The fallout from the Bridging Finance Inc. scandal is spreading as the firm’s largest borrower disclosed Wednesday it obtained creditor protection late Friday.

In a release, Alaska-Alberta Railway Development Corp. – better known as A2A – said it had obtained creditor protection so the firm could pursue a court-supervised sale or refinancing of its development-stage project for a rail link between Alberta and Alaska.

A2A owes $208 million to Bridging Finance, which also has a stake in the rail firm that it valued at approximately $109 million. A2A said that it made the decision to seek creditor protection after PriceWaterhouseCoopers, the court-appointed receiver of Bridging, called a $149 million loan extended to the railway company.

A2A was created with the intent of building a multi-billion dollar rail link from the heart of the Alberta energy industry to tidewater ports in Alaska. The project would require multiple jurisdictional approvals and extensive consultations with First Nations communities before work could potentially begin, not to mention uncertainty over financing such a project.

The move to seek creditor protection creates more uncertainty for the some 26,000 Bridging Finance clients who are anxiously awaiting the outcome of investigations into the company’s dealings. PwC is currently reviewing Bridging Finance’s portfolio, a slow process that will determine how much capital clients could hope to recoup.

It’s the latest in a dramatic series of events that have engulfed the Bay Street alternative lender. Bridging was placed in the control of PwC in May after the Ontario Securities Commission alleged the firm and its senior executives mismanaged funds and failed to disclose conflicts of interest.

A2A was at the centre of the firestorm. The OSC alleged that millions of dollars earmarked for the railway instead were transferred 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 Bridging’s former chief executive officer, David Sharpe.

Sharpe’s employment at the firm was terminated by PwC a week after the initial allegations became public.

None of the allegations have been tested or proven before the courts.