The online video rental chain, Blockbuster has filed for bankruptcy under Chapter 11. The company’s Chapter 11 petition in federal bankruptcy court lists $1.02 billion in assets and $1.46 billion in debt. Shares of Blockbuster fell 12 cents, or 29%, to 28 cents a share.
The company’s market capitalization now totals about $34 million, or just a fraction of its fourth-quarter revenue of $1 billion. The company reported an operating loss of $394 million in the period. During the Chapter 11 process, Blockbuster will continue to operate as normal. Once the dominant name in the movie rental business, the company is reeling from mounting losses, rising debt and competitors that have better catered to Americans’ changed media habits. Blockbuster faces tough competition from Redbox, which operates movie-rental kiosks in stores, and Netflix, which mails movies to subscribers and also provides digital streaming.
It is also struggling against the likes of Apple, which also rents out movies via its iTunes service. Blockbuster, which currently employs about 25,000 people, has been closing stores to keep up with the competition and plans to cut expenses by more than $200 million.
“After a careful and thorough analysis, we determined that the process announced today provides the optimal path for recapitalizing our balance sheet and positioning Blockbuster for the future as we continue to transform our business model to meet the evolving preferences of our customers,” Jim Keyes, Blockbuster’s chief executive, said in a statement.
The company has hired Rothschild, the law firm Weil, Gotshal&Manges and the consulting firm Alvarez&Marsal as advisers. Last month, Movie Gallery Inc., which also owns Hollywood Video, filed for Chapter 11 bankruptcy protection. It is liquidating at least 760 stores.