In a filing this week, Kodak announced that the Kodak Retirement Income Plan Trust, which holds the assets of the Kodak Retirement Income Plan (KRIP), had already agreed a deal with Mastercard Foundation for the sale of certain illiquid assets and private equity interests with a net asset value of $764.4m, for a cash payment of $550.6m.
Kodak’s board said it was reviewing options for the future of the entire KRIP, including a “possible termination”.
This would not affect the accrued benefits of pension scheme members, the manufacturer asserted.
Based on current assumptions, Kodak estimated that KRIP could have surplus assets of $885m-$975m.
If the plans go ahead, and after KRIP’s liabilities are satisfied and a replacement plan agreed for the benefit of current employees, Kodak has projected that it would receive proceeds with a value of $530m-$585m.
The complex process could take between 12-18 months, and Kodak would be obligated to use all of the net cash from the so-called ‘reversion proceeds’ to prepay its term loans until the value of those loans is reduced to $300m, and then subsequently to use half of the reversion proceeds until the term loans are reduced to $200m.
In June 2023 Kodak agreed an amended $450m term loan agreement with an aggregate interest rate of 12.5% per annum, that matures in August 2028.
A Kodak spokesperson commented: “The announced agreements to sell illiquid assets are a key step in positioning the U.S. Kodak Retirement Income Plan for a potential plan termination.
“This transformational opportunity would significantly strengthen our balance sheet and position the company for continued growth.
“In addition, the actions we plan to take would preserve and protect the retirement benefits of participants in our overfunded pension plan, an asset created by decades of employer-only contributions and successful management of the fund.”
The spokesperson noted that accessing the surplus plan assets would also enable Kodak to “accelerate our long-term turnaround strategy by paying down our debt and increasing capital available to invest in strategic initiatives”.
Kodak’s share price jumped to a 52-week high of $6.90 following the news. The shares had settled at $6.62 at the close of trading yesterday and are up nearly 74% since the start of the year. (52-week low: $3.33.)
Kodak’s current market capitalisation is $448.79m. The business had revenues of $1.12bn last year.
What was the Kodak UK final salary pension scheme – Kodak Pension Plan No.2 – has been managed under the auspices of the Pension Protection Fund since 2020.
The scheme was separated when Kodak exited Chapter 11 bankruptcy protection in 2013 but plans for the Kodak Alaris business to support the scheme fell short of expectations.
