Movie Gallery Inc., the second- largest North American video-rental chain, filed for bankruptcy protection for the second time since 2007.The owner of the Hollywood Video chain exited its first bankruptcy in 2008 as Netflix Inc., which rents movies by mail, and Coinstar Inc., operator of Redbox movie-rental kiosks, continued to lure customers away from traditional stores.
Movie Gallery, based in Wilsonville, Oregon, first sought protection in October 2007 following two years of losses in the face of increased competition from Blockbuster Inc., the world’s biggest movie-rental chain, and Netflix.
Movie Gallery listed assets of $892 million and debt of $1.4 billion in its 2007 Chapter 11 petition. In April 2008, U.S. Bankruptcy Judge Douglas Tice Jr. in Richmond, Virginia, approved a recovery plan that gave holders of its senior notes 22.1 percent of their claims. The new filing was also in Virginia.
During the previous reorganization process, the company cut 1,000 stores, mostly through lease rejection and saving more than $130 million in rent. The chain also amended agreements with major film studios and cut its debt, giving the company more liquidity when it previously exited bankruptcy.
Under the confirmed plan, $325 million of 11 percent senior notes, including about $174 million held by Sopris Capital Advisors LLC, and $72 million in second-lien debt was converted into equity in the reorganized company.
Unsecured creditors of Movie Gallery were to receive 6 percent of their claims, while unsecured creditors and holders of senior subordinated notes of the company’s Hollywood Entertainment unit were to get a 12.5 percent recovery.
The new case is In re Movie Gallery Inc., 10-30696, U.S. Bankruptcy Court for the Eastern District of Virginia.
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