Polaroid exploring ways to get out of debt
Associated Press
BOSTON — Polaroid Corp. said yesterday it would explore a merger or sale and said it received a reprieve from lenders, as the the camera and film maker tries to dig out from beneath a mountain of debt.
Associated Press library photo
The company announced a waiver, good through Oct. 12, on a $363 million line of credit that was set to expire today, but said it would miss payments to bond holders next month. It now faces negotiations with bondholders to restructure that debt.
Polaroid Corp., headquartered in Cambridge, Mass., is looking for ways to get out from under a pile of debt. The company says it is willing to consider a merger or sale, and has retained advisors to try to renegotiate some of the debt.
The company also has retained advisers to explore several options for the future of the company, including "a sale of assets, a merger or sale of the company, and/or a strategic partnership," said Polaroid spokesman Skip Colcord.
Pending the announcement, Polaroid shares were suspended near the end of trading yesterday after falling 30 percent to $1.92 on the New York Stock Exchange amid reports it was considering filing for bankruptcy.
The company must now negotiate with bondholders, who after 30 days could use the missed payments to force Polaroid into involuntary bankruptcy, said Buckman, Buckman & Reid analyst Ulysses Yannas.
"At this stage Polaroid has no intention of either declaring bankruptcy or going into a prepackaged bankruptcy," he said. "At least that's what the statement implies. It's a question of how successful they can be renegotiating these notes."
Polaroid said it would miss an $11 million interest payment due Monday and $16 million due August 15, as well as a $19 million principal payment due in September.
The company said it had retained Dresdner Kleinwort Wasserstein and Zolfo Cooper LLC to help it negotiate with bondholders. It has retained that firm and Merrill Lynch & Co to explore "strategic alternatives."
"The receipt of these waivers demonstrates both the company's continuing support from its bank group and the progress we are making in implementing our previously announced five-point plan to strengthen our financial position," said chairman and chief executive Gary T. DiCamillo in a statement.
Yannas said it was little surprise that the company would consider a sale.
"When you are examining alternatives, you look at every alternative possible," he said.
Previously, some analysts had indicated a waiver was likely because lenders had nothing to gain if Polaroid filed for protection. They said one clue was that lenders, who have tight controls over Polaroid's purse strings, have allowed the company to spend $120 million on severance packages related to recent layoffs. The banks couldn't recoup that money if the company declared bankruptcy.
Polaroid, founded in 1937, made its name producing instant cameras and film, but it was caught flat-footed by the recent shift to digital technology.
