(USA) Inc., Lli Ai., Debtors. Chapter 11 Case N

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK Inre Chapter 11 Quebecor World (USA) Inc., lli aI., Case No. 08-10152 (JMP) Jointly Administered Debtors. Honorable James M. Peck DISCLOSURE STATEMENT WITH RESPECT TO JOINT PLAN OF REORGANIZATION OF QUEBECOR WORLD (USA) INC. AND CERTAIN AFFILIATED DEBTORS AND DEBTORS-IN-POSSESSION Michael J. Canning, Esq. Neil M. Goodman, Esq. Joel M. Gross, Esq. ARNOLD & PORTER LLP 399 Park Avenue New York, New York 10022-4690 (212) 715-1000 Counselfor Debtors and Debtors-in-Possession Dated: April 19, 2009 THIS IS NOT A SOLICITATION OF ACCEPTANCE OR REJECTION OF THE PLAN. ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL THE BANKRUPTCY COURT HAS APPROVED TillS DISCLOSURE STATEMENT. TABLE OF CONTENTS PAGE I. INTRODUCTION 2 II. SUMMARY OF THE PLAN .3 A. The Plan .3 B. Treatment ofClaims and Interests Under the Plan .4 C. Bar Date and Claims Estimates 7 D. Recommendation 8 III. THE BANKRUPTCY PLAN VOTING INSTRUCTIONS AND PROCEDURES 8 A. Definitions 8 B. Notice to Holders ofClaims 9 C. Solicitation Package , 9 D. General Voting Procedures, Ballots and Voting Deadline 9 E. Confirmation Hearing and Deadline for Objections to Confirmation 11 IV. DESCRIPTION OF QWI AND THE DEBTORS 12 A. Organizational Structure and Corporate Information......•................................................. 12 B. Overview ofBusiness Operations 13 C. Industry Overview 14 D. Industry Trends and Outlook 15 E. Description ofBusiness Segments and Print Services 15 F. Employees 18 G. Properties and Equipment 18 H. Purchasing and Raw Materials 20 I. Financial Statements and Recent Financial Results 20 J. Environmental Regulations 20 K. Management ofQWI and the Debtors 21 V. PREPETITION CAPITAL STRUCTURE OF QWI AND THE DEBTORS 22 A. Equity ofQWI 22 B. Equity ofthe Debtors 23 C. Debt... 23 VI. THE CHAPTER II CASES .26 A. Events Leading up to the Chapter II Cases 26 B. Significant Events During the Bankruptcy Cases 28 C. United Kingdom Administration Proceedings .39 VII. SUMMARY OF THE REORGANIZATION PLAN .39 A. Overview ofChapter II .40 B. Overall Structure ofthe Plan .40 C. Administrative Expenses and Priority Tax Claims .41 D. Classification and Treatment ofClaims and Interests .42 -i- E. Secondary Liability Claims..........................................................................•....................45 F. Means for Implementation ofthe Plan , .45 G. Treatment ofExecutory Contracts and Unexpired Leases .55 H. Provisions Governing Distributions .58 I. Allowance and Payment ofCertain Administrative Claims 63 J. Effect ofPlan Confirmation 65 K. Confirmation ofthe Plan 69 1.. Retention ofJurisdiction : 70 M. Miscellaneous Provisions 71 VIII. APPLICABILITY OF U.S. FEDERAL, CANADIAN AND OTHER SECURITIES LAWS TO THE NEW SECURITIES TO BE DISTRIBUTED UNDER THE PLAN 75 A. New Securities to be Issued Under the Plan 75 B. Subsequent Transfers ofNew Securities 75 IX. CERTAIN RISK FACTORS TO BE CONSIDERED 77 X. CERTAIN TAX CONSEQUENCES OF THE PLAN 89 A. United States Federal Income Tax Consequences to the Debtors 90 B. United States Federal Income Tax Consequences to Claimbolders and Interestholders 91 C. Canadian Federal Income Tax Consequences to Claimbolders 93 D. Importance ofObtaining Professional Tax Assistance 95 XI. FEASIBILITY OF THE PLAN, ACCEPTANCE OF THE PLAN AND THE BEST INTERESTS TEST 96 A. Feasibility ofthe Plan 96 B. Acceptance ofthe Plan 96 C. Best Interests Test 97 D. Estimated Valuation ofthe Debtors Upon Reorganization 97 E. Application ofthe Best Interests Test to the Liquidation Analysis and the Valuation ofthe Debtors Post-Reorganization 98 F. Confirmation Without Acceptance ofAll Impaired Classes: The "Cramdown" Alternative 98 XII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN 99 A. Continuation ofthe Bankruptcy Case 99 B. Alternative Plans ofReorganization 99 C. Liquidation Under Chapter 7 or Chapter 11.. 100 XIII. VOTING REQUIREMENTS 100 A. Holders ofClaims and Interests Entitled to Vote 10 I B. Voting and Non-voting Classes Under the Plan IOI XIV. CONCLUSION 102 A. Hearing on and Objections to Confirmation 102 B. Recommendation : 102 -ii- APPENDICES Appendix A Plan ofReorganization AppendixB Restructuring Transactions Chart Appendix C Liqnidation Analysis AppendixD Financial Projections Appendix E Reorganization Valuation Analysis AppendixF Annual Report on Form 20-F for financial year ended Decemher 3 I, 2008 Appendix G List ofOfficers and Directors ofDebtors other than QWUSA -iii- DISCLAIMER THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT AND THE APPENDICES HERETO RELATE TO THE DEBTORS' PLAN OF REORGANIZATION. THE INFORMATION IS INCLUDED HEREIN FOR PURPOSES OF SOLICITING ACCEPTANCES OF THE PLAN AND MAY NOT BE RELIED UPON FOR ANY PURPOSE OTHER THAN TO DETERMINE HOW TO VOTE ON THE PLAN. NO PERSON MAY GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS, OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DISCLOSURE STATEMENT, REGARDING THE PLAN OR THE SOLICITATION OF ACCEPTANCES OR REJECTIONS OF THE PLAN. ALL CREDITORS ARE ADVISED AND ENCOURAGED TO READ THIS DISCLOSURE STATEMENT AND THE PLAN IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE PLAN. PLAN SUMMARIES AND STATEMENTS MADE IN THIS DISOLOSURE STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE PLAN AND OTHER EXHIBITS ANNEXED OR REFERRED TO IN THE PLAN AND THIS DISCLOSURE STATEMENT. