What has happened over time is that the concept of legal finance and frankly our brand has become much more ubiquitous in the legal industry. So, it’s rare now for me to meet a partner at a law firm or an in-house lawyer who does not both know the concept of legal finance and Burford. And we’ve historically released some research showing that our brand recognition in the industry is extraordinarily high leaps and bounds beyond anyone else. And so, basically whenever we have a high-profile event, that further – that is either successful or merely affirming, what that does is it further solidifies in the minds of potential users of that capital that this is a real thing, that we are a real business and this is a real thing. And so, events like the 60 Minutes interview last year which was watched by millions and millions of people did that.
The kind of media furor that there has been over the YPF decisions has done that. And even things like the media coverage over our litigation in the food antitrust cases on behalf of Cisco, which was a disclosed $140 million transaction, even that did that because it caused corporate clients to say – to also have a little bit of FOMO, fear of missing out. Gee, my competitors are taking $140 million or now as Jordan said, $325 million from Burford. What am I doing? And I suspect that every day, every time that happens, there are people in the C-suite looking at the General Counsel and looking at the CFO and saying, well, why aren’t we doing that? So, that’s I think what we’re asked. And now, I think we’ve got another telephone question.
Operator: Thank you. Our next audio question comes from Michael Cohen from MDC Financial Research. Michael, your line is now open. Please go ahead.
Michael Cohen: Yes. Thank you for taking my call, and congratulations on the YPF ruling here in the United States. Both of my questions have to do with valuing the YPF balance sheet asset. One of the greatest uncertainties is collectability. I was wondering if you could talk to any comments with regard to collectability leverage that you could have in collectability from a sovereign nation like Argentina. And then the second will be, how any realization will actually be taxed.
Christopher Bogart: Sure. So, let me give a couple of overall comments and Jordan then can touch on the actual sort of accounting and valuation and tax points. This goes back to sort of what Jon and I were saying earlier, we’re just not going to be in a position to go down the road of discussing the substance of enforcement and collectability. We know that people would like us to, but we are very strongly of the view that doing so is a net negative to our position and runs the risk of just injuring shareholders. So, unfortunately, I really can’t give you much there, except to say what we’ve said in the past, which is that Argentina has a long history of aggressively defending itself against litigation for its bad acts, but then has also a long history of resolving and paying judgments and awards that have been made against it after time has passed. Jordan, do you want to – do you want to chime in on the accounting side of things?
Jordan Licht: Yes. Look, with – I think your question was with respect to tax rate. We don’t like to get into the discussion of specific tax rates for a specific asset. So, unfortunately, I’m going to have to leave that one untouched.
Christopher Bogart: And in terms of the valuation?
Michael Cohen: Is there any comments you could make with regards to tax typically on legal receipts or legal realization tax?
Jordan Licht: Look, I think overall what we can say with respect to tax that we use a variety of different structures and so forth. And I think what we have said previously is that the long-term tax rate, corporate tax rate overall for the portfolio is in the low teens. And so, we don’t get into specific assets. But that’s where we expect it to fall out. Obviously, right now, cash taxes has been fairly low.
Michael Cohen: Okay. That’s helpful. Thank you.
Christopher Bogart: Okay. Thanks for the question. Next, we have a webcast question about OpEx, from Rakesh at World Capital. We’ve seen OpEx accruals go up this quarter. Does this follow the same fair value approach with assets or do they accrue simply based on milestones? The latter, is this how we reconcile a net fair value loss due to the impact of rate rises exceeding effective milestones, the increasing rate of OpEx accruals due to the impact of milestones only? So, Jordan is going to take the portion of the question about OpEx accruals and fair value and so on. I would just add as a preliminary matter. But in addition to this as Jordan is going to talk about, there is also a share price component here. As the – because we operate a deferred compensation plan that allows employees to defer compensation into Burford stock, we – even if we buy in Burford stock to cover the potential liability in the deferred compensation plan, which we have done in the past, the wonderfulness of accounting does not permit us to net those two things.
In fact, it’s a punitive impact and frankly, I think a particularly dumb accounting approach where when you let employees put cash into your stock and then you buy stock to cover the future liability, the accountants take that and they take the stock that you’ve bought and put it into treasury and so you don’t get the income benefit from the increase in share price. But they do charge you on the P&L for the share price increase because it’s going to be owed to deferred comp plan participants. So, even if we are perfectly hedged and if we’re not, we’re close, there is an accounting negative to us every time the share price rises, which is particularly perverse, given that we want to encourage employees to own our stock, and we also want not to take the naked risk in the market.
And Jordan will talk about the fair value side.
