Fri, 24 Sep 2010 | BUSINESS NEWS
Blockbuster in the US has applied for bankruptcy protection in a dramatic attempt to reduce its debt pile and to undergo restructuring at the same time.
Agreements with creditors will allow the firm to cut its debts from $1 billion to $100 million.
The 3,000 US stores are to remain open for the foreseeable future, Blockbuster said.
Its non-US businesses, including those in the UK, Denmark, Italy, Mexico and Canada, are legally separate entities and are not affected by the move.
A spokesperson for Blockbuster reiterated this point for the UK: “We are not affected by the US filing. The Blockbuster United Kingdom business is profitable, cash generative and has substantial net assets.”
A recent report, however, suggested that Martin Higgins, head of Blockbuster UK has concerns for the future, saying that the UK operations could have problems getting hold of stock if the US parent entered Chapter 11, and this could have a knock-on affect at Christmas.
A contingency plan is already in place for the UK business as Blockbuster begins to sell mobile phones, iPods and TV sets, alongside its core business of DVD and game rental in its stores. It started selling TVs in ten British stores this month, and the trial will soon be extended to a further 25 outlets.
Despite battling against increasing competition in the online rental market over the past few years, Blockbuster UK's sales increased by 6 per cent in 2009, with the company also looking into opening new outlets.
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