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Blockbuster files for Chapter 11

Dallas-based giant video rental chain Blockbuster filed for Chapter 11 bankruptcy protection after months of market uncertainty and accumulated debts. In its bankruptcy petition filed in federal court in Manhattan, Blockbuster reported $1.02 billion in assets, but $1.46 billion in debts.

The decision does not mean the end for all of Blockbusters business operations. While the company has closed more than 1,000 stores in the last year and is expected to close 500 to 800 more in bankruptcy, it willl still continue to attempt to build the relatively new kiosk and online services.

Indeed, Blockbuster said its movie stores, DVD vending kiosks, by-mail and digital businesses would remain operating as the company begins restructuring. A federal judge granted permission for the company to draw $20 million of a $125 million loan that will let it operate while it reorganises to emphasize online rentals.

The company was quick to reassure that it “is continuing to serve customers as usual.” Blockbuster’s 28-day rental advantage continues, the BLOCKBUSTER Rewards programme remains in effect; the company will continue to honor BLOCKBUSTER GiftCards, and store credits and valid coupons will be honored as usual.

Among the major creditors listed are several large film production companies including Universal, 20th Century Fox, Warner Home Video, and Sony Pictures. Blockbuster owes over $50 million to these studios alone. Another large creditor listed in the petition is Cognizant Technology Solutions, an information technology and consulting company, with a claimed debt of $3 million.

Sales at Blockbuster fell 20% last year as Netflix grew and Redbox DVD vending machines appeared at supermarkets and drugstores.

Blockbuster’s non-US operations including the UK were not involved in the proceedings.

Story filed 26.09.10

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