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April 9, 2009 1:44 PM

Jones Day, Sidley, Dorsey in Polaroid Dust-up

Posted by Zach Lowe

In federal bankruptcy court in Minnesota today, several different buyers and creditors--and their law firms--are arguing over the future of Polaroid, the iconic camera company that has filed for bankruptcy twice this decade. 

To review: A private equity fund advised by Willkie Farr & Gallagher laid down a $42 million stalking horse bid to start the auction for Polaroid in late January. Polaroid filed for bankruptcy in December, along with several other companies owned by the financier Tom Petters, who stands accused of orchestrating a $3.5 billion Ponzi scheme. 

At the time, the winning bidders (PHC Acquisitions) and the lawyers at Lindquist & Vennum repping the Petters estate seemed confident they had worked out a complicated deal in which PHC would get only certain Polaroid assets that it wanted. 

But other bidders came calling and raised the price, and on March 31, another private equity firm, Patriarch Partners--repped by Jones Day and the Minneapolis-based firm Leonard, Street & Deinard--won the auction with a $59.1 billion bid, court records show. Wasting no time, two groups urged a federal bankruptcy judge to restart the auction, saying better bids were out there. Judge Gregory Kishel agreed to restart the bidding; the parties are all at a hearing today to discuss the next steps.

Patriarch's CEO, Lynn Tilton, vowed to stay in the race, saying, "We will resume the fight in the name of Polaroid employees and American renewal," according to Bloomberg.

One of the parties opposing the Patriarch bid is a group of creditors led by Ritchie Capital Management and repped by Sidley Austin's Bryan Krakauer. The group made its own offer for Polaroid, and, in that proposed deal, said it would void massive liens the group holds against the company--including a $250 million lien held by Ritchie. "That would have made us by far the highest bidder," a Ritchie spokesman tells The Am Law Daily.

But a federal judge tossed out the group's bid after hearing concerns from the receiver for Petters' estate, Douglas Kelley of Kelley & Wolter in Minneapolis. Kelley argued the liens against Polaroid might not be valid if Petters co-mingled the debt with other funds involved in the Ponzi scheme, court records show.

Meanwhile, two liquidation companies--Hilco Consumer Capital of Northbrook, Ill., and Gordon Brothers Brands of Boston--stepped in with a $72.6 million bid. A Dorsey & Whitney team led by partners Mark Kalla and Christopher Bellini are advising the prospective buyers. 

When the dust settles, we'll update you.

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