Canadian laws
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An initial distribution to investors in the funds of failed alt fund manager Bridging Finance Inc. (BFI) has finally received a green light from the courts — although the size of planned payout has been cut by about $170 million, given an outstanding legal dispute.

Based on an order, signed by Justice Osborne of the Ontario Superior Court of Justice, the 26,000 retail investors in the Bridging funds will stand to recover about $321 million in an initial distribution from Bridging’s court-appointed receiver PricewaterhouseCoopers Inc. (PwC).

It’s expected that investors will ultimately recover more in future distributions. PwC has estimated that the total investors can expect to recover will amount to between 34% and 42% of the more than $2.1 billion that the funds were supposed to have under management when the firm was placed into receivership in April 2021, at the behest of the Ontario Securities Commission (OSC). That puts the ultimate recovery in the range of between $701 million and $880 million.

For now though, the court has approved an initial payout of $321 million.

Last year, PwC sought court approval to make an initial payout to retail investors totalling $473 million, a number that was later revised up to $491 million, as certain disputes were resolved.

However, that number has been cut down significantly, due to a still-outstanding claim from Cerieco Canada Corp., which says that it’s still owed $213 million (plus interest and costs) from one of the Bridging funds.

The company has claimed that the flagship Bridging Income Fund (BIF) provided it with a loan guarantee in connection with a major real estate development project that ultimately failed. While the receiver initially rejected the firm’s claim, that remains in dispute; the court was unwilling to approve a larger payout to retail investors before that dispute has been resolved.

Now, after accounting for that ongoing issue, the proposed distribution is being reduced by $170 million. It will affect former unitholders in the BIF and BIF RSP funds, which will see their proposed payouts reduced by $115 million and $56 million, respectively, according to court filings.

Instead of recovering $131 million as originally proposed, investors in the BIF fund will only see $16 million from the initial distribution. Investors in the BIF RSP version of the fund will only get $10 million, down from the originally intended $66 million.

Additionally, following quality control checks on the list of eligible investors, the proposed distribution to investors in the Bridging Indigenous Impact Fund (BIIF) is being boosted to $19 million from $18 million, while $1 million was subtracted from the cash available to the BIF, which is a unitholder of the BIIF, court filings also show.