MAY 20 | Movie Gallery said Tuesday that it has emerged from Chapter 11 bankruptcy protection. Co-founder Joe Malugen is out as chairman, CEO and president, and is being replaced by two executives.
The reorganized company’s new chairman is Neil Subin, who is managing director of Trendex Capital Management, an investment advisor to and general partner of private investment funds focusing primarily on distressed and troubled companies. President and CEO is C.J. Gabriel Jr., former executive VP of marketing, merchandising and supply chain management at Albertsons.
Malugen remains a member of the board of directors.
“I plan to foster a winning culture across our nearly 3,300 retail locations through a strong focus on achieving outstanding results. I am fully committed to enhancing store operations, improving operating metrics, further reducing debt and better integrating this great company’s brands and businesses,” Gabriel said in a statement. “While there is a lot of work ahead, I am excited about all that can be achieved and energized by the tremendous potential I see at Movie Gallery.”
“Gabe knows what it takes to run a successful retail business and understands what actions can be taken in today’s rapidly evolving video rental industry,” said Malugen in a statement. “Movie Gallery is emerging from bankruptcy with a talented new leader committed to meeting the needs of our customers, employees and other stakeholders. I am confident in Gabe’s ability to return the company to profitability.”
The U.S. Bankruptcy Court in Richmond, Va., last month confirmed Movie Gallery’s reorganization plan. The plan involves an exit financing facility providing the company with $100 million, which it closed concurrent with emerging from Chapter 11, and another facility of up to $25 million in letters of credit for vendors.
Effective Tuesday, Movie Gallery’s existing shares of common stock, its 11% senior notes and 9.625% senior subordinated notes were canceled. Under its reorganization plan, Movie Gallery is issuing new common stock and new warrants, which will be distributed to certain classes of unsecured creditors.
The company’s first lien debt will remain in place on restructured terms, along with some of its second lien. About $72 million of the company’s $175 million second lien, held by Sopris Capital Advisors, will be converted into equity in the reorganized company.
Movie Gallery’s $325 million in senior notes and most other general unsecured claims will be converted into new equity of the reorganized company. Sopris will invest an additional $50 million to buy new equity.
The company emerges from Chapter 11 with about 3,300 stores in the U.S. and Canada under the Movie Gallery, Hollywood Video and Game Crazy brands.
Other members of the board include Bob Fiorella, a consultant and studio veteran who most recently was senior VP of finance at 20th Century Fox Home Entertainment; Mark Holliday, partner and portfolio manager at Camden Asset Management LP; Thomas B. McGrath, senior managing director of Crossroads Media and a former Viacom executive; Steven D. Scheiwe, presidentof Ontrac Advisors Inc.; and Richard L. Shorten Jr., founder, principal and managing member of Silvermine Capital Resources LLC.
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