Eastman Kodak Preparing To File For Chapter 11 Bankruptcy

Posted Jan 4, 2012

Eastman Kodak Company is preparing to file for a Chapter 11 bankruptcy-protection in the next few weeks just in case they are unable to sell a collection of digital patents. Kodak currently employs about 19,000 people and they are discussing with lenders for about $1 billion in debtor-in-possession financing that would keep them from shutting down.

Kodak has about 1,100 patents that they could sell through a court-supervised bankruptcy auction. Kodak would continue to pay their bills and operate normally while under bankruptcy protection. Kodak said in a securities filing that they will run out of cash to fund their operations unless they are able to sell some of their patents or are able to borrow more money. The company is also at risk of being delisted from the New York Stock Exchange unless they are able to rebound in the next six months.

Kodak CEO Antonio Perez considered using patent lawsuits and licensing deals as a strategy to raise cash and fund the turnaround, but that did not work out.  Kodak hired restructuring advisers and drew about $160 million from a credit line.  Kodak would be using the bankruptcy proceedings to run a court-supervised auction in selling the patents, which is a very similar way that Nortel Networks Corp. did last year.  Nortel sold their patents to a consortium of companies for $4.5 billion.  The auction would be overseen by a judge with court approved procedures.