Woke up this morning to find an in-box full of Blockbuster releases, chief among them the downtown-based video-rentalist's announcement that, sure enough, this morning it filed for bankruptcy in a federal court in New York. Says the company, the voluntary, "prepackaged" Chapter 11 filing is the result of a deal cut with 80 percent of its noteholders -- most of them movie studios -- that'll "substantially reduce" the amount of debt Blockbuster owes, from $1.46 billion to around $125 million. The petition filed this morning is on the other side.
"After a careful and thorough analysis, we determined that the process announced today provides the optimal path for recapitalizing our balance sheet and positioning Blockbuster for the future as we continue to transform our business model to meet the evolving preferences of our customers," says CEO Jim Keyes in the release that follows in full. "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."
Says Blockbuster,which has set up a separate, court-document-rich website detailing its recapitalization plan
, its stores will remain open during Chapter 11, and it'll be business as usual -- which, says the Bronx bomber leading the shareholders' charge against the company, is precisely the problem. Even before Blockbuster sent out its official release at 6:30 this morning,Niko Celentano
sent out his own e-mail calling for Keyes's resignation.
"Jim Keyes and all involved will be held accountable for their actions that led to this today," he writes. "Jim Keyes and his BOD's have failed all shareholders in their fiduciary responsibilities due to them. Jim Keyes is the main reason Blockbuster is in this position today due to his denial of being in a business model that did not work anymore. If Jim Keyes would have seen the changes that were evolving in this industry in the past few years Blockbuster would not have been in the courts today filing Chapter 11 bk protection. ... Jim Keyes has failed in his job as CEO of Blockbuster and should resign immediately."
Meanwhile, NCR, the maker of Blockbuster's kiosks, sent out its own release moments ago "reaffirming" its deal with Blockbuster: "Our relationship with Blockbuster continues and we welcome their 'business as usual' approach in creating demand for convenient access to entertainment." Business as usual? Isn't that the problem? Jump for the announcement. Incidentally, stock's at 4 cents.
Recommended reading this morning: The Street's "Blockbuster's Rise and Fall: The Long, Rewinding Road," which goes all the way back to that day in October 1985 when former oilman David Cook opened the first Blockbuster in Dallas "at the urging of his wife."
Side note: One of Blockbuster's attorneys is Martin Sosland at Weil, Gotshal & Manges LLP -- who also repped the Texas Rangers during its prepackaged bankruptcy.