Good morning and good afternoon to everyone, and welcome to the Burford Capital 2019 Full Year Results Webcast. My name is Seb, and I'll be the operator on your call today. [Operator Instructions]. Today, on this call, we are joined by Christopher Bogart, CEO; Jonathan Molot, CIO; and Jim Kilman, CFO. I'm now handing over to Christopher to begin the call. Please go ahead, sir.

Thank you very much, and welcome, everybody, to our 2019 earnings call. At long last, we are thrilled to be presenting our 2019 results. Those results are consistent with the trading update that we put out in February, but we're happy to be here and talk you through them in substantially more detail. We're going to do this in our usual form. I'll make some opening remarks. Jon will talk about where we stand with our investment portfolio, and Jim will take you through quite a lot of financial data. There are 3 relevant documents for you all now to have: one of them is the RNS that we put out today; the second is a set of slides, and we'll advance them on the webcast and tell you where we are on them; and the third is our annual report. In the RNS that we put out, in addition to providing 2019 results, we also provided a portfolio update for the first 4 months of 2020. And what we have seen and what we reported was a tremendous level of activity. You'll have seen that our second half of 2019 was slower, but the first half of 2020, thus far, has been anything but. And we've actually already seen successes in matters that, if ultimately paid, would generate $800 million in cash across the group, $450 million for the balance sheet. And of that cash, $300 million of it is in something that we're calling final matters. So these are not just things that have succeeded at the first instant. They've not just won a trial, but they've either won on appeal or they've succeeded in arbitration. And in both of those instances, the prospects of them being set aside are much lower than if they were just a…

Thanks, Chris. Thanks to you all for joining. If you could turn to Slide 9. I think it's a very useful graphic, which we have not used before, because it not only tells you something about how our portfolio has performed to date but also gives you a glimpse at how we underwrite individual investments to add to that portfolio on an ongoing basis that gives you a sense of what the existing portfolio consists of. So if you just take -- first, what does it say about our performance to date? This is a graphical representation of basically every concluded investment that's on our website investment table, both fully concluded and partially concluded. And they are laid out grayed based on the return on invested capital. So on the far right, you have the red bars that are cases where we earned greater than a 200% return on invested capital. That means we got our money back plus twice the money. So it's better than a triple. At the far left are the cases that we lost, and in between are the cases where we -- can see the turquoise, we won and we received investment back plus greater than 100%. So it's greater than a double but not a triple. And the maroon in the middle are the ones where we received a positive return investment back plus a return of somewhere between 0% and 100% return on invested capital. These are not numbers, right? The size of the bar depends on the multiple, the return on invested capital relative to how much we invested. The only dollar figures you have are in the -- represented at the very top, which shows you the actual dollar figures that fall into each bucket, with the exception that on the…

Thanks, Jon, and good morning, everybody. Thanks for being with us. So Chris touched earlier on our overall portfolio performance statistics, but perhaps I can set those in a bit of a historical perspective on Slide 13. We've now recovered over $1.25 billion, including over $1 billion beyond our Petersen sales. And even as we produce more and more of those recoveries, our portfolio returns have continued to be consistently strong with a return on invested capital of 88% in 2019, up from 80% in the prior year. While our IRR, as Chris mentioned, has hovered right around 30% throughout the last 5 years. I would note that now we are showing return metrics on a bit larger portfolio that includes our asset recovery in certain of our complex strategy assets. Even though we're doing that, our returns are not much different on this broader portfolio than when you compare it to our core litigation finance portfolio. The ROIC is slightly lower by 88% versus 93%, but the IRR is the same, which shouldn't really be a surprise given how we think about return targeting across our different types of assets. The average life of our concluded assets continues to trend around 2 years. But as the slide Chris showed earlier demonstrates, timing varies pretty significantly based on whether cases settle or proceed to judgment. We've historically shown this average life data weighted by deployed dollars where it was 1.7 years in both 2019 and the prior year. However, we also think weighting by recoveries is an interesting way of looking at this data. Weighting by deployments looks at how long each dollar of capital is out before it turns into a realization, while weighting by recoveries looks -- shows how long it takes to, on average, to get each…

