Movie Gallery Files Plan of Reorganization and Disclosure Statement With Support...

Movie Gallery Files Plan of Reorganization and Disclosure Statement With
Support of Major Constituents

DOTHAN, Ala., Dec. 22 /PRNewswire-FirstCall/ -- Movie Gallery, Inc.
("Movie Gallery" or the "Company") (OTC Pink Sheets: MOVIQ) today announced
that the Company and its debtor subsidiaries have filed a Joint Plan of
Reorganization (the "Plan") and Disclosure Statement (the "Disclosure
Statement") with the United States Bankruptcy Court for the Eastern District
of Virginia, Richmond Division (the "Bankruptcy Court"). A hearing to
consider approval of the Disclosure Statement has been scheduled for January
29, 2008.
The Company also announced that the Plan filed today is supported by both
Sopris Capital Advisors LLC ("Sopris"), in its capacity as the largest holder
of Movie Gallery's 11% Senior Notes and in its capacity as a substantial
holder of claims under Movie Gallery's second lien credit agreement, as well
as the steering committee for holders of claims under Movie Gallery's first
lien credit agreement. Movie Gallery expects that it will ask the Bankruptcy
Court to confirm the Plan early in the second quarter of 2008, and hopes to
emerge from bankruptcy shortly thereafter.
"The filing of our Plan is a significant step towards emerging from
Chapter 11 as a stronger, more competitive company," said Joe Malugen,
Chairman, President and Chief Executive Officer of Movie Gallery. "We have
made substantial progress in addressing our operational and financial
challenges and we are confident that the company will be well-positioned to
operate profitably and create value for all of its stakeholders upon
emergence."
The Plan provides for the following:

-- Conversion of the Company's $325 million 11% Senior Notes and other
general unsecured claims into new equity of reorganized Movie Gallery;
-- Conversion of approximately $72 million of the Company's $175 million
second lien indebtedness, held by Sopris, into equity of reorganized
Movie Gallery;
-- The Company's first lien indebtedness would remain in place on
restructured terms in accordance with that certain First Lien Term
Sheet attached to the Plan;
-- The Company's remaining second lien debt (following conversion of the
second lien debt held by Sopris) would remain in place on restructured
terms set forth in that certain Second Lien Term Sheet attached to the
Plan;
-- A commitment by Sopris to backstop a $50 million equity rights offering
to be made available to eligible 11% Senior Noteholders; and
-- Existing shares of the Company's common stock will be cancelled.

Mr. Malugen added, "I want to thank all of our partners and associates,
whose perseverance and commitment to Movie Gallery has played a significant
role in helping us reach this significant milestone."
The Disclosure Statement filed today contains a historical profile of the
company, a description of proposed distributions to creditors, as well as many
of the technical matters required for the solicitation process, such as
descriptions of who will be eligible to vote on the Plan and the voting
process itself.
Movie Gallery's Plan and Disclosure Statement are available at
www.kccllc.net/moviegallery.
This release is not intended as a solicitation for a vote on the Plan.
About Movie Gallery
The Company is the second largest North American video rental company with
approximately 3,650 stores located in all 50 U.S. states and Canada operating
under the brands Movie Gallery, Hollywood Video and Game Crazy. Since Movie
Gallery's initial public offering in August 1994, the Company has grown from
97 stores to its present size through acquisitions and new store openings.
For more information about the Company, please visit our website:
www.moviegallery.com.
Forward-looking Statements
This press release, as well as other statements made by Movie Gallery may
contain forward-looking statements within the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, that reflect, when made, the
Company's current views with respect to current events and financial
performance. Such forward-looking statements are and will be, as the case may
be, subject to many risks, uncertainties and factors relating to the Company's
operations and business environment, which may cause the actual results of the
Company to be materially different from any future results, express or
implied, by such forward-looking statements. Factors that could cause actual
results to differ materially from these forward-looking statements include,
but are not limited to, the following: (i) the ability of the Company to
continue as a going concern; (ii) the ability of the Company to operate
subject to the terms of the debtor in possession financing facility; (iii) the
Company's ability to obtain court approval with respect to motions in the
Chapter 11 proceeding prosecuted by it from time to time; (iv) the ability of
the Company to develop, prosecute, confirm and consummate one or more plans of
reorganization with respect to the Chapter 11 cases including a plan
consistent with the terms set forth in the Plan Support Agreement; (v) risks
associated with a termination of the agreement and financing availability;
(vi) risks associated with third parties seeking and obtaining court approval
to terminate or shorten the exclusivity period for the Company to propose and
confirm one or more plans of reorganization, for the appointment of a Chapter
11 trustee or to convert the cases to Chapter 7 cases; (vii) the ability of
the Company to obtain and maintain normal terms with vendors and service
providers; (viii) the Company's ability to maintain contracts and leases that
are critical to its operations; (ix) the potential adverse impact of the
Chapter 11 cases on the Company's liquidity or results of operations; (x) the
ability of the Company to execute its business plans and strategy, including
the operational restructuring initially announced in 2007, and to do so in a
timely fashion; (xi) the ability of the Company to attract, motivate and/or
retain key executives and associates; (xii) general economic or business
conditions affecting the video and game rental and sale industry (which is
dependent on consumer spending), either nationally or regionally, being less
favorable than expected; and (xiii) increased competition in the video and
game rental and sale industry. Other risk factors are listed from time to
time in the Company's United States Securities and Exchange Commission
reports, including but not limited to the Annual Report on Form 10-K for the
year ended December 31, 2006. Movie Gallery disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events and/or otherwise.
Similarly, these and other factors, including the terms of any plan of
reorganization ultimately confirmed, can affect the value of the Company's
various prepetition liabilities, common stock and/or other equity securities.
Additionally, no assurance can be given as to what values, if any, will be
ascribed in the bankruptcy proceedings to each of these constituencies. A
plan or plans of reorganization could result in holders of Movie Gallery's
common stock or other equity interests and claims relating to prepetition
liabilities receiving no distribution on account of their interest and
cancellation of their interests and their claims and cancellation of their
claims. Under certain conditions specified in the Bankruptcy Code, a plan of
reorganization may be confirmed notwithstanding its rejection by an impaired
class of creditors or equity holders and notwithstanding the fact that certain
creditors or equity holders do not receive or retain property on account of
their claims or equity interests under the plan. In light of the foregoing,
the Company considers the value of the common stock and claims to be highly
speculative and cautions equity holders that the stock and creditors that the
claims may ultimately be determined to have no value. Accordingly, the
Company urges that appropriate caution be exercised with respect to existing
and future investments in Movie Gallery's common stock or other equity
interest or any claims relating to pre-petition liabilities.
Contacts:
Analysts and Investors: Thomas Johnson, Movie Gallery, Inc., 334-702-2400
Media: Andrew B. Siegel or Meaghan A. Repko of Joele Frank, Wilkinson
Brimmer Katcher, 212-355-4449

SOURCE Movie Gallery

Analysts and Investors, Thomas Johnson of Movie Gallery, Inc.,
+1-334-702-2400; or Media, Andrew B. Siegel or Meaghan A. Repko of Joele
Frank, Wilkinson Brimmer Katcher, +1-212-355-444, for Movie Gallery, Inc.