Blockbuster Files For Bankruptcy Protection
Dallas, TX, United States (AHN) – Video rental chain Blockbuster filed for bankruptcy on Thursday, implementing a recapitalization plan it hopes will cut its debt from $1 billion to $100 million.
The Dallas-based company filed voluntary Chapter 11 petitions as part of a pre-arranged agreement with bondholders. The filing does not affect operations of vending kiosks and all 3,000 stores nationwide, which are open for business, nor those of international stores and franchises, which are separately owned.
The company’s agreement with a group of bondholders holding 80 percent of the it’s 11 percent senior secured notes “provides the optimal path for recapitalizing our balance sheet and positioning Blockbuster for the future,” chief executive officer Jim Keyes said in a statement.
Blockbuster will receive $125 million from the bondholders to finance its operations during the reorganization. The loan, called debtor-in-possession” financing, will convert to an exit loan facility and a new exit revolving credit facility of as much as $50 million after the recapitalization plan is completed.
The company has been losing customers to competitors such as Netflix, which rely more on online services. Blockbuster last month reported total second quarter revenues of $788 million, down from $982 million a year ago. Net losses were due to closure of stores and decline in sales, the company said.
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