The First of Two Blockbuster Blockbuster Announcements: NYSE Is Delisting Its Stock

In about an hour, Blockbuster will release a second press release concerning, well, what we're not quite sure -- more than likely, though, it will deal with the fate of CEO Jim Keyes, whose contract with the company expires today. And, perhaps, it will address whether or not the downtown-based company is indeed heading into Chapter 11 reorganization. But first, this breaking news from the press release that just went out, following the New York Stock Exchange's halting of trading of Blockbuster stock this morning:

The NYSE has informed the company that it intends to begin the process to delist both the Class A and Class B common stock.

Blockbuster had come to a secret agreement with the NYSE two weeks ago to keep the stock listed, but only if shareholders agreed to a reverse stock split. The company said at last week's shareholders meeting that indeed they had. But, as we discovered this morning, not so much. The whole release follows. The bigger one, if such a thing is possible, is forthcoming shortly.

Update at 5:04 p.m.: Blockbuster has indeed sent out a second release, in which it says it will not make its debt payment today after all after entering into "a Forbearance Agreement with certain of its senior secured noteholders that provides the Company with additional time and flexibility as it continues to engage in productive discussions with certain of these noteholders and strategic parties regarding various recapitalization opportunities."

The downtown Dallas-based company was supposed to pay $41.5 million plus change toward its more than $900 million in debt today. But since it has around $109 million cash in hand, well, that wasn't going to work. The release also says CEO Jim Keyes isn't going anywhere. For now. Nothing about Chapter 11 reorganization. The second release follows as well.

Update Friday morning: Blockbuster has till next week "to employ a chief restructuring officer ... who will assist with all restructuring initiatives." Which means: Blockbuster's hiring!

Blockbuster Announces Revised Preliminary Annual Meeting Vote Results and Expected NYSE Delisting

DALLAS - July 1, 2010 - Blockbuster Inc. (NYSE: BBI, BBI.B) today announced that the preliminary tabulation figures received from the inspector of election for the company's 2010 annual meeting show that while the company's proposal to convert each outstanding share of Class B common stock into Class A common stock and the company's reverse stock split proposal each received the overwhelming approval of votes cast, due to a low vote turnout, the proposals did not receive the required affirmative vote of the majority of the votes of the outstanding Class A and Class B shares voting as a single class. Of the approximately 289.9 million total votes outstanding, the conversion proposal received approximately 141.2 million votes in favor (or approximately 48.7%) and the reverse stock split proposal received approximately 126.1 million votes in favor (or approximately 43.4%).

The proposal to effect the reverse stock split was made in part to allow the company to take action to facilitate regaining compliance with the continued listing criteria of the NYSE, on which both the Class A and Class B common stock currently trade. Among such criteria is the requirement that common stock maintain a $1.00 minimum average closing price.

In November 2009, we were notified by the NYSE that our Class A common stock did not satisfy the NYSE's continued listing standard that requires the average closing price of a listed security to be no less than $1.00 per share over a consecutive 30-trading-day period. Under the NYSE's rules, we had through the date of the annual meeting within which to cure this deficiency.

Because the reverse stock split proposal was not approved by the requisite number of votes, the NYSE has informed the company that it intends to begin the process to delist both the Class A and Class B common stock.

As previously announced, at the annual meeting each of the company's director nominees was elected, the company's "say-on-pay" proposal was approved and the ratification of PricewaterhouseCoopers LLP to serve as the company's independent registered public accounting firm for fiscal 2010 was approved.

The second Blockbuster press release of the day:

Blockbuster Continues to Explore Various Recapitalization Opportunities, Reaches Forbearance Agreement with Senior Secured Note Holders

DALLAS, July 1, 2010 - Blockbuster Inc. (NYSE: BBI, BBI.B), a leading provider of media entertainment, today announced that it has entered into a Forbearance Agreement with certain of its senior secured noteholders that provides the Company with additional time and flexibility as it continues to engage in productive discussions with certain of these noteholders and strategic parties regarding various recapitalization opportunities.

Blockbuster's Forbearance Agreement is with noteholders who have, collectively, represented that they hold approximately seventy percent (70%) of the Company's 11.75 percent senior secured notes due 2014. Pursuant to the Forbearance Agreement, the noteholders executing it have agreed, through August 13, 2010, from exercising certain rights and remedies they may have under the indenture and related collateral documents arising from the failure by Blockbuster to make the payments owing by it under the senior secured notes on July 1, 2010. The Forbearance Agreement provides that the parties may extend the forbearance period upon written agreement.

Given the terms of the Forbearance Agreement, Blockbuster has determined that it will not make the payments due on the senior secured notes on July 1, 2010, constituting a $23.9 million amortization payment (inclusive of a 6.0% redemption premium) and an $18.5 million interest payment. By taking this action, Blockbuster will preserve $42.4 million in incremental liquidity.

Jim Keyes, Chairman and Chief Executive Officer of Blockbuster Inc., stated, "We appreciate the ongoing support of our senior secured noteholders and other parties involved in our ongoing exploration of recapitalization opportunities. The Company determined that entering into the Forbearance Agreement and not making the payments at this time are in the best long-term interests of the Company and our stakeholders. The agreement provides us with additional time and flexibility as we continue to take steps to implement a more appropriate capital structure to support the Company's strategies for long-term growth and enhanced financial performance as we pursue a balance sheet recapitalization. While we are making progress in our recapitalization efforts and are in the process of negotiating term sheets with these parties, these are complex multiparty negotiations and take time. We currently expect any recapitalization to significantly reduce our debt and increase our financial flexibility."

"We continue to manage the business towards maximizing cash and liquidity and monitoring cost reduction opportunities and operational efficiencies," Keyes continued. "At the same time, we remain squarely focused on providing our customers with day-and-date availability of new releases any way and anywhere they want them."

The Blockbuster Board of Directors recently approved an extension of Keyes' contract to continue his service as Chairman and CEO. Keyes added, "I have reaffirmed to the Board and our management team my commitment to facilitate the recapitalization and to continue the business transformation of Blockbuster."

Forward Looking Statements

This press release contains "forward looking statements" - that is, statements related to future, not past, events. In this context, forward looking statements often address our expected future business and financial performance, and often contain words such as "expect," "intend," "plan," "believe," "seek," or "will." Forward looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could adversely or positively affect our future results include, among others, from time to time: (i) whether our operating results continue to decline and whether we are able to generate sufficient cash flows to meet our liquidity needs; (ii) whether we will have sufficient cash flows from operating activities and cash on hand to service our indebtedness and finance the ongoing obligations of our business; (iii) whether we are able to execute proposed strategies to recapitalize or restructure our balance sheet; (iv) whether we are able to execute our transformational strategies; and (v) other factors, as described in our filings with the Securities and Exchange Commission, including the factors discussed under the heading "Risk Factors" in our annual report on Form 10-K for the year ended January 3, 2010 and under the heading "Disclosure Regarding Forward-Looking Information" in our quarterly reports on Form 10-Q. This cautionary statement is provided pursuant to Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These uncertainties may cause our actual future results to be materially different than those expressed in our forward looking statements. We do not undertake to update our forward looking statements.

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