Earlier this week, the Wall Street Journal said Blockbuster was gearing up to file for Chapter 11 bankruptcy. The Journal's sources said that though creditors were still haggling over the finer details, the papers were all but ready to be filed and Blockbuster was expected to seal the deal before the end of the week.
Ars Technica reports that yesterday the movie rental company submitted its filing for Chapter 11 bankruptcy, requesting protection against its almost $1 billion worth of debt as it works on its restructuring plans. Blockbuster said the restructuring plan affects only its U.S. operations and stores it wholly owns. International branches (like Canadian stores, for example) and franchises will not be affected.
The company's stores will remain open, but the restructuring plan will see them focus on alternate sales channels, like digital distribution, mail-in and kiosks.
"The recapitalized Blockbuster will move forward better able to leverage its strong strategic position, including a well-established brand name, an exceptional library of more than 125,000 titles, and our position as the only operator that provides access across multiple delivery channels—stores, kiosks, by-mail and digital," CEO Jim Keyes said in a statement. "This variety of delivery channels provides unrivaled convenience, service, and value for our customers."
Blockbuster's massive debts have been wiped out by the filing, and the company has struck up a deal with senior stockholders, offering them equity in the new company in exchange for forgiving the debt.
Though it's big news, Blockbuster's bankruptcy filing isn’t exactly surprising. The company has had a bad year, kicking things off in January with the news that it would close 250 stores. Just a few weeks later, the company said it would close a further 500.
Source: Ars Technica