Blockbuster Sale, Chapter 11 Options Favor Carl Icahn Say Detractors

5:02 PM PST 03/01/2011 by Paul Bond

Disney, Universal are among those who filed objections as of Tues., as the troubled retailer's creditors suggest that the company should instead be liquidated so that more who are owed money will get paid.

Some studios and others who are owed money by Blockbuster are complaining that a proposed sale and Chapter 11 reorganization favors Carl Icahn and other noteholders and will cost them millions.

Among those filing objections as of Tuesday are Disney, Universal, various landlords and Yahoo. Blockbuster's unsecured creditors committee suggests that instead of reorganizing and selling the company, it should be liquidated so that more who are owed money have a chance of getting paid.

As of now, Blockbuster intends on selling itself for $290 millionto a consortium of groups, including Monarch Alternative Capital, that hold most of Blockbuster's senior debt -- a deal detractors say would let them dictate who Blockbuster pays and who it does not.

Some also are noting that these lenders had once agreed to supply Blockbuster with $125 million in credit so that it could pay for DVDs studios were supplying, back rent and other expenses.

The lenders, complains Disney, which is owed $9.2 million by Blockbuster, "fail to advance funds sufficient to pay the administrative creditors' claims, but they have now terminated the facility and are commandeering the Chapter 11 case to help themselves while leaving the estates and administrative creditors uncompensated."

Others owed money by Blockbuster include Universal ($6.4 million), Summit ($9.5 million) and Fox, which says it will soom be owed $7 million.

Blockbuster has said in filings that its possible it will get a better offer than the $290 million that's on the table now. Possible bidders include NCR, Amazon.com and Best Buy, among others.

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