Bankruptcy filings have dropped precipitously in the last decade (from more than 60,000 in 2009 to 22,000 last year) — but that trend has reversed as companies deal with the devastating consequences of the pandemic. Law firms are reportedly scrambling to hire bankruptcy attorneys to help with the flood of expected filings. Litigation finance may be a creative and viable option for restructuring attorneys and advisors to consider throughout the bankruptcy process especially as traditional sources of financing by outside lenders, creditors and law firms are constrained by the current environment.

Litigation finance can preserve or increase estate resources for creditors and enable additional recoveries. But its use is not limited to a debtor or potential debtor. Financing can be useful for creditors in intercreditor disputes or other matters and especially useful for a litigation or liquidation trust seeking to prosecute ongoing claims. Here are some examples where litigation finance may be an attractive option (although creative restructuring professionals may find it useful in a host of other circumstances):

By now you’ve likely heard about litigation finance and some of the advantages it can offer to claimholders (in a nutshell, the flexibility to pursue a claim without having to pay attorneys’ fees or other costs from the company’s balance sheet, as well as the ability to monetize all or a portion of a claim). “Sounds great,” you might be thinking, “but how much is this going to cost me?”

This article will review the basic pricing structures that litigation funders typically employ and the reasons why a claimholder may prefer one approach over another. At Lake Whillans, we have transacted using each of these pricing structures, and approach each transaction flexibly with the mindset of utilizing whatever structure works best for the claimholder. Further, we provide pricing early in the process; you can generally expect to have terms from us within 5-10 days of reaching out to discuss your matter.

In light of the rapidly shifting economy, many law firms and their clients are facing greater challenges in financing meritorious litigation. Litigants are taking stock of their cases and the path forward, mindful of increased pressure to reduce and conserve budgets. Law firms are assessing potentially heightened collection risks. In this uncertain environment, litigation funders like Lake Whillans stand ready to serve as a resource to both claimholders and law firms.

If you lead a corporation that holds monetizable litigation claims, the potential advantages of litigation finance as a risk-reduction mechanism merit careful attention. Similarly, if you lead a law firm that is bringing claims on a contingent fee basis, you may wish to explore the benefits of receiving upfront, non-recourse funding collateralized by a portfolio of the firm’s contingent fee cases.

In our first article in this series, we explained what litigation financing is and the various structures or “flavors” that are typical in the market. But why are companies using it? Is it only cash-strapped companies that look to litigation funding? While filling the budget gap is certainly one benefit, there are multiple reasons why litigation finance is gaining in popularity with corporate general counsels’ offices

Lake Whillans closely follows developments around the world related to third-party funding. As third-party funding becomes mainstream in jurisdictions like the U.K. and U.S., it is not surprising that other jurisdictions have begun to pass laws that expressly permit third-party funding, effectively recognizing the utility of third-party funding to claimholders, the lack of detrimental effect to a legal system, and the fact that third-party funding helps make the jurisdiction an attractive forum for resolving commercial disputes. Jurisdictions in the Middle East have recently followed the trend, and we asked Thomas Snider, Head of Arbitration for Al Tamimi & Company, the largest law firm in the Middle East, and his colleagues, Jane Rahman and Khushboo Shahdadpuri, to educate us on the status of third-party funding in the Middle East