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High Yield Litigation Bonds for
Mis-Sold PPI and MPPI
Capturing Growth in Adverse Times
On-line Informational Presentation...
ADJUST
Law Capital
Background
 Between 2006 and 2011 numerous financial firms were fined
by the Financial Services Author...
ADJUST
Law Capital
Background
 The amount paid out for
mis-sold PPI since January
2011 is £5.9 Bn
 The FSA estimates tha...
ADJUST
Law Capital
Common Examples of Mis-Sold PPI
The high court has ruled that PPI is mis-sold when
Claimant:
 Did not ...
ADJUST
Law Capital
Scale of the PPI Reclaim Market
 PPI Payments Hit over £1.9bn in 2011 according to FSA
 Following the...
ADJUST
Law Capital
PPI complaints have increased substantially
following the April 2011 ruling…
Complaints to the Financia...
ADJUST
Law Capital
Third Party Litigation Funding (TPLF)
 Nothing new (Insurers, Banks, Unions, Legal Aid
Funds, etc.) In...
ADJUST
Law Capital
TPLF Has Entered the Mainstream
 The market in the US and UK for litigation financing is
estimated to ...
ADJUST
Law Capital
Fund Strategy
 Adjust Law Capital aims to create a fund valued at
£200M+
 The Fund will enable Adjust...
ADJUST
Law Capital
Operating Structure
 All cases are screened by a Ministry of Justice (MoJ)
regulated claims referral c...
ADJUST
Law Capital
Transaction Structure
Claimants
Assets
Purchased
Funding
Claims
Settlements
£ Return
£££
Litigation
MoJ...
ADJUST
Law Capital
Risk Factors
Risk Mitigant
Validity of Claim/ Win Rate All claims purchased from MoJ regulated claims
m...
ADJUST
Law Capital
Efficiency
 Average duration of 9
months to judgment
 Trial costs cause last
minute settlements
 Use...
ADJUST
Law Capital
Total Settlement
= £7,700
Investor
Adjust Law Capital Fund
Appellant
Investment example
of £10M
Adjust ...
ADJUST
Law Capital
Example of £10M Investment
(Not Compounded)
Year 1 Year 2 Year 3 Year 4 Year 5 ROI
Guaranteed 6.60% 10,...
ADJUST
Law Capital
Guaranteed 6.60%
Quarterly 8.70%
Annual 9.10%
£2,113,555
£5,175,665
£5,456,948
0
2
4
6
8
10
12
14
16
Ye...
ADJUST
Law Capital
The Firm
 Offices in Liverpool and Manchester
 Regulated by the Solicitors Regulation Authority (SRA)...
ADJUST
Law Capital
The Board
Colin Downie has 17 years of post qualification experience as a
solicitor in private practice...
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Third Party Litigation Funding (TPLF)

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This presentation was used to inform and educate hedge funds on TPLF a few years ago. The bottom fell out of most of the hedge funds that were in my pipeline so I decided not to quit my day job.

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Third Party Litigation Funding (TPLF)

  1. 1. High Yield Litigation Bonds for Mis-Sold PPI and MPPI Capturing Growth in Adverse Times On-line Informational Presentation Ian Finlayson Institutional Sales Manager ADJUST Law Capital Chris Miller Consultant / TPLF Investment Strategy Presented By:
  2. 2. ADJUST Law Capital Background  Between 2006 and 2011 numerous financial firms were fined by the Financial Services Authority (FSA) for mis-sold PPI  In April 2011, the Royal Courts of Justice imposed standards requiring banks to compensate customers who were mis-sold Payment Protection Insurance (PPI) retrospectively  Claims for mis-sold PPI can be processed as far back as 6 years. MPPI can be processed as far back as 12 years  On 9 May 2011, the British Bankers‟ Association (BBA) chose not to appeal against the High Court‟s payment protection insurance (PPI) judgment
  3. 3. ADJUST Law Capital Background  The amount paid out for mis-sold PPI since January 2011 is £5.9 Bn  The FSA estimates that issuers and advisers overcharged customers by more than £1.4 Bn a year PPI Claims Paid (in Millions)  Mis-selling happens in all countries – there are several, interconnected reasons why the UK industry has been made to pay so heavily for it 0 100 200 300 400 500 600 700 800
