Kodak now likely to default sooner than thought, says KDP

Eastman Kodak is now likely to default sooner than generally thought, according to a research note from KDP Investment Advisors yesterday. KDP has maintained its 'sell' recommendation on Kodak's 9.25% 2018 notes and 7.25% 2013 notes and has also lowered Kodak's default rating to 6/6.

A key concern for investors is the fact that Kodak yesterday announced it is drawing down its $160 million revolver facility. While this may seem innocuous, this move may mean that the company has a much higher cash burn rate than previously thought, says KDP, and investors may face an unpleasant surprise when Kodak releases its Q3 earnings. Kodak had close to $1 billion in cash at the end of the last quarter and it was assumed it would still have around $500 million available at the end of the year.

Kodak's bonds plunged yesterday, with the 7.25% 2013 notes falling 20 points to 65, while the 9.25% 2018 notes fell nine points to 73.