In a submission to the US Bankruptcy Court in the Southern
District of New York on Thursday, the company said it reached an agreement with
bondholders on a recapitalization plan.
Blockbuster plans to reduce debt from nearly $1 billion to
about $100 million or less by swapping debt for equity in a reorganized
Blockbuster with bondholders that hold about 80.1 percent of the company’s
senior notes.
It has received commitments for $125 million in “debtor-in-possession”
financing from senior noteholders to repay customers, suppliers and employees
during the reorganization.
“After a careful and thorough analysis, we determined that
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 CEO
Jim Keyes.
Once a home entertainment powerhouse, Blockbuster has been
losing market share and money for years as more Americans rent DVDs from
subscription service Netflix Inc. and popularity surged for streaming video
over the Internet.
Blockbuster said its 3,000 stores in the US, DVD vending
kiosks, by-mail and digital businesses will all continue to operate normally.
Operations outside the US and domestic and international franchisees are not
part of the Chapter 11 reorganization.
Earlier this year the company said it would close hundreds
of stores and said it was struggling with liquidity problems.
The company, which had warned investors it might file for
bankruptcy protection, was delisted in early July by the New York Stock
Exchange.
