Bidding on Blockbuster kicks off

City A.M. Reporter
A bankruptcy auction for movie rental chain Blockbuster has kicked off with a $284m (£176m) bid from Dish Network, quickly topped by bids from rival groups led by billionaire Carl Icahn and hedge fund Monarch Alternative Capital.

The auction in the US Bankruptcy Court in Manhattan will decide the fate of the movie rental chain, which filed for bankruptcy last September. The company put itself up for sale in February after a reorganisation plan fell apart.

The Icahn group bid $291.4m, while Cobalt Video, a group of hedge funds led by Monarch, offered $290m, said Blockbuster lawyer Stephen Karotkin, who was leading the auction. The Cobalt bid includes more money for repaying certain noteholders, he said.

The auction, expected to continue throughout the day, will determine whether Blockbuster stays in business or shutters its 1,700 remaining stores.

Once the biggest movie rental chain, the company foundered on intense competition from mail-order and digital competitors such as Netflix.

The next owner could preserve Dallas-based Blockbuster as an ongoing business, though bidders also have the option of liquidating the company. Proceeds of the sale will become part of the bankruptcy estate.

The other qualifying bidders were SK Telecom and a team including liquidators Gordon Brothers and Hilco Merchant Resources, said Karotkin, of law firm Weil Gotshal.

The Icahn group includes liquidator Great American Corp and other parties. Activist investor Icahn, a large holder of Blockbuster senior debt, has long been interested in the company.