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Blockbuster's Fate In The Hands of Icahn?

Carl Icahn may hold enough debt to veto any restructuring plan, according to reports.

NEW YORK (

TheStreet

) -- Billionaire investor

Carl Icahn

could control

Blockbuster's

(BLOKA.PK)

restructuring, according to a report.

Icahn is telling people close to the movie rental chain that he holds about one-third of its senior debt, which would give him a say in the restructuring, the

Wall Street Journal

reported.

Icahn reportedly bought $100 million in debt from other hedge funds, and sources are saying that he holds enough senior bonds to block any restructuring plan he doesn't like, the

Journal

reported.

Blockbuster Bankruptcy

Click here to read about Blockbuster's possible bankruptcy.

Icahn has a somewhat complicated history with Blockbuster. In 2004, Icahn gobbled up shares of the company, intent on seeing a merger between now bankrupt

TheStreet Recommends

Hollywood Video

and Blockbuster, a deal that never materialized.

Then in May 2005, Icahn waged a successful proxy fight to add himself and two other members to Blockbuster's board of directors. Icahn accused Blockbuster of overpaying then CEO John Antioco. The battle between the two eventually drove out Antioco.

But it seemed like Icahn's interest in Blockbuster has died down since bankruptcy scares emerged. In January, Icahn stepped down from the board of directors, citing Institutional Shareholder Services guidelines regarding how many directorships he can hold.

And as of the end of June, Icahn has slashed his stake in Blockbuster by nearly 80%. In the second quarter Icahn held just 680,000 shares of the flailing movie rental retailer, down from 3.3 million in the first quarter. In 2004 Icahn held 9.9 million shares worth about $83.9 million.

Blockbuster is buried under nearly $1 billion in debt, and according to reports earlier this month, could file for a

pre-packaged bankruptcy

any day now.

The flailing retailer has missed a $42 million payment to creditors, which it is now scheduled to pay on Sept. 30, and also

skipped a payment to junior noteholders

because of an agreement banning it from making a payment until it repays senior holders.

Blockbuster Misses Another Payment

Click here to read about Blockbuster's late payment.

Amid these bankruptcy fears, Chief Financial Officer and Executive Vice President Thomas M. Casey stepped down from his post last week. He was replaced by Dennis McGill, who recently served as executive vice president and chief financial officer of

Safety-Kleen Systems

.

-- Written by Jeanine Poggi in New York.

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Jeanine Poggi

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