S&P rates Movie Gallery loan B+, notes B-

Standard & Poor's said it assigned its B+ corporate credit rating to Movie Gallery Inc. The outlook is stable.

At the same time, S&P assigned its B+ rating to Movie Gallery's proposed $870 million credit facility due in 2010 and 2011. A recovery rating of 3 also was assigned to the credit facility.

In addition, a B- rating was assigned to the company's proposed $325 million senior unsecured floating-rate notes due 2012.

Proceeds from the transactions will be used to finance the acquisition of Hollywood Entertainment, to refinance existing debt and for general corporate purposes.

S&P said the ratings on Movie Gallery Inc. reflect the risks of operating in a mature and declining video rental industry, the company's dependence on decisions made by movie studios, increased operating risk due to its acquisition of Hollywood Entertainment, its high leverage and the technology risks associated with delivery of video movies to the home.

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