2010-09-23 19:38:14 UTC
It'll be Chapter 11
NEW YORK (Reuters) - Video chain Blockbuster Inc filed for bankruptcy
protection on Thursday, battered by online and mail-order services
such as Netflix Inc that have transformed how customers rent movies.
A group of bondholders led by billionaire Carl Icahn and hedge funds
have signed off on a restructuring deal that gives them a controlling
stake in the company, court documents show.
Blockbuster plans to reinvent itself as a leaner competitor with more
digital video offerings, including offerings on mobile devices. It
said business is continuing as usual with its roughly 3,000 U.S.
stores still open.
The bankruptcy allows the company to break leases and analysts expect
Blockbuster to close hundreds of stores.
"The company is in a race against time," said David Pauker, a managing
director at turnaround firm Goldin Associates. He said Blockbuster
needs to find a new format to stop its business from shrinking.
The company, founded in 1985 when video cassette recorders were
becoming a fixture in U.S. homes, has been closing stores as it
grapples with competition from Netflix, Coinstar Inc unit Redbox and
others. It follows in the footsteps of rental chain Movie Gallery Inc,
which filed for bankruptcy in February.
Blockbuster, which employs about 25,000 people, filed its Chapter 11
petition with the U.S. bankruptcy court in Manhattan.
Under its plan, Blockbuster would cut its debt to about $100 million
from nearly $1 billion.