Lack of NAV to leave Bridging Finance investors with hole in portfolios — for now

As PricewaterhouseCoopers Inc. (PwC) works to assess the value of a large portion of the assets held in troubled asset manager Bridging Finance Inc.’s funds, investors may start to get reports showing that their investments are worthless.

In its latest update to unitholders, PwC (which is serving as Bridging’s court-appointed receiver) said that with no reliable net asset value (NAV) available for the Bridging funds, retail investors that hold those funds through dealers may soon be receiving June 30 account statements that record their holdings at zero.

Under securities rules, dealers are required to provide investors with values for their holdings based on market information or “other inputs” in cases where market prices aren’t available. Dealers are permitted to report a value is “not determinable” where they can’t obtain any useful pricing information.

While investors’ account statements may show that the funds aren’t worth anything, PwC stressed the funds have value — it just isn’t ascertainable at this point.

“In light of the issues that led to our appointment, and given that our review of the loan portfolio of the Bridging Funds is ongoing, Bridging is not in a position to release monthly NAV reporting at this time,” PwC said.

The consulting firm was appointed as Bridging’s receiver at the behest of the Ontario Securities Commission (OSC), which raised concerns about possible undisclosed conflicts of interest in transactions undertaken by the funds.

So far, PwC’s reviews have also raised questions about certain transactions and the status of the funds’ holdings.

Earlier this week, PwC’s reporting showed that the majority of the funds’ assets — approximately $1.43 billion worth of their reported $1.95 billion in assets, as of April 30 — remain under review by the receiver.

PwC also reported that the funds have at least $347 million in assets, including cash on hand, loans that have been repaid since April 30, and loans that are expected to be repaid in the short term.

Yet, the status of the majority of the portfolios’ assets remains uncertain.

“As part of our review of Bridging’s investment portfolio, we have identified certain loans and equity investments for which a more thorough and careful examination and analysis, including of the underlying collateral, is required,” the receiver said.

Given the relative size of the uncertain assets, PwC said it “is not in the interests of Bridging or its unitholders for us to provide inaccurate, incomplete or unreliable information.”

A recent court ruling suggested the receiver should have a better idea of the funds’ value in the next 60 days.

In the meantime, many investors will be left with a temporary hole in their portfolios.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.