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Kodak could be in danger of bankruptcy

Eve Troeh Jan 5, 2012

Stacey Vanek Smith: Shares of Eastman Kodak tumbled yesterday, on rumors that the photo giant might file for bankrupty. Today all signs point to Kodak eventually filing for Chapter 11.

Marketplace’s Eve Troeh joins us now live in the studio to talk about this. Good morning, Eve.

Eve Troeh: Good morning.

Smith: So Eve, tell us what would a Kodak bankruptcy filing might look like.

Troeh: Well, the company has not confirmed that it is filing for bankruptcy — it seems to be playing things both ways at the moment. On one hand, it’s trying to sell off assets and raise money to stay out of bankruptcy court, but it’s also making preparations to file for Chapter 11 — at least according to the Wall Street Journal this morning. The paper didn’t name any sources from Kodak, and a company spokesman said Kodak “does not comment on market rumor or speculation.”

Smith: Ah. Well, Eve, even when companies file for bankruptcy, many end up staying in business; some recover, like General Motors. What could happen here?

Troeh: So, a Chapter 11 bankruptcy filing is a company saying: listen, we’re in dire straits, but we think we can turn this ship around. And if the bankruptcy courts agree, then Kodak can keep paying its bills and doing what it’s been trying to do anyway — namely, get back in the black. Now, what changes is who decides how to do that. A committee of creditors becomes the board of directors, essentially.

Mark Kauffman is an analyst at Rafferty Capital. He says bankruptcy helps struggling companies like Kodak also get loans to stay afloat.

Mark Kauffman: Having that basically puts off the issue of a fire sale. When you’re not dealing with a situation that you need the money immediately — you know, once you have your loan — it’s an auction.

The bankruptcy court would auction off Kodak’s assets — most importantly a huge set of patents. And whether Kodak’s solvent or not will likely depend on how much those patents fetch from the bidders.

Smith: Our own Eve Troeh here in Los Angeles. Thank you, Eve.

Troeh: Thank you.

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