Carson Block, founder and chief investment officer of Muddy Waters Capital LLC, speaks during a Bloomberg Television interview in Hong Kong, China, on Tuesday, June 6, 2017. Block said his newest idea is a stock listed in the city. He is scheduled to announce it at the Sohn Hong Kong Conference just after 2 p.m. on Wednesday. Photographer: Anthony Kwan/Bloomberg
Carson Block of Muddy Waters said the latest move by Burford is a 'farce' © Bloomberg

Burford Capital, the litigation funder under attack from short-seller Muddy Waters, has demoted the wife of its chief executive from her role as finance director and pledged to overhaul its board.

Former stock market darling Burford is reeling from allegations hurled by Carson Block of Muddy Waters last week, who accused it of being “arguably insolvent” in a blistering tirade and hit out at its “laughter-inducing” governance structure.

Burford, which makes money by funding lawsuits and taking a share of the proceeds, said it had replaced Elizabeth O’Connell, wife of chief executive Christopher Bogart, as finance chief with “immediate effect”. Jim Kilman, a former Morgan Stanley banker, was named as her replacement.

Mr Block said the notion that the move would improve governance was a “farce” and some analysts and rivals greeted it with scepticism. Mr Kilman has served as senior adviser to Burford since 2016 and acted as Burford’s principal investment banker at Morgan Stanley.

“It is clear from this that Burford is more interested in imposing fig leaves than real guard rails,” said Mr Block. “This seems more a question of who would do the job and who wasn’t married to the CEO.”

However, the market reacted positively, with shares in Burford jumping 13 per cent to 880.5p. Burford’s £1.9bn valuation is still down more than a fifth since Muddy Waters’ intervention.

Burford also pledged to replace two of its board members — Peter Middleton and David Lowe — and replace them with two new independent directors at the company’s next two AGMs. Each of Burford’s directors has sat on the company’s board for around 10 years.

Burford also moved to reassure the market over transparency issues by restating its desire to list on the Nasdaq or the New York Stock Exchange before March 2020 and said it would seek a listing on London’s main market if those efforts failed.

Julian Roberts, a Jefferies analyst, said the listing news was “positive, both from a governance and a business point of view”.

The war of words since Muddy’s first salvo on Burford last week has since escalated, with Burford accusing the firm of market manipulation.

Critics said its changes did nothing to resolve the main accusations against the company, that Burford has been aggressively marking up the value of its portfolio by manipulating returns metrics.

Justin Bates, a Canaccord Genuity analyst, said the move was a “step in the right direction”, but would likely “fall short of what people were hoping for”.

In a call with its bondholders on Wednesday, Burford’s management said it was considering getting a credit rating, according to an investor who listened to the call, without making a firm commitment.

Muddy Waters cited Burford’s lack of a credit rating as a red flag in its report. Burford has issued £365m and $180m of bonds that can be bought by the general public as well as fund management firms. Its largest institutional bondholder, Swiss asset manager GAM, dumped its entire holdings of its bonds last week after the Muddy Waters report.

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