Movie Gallery Files for Bankruptcy, Plans to Shut Down

Movie Gallery, the retail movie rental company has finally decided to shut down for good. The company filed for bankruptcy for the final time in February at US Bankruptcy court in Virginia. Movie Gallery, a company that began operations in Alabama, has twice sought bankruptcy protection during its glory days and this time has decided to wind down its business in the best interests of all parties.

According to the 2010 BellSouth Yellow Pages, the company had been operating about 40 stores in the Birmingham metro area in the last year or so. However, many of those stores have since closed for business. All attempts to contact the company have only met with answering machine messages stating that Movie Gallery was no longer accepting inquiries from the media.

Movie Gallery was once regarded as a lucrative stock market investment, with its stocks climbing to a peak of $33.43 per share on June 20, 2005. But thereafter, the value of its stocks took a major tumble until it was de-listed on May 20, 2008, at which stage its value fell to below $0.01 per share.

At its peak in June 2005, Movie Gallery had been running 176 stores in Alabama. The company, founded in Dothan in the 1980’s has since moved its base to Portland, Oregon. On February 2, it filed for bankruptcy for the second time and final time since 2007 while still operating almost 2,000 stores across the country. In its Chapter 11 bankruptcy papers, the company listed its assets at as much as $50 million while its liabilities amounted to between $500 million and $1 billion.

Movie Gallery’s mercurial rise was matched only by its own rapid freefall. In the 1990’s when Americans preferred method of entertainment was to grab a movie for the weekend to watch at home, Movie Gallery’s business flourished. The company’s Initial Public Offer (IPO) was $14 per share in 1994. At that time, the company operated 324 stores in 9 states. By 2003, Movie Gallery had expanded astronomically after buying a host of small mom-and-pop stores and small rival movie rental chains and had 2,200 stores nationwide generating $700 million in sales per year. In two years time, their shares would hit its peak at $33.43 per share, giving original shareholders of the IPO more than double returns on investments.

But soon after that, trends changed with online companies like Netflix offering unlimited movies through the mail for a flat rate with no late fees. Then retail giants like Wal-Mart started selling movies for little more than the cost Movie Gallery was charging to rent them. In 2005, the company also went into heavy debt to the tune of $1.2 billion when it bought over Hollywood Entertainment, a rival company from the west coast.

By that time, the writing was on the wall and Movie Gallery never recovered from its huge debt as profits dwindled amidst depleting revenue.

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Starwood Looking to Buy Bankrupt Extended Stay

Starwood Capital Group is hoping to ink the deal to buy the Extended Stay Inc. chain of hotels currently under Chapter 11 bankruptcy soon. Starwood has been arranging for its financing with Goldman Sachs Group Inc. and the two sides are close to terms on its $2.2 billion financing. About $1 billion of the money would come from Goldman’s partner, Citigroup Inc. If the deal goes through, it would be the largest mortgage-debt financing on a real estate venture since the height of the credit crisis 2 years ago. It also indicates that big banks like Goldman Sachs are starting to resume business in commercial real estate financing just as the property market struggles to find its feet after its worst recession in decades.

There are presently two competing sides interested in buying the 680 room Extended Stay hotel chain, the other being Centerbridge Partners LP. Centerbridge Partners has joined forces with Paulson & Co. and Blackstone LP and together have also been arranging their own financing to purchase Extended Stay.

The bankruptcy judge presiding over Extended Stay’s Chapter 11 case has set May 17 as the deadline for all prospective buyers to submit their proposals to acquire the hotel chain. A public auction has been scheduled for May 27 when more prospective buyers are expected to enter the fray.

Such acquisitions like Extended Stay’s is now becoming more common as investors dig into their financial reserves to buy up commercial properties whose prices have begun to stabilize after bottoming out at about 40% off its peak in August 2007. Goldman Sach’s financing for Extended Stay is a major indication that other well-capitalized banks will follow suit into financing the loan-sale market or commercial-mortgage backed securities (CMBS).

Extended Stay Inc. filed for bankruptcy protection in June last year with debts of $7.4 billion, largely arising from the $8 billion loan that owner David Lichtenstein used to purchase the hotel chain in 2008. The budget hotel chain has raised the interest of many investors looking for a bargain buy since its bankruptcy. Such interest has been heightened since the US hotel market began to stabilize as the economy recovers.

