Bridgecorp report amazing reading
Wednesday, August 1st 2007, 8:06AM 
by Philip Macalister
I have read – with a degree of amazement – the receivers first detailed report on the real state of Bridgecorp.
It’s easy to sit here and say, with the benefit of hindsight, why would anyone have put money into this company?
The report shows the company, had a high concentration of loans. Just 69. Most of the loans were low security, that is something less than first ranking status. The lending was mainly on development properties and interest was accruing and being added to the loan balance as opposed to being paid to the company on a monthly or quarterly basis.
With even that amount of information a prudent investor or adviser could have seen that this was a high-risk company.
Bearing the above in mind, and looking at its rates comparative to other finance companies, why would anyone have gone near Bridgecorp?
Added to the points made above the report says that most of the good loans had been sold to other financiers. This fact was a pretty strong rumour in the market before the collapse.
So the questions I ask are this: Did investors and advisers know this level of detail? Is all this new information? Did any of the researchers/raters know this information?
If people did know this amount of information, why did they give the company money?
PS: This post isn't aimed at trying to be smart after the event. It's more about asking some questions. The first being if people had access to this information, why did they use Bridgecorp. Secondly, and more importantly, if the information wasn't available, why not?
Use the Comments link below to have your say on this post.
PS: This post isn't being critical of advisers. Rather it's asking a couple of questions, namely if people knew this information why did they put money into the company. There may be good reasons. Secondly, and more importantly, if this information wasn't known, why was that?
Comments from our readers
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However the general consensus in the room was that Bridgecorp was a sound company and anyway, they had a "LLoyds Guarantee" so clients would definitely get their money back. It didn't seem to do any good poitning out that far from being guaranteed, Bridegecorp had insurance through Lloyds, which covered loans to a maximum of $4m each and a maximum of $20m in any year. Clearly the receivers' estimate includes the effect of any insurance.
It was also public knowledge that Bridgecorp was selling the higher quality loans (mainly to Compass). Whay would they do that unless they had cashflow problems?
In the end, I don't think it's good enough to say