Quebecor World files Chapter 11 bankruptcy, receives $1 billion DIP commitment

By Caroline Salls

Pittsburgh, Jan. 22 - Quebecor World Inc. filed for Chapter 11 bankruptcy Monday in the U.S. Bankruptcy Court for the Southern District of New York and filed for protection under the Companies' Creditors Arrangement Act in Canada, according to a company news release.

Quebecor's non-North American operations were not included in the filings. Quebecor Inc. and Quebecor Media Inc. and its subsidiaries are also not affected by the filing.

As a result, Quebecor Inc., the principal shareholder of Quebecor World, has formally advised Quebecor World that it must remove Quebecor from its corporate name to eliminate any potential public confusion.

According to the release, the company's proposed C$400 million "rescue financing" agreement with Quebecor Inc. and Tricap Partners Ltd. was terminated after the Jan. 20 deadline passed without satisfaction of financing conditions.

"In recent weeks, Quebecor Inc., the principal shareholder of Quebecor World, actively tried to find a solution that would have avoided the CCAA action," Quebecor Inc. president and chief executive officer Pierre Karl Peladeau said in a separate news release.

"A major partner, Brookfield, had been identified and a serious offer was made to the bank creditors of Quebecor World. The banks rejected the conditions of this offer and Quebecor Inc. decided that it would not be in the interest of its shareholders to pursue further offers that could have increased unreasonably the risks it might assume.

"Quebecor and Quebecor Media are both in excellent financial health and the outlooks for the future of the businesses are excellent."

DIP terms

In connection with its bankruptcy filing, Quebecor World has obtained a commitment for $1 billion in debtor-in-possession financing from Credit Suisse and Morgan Stanley to allow the company to meet all current operating needs, including wages, benefits and other operating expenses.

The DIP facility is subject to approval by both the U.S. and Canadian courts.

According to court documents, the company is seeking immediate interim access to $750 million of the DIP facility in order to apply $416.8 million toward the purchase of a receivables portfolio under its existing receivables facility, to pay related fees and expenses and to be used for working capital and general corporate purposes.

The DIP facility will include a $400 million revolving credit facility, with a C$150 million sublimit for Canadian dollar loans and including a $100 million letter-of-credit subfacility and a $50 million swing line subfacility, and a $600 million term loan.

Interest on the revolver will be Libor plus 225 basis points or Base rate plus 125 bps, at Quebecor World's option; interest on the Canadian dollar loans will be either the average discount rate for bankers' acceptances of the appropriate amount and the appropriate term as quoted on the Reuters Screen CDOR Page plus 225 bps or the Canadian Prime rate plus 125 bps; interest on swing line loans will be Base rate plus 125 bps; and interest on the term loan will be Libor plus 375 bps or Base rate plus 275 bps, at Quebecor World's option.

The DIP facility will mature on the earliest of 18 months from the bankruptcy filing date, 45 days after entry of the interim order if a final order has not been entered, upon the effective date of a plan of reorganization and upon acceleration of the loans.

"These steps allow the company to continue operating as a going concern for the benefit of all those affected including our many loyal employees, customers and suppliers," Quebecor World president and chief executive officer Jacques Mallette said in the release.

"We believe that the steps we are taking today and the strong vote of confidence given to us by our new finance lenders will ensure that we will be able to protect the value of the business for our stakeholders.

"Today's filing is the result of industry pressures, particularly in Europe, combined with the inability of the company to raise new capital in the current market environment and the inability to complete the sale of its European operations."

The company listed $100 million to $500 million in assets and more than $1 billion in debt on its bankruptcy petition. According to its quarterly report for the period ended Sept. 30, Quebecor World had $996.6 million in assets and $1.07 billion in debt as of Sept. 30.

Unsecured creditors

Quebecor World's largest unsecured creditors include:

• Administrative agent Royal Bank of Canada, New York, with a $735 million revolving credit facility claim;

• Wilmington Trust Co., indenture trustee, Wilmington, Del., with a $450 million 8¾% senior notes claim, a $400 million 9¾% senior notes claim, a $398.2 million 6 1/8% senior notes claim and a $199.9 million 4 7/8% senior notes claim;

• Societe Generale Canada, Montreal, with a $184.32 million equipment financing loan claim;

• Abitibi Consolidated Sales, Chicago, with a $9.27 million trade debt claim;

• Cellmark Paper Inc., Philadelphia, with a $6.63 million trade debt claim;

• Midland Paper, Chicago, with a $5.49 million trade debt claim;

• Bowater Inc., Catawba, S.C., with a $4.08 million trade debt claim;

• AIG Credit Corp. of Canada, Montreal, with a $3.69 million premium financing agreement claim;

• Catalyst Paper Inc., Richmond, B.C., with a $3.34 million trade debt claim; and

• Indenture trustee the Bank of New York, with a $3.2 million 6½% senior notes claim.

A hearing on Quebecor World's first-day motions is scheduled for Jan. 23.

Montreal-based Quebecor World provides marketing and advertising solutions to retailers, catalogers, branded-goods companies and other businesses, as well as complete, full-service print solutions for publishers. Its Chapter 11 case number is 08-10152.

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