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Note 9 - Debt And Finance Leases | 12 Months Ended
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Dec. 31, 2020
Debt Disclosure [Abstract] |
Debt and Finance Leases | NOTE 9: DEBT AND FINANCE LEASES Debt and finance leases and related maturities and interest rates were as follows at December 31, 2020 and 2019:
|  |  |  |  |  |  |  |  |  | As of December 31, |
|  |  |  |  |  |  |  |  |  | 2020 |  |  | 2019 |
(in millions) |  | Type |  | Maturity |  | Weighted-Average Effective Interest Rate |  |  | Carrying Value |  |  | Carrying Value |
Current portion: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | RED-Rochester, LLC |  | 2033 |  | 11.42% |  |  |  | 1 |  |  |  | 1 |
|  | Finance leases |  |  |  | Various |  |  |  | 1 |  |  |  | 1 |
|  |  |  |  |  |  |  |  |  |  | 2 |  |  |  | 2 |
Non-current portion: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Convertible debt |  | 2021 |  | 11.72% |  |  |  | — |  |  |  | 91 |
|  | RED-Rochester, LLC |  | 2033 |  | 11.42% |  |  |  | 12 |  |  |  | 13 |
|  | Finance leases |  | Various |  | Various |  |  |  | 3 |  |  |  | 4 |
|  | Other debt |  | Various |  | Various |  |  |  | 2 |  |  |  | 1 |
|  |  |  |  |  |  |  |  |  |  | 17 |  |  |  | 109 |
|  |  |  |  |  |  |  |  |  | $ | 19 |  |  | $ | 111 |
Annual maturities of debt and finance leases outstanding at December 31, 2020 were as follows:
(in millions) |  | Carrying Value |  |  | Maturity Value |
2021 |  | $ | 2 |  |  | $ | 2 |
2022 |  |  | 2 |  |  |  | 2 |
2023 |  |  | 1 |  |  |  | 1 |
2024 |  |  | 1 |  |  |  | 1 |
2025 |  |  | 1 |  |  |  | 1 |
2026 and thereafter |  |  | 12 |  |  |  | 12 |
Total |  | $ | 19 |  |  | $ | 19 |
Convertible Notes On May 20, 2019, the Company and Longleaf Partners Small Cap Fund, C2W Partners Master Fund Limited and Deseret Mutual Pension Trust, which are investment funds managed by Southeastern Asset Management, Inc. (the “Notes Purchasers”), entered into a Notes Purchase Agreement pursuant to which the Company agreed to issue and sell to the Notes Purchasers, and the Notes Purchasers agreed to purchase from the Company, $100 million aggregate principal amount of the Company’s Convertible Notes due 2021. The transaction closed on May 24, 2019. The proceeds were used to repay the remaining first lien term loans outstanding ($83 million) under the Company’s term credit agreement, which was terminated with the repayment. The remaining proceeds were used for general corporate purposes. The Notes Purchasers also hold all outstanding shares of the Company’s Series A Preferred Stock, and are holders of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), as described below. The maturity date of the Convertible Notes was November 1, 2021. The Convertible Notes bore interest at a rate of 5.00% per annum, which would have been payable in cash on their maturity date and, at the option of the Company, in either cash or additional shares of Common Stock on any conversion date. The payment of interest only at the maturity date had the same effect as delivering additional debt instruments to the Holders of the Convertible Notes and therefore is considered Paid-In-Kind interest (“PIK”). Therefore, PIK was added to the carrying value of the debt through the term and interest expense was recorded using the effective interest method. On July 29, 2020, the Company received conversion notices from holders of the Convertible Notes exercising their rights to convert an aggregate of $95 million of principal amount of the Convertible Notes (the “Initial Converted Notes”) into shares of the Company’s common stock, par value $.01 per share (“Common Stock”). Under the terms of the Convertible Notes, the conversion date of the Initial Converted Notes was July 29, 2020 (the “Initial Conversion Date”) and the Company was obligated to deliver an aggregate of 29,922,956 shares of Common Stock (the “Initial Conversion Shares”) to the holders of the Initial Converted Notes within five trading days after the Initial Conversion Date. The Company issued the Initial Conversion Shares on August 3, 2020 and paid the $5.6 million of accumulated interest on the Initial Converted Notes in cash. As a result, the Company’s obligations under the Initial Converted Notes were fully discharged and the remaining outstanding principal amount of the Convertible Notes was $5 million. On September 30, 2020, the Company announced its election to mandatorily convert the remaining $5 million outstanding principal amount of the Convertible Notes (the “Mandatory Converted Notes”) into shares of