Blockbuster Tanks on Debt Fears
NEW YORK (
) --
Blockbuster
(BBI) - Get Brickell Biotech, Inc. Report
is tanking after it said on Wednesday that it widened its fourth-quarter loss, weighed down by hefty charges related to the eroding value of some of some of its assets.
Shares are plunging 10% to 32 cents in morning trading.
During the quarter, Blockbuster lost $434.9 million, or $2.24 a share, compared with a loss of $359.8 million, or $1.89, in the year-ago period.
Excluding these charges, Blockbuster lost 24 cents a share, still significantly more than the 12 cent loss analysts were expecting.
Sales dropped 17.5% to $1.08 billion from $1.31 billion, while same-store sales tanked 15.9%.
Yet another disappointing quarter led Janney analyst Tony Wible to downgrade Blockbuster to sell from neutral. Wible said the company has just $150 million in cash, according to his estimates. This, coupled with its continued loss of market share to rivals like
Netflix
(NFLX) - Get Netflix Inc. Report
, could make it difficult for Blockbuster to repay its debt next year.
Debt obligations are about $200 million a year, he said in a note.
Still,
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CEO Jim Keyes told TheStreet.com last month
that Blockbuster has enough liquidity to make it through the year.
Blockbuster is also cutting cost by more than $200 million, which is less than Wible expected.
Some of the cost cuts will come from the sale of assets, but Wible fears Blockbuster may get less than expected due to the economic climate.
Blockbuster is also talking with advisors and counselors to restructure its $1 billion in debt.
But this is not something unusual, spokesperson Michelle Metzger says, noting that Blockbuster has been seeking the advice of advisors for help on its balance sheet for over a year.
The
Wall Street Journal
also reported that Blockbuster is in talks with
Movie Gallery
, which filed for bankruptcy earlier this month, about acquiring assets.
The
Journal
did not specify exactly which assets, but it's highly likely it will take over Movie Gallery stores, as it plans to close between 500 and 545 of its own underperforming locations during the year.
-- Reported by Jeanine Poggi in New York.
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