UPDATE 1-Polaroid gets court OK to sell itself at auction

*Polaroid to hold bankruptcy auction March 30

*Genii Capital affiliate named lead bidder (Updates with valuation concerns, background, byline)

NEW YORK, Feb 19 (Reuters) - Polaroid Corp, maker of the iconic instant cameras, has received bankruptcy court approval to hold an auction of its assets in March, according to court documents.

U.S. Bankruptcy Judge Gregory Kishel approved the company’s plan to sell itself after a hearing on Wednesday, according to court documents filed on Wednesday night.

PHC Acquisitions, an affiliate of Luxembourg-based private equity firm Genii Capital, was approved to be the lead bidder, or “stalking horse,” at the auction, despite creditor objections that the proposed deal undervalues the company.

The auction will be held on March 30, the documents showed.

Polaroid filed for Chapter 11 bankruptcy protection in December amid fraud allegations against the founder of Petters Group Worldwide, which has owned the company since 2005.

The Genii affiliate has offered to buy the company as a going concern for $42 million plus the assumption of some liabilities.

A group of creditors had filed objections to the deal last week, saying the proposed deal undervalues the company’s brands and trademarks, but Polaroid has argued the deal is necessary to create a floor for the bidding.

Petters had paid $426 million to acquire the company in 2005 and Sovereign Bancorp, which says it is owed money in the case, said in a court filing on Monday it believes the mid-range value of the Polaroid trademarks alone is approximately $300 million.

Acorn Capital Group, which says it has a lien on Polaroid’s assets, also claimed in court documents that the value of the company’s inventory, artwork and accounts receivables is worth almost $64 million, aside from other assets the company may have.

Polaroid shot back in court papers filed on Tuesday that the stalking horse bid is the best offer it has found, and it is encouraging other bidders to enter the race for the company.

It also said that it needed to sell itself as soon as possible to save the company and the jobs of many of the employees who work there.

“Because Polaroid does not have the cash resources to continue to operate, and it has been unable to obtain third-party financing, time is of the essence with respect to this sale of Polaroid’s assets,” the company said in court papers.

Because Polaroid anticipates that Genii will pay for transition costs as well, Polaroid said the deal’s total value would be worth more than $72 million to the company’s creditors, once completed.

The case is In re: Polaroid Corp, U.S. Bankruptcy Court, District of Minnesota, No. 08-46617. (Reporting by Emily Chasan, editing by Gerald E. McCormick and Brian Moss)