Common Stock. The conversion of the Mandatory Converted Notes was effective on September 30, 2020 (the “Mandatory Conversion Date”). The Company issued 1,574,892 shares of Common Stock to the holder of the Mandatory Converted Notes on September 30, 2020 (the “Mandatory Conversion Shares”). The Company paid the accrued interest on the Mandatory Converted Notes in the form of cash and interest ceased to accrue on the Mandatory Converted Notes on the Mandatory Conversion Date. As a result of the conversion of all the Convertible Notes, the lien granted by the Company on certain of its assets to secure the Convertible Notes was released. Embedded Derivatives The Convertible Notes were considered more akin to a debt-type instrument and the economic characteristics and risks of the embedded conversion features and term extension at the Company’s option were not considered clearly and closely related to the Convertible Notes. Accordingly, these embedded features were bifurcated from the Convertible Notes and separately accounted for on a combined basis at fair value as a single derivative liability. Kodak allocated $14 million of the net proceeds received to a derivative liability based on the aggregate fair value of the embedded features and term extension on the date of issuance which reduced the net carrying value of the Convertible Notes. The derivative was being accounted for at fair value with subsequent changes in the fair value being reported as part of Other charges, net in the Consolidated Statement of Operations (refer to Note 14, “Financial Instruments”). The carrying value of the Convertible Notes at the time of issuance, $84 million ($100 million aggregate gross proceeds less $14 million allocated to the derivative liability and $2 million in transaction costs), was being accreted to the face amount using the effective interest method from the date of issuance through the maturity date. Loss on Early Extinguishment The calculation of the loss on early extinguishment of debt is shown below:
(in millions) |  |  |  |
Fair value of Initial Conversion Shares |  | $ | 506 |
Fair value of Mandatory Conversion Shares |  |  | 13 |
Carrying value of Convertible Notes |  |  | (92 | )
Fair value of pro-rata share of embedded derivatives at Initial Conversion Date |  |  | (416 | )
Fair value of pro-rata share of embedded derivatives at Mandatory Conversion Date |  |  | (9 | )
Total |  | $ | 2 |
Amended and Restated Credit Agreement On September 3, 2013, the Company entered into a Senior Secured First Lien Term Credit Agreement (the “Term Credit Agreement”). Additionally, the Company and the Subsidiary Guarantors entered into an Asset Based Revolving Credit Agreement (together with the Term Credit Agreement, the “Credit Agreements”). Pursuant to the terms of the Credit Agreements, the Company was provided with term loan facilities in an aggregate principal amount of $420 million of first-lien term loans (the “First Lien Loans”). On April 12, 2019, the Company repaid approximately $312 million of the First Lien Loans using proceeds from the sale of FPD and on May 24, 2019 repaid the remaining First Lien Loans of approximately $83 million with the proceeds from the issuance of the Convertible Notes. On May 26, 2016, the Company and the Subsidiary Guarantors entered into an Amended and Restated Credit Agreement (the “ABL Credit Agreement”) with the lenders party thereto (the “Lenders”), Bank of America, N.A., as administrative and collateral agent, and Bank of America, N.A. and JPMorgan Chase Bank, N.A., as joint lead arrangers and joint bookrunners, which amended and restated the Original ABL Credit Agreement. The ABL Credit Agreement provides that the Lenders will make available asset-based revolving loans (the “ABL Loans”) and letters of credit in an aggregate amount of up to $150 million, subject to the Borrowing Base. On January 27, 2020 Kodak exercised its right under the ABL Credit Agreement to permanently reduce lender commitments from $150 million to $120 million. As a result, the minimum Excess Availability decreased to $15 million from the previous minimum of $18.75 million. On March 27, 2020, the Company and the subsidiaries of the Company that are guarantors (the “Subsidiary Guarantors”) entered into Amendment No. 3 to the ABL Credit Agreement (the “Amendment”) with the lenders party thereto (the “Lenders”), Bank of America, N.A., as administrative and collateral agent, and Bank of America, N.A. and each of the parties to the ABL Credit Agreement as lenders. Each of the capitalized but undefined terms used in the context