Blockbuster has filed for bankruptcy, but they’re not ready to throw in the towel yet. A group of bondholders and hedge funds that is being led by Carl Icahn has signed off on a restructuring deal that will give them controlling stake in the company that took a huge market share hit from Netflix.
Blockbuster plans to offer more digital content, especially on mobile devices. Blockbuster has about 3,000 U.S. stores still open and their businesses will continue to operate during the bankruptcy process, but I would not be surprised if hundreds of stores will be shut down soon.
Blockbuster was founded in 1985 as the VCR was gaining popularity. Blockbuster employs 25,000 people and filed for Chapter 11 in a bankruptcy court in Manhattan.
Blockbuster will cut their debt to about $100 million from about $1 billion. Icahn and the hedge funds hold 80% of Blockbuster’s senior notes and agreed to support the new plan. Icahn and the hedge funds will be providing $125 million of debtor-in-possession (DIP) financing for Blockbuster to continue operating during the bankruptcy process.