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Announcements Commercial Fundraising

Omni Bridgeway Announces First Close of Funds 4 and 5 Series II Capital Raising

Omni Bridgeway Limited (Omni Bridgeway) (ASX:OBL) is pleased to announce the first close (First Close) of capital raising for the second series of its core funds, Fund 4 and Fund 5 (Series II), with existing investors on improved cost coverage terms achieved through transaction fees (Transaction Fees). Each Series II fund is capped at US$500 million, and Omni Bridgeway will continue to be a 20% co-investor. Existing investors1 in Fund 4 and Fund 5, being funds managed by Harvard Management Company, Partners Capital Investment Group LLP and Amitell Capital (Existing Investors), have all exercised their capacity rights which were a key term of the first series, granting the Existing Investors the right to reinvest in Series II on the same terms. The continued reinvestment by the Existing Investors of the first and second generation funds underscores the confidence of leading institutional and legal finance investors in our track record, investment origination and underwriting process. We anticipate additional closings in 2024 for Series II, involving potential further commitments from clients of Existing Investors (Advised Accounts), which were a significant part of Series I, along with new investors. Highlights of the Series II capital raising
  • First Close: US$485million from Existing Investors2 inclusive of OBL’s co-funding3, provides a strong base to market the remaining US$515 million capacity of Series II. 
  • Upcoming second close: Aimed at existing and new Advised Accounts. This is expected to complete in the third quarter of FY24.
  • Further closings and timeline: We anticipate further closings over the next 12 months to build up to the capped size of US$500 million for each Series II fund. This further capital raising will be aimed at broadening our private capital investor base.
  • Fee terms / cost coverage: Series II has been structured to improve the cost coverage received by Omni Bridgeway as manager through the inclusion of Transaction Fees. Transaction Fees, comparable to facility fees in traditional lending, are targeted to average around 2.5% to 3.0% of investment commitments and will typically be payable to Omni Bridgeway in the first years of an investment’s life cycle. The Transaction Fees represent a significant improvement on the fee terms of the first series, in line with our stated objective to increase cost coverage contribution from future funds. The market leading performance fee terms (an 8% hurdle return to the investors followed by a full catch-up, a 20% performance fee up to 20% investor IRR and a 30% performance fee on the residual profit) and a deal-by-deal “American” waterfall are unchanged from the first series.
  • New fund structures established: The Series II Funds 4 and 5 will be structured as new and separate fund vehicles.
  • Fund 5 adverse cost insurance policy: We are in the process of replicating the adverse cost insurance wrapper, a beneficial and innovative feature of Fund 5 series I, prior to the commencement of Fund 5 Series II.
  • Commencement: Series II will commence making investments following the expiry of the first series commitment periods.  Fund 4 series I has approximately US$150 million available for commitments, plus the ability to recycle capital from completed investments up to the end of its commitment period on 18 April 2024.  Similarly, Fund 5 series I has approximately US$77million available for commitments, with the same recycling rights and a commitment period which ends on 31 October 2024.
1 Refer to OBL’s announcement dated 20 June 2019 for further details on these investors. 2 Harvard Management Company (Harvard) has structured its commitment to each Series II fund such that US$50 million is committed unconditionally and the balance of US$25 million is conditional on Harvard’s interest being capped at 15% of the ultimate fund size (i.e., after further closings). 3 OBL’s commitment of US$100 million to each Series II fund is capped at 20% of the ultimate fund size (i.e., after further closings). Raymond van Hulst, Managing Director and CEO, commented “We have achieved an important milestone with this first close of our Series II capital raise at improved cost coverage terms. Our valued capital partners are amongst the most reputable and experienced investors in legal finance. Their ongoing support and our continued access to capital is a strong endorsement of our platform and long term performance track record, particularly given the current private capital landscape. “Our newly established capital markets team has initiated an investor outreach and onboarding campaign dedicated to further expanding our investor base to support our continued growth. This will mark the first time our core funds have been open to new investors in almost six years supporting our strategy of further diversification,” said Mr van Hulst.
Commercial People Moves

UK Funder IQuote Relocates to Support Expansion and Rebrand

Earlier this month, LFJ reported on a Liverpool-based funder’s successful fundraising round. There are more signs of strength from funders in Northwest England, as a Manchester firm has signaled its plans for future growth by expanding its footprint.  An article by Insider Media covers the news that IQuote Limited, a Manchester-based litigation funder, is relocating its offices to a larger location as part of the firm’s growth and rebranding strategy. IQuote has moved from its Dale Street office to the newly refurbished Cardinal House in Manchester's business district, with the funder looking to create 30 new jobs including roles focused on AI, management, finance, marketing, risk, compliance and legal.   Craig Cornick, founder and chief executive of IQuote, stated that the move to Cardinal House “goes beyond mere physical relocation; it symbolises our unwavering dedication to delivering unparalleled services in the sector.” Similarly, Cornick explained that the rebranding efforts are a representation of IQuote’s “dedication to embracing AI and technology in the legal funding landscape”, and that the company is “a testament to the transformative power of technology in reshaping the legal industry and enhancing performance for capital providers." According to IQuote’s website, it has already deployed over £50 million in capital to fund cases and has achieved £110 million in recovered damages. The funder offers a variety of services including operational expenditure loans, legal disbursement funding, and cost advance funding.
Commercial Deals

