In-house counsel should take note of the recent financing of a litigation claim as a way to add value to their company, according to general counsel Melissa Sobel of Burford Capital.

Finance provider Burford said Tuesday that it loaned $15 million to the U.K. power company Rurelec in a 2012 arbitration claim against the government of Bolivia, which had seized one of its power plants. By offering to pay Burford a contingency award based on the value of the claim as well as to repay the loan, Rurelec was able to obtain a lower interest rate than was possible elsewhere.

Sobel said everybody won earlier this year—well, except Bolivia. Burford collected a cool $11 million profit on top of the $15 million loan principal. And Rurelec won the arbitration while saving on a low-interest loan that it used to continue an expansion project.

In other words, what appeared to be litigation financing really wasn’t. Instead, the claim was used as an asset or collateral for a loan that financed a totally different business purpose beyond legal fees.

“We are able to understand an asset like a pending arbitration the way most financing entities can’t do,” Sobel explained. “We can estimate the right amount of risk and come up with the right interest rate on a loan. We essentially leveraged the value of the claim in the arbitration.”

Read more: www.corpcounsel.com/id=1202658010877/Burford-Capital-GC%27s-In-house-View-of-Litigation-Financing#ixzz33lcJstRo

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