Blockbuster Inc. (Cobalt Video as potential acquirers)


Blockbuster, a worldwide leader of in-home movie and game entertainment filed a pre-negotiated Chapter 11 in September 2010, which was subsequently converted to a section 363 sale. Cobalt Home Video Holdco LLC (Cobalt), formed by a group of senior secured noteholders (Monarch, Owl Creek, Stonehill, Varde) emerged as the stalking horse bidder to potentially acquire Blockbuster out of bankruptcy. As a newly formed entity, Cobalt sought assistance in preparing to operate and monetize Blockbuster’s assets.


Zolfo Cooper was retained by Cobalt in February 2011 to provide transaction and business advisory services to prepare for the ownership of the Blockbuster assets, including approximately 1,850 corporate-owned domestic stores, 1,550 corporate-owned international stores, 330 domestic franchised stores and 690 international franchised stores. The charge was to:

  • Assist in developing the go-forward strategy for acquiring, operating and/or monetizing Blockbuster’s various assets including evaluating operating and disposition scenarios for maximizing ROI.
  • Develop the appropriate Cobalt infrastructure, and/or transition services agreements, to facilitate the operation and/or wind-down of the Blockbuster assets.
  • Conduct negotiations with movie studios and other counter-parties with a focus on go-forward operating strategies.


Zolfo Cooper helped develop and assess various operating and wind-down plans to enable Cobalt to make an informed decision on how best to maximize their recoveries.

We successfully positioned Cobalt to establish the infrastructure and support services required to facilitate ownership, operation and monetization of the Blockbuster assets, including:

  • Determining a right-sized employee base and related compensation plans to align employee interests with those of Cobalt.
  • Identifying strategic overhead and store support cost reductions, including an evaluation and significant scale-back of existing information system costs, while maintaining core functionality.
  • Identifying transitional and longer term operating needs in the areas of real estate, insurance, banking, accounting and finance and then preparing the related infrastructure and/or agreements with counterparties and vendors.

Zolfo Cooper was instrumental in developing strategies around executory contracts designed to minimize costs to Cobalt while maintaining necessary third-party services and support.

We represented Cobalt in discussions with major movie studios and others to begin to mend and re-establish those relationships in the event that Cobalt consummated the transaction and decided to continue operations.

Our assistance in assessing strategies for realizing value and preparing for ownership enabled Cobalt to participate confidently in the bidding for Blockbuster’s assets, driving up the sale price significantly above the original stalking horse bid, and thereby enhancing recoveries for Blockbuster lenders.