Why Kodak Filed for Bankruptcy
By: Caroline Tucker
Updated: January 19, 2012
Since September, the financial world knew a Kodak bankruptcy was a possibility.
Kodak said it had no intentions of filing.
However, on Thursday, Kodak said it made sense in order to emerge as a lean, world class digital imaging company.
Kodak filed for Chapter 11 bankruptcy while the stock market slept.
Financial experts like George Conboy, president of Brighton Securities, said it wasn't unexpected.
"But when it actually comes, it's still a little bit of a sad shock. Kind of a hole in the heart of Rochester because the memories that we have are of a global colossus that we could have pride in," said George Conboy, financial analyst.
Conboy says he has studied Kodak for the last 30 years.
In documents filed in Manhattan, Kodak listed its debts at $6.75 billion. It's assets stand at $5.1 billion. Much of those assets are valuable patents that the company owns.
CEO Antonio Perez did not do any media interviews.
However, on the company's new bankruptcy website, www.kodaktransforms.com, he posted a video statement for the public.
"We're taking this step at this point of our transformation in order to build the strongest possible foundation for the Kodak of the future," said Antonio Perez, Kodak CEO.
Since 2003 Kodak has reduced it's workforce by 47,000 employees and closed dozens of plants and processing sites.
The company invented the first digital camera but it hasn't been a leader in digital market. Kodak says the decline of film hurt its bottom-line.
The board and management team after consulting with our advisers decided to file for reorganization. While a very difficult decision, it was the right decision to make at this time," said Perez.
Much will change over the coming months.
A bankruptcy court will determine which creditors get paid.
It typically starts with secured creditors, then unsecured creditors, and then shareholders.
There is no guaranteed that all parties will be paid.
A sale of patents will also likely happen and Kodak could sell off some of it's businesses.
"They won't be the old Kodak we knew, but they may be healthy and they may be able to add new employees. I am sure that's what they hope," said Conboy.
Kodak said employees will be paid and continue to receive benefits, including healthcare and vacation
For now, no layoffs are planned.
"What everyone should expect from Kodak is business as usual," said Perez.
However, Conboy says if businesses are sold, that could result in some layoffs.
The idea is to have Kodak pay off many of its debts so that it can one day turn a profit again.
Since September, the financial world knew a Kodak bankruptcy was a possibility.
Kodak said it had no intentions of filing.
However, on Thursday, Kodak said it made sense in order to emerge as a lean, world class digital imaging company.
Kodak filed for Chapter 11 bankruptcy while the stock market slept.
Financial experts like George Conboy, president of Brighton Securities, said it wasn't unexpected.
"But when it actually comes, it's still a little bit of a sad shock. Kind of a hole in the heart of Rochester because the memories that we have are of a global colossus that we could have pride in," said George Conboy, financial analyst.
Conboy says he has studied Kodak for the last 30 years.
In documents filed in Manhattan, Kodak listed its debts at $6.75 billion. It's assets stand at $5.1 billion. Much of those assets are valuable patents that the company owns.
CEO Antonio Perez did not do any media interviews.
However, on the company's new bankruptcy website, www.kodaktransforms.com, he posted a video statement for the public.
"We're taking this step at this point of our transformation in order to build the strongest possible foundation for the Kodak of the future," said Antonio Perez, Kodak CEO.
Since 2003 Kodak has reduced it's workforce by 47,000 employees and closed dozens of plants and processing sites.
The company invented the first digital camera but it hasn't been a leader in digital market. Kodak says the decline of film hurt its bottom-line.
"The board and management team after consulting with our advisers decided to file for reorganization. While a very difficult decision, it was the right decision to make at this time," said Perez.
Much will change over the coming months.
A bankruptcy court will determine which creditors get paid.
It typically starts with secured creditors, then unsecured creditors, and then shareholders.
There is no guaranteed that all parties will be paid.
A sale of patents will also likely happen and Kodak could sell off some of it's businesses.
"They won't be the old Kodak we knew, but they may be healthy and they may be able to add new employees. I am sure that's what they hope," said Conboy.
Kodak said employees will be paid and continue to receive benefits, including healthcare and vacation
For now, no layoffs are planned.
"What everyone should expect from Kodak is business as usual," said Perez.
However, Conboy says if businesses are sold, that could result in some layoffs.
The idea is to have Kodak pay off many of its debts so that it can one day turn a profit again.
Kodak is expected to release it's 4Q earnings report next Thursday.
