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Commercial Covid-19 Special Features

Key Takeaways from Boeing Bankruptcy Discussion with Aerospace Experts

Boeing is one of the cornerstones of the global aerospace industry, yet the company is experiencing tumultuous times. The grounding of its 737 Max airplane in the wake of the Coronavirus outbreak caused the company to book over $20Bn in charges, and some are worried about liquidity issues, and even bankruptcy. On Thursday, LFJ hosted a panel discussion with a pair of experts on the Aerospace industry regarding the fate of Boeing, and the future of the industry. The experts included Scott Hamilton (SH), Managing Editor of Leeham News and Analysis, and Richard Aboulafia (RA), Vice President of Analysis at Teal Group. Both are experts in Aerospace, and frequently cited as Aviation experts by major media outlets. The panel was hosted by LFJ Founder, Jason Redlus (JR). Below are some key takeaways: JR: On a macro basis, what is your expectation regarding Boeing specifically, and the Aviation sector more generally?  RA: I think there is this impression that it's a bailout of Boeing, and I just don't see it as that. The overwhelming footprint in terms of jobs and even money for a jetliner are not in the supply chain. The question becomes 'do we keep that supply chain going or don't we, and face the consequences of mass layoffs and a real hit to the economy? If Boeing wants to save itself, it would take the expedient route by stopping all production." SH: I don't think Boeing will go into bankruptcy unless the capital markets completely dry up…which is what we saw to some degree after 9/11. The airlines just didn't have access to liquidity and that's why you had the Air Transportation Stabilization Bill created, which in its own right wound up picking winners and losers. My concern about the supply chain is deeper than my concern about Boeing at this point. I think that Boeing is probably correct that the supply chain is more at risk than Boeing is. RA: There is a liquidity crisis…but does this mean this is an instant bankruptcy? Far from it. It just means they have to watch themselves. The question of an aid package is whether terms and conditions can be applied that guarantee they'll keep paying people and suppliers...less about avoiding bankruptcy and more about avoiding an economic collapse in that sector.  JR: In the litigation finance community, who gets in trouble on something like this?  If the government just gives Boeing a check and lets them use it at their discretion, doesn't that create a kind of litigation through the supply chain? Where do you see litigation as the fallout from this crisis in the aviation industry? SH: Lawyers can find reasons to litigate about anything (laughter). Somebody somewhere would object to how the money is disbursed. Of course, we don't know what the bailout language would look like. How does the mom and pop supplier at risk of going out of business also get a piece of the pie? How do they afford a lawyer if they're already on the edge? How would Boeing determine who the winners and losers are? RA: How much litigation is needed depends upon how well the lawyers and legislators do their jobs upfront. If they construct an architecture to come up with something that lays out the framework for disbursing that aid, we probably won't have a litigation problem. The more likely scenario is that the money is provided to Boeing and a couple of others, and then they'll be in charge of letting that cash trickle down. Some suppliers will feel aggrieved. What do you do in the case where a vital Boeing supplier is based in France? Then you get people screaming that US funds are going abroad. In global businesses, will we be matched by a similar European program—so does this become a back door to subsidization? So let's make it targeted, equity should not be allowed. I absolutely believe that government help is justified...for the supply chain. But how do you distribute it and how does Boeing become the arbiter of that money? It's gonna be a real mess. JR: Where are you seeing points of stress or opportunity during this crisis? SH: I'd be looking for buying opportunities to strengthen my supply chain. Does it make sense for the government to give money to Boeing only to see that turn around; to spend $4.5 billion on a company with a market value of $1.2 billion? Is that deal in jeopardy? JR: Any final closing comments?  SH: Everything we've said in the last half hour will probably be out of date in five minutes (laughter).
The LFJ Podcast
Hosted By Justin Kuczmarski |
In this episode, we sit down with Justin Kuczmarski of NAV Valuation and Advisory. Justin discusses the value-add that an independent auditor and valuation expert provides, why litigation funders shouldn't necessarily rely on the plaintiff firm's valuation, and what quantitative and qualitative metrics he uses when determining a claim's valuation. [podcast_episode episode="5153" content="title,player,details"]
Commercial

Insiders Are Buying Shares at Burford Capital. What Does That Indicate?

