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Burford Capital raises £175m in sell-out bond

Litigation finance firm backed by fund managers Neil Woodford and Mark Barnett closes 5% bond offer after just a week.

 
Burford Capital raises £175m in sell-out bond

Burford Capital (BURF), the litigation finance firm backed by fund managers Neil Woodford and Mark Barnett, has stopped taking money on its new retail bond after raising £175 million from investors in just a week.

The offer period on the 5%, nine-and-a-half year sterling bond was scheduled to close on 26 May but was withdrawn on Friday after being significantly over subscribed by income seekers.

The amount raised by Burford beats the £90 million and £100 million the firm attracted with its previous two bonds in 2014 and 2016. Although these pay higher annual interest rates, or coupons, of 6.5% and 6.125% until 2022 and 2024, at their current prices they offered lower yields to maturity of 4.3% and 4.6% making the new bond attractive, despite the prospect of rising interest rates.

Burford chief executive Christopher Bogart said: ‘We are delighted with the strong response to this bond issue, which has well exceeded both our previous issues and continues to provide us with a flexible and immediately accessible capital base to address the attractive opportunities we see.’

The AIM-listed company will use the money to finance corporate litigation by companies from which it receives a share of payouts if the cases are successful. It will also repay early $43.75 million of loans it took out for its acquisition of US rival Gerchen Keller Capital in December 2016.

Buford’s broker Numis Securities said the bond issue was ‘a very positive development’ with analyst Jonathan Goslin noting the company had achieved a 27% average internal rate of return from its investments in the past.

Goslin raised his earnings forecasts for Burford by 3%, 8% and 11% for 2017, 2018 and 2019 but lowered his recommendation from ‘buy’ to ‘add’ in response to a near trebling in its shares since the Gerchen deal. ‘Whilst this helps lift our target price to 950p from 880p, our recommendation moves to “add” from “buy” following the shares very strong recent performance.’

1 comment so far. Why not have your say?

Law Man

May 22, 2017 at 18:05

I like these ORB bonds as we private investors can buy a new issue:

* at the nominal price

* holding to maturity and so obtaining a certain return

* with no acquisition costs.

By buying successive issues you have staggered maturity dates.

It is a pity that there have been so few new ORB issues over recent years.

Caution: I would not buy with an interest rate under 5% through fear of inflation.

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