Kodak will issue 30 million shares for convertible-bond holders following last week's 940% rally

  • Kodak said it would issue 30 million shares to holders of its convertible bonds, according to an 8-K filed with the SEC on Monday.
  • The move is a signal that its debtholders are ready to cash in on last week’s 940% stock rally, which was spurred by the company receiving a $US765 million from the US government to produce generic drug ingredients.
  • Kodak’s outstanding shares will increase 60% to 75.5 million after the debt is converted into equity, which is expected to happen Monday.
  • Kodak shares slumped as much as 22% on Monday after the Rochester, New York-based company disclosed the news.
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Kodak’s bond holders are ready to cash in on last week’s monster stock rally that saw shares jump as much as 2,190% in three days after the company was awarded a $US765 million loan from the US government.

In an 8-K filed with the Securities and Exchange Commission on Monday, Kodak said it would issue 29.9 million new shares after it received notice from its convertible debt holders that they were ready to exercise their right to convert their debt into stock.

Convertible debt is a hybrid bond that allows the debtholder to convert their notes into stock. The convertible notes are typically reserved for companies with junk debt ratings, and are typically held by bond investors who see both upside potential and high risk in the company.

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Kodak said on July 29 it received conversion notices from holders of its 5.0% secured convertible notes due 2021. The aggregate value of the convertible notes is $US95 million, which will then be converted into 29.9 million shares that can then be sold.

At today’s opening price of $US21.00, the $US95 million convertible notes stake is worth $US628 million.

According to the 8-K, the notes were issued in 2019 to a number of funds managed by Southeastern Asset Management.

Kodak’s outstanding shares will increase 60% to 75.5 million after the debt is converted into equity, which is expected to happen Monday.

Kodak shares slumped as much as 24% to $US16.29 in Monday trades.

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