Eastman Kodak is in advanced discussions with Citigroup Inc to provide bankruptcy financing as the unprofitable imaging company prepares for a potential filing.

Kodak may seek protection from creditors within weeks and then hold an auction to sell its patent portfolio, sources said.

Kodak may seek about US$1 billion in so-called debtor-in-possession financing, though terms may change, sources said.

Advisers to Kodak are lining up a bidder to be the frontrunner or so-called stalking horse bidder for the patent portfolio should the company file, a source said.

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Moody's Investors Service cut ratings on about US$1 billion of Kodak's debt on January 5, citing "a heightened probability of a bankruptcy" as liquidity deteriorates.

In September, after a report by Bloomberg News about Kodak weighing options, the company issued a statement saying it has "no intention of filing for bankruptcy" and that it is pursuing patent sales.

Kodak's cash and equivalents fell to US$862 million at the end of its third quarter from US$1.4 billion a year earlier. The company is scheduled to report fourth-quarter results on January 26.

The New York Stock Exchange warned Kodak on January 3 that it needs to get its share price back above US$1 within six months to continue trading, under listing standards rules. Kodak fell US14c to US67c in trading yesterday.

Kodak was founded by George Eastman, who introduced the Kodak camera in 1888. It went on to invent film enabling Thomas Edison to develop the motion picture camera, Brownie cameras and Kodachrome.

- BLOOMBERG