(Bloomberg) -- Eastman Kodak Co. is contemplating a move to unlock gains created by its overfunded pension system, according to people with knowledge of the matter.

The company is weighing a so-called pension reversion, which would enable it to take control of the surplus rather than leaving excess capital to current and future retirees, said the people, all of whom requested anonymity to discuss confidential information. The maneuver would involve selling its portfolio of illiquid investments while liquidating other positions, the people said. 

Kodak on Friday confirmed that the company, with the pension plan’s committee, “has been exploring how best to preserve and maximize the value of the over-funding for the benefit of key stakeholders including current and former employees and Kodak shareholders.” The company said that it can’t provide assurances regarding the timing or amount of any proceeds from such a move. 

Proceeds may be used for corporate purposes such as paying down debt and investing in growth initiatives, according to the people. No final decision has been made. The company said any net proceeds from excess plan assets will first be used to pay down its term loan obligations before they’re avaliable for other purposes.

Shares of the company surged, closing 53% higher at $5.34, after Bloomberg News reported the potential plan, the biggest jump in more than three years. The shares retreated 1% at 10:36 a.m. on Friday, leaving them up 36% this year.  

Pension sponsors can typically end a plan and take control of the excess assets if the plans’ documents allow it. But the US may impose punitive taxes on such moves unless the company uses some of the excess to set up a replacement plan or increase benefits, according to Milliman, an actuarial company.

Kodak was once the leader in the photography and film industry, then was overtaken by the shift to digital. The company now focuses on manufacturing advanced materials and chemicals.

The company’s pension plans have benefited from strong performance. They generated $1.1 billion of returns in the three years through 2022, roughly double the $541 million that was expected. The largest US plan had almost three-quarters of its assets in private equity and hedge funds.

The overfunded status soared to about $1.2 billion at the end of 2022, or more than four times Kodak’s market capitalization through Wednesday’s close. The company is disbanding an internal team that manages the plan’s assets, transferring oversight to NEPC, Bloomberg News reported this week. It has sent liquidation requests to investment managers including Arrowstreet and Bridgewater Associates, a person with knowledge of the matter said. 

Kodak was invested in Bridgewater Pure Alpha Fund II and Arrowstreet Capital Global Equity Long/Short Fund as of Dec. 31, 2022, according to a filing. A representative for Arrowstreet didn’t immediately respond to a request for comment, and one for Bridgewater had no immediate comment.

Read More: Kodak Disbands Team Managing $4 Billion Pension Investments

(Updates with company comment in third paragraph.)

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