Blockbuster, Redbox parent try to sell debt

PHYSICAL: Companies look to raise $515 million, indicating credit-market loosening

By Danny King -- Video Business, 9/14/2009

SEPT. 14 | PHYSICAL: Blockbuster and Redbox parent Coinstar are looking to raise more than a half-billion dollars in combined debt, indicating that the largest U.S. movie-rental chain and biggest movie-rental kiosk operator believe that the credit markets have loosened enough for them to lower their interest expenses by replacing existing financing.

Blockbuster is selling as much as $340 million in senior secured notes due 2014, the company said in a statement today. Blockbuster said earlier this month that it cut its debt owed to former parent Viacom by $50 million after selling Irish retail subsidiary Xtra-vision Limited for about $45 million in cash.

The company has had to reduce costs all year in order to cut its debt to comply with the new $250 million refinancing agreement, which extended a line of credit more than a year past its previous due date of August 2009 and was finalized May 11, but was for about $100 million less than the previous agreement. Though Blockbuster’s fiscal second-quarter U.S. same-store sales fell 18% from a year earlier, the company narrowed its loss by 12% by cutting inventory and advertising expenses.

Meanwhile, Coinstar said last week that it’s offering as much as $175 million in senior secured notes in an effort to replace part of a $400 million revolving credit line.

Coinstar said last month that its second-quarter earnings doubled as Redbox’s sales more than doubled on more kiosks and higher sales per kiosk. Though Coinstar’s sales rose 43% from a year earlier, its interest expense jumped 46%, while its long-term debt climbed 55% from the end of last year to $459.1 million.