Kodak shares plunge on bankruptcy worries

Updated: 4:17 p.m. ET

Eastman Kodak (EK) has hired law firm Jones Day for restructuring advice as it faces growing concerns from investors over its turnaround prospects, The Wall Street Journal reported this afternoon.

The restructuring could include asset sales or other measures, including even a bankruptcy filing. Kodak CEO Antonio Perez told employees, however, that the company does not intend to seek bankruptcy protection. Kodak has 18,800 employees worldwide and is the dominant employer in Rochester, N.Y., where it is headquartered.

The move to hire restructuring lawyers from one of the nation's largest law firms signals Kodak is intensifying efforts to ensure it has the financial wherewithal to complete a difficult strategic and financial revamp.

Shares in the 131-year-old company have dropped 73% this week following Kodak's disclosure that it pulled $160 million from a credit line. The shares are down 84% this year.

That drawdown heightened concerns about the company's cash flow and triggered downgrades of its credit rating. Shares were down 53.8% to 78 cents today, around their lowest level since at least the 1950s. Shares have been halted several times today.

Kodak was a proud member of the Dow Jones Industrial Average ($INDU) for 74 years but was removed in 2004.

Its core business was gutted by the emergence of digital technologies. The company was organized in 1892 by George Eastman, who was an inventor of simple-to-operate cameras and films. Users of the first Kodak camera would ship their cameras to the company, which would process the films.

After that, it built up a global business of making film, printing paper and cameras. It has been the biggest supplier of film to the motion-picture industry. Its chemical operations were spun off as Eastman Chemical (EMN) in 1994.

The Journal said it was not clear what Kodak's next moves might be. It did not disclose exactly what it wants from Jones Day.

While Jones Day's restructuring lawyers have advised major companies on bankruptcies, they also advise clients on a range of other paths for improving their finances. Those possibilities include raising new debt or equity, and asking creditors to forgive debt in exchange for ownership stakes in a company, the Journal said.

Kodak, whose operations burned $847 million in the first half of the year, had $957 million in cash on June 30. It aims to have $1.6 billion to $1.7 billion on hand at the end of the year, but that target presumes successful asset sales, patent income and improvements in the company's businesses.

The company has been trying to sell many of its thousands of patents.

"We're a large company, and we employ a number of outside consultants. We don't itemize who those consultants are or what they do for us," Kodak spokesman Gerard Meuchner told the Journal. "As we sit here today, the company has no intention of filing for bankruptcy."

Perez made his comment about bankruptcy this week at a town hall meeting broadcast to the company's employees.

Bond investors are less confident about bankruptcy prospects, trading Kodak debt at levels that indicate a high risk of default. One bond issue maturing in 2013 traded at 43.5 cents on the dollar today, down from about 76.3 cents on the dollar last week.