  4. 4. ADJUST Law Capital Common Examples of Mis-Sold PPI The high court has ruled that PPI is mis-sold when Claimant:  Did not Understand The Terms  Was Told It Was Compulsory  Did Not Have a Full Time Job  Had Certain Medical Conditions That Made Them Exempt  Was sold Under False Pretences  Having to Opt OUT of the Policy (online)  Was Already covered elsewhere  Paid Up Front
  5. 5. ADJUST Law Capital Scale of the PPI Reclaim Market  PPI Payments Hit over £1.9bn in 2011 according to FSA  Following the High Court ruling on 6 April 2011, Barclays, Lloyds, HSBC, RBS and others have collectively set aside over £11Bn  Almost two thirds of all the disputes sent to the FOS relate to mis-sold PPI  Complaints totaled 85,562 between January and June - an increase of 75% compared to the final six months of 2011  Average payout per customer is £2,400
  6. 6. ADJUST Law Capital PPI complaints have increased substantially following the April 2011 ruling… Complaints to the Financial Ombudsman Service (FOS) surged by 50% in first half of 2011, with PPI complaints accounting for over 60% of total complaints in the period 0 50000 100000 150000 200000 250000 300000 350000 2007 2008 2009 2010 2011 2012 Q1 2013 est Banking and Credit Investment and Pensions Insurance ex. PPI PPI
  7. 7. ADJUST Law Capital Third Party Litigation Funding (TPLF)  Nothing new (Insurers, Banks, Unions, Legal Aid Funds, etc.) In the US, banks, special TPLF funds and hedge funds are investing substantial capital  Australia has been using TPLF for over 15 years; the UK since 2005; emerged as an asset class in the US in 1997 and has since become a growing phenomenon for mass tort cases outside the US  In 2004, nine lenders specializing in litigation loans to tort plaintiffs formed a trade association known as the American Third-Party Financing Association  Today, basically all top law firms are using or assessing external funding for litigation or arbitration
  8. 8. ADJUST Law Capital TPLF Has Entered the Mainstream  The market in the US and UK for litigation financing is estimated to exceed $1 billion in 2012 1  TPLF is categorized as an “uncorrelated investment” because the returns are not correlated to the price movements of the stock, bond, commodity or traditional markets  Current economic conditions have provided fertile ground for the growth of TPLF. Returns are typically high regardless of the performance of traditional asset classes  TPLF has emerged worldwide as a way to increase access to justice, “level the playing field” and mitigate the costs and risks involved in pursuing claims 1. N.Y.C. Bar Ass’n Comm. on Prof’l and Judicial Ethics, Formal Op. 2011-2 (2011)
  9. 9. ADJUST Law Capital Fund Strategy  Adjust Law Capital aims to create a fund valued at £200M+  The Fund will enable Adjust Law Solicitors to acquire and pursue 150K to 200K cases  The average claim value of a case that Adjust Law Solicitors will conduct is £4,000  Each case has an average net return to Adjust Law Solicitors of £3,500
  10. 10. ADJUST Law Capital Operating Structure  All cases are screened by a Ministry of Justice (MoJ) regulated claims referral company to ensure they meet strict vetting criteria  After The Event (ATE) insurance policy enables Adjust to recover court fees, disbursements and other costs in the rare event of a lost case  No up front fee for client - client receives 100% of their award in every single case  Adjust Law Solicitors have developed a proprietary software system that allows the practice to process a large volume of cases in a rapid and cost efficient manner
  11. 11. ADJUST Law Capital Transaction Structure Claimants Assets Purchased Funding Claims Settlements £ Return £££ Litigation MoJ Compliant Claims Registrant Adjust Law Solicitors Adjust Law Capital Fund Claim Assets >£800M InvestorInvestor Investor Adjust Law Capital Fund Adjust Law Capital Fund £200M+ Adjust Law Capital Fund Claim Assets >£800M
