Kodak Closes Private Placement

Yesterday, Eastman Kodak Company (EK - Analyst Report) closed its private placement of $400 million aggregate principal amount of convertible senior notes due in 2017 to qualified institutional buyers pursuant to Rule 144A under the Securities Act, as amended. The notes are unsecured obligations of Kodak and bear interest of 7.00% per year.

Upon conversion, Kodak will deliver, at its option, common stock or cash. The initial conversion rate is 134.95 shares of common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $7.41 per share.

Kodak has the right to redeem the notes in whole or in part at a specified redemption price at any time on or after Oct 1, 2014 and before Oct 1, 2016 if certain conditions are met, and on and after Oct 1, 2016 regardless of such conditions.

As disclosed recently, this offering is a part of an overall $700 million financing transaction. The sale of $400 million in convertible senior notes means that Kodak will sell $300 million in aggregate principal amount of senior secured notes due in 2017, to Kohlberg Kravis Roberts & Co. L.P. (KKR) managed investment vehicles. As part of that transaction, Kodak will issue to KKR warrants to purchase 40 million shares of Kodak common stock.

Kodak intends to use the net proceeds from these transactions to repurchase its 3.375% convertible notes due in 2033 through a tender offer and for general corporate purposes.

This move is going to strengthen the company's balance sheet and free up capital for core investments, which in turn will strengthen its business. However, in July, Kodak posted its third consecutive quarterly loss as the global economic downturn hurt sales of digital cameras, film and other photography products.

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