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Moody's on Thursday downgraded the debt of struggling photography pioneer Eastman Kodak Co. citing the heightened probability the company will file for bankruptcy court protection.
In a note to investors, analyst Richard Lane said Kodak's deteriorating liquidity is posing challenges to the company's attempt to sell or license its trove of digital patents.
The downgrade came after The Wall Street Journal reported this week that anonymous people familiar with the situation said Kodak is preparing to file for Chapter 11 bankruptcy "in the coming weeks" if it fails to sell the patents.
Analysts have said the patents could fetch $2 billion to $3 billion, but no takers have emerged since the company started shopping them around in July. In November, the company had said it could run out of cash in a year if it didn't sell the patents.
Lane said it may be easier to sell the patents while in bankruptcy court. He also said a judge's delay until September of a ruling in a patent dispute heightens the probability of a filing.
Lane lowered Kodak's corporate family and probability-of-default ratings to "Caa3" from "Caa2." The company's senior unsecured debt was lowered to "Ca" from "Caa3," its senior secured debt fell to "Caa1" from "B3."
All are junk grade ratings. And Moody's outlook for the company remains negative.
Shares of Eastman Kodak fell 5 cents Thursday and closed at 42 cents.