Kodak’s Day in Court

We have been saying at our Community Resource Meetings that Kodak’s management may have a bumpy road in bankruptcy. Specifically, there are signs that the bondholders, represented by Akin Gump & Strauss, may challenge Kodak’s management and possibly ask the court to throw out the senior management team at the company. In the first court hearing, last Thursday, Kodak asked to draw down $700 million of their $950 million DIP credit line. Bondholders objected, saying:

 “What’s past is prologue,” said Michael S. Stamer, of Akin Gump Strauss Hauer & Feld LLP, counsel for an ad hoc committee of second-lien noteholders. The post-petition financing agreement as originally conceived “gives them too much money. And if you give them too much money … they’ll spend it, to everyone’s detriment.”

 The judge then reduced Kodak’s approved drawdown to $650 mil, a small but significant reduction and a concession to bondholders.

 Latest court action was yesterday, when Kodak requested that $40 million of their $332 million in unsecured debts to suppliers be made a priority. Specifically, Kodak claimed that the $40 million was owed to “critical” suppliers who should be paid now and paid in full.  The remaining $292 million in supplier debts would have to wait until the end of the bankruptcy process (a year or more) to get paid what is likely to be pennies on the dollar. This request the judge turned down flat. “Don’t be optimistic” said Judge Allan Gropper.

 Kodak’s bankruptcy, at least in court, is not going to be the smooth transformation that Mr. Perez may have expected. With bondholders objecting and the judge indicating skepticism of management’s requests, there will be bumps in the road to the New Kodak.

Kodak Roundup

As the sun rises on Kodak’s first full week in Chapter 11 bankruptcy protection, many questions are being answered, and a few ones are being raised.

1. A Q&A piece issued by Eastman Kodak after their bankruptcy filing has stated clearly that current and former employees who have a balance in Kodak’s 401k (known as SIP) can rest assured that their money will remain accessible to them without interruption.  Some observers had speculated that SIP access would be frozen. Dispelling this notion was one of the principal reasons our firm developed our Community Resource Meetings for Kodak employees and retirees, in an attempt to bring clarity to a situation filled with rumor, half-truth, and urban legend.
2. We have been saying at our meetings that the insurance “wrapper” that has kept the SIP Fixed Income Fund a stable, comparatively high-yielding investment would at some point be discontinued. It didn’t take long for that. The Fixed Income Fund (formerly “Fund D”) will be no more, effective February 1^st 2012.  All assets will be moved into a new Short-Term Bond Fund comprised of high quality bonds. We’ve heard from many participants who are apprehensive of the change, mainly due to concerns about risk. But the new fund should have very low risk, if equally low return.
3. An ominous note was sounded by the Pension Benefit Guarantee Corp (PBGC) about Kodak’s pension, known as KRIP. The latest numbers we have about KRIP stated it was 96% funded, a comfortable level. PBGC’s latest release mentions 86% and calls KRIP “reasonably well-funded” (our italics). The lower funding level may be a result of differing assumptions by Kodak and the PBGC, but we will be watching carefully for what they mean by “reasonably.”
4. CEO Perez mentioned in his recorded statement last week that it would be “business as usual” at Kodak.  I suppose if doubling the collective blood pressure of  your work force and requiring court approval for every dollar you spend is business as usual, he’s right.  At least the company will continue to operate while it seeks to reorganize.
5. Remember Collins Ink? They are the Kodak supplier that caused a splash last fall when they sought to cancel their agreement with Kodak out of concern that a bankruptcy would leave Collins, a small company, stuck with a large unpaid bill. A quick trip to court settled the matter and Collins kept supplying ink.  Unfortunately for Collins, their prediction came true. They are owed $1,889,468  and will likely get only a fraction of that amount when the bankruptcy is settled.
6. This bankruptcy may be shaping up to be a fight between management, who expect to control the process and lead the company back to health; and bondholders, who have lent Kodak nearly $2 billion and would like to get paid. It looks like bondholders may challenge management for the right to run the company.  Attorneys for the bondholders took shots at the Perez team in court, suggesting that management bled the company and that giving them too much cash would be “to everyone’s detriment.”
7. On Friday January 27^th, in conjunction with Senator Joe Robach’s office, we will be hosting another Community Resource Meeting at the Town of Greece Community and Senior Center, 3 Vince Tofany Blvd in Greece. We’ll have room for 300 people, but like our other meetings, this one is beginning to fill up.  For seats, please call our Kodak Hotline at 585-340-2246.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

