Bankruptcy judge lets Polaroid draw $40 million

Financing to allow business to operate amid search for buyer

October 16, 2001|By BLOOMBERG NEWS

WILMINGTON, Del. - Polaroid Corp. received a bankruptcy judge's permission yesterday to draw $40 million from a $50 million bankruptcy credit line to finance operations while it reorganizes its debts.

U.S. Bankruptcy Judge Peter Walsh scheduled a hearing for Nov. 5 to consider whether to allow the company to borrow the full $50 million. A group of banks led by J.P. Morgan Chase & Co. is providing the line of credit. Faced with declining instant film sales as digital cameras become more popular, the largest instant-photography company sought bankruptcy protection Friday. Polaroid listed $1.81 billion in assets and $948.4 million in debts in its Chapter 11 papers filed in U.S. Bankruptcy Court in Delaware.

"We are pleased with the prompt approval by the court," Polaroid Chairman Gary DiCamillo said in a statement after Walsh's decision. The financing "will enable the company to continue conducting business in the U.S. and worldwide as it proceeds with the reorganization process and accelerates and intensifies its exploration of a sale of all or parts of the company."

Without the financing, Polaroid and its affiliates "will not be able to meet their payroll and other direct operating expenses, will suffer irreparable harm, and their entire reorganization effort will be jeopardized," the company said in court papers.

The credit line should give "vendors and suppliers the necessary confidence to resume ongoing relationships" with Polaroid, the court papers said.

Polaroid had pledged most of its assets to lenders as it explored selling all or parts of the company. The bankruptcy court has scheduled a Nov. 26 hearing on an undisclosed buyer's $33 million offer for Polaroid's identification business. The unit sells driver's license equipment and related services to 36 U.S. states.

In August, Polaroid reported a second-quarter loss of $109.9 million, compared with net income of $26.6 million a year earlier. Sales fell 31 percent to $333.5 million. Chapter 11 gives Cambridge, Mass.-based Polaroid protection from creditors while it reorganizes its debts. The company had faced a Nov. 15 deadline on a $360 million loan from a group led by J.P. Morgan Securities Inc. In addition, bondholders are owed about $575 million.

On Friday, Walsh temporarily approved an emergency request by Polaroid to spend $13.1 million of cash that had been pledged to lenders as collateral. That order allows the company to cover $9.1 million in employee paychecks.

Polaroid shares fell 97 percent in the past year to 28 cents last Tuesday. Trading in the shares was halted yesterday.

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