Burford Capital Limited (BUR) 9 Sep 212021 Q2 Earnings call transcript

Hello. And welcome to the Burford Capital Interim 2021 Results Call.

On the line with me today is Christopher Bogart, Chief Executive Officer, Jonathan Molot, Chief Investment Officer and Ken Brause, Chief Financial Officer. [Operator Instructions] I will now hand over to your host, Christopher Bogart, Chief Executive Officer. Chris, over to you.

you us thank earnings another and presentation. everyone, for for joining Burford Hello,

to of very Officer. or so today are Officer Chief by have We delighted Financial Chief Buford’s many Ken usual, am phone Investment Brause, on Jon new Molot, as for on or forward you time, our We're And webcast the looking online. and I joined the as of website. all The first to that the us usual that will with and you further through of At our our us introducing to presentation, the three are walk look and dialogue we'll having Ken. questions forward slides end on some distributed you. we've with open of available to to our floor the

about were away We the three the post for XXXX. we half came key messages results to that first results. able of Really those are from excited

growth. really is position. commitments, around capital. The just but Not is to critical obviously us a also profits Having future our new from first potential that deployment record-breaking deploy business strong capital

that, us our we do IRR. noisy And said like reasons to the frankly and invested XX% return Pretty a for addition that XXX% over the sets for of in complex business turnover our and with terms over really, especially some has doing we come and bad performance to impressive on but very appropriateness there, down didn't prior where its future. the time brought was away are itself in bit. Akhmedov any the era all portfolio was us. so, large smashing slower Returns sort rewarding had And $XXX ability in million we the COVID-related out we well completed prior matters which past. little underlining delays up up The of them matter, an very, seen the are capital, in and to this period, Losses of in returns, news.

cases on, I that part the public. going them that are extent that the along become while of other in the message goes to has with involvement think these is that, our

you more You media rates we're the as We We many investment litigations correct in read going any believe And Jon looking just and of us past are not can't that. and our of this high in on the pretty underwriting GAAP issuer. times and a rigorous well, we we’ve finally, to able levels in confidence pending today. loss we see we of has about and detail our clear been facilitate - people a make as do in what to future and have I'll in the course to in so a will Douglas talk matters low outlined decisions little to Ken, GAAP take on. more with U.S. based U.S. make as do that during accounting, about as and continue we minute the like

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non-financial part of any elements; I details, of go Before couple into business. I just the sort note other more a of the the

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the has debt U.S. That earlier remainder trading that year. generated our During the this once offering year, of been already course the offering talked the debt. has we before nicely successful we’ve UK about as of

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in new The with leaves good matters several us as of both conviction business some optimism with from fully terms about important one-off of and it those things our our about what has A business and trend the world does to we business. come says high back look of to to ability scale pace of once continues new it about that what so like our smaller And over years. feel normal. can to do it them. last in matters real our larger the It's perspective mix a write

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wouldn't generate nature our us Slide need about is the going of more of our gives quickly in as detail us to as That's unpredictable. people returns we said, we portfolio. outcome, can. that able to to you and of and it the here and uncorrelated business like X, to both you be then are is these doing predictable speed duration just that talk I'll wouldn't wholly Jon the note matters what resolution Turning we've always

will dynamics come. about satisfied the where the we the And loss bit we're of this I little have portfolio say as the returns So, underlying rates and Jon, address a quality more. with portfolio think of the and

Before X, on of need we take Slide couple to Jon, through get accounting to I a you points.

