The cost to protect Eastman Kodak Co. (EK)’s debt from default jumped as the unprofitable 131-year-old camera maker is said to be weighing options including a bankruptcy filing.
Credit-default swaps linked to the Rochester, New York- based company rose 4 percentage points to 66.5 percent upfront, according to data provider CMA. That means investors would pay $6.65 million initially and $500,000 annually to protect $10 million of Kodak’s debt for five years.
Kodak may seek bankruptcy protection because of concerns raised by possible bidders for its patent portfolio, said three people with direct knowledge of the process. Some potential buyers of the patents are reluctant to proceed with bids because a purchase may amount to a so-called fraudulent transfer if Kodak becomes insolvent, said the people, who asked not to be named because the talks are private.
“As we sit here today, the company has no intention of filing, and there is no change in our strategy to monetize our intellectual property,” saidGerard Meuchner, a spokesman for Kodak. “We’re not concerned about fraudulent conveyance in regards to the sale of our IP portfolio.”
Banks, hedge funds and other money managers had bought and sold credit swaps that protect against a default on a net $856.9 million of Kodak obligations as of Sept. 23, according to the Depository Trust & Clearing Corp., which runs a central repository for the market.
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