Retail chain Movie Gallery, parent of game retailer Game Crazy, is set to declare bankruptcy.

A Wall Street Journal report revealed that Movie Gallery, the parent company of game retailer Game Crazy, intends on filing for Chapter 11 bankruptcy within the next month with the hopes of emerging in early 2008. The company’s plan includes converting its bonds into stock and cash to pay part of its second-lien debt. As of July, Movie Gallery carried $1.2 billion in debt consisting of $322 million in bonds, $175 million in second-lien debt and $600 million in first-lien debt. Financial advisor Lazard Freres & Co. and restructuring firm Alvarez & Marsal have been retained to handle the bankruptcy filings.

Shares plummeted 42 percent to $0.26 during Monday’s trading session due to the news. Neither Movie Gallery or its creditor Goldman Sachs have been available for comment.

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