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Wednesday, June 16, 2010

Blockbuster Seeking Bankruptcy Financing

Phoenix Business Journal

Video rental giant Blockbuster Inc. is negotiating with bondholders to obtain $150 million in debtor-in-possession financing that would allow the company to operate in bankruptcy, according to unnamed sources cited in a Wall Street Journal article.

"We continue to have ongoing constructive dialogue with, and received several proposals from, various parties including debtholders, equity holders, and strategic investors," said a spokeswoman at Dallas-based Blockbuster, in a statement to the Dallas Business Journal.

A recent securities filing places Blockbuster's debt at around $895 million — a concern that has prompted analysts to follow developments at the company closely.

Among them is Edward Woo, a research analyst at San Francisco-based Wedbush Securities. He notes the video rental company said in security filings it has a $41.5 million interest and amortization payment to make within the course of the next several weeks.

“Since Blockbuster’s cash position is pretty low — $110 million as of March 2010 — a huge payment of $42 million would be tough for them," Woo said. “They are completely dependent on bondholders as they will likely head into Chapter 11 if they cannot agree to a restructuring, since they don’t have the cash to pay interest and principal likely through the year.”

When asked about the upcoming obligation, a spokeswoman for Blockbuster told the DBJ the company was able to make a similar payment earlier this year.

Blockbuster has stores in about 100 Arizona cities.