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Blockbuster will reorganize under Chapter 11 protection.
Blockbuster, No. 34 in the Internet Retailer Top 500 Guide, filed for Chapter 11 bankruptcy protection this morning in the U.S. Bankruptcy Court for the Southern District of New York. The movie and game rental multichannel retailer, which also rents and sells various types of DVDs, games, Blu-ray disks and digital content at Blockbuster.com, listed total assets of $1.01 billion and debts of $1.46 billion in its court filing.
While in Chapter 11, Blockbuster will reorganize to reduce its debt to $100 million or less, the retailer says. Also as part of the bankruptcy and reorganization process, Blockbuster has an agreement with a group of its major bond holders to exchange 11 secured notes in exchange for $125 million in debtor-in-possession financing.
Blockbuster says its stores, DVD vending kiosks, and mail and e-commerce channels will remain open and operating during the reorganization process. But as part of the bankruptcy arrangement, Blockbuster, which closed up to 960 underperforming stores in 2009, will review the performance of its remaining 3,000 locations. “After a careful and thorough analysis, we determined that the process announced today provides the optimal path for recapitalizing our balance sheet and positioning Blockbuster for the future as we continue to transform our business model to meet the evolving preferences of our customers,” says CEO Jim Keyes. “The recapitalized Blockbuster will move forward better able to leverage its strong strategic position, including a well-established brand name, an exceptional library of more than 125,000 titles, and our position as the only operator that provides access across multiple delivery channels–stores, kiosks, by-mail and digital.”
Blockbuster has bond debt of $315.1 million and owes a combined $84.4 million to major movie studios and entertainment companies that include Twentieth Century Fox Home Entertainment, Warner Home Video Inc., Sony Pictures Home Entertainment, The Walt Disney Co., Universal Studios Home Entertainment, Lions Gate Entertainment Corp., Summit Entertainment and Starz Media Anchor Bay Entertainment, according to the claims of creditors in the bankruptcy filing. Other debts include $434,021 owed to IBM Corp., $326,016 to Acxiom Corp. and $171,955 to Akamai Technologies Inc.
Blockbuster filed for the bankruptcy at the same time Netflix Inc., No. 14 in the Internet Retailer Top 500 Guide, is growing and looking to secure more digital content deals with major consumer electronics manufacturers and film studios. Netflix in the second quarter ended June 30 increased sales year over year 27.2%, to $519.8 billion from $408.5 billion. The company last month signed a five-year agreement with Epix that makes the premium movie channel’s library of films available to Netflix subscribers to instantly stream to their computers or televisions.
In comparison, Blockbuster so far this year has announced digital content related deals with T-Mobile USA Inc., and Onkyo, and reported:
- Sales for the second quarter ended July 4 declined 19.8% to $788 million from $982 million.
- Net loss was $69 million, compared to a net loss of $37 million in the prior year.
Blockbuster joins several other retailers recently reorganizing under Chapter 11. In August, Oriental Trading Co. Inc., No. 57 in the Top 500 Guide, filed for Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware.