David and Natasha Sharpe, of Bridging Finance Inc., in the company's downtown Toronto offices on April 11 2019.Fred Lum/The Globe and Mail
The first few years after the 2008 global financial crisis were tough for retail debt investors. With interest rates stuck near zero, few investment options offered sizeable, but stable, returns.
To help fill this void, Toronto-based Bridging Finance Inc. launched in 2012 with the explicit goal of delivering above-average yields to its investors. By lending to companies that fell short of the risk criteria necessary to secure bank financing, yet still had enticing prospects, Bridging targeted returns of at least 6.5 per cent annually.
Bridging looked for borrowers who needed short-term money for a variety of reasons, such as restructuring debt or supporting inventory purchases, and its loans were often worth between $3-million and $50-million. In doing so, the company leaned heavily on the risk assessment chops of its president, Natasha Sharpe.
Private debt manager Bridging Finance placed in receivership as OSC investigates its activities
After completing a PhD in epidemiology at the University of Toronto, Ms. Sharpe spent a decade in risk and corporate finance at Bank of Montreal, then joined Sun Life Financial as its chief credit officer in 2010. A year later she was named to Canada’s Top 40 under 40.
In 2012, she moved to Bridging, and she was joined there a year later by her husband, David Sharpe. Mr. Sharpe had spent 17 years working in the investment industry, largely in compliance roles, and he had also spent four years as the director of investigations for the Mutual Fund Dealers Association of Canada.
Together, they built the firm using the financial support of an unlikely source: Jenny Coco, the chief executive officer of Coco Paving. Privately owned, the company made a splash in early 2009 by acquiring the Ontario and Quebec road paving operations of Lafarge Canada, and Ms. Coco had developed a professional connection with Ms. Sharpe. In 2011, Ms. Sharpe joined Coco Paving’s board of directors.
For its few few years, Bridging grew quietly. In 2016, the company rearranged its executive roles and Mr. Sharpe took over as CEO. Shortly after, Bridging disclosed it managed $600-million in assets.
By 2019, Bridging was expanding rapidly. That January, the fund reported $1.1-billion in assets under management, and a few months later Bridging launched a new fund dedicated to financing Indigenous economic development.
The initiative hit close to home: Mr. Sharpe is a status Indian and a member of the Mohawks of the Bay of Quinte. The goal of the Indigenous Impact Fund was to provide early-stage funding for projects or assets, such as Bridging’s prior financing of an Inuit collective’s effort to buy a $23-million icebreaker that was used to fish shrimp in the North Sea, all while targeting 8-per-cent returns for investors.
A few months later, in the summer of 2019, Bridging sold a 50-per-cent stake in the business to an up-and-coming money manager named Gary Ng for about $50-million. By the end of the year, assets under management swelled to $1.7-billion, the vast majority of which came from accredited retail investors. (Bridging also has some institutional investors in its funds).
Behind the scenes, however, there was turbulence – some of which did not come to light until late 2020, when the Investment Industry Regulatory Organization of Canada, or IIROC, alleged that Mr. Ng had doctored records to make it look like his trading accounts held far more than they actually did. The alleged forged statements were offered up as collateral to lenders that included Bridging.
In January, Bridging told The Globe and Mail that Mr. Ng ceased being a shareholder on March 3, 2020 – about a month after IIROC launched its probe. According to a new Ontario Securities Commission affidavit, Bridging’s owners bought back his $50-million stake for $5. Bridging is now 58-per-cent owned by Ms. Coco and her brother Rock-Anthony Coco, with Ms. Sharpe owning the remaining stake. Ms. Coco did not return a request for comment, and Natasha Sharpe and David Sharpe declined to comment.
Bridging is also the senior secured creditor of Bondfield Construction Co. Ltd., a builder of public infrastructure that sought bankruptcy protection in 2019. The company had more than $1-billion in projects, including Toronto’s Union Station and St. Michael’s Hospital, when it sought protection from creditors.
In 2017, as Bondfield was engulfed in a liquidity crisis, Bridging provided the company with an $80-million credit facility for one year at an interest rate of 13.5 per cent. When Bondfield defaulted in 2018, that rate increased to 21 per cent, court records showed. Although Bridging has been able to recover some of that loan, it acknowledged in 2019 court filings that nearly $52-million was still outstanding.
The COVID-19 pandemic also put stress on Bridging’s business model because its loans tend to be illiquid, which means investor redemptions cannot be easily funded in times of market stress. In April, 2020, the money manager was forced to temporarily suspend redemptions as it navigated the credit market storm.
Late last year, Bridging sought unitholder approval to change the terms on five of its funds, giving the money manager more control over when investors would be allowed to redeem. In some cases, Bridging sought permission to accept or reject redemption requests in its sole discretion. Unitholders approved the requests for all five funds.
Despite these hurdles, Bridging kept growing and now has close to $2-billion in assets under management. It also appeared to be gaining clout on Bay Street, and in December, 2020, appointed two new blue-chip board members: David Allgood, formerly senior counsel to Dentons LLP and former general counsel at Royal Bank of Canada, and Hugh O’Reilly, who was formerly the CEO of pension fund manager OPTrust.
According to the OSC affidavit, however, Mr. Allgood stepped down from the board two weeks after joining, citing problems with the necessary time commitments. In an e-mail to The Globe, Mr. Allgood confirmed this reasoning.
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