Kodak: Its Credibility Gone, Now Has Viability Trouble

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Eastman Kodak (NYSE: EK) drew $160 million from its revolving credit line, a signal that the company’s viability is at risk.

In an 8K filing with the SEC, the firm stated, “On September 23, 2011, Eastman Kodak Company (the ‘Company’) initiated a draw of $160 million under the Second Amended and Restated Credit Agreement, dated as of April 26, 2011 (the ‘Restated Credit Agreement’), for general corporate purposes.”

“General purposes” could be read as “running out of money.” Kodak had $957 million in cash at the end of the second quarter. The figure was $1.6 billion at the end of last year. Kodak’s cash could be well be below $500 million now, and the amount must be falling quickly.

Kodak began a process in August to sell many of its patents. Chief Executive Antonio Perez did not put a value on the patents. Some of the intellectual property could be used in tablet PCs. The fact of the matter is that Kodak has not signaled any real interest in the patents, so it may be their value is  less than Perez hints. It is a reason that the board has to take much of the blame for Kodak’s problems. Perez has been a consistent failure since he became CEO at the end of 2005.

Kodak may be on a road to Chapter 11, if there is not a commitment to buy some of its patents soon. In the case of a bankruptcy, the patents will be sold anyway. The shareholders, however, will get nothing.

Douglas A. McIntyre