Blockbuster Wins Bankruptcy Court Approval to Borrow $25 Million of Loan
Blockbuster Inc., the movie-rental company that filed for bankruptcy last week, won interim court approval to pay as much as $40.4 million to studios to maintain the supply of movies.
Blockbuster can pay $28 million owed to Sony Pictures Home Entertainment Inc., Twentieth Century Fox Home Entertainment LLC and Warner Home Video, U.S. Bankruptcy Judge Burton Lifland in Manhattan said at a court hearing today.
Those studios negotiated trade agreements with Blockbuster in March in which they received security interests in Blockbuster’s Canadian assets. Blockbuster can pay other studios that negotiate agreements as much as $12.4 million, under Lifland’s order.
Blockbuster said paying the pre-bankruptcy claims of the studios was critical to maintaining the supply of movies and games. In a court document read by the company’s attorney at today’s hearing, Chief Executive Officer James Keyes said failure to pay the studios would halt the supply of products, “completely derailing” its reorganization.
Also today, Lifland said Blockbuster could borrow an additional $25 million of its $125 million loan. Lifland last week said the company could borrow $20 million. It will return to court in October for permission to borrow the rest of the loan. It will also return to court to pay additional claims of the studios.
Blockbuster, based in Dallas, filed for bankruptcy last week, listing assets of $1.02 billion against debt of $1.46 billion. The company has negotiated a restructuring plan with a group of bondholders.
The case is In re Blockbuster, 10-14997, U.S. Bankruptcy Court, Southern District of New York.
To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.
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