Blockbuster (BBI) On Brink of Bankruptcy
Blockbuster (BBI) shares dropped nearly 30% today to end the day at $.284 cents. Shares are down an additional 3% in after hours trading. Fitch downgraded Blockbuster's shares today to a C rating which is one notch above default.
Blockbuster may be forced to file for bankruptcy soon as the company's balance sheet is a nightmare and the business model is broken. Blockbuster has over $963 million in long term debt and only $247 million in cash and cash equivalents. Gross income has declined the past five years and the video game rental chain has a negative book value.
Blockbuster (BBI) is trying to get bondholders to agree to a debt for equity swap that would further dilute existing shareholders. Increasing competition from Netflix and Redbox have destroyed the traditional brick and mortar rental business which is Blockbuster's bread and butter. Unless Blockbuster can get debt holders to make serious concessions, a bankruptcy filing seems very likely.
