2nd UPDATE: Blockbuster Inks Deals With Studios; Restructuring Talks Continue
(Adds Canadian stores to operate as normal)
By Mary Ellen Lloyd
Of DOW JONES NEWSWIRES
Blockbuster Inc. (BBI) said it inked two more deals with movie studios securing rights to rent movies from its stores and by mail the same day they are released for sale on DVD.
The deals with Twentieth Century Fox Home Entertainment LLC and Sony Pictures Home Entertainment Inc. provide what Blockbuster late Tuesday called "new enhanced payment terms to Blockbuster."
Like a similar deal with Time Warner Inc.'s (TWX) Warner Bros. announced March 22, the new agreements ensure "a steady supply of top-rated movies" for Blockbuster, the movie-rental giant said in press release.
Rivals Netflix Inc. (NFLX) and Coinstar Inc.'s (CSTR) DVD-rental kiosk operator, Redbox Automated Retail, haven't reached similar agreements to date, and Blockbuster is hoping that will give it at least a month of exclusive access to studios' top movies, including Twentieth Century Fox's Avatar, due out April 22.
In exchange for the new payment terms, Blockbuster said, the studios were given a first lien on Blockbuster's 459 stores in Canada and related assets. Blockbuster's Canadian stores will continue to operate as usual, the company said.
Twentieth Century Fox is owned by News Corp. (NWSA), which also owns this newswire and The Wall Street Journal. A spokesman for Twentieth Century Fox declined to comment, and representatives for Sony Corp.'s (SNE) Sony Pictures Home Entertainment Inc. couldn't be reached immediately for comment.
Blockbuster wouldn't provide details on the new terms but said the deals affirm its "strong and collaborative" business relations with the critical vendors and will "help Blockbuster continue the recapitalization initiatives already underway."
Earlier Tuesday, Blockbuster Chief Financial Officer Tom Casey said the company is "having the right dialogue with the bondholders and other interested parties" regarding its possible recapitalization.
"I think it's fair to say the process is going as well as could be expected at this time," said Casey, who is also executive vice president, in an interview.
Blockbuster has said options under discussion include modifying terms of its senior notes and the possible swap of senior subordinated debt with class A shares. The company has said an exchange could be implemented in the late second quarter or early third quarter.
Casey declined to provide details on current talks or offer a timeframe for any resolution. Similarly, he said Blockbuster continues "to feel good about the process" of its efforts to sell international assets, offering no further update.
Casey indicated Blockbuster's vendors continue to back the struggling movie-rental giant. "We're pleased with the support of our studios and vendors," Casey said, declining to elaborate.
His comments come the same day Blockbuster filed details for its annual meeting, scheduled for May 26 in Dallas. Shareholders at the meeting will be asked to approve a conversion of class B shares into class A shares and to approve a reverse stock split.
In its filing with the SEC, Blockbuster also said it had received notice on Feb. 25 from a shareholder indicating his intention to nominate himself for election to the board at the annual meeting. Casey declined to identify the shareholder but said the company would respond appropriately.
"We certainly take any shareholder proposal seriously, but frankly what we're focused on mostly is the recapitalization and all of the parts of that and continuing to drive the business," he said.
Blockbuster said in the SEC filing that if the nomination is presented properly at the meeting, management proxy holders intend to vote for the board's nominees and not the shareholder nominating himself.
Blockbuster is struggling to turn around its declining rental business at stores, fend off competition from Netflix and Redbox, and push its own new distribution channels. But weaker-than-expected fourth quarter results took a bite out of cash, and the company last month warned it may have to file for bankruptcy protection.
-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145; maryellen.lloyd@dowjones.com
