Blockbuster faces possible evictions as woes mount

By Reuters
Posted Feb. 17 at 3:26 p.m.

Blockbuster’s landlords want to evict the bankrupt movie rental chain from dozens of stores if they are not immediately paid past-due rent, adding to the company’s woes in Chapter 11.

Blockbuster is already facing demands from the film studio behind the hit “Twilight” vampire series that it pay its bills or liquidate.

The video rental company did not immediately return a call for a comment about claims it is not paying for supplies or rent. Bankrupt companies are required to pay rent as it comes due.

Four landlords asked a Manhattan bankruptcy judge on Wednesday to order immediate rental payment for 38 stores, including one in Blockbuster’s hometown of Dallas, or allow them to evict the company.

Centro Properties Group, UBS Realty Investors LLC Federal Realty Investment Trust and Rodeo Holdings LLC said they are owed a combined $339,000, mostly for February rent.

Earlier this year, Blockbuster told Summit Distribution LLC that it would not pay $6.8 million it owed for DVDs, including “The Twilight Saga: Eclipse,” that were shipped since it filed for bankruptcy in September because it did not have the money, according to court documents.

While unpaid bills may be stacking up, so is the company’s cash. Blockbuster reported that its cash has risen to $66.2 million as of January 2, which is the most recent report, from $38.3 million when it filed for bankruptcy.

Accounts payable for expenses during bankruptcy have risen to $133.4 million as of January 2, from $13.1 million at the end of October.

The bankruptcy court allowed the company to borrow $125 million to pay for operations while it was under Chapter 11. But court records show the company had not drawn on the loan as of January 2.

The loan was provided by billionaire investor Carl Icahn and a group of hedge funds.

The company filed for bankruptcy with a plan to swap its senior secured bonds, which are owned by Icahn and the group of hedge funds, for ownership of the company.

Junior bondholders and shareholders will get nothing under the proposal.

Blockbuster has not met deadlines for providing details on its reorganization plan as originally planned when it filed for bankruptcy. Scott McMillan, a lawyer for a junior bondholder, said he now expects Icahn will make a bid for the company.

McMillan, who is based in California and represents junior bondholder Lyme Regis Partners LLC, said he thinks Icahn resigned from the company’s board last year and sold its stock to begin purchasing the senior secured debt at a steep discount.

He said he expects Icahn to bid the face value of that debt, not the discounted amount he paid for it, as a way for him to buy the company in a bankruptcy sale.

McMillan is suing Icahn in an adversary proceeding in the bankruptcy court.

Icahn did not immediately return a call for comment.

The case is In re: Blockbuster Inc, U.S. Bankruptcy Court, Southern District of New York, No. 10-14997.

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One comment:

  1. Nomo Blockbuster Feb. 18 at 2:11 a.m.

    Mr. Icahn really needs to quit his shenanigans and just let Blockbuster die.