Eastman Kodak 'CCC' ICR Affirmed And Removed From Watch Positive On Flexographic Packaging Divestiture, Outlook Negative

  • Eastman Kodak Co. announced that the sale of its Flexographic Packaging Division to Montagu Private Equity LLP has closed. The company expects to use the proceeds from the divestiture to repay over $300 million of its first-lien secured term loan due in September 2019 ($395 million outstanding).
  • Following this repayment, Kodak has stated its intention to refinance the remaining outstanding portion of the term loan (approximately $80 million-$90 million).
  • We are affirming our 'CCC' issuer credit rating on Kodak and are removing all of our ratings on the company from CreditWatch, where we placed them with positive implications on Nov. 13, 2018.
  • At the same time, we are lowering our recovery rating on the company's first-lien secured term loan to 4' from '3' and are affirming the issue-level rating at 'CCC'. The '4' recovery rating indicates our expectation for average (30%-50%; rounded estimate: 45%) recovery in the event of a payment default.
  • The negative outlook on Kodak reflects our view that near-term events could impair the company's ability to operate over the next 12 months if it is unable to successfully refinance the portion of its first-lien term loan that it will not repay with the proceeds from the divestiture.
NEW YORK (S&P Global Ratings) April 10, 2019—S&P Global Ratings today took the rating actions listed above. The rating action reflects our view that Kodak's ability to operate may be impaired over the next 12 months if the company is unable to successfully refinance the remaining portion of its first-lien term loan. While we expect Kodak to benefit from a reduction in its annual interest expense following the debt repayment, we anticipate that the company's cash position will decline absent a refinancing or further divestitures due its inability to generate positive free cash flow.
The negative outlook on Kodak reflects our view that near-term events could impair the company's ability to operate over the next 12 months if it is unable to successfully refinance the portion of its first-lien term loan that it will not repay with the proceeds from the divestiture.
We could lower our rating on Kodak if it becomes apparent that the company will be unable to meet payment obligations over the next six months, or if the firm pursues capital markets transactions that we believe to constitute a selective default.
We could raise our rating on Kodak if the company is able to successfully refinance the remaining portion of its term loan and obtain incremental financing on terms that lead us to believe it will be able to operate sustainably beyond the next 12 months.
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