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Case Developments Commercial

Argentine President Suggests Creation of Perpetual Bond to Pay for $16 Billion YPF Award

The $16 billion award handed down in the YPF lawsuit stands out as one of the key moments in litigation finance for 2023, with Burford Capital looking to achieve a massive return on its investment. However, in the months since the judgement was announced in September, there has been much speculation over Argentina’s ability to pay the full multi-billion sum if its appeal fails. Reporting by Bloomberg suggests that the Argentine government is exploring options for payments of the award, with recently elected President Javier Milei suggesting that the government could issue a perpetual bond without a fixed maturity to cover the costs. In a televised interview on La Nacion, Milei explained that the government could charge Argentines what he called the “Kicillof tax,” referring to Buenos Aires Governor Axel Kicillof who led the plan to nationalize YPF in 2012. During the interview, President Milei explained the government’s current predicament, stating: “we don’t have the money, we don’t have $16 billion, that’s the reality — but we have the willingness to pay.” He went on to describe the idea of using the new tax to “pay this fund with a perpetual bond,” with the ‘fund’ in question referring to Burford Capital. Burford Capital did not respond to Bloomberg’s request for comment in the wake of President Milei’s interview.
Announcements Commercial Deals

Montauk Metals Obtains Litigation Funding Against the Republic of Colombia

Montauk Metals Inc. (TSX-V: MTK) (the “Company” or “Montauk”) is pleased to announce that it is been advanced US$200,000 (the “Loan Amount”) pursuant to the loan and option agreement (the “Loan Agreement”) with Omni Bridgeway (Fund 5) Canada Investments Ltd. (“Omni”), as previously announced in its news release on November 9, 2023. The Loan Amount was advanced to the Company in connection with the execution of promissory note by Montauk in favour of Omni (the “Note”). Montauk brought arbitration proceedings (the “Arbitration”) against the Republic of Colombia (“Colombia”) to enforce the Company’s rights to compensation under the Canada-Colombia Free Trade Agreement (the “FTA”), as previously described in its news releases of March 27, 2018, February 25, 2019, February 10, 2020, November 23, 2021, September 1, 2023, October 5, 2023 and November 9, 2023 and subject to certain conditions and approvals as noted below. Montauk contends that Colombia breached its obligations owed to the Company, including specific obligations under the FTA. The claims include Colombia’s refusal or failure to compensate the Company for the losses with respect to the Company’s Reina de Oro project incurred as a consequence of Colombia’s prohibition of mining in the páramos (high altitude eco-systems). On March 21, 2018, Montauk filed a Request for Arbitration against the Republic of Colombia before the International Centre for Settlement of Investment Disputes (“ICSID”). The Arbitration is being conducted in two phases. Phase One will determine whether the ICSID Tribunal adjudicating Montauk’s claims (the “Tribunal”) under the FTA has jurisdiction over this case and whether Colombia has breached its obligations under the FTA and is liable for compensation to the Company. Assuming that ICSID decides in favour of Montauk in Phase 1 (the “Phase 1 Decision”), Phase 2 of the arbitration (“Phase 2”) will involve determining the quantum of damages awarded to Montauk to compensate it for losses incurred. The Company must make a payment of US$200,000 to ICSID (the “ICSID Payment”) before a ruling on Phase 1 is rendered. The Company has advanced the Loan Amount to ICSID to satisfy the ICSID Payment and expects for this to result in the issuance of a decision on jurisdiction and liability. The ICSID payment was originally required to be paid on or before November 9, 2023 (the “Payment Deadline”), however the Company advised ICSID that the Agreements (as defined below) were subject to the approval of shareholders at a meeting of shareholders to be held on December 14, 2023 (the “Meeting”), and accordingly ICSID indicated that they would extend the Payment Deadline until after the shareholders vote to approve the Agreements at the Meeting. Shareholders of the Company approved the Agreements at the Meeting. Litigation Funding The Loan Agreement grants Omni the option, exercisable in the sole discretion of Omni (the “Phase 2 Election”) to provide litigation funding to the Company pursuant to an arbitration funding agreement (the “AFA”, and together with the Loan Agreement, the “Agreements”). The Company, Omni and Lenczner Slaght LLP entered into the AFA, which, should Omni exercise the Phase 2 Election, provides Montauk an initial funding amount of up to US$2,325,000 (the “Non-Recourse Funding Amount”) subject to certain conditions. The Non-Recourse Funding Amount will be used to fund Phase 2 and may be increased in certain circumstances as may be agreed upon between the Corporation and Omni. If Omni elects to provide the Non-Recourse Funding Amount for Phase 2 and the enforcement of any award obtained by the Company in the Arbitration, the Loan Amount and interest shall be repaid through proceeds recovered in the Arbitration (and in the event there are no proceeds recovered in the Arbitration, such amount inclusive of such interest shall be payable by the Company at the conclusion of the Arbitration). Please see the Company’s press release issued on November 9, 2023 and management information circular dated November 9, 2023 for further information on the Agreements. Omni’s return on the Non-Recourse Funding Amount (the “Omni Return”) will be limited solely to recovery from the amount of money for which the Arbitration is settled, or for which a final, non-appealable award is given in favour of the Corporation (the “Litigation Proceeds”). The Omni Return shall be an amount calculated as the sum of (i) a multiple of the amounts actually incurred of the Non-Recourse Litigation Funding Amount and (ii) a percentage of the gross recovery proceeds, both calculated when the recovery proceeds are received, as set out in the table below:
MonthsMultiplePercentage
0-122.0x12%
12-243.0x14%
24+3.5x16%
For any resolution that occurs on or after thirty-six (36) months from the date Omni makes a positive Phase 2 Election, Omni’s Return shall bear interest at the rate of twelve percent (12%) per annum, accruing and compounding on a monthly basis. The Litigation Proceeds, if received, will be disbursed in the following order of priority: (a) Omni shall be reimbursed the Recourse Loan and the amounts actually incurred of the Non-Recourse Funding Amount; (b) Omni shall be paid the Omni Return and legal counsel shall be paid their legal fees; and (c) the balance shall be paid to the Corporation. In connection with the Loan Agreement, Note and LFA, the Company has agreed to grant Omni a continuing first priority security interest over any and all assets of the Company (whether presently held or acquired after the date hereof), including the Company’s interest in any Litigation Proceeds. The Company cannot guarantee that it will be successful at the Arbitration, or that the estimated amounts disclosed herein will not be revised as the Arbitration proceeds. The Company also cannot guarantee that it will be able to recover all or part of its legal and arbitration costs from Colombia even if it is successful at the Arbitration. Management of the Company will continue to provide updates on material developments of the status of the Arbitration. Private Placement Withdrawal Due to securing the foregoing funding, the Company will not be proceeding with the proposed private placement that was previously announced by the Company on October 5, 2023. RISK DISCLOSURE STATEMENT: At the present time, the Company’s payment obligations are substantially in excess of its cash balances and it has no other assets. The Company is not solvent and cannot continue as a going concern. Trading in shares of the Company and any investment in the Company is highly speculative. No trading in securities of the Company or investment should be made without being able to lose the entire amount of such funds. See below, “Cautionary Note Regarding Forward-Looking Statements”. Investors are advised to seek professional advice before making any decision to trade in or invest in the securities of the Company.
Commercial Regulatory Issues

