Burford seeks to reassure shareholders after court overturns YPF ruling

(Sharecast News) - Burford Capital said on Monday that a US appeals court has overturned a key lower court ruling in the long-running YPF litigation, dealing a setback to the company's largest single asset and prompting expectations of a material write-down, while management stressed that its core business remained unaffected. In a statement released late on Friday, the litigation finance group said the United States Court of Appeals for the Second Circuit had reversed the District Court's judgment in favour of Petersen and Eton Park, although one judge dissented and would have upheld the original decision.

The AIM-traded firm said the court acknowledged Argentina's "knowing and flagrant violation of the promises it made to foreign investors", but concluded that the commitment to make a tender offer was not enforceable by shareholders in the manner previously determined.

Burford said the decision was "obviously very disappointing", with chief executive Christopher Bogart describing it as "a remarkable abandonment of the rights of minority NYSE shareholders".

He added that while further legal avenues remain open, "unless plaintiffs can overturn this regrettable panel decision, investment treaty arbitration remains an entirely viable prospect".

The company said plaintiffs were expected to consider seeking a rehearing before the full Second Circuit, although such requests are rarely granted, and could ultimately pursue an appeal to the US Supreme Court.

At the same time, Burford indicated that investment treaty arbitration against Argentina was likely to be considered as an alternative route to recovery.

The ruling was expected to trigger a non-cash write-down of the YPF-related asset in Burford's first-quarter results, in line with its valuation policy following an appellate loss.

It said the magnitude of any adjustment was yet to be determined, but warned that a material reduction in balance sheet equity could constrain its ability to incur additional debt under existing bond indentures.

In a follow-up statement on Monday, Burford sought to address investor concerns, emphasising that the YPF case had always been treated as separate from its core operations.

"While we are optimistic about an eventual positive outcome in the case given the availability of international arbitration, we recognize that represents a meaningful delay in expected cash proceeds and affects investors' views about Burford's present value," Bogart said.

He added that the business "does not rely, or count on, cash from the YPF case to operate the business", noting that the company has more than $700m in cash and a portfolio expected to generate more than $5bn in proceeds over time, including over $1.2bn in the past two years.

"The core business is healthy, growing well and has produced consistently high asset returns," he said.

Burford reiterated that the expected write-down would have no cash impact and that liquidity remained strong.

The group said it was continuing to fund growth from existing cash resources and portfolio proceeds, with no plans to increase debt levels in the near to medium term.

Management also confirmed that while a write-down could affect certain debt incurrence metrics, its outstanding debt carried no maintenance covenants and did not restrict day-to-day operations or organic growth.

The firm added that it remained committed to its strategy of expanding its portfolio without relying on additional borrowing, targeting a doubling of the business by 2030.

At 1011 BST, shares in Burford Capital were down 1.47% at 334p.

Reporting by Josh White for Sharecast.com.

See latest RNS on Investegate