Movie Gallery enters forbearance agreement with 11% noteholders, discussing loan default with lenders

By Caroline Salls

Pittsburgh, Sept. 4 - Movie Gallery, Inc. entered a forbearance agreement with holders of a majority of its 11% senior notes due 2012 under which the noteholders have agreed not to act on any defaults until Sept. 30, according to a company news release.

In addition, Movie Gallery said it is in default on its first-lien credit facility because it was unable to meet the facility's financial covenants for the quarter ended July 1, but the default is covered under the company's forbearance agreement with the first-lien lenders.

However, the first-lien default has also prompted a default under Movie Gallery's second-lien credit facility.

The company said it is in discussions with the second-lien lenders about the default.

Movie Gallery is a Dothan, Ala.-based video rental company.

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