Eastman Kodak has recouped virtually all the $3.9m 5 former executives collected final yr by exercising share choices they had been imagined to have forfeited, in an embarrassing episode that pressured the film-era pioneer to overtake its inside controls.
Kodak has clawed back $3.6m of the proceeds and expects to gather $2m of the $3m of withholding taxes related to the ex-employees’ trades, in keeping with a securities submitting that stated it had imposed new measures to resolve the “deficiencies in controls”.
The former executives capitalised on a steep rise in Kodak’s inventory final July after it signed a letter of intent a couple of potential $765m US government loan to start manufacturing generic drug substances.
The shares crashed quickly after the executives bought their inventory, and Kodak stated final September that the mortgage was “on hold”. It has since given up hope of receiving the cash from the US International Development Finance Corporation, often called the DFC, this week’s submitting with the Securities and Exchange Commission confirmed.
But the lossmaking imaging firm continues to be coping with the fallout from the risky buying and selling it witnessed in that interval, which drew intense scrutiny from politicians, regulators and shareholders. Its submitting confirmed it has not but resolved investigations from the SEC, the New York attorney-general and several other congressional committees.
Although a evaluate commissioned by impartial board members found no evidence of insider buying and selling, the corporate nonetheless faces lawsuits alleging violations of securities legal guidelines or breaches of fiduciary duties.
Kodak’s feedback got here weeks after it clinched a refinancing that may herald not less than $210m to the struggling firm and push back maturities on its debt in a approach that the corporate stated would remove the “substantial doubt” about its potential to proceed as a going concern.
“We have fixed the balance sheet,” David Bullwinkle, Kodak’s chief monetary officer, informed the Financial Times. “We now have an opportunity to put that incremental liquidity to work” to advance a progress technique targeted on the corporate’s experience in superior supplies, print and chemical compounds.
S&P Global, the credit standing firm, stated the brand new funds would decrease Kodak’s curiosity and dividend funds and depart it with no “catalysts for default” over the following two years. It warned, nevertheless, that the group’s capital construction remained “unsustainable without substantial improvement in operating performance”.
The regulatory, authorized and monetary questions hanging over the corporate didn’t deter two new traders from backing Kodak in latest weeks.
The firm agreed a brand new financing that features a five-year $275m delayed-draw time period mortgage from funding group Kennedy Lewis that carries a 12.5 per cent rate of interest. Kennedy Lewis, which has labored with Kodak chair and chief govt Jim Continenza beforehand, additionally purchased 1m shares and invested $25m in a brand new convertible notice.
Kodak raised $75m by a convertible inventory sale to funding agency Grand Oaks Capital, which was established by PayChex founder Tom Golisano, who is predicated in Kodak’s dwelling city of Rochester, New York. Grand Oaks has agreed to buy an extra $25m of convertible shares as soon as the funding wins regulatory approval.
Kodak used $100m of the brand new funds to repurchase a few of its excellent convertible inventory.
Their investments gave Kennedy Lewis and Grand Oaks the correct to appoint one individual every to the Kodak board. The pair are anticipated to place ahead Golisano and Kennedy Lewis co-founder Darren Richman, in keeping with folks briefed on the matter.
Kodak reported this week that its revenues dropped from $1.24bn to $1.03bn final yr, when it lower 250 jobs and reported a $541m web loss due to one-off fees and bills. Bullwinkle famous that it had managed to generate money within the third and fourth quarters, saying: “We haven’t done that in a long time”.
The firm has continued to pursue its hopes of breaking into the pharmaceutical substances enterprise, an growth that the DFC mortgage was meant to supercharge. Kodak is utilizing a few of its newly raised money for that work, one of many folks accustomed to the financing added.
“They have the capacity and they have the manufacturing knowhow,” this individual stated. “Yes, the government at one point was going to contract with Kodak to manufacture critical ingredients for antibiotics. That became a lightning rod politically and obviously there was no wrongdoing, but they should have understood there would be a lot of publicity around it.”
Kodak’s submitting nonetheless acknowledged the injury that had been completed to the worth of its model, saying it wrote down the carrying worth of its commerce identify from $21m to $18m final yr to replicate the influence of the Covid-19 pandemic.
