Burford Capital(US:BUR)2020-10-01 20:05Financial Data and Key Metrics Changes - Burford Capital reported a strong first half of 2020, achieving $423 million in group realizations with a 56% internal rate of return (IRR) and a return on invested capital of 194% [5] - The company has generated over $1.6 billion in investment recoveries over 11 years, maintaining a consistent IRR of 32% and a nominal return on invested capital of 97% [5][22] - Cash balances increased significantly, with $281 million in receivables at June 30, which have begun to convert into cash [47][48] Business Line Data and Key Metrics Changes - The capital provision direct portfolio generated $272 million in realizations during the first half of 2020, contributing to $173 million in realized gains [42] - The capital provision indirect assets provided $170 million in cash receipts, demonstrating their role as a medium-term liquidity source [45] - The company reported zero contributions from YPF-related assets in the first half of 2020, highlighting the strength of non-YPF assets [16] Market Data and Key Metrics Changes - The competitive landscape for litigation finance has seen increased capital influx, but Burford maintains a robust market position [55] - The pandemic has caused delays in litigation processes, but the company expects a return to historical patterns as the legal environment normalizes [34][36] Company Strategy and Development Direction - Burford is focused on expanding its investor relations team to leverage its recent U.S. listing, which is expected to enhance access to domestic investment capital [8][9] - The company aims to capitalize on the growing demand for litigation finance, which has been historically underserved by capital markets [12][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing the potential for increased litigation arising from the pandemic and the economic disruption it has caused [66][70] - The company anticipates that the volume of disputes will rise in the coming years, similar to the aftermath of the financial crisis [36][70] Other Important Information - Burford has completed its U.S. listing process, with shares set to trade on the New York Stock Exchange starting October 19 [3][8] - The company has maintained a conservative leverage position, with a net debt to tangible assets ratio of 14% [49] Q&A Session Summary Question: Update on YPF and potential impact from Argentina debt restructuring - Management confirmed that YPF cases are progressing in the trial court, with no impact from the debt restructuring on litigation claims [53][54] Question: Changes in the competitive environment for litigation finance - Management noted an increase in capital entering the market but emphasized that Burford's leadership position remains strong [55][56] Question: Creditworthiness of defendants and timing of receipts - Management assured that there are no concerns regarding the creditworthiness of defendants and that timing is dependent on court processes [60][62] Question: Comparison of current economic disruption to the global financial crisis - Management indicated that the pandemic has created a broader range of litigation opportunities compared to the financial crisis, particularly in breach of contract claims [66][70] Question: Potential shift in portfolio mix due to increased litigation finance questions - Management stated that they are opportunistic and will allocate capital based on the best available opportunities, with a cautious approach to complex strategies until market conditions improve [67][68]