It's no secret that insiders will buy up shares of companies they anticipate will outperform. It's also no secret that the economic havoc being wreaked on the global economy by COVID-19 is bound to have legal (and litigation funding) repercussions. Could Burford's insider share purchases foretell positive times ahead for the world's largest litigation funder?  According to Simply Wall St, Jonathan Molot, CIO of Burford, bought nearly GBP 3MM in shares.  He also bought them for well over the current price. While it's not advisable to buy shares based solely on what insiders are doing—it makes sense to think Burford is a great investment when an informed insider (the term insider here referring to someone who reports their stock transactions to regulators) makes a purchase of that size. Meanwhile, no Burford insiders were known to sell shares last year.  But does insider share buying at Burford align with that at other companies? Insiders own less than 10% of Burford shares, which is nowhere near as high as some other publicly-traded firms. Yet given the fact that insiders have made large investments above current pricing, it seems safe to say that Burford insiders are predicting a stock price increase. 
Commercial Covid-19

COVID-19 Fuels Legal Boom Times

The Coronavirus is having an impact on lawyers around the world. Right now, employers need advice on the best ways to react to employees who have contracted the virus, or those desperately trying to avoid it. From remote assignments to office closures, lawyers are needed to help companies navigate the uncharted waters of a modern pandemic.  As ABA Journal reports, firms are placing emphasis on risk management and flexibility to find ways to continue serving clients. This includes assembling crisis management teams to mitigate any potential fallout, as one prominent NY firm did after a partner tested positive for Coronavirus. Cloud-based tech is also of greater importance than ever as teams work remotely to avoid the spread of the virus. Aside from mitigating current virus-related woes, lawyers are looking ahead to the coming economic downturn. A full-on recession is possible as closures, event cancellations, and a spike in insurance claims impact industries across the board. Litigation funders are also prepping for a flurry of litigation disputes brought on by the impact of COVID-19.  One California lawyer, Kent Schmidt of Dorsey & Whitney, predicts a flood of new cases to emerge in the coming months. He has already heard from companies seeking advice on whether COVID-19 precautions are suitable grounds to void contractual obligations.   Alison Chock, CIO for Omni Bridgeway, predicts an uptick in insurance related cases, as agreements are scrutinized and payouts are questioned. Bankruptcies and insolvency cases are also likely to spike, given the economic downturn expected to continue even after the virus is contained. Chock goes on to explain that when the economy gets worse, legal cases become more plentiful. A rise in cases requiring arbitration or litigation is expected—which means lit fin firms will soon have more opportunities to fund cases and ensure access to justice for everyone. 
Announcements Commercial

LCM is pleased to announce its interim (HY20) results for the six-month period ending 31 December 2019.

