One of Canada’s largest private lenders is looking to sell as much as 11 per cent of its loans to help ride out the coronavirus crisis.
Bridging Finance Inc. has already sold $30 million in loans (US$22 million) and plans to offload a further $170 million to other direct lenders and institutional investors, Chief Executive Officer David Sharpe said by phone.
The firm, which has $1.8 billion in assets under management, froze redemptions on its funds in April.
“We are selling some loans at par value to improve liquidity,” Sharpe said. “We are doing it in a prudent fashion, as we need to keep cash on hand for the revolvers and for foreign-exchange effects, and once we are comfortable with our liquidity, we will lift the gating of the funds.”
The company lends to small and mid-sized companies involved in everything from milling flour to delivering groceries. Most of its funds are invested in collateral-based bridging loans, inventory and accounts-receivables financing.
The pandemic, which forced the shutdown of many smaller businesses the sector typically lends to, is a major test for the asset class. The market has swelled to about US$820 billion globally from US$200 billion before the 2008 financial crisis.
It’s likely to see consolidation as some lenders forced to contend with problem loans, and less well-positioned firms struggle with portfolios or lack of scale.
In Canada, Fiera Capital Corp. started calling investors in April to inform them it could only fulfill a little more than 20 per cent of redemption requests in its Diversified Lending Fund, which has about $1.5 billion under management.
Canadian non-bank commercial mortgage lenders also froze redemptions as the underlying assets couldn’t be sold fast enough to keep pace with sustained withdrawals.
Vancouver-based Trez Capital gated approximately $2.6 billion. It didn’t say how long the freeze would last to “avoid building unrealistic expectations.” Some firms such as Morrison Laurier Mortgage Corp. have gone further and also suspended dividends and new purchases in March, according to people familiar with the matter.