Bill Cara: Stelco finale, Fri., Feb. 3, 2006, 5:59 PM

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February 3, 2006

Stelco finale, Fri., Feb. 3, 2006, 5:59 PM

I suppose for my likely final article on Stelco before the books are closed, I could be more cheerful. In any event I will not be around next week as I'm off traveling again, Sunday through Friday.

From where I sit, I have not heard of an Appeal to the Farley ruling, and if that's the case, we know who won here, and how much.

At least you think so. Wait until Brascan/Tricap gain control; I'm sure they'll be up to Ottawa to con the Feds into putting more money into Stelco projects like windpower and like environmental clean-up of the Hilton Works lands that will be needed for a new inland port. And they'll be down to Toronto to talk the Ontario Liberal government into taking off their hands the Stelco pension liability.

That's how these people operate " using OPM, which in case you didn't know is your money and mine. And that's how they get rich.

In any event, I think that Feb 10 is the last day the Stelco shares will trade. Then those shares will not exist on the books of Stelco, and new shares will be issued. Stelco will become a privately held company until greedy Bay Street underwriters float additional new shares to the public.

Everybody from judges, to lawyers, to accountants, to Bay Street take their piece. The owners of any Stelco shares up to Feb 11 will then receive zero. They will own wallpaper.

If by chance an Appeal is filed by Friday, a Court of Appeal could possibly rule on a motion against the order of the lower court. In that case, the shares would stay alive for a while and would continue to trade on the Toronto Exchange. I hope that happens.

Sincerely.

P.S. If this story plays out the way I suspect it will, the new shares of Stelco, which will be put into the hands of the rich, will zoom to high prices " based on the billion dollar stolen equity from the old shareholders by "private equity" people who won't invest a dime themselves. Never forget that this was a contrived bankruptcy and the assets of real Moms and Pops and workers were stolen here.

And never forget that there wasn't an elected representative, or a securities commissioner or a judge in the entire country who had the guts to stand up and simply say, let's take a deep breath before we allow the assets of hard-working people to be taken from them. Let's study what went on here before the final stroke is made that will cause grievous damage to the integrity of our courts and capital markets.

Not one.

I'm afraid to say, these are the values of Canadians today. These and the ones discovered in the recent Gomery Royal Commission " the one that stated that the former Prime Minister of Canada and people around him were corrupt " or should I phrase it the politically correct way, which is to say that the corruption occurred in the Prime Minister's Office, using his telephones, memoranda, and support staff.

This is why I (a writer) spoke up in defense of the shareholders, bondholders, creditors, and workers of Stelco, and their families -- because nobody else in this country had personal values strong enough to do it. Shame on you. These Canadians needed you.

Posted by Posted by Bill Cara on February 3, 2006 05:59:33 PM | Category: Canada

Discourse

Bill,

Now that you have mentioned the Gomery Royal Commission which was brought on by the "Sponsorship Scandal" it is timely to inform your readers that Judge Gomery brought before the commission last year two junior accountants representing the firm that did the audit on the program on behalf of the government. He called it a complete whitewash and cover-up of obvious corruption. The auditing firm was Ernst & Young. The President at the time ( 1996 ) of E&Y who signed off on the program was no other than the illustrious Hap Stephen. Has corruption in high places found a home at Stelco? You better believe it!

Posted by: TerryC at February 4, 2006 10:41 AM [link]

Here's a quote from Gomery reported in the Globe & Mail re Ernst & Young complicity: "Judge Gomery reserved some of his harshest words during last fall's Ottawa phase of the hearings for the auditors at Ernst & Young. The firm had been hired to look into the complaints of a bureaucrat in Ottawa's advertising branch in 1996, found that most of them were legitimate, and issued a report that was so innocuous it got noticed by no one. Judge Gomery was particularly riled that initial drafts of the report were actually clearer and more explosive than the final version.

"You watered [the report] down very, very considerably," Judge Gomery told the auditors. "You left out the potential for embarrassment. Why did you water it down?".

Bill, I have no doubt why it was watered down - they were told to do so by the people at the very top of E&Y who were very well connected to the Liberal party and the Prime Minister's Office at the time ( 1996 ).

Posted by: TerryC at February 4, 2006 11:12 AM [link]

Bill,

You have described the Tricap offer which is the basis of the Restructuring Plan as nothing more than a line-of-credit. Any reasonable person must conclude that there is clearly a theft here. The Court Monitor Report #50 reinforces this point.

In return for providing a revolving line of credit facility of $375 million here's what Tricap gets: 9,818,000 new Stelco shares ( 37.61% of all shares ) and a determination of the makeup of the Board of Directors; interest on drawdowns being the 30 day Canadian Bankers Acceptance Rate, currently 3.56% PLUS 7% to a cap of a PLUS 12%; a Committment Fee of $7.25 million; an Annual Fee of 3% of the $375M facility = $11.25 million; and Extention Fee of $11.25 million if the lending goes more than 3 years beyond Plan implementation; and an Interest Default Fee of 3.56% BA PLUS 7% PLUS 5% =15.56% ( if calculated at todays low BA rates ).

So why isn't the Judge or the Monitor asking why Stelco is ripping up 9.5% debentures in order to re-organize debt that is to cost no less than 10.5% in a rising interest rate environment?

Why is Stelco paying outrageous fees for the purpose of giving away more than a third of the equity to these lenders?

Anyone with eyeballs can see that this breakout into LP's is a way to obscure the hidded wealth of the company ( iron ore mining assets and land, for two) and set up quick asset sales to buyers they have already lined up.

To the judge I plead "Please take your hands off my wallet!"

Posted by: TerryC at February 9, 2006 12:35 PM [link]