Blockbuster loses $360 million in fourth quarter

Blockbuster Inc. sustained a fourth-quarter loss of $360 million to conclude another bleak year, but the struggling video rental chain has lined up critical financing to buy it more time to adapt to ever-fiercer competition from the Internet and cable services.

Despite the tentative agreements with JP Morgan Chase Bank and two other lenders, Blockbuster warned Thursday that its auditor was likely to raise doubts about the Dallas company’s ability to remain afloat.

Questions about Blockbuster’s survival aren’t new.

This month, rumors swirled that Blockbuster was poised to file for bankruptcy protection to extricate itself from a financial bind created by the August expiration of a $350-million revolving credit line.

The bankruptcy fears have hammered Blockbuster’s already battered stock, which plunged to a new low of 13 cents this month.

The company’s shares climbed 6 cents to close at 89 cents Thursday.

Blockbuster believes it is in better shape now that it has arranged to extend the credit line through September 2010.

To help ensure it has enough cash to pay its bills, management also plans to lower expenses at least $200 million this year by renegotiating store leases and taking a variety of other austerity measures.

The fourth-quarter loss, which translated into $1.89 a share, stemmed mostly from non-cash charges to account for the crumbling value of Blockbuster’s 7,400-store franchise.

The setback compared with a profit of $41 million, or 18 cents a share, a year earlier. Revenue fell 12% to $1.38 billion.