Creditors object to Blockbuster’s plan to sell itself

New York City -- Some landlords, vendors and other unsecured creditors of Blockbuster are objecting to Blockbuster's plan to sell itself because they fear they won't be paid what they are owed, according to the Associated Press.

A hearing to approve the stalking horse bid and auction was originally scheduled for Wednesday, but was postponed late Tuesday until March 10 while the judge considers the objections.

On Feb. 21, Blockbuster, which filed for Chapter 11 bankruptcy protection in September, agreed to be bought out of bankruptcy by a group of its debt holders for $290 million. The offer, from Cobalt Video Holdco LLC, is a "stalking horse" bid. It would open an auction process for other investors who could pay more.

The Cobalt group includes funds managed by Monarch Alternative Capital LP, Owl Creek Asset Management LP, Stonehill Capital Management LLC and Varde Partners. They all hold secured Blockbuster debt.

Investor Carl Icahn and his Icahn Partners LP could make a rival bid for the company, according to the report. Icahn was part of the group of investors, which also included all of the Cobalt bidders, that hold 80% of Blockbuster's secured debt and supported the chain when it filed for bankruptcy protection in September.

On Monday, a committee of unsecured creditors filed an objection with the Bankruptcy Court for the Southern District in New York stating that the original bankruptcy protection reorganization plan included $125 million in so-called debtor-in-possession financing that would help Blockbuster pay back its creditors. But if the stalking horse bid goes through they say creditors will be left in the lurch.

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