New York (AP) - Blockbuster Inc., once the dominant movie rental company in the U.S., filed for Chapter 11 bankruptcy protection on Thursday, after reeling from mounting losses, rising debt and competitors that have better catered to Americans' changed media habits.
Blockbuster will continue to operate its 3,000
In a submission to the U.S. Bankruptcy Court in the Southern District of New York on Thursday, the company said it reached an agreement with bondholders on a recapitalization plan. Under the plan, bondholders will exchange nearly $1 billion in debt for equity in a reorganized Blockbuster. The company has received commitments for $125 million in "debtor-in-possession" financing from senior noteholders to repay customers, suppliers and employees during the reorganization.
"After a careful and thorough analysis, we determined that the process announced today provides the optimal path for recapitalizing our balance sheet and positioning Blockbuster for the future as we continue to transform our business model," said CEO Jim Keyes.
Blockbuster, founded in 1985 by a
But Blockbuster has been losing money and market share for years as Netflix, Redbox and other services gained popularity. Netflix subscribers have grown from 1 million in 2002 to 15 million in 2010. Redbox, meanwhile, operated 26,900 kiosks as of the end of June. Wedbush Securities analyst Michael Pachter predicts that number will exceed 28,000 by the end of September.
In response, Blockbuster ended late fees and started online and kiosk services of its own. But it was unable to keep its debt in check.
Blockbuster, based in
Hollywood Video parent Movie Gallery Inc., once the second-largest
Movie rentals aren't the only retail segment that has been disrupted by changing ways to consume media. Amazon.com has challenged traditional booksellers like Borders Inc. and Barnes & Noble Inc. and iTunes helped lead to the end of many record and CD stores.
Blockbuster said Thursday it plans to keep its 3,000
Billionaire investor Carl Icahn will help steer the latest efforts to save Blockbuster, reviving a role he played previously in trying to shape up the company. He has thrust himself into position of power, this time by snapping up about one-third of Blockbuster's highest-priority debt, according to a report published Wednesday in The Wall Street Journal.
Blockbuster said in its filing it had about $1 billion in assets and $1.46 billion in debt.
Blockbuster's largest creditors include the Bank of New York Mellon, Twentieth Century Fox Home Entertainment, Warner Home Video Inc., Sony Pictures Home Entertainment, The Walt Disney