Blockbuster's Debt Risk Improves Following Abandonment Of Circuit City Bid

(financialwire.net via COMTEX) -- CC | Quote | Chart | News | PowerRating -- July 8, 2008 (FinancialWire) Abandonment of its bid to acquire Circuit City Stores (NYSE: CC | Quote | Chart | News | PowerRating) (Current Market Cap: US$387.58 Mil.) has removed some event risk hanging over Blockbuster's (NYSE: BBI | Quote | Chart | News | PowerRating) debt.

The risk of Blockbuster making a renewed bid for the struggling electronics retailer could be negative for its debt if it exposes the video rental chain to long-term store leases in underperforming locations. Blockbuster cited market conditions last Tuesday as a reason for withdrawing its offer for Circuit City, valued at up to $1.3 billion, and said the deal was not in the best interests of its shareholders.

The company's 9% bonds due 2012 rose to 84.25 cents on the dollar on Monday, from 82 cents before the announcement. The cost to insure Blockbuster's debt with credit default swaps dipped to around 1,040 basis points, or $1.04 million per year for five years to insure $10 million in debt, from 1,094 basis points before the news.

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