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I know only too well what you mean. I have a limit order set at what i believe is recent historic support, as do believe in the company, but cant explain price movements for last couple of months never mind last few weeks. I'm hoping we clear 5 this week and that then becomes the new support.
Thanks Jammy - can't promise it! If there's another fall and I add again I'll likely switch off anything that could make me see a price quote for a couple of years!
No problem. In my heart I'm debt adverse after a couple of companies I went for when I first started blew up on that very point. However, the maths is the maths and it does make sense in BUR's case as long as it's at levels that don't mean unwarrented risk.
The last year has been hard for us all here. Luckily I had some spare funds to top up but I'm at a point where adding much more gives me an uncomforably large position. That's why I sometimes disappear off the forums for extended periods - I have alerts set for rises or falls that I might want to know about and then sleep better without watching the price day to day!
Agreed. You make good posts Iaconic. All too often on here we have seen the same illiterate and verbose codswallop. I hope you continue to contribute.
Thanks Iaconic
I know more today than I did a couple of days ago ,
I think Bur is an excellent investment although I can't say the last ten months has been as enjoyable as my first three and a half years here ? What I will say is whilst I probably haven't explained myself re the bonds very well I would still like to see us keep our borrowing to a minimum , personally I would very happy if they were to invest all gains and not pay dividends as this was a growth share for me until MW , I certainly hadn't questioned the Bonds until GG mentioning not paying them back anytime soon , I think that's where I stopped explaining my aversion to debt getting out of hand ... Of course I don't want good opportunities turned away due to a lack of funding , Forgetting Petersen for a moment I really do think that so long as they are still picking their "fights" wisely ? the "pending" wins should enable funding going forward .
Regards
ffc
GG, TB and FFC:
Personally I agree with GG but I understand where TB is coming from.
Key factor when making comparisons: BUR is a finance company and so comparing to other sectors doesn't really make sense. To use the Buffet example that's been raised, Kraft may well have no debt (haven't checked) but the banks and other finance companies that BUffet invests in very definitely do (or their own version of it in his insurance companies). The very business of finance companies is to borrow at a lower rate and lend/invest it at a higher (expected) rate.
If you had a 10bn windfall today you'd obviously be unlikely to re-finance any bonds due tomorrow. However, you might still in the longer term if you invested that money *and still had good investments available to make*. Then you'd borrow more to finance those extra investments.
That's all it comes down to and in my view the key to finding the middle ground in this ongoing discussion! If you can make a suitable return on the money over and above the cost you borrow if for (factoring in risk, etc, into the equation), you borrow it. Simple. That's the point GG and I have been trying to make.
However, if you have your own money sitting idle you'd obviously use that first (which coincides with TBs point and aligns with FFCs wishes?).
Therefore, BUR will/should always borrow (prudently) if it can make a good return on that money. If it can't, it won't (and that's when we should be worried because the market is sauturated and growth stops).
GG I've read what you've written ok, we just respectfully disagree with each othr, though I have painstakingly went to great lengths to explain my position, Warren Buffets business model et, I don't think I can do no more, though I appreciate your passion in your beliefs and still remained respectful to other posters, that's a testament to who you truly are sir,
Kind regards.
FFCmember that was extremely disrespectful and unwarranted, I myself have struggled for a time period to understand all the funding needs, that level of disrespect has no place on any forum . There's absolutely no need to use that language when you disagree with anyone,
Regards
I give up on this discussion ThomasBrowne, I don't think you've read what I've written.
Good luck to you and to all
Warren Buffett buys shares in levered companies/ indebted companies, though he's reluctant to buy any heavily levered company unless it can pay him back . As he's $137 billion in the bank he's a perfect example to show other investors how to use your own money and not rely on complex and often expensive financing, complex as FFCmember the average investor understandable took some time to understand how the bond funding works. For a average investor it is difficult to understand why burford has all these totally different types of funding in place, but once you understand and know it's not.
