Movie Gallery filed for bankruptcy on February 2, 2010, announcing plans to close 760 stores. The company had previously filed for bankruptcy in October 2007, emerging from Chapter 11 in May 2008, with private equity firms Sopris Capital Advisors and Aspen Advisors as its primary owners. Movie Gallery’s website is asking consumers with rented movies in their possession from stores that have closed to return them “in a reasonable time frame” to one of the 1,906 stores that will remain open.
Lessons Learned: Movie Gallery’s first bankruptcy was attributable to the unmanageable debt they took on in their acquisition of competitor Hollywood Video for $1 billion in 2005. The second Movie Gallery bankruptcy is due to bad fundamentals for bricks and mortar movie rental locations – even worse than anticipated by the two private equity firms who took it out of its first bankruptcy. (Retail movie rental is turning out to be such a weak business that market leader Blockbuster is once again at risk of bankruptcy. ) The private equity firms would have done better to put their money in shares of Netflix, which has increased from $39/share in May, 2008 to a current price of nearly $70/share.
Lehman Brothers Examiner’s Report Reveals Inaccurate Disclosure
The Lehman Brothers Bankruptcy Examiner’s report is out, and anyone interested in knowing more about the reasons behind the largest bankruptcy in U.S. history should at least take the time to read the Executive Summary. Much of the initial press coverage has focused on Lehman’s use of “Repo 105″ transactions to reduce reported net leverage, for example, from 13.9 to 12.1 for the end of the second quarter of 2008. An even bigger gap between reality and what was reported to the public is noted just a page or two later in the Examiner’s Report: “By Sept 12 [2008], two days after [Lehman] publicly reported a $41 billion liquidity pool, the pool actually contained less than $2 billion of readily monetizable assets.” By understating its leverage, and overstating its liquidity, Lehman Brothers misled the rating agencies, government officials and the investing public. The Examiner’s report is shining a much needed spotlight on what happened, and why, and may result informer Lehman officers being held accountable for their roles.
Tags: bankruptcy, Lehman Brothers, Lehman Brothers Examiner's report, Repo 105