Litigation finance looks set for a cash-fuelled new year expansion with a newly listed firm and an existing one securing a major fresh fund. Australian funder Litigation Capital Management was admitted to the AIM list of the London Stock Exchange today, with a £20m share sale.
New ordinary shares were placed at 52p, valuing the company at £56.5m. The £20m will fund an existing portfolio of litigation projects and new opportunities, the company said.
LCM launched its European operation with a new London office last month, led by litigation finance consultant Nick Rowles-Davies as vice chairman.
The company funds a range of litigation including single-case and portfolio, class actions, commercial claims, claims arising out of insolvency and international arbitration.
Chief executive Patrick Moloney said the company will now seek to enter the next phase of its development, searching opportunities across the continent.
He added: ‘Being a London listed company positions us to fund an attractive, qualified pipeline of future projects and grow the business through the access to capital and a broadening of our shareholder base.’
Meanwhile, established listed funder Burford Capital has announced it will have around £1.2bn to invest in legal cases after confirming new financing arrangements.
The capital will come from a sovereign wealth fund with which Burford has entered a strategic partnership, a new private investment fund and the company’s own balance sheet.
The strategic relationship with the unnamed wealth fund involves a £790m pool of capital, with Burford providing one-third and the partner fund deploying two-thirds. Burford will allocate half of each new litigation finance investment to this pool of capital for the next four years, or until the pool is fully committed.
Elizabeth O’Connell, Burford’s chief financial officer, said: ‘We intend to continue to use multiple capital sources to finance Burford’s growth and we think doing so is the best way to balance producing desirable returns for public shareholders without assuming excessive leverage or undue balance sheet risk.’
Research published today by City firm RPC shows the value of UK litigation funders’ ‘war chests’ has risen 31% to £1.3bn over the past year.
With finance so readily available, the study found the sector’s only problem is identifying profitable legal disputes. Geraldine Elliott, partner at RPC, says: ‘One of the big challenges for the sector is deploying the huge amounts of capital waiting to get into the sector without sacrificing returns or taking too great a risk by investing in speculative cases.
‘In order to satisfy that demand for cases litigation funders and law firms are beginning to build those legal claims from scratch – locating an area where large financial damages can be shown and then marketing to potential claimants to join a group action. It is an approach that was previously largely restricted to the US.’