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Blockbuster close to bankruptcy

bruceames
03-03-2009, 10:34 PM
March 3 (Bloomberg) -- Blockbuster Inc., the world’s largest movie-rental chain, hired legal counsel to explore a possible bankruptcy filing, a person familiar with the situation said. Blockbuster fell as much as 86 percent before trading was halted.

Kirkland & Ellis LLP was asked to evaluate restructuring options for the company, which may include a “pre-packaged” or “pre-arranged bankruptcy,” in which much of the restructuring work is completed out of court, the person said. A pre-packaged filing is more advanced than a pre-arranged bankruptcy as it includes agreements from creditors about the outcome of the company’s reorganization.

“We’ve hired them for refinancing and capital raising initiatives,” said Karen Raskopf, a Blockbuster spokeswoman. “We do not intend to file for bankruptcy.”

Blockbuster is working with Kirkland and Ellis on refinancing, Raskopf said. The company previously announced plans to fund its own operations through the end of 2009 after two of its credit facilities expire this August, she said.

Blockbuster has also hired Rothschild Inc., an investment bank, to advise it on restructuring, a person familiar with the situation said.

Blockbuster, with more than 7,500 stores in North America, Europe, Asia and Australia, has faced increased competition from Netflix Inc., the largest U.S. mail-order movie service. Dallas-based Blockbuster has expanded its digital library of movies and made them available on mobile phones and Web- connected TVs. It plans to offer 90,000 DVD titles by mail, according to the company’s Web site. Netflix, by comparison, has 100,000 DVD titles, according to the company’s Web site.

Bankruptcy Specialists

“Balance sheet issues are easily solved with a prepackaged or prearranged bankruptcy,” said Paul Silverstein, a lawyer with Andrews & Kurth LLP, who has no connection to Blockbuster. Silverstein, speaking in a phone interview, said operational issues and business problems are less easily solved with such filings.

Kate Kortenkamp, a Kirkland spokeswoman, didn’t immediately return a call seeking comment. Kirkland has a specialty in restructuring and bankruptcy, and has represented Tronox Inc., Wellman Inc. and Solutia Inc., all chemicals companies, in bankruptcy filings. Kirkland has also been reported to have retained Charter Communications Inc., Paul Allen’s money-losing cable television carrier, and Visteon Corp., the auto-parts maker spun off by Ford Motor Co. in 2000.

Liquidity Challenge

“Blockbuster has been challenged liquidity-wise for a while now,” said Wedbush Morgan Securities analyst Edward Woo. “They acquired a whole bunch of debt when they had the spinoff away from Viacom.”

On Jan. 14, the company announced a partnership with Novato, California-based Sonic Solutions Inc., a digital video publishing company, to combine libraries and give customers immediate access to movies. It also recently released a media player the size of a cable box that downloads movies for viewing on television.

Blockbuster fell as much as 83 cents to 13 cents in New York Stock Exchange composite trading before trading was halted at 2:25 p.m. Netflix surged $2.01, or 5.9 percent, to $36.36 in Nasdaq Stock Market trading today


http://www.bloomberg.com/apps/news?pid=20601081&sid=ahGJXE0HCh9o&refer=australia

mytime
03-03-2009, 11:22 PM
The one close to me closed 2 wks ago. No warning, here one day shut down the next.

PFC5
03-04-2009, 02:32 AM
The closest one to me closed 2 months ago also without warning. I would say Bb is in bigger trouble financially than is being stated at this time IMO.

MikeRox
03-04-2009, 02:59 AM
The curse of dropping HD DVD continues! :lol:

I've not used Blockbuster since the one in my local town centre moved out of town making it too far to get away.

kamspy
03-04-2009, 03:54 AM
What happens if the store suddenly closes and you have movies/games out on rent...

Chris Gerhard
03-04-2009, 04:35 AM
The one close to me closed 2 wks ago. No warning, here one day shut down the next.

The closest one to me closed 2 months ago also without warning. I would say Bb is in bigger trouble financially than is being stated at this time IMO.

The most convenient for me did the same although there are still two more open close to me and one Movie Gallery remains open within a few miles. Four video rental stores so close to me was too many so I wasn't concerned when one closed but I am concerned now. I like Blockbuster and use it for online and local store rentals, I hope the company can avoid bankruptcy or restructure successfully if it can't be avoided.

Chris

Chris Gerhard
03-04-2009, 04:49 AM
What happens if the store suddenly closes and you have movies/games out on rent...

