Kodak expects to emerge from bankruptcy as early as July according to the company’s reorganization plan filed late Tuesday.
The 78-page document filed with the US Bankruptcy Court, states the company expects to issue new stock to some of its creditors for almost $3 billion of unsecured debt. But under this plan, current shareholders would see their stock become worthless.
Analyst George Conboy, President of Brighton Securities says that’s pretty standard for a company in Kodak’s position.
“It’s a little bit like, you own a home, you can’t pay your mortgage. They don’t bulldoze the house, they take the house away from you – you’re the shareholder – and they give the house to the bank because the bank lent the money. And in this case, all of the equity, the ownership in Kodak will be given to the lenders.”
Post-bankruptcy, Kodak looks set to have a new board that will include current CEO Antonio Perez, as well as members from committees representing note holders and creditors.
With a focus shift to its commercial imaging business, the plan also projects that the company’s revenue decline will rebound as early as next year to result in roughly $3.2 billion in sales by 2017.
The plan comes a day after Kodak reached a deal to turn over its personalized and document imaging businesses to UK retirees in return for $650 million and the settlement of nearly $3 billion of claims.
Conboy says that deal clears the last two hurdles facing Kodak before emergence. He doesn’t expect any roadblocks for the company on its path to exiting bankruptcy .
Kodak says it anticipates the bankruptcy court will schedule a hearing in mid-June on the plan, and the company expects to emerge from Chapter 11 sometime in the third quarter. CEO Antonio Perez calls this a major milestone in the reorganization and he says Kodak is being positioned for a profitable and sustainable future as a commercial imaging company.
But, Conboy says Kodak will face a big challenge in its transition from industry giant to minor player.
“The old Kodak was a behemoth in their marketplace. The new Kodak will be a much smaller player in the industry they’re in, which is the global printing industry. They’ll be selling equipment that has good technology, but as a niche player they will have to struggle for market share.”
Conboy says the face of Kodak will also be markedly different for consumers. We can expect to see labels and packaging printed by Kodak technology, but the days when Kodak actually produced the products that carry its iconic red and yellow seal are long gone he says.