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE ONLY AS OF THE DATE HEREOF, AND THERE CAN BE NO ASSURANCE THAT THE STATEMENTS CONTAINED HEREIN WILL BE CORRECT AT ANY TIME AFTER THE DATE HEREOF. THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH SECTION 1125 OF THE BANKRUPTCY CODE AND RULE 3016(b) OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE AND NOT NECESSARILY IN ACCORDANCE WITH FEDERAL OR STATE SECURJTIES LAWS OR OTHER LAWS GOVERNING DISCLOSURE OUTSIDE THE CONTEXT OF CHAPTER II. THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURJTIESAND EXCHANGE COMMISSION (THE "SEC"), NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER ACTIONS OR THREATENED ACTIONS, THIS DISCLOSURE STATEMENT AND APPENDICES HERETO WILL NOT CONSTITUTE OR BE CONSTRUED AS AN ADMISSION OF ANY FACT OR LIABILITY, STIPULATION OR WAIVER. THIS DISCLOSURE STATEMENT WILL NOT BE ADMISSIBLE IN ANY NON-BANKRUPTCY PROCEEDING NOR WILL IT BE CONSTRUED TO BE LEGAL ADVICE ON THE TAX, SECURJTIES OR OTHER EFFECTS OF THE REORGANIZATION AS TO. HOLDERS OF CLAIMS AGAINST, OR EQillTY INTERESTS IN, QUEBECOR WORLD (USA) INC. OR ANY OF THEIR AFFILIATES. THIS DISCLOSURE STATEMENT CONTAINS SUMMARIES OF CERTAIN PROVISIONS OF THE PLAN, CERTAIN STATUTORY PROVISIONS, CERTAIN DOCUMENTS RELATED TO THE PLAN, CERTAIN EVENTS IN THE CHAPTER 11 CASES AND THE CANADIAN PROCEEDINGS AND CERTAIN FINANCIAL INFORMATION. ALTHOUGH THE DEBTORS BELIEVE THAT SUCH SUMMARIES ARE FAIR AND ACCURATE, SUCH SUMMARIES ARE QUALIFIED TO THE EXTENT THAT THEY DO NOT SET FORTH THE ENTIRE TEXT OF SUCH DOCUMENTS OR STATUTORY PROVISIONS. FACTUAL INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS BEEN PROVIDED BY THE DEBTORS' MANAGEMENT EXCEPT WHERE OTHERWISE SPECIFICALLY NOTED. THE DEBTORS DO NOT WARRANT THAT THE INFORMATION CONTAINED HEREIN, INCLUDING THE FINANCIAL INFORMATION, IS WITHOUT ANY INACCURACY OR OMISSION. I I. INTRODUCTION Quebecor World (USA) Inc. ("QWUSA") and its affiliated debtors (collectively with QWUSA, the '''Debtors''), as debtors and debtors-in-possession in the chapter II cases pending before the United States Bankruptcy Court for the Southern District of New York (the "Court" or the "Bankruptcy Court" or the "U.S. Court"), jointly administered for procedural purposes under Case No. 08-10152 (IMP) (the "Chapter II Cases"), submit this disclosure statement (the "Disclosure Statement") pursuant to Section 1125 of title II of the United States Code (the "Bankruptcy Code"), in connection with the solicitation of votes on the Joint Plan of Reorganization ofQuebecor World (USA) Inc. and its Affiliated Debtors and Debtors-in-Possession dated April 19, 2009 (the "Plan"), which was filed with the Bankruptcy Court on April 19, 2009. A copy ofthe Plan is attached as Appendix A hereto. Capitalized tenns used but not defined in this Disclosure Statement have the meanings ascribed to such tenns in the Plan. Quebecor World Inc. ("QWI"), a Canadian corporation and the direct or indirect corporate parent of the Debtors, is pursuing a parallel reorganization in Canada through the Canadian Proceedings, as supplemented by an ancillary proceeding currently pending before the Bankruptcy Court filed under Chapter 15 ofthe Bankruptcy Code. The Debtors are also petitioners in the Canadian Proceedings in order to secure the benefit of the stay under the Canadian Companies' Creditors Arrangement Act (the "CCAA"). QWI,however, is not a Debtor in the Chapter II Cases. Effectiveness of the Plan will be conditioned upon the effectiveness of the Canadian Plan in the Canadian Proceedings, and effectiveness ofthe Canadian Plan will be conditioned on the effectiveness ofthe Plan. The Plan contemplates that voting and confirmation ofthe Plan, and·disttibutions to holders of Claims and Interests in the Chapter II Cases and the Canadian Proceedings under the Plan and the Canadian Plan, shall be effected as if the Estates ofthe Debtors and QWI were consolidated for such purposes. The Plan contemplates that (i) each and every Claim filed or to be filed in the Chapter II Cases

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