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The Trump administration’s decision to entrust Eastman Kodak with $ 765 million in taxpayer money raised several questions about the financial review of the troubled camera company even before the deal was put on hold as part of an investigation into potential insider trading.
Taking advantage of the emotion and nostalgia of a bygone era, President Trump accused Kodak of leading U.S. efforts to bring pharmaceutical manufacturing back to the U.S.
But the camera maker’s troubled history – it has failed to adapt to the digital age and has struggled in recent years – was an immediate cause for concern on Capitol Hill.
“I don’t want a once-prestigious American brand to go bankrupt. I love the idea that companies can move on; they can move into new spaces,” said a congressional assistant. “And if there’s a clear or helpful path here, I’ll be open to it. … But why is Kodak the right company?”
The anticipated loan, if completed, will be provided by a little-known government agency called US International Development Finance Corp. (DFC), which provides loans abroad. The president used the obscure agency to find out how to advance US production of medical supplies.
Elizabeth Littlefield, a U.S. development veteran who ran the Obama-era agency that became the DFC, said she was excited about the possibilities. But if the investment was wise, she asked why Kodak couldn’t get the money any other way.
“I really hope this analysis has been thorough as a lot of questions will arise, such as why Kodak didn’t raise this money from the public market? It’s a publicly traded company,” she said.
Trump said Kodak may have got lost but was now part of an effort to meet an “America First” priority of bringing manufacturing back to the US and decoupling the country’s China-wrapped drug supply.
“It’s a great name when you think of it,” Trump said when he made the announcement last month. “Such a great name. It was one of the great brands in the world.”
But the DFC has now put the deal on hold after the Securities and Exchange Commission opened an investigation into potential insider trading after a large amount of Kodak shares traded hands the day before the loan was announced.
“You see all of this trade happening, and you see board members and other employees make billions of dollars out of a transaction,” said Rep. James Clyburn, DS.C., who joined Democratic leaders in an investigation into the Call for deals.
Peter Navarro, Trump’s trade advisor who sponsored the plan, tweeted: “VERY disappointed with Kodak’s big deal last week which was tarnished by allegations. Absolutely RIGHT move from DFC!”
Navarro added that the United States “must redouble its efforts to bring our pharmaceutical manufacturing home”.
Kodak has initiated its own independent review of the measures, but has expressed confidence that discussions with the administration will continue.
“The company appreciates and supports the DFC’s decision to wait for clarification before proceeding,” said Arielle Patrick, a Kodak spokeswoman.
However, some financial analysts wonder if Kodak has the financial skills to do this successfully.
George Conboy, a financial analyst from Kodak’s hometown of Rochester, NY, said Kodak could never convince a bank to lend the company something roughly equal to what the government is considering. He points to a smaller $ 100 million loan that Kodak received last year from a private equity group at a higher rate – which included giving up a large stake in the company.
“You wouldn’t be borrowing money on these terms unless you could get someone to lend it more attractively,” said Conboy, chairman of Brighton Securities. “You don’t go to the loan shark when you can get a loan on your home loan.”
A senior US government official stated that it was not yet a loan, just an interest note. Officials said while Kodak has passed an initial screening process including site visits and a review by the authorities, the government is only now starting the stricter screening process.
This process involves the DFC signing contracts with outside lawyers and accountants to dig deeper into the company’s financial information – a process that can take at least a few months.