Business World

Fitch Ratings agency said it will have to downgrade Blockbuster’s ratings to “restricted default” or “default” if the company fails to make a $42.4 million payment to creditors next month.

The payment was originally due July 1, but Blockbuster received an extension from bondholders who hold 70 percent of the outstanding principal on the senior secured notes, which are due in 2014. Blockbuster now has until Aug. 13 to make a payment.

Fitch said Blockbuster’s ratings are okay for now, but will become a problem if they miss another payment when the extended deadline hits.

Fitch said it will downgrade Blockbuster’s issuer default rating to ‘RD’ from ‘C’ if the company ends up defaulting again or receiving another extension on Aug cash advance in one hour. 13. In the alternative, the ratings giant said it will downgrade the company’s issuer default rating from ‘C’ to ‘D’ if the company ends up filing for bankruptcy or entering into a similar procedure on or before Aug. 13.

New York-based ratings agency Standard & Poor’s also reacted to Blockbuster’s rough Thursday. The company lowered its corporate credit rating on Blockbuster to ‘SD’ from ‘CC’, and the company’s ratings on Blockbuster’s $675 million senior secured notes were downgraded to ‘D’ from ‘CC.’

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