It’s official: Blockbuster Video declares bankruptcy

The news widely reported earlier has come to fruition: Blockbuster Video’s Chapter 11 bankruptcy is happening. The bankruptcy protection plan, if approved by the court, would get rid of $1 billion in debt and provide Blockbuster with $125 million in new cash to go forward.

The Dallas Morning News said Blockbuster’s plan is to keep all 3,000 of its remaining company-owned stores and 400 franchise stores open. At the center of the restructuring is persistent billionaire Carl Icahn. He’s bought up 34 percent of the company’s senior secured debt, or just enough to exert control over the other debt holders. Icahn is known for sticking with projects, even if they’re severely troubled. He’s also a major investor in Take-Two Interactive.

Controversial executive Jim Keyes has Icahn’s full support and will remain the company’s CEO. That doesn’t sit well with a lot of investors, who blame Keyes for standing pat while Netflix and Redbox became dominant. After Blockbuster’s bankruptcy announcement, Netflix’s stock hit an all-time high of $163.72.

Read [Dallas Morning News] Also Read [San Francisco Chronicle]