* Blockbuster says does not intend to file for bankruptcy
* Blockbuster retains law firm to help with refinancing
* Netflix shares spike 6 percent
(Adds analysts' comments, details on previous actions)
By Emily Chasan and Gina Keating
NEW YORK/LOS ANGELES, March 3 Top U.S. movie
rental chain Blockbuster BBI.N has enlisted lawyers to help
it raise capital and refinance debt, but stressed on Tuesday it
has no plans to file for bankruptcy.
Blockbuster spokeswoman Karen Raskopf said the company has
hired law firm Kirkland & Ellis LLP, but denied news reports
that the firm could help Blockbuster file for bankruptcy.
Shares of the U.S. company, which has scrambled to compete
with the increasing popularity of online video, plunged more
than 76 percent before trading in them was suspended amid the
A source familiar with the matter told Reuters on Tuesday
that the struggling, debt-laden firm had hired lawyers and
investment bank Rothschild to explore restructuring options --
including a potential bankruptcy filing. [ID:nN03496022]
"We do not intend to file for bankruptcy," Raskopf told
Instead, the law firm will assist "with our ongoing
financial and capital raising initiatives," she said, including
restructuring $328 million in debt, comprising a term loan and
a revolving credit facility due in August.
If needed, Blockbuster can implement a plan to self-fund
its debt through 2009, Raskopf said.
"We look forward to discussing the progress we have made as
a company and our refinancing efforts during our earnings call
on March 19," she added.
Blockbuster, whose stock traded at around $30 in 2002 and
whose blue and yellow, ticket-stub logo still graces some 7,000
outlets across the country, is no stranger to financial woes.
The company, which spent heavily and piled up debt to build
an online DVD rental service to compete with Netflix Inc, had
to restructure its credit agreements four times starting in
2005 under former Chairman and Chief Executive John Antioco.
DOOM AND GLOOM
The spending came amid an industry-wide downturn in
in-store rental revenue and led to a proxy battle between
Antioco and billionaire Carl Icahn, one of the company's
Icahn and two allies won seats on the Blockbuster board and
forced Antioco out in 2007 following a dispute over his
Icahn, whose Icahn Associates Corp owns nearly 8 percent of
Blockbuster according to Thomson Reuters data, has seen the
company's share price fall from $18 per share when he began
buying in 2004 to 23 cents on Tuesday.
Blockbuster shares were halted about 90 minutes before the
market closed on Tuesday, and closed down 73 cents, or more
than 76 percent, while shares of online arch-rival Netflix
(NFLX.O) jumped more than 13 percent before easing to close 5.9
percent higher at $36.36.
Analysts had mixed reactions to reports of a potential
bankruptcy and to Blockbuster's insistence that it would not
"Blockbuster has been facing some liquidity issues for a
while now and this is one of the options they have. It's not a
great one," said Edward Woo, Wedbush Morgan Securities.
Tony Wible, media and entertainment analyst for Janney
Montgomery Scott, urged investors to buy the company's shares,
saying it was too early to talk bankruptcy and that the company
could pay the loans coming due with its own capital.
As increasing numbers of customers migrate to video
downloads or mailed rentals, Blockbuster is struggling to
reinvent itself while also restructuring hundreds of millions
of dollars in debt.
Executives had said in November that the firm would face
challenges refinancing its debt.
"While it's unnerving to see such a drastic move in the
stock, this move creates an unique buying opportunity," Wible
wrote in a note to clients on Tuesday.
(Reporting by Emily Chasan and Gina Keating; Additional
reporting by Sue Zeidler; Editing by Edwin Chan, Gary Hill and