Eastman Kodak Company took two significant steps towards emerging from Chapter 11 bankruptcy this month: winning court approval to cut off health benefits to retirees by the end of 2012; and a deal with bondholders which will injects more cash into the company.
The ending of health benefit obligations will effect around 56,000 retirees and their dependants.
Kodak said that while it ‘understands and appreciates the contributions of our retirees … and recognizes that this action will pose challenges,’ ending the benefits ‘is one of the many necessary and critical steps to put the company on a path to emerge as a profitable, sustainable company.’
The deal this week with bondholders for $793 million in loans, creates a path out of bankruptcy for Kodak as essentially a commercial printing company, ending any direct connection to the photographic industry.
Obstacles on the path are the sale of remaining photographic business units, the sale of its patent portfolio for at least US$500 million and a rearrangement of its UK pension obligations (one of EK’s largest creditor groups).
A rebel group of bondholders have since made a court filing demanding a say in the plan to emerge from Chapter 11, which would stymie the deal with the other bondholder group. They said they had ‘lost all faith’ in CEO Antonio Perez and other Kodak senior executives, who have presided over consistent operating losses and allowed the company to ‘burn cash at an astounding rate’ – losses of nearly $1 billion from operations since filing for bankruptcy, or roughly $107 million a month.
‘Having had and wasted 10 months, it is time to break the debtors’ stranglehold on the plan process so that other parties may move these cases forward,’ the bondholders said in court papers.
Mr. Perez said in a statement that the new financing deal would allow the company to exit bankruptcy during the first six months of next year and ‘establishes a clear path for our emergence as a stronger, more focused company.’
Kodak reported a US$312 million loss in its third quarter (June-Sept), compared to a loss in the third quarter of 2011 of US$222 million. One of the few profitable segments of the company was the Personalized Imaging and Documents Divisions (including traditional film and photographic paper) which made a profit of US$10 on sales of $382 million.