Business Blog Posts

Kodak, which delivered the first consumer camera in 1888, denied it had a bankruptcy plan, saying it was committed to meeting its obligations and is still looking for ways to "monetize" its patent portfolio.

Once synonymous with photography, Kodak has struggled with the move to digital cameras and failed to turn a profit since 2007. It has been exploring a sale of its digital imaging patents, worth an estimated $2 billion, and hired investment bank Lazard in July to explore options.

Rochester, New York-based Kodak said it has "no intention of filing for bankruptcy," after its shares plunged as much as 68 percent to 54 cents before recovering slightly to close down 53.8 percent at 78 cents on the New York Stock Exchange.

The company's market value plummeted to roughly $210 million on Friday, down from a lofty height of $31 billion in February 1997, as shown by regulatory filings. The cost to insure Kodak's debt with credit default swaps (CDS) surged on Friday as investors priced in greater bankruptcy risk.

Kodak had already scared markets on Monday when it tapped a credit line but refused to divulge its cash position. The stock dived to a 38-year low that day.

Then investors took fright again Friday after Bloomberg reported that potential buyers for its patent portfolio were cautious about going ahead with a bid as they could risk having Kodak creditors sue them after a bankruptcy filing.

Mark Kaufman, an analyst at Rafferty Capital Markets, said that Kodak urgently needed to seal a patent deal.

"I don't believe bankruptcy is inevitable. This is a pretty valuable portfolio, they should get a good price," he said. "They need to get this (sale) out of the way. They need to sell this portfolio, raise some type of cash."

The company said in July that it hired Lazard to advise on strategic options for its patents -- increasingly seen as lucrative assets. Bankrupt Canadian company Nortel fetched $4.5 billion in a patent sale in June, also run by Lazard. Google Inc agreed in August to buy Motorola Mobility for $12.5 billion primarily for its patent portfolio.

One expert -- Robert Miller, a professor at Villanova University School of Law -- said filing for bankruptcy may actually end up boosting the value of a patent sale.

Even if the company holds a robust, public auction outside of bankruptcy, the headache of litigation still looms if Kodak goes bankrupt later, said Miller.

Selling the assets as part of a bankruptcy court-supervised auction would solve that concern, Miller said.

Kodak confirmed that it has hired Jones Day but did not explain why, beyond saying it was "not unusual for a company in transformation to explore all options."

Investors for the company have been up in arms about everything from its share price decline to its management.

One shareholder had asked the company's board on Thursday to start a sales process while others sharply criticized Chief Executive Antonio Perez.

The company's board is not considering replacing Perez at this time, according to a story in the Wall Street Journal, which cited two people familiar with the matter.

Kodak CDS costs rose to 70 percent Friday from 61 percent Thursday, data provider Markit said. That means it would cost $7.0 million in upfront payments, plus $500,000 a year to insure $10 million debt if Kodak debt for five years.

"This is pretty expensive insurance at this point and the reason it's so expensive is that people believe there's a high likelihood of default," said Markit analyst Otis Casey.

(Additional reporting by Paul Thomasch, Nicholas Brown, Dena Aubin, Caroline Humer, Nadia Damouni, Phil Wahba and Jonathan Stempel; editing by Gerald E. McCormick, Matthew Lewis, Gary Hill)

The SEC staff said concerns include failures to follow ratings methodologies, failures in making timely and accurate disclosures and failures to manage conflicts of interest.

The SEC's annual report was required by last year's Dodd-Frank financial oversight law.

The staff report did not single out by name any credit-rating agency for questionable actions.

It also said the SEC has not determined that any of the report's findings constituted a "material regulatory deficiency" but said it might do so in the future.

"We expect the credit rating agencies to address the concerns we have raised in a timely and effective way, and we will be monitoring their progress as part of our ongoing annual examinations," said Norm Champ, deputy director of the SEC's Office of Compliance Inspections and Examinations.

The SEC's report covers 10 credit-rating firms including Moody's Corp, McGraw-Hill Cos Inc's Standard & Poor's and Fimalac SA's Fitch Ratings.

Congress first empowered the SEC to closely regulate the firms in 2006, and Dodd-Frank gave the agency even greater powers over the industry.

Credit raters have been widely criticized for fueling the financial crisis by giving inflated ratings to toxic subprime mortgage securities.

On Monday McGraw-Hill disclosed that the agency might charge its Standard & Poor's unit with breaking securities laws.

SEC Enforcement Director Robert Khuzami told Reuters this week that the agency faces hurdles proving wrongdoing at credit-rating agencies, pointing to the complexity of the cases and the industry's strong legal defenses.

(Reporting by Andrea Shalal-Esa, Aruna Viswanatha, Karey Wutkowski, editing by Gerald E. McCormick)

The Commerce Department said on Friday spending rose 0.2 percent, in line with economists' expectations, after increasing 0.7 percent in July. When adjusted for inflation, however, spending was unchanged after rising 0.4 percent in July.