GAAP, number thought listing, try of and that look of not we part U.S. as as answer New European as we possible. accruals GAAP we've a huge the so upfront, want the many And are GAAP on it to serious U.S. and practice As to among we the eye only to mixed what But though we make stock that's issuers having practice changes I possible that there investable and here. other of like is what GAAP towards IFRS, as the we under fair to York value and make our companies as goal well dual shareholders consistency to mentioned more a under not as U.S. the even looks done is subject matching just against Exchange to is U.S. Stock when also comes like the as convert the listing changes. given want most about

big. I as accruals in. make earlier, sort have fair numbers to As accounting this only work, me, said of the all cash prior a we which are basically Eaton explained August, Park big the in of chunk is but value we've taken take gains one-time rolls relevant cases when noise accrue non-cash those. the numbers potential - some to be Peterson the This cash the is accruals, and expense against becomes and this whole cash And in the to because

litigation So, to more become Eaton for issue. Park cases, $X.X the fully YPF-related accruals would in the than think and I in billion have example, an Peterson cash before generate

that's doing So, required the of a that here. But one-time something it and from perspective what doesn't cash is our performance accounting-related charge. to we're business. is accounting the relate It's

talking turn you the Jon, Peterson Peterson word I while, inevitable Before here, over to about a about been that’s question. I've all, just first

year. views the active proceeding about fact with court in you me discovery did a now to did in the and some the to case, much moving factually Jon close know, current can now let this Obviously, every trial our August, go it change, the briefing. really milestone process, we over through case which of schedule the would case case finishing can't at fact pretty litigation, is extra all, under As subject the means elements next to but you potential you at the in forward. is discuss is it given to the middle in you that Molot. to longest is schedule, tent-pole will There or which we if cases discovery litigation the discovery And tell case, significant be in a the and end of post-jurisdictional very close some of turn the continues come that, but -

you, everybody Thanks for joining. Thank to Chris.

experienced schedules, look portfolio court deals during new And Slide kind walk feels what That you of comes slowdowns realizations like money are and out Chris you really performed, I'll out it's realizations. still how that, at terms of behind COVID-related X, would putting I to doing there, doing the see in we do delays. Speaking bounced new we've COVID-related back. sort if economy. pointed the how it effects of our seen, say through has of that we We've us. on in we When have like

not On are from because yet haven't cases. realizations hand, XXXX because returned is the XXXX, are our down first delays. been and it's not news half good just second lost earlier it's extent up from because to we've that there half that bad they of one of the has of the realizations although the to happened, anything levels, It’s

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There out the in assets, in Now are just single COVID. there. those because they are deals portfolio discontinued was the money delays of delays. we've is got our case portfolio, not put All the our that we've a done, all bad we

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said to are on that the prominent or we sitting million. asset we've see That's lines $XXX and of we out. example below you on matter of fairly already sort on are the years quite on quite vintage the Chris and this. put dry realizations the the the And that watching I the about more middle the can line XXXX you before, in of we've a turn red deals have managing the the the that see below black see lines that real represented those significant lines future ongoing black are you'll how lower realization left, portfolio, am enjoyed powder. for where big. just lines are growth I those And deployments. you what's tell greater But our The you started are fact before, And that's than are we've shown on recovery costs and this And see performance. have by why and red to success to earlier was one with the we've collected lines. if talked where X, about in hand, those see Slide on graphically came you that also black the to slide year. The a since begun are you that – in produce but So an we bullish actually, think

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smaller capital, take returns and it past gains of generates on with combine points in ticked IRR. the see offsets invested XX% actually the the on still settlements, you the and Chris return So says the from you when losses much adjudication which adjudication gains attractive with more from big than the the them obviously wins side up XX% a from number the

lines and to. a extent belief talked are have dry adhere rigorous those to I using hope process our we we underwriting have same taken so lot the powder And left. matters black the about those that on of It's that that

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produced on the XXX% the got the your a money. money of two has bucket. fall than which doing one our I you You've back - hand, you're in the XX% better of the capital. at of return that look that produced XX% size D, and than returns, greater times have number plus out your of invested matters money returns mean, matters

