Blockbuster seeks bankruptcy, will keep stores open

Blockbuster, the world's biggest movie-rental chain, filed for bankruptcy protection this morning.

The long-anticipated move was prearranged with bondholders and will allow the Dallas-based company to reorganize and reduce its massive debt.

Blockbuster, which has 20 locations in the Triangle, said its 3,000 stores in the U.S., DVD vending kiosks, by-mail and digital businesses will all continue to operate normally. In this region, Blockbuster Express is installing its kiosks in retailers such as Kerr Drug, Sheetz and Rite Aid.

Still, filing for bankruptcy "will enable (Blockbuster) to break the leases" on its stores, Kenneth Latz, director of the New York office of financial restructuring firm Conway MacKenzie, told USA Today.

Blockbuster could eventually liquidate, as rival Movie Gallery did this year, said Kim Noland, who tracks high-yield debt for analysis service Gimme Credit.

The company has been under increasing pressure from online rivals such as Netflix and kiosks such as Redbox. Blockbuster has been losing money and marketshare for years, and has closed hundreds of stores to cut costs.

The bankruptcy filing comes about a month before the 25th anniversary of the opening of Blockbuster's first store in Dallas. "'End of an era' summarizes it neatly," said John Tinker, senior media analyst at Maxim Group, a brokerage firm.

Billionaire investor Carl Icahn will help steer the latest efforts to save Blockbuster, reviving a role he played previously in trying to shape up the company. He has thrust himself into position of power, this time by snapping up about one-third of Blockbuster's highest-priority debt, according to a report published Wednesday in The Wall Street Journal.

Blockbuster said in its filing it had about $1 billion in assets and $1.46 billion in debt.

Hollywood Video parent Movie Gallery, once the second-largest U.S. movie rental chain behind Blockbuster, also fell victim to changing movie-watching habits and filed for bankruptcy protection in February. It liquidated in August.

The Associated Press contributed to this report.