Blockbuster Denies Bankruptcy Plan

Stock drops 77% in Tuesday trading.

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    NEWSLETTERS

    AP
    Sale of Blockbuster stock had to be halted Tuesday after the price plunged 77% on Tuesday.

    Blockbuster denied Tuesday reports that the video company is considering filing for bankruptcy.

    it may file for bankruptcy as the sale of company stock was halted after falling 77 percent.

    Shares of Dallas-based Blockbuster plunged Tuesday after the reports. Sale of company stock was halted after shares fell 77 percent.

    Blockbuster hired Kirkland & Ellis LLP to help it look at various restructuring options, which may include a "pre-packaged" or "pre-arranged" bankruptcy, Bloomberg reported, citing an unnamed source close to the situation.

    In such a bankruptcy, most of the restructuring would be accomplished outside of court, the news service said.

    But CEO Jim Keyes said the company is "nowhere near bankruptcy."

    "We've hired them for refinancing and capital raising initiatives," said Karen Raskopf, a Blockbuster spokeswoman. "We do not intend to file for bankruptcy."

    Blockbuster is working with Kirkland and Ellis on refinancing, Raskopf said. The company previously announced plans to fund its own operations through the end of 2009 after two of its credit facilities expire this August, she said.

    Blockbuster's rebuttal of the bankruptcy reports reversed the company's stock decline. The shares recovered 13 cents to 35 cents in Tuesday's extended electronic trading, after plunging 74 cents to finish the regular session at 22 cents.

    Keyes said Blockbuster will soon offer all 90,000 of its DVD titles by mail.

    "(It) hardly sounds like a company headed for bankruptcy, but the rumors are making the job more difficult," Keyes said.

    Blockbuster faced serious challenges even before the worldwide economic collapse, which has made consumers more cost-conscious as online DVD rental company Netflix cut into Blockbuster's share of the market with its DVD-by-mail service.

    Blockbuster operates more than 7,500 stores worldwide.