Kodak Arranges $793 Million Financing for Bankruptcy Exit

Kodak Said to Arrange Financing for Bankruptcy Emergence
Kodak filed for bankruptcy after years of burning through cash while the rise of digital photography eroded its film business. Photographer: David Paul Morris/Bloomberg

Eastman Kodak Co., the bankrupt photography pioneer, said it arranged with some creditors for $793 million in financing to exit bankruptcy as a commercial-printing company by mid-2013.

Centerbridge Capital Partners, GSO Capital Partners, UBS AG and JPMorgan Chase & Co. are among second-lien creditors participating in the financing, which will be used during bankruptcy and can partly be converted to fund the emerging company, Rochester, New York-based Kodak said yesterday in a statement. The agreement requires court approval.

Funding is conditional on selling its patent portfolio for at least $500 million, which Kodak said yesterday it “is confident it will achieve.” Converting the debt for use by the emerging company requires progress in the sale of two business units, and the resolution of the company’s U.K. pension obligations.

Chief Executive Officer Antonio Perez has announced almost 4,000 job cuts this year and has been selling businesses to help fund a turnaround after seeking Chapter 11 protection in January. The company, which yesterday reiterated plans to exit bankruptcy in the first half of 2013, is selling its consumer-film, photo-kiosk and commercial-scanner businesses; continuing an extended effort to auction its digital-imaging patents; and shuttering its consumer inkjet printer sales.

“The additional liquidity from this financing will enable Kodak to accelerate its momentum,” Perez said in the statement. “It establishes a clear path for our emergence as a stronger, more focused company.”

Term Loans

Another group of second-lien creditors had competed to provide the funding, according to a person familiar with the negotiations, who declined to be identified because the negotiations aren’t public. The financing attracted “significant interest from potential lenders,” Perez said in yesterday’s statement.

Creditors offered $476 million of new term loans and a $317 million loan in exchange for the same amount of second lien bonds. The commitment allows up to $567 million of the loans to be converted into exit financing, provided Kodak emerges from bankruptcy by Sept. 30 2013, among other conditions. The financing was first reported by the Wall Street Journal.

A group of second-lien noteholders said in a court filing yesterday that they have lost faith in management, claiming the company’s ability to successfully restructure and exit bankruptcy has been jeopardized.

Kodak is suffering operating losses and burning cash at “an astounding rate” and will probably run out of money in the first half of 2013 without new financing, the creditor group said in the filing in U.S. Bankruptcy Court in Manhattan.

“The second-lien parties have lost all faith in the ability of the debtors’ current leadership to lead the debtors’ restructuring efforts or, in fact, to lead the debtors at all,” the group said.

Extension Opposed

The noteholders oppose Kodak’s request for an extension of its exclusive right to file a reorganization plan in court. They said they can propose a plan for the company that will win court approval.

Stefanie Goodsell, a Kodak spokeswoman, said the objection was from a “minority group” of noteholders and wasn’t unexpected.

“Our motion to extend exclusivity has the support of other creditors, and we are confident that this objection will not impact our timeline for emergence,” she said in an e-mailed statement

Kodak filed for bankruptcy after years of burning through cash while the rise of digital photography eroded its film business. The company spent $3.4 billion on restructuring before bankruptcy, including payouts to fire 47,000 employees since 2003, while closing 13 factories that produced film, paper and chemicals, and 130 photo laboratories.

The case is In re Eastman Kodak Co., 12-10202, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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