The relevant documents (all funds in Cdn Dollars) can be found at this link, with reference to Monitor's Report #48, dated January 20, 2006:

1. Cover Letter and Indicative Term Sheet dated January 20, 2006 between the ABL Lenders and Stelco, for up to $600 million (the "ABL Facility").

2. Commitment Letter and Term Sheet between Tricap and Stelco with respect to the $375 million secured revolving term facility (the "Bridge Loan").

The ABL is for $500 million with provisions, to be increased in increments of $25 million, to $600 million. The borrowing rates are based on eligible accounts receivable as to 85 pct and on eligible inventory as to 65 pct.

At the date of CCAA filing Stelco had at least the same, if not greater, amounts of accounts receivable and inventory than it has today. So, an objective party must ask how is it that Stelco could not increase its credit line in 2004, but it can easily do so today?

Moreover, this Stelco ABL on the Company receivables and inventory is to be provided by the lenders who are providing the existing credit facility. Yes, the same ones, GE and CIT.

I note there is a covenant clause in the current ABL lender Term Sheet regarding litigation, which is that there shall not be any pending litigation at Stelco that could have a "material effect" of its financial affairs. As you know, Georgian Windpower has a $350 million dollar lawsuit against Stelco that the Court of Appeal this past week has ruled may proceed.

I believe this lawsuit would have a potential "material effect" on Stelco, and I wonder why the credit committees of both GE and CIT required this covenant with full knowledge of the $350 million lawsuit?

One could surmise that the Georgian Windpower lawsuit has always been in the back of their minds and the continual delays in presenting their ABL Term sheet was only to see what the outcome of the Appeal in that case would be.

Should Stelco ultimately lose this lawsuit, clearly with this refinancing structure, Stelco would be headed straight back to CCAA. It goes without saying that the Bridge Loan facility from Tricap would also be subject to compromise.

In any event, contained in the Monitor Report para 21 is: "Stelco has advised the Monitor that the ABL Term Sheet and the Bridge Loan Term Sheet have been approved by the board of directors at Stelco, subject to obtaining ABL lender credit committee approval."

I suppose all the parties have legal opinions that $350 million litigation is immaterial.

Now to the Bridge Loan, which is truly nothing short of financial rape.

Tricap is to earn an upfront commitment fee of $7.25 million, due and payable upon Stelco's acceptance of this commitment. But that is just the icing on the cake. On top of that exorbitant fee, Stelco must agree to pay for all expenses incurred by Tricap in relation to Stelco's CCAA proceedings prior to the date of the loan. That's a hypothetical because who knows how much that bill will come to.

Given that this whole negotiation was conducted in private by friendly parties (the Stelco CEO is a former Brascan (Tricap) executive officer for about 20 years), with no outside bidding permitted, I shall assume that all those who are employed by Tricap are to be listed as consultants and their time on this extensive matter will come through as an expense. But, in all probability, we may never know the cost as it will show as a deferred debt issue cost and capitalized on the books.

As to terms and conditions: this is a BA Rate Loan where, for the first 3 years, the interest rate is the 30-Day Bankers Acceptance Rate plus 675 basis points, plus loss increments, if applicable, to between 300 to 500 basis points. The loss increments kick in if certain liquidity is not maintained. The maximum rate is capped at 30-Day BA plus 12.75 pct. For years 4 to 7, the terms are at the 30-Day BA Rate plus 725 basis points, plus loss increments, plus applicable premium. The premium is an additional 50 basis points every 6 months from year 4 to 7. In addition, the Annual Fee is 3-pct of the total facility amount ($375 million), which is an additional $11.25 million.

On the bright side, the Bridge Loan is repayable without notice at any time. :-)

Then again, this so-called financing is the reason why the judge terminated all existing shares and agreed to the Plan of Arrangement (whenever they get it done) that would pay Brascan/Tricap a bonus of a minimum of 34.5 pct of the "new" common shares, which I estimate to be worth at least $400 million. I have read estimates that Tricap and two smaller financial players will end up controlling about 88 pct of the equity for in effect providing this "fair, reasonable and equitable" Bridge Loan.

Have you thought to ask the question, why the need to enter into such an expensive financing arrangement? Isn't it obvious?

No other steel company in their right mind would seek to acquire Stelco with this financial structure in place. Besides, term lenders know that there is no new equity going into Stelco and would not want to face an immediate crisis if they were to support a competing bid at this time. And, since traditional term lenders do not want to fight for priority with other lenders, this structure, in my view, has been put in place to force all other parties to wait until Stelco emerges from CCAA.

