Actual finance blog

Blockbuster filed for bankruptcy Thursday in its latest attempt to overcome nearly $1 billion in debt.

The movie rental store’s U.S. businesses filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York. As part of its recapitalization plan, Blockbuster (BBI, Fortune 500) said it would attempt to reduce its debt load to $100 million or less.

In a release Thursday, the company said it has secured $125 million in financing from senior bondholders to keep its remaining U.S. businesses open during the bankruptcy proceedings.

Its stores, DVD vending kiosks, by-mail and digital businesses will continue serving customers. But the company will have to implement major cost-cutting measures to repay its investors, said Michael Pachter, an analyst with Wedbush Morgan Securities.

"Blockbuster is under the gun now to generate as much cash as possible," he said. "When they were run by shareholders, the company was making investments and trying to grow. Now that they’ve been seized by creditors… Blockbuster will have to manage the business as lean as possible."

Blockbuster has struggled for survival ever since media conglomerate Viacom (VIA) spun off the company in 2004. As a part of the deal, the company had to pay Viacom shareholders a $5 per-share dividend, and the movie rental giant racked up about $1 billion of debt in the process.

The company also suffered losses from unprofitable stores and increased competition from both Netflix (NFLX) and Coinstar’s (CSTR) Redbox.

Blockbuster’s advantage over its competitors continues to be its selection of new releases and large volume of titles in every store, Pachter said.

But customers who look for lower prices have turned to Redbox, and those who prefer the ultimate convenience of never leaving home often prefer Netflix’s by-mail service, he said.

Blockbuster warned of a possible bankruptcy as early as March of this year.

To help solve its debt problems, Blockbuster began shutting down a third of its 4,500 U.S. stores last year, and now operates about 3,000 locations in the United States.  

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The owner of a Jacksonville electric company has been elected chairman of the Jacksonville Aviation Authority’s board.

Ernest Isaac Jr., owner of Ernie Isaac Electric Co. Inc., succeeds Deborah Pass-Durham, president of Potentiae, a Jacksonville-based consulting firm. Isaac will serve a four-year term starting in fiscal 2011, which begins Oct. 1.

The seven-member board consists of four members appointed by the governor of Florida and three members appointed by the mayor of Jacksonville. Isaac was appointed by Mayor John Peyton.

The other fiscal 2011 board officers include Chester Aikens, a dentist, as vice chairman; Jack Demetree, a Jacksonville real estate developer, as treasurer; and A.L. Kelly, a State Attorney’s Office investigator, as secretary. Previously, Isaac was treasurer of the board and Aikens was secretary.

Other board members include Pass-Durham; Ron Weaver, an insurance executive; and Cyrus “Russ” Jollivette, group vice president of public affairs for Blue Cross and Blue Shield of Florida Inc.

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Consumer prices in Wisconsin and other Midwest states rose 0.2 percent in August from the previous month and rose 1.5 percent from a year earlier, the U.S. Labor Department reported Friday.

The month-to-month increase in the Midwest's Consumer Price Index (CPI) matched a 0.2 percent increase in July from the previous month.

The CPI is a major gauge of inflationary pressures. The index measures the cost of typical consumer expenses, from housing to haircuts.

Nationwide, consumer prices increased a seasonally adjusted 0.3 percent in August from the month before, the same rise as in July, BLS said. Excluding food and energy, the CPI was unchanged in August after rising 0 payday loans lenders.1 percent in July. Year over year, the CPI was up 1.1 percent in August.

Year over year, the Midwest CPI was up 1 percent excluding food and energy. The food index rose 1.2 percent over the 12-month period while energy prices jumped 5.0 percent since last August.

The Midwest region is comprised of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin.

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Aker Solutions has signed a new office lease that will decrease its Houston footprint.

The Norwegian conglomerate will shed 118,000 square feet of space in November when it moves into Pinnacle Westchase, located at 3010 Briarpark Drive in West Houston. Aker Solutions struck a deal last month for 133,000 square feet in the building.

Pinnacle Westchase is just down the street from 3600 Briarpark Drive, where Aker Solutions currently leases 251,000 square feet.

The 471,000-square-foot Pinnacle Westchase, built in 1999, is about to undergo extensive renovations. A total of 210,000 square feet on the top four floors are vacant fast cash now.

Mark O’Donnell of Studley Inc. represented Aker Solutions on the lease. Adam Jackson and Stewart Lyman of Stream Realty Partners LP represented the building owner.

Aker Solutions provides engineering and construction services, technology products and integrated solutions. Following the relocation, the company will have operations in five area locations with a total of 315,000 square feet.

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San Francisco's KIPP Foundation has raised $10 million in matching funds to secure a $50 million federal Investing in Innovation grant.

KIPP Foundation will use the $60 million to double in size over the next 10 years. KIPP is a national network of charter schools. There currently are 99 KIPP schools in 20 states and Washington, D.C., serving 26,000 students from low-income rural and urban neighborhoods.

Sixty percent of the matching funds come from new donors like the Charles and Helen Schwab Foundation, which gave $1 million.

Other major first-time supporters include: New York City's Wallace Foundation ($2 million), the Bezos Family Foundation in Seattle ($2 million), the Charles and Lynn Schusterman Foundation, Robin Hood Foundation and the Chamberlin Family Foundation.

