E2%80%99s%20share%20of%20the%20%2416%20billion,more%20than%2037%2C000%25%20return%20on%20its%20initial%20investment. you can see that. Burford made $6.2B on a $16B award, which represents 38.75% of the award. This falls within the 30-40% window, mentioned above.
-Key feedback items:
a)My research shows that 50% is too high. If you wan to use the upper limit of what it might be, I would use40% in your calculations.
b)If the payment deal that Sundance reached with Burford follows what they say on their site, and is anything like the Argentina case, I don’t think that you can assume that it is capped at all. They will walk away with the lion’s share of the payout.
2)Repaying Borrowings
-It’s not as simple as just “paying them back the amount of the loan…and some interest”.
-From the announcement, 11August 2021:
"Note holders will be entitled to receivean agreed portion of any damages recovered (i) as compensation for their forbearance of their Convertible Notes”
-Sundance had to make a deal with them so that they didn’t have to pay back any money during the legal proceedings. We don’t know what the deal is, and their deal depends on the final payout value; Their percentage of the damages increase as the payout increases.
-We don’t know what this percentage is, but you can bet they got a sweetheart deal here. They will get a nice piece of the pie.
-Itis extremely difficult to factor this into any calculations – but it’s not 1for 1. I’ll leave you to make an educated guess – It’s a decent percentage.
And in other news…
I also found this, document which I thought was interesting in parts.
https://www.cailaw.org/media/files/ITA/ConferenceMaterial/2014/workshop/lmistelis-settlement-enforcement.pdf
It’s old(2008 survey) but it does give some good insights:
Now, the next section will be of interest to you all.
We are settling “Pre Award” (for which the data was not available), but for settling “Post-Award”, the document says:
And
There was no indication of what “very or fairly satisfactory” means, but there was some data in a chart for “Post-Award”:
I hope you all find this to be somewhat informative.
