Interesting development in bankruptcyland

[mcmarc]

Carl Ichan appears again...

http://www.homemediamagazine.com/blockbuster/report-icahn-acquires-a-third-blockbusters-debt-could-affect-bankruptcy-filing-20627

The question is if he is going to force liquidation?  They could be Chapter 7 sooner than we thought.

[moviecritic202]

I'm thinking he'll try to force liquidation!  H's probably looking for a way to make back some of what he lost on their stock.

[supera]

Considering that on August 13th, debt was being sold for 50 cents on the dollar, that means he probably has around 150 million invested in the bonds that have a face value of $300 million.

If he were to force liquidation in order to try to get an immediate return on investment, I can easily see him profiting from it.

If he had bought up over 50% of the bonds, I would say that he was trying to take control over the company.

[CHICAGOTOM]

Carl bought the bonds so he could protect the interests of the gamblers...er...I mean share holders. He would never do anything to screw them out of their 7 cents 

[mcmarc]

Considering that on August 13th, debt was being sold for 50 cents on the dollar, that means he probably has around 150 million invested in the bonds that have a face value of $300 million.

If he were to force liquidation in order to try to get an immediate return on investment, I can easily see him profiting from it.

If he had bought up over 50% of the bonds, I would say that he was trying to take control over the company.

Liquidate then sell the name to the highest bidder.  I'm digging that scenario.

[direct007]

If you look at his track record, here's his game:

He buys up the debt for a fraction of the face value (the debt he purchases always has 1st priority in the bankruptcy so he doesn't screw himself), the company goes chapter 11, he then buys the company for what amounts to the debt that he purchased which is a fraction of the $900 million currently owed.  He then put's his own management team in and builds the company back up and then sells it down the road once circumstances improve.   This is exactly what he did with the Tropicana Casino in Atlantic City but he still owns it as this has recently happened as well.  The challenge is how he is going to change their operation to compete with Redbox and Netflix.  Most likely a major restructuring of rental rates and getting out of money losing locations will occur.

Liquidation would only make sense if there was real actual value to the assets.  In this case inventory and fixtures and the blockbuster trademark are the only real assets.  Movies and fixtures get squat in a distress sale and there are no buyers with millions of dollars in our industry anymore that would want to continue ongoing operations, so I highly doubt liquidation is the game plan.

[CHICAGOTOM]

From Wall Street Journal

By MIKE SPECTOR
Blockbuster Inc. is in the final stages of preparing a long-awaited bankruptcy filing, marking a milestone in consumers' shift away from brick-and-mortar video stores to films delivered by mail and the Internet.

Blockbuster, struggling amid more than $900 million in debt, could file for Chapter 11 bankruptcy protection in the next few days, said people familiar with the matter. The filing could come as soon as Wednesday  , they said, but is likely to come by Friday or sometime next week.

Blockbuster's restructuring plans are nearly finished, they said, but creditors were still haggling over a few small issues. The company's advisers and creditors were working late into Tuesday night on Blockbuster's bankruptcy plans, they said.

Under the plan, the company wouldn't close its doors, but rather would retreat to a select number of locations while focusing more on digital distribution. Blockbuster recently outlined plans to shutter nearly 1,000 stores, and more closures are on deck. Somewhere between 500 and 800 additional stores could close under Blockbuster's current bankruptcy plan, said the people familiar with the matter.

Blockbuster shares have been delisted and currently trade for pennies on the "pink sheets." A company spokeswoman wasn't immediately available for comment.

While the overall pace of bankruptcies has slowed of late, companies facing secular economic changes still face problems. Blockbuster's plight comes amid major shifts in how consumers view content. Consumers now get most of their movies through vending machines operated by Redbox, a unit of Coinstar Inc., and mail-order and online streaming giant Netflix Inc. Consumers have also gravitated toward cable on-demand services and getting films and television shows through gadgets such as Apple Inc.'s iPod and iPad.

In a deal backed by Blockbuster's senior creditors, the movie-rental chain plans to wipe its balance sheet clean of debt, the people said. Senior bondholders owed about $630 million would convert all that debt into ownership stakes in a restructured Blockbuster, they said. Lower-ranking bondholders owed about $300 million would be wiped out.

Corporate raider Carl Icahn holds about a third of Blockbuster's senior debt and has led the charge to make the company debt-free, one of the people said. Mr. Icahn will return to Blockbuster's boardroom once the company exits bankruptcy, either with his own seat or one held by a director of his choosing, they said.

A waiver on Blockbuster's senior debt expires Sept. 30. When entering bankruptcy, senior bondholders plan to provide Blockbuster with a roughly $125 million bankruptcy loan to keep the company operating while under court protection, the people said.

Some of the unused funds from that loan would remain on Blockbuster's balance sheet when it exits bankruptcy, they said. The company plans to raise about $50 million in new debt at that time, the people said.

Mr. Icahn plans to push Blockbuster to ramp up digital distribution, an area where it has lagged. He didn't immediately return a call seeking comment.

Mr. Icahn was feuding with other creditors late Tuesday over small details of Blockbuster's restructuring, though he supported its major components, the people said. The details of the infighting among creditors couldn't be determined.

