Thursday, January 19, 2012

Eastman Kodak Bankruptcy

As expected, Eastman Kodak filed for bankruptcy protection today. Reuters I own two unsecured senior bonds maturing in 2013. Eastman Kodak (EK) Bonds-Own 2013 Senior Bond  Eastman Kodak Bonds: Update on Third Quarter Earnings Report I would hope now that Antonio Perez, an abysmal failure as CEO, will be told to find other employment soon. Several of his money losing ventures need to be sold or shut down.  

My current guess is that the unsecured senior bonds, irrespective of maturity, will ultimately be worth 20 to 30 cents on the dollar, provided EK is successful in selling the 1,100 digital patents that it has been peddling for several months now (2B+), and soon stops the massive consumption of cash caused by its money losing operations. That estimate will change based on future events. 

Part of the recovery, if any, may come from stock that is issued to unsecured creditors when a company emerges from bankruptcy. I would not expect the existing common shareholders to recover anything.  As noted in this article at Forbes, common stockholders are frequently wiped out in bankruptcy. 

Another wild card for the bond owners is the unfunded U.K. pension obligations which I discuss in a recent post. Eastman Kodak 

Needless to say, I would not speculate on buying EK unsecured bonds now. RB bought the bonds. 

Information about EK bonds can be found at FINRA

The FINRA site will have trading information on these bonds. The prices for large trades will reflect the estimates made by institutional investors on the potential recovery. 

I will occasionally monitor the prices of those bonds just to see how institutional investors are valuing them.

Added 7/20/12: The ITC ruled last Friday that a key EK patent was invalid and affirmed the dismissal of EK's important patent claims against Apple and RIMM. A lot will now hinge on the impact of this decision on the upcoming patent sale. This development would cause me to at least posit a zero recovery for EK's unsecured bond owners as a possibility. I may sell one of the two 2013 bonds within the next month just to establish a tax loss.  

1 comment:

  1. I am really sad to hear and read about Kodak which I like it from childhood days film camera even photograph on Kodak paper colour etc. How a company unless keeps pace with the change can perish Kodak is the example . It is a lesson for all.