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Blockbuster Bankruptcy Essay

1427 words - 6 pages

Blockbuster Reorganization
Dana Brown
ACC 401
02/23/2014
Professor Neely

Blockbuster Reorganization
INTRODUCTION
In today’s economy so many businesses are failing and having to file for different types of bankruptcy. Some of the very common ones are Chapter 13, Chapter 7 and Chapter 11. Chapter 11 is more common for corporation and businesses. Chapter 11 reorganization is when the business is on the “verge of bankruptcy but believes it can be successful again” ("Chapter 11 Definition", n.d.,). The goal in filing Chapter 11 is to reorganize the assets and liabilities to become profitable again. Investopedia talks about how the value of the stock can drop as well as the bonds ...view middle of the document...

d.,).
Blockbuster’s target audience is young adults using the slogan “Make it a Blockbuster night”. The young adults between 18 and 34 with a college or higher education are the targets of Blockbuster ("Debt Reorganization", n.d.,). The product that was rented out was movies and games for all ages. This was a great way of making a profit until competition came into the picture. Chapter 11 reorganizing had to be filed for several reasons. Instant streaming and On-Demand came into play which in turn caused Blockbuster to take a hit in revenue. Blockbuster had debt of a whopping 1 billion dollars along with some major competition with Netflix, Redbox and more (Fritz, 2010). Millions were owed to major studios such as Warner Bros, Walt Disney Studios, and Lions Gate (Fritz, 2010).
PREDICTION
In filing Chapter 11 reorganizing, you file in hopes of becoming profitable once again (Corporate Bankruptcy, 2009). This is a way to file bankruptcy and keep your business up and running versus filing a Chapter 7 or 13 where you have to cease all operations. Chapter 11 also gives the business some type of control over the bankruptcy process (Corporate Bankruptcy, 2009). The first step in a Chapter 11 bankruptcy is a committee being appointed to develop a plan (Corporate Bankruptcy, 2009). The debtor company then develops a plan with the committee then prepares a disclosure statement along with a reorganization plan to file with the court (Corporate Bankruptcy, 2009). The SEC then reviews to ensure completion and then creditors are allowed to vote on the plan (Corporate Bankruptcy, 2009). Once the creditors vote on the plan the court needs to confirm it as well (Corporate Bankruptcy, 2009). The company then carries out the plan to Chapter 11 reorganization.
Based on Blockbuster’s financial statements at the time of filing and afterwards, I predict that there will be some success in the business. The income statement shows an improvement in decreasing expenses from the year of filing(2010) and the year after filing (2011) ("Financial Statements for BB Liquidating Inc - Google Finance", n.d.).. In the balance sheet it shows an improvement in liabilities the company has. The liabilities decreased from 1852.60 in 2010 to 1735.50 in 2011("Financial Statements for BB Liquidating Inc - Google Finance", n.d.). So based on the financial statements I have to say that filing Chapter 11 reorganization was a very good move for Blockbuster. Without this move Blockbuster would have likely had to file for bankruptcy and closed down for good. With the improvements shown in the financial statements after only one year of filing Chapter 11 bankruptcy, I have to say after five years I believe Blockbuster would be back in the competition alongside Netflix and Redbox. This would mean Blockbuster would be in better position financially because of this move. As long as the reorganization plan is followed and focus is maintained then Blockbuster will continue to see...

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