Blockbuster Bankruptcy: Video Store Giant Faces Bleak Future

Blockbuster filed for Chapter 11 of the U.S. Bankruptcy Code, last week.

According to a press release from Blockbuster, the company submitted First Day motions to enable them to stay open for their domestic customers, employees and vendors.

Blockbuster was granted permission by the court to stay open and conduct business as usual allowing them to continue to provide for its customers and vendors.

“I’m very surprised. I would think that a big company like Blockbuster that has been around so long wouldn’t have that happen,” Robert Louis, a sophomore said.

Blockbuster’s plan to recapitalize involves handing over the equity stake of the company to senior bondholders.

This will significantly reduce the company’s debt from $1 billion to an estimated $100 million or less.

The senior bondholders are lending the company $125 million to enable them to stay open during bankruptcy.

“After a careful and thorough analysis, we determined that the process announced [Thursday] 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.

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,” Jim Keyes, chairman and chief executive officer, said.

Part of the process involves evaluating the store portfolio with the goal of enhancing overall profitability.

At the moment there are no plans on closing down any more of their 3,000 U.S. stores, although numerous Blockbuster stores have closed all around the country.

“[It’s] so sad, but kind of cool because when they close I get to buy their movies for really cheap,” Joanna Hynes, a freshman, said.

Blockbuster’s non-U.S. operations and domestic and international franchises are not a part of the filling, because they are legally separate entities.

However, Blockbuster will no longer be funding operations in Argentina because they have not been making much profit.

According to the New York Times, on the day of Blockbuster’s bankruptcy proceedings, NetFlix stock rose to a record high of $163.72 a share before closing the day up 2.26 percent to $160.47. Because Blockbuster has other competitors like Redbox and iTunes some students are indifferent to the status of the company.

“It won’t really effect me because I haven’t used it in five years,” Keila Hampton, a freshman said.

Mandy Erfourth can be reached at

Posted October 06 2010 at 10:03 pm

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