Judge Allows Blockbuster Auction10 Mar, 2011 By: Erik Gruenwedel
Blockbuster lives to see another day.
A U.S. Bankruptcy Court judge March 10 ruled that the troubled rental icon can proceed with an auction process — thereby avoiding what many observers believed would be Chapter 7 liquidation.
Dallas-based Blockbuster apparently worked out an agreement with major studio suppliers, their consent paramount to any negotiation or ongoing business operations. Investor group Cobalt Video Holdings also ironed out misgivings held by some creditors who believed its initial $290 million bid was self-serving.
“The parties have come to an accord and presented us with a more palatable situation,” Lifland told the court, according to Reuters. “If you've got a deep pocket, empty it out at the auction.”
It was not immediately clear what agreement studios signed off on considering most of the majors, in addition to Lionsgate and Summit Entertainment, had filed motions seeking immediate payment for past-due disc shipments.
In addition, more than 45 creditors, including The Walt Disney Co. and Sony Pictures Home Entertainment, had filed motions advocating liquidation.
Lifland also ruled that investor Carl Icahn — a former Blockbuster board member — can participate in the auction. A Blockbuster bondholder (Lyme Regis Partners LLC) had filed a motion asking that Icahn not be allowed to take part in any auction due to the investor’s alleged disingenuous actions following Blockbuster’s Chapter 11 filing.
Store personnel contacted at a company-owned Blockbuster in Foothill Ranch, Calif., who believed liquidation was in their immediate future, were ecstatic with the news.
“I’m totally excited…I’m pumped,” said one employee.