Jan. 16 (Bloomberg) -- Quebecor World Inc.'s stock and bonds plunged after the company missed a deadline to raise funds and failed to make a payment on $400 million of debt, boosting concern banks may force the second-largest North American printer into default.

The company asked lenders for more time to raise C$125 million ($123 million) as it seeks to complete a C$400-million rescue offer from Pierre Karl Peladeau, chief executive of parent Quebecor Inc., and Tricap Partners. Banks, which must approve the deal, may choose not do so because debt from that deal would outrank their own, said CreditSights Inc. analyst Chris Ucko.

``If the banks don't like what Peladeau brings to them, they now have the ability to accelerate the process of the bankruptcy,'' London-based Ucko said today in an interview.

Quebecor World fell 29 cents, or 61 percent, to 19 cents at 4:10 p.m. on the Toronto Stock Exchange. The shares have tumbled 90 percent this year.

Quebecor's $200 million of 4.875 percent notes due in November fell 2.5 cents to 68 cents on the dollar, according to Trace, the bond reporting system of the Financial Industry Regulatory Authority. The yield surged to 60 percent.

Quebecor World said it's still working with its parent and Tricap, a private-equity fund managed by Brookfield Asset Management Inc., on the rescue plan. The company, which prints newspapers, magazines and books, is awaiting a response from bankers for its request for a ``suitable waiver.''

Bank Fees

Quebecor World said Jan. 14 it would receive C$200 million in interim financing from Quebecor and Tricap if it receives ``consents and certain other agreements'' from its lenders by 9 p.m. today. The company asked its bankers yesterday for an extra week to complete the financing. It declined to pay the fees the bank demanded after a previous request to extend the waiver.

``The banks wanted to charge a large fee for extending the deadline and the company resisted that,'' said Lori Harris, a director at Standard & Poor's in Toronto. ``The banks want to be paid for exposure to the company.''

As a result of its failure to obtain the $125 million, Quebecor World said yesterday it wouldn't make a $19.5 million interest payment on the $400 million in senior notes. The failure to make a payment on the 9.75 percent notes due in 2015 doesn't immediately put it into default, because it has a 30-day grace period, the company said.

S&P downgraded the debt today one level to D, the lowest non-investment-grade rating.

Credit-default swaps tied to Quebecor World's bonds climbed 6 percentage points to 39 percent upfront and 5 percent a year for five-year contracts, according to CMA Datavision in London.

That means investors are demanding $3.9 million upfront and $500,000 a year to protect $10 million in debt from default.

The contracts are used to speculate on the company's ability to repay debt or to hedge against losses on the bonds. They pay the buyer face value in exchange for the underlying securities, or the cash equivalent, should the company fail to repay debt.

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net; Pierre Paulden in New York at ppaulden@bloomberg.net

Last Updated: January 16, 2008 18:06 EST