The wounded video rental giant Blockbuster made the long expected move of filing for Chapter 11 bankruptcy.  As expected (see “Blockbuster to File Chapter 11”) the troubled chain has a pre-packaged plan in place, which will reduce its nearly billion dollars in debt to around $100 million.  Blockbuster also announced that it has set up $125 million in debtor-in-possession financing fund from its senior bondholders to maintain operations. 

Major creditors including studios such as 20th Century Fox, which was owed over $21.8 million, may receive equity in the restructured company. According to Home Media magazine, holders of the company’s 11 3/4 percent senior secured notes will receive equity in the new entity, but Blockbuster’s stockholders, whether they held preferred shares or common stock, are SOL.  The company’s stock, which had been selling for as little as six cents a share as bankruptcy loomed, is now worthless, and  holders of its subordinated debt are also out of luck under the current bankruptcy plan.

Blockbuster CEO Jim Keyes, who according to irate company stockholders is working to enhance the interests of investor Carl Icahn, said the Blockbuster's more than 3,000 brick and mortar outlets will remain open for the time being as the company examines its options.  Industry analysts expect that Blockbuster will end up shuttering hundreds of stores.

The company announced that it is restructuring around a multi-platform approach to entertainment rental, but it has a long way to go to be able to compete with online rival Netflix in the Internet arena.  But Duluth, Georgia-based NCR, which produces the kiosks that Blockbuster is using in its attempt to compete with Redbox, has expressed its support for the reorganization plan.