Trump Puts Kodak Deal On Hold Amid SEC Probe
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As a maker of cameras, Kodak was iconic. But in the digital age, it was failing. And then last month, the Trump administration announced it was giving Kodak $765 million to make pharmaceutical ingredients instead of cameras. That is now on hold because of an investigation into potential insider trading. Here's NPR's Franco Ordoñez.
FRANCO ORDOÑEZ, BYLINE: President Trump touted the deal as a major step toward fulfilling an "America First" priority - bringing back manufacturing to the United States and decoupling the nation's drug supply that's wrapped up in China.
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PRESIDENT DONALD TRUMP: My administration is using the Defense Production Act to provide a $765 million loan to support the launch of Kodak Pharmaceuticals.
ORDOÑEZ: The announcement was a boon for Kodak, sending the stock price soaring and bringing back emotions and nostalgia for a bygone era, one that was often captured by Kodak cameras.
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UNIDENTIFIED SINGER: (Singing) The Kodak moments...
UNIDENTIFIED VOICE ACTOR: (As voiceover) Aren't all your moments worth Kodak film?
ORDOÑEZ: The anticipated loan, if completed, is being made by a little-known government agency called the U.S. International Development Finance Corporation, which provides loans in foreign countries. The president tapped the obscure foreign investment agency to work on the very domestic job of figuring out how to spur U.S. production of medical supplies. Trump says Kodak may have lost its way but with the administration's help, it will lead U.S. efforts to bring pharmaceutical manufacturing back to the United States.
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TRUMP: It's a great name when you think of it, such a great name - was one of the great brands in the world.
ORDOÑEZ: But Kodak is no longer the same company. Once boasting billions in profits, it suffered through multiple reorganizations as the shift to digital cameras devastated its business. It filed for bankruptcy in 2012.
GEORGE CONBOY: In my opinion, there's not a chance that Kodak could have gotten a loan from anyone of this magnitude.
ORDOÑEZ: That's George Conboy, a financial analyst based in Kodak's hometown of Rochester, N.Y. He points to a smaller hundred-million-dollar loan Kodak secured last year from a private equity group at a higher interest rate that also involved giving up a large stake in the company.
CONBOY: You would not borrow money on those terms unless you couldn't get someone else to lend it to you more attractively. You don't go to the loan shark if you can borrow on your home equity loan.
ORDOÑEZ: A senior U.S. government official cautioned, it's not a loan yet. It's a letter of interest, which they wouldn't, by the way, share with NPR. And officials say while Kodak has passed an initial screening process, including site visits and interagency review, the government is only now beginning the more rigorous vetting process where the DFC contracts with outside lawyers and accountants to dig deeper into the company's financials, a process that could take at least a couple months.
But Kodak is already under heavy scrutiny. The Securities and Exchange Commission has launched its investigation into potential insider trading after a massive spike in Kodak shares traded hands the day before the loan was announced.
JAMES CLYBURN: You see all of this trading take place, and you see board members and other associates making millions of dollars off a transaction.
ORDOÑEZ: That's Congressman James Clyburn of South Carolina, who joined Democratic leaders in calling for an investigation of the deal. While Trump initially claimed credit for the agreement, after reports of the SEC probe, he appeared to distance himself from it and then suspended the deal last Friday.
Franco Ordoñez, NPR News, Washington.
(SOUNDBITE OF YPPAH'S "SHOT INTO THE SUN") Transcript provided by NPR, Copyright NPR.