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Polaroid gets extension
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July 11, 2001: 5:36 p.m. ET
Debt-ridden photo company gets extension on payment deadline
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NEW YORK (CNNfn) - A day ahead of a deadline for payment on two lines of credit, Polaroid late Wednesday received a waiver from its lenders, giving it more time to repay its debts.
Polaroid company also said it is exploring a merger or possible sale of the company and has hired Merrill Lynch and Dresdner, Kleinwort Wasserstein to assist in those efforts.
Additionally, Polaroid said it will not make upcoming interest payments on its bonds and that it will seek to restructure its existing debt.
"I think the banks have confidence in our ability as a going concern, hence the waiver," Polaroid spokesman Skip Colcord said. "The banks certainly are not going to grant a waiver to a company it feels does not have ability to pay its debts."
Polaroid had said earlier Wednesday it was optimistic that banks would grant an extension on two major lines of credit due to expire. The comments follow an earlier published report that said the film and camera maker is considering a voluntary bankruptcy filing in order to remain operable.
Shares of the Cambridge, Mass.-based company sank nearly 29 percent in trading Wednesday following the initial news of a possible bankruptcy filing.
Despite its financial woes and shrinking business, the company produces the best-selling camera in the United States, the i-zone, which takes thumbnail-sized digital photos that can be printed as stickers.
The Wall Street Journal, quoting unnamed sources familiar with the discussions, reported that banks due payments from the company Thursday are prepared to grant an extension – if they get assurances Polaroid (PRD: down $0.78 to $1.92, Research, Estimates) will find a long-term solution to its problems.
Without an extension, banks led by JP Morgan Chase (JPM: Research, Estimates) could call in $363 million in loans.
The paper's report said one alternative being studied is a so-called "prepackaged bankruptcy" in which its creditors and the company agree on a plan to rework outstanding debt. The paper said the agreement would need approval not just of banks but of bondholders.
The Journal said that in addition to the loans due Thursday the company has $575 million in bonds and an additional $50 million-to-$100 million owed to overseas creditors. And it said that its debt maturing in 2006 recently was being offered at 29 cents on the dollar.
However, some analysts are skeptical about the possibility of a bankruptcy filing.
"I suspect the scenario is they'll get themselves an extension," said Ulysses Yannas, an analyst at Buckman Buckman & Reid.
Yannas said the company plans to sell off much of its inventory, which he said has a market value of about $835 million. That combined with other streamlining, could be enough to satisfy the banks, Yannas said.
Hit by the growth of one-hour photo developing and digital photography, the company has reported a trend of declining sales and mounting losses. It announced a restructuring program that includes cutting an estimated 25 percent of the staff. It confirmed to CNNfn earlier this week that five top executives have left the company. 
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