The transformation of American entertainment retailing continues. Onetime video rental giant Blockbuster, which is under Chapter 11 bankruptcy protection, has acknowledged that its reorganization plan is “no longer feasible,” has defaulted on its Debtor in Possession financing, and seeks to sell itself to the highest bidder in an auction, according to Seeking Alpha. 

 

Blockbuster has accepted a $290 million stalking horse bid from Cobalt Video, a group of investors which holds over 50% of Blockbuster’s senior secured debt, according to the New York Times. Under the proposed auction process, Blockbuster will take additional bids over Cobalt’s for 30 days after the auction is approved, followed by a one week auction.    

 

The Cobalt offer requires that Blockbuster begin closing another 609 stores immediately. Gift cards would only be accepted for another 45 days, according to the plan. Cobalt would have no obligation to continue the operations of any portion of Blockbuster’s business after consummation of the Sale Transaction. And the motions also requested that landlords be forced to extend Blockbuster’s option period to assume or reject leases. Stores in locations where landlords will not extend leases will commence immediate liquidation.

 

A little over a month ago, the company was estimated to be worth over $400 million (see “Blockbuster Asks for $200 Million”).