04 Apr 2017

Third Party Litigation Funding: Add to Your Toolkit

0 Comment

BMS client and bankruptcy trustee, Lee Buchwald, broke a bankruptcy industry record last year when he used a third party to fund litigation proceedings on an over 15-year-old bankruptcy case involving Magnesium Corporation of America and Renco Metals, Inc. As a result, in early March the 2nd U.S. Circuit Court of Appeals affirmed a $213 million judgment against The Renco Group, who had opposed a sale proposal from the case.

No transaction like this has ever been done in a pending bankruptcy case. However, according to Buchwald’s legal counsel, Nick Kajon of the Stevens & Lee law firm, deals with litigation funders “should be in every trustee’s toolkit.”

The third party litigation funder, Gerchen Keller (now part of Burford Capital), agreed to pay $26.2 million to acquire a $50 million interest in the judgment from Buchwald for MagCorp. After the judgment, Burford Capital (as successor in interest to Gerchen Keller) will likely end up with nearly double its money from its investment.

Although it won’t make sense for every case, Kajon says trustees should consider litigation funding if the bankruptcy estate would be better off monetizing a piece of its potential recovery to be able to keep litigating and have some cash for creditors, even if they end up losing the case.

To read more about the case, click here.

Lee Buchwald

About Lee Buchwald

Lee Buchwald is the founder and principal of Buchwald Capital Advisors LLC, and is a thirty-five year veteran investment banker who has been an executive at such prominent firms as Rothschild Inc., Salomon Brothers and Chanin Capital Partners. During his career, Mr. Buchwald has been responsible for over 120 transactions. In addition to financial restructuring advisory services, Mr. Buchwald’s transactions have included: trustee and fiduciary appointments, litigation support and expert testimony, mergers and acquisitions, private and public securities placements, valuations and fairness opinions.

 

Nicholas F. Kajon

About Nick Kajon

Nick Kajon, is the Co-Chair of the Bankruptcy & Financial and Litigation Finance and Alternative Funding Groups at Stevens & Lee, and regularly represents trustees in contingency fee litigation. He has over 30 years of experience advising clients on financial restructuring, corporate governance and commercial litigation matters. Nick has negotiated a number of multi-million dollar agreements with litigation funders pertaining to both insolvency and other commercial litigation claims, and has extensive contacts in the litigation finance industry.

[top]