Blockbuster Declares Chapter 11, Keeps Stores and Kiosks Operating

On September 23, video-rental retail giant Blockbuster filed for Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York. The company reached an agreement with a group of bondholders on a plan to recapitalize its balance sheet as it tries to pursue a strategic plan to transform the company.

All of Blockbuster’s operations, including its 3,000 U.S. stores, DVD vending kiosks, mail and digital businesses will remain open. The company said it plans to continue fulfilling all its orders and other normal business operations. Blockbuster’s franchise locations in the U.S. and abroad are independently owned, operated and funded, and are also continuing normal business operations.

However, there are plans to evaluate the U.S. store portfolio “with a view towards enhancing the overall profitability of its store operations,” according to a press release issued by the company.

At a hearing later in the day after Blockbuster filed for Chapter 11, the court granted permission for the company to: continue honoring its “rewards” program, valid coupons, gift cards, and other customer programs; pay its employees in the usual manner and to continue with their primary benefits without disruption; and continue to maintain its cash management systems. The court also authorized Blockbuster to access up to $20 million of the new $125 million debtor-in-possession financing provided by the senior noteholders on an interim basis to help the company meet its obligations to suppliers, customers, and employees. The company will seek final approval of the entire DIP financing at a future court hearing. Blockbuster intends to pay suppliers under normal terms in the ordinary course for all post-petition goods and services.