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Blockbuster and the "New" Chapter 11

posted by Stephen Lubben

Up now on Dealbook.


Good points all around, Stephen. The resistance to the KEIP in A&P may be a sign of the same phenomenon.

BBI is an absurd situation. Basically, you have a bunch of hedge funds who crossed paths with Uncle Carl in a business that no longer has a purpose for being. These hedge funds decided that they don't like the priority scheme of the Bankruptcy Code except on Mondays, Wednesdays, and Fridays when it works for them between the hours of 11-1. So, after they promised a whole bunch of pre-petition creditors in the form of Hollywood studios that they could now be admin creditors, the business tanked. The hedgies of course had reordered the priorities prior to cutting this deal by making a DIP loan and validating their pre-petition loans. Not wanting to lose their shirts, they decided they could reneg and cooked up a bid for $290 m. that really paid nobody but themselves and their friends. Then they told the Court if you don't approve our bid 20,000 workers will lose their jobs. Bottom line is there is over $420 m. in admins. They will do much better in a Chapter 7 than in a cockamamie 11 which seeks to reorder the Bankruptcy Code. Of course the story isn't over --there's still an "auction" to be held.

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