Blockbuster prepares bankruptcy filing
Eyes pre-planned Chapter 11 in mid-SeptemberVideo rental giant Blockbuster is planning to file for Chapter 11 bankruptcy in mid-September to restructure its nearly $1 billion in debt and escape leases on several hundred stores.
The company, which has been trying to get rid of its crippling debt load, has told Hollywood studios that it plans a pre-planned bankruptcy filing, according to the LA Times.
Unlike a Chapter 7 liquidation, a Chapter 11 filing allows a company to work out its debt issues via a restructuring plan. Pre-planned filings get most creditors of a company - in this case that includes content suppliers - on board with the plan ahead of time.
Blockbuster CEO Jim Keyes held meetings with studio heads in LA last week as a continued supply of movies is key for the Dallas-based company. After emergence from Chapter 11, Blockbuster's senior debt holders are expected to own a big stake in the firm.
Earlier this month, Blockbuster got an extension on debt payments, but Wall Street analysts said even back then that a bankruptcy filing was a distinct possibility.