The Bridging Finance Debacle: Peguis First Nation’s Battle with Financial Crisis
In 2017, Peguis First Nation engaged with Bridging Finance Inc., a company founded and operated by David and Natasha Sharpe, to obtain a $30 million loan due to its pressing housing shortage and development needs. Sean McCoshen facilitated this loan to help Peguis meet urgent needs for badly needed financial resources, but the terms of this loan would soon reveal themselves to be a double-edged sword.
The Bridging loan had punitive terms, with an interest rate of prime plus 11%. The Canadian average mortgage rate at the time was 3.8%. The high interest rate would add substantial financial strain to Peguis First Nation, ultimately adding a spiral of debt.
The Domino Effect of High-Interest Loans
The initial $30 million loan triggered a financial crisis when it breached the conditions of an existing Bank of Montreal (BMO) financing arrangement, prompting an immediate demand for repayment. To cover this, Peguis was forced to secure an additional $30 million loan from Bridging, exacerbating their financial strain.
By early 2022, Peguis First Nation was over $140 million in debt, with the high-interest rates from Bridging Finance deepening the crisis. The community’s struggle was further compounded by the need for flood recovery and legal battles, adding to the financial turmoil.
Bridging Finance: A Closer Look at the Firm
Bridging Finance, led by David and Natasha Sharpe, operated with a reputation for high-risk, high-reward financial solutions. Their business model, characterized by aggressive lending practices and high interest rates, drew significant scrutiny as Peguis First Nation faced mounting debt.
The Sharpes’ approach to finance was criticized for its lack of transparency and oversight, leading to a broader investigation into their questionable business practices. As detailed in Canadian Business, the Sharpes prioritized profits over ethical financial practices, which played a role in the financial difficulties experienced by Peguis.
The Sharpes have a documented history of forging documents and applying significant pressure on borrowers, often forcing them into agreements that were detrimental to their interests.
The Aftermath and Ongoing Legal Battles
As Peguis First Nation grapples with its financial crisis, its experience with Bridging Finance underscores critical issues in financial oversight and governance. The interest charges on the Bridging loans now total $72.6 million, according to PwC, which is trying to recover $172 million in principal and interest. Peguis’ situation serves as a cautionary tale about the dangers of aggressive lending practices and the risks posed by a lack of transparency in financial management.
References
- Canadian Business. (n.d.). The Fall of the House of Sharpe: What Exactly Happened to Bridging Finance?
- CBC News. (2024, July 16). Cash-strapped First Nation spent at least $4.4M on consulting firm controlled by Winnipeg developer
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