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ROCHESTER — Shares of Eastman Kodak Co. slumped more than 11 percent Thursday a day after its management announced a deal with investors to pump up to $700 million into the photography products company.
The stock, which has climbed 59 percent over the last month, fell 75 cents, or 11.2 percent, on heavy volume to close at $5.93. The shares set an all-time low of $2.01 on March 6.
Kodak has been battling through a digital transformation for the last five years and is occasionally rumored to be a buyout target.
On Wednesday, Kodak said Kohlberg Kravis Roberts committed to purchase up to $400 million in senior secured notes in exchange for Kodak agreeing to issue the private equity firm warrants to purchase up to 53 million Kodak common shares.
Separately, Kodak plans to offer $300 million of convertible senior notes due 2017 in a private placement to institutional buyers. Kodak intends to use proceeds from both debt sales to buy back up to $575 million worth of its 3.375 percent convertible notes due 2033.
"You're talking KKR getting 20 percent of the company, and the convert is probably going to be somewhere between another 10 to 15 percent," said analyst Shannon Cross of Cross Research in Livingston, N.J.
"So you diluted the shareholders 35 percent, maybe as much as 40 percent. That's really what's pressuring the stock, plus there's a lot of people likely sort of hedging their positions right now."
Investors had worried about Kodak's ability to fund the buyback without depleting cash reserves, noting the convertible bonds' owners have the right to sell them back to Kodak as early as October 2010.
"They pushed out their potential bankruptcy date by a period of time by refinancing," Cross said. "It's a good thing but, again, it shows how shaky their position is because they had to give up so much of their company to do that."
In July, Kodak posted a $189 million second-quarter loss, its third consecutive quarterly deficit, as the global economic downturn hurt sales of digital cameras, film and other photography products.
From 2004 through 2007, Kodak spent $3.4 billion converting the bulk of its 129-year-old business from high-margin film to electronic technology.
Through 2008, its digital businesses were picking up speed, posting six straight quarters of growth. But in January, as the economy contracted, Kodak resorted once more to job cuts. It is eliminating 3,500 to 4,500 jobs this year, which could reduce its work force to a 1930s-era low of 19,900 from a 1988 peak of 145,300.
