ROCHESTER, N.Y. ( TheStreet) -- Eastman Kodak's (EK) shares spiraled downward Monday after the imaging company said late Friday it drew $160 million against its credit line, but one analyst said the decline is a great buying opportunity since a lucrative patent sale is imminent.
Kodak shares shed 24% to $1.81 amid very heavy trading. More than 19.5 million shares changed hands less than halfway through the trading session, compared with their average daily volume of just 14.5 million.
Kodak said late Friday it was borrowing the funds "for general corporate purposes," according to a filing with the Securities and Exchange Commission. With an interest rate of 1.5%, Kodak has until 2016 to repay the loan. The draw followed Kodak's move in April when it entered into an agreement for a new credit facility of up to $400 million."The purpose of the revolving credit facility is to bridge timing differences between cash outflows and inflows, which is a common practice at many corporations," Kodak said on Monday. But Monday's share price plunge indicated that investors were concerned with Kodak's ability to operate with the cash it already had on hand. Kodak has been marketing its trove of digital imaging patents, a sale of which could prove quite lucrative, but no bidders have officially stepped forward yet. Rafferty Capital Markets analyst Mark Kaufman was confident Kodak could repay the $160 million loan on time, and that a patent sale was likely imminent later this year, while Cross Research analyst Shannon Cross cut her price target on the company to $1 citing the "unexpected cash usage."