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Hogan Lovells Advises on Innovative Kodak Pension Plan Restructuring

11 October 2013

LONDON, 11 October 2013 - Hogan Lovells advised the Trustees of the Kodak Pension Plan (KPP) on an innovative pensions restructuring, agreed by KPP members representing 92% of KPP's liabilities, to give members of the KPP the option to opt out of the UK Pension Protection Fund (PPF) and into a plan with better benefits than the PPF.

Eastman Kodak Company (EKC), the guarantor of the obligations of Kodak Limited, the KPP's sponsor, to the KPP, filed for Chapter 11 bankruptcy protection in the U.S. in January 2012. This resulted in the KPP Trustees filing unsecured claims for US$2.837 billion against EKC last year.

Last month the KPP acquired EKC's Personalized Imaging and Document Imaging businesses, valued at US$650 million. Hogan Lovells also advised on this transaction, which was paid for part in cash and part by release of claims. The ongoing income generated by these businesses will be used to fund member benefits.

The Pensions Regulator was unconvinced, however, that this would be sufficient to pay member benefits in full and was concerned about letting KPP continue in its current form. Hogan Lovells therefore devised an innovative process to offer members more affordable benefits which were better than PPF compensation and advised the Trustees on the complex communication of this new plan to the 15,000 scheme members. This resulted in a successful vote of 92% for joining the new plan and receiving better benefits than the PPF. There is much more confidence that these more affordable benefits will be paid in full.

The cross-border, cross-practice Hogan Lovells team advising the Trustees was led by London pensions partner Katie Banks, supported by associate Jim Davis, with significant contributions from U.S. partner Christopher R. Donoho III and associate Daniel Lanigan on business restructuring and insolvency matters; and London partner Karen Hughes on tax matters. Members of Hogan Lovells' global corporate, employment, IP, real estate, environmental, and antitrust and competition teams also provided major support on the transactions.

Commenting on the process, Katie Banks, partner in Hogan Lovells' London pensions team, said:

"Gaining member approval on such a scale for the new Kodak Pension Plan is a huge achievement which marks the end of the process of recovering value for the KPP from the EKC bankruptcy process. This is a hugely positive result for KPP members who wish to choose a more generous alternative to the PPF."

Steven Ross, independent Chairman of the KPP, said:

“Acquiring the profitable and cash generative Personalised Imaging and Document Imaging businesses from Eastman Kodak means that members who have voted for the new plan will avoid substantial loss of their pension benefits. In fact, all these members will receive 100% of the pension they are receiving or were expecting to receive under the old plan. This is substantially better than the compensation they would have received in the PPF".

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