It was no surprise when video rental giant Blockbuster was taken down by the smaller but more technologically advanced movie rental companies. Blockbuster tried for years to keep up with their competition, but at the high prices and inflexible return policies, their fall from the top was inevitable.
Years later, Blockbuster is still trying to hold on. The company had filed Chapter 11 Bankruptcy back in September of 2010 and is considered administratively insolvent. This means there isn’t enough unencumbered cash and assets to pay back their creditors. Secured note-holders won’t be paid in full either.
The good news is that as of this April, Blockbuster Inc. received approval from the bankruptcy judge to sell their assets to Dish Network Corp. Dish had won an auction for these assets and is currently valued at $320 million. The auction brought in about $227 million to help pay off their debts.
Are the creditors satisfied with these numbers? Hardly. Multiple creditors had filed a petition listing assets of $1.017 billion against debt of $1.465 billion. Deciding which bankruptcy to file became a huge issue. Some creditors wanted to force a Chapter 7 Bankruptcy to liquidate the company completely. The final decision of Chapter 11 Bankruptcy would allow creditors to receive more money upfront. Still, 40 creditors objected to this bid, and argued that Blockbuster should be liquidated instead of sold.
So who will receive payment from the $227 million? One of Blockbuster’s lawyers said the Dish purchase will send $178.8 million for senior secured lenders, $20 million for administrative claims, and $11.5 million to movie studios Fox, Warner Bros., Paramount and others.
Trying to move forward, Blockbuster began reorganization in September with 5,600 stores, including 3,300 in the U.S. Blockbuster has denied roughly 400 stores renewing their leases and it’s estimated that about 1,700 stores will remain after the latest round of closings.
While bankruptcy can be a long and drawn out process, yours doesn’t have to be. If you’re having financial troubles and are considering bankruptcy, please contact an experienced El Paso bankruptcy attorney to learn more about your options.
Jeff Davis is the Owner of the Davis law firm, and a highly experienced El Paso bankruptcy attorney. To find out more information about a El Paso bankruptcy lawyer, please visit www.jeffdavislawfirm.com.