‘World’s largest dispute financier’ targets US litigation market uptick
29 November 2010
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Burford staying local, but as Matt Byrne reports, London might not be a million miles away
Last week a company that describes itself as “the world’s largest dispute financier” raised $175m (£110m) on AIM.
The placing of 100 million shares at 110p per share by Burford Capital follows the company’s October 2009 IPO on the London Stock Exchange, when it raised £80m, the City’s second-largest listing last year and the biggest capital-raise in the history of dispute financing.
Last week’s fundraising was designed to give alternative litigation funding specialist Burford the funds to continue ramping up its programme of commercial dispute financing investments, which up until now have been focused exclusively on cases in the US.
Last week Chris Bogart, principal of Burford, was in London for the fundraising.
Bogart, a former general counsel at Time Warner and also formerly a lawyer at Cravath Swaine & Moore, admits that the fundraising left him in good spirits.
“Raising a lot of money has that effect,” jokes Bogart.
But his good humour, while no doubt merited, is not shared by everyone involved in the global litigation market.
Lawyers in certain quarters claim that the business model of litigation funders such as Burford’s is limited, with effectively an inbuilt cap on the size of funding on cases. This limit to the size of investments companies such as Burford are willing to make does not always chime with the kinds of cases major corporate clients want to fight, critics claim.
Freshfields Bruckhaus Deringer global head of dispute resolution Chris Pugh says: “Clients are exploring litigation funding more often, but not yet obtaining funding for complex or large claims. Funders have some high-quality people working for them and are becoming more confident in supporting challenging claims, but there’s still a large gap that needs to be bridged before they can offer what the market wants.”
That said, there can be no doubting the pedigree of the team Burford has on board. Its advisory team is comprised of several lawyers with US litigation backgrounds, while its three founders have hard-to-argue-with credentials.
Along with Bogart, fellow Burford principal Selvyn Seidel was formerly a senior partner at Latham & Watkins, while chief information officer Jon Molot, a former Supreme Court clerk, was a member of President Barack Obama’s transition team and a Georgetown law professor. Molot also practised law at Cleary Gottlieb Steen & Hamilton.
“That level of experience allows us to go to large law firms and corporate clients and offer credible alternatives,” claims Bogart.
It seems to have already done the trick for Simpson Thacher & Bartlett, which won a particularly large case recently.
On 27 July, following a six-week trial in Maricopa County Superior Court, Arizona, a unanimous 10-member jury awarded a $110,658,800 verdict to Simpson client Gray Development.
Burford invested $5m towards the costs of the case, which featured Simpson heavyweight Barry Ostrager, and is entitled to 40 per cent of the award. So far Burford has made 18 investments in cases totalling $102m.
Bogart says: “We’re fundamentally a capital provider. We take a share of the ultimate recovery, having taken the risk of funding the case. Forget this being about the law or litigation - we’re providing risk funding for an investment in the same way as in any other sector of the market. If the investment pays off we make a return on the capital we’re investing.”
So far Burford has not made any effort to launch in the UK, although Bogart was careful not to rule it out.
“Our market orientation is the US - we know it and we’re comfortable with it,” he says. “We’re also interested in international arbitration, some of which occurs in London, and yes it’s growing. But we’re only 13 months old.”
You have been warned.