Polaroid’s future is out of focus

By Justin Pope

Associated Press

BOSTON — Trading in shares of instant-image company Polaroid Corp. was halted Wednesday following a report that a filing for federal bankruptcy protection was imminent.

Such a filing, which would protect the company from creditors as it tries to restructure, is widely expected by analysts and investors.

The Wall Street Journal, citing people familiar with the matter, reported that a Chapter 11 filing could come as early as Wednesday.

In July, the company said it would miss payments to bondholders and explore strategic options, including a sale of the company. Because of the missed payments, bondholders could force the company into involuntary bankruptcy.

Polaroid spokesman Skip Colcord said he couldn’t comment on whether the trading halt came at Polaroid’s request and declined to comment on the possible bankruptcy filing.

"We’re continuing to explore a variety of strategic alternatives, including a sale of assets, a merger or sale of the company, and or a strategic partnership," he said.

But Colcord acknowledged that the company’s business has slowed since the World Trade Center attacks.

"Yes, Sept. 11 has impacted Polaroid the same as it has other consumer companies," he said.

Polaroid shares had not traded on the New York Stock Exchange by Wednesday afternoon; on Tuesday, they closed at 28 cents a share, down 15 cents.

The company’s debt is trading at about 10 cents on the dollar, said Kevin Kuzio, a bond analyst at KDP Investment Advisors in Montpelier, Vt., indicating the market strongly believes the company won’t be able to pay off the bonds in full.

"We’ve expected that they would file just to fix the balance sheet at the very least, then as things have deteriorated over the last month it appeared they weren’t pulling a plan together with the creditors," Kuzio said.

Polaroid has seen its core instant-film business slip dramatically in recent years. It is rushing to develop new instant-printing technology, but analysts have expressed doubts it will be ready in time to save the company from reorganization.

The Cambridge-based company has been trying to restructure $900 million in debt, and lost $109.9 million in the quarter ending July 2.

In June it cut 2,000 jobs, or 25 percent of its global workforce, and last month told employees that its pension plan had only enough to pay 90 percent of all benefits accrued by employees.

It is unclear whether the company would come out of a bankruptcy filing as one entity or be split up. The potentially valuable Polaroid brand name could also be sold off and live on with a new owner.

"It may very well be that two or three major pieces of the company get sold off, that it doesn’t survive bankruptcy in the sense of being restructured," Kuzio said.

Polaroid isn’t the only imaging company hit hard by the economic slowdown, but it is the most vulnerable. Eastman Kodak Co. recently cut its third-quarter earnings outlook by 38 percent and is also cutting an unspecified number of jobs.

Shares of Polaroid, once an investor darling as a member of the "Nifty Fifty" in the late 1960s and early 1970s, hit $60 a share in 1997 before sinking to almost nothing since as the company’s core instant film business became less profitable and it fell behind in digital technology.