Blockbuster, severing its last tie to former parent Viacom, said Thursday that it has eliminated the final $24 million of certain letters of credit it maintained on behalf of Viacom.
Viacom spun off Blockbuster in 2004, after unsuccessful attempts to sell the movie-rental chain.
"Eliminating this final $24 million of credit exposure frees up cash and helps our liquidity," Blockbuster chief financial officer Tom Casey said in a statement.
The letters of credit were maintained by Blockbuster for Viacom's benefit to cover Viacom's potential liability under certain Blockbuster store leases, pursuant to arrangements made in connection with Blockbuster's split from Viacom in 2004. According to Blockbuster, its obligation to maintain a letter of credit expired when Viacom's overall exposure -- as determined on an agreed basis -- fell below $25 million.
"Not only were we able to eliminate the previous $51 million of letter of credit exposure with Viacom in 2009, we also raised $675 million on our bond offering to extend our debt maturities into 2014," Casey added. "While 2009 was a challenging year in the overall macroeconomic environment, what we were able to accomplish in such a credit strapped market last year was truly remarkable."
Viacom declined to comment on Blockbuster's announcement.
Blockbuster last year said it would close up to 960 stores, or 20% of its outlets, in 2010. Meanwhile, it is focusing more attention on other video distribution channels, including inking deals with Suddenlink Communications and Mediacom Communications to offer VOD services under the Blockbuster brand.
Last week, Blockbuster announced a contract with ActiveVideo Networks to provide interface hosting services for its Internet and cable on-demand services.
