A UK-listed business that earns a living providing litigation finance to companies and individuals said it has demonstrated its coming of age as a maturing firm by tapping bond markets for investment.

A UK-listed business that earns a living providing litigation finance to companies and individuals said it has demonstrated its coming of age as a maturing firm by tapping bond markets for investment.

Last week, Burford Capital Plc, which is a wholly-owned subsidiary of Burford Capital Limited, launched a 6.5 per cent sterling bond maturing on 19 August, 2022. The bonds have a minimum initial subscription amount of £2,000 ($3,397).

The bonds are expected to be admitted to trading on the regulated market of the London Stock Exchange, Burford said in a statement.

“This business has been popular with equity investors and this is the first time it has gone down the bond market route. We have decided the business is sufficiently mature to put some of the debt into the capital structure,” Christopher Bogart, Burford Capital’s chief executive, told this publication in a telephone call.

At a time when firms face rising litigation risks, but when solicitors also squeezed on fees, litigation finance is meeting an important need, Bogart’s firm said. Citing data from Fulbright & Jaworski, Burford said the percentage of UK companies spending more than $1 million on litigation has grown 15 per cent in the past three years – to 53 per cent. When litigation is needed, a general counsel at a business faces the unpalatable option of trying to negotiate an alternative fee arrangement or can retain a lesser firm at a lesser fee. This, the firm says, is where litigation finance comes in.

One advantage that litigation finance has compared with some other “alternative” areas such as private equity is that it enjoys automatic exits from its investments.  There is essentially a “conveyor belt” of legal cases that by their very nature will have to be resolved at some point in time, he said. This also means that litigation finance is an area that is lowly, or negatively, correlated with the equity markets and broader economic environment, he said.

The bonds are aimed at a spectrum of investors in the UK and the Channel Islands, ranging from private retail investors with execution-only accounts, through to institutional investors.The relatively high coupon of 6.5 per cent reflects the fact that litigation finance, despite Burford’s success with it, is still a relatively young asset class.

As of 30 June, since inception Burford’s 26 investments have generated $173.9 million in gross investment recoveries and $67 million net of invested capital, producing a 63 per cent net return on invested capital.

According to one definition, litigation finance enables a party to litigate or arbitrate without having to pay for it, whether because they are unable to pay for it or because they do not want to do so. A third-party professional funder can pay some or all of the costs/expenses associated with a dispute in return for a share of the proceeds of the dispute if it is successful. Other companies in the space include Vannin Capital, which is headquartered in the Isle of Man, and founded in 2010, and Harbour Litigation Funding, which has £180 million of capital, funding cases in nine jurisdictions. This firm is headquartered in London.