KKR must not carry the clout it once did. Eastman Kodak (EK) announced that it expects to raise up to $700 million through a series of financing transactions, including a commitment from KKR  to purchase up to $400 million in Senior Secured Notes due 2017.  Kodak’s stock fell 3% to $6.49.

Kodak agreed to issue to KKR warrants to buy up to 53 million shares of Kodak common stock. Kodak, at its discretion, may issue to KKR as few as $300 million of the Senior Secured Notes, in which case the number of shares underlying the warrants will be adjusted to as few as 40 million.

Put another way, current shareholders may see their position in the company diluted. Kodak now has 260 million shares outstanding.

Kodak has not done well in years, so it is a mystery what KKR sees in the firm.

Kodak’s current share price is well below its 52-week high of $16.90. In 2007, the shares traded close to $30. But competition has beaten down the company’s film business.

In 2006, Kodak lost $200 million on $13.3 billion in revenue. Last year those numbers had worsened to an $821 million loss on revenue of $9.4 billion.

The market thinks what is left of Kodak is not worth owning.

Douglas A. McIntyre

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