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Burford bonds

Gilts, bonds, and interest-bearing shares
gbjbaanb
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Burford bonds

#242421

Postby gbjbaanb » August 7th, 2019, 1:42 pm

Noticed that, with the current Burford hoohah going on, the bonds have also dropped 40%, so now a 5% BUR3 is 68p. Assuming Burford doesn't collapse entirely, and carries on running with "reduced expectations", then these should be reasonably attractive right now.

GSVsowhat
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Re: Burford bonds

#242423

Postby GSVsowhat » August 7th, 2019, 1:47 pm

Agree this may be an opportunity - will watch what tomorrow brings with Burford riposte - currently 79-82

gbjbaanb
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Re: Burford bonds

#242429

Postby gbjbaanb » August 7th, 2019, 1:59 pm

GSVsowhat wrote:Agree this may be an opportunity - will watch what tomorrow brings with Burford riposte - currently 79-82


Graham Neary on Cubeinvestments has an article about Burford today, he thinks all that's happened is the massive amount of frioth has been blown off BUR, and that its a profitable company at reasonable valuation - but that valuation is around £5 - which is roughly what it is today. Do I think the shares will rise? No. Do I think the bond price will rise back to normality once investors stop panicing and think that the company will not go bust? Yep.

Net assets at 30 June 2019 were $1,567 billion ($7.17 per share). If 40% of the investment portfolio are unrealised gains, and we don’t want to pay anything for them, that knocks the value down to $860 million ($3.93 per share). The latest share price is 568p, representing $6.90 at the latest exchange rates.

In other words, normality has been restored to the Burford valuation

Clitheroekid
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Re: Burford bonds

#242450

Postby Clitheroekid » August 7th, 2019, 3:05 pm

I think the selling's been overdone, but I'd be a bit wary of buying the shares yet.

However, as well as the 5% bond there are also two others available, the 2022 bond (BUR 1) with a coupon of 6.5%, and the 2024 bond (BUR 2) with a coupon of 6.125%. These have also dropped dramatically, and if, as I believe, the company is basically sound they would both appear to offer excellent value. So much so that I've decided to buy some of the BUR1 at approximately £0.79.

Thanks for bringing it to my attention.

scrumpyjack
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Re: Burford bonds

#242468

Postby scrumpyjack » August 7th, 2019, 3:41 pm

Looking at their 2018 accounts, it has the longest audit report I've ever seen! It takes Ernst and Young 9 pages to give a clean audit opinion.

They were obviously worried about how things were valued. Their report lists all the things they did to try and form an opinion.

Maybe Muddy Waters looked more closely.

Too soon to say if this another Quindell but I wouldn't rule it out.

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Re: Burford bonds

#242494

Postby Gan020 » August 7th, 2019, 5:08 pm

I bought BUR3 in the reatil bond raise in May 2017. I sold a quarter in Jan 2019 and then got nervous after the first shareprofits write up. I didn't particluarly agree with much of it but there was just about enough to make me feel uneasy. I sold another quarter in June 2019 and I got lucky last week and sold my remaining holding at 101.77. It was gut feel mostly. I liked the price I could sell for felt I could do better elsewhere with the cash.

I have read the Muddy Waters report today and I shan't be repurchasing any of these bonds. I would recommend reading the full MW report. There are a large number of red flags the largest of which for me is that they've had around 4 accountants in 4 years and the latest one is the wife of the founder (who I have read elsewhere but not verified is not a qualified acccountant). What was a £3b company doing without a qualified accountant as the accountant? It's no wonder they are still on AIM (which makes you wonder why they are on AIM). There's a lot of stuff in the report about questionable valuation of income streams.

What is not discussed at any length in the report is how BUR re-finance the debt when it becomes due, because if the market loses faith, the only choice will be to roll the debt at a very high interest rate.

I invest in bonds as I want a steady income stream with (no/minimal) risk. That no longer applies here so I won't be buying any of these.

I think BUR are going to find it very difficult to raise any new finance (even if they successfully refute MW claims) which means bond interest is going to have to be paid out of profits not new bond issues and may constrain BUR's ability to bring some of the cases currently in place to completion due to lack of funds.

There may be money to be made here but it's not for me. Doesn't fit my risk profile. GLA

gbjbaanb
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Re: Burford bonds

#242714

Postby gbjbaanb » August 8th, 2019, 1:20 pm

Clitheroekid wrote:So much so that I've decided to buy some of the BUR1 at approximately £0.79.

Thanks for bringing it to my attention.


Today they're £0.89... you're welcome! BUR3 did better - 68p to 87p today.

langley59
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Re: Burford bonds

#347384

Postby langley59 » October 13th, 2020, 1:57 pm

With the US listing the BUR share price is climbing back up nicely as confidence rebuilds after the Muddy Waters affair. I hold the BUR2 bonds (as well as the shares) bought on launch and see that I can still add to these below par (just) for a 6%+ yield. Tempting...

88V8
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Re: Burford bonds

#347724

Postby 88V8 » October 14th, 2020, 6:57 pm

langley59 wrote:....see that I can still add to these below par (just) for a 6%+ yield. Tempting...

Well, so long as you're not a widow nor an orphan....

V8


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