Blockbuster secured noteholders offer $290 million for company assets

By Caroline Salls

Pittsburgh, Feb. 22 - Blockbuster Inc. has launched a process for the proposed $290 million sale of substantially all of its assets to maximize value for its stakeholders, according to a company news release.

In conjunction with this process, Blockbuster has entered into an asset purchase agreement with stalking horse bidder Cobalt Video Holdco, LLC, a limited liability company formed by funds managed by Monarch Alternative Capital LP, Owl Creek Asset Management LP, Stonehill Capital Management LLC and Varde Partners, Inc., each of which is a Blockbuster secured noteholder.

Cobalt has agreed to buy substantially all of the assets of Blockbuster and its U.S. and international subsidiaries, subject to receipt of higher bids at auction.

According to court documents, the auction will begin with the highest bid and continue in minimum increments of $1 million.

Under specified conditions, the stalking horse bidder would be entitled to an up to $5 million expense reimbursement, but it will not receive a break-up fee or termination fee if it is not the high bidder.

Blockbuster said it expects that its U.S. operations, including a majority of its stores, DVD vending kiosks, by-mail and digital businesses, will continue to serve customers during the sale process, as well as its international operations in Canada, Denmark, Italy, Mexico and the United Kingdom.

Blockbuster franchise locations in both the Unites States and abroad are independently owned, operated and funded, and will also continue normal business operations.

"By initiating a sale process at this time, we intend to accelerate our Chapter 11 proceedings and move the company forward," chairman and chief executive officer Jim Keyes said in the release. "An auction will allow the company to invite competing bids from both strategic and financial investors.

"This will also allow for the consolidation of ownership of the company to those with a clear and focused vision for Blockbuster's future."

The auction will be held roughly 30 days after the bid procedures are approved by the court. The sale is expected to close by April 20, according to the release.

Blockbuster, a Dallas-based provider of in-home movies and game entertainment, filed for bankruptcy on Sept. 23 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 10-14997.

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