Eastman Kodak Co. said it is unlikely there will be enough cash at the end of its restructuring to pay shareholders, which is why the company is opposing one shareholder group’s request for an expanded role in the case.
Still in the uncertain early days of its Chapter 11 case, Kodak said the shareholders simply can’t back up their claim that there is a good chance they will be in the money after the company pays off a substantial debt load — a belief that drove them to request an official committee to represent them in the bankruptcy case.
Such committees are rare because bankruptcy laws rank shareholders at the bottom of the payment priority list, meaning they often go unpaid and therefore don’t need special representation.
“Only through pure speculation and obscuring the true extent of the debtors’ liabilities do the equity holders surmise any meaningful recovery for equity,” Kodak said in court papers filed Tuesday. “In other words, equity is out of the money and there is no substantial likelihood of equity receiving a distribution at this stage of the proceedings.”
Kodak said appointing a committee could lead shareholders to believe that a federal judge agreed that their future looks bright, possibly misleading some into holding or buying Kodak stock.
The shareholder group requesting a committee said last month that while the value of Kodak’s bankruptcy estate is uncertain, the assets are likely “substantially more valuable” than the $3.4 billion-to-$4.3 billion range that the company has previously estimated.
Winning official committee status would not only allow the shareholders to organize to protect their interests and potentially play a larger role in Kodak’s restructuring, but also obligate Kodak, which says its cash is already tight, to cover their legal and professional fees.
To support their request for a committee, the shareholders — who include individuals and funds tied to hedge-fund manager Greywolf Capital Management LP — say no one is looking out for their interests.
