Trials & Litigation

Litigation funder would make 37,000% return on its investment in litigation over oil company seizure

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“The model is working; it’s delivering something of real value to the corporate clients,” Burford Capital CEO Christopher Bogart told Bloomberg Law. Image from Shutterstock.

Litigation funding company Burford Capital would receive about $6.2 billion under a federal judge’s order requiring Argentina to pay likely damages of about $16 billion for its 2012 seizure of an oil and gas company.

Burford Capital’s share of the award amounts to a 37,000% return on its initial investment, Bloomberg Law reports.

The case involved Argentina’s seizure of a majority stake in oil company YPF, Reuters reports. U.S. District Judge Loretta Preska of the Southern District of New York ordered the country to pay about $16 billion to minority shareholders in a Sept. 8 decision. Burford Capital funded the litigation by minority shareholders Petersen Energia Inversora and Eton Park Capital Management.

According to a prior article in Forbes, Argentina forced Spanish energy firm Repsol to sell its 51% stake in YPF but did not buy out other shareholders.

But the case isn’t over, Bloomberg Law cautions. The planned appeal and fights over collection “could delay or even derail payment,” the article says. If the award is upheld or if there is a settlement, however, the case would be the most successful so far for a litigation funder.

Bloomberg Law spoke with Burford Capital CEO Christopher Bogart, who was formerly the general counsel for Time Warner Inc. and a litigator with Cravath, Swaine & Moore.

“The model is working; it’s delivering something of real value to the corporate clients,” Bogart told Bloomberg Law.

Burford Capital brought the claims of the plaintiff shareholders in the lawsuit over the seizure of YPF for $16.6 million in 2015. Some claims were purchased in a bankruptcy auction.

“Ideally,” Bloomberg Law reports, “Burford identifies undervalued legal claims, pays lawyers to successfully litigate them and then takes a percentage of the award. In the YPF case, Burford said it’s paid around $50 million in lawyers’ fees to date. It previously sold more than a third of its interest to other investors, mainly large hedge funds, for $236 million.”

Bogart told Bloomberg Law that a big risk in the YPF case was the possibility that a U.S. court would hold that Argentina was immune from the claim. The immunity claim was defeated in litigation.

In a Sept. 8 press release, Bogart called the latest decision an “extraordinary win” and a “major milestone for Burford.” The press release also noted Preska’s reference to Burford Capital in her opinion.

Preska wrote that she rejects the Argentine Republic’s “effort to inject Burford Capital into these proceedings.” Argentina “owes no more or less because of Burford Capital’s involvement. Furthermore, the republic pulled the considerable levers available to it as a sovereign to attempt to take what it should have paid for and has since spared no expense in its defense.

“If plaintiffs were required to trade a substantial part of their potential recovery to secure the financing necessary to bring their claims, … this is all the more reason to award plaintiffs the full measure of their damages.”

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