Thanks very much, Jim. And before we take your questions, let me just conclude on a few slides here. I said at the beginning of the call that we have listened hard and that the extensive and expanded financial disclosure in the annual report, some of which Jim just went through, was one result of that listening tour. Another result was a variety of changes that we've made in response to shareholder feedback around our governance. You've seen us make significant changes to the Board, introducing new directors and announcing a clear plan for the phased retirement of existing directors. You've seen changes and upgrades to our management structure, including the creation of a clear set of management responsibilities and a Management Committee that is responsible for running the business. And even though this long predated the events of last year, we continue to move forward with the U.S. listing. As a reminder, there's relatively little that we will be able to say to you publicly about that process, other than we intend to file for that listing now that we've been able to put these results out. We intend to file as soon as we're able to and as soon as the audit backlog clears. And then we will effectively be in a quiet period while we go through the U.S. process. Turning to Slide 27. I addressed COVID-19 already at the beginning of our presentation. And given the amount of data on this slide and in our annual report, I don't propose to spend any more time on it right now as opposed to taking your more focused questions about it, other than really to reemphasize that to the extent that we're going to see negative implications from COVID-19, those are largely timing-based. And while we hate the idea of trading on human misery, the reality is that the world post COVID is going to be a world with an awful lot of disputes and less corporate liquidity to pursue those disputes. So finally, on Slide 28. Just to sum up, we're very pleased, from a business perspective, about 2019. We solidified the growth that we've seen in the business. We generated a lot of cash. We ended the year with a large diversified portfolio that we're very happy with. We have strong liquidity and a strong balance sheet, and we're excited to be able to walk into 2020 with an enormous number of early successes and what we see as a very significant amount of opportunity. And with that, we'd be happy to take your questions.

[Operator Instructions]. The first question comes from Justin Bates at Canaccord.

I wonder if you could just cover off 3 quick points for me, please. Firstly, on the acceptance rate, so if you look at the closed legal finance assets to the original inquiry screening, that seems to have increased quite a bit, that conversion rate, from 3.8% back in '17 to 7% this year in 2019. If you could explain that, that would be helpful, please. Then on to commitments, the point you make about the deployment profile being at 16%. I was trying to reconcile that with -- that seems to imply 5- to 6-year period. I was trying to reconcile that with the 2.9 years you quote in the analyst pack. And also, when I look at Page 44 of the annual report, the matrix of concluded cases, if you take the concluded cases, deployment cost to commitment amount, you get to 88%. So it would be helpful if you could just try and highlight where I'm going wrong in looking at those numbers. And then finally, just in relation to how the year has started for you, has that -- with respect to how strong it seems to have been, has that changed your view with respect to securing further funding with a bond raise or otherwise?

