Creditors of Blockbuster Inc. received court approval to investigate events leading to the movie rental company's bankruptcy, a reorganization that will hand control to billionaire Carl Icahn.
Judge Burton Lifland approved the request by the official committee of unsecured creditors to probe the circumstances surrounding the negotiation of the deal with Icahn, which was drafted just prior to Blockbuster's bankruptcy filing in September.
Unsecured creditors wanted to look into the plan because it would give them what they called a minimal return at best. Shareholders would get nothing.
That agreement proposes to turn the equity of the top U.S. video chain over to a group of senior bondholders, including Icahn, in return for what they are owed.
Icahn and his fellow bondholders also put up $125 million to fund Blockbuster's operations while in bankruptcy, which put them ahead of others in line for repayment.
The agreement with Icahn also puts the company on a relatively tight schedule for its reorganization. For example, unsecured creditors have to file any legal action that stems from their investigation by Dec. 26.
Blockbuster filed for bankruptcy in September in U.S. Bankruptcy Court in Manhattan.
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