Bankruptcy Archive

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Bankrupt Kodak Finally Starts Killing Hopeless Businesses, Retains Doublespeak

By
Inelegant Investor
– February 9, 2012Posted in: Inelegant Investor

Eastman (EKDKQ), in with its shares destined to be worthless, is finally starting to make the

English: This is a Kodak EasyShare LS743 digit...

moves that might have helped it avert this fate had failed CEO Antonio Perez undertaken them sooner. The company announced today that “it plans to phase out its dedicated capture devices business“.  Perhaps part of its failure lies in its insistence on using  obtuse language to describe its actions and products. Dedicated capture devices business?  Does McDonald’s speak of its “Animal derived protein-based human consumables business”?  Even the Postal Service doesn’t talk about cutting “physical object routing and transmittal personnel”.

With bankruptcy rumors swirling late last year, Kodak’s defenders were talking about imagined strength in Kodak’s digital camera business. With the company killing this business and saving $100 million per year by doing so, we now see that many of the rosy claims made about Kodak were not grounded in reality. One wonders why the company is continuing its struggling consumer printer business.

Long ago, the company split into a chemicals business and an imaging business. Its brand was once synonymous with photographs, though the cameras were often made by others. The company needs to return to these roots and pursue an asset-lite “Kodak-inside” business model, licensing its brand, intellectual property, and components for inclusion in others products.

Disclosure: The author holds no position in any stock mentioned

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Kodak Shares Worthless As Firm Finally Files Chapter 11

By
Inelegant Investor
– January 19, 2012Posted in: Inelegant Investor

We’ve been warning for weeks that Eastman (EK) shares were too dangerous to own. Kodak finally made it

080809_Kodak_Tower_Top

official late last night and filed a voluntary business reorganization.  Citigroup will provide $950 million in debtor-in-possession financing. As we had stated, the company’s liabilities were to great, its ability to monetize intellectual and real property too slow, and its digital and other new operations not developing quickly enough to avoid this outcome.

We continue to believe that Kodak will emerge from the as a strong, but smaller company, having shed the liabilities that strangled it, having disposed of non-core assets, and having retained those parts of the company with the best prospects. It is important to note that current shareholders will not participate in this and that their shares are worth zero.  Inevitably in a bankruptcy, a robust market continues in the company’s shares despite the fact that there are very few cases when shares of bankrupt companies retain value(one recent example would be SYMS(SYMSQ)). This will not be an exception to the rule. Those who own Kodak ought to sell and salvage what they can, those who don’t should not buy. Our sympathy is with Kodak employees, vendors and partners during this difficult time.  We hope that the company’s reorganization and eventual emergence in 2013 will remove the clouds of uncertainty and create new growth and new opportunities.

Disclosure: The author owns shares in

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Eddie Lampert Doesn’t Fear Sears Bankruptcy, Personally Purchases $150 Million Worth Of Sears Stock

By
Inelegant Investor
– January 12, 2012Posted in: Inelegant Investor

It’s been a brutal year for (SHLD) and a brutal year for Eddie ’s hedge fund . ESL has recently handed over shares of (AN) to investors, presumably to cover redemptions, but it looks like Mr.

English: Sears Hawthorn Center.

Lampert is not willing to part with shares of . The WSJ reports, based on public filings, that Lampert purchased 4.46 million shares of Sears from the fund, and spent another $12 million purchasing shares on the open market.  In our opinion this is a positive sign.  That Lampert did not inject cash into the company by purchasing new shares, or by purchasing new securities senior to common equity, or by purchasing outstanding distressed debt, sends a strong message that he does not believe the company is at risk of or that it faces a liquidity crunch.

UPDATE: Redemptions were paid in AutoZone(AZO) shares, not AutoNation which ESL also owns a large stake in.
Disclosure: The author owns shares of

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Don’t Be Fooled By Eastman Kodak’s Dead Cat Bounce

By
Inelegant Investor
– January 12, 2012Posted in: Inelegant Investor

(EK) surged 35% today, building on yesterday’s gains. Investors were reacting positively to two pieces of news released by the company.  On Tuesday morning the company announced it was restructuring from three reporting segments to two.

Under the new structure, Kodak has reduced its number of segments from three to two – the Commercial Segment and the Consumer Segment – which will both report into a newly created Chief Operating Office. The Chief Operating Office will be led by Philip Faraci, who will continue to serve as Kodak’s President and Chief Operating Officer and by Laura Quatela, who was recently named, alongside Faraci, as President and Chief Operating Officer of Kodak. Faraci will focus on the Commercial Segment and the company’s sales and regional operations, and Quatela will focus on the Consumer Segment and certain corporate functions. Both individuals will report to , Chairman and Chief Executive Officer, as will the positions of Chief Financial Officer, Chief Technical Officer, Chief Marketing Officer and General Counsel.

“As we complete Kodak’s transformation to a digital company, our future markets will be very different from our past, and we need to organize ourselves in keeping with that evolution,” Perez said. “This new structure simplifies the organization, focuses it more precisely on our consumer and commercial customers, and puts the right people in place to capitalize fully on the tremendous technological capabilities of Kodak. These business structure changes also allow us to allocate resources more productively, continue to significantly reduce administrative costs, and improve efficiency. We are confident that these changes will support our efforts to make the most of our opportunities.”

