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Interview with Eastman Kodak Chief Operating Officer

lonelyboy

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http://whattheythink.com/articles/54667-kodak-president-coo-phil-faraci-clarifies-kodak-position/



WTT: So the rumors of an impending bankruptcy filing are false?

PF: Yes. In fact, in the last week, news coverage has become more balanced. From an operations perspective, we are focused on continuing to drive growth in our growth areas, and we are very committed to our customer and supplier commitments. Kodak has no interest in filing for bankruptcy. [CEO} Antonio [Perez} has made that very clear. In fact, in a recent employee town meeting, he said, “There is nothing that is wrong with this company that cannot be overcome with what is right with this company.”

WTT: This speculation seemed initially to be driven by the fact that you have retained Jones Day, a well-known law firm with a specialty in bankruptcy. What is your relationship with them?

PF: We did hire Jones Day, and we have been extensively utilizing them since 2003 in areas related to litigation and intellectual property (IP). We have been in litigation on the IP side for a while, and we have made it public that we are looking at potential monetization of our Digital Imaging IP portfolio, which represents about 10% of our IP portfolio.

Editor’s Note: Jones Day is a large law firm with more than 2,500 lawyers on five continents and a wide variety of practice areas, one of which is Business Restructuring & Reorganization; another is Intellectual Property.
 
I love corporate-speak. Notice he never says that they are not going to file bankruptcy. They merely have no interest in it. Who would? Right up there with the "At the present time, we do not plan to have any layoffs". Of course, tomorrow is another day, and in no way can be construed as the 'present time'.
 
With such a law firm as advisor it's no wonder that Kodak is in financial troubles.
 
Kodak revenues are not meeting its expenses. Their digital portfolio is weak and their analog portfolio is in demand decline. All the Lomo and eBay cameras in the world cannot make up 1% of what has been lost from the withdrawal of most major camera manufacturers.

So the question is: who owns the proceeds from a patent sale?

Current management, or the bondholders?
 
Aristophanes said:
So the question is: who owns the proceeds from a patent sale? Current management, or the bondholders?
Click to expand...

A judge is going to decide, if they sell the patents and not file for bankruptcy, the bondholders will sue since their bonds were secured against the patents, if they file for bankruptcy, then a judge will decide too....not a good situation either way...
 

I am not a financial guru but I was always under the impression bondholders made a return based on the risk of their investment, much like stockholders. The assets of a company, including sales history and estimates of future sales, serve to indicate the potential risk to payback to the bond purchaser but are not themselves used as collateral for bonds. How can they be, they're owned by the stockholders? The bonds might not be repaid. That's the risk you took on the chance of some return. This is why I can take part in a bond sale by Kodak without owning any shares of Kodak stock. And vice versa.

Of course a company's Board can write whatever agreement they want but doesn't doing so imply Kodak was selling risk-free investment? I'm probably completely wrong; that's why I let others manage my vast empire of holdings.

s-a
 

zsas,

You mis-understand. I'm not calling you out on anything, just throwing out how I thought things worked in my (truly) uneducated financial worldview. If you feel I put you on the spot I apologize.

s-a
 
Semi - Sorry for being over sensitive. I am just so sad re this whole Kodak issue (reguardless of why we are here today), tis like watching a train wreck in slow motion. Looks like the wagons are circling now and just kills me to watch it!
 

Speaking very broadly, I's suppose it depends what is meant by "Bond" in the particular country or jurisdiction. Here in the UK there are lots of "Bonds"...it's really just another name for a loan. But, like any loan or mortgage, it may (or may not) be secured, perhaps on specific assets of a business.

I've not studied EK's account, but I suppose that Bonds could be secured on the specific collateral of patents or some other asset? IDK?

e.g. I have a mortgage loan on my house....I own the house, and the bank demands a rate of interest to reflect the risk of me not paying back their investment. However, if I went bankrupt, they would have a "first charge" on the house...so they would have their loan fully repaid from the sale of the house, before any other creditors had anything paid off their debts. Similar, if or when I move house, I have to arrange to either repay the bank, or arrange for the loan to be secured against the collateral of my next house.
 
zsas said:
Semi - Sorry for being over sensitive. I am just so sad re this whole Kodak issue (reguardless of why we are here today), tis like watching a train wreck in slow motion. Looks like the wagons are circling now and just kills me to watch it!
Click to expand...

