Judge approves Kodak's bankruptcy plan

• Kodak hopes to exit bankruptcy Sept. 3
• New focus will be on equipment and services around commercial printing
• Shareholders%2C retirees and a U.S. trustee objected to bankruptcy plan

NEW YORK — Nineteen months after a late-night bankruptcy filing, Eastman Kodak Co. is all but done with one of the most traumatic periods of its history.

A U.S. Bankruptcy Court judge Tuesday approved the company's Chapter 11 bankruptcy reorganization plan.

For Kodak, Tuesday was a great moment, a watershed moment, as that approval means no hurdles remain before Kodak can actually end its bankruptcy and resume operations as essentially a new company. The company has said that through the cost cutting and restricting it has undertaken during bankruptcy, it now sees a future as a growing and profitable firm focused solely on different aspects of printing.

In a prepared statement, Kodak CEO Antonio M. Perez called the decision a critically important step in the bankruptcy process. "Next, we move on to emergence as a technology leader serving large and growing commercial imaging markets — such as commercial printing, packaging, functional printing and professional services — with a leaner structure and a stronger balance sheet.

"There are additional transactional steps ahead as we complete our Chapter 11 restructuring," Perez said in the statement, "but with the court's decision today, our emergence is now imminent."

But for many of the people who became collateral damage in the bankruptcy, such as Kodak creditors, retirees and shareholders, Tuesday was undoubtedly not a day of celebration.

"Many are losing their retirement benefits," U.S. Bankruptcy Court Judge Allan Gropper said as he approved Kodak's turnaround plan. "Many are finding their recovery as a creditor is just a minute fraction of what their debt is from Kodak. (Kodak's) decline and bankruptcy is a tragedy of American economic life."

Kodak tentatively hopes to exit bankruptcy Sept. 3. "Closing is complicated, but we're cautiously optimistic," said Andrew Dietderich, an attorney with Kodak's legal counsel, Sullivan & Cromwell.

Kodak filed for Chapter 11 bankruptcy protection in January 2012 with the goals of shoring up its sagging finances, selling off non-strategic intellectual property, wrapping up legacy expenses such as its British pension fund shortfall and refocusing the company on only the most valuable of its lines of business, Dietderich said. Tuesday, he told the court, "Kodak is a different company than the one in popular imagination and a very different one than the one that filed for bankruptcy."

Kodak came into Tuesday's U.S. Bankruptcy Court hearing with sizable momentum. Last week, the company announced that a majority of its various creditors had signed off on the company's turnaround plan. The official committee representing unsecured creditors also is backing the plan.

But Kodak faced a variety of opposition Tuesday in the form of objections from a group of retirees, from a number of former Kodakers, and from the wing of the U.S. Justice Department overseeing the bankruptcy. Several handfuls of Kodak shareholders filed roughly 200 objections to various aspects of the plan.

Much of the hearing was taken up by addressing those various objections, including a lengthy back-and-forth between Canadian money manager Gunes Biray and some of Kodak's outside consultants. Biray wanted to know how they arrived at the various values of Kodak's estimated worth. He also argued the company has substantial untapped wealth that could have gone to repaying creditors, with enough left over for shareholders.

Kodak's reorganization plan has it canceling all its existing stock and issuing new stock that will be owned by a handful of large financial firms and by unsecured creditors. Its stock price fell 2 cents to close at 5.6 cents, a 28% drop.

The company had hoped that "someone else would walk in and say Kodak is worth more," testified David Kurtz, global head of the Restructuring Group of Lazard Freres & Co. LLC, one of Kodak's bankruptcy consultants. "If someone had been willing to do that, we would have embraced them. No one did that.

"The Kodak investment opportunity ... has been exposed to the marketplace. Anyone has had an opportunity to come in and pay more," Kurtz said. "The market has spoken."

Along with the multitudes of objections from individual shareholders, Gropper also rejected a U.S. Trustee objection to a set of performance bonuses Kodak proposes paying some of its top executives. While executive bonuses in bankruptcy have at times become examples of scandalous corporate giveaways, Gropper said, Kodak "to its credit has not proposed anything like a $20 million payment to anyone." Gropper also noted Kodak's creditors had previously approved of the bonus structure.

On the day Kodak officially exits bankruptcy, it will be largely free of U.S. Bankruptcy Court oversight, meaning every significant contract or business deal doesn't first require court approval. That date also would be when the company's Document Imaging and Personalized Imaging businesses are officially turned over to their new owner — the pension plan representing Kodak's United Kingdom workers and retirees.

Kodak will continue to manufacture and supply camera film for the Personalized Imaging business, which aside from camera film also includes Kodak's photo kiosk business. Its Document Imaging business is primarily its document scanner line. That date also will see Kodak's board largely replaced by a group of nine people.

Daneman also writes for the Rochester (N.Y.) Democrat and Chronicle.