RBC Capital Sees Plenty of Challenges Left For Quebecor World

Quebecor World Inc. (IQW) has plunged roughly 70% in less than a month, continuing the decline in recent days after the commercial printer’s refinancing plan fell through due to weak credit markets.

The shares may not have much further to fall, but RBC Capital Markets’ Drew McReynolds still sees no shortage of risks for the company.

Quebecor’s near-term refinancing strategy remains unclear; there is little room for error on its debt covenants; and there is poor visibility on the earnings before interest, taxes, depreciation and amortization (EBITDA) recovery, the analyst told clients in a note.

“Until a comprehensive plan is put in place that can address near-term refinancing requirements, we believe the shares will trade under the dilutive overhang of a potential Series 5 Preferred Share conversion and future equity issue,” he said while resuming coverage of the stock with a “sector perform” rating and US$3.50 price target after a period of restriction. His previous target was US$12.

The analyst also made major cuts to his EBITDA estimates for 2007, 2008 and 2009 on weaker-than-expected third quarter results and a more conservative revenue growth outlook given economic concerns in the U.S.