The Eastman Kodak Company was expecting to gain upwards of $400 million of its $700 million in debt refinancing from other qualified institution buyers instead of using Kohlberg Kravis Roberts & Co., a private equity fund.
The iconic photography business has sought to redefine itself in order to keep pace in the digital age. The interest of hedge funds, pension funds, and other institutional investors has been seriously piqued by convertible senior notes, with 7% annual interest rates.
According to company execs, initially, Kohlberg Kravis Roberts would have provided the $400 million in refinancing dollars. Yet, it ended up only offering $300 million. They plan to buy senior secured notes at a 10-10.5% interest rate range. It could end up being a better deal in the end according to one analyst.
Kodak, like many companies, has experienced its own roller coaster ride of rises and falls in share prices. Back in March, the company saw an all-time low of $2.01 a share.
Kohlberg Kravis Roberts (KKR) is best known for the $25.1 billion purchase of RJR Nabisco Inc. in 1989. More recently, the fund made two high level purchases, including the 2006 acquisition of hospital operator HCA, a $21 billion deal, and the 2007 buyout of Texas electric company TXU for $32 billion.
As part of its current agreement, KKR will be allowed to buy up to 40 million shares, about 15% of the total 268 million shares that are still outstanding. Additionally, KKR will be granted two seats on the company’s board of directors.
Kodak plans to use the proceeds from these two debt sales to pay off $575 million in debt. Like so many businesses, Kodak has had to make some touch decisions in the wake of the economic downturn. With sales of digital cameras, film, and other photography products noticeably reduced, the company has had to eliminate between 3,500 and 4,500 jobs.
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Tags: Debt, Debt Refinancing
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