Troubled retailer Blockbuster has been given clearance by the US courts to go ahead with its proposed $290m (£180m) sale to investors, overcoming fears that the group may file for Chapter 7 liquidation.

The retailer had come under pressure from creditors, including a growing number of movie studios that were owed money by the chain. However, following negotiations in court, creditors have worked out an arrangement to benefit from proceeds of the sale, meaning they will continue to ship DVDs to Blockbuster stores.

The company is hoping to sell its operations to an investment group including private equity and hedge funds Monarch Alternative Capital, Owl Creek Asset Management, Stonehill Capital Management and Varde Partners.