Blockbuster is telling Hollywood studios that it is preparing for a mid-September bankruptcy through which it would attempt to recapitalize and shed some lagging assets, the LA Times reports. The bankruptcy filing comes as the video rental firm attempts to stay alive despite holding nearly $1 billion in debt.
According to the LA Times, Blockbuster CEO Jim Keyes was making the rounds in Hollywood last week, meeting with studio execs to present a proposed pre-planned bankruptcy plan that it expects to file next month. Keyes was reportedly joined by “a team of restructuring consultants” and senior debt-holders that will hold a substantial portion of Blockbuster once the firm emerges from bankruptcy. Also present, according to the LA Times, was former Sony Pictures home entertainment president Ben Feingold.
Blockbuster is trying to ensure that it will continue to have an uninterrupted supply of DVDs for stores as it attempts to restructure its business while in Chapter 11 bankruptcy. As a result, Keyes met with representatives from 20th Century Fox (s NWS), Paramount (s VIA), Sony Pictures (s SNE), Universal Pictures (s GE) and Disney (s DIS) to present the plan.
Blockbuster wants to use its time in bankruptcy protection to restructure its nearly $1 billion of debt and shed leases for underperforming retail locations. According to the report, Blockbuster could shut down more than 500 of its 3,425 locations as it attempts to return to profitability. The company has lost more than $1 billion since the beginning of 2008 and has had difficulty turning around, due to payments it must make on the $920 million it owes to debt holders.
A bankruptcy filing by Blockbuster has long been expected, as the DVD rental firm has failed in its attempts to fend off competitive threats from Netflix’s (s NFLX) subscription service and Redbox’s (s CSTR) dollar-a-night DVD rentals. The firm was recently delisted from the New York Stock Exchange after it failed to get shareholders to agree to a reverse stock split and a combination of its Class A and Class B shares that would comply with NYSE requirements.
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