(Reuters) - Photography pioneer Eastman Kodak Co EKDKQ.PK on Monday cleared the last two hurdles to ending its bankruptcy in one leap, with an agreement to sell its remaining non-core businesses to its British pension fund for $650 million.
The pension plan also agreed to give up a $2.8 billion claim against Kodak, resolving the largest unsecured claim against the company.
The agreement is subject to approval by the U.S. Bankruptcy Court in Manhattan.
“It is a huge step in Kodak exiting from bankruptcy. In effect, it combines the final two steps that were needed for the company to emerge,” said George Conboy, president of Brighton Securities Corp. Brighton is a Rochester-based brokerage.
The deal allows Kodak to meet a requirement for securing financing for exiting its bankruptcy. Lenders required the company to sell its consumer and document imaging businesses for at least $600 million.
The two businesses being sold are personalized imaging, which includes most consumer products and retail printing kiosks, and its document imaging unit that makes scanners for enterprise customers.
Kodak said it will present a plan on Tuesday for its post-bankruptcy business that will focus on commercial imaging, which includes its graphic communication, film and specialty chemical products. The plan will also outline how much creditors can expect to be repaid.
Also on Monday, Kodak reported a $283 million net profit for the January-March quarter, compared to a $366 million loss for the same period a year ago.
The company said the profitable quarter reflected improvements in its commercial imaging businesses as well as a $535 million gain from the sale of its digital imaging patents.
“These results demonstrate that we are on track with our strategy to focus on commercial imaging,” said Antonio M. Perez, Kodak’s chairman and chief executive officer in a statement.
The company’s cash balance ticked up to $1.17 billion from $1.14 billion at the end of 2012.
The sale agreement announced Monday assures that the businesses being sold will continue to fund pension benefits for British retirees. The pension trustee indicated in a statement it intends to own the businesses for an extended period.
“Though it is an unusual transaction, for the pension fund, it makes sense because the number of pensioners is dwindling and they still have found a business to invest in,” said Conboy.
Kodak launched its first camera in 1888, and grew to dominate the market for photographic film. Although Kodak invented the digital camera, it put the project on the back burner and spent years watching rivals stake claim to the market while roll-up film sales plummeted. The company filed for bankruptcy protection last year.
The company’s pink sheet shares rose 25 percent on Monday to 37.9 cents. The company has said it does not expect shareholders to receive anything in the bankruptcy. Most companies that file for Chapter 11 bankruptcy end up canceling their stock.
Its bankruptcy case is in Re: Eastman Kodak Co. et al, U.S. Bankruptcy Court, Southern District of New York, No. 12-10202.
Reporting by Tanya Agrawal in Bangalore, writing by Tom Hals in Wilmington, Delaware.; Editing by Joyjeet Das