Blockbuster "going concern risk," Netflix waits in wings

Blockbuster announced Tuesday that it expects its auditors to list it as a going concern risk until it meets conditions for refinancing of a $350 million credit facility with J.P. Morgan and others that is due in August. Blockbuster's share price dropped almost 90 percent in March due to speculation the company could go bankrupt under its large debt load and inability to meet the credit facility obligations.

"Even if the amended credit facility is funded upon the terms contemplated, we may not have sufficient liquidity to finance the ongoing obligations of our business, which raises substantial doubt about our ability to continue as a going concern," Blockbuster said in the filing.

If Blockbuster can meet the conditions, it could gain the leeway to turn the company around, as the new credit facility wouldn't come due until September 2010. But if the company fails to meet the conditions and files for bankruptcy, Netflix and its streaming video service could come out big winners.

Netflix has already hinted at strong Q1 subscriber and revenue growth and its largest competitor having to restructure could allow it to gain even more market share. Analysts are already predicting a 9 percent revenue increase for Netflix for the quarter, and if Blockbuster goes belly up soon, Q2 could be even stronger.

For more:
- see the PaidContent article on Blockbuster's debt troubles here 

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