Although bankruptcy rumors of the famous American manufacturer of cameras have been denied by company representatives, on Thursday morning it issued a press release that announces that Kodak sought protection under Chapter 11 of Bankruptcy Code. The company has assets worth U.S. $5.1 billion and $6.8 billion in debt. Eastman Kodak Company, which has helped to take the first images on the moon, also said it obtained a credit facility worth 950 million dollars over a period of 18 months from Citigroup, to keep afloat during bankruptcy proceedings. Kodak just announced that its subsidiaries in the United States were put under protection of Chapter 11.
“Board of Directors and the entire management team believes unanimously that this step is necessary and it’s the best choice for the future of Kodak”, said in a press release President and CEO, Antonio M. Perez. The company plans to sell “significant assets” during the bankruptcy protection, said Antoinette McCorvey, CFO of the company, without giving more details. According to analysts, Kodak could get 2 to 3 billion dollars for patents it holds, if it finds suitable buyers.
Company with a history of 131 years and once a dominating force in the industry of film and photography, in recent years was surpassed by almost all competitors, as it failed to adapt to more modern technology such as digital photography that , ironically, it invented. The decline of the company has already affected the city of Rochester, New York, the place of Kodak headquarters and where now only 7,000 people work, from 60,000 at the time when the camera manufacturer was in its heyday. Kodak had cash of 862 million dollars at the end of September, compared to $1.4 billion in same period of 2010.
The provisions of Chapter 11
Chapter 11 of Bankruptcy Code gives debtors protection in the U.S., being used almost exclusively by businesses due to cost and complexity. Companies can turn to this option when debt restructuring is necessary and offers the advantage of keeping a large part of the assets protected from execution. The first concern of the debtor is to achieve a restructuring plan, which must be accepted by all creditors. Otherwise, the plan may be proposed by creditors, but if it is not accepted by the debtor, the judge decides liquidation.
