Kodak identifies core businesses as it pitches for $950m financing

Jo Francis and Simon Nias
Wednesday, January 25, 2012

Kodak has singled out digital printing and packaging solutions as being among its most valuable growth businesses, as part of its pitch to potential investors.

The company is trying to secure a $950m (£610m) debtor-in-possession facility to provide liquidity and to re-finance its existing revolving loan, allowing it to restructure under Chapter 11 bankruptcy protection.

The presentation highlighted what Kodak considers its most valuable operations in terms of core businesses and growth businesses.

The core businesses are: retail systems solutions, document scanners and digital plates. The growth businesses are: consumer inkjet, digital printing solutions, enterprise workflow software and services, and packaging solutions.

The Prosper inkjet printing family was described as having "game-changing technology" and "attractive margins on equipment, ink and service".

Other business areas, including commercial and consumer film, digital cameras and its intellectual property portfolio, will be "managed for cash/value".

Kodak told potential lenders that it had identified more than $100m in cost-reduction opportunities "across all corporate costs".

This includes reduced administration spend through its recently-announced simplified two division structure, as well as the elimination of "all non-core corporate research and engineering" and a halt to "all non-essential advertising and marketing programs". It will also exit some contractual obligations.

Lenders will gain a first-priority secured interest in Kodak's intellectual property and real estate, as well as a 65% pledge of the stock of its foreign subsidiaries.

Kodak also pitched a "substantial global cost-reduction opportunity" in the presentation. As part of its restructuring plans, Kodak intends to reduce the burden to the business of its legacy costs, including pension commitments. The company said it was "in constructive discussions with the trustees of its UK pension plan".

Another pivotal aspect of the Kodak UK business is that it is the holding company for Kodak International Finance, the group's finance vehicle for the rest of the world.

Separately, Eastman Kodak’s EMEA regional managing director Philip Cullimore told PrintWeek it was "business as usual" this week, after the firm filed for Chapter 11 bankruptcy protection in the US.

Cullimore attempted to calm concerns over the size of the deficit in Kodak’s UK pension scheme (which stood at more than £423m at 31 December 2010) and its post-retirement medical scheme.

"The great news for Europe is that we’re operating in a business-as-usual manner," he said when asked about Kodak’s ability to continue meeting its obligations under the payment plan agreed with pension trustees in 2010.

This included payments to the pension scheme of around £37m per annum from 2012 to 2014, rising to £62m per annum from 2015 to 2022, with any remaining deficit to be funded by the end of 2024.

"We’re not alone in that there is a difference between the value of the pension scheme and the amount that would make it fully-funded," said Cullimore. "There is an agreed plan with the trustees to make contributions – that plan is on-track."

The firm’s post-retirement medical scheme had a deficit of £17.9m at 31 December 2010 and was described as "unfunded", with payments being met out of company assets.

Kodak will announce its 2011 fourth quarter results tomorrow (26 January).


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