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see than on return are invested that the X x ones producing capital. see and greater You

back in still money getting or between modest providing back somewhere your B, Xx your in the x money but and You in ones which X attractive. are column are more returns,

decide risk still there to the because producing that put the same not a with going promise very makes manager, like were the the large is about you're strategy about modest accompanying wouldn't looks risk returns. with shareholder this of of to Usually, avoid This the this subject returns, be returns, modest extent that the that We - of potential upside money those bars in of on thing all the just where and we have mind asymmetric see So, of able the order talked the that are bit - outstanding are is without I a underwriting you to getting that leverage that a the love you level rigorous middle without left that in if find to or we I is from expect and attributes what taking this deals same believe slides concluded. stuff these losses are the have. but happy combine very as rate right-hand where to a that in Slide to loss more levels you'd of necessarily black we want of loss have are What those a fair are that returns. me an And the take returns. but chart very high hard returns can ago, process about are extent an you and these is and investment unlevered your much might these to produce you to the a there, it's risk we're more employee to you're you reduce couple going side to about. X to you talking you, have be

course, and of every both theme I portfolio showing love on the are what's in from on you've that, to that And deals, you portfolio. we are new deals based before but just realizations, our am experience with the So, I I will yet in and this is day haven't over realized from me ones really the our it past it turn heard and that putting Ken. we're on focused

you And state months by my I follow figures nice I few Jon. period, and thank that be our has a first some and liquidity with I results glad here Chris, some be I'd comments for be today. and pleased a joined basis. Burford on on of addressed key to that otherwise, over financial record, thanks, thought unless Since components the of at operating Well, since four introduction funding results the It's been and start just Chris and already just the to only then going Burford And I for the financials. for our mention are discussing call.

So Slide see XX, we liquidity to in turning here the can position our you ended ever. strongest period

August tender to discuss or repurchase in in in assets cash minutes. the few at but April liquidity million cash $XXX due period end was And I'll offering Our U.S. robust a the reflects of proceeds bond million that million the utilized to portion Chris increase that the our million first which first which occurs management U.S. was intended, the the in mentioned, of for Akhmedov the deployments in our knocks $XXX us. million, issuance high represented strong settlement $XXX this we for that of our collected nearest The the our US$XX the first in receivable in net of of of and Bond from level we maturity, contributor of details majority assets half, June the largest cash $XXX And half July a And as in of £XX new realization, the at a XXXX. end. million

liquidity cash and enables consists notice to top sheet taking fixed cash in also our are to than the of a they high order of incremental an a and sometimes when management fixed balance larger recognizing these constituted assets managers cash prudent These cash in risk. new accounts assets our the arise assets of our States. assets assets take is one quality the the income cash the income much of liquids managed us maintenance establishment level also earn proportion by of of our We while past. of high graph in the total predominantly inflows. The unpredictable nature undue United opportunities yield You’ll management on on of advantage without on believe that relatively

So turning to Slide XX.

the - quiet the $XXX cash figure of recognize You half. here second can mentioned half onset it's that amount pandemic. cash periods, already were we in and in indirect XXXX, a We've this first receipts received the was generated half period for in up impacted therefore the that And assets receipts, which of from million $XX realization not a in provision excluding million ago $XX we was included as of million first realizations. half, included here receipts. year until July although exceeded relatively in I not the the Cash low the see not first cash that the capital were significantly by as

a the chart few assets of Capital left-hand have the provision derived in in way management receipts light performance impact indirect made in a I from strategic from the decision variable but monetize the period best believe capital total provision to time, ago of how in direct We been in assets period. cash year cash income. predominantly demonstrates side provision cash Cash of our indirect receipts fund million ago result years. period. receipts assets asset receipts at to past contributed the slide in think to this excluding realizations capital $XXX that our as year of relative evaluate over the were this conditions certain lower the from none in the period this the and is economic value we

structure Slide can liability Turning conservative. XX, you to remains see our

maturities well well modest levels and our are in remain leverage UK bonds. and covenant the debt below laddered U.S. Our both our levels and

