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Saturday, July 3, 2010

Blockbuster Gets Reprieve from Lenders

LA Times
The video rental chain, which is being delisted by the NYSE, gets a six-week extension on its debt payment. As part of the deal, it must hire a restructuring officer.

Troubled Blockbuster Inc. has won some breathing room.

The money-losing video rental chain said Friday that bondholders had agreed to a six-week extension of an interest payment. As part of the agreement, Blockbuster must hire a chief restructuring officer by next week.

The agreement follows an announcement by the New York Stock Exchange on Thursday that the company's stock would be delisted.

More staff cuts and cost-cutting measures are probably ahead, but that doesn't mean that Jim Keyes, the chairman and chief executive who was hired in 2007, is out. The company said Thursday that his contract was extended by the board.

While Keyes focuses on getting the company's many projects and partnerships to produce revenue, a new restructuring officer would work on difficult expense-cutting issues.

Chief Financial Officer Tom Casey is working with Blockbuster's outside advisors to restructure the company's nearly $1 billion in debt.

The bondholders agreed to give Blockbuster another six weeks to make a $42.4-million interest and principle payment. The move signals that Blockbuster was able to show them it had good prospects for new equity and cost reductions.

Speculation has focused on NCR Corp., which is rolling out as many as 10,000 Blockbuster Express kiosks by the end of this year. It has a licensing agreement with Blockbuster that analysts have estimated could generate a revenue stream of more than $25 million a year for Blockbuster.

Blockbuster didn't solicit enough votes from shareholders last week to win approval of two key pieces of an agreement with the NYSE to boost its stock price above the exchange's $1 minimum. Blockbuster shares have traded below $1 since October.

NYSE halted trading of the stock Thursday morning and announced that it would remove Blockbuster next week.

The company is likely to move its shares to the less prestigious over-the-counter market, said Rod McDonald, secretary and general counsel.