In a move to settle a bankruptcy claim, Kodak has given two iconic business units to a U.K. pension plan.
Here are the basic details from the Bloomberg story:
Eastman Kodak Co., the bankrupt photography pioneer, will spin off imaging businesses to its U.K. pension plan in a deal that settles $2.8 billion in claims.
Kodak’s personalized- and document-imaging businesses will be spun off to the pension plan, Kodak’s largest creditor in the bankruptcy case, for $650 million, the company said today in a statement.
Kodak, based in Rochester, New York, plans to file tomorrow in court its plan to exit bankruptcy protection. The spinoff agreement settles about $2.8 billion of claims by the pension plan against Kodak, according to the statement.
Kodak’s hometown newspaper, Rochester’s the Democrat and Chronicle, added these details:
With those businesses, the pension plan would pick up roughly 3,200 full-time permanent Kodak workers — roughly a quarter of its 13,000 employees worldwide. Kodak on Monday declined to say how many of the 3,500 Kodak workers locally would be part of that sale.
Document Imaging revolves primarily around Kodak’s various document scanners. Personalized Imaging includes the businesses that made Kodak a worldwide household name — camera film and photographic paper.
Pension plan Chairman Steven Ross said Monday that the terms of the deal also include its rights to use the Kodak brand for those products.
In a statement Monday, Kodak CEO Antonio M. Perez said the sale “moves us past several key hurdles in our reorganization, resolving all potential claims worldwide … pacing our Personalized Imaging and Document Imaging businesses with a new owner that recognizes their value and is focused on their growth and success, and providing the remaining liquidity we require to emerge from Chapter 11.”
Kodak pension fund spokesman John Kiely said the pension fund won’t run the businesses directly, but will put together a management team to run them.
Kiely said specific plans for the DI and PI businesses — including how to grow them — still have to be worked out. But the U.K. pension plan, having talked with current management and looked at projections, is confident DI and PI can grow, he said. Pension fund managers “obviously gone through an exhaustive due diligence process,” Kiely said.
The Wall Street Journal added this context about the ongoing back and forth as Kodak tries to reorganize:
Kodak put the camera-film business and other businesses, including kiosks that develop digital photos and heavy-duty commercial scanners, on the block in August as part of a downsizing effort aimed at focusing on commercial printing, packaging and functional printing.
The $2.8 billion in pension obligations and the sale of the businesses were among the final outstanding issues keeping Kodak in bankruptcy court. The U.K. pension plan includes roughly 15,000 members.
A bankruptcy judge earlier this year approved Kodak’s deal to sell a portfolio of 1,100 digital patents for $527 million. Though a lower price than Kodak hoped, the deal also involved the buyers—including Apple Inc., Google Inc. and Microsoft Corp., agreeing to end contentious patent litigation.
With the transfer of its traditional camera-film business and other enterprises, Kodak will cement a long fall from a technological titan included in the Dow Jones Industrial Average from 1930 until 2004. Despite inventing the digital camera, Kodak has been slow to adapt to new technologies and ended up filing for bankruptcy protection in January 2012 amid a cash crunch.
What I’m left wondering is how many pension funds have responsibility for company operations at this point? Is this something that’s done regularly or a novel way for manufacturers to use physical assets and businesses to settle liabilities.
And what of the implications for the pension funds? Fund mangers will have to divert time and attention away from making money for investors while they search for the people to run Kodak. How is this going to help pensioners in the long-term?
While many pensions have private-equity investments and other alternative assets, does this mark a whole new era in what types of assets they’ll hold?
I find the situation incredibly interesting and I look forward to the follow-up stories that will hopefully address some of these issues. I, for one, would like to hear what Calpers has to say about the deal.
