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Polaroid Files for Bankruptcy Protection
Polaroid Corp. has today filed for Chapter 11 Bankruptcy Protection (according to Fox News). This has been on the cards for several days, it now seems to have finally happened. Polaroid's last recorded share value was 28 cents compared to a 10 year high of $60.31 back in July 1997. According to Reuters Polaroid owes almost $1 billion in total ($600 million to bond holders, $350 million to two groups of banks).
Reuters story: (from Fox News)
Polaroid Files for Ch. 11 Bankruptcy Protection
CAMBRIDGE, Mass. Polaroid Corp. , an American icon that became famous for a camera that delivered pictures in seconds, Friday said it filed for bankruptcy protection after being hounded by bondholders for missing interest payments this summer.
Waylaid by one-hour film developing shops and a heavy debt load, the Cambridge, Massachusetts-based company's core business suffered from the rise of digital cameras while being late to develop its own digital technologies.
Polaroid, once propelled by the wizardry of Harvard University dropout Edwin Land and his camera that squeezed out pictures almost instantly, said it filed for protection under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court in Delaware. Polaroid owes about $600 million to holders of its bonds and about $350 million to two groups of banks.
Its shares have not traded since Tuesday on the New York Stock Exchange as speculation mounted that the one-time member of the "Nifty 50" group of fast-growing stocks would seek bankruptcy protection. The stock, which reached a high of $60.31 in July 1997, closed at 28 cents Tuesday on the New York Stock Exchange, down 98 percent in the past year.
This from PRNewsWire:
Polaroid Files Voluntary Chapter 11 Petition, Receives $50 Million in New Financing
CAMBRIDGE, Mass., Oct. 12 /PRNewswire/ -- Polaroid Corporation (PRD) today announced that, following this year's steep decline in its revenues and the resulting impact on its liquidity, the company and its U.S. subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The filings were made in the U.S. Bankruptcy Court in Wilmington, Delaware. Polaroid intends to use the Chapter 11 process to restructure its business operations and finances.
Polaroid is open and conducting business in the U.S. and elsewhere around the world. Polaroid's non-U.S. subsidiaries, including those in Europe, Asia and Japan, are not part of the filing.
In order to address immediate liquidity concerns created by the dramatic shortfall in revenue, Polaroid 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 of these funds will be available immediately on an interim basis to supplement the company's existing cash flow and help Polaroid fulfill obligations associated with operating its business, including payment to suppliers, vendors and other business partners for goods and services provided on or after today's filing. The full $50 million commitment is subject to final court approval and other conditions.
Polaroid intends to continue to manufacture, market and distribute its core instant imaging products and to provide customer service and support for these products. Employees are being paid in the usual manner and their medical, dental and life insurance benefits are expected to continue unchanged.
Polaroid also announced that the company and its lenders have agreed to accelerate and intensify its exploration of a possible sale of all or parts of the company. Polaroid believes that such a sale would be in the best interests of all constituencies, including employees. As previously announced, Polaroid has retained financial advisors to assist with this process.
Additionally, in light of its reduced revenue base and the uncertain economic outlook, the company has initiated a thorough evaluation of all aspects of its business operations with the objective of achieving significant cost savings beyond those already provided by the company's previously announced restructuring activities. This process will result in the disposition or elimination of non-core products and businesses, additional asset sales, facility closings, and a further reduction in personnel.
Gary T. DiCamillo, chairman and chief executive officer, said, "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. Despite our best efforts to stabilize revenue, reduce costs and maximize cash flow, the company's financial condition deteriorated further in recent weeks.
"Filing for Chapter 11 at this time allows Polaroid to enhance its liquidity by supplementing cash flow from operations with $50 million in new financing. It also allows us to initiate a formal process in which to intensify our exploration of strategic alternatives and work with our creditors to develop a plan to resolve their financial claims.
"From an operational standpoint," DiCamillo continued, "we intend to continue shipments of our core instant imaging products to customers as normal and meet our post-petition obligations to suppliers, vendors and other business partners. We will also continue to pursue opportunities to maximize the potential of our Opal and Onyx instant digital printing technologies."
In conjunction with today's court proceedings, Polaroid expects to file a variety of "first day motions" to support its employees, customers and suppliers. These include motions seeking court permission to: continue payments for employee payroll and health benefits; honor existing warranties; obtain interim financing authority and maintain cash management programs; and retain legal, financial, and other professionals to support the company's reorganization. In accordance with applicable law and court orders, suppliers who provided goods or services to Polaroid or its U.S. subsidiaries before today's filing may have pre-petition claims, which will be frozen pending court authorization of payment or consummation of a plan of reorganization.
William L. Flaherty, executive vice president and chief financial officer,
said, "Polaroid made significant progress over the last year toward
reducing costs through restructuring, improving working capital, consolidating
manufacturing, reducing capital spending and selling non-core assets.
However, it is evident that with the company's substantially reduced revenue
stream, additional steps must be taken during the reorganization process
to improve the viability of the core instant imaging business, optimize
the sale process and maximize the value of the enterprise."