Blockbuster has until February 4 to deliver a business plan to its bankruptcy lender and until February 11th to present a bankruptcy reorganization plan to the bankruptcy court. It is also rumored that Blockbuster is trying to get an additional $250 million from lenders in order to exit bankruptcy. When it filed for bankruptcy protection, Blockbuster’s debt holders agreed to wipe out all but $100 million of the company’s almost $1 billion in debt in exchange for owning the company. Icahn and Monarch, which together make up a controlling majority of debt holders, have agreed to previous extensions waiting for key holiday season results.

But many fear that the video rental giant may not make the smooth bankruptcy exit they hoped for. There are rumors that there may even be a sale of the company and that while bankruptcy will give them an edge, the massive changes required to compete the constantly changing movie rental market are so massive that the company cannot adapt in their present form.

While change will be necessary for Blockbuster to compete in the movie rental market, bankruptcy, the cancellation of over $900 million in debt will give the company the advantages necessary and the flexibility needed to make those changes.  Corporate bankruptcy provides an environment where business debtors and creditors can come to the negotiating table and hammer out an agreement which benefits all parties.  Even if Blockbuster is sold before its bankruptcy exit, the company that takes it over will be able to leverage to their advantage the fresh start that bankruptcy provides both business and individual debtors.

(source: )