Insights

LCM provides disputes financing to a wide variety of corporate clients, including global infrastructure investors and asset managers, as well as the companies they invest in.

For example, LCM’s funding has enabled:

• a global infrastructure fund to successfully pursue a contractual claim in the Supreme Court of Queensland;
•  a post-M&A dispute related to the sale of a water company to be brought in the Singapore International Commercial Court;
• a contractual claim to be brought against an electricity company by means of a London-seated arbitration governed by the UNCITRAL Arbitration Rules; and
• a Middle-Eastern company to bring a cross-border construction dispute under the auspices of the London Court of International Arbitration.

Context

Infrastructure investors are exposed to a broad range of disputes that can benefit from third party funding. These includes disputes where the investor itself is a party, as well as disputes involving the assets they invest in. Most infrastructure companies and investors will seek to avoid litigation as far as possible but in some cases a dispute is inevitable and pursuing a strong claim is, commercially, the best course of action.

When a company pursues, and self-funds, a legal claim, its cash flow and profitability are immediately impacted, which can in turn affect distributions to its investors. Alternatively, a company that cannot self-fund its legal costs may seek an equity injection from its investors, who may in turn need to call capital from their limited partners (LPs) [1]. For many infrastructure investors, there are few things they would like to fund less than litigation.

We get it. Litigation is inherently risky and increasingly expensive. LCM’s funding can be a useful tool for sophisticated companies and institutional investors to effectively manage their cash flow and risk.

How LCM’s funding can assist infrastructure companies and investors

• Access to capital: LCM funds the legal costs of bringing the claim, including law firm fees and disbursements, such as Counsel and expert fees.
• Flexibility: LCM can fund the total cost of bringing a claim or part of it, and we can commence funding at the outset of a claim or partway through.
• Non-recourse funding: Our funding is non-recourse to the claimant’s assets, meaning that LCM only recovers its funded costs and funding premium if the claim is successful. If the claim is unsuccessful, LCM has no right to be repaid its investment.
• Risk and cash flow management: Third party funding allows the claimant to shift the considerable cost of bringing a legal claim off its balance sheet, preserving its cash flow, and continuing its normal course of business without the disruption of funding legal fees. At the same time, the claimant can pursue a meritorious claim and may be exposed to upside if the claim results in a settlement or an award of damages. For equity investors, the cash flow benefits of LCM’s funding may limit any disruption to equity distributions.

If you’d like to explore ways that LCM might be able to assist you, please get in touch.

[1] A limited partner is a passive investor that provides capital but generally does not participate in the day-to-day management of the fund’s activities.