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Announcements Commercial

Manolete Partners Announces Audited Results for the Year Ended 31 March 2024

By Harry Moran |

Manolete (AIM:MANO), the leading UK-listed insolvency litigation financing company, today announces its audited results for the year ended 31 March 2024. 

Steven Cooklin, Chief Executive Officer, commented: 

"These annual results show that Manolete has now recovered strongly from the UK Government's suppression of the UK insolvency sector that prevailed during the Covid period. The Company has returned to profitability and has continued its track record of consistent operational cash generation. That has been driven by a record number of 251 case completions in FY24.

The trading results for the new financial year, which commenced on 1 April 2024, clearly show that this positive momentum has continued: year to date, new case enquiries are running 22% ahead of FY24 and our in-house legal team has already completed 116 cases with an aggregate value of £11.8m (compared to this stage last year, where we had completed 93 cases for a total value of £6.3m). This is also reflected in our gross cash receipts where we have already collected £10.3m in the first five months of this financial year, compared to £8.7m for the whole six-month, first half period of the previous financial year.

"Widely reported, challenging, multiple, macro-economic factors including: high interest rates, persistent inflationary threats, stretched Government balance sheets and global conflicts, provide strong tailwinds and significant momentum for further growth. As the clear market leader in the UK insolvency litigation finance sector, the Company is exceptionally well positioned to take advantage of these conditions". 

Financial (statutory and non-statutory) highlights: 

  • Realised revenues on completed cases were £24.2m, a decrease of 10% (FY23: £26.8m) although FY23 included an exceptionally large, funded case completion of which £4.9m was recorded in realised revenue (total settlement £9.5m).
  • Adjusting for that single exceptional case, FY24 realised revenues were 11% higher than FY23. 
  • 92% of total revenues represented by realised revenues on fully completed cases (FY23: 129%). 
  • Increase in the valuation of the cartel cases contributed £0.1m to gross profit in FY24 (FY23: £1.2m). 
  • EBIT increased to £2.5m, which represented a positive change from an EBIT loss of £3.1m in the prior year. 
  • Gross cash receipts from completed cases were £17.7m, a decrease of 34% (FY23: £26.7m, however, FY23 included the same one-off exceptionally large case completion, referred to above, which delivered gross cash receipts of £9.5m. Excluding that case, gross cash receipts rose by 3%). 
  • The Company's retained share of gross cash receipts from completed cases (after all legal costs and payments to Insolvent Estates) was £10.8m, a decrease of 18% (FY23: £13.1m) but again, the only reason for the decrease was the £9.5m exceptional case in FY23. 
  • Cash generated from operations (after all completed case costs and all overheads but before new case investments and taxation) was £5.0m (FY23: £8.0m). 
  • As at 31 March 2024, the Company had cash balances of £1.4m and borrowings of £13.7m resulting in a net debt of £12.3m (FY23: £0.6m and £10.5m, respectively and therefore a net debt of £9.9m). 

Operational highlights: 

  • A record number of new case investments in UK insolvency cases, an increase of 18%: 311 in FY24 (FY23: 263). 
  • A record number of 251 cases were completed in FY24 (FY23: 193 cases), with an average duration per case of 13.2 months (FY23: 15.5 months), generating a Money Multiple of 1.9x (FY23: 1.9x) and an IRR of 131% (FY23: 131%) (based on unaudited internal management information). 
  • As previously reported, following the ending in April 2022 of the Covid-related emergency legislation to suppress UK insolvencies and the withdrawal of very substantial financial support to UK businesses by the previous Government, the number of UK insolvencies have been at record high levels. The first wave of these insolvencies has predominantly been the smaller and weaker "zombie" companies. Only in recent months have the larger company insolvencies, typically by way of Administration, returned to levels seen before the Covid pandemic. This has resulted in record high numbers of cases taken on by Manolete but the average case size is smaller than had been the case, pre-pandemic. By way of comparison: FY21 was the trading year that best reflects the completion values of cases acquired and funded before the Covid-19 impact (this is because, on average, cases take around 12 months to complete). In FY21, audited realised revenues were £24.4m from 135 cases: an average of £180k per case, which is close to double the average for FY24 of £96k. 
  • ROI of 116% and Money Multiple of 2.2x from 933 completed cases since inception (based on unaudited internal management information). 
  • Average case duration across the full lifetime portfolio of 933 completed cases is 12.7 months · 19% increase in live cases: 418 in process as at 31 March 2024 (351 as at 31 March 2023)

