Polaroid Corporation is moving closer to bankruptcy as its financial position has deteriorated rapidly since the September 11 attacks, according to analysts.

"A Chapter 11 filing is now inevitable once the company and its creditors figure out what they want to do," said Kevin Kuzio, analyst with KDP Investment Advisors, a distressed debt specialist.

In a clear sign of crumbling faith in the company's solvency, the price of Polaroid bonds tumbled to 9 cents on the dollar at the start of trading yesterday, from over 20 cents just before the terrorist attacks.

Polaroid's ability to raise cash to pay its $950m in debt - $350m to banks and $600m to bondholders - is now in serious question. The company has been looking to sell various divisions of the company, including its drivers' licence unit, for months. In current economic conditions, an asset sale now seems improbable. "We've been concerned ever since we missed payments to bondholders a few months ago," said Polaroid spokesman Skip Colcord.

The company's bankers have granted a number of reprieves on loan covenant violations this year. The recent and dramatic drop in Polaroid's bond price, however, puts that relationship in jeopardy. On November 15, the waiver on the company's short-term revolving loan expires, and the banks must decide whether they wish to extend that deadline.

"The bankers have felt their portion of the debt was covered, because they would get paid before the bondholders, so they were patient," said Mr Kuzio. "Now, they are getting concerned. They won't allow bondholders to get ahead of them on any deal, and it doesn't take many creditors to say 'No way' for any deal to fall apart."

Polaroid is unlikely to squeeze cash from its ongoing operations. The company is expected to record a heavy loss at its next quarterly earnings release later this month. "Sales have fallen off a cliff," said Ulysses Yamas, an analyst with Buckman Buckman & Reid. The Christmas retail season, when camera-makers usually bring in much of their revenue, is expected to be weak. Two weeks ago, Eastman Kodak warned that its third-quarter results would be well below expectations.

Polaroid was one of the highest-flying stocks on Wall Street, but has fallen on hard times. The proliferation of one-hour film kiosks reduced demand for instant photography, and the group was slow to develop new products. Polaroid has already announced plans to lay off more than a quarter of its work force. The sale of large tracts of real estate helped the company raise cash, but not enough to pay its debts. Last month, Polaroid said it would cut employees' health benefits.