Movie Gallery closer to comeback

Chain could exit Chapter 11 bankruptcy soon

By Cindy Spielvogel -- Video Business, 2/28/2008

FEB. 28 | As court proceedings continue largely in its favor, Movie Gallery is moving closer to exiting from Chapter 11 and implementing its reorganization plan without much interference.

The U.S. Bankruptcy Court in Richmond has approved Movie Gallery’s plans for auctioning off store leases for the most recent round of stores that will be closing. The court also is expected to approve the company’s plans for executive incentive payments for meeting financial performance targets.

Other outstanding matters appear closer to resolution. A February hearing had been scheduled regarding a dispute between Movie Gallery and Boards, the company owned by former Hollywood Entertainment CEO Mark Wattles that continues to operate about 20 Hollywood locations. But that hearing did not take place because the parties are now trying to settle out of court, according to court records.

Both parties agreed to keep the proceedings in the matter confidential.

Movie Gallery had filed a motion to stop licensing the Hollywood name to Boards, and Boards had filed an objection mentioning that Wattles may be involved in a competing reorganization plan.

However, the court has extended the period in which only Movie Gallery may file plans for restructuring, without interference from competing plans, until June 13. And Wattles has since appeared more interested in increasing his stake in Circuit City.

A hearing to approve Movie Gallery’s reorganization plan has been set for April 9.

An objection to the most recent version of the plan was filed by the state of Massachusetts, which wants more than $140,000 in past due sales taxes, plus interest.

However, most previous objections in the bankruptcy case either have been settled by Movie Gallery or overruled by the court.