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Movie Gallery to auction leases on 508 stores

Wed Oct 17, 2007 6:56pm EDT

LOS ANGELES, Oct 17 (Reuters) - Movie Gallery Inc MOVI.O said on Wednesday it will conduct an auction for leases on 508 stores it had previously earmarked to close in an effort to shave about $70 million in annual costs.

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The No. 2 U.S. video rental company filed for bankruptcy protection on Tuesday, and requested in a motion filed with the U.S. Bankruptcy Court in Richmond, Virginia to schedule the auction for Nov. 15.

The company said rental payments and other costs associated with the stores were an "unnecessary drain" on its resources.

Dothan, Alabama-based Movie Gallery, which operates some 4,430 stores in the United States and Canada, filed for a prenegotiated bankruptcy filing in a plan under which some $400 million in debt will be converted to equity when it emerges from bankruptcy.

In a U.S. Securities and Exchange Commission filing on Wednesday, Movie Gallery also said Chief Financial Officer Thomas D. Johnson Jr. will continue to receive an annual salary of $325,000.

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