What Goes Around

Last October an Ohio company, Collins Ink, made local headlines by halting shipments of its product to Kodak, citing concern about the impact to Collins of a Kodak bankruptcy. After a quick trip to Federal court, Collins and Kodak agreed to resume their relationship and Collins dropped from the headlines.  Fast forward to January 19 and we were reading the Collins name again, this time listed as one of Kodak’s 50 biggest creditors (find them here, page 18) owed just under $2 million. As it now stands, Collins is unlikely to see much of that money – the very outcome Collins said it feared when it attempted to cancel its relationship with Kodak.

Collins Ink is a small company, $12 million in sales compared with Kodak’s $6 billion. And I can’t help thinking that in their court fight, Kodak got the justice it could afford. But Kodak has bigger legal issues, with bigger adversaries.  A critical case, one in which Kodak has supposedly prevailed, is a patent dispute with Apple and Research in Motion (RIMM). The International Trade Commission (ITC) first ruled for Apple/RIMM, then reversed itself and awarded Kodak $1 billion in damages. But curiously, the ITC has been delaying, and delaying again, a final order in the matter. That delay is an urgent matter for Kodak, which had been hoping for the cash to help it avoid bankruptcy.  With bankruptcy a fact, now the money could help Kodak emerge healthier down the road. But Apple is not giving up the fight, asking the bankruptcy court for permission to sue Kodak for infringement.

In this new reordered scenario, Kodak is the small fry, facing a much larger adversary in court.  One wonders if Apple will get the justice it can afford. We will see what comes around.

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).

Kodak’s (Next) Day in Court

On Wednesday February 15^th, Eastman Kodak’s lawyers will be back in court in Manhattan. The topic on this trip to court will be Kodak’s request to pay some of its creditors ahead of others.  This is a big deal to everyone involved in the Kodak bankruptcy. Every dollar paid to one creditor may be a dollar that can’t be paid to another. With a towering pile of IOUs and not enough cash to meet them all, everyone hoping to get paid – vendors, bondholders, retirees – has a stake in this hearing.

Kodak’s recent requests to the court suggest that they consider some creditors more equal than others. When Kodak filed for bankruptcy they listed $332 million in trade credits – money owed to vendors. Now Kodak has asked the court to pay $100 million of that in full immediately, claiming that money is owed to unidentified “critical suppliers.” Any  company that sold goods to Kodak and remains unpaid might be a part of this mysterious group; any one that isn’t will be at an immediate disadvantage.

Judge Allan Gropper has seemed willing at times to defer to bondholders – he reduced Kodak’s initial DIP financing request from $700 million to $650 million, and initially denied the company’s request to pay the critical suppliers.  But he’s also granted Kodak’s request to reduce from 2 weeks to 1 week the window for objections to Kodak’s motion that the DIP contract be kept a secret. Where he will come down tomorrow is anyone’s guess, but we expect sparks to fly at tomorrow’s meeting.

The bankruptcy process is an ebb and flow of information – at times we are flooded with news and at other times we are forced to wait for just a trickle.  Tomorrow ought to be closer to a flood.

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).