Blockbuster Hires Firm for Restructing Advice, Stock Plummets
Bloomberg reported yesterday that Blockbuster had hired Kirkland & Ellis LLP to evalute restructing options and possibly a pre-arranged bankruptcy.
Kirkland & Ellis LLP was asked to evaluate restructuring options for the company, which may include a “pre-packaged” or “pre-arranged bankruptcy,” in which much of the restructuring work is completed out of court, the person said. A pre-packaged filing is more advanced than a pre-arranged bankruptcy as it includes agreements from creditors about the outcome of the company’s reorganization.
“We’ve hired them for refinancing and capital raising initiatives,” said Karen Raskopf, a Blockbuster spokeswoman. “We do not intend to file for bankruptcy.”
Blockbuster is working with Kirkland and Ellis on refinancing, Raskopf said. The company previously announced plans to fund its own operations through the end of 2009 after two of its credit facilities expire this August, she said.
Blockbuster claims they seek to raise funds not file for bankruptcy but the news of a possible bankruptcy concerned investors. Trading of Blockbuster shares was halted yesterday after shares of Blockbuster plunged over 77% to 22 cents on the New York Stock Exchange. Blockbuster owns thousands of video rental stores which doesn't seem like the best business model at a time when people are increasingly turning to the Internet and digital downloads.
