Blockbuster creditors committee opposes sale of assets to Cobalt Video

By Lisa Kerner

Charlotte, N.C., Feb. 28 - Blockbuster Inc.'s official committee of unsecured creditors filed an objection to the company's motion to sell its assets for $290 million to 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, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

A hearing is set for March 2.

The committee is asking that Monarch Group be required to make improvements and "provide satisfactory assurances" that the estates and creditors will benefit from a section 363 sale process.

If Monarch Group does not make improvements or provide assurances as requested in its motion, the committee wants the court to convert Blockbuster's Chapter 11 cases to Chapter 7, the filing said.

Cobalt agreement

As previously reported, under a Feb. 21 agreement 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.

The auction will begin with the highest bid and continue in minimum increments of $1 million.

Cobalt, under specified conditions, would be entitled to an up to $5 million expense reimbursement, but it will not receive a breakup fee or termination fee if it is not the high bidder.

The sale is expected to close by April 20, according to the release.

According to its filing, the committee's does not believe Monarch Group is a good faith purchaser and does not want Monarch to be permitted, among other things, to dictate the allocation of sale proceeds.

Blockbuster, a Dallas-based provider of in-home movies and game entertainment, filed for bankruptcy on Sept. 23, 2010 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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