How the U.K. Pension Plan Ended Up Owning a Big Part of Kodak

Ron Gilboa
Apr 30, 2013

Yesterday Kodak and the U.K. Based Kodak Pension Plan (KPP) made news. Resolving their financial issues was only one element but surprisingly KPP ended up owning key Kodak businesses. In its release Kodak stated the following: “Eastman Kodak Company announced a settlement agreement with the U.K. Kodak Pension Plan (KPP).” KPP is Kodak’s largest creditor with respect to its Chapter 11 Plan of Reorganization. Under the agreement, which will be filed with the U.S. Bankruptcy Court, Kodak’s Personalized Imaging and Document Imaging businesses will be spun off under new ownership to KPP.”

“The settlement agreement provides, among other things, for the spin-off of Kodak’s Personalized Imaging and Document Imaging businesses to KPP for cash and non-cash consideration of $650 million. Certain proceeds will be used to support the emergence of Kodak from Chapter 11 and the growth of its Commercial Imaging business. The agreement also settles approximately $2.8 billion of claims by KPP against Kodak and certain of its affiliates.”

“The agreement will be implemented as part of Kodak’s Chapter 11 plan in the United States. At the consummation of the spin-off, Kodak and its worldwide affiliates will be released from their obligations to KPP. The UK Pensions Regulator (“the Regulator”) has been kept fully informed of this process and the Regulator has granted clearance in respect of the acquisition. The Regulator has decided that it will approve the release of Kodak Limited, the KPP’s sponsoring employer, from its liabilities to the KPP and the UK Pension Protection Fund has confirmed that it has no objection. Closing of the transaction is subject to the approval of the U.S. Bankruptcy Court, approval by the Regulator and the satisfaction or waiver of other conditions precedent.”

This announcement by Kodak comes on the heels of several milestones the company has reached since its 2012 Chapter 11 protection announcement. Key for Kodak’s successful emergence from Chapter 11 was the ability to settle its debt to stake holders such as the U.S. retirees as well as KPP mentioned above. Until it could settle the debt to the retirees, the chances for emergence were slim. To that end Kodak has made some key strategic divestitures that ensure its future, settle the debt, and help Kodak Commercial imaging, the main remaining part of Kodak, to become a viable company.

These strategic initiatives included selling key assets and reorganizing the remainder of the company under the Commercial Imaging umbrella.

The big news in the announcement today is that KPP, an organization that represents Kodak retirees, now becomes a new company that will market and sell the products and services that used to be Kodak’s Personalized Imaging business (consisting of of Retail Systems Solutions (RSS), Paper & Output Systems (P&OS), and Event Imaging Solutions (EIS)) and the Document Imaging business (which provides a portfolio of scanners, capture software and services to enterprise customers).

A few words about KPP: this pension plan serves 6,230 members who deferred their pension payout and 8,610 current pensioners. Prior to this announcement, KPP had approximately £1 Billion in assets; however, it also had a £1.9 Billion deficit. These facts drove KPP’s desire to settle the deal with Kodak and move its members to a new Pension Protection Fund (PPF) that will offer them a new pension offering that will meet the their needs. The trustees of this plan will provide business structure and undoubtedly work to maximize the benefit from the new assets under their control. These assets, which according to previous Kodak financial reports were profitable, are valued at more than $650 Million.

In return, Kodak and the Commercial Imaging group are now that much closer to emerging from Chapter 11 with core businesses in digital printing, packaging, prepress, and functional printing. These represent a blend of solutions in support of existing customers as well as a move to emerging opportunities in functional printing. And so while it’s surprising that a pension plan now owns some significant Kodak assets (and also that the Brother announcement of last week has been superseded), these all can be seen as necessary moves that Kodak had to make to prepare the remaining Commercial Imaging group for a brighter post-Chapter 11 future.


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