NEW YORK -- Shares of Blockbuster Inc. sank 30 percent Wednesday after the video rental chain warned that it may have to file for Chapter 11 bankruptcy protection.
Competition from DVD-by-mail company Netflix Inc. and DVD vending machines operated by Coinstar Inc. have eroded the Dallas company's revenue even as it staggers under a heavy debt load.
Blockbuster Inc. said in a regulatory filing late Tuesday that it was suffering "significant liquidity constraints," and could have to file for bankruptcy protection if it was unable to convince creditors to restructure a big chunk of its debt or its business continued to deteriorate.
The company has had to close about 1,300 stores and wants to shut down hundreds more. It had about 5,200 stores worldwide in January, excluding franchised shops. About 3,500 of those were in the U.S.
The company is trying to update its business, setting up video rental kiosks like those run by Coinstar and offering a DVD-mailing service. It added 2,000 kiosks in 2009 and expects to have more than 10,000 by the middle of this year - but NCR Corp., which operates the kiosks, is "under no obligation" to install or run them, Blockbuster said.
Meanwhile, the company predicts further declines in its sales. The chain said it expects a key sales measure to drop in the mid-single digits to high single digits in 2010 - and a "further deterioration" could leave it unable to service its debt, leading to default.
Shares fell 12 cents, or 30 percent, to 28 cents Wednesday.
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