Blockbuster Initiates Auction With $290 Million Bid From Four Creditors

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The video rental firm's creditors failed to agree on a recapitalization after the company filed for Chapter 11 bankruptcy in September.

NEW YORK -- Video rental firm Blockbuster said Monday it has initiated an auction process for the company with a $290 million initial bid from four large creditors.

The company said it expects a sale to close no later than April 20.

The decision to initiate an auction came after creditors were unable to agree on a recapitalization plan for Blockbuster, which had filed for Chapter 11 bankruptcy in the fall.

The company said it believes an auction "represents the best means of maximizing value for Blockbuster's stakeholders."

Cobalt Video Holdco, a company formed by funds managed by financial firms and Blockbuster debtors Monarch Alternative Capital, Owl Creek Asset Management, Stonehill Capital Management and Varde Partners, made the initial bid, or so-called "stalking horse" bid, which established the minimum acceptable bid in the auction.

Billionaire investor Carl Icahn, which owns a big chunk of Blockbuster's debt, isn't part of the initial bid.

"By initiating a sale process at this time, we intend to accelerate our Chapter 11 proceedings and move the company forward," said Blockbuster chairman and CEO Jim Keyes. "An auction will allow the company to invite competing bids from both strategic and financial investors. This will also allow for the consolidation of ownership of the company to those with a clear and focused vision for Blockbuster's future."

As key strengths of the firm, he cited "an internationally recognized brand name, an exceptional library of more than 125,000 titles, millions of loyal customers and a multi-channel content distribution platform."

The proposed sale and auction are subject to the approval of the company's bankruptcy court. The proposed bidding procedures would require other parties to submit binding offers within approximately 30 days following such approval.

Blockbuster filed a Chapter 11 bankruptcy petition on Sept. 23.