Blockbuster seeks debt overhaul, shares halted

By Emily Chasan and Gina Keating

NEW YORK/LOS ANGELES (Reuters) - Top U.S. movie rental chain Blockbuster (BBI.N) has enlisted lawyers to help it raise capital and refinance debt, but stressed on Tuesday it has no plans to file for bankruptcy.

Blockbuster spokeswoman Karen Raskopf said the company has hired law firm Kirkland & Ellis LLP, but denied news reports that the firm could help Blockbuster file for bankruptcy.

Shares of the U.S. company, which has scrambled to compete with the increasing popularity of online video, plunged more than 76 percent before trading in them was suspended amid the reports.

A source familiar with the matter told Reuters on Tuesday that the struggling, debt-laden firm had hired lawyers and investment bank Rothschild to explore restructuring options -- including a potential bankruptcy filing.

"We do not intend to file for bankruptcy," Raskopf told Reuters.

Instead, the law firm will assist "with our ongoing financial and capital raising initiatives," she said, including restructuring $328 million in debt, comprising a term loan and a revolving credit facility due in August.

If needed, Blockbuster can implement a plan to self-fund its debt through 2009, Raskopf said.

"We look forward to discussing the progress we have made as a company and our refinancing efforts during our earnings call on March 19," she added.