Dallas Blockbuster said Friday that its revolving and term loan agreement has been amended, giving the company some breathing room on its finances amid a deepening recession and increased competition.
The chain had lined up tentative financing deals prior to the amendment, but cautioned last month that its auditor was likely to raise doubts about its ability to stay in business. To that end, the chain said lenders, including JPMorgan, have also agreed to waive any default that could result if auditors attached a "going concern" classification to their report on the company's books for the recently completed fiscal year.
"The completion of the amendment is an important milestone for Blockbuster," stated Jim Keyes, Blockbuster chairman and CEO. "We believe the amount that will be available under this extended facility, combined with our cash flow from operations and our cost-saving initiatives, will provide the company with adequate liquidity to manage through the challenging macroeconomic environment and constrained capital markets.”
Blockbuster's viability has been questioned for a while. In March there was speculation that it was set to file for bankruptcy protection as it faced increased competition from such companies as Netflix, as well as distribution of movies over the Internet and cable services.
The amended facility now gives Blockbuster a $250 million revolving loan refinancing that matures on Sept. 30, 2010. But the company is not just relying on amended agreements to help it survive. It also plans to cut expenses by least $200 million this year by renegotiating store leases and taking various other actions.
Blockbuster reported last month that it lost $360 million in the fourth quarter, mostly from non-cash charges to account for the declining value of its 7,400-store franchise.