Blockbuster Explores Bankruptcy Advice

by Jordan Yerman | March 3, 2009 at 12:33 pm

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DVD-rental giant Blockbuster has hired a legal firm to explore a possible bankruptcy filing. The chain is facing stiff competition from Netflix, which continues to introduce new services such as video on demand, which Blockbuster scrambles to emulate.

Here in Canada, we have no Netflix, but there's little to differentiate Blockbuster from Rogers Video, a homegrown DVD-rental chain.

Netflix, however, does not rent video games, but similar subscription services aimed at console gaming, such as Gamefly, have since emerge to eat into Blockbuster's bottom line.

The company's stock fell by up to 86%.

Kirkland & Ellis LLP was asked to evaluate restructuring options for the company, which may include a “pre-packaged” or “pre-arranged bankruptcy,” in which much of the restructuring work is completed out of court, the person said. A pre-packaged filing is more advanced than a pre-arranged bankruptcy as it includes agreements from creditors about the outcome of the company’s reorganization.