David George-Cosh

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An Ontario Superior Court judge has adjourned a decision to determine the fate of Bridging Finance Inc.

Chief Justice Geoffrey Morawetz - who at one point described Friday’s proceedings as "chaotic" – delayed his decision until the week of March 21 after lawyers representing one investor and asset-management giant BlackRock Inc. raised concerns about how quickly PricewaterhouseCoopers (PwC), the lender’s court-appointed monitor, was seeking to pull the plug on a sale and investment solicitation process. 

PwC said on Feb. 18 that it would seek approval to scrap Bridging's sale process and instead opt for an orderly wind-down of the firm, a move that could result in the loss of more than $1 billion for its investors, according to documents filed with the court. 

PwC said bids for Bridging's portfolio and business were at a “significant discount” to its net asset value and that the best option was to wind down the business and dispense the remaining $701 million to $880 million in funds it believes it can fully recover for investors over five years.

Lawyers representing BlackRock, which is a secured creditor and a bidder for Bridging's loan portfolio, submitted a letter to the court Thursday evening that called for a delay in ruling on PwC's motion. BlackRock's lawyers said in the letter that Bridging's investors should be provided with full disclosure of their options on the lender's future and to hold a formal vote to determine whether the firm should be wound down or if it should be sold to a bidder.

"We've always said that we believe a unitholder vote is appropriate in the circumstances because it's really those unitholders who should be making the decision as to what happens with these funds," said Marc Wasserman, a partner at Osler, Hoskin & Harcourt LLP representing BlackRock, in court today.

Supporting BlackRock's motion was a lawyer who represents one of Bridging's investors and who told the court that adjourning PwC's motion would allow those investors to get more information about how Bridging's assets should be handled.

"It's the unitholders’ money," said Domenico Magisano, a partner at Lerners LLP, who represents an unidentified investor who has approximately $120,000 invested in the firm's funds.

"The unitholders should have some say on whether or not a proposal [to wind down Bridging] was accepted or rejected at this point," Magisano said during the hearing Friday. "I could understand [PwC's] position to move forward with this without that information if it was clear beyond all reasonable doubt that the status quo option was better than the investment proposal."

However, one of the lawyers who represents PwC said a wind-down of Bridging would allow investors to get some of their funds back sooner, which he claims is what the majority of those investors want.

"This will be a significant setback for this process in terms of getting money back to people as quickly as possible, which we believe is what they want," said John Finnigan, partner at Thornton Grout Finnigan LLP.

Following a brief recess, Morawetz ruled in favour of adjourning the hearing so more time can be provided to determine if investors support a wind-down of the lender's business or a sale.

"There's enough chaos and enough information or loose ends that came in at the last moment," Morawetz said during the hearing.

The upcoming hearing will likely determine the path forward for Bridging Finance, which was rushed into receivership last April at the behest of Ontario Securities Commission (OSC) staff as they investigated alleged violations of securities laws at the lender.

OSC staff have claimed tens of millions of dollars were misappropriated from Bridging’s investment funds and also claimed improper dealings occurred with two key clients, Sean McCoshen and Gary Ng.

None of the allegations have been proven in court or before the OSC.​