Deadline Looming for 2 Loans to Polaroid

Banks have given money-losing Polaroid Corp., which is struggling to compete with better-financed rivals, until Thursday to get back in compliance with two loans.

In a securities filing, the Cambridge, Mass.-based camera and film maker said if it fails or can’t get an extension, the banks, led by J.P. Morgan Chase & Co., can call in the loans.

The loans total at least $363 million, and extending them is proving a struggle, people familiar with the situation said.

Kevin Kuzio, an analyst at KDP Investment Advisors Inc. in Montpelier, Vt., said he expects an extension because Polaroid’s asset value exceeds its bank debt by at least 50%.

“We believe that the valuation on the company covers the banks,” he said.

If the banks call the loans in, Polaroid said, it could be forced to pay $575 million on three note issues. The company has $10.5 million in interest due July 16 and $15.8 million due Aug. 15.

It said it had $88 million in cash as of April 1.

An extension wouldn’t be the first for Polaroid, which competes against Eastman Kodak Co. and Hewlett-Packard Co. and was a late arrival to the digital photography world.

In 2001 Polaroid suspended its dividend and unveiled two restructuring plans involving asset sales and deep job cuts.

The banks gave Polaroid a reprieve in February and a second in May.

Though Polaroid’s credit ratings are sinking, analysts expect it to announce a third reprieve before it releases second-quarter earnings July 18. It posted a $38 million first-quarter operating loss.

Polaroid spokesman Skip Colcord said the company is having “weekly discussions” with its banks.

Polaroid shares closed Friday at $2.97, up 8 cents, on the New York Stock Exchange.