According to news reports Quebecor World's board of directors unanimously
agreed for the company to file for bankruptcy protection, and said it had
entered into a financial arrangement with Credit Suisse and Morgan Stanley for
US$1bn to continue operating as a going concern.
The company's share price has plummeted in the past three months, it is
currently trading at US$0.32c, compared with US$11.85 this time last year, and
US$9 in October.
Reports state that the company has been in frantic negotiations for
refinancing, as its poor performance drove it to breach the debt-to-EBITDA
ratios stipulated in its lending package.
The battle against bankruptcy was precipitated following the collapse of the
sale of its loss-making European division – the biggest print operation on the
continent – to RSDB, the parent company of European print giant Roto Smeets.
The abandonment of the deal, which came after a shock refusal of the
acquisition by Roto Smeets shareholders threw into doubt the future viability
of Canadian-owned Quebecor World.
Following the collapse of the deal the company's shares dived to a record low
of $1.18 on December 20, having traded at over $8 dollars in November and
$17.25 a year ago in February 07. Since then they have dropped another 75 per
cent.
Quebecor World president and chief executive Jacques Mallette said:
"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 steps we initiate today will allow the company to make changes that
are necessary to ensure the long-term viability of the company within a process
that ensures fair and equitable treatment for all stakeholders."
When a company files for creditor protection in the US
and Canada, it
is often able to raise large amounts of money in the form of Debtor In
Possession financing (DIP). With DIP, a new lender is able to take a preferred
security position over all the assets. This would enable the company to
continue trading during the Chapter 11 proceedings while it tries to
restructure either its operations, its financing or both.
The giant print had a turnover of some US$6.1bn in 2006. The bulk of that,
$4.8bn came form the US
and Canada,
with Latin America contributing around US240m and Europe
around $1bn. However revenues form Europe have been on
the slide for several years, while the other two regions have remained steady.
Quebecor World has around 130 printing plants located in North and South
America, Europe, with one in India.
