U.S. Bankruptcy Judge Allan Gropper in New York gave Kodak a year to reorganize and a permission to borrow an initial $650 million from Citigroup (Citigroup to provide $950 million).
On Thursday, January 19, 2012 Kodak filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of New York. The Company is represented by Andrew G. Dietderich of Sullivan & Cromwell. The case is In re Eastman Kodak Co., 12-10202, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
According to official statements: “Since 2008, despite Kodak’s best efforts, restructuring costs and recessionary forces have continued to negatively impact the Company’s liquidity position, ultimately leading to the commencement of these Chapter 11 cases.”
Only in 2011 Kodak took multiple actions in order to enhance its cash position including but not limited to issuing $250 million in senior secured notes due 2019; entering into a second amended and restated credit agreement with its lenders that facilitated a draw of approximately $160 million; and selling certain non-strategic businesses and assets[1]. Kodak has been attempting to sell 1,150 patents relating to its digital capture and imaging systems.
According to Antonio M. Perez, chairman and chief executive officer: “Despite these actions, the Company’s liquidity has been impaired further by difficulties collecting licensing fees from infringers of Kodak’s intellectual property, who Kodak believes have employed a strategy of delay in light of Kodak’s liquidity position, and by substantial foreign and U.S. legacy costs.” Mr. Perez said: “After considering the advantages of Chapter 11 at this time, the Board of Directors and the entire senior management team unanimously believe that this is a necessary step and the right thing to do for the future of Kodak.“
Kodak’s revenue shrank to $6 billion in 2011 from $13.3 billion in 2003. Kodak had 2010 sales of $7.2 billion and a net loss of $687 million. During the first nine month of 2011, the net loss was $647 million on sales of $4.27 billion. Gross profit in the first three quarters was $543 million.
According to Bloomberg Businessweek, Kodak listed $5.1 billion in assets and $6.75 billion in debt. Liabilities for borrowed money, totaling $1.6 billion, include $100 million on a first-lien revolving credit and $96 million in outstanding letters of credit. Other liabilities include $750 million in second-lien notes, $400 million in convertible notes, and $283 million in senior unsecured notes. In addition, Kodak pegged trade debt at $425 million. Other liabilities include $1.2 billion in U.S. pension obligations and $1.3 billion for other retiree benefits, plus $100 million in environmental liabilities[2].
Regardless the bankruptcy and the debt, Kodak aims to keep operating normally during the bankruptcy. It has already secured a $950 million financing deal with Citigroup Inc., and hopes to sell 1,150 patents for at least $2 Billion. In addition, through negotiations and intellectual property litigation, Kodak has collected approximately $1.9 billion in patent licensing fees. It claims many more to come. Multiple patent-infringement lawsuits have already been filed by Kodak against Apple Inc., BlackBerry maker Research in Motion, Ltd., HTC Corp., Samsung Electronics., Fujifilm Corp.
Kodak, the 131-year-old film pioneer although apparently has lost some steam in the fight to rule a digital-imagining technology arena, but seems to be fighting back and may appear much stronger after a successful reorganization.
[2] Bloomberg Businessweek