Eastman Kodak Co., the imaging company that lost 88 percent of its market value last year, fell after a report that the company is preparing for a bankruptcy filing should its effort to sell patents fail.
Shares of the Rochester, New York-based company declined 28 percent to 47 cents at the close in New York. The company may file for bankruptcy protection this month or early February if it can’t sell digital patents, the Wall Street Journal reported today, citing people familiar with the matter.
Bloomberg News reported in September that Kodak was weighing options including a bankruptcy filing, according to people with knowledge of the matter. Its revenue has tumbled because of slowing demand for traditional film and competition in digital cameras and printers from Canon Inc. and Hewlett-Packard Co. Kodak’s cash and equivalents fell to $862 million at the end of its third quarter from $1.4 billion a year earlier.
Chairman and Chief Executive Officer Antonio Perez, who took the helm in 2005, is trying to turn around the money-losing company by focusing on the printing business. He is seeking to raise cash by selling a portfolio of more than 1,100 digital imaging patents, and some other business units.
Kodak doesn’t comment on market rumors or speculation, said Christopher Veronda, a spokesman for the company.
The New York Stock Exchange yesterday warned the company it needs to get its share price back above $1 within six months to continue trading, under listing standards rules.
Three board members resigned last month, including Laura D. Tyson, a director since 1997, and Adam H. Clammer and Herald Y. Chen, two directors from private-equity firm KKR & Co. who were elected in September 2009.
Kodak’s board decided early last year to reduce the number of directors, Tyson said yesterday in a telephone interview. Her 2012 schedule made it “virtually impossible” to continue to serve, and she resigned last week to help the company reach an “optimal board size.”
“It’s not a statement about the firm’s strategy or the firm’s leadership,” Tyson said. “I was part of the board for a long time, I was part of the strategy to transform the company, then part of the strategy of choosing the company CEO, I’ve worked closely with him and with the other members of the board.”
Tyson, a professor at University of California Berkeley’s Haas School of Business, declined to comment on Kodak’s next steps. She was an adviser to the administrations of Presidents Barack Obama and Bill Clinton and sits on the boards of at least five companies, including Morgan Stanley and AT&T Inc.
KKR’s Clammer and Chen got board seats after the firm invested $300 million of senior bonds and warrants for 40 million shares with an exercise price of $5.50. Kodak refinanced KKR’s bonds in March 2010 via private placement.
Five-year credit-default swaps tied to Kodak’s debt jumped 2.9 percentage points to 70.4 percent upfront, according to data provider CMA. That’s in addition to 5 percent a year, meaning it would cost $7.04 million initially and $500,000 annually to protect $10 million of Kodak’s debt.
One-year protection surged to a record, adding 8.2 percentage points to 66.2 percent, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. The contracts, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rise as investor confidence deteriorates.