Soaring insolvencies boost litigation funder to record year

Cooklin: Favourable trading conditions

Listed insolvency litigation funder Manolete Partners has enjoyed a record year so far as the number of insolvencies in the UK soars, with more new cases than ever before, it revealed yesterday.

However, the joy was dampened by the company’s failure to persuade the Court of Appeal to overturn a decision to dismiss its claim against the owner of a poultry business. It was the first time one of its cases reached the court.

In a trading update, Manolete said it has so far invested in 246 new cases in the current financial year (to 31 March 2023), already the highest ever.

It is 55% more than the 159 for the whole of FY22, but that year – and the first half of the current year – were impacted by government Covid measures that restricted insolvencies.

Manolete has also completed a record number of cases, 168 (compared to 139 in FY22), mainly through settlements “plus a small number of favourable court judgments”. As a result, it has achieved record gross cash recoveries.

In all, by the end of last month, the company had generated £8.7m of net cash, nearly three times the same period in the previous financial year.

Having a made a loss of £5.5m in the first half of the year, it said this should be reduced when the full-year results were released.

Manolete announced last November that it was working on a pilot with Barclays Bank to assist in the recovery of Bounce Back Loans (BBL) that appeared to have been misappropriated by company directors.

There are 119 companies in the pilot and 45 cases have so far been assigned to Manolete, of which three have already settled, with offers to settle on a further seven.

“In all but one of those combined 10 cases, the directors have offered, or agreed to re-pay, the full amount of the mis-appropriated BBL,” the announcement said. “This is encouraging progress as the Manolete team have only had access to these cases for a few weeks.”

Manolete told investors it was now in “advanced discussions with another major UK high street bank” over a similar pilot. “While still at a relatively early stage, the BBL recovery opportunity is potentially highly significant,” it said.

The company’s shares slumped last year after the High Court ruling and today the Court of Appeal upheld the decision.

Manolete had claimed that Bolton Poultry’s turnover was considerably greater than appeared in its annual accounts and had been reported to HM Revenue & Customs, and that one of the directors was liable to account for the additional profits made.

“While this is disappointing, it is one of the very few that the company has lost at trial in its 13-year history, an enviable track record in the litigation finance industry,” it said.

“The full write-off of the fair value of this case had already been accounted in H1 FY23. The final costs (including adverse costs) consequent to the appeal of c.£750k, relating to this case, will now be written off in H2 FY23 and a line drawn under the matter.”

Manolete said that more than 97% of the 665 cases completed in its history have settled before trial.

Chief executive Steven Cooklin commented: “The UK is now experiencing record high levels of insolvencies and that is directly leading to the company’s impressive operating performance.

“With the persistent macro headwinds of inflation and significantly higher interest rates, the board expects these favourable trading conditions to persist for the foreseeable future.”

Manolete has now invested in over 1,000 UK insolvency litigation claims in its lifetime, over 80% of which it has purchased rather than funded, a figure that has increased in recent years.

Our annual review of the performance of listed legal businesses’ share prices found that Manolete’s was the only one not to fall in 2022, ending up 2.5p at 252.5p, having been 330p earlier in the year. It closed at 262p yesterday.

The shares reached an all-time high of 585p in May 2020.

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