Blockbuster Gets $250M Revolving Loan3 Apr, 2009 By: Erik Gruenwedel
Blockbuster Inc. April 2 said it successfully amended its revolving loan agreement, funded in part by JP Morgan and other financial institutions.
The new $250 million credit revolver, which matures (comes due) Sept. 30, 2010, allows the Dallas-based No. 1 DVD rental service to maintain ongoing operations. The previous $200 million credit revolver was slated to mature in August.
The chain ended 2008 with just $94 million in available cash.
“We believe the amount that will be available under this extended facility … will provide the company with adequate liquidity to manage through the challenging macro-economic environment,” said CEO Jim Keyes in a statement.
Blockbuster continues to generate considerable revenue ($1.4 billion in the most recent quarter) through a base of 7,400 corporate and franchise stores globally. It is the cost of generating that revenue that concerns analysts and prompted management to declare that it would trim $200 million costs this year.
The company must also contend with more than $800 million in liabilities, the majority accrued when former parent Viacom spun off Blockbuster in 2005 saddling it with $1 billion in debt obligations.
Edward Woo, retail analyst with Wedbush Morgan Securities in Los Angeles, said the new revolver is important because Blockbuster could have lost another $140 million of potential credit in August without a show of support from banks. He said the one-year extension gives them more time in the current recession to turn things around and to pay off debt.
"While this news was expected, it is a big positive for them," Woo said.
With the new credit revolver, Blockbuster said it would file the delayed annual report April 6.