Kodak, From Blue Chip To Chapter 11?

| About: Eastman Kodak (KODK)

By BCbanker

Well the bankruptcies keep coming, with the latest rumored to be Kodak. It doesn't take a rocket scientist to realize that I am not buying film for my iphone (the 4gs has a sweet camera, by the way).

I am hoping to start a discussion around the value of the remaining equity, which today trades at $120MM, just a fraction of the once $9Bn market cap. In 2010 the company generated $7Bn top line, $731MM of EBITDA and had approximately $1.3Bn in debt. For run-rate 3Q11 the company generated $312MM of EBITDA and $1.5Bn of debt (ignoring pension liabilities). Even at a measly 6x multiple the company would be worth $1.9Bn, which easily covers debt.

Given the lumpy EBITDA, and more stable revenue performance, I would have to think that careful cost management could stabilize EBITDA somewhere between $300 and $700MM, which easily throws enough cash to debt holders.

So my question to you is, why are they going bankrupt? The company is 3.00x levered using a $500MM EBITDA. I admit I would project negative growth in the coming years, but that still generates a positive equity value. I have to think that there will still be some value left over for shareholders at the end of either a reorg, recap, or spin off.

Financials are available here.