IMF Bentham responds to share price movement of rival Burford Capital Limited
- Jeremy Sambrook
- Group General Counsel and Company Secretary | +61 8 9225 2324 | [email protected]
- Marella Gibson
- Chief Marketing Officer - Australia and Asia | +61 2 8223 3517 | [email protected]
- Gretchen Lyn Koehler
- Chief Marketing Officer - North America | +1 212 488 5331 | [email protected]
Accounting treatment of Litigation Finance Assets
- The accounting treatments adopted by IMF and some of its competitors vary materially.
- IMF’s litigation funding assets, and those of investment vehicles managed or advised by IMF, are classified as intangible assets and therefore, in accordance with the International Financial Reporting Standards (IFRS), are recognised at cost throughout the life of the investment and are subject to impairment testing. IMF does not record any unrealised gains attributable to market value adjustments of its litigation assets during the life of the investment.
- IMF recognises any gain on assets at the time of completion of an investment. Losses on investments are recognised at the earlier of either negative developments which impact potential recoveries via an asset impairment, or from a loss at trial.
- IMF’s conservative and transparent approach removes potentially artificial estimations of asset values and offers investors comfort in the integrity and stability of the reported results.
- IMF prepares its accounts in accordance with the Corporations Act and complies with the Australian Accounting Standards and the IFRS.
IMF’s key metrics
As stated in prior ASX announcements, IMF calculates its aggregate Return on Invested Capital (ROIC) and Internal Rate of Return (IRR) on concluded investments only (excluding any partial conclusions), withdrawals and overheads. These metrics include losses on concluded cases.
Funding for Future Investments and strategic capital management
- A substantial capital position is essential in the dispute finance industry to underwrite investments.
- During FY19, IMF significantly increased its capital reserves with the launch of two new Funds (Fund 4, Fund 5) with aggregate capital commitments of US$1 billion (including commitments from IMF of US$200 million). This external capital secures IMF’s medium-term funding requirements for its current and future litigation funding investments.
- In FY19, IMF also completed an equity placement raising approximately $75 million, refreshed the terms of its listed bonds pushing maturity out to FY23 and raising a further $41 million from the issue of new bonds.IMF also currently expects to receive income of approximately $70 million in FY20 from conditional and in principle settlements which have occurred since 1 July 2019 (of which $23.5 million relates to on-balance sheet investments and $45.7 million reflects fund investments).