As we reported yesterday, it was well-known that the company was preparing the filing, it was just a question of when it would actually happen.  According to Bloombergs, the company is currently listing that it currently has $1.02 billion in assets against $1.46 billion in debt.  The outstanding debt blows away the estimated we had been hearing of it being $900 million.

Blockbuster storeJeffery Stegenga, the company’s restructuring officer, said in a statement, “To preserve its three-decade long developed brand value, Blockbuster seeks a restructuring that permits a significant deleveraging of its business so that it can move forward at the digital clip at which its industry and competitors are currently running.”

The problem I see with the filing is it really doesn’t say what the company plans to do to reach this goal.    There is no obvious mention of closing any more of its remaining 3,000 stores, just that it has lined up another $125 million in operating capital, which it only has access to $45 million until more paperwork is done.  An additional $250 million of secured debt will be converted into another loan.

So, you’re getting a whole lot more loans, and something magical will happen to right the sinking ship?  Lets look at some of their secured creditors (remember, unsecured means you may not get anything, but the company is promising to pay those firms at least something)

  • Twentieth Century Fox Home Entertainment – $21.6 million claim
  • Warner Home Video Inc. – $19 million
  • Sony Pictures Home Entertainment – $13.3 million
  • Coca-Cola Enterprises – $703,412

I am sure there are people far smarter than I out there who can figure out how the company is going to pull itself out of this, but with no store closings planned, I just don’t see how it can do it.  According to an article in today’s USA Today, in 2005 there were 22,275 video stores in the country, there are now 9,900, and by 2014 that numbed is expected to drop to 4,400.  Wouldn’t it be wiser to start cutting away at the anchor that is your brick and mortar locations now, and focusing all of your energies on kiosks, rentals-by-mail and online services?  Why continue to be tied to the past when it is obviously was has brought you to your knees?  Now all the company will say about closings is it will “evaluate its U.S. store portfolio with a view toward enhancing the overall profitability of its store operations.”

Don’t get me wrong, I don’t want to see those store employees lost their jobs, but we just lost the Movie Gallery chain which once numbered over 4,000 stores, shouldn’t this tell Blockbuster something?

What say you?  Is Blockbuster still not getting the big picture?