Flash back with me to July 2, when the company shocked investors by announcing that it was in default of its debt covenants. Since then, the company has issued three different press releases, basically indicating that antsy creditors are tapping on the snooze bar to give Movie Gallery a little more time to get its act together.
Three extensions? Obviously, the creditors realize that their debt will be smacked around in bankruptcy court if they push the issue, but isn't that where this story is heading anyway? Movie Gallery hinted at "exploring strategic alternatives" nearly two months ago, but who would step up to buy a company that one assumes can be had for a pittance in bankruptcy court?
Let's go over the quotes from CEO Joe Malugen that have accompanied each stay of creditor execution:
- "We are pleased to be working cooperatively with our lenders to address the Company's current financial situation. In the near future, we expect to present a longer-term solution to the lender group that will address the operational and financial issues currently impacting our business. Meanwhile, our plan is to operate our stores and, together with our outside advisors, execute on our plan to conserve cash and improve profitability. We appreciate the strong support of our customers, the continued dedication of our employees, and the cooperation of our trusted business partners as we work through this challenging period." -- July 23.
- "Despite the challenging market conditions for Movie Gallery and the entire rental industry, we are continuing to work with our lenders and our outside advisors to help address the Company's current financial situation. We plan to continue to operate the Company without interruption as we work through this challenging period. I would like to thank our customers and our hard working associates and partners, who continue to remain faithful to our Company." -- Aug. 16.
- "We are pleased to have the continued cooperation of our lenders as well as the ongoing support of our valued employees, customers and business partners. This further extension of the Forbearance Agreement allows us time to continue to develop our long-term restructuring plan while we accelerate our current store rationalization process and take other steps to conserve cash and improve profitability." -- Aug. 28.
They're in chronological order, but aren't they all really interchangeable? We know that the old-school model of renting films from a store is fading. Rival Blockbuster
Between the mail-based subscription plans of Total Access and Netflix
Cashing out isn't the only way out. The company has indicated a willingness to close stores. However, every single one of these default extension releases still states that Movie Gallery presides over "more than 4,550 stores."
We need action, Movie Gallery, not words. Nor snooze bars, for that matter.
Further flickering Foolishness:
- Thumbs Down for Movie Gallery
- End Credits for Movie Gallery?
- It's in the Box, Movie Gallery
- Movie Gallery Is on the Move
Longtime Fool contributor Rick Munarriz hasn't stepped into a Hollywood Video store in about a dozen years. He does not own shares in any of the stocks in this story, save for Netflix. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool's disclosure policy is kind, and rewinds.