An independent film distributor, Summit Distribution, is putting the pressure on Blockbuster to pay up or convert their Chapter 11 bankruptcy into a Chapter 7 bankruptcy liquidation. Summit, the distributor of “The Twilight Saga,” says that the rental chain owes them $1.6 million so far but that amount could rise if they continue to miss payments.
In a Thursday court filing with the Manhattan bankruptcy court, Summit said it shipped “The Twilight Saga: Eclipse” to Blockbuster with a 60-day credit agreement in place, and that the movie rental giant missed its first $1.6 million payment last week. Blockbuster then told Summit not to expect money for any films shipped after its September 2010 bankruptcy filing because the company doesn’t have enough cash.
Summit is arguing that Blockbuster may need a bankruptcy trustee to take over the management of their finances so that all creditors will be treated fairly and consistently. However, it is not clear at this point if Blockbuster and Summit had an agreement post-petition that would account for the fact that the rental company is in bankruptcy.
While Summit says that they had a 60-day credit agreement in place, was this agreement the same one that was in place before the company filed bankruptcy? If so, it would probably have been best for the creditor to confirm in writing that Blockbuster intended to honor that agreement. When companies file bankruptcy, they often ask creditors to accept significant delays in payments while they hash out a reorganization plan and put in place new financing. But at the same time, the creditors are not required to agree to the terms that the debtor company demands.