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Bloomberg: Blockbuster to File Bankruptcy Tomorrow Morning

22 Sep, 2010 By: Erik Gruenwedel

The widely expected pre-packaged bankruptcy filing by Blockbuster Inc. appears to now have a date and time: Sept. 23 before the stock market opens, according to Bloomberg News, citing sources familiar with the negotiations.

Dallas-based Blockbuster will enter bankruptcy with $125 million in loan funding earmarked for continued expansion of its multiplatform distribution strategy, including rental kiosks, video-on-demand (VOD), mobile phone and related digital channels.

Blockbuster also will expedite closures of unproductive company-owned stores, including a reported additional 500 to 800 stores above the original 1,000 stores earmarked for closure.

As previously reported, corporate raider Carl Icahn, who recently acquired a third of Blockbuster’s $630 million in senior debt, will join remaining senior creditors in swapping debt for equity (and control) of the new Blockbuster. Junior bondholders and common stock holders reportedly will receive nothing.

Blockbuster has spent recent years unsuccessfully attempting to recapitalize and restructure more than $900 million in debt while reinventing itself in the evolving home entertainment market. CFO Thomas Casey resigned his position Sept. 11.

The news sent Netlfix shares soaring to record levels, closing up a record $9.73 (6.6%) to $156.93 per share. The Los Gatos, Calif.-based company also bowed a streaming-only service in Canada.

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