The company remains under the "protection" of the bankruptcy court even though (i) management decided for their own reasons that court protection was needed, given that no formal notice of debt default had ever been received, (ii) professional accountants submitted opinions to the court that the corporation was a non-bankrupt going concern, and (iii) corporate earnings for the year (Y-E-A-R!) this company has been in formal bankruptcy have been at record levels each quarter.

In fact the quarter just reported is the historical record for this very old company, and earnings would even have been 50 pct higher had the army of involved lawyers and accountants not been eating away at the pig's trough.

Words cannot describe my disgust for the OSC permitting this charade.

This company is worth, at a minimum, Cdn$1 billion net of debt, and there are just over 100 million shares outstanding.

If shareholders were in control, i.e., able to vote freely for directors, it is almost a certainty that a new slate would be voted in, and the present bunch, plus the ex-Toronto Hydro CEO who apparently is running the show for them, and their restructuring officer, and pals, would be summarily turfed. Then the shareholders would be able to recover their assets.

Every single person who is a party to this charade should be named and shamed, and that includes the Ontario Securities Commission.

These people have just taken every legitimate shot by professional business journalists writing for The Toronto Star, the Globe & Mail Report On Business, and on and on, and brushed it aside like water off the duck's back.

The Government of Ontario has the power to step in, but lacks the competence. Two years hence, however, a new government, under the Conservative leadership of John Tory, will take over, and business will get back to normal.

In the meantime, OSC chair David Brown is retiring at the end of June, and Canada's top securities regulator needs to get a new and more aggressive leader who will clean house. Then, and only then, apparently, will securities traders have any confidence in capital markets here.

And, if you question the legitimacy of such sentiments, you have to look no further than trading in the Cdn Dollar in the past 12 hours since a vote was held in Ottawa, amongst federal politicians, that has furthered the likelihood of a federal government defeat. The Cdn Dollar is down 40 basis points against the USD, which is significantly more than any other currency.

So trader confidence is critically important, and in Canada's case, the Stelco mess had better be resolved soon or that international confidence will slip away.

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May 11, 2005. 06:49 AM

Sizzling Stelco! Amazing turnaround quarter

Toronto Star: TONY VAN ALPHEN, BUSINESS REPORTER

Record profit while in court protection `very unusual'

Earnings of $49 million for insolvent Hamilton company

"Sizzling Stelco Inc., which is still legally insolvent, has posted the biggest first-quarter profit in its history while creditors wait for the company to emerge from court protection. Hamilton-based Stelco, the country's biggest steelmaker in terms of shipments, disclosed yesterday that it had earned $49 million in net profits during the three months ending March 31. That compares with a loss of $37 million in the same period last year when the then-teetering steelmaker gained court protection from creditors so it could restructure operations and debts. The company's latest performance edged the previous record of $48 million in 1995. Furthermore, Stelco's operating profit of $118 million before interest, taxes and restructuring expenses in the three months smashed the record for any quarter in the company's 95-year history. The company set the previous mark of $88 million in the same 1995 quarter. It is also the fourth consecutive quarter that Stelco has earned a profit since a judge granted the steelmaker protection under the federal Companies' Creditors Arrangement Act almost 16 months ago. The profits would have been even higher if the company did not run into reorganization costs of $21 million in the quarter, including $10 million in "professional fees" for lawyers and financial advisers. "We've had a very good quarter," Courtney Pratt, Stelco's chief executive officer, told reporters. Stelco continues to account for interest payments in its financial statements as if the company were making them to creditors. But the company won't be making payments until details on terms emerge in a restructuring plan. For example, the company has accrued about $44 million for interest payments on long-term debt since January 2004. It appears creditors will now be waiting longer because of the time it will take to hammer out a restructuring plan. Pratt, who had earlier hoped for Stelco's emergence from court protection by mid-summer, confirmed yesterday it won't happen until September. "This is dragging on longer than any of us would have thought or hoped," he added. "It's a situation that I would like to bring to an end as soon as possible." Pratt described the situation of a profitable company that continues to operate under court protection as "very unusual." "There are a number of people involved in this who spent their whole careers in restructuring and everyone would say this is absolutely unique." Stelco, which rejected a number of outside restructuring bids in March, is working on a capital-raising plan through a combination of debt and equity. Pratt revealed the market for capital has declined, although "doors haven't closed" during the last six weeks as steel prices and demand softened. Stelco plans to present an outline of a plan tomorrow for discussion among stakeholders, including bondholders, retirees, salaried employees, union locals representing production workers and the Ontario government. But it is unclear whether some stakeholders have made adequate compromises to proceed. "I believe we're entering a very critical stage of our restructuring process," Pratt said. He also disclosed for the first time that Stelco may sell some of its subsidiaries after the company emerges from restructuring. The United Steelworkers of America union has rejected any sales, but sources say they might agree to transactions with buyers who address employee concerns. Pratt said Stelco continues to expect "significantly" higher operating profits for the remainder of the year, but he warned there is "increasing uncertainty" about global steel markets in the second half. Stelco estimated in March that its 2005 operating profits would be in the range of $350 million to $400 million but Pratt said the company is currently reviewing that forecast. In the first quarter, Stelco's net sales soared 26 per cent to $968 million from the same 2004 period. The company attributed the big increase to renewing contracts at much higher prices and jumps in spot prices because of heavy market demand."