Burford Capital Limited

Potential new issue - road show begins next week...
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Comments

  • Let's hope for a decent interest rate with not too long a term if the issue goes ahead!
  • edited July 2014
    So, what do you think, people?
  • Well this one could be interesting. The coupon offers a significantly better yield than most of the 8 year debt around at the moment, or even the longer term stuff, so it's got to be worth a closer look.

    The thing that jumps out at me is the balance sheet. It does look extremely healthy from a bondholder's perspective due to the apparent lack of any other kind of debt to speak of. They also seem to have quite a lot of cash in hand. Furthermore, there's a covenant in the prospectus (para C.8) which would appear to offer assurance about total borrowings of the guarantor not exceeding 50% of assets.

    Meanwhile, their shares (according to HL) are currently trading at a 20% premium to asset value, suggesting the market has a high opinion of the quality of the asset book that will be covering these bonds.

    So, yes. Based on the information to hand, I'm feeling positive about this one. I'd be really interested to hear what others think.
  • Some preliminary thoughts: the company (or is this just the UK arm?) is a fairly recent creation: late 2009 - considerations of track record (short) may apply. Does anyone know how long it's been in existence in the US? It's listed on AIM. Higher premium tends to indicate higher risk/greater need to persuade investors.
  • This new issue is of interest.

    Burford Capital has a useful website, where much information, including recent financials, can be gleaned:
    http://www.burfordcapital.com/

    Initial review has not thrown up any red flags thus far.
  • Mmm Interesting. Wonder what "Bond of the Week" thinks?
  • Now covered by HL by telephone (and without commission). Also selftrade can do it online
  • Anyone know if YouInvest are doing it?
  • Hi - this looks like it is of interest. Tell me, re HL it says earlier in the thread no commission but do he normal HL charged apply to buy and sell this bond as i havent always found them terribly competitive but equally thats where all my cash it as the moment !
  • DavRos: the initial purchase is normally commission-free. Trading in the secondary market would normally attract whatever charges your broker levies on bonds traded over the telephone.
  • Just placed an order with yousipp
  • Quite a complex business, in particular for the internal financial accountants, who I assume must rely on others to "give fair values on investments" etc. Not the same as a simple business manufacturing "widgets".
    My only surprise reviewing the prospectus is the size and the membership of the "Audit Committee", Being a complex business, I would have expected a much "beefier" committee, not just two members of the board!
    The Audit Committee Chairman, should, I feel, be an external person (eg senior member of an audit firm), with at least three or four experienced (some external to the business) members supporting the Chairman.
    Otherwise I have no other negative points.
    The coupon suggests a higher risk, however, being part of a balanced portfolio, would help to diversify any existing portfolio.
    Therefore plan to place my usual quota (under 5% of total investment!) for this new bond, within a SIPP.
    ps, the age of the Board Members is a possible concern! (too senior?)

  • Little or nothing to claim against in the event of default? "The Issuer’s only material assets will be the obligation of other subsidiaries within the Group to repay funds
    that the Issuer on-lends to them back to it." The Guarantor's "only
    assets are its shares in various subsidiaries within the Group." Bondholders rank after the creditors of the subsidiaries.
  • Plus points:
    - high yield
    - backed by Neil Woodford, whose fund owns 7.23% of ordinary shares
    - company is growing well
    - no other borrowings
    - pledge to limit net debt to 50% of net assets

    Minus points:
    - high yield (6.5% versus 5.53% for the current highest yielding bond on ORB suggests that we need to be compensated for risk)
    - unsecured bond is guaranteed by parent company, whose only assets are its subsidiaries to which proceeds of bond are lent, so no effective guarantee at all

    Other comments:
    - Investors Chronicle is positive about the company and its bond
    - What Investment considers it risky http://www.whatinvestment.co.uk/financial-news/funds/2467682/new-burford-capital-retail-bond-and39too-riskyand39-for-the-typical-private-investor.thtml