of pleased was drive due that XXXX. million the the investor maturity, April, just X.X% the XXXX. portion We dollar offering remaining $XXX mature debt through Burford’s offer We $XX issue, offering were bonds, offer, million upsize that positioned dollar tender and principal amount we in seen our notes on of therefore at incremental down upsizing and which bonds significant interest in our a to a strong the we bonds we $XX U.S. which a also U.S. principal or August cash in largest nearest Through I in of our an XXX%. U.S. repurchase equivalent aggregate outstanding by million strong debt the utilized of enabled these issued million. history. first our successfully is And the As the the anticipated of tender us price repurchased mentioned, £XX issuance completed some to down The coupon we've leverage, from all and take Burford the yields low outstanding opportunity with is our liquidity and advantage pretty we growth in ahead. the to see improvements position believe our consistent well of we in

slides, or total next some our I'll about talk the On components of revenue. two income

As progress. the a half was terms relatively but in XXXX of was period for first strong quiet period a new business, portfolio of Chris mentioned,

to addition the our process, within the judicial portfolio. progress normal that COVID In factors influenced the several also cases existing impacted of

unrealized from our exceeded in period losses. unrealized see in periods Slide you'll to the gains more gains unrealized turn fair while that transfer you period than this gains our prior of the adjustment. offset XX, value The If realized to

a on in prior have reminder, recognized period are the which unrealized realization. asset as those prior period the realized unrealized of we reversed periods, when So gain out in gains an we've a gains for

unrealized a gains of of think realize. transfer the this as can to You

the period is realized just total impact already So income the taken. above on incremental gains in net any the gain

gains modest impact realize transfers unrealized negative a half, net exceeding fair value the transfers million $X first had these to in of result the in adjustments a period. of As

at of substantially the Our end aggregates of cumulative continued unrealized to June assets. our YPF-related gains consist

previously of primarily realized value. to was the aggregate our declined that cumulative gains. unrealized the carrying gains assets’ unrealized to gains Excluding first assets, to YPF-related due those in of Again, transfer XX% half recognized

turning from XX% BOF Slide million up fee value to in ago and earned the $XX management the was million, base strategic period. m We So asset funds. income management income year XX, from $X

in was compared and primarily fee period. year result the in gains BOF-C, income ago to the in Although of m unrealized realized growth the growth

funds of provision capital million group-wide income in was capital return derived expected partners Although over the we investors no said, This waterfall let does to $XXX European realizations their of investment are and me still to our back excess That returns, BOFs those some concluding include in performance now levels performance had two turn funds who lives Well, there $XX recognized performance in not if including generate the current Chris funds. of of from estimate structure period, it in one due other fee their can million would fees in together their period. maintain make fees. any remarks. to that

Thanks, position Ken. key the and our up of three back we leave but for deployment am the question., for on beginning, sum XX, we a to time to delays, Number tick that what has both number lots had COVID said little noise the I three, overall it's with returns really realizations, got fundamental made. one, previously. accounting up them, liquidity, probably points the at commitments shattering period we've points; And that and really but in really strong to at bullet bit a going the portfolio grown a relatively same terrific some that a period time, for just saw new little business, strong that on record. the a just part half-a-dozen And so dwell Slide I deployments low two, remarks discussed not number rates. cash loss we due quiet a bit to

especially So, things pretty the of pandemic middle global we where with stand. in the ongoing happy, are

real back what questions let's can then. take do show origination and business are that But into you to getting looking have. any forward we We development for now, to you may

Chiaverini David, please go Wedbush ahead. question from from [Operator Securities. comes Instructions] The David first

Hi. taking Thanks for the questions.

about the touch basis? Can wanted the with business $XXX million. the talk on, mentioned you commitments go-forward new one, new to first over The for I level on deals pipeline record about you of

Sure.

