The rental chain declared that  it reached agreement with a group of bondholders holding approximately 80.1 percent principal amount of the company’s 11 3/4 percent senior secured notes on the material terms of a plan to recapitalize its balance sheet and put the firm in a stronger financial position. The recapitalization plan would substantially reduce the Company’s indebtedness — from nearly $1 billion currently to an estimated $100 million or less.

The Chapter 11 is “pre-arranged” so its debtholders have agreed to the terms of the legal action. The case was filed with the U.S. Bankruptcy Court for the Southern District of New York.

Blockbuster will receive “debtor-in-possession” from the bondholders involved. They will trade their other outstanding debt for equity, which means that existing shareholders will get nothing. The stock has traded for pennies for some time.

Blockbuster said it would continue to operate its 3,000 US stores. “All of Blockbuster’s U.S. operations, including its stores, DVD vending kiosks, by-mail and digital businesses, are open and serving customers in the normal course.”

The reprieve is only temporary. Blockbuster has no future, but the debtholders’ only recourse was to make long-shot bet that the firm can come up with some way to salvage its business.

But, the world of video has left Blockbuster behind, or more appropriately, it allowed itself to fall behind. The company stuck with the model of DVD rentals through physical stores. Once it realized that the NetFlix (NASDAQ: NFLX) rental-by-mail business had become the standard, it was too late for Blockbuster. It was also too slow as it tried to get into the business of digital delivery of premium content, a field now crowded by large and powerful companies such as Apple Inc (NASDAQ: AAPL) and Amazon.com (NASDAQ: AMZN)

Blockbuster even missed its chance to enter the DVD kiosk business. Redbox, which created the model, already has kiosks in more than 25,000 locations and require no staff.

Blockbuster may have bought itself a year or two, but that is all it has done. The firm is doomed.

Douglas A. McIntyre

We have taken a look at the moves and the changes in short interest, and then added in on color on each where applicable.

Alcatel-Lucent (NYSE: ALU) is one that just isn’t going anywhere and is in a perpetual turnaround.  And the pressure in Europe which built up probably only added more fuel to the short sellers.  This was one of the worst performing of the ADRs during that troubled period.  before things stabilized. At June 15 settlement date the short interest was 29,654,276 shares, which is up 8.9% from 27,239,231 on May 28.

Ambac Financial Group, Inc. (NYSE: ABK) is one of the ongoing brands which could vanish.  The company has even gone so far as to warn that it could be facing bankruptcy protection.   This period was brutal on the stock price as it went from over $1.00 down to under $0.90 and things have been even worse since the June 15 settlement date at Ambac.  It may even feel like a mystery that the short interest did not grow.  The June 15 short interest was listed as 71,653,753 shares, down by -7.6% from 77,529,115 on May 28.

Blockbuster Inc. (NYSE: BBI) has the two classes of shares, although not for long… It is also trying for a reverse split to keep its shares above the $1.00 NYSE minimum.  The selling was mixed here, which is surprising considering how many traders and companies believe it could implode.  We have it as one of the brands that could disappear.   June 15 “A Shares”: 5,925,502 was up 16% from 5,108,280 on May 28. “B Shares”: 23,666,143 was down -17.2% from 28,588,235 on May 28.

Borders Group, Inc. (NYSE: BGP) is in the doghouse and short sellers believe it could topple into bankruptcy protection.  It is yet another one of our brands that may disappear.  June 15: 4,193,322 was up 21.3% from 3,457,975 on May 28.

Brocade Communications Systems, Inc. (NASDAQ: BRCD) is still one of our “stocks that could double” per our picks, but the company has to find its footing and may need new blood in order for this to happen.  June 15: 18,397,733 was up 5.5% from 17,441,727 on May 28.

Citigroup, Inc. (NYSE: C) is another of our “stocks which could double” and its shares have been bouncing around at all prices with the market.  Pershing Square’s Ackman also disclosed how large his stake was.  Shorts got more aggressive though.  June 15: 497,392,313 shares short was up 14.7% versus 433,618,690 on May 28.

DryShips Inc. (NYSE: DRYS) may have that Greek issue and it may just have that transportation issue.  The shorts came out more against it, although it could always be part of those offerings it loves to do from time to time.  June 15: 35,894,737 shares was up by +11.4% versus 32,224,218 on May 28.

Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM) were two surprises considering the awful woes that have set in after the FHFA is seeking the delisting of the common and preferred shares from NYSE now.  These are also still two candidates for a disappearing brand.  Federal Home Loan Mortgage Corp. (NYSE: FRE) at June 15 was 51,679,910 shares short, down only -0.3% from 51,840,580 on May 28.  Federal National Mortgage Association (NYSE: FNM) at June 15 was 135,468,832 shares short and down only by -0.2% versus the 135,771,853 on May 28.

Nokia Corporation (NYSE: NOK) is another one that the short sellers got right.  It has such a small percentage of smartphones that Nokia is becoming more synonymous with poor peoples’ phones.  Its earnings took shares down hard, so short sellers cleaned house here against the Finns.  June 15: 81,384,713 shares short was up over 27% versus 63,888,089 on May 28.

Palm, Inc. (NASDAQ: PALM) is probably just arbitrage bets and other shorters covering now that it is being acquired.  Palm’s June 15 short interest was 26,680,444 shares, which is down by -14.2% from the 31,109,807 on May 28.

PMI Group, Inc. (NYSE: PMI), the company that borrowers love to hate, was 21,671,711 shares in the short interest on the June 15 settlement date versus 17,975,874 on May 28.

Popular, Inc. (NASDAQ: BPOP) has become much more actively traded than in months before due to that large offering it had.  Much of this change may be covering of bets and exiting arbitrage spreads for those traders.  At June 15 its short interest was listed as 19,168,645 shares, down almost 25% from the 25,518,384 on May 28.

Rite Aid Corporation (NYSE: RAD) is another one of the “stocks which could still potentially double” per our picks, but the company is severely hamstrung and the new blood that has been brought in only just recently saw it post a narrower loss than expected. June 15 short interest was 23,654,512 shares, up 14.2% from the 20,718,870 listed by NYSE on May 28.

Sirius XM Radio Inc. (NASDAQ: SIRI) is a perpetual tug of war between short sellers who believe it can implode and those who want to see it recover to its glory days.  The June 15 short interest was a whopping 227,767,942 shares, up 6.2% from the 214,514,322 counted on May 28.

Sprint Nextel Corporation (NYSE: S) saw many shorts exit here as it has the only real 4G phone per the news.  The problem is that the news is very mixed over how well these are really selling.  Still, short sellers decided that maybe they should not be in the fight.  June 15: 72,613,518 shares in the short interest is high, but that is down a sharp 27.8% from the 100,520,184 shares short on May 28.

United States Natural Gas Fund (NYSE: UNG) is the ETF that traders probably hate more than any other energy commodity ETF product because of the tracking errors and roll-dates that many believe take this one gradually down closer to ZERO… Interestingly enough, the June 15 short interest was 10,833,137 shares, which was actually down by -5.9% from the 11,512,906 counted on May 28.

Vonage Holdings Corp. (NYSE: VG) is another highly controversial low-priced stock that has millions of customers and has historically seen many traders and investors bet against its survival.  The short interest here is muted compared to the past, and the stock was actually hitting 52-week highs recently.  The June 15 short interest was 2,605,495 shares, down by -8.7% from the 2,852,429 shares counted on May 28.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

However, short sellers moved out of the shares in several other weak companies. The short interest in Sprint-Nextel (NYSE: S) dropped 28% to 76.2 million shares. Shares short in airline AMR (NYSE: AMR) were down 18% to 32 million. The short interest in beleaguered financial firm Ambac (NYSE: ABK) dropped 8% to 71.7 million shares. Shares short in Blockbuster (NYSE: BBI) dropped 17% to 23.7 million. The short interest in Monster Worldwide (NYSE: MWW) fell 17% to 20 million. Shares short in Yahoo! (NASDAQ: YHOO) fell 13% to 32.2 million. And, shares short in Qualcomm (NASDAQ: QCOM) fell 4% to 22.9 million.

Shares sold short in Microsoft (NASDAQ: MSFT) rose 42% to 80.6 million. Shares short in Cisco (NASDAQ: CSCO) rose 25% to 50.4 million. The short interest in Ebay (NASDAQ: EBAY) rose 66% to 44 million. Shares sold short in Oracle (NASDAQ: ORCL) were up 12% to 27.8 million.

The short interest in Citigroup (NYSE: C) rose 14% to 487 million shares. Shares short in General Electric (NYSE: GE) rose 23% to 73.8 million. The short interest in AT&T (NYSE: T) was up 11% to 61.4 million.

