Blockbuster Faces Chapter 11

Blockbuster Inc. has said it may file for bankruptcy if it can’t restructure or refinance its debt. MarketWatch has more:

Because of its losses and “the increasingly competitive industry conditions,” the company sees “substantial doubt about our ability to continue as a going concern,” according to the company’s filing. Blockbuster said if its operating results don’t improve and if it is unable to refinance or restructure its debt, it “could require us to pursue a restructuring of our indebtedness or file for protection under the U.S. Bankruptcy Code.”

Blockbuster’s debt, including capital lease obligations, totaled $964 million as of Dec. 31, according to its financial filings. The company issued a similar warning nearly a year ago, but was able to improve its liquidity through widespread store closings and amended agreements with creditors to delay debt payments.

As part of its plan to stave off bankruptcy, Blockbuster plans to close more stores and cut expenses by more than $200 million. It hopes to do a debt-for-equity swap with holders of its senior subordinated notes and intends to hold talks with holders of its Series A convertible preferred stock, the company said in the filing.

Last month, Movie Gallery Inc., which also owns Hollywood Video, filed for Chapter 11 bankruptcy protection. It is liquidating at least 760 stores.

Carl Icahn and Goldman Sachs respectively own 10.8% and 9.9% of the company, according to the article.

Blockbuster hasn’t exactly been competitive during the past decade or so. Still, it will be sad to see the neighborhood video store go.

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Written by Drea Knufken

Drea Knufken

Currently, I create and execute content- and PR strategies for clients, including thought leadership and messaging. I also ghostwrite and produce press releases, white papers, case studies and other collateral.