Kodak Considering Terminating $3.5 Billion Pension Plan: Report

Eastman Kodak has begun taking steps to end its $3.5 billion pension plan, agreeing to sell private equity and other illiquid assets attached to it.

The agreement was made public by a regulatory filing on Monday and is an effort for the company to unlock cash and reduce debt, according to the Wall Street Journal.

As of September 30, Kodak had $214 million in cash on its balance sheet.

The pension plan, covering around 35,000 participants and 2,000 current employees, has grown significantly due to strong market performance and past contributions. Kodak has 4,000 employees globally.

Kodak could gain between $530 million and $585 million from ending the current pension plan.

The company, facing high interest rates, has already begun selling illiquid assets like private equity, with its largest buyer, Mastercard Foundation, agreeing to buy interests valued at $764.4 million, according to the WSJ.

Kodak is in the process of settling $2.3 billion in liabilities–which needs to be resolved before terminating the pension plan.

Kodak made $18 million in profit this year but paid $14 million in interest expenses during the third quarter, according to the Journal report.

Kodak's goal is to increase shareholder value by using the liquid cash from the closed pension plan to reinvest in commercial printing products; film and specialized industrial chemicals.

The company claims the termination would not affect promised benefits for retirees, who would receive annuities from an insurance company while current and former employees could opt for lump-sum payouts or annuities upon retirement.

"It really won't look different to them," Jim Continenza, chairman and chief executive, said to the Wall Street Journal.

Kodak plans to replace the pension plan with a new retirement plan but has not yet specified whether it will offer a defined-benefit or defined-contribution plan like a 401(k).

While the company hopes to have a new plan drafted and implemented within a year, the transition could also take over a year to complete Continenza said.

Once a behemoth in the photography industry having a 125-year stronghold, Kodak filed for bankruptcy in 2012 which later led to shuttering its camera business in an effort to convert to digital.