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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowBlockbuster 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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