Game Crazy's parent corporation Movie Gallery officially files for Chapter 11 Bankruptcy.
Movie Gallery announced its motions to file for bankruptcy with the U.S. Bankruptcy Court with the Eastern District of Virginia, Richmond Division on October 16, 2007, not including its Canadian business. The company received interim court approval to access $140 million of its $150 million debtor in possession (DIP) financing. The DIP financing and cash generated from continuing operations will help pay off vendors and employees and provide stability to Movie Gallery's financial restructuring.
The company also received Court approval to pay pre-petition employee wages, health benefits and other employee obligations during its restructuring. Movie Gallery is authorized to pay ordinary course post-petition expenses and continue customer service policies such as merchandise returns without seeking Court approval. The final DIP hearing is scheduled for November 6, 2007.
Joe Malugen, Movie Gallery's Chief Executive Officer, said, "We are pleased with the prompt action by the Bankruptcy Court in approving our first day motions. This approval will allow our stores to continue to operate so that we can continue to serve our customers while implementing strategies to enhance our financial performance."
JP Morgan analyst Barton Crockett said, "The Chapter 11 filings state that the company will evaluate operations and determine if additional closings are appropriate as part of a new management plan. At this point, we believe that Movie Gallery is likely to use Chapter 11 to reject leases and close more stores."