Moody's cuts Quebecor to SGL-4

Moody's Investors Service said it downgraded Quebecor World Inc.'s speculative grade liquidity rating to SGL-4, indicating weak liquidity, from SGL-3, indicating adequate liquidity.

The agency also affirmed the B2 corporate family rating, the B2 senior unsecured ratings for subsidiary companies Quebecor World Capital Corp. and Quebecor World Capital ULC and the Caa1 senior subordinated rating for Quebecor World (USA) Inc.

The outlook continues to be negative.

Over the very near term, there appears to be risk that the company's underlying performance may generate financial statistics that are not in compliance with covenants in the company's bank credit facility, Moody's said, implying that Quebecor may have to negotiate with its lenders to ensure ongoing access to third-party credit and the resources needed to complete its transformation initiatives.

The agency said first-quarter results were quite weak and could signal that credit protection measures will be adversely affected by difficulties encountered in implementing the company's five-point transformation plan and given cash consumed to fund the initiatives, Quebecor's financial performance, coverage and leverage may continue to deteriorate over the next six to 12 months - although it is not yet conclusive that this is the case, Moody's added.

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