Blockbuster, Inc. and 12 affiliates (the “Debtors”) filed for relief under Chapter 11 of the Bankruptcy Code on September 23, 2010 (Bankruptcy Court for the Southern District of New York, Manhattan Division, Case No. 10-14997). The Debtors have requested authority to file a consolidated list of the 50 largest unsecured creditors in lieu of a separate list for each of the Debtors. The consolidated list is set forth below.

The Debtors Critical Vendor Motion

The list is top heavy with trade debt to the major movie studios, but the Debtors have filed a “critical vendor” motion that might result in the studios being fully paid their pre-petition unsecured claims. The critical vendor motion seeks interim authority within the initial days of the bankruptcy to pay $12.4 million of the listed indebtedness to the studios. The motion also seeks ultimately for the debtors to have authority to pay all undisputed outstanding pre-petition obligations due and owing to the unsecured studios. In order to receive these payments, each unsecured studio must execute an accommodation agreement with the Debtors.

The “Secured Studios” are Not on the List

The amounts owed to the studios could have been substantially higher but for some interesting pre-petition maneuvers. The critical vendor motion explains:

on March 31, 2010, Blockbuster Canada Co. (“Blockbuster Canada”), a non-Debtor foreign affiliate of the Debtors, entered into an agreement (the “Canadian Lien Agreement”) with the Secured Studios whereby Blockbuster Canada agreed to provide a guarantee of Blockbuster’s obligations under certain agreements for the purchase of Product from the Secured Studios (the “Trade Agreements”) secured by substantially all of Blockbuster Canada’s assets to induce the Secured Studios to continue to extend trade credit and provide extended payment terms to Blockbuster Inc. (“BBI”) under such agreements.

As of the filing of the petitions, the Blockbuster owed approximately $68.5 million to these “Secured Studios.”

And Don’t Forget to get a Waiver of Bankruptcy Preference Claims

The Canadian Lien Agreement expressly addresses the potential for bankruptcy preference avoidance actions and provides that the Blockuster, Inc. bankruptcy in the US would constitute and “event of default” which could be cured if an order is entered in the bankruptcy case providing (among other things) for:

a waiver (the “Waiver”) by the Debtors, on their own behalf and on behalf of their non-Debtor affiliates, of all claims and causes of actions against the Secured Studios arising prior to the Commencement Date, including, without limitation, any claims and causes of action arising under chapter 5 of the Bankruptcy Code (collectively, the “Avoidance Actions”);

The List of the Top 50 Unsecured Creditors

Name of Creditor Nature of Claim Contingent, unliquidated, disputed, or subject to setoff Amount of Claim
THE BANK OF NEW YORK MELLON, AS INDENTURE TRUSTEE Bond Debt Unliquidated $315,121,589.67
TWENTIETH CENTURY FOX HOME ENTERTAINMENT Trade Payable Studio Unliquidated $21,603,028.71
WARNER HOME VIDEO INC Trade Payable Studio Unliquidated $18,967,976.91
SONY PICTURES HOME ENTERTAINMENT Trade Payable Studio Unliquidated $13,301,107.55
THE WALT DISNEY COMPANY Trade Payable Studio Unliquidated $8,577,973.72
UNIVERSAL STUDIOS HOME ENTERTAINMENT Trade Payable Studio Unliquidated $8,286,890.21
LIONS GATE Trade Payable – Studio Unliquidated $7,908,719.95
SUMMIT ENTERTAINMENT Trade Payable – Studio Unliquidated $3,003,223.35
STARZ MEDIA Trade Payable Studio Unliquidated $2,794,868.16
AT&T Trade Payable $2,732,933.13
E1 ENTERTAINMENT US LP Trade Payable – Studio Unliquidated $1,849,466.34
DEVELOPERS DIVERSIFIED REALTY CORP Trade Payable – Rent; Lease Termination Agreement Unliquidated $1,245,523.67
COMPUCOM SYSTEMS INC Trade Payable $1,180,613.27
HUGHES ELECTRONICS CORP Trade Payable $1,049,332.20
MAGNOLIA PICTURES LLC Trade Payable Studio Unliquidated $832,413.50
SITEL OPERATING CORP Trade Payable $768,190.67
COCA-COLA ENTERPRISES Trade Payable Unliquidated $703,412.31
PHASE 4 FILM (USA), LLC Trade Payable Studio Unliquidated $698,483.41
STEWART TENANTS CORP. Lease Termination Agreement Unliquidated $518,148.00
IFC (RAINBOW MEDIA ENTERPRISES) Trade Payable Studio Unliquidated $464,509.85
TECHNIMARK INC Trade Payable Unliquidated $453,404.88
IBM CORPORATION Trade Payable $434,021.32
VIACOM Contract Claim Unliquidated|Contingent $405,543.00
REDPRAIRIE CORP Trade Payable $394,770.15
BELL, MARY Severance $363,456.00
REGENCY CENTERS LP Trade Payable Rent Unliquidated $345,396.75
ACXIOM CORPORATION Trade Payable $326,016.98
MERKLE INC Trade Payable Unliquidated $318,154.75
TALEO CORPORATION Trade Payable $312,631.28
PARTNERSHIP MARKETING, INC. Trade Payable $302,139.86
VIVA PICTURES LLC Trade Payable Studio $300,087.20
BIC MANAGEMENT CORP. Lease Termination Agreement Unliquidated $300,000.00
CIRCLE.COM Trade Payable $300,000.00
FIRST LOOK (MILLENNIUM MEDIA SERVICES) Trade Payable Studio Unliquidated $297,940.08
IMAGE ENTERTAINMENT INC Trade Payable Studio Unliquidated $264,193.34
FRITO-LAY INC Trade Payable Unliquidated $263,797.80
MOELIS & COMPANY LLC Trade Payable $254,050.02
NCR CORPORATION Trade Payable Unliquidated $216,793.50
KRUMHOLZ, STEPHEN Severance $199,765.12
LEE, BILL Severance $190,388.00
AUTRONIC PLASTICS INC Trade Payable $178,106.00
GENCORP TECHNOLOGIES INC Trade Payable $176,040.00
AKAMAI TECHNOLOGIES INC Trade Payable $171,955.14
STARRETT CITY ASSOCIATES Trade Payable -Rent Unliquidated $170,554.33
FRANK N MAGID ASSOCIATES INC Trade Payable $166,539.97
MAYA ENTERTAINMENT Trade Payable Studio Unliquidated $164,578.43
GENIUS PRODUCTS Trade Payable Studio Unliquidated $162,203.85

The list does not include: (1) persons who come within the definition of “insider”); or (2) secured creditors, unless the value of the collateral is such that the unsecured deficiency places the creditor among the holders of the largest unsecured claims.

Bankruptcy Rule 1007(d) provides that a debtor shall file “a list containing the name, address and claim of the creditors that hold the 20 largest unsecured claims, excluding insiders.” Fed. R. Bankr. P. 1007(d). In the case of a multi-debtor filing, it is likely that many creditors are shared among certain of the debtors. This is especially the case where the debtors operate as a single business enterprise. Under these circumstances and provided that there is a request for joint administration, it is common for multiple, related debtors to request authority to file a single, consolidated list of their collective largest general unsecured creditors. These requests usually are granted by the bankruptcy court.

The Top Unsecured Creditor List is never to be considered a waiver of any defense to or “allowability” of a listed claim or an admission of the amount of any listed claim. It is common for the amount of the claims to shift and sometimes a claim that is initially is undisputed is later disputed. Creditors should always consult the official claims register.