Consumer spending accounts for about 70 percent of U.S. economic activity.

Income slipped 0.1 percent, the first decline since October 2009, with private wages and salaries dropping $12.2 billion after increasing $23.8 billion in July.

Economists had expected income to edge up 0.1 percent.

"What you're basically getting is a scene where consumers are losing momentum, they're losing momentum on income and as a result of that they're slowing down on spending," said Steven Ricchiuto, U.S. chief economist at Mizuho Securities in New York.

Employment growth ground to a halt in August, and the jobless rate remains at a lofty 9.1 percent.

U.S. stock index futures held losses after the data, while bonds slightly extended gains.

Consumer spending growth slowed sharply to a 0.7 percent annual pace in the second quarter after advancing 2.1 percent in the first three months of the year.

Overall economic growth rose at a 1.3 percent rate in the second quarter after expanding only 0.4 percent in the January-March period.

Last month, real spending on goods fell 0.2 percent, while services ticked up 0.1 percent.

Disposable income was unchanged for the first time since September, but when adjusted for inflation fell 0.3 percent, the largest drop since October 2009.

With real disposable income weak, savings fell to an annual rate of $519.3 billion, the smallest since December 2009, from $550.5 billion in July. The savings rate dropped to 4.5 percent, also the lowest since December 2009.

The report showed a moderation in inflation pressures on a monthly basis. The personal consumption expenditures price (PCE) index rose 0.2 percent after increasing 0.4 percent in July.

Compared to August last year, the index was up 2.9 percent, the largest increase since October 2008, after advancing 2.8 percent in July.

The core PCE index -- excluding food and energy - rose 0.1 percent after gaining 0.2 percent the prior month.

The core index, which is closely watched by Federal Reserve officials, increased 1.6 percent in the 12 months through August after rising by the same margin in July.

The Federal Reserve would like to see it close to 2 percent.

(Reporting by Lucia Mutikani; Additional reporting by Emily Flitter in New York; Editing by Andrea Ricci)

* Swiss drugs industry supplier Lonza (LONN.VX) has extended its offer for U.S. group Arch Chemicals (ARJ.N) as it seeks to close a $1.2 billion deal that would make it the world's largest player in the microbial control market.

* At 1230 GMT, the Institute for Supply Management-New York releases September index of regional business activity. In August, the index read 537.6.

* The Institute of Supply Management Chicago releases at 1345 GMT September index of manufacturing activity. Economists predict a reading of 55.5 compared with 56.5 in August.

* McGraw-Hill Companies Inc (MHP.N) is in advanced talks to merge its S&P Indices business with CME Group Inc's (CME.O) Dow Jones Indexes, a source familiar with the situation said on Thursday.

* Thomson Reuters/University of Michigan Surveys of Consumers release final September consumer sentiment index at 1355 GMT. Economists expect a reading of 57.8, a repeat of the preliminary September figure.

* The rock-bottom price of the new Kindle Fire tablet computer is raising questions about Amazon.com Inc's (AMZN.O) ability to keep up with demand and the device's effect on the company's already razor-thin profit margins.

* The Commerce Department releases at 1230 GMT August personal income and consumption data. Economists expect a 0.1 percent rise in income and a 0.2 percent increase in spending. In July, income rose 0.3 percent and spending was up 0.8 percent.

* Economic Cycle Research Institute releases at 1430 GMT its weekly index of economic activity for September 23. In the prior week, the index read 122.2.

* China's manufacturing sector contracted for a third consecutive month in September, suggesting that the world's second-largest economy is not immune to global headwinds, while factory inflation quickened.

* Oil and gas company Apache Corp (APA.N) said its subsidiary will proceed with the development of the Balnaves oil field in offshore Western Australia, with gross peak production of about 30,000 barrels per day.

* The U.S. Justice Department is investigating accounting irregularities at Chinese companies listed on U.S. stock exchanges, said an official with the U.S. Securities and Exchange Commission, suggesting criminal charges may be brought in addition to civil proceedings.

* Japan's Toshiba Corp (6502.T), the world's No.3 chipmaker, said on Friday that it will sell its Malaysia chip assembly unit to Amkor Technology Inc (AMKR.O) as part of its push to consolidate chip operations.

* European shares .FTEU3 fell 1.1 percent on Friday, on track to record their worst quarterly performance since late 2008, as markets grapple with slowing global growth and a long-running euro zone sovereign debt crisis.

* The Dow Jones industrial average .DJI gained 143.08 points, or 1.30 percent, to 11,153.98 on Thursday. The Standard & Poor's 500 Index .SPX gained 9.34 points, or 0.81 percent, to 1,160.40. But the Nasdaq Composite Index .IXIC dropped 10.82 points, or 0.43 percent, to 2,480.76.

(Reporting by Atul Prakash; Editing by Mike Nesbit)