Blockbuster Inc. (BLOAQ) has bids from investor Carl Icahn, Dish Network Corp. (DISH) and SK Telecom Co. to compete with a $290 million offer from a group of lenders at a bankruptcy auction of the movie-rental chain, according to a person familiar with the matter.
The bids are slightly higher than the offer from the group of secured creditors, said the person, who declined to be named because the talks are private. Corporate liquidators Gordon Brothers Group LLC and Hilco Merchant Resources LLC are also among the bidders, the person said. The bankruptcy auction is set for April 4.
The company’s lawyers and advisers currently are reviewing the bids, as are lawyers and advisers for the secured creditors, the person said. The first $125 million of a successful bidder’s money would go to pay the most senior secured creditors in full, leaving little for other creditors unless an offer is larger than expected, the person said.
Icahn didn’t immediately return a call seeking comment, nor did Gordon Chief Executive Officer Michael Frieze. Francie Bauer, a Dish spokeswoman, declined to comment, as did Hilco executive vice president Richard Kaye.
SK Telecom CEO Ha Sung-Min didn’t immediately return an e- mail requesting comment outside regular business hours in Seoul. The company said earlier today it may bid for Blockbuster.
“There were multiple bids received, and the debtors are analyzing it,” a lawyer for the creditors, Richard S. Kanowitz, said in a phone interview today, following yesterday’s deadline to submit competing bids.
Blockbuster, once the world’s largest movie-rental chain, has a “stalking-horse” offer, or lead bid, from Cobalt Video, a venture between lenders including Monarch Alternative Capital LP. The $290 million bid compares with Blockbuster’s $630 million in senior secured notes, indicating bidders are steeply discounting the company’s assets.
Icahn, a Blockbuster lender and former director, has long invested in media companies ranging from Time Warner Inc. to Lions Gate Entertainment Corp. (LGF) and Metro-Goldwyn-Mayer Inc. SK Telecom may want Blockbuster to boost video content for mobile devices and Web-connected televisions, said Kim Hong Sik, an analyst at NH Investment & Securities Co.
Content is the “biggest issue” for Dish CEO Charles Ergen, said Wells Fargo Securities LLC analyst Marci Ryvicker.
“I don’t know if he needs Blockbuster’s stores, but at least he would have rights to the content, and that’s what he’s likely gunning for,” she said.
U.S. Bankruptcy Judge Burton Lifland, who will oversee the auction, said at a March 10 hearing to approve the revised offer from Cobalt that the company still appeared to be administratively insolvent, or unable to pay its priority claims and the cost of its bankruptcy.
Kanowitz and Michael Freitag, a Blockbuster spokesman, declined to comment on the number of bids received.
Blockbuster hasn’t proven that it or a buyer can pay amounts still owed under contracts, landlords and business partners including Microsoft Corp. (MSFT), T-Mobile USA Inc. and Yahoo! Inc. said in objecting to the bankrupt company’s proposed sale.
Smaller creditors filed more than 50 objections in U.S. Bankruptcy Court in Manhattan in the past two days to the way Blockbuster intends to transfer old contracts to a new owner during the sale. The Dallas-based company reported a $27.5 million operating loss in February.
“Given the number of contracts and business relationships, a number of people were expected to inquire about their cure amounts,” Kanowitz said. The objections shouldn’t be an obstacle to a sale, he said.
The Cobalt group’s “statement that it will obtain funding commitments prior to the auction which will enable it to perform under the leases is at most a vague promise,” a group of objecting landlords said. The group, including Aston Properties Inc. and General Growth Properties Inc. (GGP), asked that the sale be delayed until Blockbuster and proposed buyers can give financial assurances that the landlords will be paid.
T-Mobile, which licenses intellectual property to Blockbuster, said it is owed about $29,513 and Blockbuster has proposed paying it nothing while having the buyer assume their contract. Too little is known about the buyer to assign the agreement, said T-Mobile, a Deutsche Telekom AG (DTE) unit.
Blockbuster owes Yahoo about $263,105, not about $187,965 as listed in a March 26 court document, lawyers for the Sunnyvale, California-based Internet company wrote. Blockbuster has said it expects to have enough funding by the time of the auction to pay off money owed under its contracts.
“As of this date, Yahoo is unaware of any competent evidence submitted in support of this representation,” Yahoo said in a March 31 court filing.
Microsoft said Blockbuster owes it about $155,842 for data and messaging services support, not about $98,627 as asserted by the company. Microsoft, based in Redmond, Washington, said it doesn’t know the auction’s winner so can’t yet say whether it will continue its contracts with Blockbuster’s buyer.
The case is In re Blockbuster, 10-14997, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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