By Nick Brown
NEW YORK, June 25 | Tue Jun 25, 2013 5:13pm EDT
NEW YORK, June 25 (Reuters) - The framework of a plan by Eastman Kodak Co to restructure as a commercial imaging business was approved by a bankruptcy judge on Tuesday, bringing the former photography company one step closer to exiting from Chapter 11 protection.
Judge Allan Gropper in U.S. Bankruptcy Court in Manhattan said he was "happy" to green-light the so-called disclosure statement, which creditors will use as a reference when they vote on the plan in the coming weeks.
Kodak declared bankruptcy in January of 2012 because of high pension costs and after falling many years behind rivals in embracing digital technology in its photography business.
It has since sold a variety of assets, and will emerge from Chapter 11 as a mainly commercial imaging-focused enterprise.
Last week, the company announced it had reached an $895 million financing deal with JPMorgan Chase & Co, Bank of America Corp and Barclays Plc. Kodak will use the money to pay off loans that funded its bankruptcy, as well as for working capital after its exit from Chapter 11, expected later this year.
Kodak also plans to implement a $406 million rights offering, selling 34 million shares, or 85 percent of the equity in the reorganized company. Proceeds would go to repay various creditors, including more junior second-lien creditors that would no longer receive equity in the reorganized company.
Before Kodak can exit bankruptcy, its restructuring plan must be supported by creditors, and the plan must go before Gropper for a final sign-off. That hearing is expected to take place on Aug. 20.
Gropper voiced some compassion for Kodak's smaller creditors, many of whom have sent letters to the court expressing concerns about their claims, which stand to see little or no recovery.
One business owner in Colorado said in a letter to Gropper that her company may go bankrupt because of a $148,000 claim against Kodak, Gropper said.
Shareholders, whose stakes stand to be wiped out altogether, have flooded the court with letters, and some have sought representation of a committee to vouch for its interests. That is a decidedly uphill battle, since Gropper has already once refused to appoint a shareholder committee. But the judge said at Tuesday's hearing that shareholders deserve some answers, whether in the form of responses from Kodak or a hearing on the shareholders' concerns.
"These letters are heartfelt," Gropper said.
The case is In re: Eastman Kodak Co, U.S. Bankruptcy Court, Southern District of New York, No. 12-10202.
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