New York City Blockbuster is preparing to file for bankruptcy next month, The Los Angeles Times reported on Thursday.
The chain is hoping to use its time in Chapter 11 to restructure a crippling debt load of nearly $1 billion and escape leases on 500 or more of its 3,425 U.S. stores, the report said.
Blockbuster, which has lost a total of $1.1 billion since the beginning of 2008, has been severely hamstrung in efforts to grow its business due to interest payments on $920 million in debt. Earlier this month, the company announced that most of its debt holders had agreed to a forbearance on interest payments until Sept. 30, during which time it would attempt a recapitalization.
According to the report, executives from Blockbuster and its senior debt holders last week held meetings with the six major movie studios to discuss their intention to enter a “pre-planned” bankruptcy in mid-September. It is critical that Blockbuster retains the support of Hollywood's film studios during the process so that it can continue to offer customers an uninterrupted supply of the latest DVDs.