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Is Blockbuster Heading To Chapter 11 Bankruptcy?

Posted By admin || 21-Sep-2009

Is Blockbuster Heading To Chapter 11 Bankruptcy? According to an article in the Dallas Business Journal, movie and video game retailer Blockbuster Inc. as announced that it plans to close as many as 960 stores by the end of 2010, prompting some analysts to suspect a future Chapter 11 bankruptcy filing by the retailer.

The article said:

"Earlier in the year, Blockbuster denied that it was considering a bankruptcy filing after hiring law firm Kirkland & Ellis. Blockbuster said Kirkland & Ellis was hired as a consultant to help with raising capital. Blockbuster reported a second-quarter loss of $39.7 million..."

The Dallas-based company has already been on shaky ground even before the recession as competition from companies such as Netflix and Redbox eat away at its customer base.  But since the recession has caused many consumers to drop discretionary spending, many Blockbuster stores have seen their sales numbers drop, causing many to suggest that the retailer may need to seek Chapter 11 bankruptcy protection.

Filing a business bankruptcy could help the retailer eliminate debt and end less than lucrative contractors with vendors and suppliers. Already the retailer has implemented a "cash conservation" strategy to avoid bankruptcy, increase liquidity and counteract the credit restrictions forced on it by its suppliers. But as their sales decrease rapidly, bankruptcy may become inevitable.

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