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  • jabv21 jabv21 Feb 25, 2013 6:33 PM Flag

    Why would a bond holder want Chapter 7

    Not sure why anyone in there right mind would wantchapter 11 if they are a holder on unsecured bonds.
    There is an individual who appresrs to believe that he would receive moreforhis bonds under chapter 7 than with Kodak exiting Chapter 11.
    Lets look at what would trigger Chapter 7: 1.) low sales revenue from the sale of DI & PI 2.) the exiting Kodak is unable to generate much cash andcould not survive. 3.) the TPP Trustee (UK pension) believes that the ongoing Kodak (exit Chapter 11) could not carry much if any payments to satify the needs of the UK pension.
    These should be enough to concern any unsecured bond holder.
    You go to Chapter 7: the second lien holders now want cash not the bonds somewould hold if Kodak exits, The UK Pension fund now has a $2.8B claim that is much higher than what would be required given an ongoing Kodak. The PBGC puts in a $1B+ claim since it now needs to pay the US pension that would have been fully funded under new rules with an ongoing Kodak but not is woefully short given PBGC takes over. The remaining Kodak (that would have exited Chp 11) can not bring much cash in a sale of its assets since it had to enter Chapter 7 because the ongoing business was not sustainable.

    I agree that the current shareholders are likely to get wiped out but to believe that Chapter 7 is good for the unsecured bonds is illogical given the reasons to enter Chapter 7.
    So if you get great Joy from the current shareholders being wiped because of a Chapter 7 event and you think that you will double your money with unsecured bonds your blind focus on laughing at current shareholders because they are likely to have a 0 value investment you are likely to join them in their misery if Kodak goes Chapter 7.

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    • I meant to say why anyone in their right mind would want Chapter 7 (not 11) if they are holders of unsecured bonds.
      Overall the downside for unsecured bond holders is significant if Kodak goes Chapter 7

      • 1 Reply to jabv21
      • For bond holders who bought at face value, the best case for chapter 7 is that they get what they originally promised. If there is not enough assets, they get less but still get some thing. However, for a few speculative buyers (such as some hedge funds), who bought Kodak bonds at deep discount, even a partial payment might give them a decent return.

        Bond holders are ahead of share holders, even ahead of Kodak's unsecured suppliers who in turn ahead of all shareholders.