A collection agency hired to persuade movie renters to pay their late fees is among the 1,309 unsecured creditors who are owed money by Blockbuster Canada.
The video rental chain was pushed into receivership earlier this month after Hollywood movie studios called in $70-million in debt racked up by its parent company that had been secured against the Canadian operations.
While the U.S. chain was losing money as consumers opted for alternatives such as mail-order DVDs, mall kiosks and Internet services such as Netflix, the Canadian operations had $117-million in assets – including $15-million in cash – when pushed into receivership, according to documents filed this week by receiver Grant Thornton.
Blockbuster Canada is essentially being sold to service the U.S. debt, after its parent company was sold to Dish Networks earlier this month. The receivership puts the U.S. movie studios at the front of the line when the chain is eventually sold; anything left over will go to smaller suppliers that were caught off guard by the receivership.
“We really thought everything was going well for them,” said Anthony Lacavera, chairman of Toronto-based Wind Mobile, whose parent company, Globalive Wireless, is owed $31,000.
The number of creditors could rise as Grant Thornton goes through Blockbuster Canada’s books to value the chain, which has 400 stores and employs about 4,000 people.
The task was made more difficult with chief executive officer Barry Guest, chief financial officer Steve Medlar and controller Jane Brough tendering their resignations days before the company made its announcement, after they found out the U.S. parent had allowed their liability-insurance policies to lapse.
“I take this step with sadness and with deep concern for all the stakeholders, including our loyal employees,” their identical letters of resignation read. “Over the last several months the situation in the U.S. relating to the parent company has adversely affected management's ability to operate in a manner consistent with normal operating conditions and our team has been asked to function in very difficult circumstances.”
The studios are owed $70-million together, and five other secured creditors are listed: Metro News, U.S. Bank National Association, Udios Canada Inc., Universal Studios Home Entertainment Canada, and Wilmington Trust. It is not clear how much each is owed.
There is also a list of 1,309 unsecured creditors. The receiver has determined the company owes at least $3.6-million to that group, although the amount is likely to rise as the receiver gets a better handle on the books.
Maple Pictures Corp., a Canadian film distributor, is shown as being owed $436,227. Credit Bureau Collections is listed with $194,150 owing.
Store Front Awnings Inc., an Orillia, Ont., company that provided outdoor signs for the chain, said the receiver was “a little light” on the estimated $37,000 owed to the company. Store Front has worked with Blockbuster Canada for 15 years and plans to continue providing product through the receivership.
“Whether that’s smart or not, I don’t know,” president Timothy Wood said. “As a small business we took a hit, but it’s still business as usual for us and we plan to continue as a vendor.”
Only a third of the entries on the unsecured creditors’ list have specific amounts associated with their names; the rest are shown as being owed $1 each.Report Typo/Error
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