The Eastman Kodak Co. is reviewing options to manage its pension plan that include offloading illiquid assets, which could lead to terminating the plan, according to a Form 8-K filed with the Securities and Exchange Commission on November 25. 

The Kodak Retirement Income Plan has entered into an agreement for the Mastercard Foundation to purchase $764.4 million in illiquid assets, including private equity ownership interests, from Kodak for $550.6 million, with closing scheduled for December 31, according to the 8-K filing.  

Four other investors, not identified in the filing, have agreed to buy $87.3 million in illiquid assets for $61.7 million. The agreements, if passed, would leave Kodak with illiquid assets of $161.3 million, as of September 30 reporting. According to Kodak, after the tax penalties of accessing surplus pension assets, the move could net the company $530 million to $585 million. Kodak’s market cap is $538 million, as of midday Monday. Shares of Kodak rose more than 27% on Monday with the news. 

“Accessing the surplus plan assets would also enable us to accelerate our long-term turnaround strategy by paying down our debt and increasing capital available to invest in strategic initiatives,” a spokesperson for Kodak told CIO. 

Kodak’s board of directors is still reviewing options with respect to the retirement plan, including termination, according to the filing, while instructing the retirement plan committee to “take actions appropriate to position KRIP for a potential termination.” 

According to the company, the plan’s liabilities to qualifying participants would be satisfied through a combination of lump sum distributions and an annuity purchased from an insurance company to cover existing obligations. Kodak, like many corporate pension plans, is in a funding surplus; it has significantly more assets than liabilities owed to plan beneficiaries and participants.  

After the plan’s liabilities and legal requirements have been satisfied, Kodak estimated it would have surplus assets of between $885 million and $975 million.  

To reduce the tax impact of the surplus assets, the firm would also likely contribute 25% of the surplus assets from the sale to “one or more qualified replacement plans for the benefit of current employees,” according to the filing. That would leave the so-called replacement plan with between $220 million and $245 million for those benefits. 

If the company goes ahead with termination and clears both market and regulatory hurdles, it may take between 12 and 18 months to determine and satisfy its liabilities and between 18 and 24 months before it receives proceeds from the termination, according to the filing. 

The move comes after the company shut down its internal investment office in February, with plans to outsource management of the pension plan to NEPC.  

As of December 31, 2022, the plan had assets of $3.7 billion and liabilities of $2.5 billion, yielding a $1.2 billion surplus and a funded status of 148%.