Blockbuster Inc. is in talks for a new loan that would keep it afloat in bankruptcy court, a fresh sign the movie-rental chain could be forced to seek Chapter 11 protection from creditors to rework more than $900 million in debt.
Blockbuster is in discussions with bondholders to get up to $150 million in so-called debtor-in-possession financing, said people familiar with the matter. Such loans, which typically carry high interest rates, are used to help companies operate while under bankruptcy court protection.
The talks don’t necessarily mean Blockbuster will file for bankruptcy.
Blockbuster is pursuing other options, and troubled companies often negotiate bankruptcy loans as a precautionary measure and still reach deals with creditors to restructure their debt outside of court.
On a separate front, Blockbuster is talking with possible strategic partners about a new cash infusion, a person familiar with the matter said.
Under that scenario, a group of lower- ranking bondholders owed $300 million would likely convert their debt to equity, this person said.
One potential investor could be NCR Corp., which provides the company with Blockbuster Express-branded vending machines, the source said.
It remained unclear which other possible investors Blockbuster had sounded out.
