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Arizona to Lose More Blockbusters this Year

Arizona to Lose More Blockbusters this Year

January 23, 2013

Struggling Retailer Closes Over Half of Phoenix Area Stores

According to The Arizona Republic.  Movie rental giant Blockbuster is closing approximately 25 of its retail stores in the Phoenix metro area.  The Arizona stores being closed are among about 200 locations nationwide that Blockbuster is shuttering in this latest round of store closures. About 60 were shut down soon after Blockbuster filed for Chapter 11 Bankruptcy protection in 2012.

In a Chapter 11 bankruptcy proceeding, a business can use the power of the court to void real-estate leases and close stores.  Chapter 11 bankruptcy is used mainly for businesses who are seeking to re-organize debt and carry on with business.  One of the main differences between a chapter 11 bankruptcy and a chapter 7 bankruptcy when it comes to business is that in a chapter 11 the business remains open and conducts business and in a chapter 7 bankruptcy, the business is closed and the assets are liquidated. 

This latest round of store closings will leave Blockbuster with about 3,200 U.S. stores. Worldwide, the company has about 5,000 stores and 20,000 employees.  Blockbuster will still have approximately 25 stores and 300 employees in the greater Phoenix metro area after the current closures.

The latest store closings by Blockbuster will put about 250 people out of work in metro Phoenix and add to the growing glut of vacant retail space.  The current financial state of many people in Phoenix and throughout Arizona will not be helped by the jobs lost as Blockbuster closes nearly half of its current locations.  This definitely will not boost the already strained economy of Arizona.

The store closings aren’t exactly a surprise.  Blockbuster had been slowly closing unprofitable stores over the past few years but ramped up the process after filing for Chapter 11 bankruptcy protection in September. In a bankruptcy proceeding, a business can use the power of the court to void real-estate leases and close stores.

On Thursday, the company’s creditors agreed to allow the sale of the company to a group of creditors for $290 million in a move that could set up an open-bidding process for the company.  There had been speculation that the proposed sale would be blocked by the creditors, leading to the liquidation of the company in a Chapter 7 bankruptcy.  If the creditors had forced Blockbuster into a chapter 7 bankruptcy, all of the remaining stores would have been closed and all of the company’s assets would have been liquidated to pay the creditors. Bookstore giant Borders was forced into a similar situation.  Read more…

A number of creditors, including several major movie studios, see liquidation as the best way to recover the money they are owed. They argue that to allow Blockbuster to continue to operate would only lead to more losses.

The struggling retailer has had a miserable last 3 months as it has lost an estimated $65 million from November 2012 to January 2013.  The Dallas based movie rental giant has been slow to conform to many of the new advances in technology which are changing the future of the video-rental business. Consumers are downloading and streaming videos directly to their computers from a formidable group of Blockbuster competitors, including:  Amazon.com, Apple Inc., Google Inc. and Facebook Inc.

 

 

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