Kodak’s former pension scheme could become the latest industry scheme to end up in the Pension Protection Fund, and the Kodak Alaris business could be sold as a result.


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The scheme was separated from Kodak as part of the group’s exit from Chapter 11 bankruptcy protection five years ago.

At the time, the Kodak UK pension scheme was the imaging group’s single-biggest creditor, with a claim against Kodak of $2.8bn (£1.8bn at 2013 exchange rates, £2.1bn at the current rate).

To get around the problem the Kodak Pension Plan acquired Kodak’s Personalised Imaging and Document Imaging businesses (subsequently renamed Kodak Alaris) for $650m, with the expectation being that long-term cash flows and profits from the business would fund the ongoing pension commitments for the scheme’s then-15,000 members, albeit at a reduced level to original expectations.

However, the trustees of Kodak Pension Plan 2 have now written to scheme members explaining the current situation, having asked PwC to carry out a detailed review of the Alaris investment and the options available.

“Kodak Alaris is doing well, but not well enough to support the Plan in the long term,” the trustees said in the communication. “The most likely outcome is that the Plan will in due course move into the Pension Protection Fund.”

In what is a unique situation the Kodak Alaris business is an asset of the pension scheme, which is its sole shareholder. This means Kodak Alaris could theoretically transfer across to become an asset of the PPF if and when the scheme moves over.

It could also be sold separately, and the trustees have asked Kodak Alaris to “explore opportunities to sell some or all of its assets, if an attractive arrangement can be made.”

The most recent estimate of the Plan’s financial position, at 31 December 2016, showed a funding target of £2.18bn, assets of £747m, and funding shortfall of £1.44bn.

Kodak Pension Plan 2 received $75m in interest and capital payments from Kodak Alaris between 2014 and 2016.

At the beginning of 2017 there was a significant balance sheet restructuring at the firm, resulting in the interest and capital payments being replaced by dividend payments. Kodak Alaris also sold its shuttered Harrow site in Q2 2017, netting cash proceeds of £59m.

The trustees said they would consult with the Pensions Regulator and PPF in making their decision, and would communicate with scheme members again in December.

The trustees also pointed out that when Kodak was in Chapter 11 in 2013, pension scheme members had the choice of moving into the PPF or switching to Kodak Pension Plan 2.

“No member would have been better off if they’d chosen to move to the PPF at that time… If we now move into the PPF members will get pensions that are as good or better than the pensions they would be getting if they had moved into the PPF in 2013,” they stated.

Frank Field MP, chair of the House of Commons Work & Pensions select committee, wrote to the Pensions Regulator yesterday asking if there are lessons to be learned from the “unusual circiumstances” that resulted in the creation of KPP2, and which had to be approved by the regulator at the time. 


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