KODAK BANKRUPTCY IS EMINENT, SELLING PATENTS TO RAISE CASH, BORROWED $119 MILLION FROM ITS BANK, BUT IT COULD BE TOO LATE

"Don't forget to turn the lights off on your way out."

Investors dumped Eastman Kodak's stock Friday amid fears that the photography pioneer is headed toward bankruptcy.

The Wall Street Journal rattled Kodak's already jittery shareholders with a report that the company has hired Jones Day, a law firm that dispenses advice on bankruptcies and other restructuring alternatives.

Kodak, which is based in Rochester, N.Y., didn't respond to a request for comment. A Jones Day partner who oversees the firm's business reorganization and restructuring practice didn't immediately return a message either.

Kodak spokesman Gerard Meuchner told the Journal. 

"As we sit here today, the company has no intention of filing for bankruptcy."  

Kodak CEO Antonio Perez also sought to defuse the bankruptcy speculation in a meeting held earlier this week with the company's 19,000 employees, according to the Journal.

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Friday's news followed a Kodak disclosure earlier this week that the company was borrowing $160 million from its revolving credit line. That convinced some investors that Kodak is running out of cash as it scrambles to adapt to the age of digital imagery.

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Eastman Kodak shares lost more than half their value Friday, December 30, plunging 91 cents to close at 78 cents per share.  Kodak stock hit a new low of 47 cents on Wednesday, January 4, down an additinoal 31 cents.  The selling was so intense that the shares temporarily stopped trading under the New York Stock Exchange's automated controls.

After 131 years in business, Kodak finds itself on shaky ground largely because of the shift to digital cameras. That change, coupled with tougher foreign competition, has undercut sales of the film that made Kodak famous.

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To survive, the company has been mining its patent portfolio for additional cash. Since 2008, Kodak has pocketed nearly $2 billion in royalties and licensing fees. In July, Kodak hired investment bankers Lazard Ltd. to sell about 1,100 digital-imaging patents.

The question now is whether those measures will be enough to keep Kodak afloat. The company had $957 million in cash as of June 30, down from $1.6 billion at the start of the year.

Kodak warned in a securities filing in November that it could run out of cash within a year unless it can sell its digital-imaging patents or raise money selling its debt to the public.

The cautionary statement came as Kodak reported a third-quarter loss of $222 million, bigger than a year earlier, and said its cash reserves fell almost 10% over the year.

Three members of Kodak's board of directors have resigned in the past two weeks.

The latest to relinquish her post was economist Laura Tyson, a member of the Clinton administration and a former dean of the Walter A. Haas School of Business at theUniversity of California, Berkeley.

COMMENTARY:  In a blog post dated October 3, 2011, I reported that Kodak had hired bankruptcy firm Jones Day.  I also reviewed their financials and pointed out that selling their patents would not be enough to help Kodak much, and this has turned out to be the case. Once you start selling your "crown jewels," those valuable patents, you are dead.   I also said they should reduce their expenses, especially payroll and selling.   If Kodak has 19,000 employees right now, I have to ask the question, why?   What the hell was CEO Antonio Perez doing for three months?  

As much as I hate to say it, it's probably too late to save Kodak.  A bankruptcy would only delay the inevitable.  Where is the bankruptcy plan?  The company has over 2 billion in longterm debt (including the shorterm portion), and I am sure that's secured in some way.  If you are a stockholder, you can kiss everything goodbye.   

Courtesy of an article dated January 4, 2011 appearing in The Wall Street Journal

Comments

[Peter Watson]

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[Tommy]

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Yes, it sure is. As you know, Kodak finally did file for bankruptcy. The employees will probably lose their retirement plans. It was a failure of management to pivot into digital when they could've had the market to themselves. What a huge mistake. Hope you will visit my blog retularly, and thank you for your comment. Tommy

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Bankruptcy and financial collapse have become pretty common themes today in our modern media. It is a stark reality for many small businesses and individuals. There's no worse kind of debt to have on your plate than a credit card debt.

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