Bridging Finance investors face minimum of $580M loss: Receiver

Ian Vandaelle, BNN Bloomberg

The PricewaterhouseCoopers LLP logo sits on 51-storey skyscraper Tower 185 as an aircraft flies above in Frankfurt, Germany, on Wednesday, Oct. 18. 2017. In a tweet with the hashtag #Brexit, Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein on Thursday hailed great meetings he had in Frankfurt and said he will spend a lot more time there. Photographer: Bloomberg/Bloomberg , Photographer: Bloomberg/Bloomberg

Investors who put money into Bridging Finance may be left with 65 cents on the dollar, if not less, according to the beleaguered lender’s court-appointed receiver.

In documents filed with the Ontario Superior Court on Wednesday, PricewaterhouseCoopers Inc. (PwC) – which inherited responsibility for Bridging after it was rushed into receivership in the spring – said the lender’s losses attributed to unitholders could be about $580 million, roughly 36 per cent of the $1.6 billion the firm lent out.

PwC noted that the $580-million figure was subject to change, and estimated the total loss to unitholders may ultimately be higher than that figure.

Bridging had accumulated funds from about 26,000 investors, the vast majority of whom were retail buyers.

While Bridging had about $2 billion in assets under management, it did hold a sizable cash position, with $282.3 million and US$115 million on the books as of Dec. 3, according to the receiver.

PwC also included an update on its efforts to sell the company, either in full or on a piecemeal basis, disclosing 14 bidders advanced to the second stage of bidding. Of those interested suitors, 11 submitted final bids. Four of those bids were for substantially all of the business, while the remainder were for “individual or certain specified assets.” Some of those bids require further due diligence, according to the receiver.

The latest disclosure from PwC comes amid ex-Bridging Finance Chief Executive Officer David Sharpe’s pushback against how regulators handled the probe into his embattled firm. Lawyers for Sharpe, who was dismissed by the receiver in the early days of the controversy, have argued the release of his compelled testimony undermined the integrity of the investigation.

Sharpe had no comment Thursday on the loss figure put forward by PwC.

Bridging was ushered into the control of PwC on Apr. 30 after Ontario Securities Commission (OSC) staff alleged the firm and its senior executives, including Mr. Sharpe, had mismanaged funds and failed to disclose conflicts of interest.

Among the key grievances put forward by the regulator’s staff was the lender’s relationship with Alaska-Alberta Railway Development Corp. – better known as A2A – a company with plans to link Alberta’s energy heartland to tidewater ports on the Pacific coast. A2A filed for creditor protection in June, owing $208 million to Bridging.

The link between Bridging and A2A allegedly extended beyond the corporate level to the personal, according to the OSC. The regulator alleges millions of dollars earmarked for the railway in fact flowed to the bank account of its founder, Sean McCoshen. The money allegedly flowed in both directions – the regulator alleged $19.5 million was transferred by an entity controlled by McCoshen to the bank account of Sharpe.

None of the allegations regarding Bridging Finance, Sharpe, or McCoshen have been tested or proven.