Blockbuster Files for Chapter 11
It always seemed to be a question of when Blockbuster would
file for bankruptcy protection and now it’s official.
The movie and game retailer
has filed for Chapter 11 bankruptcy protection after reaching an agreement
with a group of bondholders to reduce its debt from its current $900 million
to $100 million or less. It has also reached a deal for $125 million in financing
The company said that it plans to keep all of its U.S. operations
including its 3,000 stores, vending kiosks, digital downloads and mail service
operating normally for the time being although it is clear significant changes
will be needed for Blockbuster to reduce its debt level.
A company press release
added: "Blockbuster is fulfilling all orders as
usual, including continuing to provide access to new releases the first day they
become available. Blockbuster intends to continue honoring its Rewards program,
valid coupons, gift cards and other customer programs."
operations in Canada, Denmark, Italy, Mexico, and the United Kingdom would
remain as-is, but that it would no longer fund its business in Argentina.
"The process announced today provides the optimal path for recapitalizing
our balance sheet and positioning Blockbuster for the future as we continue
to transform our business model to meet the evolving preferences of our customers," said
Jim Keyes, chairman and dhief executive officer of Blockbuster, in a statement. "The
recapitalized Blockbuster will move forward better able to leverage its strong
strategic position, including a well-established brand name, an exceptional
library of more than 125,000 titles, and our position as the only operator
that provides access across multiple delivery channels — stores, kiosks,
by-mail and digital. This variety of delivery channels provides unrivaled convenience,
service, and value for our customers."
Blockbuster said it will also continue
with a program that gives its customers the opportunity to rent new releases
28 days before its main competitors.
Discussion Question: What do you see in the future for Blockbuster now that
it has filed for Chapter 11 bankruptcy protection?
- Blockbuster Reaches Agreement on Plan to Recapitalize Balance Sheet and Substantially
Reduce its Indebtedness – Blockbuster Inc./PRNewswire-First Call
- Blockbuster Continues Normal Business Operations During Recapitalization