Bloomberg reported earlier today that Blockbuster was exploring bankruptcy, and it resulted in the stock dropping almost 80% and trading was halted. A Blockbuster spokesperson said that the story was wrong:
“We’ve hired them for refinancing and capital raising initiatives,” said Karen Raskopf, a Blockbuster spokeswoman. “We do not intend to file for bankruptcy.”
Blockbuster is working with Kirkland and Ellis on refinancing, Raskopf said. The company previously announced plans to fund its own operations through the end of 2009 after two of its credit facilities expire this August, she said.
Blockbuster has also hired Rothschild Inc., an investment bank, to advise it on restructuring, a person familiar with the situation said.
While its unnerving to see such a drastic move in the stock, this move creates an unique buying opportunity. We continue to see BBI having growth opportunities from: 1) cost cuts; 2) countercyclical demand for movie rentals; 3) store restructurings; 4) kiosk deployments; and 5) new price plans. Furthermore, the company continues to be well positioned for the long term through its five point distribution strategy. We maintain our $3.25 target.
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