Burford Capital shares crash after US court overturns $16bn Argentina ruling

Shares in the dual-listed group Burford Capital have dropped nearly 50 per cent since a US court overturned a ruling in favour of Argentina, a blow to the litigation funder.

The US Court of Appeals for the Second Circuit reversed the District Court’s previous ruling that found Argentina liable to pay $16bn to former shareholders of the oil major YPF.

The dispute centres on the 2012 expropriation by the Argentine government of a 51 per cent stake in oil major YPF from Spain’s Repsol.

In one of the most significant awards for damages against a foreign state in US legal history, Argentina was ordered by the US District Court for the Southern District of New York in 2023 to pay around $16bn to two claimants, smaller shareholders backed by Burford Capital.

At the time, Burford was estimated to receive $6.2bn from the ruling.

However, in what is seen to be a blow to the funder, a US appeals court overturned the 2023 legal ruling on Friday.

Despite acknowledging Argentina’s “knowing and flagrant violation” of promises made to foreign investors, it found that Argentina likely could not have raised $1.1bn without those protections.

Lawyers for Argentina had previously argued that the sum cannot be paid by the cash-strapped country and that a US federal court should not have jurisdiction over the claims.

Argentina’s President Javier Milei posted on X that the court’s ruling was “the best possible scenario”.

‘Remarkable abandonment’ of shareholders

The parties have 14 days to apply for a rehearing, but Burford noted that they may appeal to the Supreme Court or pursue investment treaty arbitration.

As Burford Capital had backed the shareholders’ claims and was set to take a share of the award, the listed group shares have plummeted in both New York and London.

Since the court’s decision, the listed funder’s shares have fallen nearly 50 per cent on NYSE and over 46 per cent on LSEG, its biggest decline since July 2020.

Chief executive Christopher Bogart called the decision a “remarkable abandonment” of shareholder rights but emphasised that the company’s core business remains strong and diversified beyond the YPF case.

Following the drop in its share price, the firm issued another statement to shareholders on Monday.

Bogart added, “We understand ― and share ― the market’s disappointment with Friday’s court decision regarding YPF. While we are optimistic about an eventual positive outcome in the case given the availability of international arbitration, we recognise that represents a meaningful delay in expected cash proceeds and affects investors’ views about Burford’s present value.”

Argentina’s legal battle grows in UK

Earlier this month, law firm Quinn Emanuel, led by partner Aidan O’Rourke, filed a new claim to the English High Court for an order that Argentina’s legal bill “remains substantially unpaid”.

The Republic of Argentina was ordered to pay around £1.1bn (plus interest) to holders of GDP-linked securities, over the country’s non-payment of GDP-linked sovereign bonds in 2014.

The case stems from the Argentine economy, which was on track to make a payment in 2013 that would have amounted to several billion euros across the different bond series. However, the country abruptly ceased publishing its historic GDP data series, changed its calculation processes, and issued a final-year GDP growth figure fractionally below the payment threshold.

A mammoth lawsuit was filed in London by Quinn Emanuel on behalf of bondholders, including Palladian Partners, in 2019, with a trial heard over October and November 2022. The High Court issued a judgment siding with the bondholders for the 2013 financial year, ordering Argentina to cough up more than £1.1bn.

Argentina tried to appeal to the UK Supreme Court, but its appeal was rejected.

Now, the lawyers are seeking an order that includes a declaration that Argentina breached this ruling, as the parties remain unpaid. The investors are now also suing for payments due for 2017, 2021, and 2022, estimated at another €1.58bn (£1.36bn).