Burford debt model is not easily understood, I took some time to understand why it needed all these types of funding, it can actually make you feel that there's trouble hiding somewhere, but that's not the case at all, it's debt model is perfect for its current needs, though as I've stated if burford made $10 billion profit tomorrow , does anyone really think they would need any debt other to take money off the tax man ?
I agree with you it's most likely burford will need debt until it makes that $10 billion profit one day. LOL
GLA
Not that it is relevant to what's being discussed, Warren Buffet has invested in some very highly levered companies, so I wouldn't use him as a counter-example.
Futhermore, the ways Burford raises capital is very straightforward - equity, debt, and third party investments.
I'm not saying Burford will need debt, but it will always have debt. I suggest you look at the differential between ROE and ROA for Burford to get a sense of why that is
GG its not me you need to convince it's Warren Buffet, who has practiced what I've just stated for 50+ years,
Corporate finance can be fantastic, and very complex should you have complex needs, or if you take a straight forward approach it can be very easily understood and used,
As you've just seen by FFCmember it can hard to understand and complex to a ordinary investor, but a great way of making money that you don't have in the bank as clear profits to use.
I do clearly understand how finance works, though it's only complex if you make it complex, burford truly needs these complex ways of raising funding money to make lrofits, that's a given, but as I've stated earlier if we had billions of profits in the bank we wouldn't need a penny of debt, unless it was to reduce our tax bill, after watching Amazon and others avoid tax that way, surly that has to come into question unless it's genuine debts, and not artificially engineered debts.
GLA
Yes GG I get it
It just felt to me that the suggestion was that we just keep issuing bonds for future funding as they are so cheap !!! It mounts up if they don't get settled at some point , there's debt and there are millstones
Although I wouldn't mind a few at 87 bucks
I know what you're saying @thomasbrowne but it's just wrong. Fundamentally misunderstanding how corporate finance works.
GG the point I'm trying to make is this, if you gave burford £10 billion right now they would then need no debt, if burford had a unexpected lawsuit win at £10 billion profit it would then cancell out and probably get rid of most if not all of its debt, it wouldn't need bond money or The S.W.F money, and could keep all The profits from our litigation settlements.
The reason it has debts is to get its hands on other people's money to make a profit from that money,
Burford wouldn't need any debt at all if it made billions in profits,
Just ask Warren buffet about using your own money to fund your companies success, he has around $137 billion, and the only debts he has is to reduce his tax returns, that's why numerous companies load up with debt to reduce the tax bills, and then get into trouble in recessions, that's why Warren Buffett accumulates billions until he hits a recession and then buys UP companies that can't service there debts at a low price, that's why he's a king in investing.
Burford absolutely needs debts ok, but only because we can't replace that debt with our own billions.£$
GLA
"and one day we will hopefully have made billions £$ and then need little or no funding at all, in the mean time,"
No, no no!!! Please read what myself and laconic wrote earlier about debt funding. If Burford carried no debt, you would see the return on equity go down quite significantly. Burford will always carry debt on its balance sheet.
@ffcmember it's hard to say exactly when the bond will be called because it depends on market conditions.
Let's start by taking it as given that Burford will want to have some debt outstanding (which laconic and myself has argued will be the case). The next consideration will be the cost of that debt - Burford will be seeking to pay as little in interest as is practicable.
Burford raised its latest bonds back in 2018, before the MW attack when the market was extremely bullish on the company's prospects. Now things are clearly different, and the bond price has fallen to well below par. The best indication for the rate at which a company will be able to issue new debt is the yield on its outstanding debt. NOTE that the yield vs. the coupon are two different things - a bond priced below par will yield more than its coupon and vice versa. So, given that Burford's bonds are trading well below par, it implies that Burford would have to pay more if it raised new debt than if it just kept the current debt outstanding.
"and one day we will hopefully have made billions £$ and then need little or no funding at all, in the mean time,"
Voila
GG no I'm very clear that the S.W.F doesn't lend to burford per-say , let's just call it a investment that's safer than other types of lending, the huge amounts of money the S.W.F directly invest in burford is injected because the returns are so huge, and the risk are kept as LOW as possible/ with burfords lawyers picking the safest lawsuit cases possible.
