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Melting Ice Cubes Do Melt: Movie Gallery Preparing For Second Bankruptcy In As Many Years
The company which came to investors two years ago via Goldman Sachs peddling the biggest turd of a business model caked with 10 layers of lipstick for a global refi, and proceeded to file for bankruptcy before even one coupon payment was made (we hope that's a warning to Hexion 1.5 lien investors... wtf is a 1.5 lien anyway?), is throwing in the towel once again, and preparing to file for Chapter 11 for the second time in as many years according to the WSJ. Sucks for investors Sopris Capital and Aspen. We hope they managed to extract some equity out of this brilliant investment while they had the chance.
Movie Gallery has yet to decide on the number of store closures as it
weighs its restructuring options. Closing about 1,000 outlets is one of
several options under discussion. The company has already asked
liquidators to bid for the inventory at an undisclosed number of its
stores, according to those people.
Some more thoughts from the WSJ on the melting ice cube of a model, that somehow bond investors always fall for the "this time it's really different" BS:
A Chapter 11 filing would be Movie Gallery's second in just over two
years. The company filed for bankruptcy-protection from creditors in
October 2007, emerging in spring 2008 with private-investment firms
Sopris Capital Advisors LLC and Aspen Advisors LLC as its principal
owners, according to regulatory filings.
Sopris was instrumental in negotiating the company's 2008
reorganization plan, agreeing to trade its debt for equity and backstop
the sale of $50 million in shares.
The company's financial woes began after it took on too much debt to
acquire Hollywood Entertainment Corp. in 2005 for more than $800
million. Since then Movie Gallery has aggressively tried to cut costs,
closing about 500 stores last year.
Its struggles are similar to those at Blockbuster, which recently
outlined plans to close up to 960 stores. While Blockbuster's auditors
raised concerns about the company's viability back in April, it was
able to tap the high-yield bond market to raise $675 million—twice as
much as it had first sought—to pay off its existing bank debt.
The company's 10K lists the following most recent locations of which at least 1,000 will prsumably be whacked.
- Alabama 157
- Alaska 7
- Arizona 81
- Arkansas 79
- California 307
- Colorado 47
- Connecticut 21
- Delaware 14
- District of Columbia 1
- Florida 155
- Georgia 147
- Hawaii 4
- Idaho 32
- Illinois 89
- Indiana 98
- Iowa 43
- Kansas 32
- Kentucky 76
- Louisiana 48
- Maine 48
- Maryland 41
- Massachusetts 45
- Michigan 94
- Minnesota 65
- Mississippi 69
- Missouri 117
- Montana 22
- Nebraska 28
- Nevada 32
- New Hampshire 17
- New Jersey 26
- New Mexico 34
- New York 84
- North Carolina 143
- North Dakota 9
- Ohio 166
- Oklahoma 66
- Oregon 75
- Pennsylvania 129
- Rhode Island 12
- South Carolina 77
- South Dakota 13
- Tennessee 99
- Texas 317
- Utah 46
- Vermont 6
- Virginia 114
- Washington 109
- West Virginia 28
- Wisconsin 64
- Wyoming 6
What will end up happening is that a lot of strip and regular malls for which Movie Gallery is an anchor or core tenant will be faced with even less rental revenues:
A Movie Gallery bankruptcy-court filing would be yet another blow to
shopping-center owners across the country already suffering from record
vacancies in their strip malls. On a recent conference call with
investors, Brenda Walker, the chief operating officer of mall owner Cedar Shopping Centers Inc., expressed concern about the 24 video-rental retail tenants in its portfolio.
In other words today is another great opportunity to buy REITs as market reality diverges from fundamentals even futher, which in the past 9 months has been the primary reason to acquire these stocks. And if that does not tickle your fancy, then #1 video rental chain Blockbuster should certainly be on your "to buy" list.
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When will the insanity stop? When?
It will take criminal charges to disrupt the pathological cycle of thievery.
Someone needs to set up something like Alcoholics Anonymous, only for buyers of these worthless companies. "Stop me before I buy another worthless company! Please!"
I'm sure Goldman would capture and subvert a group like that; Lloyd is our "higher power".
Only works if the addict reconizes that there is a problem.
They are not there yet.
When people stop praying to the Green God.
No video rental bailout?
Sopris and Aspen are the same guy, Nikos Hecht.
"Turd Ball"--I love it! Also, what time will the market start going back up today?
Half past a monkey's a**. Could not resist.