Kodak Exec Says Company Has Reached “Turning Point” in Quest to Emerge from Chapter 11
By Patrick Henry
Published: November 26, 2012
As it has at previous stages of its effort to put its troubles behind it, Kodak has reached out to the trade media with another update on the progress it claims to be making toward orderly emergence from bankruptcy. We spoke recently with Chris Payne, Kodak’s vice president - marketing, business to business, about the latest developments and about Kodak’s long-term plan to renew itself as a provider of graphic production technologies.
The key news from Wall Street is Kodak’s securing of $793 million worth of financing to fund its exit from the Chapter 11 status it entered by filing for bankruptcy protection in January of this year. The financing, consisting of loans and loan extensions provided by a selected group of Kodak bondholders, represents money that the company needs for interim and exit funding as it reorganizes.
But, accepting the package binds Kodak to a number of stiff obligations it must meet by September 30, 2013, including the sale of $500 million worth of patents and the full execution of its reorganization plan. Reports by Bloomberg and The Wall Street Journal quoted some bondholders as saying that they had lost faith in the company and doubted its ability to restructure as it proposes to.
We asked Payne what assurance Kodak could give the industry that the goals were achievable within the 10-month window specified by the financing deal. He repeated previous statements by Kodak that the company was on track to be out of bankruptcy sooner than the deadline, perhaps by the middle of next year.
Referring to the conditions imposed by the financing package, “we expect to conclude a lot of those way before September,” Payne said.
He noted that Kodak has announced a number of steps successfully taken toward emerging from Chapter 11, including the sell-off of some of its consumer patents and businesses and a comprehensive settlement of medical benefit obligations to about 50,000 retirees. As for complaints about the most recent round of financing, Payne said that these were coming mainly from bondholders who had not been chosen for the opportunity to provide the funding.
“The process has winners and losers,” he said.
He preferred to address Kodak’s plans to make graphic communications one of the mainstays of the new, B2B-focused organization it is striving to become. Going forward, Payne said, the company will rely heavily on sales in commercial imaging, including packaging, publishing, and “functional printing” for applications such as touchscreens and solar panels. These activities will take place within Kodak’s recently formed division of graphics, entertainment, and commercial film, the segment from which the company expects to derive the bulk of its income.
Nothing in the reorganization plan will impair Kodak’s ability to remain an “innovation company” in these areas, according to Payne. The mandated sale of intellectual property applies to consumer products representing only about 10% of Kodak’s patent portfolio, he said. Patents in graphic imaging are “absolutely critical” to Kodak’s future and will not be auctioned off to raise money.
Investments in technology and talent also will be protected, said Payne, noting that cutbacks and layoffs have taken place only in the lines of business that Kodak is exiting. He added that the industry can expect to see “more R&D in our products, not less, as we move through time.”
We asked Payne why Kodak was not tilting its business model as strongly toward business consulting services as some other technology providers in the graphic communications space.
He explained that while Kodak does have a business services unit that helps customers install Prinergy workflows and achieve other kinds of process improvements, “it’s not the core of our go-forward strategy.” Kodak, Payne said, will continue to build on its strengths in deposition technologies with the kinds of production solutions that it showcased at drupa and Graph Expo this year.
It would be premature, he said, to discuss ongoing technical developments that Kodak is counting on to return its operations to solvency and profitability. He emphasized, however, that Kodak now has “a clear path forward” to emergence from Chapter 11 and deserves the votes of confidence its customers are giving it.
“We’re at the turning point.” Payne declared.