Blockbuster sales process objected to by Disney, Universal, landlords, U.S. trustee and others
Blockbuster Inc.'s plan to put itself up for sale after a Chapter 11 reorganization process failed has run into a wall of opposition including Hollywood.
In Bankruptcy Court filings Monday and Tuesday, Walt Disney Studios, Universal Studios, landlords, unsecured creditors, other parties and the office of the U.S. Trustee, a Justice Department unit that oversees bankruptcy proceedings, all objected to the sales process proposed Feb. 21 by Blockbuster's senior lenders.
Their main objection was that the plan would benefit Blockbuster's secured creditors, which include activist investor Carl Icahn and hedge funds such as Monarch Capital, at the expense of the rest. They are particularly upset that those lenders remain in the most advantaged position even though a planned $125-million credit facility that they were supposed to provide in order for Blockbuster to pay creditors during the bankruptcy process has been terminated with no debt outstanding.
"Not only did the pre-petition lenders fail to advance funds sufficient to pay the administrative creditors' claims, but they have now terminated the [credit] facility and are commandeering the Chapter 11 case to help themselves while leaving the estates and administrative creditors uncompensated," Disney said in its court filing. The studio said it is owed $9.2 million for DVDs shipped to Blockbuster since the company entered Chapter 11 in September.
Other studios that have said in court documents they are owed millions of dollars for products shipped since September include Universal, 20th Century Fox and Summit Entertainment.
Several of the objecting parties, including the U.S. trustee, argued in court papers that instead of seeking a buyer, Blockbuster should be forced into Chapter 7, a liquidation of all its assets. That would mark a dramatic end to a company that less than a decade ago dominated the U.S. DVD and VHS rental market.
A Blockbuster spokesman did not respond to a request for comment.
A group of Blockbuster creditors last week filed a "stalking horse" bid, intended to create a floor for other bids, of $290 million. That includes $25 million that would be carved out to pay some money owed to the six biggest studios: Disney, Fox, Universal, Warner Bros., Paramount Pictures and Sony Pictures.
-- Ben Fritz