Business Context and Reporting Period
Company: Eastman Kodak Company
Filing Type: Form 8-K (Current Report)
Date of Report: November 7, 2016
Event: Entry into a Material Definitive Agreement for the sale of Series A Preferred Stock and an amendment to the Asset-Based Lending (ABL) Credit Agreement.
Key Financial Metrics and Transaction Details
- Gross Proceeds: $200 million from the sale of 2,000,000 shares of 5.50% Series A Convertible Preferred Stock at $100 per share.
- Debt Repayment Plan: Proceeds, combined with cash on hand, will be used to prepay $262 million of outstanding Second Lien Term Loans.
- Dividend Rate: 5.50% per annum, payable quarterly in cash (cumulative).
- Liquidation Preference: $100 per share, ranking senior to Common Stock.
- Conversion Terms: Initial conversion rate of 5.7471 shares of Common Stock per Preferred share (equivalent to a $17.40 conversion price, a 20% premium to the $14.50 closing price on November 4, 2016).
- Redemption: Mandatory redemption required if shares are not converted by the fifth anniversary of issuance.
Material Changes and Governance Impacts
- Board Representation: Purchasers (Southeastern Asset Management, Inc. and affiliated funds) gain the right to nominate two members to the Board of Directors, proportional to their ownership on an as-converted basis.
- Dividend Arrears Voting: If dividends are in arrears for six or more periods, Preferred Stockholders gain the right to elect two additional directors.
- Credit Facility Amendment: The ABL Credit Agreement was amended to permit the prepayment of Second Lien Term Loans and the payment of cash dividends on the new Preferred Stock.
- Environmental Contingency: Conversion rates are subject to adjustment if the Company is obligated to make cash payments under a settlement agreement regarding historical environmental conditions at Eastman Business Park (liability triggers if remediation costs exceed $99 million).
Guidance, Outlook, and Risks
- Closing Timeline: The transaction is expected to close in November 2016.
- Regulatory Compliance: Conversion into Common Stock is capped at 19.99% of outstanding Common Stock until shareholder approval is obtained for any issuance exceeding this threshold.
- Unregistered Sale: The sale is exempt from registration under Section 4(a)(2) of the Securities Act; purchasers represented they are accredited investors.
- Financial Risk: The filing does not provide current revenue, profit, or cash flow figures, focusing solely on the capital structure transaction.
Investor Verification Checklist
- Verify the successful closing of the $200 million Preferred Stock sale and the subsequent prepayment of the $262 million Second Lien Term Loans.
- Confirm the filing of the Certificate of Designations with the State of New Jersey to establish the rights of the Series A Preferred Stock.
- Monitor the status of the environmental remediation settlement at Eastman Business Park to assess potential conversion rate adjustments.
- Track the appointment of the two director nominees from the Purchasers to the Board of Directors.
- Review future filings for shareholder approval regarding the conversion cap exceeding 19.99% of outstanding Common Stock.