New Issues Examined by Oliver Haill 

Undoubtedly, caution continues to keep many new companies from AIM’s door, but institutional investors are still willing to stump up generous sums of cash for the right type of venture. And the clever money at the moment is being channelled into investment companies, particularly those with stated strategies to extract value from current economic conditions.

Receiving the most sizeable backing was LXB Properties, the closed-ended real estate investment trust formed by property veteran Tim Walton to focus on neglected out-of-town retail parks. Armed with the £110 million raised by brokers JP Morgan Cazenove and Oriel Securities, including almost £15.5 million forked out by the board and internal fund management team, LXB plans to capitalise on certain structural changes occurring in its niche.

Walton et al observe that with restrictive national planning guidelines and ‘winning’ retailers which are the battle are still looking for the right leases, it will be able to profit by snapping up old retail parks that have been poorly managed. Once these have been refurbished, extended or redeveloped, they will remain attractive enough to lure any expansionist retailers, ‘while enabling a rental uplift for the landlord at a level to justify the investment’ as well as the upturn in yields upon redevelopment (for more details, see property feature on p12). Up by a penny on their 100p issue price, the shares might have gained more had they not arrived at the peak of the bull run.

Lucrative litigation
Almost as impressive was the $130 million (£80 million) garnered by US commercial litigation lawyers Christopher P Bogart and Selvyn Seidel for their Burford Capital vehicle. An intriguing fund, it plans to generate significant gains from backing companies that wish to fight commercial battles in the law courts in return for a share of the funds awarded through out-of-court settlement or in the final adjudication.

A former general counsel and executive vice president of media conglomerate Time Warner, Bogart says third-party commercial dispute finance is ‘a high-growth market’, pointing to the $161 billion paid out in tort claims against businesses in 2007 and the $18-20 billion, or $450-500 million per case, generated in recoveries by 40 major recent ‘anti-trust’ cases.

He claims that, as an asset class, it is ‘capable of generating highly attractive returns irrespective of the performance of equity markets’. Indeed, among the number of similar specialists to Burford around the globe, AIM is already host to Juridica Investments, up from its 100p December 2007 float price to 122p.

Burford intends to pay out either 90 per cent of the net cash returns generated by its investments until it is paying a dividend equivalent to 5 per cent of the gross placing proceeds, or 50 per cent of the net cash returns from its investment, whichever would represent the larger dividend. Issued at £1, the shares have bounced 7.7p higher and should go further, if somewhat slowly.

Hunger for Chinese
China Private Equity Investment, while the smallest of the three fundraisings, has proved the most popular, leaping to a 46 per cent premium to its $1.80 AIM start price. Whether this implies that broker Shore Capital could have pulled in more than the $5 million raised in the placing, that retail investors retain more hunger for this story than their institutional peers, or that management has only modest plans for now, I’m not sure.

In any event, the British Virgin Islands-incorporated investment company is the brainchild of veteran, and lately Hong Kong-based, banker Patrick Macdougall and Hong Kong venture capitalist Duncan Chui. With a large stake in Chui’s loss-making but fast-growing online content distribution business, Fortel, as an ‘anchor investment’, the pair propose to build a portfolio in China’s ‘dynamic’ telecommunications, media, technology and financial services sectors. Speculative.

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