Court Approves Gallery Bankruptcy Plan9 Apr, 2008 By: Erik Gruenwedel
As expected, the U.S. Bankruptcy Court in Richmond, Va., has approved No. 2 DVD rental chain Movie Gallery Inc.'s amended plan for reorganization.
The approval means Dothan, Ala.-based Gallery will likely emerge from bankruptcy protection in the second quarter. An exact date has not been announced.
The decision was expected when more than 90% of Gallery's 1,500 creditors signed off on the plan and the Internal Revenue Service withdrew its objections regarding $7.5 million in outstanding tax-related fees.
The reorganization plan structured last year with Sopris Capital Advisors LLC includes conversion of $325 million 11% senior notes and $72 million of Gallery's $175 million second lien (held by Sopris) into equity in the new company.
Gallery's first lien indebtedness remains in place on the restructured terms. Sopris will invest up to an additional $50 million to purchase new equity of the reorganized company. Existing shares of the Gallery's common stock will be canceled.
“Movie Gallery is now poised to emerge as a competitive and financially stable company,” said co-founder and CEO Joe Malugen, in a statement. “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.”