Kodak Says Rights Offering, With Additional $8M For Creditors, Is ‘Reasonable’

by Tara Arick on June 28, 2013 · 0 comments

in Bankruptcy

- From LexisNexis® Mealey’s™ Daily Legal News.

Bankrupt Eastman Kodak Co. on June 25 filed a brief arguing that a bankruptcy court should authorize it to conduct a rights offering in conjunction with its first amended Chapter 11 plan of reorganization because the company has made an additional $ 8 million available to creditors, which is “reasonable” (In Re: Eastman Kodak Company, No. 12-10202, Chapter 11, S.D. N.Y. Bkcy.).

Kodak filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York on Jan. 19, 2012.

Recoveries ‘Enhanced’

Kodak contends that it has conducted discussions with creditors pertaining to the payment of second lien notes in cash, which would “enhance” recoveries of unsecured creditors as well as facilitate the confirmation process.

Kodak says the rights offering is a “cornerstone” of the first amended joint plan of reorganization.

Moreover, the plan “represents a comprehensive compromise” that provides greater recovery for unsecured creditors than did the initial reorganization plan, Kodak adds.

Kodak contends that the Official Committee of Unsecured Creditors “endorses fully” the plan and the rights offering in question.

Rights Offering

The eligibility requirements for participation in the rights offering, referred to as the 4(2) rights offering, are “reasonable and appropriate,” Kodak maintains

Kodak argues that it has addressed the objection of creditor Paul Hussey, who contended that the 4(2) rights offering “inappropriately limited” participation to creditors that held a minimum face of general unsecured claims or retiree settlement unsecured claims amounting to $ 100,000 in the case of a “qualified institutional buyer.”

A qualified institutional buyer is defined by the Securities Act of 1933 Rule 144A.

In the case of an “accredited investor” under the Securities Act, the claim amount was $ 500,000, Kodak adds.

Qualified Buyers

Moreover, Kodak says qualified institutional buyers are institutions that own and invest on a discretionary basis at least $ 100 million in securities of issuers with which they are unaffiliated. Accredited investors need not meet a comparable requirement and may include individual investors, Kodak adds.

Kodak maintains that the amended plan does not violate 11 U.S. Code Section 1123(a)(4) by unfairly discriminating among similarly situated creditors of the same class, contrary to Hussey’s assertions.

2-Tier Structure

Kodak argues that it designed a two-tier structure of the rights offering to allow greater creditor participation and, as is common in 4(2) rights offerings, it has made a provision to compensate creditor that do not meet the eligibility requirements.

For example, the Official Committee of Unsecured Creditors negotiated for an additional $ 8 million to be distributed to creditors that certify that they are ineligible to participate in the 4(2) rights offering, Kodak adds.

Kodak is represented by Andrew G. Dietderich of Sullivan Cromwell in New York; Christopher M. Desiderio of Nixon Peabody in New York; Edward J. Meehan, Hisham M. Ami, Julia E. Zuckerman and Kevin Walsh of the Groom Law Group in Washington, D.C.; and Pauline K. Morgan of Young Conaway Stargatt & Taylor in Wilmington, Del.

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