Burford Capital (LSE:BUR) has encountered a significant setback in the long-running YPF litigation after the U.S. Court of Appeals for the Second Circuit overturned a previous ruling that had favored claimants Petersen and Eton Park. The case relates to Argentina’s failure to comply with shareholder protections embedded in YPF’s bylaws. While the appellate court criticized Argentina’s conduct and rejected its jurisdictional arguments, the majority concluded that minority shareholders could not enforce the tender offer provisions directly and that such claims should instead have been pursued in Argentine courts. One judge issued a strong dissent opposing the majority’s interpretation.
The ruling introduces uncertainty for NYSE investors who rely on U.S. courts to enforce governance protections in foreign-listed companies and may prompt a reassessment of legal strategy by Burford and the claimants involved in the YPF dispute. The plaintiffs are expected to seek further review, potentially including an en banc rehearing by the full appellate court and, if necessary, an appeal to the U.S. Supreme Court. Another possible avenue under consideration is pursuing compensation through investment treaty arbitration against Argentina.
In response to the adverse decision, Burford plans to record a non-cash partial write-down of its YPF-related asset, which will be quantified in its first-quarter results. The company noted that a substantial reduction in balance sheet equity could limit its flexibility to raise new debt or make certain payments tied to debt-to-equity thresholds. However, management emphasised that the rest of its diversified portfolio continues to perform well and that its capital structure remains supported by recent fundraising activity and the absence of maintenance covenants on its outstanding debt.
The company’s outlook reflects mixed fundamentals, with volatility in cash flows and increased leverage weighing on the investment case. Technical indicators are also weak, with the share price trading well below major moving averages and showing negative MACD momentum. On the other hand, operational momentum and liquidity remain constructive according to recent earnings commentary, though valuation remains difficult to assess given a negative price-to-earnings ratio and only a modest dividend yield.
More about Burford Capital
Burford Capital is a global finance and asset management firm focused on legal-related investments, including litigation finance, risk management, asset recovery and broader legal finance advisory services. Listed on both the New York Stock Exchange and the London Stock Exchange, the company works with corporations and law firms around the world through a network of international offices to fund and manage legal claims and related assets.
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