On March 27, 2007, Standard&Poor's Ratings Services raised the ratings on Dallas-based Blockbuster Inc. to 'B' from 'B-'. This action reflects the improved operating performance and improved credit protection metrics for the company. At the same time, we raised the recovery rating on the bank facility to '3' from '5', indicating the expectation for meaningful (50%-80%) recovery of principal in the event of payment default. Standard&Poor's affirmed the stable outlook. The ratings reflect its participation in the declining video rental industry, extremely competitive home entertainment market, operational challenges as the company diversifies its distribution channels, dependence on decisions made by the movie studios, and highly leveraged capital structure. The movie rental industry continues to decline with