Bloomberg Law Lists Five Biggest Developments in Litigation Finance for 2023

As we head into the final days of 2023, industry leaders and analysts continue to offer their takeaways from the previous year, putting the spotlight on the most important cases, regulatory developments, and market trends. In an article on Bloomberg Law, Emily R. Siegel takes a look back at the last 12 months in litigation finance and highlights five of the most important market events and trends that occurred in 2023. First up is the headline-grabbing dispute between Burford Capital and its former client, Sysco Corp. The conflict came into public view in March after the wholesale food distributor sued Burford over claims that the funder had interfered with its efforts to settle cases, whilst the funder argued that Sysco had broken the terms of the original funding agreement. The dispute was resolved in June after Sysco agreed to assign the claims to Burford affiliate, Carina Ventures LLC, yet the public fight reignited debates over the level of control that funders can exert over proceedings. Siegel’s second highlight also involves Burford Capital, with the landmark $16 billion award in the Argentina YPF case. Whilst a temporary suspension of enforcement has been granted by a New York judge, if Burford are successful in their enforcement and collection efforts, then the funder could be in line to receive up to $6.2 billion from the award. The third big development on the list is the appearance of new legislative measures being taken at the state level to enforce tighter disclosure requirements on litigation funding arrangements. As Siegel notes, these policy proposals have achieved varying levels of success, with Montana’s governor signing a bill governing disclosure whilst Louisiana’s governor vetoed a similar piece of legislation. Moving from the US to the UK, Siegel unsurprisingly places the Supreme Court’s PACCAR decision among the year’s biggest developments. Whilst industry leaders and analysts had mixed perspectives on the impact of the judgement at the time, we have seen encouraging signs that a variety of solutions are evolving, whether that is in the form of legislative amendments or the modification of existing funding agreements. Finally, Siegel highlights the ongoing campaign by Judge Colm F. Connolly in Delaware to shed light on the presence of third-party funding in patent litigation matters. This November saw Connolly make his biggest move yet, when he announced his intention to refer multiple lawyers for ethics inquiries, due to their alleged violation of professional conduct rules in cases involving patent monetization firm IP Edge LLC.
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.”