Ben Richardson, CEO at SulNOx, confident they can cost-effectively decarbonise commercial shipping. Watch the video here.
"Argentina’s government is finalizing an agreement with a group led by BlackRock Inc. and a handful of large U.S. investment firms to restructure about $65 billion in foreign debt and resolve the country’s third sovereign default in 20 years, said people involved in the talks."
Or just one of those days?
Both valid points
But it says they are a "US" funder. Although Burford's business is very US-focussed, I'm not sure it can be described as a "US funder". I work in the private funds industry and can confirm there has been a proliferation of large hedge funds getting into this space. Could be one of those
A really really excellent bull case for Burford. One thing I have issue with is the author extrapolating past returns. I don't think 24% IRRs will be sustainable given the number of new firms/funds moving into this space - competition will erode those away to an extent over the long term. Nevertheless, a very compelling case for significant upside from where we are now.
I think this is one where you have to take a step back and ask yourself: will passenger traffic ever recover? If (like me) you think in 10 years the world will have moved on and you'll have regional jets whipping back and forth across India and Africa as well as legacy European, Asian, and US travel then at current prices I think you'll likely see >15% FCF yields on MGGT. In the meantime, I'm just pinching my nose and buying... even though it hurts.
I think what's important is it's not as bad as expected and a key piece of information is that they expect to be free cash flow positive for the year as a whole which given the circumstances is pretty remarkable.
Still not delighted they sold that training business when it seems they had ample liquidity anyway.
Not sure I see this as good news
Part of me wonders whether it's Wirecard-related. I think a few other stocks that have been accused of accounting irregularities also took a beating (please do not take this as me implying the accusations have merit in Burford's case).
Seems strange to me. I would have thought most skittish investors would have left BUR by now given the ride we've had, yet it takes a clattering with every fresh bout of volatility. Potentially heavily retail-owned at this point but even so...
His first post on this platform was 16th of June yet he's talking like he's a long-term TB follower and sycophant. The man is clearly Thomas Browne. Very strange behaviour indeed.
@TB. Yes, agree could be a potential bolt-on for a larger player. I know of a number of groups who have already done this (e.g. Fortress Investment Group and Vannin Capial - albeit under slightly tumultuous circumstances).
I guess bolt-ons from Burford would involve them looking for funders in new jurisdictions? Or perhaps other platforms like Vannin?
A lot of hedge funds are currently making moves into litfi. Although on the one hand this spells more competition within the space, it could also create opps for Bur to buy up portfolios of less well-resourced platforms.
time.will.tell - Blackstone does not have a similar asset class focus. It's mainly focussed on real estate, standard private equity, and hedge funds.
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
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
I know what you're saying @thomasbrowne but it's just wrong. Fundamentally misunderstanding how corporate finance works.
"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.
@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.
@ffcmember you could argue it's because they see more value in the bonds vs the equity but I'd think that would be very unlikely in this case. I'm not really sure why they went for the bonds rather than the equity, it might be as laconic says that they're planning to issue more.
For them to call these 6% bonds you'd expect to see the price much closer to/at/above par (the implied cost of debt for Bur is 8%-10% while they're trading around 90). It would make sense to do it once they're up a bit though though because interest rates have tanked, and hopefully the business will soon prove that it's counter cyclical (which is what bond investors love).