When a Madrid-based company bought shares of an Argentine government-controlled energy company in an initial public offering, it was promised that if the energy company were re-nationalized, Argentina would pay fair value to shareholders. When Argentina ignored that promise and expropriated a controlling stake in the energy company, the shares’ market value fell sharply—causing the Spanish company, as the largest minority shareholder, to become insolvent and thus unable to repay creditors.
Burford legal finance solution
The Spanish company’s legal claim represented its most significant asset and its best path toward creditor repayment. Nevertheless, progress stalled: The now-insolvent company had a strong case on the merits but lacked the resources to pursue a protracted legal claim on its own—and traditional capital providers were unable to recognize the asset value of the claim.
Using the company’s claim as collateral, Burford provided the financing the company needed to move forward, ensuring the company would have the resources to pursue the case without being forced into an early settlement.
Legal finance impact
As a result of securing finance, the company—and its creditors—finally had a clear path to recovery and eventually being made whole. Because Burford recognized the asset value of the company’s arbitration claim, the insolvent company recovered its losses and repaid its creditors.