Both the Starwood and the Centerbridge groups are likely to say that each can provide better value to Extended Stay. Bankruptcy experts say that the bidding war is good for Extended Stay’s creditors, among whom are the Federal Reserve Bank, who inherited $900 million Extended Stay debts through a fund called Maiden Lane, a result of the collapse of Bear Stearns in 2008.

Extended Stay will ultimately choose the winning bidder subject to the approval from the bankruptcy court.

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Greece Ready to accept EU-IMF Plan

Two recent opinion polls showed that most Greeks agree that the country’s government has to adopt the austerity measures imposed by the European Union (EU) and International Monetary Fund (IMF) in exchange for bailout funds to avoid national bankruptcy.

The Greek government coffers have no money to meet its obligations largely due to endemic corruption, cumbersome bureaucracy and government largesse. The country is only one week away from defaulting on bonds worth €8.5 billion maturing May 19 for which it does not have the money to pay. Despite widespread violent protests last Wednesday, a majority of the people have begun to realize that they have to bite the bullet if their country is to survive.

In a poll conducted by the Proto Thema newspaper, 54.2% of respondents say they are willing to go along with the austerity measures imposed by the EU-IMF plan rather than see their country go bankrupt. On the other hand, 33.2% of those who responded to the poll feel the government should not accede to getting outside help but should rather go it alone. The poll also shows that 51.4% of the public are reasonable enough to accept that more personal sacrifices have to be made to overcome the economic crisis while only 28% believe that having strikes will solve the problem.

Another poll was conducted by the Sunday edition of the To Vima newspaper. This poll showed similar results in more than half of Greeks (55.2%) feeling that the EU-IMF austerity measures are necessary and they will ‘accept’ or ‘probably accept’ them. 44.6% of respondents in this poll do not accept the EU-IMF conditions. However in contrast to the other poll by Proto Thema, this poll discovered 53.2% of Greeks feel that strikes and protests should continue. However, 63.5% of these respondents do not think that the protests would stop the government from adopting the austerity measures.

In the Proto Thema poll, 1,000 people were asked if they thought the Greek workers unions keep their protests at a ‘rational’ level. A whopping 74% said yes while only 21% replied in the negative. This poll was conducted on behalf of the newspaper by Alco polling agency on May 5 to 7 through telephone calls after violence in Athens by protestors resulted in the deaths of 4 bank employees whose building was set on fire.

On what they thought of their political leaders, the poll showed that 49.4% of the people felt that Prime Minister George Papandreaou has been ‘responsible’ in his job while 39.9% said he was not. In a related result from the other poll by the To Vima newspaper, 71.3% of Greeks think the country’s major political parties should cooperate more to tackle the crisis.

The To Vima survey was conducted by the Kapa Research polling agency interviewing 1,030 respondents on May 6.

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Heir to Brandeis Fortune files for Bankruptcy

In an amazing development, Ted Baer, who is the heir to the Brandeis Departmental stores has filed for Chapter 7 bankruptcy. Ted and his wife, Kathy Baer filed papers at the bankruptcy court on April 29. A few days after the filing, Baer’s mother passed away.

Ted Baer is the great grandson of J.L. Brandeis who founded the Brandeis Departmental stores. Baer’s father died in 2002. At one point of time, Baer was the owner of US Hockey league team, the Omaha Lancers until he sold off the team in 2004. The bankruptcy filed by Baer cited debts between $10 million and $50 million, one of the biggest Chapter 7 bankruptcies in the country.

Baer owes about 200 creditors, including Borsheims, Nebraska Furniture Mart and ConAgra. The Baer’s lawyer said that the bankruptcy involved the couple’s personal finances and not their family business holdings. The lawyer also stated that they chose to file for bankruptcy to avoid personal liability and that the business contributed to the couple’s personal financial problems.

The court imposed a deadline for the couple to disclose more details on their bankruptcy filing. At this point, the family still runs the Georgetown Club and Brandeis Catering.

Before filing this present Chapter 7 application, Baer had filed a Chapter 11 bankruptcy case on 2 of his other companies that owned and operated a bowling alley called Thunder Alley located in Elkhorn. The 2 companies in question are BowlNebraska and Husker Bowl. Baer closed down the bowling alley in June last year without warning and explanation. According to bankruptcy records, he had been behind in payments on several loans connected to the property there. But the bowling alley was re-opened by one of Baer’s former business partners, Steve Sempeck who started to lease the 86,000 square feet property after his own bowling alley burned down.

