FX.co ★ Kodak Evaluates Options For U.S. Pension Plan, Including Potential Termination; Stock Surges

Eastman Kodak Co. (KODK) announced in a regulatory filing on Monday that it is exploring various strategies for its U.S. pension plan, including potential termination, as part of an initiative to realize the value embedded within its overfunded pension fund.

Kodak conveyed that ending the plan could potentially generate proceeds ranging from $530 million to $585 million. However, a final determination on whether to terminate the pension plan has not yet been made.

KODK saw its stock rise significantly in Monday’s regular trading session, closing at $6.25, marking an increase of $0.98 or 18.60%. This momentum continued in after-hours trading, with the stock advancing by an additional $0.19 or 3.04%.

Furthermore, Kodak has entered an agreement to divest certain private equity stakes and other non-liquid assets held by the Kodak Retirement Income Plan Trust, which support the Kodak Retirement Income Plan (KRIP). As of March 31, 2024, these assets have a total net asset value of $764.4 million, which are to be sold for $550.6 million in cash at closing.

The Trust has also entered or plans to enter Purchase and Sale Agreements with four additional investors. These agreements involve selling KRIP Illiquid Assets valued at $87.3 million as of the Reference Date for a cash purchase price of $61.7 million, with $15.3 million of the proceeds payable on a deferred basis by December 31, 2025.

Given the current assessments, Kodak anticipates KRIP to possess surplus assets ranging from $885 million to $975 million post-liability fulfillment.

Assuming completion of transactions as outlined in the Sale Agreements, the Trust will continue holding KRIP Illiquid Assets valued at $161.3 million as of September 30, 2024. In addition, KRIP owns hedge fund interests with a net asset value of $917.2 million as of the same date, which are not part of the KRIP Illiquid Assets.

Kodak plans to allocate or contribute 25% of the excess assets, potentially including significant portions of remaining non-cash assets, to one or more qualified replacement plans to benefit current employees. Additionally, Kodak expects to receive funds from KRIP that, combined with assets of $220 million to $245 million from the Replacement Plan, will enable provision of substantial benefits to its existing workforce without incurring further cash expenditures.

Kodak has assured that terminating KRIP will not impact the accrued benefits of any plan participants.