NEW YORK (AP) - Troubled video-rental chain Blockbuster Inc. filed for Chapter 11 bankruptcy protection, and said it plans to keep stores and kiosks open as it reorganizes.
In a submission to the U.S. Bankruptcy Court in the Southern District of New York on Thursday, the company said it reached an agreement with bondholders on a recapitalization plan.
Blockbuster plans to reduce debt from nearly $1 billion to about $100 million or less by swapping debt for equity in a reorganized Blockbuster with bondholders that hold about 80.1 percent of the company's senior notes.
It has received commitments for $125 million in "debtor-in-possession" financing from senior noteholders to repay customers, suppliers and employees during the reorganization.
"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," said CEO Jim Keyes.
Once a home entertainment powerhouse, Blockbuster has been losing market share and money for years as more Americans rent DVDs from subscription service Netflix Inc. and popularity surged for streaming video over the Internet.
Blockbuster said its 3,000 stores in the U.S., DVD vending kiosks, by-mail and digital businesses will all continue to operate normally. Operations outside the U.S. and domestic and international franchisees are not part of the Chapter 11 reorganization.
Earlier this year the company said it would close hundreds of stores and said it was struggling with liquidity problems.
The company, which had warned investors it might file for bankruptcy protection, was delisted in early July by the New York Stock Exchange.
(Copyright 2010 by The Associated Press. All Rights Reserved.)
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