Eastman Kodak Co. fell the most in more than two years after the 131-year-old camera maker drew down $160 million from its revolving bank line.
Kodak declined 54 cents, or 23 percent, to $1.84 at 10:01 a.m. in New York Stock Exchange composite trading. The shares earlier slumped as much as 24 percent, the biggest intraday decline since January 2009. Before today, Rochester, New York-based Kodak had slumped 56 percent this year.
The company is borrowing money after Chief Executive Officer Antonio Perez said last month that the patents Kodak is seeking to sell have generated interest from potential bidders. Kodak is trying to raise cash to continue funding inkjet printing and other digital businesses that it has projected will generate operating profits by 2013.
“Investors are selling first and asking questions later,” Mark Kaufman, an analyst at Rafferty Capital Markets Inc. in New York, said today by telephone. He recommends buying the shares and said expecting a patent sale “in such a short period of time would be naive. I’ve been thinking more along the lines of November or December.”
Kodak will pay interest beginning at 1.5 percentage points more than the base rate, the company said Sept. 23 in a regulatory filing. It may repay the money at any time without penalty.
The company entered into a restated credit agreement in April for the five-year asset-based revolving line for up to $400 million. Proceeds may be used for general corporate purposes, including the purchase of its 7.25 percent bonds due in 2013, Kodak said in an April 27 regulatory filing.
The credit facility “has been a part of Kodak’s cash-management tool kit for quite some time,” Christopher Veronda, a spokesman for Kodak, said in an e-mailed statement. “The purpose of the revolving credit facility is to bridge timing differences between cash outflows and inflows, which is a common practice at many corporations.”
While Veronda declined to disclose the company’s current cash balance, he said we “certainly have not consumed $957 million in cash since June 30th.”