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Printing Consumables
The New Polaroid: After Chapter 11

Polaroid's secured creditors, a group of banks led by JPMorgan Chase, made out well, receiving 93 percent of the money they are owed-$228 million out of a total $244 million, an outstanding recovery for a Chapter 11 situation.

The result for Polaroid bondholders is less clear-cut-instead of having about $950 million in claims against the old Polaroid, they now have 35 percent ownership of the new, post-bankruptcy company, and only time will reveal how much that will be worth. But the bondholders did much better than Polaroid's shareholders, who get . . . nothing. All existing shares of Polaroid stock are "extinguished," which is often the case in Chapter 11.

In addition to leaving Polaroid stockholders empty-handed, the settlement completely leaves out many other groups, such as the thousands of Polaroid retirees who have lost their formerly paid for healthcare insurance and life insurance. The most important shortcoming may be Bank One's refusal to take over Polaroid's pension plan, which has turned out to be underfunded. Because of this underfunding, the plan might be taken over by a federal agency, but this would limit the maximum monthly payment, so many retirees would get less.

Industry analyst Ulysses Yannas of Buckman, Buckman & Reid, told PTN the sale to OEP Imaging "was a steal." For one thing, Yannas pointed out, the Polaroid subsidiaries in Europe and Asia, which are doing well financially, were not part of the U.S. bankruptcy filing but still went to OEP as part of the deal.

Yannas estimates Polaroid's worldwide sales are more than $1 billion per year, and he points out that Polaroid's contracts with Spectra and Concord show "there is a lot of value in the Polaroid name," adding that he thinks those deals are "a great idea. It doesn't hurt for the Polaroid name to stay visible."

However, Yannas cautions that "[Polaroid] needs someone who understands marketing." However, if things work out as he suspects they will, the new privately-held Polaroid will hold an IPO in two to three years "and these guys who bought it will clean up."