of describing the ABL Credit Agreement and the Amendment has the meaning ascribed to such term in the ABL Credit Agreement and the Amendment. The Amendment decreased the available ABL Loans and letters of credit from an aggregate amount of up to $120 million to $110 million, subject to the Borrowing Base. As a result of the additional reduction in lender commitments, the minimum Excess Availability decreased to $13.75 million from the previous amount of $15 million. The Amendment also changed Equipment Availability from (i) the lesser of 75% of Net Orderly Liquidation Value of Eligible Equipment or $6 million to (ii) the lesser of 70% of Net Orderly Liquidation Value of Eligible Equipment or $14.75 million as of March 31, 2020. The $14.75 million amount decreases by $1 million per quarter starting on July 1, 2020 until maturity or the amount is decreased to $0, whichever comes first. Under the ABL Credit Agreement, Kodak is required to maintain a minimum Fixed Charge Coverage Ratio of 1.00 to 1.00 when Excess Availability is less than 12.5% of lender commitments. As of December 31, 2020 and 2019, 12.5% of lender commitments were $13.75 million and $18.75 million, respectively. If Excess Availability falls below 12.5% of lender commitments, Kodak may, in addition to the requirement to be in compliance with the minimum Fixed Charge Coverage Ratio, become subject to cash dominion control. Since Excess Availability was greater than 12.5% of lender commitments at December 31, 2020 and 2019, Kodak is not required to have a minimum Fixed Charge Coverage Ratio of 1.0 to 1.0. The Company has issued approximately $90 million and $80 million of letters of credit under the ABL Credit Agreement as of December 31, 2020 and 2019, The Company had approximately $20 million and $22 million of Excess Availability under the ABL Credit Agreement as of December 31, 2020 and 2019, respectively. Excess Availability is equal to the sum of (i) 85% of the amount of the Eligible Receivables less a Dilution Reserve, (ii) the lesser of 85% of Net Orderly Liquidation Value or 75% of the Eligible Inventory, (iii) the lesser of 70% of Orderly Liquidation Value of Eligible Equipment or $12.75 million as of December 31, 2020 and (iv) Eligible Cash less (a) Rent and Charges Reserves, (b) Principal Outstanding and (c) Outstanding Letters of Credit. Availability is subject to the borrowing base calculation, reserves and other limitations. To maintain Excess Availability of greater than 12.5% of lender commitments ($13.75 million and $18.75 million as of December 31, 2020 and 2019, respectively), Kodak funded $35 million and $22 million to the Eligible Cash account held with the ABL Credit Agreement Administrative Agent as of December 31, 2020 and 2019, respectively, which is classified as Restricted Cash in the Consolidated Statement of Financial Position. In addition to the changes discussed above, the Amendment increased the interest rate charged on the ABL Loans. The interest rate on the ABL Loans (which is based on Excess Availability) increased to LIBOR plus 3.50% - 4.00% per annum from LIBOR plus 2.25% - 2.75% per annum or the Base Rate plus 2.50% - 3.00% per annum from the Base Rate plus 1.25% - 1.75% per annum. The ABL Credit Agreement matures on May 26, 2021. Each existing direct or indirect U.S. subsidiary of the Company (other than Immaterial Subsidiaries, Unrestricted Subsidiaries and certain other subsidiaries) has provided an unconditional guarantee (and any such future subsidiaries must provide an unconditional guarantee) of the obligations of the Company under the Credit Agreements. Obligations under the ABL Agreement are secured by: (i) a first lien on cash, accounts receivable, inventory, machinery and equipment (the “ABL Collateral”) and were also secured by (ii) a second lien on the Term Collateral (as defined below). Subject to certain exceptions, obligations under the Term Credit Agreement were secured by: (i) a first lien on all assets of the Company and the Subsidiary Guarantors, other than the ABL Collateral, including a first lien on 100% of the stock of material domestic subsidiaries and 65% of the stock of material first-tier foreign subsidiaries (collectively the “Term Collateral”) and (ii) a second lien on the ABL Collateral. With the repayment of the First Lien Loans, the obligations under the ABL Agreement are now secured by a first lien on the Term Collateral. The aggregate carrying value of the Term Collateral and ABL Collateral as of December 31, 2020 and 2019 was $1,412 million and $1,302 million, respectively Under the terms