BB Liquidating Inc. (BLIAQ)

[eddy2]

https://www.google.ca/amp/s/www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/amp/


Let me take the time to explain how this went down. Blockbuster was approached by Netflix for collateral to support a loan that was sold to the public holders of Netflix.

Blockbuster was never about renting movies it was a franchise to support the leasing of land to the franchisers who bought the blockbuster franchise.


The collateral supports the debt but what gets distorted is the paid in capital " goodwill " to support the credit to Netflix. As this credit gets used a collateral has to support the debt. This collateral is retained equity earnings the spread above par the trinsic collateral support.

The thing many don't realize is if the collateral support of the equity falls then something must replace that support. This is where the outstanding shares are increased diluting investors to support the short fall in the collateral support.

Now of course none of this has taken place in the Netflix offering to date. The short position does not support this nor does the removal of the retained equity earnings from liget earnings of Netflix.


So where does this leave Blockbuster. Well the token collateral lent is slowly being leased or sold. Netflix is in the position of replacing that collateral or paying down the debt. Had it gone bad for them blockbuster could of taken on a huge equity position in Netflix.

The thing is that it buys time for both parties. One too reorganize there operations and restructure there debt, the other to grow on borrowed collateral to support additional debt that can be resold to a public interest.