Movie Gallery to continue operating in Chap. 11 bankruptcy, closing 760 stores

Movie Gallery to continue operating in bankruptcy

WILSONVILLE, Ore. — Movie Gallery Inc., owner of struggling movie rental chain Hollywood Video, said Wednesday it will continue to operate while the company is in bankruptcy.

Movie Gallery said the bankruptcy court in Virginia has approved the use of cash on hand for operations. The company will continue to pay employee salaries and benefits, honor customer gift cards and store credits, and pay vendors.

The company filed for Chapter 11 bankruptcy on Tuesday, 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 bankruptcy filing does not include Movie Gallery’s Canadian operations.

Movie Gallery, which also operates stores under the Movie Gallery and Game Crazy names, said it is closing about 760 stores. After the closings, the company will be left with 1,906 locations in the country — more than 1,100 of which would be Movie Gallery stores.

The company, based in Wilsonville, Ore., expects to close more stores as the bankruptcy progresses.

Movie Gallery has hired DJM Realty to help evaluate and renegotiate its store leases. Gordon Brothers Group also was hired to manage the store closings.