Kodak's picture perfect Ch 11 bankruptcy: say cheese!

Alex Zaharov-Reutt
Thursday, 19 January 2012 21:48

IT Industry - Market

Kodak, the legendary photographic company, has entered into Chapter 11 bankruptcy in the US, hoping to reorganise its business with a near US $1b 'debtor-in-possession' loan from Citigroup.

Who would have ever imagined that Kodak, one of the world's most famous companies, would one day go bankrupt?

Now, it isn't the end for Kodak, as the company, Eastman Kodak, and its US subsidiaries (but not its other worldwide operations) enter into a voluntary Chapter 11 business reorganisation, clearly with a view to restoring the company back to profitability - if not its former glory.

The company says its 'business reorganisation' is 'intended to bolster liquidity in the U.S. and abroad, monetise non-strategic intellectual property, fairly resolve legacy liabilities, and enable the Company to focus on its most valuable business lines', with a special 'Kodak Transforms' website to explain the how, whys, wheres, whats and whens of the situation.

It's also interesting to note that Kodak says it generated approximately '75% of its revenue from digital businesses in 2011', showing that the company isn't relying on old fashioned photo production to earn money any more.

An obviously important part of this reorganisation is a whopping US $950m 'credit facility' obtained from Citigroup to continue in business, although that credit facility is 'subject to Court approval and other conditions precedent'.

It's also not the end for Kodak's employees, with the company saying it 'expects to pay employee wages and benefits and continue customer programs'.

As previously noted, Kodak's subsidiaries outside of the US 'are not subject to proceedings and will honour all obligations to suppliers, whenever incurred'.

Antonio M. Perez, Kodak's Chairman and CEO, stated that: 'Kodak is taking a significant step toward enabling our enterprise to complete its transformation.

'At the same time as we have created our digital business, we have also already effectively exited certain traditional operations, closing 13 manufacturing plants and 130 processing labs, and reducing our workforce by 47,000 since 2003. Now we must complete the transformation by further addressing our cost structure and effectively monetising non-core IP assets.

'We look forward to working with our stakeholders to emerge a lean, world-class, digital imaging and materials science company.'

'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,' Mr. Perez continued.

'Our goal is to maximise value for stakeholders, including our employees, retirees, creditors, and pension trustees. We are also committed to working with our valued customers.

'Chapter 11 gives us the best opportunities to maximise the value in two critical parts of our technology portfolio:  our digital capture patents, which are essential for a wide range of mobile and other consumer electronic devices that capture digital images and have generated over $3 billion of licensing revenues since 2003; and our breakthrough printing and deposition technologies, which give Kodak a competitive advantage in our growing digital businesses.'

Mr. Perez concluded, 'The Board of Directors, the senior management team and I would like to underscore our appreciation for the hard work and loyalty of our employees. Kodak exemplifies a culture of collaboration and innovation.  Our employees embody that culture and are essential to our future success.'

Kodak expects to 'complete its US-based restructuring during 2013'.

Good luck, Kodak!