Movie Gallery Gets Funding Approval15 Nov, 2007 By: Erik Gruenwedel
Bankrupt Movie Gallery Inc. last week received official court backing for a $150 million debtor-in-possession credit (DIP) facility.
The U.S. Bankruptcy Court of Virginia said the Dothan, Ala.-based No. 2 video rental chain could use the funds to pay vendors and employees in addition to providing operational and financial stability.
Gallery listed debt of more than $1.4 billion with assets exceeding $890 million in chapter 11 filings with the bankruptcy court.
The DIP, initially approved by the court Oct. 16 and arranged by Goldman Sachs Credit Partners L.P., was challenged primarily by leaseholders who objected to Gallery's store closure sales.
Gallery earlier this month resolved reservations by the landlords about hours of business, signage and security during the sales, according to court documents.
The court also approved Gallery's fiscal restructuring agreement with Sopris Capital Advisors LLC, including conversion of $325 million 11% senior notes and $72 million of Gallery's $175 million second lien (held by Sopris) into equity in the reorganized movie rental company.
“We are pleased to have received final court approval,” said Joe Malugen, chairman, president and CEO of Gallery. “We are confident that Sopris' support and approval of our DIP financing will significantly accelerate Movie Gallery's emergence from bankruptcy protection.”