DOW JONES NEWSWIRES
Blockbuster Inc. (BBI) said it has reduced the face value of
letters of credit with former parent Viacom Inc. (VIA) by
two-thirds to $25 million, the latest step in the video-rental
chain's efforts to boost liquidity.
The stock rose 4 cents premarket to 95 cents. Shares through
Tuesday were down 61% the past year amid concerns about
Blockbuster's debt load and operating performance.
The letters of credit are maintained by Blockbuster for Viacom's
benefit to cover Viacom's potential liability under existing
Blockbuster store leases in place prior to Blockbuster's 1999
initial public offering. Since 2004, many of those leases have been
renegotiated or renewed without reliance on Viacom's credit,
allowing for the lines' reduction.
The cut comes days after the company said it sold its Irish
chain for up to $45 million.
Liquidity has been a key issue for Blockbuster, which earlier
this year faced some doubts about its ability to continue
operating. However, the company in April refinanced $250 million in
debt that was coming due, which Chairman and Chief Executive Jim
Keyes then said would assure survival through the downturn when
combined with operating cash flow and cost cutting.
-By Kevin Kingsbury, Dow Jones Newswires; 212-416-2354;
kevin.kingsbury@dowjones.com