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Burford Capital Reports Favourable Investment Result




ST. PETER PORT, Guernsey–(BUSINESS WIRE)–Burford Capital Limited (“Burford”), a leading global finance and
investment management firm focused on law, is pleased to announce that a
favourable decision in an arbitration matter underlying one of its
investments has been rendered by the arbitration tribunal.

The arbitration matter is a claim by Teinver S.A. and others against
Argentina in connection with Argentina’s expropriation of two airlines.
The arbitration tribunal ruled yesterday evening against Argentina,
requiring it to pay $324,254,807 in damages plus pre- and post-award
interest which remains to be computed. Burford’s entitlement from the
award is dependent on a number of other variables which are not yet
known precisely but is estimated to be in the range of $140 million and
is subject to an ongoing and compounding interest entitlement.

As at 30 June 2017, Burford’s current investment in this matter is
approximately $13 million and it is carried on the balance sheet at a
fair value of approximately $30 million. Thus, this favourable result is
expected to result in the recognition of substantial additional income
(although not approaching Burford’s full potential entitlement above)
pursuant to Burford’s valuation policies. Any such income would be
included in Burford’s financial result for the second half of its
financial year 2017, to be reported in its financial results for the
year ended 31 December 2017. However, Burford has not yet determined,
nor yet consulted with its auditors about, any impact of the arbitral
decision on Burford’s financial statements in 2017.

It is important to emphasize that this arbitral decision does not
necessarily mean that this amount will actually be paid in full, or at
all. There remain various avenues for challenge to the decision and the
matter is not yet free of litigation risk; indeed, the entire decision
could later be overturned by an adjudicatory body with higher authority
and result in a loss for Burford. Moreover, it is commonplace for there
to be negotiations, settlement discussions and discounting that could
reduce materially the figures provided above, and Burford generally does
not have any control over the outcome of those discussions as it is a
third party to the actual litigation.

Nonetheless, it is Burford’s policy to announce individually significant
investment results such as this one for the information of shareholders
despite the uncertainty as to the final outcome. For further background
to the Teinver investment, please refer to Burford’s 2015 Annual Report.

Christopher Bogart, Chief Executive Officer of Burford, commented:

We are very pleased with this result and are gratified to see justice
done for Teinver and its stakeholders. Without Burford’s capital, it is
doubtful that this kind of recovery could have been obtained for the
claimants. This investment is from our 2010 vintage and proves out what
we have said to investors over time: that it is premature to judge any
investment vintage until it is entirely complete.”

Background to Burford’s investment valuation process and its impact
on reported earnings

Burford values transparency in its presentation of financial results and
wants to be clear with investors about its approach to those results.

Most of Burford’s income comes from its litigation finance business.
Within that business, there are two principal sources of income for
accounting purposes, realized gains on investments and unrealized gains
on investments. (Realized and unrealized losses will naturally
negatively affect income and the principles we set forth here apply
equally to losses.)

Realized gains are straightforward: they represent the amount of profit,
net of the return of Burford’s invested capital and any previously
recognized unrealized gains, on an investment that has either resolved
entirely or has been settled or adjudicated such that, in Burford’s
view, there is no longer litigation risk associated with the investment.
(In the latter event, Burford may discount the anticipated profit in
respect of an investment to account for any continuing uncertainty as to
the recoverability of any amount.) Burford announces individual
investment results that will produce realized gains separately from its
financial results only when the individual gain is new information which
may be material to Burford.

Unrealized gains are more complex: they represent the fair value of
Burford’s investment assets, as determined by Burford’s board of
directors in accordance with the requirements of the relevant IFRS
standards, as at the end of the relevant financial reporting period.
There is no active secondary market for litigation risk, and thus there
is generally no market-based approach to assessing fair value; to the
extent that a secondary market transaction does take place with respect
to an investment, the implied value of that transaction is a key
valuation input. In the absence of such a transaction, we are mindful
that the outcome of each matter Burford finances is likely to be
inherently uncertain, may take several years to conclude and is often
difficult to predict with accuracy. Moreover, litigation matters
frequently experience multiple significant shifts in sentiment during
their evolution. Burford thus eschews fair values based solely on
current sentiment, and focuses on objective events (such as court
rulings or settlement offers) to ground its assessment of fair value.

Burford’s board of directors assesses the fair value of Burford’s
investments after the close of each financial reporting period and
therefore investors should not expect updates about potential changes in
fair value during the course of any given reporting period. Following
the close of each financial reporting period, Burford’s board determines
the fair values of investments after taking into account the views of
management, the operation of the audit process and input from external
experts (as it considers appropriate). Generally, that process does not
conclude finally until shortly before the release of Burford’s financial
results for the relevant period.

Burford is pleased to be followed by a number of research analysts and
we are grateful for their efforts to understand and explain our
business. They perform a valuable role in assessing our operating
performance, the evolution of the litigation finance market and
interpreting other relevant industry developments. However, prospective
investors and other market participants must appreciate that, due to the
confidential, potentially privileged, long-term and uncertain nature of
each investment asset, it is very difficult for research analysts to
project accurately the likely investment income of the business. Any
projections produced by research analysts are not produced on behalf of
Burford and Burford takes no responsibility for such projections.

As a result, prospective investors and other market participants should
not treat, and Burford does not intend to treat, the financial
projections produced by research analysts as indicative of the market’s
expectations of Burford’s future financial performance. We specifically
eschew any obligation to correct estimates made by financial analysts or
to inform the market should we come to believe that our actual
performance will diverge from those estimates. This is, of course,
different to the approach taken by most operating companies, in respect
of which research analysts can produce relatively reliable estimates and
the relevant company will advise the market if it expects to see
performance materially different from the consensus of analyst
forecasts. It is important that investors understand that Burford takes
a different approach as a result of the different nature of its business.

This announcement contains inside information. The person responsible
for this release is Elizabeth O’Connell, a Burford Managing Director.

About Burford Capital

Burford Capital is a leading global finance and investment management
firm focused on law. Its businesses include litigation finance and risk
management, asset recovery and a wide range of legal finance and
advisory activities. Burford is publicly traded on the London Stock
Exchange, and it works with law firms and clients around the world from
its principal offices in New York, London and Chicago.

For more information about Burford: www.burfordcapital.com






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