Quebecor World’s outlook

While officials with Quebecor World insist it’s “business as usual” in the wake of the Jan. 21 Chapter 11 bankruptcy protection filing, some industry experts wonder what’s in store for the Montreal-based printer.

Quebecor World Inc., one of North America’s largest book printers, filed for protection under the Companies’ Creditors Arrangement Act, saying it would run out of cash by week’s end after a rescue-financing plan failed. “The company is currently facing a liquidity crisis and is in … serious need of relief,” Quebec Superior Court Justice Robert Mongeon said as he approved a motion by the company to file for protection under the Companies’ Creditors Arrangement Act.

After Quebecor World Inc. filed for creditor protection, parent Quebecor Inc. formally advised Quebecor World to remove “Quebecor” from its corporate name.

The filing comes with $1 billion in new senior financing from Credit Suisse and Morgan Stanley.

What’s more, officials for Quebecor World placed its British subsidiary under the administration of Ernst & Young after a failed turnaround attempt. The U.K. facility, located north of London, employs about 290 people and produces magazines and catalogs, along with marketing and advertising materials.

Quebecor World has about 28,000 employees in more than 115 printing and related facilities in the U.S., Canada, Argentina, Austria, Belgium, Brazil, Chile, Colombia, Finland, France, India, Mexico, Peru, Spain, Sweden, Switzerland, and the U.K.

Anita Pursley, vice president of postal affairs for Quebecor World, says there is no specific timetable for the bankruptcy protection, but she estimates that it could run from 12 to 15 months. “The $1 billion in financial assistance is a vote of confidence,” she says. “That’s the most important part of the deal, to continue to serve our customers and become more efficient.”

So far, she says, customers have been supportive. In fact, Quebecor World announced in February that it has signed new and renewed multiyear agreements with important customers across all its major business groups.

Still, “I know they have a few nervous customers and suppliers right now,” Dave Goldschmidt, vice president of marketing, catalog division for Irvine, CA-based paper brokerage Strategic Paper Group, says about Quebecor World. “Hopefully, they can manage through this and hold things together. It would be a shame to lose another major printer — and it would put a significant strain on press capacity. There were a lot of paper mills and merchants with significant debt exposure at QW. It will be interesting to see if there is any fallout because of this.”

In addition to the difficult economy for Quebecor customers, published reports say the company went through six CEOs in the past five years, including Pierre-Karl Peladeau, the founder’s son, who is now CEO of Quebecor.

The company was late to invest in new machines, lagging its competitors, and in 2003 it bought back $200 million worth of stock, rather than pay down debt or invest in the business, the reports say.

What’s more, the reports suggest the company didn’t do enough to improve results at its lagging European operations, and lost key printing contracts to rivals. And, believing it could fix its problems, the parent company spurned offers for the printer, despite the fact it could have earned well over $1 billion by selling the company.

Jim Treis, executive vice president of sales and marketing for Menomonee Falls, WI-based printer Arandell Corp., believes the name change order by the parent company doesn’t bode well for Quebecor World. A situation like this, Treis says, is a “scary part of the industry. It’s something nobody ever wants to see.”

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