Quebecor Bailout Plan - Will It Be Enough?

Shares in Quebecor World Inc. (IQW) fell to new lows on Wednesday as the printing giant headed toward a bank-imposed deadline with a proposed bailout plan that would leave existing shareholders with a fraction of the company's equity.

Quebecor World stock fell 42% to $0.47, while its two classes of preferred shares fell by 30% and 44%. The equity values collapsed after the company said late Monday a bailout package proposed by parent Quebecor Inc. and Brookfield Asset Management Inc. unit Tricap Partners would give the two financiers new stock equal to 75% of the firm's equity.

The news was dire for common shareholders as it would require preferred stock owners to convert their holdings into common stock, a move that would almost triple the float.

After the proposed refinancing, existing common shares would then carry 10% of their former value, National Bank Financial analyst Adam Shine estimated in a note. The proposal "represents a pseudo-privatization," of the printer, he wrote.

The proposal faced a cool reception from the printer's banks, as the $400-million injection would rank senior to bank and public debt, allowing Quebecor and Tricap to be paid back first if the printer failed. The banks had asked Quebecor World to find $125-million in new, unsecured financing by Tuesday, followed by a full refinancing plan by Jan. 31.

But Quebecor Inc. and Brookfield figured the banks would have little choice but to accept its proposal, since the lenders have more than $500-million in unsecured loans in a bank credit facility that would be at risk if they pushed the printer to seek creditor protection. As of 5:30 p.m. Wednesday, the company hadn't revealed the outcome of negotiations with its bankers.