Kodak recovers millions after share allocation error
Eastman Kodak clawed back almost all of the five former executives’ $ 3.9 million they collected last year by exercising stock options they were said to have lost, in a embarrassing episode which forced the pioneer of the cinema era to review its internal controls.
Kodak has recovered $ 3.6 million of the proceeds and expects to collect $ 2 million of the $ 3 million in withholding taxes associated with former employee transactions, according to a securities filing indicating that it had imposed new measures to resolve “deficiencies in controls”.
Former executives took advantage of a sharp rise in Kodak shares last July after signing a letter of intent regarding a possible US government loan of $ 765 million to start manufacturing generic drug ingredients.
The shares collapsed shortly after executives sold their shares, and Kodak said last September that the loan was “on hold.” He has since given up on any hope of receiving the money from the U.S. International Development Finance Corporation, known as DFC, this week’s filing confirmed with the Securities and Exchange Commission.
But the loss-making imaging company is still grappling with the fallout from the volatile trading it has witnessed during that time, which has drawn close scrutiny from politicians, regulators and shareholders. His case confirmed that he had not yet resolved investigations by the SEC, the New York attorney general and several congressional committees.
Although a review commissioned by independent board members found no evidence insider trading, the company continues to face lawsuits alleging violations of securities laws or breaches of fiduciary duties.
Kodak’s comments came weeks after securing a refinance that will bring in at least $ 210 million for the struggling company and push back its debt maturities in a way the company says would eliminate “substantial doubt.” on its ability to continue operating. worry.
“We corrected the balance sheet,” Kodak chief financial officer David Bullwinkle told the Financial Times. “We now have the opportunity to leverage this additional liquidity” to advance a growth strategy focused on the company’s expertise in advanced materials, printing and chemicals.
S&P Global, the rating firm, said the new funds would reduce Kodak’s interest and dividend payments and leave it without a “default catalyst” for the next two years. He warned, however, that the group’s capital structure remained “unsustainable without a substantial improvement in operational performance”.
Regulatory, legal and financial issues hanging over the company have not deterred two new investors from backing Kodak in recent weeks.
The company has accepted new financing that includes a five-year, $ 275 million, deferred drawing term loan from Kennedy Lewis Investment Group, with an interest rate of 12.5%. Kennedy Lewis, who previously worked with Kodak president and CEO Jim Continenza, also bought 1 million shares and invested $ 25 million in a new convertible note.
Kodak raised $ 75 million through a sale of convertible shares to investment firm Grand Oaks Capital, created by PayChex founder Tom Golisano, based in Rochester, New York, Kodak’s hometown. Grand Oaks has agreed to purchase an additional $ 25 million of convertible shares once the investment obtains regulatory approval.
Kodak used $ 100 million of the new funds to buy back some of its outstanding convertible shares.
Their investments gave Kennedy Lewis and Grand Oaks the right to each appoint one person to Kodak’s board of directors. The pair are expected to nominate Golisano and Kennedy Lewis co-founder Darren Richman, according to people briefed on the matter.
Kodak announced this week that its revenues jumped from $ 1.24 billion to $ 1.03 billion last year, when it cut 250 jobs and reported a net loss of $ 541 million due to charges and one-off expenses. Bullwinkle noted that it had been successful in generating liquidity in the third and fourth quarters, saying, “We haven’t done this for a long time.”
The company continued to pursue its hopes of breaking into the pharmaceutical ingredients business, an expansion that the DFC loan was supposed to spur. Kodak is using some of its newly raised funds for this work, added one of the people familiar with the funding.
“They have the ability and the know-how to manufacture,” said this person. “Yes, the government at one point was going to contract with Kodak to manufacture essential ingredients for antibiotics. It became a lightning rod politically and obviously there was no wrongdoing, but they should have understood that there would be a lot of publicity around it.
Kodak’s case nonetheless acknowledged the damage that had been done to its brand value, saying it reduced the book value of its business name from $ 21 million to $ 18 million last year to reflect the impact of the Covid-19 pandemic.