Sources: NYSE and NASDAQ

Douglas A. McIntyre

24/7 Wall St. regularly compiles a report of brands that are likely to disappear in the near-term. Last April, and again in December, we published our findings. Usually, it would take a full year before such a list could be compiled again. However, the current economic climate has accelerated this process and a majority of the brands on the first two lists are either gone, have been acquired, or have filed for bankruptcy. Last April, 24/7 Wall St. identified twelve brands that our analysis showed would disappear, including Saturn, Borders, Palm, AIG and Eddie Bauer.

We also accurately identified brands that would disappear in our December list.

The first brand on that list was Newsweek. The publication was founded in 1933. Parent firm, The Washington Post Company (NYSE: WPO), has given up on the magazine, which it has owned since 1961. None of the buyout offers made thus far seem to be serious. Closing magazines was in vogue during the depths of the recession. Newsweek has little chance of staying open.

Another brand on last year’s list was Palm. Its sales were so slow and its new mobile device, the Pre, sold so poorly that Hewlett-Packard (NYSE: HPQ) was able to buy Palm for next to nothing. The Palm brand is so badly damaged that HP is likely to keep the technology and kill the name.

Borders Group (NYSE: BGP), which was also on the December list, is still in business – barely. The company has closed most of its Waldenbooks stores, gone through serial layoffs and has now had two consecutive majority shareholders. It recently fired a number of the people in its UK operation. Borders is burdened with $300 million in debt, and its stock recently traded as low as $.35. The company is outmatched by larger and more successful competitors, Amazon.com and Barnes & Noble.

Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) were on our earlier list. We were wrong about them closing. They have become “wards of the state,” kept open by the US government to help maintain an orderly mortgage market. It is estimated that keeping the two firms open costs taxpayers about $7 billion a month. The companies lost a combined $291 billion in 2009. Members of Congress are pushing to have the companies shuttered. It is almost certain that they will not be around, at least in their current forms, much longer. One estimate is that the cost of supporting the two companies will total $1 trillion, making it more likely that they will be closed in the favor of other alternatives to maintain the mortgage market.

Another financial firm on our list, bond insurance firm Ambac (NYSE: ABK), warned last week that it may have to file for bankruptcy in the near-term. That news caused the stock to drop from a 52-week high of $3.39 to a $.51.  Ambac’s stock traded at $96 three years ago.

Sun Microsystems failed so badly in its core server market that it was forced to downsize to the point where it was not a viable standalone company. It was sold to Oracle (NASDAQ: ORCL) for a fraction of what it was worth three years ago.

We also completely missed the mark on a few companies.  They include Eastman Kodak, Motorola, and The GAP’s Old Navy brand.

With a number of the brands on the December list either gone or on a short-term path to extinction, 24/7 Wall St. has put together the latest version of the Ten Brands that Will Disappear. To qualify, we expect that brand to be gone by the end of 2011, or for its parent to be sold or go into Chapter 11.

Actel Corporation (NASDAQ: ACTL) is down after it announced that Q2 revenues are expected to come in at the low end of the previous guidance of +8% to +12% sequentially.  Shares are trading down 3.5% at $13.61 on very thin trading volume, and its 52-week range is $10.03 to $17.10.  Average daily volume is only 71K shares.

Blockbuster Inc. (NYSE: BBI) is just about dead if the news is accurate.  It is still reportedly considering bankruptcy.  As the stock has already compressed so much, Blockbuster shares are down 5% at $0.26 and the 52-week range is $0.24 to $1.56.  Hardly a blockbuster.

BP plc (NYSE: BP) is becoming a permanent member of top day trader alerts, probably because they are in the soup over and over.  Shares are lower on talk of a dividend cut, talk of $10 billion or more being demanded to be put in escrow, and the notion that BP said it has some 51,000 claims amounting to $1.6 billion so far.

Cell Therapeutics, Inc. (NASDAQ: CTIC) is one of the top gainers this morning on a press release that the Italian Medicines Agency approved NerPharMa to manufacture Cell Therapeutics’ drug Pixantrone in the European Union.  This was also an UNUSUAL SUSPECT stock over the weekend as we noted “this has a chance for a trader-interest revival after the penny stock imploded earlier this year” due to new news.  Shares are trading up 18% at $0.53 on well over 500K shares, although the stock was up over 20% a few minutes before.

