Wall Street Journal: Blockbuster's Chapter 11 Filing Could Come "In Next Few Days"

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Today could be the day Blockbuster officially files for bankruptcy. So reports The Wall Street Journal, echoing that earlier Los Angeles Times piece that said CEO Jim Keyes had been in Hollywood at August's end briefing studio heads on the inevitable next chapter in the beleaguered Renaissance Tower-based video-rentalist's history -- Chapter 11. And if it's not today, tomorrow or Friday -- no later than next week, which jibes with earlier reports (not to mention a repayment deadline). If so, it'll come four months after Keyes promised to deliver a recapitalization plan intended to address Blockbuster's close-to-$1-billion debt and never delivered.

Truth is, The Journal's not going out on much of a limb here prediction-wise: Blockbuster announced on August 13 that it has till September 30 to pay back its noteholders the $42.4 million they've been owed since forever. So bankruptcy between now and then is inevitable when you only have $100 million on hand. Nevertheless, The Journal reports how restructuring will work under the prepackaged bankruptcy plan -- and it does indeed include Carl Icahn returning to the board following his snatching up Blockbuster's senior bonds in recent days. The paper also says Chapter 11 would see the shuttering of somewhere between 1,000 stores (expected already) and an addition 500 to 800. Writes Mike Spector:
In a deal backed by Blockbuster's senior creditors, the movie-rental chain plans to wipe its balance sheet clean of debt, the people said. Senior bondholders owed about $630 million would convert all that debt into ownership stakes in a restructured Blockbuster, they said. Lower-ranking bondholders owed about $300 million would be wiped out.

Corporate raider Carl Icahn holds about a third of Blockbuster's senior debt and has led the charge to make the company debt-free, one of the people said. Mr. Icahn will return to Blockbuster's boardroom once the company exits bankruptcy, either with his own seat or one held by a director of his choosing, people familiar with the matter said.
The Journal also has this interesting sidebar worth a look: "Is Hollywood Going Down with the Blockbuster Ship?" But any piece that mentions the Dudley Moore epic Santa Claus: the Movie -- the video rights to which sold in 1984 for $2.6 million, a record at the time -- is worth a look.

Update at 1 p.m.: Bloomberg News reports: "Blockbuster Inc. is set to file for bankruptcy tomorrow in New York before the stock market opens, using a $125 million loan to reorganize so it can compete with rivals such as Netflix Inc. in renting movies online, according to a person with knowledge of the planned petition." I asked Patty Sullivan, Blockbuster's spokesperson, if there was an Official Comment on today's stories. Her response, via e-mail: "There is no news."

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