Ailing US video rental company Blockbuster said today that it has filed for bankruptcy protection while it tries to restructure its business to focus on digital distribution.
The company said it reached agreement with a group of creditors on a plan to bolster its financial position as it tries to turn around its business which has been undercut as technical advances, especially in digital video-on-demand.
Under the Chapter 11 bankruptcy plan, Blockbuster would drastically reduce its number of stores and focus more on digital distribution.
Seeking bankruptcy protection is 'the optimal path for recapitalising our balance sheet and positioning Blockbuster for the future as we continue to transform our business model to meet the evolving preferences of our customers,' said Jim Keyes, Blockbuster's chairman and chief executive officer.
'The recapitalised Blockbuster will move forward better able to leverage its strong strategic position, including a well-established brand name, an exceptional library of more than 125,000 titles, and our position as the only operator that provides access across multiple delivery channels - stores, kiosks, by mail and digital,' he said.
The recapitalisation plan would substantially reduce the company's debt from nearly $1 billion currently to about $100m.
Blockbuster has already unveiled plans to close nearly 1,000 outlets and between 500 and 800 additional stores would close under the reorganisation.
Blockbuster's non-US operations and its domestic and international franchisees, all of which are legally separate entities, were not included in the bankruptcy proceedings.
