Company Expects to Emerge From Chapter 11 Early in the Second Quarter of 2008
DOTHAN, Ala., April 9 /PRNewswire-FirstCall/-- Movie Gallery, Inc. ("Movie
Gallery") (OTC Pink Sheets: MOVIQ.PK) today announced that the United States
Bankruptcy Court for the Eastern District of Virginia, Richmond Division (the
"Bankruptcy Court") confirmed Movie Gallery's Second Amended Plan of
Reorganization with Technical Modifications (the "Plan"). Movie Gallery
currently expects to emerge from Chapter 11 early in the second quarter of
2008.
"The Court's confirmation of our Plan is a major milestone for Movie
Gallery," said Joe Malugen, Chairman, President and Chief Executive Officer of
Movie Gallery. "Movie Gallery is now poised to emerge as a competitive and
financially stable company. We are very proud of what we have been able to
accomplish during our short time in Chapter 11 and look forward to working
with all of our stakeholders through the remainder of our restructuring and
beyond. On behalf of my entire management team, we remain grateful for the
unwavering support of our dedicated partners and associates throughout our
restructuring process."
As previously announced, the Plan provides for the following:
-- An exit financing facility providing the Company with $100 million and
a facility providing up to $25 million of letters of credit for certain
trade vendors;
-- The Company's first lien indebtedness will remain in place on
restructured terms;
-- Conversion of approximately $72 million of the Company's $175 million
second lien indebtedness, held by Sopris Capital Advisors, into equity
of reorganized Movie Gallery;
-- The Company's remaining second lien debt (following conversion of the
second lien debt held by Sopris) will remain in place on restructured
terms;
-- Conversion of the Company's $325 million 11% Senior Notes and most
other general unsecured claims into new equity of reorganized Movie
Gallery, warrants for additional new equity of reorganized Movie
Gallery and a share of distributions from a litigation trust
established under the Plan;
-- A commitment by Sopris to invest up to an additional $50 million to
purchase new equity of reorganized Movie Gallery; and
-- Existing shares of the Company's common stock will be cancelled.
Movie Gallery's Plan and Disclosure Statement and related documents are
available at www.kccllc.net/moviegallery.
About Movie Gallery
The Company is the second largest North American video rental company with
approximately 3,490 stores located in all 50 U.S. states and Canada operating
under the brands Movie Gallery, Hollywood Video and Game Crazy. 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:
www.moviegallery.com.
Forward-looking Statements
This press release, as well as other statements made by Movie Gallery may
contain forward-looking statements within the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, that reflect, when made, the
Company's current views with respect to current events and financial
performance. Such forward-looking statements are and will be, as the case may
be, subject to many risks, uncertainties and factors relating to the Company's
operations and business environment, which may cause the actual results of the
Company to be materially different from any future results, express or
implied, by such forward-looking statements. Factors that could cause actual
results to differ materially from these forward-looking statements include,
but are not limited to, the following: (i) the ability of the Company to
continue as a going concern; (ii) the ability of the Company to operate
subject to the terms of the DIP Credit Agreement; (iii) the Company's ability
to obtain court approval with respect to motions in the Chapter 11 cases; (iv)
the ability of the Company to develop, prosecute, confirm and consummate one
or more plans of reorganization with respect to the Chapter 11 cases,
including a plan consistent with the terms set forth in the plan term sheet
attached to the Lock Up, Voting and Consent Agreement dated as of October 14,
2007 or the plan of reorganization attached to the plan support agreement
dated January 22, 2008, both of which have been executed by the Company; (v)
risks associated with a termination of the $150 million secured super-priority
debtor in possession credit agreement and financing availability; (vi) risks
associated with third parties seeking and obtaining court approval to
terminate or shorten the exclusivity period for the Company to propose and
confirm one or more plans of reorganization, for the appointment of a Chapter
11 trustee or to convert the cases to Chapter 7 cases; (vii) the ability of
the Company to obtain and maintain normal terms with vendors and service
providers; (viii) the Company's ability to maintain contracts and leases that
are critical to its operations; (ix) the potential adverse impact of the
Chapter 11 cases on the Company's liquidity or results of operations; (x) the
ability of the Company to execute its business plans and strategy, including
the operational restructuring initially announced in 2007, and to do so in a
timely fashion; (xi) the ability of the Company to attract, motivate and/or
retain key executives and associates; (xii) general economic or business
conditions affecting the video and game rental and sale industry (which is
dependent on consumer spending), either nationally or regionally, being less
favorable than expected; and (xiii) increased competition in the video and
game rental and sale industry. Other risk factors are listed from time to
time in the Company's Annual Report on Form 10-K for the year ended December
31, 2006 and subsequent reports filed with the Securities and Exchange
Commission. Movie Gallery disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events and/or otherwise.
Similarly, these and other factors, including the terms of any plan of
reorganization ultimately confirmed, can affect the value of the Company's
various prepetition liabilities, common stock and/or other equity securities.
Additionally, no assurance can be given as to what values, if any, will be
ascribed in the bankruptcy proceedings to each of these constituencies. A
plan or plans of reorganization could result in holders of Movie Gallery's
common stock or other equity interests and claims relating to prepetition
liabilities receiving no distribution on account of their interest and
cancellation of their interests and their claims and cancellation of their
claims. Under certain conditions specified in the Bankruptcy Code, a plan of
reorganization may be confirmed notwithstanding its rejection by an impaired
class of creditors or equity holders and notwithstanding the fact that certain
creditors or equity holders do not receive or retain property on account of
their claims or equity interests under the plan. In light of the foregoing,
the Company considers the value of the common stock and claims to be highly
speculative and cautions equity holders that the stock and creditors that the
claims may ultimately be determined to have no value. Accordingly, the
Company urges that appropriate caution be exercised with respect to existing
and future investments in Movie Gallery's common stock or other equity
interest or any claims relating to pre-petition liabilities. The proposed plan
of reorganization currently provides that all of Movie Gallery's common stock
and other equity interests will be cancelled for no consideration.
Contacts:
Analysts and Investors: Thomas Johnson, Movie Gallery, Inc., 334-702-2400
Media: Andrew B. Siegel or Meaghan A. Repko of Joele Frank, Wilkinson
Brimmer Katcher, 212-355-4449
SOURCE Movie Gallery, Inc.
-0- 04/09/2008
/CONTACT: Analysts and Investors: Thomas Johnson of Movie Gallery, Inc.,
+1-334-702-2400; or Media: Andrew B. Siegel, or Meaghan A. Repko of Joele
Frank, Wilkinson Brimmer Katcher, +1-212-355-4449/
/Web site: http://www.moviegallery.com
http://www.kccllc.net/moviegallery /
(MOVIQ)
CO: Movie Gallery, Inc.; United States Bankruptcy Court for the Eastern
District of Virginia, Richmond Division; Sopris Capital Advisors
ST: Alabama
IN: FLM ENT OTC
SU: RCN LAW
VD-FB
-- NYW110 --
2457 04/09/2008 17:34 EDT http://www.prnewswire.com
