Quebecor World Trustee Files 1,700 Vendor Lawsuits

Jan. 20 (Bloomberg) -- A trustee for Quebecor World Inc., the magazine printer that changed its name to World Color Press Inc. when it left bankruptcy in July, sued hundreds of vendors for the return of $390 million in pre-bankruptcy payments.

About 1,700 complaints, filed over the past two weeks in U.S. Bankruptcy Court in New York, target paper-industry firms including Catalyst Paper Corp. and UPM-Kymmene Oyj, which were each sued for the return of about $18.5 million. The proceeds will go to unsecured creditors, said Joseph Steinfeld, a lawyer for the litigation trust with ASK Financial LLP.

The companies allegedly received payments from Quebecor World in the regular course of business within 90 days before the Chapter 11 filing in January 2008, when the Montreal-based printer of Time and Cosmopolitan magazines was already insolvent. About 50 of the lawsuits account for half of the total amount sought in the litigation, Steinfeld said.

The paper companies will likely seek so-called “new- value” deductions to reduce their liability, Steinfeld said. That would lower the amount he could seek in the so-called preference lawsuits to an estimated total of about $225 million, he said.

Albert Togut, a New York-based lawyer with Togut Segal & Segal LLP, who isn’t involved in the case, said trusts that sue on behalf of creditors have become common features of turnaround plans as companies seek rapid asset sales through bankruptcy cases that don’t leave time for preference complaints.  Such lawsuits are “standard operating procedure these days,” Togut said in a phone interview last week. “It’s common for a company to go into Chapter 11, get the votes they need to get a plan approved and then leave a lot of work for after the plan is confirmed.”

Quebecor World’s reorganization plan, approved last year by judges in both the U.S. and Canada, called for unsecured creditors to receive notes for 50 percent of their claims so long as claims in the class don’t exceed $150 million.  That recovery compares to revolving credit lenders, owed $735 million, and equipment financing lenders, owed $184 million, who received a combination of cash, common stock and preferred stock, for a recovery estimated to be worth between 85 percent and 88 percent.

--Editors: Michael Hytha, Mary Romano.

To contact the reporter on this story: Erik Larson in New York at +1-212-617-5485 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .