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Kodak-Post b/k


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Has anyone taken a look at this?  They have jettisoned the film business and are focusing on commercial printing/imaging and look to be "ebitda" positive to the tune of $167m this year.  Nearest I can figure there are 41.7m shares plus 2 sets of warrants with 2m warrants each with more than 100m of net cash on the balance sheet.  So about $1.1b EV fully diluted.  Management seems to be pitching some return to growth and has some rosy projections, but if I recall Kodak had a $2.9b NOL that they have a full valuation allowance against (I assume much of this was preserved post-b/k, and perhaps this is a bad assumption but AMBC was able to preserve a large portion of their NOL in their b/k), if you tax-adjust the value of that it's probably worth close to the market cap.  It would also give them an advantage pursuing bolt on acquisitions, since the earnings could be put against the NOL they could pay a higher price than the next guy with it still being a good deal for them, the only loser would be the government.  It seems like an ebitda positive Kodak with a credible growth story and large tax shield could be worthwhile. 

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Seems to me that the NOL will be preserved, but will be subject to the Section 382 rate of use limitations which could seriously impair their value.  The applicable law is in Section 382(L)(5) of the internal revenue code.  Seems the sticking point will be that most of the new stock was purchased in a rights offering, and this defeats the provision in (L)(5)E) that requires the stock received by creditors to be received in satisfaction of the debt.  I don't think the rights offering shares would qualify as they were purchased for new and additional consideration rather than simply being distributed in exchange for the debt.

 

Have not confirmed this however, you may be able to find some precedent discussing the implications of a rights offering wrt change of control for NOL purposes.

 

 

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I think this is going to be a Chapter 22 company.  The CEO that took them into bankruptcy is still at the helm and the business they retained is a poor business.  Selling printer hardware is competitive and is a declining business.  They have to compete against Xerox, Xycon and HP for market share in a shrinking market with debt (yikes!).  I looked at this coming out of BK because my dad received some stock from a retirement plan and told him to sell before they go bankrupt again.  This may be a better short candidate than a long.

 

Packer

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Their projection of $494M EBITDA in 2017 sounds fantastic. Not sure how realistic it is.

 

                2013 EV/EBITDA      P/E          EBITDA margin      2015 EBITDA margin

KODK                7.4                  7.2                6.6                              15.4

XRX                    7.3                  10.7              12.1

CAJ                    4.9                  12.6              16.1

Ricoh                10.8                19.4              6.4

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I think this is going to be a Chapter 22 company.  The CEO that took them into bankruptcy is still at the helm and the business they retained is a poor business.  Selling printer hardware is competitive and is a declining business.  They have to compete against Xerox, Xycon and HP for market share in a shrinking market with debt (yikes!).  I looked at this coming out of BK because my dad received some stock from a retirement plan and told him to sell before they go bankrupt again.  This may be a better short candidate than a long.

 

Packer

 

I think this is a fair assessment and totally within the realm of possibility.  I thought the NOL was bigger, someone pointed out the change in control limited it, but reading the b/k docs it looks like they still don't expect to pay US taxes until after 2019.  I would be curious to hear the explanation that lead to almost $500m of ebitda.  It got the lenders to pony up equity. 

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