A litigation funder once pumping hundreds of millions into the legal sector is in the process of being wound up, it has emerged.

A notice posted on Companies House states that SpectraLegal Limited is now subject to a compulsory strike-off order. The registrar of companies confirmed that the business is likely to be dissolved in the next two months, with all remaining property and assets surrendered at that point.

In reality, the company has not functioned for several months, having failed to file its latest accounts by the required deadline in July and stopping all lending. It is understood the business is now in run-off with remaining staff long since made redundant.

It is an ignominious end for a lender that was incorporated in 2014 and sought to ride the wave of litigation funding that emerged after the Jackson reforms.

The company had been formed by the principals of Canada’s leading provider of litigation finance and risk management solutions, BridgePoint Financial Group. It promised to help law firms unlock sustainable cashflow and take advantage of acquisition and investment opportunities. Its website featured testimonials from firms saying SpectraLegal had helped them to grow their business and the company was a regular fixture at legal conferences.

SpectraLegal had specialised funding schemes for specific case areas – in particular mis-sold business energy claims and mis-sold PPI claims (one such investment ended up with a court dispute between a law firm and its outsourcing partner).

By 2019, the company was bullishly trumpeting a new facility of £100m to finance disbursements, with the option of increasing this to £200m. This was enabled by a deal struck with New York-headquartered Waterfall Asset Management, an asset manager focused on asset-backed securities and loans and private equity investments.

SpectraLegal said it was then the largest institutionally funded business in the UK, and it would aim to ‘aggressively expand’ its reach across the country, forming new strategic partnerships and recruiting new staff.

But the tightening of the claims market, the failure to capitalise on certain areas of claims, and the slowing down of the civil justice process has cast a long shadow over the litigation finance market.

Litigation funder Novitas announced in December 2021 it was ceasing lending to new customers, while VFS Legal Limited entered administration earlier this year owing almost £40m.

Some firms remain committed to the legal sector, however. Doorway Capital, a specialist legal funder which owns Simpson Millar, today said it had a new ‘shelf’ facility for lending to law firms for mergers and acquisitions. The facility is fully underwritten and documented in advance of being required, with funds being made available as they are needed.

 

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