Burford received $26 million in proceeds from an innovative transaction where it provided a corporate debt facility linked to an arbitration claim for Rurelec PLC, a publicly-traded owner, operator and developer of power generation capacity internationally. Rurelec was pursuing an arbitration claim against Bolivia for the expropriation of one of Rurelec’s power plants. The company did not need the capital to pay its lawyers but to continue to grow its business. However, it was reluctant to pay the high interest rates offered by lenders. Rurelec’s pending arbitration claim was evaluated and Burford provided a a fully recourse, secured $15 million senior loan at a 12 per cent capitalised interest rate plus a contingent value right to receive a portion of the ultimate arbitration award, expressed on a sliding scale based on time and amount. Rurelec won its claim, extracted payment from Bolivia, and paid off Burford.
Lucrative transaction
The transaction enabled Burford to earn appealing returns in a transaction with lower risk of loss. The deal earned the litigation funder an $11 million net profit on a $15 million investment, generating a 73 per cent return and a 34 per cent IRR. Commenting on the transaction, Rurelec’s Chairman Colin Emson said: 'We were able to use a pending arbitration claim to obtain innovative corporate financing from Burford that lowered our cost of capital and helped our business expand.. The ability to monetise a pending claim is something that we could only have achieved with Burford.' Christopher Bogart, Burford’s CEO, commented: 'Litigation finance is too often thought of in its most basic form, which does not reflect the range of innovative investment structures we are able to utilise. In this case, by recognising and assigning value to a pending arbitration claim, Burford was able to structure an investment which allowed Rurelec to pursue its expansion. This is a good demonstration that the benefits of litigation finance go far beyond that of simply helping to pay legal fees, and in many cases can provide an effective alternative method of financing to help companies achieve their strategic goals.'
Law firms involved
Rurelec was represented by Freshfields Bruckhaus Deringer in the arbitration proceeding and Skadden, Arps, Slate, Meagher & Flom in the financing transaction. Burford performed its own internal evaluation of the arbitration claim and was represented by Latham & Watkins in the financing transaction.
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