Video rental company Movie Gallery Inc. is on life support looking for a way to fend off bankruptcy. In a desperation move to save cash, the Dothan, Ala.-based company announced Monday that it will close about 520 underperforming and unprofitable stores.
The closures follow last week's ratings downgrade. Standard & Poor's changed its rating on Movie Gallery to D from CC because the company was unable to make an interest payment on its second-lien term loan. A D rating means that Movie Gallery has defaulted on a loan, and the rating agency believes the company will not be able to meet its other debt obligations. Movie Gallery owes more than $1 billion, most of which is from its purchase of larger Hollywood Entertainment Corp. in 2005.
Followers of the company on Google Finance's discussion board are talking about the possibility of a buyout as well as the divestiture of its Game Crazy video game retail division. However, with the credit crunch keeping buyout firms at bay, there are few buyers for the company, leaving bankruptcy the likely ending. —Gerald Magpily
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Tags: movies, movie, dvd, film, video, rental, entertainment, hollywood
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