Billionaire Carl Icahn’s offer for Blockbuster Inc. has attracted a second group of liquidators, Great American Group Inc. (GAMR) and Tiger Capital Group LLC, to join his auction bid for the bankrupt movie-rental company, two people familiar with the matter said.
The liquidators face competition from Dish Network Corp. (DISH) and SK Telecom Co., according to another person familiar with the case. The companies participated in closed-door bidding yesterday at U.S. Bankruptcy Court in Manhattan. Another group of liquidators, Gordon Brothers Group LLC and Hilco Merchant Resources LLC, are also bidding on the company, the person said.
Eight hours of closed-door bidding in U.S. Bankruptcy Court in Manhattan yesterday was closed to outside parties, and will resume today with an open auction. The auction was based on a so-called stalking horse offer of $290 million from lenders to the Dallas-based company, including Monarch Alternative Capital LP, which had to be topped by other qualifying bids.
The presence of liquidators at an auction doesn’t necessarily mean the company will end up closing, as liquidators commonly bid for the assets of retailers, said Raniero D’Aversa, a bankruptcy lawyer at Orrick, Herrington & Sutcliff LLP who isn’t involved in the case.
“They always swarm these cases,” D’Aversa said in an e-mail, noting that liquidators might have to offer more money or otherwise make their offer more attractive to be competitive with offers that would keep the company operating.
“Debtors often weigh the bids differently,” D’Aversa said. “A going concern bid may assume some liabilities and contracts that a liquidation bid doesn’t.”
Ron Whittington, a spokesman for Great American, declined to comment. Albert Nassi, a principal at Tiger, and Michael McGrail, a managing director at Tiger, didn’t return calls or e-mails seeking comment. Icahn spokeswoman Susan Gordon declined to immediately comment.
Hilco and Gordon Brothers may seek to liquidate the company or work with Dish or SK Telecom to manage hundreds of Blockbuster store-closure sales as part of a reorganization, said the people, who declined to be identified because the matter isn’t public.
Marc Lumpkin, a spokesman for Dish Communications, declined to comment. SK Telecom Chief Executive Officer Ha Sung-Min didn’t immediately return an e-mail seeking comment.
Michael Freitag, Blockbuster spokesman, declined to comment on the involvement of liquidators or any other aspect of the auction, including how many bidders are involved, and who the bidders are.
Blockbuster has 2,400 U.S. stores as of yesterday, with plans to close another 700 by mid-April, Freitag said.
U.S. Bankruptcy Judge Burton Lifland, who is overseeing Blockbuster’s bankruptcy case, said at a March 10 hearing that the company appeared to be administratively insolvent, or unable to pay its priority claims and the cost of its bankruptcy. Liquidation is an advantage to companies that don’t have enough to pay creditors because it lets them sell merchandise quickly in exchange for cash to satisfy their highest priority creditors.
“A slightly lower going concern bid that will keep employees working could be favored in the debtor’s business judgment over a slightly higher bid from a liquidator, although the secured creditors might fight it,” said Evan Flaschen, chairman of the restructuring group at Bracewell & Giuliani LLP, who isn’t involved in the case.
Hudson Capital Partners LLC and SB Capital Group LLC were also working with Tiger and Great American, one person said. A message left in the general mailboxes for Hudson Capital Partner’s Newton, Massachusetts, office and SB Capital’s New York Office weren’t returned.
The case is In re Blockbuster, 10-14997, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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