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Gramercy, a US hedge fund, has made headlines by securing one of the largest litigation funding deals ever. The deal involves backing separate trials against miners BHP and Vale and 14 global carmakers in mass environmental claims. This funding, totaling $552.5 million, is in the form of a secured loan provided to law firm Pogust Goodhead. This deal sets a new record for the UK law firm in the $16 billion litigation funding market.
The law firm is currently pursuing the UK’s biggest opt-in class action lawsuit on behalf of 700,000 Brazilian claimants affected by the 2015 collapse of the Fundão tailings dam at the Samarco Mariana mine complex. The trial is scheduled to begin in London in October 2024 and seeks compensation for damages caused by the disaster to homes and livelihoods.
Pogust Goodhead is also involved in more than a dozen lawsuits on behalf of one million UK customers of 14 carmakers involved in the dieselgate scandal. The firm has already reached a £193 million settlement with Volkswagen and has a trial against Mercedes scheduled for next year.
The funding commitment made by Gramercy is significant, especially considering its $6 billion worth of assets under management. Gramercy is well-known for its investments in emerging markets, particularly in Russia and Argentina. This loan arrangement also includes co-investments from some of the fund’s clients.
Investments like these are a key part of Gramercy’s appeal to clients, showcasing its ability to deliver returns regardless of market conditions. Founder Robert Koenigsberger stated, “It’s becoming an important area for us in global markets. We feel like we are coming into the sweet spot of litigation funding.”
Gramercy’s flagship fund has yielded a 15% return year-to-date, according to an investor. The litigation funding market was valued at $15.8 billion last year and is expected to grow by 9% annually in the next five years, as predicted by RationalStat.
Pogust Goodhead stands to receive up to 30% of the settlement in the mine case, in partnership with local Brazilian lawyers, if they win the lawsuit. “This transaction with Gramercy gives us the ability to bring the fight to any wrongdoer,” said Harris Pogust, the law firm’s chair.
Gramercy structured its investment as a secured loan to avoid legal concerns following a recent UK Supreme Court decision on litigation funding arrangements. The court decision nullified a funding agreement in a competition case involving the Road Haulage Association and truckmakers such as DAF.
Pogust Goodhead has previously received two rounds of funding totaling £150 million from NorthWall Capital, a London-based credit specialist.
“These claims are real, but [the law firm] was financially depleted,” said James Taylor, head of special situations at Gramercy. “This gives them the financial power to finish the job. The defendants are not going to be able to wait them out.”
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