Bankrupt Kodak to give film arm to UK pensioners

[sblitz]

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From today's FT

 

Eastman Kodak, once one of the biggest names in corporate America, is to hand British pensioners its outdated camera-film business and other assets in return for erasing an estimated $2.8bn of claims.

 

The groundbreaking plan, which would see the 131-year-old company begin extricating itself from Chapter 11, has been agreed by UK pension fund trustees.

 

 

. . . .

 

 

 

Kodak Pension Plan, which is Kodak’s biggest creditor, will pay $650m in cash and non cash to take on the personalised imaging and document imaging businesses.

 

 

 

 

 

 

COMMENTS?

[steveclem]

I feel just a bit sad that the mighty Kodak have imploded so unequivocally in recent years, I had no business connection with them but they were the film business for decades, from the start.

[Fgcm]

Steve, I agree.

Franco

[stunsworth]

So Kodak decided to sell its film business after all. Sad, very sad.

[stunsworth]

I feel just a bit sad that the mighty Kodak have imploded so unequivocally in recent years, I had no business connection with them but they were the film business for decades, from the start.

 

Even though I don't use film these days, I hope Tri-X survives. I've many fond memories of that film.

[TomB_tx]

So the Pension Plan is simply the new owner of that part of the business - possibly including the facilities, staff, etc. Perhaps they see the revenue from continued operation as adequate to fund their members, or else they believe they can find a buyer for more money when Kodak couldn't. My guess is that production will continue pretty much unchanged, still with the Kodak name, since the asset is worth more with the name attached.

[stunsworth]

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So the Pension Plan is simply the new owner of that part of the business - possibly including the facilities, staff, etc. Perhaps they see the revenue from continued operation as adequate to fund their members, or else they believe they can find a buyer for more money when Kodak couldn't

 

The alternative is that they thought they'd rather have something, anything, rather than nothing.

[StS]

If I understand this correctly, making film and photographic paper will be the core business of the new company rather than an unwanted cash-cow of a company looking for new business fields. Which should be good news for the future of Kodak films - or whatever their name will be in the future.

 

Stefan

[plasticman]

The use of the term 'outdated' seems completely unnecessary - but indicative of the way mainstream media portray film (if the FT article used this wording).

 

Anyway, over on RFF there seems to be an equal split between the doom-merchants and the jubilant. In other words, yet another event over which none of us really have any influence other than going out and buying and using Kodak film.

Absolutely no point in hand-wringing and wailing in anguish.

[sblitz]

i can't see how this has a great end, the pension is the sole shareholder of a business whose only value is to generate cash for a pension fund which, in and of itself, has a limited life since my guess is there aren't new employees joining the pension fund. the article mentions other similar situations in england in the past, mg and woolworths. there can be a happy ending to this, such as selling to a group interested in making a go of it.

[el.nino]

If I understand this correctly, making film and photographic paper will be the core business of the new company.

 

No, PRODUCTION will stay at Kodak.

They "only" thing that is being sold is the end-user-distribution (if that's the correct english term): packging, marketing etc.

 

 

There was a lot of confusion when they announced they were willing to sell the film business a few months ago (what they did today).

 

This is the official statement a few months ago:

Kodak will continue to manufacture and distribute its quality line of motion picture film products. As a matter of fact, all film manufacturing will actually stay with Kodak, including that of consumer and professional still film. We will continue providing our entertainment customers with the products and support they have come to depend upon from Kodak.

 

 

Simple, Kodak will become a subcontractor to other companies. They sell the right to use the name Kodak to a packaging company and keep producing the film. But now, instead of having customers buy the product, they sell the entire batch to another company which cuts and packages the product.

 

Since they don't have to figure out the market, they automatically eliminate losses due to poor market performance. Instead, this risk is dumped to the packaging company which becomes responsible for measuring the volumes to be produced.

 

Think of Kodak's production not as a final product but as a simple part. The company that produces springs has a lower risk of encountering losses than the company that makes a consumer device containing a spring...

News from Kodak

 

 

From Jenny on Twitter:

 

"Kodak CB J Cisney ‏@kodakCB

Got the official statement - Kodak will continue to MAKE all films. We are selling biz that SELLS pro & consumer still films."

 

and

 

"Kodak CB J Cisney ‏@kodakCB

"As a matter of fact, all film manufacturing will actually stay w/ Kodak, including that of consum & pro still film." 3rd parag"

Flickr: Discussing FPP Supports the KODAK Film Transition in Film Photography Podcast

[AlanG]

...Simple, Kodak will become a subcontractor to other companies. They sell the right to use the name Kodak to a packaging company and keep producing the film. But now, instead of having customers buy the product, they sell the entire batch to another company which cuts and packages the product....

 

I am not sure about this. The statements quoted above were goals and have been superseded by this settlement. Wouldn't it stand to reason that the pension fund owns and controls the manufacturing facilities and probably also owns the property? It would also hire and fire people, plan products, etc. Basically run the entire operation including using the Kodak name. It also has the right to sell the entire operation if it wants. How else can it be if $2.8 billion in claims are being "satisfied" by this deal?

