Movie Gallery gets court approval of restructuring terms

By Reshmi Basu

New York, Nov. 14 - Movie Gallery, Inc. obtained court approval Wednesday of several agreements needed to implement its proposed restructuring, according to a company press release.

As previously reported, Movie Gallery sought approval of a lock up, voting and consent agreement with proposed plan sponsor Sopris Capital Advisors LLC and some of Movie Gallery's second-lien lenders; the restructuring term sheet; the rights offering term sheet; and the plan term sheet.

Through the lock up agreement, holders of a majority of the company's 11% senior unsecured notes and a majority of its second-lien lenders have agreed to support and vote to accept Movie Gallery's plan of reorganization.

Under the proposed Sopris-funded plan, which is subject to court approval, the terms include:

• The company's $325 million of 11% senior notes and other general unsecured claims will be converted into new equity of reorganized Movie Gallery;

• Roughly $72 million of Movie Gallery's $175 million second-lien debt, held by Sopris, will be converted into new equity of reorganized Movie Gallery;

• The company's first-lien debt will remain in place on restructured terms to be agreed upon by Movie Gallery, Sopris and the first-lien lenders;

• The company's remaining second-lien debt will be amended following conversion of the second-lien debt held by Sopris to revise interest rates based on the terms of the restructured first-lien debt and to modify some payment-in-kind interest terms and conditions;

• Sopris will backstop a $50 million equity rights offering to be made available to all eligible holders of Movie Gallery's 11% senior notes; and

• Holders of the company's common equity will receive, under specific circumstances, a minority share of the equity in reorganized Movie Gallery, estimated at about 2% of the total equity interests.

Existing shares of common stock will be canceled.

Movie Gallery, a Dothan, Ala.-based video rental company, filed for bankruptcy on Oct. 16 in the U.S. Bankruptcy Court for the Eastern District of Virginia. Its Chapter 11 case number is 07-33849.

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