October 12, 2012
--- Kodak and
its Official Committee of Retirees have agreed on a proposal to terminate
retiree health care and survivor benefits, or other post-employment benefits
The benefits to be terminated include medical, dental, life
insurance and survivor income benefits, and the proposed date of termination is
December 31, 2012. This will relieve the company of $1.2 billion in OPEB
liability. The proposed settlement does not impact retiree pension
Kodak will provide the Official Committee of Retirees a $7.5
million cash payment to support initial administration and benefit obligations;
a $635 million unsecured claim; and a $15 million allowed administrative claim
that would have priority status in Kodak’s reorganization proceedings. These
funds can be used at the committee’s discretion to make payments to retirees to
subsidize a limited portion of future benefit costs. Additional information
will be provided to retirees once Kodak coverage ends.
The agreement is supported by the debtor’s Official
Committee of Unsecured Creditors, and will significantly reduce one of the company’s
most substantial legacy liabilities, marking a step towards Kodak’s emergence
from Chapter 11.
As of December 31, 2011, the company’s aggregate U.S. OPEB
liability exceeded $1.2 billion. OPEB coverage currently costs the company
about $10 million a month. Since filing Chapter 11, Kodak has paid 100% of its
share of the costs for these benefits, resulting in cash expenditures in excess
of $90 million.
The company said that the proposed agreement results in
significant cost savings and liquidity enhancement and eliminates the need for
costly and lengthy litigation. The agreement is subject to approval by the
Bankruptcy Court and is scheduled for a hearing on October 29.
In February, the company asked the court’s permission to end
health care benefits for approximately 16,000 Medicare-eligible retirees (see "Kodak Asks to Drop Benefits for Medicare-Eligible
Retirees"). The company is facing an employee lawsuit about the
bankruptcy and its effect on the company’s retirement plans.