A judge Friday approved Eastman Kodak Co.'s (EKDKQ) long-awaited
sale of digital-imaging patents to a collection of technology
giants, albeit for much less than the company originally
wanted.
Judge Allan L. Gropper of U.S. Bankruptcy Court in Manhattan
signed off on the deal, which should take about 45 days to close
because of international approvals that are still needed, Kodak
said.
The judge called the price "disappointing" but said it moves the
case forward.
The $527 million sale, to a group including Apple Inc. (AAPL),
Microsoft Corp. (MSFT) and Google Inc. (GOOG), still represents a
key milestone for Kodak in its nearly one-year-old bankruptcy, as
it continues to design a streamlined version of the iconic company
as well as pay back its creditors. While the price is lower than
the $2 billion or more Kodak originally sought at an attempted
auction this past summer, it settles a lot of patent litigation
that could have hurt the company's reorganization efforts even
more.
"The amount in the transactions, which are complicated and
integrated, are the highest and best value available to the
debtors," said Sullivan & Cromwell LLP's Michael H. Torkin, a
Kodak lawyer.
Also buying the patents are Adobe Systems Inc. (ADBE), Research
In Motion Ltd. (RIMM), Samsung Electronics Co. (SSNHY), a unit of
HTC Corp. (HTCXF), Fujifilm Holdings Corp. (FUJIY), Facebook Inc.
(FB), Huawei Technologies Co. (HWI.YY), a unit of Amazon.com Inc.
(AMZN) and Shutterfly Inc. (SFLY).
Despite the lower price, one of the more important aspects of
the deal is that patent litigation with all the parties involved in
the sale will now end.
A lawyer for Kodak's official committee of unsecured creditors
said that while the $527 million price is disappointing, it
provides "much-needed liquidity" to the case. An $830 million loan
made by a group of Kodak's bondholders was contingent on the
patents being sold for at least $500 million.
Several parties originally objected to the patent sale, mostly
worried that they would be shut out of going after certain patents
in the future. Kodak satisfied most of those objections before
Friday's hearing.
An objection to the sale of one of the patents, from a man named
David J. Olilla, will be settled at a later date, Judge Gropper
said. Mr. Olilla said he is a co-inventor on one of the patents and
said Kodak breached its contract. The judge said his objection
wouldn't hold up the sale.
The patents being sold are for imaging technology used in
digital cameras, smartphones and tablet computers.
Since it filed for bankruptcy in January 2012, Kodak has shut
down or put up for sale many of its once-core businesses, including
ending its consumer-printing business and shopping its photo kiosk,
scanner and camera-film units. It has also gotten out of its once
iconic camera business, signing a brand-licensing agreement with JK
Imaging Ltd. that will allow JK to make digital cameras and
projectors with the Kodak name.
The changes have resulted in thousands of layoffs at Kodak, and
the company has cut pension benefits.
Since even before its bankruptcy filing, Kodak has pinned its
hopes on raising cash on the sale of the portfolio of 1,100
patents.
Kodak said earlier this year the patents could be worth up to
$2.6 billion and put them up for sale again in August through a
bankruptcy-court supervised auction.
The auction started with two competing groups looking at the
assets, and bids came in below $250 million, people familiar with
the matter have said. Soon after, bidders collapsed into the
consortium that received Judge Gropper's approval Friday.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Dana Mattioli and Mike Spector contributed to this article.
Write to Joseph Checkler at joseph.checkler@dowjones.com. Follow
him on Twitter at @JoeCheckler
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