Bridgecorp broke in 2006: PwC

Gary Urwin (right) and Peter Steigrad (left), two of the three former Bridgecorp directors who are being sued for $442 million. Pictures / Brett Phibbs

Company claiming $442 million from former directors says non-performing loans not disclosed

Bridgecorp was insolvent from at least February 2006 - a year and a half before it collapsed, its receiver alleges in civil action against three former directors.

PricewaterhouseCoopers, the failed finance firm's receiver, has filed a $442 million claim against former Bridgecorp directors Bruce Davidson, Gary Urwin and Peter Steigrad.

The legal action is believed to be one of the biggest civil cases in New Zealand's history.

PwC's statement of claim against the directors alleges that from at least February 2006 the liabilities of the Bridgecorp companies would have exceeded their assets if properly recorded in financial statements.

PwC claims the three directors breached their duties to Bridgecorp by allowing it to carry on business past this date.

"If the Bridgecorp companies had ceased trading from at least February 1, 2006, they would have avoided losses to investors of up to $442 million," PwC said.

PwC's statement of claim filed with the High Court at Auckland alleges eight "causes of action" against the defendants for aspects of the Bridgecorp group's operations in New Zealand and Australia.

The receiver claims that from 2006 the defendants failed to put policies in place to ensure a number of Bridgecorp's loans were properly managed and monitored.

According to the statement of claim, it was clear by February 2006 that a "substantial amount of Bridgecorp's New Zealand borrowers" were unable to repay their loans at maturity.

Instead of recording these loans as "non-performing", Bridgecorp rolled them over, in some case for more than two years, PwC said.

The directors would or should have known borrowers were unable to pay back these when they fell due and should not have recorded the maturing loans at full face value in financial statements, PwC said.

Bridgecorp also refinanced a number of its loans with companies such as Hanover Finance and St Laurence.

PwC said the directors would or should have known that the only purpose of this refinancing was to generate cash flow for Bridgecorp when it could not do so from its normal operations.

As well as this, the refinancing was not done at market rates and delayed the appointment of receivers, PwC alleged.

Steigrad's lawyer, Brian Keene QC, said last month that Davidson, Steigrad and Urwin had filed statements of defence in response to the allegations.

Bridgecorp former managing director Rod Petricevic and its financial controller Rob Roest have been declared bankrupt and are exempt from proceedings.

Davidson and Urwin last year pleaded guilty to 10 Securities Act charges for misleading investors.

Petricevic and Roest were found guilty of 18 Securities Act and Crimes Act charges this year.

Steigrad was found guilty of six Securities Act charges and acquitted on four.

Bridgecorp's 14,500 investors, who were owed $459 million when the company went into receivership in July 2007, have to date got back 8c in the dollar.