of the ABL Credit Agreement, the Company may designate Restricted Subsidiaries as Unrestricted Subsidiaries provided the aggregate sales of all Unrestricted Subsidiaries are less than 7.5% of the consolidated sales of Kodak and the aggregate assets of all Unrestricted Subsidiaries are less than 7.5% of Kodak’s consolidated assets. Further, on a pro forma basis at the time of designation and immediately after giving effect thereto, Excess Availability must be at least $30 million and the pro forma Fixed Charge Coverage Ratio must be no less than 1.0 to 1.0. Upon designation of Unrestricted Subsidiaries, the Company is required to provide to the Lenders reconciling statements to eliminate all financial information pertaining to Unrestricted Subsidiaries which is included in its annual and quarterly financial statements. In March 2018, the Company designated five subsidiaries as Unrestricted Subsidiaries: Kodak PE Tech, LLC, Kodak LB Tech, LLC, Kodak Realty, Inc., Kodakit Singapore Pte. Limited and KP Services (Jersey) Ltd. This action allowed the Company to better position assets which may be monetized in the future and address costs related to underutilized properties. Collectively, these subsidiaries have sales of approximately $6 million and $12 million for the years ended December 31, 2020 and 2019, respectively, which represents 1% of Kodak’s consolidated sales for both periods. These subsidiaries had assets of $15 million and $20 million as of December 31, 2020 and 2019, respectively, which represented 1% of Kodak’s consolidated assets as of such dates. Each of the capitalized but undefined terms has the meaning ascribed to such term in the Credit Agreements. Debt Reporting and Other Requirements Reporting requirements under the ABL Credit Agreement require the Company to provide annual audited financial statements accompanied by an opinion of an independent public accountant without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit or other material qualification or exception, except for any such qualification or exception with respect to any indebtedness maturing within 364 days after the date of such financial statements, and that the opinion be reasonably acceptable to the agent. On March 6, 2020 the Company obtained a waiver from the agent and lenders under the ABL Credit Agreement with respect to any event of default under the reporting covenant that may be deemed to have occurred in relation to the going concern explanatory paragraph in the 2019 Form 10-K audit report. The ABL Credit Agreement limits, among other things, the Company’s and the Subsidiary Guarantors’ ability to (i) incur indebtedness, (ii) incur or create liens, (iii) dispose of assets, (iv) make restricted payments (including dividend payments, et al.) and (v) make investments (ABL Credit Agreement only). In addition to other customary affirmative covenants, the ABL Credit Agreement provides for a periodic delivery by the Company of its various financial statements as set forth in the ABL Credit Agreement. Events of default under the ABL Credit Agreement include, among others, failure to pay any principal, interest or other amount due under the applicable agreement, breach of specific covenants and a change of control of the Company. Upon an event of default, the lenders may declare the outstanding obligations under the ABL Credit Agreement to be immediately due and payable and exercise other rights and remedies provided for in such agreement. RED-Rochester, LLC In January 2019 Kodak entered into a series of agreements with RED-Rochester, LLC (“RED”), which provides utilities to the Eastman Business Park. Kodak received a payment of $14 million from RED. Kodak is required to pay a minimum annual payment to RED of approximately $2 million regardless of utility usage. Kodak is accounting for the $14 million payment from RED as debt. The minimum payments required under the agreement from Kodak to RED will be reported as a reduction of the debt and interest expense using the effective interest method. The debt payments to RED continue until August 2033.

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- Definition The entire disclosure for debt and capital lease obligations can be reported. Information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. Also includes descriptions and amounts of capital leasing arrangements that consist of direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -URI http://asc.fasb.org/topic&trid=2208923 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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