Reaction to Kodak Auction Results Delay
By: Mark Gruba
Updated: August 23, 2012
Kodak's announcement that its patent auction results will be delayed was met with concern from experts.
The company sent word in a statement just before 5 p.m. Monday that the results would be delayed because discussions with the patent bidders were ongoing.
That announcement came on the heels of reports over the weekend that bids were coming in lower than anticipated by Kodak. "I'm not necessarily inclined to believe this is a great development for them," said financial analyst Doug Hendee of Brighton Securities.
Kodak has valued its 1,100 digital imaging patents in the neighborhood of $2.5 billion. The Wall Street Journal reported bids are closer to $500 million. Bidding began last week and has been kept confidential. "If they can't bring these dollars in at the level that they have projected they're going to have a hard time working with creditors, they're going to have a hard time working with the bankruptcy judge and coming out with a plan that looks to make them viable moving forward," said Hendee.
Kodak has borrowed $700 million from Citigroup to pay its bills during bankruptcy, with the promise that the money would be paid back from the patent sale proceeds. If the sale falls in line with the Journal report it would be a troubling sign for the once film giant. "The sale of this intellectual property wouldn't cover the first in line on the DIP financing, so that would become very, very challenging for the ongoing enterprise, I believe," said business consultant Dennis Mullen.
Kodak said in a filing with the Securities and Exchange Commission that if the patent auction isn't successful it will consider licensing the patents, selling off businesses, slowing down digital investment or seeking other financing to raise cash. "All of this is very complicated, there's so many aspects, we don't know what pots Kodak was truly planning to put the proceeds in, but the less proceeds, the less pots that they can fill," said retired bankruptcy judge John Ninfo.
The clock is ticking on Kodak. Hendee said the company must present its exit plan to the bankruptcy court on October 15.
The company sent word in a statement just before 5 p.m. Monday that the results would be delayed because discussions with the patent bidders were ongoing.
That announcement came on the heels of reports over the weekend that bids were coming in lower than anticipated by Kodak. "I'm not necessarily inclined to believe this is a great development for them," said financial analyst Doug Hendee of Brighton Securities.
Kodak has valued its 1,100 digital imaging patents in the neighborhood of $2.5 billion. The Wall Street Journal reported bids are closer to $500 million. Bidding began last week and has been kept confidential. "If they can't bring these dollars in at the level that they have projected they're going to have a hard time working with creditors, they're going to have a hard time working with the bankruptcy judge and coming out with a plan that looks to make them viable moving forward," said Hendee.
Kodak has borrowed $700 million from Citigroup to pay its bills during bankruptcy, with the promise that the money would be paid back from the patent sale proceeds. If the sale falls in line with the Journal report it would be a troubling sign for the once film giant. "The sale of this intellectual property wouldn't cover the first in line on the DIP financing, so that would become very, very challenging for the ongoing enterprise, I believe," said business consultant Dennis Mullen.
Kodak said in a filing with the Securities and Exchange Commission that if the patent auction isn't successful it will consider licensing the patents, selling off businesses, slowing down digital investment or seeking other financing to raise cash. "All of this is very complicated, there's so many aspects, we don't know what pots Kodak was truly planning to put the proceeds in, but the less proceeds, the less pots that they can fill," said retired bankruptcy judge John Ninfo.
The clock is ticking on Kodak. Hendee said the company must present its exit plan to the bankruptcy court on October 15.
