The announcement that Blockbuster Inc. (Blockbuster) has entered into a
Forbearance Agreement with certain of its senior secured noteholders
does not impact Fitch's current ratings on the company. However, the
ratings are expected to be downgraded to 'Restricted Default (RD)' or
'Default (D)' unless the payment default is cured by Aug. 13, 2010.
On July 1, 2010, Blockbuster announced that it has entered into a
Forbearance Agreement with holders of approximately 70% of the
outstanding principal amount of the $675 million 11.75% senior secured
notes due 2014. Based on the terms of the Forbearance Agreement, the
forbearing holders agreed to not take any action to enforce certain of
their rights or remedies under the indenture with respect to the
company's failure on July 1, 2010 to make the amortization and interest
payments. The forbearance agreement is effective until the earliest of
i) Aug. 13, 2010, ii) the occurrence or existence of any default or
event of default other than the Amortization Payment Default or Interest
Payment Default and iii) the occurrence of certain other events
described in the forbearance agreement, such as the payment of any
amounts, including any fees, principal or interest under or in
connection with the senior subordinated notes.
If the default forbearance period expires with the payment default
uncured or if there is an extension of forbearance periods, Fitch will
downgrade Blockbuster's Issuer Default Rating (IDR) to 'RD' from 'C'.
Similarly, if an agreement is reached with the noteholders in terms of a
coercive debt exchange (see Fitch's report 'Coercive Debt Exchange
Criteria' published on March 3, 2009), Fitch will downgrade the IDR of
Blockbuster to 'RD' from 'C' and will subsequently assign a new IDR
based on the company's credit profile and its modified capital
structure. If the company enters into bankruptcy filings or other
similar procedure, Blockbuster's IDR will be downgraded to 'D' from 'C'.
Fitch's ratings on Blockbuster are as follows:
--Long-term IDR 'C';
--$675 million senior secured notes 'CC/RR3';
--$300 million senior subordinated notes 'C/RR6'.
Applicable criteria reports are available at 'www.fitchratings.com':
-- 'Corporate Rating Methodology', dated Nov. 24, 2009;
-- 'Operating Leases: Updated Implications for Lessees' Credit', dated
Aug. 13, 2009;
-- 'Coercive Debt Exchange Criteria', dated March 3, 2009;
-- 'Evaluating Corporate Governance', dated Dec. 12, 2007;
-- 'Liquidity Considerations for Corporate Issuers', dated June 12, 2007;
-- 'Short-term Ratings Criteria for Corporate Finance', dated June 12,
2007.
Additional information is available at www.fitchratings.com.
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Fitch Ratings
Tiffany Co, +1-312-368-3185 (Chicago)
Karen
Ghaffari, CFA, CPA, +1-212-908-0708, (New York)
Cindy Stoller,
+1-212-908-0526 (Media Relations, New York)
cindy.stoller@fitchratings.com