We have been saying at our Community Resource Meetings that Kodak's management may have a bumpy road in bankruptcy. Specifically, there are signs that the bondholders, represented by Akin Gump & Strauss, may challenge Kodak's management and possibly ask the court to throw out the senior management team at the company. In the first court hearing, last Thursday, Kodak asked to draw down $700 million of their $950 million DIP credit line. Bondholders objected, saying:

"What's past is prologue," said Michael S. Stamer, of Akin Gump Strauss Hauer & Feld LLP, counsel for an ad hoc committee of second-lien noteholders. The post-petition financing agreement as originally conceived "gives them too much money. And if you give them too much money ... they'll spend it, to everyone's detriment."

The judge then reduced Kodak's approved drawdown to $650 mil, a small but significant reduction and a concession to bondholders.

Latest court action was yesterday, when Kodak requested that $40 million of their $332 million in unsecured debts to suppliers be made a priority. Specifically, Kodak claimed that the $40 million was owed to "critical" suppliers who should be paid now and paid in full. The remaining $292 million in supplier debts would have to wait until the end of the bankruptcy process (a year or more) to get paid what is likely to be pennies on the dollar. This request the judge turned down flat. "Don't be optimistic" said Judge Allan Gropper.

Kodak's bankruptcy, at least in court, is not going to be the smooth transformation that Mr. Perez may have expected. With bondholders objecting and the judge indicating skepticism of management's requests, there will be bumps in the road to the New Kodak.