Jim Kilman is Chief Financial Officer of Burford and a member of the Complex Strategies Commitment Committee with responsibility for managing and overseeing Burford’s global finances and financial strategy. In that capacity, he oversees Burford’s funding, capital raising, financial reporting and investor relations.
With companies under significant economic pressure, how do you think CFOs are prioritizing their work today?
First and foremost, CFOs are emphasizing liquidity—that’s why you’ve seen many companies tap the capital markets and raise funds, even if they don’t need them today. After that, CFOs will be focused on analysis of operations and margins: Are there parts of the business that are “underwater” because of the pandemic? Is that likely to change and how do we address it?
A lot of CFOs aren’t aware of legal finance as a mechanism to manage legal risk. How would you explain it to them?
Legal finance can deliver a bird in the hand instead of two in the bush, meaning that while it would take you several years and lots of money to recover value from affirmative litigation—by which time those two birds may be gone should you lose—legal finance can deliver cash against that legal asset at no risk. Less colloquially, the analysis is pretty simple: Burford will give you non-recourse dollars today for a share of a legal outcome some years out and with a significant degree of uncertainty. With this financing, your worst case scenario is you keep the dollars Burford funds today; your best case scenario is a win in the litigation, in which event you have not only the dollars you received up front, but also a portion of the back-end. Yes, you’ve given up some upside, but you’ve significantly lowered your downside.
How should CFOs think about non-bank, non-recourse finance as a part of their overall funding stack and capital structure?
For most, it’s found money. Because litigation finance is non-recourse and doesn’t require the pledge or sale of an asset to generate, it shouldn’t impact a company’s debt capacity nor represent a diminution of credit from the perspective of the company’s lenders. In fact, because the company has more cash, litigation finance could actually improve its credit profile.