Liquidator for Xpress Fuel Australia Secures Financing from Ironbark Funding

One of the most potent use cases of litigation finance can often be found in cases of insolvency proceedings, where liquidators can access third-party funding to pursue meritorious claims and recoup lost value for creditors. In a post on LinkedIn, Aston Chase Group (ACG) announced that it had received creditor approval to secure litigation funding to pursue claims as the liquidator for Xpress Fuel Australia Pty Limited. Following its appointment as the liquidator for the Australian fuel supplier, along with Xpress Transport Solutions and Xpress Group Australia, ACG has secured legal financing from Ironbark Funding. The litigation funding will allow ACG to pursue lawsuits against other fuel companies over claims of ‘unfair preferential payments in excess of $40m’. ACG explained that the additional capital would support its efforts ‘to undertake detailed investigations and bring mothership proceedings for the benefit to the overall body of creditors.’ ACG’s Rajiv Goyal, Ian Niccol, and Andrew McEvoy, have all been added as liquidators to the appointment, with legal support provided by Noel McCoy, a specialist restructuring and insolvency lawyer at Norton Rose Fulbright.
Commercial Deals

Aringa Lawsuit Reveals Details of Longford Capital’s Funding to Susman Godfrey

Due to the confidential nature of litigation finance arrangements, the wider public rarely receives insights into the specific amounts of capital provided, or the terms involved in funding agreements. However, a lawsuit between a patent monetization firm and its funder has provided a rare glimpse into the scale of funding that is driving patent infringement cases. Reporting from Bloomberg Law covers a court filing in the case of Arigna Technology Limited v. Longford Capital Fund, which has revealed details of litigation finance arrangements between Longford Capital and boutique litigation firm Susman Godfrey. The lawsuit was filed in U.S. District Court, District of Delaware by Arigna Technology, an affiliate of the patent monetization company Atlantic Technology Limited. The details of the filing shed light on the terms of the funding agreement between Longford and Susman, with Longford's capital to be used for patent enforcement cases in the US, Germany, and the International Trade Commission. The agreement shows Longford committing $23,595,500, with additional monthly fees of up to $6,915,000 for Susman to bring district court cases to a first trial. The deal also provides for monthly non-contingent fees, which ranged from $1.3 million to $3.6 million. Susman has represented Arigna across 12 separate patent cases over the last two years, bringing lawsuits against major technology corporations such as Samsung, Google and Apple. All of these cases have been brought in the Eastern and Western Districts of Texas.
Commercial

Houlihan Lokey’s Valuation Framework for Litigation Finance Assets

Whilst the vast sums of capital raised by litigation funders and the equally impressive settlements and awards achieved often dominate the headlines, there is a more fundamental question that underpins the market: how do we value individual litigation finance assets? A new white paper from Houlihan Lokey sets out to provide a framework to assist in the valuation of third-party litigation finance assets.  The paper acknowledges from the outset that any attempt to provide a valuation of litigation finance assets ‘can be challenging’, explaining that unlike calculation the valuation of a business, these assets ‘typically do not have representative metrics that can be easily capitalized.’ Furthermore, the fact that litigation funding assets are rarely uniform in nature and are ‘often highly customized with structured payoffs to the financier’, it is difficult to compare the economics of different pieces of litigation. Houlihan Lokey’s valuation framework is comprised of four key steps:
  • Step 1: Underwriting Assumptions
  • Step 2: Discount Rate and UEV Discount Estimation
  • Step 3: Milestone Probability and Litigation Risk Discount Estimation
  • Step 4: Fair Value Estimation
The white paper then lays out the individual equations that form each of the steps in the valuation framework, before providing an example to illustrate how the framework is used in practice. However, it is also noted that the framework is simplistic ‘as it assumes that the Asset is fully funded at the start’, and ‘also does not consider settlements.’ However, the author adds that the framework ‘can be expanded to handle these and other considerations.’ To read the full white paper, click here.
Commercial People Moves

