Blockbuster Improves Liquidity, Eliminates Viacom Letters of Credit14 Jan, 2010 By: Stephanie Prange
Blockbuster Inc. announced it has eliminated the final $24 million of letters of credit it maintained under an agreement with its former parent Viacom Inc.
"Eliminating this final $24 million of credit exposure frees up cash and helps our liquidity," said CFO Tom Casey. "Not only were we able to eliminate the previous $51 million of letter of credit exposure with Viacom in 2009, we also raised $675 million on our bond offering to extend our debt maturities into 2014. While 2009 was a challenging year in the overall macroeconomic environment, what we were able to accomplish in such a credit strapped market last year was truly remarkable."
The letters of credit were maintained by Blockbuster for Viacom's benefit to cover Viacom's potential liability under certain store leases under arrangements made in connection with Blockbuster's split off from Viacom in 2004. Under that arrangement, the obligation to maintain a letter of credit expires when Viacom's overall exposure (as determined on an agreed basis) is below $25 million. As a result of normal reduction of remaining lease term and targeted Blockbuster efforts, that exposure is now below the $25 million threshold.