Investors in the growing field of funder-backed litigation, which finances business disputes in exchange for a cut of the proceeds, are eyeing bankruptcy court as a potentially lucrative new venue, the Wall Street Journal reported today. Chilmark Partners, a bankruptcy and restructuring firm, and litigation funder Burford Capital will team up to finance and advise on legal disputes arising out of U.S. bankruptcy cases, Burford co-founder and Chief Investment Officer Jonathan Molot said yesterday. “It just makes sense that there should be an institutional player that can come in and evaluate these claims,” Mr. Molot said of the more than $100 million venture, called Bankruptcy Litigation Funding LLC. In chapter 11 cases, lawsuits are often assigned to trusts, which can opt to pursue them in hopes of winning a judgment or settlement that can be divided among creditors. Without outside funding, these suits might not be able to proceed. “Many times at the end of bankruptcy cases I have seen major creditors stay interested through confirmation and kick important unresolved disputes down the road,” said David Schulte, Chilmark’s managing general partner.
