Remember Blockbuster, the beleaguered video rental chain that filed for bankruptcy last September?
Well it seems there may be a last-ditch effort to revive the company or, perhaps, kill it off. In the face of a failed bankruptcy reorganization, Blockbuster has agreed to be sold for $290 million to a group of creditors that owns more than 50% of the company's senior secured notes.
The group of four creditors, calling itself Cobalt Video, does not include investor Carl C. Icahn — but Icahn, who is a major creditor, could still go after Blockbuster if he can best the bid by the other creditors.
If a bankruptcy judge allows the sale, and no other bidders come forward, then Blockbuster must close more than 600 stores. While the creditors have the option of liquidating the company should it fail in a turnaround bid, Blockbuster's CEO, Jim Keyes, is hopeful.
Keyes said in a statement, "By initiating a sale process at this time, we intend to accelerate our Chapter 11 proceedings and move the company forward."
It is crucial to exit its five month old bankruptcy quickly if Blockbuster is to survive. Its business "continued to deteriorate over the holidays," says the Los Angeles Times. The company had a net loss of $11.7 million on $206.5 million in revenue for the five weeks ending January 2, 2011. Blockbuster remains indebted to movie studios. The company has not made a $9.5 million payment to Summit Entertainment, and it will soon owe 20th Century Fox more than $7 million.
Blockbuster was at one time the leader in DVD movie rentals, but it failed to compete effectively with nimbler rivals Netflix, which rents DVDs by mail and increasingly has moved to digital rentals, and Redbox, which rents DVDs from kiosks at cut-rate prices.
As consumers move from hard copies to digital, Blockbuster's situation is not unlike that of Borders, the bookseller who also recently filed for bankruptcy. Borders had difficulty competing with online competitor Amazon.com and retailer Barnes & Noble.
Now all eyes will be watching Blockbuster — and not for the latest releases.