Eastman Kodak Co warned on Thursday that it must raise $500 million in new debt or complete a multibillion dollar patent sale to survive the next 12 months.

The photography company also posted dismal third-quarter results, with cash holdings down 10 percent from the second quarter, and it projected deeper losses this year as new printers and digital cameras failed to gain traction.

Speculation that Kodak was on the verge of filing for bankruptcy flared at the end of September after the company hired restructuring specialist Jones Day.

Kodak has denied that it plans to file for bankruptcy, but gave a stark warning on Thursday about its liquidity over the next 12 months.

The Company's ability to continue its operations...is dependent upon the ability to monetize its digital imaging patent portfolio through a sale or licensing of the relevant patents and/or the successful execution of the alternative actions, which could include the issuance of additional debt, listed above, Kodak said in a filing with the U.S. Securities and Exchange Commission.

The Company can provide no assurance that it will successfully execute the actions listed above.

Kodak shares fell 8.33 percent to $1.10, after having already lost roughly 80 percent so far this year.

Kodak hired investment bank Lazard in July to help it sell more than 1,100 digital imaging patents, which analysts have estimated could be worth as much as $2 billion to $3 billion.

It's not clear what interest there is in the patents or if they would fetch as much money as Kodak hoped for, industry bankers have said.

Kodak declined to give a timeline for the sale or give investors any details on the process. It said it was pleased with the progress and level of interest in the portfolios.

The century-old Kodak name was once synonymous with photography, but Wall Street fears its time is running out as film sales faded with the advent of digital cameras. In recent years, Kodak has relied on licensing revenue from its patents, as well as sales of commercial and consumer printing systems. It has failed to turn an annual profit since 2007.

This company needs to be sold. Pursuing any other strategy is folly at this point, said Gregg Abella, co-principal at Investment Partners Group, which owns Kodak shares and bonds.

Kodak cut its cash outlook and projected wider losses for the year. It expects to end the year with $1.3 billion to $1.4 billion in cash, down from a previous forecast of $1.6 billion to $1.7 billion.

It projected losses from continuing operations in the range of $400 million to $600 million, compared with a previous forecast for a loss of $200 million to $400 million.


Kodak said it was exploring the possibility of raising an additional $500 million in first lien financing, which means lenders would be first in line to get paid if there is a default.

Moody's analyst Richard Lane told Reuters earlier this week that Kodak's credit rating, as well as the trading of its debt instruments, indicate a heightened probability of default.

Kodak listed several commitments it would not be able to meet without the patent sale or debt financing, including its ability to fund working capital, capital investments, make scheduled interest and debt payments and contribute to employee benefit plans.

As of September 30, the company said it held $862 million in cash, down from $957 million on June 30.

In the third quarter, Kodak's loss from continuing operations widened to $222 million, or 83 cents per share, from $43 million, or 16 cents per share, a year earlier. A year ago, it announced a $210 million licensing deal.

Analysts on average were expecting a loss of 44 cents per share, according to Thomson-Reuters I/B/E/S.

Revenue fell 17 percent to $1.46 billion, short of the $1.65 billion analysts were expecting.

The company's consumer digital imaging group, which includes consumer inkjet printing, commercial printing and digital cameras posted a net loss was $90 million, compared with a loss of $67 million a year earlier.

The company's traditional film business sales fell 10 percent to $389 million, as silver costs hurt the segment.

In addition to Jones Day, restructuring firm FTI Consulting also advises Kodak. FTI also counts bankrupt MF Global as a client.

(Reporting by Liana B. Baker; Editing by Lisa Von Ahn and Derek Caney)