Moody's may downgrade Movie Gallery

Moody's Investors Service said it affirmed Movie Gallery Inc.'s speculative grade liquidity rating at SGL-4 and placed the Caa1 corporate family rating, B3 probability-of-default rating, B2 senior secured credit facilities (LGD3, 41%) and Caa2 senior unsecured guaranteed notes (LGD5, 88%) on review for possible downgrade following the company's announcement that it would not be able to file it third-quarter 10-Q report with the Securities and Exchange Commission on a timely basis due to a review by its independent auditor into its accounting treatment for end-of-term store lease obligations.

The review for downgrade reflects the risk that the company could be served with a notice of default under its bond indenture as a result of the delayed filing, the agency said. The five-day grace period for the filing the report with the SEC expired on Monday and as a result, the trustee or at least 25% of the bondholders can declare an event of default. The company has 45 days to cure such default.

If Movie Gallery were not able to cure the default within the 45-day grace period, it would trigger the company's cross-default provisions in its bank credit agreement resulting in all the debt becoming due and payable, Moody's said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.