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Kodak: With Firings, Asset Sales, Company Should Emerge Trimmer

A trimmer, downsized Eastman Kodak Co. ought to exit bankruptcy early next year if it succeeds with plans to sell its films and imaging operations and keeps slashing its payroll, a veteran upstate New York bankruptcy lawyer said.

“There’s a really good chance of success,” said Robert J. Rock, partner with Tully Rinckey in Albany, N.Y.

Rock is not involved in the case of the collapsed Rochester, N.Y. imaging giant, but he’s handled corporate bankruptcy cases for more than 30 years, and he made several predictions about Kodak, whose market capitalization has shriveled to only $58 million from $1.2 billion since 2003.

First, after laying off 2,700 employees since filing for bankruptcy protection in Manhattan on Jan. 19, Kodak will fire another 1,000 by year’s end, as it advised the U.S. Securities and Exchange Commission on Monday. That will lower the remaining payroll to around 13,400 employees, compared to as many as 145,000 employees, most of whom were located in upstate New York, in its heyday.

“The first thing you have to do is curtail costs, overhead,” Rock said. “Some jobs have to be sacrificed to save the enterprise.”

U.S. Bankruptcy Judge Alan Gropper is likely to OK the firings, Rock said, because he wants to keep a smaller Kodak alive. Labor groups have opposed the job cuts.

Next, Kodak will sell two units, document imaging and personalized imaging, but for prices far below expectations, the lawyer said. The discounts are because of the bankruptcy, which means any bidder won’t need to pay full price.

Before its bankruptcy, Kodak, under CEO Antonio Perez, a former head of the printers business for Hewlett-Packard Co., the No. 1 maker of printers, had already hived off the medical imaging, digital camera manufacturing, light management films, and organic light-emitting diode businesses to others.

Perez wants to refocus a smaller Kodak solely on printers, graphics and entertainment and commercial films.

Meanwhile, Perez shouldn’t count on getting anything like the $2 billion he’d planned selling about 1,100 imaging patents to technology bidders known to include groups including Apple, the world’s most valuable technology company, as well as Google, the No. 1 search engine company.

“He’s not asking for the right price,” Rock said. As with sales of Kodak businesses, the overall value of the patents has been sharply diminished by the company’s bankruptcy. During the third and fourth quarters of 2011, Perez repeatedly held out hope for the auction cash to keep Kodak’s businesses alive.

Kodak filed for bankruptcy after lackluster sales duiring last year’s holiday season amid blistering competition from Japanese competitors like FujiFilm and Canon Inc. In its most recent filings, Kodak said its cash position on July 30 had dwindled to only $72 million.

Kodak started the auction after an Apple-led syndicate won a bigger patent portfolio from bankrupt Nortel Networks of Canada last June. Investment bankers specializing in intellectual property said Kodak’s portfolio might be valued as high as $3 billion.

Meanwhile, Rock said, there’s other fallout from big bankruptcies and layoffs, as other businesses that counted on employees suffer. “I’ve just handled the cases of three marinas that went out of business,” he said. Their customers were all laid off.

Kodak shares traded for only 21.5 cents in midday Tuesday trading.

Bob is the managing partner of the Albany office of Tully Rinckey PLLC and the head of the Firm’s insolvency practice. He has 35 years of experience in dealing with complex financial, corporate and commercial issues. Throughout his 35year legal career, Bob has centered his practice in the Capital Region but has represented clients all across New York including in each of the four United States District Courts and the U.S. Second Circuit Court of Appeals.

Bob has extensive experience before both state and federal courts fighting for clients in the civil litigation arena. When Tully Rinckey PLLC’s clients have been wronged by the action or inaction of another party, they find an ally and advocate in Bob as they pursue their rights in court Clients may also find themselves being sued and in need of the kind of proactive defense provided by Bob and the Tully Rinckey PLLC civil litigation team. Bringing to bear the lessons learned over decades of representing individuals, businesses, non-profit organizations, municipalities, and the full range of legal entities, Bob and the team provide aggressive representation to secure the best possible legal outcome for our clients.

A long-time ally of distressed and troubled businesses and individuals throughout upstate New York, Bob has been expanding Tully Rinckey PLLC’s bankruptcy practice, particularly in the areas of Chapter 11 (business) and Chapter 12 (farm) reorganization while continuing the firm’s tradition of representing individuals in Chapter 7 and Chapter 13 proceedings and all types of bankruptcy litigation.

Bob has successfully confirmed Chapter 11 plans in diverse cases, including a rural Delaware County acute care hospital, a swimming pool builder and water park developer, a major printing company and an ante-bellum ladder manufacturer. He has successfully represented a ski manufacturer in protecting its rights and ensuring that its position was adequately protected in the bankruptcy of a central New York ski area. He has also represented creditors’ committees in a Broome County and Pennsylvania baker, a mid-Hudson building products supplier and a consortium of banks in a case involving a purported investment company behind a massive Ponzi scheme. Bob was the lead attorney on a landmark case involving the eligibility of certain New York partnerships to seek reorganization under Chapter 11. Bob has represented secured and unsecured creditors as well as Chapter 7 and Chapter 11 trustees in virtually every aspect of bankruptcy.

Bob received a juris doctorate from Albany Law School and a bachelor’s degree in political science from LeMoyne College. His admissions include the New York State Bar, the U.S. District Courts for the Eastern, Southern and Northern Districts of New York, and the 2nd U.S. Circuit Court of Appeals.

When not at work, Bob enjoys hiking in the Adirondacks and Catskills, music, local history and travel.



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