March 20 (Bloomberg) -- Blockbuster Inc.’s directors and some of its biggest investors have been receptive to the company’s cost-cutting and refinancing efforts, Chief Executive Officer Jim Keyes said.

“The board has been extremely supportive through these times,” Keyes said in an interview yesterday. It has helped the company “work through the challenges of these credit markets.”

Dallas-based Blockbuster, the largest video-rental chain, said yesterday it had reached agreements with JPMorgan Chase & Co. and two of its largest lenders to extend a credit facility through Sept. 30, 2010. It needs to reach deals with other lenders or obtain a waiver to avoid default.

Blockbuster shares rallied earlier this week after Mark Wattles, founder of the Hollywood Video rental chain, reported taking a 5.7 percent equity stake in Blockbuster and expressed confidence in the company’s financial stability.

“I was pleased to find he is a strong believer in our industry,” Keyes, 54, said. “We didn’t have any strategic discussions. He just emphasized his confidence in the direction of the company.”

Keyes said he has also received counsel from billionaire Carl Icahn, a board member. Icahn, the company’s second-largest shareholder, owns 8.7 percent of the stock, according to data compiled by Bloomberg.

Refinancing Advice

“When it comes to financing issues, Carl has been very helpful,” Keyes said. Prentice Capital Management is Blockbuster’s largest investor with 10.1 percent, Bloomberg data show. Intana Management LLC also reported a 6 percent stake in Blockbuster this week. Icahn and Wattles didn’t return calls to their offices placed after normal business hours yesterday.

Blockbuster hired law firm Kirkland & Ellis LLP for refinancing advice earlier this month. The company also has “engaged several different banks to do different things for us,” Keyes said yesterday, without providing details or names.

“We have retained expertise both on the legal side and the investment-banking side to very aggressively pursue our refinancing alternatives,” Keyes said. Bankruptcy, he said, is “not our objective.”

Blockbuster has battled competition from Netflix Inc., the largest U.S. mail-order movie service, and Coinstar Inc.’s Redbox Automated Retail LLC, which runs DVD rental kiosks in retail stores. Sales have been flat or declined for the past four years.

Customers, Content

The company plans to lower general and administrative expenses by more than $200 million this year through reductions in areas including compensation and lease costs. It forecast net income of $40 million to $60 million for 2009, compared with a loss of $374.1 million in 2008.

Keyes also said the company intends to seek more partnerships along the lines of one made with Live Nation Inc. to sell concert tickets in its stores. Such accords help increase customer visits and provide exclusive content, Keyes said. He declined to discuss specific plans.

Blockbuster shares have lost 79 percent since Keyes took the helm in July 2007. He replaced John Antioco, who stepped down after Icahn led a fight to reduce his compensation. Icahn joined the board in May 2005.

Five analysts tracked by Bloomberg recommend buying Blockbuster stock. Three say “hold,” while one recommends selling.

Blockbuster fell 7 cents, or 7.9 percent, to 82 cents at 4:05 p.m. in New York Stock Exchange composite trading. The shares have dropped 35 percent this year.

To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net.

Last Updated: March 20, 2009 16:10 EDT