Burford Capital (BUR), the civil litigation finance provider, is to issue a 6.5 per cent senior unsecured bond with a maturity date of 19 August 2022, at which point the bonds are redeemable at par. The minimum application is £2,000, and interest payments will be made bi-annually, starting on 19 February 2015.
Applications can be made through a stockbroker or other financial intermediary, and the bonds will be available for purchase as part of the initial offering until noon on 12 August. The total size of the issue will depend on the level of applications, with an announcement on this expected on or around 13 August. After the initial purchase of bonds during the offer period, they can be bought or sold in multiples of £100. At the time of issue the bonds should be eligible for investing in an individual savings account (Isa) or in a self-invested personal pension (Sipp).
The prospect of a regular income provides an interesting contrast to the rather lumpy dividend payments made by the company itself. Payments to shareholders tend to be so because there is no guarantee of how much revenue is generated from successful court cases, while the timetable is governed by how long it takes to achieve a successful outcome. Burford provides the capital for clients to pursue civil litigation which, for reasons of cost or time consumption, they might otherwise decide not to proceed with. Some cases are settled relatively quickly through out of court settlements, while others have to be taken through the full legal process.
It's not possible at this stage to establish the size of the fund raising, but estimates suggest that between £50m and £75m represents the target range. The money will be used to fund more cases, and while the company has a strict leverage ratio to adhere to, there is sufficient room on the balance sheet to allow this bond offering. During the first half of this year, the company has invested $62m (£36.5m) in new cases.
Meanwhile, recent research by analysts at Hardman & Co highlighted another solid performance by London's ORB retail bond index, despite a slowdown in issuance in recent months. Existing bonds trading on ORB have posted a respectable 2.2 per cent return in the second quarter of the year, matching the return of the FTSE 100 in the same period. Over three years, the ORB index has risen by 27 per cent.
