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Disney Joins Bandwagon in Opposition to Blockbuster Auction

1 Mar, 2011 By: Erik Gruenwedel

Walt Disney Studios Home Entertainment has joined a growing list of product and service providers objecting to the $290 million opening bid for bankrupt Blockbuster proffered by a group of senior lenders.

The studio joined a slew of companies that filed objections Feb. 28 and March 1 with U.S. Bankruptcy Court in New York alleging that the so-called “stalking horse” bid from Cobalt Video Holdco LLC undermined the value of Blockbuster and its assets.

Disney said it is owed more than $9 million for disc shipments sent to Blockbuster after it filed for bankruptcy last September, according to the filing.

Cobalt consists of Carl Icahn, Monarch Alternative Capital LP, Owl Creek Asset Management LP, Stonehill Capital Management LLC and Värde Partners, Inc. — many of which fronted Blockbuster’s initial $125 million debtor-in-possession, or DIP, financing vehicle.

Disney counters that Blockbuster’s senior lenders never actually fronted the DIP funds, and instead offered post-bankruptcy guarantees actually supported by ongoing cash flows.

The studio said it objected to Cobalt having “dictated sale terms” beneficial to its interests at the expense of third parties.

Universal, which filed its complaint last month, said Blockbuster owes it more than $6.4 million for disc shipments. Twentieth Century Fox Home Entertainment filed a similar motion.

U.S. Bankruptcy Judge Burton Lifland March 2 is slated to hear the bid and dissent motions, including Summit Home Entertainment, which seeks millions for shipments of The Twilight Saga: Eclipse, among other titles.

The session includes more than 45 objection documents filed with the court.

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