January 19, 2012
Kodak, bankrupt. How can it be? Who would have thought, ten years ago - even a year ago - that this would come to pass. And yet here we are. Our firm has been busy holding Community Resource Meetings for Kodak employees and retirees, helping to provide clear information at a time when rumor, half-truth, and urban legend have all circulated throughout the community. We have another session tomorrow night here at our office and one a week from tomorrow in Greece, home of the largest concentration of current and former Kodakers.
Here's a quick rundown of what to expect - and what not to:
- Bankruptcy means reorganization for Kodak - not liquidation. The company will try to sell its patents and some business units with a plan to slim down and emerge a smaller and more profitable company. Estimated time in bankruptcy: about 18 months.
- For retirees who are receiving monthly pensions, no worries. Your pensions are safe and will continue to be paid. Some special executive plans will probably suffer, and current employees may find available pension options curtailed. But KRIP pensions are well-funded and safe.
- SIP, Kodak's well-known 401k plan, is also safe. Kodak cannot touch those assets and neither can its creditors. There should be no meaningful short-term change in investment options, including the Fixed Income Fund (still known as "Fund D" to many).
- Health insurance benefits are safe - for now. Since Kodak will operate under bankruptcy protection, the company cannot terminate or alter retiree health benefits without court approval. It's true that Kodak could move quickly and ask the court to approve a prompt termination, but we see that as highly unlikely. Current view: retiree health insurance will not end prior to the end of bankruptcy.
- Employees will keep their jobs and benefits - for now. Kodak will try to sell businesses (consumer is high on the list) but even if sold a lot of jobs will remain.
- Many of the upbeat projections rely on a sale of patents for the higher end of the range, $2 - $3 billion. A strong patent sale will lubricate the entire process.
- Still waiting to hear a realistic, believable scenario from the office of the CEO. Because this time last year, here was the story
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).