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Eastman Kodak Co. has reached a proposed agreement in which it would terminate its retiree benefits program effective Dec. 31.
The company on Wednesday said that, following extensive negotiations, it reached an agreement in principle with the Official Committee of Retirees that provides for a comprehensive resolution of Kodak’s retiree health care and survivor benefits liabilities.
The retiree benefits program includes medical, dental, life insurance and survivor income benefits.
In satisfaction of its $1.2 billion retiree benefits liability, Kodak will provide the committee with a $7.5 million cash payment to support initial administration and benefit obligations, a $635 million unsecured claim and a $15 million allowed administrative claim that would have priority status in Kodak’s reorganization proceedings, the company said.
The funds can be used at the committee’s discretion to make payments to retirees to subsidize a limited portion of future benefit costs.
The agreement has the support of the debtor’s Official Committee of Unsecured Creditors, and will significantly reduce one of Kodak most substantial legacy liabilities, marking another major step toward Kodak’s successful emergence from Chapter 11, the company said. It currently costs Kodak some $10 million a month.
Kodak said the proposed agreement results in significant cost savings and liquidity enhancement and eliminates the need for costly and lengthy litigation. Ultimately, through the allowed claims process, the retirees’ recovery is linked to Kodak’s successful reorganization.
Kodak said it recognizes this action will pose challenges for retirees.
The agreement is subject to approval by the Bankruptcy Court and a hearing is scheduled for Oct. 29.
“With this proposed resolution to our U.S. retiree benefit legacy liabilities, Kodak takes a major step forward toward our successful emergence. Today’s agreement is a decisive accomplishment toward one of our fundamental objectives in our restructuring. At the same time, Kodak continues to make progress in the other important restructuring areas as we prepare Kodak for emergence. We are appreciative of the hard work and engagement of the 1114 Committee that helped us reach this agreement and of the great contributions of our retirees,” said Chairman and CEO Antonio Perez in a statement.
EKRA Ltd., an organization of Kodak retirees, said Wednesday evening it became aware Kodak submitted a motion to the bankruptcy court in New York City to present a proposal negotiated with the Official Retirees Committee to eliminate all retiree health and welfare benefits.
“Although EKRA has not seen the details of the Kodak plan, we are very disappointed that the information about such a dramatic change in health and welfare benefits became known via the public court venue. It is especially disappointing that neither Kodak nor the Official Retiree Committee, who worked on this for the past five months, felt it was important to communicate to retirees the direness of the Kodak situation nor in any way to indicate the Draconian result they were about to reveal. This, coupled with not seeking input, makes this news all the more shocking,” EKRA said in a statement.
Both Kodak and EKRA said the proposal does not affect pension benefits.
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