You mis-understand. I'm not calling you out on anything, just throwing out how I thought things worked in my (truly) uneducated financial worldview. If you feel I put you on the spot I apologize.
Semi - Sorry for being over sensitive. I am just so sad re this whole Kodak issue (reguardless of why we are here today), tis like watching a train wreck in slow motion. Looks like the wagons are circling now and just kills me to watch it!
I've not studied EK's account, but I suppose that Bonds could be secured on the specific collateral of patents or some other asset? IDK?
e.g. I have a mortgage loan on my house....I own the house, and the bank demands a rate of interest to reflect the risk of me not paying back their investment. However, if I went bankrupt, they would have a "first charge" on the house...so they would have their loan fully repaid from the sale of the house, before any other creditors had anything paid off their debts. Similar, if or when I move house, I have to arrange to either repay the bank, or arrange for the loan to be secured against the collateral of my next house.
www.slashdot.org and check out the Kodak story. I have nothing against Technology but, jeez Louise. And they think Apple users have swallowed some kool-aid.
The bondholders are calling Kodak's loans. Or at least threatening to do so. This is the way bondholders vote against their confidence in management. The bondholders are clearly worried that a Kodak based on its digital/analog portfolio sans patents will not be equal to the collateral obligation at time the loan was issued. Nor do they have faith that Kodak to pay the coupons on the bonds faithfully. Management appears to want to sell the patents to substitute for revenues from day-to-day activities. The story is from the Chief Operating Officer, no less, the person responsible for day-to-day. Shareholders also see this, so they are selling the stock.
Kodak management has responded (and it is their fiduciary obligation to do so) by hiring legal counsel. The market and third parties haven't much faith in management utilizing either current revenues or funds from the sale of intellectual property.
As noted in another post, this may only be decided by a judge if the creditors and Kodak management cannot hammer out an agreement.
If the bonds were secured by patents and the patents were sold, the bond holders have to be paid. There would be no security for the bond if Kodak no longer owned patents. Same principle as selling a mortgaged home. The lender gets his money first, you get what is left over.
What I find really surprising is that their Digital Imaging IP portfolio is only 10% of their IP portfolio. Hard to tell whether that is measured in terms of actual numbers of patents or perceived value. But when you factor in the natural expiration of IP over time and that the digital IP should be the freshest, this is very surprising number. It suggests to me that Kodak really didn't make a serious foray into digital and/or was very unsuccessful in doing so.
Then again, when Kodak was at the top of their game in film-related research, they were probably patenting left and right. I just wonder how much of that IP still carries value.
If they are indeed selling off their digital IP, well that's great.
I hate to be a sky is falling believer, but the two below articles are just making me think the wagons are circling, and fast (bond holders and now Fuji):
1) Eastman Kodak Could this American Icon Go Bust (written 10/15/11)
2) Fuji Sues Kodak Over Digital Patents (written 10/14/11)
I know 'keep your head down, don't look at the train wreck and make pictures', but reading these articles just pains me...
The Fuji lawsuit adds quite a wrinkle, could they sell their digi patents when they might have some of those very patents named in a lawsuit with Fuji now?