Eastman Kodak Co. is seeking $695 million of loans as part of its plan to complete bankruptcy reorganization, tapping a market where demand for riskier debt is climbing.
The funding includes a $420 million, six-year term loan with a proposed interest rate of 4.75 percentage points to 5 percentage points more than the London interbank offered rate, according to a person with knowledge of the transaction. Libor would have a 1 percent minimum.
Companies including Kodak and Cooper Tire & Rubber Co. are turning to the loan market as demand for floating-rate debt rises. Investors added $930 million this week to funds that buy U.S. bank loans, bringing the increase this year to about $35 billion, a rise of 46 percent, according to a report by Bank of America Corp. yesterday.
“While other fixed-income asset classes are hemorrhaging capital and suffering their largest price declines in a few years, the leveraged-loan market has served as a lonely bright spot,” Citigroup Inc. analysts led by Michael Anderson wrote yesterday in a research note.
Leveraged loans have returned 2.7 percent this year, outpacing gains of 2.5 percent in junk bonds, while high-grade debt has lost 3.2 percent, Bank of America Merrill Lynch index data show.
Kodak’s first-lien term loan, which will help finance distributions to creditors under the photography pioneer’s reorganization plan, may be sold to investors at a discount of 99 cents on the dollar, said the person with knowledge of the financing, who asked not to be identified because terms are private. Discounts reduce proceeds for the borrower and boost the yield for investors.
Cooper Tire & Rubber, based in Findlay, Ohio, is seeking a $1.875 billion bridge loan, according to a person with knowledge of that transaction, who asked not to be named because the terms aren’t set. The company agreed last month to be acquired by Apollo Tyres Ltd. for about $2.5 billion.
Morgan Stanley, Deutsche Bank AG, Goldman Sachs Group Inc. and Standard Chartered Plc are arranging the financing, according to a June 12 statement.
Bridge loans usually mature in one year and are often used as backstops to bond offerings or longer-dated bank debt.
Loan prices rose 0.51 cent this week to average 97.93 cents on the dollar today, according to the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 index.