(Bloomberg) — The federal agency that announced a $765 million loan to Eastman Kodak Co. less than two weeks ago said the offer is on hold pending probes into allegations of wrongdoing.
“Recent allegations of wrongdoing raise serious concerns,” the U.S. International Development Finance Corporation said in a tweet Friday night. “We will not proceed any further unless these allegations are cleared.” Congress and the Securities and Exchange Commission are investigating the deal, and Kodak’s board said Friday it is also opening a review of the loan disclosure.
The development bank loan announced July 28 was the first of its kind under the Defense Production Act in collaboration with the U.S. Department of Defense. It was intended to speed production of drugs in short supply and those considered critical to treat Covid-19, including hydroxychloroquine, the controversial antimalarial drug touted by President Donald Trump.
The president, along with New York Governor Andrew Cuomo and White House aide Peter Navarro pitched the loan as a way to rebuild America’s pharmaceutical manufacturing infrastructure while restoring a beleaguered Rochester, New York-based camera company.
The news sent the stock soaring as much as 2,760%. Quickly, however, the deal received scrutiny. Corporate disclosures showed that Kodak board members had purchased additional shares before the announcement. Analysts questioned whether Kodak was truly equipped for large scale pharmaceutical manufacturing. In an interview with Bloomberg after the deal was announced, the DFC said that they had only signed a “letter of interest” and that the agency was still doing diligence on the deal.
A spokesperson for Kodak declined to comment in an email.
On Friday the agency tweeted, “We remain committed to working together with other government agencies to address critical shortfalls in America’s pharmaceutical supply chain.”
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