Bankrupt Blockbuster seeks more cash, time for restructuring

Woe unto Blockbuster Video. The struggling video chain is asking its bondholders to pony up some more cash, in the neighborhood of $200 miliion to $250 million, to help it kick start its business after it exits court protection.

The chain, which filed Chapter 11 protection in September and is attempting to reduce its debt from nearly $1 billion to $100 million, said poor holiday sales and turnaround costs that are higher than it had estimated has made it also consider closing up to 20 percent more of its remaining 5,000 stores. It already has closed about 1,000 stores.

The company also is having a tough time getting its newest initiatives, a streaming video service and DVD-by-mail operation, to grow. The company lost 300,000 DVD-by-mail subscribers in the first nine months of 2010, finishing at 1.2 million subs, down from 1.5 million in the first nine months of 2009. By comparison, Netflix had 16.9 million subscribers.

The request for more cash has bondholders--led by billionaire investor Carl Icahn and hedge fund Monarch Alternative Capital--weighing whether to dump the remaining assets of the store in a fire sale or invest more to try and get it moving forward.

Blockbuster this week also asked for and received an extension from the Securities and Exchange Commission to provide an outline of its reorganization plan. It missed a Friday deadline last week and now has until Feb. 4 to file. It's the second extension it has received.

The company also has yet to hire a CEO--which likely won't happen until it "sorts out the capital structure and the ownership structure" of the company, one of the people familiar with the matter told the Wall Street Journal--and to lay out a formal business plan for bondholders.

Blockbuster has continued to take a beating from alternative video outlets like Netflix and VOD platforms from pay-TV operators. A report from consumer research company NPD Group said that in the third quarter, for the first time ever, kiosks had a bigger share of the video rental market than stores (see related story).

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