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Recently, we’ve taken a dim view of Eastman Kodak’s (EK) prospects. As we wrote here and here, we believe the company is most likely past the point where a turnaround outside of bankruptcy is possible. A commenter assuming various names, most recently “Truthseeker”, has expressed his criticism in a most disdainful and discourteous manner. While we object strenuously to his lack of civility, and may delete future comments that do not take a civil tone (though we will never delete comments that merely disagree with us), we thought we would pull up his comment and respond to it. We encourage dissenting opinions and we all benefit from civil debate.

Truthseeker wrote:

Are you aware:

Kodak has received $1B offer in rescue financing from bondholders
Kodak has $2B+ in NOLs to offset income derived from patent sales
Kodak still has billions in non-core assets to sell if necessary to raise additional cash
Kodak has mentioned it can slow its global digital expansion if necessary to minimize cash burn

Didn’t think so..do some research before jumping on the bandwagon bashing a 70 cent stock ..where were you when Kodak was trading $80 and when you could actually add some value? Pathetic.

Unlike his previous comments, this time, Truthseeker actually stated some facts together with his offensive and discourteous tone. Where I was when Kodak was at $80 is irrelevant; I wasn’t publicly advocating either buying or selling. I write infrequently and on topics that resonate with me at the moment. There’s still $.70 more for this to go down, and my initial post was reacting to an unwarranted jump in the share price. Where were you at $80?

As to his claims:

  • $1B offer in rescue financing from bondholders: Bondholders have no reason to preserve value for equityholders, especially since it means keeping pension liabilities. Any bondholder bailout is likely to be part of a restructuring that wipes out equityholders.
  • $2B in NOLs- You need to profit to take advantage of these and the company’s liabilities are greater than $2B.
  • Billions in non-core assets to sell: What are these magical assets that are worth billions, which are not core to the business and losing money right now? The patents, again?
  • Slow global digital expansion to minimize cash burn: Kodak missed digital. Period. Expansion isn’t happening. What would it mean to slow it?

This company has a bloated legacy cost structure it can’t get out from under. Like other legacy manufacturing industries (auto, steel, etc.), it will require restructuring in bankruptcy to rationalize and create a sustainable business.

Disclosure: The author has no position in any stock mentioned

Source: Eastman Kodak: Past The Point Of A Turnaround