The rest of the matching gifts, $4 million, came from existing KIPP supporters. New Profit Inc. was another major funder with $2 million' the Laura and John Arnold Foundation pledged $1 million and CityBridge and the Ewing Marion Kauffman Foundation also contributed to the match low interest rate personal loans.

The KIPP Foundation was established in 2000 to help grow the KIPP charter school network. Its primary supporters were Doris and Don Fisher, the co-founders of the Gap. Charles Schwab and Don Fisher were longtime friends and business associates, and the Schwab's foundation has long supported other educational causes.

KIPP, along with teach for America which also won $50 million from the government, were the two biggest winners in the Department of Education's $650 million Investing in Innovation grant competition.

The i3 Fund, as this federal program is called, aims to bring new philanthropic interest to education reform.

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Cisco’s rumored bid for Skype would make a great deal of strategic sense for the networking giant, but the pairing faces one major obstacle that might prevent the deal from getting done.

Buying a phone service would put Cisco into competition with its largest customer base: telecommunications companies.

"If they were to own that, they’d scare all of the phone carriers in the world," said Ken Dulaney, an analyst at Gartner. "Skype is in the business of selling cut-rate phone service, and Cisco sells all of its equipment to carriers. That would seem like a bad idea."

Dulaney said he thought the deal was unlikely to happen because of the conflict of interest Cisco would face.

It’s also not the kind of deal that Cisco typically does. Skype’s sales topped $700 million last year, and the company would likely sell for several billion dollars. The vast majority of Cisco’s acquisitions are for much smaller companies. However, when there’s a technology that it really likes, Cisco has been known to make rare exceptions. Last year, it even did it twice, paying $3 billion each for videoconferencing systems maker Tandberg and networking products company Starent Networks.

Other analysts think that the deal is too good for Cisco to pass up.

Skype would seem like a natural fit. Cisco chief John Chambers and his team are making a big push into video and voice-over-IP collaboration tools, and that’s exactly what Skype offers.

TechCrunch reported Sunday that Cisco had made a bid for Skype, citing a source it deemed reliable. The Internet phone company filed last month for a $100 million public offering, but Cisco certainly has the cash to make a better deal. Neither company would comment on the rumors.

Skype would bring to Cisco a customer base of more than 550 million worldwide users. It’s a consumer product, which would play well with Cisco’s attempts to move beyond its networking roots and become a more broad-based, consumer-friendly IT company.

Many Americans already have a Cisco product or two in their home — even if they don’t know it. Last year, Cisco (CSCO, Fortune 500) bought Flip video player maker Pure Digital. The company already makes the popular Linksys-branded Wi-Fi routers for consumers and small businesses, and in March, it unveiled a consumer-friendly wireless router line called Valet.

Skype is attractive bait: Cisco CEO John Chambers has called the collaboration market a $34 billion opportunity, and acquiring Skype would position Cisco even better to cash in on that market.

"The only sticking point to this deal is that Cisco would go into competition with its customers," said Brian White, analyst at Ticonderoga Securities. "Cisco is one of the savviest tech companies out there, so they must be able to find a way where it wouldn’t be so threatening."

Suppressing the threat may not be as big of a deal as it seems, as telecoms are beginning to play nicely with Internet phone services. Verizon allows its customers to use Skype on their smartphones, and a Google Voice app is available on a growing number of smartphones (though, notably, not the iPhone).

Cisco is already involved to some degree in "coopetition" with its customers. The company’s WebEx online conferencing software uses voice-over-IP technology that bypasses the need to use a telephone for virtual meetings.

"There’s a good chance the deal will get done," said Erik Suppiger, a senior research analyst at Signal Hill Capital. "Skype certainly feeds into Cisco’s vision, so the deal makes a good deal of sense." 

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District-based EverFi, a developer of cloud-based financial literacy programs for high school and college students, said Thursday it has raised $11 million in its first round of venture funding.

The Series A round, led by Chevy Chase-based New Enterprise Associates, will allow the early-stage company to grow beyond its handful of employees, hiring aggressively in D.C. and expanding its workforce in the field, said CEO Tom Davidson.

The company until now had been entirely bootstrapped, he said.

EverFi projects more than 2,000 schools across nearly every state in the U.S. will make use of its software.

The company uses a mix of social media, gaming and other simulations to teach students about personal finance, student loans, fraud protection and other subjects.

“There is an enormous crisis in public education,” said Davidson. “What’s being left behind are courses and programs that teach practical life skills.” Instead of public funds, schools’ use of EverFi’s software is paid for by foundations and corporate giving.

Also participating in the round were Palo Alto, Calif.-based TomorrowVentures LLC and D.C.-based Blackboard Inc. CEO Michael Chasen.

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Garmin is recalling 1.25 million GPS devices, most of which were sold in America, because their batteries could overheat and cause fires, the company said Thursday.

The affected units contain batteries made by a third-party supplier, and almost 800,000 were sold in America.

Garmin said it had received fewer than 10 reports involving certain "nüvi" GPS models, and no property damage or injuries occurred. But the company decided to recall the units due to "an abundance of caution."

Only GPS units with model numbers 200W, 250W, 260W, 7xx and 7xxT, where xx is a two-digit number, may be affected free business cards.

Customers should visit www.garmin.com/nuvibatterypcbrecall. If they own recalled units, Garmin will replace the battery and insert a spacer on top of it for free. Owners should not try to remove the batteries on their own.

Garmin (GRMN) said it doesn’t expect the recall to affect its financial performance. Shares fell 2.1% to close at $26.76 in New York.  

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