Litigation Capital Management Limited (AIM:LIT), a leading international provider of disputes financing solutions, announces its interim results for the six months ended 31 December 2019 (“HY20”). Highlights
  • Delivering sustained growth across a diversified portfolio by investment activity and geography
  • First close of a new third-party fund of US$150 million (post-period)
  • Cumulative 139% ROIC and 79% IRR over the last 8.5 years*
  •  Total cash generated of A$18.9 million (post-period cash receipt totalling A$9.7 million)
  • Four single-case investments in APAC generated a combined revenue of approximately A$14.9 million and contribution to gross profit of approximately A$7.8 million
  • Significant traction in key growth area of corporate portfolio funding:
  • Construction portfolio: resolved two disputes out of seven matters; generated revenue of A$8.6 million and provided a contribution to gross profit of A$4.3 million
  •  First matter resolution in the aviation portfolio; generated revenue of A$0.6 million and provided a contribution to gross profit of A$0.2 million
  • Strategic Alliance with international law firm delivered material opportunities and over 30 applications, including both single case and corporate portfolio. Second Alliance initiated with an international law firm which has already generated corporate portfolio applications
*FY12 to HY20, including losses. The Company reports performance over the last 8.5 years since FY12 as the Board deems it the period most representative of the current business Summary of financials
Figures in A$ million unless otherwise statedSix months ended 31 December 2019Six months ended 31 December 2018
Gross revenue24.111.7
Gross profit12.25.7
Adjusted profit before tax6.92.7
Adjusted basic EPS (cents per share)6.614.31
Statutory profit before tax6.71.0
Net cash34.752.6
Capital deployed on litigation investments18.412.8
Litigation investments34.020.7
Total equity80.470.3
Cash receipts from the completion of litigation investments9.211.0
Post-period events
  • First close of US$150 million LCM Global Alternative Returns Fund (the Fund) – US$140 million committed investments from global blue-chip investors with balance of US$10 million which LCM expects to be subscribed in the near term
  • Fund will supplement the deployment of capital from LCM’s balance sheet, significantly increasing the Group’s ability to invest in new opportunities.
  • Transitions LCM into an alternate asset manager specialising in investments relating to the global disputes market
  • Post period cash received on projects resolved – A$9.7 million, as a result of resolutions occurring close to the end of the financial period
Current trading and outlook LCM moves forward as an alternate asset manager specialising in investments relating to the global disputes market with two complementary business models: direct investment from the Company’s balance sheet and asset management following the first close of the US$150m fund. In the second half, we will continue to execute our strategy of growing and diversifying our portfolio by investment activity and geography, taking advantage of the numerous and exciting growthopportunities available to us in a measured and disciplined way. With a burgeoning global infrastructure in place, an increasingly diversified portfolio and a strong pipeline supported by a robust balance sheet, third-party funds and growing pool of the best talent in the industry, while the nature of LCM’s business model means that returns will not always result in a linear growth pattern, the Board is confident the Company will continue to grow and deliver strong returns. Patrick Moloney, CEO of LCM, commented: “In the first half, LCM has continued to strengthen its market position in all of the geographies we operate. The development of our corporate portfolio strategy is gaining significant traction and already paying dividends in an area where we are a global leader in the provision of portfolio financing to corporate clients. With the first close of LCM’s US$150 million fund we are well placed to significantly increase the portfolio of investments under management, enabling LCM to expand its business in all of the geographies in which we operate. The launch of the fund in parallel with direct balance sheet investments signals the transition of the business into a global alternate asset manager.” Nick Rowles-Davies, Executive Vice Chairman of LCM, added: “Momentum in corporate portfolio opportunities has increased in the first half with the Fund now enabling LCM to invest in larger corporate portfolio transactions which have previously been beyond the capacity of our balance sheet. This provides an important catalyst for the ongoing development of LCM’s corporate portfolio strategy.” LCM Contact Angela Bilbow Global Head of Communications abilbow@lcmfinance.com +44 (0)20 3955 5271
Announcements Commercial

Longford Capital Adds Andrew A. Stulce as Vice President

CHICAGO – March 16, 2020 – Longford Capital today announced that Andrew A. Stulce joined the firm as Vice President. Mr. Stulce will assist with investment sourcing, due diligence, and monitoring of portfolio investments.

 Mr. Stulce was a member of the litigation department at some of the most prestigious law firms in the country. Prior to joining Longford Capital, Mr. Stulce was with McGuireWoods LLP; prior to McGuireWoods, he was with Hunton & Williams LLP (now Hunton Andrews Kurth LLP).

 

Mr. Stulce has significant experience litigating complex antitrust and insurance recovery cases. He has also represented corporate clients in a range of commercial litigation matters, including fraud, breach of contract, and breach of fiduciary duty matters.

