Leading insolvency litigation funder Manolete is to receive more cases from Barclays to recover Covid Bounce Back Loans (BBL) that appear to have been misappropriated by company directors.
The listed company said yesterday that the success of the pilot it has been working on with Barclays has led the British Business Bank to approve an increase in the scale of the pilot.
A trading update for the six months to 30 September said that another “well-known bank” is soon to start its own BBL recovery programme with Manolete. It has so far funded 81 BBL cases for loans worth up to £50,000.
Investors were told that they “tend to settle materially faster” than Manolete’s average case duration of around a year.
More broadly, Manolete has had a very strong first six months of trading this year, with 146 new, non-BBL investments (and 179 with them), compared to just 83 in the first half of 2022, when post-Covid restrictions on insolvency market were just being lifted.
In the second half of 2022, the company invested in 180 new cases, including 48 BBL claims.
This meant that over the last year, Manolete has invested in 359 new cases, equivalent to 1.4 every business day, compared to a pre-pandemic high of 141.
Manolete completed 116 cases in the first six months, 22% higher than the same period last year. Their total value was £9.2m, with a money multiple of 2.3x.
The average size of completed cases, at £79,300 per case, was 18% lower than in 2022/23 and Manolete said this, along with investment in the business as it looked to build capacity, would mean profitability “at marginally less than was reported for H2 FY23”.
“This reflects the fact that the first wave of new cases emerging post-pandemic primarily relate to the high number of smaller UK companies that tend to take the creditors voluntary liquidation (CVLs) insolvency route.
“It is the high CVL numbers that have driven the current high growth of overall insolvencies in the UK post-pandemic. It is only in the last seven months that the UK insolvency market has seen any sustained recovery to pre-pandemic levels of administration appointments, which is the usual insolvency route for larger company insolvencies.
“As the insolvency market develops through the current business cycle, the directors anticipate a return to higher average case sizes, reflecting a greater mix of larger company insolvencies.”
The announcement added that August’s Supreme Court ruling in PACCAR – that litigation funding agreements were caught by the regulations on damages-based agreements – “has had no adverse impact, necessitating only very minor amendments to the standard terms of our funding agreements”.
Funded cases typically account for just 5% of Manolete’s total case investments, with the rest being purchased cases, where PACCAR has no relevance.