What's Important in the Financial World (1/19/2012) BP Settlement, Kodak Patents

Eastman Kodak’s Chapter 11 filing is a way to shed its financial obligations. It also may allow a bankruptcy court to auction off its patents, either through purchase or license, to the highest bidders. So far, Kodak has been unable to make these sales on its own. Rather, it has relied on a series of patent suits against firms like Samsung to solve its intellectual property value problems. But Chapter 11 may not help Kodak as much as it believes. There must be some reason there were no takers for its patent portfolio already. Kodak’s efforts to monetize the portfolio have gone on for more than a year. And the company’s patent suits may not be resolved for a very long time. Firms like Samsung have access to legal talent that will allow them to battle Kodak for protracted periods.

Greek Default Looms

Each day that passes makes a deal between Greece and private holders of its debt less likely. The nation only has until mid-March to reach a compromise. It needs the next installment of aid from its neighbors by then, or it almost certainly will default. Private investors walked away from negotiations last week. They have now been back in discussions with the Greek government for two days. There is no reason to think that either side has changed it position much. Private investors may believe that other eurozone countries will provide Greece more aid before a default in order to preserve the euro. If the assumption is correct, their debt may be valued at a greater price that Greece wants them to have.

French and Spanish Debt

The global capital markets have partially solved the eurozone debt problem — for now. Spain managed successfully to auction more sovereign paper. The country sold 6.61 billion euros of debt that matures in 2016, 2019 and 2022. France also sold notes at preferential interest rates. The downgrades of these nations by S&P has not hurt their ability to raise money. Perhaps news that the International Monetary Fund wants to increase its fund to rescue local nations by $600 billion has stabilized the markets. There is no economic news to sooth investors, however. Unemployment in the regions continues to rise as GDP expansion suffers.

BP Settlement

Rumors swirl that BP (NYSE: BP) will agree to a settlement of all civil and criminal charges by the U.S. with regard to the Deepwater Horizon disaster. The sum of the settlement will be set at $20 billion to $25 billion. The sum is very large for BP, which has already provided a $20 billion clean-up facility for the Gulf. And such an agreement would not settle claims from private industry or, more importantly, from Gulf coast states. But BP may be able to set its disputes with the U.S. government to rest. That will not by any means solve many of its legal problems. As a matter of fact, a rich deal with the Justice Department actually may encourage other parties to press expensive claims against what will be seen as BP’s deep pockets.

Douglas A. McIntyre