MUMBAI: As part of its ongoing liquidity improvement initiatives, Blockbuster Inc. has reduced the face amount of certain letters of credit it maintains on behalf of its former parent company, Viacom Inc., from $75 million to approximately $25 million, paralleling a reduction in Viacom’s exposure to Blockbuster lease obligations.
The reduction of the letters of credit follows Blockbuster’s announcement on 28 August that it sold its 186-store XTRA-Vision chain in Ireland for cash proceeds of up to $45 million.
"We are pleased to have reached this agreement with Viacom, which delivers on our promise to improve liquidity through a number of
initiatives. This agreement, combined with strong cash from operations from our core business and proceeds from the sale of our Xtra-vision chain, will allow us to continue development of the multi-channel offering of Blockbuster," said Blockbuster chairman and CEO Jim Keyes.
The letters of credit are maintained by Blockbuster for Viacom’s benefit to cover Viacom’s potential liability under existing
Blockbuster store leases in place prior to Blockbuster’s 1999 initial public offering. Since 2004, many of those leases have been
renegotiated or renewed without reliance on Viacom’s credit, thereby further facilitating the reduction in the face amount of the letters