Opening bid for Petters' Polaroid: $42 million

  • Article by: DAN BROWNING and LIZ FEDOR
  • Star Tribune Staff Writers
  • January 28, 2009 - 11:18 PM

Polaroid Corp., the venerable inventor of instant film cameras that was thrust into bankruptcy in the wake of the fraud investigation involving owner Tom Petters, has entered into a "stalking horse" agreement to sell itself for $42 million to a Delaware firm called PHC Acquisitions LLC.

The buyer is affiliated with Genii Capital SA, a Luxembourg-based private equity firm, according to a statement Polaroid released Wednesday night. The stalking horse agreement acts as an opening bid. It entitles PHC Acquisitions to acquire certain assets including but not limited to Polaroid's intellectual property and branding rights.

The bid price is less than 10 cents on the dollar of what Petters paid for the company in 2005. Polaroid said the sales agreement with PHC is subject to higher or otherwise better offers, approval of the bankruptcy court and customary closing conditions.

Doug Kelley, the designated trustee in the bankruptcy, said Wednesday night that the $42 million agreement represents an opening bid for Polaroid. "There will be a process later in the bankruptcy court, supervised by the judge, in which others will have the opportunity to bid," he said. "I fully expect that others will bid."

Polaroid's attorneys filed a motion Wednesday night seeking court approval for the agreement "free and clear of any liens." A hearing on the motion is scheduled for Feb. 19 at 2 p.m. before Bankruptcy Judge Gregory Kishel in St. Paul. Polaroid filed for Chapter 11 bankruptcy protection Dec. 18.

"Genii Capital's interest in Polaroid affirms the viability of the company and the brand," Polaroid CEO Mary Jeffries said in a written statement.

The fate of Polaroid is important to creditors and lenders who lost as much as $3.5 billion in what authorities have characterized as a Ponzi scheme directed by Petters and a small group of associates. Polaroid is one of the few remaining Petters companies that had solid assets that might mitigate the creditors' losses. Sun Country Airlines, which filed for bankruptcy in October, is the other Petters entity that has substantial value.

Petters paid $426 million for the Massachusetts-based Polaroid in 2005. He invested $150 million of his own money and raised $250 million from commercial lenders who were later repaid.

Polaroid's sales peaked in 1991 at nearly $3 billion. But fierce competition drove it into bankruptcy in 2001. It recorded sales of about $1 billion last year. The aggregate net losses since Petters bought the company exceed $200 million, according to a Wednesday court filing. It said the company had an operating loss of about $107 million in the last year.

Dan Browning • 612-673-4493 Liz Fedor • 612-673-7709

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