Blockbuster Inc. is planning to put itself up for sale after failing to raise more cash from creditors, Reuters reported, citing a story in the Wall Street Journal. The company, which filed for bankruptcy last year, is planning to solicit buyers through an auction, Reuters reported. Carl Icahn and a consortium led by hedge-fund Monarch Alternative Capital are the leading contenders, Reuters wrote.
(Reuters) – Blockbuster Inc., which filed for bankruptcy last year, is preparing to put itself up for sale after creditors disagreed on plans to give the chain more cash, the Wall Street Journal reported on Thursday, citing unnamed sources.
Blockbuster now plans to seek buyers through an auction, the newspaper reported, saying that investor Carl Icahn and a consortium led by hedge-fund Monarch Alternative Capital are the leading contenders.
A spokesman for Blockbuster declined to comment.
Under the original plan disclosed when the company filed for bankruptcy in September of 2010, Icahn and some hedge funds would have received a controlling stake in the company after the company completed an operational and debt restructuring in bankruptcy court.
In that plan, Blockbuster was planning to cut its debt to about $100 million from nearly $1 billion. Icahn and other hedge funds were holding 80 percent of Blockbuster’s senior notes in September when they agreed to the company’s initial restructuring plan and to provide another $125 million in bankruptcy financing.
According to the newspaper report, the company needed more cash after poor holiday sales and due to expectations of a costlier turnaround. While Icahn was willing to invest $200 million, the other bondholders did not want to put up that much, the paper said. That stalemate led to a decision to hold an auction, which could potentially bring in outside bidders.
The sales process would be run in bankruptcy court with either Icahn or the Monarch group setting the lowest bid for the company. The chain could be worth more than $300 million, plus the assumption of debt, the newspaper reported.
Citing unnamed sources, the newspaper said that the creditors are concerned about Blockbuster’s performance. The company has been hurt as consumers have moved to Netflix Inc (NFLX.O), which delivers movies by mail and the Internet. Blockbuster’s reorganization plan had involved increasing its digital delivery.
Icahn and Monarch were not immediately available for comment.
Blockbuster shares were up 22 percent, or 2 cents, at 9.7 cents on the pink sheets. (Reporting by Caroline Humer and Jon Stempel, editing by Gerald E. McCormick, Dave Zimmerman and Bernard Orr)