Professional Services Group RBG announced on Tuesday that its subsidiary LionFish Litigation Finance has entered into a £20 million litigation investment agreement with an unnamed alternative investment firm.
Under the deal, the company would participate in all of LionFish’s litigation investments, investing up to 75% in each across the portfolio over a two-year period.
LionFish would be entitled to receive a “significant share” of the returns from the arrangement after a high single-digit return hurdle is met, thereby providing “significant additional potential returns” to LionFish beyond its own investment .
RBG said LionFish would have discretion as to which investments to pursue within a wide range of agreed parameters, which the board said would be similar to its current investment parameters.
The purpose of the arrangement would be to maintain LionFish’s selective and quality-focused investment standards, without any undue deployment pressure.
LionFish would also be responsible for administering each underlying litigation investment.
The company said the arrangement would provide LionFish with significant additional capital flexibility in its investments, allowing it to manage a more diversified and granular risk portfolio off its balance sheet, as well as move away from the sell-to-investor model. currently used to reduce risk.
By partnering with a large alternative investment manager, he said LionFish had the ability to extend or repeat the deal on an ongoing basis, potentially providing a flexible, long-term source of capital that could grow as of the activity.
The arrangement was approved by RBG’s banking partners and was not a debt or credit facility, with the board saying the group’s balance sheet would remain unchanged.
“This agreement is a significant development in the long-term growth of LionFish and a validation of our decision to enter the third-party litigation funding market,” said Nicola Foulston, CEO of RBG.
“The Arrangement will support our move away from our current model of selling equity interests in businesses to investors.
“This will provide LionFish with the right kind of flexible capital to allow the management team to focus on the quality of earnings, not the amount of money deployed in litigation risk.”
As of 14:01 GMT, RBG Holdings shares were up 2.54% at 127.66p.