The International Development Finance Corp., or DFC, disclosed the news in an Aug. 7 tweet, citing "serious concerns."
"We will not proceed any further unless these allegations are cleared," the agency tweeted.
The DFC and Kodak signed a letter of interest July 28 — an action President Donald Trump and DFC CEO Adam Boehler promoted as a done deal, despite no agreement being finalized.
The loan was being considered under DFC's program that is relying on the Defense Production Act, or DPA — a 1950 wartime law used to direct private companies to manufacture certain products in times of emergency.
It was part of the administration's effort to bring drug manufacturing back to American shores.
But the Kodak matter quickly came under congressional scrutiny after shares of the company rose a day before the DFC letter was signed.
On July 27, 1,645,719 shares of Kodak were traded — almost eight times the daily average. The next day, shares of the company climbed as high as 350% on the New York Stock Exchange, rising from $2.62 to $11.80. On July 29, Kodak's shares surged — leaping as high as $60 per share.
Sen. Elizabeth Warren, D-Mass., asked the U.S. Securities and Exchange Commission to investigate the "unusual trading activity."
"Individuals who purchased the stock immediately prior to the announcement earned an extraordinary return," Warren told the SEC.
Filings with the commission showed that Kodak Chairman Jim Continenza and other members of the company's board purchased substantial amounts of company stock ahead of the public announcement about the DFC letter of interest, the Massachusetts lawmaker noted.
A spokeswoman for the SEC declined to comment on whether it was investigating Kodak.
The Democratic heads of the House Financial Services and Oversight and Reform Committees and some subcommittees, including the panel overseeing coronavirus funding, opened a joint probe of their own and demanded information from Kodak and the DFC.
After Kodak came under congressional scrutiny, Trump told reporters Aug. 4 he "wasn't involved" in the potential loan to the company, despite repeatedly touting it as a "deal" his administration had made.
Documents being sought
In their letter to Boehler, House lawmakers said they wanted him to turn over by Aug. 31 all records and communications, including those between May 1 and Aug. 4, related to DFC's consideration of Kodak and any component or affiliates for financing under the agency's DPA loan program.
The committee leaders also requested that the DFC provide any communications it had with private-sector entities from May 1 through Aug. 4 about financing under the agency's DPA program.
The lawmakers called on Boehler to acknowledge in writing within five days that he had received the letter from Capitol Hill and said they also wanted to meet with his staff.
The committees gave Kodak's Continenza a shorter timeline to respond, telling him in an Aug. 4 letter to provide certain documents and communications by no later than Aug. 18.
The congressional leaders are looking into trades involving shares of Kodak and any stocks, options or other securities issued to the company's officers and directors on May 20, June 23 and July 27.
The committees are seeking information and documents related to Kodak's interest for obtaining a loan or entering into any agreement with the U.S. federal government to manufacture pharmaceutical ingredients.
The lawmakers called on Continenza to provide anything related to discussions or negotiations with DFC, the Department of Defense, the White House or any other federal agency related to the matter.
In addition, the committees are seeking information about Kodak's ability to manufacture or procure pharmaceutical ingredients. The company has long made chemicals for the commercial printing, publishing and entertainment sectors, but it was seeking the loan to produce active pharmaceutical ingredients for essential generic medicines for human consumption — a process that will require U.S. Food and Drug Administration inspections and approvals.
Due diligence ongoing
Kodak declined to comment on DFC's Aug. 7 tweet, but the company has launched its own investigation. It said it has appointed a "special committee of independent directors" to oversee an internal review of recent activity in connection with the announcement of the potential DFC loan.
DFC and Kodak are still in the due diligence phase of the letter of interest process, a company spokesperson confirmed to S&P Global Market Intelligence in an email response.
"Diligence is ongoing and this could be considered part of that," the spokesperson said. The DFC tweet "simply implies that they are awaiting clarification, which could be done through the House" panels.
Kodak is slated to hold its earnings call Aug. 11, where it may potentially discuss the DFC letter of interest.