This content is from: Innovation
Movie Gallery Debt Jumps On Possible Rights Offering
Movie Gallery's bonds and bank debt traded up after a shareholder proposed reducing the company's bank and/or bond debt through a rights offering.
Movie Gallery's bonds and bank debt traded up after a shareholder proposed reducing the company's bank and/or bond debt through a rights offering. Movie Gallery's term loan "B" traded up a point to the 92-93 range, while its bonds jumped 3 points to 54 1/2. Shareholder George Schultze, managing member at Schultze Asset Management, a distressed debt asset management firm, made the proposal in a filing with the Securities and Exchange Commission. He said he planned to propose steps to Movie Gallery management to improve shareholder value. These would include a rights offering to raise capital to reduce bank and/or bond debt, which would in turn lower its interest expense.
Schultze Asset Management owns 8.6% of the company's common stock, according to the filing. It also owns some of its 11% '12 senior notes. The firm also has a subsidiary, Schultze Master Fund, which owns a further 8.1% of the company's common stock. Schultze did not return a call seeking comment on the proposal. A Movie Gallery spokesman said the company welcomes the perspective of all its shareholders. He added the company is actively looking at ways to strengthen its balance sheet and improve its capital structure. He would not comment further on the proposal.
Movie Gallery's bonds have steadily climbed over the past two weeks from a low of 45. The bonds have been boosted by several steps the company has taken to strengthen its balance sheet, including lowering real estate costs at more than 1,100 video rental stores.