Business Context and Reporting Period
This Form 8-K filing by Eastman Kodak Company reports on events occurring on March 31, 2009. The primary event is the entry into a Material Definitive Agreement involving the Company, its subsidiary Kodak Canada Inc., and U.S. subsidiaries as guarantors.
Key Financial Metrics and Debt Structure
- Credit Facility: Entered into an Amended and Restated Credit Agreement providing an asset-based revolving credit facility of up to $500 million.
- Letters of Credit: Up to $250 million of the facility is available for letters of credit. $131 million in letters of credit were previously issued and continue under the new agreement.
- Outstanding Advances: There are no advances outstanding under the facility as of the filing date.
- Interest and Fees: Advances bear interest at applicable margins over the Base Rate or Eurodollar Rate. A quarterly fee on unused commitments ranges from 0.05% to 1%.
- Liquidity Requirement: The Company is required to maintain cash and cash equivalents in the U.S. of at least $250 million.
- Collateral: Obligations are secured by liens on substantially all non-real estate assets and a pledge of 65% of the stock of certain material non-U.S. subsidiaries. The Company expects to mortgage certain U.S. real property.
Material Changes Versus Prior Period
- Extension of Maturity: The facility extends the termination date to March 30, 2012 for lenders agreeing to the extension (and future lenders), while other lenders remain on the original October 18, 2010, termination date.
- Covenant Relief: The Company is no longer subject to quarterly testing for the two financial covenants that existed under the previous credit agreement.
- New Conditional Covenants: If excess availability falls below $100 million for three consecutive business days, the Company must maintain a fixed charge coverage ratio of not less than 1.1 to 1.0 until excess availability exceeds $100 million for 30 consecutive days.
- Cash Sweep: A concentration account will be established to sweep cash to pay down amounts owed if the Company is in default or if excess availability falls below $100 million.
Outlook, Risks, and Contingencies
- Usage Restrictions: The facility may be used for general corporate purposes but cannot be used to prepay or redeem the Company's outstanding 3.375% Senior Convertible Notes due 2033.
- Events of Default: Standard events of default include payment defaults, breach of covenants, bankruptcy, ERISA events, and change of control. Consequences include the imposition of a default interest rate and acceleration of all amounts due.
- Current Status: Excess availability is currently reported as higher than $100 million, meaning the conditional fixed charge coverage ratio is not currently triggered.
Investor Verification Checklist
- Verify the current status of the $131 million in outstanding letters of credit and their impact on available borrowing capacity.
- Confirm the Company's compliance with the requirement to maintain $250 million in U.S. cash and cash equivalents.
- Monitor the excess availability under the borrowing base formula to ensure it remains above the $100 million threshold to avoid triggering the fixed charge coverage ratio covenant.
- Review the specific terms of the 3.375% Senior Convertible Notes due 2033 to understand the restriction on using this facility for their prepayment.
- Assess the progress of mortgaging U.S. real property to include it in the borrowing base.