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Hello, my name
is Michael McDonald.
This is a business case study
developed for
Henry Stewart Talks.
Today we will be talking
about corporate bankruptcy,
and the case of Kodak.
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Now, before we start talking
about Kodak specifically,
let's talk a little bit about
bankruptcy.
In general, there are
three different types
of stakeholders in a company.
The first and most common
are shareholders.
These are investors
who have purchased
an equity stake in a company.
The second group are bondholders
or unsecured debtholders.
These are investors
who are owed
an amount of money
by the company,
that we call principle,
plus their owed interest
on that principle,
based on funds
they've lent to the company.
And then third
are secured debtholders.
These investors are
also owed principle
and interest by the company
for an amount of money
lent to that company,
but their claims are backed by
specific assets of the company.
Now, as long as
a company can pay
all of the principle
and interest
that it owes
to its bondholders,
unsecured debtholders,
and secured debtholders,
that company
can remain in business.
The company does not
actually have to pay
anything to shareholders.
Shareholders may or may not
get a return
on their investment.
That all depends on how
the business is faring.
If shareholders
don't earn a return,
there's nothing they can do
other than sell their shares
in the company
or vote to make changes
to management.
During the financial crisis
in 2007 and 2008,
many shareholders found
that stocks fell so much
that the price of those stocks
was exactly the same
as it had been 10 years earlier.
In essence, it was like
they had earned no return
on their investment
over a 10-year timeframe,
in terms of capital
appreciation.
There is nothing those
shareholders could do
other than hold on to the stock
and hope for better
things in the future,
or sell and invest
in something else.
They could not force
the company into bankruptcy.
In contrast, if bondholders
or debtholders of
any type do not get paid,
they can force that
company into bankruptcy.