This led to a significant jump in the stock price, but it is unclear why.  The company has rearranged furniture, but ultimately not addressed the key problem which is that the company needs cash now. While this change may lead to cost savings and/or increased profitability, it certainly won’t do so in time to help the company with its current dire situation.

After the bell on Tuesday, the company released a second announcement.  In it, the company announced that it had filed patent infringement lawsuits against (AAPL) and .  The claims were similar to previous claims the company has made regarding infringement by phone and tablet devices of a series of ridiculously broad patents.  Interestingly, Kodak did not file any claims against Google(GOOG) or (MMI).  Kodak has been in discussions with all of these firms for sometime and been attempting to sell its patent portfolio.  This is a desperate, last-ditch attempt to force a settlement or purchase, but it is unlikely to result in any cash quickly enough to avoid . Despite this, shares were up 35% on Wednesday.

Mr. Market is in a manic mood and his bid this company up significantly in the last two days, but the common stock is still worth what it was before Tuesday’s open- nothing.

Disclosure: The author holds no position in any stock mentioned

 

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Eastman Kodak Preparing Bankruptcy Filing- WSJ

By
Inelegant Investor
– January 4, 2012Posted in: Inelegant Investor

Kudos to the for scooping the story that (EK) is preparing a bankruptcy filing and may file by month’s end.  The company is still exploring a patent sale to stave off , but it will be difficult to get adequate price in this distressed situation.  The company is said to be in negotiations for $1B in debtor-in-possession financing.  stock is down over 30% on the news- a stark reminder to those who have chastised us in recent days for picking on a beaten down stock that there is always more room to go down. Bankruptcy will wipe out shareholders, but will provide opportunity for the company to shed its liabilities and legacy costs, sell surplus assets in a controlled and organized way, and emerge with a profitable, but smaller operating business.  We believe the future for Kodak is bright, but current shareholders will not participate in its rebirth.

Disclosure: The author holds no position in

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Eastman Kodak Delisting Notice a Non-Event

By
Inelegant Investor
– January 3, 2012Posted in: Inelegant Investor

Lately, it seems like this blog is becoming all Eastman (EK) all the time.  Odd for a stock we don’t even own. Some Kodak bulls  have commented that we interpret every piece of Kodak news negatively, so we felt we should comment that today’s announcement that Kodak has received a continued listing standards notice from the is insignificant and should not factor into any appraisal of the company’s prospects.  There is nothing surprising about the notice; it merely states that the company’s average stock price has been below $1 for 30 consecutive trading days- something anyone with a calendar and internet access ought to have known.  It has no bearing and passes no judgement on the company’s prospects.

Kodak has 6 months to remedy the situation. By that point, either the stock will have rebounded above $1, or the company’s financial situation will be dire indeed.  We continue to think that is likely to file for this year- but this delisting notice has nothing to do with it.

Disclosure: The author holds no position in

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Can Eastman Kodak’s Real Estate Save It?

By
Inelegant Investor
– January 3, 2012Posted in: Inelegant Investor

A comment on a recent post asked whether we’d considered the value of Eastman ’s(EK) . It’s not something we’d given much thought to, but we’re friendly folk and so we proceeded to do a bit of digging.  Our first stop was Kodak’s most recent 10K. While some companies provide detail on their real estate holdings, Kodak provides a bare minimum. Kodak lists $1.037 billion in Property, Plant, and Equipment, $664 million in the United States, and $337 million abroad.  It’s reasonable to assume this long held property is held on Kodak’s books at a significant discount.  The most significant piece of real estate we were able to find is the 1200 acre Eastman Business Park in Rochester. The park has 300 greenfield acres resulting from the demolition of 44 buildings. There are still over 100 buildings remaining, and 14 have already been sold to other firms, including the largest, a 2.1 million square foot building sold for $11 million in 2008.

Kodak is also nearing a deal to sell some space to .  The college plans on spending $75 million to purchase and renovate the buildings.  Kodak’s real estate holdings are impressively large, and given the luxury of time the company could conceivably raise upwards of $2 billion by selling them, but it would be difficult to realize a fraction of that in the compressed time frame the company is working on. Similar to the patents, which I believe have been the subject of overly optimistic valuations, the real estate will take time to see its full value realized.  Any attempt to move the real estate quickly will result in lower sale prices. It’s possible that if the company can monetize some real estate and some intellectual property quickly, that can be staved off for the time being.  However, management will still be faced with a company bleeding money that they have not been able to staunch.

Please share any further information you have about Kodak’s real estate holdings so that we can continue to refine our valuation estimates.

Disclosure: The author holds no position in any stock mentioned.

Can Eastman Kodak’s Real Estate Save It? is a post from Inelegant Investor – Something of Value. All Rights Reserved.



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Response To Critic Of Our Eastman Kodak Post

By
Inelegant Investor
– December 30, 2011Posted in: Inelegant Investor

Recently, we’ve taken a dim view of Eastman Kodak’s(EK) prospects.  As we wrote here and here, we believe the company is most likely past the point where a turnaround outside of bankruptcy is possible. A commenter assuming various names, most recently “Truthseeker”, has expressed his criticism in a most disdainful and discourteous manner.  While we [...]

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