April 6, 2006 - No. 50
Rolf Gerstenberger Wins Re-election
• Rolf Gerstenberger Wins Re-election
• Trading New Stelco Shares: CCAA Bankruptcy
• Monopoly Capital Hooliganism
• Deceit Is Their Stock in Trade -
Excerpts from Bill Cara Blog
Rolf Gerstenberger Wins Re-election
By a vote of nearly two to one in a large turn-out of
workers at Stelco's Hamilton Steel (formerly Hilton Works), Rolf
Gerstenberger was re-elected president of United Steelworkers Local
Current vice-president Jake Lombardo who ran against Gerstenberger on a
platform of compromise and delivering a contract in upcoming
negotiations with the company was defeated, along with four other
members of the current executive.
Executive member Gary Howe was elected vice-president also with a two
to one vote, along with a majority of workers who have supported
Gerstenberger's leadership throughout the Companies' Creditors Arrangement Act
(CCAA) bankruptcy fraud.
Overnight the media, which strongly advocated Lombardo's election, went
from calling Gerstenberger a hard-line "avowed Marxist" who may provoke
a strike to a "fiery steelworkers' leader." For their part, the workers
went all out to reaffirm the Spirit of '46 to defend their rights and
expressed confidence in Gerstenberger's leadership.
Congratulations to the new Local 1005 executive and all the Hamilton
Stelco workers and retirees who for more than three years have
successfully defended their rights in the face of an historic corporate
Trading New Stelco Shares:
CCAA Bankruptcy Fraud Consummated
There couldn't be a more despicable example of monopoly
capital hooliganism than what workers are witnessing at Stelco. The
alarming profiteering upon exiting bankruptcy protection has
generated enormous outrage, even though it was widely predicted. It is
an example of the "shock and awe" tactics
of monopoly capital: "We can do it and you are powerless so may as
well give up the fight for your rights."
This particular type of capitalist profit is not even
connected with the production of steel or any use-value. Production of
added-value by steelworkers and the existence of privately-owned
productive steel works provide a backdrop to the dark wheeling and
dealing that gives rise to this most parasitic
form of monopoly capitalist profit.
Within the social economy, share coupons represent a
kind of private currency with their own floating rate. A small gang
that controls the Board of Directors and executive management of a
particular enterprise issues the private share currency not to raise
capital for the enterprise and contribute to its
viability but as part of a scheme to make a big quick score.
Increasingly, the issuing of private share currency is
fashioned under dubious circumstances in cahoots with government
institutions, such as the Ontario Superior Court and the Companies'
Creditors Arrangement Act (CCAA). The old private share currency
liquidated and a new one issued to those
in control, which has occurred at Stelco, Algoma, Air Canada, Ivaco et
al. This practice also includes the most corrupt and inhuman
activity of threatening the working class with loss of livelihoods,
wages, benefits and pensions. It is most widespread in the United
States with cases now underway involving
tens of thousands of autoworkers and current shareholders at Delphi,
airline workers at Delta and elsewhere.
Private Currency Within the Social Economy
Stelco's new private share currency entered circulation
April 3. Its floating rate rose dramatically providing the possibility
of stupendous profits for those who awarded the private currency to
themselves and their allies. The private Stelco currency merged
with the national currency becoming interchangeable, as the Stelco
stock coupon is very liquid. Canadian dollars can be easily exchanged
for Stelco share currency and vice versa.
Monopoly capital has become so powerful and its
manipulation of the state so brazen, such as with the CCAA process,
that it can literally print money for its own private gain and use in
total contradiction with the public good and the people's conception of
justice. In this case, Brookfield/Tricap and
its co-conspirators used $114,675,000 of Canadian currency to issue
27.1 million units of Stelco share currency and within two days the
floating rate rose dramatically, but not unexpectedly because it was
all carefully planned and orchestrated, creating the possibility to
exchange the 27.1 million units of Stelco currency
for $650,400,000 worth of Canadian currency.
To have private groups issuing new currency to
themselves is unjust and highly destructive to the social economy. The
injustice is in addition to the diverse economic problems this practice
causes, such as draining money from other sectors of the social
economy, removing it from the productive economy and concentrating it
in the possession of particular individuals and groups, diluting the
Canadian currency contributing to inflation etc.
The practice is grossly unjust and an insult to the working class that
creates all material wealth from the country's resources. The social
product generated by workers in Canada's main means of production
is the basis for their own wellbeing and of society. The social forces
of production such as Stelco and their social product must no longer be
considered the private property of individuals to do with as they
The practice of issuing private share currency to
privileged individuals and groups must be condemned. The organized
working class must demand that government authority do its duty and put
an end to the issuing of private share currency, especially when a
monopoly claims CCAA bankruptcy
The practice reflects the destructive nature of private
ownership of social production, a contradiction at the heart of
Canada's modern integrated social economy that must be overcome through
the unity and cooperation of the organized working class, replacing
private ownership of the basic sectors of
the social economy with social ownership that serves the public good.
