Filing bankruptcy is often considered a bad thing. However, companies file bankruptcy because things have gotten bad, and the one thing that may be worse than filing bankruptcy is not filing. Take Eastman Kodak Co. for an example. In 2011, Kodak sales were down 16 percent to $6 billion dollars. The company lost $764 million in that year.
In 2012, Kodak filed for Chapter 11 bankruptcy protection. Since then the company has reorganized itself. Kodak eliminated 600 jobs, including positions in manufacturing, supply chain, and engineering. It cut its corporate expenditures by 26 percent and sold off 30 percent of its global real estate. In addition, it sold off parts of the company that were less profitable, such as its Kodak Gallery business, its desktop inkjet printer line, and its photo kiosk business. After these changes Kodak is a much leaner streamlined company.
It hasn’t been an easy road though. Under the current reorganization plan, Kodak’s unsecured creditors will receive 4 to 5 cents for each dollar owed to them. In addition, approximately 200 objections have been filed by individuals, stockholders, and creditors. Approval of the current plan is not guaranteed. The bankruptcy court has the final say on whether or not the plan will be approved.
If approved then Kodak will be able to exit bankruptcy. Exiting bankruptcy will give the company control of its finances again. Executives will no longer have to go to bankruptcy court to seek approval for their decisions. The managers of the company can spend their time managing the company instead of talking to their bankruptcy attorneys. Hopefully it will boost Kodak’s stock price as well. It sounds great, but these are the same people that may have gotten Kodak in trouble in the first place. Kodak’s future prosperity after bankruptcy is not guaranteed.
Source: democratandchronicle.com