Polaroid, Once a Creative Star, Files for Bankruptcy Protection
Polaroid Corp., known to generations of consumers for its instant cameras and film, filed Friday for Chapter 11 bankruptcy protection, unable to keep up with new digital technologies that have reshaped the photography world as it struggled with nearly $1 billion in debt.
The widely expected move comes three months after Cambridge, Mass.-based Polaroid said it will miss payments to bondholders and explore strategic options, including a sale of the company.
No buyer has stepped forward, and business slowed further after the Sept. 11 terrorist attacks, forcing the company into reorganization.
The filing in U.S. Bankruptcy Court in Wilmington, Del., was “prudent and necessary,” Chairman and Chief Executive Gary T. DiCamillo said. “Despite our best efforts to stabilize, reduce costs and maximize cash flow, the company’s financial condition deteriorated in recent weeks.”
The company said it has obtained a commitment of $50 million from a bank group led by J.P. Morgan Chase & Co. to continue operating during the restructuring.
Polaroid, founded by Harvard dropout Edwin Land in 1937, has struggled to adapt to the popularity of digital cameras as its core instant film business has slumped.
The company could be sold in its entirety or stripped for parts under the supervision of a Bankruptcy Court.
A Chapter 11 reorganization would make Polaroid and its parts more attractive to potential buyers, analysts said. Buyers could acquire equity for free and possibly get a discount on Polaroid debt if the purchase came out of bankruptcy proceedings.
The company said it will “accelerate and intensify its exploration of a possible sale of all or parts of the company.”
One of the first great research-based companies, Polaroid in its early years concentrated on products that polarized light and invented the technology behind the briefly popular 3-D movies.
After doing defense research during World War II, Land and Polaroid turned to photography, developing a range of revolutionary products, culminating with the SX-70 in 1972, the first camera to eject a self-developing print.
Land died in 1991 with more patents to his name than anyone except Thomas Edison, said biographer Peter Wensberg, a former Polaroid executive who retired in 1982, the same year as Land.
The company ran up its debt in the 1980s as it fended off a takeover bid by Shamrock Holdings.
Later, it failed to use a nearly $1-billion windfall from the settlement of a patent lawsuit to pay down some of that debt and instead wasted it developing products that never panned out, said analyst Ulysses Yannas at Buckman, Buckman & Reid.
The company also suffered from a top-heavy management structure, a sharp drop-off in business from commercial clients such as real estate agents and insurance adjusters and a failure to sustain the creativity that had fueled great inventions for much of its history.
Polaroid’s debt totals $950 million, and the company lost $109.9 million in the quarter ended July 2.
Trading in Polaroid shares has been halted since Wednesday at 28 cents on the New York Stock Exchange. The shares traded as high as $60 in 1997.
