Movie Gallery plans closure of 'several hundred' more stores
Lenders approved reorganization plan
By Cindy Spielvogel -- Video Business, 1/23/2008
JAN. 23 | Movie Gallery filed a motion with the U.S. Bankruptcy Court in Richmond for permission to spend about $1 million to compensate employees of more stores it plans to close.
The motion didn’t specify how many stores will be closed. But according to a footnote, the company “may close in the near future several hundred underperforming or unprofitable potential store closure locations as part of a ‘Phase II’ store closure initiative” and could “determine to close additional locations” as well.
The motion requested authority “to pay limited liquidation and closure performance bonuses to various district and store-level employees to incentivize them to continue to work” through the store closing period, “notwithstanding that many of these employees will be terminated after completion of the store closing sales.”
The “liquidation and closure performance” bonuses were specified at up to $1 per hour worked per store-level employee beginning when the store closing is announced through the end of the closure, up to $100 per week per store director or store manager, and up to $2,000 per district manager.
The company said it expected to pay severance benefits to individual district managers of up to $5,000 and would definitely not exceed $10,000 for any of them.
The payments, which the company said would amount to as much as $1 million, are similar to what the company paid during its “Phase I” store closing process, according to the motion.
After closing about 70 stores in August, Movie Gallery shut another 520 stores under a Phase I store reduction plan beginning Sept. 25.
The company said its current store total is about 3,640, consisting of Movie Gallery, Hollywood Video and Game Crazy locations.
Movie Gallery also said its lenders, which include Sopris Capital Advisors, have agreed to its reorganization plan.
Officially filed Dec. 22, the plan involves converting debt into equity and the cancellation of existing shares of the company’s common stock.
The bankruptcy court has not yet approved the plan, but Movie Gallery expects it to be confirmed by early in the second quarter.
After missing payments and conducting store closings and other cost-cutting measures in an unsuccessful attempt to avoid bankruptcy, Movie Gallery filed for Chapter 11 protection Oct. 16.
