Blockbuster Warns About Continued Operations6 Apr, 2009 By: Erik Gruenwedel
Blockbuster Inc. April 6 warned shareholders if it doesn’t close a previously announced amended credit facility by May 11, its ability to continue operations could be in “substantial doubt.”
The Dallas-based No. 1 DVD rental company issued the caveat in its annual report filed with the Securities and Exchange Commission.
Blockbuster, which had a credit facility and Term A loan facility come due April 2, last week received a $250 million revolving credit facility commitment from JP Morgan and others lenders, due Sept. 30, 2010.
“The risk that we may not successfully complete this refinancing ... raises substantial doubt about our ability to continue as a going concern,” the company said in the 290-page filing.
Edward Woo, analyst with Wedbush Morgan Securities in Los Angeles, which covers Blockbuster, said there is a heightened risk due to the current credit market. He said Blockbuster has already publicly stated the "going concern" risk and outlining it in the 10K filing was merely a formality.
"I think [bankruptcy] would be the exception since they have gone so far and it would be a waste of everybody [including the creditors] time if [funding] wasn't completed," he said.
Blockbuster operates 5,800 company-owned stores globally (3,878 in the United States), in addition to 1,599 franchise stores worldwide (707 domestically).
Blockbuster shares declined 12.5% to 77 cents per share in midday trading.