Kodak Asks Bankruptcy Court to Bless New Deal With Movie Studios
Disney, Warner, NBCU and Paramount resolve $26.6 million in claims, and Kodak gets to rewrite supply agreements on more favorable terms.
Eastman Kodak is seeking permission from a bankruptcy court to sign new contracts with major film studios that would entitle the company to higher prices for Kodak film and ensure that much of the movie industry continues to use its product through 2015.
Kodak filed for bankruptcy in January after 131 years of a solid relationship with Hollywood, including 80 Oscar best pictures shot on Kodak film. But when Kodak declared Chapter 11, it owed studios including Sony, Warner Bros., Universal and Paramount tens of millions of dollars from tax credits, rebates, discounts and other incentives that qualified for preplan payment.
The studios filed creditor claims. Then Kodak, "recognizing the value and importance of its relationship with the Movie Studios," it says in bankruptcy court, "affirmatively engaged with the Movie Studios to attempt to negotiate new terms for existing contracts."
Kodak says it has now reached terms with Disney, Warners, NBCU and Paramount on replacement supply agreements and is asking a bankruptcy judge to bless the new arrangements.
The court papers reveal studios demanded payment of rebates owed and Kodak attempted to leverage more favorable terms to ensure sufficient profitability over the long term.
Now that a deal has been made, if a judge approves it, it will take care of the $26.6 million owed to these four studios. And Kodak's return?
According to a court filing this week, Kodak says it has managed to have its supply agreements with studios rewritten to provide:
- Higher 2012 pricing;
- Material share commitments, subject to certain exceptions;
- Extension of termination dates to 2014 or 2015;
- Generally potential annual price increase after 2012 (excluding commodities) versus existing contracts;
- Commodities price increase generally with no cap or commodity price indexing; and
- A sunset clause allowing Kodak to exit motion picture film manufacturing with 180 days’ notice.
Kodak also says there's a commitment to provide motion picture film beyond contractual expiration periods, that the studios will get administrative expense priority, and there will be a mutual release of claims between the parties "subject to the Movie Studio’s right to 'earn' payment of any unpaid pre-petition rebates through purchase volume."
Even though Kodak says that going to a bankruptcy judge wasn't required for a deal of this nature, it says that certain studios insisted upon it. Now the company, which has been having trouble getting big bids for its patent portfolio, seeks the judge's permission to make a deal that it says is necessary to continue Kodak's long-running place as the one who puts the film in the film business.
No word, however, on Sony Pictures, which said at the time of the bankruptcy filing that it was the studio owed the most money at $16.6 million.