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Blockbuster becomes latest U.K. retailer to go bust

by Jonathan Braude  |  Published January 16, 2013 at 2:28 PM
The U.K.'s retail dominoes continue to tumble.

DVD rental chain Blockbuster Entertainment Ltd. on Wednesday, Jan. 16, collapsed into insolvency administration just one day after entertainment products retailer HMV Group plc called in the administrators.

Accountancy firm Deloitte LLP said in a statement Wednesday that its partners Lee Manning, Matthew Smith and Neville Kahn had been appointed joint administrators to Blockbuster Entertainment and Blockbuster GB Ltd.

The problems at Uxbridge, England-based Blockbuster add another 4,200 jobs and 528 stores to the list of those put at risk by high-profile retail insolvencies in the U.K. so far this year. In just two weeks, the demise -- and unusually swift closure of all its remaining stores -- at photography goods retailer Jessop Group Ltd. and the failure of the two big movie and music chains have together put almost 10,000 jobs and just under 1,000 in the balance.

All three groups have had a torrid time in recent years, and follow similarly painful episodes at other entertainment and electrical goods retailers. Last year saw the administration of computer game purveyor Game Group plc and Comet Group Ltd., which, like HMV, quickly declined to honor customers' gift tokens. Under U.K. bankruptcy rules, the holders of gift tokens are considered unsecured creditors at the bottom of the feeding order for recovery of their money.

"Unfortunately, Blockbuster is yet another brand with a legacy network of stores in secondary locations and an offering which its market has moved away from," said Julia Palmer, a partner at business recovery firm Begbies Traynor Ltd. in an e-mailed statement. "The ease of downloading films, and their storage via the cloud, as well as online rental enables consumers to rent films and games more conveniently, for longer periods and at cheaper rates."

That is not to say that all three companies were in the same boat. HMV for instance had moved some time ago to put more of its business online, sold noncore businesses such as Waterstone's Booksellers Ltd. and attempted to make its stores more customer-friendly with a wider range of products and services. It had also expanded the business to live music venues and technology. An administration that helps it shed burdensome property rental agreements might yet allow it to be sold.

Hilco UK Ltd. was mooted Tuesday in media reports as a potential suitor for HMV, since Hilco UK bought HMV Canada Inc. from the U.K. parent in 2011. Jon Moulton's distressed investment vehicle Better Capital plc as well as Endless LLP, best known for its rescue of Crown Paints Ltd., are also reported to have expressed interest.

Deloitte made clear on Wednesday that it has not yet given up hope for finding similar potential rescuers for Blockbuster.

"The core of the business is still profitable," Manning said in the statement. "We will continue to trade as normal in both retail and rental whilst we seek a buyer for all or parts of the business as a going concern."

It is not yet clear, however, what kind of interest there might be in Blockbuster or whether any of its stores and jobs can be saved.

U.S. retailer Blockbuster Inc. filed for Chapter 11 protection in September 2010 and ultimately sold most of its assets to Dish Network Corp. for $320.6 million.

Tags: Better Capital plc | Blockbuster Entertainment Ltd. | Blockbuster GB Ltd. | Blockbuster Inc. | Chapter 11 | Comet Group Ltd. | Deloitte LLP | Endless LLP | Game Group plc | Hilco UK Ltd. | HMV Group plc | Jessop Group Ltd. | Jon Moulton | Lee Manning | Matthew Smith | Neville Kahn

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Jonathan Braude

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