NEW YORK – Eastman Kodak Co., which dominated the photography industry before being hobbled by digital competition, won court approval Tuesday of a plan to exit bankruptcy as a commercial printing company that sells nothing to consumers.
The plan, which cuts about $4.1 billion of debt, was approved by U.S. Bankruptcy Judge Allan Gropper in Manhattan. It affirms Kodak’s move away from cameras, film sales and consumer photo developing, which made it a household name, to focus on printing technology for corporate customers.
“Kodak is one of the best-known names of American business,” Gropper said. “Its decline in bankruptcy is a tragedy of American economic life.”
Secured claims will be paid in full under the plan, while shareholders will receive nothing. Unsecured creditors with estimated claims of as much as $2.2 billion will be paid 4 cents to 5 cents on the dollar. In court papers, Kodak called the plan a “comprehensive compromise” between the company and its creditors.
Gropper rejected claims from some shareholder groups that Kodak and its bankruptcy experts were hiding value. In court today, he said that even if Kodak were worth far more than it claimed, that value would go to unsecured creditors and shareholders still wouldn’t get anything.
Kodak, based in Rochester, N.Y., filed a Chapter 11 petition in January 2012 after spending $3.4 billion on earlier attempts to turn the company around. By then, Kodak had already shed 47,000 employees since 2003, closed 13 factories that made film, paper and chemicals, and shuttered 130 photo laboratories.
The company entered court protection with about 17,000 employees and will exit the case with about 8,500, after previously agreed sales and spinoffs.
“I’ve reviewed dozens of letters from Kodak shareholders asking how the company in which they invested fell so far,” the judge said Tuesday.
The photographic and consumer print products associated with Kodak’s brand for generations were sold during the bankruptcy or spun off to settle pension claims. Its commercial printing businesses will continue making presses and technology to print documents, publications and product packaging.
Under the reorganization plan, Kodak will also focus on a new technology – touch-screen sensor components for smartphones and computer tablets – and continue producing film for the movie industry.
While the new Kodak won’t be the company of “popular imagination,” it will again “be a leader in its chosen field,” its lawyer, Andrew Dietderich, said in court.
The plan hinges on Kodak selling $406 million of new stock. The rights offering for 85 percent of the company’s equity will be backstopped by a creditor group that includes GSO Capital Partners and BlueMountain Capital Management.
Kodak also plans to rely on $895 million in loans to finance the bankruptcy exit, according to court papers.
The reorganized company will have an estimated enterprise value in the range of $785 million to $1.38 billion, David Kurtz, the head of restructuring for Lazard Freres & Co., said in an Aug. 2 filing.
The company, which sold the first consumer camera 125 years ago, was founded by George Eastman, who developed a method for dry-plate photography before introducing the Kodak camera in 1888.
It went on to invent film, enabling Thomas Edison to develop the motion picture camera, as well as Brownie cameras selling for $1 and Kodachrome film.