Video Update Files Reorganization Plan1 Aug, 2001 By: Hive News
Video Update Inc. and its subsidiaries have filed a Plan of Reorganization and Disclosure Statement with the United States Bankruptcy Court for the District of Delaware, according to a press release.
Prior to filing for Chapter 11 bankruptcy protection from its creditors on Sept. 18, 2000, Video Update was the fourth largest specialty retail video chain in North America, with nearly 600 stores in the U.S. and Canada. Since the bankruptcy filing, Video Update has closed more than 200 underperforming stores in the U.S.
In May 2001, Movie Gallery Inc. purchased 92% of Video Update's senior secured debt and, with approval fromthe Bankruptcy Court, extended a $5 million debtor-in-possession or DIP loanfacility.
Under the plan proposed by Video Update, Movie Gallery will receive 100% of the common stock of the reorganized Video Update in exchange for canceling the outstanding debt under the DIP facility. Movie Gallery will also provide Video Update with working-capital financing followingconfirmation of the plan.
The plan also provides for a restructuring of VideoUpdate's senior secured debt and for a cash payment in the satisfaction and release of all general unsecured claims. All existing shares of stock,including any warrants and options, in VUPDA will be cancelled under the Plan.
A hearing on Video Update's disclosure statement is scheduled to be held onSept. 11, 2001.
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