Dawn McCarty and Beth Jinks New York
Eastman Kodak, the photography pioneer that introduced its $1 Brownie camera more than a century ago, filed for bankruptcy protection from creditors yesterday after consumers worldwide moved from film to digital technology.
The New York-based company, which traces its roots to 1880, listed assets of $5.1 billion (R41bm) and debt of $6.8bn in Chapter 11 documents filed in the US Bankruptcy Court in Manhattan.
“They were a company stuck in time,” said Robert Burley, an associate professor at Toronto’s Ryerson University who has photographed shuttered Kodak facilities in the US, Canada and France since 2005. “Their history was so important to them, this rich century-old history when they made a lot of amazing things and a lot of money along the way. Now their history has become a liability.”
The company’s credit deteriorated as revenue tumbled from traditional film, and the inventor of the Instamatic camera was slow during the past decade to compete with Canon and Hewlett-Packard in digital cameras and printers.
On January 5 Moody’s Investors Service cut ratings on about $1bn of Kodak debt with a negative outlook, and cited “a heightened probability of a bankruptcy over the near term” as liquidity deteriorated.
Citigroup had agreed to provide a $950 million debtor-in-possession loan to help Kodak operate during bankruptcy, the photo company said yesterday. The loan must be approved by a bankruptcy judge.
“Kodak is taking a significant step toward enabling our enterprise to complete its transformation,” Antonio Perez, the chief executive, said.
The company planned to sell “significant assets” during the bankruptcy, chief financial officer Antoinette McCorvey said in a court filing.
Kodak, headed for its sixth annual loss in the past seven years, is trying to sell more than 1 100 digital-imaging patents and pursue royalties to fund a shift to modern commercial and consumer digital printers.
Kodak’s cash and equivalents fell to $862m at the end of its third quarter from $1.4bn a year earlier. The company is scheduled to report fourth-quarter results on Thursday.
Kodak’s revenue has fallen by half since 2005 to $7.2bn last year, with further declines predicted this year and next after film and photofinishing unit sales sank 14 percent in the second quarter. The firm’s losses since 2008 exceed $1.76bn.
The Bank of New York Mellon is listed as Kodak’s biggest unsecured creditor with $668m of unsecured notes. Other unsecured creditors include Sony Studios, which is owed $16.7m, Warner Brothers with $14.2m, and Alcoa with $2.8m.
Bank of New York Mellon is also listed as the biggest secured creditor with a claim of $776m, backed by all of Kodak’s US assets except for those exempted in a 1988 agreement, according to the filing.
Perez, a former Hewlett-Packard executive who took charge at Kodak in 2005, tried to rescue the brand by slashing costs and winning shelf space for inkjet printers at Walmart and Staples stores. He pushed its commercial digital printers into publishing and packaging, touting their flexibility.
Kodak was five years too late to accelerate its shift to the digital age, Perez, 65, said in an interview in August.
Kodak has not sold enough printers and presses to create sufficient demand for replacement ink and supplies and service contracts to end losses in those units. Last February it projected operating profit in consumer and commercial inkjet printing by the end of 2013.
“Essentially they’re moving away from a very profitable model that generated multiple sales – almost everyone got double prints – to one that’s awfully difficult to make a profit in,” said John Ward, a 20-year Kodak veteran who is now a lecturer in Rochester Institute of Technology’s business.
“Perez had a clear understanding that change had to happen and it had to happen quickly,” said Ward, who met Perez shortly after he joined Kodak as president and chief operating officer in 2003. “Clearly they could have made some changes faster, but there just weren’t a lot of options to replace the film business.”
Kodak was founded by George Eastman, who developed a method for dry-plate photography before introducing the Kodak camera in 1888, according to the company’s website. It went on to invent film. enabling Thomas Edison to develop the motion picture camera. It later made Brownie cameras and Kodachrome film.
Paul Simon immortalised the film in his 1973 song Kodachrome. The single, which praised Kodachrome’s “nice bright colours”, peaked at second place on the Billboard Hot 100 chart. Kodak stopped producing the film in 2009.
“Everyone in the 20th century has been familiar with the Kodak name and its products,” said Burley of Ryerson’s School of Image Arts. “We’ve not only used them to memorialise our families and their histories, but also for diagnostics in hospitals, producing books and newspapers and police investigative work. And then the whole world of Hollywood is based around Kodak products.”
The company invented the first digital camera in 1975, which it shelved because it would threaten its lucrative film business, Perez said in March.
“Like many other companies on the East Coast, Kodak has been phenomenal in research and patents and not so good at commercialising things, actually terrible at commercialising things,” Perez said.
The company said last week it had adjusted its management structure and created a chief operating office to reduce costs. The new commercial and consumer segments replace a previous business structure of three divisions: graphic communications; consumer digital imaging; and film, photofinishing and entertainment.
The digital business accounted for about 75 percent, or $4.5bn, of Kodak’s revenue last year, McCorvey said in her filing yesterday. The company employed about 17 000 people, 9 100 of whom were in the US, compared with the 63 900 that it employed in 2003, she said.
The chief operating office will be led by Philip Faraci and Laura Quatela. Faraci, the president and chief operating officer since 2007, would focus on the commercial segment and sales and regional operations, and Quatela, the company’s former general counsel who was named as a second president last month, would focus on the consumer segment and certain corporate functions, Kodak said.
Three directors resigned from Kodak’s board last month, two of them from KKR, two years after the private equity firm helped the company refinance debt. Adam Clammer and Herald Chen were elected in September 2009 after a refinancing deal that included KKR investing in $300m of senior bonds and warrants for 40 million shares with an exercise price of $5.50. Kodak refinanced KKR’s bonds in March 2010 via a private placement to other investors. – Bloomberg