Rochester, NY—Eastman Kodak Company and its U.S. subsidiaries filed voluntary petitions on January 19 for chapter 11 business reorganization in the U.S. Bankruptcy Court for the Southern District of New York. The U.S. Chapter 11 proceeding is a legal mechanism that generally focuses on the preservation and reorganization of ongoing operating companies. The process will allow Kodak to continue normal business operations while restructuring to further attempt sustainability.
Last week, Kodak announced a more simplified business structure to accelerate its digital transformation and attain sustainable profits, and now the company plans to further reorganize “to bolster liquidity in the U.S. and abroad, monetize nonstrategic intellectual property, fairly resolve legacy liabilities and enable the company to focus on its most valuable business lines.”
Kodak obtained a fully committed, $950 million debtor-in-possession credit facility with an 18-month maturity from Citigroup to enhance liquidity and working capital. The credit facility is subject to court approval. Kodak believes that it has sufficient liquidity to operate its business during chapter 11, and to continue the flow of goods and services to its customers in the ordinary course.
In recent months, the company has attempted to sell noncore assets, including Eastman Gelatine Corporation and its Image Sensor Solutions, to sharpen its focus on digital growth initiatives, as well as sell off portions of its huge patent portfolio to generate operating cash flow as it struggles to get its core digital businesses on track.
Under Chapter 11, Kodak expects to pay employee wages and benefits and continue customer programs. Subsidiaries outside of the U.S. are not subject to proceedings and will honor all obligations to suppliers, whenever incurred. Kodak and its U.S. subsidiaries will honor all post-petition obligations to suppliers in the ordinary course, the company stated.
“Kodak is taking a significant step toward enabling our enterprise to complete its transformation,” said Antonio M. Perez, chairman and CEO. “At the same time as we have created our digital business, we have also already effectively exited certain traditional operations, closing 13 manufacturing plants and 130 processing labs, and reducing our workforce by 47,000 since 2003. Now we must complete the transformation by further addressing our cost structure and effectively monetizing noncore IP assets. We look forward to working with our stakeholders to emerge a lean, world-class, digital imaging and materials science company.
“After considering the advantages of chapter 11 at this time, the board of directors and the entire senior management team unanimously believe that this is a necessary step and the right thing to do for the future of Kodak,” Perez continued. “Our goal is to maximize value for stakeholders, including our employees, retirees, creditors and pension trustees. We are also committed to working with our valued customers. Chapter 11 gives us the best opportunities to maximize the value in two critical parts of our technology portfolio: our digital capture patents, which are essential for a wide range of mobile and other consumer electronic devices that capture digital images and have generated over $3 billion of licensing revenues since 2003; and our breakthrough printing and deposition technologies, which give Kodak a competitive advantage in our growing digital businesses.”
Perez concluded, “The board of directors, the senior management team and I would like to underscore our appreciation for the hard work and loyalty of our employees. Kodak exemplifies a culture of collaboration and innovation. Our employees embody that culture and are essential to our future success.”
The company has also taken this step after preliminary discussions with key constituencies and intends to work toward a consensual reorganization in the “best interests of its stakeholders.” Kodak expects to complete its U.S.-based restructuring during 2013.
Kodak will be filing monthly operating reports with the bankruptcy court and plans to post these monthly operating reports on the Investor Relations section of kodak.com. It will continue to file quarterly and annual reports with the Securities and Exchange Commission, which will also be available in the Investor Relations section of kodak.com. Information for suppliers and vendors is available at (800) 544-7009 or (585) 724-6100.