According to Sempeck, the precipitating cause of the Baers’ financial problems was the ailing economy. Register of Deeds Diane Battiato said the Baers started to default on their mortgage loans last summer about the time they closed down Thunder Alley. The Baers had three out of their four deeds of trust with defaults filed on them.

With his companies under Chapter 11 bankruptcy and his own personal finances under Chapter 7, Ted Baer faces an uphill task in working his way out of the debts he owes.

Bailout Only Hope for Greece to Avoid Bankruptcy

In what seems like the only way out of a catch 22 situation, Greece has to borrow money from the International Monetary Fund (IMF) and its fellow EU countries to avoid national bankruptcy. The country is two weeks away from defaulting on €8.5 billion worth of bonds maturing May 19 for which it does not have the money to pay.

During a heated debate in parliament, Greek Prime Minister George Papandreou said the government has to avail itself to the €110 billion three-year package comprising of loans from other eurozone countries and the IMF. But the package comes at a price. The government must agree to severe austerity measures over the three year period. These measures include slashing salaries, pensions and increasing taxes. The government was trying to rush through legislation in parliament to authorize the austerity measures.

The loan package is also aimed at preventing the debt problem from spilling over to other European countries with vulnerable economies such as Portugal and Spain. Portugal and Spain has had their debt ratings downgraded which contributed to the depreciation of the value of the Euro from as high as $1.51 to below $1.28.

The austerity measures have sparked outrage among the Greeks, with approximately 100,000 people spilling into the streets last Wednesday, torching buildings, destroying public property, smashing windows and fighting with police. Three bank employees – a man and two women, one of whom was pregnant – died when they were trapped inside their building set ablaze by rioters. Another four people were rescued by fire fighters using a crane from the balcony of the bank. The deaths were the first protest-linked ones in more than 20 years and have shocked the nation in which protests are common but rarely result in fatalities. A makeshift shrine with flowers and candles was set up in a charred window of the Marfin Bank, the scene of the deaths.

41 policemen and 15 civilians were injured in the riots, while 25 people were arrested. When the journalist union canceled their participation in the protests, newspapers were rushed through the press on Wednesday just in time to report on the riots and deaths. But despite the fatalities and general carnage, unions and far left groups were planning for more protests on Thursday.

The bank workers’ union called for a strike Thursday to protest the deaths of their members and at the same time laid the blame for the violence on the government’s austerity measures. However, most banks in central Athens remained open.

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Should Student Loans be Subject to Bankruptcy?

There are certain types of debts that you cannot be forgiven of even under bankruptcy, such as child support and tax debt. Another such debt is student loans. When students take on too much debt in the form of student loans to obtain their degree, they may not have the means to repay these loans even when they graduate and start earning a living. The problem is compounded when these loans are taken from private lenders (as opposed to government backed loans).

In today’s world, having a college degree is almost a must if you want to earn a decent salary. But too many people get into huge debts in order to get a degree, and when life’s uncertainties happen such as an illness, economic recession or divorce it makes it difficult for them to continue paying for the loans.

The problem with student loans is that it cannot be easily wiped out by bankruptcy. In order to do so, you have to prove undue hardship, not just an inability to afford the repayments.

Before 2005, only government backed loans were non-dischargeable. The rationale for this is that borrowers who do not repay their loans would affect the national budget. In other words, the American public pays for the borrower’s default, which is unfair. The same goes for loans that come from charitable or non-profit organizations. These organizations give out loans as a means to generate revenue since their core activities do not earn profit. Therefore, such loans should not be easily forgiven. Other categories of student loans such as private student loans were subject to cancellation if you come under bankruptcy protection.

But all of this changed in 2005 when the government put new legislation into effect designed to make it more difficult for people to be declared bankrupt. The new legislation was aimed at preventing people from defaulting on their loans without trying hard enough to repay them. This legislation was called the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). One aspect of this legislation elevated the status of student loans (including private student loans) to prevent them from being dischargeable.

But elevating the status of private student loans does not make sense. They should be classified the same way as other commercial loans like car loans. But lenders of such loans argue that if private student loans are subject to discharge like other private consumer debts, it would make it harder for students to get such loans. Lenders would be fearful that students would take up a loan and immediately seek bankruptcy protection upon graduation even before they get a proper job. However, most borrowers are not frauds seeking to game the system. Furthermore, there is a means test in every state that determines who can file for bankruptcy.

Although there have been some attempts to change the status of private loans and allow borrowers to be forgiven of the debt in bankruptcy, they have not been successful.