Military people would call this a flanking action, given that Tricap's goal is to gain control of the Company equity and its Board, which is a billion dollar play. Lawyers see the Bridge Loan as the means to helping Justice Farley acknowledge there is no white knight. It's the CCAA version of a poison pill.

In practical terms, this proposed financial structure (no equity and excessive terms of the Bridge Loan) is most probably going to accomplish one or both of the following:

(i) Bleed more cash out of Stelco in the event a legitimate bidder does make an offer for the company, and

(ii) Make it tough at this point in time for any other party to put new debt financing in place because of the leverage. Under different owners, Stelco would have to pay the upfront fees and high interest rates until it could satisfy these particular term lenders that it is solvent as a going concern -- maybe 12 to 15 months from now -- and only then could it cancel the Tricap loan.

The Stelco directors are in on this deal too. They approved these Term Sheets knowing the Company could have worked out better terms elsewhere if put out to market bid. Moreover, if the Directors had put Stelco into play without this CCAA albatross, there would have been several bidders for the equity. The Court rejected this notion, apparently because the Company management stated that their door was always open, which ought to be key points for Appeal.

Moreover, it was incumbent on the Directors to have ensured a fair value calculation of the iron ore assets and the windpower plan. As I see it these multi-hundred million dollar values were deliberately omitted from the management evaluation in the CCAA process. These are values that lawyers can fiddle with, but capital market traders (independent and objective ones like me) do consider.

Based on these values alone, Stelco was is a very good position to extend their credit lines, or do a re-financing in the past two years, if running a going concern was truly the interest of this Board and management group.

A legitimate operator of Stelco would have used the value of the continuous flow of iron ore mining revenues in a separate financing that could easily have been monetized, i.e., turned the ore revenues for so many years into the future into a lump sum payment today. This practice is quite standard in the mining industry. Alternatively, Stelco could have directly used the ore it controls as security for financing. But the Directors permitted these valuable mining operations to be given no mention in CCAA and kept out of any valuations as far as I can see.

Iron ore is today at record high prices. A new buyer/operator of Stelco will in all likelihood use those separate assets to pay for the acquisition. That's the shame of what the directors have allowed to go on here.

But, back to the key point I am making today. The Director's action with respect to signing off on these Term Sheets represents to me a massive failure of the concept of fiduciary obligation, and ought to be another point on Appeal.

Justice Farley is quoted as saying: "It would seem to me that the plan is fair, reasonable and equitable."

But, ask yourself if a single member of that Board would have agreed to pay these kinds of rates in their own businesses? Is that Farley's concept of "fair, reasonable and equitable"? Let's get real.

Better still; let's get fair and reasonable. An objective Court would do that. There is no reason all the stakeholders could not be treated equitably.

As you know, there is a Sanction Order (dated Jan-20 based on the supposed reasonableness of these prospective/"indicative" Term Sheets) containing a bar order from Justice Farley that intends to "protect" these Directors, as well as Tricap, from stakeholders who have suffered and will continue to suffer damages by this CCAA process.

Where is the equity in protecting people who damage others? In a just society, it just doesn't happen.

But we all know it does, which is why I write this blog.

Think about this Stelco Director and management-approved news release from Stelco VP Helen Reeves, who happens to be another ex-Brascan (Tricap) career executive:

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"Conditions precedent: The Report notes that the term sheets contain certain conditions precedent to the implementation of the financings, which the Monitor notes is not unusual for exit financing at this stage of a major CCAA restructuring....

The Report notes that the parties to the asset based loan have indicated to the Monitor that they have reached sufficient consensus between themselves and with the Province. As a result, the parties have indicated that they do not believe that any issues remain which could reasonably be expected to prevent the transactions contemplated in the term sheet from being implemented.

The Report notes that the parties to the bridge loan have indicated to the Monitor that details concerning the condition with respect to the proposed corporate reorganization of Stelco remain to be finalized. At the same time, the Report adds that the parties have confirmed to the Monitor that, subject to obtaining Court approval of the proposed reorganization, they do not believe that any issues remain which could reasonably be expected to prevent the transactions contemplated in the bridge loan term sheet from being implemented.

