RICHMOND, Va. — Movie Gallery Inc., the owner of struggling movie rental chain Hollywood Video, is planning to close its remaining stores and liquidate as consumers are increasingly get movies through the mail, vending machines and high-speed Internet connections.
The No. 2 rental chain behind Blockbuster Inc. filed a notice with the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond late last week that it will terminate its business operations after defaulting on a loan from one of its creditors.
An agreement filed with the court says the move to close more than 1,900 remaining stores is in the “best interests” of the company and its creditors. The agreement does not specify a time line. It must be approved by a bankruptcy judge.
Phone calls to Movie Gallery and an attorney representing the company were not immediately returned.
The company, based in Wilsonville, Ore., filed for Chapter 11 bankruptcy in February, buckling under the competitive pressure from movies-by-mail service Netflix Inc., DVD kiosk company Redbox and delivery of movies and TV shows over the Internet.
The company first landed in bankruptcy court in October 2007, unable to sustain the debt it took on in its $850 million acquisition of rival Hollywood Entertainment Corp. in 2005. Movie Gallery agreed to assume about $350 million of Hollywood Entertainment’s debt as a part of the deal.
The acquisition made Movie Gallery the No. 2 rental chain in the country behind Blockbuster Inc. but it has been forced to close more than 2,400 of its stores in the past three years, according to court filings. It had since announced plans to close more stores as part of its restructuring.
Phone calls to Movie Gallery and an attorney representing the company were not immediately returned.
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