Feb 24 (Reuters) - Blockbuster Inc BBI.N has hired a law firm and an investment bank to explore how the video rental firm can cut its $1 billion debt load, the Wall Street Journal reported on Wednesday.
Law firm Weil, Gotshal & Manges and the bank, Rothschild Inc, will also look at other strategies, such as acquisitions or partnerships, the newspaper said, citing people familiar with the matter.
Bondholders have also begun talking with potential advisers to move towards reworking Blockbuster’s capital structure, such as converting debt to equity, the WSJ said.
“We don’t contemplate filing for bankruptcy,” it quoted Chief Executive Jim Keynes as saying.
Blockbuster is struggling to pare huge debt it inherited a decade ago when it was spun off from Viacom Inc VIAb.N, while trying to handle the increasing challenge from Netflix Inc NFLX.O and Redbox as well as Apple AAPL.O, Amazon.com AMZN.O, Google GOOG.O, Hulu and cable companies that have expanded video-on-demand offerings.
Blockbuster has also been in talks with Hollywood Video rental chain Movie Gallery Inc MVGR.PK, which filed for bankruptcy the second time in three years earlier this month, about acquiring assets, the business daily said.
Last month, the once mighty U.S. video chain, said it had a weaker-than-expected holiday season, fueling concerns about its viability. [ID:nN21221995]
The company, which already has sold off most of its international operations and may shut as many as 20 percent of its U.S. stores this year, said it plans to further reduce costs in 2010 and to remain “conservative” in its spending.
However, the restructuring discussions are in early stages and no major actions appear imminent, the paper said.
Blockbuster could not be immediately reached for comment by Reuters outside of regular U.S. business hours.
The firm’s shares are trading around 38 U.S. cents, down from 67 cents at the end of 2009 and far off heights of more than $28 in 2002. (Reporting by Archana Shankar in Bangalore; Editing by Neil Fullick)
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