Private Equity Firm’s Bid For Polaroid Put On Hold

A judge has rejected private equity firm Patriarch Partners’ purchase of Polaroid Corp., giving the preferred bidder of the camera company’s hedge fund creditors another shot.

U.S. Bankruptcy Judge Gregory Kishel tossed the results of last week’s auction, in which Polaroid’s bankruptcy trustee chose a $59.1 million offer from New York-based Patriarch. The private equity firm’s bid was selected over a potentially richer one from Hilco Merchant Resources and Gordon Brothers Group, as well as another from three hedge fund creditors of Polaroid. Polaroid filed for bankruptcy in December after its owner, Thomas Petters, was arrested and charged with running a $3 billion Ponzi scheme.

Kishel rejected the auction at a hearing in St. Paul reportedly packed with angry creditors who urged him to give Hilco and Gordon Brothers another chance, citing disagreements over both price and procedure. Both the Hilco-Gordon joint venture and Patriarch had until yesterday to make new, presumably final offers, with Polaroid to notify the court of its choice today. A hearing on that bid is to be held on Wednesday.

Hedge funds Ritchie Capital Management, Acorn Capital Group and Lancelot Investors Fund claimed that Patriarch’s bid was too low and would violate liens they held against Polaroid’s trademark rights.

Those liens are at the center of a nasty dispute between the hedge funds and the bankruptcy trustee running Polaroid. In February, Polaroid sued Ritchie and Acorn, accusing them of assisting Petter’s alleged fraud. Last month, Ritchie sued back, calling Polaroid’s claims “outrageous.”