New York City -- A Manhattan bankruptcy judge on Thursday has cleared the path for Blockbuster to sell itself to a group of hedge funds, preventing the movie rental chain from having to liquidate its assets.
Judge Burton R. Lifland has approved procedures for the auction of Blockbuster, with a $290 million initial offer from a group of senior bondholders led by hedge fund Monarch Alternative Capital.
"The parties have come to an accord and presented us with a more palatable situation," said Judge Lifland. He has agreed to hold the auction in his courtroom. It is expected to occur in the first week of April.
The Monarch-led group's proposal could be topped by competing bidders in a bankruptcy court auction. According to reports, at least seven other suitors have expressed interest in Blockbuster.
"Hopefully, there will be an overbid so there will be [more] money available to pay these administrative claims," said Stephen Karotkin of Weil, Gotshal & Manges, a lawyer for Blockbuster, in a report by the The Wall Street Journal.
Blockbuster will use proceeds from the sale to pay movie studios for money owed, and the studios will continue shipping DVDs to Blockbuster stores.
A Chapter 7 liquidation is now off the table.