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Blockbuster files for bankruptcy protection

By Ed Monk for Thisismoney.co.uk
Updated: 06:28 EDT, 23 September 2010

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Blockbuster, the DVD rental chain, has filed for bankruptcy protection in the US, raising the risk that the stores may disappear from UK High Streets.

Block-bust: Blockbuster has been unable to service debts.

Bosses at US-owned Blockbuster have applied for 'Chapter 11' bankruptcy protection because the company has been unable to service its debts.

The company's largest trade creditor is Twentieth Century Fox Home Entertainment with a $21.6m claim, according to today's filing.

Chapter 11 protection means that creditors will be held at bay for a period. The current bosses can remain in charge to run the business, although the process will be overseen by the federal bankruptcy court.

Bosses must now seek sustainable funding to secure the future of the business.

Senior Blockbuster bondholders are reportedly to provide the Dallas-based retailer with a $125m loan to support operations while it is under bankruptcy protection, according to Reuters.

Investor Carl Icahn is thought to hold about one-third of the debt from Blockbuster bonds.

Blockbuster has seen sales fall away in the face of competition from online DVD rental companies. In the giant US market, vending machine companies have begun placing DVD rental machines in supermarkets and drugstores.

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