If you're a glutton for punishment you can swing by www.slashdot.org and check out the Kodak story. I have nothing against Technology but, jeez Louise. And they think Apple users have swallowed some kool-aid.

s-a
 

Bonds are almost always secured against assets. After the taxman and sureties they are first in line for recovery of assets in bankruptcy. The issue here is the risk of those sold assets (the patents) falling into management hands.

The bondholders are calling Kodak's loans. Or at least threatening to do so. This is the way bondholders vote against their confidence in management. The bondholders are clearly worried that a Kodak based on its digital/analog portfolio sans patents will not be equal to the collateral obligation at time the loan was issued. Nor do they have faith that Kodak to pay the coupons on the bonds faithfully. Management appears to want to sell the patents to substitute for revenues from day-to-day activities. The story is from the Chief Operating Officer, no less, the person responsible for day-to-day. Shareholders also see this, so they are selling the stock.

Kodak management has responded (and it is their fiduciary obligation to do so) by hiring legal counsel. The market and third parties haven't much faith in management utilizing either current revenues or funds from the sale of intellectual property.

As noted in another post, this may only be decided by a judge if the creditors and Kodak management cannot hammer out an agreement.
 
If the bonds were secured by patents and the patents were sold, the bond holders have to be paid. There would be no security for the bond if Kodak no longer owned patents. Same principle as selling a mortgaged home. The lender gets his money first, you get what is left over.
 
What I find really surprising is that their Digital Imaging IP portfolio is only 10% of their IP portfolio. Hard to tell whether that is measured in terms of actual numbers of patents or perceived value. But when you factor in the natural expiration of IP over time and that the digital IP should be the freshest, this is very surprising number. It suggests to me that Kodak really didn't make a serious foray into digital and/or was very unsuccessful in doing so.

Then again, when Kodak was at the top of their game in film-related research, they were probably patenting left and right. I just wonder how much of that IP still carries value.

If they are indeed selling off their digital IP, well that's great.
 
I hate to be a sky is falling believer, but the two below articles are just making me think the wagons are circling, and fast (bond holders and now Fuji):
1) Eastman Kodak Could this American Icon Go Bust (written 10/15/11)
Dead Link Removed

2) Fuji Sues Kodak Over Digital Patents (written 10/14/11)
http://www.businessweek.com/news/2011-10-14/fujifilm-sues-eastman-kodak-over-digital-camera-patents.html


I know 'keep your head down, don't look at the train wreck and make pictures', but reading these articles just pains me...

The Fuji lawsuit adds quite a wrinkle, could they sell their digi patents when they might have some of those very patents named in a lawsuit with Fuji now?
 
Last edited by a moderator:
zsas said:
The Fuji lawsuit adds quite a wrinkle, could they sell their digi patents when they might have some of those very patents named in a lawsuit with Fuji now?
Click to expand...

Well it'd be a nice way to prevent Kodak's IP from entering the marketplace, right? Kodak wants to sell their IP but nobody will pay much for it if they think it might be litigated anyway.
 
Way to pile on, Fuji.
'Course, I'm still steamed that the Feds forced Kodak to hand over its E-6 and C-41 proprietary processes to its competitors years ago, claiming to be protecting U.S. consumers.
 
I noticed today that the minilab I use, which is a Fuji-only operation, raised its base processing price for one roll from 6.99 to 9.99....
 
tomalophicon said:
I noticed today that the minilab I use, which is a Fuji-only operation, raised its base processing price for one roll from 6.99 to 9.99....
Click to expand...

Same here. (Walgreens) In the past few weeks the price has gone up 2.50 per roll for C-41.

I had sticker shock.
 
I just got my first C-41 kits from Photographer's Formulary yesterday. Not sure you can get those shipped to you for reasonable cost, but I'm jumping all over it here.

I'll grant that the local Walgreens service here is good, not crappy like many others seem stuck with, but after taxes my total was over $12 last week, with no scans.
 
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