Creditor Seeks to Subpoena Carl Icahn Regarding Blockbuster Bankruptcy

17 Nov, 2010 By: Erik Gruenwedel

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A law firm representing a holder of unsecured bonds is asking the bankruptcy court to subpoena documents from Carl Icahn regarding his involvement leading up to Blockbuster’s Chapter 11 filing.

Bondholder Lyme Regis Partners LLC, in a Nov. 15 filing with the U.S. Bankruptcy Court in New York, is seeking to determine whether Icahn committed any wrongdoing from the time he was a principal Blockbuster shareholder and member of the board to his later involvement in the company’s Sept. 23 pre-packaged filing.

Blockbuster listed $1.4 billion in liabilities in the Chapter 11 filing.

Specifically, Lyme Regis seeks to find out the details, including confidentiality agreements, surrounding Icahn’s purchase and sale of Blockbuster’s secured debt from October 2009 until present, among other issues.

Lyme Regis said that without the information, it cannot “fully evaluate” the value of Blockbuster while in Chapter 11.

Icahn, who at one time owned about 5% of Blockbuster common shares, in addition to significant senior debt, was instrumental in pushing through the debtor-in-financing bankruptcy filing.

The investor is expected to assume a prominent role when Blockbuster emerges from bankruptcy, with senior lenders converting $600 million in debt into equity in the new company.

Secondary lenders holding more than $300 million in debt, which presumably include Lyme Regis, would get nothing.
 

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