Kodak prepares for Chapter 11 filing: report

(Reuters) - Eastman Kodak is preparing a Chapter 11 bankruptcy protection filing in case it is unable to sell its digital patents to raise capital, The Wall Street Journal reported on Wednesday.

A statue of Eastman Kodak founder George Eastman stands on the University of Rochester campus in Rochester, New York, December 23, 2011. REUTERS/Adam Fenster

The once-iconic photographic film pioneer is in talks with potential lenders to secure about $1 billion in debtor-in possession financing to sustain Kodak through bankruptcy proceedings, the Journal reported citing unidentified sources.

The Chapter 11 filing could come as soon as this month or early February, the newspaper said.

Kodak shares fell about 28 percent to 47 cents on the New York Stock Exchange following the online report, which dampened investors’ hopes that the company could arrange a quick sale of its patents or a financing lifeline to keep it afloat.

A spokesman for Kodak declined to comment, saying its policy is not to comment on market rumors or speculation.

Kodak warned in November that it might not survive 2012 if it was unable to secure $500 million in new debt or sell its patents. The company’s cash had been shrinking as sales of its consumer products have failed to keep up with its heavy cost base, which includes employees and offices around the globe.

Kodak invented the digital camera in 1975 when one of its engineers developed a prototype that was as big as a toaster and captured black and white images. But it failed to capitalize on that innovation, and it was only when Kodak’s film business began to decline a decade ago that it tried to catch up with rivals by launching a mass-market line of digital cameras.

The company has been beset by bankruptcy speculation since it drew down a credit line last September. It also hired restructuring firm FTI and confirmed that a law firm known for dealing with bankruptcy was doing work for it.

Last week, Kodak announced the resignation of three directors, including two representatives of private equity firm KKR & Co and a professor from the University of California, leading some industry experts to speculate that a Chapter 11 filing was imminent.

On Tuesday, Kodak said its stock may be removed from the New York Stock Exchange if the company cannot boost its share price over the next six months.

Kodak, which had $862 million in cash at the end of September, down from $1.4 billion a year earlier, is scheduled to report fourth-quarter results on January 26.

As part of its efforts to raise cash, Kodak has been looking since last July for a buyer for its 1,100 digital patents, with the help of investment bank Lazard Ltd.

The Journal said Kodak is still trying to sell the patents, which could help it stave off a bankruptcy filing. If Kodak does seek Chapter 11 protection, it could try to sell its patents through a bankruptcy auction supervised by a court.

Reporting By Liana B. Baker; editing by Mark Porter and Carol Bishopric