Kodak Answers the Age-Old Question: How Much Is a Picture Worth?

A picture is worth 1,000 words, but what exactly is a dying brand worth? According to reports from Debtwire issued late last week, at least $900 million.

Based on the Debtwire report, Eastman Kodak (NYSE: EK  ) met with hedge funds last week, including Cerberus Capital Management and Silverpoint, to discuss bridge financing in the amount of $900 million that would last the company four to six months. This would give Kodak ample time to sell off its digital-imaging portfolio and perhaps the only valuable commodity it has left: its patents. If you recall, Kodak hired Lazard in July to help advise the company on selling up to 10% of its patent portfolio.

Like Napoleon trying to march on Europe, it appears Kodak's largest bondholders and the company itself are readying for an inevitable battle. The report cited that Kodak hired FTI Consulting Group, a company that specializes in corporate restructurings. In response, Kodak's bondholders have hired the law firm Akin Gump Strauss Hauer & Feld to represent their interests in case the company were to file for bankruptcy protection, according to The Wall Street Journal.

This made-for-TV stand-off shouldn't really come as a shock to anyone based on news released recently that it would be drawing down $160 million of its $400 million credit line to pay for operational expenses. If the rumors weren't swirling about Kodak possibly declaring bankruptcy three weeks ago, they're sure to be swirling if the company eventually does confirm reports that it's seeking a bridge loan.

With estimates for Kodak's patent portfolio ranging as high as $2 billion, all hope isn't lost for shareholders. It's possible a white knight like Microsoft (Nasdaq: MSFT  ) , Sony (NYSE: SNE  ) , Canon (NYSE: CAJ  ) , or even Samsung could step in and purchase the majority of Kodak's patents, giving the company enough cash to potentially execute a turnaround. Kodak already worked out details to license some of its cinematic patent technology to IMAX (NYSE: IMAX  ) , and more deals could be in the offing.

Then again, without its patents, Kodak might just become even more of a shell of its former self than it already is. Having lost money in five of the past six years and burning an incredible amount of cash in the process hasn't exactly inspired confidence in CEO Antonio Perez's turnaround plans. Though, one thing is for certain: Kodak clearly doesn't currently have enough cash to complete a turnaround without selling at least part of its patent portfolio.

With more losses projected on the horizon and the bondholders perched like vultures on a branch, I don't see a very bright future ahead for Kodak whether the reports are true or not. It simply wouldn't surprise me if the potential patent-portfolio buyers took their chances in bankruptcy court at acquiring Kodak's patents for pennies on the dollar as opposed to buying them now. It appears Kodak's time may finally be running out, so I'll leave you with this advice: Why don't you take a picture? It'll last longer.

Is Kodak destined to join Polaroid in a museum, or does the company still have some pep in its step? Share your thoughts in the comments section below, and consider adding Eastman Kodak to your free and personalized watchlist to keep up on Wall Street's version of a soap opera.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He definitely believes a picture is worth much more than Kodak's stock price. You can follow him on CAPS under the screen name TMFUltraLongand on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft and IMAX, as well as creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On October 24, 2011, at 10:43 PM, trickytom wrote:

    The major question is can Kodak get enought from the sales of it patents and portiflio to cover a $900M bridge loan? They expected close to $100M from Imax but settled for only $10M. with the hopes Imax will enable them and collect royalities. What if Imax doesn't?

  • Report this Comment On October 25, 2011, at 6:25 PM, richardrollo wrote:

    Fortunately, this is a bottom fishing experiment for me. I may have broken both of Buffett's rules for investing here, but even he makes mistakes. This quote from the article gives me the most concern:

    "It simply wouldn't surprise me if the potential patent-portfolio buyers took their chances in bankruptcy court at acquiring Kodak's patents for pennies on the dollar as opposed to buying them now."

    Yes, I would think so. This reminds me of one of my neighbors who bought his house at the top of the real estate boom market and who is now digging up the brickwork and selling it before the bank forecloses on him.

    If Kodak is trying to sell off its patents only to stay in business for another 6 months, then the shareholders have effectively been thrown overboard.

  • Report this Comment On October 26, 2011, at 1:33 PM, richardrollo wrote:

    I bailed. When I heard that they are selling their patents to stay in business another six months, the next question is, then what?

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