Current Trading 

  • The first five months of FY25 have been buoyant:
    • Highest ever number of new case enquiries year to date: 348 (FY24: 286). 
    • 103 new case investments, which is broadly tracking the record 146 new case investments for the whole first six months of FY24. 
    • 116 case completions at an aggregate value of £11.8m (FY24: 93 case completions at a total value of £6.3m). o Gross cash receipts from previously completed cases is £10.3m, compared to £8.7m for the whole first six months of FY24. 
    • Net cash receipts (after all payments to insolvent estates and all associated external legal costs) are £6.5m year to date for FY25, compared to £4.6m for the whole first six months of FY24. 

Outlook 

  • Given that the number of corporate insolvencies in the UK remain at record highs, the Company can look forward to a sustained period of growth. A strong recovery in the number of larger case investments signed in the second half of FY24 is also an encouraging indicator of future business strength.

A copy of the annual report and accounts will be available on the Company's website shortly and will be posted to shareholders in due course.

The full announcement and results can be read here.

Commercial

Deminor Publishes Insights on AI and the Economics of Litigation Funding

Deminor has published a pair of articles into specific aspects of legal funding. The first, authored by senior legal counsel Patrick Rode, explores the topic of ‘AI in Litigation Funding in the Context of the EU AI Act’. The second, written by investment associate Aliki Halcoussi, covers ‘The Economics of Litigation Funding: Assessing the Financial Viability of Legal Dispute Investments’.

Rode’s article first examined the potential use cases for AI in litigation funding, including case evaluation and risk assessment, predictive analytics, automation of decision-making, and due diligence. Then, Rode provided an overview of the impact of the European Union’s AI Act which came into force this month, looking at the regulatory requirements that will be imposed on the use of AI systems.

Finally, Rode offered four potential strategies for funders to take a pro-active and strategic approach to dealing with comprehensive legislation, which included investing in compliance infrastructure, collaborating with leading AI experts, prioritising ethical AI systems development, and engaging in active discussions with EU regulators.

Halcoussi’s insights piece provided an overview of the ‘thorough and complex process’ through which funders are able to assess the viability of investing in individual claims or portfolios of cases. Halcoussi explained that funders like Deminor begin with rigorous data collection that can then be used to form a financial framework which can be used to ‘accurately calculate the relevant exogenous factors that might affect the recovery amount.’

The funder’s financial modeling also incorporates an analysis of the potential range of costs involved in that specific case, balancing it against legal budgets and the expected duration of the legal proceedings. In order to ensure that these investments are profitable for the funder, the level of risk must be balanced against the potential size of the recovered proceeds to calculate the funder’s required return.

Rode’s article can be read here. Halcouissi’s article can be read here.

Commercial People Moves

HFW’s Restructuring and Insolvency Practice Hires Australian Litigation Funding Pioneers

By Harry Moran |

An announcement from HFW revealed that the law firm has made two hires in its corporate restructuring, insolvency and commercial litigation practice, with the appointment of partners Paul Buitendag and Rena Solomonidis in the firm’s Melbourne office. Both partners have joined HFW from Johnson Winter Slattery, bringing combined expertise in complex commercial disputes as well as experience in working with litigation funders.

