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Supplement | HBS Case Collection | April 2016 (Revised February 2017)

Eastman Kodak Company: Restructuring a Melting Ice Cube

by Stuart C. Gilson, John D. Dionne and Sarah L. Abbott

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Abstract

In May 2013, senior managers of GSO Capital Partners, an $80 billion credit-oriented investment firm owned by The Blackstone Group, are considering what to do next with their investment in the senior secured debt of Eastman Kodak Company. Once a great company and an icon of American business, Kodak had fallen on desperately hard economic times as its traditional business of manufacturing cameras and photographic film had all but disappeared with the rise of digital photography, causing its annual revenues to plummet from $13 billion to $6 billion, and its stock price to fall by 95%, between 2003 and 2011. Having taken various positions in Kodak's debt during the previous four years, GSO is now faced with a major decision. Under the company's recently proposed plan of reorganization, secured creditors were to be given 85% of the company's common stock, but unsecured creditors objected to the plan. Now, six months later, GSO has brought an amended plan to the table, under which it would commit to backstop a $406 million equity rights offering that would be made directly to all the unsecured creditors. This offer might bring the objecting creditors on board, but could also require an additional large capital commitment by GSO, which was already heavily invested in a highly troubled business that many viewed as a "melting ice cube."

Keywords: Restructuring; Financial Strategy; Investment; United States;

Language: English Format: Electronic Purchase

Citation:

Gilson, Stuart C., John D. Dionne, and Sarah L. Abbott. "Eastman Kodak Company: Restructuring a Melting Ice Cube." Harvard Business School Spreadsheet Supplement 216-707, April 2016. (Revised February 2017.)

Related Work

  1. Supplement | HBS Case Collection | April 2016 (Revised February 2017)

    Eastman Kodak Company: Restructuring a Melting Ice Cube

    Stuart C. Gilson, John D. Dionne and Sarah L. Abbott

    In May 2013, senior managers of GSO Capital Partners, an $80 billion credit-oriented investment firm owned by The Blackstone Group, are considering what to do next with their investment in the senior secured debt of Eastman Kodak Company. Once a great company and an icon of American business, Kodak had fallen on desperately hard economic times as its traditional business of manufacturing cameras and photographic film had all but disappeared with the rise of digital photography, causing its annual revenues to plummet from $13 billion to $6 billion, and its stock price to fall by 95%, between 2003 and 2011. Having taken various positions in Kodak's debt during the previous four years, GSO is now faced with a major decision. Under the company's recently proposed plan of reorganization, secured creditors were to be given 85% of the company's common stock, but unsecured creditors objected to the plan. Now, six months later, GSO has brought an amended plan to the table, under which it would commit to backstop a $406 million equity rights offering that would be made directly to all the unsecured creditors. This offer might bring the objecting creditors on board, but could also require an additional large capital commitment by GSO, which was already heavily invested in a highly troubled business that many viewed as a "melting ice cube."

    Keywords: Restructuring; Financial Strategy; Investment; United States;

    Citation:

    Gilson, Stuart C., John D. Dionne, and Sarah L. Abbott. "Eastman Kodak Company: Restructuring a Melting Ice Cube." Harvard Business School Spreadsheet Supplement 216-707, April 2016. (Revised February 2017.)  View Details
    CiteView DetailsPurchase Related

About the Authors

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Stuart C. Gilson
Steven R. Fenster Professor of Business Administration
Finance

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John D. Dionne
Senior Lecturer of Business Administration
Finance

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More from these Authors

  • Case | HBS Case Collection | November 2019

    Constellation Brands' Investment in Canopy Growth: Aiming High

    Stuart C. Gilson and Sarah L. Abbott

    In 2017, Constellation Brands, the U.S. based beverage company, acquired a 9.9% equity interest in the Canadian marijuana company, Canopy Growth. In 2018, Constellation announced a subsequent investment in Canopy—taking its ownership interest to 37%. However, Canopy’s performance had been volatile and net losses had increased since the investment. In an effort to get into the cannabis market early, had Constellation Brands been too early?

    Keywords: Equity Investment; marijuana; growth investing; new market development; beverage industry; Equity; Investment; Strategy; Consulting Industry; Canada; United States;

    Citation:

    Gilson, Stuart C., and Sarah L. Abbott. "Constellation Brands' Investment in Canopy Growth: Aiming High." Harvard Business School Case 220-044, November 2019.  View Details
    CiteView DetailsEducators Related
  • Case | HBS Case Collection | January 2011 (Revised July 2019)

    Houghton Mifflin Harcourt

    Stuart C. Gilson and Sarah L. Abbott

    One of the leading publishers of textbooks and other educational materials for the U.S. K-12 educational instruction market has suffered a dramatic decline in sales and profits in the wake of the 2008-2009 financial market crisis and economic recession, and is now overburdened with debt. To regain its competitiveness the company has to significantly reduce its debt, by billions of dollars. Company management is trying to decide which of several options is best for achieving this goal, including filing for Chapter 11 bankruptcy, restructuring its debt out-of-court, or filing a “pre-packaged” Chapter 11 bankruptcy.

    Keywords: Restructuring; Capital Structure; Financial Crisis; Insolvency and Bankruptcy; Decision Choices and Conditions; Publishing Industry; Massachusetts;

    Citation:

    Gilson, Stuart C., and Sarah L. Abbott. "Houghton Mifflin Harcourt." Harvard Business School Case 211-027, January 2011. (Revised July 2019.)  View Details
    CiteView DetailsEducatorsPurchase Related
  • Supplement | HBS Case Collection | February 2011 (Revised July 2019)

    Houghton Mifflin Harcourt

    Stuart C. Gilson and Sarah Abbott

    One of the leading publishers of textbooks and other educational materials for the U.S. K-12 educational instruction market has suffered a dramatic decline in sales and profits in the wake of the 2008-2009 financial market crisis and economic recession, and it now overburdened with debt. To regain its competitiveness, the company has to significantly reduce its debt, by billions of dollars. Company management is trying to decide which of several options is best for achieving this goal, including filing for Chapter 11 bankruptcy, restructuring its debt out-of-court, or filing a "pre-packaged" Chapter 11 bankruptcy.

    Keywords: Restructuring; Decisions; Economic Slowdown and Stagnation; Borrowing and Debt; Insolvency and Bankruptcy; Profit; Crisis Management; Goals and Objectives; Sales; Competition; Publishing Industry; United States;

    Citation:

    Gilson, Stuart C., and Sarah Abbott. "Houghton Mifflin Harcourt." Harvard Business School Spreadsheet Supplement 211-708, February 2011. (Revised July 2019.)  View Details
    CiteView DetailsPurchase Related
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