Polaroid's Loan Waivers Are Extended; Firm Will Explore Total or Partial Sale
By JERRY GUIDERA and JATHON SAPSFORD
Staff Reporters of THE WALL STREET JOURNAL
Polaroid Corp Corp., struggling with a debilitating debt load and a fading product line, gained some breathing room from bank lenders and said it has put itself up for sale.
Polaroid said its banks had extended until Oct. 12 waivers on loan covenants, which are requirements that the company maintain certain financial-health standards. The previous extension on the waivers had been due to expire Thursday.
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The Cambridge, Mass., company also said it hired financial advisers Dresdner Kleinwort Wasserstein and Merrill Lynch & Co. to explore a total or partial sale.
The waivers on the bank lines give the instant-photography firm a much-needed respite, and officials hope to use the extra time to negotiate changes to its bank lines if the advisers are unable to find a buyer.
The storied instant-photography concern, whose past inventiveness and marketing acumen once placed it among the U.S. corporate elite, also acknowledged it would miss interest payments to bondholders, including an $11 million remittance due Thursday, and a $16 million payment due Aug. 16. The company also said it would miss a $19 million principal payment to the banks due in September.
Polaroid Chairman Gary T. DiCamillo maintained that the waiver extension demonstrated "continuing support" from creditors for the company's turn-around strategy. "This allows us to continue business as usual," he said in a statement.
But the missed interest payments give bondholders the right to force Polaroid into bankruptcy proceedings after 30 days.
The company said this possibility was unlikely since the bondholders are unsecured and would have secondary standing behind banks in bankruptcy court. Polaroid also said it aims to open negotiations with the bondholders as part of an overall debt-restructuring effort. It has hired Dresdner Kleinwort Wasserstein and Zolfo Cooper LLC to handle those negotiations.
Polaroid, whose 2001 revenue is widely expected to decline from the $1.86 billion of last year, is saddled with a fully drawn $360 million credit line, $575 million in bonds, and as much as $100 million in bank debt to overseas creditors.
The company reported a loss of $90.9 million on revenue that declined 18% to $330.8 million in the first quarter.
Polaroid needed 51% of its banking syndicate, led by J.P. Morgan Chase & Co., to pass the waiver. An official familiar with the discussions said that as of late Wednesday, the camera maker had the approval of more than 90%.
The waivers come in exchange for a firm verbal commitment to restructure the outstanding debt, according to people involved in the discussion. Polaroid also is pursuing options that include a "pre-packaged" bankruptcy filing in which debtors would agree to recapitalization terms, these people said. Another option might be a capital injection that might come as part of a joint venture with another manufacturer.
In a news release, Polaroid didn't mention any move toward a bankruptcy filing. But officials familiar with the matter say a filing is seen by some advisers as the most feasible way for Polaroid to make good on its promise to restructure its debt.
In a bankruptcy case, bank creditors have senior claims to a company's assets and cash flow. Bondholders are next in line, followed by shareholders, who often are left with little or nothing.
Following a report about its precarious position in Wednesday's Wall Street Journal, Polaroid's share price fell sharply in 4 p.m. composite trading on the New York Stock Exchange Wednesday, down 78 cents, or 29%, to $1.92 each. Polaroid's shares are down from a 52-week high of $19.94.
Write to Jerry Guidera at jerry.guidera@wsj.com and Jathon Sapsford at jathon.sapsford@wsj.com |