Ceragon Networks Ltd. (NASDAQ: CRNT) is up after getting a $9 million follow-on order from teh Philippines for a 2G/3G backhaul expansion.  While the gain is on thin volume, the shares are up 7.3% at $7.78 versus a 52-week range of $6.14 to $13.29.

Onyx Pharmaceuticals Inc. (NASDAQ: ONXX) is trading lower after it and Bayer’s Nexavar, a potential lung cancer treatment, failed to meet some endpoints in a Phase III trial.  Shares are down 5% at $21.66, which will be a new 52-week low if it holds as the prior range was $21.77 to $36.75.

Rosetta Resources, Inc. (NASDAQ: ROSE) is trading up, albeit a bit smaller than expected in pre-market trading after being featured in our UNUSUAL SUSPECTS.  Barron’s called it a BUY with shares possibly doubling. Monday’s pre-market trading has shares up 3% at $26.00 on close to 20,000 shares.

THQ Inc. (NASDAQ: THQI) is getting clipped after lowering guidance for Q1: it now sees an adjusted loss of -$0.20 to -$0.30 EPS versus a previous outlook of a breakeven with sales of $155 to $165 million versus its prior forecast of $190 to $200 million.  The video game publisher’s shares are down 7.2% at $5.15 on fairly thin volume, and its 52-week range is $4.12 to $8.82.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Sponsor: 3 Recovery Stocks to Own Now – Get the names of the best cheap stocks to rebuild your wealth in 2010 and beyond.

Now, the company is fighting with bondholders over terms for restructuring Blockbuster’s debt of about $900 million. The dispute, according to The Wall Street Journal, involves a group of bondholders who are willing to eliminate $300 million in debt for a “lion’s share” of Blockbuster’s new equity. The sticking point is that the group is willing to invest $30 million in new money in the re-tooled Blockbuster, but Blockbuster wants $100 million.

The company is also negotiating with bondholders who are owed around $630 million, trying to get the creditors to cancel $20 million in quarterly amortization payments. Apparently, these bondholders, who are senior to the other group, want their “lion’s share” of the company as well in exchange for eliminating these payments.

A third option is that NCR Corp. (NYSE:NCR) would save the day with an investment in Blockbuster. NCR makes the video rental machines for Blockbuster, which has installed more than 4,000 of the machines as of the end of the first quarter. NCR has offered no comment on the idea.

Blockbuster is also the target of an angry shareholder who is putting himself up for a board seat. The shareholder, Gregory Meyer, owns 620,000 shares of Class A common stock (0.44%) and 25,000 shares of Class B common stock. Blockbuster issued a statement this week saying that electing Meyer “would be a mistake.”

It wouldn’t be the first mistake that the company’s shareholders have made. Blockbuster shares are trading today at $0.35. Tell me that’s not the result of a series of mistakes.

Paul Ausick

Reuters:   Geithner went to Europe to press for more reform.

Reuters:   The Qatar sovereign wealth fund wants to buy shares in Citigroup, Inc (NYSE: C).

Reuters:   Oil rose on indications that US supply will tighten.

Reuters:   Dell Computer’s (NASDAQ: DELL) tablet PC has launched.Reuters:  The government is looking into Apple Inc.’s (NASDAQ: AAPL) tactics in selling music.

Reuters:   Blockbuster’s (NYSE: BBI) talks with creditors are in trouble.

WSJ:   Bank of America (NYSE:  BAC), Citigroup, and Deutsche Bank (NYSE: DB) have cut liabilities temporarily just before reporting earnings.

WSJ:   The Fed is fighting more scrutiny, which is  a part of financial legislation.

WSJ:   Very few lenders will risk putting money into European banks.

WSJ:   Hewlett-Packard (NYSE: HPQ) topped International Business Machines (NYSE: IBM) in server sales.

WSJ:   Amazon.com (NYSE: AMZN) said its Kindle will continue to focus on being only an e-reader.

WSJ:   Video game consoles are threatening pay TV.

WSJ:   Medtronic (NYSE: MDT) says its stents perform as well as those sold by Abbott Labs (NYSE: ABT).

WSJ:   China’s economic power allows it to buy oil more cheaply than nations in the West.

WSJ:   Standard & Poor’s will not set new ratings for US banks until financial reform legislation is set.

NYT:   Problems with the European economy may hurt the US economy.