Litica Appoints Ben Hooper and Sam Dansey to Leadership Team

An announcement by Litica highlights two new appointments to the company’s leadership team, as Ben Hooper has joined the company as Finance Director and Sam Dansey takes on the role of Head of Operations. Hooper brings over 20 years in accounting and a depth of expertise in the insurance industry to his new role at Litica, having previously been a partner at Gravita. Hooper also served in senior managerial positions at both Blick Rothenberg and Moore Stephens. In his new position as Litica’s Finance Director, Hooper will oversee ‘all aspects of internal finance, accounting, and tax compliance.’ Dansey brings his own wealth of experience in underwriting and operations, having worked across insurance, broking, and reinsurance. Dansey arrives at Litica from Allianz, where he served as the Head of Home Underwriting, having previously spent five years at Flood Re as the Head of Operations and Market Relations. Steve Ruffle, Co-Founder and Director of Litica, described the appointments as “a significant milestone” for Litica, and said that Hooper and Dansey’s “wealth of experience and expertise will undoubtedly contribute to our mission of setting the highest standards in the litigation insurance industry.”
Case Developments Commercial

Therium Announces Settlement for 700 UK Businesses in Claims Brought Against Mastercard and Visa

Funded claims brought in the Competition Appeal Tribunal continue to achieve successful outcomes, as a claim brought against two of the world’s largest payment processing corporations has achieved a settlement for over 700 companies. An announcement from Therium Capital Management reveals that a settlement has been reached in claims brought by over 700 UK businesses against Mastercard and Visa. The settlement will provide compensation to this group of claimants, which is mostly comprised of retailers, as well as local authorities and universities. The claims, which were fully funded by Therium, focused on allegations that Mastercard and Visa had broken both domestic and European competition regulations through their use of multilateral interchange fees (MIFs).  Fred Bowman, Senior Investment Manager at Therium, stated: “Therium is proud to have provided the funding that enabled the claimants to take legal action against such well-resourced defendants. This result demonstrates the important role of litigation finance and we are very happy to have supported the claimants in this long-running litigation.” Therium’s announcement also clarified that whilst these claimants have settled, there is a wider group of claims focusing on MIFs, ‘which are currently being managed together in the Competition Appeal Tribunal in the UK in the Merchant Interchange Umbrella Proceedings.’ These claims are due to proceed next year, with the first trials set to begin in February 2024.
Case Developments Commercial

Federal Court of Australia Dismisses IOOF Class Action

As LFJ reported earlier this week, the shareholder-led class action brought against Wellard and funded by ICP Funding has reached a settlement agreement. However, today we have news of another investor-led class action which has met a different fate, as the case brought against IOOF and funded by LLS has been dismissed by the court. Reporting from Australian Associated Press, published by Yahoo Finance, provides an overview of the judgement in the IOOF class action in the Federal Court, where Justice Anderson dismissed the case and stated that the claimants had failed to provide evidence for the allegations brought against IOOF, now known as Insignia Financial. In his judgement, Justice Anderson reasoned that “the evidence as a whole, does not rise to the level of establishing a problem with IOOF's culture, systems, governance and compliance during the relevant period." The class action, which began in February 2020, had been brought on behalf of investors who alleged that IOOF engaged in material non-disclosures, as well as misleading or deceptive conduct between March 2014 and July 2015. The claim alleged that these breaches in disclosure obligations had led investors to purchase IOOF shares at an inflated price. In response to the favourable judgement, Insignia’s spokesperson continued to attest that the allegations in the case “were all historical, relating to matters which are more than a decade old," and had been “investigated, and disproved or addressed at the time."  The group members in the class action were represented by Shine Lawyers, with the firm’s joint-head of class actions, Craig Allsop stating that they would consider whether they would appeal the court’s judgement. Funding for the class action was provided by LLS Fund Services. The case is John Mcfarlane ATF The S Mcfarlane Superannuation Fund v Insignia Financial Limited in the Federal Court of Australia, New South Wales Registry.
Commercial Fundraising

Qanlex Raises $30MM for Third Litigation Investment Fund

With competition among funders increasing across the major markets of the US, UK and Australia, emergant funders are keen to explore opportunities in jurisdictions that lack a well-established funding market. The investment appetite for these specialist regional funders appears to remain healthy, as a funder with a focus on Latin America has completed a new $30 million fundraising round.  An article from Financecommunity.es covers an announcement by Qanlex, a litigation funder with operations in both Europe and Latin America, that it has raised $30 million for its third litigation investment fund.  Fernando Folgueiro, co-founder of Qanlex, stated that the establishment of a third investment fund will allow the funder to expand its operations and pursue its goal of “levelling the playing field in the legal system and ensuring that justice is accessible to all.” Qanlex’s other co-founder, Yago Zavalia Gahan emphasised that this latest fundraising “underlines the confidence that investors have in our business model and our mission to democratize access to justice.” As LFJ reported in September 2022, Qanlex has also conducted two separate fundraising rounds to develop its proprietary Case Miner platform, which allows the funder to find and analyse potential cases for investment. Last year’s $3 million fundraising round saw Qanlex secure investments from private capital including The LegalTech Fund, Carao Ventures, FJ Labs and J Ventures. In Latin America, Qanlex has a presence in Argentina, Brazil, and Columbia, with European operations in Spain and France.