Blockbuster Gets Debt Extension, Reports Loss
Blockbuster Inc., struggling to service $920.4 million in debt, reported a wider second-quarter loss and said it received a six-week reprieve from creditors.
The forbearance agreement is “substantially similar” to the prior one and is effective until Sept. 30, unless terminated earlier, Dallas-based Blockbuster said today in a statement. The video-retailer’s loss grew to $69 million as sales tumbled 20 percent to $788 million.
Lenders have been pushing for a pre-packaged bankruptcy in exchange for an extension on debt and interest payments, three people with knowledge of the situation said earlier this month. Creditors previously granted a 45-day forbearance that expires today. The company is seeking potential buyers of assets in or out of bankruptcy, one of the people said.
“It is possible that even a successful and efficient implementation of the recapitalization initiatives we are pursuing will require us to make a filing for protection under Chapter 11 of the U.S. Bankruptcy Code,” the company said today in a regulatory filing.
Cash holdings in the second quarter fell to $64.3 million from $109.9 million in the first, according to a regulatory filing.
“While making progress, this extension allows additional time to complete these complex, multiparty negotiations,” Chief Executive Officer Jim Keyes said in the statement.
Secured Bondholders
On Aug. 4, Blockbuster and Comcast Corp., the nation’s largest cable operator, began testing a website that directs Comcast customers to join Blockbuster’s mail order DVD service.
The initiative is one of several undertaken by Keyes to bolster the retailer’s revenue. The company licenses its name as well to NCR Corp., which has introduced more than 6,500 DVD kiosks nationwide.
Blockbuster’s secured bondholders hired Houlihan Lokey Howard & Zukin in March to advise them on the video merchant, people with knowledge of the move said at the time. Blockbuster is being advised by Rothschild and Weil Gotshal & Manges LLP.
Blockbuster fell 4.5 cents, or 25 percent, to 13.5 cents at 4 p.m. New York time in over-the-counter trading. The stock has dropped 80 percent this year.
Blockbuster’s $630 million of 11.75 percent senior secured notes due in 2014 traded at 50 cents on the dollar today, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. They traded for 61.8 cents on Aug. 9.
Bond analyst Stan Manoukian, founder of Independent Credit Research, said in an e-mail he would buy Blockbuster debt at around 35 cents on the dollar given his liquidation analysis.
To contact the reporter on this story: Ronald Grover in Los Angeles at rgrover5@bloomberg.net.
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