DBRS Downgrades Quebecor World to BB and Pfd-4

Dominion Bond Rating Service (DBRS) has today downgraded the long-term debt ratings of Quebecor World Inc. (Quebecor World or the Company) and related entities to BB from BB (high) and downgraded the Cumulative Redeemable Preferred Shares to Pfd-4 from Pfd-4 (high). The trends remain Negative. The downgrade reflects a greater than expected weakening of the financial profile due to (1) continuing market disequilibrium and secular adversity, including further pricing pressure and reduced volume, and (2) free cash flow pressure as a result of declining earnings together with higher capital expenditure.

The Company’s financial profile has deteriorated more than expected in 2006, with EBITDA margins falling below 10%, cash flow-to-debt decreasing to 0.15 times, and gross debt-to-EBITDA increasing to 4.7 times (DBRS calculated). While DBRS acknowledges the Company is experiencing temporary inefficiencies related to the upgrading of its plants which is depressing results, DBRS is concerned with Quebecor World’s ability to grow revenue and improve margins in an environment where competitors are leveraging their updated manufacturing platforms during Quebecor World’s upgrade cycle.

DBRS notes the Negative trend reflects that Quebecor World will continue to be pressured until it can realize efficiencies related to the installation of state-of-the-art presses (upgrade cycle) that should improve the Company’s competitive position and improve efficiencies, which should manifest by way of improving EBITDA margins and cash flow.

Two key metrics of the commercial print industry’s health, low U.S. Capacity Utilization and stagnant U.S. Advertising Pages growth, continue to reflect difficult industry conditions. In short, there continues to be oversupply. DBRS believes that oversupply may continue to be a concern, as new presses have great capacity and demand remains stagnant due to the Internet and digital technology, which have resulted in a secular shift away from print products. Print-based media are increasingly used less as information sources and thus advertisers are reducing their allocation to print media and rapidly accelerating their spending on Internet advertising. As a result, Quebecor World has to price aggressively to maintain or win contracts.

DBRS notes the Company appears to be committed to strengthening the balance sheet; hence, share repurchase or increase of dividends are not expected. Liquidity seems reasonable, given availability under the bank facilities.