By Kali Hays
Law360, New York (January 26, 2016, 3:28 PM ET) — New York litigation funding firm Burford Capital LLC is putting $45 million behind the litigation efforts of a top British-based company — enough to finance an entire portfolio of pending actions.
Burford announced the deal Jan. 6, but said the client wished to remain unnamed to keep the nature of its pending litigation confidential. However, Britain’s The Lawyer reported Monday that the client is BT Group, the holding company that owns British Telecommunications plc, which operates in about 170 countries.
Representatives of Burford and BT could not be reached for comment Tuesday.
When Burford announced the financing, the firm said the agreement “addresses the need that companies of all sizes have for financial alternatives to paying by the hour for legal services” and that the deal “provides multiple corporate benefits” for both companies, according to a statement.
“This transaction is another example of the continuing transformation of litigation finance into corporate finance for law,” said Burford CEO Christopher Bogart.
The capital will be provided to BT on a nonrecourse basis, meaning the telecom company can mark the funds whenever tapped as “income received” without having to wait for litigation to conclude.
On the other side of the deal, Burford is set to receive a portion of any proceeds realized from the litigation on a cross-collateralized basis, protecting the firm from risk should any legal action be lost, according to the statement.
Bogart commented in the announcement that in-house counsel and corporate financial executives are coming “more and more” to appreciate the value of outside litigation financing, considering that such an arrangement means a company can “move risk from corporate balance sheets.”
Added with the “tremendous benefit” of a company being able to recognize income from a claim when it’s good for business as opposed to waiting on the court system, Bogart said the “appetite for this kind of transaction” will continue.
Burford’s $45 million deal with BT is reportedly the first time a litigation funder has made such a large investment in a U.K.-based corporation, but the firm went outside the norm in late October as well, when it entered into a rare public deal with Hausfeld LLP.
Burford committed $33 million to Washington D.C.-based Hausfeld in anticipation of its Berlin launch, marking an evolution in the relationship between firms and investors. It was the first time a firm had entered a new international market explicitly to woo clients with the cash backing and risk-sharing deals offered by a third-party funder.
Jonathan Molot, Burford’s chief investment officer, admitted at the time of the deal’s announcement it was “an unusually overt acknowledgment” of an outside funder’s role in planned litigation.
Industry experts have characterized the apparent move toward deeper outside funding in law firms as “inevitable,” while noting the investments are starting to look and sound more like venture capital investments.
–Additional reporting by Andrew Strickler. Editing by Jill Coffey.