The Wall Street Journal reports that Blockbuster Inc. is looking for short-term financing that will allow it to stay in business in the event that it has to file for bankruptcy protection - something it will only have to do, CEO Jim Keyes says, if it is not able to restructure its $900 million in debt outside of court.
According to the story, “Mr. Keyes emphasized that ‘speed is of the essence’ in any restructuring the company pursues. According to a person familiar with the matter, Blockbuster would likely try to file a ‘prepackaged’ or ‘prearranged’ bankruptcy if it has to restructure in court. In such bankruptcies, a company lines up approval for a bankruptcy plan from many creditors in advance of a filing, with a goal of limiting its stay in court.”
According to the story, “Mr. Keyes emphasized that ‘speed is of the essence’ in any restructuring the company pursues. According to a person familiar with the matter, Blockbuster would likely try to file a ‘prepackaged’ or ‘prearranged’ bankruptcy if it has to restructure in court. In such bankruptcies, a company lines up approval for a bankruptcy plan from many creditors in advance of a filing, with a goal of limiting its stay in court.”
- KC's View:
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Once again, an object lesson in what happens if you allow yourself to become irrelevant.
Blockbuster was a retail mainstay. But technology changed, consumers changed, and suddenly there was Netflix and Redbox and iTunes and all sorts of other competitors that were more in line with shopper needs and wants than Blockbuster...and suddenly it has $900 million in debt and, I would think, a dubious future as an independent entity.
Bankruptcy and new financing may protect Blockbuster from its creditors and an immediate demise. But that may not be enough.
