The other shoe has finally dropped for Blockbuster. The troubled DVD rental firm today filed for Chapter 11 bankruptcy protection in New York, listing assets of $1.02 billion against debt of $1.46 billion. But the Dallas-based company, the largest movie- and game-rental company in the industry, said it would keep its stores and kiosks open as it transitions its business model after reaching a deal with creditors that would cut its debt by some $900 million, and lining up a deal with bondholders for a $125 million loan to finance its reorganization.
The company earlier this year announced plans to shutter about 1,000 of its outlets after sales continued to erode as customers increasingly looked to online services for movie rentals. Blockbuster launched its own online rental service in 2004, well behind segment leader Netflix, which launched in 1999. The bankruptcy filing could accelerate the pace at which it closes stores, and could add an additional 500 to 800 stores to its list, reported Dow Jones Newswires.
The filing "provides the optimal path for recapitalizing our balance sheet and positioning Blockbuster for the future, as we continue to transform our business model to meet the evolving preferences of our customers," Blockbuster CEO Jim Keyes said.
In February, Movie Gallery, the segment's second-largest player, filed for bankruptcy, saying it planned to reorganize its Hollywood Video and Movie Gallery movie rental chains, but by May had decided to simply liquidate its business. It, too, was pressured by Netflix and by video vending business Redbox, which has thousands of kiosks in locations around the country.
The case is In re Blockbuster, 10-14997, U.S. Bankruptcy Court, Southern District of New York.
- see this Bloomberg story
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