Like an action hero trapped in a harrowing situation, Movie Gallery Inc. needs
an escape. The No. 2 video rental company found some temporary reprieve,
receiving its third extension Tuesday to meet requirements for a $900 million
loan, which was used to partly pay for its purchase of Hollywood Entertainment
Corp. in 2005.
The new loan deadline is Sept. 30. But experts say Movie Gallery's only way to
solve its problems is to sell part of itself or the entire company to a
competitor. That route may be tough to accomplish: Industry leader Blockbuster
is having trouble turning a profit, and cautious banks have become more
cautious as the credit crunch has slowed down the pace of dealmaking.
Movie Gallery needs to show the lender a record of financial improvement as
well as a restructuring plan by the new deadline or possibly face default on
the loan. The struggling video rental chain was given an earlier extension of
Aug.
27 from the original date of Aug. 14.
The Dothan, Ala.-based company's strategy of purchasing the then-No. 2 video
rental chain, Hollywood Entertainment,
for
$1.2 billion has turned out
to
be a costly mistake that Movie Gallery is now paying dearly for.
—Gerald Magpily
See
Birmingham Business Journal
Tags:
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Movie
Gallery
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