Bridging Finance sale attracts suitors, but BlackRock and PwC hold the keys – .

Bridging Finance sale attracts suitors, but BlackRock and PwC hold the keys – .

Distressed potential buyers of Bridging Finance Inc. will have to convince BlackRock Inc., a creditor who has influence over any final deal.

Lucas Jackson / Reuters

Dozens of potential buyers, including Canaccord Genuity Group Inc., have expressed interest in buying or investing in struggling Bridging Finance Inc., but potential suitors will likely have to overcome two hurdles before they can achieve victory: winning BlackRock Inc. exerts a grip on any potential transaction and beats its competition in a formal sales process handled by the lender’s escrow.

On Thursday evening, Canaccord is reportedly in advanced talks with BlackRock over a potential offer for Bridging, with Bloomberg LP reporting that the two are seeking to submit an offer to regulators.

Little known to Bridging’s 26,000 retail investors, BlackRock has a significant influence on Bridging’s future and interested bidders will be forced to negotiate with the extremely powerful creditor, people familiar with the matter told The Globe.

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The giant New York-based asset manager, which oversees more than $ 9 trillion in assets, has at least two loans outstanding to Bridging, both from a series of complex transactions. BlackRock has a senior secured debt on Bridging worth around $ 50 million, according to sources and court documents. In 2019, Bridging was valued at $ 100 million.

However, BlackRock is only one of the powerful stakeholders, and Friday Bridging’s receiver, PricewaterhouseCoopers LLP, responded to Thursday’s report by stating that it was “not in advanced discussions with any party regarding a sale. potential ”.

Bridging Finance’s largest borrower to seek creditor protection owes private lender $ 208 million

What is Bridging Finance and who are its leaders?

Ontario judge placed Bridging under PwC control in late April following Ontario Securities Commission allegations the private lender misused investor funds to benefit some of its founders and leaders. As receiver, PwC manages all of Bridging’s affairs while the OSC investigates.

Instead of seeking a quick turnaround, PwC said it would seek court approval to initiate a formal investor sales and solicitation process (SISP), and added that it had received preliminary indications from interest “of a wide range of potentially interested parties”. The SISP is expected to last about three months and dozens of companies have expressed interest, according to people familiar with the matter.

In an emailed statement, a spokesperson for Canaccord said the company could not comment on rumors in the market, but added that the dealership is “always on the lookout for growth opportunities and to provide solutions for the underserved middle market in Canada. We also work with strategic partners to assess opportunities, where appropriate. “

To some, Canaccord may seem like an unusual suitor for Bridging, given its roots in investment banking, but the Toronto-based broker has forged a strong bond with Bridging in recent years.

Stuart Raftus heads the Canadian wealth management division of Canaccord and, in September 2018, took out a personal loan of $ 3.75 million from Bridging at a prime annual interest rate plus 4.3 percent, according to court documents and documents obtained by The Globe. As of September 2020, the loan remained on Bridging’s books and was still valued at $ 3.3 million, but a spokesperson said the loan was repaid “well before receivership.”

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Mr. Raftus received more than $ 3 million in total annual compensation from Canaccord in 2019 and 2020, according to the company’s annual documents. He did not respond to questions from The Globe about the need for a loan from another lender.

Canaccord has also been the principal financial advisor to several Bridging borrowers, including MJardin Group Inc., Enthusiast Gaming Holdings Inc., FaZe Clan Inc. and Tilray Inc., who collectively had outstanding loans worth $ 237 million. dollars in September 2020. Bridging had approximately $ 2 billion in assets under management before it went into receivership.

In at least one instance, Canaccord directly negotiated a Bridging loan. In January 2020, the investment bank served as an exclusive advisor to FaZe Clan, which is a games and esports brand, and helped secure a $ 30 million loan from Bridging. David Sharpe, former managing director of Bridging, who was fired when the lender went into receivership, joined FaZe Clan board after loan extension.

If Canaccord – or any other suitor – is successful in wooing BlackRock, it is possible that they will get a head start in the Bridging sales process.

In 2019, the owners of Bridging sold a 50% stake in the company to financier Gary Ng for $ 50 million, but unbeknownst to them, the acquisition of Mr. Ng was funded by fraud, a regulator says. of the sector.

When the alleged fraud came to light, Bridging shareholders forced Mr. Ng to sell his Bridging stake back to them for just $ 5. However, he had previously pledged his stake as collateral for a $ 20 million loan he received from BlackRock. Indeed, when the other shareholders of Bridging bought back its stake, they were required to assume and manage the BlackRock loan.

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Bridging also borrowed an additional $ 52.5 million from BlackRock in November 2019, court records show, and the money was used by Bridging to buy out the management contract of a former investment partner, court records show .

In an emailed statement, a lawyer for BlackRock declined to comment.

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