GameStop Vanquishes Ghost of Blockbuster With Debt Redemption
(Bloomberg) -- GameStop Corp. announced plans to retire senior notes due in two years, leaving the company virtually debt free.
The video-game chain said Tuesday it’s redeeming $216.4 million of notes. GameStop also redeemed $73.2 million in debt last month. At the end of January, the company had about $363 million in net debt.
Being debt free is unusual for brick-and-mortar retailers, such as Walmart Inc. and Best Buy Co., which have billions in long-term obligations. Some stores hit hard by the Covid-19 pandemic actually borrowed additional funds last year to survive. GameStop finished its last fiscal year with $755.3 million in lease obligations, according to the company’s annual report.
GameStop is in turnaround mode. It’s long been losing money and has closed more than 1,000 stores. For years, the company has been dogged by talk that it could be the next Blockbuster, the video-store chain that ended up filing for bankruptcy. Such talk will probably die down with the cleaner balance sheet. Its suppliers and partners are also likely to give it more favorable terms.
GameStop is trying to transform from a brick-and-mortar retailer into an e-commerce marketplace competing with Amazon.com Inc. That’s the vision of investor Ryan Cohen, who recently became GameStop’s chairman. He plans to strengthen the company’s customer service and distribution, and increase the range of products it sells. GameStop may raise up to $1 billion via a stock sale for the transformation.
Since Cohen joined GameStop’s board earlier this year, he has brought in new management, including people who worked for him at Chewy, the pet-supply store he co-founded. The company is also seeking a new chief executive officer, Reuters said on Monday.
Shares of GameStop, sent soaring this year by some day traders, rose as much as 2.8% to $145 in extended trading. The 10% bonds due in April 2023 were last quoted at 105.06 cents on the dollar, according to Trace.
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