S&P Hits Kodak With Junk-Grade Credit Rating

S&P Hits Kodak With Junk-Grade Credit Rating

NEW YORK – Standard & Poor’s Rating Services said it assigned a ‘B-‘ corporate credit rating to Rochester, N.Y.-based  Eastman Kodak Co. The outlook is stable.  In addition, we assigned a ‘B-‘ issue rating to the $420 million first-lien  term loan, with a ‘3’ recovery rating (indicating our expectation of  meaningful (50% to 70%) recovery of principal in the event of a payment  default), and a ‘CCC’ issue rating to the $275 million second-lien term loan,  with a ‘6’ recovery rating (indicating our expectation of negligible (0% to  10%) recovery of principal in the event of a payment default).  “The ratings reflect our assessment of the company’s ‘vulnerable’ business  risk profile and ‘highly leveraged’ financial risk profile,” said Standard &  Poor’s credit analyst Molly Toll-Reed.   In our view, Kodak’s vulnerable business risk profile reflects its small share  of a large, mature global market in commercial printing, facing secular  decline in demand and significantly larger competitors with greater resources. 

Our base-case forecast assumptions include: 

Mid-single-digit revenue decreases, as declining end-of-life segments  outweigh new product growth in the near term.

Cost reductions and restructurings will enable Kodak to sustain adjusted  annual EBITDA of about $160 million in the near term.

Preservation of adequate liquidity, including substantial offshore cash  balances.

The stable outlook incorporates our expectation that Kodak will be challenged  to stabilize revenues and grow operating earnings, given expected declines in  the commercial film and consumer inkjet segments. However, important rating  support is provided by cash balances in excess of $800 million, which provide  a significant cushion in the event of earnings and cash flow volatility.  The potential for a higher rating is constrained by Kodak’s highly leveraged  financial profile and lack of predictability of operating performance.  Although the potential for lower ratings over the coming year is currently  limited by sizeable cash balances, ratings could be lowered if a substantial  deterioration in operations leads us to view Kodak’s liquidity as less than  adequate.

For more information, please visit http://www.standardandpoors.com/prot/ratings/articles/en/us/?articleType=HTML&assetID=1245358530030