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Kodak arranges financing; noteholders group opposes extension

Rochester Business Journal
November 12, 2012

Eastman Kodak Co. late Monday confirmed it has arranged $793 million in financing to exit bankruptcy as a commercial-printing company. Bloomberg had reported the news earlier in the day, citing a person familiar with the negotiations.

Separately, a group of second-lien noteholders filed an objection Monday in U.S. Bankruptcy Court in Manhattan to Kodak’s request of an extension of its exclusive periods to file a plan of reorganization and to solicit acceptances to that plan through Feb. 28 and April 30, 2013.

Centerbridge Capital Partners L.P., GSO Capital Partners L.P., UBS AG and JPMorgan Chase & Co. are the second-lien creditors participating in the financing, Kodak said. The agreement requires court approval. The funding is conditional on Kodak selling its digital-imaging patent portfolios for at least $500 million, making progress in the sale of two business units and the resolution of the company’s U.K. pension obligations.

"This financing is a key element in the steps to enable the company to successfully execute its remaining reorganization objectives and emerge from Chapter 11 in the first half of 2013," Kodak said in a statement.

The junior debtor-in-possession financing is composed of new term loans of $476 million, as well as term loans of $317 million issued in a dollar-for-dollar exchange for amounts outstanding under the company’s pre-petition second lien notes, the company said..

The company filed for Chapter 11 protection on Jan. 19.

The second-lien noteholders’ filing sharply criticizes Kodak—and its management—for continuing to suffer operating losses and “burn cash at an astounding rate that is rapidly eroding the debtor’s liquidity and creditors’ potential recoveries ... experienced a net loss from operations of almost $1 billion since the commencement of these Chapter 11 cases—an average net loss of approximately $107 million a month. …

“Cash position has decreased by approximately $429 million,” the filing states. “The debtors likely will run out of money during the first half of 2013 without additional financing and will be in default of their (debtor in possession) financing much sooner.”

The filing states the noteholders have lost all faith in management, and claims the company’s ability to successfully restructure and exit bankruptcy has been jeopardized.
 
“The debtors’ current leadership has lost its right to lead,” the filing states.
 
The noteholders said they can propose a plan for the company that will win court approval.

Kodak said in a statement that the move by the noteholders was not unexpected.

"The objection, which came from a minority group of secured noteholders, was not 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."

(c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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