NEW YORK (CBSNewYork/AP) — A judge Thursday was set to rule on whether movie-rental chain Blockbuster Inc., operating under Chapter 11 bankruptcy protection can sell itself to a group of investors or will be forced to liquidate.
The U.S. Bankruptcy Court for the Southern District in New York will rule on whether a bid by a group of debtholders for $290 million should be approved. Last week, a U.S. Bankruptcy Trustee filed a motion to instead convert the Chapter 11 sale process into a Chapter 7 liquidation case.
The judge will hear objections from both sides during the hearing.
Billionaire investor Carl Icahn weighed in on the matter on Wednesday, saying in a court filing a sale was in the best interest of the company. Icahn hasn’t made a bid for the company, but it is possible he will if the court orders the company to be auctioned.
A sale “will maximize value and provide all creditors the best avenue for possible recoveries as opposed to a Chapter 7 liquidation,” he said.
Icahn was part of the group of debtholders that provided Blockbuster financing to operate while in bankruptcy in September.
Everyone in the group except for Icahn in February made the “stalking horse” bid to buy Blockbuster for $290 million. That group, called Cobalt Video Holdco LLC, includes funds managed by Monarch Alternative Capital LP, Owl Creek Asset Management LP, Stonehill Capital Management LLC and Varde Partners Inc.
Blockbuster used to be the dominant U.S. movie rental chain. But it lost money for years as customers shifted to Netflix Inc., video on demand and DVD rental kiosks.
When it filed for bankruptcy protection in September it was down to 3,000 stores, less than a third of the peak of 9,100 it reached in 2004. In December, the chain said it planned to close 182 more in the next few months.
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