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Kodak seeks to emerge from bankruptcy in 13 months

Associated Media CEO Antonio Perez on Kodak's bankruptcy filing
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Rochester Business Journal
January 19, 2012

If Eastman Kodak Co. successfully emerges from bankruptcy in 13 months, as it projects, plans it has laid out in hundreds of pages of court filings show much about the company will have changed.

The company shortly after 1 a.m. Thursday announced it had filed voluntary petitions for Chapter 11 business reorganization. The company has obtained a $950 million debtor-in-possession credit facility.

That Kodak has been strained increasingly by a liquidity crisis has long been no secret. Over the next 30 days, Kodak expects to see a net-cash loss of $135 million, the company states in a bankruptcy filing. Reasons Kodak gives for the cash crunch in bankruptcy papers are the same as what it has told analysts and investors for some two years:

  • Faster than expected decline in traditional photo film business;
  • Weaker than hoped for sales since 2008 in the digital business Kodak hoped would replace lost film sales;
  • An inability to adequately cash in on an intellectual property portfolio of digital patents estimated to be worth as much as $3 billion; and
  • The high cost of meeting obligations to retirees, particularly health care costs.

Kodak stock was suspended from trading Thursday by the NYSE Regulation Inc., which found it “is no longer suitable for listing.” Kodak started trading at the New York Stock Exchange in April 1905. Bloomberg reports the company now trades over-the-counter as EKDKQ.PK.

The restructuring Kodak hopes to do under court protection to address those weaknesses was in progress before it filed. This month, the company announced plans to pare its operations, trimming itself from three business segments to two. Future markets would be different and the company needs to change with the times, Perez said at the time.

Kodak’s intent in filing bankruptcy is to, as much as possible, keep doing business as usual.

“The flow of goods and services to customers (will) continue globally,” the company promises in a statement meant to calm the jitters that its early Thursday morning bankruptcy filing—filed at 1 a.m. in Manhattan—might to evoke among Kodak’s shareholders, employees, customers and retirees.

A commitment from Citigroup Inc. to loan Kodak some $950 million in cash would let the cash-short company run and stay current with suppliers over the next 18 months while it restructures, Kodak chairman and CEO Antonio Perez said.
The bankruptcy affects only U.S. operations. Kodak’s offshore units, which accounted for 57 percent of its revenues in 2010 and 67 percent of its revenues in the first three quarters of 2011, are not part of the bankruptcy.

In a filing outlining how it hopes to operate through its Chapter 11 workout, Chief Financial Officer Antoinette McCorvey echoed Perez’s promises to fully pay U.S. workers.

“Loss of valuable employees and the recruiting efforts that would be required to replace such employees would be distracting at a time when (Kodak) should be focusing on maintaining (its) operations,” McCorvey states in a filing. “I have no doubt that (Kodak) must do (its) utmost to retain the workforce by … continuing to honor wage, benefit and related obligations.”

Kodak intends to fully pay U.S. vendors going forward, but under Chapter 11 rules, it could pay suppliers at less than 100 cents on the dollar for unpaid debts incurred before the Jan. 19 filing.

“Under federal law, our Chapter 11 filing means that Kodak is now generally prohibited from making any payments to suppliers to our U.S. businesses for services or goods received prior to the filing. Unpaid obligations incurred by Kodak before the filing date are now frozen and will be treated as general unsecured claims in the reorganization,” on, a website the camera giant put up to answer restructuring questions.

Whether it would take advantage of that provision or fully pay vendors will not be known until Kodak files a reorganization plan with the court, an event that could be months down the road.

In motions filed Thursday, Kodak asks for authorization allowing, but not requiring, it to pay up to $40 million worth of what it calls its critical U.S. vendors’ pre-petition claims and up to $60 million of foreign vendors’ pre-petition claims.

“To stabilize (Kodak’s) operations, and to smoothly transition into Chapter 11, it is imperative that (Kodak) normalize its global supply relationships,” McCorvey states in a filing. “Failure to do so would result in extremely adverse business effects given the current pressure on (Kodak’s) already strained supply chain.

“(Kodak) believes that the majority of (its) vendors will be comforted by the increased liquidity made available to them under the anticipated debtor-in-possession financing; therefore, (Kodak is) optimistic (its) trade terms ultimately will stabilize over the course of these chapter 11 cases.”
(c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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