Eastman Kodak Co. (EKDKQ) said Monday that it has reached a comprehensive settlement agreement with its largest creditor, the U.K. Kodak Pension Plan or KPP, enabling the company to move a step closer towards its emergence from bankruptcy.
Under the settlement that will be filed with the U.S. Bankruptcy Court, Kodak will spin off its Personalized Imaging and Document Imaging businesses under new ownership to KPP for $650 million. The agreement will also settle about $2.8 billion of claims by KPP against Kodak and certain of its affiliates.
Kodak noted that certain proceeds will be used to support its emergence from Chapter 11 as well as the growth of its Commercial Imaging business. The agreement will be implemented as part of Kodak's Chapter 11 plan in the U.S.
Antonio Perez, Kodak Chairman and Chief Executive Officer said, "In one comprehensive transaction, Kodak will realize its previously announced intention to divest its Personalized Imaging and Document Imaging businesses and settle its largest legacy liability. The KPP transaction moves us past several key hurdles in our reorganization, resolving all potential claims worldwide, assuring continued operations outside of the United States, placing our Personalized Imaging and Document Imaging businesses with a new owner that recognizes their value and is focused on their growth and success, and providing the remaining liquidity we require to emerge from Chapter 11."
New York-based, 132-year-old Kodak has been struggling to sell its non-core assets to stay afloat and to transform itself into a digital company from being a film photography company. Kodak filed for bankruptcy in January 2012.
The company said in mid-December 2012 that it agreed to sell its digital imaging patent portfolio and certain other patents for about $525 million. Kodak had been trying to sell the patent portfolio since July 2011, but those efforts failed amid rumors of the company's then impending bankruptcy filing.
Kodak noted that at consummation of the spin-off of the imaging businesses, the company and its worldwide affiliates will be released from their obligations to KPP. The company has kept the UK Pensions Regulator fully informed of this process and the regulator has granted clearance in respect of the acquisition.
The regulator will approve the release of KPP's sponsoring employer, Kodak Ltd, from its liabilities to KPP, while the UK Pension Protection Fund has confirmed that it has no objection. Closing of the transaction is subject to the approval of the U.S. Bankruptcy Court, approval by the regulator and the satisfaction of other conditions.
Kodak plans to file a draft Chapter 11 plan with the Bankruptcy Court on April 30, and to seek approval of the KPP settlement as well as related transactions promptly thereafter. The company will withdraw its previously-filed motion for the standalone sale of the Document Imaging business.
EKDKQ closed Friday's trading at $0.31 on a volume of 1.40 million shares.
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