Source: Daily Deal
 
Bank One Corp.'s private equity affiliate prevailed over the unsecured creditors of Polaroid Corp. to win a marathon auction for the bankrupt instant-photography giant, doing so by increasing the amount of equity its rival bidder would get under its latest offer.
 
The unsecureds were armed with financial support from Deutsche Bank AG and Congress Financial Corp. and made a bid that reportedly eclipsed an earlier one by Bank One's One Equity Partners.
 
While details weren't available, the bid was seemingly good enough that One Equity revised its stalking-horse bid by offering to inject $255 million into Cambridge, Mass.-based Polaroid for a 65% stake, with creditors getting the remaining 35%. In its earlier bid, One Equity was only going to give creditors 6% of the equity.
 
The revised One Equity offer contains $10 million in cash less than its initial $265 million offer, but it's also getting far less equity than it would have under the first bid.
 
The unsecureds agreed to One Equity's revised offer at 6 a.m. Thursday, ending an auction for Polaroid that started midday Wednesday in the New York offices of its counsel, Skadden Arps Slate Meagher & Flom LLP.
 
Judge Peter Walsh of the U.S. Bankruptcy Court for the District of Delaware in Wilmington will hold a hearing on the winning bid at 9 a.m. today.
 
The unsecureds had submitted a plan in which an arm of Deutsche Bank would inject $35 million into Polaroid. Under that scenario, the unsecureds would have "gotten a larger share of the equity," according to the unsecureds' financial adviser, Bradley Geer of Houlihan Lokey Howard & Zukin. He declined to provide further specifics.
 
The unsecureds also obtained a $110 million replacement debtor-in-possession financing commitment from Congress, a unit of Wachovia Corp. The DIP would have eventually been rolled into an exit financing facility, Geer said.
 
The DIP would have replaced Polaroid's existing $50 million facility with J.P. Morgan Chase & Co.
 
Based on their harsh treatment under One Equity's initial bid, the unsecureds had been seeking a rival bidder for a couple of months to counter the firm's offer.
 
The unsecureds even gotten support from Donald Walton, the acting U.S. trustee for the region of Delaware, who filed an objection to the sale in early May based on, among other reasons, Polaroid not having come to an agreement with the unsecureds over One Equity's initial bid.
 
Separately, Polaroid said Wednesday that CEO Gary T. DiCamillo had been replaced as its chairman by former Corning Inc. president and CEO John W. Loose.
 
With One Equity again in the front-runner's seat, it appears there may be some closure soon to an eight-month bankruptcy characterized by hotly contested auctions.
 
Before Wednesday's auction, One Equity had emerged as the front-runner from a pack of around six bidders in April. Among them was Cerberus Capital Management LP, according to sources. Bain Capital Inc. and Audax Group, two Boston-based private equity firms, also expressed interest.
 
Even the bidding in December for Polaroid's identification business was heated. Digimarc Corp.'s $56.5 million offer won, but only after the Tulatain, Ore.-based company trumped the stalking-horse bidder by $24 million.
 
Polaroid has been advised in the case by Miller Buckfire Lewis & Co., which was spun off by Dresdner Kleinwort Wasserstein. The noteholders' legal counsel is Akin Gump Strauss Hauer & Feld LLP.