 

Before entering private practice, Mr. Stulce clerked for the Honorable Charles A. Pannell, Jr., of the United States District Court for the Northern District of Georgia.

 

“Andrew has joined our team of experienced litigators and trial lawyers to assist in addressing the growing demand for litigation finance from leading law firms and corporate claimants,” said William P. Farrell, Jr., Managing Director and General Counsel of Longford Capital. “Andrew is an experienced litigator and trial lawyer. His work at two fine law firms and experience clerking in the federal trial court has prepared him to make an important contribution to Longford Capital. We are excited to welcome Andrew to the firm.”

 

Mr. Stulce is a member of the state bars of Illinois, Georgia, and Tennessee. He is admitted to practice before the United States District Court for the Northern District of Illinois, the United States District Court for the Northern District of Georgia, the United States District Court for the Middle District of Georgia, the United States District Court for the Eastern District of Tennessee, the United States District Court for the Eastern District of Texas, the United States Court of Appeals for the Eleventh Circuit, and the United States Court of Appeals for the Federal Circuit.

 

He graduated, cum laude, from the University of Georgia School of Law and earned a Bachelor of Science degree in Business Administration and Romance Languages from the University of North Carolina at Chapel Hill.

 

About Longford Capital

Longford Capital is a leading private investment company that provides capital to leading law firms, public and private companies, universities, government agencies, and other entities involved in large-scale, commercial legal disputes.  Typically, Longford Capital funds attorneys' fees and other costs necessary to pursue meritorious legal claims in return for a share of a favorable settlement or award. The firm manages a diversified portfolio, and considers investments in subject matter areas where it has developed considerable expertise, including, business-to-business contract claims, antitrust and trade regulation claims, intellectual property claims (including patent, trademark, copyright, and trade secret), fiduciary duty claims, fraud claims, claims in bankruptcy and liquidation, domestic and international arbitrations, and a variety of others. For additional information about Longford Capital, please visit www.longfordcapital.com.

Announcements Commercial

The world’s largest dispute resolution finance team continues expansion with senior appointments

SYDNEY, 16 March 2020: Omni Bridgeway Limited, (formerly known as IMF Bentham ASX:IMF), has welcomed talented new colleagues to the team as the company continues its international expansion. The appointments include global leadership positions following the merger of IMF and Omni Bridgeway in November 2019 and important roles in Australia in response to increased appetite for dispute finance solutions. Omni Bridgeway can also announce it is expanding its footprint into New Zealand, where the firm is already active in several actions. OMNI BRIDGEWAY WELCOMES: Leanne Meyer | Investment Manager, Sydney Leanne is a former in-house counsel and joins the Australian Investment Management team to identify and assess investment opportunities and manage funded claims with a focus on finance solutions for corporates. [Read more.] Heather Collins | Investment Manager, Sydney Heather augments the Australian Investment Management team to identify and assess investment opportunities with a particular specialisation in financing in the insolvency sector. [Read more.] Niall Watson-Dunne | Associate Investment Manager, Sydney Niall joins the Australian Investment Management team to manage due diligence and assist with the management of funded claims. [Read more.] Gracey Campbell | Associate Investment Manager, Melbourne Gracey will undertake due diligence and assistance with managing funded claims for the Australian Investment Management team. [Read more.] Siobhan Hannon | Global Head of Compliance and Risk Sydney-based Siobhan is a seasoned compliance and risk specialist who will lead the design and management of the Group’s global compliance framework, encompassing risk management reporting, policies and procedures. [Read more.] Elizabeth Beacham | Global General Manager People & Culture Elizabeth is based in Sydney and will lead the company’s global People & Culture strategy and initiatives. [Read more.] Alistair Morgan | General Counsel – Australia and Asia Perth-based Alistair will advise the company on transactional and regulatory matters across the Asia Pacific region. [Read more.] NEW ZEALAND EXPANSION: In addition to the above new appointments, Omni Bridgeway’s geographic footprint is expanding to New Zealand where the company is already funding proposed combustible cladding class actions. Sydney-based Investment Manager and Head of New Zealand, Gavin Beardsell, is leading the company’s expansion into New Zealand in response to increasing financing inquiries from that market. In New Zealand, Gavin already manages the company’s investments in one of the CBL Corporation shareholder class actions and the proposed combustible cladding class actions involving product liability claims against certain manufacturers of Alucobond and Vitrabond PE core cladding products. [Read more here and here.]
ABOUT OMNI BRIDGEWAY
Omni Bridgeway is a global leader in dispute resolution finance, with expertise in civil and common law legal and recovery systems, and operations spanning Asia, Australia, Canada, Europe, the Middle East, the UK and the US. Omni Bridgeway offers dispute finance from case inception through to post-judgment enforcement and recovery. It has a proud 34-year record of funding disputes and enforcement proceedings around the world. Omni Bridgeway is listed on the Australian Securities Exchange (ASX:IMF) and includes the leading dispute funders formerly known as IMF Bentham Limited, Bentham IMF and ROLAND ProzessFinanz. It also includes a joint venture with IFC (part of the World Bank Group). Visit imf.com.au or omnibridgeway.com to learn more.
Commercial

