Blockbuster Inc stayed a step ahead of bankruptcy after winning a crucial one-month reprieve on debt payments, but was forced to begin the process of delisting from the New York stock exchange.

The once-dominant video rental chain — which has bled market share to more nimble rivals Netflix Inc and Coinstar Inc’s Redbox — failed to make debt payments due July 1. But Blockbuster said it had struck a forbearance agreement with creditors holding about 70 percent of its 11.75 percent senior secured notes due 2014.

Those creditors — which hold debt amounting collectively to about $440 million — agreed to hold off from exercising “remedies” until Aug. 13 on the missed payments. But some analysts doubted the extension would matter in the long run.

The company is saddled with about $920 million in total debt and it has struggled to cover interest payments.

“Six weeks is not a long time in a tough economy, where nobody has much credit,” said Michael Pachter, analyst with Wedbush Securities. “There’s nothing on the horizon that makes it look like Blockbuster is going to be more profitable.”

Based on first-quarter results, Blockbuster is on-pace for less than $100 million this year in earnings before interest, taxes, depreciation and amortization, Pachter said.

Also on Thursday, Blockbuster said its board has agreed to indefinitely extend CEO Jim Keyes’ contract, which had been due to expire this week.

“The agreement provides us with additional time and flexibility as we continue to take steps to implement a more appropriate capital structure,” Keyes said in a statement.

“While we are making progress in our recapitalization efforts and are in the process of negotiating term sheets with these parties, these are complex multi-party negotiations and take time.”

The Wall Street Journal reported last week the company was discussing a cash injection with potential partners in a deal likely to involve some bondholders converting to equity investors.

Regardless, Blockbuster’s Class A and Class B shares would be delisted for hovering below $1 over 30 trading days.

On Thursday, the company said its pending delisting from the NYSE resulted from shareholders failing to pass a proposed reverse stock split to keep its price at acceptable levels.

Blockbuster said last week that preliminary results from a shareholder vote showed it won approval for a reverse stock split. But in a regulatory filing late on Wednesday, the company disclosed a final count showed it failed to reach the required threshold.

Its proposal was approved by shareholders holding just 43.4 percent of outstanding stock — short of the needed majority.

The NYSE first warned Blockbuster in November 2009 that it risked getting bumped because of its low share price.

Blockbuster closed at 23 cents on Thursday on the NYSE, down about 2.9 percent. (Reporting by Alex Dobuzinskis;Editing by Sofina Mirza-Reid) Reut11:23 07-02-10