Quebecor World stock down 41% in a week, facing refinancing challenge

Quebecor World, the printing core of Quebecor Inc., which is Quebec's largest consumer magazine publisher, has had a heckuva week, or a heckuva month to think of it.

• It announced it would sell a total of $778 million worth of additional shares and debt securities to investors and to its controlling shareholder, Quebecor Inc. , in a refinancing of its debt and credit facilities. On Tuesday it said that it would be selling up to $213 million worth of its subordinate voting shares to the public through a syndicate of underwriters. It would also be selling about $400 million of new unsecured notes and $100 million of unsecured convertible debentures.
  
• Rating agencies promptly downgraded the company and put it on a credit watch.
• The company's stock price lost ground all week and Friday at one point lost almost 23% of its value and was down 41% for the week and more than 66% for the month.
• Banks have forced Quebecor World to reduce its credit facility, from a high of $1 billion, worried about its ability to raise cash.
• Quebecer World's high rating profile - DBRS gave a rating of B with negative trend - makes refinancing complicated and expensive.
• The company lost US$315 million in the third quarter as revenue declined to $1.41 billion, mainly the result of writedowns of its European printing operations.
• This on the heels of its November 7 announcement that it is selling its perennially troubled European printing business in a deal valued at US$341 million, retaining a minority ownership in a new company to be called Roto Smeets Quebecor.

Jamie Wetmore, senior financial analyst for DBRS said in an interview with The Canadian Press, that not only are there concerns about the look-ahead for the industry, but about the company's liquidity. "In terms of financing, there still is the question about whether or not they can even get it done in these markets.

"If they can't get the financing done, the liquidity issues remain significant."

(Even more alarming, Jan Hatzius, chief economist at Goldman Sachs wrote in a report that a global credit crunch may force lenders to cut the outlays available by up to US$2 trillion, triggering a "substantial recession" in the U.S, where Quebecor World has a substantial part of its holdings.)