[adan]

1. "Give" in the thread title is a bit misleading. Kodak is receiving rather a lot from the pension fund in this deal:

 

$650 million in cash

$2.8 billion in debt wiped off its books (owed to the pension fund).

 

2. I wonder what pension-fund executives know about the film-marketing business? I guess if some fairly high-level Kodak managers in the division in question "come with" the deal so that it remains a going concern, with the pension fund simply the new owner, that won't really be an issue. (After all, how many of Kodak's stockholders 20 years ago actually ran the business?)

 

3. As to who will actually make the film and where - on the one hand, in a bankruptcy situation, I would not put a lot of faith in previous statements. "That was then; this is now." applies.

 

If Kodak is going to retain the motion-picture-film business (and associated machinery and such) - AND those machines also produce (or can produce) still-photography film, then perhaps they retain all production, providing film to the pension fund to sell.

 

OTOH, if the movie-film production is basically separate from the still-film production, Kodak may be happy (even eager) to simply get rid of the whole structure, top to bottom.

 

I note, in the WSJ article on the transaction, that Kodak has a color paper factory in Harrow, U.K. So it may not be that hard to simply pack up the whole (relatively new - 2005? - whenever the "new" Tri-X/Tmax films came out) still-film facility now in Rochester and reinstall it in Harrow.

 

I note (also in the WSJ article) that the pension-fund people made numerous trips to Rochester over the past 15 months, and were given about 25 different proposals to consider, which probably ranged from "We'll make the film; you do the rest," to a full and complete transfer of the entire business.

 

4. The WSJ article also quotes the pension-plan chairman Steven Ross as saying the fund might itself sell the businesses, down the road, but not for at least 10 years. FWIW.

 

I guess we'll find out soon enough exactly which way this frog is jumping...

[wattsy]

There are clarifying statements from Collene Krenzer, a Kodak representative over at RFF.

 

"All manufacturing of both motion picture and still film will remain with Kodak. The film business (sales, marketing, etc) is part of the Personalized Imaging Business and part of the spin off. Kodak will supply film via a long-term supply agreement.

 

….the manufacturing of paper and chemistry will go to KPP. The manufacturing of film will remain with Kodak and be supplied to the new owner via a long term supply agreement."

[adan]

Thanks, Ian - I was about to update my post, having read those (also on APUG from the same Kodak "social media" PR representative).

 

As of today, the position is still that manufacturing of FILM stays in Rochester, being supplied to Hollywood/Bollywood on the one hand for use, and the U.K pension fund on the other hand, for sale.

 

The agreement to supply film to KPP is "long-term" but not specified in a precise number of years.

[plasticman]

Much has been said in the past of the need for (very) large volume production of film stock. Considering color film production seems to be dependent on the moving picture business, what are the realistic prospects for Portra?

 

Not interested in the usual doom-merchant opinions from the b&w diehards. Just some informed opinion from someone with some facts. Thanks.

[250swb]

If the 'usual B&W merchants' do carry a warning of doom they can't have looked very far for inspiration.

 

I suspect the pension fund owners (who may manage more than one pension fund, either private or commercial) have looked at the niche marketing of film stock in a long term plan, and taken the success story of Ilford to heart. The use of the term 'pension fund' has thrown some people. Pension funds own large percentages of some of the worlds largest companies, they have trillions of dollars to invest, more than the banks, and their only aim is to make money. They won't be 'buying' Kodak out of an interest in photography, they see it as part of a portfolio, perhaps investing in the production of Bollywood films is another part of that portfolio, but it will fit into other investments they have on their books. But Ilford have shown the way, since the management buy out, that a small lean niche business can grow again. The market for film has bottomed, so the only way is up.

 

Steve

[earleygallery]

I had some dealings with a company who were well run and profitable but crippled by the huge debt they owed to their pension fund.

 

The solution they found was to effectively give the business over to the pension fund (as well as sellling of some non-core operations). The management team have remained in place because pension fund managers didn't want to run a completely unrelated type of business they have no experience of, and it continues to trade profitably to all parties benefit.

 

The Kodak news should be seen as a positive, unless there's evidence otherwise.

[AlanG]

I think one goal for the pension fund may be to look for additional products to market under the Kodak brand name if they want to expand the business. There are some other examples of pensions being paid off in cheese and booz.

 

http://business.time.com/2013/04/30/kodak-to-pay-retired-workers-in-film-and-other-adventures-in-creative-pension-funding/

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[Peter H]

I think one goal for the pension fund may be to look for additional products to market under the Kodak brand name if they want to expand the business. There are some other examples of pensions being paid off in cheese and booz.

 

.........

 

Pension fund managers hardly ever take an active role in the management of the businesses they own or hold stakes in. And I think they'd be mad to do so.