Thu Jul 1, 2010 7:19pm EDT
Blockbuster gets more time from creditors
Reverse stock split failed to win approval
Will begin delisting from NYSE
Analyst expects under $100 million in EBITDA this year
(Recasts, adds byline and analyst comments)
By Alex Dobuzinskis
LOS ANGELES, July 1 (Reuters) - Blockbuster Inc (BBI.N)
stayed a step ahead of bankruptcy after winning a crucial
one-month reprieve on debt payments, but was forced to begin
the process of delisting from the New York stock exchange.
The once-dominant video rental chain -- which has bled
market share to more nimble rivals Netflix Inc (NFLX.O) and
Coinstar Inc's (CSTR.O) Redbox -- failed to make debt payments
due July 1. But Blockbuster said it had struck a forbearance
agreement with creditors holding about 70 percent of its 11.75
percent senior secured notes due 2014.
Those creditors -- which hold debt amounting collectively
to about $440 million -- agreed to hold off from exercising
"remedies" until Aug. 13 on the missed payments. But some
analysts doubted the extension would matter in the long run.
The company is saddled with about $920 million in total
debt and it has struggled to cover interest payments.
"Six weeks is not a long time in a tough economy, where
nobody has much credit," said Michael Pachter, analyst with
Wedbush Securities. "There's nothing on the horizon that makes
it look like Blockbuster is going to be more profitable."
Based on first-quarter results, Blockbuster is on-pace for
less than $100 million this year in earnings before interest,
taxes, depreciation and amortization, Pachter said.
Also on Thursday, Blockbuster said its board has agreed to
indefinitely extend CEO Jim Keyes' contract, which had been due
to expire this week.
"The agreement provides us with additional time and
flexibility as we continue to take steps to implement a more
appropriate capital structure," Keyes said in a statement.
"While we are making progress in our recapitalization
efforts and are in the process of negotiating term sheets with
these parties, these are complex multi-party negotiations and
The Wall Street Journal reported last week the company was
discussing a cash injection with potential partners in a deal
likely to involve some bondholders converting to equity
Regardless, Blockbuster's Class A and Class B shares would
be delisted for hovering below $1 over 30 trading days.
On Thursday, the company said its pending delisting from
the NYSE resulted from shareholders failing to pass a proposed
reverse stock split to keep its price at acceptable levels.
Blockbuster said last week that preliminary results from a
shareholder vote showed it won approval for a reverse stock
split. But in a regulatory filing late on Wednesday, the
company disclosed a final count showed it failed to reach the
Its proposal was approved by shareholders holding just 43.4
percent of outstanding stock -- short of the needed majority.
The NYSE first warned Blockbuster in November 2009 that it
risked getting bumped because of its low share price.
Blockbuster closed at 23 cents on Thursday on the NYSE,
down about 2.9 percent.
(Reporting by Alex Dobuzinskis;Editing by Sofina Mirza-Reid)