Gavin Vallely, managing partner at HFW Australia, described Buitendag as “one of Australia’s preeminent insolvency and commercial litigation practitioners” and highlighted his renown for “litigation funding in Australia, including the introduction of ATE insurance as an alternative form of security for costs in litigation funding agreements.” Vallely praised Solomonidis as “a leading practitioner in commercial litigation, corporate insolvency and restructuring, as well as in prosecuting and defending class actions”, and noted that the pair “have worked with funders in the USA, UK and Australia in significant disputes.”

Buitendag highlighted HFW’s work in London as “an important centre not only for litigation funders, but also for brokers and insurers who are developing innovative, insurance-backed litigation funding products.” Whilst Solomonidis praised HFW’s “international reach”, which would be able to “support our practice at a time of increasing insolvency activity in Australia that regularly involves assets, investors and alternative lenders in offshore locations.”

Case Developments Commercial

FORIS AG Announces Settlement in Dispute Over Deutsche Bank’s Postbank Takeover

By Harry Moran |

Whilst third-party funding is less commonly seen within the various European Union jurisdictions, a landmark case in Germany that dates back to a 2010 takeover of Postbank has finally achieved a settlement according to the litigation funder that provided the financial backing for the claim.

An announcement from German litigation funder FORIS AG revealed that a settlement has been reached in the legal proceedings brought against Deutsche Bank related to the bank’s takeover of Postbank in 2010. FORIS had financed two claims that represented a total of 19 Postbank shareholders, and following the agreement with Deutsche Bank, all that remains is for the plaintiffs to decide whether or not to accept the settlement.

The claims which were first brought in 2017 focused on allegations that Postbank shareholders had been underpaid for their shares, when they were forced to accept 25 euros per share. The settlement provides for each shareholder in the claims to receive an additional payment of 31 euros per Postbank share they held at the time of the takeover, with the total value of the dispute estimated at around 4.5 million euros.

Dr. Anke Warlich, senior legal counsel at FORIS, said that the funder was pleased with Deutsche Bank’s willingness to settle and that there was already a high approval rate for the settlement amongst the shareholders whose claims FORIS has financed. Warlich emphasised that without third-party litigation funding, the risk and costs involved in pursuing such a claim would have meant that the injured parties would not have been able to take on these legal proceedings.

The plaintiffs in the claims were represented by the law firms AWARR.legal/Schirp &Partner and Nieding & Barth.

Announcements Commercial Fundraising

Irish Litigation Firm Signs €150M Funding Deal With European Investment Company

By Harry Moran |

Nera Capital’s groundbreaking partnership with a substantial European investment platform, is poised to significantly benefit the company’s consumer division. 

This latest success has come at a prosperous time for Nera Capital, which earlier this year expanded into Europe, opening an office in The Netherlands, adding to its locations in England and Ireland. 

Following its establishment in 2011, the company has become a pioneer in the legal finance industry. Nera Capital is a specialist funding provider to law firms across Europe and the US.  The firm has administered legal finance in numerous jurisdictions and assisted more than 200,000 claimants to date. 

Recently, Nera secured a sought after spot in the European Litigation Funders Association. Director of Nera Capital, Aisling Byrne, said: “This latest funding partner is a strategic advancement which will greatly enhance the services we provide to our clients and partners. 

“I am excited about the possibilities this funding line will unlock.” Ms Byrne called the deal a ‘significant milestone’ for the business.  She added: “Nera Capital continues to advocate for transparency and promoting higher industry standards. We assist financially vulnerable consumers, whilst maintaining exceptional returns for our investors and all stakeholders. 

“This newest collaboration allows us to enhance consumer access to justice, supporting equitable outcomes over time for more people.” 

Case Developments Commercial

NZ Court of Appeal Approves Opt-Out Class Action Against ANZ and ASB Banks

By Harry Moran |

When it comes to ensuring that litigation is effective in providing full access to justice for individuals, a key factor in class actions is often whether these claims are brought on an opt-in or opt-out basis. In the latest example of this important distinction being at stake, a New Zealand court has ruled that a large class action against two of the largest banks will be allowed to proceed as an opt-out claim.

