Bankrupt Blockbuster Canada Co. is ready to liquidate its movie rental chain of stores in Canada after failing to find a buyer for them.

Judge Geoffrey B. Morawetz of the Superior Court of Justice of Ontario in Canada approved going-out-of-business sales on Wednesday, court documents said.

Through the GOB sales, the debtor's receiver, Grant Thornton Ltd., will sell the company's inventory, furniture, fixtures and equipment and remaining stores.

The receiver had been looking for a buyer for the bankrupt movie store chain, but its sales process "did not generate a transaction with a third party that would generate recoveries in excess of the recoveries that the receiver believes will be generated by the [liquidation] sale," court papers said.

Blockbuster Canada's former owner, Blockbuster Inc., was sold out of bankruptcy to Dish Network Corp. in April for $320 million. Blockbuster's Chapter 11 case was overseen by the U.S. Bankruptcy Court for the Southern District of New York in Manhattan and the sale, which closed April 26, didn't include the Canadian company.

Soon after the sale was completed, the new company formed from the sale -- Blockbuster LLC -- notified Blockbuster Canada that it planned to reject the agreements between Blockbuster Inc. and Blockbuster Canada, thus preventing the latter from using its intellectual property.

The hearing to reject the agreements is scheduled for Sept. 20, court papers said.

However, the parties reached a settlement on Sept. 2 that will allow Blockbuster Canada to use the IP for a period of six months in exchange for a C$345,000 ($350,019) fee. Blockbuster Canada will also pay Blockbuster LLC a fee of 4% of its gross revenue from May 3 through the completion of its GOB sales.

Blockbuster Canada expects its GOB sales will be completed by Dec. 31, court filings said.

The Canadian company operates more than 400 stores across Canada -- 198 in Ontario alone -- and has 4,000 employees. The debtor has been operating in Canada since 1990.

The company closed 154 of its Canadian stores in May, court papers said.

The Canadian retailer filed for protection under the Bankruptcy and Insolvency Act with the Superior Court of Justice in Toronto on May 3, the same day Grant Thornton was appointed as receiver.

The company was forced into bankruptcy protection after collateral trustee Home Trust Co. asked for the appointment of a receiver.

The collateral trustee demanded that Blockbuster Canada pay $70.2 million because it guaranteed debt owed by its U.S. parent to movie studios Warner Home Video, Twentieth Century Fox Home Entertainment LLC and Sony Pictures Home Entertainment Inc. Blockbuster Canada guaranteed the debt in March 2010 so that the studios would continue to supply product and extend credit to the debtors. Blockbuster Canada missed the Feb. 10 payment deadline to the collateral trustee under the guarantee agreement, court papers said.

The parties entered into a series of forbearance agreements, but they expired March 21 without being extended further, court documents said. Blockbuster Canada has been in default of its obligations since then.

On May 2, Blockbuster Canada's directors and officers resigned after the company's D&O insurance liability policy expired. Due to the resignations and the continued default, the collateral trustee asked for a receiver to be appointed.

Blockbuster Canada sought Chapter 15 protection in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan on May 20.

A hearing to recognize the Canadian bankruptcy case as its foreign main proceeding is scheduled for the Manhattan court on Sept. 20, court papers said.

Recognition would prevent creditors from moving on Blockbuster Canada's U.S. assets while it's under bankruptcy protection in Canada.

Blockbuster Inc., meanwhile, filed for Chapter 11 on Sept. 23, 2010, due to an unsustainable debt load and disappointing financials, as new distribution streams for movie and video game rentals have supplanted its traditional brick-and-mortar stores.

Martin Flics and Paul Hessler at Linklaters LLP represent Blockbuster LLC.

Robert J. Feinstein and Gabrielle Rohwer are U.S. counsel to the receiver at Pachulski Stang Ziehl & Jones LLP.

James H. Grout, Rachelle F. Moncur and Danny M. Nunes of Thornton Grout Finnigan LLP are Canadian counsel to the receiver.