Disagreements Continue Over Ethics of Litigation Funding

Legal minds Paul Haskel and Jim Walker have kept a close eye on how litigation funding is impacting legal ethics. Like many lawyers and judges, they have grave concerns and feel that some tweaks in the Code of Ethics should be considered. But how to get everyone on the same page about what needs to change?  Value Walk reports that the first hurdle in addressing concerns over litigation funding is to refrain from making sweeping generalizations about the practice. Finding practical ways to address ethical concerns without painting with too broad a brush is a concern on all sides.   The goal, then, is to devise ethical guidelines that allow lawyers and funders to develop their own funding agreements that work with the specifics of a given case. The thinking is that broad, rigid ethics rules would limit lawyers, clients, and funders unnecessarily. But reaching these goals effectively requires compromise.   It's vital to keep in mind that the committee has made recommendations, not laws or binding precedents.  While the opinions expressed are influential and widely read, they fall short of fixing what some believe are growing problems within litigation funding. The hope is that a compromise can be reached and enforceable guidelines can be enacted to protect clients and firms. 
Commercial

Working Group Counters NYC Bar Opinion on Litigation Funding Ethics

While not legally binding, the recent NYC Bar Association opinion on litigation funding is a powerful statement on the ethics of funding and what regulations are needed. In response to this, a 25-person working group on litigation funding was assembled.  As Bloomberg News explains, the working group came away with two main recommendations to amend existing ethics rules. First, that funding agreements between lawyers and funding entities should be expressly allowed. This is contrary to what the NYC Bar recommended. Opinions are divided on how this impacts the appearance of coercion, manipulation, or undue influence on a case. The working group asserts that clients and the lawyers who serve them can both benefit from more fluid funding options and fewer restrictions. As one would expect, third party litigation funders are in agreement here. Second, the working group opposed the mandatory disclosure of funding agreements to the courts. This opinion applies to both state and federal courts, regardless of the amounts or percentages being funded. Instead of automatic disclosure, the working group asserts that disclosure on a case-by-case basis makes more sense. At the same time, some jurists find lack of funding agreement disclosure acceptable, as it rarely impacts the material facts of a case.  As the NYC Bar pointed out, Rule 5.4 of the New York Rules of Professional Conduct disallows fee sharing between case lawyers and those without a license to practice law under some circumstances. But this rule applies to very specific types of litigation funding, not all of it.  It's likely that ethics rules will be reexamined and amended in the near future, and again as litigation funding becomes more commonplace, and future industry innovations come into conflict with long-standing ethical norms.