UK pension deal to let Kodak exit bankruptcy

Experts cautious over plan to wipe out the $2.8bn owed to 15,000 fund members

Kodak's UK pension fund is buying the beleaguered business's consumer and scanner operations to allow the US company to emerge from bankruptcy.

The deal – which involves the pension fund handing over $650m (£419m) to the company – will wipe out Kodak's $2.8bn debt to thousands of British pensioners.

The two units being sold are personalised imaging, which includes most consumer products and retail printing kiosks, and Kodak's document imaging unit, that makes scanners for business customers.

Antonio Perez, the chairman of the struggling film group, said that in one transaction the company would divest the businesses and "settle its largest legacy liability", calling it an "extraordinary result".

The Kodak UK pension scheme is currently facing a £1.9bn deficit. That will be closed and members offered the chance to join a new scheme which will have lower benefits but spare scheme members the prospect of having to rely on a statutory rescue fund, which could leave them even worse off. The scheme has nearly 15,000 UK members, including 8,610 who are already claiming their pensions.

Steven Ross, the chairman of the scheme, said: "This settlement gives members greatly improved future prospects while being good for Kodak's employees, its creditors and for UK business."

The deal has to be approved by the UK Pensions Regulator and the US bankruptcy court.

A spokesman for the Pensions Regulator yesterday indicated that it would approve the deal. He said: "The Pensions Regulator has been engaged in discussion with the trustees and the Kodak group throughout the Chapter 11 [US bankruptcy] process.

"Although we recognise that the settlement awaits the approval of the US court overseeing Chapter 11 proceedings later this year, we believe that the agreement reached represents the best outcome for scheme members in a difficult situation. The regulator will continue its dialogue with the trustees about future arrangements."

But the independent pension consultant John Ralfe warned that the deal should not go through without close examination.

"I hope this is a genuinely better alternative than liquidation," he said. "To make sure we understand the detail the regulator should produce a 'section 89' report explaining why this is better than simply getting a share of the liquidation proceeds through the UK and US courts."

The move is the latest in a long line concerning companies facing large pension black holes choosing to fill them with assets, including Dairy Crest's scheme recently taking cheese and Johnnie Walker distiller Diageo taking 2 million barrels of whisky.

Mark Wood, the chief executive of JLT Employee Benefits, said: "The Kodak pension plan in the UK is taking on two unlisted subsidiary companies as assets. As deficits have widened, schemes are increasingly looking at alternative assets to provide cashflows, as happened with Dairy Crest and Diageo. Kodak's move goes a step further but, providing the businesses can generate enough cashflow, the principle is the same."

Kodak – which launched its first camera in 1888 – got into difficulties in recent years because it failed to anticipate or cope with the consumer shift to digital imaging. It was forced to file for bankruptcy protection in the US last year.

As part of its struggle earlier this year, Kodak sold a portfolio of 1,100 digital patents for $527m to the likes of Apple, Google and Microsoft.

Yesterday's agreement with the pension fund will be implemented as part of Kodak's Chapter 11 bankruptcy plan in the US.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones