Eastman Kodak Co. on Monday said it has agreed to sell $200 million of newly created convertible preferred stock to funds managed by Southeastern Asset Management Inc.
Kodak plans to use the net proceeds of the sale of 5.5 percent Series A Convertible Preferred Stock, together with cash on hand, to prepay in full its $262 million of outstanding second lien term loans.
“This transaction improves our capital structure and enhances our financial flexibility,” Kodak CEO Jeffrey Clarke said. “This is an important step forward in Kodak’s return to strength. We are very pleased that Southeastern has committed to make this significant investment and demonstrated its confidence in Kodak’s future.”
On an as-converted basis, the preferred stock will represent some 11.5 million common shares, or roughly 21 percent of the common shares outstanding, Kodak said. Southeastern Asset Management will have the right to nominate members to Kodak’s board of directors proportional to its shareholding on an as-converted basis.
Southeastern Asset Management, which has its headquarters in Memphis, Tenn., is an employee-owned, global investment firm founded in 1975. It also has offices in London, Singapore and Sydney. The company has some $21.5 billion in assets under management.
To facilitate the preferred stock sale, Kodak entered into an amendment to its revolving asset-based credit facility to permit pre-payment of the second lien term loans and payment of cash dividends on the preferred stock.
The transaction is expected to close in November.
The per share purchase price for the preferred stock is equal to its liquidation value of $100 a
share. The stock will have a 5.5 percent cash dividend rate and is convertible into shares of common stock at a conversion price of $17.40 a share.
This conversion price represents a 20 percent premium to the closing price of $14.50 a share on Nov. 4.
At any time after two years from the issuance date, if the closing price of Kodak’s common stock equals or exceeds $21.75 for 45 trading days within a period of 60 consecutive trading days, the shares of preferred stock will, upon notice from Kodak, convert into shares of common stock, the company said. On the fifth anniversary of the issuance date, Kodak will redeem any unconverted preferred stock at a redemption price equal to 100 percent of the liquidation preference plus any accrued but unpaid dividends.
Shares of Kodak stock (NYSE: KODK) were trading midafternoon Monday at $14.90, up nearly 3 percent.
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