Blockbuster Stock Woes Continue16 Sep, 2005 By: Erik Gruenwedel
Shares of Big Blue closed at an all-time low of $4.76 per share Sept. 16, down almost 10 percent from the day before. The drop followed a warning by rival Movie Gallery about a projected 10 percent drop in same-store revenue for the third quarter.
A Blockbuster Inc. spokesperson denied speculation the No. 1 video rental chain was renegotiating covenants on about $1 billion in long-term debt.
“It is not true,” said spokesperson Randy Hargrove. “We are not engaged in renegotiation of our covenants. We believe we will be in compliance with the covenants of the waiver period through June 30, 2006.”
He said Blockbuster, per policy, does not comment on stock valuations.
Late afternoon Sept. 15, Moody's Investors Service reportedly downgraded Gallery's long-term debt ratings, citing concerns over the Dothan, Ala.-based chains' operating performance over the next 12 months following the impact of Hurricane Katrina and an overall rental industry decline.