After entering bankruptcy protection in 2009, Eastman Kodak Company (OTCMKTS:EKDKQ) is ready to reintroduce itself to the public markets, and pay off various levels of credit holders who have patiently waited for the company to drum up some cash. It’s been a long, painful process, but management has successfully sold off assets — from digital imaging patents to its document and personal imaging business. The question is, with hundreds of millions worth of assets sold off, what will the remaining company be left with, and should investors consider a position in Kodak 2.0? Let’s take a closer look.
The new, slimmer Kodak
When Eastman Kodak Company (OTCMKTS:EKDKQ) hits the equity markets near the end of the year, it will be a far cry from your parents’ snapshot developer. The operating Kodak will be mainly a commercial imaging company, along with packaging and enterprise printing solutions.
The company sold over 1,000 digital imaging patents for $525 million (which was less than expected) to a group of investors, but retains the rights to use the technologies in future products. While it may not be as big of an upfront payment as creditors may have desired, the remaining access could prove to be very valuable down the line.
At least some of the issues that brought Eastman Kodak Company (OTCMKTS:EKDKQ) down will no longer be relevant to prospective investors. The company was burdened with mounting pension payments that it simply could not meet — an issue not resolved until the latest round of asset sales. Poor financial management left the company with very little resources to improve the business. The more obvious, public reason for Eastman Kodak Company (OTCMKTS:EKDKQ)’s failure was the inability to adapt to technological change in the industry — that is, embracing digital imaging trends. Kodak will come back to us a company that once again focuses on a fast-growing sector: commercial printing and solutions. But has management learned its lesson that the imaging business is highly dependent on technological innovation?
What to expect
The market in general may neglect the Kodak IPO for a few reasons. For one, the name Eastman Kodak Company (OTCMKTS:EKDKQ) has a bad connotation to it these days, as people have it mind as a head-in-the-sand player, like Polaroid.
The offering’s proceeds will pay off junior creditors who will not be awarded equity positions in the new company. This may, again, discourage prospective investors who want to see money go to the operating company. While I would normally agree that with that, in this special situation, the company needs to pay its creditors as soon as possible.
