The Eastman Kodak Company received court approval on Tuesday for its plan to exit bankruptcy as a greatly smaller digital-imaging company.
U.S. Bankrupty Judge Allan Gropper offered the go-ahead for the plan that will put the company on target to exit bankruptcy in about two weeks, reports Reuters.
"It will be enormously valuable for the company to get out of Chapter 11 and hopefully begin to regain its position in the pantheon of American business," said Gropper.
For numerous years, the Rochester based company was the go-to for cameras and family photos. But in January 2012, it filed for bankruptcy, largely as the result of high pension costs and its stunted movement to adopt digital camera technologies.
Kodak’s chief executive, Antonio M. Perez, said in a statement the company is ready to take on its role.
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“We move on to emergence as a technology leader serving large and growing commercial imaging markets,” he said.
The company sold many of its assets. These included its consumer operations. The company will now rely mainly on commercial products such as high-speed digital printing technology.
Due to Kodak's inability to gather significant value for its patent portfolio, the company was required sell the bulk of its main business and restructure itself.
Along with the restructuring, though, the major retiree pension issues affecting the company were resolved. The new plan will remove shareholders completely but should allow the company to fully pay secured creditors and second-lien note holders.
General unsecured creditors are expected to receive a marginal payout close to 4 to 5 cent to the dollar.
“This comes on a day when many are losing retirement benefits and many are finding that their recovery as a creditor is just a minute fraction of what their debt is,” Judge Gropper said. “But I cannot decree a larger payment for creditors or any payment for shareholders if the value is not there.”
According to the company's lawyer, Kodak plans to emerge from bankruptcy as early as September 3.
When it initially filed for bankruptcy, Kodak expected to earn more than $2 billion for close to 1,100 digital imaging patents. But partly as the result of the losses following litigation with Apple Inc., Kodak was only able to sell the portfolio for around $525 million. It was sold to an alliance led by Intellectual Ventures and RPX Corp.
In June, the company reached an $895 million financing deal with JPMorgan Chase, Bank of America and Barclays. The company also has plans for a rights offering of $406 million, during which 34 million shares will be sold with proceeds going to creditors.