Blockbuster filed for bankruptcy Thursday in its latest attempt to overcome nearly $1 billion in debt.
The movie rental store's U.S. businesses filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York. As part of its recapitalization plan, Blockbuster (BBI, Fortune 500) said it would attempt to reduce its debt load to $100 million or less.
n a release Thursday, the company said it has secured $125 million in financing from senior bondholders to keep its remaining U.S. businesses open during the bankruptcy proceedings.
Its stores, DVD vending kiosks, by-mail and digital businesses will continue serving customers. But the company will have to implement major cost-cutting measures to repay its investors, said Michael Pachter, an analyst with Wedbush Morgan Securities.
"Blockbuster is under the gun now to generate as much cash as possible," he said. "When they were run by shareholders, the company was making investments and trying to grow. Now that they've been seized by creditors... Blockbuster will have to manage the business as lean as possible."
Somehow, I don't see many of those Blockbuster stores remaining open with Netflix and Redbox lurking. Then again, with people across the country cutting back on entertainment dollars (I know I am) it's not like those two companies are in terrifically better shape than Blockbuster is, either. Netflix isn't exactly making tons of money off guys like me who pay for one Blu-Ray disc out at a time and unlimited digital streaming for $15 a month.
Still, just goes to show you that 10 years ago Blockbuster was a huge company. Now it's fighting over scraps in a pockmarked economy.
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