NYT:   Nissan says its electric car is sold out for the year.

FT:   BP’s chairman has begun to take on US critics.

FT:   Asian investors are stepping away from euro bonds.

FT:   The cost of swapping euros for dollars rose.

FT:   Obama pushed his small business aid plan.

Bloomberg:   Italy adopted $30 billion in budget cuts.

Bloomberg:   Obama will revamp drilling rules.

Douglas A. McIntyre

It was just yesterday that shares hit a new 52-week and all-time high of $119.50, but shares closed down at $110.01 on the intra-day downgrade.

Citigroup cut Netflix down to a “Hold” from Buy due to target price and valuation (target $110).  Merriman Curhan Ford cut the rating to Neutral from Buy on the same reasoning this morning.

Blockbuster Inc. (NYSE: BBI) earnings were a disaster and shares are down 21% at $0.39 in trading this morning.  Our own take is that if Amazon.com really wanted to buy Netflix it should have done so last summer.  A Netflix acquisition would only be combining two high valuation and premium multiple stocks even if it would add in a solid business that could easily be consolidated in the Amazon network.

Netflix shares are trading down 4.78% at $104.75 on the two analyst downgrades this morning.  At 9:25 AM EST we have seen only about 45,000 shares trade hands.

JON C. OGG

Reuters:   Oil dropped to a three-month low based on demand.

Reuters:   Facebook will hold a staff meeting on privacy.

Reuters:   Video game sales plunged in April.

WSJ:   The Goldman Sachs Group (NYSE: GS) is trying to help a Chicago group that loans to the poor.

WSJ:   The costs of the A380 hurt that financial results of EADS.

WSJ:   Regulators are investigating whether banks bet that municipal bonds would fail.

WSJ:   The CEO of BP plc (NYSE: BP) says his company could have done more to prevent a spill in the Gulf.

WSJ:   Large sums of capital are being invested in China.

WSJ:   Attorneys are fighting for the lead in the Toyota Motors (NYSE: TM) case.

WSJ:   The yen’s strength is hurting exporters.

WSJ:   Portugal will increase taxes and cut civil servant salaries.

WSJ:   Mahindra & Mahindra of India will enter the US car market.

WSJ:   Wireless rivals are increasing pre-paid services.

WSJ:   Video game sales in April dropped more than any month since July.

WSJ:   Nissan may press for expansion in China.

WSJ:   Blockbuster Inc.  (NYSE: BBI) posted weak earnings.

WSJ:   A Chinese energy firm will begin explore oil sands in Canada.

WSJ:   Rising inflation in Europe may hurt bailouts.

WSJ:   Industrial stocks like GE (NYSE: GE) and Honeywell still face headwinds.

WSJ:   E*Trade (NASDAQ: ETFC) shareholders approved a reverse split.

NYT:   The Minerals Management Service allowed companies to drill in the Gulf without permits.

NYT:   The size of the oil spill was underestimated.

NYT:   Cellphones are now used more for data than for voice.

NYT:   Oil laws will hurt Portugal’s efforts to balance it budget.

NYT:   It looks more likely that banks will settle charges about improper conduct.

FT:   Restrictions on hedge fund may cause tension between the US and EU.

FT:   Worries about the bailout have hurt the euro.

FT:   Adobe Inc. (NASDAQ: ADBE) is battling back against Apple Inc. (NASDAQ: AAPL) over Flash.

Bloomberg:   Morgan Stanley (NYSE: MS) bet against CDOs that it invented.

Bloomberg:   US firms have been able to dodge $60 billion in taxes by moving money overseas.

Bloomberg:   Volcker says the debt crisis may cause Europe to “disintegrate”

Douglas A. McIntyre

Worldwide same-store sales for the first quarter of 2010 declined 7.1%.

The stock fell over 17% after hours.

Blockbuster’s initiatives to save itself are almost certainly too little, to late. In a partnership with NCR it has opened 4,000 rental kiosks. Redbox has over 25,000. Blockbuster also has an untried partnership to download content to T-Mobile’s HTC HD2 smart-phones. Premium films and TV have been available on handsets for several years, but the business has been slow to gain ground.

Blockbuster is still burdened by its operation of 4,914 stores. Its major competition is from relatively lower cost DVD-by-film, digital download, and kiosk operations.

What was true last year is still true at the end of its most recently reported quarter. Blockbuster has no future.

Douglas A. McIntyre