Money back for Bridging investors? Not so fast

A couple of institutional investors are in line to receive a $78-million distribution from the ongoing receivership of failed fund manager Bridging Finance Inc. Most other investors are going to have to wait, however.

In a new court filing, PricewaterhouseCoopers Inc. (PwC), in its role as the receiver for Bridging, is set to ask the Ontario Superior Court of Justice for permission to distribute a portion of the cash held by a single Bridging fund, the Bridging SMA2 LP (SMA2). The distribution would go to the fund’s only two unitholders: Blue Cross Life Insurance Company of Canada (which controls 86.8% of the fund’s units) and Canassurance Hospital Services Association (which holds the other 13.2%).

PwC was appointed as Bridging’s receiver in April 2021 at the request of the Ontario Securities Commission (OSC), amid concerns about possible misconduct involving Bridging funds.

Earlier this year, the OSC filed allegations against several top executives at the firm. Those allegations have not been proven.

In the meantime, PwC has been given court permission to liquidate the funds and return as much money as possible to investors.

In previous court proceedings, PwC indicated that it was hoping to get court approval for an initial distribution to Bridging investors — who are facing over $1 billion in losses (according to reports from the receiver) — by June 30.

However, the latest filing from PwC said that several issues need to be resolved before it can make distributions to investors generally.

For instance, it needs to confirm exactly how many units investors hold, and in which funds. It also needs court-approved methodologies for distributing funds to valid claims and for denying invalid claims; to determine whether any claims take priority over others; and to resolve any intra-fund claims.

In its latest filing, PwC said that while it’s working to address these issues as quickly as possible, it’s currently unable to determine when that will happen. As a result, it can’t say when investors will start seeing some of their money.

That said, the filing also indicated that PwC will ask the court to approve a motion allowing it to return $78 million to the two institutions that hold all the units in the SMA2 fund ($67.7 million to Blue Cross and $10.3 million to Canassurance).

According to court filings, that fund — which was launched in December 2020 with $188 million in capital — had $94.3 million in cash as of May 31 this year. The fund’s cash assets were held in a separate account since the fund was established, the report noted.

PwC proposed to retain $16.3 million of the fund’s current cash to address its share of the cost of the receivership and the possible impact of other distribution issues that have yet to be resolved (and won’t be known until those issues are addressed).

The receiver also proposed to enter an agreement that would allow it to claw back some or all of the money from the institutions, if required by the ultimate resolution of the distribution issues.

In addition to the motion seeking approval for the payout to the SMA2 unitholders, the receiver’s motion also asks the court to approve a procedure for verifying other investors’ holdings in the other Bridging funds.

A hearing on these latest motions is being sought for July 19.

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.