Sure. So let me start with some of those, and then I'll pass you to Jim, especially in your second question. So the acceptance rate or the closing rate is something that we've talked about for some time. And we've had, as a goal, getting that number higher, and so we're pleased to be succeeding at doing that. Now of course, the investor reaction to that could be, Oh, my goodness, they're becoming less selective, but that's not in fact true. What's going on there instead is we are improving the quality of the inbound inquiries. And we're doing that in a couple of ways. One is that we are consistently educating the market. And as a result, we're seeing fewer inquiries that are just completely unsuitable for us. When we -- earlier on in this business, we would get lawyers ringing up and saying, Well, hey, I've got a fantastic opportunity here. It's a $5 million budget. And if the claim wins, it will make $20 million. And that really doesn't work. The $20 million claim will probably settle for closer to $10 million. By the time we put $5 million into it, we're going to want to make $7 million, $8 million, $9 million, $10 million. It won't leave enough money for the client, and that's not a viable investment for us. And so starting to weed those out has been successful as has been building our own internal business development and origination team. We find that we have about a 3 or a 3.5x greater level of success in moving an inquiry that has come in through the activities of that team into the pipeline than we do just a cold inquiry. So -- and this is an expensive process to run, and so our goal actually is to reduce the number of unqualified inquiries we get and continue to increase that close rate. It's not -- even at 7% where we are right now, 7% still means we're saying no 93% of the time, which is not all that desirable a dynamic. It would be much better for us to say yes more often because the cases that are coming in the door are far more suitable. And just jumping to the successes that we've had in 2020 and what that means for finance [indiscernible], we're opportunistic about what we do about capital sources. We've deliberately constructed -- a capital structure that has multiple sources of capital that we could call on, and so we have never been committed to the need to make a debt issuance. And certainly, as cash starts to come in from the things that we've called final matters, that's cash that we can turn around and reinvest. Jim, do you want to pick that up?

Yes. So Justin, on your question about how to think about deployment and how it works over time, I think probably the easiest way to do that is to look at the graphic we had on Slide 18, which is also on Page 37 of the annual report, although, frankly, it's easier to see the one on Slide 18 because it's bigger. But the way to think about this is typically -- and if you look at the solid red line on that graph, you'll be able to follow along. Typically, a vintage will have somewhere between 40% to 50% deployed in its initial year. So 2019, for example, would be at the low end of that range, but that would be the typical range that you would see. What that means is that over the rest of its commitment life, there's another 45%, if I want to make my math easy, that needs to get deployed to get to that roughly 90% that we see on concluded cases, deployments on concluded cases. So the way to think about this is that over the next 3 or 4 years, that remaining 45% of deployment will occur so that you would have somewhere between 10% and 15% a year going out that builds you over time from the initial 45% to the final 88%. And that's really, I think, what you see in the graphs on Page 18 that the deployments occur kind of gradually over time that way.

Our next question comes from Brian Flynn at Shannonside Capital.

I wanted to ask about the Petersen case. In the annual report, you've helpfully given great information on that. And you've mentioned that in the context of these claims, weakness in the Argentinian currency should be irrelevant because the payout would be based on the formula from the bylaws. So my question is do the bylaws explicitly state that the payout should be based on a multiple of earnings per share in U.S. dollars? Or do they state a currency at all?

Chris, I'm happy to take...

Jon, would you like to?

Sure. I'm happy to talk about that. So the bylaws do state in Section 7 that the public offering has to be made in the jurisdiction on the exchange in compliance with the exchange rules where it's held. So Petersen and Eton Park held shares that were dollar-denominated, traded on the New York Stock Exchange. And under Section 7 of the bylaws, the tender offer had to be made in New York for those shares in compliance with New York Stock Exchange and SEC rules. So the first thing is it's going to be a dollar-denominated exchange, where they would be paying dollars to reacquire dollar-denominated securities just as any tender offer in the United States for a security to dollar-denominated trades on New York Exchange would be. The formula in figuring out what the price would be is basically to figure out what the price to earnings multiplied by the earnings would be, and that gets you to a value. But that would then be converted to dollars in order to do the tender offer in New York in compliance with SEC and New York Stock Exchange rules. So that's the first point as to why the whole thing would have been a New York-based dollar-denominated exchange. The second is even if for some reason you were to ignore that and say that the price would have been determined in pesos -- and frankly, for that to happen to a transaction -- for pesos for a dollar-denominated ADR traded in New York, basically, what would have had to happen is the holders of the ADRs would have had to break them apart, exchange them for peso-denominated shares traded in Argentina and then sold in Argentina, which would be at odds for the bylaws. But even if you put that…

Yes. Understood. Could I ask a follow-up question? You mentioned in the slides today in the presentation that with regard to valuation policy, third-party events can impact the valuation. And I understand -- if I understand correctly, the valuation of Petersen was actually written up slightly, the unrealized gain in Petersen, because you've chosen to use the sale value from 2019 as the basis for your valuation at year-end. The change in government, however, in Argentina, happened after those sales in 2019. And if we look at financial market development such as the currency development, those indicated that the change was quite unexpected. So would that not be a third-party event which would impact valuation? I recognize it's not a case milestone, but nonetheless, would it not be a third-party event that would impact the valuation?

