Eastman Kodak Co. (OTCMKTS: EKDKQ) will seek court approval for a rights offering worth $406 million, which will be used to pay back its creditors under a revised Chapter 11 reorganization of the iconic technology company.
The rights offering, if approved by the court, will give Kodak’s creditors a chance to purchase equity in the company after it emerges from bankruptcy protection.
“Attracting this additional funding is a strong vote of confidence in both Kodak’s plan of reorganization and in the actions we have taken during our restructuring to create a solid future for our company,” Kodak Chairman and Chief Executive Officer Antonio Perez said on Tuesday in a statement, Bloomberg reported.
In a Chapter 11 case, which begins with the filing of a petition with the bankruptcy court, an ailing company puts forth a plan of reorganization to keep the business alive and pay creditors over a period of time. Rights offerings have emerged as an important source of exit financing for Chapter 11 debtors.
Kodak said creditors GSO Capital Partners, BlueMountain Capital, George Karfunkel, United Equities Group and Contrarian Capital have all agreed to backstop the rights offering by purchasing any unsubscribed shares.
In Chapter 11 documents filed in U.S. Bankruptcy Court in Manhattan, Kodak had said it had $5.1 billion in assets and owed $6.8 billion in debt. The photography pioneer filed for bankruptcy in January 2012, amid a mounting popularity of digital cameras, a technology that Kodak invented but could not market
The Rochester, N.Y.-based company said it hoped to emerge from Chapter 11 protection in the third quarter of 2013, and proceeds from the rights offering would be used to repay various creditors, who would no longer receive equity after the reorganization, Reuters reported.
When the company emerges from bankruptcy, it plans to focus on its commercial printing business, which its officials say is set for a profitable and sustainable future.