Reporting by RNZ covers the news that a class action being brought against ANZ and ASB banks has been approved to be brought on an opt-out basis by the New Zealand Court of Appeal. The class action was first filed in 2021 over allegations that the banks breached their disclosure obligations under section 22 of the CCCFA, and failed to sufficiently refund customers’ interest payments and fees that the banks were not entitled to charge. The Court of Appeal’s decision to approve the opt-out proceedings means that the class action could end up representing up to 100,000 customers.

Scott Russell, managing director of Russell Legal and lawyer for the claimants, said that the ruling “not only removes a significant barrier for consumers who might have been unaware they had a right to participate, it means if we are successful, ANZ and ASB will be held liable for every eligible customer that was allegedly impacted when the banks breached New Zealand consumer protection laws.” The class action covers those who were customers of ASB Bank between 6 June 2015 and 18 June 2019, as well as ANZ Bank customers between 6 June 2015 - 28 May 2016, for loans entered into post 6 June 2015.

Whilst the latest article makes no mention of third-party funding, when the class action was filed in 2021, it was reported that the legal proceedings were being jointly funded by CASL and LPF. On the Banking Class Action website, both CASL and LPF are still listed as the funders for the class action.

ANZ provided the following statement in response to the ruling:

"The recent Court of Appeal hearing rejected the plaintiffs claim for a wider ANZ class and confirmed the High Court decision that the banking class action currently before the courts only includes ANZ customers who entered into a loan from 6 June 2015 and also received a loan variation letter that was affected by the calculator issue (i.e. received a letter containing incorrect information between 6 June 2015 and 28 May 2016).

"We have relevant records for customers who might be part of the class, which we will retain. There is no need to contact the bank at this stage. The Court will consider as part of the proceedings how and when to notify customers who are part of the class and who may have a claim."

Case Developments Commercial

Delaware Court Orders Full Disclosure of Class Action Funding Agreement

By Harry Moran |

Disclosure of litigation funding agreements has been one of the most contentious issues in recent years, particularly in the state of Delaware, where certain judges have focused on in questions of transparency. However, a class action in the state has produced one of the most interesting rulings of the year, as the court ordered the full disclosure of the funding agreement and suggested that the litigation funder may also be a competitor of the defendant.

An article in Reuters examines a case in the Court of Chancery for the State of Delaware, in which Vice Chancellor Nathan Cook ruled that plaintiffs in a class action must share their litigation funding agreement with the defendants. The class action at stake is a 2018 case brought against insurer Genworth Financial over allegations of fraudulent transfers that stripped assets from its long term care subsidiary, resulting in the company being unable to pay future claims and commissions to policyholders and insurance brokers. The August 21 ruling granted the defendants’ motion to compel the production of both the litigation funding agreement and the unredacted fee agreements.

Cook explained his ruling in part by emphasising that both the nature of class action lawsuits and the specific context of this case, “give rise to several unique concerns, including the potential for class counsel to face conflicts of interest and for the third-party funders to exercise improper control over the litigation”. Cook also highlighted that the language used in the funding agreement appeared to acknowledge that “the arrangement set forth within, will be disclosed in some fashion during litigation.”

Cook went on to refute the arguments made by the plaintiff’s lawyers that the funding agreement contained privileged or confidential information, stating: “I am confident that, in compelling production of the Funding Agreement, I am not requiring Plaintiffs to disclose meaningful opinion work product.” Referencing existing case law set down in the cases of Carlyle and Charge Injection, Cook concluded that “contrary to Plaintiffs’ assertion, it is not “well established” that, under Delaware law, “litigation funding agreements . . . are not discoverable.”” 

