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Polaroid files Chapter 11
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October 12, 2001: 2:06 p.m. ET
Instant film maker seeks court protection and will trim staff and sell assets.
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NEW YORK (CNNmoney) - Polaroid Corp. filed for voluntary Chapter 11 bankruptcy protection in Delaware Friday, capping three days of speculation in which the instant photography company's stock had not traded.
The company, which has been struggling with more than $900 million in debt, said it still is considering an outright sale of all or part of the company and that it plans to cut further staff, close facilities and sell non-core assets to reduce costs.
Its stock last traded Tuesday at 28 cents.
Filing Chapter 11 bankruptcy protects a company from creditors and keeps it operational until a restructuring plan can be formed to either lift it out of debt, sell, or liquidate assets.
"The intent had been to pursue an out-of-court , pre-negotiated bankruptcy filing, but ultimately the company's liquidity was just too tight and it just couldn't hold out long enough to get a deal done," said Brad Geer of Houlihan Lokey Howard and Zukin, the financial firm advising Polaroid's bondholders.
Polaroid (PRD: unchanged at $0.28, Research, Estimates) said it has obtained a commitment for $50 million in debtor-in-possession financing from a bank group led by J.P. Morgan Chase & Co. Upon court approval, which is expected shortly, $40 million will be available immediately on an interim basis to pay suppliers and help keep the company operational. The full $50 million commitment is subject to final court approval and other conditions.
Polaroid said it will continue to manufacture, market and distribute its core instant imaging products and to provide customer service and support. Employees will continue to be paid with full benefits.
The Cambridge, Mass.-based company also said its lenders have agreed to accelerate and intensify its efforts to sell all or parts of the company, and that it has retained financial advisors to assist in that process.
"It gives you the time to negotiate without a gun on your head in a more orderly fashion," said Ulysses Yannas, an analyst with Buckman Buckman & Reid. "Maybe they'll sell the company, or maybe they'll continue operating. I am convinced it can be operated profitably."
Additionally, Polaroid said it has initiated a thorough evaluation of all aspects of its business operations in order to cut costs beyond previously announced initiatives, including elimination of non-core products and businesses, additional asset sales, facility closings and further personnel reductions.
"After a thorough analysis of Polaroid's financial condition and the rapidly changing outlook in our key markets, the board of directors and senior management concluded that today's court filings by our U.S. operations were both prudent and necessary," Polaroid CEO Gary DiCamillo said. "Despite our best efforts to stabilize revenue, reduce costs and maximize cash flow, the company's financial condition deteriorated further in recent weeks."
On Aug. 10, Polaroid had obtained a one-month extension on its loan waivers and an extra $10 million from its creditors, and put up some of its real estate as collateral with bondholders.
Polaroid spokesman Skip Colcord said Friday that agreement was incorporated into the pending restructuring plan.
Once a Wall Street darling, Polaroid's cutting edge instant cameras were a cash cow that kept shareholder value high. But the emergence of new technologies such as one-hour photo processing and the recent rise of digital photography hurt Polaroid, which chose to stay with its niche instant film products.
Additionally, the company became saddled with debt in 1989 after successfully fending off a hostile takeover by Shamrock Holdings.
Some sources familiar with the situation have said rivals in digital printing technology such as Hewlett-Packard and Canon would be likely suitors for the streamlined company.
Other potential candidates would be Schroders Ventures and Japan's Fuji Photo Film co. Ltd.
Polaroid has been struggling to pay down its massive debt for a decade as it faced the additional challenge of emerging digital photo technology that has continually hurt sales of its instant film.
Bondholders had become increasingly agitated as the company has yet to announce a partner for its new digital technology systems Opal and Onyx. Opal allows consumers to bring digital cameras to a kiosk at a mall or a store and instantly have them printed. Onyx is digital printing used for business applications.
Then, on July 11, bondholders were further angered after the company obtained a last-minute loan extension from creditors in a deal in which Polaroid agreed to withhold interest payments to bondholders. 
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