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Who is Emerging from Bankruptcy

Six Flags Entertainment Corporation (formerly Six Flags Inc) emerges from Chapter 11 bankruptcy protection after a year of restructuring and reorganization. It now has $725 million in equity committed by new shareholders and its debts have been slashed by about $1.7 billion.

In line with this development, Six Flags Discovery Kingdom begins its daily summer business later this month. The summer season is scheduled to run from May 28 till August 22. The popular sea entertainment park has designated 2010 the Year of the Dolphin and is eagerly awaiting the birth of its two newest dolphin calves this year. As such, several new shows will see their debuts along with a dolphin swim program and dolphin experiences. Visitors to the park will also find new food vendors throughout the park.

Along with the planned new shows, the management will also focus on upgrading the infrastructure of the park. New rides, new events and several attractions are planned over the next few years, not forgetting the theme park’s highly anticipated 50th anniversary celebrations next year.

This year, Six Flags Discovery Kingdom has recruited 1,400 employees to run its operations. In addition, the park’s special Season Pass price of $49.99 will be extended till May 31.

On the financial front, Six Flags Entertainment Corporation plans to float the company’s new common stocks on the New York Stock Exchange. Presently, the company owns 19 theme parks in the US, Canada and Mexico.

Another company exiting bankruptcy is media company Freedom Communications. The company ceded control of the business to its main creditor, JPMorgan Chase in exchange for a remission of almost 60% of its debts to $325 million. Another beneficiary who gets a share of the media giant is Angelo, Gordon & Co, who has been buying up similar media companies in Minneapolis and Philadelphia through bankruptcy.

Among Freedom Communications’ publications are The Orange County Register in California and more than two dozen other dailies. It also owns 8 TV stations. Freedom Communications filed for bankruptcy protection in September because of drastic drops in its advertising revenue. The move for bankruptcy eliminated the ownership of Blackstone Group LP, Providence Equity Partners and descendants of Freedom founder R.C. Hoiles in the company.

Organizationally, its interim CEO, Burl Osborne who has held the position since last June will continue to do so until a permanent replacement is appointed by the company.

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Brown Publishing Co. files for Bankruptcy

Brown Publishing Co. the publisher of Dan’s Papers has filed for Chapter 11 bankruptcy. Dan’s Papers is eastern Long Island’s widest circulating newspaper. The company filed for Chapter 11 April 30 in Central Islip, New York.

According to Brown Publishing Chief Executive Officer Roy Brown, the primary cause of its financial problems is due to declining advertising revenue linked to the real estate market crash. A similar drop in retail advertising also severely impacted its Ohio newspapers. Brown Publishing and 14 associated companies owe $104.6 million as at March 31 and have assets worth $94.1 million.

Dan’s Papers Inc. are the publishers of Dan’s Hampton Style, Montauk Pioneer and The Insider Guide which are magazines targeted at local residents and second-home owners. They feature stories about fashion, performing arts, dining, nightlife and parenting and social commentary produced largely by founder Dan Rattiner. A Dan’s Papers subscription costs $100 a year. But this could easily be afforded by its largely upper middle class to upper class readership whose mean annual income is $381,000. Dan’s Papers has been attracting high-end advertisers to service its readership base.

But the ongoing economic recession has largely changed all that. With declining advertising income and readers and advertisers deserting the print media in favor of web-based alternatives on the Internet, Brown Publishing has fallen into hard times. The company which started operations in 1920 as a family-owned newspaper publisher in Ohio has laid off staff and non-profit making publications and pursued out-of-court restructuring exercises but still could not raise enough funds to meet its financial needs quickly enough.

Court documents show that Brown Publishing’s five major creditors are owed a total of $70.5 million in secured debts with collateral of $94.9 million in book value. The company’s largest unsecured creditors are Abitibi Consolidated Sales, a unit of AbitibiBowater Inc. to whom Brown Publishing owes $296,256, White Birch Paper Co. who are owed $219,150 and Page Cooperative a creditor for $195,680.

Another notable newspaper publisher in the red and seeking bankruptcy protection besides Brown Publishing is Tribune Co. who owns the Chicago Tribune and the Los Angeles Times. Tribune Co. filed for bankruptcy in December 2008.

On the whole, newspaper readership fell 8.7% in the six months through March this year. This comes following a decline of 11% in the six months through September 2009. In addition, income from advertisements fell 24% to $7.68 billion in the fourth quarter of 2009 compared with a year earlier, after an earlier drop of 28% in the third quarter.

