By Stephanie Gleason
Eastman Kodak Co. (EKDKQ) cleared the final major hurdle in its
Chapter 11 case Tuesday, winning a judge's approval of its plan to
exit bankruptcy protection.
Bankruptcy Judge Allan L. Gropper's confirmation of the
restructuring plan, which came after Kodak reached several major
settlements with creditors over the summer, puts the iconic
photography company on the path to conclude its nearly two-year
stay in Chapter 11 as a leaner company focused on commercial
imaging.
Kodak's plan will see the company exit Chapter 11 protection
under the ownership of creditors who agreed to buy 85% of the
reorganized company's shares through a rights offering that brought
in more than $400 million. The company expects to formally emerge
from bankruptcy protection on Sept. 3.
Kodak's "decline and bankruptcy is a tragedy of American
economic life," said Judge Gropper, who acknowledged that many of
the company's creditors will see only a fractional recovery and
shareholders will get nothing. He expressed hope that the company,
with a renewed business focus and a restructured balance sheet,
would be successful going forward.
"Kodak is a different company than the one in the popular
imagination and very different from when it filed for bankruptcy,"
Kodak lawyer Andrew G. Dietderich of Sullivan & Cromwell LLP
said at Tuesday's hearing in the Manhattan bankruptcy court.
Most of the Kodak's creditors voted to back the bankruptcy-exit
plan. Three creditor groups--second-lien bondholders and U.S. and
U.K. retirees--were unanimous in their support for the plan, while
82.5% of Kodak's unsecured creditors voted for the plan.
The restructuring plan includes an unconventional deal to settle
$2.8 billion in claims of Kodak's U.K. pension fund by handing it
the company's document- and personal-imaging businesses. The
pension fund has agreed to pay $650 million for the businesses.
Kodak's U.S. retirees struck a settlement with the company that
gave them an unsecured claim of $635 million after the company
terminated their health and other benefits. The restructuring plan
gives the U.S. retirees and other unsecured creditors the
opportunity to purchase six million shares of Kodak's new common
stock through the rights offering, warrants to buy additional
shares and a $3 million cash payment.
The company's bondholders are slated to receive payment in full
of the $375 million in principal they are owed. They'll also share
an additional $20 million payment that was conditioned upon their
support of the plan.
The plan wipes out Kodak's current shareholders, one of which
argued for more than an hour during Tuesday's hearing that the
company is valuable enough to provide a recovery for equity
holders, an argument Judge Gropper rejected.
"None of the shareholders has provided the slightest evidence
that Kodak is solvent," he said.
In addition to the proceeds of the rights offering, Kodak will
fund the plan with an $895 million loan from lenders led by J.P.
Morgan Chase & Co. (JPM), Bank of America Corp. (BAC) and
Barclays PLC (BCS).
Kodak, based in Rochester, N.Y., filed for Chapter 11 protection
in January 2012. Since then, it has been working to sell assets and
shed unprofitable business lines to reorganize around its
commercial-imaging business, which includes digital printers and
motion picture film.
-Jacqueline Palank contributed to this article.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Stephanie Gleason at stephanie.gleason@wsj.com
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