For every troubled company that’s trying to restructure and eyeing a trip through bankruptcy to get a fresh start, Kodak is a case study on what not to do. For several days now, media headlines have reported on Kodak’s plans to file for bankruptcy protection, with no comment from the company. It’s the wrong strategy.
Kodak has lost control of the message and might lose everything. Unless it can provide some clarity on its course of action, liquidation rather than restructuring looks likely.
Ironically, it’s uncertainty, more than bankruptcy itself, that will undermine efforts to turn around Kodak. If the company filed today for Chapter 11 it could obtain financing to continue its operations, put a hold on litigation and take advantage of other benefits under the Bankruptcy Code to get its house in order. But right now, without any guidance from Kodak’s board or management, people are left to speculate about the future. Employees are eyeing the exits, suppliers are demanding cash on delivery and customers are withholding orders – a downward spiral the company might not survive.
The best course is to file the bankruptcy petition fast, get financing, reassure customers and suppliers and continue operations as normally as possible. That will preserve value for everyone (except equity holders, sorry) and give Kodak the best chance of an orderly restructuring.