Chief Restructuring Officer Resumes Role and Company Retains Financial Advisor
Company Plans to Operate Business Without Disruption
Company to Evaluate Strategic and Restructuring Alternatives
DOTHAN, Ala., July 2 /PRNewswire-FirstCall/ -- Movie Gallery, Inc.
(Nasdaq: MOVI) today announced that, as a result of significantly softer than
expected second quarter results, the Company notified the administrative agent
for its senior credit facility, Goldman Sachs Credit Partners L.P., that it
was not able to meet the financial covenants contained in the facility for the
fiscal quarter ending July 1, 2007. The Company is in discussions with its
lenders regarding the current situation and intends to work closely with them
to develop a plan to remedy the defaults, which may include seeking a waiver,
amendment, forbearance or similar agreement.
The Company also announced today that Bill Kosturos, a Managing Director
at restructuring and corporate advisory firm Alvarez & Marsal, has resumed his
role as Chief Restructuring Officer. Alvarez & Marsal was retained by Movie
Gallery in 2006 to bolster the Company's accounting and finance functions and
assist in improving the Company's overall operating performance. Alvarez &
Marsal's responsibilities have expanded to include helping the Company
evaluate available strategic and restructuring alternatives. In addition to
Alvarez & Marsal, the Company yesterday hired Lazard Freres & Co. LLC to serve
as an independent financial advisor to the Company.
The Company plans to operate its business without interruption while it
engages in discussions with its lenders and evaluates strategic and
restructuring alternatives. To facilitate this, the Company has fully drawn
the remaining availability under its revolver and currently has liquidity
consisting of approximately $50 million of cash on hand. Moreover, the
Company will continue to take actions to conserve cash and improve
profitability. These initiatives include accelerating the closure of
unprofitable stores, consolidating stores in certain markets, realigning the
company's cost structure to better reflect its reduced size, and seeking a
more competitive capital structure. The Company intends to consider a number
of alternatives, including asset divestitures, recapitalizations, alliances
with strategic partners, and a sale to or merger with a third party. The
Company does not intend to comment further publicly with respect to its
evaluation process of strategic and restructuring alternatives until its
conclusion.
Joe Malugen, Chairman, President and Chief Executive Officer of Movie
Gallery, said, "While we expected the rental industry to be soft in the first
half of 2007, our results for the first two months of the year were slightly
ahead of our refinancing plan. However, during the last four months, we, like
most of the industry, have experienced a sharp decline in our rental business,
which has put unexpected pressure on our financial performance. With the help
of our advisors, we are actively pursuing every avenue to restore the
financial soundness of the Company. We are committed to working with our
lenders and other stakeholders in a transparent way to remedy the current
situation."
About Movie Gallery
The Company is the second largest North American video rental company with
over 4,600 stores located in all 50 U.S. states and Canada operating under the
brands Movie Gallery, Hollywood Video and Game Crazy. The Game Crazy brand
represents 648 in-store departments and 17 free-standing stores serving the
game market in urban locations across the Untied States. Since Movie
Gallery's initial public offering in August 1994, the Company has grown from
97 stores to its present size through acquisitions and new store openings.
For more information about the Company, please visit our website at:
www.moviegallery.com
Forward Looking Statements
To take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, you are hereby cautioned that this
release contains forward-looking statements, including descriptions of the
Company's proposed strategic and restructuring alternatives and liquidity
outlook, that are based upon the Company's current intent, estimates,
expectations and projections and involve a number of risks and uncertainties.
Various factors exist which may cause results to differ from these
expectations. These risks and uncertainties include, but are not limited to,
the risk factors that are discussed from time to time in the Company's SEC
reports, including, but not limited to, the Company's annual report on Form
10-K for the fiscal year ended January 1, 2006 and subsequently filed
quarterly reports on Form 10-Q. In addition to the potential effect of these
ongoing factors, the Company's liquidity outlook is subject to change based
upon the Company's operating performance, including as a result of changes in
the availability of credit from the Company's suppliers, and there can be no
assurance regarding the Company's ability to complete any restructuring or
other transaction. The Company undertakes no obligation to update any
forward-looking statements, whether as a result of new information, future
events, or otherwise.
SOURCE Movie Gallery, Inc.
-0- 07/02/2007
/CONTACT: Analysts and Investors, Thomas Johnson, of Movie Gallery, Inc.,
+1-334-702-2400; or Media, Andrew Siegel, of Joele Frank, Wilkinson Brimmer
Katcher, +1-212-355-4449, for Movie Gallery, Inc./
/Web site: http://www.moviegallery.com /
(MOVI)
CO: Movie Gallery, Inc.; Goldman Sachs Credit Partners L.P.; Alvarez &
Marsal; Lazard Freres & Co. LLC
ST: Alabama
IN: FLM ENT REA FIN
SU: FNC RCN
SM-AA
-- NYM122 --
4411 07/02/2007 16:30 EDT http://www.prnewswire.com