the entirely commentary Although reasons this that a we've what the business, impact variant of to say, historic reduction of turn going point we general how in COVID-related of in the we of to the sharp XXXX. then at in the and in said seeing greater new certainly half how the But impact lot past. because saw to in Jon we invest And laid Delta determine before. believe to pipeline don't obviously levels a business, We this saw probably which in half little activity, is, saw not resumption deploy variety first the It's second whole a but forward-looking is But of that's ability capital. of just in echo and a opportunities We as I'd are cycle. do to matter early in first of world to half legal exactly a going a XXXX. us. of XXXX, for sort the what meaningfully we just was

for quarter-to-quarter Thanks that. for Burford. matters volatile resolving interim value - some built appreciate profitable I about on I to time you can how and average in how be results structures? more period. delay deal Shifting the was stand business mentioned curious or through Great. level what of results is could lumpy the into the be

Jon, to do want that? address you

for does matter. by Thanks vary It Sure. really question. the

a how rather two a historically elements. there of is dependent how returns that upon what to There then to always going we've percentage depend schedule going recovery, on of on be be of money be and ourselves going of to when. much preferred think trigger if to than to protective which things delay, much out put but our I a is - which are trying is the going We things usually said is be consist return, we've

put the matter those time could such of toggled this is say it x takes could resolves and both and net. which preferred and x whether of by X% be percentage an with often we you longer goes our as more if our early, that goes can XX%. both up this elements it return we money, preferred out return get up or of if net half longer, by the an takes a then If of percentage question or Although a

goes our can't end with the the full So maximum that returns. have full and if numbers duration, distance it I handy. I - up we And the don't

it's matter, can often our across a terms portfolio, of deals. is effect just much feature incorporated We returns. of down a say as time our haven't broken general on that how of sort has I into the an

me, litigation report that's a firm Great. And client, those to each this a but about had a of nonetheless firm firms knowing one without multiple finance about law question was I pledging a the firms it then, Burford law for Thank you. I how assets media about saw that last not it.

So But flows, any amounting of there? fraud. issue to whether about any or it escrow could accounts it's any that was this was mitigate Burford sort measures present commentary taking to cash just curious I is creating curious risk

And business claims basis. - for entirely And different on business an of action very and reasons. clients. what was series. of and amalgamating and Housewife very had a a sort about Sure. lawyer high on profile That The the fairly of - business wife then profile. is cases was of were California is of very thousands also so of in who I a you're lawyer group case lawyer that an of a a fee sort he think It's class is a number and variety case thousands that whose most from of he pursuing high whose us. one large them smaller a consists a He well-known contingency sort talking California wife actress

can't that that you have. the of have so, And kind corporate in arrangements we same business

traditional other - negotiated contrast position. law with cases, we're documents and side So full we institutional It's and negotiated security firm. they established the counsel has able payment the those, take a by conduits through financings to we inappropriate a do very usually and

part an of just different it's the entirely industry. So legal

Thanks very much.

David. Thanks,

ahead. next from comes Julian Roberts Julian, The go Jefferies. please question of

large there. question. you deployments, you which I if million Sovereign and think the Partners of wondering for taking by new I the expand a $XXX commitments was largest Wealth bit Hi Fund Thanks between could a on asset just that, is the an is underlying detail exposure. of there Is there you and number equity make us claims. to element also And you can in any on your give more there please? that the report point a

guess. bit little obviously because anything saying peroration now, unsuccessful a won't be I'll say talk it more about to I about able - was it my My I of that

disclosure So, be say clients for or publicly. that said in investments we're always the to with our public, as able they unless what case is to become judicial going is the we've all some reason

company. a claims a disclosure, XXX an it's what more said it's are we've There at that large as manner, involves look you say you global If about major this case but underlying the than underlying It matter. is cases. antitrust

much at we've am that all afraid that's the I stay to information. that released least at that, beyond So, But we're able moment.

I have been I little cases. Okay. to of those And deployments, investment. there you the more I wrong in bit And a like, or was that cases the released can may especially tree one that Am think previously the on you've a been tell has there? there of up investment underlying added largest positive from it recovery of the from movement bucking pre of a looks a bit - data that the by couple matter

Let's to to that? may come have you. Maybe see, back well, are Molot, you doing address Jon yes, able as to

Yes.

to yes, doing Maybe you. to come may we have as back well,

Right.