The Monitor indicates that the Province has confirmed that, to the extent that the transactions contemplated in the term sheets affect pensions and related liabilities, the Province is committed to working with the parties to satisfy the conditions precedent in the term sheets. The Report adds that the Province has confirmed that it is also committed to working to resolve any remaining issues that may affect pension and related liabilities arising from the proposed corporate reorganization."

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What these statements mean to me is:

The Hamilton (Hilton Works) and Erie operations are to be split, and the Hilton Works ultimately shut down. A smaller workforce and downsized operation will then have an even greater problem in meeting terms and conditions of the Defined Benefits Pension Plan, and there will be Local 1005 workers put out of work, but the Ontario government has agreed to try to resolve their differences in future.

The Plan of Arrangement will accomplish what the Distinguished Faculty in the Canadian Institute conference (Justice Farley included) were there to teach: to wit " "structuring union concessions as claims for equity" and "the latest word on termination of a defined benefits pension plan."

But let's step back a second. There is no Plan of Arrangement but the shareholders have been terminated, subject to Appeal, on the basis there was a problem (there wasn't), there wasn't a solution in the free capital market (there always was), and there is a Plan of Arrangement from all the non-shareholder Stakeholders (there isn't).

There is little to nothing I can observe here that is "fair, reasonable and equitable".

At the end of the day, I think any expert should be able to see that the ABL and Bridge Loan package are like quicksand " this is not rock solid financing for Stelco's future.

In fact, the terms and conditions are so excessive that an independent and objective banker must be thinking -- if the current Plan of Arrangement were to fall through for some reason, this Bridge Loan deal is just another pre-authorized theft of $7+ million from Stelco.

Thinking ahead to an Appeal, it could be that having used a "legal process" to beat the stakeholders to a pulp, buying up debentures at fire sale prices in the process, Brascan/Tricap and friends may have been in the stock market too, buying up the balance of the existing common shares for a couple pennies each.

And if someone can prove that, I'd say there might be more grounds for appeal.

Unfortunately some people think this stuff is complicated. It's probably true that " with 39 law firms drafting docs day and night -- too many Little People who have stakes in Stelco are overwhelmed by it all. I'm not. I love it.

Although, I do admit that having earned two professional accounting designations, an MBA, and 40 years experience, including 25 in capital markets, a lot of it in corporate finance, does help.

I also admit that it's hard to speed-read these documents when I've got better things to do, and a lot of other things on my mind.

But I do it because nobody else appears to want to, and I see this as an important Public Policy issue: Are the Little People going to allow so-called "legal processes" like this to overwhelm the integrity of their capital markets?

I hope not, so I put the time in. I just have to start at 4am in the morning.

Stelco management, the Board, Tricap, the judge, and others, obviously have a different view.

Management did take exception to an apparently negative article in the January 3, 2006 Toronto Star (which I missed because I was on vacation). That article was written by David Olive, who my readers know I have a very high regard for, just as I do Eric Reguly of the Globe & Mail Report On Business, who also has a perspective that is different to that of Stelco. If enough of us got together....

You should read Helen Reeves' news release (first one for 2006), which is listed on the McCarthy Stelco CCAA website, about David Olive.

As I see it, that is a not-too-subtle threat. I saw the Stelco lawyers try the same deal in the Court when referring to Affidavit statements made by Fabrice Taylor, a financial analyst who stood up to the Stelco gang by backing the independent valuator's report " the one that says Stelco is worth well over a billion dollars.

But that's what attack-dog lawyers do to honest people, I suppose. They use their knowledge of the law to try to abuse them.

I can only wonder what the Stelco gang must think of me today, but since they didn't ever contact me, I take it they must like it when I inform people what's going on here. :-)

Then again, since I don't have the 2 million regular readers/viewers that Olive and Reguly have, maybe they don't care? They seem to have the law on their side.

Here (below) for the record, are exhibits in the Monitor's Report #48. Please note that the Monitor Ernst & Young also has stated that they believe these "vulture banking" ABL Facility and Bridge Loan terms and conditions are acceptable. The mind boggles, but as always I'll let you decide.

I'm only, like most of you, one of the Little People " an objective observer " giving you information and opinions.

If I had a personal financial stake in this, though, I'd be filing that Appeal on or before the 10th. You see; I don't care how much these lawyers learned at the Canadian Institute CCAA Conference the week before the Stelco CCAA filing, I doubt that, over the course of a two-year charade, they managed to precisely dot every "i" and cross every "t".