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Unread September 19th, 2009, 11:34 AM
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Blockbuster Gets a Lifeline

Blockbuster Gets a Lifeline, Analysts Say

By : Erik Gruenwedel | Posted: 18 Sep 2009
egruenwedel@questex.com

The day after Blockbuster Inc. announced it had doubled its senior note offering (due in 2014) for private investors to $675 million, analysts hailed the news as an end to the Dallas-based No. 1 DVD rental service’s short-term liquidity issues.

Coupled with the recent asset sale of an Irish retailer and the decision to shutter nearly 1,000 stores in the United States through 2010, Wedbush Morgan Securities analyst Michael Pachter Sept. 18 said Blockbuster could emerge with a reduced debt level around $500 million (from more than $750 million) and five years to pay it off.

Pachter said Blockbuster could sell another $200 million in assets thereby requiring about $60 million in free cash annually to service the remaining debt.

“We think that this is achievable,” Pachter wrote in a note.

The analyst did revise downward the rental chain’s 2009 revenue projection to $4.32 billion from $4.51 billion. He also lowered 2010 revenue estimates to $3.9 billion from $4.37 billion due in large part to the store closures.

Pali Capital retail and home video analyst Stacey Widlitz said the five-year note removed “any imminent” liquidity crisis and allowed Blockbuster to focus instead on current challenges, which she said revolved around $1-per-day rental kiosks.

Widlitz said efforts by studios to window kiosks separately for new release title street dates could prove to be a bonanza for Blockbuster, which operates both brick-and-mortar operations in addition to upstart Blockbuster Express kiosks through partner NCR Corp.

“Blockbuster just might be the last man standing offering new releases day-and-date,” Widlitz wrote in a note. Conversely, should the studios implement an across-the-board window for all rentals, this would result in “the worst case scenario” for Blockbuster, said the analyst.

Indeed, Blockbuster produces about 80% of its earnings from new releases generated by just 35% of its core stores, according to Widlitz.

“It highlights the option to eliminate unprofitable stores,” she said.
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  #2  
Unread September 19th, 2009, 12:39 PM
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Quote:
Originally Posted by Morbid Angel View Post
Blockbuster Gets a Lifeline, Analysts Say
Indeed, Blockbuster produces about 80% of its earnings from new releases generated by just 35% of its core stores, according to Widlitz.
that figure sounds a bit inflated...
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Unread September 19th, 2009, 12:42 PM
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You mean the sky isn't falling?
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Unread September 19th, 2009, 02:11 PM
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You mean the sky isn't falling?
Only at night my friend...............
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