Blockbuster hires counsel for debt
Movie rental chain denies report that it might file for bankruptcy
By Danny King -- Video Business, 3/3/2009
MARCH 3 | Blockbuster hired legal counsel to provide advice on how to address about $370 million in debt that’s scheduled to expire in August and said it will discuss its attempts to refinance the debt during its earnings call later this month.
The largest U.S. movie-rental chain hired law firm Kirkland & Ellis LLP to address Blockbuster's senior debt, the company said in a statement today. Bloomberg News, citing a person familiar with the situation, reported earlier today that the company is working with the law firm to explore a possible bankruptcy, while hiring investment bank Rothschild Inc. to examine a possible restructuring.
Blockbuster spokeswoman Karen Raskopf said the company doesn't intend to file for bankruptcy, adding that it was "the normal course of business to hire bankers and lawyers when your looking for refinancing." She also said the company has talked to financial advisors, though hasn't hired any but declined to say if Blockbuster had talked to Rothschild about arranging a possible restructuring.
Blockbuster's debt is becoming a concern as the company has been improving its financial performance. In November, the chain, which is shuttering underperforming stores, said it cut its fiscal third-quarter loss in half by increasing its focus on videogames, consumer electronics and rental profitability, while making plans to deepen its commitment to digital delivery.
The company also said that if it can’t get outside funding to replace the debt that’s due next August, it might consider cost-cutting measures, such as inventory cutbacks and more store closures, in order to free up cash flow and “self-fund” the debt, Blockbuster chief financial officer Thomas Casey told analysts during the company’s third-quarter conference call.
As of Oct. 5, Blockbuster had $95 million in cash and $615 million in long-term debt, according to filings with the Securities and Exchange Commission. About $370 million of the debt is due in August, primarily with JPMorgan Chase.
Blockbuster shares fell as much as 86% to 13 cents a share today before rebounding to 22 cents during regular trading and rising to 35 cents after hours.
