(Reuters) – Eastman Kodak Co, the photography icon that invented the hand-held camera, has filed for bankruptcy protection and plans to shrink significantly, capping a prolonged plunge for one of America’s best-known companies.
The Chapter 11 filing makes Kodak one of the biggest corporate casualties of the digital age, after it failed to quickly embrace more modern technologies such as the digital camera — ironically, a product it invented.
Kodak once dominated its industry, and its film was the subject of a popular 1973 song, “Kodachrome,” by Paul Simon.
The bankruptcy may give Kodak, which traces its roots to 1880, the ability to find buyers for some of its 1,100 digital patents, a major portion of its value. Kodak now employs 17,000 people worldwide, down from 63,900 just nine years ago.
“It is a very sad day even though we had anticipated it,” said Shannon Cross, an analyst at Cross Research who has had a “sell” rating on the company since 2001. “If it emerges, it will be a much smaller entity.”
According to papers filed with the U.S. bankruptcy court in Manhattan, Kodak had about $5.1 billion of assets and $6.75 billion of liabilities at the end of September. In court documents, Chief Financial Officer Antoinette McCorvey said, without elaborating, that Kodak plans to sell “significant assets” during the bankruptcy.
Kodak expects to complete its U.S. restructuring in 2013. Non-U.S. units are not part of the Chapter 11 case.
“This is a necessary step and the right thing to do for the future of Kodak,” Chairman and Chief Executive Antonio Perez said in a statement yesterday.
Kodak’s market value has sunk below $100 million from $31 billion 15 years ago, when its share price topped $94.
The shares began trading yesterday on the Pink Sheets, and closed down 6 cents at 30 cents.
At a nearly five-hour court hearing yesterday, Kodak won interim approval from U.S. Bankruptcy Judge Allan Gropper to obtain up to $650 million of debtor-in-possession financing led by Citigroup Inc.
The amount is $300 million less than Kodak had sought, but would allow it to keep operating and avoid having to liquidate. A hearing to consider final approval was set for Feb. 15.
Kodak’s proposed 18-month package drew objections from secured creditors concerned they might not be paid back if Kodak executives mismanaged the company, allowed losses to mount, and failed to come up with a viable reorganization plan. Lenders and creditors argued at yesterday’s hearing over whether the package was too big. Gropper agreed that it could be cut down without threatening Kodak’s ability to operate.
“This is not going to be a Chapter 7,” the judge said, referring to a part of the U.S. bankruptcy code that governs liquidations.
Perez, a former Hewlett-Packard Co executive who became Kodak’s chief in 2005, has in recent years steered Kodak toward consumer and commercial printers. But that failed to restore annual profitability, something Kodak has not seen since 2007, and did not arrest a cash drain.
“They got behind the curve on the analog-to-digital shift, and they were way behind for a long time,” said Ananda Baruah, a Brean Murray analyst who covers Kodak.
Kodak has struggled to meet its pension and other obligations to more than 65,000 workers, retirees and others who participate in its employee benefit programs.
