No Reason to Panic About Quebecor

As upsetting as this news may at first appear, it is not a reason to panic. The presses are running, the paper is rolling and ink is being placed within tolerances of 1/1000th of an inch, as per usual with a rhythm and a predictable schedule.

They have received $1 billion dollars to create and sustain moderate stability. And all they need for now is the stability to forecast the next few quarters of business cycles. After that I don't know what will happen and neither do you, but I suggest that for today and tomorrow it is business as usual. If your titles were to ship this week, I would expect them to do so. If your titles were scheduled to ship next week, the same holds true. It is a time of transition and change, but not of wholesale upheaval. It's my experience that, under conditions like this, all titles will get out and all publishers will continue to publish. The details of this and the plains of action, lay with the accountants of the world.

As I heard New England Patriots coach Bill Belichick say last night, "Be smart, stay alert and do your job, and we will get through this just fine."

Dear Quebecor World Customer,

Quebecor World has applied today for court protection in Canada and the United States to conduct restructuring for the long-term interests of the company, its customers, suppliers and employees. As part of this process, Quebecor World has secured US $1 billion of new financing to continue to provide you and all our customers with reliable, quality services on a business-as-usual basis. Our operations in Europe and Latin American are not included in these filings.

The approval of $1 billion in new financing through Credit Suisse and Morgan Stanley was included in the court applications under Canada's Companies' Creditors Arrangement Act and Chapter 11 of the U.S. Bankruptcy Code. In addition, Quebecor World is seeking the appointment of Ernst & Young Inc. to monitor the company activities in the Canadian proceedings.

Despite the difficult economic conditions in general and in the credit market in particular, Quebecor World continues to have a positive cash flow, expert teams of experienced employees, valuable, performing assets and an impressive roster of customers such as you. In the months ahead we will be reviewing the company's performance and developing ways to make further improvements in all our operations.

The prudent action we have undertaken today and the vote of confidence represented by the $1 billion of new financing means that we will continue to operate on a normal basis as we restructure for the future.

We look forward to maintaining our business relationship with you.

Quebecor World's commitment is to keep customers, suppliers and employees and other stakeholders informed of all significant developments, either directly or through our webpages on the Internet. Please do not hesitate to contact us if you require further information. We will make every effort to respond in a timely fashion.

Thank you in advance for your patience and support as we work to achieve an outcome that serves the best interests of our customers, employees, suppliers and other stakeholders.

Sincerely,
Jacques Mallette

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By Bob Sacks -- Folio: Contributor

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For heaven's sake

Submitted by Anonymous on Tue, 01/22/2008 - 13:45.

Usually I find myself in agreement with your contrarian perspective. Often I find it insightful. Not in this case. The drama that has played out surrounding Quebecor Inc. and Quebecor World has been a multi-year Machiavellian soap opera. Depending on the truth behind the drama, it might well become a cautionary tale of the risks in unchecked hubris. Will the company put ink on paper this week? Of course. Will they do so next week? Very likely. Will the company, at the end of 90 or 120 days, look much like it does now? That seems exceptionally uncertain. The attempt to sell off its European operations was met with yawns at best, and contempt at worst. No one wanted them. The recent attempt to create rescue financing that would have crammed very unattractive terms down the throats of currently secured creditors was met with disdain and failed 24 hours prior to the bankruptcy filing. Now the company has had to reach for bankruptcy protection in order to continue to operate, relying on new debt to recapitalize an already over-leveraged enterprise. How will they repay $1 billion in high-interest, bankruptcy financing which will be used as operating capital? Simple: they will likely sell pieces of the enterprise that are valued much more highly than were the European operations. And therein lies the real rub. The board and executive team will be forced to sell elements of the company that are genuinely attractive, valuable and which they will be loathe to sell. But breaking up the company appears to be their only remaining course since the capital markets have turned their backs on Quebecor World, with its shares currently valued at 34 cents each, essentially a "penny stock" at risk of being delisted had bankruptcy protection not been sought and secured. In the midst of that process, difficult as it will be, the executive team must now completely re-brand the company. Yes, rebrand it. Quebecor Inc., (the holding company) currently owns a controlling interest in Quebecor World (the printing company.) Quebecor Inc. transmitted instructions to Quebecor World to drop its use of the "Quebecor" name "in order to eliminate any confusion in the public." Clearly whatever emerges won't look much like the current entity. And the likelihood of an entity (insert new brand name here) of this scale and scope remaining on the far side of bankruptcy protection seems exceptionally low. Will that affect every aspect of the company? How could it not? Will every stakeholder be affected in the process, including creditors, employees and customers? Isn't that nearly inevitable? Is that sufficient cause on their parts for grave concern?

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