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Kodak reaches $793 million bondholder deal

November 13, 2012

Deal may potentially take Kodak out of bankruptcy, should its patent sale be successful.

Kodak has announced that it may be able to exit bankruptcy should the ailing OEM be able to sell its patent collection for at least $500 million (€394 million) in a deal reached with bondholders for loans of $793 million, reports the Wall Street Journal.

Bondholders from a number of companies including Centerbridge Partners LP, GSO Capital Partners LP, J.P. Morgan Chase & Co. and UBS AG will provide the OEM with the new financing, and the package was approved by the bondholders on 11 November.

The financing package is said to include $476 million (€375 million) in new loans and $317 million (€249 million) of “roll-up loans”, which were owed to Kodak prior to its bankruptcy filing. With the new package, Kodak will benefit from $476 million in new cash.

As such, the deal is still subject to approval by the bankruptcy court in Manhattan.

Kodak chose the current bondholders over an offer from another group, with one commentator stating that the OEM arranged a deal with bondholders who hold “second-lien bonds”, which stand behind all other debts to be repaid in a bankruptcy. The bondholders Kodak declined have since demanded in a court filing to be allowed to steer Kodak’s path out of Chapter 11, claiming they had “lost all faith” in company executives as the OEM had lost almost $1 billion (€788 million) since filing for Chapter 11.

To acquire the financing and exit bankruptcy, Kodak must succeed in selling its patent portfolio of 1,100 digital patents for at least $500 million in addition to making progress selling businesses, restructuring UK pension obligations and executing a reorganisation plan by 30 September 2013.

Kodak CEO Antonio Perez commented that the new financing deal with other creditors would allow Kodak to exit bankruptcy during the first six months of 2013 and “establishes a clear path for our emergence as a stronger, more focused company.”

The deal has been met with criticism from a number of bondholders, who complained as of 12 November that Kodak has “squandered” 10 months of bankruptcy protection by relying too heavily on the patent sale, commenting: “Having had and wasted 10 months, it is time to break the debtors’ stranglehold on the plan process so that other parties may move these cases forward.”

A Kodak spokesperson stated that the objections had been expected and that “we are confident that this objection will not impact our timeline for emergence.”

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