Eastman Kodak Co.'s officers and directors want to tap a $25 million insurance policy to defend themselves in pending lawsuits as the imaging company continues to bleed cash in its Chapter 11 case.Kodak Chairman and Chief Executive Antonio M. Perez, Chief Financial Officer Antoinette P. McCorvey and President and Chief Operating Officer Philip J. Faraci are among the 19 current and former Kodak officers and directors who are requesting a bankruptcy judge's approval to access the insurance proceeds.
The officers and directors face litigation on two fronts for which they're seeking help covering their defense costs, which they say Kodak hasn't covered as a result of its bankruptcy filing.
The first is a class-action securities lawsuit accusing Perez, Faraci and McCorvey of making false and misleading statements about Kodak's business and financial results. The second front covers seven lawsuits brought by Kodak employees who say the defendants continued to offer them Kodak shares when they knew or should have known it was an " imprudent investment."
Judges for both types of lawsuits have ordered plaintiffs to file amended complaints, at which time the clock will start ticking for the defendants to respond.
In addition to Kodak's top executives, those seeking access to the $25 million insurance policy include all of Kodak's current 11 directors. Perez leads the board, which includes Richard S. Braddock, the CEO of online grocer Fresh Direct; and Kyle P. Legg, the former CEO of Legg-Mason Capital Management.
The former directors joining the request include Debra L. Lee, the head of BET Holdings Inc., and Herald Y. Chen and Adam H. Clammer, whom Kohlberg Kravis Roberts appointed to the board when the investment firm helped Kodak refinance in 2009. Lee resigned from the board as of May 2011, according to a Securities and Exchange Commission filing, while Chen and Clammer stepped down last December.
According to court papers filed Tuesday, insurer XL Specialty Insurance Co. is willing to advance the funds but wants the all-clear from the U.S. Bankruptcy Court in Manhattan, where Kodak sought Chapter 11 protection in January. The court is slated to review the request at a June 20 hearing.
Meanwhile, Kodak disclosed that it is bleeding cash. A monthly operating report filed with the court Tuesday showed that the Rochester, N.Y., company spent $213.4 million between April 1 and April 30 but only took in $182.1 million, a difference of $31.3 million.
An unaudited combined financial statement showed $156 million in revenues last month and a net loss of $91.3 million. Kodak and its affiliates ended April with $4.2 billion in assets and $5.3 billion in liabilities.