The Importance of Emotional Detachment

While I pride myself on the relationships I develop with each and every one of my clients, I also pride myself on my emotional detachment I maintain in my investment philosophy. A great example of the benefits of staying the course and sticking with the plan, rather than making emotionally based investment decisions can be seen in the market activity of the last few months. We had a very rough summer filled with exceptional market volatility and negative sentiment. For all the doom and gloom, here we are a few months later off merely 4% from the May highs. If you had a plan in place and stuck with it, you would have came away relatively unscathed. For example, looking back to my previous post regarding the SPY’s, we see that we have successfully broken out of the triangle and look to be heading back to highs. I hope this is the case, as 2011 was a long year!

 

Sam DiNorma

 

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

We’re Going West

With over 25,000 Kodak retirees residing in the town of Greece, Brighton Securities is taking our Kodak Community Forum to the west side next week. At the request of Senator Robach and Assemblyman  Reilich, we’ll be hosting a forum to answer your questions and address your concerns about Kodak’s bankruptcy.

We’ll also give analysis on the company financials which will be released the day before on Thursday, January 26^th.

 As always, our hotline remains open throughout the crisis Please call 585-340-2246 with your questions or to register for the meeting.

  Residents of Greece and surrounding west side communities are welcome to attend next Friday’s meeting at the Greece Community Center. There is room for 300 people, meaning there will be a large group of other retirees and employees present to share your concerns and questions.

 

 WHEN:          Friday, Jan. 27, from 5 pm – 6 pm

 

WHERE:       Town of Greece Community Center

                        3 Vince Tofany Blvd., Greece, NY 14612

 

WHO:             George Conboy, president of Brighton Securities

                       @gtconboy

                     Senator Joseph Robach @SenatorRobach

                     Assemblyman Bill Reilich on Facebook

 

CONTACT:  For more information on the Kodak community meeting in Greece, visit http://www.brightonsecurities.com/ or call the Brighton Securities hotline to register (585) 340-2246.

 

Alexandra Conboy

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Bankrupt

 Kodak, bankrupt. How can it be? Who would have thought, ten years ago – even a year ago –  that this would come to pass. And yet here we are.  Our firm has been busy holding Community Resource Meetings for Kodak employees and retirees, helping to provide clear information at a time when rumor, half-truth, and urban legend have all circulated throughout the community.  We have another session tomorrow night here at our office and one a week from tomorrow in Greece, home of the largest concentration of current and former Kodakers.  

Here’s a quick rundown of what to expect – and what not to:

1. Bankruptcy means reorganization for Kodak – not liquidation. The company will try to sell its patents and some business units with a plan to slim down and emerge a smaller and more profitable company. Estimated time in bankruptcy: about 18 months.
2. For retirees who are receiving monthly pensions, no worries. Your pensions are safe and will continue to be paid. Some special executive plans will probably suffer, and current employees may find available pension options curtailed.  But KRIP pensions are well-funded and safe.
3. SIP, Kodak’s well-known 401k plan, is also safe. Kodak cannot touch those assets and neither can its creditors. There should be no meaningful short-term change in investment options, including the Fixed Income Fund (still known as “Fund D” to many).
4. Health insurance benefits are safe – for now. Since Kodak will operate under bankruptcy protection, the company cannot terminate or alter retiree health benefits without court approval. It’s true that Kodak could move quickly and ask the court to approve a prompt termination, but we see that as highly unlikely. Current view: retiree health insurance will not end prior to the end of bankruptcy.
5. Employees will keep their jobs and benefits – for now. Kodak will try to sell businesses (consumer is high on the list) but even if sold a lot of jobs will remain.
6. Many of the upbeat projections rely on a sale of patents for the higher end of the range, $2 – $3 billion. A strong patent sale will lubricate the entire process.
7. Still waiting to hear a realistic, believable scenario from the office of the CEO.  Because this time last year, here was the story

Stay with us on Facebook and Twitter for the latest.  For Kodak employees and retirees with questions, our hotline is 585-340-2246.

 

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Are you one of the 99 thousand?

For years the Internal Revenue Service has encouraged taxpayers to receive their refunds through direct deposit.  The Internal Revenue Service recently announced that it is looking to return $153.3 million in undelivered tax refund checks. In all, 99,123 taxpayers are due refund checks for last year that could not be delivered because of mailing address errors.  The undelivered refund checks average $1,547.

