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Blockbuster gets OK of creditors, studios on sale plan

March 10, 2011|Reuters

Blockbuster Inc. will proceed with an auction that could preserve the troubled video rental chain after reworking the sale plan to win the support of Hollywood studios, a company lawyer said at a court hearing Thursday.

The hedge fund group that has proposed an initial bid for the company reached an agreement that won over creditors who said the original sale plan shortchanged them.

Numerous creditors had asked the Bankruptcy Court judge to convert the bankruptcy to a Chapter 7 liquidation, essentially a going-out-of-business sale, rather the proceed with the company's original sale plan.

The judge, Burton Lifland, helped prompt the talks by making it clear he had concerns about the original sale proposal, which could have left many creditors with nothing.

The agreement sets up an auction and could preserve Blockbuster as an ongoing business.

Hedge funds led by Monarch Capital submitted an initial bid for $290 million. The company listed assets of about $1 billion in its most recent disclosure, for Jan. 30.

The judge told lawyers for billionaire investor Carl Icahn their client could bid at the auction. A bondholder wanted to prevent Icahn from bidding, arguing that he was an insider because he served on the company's board last year.

"If you've got a deep pocket, empty it out at the auction," the judge said during the hearing, which was delayed for hours for the negotiations over the sale proposal.

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