High angle view of mallet eyeglasses legal book in courtroom

A battle is brewing between investors over who gets priority in failed manager Bridging Finance Inc.’s fund liquidations.

In a court proceeding scheduled for Nov. 16-17, Bridging’s receiver, PricewaterhouseCoopers LLP, will ask the Ontario Superior Court of Justice to determine the process for returning assets to investors from the funds.

According to court filings, PwC and court-appointed counsel to Bridging unitholders will take the position that all investors should be treated equally in the proceedings.

However, lawyers representing certain groups of investors will argue that their claims on the funds’ remaining assets should take priority.

These include investors with potential statutory rescission claims — investors who potentially bought funds when their offering documents contained alleged misrepresentations — and investors who sought to redeem their funds before the receiver was appointed but didn’t have their redemption requests processed in time.

PwC estimates that statutory rescission claims could represent approximately $202.4 million, and the potential unfulfilled redemption claims amount to approximately $218.8 million.

“If it is determined that potential statutory rescission claims and/or potential redemption claims have priority over general unitholder claims, the impact on recoveries for unitholders with general unitholder claims will be significant,” the court filings stated.

It’s currently projected that between $701 million and $880 million will be available to investors in the liquidation of the funds. This represents between 34% and 41% of the funds’ purported assets before Bridging was put into receivership in early 2021. The firm reported AUM of $2.1 billion at the end of 2020.

However, if the investor groups seeking priority succeed in persuading the court that their claims should take priority (and then prove their claims), the remaining investors would see between $279 million and $459 million (17% to 26% of the funds’ assets), the filings indicate.