A bankruptcy trustee’s innovative use of capital

Company challenge

For more than a decade, MagCorp had been embroiled in a lawsuit against its former holding company over allegations that the company helped drive MagCorp into bankruptcy. MagCorp’s bankruptcy trustee was confident MagCorp would ultimately win its appeal and collect its substantial judgment, but after litigating against a billionaire for 13 years, the trustee was running low on the funds needed to see the matter through to its conclusion.

Burford legal finance solution

MagCorp’s trustee Lee Buchwald and Nicholas Kajon of Stevens & Lee found a solution to its cash flow issues by arranging the unprecedented sale at public auction of an interest in the right to receive litigation recoveries from MagCorp’s $213 million judgment on appeal. 

Legal finance impact

The $26.2 million sale to Gerchen Keller Capital (later acquired by Burford) enabled the estate to liquidate a portion of a contingent asset, hedge against appellate risk and guarantee a minimum recovery to MagCorp’s creditors. The solution won the award for “Most Innovative” at the Financial Times Innovative Lawyers Awards for North America in December 2017.