Movie Gallery's Chapter 22 just turned into a 7. The WSJ reports that
the firm has decided to shutter all of its 2,415 stores and liquidate
completely. Previously, the bankrupt movie rental chain had hoped to
continue operating with a trimmed down asset base, and close just half
of its stores. Alas, the melting of the icecube
could not be stopped. This is nonetheless good news for liquidating
advisor Gordon Brothers which just saw its bill double. As for main
competitor Blockbuster, which itself is on the verge of bankruptcy
(yes, those still do occur in the US, but the business must be
really atrocious plus have no unionized workers anywhere within 50
miles of its operations), it is unclear whether the liquidation of
Movie Gallery will be beneficial or merely too late. Tangentially,
businesses all over America and the world which otherwise would benefit
from the bankruptcy of their weaker competitors and flourish, are
suffering just as much, courtesy of the no-risk/no-failure doctrine recently instituted by the administration, which has made Survival of the Fittest irrelevant.
The Wilsonville, Ore., chain had hoped to restructure in bankruptcy court and continue operating around a smaller set of viable stores. The company employed more than 19,000 people when it filed for bankruptcy.
Reorganizing around smaller core stores was "honestly debated," said a person familiar with the situation. "It just never got any traction."
Movie Gallery, the second-largest movie-rental chain by outlets behind Blockbuster Inc., failed to rebound after it emerged from bankruptcy in spring 2008 owned by private-investment firms Sopris Capital Advisors and Aspen Advisors.
Consumers are now viewing movies streamed online or through on-demand cable services. Netflix Inc. has cut into revenues of Movie Gallery and Blockbuster through its mail-order service and online offerings. In addition, movie-watchers have turned to alternatives such as Redbox, a unit of Coinstar Inc. that operates movie-vending machines in grocery stores, among other places.
Movie Gallery's financial woes trace back to debt it took on acquiring Hollywood Entertainment Corp. in 2005. It filed for bankruptcy in February under the weight of roughly $600 million in debt.
Blockbuster had weighed acquiring some better-performing Movie Gallery stores, but a deal never gained momentum, said the person familiar with the matter. A Blockbuster spokeswoman didn't immediately respond to a request for comment.
Blockbuster is in the midst of negotiating with bondholders over restructuring debt and warned in a recent regulatory filing that it, too, could be forced to seek bankruptcy protection.
We dare you to guess which firm refinanced Movie Gallery in early 2007, with the firm filing for bankruptcy before even one coupon payment on its new notes was ever made.