Ideally we want to issue bonds with the lowest interest rates possible, so that may mean paying many different interest rates over many years on different lengths of bonds. That's a very good thing, and one day we will hopefully have made billions £$ and then need little or no funding at all, in the mean time, what burford is doing is using a truly fantastic business model. And one that every other litigation funder uses to their advantage.
GLA
GG
Re your Monday 13.41 " you don't see them settling any time soon"
Can I ask when would you see the 2018 bond (due 2025) might_could be settled ????
I am not disagreeing I just think I may have misunderstood during this particular thread !
Regards
ffc
FFCmember. Most of the reason burford uses all these different types of Litigation funding is to spread the risk out in different types of funding models as possible, sovereign wealth fund, bond holders etc, they proportionally take the risk with there own money , and burford takes the 60% profit made from the S.W.F funding money, how fantastic a business model is that, the bond holders get promised a much smaller share of that profit, though their actual money is not at risk as long as burford stays solvent. for me it's a sensible respectable lawyer based business model that's trying to reduce our shareholder risk and put that risk onto other funders, namely the S.W.F. And yet we still get 60% of any settlement money. A truly fantastic business model in my humble opinion.
Very soon AMERICAN investors can share in the huge rewards and push our share price to a historical high.
PLEASE DYOR. GLA
@thomasbrowne you seem to be under the impression that the SWF is lending to Burford? I don't think that's the case.
@ffcmember it might be better to think about this mathematically. Let's say one year Burford invests £100 and makes a return of 50% for a £50 profit. If this were all funded by equity, you'd have an ROE of 50% - quite nice.
Let's then imagine that Burford raises 100 of debt @6% to go alongside that 100 of equity. Now it invests 100 of equity and 100 debt in the same/similar investment. The return is the same at 50%, but the profit is 100 on the investment. Burford then pays the 6 back in interest, for a total profit on 94. Your ROE has been boosted from 50% to 94% with addition of debt @6%.
It's the same point laconic made, 6% in the context of the business is pretty good. I don't think you'd want them to pay back debt, and contrary to what I think you might believe, the use of debt typically increases rather than decreases as a business matures.
Also, I think the debt maturity profile is very attractive. You do NOT want Burford funding itself with short term debt.
TB
We have Bond paying 6.5% , 6.125 % ,5% and 6.125%
I Completely understand why but whilst they don't resemble the high figures attached the junk bonds say ? over the life of the Bonds they actually add up to a significant amount so I welcome the day when it comes that they are paid off !!!
AISI Sovereign wealth funds get a higher pay off because correct me if I'm wrong they are not "lending " but taking the risk with us ????
FFcmember Burfords debt is not a normal typical debt, they borrow money for the safest litigation lawsuits that they can find, they get there litigation cost back + a proportion of that litigation settlement,
That money gets spent and hopefully returned in around 12 months or so, the biggest amount of that money gets returned as profits, And overall we clear a great profit margin, It’s not like we buy machinery or plant with that money, it essentially stays intact, that’s why the sovereign wealth fund lends to us year after year, now if we can issue more bonds then we can make more money taking less from the S.W.F
as they get 40% of any litigation settlement money, as we get 60% settlement money using there money, if the market sees Burford making huge sums of profits then much higher funding from the bond market should ensue. with Burford only paying
5 % / 6 % Interest on them bonds, if Burford holds onto more of there profits , then that cash balance would give bond holders much more confidence in holding Burfords bonds. Also that in itself could mean us paying even a lowering of interest rates on any new bonds, the lower the risk the lower the interest on any bonds, investors always feel safer for Burford to have substantial assets per share when buying new bonds.
GLA
Many thank Iaconic
The only way to question your own opinions sometimes is to have them questioned for you ! and I appreciate the manner in which you did it
Regards
ffc