Trimming the Fat: Kodak Emerges from Bankruptcy as a Smaller Company
Filing for bankruptcy, if you’re a business owner, doesn’t always mean closing the doors and laying off all your employees. In many cases, reorganization of debts before the court through a Chapter 11 filing can allow your company to keep operating and prevent the seizure of assets by its creditors. Such is the case with Eastman Kodak, a once mighty industry juggernaut that technology and the march of the digital age felled to a nub of its former glory. According to NBC News, Kodiak will emerge from a $6.75 billion bankruptcy filing in about two weeks as a smaller version of its former self. How do attorneys manage to save a company that by all indications may have outlived its usefulness?
Financials Weigh Heavily in Reorganization
While I preface my comments by saying I am no intimately familiar with Kodak’s filing, it’s almost a certainty that the court believed the company could still be profitable in the future by allowing the restructuring to occur. If the court reviewed the financials, and found Kodak incapable of living up to its proposed payment plans, they would’ve either rejected the filing or converted it to a liquidation. Should that have happened, there would most assuredly been layoffs on a large scale — not that they haven’t already occurred as Kodak looked to shed costs and address its financial obligations elsewhere. According to the Los Angeles Times, layoffs for Kodak numbered between 3,500 and 4,500 amid slumping sales of about 24 percent.
Obligation to Make Timely Payments
Reorganization does not exempt a company (or a person for that matter) of its obligation to repay their creditors. The business must make timely payments in accordance with its restructuring. Failure to live up to the agreed-upon terms could land Kodak, or any other company, back in court before a judge to answer for their delinquencies. The court won’t look favorably on them should this occur. The hope with any business or individual debtor is that the new repayment plan works within the larger scheme of revenue and profitability. In short, the court wouldn’t have agreed to the terms (and neither would the creditors) if living up to the plan was a long shot. To accomplish that goal, Kodak will reportedly emerge from bankruptcy as a tinier version of the massive corporation that dominated the camera film and printer industries for decades. According to reports, the business will focus primarily on digital sales of images rather than camera film. The decision to slash departments and shrink a company’s capabilities may be a hard pill for any owner to swallow, but it may be necessary to keep the doors open. It’s a task not taken lightly, and one that shouldn’t be engaged in without the help of experienced bankruptcy attorneys.
If your business is in the midst of a financial crisis, restructuring your debt may be the best solution to satisfy your creditors and retain control of your company. Contact our law firm today for immediate assistance. We’ve helped thousands gain fresh financial starts and prevent their debts from damaging the long-term health of their finances.