NEW YORK — Blockbuster, its creditors and potential buyers reached an agreement Thursday on a sale process that may prevent liquidation of the movie rental chain. The deal ends demands from some creditors that the bankrupt movie-rental chain shut down and liquidate. A judge from the U.S. Bankruptcy Court for the Southern District in New York on Thursday was set to rule on whether Blockbuster Inc., operating under Chapter 11 protection, can start the process to sell itself in an auction that would start with a bid of $290 million bid from a group of debtholders.
Some creditors want the chain to sell itself. But others, including a U.S. Bankruptcy Trustee, said the Dallas company should shut down and liquidate.
Late Thursday Blockbuster, its creditors and prospective buyers agreed to allow the sale process to go forward, confirmed Jay Indyke of Cooley LLP, attorney for the committee of unsecured creditors. Blockbuster lawyers could not be reached.
Billionaire investor Carl Icahn weighed in on the matter on Wednesday, saying in a court filing a sale was in the best interest of the company. Icahn hasn’t made a bid for the company, but it is possible he will.
A sale “will maximize value and provide all creditors the best avenue for possible recoveries as opposed to a Chapter 7 liquidation,” he said.
Icahn was part of the group of debtholders that provided Blockbuster financing to operate while in bankruptcy in September.
Everyone in the group except for Icahn in February made the “stalking horse” bid to buy Blockbuster for $290 million. That group, called Cobalt Video Holdco LLC, includes funds managed by Monarch Alternative Capital LP, Owl Creek Asset Management LP, Stonehill Capital Management LLC and Varde Partners Inc.
Blockbuster used to be the dominant U.S. movie rental chain. But it lost money for years as customers shifted to Netflix Inc., video on demand and DVD rental kiosks.
When it filed for bankruptcy protection in September it was down to 3,000 stores, less than a third of the peak of 9,100 it reached in 2004. In December, the chain said it planned to close 182 more in the next few months.
