KODAK NEEDS TO BORROWS $ 700,000,000.00 !!!

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KODAK NEEDS TO BORROWS $ 700,000,000.00 !!!

 user 2009-09-25 at 11:24:31 am Views: 44
  • #22683

    KODAK NEEDS TO BORROWS $ 700,000,000.00 !
    Kodak Gets Financial Lifesaver From KKR
    Eastman Kodak Co., bolstering its balance sheet as its business deteriorates, said it will raise up to $700 million in debt in an investment led by Kohlberg Kravis Roberts & Co.
    The deal gives the camera and printer maker, which had $1.13 billion in cash at the end of June, more financial breathing room, as well as capital it can use to pay off debt that could come due next year. The financing comes at a steep price, and KKR could end up with a 20% equity stake in Kodak by exercising warrants issued as part of the deal.Kodak has been undergoing a painful transition as its film business disappears and it tries to develop digital products that will carry it into the future.

    Both Kodak and KKR characterized the deal as a vote of confidence in the company’s strategy and prospects. However, in conjunction with the fund raising, Kodak, based in Rochester, N.Y., said it now expects its net loss for the current year will be close to $400 million, the high end of its previous forecast.”Given their capital structure and the worries about viability of the business, it’s a smart move,” said one bondholder who declined to be identified. “Now they have a cushion of time to grow” their most promising businesses, he said. Kodak is counting on its consumer inkjet business, but that won’t start generating profits until 2011, when the installed base of printers grows large enough to generate significant sales of highly profitable ink cartridges.

    Fund-raising proceeds will be used to repurchase up to $575 million of convertible notes that have provided a worrisome threat to Kodak’s balance sheet. These noteholders are expected to force Kodak to repurchase them Oct. 15, 2010, since their conversion price is far higher than Kodak’s recent stock price; it closed Wednesday at $6.68.”Today’s announcement is particularly welcome,” said Terrence Dwyer, a debt analyst at KDP Investment Advisors in Montpelier, Vt.

    Kodak Chief Executive Antonio Perez said, “KKR’s investment is a validation of our strategy and our team.” He noted that KKR has a “long, successful record” of helping companies create value.In a July interview, Mr. Perez said he was comfortable with Kodak’s outlook, but that if the fourth quarter outlook “was lousy” he was confident Kodak could raise additional funds. Kodak’s business is heavily dependent on holiday-season sales of digital cameras and picture frames and kiosk printing of personalized cards and calendars.Kodak said that it expects its revenue for the full year will decline 12% to 18%, with most of the decline in the film business during the first half of the year. That outlook is in line with its earlier projections. It declined to comment on the fourth quarter.Kodak said KKR will buy up to $400 million in senior secured notes due 2017 carrying an interest rate of 10% to 10.5%. KKR will also get warrants to purchase up to 53 million shares, equal to about 20% of Kodak’s shares outstanding, and two board seats.

    The remaining $300 million will be raised through a private-placement transaction.
    Such highly structured deals have become a popular way for private-equity firms to put money to work ever since banks became reluctant to lend money for classic leveraged buyouts.

    KKR has done several of these convertible-debt deals over the past two years. George M.C. Fisher, a former Kodak CEO, is a senior adviser to KKR, although he isn’t expected to play a formal role in the investment.At the same time, capital-starved corporations that can’t get financing from struggling banks are finding ready lenders in private investors such as KKR, which are able to extract favorable terms for their loans.

    This summer, Office Depot Inc. received a $350 million investment from U.K. buyout shop B.C. Partners in the form of preferred stock that pays a 10% annual interest rate. Last November, Whole Foods Market Inc. received a $425 million investment from Leonard Green & Partners LP in return for preferred shares that pay a dividend of 8%.