One of the most interesting elements of Cook’s ruling was that he appeared to infer that the nature of the unnamed litigation funder had raised concerns. Cook noted that the funders behind the Genworth class action “do not seem to be entities ordinarily involved in litigation funding”, going on to state that “they appear to be competitors financing litigation against a market peer.”

Announcements Consumer

Express Legal Funding Launches LFAFF: New Trade Organization to Protect Consumers & Law Firms with Strategic Vendor Partnerships

By Harry Moran |

Express Legal Funding, a leading provider of pre-settlement funding services, proudly announces the establishment of the Legal Funders for Actually Fair Funding (LFAFF), a coalition dedicated to safeguarding consumers and law firms through strategic vendor partnerships and ethical pre-settlement funding practices.

A New Standard in Legal and Consumer Protection
LFAFF aims to redefine the legal funding industry by championing fairness, transparency, and inclusivity. This new trade organization is committed to ensuring that injured claimants, regardless of their background, can access the financial support they need to cover their living costs while pursuing justice, and law firms benefit from reliable, transparent vendors to accelerate their growth.

"At Express Legal Funding, our commitment has always been to support both our clients and the legal community with integrity," said Aaron Winston, Author and Strategy Director at Express Legal Funding. "With the launch of LFAFF, we're taking this commitment to the next level by establishing a trusted alliance that prioritizes ethical standards and transparency in all legal service industry vendor partnerships, reducing overhead expenses and protecting law firms from wasted SEO and marketing costs."

Core Objectives of LFAFF

  • Industry Best Practices (B2C): Implement a higher standard for pre-settlement funding, providing plaintiffs access to financial resources without compromising their legal claims.
  • Law Firm Support (B2B): Providing law firms with access to pre-vetted, trustworthy vendors to enhance their practice and client service, with potential discounts for member firms.
  • Ethical Standards and Transparency: Promoting high ethical standards across all vendor partnerships, ensuring that the legal funding industry remains accountable and trustworthy.

Membership and Benefits
Expanding beyond the pre-settlement funding industry, LFAFF is open to law firms and vendors who are committed to upholding the organization's ethical standards and guidelines. Members will benefit from a network of like-minded professionals, access to exclusive resources, and the opportunity to contribute to the ongoing development of industry best practices.

About Express Legal Funding
Express Legal Funding is a nationally recognized and trusted pre-settlement funding company and brand based in Plano, Texas. As a premier provider of pre-settlement funding, it's dedicated to offering plaintiffs the financial support they need while they await the resolution of their cases. The company is committed to ethical practices and transparency, ensuring that its clients receive fair and equitable services.

About LFAFF
The Legal Funders for Actually Fair Funding (LFAFF) is a trade organization founded by Express Legal Funding to promote ethical standards, consumer protection, and strategic partnerships in the legal funding industry. LFAFF is committed to fostering a fair and transparent environment for both law firms and the consumers they serve.

Announcements Commercial

Nakiki SE: Examination of First Capital Market Claim

By Harry Moran |

Nakiki SE announces that it is investigating a capital market claim of up to EUR 400,000 against a company listed on the Open Market of the Düsseldorf Stock Exchange. Nakiki is thus opening up a new area of business: the financing of securities law claims.

With this step, Nakiki SE expands its expertise in the area of litigation financing and continues its growth strategy. The financing of securities litigation enables investors and shareholders to pursue potential claims against listed companies without financial risk. Nakiki SE assumes the full cost of the litigation and receives a share of the proceeds in the event of a successful outcome.

This new business area responds to the growing demand for specialised financing models for legal claims in the capital market. Nakiki SE is supported by an experienced team of lawyers and financial experts to ensure that cases are thoroughly investigated and the plaintiffs’ chances of success are maximised.

With the establishment of securities litigation financing, Nakiki SE is positioning itself as a leading player in a dynamically growing market. We see considerable potential here to facilitate investors’ access to capital market legal protection and at the same time to diversify our portfolio,” says Andreas Wegerich, CEO of Nakiki SE.