  12. 12. ADJUST Law Capital Risk Factors Risk Mitigant Validity of Claim/ Win Rate All claims purchased from MoJ regulated claims management company (CMCs); all cases meet strict vetting criteria. Win-rate = 98% Possible obstacles to recovering award To maintain compliance with the FSA banks have collectively set aside over £11bn in provisions for those who were mis-sold PPI Reduction in claims due to either competition with CMCs or self processing of claims Complaints are mounting against many CMCs that are not regulated by the MoJ and many have been forced to shut down. Less than 50% of claimants self process claims Expense of Lost Cases/ Negative Returns After-the-Event Insurance eliminates any negative return due to any lost cases
  13. 13. ADJUST Law Capital Efficiency  Average duration of 9 months to judgment  Trial costs cause last minute settlements  Use of mediation increases probability of early settlement  Use of MoJ registered CMCs and Adjust Law Solicitors‟ bespoke software ensures a 98% win rate  ATE Insurance mitigates loss
  14. 14. ADJUST Law Capital Total Settlement = £7,700 Investor Adjust Law Capital Fund Appellant Investment example of £10M Adjust acquires and processes 10,000 pre validated PPI Claims Cases at a cost of < £1,000 each; £600.00 to purchase claim £400.00 for processing fees, e.g: Court Filings & Brief to Senior Counsel Average Claim £4,200.00 Adjust Law has 98% Win Rate Solicitors Professional Indemnity covers investment capital ATE Insurance covers court fees in the event of a lost case Claimant Paid Out From Successful Claim 100% of initial claim £4,200.00 Adjust Law Solicitors Court awarded legal costs to Adjust Law Group average £3,500.00 per claim Claimant Invested capital £I,000.00 Int @ 9.1%pa £91.00 TOTAL: £1,091.00 100% of initial claim paid. No Upfront fees or success fees. £4,200.00Balance = £2,410.00 Less Ave Costs; £2150.00 Per Case Profit = £260.00 Example Investment Flow £1,091.00 X 10,000 Cases = £10,910,000.00
  15. 15. ADJUST Law Capital Example of £10M Investment (Not Compounded) Year 1 Year 2 Year 3 Year 4 Year 5 ROI Guaranteed 6.60% 10,660,000 10,660,000 10,660,000 1,980,000 Quarterly 8.70% 10,870,000 10,870,000 10,870,000 10,870,000 10,870,000 2,610,000 Annual 9.10% 10,910,000 10,910,000 10,910,000 10,910,000 10,910,000 2,730,000 £0 £500,000 £1,000,000£1,500,000£2,000,000£2,500,000£3,000,000 Guaranteed 6.60% Quarterly 8.70% Annual 9.10% 1,980,000 2,610,000 2,730,000
  16. 16. ADJUST Law Capital Guaranteed 6.60% Quarterly 8.70% Annual 9.10% £2,113,555 £5,175,665 £5,456,948 0 2 4 6 8 10 12 14 16 Year 1 Year 2 Year 3 Year 5 Guaranteed 6.60% 10,660,000 11,363,560 12,113,555 Quarterly 8.70% 10,870,000 11,815,690 12,843,655 15,175,665 Annual 9.10% 10,910,000 11,902,810 12,985,966 15,456,948 £Millions Example of £10M Investment (Compounded)
  17. 17. ADJUST Law Capital The Firm  Offices in Liverpool and Manchester  Regulated by the Solicitors Regulation Authority (SRA)  Incorporated May „06; bought out by the current directors in ‟09  Specialist in securing successes against high street lenders, including Lloyds Banking Group, Barclays, HSBC, Santander, RBS Group, and sub-prime lenders and finance houses such as Welcome  Significant experience operating in Mis-Sold PPI market, settled 541 cases by early May 2011 with 539 having successful outcomes for claimants
  18. 18. ADJUST Law Capital The Board Colin Downie has 17 years of post qualification experience as a solicitor in private practice. He trained with Pannone Solicitors in Manchester and after qualification has gained considerable experience in a wide variety of litigation and as an advocate. Mr Downie is the Chief Executive Officer of Adjust. Mike Wilson qualified in 2001 having trained with Paul Rooney & Co, a leading litigation practice. He worked with Colemans Solicitors in Manchester specialising in personal injury claims and has worked closely with Colin Downie since 2003. David Brown has practised in law since 1994 and in that time has gained considerable experience and expertise in different areas of litigation. He has brought multi Claimant proceedings in consumer credit cases against a wide variety of banks and has represented Government agencies in litigation proceedings.

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