Bridging Finance receiver faces opposition to wind-up plan from unknown investor group

David and Natasha Sharpe, of Bridging Finance Inc. in the company’s downtown Toronto office on April 11, 2019.Fred Lum/The Globe and Mail

A mysterious and anonymous group claiming to be investors in Bridging Finance Inc. has threatened to derail a proposal by the troubled lender’s court-appointed receiver to wind up its operations.

The anonymous group, which refers to itself in legal filings as “Certain Bridging Unitholders,” will ask a judge at a hearing on Friday to reject a recommendation made by receiver PricewaterhouseCoopers LLP (PwC), which is seeking permission to officially terminate its unsuccessful, five-month effort to sell Bridging’s loan book.

Instead, PwC has proposed it should oversee Bridging’s outstanding loans and eventually dissolve the company – a move that it says will bring better and more immediate returns to Bridging investors than the offers it received during the bidding process. A legal team from Bennett Jones LLP, which was appointed by the court to advocate for the interests of the investors, fully supports PwC’s proposal.

But that is not acceptable to “Certain Bridging Unitholders,” which is calling for more outreach to investors and has urged them, in a news release, to consider an alternative plan put forward by BlackRock Financial Management Inc., the New York asset management giant that is also a significant creditor to Bridging.

BlackRock has said, in a Feb. 24 letter one of its lawyers sent to PwC, that it could oversee the gradual liquidation of Bridging’s portfolio at a lower cost than the fees PwC anticipates charging.

Legal skirmishes over receivership proposals are nothing new, but what is novel about this one is the concealment of the identities of the people behind “Certain Bridging Unitholders.” Despite expending significant resources on a sophisticated public relations campaign – launching a website, hiring an Ottawa-based advertising firm and retaining a Bay Street law firm – the group has failed to put forward any Bridging investor, identified by name, to answer questions about their problems with PwC’s plan.

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The mystery around the group is just another strange twist in what has been a harrowing ride for Bridging’s 26,000 investors, who were told last month they should expect losses of about $1.3-billion, or 62 per cent of the $2.09-billion Bridging had under management when it was placed in receivership in 2021.

At that time, the Ontario Securities Commission alleged it uncovered evidence of fraud and mismanagement on the part of Bridging’s leadership team, which included then chief executive officer David Sharpe and his wife, Natasha Sharpe, then the chief investment officer.

A little more than a month after the receivership was granted, the first iteration of the influence campaign was launched, with someone issuing a news release on behalf of unidentified “Concerned Unitholders of Bridging Finance Inc.” The June 7, 2021, release said the receivership was harmonizing value for investors. Whoever was behind the release professed to know about “multiple credible expressions of interest” in a quick sale of the Bridging portfolio. The release included no contact information.

Another wave of anonymous news releases started again this February, after PwC detailed how poorly its sales process had fared. On Feb. 14, “Concerned Unitholders of Bridging Finance Inc.” decried PwC’s recommendation that the sales process should be terminated and that PwC should oversee the winding down of Bridging.

This time, however, their news release included one piece of contact information – a ProtonMail address – but still no names of any individuals associated with the group.

On Feb. 22, the same group announced, in a news release, it had retained a lawyer, Domenico Magisano of Lerners LLP, to push back against PwC’s proposal at a Feb. 25 hearing. The release urged other Bridging investors to reach out to Mr. Magisano and called the receivership an “abuse of power.”

From there, things got even murkier.

Shortly after issuing the release, Canada Newswire took it down. The reason? Mr. Magisano and Lerners denied they had been retained by “Concerned Unitholders of Bridging Finance Inc.” and issued a statement saying they did not agree with the suggestion the process had been abusive.

What was true, however, was that Mr. Magisano had indeed been retained by a Bridging investor – but one who wanted anonymity and had other concerns with PwC’s approach.

In an e-mail, Mr. Magisano said that he did not know who was behind the erroneous news release and declined to address questions about how it came to be that a different anonymous group of investors mistakenly believed it had retained him.

In his e-mailed statement to The Globe and Mail this week, Mr. Magisano said around the time the Feb. 22 news release was issued, his client was a Bridging investor who wanted to remain anonymous because he was a current member of the “Canadian military of some note.”

“Their decision to remain anonymous was to ensure that the argument before the court did not revolve around their identity, or the fact that Canadian military (or ex-military) members lost money,” Mr. Magisano said.

Since then, Mr. Magisano said in his e-mail, things have shifted again, and he now represents a Bridging investor who is prepared to identify himself: Michael White, a former member of the Canadian military, who has chosen to be the public representative of the group.

However, when The Globe attempted to set up an interview with Mr. White this week through an e-mail address listed on the group’s website, www.bridginginvestors.ca, someone, who did not identify themselves by name, said Mr. White was not available to answer questions.

The next day, The Globe received an unsolicited e-mail from spark*advocacy, the Ottawa public relations firm founded, in part, by prominent public opinion pollster Bruce Anderson.

An employee of spark*advocacy, Dustin Fitzpatrick, said the anonymous group of investors was unable to provide Mr. White, or anyone with grievances against PwC, who was willing to be named.

Mr. Fitzpatrick declined to identify, by name, the individuals or companies paying spark*advocacy for its work, but said the group had no “connection to major creditors or former principals at Bridging Finance.”

He provided another statement, which he said could be attributed to unnamed “Bridging Investors.” This statement referred to their campaign as “grassroots.”

Bennett Jones, in his submissions to court, has highlighted the mystery shrouding the identities of the people who are driving this legal fight. Bennett Jones was appointed as the representative counsel for Bridging investors by an Ontario judge in October.

“The failure or refusal of the Unidentified Unitholders to self-identify, and to offer evidence about the quantum of their holdings, should weigh heavily against giving weight to the concerns being offered on their behalf,” Bennett Jones said in court filings.

Bennett Jones has offered several online information sessions for investors to explain the various bids and their components. A survey it conducted shows that, of the investors who participated in those sessions, a majority, or 65 per cent, prefer PwC’s plan. Bennett Jones estimates the number of investors and investment advisers it was able to contact about the information sessions hold about 80 per cent of the units in the Bridging funds.

Although the anonymous group of investors has urged other Bridging unitholders to support a proposal by BlackRock, the New York-based firm says it has nothing to do with the group. In an e-mailed statement, a BlackRock spokesperson said the company had “no affiliation” with the anonymous investors.

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