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Finance Finesse:
Amended DIP May Help Kodak Emerge From Bankruptcy

Kodak is one of several large companies to convert existing DIP loans into exit financing

Eastman Kodak Co. asked a bankruptcy judge to amend its debtor-in-possession (DIP) loan so it could refinance its previous one and gain the option to convert it into exit financing, which could help the company emerge from bankruptcy in mid-2013. Eastman Kodak Co. is one of several large companies to convert existing DIP loans into exit financings.

In 2012, Houghton Mifflin Harcourt Publishing Co. got permission to convert its $500 million DIP into an exit loan, and in 2008 Calpine Corp. got permission to convert its $5 billion DIP, at the time the largest in history, to exit financing.

Kodak sought bankruptcy protection on Jan. 19, 2012 after years of trying to transform from a film and consumer photography business into one focused on digital and printing technologies. The company sold off its patent portfolio for $525 million in December to a group organized by Intellectual Ventures and RPX Corp.

Kodak said in court documents that the amended DIP may help it exit bankruptcy in mid-2013.

The loan is composed of $468.65 million new money loan and $375 million junior term loan. Of those loans, Kodak can convert $643.6 million of the total $843.7 million loan into an exit loan for when it is ready to come out of bankruptcy.

The amended DIP is being put together by Centerbridge Partners LP. Kodak's junior noteholders were allowed to convert what they are owed on notes into loans to join the junior facility through Feb. 21.

After interim approval from Judge Allan Gropper of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan, Kodak was allowed to use $468.7 million of the loan to operate and refinance its first DIP.

Kodak's initial $950 million DIP loan was approved by the court on Feb. 16, 2012. Bank of America NA was the administrative agent and co-collateral agent, while Citibank NA and Wells Fargo Capital Finance LLC acted as co-syndication agents, court documents show.

The original agent indicated that broadly-syndicated credit markets generally couldn't provide an option to convert new money DIP loans into exit financing, given the amount of time before Kodak is expected to emerge from chapter 11, court documents show.

"The court's approval of this financing commitment puts Kodak in a strong position to emerge from Chapter 11. This agreement, in conjunction with the recently approved sale ... lays the financial foundation for our plan of reorganization and a successful emergence from Chapter 11," Kodak chief executive Antonio Perez says.

As a condition to the loan, Kodak needs to consummate a reorganization plan by September 30.

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