Movie Gallery Files Reorganization Plan
Movie Gallery, the second-biggest U.S. video rental chain, said it filed a reorganization plan in bankruptcy court, and hopes to emerge from Chapter 11 next year.
The filing of the plan comes two months after the company filed for a prenegotiated bankruptcy.
After the company emerges from bankruptcy, it expects to be "well positioned to operate profitably," Joe Malugen, Movie Gallery's chief executive, said in a statement on Saturday.
Movie Gallery, like leading chain Blockbuster , is struggling to cut costs amid intense competition from online rivals like Netflix as well as cable companies.
Before filing for bankruptcy, the company struggled under a massive debt load of more than $1 billion after taking over larger competitor Hollywood Video.
Under the plan, existing shareholders will receive nothing.
The company said in a statement that under the plan, investors in about $400 million of the company's senior notes, unsecured claims, and second-lien debt will receive equity in the new company. That portion of the plan is similar to what the company had expected when it filed for bankruptcy in October.
The company said it plans to ask the U.S. Bankruptcy Court for the Eastern District of Virginia to confirm the plan early in the second quarter of 2008, and hopes to emerge from bankruptcy soon after that.
