A Primer on Third party funding: How to monetise disputes to generate profit

Scales with wooden gavel and lots of money

It is almost tautologous to say that the pandemic has caused a deep economic crisis affecting businesses across various sectors and industries. In order to survive such a downturn, organizations need to think of creative solutions to survive and indeed, thrive. Using third party funding (also known as litigation funding) to unlock the value of contingent assets, such as litigation claims, is a novel way to create cash flow and manage liquidity risks.

A litigation funder, such as Omni Bridgeway, can provide capital for businesses with meritorious commercial claims, in exchange for a return only upon a successful recovery in the litigation. The nature of such funding is non-recourse, meaning that the business is not liable if the claim fails. Instead, the company in question is able to monetize such claims to create revenue to finance the litigation and/or its core business needs with no balance sheet liability.

Not only does this funding model have an obvious appeal over traditional bank lending in times of economic uncertainty, it also allows corporates to preserve and direct their capital towards profit making ventures and growth, rather than to be saddled with litigation expenses. By transferring the downside risk of complex commercial disputes to a funder, corporates can better manage cash flow and reduce drag on their profitability arising out of costly disputes.

Omni Bridgeway offers the ability to assess the merits of not just a single case, but a number of cases that a company may have and invest non-recourse capital in a portfolio comprised of several legal actions (including claims and defences). Whether paying litigation fees and costs through the life of a single case or deploying capital to support pools of cases, the funding which Omni Bridgeway provides can also contain a working capital component; this allows the company to book the capital infusion as a financial asset.

Indeed, investing in several cases at once also allows the funder to significantly increase the level of investment it can provide. Funding from Omni Bridgeway has been used as additional working capital to meet operational needs, address short-term debt obligations, and retain key employees to ensure that the company can withstand the often-lengthy litigation process. And because the cases are cross-collateralized, the arrangement typically reduces both the risk to the funder and its pricing.

Partnering with a litigation funder also brings with it other benefits. For example, Omni Bridgeway is a world class funder listed on the ASX with over 30 years of experience in assessing, funding and managing claims around the world, and boasts an unmatched track record. It brings to the table the knowledge, commercial acumen, strategic insights and experience of a multi-disciplinary team across 18 offices in 10 countries, thereby improving the prospects of success of a claim and alleviating the stress associated with managing and running such claims. Uniquely, Omni Bridgeway also has an experienced global judgment and award enforcement team with the know how to ensure that a recalcitrant respondent will pay an award or judgement. Put simply, Omni Bridgeway is a formidable ally in any dispute, and because it is highly selective and only invests in meritorious cases, signals to a party that a claim against them is neither fanciful nor frivolous and must be taken seriously.

To learn more about Omni Bridgeway’s litigation funding and enforcement capabilities, contact amanoosegaran@omnibridgeway.com