First, Blockbuster was busted. Now, it’s on the block.
The embattled video-rental chain, which filed for bankruptcy last September, is preparing to put itself up for sale, sources told The Post.
A court-administered auction of the company, which could fetch more than $300 million, is Blockbuster’s latest desperate move after billionaire Carl Icahn and other squabbling creditors failed to agree on a plan to help the chain exit Chapter 11.
The big issue is cash, which is in short supply after a disappointing holiday season — despite the fact that creditors gave Blockbuster $130 million last fall to fund operations, according to sources close to the company.
“Rome is burning and they have to come up with a solution fast,” a source briefed on the situation told The Post.
Indeed, Blockbuster execs have been pleading for cash to fund a strategy to fight online video-rental giant Netflix and Redbox, a fast-growing network of video-rental kiosks owned by Coinstar. And the competitive forecast is for more pain as Amazon.com reportedly is gearing up to launch an online video streaming service of its own.
“The difficulty is that the future of ‘brick-and-mortar’ [stores] looks very iffy in the video-rental space,” according to one person close to the process, noting that the 25-year-old company is frantically closing many of its 5,500 stores amid efforts to gain its own foothold online.
Icahn — who has long sought to gain control of Blockbuster, to the mystification of many on Wall Street — at one point was willing to inject more than $200 million into the company, according to a report in the Wall Street Journal yesterday.
But a consortium of creditors, led by Monarch Capital, didn’t want to be diluted by a big equity injection from Icahn, the paper said.
An auction, which could be approved by a bankruptcy judge as soon as next week, would open Blockbuster to bids from both financial and strategic bidders looking to get a leg up in the increasingly competitive race to control distribution of TV and movie content online.
But Icahn and Monarch, who already have sunk hundreds of millions of dollars into Blockbuster’s crushing debt load, are still seen as the most likely bidders for the assets.