Court File No.: CV-21-00661458-00CL

Date: 2022-08-03

Superior Court of Justice - Ontario

Re: Ontario Securities Commission, Applicant

And:

Bridging Income Fund LP, Bridging Mid-Market Debt Fund LP, SB Fund GP Inc., Bridging Finance GP Inc., Bridging Income RSP Fund, Bridging Mid-Market Debt RSP Fund, Bridging Private Debt Institutional LP, Bridging Real Estate Lending Fund LP, Bridging SMA 1 LP, Bridging Infrastructure Fund LP, Bridging MJ GP Inc., Bridging Indigenous Impact Fund, Bridging Fern Alternative Credit Fund, Bridging SMA 2 LP, Bridging SMA 2 GP Inc., and Bridging Private Debt Institutional RSP Fund, Respondents

Before: Chief Justice G.B. Morawetz

Counsel: John L. Finnigan, Grant B. Moffat and Adam Driedger, for the Receiver Robert Staley and Mike Shakra, for the Bridging Unitholders Steve Graff and Miranda Spence, for the SMA 2 Unitholders Monica Faheim, Representative Counsel for the Misrepresentation Claimants for the Unitholder Priority Motion Eric Bédard and Émile St-Pierre, Quebec Representative Counsel for the Unitholder Priority Motion Steven Weisz, for University of Minnesota Foundation David Bish, for The Coco Group, 2693600 Ontario Inc., Rocky Coco and Jenny Coco Robb English, for the Redemption Claimants for the Unitholder Priority Motion Ryan Taylor, for David Sharpe David T. Ullmann, for Thomas Canning (Maidstone) Limited, William Thomas, Robert Thomas and 2190330 Ontario Ltd. Lawrence Thacker, for Natasha Sharpe Martino Calvaruso, for Blackrock Financial Management Inc.

Heard: July 19, 2022

Determined: July 29, 2022

Reasons Released: August 3, 2022

Endorsement

[1] On July 29, 2022, a SMA 2 Interim Distribution of $46 million, allocated to Blue Cross (86.84%) and Canassurance (13.16%) was approved with reasons to follow. These are the reasons.

[2] PricewaterhouseCoopers Inc. (“PwC”), in its capacity as Receiver and Manager of the assets and properties (collectively, the “Property”) of each of the Respondents, brings this motion for an order (the “SMA 2 Interim Distribution Order”), approving an interim cash distribution to Blue Cross Life Insurance Company (“BCLIC”) and Canassurance Hospital Service Association (“CHSA” and together with BCLIC, the “SMA 2 Unitholders”), the two institutional unitholders in Bridging SMA 2 LP (“SMA 2”), subject to the terms and conditions of a proposed reimbursement agreement between the Receiver and each of BCLIC and CHSA.

[3] The Receiver is of the view that, given the unique circumstances of the SMA 2 Unitholders, it is appropriate to carry out an interim cash distribution to the SMA 2 Unitholders at this time, subject to the terms of the SMA 2 Reimbursement Agreement. Although the quantum of proceeds of Property available for distribution to the SMA 2 Unitholders will not be finally known until the Distribution Issues are resolved, the Receiver estimates that the Other Claims for which SMA 2 may be liable in accordance with the Distribution Methodology, ultimately approved by the court, will likely be less than the amount of the SMA 2 Cash Reserve (the “SMA 2 Cash Reserve”). In the event that the SMA 2 Cash Reserve is not sufficient to address Other Claims or Distribution Issues, the proposed SMA 2 Reimbursement Agreement requires the SMA 2 Unitholders to repay any amounts distributed to them within 30 days of demand from the Receiver. The Receiver is of the view that no stakeholders will be prejudiced by the proposed SMA 2 Interim Distribution.

[4] All of the units in SMA 2 are held by BCLIC and CHSA. BCLIC holds approximately 86.84% of the SMA 2 units and CHSA holds approximately 13.16% of the SMA 2 units.

[5] The Receiver reports that SMA 2 was established in December 2020, less than five months before the appointment of the Receiver. The SMA 2 Unitholders invested capital in SMA 2 totaling $188 million. Based on the Receiver’s review of Bridging’s books and records, these cash amounts were held in a separate bank account in the name of SMA 2 at all times since December 2020.

[6] The Receiver is of the view that it is appropriate at this time to issue a partial distribution to the SMA 2 Unitholders in the aggregate amount of $78 million (the “Proposed SMA 2 Interim Distribution) on a pro rata basis to BCLIC and CHSA, based on their proportionate investments.

[7] The Receiver has consulted with Representative Counsel on the SMA 2 Reimbursement Agreement and the Proposed Interim SMA 2 Distribution.

[8] The Receiver submits that orders granting interim distributions have been granted by courts in insolvency proceedings. Reference was made to the Abitibibowater Inc., 2009 QCCS 6461 at para. 71 and SemCanada Crude Co., Re, 2009 ABQB 90 at para. 27 in support of this proposition.

[9] The Receiver is satisfied that the amount of Other Claims for which SMA 2 may be liable will likely be less than the SMA 2 Cash Reserve.

[10] The Receiver submits that the Proposed SMA 2 Interim Distribution strikes an appropriate balance in the circumstances between the need to distribute the proceeds of the Property as quickly and efficiently as possible and the protection of the interest of all stakeholders.

[11] During the hearing, I raised questions regarding the potential impact that substantively consolidating the various Bridging Funds for the purpose of distribution to Unitholders and other stakeholders of the proceeds of the Property (a “Distribution”) would have on the amount of the Proposed Interim SMA 2 Distribution. I requested that the Receiver prepare a supplement to the 12^th Report (the “Supplement to the 12^th Report”) to provide additional information that could result from a substantive consolidation of the Bridging Funds. The Supplement to the 12^th Report is attached as Schedule 1 to this endorsement.

[12] I am satisfied that it is appropriate for the Receiver to make an interim distribution to SMA 2 Unitholders. However, it seems to me that, until such time as a determination has been made as to whether substantive consolidation should be applied to the various Bridging Funds, it is appropriate to reduce the amount of the Proposed Distribution such that SMA 2 Unitholders do not receive an interim distribution that could exceed the amount of the final Distribution.

[13] Accordingly, taking into account the analysis in the Supplement to the 12^th Report, I have determined that the Proposed Interim SMA 2 Distribution set out in the 12^th Report of $78 million should be reduced to $46 million. This reduced amount takes into account that the issue of substantive consolidation has yet to be determined.

[14] I do not question in any way the financial position of either of the SMA 2 Unitholders nor their commitment to enter into the SMA 2 Reimbursement Agreement. Rather, I have not been persuaded that it is appropriate, at this time, to approve the Proposed Interim SMA 2 Distribution, prior to the determination of the substantive consolidation issue.

[15] I take this opportunity to thank the Receiver and all parties for their prompt response to the questions that I posed during the hearing and for the preparation of the Supplement to the 12^th Report.

[16] The form of order attached at Tab 4 of the Motion Record has been revised in accordance with these reasons and has been signed by me.

Chief Justice G.B. Morawetz

Date: August 3, 2022