Print | Share | Reprint

Kodak shareholders want official committee

by Jamie Mason | Published March 12, 2012 at 4:05 PM

Having failed to convince the U.S. trustee, Eastman Kodak Co.'s common stockholders have taken their request for an official committee straight to the presiding bankruptcy judge.

Judge Allan L. Gropper of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan is set to consider the request on April 18.

Weeks after the once-storied photography giant filed for Chapter 11 protection on Jan. 19, certain shareholders asked U.S. Trustee Tracy Hope Davis to appoint an official committee of equity holders.

The official committee of unsecured creditors opposed the request, calling it unwarranted and arguing it would "delay the efficient administration of these cases and unnecessarily increase costs--costs that will ultimately be borne by (and reduce the recoveries for) unsecured creditors," the creditors said in a Feb. 17 letter to the U.S. trustee.

Kodak also opposed the request, stating in a Feb. 17 letter to Davis that an equity committee would result in undue costs to the estate to the detriment of all stakeholders and "could have the unintended consequence of misleading public equity investors as to the value of Kodak stock."

Davis declined to appoint an official committee of equity holders on Feb. 28.

Certain common stockholders, though, want the bankruptcy court to weigh in on formation of an equity committee.

"At this juncture, the value of Kodak's bankruptcy estate is uncertain," the shareholders said in court filings. "Kodak's end-game enterprise valuation is, today (like in so many other cases where official equity committees were appointed), a 'black box' question."

According to the shareholders, evidence shows stockholder value exceeds $570 million to $1.53 billion, depending on asset valuation.

"The appointment of an official equity committee will enable bankruptcy's adversary process to work properly and [ensure] that the interests of stock holders are not inappropriately ignored at the most crucial time in the bankruptcy case," court papers said.

The equity holders also argued that the cost of an official committee couldn't deprive the stockholders of representation.

"In extremely large cases (like this one), where the debtors, secured lenders and the official creditors' committee each hire highly expensive counsel, investment bankers, financial and other advisers, none should be heard to complain about cost," the motion said.

Kodak filed for Chapter 11 on Jan. 19 after a long-term transformation and other restructuring moves failed to reverse a protracted decline.

The Rochester, N.Y., company, founded in 1880 by George Eastman, was once the world's leading producer of film and cameras and today has a diverse collection of mature and growth businesses. Kodak has been working to transform itself from a film and consumer photography company to a smaller business focused on the commercialization of proprietary digital-imaging and printing technologies.

Restructuring costs and the recession have continued to negatively impact liquidity since 2008, however. As a result, last year the company issued $250 million in senior secured notes, amended its credit agreement with its lenders and sold nonstrategic businesses and assets.

Kodak also blamed its Chapter 11 filing on market conditions, which have caused losses to its business and reduced revenue. The company further cited legacy post-employment benefits as consuming a substantial amount of its cash ($245 million in 2011). Lastly, negative publicity and other external issues at the end of 2011 strained its trade credit, Kodak said.

The company is funding its bankruptcy case with a $950 million debtor-in-possession loan from lenders led by Citigroup Global Markets Inc.

Andrew G. Dietderich, John J. Jerome, Michael H. Torkin and Mark U. Schneiderman at Sullivan & Cromwell LLP and Pauline K. Morgan and Joseph M. Barry at Young Conaway Stargatt & Taylor LLP are debtor counsel.

James A. Mesterharm of AlixPartners LLP is Kodak's chief restructuring officer.

Matthew J. Hart of Lazard is the company's investment banker.

Robert J. Stark and Neal A. D'Amato of Brown Rudnick LLP and Stephen G. Grygiel at Keefe Bartels LLC represent the equity holders seeking a committee.

Dennis F. Dunne, Tyson M. Lomazow and Brian Kinney of Milbank, Tweed, Hadley & McCloy LLP are counsel to the creditors' committee.

Share:

Restructuring

Kodak shareholders want official committee

Free preview

Meet the journalists

Jamie Mason

Senior Editor: Out of Court Restructuring

Movers & Shakers

Video

Fewer deals despite discount debt

Sectors