Blockbuster Asking Bondholders for More Money18 Jan, 2011 By: Erik Gruenwedel
Bankrupt Blockbuster Inc. is reportedly asking bondholders for millions in additional funding to assist the Dallas-based disc rental icon with emerging from Chapter 11 protection.
Specifically, Blockbuster is seeking upwards of $250 million in funding it says it needs to operate upon exiting bankruptcy reported The Wall Street Journal, citing sources familiar with the proceedings. The chain is also considering shuttering an additional 1,000 stores and/or putting itself up for sale in a worst-case scenario should the funding not materialize.
Blockbuster last month said it would shutter 186 stores, on top of the hundreds of stores earmarked for closure since Sept. 23, when it filed for bankruptcy with $1.4 billion in liabilities. The chain in December said it needed additional time beyond the Jan. 15 deadline to reach a compromise with debt holders regarding filing a business plan. It also asked for a third extension to March 11 to file a plan of reorganization.
Blockbuster Jan. 18 asked to amend the aforementioned deadlines, including securing a new CEO, until Feb. 4, according to a regulatory filing submitted by Rod McDonald, SVP and general counsel with Blockbuster.
According to the WSJ, bondholders, who are led by activist investor Carl Icahn and hedge fund Monarch Alternative Capital LP, are focused on convincing other bondholders to make a deal and avert putting Blockbuster on the auction block, where it could reportedly generate upwards of a $400 million based on the value of its disc inventory and real-estate holdings.
Blockbuster’s search for a new CEO, which received funding approval by a bankruptcy court judge last month, is on hold, pending resolution of the funding issue.
A Blockbuster rep was not immediately available for comment.
Analyst Michael Pachter with Wedbush Securities in Los Angeles said Blockbuster will be lucky to receive a fraction of what it is asking for in supplemental funding.
"I doubt it will be what they're asking for, maybe $50 million, but $200 million would take a lot of faith," Pachter said.