Eastman Kodak announced Wednesday that it will end its retiree health care and benefits by the end of the year.
The company was able to reach an agreement with the officials Committee of Retirees. The benefits program includes medical, dental, life insurance, and survivor income benefits.
Kodak says it will pay seven and a half million dollars cash that the committee can use to make payments to retirees towards a limited portion of benefit costs. The company would also provide a $635 million unsecured claim.
"Right now, the unsecured debt of Kodak is trading at 15 cents on the dollar. That's if they emerge from bankruptcy, so the likelihood that they're going to receive anything tangible that would be able to fulfill the benefits promised after Kodak emerges from bankruptcy is virtually nil," said Brennan Redmond, Vice President, Brighton Securities.
The agreement resolves a $1.2 billion liability for Kodak as it pays ten million dollars a
month for the benefits.
The deal does not affect pension benefits and is subject to court approval at a hearing October 29th.
Kodak acknowledged the move "poses challenges for retirees.” Chairman and CEO Antonio Perez released a statement Wednesday saying, “With this proposed resolution to our U-S retiree benefit legacy liabilities, Kodak takes a major step forward toward our successful emergence. Today’s agreement is a decisive accomplishment toward one of our fundamental objectives in our restructuring.”
Partial Statement from EKRA
"Although EKRA has not seen the details of the Kodak plan, we are very disappointed that the information about such a dramatic change in health and welfare benefits became known via the public court venue.
It is especially disappointing that neither Kodak nor the Official Retiree Committee, who worked on this for the past five months, felt it was important to communicate to retirees the direness of the Kodak situation nor in any way to indicate the Draconian result they were about to reveal. This, coupled with not seeking input, makes this news all the more shocking."