Worked example

A company in restructuring finds hidden value

Company challenge

A company is undergoing voluntary Chapter 11 reorganization. It is also in the middle of a preexisting legal proceeding that likely will return $80 million in damages to the business—but that will take at least two years to resolve, as it is unlikely to settle before appeals. The company recognizes that litigation will be critical to its reorganization plan, but it has been unable to obtain debtor-in-possession (DIP) financing to fund the continued prosecution of the claim. The company’s attorneys are unwilling to go on contingency and switching attorneys at this late stage will be costly.

Burford legal finance solution

Burford agrees to monetize 25 percent of the claim, or $20 million, enabling the company to immediately free up liquidity to satisfy its creditors and to pay legal expenses. The capital is provided on a non-recourse basis in exchange for its investment back and a pre-defined percentage of the recovery net of the return of investment. Given the dire need for liquidity, management presents Burford’s financing to the bankruptcy court as part of the reorganization plan, and the monetization is approved.

Legal finance impact

With financing from Burford, the company gains immediate access to $20 million, some of which it uses to repay creditors as part of a court-approved reorganization plan. Its legal matter concludes in three years for $65 million. The company repays Burford its investment back plus a return, leaving a $15 million recovery for the once-imperiled company.

This is a hypothetical example of one type of matter Burford routinely encounters and finances. It is meant to help demonstrate different use scenarios for our capital and the associated quantitative benefits.