Member Info for GekkoGordon

"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).

@ffcmember it's highly highly highly unlikely Burford will settle the bonds at any point soon. Any receipts they get would be wasted if not funneled back into cases

Also, if they were going refinance they'd be doing so at much more expensive levels than those prevailing when they were issued.

Burford's business will experience wild swings in earnings depending on realisations (which will be lumpy); one year the PE might look v expensive vs cheap the next and so on. Furthermore, Burford's balance sheet is made up primarily of its cases (admittedly with about half held at cost), you can get a better sense for what you're paying for than the PE ratio if you look at it through a P/B lens. Last year when people were piling in at 4x book value or what have you, it was asking a lot of portfolio level returns even when the PE was low (imagine buying a portfolio of stocks marked at £10 for £40). Now, at 0.8x book, it looks like a no-brainer.

ThomasBrowne, it's usually best to look at financial companies like Burford on a P/B basis rather than a P/E basis.

thomasbrowne: "if burfords auditors give us a clean bill of health , then they are responsible for any mistakes or misrepresentations"

Please don't interpret a clean audit as a good bill of health, it's folly. Look at Lehman, Enron, Bernie Madoff, Valeant, AIG...the list goes on

I know the audit industry pretty well. There's NO WAY the people conducting this audit are intimately familiar intricacies of litigation finance. Bear in mind how new and small this industry is - auditors won't have litfi specialists on this.

I actually found Caro-Kann's analysis of the accounts the most comprehensive if you haven't seen it already.

I've been around investors my whole life and it's usually the glass half full types who lose their shirts....

But I will agree that this latest MW report seems to be clutching at straws. You can see that by the size of their proposed adjustments (-35% vs -30.6%....doesn't seem material)

Quite clearly Burford's share price hasn't clawed back from previous MW attacks.....its share price is half what it was when MW launched its first salvo.

Bonuses???!!!! Earnings down; stock price down. Where are these bonuses coming from?

"Argentina’s economy minister has sought to raise the stakes with the country’s bondholders by suggesting his government would consider defaulting on $65bn of foreign debt unless investors engaged in negotiations to alleviate its financial burden while tackling the coronavirus pandemic."

Still can't figure out just how Burford expect to collect on their YPF claims.

You're kidding yourself if you think the MW team won't be combing through the financials right now looking for ammunition. I'd expect a release from them sometime in the next week or so.

Also bear in mind that it was a HUGE annual report and it will take days for brokers and buy-side analysts a few days to digest that information and update models. Then I think you'll get a sense of how the results have really been interpreted.

I'd really stop focussing on technical factors with this one. I doubt day traders are really as important as this board would have you believe. They're practically extinct in professional money management anyway.

Wow the formatting really messed up.

Also an FYI, all deployment figures in USDm

I'll try this:
TVPI -- Deployed -- % Deployed
<0.75x, -- 98.40, -- 14.2%

0.75-1x, -- 15.4, --2.2%

1-1.25x, --167.7, -- 24.3%

1.25-1.5x, -- 148.8, -- 21.5%

1.5-1.75x, -- 45.4, -- 6.6%

1.75-2x, -- 87.4, -- 12.6%

>2x, --128.3, --18.6%

Total, -- 691.40, -- 100.0%

Hi All,

Downloaded Burford's investment history pdf and converted it into a database. Please see below for a return distribution for their cases. This only includes concluded investments and the realized portion of concluded investments (aka there are no unrealized investments in the below figures).

TVPI = total value to paid in capital = ((principal + proceeds of investment) / principal of investment)

Total investment count = 131

TVPI Deployed % Deployed
<0.75 98.40 14.2%
0.75-1 15.4 2.2%
1-1.25 167.7 24.3%
1.25-1.5 148.8 21.5%
1.5-1.75 45.4 6.6%
1.75-2 87.4 12.6%
>2 128.3 18.6%
Total 691.4 100.0%

Hope all are doing well. Just an FYI, I had a call with a large distressed hedge fund that has also developed a litigation finance franchise. They're seeing an increase in dealflow on that side of the business amidst all this. Firms are scrambling to get liquidity so are generally keener to monetize their claims.. Hopefully a positive read-across to Burford's pipeline provided they're not too busy fighting fires themselves.

Classic vacuous speculation

To be fair, Burford does provide all the information one would need to form an opinion of their investments, it's just extremely complicated which...muddies the waters. However, I don't truly think there is anything wrong with their valuation methodology. People often overlook the fact that Burford is not just investing for its balance sheet but also through funds on behalf of institutional investors. I know the diligence processes of these firms and they're not frivolous by any means, and a key focus is always the valuation of the underlying assets.

It's presented pretty clearly in the financial statements. Cash receipts are reinvested, just as they would be in a stock portfolio. It's mistaken to think of this like an industrial business or similar.

It's a broader swipe at the general quality of posts on this platform. The chat is littered with people saying "back to 800", "up to 1000", "sky's the limit", "big buys at the close", speculations about short squeezes and so on.

It's about time some of them were called out as hollow, echo-chamber inducing nonsense.

That post was about a month ago, and we're welllllll below 700 now (not so say we won't be soon - because I have NO idea where this is heading short term, much as no one else does).

What I am more confident of is the long-term prospects of this sector and (for the timebeing) Burford's leading position within it.