Burford Capital & The YPF Litigation
Gambling on the resolution of Burford Capital in connection with the Petersen and Eton Park cases against the Republic of Argentina and YPF
Dear Readers,
I’m happy to present you with an interesting “opportunity” to invest in the equity of Burford Capital, expecting a positive resolution between Burford and the government of Argentina regarding the Petersen & Eton Park case against YPF.
As many of you will know, in 2012 Cristina Fernandez, ex-prime minister of Argentina, seized the oil major YPF to “safeguard the hydrocarbon sovereignty” of the country. Eleven years later, the New York court awarded $16bn in damages and interest to Eton and Petersen, claims mostly financed by Burford Capital.1
As per the latest Burford statement, it is expected that the actual claim to Burford will be around $5.6Bn.2 Since Mar-23, shares have increased c.67%, currently trading at $13.743, but yet… Is it fully priced in? It is my opinion that the market is not giving enough value to the repayment of the debt (and why would they, Argentina is not well known for making creditors happy!). However, I think there is too big of a gap to at least not talk about it.
Burford currently trades at a £3.0Bn market cap. The fund assumes that only $1.4Bn of the proceeds are going to get paid. Even if that would be the case, the cash would be sitting in Burford accounts in the next year if Javier Milei keeps his promise.4
We may not believe a lot Argentinians, but I do have a bit of faith in Milei (call me naive), and the business itself trades at <50% of the value of the total claim portfolio.
I’m still waiting for any resolution given the appeal by the Argentinian government, but meanwhile, I’ll keep digging and trying to understand if it’s worth a trade or not.
Cheers,
Muppet
Sources:
Burford Capital Resolution: https://investors.burfordcapital.com/news/news-details/2023/BURFORD-CAPITAL-STATEMENT-ON-YPF-DAMAGES-RULING/default.aspx
FT Article: https://www.ft.com/content/1abd35df-1efd-4c61-b983-b5a580e44b3a#comments-anchor
Javier Milei creates a tax to pay Burford Capital debt: https://www.europapress.es/economia/noticia-milei-creara-tasa-pagar-deuda-14460-millones-argentina-nacionalizacion-ypf-20231227133339.html#:~:text=El%20presidente%20de%20Argentina%2C%20Javier%20Milei%2C%20ha%20confirmado%20que%20se,en%20Estados%20Unidos%20por%20la
Burford IR: https://investors.burfordcapital.com/events-and-presentations/default.aspx
FT Article: https://www.ft.com/content/1abd35df-1efd-4c61-b983-b5a580e44b3a#comments-anchor
As per Sep-23, Burford Capital is entitled to ~35% of any proceeds generated in the Petersen case, and ~73% of any proceeds generated from the Eton Park Case. Burford however sold 38.75% of its entitlement in the Petersen case, reducing their net share to ~35%. Burford Capital Resolution: https://investors.burfordcapital.com/news/news-details/2023/BURFORD-CAPITAL-STATEMENT-ON-YPF-DAMAGES-RULING/default.aspx
Market data as of 13th March 2024
https://www.europapress.es/economia/noticia-milei-creara-tasa-pagar-deuda-14460-millones-argentina-nacionalizacion-ypf-20231227133339.html#:~:text=El%20presidente%20de%20Argentina%2C%20Javier%20Milei%2C%20ha%20confirmado%20que%20se,en%20Estados%20Unidos%20por%20la