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).

Today’s Kodak Hearing

As we blogged about yesterday, Kodak is in bankruptcy court today where a good amount of information about what this bankruptcy will be like ought to be revealed.  The hearing began at 11:00 a.m. and the first news coming out today has been about Apple’s request of the court to go forward with patent infringement lawsuits against Kodak.  That’s an interesting stance – bankruptcy court should not hinder their lawsuit(s) but Apple is asking regardless.  They’re the 800 lb. Gorilla in the room and they’re playing nice.  Why?  What else do they want from the court? 

As I’ve been writing this post, the hearing has finished.  Here are some decisions: DIP financing to be approved, Kodak’s name to come off of Hollywood theater, fees for lenders noted (28 million) but DIP docs may be kept under seal, patent sale will pay back DIP. 

The Kodak theater not being named the Kodak theater anymore ought to make some headlines.  Probably starting to already.  Let’s check… yes.

No commentary, as far as we know, about pensions and retirement benefits from this hearing.  DIP lenders have helped their case by placing themselves high up, but their position before most everything else was expected and is to our understanding customary.  For our community of retirees and employees that means continuing to wait and see.

Stay tuned to this blog; as we get information, we provide it.  Follow George (@gtconboy) or me (@chris_crom) on Twitter and sign up for our blog here.

Chris

Chris Cromwell
Business Development Manager
Brighton 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).

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.