Features

Chris Young — Bentham IMF

Tapping into an emerging litigation financial services model

In years past, a small company with valuable litigation claims may not have had the financial wherewithal to navigate the unpredictability and cost of commercial litigation—even if their claims had merit. The alternative might have been to settle for pennies on the dollar, bleed its legal fund dry or simply not proceed with its case.

But not anymore.

Once in the background of financial services, litigation finance has emerged not only as a viable solution for organizations to prosecute commercial claims, but also as an attractive, non-correlated asset class for investors.

Chris Young — Bentham IMF Vanguard Law Magazine

Bentham IMF and its parent company, IMF Bentham Limited, are leaders in the litigation finance space, managing investor capital used by claimants and law firms to recover damages in commercial disputes. IMF trades on the Australian Stock Exchange and operates in Australia, Singapore, Hong Kong, London, Canada, New York, Houston, Los Angeles and San Francisco.

Behind the scenes handling all U.S. legal, transactional and regulatory matters is Chris Young, Bentham’s corporate counsel and chief compliance officer.

“The work I do at Bentham is so exciting,” says Young, who arrived in 2017 with a strong background in banking and financial services. “I am fortunate to be leading complex, bespoke financings, partnering with investment managers (former litigators) that are focused on providing exceptional client service. As our industry continues to mature, there’s great opportunity to contribute to our own growth and mitigate institutional risk.”

Doing the math

Bentham provides non-recourse funding to claimants and law firms in disputes relating to patent and trademark infringement, international arbitration, antitrust, fraud, whistleblower actions, fraudulent conveyance and avoidance actions in bankruptcy, among other types of commercial claims.

With a staff of seasoned former litigators, Bentham views litigation as an asset. And because Bentham  only recovers a return if the litigation is successful, Bentham’s investment team analyzes many risks before underwriting a potential funding transaction.

“For every opportunity, we assess the merits and stage of the case, collectability of damages, timeframe for recovery, the prospects of settlement, and even who the judge might be,” he says. “We have to determine if we see a likelihood of success and recovery from a defendant. We are underwriting an investment in an asset (litigation), just like a hedge fund would analyze whether to invest in a bonds, loans or equity.”

Young explains that Bentham’s funding is secured only by the proceeds of claims, allowing claimants to de-risk and level the playing field with defendants who have deeper pockets. At the same time, Young notes, “We’re providing a financial service and we want to make sure our clients recover the majority of the proceeds.”

From balance sheet to asset managerChris Young — Bentham IMF Vanguard Law Magazine

Arriving at Bentham to become its first in-house U.S. corporate counsel primarily handling funding transactions, Young was pleasantly surprised to be working on Bentham’s transition to a U.S. investment adviser in his second year with the firm.

In 2018, Young worked with Bentham’s management and outside counsel to establish a $500 million U.S. fund, which has the capacity to be increased to $1 billion in committed investments. Young also assisted with the structuring and implementation of its recent international fund, also a $500 million committed fund.

“We’ve moved from a funder that used its own balance sheet to an asset manager. This development was integral to our long-term strategy, as we have secured better economics for our firm and given our clients the benefit of accessing larger amounts of capital, all while delivering attractive, risk-adjusted returns to our investors,” says Young.

Navigating the compliance world

To manage investor capital, in 2018 Bentham registered as an investment adviser with the SEC under the Investment Advisers Act of 1940.

In his role as CCO, it’s Young’s job to ensure Bentham remains in compliance with all applicable SEC rules and regulations.

To that end, Young worked closely with outside counsel, Katten Muchin Rosenman LLP, to prepare Bentham’s Form ADV, code of conduct and compliance manual. He also ensures that his staff complies with SEC regulations prohibiting insider trading, oversees the firm’s restricted list, analyzes non-public information material, reviews marketing materials, and ensures appropriate data security and record retention practices.

“Our staff has embraced the compliance program,” Young notes. “Our employees consistently do the right thing, educate themselves and take ownership over their actions.”

Allies in analysis

While Young strives to handle Bentham’s daily transactional and compliance needs internally, he maintains a strong partnership with Katten, which is intimately familiar with Bentham’s business model. He looks to Katten for complex securities, tax, and regulatory matters and says that Katten’s advice is continually strategic, creatively conservative, efficient and solution oriented.

“Chris’ extensive experience in credit, coupled with Katten’s knowledge of the Investment Advisers Act and deep understanding of transactional and regulatory issues and tax consequences, created a true collaborative partnership,” Katten’s Co-Chair of Investment Management and Funds  Allison Yacker says. “Working with Chris, I’m impressed with his tireless work ethic and ability to master the complex nuances of monetizing litigation assets.”

While litigation finance is growing more popular, litigation funders were backing cases even prior to the financial crisis, notes Young.

Young says, “Litigation finance is becoming more recognized as an established asset class. In a low interest rate environment, instead of squeezing basis points from traditional assets, investors can seek higher IRRs in a non-correlated asset and recover multiples on invested capital or a percentage of a larger recovery.”

There is no established secondary market for litigation finance investments, so the asset class is mostly illiquid.

“The fact that there is no market for these investments makes our underwriting standards so important,” Young says. “Our investment committee seeks comfort that years down the line, there is an “exit” that gives us a return. With no market on which to trade the asset, litigation finance is very similar to private equity.”

Leap of faith rewarded

A graduate of Yale University in 2004, Young was an American studies major and was catcher for the Bulldogs baseball team. He earned his J.D. from Cardozo Law in 2007 and his LLM in taxation from NYU in 2008.

During his law firm years with Carter Ledyard & Milburn LLP and Hunton Andrews Kurth, Young handled distressed debt, structured finance, and lending for large banks, including Bank of New York Mellon, Credit Suisse, JPMorgan Chase, Barclays, and RBS—the latter recruiting him to go in-house in 2012.

During his five years at RBS, Young oversaw its global Special Situations credit trading desks, working with traders, analysts and salespeople. He later covered syndicated loan origination, where he helped portfolio managers and credit underwriting arrange large, high-yield secured credit facilities. Young also worked on firm-wide strategic initiatives, including a $1.2 billion sale of non-performing loans to Mizuho and an IPO with RBS’ former retail bank, Citizens Bank. He also drafted and negotiated vendor contracts, implemented policies and procedures, and supported operations, finance and tax functions.

In 2017, Young left traditional banking for the unknown—the litigation finance industry. It’s the kind of leap of faith that has defined much of his career.

“I’ve always embraced change. I didn’t know exactly what to expect when I joined Bentham, but I love the firm and this burgeoning market, and I am exactly where I am supposed to be,” he says.

Young resides in Westport, Connecticut, where he takes his daughters, Alden, 6, and Celia, 3, to the bus stop before work every morning and to the diner every Saturday. He also enjoys coaching soccer and watching Netflix with his wife Miriam.

Published on: October 8, 2019

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