The Stel Salaried Pensioners Organization wishes to
thank The Hamilton Spectator for permission to post the following article by
Reporter Tara Perkins
published in
the April 8, 2006 edition
TORONTO (CP) - The strength of Stelco Inc.'s (TSX:STE) new
shares has some of the Hamilton-based steelmakers' old shareholders saying 'I
told you so.' Newly issued stock in the company, which was doled out at $5.50
apiece to creditors, financiers and the steel producer's new CEO, traded as
high as $24.90 on the Toronto Stock Exchange last week.
The shares, which began trading Monday morning, closed
Friday at $18.50.
Stelco's old shares were wiped out and delisted last month
as the company completed its court-supervised restructuring process, which left
value for bondholders and other creditors but nothing for stock investors.
The steel maker was in bankruptcy protection for two years
and two months as it struggled to reach deals with its union, creditors,
bondholders and shareholders.
Now some members of the shareholder group are crying foul.
This is a pretty sad day, Peter Jervis, a lawyer with
Lerners said in an interview last week.
Jervis represented a group of Stelco's former shareholders,
including AGF Management Ltd. and Pollitt Co., which had tried to stop the old
stock from being wiped out. Shares of firms that file for bankruptcy protection
in Canada normally lose all their value because shareholders are at the bottom
of the ranking of creditors to be paid back.
What the market's basically said is what we said, and that's
that there is substantial value there, Jervis said.
Does this not suggest that the process was somewhat
disgraceful? You've got at least half a billion dollars of shareholder value
that had to be there before.
Stelco's stock market value is close to $600 million now.
Jervis's clients commissioned a report by Navigant
Consulting, which concluded that Stelco's shareholder equity should be worth
between $1.1 billion and $1.3 billion. A later report by the same firm revised
that estimate down to $750 million, Jervis said last week.
In January, Jervis's clients lost a legal bid to delay
Stelco's restructuring for 30 days while they tried to find a buyer for the
steel maker.
What we said to the judge was, you've got a $5.5-billion bid
for Dofasco across the street, there's consolidation across the steel industry,
you've got sustained steel price increases ... and there's value in Stelco,
Jervis said.
In his ruling, Ontario Superior Court Justice James Farley
acknowledged the shareholders were being wiped out, but said their efforts to
find a buyer appeared to have been rebuffed.
No one has shown any real or realistic interest in Stelco,
Farley wrote, adding that certainly, Stelco is not Dofasco.
Stelco tried to sell itself while in bankruptcy protection,
but stepped off the auction block after deeming all of the bids too low.
Besides Jervis's clients, other shareholders who fought to
squeeze value out of Stelco's old shares as the steelmaker restructured
included Toronto-based hedge funds Clearwater Capital Management Inc., led by
Roland Keiper - previously dubbed by Report on Business magazine the smartest
man on Bay Street - and Equilibrium Capital Management Inc., led by Lidio
Mancuso.
Jervis acknowledges that there obviously were some
shareholders that were bigger players, but he adds that there was also lots of
moms and pops. All of them got screwed.
These were hard-working folks who made steel with calloused
hands. They weren't people who were bottom scavengers who tried to buy Stelco
shares and tried to make a quick buck, he said.
Jervis has worked on high-profile class-action lawsuits
against firms like Nortel, but said no legal actions are being considered in
Stelco's case. His clients did not appeal Farley's ruling.
I think our clients lost faith in the process, he said.
A spokeswoman for Stelco did not return a request for
comment.