Time will tell if the Kodak deal is a success, but at least the trustees and sponsor have been given the chance to try something new

Compromise and negotiation have replaced litigation and confrontation in the battle to save defined benefit pension schemes and their sponsoring companies from going under.

Rather than fight tooth and nail through the courts, a growing number of trustee boards, under the watchful glare of the Pensions Regulator, are agreeing to more inventive ways of protecting their DB schemes from falling into the Pension Protection Fund (PPF).

Kodak

The Kodak Pension Plan (KPP) is the latest scheme to reach an agreement with its beleaguered sponsor, with both parties claiming victory.

Parent company Eastman Kodak has ‘spun off’ its Personalized Imaging and Document Imaging businesses to KPP for a cash and non-cash consideration of $650m (£419m).

This ends a $2.8bn claim made by the pension plan against Eastman to cover liabilities while releasing the sponsor from Chapter 11 bankruptcy proceedings.

Dedication and creativity of KPP had made it possible to achieve this extraordinary result

A result for Eastman, which gets to stay afloat, and for the scheme members who no longer face the reduced benefit levels offered by the PPF.

Antonio Perez, Kodak chairman and CEO, made clear his relief that a deal had been struck, noting the “dedication and creativity of KPP had made it possible to achieve this extraordinary result”.

Meanwhile Steven Ross, chairman of KPP, claimed “the acquisition provides security for, and delivers the greatest value to, the KPP members”.

Yet members still face the prospect of watered down benefits since the scheme is unable to continue it is current guise, even with the cash flows from the Kodak imaging business.

Consequently certain pension commentators are questioning the Pension Regulator’s oversight, with independent pension consultant John Ralfe asking why the watchdog has allowed so many of these types of transaction to go through recently.

Ralfe believes the pension plan should have adopted the ‘tried and tested’ approach and simply waited along with the other unsecured creditors for its share of assets and/or a stake in any new Kodak venture.

He also says the regulator must produce a Section 89 report to explain why it allowed the Kodak deal to go through.

This kind of innovation may be unconventional but who’s to say that makes it inappropriate?

However, if the deal works then Perez and Ross will be proven heroes and have every right to champion their hard work. Jobs will be saved, a company will remain in operation and members get to keep their, albeit potentially reduced, DB benefits.

This kind of innovation may be unconventional but who’s to say that makes it inappropriate?

Such difficult challenges require intelligent thinking; they need innovators who can see beyond the tried and tested’ and proffer new ways of moving forward.

Once the dust has settled it will become clearer as to the success or otherwise of the Kodak deal, but at least the trustees and sponsor have been given the chance to try something new.