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    Brown Media Files for Bankruptcy

    Brown Media Holdings Co. and Brown Publishing Co. of Ohio have filed for Chapter 11 bankruptcy protection Friday in US Bankruptcy Court for the Eastern District Court of New York. Brown Media Holdings is the parent company of business newspaper Boulder County Business Report, having bought over the paper in February 2008. In turn, the Boulder County Business Report is the majority owner of Northern Colorado Business Report (NCBR), thus making Brown Media Holdings the parent company of both publications. Ohio-based Brown Media runs 11 business publications and 15 daily newspapers and over 30 weeklies.

    The co-publisher of NCBR, Chris Wood assumed the position of publisher of Boulder County Business Report at the point of the takeover while another co-publisher at NCBR, Jeff Nuttall was appointed the NCBR publisher. Joel Dempsey, corporate lawyer representing Wood was assigned to make official comments but has thus far remained mum over the bankruptcies.

    Chapter 11 of the Bankruptcy code provides immediate cessation of all actions of creditors to reclaim any outstanding debts such as liquidation of assets while at the same time allows the debtor companies to reorganize their finances. However, companies under Chapter 11 do have the option to voluntarily liquidate their assets. This option was taken up by Brown Media Holdings, who will be selling their assets in 10 states to an undisclosed bidder.

    Conflicting reports have appeared on the details of the bankruptcy. For instance, initially NCBR reported in its website that neither it nor another sister company, Wyoming Business Report ‘is affected by the bankruptcy’. But this statement was later altered to say that neither paper ‘was named as part of the bankruptcy’. However, the company that publishes the NCBR and Wyoming Business Report, Boulder Business Information Inc., a subsidiary of Brown Media is listed among 15 subsidiaries seeking bankruptcy protection, according to court papers.

    Print media companies have had to grapple with severe financial problems due to the economic slowdown that brought about substantial drops in advertising revenue as companies cut back on spending to advertise. Besides that, publishers also had to contend with competition for readership from the digital media such as news websites. With its application for bankruptcy, Brown Media joins a growing number of publishers struggling to stay afloat financially.

    In its bankruptcy filing, Brown Media listed PNC Bank in Philadelphia and Wilmington Trust Co. in Boston as its biggest creditors to whom they owed a total of $94 million in secured loans.

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    Tampa Pre-foreclosure, Bankruptcies Skyrocket in Q1

    Pre-foreclosures and bankruptcies in the Tampa area have shot up in the first 3 months of the year in the face of the worst economic recession since the Depression.

    The number of foreclosure filings in the Tampa-Saint Petersburg Metro area jumped to 19,284 in the first quarter of this year. This represented a rise of 27% compared to the last quarter and a 17% increase year-on-year. The number of foreclosure filings appears to increase from month to month. For the month of March, total foreclosure filings in the Metro area were 11% higher than February and 7% higher than March 2009.

    In a similar fashion, the number of bankruptcy filings in the first 3 months of the year rose by 21% from the last quarter of 2009, representing a record high for the Tampa area.

    Other areas of Florida seemed to fare no better. In the middle district of Florida where Orlando, Jacksonville and Tampa are located, there were 16,149 cases of bankruptcy filings out of which 7,810 came from Tampa. This total represented an increase in number of filings by almost 21%, making the Middle District of Florida the second in total bankruptcy cases in the nation, an unenviable record indeed. Only the Central District of California has recorded more bankruptcy filings.

    The increase in number of pre-foreclosure notices in the Tampa area has sparked a surge in bankruptcy filings as house owners scramble to get the protection afforded by the bankruptcy law and stave off creditors. The Middle District of Florida experienced a worrying 18% jump in bankruptcy filings in March compared to the same month last year as over 1,500 people sought Chapter 13 bankruptcy protection from the courts. Chapter 13 of the bankruptcy code specifically disallows creditors from taking any further action against bankrupt residents, who are given up to 5 years to pay off their debts under a rescheduled arrangement. It also protects certain assets such that they cannot be liquidated by creditors and helps borrowers avoid paying off home equity loans or second mortgage loans.

    The financial malady affects a broad cross section of the community with people from all walks of life, retailers, restaurant owners, home owners, property developers and even professionals seeking bankruptcy protection.

    In the whole of Florida, there were 153,540 foreclosure filings in the first quarter of this year, a rise of 7% and 29% from the last quarter and year-on-year respectively. Florida is still experiencing a double digit unemployment rate of 12.3% with 1,138,000 residents without jobs.

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