[moviesgamesetc]

The writers of articles take such liberties! To say that the bankruptcy filing of one chain store in an industry (albeit, a prominent one) marks "a milestone in consumers' shift away from brick-and-mortar video stores to films delivered by mail and the Internet" is a hugh leap in 'logic'. This type of faulty deductive reasoning could also be used to say that Blockbuster is filing for bankruptcy because their sign out front is blue. "Blue is the color least favored by dvd rental customers, therefore, they are staying away in droves."
You can't base a conclusion on personal bias. The true conclusion is that, in a economy where every penny counts, BB is overpriced and customer service is non-existent. People are demanding more for their hard earned dollars.

[direct007]

Unfortunately, the reality is that more people are using netflix movies by mail and streaming  as well as redbox than ever before.  Netflix's stock is through the roof.  As independents, we have to find a niche that we can profit from because business as usual has been on a decline for years.  I see great potential in used movie sales as this is the only area of my business that is growing.  I read the occasional post that says how great an individual store is doing but in the big picture nationwide. Video store rentals are down double digit percentages.

Customers can rent just about any movie with no late fees via netflix and rent most popular new releases for a buck a night at redbox.  A bricks and mortar store has to be able to offer something to differentiate themselves from these two options. This is where Blockbuster has failed and the reason many independent video stores are struggling if not closing.

Niches that we can cater to...
Inexpensive previously viewed movie sales is one , selection and customer service is another while being able to offer a movie now without waiting is yet another benefit of a store... but in today's economy there has to be something new and different to make a store not only survive but thrive.

I haven't seen anyone post a niche other than tanning in quite a while... What are YOU doing to differentiate your store from the rest?

[twinvid]

Competitive game rentals and buy sell trade of games, Disc repair is another area where we stand out ( people are amazed at what the RTI can do to their non-working game or CD).

We also offer some kind of special everyday which ingrains the thought that they are always geting a deal of some sort.

Quality pre-viewed that are scratch free and rentals in the same condition all go a long way.

Our old store grew every month for the 4 years we were there, and the new location in an old movie gallery is going strong even with 3 redboxes within a mile of us.

It can be done.

Bob

[CHICAGOTOM]

http://www.cnbc.com/id/15840232/?video=1597217957&play=1

[CHICAGOTOM]

Blockbuster Said to Plan Bankruptcy Tomorrow With Loan
IVRs meeting in Vegas to discuss how to gain market share
 
By Linda Sandler - Sep 22, 2010 2:50 PM CT

 
A customer leaves a Blockbuster store in Provo, Utah. Photographer: George Frey/Bloomberg

Blockbuster Inc. is set to file for bankruptcy tomorrow in New York before the stock market opens,   using a $125 million loan to reorganize so it can compete with rivals such as Netflix Inc. in renting movies online, according to a person with knowledge of the planned petition.

Billionaire investor Carl Icahn, who bought about one-third of Blockbuster’s bonds, will join with a group of creditors in swapping their debt for all of the video-rental company’s stock, according to the person and two others who declined to be identified because the discussions are private.

Blockbuster, saddled with more than $900 million in debt, has stopped paying interest to its lenders. The company, led by Chief Executive Officer James Keyes, has said it may have to file for bankruptcy as it tries to restructure its operations and finances.

Blockbuster lost 2.5 cents, or 31 percent, to 5.5 cents at 3:05 p.m. New York time in over-the-counter trading. The shares have lost about 92 percent of their value this year. Netflix, based in Los Gatos, California, reached a record $156.97 in intraday trading. The shares rose $9.22, or 6.3 percent, to $156.42 on the Nasdaq Stock Market.

If creditors get all of Blockbuster’s stock, current shareholders will be wiped out.

Business Revival

In attempting to revive its business, Blockbuster will keep stores that are doing well, while using its bankruptcy loan to take on Netflix and companies that rent videos in kiosks, said the person with knowledge of the plan. Creditors believe Blockbuster, with its “footprint” of stores, has an advantage in a market where so many rivals compete, he said.

The Dallas-based company was founded in 1985, and grew to serve almost 47 million customers daily in the U.S. and 16 other countries. Viacom Inc., which owns the Paramount film studio, bought Blockbuster from Wayne Huizenga for $8.4 billion in 1994, then spun it off to shareholders in 2004.

The 74-year-old Icahn led a proxy fight in 2005 that put him on the video rental chain’s board. He resigned as director in January and in March sold most of his 16.9 percent common- share stake, according to a regulatory filing.

Patricia Sullivan, a spokeswoman for Blockbuster, didn’t immediately return calls seeking comment.

To contact the reporters on this story: Linda Sandler in New York at lsandler@bloomberg.net;

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

[moviesgamesetc]

I can't sell p-viewed movies worth a darn! : (

[moviesgamesetc]

What I mean is p-viewed don't sell well for us.

[direct007]

The key is to buy them cheap so you can sell them cheap and make a decent profit.  We pay between .50 and $1 each and sell for $4.98 on up.  We also use the RTI machine to make them like new before we sell them.