Taxpayers who believe their refund check may have been returned to the IRS as undelivered should use the “Where’s My Refund?” tool on IRS.gov. The tool will provide the status of their refund and, in some cases, instructions on how to resolve delivery problems.

Taxpayers checking on a refund over the phone will receive instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.

Senator Chuck Schumer (D-N.Y.) recently announced that New York State has over 7,000 state refund checks returned by the post office as un-deliverable due to address issues.  These checks total about $14.5 million or an average of over $2,000 per check, sitting in a bin somewhere in Albany.

 Direct deposit is definitely the way to go!!

 

Joe Arena

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

On The Brink

For months the story of Eastman Kodak has swirled with rumor and urban legend.  Word from the CEO had been relentlessly upbeat, despite what employees, retirees, investors, and everyone else could see happening: cash dwindling and lawyers circling.  Patents have been up for sale but no deal has been struck.  Stories of “rescue financing” have circulated, but no one has been willing to lend to a company whose situation has become so precarious. And then last night the word came from Bloomberg News that Kodak is in “advanced discussions” for bankruptcy financing.

Sometimes when there’s smoke it’s just smoke.  But with Kodak lately I think fires are raging on the top floors of 343 State Street. Sources inside Kodak are speaking out, and the same goes for people connected to the banks who may lend.  There are credible stories that some of the leaks may have been engineered by Kodak itself, as a way of preparing the public for an imminent bankruptcy. Last week’s resignation of Kodak’s Chief Communications Officer Gerard Meuchner was just one more troubling sign of turmoil at the top.

All that turmoil has meant sleepless nights for thousands of Kodak employees and retirees, who are concerned about what a bankruptcy would mean to them and their families. If there’s any silver lining to this story, it’s that most retiree benefits will remain intact (except healthcare) and that Kodak will not simply shut down and send all of its employees home.

We have been saying for months that Kodak is headed for bankruptcy, and it looks like they are about to file.  As the event looms near, I’ll feel no satisfaction if we’re proven right.

Questions or comments? Find me on Twitter to continue the conversation.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Hail to the Chief

Brennan Redmond has many titles. He is a Financial Advisor, a CFA, and a (newly-promoted) Vice President. Today he added one more: President.

 After serving as its Treasurer, Brennan was elected President of the Brighton Chamber of Commerce today.

 He’s just the kind of guy we like here at Brighton Securities – committed to the community inside the office and out (also he scored some runs on our company softball team last summer). Way to go, Brennan!

Alexandra Conboy

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

The “Fed”

I had the pleasure of attending the Simon School’s Annual Economic Seminar yesterday.  I enjoyed Federal Reserve Bank of Philadelphia President Charles Plosser’s thoughts and perspective.  Mr. Plosser gave a fairly subdued yet constructive outlook on the nation’s economy.  He believed the U.S. would not find it’s way into recession this year, he believes the nations GDP will track at a 3% growth rate.  He feels the housing market will stabilize , however, does not foresee robust growth.  All in all, my sense is he is in the “muddle along “ camp. 

 I thought the most interesting points Mr. Plosser made were in reference to his interpretation of current and future Fed policy decisions and how the message is disseminated to the public.  Mr. Plosser assured me that the federal reserve does have independent thinkers who are encouraged to voice their opinion both publically and privately.  A quote that struck me was ”federal reserve policy should not be set by the calendar.”  This is a reference to Dr. Bernanke’s decision to publically disclose that the Federal Reserve will hold short term interest rates low until mid 2013.  Mr. Plosser’s contention and I wholly agree that “ how does anyone know now what fed policy should be 12 months from now?”  Mr. Plosser also contends that the more transparency there is with respect to how Fed policy is established and what the factors were that went into the policy decisions the better it is for our nations citizens.  Once again, I agree.

 

Doug Hendee, CFP^®

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Call Us on Our Meeting Conference Line

Due to the great interest in our Kodak Q&A meetings being held this week, we have set up a conference phone line to allow those who are unable to attend in person to ask questions and to listen in on the live meetings. 

 The phone line will be open from 5:30pm to 6:30pm on Thursday, January 12th and from 4:00pm to 5:00pm on Friday, January 13th. 

 Our toll-free conference dial-in number: (866) 576-7975

Enter participant access code: 625914

 You may also contact us with questions via twitter (@gtconboy, @chris_crom, #ROCKodak) or post to our wall on Facebook.

 

Laura Geyer

 

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).