Blockbuster bankruptcy weeks away?
Reports say the struggling movie-rental chain may enter a planned bankruptcy as soon as mid-September.
By 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:
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 DVDsByMail.com, 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).
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The offering could become the second-biggest this year if underwriters exercise an option to buy more shares.
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