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 11:25:17 am Views: 44
  • #22652

    KODAK NEEDS TO BORROWS $ 700,000,000.00 !
    Kodak Gets Financial Lifesaver From KKR
    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.

    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.
    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.

    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%.