After months of speculation, troubled movie rental company Blockbuster has filed for Chapter 11 bankruptcy protection and has reached a deal with bondholders on a recapitalization plan.
The strategy sees bondholders exchanging close to $1 billion in debt for equity in a reorganized Blockbuster, according to the U.S. Bankruptcy Court filing in the Southern District of New York. Blockbuster's U.S. operations, including its 3,000 stores, as well as DVD vending kiosks, by-mail and digital businesses remain open. The company has secured a commitment of $125 million in new "debtor-in-possession" financing from the senior noteholders to meet its obligations during the recapitalization process.
"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," says Jim Keyes, chairman and chief executive officer of Blockbuster. "The recapitalized Blockbuster will move forward better able to leverage its strong strategic position, including a well-established brand name, an exceptional library of more than 125,000 titles, and our position as the only operator that provides access across multiple delivery channels—stores, kiosks, by-mail and digital. This variety of delivery channels provides unrivaled convenience, service and value for our customers."
The company's non-U.S. operations and domestic and international franchises, which are separate entities, were not included in the filings.