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Blockbuster selling movie-rental chain to creditors

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Blockbuster Inc., the movie-rental chain, announced Monday afternoon that it’s selling the business to a group of four creditors who hold more than half of the $630 million in 11.75 percent senior-secured notes.

The purchasers will pay as much as $290 million, subject to adjustment based on variation from the $635 million inventory as of Dec. 31. The maximum price is effectively about $220 million because the buyers will receive Blockbuster’s cash estimated at almost $70 million.

The buyers have no commitment to continue the business. While the contract says 609 stores will begin closing immediately, the buyers can compel a liquidation of the inventory at any stores they don’t elect to take.

The chain currently counts more than 20 stores in the Indianapolis area. The company declined to comment Tuesday morning on whether any of those stores would be among the casualties.

The contract requires a closing of the purchase by April 20. The buyers are Monarch Alternative Capital LP, Owl Creek Asset Management LP, Stonehill Capital Management LLC and Varde Partners Inc.

The bankruptcy court in Manhattan already scheduled a hearing on March 2 for approval of procedures for auction and sale. Blockbuster wants the auction 30 days after sale procedures are approved. Competing bids would be due initially three days before the auction. The hearing for approval of the sale is to occur within three days after the auction.

Blockbuster said in a statement it “expects” a majority of the stores, the kiosks, and the mail and digital rental businesses will continue “during the sale process.”

The chain filed for bankruptcy under Chapter 11 in September after negotiating the outline of a debt-for-equity swap with holders of 80 percent of the $630 million in 11.75 percent senior- secured notes. The plan and accompanying disclosure statement never were filed.

Blockbuster said in its court papers Monday that the reorganization effort failed as a result of poor holiday sales, deteriorating operations, and the lack of agreement with noteholders on a long-term business plan. Blockbuster said the plan hashed out before bankruptcy was “not feasible.”

Dallas-based Blockbuster began reorganization in September with 5,600 stores, including 3,300 in the U.S. and the remainder abroad. The chain currently counts about 3,000 U.S. stores, according to a company spokesperson.

The petition listed assets of $1.017 billion against debt of $1.465 billion. Blockbuster estimated it owes $57 million in accounts payable in addition to the secured and subordinated notes.

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  • GREAT
    THESE GUYS TOOK A LOT OF LITTLE GUYS OUT OF THE BIZ. GOOD TO SEE THEM GO. AND THE GREADY STUDIOS WHO SOLD THEM VIDEOS AT HALF THE PRICE THE LITTLE GUYS WERE PAYING.
  • Brownsburg closing
    Brownsburg store told me they were closing mid April and stopping renting effective Thursday.

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  1. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  2. If you only knew....

  3. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.

  4. The facts contained in your post make your position so much more credible than those based on sheer emotion. Thanks for enlightening us.

  5. Please consider a couple of economic realities: First, retail is more consolidated now than it was when malls like this were built. There used to be many department stores. Now, in essence, there is one--Macy's. Right off, you've eliminated the need for multiple anchor stores in malls. And in-line retailers have consolidated or folded or have stopped building new stores because so much of their business is now online. The Limited, for example, Next, malls are closing all over the country, even some of the former gems are now derelict.Times change. And finally, as the income level of any particular area declines, so do the retail offerings. Sad, but true.

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