To further its efforts to avoid bankruptcy, Eastman Kodak Co. has changed law firms hoping that a new firm can help it restructure its debts outside of the bankruptcy process.
Kodak is intent on avoiding bankruptcy, a person familiar with the matter said. That is even though some of Kodak's biggest challenges involve expensive leases, pension obligations, and health care costs for current and former employees that cost hundreds of millions of dollars each year and could be purged through bankruptcy proceedings, this person said.
While it's understandable that Kodak wants to avoid the complexities of bankruptcy, the reality facing this company is that they are trying to survive in a changed world. Once at the top of its field, Kodak is quickly finding its products replaced by digital photography. The firm's leases and other costs are based on its former dominance in the photography field. Sometimes the smart move for any company faced with this type of massive and rapid change is to file bankruptcy. In bankruptcy, Kodak would have the power to renegotiate leases, pension obligations and other expenses that are quickly draining it of its cash. Without bankruptcy, the company is hamstrung in its ability to negotiate with powerful interests who are hesitant to give ground when not required. At least in bankruptcy all parties are forced to the negotiating table where they must come to an agreement on the terms of the firm's bankruptcy restructuring.
Could Kodak run out of time? It's possible that it's more likely the company will run out of cash first. They've already burned through a substantial amount of the $1.4 billion they had when they began their out-of-bankruptcy restructuring. With only $862 million left, now may be the best moment for the company to file Chapter 11 bankruptcy, while it still has the wiggle room to offer acceptable compromises.