updated 07:12 pm EDT, Tue August 20, 2013
Kodak's rebirth funded by new stock sale, $895 million in loans
A plan slashing $4.1 billion dollars of debt in order for Eastman Kodak to emerge from bankruptcy has finally been approved by the court. Judge Allan Gropper approved the plan, but at a cost -- the judge said in his ruling that despite the approval, "this is on a day when many are losing retirement benefits, when many are finding that their recovery as a creditor is just a minute fraction" of what was originally promised by the fallen giant.
Under the plan, shareholders receive nothing. Unsecured creditors will be paid between four and five cents on the dollar. Secured claims will be paid in full. The judge rejected claims that Kodak has been hiding assets in the filing, dashing the hopes of most of the creditors. The pool of unsecured creditors are owed as much as $2.2 billion, with the share award to the class worth approximately $66.15 million. Also in the "unsecured creditors" group are Kodak retirees, an assembly owed $635 million.
In a statement released by Kodak's chairman and CEO Antonio M. Perez, Kodak will once again serve "as a technology leader serving large and growing commercial imaging markets -- such as commercial printing, packaging, functional printing and professional services -- with a leaner structure and a stronger balance sheet."
Funds for the emergence will be generated by the sale of $406 million of new stock. Additionally, Kodak will require $895 million in loans for the exit. The plan has shifted Kodak away from its traditional business, and migrates it towards sensors for computer equipment. It will still produce film stock for Hollywood and other entertainment industries.
To escape from the financial pit, the company plans on focusing on the strongest segment it has left -- digital printing. At the end of 2012, the company announced it would sell its print-film business and several other related businesses to raise additional funds. The imaging giant made the move public in the last days of its patent portfolio auction.
Jusge Allan Gropper, the judge overseeing the Kodak bankruptcy proceedings, approved a $525 million patent sale to assist the company in successfully navigating the Chapter 11 process. The completed sale allowed the company to obtain an additional $830 million in financing on top of the patent proceeds.
"Kodak is one of the best-known names of American business," Gropper said today in court. "Its decline in bankruptcy is a tragedy of American economic life. I've reviewed dozens of letters from Kodak shareholders asking how the company in which they invested fell so far." The company has lost $1.76 billion since 2008.