By Joseph Checkler
Of DOW JONES DAILY BANKRUPTCY REVIEW
Droves of Blockbuster Inc. (BLOAQ, BLOBQ) landlords are
objecting to Blockbuster's assumption of leases that it seeks to
assign to soon-to-be-owner Dish Network Corp. (DISH), saying among
other things, they don't have adequate assurance that the new owner
will honor those leases.
In documents filed with U.S. Bankruptcy Court in Manhattan,
landlords are also arguing over how much money Blockbuster plans to
pay them to take over the leases.
One consortium that owns a total of 17 Blockbuster stores said
in court papers it has received "virtually no information" about
what Dish-related entity will assign the leases, "including its
identity, how it will pay the rent and year-end adjustments, or
what experience, if any, the proposed assignee has operating a
chain of retail stores."
The lawyers for the group, which includes General Growth
Properties Inc. (GGP), added, "By their silence, the Debtors and
DISH have failed to provide evidence of adequate assurance of
future performance under the leases, and the Court should deny
their request to assign the leases."
Other landlords object to the amounts of money Blockbuster
proposes to pay them to take over the leases.
A spokesman for Blockbuster declined to comment, while a
spokesman for Dish didn't immediately respond to a request for
comment. A hearing on the objections is set for Thursday.
Dish, which won a bankruptcy-court auction for Blockbuster
earlier this month, said in court papers last weekend it plans to
assume the leases on more than 500 Blockbuster stores after it
completes the acquisition. It listed those stores, along with the
amount it plans to pay the landlords to take over those leases.
Blockbuster also submitted a long list of leases it plans to
reject, which will bring the company's store count down to 1,000 or
less. It had more than 3,300 stores when it filed for Chapter 11
protection late last summer.
At the time of the sale, Dish said it planned to keep some
Blockbuster stores open, something Judge Burton R. Lifland seemed
pleased with in approving the sale. Dish cited the crossmarketing
opportunities of selling its satellite service to Blockbuster
customers. Dish could also offer Blockbuster's on-demand services
and digital products to its satellite subscribers
Battered by the popularity of Netflix Inc.'s (NFLX) DVD mailing
service, Blockbuster filed for Chapter 11 protection in September
with plans to reorganize, but lackluster holiday sales and
continued losses forced the company to put itself on the
market.
Dish, controlled by satellite mogul Charles Ergen, hopes to
close the deal by April 25, although the purchase agreement gives
the company until May.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection.)
-By Joseph Checkler; Dow Jones Newswires; 212-416-2152;
joseph.checkler@dowjones.com