Shares of Blockbuster (NYSE: BBI) tumbled 77% yesterday in the wake of a Bloomberg report that the company was exploring a possible bankruptcy filing.But Dow Jones Newswires reported that the law firm of Kirkland & Ellis was hired to help the company explore efforts to raise additional capital, and that bankruptcy is not part of the discussion. A Blockbuster spokesperson has confirmed that report.
Shares of Blockbuster are down 92% over the past year and regardless of whether the company is exploring bankruptcy protection now, shareholders are in trouble: The company has $615 million in debt, a crippling burden for a company that's losing market share to Netflix (NASDAQ: NFLX), which has flourished while the economy and consumer spending hit the bricks.
In a press release issued after the close of the market, Blockbuster said it would announce its fourth quarter results on March 19 and added that at that time "the Company will discuss the status of its efforts to refinance the portions of its senior credit facility which are scheduled to mature on Aug. 20, 2009."
Given the status of the credit markets and the universal pessimism surrounding Blockbuster's prospects, that refinancing might not be impossible and even if possible, could come at such a high cost that a return to profitability will be impossible.
On the bright side: Blockbuster didn't acquire Circuit City. The fact that the deal was even proposed should give investors little faith in the company's management.
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Reader Comments (Page 1 of 1)
3-10-2009 @ 6:50PM
ryan said...
The two Blockbusters in my town have closed down in the past few months. Blockbuster is not exactly saying bankruptcy isn't an option, they are just saying they haven't discussed it yet. I don't know if i believe it. And I don't think most investors do either. Sentiment is bearish (http://www.predictwallstreet.com/forecast.aspx?symbol=BBI) showing people aren't exactly confident in BBI's management right now.