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Quebecor World files for bankruptcy protection

Quebecor World, the second-largest commercial printer in the world, filed for bankruptcy protection in Canada and the US on Monday.

The Montreal-based company, which prints a wide variety of publications at plants in the US, including Time and Parade magazines as well as catalogs for Victoria's Secret and Williams-Sonoma, made the move after its banks failed to approve a rescue plan valued at C$400 million (US$390 million).

The bailout was proposed by its controlling shareholder, Quebecor, a media company, and a fund managed by Brookfield Asset Management of Toronto after the collapse of a deal to sell the company's troubled European operations. Quebecor World's shares closed at C$0.165 in trading on Monday in Toronto.

The filings were an embarrassment for Pierre Karl Peladeau, the president and chief executive of Quebecor and son of the founder of the two companies, Pierre Peladeau, who died in 1997.

The company said in a statement that it had arranged US$1 billion in financing from Credit Suisse and Morgan Stanley, which is subject to court approval, for continuing operations.

A spokesman for Quebecor World, Tony Ross, said that without the financing, the company would run out of cash by tomorrow. But he said that its managers were confident that the courts would approve the measure.

"It's business as usual," Ross said.

A series of acquisitions during the 1990s transformed Quebecor from a primarily Canadian-based company, with a particular focus on French-language media properties, into an international player with operations in the US, Europe and parts of Latin America.

In 2002, when Quebecor World was the biggest commercial printer in the world, some of its managers approached Peladeau with a proposal to buy the operation in conjunction with the private equity firm Kohlberg Kravis Roberts for about US$5 billion. But he rejected the plan and removed the executive who made the approach.

Peladeau, 45, is a celebrity in Quebec, partly because of his common-law relationship with a popular host, Julie Snyder, on the TVA television network, another Quebecor property.

His first high-profile assignment within the family empire was moving to France in 1994 to build Quebecor World's operations in Europe.

But that investment soured in part because European labor laws have made restructuring difficult.

Peladeau personally led the failed negotiations with Quebecor World's banks after a deal to sell the European operations to Roto Smeets of the Netherlands for about US$340 million also fell apart.

That sale had been ordered by a board that is led by former Canadian prime minister Brian Mulroney, who is also a director of Quebecor.

A spokesman for Quebecor, Luc Lavoie, said Peladeau was disappointed that the banks had rejected the financing largely because it put them further down the list of creditors. But he added that the bankruptcy filings gave Quebecor a chance to completely separate itself from the printing business.

"There are people who are saying the impact will be positive for Quebecor," he said.

Lavoie declined to comment on its short-term financial impact.

Quebecor owns newspapers throughout Canada along with Quebec's leading cable TV operator.

To emphasize the separation, Quebecor has asked the court to remove its name from that of Quebecor World.
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