Kodak plans to sell up to $400 million of senior secured notes to KKR

By Lisa Kerner

Charlotte, N.C., Sept. 16 - Eastman Kodak Co. announced on Wednesday that it expects to raise up to $700 million through a series of financing transactions in a bid to shore up its financial position.

Investment vehicles managed by Kohlberg Kravis Roberts & Co. LP committed to purchase from Kodak up to $400 million in senior secured notes due 2017.

The notes will bear interest at a rate ranging from 10% to 10½% per year, based on the principal amount of the notes.

The notes will also bear payable-in-kind interest at a fixed rate of ½% to 1½% per year. The exact amount will be determined based on the final size of the private financing transaction.

Kodak said it will also issue warrants to KKR to purchase up to 53 million shares of the company's common stock.

The warrants will be exercisable any time prior to the eighth anniversary of the date of issuance at an exercise price based on a formula tied to Kodak stock price performance but at no greater than $5.50 per share.

According to Kodak, it may issue as few as $300 million of the notes. The number of shares underlying the warrants would then be adjusted to as few as 40 million.

The notes may be issued at a discount based on the strike price of the warrants.

KKR is required to hold the warrants and shares issuable upon exercise of the warrants for a minimum of two years, a Kodak news release said.

Net proceeds from the transactions, as well as from a separate private placement of convertible senior notes, will be used to repurchase up to $575 million principal amount of Kodak's existing 3.375% convertible senior notes due 2033 and for general corporate purposes.

Kodak said it will appoint two KKR designees to its board of directors upon the transaction's close on or before Sept. 30.

Eastman Kodak is a Rochester, N.Y.-based provider of imaging technology products and services to the photographic and graphic communications markets.

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