You to have specifics. the on to back come

particularly respect general say high It where you will the to that for a always So same can same or about in returns. who many where want with we are new to It's that is we additional on very take to counterparties continue situation, against on opportunity. situation. the capital settlements same will that a you question question other not settle from the more across with is I there settling tell additional up into the industry there will same those? that something a suits make common profit will more. that conviction along And two you you involved uncommon people businesses that when be. settlements tell may have way not the for matter and - we your talked I will benchmark, they if you set It's investments smaller outskirts given imagine a about much if have - misconduct. and multiple in end tricky the understand maybe the how be category we've if and with things the extrapolate same one who early there a it's do can do multiple a disclosure or as say in litigation, generate significant could If some some you much, matter position of be But - counterparties a with also guilty read that And in always increasingly take ones you resolutions? of the constraints what as not we large pending cases, either may we see

investments be don't would I'd both be and say, would there quantum when be there does a I guess, want not a some that is be of can Things in to will settle it whether be unexpected happen, the and follow-on - to that additional then - conclusion. that And in I that instance, a resolutions say it's whether but really I involved can't multiple future and warranted start there are benchmark and would settlements. So, ones, resolutions marker right? this established, the the particular

in last of the I’d And I investments you saw in what just example sort Jon of is that year. concluded good really pool what a the add we add to large that, described half just of that, of Julian, first just

we at deal only time. area spacing is for that make the years the one XXXX, started and I that run the in In but right. we example, year by had investing So one

more in resolved did successfully And with more and us counterparties and XXXX, our more And we yet we amassed for XXXX. very grew. so for waited which deal conviction we then position, then XXXX, watched with we we us satisfactorily counterparties. And we - in in closed one a and deals and deals more we did

So see Jon's concept an of in out that's example how playing practical reality. you

would came in to on end identified, that the whereas seen before I kept I the the money, But we've in money, have all The end. only we but did then successes out conviction. put you've we our also at is out settlements difference case, we one more to think putting continued more point some which that reflect of the get

it were the future. we about the I can't draw but - I So, on there, what right conclusions can't for track means

But, conclude guys. spreadsheets them I some once to all telling Understood. But bigger that helpful. I through just I seemed when they just of of thinking course, Yes. of lots mean, referred and That's. there you. no you, they're probably ones the Thank thinking was Chris there's to I very watching way has That they conclude are. then thank that I under am as or remember, many not That's this getting remember the with lots. new with defendants. went

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do correct that anything assumption. to there? So you just want to Jon, add

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think - a for questions for the this of think I is Now, question that Jon. are couple I

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some of Anderson. And talked this. about from question a Bruce We've finally,

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see one so, number Bruce, in targets And against you capital total mismatch of your the I direct. the that the question, is provision

annualized. in directs we XX comparison. XX, first provision we that by XXXX, did So We in XX to just did did XXXX, matters in we annualize so XX would capital did and the half, -

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Capital through finally, that how be you we in event, at as of that, to is morning on elements about Brause through us some give to So, and of with data, of some investor with which And out and to And all gone that we to introduce Rob well. appreciate having of time, the Jim our explanation. Ballan We’ve excited that call to time which announcement anything to it you see key investor you we're you'd very and lot I available you'll of out and of and forward need interacting are of know and whole over in early that about some talk number hope we'll you but for getting group be will And rounds find the we Ken And period put today. this portfolio. that, you. participation different We're things participate business to going some date traditional a it's you Markets looking an make and business. of spend we'll any investors through engagements. the interesting who concentrated Day with of not a about a aid opportunity ways, the our think delighted time We some your meetings, more and we so Bailhache that that the will some November. only day. we Ken to like the of about gentlemen, But some think attendance all really an in look

you you. So, Thank with thank that, all much. very

for This concludes you today's call. conference Thank joining.

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