WSJ: Movie Gallery to Shutter 1,000 Stores14 Jan, 2010 By: Erik Gruenwedel
Movie Gallery, which also owns Hollywood Video, is reportedly eyeing the closure of nearly 40% of its 2,700 U.S. locations, the Wall Street Journal reported Jan. 14.
Citing sources familiar with the downsizing, the Journal said the Wilsonville, Ore.-based No. 2 DVD rental service, which is owned by Sopris Capital Advisors LLC and Aspen Advisors LLC, is trying to restructure operations as it labors with about $600 million in debt.
Gallery also is reportedly considering filing for Chapter 11 bankruptcy protection for a second time in two years. The company filed for bankruptcy in 2007 as a public entity after struggling to absorb nearly $1 billion in debt following an ill-conceived acquisition of Hollywood Video.
Gallery’s fiscal woes are not new. The chain, which has been reticent to discuss its problems, Dec. 15 hired restructuring firm Moelis & Co., which placed a 30-day grace period to negotiate terms with lenders and landlords.
Gallery reportedly has a $100 million senior secured revolver loan due 2011, a $600 million term loan, a $117 million second lien facility due 2012 and a $26 million letter of credit.
Movie Gallery in September said it would close 200 underperforming Gallery, in-store Game Crazy and Hollywood Video locations.
Gallery operates about 680 Game Crazy locations.
Representatives from Gallery and Moelis were not immediately available for comment.
Nonetheless, Gallery’s closures would represent another blow to brick-and-mortar video rental stores, which have come under attack by kiosk vendors offering new release rentals for $1 per day.
Blockbuster last year said it would close nearly 1,000 stores through this year. The No. 1 DVD rental service also is adding 10,000 Blockbuster Express kiosks this year with partner, NCR Corp., for a net gain of 9,000 consumer locations, CEO Jim Keyes reiterated in a recent investor call.