Kodak is an iconic American company, a pioneer in photography and film, perhaps best known for its Kodachrome film, which changed the industry in 1935. By the mid-1990s Kodak shares were worth about $90 and it offered a steady dividend. Now Kodak is on its way to becoming a penny stock, they’ve hired a restructuring law firm as advisors, and the company is scrambling to survive.
CNBC spoke with attorney Gary Rosenbaum on what Kodak needs to do now.
Gary Rosenbaum is a Partner in the law firm of McDermott Will & Emery. He specializes in all types of financial transactions, including debt workouts and restructurings. He often represents lenders, either in initial loan transactions or restructurings. The firm also represents companies, or private equity groups and their portfolio of companies, advising them on their options.
Is there something special about Kodak’s situation? Or are they unable to get credit because of the economy, like so many other companies?
I don’t think it’s Kodak per se. This is the tale of two markets. If you’re a BB [rated] company, you can put a deal together. If you’re below BB, you might be looking at aggressive lenders. It’s tough for a company like Kodak. They have a story to tell. Some lenders might be willing, but it’s very costly.
Who are the aggressive lenders, and what would they want from Kodak?
It could be asset-based lenders or hedge fund lenders. Asset-based lenders normally lend based on accounts receivable and inventory. But in today's world patents might fit the bill. Hedge funds might be willing to own the company if things don't work out. They might take a bet that they'll end up with the patent portfolio.
They’ve been licensing the patents, and not bringing in enough to make a difference. But wouldn’t selling the patents undermine the future?
Presumably they’ll sell the non-strategic stuff. This is what we do all the time. You need to satisfy the investors, the lenders, everyone. The lenders are going to be pressuring them for a plan that will pay down the debt in a reasonable amount of time.
They have to monetize those patents, which can mean licensing or selling. But yes, you have to be careful. If you dispose of an asset, what do you have left for investors to focus on?
What’s the near-term outlook?
It all comes down to the holiday season. The next eight weeks will be crucial. For the investors they’ll have to show some monetization, get rid of some non-core assets, pay down some debts and have a good holiday season. If they do all that, this might just be a blip on the radar screen.
In the end, will Kodak survive?
Other iconic brands have gone into bankruptcy. But you do sort of feel like, no, Kodak can’t go. I think they’re still going to make something happen.