Eastman Kodak, the 131-year-old movie pioneer who has struggled for years to adapt to an increasingly digital world, filed for bankruptcy protection early Thursday.
The American legend had tried a number of turnaround strategies and cost-cutting efforts in recent years, but the company – which since 2004 has reported just one full year of profit – was cash-strapped.
“Since 2008, despite Kodak’s best efforts, restructuring costs and recessionary forces have continued to negatively impact the company’s liquidity position,” Kodak Chief Financial Officer Antoinette P. McCorvey, in a court filing.
Citigroup grants Kodak $950 million in funding to enable the business to continue. Kodak plans to continue operating normally during the bankruptcy.
The company will also seek to continue selling a portfolio of 1,100 digital imaging patents to raise funds for its loss-making operations.
Kodak has become the latest giant to falter in the face of technological advances. The Borders group was liquidated last year after failing to gain a foothold in e-books, while blockbuster sold out to Dish Network last year as its retail outlets lost ground to online rivals like
Founded in 1880 by George Eastman, Kodak became one of America’s most notable companies, helping establish the camera film market and then dominating the field. But it has suffered from various problems over the past four decades.
The first came from foreign competitors, notably Fujifilm of Japan, which undercut Kodak’s prices. Then the advent of digital photography eroded demand for traditional film, crushing Kodak’s business so much that in 2003 the company said it would stop investing in its long-standing product.
The Chapter 11 filing was filed in United States Bankruptcy Court in Lower Manhattan. Kodak said its non-US subsidiaries were not part of the case.
The company said it had about $5.1 billion in assets and nearly $6.8 billion in debt. Its largest group of unsecured creditors are bondholders represented by the Bank of New York Mellon who owe $658 million.
“Kodak is taking an important step to enable our business to complete its transformation,” Antonio M. Perezthe general manager of the company, said in a press release. “At the same time that we have created our digital business, we have also already effectively exited some traditional operations, closing 13 manufacturing plants and 130 processing labs, and reducing our workforce by 47,000 since 2003. We now need to complete the transformation by further addressing our cost structure and effectively monetizing non-core intellectual property assets. »
Under Mr. Perez, who joined Kodak since Hewlett-Packard in 2003, the company bet on inkjet printers. But this strategy has yet to bear fruit.
It also turned to patent lawsuits to generate revenue, winning settlements from South Korea’s LG.
Nevertheless, the company has depleted its cash reserves, fueling fears of running out of cash. As of Sept. 30, Kodak said it had $900 million in cash and short-term investments.
In a last ditch effort to raise funds, Kodak announced last July that it had hired Lazard to sell its digital imaging patents, hoping to cash in on an intellectual property frenzy that has driven googlethe purchase of 12.5 billion dollars from Motorola Mobility. But the company had failed to generate enough interest among potential buyers, in part because of fears that Kodak’s financial health was deteriorating.
But in the fall, it became apparent that Kodak was also preparing for a potential Chapter 11 filing, hiring advisers who could help with a court-supervised restructuring. As reports circulated about Kodak’s bankruptcy preparations, some of the company’s suppliers stopped providing services or demanding faster payments, the company said in a filing Thursday.
In addition to potentially helping with the sale of patents, bankruptcy protection could also allow Kodak to rid itself of hundreds of millions of dollars in pension obligations. Kodak said in a filing that it paid about $245 million toward its U.S. retirement obligations last year and was unable to reduce those obligations to a more manageable level.
Earlier this month, Kodak announced a corporate overhaul that splits its business into consumer and commercial segments, which some analysts said could help sell off parts of the business.
The company has also filed new patent infringement lawsuits against a number of competitors, including Fujifilm and Apple Inc.an effort to consolidate the value of the patents it hopes to sell.
In a court filing, Kodak argued that Apple, the maker of BlackBerry devices Search in motion and Taiwan’s HTC all owed the company “substantial royalties” for using its patents in their smartphones. Entering into licensing agreements with these companies, as Kodak has done with Motorola and LG, could net Kodak substantial costs.
Kodak is advised by Lazard, FTI Council
and the law firm Sullivan & Cromwell. The company said Dominic DiNapoli, vice president of FTI Consulting, will serve as chief restructuring officer during Chapter 11.