Blockbuster shares tumble after bankruptcy warning

Mar 17, 2010 By TALI ARBEL , AP Business Writer

(AP) -- Shares of Blockbuster Inc. sank 30 percent Wednesday after the video rental chain warned that it may have to file for Chapter 11 bankruptcy protection.

Competition from DVD-by-mail company . and DVD operated by Coinstar Inc. have eroded the Dallas company's revenue even as it staggers under a heavy debt load.

. said in a regulatory filing late Tuesday that it was suffering "significant liquidity constraints," and could have to file for protection if it was unable to convince creditors to restructure a big chunk of its debt or its business continued to deteriorate.

The company has had to close about 1,300 stores and wants to shut down hundreds more. It had about 5,200 stores worldwide in January, excluding franchised shops. About 3,500 of those were in the U.S.

"The increasingly competitive industry conditions under which we operate has negatively impacted our results of operations and cash flows and may continue to in the future. These factors raise substantial doubt about our ability to continue as a going concern," Blockbuster said in a regulatory filing late Tuesday.

The company is trying to update its business, setting up video rental kiosks like those run by Coinstar and offering a DVD-mailing service. It added 2,000 kiosks in 2009 and expects to have more than 10,000 by the middle of this year - but NCR Corp., which operates the kiosks, is "under no obligation" to install or run them, Blockbuster said.

Blockbuster is also pursuing several measures to help shore up cash. It wants to sell some of its international business and it is pursuing a debt-for-equity swap to help alleviate its debt burden. It wants to swap all or part of its senior subordinated notes for .

It said it owed $975 million under senior secured notes and senior subordinated notes as of Jan. 3.

Even if the swap goes through, it could significantly dilute current shareholders.

Meanwhile, the company predicts further declines in its sales. The chain said it expects a key sales measure to drop in the mid-single digits to high single digits in 2010 - and a "further deterioration" could leave it unable to service its debt, leading to default.

The Dallas company's key sales measure sank 16 percent in the fourth quarter - a dismal holiday season performance despite higher advertising. It lost $435 million compared to a loss of $360 million in the last three months of 2008.

Shares fell 12 cents, or 30 percent, to 28 cents in afternoon trading Wednesday. Earlier shares fell to 25 cents, their lowest point in more than a year. They have traded as high as $1.56 in the past 12 months.

Explore further: Apple's fiscal 3Q earnings top analyst forecasts

5 /5 (1 vote)
add to favorites email to friend print save as pdf

Related Stories

Simmons plans to file for bankruptcy protection

Sep 25, 2009

(AP) -- Simmons Co., the maker of Beautyrest mattresses, said Friday that it plans to file for Chapter 11 bankruptcy protection in a move that will put new owners in charge of the bedding unit and significantly lower the ...

Blockbuster to stream video rentals on Samsung TVs

Jul 14, 2009

(AP) -- Having been a step behind in the race to pipe entertainment from the Internet to television screens, struggling video rental-chain Blockbuster Inc. is counting on a new partnership with Samsung Electronics America ...

Netflix to delay delivery of Warner's latest DVDs

Jan 06, 2010

(AP) -- Netflix Inc. will delay sending out Warner Bros.' latest movies by nearly a month in a concession that the DVD-by-mail service made so it could gain rights to show its subscribers more movies over the Internet.

FairPoint phone company files for bankruptcy

Oct 26, 2009

(AP) -- Telecommunications services provider FairPoint Communications filed for Chapter 11 bankruptcy protection Monday after agreeing on a deal with key lenders that will help lower its debt by about 62 percent.

Blockbuster to offer movies on Motorola phones

Aug 18, 2009

(AP) -- Blockbuster Inc. plans to offer movies that can be watched on Motorola Inc. cell phones. It marks the struggling rental company's first step into mobile video and is its latest effort at chasing down the customers ...

Recommended for you

Microsoft CEO sees 'bold' plan as 4Q tops Street

1 hour ago

(AP)—Microsoft Corp. CEO Satya Nadella painted an upbeat vision of the future Tuesday, saying that the next version of Windows will be unified across screens of all sizes and that two money-losing units—Nokia ...

Apple's fiscal 3Q earnings top analyst forecasts

11 hours ago

Apple's growth prospects are looking brighter as anticipation builds for the upcoming release of the next iPhone, a model that is expected to cater to consumers yearning for a bigger screen.

Verizon 2Q profit rises 93 percent

19 hours ago

Verizon reported Tuesday that its second-quarter earnings nearly doubled after it secured full ownership of Verizon Wireless.

User comments : 1

Adjust slider to filter visible comments by rank

Display comments: newest first

sams
5 / 5 (1) Mar 17, 2010
Their time might have been better spent adapting to this century ...