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  • superbowl6wins superbowl6wins Sep 1, 2013 9:42 AM Flag

    Will Kodak Make It ?

    Even though Kodak has made big changes, it's not automatic that it will be successful this time around.

    At least statistically speaking, it's not inconceivable that Kodak might end up in Chapter 11 bankruptcy again in a few short years. According to the University of California at Los Angeles LoPucki Bankruptcy Research Database, roughly one in five companies ends up back in bankruptcy in five years.

    While a court approving a reorganization plan, as happened with Kodak on Aug. 20, is supposed to be an indicator that the company is now on solid financial ground, "I think what happens frequently is that in the reorganization process, the underlying pathology that led the debtor to Chapter 11 in the first place has not really been rectified," said Robert Rock, senior counsel with the bankruptcy practice at Tully Rinckey PLLC.

    "The core problem Kodak had was that its core business no longer existed," Rock said. "Nobody uses film anymore. My suspicion is that Kodak has a very good chance of succeeding because its underlying pathology ... was abundantly obvious and has been dealt with. The question becomes, is what is left independently economically viable?"

    Moody's Investors Service in July was fairly pessimistic as it rated the odds of Kodak defaulting on its various bonds.

    While printing gives Kodak "the most promising opportunity to resume revenue growth," its future is also tied to an ongoing decline of printed materials, Moody's said. And while Kodak has slashed billions of dollars worth of liabilities, "there is limited visibility in whether the company has sufficiently stabilized its operations and cut expenses … to stem further weakening of its financial obligation."

    "Jack Welch, the very successful CEO of General Electric, had a rule of thumb of GE that if you can't be number one or number two in market share, you're not going to be successful," said retired Kodak Vice President Terry Faulkner. "That's going to be the problem (for Kodak) as I see it.

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    • Kodak will have cut 6 billion in liabilities come tuesday, and will have brought in another 400 million with the new shares that were sold.

      They are no longer in the old unprofitable businesses and are only in packaging and printing as their primary businesses.

      They have deals with UNXL and Kingsberry coming though in the next year. With profit split in the UNXL deal (supposedly) being close to 50/50. UNXL alone is a 220 million dollar company, and 2-3 months ago had a market cap of about 500 million. If UNXL is not a total scam, kodak can double in price based on the UNXL deal alone.

      There will be less then 2 billion in liabilities for the new company, with over 1 billion in international cash.

      There are many properties that have been fully depreciated to zero, that will start to be sold over the coming 1-2 years.

      I was part of the GGP (bankruptcy), LVS (at under $2) and KFN (under .50 cents), and I am more excited for this deal then I ever was with any other company (and more initial investment). Anybody buying the new company will be very happy in the next couple of years.

      Sentiment: Buy