S&P: Hollywood watch to negative

Standard & Poor's said it revised its CreditWatch implications on the ratings for Hollywood Entertainment Corp. (B+ corporate credit rating) to negative from developing.

Also on watch are Hollywood's BB- bank loan rating and B- subordinated debt rating.

S&P said this follows Blockbuster Inc.'s announcement that it has decided not to extend its offer to purchase its closest competitor, Hollywood Entertainment.

Hollywood has agreed to be purchased by Movie Gallery Inc. for total considerations of about $1 billion. The U.S. Federal Trade Commission has already approved the merger.

The negative CreditWatch listing reflects the possibility that ratings could be lowered based on a potential deterioration in Hollywood's financial profile following the merger with Movie Gallery, according to S&P.

Hollywood is already highly leveraged, with total debt to EBITDA at 3.9x before any additional transactions.

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