New York City Blockbuster filed for bankruptcy early Thursday morning in its latest attempt to overcome nearly $1 billion in debt. The chain filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York. As part of its re-capitalization plan, Blockbuster said it would attempt to reduce its debt load to $100 million or less.
Blockbuster listed assets of $1.02 billion against debt of $1.46 billion it its filing. In a release Thursday, the company said it has secured $125 million in financing from senior bondholders to keep its remaining U.S. businesses open during the bankruptcy proceedings. Its stores, DVD vending kiosks, by-mail and digital businesses will continue serving customers.
“To preserve its three-decade long developed brand value, Blockbuster seeks a restructuring that permits a significant deleveraging of its business so that it can move forward at the digital clip at which its industry and competitors are currently running,” Jeffrey Stegena the company’s restructuring officer, said in a court filing.
Under the proposed plan, there will be no recovery by the holders of the company’s outstanding subordinated debt, preferred stock or common stock, according to the statement. Blockbuster anticipates it will pay something to unsecured creditors, court papers show. Blockbuster’s proposals included bankruptcy for units in Italy, Spain and Canada.
The company’s largest trade creditor is Twentieth Century Fox Home Entertainment with a $21.6 million claim, followed by Warner Home Video with a claim of $19 million and Sony Pictures Home Entertainment with a claim of $13.3 million, according to today’s filing.
Blockbuster has support for its reorganization plan from a group of bondholders holding about 80.1% of the company’s 11 ?% senior-secured notes, it said. The notes will be exchanged for equity in the reorganized company. The company has secured bonds with a face value of $630 million and unsecured bonds with a face value of $300 million, court papers show.
After it emerges from bankruptcy, the only debt expected to remain on Blockbuster’s balance sheet will be the $125 million loan, of debtor-in-possession loan, the company said. The chain will convert to exit financing and a revolving-credit line of as much as $50 million.