Kodak 2008 Annual Report Download - page 74

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In the event that the Company is unable to successfully re-negotiate the terms of the Secured Credit Agreement, and the Company
breaches the financial covenants, the Company may be required to cash collateralize approximately $131 million of outstanding
letters of credit. A breach of the financial covenants would not accelerate the maturity of any of the Company’s existing outstanding
debt. However, should the Company lose access to its revolving credit facility under the Secured Credit Agreement, it would lose the
additional financial flexibility provided by the facility. Based on its current financial position and expected economic performance, the
Company does not believe that its liquidity will be materially affected by an inability to access external sources of financing.
However, the Company’s goal is to complete its negotiation and amendment prior to covenant compliance testing for the first quarter
of 2009.
In addition to the 5-Year Revolving Credit Facility, the Company has other committed and uncommitted lines of credit as of
December 31, 2008 totaling $49 million and $446 million, respectively. These lines primarily support borrowing needs of the
Company’s subsidiaries, which include term loans, overdraft coverage, letters of credit, guarantee lines, and revolving credit lines.
Interest rates and other terms of borrowing under these lines of credit vary from country to country, depending on local market
conditions. Total outstanding borrowings against these other committed and uncommitted lines of credit at December 31, 2008 were
$4 million and $0, respectively. These outstanding borrowings are reflected in Short-term borrowings and current portion of long-term
debt in the accompanying Consolidated Statement of Financial Position at December 31, 2008.
At December 31, 2008, the Company had outstanding letters of credit totaling $133 million and surety bonds in the amount of $62
million primarily to ensure the payment of possible casualty and workers' compensation claims, environmental liabilities, and to
support various customs and trade activities.
Debt Shelf Registration and Convertible Securities
On September 5, 2003, the Company filed a shelf registration statement on Form S-3 (the primary debt shelf registration) for the
issuance of up to $2.65 billion of new debt securities, including $650 million of remaining unsold debt securities under a prior shelf
registration statement, pursuant to Rule 429 under the Securities Act of 1933. On October 10, 2003, the Company completed the
offering and sale of $500 million aggregate principal amount of Senior Notes due 2013 (the “Notes”), which was made pursuant to
the Company’s debt shelf registration. The remaining unused balance under the Company's debt shelf was subsequently $2.15
billion. This existing shelf registration expired in December 2008. The Company is currently evaluating the need to renew the shelf
registration.
Concurrent with the sale of the Notes, on October 10, 2003, the Company completed the private placement of $575 million
aggregate principal amount of Convertible Senior Notes due 2033 (the “Convertible Securities”) to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933. Interest on the Convertible Securities accrues at the rate of 3.375% per
annum and is payable semiannually. The Convertible Securities are unsecured and rank equally with all of the Company’s other
unsecured and unsubordinated indebtedness. As a condition of the private placement, on January 6, 2004 the Company filed a shelf
registration statement under the Securities Act of 1933 relating to the resale of the Convertible Securities and the common stock to
be issued upon conversion of the Convertible Securities pursuant to a registration rights agreement, and made this shelf registration
statement effective on February 6, 2004.
The Convertible Securities contain a number of conversion features that include substantive contingencies. The Convertible
Securities are convertible by the holders at an initial conversion rate of 32.2373 shares of the Company’s common stock for each
$1,000 principal amount of the Convertible Securities, which is equal to an initial conversion price of $31.02 per share. The initial
conversion rate of 32.2373 is subject to adjustment for: (1) stock dividends, (2) subdivisions or combinations of the Company's
common stock, (3) issuance to all holders of the Company's common stock of certain rights or warrants to purchase shares of the
Company's common stock at less than the market price, (4) distributions to all holders of the Company's common stock of shares of
the Company's capital stock or the Company's assets or evidences of indebtedness, (5) cash dividends in excess of the Company's
current cash dividends, or (6) certain payments made by the Company in connection with tender offers and exchange offers.
The holders may convert their Convertible Securities, in whole or in part, into shares of the Company’s common stock under any of
the following circumstances: (1) during any calendar quarter, if the price of the Company’s common stock is greater than or equal to
120% of the applicable conversion price for at least 20 trading days during a 30 consecutive trading day period ending on the last
trading day of the previous calendar quarter; (2) during any five consecutive trading day period following any 10 consecutive trading
day period in which the trading price of the Convertible Securities for each day of such period is less than 105% of the conversion
value, and the conversion value for each day of such period was less than 95% of the principal amount of the Convertible Securities
(the “Parity Clause”); (3) if the Company has called the Convertible Securities for redemption; (4) upon the occurrence of specified
corporate transactions such as a consolidation, merger or binding share exchange pursuant to which the Company’s common stock
would be converted into cash, property or securities; and (5) if the Senior Unsecured credit rating assigned to the Convertible
Securities by either Moody’s or S&P is lower than Ba2 or BB, respectively, or if the Convertible Securities are no longer rated by at
least one of these services or their successors (the “Credit Rating Clause”). At the Company's current credit rating, the Convertible
Securities may be converted by their holders.