Eastman Kodak Company (NYSE:KODK) today announced that it has entered
into an agreement for the issue and sale of $100 million aggregate
principal amount of its 5.00% Secured Convertible Notes due 2021 (the
“Convertible Notes”) to funds managed by Southeastern Asset Management,
Inc., an employee-owned, global investment management firm
Kodak intends to use the net proceeds of the issuance and sale of the
Convertible Notes to prepay in full its outstanding first lien term
loans, and the remainder for general corporate purposes. To facilitate
the Convertible Notes issuance, Kodak expects to enter into an amendment
to its asset based revolving credit facility to permit the incurrence of
the Convertible Notes.
“Over the last few months, the Company has worked diligently to improve
its capital structure. This refinancing is a major milestone for the
Company and supplements the proceeds from the recent packaging sale to
completely repay the Company’s first lien term debt of approximately
$395 million,” said James Continenza, Kodak’s Executive Chairman. “It
improves the Company’s balance sheet, provides additional capital and
lowers debt service costs, which will support the realignment of our
business and our emphasis on meeting our customer needs.”
The transaction has been approved by a special committee of Kodak’s
board of directors comprised of independent directors who are not
affiliated with Southeastern and by Kodak’s board of directors.
The transaction is expected to close during the second quarter of 2019.
The closing conditions in the purchase agreement include entry by the
shareholders who are not affiliated with Southeastern holding a majority
of the outstanding shares of common stock into support agreements
pursuant to which such shareholders agree to execute a written consent
approving the issuance of the Convertible Notes, the conversion feature
of the Convertible Notes and the issuance of the shares of common stock
issuable upon conversion of the Convertible Notes, and related matters.
Summary of Key Terms
The Convertible Notes will be issued in an aggregate principal amount of
$100 million. The maturity date of the Convertible Notes will initially
be November 1, 2021, which may be extended at Kodak’s option by up to
three years in the event that the Series A preferred stock is refinanced
with debt or equity or the mandatory redemption date of the Series A
preferred stock is extended. The Convertible Notes will accrue interest
at a rate of 5.00% per annum, payable to holders on conversion (as to
the portion of the outstanding balance being converted) and on maturity.
At any time while the Convertible Notes are outstanding, the holders may
convert the Convertible Notes to shares of common stock at a conversion
rate equal to 314.9785 shares of common stock per each $1,000 principal
amount of Convertible Notes (based on a conversion price equal to
$3.17482 per share of common stock (the “Conversion Price”), which
represents a 10% premium to the volume weighted average price of the
shares of common stock for the five day trading period ended on April 9,
2019) (the “Conversion Rate”). On an as-converted basis, the Convertible
Notes will represent approximately 31,497,850 shares of Common Stock, or
42.28% of the shares of Common Stock outstanding after giving effect to
the issuance and conversion. The Conversion Rate and Conversion Price
will be subject to certain customary anti-dilution adjustments.
Kodak may elect to convert all outstanding Convertible Notes to shares
of common stock at the Conversion Price in the event that its shares of
common stock trade at or above 150% of the Conversion Price for 45
trading days in any period of 60 consecutive trading days.
Kodak may also elect to repay all outstanding Convertible Notes at par
plus accrued and unpaid interest during a specified period following
certain fundamental transactions.
The rights of the holders to convert the Convertible Notes into shares
of common stock will not be effective until the Company has obtained
approval of the issuance of the Convertible Notes, the conversion
feature of the Convertible Notes and the issuance of the shares of
common stock issuable upon conversion of the Convertible Notes, from the
holders of a majority of the outstanding shares of common stock not
beneficially owned by Southeastern.
The Convertible Notes will be guaranteed by certain domestic
subsidiaries of Kodak (the “Subsidiary Guarantors”) and will be secured
by a second priority lien on certain receivables, inventory and other
assets of Kodak and the Subsidiary Guarantors, in which the lenders
under Kodak’s asset based revolving credit facility have a first
priority security interest.
Kodak is a technology company focused on imaging. We provide – directly
and through partnerships with other innovative companies – hardware,
software, consumables and services to customers in graphic arts,
commercial print, publishing, packaging, entertainment and commercial
films, and consumer products markets. With our world-class R&D
capabilities, innovative solutions portfolio and highly trusted brand,
Kodak is helping customers around the globe to sustainably grow their
own businesses and enjoy their lives. For additional information on
Kodak, visit us at kodak.com, follow us on Twitter @Kodak, or like us on
Facebook at Kodak.
About Southeastern Asset Management
Southeastern Asset Management is an employee-owned, global investment
firm founded in 1975. Southeastern employs a value investment approach,
focusing on long-term investments in strong businesses, which are
managed by good people and trade at deeply discounted prices relative to
intrinsic value. The firm seeks to build collaborative, constructive
relationships with company boards and management to support long-term
value creation. Southeastern is headquartered in Memphis, with global
offices in London, Singapore, and Sydney. Additional information can be
found at www.southeasternasset.com.
This press release does not constitute an offer to sell or the
solicitation of an offer to buy any securities. The offer and sale of
the Convertible Notes are being made in a transaction not involving a
public offering and have not been registered under the Securities Act of
1933, as amended, or applicable state securities laws. Accordingly, the
Convertible Notes may not be reoffered or resold in the United States
except pursuant to an effective registration statement or an applicable
exemption from the registration requirements of the Securities Act and
applicable state securities laws.
Cautionary Statement Regarding Forward-Looking
This press release includes “forward-looking statements” as that term is
defined under the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements concerning Kodak’s plans,
objectives, goals, strategies, future events, business trends and other
information that is not historical information. When used in this press
release, the words “estimates,” “expects,” “anticipates,” “projects,”
“plans,” “intends,” “believes,” “predicts,” “forecasts,” “strategy,”
“continues,” “goals,” “targets” or future or conditional verbs, such as
“will,” “should,” “could,” or “may,” and similar expressions, as well as
statements that do not relate strictly to historical or current facts,
are intended to identify forward-looking statements. All forward-looking
statements are based upon Kodak’s expectations and various assumptions.
The forward looking statements contained in this press release include,
without limitation, statements related to: the planned issue and sale of
the Convertible Notes and the timing thereof; the ability to obtain
shareholder approvals and meet other closing conditions for the planned
issue and sale of the Convertible Notes; the conversion of the
Convertible Notes into shares of Kodak’s common stock; and the planned
prepayment of Kodak’s first lien term loans from proceeds of the issue
and sale of the Convertible Notes. These and other forward-looking
statements are based on management’s current views and assumptions and
involve risks and uncertainties that could significantly affect expected
Future events or results may differ from those anticipated or expressed
in the forward-looking statements. Important factors that could cause
actual events or results to differ materially from the forward-looking
statements include, among others, the risks and uncertainties described
in more detail in Kodak’s Annual Report on Form 10-K for the year ended
December 31, 2018 under the headings “Business,” “Risk Factors,” “Legal
Proceedings” and/or “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Liquidity and Capital Resources,” in
the corresponding sections of Kodak’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2019, and in other filings Kodak makes with
the U.S. Securities and Exchange Commission from time to time.
All forward-looking statements attributable to Kodak or persons acting
on its behalf apply only as of the date of this press release and are
expressly qualified in their entirety by the cautionary statements
included or referenced in this press release. Kodak undertakes no
obligation to update or revise forward-looking statements to reflect
events or circumstances that arise after the date made or to reflect the
occurrence of unanticipated events, except as required by law.