    I will place an order for the bonds, but have not yet decided whether to buy a standard position size or something a bit smaller.
  • Informative and eloquent, as ever, Oliver. Thank you.
  • Of peripheral interest there's another investment company that invests in litigation which trades in London: www.juridicainvestments.com. They seem to be doing well too. If legal cases cases can be considered an asset is it therefore possible they could be a traded or used as collateral?
  • Oliver,
    Very good write-up, much appreciated.
    Agree with the statement "There is little doubt in my mind that although Burford has a small market cap for an ORB borrower", generally I would prefer the market capitalization to be over half a billion, however as the company is growing strongly, this hasn't dented my views that this should be a successful launch.
    In addition, the bond launch, should help it to gain further retail investors for it's ordinary shares. (perhaps the institutions may start to take an interest?)
    I will be monitoring the company's performance carefully over the next 24 months and whether they take the hint to strengthen their "Audit Committee".
  • edited July 2014
    Feeling relatively positive about this one, despite what is possibly a higher risk. Not sure I would see them as Beelzebub, Oliver. It seems like a valuable service to be enabling litigants with a strong case to obtain what they might otherwise have to forego through financial constraints - it levels up the playing field when dealing with large corporations. There is a cost but it's better to get something than nothing....At least that's the kind of face they present in their info.
  • I see the offer is closing today at 10am, two weeks earlier than the originally planned date of 12 August. I'm glad I placed my order yesterday.

    On the one hand it is good news that they have raised the money they are looking for so quickly, and suggests that the price will be well supported.

    On the other hand, I can't help feeling that it is a way that companies can borrow money more cheaply. Please correct me if I'm wrong, but I believe they receive the proceeds two weeks early but don't pay interest on it. So, for the first year the effective return drops from 6.5% to 6.26%, and the company is able to borrow, say, £75m interest free for two weeks, saving them £187k.
  • Good afternoon

    I have only just succeeded in registering for this board although I have been reading it for some time

    I think I may be a bit late here, but I have had a holding in Juridica for about 2 years. The investment is a very silent one ie you have very little in the way of RNS beyond half yearly reports etc and special news about recoveries and subsequent dividend payouts. With this type of investment returns can be very lumpy but also very rewarding (in excess of 10% on my original investment at 90p)

    Knowing this I placed an order for this bond last week knowing it would close early. Only problem is with iDealing who took 4/5 days to get it up on their website

    Many thanks to Oliver for the write up and the regular contributors
  • JGH,
    I am more than pleased in the knowledge the issue has closed early; lending for an extra 2 weeks out of 8 years to me is not an issue. Could have gone the other way, you allocated some funds to the new issue, then fails due to poor uptake. Money tied up for no result!
    Note the expenses to the offer £1,125,000! (Burford cost)
    Remember that Burford management team must have accepted Canaccord Genuity recommendation to provide a reasonable coupon of 6.5% for the 8 years

    Everybody, in particular bond subscribers, should be happy!
  • Shaunm,

    Yes, and I accept that my money is tied up for the same amount of time and my return will be the same as I was expecting when I placed my order, so I haven't lost out. It just seems a little underhand to me.

    It is good to see a successful launch. Burford was said to be looking to raise £50m -£75m and have raised £90m. Maybe they feel that the rate has been set too high !

    Anyway, I see that the bonds are already trading in the grey market at 100.7 - 101.2.
  • Well, this has all been rather good for the retail bond sector!

    They've made £90m (tips hat), still well below their covenanted debt ceiling, and well, well below anything one might consider dangerous as a bondholder (quick calc suggest they have at least 4x interest cover on the basis of last year's cashflow).

    My guess is that these will be trading at about 103p in the medium term in current market conditions. I would price the market yield on these at about 6%.

    So, yes. Here's a firm that, for whatever reason, has come to ORB for funding and we've given them an emphatic yes. May there be more!
  • Disclaimer, yes I bought a few.
  • Burford have announced a new sterling bond, maturing 2024 with 6.125% coupon:
    http://www.burfordcapital.com/investor-relations/bonds/
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