After reports began to surface yesterday that Blockbuster was hiring an outside firm to discuss the possibility of a bankruptcy filing, their stock plummeted over 75% before the market close. Later that day, reports (CNN Money) came out that Blockbuster hired Kirkland & Ellis for "assistance with our ongoing finance and capital raising initiative" according to the Blockbuster spokesperson Karen Raskopf.
Having experienced a company going through bankruptcy I see this as the standard "we are not filing for bankruptcy" speech that really means: "we don't want to file for bankruptcy and are looking for a way out, but are at the point where we have to plan for it in case the banks don't give us another lifeline (loan covenant revisions). All bankruptcy firms such as Kirkland & Ellis look for alternatives to Bankruptcy, but you don't hire them unless you're on the brink.
Blockbuster has become mostly irrelevant in the movie rental market with steep competition from Netflix, Redbox and other movie vending services, and even online streaming. In the current market environment, I'm betting that Blockbuster has very little time left before bankruptcy. Time will tell.