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Will Blockbuster Make Its Debt Payment?

Blockbuster is scheduled to make a debt payment on Friday, but will the retailer be able to pay up?



) --



is on deck this week to repay debt that it pushed back last month. But will the dying video chain be able to pay up?

Bond holders agreed last month to let Blockbuster defer the $42 million in interest and principal on senior secured notes until Aug. 13 -- which, coincidentally enough, is also Friday the 13th. The company is currently weighed down under about $1 billion of debt.

It's looking like one potential outcome is that lenders will give Blockbuster another one-month reprieve in exchange for a pre-packaged bankruptcy, according to


, which cited sources familiar with the matter. Blockbuster is reaching out to companies about buying assets in or out of bankruptcy,



But bankruptcy doesn't have to be the only option. While Wedbush analyst Michael Pachter believes a pre-packaged bankruptcy would be the company's smartest move, he also said creditors can convert debt into equity without a Chapter 11 filing.

Either way, Pachter said Blockbuster will most likely present a plan by Friday that will satisfy creditors.

Blockbuster declined to comment on where it stands in coming to a resolution with creditors. "We do have the continued support of our bondholders and are engaged with them in productive discussions," said Patty Sullivan, senior director, Corporate Communications.

Blockbuster originally postponed the debt payment until Aug. 13 to give it the opportunity to present its second-quarter earnings, which are due out after-market on Aug. 12. The company is hoping to show creditors that trends are improving.

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Over the weekend, Blockbuster and


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, partnered to launch, a site that allows Comcast subscribers to sign up for the video chain's Blockbuster by Mail service at a discounted rate.

This is one of several moves Blockbuster has made over the last month, including offering Canada members a $9.99 per month plan that will allow them to rent unlimited movies (one at a time).

Blockbuster was delisted from the New York Stock Exchange in July after shareholders failed to approve a recapitalization plan, which included combining Class A and Class B common stock, or the option for a reverse stock split, which was necessary to comply with listing requirements. It is currently trading over-the-counter.

-- Reported by Jeanine Poggi in New York.

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