Blockbuster Creditors Discuss Sale, Cash Infusion

Blockbuster Store - September 2010
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Carl Icahn is reportedly willing to put up more money, but some hedge funds are pushing for a sale that could fetch an estimated $400 million.

NEW YORK - Blockbuster has asked its creditors to put up more money to help it exit bankruptcy protection, which has led to a debate among bondholders, which include billionaire investor Carl Icahn, about whether to invest further in the video rental chain or put it up for sale, the Wall Street Journal reported Tuesday.

The company, which has looked to restructure itself under Chapter 11 bankruptcy protection, needs more cash to the tune of $200 million-$250 million after a sluggish holiday season and new estimates for a costlier turnaround, according to the paper.

It reported that Icahn supports providing Blockbuster with as much as $250 million, but some hedge funds holding senior bonds in the firm are more reluctant.

Blockbuster could fetch around $400 million or so in an auction, the Journal cited people familiar with the situation as saying.

Another scenario could see the company close as many as 1,000 of its more than 5,000 remaining stores, the Journal said.

Blockbuster was supposed to outline its Chapter 11 reorganization plan, provide a business plan and hire a new CEO by the end of last week. There are discussions to formally extend that deadline, the Journal said.

Blockbuster has been a victim of changing consumer behavior.

For the first time, consumers are now renting more DVDs from kiosks than from their local video store, according to research firm NPD Group, the New York Post reported.

Video stores, many operated by Blockbuster, saw a 13 percent drop in market share to 27 percent in the third quarter, compared to 31 percent for kiosks. Subscription movie services, led by Netflix, dominate the market with a 41 percent share.