Blockbuster reduced the amount of letters of credit it has extended to former parent company Viacom by $50 million today, leaving the company with about $25 million in letters of credit still extended to Viacom and a stock price 32% higher than it was when it opened this morning.
The BBI shares closed $0.29 higher today to end the day at $1.20.
The letters of credit were extended to former owner Viacom in order to cover leases that date back prior to the company’s IPO in 1999 and are still in effect, meaning Viacom would be on the hook. Investors viewed the decrease in potential debt as another sign the company will survive the economic downturn. Last week the company sold a subsidiary in Ireland for $45 million in cash, strengthening its balance sheet.