Blockbuster Shareholder Group Decries Bankruptcy Talk30 Aug, 2010 By: Erik Gruenwedel
A group of Blockbuster Inc. shareholders claiming to represent more than 26% of the Dallas-based DVD rental icon’s voting shares said it is seeking legal recourse should the company file for bankruptcy, as reported in the media.
Blockbuster, citing debt of more than $980 million, is reportedly in discussions with studios and creditors regarding a pre-packaged Chapter 11 filing that could occur in the coming weeks.
Niko Celentano, who heads the group of 480 Blockbuster shareholders (www.blockbustershareholders.com), in an Aug. 29 letter to Blockbuster CEO Jim Keyes, said the group feels shareholders have been “left in the dark” during protracted recapitalization talks with creditors.
Celentano said Blockbuster’s board of directors has a fiduciary duty to negotiate in the best interest of shareholders. He lamented recent claims by Keyes to shareholders, analysts and the media that Blockbuster had “more options” available to it than it did last year.
“If this is true…have all these options [fallen] apart?” Celentano wrote.
During a bankruptcy, common shareholders typically can expect to see little or no return on their investments, analysts say.
“It is not clear whether common shareholders will be protected,” wrote Michael Pachter with Wedbush Morgan Securities in Los Angeles, in an Aug. 9 note.
Celentano said the group has stood by Blockbuster while other investors dumped their stock and that they “fully expect” to be part of the company’s future turnaround.
“We still are hopeful that Blockbuster will be able to complete an out-of-court settlement … as this would be in the best interest of all involved,” Celentano wrote.
Blockbuster shares closed Aug. 30 up 1 cent to 8 cents per share in light trading.