The store will have the return slot available for a month or two after closing and someone will follow up with collecting unreturned movies during that period, including charging your credit card on file when necessary and possible.

I haven't tried Redbox yet and don't know if there is one close enough to me to make sense but if Blockbuster closes, I will sure look for one.

Chris

cbcdesign
03-04-2009, 05:24 AM
My local Blockbuster went down around 6 months or so ago. With web based rental companies offering movies for extended periods at less than half the price of thisl high street rental chain, I am not surprised they are in trouble.

MikeRox
03-04-2009, 06:17 AM
cbc how much do Blockbuster charge for Blu-ray rentals, I believe it was actually around £5 for 2 nights last time I saw. I'd rather pay £10-15 and own the film at those prices, especially when unlimited online rentals with 3 discs at a time is only £14.99 a month with lovefilm.

That means just watching 3 discs a week (as thats how many they post out) will cost you £14.99 for 12-15 rentals, whereas that would get you 3x 2 night rentals from a store. Daylight robbery!

PFC5
03-04-2009, 07:11 AM
cbc how much do Blockbuster charge for Blu-ray rentals, I believe it was actually around £5 for 2 nights last time I saw. I'd rather pay £10-15 and own the film at those prices, especially when unlimited online rentals with 3 discs at a time is only £14.99 a month with lovefilm.

That means just watching 3 discs a week (as thats how many they post out) will cost you £14.99 for 12-15 rentals, whereas that would get you 3x 2 night rentals from a store. Daylight robbery!

The one that closed near me was charging $6.50 for 2 nights, which is about $1.00 more than a new release SD DVD. I was shocked when i went in there about 10 months ago and saw what they were charging and they only had about 25 different titles on BD available and usually only 1-2 copies for rent of the most popular titles.

mytime
03-04-2009, 07:19 AM
The store will have the return slot available for a month or two after closing and someone will follow up with collecting unreturned movies during that period, including charging your credit card on file when necessary and possible.

I haven't tried Redbox yet and don't know if there is one close enough to me to make sense but if Blockbuster closes, I will sure look for one.

Chris

The BB close to me that's gone now was next to a Wal-Mart who had a Redbox in it. I'm thinking that might have helped push that BB out. There is always a line at that Redbox.

PFC5
03-04-2009, 07:27 AM
A line at a vending machine? :lol:

mytime
03-04-2009, 07:37 AM
A line at a vending machine? :lol:

Yeah! Who would believe that? When I'm there it's about 3 or 4 deep. I'm in a town of about 12,000 and with BB gone we have a Redbox and a Movie Gallery left.

Chris Gerhard
03-04-2009, 08:51 AM
The BB close to me that's gone now was next to a Wal-Mart who had a Redbox in it. I'm thinking that might have helped push that BB out. There is always a line at that Redbox.

I think you are right. Of course overhead to have a vending machine without employees or floor space is not much so people are getting what they asked for, low cost rentals. I prefer the video rental store personally but it looks like it is going the way of the dodo bird. I guess I will have to look at one of these machines and see what the selection is like.

Chris

HD Goofnut
03-04-2009, 09:04 AM
I live in a large urban area and have several Blockbuster stores in my area and from what I can tell none have closed as of yet. I always go to Hollywood Video myself though, but because their BD rentals are rather steep ($5.29 for 5 days) I have found myself utilizing Netflix more over the last couple months. They are doing better about carrying more of the newer releases on BD though.

Chris Gerhard
03-04-2009, 09:05 AM
cbc how much do Blockbuster charge for Blu-ray rentals, I believe it was actually around £5 for 2 nights last time I saw. I'd rather pay £10-15 and own the film at those prices, especially when unlimited online rentals with 3 discs at a time is only £14.99 a month with lovefilm.

That means just watching 3 discs a week (as thats how many they post out) will cost you £14.99 for 12-15 rentals, whereas that would get you 3x 2 night rentals from a store. Daylight robbery!

The one that closed near me was charging $6.50 for 2 nights, which is about $1.00 more than a new release SD DVD. I was shocked when i went in there about 10 months ago and saw what they were charging and they only had about 25 different titles on BD available and usually only 1-2 copies for rent of the most popular titles.

My online Blockbuster service costs $4/month for two rentals and I can keep each on average 2 weeks. The local stores charge $4.50 regular rental but I never pay that, I have always rented Blu-ray at rent one get one free specials. I don't know if the specials will continue though since a couple of months ago the Wednesday special ended and the last one I had was the Valentine's weekend special.