So I would say the difference is when you're talking about repayment of sovereign debt and how credit markets are going to view Argentina based on a change of administration, that's a very different matter from the value of a piece of litigation. When you're a holder of Argentine debt, you are subject to potential renegotiations, the entire debt structuring involving Argentina, the IMF and many more creditors beyond just you, the individual holder. When you are a judgment creditor for a judgment that's been entered in a U.S. court against the country, it's a very different matter. And in fact, the Kirchner regime, before the Macri regime, was the one, in fact, that had settled virtually all of its outstanding obligations under arbitral boards, court judgments en masse actually before the Macri government took over. So basically, whether it's the Marci administration or the Kirchner administration or a successor now, countries cannot evade their debts. And in the way that they may be able to renegotiate their debts, they can't avoid paying judgments in accord in the United States. And that's especially the case here because we have a defendant that is not just the sovereign, the country. It's also the company. And it's very difficult, if not impossible, for a multinational, for a company that does business abroad to be able to evade a debt from a New York court, from a judgment. So I think it's a quite different matter looking at credit markets and debt values versus the value of a litigation claim.

So we have a question from the webcast, which comes from Laurence Endersen at Capstrive. It reads, Thanks for the broader disclosures and congratulations on the continued progress you are making. Two questions. One, given the likelihood that exposure to a diversified or properly underwritten portfolio of litigation receivables is a relatively scarce and attractive resource as it requires skill and expertise to access and build, how large is the opportunity to expand your third-party capital initiative? Two, could you comment on the currency characteristics of the YPF case, i.e., address any risk that compensation could be paid in local devalued currency?

Great. Thank you for the questions. So question number two, we've obviously just answered in response to the prior question. And as to question number one, I think what we're likely to see -- you're quite right that, that's a valuable thing to have. And we, of course, after 10 years in this business, having looked at thousands and thousands of litigation claims and having -- at having actually financed many of them such that we've now returned more than $1 billion of capital just to the balance sheet, that's given us a unique set of data and the ability to -- the ability to go forward and really do a good job compared to the competitive universe when we consider how we underwrite, how we risk assess and how we make investment decisions. So that's all a significant positive. And as you suggest, the likelihood is that, that means, especially in the next few years where we're going to see, we believe, considerable growth in disputes and considerable demand for dispute-related capital. I think what you'll see is us continuing a growth strategy and growth trajectory. And it's entirely possible that, that will include continued use of third-party capital.

The next question comes from Thomas Roman.

I have two questions in relation to the Argentinian case. The first question relates to -- you appear to be very confident about winning the case. However, what arguments have the Argentinian lawyers put forward in order to defend themselves? And what merit do you see in those defense proposals? Second portion of the question is just to confirm, for the avoidance of doubt, if you were to lose the case, would you have to fully write off the $773 million of unrealized gains?

Chris, I'm happy to [indiscernible] that.

Sure. So before Jon talks about the substance, let me just say 2 things about Petersen and, in general, about pending litigation, which some of you already know. So there's obviously a tension in Burford's business when one of the matters that we have been invested in becomes publicly known. And as most of you are aware, most of the matters are not publicly known. And the tension that is created is that investors, of course, would like lots and lots of information about those matters and would like us to start to do things like what you just asked, assess what we think about the defenses of the other side of rigs. Those are not things in active litigations that we could do. We know a lot about the cases that we're involved in. A lot of that material is protected by various legal privileges, and we're not only free to, but it would anger the court if we were to start in the public forum, effectively litigating the case. So we can give you some basic answers to the questions. But just because Petersen is out there publicly doesn't mean that we're free to discuss case strategy or anything else. And as to your valuation question, we have always -- as we've always said, there are multiple paths to recovery here, and we're just exploring one of them at the moment. Jon, do you want to...

