New York City -- Blockbuster said on Monday that it reached a $290 million deal to be bought out of bankruptcy by a group of investors.
The offer by a group of hedge firms comprised of Monarch Alternative Capital, Owl Creek Asset Management, Stonehill Capital Management and Värde Partners -- is a so-called “stalking horse” bid. It sets a base price that Blockbuster hopes will attract other potential suitors who will offer more.
Together, the creditor group, which calls itself Cobalt Video, owns more than 50% of Blockbuster’s senior secured notes, and each member is part of the company’s creditor steering committee, according to The New York Times.
As part of the purchase agreement with Cobalt, Blockbuster must begin closing down 609 stores, according to a court filing. Cobalt has also reserved the right under certain circumstances to convert Blockbuster’s bankruptcy case into a Chapter 7 liquidation.
“By initiating a sale process at this time, we intend to accelerate our Chapter 11 proceedings and move the company forward,” Jim Keyes, Blockbuster’s chairman and CEO, said in a statement. “An auction will allow the company to invite competing bids from both strategic and financial investors.”
Blockbuster must still seek permission from Judge Burton R. Lifland, the Manhattan federal judge overseeing the company’s bankruptcy case, to run the sales process. If the judge approves, potential bidders would have 30 days to submit their offers, followed by a one-week auction.