Monopoly Capital Hooliganism
Within two days, the new shares in Stelco equity have
ballooned from the initial price of $5.50 to $24. Around 4 million
shares changed ownership during that time. Those in control of the
Stelco Companies' Creditors
Arrangement Act (CCAA) fraud liquidated the
old shares and created new ones that were
issued to themselves for $5.50 each March 31, the day that Stelco
exited CCAA. The public were able to buy the shares with the opening of
trading on the Toronto Stock Exchange April 3. Even before trading
began the initial price had already climbed from $5.50 to $15.00
reaching $24 the following day.
A total of 27.1 million Stelco shares for a
combined price of $149,050,000 ($34,375,000 was transferred debt) were
allocated in approximately the following manner on March 31:
Brookfield/Tricap: 9.93 million shares; paid
$54,615,000; at current trading price worth $238,320,000 for a paper
capitalist profit of $183,705,000 within two days
Appaloosa: 4.96 million shares; paid $27,280,000; at
current trading price worth $119,040,000 for a paper capitalist profit
of $91,760,000; (plus it claims entitlement to an additional 43,849
shares and 56,546 warrants with one warrant equal to one share at the
initial price of $11. Appaloosa's claim
is under dispute and before the court this July.)
Sunrise: 4.96 million shares; paid $27,280,000; at
current trading price worth $119,040,000 for a paper capitalist profit
of $91,760,000; (plus a disputed claim to an undisclosed number of
additional shares and warrants)
Rodney Mott, new Stelco CEO: 1 million shares
immediately purchased at $5.50 each; paid $5,500,000; at current
trading price worth $24 million for a paper capitalist profit of
$18,500,000; plus 1.04 million optioned shares that can be purchased
over the next four years at $5.50 no matter what the
trading price; the optioned shares when purchased are in addition to
the total number of outstanding shares
Creditors in Stelco who were recognised under the
Brookfield restructuring plan; all the affected creditors opted to
receive stock at $5.50 rather than cash: 6.25 million shares; a
transfer of $34,375,000 of their affected debt (no new money injected
into Stelco); at current trading price worth $150,000,000
for a paper capitalist profit of $115,625,000
Total: 27.1 million shares issued (not optioned); paid
$114,675,000 (new cash to Stelco) plus $34,375,000 of transferred debt
for a total worth of $149,050,000; at current trading price the total
share equity is now worth $650,400,000 for a paper capitalist profit of
$501,350,000 in two days.
Other details released:
Unnamed individuals: 860,000 options were handed out to
buy stock at $5.50 over the next four years no matter what the trading
Stock options: 700,000 additional options to buy stock
at $5.50 will be handed out to unnamed individuals in the future
Stelco now has outstanding:
- a new $600 million asset backed loan facility
- a $375 million secured revolving term loan owned by
- a low interest loan of $150 million from the Province
- 27,100,000 New Common Shares (traded on the TSX; some
ownership under dispute) for which the company received $114,675,000;
no additional monies come to the company for those shares no matter
what the trading price becomes
- 2,269,600 New Warrants (traded on the TSX; one warrant
entitled to purchase one share at $11 at a set date; ownership under
- US$235,070,000 of New Secured Floating Rate Notes
(part of the turnover of old debt; traded on the TSX); interest on the
New Secured Floating Rate Notes payable in semi-annual instalments will
float with the London Interbank Offering Rate. The interest rate
applicable from March 31, 2006 to September
30, 2006 is 10.61%
- plus options to purchase 1.94 million of the company's
New Common Shares to be issued in the future
Deceit Is Their Stock in Trade
from Bill Cara Blog -
The following item contains excerpts from Bill Cara's
blog dated April 3 and 4; full blogs are available at www.billcara.com.
* * *
The ROBTV stock reporter just made the following
statement: "A good day for Stelco... A tripling of the stock price." No
this wasn't a good day for Stelco; Stelco was raped, then died, and
family and friends are in mourning. This was a tragedy.
Let's for once call a spade a spade: Brascan/Brookfield/Tricap and
their friends had the good day. They got away with fraud. The rest of
us want to throw up.
The old owners were stripped of all their stock -- left with zero to
show for their investment in Stelco. And the new owners added about
$400 million in debt, after they caused $150 million to be paid out to
lawyers and accountants to make this fraud look like a legitimate deal.
Even writing off these costs, the Company barely lost any money.
Please, anybody, tell me how adding $400 million in debt and virtually
no equity to a bankrupt company suddenly makes it a healthy one...? The
Company was NEVER worth less than $1 billion, and probably double that.