Chris

Chris Gerhard
03-04-2009, 09:17 AM
Blockbuster also offers prepaid rental specials that look attractive but based on the tenuous nature of the company, I don't know if many will choose that option now.

Chris

cbcdesign
03-04-2009, 10:44 AM
cbc how much do Blockbuster charge for Blu-ray rentals, I believe it was actually around £5 for 2 nights last time I saw. I'd rather pay £10-15 and own the film at those prices, especially when unlimited online rentals with 3 discs at a time is only £14.99 a month with lovefilm.

That means just watching 3 discs a week (as thats how many they post out) will cost you £14.99 for 12-15 rentals, whereas that would get you 3x 2 night rentals from a store. Daylight robbery!

They didn't even get around to offering HD movies in either format which gives you an idea of just how badly they were doing!

pearl-drum-man
03-04-2009, 11:25 AM
Netflix+Redbox= big trouble for Blockbuster.

kamspy
03-04-2009, 12:43 PM
The store will have the return slot available for a month or two after closing and someone will follow up with collecting unreturned movies during that period, including charging your credit card on file when necessary and possible.

I haven't tried Redbox yet and don't know if there is one close enough to me to make sense but if Blockbuster closes, I will sure look for one.

Chris

Well you're a load of fun.:what:

Lee Stewart
03-04-2009, 12:46 PM
Blockbuster Denies Bankruptcy

By Erik Gruenwedel | Posted: 03 Mar 2009
[email protected]

Blockbuster is not planning to file for Chapter 11 bankruptcy protection, despite hiring a legal firm that specializes in corporate fiscal restructuring, according to spokesperson Karen Raskopf.

The Dallas-based No. 1 DVD rental firm March 3 retained Kirkland & Ellis LLP, a firm that specializes in bankruptcy, including so-called “pre-packaged” or “pre-arranged” financial reorganizations.

A pre-packaged filing typically includes agreements from creditors about the outcome of the company’s reorganization.

Raskopf said Kirkland & Ellis was retained for assistance in ongoing financing and capital fundraising initiatives to replace a $200 million credit revolver that matures (comes due) in August.

“We are pursuing financing options and we hired Kirkland for that effort,” Raskopf said. “We do not intend to file for bankruptcy.”

She said it was the normal course of business to hire lawyers, bankers and financial advisors when exploring different options.

Raskopf agreed that generating a substantial line of credit in the current economy was challenging. She said Blockbuster had a fallback option that included self-financing backed by the company’s considerable cash flow. This option would enable Blockbuster to sustain operations through the end of the year.

“We are hopeful that won’t be necessary,” Raskopf said.

She said she understood why the media jumped on the bankruptcy angle, considering Kirkland’s expertise in the matter.

“They are also known for helping people with their capital raising initiatives,” Raskopf said. “That’s why we’ve hired them.”

Blockbuster was saddled with more than $1 billion in debt folowing its spinoff from Viacom in 2004. It had whittled down long-term debt to about $600 million with $95 million in available free cash, according to a recent regulatory filing.

Edward Woo, research analyst with Wedbush Morgan Securities in Los Angles, who tracks Blockbuster, said a bankruptcy filing underscored the current economic times.

“They wouldn't hire a lawyer unless they think they will use it,” Woo said.

He said Blockbuster, like many retailers, has historically faced liquidity issues, a situation exasperated by the current economy. Woo said studios and video game publishers should be concerned since he estimated Blockbuster spent about $2.7 billion on games and DVDs in 2007.

Wall Street reacted accordingly, sending Blockbuster shares freefalling more than 77% to 22 cents per share in midday trading before trading was halted. Shares of rival Netflix closed up nearly 6%.

Chris Gerhard
03-05-2009, 03:32 AM
Blockbuster Denies Bankruptcy

That is just a time specific denial stating there are no current plans for bankruptcy and I sure believe that. What isn't included is any evidence the company has a plan to avoid having bankruptcy plans in the near future. It sure seems to me that it should be possible for Blockbuster to come up with a business plan that works coordinating the online business with local stores and offering something better than Netflix has but so far it hasn't resulted in a profitable operation.

Once a company is attached to such widespread negative rumors and the stock price collapses, it usually means it is all over. A bankruptcy reorganization is difficult here because the business shows no signs of viability. I will continue to do business with Blockbuster and hope the company finds a way to make it work.

I guess the negative fallout from deciding to no longer add new HD DVD releases close to 2 years was too much to overcome.:)

Chris

PFC5
03-05-2009, 06:41 AM
:lol: