Late yesterday - 1/15 - Quebecor World announced that it had failed to meet the first financial hurdle in its push to financial solidarity. A piece in the Globe and Mail on Monday, 1/14, outlined some of the potential results should the banks decline to accept the proposed financing.
In exchange for a bailout package from Quebecor Inc. and Tricap Partners, Quebecor and Tricap would end up with large equity stakes in IQW to the detriment of the company's banks. Those banks would take a junior position and agree to freeze existing loans for 2 years.
Obviously Quebecor World's bankers didn't like the terms!
A little history here...
In a December 31 press release, the company had announced that its bankers and the sponsors of its North American securitization program would put series of waivers in place to assist in IQW's pursuit of financing options and strategic alternatives (read: sale of some or all of the company). The details included:
- Jan. 15 - obtain US$125 million of new financing.
- Jan. 31 - deliver a "Refinancing Transaction" comprised of commitments that would reduce the company's current credit facility.
- Feb. 29 - reduce current credit facility to US$500 million.
- June 30 - repay in full the current credit facility and terminate the North American securitization program.
Monday, Jan. 14, Quebecor Inc. and Tricap Partners (a fund managed by Brookfield Asset Management) offered - and IQW accepted - a CDN$400 million "rescue financing" package. Points in that package were:
- Jan. 16 - Quebecor World would receive interim financing of CDN$200 million upon receipt or waiver of of the consent and other agreements by Quebecor's lenders and sponsors of its securitization programs.
- Jan. 21 - New date requested by IQW by which it must obtain US$125 million of new financing.
- Mar. 31 - The $200 million interim facility would be replaced by a recapitalization plan comprised of an aggregate CDN$200 million issuance of senior secured notes due 2012. At the same time, Quebecor Inc. and Tricap Partners would be issued subordinate voting shares representing 75% of IQW's equity on a fully diluted basis. Agreements from holders of three debt securities - maturing in 2008, 2013, and 2027 - would have to be obtained.
Now we just wait for the crash... At the time of publication (11:24 PM EST, 1/16/08), the stock was selling for $.20. Got some pocket change to buy a few shares of IQW?
(UPDATE: 4:19PM EST, 1/16/08 - The last trade of the day: $.19.)
Discussion
By David Watson on Jan 16, 2008
The prospect of the demise of Quebecor World, or its sale, are overexagerated. Quebecor is one of the crown jewels of Quebec business and what is known as "Quebec Inc.", pension funds, government, etc. will come up with a solution. What is going on now is a game of chicken and the parent company is looking for a way to increase control. Some part of Quebecor World maybe sold, like they tried to sell the European operations, but the family that started it will somehow retain control. Quebecor has a history of overusing debt and they are squeezed in the current credit enviornment, but it is doubtful they will be forced into bankruptcy, unless they want to go there to follow through on an even more agressive restructuring.
By sparky on Jan 16, 2008
Is the print industry big enough to absorb 6 billion dollars in print work in QW goes under? This is a sad day...but if it works out someone might get a great printing copany on the cheap. Where's Bob Burton when you really need him?
By Stan on Jan 17, 2008
I agree with Mr. Watson. It is a game of chicken right now. I also agree with the misuse of debt management and current credit environment caught up to IQW/TSX
I do not think the Gentleman from CT is paying much attention, Mr. Sparky. I'm sure he is busy with what is on his plate but, if he has some spare time, I'm sure he'll be picking though the piles of smoldering rubble.
All at the expense of 27,000 hard working former team members is what has me very sad. Thank you.
By David Watson on Jan 21, 2008
It looks like they are opting for the more radical restructuring. It is interesting to note that the parent company, Quebecor Inc, has widrawan the right to use the Quebecor name. So what will "World" printing be called:
"Quebecor Inc. formally advised Quebecor World yesterday that it must remove "Quebecor" from its corporate name. This measure is intended to eliminate any confusion in the public."
By Bob on Jan 21, 2008
Do I sell the few shares I have or hold on for the ride? What is the best case scenario?
By Mark Green on Feb 20, 2008
Im actually buying some while its cheap and holding on for the ride.
Discussion
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