Yes. That was pretty much what I was going to say. I mean the briefs of what they've argued are public. I'd rather not characterize them. I feel very comfortable with where we are. And the amazing thing is if you look at how we're trading, [indiscernible] we're not very dependent on Petersen at all because the stock price isn't giving any credit for Petersen or the ongoing value of the business and not expecting that our -- the remainder of our cases are going to generate returns anywhere near what our historical track record has produced. So I'm quite comfortable with the value of it and, I think, probably shouldn't, as Chris said, as tempted as I am, you can tell to dig in and explain on the merits, I think it's probably wise for me not to go further in characterizing the arguments, which have mostly been about trying to change the forum.

So we have a question on the webcast from Dennis Hilkens at King Street which reads, Number one, understand you see a significant opportunity set. Are you capital constrained? Why don't you raise incremental capital to address this opportunity set? Number two, are there any changes to your plans for U.S. listing? And number three, in the past, you have talked about raising incremental debt. How are you thinking about this now with your debt trading in the 70s to 80s?

Jim, do you like to take a start on those?

Yes. Look, I think, as we said earlier, our view of this is that we are opportunistic in terms of -- certainly on the debt side and any other form of capital. We don't have to go out and do anything to run the business that generates plenty of organic cash. So it's really all about if there is a good opportunity to raise capital, debt or other forms of capital at attractive terms, then we would certainly consider doing that and using that money to accelerate growth. And so that will always be the tension in how we think about it. We're not in a position where we need to do it. We're in a position where we can if it makes sense. And I think on the U.S. listing question, we've already said there's very distinct limits to what we can comment on that.

So our next question on the webcast comes from Trevor Griffiths, who's a private investor. Just firstly, may I thank you for the new disclosures, particularly the detail on fair value movements, which I had asked for in the past. In relation to the quiet period in H2 2019, you have discussed in the past how there tends to be a seasonal boost to results towards the calendar year-end, which evidently didn't happen this time. Is this due to a change in the nature of the business at all? I know that you are doing more business direct with corporates, which may not have the same year-end pressures as lawyers, but I also wonder if there's a move to more contentious cases with less room for settlement? Or is it just that lawyers have been making so much money of late, they didn't need to boost the end of year results?

Thank you, Trevor, for the question. And for those of you who are unaware, Trevor calling himself a private investor is a currently true statement. But Trevor is a former research analyst who has followed Burford for many years, in fact, all the way since IPO, and so it's very nice to hear from you, Trevor. The question about timing and year-end. So what has historically happened in our business, has not been so much around cash generation at the end of the year, although that has sometimes happened, but has been around new business. And what we do find is that lawyers and law firms are very driven by their calendar year-end and are also, shall I say it, somewhat procrastinators when it comes to managing their business. And so we historically have had very busy fourth quarters when it comes to deal flow and deal closings. And by busy, I mean that routinely on the 31st of December, we tend to close multiple transactions. And that was no different this year. We saw a busy December 31. In terms of resolutions, I do think, as we've discussed already in the context of COVID-19, it wouldn't surprise me if we see some dislocation in the normal settlement patterns of litigation for a little while. And I think there's 2 reasons for that. One is while some litigation is going forward at a completely normal pace, and as you can see from the first 4 months of results that we've already released, we've had a very strong first 4 months, and that's showing the courts are still acting and businesses are still engaging. That being said, there's no question that in some instances, courts are going to slow down or something else around the pandemic is going to slow down,…

Ladies and gentlemen, this concludes today's call. Thank you for dialing in. You may now disconnect your lines.