Jefferies reiterates 'buy' on Burford Capital, says value of Petersen recoveries underestimated

Analysts at Jefferies reiterated their 'buy' recommendation for shares of Burford Capital, pointing out to clients that the company's share of the legal recoveries from the Petersen investment might reach $2.5bn, which would equate to 55% of the company's market capitalisation.

In their opinion, the market was underestimating that value "although it is both an overhang and a potential positive catalyst for the shares."

The Petersen case involved two Spanish firms - together known as Petersen - which were pushed into bankruptcy by the Argentine government's decision to expropriate oil outfit YPF in 2012.

Those two companies sued the Argentine government in the States, alleging that the expropriation should have been carried out through a tender offer and at price set out in YPF's bylaws, and were now waiting for America's Supreme Court to decide whether or not it would hear an appeal on what the correct jurisdiction for the case was, the US or Argentina.

On the other hand, the asset was also a possible source of capital at a premium to its carrying value on the balance sheet.

Jefferies bumped up its target price for the shares from 2,253p to 2,364p, but only on account for changes in its foreign exchange rate assumptions.

The next step in the jurisdiction would likely take place in the summer or autumn, Jefferies said, with the broker also estimating that the case could be heard in 2020.