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Kodak borrows $160M, stock plunges

By: The Associated Press//September 26, 2011

Kodak borrows $160M, stock plunges

By: The Associated Press//September 26, 2011//

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Shares of Eastman Kodak Co. lost one-quarter of their value Monday morning after the 131-year-old photography pioneer, scrambling to redefine itself in a cutthroat digital arena, drew down $160 million from its revolving credit line.

Some analysts worried the borrowing was a troubling sign that Kodak is running out of cash in its battle to return to profitability. Others dismissed the concerns, maintaining Kodak dipped into a $400 million credit line because most of its available cash is deposited overseas.

“The bulk of their money is in Europe,” said Ulysses Yannas, a broker with Buckman, Buckman & Reid in New York. “Either you repatriate some of that money, thereby paying a tax differential as high as 30 percent, or you borrow off the credit line.”

“Trying to manage the amount of cash they have domestically versus internationally might be part of the answer,” concurred analyst Shannon Cross, “but I think the more concerning part is the continued cash burn.

“Europe, a big portion of their addressable market, is slowing down, so they may be trying to have to right the ship in a really tough economic environment.”

Kodak said in a statement that the revolving credit line is intended to “bridge timing differences between cash outflows and inflows, which is a common practice at many corporations.”

“As we have said in the past, our cash flow is highly seasonal,” it said. “This is a tool to help that manage that seasonality.”

Kodak’s stock fell 60 cents, or 25 percent, to $1.78 in morning trading, approaching its 52-week low of $1.75.

The company has been burning through cash as it invests in digital inkjet printer businesses. It had $957 million in cash at the end of June and expects to cross back to profitability in 2012 after four years of losses.

Mining its rich patent portfolio for repeated cash infusions has become an indispensable tactic. Since 2008, Kodak has generated almost $2 billion in licensing fees and royalties. It revealed in July it is exploring the sale of its 1,100 digital-imaging patents.

“The biggest wild card they have is their ability to sell that IP (intellectual property),” Cross said. “That’s really what would give them a lifeline to get closer to positive cash flow. It’s a challenge for the company because now who knows what we’re facing from an economic standpoint.”

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