Quebecor World announced April 9 it has reached an agreement with its creditors—the first step toward emerging from its financial problems.
The Montreal-based printer filed for Chapter 11 bankruptcy protection in January 2008 under the Companies’ Creditors Arrangement Act, saying it would run out of cash by week’s end after a rescue-financing plan failed.
The agreement Quebecor World has reached on a term sheet with its creditors is “an important milestone in the company’s process to exit creditor protection as a strong player in its industry,” said Cynthia Rhilinger, a marketing communications specialist for Quebecor World Norwood, in a release.
A term sheet sets out the basic terms and conditions under which the creditors will be paid and what the new capital structure will be. The details are confidential for now, but Quebecor World “is very pleased with the agreement because it creates a low-leveraged capital structure that will provide the company with one of the strongest balance sheets in our industry upon exit,” the release said.
This means that Quebecor World is on track with its plans to emerge from Chapter 11. The printer says that while under creditor protection, Quebecor World closed new and renewed business in excess of $2.5 billion.
But Lee Helman, managing director with New York-based investment firm Financo, says the deal isn’t a guarantee of the printer’s health or survival. “The creditors are banking on giving the plan put together a chance to generate enough money to pay them back what they are owed and allow Quebecor World to continue in business,” he says. “It just means that they have worked out a deal with their creditors. Now, it needs to deliver on the deal. Who knows what will happen?”