Moody's cuts Movie Gallery to SGL-4

Moody's Investors Service said it downgraded the speculative-grade liquidity rating of Movie Gallery, Inc. to SGL-4 from SGL-3and affirmed the company's long-term debt ratings.

The outlook remains negative.

The downgrade to an SGL-4 reflects Moody's expectation that the company will likely violate its third quarter 2006 financial covenants contained in its recently amended credit agreement without Movie Gallery receiving an additional amendment from its bank group, the agency said.

Affirmed ratings include the company's corporate family at B2, $920 million of senior secured credit facilities at B2 and $325 million of guaranteed senior notes at B3.

The B2 rating reflects Moody's expectation that operating performance will continue to be constrained versus historic levels.

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