Blockbuster may put itself up for sale; sources say Icahn will bid

Instead of presenting a reorganization plan to Bankruptcy Court on Friday, Blockbuster Inc. is preparing to ask the court to let the company put itself up for sale.

A group of secured creditors led by Carl Icahn and hedge fund Monarch Alternative Capital are planning to bid for the Dallas movie rental chain, according to sources familiar with the matter.

Not all the secured lenders in the group appear willing to put more money into the company, which has been struggling to evolve in the rapidly changing digital home and mobile entertainment business. A sale seems like the best option left for the company and its 40,000 employees.

Following through with the Chapter 11 reorganization could take more time than Blockbuster has to right the ship. And a sale beats liquidation, which was the fate of its largest competitor, Movie Gallery Inc., which operated Hollywood Video stores.

That option was raised last week in a court filing by an independent movie studio that says Blockbuster hasn’t paid for DVDs of the popular “Twilight” movies.

Halkias writes for the Dallas Morning News/McClatchy.