10 Sep 2013: TPR supportive of Kodak restructuring

The Regulator has issued a positive response to the completion of the Kodak Pension Plan’s acquisition of Kodak's imaging businesses.

US-based Eastman Kodak Company (‘EKC’) filed for Chapter 11 bankruptcy protection in January 2012. It had failed to adapt its business model quickly enough to the emergence of digital photography.  

EKC had previously provided a guarantee to the UK Pension Plan creating a link between EKC and the Plan.  The trustees of the Plan filed a claim against EKC for £1.8bn in the US courts in November 2012.

A settlement was reached whereby the Pension Plan would acquire two cash generative businesses, Personalised Imaging and Document Imaging, from EKC in return for relinquishing its claim on EKC.  A new scheme, which was voted on by the Plan membership, will be created and is expected to provide greater benefits than would have been provided by the PPF.  The capital EKC will receive for the businesses will help it emerge from Chapter 11.

TPR provided clearance for the transaction in April 2013 and in its latest statement, interim chief executive Stephen Soper said “this is an important step towards reaching an outcome that best balances the needs of members, the Pension Protection Fund, the company and its employees. Where businesses are in a distressed state, we’re prepared to be creative and work collaboratively with pension trustees and employers to explore the options in order to find viable outcomes.”

Argyll comment: debt for equity’ deals are not brand new (eg Uniq in 2011) but what sets this case apart is that existing scheme resources have been used to purchase equity assets of the sponsor.  In such a situation it becomes even more important that trustees have the necessary expert assistance to assess the value to the scheme of an equity interest.  As trustees and employers continue to work together to find creative ways to deal with deficits, TPR has shown that it is prepared to consider proposals that have value for pension schemes particularly if other options are limited.  


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