Kodak trustee defends $650m settlement as 'best outcome'
GLOBAL – Kodak's underfunded UK pension scheme has paid as much as £210m (€249m) to buy two businesses from its bankrupt US parent Eastman Kodak (EKC), a trustee of the fund has revealed.
Speaking with IPE days after the Kodak Pension Plan (KPP) announced a $650m (€497m) settlement as part of its $2.8bn lawsuit in the wake of the company's Chapter 11 bankruptcy filing, Andrew Bradshaw said the deal was "by far the best outcome" for scheme members.
He said the fund, closed to new accrual, would not see more than £210m in scheme assets used to pay for the acquisition of the Personalised Imaging and Document Imaging businesses, and stressed the importance of the cash flows both generated in addressing KPP's deficit.
"The real reason we're doing this is because of the cash flows, because what we are interested in is whether these businesses have got cash flows to sustain the scheme over the next 10, 20 or 30 years – that's what all the modelling was around," he said.
Bradshaw, a professional trustee from Ross Trustees, said the predicted cash flows would give the fund "a very good chance" of achieving full funding in future, but was unable to provide precise figures for the predicted earnings.
At present, KPP has a buyout deficit of £1.9bn, with assets of only £1bn.
Under the terms of the settlement – already agreed with the UK Pensions Regulator and the Pension Protection Fund (PPF) – a new scheme will be launched with an amended benefit structure.
KPP members will be able to transfer to the new scheme or enter the PPF, likely drawing a lower level of benefits.
It is understood that members will be consulted over the changes in the coming weeks.
Bradshaw defended the settlement, which will see a £210m uplift in asset value for the fund due to EKC only being paid half the value of the companies.
"This was by far the best deal we could have got in the circumstances because we were in a Chapter 11 process," he said.
"There's only a certain pot of cash, and as you go through Chapter 11, the cash just keeps on leaking. Essentially, and you don't want to be the last man standing when there's nothing left."
He stressed that the settlement kept the fund from entering the PPF, beneficial to members as the UK lifeboat scheme only guarantees 90% of benefits to members not already drawing their pension, if the benefit exceeds a set amount.
He said the two businesses presented a "mixed bag" of opportunities, with one offering potential growth and the other likely to be in longer-term decline.
"Our advisers tell us that, [with] the kiosk and document imaging businesses, there is quite a lot of potential for growth," he said.
"It's a mixture of businesses that are in very long-term run-off. But within that, we have businesses that could grow, and grow quite significantly to offset that."