The old shareholders just had $10 a share stolen and the shares taken
from them. The Toronto Exchange and Ontario Securities Commission never
lifted a finger.
In 40 years I have never seen anything like this.
Read the Globe & Mail
report today and tell me if this isn't enough to turn off any person
who actually believes that equity markets are not a scam.
"Shares of Stelco Inc. rocketed as much as 239 per cent higher on the
Toronto Stock Exchange in their first day of trading since the steel
maker emerged from court-supervised bankruptcy protection.
"The shares, issued at $5.50 and trading under the ticker STE-T, opened
Monday at $15 and rose as high as $18.65. At last check, they were up
$18.01, or 228 per cent....
"Mr. Mott bought 1 million new company shares 'as a personal
on Monday at a price of $5.50 a share, for a total cost of
$5.5-million, Stelco said in a weekend release....
I am appalled.
Don't anyone ever again say to me that capital markets are not managed
A reader once wrote to say that he liked my style as it was somewhat
jaded, but very much based in reality. Now you see why. I have watched
these Stelco-type deals repeat themselves time and again over the years.
You know, I never ever had a dime invested in Stelco. I just spent
hundreds of hours of my valuable time to prove a point. I have made it.
Actually Brascan/Brookfield made it for me -- as I knew
makes a mockery of equity markets
I cannot leave it alone. For almost two years I told you this would
happen to Stelco shareholders and bondholders. The mockery of equity
markets is now complete.
On the order of a single judge, the share register destroyed the equity
interests of the legitimate shareholders last month. New shares were
priced at $5.50, but there was no basis for that because adding $400
million in debt to a bankrupt company still makes it a bankrupt.
So on the second day of trading of the "new" Stelco shares, the stock
closed today at $24.00. That's twenty-four dollars from $5.50 in just
Did I expect this? Of course; some of the same people (the judge and
the restructuring officer) were there to do the same for another steel
company here -- Algoma Steel -- whose shares zoomed from $3.00 to
$30.00 in short order after all the Moms & Pops had their shares
stolen then too.
So, no, I'm not surprised. I predicted it in this blog.
This is an open blog and one that is read by about 10,000 Canadians,
including Toronto Stock Exchange staff, Ontario Securities Commission
staff and politicians, judges, securities lawyers, other lawyers and
accountants, cops, brokers, analysts, money managers, teachers and Moms
I have a question: Is there a single person in this country who can
explain how suddenly there is value behind Stelco that didn't exist a
month ago when the "old" shares were still trading?
If you have an answer, just send me a comment with your name and
position attached to it. I'll review it because the rest of the world
-- the other 30,000 people who read my blog -- would like to know if it
is possible that theft of assets is legal in Canada....
Life as a broker-dealer is not always pretty, but I always cared enough
for people that I got to sleep at night. But then there was never a bad
one come along like Stelco.
Mom & Pop just had a couple billion dollars stolen. They need
The rest of the world needs answers.
Comment from Cara reader:
Sorry, I only have another question to add: if we don't have a single
journalist in Canada with the requisite balls to tackle this, what
about an American? Surely there must be at least one foreign journalist
who reads this blog and isn't afraid of wading into this mess.
Others have asked about why there is not more Canadian media coverage.
Reporters are not well paid, and there are only about three major media
groups here. The employer depends on advertising from the financial
services industry, and the reporters know it is a closed system, so
they protect their careers. I suppose there are some reporters who
would do this, but it takes someone who understands financial summaries
and capital markets and banking agreements. Most editors would rather
re-hash corporate press releases. In the case of Stelco, those news
releases all through this CCAA charade were produced and distributed by
the person who did the same job at Brascan as a vice president for well
over ten years there too. I venture to say that unless they discovered
that from my blog, the "reporters" covering the Stelco story did not
even know that important fact.
And as for lawyers speaking out, I believe that the 39 firms involved,
all earning big fees from the Stelco case, pretty much cover the legal
If we can't take care of people who cannot take care of themselves,
then who will? What kind of society do we end up with?
What happened here is just shameful. With money in hand, I figure it
would have been an easy task to flood that CCAA courtroom of Judge
Farley with enough independent and objective business valuations (of $1
billion and up) to make his head spin. As it stands he took the two
that were submitted (one by a qualified Bay Street analyst and another
by the world's biggest forensic accounting firm) and allowed his
courtroom to make a mockery of them too.
When a society stops caring, it self destructs.
Apparently I am one of the few who care. I hope there are others.
This same thing happened with United Airlines and will soon happen to
Delta and Northwest shareholders. Different situations, but the end
result is the original shareholders left holding the bag.
(TML Comment: The
workers, Mr. Cara, the workers, the community and the Canadian economy.)
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