JURI KOOR HAS ONE OF THE TOUGHEST JOBS IN CORPORATE CANADA— SALVAGING A TROUBLED TRUST
Until recently, Juri Koor was a selfemployed management consultant in Toronto, specializing in the financial services industry. But on Jan. 7, he tackled one of the toughest assignments in corporate Canada: taking over as president and chief executive officer of financially troubled Standard Trustco Ltd. Saddled with a $230-million portfolio of bad real estate loans, the Toronto-based trust company has for months been the object of intense scrutiny by federal and provincial regulators, anxious creditors and thousands of bewildered shareholders—not to mention its 250 employees, many of whom fear for their jobs. But in spite of the pressures, Koor insisted last week that he was enjoying his new duties as head of Canada’s ninth-largest trust company. Declared Koor: “I like situations where you manage a lot of change quickly.”
True to form, Koor has moved swiftly to try to put Standard’s tangled affairs in order. Even before his business cards were printed, the 50year-old chief executive had overhauled the firm’s senior management, opened negotiations with its creditors and met with government regulators to reassure them about the company’s prospects for survival. Koor then ended months of speculation by announcing that Standard was putting its trust operations, including its network of 37 branches in seven provinces, up for sale. Together, those measures were designed to halt the damage that has been inflicted on Standard by the recent sharp decline in real estate values in many parts of Canada.
That strategy is designed in part to satisfy Standard’s controlling shareholder, Roman Corp. Ltd., a beleaguered Toronto holding company that is trying to raise money to reduce its debts. But it is a tall order for a trust company that has lost its credit rating and is
burdened with $230 million in nonperforming loans. Kersi Doodha, a financial services analyst with Maison Placements Inc. in Toronto, for one, says that he is skeptical that Standard can be revived. Said Doodha: “It’s too late for a hero to ride in. It’s a question of holding hands until the company is sold, which should have been done some time ago.”
Koor’s immediate task is to revitalize the ailing trust company to enhance its value for a potential buyer. “We’ve been over-audited, over-consulted and over-advised,” said Koor,
sipping coffee from a plastic cup in his modest secondstorey office in downtown Toronto. “Now, it is time to get down to business.”
So far, the leading contenders to assume control of Standard appear to be Montreal Trustco Inc., Manufacturers Life Capital Corp. Inc. and National Trustco Inc. But their interest is likely to be limited to acquiring the company’s healthy assets—including Standard’s $1.1-billion portfolio of healthy loans. Standard officials say that the company’s nonperforming assets—loans on which interest payments are more than 90 days in arrears— will likely be transferred into a yet-to-be-created subsidiary. Standard’s owners could then try to collect on the loans themselves, or sell them at a discount to a company that specializes in salvaging bad debts.
Standard’s fortunes have fallen sharply during the past six months. Founded by mining magnate Stephen Roman in 1963, the company was well-known in the £ trust industry for its coniti servative lending practices. I But last July, federal and s provincial regulators orI dered a special audit of Standard’s financial state“ ments because of concerns that it was carrying too
many bad loans. The audit,
made public in November, revealed that the company was carrying more than $215 million worth of nonperforming loans, an amount equal to about 12 per cent of its $1.8 billion in assets. That compares with an industry average for nonperforming loans of two per cent. Since then, Standard’s nonperforming loan portfolio has grown by more than $15 million.
At a time when property values throughout most of North America are weak, those numbers alone are enough to frighten many investors. But Standard appears to have had other
problems, as well. For one thing, many of the company’s nonperforming loans were made to a single developer, Edmonton-based Owl Developments Ltd., which used the money to finance condominium projects in Manitoba, Ontario and Nova Scotia. Said Stephen Martin, an analyst with Montreal-based Canadian Bond Rating Service Ltd.: “Clearly, Standard did not pay attention to its portfolio risk, or it encouraged a high-risk portfolio. They did most of their lending at the peak in the real estate market.”
Largely as a result of those revelations,
Prices for preferred shares in Standard Trustco Ltd.
Standard’s share price has fallen sharply from its peak a year ago of $24, closing last Friday at $1.75. At the same time, the Ontario Securities Commission says that it is investigating possible insider trading at Standard’s parent, Standard Trustco, and whether Standard’s accounting practices violated the province’s Securities Act.
For his part, Koor said that he plans to co-operate fully with the current investigation. He added that he sympathizes with the plight of the small investors who have suffered because of Standard’s fall from grace. “I have special empathy for the ordinary person in a small town who decided to buy some trust company shares,” says Koor.
“That person doesn’t understand the market and true equity risk.”
Still, Koor insists that Standard’s lending practices were “not overly aggressive” given the conditions that prevailed in the real estate market in the 1980s. “It’s easy for an outsider with hindsight to say,‘How could they be so dumb,’ ” he adds. “But this business is in good shape, except for the lending area. You don’t build the ninth-largest trust company surrounded by
idiots.” Despite those assurances, Koor issued a brief statement late last week announcing the departure of three of Standard’s vice-presidents. That brought to six the number of senior officials who have left in the past six months, including the previous president, Brian O’Malley, who resigned last December.
Koor himself says that he is savoring the challenge of trying to restore Standard’s battered credibility. He is not the only person brought in recently to help Roman Corp. out of its difficulties. In addition to its 48-per-cent stake in Standard, Roman owns 25 per cent of
Denison Mines Ltd. and a 26-per-cent equity stake in Lawson Mardon Inc., a Mississauga, Ont.-based packaging company. Last December, Helen Roman-Barber, who took control of Roman Corp. in 1988 after her father’s death, recruited William James, former president and chief executive officer of Falconbridge Ltd., to help Denison dispose of assets and improve the prospects of its uranium-mining and coal operations. For the past two years, Denison has been trying to sell its European oiland-gas investments, g Meanwhile, Roman is also trying to find a buyer for its z share of Lawson Mardon. I The company’s stated objecI tive is to sell its investment I by the middle of this year—a “ goal that Roman officials say appears within reach. Koor, however, is less specific about the timing of a possible sale of Standard’s trust operations. “We’re not committed to any schedule,” he says. “We are going to do the best thing for depositors, investors and shareholders.” Most analysts say that would make a refreshing change.
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