Blockbuster bankruptcy weeks away?

Reports say the struggling movie-rental chain may enter a planned bankruptcy as soon as mid-September.

By TheStreet Staff Aug 27, 2010 9:42AM

finance news from the streetBy Jeanine Poggi, TheStreet


It looks like the worst fear of many Blockbusterinvestors may come true: The movie-rental chain could be gearing up for a bankruptcy filing next month, according to reports.


Blockbuster and its senior debt holders met last week with six major movie studios to discuss their intention to enter a planned bankruptcy, the Los Angeles Times reported, citing sources familiar with the matter.


It would be essential for Blockbuster to retain the support of movie studios amid a bankruptcy filing, to ensure it continues receiving new releases so business isn't disrupted.


A planned bankruptcy, which the Los Angeles Times said would last about five months, would allow Blockbuster to escape leases at some of its underperforming stores. This could mean the closure of 500 to 800 more locations.

The flailing retailer is due to repay $42 million from its mounting $1 billion in debt on Sept. 30, but if this report proves true, the prepackaged bankruptcy would come as soon as mid-September. Blockbuster has already postponed the payment two times. Post continues after video:

Earlier in the month, the company reported a wider second-quarter loss of $37 million, or 21 cents per share, in the year-ago period. That was significantly larger than the loss of 24 cents analysts had expected.


Blockbuster's revenue tanked 20% to $788 million from $982 million, missing forecasts of $840.1 million.


The company attributed the decline to worse-than-expected results on the shuttering of stores over the past year, fewer store customers and a nearly 30% drop in average subscribers to its by-mail service.


Management continues to expect same-store sales to decline in the high single digits for the rest of the year.


Blockbusters' stock was delisted from the New York Stock Exchange last month and is now trading on the over-the-counter market.


For the most part, even amid this mess, Blockbuster has tried to carry on business as usual. It has announced plans to roll out more DVD kiosks, added video games to its Blockbuster by Mail service and teamed up with Comcast (CMCSA) to launch, a site that allows Comcast subscribers to sign up for its mail service at a discounted rate. Blockbuster is also offering its Canadian members a $9.99-per-month plan that will allow them to rent unlimited movies (one at a time).

Related Articles

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
266 rated 2
485 rated 3
660 rated 4
586 rated 5
652 rated 6
640 rated 7
504 rated 8
289 rated 9
159 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.