S&P lowers Blockbuster

Standard & Poor's said it lowered its corporate credit and bank loan ratings on Blockbuster Inc. to B from BB- and the subordinated note rating to CCC+ from B.

Ratings on the company remain on CreditWatch with negative implications, where they were placed on Aug. 3, the agency noted.

The downgrade is a result of S&P's preliminary rating review following the Aug. 9 release of Blockbuster's second-quarter results and reflects the continuation of extremely weak operating performance due to poor industry fundamentals, the company's decision not to charge late fees and the high cost related to the rollout of its in-store and online subscription programs, the agency said.

S&P said operating margin dropped to 9.5% in the first half of 2005 from 20.5% a year earlier and cash flow protection measures deteriorated as a result of the company's new initiatives and are weak for the rating category.

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