Movie Gallery granted court approval for plan of reorganization

By Jennifer Lanning Drey

Portland, Ore., April 9 - Movie Gallery, Inc.'s second amended plan of reorganization was confirmed Wednesday by the U.S. Bankruptcy Court for the Eastern District of Virginia, according to a company news release.

Movie Gallery expects to emerge from bankruptcy early in the second quarter, according to the release.

The plan provides for an exit financing facility that will provide the company with $100 million, as well as up to $25 million of letters of credit for certain vendors.

"Movie Gallery is now poised to emerge as a competitive and financially stable company," Joe Malugen, chief executive officer of Movie Gallery, said in the release.

"We are very proud of what we have been able to accomplish during our short time in Chapter 11 and look forward to working with all of our stakeholders through the remainder of our restructuring and beyond."

Plan terms

As previously reported, the reorganization plan calls for conversion of the company's $325 million of 11% senior notes and other general unsecured claims into new equity of the reorganized Movie Gallery.

About $72 million of the company's $175 million second-lien debt held by Sopris Capital Advisors LLC will also be converted into equity of the reorganized company.

Sopris has placed $50 million into escrow to support its commitment to backstop the rights offering to be offered under the plan.

The company's first-lien debt and the second-lien debt not held by Sopris will be restructured.

Existing shares of the company's common stock will be canceled.

Movie Gallery, a Dothan, Ala.-based video rental company, filed for bankruptcy on Oct. 16. Its Chapter 11 case number is 07-33849.

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