Judge Says Creditors Can Vote on Kodak's Restructuring Plan

   By Joseph Checkler 
 

NEW YORK--A judge Tuesday said creditors can vote on Eastman Kodak Co.'s (EKDKQ) plan to exit bankruptcy as a much leaner version of its famous former self, owned mostly by a group of key creditors.

The approval by U.S. Bankruptcy Court in Manhattan Judge Allan L. Gropper of Kodak's disclosure statement, the plain-language outline of a company's restructuring proposal on which creditors must vote, brings Kodak closer to leaving Chapter 11 as a business-to-business company focused on commercial imaging.

If the creditors ratify Kodak's proposal, Judge Gropper will be asked to approve the plan at a hearing later this summer, tentatively set for Aug. 20.

Kodak plans to emerge from bankruptcy under the control of key creditors who will get 85% of Kodak's reorganized stock in a $406 million rights offering, which they have agreed to backstop. The proceeds of that would be used to repay second-lien bondholders owed $375 million. Judge Gropper allowed Kodak to move forward with that offering Tuesday, approving the company's request to pay about $16.24 million in commitment fees and a $4.06 million closing fee to GSO Capital Partners, BlueMountain Capital Management, George Karfunkel, United Equities Group and Contrarian Capital.

The judge also said Kodak could move forward with an $895 million debt-financing package with J.P. Morgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Barclays PLC (BCS, BARC.LN) serving as lead arrangers. Those banks can line up $695 million in senior secured loans, and $200 million in revolving credit to which they will contribute $130 million.

In late April, Kodak filed a restructuring plan that its major creditor groups weren't happy with. After weeks of negotiations with its official committee of unsecured creditors and the second-lien bondholders, the company conjured up a plan that all sides endorse. Unsecured creditors will get 15% of the stock of reorganized Kodak, no change from the April proposal, but also will be allowed to participate in the rights offering, the chance at 10% of the warrants of the new Kodak and interests in a trust pursuing litigation.

Last week, Judge Gropper approved Kodak's crucial and unusual deal to hand over its personalized-imaging and document-imaging deal to U.K. pensioners owed $2.8 billion, eliminating one of the most important liabilities still remaining in its case. Upon emerging from bankruptcy, which it hopes to do by early September, Kodak plans to center itself around commercial imaging, which includes digital printing and motion-picture film.

The Rochester, N.Y., company filed for Chapter 11 in January 2012 after failing to sell its digital patent portfolio. It sought more than $2 billion for the patents, but only ended up getting $527 million for the ones it sold. It also has shed employees and its unprofitable businesses during its Chapter 11.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)

Write to Joseph Checkler at [e-mail]. Follow him on Twitter at @JoeCheckler

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