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The Wall Street Journal found many companies don’t disclose in advance they’re going to file for bankruptcy. Exhibit A: Eastman Kodak.

In the summer and fall of 2011, Kodak was already gathering a team of restructuring experts as it bled cash. The signs were there, but the company didn’t say the “B” word and denied reports it was headed in that direction:

On Sept. 30, 2011, reports swirled that Kodak had hired restructuring lawyers and was weighing filing for Chapter 11 protection. In response, Kodak said in a statement it “is committed to meeting all of its obligations and has no intention of filing for bankruptcy.”

In ensuing weeks, Kodak made no mention in regulatory filings of bankruptcy preparations or the possibility of pursuing that path, according to regulatory filings. Yet Kodak was exploring a bankruptcy filing before the statement, according to bankruptcy-court records.

Shareholders have sued, but the Journal reports the law is not on their side. Securities law doesn’t require companies to disclose they are filing for bankruptcy. The problem is creditors, supplies and customers could run for the exits, hurting shareholders even more.

“Anybody who could add and subtract knew there was no way out,” said George Conboy of Brighton Securities. “Kodak would say, ‘Ethically, we have a responsibility not to the media, not even to our employees. Our responsibility is to shareholders.”

Despite headlines warning Kodak was on the brink, there were trusting suppliers who continued to do business with the company. Some of them are smaller firms in Rochester. They are among those hurt by by Kodak’s bankruptcy.

Update: A shareholder lawsuit against CEO Antonio Perez has been dismissed.

Links of the Day:

– “At 9:46 I think I threw up, then at 11:46 or 12:46 I’m up by five so, welcome to East Rochester!” The close race for town justice in a Monroe County town.

– Wegmans is expanding its Pub restaurants, which sit within Market Cafes. This wouldn’t work in New York State, which requires separate entrances for eateries serving booze. (Meantime, Wegmans is opening its first Italian restaurant at the East Ave. location.)

– Governor Andrew Cuomo fired his emergency management chief for deploying crews to clear a tree out of his driveway after Hurricane Sandy hit.

– Cities going bankrupt are blaming pensions. Maybe they should also blame sprawl.

– An Albany ship replica avoided the same fate as the Bounty.

One Response to When Should Kodak Have Said “B” Word?

  1. I still don’t understand HOW the demise of this company came to be. Where was the Board of Directors? How could executives continue to get raises and bonuses when the company was losing money? I can’t understand how claiming that the company is on a path to profitability while secretly planning for a bankruptcy is not criminal? Perez should be fired with NO compensation and sued for damages. How can anybody disagree!

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