By : Erik Gruenwedel | Posted: 28 Jan 2010
Financially challenged Movie Gallery has reportedly hired a law firm that specializes in pre-packaged bankruptcies and is taking bids from liquidation companies, including Los Angeles-based Great American, which handled “going out of business” sales for Tower Records and Musicland.
Citing increased debt and a DVD rental market that increasingly is gravitating away from stores and towards by-mail, kiosk and digital distribution, Wilsonville, Ore.-based Movie Gallery, which also owns and operates the Hollywood Video brand stores, is on the verge of filing for Chapter 11 bankruptcy protection, The Wall Street Journal reported Jan. 27.
In addition, the No. 2 DVD rental service plans to shutter two-thirds of its 3,000 stores.
Gallery, which reportedly stopped making lease payments on numerous store locations in late 2009, reportedly hired the law firm Sonnenschein Nath & Rosenthal, which was involved in Gallery’s first bankruptcy in 2007, according to Reuters, which cited internal sources familiar with the situation.
Representatives from Gallery and Sonnenschein were not immediately available for comment. Representatives from Great American declined comment.