NEW YORK – Eastman Kodak Co., which dominated the photography industry before being hobbled by digital competition, won court approval 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 Tuesday by U.S. Bankruptcy Judge Allan L. 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 in many ways a new operation” after shedding its best-known businesses, Gropper said. “This is on a day when many are losing retirement benefits, when many are finding that their recovery as a creditor is just a minute fraction” of what they expected.
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, 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, 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 unit sales and spinoffs.
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.
`The company will soon emerge “as a technology leader serving large and growing commercial imaging markets – such as commercial printing, packaging, functional printing and professional services – with a leaner structure and a stronger balance sheet,” Antonio M. Perez, Kodak’s chairman and CEO, said in a statement.
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 G. 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.
Creditors holding more than half of the company’s unsecured bonds agreed to invest new money in Kodak to boost their equity ownership through the rights offering, David S. Kurtz, the head of restructuring for Lazard Freres & Co., said in an interview.
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.
Kodak 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, Kurtz said in an Aug. 2 filing.
Company revenue at the time of the bankruptcy filing had fallen by half since 2005 to $7.2 billion in 2011. The company’s losses since 2008 had exceeded $1.76 billion.
“Kodak is one of the best-known names of American business,” Gropper said Tuesday.
“Its decline in bankruptcy is a tragedy of American economic life. I’ve reviewed dozens of letters from Kodak shareholders asking how the company in which they invested fell so far.”