Quote Originally Posted by arpinum View Post
I'd like to gently sprinkle some cold water on hpulley's optimism:

The $3B figure for patents is too high. One research firm published this guess, but subsequent patent sales by others have shown the patent buying frenzy to be short lived. Kodak has been monetizing these patents for some time, and most major companies already have licenses. Those who won't pay have been doing well in the courts to squash the patents. Expect no more than $2B, and could be under $1B

Kodak only has 6-10 months before serious cash flow issues appear. The debt is junk status and sells for 25-45 cents on the dollar. Their pension liabilities are much greater than they admit due to their overly optimistic predictions on rate of return (~8.7%). A more realistic assumption would have their losses increase by at least 10% a year and adds $2B to total liabilities.

Kodak expects their turnaround to take another three years. To avoid a cash crunch they will be forced to sell not only their patents, but other valuable assets as well. They have already sold off many divisions, including the space and OLED divisions to name a few.

The patent sale won't net them as much cash as you think. Due to Kodak's debt obligations and terms (~$1.2B), assets sales such as this cannot be used to fund ongoing operations and must first go toward repaying debt. The cash from patent sales won't tide them over through the restructuring plan, and will buy them only a maximum of 2 years cash.

Can the company be restructured in bankruptcy?: Bankruptcy would slow the cash outflow enough for kodak to finish the restructuring, assuming the boat can be turned around.

Is liquidation still a possibility: ?
You're right about those patents. And the number of buyers for those patents is swiftly declining as the markets to which those patents are relevant begin to mature (just ask Nokia, RIM, Motorola, HP, etc...)

I think seeking Ch. 11 protection sooner rather than later is the right thing to do because we're again faced with the potential of a serious global banking crisis - which could make it much, much harder for them to get "debtor-in-possession" financing.

Given that all of their operations remain in cyclical or secular decline and the risk-aversion of lenders, yes, I think Ch. 7 liquidation is a definite possibility. In fact, Kodak's debtholders may prefer that the company go that route immediately because Kodak's assets are not likely to appreciate as time passes.

And even if they do obtain financing for continued operations, I think that that financing would only come about as a result of a restructuring plan that breaks up the company.

I'm not sure where all of the above leaves the film division but I suspect that if Kodak film continues to be manufactured, it will have to be made outside of the USA. The current USA-based production infrastructure is now too large and there is the ongoing matter of toxic torts...